East Palo Alto City Council
January 6, 2026

EAST PALO ALTO CITY COUNCIL

REGULAR SESSION AGENDA
Tuesday, January 6, 2026, 6:00 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 6, 2026 Agenda
1 1. CALL TO ORDER AND ROLL CALL

2. APPROVAL OF THE AGENDA

3. APPROVAL OF CONSENT CALENDAR

3.1 Proclamation of the City of East Palo Alto Commemorating the Contributions of the Reverend Dr. Martin Luther King, Jr., in the Fight for Equality.

3.2 Palo Alto Park Mutual Water Company Proclamation

3.3 Speed Hump Criteria Update

3.4 Minutes of the December 16, 2025 Meeting

4. CLOSED SESSION

5. PUBLIC COMMENT

6. ADJOURN CITY COUNCIL REGULAR MEETING TO THE EAST PALO ALTO

SANITARY DISTRICT BOARD MEETING

7. EPASD BOARD MEETING POLICY AND ACTION

7.1 Accept EPASD Annual Financial Report for Fiscal Year 2024-25 Recommendation: Accept the proclamation.

Recommendation: Present the proclamation.

Recommendation: Amend the adopted Speed Hump Installation Criteria and Review Process guidelines to revise Criterion No. 1 pertaining to functional classification requirements.

Recommendation: Adopt the minutes of the December 16, 2025, Meeting.

Recommendation:

Adopt a resolution:

1. Accepting and directing staff to file with the State Controller’s Office the Annual Audited Financial Reports for Fiscal Year 2024-25; and

2. Finding that the proposed action does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(4) in that it is related to government fiscal activities, which do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment.

East Palo Alto City Council January 6, 2026 Agenda
2 8. ADJOURN EAST PALO ALTO SANITARY DISTRICT BOARD MEETING AND

RECONVENE CITY COUNCIL REGULAR MEETING

9. INFORMATIONAL REPORTS

10. SPECIAL PRESENTATIONS

11. PUBLIC HEARINGS

12. POLICY AND ACTION

12.1 Accept Annual Financial Reports for Fiscal Year 2024-25

12.2 Youth Engagement Program Development

12.3 Adoption of the Economic Development Strategic Plan (EDSP)

13. COUNCIL REPORTS
Recommendation:

Adopt a resolution accepting and directing staff to file with the State Controller’s Office the Annual Financial Reports for Fiscal Year 2024-25, including:

1. Annual Comprehensive Financial Report (ACFR),

2. Measure A Fund Report,

3. Measure HH Fund Report,

4. Measure W Fund Report, and

5. Report on Agreed-Upon Procedures Applied to Appropriations Limit Schedule (Fiscal Year 2025-26).

Recommendation:

1. Adopt a resolution authorizing the City Manager to pursue implementation of a formal non-Brown Act Youth Commission and an informal Youth Task Force for a minimum period of at least three years and to budget funds for $50,000 annually from CYFS Transient Occupancy Tax funds in a form approved by the City Attorney, for $150,000, in an amount not-toexceed $180,000.

2. 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.

Recommendation:

Staff recommends that the City Council:

1. Adopt the Final Draft Economic Development Strategic Plan (EDSP) prepared by HR&A Advisors, Inc. and Kearns & West; and

2. Provide feedback to staff on the EDSP.

East Palo Alto City Council January 6, 2026 Agenda
3 14. ADJOURNMENT
Upcoming meetings:

Regular Meeting January 20, 2026 6:00 pm
Regular Meeting February 3, 2026 6:00 pm
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: December 30, 2025
ATTEST:

James Colin
City Clerk
East Palo Alto City Council January 6, 2026 Agenda
4 CONSENT ITEM 3.1

EAST PALO ALTO

CITY COUNCIL

STAFF REPORT
DATE: January 6, 2025
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 domains that 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; and
WHEREAS 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
NOW THEREFORE BE IT RESOLVED THAT on January 6, 2026, the City Council of East Palo Alto designates this day as “Dr. Martin Luther King, Jr.” Day.

Dated: January 6, 2026
Webster Lincoln, Mayor
6 CONSENT ITEM 3.2

EAST PALO ALTO

CITY COUNCIL

STAFF REPORT
DATE: January 6, 2025
TO: Honorable Mayor and Members of the City Council
VIA: Melvin E. Gaines, City Manager
BY: James Colin, City Clerk
SUBJECT: Palo Alto Park Mutual Water Company Proclamation Recommendation
Present the proclamation.

Attachments

1. Proclamation
7 CITY OF EAST PALO ALTO PROCLAMATION

HONORING THE PALO ALTO PARK MUTUAL WATER COMPANY
ON THE OCCASION OF ITS 101st ANNIVERSARY OF SERVICE
WHEREAS, the Palo Alto Park Mutual Water Company was founded in 1924 and has provided continuous and essential water service to the East Palo Alto community for more than a century; and
WHEREAS, for 101 years, the Palo Alto Park Mutual Water Company has played a vital role in safeguarding public health and supporting the daily lives of residents through the delivery of safe, reliable, and high-quality drinking water; and
WHEREAS, the Company’s long-standing service reflects a strong tradition of local governance, operational stewardship, and responsible infrastructure management that has endured through changing regulatory, operational, and community needs; and WHEREAS, throughout its history, the Palo Alto Park Mutual Water Company has served generations of residents while adapting to evolving standards and challenges, demonstrating resilience, accountability, and dedication to public service; and WHEREAS, this milestone represents the collective efforts and commitment of the Company’s members, Board of Directors, management, operators, and staff—past and present—whose leadership and professionalism have ensured continuity, integrity, and reliability in water service; and
WHEREAS, the City of East Palo Alto recognizes the importance of community-based institutions that contribute to public health, infrastructure stability, and long-term sustainability for current and future generations.

NOW, THEREFORE, BE IT PROCLAIMED, that the City Council of the City of East Palo Alto hereby recognizes and congratulates the Palo Alto Park Mutual Water Company on the occasion of its 101st Anniversary of Service, and commends the organization for its perseverance, dedication, and continued commitment to responsibly managing and maintaining critical water infrastructure for the community.

Dated: January 6, 2026
Webster Lincoln, Mayor
8 CONSENT ITEM 3.3

EAST PALO ALTO

CITY COUNCIL

STAFF REPORT
DATE: January 6, 2026
TO: Honorable Mayor and Members of the City Council
VIA: Melvin E. Gaines, City Manager
BY: Michael Cortez, Associate Civil Engineer
Batool Zaro, Senior Civil Engineer
SUBJECT: Speed Hump Installation Criteria and Review Process Guidelines Update Recommendation
Adopt a resolution amending the adopted Speed Hump Installation Criteria and Review Process guidelines to revise Criterion No. 1 pertaining to functional classification requirements.

Alignment with City Council Strategic Plan
Public Health, Safety, and Quality of Life
Public Infrastructure and Utilities
Background
The City of East Palo Alto originally adopted the Speed Hump Installation Criteria and Review Process in 1998. These guidelines were established in an effort to mitigate motorists travelling at excessively high speeds as well as address instances of commuter traffic using residential streets as cut-through streets. The City Council updated these guidelines pn February 17, 2015 through Resolution No. 4592; and further updated the guidelines via Resolution No. 53-2024 in May 2024. The current criteria for the installation of speed humps are listed below.

1. Be classified as a local/residential street

2. Have a street width of 40 feet or less

3. Have no more than two lanes (one in each direction)

4. Speed humps petition requires at least 67% of residents of the addresses

5. Have a speed limit of 25 mph or less

6. Being able to have a warning sign posted before the hump at a distance equal to at least the minimum safe stopping distance as defined by the City Engineer 9 CONSENT ITEM 3.3

7. Be visible to oncoming traffic for at least the minimum safe stopping distance as defined by the City Engineer

8. Be able to accommodate an installation without extending over a manhole, catch basin, or other utility access point

9. Have curbs and gutters
In order for a speed hump to be installed on a street, the street must meet each of the criteria stated above. If the street fails to meet one or more of the above criteria, the petition for the placement of a speed hump cannot be approved.

Recently, at a regularly scheduled meeting on September 17, 2025, the Public Works and Transportation Commission (PWTC) received a presentation from Public Works staff regarding the analysis for amending the existing Speed Hump Installation Criteria and Review Process guidelines. The Commission agreed unanimously to recommend to City Council to amend the guidelines such that Criterion No. 1 be revised to include street types classified as Collector Streets as defined by the Federal Highway Administration (FHWA) Functional Classification system.

Analysis
Current guidelines for the installation of speed humps contain a requirement pertaining to the functional classification of the street, as can be seen in Criterion No. 1 from the current Speed Hump Installation Criteria and Review Process as listed in the Background section in this report.

There are two main classification systems utilized in characterizing streets within East Palo Alto:
the National Association of City Transportation Officials (NACTO) Urban Street Design Guide and the FHWA Functional Classification system. These classifications are used in conjunction with one another to guide future roadway improvements and performance measurements to carry out mobility priorities more effectively and to balance the needs of all travel modes.

The City’s network of streets is classified by street type as defined by NACTO Urban Street Design Guide. Street types within East Palo Alto include the following:
 Major Thoroughfare
 Connector
 Residential Boulevard
 Neighborhood Main Street
 Neighborhood Connector
 Neighborhood Street
 Yield Street
The street types in the list above have been converted to FHWA classification terminology for federal transportation funding eligibility purposes in the City of East Palo Alto 2035 General Plan.

This conversion has been tabulated on the next page.
10 CONSENT ITEM 3.3

RELATIONSHIP BETWEEN STREET TYPES AND

EXISTING FHWA CLASSIFICATIONS

ARTERIAL COLLECTOR LOCAL/RESIDENTIAL
Major Thoroughfare X
Connector X
Residential Boulevard X
Neighborhood Main Street X
Neighborhood Connector X
Neighborhood Street X
Yield Street X
Criterion No. 1 of the City’s current speed hump guidelines requires the street under consideration for the installation of a speed hump to be classified as a Local/Residential street as defined by FHWA guidelines. As it is currently written, Criterion 1 alone disqualifies many streets throughout the City from being considered for the installation of a speed hump. Numerous petitions submitted by concerned residents in the past to request the installation of speed humps on streets of similar traffic volumes, speed limits, and geometric configuration (i.e. two lanes of travel, curb and gutter, etc.) have been denied solely on the premise of its functional classification, despite meeting all other criteria.

In order for these streets to be properly considered for the installation of a new speed hump, Criterion No. 1 of the existing Speed Hump Installation Criteria and Review Process should be revised to include street types classified as Collector streets as defined by the FWHA Functional Classification system. This change would make an additional 16 streets in East Palo Alto eligible streets.

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, CA 94303. 11 CONSENT ITEM 3.3
Environmental
The proposed action does not constitute a “project” with the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines sections 15378(b)(4) and (5) in that it is a governmental fiscal, organizational or administrative activity that will not result in direct or indirect changes in the environment.

Government Code § 84308
Analysis of Levine Act Compliance: Not applicable.

Attachments

1. Resolution

2. Speed Hump Installation Criteria and Review Process – Proposed Revisions

3. City of East Palo Alto 2035 General Plan, Chapter 6: Transportation, “Street Network” 12 Resolution No. XX-2026 1 of 2
RESOLUTION NO. XX– 2026

A RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF EAST PALO ALTO

AMENDING THE ADOPTED SPEED HUMP INSTALLATION CRITERIA AND REVIEW PROCESS GUIDELINES TO REVISE CRITERION NO. 1 PERTAINING TO FUNCTIONAL

CLASSIFICATION REQUIREMENTS
WHEREAS, the City of East Palo Alto originally adopted the Speed Hump Installation Criteria and Review Process in 1998 with the goal of enhancing public safety and emergency preparedness, improving public facilities and infrastructure, and creating a healthy and safe community; and WHEREAS, on February 17, 2015, the City of East Palo Alto adopted an updated version of these guidelines as per Resolution No. 4592; and
WHEREAS, on May 21, 2024, the City Council amended these guidelines to remove Criterion No. 6 pertaining to bus route requirements via Resolution No. 53-2024; and WHEREAS, at a regularly scheduled meeting on September 17, 2025, the Public Works and Transportation Commission received a presentation for a recommendation to amend the Speed Hump Installation Criteria and Review Process to revise Criterion No. 1 to include street types classified as Collector Streets as defined by the Federal Highway Administration Functional Classification System; and
WHEREAS, staff recommends the City Council amend the Speed Hump Installation Criteria and Review Process to revise Criterion No. 1 to include street types classified as Collector Streets as defined by the Federal Highway Administration (FHWA) Functional Classification System.

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; and

2. Amends the existing Speed Hump Installation Criteria and Review Process guidelines to revise Criterion No. 1 to include street types classified as Collector Streets as defined by the FHWA Functional Classification System; and

3. Finds that the proposed action does not constitute a “project” with the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines sections 15378(b)(4) and (5) in that it is not a governmental fiscal, organizational, or administrative activity that will not result in direct or indirect changes in the environment.

PASSED AND ADOPTED this 6
th day of January 2026, by the following vote:

AYES:

NOES:
13 Resolution No. XX-2026 2 of 2
ABSENT:

ABSTAIN:

Webster Lincoln, Mayor
ATTEST: APPROVED AS TO FORM:

James Colin, City Clerk John D. Lê, City Attorney
14 CHAPTER 6: TRANSPORTATION
15 CHAPTER 6: TRANSPORTATION
CITY OF EAST PALO ALTO: GENERAL PLAN 2035 | 6-1

6. Transportation
Overview
A safe and well-maintained multi-modal
transportation system is essential for the vitality,
connectedness, and economic success of East Palo
Alto. The City oversees most street, pedestrian, and
bicycle facilities while also coordinating with
partners like CalTrans and SamTrans for highways
and transit service. This chapter defines the
transportation system envisioned for East Palo Alto
and contains goals and policies for different modes
of transportation throughout the City. It serves to
reinforce the City’s long-term strategy to improve
access for all means of travel and design streets that
accommodate all users. This chapter includes goals
and policies for transportation; specific
transportation improvements are listed in Chapter
12: Implementation, while the traffic analysis of the
future year growth may be found in the EIR.

Statutory Requirements
The East Palo Alto Transportation Element meets state
requirements for the “Circulation Element” as defined in Section 65302(b) of the California Government Code. As
per State law, the Element must contain “the general
location and extent of existing and proposed major
thoroughfares, transportation routes, terminals, any
military airports and ports, and other local public utilities and facilities, all correlated with the land use element of the plan.” Additionally, as of 2011, Circulation Elements must “plan for a balanced, multimodal transportation
network that meets the needs of all users of streets, roads, and highways for safe and convenient travel in a manner that is suitable to the rural, suburban, or urban context of the general plan.”
Issues and Opportunities
East Palo Alto has a diverse transportation system that is used for both local and regional travel. It consists of a network of roads, transit routes, and paths for bicyclists and pedestrians in various states of repair.

The transportation goals and policies of this chapter
directly respond to current conditions, including issues and opportunities, to direct change and advance community
priorities. This Issues and Opportunities section represents an overview of current conditions, and is organized
according to the following topics:
• Transportation Patterns
• Connectivity and Accessibility
• Vehicle Traffic and Roadways
• Transit
• Bicycling
• Walking
• Parking
Transportation Patterns
The ways in which people get around are important
indicators of the success of a transportation system,
shedding light on which modes are most popular,
convenient, and safe.

According to the U.S. Census’ American Community
Survey, East Palo Alto residents currently own cars at a much lower rate than the county average (9% of
households have no vehicle, as compared to 6%
16 CHAPTER 6: TRANSPORTATION
CITY OF EAST PALO ALTO: GENERAL PLAN 2035 | 6-2
Countywide), but are almost as likely to use a car to get to work and are less likely to take transit given the lack of convenient alternatives to the car. Comparing vehicle
ownership rates to journey to work mode split data, shown in Table 6-1, it is clear that East Palo Alto exhibits a larger than average transit dependent population, but poor eastSource: American Community Survey, 2007-2011 5-year estimates west transit connectivity and little bicycle and pedestrian infrastructure. This dynamic serves to discourage travel via non-car modes, and commuting patterns are thus
dominated by automobile travel, be it persons driving
alone or as part of a carpool. As such, there likely exists a sizeable latent demand for improved transit service and bicycle and pedestrian facilities. Improving transit, bicycle, and pedestrian connectivity will help decrease traffic, increase mobility and access to jobs, reduce greenhouse gas emissions, and improve East Palo Alto’s overall health, wellness, and quality of life.

Connectivity and Accessibility
There exists a lack of connections within East Palo Alto (be it bicycle, pedestrian, or transit) to regional transit corridors such as Caltrain and El Camino Real, and job and activity centers in neighboring municipalities. In particular, the barriers created by U.S. Highway 101, and the lack of adequate bicycle and pedestrian crossing accommodations on the University Avenue (State Highway 109) and Willow Road (State Highway 114) overpasses, further limit
connectivity. Moreover, people with disabilities often face additional obstacles to mobility, encountering parked cars blocking sidewalks by driving over rolled curbs.

By improving the multimodal connectivity of the
transportation network, residents would enjoy improved
access to employment, services, recreational
opportunities, and activity centers. Palo Alto, followed by Menlo Park, is the primary location of employment for
many East Palo Alto residents; therefore, non-motorized alternatives in these areas need to be prioritized.

Vehicle Traffic and Roadways
Private and commercial vehicles (including trucks) are a large part of the transportation system in East Palo Alto.

Generally, traffic volumes within East Palo Alto are
relatively low on most streets, with the exception of two key arterials: University Avenue, which runs through the heart of the City, and Willow Road, which delineates the northernmost border between Menlo Park and the City.

There is a significant amount of regional traffic between the Dumbarton Bridge and Highway 101 cutting through
the City via these two streets, increasing delay and
localized air pollution. As of 2015, University Avenue
carries an estimated 25,000 vehicles on most segments,
including the US 101 overpass, with higher volumes – just over 30,000 – on the segment just north of East Bayshore Road. Approximately 84% of this traffic is “cut-through” traffic that neither originates nor ends in East Palo Alto.

Willow Road carries similar amounts, representing, along with University Avenue, the City’s highest volume streets.

Other streets, such as Pulgas Avenue, Clarke Avenue, Bay Road, Cooley Avenue and East Bayshore Road see
significant cut-through traffic as well, though not to the degree of University and Willow.

Table 6-1: Journey to Work Mode Splits
Mode East Palo Alto San Mateo
County
Drive Alone 69% 71%
Carpool 14% 11%
Transit 6% 8%
Bicycle 4% 1%
Walk 4% 3%
Telecommute 2% 5% The University Avenue overpass includes no bicycle lanes and an uninviting pedestrian sidewalk. (Image Source: Bryan Goebel) 17 CHAPTER 6: TRANSPORTATION
Figure 6-1: Truck Routes
Truck routes on existing streets within East Palo Alto include portions of University Avenue, East Bayshore Road, West Bayshore Road, Donohoe Street, Willow Road, and Bay Road. The new street to be constructed as part of the Ravenswood/4 Corners TOD Specific Plan is a proposed future truck route.
18 CHAPTER 6: TRANSPORTATION
It should also be noted that while University Avenue is currently predominantly used by regional traffic, it is also the main local transportation spine of East Palo Alto. As such, it represents a prime candidate for potential redesign to improve its local function as a community focal point and gathering place. Potential redesigns for the roadway could include buffered and painted bicycle lanes,
streetscape improvements such as benches and pedestrian scale lighting, and mid-block crossings.

Finally, as regional through traffic contributes to localized congestion within East Palo Alto, a plan for truck traffic is an important tool to protect neighborhood streets from
noise and traffic impacts. Figure 6-1 maps existing and proposed truck routes within city limits.

Transit
There are currently frequent, convenient transit options throughout much of East Palo Alto. Most commute hour
bus lines serving East Palo Alto operate on 15 minute
headways, thus requiring short waits between buses.

However, on average, transit riders in East Palo Alto spend 25 more minutes commuting per day than the citywide
average across all modes, as shown in Figure 6-2. This
equates to 500 more minutes per month, and 6,000
minutes (100 hours) per year.

Figure 6-2: Means of Transportation to Work by
Travel Time
More specifically, five SamTrans routes have stops within the City limits, including:
• Route 280 with service to the Stanford Shopping
Center, Palo Alto Caltrain Station, and the
Ravenswood Shopping Center (1 hour headways)
• Route 281 with service to the Stanford Shopping
Center, Palo Alto Caltrain Station, East Palo Alto, and the Onetta Harris Community Center (15 minute
peak headways)
• Route 296 with service to Redwood City, Atherton,
and Menlo Park (15 minute peak headways)
• Route 297 with service to Redwood City and Palo
Alto (4 times daily on weekdays, 10 times on
weekends)
• Route 397 with late night service to San Francisco,
South San Francisco, San Francisco International
Airport, Burlingame, San Mateo, Belmont, San
Carlos, Redwood City, and Palo Alto (hourly)
SamTrans is also currently studying ways of restructuring bus service in East Palo Alto, particularly as new
development projects are completed.

AC Transit operates two Dumbarton Express routes which
stop only at Newbridge and Willow, offering connections between the city of Menlo Park and the East Bay (including the Union City BART station), as well as Palo Alto and
Stanford University. Both routes only operate during peak commute hours (6AM to 8PM with hour long headways).

The proximity of high capacity transit service, however, such as Caltrain, bus service along El Camino Real, and proposed rail service along the Dumbarton Corridor,
presents an opportunity to improve connectivity between East Palo Alto and regional employment and activity
centers. Figure 6-3 shows existing and planned transit
service. Currently, the San Mateo County Transportation Authority is considering restoring train service or
establishing bus rapid transit service on a 4.5-mile segment of the Dumbarton Rail Corridor between the Redwood City Caltrain Station and Willow Road in Menlo Park, near
Facebook’s campus.

Encouraging the increased use of public transportation can help reduce vehicular emissions and pollution, increase access to employment and activity centers for those
without a car, and also help individuals meet daily
requirements for physical activity.
19 CHAPTER 6: TRANSPORTATION
Figure 6-3: Existing and Planned Transit Service
Existing transit service is predominantly provided by SamTrans, though new rail service is proposed along the Dumbarton rail corridor, with potential station locations in Menlo Park and East Palo Alto. 20 CHAPTER 6: TRANSPORTATION
Bikeability
East Palo Alto’s existing bicycle network is relatively modest, even though the bicycle mode share in the City is four times the countywide average (4% versus 1%). Existing facilities do afford both north-south and east-west bicycle connectivity, but key facility gaps exist, particularly across Highway 101. The University Avenue corridor – particularly at Bay and University – is the most common site of vehicle collisions with bicycles. Figure 6-4 shows the number of bicycle collisions from 2007 to 2011, and helps illustrate the need for improved bicycle accommodations.

The new bicycle and pedestrian overpass for Highway 101 at Clarke Avenue, however, represents an investment to
improve connectivity across the freeway, and a focal point around which to plan additional connecting infrastructure.

Figure 6-5 shows the existing and planned bicycle network.

Connecting the planned bicycle network to neighboring
jurisdictions will improve accessibility to existing bikeways.

The East Palo Alto Bicycle Transportation Plan, adopted in 2011, describes many potential improvements (as well as some improvements which are currently being
implemented, such as the Highway 101 overcrossing). The 2011 Bicycle Transportation Plan was adopted as an
interim plan, to acknowledge that this General Plan
Transportation Element may incorporate and/or supersede its contents.

The benefits of walking and bicycling to school or work, for daily errands, and for recreation include increased physical activity, stress reduction, and better cardiovascular fitness and cardiovascular risk factors among working-age adults.

Additionally, when more people bicycle for transportation, car emissions decrease. This can improve air quality (and respiratory health) and reduce carbon emissions that
contribute to climate change. Finally, walking and cycling are no- or low-cost transportation options, saving money that individuals would otherwise spend on fuel and car
expenses.

Walkability
Similar to bicycling, walking represents a no-cost
transportation mode that improves health outcomes,
reduces congestion, and improves air quality.

Numerous streets in East Palo Alto lack sidewalks on either one or in many cases both sides, as shown in Figure 6-6.

Additional sidewalk gaps exist across key barriers, such as Highway 101 and the San Francisquito creek. Additionally, some East Palo Alto streets, such as those in the Gardens Neighborhood, are slender and have rolled curbs, which
frequently results in drivers parking on sidewalks.

Wheelchair users and other pedestrians are then forced to walk in the street. Various traffic calming improvements can help reduce vehicle speeds and improve bicyclists and pedestrian safety. These improvements could be utilized along key corridors shown in Figure 6-7, and could include speed humps, roundabouts, bulbouts, high visibility
crossings, pedestrian refuges, raised crosswalks, motionactivated beacons, conversion of rolled curbs to vertical curbs, and mid-block crossings.

Parking
There is currently a significant parking problem in certain areas of the City, particularly in the area west of Highway 101 (the Westside), and the Gardens neighborhood. This is as a result of limited on-street parking and relatively few off-street parking spaces given the number of dwelling
units or the number of residents (on average) per unit. In the Gardens neighborhood, the parking shortage is likely attributed to the conversion of garages into living space, curb cuts that reduce on-street parking and narrow street widths which limit the possibility of parking parallel on both sides of the street. Furthermore, parking is also
influenced in the Westside’s Willows Neighborhood
bordering Menlo Park whose city ordinance prohibits
overnight parking.

The efficient provision and management of parking can
help provide sufficient space for vehicles while also
encouraging more efficient use of existing facilities,
reducing the impact of parking facilities, and reducing automobile use.
21 CHAPTER 6: TRANSPORTATION
Figure 6-4: Bicycle Collisions, 2007-2011
22 CHAPTER 6: TRANSPORTATION
CITY OF EAST PALO ALTO: GENERAL PLAN 2035 | 6-8
Figure 6-5: Existing and Proposed Bicycle Network
The existing bicycle network in East Palo Alto exhibits various gaps, particularly across Highway 101. Planned facilities, such as the bicycle and pedestrian bridge across Highway 101 and bicycle lanes along Pulgas Avenue will improve connectivity, though additional potential new bicycle corridors should be studied, and cou d include: University Avenue (buffered lanes), Bell Street, Clarke Avenue, Newell Road, an additional crossing over Highway 101 north of University, and various connections to the Bay Trail. 23 CHAPTER 6: TRANSPORTATION
CITY OF EAST PALO ALTO: GENERAL PLAN 2035 | 6-9
Figure 6-6: Existing and Proposed Pedestrian Network
Many streets in East Palo Alto lack sidewalk facilities on one or both sides. The policies spelled out in this Circulation Element call for eliminating these gaps in the pedestrian network whenever feasible to improve safety, increase pedestrian comfort, and benefit public health.
24 CHAPTER 6: TRANSPORTATION
CITY OF EAST PALO ALTO: GENERAL PLAN 2035 | 6-10
Figure 6-7: Traffic Calming Priority Corridors
Traffic calming priority corridors include roadways with high levels of bicycle and pedestrian collisions, existing or planned bicycle infrastructure, and those leading to schools, parks, and other community facilities. These represent priorities for implementation of traffic calming policies, as stated in Goal T-1 and Policy T-1.2. 25 CHAPTER 6: TRANSPORTATION
Street Network
Street Types
The General Plan’s system of street types will inform
future roadway improvements and performance
measurement for new and reconfigured streets to carry
out mobility priorities more effectively and to balance the needs of all travel modes. Definitions of street types
consider surrounding land uses and designate priority
levels for different travel modes within each street type.

Combined, the types represent a hierarchical network
linked to typical design standards and anticipated traffic levels.

Table 6-3 and Figure 6-8 delineate the planned roadway
circulation system at full build-out of the General Plan, while Figures 6-9-14 serve as illustrative examples of each street type. Each street type is based upon a
corresponding street type defined in the National
Association of City Transportation Officials (NACTO) Urban Street Design Guide. Additional definition of and
information about each street type is provided in the
NACTO Urban Street Design Guide. As noted in the
Implementation section of this document, the City will
develop updated City standards for each street type.

Street types include the following:
• Major Thoroughfare
• Connector
• Residential Boulevard
• Neighborhood Main Street
• Neighborhood Connector
• Neighborhood Street
• Yield Street
Federal Guidance on Functional
Classification
Functional classification is required by the Federal Highway Administration for projects receiving federal funds. This system is primarily auto-centric and does not take into consideration local context, land use, or built form. The street types presented in this document are an alternative to conventional functional classification. To ensure that East Palo Alto remains eligible for federal transportation funds, Table 6-2 converts street types into FHWA
functional classification terminology.

Table 6-2: Relationship between Street
Types & Existing FHWA Classifications
Arterial Collector Local
Major
Thoroughfare
Connector
Residential
Boulevard
Neighborhood
Main Street
Neighborhood
Connector
Neighborhood
Street
Yield Street
26 CHAPTER 6: TRANSPORTATION
Table 6-3: Street Types
Type Mode Priority Description and Guidelines
Highway Vehicle:

Other modes: N/A
Limited access, major regional freeways that are part of the state and regional network of highways and subject to state design standards.

Major
Thoroughfare
(Arterial)
Bicycle:

Pedestrian:

Transit:

Vehicle:

Major arterial with higher frequency of transit service and mixed commercial and retail frontages.

Provides access and safe crossings for all travel modes along a regional transportation corridor. Emphasizes walking and transit and accommodates regional vehicle trips in order to discourage such trips on nearby local roadways, through collaborations with other cities and agencies. In areas of significant travel mode conflict, bicycle improvements may have lower priority, particularly where parallel corridors exist.

Connector
(Collector)
Bicycle:

Pedestrian:

Transit:

Vehicle:

Streets with mixed residential and commercial frontages that serve as a main route for multiple modes.

Distributes trips to residential and commercial areas. Provides a balanced level of service for vehicles, transit, bicycles and pedestrians wherever possible. Bicycle priority is greater along identified bicycle corridors. Pedestrian improvements are comfortable to walk along, and provide safe crossings at designated locations.

Residential
Boulevard
(Collector)
Bicycle:

Pedestrian:

Transit:

Vehicle:

Primarily residential street that serves a significant destination.

Prioritizes walking and bicycling. Accommodates intra-city trips while also distributing local traffic to other streets and areas.

Accommodating vehicle traffic while ensuring a high quality of life for residents is a key design challenge.

Neighborhood
Main Street
(Collector)
Bicycle:

Pedestrian:

Transit:

Vehicle:

Mixed-use street that serves a significant destination.

Serves as a nexus of neighborhood life, with high pedestrian volumes, frequent parking turnover, key transit routes, and bicyclists all vying for limited space.

Neighborhood
Connector
(Collector)
Bicycle:

Pedestrian:

Transit:

Vehicle:

Low-medium volume residential through street.

Primarily serves residential neighborhoods. Provides high quality conditions for walking and bicycling and distributes vehicle, pedestrian and bicycle trips to and from other streets.

Neighborhood
Street
(Local)
Bicycle:

Pedestrian:

Transit:

Vehicle:

Low volume residential street, serving mostly local traffic.

Provides access primarily to abutting uses. These streets should offer safe and inviting places to walk and bike.

Yield Street
(Local)
Bicycle:

Pedestrian:

Transit:

Vehicle:

Narrow, low volume residential street serving mostly local traffic.

Residential environments where drivers are expected to travel at low speeds and pedestrian and bicycle comfort is prioritized. = High Priority
= Medium Priority
= Low Priority
27 CHAPTER 6: TRANSPORTATION
CITY OF EAST PALO ALTO: GENERAL PLAN 2035 | 6-13
Figure 6-8: Street Network
As described above on page 6-12, the City's street network contains a variety of types intended to support a wide spectrum of users and adjacent land uses. Combined, the types represent a hierarchical network linked to typical design standards and anticipated traffic levels. 28 CHAPTER 6: TRANSPORTATION
CITY OF EAST PALO ALTO: GENERAL PLAN 2035 | 6-14
Figure 6-9: Major Thoroughfare
University Avenue, Willow Road, and portions of Donohoe and East Bayshore are designated as Major Thoroughfares. This street type is referred to in the NACTO Urban Street Design Guide as a “Downtown Thoroughfare”. Additional information on this street type is provided on pages 12-13 of the Urban Street Design Guide. (Image source: NACTO Urban Street Design Guide.) 29 CHAPTER 6: TRANSPORTATION
CITY OF EAST PALO ALTO: GENERAL PLAN 2035 | 6-15
Figure 6-10: Connector
Manhattan Avenue, Woodland Avenue and portions of Donohoe, West Bayshore Road and East Bayshore Road are designated as Connectors. This street type is referred to in the NACTO Urban Street Design Guide as a “Downtown 2-Way Street”. Additional information on this street type is provided on pages 10-11 of the Urban Street Design Guide. (Image source: NACTO Urban Street Design Guide.) Figure 6-11: Residential Boulevard
Newbridge Street and the portion of Bay Road west of University Avenue are designated as Residential Boulevards. Additional information on this street type is provided on pages 20-21 of the Urban Street Design Guide. (Image source: NACTO Urban Street Design Guide.) 30 CHAPTER 6: TRANSPORTATION
CITY OF EAST PALO ALTO: GENERAL PLAN 2035 | 6-16
Figure 6-12: Neighborhood Main Street
Bay Road east of University Avenue is designated as a Neighborhood Main Street. Additional information on this street type is provided on pages 14-15 of the Urban Street Design Guide. (Image source: NACTO Urban Street Design Guide.) 31 CHAPTER 6: TRANSPORTATION
CITY OF EAST PALO ALTO: GENERAL PLAN 2035 | 6-17
Figure 6-13: Neighborhood Street and Neighborhood Connector Numerous local residential streets throughout the City are designated as Neighborhood Streets. Neighborhood Streets are wide enough to allow slow-flow operation, allowing vehicles moving in opposite directions to pass each other at slow speeds. Clarke, Euclid, Fordham, Pulgas and portions of Cooley, Glen Way, Runnymede and O’Connor are designated as Neighborhood Connectors. The typical physical dimensions and elements of these two street types are similar, and typical elements are illustrated in the figure above. The primary difference between the Neighborhood Connector and the Neighborhood Street type is that the Neighborhood Connector type is intended (a) to serve more destinations (such as local schools) than the Neighborhood Street, and (b) to distribute local traffic to neighborhood streets. Neighborhood Connectors are therefore designated to accommodate low-to-medium traffic volumes. By contrast, the Neighborhood Street serves primarily local traffic and is designated for low volumes. These street types are collectively referred to in the NACTO Urban Street Design Guide as “Neighborhood Streets”. Additional information on this street type is provided on page 16 of the Urban Street Design Guide. (Image source: NACTO Urban Street Design Guide.) 32 CHAPTER 6: TRANSPORTATION
CITY OF EAST PALO ALTO: GENERAL PLAN 2035 | 6-18
Figure 6-14: Yield Street
The most slender local residential streets in the City are designated as Yield Streets. The Yield Street type is distinguished by a slender curb-to-curb width, and typically includes segments where two-way traffic is not possible when vehicles are parked at the curb: in such segments, some drivers must stop and yield the right-of-way to oncoming traffic. This is referred to as yield-flow operation. As noted in the Institute of Transportation Engineers’ (ITE) Residential Streets, Third Edition, “Yield flow occurs when two-way traffic is impossible where parked vehicles are present. Thus, some motorists must stop and yield the right-of-way to oncoming vehicles. For decades prior to the 1960s, yield flow was the widely accepted norm for local streets. Thus, the vast majority of local streets throughout the United States operate at yield flow.” Recent research has confirmed the traffic calming and safety benefits of this street type. Additional information on this street type is provided on page 17 of the Urban Street Design Guide and pages 12-50 of the ITE’s Residential Streets, Third Edition. (Image source: NACTO Urban Street Design Guide.)
33 CHAPTER 6: TRANSPORTATION
Goals and Policies
Goal T-1. Improve safety through the
design and maintenance of sidewalks,
streets, intersections, and other
roadway improvements.

Intent: To ensure that human life and health is paramount and takes priority over mobility and other road traffic system objectives.

Policies:

1.1 Vision Zero. Eliminate traffic fatalities and reduce the number of non-fatal injury collisions by 50% by
2030.

1.2 Traffic calming. Implement traffic-calming and
traffic-slowing measures on roads and at
intersections with a high level of existing or planned
pedestrian and non-motorized vehicle activity
and/or collisions.

1.3 Safe Routes to Schools. Actively promote safety
around schools, pursue funding to implement
physical improvements around schools and student
education programs around traffic safety (such as
“walking school buses”, walking audits, bike rodeos,
classroom instruction and promotional events).

1.4 ADA-compliant Sidewalks. Ensure sidewalks are
ADA compliant and free of blockage resulting from
parked vehicles or other obstructions.

1.5 Coordination with public safety. Ensure that the
Menlo Park Fire Protection District (MPFPD) and the
City’s Police Department review construction plans
for roadway modifications, internal circulation, and
establish, if needed, temporary alternative
emergency routes to be used the duration of any
construction project. During design review, ensure
that roads and driveways are established that meet
applicable code requirements for emergency access,
including potentially including signal preemption
mechanisms. Ensure that the MPFPD reviews
related building plans for compliance with the Fire
Code and establishes a future inspection schedule
for continued compliance. Continue the existing
practice of informing the MPFPD and the Police
Department of projects and proactively engaging
with the MPFPD and the Police Department through
the Development Review Committee (DRC) and the
plan check process.

Goal T-2. Foster the creation of
complete, multimodal streets.

Intent: To encourage multimodal and attractive streets
that provide for the needs of diverse members of the
community, balance the different modes of transportation, promote physical activity, and support environmental
sustainability.

Policies:

2.1 Accommodating all modes. Plan, design and
construct transportation projects to safely
accommodate the needs of pedestrians, bicyclists,
transit riders, motorists, people with disabilities, and persons of all ages and abilities.

2.2 University Avenue. As the main transportation spine of East Palo Alto, ensure that any future redesign of
University Avenue include improvements for all
modes of travel, focusing on its local function as a
community centerpiece for local activity and travel.

Design options could include buffered and painted
bicycle lanes, streetscape improvements such as
benches and pedestrian scale lighting, and mid-block
crossings, reversible lanes, and the reintroduction of
on-street parking. The City shall maintain control of
University Avenue (not Caltrans).

2.3 Fix It First. Maximize the value of past investments by prioritizing infrastructure spending to support the
maintenance and upgrading of existing
transportation infrastructure before incurring the
cost of constructing new infrastructure.

2.4 Funding. Pursue adequate and sustainable funding
sources for maintaining all existing city
transportation infrastructure.

2.5 NACTO Design Guides. Adopt the NACTO (National
Association of City Transportation Officials) Urban
Street Design Guide and Urban Bikeway Design
Guide as supplements to the street types in this Plan
and the California Manual for Uniform Traffic
Control Devices.
34 CHAPTER 6: TRANSPORTATION
CITY OF EAST PALO ALTO: GENERAL PLAN 2035 | 6-20

2.6 Pedestrian and bicycle crossings. Encourage
pedestrian and bicycle crossings at key locations and
across existing barriers such as Highway 101 and to
local employment and schools, such as Bay Road.

2.7 Truck routes. Update Municipal Code demarcating
truck routes through East Palo Alto to conform to
the new Truck Route map shown in this Circulation
Element.

Goal T-3. Create a complete, safe, and
comfortable pedestrian network for
people of all ages and abilities.

Intent: To encourage a livable, healthy, and connected city with a safe and comfortable pedestrian network among its various neighborhoods, parks, trails, employment centers, community facilities, and commercial areas.

3.1 Active transportation. Increase the levels of active transportation.

3.2 Loop road. Pursue the new multimodal Loop Road,
including the Bay Trail connection, as described in
the Ravenswood/4 Corners TOD Specific Plan to
alleviate congestion and neighborhood traffic

3.3 Pedestrian network. Create a safe, comfortable, and convenient pedestrian network that focuses on a)
safe travel; b) improving connections between
neighborhoods and commercial areas, and across
existing barriers; c) providing places to sit or gather, pedestrian-scaled street lighting, and buffers from
moving vehicle traffic; and d) includes amenities
that attract people of all ages and abilities.

3.4 Pedestrian and bicycling education,
encouragement, and awareness. Actively engage
the community in promoting walking and bicycling
through education, encouragement (such as Bike to
Work Day, Walk to Work Day, and Bike/Walk to
School days and programs), and outreach on
improvement projects and programs.

3.5 Coordination with neighboring jurisdictions.

Coordinate pedestrian and bicycle improvements
with the plans of neighboring jurisdictions and the
region.

Goal T-4. Build a comprehensive and
well-used bicycle network that
comfortably accommodates bicyclists
of all ages and skill-levels.

Intent: To encourage a livable, healthy, and connected city with a safe and comfortable bicycle network and adequate bicycle parking to enhance bicycling as a convenient form of transportation for both commute and leisure trips.

4.1 Bicycle network. Improve facilities and eliminate
gaps along the bicycle network to connect
destinations across the city and create a network of
bicycle facilities of multiple types that connect to
neighboring cities, including a path along Newell
Road between Highway 101 and San Francisquito
Creek. The network should facilitate bicycling for
commuting, school, shopping, and recreational trips
by riders of all ages and levels of experience.

4.2 Bicycle Transportation Plan. Utilize the City’s Bicycle Transportation Plan to help guide the location and
timing for bicycle improvements

4.3 Wayfinding. Increase the convenience of walking
and bicycling by supporting the phased
implementation of a comprehensive citywide,
consistent bicycle and pedestrian wayfinding system
connecting major destinations.

4.4 Bicycle safety. Support bicycle education,
encouragement, and enforcement activities that
promote bicycle safety.

4.5 Public bicycle parking. Increase the amount of safe and convenient short- and long-term bicycle parking
and storage available to the public throughout the city.

4.6 Bicycle parking standards. Require large public and private development projects to provide sufficient
bicycle parking, shower and locker facilities.

4.7 Bikeshare. Support the expansion of the regional
bike share pilot program, helping to identify
appropriate locations for system expansion within
East Palo Alto.

4.8 San Francisco Bay Trail. Support the completion of
the San Francisco Bay Trail, including relevant
portions within East Palo Alto.
35 CHAPTER 6: TRANSPORTATION
CITY OF EAST PALO ALTO: GENERAL PLAN 2035 | 6-21
Goal T-5. Support local and regional
transit that is efficient, frequent,
convenient, and safe.

Intent: To support planning and coordination of transit services to accommodate diverse community needs for
safe, comfortable, and efficient local and regional transit.

5.1 Dumbarton rail service. Support ongoing regional
efforts to reintroduce passenger rail service along
the Dumbarton corridor and support multimodal
access improvements to future rail station(s).

5.2 Coordination with transit agencies. Coordinate with transportation service providers to improve transit
service and access in the City, focusing particularly
on areas with high concentrations of zero vehicle
households, areas that currently lack public transit
options, and on the improvement of transfers and
connections between systems.

5.3 Transit priority. Ensure transit vehicles retain
priority over other vehicles along transit network
streets (as shown in Figure 6-3), prioritizing transit
speed and schedule reliability.

5.4 Access to transit. Provide connecting bicycle and
pedestrian infrastructure and amenities to improve
access to transit stations and stops, and encourage
new development projects near transit to improve
transit stop amenities.

5.5 Transit stops. Support the installation of transit stop amenities, including shelters, benches, real-time
information panels, lighting, bike parking, bike
sharing stations, etc.

5.6 Local transportation services. Create or partner
with transit providers, employers, educational
institutions, major commercial entities and event
organizers to improve local transportation services,
including developing discount transit pass programs
for groups such as students.

5.7 Connection to Dumbarton corridor. Should
Facebook be successful in lobbying for a fixed
railway or Bus Rapid Transit (BRT) connection to
their campus, request a pedestrian connection to a
Willow Road station that transects the office park
behind the Kavanaugh neighborhood.

5.8 Senior transit. Support the expansion of affordable and reliable transportation options such as
discounted transit passes for older adults and
persons with disabilities, focusing on neighborhoods
with high concentrations of elderly residents.

5.9 Cut-through traffic. Encourage and support efforts
to improve regional transportation given that the
majority of traffic congestion in the City is generated by regional circulation..

Goal T-6. Develop strategies to provide
efficient and adequate vehicle
parking.

Intent: To encourage the development of an efficient and adequate parking supply, reduce the negative effects of parking on the pedestrian environment and surrounding
neighborhoods, and support community goals for complete streets, walkability, bikeability, and effective transit.

6.1 Public parking management. Improve the efficiency
of the on- and off-street public parking system via
parking management strategies that ensure adequate
parking is available for nearby uses, including
Residential Permit Parking (RPP) in residential areas
that see significant parking spillover.

6.2 Parking requirements. Maintain efficient parking
standards that consider the effect on demand due
to various contextual conditions such as parking
prices, transportation demand management
strategies, transit accessibility, walkability, and
bikeability. Study establishing a density bonus
program for developments that utilize mechanized
parking lifts.

6.3 Off-street parking. Ensure new off-street parking is properly designed and used efficiently.

6.4 “Park Once.” Support the establishment of shared
public parking, particularly in mixed-use and retail
areas, and of Park-Once strategies that allow
motorists to park just once and complete multiple
daily tasks on foot before returning to their vehicle,
helping to reduce vehicle trips and parking demand.

Potential shared parking facilities include private
and public facilities such as church and school
parking lots.
36 CHAPTER 6: TRANSPORTATION
CITY OF EAST PALO ALTO: GENERAL PLAN 2035 | 6-22
Goal T-7. Adopt transportation
performance measures.

Intent: To enable effective, informed transportation
planning by using indicators, data and monitoring to
evaluate the city’s multi-modal transportation system.

7.1 Automobile Level of Service Standards. Improve the
East Palo Alto circulation system roadways in
concert with land development to maintain
adequate levels of service for automobile travel.

Automobile Level of Service (LOS) performance can
be measured using a volume-to-capacity (V/C) ratio.

V/C ratios are calculated based on existing or future
average daily traffic (ADT) volumes and daily
capacity values for various types of roadways. A
level of service scale is used to evaluate roadway
performance based on V/C ratios. These levels range
from “A” to “F”, with LOS A representing free flow
conditions and LOS F representing severe traffic
congestion. Descriptions of traffic flow for the
different levels of service are provided in Table 6-4
Standards for Roadway Levels of Service. The
performance criteria for evaluating volumes and
capacities of the East Palo Alto roadway system is
LOS D. At a signalized intersection, an impact is
considered significant if it causes operations to
degrade from LOS D or better to LOS E or F; or
exacerbates LOS E or F conditions by increasing
critical delay by >4 seconds and increasing volume
to capacity ratio (V/C ratio) by 0.01; or increases the V/C ratio by > 0.01 at an intersection that exhibits
unacceptable operations, even if the calculated LOS
is acceptable. At an unsignalized intersection, an
impact is considered significant if it: causes
operations to degrade from LOS D or better to LOS E
or F; or exacerbates LOS E or F conditions by
increasing control delay; or causes volumes under
project conditions to exceed the Caltrans Peak Hour
Volume Warrant Criteria. Where the City
determines that proposed development projects will
cause LOS standards to be exceeded, appropriate
mitigation will be required to improve roadways to
meet LOS standards.

7.2 Updating Transportation Performance Measures.

Update the transportation performance measures in
this Transportation Element, including Automobile
Level of Service standards, once the State of
California has amended the California
Environmental Quality Act Guidelines to implement
Senate Bill 743's requirement to provide an
alternative to automobile Level of Service for
evaluating transportation impacts (See California
Public Resources Code Section 21099(b)(1).)
Additionally, designate appropriate infill opportunity
zones within East Palo Alto, within which the
automobile Level of Service standards prescribed by
California Government Code Section 65089 shall not
apply. (See Government Code Sections 65088.1 and
65088.4.)

7.3 Multimodal transportation impact fee. Adopt a
transportation impact fee for new development that
raises funds for improving all modes of
transportation.

Goal T-8. Adopt transportation
demand management and roadway
system efficiency strategies.

Intent: To increase transportation choices, improve public health, reduce pollution, make effective use of roadway capacity and decrease automobile traffic by improving
management of existing roadways and implementing
complementary policies promoting transit, walking,
bicycling and complete streets.

8.1 Transportation Demand Management (TDM).

Promote effective TDM programs to reduce travel
demand from existing and new development,
shifting trips to alternative modes. Regularly update
the TDM ordinance to establish effective
requirements that reduce travel demand from
existing and new development. Require projects to
implement TDM programs, as defined in the TDM
ordinance.

8.2 Avoidance of street widening. When feasible, avoid
widening streets to increase automobile capacity,
37 CHAPTER 6: TRANSPORTATION
CITY OF EAST PALO ALTO: GENERAL PLAN 2035 | 6-23
focusing instead on operational improvements such
as signal timing optimization, modern roundabouts
and other Transportation Systems Management
(TSM) strategies that aim to improve traffic
conditions and reduce cut-through traffic by
maximizing the efficiency of existing vehicle
infrastructure.

Source: Highway Capacity Manual (HCM), 2000.

Table 6-4: Standards for Roadway Levels of Service
Level of
Service Traffic Conditions V/C Value
A
Primarily free flow operations at average travel speeds usually about 90% of free-flow speed. Vehicles can maneuver unimpeded within the traffic stream. Delay at signalized intersections is minimal.

0.00 - 0.60
B
Reasonably unimpeded operations at average travel speeds usually about 70% of free flow speed. Ability to maneuver is only slightly restricted and stopped delays are not bothersome. Drivers are not subjected to appreciable tension.

0.61 - 0.70
C
Represents stable operations, however, ability to maneuver and change lanes in midblock locations may be more restricted. Longer queues and/or adverse signal coordination may contribute to lower average travel speeds of about 50% of free-flow speed. Drivers will experience some appreciable tension.

0.71 - 0.80
D
Borders on a range in which small increases in flow may cause substantial increases in approach delay, and hence, decreases in arterial speed. Causes range from adverse signal progression, inappropriate signal timing, high volumes, or any combination. For planning purposes, this Level of Service is the lowest that is considered acceptable.

Average travel speeds are about 40% of free-flow speed.

0.81 - 0.90
E
Characterized by significant approach delays and average travel speeds of one-third of free-flow speed or lower, caused by adverse progression, high signal density, extensive queuing at critical intersections, inappropriate signal timing, or some combination.

0.91 - 1.00
F
Characterized by arterial flow at extremely low speeds below one-third to one-quarter of free flow speed. Congestion is likely at critical signalized intersections, resulting in high approach delays. Adverse progression is frequently a contributor to this situation.

Above 1.00
38 Revised per City Council approval date of 05/21/24

SPEED HUMP INSTALLATION CRITERIA AND REVIEW PROCESS

CITY OF EAST PALO ALTO
Dear Resident/Neighborhood Association:

Our correspondence indicates that you have contacted the City to request the installation of speed humps on your street. When placed on an appropriate street, speed humps can be effective in reducing vehicle speeds. Speed humps cannot, however, be installed on every street in East Palo Alto due to safety considerations. In order for us to identify streets that do qualify for speed humps, the City has established a set of criteria that must be met before speed humps can be eligible for installation on any streets. The criteria are as follows:

In order for a street to qualify as eligible for speed humps the street must:

1. Be classified as a local/residential street

2. Have a street width of 40 feet or less

3. Have no more than two lanes (one in each direction)

4. Speed humps petition requires at least 67% of residents of the addresses

5. Have a speed limit of 25 mph or less

6. Be able to have a warning sign posted before the hump at a distance equal to at least the minimum safe stopping distance as defined by the City Engineer

7. Be visible to oncoming traffic for at least the minimum safe stopping distance as defined by the City Engineer

8. Be able to accommodate an installation without extending over a manhole, catch basin, or other utility access point

9. Have curbs and gutters
If your street meets each of the criteria stated above, you may submit a petition to the City Engineer requesting the installation of speed humps. If your street fails to meet one or more of the criteria, your petition cannot be approved for placement of speed humps.

Priority for speed humps will be given to streets that have an average daily traffic (ADT) between 500 and 3,000 vehicles. Priority for installation will also be given for streets that have at least three (3) reported speed-related traffic accidents that occurred in the past five years.

Attached is a blank petition form that must be completed before consideration can be given to installing speed humps on a street. If you are interested in having speed humps installed on your street, you must obtain signatures representing at least 67% of the addresses within the block collector or local street.
39 Revised per City Council approval date of 05/21/24
where the speed humps are requested. Each rental unit within an apartment building requires a separate signature. If you wish to have speed humps installed on more than one block, you must circulate a separate petition for each block. Signatures obtained from citizens that do not reside on the block where speed humps are requested will not be considered when evaluating the petition. If you need additional petition forms, please photocopy the attached form.

For the purpose of this speed hump petition, an “address” is defined as any residence or business with frontage on the street where the speed hump is requested. Petition should include all individual apartment units as well as corner properties with frontage on the street where speed hump(s) is requested, even if the property’s address is on the cross street. You must enter the total number of addresses on the block(s) that will be directly affected by the speed hump on the accompanying petition.

Upon receipt of your petition, the Public Works & Transportation Commission will review and confirm that you have obtained signatures representing at least 67% of the addresses with the requesting block(s). If the petition does not contain sufficient signatures, your request will be denied. If the petition does contain sufficient signatures, we will post a public hearing notice for residents of your surrounding neighborhood to meet with the Commission to discuss the petition.

A written report will be submitted after the hearing to the City Council if speed hump installation is recommended.

If there is a favorable hearing, and the City Council approves our recommendation, speed humps may be installed on your street if funding is available. If funding is not available, the City may request that the affected residents pay for the installation.

Road humps may be considered for removal under a similar procedure, with consideration only three (3) years after installation. Costs for removal may also be requested from the affected residents.

Please forward your completed petition(s) to the City Engineer, City of East Palo Alto, 1960 Tate Street, East Palo Alto, CA 94303.

We appreciate your concern. Unfortunately, due to the growing number of requests we are receiving on speed humps, we cannot guarantee that your street(s) will be selected for speed humps even if a qualifying petition is submitted.

If you are not sure if your street(s) meet the criteria outlined above, or if you have any questions regarding the petition process, please call the City Engineer’s Office at 650-853-3189.

Yours very truly,
City Engineer
40 CITY PETITION FOR THE INSTALLATION OF SPEED HUMPS
To: City of East Palo Alto Date:___________
Community & Economic Development DepartmentEngineering Division1960 Tate StreetEast Palo Alto, CA 94303 Phone: 650-853-3189Fax: 650-853-3179The undersigned residents request the installation of a Speed Hump(s) on______________________ Street, between_____________________ Street and _______________________ Street. Please diagram by name those streets in the space provided below.

Additional comments or diagrams
Name Namethe theintersection intersectionby the X X
X by the X
(Name street proposed for Speed Hump below)
Please give reason(s) for this request:How many traffic accidents have occurred in the past 5 years in this street?During which hours is speeding at its worse? a.m. and/or p.m. 41 How many addresses are within the area specified in your diagram? ______________________ Note: Signatures are required of residents representing at least 67% of the addresses within the described area you have listed. These signatures are limited to on per home address. However, each apartment unit within an apartment building requires a separate signature. All questions on this petition must be completed to be considered for action.

Petition Submitted By:Name:Address:Email:Phone:

NAME (with Signature) ADDRESS (Please include Apt.#) DAYTIME PHONE NO.1. (signature)(print name here)2. (signature)(print name here)3. (signature)(print name here)4. (signature)(print name here)5. (signature)(print name here) 42 NAME (with Signature) ADDRESS (Please include Apt.#) DAYTIME PHONE NO.

6. (signature)(print name here)7. (signature)(print name here)8. (signature)(print name here)9. (signature)(print name here)10. (signature)(print name here)11. (signature)(print name here)12. (signature)(print name here)13. (signature)(print name here) 43 NAME (with Signature) ADDRESS (Please include Apt.#) DAYTIME PHONE NO.

14. (signature)(print name here)15. (signature)(print name here)16. (signature)(print name here)17. (signature)(print name here)18. (signature)(print name here)19. (signature)(print name here)20. (signature)(print name here)21. (signature)(print name here) 44 NAME (with Signature) ADDRESS (Please include Apt.#) DAYTIME PHONE NO.

22. (signature)(print name here)23. (signature)(print name here)24. (signature)(print name here)25. (signature)(print name here)Please add more lines if additional signatures are required. 45 CONSENT ITEM 3.4

EAST PALO ALTO

CITY COUNCIL

STAFF REPORT
DATE: January 6, 2026
TO: Honorable Mayor and Members of the City Council
VIA: Melvin E. Gaines, City Manager
BY: James Colin, City Clerk
SUBJECT: City Council Meeting Minutes
Recommendation
Adopt December 16, 2025, minutes.

Attachments

1. December 16, 2025, Minutes
46 EAST PALO ALTO CITY COUNCIL

REGULAR SESSION MINUTES
Tuesday, December 16, 2025, 6:30 PM
EPA Government Center
2415 University Avenue, First Floor
East Palo Alto, CA 94303

1. CALL TO ORDER AND ROLL CALL
The City Council meeting was called to order by Mayor Lincoln at 6:31 PM.

Attendee Name Title Status Arrived
Webster Lincoln Mayor Present
Ruben Abrica Vice Mayor Present
Carlos Romero Councilmember Present
Mark Dinan Councilmember Present
Martha Barragan Councilmember Present

2. APPROVAL OF THE AGENDA
A motion to approve the agenda was made by Councilmember Romero, seconded by Councilmember Barragan, and passed unanimously.

3. APPROVAL OF CONSENT CALENDAR
A motion to approve the consent calendar was made by Vice Mayor Abrica, seconded by Councilmember Barragan, and passed.

3.1 Monthly Cash Treasury Report for October 2025

3.2 Annual Development Impact Fee Report (AB 1600 Report)

3.3 Agreement with Street Level Advisors and the Community Planning Collaborative in Updating the Inclusionary Housing Ordinance (IHO) and Guidelines

3.4 City Council Meeting Minutes

4. CLOSED SESSION

5. PUBLIC COMMENT
Speakers:
- Gail Dixon
- Adrienne Bryant

6. INFORMATIONAL REPORTS

7. SPECIAL PRESENTATIONS 47

7.1 Northern California Carpenters Union Special Presentation Northern California Carpenters Union Presentation
Presenter: Harvey McKeen, Northern California Carpenters Union Mr. McKeen presented on proposed labor standards related to public works contractor prequalification, focusing on:
- Apprenticeship participation standards
- Local hire best-effort requirements
- Healthcare contribution requirements

8. PUBLIC HEARINGS

9. POLICY AND ACTION

9.1 Resolution Modifying Regular City Council Meeting Start Times to 5:30 pm City Clerk James Colin presented a resolution proposing to change regular City Council meeting start times to 5:30 PM, following discussion during adoption of the 2026 Council calendar.

The following speakers provided public comments:
- Gail Dixon
- Luis Rosas
- Adrienne Bryant
- Maureen L.

Motion by Councilmember Romero, seconded by Councilmember Dinan, to adopt a resolution establishing regular City Council meetings on the first and third Tuesdays of each month with a 6:00 PM start time.

Motion passed unanimously.

9.2 Internal Control Policy
Finance Director Tomo Oku presented the proposed Internal Control Policy developed in response to the 2023–24 San Mateo County Civil Grand Jury report. The policy aligns with the U.S. Government Accountability Office “Green Book” framework and includes annual assessments and reporting to the City Council.

Public Comment:
- Gail Dixon
Motion by Councilmember Dinan, seconded by Councilmember Barragan, to:
- Adopt the Internal Control Policy;
- Accept the implementation framework responding to the 2023–24 Civil Grand Jury report; and 48
- Receive the Internal Control Procedures Manual and example Risk Register.

Motion passed unanimously.

9.3 Authorization to Award Agreement to LAZ Parking to Provide Parking Enforcement and Staffing Services
Assistant to the City Manager Orly Amey presented the item, describing the procurement process and the need to expand parking enforcement capacity beyond current Community Service Officer staffing.

Police Chief Liu explained three service options:
- Baseline
- Expanded
- Comprehensive 24-hour coverage
Representatives from LAZ Parking (Mohammad Monsoor, Anthony Hamilton, and Steve Mooney) described their experience, education-first enforcement approach, and statewide municipal partnerships.
- Marianna Sumina
- Christopher Kao
- Gail Dixon
- Isabel Lopez Ysmael
- Adrienne Bryant
- Laura Rubio (via interpreter)
- Luis Rosas
Motion by Vice Mayor Abrica, seconded by Councilmember Dinan, to select Option 3 (Comprehensive 24-Hour Coverage) and adopt a resolution authorizing the City Manager to negotiate and execute a five-year agreement with LAZ Parking, with a one-year review to determine whether to continue or scale back service levels.

Motion passed unanimously.

10. COUNCIL REPORTS
- Councilmember Romero raised concerns regarding the SFO Airport Expansion Final EIR and noted that East Palo Alto did not submit comments despite being in the flight path.
- Councilmember Barragan stated there may have been confusion regarding the City’s participation status.
- Mayor Lincoln highlighted the success of the University Circle holiday event.

11. ADJOURNMENT 49
The meeting was adjourned at 9:09 PM.
50 POLICY AND ACTION 9.1

EAST PALO ALTO

SANITARY DISTRIC

STAFF REPORT
DATE: January 6, 2026
TO: Honorable Members of the City of East Palo Alto City Council, Governing Board to the East Palo Alto Sanitary District, a Subsidiary of the City of East Palo Alto VIA: Melvin E. Gaines, General Manager
BY: Tomohito Oku, Finance Director/District Treasurer
SUBJECT: Accept EPASD Annual Financial Report for Fiscal Year 2024-25 Recommendation
Adopt a resolution:

1. Accepting and directing staff to file with the State Controller’s Office the Annual Audited Financial Reports for Fiscal Year 2024-25; and

2. Finding that the proposed action does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(4) in that it is related to government fiscal activities, which do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment.

Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:

Priority: Governance, Organizational Strength, and Fiscal Sustainability Background
State law requires special districts to issue annual financial reports prepared in accordance with generally accepted accounting principles (GAAP) to ensure that the financial position and results of operations of each governmental entity are publicly available to residents, legislators, financial institutions, and other interested parties.
51 POLICY AND ACTION 9.1
Effective October 1, 2024, the East Palo Alto Sanitary District (EPASD or District) was reorganized as a subsidiary district of the City of East Palo Alto (City), with the City Council serving as the governing board. As a result of this reorganization, EPASD’s financial activities are now closely integrated with the City’s financial reporting, budgeting, and internal control framework, while the District continues to operate as a legally distinct enterprise fund.

Prior to the reorganization, EPASD retained a separate independent auditor to perform its annual financial audit. Following incorporation of EPASD as a subsidiary district, staff evaluated whether to continue with a separate audit firm or to expand the scope of the City’s existing audit services contract. Ultimately, the City Council decided the same firm should audit the City and EPASD, and approved a First Amendment to the audit services agreement with Eide Bailly LLP exercising the optional contract extension years and expanding the scope of services to include the EPASD audit.

The decision to expand the scope of the City’s existing audit contract, rather than retain a separate auditor for EPASD, was based on several considerations. These include improving operational efficiency by consolidating audit planning, fieldwork, and reporting under a single audit firm; enhancing the overall quality and consistency of audit services by applying a uniform audit approach across the City and EPASD; and reducing complexity and coordination risks associated with a “group audit” involving multiple audit firms. Utilizing a single auditor also supports clearer accountability, streamlined communication with management and the governing board, and a more cohesive evaluation of internal controls across the combined reporting entity.

This approach is intended to support a smoother transition following EPASD’s incorporation, strengthen financial oversight, and ensure timely, high-quality audit reporting for both the City and the District.

Analysis
Eide Bailly LLP, Certified Public Accountants, has completed the independent audit of the East Palo Alto Sanitary District’s financial statements for the fiscal year ended June 30, 2025. An auditor representative will present an overview of the audit results and be available to respond to questions from the Governing Board.

Below is a summary description of the annual financial report:
1) Independent Auditor's Report
Provides the auditor’s professional opinion on whether the financial statements fairly present the District’s financial position and results of operations, identifies the auditing standards applied, and affirms the auditor’s independence.
2) Management’s Discussion and Analysis (MD&A)
52 POLICY AND ACTION 9.1
A narrative overview prepared by management that highlights key financial trends, significant changes in revenues and expenses, and factors affecting the District’s financial position, including comparisons to the prior fiscal year.
3) Basic Financial Statements
Includes the Statement of Net Position, Statement of Revenues, Expenses, and Changes in Net Position, Statement of Cash Flows, and the accompanying Notes to the Financial Statements, which provide detailed disclosures of accounting policies and significant financial activities.
4) Required Supplementary Information
Includes pension and other post-employment benefit schedules required under applicable accounting standards.

Audit Highlights
The District received an unmodified (“clean”) audit opinion, indicating that the financial statements present fairly, in all material respects, the financial position and results of operations of the District in conformity with generally accepted accounting principles (GAAP).

As part of the audit, the auditor considered the District’s internal control environment over financial reporting for the purpose of designing appropriate audit procedures. The audit was not designed to express an opinion on internal controls; however, no deficiencies, significant deficiencies, or material weaknesses in internal control were identified or reported as a result of the audit. Accordingly, no internal control findings are being reported to the Governing Board for Fiscal Year 2024-25.

Financial Statements Highlights
Fiscal Impact
There is no fiscal impact by 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. 53 POLICY AND ACTION 9.1
Environmental
The proposed action does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(4) in that it is related to government fiscal activities, which do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment.

Government Code § 84308
Applicability of Levine Act: No, as the proposed action does not involve an entitlement.

Analysis of Levine Act Compliance: Not applicable.

Attachment:

1. Resolution

2. Annual Financial Report

3. Communication letter to the Board of Directors
54 DRAFT
Resolution No. XX-2026 1 of 2
RESOLUTION NO. XX– 2026

A RESOLUTION OF THE BOARD OF

DIRECTORS OF THE EAST PALO ALTO

SANITARY DISTRICT
ACCEPTING AND DIRECTING STAFF TO FILE THE ANNUAL FINANCIAL4REPORT WITH THE STATE CONTROLLER’S OFFICE FOR FISCAL YEAR 2024-25
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 East Palo Alto Sanitary District (“District”) engaged David Farnsworth, Certified Public Accountant, as the District’s independent auditor for the fiscal year 2023-24; and WHEREAS, following the reorganization of the East Palo Alto Sanitary District as a subsidiary district of the City of East Palo Alto, the City Council approved an amendment to the City’s audit services agreement with Eide Bailly LLP exercising the optional extension years and expanding the scope of services to include the annual audit of the District, thereby consolidating audit services under a single auditor to promote efficiency, consistency, and coordinated financial reporting; and WHEREAS, the annual financial audit for fiscal year ended June 30, 2025, was conducted in accordance with auditing standards generally accepted in the United States of America; and WHEREAS, the District received an auditor opinion that the financial statements referred to above present fairly, in all material respects, the respective financial position of the District, as of June 30, 2025, 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.

NOW, THEREFORE, BE IT RESOLVED THAT THE BOARD OF DIRECTORS OF THE EAST PALO ALTO SANITARY DISTRICT hereby:

1. Finds the foregoing recitals are true and correct, and are incorporated by this reference into this action;

2. Accepts the annual financial report for Fiscal Year Ending June 30, 2025;

3. Directs staff to file the annual financial report with the State Controller’s Office, as required by law; and

4. Finds that the proposed action does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(4) in that it is related to government fiscal activities, which do not involve any 55 DRAFT
Resolution No. XX-2026 2 of 2
commitment to any specific project which may result in a potentially significant physical impact on the environment
PASSED AND ADOPTED 6th day of January 2026, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

Ruben Abrica, Board President
ATTEST: APPROVED AS TO FORM:

James Colin, Secretary John D. Lê, District Counsel
56 East Palo Alto
Sanitary District
Annual Financial
Report
June 30, 2025
eidebailly.com
57 This pageintentionally left blank
58 East Palo Alto Sanitary District
Table of Contents
June 30, 2025
Independent Auditor’s Report....................................................................................................................... 1 Management’s Discussion and Analysis....................................................................................................... 4 Basic Financial Statements:

Statement of Net Position ................................................................................................................8 Statement of Revenues, Expenses, and Changes in Net Position..................................................... 9 Statement of Cash Flows………………………………………………………………………….10
Notes to the Financial Statements.......................................................................................................11 Required Supplementary Information:

Schedule of Changes in the District’s Net OPEB Liability and Related Ratios… .........................28 Schedule of the District’s Contributions for OPEB ...................................................................... 29 Schedule of the District’s Proportionate Share of the Net Pension Liability..................................30 Schedule of the District’s Pension Contributions… .......................................................................31 Notes to the Required Supplementary Information….....................................................................32 59 This pageintentionally left blank
60 1
Independent Auditor’s Report
To the To the Board of Directors
East Palo Alto Sanitary District
East Palo Alto, California
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements the business-type activities of the East Palo Alto Sanitary District (District) as of and for the year ended June 30, 2025, and the related notes to the financial statements, which collectively comprise the District’s basic financial statements as listed in the table of contents.

In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the financial position of the business-type activities of the District as of June 30, 2025, and the changes in financial position and cash flows 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). 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 District 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.

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 District’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. eidebailly.com
4040 Campbell Ave., Ste. 200 • Menlo Park, CA. 94025-1053 • T 650.522.3400 • F 650.645.7393 • EOE 61 2 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 a 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, 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 District’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 District’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.
62 3
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management Discussion and Analysis, Schedule of Changes in the District’s Net OPEB Liability and Related Ratios, Schedule of the District’s Contributions for OPEB, Schedule of the District’s Proportionate Share of the Net Pension Liability and the Schedule of the District’s Pension 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.

Menlo Park, California
December 26, 2025
63 EAST PALO ALTO SANITARY DISTRICT
Management’s Discussion and Analysis
June 30, 2025
4 This section of the East Palo Alto Sanitary District financial statements presents management’s discussion and analysis of the District’s financial performance during the fiscal year ended June 30, 2025. Since this management’s discussion analysis is designed to focus on current activities, resulting in change and current known facts, please read it in conjunction with the District’s basic financial statements and notes to the financial statements.

Financial Highlights
For the fiscal year ended June 30, 2025, the District’s net position increased by $3.4 million from $37.4 million to $40.9 million. Operating revenue, which consists of sewer service charges, increased by $410K or 8%, compared to the previous year. Non-operating revenue, which consists of property tax and investment earnings increased by $624K or 22%. Capital contributions decreased by $2.2 million. Operating expenses increased by $2.0 million, or 56%. The overall increase in the District’s net position is due in large part to the increase in cash and investment of $3.7 million. Current assets increased by $2.2 million. The unrestricted portion of the District’s net position (the portion available for capital projects and other expenditures) was $25.7 million as of June 30, 2025, an increase of $2.6 million compared to the previous year. The increase in the unrestricted portion is due to unspent property tax revenues which are reserved for deferred capital projects.

Overview of the Financial Statements
This management’s discussion and analysis is intended to serve as an introduction to the District’s basic financial statements. The District’s basic financial statements are comprised of two components: 1) the financial statements and 2) notes to the financial statements that explain in more detail some of the information in the financial statements.

Required Financial Statements
The financial statements of the District report information about the District using accounting methods similar to those used by private-sector companies. These statements provide both long-term and short-term information about the District’s overall financial status.

The Basic Financial Statements have three individual statements:
• Statement of Net Position: This statement presents information on the District’s assets, deferred outflows, liabilities, and deferred inflows as of year-end, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the District is improving or worsening.
• Statement of Revenues, Expenses, and Changes in Net Position: This statement presents the results of the District’s operations over the course of the fiscal year and information as to how the net position changed during the year. These statements can be used as an indicator of the extent to which the District successfully recovered its costs through user fees and other charges. All changes in net position are reported during the period in which the underlying event giving rise to the change occurs, regardless of the timing of the related cash flows. Thus, revenues and expenses are reported in this statement from items that will result in future cash flows.
• Statement of Cash Flows: This statement presents the changes in cash and cash equivalents resulting from operational, capital financing, non-capital financing, and investing activities. These statements summarize the annual flow of cash receipts and cash payments, without consideration of the timing of the event giving rise to the obligation or receipt and exclude non-cash accounting measures of depreciation or amortization of assets.
64 EAST PALO ALTO SANITARY DISTRICT
Management’s Discussion and Analysis
June 30, 2025
5 Financial Analysis of the District
As previously noted, net position may serve over time as a useful indicator of an entity’s financial position. In the case of the District, assets and deferred outflows exceeded liabilities and deferred inflows by $40.9 million at the close of the most recent fiscal year. The largest portion of the District’s net position (62.9%) reflect its unrestricted net position. Net investment in capital assets consists of 31.1% of total net position (e.g., sewers, buildings, machinery and equipment) as of June 30, 2025. Restricted net position consists of 6.0% of total net position.

The following schedule is prepared from District’s Statement of Net Position, which is presented on the full accrual basis of accounting in which capital assets are systematically depreciated. 2025 2024
Assets:

Current and other assets 29,879$ 26,578$
Noncurrent assets 13,035 12,321
Total assets 42,913 38,899
Total deferred outflows 638 1,462
Liabilities:

Current and other liabilities 1,168 856
Noncurrent liabilities 781 790
Total liabilities 1,949 1,646
Total deferred inflows 751 1,283
Net Position:

Net Investment in capital assets 12,716 12,161
Restricted 2,434 2,162
Unrestricted 25,703 23,109
Total Net Position 40,852$ 37,432$
Current assets increased by $3.3 million compared to the prior year and the change is primarily due to increases in cash and investments for $3.9 million.

Noncurrent assets increased by $0.7 million due mainly to increases in capital assets. 65 EAST PALO ALTO SANITARY DISTRICT
Management’s Discussion and Analysis
June 30, 2025
6 Change in Net Position
The change in net position was reported for $3.4 million in the fiscal year 2025 which is a decrease of $2.7 million compared to the previous fiscal year.
2025 2024
Operating revenues $ 5,453 $ 5,043
Operating expenses 5,527 3,552
Operating income (74) 1,491
Nonoperating revenue 3,429 2,805
Capital contributions 65 2,228
Special items - (361)
Change in Net Position 3,420 6,164
Net Position - Beginning 37,432 31,268
Net Position - Ending 40,852$ 37,432$
The change in net position shows the Summary of Revenues, Expenses, and Changes in Net Position and provides details as to the nature and source of these changes. During the fiscal year 2025, the total operating revenues increased by $0.4 million. Total operating expenses increased by $2.0 million. Non-operating revenue and capital contributions decreased by $1.5 million. The major factors which contributed to these results include:
• The operating revenues increased by $0.4 million, driven mainly by a 10% increase in sewer service charges implemented in the current fiscal year.
• Operating expenses increased by $2.0 million, primarily due to a $1.6 million increase in pensionrelated adjustments under GASB 68 and a $0.3 million increase in engineering services. • The increase in nonoperating revenues (expenses) of $0.6 million was due primarily to an increase of investment incomes for $0.4 million.
• The decrease in capital contributions of $2.2 million is due to decrease in development impact fees.

BUDGETARY HIGHLIGHTS
The District has an annual operating budget that is approved by its Board of Directors. Capital projects are approved on a project-by-project basis within the annually approved capital budget. The total budgeted expenditure was approved by the Board in the amount of $15.7 million including capital expenditures. The District has spent a total of $6.0 million on a budgetary basis of accounting in the current fiscal year which was within the authorized budget.

CAPITALASSETS AND DEBT ADMINISTRATION
Capital Assets
As of June 30, 2025, the District's investment in capital assets, net of accumulated depreciation reported $12.7 million and $12.2 million as of June 30, 2025, and 2024, respectively. 66 EAST PALO ALTO SANITARY DISTRICT
Management’s Discussion and Analysis
June 30, 2025
7 2025 2024
Land $ 185 $ 185
Construction in Progress - 6,677
Buildings 2,588 2,588
Furnishings & Equipment 2,176 2,176
Sewer system 17,333 9,691
Less: Accumulated Depreciation (9,565) (9,154)
Total $ 12,716 $ 12,162
Debt Administration
There is no long-term debt reported.

ECONOMIC FACTORS AND THE NEXT YEAR'S BUDGETS AND RATES
The service area of the District is best described as mature. The District is not in a growth situation but one in which the system is continually televised, upgraded, and repaired given budgetary constraints.

Requests for Information
The financial report is designed to provide a general overview of the District's finances and operations for all those with an interest in the District's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to:

Office of the General Manager
East Palo Alto Sanitary District
901 Weeks Street
East Palo Alto, CA 94303
67 FINANCIAL STATEMENTS
68 EAST PALO ALTO SANITARY DISTRICT
8 Statement of Net Position
June 30, 2025
ASSETS
Current assets:

Cash and investments $ 27,097,208
Cash with fiscal agents 2,369,061
Accrued interest 199,302
Tax receivable 213,105
Accounts receivable, net -
Total current assets 29,878,676
Noncurrent assets:

Loans and notes receivable 18,770
Net OPEB assets 300,413
Capital assets:

Non-depreciable 184,601
Depreciable, net 12,530,953
Total capital assets 12,715,554
Total noncurrent assets 13,034,737
Total assets 42,913,413

DEFERRED OUTFLOWS OF RESOURCES
Deferred outflows of resources - pension 490,637
Deferred outflows of resources - OPEB 147,635
Total deferred outflows of resources 638,272

LIABILITIES
Current liabilities:

Accounts payable 1,167,809
Total current liabilities 1,167,809
Noncurrent liabilities:

Net pension liability 781,238
Total noncurrent liabilities 781,238
Total liabilities 1,949,047

DEFERRED INFLOWS OF RESOURCES
Deferred inflows of resources - pension 602,578
Deferred inflows of resources - OPEB 148,246
Total deferred inflows of resources 750,824

NET POSITION
Net investment in capital assets 12,715,554
Restricted for:

Pension 2,369,061
Capital projects 64,698
Unrestricted 25,702,501
Total net position $ 40,851,814
See accompanying Notes to Basic Financial Statements.
69 EAST PALO ALTO SANITARY DISTRICT
9 Statement of Revenues, Expenses, and Changes
in Net Position
Year Ended June 30, 2025
OPERATING REVENUES:

Charges for services and other fees $ 5,424,854
Other 28,179
Total operating revenues 5,453,033
OPERATING EXPENSES:

Sewer treatment charges 2,109,731
Operation and maintenance services 764,377
Engineering and other services 504,088
General and administrative services 1,737,422
Depreciation 410,932
Total operating expenses 5,526,550
OPERATING INCOME (73,517)
NONOPERATING REVENUES (EXPENSES):

Property taxes 1,624,691
Operating grants and assistance 361,486
Interest income 1,442,427
-
Total nonoperating revenues (expenses) 3,428,604
INCOME (LOSS) BEFORE CONTRIBUTIONS AND TRANSFERS 3,355,087 Capital contributions 64,698
Change in net position 3,419,785

NET POSITION
Beginning of year 37,432,029
End of year $ 40,851,814
See accompanying Notes to Basic Financial Statements.
70 EAST PALO ALTO SANITARY DISTRICT
10 Statement of Cash Flows
Year Ended June 30, 2025
CASH FLOWS FROM OPERATING ACTIVITIES:

Cash received from others $ 28,179
Cash received from customers 6,038,263
Cash payments to suppliers for goods and services (3,660,437) Cash paid to employees and city administration (1,017,917) Net cash provided by operating activities 1,388,088
CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:

Taxes and Operating grants 1,986,177
Net cash provided by noncapital financing activities 1,986,177 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:

Capital contributions 50,399
Acquisition of capital assets (965,288)
Net cash (used in) capital and related financing activities (914,889) CASH FLOWS FROM INVESTING ACTIVITIES:

Investment income received 1,487,940
Net cash provided by investing activities 1,487,940

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
3,947,316
CASH AND CASH EQUIVALENTS - Beginning of year 25,518,953 CASH AND CASH EQUIVALENTS - End of year $ 29,466,269
FINANCIAL STATEMENT PRESENTATION:

Cash and investments $ 27,097,208
Cash with fiscal agents 2,369,061
Total $ 29,466,269

RECONCILIATION OF OPERATING INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:

Operating income (loss) $ (73,517)
Adjustments to reconcile operating income
to net cash provided by operating activities:

Depreciation 410,932
Changes in assets, liabilities and related deferrals:

Accounts receivable 613,409
Pension and OPEB related deferred outflows of resources 824,171 Accounts payable 311,480
Net pension liabilities (8,327)
Net OPEB assets (157,579)
Pension and OPEB related deferred inflows of resources (532,481) Total adjustments 1,461,605
Net cash provided by operating activities $ 1,388,088
See accompanying Notes to Basic Financial Statements
71 EAST PALO ALO SANITARY DISTRICT
Notes to the Financial Statements
June 30, 2025
11 Note 1 – Summary of Significant Accounting Policies
A. Description of the Reporting Entity
The East Palo Alto Sanitary District (EPASD or the District) was originally formed in 1939 as an independent special district under the provisions of the California Health and Safety Code to provide wastewater collection services to the East Palo Alto community. Effective October 1, 2024, the District was incorporated into the City of East Palo Alto (City) as a subsidiary district, as approved by the San Mateo County Local Agency Formation Commission (LAFCo) and documented in its Certificate of Completion for LAFCo File 22-09, which formally established EPASD as a subsidiary district of the City.

As a subsidiary district, EPASD’s governing board became the City Council. Consistent with GASB Statement No. 14, as amended by GASB Statement Nos. 39 and 61, the District meets the criteria for inclusion in the City’s reporting entity. Because the City Council serves as the governing body of EPASD and the District provides services exclusively to the City’s residents, EPASD is reported as a blended component unit in the City’s Annual Comprehensive Financial Report (ACFR). The District’s financial data are therefore combined with and reported within the appropriate enterprise fund columns of the City’s basic financial statements.

Although EPASD is presented as a blended component unit of the City, the District continues to issue separate stand-alone financial statements to meet statutory and operational requirements.

B. Basis of Presentation and Accounting
The fund financial statements provide information about the District's enterprise funds. Statements for proprietary funds are presented. The emphasis of fund financial statements is on major enterprise funds, each displayed in a separate column. Major individual enterprise funds are reported as separate columns in the funds financial statements.

The District reports the following major enterprise fund:

The sewer fund accounts for the activities of the District. The activities are financed in whole or in part by fees charged to external parties and are accounted for in an enterprise fund. Enterprise funds maintain their records using the economic resources measurement focus and the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded when the related liability is incurred, regardless of the timing of the cash flows.

The statement of net position and the statement of revenues, expenses, and changes in net position displays information about the primary government (the District). Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. Operating revenues,such as charges forservices, result from exchange transactions associated with the principal activity of the District. Exchange transactions are those which each party receives and gives up essentially equal values. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses. 72 EAST PALO ALO SANITARY DISTRICT
Notes to the Financial Statements
June 30, 2025
12 C. Budgets and Budgetary Accounting
Annual budgets are adopted on a modified accrual basis of accounting.

The appropriated budget is prepared by fund, function, and department. The District General Manager is authorized to transfer any unencumbered amounts from one department to another within the same fund and to transfer any unencumbered appropriation from one line- item account to another within the same fund. Any additional appropriations require approval by the Board of Directors. Appropriations in all budgeted funds lapse at the end of the fiscal year.

D. Cash and Cash Equivalents
The District's cash and cash equivalents include cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition. For purposes of the statement of cash flows, the District's proprietary funds consider their demand deposits and all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

Restricted cash - Restricted assets are financial resources generated for a specific purpose, such as pension benefits. These assets are for the benefit of a specific purpose and, as such, are legally or contractually restricted by an external third-party agreement. The District's restricted assets consist of a Section 115 trust with California Public Employees' Retirement System (CalPERS) called California Employers' Pension Prefunding Trust (CEPPT) that is dedicated to pre-funding employer contributions to the defined benefit pension plan.

E. Prepaid Items
Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in fund financial statements. The cost of prepaid items is recorded as expenses when consumed rather than when purchased.

F. Capital Assets
The cost of additions to utility plant and major replacements of property is capitalized. Costs include material, direct labor, transportation and indirect items such as interest, engineering, supervision and employee fringe benefits. Capital assets are defined by the District as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of one year.

Donated capital assets are recorded at estimated acquisition value at the date of donation.

Depreciation is computed on a straight- line basis over the estimated useful lives of the property as follows:

Sewer Collection 50 years
Facilities Building 30 years
Furniture, Vehicle and Equipment 5 - 10 years
73 EAST PALO ALO SANITARY DISTRICT
Notes to the Financial Statements
June 30, 2025
13 G. Deferred Outflows and Inflows of Resources
In addition to assets, the statement of financial position includes a separate section for deferred outflows of resources. Deferred outflows of resources represent a consumption of net assets that applies to a future period(s) and so will not be recognized as an outflow of resources (expense) until then. The District has three items that qualify for reporting in this category. It isthe deferred charge on refunding reported in the government-wide statement of net position, and deferred amounts related to pension and OPEB
In addition to liabilities, the Statement of Net Position will report a separate section for deferred inflows of resources. Deferred inflows of resources represent an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. In the fund financial statements, the District reports deferred amounts related to pension and OPEB.

H. Postemployment Benefits Other Than Pensions (OPEB)
For purposes of measuring the total OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the District Plan and additionsto/deductions from the District Plan have been determined on the same basis as they are reported by CalPERS. For this purpose, the District recognizes benefit payments when due and payable in accordance with the benefit terms. Investments are reported at fair value.

I. 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 and additions to/deductions from the Plan 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.

J. Net Position
For reporting proprietary funds, the difference between assets and deferred outflows of resources less liabilities and deferred inflows of resources is called net position. Net position is comprised of three components: net investment in capital assets, restricted, and unrestricted. • Net investment in capital assets consists of capital assets, net of accumulated depreciation/amortization and reduced by outstanding balances of bonds, notes, and other debt that are attributable to the acquisition, construction, or improvement of those assets. Deferred outflows of resources and deferred inflows of resources that are attributable to the acquisition, construction, or improvement of those assets or related debt are included in this component of net position.
74 EAST PALO ALO SANITARY DISTRICT
Notes to the Financial Statements
June 30, 2025
14 • Restricted net position consists of restricted assets reduced by liabilities and deferred inflows of resources related to those assets. Assets are reported as restricted when constraints are placed on asset use either by external parties or by law through constitutional provision or enabling legislation. Amounts reported in restricted net position represent funds held in a Section 115 trust with CalPERS, called CEPPT, that are restricted for future contributions to the pension plan; amounts related to the net pension liability
• Unrestricted net position is the net amount of the assets, deferred outflows of resources, liabilities, and deferred inflows of resources that does not meet the definition of the two preceding categories.

Sometimes the District will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted net position and unrestricted net position in the government-wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the District's policy to consider restricted net position to have been depleted before unrestricted net position is applied.

K. Revenues and Expenses

1. Sewer Service Charges-Sewer service charges are billed and collected, on behalf of the District, by San Mateo County (the County) as a separate component of semi-annual property tax billings. The County assesses properties, bills for and collects property taxes on the following schedule:

Lien/valuation
Date Levy dates
Due dates
Delinquent as of
Secured
January 1
July 1
50% on November 1
50% on February 1
December 10
April 10
Unsecured
January 1
July 1
July 1
August 31
75 EAST PALO ALO SANITARY DISTRICT
Notes to the Financial Statements
June 30, 2025
15 2. Sewer Connection Fees-Connection fees represent a one-time contribution of resources to the District imposed on developers for the purpose of financing growth-related construction and improvements. Connection fees are recognized as 'Capital Contributions' revenues in the Statement of Revenues, Expenses and Changes in Net Position.

3. Use of Estimates-The preparation of basic financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Note 2 - Cash and Investments
Cash Deposits with Financial Institutions
Custodial credit risk- deposits. In the case of deposits, this is the risk that, in the event of a bank's failure, the East Palo Alto Sanitary District's deposits may not be returned to it. The District does not have a deposit policy for custodial credit risk. As of June 30, 2025, the District's cash deposit balance was $27,097,208 and $0 of that amount was exposed to custodial credit risk. The carrying amount of the deposits as of June 30, 2025, was $27,097,208.

Policies and Classification
The District's cash and investments consist of the following at June 30, 2025:

Cash and investments with San Mateo County Treasurer $ 27,097,208 Pension trust - CEPPT 2,369,061
$ 29,466,269
The District has authorized staff to invest cash with the San Mateo County Treasurer in a series of pooled accounts with cash from various other governmental entities within the County, for investment purposes.

State statutes govern the County's investment policies.

In addition, the County has an investment committee, which prescribes written investment policies regarding the types of investments that may be made. The policies limit amounts that may be invested in any one financial institution or amounts which may be invested in long-term instruments. Interest earned from such time deposits and investments is allocated quarterly to the District based on its average daily cash balances. The fair value of the account at June 30, 2025, was provided by the County Treasurer.

The District is a voluntary participant in the San Mateo County Investment Fund (SMCIF) that is regulated by California Government Code Section 53600 under the oversight of the treasurer of the County of San Mateo. The District reports its investment in SMCIF at the fair value amount provided by SMCIF. The balance available for withdrawal is based on the accounting records maintained by SMCIF, which are recorded on an amortized cost basis. The pool is not registered with the SEC and is unrated. 76 EAST PALO ALO SANITARY DISTRICT
Notes to the Financial Statements
June 30, 2025
16 Restricted Investments- Pension Trust - The District established a Section 115 trust account with CalPERS entitled CEPPT to hold assets that are legally restricted for use in administering the District's pension plan.

Trust account holders can select from two strategy options for investments. The District elected to select 50% of restricted funds to Strategy 1 portfolio and 50% of restricted funds to Strategy 2 portfolio of restricted funds. The CEPPT Strategy 1 and 2 portfolios are invested in various asset classes that are passively managed to an index. CalPERS periodically adjusts the composition of the portfolio in order to match the target allocations. Generally, equities are intended to help build the value of the portfolio over the long term while bonds are intended to help provide income and stability of principal. Also, strategies invested in a higher percentage of equitiesseek higher investment returns(but assumes more risk) compared with strategies invested in a higher percentage of bonds. Compared to CEPPT Strategy 2, this portfolio has a higher allocation to equities than bonds. The CEPPT Strategy 1 portfolio and CEPPT Strategy 2 portfolio consist of the following asset classes and corresponding benchmarks:

CEPPT CEPPT
Strategy 1 Strategy 1
Asset Class
Target
Allocation
Target
Range Benchmark
Global Equity 37% +/- 5% MSCI All Country World Index IMI (Net) Fixed Income 44% +/- 5% Bloomberg U.S. Aggregate Bond Index Real Estate Investment Trusts (REITs) 14% +/- 5% Bloomberg U.S. Aggregate Bond Index Treasury Inflation Protected Securities (TIPS) 5% +/- 3% Bloomberg US TIPS Index, Series L Cash 0% +/- 2% 91-Day Treasury Bill
Total 100% 0%

CEPPT CEPPT
Strategy 2 Strategy 2
Asset Class
Target
Allocation
Target
Range Benchmark
Global Equity 21% +/- 5% MSCI All Country World Index IMI (Net) Fixed Income 61% +/- 5% Bloomberg U.S. Aggregate Bond Index Real Estate Investment Trusts (REITs) 9% +/- 5% Bloomberg U.S. Aggregate Bond Index Treasury Inflation Protected Securities (TIPS) 9% +/- 3% Bloomberg US TIPS Index, Series L Cash 0% +/- 2% 91-Day Treasury Bill
Total 100% 0%
77 EAST PALO ALO SANITARY DISTRICT
Notes to the Financial Statements
June 30, 2025
17 Interest Rate Risk - Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment the greater the sensitivity of its fair value to changes in market interest rates. The District manages its exposure to interest rate risk by investing in the SMCIF. The sensitivity of the fair values of the District's investments to market interest rate fluctuation is measured as the weighted average maturity of the investment portfolio, which was 2.28 years and average duration of 2.05 years on June 30, 2025.

Investment Type Fair Value 1 Year or Less 1-2 Years 2-3 Years 3+ Years San Mateo County Pool $ 27,097,208 $ 27,097,208 $ - $ - $ - Pension trust - CEPPT 2,369,061 2,369,061 - - -
Total $ 29,466,269 $ 29,466,269 $ - $ - $ -
Investment Maturities (in years)
Fair Value Measurements - The District categorizes the fair value measurements of its investments based on the hierarchy established by generally accepted accounting principles. The fair value hierarchy has three levels and is based on the valuation inputs used to measure an asset's fair value. Deposits and withdrawals in the SMCIP and CEPPT- mutual funds are made in the basis of $1 and not fair value. Accordingly, the District's proportionate share of investments in those funds at June 30, 2025, is an uncategorized input not defined as Level 1, Level 2 or Level 3 input.
78 EAST PALO ALO SANITARY DISTRICT
Notes to the Financial Statements
June 30, 2025
18 Note 3 – Capital Assets
Capital assets activity for the year ended June 30, 2025, was as follows:

Balance at July
1, 2024 Additions
Deletions/
Reclassification
Balance at June
30, 2025
Capital assets not being depreciated
Land $ 184,601 $ - $ - $ 184,601
Construction in progress 6,676,749 965,287 (7,642,036) - Total capital assets not being dep 6,861,350 965,287 (7,642,036) 184,601 Capital assets being depreciated/amortized
Building 2,587,577 - - 2,587,577
Sewer system 9,690,761 - 7,642,036 17,332,797
Furniture and equipment 2,175,995 - - 2,175,995
Total capital assets being depreciated/amortized 14,454,333 - 7,642,036 22,096,369 Less accumulated depreciation/amortization for:

Building (2,479,809) (81,542) - (2,561,351)
Sewer system (4,628,346) (289,894) (4,918,240)
Furniture and equipment (2,046,330) (39,495) - (2,085,825) Total accumulated depreciation (9,154,485) (410,931) - (9,565,416) Total capital assets being depreciated/amortized 5,299,848 (410,931) 7,642,036 12,530,953 Total capital aseets, net $ 12,161,198 $ 554,356 $ - $ 12,715,554 Note 4 - Defined Benefit Pension Plan
A. Plan Descriptions
The District contributes to the California Public Employees' Retirement System (CalPERS), a cost sharing multiple-employer public employee retirement system. CalPERS provides retirement and disability benefits, annual cost-of living adjustments, and death benefits to plan members and beneficiaries. CalPERS acts as a common investment and administrative agent for participating public entities within the State of California. Benefit provisions and all other requirements are established by state statute and District resolution. Calipers issues a publicly available financial report that includes financial statements and required supplementary information. The report may be obtained from CalPERS, 400 Q Street, Sacramento, CA 95811.
79 EAST PALO ALO SANITARY DISTRICT
Notes to the Financial Statements
June 30, 2025
19 B. Benefits Provided
CalPERS providesservice 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: The Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost-of-living adjustments for each plan are applied asspecified by the Public Employees' Retirement Law.

The Plan's provisions and benefits in effect at June 30, 2025, are summarized as follows:

Miscellaneous
Hire Date Prior to January 1, 2013
Benefit vesting schedule 5 years service
Benefit Formula 2.5% @ 55
Benefit payment Monthly for life
Retirement age 50
Monthly benefits, as a % of annual salary 2 - 2.5%
Required employee contribution rates 7.96%
Required employer contribution rates 13.41%
Required unfunded accrued liability payment (UAL) $ 27,483 Miscellaneous
Hire Date On or after January 1, 2013
Benefit vesting schedule 5 years service
Benefit Formula 2.0% @ 62
Benefit payment Monthly for life
Retirement age 62
Monthly benefits, as a % of annual salary 2.00%
Required employee contribution rates 7.75%
Required employer contribution rates 7.87%
Required unfunded accrued liability payment (UAL) $ 644 Contributions- Section 20814(c) of theCalifornia Public Employees'Retirement Law requiresthat the employer contribution rates for all public employers are determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Funding contributions for the 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 byemployees during theyear,withanadditional amount tofinance any unfunded accrued liability. The District is required to contribute the difference between the actuarially determined rate and the contribution rate of employees.

For the year ended June 30, 2025, the contributions to the Plan were $69,226. 80 EAST PALO ALO SANITARY DISTRICT
Notes to the Financial Statements
June 30, 2025
20 C. Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions
As of June 30, 2025, the District reported net pension liability for its proportionate share of collective net pension liability in the amount of $781,238.

The District's net pension liability for the Plan is measured asthe proportionate share of the collective plans net pension liability. The net pension liability of the Plan is measured as of June 30, 2024, and the total pension liability for the Plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2023, rolled forward to June 30, 2024, using standard update procedures. The District's proportion of the net pension liability was based on a projection of the District's long-term share of contributions to the pension plan relative to the projected contributions of all participating employers, actuarially determined. The District's proportionate share of the net pension liability for the Plan as of the June 30, 2023, and 2024 measurement dates was as follows:

Proportion - June 30, 2023 0.00633%
Proportion - June 30, 2024 0.00644%
Change - Increase (Decrease) 0.00011%
At June 30, 2025, the District 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 $ 69,226 $ -
Changes of assumptions 20,079 -
Differences between expected and actual experience 67,545 2,636 Changes in employer's proportion 63,959 413,148
Differences between the employer's contribution 224,853 186,794 Net differences between projected and actual earnings
on plan investments 44,975 -
Total $ 490,637 $ 602,578
81 EAST PALO ALO SANITARY DISTRICT
Notes to the Financial Statements
June 30, 2025
21 The $69,226 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 near fiscal year. 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
2026 $ (184,432)
2027 34,778
2028 (16,100)
2029 (15,413)
Actuarial Assumptions
The total pension liabilities in the June 30, 2023 actuarial valuation was determined using the following actuarial assumptions for both plans:

Valuation Date June 30, 2023
Measurement Date June 30, 2024
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.

Discount Rate - The discount rate used to measure the total pension liability was 6.90 percent for the Plan. To determine whether the municipal bond rate should be used in the calculation of a discount rate for the plans, CaIPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the tested plans run out of assets. Therefore, the current 6.90 percent discount rate is adequate, and the use of the municipal bond rate calculation is not necessary.

The long term expected discount rate of 6.90 percent will be applied to all plans in the Public Employees' Retirement Fund (PERF). The stress test results are presented in a detailed report that can be obtained from the CalPERS website.
82 EAST PALO ALO SANITARY DISTRICT
Notes to the Financial Statements
June 30, 2025
22 The long-term expected rate of return on pension plan investments was determined using a building-block 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 took into account both short-term and long- term market return expectations as well as the expected pension fund cash flows. Using historical returns of all the funds' asset classes, expected compound returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both shortterm and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the 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 equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent.

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% 4.54%
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. 83 EAST PALO ALO SANITARY DISTRICT
Notes to the Financial Statements
June 30, 2025
23 Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate - The following presents the District's proportionate share of the net pension liability for the Plans, calculated using the discount rate for the Plans, as well as what the District'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 $ 1,737,767
Current Discount Rate 6.90%
Net Pension Liability $ 781,238
1% Increase 7.90%
Net Pension Liability $ (6,126)
Pension Plan Fiduciary Net Position - Detailed information about each pension plan's fiduciary net position is available in the separately issued CalPERS financial reports.

Note 5 – Postemployment Benefits Other Than Pensions (OPEB) General Information about the OPEB Plan
Plan Description and Benefits Provided
The District provides post‐retirement benefits to eligible employees in the form of reimbursement for post‐ retirement health insurance premiums. Retired employees have a choice of remaining on the district’s group health insurance plan or purchasing a plan of their choice. Reimbursement is made quarterly upon receipt of proof of payment. The District’s contribution is capped at the amount of the Kaiser premium. The obligation of district to provide these benefits is determined annually by the Board of Directors. In order to qualify for postemployment medical benefits, an employee must retire from the District with at least 5 years of service and be over 50 years of age. The District is a contracting agency under the Public Employees’ Medical and Hospital Care Act (PEMHCA), which is administered by CalPERS for the provision of healthcare insurance programs for both active and retired employees. The District participates in the California Employers’ Retiree Benefit Trust Fund Program (CERBT), an agent‐ multiple employer postemployment health plan, to prefund other postemployment benefits through CalPERS. The financial statements for CERBT may be obtained by writing the California Public Employees’ Retirement System. Employees covered by benefit terms.

As of the June 30, 2024, actuarial valuation date, the following current and former employees were covered by the benefit terms under the healthcare plan:

Active employees 6
Retired employees and beneficiaries 7
Total 13 84

EAST PALO ALO SANITARY DISTRICT
Notes to the Financial Statements
June 30, 2025
24 Contributions
The OPEB Plan and its contribution requirements are established by the District. The annual contribution is based on the actuarially determined contribution. For the fiscal year ended June 30, 2025, the District's contribution was $92,504, of which $3,566 was in the form of a subsidy.

Net OPEB Liability and Assumptions
The District’s net OPEB liability was measured as of June 30, 2024 and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation dated June 30, 2023, based on the following actuarial methods and assumptions:

Valuation Date June 30, 2023
Measurement Date June 30, 2024
Actuarial Cost Method Entry-Age Normal Cost Method
Actuarial Assumptions:

Discount Rate 6.55%
Inflation 2.50%
Health cost trend rates 6.5% in 2025 grading down to 3.9% by 2075 Projected Salary Increase 3.00%
Investment Rate of Retum 6.55%
Retirement age 50 to 75
Mortality CalPERS 2024 experience study
Demographic actuarial assumptions used in this valuation are based on the 2021 experience study of the California Public Employees Retirement System using data from 1997 to 2019, except for a different basis used to project future mortality improvements.

The long-term expected rate of return on OPEB plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

Asset Class
Assumed Asset Allocation
(CERBT Strategy 1)
Compound Return 6-20
Years
Global equity 49.00% 7.10%
Fixed income 23.00% 5.00%
Global real estate (REITs) 20.00% 6.40%
Treasury inflation protected securities 5.00% 3.80%
Commodities 3.00% 4.40%
100.00%
85 EAST PALO ALO SANITARY DISTRICT
Notes to the Financial Statements
June 30, 2025
25 The discount rate used to measure the total OPEB liability was 6.55 percent. The projection of cash flows used to determine the discount rate assumed that contributions will be made at rates equal to the actuarially determined contribution rates. Based on those assumptions, the OPEB plan's fiduciary net position was projected to be available to make all projected OPEB payments for current active and inactive employees and beneficiaries. Therefore, the long-term expected rate of return on OPEB plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability.

Changes in the Net OPEB Liability
The changes in the net OPEB liability are as follows:

Total OPEB
Liability (a)
Plan Fiduciary Net
Position (b)
Net OPEB
(Asset)
(c) = (a) - (b)
Balance at June 30, 2024 $ 1,281,928 $ 1,424,762 $ (142,834) Changes recognized during the period:

Service cost 57,107 - 57,107
Interest cost 79,941 - 79,941
Expected investment income - 87,609 (87,609)
Contributions - 78,371 (78,371)
Administrative expenses - (464) 464
benefit payments (78,371) (78,371) -
Change due to investment experience - 68,783 (68,783)
Change due to change in dicount rate (60,328) - (60,328) Net changes during the period (1,651) 155,928 (157,579) Balance at June 30, 2025 $ 1,280,277 $ 1,580,690 $ (300,413) Increase (Decrease)
Sensitivity of the Net OPEB Liability to Changes in the Discount Rate and to Changes in the Health Care Cost Trend Rates
The following presents the net OPEB liability if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate:

Change in discount rate
1% Decrease 5.55%
Net OPEB Assets $ 139,779
Current Discount Rate 6.55%
Net OPEB Assets $ 300,413
1% Increase 7.55%
Net OPEB Assets $ 431,399
86 EAST PALO ALO SANITARY DISTRICT
Notes to the Financial Statements
June 30, 2025
26 The following presents the net OPEB liability if it were calculated using health care cost trend rates that are one percentage point lower or one percentage point higher than the current rate:
1% Decrease 5.50%
Net OPEB Assets $ 339,975
Current Health Care Cost Trend Rate 6.50%
Net OPEB Assets $ 300,413
1% Increase 7.50%
Net OPEB Assets $ 177,216
OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB
Gains and losses related to changes in total OPEB liability and fiduciary net position are recognized in OPEB expense systematically over time. Amounts are first recognized in OPEB expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to OPEB and are to be recognized in the future as OPEB expense. The recognition period differs depending on the source of the gain or loss:

Net difference between projected and actual earnings on 5 Years straight-line recognition OPEB plan investments.

All other amounts Straight-line recognition over the expected average remaining service lifetime (EARSL)of all members that are provided with benefits, determined as of the beginning of the Measurement Period. In determining the EARSL, all active, retired and inactive (vested) members are counted, with the latter two groups having O remaining service years.
87 EAST PALO ALO SANITARY DISTRICT
Notes to the Financial Statements
June 30, 2025
27 For the fiscal year ended June 30, 2025, the District recognized OPEB expense of $52,977. As of fiscal year end June 30, 2025, the District reported deferred outflows and inflows of resources related to OPEB from the following sources:

Deferred Outflows
of Resources
Deferred Inflows of
Resources
OPEB Contributions subsequent to measurement date $ 92,504 $ - Changes of assumptions 29,439 58,074
Differences between expected and actual experience 9,092 90,172 Net differences between projected and actual earnings
on plan investments 16,600 -
Total $ 147,635 $ 148,246
The $92,504 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the OPEB liability in the next fiscal year. Other amounts reported as deferred outflows and inflows of resources related to OPEB will be recognized as expense as follows:

Fiscal Year Ending
June 30
Deferred Outflows/
(Inflows) of
Resources
2026 $ (12,853)
2027 17,852
2028 (51,042)
2029 (40,419)
2030 (6,653)
Note 6 - Commitments and Contingencies
Litigation-AtJune 30, 2025, in the opinion of the District's management, there are no outstanding matters, which could have a significant effect on the financial position of the District. 88 REQUIRED SUPPLEMENTARY INFORMATION
89 EAST PALO ALTO SANITARY DISTRICT
Required Supplementary Information
28 Schedule of Changes in the District's OPEB Liability and Related Ratios June 30, 2025
6/30/2025 6/30/2024 6/30/2023 6/30/2022 6/30/2021 6/30/2020 6/30/2019 6/30/2018 Measurement date 6/30/2024 6/30/2023 6/30/2022 6/30/2021 6/30/2020 6/30/2019 6/30/2018 6/30/2017 Total OPEB liability
Service cost $ 57,107 $ 39,876 $ 34,524 $ 33,345 $ 32,374 $ 29,357 $ 28,433 $ 65,151 Interest 79,941 84,170 83,575 78,160 76,380 86,688 83,812 75,555 Difference between expected and actual experience - (139,990) - 134,472 - (158,786) - 56,218 Change of assumptions (60,328) (4,374) 97,899 (83,791) - 11,722 - 58,445 Benefit payments (78,371) (75,430) (83,907) (82,353) (84,375) (73,289) (70,888) (47,473) Net change in total OPEB liability (1,651) (95,748) 132,091 79,833 24,379 (104,308) 41,357 207,896 Total OPEB liability - beginning 1,281,928 1,377,676 1,245,585 1,165,752 1,141,373 1,245,681 1,204,324 996,428 Total OPEB liability - ending (a) $ 1,280,277 $ 1,281,928 $ 1,377,676 $ 1,245,585 $ 1,165,752 $ 1,141,373 $ 1,245,681 $ 1,204,324 Plan Fiduciary Net Position
Contributions - employer $ 78,371 $ 75,430 $ 83,907 $ 82,353 $ 84,375 $ 118,018 $ 167,884 $ 123,991 Net investment income 87,609 81,677 (207,000) 333,568 41,428 66,813 61,815 84,512 Benefit payments (78,371) (75,430) (83,907) (82,353) (84,375) (73,289) (70,888) (47,473) Administrative expenses (464) (389) (392) (459) (573) (228) (522) (421) Other expenses - - - - - - (1,196) -
Change due to investment experience 68,783 4,315 - - - - - - Net change in plan fiduciary net position 155,928 85,603 (207,392) 333,109 40,855 111,314 157,093 160,609 Plan Fiduciary Net Position - beginning 1,424,762 1,339,159 1,546,551 1,213,442 1,172,587 1,061,273 904,180 743,571 Plan Fiduciary Net Position - ending (b) $ 1,580,690 $ 1,424,762 $ 1,339,159 $ 1,546,551 $ 1,213,442 $ 1,172,587 $ 1,061,273 $ 904,180 Net OPEB liability (asset) - ending (a) - (b) $ (300,413) $ (142,834) $ 38,517 $ (300,966) $ (47,690) $ (31,214) $ 184,408 $ 300,144 Plan fiduciary net position as a percentage of the the
total OPEB liability (asset) 123.46% 111.14% 97.20% 124.16% 104.09% 102.73% 85.20% 75.08% Covered-employee payroll 603,962 727,950 423,561 450,416 315,700 276,918 325,500 309,225 Net OPEB liability (asset) as a percentage of coveredemployee payroll -49.74% -19.62% 9.09% -66.82% -15.11% -11.27% 56.65% 97.06% Note: Until the full ten year trend is compiled, information is presented only for those years which information is available. 90 EAST PALO ALTO SANITARY DISTRICT
Required Supplementary Information
29 Schedule of the District's Contributions for
OPEB June 30, 2025
Fiscal Year 2025 2024 2023 2022 2021 2020 2019 2018
Actuarially determined contribution $ 49,382 $ 6,714 11,163 $ 34,870 $ 33,760 $ 45,599 $ 44,729.0 $ 84,368.0 Contribution in relation to the actuarially
determined contributions $ (92,504) $ (78,371) $ (75,430) $ (83,907) $ (82,353) $ (84,375) $ (118,018.0) $ (171,601.0) Contribution deficiency (excess) $ (43,122) $ (71,657) $ (64,267) $ (49,037) $ (48,593) $ (38,776) $ (73,289) $ (87,233) Covered payroll $ 622,000 $ 603,962 $ 727,950 $ 423,561 $ 450,416 $ 315,700 $ 276,918 $ 325,500 Contributions as a percentage of covered
payroll 7.94% 1.11% 1.53% 8.23% 7.50% 14.44% 16.15% 25.92% Note: Until the full ten year trend is compiled, information is presented only for those years which information is available. 91 EAST PALO ALTO SANITARY DISTRICT
Required Supplementary Information
Schedule of the District's Proportionate Share of the Net Pension Liability June 30, 2025
30 6/30/2025 6/30/2024 6/30/2023 6/30/2022 6/30/2021 6/30/2020 6/30/2019 6/30/2018 6/30/2017 Measurement date 6/30/2024 6/30/2023 6/30/2022 6/30/2021 6/30/2020 6/30/2019 6/30/2018 6/30/2017 6/30/2016 Proportion of the net pension liability 0.006440% 0.006330% 0.017670% 0.064810% 0.044070% 0.044010% 0.043660% 0.042520% 0.042320% Proportionate share of the net pension
liability $ 781,238 $ 789,565 $ 827,039 $ 1,230,697 $ 1,858,898 $ 1,762,354 $ 1,645,444 $ 1,676,026 $ 1,470,158 Covered payroll $ 603,962 $ 471,085 $ 423,561 $ 435,859 $ 359,533 $ 262,098 $ 185,975 $ 367,923 $ 701,673 Proportionate share of the net liability
as a percentage of covered payroll 129.35% 167.61% 195.26% 282.36% 517.03% 672.40% 884.77% 455.54% 209.52% Plan fiduciary net position as a
percentage of the total pension liability 78.08% 76.21% 76.68% 88.29% 75.10% 75.26% 75.26% 73.31% 74.06% 92 EAST PALO ALTO SANITARY DISTRICT
Required Supplementary Information
Schedule of the District's Contributions for Pensions
June 30,2025
31 2025 2024 2023 2022 2021 2020 2019 2018 2017 2016
Fiscal Year
Contractually required contribution
(actuarially determined) $ 69,226 $ 72,684 $ 122,760 $ 84,229 $ 54,342 $ 38,195 $ 33,957.0 $ 27,317.0 $ 42,955.0 $ 76,889.0 Contribution in relation to the actuarially
determined contributions $ (69,226) $ (72,684) $ (122,760) $ (84,229) $ (54,342) $ (38,195) $ (33,957.0) $ (27,317.0) $ (42,955.0) $ (76,889.0) Contribution deficiency (excess) $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Covered payroll $ 327,110 $ 603,962 $ 471,085 $ 423,561 $ 435,859 $ 359,533 $ 262,098 $ 185,975 $ 367,923 $ 701,673 Contributions as a percentage of covered
payroll 21.16% 12.03% 26.06% 19.89% 12.47% 10.62% 12.96% 14.69% 11.67% 10.96% Notes to schedule:

Variation Date (for
contractually required contribution) 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 6/30/2013 Actuarial cost method Entry Age 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) (1) Assets valuation method Market Value Market Value Market Value Market Value Market Value Market Value Market Value Market Value Market Value Market Value Inflation 2.30% 2.30% 2.50% 2.50% 2.50% 2.63% 2.75% 2.75% 2.75% 2.75% Salary increases (2) (2) (2) (2) (2) (2) (2) (2) (2) (2) Investment rate of return 6.80% 6.80% 7.00% 7.00% 7.00% 7.25% 7.375% 7.50% 7.50% 7.50% Retirement age (3) (3) (3) (3) (3) (3) (3) (3) (3) (3)
Mortality (4) (4) (4) (4) (4) (4) (4) (4) (4) (4)
(1) Level percentage Level percentage of payroll, closed (2) Depending on age, service, and type of employment 50 for all plans, with the exception of 52 for Miscellaneous PEPRA (3) 2% @62
(4) Mortality assumptions are based on mortality rates resulting from the most recent CalPERS Experience Study adopted by the CalPERS board.
93 32

EAST PALO ALTO SANITARY DISTRICT
Notes to Required Supplementary Information
June 30, 2025
Schedule of Changes in the Net OPEB Liability and Related Ratios The District's OPEB liability is administered as an agent multiple employer plan, which is administered by CalPERS. The schedule of changes in Net OPEB liability and the schedule of contributions show a ten-year trend information, where available, about these amounts and they are changing from year to another.

Schedule of OPEB Contributions
The District makes contributions towards the OPEB liability at an actuarially determined rate. The District does not request reimbursement for its' out-of-pocket expenditures for this subsidy from the OPEB trust and allows the subsidy amount to remain in the CERBT to prefund OPEB and offset the total OPEB liability.

Schedule of District's Proportionate Share of the Net Pension Liability (NPL) This schedule presents information on the District's proportionate share of the net pension liability (NPL), the plans' fiduciary net position and, when applicable, the State's proportionate share of the NPL associated with the District.

Schedule of District's Pension Contributions
This schedule presents information on the District's required contribution, the amounts actually contributed, and any excess or deficiency related to the required contribution. 94 1
December 26, 2025
To the governing board
East Palo Alto Sanitary District
East Palo Alto, California
We have audited the financial statements of the East Palo Alto Sanitary District (District) as of and for the year ended June 30, 2025, and have issued our report thereon dated December 26, 2025. Professional standards require that we advise you of the following matters relating to our audit.

Our Responsibility in Relation to the Financial Statement Audit As communicated in our engagement letter, 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. Our audit of the financial statements does not relieve you or management of your 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 the system 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 system of internal control of the District solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control.

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.

Planned Scope and Timing of the Audit
We conducted our audit consistent with the planned scope and timing we previously communicated to you. eidebailly.com
4040 Campbell Ave., Ste. 200 • Menlo Park, CA. 94025-1053 • T 650.522.3400 • F 650.645.7393 • EOE 95 2 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.” We have identified the following 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 • Revenue recognition
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 District 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.

Accounting Estimates and Related Disclosures
Accounting estimates and related disclosures 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 District’s pension and other postemployment liabilities.

Management’s estimate of the pension and other postemployment liabilities is based on actuarial valuations.

We evaluated the key factors and assumptions used to develop the pension and other postemployment liabilities and determined that it is reasonable in relation to the basic financial statements taken as a whole. 96 3
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 District’s financial statements relate to the sensitivity of the pension and other postemployment liabilities described n the notes ot the financial statements.

Significant Difficulties Encountered during the Audit
We encountered no significant difficulties in dealing with management relating to the performance of the audit.

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 [Entity’s Name] 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 26, 2025.

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.
97 4
Other Significant Matters, Findings, or Issues
In the normal course of our professional association with the District, 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 and regulatory conditions affecting the entity, and operational 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 District’s auditors.

This report is intended solely for the information and use of the governing board and management of the District and is not intended to be, and should not be, used by anyone other than these specified parties.

Menlo Park, California
98 POLICY AND ACTION 12.1

EAST PALO ALTO

CITY COUNCIL

STAFF REPORT
DATE: January 6, 2026
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 2024-25 Recommendation
Adopt a resolution accepting and directing staff to file with the State Controller’s Office the Annual Financial Reports for Fiscal Year 2024-25, including:

1. Annual Comprehensive Financial Report (ACFR),

2. Measure A Fund Report,

3. Measure HH Fund Report,

4. Measure W Fund Report, and

5. Report on Agreed-Upon Procedures Applied to Appropriations Limit Schedule (Fiscal Year 2025-26).

Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:

Priority: Governance, Organizational Strength, and Fiscal Sustainability 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 residents, legislators, financial institutions, and other interested parties.

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 99 POLICY AND ACTION 12.1
option to extend for two additional years. Based on the evaluation of proposals received, the City entered into an agreement with Eide Bailly LLP to provide annual auditing services through the fiscal year ending 2025, with an option to extend for an additional two years.

Subsequently, the City Council approved an amendment to the agreement exercising the optional contract extension and expanding the scope of services. The expanded scope includes audit services for the East Palo Alto Sanitary District (EPASD) following its incorporation into the City as a subsidiary district. As a result, Eide Bailly LLP now provides audit services covering both the City and EPASD under the extended contract term, ensuring continuity, consistency, and efficiency in the City’s financial reporting and audit process.

Analysis
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” audit opinion which means the independent auditor reviewed the financial records and found that they were presented fairly and accurately, according to the Generally Accepted Accounting Principles (GAAP) on the Annual Comprehensive Financial Report for the Fiscal Year ended June 30, 2025. In addition, the special financial reports issued by the City (e.g., Measure A, Measure HH, Measure W, EPASD and Appropriations Limit) met applicable standards and no material exceptions were identified by the auditors.

Fiscal year 2024-25 marks the seventeenth 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 submitted the Fiscal Year 2024-25 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.

Below is a summary description and highlights of each report published:

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
100
POLICY AND ACTION 12.1
The financial section contains the auditors “unmodified” (clean) audit opinion for Fiscal Year 2024-25, 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 informational 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.

Highlights from the ACFR
City’s Overall Financial Position
 The City’s total net position increased to $310.6 million, reflecting a $70.8 million yearover-year increase, driven primarily by the incorporation of the East Palo Alto Sanitary District (EPASD) as a subsidiary district and significant capital grant activity.  Governmental activities net position increased by $26.0 million, while business-type activities increased by $44.8 million, largely attributable to EPASD’s inclusion as a blended component unit.

City’s Overall Revenues and Expenses
 Total City revenues increased to $81.5 million, up $18.6 million (29.6%) from the prior year.
 Governmental activities generated $64.2 million.
 Business-type activities generated $17.3 million, including approximately $8.9 million from EPASD operations.
 Total expenses totaled $48.0 million, an increase of $5.6 million, primarily reflecting EPASD operating costs and expanded capital maintenance activities.

Governmental Funds
 Total governmental fund balances increased to $142.3 million, a $3.2 million increase over the prior year.
101
POLICY AND ACTION 12.1
 Of this amount, $30.9 million (21.7%) is unassigned which includes $10.7 million designated by Council as a contingency reserve. The unassigned fund balance reflects a $12.6 million decrease from the prior fiscal year, due primarily to the Council commitment of $20 million to Civic Common project in June 2025, partially offset by the General Fund surplus of $6.3 million. Overall, the unassigned fund balance continues to provide substantial fiscal flexibility to address unforeseen needs and strategic priorities.  The General Fund ended the year with a fund balance of $65.7 million, an increase of $6.3 million, driven by expenditure savings, including salary savings and delayed professional services.

A summary of the net change in fund balance and position reported in the FY 2024-25 ACFR is as follows:

General Measure A CIP Restricted
Fund Fund Fund Funds
Net change in fund balance $ 6,316,269 $ (1,795,840) $ (4,697,305) $ 3,346,215 Beginning fund balance 59,417,598 6,385,678 20,043,685 53,309,107 Ending fund balance $ 65,733,867 $ 4,589,838 $ 15,346,380 $ 56,655,322 Governmental
Water Garbage Sewer Total
Net change in net position $ 3,755,431 $ 142,822 $ 3,419,785 $ 26,166,576 Beginning net position 26,401,084 1,611,583 37,432,029 211,643,120 Ending net position $30,156,515 $1,754,405 $40,851,814 $ 237,809,696 Government-wide
Business-type
Budgetary Performance
 Actual General Fund revenues exceeded the final amended budget by approximately $2.3 million, largely due to higher-than-anticipated property tax revenues (a backfill of in-lieu of VLF) and investment earnings.
 Actual expenditures were approximately $8.1 million below budget including carriedover encumbrances, reflecting staffing vacancies and timing delays in planned service contracts.

Capital Assets and Infrastructure
 Total capital assets (net of depreciation) increased to $126.6 million, a $32.0 million increase year-over-year.
 Key contributors included:
 University Avenue / U.S.-101 pedestrian overcrossing project  Street resurfacing and transportation improvements
 Water infrastructure investments
 Addition of EPASD sewer system assets
 The City continues to rely primarily on grants and pay-as-you-go financing, with limited long-term debt
102
POLICY AND ACTION 12.1
Economic Conditions and Outlook
 Property tax revenues remain the City’s largest General Fund revenue source, accounting for approximately 48% of General Fund revenues, with assessed valuation growth of 2.4% in FY 2024-25, compared to a 4.0% increase in the prior fiscal year.  Sales tax revenues declined for the second consecutive year, reflecting broader economic conditions and the loss of a major retailer.
 The City maintains strong reserve levels above adopted policy targets, positioning it to manage near-term revenue volatility and long-term infrastructure and service cost pressures.

As mentioned above, high level discussion and analyses of the basic financial statements are available in the MD&A section (page 5) 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.

Highlights of Measure A Report
For FY 2024-25, the City’s Measure A Transportation Fund received an unmodified attestation (examination) opinion, concluding that the City complied in all material respects with the Measure A Agreement and that the Schedule of Receipts and Disbursements is fairly presented.

Total Measure A receipts were approximately $1.09 million, while disbursements totaled $2.89 million, reflecting planned use of prior-year fund balance. Expenditures were consistent with eligible transportation purposes and included $2.81 million for the Annual Street Resurfacing Program and $73,700 for the Pulgas Avenue Mini-Roundabout.

3. 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.

Highlights of Measure HH report
For FY 2024-25, the City’s Measure HH Special Revenue Fund received an unmodified audit opinion, with the independent auditors concluding that the financial statements present fairly, in all material respects, the Fund’s financial position and results in accordance with GAAP.

Measure HH revenues totaled approximately $2.00 million, consisting of $1.68 million in parcel tax revenues and $0.32 million in investment earnings, while expenditures totaled $565,047, including $452,373 for Job Train and First Source Hiring program activities and $112,674 for administration. As a result, the Measure HH Fund ended the fiscal year with a restricted fund balance of $7.55 million, available for future affordable housing and workforce development purposes consistent with voter authorization. 103
POLICY AND ACTION 12.1

4. 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.

Highlights of Measure W Report
For FY 2024-25, the City’s Measure W Transportation Fund received an unmodified attestation (examination) opinion, concluding that the City complied, in all material respects, with the Measure W Agreement and that the Schedule of Receipts and Disbursements is fairly presented. Total Measure W receipts were approximately $402,077, consisting of transaction and use tax revenues and investment earnings, while disbursements totaled $92,630. Measure W expenditures were used exclusively for eligible transportation purposes, consisting entirely of $92,630 for the Annual Street Resurfacing Program, resulting in a net increase to fund balance for future transportation projects. .

5. Report on Agreed-upon Procedures Applied to Appropriations Limit Schedule 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 2025-26. No exceptions were noted as a result of the auditor’s procedures including examination of City’s calculation necessary to establish the City’s appropriations limit and compared the 2025-26 limit and annual adjustment factors.

The City’s prior-year (FY 2024-25) appropriations limit was $40,575,070, and the FY 2025- 26 limit was calculated by applying a 1.0644 adjustment factor (0% population change ×

6.44% inflation per DOF), resulting in an annual increase of $2,613,035 and a new appropriations limit of $43,188,407 The detail procedures are described in the report.

East Palo Alto Sanitary District (EPASD) Report
The East Palo Alto Sanitary District (EPASD) is incorporated into the City of East Palo Alto as a subsidiary district. In accordance with Generally Accepted Accounting Principles (GAAP), EPASD’s financial activities are included in the City’s Annual Comprehensive Financial Report (ACFR) as an enterprise fund reported as a blended component unit.

Although EPASD’s financial information is included in the City’s ACFR for consolidated reporting purposes, a separate audit report is issued for EPASD. That separate EPASD audit report is not included in this agenda item and presented independently to the EPASD Board at the meeting. This approach reflects EPASD’s distinct legal status and governance structure while ensuring comprehensive financial reporting within the City’s ACFR.

Fiscal Impact
There is no fiscal impact for this item.

Public Notice
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POLICY AND ACTION 12.1
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 proposed action does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(4) in that it is related to government fiscal activities, which do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment.

Government Code § 84308
Applicability of Levine Act: No, as the proposed action does not involve an entitlement.

Analysis of Levine Act Compliance: Not applicable.

Attachment:

1. Resolution.

2. Annual Comprehensive Financial Report (ACFR)

3. Measure A Report

4. Measure HH Financial Report

5. Measure W Report

6. Report on Agreed-Upon Procedures Applied to Appropriations Limit Schedule (FY 2025-26)

7. Communication letter to Council
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Resolution No. XX-2026 1 of 2
RESOLUTION NO. XX– 2026

A RESOLUTION OF THE CITY COUNCIL OF

THE CITY OF EAST PALO ALTO

ACCEPTING AND DIRECTING STAFF TO FILE THE ANNUAL FINANCIAL REPORTS WITH THE STATE CONTROLLER’S OFFICE: ANNUAL COMPREHENSIVE FINANCIAL REPORT (“ACFR”); AND MEASURE A, MEASURE HH, AND MEASURE W FUND REPORTS FOR THE FISCAL YEAR ENDED JUNE 30, 2025;

AND THE REPORT ON AGREED-UPON PROCEDURES APPLIED TO THE APPROPRIATIONS LIMIT SCHEDULE FOR FISCAL YEAR ENDING JUNE 30, 2026
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 through the fiscal year ending 2025 with an option to extend for additional two years; and
WHEREAS, the City Council subsequently approved an amendment to the agreement with Eide Bailly LLP exercising the optional contract extension and expanding the scope of audit services to include the East Palo Alto Sanitary District (EPASD) following its incorporation into the City as a subsidiary district, thereby providing for continuity and consistency in the City’s and EPASD’s financial reporting and audit services; and
WHEREAS, the annual financial audit for fiscal year ended June 30, 2025, 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, Measure A, 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”), Measure A, Measure HH, and Measure W Fund Reports for the Fiscal Year ended June 30, 2025, and the Report on Agreed-Upon Procedures Applied to Appropriations Limit Schedule for Fiscal Year Ending June 30, 2026; and 106
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Resolution No. XX-2026 2 of 2

3. Directs staff to file the annual financial reports with the State’s Financial Controller, as required by law.

PASSED AND ADOPTED 6th day of January 2026, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

Webster Lincoln, Mayor
ATTEST: APPROVED AS TO FORM:

James Colin, City Clerk John D. Lê, City Attorney
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ANNUAL

COMPREHENSIVE

FINANCIALREPORT
2025

FISCAL YEAR ENDED
JUNE 30, 2025
East Palo Alto, California
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East Palo Alto, California
Annual Comprehensive Financial Report
For the year ended June 30, 2025
Prepared by:

Finance Department
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City of East Palo Alto
Annual Comprehensive Financial Report
For the year ended June 30, 2025
Table of Contents
i
INTRODUCTORY SECTION Page
Table of Contents.........................................................................................................................................................i Transmittal Letter......................................................................................................................................................iv Directory of City Officials .......................................................................................................................................xii Map of City’s Location........................................................................................................................................... xiii Organization Chart................................................................................................................................................. xiv GFOA Certificate of Excellence in Financial Reporting.......................................................................................xv

FINANCIAL SECTION
Independent Auditors’ Report................................................................................................................................1 Management’s Discussion and Analysis...............................................................................................................5 Basic Financial Statements:

Government-Wide Financial Statements:

Statement of Net Position..............................................................................................................................20 Statement of Activities ...................................................................................................................................21 Fund Financial Statements:

Governmental Fund Financial Statements
Balance Sheet ...............................................................................................................................................24 Reconciliation of the Governmental Funds Balance Sheet
to the Government-Wide Statement of Net Position...........................................................................25 Statement of Revenues, Expenditures and Changes in Fund Balances................................................26 Reconciliation of the Governmental Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-Wide Statement of Activities.............................................................................................................................27 Proprietary Fund Financial Statements:

Statement of Net Position...........................................................................................................................29 Statement of Revenues, Expenses and Changes in Net Position...........................................................30 Statement of Cash Flows ............................................................................................................................31 Fiduciary Fund Financial Statements:

Statement of Fiduciary Net Position.........................................................................................................33 Statement of Changes in Fiduciary Net Position.....................................................................................34 Notes to Basic Financial Statements....................................................................................................................36 112
City of East Palo Alto
Annual Comprehensive Financial Report
For the year ended June 30, 2025
Table of Contents, Continued
ii
FINANCIAL SECTION, Continued Page
Required Supplementary Information (Unaudited):

Budgets and Budgetary Accounting...................................................................................................................86 Budgetary Comparison Schedules:

General Fund......................................................................................................................................................87 Measure A Fund ................................................................................................................................................88 Defined Benefit Pension Plan:

Schedule of the City's proportionate share of the Net Pension Liability....................................................89 Schedule of Pension Contributions ..................................................................................................................91 Defined Benefit OPEB Plan:

Schedule of Changes in City’s Net OPEB Liability/Asset and Related Ratios – Last 10 years..............95 Schedule of OPEB Contributions......................................................................................................................93 Supplementary Information:

Non-Major Governmental Funds:

Combining Balance Sheet ...............................................................................................................................101 Combining Statement of Revenues, Expenditures and Changes in Fund Balances................................ 105 Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual:

NPDES Fees Special Revenue Fund...........................................................................................................109 Gas Tax Special Revenue Fund...................................................................................................................110 Federal and State Law Enforcement Special Revenue Fund...................................................................111 Park in Lieu Special Revenue Fund............................................................................................................112 Rent Stabilization Special Revenue Fund..................................................................................................113 Federal and State Grant Special Revenue Fund........................................................................................114 Housing Assistance Special Revenue Fund ..............................................................................................115 CYSFF TOT Special Revenue Fund............................................................................................................117 Lighting District Special Revenue Fund....................................................................................................118 Drainage District Special Revenue Fund...................................................................................................119 Local Grants Special Revenue Fund...........................................................................................................120 Silicon Valley Community Foundation Special Revenue Fund..............................................................121 Low- and Moderate-Income Housing Special Revenue Fund...................................................................122 Housing in Lieu Special Revenue Fund.................................................................................................................123 Housing TOT Special Revenue Fund.........................................................................................................124 Measure HH Special Revenue Fund ..........................................................................................................125 Measure W Special Revenue Fund.............................................................................................................126 113
City of East Palo Alto
Annual Comprehensive Financial Report
For the year ended June 30, 2025
Table of Contents, Continued
iii
STATISTICAL SECTION (Unaudited)
Net Position by Component – Last Ten Fiscal Years ..................................................................................... 128 Changes in Net Position – Last Ten Fiscal Years ............................................................................................ 129 Fund Balances of Governmental Funds – Last Ten Fiscal Years .................................................................. 130 Changes in Fund Balances of Governmental Funds – Last Ten Fiscal Years...............................................131 Assessed Value of Taxable Property – Last Ten Fiscal Years........................................................................ 132 Direct and Overlapping Property Tax Rates – Last Ten Fiscal Years........................................................... 133 Principal Property Tax Payers – Current Year and Nine Years Ago.............................................................134 Property Tax Levies and Collections – Last Ten Fiscal Years ....................................................................... 135 Ratios of Outstanding Debt by Type – Last Ten Fiscal Years ........................................................................136 Computation of Direct and Overlapping Debt............................................................................................... 137 Computation of Legal Bonded Debt Margin - Last Ten Fiscal Years........................................................... 138 Demographic and Economic Statistics – Last Ten Fiscal Years................................................................................139 Bonded Debt Pledged-Revenue Coverage – Last Ten Fiscal Years ...............................................................140 Principal Employers – Last Fiscal Year and Six Years Ago........................................................................... 141 Number of Positions – City Government by Function – Last Ten Fiscal Years...........................................142 Operating Indicators by Function – Last Ten Fiscal Years ............................................................................ 143 Capital Asset by Function – Last Ten Fiscal Years. ........................................................................................ 144 114
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December 26, 2025

CITY OF EAST PALO ALTO

DEPARTMENT OF FINANCE
Letter of Transmittal
Honorable Mayor
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, 2025. 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, 2025 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.
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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.

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 29,133.

The East Palo Alto Sanitary District (EPASD or the District) was originally formed in 1939 as an independent special district under the provisions of the California Health and Safety Code to provide wastewater collection services to the East Palo Alto community. Effective October 1, 2024, pursuant to approval by the San Mateo County Local Agency Formation Commission (LAFCo), EPASD was incorporated into the City of East Palo Alto as a subsidiary district in accordance with Government Code Section 56886 and related statutory provisions governing special district reorganizations.

As a result of the reorganization, the City Council serves as the governing board of EPASD, and the City is fiscally accountable for the District. In accordance with Governmental Accounting Standards Board (GASB) Statement No. 14, as amended by GASB Statement Nos. 39 and 61, EPASD meets the criteria for inclusion in the City’s reporting entity. Because the City Council serves as EPASD’s governing body and the District provides services solely within the City’s geographic boundaries, EPASD is reported as a blended component unit in the City’s financial statements.

Accordingly, the financial activities of EPASD are combined with those of the City and are included in the City’s business-type activities, as applicable, within this Annual Comprehensive Financial Report.

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.

The City Council also appoints members to advisory boards and commissions, which provide recommendations on specific policy areas. These include the Rent Stabilization Board, Planning Commission, Public Works and Transportation Commission, Senior Advisory Board, and EPASD Advisory Committee.
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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, water, wastewater, 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.

ECONOMIC CONDITION AND FISCAL OUTLOOK
The U.S. economy continued to expand through calendar year 2025, supported by steady consumer spending, a resilient labor market, and moderating inflationary pressures. While economic growth has slowed from post-pandemic highs, overall conditions remain stable, with economic activity reflecting a gradual normalization following several years of volatility.

In response to easing inflation and evolving economic conditions, the Federal Reserve has shifted away from a highly restrictive monetary policy stance. Interest rates have begun to decline from recent peaks, improving financing conditions and supporting continued economic expansion, although rates remain elevated relative to pre-pandemic levels. The Federal Reserve has emphasized that future policy actions will remain data-dependent, reflecting ongoing uncertainty surrounding inflation, labor markets, and global economic conditions.

The national economic outlook continues to be influenced by a range of policy and geopolitical factors. In particular, uncertainty related to trade policy, including the continuation or potential expansion of tariffs, has been cited by economists and business surveys as a factor contributing to cautious business investment and pricing decisions. While the direct economic impacts remain uncertain, such policy considerations may affect inflation trends, supply chains, and overall business confidence.

Overall, the U.S. economy enters the latter part of 2025 with moderate growth, improving inflation dynamics, and reduced volatility compared to prior years. However, ongoing policy developments, global economic conditions, and financial market responses will continue to shape the economic environment in which state and local governments operate.

The City’s resident population has been a downward trend over the past five years but has slightly ticked up this fiscal year. National labor market indicators in late 2025 point to a gradual cooling, with slower payroll growth and a modest increase in unemployment, though recent data remain subject to higher-than-normal revisions. Locally, employment conditions in the City of East Palo Alto remained stable, with the unemployment rate unchanged at approximately 3.3% from fiscal year 2023-24 to fiscal year 2024-25. Overall, the City’s labor market continues to demonstrate resilience despite signs of moderation at the national level.
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According to data from the California Association of Realtors, the San Francisco Bay Area housing market has continued to reflect elevated prices and constrained supply, with sales activity moderating due to affordability pressures and higher mortgage rates. While price growth has flattened or declined modestly in some submarkets, overall home values remain high by historical standards, particularly in San Mateo County, which continues to rank among the most expensive housing markets in the region.

Property taxes, which are based on assessed property values, remain one of the City’s largest revenue sources, accounting for approximately 48% of General Fund revenues. Total assessed valuation for fiscal year 2024-25 was approximately $4.5 billion, representing a 2.4% year-over-year increase, compared to a 4.0% increase in the prior fiscal year. General Fund property tax revenues totaled approximately $19.0 million, reflecting a 1.0% increase over the previous fiscal year.

Under Proposition 13, growth in assessed value for properties without changes in ownership or new construction is limited by an inflation factor tied to the California Consumer Price Index (CCPI), capped at 2.0% annually. For fiscal year 2024-25, the maximum inflation factor of 2.0% was applied to eligible properties.

Over the long term, the City’s property tax base continues to present growth potential due to undeveloped land within the Ravenswood Business District, ongoing development planning activity, consolidation of industrial properties, strategies to expand affordable housing, and incentives to increase residential density. At the same time, the City continues to address infrastructure, transit, environmental, and community impact considerations associated with sustained development interest. These opportunities are tempered by broader regional challenges in the office real estate market, as many office properties throughout the Bay Area continue to experience elevated vacancy and low occupancy rates, which may affect the timing, feasibility, and assessed value growth of certain commercial development projects.

Sales tax revenues declined by approximately $482,000 (8.0%) compared to the prior fiscal year, marking the second consecutive year of decline following a decrease of approximately $375,000 (5.9%) in the previous year. In addition to broader economic conditions—including elevated interest rates and inflation that moderated consumer spending—the decline was also attributable in part to the loss of a major retail taxpayer, which reduced taxable sales activity during the fiscal year.

Compared to the pre-pandemic level of $3.0 million from the fiscal year 2018-19, Transient Occupancy Tax (TOT) revenues were $2.8 million in the fiscal year 2024-25; approximately 93% recovery from the pre-pandemic figure and a 10.5% increase from the previous year. 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.
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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. Currentreserve 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 another important long-term planning factor to consider in 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 2024-25 budget through a public hearing process conducted during June 2024. 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.

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. 120
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Major Initiatives
The City developed major initiatives for the year through the budget planning process and with the guidance of the City Council as articulated through its Strategic Priorities process, as follows:

Promote Housing, Economic & Workforce Development:
• Implement Measure HH Employment Program
• Continue to implement the City’s Affordable Housing Strategy • Create an Economic Development Strategy focusing on small/micro businesses for City Council consideration
• Convert the City’s Cummings Loft property into office space that could be used as a small business incubator
• Implement a program to distribute Community Resource Funds grants • Revisit the West Side Area Plan development approval process • Evaluate the Measure HH pilot workforce development program • Complete the Ravenswood Business District/Four Corners Specific Plan update • Streamline the accessory dwelling unit (ADU) permitting process • Work with partners to complete construction of 965 Weeks / Colibri Commons • Update the Zoning Code to address permanent supportive housing, housekeeping units, residential care facilities, and objective design standards • Develop a policy and program addressing pop-up and unlicensed businesses Implement the Comprehensive Transportation and Mobility Plan:
• Implement the Comprehensive Transportation and Mobility Plan • Construct the University Bicycle and Pedestrian Overcrossing • Explore a potential public infrastructure revenue measure • Replace temporary traffic circles on Pulgas Avenue with mini roundabouts • Construct bus stop shelter improvements using AHSC grant funds • Finalize the Addison Avenue Safe Routes to School and green infrastructure project • Construct University Avenue at Runnymede traffic signal improvements • Design East Bayshore sidewalk improvements with grant funds and secure funding to design the University Avenue Grand Corridor
• Complete the street lighting upgrade project, including 70 streetlights and the Clarke Avenue overcrossing
• Construct University Avenue safety improvements
• Design and construct road improvements on Woodland Avenue from University Avenue to Newell Road
• Develop strategies to improve parking and traffic enforcement and identify next steps 121
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Promote Health & Public Safety:
• Enhance flood protection for residents, businesses, and property owners • Resolve the Sanitation District incorporation matter
• Develop a Community Emergency Preparedness and Education Initiative • Develop the Police Department’s data analytics capacity • Rehabilitate the O’Connor Pump Station
• Construct improvements to the San Francisquito Creek bank • Upgrade the stormwater system to meet State trash capture requirements • Complete the update of the Environmental Justice (Health & Equity) Element of the General Plan
• Complete the update of the Safety Element of the General Plan • Evaluate emergency shelter sites
• Develop and implement a strategy to address illegal dumping Ensure Our Financial & Organizational Health:
• Address the structural deficit through fiscal resiliency measures • Develop 10-year financial projections
• Plan and implement an Enterprise Resource Planning (ERP) system • Focus on staff morale, retention, recruitment, and succession planning • Develop an Information Systems Master Plan
• Conduct a process to develop a five- to ten-year strategic plan Improve the City's Water Infrastructure:
• Focus on customer service and education
• Advance key water infrastructure projects
• Develop a water infrastructure financing plan
• Develop a water asset management database
Develop and Implement a Comprehensive Facilities Master Plan:
• Coordinate with the Library District to advance a new library for East Palo Alto • Investigate options for developing County vacant property located on Beech Street • Develop a detailed strategy for the location of the future Police Department • Complete the City Hall improvements planning process
Enhance Community Services and Parks for Residents:
• Foster community cultural events and activities
• Complete and implement the Parks Master Plan
• Focus on youth engagement
• Engage with community and partner agencies to improve educational resources and outcomes
• Construct the Joel Davis Park restroom
• Secure Bay Trail access at Rutgers Street
• Implement a program that activates parks and promotes public health and public safety, similar to the FIT Zone program
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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, 2024. This is the sixteenth 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
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CITY OF EAST PALO ALTO

DIRECTORY OF OFFICIALS
City Council
Martha Barragan
Mayor
Mark Dinan
Vice Mayor
Carlos Romero
Councilmember
Ruben Abrica
Councilmember
Webster Lincoln
Councilmember
Executive Staff
Melvin Gaines
City Manager
John Le
City Attorney
Shiri Klima
Assistant City Manager
Tomohito Oku
Finance Director
Jeff Liu
Police Chief
Humza Javed
Public Works Director
Amy Chen
Community & Economic Development Director
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REGIONAL MAP
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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, 2025, 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, each major fund, and the aggregate remaining fund information of the City, as of June 30, 2025, 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.

Emphasis of Matter - Change in the Financial Reporting Entity As discussed in Note 15, during the fiscal year 2025, there was a change to the reporting entity, resulting in the East Palo Alto Sewer District (District) being reported as a blended component unit. Accordingly, the net position as of July 1, 2024, has been restated to include the District as a major enterprise fund and as part of the business-type activities. Our opinions are not modified with respect to this matter. eidebailly.com
4040 Campbell Ave., Ste. 200 • Menlo Park, CA. 94025-1053 • T 650.522.3400 • F 650.645.7393 • EOE 128 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.

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.
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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 Measure A Special Revenue Fund, the Schedule of the City's Proportionate Share of the Net Pension Liability, the Schedule Pension of Contributions, Schedule of Changes in City’s Net OPEB Liability/Asset and Related Ratios and the Schedule of OPEB 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 and the nonmajor funds’ Schedules of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual 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 and the nonmajor funds’ Schedules of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual 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.

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. 130
4 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 26, 2025, 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 26, 2025
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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, 2025. We advise readers to consider the information presented here in conjunction with the accompanying transmittal letter and basic financial statements.

FISCAL YEAR 2024-25 FINANCIAL HIGHLIGHTS
Government-wide Statements
• Total net position equals $310.57 million, an increase of $70.8 million over the prior year balance of $239.8 million. The increase is comprised of $26.0 million in governmental activities and $44.8 million in business-type activities.
• Total revenues for the City increased to $81.5 million in the current fiscal year, compared to $62.9 million in the prior year, representing an increase of $18.6 million. Of the total revenues reported, $64.2 million were generated by governmental activities and $17.3 million by business-type activities. The year-over-year increase was driven primarily by the incorporation of the East Palo Alto Sanitary District (EPASD), which contributed approximately $8.9 million in additional revenue to business-type activities. The increase was further supported by an additional $6.7 million in capital grant revenues recognized during the fiscal year. • Total expenses increased to $48.0 million in the current fiscal year, compared to $42.4 million in the prior year, representing an increase of $5.6 million. Of the total expenses reported, $38.0 million were attributable to governmental activities and $10.0 million to business-type activities. The increase in total expenses was driven primarily by the incorporation of the EPASD, which resulted in the recognition of additional operating and maintenance costs within business-type activities.

Governmental Fund Statements
• Total governmental fund balances increased to $142.3 million, up $3.2 million from the prior year balance of $139.2 million. Of the total fund balance, $111.4 million is classified as nonspendable, restricted, committed, or assigned, while the remaining $30.9 million represents unassigned fund balance.
• The General Fund reported a total fund balance of $65.7 million at year-end, an increase of $6.3 million from the prior year balance of $59.4 million. This increase was driven by $39.5 million in revenues, partially offset by $31.4 million in expenditures and $1.8 million in net other financing uses. The net other financing uses primarily reflect operating subsidies provided to special revenue funds.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
6 OVERVIEW OF THE ANNUAL COMPREHENSIVE FINANCIAL REPORT Government-wide Financial Statements
The government-wide financial statements are designed to provide the readers with a broad view 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, sewer 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, Capital Improvements Fund and Measure A Fund. Measure A Fund became a major fund in the current fiscal year pursuant to GASB reporting requirements. 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.
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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 how money flows into and out of those funds and the balances left at yearend 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, sewer systems 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.

Analysis of Net Position
At June 30, 2025, government-wide assets of $338.25 million and deferred outflows of resources of $7.0 million exceeded liabilities of $33.7 million and deferred inflows of resources of $0.9 million, resulting in a total net position of $310.6 million. A significant portion of the City’s net position, $124.0 million, is invested in capital assets and is not available to finance current operations or pay future liabilities. The following table summarizes the City’s government-wide net position for both governmental and business-type activities.:
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MANAGEMENT'S DISCUSSION AND ANALYSIS
8 (Dollars in thousands) 2025 2024* 2025 2024* 2025 2024* Assets: Current and other assets $ 165,116 $ 147,700 $ 46,220 $ 20,787 $ 211,336 $ 168,487 Noncurrent assets 94,055 82,433 32,854 12,195 126,908 94,628 Total assets $ 259,171 $ 230,134 $ 79,074 $ 32,982 $ 338,245 $ 263,115 Deferred outflows of resources Deferred pension and OPEB outflows 6,259 7,845 692 70 6,951 7,914 Liabilities: Current and other liabilities 10,134 7,033 2,301 1,817 12,435 8,850 Noncurrent liabilities 17,349 18,823 3,951 3,218 21,300 22,041 Total liabilities 27,483 25,856 6,252 5,036 33,735 30,891 Deferred inflows of resources Deferred inflows - pension and OPEB 136 336 752 3 888 339 Net Position: Net Investment in capital assets 92,335 80,872 31,622 11,338 123,957 92,211 Restricted 76,029 62,510 12,436 13,778 88,466 76,288 Unrestricted 69,445 68,405 28,704 2,896 98,150 71,301 Total Net Position $ 237,810 $ 211,787 $ 72,763 $ 28,013 $ 310,572 $ 239,799 * The prior year amounts were not restated for the change in compensated absences or the change in reporting entity.

STATEMENT OF NET POSITION
Governmental Activities Business-Type Activities Total
Net Position – Governmental Activities
Total governmental activities assets of $259.2 million consist of current and other assets of $165.1 million and capital assets of $94.1 million. Total assets increased by $29.0 million from the prior year, reflecting growth in current and other assets of $17.4 million and an increase in capital assets of $11.6 million.

Deferred outflows of resources totaled $6.3 million, consisting primarily of $2.9 million in deferred employer pension contributions made subsequent to the pension liability measurement date and $3.4 million related to other pension valuation factors.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
9 Net Position – Governmental Activities, Continued
Total liabilities for governmental activities were $27.5 million, comprised of $10.1 million in current liabilities and $17.3 million in noncurrent liabilities. Of the noncurrent liabilities, the most significant component is the net pension liability of $15.6 million. Total liabilities increased by $1.6 million, driven primarily by an increase in accounts payable of $3.0 million, partially offset by a decrease in noncurrent liabilities of $1.5 million.

Deferred inflows of resources totaled $0.1 million and relate to pension accounting under GASB Statement No. 68, primarily due to differences between projected and actual investment earnings and actuarial experience.

Governmental activities reported total net position of $237.8 million. Of this amount, $92.3 million (38.8%) represents capital assets net of related debt. Capital assets—including roadways, storm drains, lighting, parks, and other infrastructure—are used to provide services to residents and therefore do not provide liquidity for the payment of liabilities. Historically, the City has not relied heavily on debt financing for capital assets, due in part to its prior emphasis on redevelopment agreements, grant-funded projects, and the limited availability of capital assets suitable for leveraged leaseback financing.

Restricted net position totaled $76.0 million (32.0%) and represents resources subject to externally imposed legal or contractual restrictions on their use. These balances are primarily associated with local and county special taxes, tax districts, capital and grant agreements, housing funds, and other restricted purposes. Unrestricted net position totaled $69.4 million (29.2%); however, a significant portion of these balances is either non-liquid or committed for capital projects and other intended uses.

Net Position - Business-type Activities
Business-type activities reported total assets of $79.1 million, consisting of current and other assets of $46.2 million and noncurrent assets of $32.9 million. Of the $46.2 million in current and other assets, approximately $1.8 million relates to garbage collection services, $29.9 million relates to sewer services, and $14.5 million relates to water services, a significant portion of which is committed for capital infrastructure replacement. All capital assets reported within business-type activities consist of water and sewer service infrastructure.

Total liabilities for business-type activities were $6.3 million and consist primarily of accounts payable of $1.9 million, net pension liability of $0.9 million, and $2.5 million in amounts advanced from developers in connection with certain water service implementation agreements.

Business-type activities reported total net position of $72.8 million, of which $31.6 million represents capital assets net of related debt, $10.5 million is restricted for capital projects, and $30.6 million is reported as unrestricted net position.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
10 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 $33.5 million as further described below.
(Dollars in thousands) 2025 2024* 2025 2024* 2025 2024* Revenues Program revenues: Charges for services $ 3,815 $ 2,422 $ 10,718 $ 4,769 $ 14,533 $ 7,190 Operating grants & contributions 3,440 3,165 - - 3,440 3,165 14,198 7,454 2,135 1,309 16,333 8,762 General revenues: Property taxes 20,109 19,859 1,625 - 21,734 19,859 Sales taxes 5,538 6,020 - - 5,538 6,020 Utility user tax 2,139 2,052 - - 2,139 2,052 2,792 2,526 - - 2,792 2,526
2,601 2,415 - - 2,601 2,415 Other taxes 1,817 1,780 - - 1,817 1,780 Investment Earnings 6,142 6,690 2,485 1,095 8,627 7,785 Miscellaneous 1,580 1,338 361 - 1,941 1,339 Total revenues 64,171 55,722 17,324 7,171 81,496 62,893 Expenses Program expenses: General government 9,182 8,165 - - 9,182 8,165 Public safety 14,024 13,641 - - 14,024 13,641 Public works 7,385 7,292 - - 7,385 7,292 Culture and recreation 2,313 1,950 - - 2,313 1,950 Community development 5,063 7,245 - - 5,063 7,245 Water services - - 1,029 894 1,029 894 Garbage collection - - 3,450 3,171 3,450 3,170 Sewer services - - 5,527 - 5,527 (1) Interest on long-term debt 37 58 - - 37 58 Total expenses 38,004 38,352 10,006 4,066 48,010 42,416 Excess before transfers or special items 26,167 17,370 7,318 3,105 33,484 20,477 Transfers - (433) - 433 - - Change in Net Position 26,167 16,937 7,319 3,539 33,484 20,476 Net Position - Beginning, as restated 211,643 194,850 65,445 24,475 277,088 219,324 Net Position - Ending $ 237,810 $ 211,787 $ 72,763 $ 28,013 $ 310,571 $ 239,800 * The prior year amounts were not restated for the change in compensated absences or the change in reporting entity.

STATEMENT OF ACTIVITIES
Capital grants & contribution
Transient Occupancy tax Business taxes
Governmental Activities Business-Type Activities Total
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MANAGEMENT'S DISCUSSION AND ANALYSIS
11 Statement of Activities – Governmental
Governmental activities reported a change in net position of $26.2 million for the current fiscal year, compared to a prior year increase of $16.9 million, representing an improvement of $9.3 million. The following charts illustrate the major sources of governmental activities revenues and the related categories of expenses:

Charges for
services, 6%
Grants &
Contributions, 28%
Property taxes, 31%
Sales taxes, 9%
Utility user tax, 3%
Transient
Occupancy tax, 4%
Business License
tax, 4%
Other Taxes, 3% Other revenues,
12%
Governmental Activities
Revenues by Source
General government
24%
Public safety
37%
Public works
20%
Culture and
recreation
6%
Community
development
13%
Interest on long-term debt…
Governmental Activities
Expenses by Type
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MANAGEMENT'S DISCUSSION AND ANALYSIS
12 Statement of Activities - Governmental, continued
• Total revenues before transfers were $64.2 million, an increase of $8.4 million (15.2%) over the prior year’s revenues of $55.7 million. This increase was driven primarily by higher capital grants and contributions of $6.7 million and increased charges for services of $1.4 million, partially offset by decreases in investment earnings of $0.5 million and sales tax revenues of $0.5 million. The growth in capital grants and contributions is primarily attributable to grants related to the University-101 pedestrian overcrossing project totaling approximately $11.0 million, while the increase in charges for services reflects higher levels of developer activity.

The decline in investment earnings resulted from lower interest income following federal interest rate cuts. The decrease in sales tax revenues reflects both broader economic conditions and the loss of a major retail taxpayer, which reduced taxable sales during the fiscal year. • Total expenses for governmental activities were $38.0 million, a decrease of $0.3 million (0.9%) from the prior year total of $38.4 million. The decrease was driven primarily by lower community development expenditures of $2.0 million, attributable largely to reduced Affordable Housing Sustainable Communities (AHSC) grant-related activity during the fiscal year.

Statement of Activities - Business-type
• Business-type activities change in net position totaled $7.3 million compared to previous fiscal year of $3.5 million. The difference in change in net position is primarily related to the incorporation of EPASD ($3.4 million).
• Total revenues before transfers equal $17.3 million, an increase of $10.1 million from prior year revenues of $7.2 million. The change mainly consists of increases attributable from the EPASD incorporation ($8.9 million) and in capital grants and contributions ($0.8 million). • Total expenses before transfers equal $10.0 million – an increase of $5.9 million from the prior year due primarily to the EPASD incorporation ($5.5 million). • The beginning balance of the business-type activities was restated for $37.4 million due to the EPASD incorporation as a subsidiary district for the City. More information is provided in Note

15. FINANCIAL ANALYSIS OF THE CITY'S FUNDS
As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with financerelated legal requirements. 139

MANAGEMENT'S DISCUSSION AND ANALYSIS
13 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, 2025, the City’s governmental funds reported combined fund balances of $142.3 million, an increase of $3.2 million in comparison with the prior year. Of this amount, $30.9 million, or 21.7%, constitutes unassigned fund balance, which is available for spending at the City’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, $0.5 million; (2), restricted for particular purposes, $62.4 million; (3) committed for particular purposes, $38.2 million; or (4) assigned for particular purposes, $10.3 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 $30.9 million, while total fund balance increased to $65.7 million.

The remaining fund balance consists of nonspendable ($0.5 million), restricted ($0.05 million), committed ($31.4 million), or assigned ($2.9 million). 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 99% of total general fund expenditures, while total fund balance represents 210% of that same amount.

The City’s general fund balance increased by $6.3 million during the current fiscal year. This growth was primarily driven by underspending of the budget expenditures—including salary savings of $2.1 million and planned but incomplete professional and technical services across various departments, totaling $5.2 million.

The capital projects fund, a major fund, had a $4.7 million decrease in fund balance during the current fiscal year which put the overall fund balance to $15.3 million. The fund reports an assigned fund balance, $7.4 million comprised of encumbrances, restricted by funding sources for $1.1 million, and committed, $6.8 million for flood preventative projects and other capital projects. The decrease in fund balance was caused mainly by a timing difference between the revenues and expenditures related to reimbursement basis capital grants; the City has spent approximately $11.7 million from various grants in accumulate subject to reimbursements. Such amount has not been reflected on the fund balance analysis above.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
14 Analysis of Individual Funds, Continued
Measure A fund became a major fund in the current fiscal year pursuant to GASB reporting requirements. At the end of the current fiscal year, Measure A fund reported $4.6 million in fund balance which is restricted to the street and transportation purposes pursuant to the agreement with San Mateo Transportation Authority (SMCTA). Measure A fund had a $1.8 million decrease in fund balance during the current fiscal year due to the planned capital spending for approximately $2.9 million related to Annual Street Resurfacing project, offset by the fund’s revenues generated during the current 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. The water service fund reported $30.2 million in total net position. Of which $18.9 million is reported as net investment in capital assets, $10.5 million as restricted for capital projects, and $0.8 million as unrestricted. The garbage collection fund reported $1.8 million in total net position all of which is unrestricted. Due to the incorporation of EPASD as a subsidiary district of the City, the sewer service fund was added as a separate enterprise fund which reported $40 million in the total net position. Of which $12.7 million is reported as net investment in capital assets, $2.4 million as restricted for pension, and $25.7 million as unrestricted.

The net position in the water service fund increased by $3.8 million due primarily from the state grant received supporting the water pipe replacement project($2million) and the water capital surcharge fees collected during the current fiscal year ($1.3 million). The net position in the garbage collection fund increased by $0.1 million which remained comparable to the prior year increase. The sewer service fund reported $3.4 million in change in net position which is due to nonoperating revenues for the same amount. The nonoperating revenues of the sewer service fund consists of property taxes ($1.6 million), investment income ($1.4million) and miscellaneous revenues ($0.4 million) and are used to support the operation or future capital projects.

GENERAL FUND BUDGETARY HIGHLIGHTS
Total adopted revenue budget (before transfers) was $37.5 million. During the year, there was no need for any significant amendments to increase the adopted budget appropriations.

Total adopted expenditure budget (before transfers) of $35.7 million increased $3.7 million to final amended expenditure budget of $39.5 million. The amendment is due primarily to the encumbrances carried forward from the previous year ($3.7 million).
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MANAGEMENT'S DISCUSSION AND ANALYSIS
15 GENERAL FUND BUDGETARY HIGHLIGHTS, Continued
Following are the main components of the differences between final amended budget and actual results:
• Actual revenues total $39.5 million, approximately $2.3 million more than the final budget of $37.2 million which primarily came from the differences in property tax revenues and investment earnings. The excess actual property tax revenues are due to an unexpected backfill revenue related to the shortfall in property tax in-lieu of VLF revenue experienced in the FY22-23 ($1.6M).

The actual investment earnings were higher than the estimated earnings because of the lingering higher interest rates resulted from the stubborn inflation. • Actual expenditures total $31.4 million, approximately $8 million less than the amended budget of $38.4 million. Of this amount, approximately $2.1 million is due to salary savings; $5.2 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, 2025 total $126.6 million (net of accumulated depreciation/amortization), a net increase of $32.0 million (33.8%) over the prior year. The increase in the governmental activities is reported for $11.6 million and primarily from University-101 Overcrossing project ($6.8 million) and Annual Street Resurfacing project ($5.1 million) offset by depreciation. The increase in the business-type activities is reported for $20.3 million due primarily to the incorporation of EPASD ($12.7 million) and the water pipe replacement project ($6.7 million). Total capital assets include land, construction in progress, buildings and improvements, machinery and equipment, and infrastructure.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
16 Capital assets, net of accumulated depreciation and amortization, for the governmental and businesstype activities are as follows:
2025 2024 2025 2024* 2025 2024*
Land $ 7,319 $ 7,319 $ 5,448 $ 5,264 $ 12,767 $ 12,582 Buildings and Improvements 20,651 20,267 34,170 11,302 54,821 31,569 Right-to-use Buildings 2,307 2,307 127 127 2,434 2,434 Construction in Progress 22,329 11,653 8,681 1,498 31,010 13,152 Furnishings & Equipment 2,672 2,457 - - 2,672 2,457 Vehicles 3,800 3,345 - - 3,800 3,345 Street and Roadways 87,800 84,588 - - 87,800 84,588 Storm Drain System 6,819 6,819 - - 6,819 6,819 Less: Accumulated Depreciation (59,642) (56,321) (15,891) (5,996) (75,533) (62,317) Total $ 94,055 $ 82,433 $ 32,535 $ 12,195 $ 126,589 $ 94,627 * The prior year amounts were not restated for the change in reporting entity.

June 30, 2025
(Dollars in thousands) Governmental Activities Business-Type Activities Total 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 $0.6 million note payable related to funding the Gloria Way Well project.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
17 ECONOMIC FACTORS AND NEXT YEAR'S BUDGET
Current economic concerns center on the Federal Reserve’s continued management of monetary policy amid moderating inflation, elevated interest rates, and uncertainty regarding the pace of economic growth at both the national and local levels. The following economic factors were considered in the preparation of the City’s budget for fiscal year 2025-26:
• Near-term general revenue growth remains constrained, as major drivers such as large-scale taxable development and significant property ownership turnover are not anticipated in the immediate future for property tax revenues. In addition, economically sensitive revenues, including sales tax and transient occupancy tax, are expected to experience modest growth or volatility due to continued economic uncertainty, elevated costs, and slower consumer spending.
• 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 continued recovery in FY2024-25 yet has only reached 93% 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 activities 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 inflation.
• The City has reserves available to maintain stable service delivery during FY 2025-26 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.
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BASIC

FINANCIAL STATEMENTS
18 145
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GOVERNMENT-WIDE

FINANCIAL STATEMENTS
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City of East Palo Alto
Statement of Net Position
June 30, 2025
20 Governmental Business-Type Activities Activities Total ASSETS Current assets: Cash and investments $ 131,363,844 $ 45,327,175 $ 176,691,019 Restricted cash and investments with fiscal agents 338,253 2,581,938 2,920,191 Receivables:

Accounts receivable 748,796 150,724 899,520
Interest receivable 825,377 249,879 1,075,256
Taxes receivable 1,447,523 213,105 1,660,628
Intergovermental receivables 13,787,061 - 13,787,061 Deposits and prepayments 68,988 - 68,988 Internal balances 2,302,886 (2,302,886) - Total current assets 150,882,728 46,219,935 197,102,663 Noncurrent assets: Net OPEB assets - 300,413 300,413 Loans and notes receivable 14,233,042 18,770 14,251,812 Capital assets: Capital assets not being depreciated 29,647,545 14,129,227 43,776,772 Capital assets, net of accumulated depreciation/amortization 64,407,314 18,405,577 82,812,891 Total capital assets 94,054,859 32,534,804 126,589,663 Total noncurrent assets 108,287,901 32,853,987 141,141,888 Total assets 259,170,629 79,073,922 338,244,551 DEFERRED OUTFLOWS OF RESOURCES Deferred outflows of resources - pension 6,258,602 544,594 6,803,196 Deferred outflows of resources - OPEB - 147,635 147,635 Total deferred outflows of resources 6,258,602 692,229 6,950,831 LIABILITIES Current liabilities: Accounts payable 7,303,700 1,924,006 9,227,706 Accrued liabilities 466,384 683 467,067 Retentions payable 794,751 332,291 1,127,042 Unearned revenue 913,700 - 913,700 Compensated absences 368,192 - 368,192 Claims payable 33,093 - 33,093 Notes payable - 23,333 23,333 Leases payable 253,951 20,603 274,554 Total current liabilities 10,133,771 2,300,916 12,434,687 Noncurrent liabilities: Deposits payable 847,905 26,360 874,265 Advances from developers 100,891 2,468,298 2,569,189 Compensated absences 552,289 - 552,289 Claims payable 52,877 - 52,877 Notes payable - 536,669 536,669 Leases payable 170,295 - 170,295 Net pension liablity 15,625,080 919,339 16,544,419 Total noncurrent liabilities 17,349,337 3,950,666 21,300,003 Total liabilities 27,483,108 6,251,582 33,734,690 DEFERRED INFLOWS OF RESOURCES Deferred inflows of resources - pension 136,427 603,589 740,016 Deferred inflows of resources - OPEB - 148,246 148,246 Total deferred inflows of resources 136,427 751,835 888,262 NET POSITION Net investment in capital assets 92,334,942 31,621,908 123,956,850 Restricted for: Streets and Infrastructure 14,574,306 - 14,574,306 Parks and Recreation 383,310 - 383,310 Penson and OPEB amounts - 1,888,236 1,888,236 Housing Programs 40,727,575 - 40,727,575 Special Programs 3,393,875 - 3,393,875 Capital Projects 16,950,310 10,548,127 27,498,437 Total restricted 76,029,376 12,436,363 88,465,739 Unrestricted 69,445,378 28,704,463 98,149,841 $ 237,809,696 $ 72,762,734 $ 310,572,430
See accaompanying Notes to Basic Financial Statements.

Primary Government
Total net position
149
City of East Palo Alto
Statement of Activities
For the Year Ended June 30, 2025
21 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 $ 9,182,069 $ 7,089 $ 325,489 $ - $ 332,578 $ (8,849,491) $ - $ (8,849,491) Public safety 14,023,956 485,577 617,333 - 1,102,910 (12,921,046) - (12,921,046) Public works 7,384,886 294,826 - 14,197,560 14,492,386 7,107,500 - 7,107,500 Culture and recreation 2,312,962 2,327 1,730,145 - 1,732,472 (580,490) - (580,490) Community Development 5,063,007 3,024,702 766,883 - 3,791,585 (1,271,422) - (1,271,422) Interest on long-term debt 37,139 - - - - (37,139) - (37,139) Total governmental activities 38,004,019 3,814,521 3,439,850 14,197,560 21,451,931 (16,552,088) - (16,552,088) Business-type activities: Garbage Collections 3,451,140 3,495,110 - - 3,495,110 - 43,970 43,970 Water Services 1,028,660 1,769,274 - 2,070,611 3,839,885 - 2,811,225 2,811,225 Sewer Services 5,526,550 5,453,033 - 64,698 5,517,731 (8,819) (8,819) Total business-type activities 10,006,350 10,717,417 - 2,135,309 12,852,726 - 2,846,376 2,846,376 Total primary government $ 48,010,369 $ 14,531,938 $ 3,439,850 $ 16,332,869 $ 34,304,658 $ (16,552,088) $ 2,846,376 $ (13,705,711) General Revenues: Taxes: Property taxes 20,109,241 1,624,691 21,733,932 Sales taxes 5,537,998 - 5,537,998 Utility users tax 2,138,926 - 2,138,926 Transient occupancy tax 2,792,204 - 2,792,204 Business license tax 2,600,501 - 2,600,501 Other taxes 1,817,428 - 1,817,428 Total taxes 34,996,298 1,624,691 36,620,989 Investment earnings 6,141,685 2,485,485 8,627,170 Miscellaneous 1,580,681 361,486 1,942,167 Total general revenues and transfers 42,718,664 4,471,662 47,190,326 Change in net position 26,166,576 7,318,038 33,484,614 Net position - beginning of year, as previously reported 211,786,620 28,012,667 239,799,287 Restatement (143,500) 37,432,029 37,288,529 Net position - beginning of year, as restated 211,643,120 65,444,696 277,087,816 Net position - end of year $ 237,809,696 $ 72,762,734 $ 310,572,430 Net (Expense) Revenue Program Revenues and Changes in Net Position See accompanying Notes to Basic Financial Statements.
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FUND

FINANCIAL STATEMENTS
22 Governmental Fund Financial Statements
Proprietary Fund Financial Statements
Fiduciary Fund Financial Statements
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23 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.

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.

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 are the aggregate of all the non-major governmental funds. 154
City of East Palo Alto
Balance Sheet
June 30, 2025
24 Capital Improvements Non-Major Total Measure A Capital Governmental Governmental General Fund Projects Fund Funds Funds ASSETS Cash and investments $ 64,610,200 $ 7,315,766 $ 18,170,965 $ 41,266,913 $ 131,363,844 Restricted cash and investments - - 338,153 100 338,253 Receivables:

Accrued interest 168,319 18,795 43,834 594,429 825,377
Taxes 1,304,356 - - 143,167 1,447,523
Intergovernmental 1,732,248 - 11,816,666 238,147 13,787,061 Accounts receivable 549,438 62,783 - 136,575 748,796 Deposits and prepayments 68,988 - - - 68,988 Advances to other funds 438,023 - - 1,864,863 2,302,886 Loans and notes receivable - - - 14,233,042 14,233,042 Total assets $ 68,871,572 $ 7,397,344 $ 30,369,618 $ 58,477,236 $ 165,115,770 LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES Liabilities: Accounts payable $ 1,634,557 $ 2,649,802 $ 1,882,818 $ 1,136,523 $ 7,303,700 Retentions payable - 157,704 542,933 94,114 794,751 Deposits payable 842,905 - 5,000 - 847,905 Other accrued liabilities 463,408 - 178 2,798 466,384 Unearned revenue - - 823,522 90,178 913,700 Advances from developers - - 100,891 - 100,891 Total liabilities 2,940,870 2,807,506 3,355,342 1,323,613 10,427,331 Deferred inflows of resources: Unavailable revenues 196,835 - 11,667,896 498,301 12,363,032 Fund Balances: (Note 8) Nonspendable 507,011 - - - 507,011 Restricted 52,008 4,589,838 1,080,768 56,655,322 62,377,936 Committed 31,394,222 - 6,837,690 - 38,231,912 Assigned 2,876,189 - 7,427,922 - 10,304,111 Unassigned 30,904,437 - - - 30,904,437 Total fund balances 65,733,867 4,589,838 15,346,380 56,655,322 142,325,407 Total liabilities, deferred inflows of resources, and fund balances $ 68,871,572 $ 7,397,344 $ 30,369,618 $ 58,477,236 $ 165,115,770 See accompanying Notes to Basic Financial Statements.
155
City of East Palo Alto
Reconciliation of the Governmental Funds Balance Sheet
To the Governmental-Wide Statement of Net Position
June 30, 2025
25 Total Fund Balances - Governmental Funds $ 142,325,407

Capital assets not being depreciated 29,647,545 Capital assets, net of accumulated depreciation/amortization 64,407,314 Total capital assets 94,054,859

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. 2,928,524

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 3,330,078 Deferred inflows of resources - pension (136,427) 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. 12,363,032 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 (920,481) Claims payable (85,970) Lease payable (424,246) Net pension liability (15,625,080) Total long-term liabilities (17,055,777)
Net Position of Governmental Activities $ 237,809,696
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.
156
City of East Palo Alto
Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds
For the Year Ended June 30, 2025
26 Capital
Improvements Non-Major Total
General Measure A Capital Governmental Governmental
Fund Fund Projects Fund Funds Funds
REVENUES:

Property taxes $ 18,988,778 $ - $ - $ 1,120,463 $ 20,109,241 Sales taxes 5,537,998 767,302 - 339,655 6,644,955
Transient occupancy tax 2,233,764 - - 558,440 2,792,204 Utility users tax 2,138,926 - - - 2,138,926
Other taxes 2,669,114 - - 3,348,249 6,017,363
Licenses, fees and permits 2,809,442 - - 162,282 2,971,724 Charges for services 722,561 - - 701,397 1,423,958
Fines and forfeitures 556,245 - - - 556,245
Use of money and property 2,815,526 322,864 942,027 2,063,595 6,144,012 Grants and intergovernmental 378,654 - 2,117,940 714,972 3,211,566 Miscellaneous 674,780 - - - 674,780
Total revenues 39,525,788 1,090,166 3,059,967 9,009,053 52,684,974 EXPENDITURES:

Current:

General government 7,666,231 1,799 51,048 862,617 8,581,695 Public safety 13,331,875 - - 119,531 13,451,406
Public works 4,489,362 3,000 31,170 1,305,360 5,828,892 Culture and recreation 1,109,911 - 1,981 574,590 1,686,482 Community development 3,634,096 - - 1,253,213 4,887,309 Capital outlay 593,245 2,881,207 8,723,073 2,326,938 14,524,463 Debt service:

Principal 503,210 - - 15,039 518,249
Interest 36,177 - - 962 37,139
Total expenditures 31,364,107 2,886,006 8,807,272 6,458,250 49,515,635 REVENUES OVER (UNDER) EXPENDITURES 8,161,681 (1,795,840) (5,747,305) 2,550,803 3,169,339 OTHER FINANCING SOURCES (USES):

Transfers in - - 1,050,000 795,412 1,845,412
Transfers out (1,845,412) - - - (1,845,412)
Total other financing sources (uses) (1,845,412) - 1,050,000 795,412 - Net change in fund balances 6,316,269 (1,795,840) (4,697,305) 3,346,215 3,169,339 FUND BALANCES:

Beginning of the year, as previously reported 59,417,598 - 20,043,685 59,694,785 139,156,068 Restatement (Note 14) - 6,385,678 - (6,385,678) -
Beginning of the year, as restated 59,417,598 6,385,678 20,043,685 53,309,107 139,156,068 End of year $ 65,733,867 $ 4,589,838 $ 15,346,380 $ 56,655,322 $ 142,325,407 Major Funds
See accompanying Notes to Basic Financial Statements.
157
City of East Palo Alto
Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities
For the Year Ended June 30, 2025
27 Net Change in Fund Balances - Total Governmental Funds $ 3,169,339 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. 14,942,705 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. (3,320,931)
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. 155,177
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. 164,465
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 518,249 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 GovernmentWide Statement of Net Position. 288,424 Pension expense is recorded as incurred in the Government-Wide Statement of Activities, however pension expense is not recognized in the governmental funds. (1,236,473) 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. 11,485,621

Change in Net Position of Governmental Activities $ 26,166,576 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.
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28 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.

Sewer Service Fund accounts for activities related to the provision of wastewater collection and conveyance services within the City. The fund records sewer service charges, connection fees, and other related revenues, which are utilized to operate, maintain, and improve the City’s wastewater system. 160
City of East Palo Alto
Statement of Net Position
Proprietary Funds
June 30, 2025
29 Water Garbage Sewer Total Enterprise
Service Collection Service Funds
ASSETS
Current assets:

Cash and investments $ 16,454,627 $ 1,775,340 $ 27,097,208 $ 45,327,175 Cash with fiscal agents 212,877 - 2,369,061 2,581,938
Accrued interest 43,510 7,067 199,302 249,879
Tax receivable - - 213,105 213,105
Accounts receivable, net 127,391 23,333 - 150,724
Total current assets 16,838,405 1,805,740 29,878,676 48,522,821 Noncurrent assets:

Loans and notes receivable - - 18,770 18,770
Net OPEB assets - - 300,413 300,413
Capital assets:

Non-depreciable 13,944,626 - 184,601 14,129,227
Depreciable, net 5,874,624 - 12,530,953 18,405,577
Total capital assets 19,819,250 - 12,715,554 32,534,804 Total noncurrent assets 19,819,250 - 13,034,737 32,853,987 Total assets 36,657,655 1,805,740 42,913,413 81,376,808

DEFERRED OUTFLOWS OF RESOURCES
Deferred outflows of resources - pension 29,582 24,375 490,637 544,594 Deferred outflows of resources - OPEB - - 147,635 147,635 Total deferred outflows of resources 29,582 24,375 638,272 692,229

LIABILITIES
Current liabilities:

Accounts payable 756,197 - 1,167,809 1,924,006
Retentions payable 332,291 - - 332,291
Other accrued liabilities 255 428 - 683
Note payable 23,333 - - 23,333
Lease payable 20,603 - - 20,603
Total current liabilities 1,132,679 428 1,167,809 2,300,916 Noncurrent liabilities:

Deposits payable 26,360 - - 26,360
Advances from developers 2,468,298 - - 2,468,298
Advances from other funds 2,302,886 - - 2,302,886
Note payable 536,669 - - 536,669
Net pension liability 63,288 74,813 781,238 919,339
Total noncurrent liabilities 5,397,501 74,813 781,238 6,253,552 Total liabilities 6,530,180 75,241 1,949,047 8,554,468

DEFERRED INFLOWS OF RESOURCES
Deferred inflows of resources - pension 542 469 602,578 603,589 Deferred inflows of resources - OPEB - - 148,246 148,246 Total deferred inflows of resources 542 469 750,824 751,835

NET POSITION
Net investment in capital assets 18,906,354 - 12,715,554 31,621,908 Restricted for:

Penson and OPEB amounts - - 1,888,236 1,888,236
Capital projects 10,483,429 - 64,698 10,548,127
Unrestricted 766,732 1,754,405 26,183,326 28,704,463
Total net position $ 30,156,515 $ 1,754,405 $ 40,851,814 $ 72,762,734 Business-type Activities
See accompanying Notes to Basic Financial Statements.
161
City of East Palo Alto
Statement of Revenues, Expenses and Changes in Fund Net Position Proprietary Funds
For the Year Ended June 30, 2025
30 Total
Water Garbage Sewer Enterprise
Service Collection Service Funds
OPERATING REVENUES:

Charges for services and other fees $ 1,318,501 $ 3,207,789 $ 5,424,854 $ 9,951,144 Other 450,773 287,321 28,179 766,273
Total operating revenues 1,769,274 3,495,110 5,453,033 10,717,417 OPERATING EXPENSES:

Outside services 558,678 3,225,098 4,025,992 7,809,768
Administration 140,570 226,042 1,089,626 1,456,238
Depreciation 329,412 - 410,932 740,344
Total operating expenses 1,028,660 3,451,140 5,526,550 10,006,350 OPERATING INCOME 740,614 43,970 (73,517) 711,067
NONOPERATING REVENUES (EXPENSES):

Property taxes - - 1,624,691 1,624,691
Operating grants and assistance - - 361,486 361,486
Interest income 944,206 98,852 1,442,427 2,485,485
- -
Total nonoperating revenues (expenses) 944,206 98,852 3,428,604 4,471,662 INCOME (LOSS) BEFORE CONTRIBUTIONS AND TRANSFERS 1,684,820 142,822 3,355,087 5,182,729 Capital contributions 2,070,611 - 64,698 2,135,309
Change in net position 3,755,431 142,822 3,419,785 7,318,038

NET POSITION
Beginning of year, as previously reported 26,401,084 1,611,583 - 28,012,667 Restatement - - 37,432,029 37,432,029
Beginning of year, as restated 26,401,084 1,611,583 37,432,029 65,444,696 End of year $ 30,156,515 $ 1,754,405 $ 40,851,814 $ 72,762,734 Business-type Activities
See accompanying Notes to Basic Financial Statements.
162
City of East Palo Alto
Statement of Cash Flows
Proprietary Funds
For the Year Ended June 30, 2025
31 Total
Water Garbage Sewer Enterprise
Service Collection Service Funds
CASH FLOWS FROM OPERATING ACTIVITIES:

Cash received from others $ 450,773 $ 287,321 $ 28,179 $ 766,273 Cash received from customers 1,312,735 3,214,892 6,038,263 10,565,890 Cash payments to suppliers for goods and services (38,070) (4,704,370) (3,660,437) (8,402,877) Cash paid to employees and city administration (164,741) (241,463) (1,017,917) (1,424,121) Net cash provided by operating activities 1,560,697 (1,443,620) 1,388,088 1,505,165 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:

Taxes and operating grants - - 1,986,177 1,986,177
Net cash provided by noncapital financing activities - - 1,986,177 1,986,177 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES:

Capital contributions 2,047,278 - 50,399 2,097,677
Acquisition of capital assets (7,621,702) - (965,288) (8,586,990) Payment of leases (29,367) - - (29,367)
Repayments on advances from other funds (1,750) - - (1,750) Repayments on advances from developers (708) - - (708)
Net cash (used in) capital and related financing activities (5,606,249) - (914,889) (6,521,138) CASH FLOWS FROM INVESTING ACTIVITIES:

Investment income received 973,043 103,228 1,487,940 2,564,211 Net cash provided by investing activities 973,043 103,228 1,487,940 2,564,211 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,072,509) (1,340,392) 3,947,316 (465,585) CASH AND CASH EQUIVALENTS - Beginning of year 19,740,013 3,115,732 25,518,953 48,374,698 CASH AND CASH EQUIVALENTS - End of year $ 16,667,504 $ 1,775,340 $ 29,466,269 $ 47,909,113 FINANCIAL STATEMENT PRESENTATION:

Cash and investments $ 16,454,627 $ 1,775,340 $ 27,097,208 $ 18,229,967 Cash with fiscal agents 212,877 - 2,369,061 212,877
Total $ 16,667,504 $ 1,775,340 $ 29,466,269 $ 18,442,844

RECONCILIATION OF OPERATING INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:

Operating income $ 740,614 $ 43,970 $ (73,517) $ 711,067 Adjustments to reconcile operating income
to net cash provided by operating activities:

Depreciation 329,412 - 410,932 740,344
Changes in assets, liabilities and related deferrals:

Accounts receivable (5,766) 7,103 613,409 614,746
Pension and OPEB related deferred outflows of resources 2,813 12,748 824,171 839,732 Accounts payable 495,667 (1,479,272) 311,480 (672,125)
Other accured liabilities - (23,953) - (23,953)
Net pension liabilities (777) (3,527) (8,327) (12,631)
Net OPEB assets - - (157,579) (157,579)
Pension and OPEB related deferred inflows of resources (1,266) (689) (532,481) (534,436) Total adjustments 820,083 (1,487,590) 1,461,605 794,098 Net cash provided by operating activities $ 1,560,697 $ (1,443,620) $ 1,388,088 $ 1,505,165 NON-CASH INVESTMENT AND FINANCING ACTIVITY:

Capital-related accounts and retention payable $ 332,291 $ - $ - $ 332,291 Forgiveness of long term debt 23,333 - - 23,333
Total non-cash investment and financing acitvity $ 355,624 $ - $ - $ 355,624 Business-type Activities
See accompanying Notes to Basic Financial Statements.
163
32 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. 164
City of East Palo Alto
Statement of Net Position
Fiduciary Funds
June 30, 2025
33 Successor Agency
Trust Fund
ASSETS
Current assets
Cash and investments $ 1,849,021
Receivables:

Interest receivable 5,666
Total current assets 1,854,687
Total assets 1,854,687

LIABILITIES
Liabilities:

Current liabilities
Accounts payable 500
Other accrued liabilities 95,849
Bonds payable 1,195,000
Total current liabilities 1,291,349
Noncurrent liabilities
Bonds payable 9,645,000
Total noncurrent liabilities 9,645,000
Total liabilities 10,936,349

DEFERRED INFLOWS OF RESOURCES
Deferred gain on refunding 73,828

NET POSITION
Held in trust for dissolution of RDA
Total net position $ (9,155,490)
See accompanying Notes to Basic Financial Statements
165
City of East Palo Alto
Statement of Changes in Fiduciary Net Position
Fiduciary Funds
For the Year Ended on June 30, 2025
34 Successor Agency
Trust Fund
ADDITIONS:

RDA property tax trust fund distribution $ 1,948,554
Use of money and property 73,463
Total additions 2,022,017
DEDUCTIONS:

General government 40,000
Interest and fiscal charges 490,012
Total Deductions 530,012
Change in net position 1,492,005
NET POSITION:

Beginning of year (10,647,495)
End of year $ (9,155,490)
See accompanying Notes to Basic Financial Statements.
166
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167

NOTES TO BASIC

FINANCIAL STATEMENTS
35 168
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169
City of East Palo Alto
Notes to Basic Financial Statements
For the year ended June 30, 2025
36 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 for the 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.

The East Palo Alto Sanitary District (EPASD) – Effective October 1, 2024, the East Palo Alto Sanitary District was incorporated as a subsidiary district of the City pursuant to the approval of the San Mateo County Local Agency Formation Commission (LAFCo). Under this reorganization, the City Council serves as the governing board of EPASD, and the City exercises financial accountability over its operations and resources. In accordance with GASB Statement No. 14, The Financial Reporting Entity, as amended by GASB Statements No. 61, EPASD meets the criteria for inclusion as a blended component unit. Beginning in fiscal year 2024-25, EPASD’s financial activities are incorporated within the City’s basic financial statements as a separate enterprise fund, as EPASD’s operations are now considered an integral part of the City’s business-type activities. The effect of the incorporation on beginning net position of the City’s business-type activities is disclosed in Note 15. Separate financial statements of EPASD are prepared and issued annually, in accordance with generally accepted accounting principles and applicable statutory requirements. 170
City of East Palo Alto
Notes to Basic Financial Statements
For the year ended June 30, 2025
37 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued 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.

Government-Wide Financial Statements
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 recognized in the period in which they are earned while 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 other funds
• Transfers in/out
The City applies all applicable GASB pronouncements including all NCGA Statements and Interpretations currently in effect.
171
City of East Palo Alto
Notes to Basic Financial Statements
For the year ended June 30, 2025
38 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued B. Basis of Accounting and Measurement Focus, Continued Governmental Fund Financial Statements, Continued
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 and the modified accrual 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.

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.

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.

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 for funds 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. 172
City of East Palo Alto
Notes to Basic Financial Statements
For the year ended June 30, 2025
39 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued B. Basis of Accounting and Measurement Focus, Continued 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.

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.

Governmental Fund Financial Statements
Lighting District Special Revenue Fund accounts for revenues (property taxes) and expenditures for the Ravenswood Highway Lighting District.

Drainage District Special Revenue Fund accounts for revenues (property taxes) and expenditures for the East Palo Alto Maintenance Drainage District.

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 in Lieu Special Revenue Fund accounts for developer fees in lieu of providing affordable housing and the expenditures related to affordable housing development activities.

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.
173
City of East Palo Alto
Notes to Basic Financial Statements
For the year ended June 30, 2025
40 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued B. Basis of Accounting and Measurement Focus, Continued Governmental Fund Financial Statements, Continued
CIP Impact Fees Capital Project Fund accounts for various development impact fees collected by the City for capital related activities.

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 of Revenues, 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.

Sewer Service Fund accounts for activities related to the provision of wastewater collection and conveyance services within the City.

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 fund:

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.
174
City of East Palo Alto
Notes to Basic Financial Statements
For the year ended June 30, 2025
41 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued C. 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 for Deposits and Investment Risks 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. 175
City of East Palo Alto
Notes to Basic Financial Statements
For the year ended June 30, 2025
42 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued C. Cash, Cash Equivalents, and Investments, Continued
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.

D. 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.

E. 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.

F. 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
176
City of East Palo Alto
Notes to Basic Financial Statements
For the year ended June 30, 2025
43 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued F. Capital Assets, Continued
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.

G. 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.

H. 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 over the 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.

I. 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 or the inflation rate as determined by the Board of Equalization California Consumer Price Index.
177
City of East Palo Alto
Notes to Basic Financial Statements
For the year ended June 30, 2025
44 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued I. 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:

Secured Unsecured
Valuation/Lien dates January 1 January 1
Levy Dates On or before November 1 July 1
Due Dates (deliquent after) 50% on November 1 (December 10) July 1 (August 31) 50% on February 1 (April 10)
J. Deferred Outflows/Inflows of Resources
In addition to assets, the statement of net position (balance sheet) may report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, 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.

K. 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 or regulations 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. 178
City of East Palo Alto
Notes to Basic Financial Statements
For the year ended June 30, 2025
45 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.

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.
179
City of East Palo Alto
Notes to Basic Financial Statements
For the year ended June 30, 2025
46 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued L. Fund Balances, Continued
On June 30, 2025, the General Fund reported $30,904,437 in reserve which meets the City’s minimum 30% requirement level of $10,746,347. After the minimum fund balance requirement, the General Fund reserve fund balance is $20,158,090.

M. Compensated Leave Payable
Compensated absences are accrued as a liability as the benefits are earned for leave balances that are more likely than not to be used for compensated leave or settled through cash or noncash means. The entire compensated absence liability is reported on the government-wide statement of net position. For governmental funds, a liability for compensated absences is recognized upon the occurrence of relevant events such as employee resignations and retirements that occur prior to year-end that have not yet been paid with expendable available financial resources. These amounts are reported in the fund from which the employees who have accumulated leave are paid. 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.

Sick leave is accumulated without limit for each employee at the rate of 3.7 hours for each pay period worked. Leave with pay is provided when employees are absent for health reasons; however, the employees do not gain a vested right to accumulated sick leave. Employees are never paid for any sick leave balance at termination of employment or any other time. Therefore, only the portion of accumulated sick leave that is more likely than not to be used by the employee for paid leave is recognized as a liability in the City’s financial statements. The portion of sick leave that is more likely than not to be settled through conversion to service credit for employee retirement plans is not included in the City’s liability for compensated absences.

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. Other Postemployment Benefits Liability (Asset) (OPEB) For purposes of measuring the OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB and OPEB expense, information about the City's OPEB plan have been determined by an independent actuary. For this purpose, benefit payments are recognized when currently due and payable in accordance with the benefit terms. The liability (asset) for OPEB‐related debt is primarily liquidated by Sewer enterprise fund as it is only reported in the fund. 180
City of East Palo Alto
Notes to Basic Financial Statements
For the year ended June 30, 2025
47 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued P. 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.

Q. Implementation of GASB Statement No. 101
As of June 30, 2025, the City adopted GASB Statement No. 101, Compensated Absences. The provisions of this standard modernize the types of leave that are considered a compensated absences and provides guidance for a consistent recognition and measurement of the compensated absence liability. The effect of the implementation of this standard on beginning net position is disclosed in Note 15. 181
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
48 2. 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, 2025:

Governmental
Activities
Business-Type
Activities
Fiduciary
Funds Total
Cash Investments $ 131,363,844 $ 45,327,175 $ 1,849,021 $ 178,540,040 Reistricted cash and investments 338,253 2,581,938 - 2,920,191 Total cash and investments $ 131,702,097 $ 47,909,113 $ 1,849,021 $ 181,460,231 Cash and investments as of June 30, 2025 consist of the following:

Deposits:

Cash on hand $ 10,800
Deposits with Financial Institution 992,270
Total Deposits 1,003,070
Investments:

Local Agency Investment funds 10,464,126
San Mateo Investment Pool 58,663,480
California Asset Management Program 108,409,364
Total investments 177,536,970
Total City Treasury 178,540,040
Restricted cash and investments:

Cash with fiscal agent 2,920,191
Total restricted Cash and Investments 2,920,191
Total cash and investments $ 181,460,231
182
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
49 2. CASH AND INVESTMENTS, Continued
B. Deposits
The carrying amount of the City’s cash deposits was $992,270 at June 30, 2025. Bank balances before reconciling items were a positive amount of $3,781,214 at June 30, 2025. 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.
183
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
50 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 or the 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.
184
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
51 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 $ 7,687,328
Unrealized gain/ (Loss) in changes in fair value of investments 1,013,305 Total Investment Income (Loss) $ 8,700,633
The City’s portfolio value fluctuates in an inverse relationship to any change in interestrate. Accordingly, if interest rates rise, the portfolio value will decline. If interest rates 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 underthe oversight of the Treasurer of the State of California.

The City’s investments with LAIF at June 30, 2025, 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.

The LAIF fair value factor of 1.001198 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 1.01103 was used to calculate the fair value of the investments in the County Pool.

The City also participates in the California Asset Management Program (CAMP), a California Joint Powers Authority that falls under California Government Code Section 53601(p), which is directed by a Board of Trustees. CAMP have adopted Governmental Accounting Standards Board (GASB) Statement No.79 which provides the safety and liquidity of public funds invested in the pool. GASB 79 incorporates robust guidance and accounting standards for local government investment pools to qualify for electing to measure its investments at amortized cost from a financial reporting perspective. 185
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
52 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, 2025, are shown below:

Investment Type Fair Value 1 Year or Less 1-2 Years 2-3 Years 3+ Years City Local Agency Investment Fund $ 10,464,126 $ 10,464,126 $ - $ - $ - San Mateo County Pool 58,663,480 58,663,480 - - -
California Asset Management Program 108,409,364 108,409,364 - - - Total $ 177,536,970.00 $ 177,536,970.00 $ - $ - $ -
Investment Maturities (in years)
Credit Risk: Credit risk 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, 2025 for each investment type:

Moody's S&P Fair Value
City Local Agency Investment Fund Not Rated Not Rated $ 10,464,126 San Mateo County Pool Not Rated Not Rated 58,663,480
California Asset Management Program Not Rated Not Rated 108,409,364 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 deliveryversus-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, San Mateo County Pool, CAMP and restricted cash and investments included money market accounts and guaranteed investment contracts are not subject to levelling disclosure requirements.
186
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
53 3. INTERFUND TRANSACTIONS
A. Transfers
At June 30, 2025, the City had the following transfers in/out which arose in the normal course of operations:

Transfers Out
Capital
Improvements
Non-Major
Governmental
Funds Total
General Fund $ 1,050,000 $ 795,412 $ 1,845,412
Transfers In
Transfers from the General Fund were made to 1) the Capital Improvements Fund to fund various capital projects mainly for streets and road improvement projects, 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 Woodland Palo Alto Intertie project.

B. Due to/from Other Funds
At June 30, 2025, the City had no balances in due to/from other funds:

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. At June 30, 2025, the City had the following advances to/from other funds:

Advances To
Advances From
Water Services
Fund
Major Funds:

General Fund $ 438,023
Non-Major Governmental Funds 1,864,863
Total $ 2,302,886
187
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
54 4. LOANS AND NOTES RECEIVABLE
Loans receivable as of June 30, 2025, composed of the following, were held by the City:

Balances as of
June 30, 2025
Nairobi Housing Associates Loan $ 4,405,460
Nugent Square Partners Loan 1,100,000
Bay Road Housing Loan 522,500
First Time Home Buyers Assistance Loans 127,546
University Senior Apts Loan 663,536
CalHome Loans 200,000
Colibri Commons Loans 7,214,000
Total $ 14,233,042
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 developerrefinancing 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 multifamily 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.
188
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
55 4. LOANS AND NOTES RECEIVABLE, Continued
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 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.

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. Colibri Commons Loans
On October 21, 2023, the City entered into loan agreement in the amount of $7,214,000 with MP 965 Weeks Street Associates, L.P., a California limited partnership to develop 135 units ranging from 30% to 60% Area Median Income (AMI) and one manager unit known as Colibri Commons Apartments. The loans consist of a loan in the amount of $714,000 (Housing Fund Loan) and a loan in the amount of $6,500,000 (State Grant Fund Loan). The Housing Fund Loan bear simple interest at the rate of 3% per annum commencing on October 21, 2023. The State Grant Fund Loan shall not bear interest. The loans are due, in full, on October 21, 2080 and are secured by a deed of trust on the property. 189
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
56 5. CAPITAL ASSETS
Changes in capital assets during the year ended June 30, 2025, are comprised of the following:

Balance at
July 1, 2024 Additions
Deletions/
Reclassification
Balance at
June 30, 2025
Government activities
Capital assets not being depreciated
Land $ 7,318,724 $ - $ - $ 7,318,724
Construction in progress 11,653,239 14,272,276 (3,596,694) 22,328,821 Total capital assets not being depreciated 18,971,963 14,272,276 (3,596,694) 29,647,545 Capital assets being depreciated/amortized
Infrastructure:

Streets and roadways 84,588,153 - 3,212,171 87,800,324
Storm drain system 6,818,771 - - 6,818,771
Building and improvements 20,266,962 - 384,523 20,651,485 Right-to-use leased buildings 2,306,523 - - 2,306,523
Furniture, fixtures, and equpment 2,456,576 215,305 - 2,671,881 Vehicles 3,344,976 490,262 (35,138) 3,800,100
Total capital assets being
depreciated/amortized 119,781,961 705,567 3,561,556 124,049,084 Less accumulated depreciation/amortization for:

Infrastructure:

Streets and roadways (37,977,381) (1,641,666) - (39,619,047) Storm drain system (3,017,608) (96,940) - (3,114,548)
Building and improvements (9,597,740) (750,989) - (10,348,729) Right-to-use leased buildings (1,446,855) (482,285) - (1,929,140) Furniture, fixtures, and equpment (2,160,402) (81,185) - (2,241,587) Vehicles (2,120,853) (267,866) - (2,388,719)
Total accumulated depreciation/amortization (56,320,839) (3,320,931) - (59,641,770) Total capital assets being depreciated or
amortized, net 63,461,122 (2,615,364) 3,561,556 64,407,314 Governmental activities capital assets $ 82,433,085 $ 11,656,912 $ (35,138) $ 94,054,859 190
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
57 5. CAPITAL ASSETS, Continued
Balance at
July 1, 2024,
as restated Additions
Deletions/
Reclassification
Balance at June
30, 2025
Business - Type activities
Capital assets not being depreciated
Land $ 5,448,275 - - $ 5,448,275
Construction in progress 8,175,192 8,919,281 (8,413,521) 8,680,952 Total capital assets not being dep 13,623,467 8,919,281 (8,413,521) 14,129,227 Capital assets being depreciated/amortized
Building and improvements 25,756,094 - 8,413,521 34,169,615 Right-to-use leased buildings 127,066 - - 127,066
Total capital assets being depreciated/amortized 25,883,160 - 8,413,521 34,296,681 Less accumulated depreciation/amortization for:

Building and improvements (15,069,073) (713,115) - (15,782,188) Right-to-use leased buildings (81,687) (27,229) - (108,916) Total accumulated depreciation (15,150,760) (740,344) - (15,891,104) Total capital assets being depreciated/amortized 10,732,400 (740,344) 8,413,521 18,405,577 Business-type activities capital assets $ 24,355,867 $ 8,178,937 $ - $ 32,534,804 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. 191
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
58 5. CAPITAL ASSETS, Continued
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 $ 58,876
Public Safety 480,729
Culture Recreation 607,424
Public Works 2,117,658
Community Development 56,244
Total Government Activities $ 3,320,931
Business-Type Activirties
Water Service $ 329,412
Sewer Servce 410,932
Total Business-Type Activities $ 740,344
192
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
59 5. CAPITAL ASSETS, Continued
C. Capital Project Commitments
The City has commitments underthe following significant capital infrastructure projects and programs:

Project
Project
Authorization
Expended through
June 30, 2025 Commitments
Annual Street Resurfacing $ 5,774,056 $ 4,986,685 $ 787,371 City of East Palo Alto Library (Design Phase) 3,075,218 648,074 2,427,144 Cummings Loft Improvements 109,135 69,631 39,504
East Bayshore Pedestrian and Cyclist Improvements 3,369,832 439,171 2,930,661 Lighting Improvements at Clarke Ave Overcrossing 150,000 69,847 80,153 O'Connor Pump Station Improvements Phase 1 357,267 7,314 349,953 Safer Bay - Flood Control (SFCJPA Saferbay Phase I) 3,076,619 - 3,076,619 Tate St. Office Improvement 851,920 - 851,920
Traffic Calming - Pulgas Roundabouts 855,579 86,700 768,879 University Avenue Grand Corridor 1,680,905 - 1,680,905
University Avenue/101 Pedestrian Overcrossing 14,502,132 7,930,509 6,571,623 University Avenue Safety Enhancements (HSIP) 957,283 156,487 800,796 Water Meter Replacement 416,483 - 416,483
Water Storage Tank Siting Study 153,549 - 153,549
-
Total $ 35,329,978 $ 14,394,418 $ 20,935,561

6. LONG-TERM DEBT
The City’s debt issues and transactions are summarized below and discussed in detail thereafter:

Balance June
30, 2024 Additions Retirements
Balance June
30, 2025
Current
Portion
Government Activities
Leases $ 942,495 $ - $ (518,249) $ 424,246 $ 253,951
Total $ 942,495 $ - $ (518,249) $ 424,246 $ 253,951
Business-Type Activities
San Mateo County Housing
Promissory Note $ 583,335 $ - $ (23,333) $ 560,002 $ 23,333 Leases 49,970 - (29,367) 20,603 20,603
Total $ 633,305 $ - $ (52,700) $ 580,605 $ 43,936
193
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
60 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.

B. 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,
2025
Police Department 4.05% 10/31/2025 n/a $ 63,673
Police Substation 4.05% 10/31/2027 n/a 175,140
Corp Yard 4.05% 2/28/2026
Rent increases evrery February by
the prior changes in CPI for the
San Francisco Bay Area. 206,036
Fiscal Year Ending
June 30
Principal Interest Principal Interest
2026 $ 63,673 $ 294 $ 72,549 $ 4,847
2027 - - 76,386 2,198
2028 - - 26,205 121
Total $ 63,673 $ 294 $ 175,140 $ 7,166
Police Department Police Substation
Government Activities Government Activities
194
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
61 6. LONG-TERM DEBT, Continued
B. Leases, Continued
Principal Interest Principal Interest
2026 $ 185,433 $ 1,965 $ 20,603 $ 219
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, 2025, the City’s maximum legal debt margin was $167,559,273 and the City had no outstanding debt subject to the margin.

7. COMPENSATED ABSENCES
As of June 30, 2025 the City adopted GASB Statement No. 101, Compensated Absence. The provisions of the standard modernize the types of leave that are considered a compensated absence and provides guidance for a consistentrecognition and measurement of the compensated absence liability. Compensated absences are primarily comprised of unpaid vacation and sick leaves which are accrued as earned. The City’s liability for compensated absences is determined annually and is liquidated primarily by the General Fund. The change in compensated absences is presented as a net change below.

Balance July
1, 2024, as
restated Additions Deletions
Balance
June 30,
2025
Due Within
One Year
Due in More
Than One Year
Government Activities
Compensated Leave Payable $ 1,075,658 $ 197,258 $ (352,435) $ 920,481 $ 368,192 $ 552,289 195
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
62 8. FUND BALANCE
Detailed classifications of the City's Fund Balances, as of June 30, 2025, are below:

General Fund
Measure A
Fund
Capital
Improvements
Capital Projects
Fund
Other
Government
Funds Total
Nonspendable Fund Balance
Advance to other funds $ 438,023 $ - $ - $ - $ 438,023
Deposits and prepayments 68,988 - - - 68,988
507,011 - - - 507,011
Restricted Fund Balance for:

NPDES Fees - - - 424,169 424,169
Gas Tax - - - 4,300,324 4,300,324
Park in Lieu - - - 383,310 383,310
Rent Stabilization - - - 317,483 317,483
Housing Assistance - - - 515,992 515,992
Measure W - - - 1,506,525 1,506,525
CYSFF TOT Fund - - - 1,122,040 1,122,040
Lighting District - - - 7,088,381 7,088,381
Drainage District - - - 1,254,907 1,254,907
Silicon Valley Community Fd - - - 2,000,000 2,000,000
Low and Moderate Income Housing - - - 8,109,481 8,109,481 Measure A - 4,589,838 - 14,048,565 18,638,403
Housing TOT - - - 3,126,840 3,126,840
Measure HH - - - 7,548,234 7,548,234
Capital projects - - - 2,905,975 2,905,975
Other Purposes 52,008 - 1,080,768 2,003,096 3,135,872
52,008 4,589,838 1,080,768 56,655,322 62,377,936
Committed fund balance for:

CalPERS prefunding 3,000,000 - - - 3,000,000
Community benefits reserve 299,770 - - - 299,770
Information Technology Reserve 4,303,997 - - - 4,303,997 Vehicles Equipment Reserve 887,428 - - - 887,428
Self Insurance Reserve 2,273,027 - - - 2,273,027
Capital projects 20,000,000 - 6,837,690 - 26,837,690
Other 630,000 - - - 630,000
31,394,222 - 6,837,690 - 38,231,912
Assigned fund balance for:

Capital projects - - 7,427,922 - 7,427,922
Subsequent yearʹs budget: appropriation of
fund balance 2,876,189 - - - 2,876,189
2,876,189 - 7,427,922 - 10,304,111
Unassigned fund balance
Contigency reserve 10,746,347 - - 10,746,347
Other Purposes 20,158,090 - - - 20,158,090
30,904,437 - - - 30,904,437
Total Fund Balances $ 65,733,867 $ 4,589,838 $ 15,346,380 $ 56,655,322 $ 142,325,407 196
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
63 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 individual rate 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.
197
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
64 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, 2025 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 23.00% 13.41%
Required unfunded accrued liability payment (UAL) $ 859,026 $ 544,436 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 2.7% @ 57 2.0% @ 62
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 13.75% 7.75%
Required employer contribution rates 13.76% 7.87%
Required unfunded accrued liability payment (UAL) $ 16,777 $ 11,918 Contributions – Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Funding contributions for the 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, 2025, the contribution to the plan was $3,023,982, consisting of $1,563,770 for Safety and $1,460,212 for Miscellaneous. 198
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
65 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, 2025, the City reported a net pension liability for its proportionate share of the net pension liability of the Plan of $16,544,419. 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, 2024, and the total pension liability for the Plan used to calculate the net pension liability was determined by actuarial valuations as of June 30, 2023 rolled forward to June 30, 2024 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, 2023 and 2024 were as follows:

Proportion - June 30, 2023 0.13624%
Proportion - June 30, 2024 0.13642%
Change - Increase (Decrease) 0.00018%
For the year ended June 30, 2025, the City recognized pension expense of $4,146,642. On June 30, 2025, 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 $ 3,023,982 $ -
Changes of assumptions 415,262 -
Differences between expected and actual
experience 1,385,000 49,073
Changes in employer's proportion 330,581 413,148
Differences between the employer's contribution 782,386 277,795 Net differences between projected and actual
earnings on plan investments 865,985 -
Total $ 6,803,196 $ 740,016
199
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
66 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 $3,023,982 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 next fiscal year. 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
2026 $ 1,083,390
2027 2,155,785
2028 96,545
2029 (296,522)
Actuarial Assumptions – The total pension liabilities in the June 30, 2023 actuarial valuations were determined using the following actuarial assumptions:

Valuation Date June 30, 2023
Measurement Date June 30, 2024
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.
200
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
67 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 long-term 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% 4.54%
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. 201
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
68 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 $ 27,479,568
Current Discount Rate 6.90%
Net Pension Liability $ 16,544,419
1% Increase 7.90%
Net Pension Liability $ 7,572,037
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, 2025 the City reported a payable of $72,885 for outstanding amount of contributions to the pension plan required for the year ended June 30, 2025. All amounts were paid in July 2025 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. 202
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
69 9. RETIREMENT BENEFITS, Continued
C. Other Postemployment Benefit (OPEB) Plan for EPASD
Plan description and benefits provided:

The EPASD provides post‐retirement benefits to eligible employees in the form of reimbursement for post‐ retirement health insurance premiums. Retired employees have a choice of remaining on the EPASD's group health insurance plan or purchasing a plan of their choice. Reimbursement is made quarterly upon receipt of proof of payment. EPASD’s contribution is capped at the amount of the Kaiser premium. The obligation of EPASD to provide these benefits is determined annually by the Board of Directors. In order to qualify for postemployment medical benefits, an employee must retire from the EPASD with at least 5 years of service and be over 50 years of age. The EPASD is a contracting agency under the Public Employees’ Medical and Hospital Care Act (PEMHCA), which is administered by CalPERS for the provision of healthcare insurance programs for both active and retired employees. The EPASD participates in the California Employers’ Retiree Benefit Trust Fund Program (CERBT), an agent‐ multiple employer postemployment health plan, to prefund other postemployment benefits through CalPERS. The financial statements for CERBT may be obtained by writing the California Public Employees’ Retirement System.

Employees covered by benefit terms :

As of the June 30, 2024 actuarial valuation date, the following current and former employees were covered by the benefit terms under the healthcare plan:

Active employees 6
Retired employees and beneficiaries 7
Total 13
Contributions:

The OPEB Plan and its contribution requirements are established by EPASD. The annual contribution is based on the actuarially determined contribution. For the fiscal year ended June 30, 2025, EPASD’s contribution was $92,504, of which $3,566 was in the form of a subsidy. 203
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
70 9. RETIREMENT BENEFITS, Continued
C. Other Postemployment Benefit (OPEB) Plan for EPASD, continued Net OPEB Liability (Asset) and Assumptions:

The EPASD’s net OPEB asset was measured as of June 30, 2024 and the total OPEB liability used to calculate the net OPEB asset was determined by an actuarial valuation dated June 30, 2023, based on the following actuarial methods and assumptions:

Valuation Date June 30, 2023
Measurement Date June 30, 2024
Actuarial Cost Method Entry-Age Normal Cost Method
Actuarial Assumptions:

Discount Rate 6.55%
Inflation 2.50%
Health cost trend rates 6.5% in 2025 grading down to 3.9% by 2075 Projected Salary Increase 3.00%
Investment Rate of Retum 6.55%
Retirement age 50 to 75
Mortality CalPERS 2024 experience study
Demographic actuarial assumptions used in this valuation are based on the 2021 experience study of the California Public Employees Retirement System using data from 1997 to 2019, except for a different basis used to project future mortality improvements.

The long‐term expected rate of return on OPEB plan investments was determined using a building‐block method in which expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long‐term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

Asset Class
Assumed Asset Allocation
(CERBT Strategy 1)
Compound Return 6-20
Years
Global equity 49.00% 7.10%
Fixed income 23.00% 5.00%
Global real estate (REITs) 20.00% 6.40%
Treasury inflation protected securities 5.00% 3.80%
Commodities 3.00% 4.40%
100.00%
204
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
71 9. RETIREMENT BENEFITS, Continued
C. Other Postemployment Benefit (OPEB) Plan for EPASD, continued The discount rate used to measure the total OPEB liability was 6.55 percent. The projection of cash flows used to determine the discount rate assumed that contributions will be made at rates equal to the actuarially determined contribution rates. Based on those assumptions, the OPEB plan’s fiduciary net position was projected to be available to make all projected OPEB payments for current active and inactive employees and beneficiaries. Therefore, the long‐term expected rate of return on OPEB plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability.

Change in the Net OPEB Asset:

The EPASD’s changes in the net OPEB asset are as follows:

Total OPEB
Liability (a)
Plan Fiduciary
Net Position (b)
Net OPEB
(Asset)
(c) = (a) - (b)
Balance at June 30, 2024 $ 1,281,928 $ 1,424,762 $ (142,834) Changes recognized during the period:

Service cost 57,107 57,107
Interest cost 79,941 79,941
Expected investment income - 87,609 (87,609)
Contributions - 78,371 (78,371)
Administrative expenses - (464) 464
benefit payments (78,371) (78,371) -
Change due to investment experience - 68,783 (68,783)
Change due to change in dicount rate (60,328) - (60,328) Net changes during the period (1,651) 155,928 (157,579) Balance at June 30, 2025 $ 1,280,277 $ 1,580,690 $ (300,413) Increase (Decrease)
205
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
72 9. RETIREMENT BENEFITS, Continued
C. Other Postemployment Benefit (OPEB) Plan for EPASD, continued Sensitivity of the Net OPEB Liability to Changes in the Discount Rate and to Changes in the Health Care Cost Trend Rates:

The following presents the net OPEB liability if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate:
1% Decrease 5.55%
Net OPEB Assets $ 139,779
Current Discount Rate 6.55%
Net OPEB Assets $ 300,413
1% Increase 7.55%
Net OPEB Assets $ 431,399
The following presents the net OPEB liability if it were calculated using health care cost trend rates that are one percentage point lower or one percentage point higher than the current rate:
1% Decrease 5.50%
Net OPEB Assets $ 339,975
Current Health Care Cost Trend Rate 6.50%
Net OPEB Assets $ 300,413
1% Increase 7.50%
Net OPEB Assets $ 177,216
OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB:

Gains and losses related to changes in total OPEB liability and fiduciary net position are recognized in OPEB expense systematically over time. Amounts are first recognized in OPEB expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to OPEB and are to be recognized in the future as OPEB expense. The recognition period differs depending on the source of the gain or loss. Net difference between projected and actual earning on OPEB plan investments are amortized over 5 years by straight-line methodology while all other deferrals are amortized by straight-line methodology over the expected average remaining service lifetime (EARSL) of all members that are provided with benefits, determined as of the beginning of the Measurement period.

In determining the EARSL, all active, retired and inactive (vested) members are counted, with the latter two groups having zero remaining service years.
206
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
73 9. RETIREMENT BENEFITS, Continued
C. Other Postemployment Benefit (OPEB) Plan for EPASD, continued For the fiscal year ended June 30, 2025, EPASD recognized OPEB expense of $52,977. As of fiscal year end June 30, 2025, EPASD reported deferred outflows and inflows of resources related to OPEB from the following sources:

Deferred Outflows
of Resources
Deferred Inflows of
Resources
OPEB Contributions subsequent to measurement
date $ 92,504 $ -
Changes of assumptions 29,439 58,074
Differences between expected and actual
experience 9,092 90,172
Net differences between projected and actual
earnings on plan investments 16,600 -
Total $ 147,635 $ 148,246
The $92,504 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net OPEB asset during the fiscal year ending June 30, 2026. Other amounts reported as deferred outflows and inflows of resources related to OPEB will be recognized as expense as follows:

Fiscal Year Ending
June 30
Deferred
Outflows/
(Inflows) of
Resources
2026 $ (12,853)
2027 17,852
2028 (51,042)
2029 (40,419)
2030 (6,653)
207
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
74 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, 2023, 2024, and 2025:
2023 2024 2025
Beginning balance of claims payable $ 180,000 $ 266,149 $ 250,435 Increase in estimated claims liability 152,152 105,823 56,506 Claims period (66,003) (121,537) (220,971)
Ending balance of claims payable 266,149 250,435 85,970 Current portion $ 113,979 $ 114,127 $ 33,093
During the past three fiscal years none of the above programs of protection have had settlements or judgments that exceeded pooled orinsured coverage. There have been no significant reductions in pooled or insured liability coverage from the prior year.
208
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
75 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, 2025, the City contributed $93,520 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, 2025, the City contributed $9,190 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.
209
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
76 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, 2025, 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. For the year ended June 30, 2025, the City contributed $350,936 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, 2025, the City made payments to Recology in the amount of $3,198,663. Financial statements may be obtained by mailing a request to 610 Elm Street, Suite 202, San Carlos, CA 94070. 210
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
77 12. SERVICE CONCESSION ARRANGEMENT FOR WATER SERVICES 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 capitalrelated 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 waterrate increases. No water rate relief request was submitted to the City during the year ended June 30, 2025. Any fees or taxes billed and passed through to the City are not considered contractual gross revenues of the water system operation.

The City has retained title of the Water System and related capital assets under the 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.

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, 2025, Veolia paid lease payments and franchise fees to the City in amount of $450,773 and $375,644, respectively. Further, for the year ended June 30, 2025, the City reported passed-through utility taxes and capital-related surcharges of $363,905 and $1,304,305, respectively. 211
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
78 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 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 for the water system interties. As of June 30, 2025, the City has capital water reserves of approximately $10.5 million.
212
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
79 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 or related 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, 2025, the inter-fund advance amount totaled $1,864,863.

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, 2025, the inter-fund advance amount totaled $438,023.

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 to 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, 2025, the Primary School and Sobrato development projects were entitled; however, no building permits have been issued. 213
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
80 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 for the 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. 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, 2025, the balance of the advance totaled $932,433.

As of June 30, 2025, the advance from the Developers was outstanding for a collective total of $2,462,433.

E. 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 grant required 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.

F. 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 three- year period. For the year ended June 30, 2022, the City paid its final $40,000 commitment.

G. Encumbrances
Encumbrance accounting is utilized to the extent necessary to assure effective budgetary control and accountability and to facilitate effective cash planning and control. At year end, the amount of encumbrances expected to be honored upon performance by the vendor in the next year were as follows:

General Fund $ 2,876,189
Measure A 957,999
Capital Projects Fund 8,101,722
Non-major Governmental Funds 907,896
Total $ 12,843,806
214
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
81 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 wind-down 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.

B. Long-Term Debt
The Successor Agency’s debt issues and transactions are summarized below and discussed in detail thereafter.

Successor Agency
Issue
Amount
Balance at
June 30, 2024 Retirements
Balance at
June 30, 2025
Due within One
Year
2015 Tax Allocation
Refunding Bonds Series A

3.625%-4% due 10/1/2032 $ 16,950,000 $ 11,980,000 $ (1,140,000) $ 10,840,000 $ 1,195,000 215
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
82 14. REDEVELOPMENT AGENCY DISSOLUTION AND SUCCESSOR AGENCY ACTIVITIES, Continued B. Long-Term Debt
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 deb service requirements of the Series 2015 A bonds are as follows:

Year Ending
June 30, Principal Interest Total
2026 $ 1,195,000 $ 353,425 $ 1,548,425
2027 1,250,000 304,800 1,554,800
2028 1,295,000 266,625 1,561,625
2029-2033 7,100,000 648,581 7,748,581
Total $ 10,840,000 $ 1,573,431 $ 12,413,431
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.
216
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
83 14. REDEVELOPMENT AGENCY DISSOLUTION AND SUCCESSOR AGENCY ACTIVITIES, Continued B. Deferred Inflows of Resources
The Successor Agency recorded the following item as deferred inflows of resources as of June 30, 2025.

Balance June
30, 2024 Additions Retirements
Balance June
30, 2025
2015 Tax Allocation Refunding
Bonds - Gain on refunding $ 96,414 $ - $ (22,586) $ 73,828 Total $ 96,414 $ - $ (22,586) $ 73,828

15. RESTATEMENT
A. Change in Accounting Principle
As of June 30, 2025 the City adopted GASB Statement No. 101, Compensated Absences. The provisions of this standard modernize the types of leave that are considered a compensated absence and provide guidance for a consistent recognition and measurement of the compensated absence liability. As a result of the implementation, the governmental activities compensated absences liability were increased by $143,500 in the as of July 1, 2024. The effect of this change in accounting principle is described in the table below.

B. Change in Reporting Entity
Effective October 1, 2024, the East Palo Alto Sanitary District (EPASD) became a subsidiary district of the City of East Palo Alto pursuant to approval by the San Mateo County Local Agency Formation Commission (LAFCo). As a result of this reorganization, the City Council now serves as the governing board of EPASD, and the City exercises financial accountability over its operations, revenues, and obligations. Accordingly, in accordance with GASB Statement No. 14, The Financial Reporting Entity, as amended by GASB Statements No. 61, EPASD is reported as a blended component unit at the beginning of the fiscal year 2024-25. This inclusion constitutes a change in the City’s reporting entity. Consistent with the provisions of GASB Statement No. 100, Accounting Changes and Error Corrections—an amendment of GASB Statement No. 62, the City has restated its beginning net position of the enterprise fund and the business-type activities as of July 1, 2024 to include the balances of EPASD as of that date. The restatement had no effect on the City’s governmental activities.
217
City of East Palo Alto
Notes to Basic Financial Statements
For the Year Ended June 30, 2025
84 15. RESTATEMENT, Continued
B. Change Within Reporting Entity, Continued
In addition, during fiscal year 2024-2025, there was a change within the financial reporting entity which resulted in the Measure A Fund being reported as a major governmental fund instead of a non-major governmental fund. The impact of this restatement on the City’s beginning fund balance is summarized below.

Governmental Business-Type Sewer Services
Activities Activities Enterprise Fund
Beginning net position, as previously reported on June 30, 2024 $ 211,786,620 $ 28,012,667 $ - Change in accounting principle - Compensated Absences (143,500) - - Change in reporting entiry - EPASD - 37,432,029 37,432,029 Beginning net position, as restated on July 1, 2024 $ 211,643,120 $ 65,444,696 $ 37,432,029 Non-Major
Measure A Govenmental
Fund Funds
Beginning fund balance, as previously reported on June 30, 2024 - $ 59,694,785 Change in reporting unit -Measure A Fund 6,385,678 (6,385,678) Beginning balance, as restated on July 1, 2024 $ 6,385,678 $ 53,309,107 218

REQUIRED SUPPLEMENTARY

INFORMATION
85 219
City of East Palo Alto
Notes to Required Supplementary Information
For the Year Ended June 30, 2025
86 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 Capital Improvements Capital Projects Fund and CIP Impact Fees 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.
220
City of East Palo Alto
Required Supplementary Information
For the Year Ended June 30, 2025
87 1. BUDGETS AND BUDGETARY ACCOUNTING
A. Budgetary Comparison Schedules
Budgetary Comparison Schedule, General Fund
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES:

Property taxes $ 17,384,764 $ 17,384,764 $ 18,988,778 $ 1,604,014 Sales taxes 6,219,000 5,479,000 5,537,998 58,998
Transient occupancy tax 2,200,000 2,200,000 2,233,764 33,764 Utility users tax 1,788,874 1,788,874 2,138,926 350,052 Other taxes 2,400,000 2,400,000 2,669,114 269,114
Licenses, fees and permits 3,070,051 3,070,051 2,809,442 (260,609) Charges for services 1,269,119 1,269,119 722,561 (546,558) Fines and forfeitures 290,000 290,000 556,245 266,245
Use of money and property 1,520,000 2,220,000 2,815,526 595,526 Grants and intergovernmental 245,000 495,000 378,654 (116,346) Miscellaneous 1,100,000 600,000 674,780 74,780
Total revenues 37,486,808 37,196,808 39,525,788 2,328,980 EXPENDITURES:

Current:

General government 8,592,968 9,834,252 7,666,231 2,168,021 Public safety 14,636,146 14,932,184 13,331,875 1,600,309 Public works 4,761,564 6,275,363 4,489,362 1,786,001
Culture and recreation 1,141,130 1,218,035 1,109,911 108,124 Community development 6,094,343 6,660,626 3,634,096 3,026,530 Capital outlay - 8,500 593,245 (584,745)
Debt service:

Principal 545,300 545,300 503,210 42,090
Interest - - 36,177 (36,177)
Total expenditures 35,771,451 39,474,260 31,364,107 8,110,153 REVENUES OVER (UNDER) EXPENDITURES 1,715,357 (2,277,452) 8,161,681 10,439,133 OTHER FINANCING SOURCES (USES):

Transfer out (1,845,412) (1,845,412) (1,845,412) -
Total other financing sources (uses) (1,845,412) (1,845,412) (1,845,412) - Net change in fund balance $ (130,055) $ (4,122,865) $ 6,316,269 $ 10,439,133 FUND BALANCE:

Beginning of year 59,417,598
End of year $ 65,733,867
Budget Amounts
221
City of East Palo Alto
Required Supplementary Information
For the Year Ended June 30, 2025
88 1. BUDGETS AND BUDGETARY ACCOUNTING, Continued
A. Budgetary Comparison Schedules, Continued
Budgetary Comparison Schedule, Measure A Fund
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES:

Sales taxes $ 750,000 $ 750,000 $ 767,302 $ 17,302
Use of money and property 200,000 200,000 322,864 122,864 Total revenues 950,000 950,000 1,090,166 140,166
EXPENDITURES:

Current:

General government 3,539 3,539 1,799 1,740
Public works - - 3,000
Capital outlay 1,885,000 3,680,982 2,881,207 799,775
Total expenditures 1,888,539 3,684,521 2,886,006 801,515 Net change in fund balance $ (938,539) $ (2,734,521) (1,795,840) $ 941,681 FUND BALANCE:

Beginning of the year, as previously reported -
Restatement (Note 14) 6,385,678
Beginning of the year, as restated 6,385,678
End of year $ 4,589,838
Budget Amounts
222
City of East Palo Alto
Required Supplementary Information
For the Year Ended June 30, 2025
89 2. DEFINED BENEFIT PENSION PLAN
A. Schedule of the City’s Proportionate share of the Net Pension Liability – Last 10 years 6/30/2025 6/30/2024 6/30/2023 6/30/2022
Measurement date 6/30/2024 6/30/2023 6/30/2022 6/30/2021 Proportion of the net pension liability 0.136420% 0.136240% 0.145200% 0.185480% Proportionate share of the net pension
liability $ 16,544,419 $ 16,995,749 $ 15,557,214 $ 7,756,986 Covered payroll $ 11,878,525 $ 10,794,559 $ 10,544,106 $ 10,780,420 Proportionate share of the net liability
as a percentage of covered payroll 139.28% 157.45% 147.54% 71.95% Plan fiduciary net position as a
percentage of the total pension liability 78.08% 76.21% 76.68% 88.29% Notes to Schedule:

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. 223
City of East Palo Alto
Notes to Required Supplementary Information
For the Year Ended June 30, 2025
90 2. DEFINED BENEFIT PENSION PLAN
B. Schedule of the City’s Proportionate share of the Net Pension Liability – Last 10 years* 6/30/2021 6/30/2020 6/30/2019 6/30/2018 6/30/2017 6/30/2016 6/30/2020 6/30/2019 6/30/2018 6/30/2017 6/30/2016 6/30/2015

0.159640% 0.156310% 0.154110% 0.151961% 0.151630% 0.161220% $ 14,433,619 $ 13,270,108 $ 12,288,346 $ 12,529,613 $ 10,928,742 $ 9,292,880 $ 10,033,235 $ 9,839,123 $ 9,443,830 $ 8,832,279 $ 8,780,093 $ 8,641,569 143.86% 134.87% 130.12% 141.86% 124.47% 107.54%

75.10% 75.26% 75.26% 73.31% 74.06% 78.40%
224
City of East Palo Alto
Required Supplementary Information
For the Year Ended June 30, 2025
91 2. DEFINED BENEFIT PENSION PLAN, Continued
B. Schedule of Pension Contributions – Last 10 years
2025 2024 2023 2022
Fiscal Year
Contractually required contribution
(actuarially determined) $ 3,023,982 $ 2,736,186 $ 2,588,849 $ 2,450,300 Contribution in relation to the actuarially
determined contributions $ (3,023,982) $ (2,736,186) $ (2,588,849) $ (2,450,300) Contribution deficiency (excess) - - - -
Covered payroll $ 13,155,383 $ 11,878,525 $ 10,794,559 $ 10,544,106 Contributions as a percentage of covered
payroll 22.99% 23.03% 23.98% 23.24%
Notes to schedule:

Variation Date (for
contractually required contribution) 6/30/2022 6/30/2021 6/30/2020 6/30/2019 Actuarial cost method Entry Age Entry Age Entry Age Entry Age Amortization method (1) (1) (1) (1)
Assets valuation method Market Value Market Value Market Value Market Value Inflation 2.30% 2.30% 2.50% 2.50%
Salary increases (2) (2) (2) (2)
Investment rate of return 6.80% 6.80% 7.00% 7.00%
Retirement age (3) (3) (3) (3)
Mortality (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.
225
City of East Palo Alto
Notes to Required Supplementary Information
For the Year Ended June 30, 2025
92 3. DEFINED BENEFIT PENSION PLAN
C. Schedule of Contributions – Last 10 years*
2021 2020 2019 2018 2017 2016
$ 2,315,360 $ 2,014,243 $ 1,846,856.0 $ 1,669,877.0 $ 1,536,173.0 $ 1,448,467.0 $ (2,315,360) $ (2,014,243) $ (1,846,856.0) $ (1,669,877.0) $ (1,536,173.0) $ (1,448,467.0) - - - - - -
$ 10,780,420 $ 10,033,235 $ 9,839,123 $ 9,443,830 $ 8,832,279 $ 8,780,093

21.48% 20.08% 18.77% 17.68% 17.39% 16.50%
6/30/2018 6/30/2017 6/30/2016 6/30/2015 6/30/2014 6/30/2013 Entry Age Entry Age Entry Age Entry Age Entry Age Entry Age (1) (1) (1) (1) (1) (1)
Market Value Market Value Market Value Market Value Market Value Market Value

2.50% 2.63% 2.75% 2.75% 2.75% 2.75%
(2) (2) (2) (2) (2) (2)

7.00% 7.25% 7.375% 7.50% 7.50% 7.50%
(3) (3) (3) (3) (3) (3)
(4) (4) (4) (4) (4) (4)
226
City of East Palo Alto
Required Supplementary Information
For the Year Ended June 30, 2025
93 3. DEFINED BENEFIT OPEB PLAN
A. Schedule of Changes in City’s Net OPEB Liability/Asset and Related Ratios – Last 10 years 6/30/2025 6/30/2024 6/30/2023 6/30/2022 6/30/2021
Measurement date 6/30/2024 6/30/2023 6/30/2022 6/30/2021 6/30/2020 Total OPEB liability
Service cost 57,107 39,876 34,524 33,345 32,374
Interest 79,941 84,170 83,575 78,160 76,380
Difference between expected and actual experience - (139,990) - 134,472 - Change of assumptions (60,328) (4,374) 97,899 (83,791) - Benefit payments (78,371) (75,430) (83,907) (82,353) (84,375) Net change in total OPEB liability (1,651) (95,748) 132,091 79,833 24,379 Total OPEB liability - beginning 1,281,928 1,377,676 1,245,585 1,165,752 1,141,373 Total OPEB liability - ending (a) 1,280,277 1,281,928 1,377,676 1,245,585 1,165,752 Plan Fiduciary Net Position
Contributions - employer 78,371 75,430 83,907 82,353 84,375 Net investment income 87,609 81,677 (207,000) 333,568 41,428 Benefit payments (78,371) (75,430) (83,907) (82,353) (84,375) Administrative expenses (464) (389) (392) (459) (573)
Other expenses - - - - -
Change due to investment experience 68,783 4,315 - - -
Net change in plan fiduciary net position 155,928 85,603 (207,392) 333,109 40,855 Plan Fiduciary Net Position - beginning 1,424,762 1,339,159 1,546,551 1,213,442 1,172,587 Plan Fiduciary Net Position - ending (b) 1,580,690 1,424,762 1,339,159 1,546,551 1,213,442 Net OPEB liability (asset) - ending (a) - (b) (300,413) (142,834) 38,517 (300,966) (47,690) Plan fiduciary net position as a percentage of the the
total OPEB liability (asset) 123.46% 111.14% 97.20% 124.16% 104.09% Covered-employee payroll 603,962 727,950 423,561 450,416 315,700 Net OPEB liability (asset) as a percentage of coveredemployee payroll -49.74% -19.62% 9.09% -66.82% -15.11% *Note: Until the full ten year trend is compiled, information is presented only for those years which information is available. 227
City of East Palo Alto
Required Supplementary Information
For the Year Ended June 30, 2025
94 4. OPEB PLAN
B. Schedule of Changes in City’s Net OPEB Liability/Asset and Related Ratios – Last 10 years* 6/30/2020 6/30/2019 6/30/2018
6/30/2019 6/30/2018 6/30/2017
29,357 28,433 65,151
86,688 83,812 75,555
(158,786) - 56,218
11,722 - 58,445
(73,289) (70,888) (47,473)
(104,308) 41,357 207,896
1,245,681 1,204,324 996,428
1,141,373 1,245,681 1,204,324
118,018 167,884 123,991
66,813 61,815 84,512
(73,289) (70,888) (47,473)
(228) (522) (421)
- (1,196) -
- - -
111,314 157,093 160,609
1,061,273 904,180 743,571
1,172,587 1,061,273 904,180
(31,214) 184,408 300,144
102.73% 85.20% 75.08%
276,918 325,500 309,225
-11.27% 56.65% 97.06%
228
City of East Palo Alto
Required Supplementary Information
For the Year Ended June 30, 2025
95 2. DEFINED BENEFIT OPEB PLAN, Continued
B. Schedule of City’s OEPB Contributions - Last 10 years, Continued Fiscal Year 2025 2024 2023 2022
Actuarially determined contribution $ 49,382 $ 6,714 11,163 $ 34,870 Contribution in relation to the actuarially
determined contributions $ (92,504) $ (78,371) $ (75,430) $ (83,907) Contribution deficiency (excess) (43,122.00) (71,657.00) (64,267.00) (49,037.00) Covered payroll $ 622,000 $ 603,962 $ 727,950 $ 423,561 Contributions as a percentage of covered
payroll 7.94% 1.11% 1.53% 8.23%
Note: Until the full ten year trend is compiled, information is presented only for those years which information is available. 229
City of East Palo Alto
Required Supplementary Information
For the Year Ended June 30, 2025
City of East Palo Alto
96 2021 2020 2019 2018
$ 33,760 $ 45,599 $ 44,729.0 $ 84,368.0
$ (82,353) $ (84,375) $ (118,018.0) $ (171,601.0)
(48,593.00) (38,776.00) (73,289.00) (87,233.00)
$ 450,416 $ 315,700 $ 276,918 $ 325,500

7.50% 14.44% 16.15% 25.92%
230
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231

SUPPLEMENTARY INFORMATION
97 232
98 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.

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.

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 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 position over a minimum period of five years. 233
99 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 in Lieu Special Revenue Fund accounts for developer fees in lieu of providing affordable housing and the expenditures related to affordable housing development activities.

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.

CAPITAL PROJECT FUND
CIP Impact Fees Capital Project Fund accounts for various development impact fees collected by the City for capital related activities.
234
City of East Palo Alto
Combining Balance Sheet
Non-Major Governmental Funds
June 30, 2025
100
Federal and Rent
NPDES State Law Park in Stabilization
Fees Gas Tax Enforcement Lieu Fund
ASSETS
Cash and investments $ 483,329 $ 4,572,934 $ 593,926 $ 382,319 $ 358,551 Restricted cash and investments - - - - -
Receivables:

Accrued interest 1,282 13,060 1,550 991 1,042
Taxes - - - - -
Intergovernmental - 216,750 - - -
Accounts receivable - - - - 936
Advances to other funds - - - - -
Loans and notes receivable - - - - -
Total assets $ 484,611 $ 4,802,744 $ 595,476 $ 383,310 $ 360,529

LIABILITIES, DEFERRED INFLOWS OF

RESOURCES, AND FUND BALANCES
Liabilities:

Accounts payable $ 60,397 $ 413,378 $ 164 $ - $ 41,324
Retentions payable - 89,027 - - -
Other accrued liabilities 45 15 - - 1,242
Unearned revenue - - - - -
Total liabilities 60,442 502,420 164 - 42,566
Deferred inflows of resources:

Unavailable revenue - - - - 480
Fund Balances:

Restricted 424,169 4,300,324 595,312 383,310 317,483
Total fund balances 424,169 4,300,324 595,312 383,310 317,483 Total liabilities, deferred inflows
of resources, and fund balances $ 484,611 $ 4,802,744 $ 595,476 $ 383,310 $ 360,529 Special Revenue
235
City of East Palo Alto
Combining Balance Sheet
r Ended June 30, 2025
101
Federal
and State Housing CYSFF Lighting Drainage Local
Grants Assistance TOT District District Grants
$ 532,712 $ 412,913 $ 1,253,528 $ 6,976,696 $ 1,252,954 $ 840,772 - - - - - -
10,667 7,855 3,254 17,941 3,262 2,177
- - - 134,148 9,019 -
21,397 - - - - -
- - 26,964 - - -
- - - - - -
200,000 102,436 - - - -
$ 764,776 $ 523,204 $ 1,283,746 $ 7,128,785 $ 1,265,235 $ 842,949 $ 83,482 $ 429 $ 161,706 $ 40,404 $ 10,328 $ 6,385
- - - - - -
- - - - - -
- - - - - 90,178
83,482 429 161,706 40,404 10,328 96,563
19,896 6,783 - - - -
661,398 515,992 1,122,040 7,088,381 1,254,907 746,386
661,398 515,992 1,122,040 7,088,381 1,254,907 746,386
$ 764,776 $ 523,204 $ 1,283,746 $ 7,128,785 $ 1,265,235 $ 842,949 Special Revenue
236
City of East Palo Alto
Combining Balance Sheet
Non-Major Governmental Funds
June 30, 2025
102
Low and
Moderate
Income
Housing Housing Housing Measure
SVCF Successor in Lieu TOT HH
ASSETS
Cash and investments $ 135,137 $ 1,355,620 $ 7,528,937 $ 2,406,306 $ 7,743,836 Restricted cash and investments - - 100 - -
Receivables:

Accrued interest - 436,891 19,528 43,534 19,974
Taxes - - - - -
Intergovernmental - - - - -
Accounts receivable - - - 50,816 -
Advances to other funds 1,864,863 - - - -
Loans and notes receivable - 6,767,070 6,500,000 663,536 - Total assets $ 2,000,000 $ 8,559,581 $ 14,048,565 $ 3,164,192 $ 7,763,810

LIABILITIES, DEFERRED INFLOWS OF

RESOURCES, AND FUND BALANCES
Liabilities:

Accounts payable $ - $ 15,448 $ - $ - $ 214,942
Retentions payable - - - - -
Other accrued liabilities - 862 - - 634
Unearned revenue - - - - -
Total liabilities - 16,310 - - 215,576
Deferred inflows of resources:

Unavailable revenue - 433,790 - 37,352 -
Fund Balances:

Restricted 2,000,000 8,109,481 14,048,565 3,126,840 7,548,234 Total fund balances 2,000,000 8,109,481 14,048,565 3,126,840 7,548,234 Total liabilities, deferred inflows
of resources, and fund balances $ 2,000,000 $ 8,559,581 $ 14,048,565 $ 3,164,192 $ 7,763,810 Special Revenue
237
City of East Palo Alto
Combining Balance Sheet
For the Year Ended June 30, 2025
103
Special Capital
Revenue Project
Total
Non-Major
Measure CIP Governmental
W Impact Fees Funds
$ 1,537,385 $ 2,899,058 $ 41,266,913
- - 100
3,910 7,511 594,429
- - 143,167
- - 238,147
57,859 - 136,575
- - 1,864,863
- - 14,233,042
$ 1,599,154 $ 2,906,569 $ 58,477,236
$ 87,542 $ 594 $ 1,136,523
5,087 - 94,114
- - 2,798
- - 90,178
92,629 594 1,323,613
- - 498,301
1,506,525 2,905,975 56,655,322
1,506,525 2,905,975 56,655,322
$ 1,599,154 $ 2,906,569 $ 58,477,236
238
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, 2025
104
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 - 1,670,984 - - -
Licenses, fees and permits - - - - -
Charges for services 132,241 - - - 568,922
Use of money and property 22,587 255,610 24,220 17,924 22,264 Grants and intergovernmental - - 194,663 - -
Total revenues 154,828 1,926,594 218,883 17,924 591,186 EXPENDITURES:

Current:

General government 90,547 221,336 - - 276,887
Public safety - - 39,841 - -
Public works 578,460 378,144 - - -
Culture and recreation - - - - -
Community development - - - - 480,748
Capital outlay - 2,217,358 - - -
Debt service:

Principal 15,039 - - - -
Interest 962 - - - -
Total expenditures 685,008 2,816,838 39,841 - 757,635

REVENUES OVER
(UNDER) EXPENDITURES (530,180) (890,244) 179,042 17,924 (166,449) OTHER FINANCING SOURCES (USES):

Transfers in 595,290 64,500 - - -
Total other financing sources (uses) 595,290 64,500 - - - Net change in fund balances 65,110 (825,744) 179,042 17,924 (166,449) FUND BALANCES:

Beginning of the year, as previously reported 359,059 5,126,068 416,270 365,386 483,932 Restatement (Note 14) - - - - -
Beginning of the year, as restated 359,059 5,126,068 416,270 365,386 483,932 End of year $ 424,169 $ 4,300,324 $ 595,312 $ 383,310 $ 317,483 Special Revenue
239
City of East Palo Alto
Combining Statement of Revenues, Expenditures and Changes in Fund Balances Non- Governmental Funds
For the Year Ended June 30, 2025
105
Federal
and State Housing CYSFF Lighting Drainage Local
Grants Assistance Measure A TOT District District Grants $ - $ - $ - $ 931,241 $ 189,222 $ -
- - - - - -
- - 279,220 - - -
- - - - - -
- - - - - -
- 234 - - - -
19,994 22,149 64,792 305,366 58,405 37,470
325,581 - - - - 194,728
345,575 22,383 344,012 1,236,607 247,627 232,198
- 1,722 48,822 50,530 99,073 4,574
- - - - - 79,690
24,830 - - 142,734 140,044 21,700
2,324 - 572,266 - - -
1,235 1,435 - - - 22,960
- - - 16,950 - -
- - - - - -
- - - - - -
28,389 3,157 621,088 210,214 239,117 128,924
317,186 19,226 (277,076) 1,026,393 8,510 103,274
- - - - 62,078 -
- - - - 62,078 -
317,186 19,226 (277,076) 1,026,393 70,588 103,274
344,212 496,766 6,385,678 1,399,116 6,061,988 1,184,319 643,112 - - (6,385,678) - - - -
344,212 496,766 - 1,399,116 6,061,988 1,184,319 643,112 $ 661,398 $ 515,992 $ - $ 1,122,040 $ 7,088,381 $ 1,254,907 $ 746,386 Special Revenue
240
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, 2025
106
Low and
Moderate
Income
Housing Housing Housing Measure
SVCF Successor in Lieu TOT HH
REVENUES:

Property taxes $ - $ - $ - $ - $ -
Sales taxes - - - - -
Transient occupancy tax - - - 279,220 -
Other taxes - - - - 1,677,265
Licenses, fees and permits - - - - -
Charges for services - - - - -
Use of money and property - 210,435 360,220 129,539 319,482 Grants and intergovernmental - - - - -
Total revenues - 210,435 360,220 408,759 1,996,747
EXPENDITURES:

Current:

General government - 7,184 32,518 29,418 6
Public safety - - - - -
Public works - - - - -
Culture and recreation - - - - -
Community development - 166,744 15,050 - 565,041
Capital outlay - - - - -
Debt service:

Principal - - - - -
Interest - - - - -
Total expenditures - 173,928 47,568 29,418 565,047

REVENUES OVER
(UNDER) EXPENDITURES - 36,507 312,652 379,341 1,431,700 OTHER FINANCING SOURCES (USES):

Transfers in - 73,544 - - -
Total other financing sources (uses) - 73,544 - - -
Net change in fund balances - 110,051 312,652 379,341 1,431,700 FUND BALANCES:

Beginning of the year, as previously reported 2,000,000 7,999,430 13,735,913 2,747,499 6,116,534 Restatement (Note 14) - - - - -
Beginning of the year, as restated 2,000,000 7,999,430 13,735,913 2,747,499 6,116,534 End of year $ 2,000,000 $ 8,109,481 $ 14,048,565 $ 3,126,840 $ 7,548,234 Special Revenue
241
107
Special Capital
Revenue Project
Total
Non-Major
Measure CIP Governmental W Impact Fees Funds
$ - $ - $ 1,120,463
339,655 - 339,655
- - 558,440
- - 3,348,249
- 162,282 162,282
- - 701,397
62,422 130,716 2,063,595
- - 714,972
402,077 292,998 9,009,053
- - 862,617
- - 119,531
- 19,448 1,305,360
- - 574,590
- - 1,253,213
92,630 - 2,326,938
- - 15,039
- - 962
92,630 19,448 6,458,250
309,447 273,550 2,550,803
- - 795,412
- - 795,412
309,447 273,550 3,346,215
1,197,078 2,632,425 59,694,785
- - (6,385,678)
1,197,078 2,632,425 53,309,107
$ 1,506,525 $ 2,905,975 $ 56,655,322
242
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, 2025
108
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES:

Charges for services 127,500 $ 127,500 $ 132,241 $ 4,741 Use of money and property 10,860 10,860 22,587 11,727
Total revenues 138,360 138,360 154,828 16,468
EXPENDITURES:

Current:

General government 92,838 92,838 90,547 2,291
Public works 640,812 1,020,656 578,460 442,196
Debt service:

Principal - - 15,039 (15,039)
Interest - - 962 (962)
Total expenditures 733,650 1,113,494 685,008 428,486
REVENUES OVER (UNDER) EXPENDITURES (595,290) (975,134) (530,180) 444,954 OTHER FINANCING SOURCES (USES):

Transfer in 595,290 595,290 595,290 -
Total other financing sources (uses) 595,290 595,290 595,290 - Net change in fund balance $ - $ (379,844) $ 65,110 $ 444,954 FUND BALANCE:

Beginning of year 359,059
End of year $ 424,169
Budget Amounts
243
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, 2025
109
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES:

Other taxes $ 1,478,280 $ 1,478,280 $ 1,670,984 $ 192,704 Use of money and property 160,000 160,000 255,610 95,610 Total revenues 1,638,280 1,638,280 1,926,594 288,314
EXPENDITURES:

Current:

General government 225,796 225,796 221,336 4,460
Public works 794,062 906,233 378,144 528,089
Capital outlay 1,010,000 2,020,638 2,217,358 (196,720)
Total expenditures 2,029,858 3,152,667 2,816,838 335,829

REVENUES OVER (UNDER)
EXPENDITURES (391,578) (1,514,387) (890,244) 624,143
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 $ (327,078) $ (1,449,887) $ (825,744) $ 624,143 FUND BALANCE:

Beginning of year 5,126,068
End of year $ 4,300,324
Budget Amounts
244
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, 2025
110
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES:

Use of money and property $ 13,000 $ 13,000 $ 24,220 $ 11,220 Grants and intergovernmental 170,000 170,000 194,663 24,663 Total revenues 183,000 183,000 218,883 35,883
EXPENDITURES:

Current:

Public safety 170,000 170,000 39,841 130,159
Total expenditures 170,000 170,000 39,841 130,159
Net change in fund balance $ 13,000 $ 13,000 $ 179,042 $ 166,042 FUND BALANCE:

Beginning of year 416,270
End of year $ 595,312
Budget Amounts
245
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, 2025
111
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES:

Use of money and property $ 10,000 $ 10,000 $ 17,924 $ 7,924 Total revenues 10,000 10,000 17,924 7,924
Net change in fund balance $ 10,000 $ 10,000 $ 17,924 $ 7,924 FUND BALANCE:

Beginning of year 365,386
End of year $ 383,310
Budget Amounts
246
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, 2025
112
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES:

Charges for services $ 570,000 $ 570,000 $ 568,922 $ (1,078) Fines and forfeitures 2,500 2,500 - (2,500)
Use of money and property 20,000 20,000 22,264 2,264
Total revenues 592,500 592,500 591,186 (1,314)
EXPENDITURES:

Current:

General government 289,050 289,050 276,887 12,163
Community development 456,069 572,069 480,748 91,321
Total expenditures 745,119 861,119 757,635 103,484
Net change in fund balance $ (152,619) $ (268,619) (166,449) $ 102,170 FUND BALANCE:

Beginning of year 483,932
End of year $ 317,483
Budget Amounts
247
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, 2025
113
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES:

Use of money and property $ 4,000 $ 4,000 $ 19,994 $ 15,994 Grants and intergovernmental 389,627 416,381 325,581 (90,800) Total revenues 393,627 420,381 345,575 (74,806)
EXPENDITURES:

Current:

Public works - 28,907 24,830 4,077
Culture and recreation - 7,406 2,324 5,082
Community development 300,060 350,060 1,235 348,825
Total expenditures 300,060 386,373 28,389 357,984
Net change in fund balance $ 93,567 $ 34,008 317,186 $ 283,178 FUND BALANCE:

Beginning of year 344,212
End of year $ 661,398
Budget Amounts
248
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, 2025
114
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES:

Charges for services $ - $ - $ 234 $ 234
Use of money and property 14,000 14,000 22,149 8,149
Total revenues 14,000 14,000 22,383 8,383
EXPENDITURES:

Current:

General government 1,722 1,722 1,722 -
Community development 1,452 1,452 1,435 17
Total expenditures 3,174 3,174 3,157 17
Net change in fund balance $ 10,826 $ 10,826 19,226 $ 8,400 FUND BALANCE:

Beginning of year 496,766
End of year $ 515,992
Budget Amounts
249
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, 2025
115
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES:

Transient occupancy tax $ 275,000 $ 275,000 $ 279,220 $ 4,220 Use of money and property 40,000 40,000 64,792 24,792
Total revenues 315,000 315,000 344,012 29,012
EXPENDITURES:

Current:

General government 48,822 48,822 48,822 -
Culture and recreation 525,000 770,500 572,266 198,234
Total expenditures 573,822 819,322 621,088 198,234
Net change in fund balance $ (258,822) $ (504,322) (277,076) $ 227,246 FUND BALANCE:

Beginning of year 1,399,116
End of year $ 1,122,040
Budget Amounts
250
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, 2025
116
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES:

Property taxes $ 866,300 $ 866,300 $ 931,241 $ 64,941
Use of money and property 200,000 200,000 305,366 105,366 Total revenues 1,066,300 1,066,300 1,236,607 170,307
EXPENDITURES:

Current:

General government 54,545 54,545 50,530 4,015
Public works 275,450 285,262 142,734 142,528
Capital outlay 300,000 300,000 16,950 283,050
Total expenditures 629,995 639,807 210,214 429,593
Net change in fund balance $ 436,305 $ 426,493 1,026,393 $ 599,900 FUND BALANCE:

Beginning of year 6,061,988
End of year $ 7,088,381
Budget Amounts
251
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, 2025
117
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES:

Property taxes $ 162,295 $ 162,295 $ 189,222 $ 26,927
Use of money and property 89,081 89,081 58,405 (30,676) Total revenues 251,376 251,376 247,627 (3,749)
EXPENDITURES:

Current:

General government 99,373 99,373 99,073 300
Public works 214,081 244,763 140,044 104,719
Capital outlay 200,000 200,000 - 200,000
Total expenditures 513,454 544,136 239,117 305,019

REVENUES OVER (UNDER)
EXPENDITURES (262,078) (292,760) 8,510 301,270
OTHER FINANCING SOURCES (USES):

Transfer in 62,078 62,078 62,078 -
Total other financing sources (uses) 62,078 62,078 62,078 - Net change in fund balance $ (200,000) $ (230,682) 70,588 $ 301,270 FUND BALANCE:

Beginning of year 1,184,319
End of year $ 1,254,907
Budget Amounts
252
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, 2025
118
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES:

Use of money and property $ 120,000 $ 120,000 $ 37,470 $ (82,530) Grants and intergovernmental 963,563 720,000 194,728 (525,272) Total revenues 1,083,563 840,000 232,198 (607,802)
EXPENDITURES:

Current:

General government 15,000 15,000 4,574 10,426
Public safety 150,000 150,000 79,690 70,310
Public works 243,563 243,563 21,700 221,863
Culture and recreation 570,000 570,000 - 570,000
Community development 85,000 85,000 22,960 62,040
Total expenditures 1,063,563 1,063,563 128,924 934,639
Net change in fund balance $ 20,000 $ (223,563) 103,274 $ 326,837 FUND BALANCE:

Beginning of year 643,112
End of year $ 746,386
Budget Amounts
253
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, 2025
119
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
OTHER FINANCING SOURCES (USES):

Transfer in $ - $ - - $ -
Total other financing sources (uses) - - - -
Net change in fund balance $ - $ - - $ -
FUND BALANCE:

Beginning of year 2,000,000
End of year $ 2,000,000
Budget Amounts
254
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, 2025
120
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES:

Use of money and property $ 35,000 $ 35,000 $ 210,435 $ 175,435 Total revenues 35,000 35,000 210,435 175,435
EXPENDITURES:

Current:

General government 43,253 43,253 7,184 36,069
Community development 380,206 411,038 166,744 244,294
Total expenditures 423,459 454,291 173,928 280,363
REVENUES OVER (UNDER) EXPENDITURES (388,459) (419,291) 36,507 455,798 OTHER FINANCING SOURCES (USES):

Transfer in 73,544 73,544 73,544 -
Total other financing sources (uses) 73,544 73,544 73,544 - Net change in fund balance $ (314,915) $ (345,747) 110,051 $ 455,798 FUND BALANCE:

Beginning of year 7,999,430
End of year $ 8,109,481
Budget Amounts
255
City of East Palo Alto
Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual Housing in Lieu Special Revenue Fund
For the Year Ended June 30, 2025
121
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES:

Licenses, fees and permits $ 54,680 $ 54,680 $ - $ (54,680) Use of money and property 250,000 250,000 360,220 110,220 Grants and intergovernmental - - - -
Total revenues 304,680 304,680 360,220 110,220
EXPENDITURES:

Current:

General government 32,518 32,518 32,518 -
Community development 72,250 2,096,977 15,050 2,081,927 Total expenditures 104,768 2,129,495 47,568 2,081,927
REVENUES OVER (UNDER) EXPENDITURES 199,912 (1,824,815) 312,652 2,192,147 Net change in fund balance $ 199,912 $(1,824,815) 312,652 $ 2,192,147 FUND BALANCE:

Beginning of year 13,735,913
End of year $ 14,048,565
Budget Amounts
256
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, 2025
122
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES:

Transient occupancy tax $ 275,000 $ 275,000 $ 279,220 $ 4,220 Use of money and property 60,000 60,000 129,539 69,539
Total revenues 335,000 335,000 408,759 73,759
EXPENDITURES:

Current:

General government 29,418 29,418 29,418 -
Total expenditures 29,418 29,418 29,418 -
Net change in fund balance $ 305,582 $ 305,582 379,341 $ 73,759 FUND BALANCE:

Beginning of year 2,747,499
End of year $ 3,126,840
Budget Amounts
257
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, 2025
123
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES:

Other taxes $ 1,677,000 $ 1,677,000 $ 1,677,265 $ 265
Use of money and property 180,000 180,000 319,482 139,482 Total revenues 1,857,000 1,857,000 1,996,747 139,747
EXPENDITURES:

Current:

General government 1,752 1,752 6 1,746
Community development 290,094 752,259 565,041 187,218
Total expenditures 291,846 754,011 565,047 188,964

REVENUES OVER (UNDER)
EXPENDITURES 1,565,154 1,102,989 1,431,700 328,711
Net change in fund balance $ 1,565,154 $ 1,102,989 1,431,700 $ 328,711 FUND BALANCE:

Beginning of year 6,116,534
End of year $ 7,548,234
Budget Amounts
258
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, 2025
124
Variance with
Final Budget
Actual Positive
Original Final Amounts (Negative)
REVENUES:

Sales taxes $ 350,000 $ 350,000 $ 339,655 $ (10,345)
Use of money and property 15,000 15,000 62,422 47,422
Total revenues 365,000 365,000 402,077 37,077
EXPENDITURES:

Current:

General government 1,740 1,740 - 1,740
Capital outlay 500,000 187,542 92,630 94,912
Total expenditures 501,740 189,282 92,630 96,652
Net change in fund balance $ (136,740) $ 175,718 309,447 $ (59,575) FUND BALANCE:

Beginning of year 1,197,078
End of year $ 1,506,525
Budget Amounts
259

STATISTICAL

SECTION
125
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 well being 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 government-wide information include information beginning in that year. 260
126
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Government activities
Net investment in capital assets $ 41,044,530 $ 42,278,404 $ 48,784,281 $ 55,197,664 $ 56,070,993 $ 63,227,229 $ 64,005,813 $ 74,583,002 $ 80,872,067 $ 92,334,942 Restricted For:

Streets and Infrastructure 5,816,534 6,411,718 7,700,051 9,885,470 11,354,052 12,774,681 14,736,889 16,118,821 20,314,190 14,574,306 Parks and Recreation 1,120,082 1,117,148 1,089,920 340,827 348,880 344,094 334,082 343,811 365,386 383,310 Measure C programs 1,405,053 1,510,846 1,015,232 592,734 253,401 223,160 217,659 138,450 - - Housing Programs 17,325,494 20,518,013 20,824,081 21,669,184 24,277,027 25,891,744 26,780,234 31,735,201 33,955,113 40,727,575 Special Programs 1,168,856 853,741 1,262,039 1,522,452 1,755,499 2,012,599 2,010,100 2,529,780 2,870,088 3,393,875 Capital projects 279,184 3,796,398 3,012,787 9,816,132 10,159,391 6,707,412 8,602,288 7,172,849 5,004,887 16,950,310 Total restricted 27,115,203 34,207,864 34,904,110 43,826,799 48,148,250 47,953,690 52,681,252 58,038,912 62,509,664 76,029,376 Unrestricted 28,798,504 33,919,154 40,774,262 40,040,582 46,185,712 49,482,293 59,082,008 62,177,856 68,404,889 69,445,378 Total governmental activities net position $ 96,958,237 $ 110,405,422 $ 124,462,653 $ 139,065,045 $ 150,404,955 $ 160,663,212 $ 175,769,073 $ 194,799,770 $ 211,786,620 $ 237,809,696 Business-type activities
Net investment in capital assets 3,353,012 4,050,566 11,161,837 10,964,954 10,880,048 11,205,575 11,306,820 11,212,431 11,338,141 31,621,908 Restricted For:

Capital Projects¹ 926,770 928,562 682,991 585,636 591,828 591,909 1,943,955 5,589,148 13,778,345 10,548,127 Total restricted 926,770 928,562 682,991 585,636 591,828 591,909 1,943,955 5,589,148 13,778,345 10,548,127 Unrestricted¹ 4,919,239 5,592,490 1,949,538 3,292,824 4,362,698 5,216,208 4,120,165 7,672,675 2,896,181 30,592,699 Total business-type activities net position $ 9,199,021 $ 10,571,618 $ 13,794,366 $ 14,843,414 $ 15,834,574 $ 17,013,692 $ 17,370,940 $ 24,474,254 $ 28,012,667 $ 72,762,734 Primary Government
Net investment in capital assets 44,397,542 46,328,970 59,946,118 66,162,618 66,951,041 74,432,804 75,312,633 85,795,433 92,210,208 123,956,850 Restricted 28,041,973 35,136,426 34,904,110 43,826,799 48,740,078 48,545,599 54,625,207 63,628,060 76,288,009 86,577,503 Unrestricted 33,717,743 39,511,644 43,406,791 43,919,042 50,548,410 54,698,501 63,202,173 69,850,531 71,301,070 100,038,077 Total primary government net position $ 106,157,258 $ 120,977,040 $ 138,257,019 $ 153,908,459 $ 166,239,529 $ 177,676,904 $ 193,140,013 $ 219,274,024 $ 239,799,287 $ 310,572,430 ¹ Certain amounts have been reclassified to present historical information in conformance with current classification.

City of East Palo Alto, California
Net Position by Component
Last Ten Fiscal Years
(accrual basis of accounting)
261
127
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Expenses
Governmental Activities:

General government $ 3,857,915 $ 4,183,768 $ 4,550,835 $ 4,811,440 $ 5,309,119 $ 6,356,058 $ 5,779,679 $ 7,264,421 $ 8,179,233 $ 9,182,069 Public safety 9,653,248 9,313,300 10,694,568 11,860,715 11,681,076 12,076,770 11,242,720 13,158,656 13,640,989 14,023,956 Public works 4,947,019 4,734,883 4,925,199 5,103,756 4,943,077 5,598,607 5,275,133 5,995,606 7,292,278 7,384,886 Culture and recreation 1,181,861 1,183,150 1,712,237 1,805,560 1,654,667 1,349,016 1,822,711 2,170,071 1,950,423 2,312,962 Community development 2,748,306 2,426,699 3,129,327 3,720,981 4,984,488 5,939,827 4,943,100 7,099,055 7,244,815 5,063,007 Interest on long-term debt 4,325 2,347 1,214 154 - - 6,561 73,997 43,766 37,139 Total governmental activities 22,392,674 21,844,147 25,013,380 27,302,606 28,572,427 31,320,278 29,069,904 35,761,806 38,351,504 38,004,019 Business-type activities
Water Service 342,263 378,893 320,163 423,315 637,581 687,250 2,789,343 813,827 894,227 1,028,660 Garbage collection 2,490,862 2,501,535 2,320,786 2,583,092 2,702,159 2,618,989 1,054,839 2,940,594 3,171,977 3,451,140 Sewer services 5,526,550
Total business-type activities 2,833,125 2,880,428 2,640,949 3,006,407 3,339,740 3,306,239 3,844,182 3,754,421 4,066,204 10,006,350 Total primary government expenses 25,225,799 24,724,575 27,654,329 30,309,013 30,309,013 34,626,517 32,914,086 39,516,227 42,417,708 48,010,369 Program Revenues
Governmental Activities:

Charges for Service:

General government 22,278 26,441 51,117 82,963 45,297 5,666 7,851 12,786 8,981 7,089 Public safety 574,595 480,048 595,725 430,611 353,229 246,218 248,561 323,391 414,605 485,577 Public works 221,994 298,451 258,277 521,338 251,126 232,121 129,159 172,677 304,110 294,826 Culture and recreation - 4,731 5,956 4,762 14,361 3,049 11,080 27,294 10,555 2,327 Community Development 2,088,395 1,989,755 1,808,234 1,697,655 3,078,503 3,540,707 3,211,876 2,367,939 1,683,411 3,024,702 Operating Grants and Contributions 2,643,028 4,969,735 1,740,657 1,948,262 2,542,025 2,757,114 5,610,645 15,916,942 3,165,138 3,439,850 Capital Grants and Contributions 8,348,064 4,229,323 5,930,378 5,770,566 2,037,536 7,797,945 6,783,094 3,414,258 7,453,564 14,197,560 Total governmental activities program revenues 13,898,354 11,998,484 10,390,344 10,456,157 8,322,077 14,582,820 16,002,266 22,235,287 13,040,364 21,451,931 Business-type activities
Charges for Service:

Water Service 980,296 1,227,649 1,149,827 1,184,789 1,222,502 1,142,586 1,256,458 1,189,481 1,606,313 1,769,274 Garbage collection 2,482,434 2,461,388 2,433,093 2,636,619 2,762,229 2,733,951 2,905,566 3,030,827 3,161,410 3,495,110 Sewer Services - - - - - - - - - 5,453,033
Operating Grants and Contributions - - - - - - 186,919 - - - Capital Grants and Contributions - - 1,963,050 - 31,480 622,565 291,112 44,963 1,308,516 2,135,309 Total business-type activities program revenues 3,462,730 3,689,037 5,545,970 3,821,408 4,016,211 4,499,102 4,640,055 4,265,271 6,076,239 12,852,726 Total primary government revenues 17,361,084 15,687,521 15,936,314 14,277,565 12,143,485 19,081,922 20,642,321 26,500,558 19,116,603 34,304,657 Net Revenue (Expenses):

Governmental Activities (8,494,320) (9,845,663) (14,623,036) (16,846,449) (20,250,350) (16,737,458) (13,067,638) (13,526,519) (25,311,140) (16,552,088) Business-type Activities 629,605 808,609 2,905,021 815,001 815,001 676,471 1,192,863 510,850 2,010,035 2,846,376 Total Net Revenue (Expenses) $ (7,864,715) $ (9,037,054) $ (11,718,015) $ (16,031,448) $ (19,435,349) $ (16,060,987) $ (11,874,775) $ (13,015,669) $ (23,301,105) $ (13,705,712) Fiscal Year Ending June 30
City of East Palo Alto, California
Changes in Net Position
Last Ten Fiscal Years
(accrual basis of accounting)
262
128
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
General Fund
Nonspendable $ 11,932,475 $ 12,066,847 $ 11,743,001 $ 10,938,871 $ 8,826,647 $ 6,554,760 $ 5,282,165 $ 2,875,868 $ 927,145 $ 507,011 Restricted - - - - 20,065 23,784 27,297 38,659 45,039 52,008 Committed - - - - 980,355 980,355 10,097,589 11,844,496 11,150,949 31,394,222 Assigned 383,658 1,188,899 1,886,415 1,839,551 2,183,599 4,128,219 6,658,000 6,000,000 3,824,125 2,876,189 Unassigned 16,293,653 17,235,337 24,191,919 26,426,148 30,996,166 31,116,240 26,407,109 33,027,657 43,470,340 30,904,437 Total General Fund 28,609,786 30,491,083 37,821,335 39,204,570 39,204,570 42,803,358 48,472,160 53,786,680 59,417,598 65,733,867 All Other Governmental Funds
Restricted 26,537,401 34,122,255 34,904,110 43,826,799 47,339,670 45,250,665 45,389,536 51,986,249 60,968,691 62,325,928 Committed - - - - - 5,500,000 9,000,000 10,414,734 9,350,000 6,837,690 Assigned 4,803,773 7,289,475 6,772,150 7,874,189 11,936,316 10,908,746 5,600,829 6,889,192 9,419,779 7,427,922 Unassigned (197,068) - - - - (61,923) (111,371) (206,396) - - Total all other governmental funds 31,144,106 41,411,730 41,676,260 51,700,988 51,700,988 61,597,488 59,878,994 69,083,779 79,738,470 76,591,540 Total Governmental Funds $ 59,753,892 $ 71,902,813 $ 79,497,595 $ 90,905,558 $ 90,905,558 $ 104,400,846 $ 108,351,154 $ 122,870,459 $ 139,156,068 $ 142,325,407 Fiscal Year Ended June 30
City of East Palo Alto, California
Fund Balances-Governmental Funds
Last Ten Fiscal Years
(modified accrual basis of accounting)
263
129
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Revenues
Taxes $ 22,015,184 $ 22,570,573 $ 26,465,002 $ 28,911,799 $ 30,593,515 $ 27,551,942 $ 31,488,448 $ 38,052,255 $ 37,239,225 $ 37,702,689 Licenses, fees, and permits 8,225,539 2,276,892 2,945,418 2,816,522 1,425,267 2,665,772 2,344,950 1,734,484 3,657,663 2,971,724 Charges for services 2,778,293 2,090,795 1,942,517 2,027,506 2,901,680 1,487,373 1,340,766 1,387,903 1,116,255 1,423,958 Fines and fortfeitures 532,143 442,911 745,766 421,661 401,717 242,042 263,437 379,861 540,438 556,245 Use of money and property 474,624 410,003 878,892 2,082,517 2,730,055 207,416 (2,323,287) 2,802,993 6,759,703 6,144,012 Grants and intergovernmental 3,589,152 8,724,241 5,177,790 7,459,093 1,285,504 5,659,603 4,897,399 17,631,163 10,680,936 3,211,566 Miscellaneous 1,212,731 205,096 119,862 385,940 260,257 1,915,735 1,700,286 975,524 546,286 674,780 Total revenues 38,827,666 36,720,511 38,275,247 44,105,038 39,597,995 39,729,883 39,711,999 62,964,183 60,540,506 52,684,974 Expenditures
Current
General Government 4,037,015 4,270,123 4,286,525 4,696,638 5,126,419 6,144,761 6,332,990 6,646,083 7,490,022 8,581,695 Public Safety 10,200,118 10,159,814 10,165,174 11,240,702 10,920,002 11,629,425 11,767,310 12,671,959 12,802,340 13,451,406 Public Works 3,106,375 3,560,158 4,251,301 4,150,097 3,844,254 4,134,384 4,097,153 4,189,669 4,969,777 5,828,892 Culture and recreation 1,036,572 959,888 1,243,981 1,203,631 1,001,494 700,691 1,219,765 1,553,917 1,329,817 1,686,482 Community Development 2,257,570 2,397,396 2,984,606 3,589,412 4,823,525 5,758,006 5,146,245 7,001,196 7,062,319 4,887,309 Capital Outlay 2,524,109 3,290,362 7,716,265 7,800,356 2,505,041 9,244,588 7,067,172 9,614,380 9,624,330 14,524,463 Debt Service (a)
Principal repayment 61,347 52,302 31,399 16,085 - - - 452,677 499,126 518,249 Interest & fiscal charges 4,325 2,347 1,214 154 - - 6,561 73,997 43,766 37,139 Total expenditures 23,227,431 24,692,390 30,680,465 32,697,075 28,220,735 37,611,855 35,637,196 42,203,878 43,821,497 49,515,635 Excess of revenues
over (under) expenditures 15,600,235 12,028,121 7,594,782 11,407,963 11,407,963 2,118,028 4,074,803 20,760,305 16,719,009 3,169,339 Other financing sources (uses)
Transfers in 1,236,787 3,876,948 2,121,910 8,637,770 8,266,603 3,506,089 2,381,000 5,133,238 3,686,297 1,845,412 Transfers (out) (3,498,787) (3,811,148) (2,121,910) (8,637,770) (8,266,603) (3,506,089) (2,381,000) (11,374,238) (4,119,697) (1,845,412) Total other financing sources(uses) (2,262,000) 65,800 - - - - - (6,241,000) (433,400) - Net change in fund balances $ 13,338,235 $ 12,093,921 $ 7,594,782 $ 11,407,963 $ 11,407,963 $ 2,118,028 $ 4,074,803 $ 14,519,305 $ 16,285,609 $ 3,169,339 Debt service as a percentage of noncapital
expenditures 0.32% 0.26% 0.14% 0.07% 0.08% 0.00% 0.02% 1.62% 1.59% 1.59% Debt service as a percentage of total expenditures
expenditures 0.28% 0.22% 0.11% 0.05% 0.06% 0.00% 0.02% 1.25% 1.24% 1.12% City of East Palo Alto, California
Changes in Fund Balances-Governmental Funds
Last Ten Fiscal Years
(modified accrual basis of accounting)
264
130
Secured Total Unsecured Factor of
Fiscal Gateway 101 University Secured University Unsecured Total Taxable Taxable Assessed Year City Corridor Circle Ravenswood Property City Circle Ravenswood Property Assessed (1) Value (3) 2016 $ 1,387,303,962 $ 366,869,951 $ 386,077,451 $ 89,606,753 $ 2,229,858,117 $ 5,895,578 $ 32,434,814 $ 5,307,991 $ 64,725,455 $ 2,294,583,572 1.000000 2017 1,496,819,954 383,867,913 391,965,125 128,424,119 2,401,077,111 5,357,954 31,608,639 6,300,157 64,603,270 2,465,680,381 1.000000 2018 1,860,043,257 493,901,959 399,943,872 139,127,273 2,893,016,361 5,568,741 28,727,193 3,838,839 59,703,566 2,952,719,927 1.000000 2019 1,987,717,844 589,570,833 491,664,014 149,310,365 3,218,263,056 16,763,127 26,264,047 3,792,066 70,949,766 3,289,212,822 1.000000 2020 2,141,077,211 610,407,047 501,497,289 167,894,435 3,420,875,982 16,924,357 25,817,541 3,956,073 70,967,618 3,491,843,600 1.000000 2021 2,256,060,762 626,312,724 511,628,461 247,209,411 3,641,211,358 5,172,050 23,863,678 4,876,777 70,667,249 3,711,878,607 1.000000 2022 2,334,992,280 647,462,524 520,340,698 261,727,649 3,764,523,151 17,480,486 17,381,330 4,386,585 75,381,087 3,839,904,238 1.000000 2023 2,496,505,848 702,048,413 688,427,574 245,346,193 4,132,328,028 6,909,334 13,391,529 4,677,616 64,162,471 4,196,490,499 1.000000 2024 2,599,989,651 738,414,743 702,195,861 253,694,547 4,294,294,802 7,407,119 16,148,352 5,684,837 69,614,625 4,363,909,427 1.000000 2025 2,696,748,543 722,881,910 714,628,847 262,085,458 4,396,344,758 6,504,071 16,509,457 4,977,750 71,902,516 4,468,247,274 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.

City of East Palo Alto, California
Assessed Value of Taxable Property
Last Ten Fiscal Years
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
$5,000
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Millions Unsecured Property Secured Property
265
131
2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 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 0.0304 0.0376 0.0352 0.0616 0.0522 0.0341 0.0369 0.0415 0.0674 0.0615 Sequoia Union High School District 0.0434 0.0391 0.0383 0.0365 0.0340 0.0315 0.0290 0.0286 0.0391 0.0388 San Mateo Community College District 0.0250 0.0247 0.0235 0.0175 0.0266 0.0213 0.0227 0.0193 0.0190 0.0178 Midpeninsula Open Space District 0.0008 0.0006 0.0009 0.0018 0.0016 0.0015 0.0015 0.0013 0.0012 0.0013 TOTAL 0.0996 0.1020 0.0979 0.1174 0.1144 0.0884 0.0901 0.0907 0.1267 0.1194 Total Tax Rate 1.0996 1.1020 1.0979 1.1174 1.1144 1.0884 1.0901 1.0907 1.1267 1.1194 Tax Rate as represented by TRA 021-000.

City of East Palo Alto, California
Direct and Overlapping Property Tax Rates
Last Ten Fiscal Years
Source: County Auditor data, MuniServices, LLC / Neumo
266
132
Taxpayer Taxable Value
($)
Percent of Total
City Taxable
Value (%)
Taxable Value
($)
Percent of
Total City
Taxable Value
(%)
Columbia REIT University Circle LP $ 556,704,133 12.46% Woodland Park Property Owner LLC 474,141,163 10.61%
University Plaza EPA LLC 217,523,500 4.87%
SHR Palo Alto LLC 154,744,802 3.46% 52,069,011 2.27%
Ikea Property Inc. 107,922,716 2.42% 85,985,187 3.75%
Bayshore 1771 LLC 56,419,123 1.26%
Four Corners EPA Property Owner LLC 45,032,487 1.01%
Sycamore Real Estate Investment LLC 44,057,554 0.99%
HPI ASVRF 1990 Bay LLC 38,851,548 0.87%
HD Devel Of Maryland Inc. 23,617,071 0.53% 20,043,605 0.87% Wells REIT II University Circle 333,161,508 14.52%
Gateway 101 LLC 26,465,708 1.15%
RFHC Bay Pulgas Landowner Inc. 12,747,728 0.56%
Woodlands Newell Assoc LP 7,956,352 0.35%
Working Dirt R2 LLC 7,800,460 0.34%
Green Valley Corporation 7,750,952 0.34%
Wayland LLC 6,629,870 0.29%
Total Top 10 Taxpayers 1,719,014,097 38.48% 780,554,851 34.03% Total Taxable Value 4,468,247,274 100.00% 2,294,583,572 100.00% Source: County Assessor data, MuniServices, LLC / Neumo City of East Palo Alto, California
Principal Property Taxpayers
Current Fiscal Year and Nine Years Ago
2024-25 2015-16
267
133
Total Tax Levied Current Tax Percentage Delinquent Tax Total Tax Percentage for Fiscal Year (1) Collections (2) of Levy Collections (3) Collections of Levy 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%
2024 10,255,973 10,141,505 98.9% 10,141,505 98.9%
2025 10,619,190 11,533,494 108.6% 11,533,494 108.6%
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.

City of East Palo Alto, California
Property Tax Levies and Collections
Last Ten Fiscal Years
June 30
Fiscal Year Ended
Fiscal Year of the Levy
Collected Within the
Total Collections To Date
268
134
Fiscal
Year
End
Leases
Payable
Capitalized Lease
Debt (1)
Leases
Payable
Notes
Payable
Total Primary
Government
Debt
Percentage of
Personal
Income (2)
Outstanding
Debt Per
Capita (2)
Outstanding
Debt to Taxable
Assessed Value
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 0.09% 22.30 0.02%
2021 - 2,306,523 - 653,334 2,959,857 0.08% 21.53 0.08%
2022 - 1,880,524 - 2,936,524 4,817,048 0.07% 21.75 0.13% 2023 - 1,427,847 - 4,793,715 6,221,562 0.06% 21.22 0.15% 2024 942,495 942,495 49,970 583,335 2,518,295 0.21% 86.60 0.06% 2025 424,246 424,426 20,603 560,002 1,429,277 0.11% 49.06 0.03% Notes:
(1) Capitalized Lease Debt due to Police Vehicles acquired in 2013 and 2015. (2) Population Projections prepared by State of California Department of Finance, Personal Income Data by MuniServcies LLC City of East Palo Alto, California
Ratios of Outstanding Debt by Type
Business-Type
Governmental Activities Activities
269
135
2024-25 Assessed Valuation $ 4,468,247,274
City's Share
Total Debt Percentage of Debt
DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT 6/30/2025 Applicable (1) 6/30/2025 City of East Palo Alto $ 1,429,277 100.000% $ 1,429,277 Total Direct Debt $ 1,429,277 $ 1,429,277
San Mateo Community College District $ 655,171,697 1.376% $ 9,015,163 Sequoia Union High School District 449,512,000 3.214% 14,447,316 Ravenswood School District 130,390,000 40.814% 53,217,375 Midpeninsula Regional Open Space District 114,920,000 1.048% 1,204,362 California Statewide Communities Development Authority 1915 Act Bonds 2,133,840 100.000% 2,133,840 Total Overlapping Debt 1,352,127,537 80,018,056
TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT $ 1,353,556,814 $ 81,447,333

OVERLAPPING GENERAL FUND DEBT
San Mateo County General Fund Obligations $ 530,970,772 1.376% $ 7,306,158 San Mateo County Board of Education Certificates of Participation 5,330,000 1.376% 73,341 Midpeninsula Regional Open Space District General Fund Obligations 74,065,600 1.048% 776,207 San Mateo County Mosquito and Vector Control District General Fund Obligations 3,185,295 1.376% 43,830 TOTAL OVERLAPPING GENERAL FUND DEBT $ 613,551,667 $ 8,199,536 OVERLAPPING TAX INCREMENT DEBT (Successor Agency)
2015A Refunding Tax Allocation Bonds $ 10,840,000 100.000% $ 10,840,000 COMBINED TOTAL DEBT $ 100,486,869
Ratios to 2024-25 Assessed Valuation:

Direct Debt 0.032%
Direct and Overlapping Tax and Assessment Debt 1.790%
Direct and Overlapping Tax, Assessment and Increment Debt 2.030% Combined Total Debt 2.249%
Ratios to Redevelopment Successor Agency Incremental Valuation ($1,427,707,876):

Overlapping Tax Increment Debt 0.640%
Source:MuniServices, LLC / Neumo
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.

Source: MuniServices, LLC / Neumo
California Municipal Statistics, Inc.

City of East Palo Alto, California
Computation of Direct and Overlapping Debt
June 30, 2025
270
136
2015-2016 2016-2017 2017-2018 2018-2019 2019-2020
Taxable Assessed Valuation $ 2,294,583,572 $ 2,465,680,381 $ 2,952,719,927 3,289,212,822 $ 3,491,843,600 Conversion Percentage 25% 25% 25% 25% 25%
Adjusted Assessed Valuation 573,645,893 616,420,095 738,179,982 822,303,206 872,960,900 Debt service limit percentage 15% 15% 15% 15% 15%
Debt Limit 86,046,884 92,463,014 110,726,997 123,345,481 130,944,135 Debt Applicable to Limit:

Less: Outstanding General Obligations - - - - -
Legal Debt Margin $ 86,046,884 $ 92,463,014 $ 110,726,997 $ 123,345,481 $ 130,944,135 2020-2021 2021-22 2022-23 2023-24 2024-25
Taxable Assessed Valuation $ 3,711,878,607 $ 3,839,904,238 $ 4,196,490,499 $ 4,363,909,427 $ 4,468,247,274 Conversion Percentage 25% 25% 25% 25% 25%
Adjusted Assessed Valuation 927,969,652 959,976,060 1,049,122,625 1,090,977,357 1,117,061,819 Debt service limit percentage 15% 15% 15% 15% 15%
Debt Limit 139,195,448 143,996,409 157,368,394 163,646,604 167,559,273 Debt Applicable to Limit:

Less: Outstanding General Obligations - - - - -
Legal Debt Margin $ 139,195,448 $ 143,996,409 $ 157,368,394 $ 163,646,604 $ 167,559,273 Source: San Mateo County Assessors, MuniServices, LLC / Neumo 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.

City of East Palo Alto, California
Computation of Legal Bonded Debt Margin
Last Ten Fiscal Years
271
137
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)
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
2023-24 29,078 3.30% 41,158 2.90% 155,903 2,555
2024-25 29,133 3.30% 44,376 3.40% 168,093 2,532
Source: MuniServices, LLC / Neumo
1) Population Projections are provided by the California Department of Finance Projections. 2) Unemployment Data are provided by the EDD's Labor Market Information Division. 3) Income Data is provided by the U.S. Bureau of Labor Statistics. 4) Student Enrollment reflects the total number of students enrolled in the Ravenswood City Elementary.

City of East Palo Alto, California
Last Ten Fiscal Years
Demographic and Economic Statistics
26,000
27,000
28,000
29,000
30,000
31,000
32,000
City Population
0%
5%
10%
15%
20%
25%
30% 272
138 Fiscal Increment Payments to
Year ( Gross RPTTF) Principal Interest Total Coverage PFA Interest Total Coverage 2016 $ 8,369,650 $ 655,000 $ 1,037,717 $ 1,692,717 4.9 $ 15,242,245 $ 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 2 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 - - - - 2024 17,167,429 1,085,000 407,425 1,492,425 11.5 - - - - 2025 17,183,207 1,140,000 411,800 1,551,800 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 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
City of East Palo Alto, California
Bonded Debt Pledged Revenue Coverage
Successor Agency (Including Former Redevelopment and Authority Bonds) Last Ten Fiscal Years
273
139
Business Name Number of
Employees
Percent of Total
Employment
Number of
Employees
Percent of Total
Employment
Amazon Web Services (a) 1,613 9.78%
Ravenswood Family Health Center 361 2.19% 213 1.42%
Ikea 306 1.85% 328 2.19%
Ravenswood City School District 265 1.61% 586 3.91%
Four Seasons Hotel - Silicon Valley 225 1.36% 310 2.07% The Home Depot 186 1.13% 159 1.06%
City of East Palo Alto (b) 122 0.74% 110 0.73%
Eastside College Preparatory School 75 0.45% 0.00%
Nordstrom Rack 59 0.36% 70 0.47%
The Primary School 51 0.31%
DLA Piper LLP 176 1.17%
US Post Office 150 1.00%
NTT Group 80 0.53%
Ropes and Gray Law Firm 60 0.40%
Total 10 Top Employers 3,263 19.78% 2,242 14.95%
Total City Employment (1) 16,500 15,000
Notes:

Results based on direct correspondence with city’s local businesses. (a) Amazon Web Services - Due to company's security policy, Employer will not provide updated counts.

Previous year count 1,613 has been applied.
(b) City of East Palo Alto - Count obtained from the FY2024-25 Adopted Budget Publication Report.

Source: MuniServices, LLC / Neumo
Source: FY2015-16, City of East Palo Alto -- ACFR Publication Report (1) Total City Labor Force provided by EDD Labor Force Data.

City of East Palo Alto, California
Principal Employers
Last Fiscal Year and Nine Years ago
2024-25 2015-16
274
140
Function 2015-2016 2016-2017 2017-2018 2018-2019 2019-2020 2020-2021 2021-2022 2022-2023 2023-2024 2024-2025 General Government 21.0 23.0 23.0 23.0 24.0 24.0 21.0 21.0 22.0 30.7 Public Safety 45.5 45.5 46.0 46.3 47.2 48.2 48.2 50.6 49.6 49.3 Police
Officers 36.0 36.0 36.5 37.3 36.5 37.5 37.5 38.4 38.4 42.8 Civilians 9.5 9.5 9.5 9.0 10.7 10.7 10.7 12.3 11.3 6.5
Public Works¹ 19.0 19.0 19.0 19.0 19.0 20.3 21.5 21.5 21.5 22.5 Culture & Recreation² 4.4 4.4 4.4 4.2 4.2 3.7 8.2 8.2 7.2 - Community Development 15.0 17.0 19.9 20.5 20.5 17.5 19.0 20.0 20.0 20.0 Administration 4.0 4.0 5.9 6.5 6.5 3.5 4.0 4.0 4.0 4.0
Planning Division 3.0 4.0 4.0 4.0 4.0 4.0 4.0 5.0 5.0 5.0 Building Services Division 6.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 7.0 Housing Division ( includes Rent Stabilization) 2.0 2.0 3.0 3.0 3.0 3.0 4.0 4.0 4.0 4.0 Administration Division 2.0 2.0 2.0 2.0 2.0 4.5 4.5 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 5.0 6.0 Maintenance Division 12.0 12.0 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 2.0 -
Recreation 1.0 1.0 1.0 1.0 1.0 0.9 2.9 2.9 2.9 -
Senior Services 1.6 2.4 2.4 2.2 2.2 1.8 2.3 2.3 2.3 -
Total 104.9 108.9 112.3 112.9 114.8 113.6 117.8 121.2 120.2 122.4 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.

City of East Palo Alto, California
Number of Positions - City Government by Function
Last Ten Fiscal Years
275
141
2015-2016 2016-2017 2017-2018 2018-2019 2019-2020 2020-2021 2021-2022 2022-2023 2023-2024 2024-2025 Function
Public Safety
Calls for Service 31,312 30,745 28,087 29,375 26,344 24,969 20,855 23,701 24,254 29,523 Number of serious crimes ¹ 174 116 319 164 129 172 359 216 179 454 Number of burglaries 93 97 78 82 64 92 80 43 27 33
Number of assaults 284 239 238 276 323 292 284 315 369 383 Number of auto thefts reported 393 86 101 192 110 212 158 150 141 112 Number of homicides 4 1 1 3 2 7 6 3 2 -
Number of robberies 77 48 69 57 49 65 55 63 50 53
Number of physical arrests 1,462 1,433 984 904 602 481 465 395 396 533 Public Works
Streets
Street Resurfacing (lane miles) - - - - 2 2.5 6.3 6.2 - 32 Potholes repaired 94 98 159 152 159 89 75 81 133 131
Engineering
Encroachment permits 109 67 - 44 101 150 87 92 119 151
Culture & recreation
Facility Rentals 41 67 58 55 101 24 106 242 558 1,263
Senior Lunches 6,662 9,112 6,509 3,094 5,742 8,548 10,155 6,075 5,640 2,100 Senior Transportation 3,020 2,996 2,606 2,349 2,041 - 7,854 1,744 1,828 2,128 Community Event participants 2,600 3,762 3,600 3,820 426 - 1,700 2,540 6,000 5,500 Fit Zone/Clean Zone Participants 1,116 2,655 194 500 130 - - 75 125 75 Community Development
Building Permits
Residential - Count 391 590 506 442 397 397 352 407 455 481 Commercial Count 43 60 29 31 31 44 34 37 43 42
Transportation 2
Shuttle Passengers
Caltrain/Commuter Shuttle 28,901 7,978 - - - - - - -
Water Service³
Hydrant Breaks 12 3 4 7 15 - 10 12 9 3
Water main breaks 19 7 3 13 16 10 14 21 10 12
Average daily consumption per family (in gallons) 200.0 217.0 222.7 258.0 226.0 229.0 258.0 270.8 282.2 274.4 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
City of East Palo Alto, California
Operating Indicators by Function
Last Ten Fiscal Years
276
142
2015-2016 2016-2017 2017-2018 2018-2019 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25

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 846 846 846 846 846 846 846 846 846 846
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 1 1
Water Service¹
Water pipelines (miles) 39 39 39 39 39 39 40 40 40 40
Fire hydrants 290 330 330 330 330 330 272 325 325 326
Maximum daily capacity 2.0 2.0 3.0 3.0 3.0 3.0 1.5 3.0 3.0 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
City of East Palo Alto, California
Capital Asset Statistics by Function
Last Ten Fiscal Years
277
City of East Palo Alto
Measure HH Fund
Financial Statements
For the year ended June 30, 2025
Table of Contents
Measure A Fund
East Palo Alto, California
Schedule of Receipts and
Disbursements with Independent
Accountants’ Report
For the year ended June 30, 2025
278
City of East Palo Alto
Measure A Transportation Fund
For the Year Ended June 30, 2025
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
279
1 Independent Accountants’ Report
To the Honorable Members of the City Council
of the City of East Palo Alto, California
We have examined management of the City of East Palo Alto, California’s (City) assertion that the City followed the requirements of 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, 2025. A summary of revenues and expenditures specific to the Measure A Fund 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 on 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 the examination to obtain reasonable assurance about whether management’s assertion is consistent with the criteria, in all material respects. An examination involves performing 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 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.

Our examination does not provide a legal determination on the City’s compliance with the Agreement.

In our opinion, management’s assertion that the City complied with Agreement for Distribution of San Mateo County Measure A Funds for Local Transportation Purposes in Accordance with the 2004 Measure A between the City and the San Mateo County Transportation Authority dated March 5, 2009 is fairly statded in all material respects.

Menlo Park, California
December 26, 2025
eidebailly.com
4040 Campbell Ave., Ste. 200 • Menlo Park, CA. 94025-1053 • T 650.522.3400 • F 650.645.7393 • EOE 280 City of East Palo Alto
Measure A Transportation Fund
Schedule of Receipts and Disbursements
For the Year Ended June 30, 2025
2 Schedule of Receipts and Disbursements
RECEIPTS:

Transaction and use tax - Measure A $ 767,302
Investment income 322,864
Total receipts 1,090,166
DISBURSEMENTS:

Annual Street Resurfacing 2,807,507
Pulgas Avenue Mini Roundabout 73,700
Inter-governmental - PTap 26 3,000
Fiscal services & management overhead 1,799
Total disbursements 2,886,006
Receipts over / (under) disbursements $ (1,795,840)
281

CITY OF EAST PALO ALTO
3 December 26, 2025
San Mateo County Transportation Authority
1250 San Carlos Avenue
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, 2025:
• 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 Schedule of Receipts and Disbursements for the fiscal year ended June 30, 2025, are in compliance with the Agreement.

Melvin E. Gaines Tomohito Oku
City Manager Finance Director
Docusign Envelope ID: AC97C203-4CF0-43CC-9A41-2F864F03C714 12/26/2025 12/26/2025
282
City of East Palo Alto
Measure HH Fund
Financial Statements
For the year ended June 30, 2025
Table of Contents
Measure HH Fund
East Palo Alto, California
Financial Statements and
Independent Auditor’s Reports
For the year ended June 30, 2025
283
City of East Palo Alto
Measure HH Fund
Financial Statements
For the Year Ended June 30, 2025
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 9
284
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
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 (the City), as of and for the year ended June 30, 2025, 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 Fund of the City, as of June 30, 2025, and the changes in its 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 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
The financial statements present only the Fund, and do not purport to, and do not, present fairly the financial position of the City, as of June 30, 2025, the changes in its financial position, or, where applicable, its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter.

Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with 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.
eidebailly.com
4040 Campbell Ave., Ste. 200 • Menlo Park, CA. 94025-1053 • T 650.522.3400 • F 650.645.7393 • EOE 285 2 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.

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.
286
3 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 26, 2025 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, 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 26, 2025
287
City of East Palo Alto
Measure HH Fund
Balance Sheet
June 30, 2025
See accompanying notes to the financial Statements
4 Measure HH
Special Revenue
Fund
ASSETS:

Cash and Investments $ 7,743,836
Accounts Receivable 19,974
Total assets $ 7,763,810
LIABILITIES AND FUND BALANCES:

Accounts payable and accrued liabilities 215,576
Total liabilities 215,576
Fund Balances:

Restricted 7,548,234
Total fund balances 7,548,234
Total liabilities and fund balances $ 7,763,810
288
City of East Palo Alto
Measure HH Fund
Statement of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2025
See accompanying notes to the financial Statements
5 Measure HH
Special Revenue
Fund
REVENUES:

Parcel Tax - Measure HH $ 1,677,265
Interest income 319,482
Total revenues 1,996,747
EXPENDITURES:

Administration:

Community development 112,674
Program expenditures:

Job Train and First Source Hiring 452,373
Total expenditures 565,047
REVENUES OVER (UNDER) EXPENDITURES: 1,431,700
FUND BALANCES:

Beginning of year 6,116,534
End of year $ 7,548,234
289
City of East Palo Alto
Measure HH Fund
Notes to Financial Statements
For the Year Ended June 30, 2025
6 Notes 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. 290
City of East Palo Alto
Measure HH Fund
Notes to Financial Statements
For the Year Ended June 30, 2025
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 Annual Comprehensive Financial Report.

As of June 30, 2025, the Measure HH Fund had the following cash and investment activity:

Cash and investments $ 7,743,836
Investments are stated at fair value using the aggregate method, resulting in the following investment income allocated to the Measure HH Fund:

Interest income $ 286,034
Unrealized gain on change in fair value of investments 33,448 $ 319,482

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.
291
City of East Palo Alto
Measure HH Fund
Notes to Financial Statements
For the Year Ended June 30, 2025
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 2025, the City incurred $112,674 and $452,373 in administrative activities and program activities, respectively.
292
9 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 Measure HH Special Revenue Fund (Fund) of the City of East Palo Alto, California (City), as of and for the year ended June 30, 2025, and the related notes to the financial statements, and have issued our report thereon dated December 26, 2025.

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 City’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 may exist that have not been identified.
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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.

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 City’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 City’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Menlo Park, California
December 26, 2025
294
City of East Palo Alto
Measure HH Fund
Financial Statements
For the year ended June 30, 2025
Table of Contents
Measure W Fund
East Palo Alto, California
Schedule of Receipts and
Disbursements With Independent
Accountants’ Report
For the year ended June 30, 2025
295
City of East Palo Alto
Measure W Transportation Fund
For the Year Ended June 30, 2025
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................................................................................................................... 3 296
1 Independent Accountants’ Report
To the Honorable Members of City Council
of the City of East Palo Alto
We have examined management of the City of East Palo Alto, California’s (City) assertion that the City followed 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, 2025. A summary of revenues and expenditures specific to the Measure W Fund 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 on 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 the examination to obtain reasonable assurance about whether management’s assertion is consistent with the criteria, in all material respects. An examination involves performing 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 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.

Our examination does not provide a legal determination on the City’s compliance with the Agreement.

In our opinion, management’s assertion that the City followed 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 between the City and the San Mateo County Transportation Authority dated January 16, 2020, is fairly stated in all material respects.

Menlo Park, California
December 26, 2025
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Measure W Transportation Fund
Schedule of Receipts and Disbursements
For the Year Ended June 30, 2025
2 Sc Receipts and Disbursements
RECEIPTS:

Transaction and use tax - Measure W $ 339,655
Investment income 62,422
Total receipts 402,077
DISBURSEMENTS:

Annual street resurfacing 92,630
Total disbursements 92,630
Receipts over / (under) disbursements $ 309,447
298

CITY OF EAST PALO ALTO
3 December 26, 2025
San Mateo County Transportation Authority
1250 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, 2025:
• 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, 2025, are in compliance with the Agreement.

Melvin E. Gaines Tomohito Oku
City Manager Finance Director
Docusign Envelope ID: AC97C203-4CF0-43CC-9A41-2F864F03C714 12/26/2025 12/26/2025
299
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, 2026
300
City of East Palo Alto
Appropriations Limit Schedule
For the Year Ended June 30, 2026
Table of Contents
Independent Accountant’s Report.................................................................................................................... 1 Appropriations Limit Schedule......................................................................................................................... 3 Notes to Appropriations Limit Schedule.......................................................................................................... 4 301
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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, 2026. 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 2025-26 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 2025-26 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. 302
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4. 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 26, 2025
303
City of East Palo Alto
Appropriations Limit Schedule
For the Year Ended June 30, 2026
3 Source
A. Appropriations limit for the FY 2024-25 $ 40,575,070 Prior year schedule B. Calculation Factors:

1. Population increase % 1.0000 State Department of Finance

2. Inflation increase % 1.0644 State Department of Finance

3. Total adjustment factor % 1.0644 B1 x B2
C. Annual adjustment Decrease $ 2,613,035 [(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 2,613,035 (C+D)
F. Appropriations limit for FY 2025-26 $ 43,188,407 (A+E) 304
City of East Palo Alto
Notes to Appropriations Limit Schedule
For the Year Ended June 30, 2026
4 1. PURPOSE OF LIMITED PROCEDURES 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 2025-2026 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 2025-2026 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, 2026.
305
1 December 26, 2025
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, 2025, and have issued our report thereon dated December 26, 2025. 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 October 15, 2025 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. 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.

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 26, 2025.

Planned Scope and Timing of the Audit
We conducted our audit consistent with the planned scope and timing we previously communicated to you. eidebailly.com
4040 Campbell Ave., Ste. 200 • Menlo Park, CA. 94025-1053 • T 650.522.3400 • F 650.645.7393 • EOE 306 2 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.”
• Estimates – Generally Accepted Auditing Standards require a presumed risk of management bias when assumptions are used to calculate significant account balances, which for the City applies to pension, OPEB, claims, and compensated absences.
• 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.

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 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 the fiscal year, except for the effects of GASB Statement No. 101, Compensated Absences. 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.
307
3 The most sensitive accounting estimates affecting the financial statements are related to the City’s pension liabilities, Other Post Employment Benefit (OPEB) liability, and compensated absences liability. 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.

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 26, 2025.
308
4 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, the East Palo Alto Sanitary District (District) 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
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POLICY AND ACTION ITEM 12.2

EAST PALO ALTO

CITY COUNCIL

STAFF REPORT
DATE: January 6, 2026
TO: Honorable Mayor and Members of the City Council
VIA: Melvin E. Gaines, City Manager
BY: Shiri Klima, Assistant City Manager
Maurice Baker, Community Services Manager
SUBJECT: Youth Commission and Youth Task Force Program Development Recommendation
That the City Council:

1. Receive a report on the process and progress in creating a Youth Commission and Youth Task Force and provide feedback; and

2. Find that 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.

Executive Summary
The City of East Palo Alto has a long-standing interest in establishing a youth engagement body, with efforts dating back to the early 2000s. This City Council has identified this as a strategic priority project in the FY 2025-2027 Work Plan.

To advance this goal, the City issued a request for proposals in November 2024 and subsequently contracted with three consultants in early 2025. Together with City staff, the consultant team developed and implemented a comprehensive engagement strategy aligned with youth availability, reaching young residents through summer programs, schools, community events, pop-ups, and surveys between July and November 2025.

The outreach and engagement process was robust and inclusive, resulting in participation from over 100 youth. This engagement confirmed strong interest in a formalized youth governing body and underscored the desire for meaningful influence on City decision-making. Youth 310
POLICY AND ACTION ITEM 12.2
participants expressed a clear preference for a Youth Commission, citing direct access to City Council, formal leadership development, and exposure to civic and budgetary processes.

There was also strong support for a complementary Youth Task Force to promote collaboration among youth-serving organizations and broaden participation across the community.

Based on best practices and local feedback, staff recommends pursuing a dual-entity model consisting of a Youth Commission and a Youth Task Force. Implementation is expected to occur at least through FY 2028-29 to ensure sustainability, capacity-building, and leadership development. Staff proposes partnering with a qualified nonprofit organization to implement and operate the program. The estimated program cost is approximately $175,000, excluding staff time.

Overall, this effort represents a significant step toward amplifying youth voice, increasing civic engagement, and fostering intergenerational leadership in East Palo Alto. The proposed model reflects extensive community input and positions the City to build a sustainable, impactful youth engagement framework that aligns with Council priorities and community needs.

Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:

Priority: Civic Engagement
Priority: Governance, Organizational Strength, and Fiscal Sustainability Priority: Parks, Recreation, and Community Facilities
Background
There have been multiple attempts to establish a youth engagement body dating back to the early 2000’s with the most recent effort being an EPA Youth Advisory Council formation in 2009-

10. Following the changes made to the Community Services Department in 2011-12, this effort was placed on pause despite there still being significant interest from Council in development of a youth governing body. In 2022, Council reaffirmed its interest by budgeting funding to the Community Services Division of the City Manager’s Office to investigate resident interest in taking the next steps to develop a youth governing body. Due to staff capacity, this project was put on hold. However, in the spring of 2024, the City Council listed Develop Recommendations for Establishing a Youth Commission or Alternative Civic Engagement Program as one of its Strategic Priority Projects on its FY2025-2027 Work Plan.

Analysis
Staff issued a request for proposals (RFP) in November 2024. In that RFP, the City requested services to support what it would take to build a youth engagement body. Staff reviewed all five proposals. In early 2025, the City Manager awarded contracts in this regard (each below his $75,000 signing authority) to Leadership Institute (YLI) related to governance and program 311
POLICY AND ACTION ITEM 12.2
structure, to Creative Hustle to implement their co-design process in engaging all parties who will play a role in the youth body’s structure, and to Swordhouse for its grassroots community engagement style with local youth-serving organizations.

Staff and consultants came together to develop a work plan and schedule for completing the process by December 2025. Each consultant had one City staff member liaison with whom to work on a consistent basis while the entire team met monthly. The team recommended multiple strategies for community engagement that aligned with the availability of the 12- to 18-year-old demographic. With most students being out of school in June through August, the following timeline was developed to ensure we were engaging as many youth as possible at one setting:

July
 Host Co-Design Session One (engaged Summer Park Activation providers and organizations who gather youth during summer months)
 Meet with organizations that are partnering with facilities like East Palo Alto Community Archive @ EPACENTER
August
 Conduct outreach at various community events that are taking place around the City where youth are expected to gather like Back-to-School Family Day September
 Host Co-Design Session Two (connect with schools directly and organizations that offer year-round programming)
 Begin school tour program where we engage youth during their class breaks and specialized instruction
 Start the community survey distribution that was distributed through multiple channels, like: City website and newsletter, City social media, Community Services email database, schools, and local community-based organizations (CBOs) October
 Ramp up survey promotion to include paid social promotion to specific demographic  Engage previous responders and incentive referral
 Begin promotion of Co-Design Session Three gathering
November
 Host Co-Design Session Three
 Conduct pop-up events at CCRMS and to engage the younger half of the 12- to 18-yearold demographic  Perform survey outreach at KIPP Esperanza and Eastside College Preparatory Governance/Structure
Youth Leadership Institute (YLI) has been responsible for developing and executing several youth engagement bodies around Northern California. Wendy Pacheco was selected as the 312
POLICY AND ACTION ITEM 12.2
Project Manager from YLI and began working with the Community Services Division to assess options for a youth engagement body.

The following goals were developed to help ground and guide the conversation:
 Amplify youth voice and share in decision making
 Increase civic engagement among youth in EPA
 Create and sustain intergenerational leadership
With the established goals in mind, YLI compiled examples of each youth body variation that has been established the area and educated staff on their various strengths and considerations:

Option 1: Youth Council
Structure Key Responsibilities Considerations
Advisory or advocacy
group made up of young
people who provide input
on youth-related issues,
often to a city council,
nonprofit, or school district
Local examples:
 Palo Alto Youth
Council
 Oakland Police
Youth Leadership
Council

1. Town Halls & Listening
Sessions

2. Gather youth input on, and
lead campaigns around,
current issues

3. Organize youth-led events
in partnership with schools,
local CBOs, and
businesses

4. Run social media accounts
or newsletters tailored to
youth

5. Share youth perspectives
with City departments
during presentations or
informal sessions.

6. Propose pilot programs or
changes to recreation
schedules or spaces.

Pros:
 More flexible and creative
structure.
 Allows youth to voice
opinions and influence
decisions in a supportive,
educational environment.
 Can focus on peer-led
projects and outreach.

Drawbacks:
 Lacks formal authority or
decision-making power.
 Often seen as symbolic
rather than impactful.
 Heavily dependent on
adult facilitation and
funding.

Option 2: Youth Advisory Board
Structure Key Responsibilities Considerations
Structured body of young
people that provides
strategic guidance,
feedback, and
recommendations to an
organization, nonprofit,
institution, or agency on

1. Reviewing and giving
feedback on new programs
or services.

2. Participating in strategic
planning sessions.

Pros:
 Members may have a say
in real decisions, budgets,
or programmatic shifts.
 Offers youth experience
in governance,
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POLICY AND ACTION ITEM 12.2
programs, services, or
policies that affect youth.

These boards are often
established within public
agencies and can have
either advisory or codecision-making roles.

Local examples:
 Youth Climate
Advisory Board
 Redwood City
Youth & Team
Advisory Board
 Oakland Police
Youth Leadership
Council

3. Leading or advising on
grantmaking (youth-led
philanthropy models).

4. Presenting to the
organization's board or
leadership team.

5. Engaging in peer-to-peer
outreach or storytelling.
leadership, and project
management.
 Organizations or
departments gain
authentic youth input to
improve services or
programs.
 Boards can target specific
outcomes (e.g., grant
allocation, youth
homelessness solutions).

Drawbacks:
 Without real decisionmaking power, boards
can feel performative
 Usually tied to one
organization’s mission;
not citywide or policyfocused.

Option 3: Youth Task Force
Structure Key Responsibilities Considerations
Youth-led, adult-supported
body that brings together
young people from diverse
backgrounds — including
at-large members and
representatives from local
community-based. The
collective will elevate youth
voice, strengthen
community partnerships,
and provide
recommendations to city
departments or the City
Council on recreation,
education, wellness, and
equity.

1. Advise the City Council on
policies and programs
impacting youth.

2. Identify and promote
recreational opportunities
for youth.

3. Serve as a liaison between
youth and local
government.

4. Encourage civic
engagement and
leadership development
among youth.

5. Promote crosscollaboration among local
CBOs across the city.

Pros:
 Informal structure
 Allows for membership
from all youth serving
organizations that have
interest; no size cap
Drawbacks:
 No requirement for
commitment
Option 4: Youth Commission
Structure Key Responsibilities Considerations
Pros:
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POLICY AND ACTION ITEM 12.2
A formal, often
government-appointed
advisory body that provides
policy recommendations to
city councils or other
government entities on
issues affecting youth.

Local examples:
 San Mateo Youth
Commission
 Oakland Youth
Commission
 Hayward Youth
Commission
 San Jose Youth
Commission
 Sacramento Youth
Commission

1. Conduct youth-led
research and present
findings to City Council or
government departments.

2. Host regular, publicly
noticed meetings.

3. Provide formal input on city
budget allocations or
department plans.

4. Track local or state
legislation affecting youth.

5. Collaborate with other
commissions or advisory
bodies.

6. Write letters of support or
opposition to bills or
proposals.

7. Give input on parks and
recreation programs,
housing policies, or public
safety issues.

8. Serve on city-led task
forces or working groups.

9. Evaluate the effectiveness
of city youth programs.
 Has the potential to
influence public policy and
legislation.
 More structured and
respected by decisionmakers.
 Offers civics education &
government experience.

Drawbacks:
 Bureaucratic structure can
limit flexibility and
creativity.
 May require formal
appointments, limiting
access.
 Slower-paced due to
government processes.

There is also a fifth option, which is reserving a youth seat for appointment to each current board and commission. To set up youth for success, integration into local government processes requires onboarding that commissions may or may not be equipped to lead. Also, there may be current commissions that do work the youth are not interested in, and likewise, there may be work the youth are interested in that does not correspond with a current commission. Thus, this option was rejected right away.

Community Engagement
Local community member and entrepreneur, Swordhouse owner Tonga Victoria, along with her staff partner, Recreation Coordinator Vincent Amelio, led the robust strategy for reaching our young residents. Tonga and Vincent set up physical outreach at places like the Boys & Girls Club of the Peninsula and EPAA. They also solicited consistent support and engagement from local organizations like East Palo Alto Boxing Club, Live in Peace, and Youth United for Community Action. For each piece to work, there had to be clear coordination between all teams so that everyone was communicating the same direction. Below are the results of each engagement method led by the team.
 Co-Design Session 1: 34 attendees
 Co-Design Session 2: 35 attendees
 Co-Design Session 3: 37 attendees
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POLICY AND ACTION ITEM 12.2
 Survey Responses: 262 responses
 Two pop-ups attended: Cesar Chavez-Ravenswood Middle School and Eastside College Preparatory
 Six survey outreach sites: Boys & Girls Club of Peninsula, East Palo Alto Academy, KIPP Esperanza, EPACENTER, YMCA, and College Track
Co-Design Session
Led by the authors of Creative Hustle, Olatunde Sobomehin and Sam Seidel, the Co-Design process taken out of the halls of Stanford University’s Hasso Plattner Institute of Design was brought straight to East Palo Alto. Along with the staff partner, Orleashia Amey, the act of engaging the intended audience in the development from start to finish provided a clear message that there is significant interest in a youth engagement body of some kind that will give a more solidified voice to one of our most vulnerable but active populations. Each session provided youth with information to make decisions that had clear outcomes.

In the first session, youth were educated by YLI about the four types of youth engagement options listed above as well as the pros and cons of each. The youth articulated a preference for a youth commission because this option:
 Provides direct access to the final decision makers (the Councilmembers)  Offers experience with formal leadership opportunities within their City  Can provide learning opportunities, including those regarding the budget process and political decision making
The youth also articulated an interest in a youth task force because this option:
 Allows for informal but strong collaboration between youth-serving organizations  Provides a more complete understanding of the work being done in the City and areas for growth
 As a collective, they feel they will have a stronger voice related to matters of youth In Co-Design Session Two, the focus was on the opportunities for growth that could be cultivated through a Youth Commission and/or Task Force. Youth were asked to weigh in on what they needed at each stage in life to become a leader in East Palo Alto. To do so, they first heard from leaders like San Mateo County Supervisor Lisa Gauthier and City Manager Melvin Gaines. This led to some very thoughtful responses and actionable items for a youth governing body to prioritize and present to the City Council.

The third Co-Design session gave the youth a chance to hear from founders of the City’s incorporation about how they actually established the City. Youth commented following the presentations from Dr, Omowale Satterwhite and Vice Mayor Ruben Abrica that they too want to build something substantial.

A Commitment at Least through FY 2028-29
Staff believes that for the youth commission and youth task force to be fully implemented and functioning, it will take us along with a non-profit three years. Thus, although budget decisions 316
POLICY AND ACTION ITEM 12.2
are made annually, the Council should be prepared to fund this program at least through FY 2028-29. In addition to the $25,000 we will request with the midyear budget for the remainder of FY 25-26, staff anticipates that the three-year cost of this program will be approximately $150,000 (meaning $50,000 annually in FY 2026-28 through FY 2028-29), which staff proposes come out of TOT. This is not accounting for the cost of staff time.

Immediately after This Meeting (still in FY 2025-26)
Following this meeting, staff will seek to obtain a non-profit that will implement a three-year plan that allows us to have a fully functioning Youth Commission. (To be eligible for funding using CYFS Transient Occupancy Tax (TOT) revenues, the selected nonprofit service provider must either be headquartered in East Palo Alto or for which a majority of clients served are East Palo Alto residents.) Staff will return to the City Council with that contract, which should be approximately $150,000. We may also have some ordinances to bring forward to Council to formally adopt these entities.

Year 1 (Implementation and Start Up in FY 2026-27)
hereafter, staff and the non-profit will finalize the structure of both entities and develop outreach and recruitment materials. This spring and summer, the non-profit will begin outreach and recruitment, review applications and interview the youth (by a youth panel and City staff) and complete the selection process for eight to twelve youth.

In the fall, staff hopes to plan a youth retreat, engage the youth commission in a decision process regarding the 2027 Summer Parks Activation programs, and host a holiday gather of the Youth Commission and Youth Task Force.

Year 2 (Growth and Capacity Building in FY 2027-28)
In Year 2, the goal will be to expand the membership to 12 to 15 participants. Staff and the nonprofit will review and evaluate the pilot year with the initial group of youth and also consider community feedback. We will do extra outreach and recruitment to increase participation.

Year 2 will also be about goal- and objective-setting for the commission and task force. The youth will be building capacity, learning the different areas the City touches and meeting with various elected officials, City staff and other decision makers. That year will include a youth needs assessment, community engagement period, and two or three developing campaigns or events.

Year 3 (Full Implementation and Sustainability in FY 2028-29) In Year 3, staff and the nonprofit will review and evaluate Year 2 with the youth, considering both their own and community feedback. That year, the goal will be to maintain 15 active youth members through the application process as well as to formalize a leadership pipeline and succession plan.
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POLICY AND ACTION ITEM 12.2
Also in Year 3, we will pursue leadership opportunities within other City commissions and boards.

We will create a sustainable communications strategy and finalize reporting channels to City staff and the community.

Fiscal Impact
In FY24, staff received funding from what was previous funding from Community Resource Grant funding for Youth Program Development that went unspent due to staff capacity. In FY 2025-26 as part of the mid-year budget adjustment, staff will be requesting $25,000 to initiate the development of said programming if Council should desire to move forward. Starting in FY 2026- 27, staff will be requesting an annual appropriation of $50,000 annually to be budgeted in the Community Services Division from CYFS TOT Fund for as long as Council desires the program to continue; this funding will be granted to a nonprofit to run the program. In the far future, this amount may need to increase along with inflation. Sample preliminary Youth Task Force Budget and preliminary Youth Commission Budget are attached; these are drafts.

As proposed, participating youth would receive stipends for their commitment to the youth commission and youth task force. Considering that many youth in our community have to work to help their families, not providing such stipends would limit the diversity desired in this program.

Transportation is also a huge consideration given the strained resources that are shared between a majority of families in our community, so we would be considering transportation vouchers as well, During the community engagement process and research of previous programming, these were two factors that crippled the opportunity to continue.

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.

Levine Act
The Levine Act is not applicable here as none of the consultants are seeking a license, permit, or other entitlement for use.

Attachments

1. Draft FY2026-27 Youth Task Force Budget

2. Draft FY2026-27 Youth Commission Budget
318

REVENUE
City of East Palo Alto- Youth Task Force Budget
EXPENSES Total Project Cost Notes
Program Materials &
Supplies $500 Includes any program branding materials, meeting materials, etc.

Food $1,250 Snacks for meetings and food for up to 4 meetings Community Outreach / Event
promotion $1,000
Can include social media outreach (paid ads), subscription for Canva to design promotion materials, incentives (e.g. SWAG) for community events, etc.

Youth Travel $2,500
At minimum $100 per youth
25 youth x $100
Youth Stipends $5,000
At $50 per meeting (4 meetings annually) = $200/youth
25 youth x $200
TOTAL EXPENSES $10,250.00
319
Cost of Internal Department Implementation

REVENUE
City of East Palo Alto- Youth Commission Budget
EXPENSES Total Project Cost Notes
Youth Capacity Building $3,500 2-day retreat or equivalent; includes space reservation, food, and event materials Program Materials &
Supplies $2,000 Includes any program branding materials, meeting materials, etc.

Food $2,500 Snacks for meetings and food for up to 2 community events Community Outreach / Event
promotion $1,000
Can include social media outreach (paid ads), subscription for Canva to design promotion materials, incentives (e.g. SWAG) for community events, etc.

Professional / Consultants
Fees $2,500
Bring in CBO’s to support the youth development and leadership training aspects of the programming.

Can include professional development for staff.

Youth Travel $3,750
At minimum $250 per youth
10 youth = $2,000
15 youth = $3,750
Youth Stipends $18,000
At $50 per meeting (2 meetings x month) = $1200/youth
10 youth = $12,000
15 youth = $18,000
TOTAL EXPENSES $33,250.00
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POLICY AND ACTION 12.3

EAST PALO ALTO

CITY COUNCIL

STAFF REPORT
DATE: January 6, 2026
TO: Honorable Mayor and Members of the City Council
VIA: Melvin E. Gaines, City Manager
BY: Denise J. Garcia, Assistant to the City Manager
Shiri Klima, Assistant City Manager
SUBJECT: Adoption of the Economic Development Strategic Plan (EDSP) Recommendation
Staff recommends that the City Council:

1. Adopt the Final Draft Economic Development Strategic Plan (EDSP) prepared by HR&A Advisors, Inc. and Kearns & West; and

2. Provide feedback to staff on the EDSP.

Executive Summary
The Economic Development Strategic Plan (EDSP) provides a 10-year roadmap to strengthen East Palo Alto’s economic resilience, support local businesses and entrepreneurs, expand workforce opportunities, and position the City for long-term fiscal sustainability. The City contracted with HR&A Advisors, Inc. to develop the EDSP through extensive research and community engagement.

The EDSP analyzes existing economic conditions, identifies key opportunity sectors, and outlines strategies to boost homegrown businesses, attract private investment, and make East Palo Alto investment ready. The EDSP organizes these strategies into three major goals supported by phased initiatives, which include “quick wins” achievable in the first two years, and provides supplemental guidance on strategic site development, potential tax increment financing, and local workforce alignment. Adoption of the EDSP will enable staff to prepare a detailed Five-Year Implementation Plan, including budget and staffing needs, and begin prioritizing initiatives for FY 2026–27.
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POLICY AND ACTION 12.3
Alignment with City Council Strategic Plan
This recommendation is primarily aligned with:

Priority: Land Use, Economic and Workforce Development
Background
During the City Council Priority Setting for Fiscal Year (FY) 2023 - 2025, the City Council established a Strategic Plan priority to “Promote Housing, Economic and Workforce Development,” including creation of an Economic Development Strategic Plan (EDSP). This priority was reaffirmed during the FY 2025 – 2027 City Council Priority Setting and focuses on expanding opportunities for small and micro businesses, supporting residents through quality job pathways, and leveraging strategic sites for long-term fiscal sustainability.

To support the development of the EDSP, City staff engaged Regional Government Services (RGS) for assistance in preparing a Request for Proposals (RFP) to retain a consultant firm to develop the City’s Economic Development Strategic Plan. Brian Moura, a lead consultant from RGS with extensive experience in economic development, collaborated with City staff to draft the RFP and identify and map eight business districts. Following a competitive request RFP process, the City Council awarded a contract to HR&A Advisors, Inc. with community engagement subconsultant Kearns & West (K&W) in December 2024 to lead development of the EDSP. Work began with a project kickoff meeting in February 2025, which included the following:
 City Council Subcommittee Members, who are Vice Mayor Abrica and Councilmember Dinan
 City leadership, which included City Manager, Assistant City Manager. Assistant to the City Manager, and Community and Economic Development Director  HR&A and K&W
 Brian Moura from RGS - Economic Development Advisors.

On July 15, 2025, the City Council received a project update and Existing Conditions Report summarizing the City’s economic baseline, business district conditions, workforce landscape, community input themes, and early opportunity areas. Since that time, HR&A and K&W have worked with the City staff and Advisor Moura to complete extensive research, community engagement, and strategy development, resulting in the Final Draft EDSP now presented for adoption.

Analysis
The Final Economic Development Strategic Plan (EDSP) provides a comprehensive, data-driven framework for strengthening East Palo Alto’s economic resilience, expanding opportunity for residents, and guiding land use and investment decisions over the next ten years. The EDSP is organized into eight major components, each of which contributes to a cohesive strategy for inclusive economic development. The following sections summarize the key components of the EDSP.
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POLICY AND ACTION 12.3

1. Existing Conditions Report
On July 15, 2025, the Council reviewed the Existing Conditions Report, which included a comprehensive assessment of East Palo Alto’s current demographic and socioeconomic context, real estate uses and trends, business and retail landscape, industry and employment base, and barriers and opportunities to economic growth. The report has since served as the shared fact base informing community engagement, opportunity identification, and strategy development.

2. Engagement Overview & Findings
HR&A and K&W engaged local stakeholders in a variety of formats – including interviews, focus groups, a pop-up event, and a community workshop – to validate data findings and inform the development of the EDSP. Key engagement themes included:
 Strong interest in a vibrant downtown and an activated waterfront that reflect East Palo Alto’s cultural diversity and serve both residents and visitors;  A desire for increased City support for small and micro businesses and entrepreneurs;  The need for expanded education and workforce training opportunities for youth and adults; and
 The importance of streamlining business permitting and development review processes to support long-term economic success.

3. Strengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis Insights from the existing conditions analyses and stakeholder conversations supported a SWOT analysis, which finds:

STRENGTHS
East Palo Alto benefits from its proximity to major employment hubs in the Bay Area, a strong base of small and micro businesses, and the waterfront as a unique natural asset.

These key strengths that will support future economic development.

WEAKNESSES
Aging infrastructure and cumbersome development processes have limited the City’s ability to foster the street-level vibrancy that attracts visitors and residents and drives economic growth.

OPPORTUNITIES AND THREATS
While development of vacant land and leveraging of State investments present significant opportunities, limited transit access and lingering negative perceptions must be addressed for East Palo Alto to fully realize these benefits. 323
POLICY AND ACTION 12.3

4. Opportunity Sectors
HR&A identified opportunity sectors for East Palo Alto based on the City’s current economic foundation and assets, regional strengths, and statewide and regional policy and funding priorities. Primary sectors, where East Palo Alto’s strengths align with regional funding opportunities, include educational services and childcare, healthcare, construction, and light manufacturing.

Supporting sectors are those that have strong foundations to grow in East Palo Alto. They include food and beverage / hospitality, retail, professional services (and other office-based sectors), and tech. Supplemental sectors are those that may offer regional funding opportunities that the City may pursue opportunistically and include arts and culture as well as sustainable environmental management.

The economic development strategies section details how East Palo Alto should prioritize these sectors in industry attraction, site development, and workforce training.

5. Economic Development Strategies
Based on data analysis, stakeholder feedback, and national best practices, HR&A outlined a ten-year phased economic development vision for East Palo Alto: to expand the City’s economy, grow community wealth, create vibrant places, and celebrate and tell its story.

Together, the strategies reflect a balanced approach to strengthening the local economy by supporting existing businesses, attracting new investment, and preparing the City for development. The strategies are anchored in three key economic development goals:
 Goal 1 - boost homegrown businesses and entrepreneurs in order to generate community wealth.
 Goal 2 - attract businesses and private investments to expand jobs, community amenities, and fiscal stability.
 Goal 3 - make East Palo Alto investment ready by unlocking key development sites, improving infrastructure, and enhancing the City’s brand.

Under each goal, two interconnected strategies and multiple initiatives work together to advance implementation. As detailed in the EDSP, initiatives are phased over ten years and include one to three “quick wins” achievable within the first two years. In support of these strategies, HR&A also developed a phased staffing plan.

Table 1: Economic Development Strategies At-A-Glance
Goals Strategies Initiatives

1. Boost
Home-grown
 Provide a one-stop
resource for small

1. Create a small business guide (digital / print) in
English and Spanish.
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POLICY AND ACTION 12.3
Businesses &
Entrepreneurs
businesses to start,
scale, and thrive in
EPA

2. Program the forthcoming City-owned
incubator/office space in Gateway Retail
Center for businesses and entrepreneurs.

3. Establish “EPA Business Commons”, a
physical all-in-one small/micro business and
entrepreneurship center.
 Make it easier for
small businesses to
navigate processes
and reach
customers

4. Streamline business licensing / permitting
processes and fee structure.

5. Create simple permits or pre-approved zones
for temporary uses and small activations.

6. Appoint an EPA Business Ambassador as the
champion and promoter, technical assistant,
and ombudsman.

7. Create a “Shop Local” campaign and program.

2. Attract
Businesses &
Private
Investments
 Run proactive
business
development with a
clear EPA business
case, digital “front
door,” sector
targets, and
account
management

8. Create a dedicated business development
landing page on the City’s website with
external resources and contact info.

9. Expand the landing page to launch a more
comprehensive “Choose EPA” portal as the
digital “front door” for prospective businesses
and investors.

10.Grow EPA Business Ambassador’s role to also
provide concierge-style support for prospective
businesses and investors. Expand the team to
also include an Economic Development
Manager to conduct proactive business
development.
 Invest in workforce
development to
connect EPA
residents to new
economic
opportunities and
expand EPA’s
appeal for
opportunity sectors

11.Work with workforce development partners to
provide industry-aligned trainings, potentially
targeting opportunity sectors.

12.Connect regional talent pipeline with EPA job
and entrepreneurship opportunities.

13.Establish a physical job-training hub.

3. Make East
Palo Alto
Investment
Ready
 Strengthen EPA’s
brand, activate the
public realm, and
create dynamic
destinations

14.Promote EPA as a place to live, work, and visit.

15.Regularly activate key corridors and strategic
corners, public spaces, and underutilized
private spaces.

16.Engage professional branding consultant to
launch a comprehensive marketing and
branding campaign for the City.
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POLICY AND ACTION 12.3
 Advance shovelreadiness and
leverage the
entitlement process
to unlock strategic
sites and
incentivize priority
uses

17.Leverage development requirements and
entitlements to incentivize priority uses – to
make desired uses and development type
easiest to build.

18.Establish an EPA Construction Accelerator
program to train up a local construction
workforce and help EPA contractors to
compete for larger local and regional projects.

19.Fund public infrastructure improvements
(water/sewer, fiber, roads, placemaking,
community assets, environmental remediation)
at/near key sites / business districts.

20.Assess the impact of current development
requirements and fees; as needed, fill funding /
financing gaps for catalytic projects.

Strategy Deep Dive
In addition to the core economic development strategies, the EDSP includes three supplemental strategy sections that provide deeper analysis of key implementation tools and opportunities:
site opportunities, a tax increment financing district, and local employment strategies. These sections are intended to support more detailed planning and implementation while providing additional context to inform future policy and investment decisions.

6. Site Opportunities
HR&A conducted an assessment of vacant and underutilized sites in East Palo Alto and identified four strategic clusters that are best positioned for investment in support of inclusive economic development, aligned with the opportunity sectors identified in the EDSP. The recommendations and development concepts introduced in this section are intended to inform and inspire future planning and development review processes and are not intended to predetermine or prescribe specific land uses. Unlocking these strategic sites will require implementation of EDSP strategies to address negative external perceptions, development feasibility challenges, misalignment between development proposals and community vision, and existing infrastructure deficits. The four strategic clusters are described below and included on page 54 of the EDSP (Attachment 1):
 The Waterfront Cluster is envisioned as a hub of community life that leverages waterfront access and is anchored by destinations such as Bloomhouse and the proposed Civic Commons and athletic field.
 The Bay Road Cluster is envisioned as an employment and innovation district, building on the area’s existing industrial base and transportation access.  The Gateway Cluster is envisioned as a well-connected gateway to the City and region, offering destination shopping experiences and community-serving retail, services, and local job opportunities.
 The Neighborhood Infill Cluster is envisioned as a series of active neighborhood sites that integrate housing, retail, and small businesses, supporting more vibrant local 326
POLICY AND ACTION 12.3
activity.

7. Tax Increment District High Level Analysis:

The City expressed interest in understanding whether a tax increment financing district model would be a useful tool in East Palo Alto. In response, HR&A conducted a high-level analysis to identify the conditions necessary for a successful Tax Increment Financing (TIF) district and to evaluate alternative financing mechanisms the City could consider. Key findings from this analysis include the following:
 The Ravenswood District represents the strongest candidate for a potential TIF, given its adopted Specific Plan, clearly defined infrastructure needs, established vision, and sites with significant development potential.
 Prior to pursing a TIF, the City should consider alternative tools that can deliver community benefits, including a Community Facilities District (CFD), Special Assessment District, Incentive Agreements, or Incentive Zoning.  Additional analysis is required to evaluate the viability of any tax increment district, including the County being willing to contribute, and discussing tradeoffs between district-specific goals and broader General Fund and citywide needs, including staffing and service demands.

8. Local Employment Strategies Deep-Dive
East Palo Alto has a robust ecosystem of nonprofits such as JobTrain, StreetCode Academy, Live in Peace, WeHope, EPACenter, One EPA, Renaissance Entrepreneurship Center, and Grassroots Ecology, that are engaged in local workforce development. These nonprofits could be better aligned with strong regional industries to maximize resident access to quality jobs.

Training in tech and entry-level skills for youth and young adults are existing strengths, while workforce training for healthcare, hospitality, and green jobs are emerging opportunities.

However, gaps remain in preparing residents for employment in advanced manufacturing and other opportunity sectors identified in the EDSP. The EDSP identifies Bay Area California Jobs First funding as a potential resource to strengthen training programs in priority sectors. The City’s use of Measure HH funds for job training, placement, and support services to East Palo Alto residents in the STEM and building trades employment sectors is another resource. 8 Critical Initiatives
The EDSP identifies 20 initiatives across three goals; among these, eight “must-do” initiatives are considered critical to launching East Palo Alto on a path of inclusive and sustainable economic growth. Several of these initiatives are designed as early “quick wins” that can be implemented within the first one to two years to deliver immediate benefits for residents and businesses. These include:

1. Creating a small and micro-business guide

2. Streamlining business licensing and permitting processes

3. Establishing a dedicated business development landing page as a clear digital “front door” for prospective businesses and investors
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POLICY AND ACTION 12.3

4. Partnering with workforce development organizations to provide industry-aligned training

5. Promoting East Palo Alto as a place to live, work, and visit through public-realm activations and branding efforts.

Mid-term priorities identified in the EDSP include:

6. Updating development requirements and entitlement processes to incentivize priority uses

7. Appointing an EPA Business Ambassador to serve as a champion, concierge, and ombudsman for businesses, with the potential to expand this capacity over time.

The final critical initiative, which is a longer-term effort that will be essential to unlocking private investment and supporting sustained economic vitality, is:

8. Funding public infrastructure improvements near key sites and business districts.

Staff seeks Council’s feedback on the EDSP in general, the 20 initiatives, and especially on the 8 must-do initiatives.

Next Steps
If the Council adopts the Final EDSP, staff will develop a detailed Five-Year Implementation Plan, which will include a staffing plan, timelines, budget needs, and metrics. Staff will also return to Council with funding and staffing recommendations in early 2026 in coordination with the FY 2026–27 budget cycle to fund the first year of this Implementation Plan.

Fiscal Impact
There is no fiscal impact for adopting the EDSP. Implementation of strategies will require future staffing, operational, and capital funding, which will return to Council for approval during the budget process or as part of project-specific actions.

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.

Government Code § 84308
Analysis of Levine Act Compliance: Not applicable.
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POLICY AND ACTION 12.3
Attachments

1. Final Draft of the Economic Development Strategic Plan 329
1| HR&A Advisors East Palo Alto Economic Development Strategic Plan East Palo Alto
Economic Development Strategic Plan
January 6, 2026
Final Report
330
2| HR&A Advisors East Palo Alto Economic Development Strategic Plan Table of Contents
00 | Executive Summary 03
01 | Engagement Overview & Findings 16
02 | SWOT Analysis 25
03 | Opportunity Sectors 29
04 | Economic Development Strategies 34
05 | Strategy Deep-Dive #1 - Site Opportunities 52
06 | Strategy Deep-Dive #2 - Tax Increment District 60
07 | Strategy Deep-Dive #3 - Local Employment Strategies 73 Appendix A: Existing Conditions Report
Appendix B: Business District Details
Appendix C: Site Opportunities Details
79 331
3| HR&A Advisors East Palo Alto Economic Development Strategic Plan NJ TRANSIT TOD Advisory Consulting Services Executive
Summary
00 332
4| HR&A Advisors East Palo Alto Economic Development Strategic Plan The Economic Development Strategic Plan (EDSP) will deliver an equity-focused, actionable economic development strategy* tailored to East Palo Alto’s needs.

EXECUTIVE SUMMARY | PROJECT GOALS
Support local
entrepreneurship
Diversify tax base &
Increase revenues Leverage strategic sites Generate employment opportunities *An economic development strategy focuses on strengthening the economy, supporting business activity, and creating jobs in a city to expand economic opportunities for its residents. 333
5| HR&A Advisors East Palo Alto Economic Development Strategic Plan OSWD Workshop #2 | Defining OSWD’s Role in the Ecosystem The EDSP provides the City of East Palo Alto and its partners with clear next steps to realize the City’s economic development vision.

EXECUTIVE SUMMARY | DESIRED OUTCOME
Clear Vision
grounded in data and engagement
Actionable Frameworks
with measurable outcomes the community can understand and use Priority Actions
to take in the near-, mid-, and long-term
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6| HR&A Advisors East Palo Alto Economic Development Strategic Plan EXECUTIVE SUMMARY | PLAN OVERVIEW
The EDSP includes the following components, drawing on insights gathered through engagement and data analysis.

Stakeholders Engaged
• City leadership & staff
• Local developers
• Workforce development
organizations
• Small / micro businesses &
entrepreneurs
• Ravenswood Shores Business
District (RSBD)
• Community members
Data Sources
• City of East Palo
• CoStar
• Lightcast
• EPA sales tax data
• ACS 5-year estimates, 2023
• Regrid
• Site visit
• Interviews, focus groups, popup event, workshop
1 | Existing Conditions
• History & Background
• Demographic & Socioeconomic Context
• Industry & Employment Base
• Business & Retail Landscape
• Real Estate Conditions
2 | Engagement Overview & Findings
3 | Strengths, Weaknesses, Opportunities, Threats (SWOT) Analysis 4 | Opportunity Sectors
5 | Economic Development Strategies
• Vision, Goals, Strategies, & Corresponding Initiatives • Implementation Roadmap
• Strategy Deep-Dives: Site Opportunities, Tax Increment District, & Local Employment Strategies
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7| HR&A Advisors East Palo Alto Economic Development Strategic Plan EXECUTIVE SUMMARY | EAST PALO ALTO TODAY: PEOPLE, PLACE, AND HISTORY Detailed analysis included in Appendix A (Existing Conditions Report).

1. Community of color rooted in resilience and self-determination. EPA has long served as an affordable haven for Black and Latinx residents in the Bay Area, shaped by a history of resistance against racialized policies, active community organizing, and ongoing tensions between growth and displacement.

2. Younger residents and larger households. EPA has a younger population and larger households compared to the region, underscoring the need for strong schools, workforce pathways, and familysustaining jobs.

3. Rising incomes and education - but persistent inequities. Median household income and educational attainment are improving, yet remain well below regional levels; residents earn less even with a college degree.

4. Stark racial disparities. Roughly 70% of residents - primarily Latinx and Black households - earn about $25,000 less than the citywide median, highlighting ongoing inequities and the importance of expanding accessible economic opportunities.
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8| HR&A Advisors East Palo Alto Economic Development Strategic Plan

1. Small, growing employment base that still lacks high-wage jobs. EPA has regained most jobs lost since 2013, but total employment remains relatively low and has grown more slowly than the region; low-wage jobs still dominate even as high-wage jobs expand.

2. Emerging industry strengths, limited access to tech. Professional, Scientific and Technical Services and Health Care are the largest industries and offer key sources of quality jobs in EPA, but the City captures little of the region’s dominant tech sector and its legacy manufacturing base remains small.

3. City of small and micro businesses with few major economic anchors. Most businesses employ fewer than 10 workers, making small business growth central to local economic development, while a handful of larger employers have outsized influence on jobs and tax revenues.

4. Fragmented commercial environment and limited retail. There are few visible business clusters and concentrated active storefronts, limiting vibrant commercial corridors and sense of place; retail diversity is limited, leading to unmet demand and a leakage of resident and worker spending.

5. Stagnant development but clear opportunities. Growth across real estate types has been stagnant, yet tightening demand in existing multifamily housing and the potential for new retail and industrial uses - especially in the City’s business districts - signal potential focus for investment.

EXECUTIVE SUMMARY | ECONOMIC & MARKET CONDITIONS: STRENGTHS, GAPS, AND POTENTIAL Detailed analysis included in Appendix A (Existing Conditions Report). 337 9 DRAFT
EXECUTIVE SUMMARY | ENGAGEMENT TAKEAWAYS
Center local people and small businesses
Provide tangible support to entrepreneurs and
small/micro-businesses through grants, shared spaces
(ghost kitchens, coworking, pop-ups), marketing help,
and access to a broader customer base beyond EPA.

Create quality jobs and pathways
Invest in young residents and the local workforce
through education, mentorship, and skills training that lead to living-wage careers in strong regional
industries.

Make it easier to invest and develop
Streamline permitting and entitlement processes,
clarify steps for new businesses and development, and
align regulations with EPA’s economic development
goals.

Strengthen EPA’s identity and tell the EPA story
Communicate a new “brand,” highlighting opportunity
and cultural richness, to attract and retain businesses and visitors.

Invest in places that catalyze activity
Activate the waterfront, establish a vibrant commercial corridor, expand public gathering spaces, and improve
infrastructure and community-facing services.

Support shared prosperity
Advance inclusive growth and mitigate negative
impacts such as displacement to ensure that EPA’s
economic gains benefit all.

Detailed engagement summary is included in Chapter 1 (Engagement Overview and Findings).

HR&A and Kearns & West conducted ~20 interviews and focus group conversations, along with two community events, that together engaged approximately 100 people. 338
10| HR&A Advisors East Palo Alto Economic Development Strategic Plan DRAFT
EXECUTIVE SUMMARY | SWOT FINDINGS
Based on existing conditions analyses and stakeholder engagement, HR&A developed a SWOT analysis that summarizes EPA’s assets, challenges, and regional opportunities.

STRENGTHS WEAKNESSES

OPPORTUNITIES THREATS

INTERNAL

POSITIVE

NEGATIVE

EXTERNAL
• Strategic location & waterfront access
• Base of small / micro businesses
• History of resilience & self-determination
• Active & engaged residents / nonprofits
• Relative affordability
• Job growth & declining unemployment
• State and regional investments in economic
development (Jobs First)
• Availability of vacant/underutilized sites
• Significant children & youth population
offering opportunities to invest in upward
mobility
• Lacking retail options / street vibrancy
• Unpredictable entitlement process
• Complicated & lengthy business licensing
processes
• Infrastructure upgrades needed for key sites
• Resident skills gap
• High growth, high-paying industries
underrepresented in EPA
• Limited transit access
• Negative external perception
• Lack of County and State focus on EPA
Strengths, Weaknesses, Opportunities, Threats (SWOT)
Detailed SWOT analysis is included in Chapter 2 (SWOT Analysis). 339
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EXECUTIVE SUMMARY | OPPORTUNITY SECTORS
Based on EPA’s current economy, regional industry strengths, and alignment with regional and state funding priorities through CA Job First / Bay Area Job First Collective, HR&A has identified the following Opportunity Sectors.

Detailed opportunity sector identification and analysis are included in Chapter 3 (Opportunity Sectors).

Opportunity Sector Type Sectors Goals
Primary Sectors
Sectors where EPA’s strengths/growths &
regional funding opportunities align
• Education / Childcare
• Healthcare
• Construction
• Manufacturing (incl. advanCEDD
manufacturing)
• Grow existing
businesses
• Attract new businesses /
industries
• Workforce development
& entrepreneurship
Supporting Sectors
Sectors with a foundation to grow in EPA
given local and regional context
• Food & Beverages / Hospitality
• Retail (local & destination)
• Office-Based Sectors (incl. Professional
Services)
• Technology
Supplemental sectors
Other sectors that may offer regional
funding opportunities
• Arts & Culture
• Sustainable Environmental Management
• Workforce development
& entrepreneurship
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12| HR&A Advisors East Palo Alto Economic Development Strategic Plan EXECUTIVE SUMMARY | SITE OPPORTUNITIES
• Waterfront Mixed-Use Civic Hub: hub of
community life, anchored by destinations like
Bloomhouse, proposed civic commons and
athletic fields, and leveraging waterfront access
• Bay Road Industry Hub: employment and
innovation district, building on the area's
existing industrial base and transportation
access
• Gateway Commercial Hub: well-connected
gateway to the city and region, offering
destination shopping experience and
community-serving retail, services, and local job
opportunities
• Mixed-Use Corridor: a series of sites that
integrate housing, retail, and small businesses,
supporting mixed-use neighborhood
Waterfront
Mixed-Use
Civic Hub
Bay
Road
Industry
hub
Gateway
Commercial
Hub
Mixed Use
Corridor
In alignment with opportunity sectors, HR&A developed potential priority uses for strategic sites to advance EPA's community and economic development goals.

EPA Business Districts
Detailed site opportunities are included in Chapter 5 (Site Opportunities). 341
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EXECUTIVE SUMMARY | STRATEGIES & OUTCOMES AT-A-GLANCE
HR&A recommends six economic development strategies across three goals to expand the economy, grow community wealth, create vibrant places, and celebrate and tell EPA’s story.

Goals Strategies Desired Impact

1. Boost Home-Grown
Businesses &
Entrepreneurs
A. Provide a one-stop resource for small businesses
to start, scale, and thrive in EPA
B. Make it easier for small businesses to navigate
processes and reach customers
• More businesses launched and
sustained; higher revenues and survival
rates for local firms.
• Shorter, clearer permitting and licensing
timelines; expanded market access.

2. Attract Businesses &
Private Investments
A. Run proactive business development with a clear
EPA business case, “front door,” sector targets, and
account management
B. Invest in workforce development to connect EPA
residents to new economic opportunities and
expand EPA’s appeal for opportunity sectors
• Stronger investment pipeline and site
take-up; new, higher paying jobs, and a
larger tax base.
• ReduCEDD land / space vacancy and
visible wins (anchor tenants,
expansions).

3. Make East Palo Alto
Investment Ready
A. Strengthen EPA’s brand, activate the public
realm, and create dynamic destinations
B. Advance shovel-readiness and leverage the
entitlement process to unlock strategic sites and
incentivize priority uses
• Faster time-to-market and activation of
underutilized sites with job-generating
and community sustaining uses.
• Upgraded public realm and increased
foot traffic and visitation.

As detailed on the next slides and in Chapter 4 (Economic Development Strategies), HR&A recommends 3 – 4 initiatives to advance each of the six strategy. 342 14| HR&A Advisors East Palo Alto Economic Development Strategic Plan DRAFT
Lead Resource Y1-2 Y3-5 Y6-10
1A.1 Create a small/micro business guide CEDD / Small Biz Ambassador $ 1B.1 Streamline business licensing / permitting processes Finance/Permitting $ 2A.1 Create a dedicated business development landing page CEDD / BizDev Manager $ 2B.1 Work with workforce development partners to provide industry-aligned trainings CEDD / Nonprofit partner $ 1B.2 Create simple permits or pre-approved zones for temporary uses Finance/Permitting $ 3A.1 Promote EPA as a place to live, work, and visit through activations City Manager’s Office $ 1A.2 Program City-owned incubator space in Gateway Retail Center CEDD / Nonprofit partner $$ 1B.3 Appoint an EPA Business Ambassador City Manager’s Office $$ 1B.4 Create a “Shop Local” campaign and program CEDD / Small Biz Ambassador $ 2A.2 Launch a more comprehensive “Choose EPA” portal CEDD / BizDev Manager $$ 2B.2 Connect regional talent pipeline with EPA job/entrepreneurship opportunities CEDD / BizDev Manager $ 3A.2 Regularly activate key public spaces and underutilized private spaces CEDD $$ 3B.1 Update development requirements and entitlements to incentivize priority uses CEDD $ 3B.2 Establish an EPA Construction Accelerator City Manager’s Office / CEDD $$ 1A.3 Establish EPA Business Commons City Manager’s Office / CEDD $$$ 2A.3 Expand CEDD team to include an Economic Development Manager City Manager’s Office $$ 2B.3 Establish a physical job-training hub City Manager’s Office / CEDD $$$ 3B.3 Fund public infrastructure improvements City Manager’s Office / CEDD $$$ 3B.4 Fill funding / financing gaps for catalytic projects City Manager’s Office / CEDD $$ 3A.3 Engage professional branding consultant City Manager’s Office / CEDD $$ EXECUTIVE SUMMARY | INITIATIVES & IMPLEMENTATION ROADMAP LEGEND
Quick-win
Mid-term
Long-term
Sequence
Continued
Implementation /
Updates
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CRITICAL INITIATIVES
The full EDSP outlines 20 initiatives across three goals. Among them, eight “must-do” moves are especially critical to launching EPA on an inclusive growth path.

1. Create a small/micro business guide (1A.1). Quick Win

2. Streamline business licensing / permitting processes (1B.1). Quick Win

3. Create a dedicated business development landing page (2A.1). Over time, further expand this into a more comprehensive “Choose EPA” portal (2A.2). Quick Win

4. Work with workforce development partners to provide industry-aligned trainings (2B.1). Quick Win

5. Promote EPA as a place to live, work, and visit through activations (3A.1). Quick Win

6. Update development requirements and entitlement process to incentivize priority uses (3B.1). Mid-Term

7. Appoint an EPA Business Ambassador (1B.3). Over time, further grow the team to include an Economic Development Manager (2A.3). Mid-Term

8. Fund public infrastructure improvements (3B.3). Long-Term 344
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Engagement
Overview &
Findings
01 345
17 ENGAGEMENT OVERVIEW
HR&A and Kearns & West engaged local stakeholders in a variety of formats to inform the development of the Economic Development Strategic Plan.

Real Estate Community Local Businesses /
Entrepreneurs
Workforce &
Entrepreneurship
Nonprofits
Broader EPA Community
Format: Interviews
Participants: 6 individuals/firms
Engagement Goal: Fact-finding
Format: Interviews
Participants: 10 entrepreneurs /
businesses
Engagement Goal: Fact-finding
Formats: Interviews & focus
groups
Participants: 7 organizations
Engagement Goal: Fact-finding
Formats: Pop-up event &
community workshop
Participants: ~90 community
members at community workshop
and pop-up event.

Engagement Goal: Fact-finding;
vision & strategy development
Areas of input:
• Commercial, industrial, and
residential market trends
• Challenges and opportunities
in development / attracting
market interest
• Development feasibility
• City processes
Areas of input:
• Businesses’ locational
decisions
• Opportunities / constraints
for growth
• Workforce challenges
• Areas of needs & support
Areas of input:
• Workforce development
ecosystem (players and
focus)
• Strategies and impact
• Challenges & opportunities
• Partnership with the City
Areas of input:
• Validate concerns, challenges,
and opportunities for
individuals, families, and
small/micro-businesses &
research findings
• Gather feedback on
proposed strategies
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18| HR&A Advisors East Palo Alto Economic Development Strategic Plan DRAFT

POP-UP EVENT OVERVIEW & TAKEAWAYS
Activity
We asked ~70 residents:
"What is missing? What would you like to see
more of in East Palo Alto?” For example:
restaurants, offices, parks, shops, housing, etc.

TOP ANSWERS TO “WHAT IS MISSING?"
TOP ANSWERS TO “WHAT WE LOVE"
• Housing & mixed-use development
• Dining & nightlife hub: sit-down restaurants, cafés,
affordable eateries, bars
• Retail essentials: big-box stores, full-service
groceries/food courts, pharmacies, second-hand shops
• Recreation & open space: entertainment center, water
park, bowling alley, gyms/yoga studios, nature trails
• Youth & community hubs: kid-safe spaces, study cafés, summer jobs, cultural/history venues & events
• Entrepreneur launchpads: cloud/ghost kitchens, flexible maker/retail spaces
• Access & streets: more parking, University Ave redesign • Favorite places/businesses
are concentrated in
business districts
• High levels of civic pride
with deep sense of
community and belonging

DOTS INDICATING BUSINESSES/AREAS

THEY RELY ON OR FREQUENT OFTEN
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19| HR&A Advisors East Palo Alto Economic Development Strategic Plan DRAFT

6. Customer base beyond EPA. Attracting residents of
neighboring cities to increase visibility of EPA businesses.

7. Employees beyond friends & family. Guidance for EPA
businesses on the process of hiring and onboarding staff.

8. Peer-to-peer networking. Opportunities for EPA
businesses and entrepreneurs to exchange knowledge and
share resources.

9. Amenities for workers and residents. More places to
eat, socialize, shop, and relax in EPA – crucial for office tenant attraction and community vibrancy.

10. Streamlined development review. Development
approval process mismatched with economic development
goals. Development requirements and entitlement process are negatively impacting development feasibility - “30% of zero is still zero.”
What's Next
TOP ANSWERS TO “WHAT CAN EPA DO TO HELP?"

1. Easy-to-navigate permitting
process. Streamlining and demystifying steps for new
EPA food & beverage businesses.

2. Jobs with living wages. Partnerships with nonprofits and employers to support EPA residents in securing higher-paying jobs.

3. Idea-stage startups. Partner with tech incubators
to support entrepreneurial EPA residents in
developing their ideas.

4. Sales and marketing beyond word
of mouth. Partnerships with online influencers and
e-commerce platforms to increase visibility of
EPA businesses.

5. More opportunities to sell. Frequent and
predictable events or “shop-local fairs” for EPA
businesses to rely on as a source of revenue.

Interviews With 23 stakeholders representing local small/micro businesses, workforce non-profits, and the business / development community

STAKEHOLDER INTERVIEW OVERVIEW & TAKEAWAYS
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On September 4, HR&A and Kearns & West hosted a community meeting to validate existing condition findings, co-develop EPA’s economic development vision, and gather feedback on potential strategies.

COMMUNITY WORKSHOP OVERVIEW
Validate Opportunities
& Challenges Findings
Develop a Shared
Economic Development
Vision
Gather Input on
Strategic Approach
Prioritize Potential
Initiatives
Community
Meeting
Goals
20+
Local residents, small business owners, faith leaders, workforce development organization representatives, City staff, and more 349
21 DRAFT
On September 4, HR&A and Kearns & West hosted a community meeting to validate existing condition findings, co-develop EPA’s economic development vision, and gather feedback on potential strategies.

WORKSHOP ACTIVITIES
Open House Engagement
Upon arrival and after programmed
activities, attendees were encouraged
to review informational boards around
the room and respond to prompts
about EPA’s economic strengths and
challenges.

Findings Presentation
HR&A and Kearns & West welcomed
attendees and provided an overview of
the strategic planning process, as well
as key findings from the initial existing
conditions analysis.

Facilitated Breakout Discussions
Attendees broke out into three
discussion groups to collaboratively
develop an economic vision for the city
and explore actionable strategies to
bring it to fruition.
350
22 DRAFT
Attendees also shared ideas on
how vacant parcels in the city may
better serve the community.