Gilroy City Council
April 6, 2026

City of Gilroy
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started before the expiration of the 3-year period, records must be retained until all findings involving the records have been resolved and final action is taken (2 CFR 200.334.(a))

5. For the City’s protection, CDBG records must be retained for a minimum of five years after the expiration or termination of the subrecipient agreement. *It is always theoretically possible that a federal entity like the HUD Office of the Inspector General (OIG) or the General Accounting Office (GAO) may show up to perform an audit after the three years have elapsed and request to access such records concerning some questionable costs. Therefore, even after the three years, for protection, you may want to place the records in storage for an additional year or two, rather than discard them (Chapter 5: Recordkeeping and Reporting Requirement, Playing by the Rules: A Handbook for CDBG Subrecipients on Administrative Systems)
Amendments
Minor Amendments
Minor amendments are those that maintain the integrity of the associated plan and do not include any substantial change in policy or in funding priorities while still maintaining flexibility in meeting the goals and objectives. Minor amendments will be made administratively and will be incorporated into the City’s CAPER at the end of the program year.

Substantial Amendments
Substantial amendments are those that (a) change the allocation priorities or the method of fund distribution by more than $100,000; (2) carry out an activity using funds from any program covered in the Con Plan that was not previously described in the AAP; (3) change the purpose, scope, location or beneficiaries of any activity; or (4) change use from one eligible activity to another eligible activity.

Minor adjustments to funding levels for activities described in the Con Plan due to differences in actual versus anticipated program income are not considered substantial.

Any substantial amendment to the Con Plan will be incorporated into the Con Plan after a 30‐day public comment period and public hearing, encouraging input on the proposed substantial amendment, unless otherwise permitted by HUD. Notice of the opportunity for public comment will be distributed as outlined in the “Outreach” section of this CPP.

Temporary Citizen Participation Plan Amendments
In response to urgent situations or pandemics, the City will adopt HUD regulatory waivers regarding Citizen Participation timeliness, ensuring rapid access to critical CDBG funds.

Public Hearings/Meetings
In accordance with HUD regulations, the City will hold at least two public hearings a year to obtain

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residents’ views and to respond to applications for funding and questions. The two hearings will be conducted at a minimum at two different stages of the program year. At least one of the public hearings will be held before the draft Con Plan is published for comment.

Between the two hearings, staff shall address:
• Housing and community development needs, development of proposed activities, and review of program performance;
• Include discussion of past performance and use of funds.

Public hearings will be held at times and in locations (in person or virtual) that are convenient to potential and actual beneficiaries, with accommodations for persons with disabilities.

When non‐English speaking members of the public attend a public hearing or meeting in the City Council Chambers, non-English speaking participants can access the City’s Wordly AI Translation tool in the language of their choice, by scanning a QR code available in the City Council Chambers; Spanish is the default language captioned on several screens
Public Hearing Notices
If any federal plan or report requires a public hearing, the public shall be provided notice of the hearing as follows.
• Contents of Notice: The contents of a notice of a public hearing shall include:
• The date, time, and place (e.g., address, room, etc.) of the hearing. • A general description of the program and document that are the subject of the hearing. • A statement that any interested person is invited to appear and be heard on the request or proposal.
• A statement that a copy of the plan/report is available at City Hall and the Gilroy Library, including the addresses.
• The phone number, email, and street address of staff so an interested person can call, email, or visit to obtain additional information.
• Any additional information as may be required under applicable state or federal law, including information required under the City’s implementation of the Americans with Disabilities Act (ADA).
• Method of Notice Distribution: Notice of a public hearing required by this CPP shall be given as follows:
• Newspaper Publication: Notice shall be given at least once by publication in at least one newspaper of general circulation in the City a minimum of 10 days prior to the scheduled public hearing, more particularly in the Gilroy Dispatch and/or San Jose Mercury News (last resort option).

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• Site Posting: The City shall post notices in at least two public places within the City boundary (City Hall and Library).

Online Posting: Notice shall be given at the HCS website https://www.cityofgilroy.org/cdbg Availability of Draft and Final Documents to the Public All draft and final federal plans and reports will be available on the City’s website, at the City’s HCS office, and the Gilroy Library.

During the comment period for federal plans and reports, copies will be available for public review in the following locations:

1. HCS Division 7351 Rosanna Street

2. Gilroy Library 350 W. Sixth Street
Technical Assistance
HCS staff will provide technical assistance to subrecipients and any person or group interested in commenting on federal plans or reports or in developing CDBG funding applications. All new applicants or returning applicants with new activities are required to meet with HCS staff to discuss the proposed activity’s eligibility prior to the deadline provided in the application packet.

Complaints
Within 15 working days of receipt, HCS will provide a timely, substantive written response to every written citizen complaint related to the applicable federal plan or report. A summary of any written complaints received during the comment period will be included in the applicable federal plan or report.

Public Review of the Citizen Participation Plan
This CPP was made available for public review and comment prior to adoption, in accordance with the public notice, public hearing/meeting, and public comment procedures described herein. Any substantial amendments to this CCP will be made available for public review and comment through the same process prior to adoption. This CPP will be available on the City’s HCS website. Copies will also be made available to those that do not have internet access at no charge and will be made available in a format accessible to persons with disabilities, upon request. Interested residents should call or email HCS to request a copy of the CPP.

8.2. City of Gilroy

STAFF REPORT
Agenda Item Title: Acceptance of Fiscal Year 2024-25 Annual Comprehensive Financial Report (ACFR)
Meeting Date: April 6, 2026
From: Matt Morley, City Administrator
Department: Finance
Submitted by: Harjot Sangha, Finance Director
Prepared by: Harjot Sangha, Finance Director
STRATEGIC PLAN GOALS: Develop a Financially Resilient Organization

RECOMMENDATION
Accept and file the report.

EXECUTIVE SUMMARY
Accept and file the audited Annual Comprehensive Financial Report (ACFR) for the fiscal year ended June 30, 2025 (FY25).

ANALYSIS
Following the close of each fiscal year on June 30th, the City’s external auditors conduct an audit of the City’s financial records and assist in the compilation of the ACFR.

The objective of external financial reporting is to ensure accountability. The goal of a financial statement audit is to provide users with reasonable assurance from an independent auditor that the information presented in the statements is reliable. The audit for the fiscal year ended June 30, 2025, was completed by The Pun Group, LLP (Auditor), Certified Public Accountants.

8.2. In conjunction with the annual audit, the City prepares the ACFR to comply with the requirements to receive the Certificate of Achievement for Excellence in Financial Reporting administered by the Government Finance Officers Association (GFOA). The The Certificate of Achievement is a prestigious national award recognizing compliance with the highest standards for the preparation of state and local government financial reports. The City’s ACFR has received this award for the previous 20 fiscal years, most recently for FY24, and staff believe the current report (FY25) continues to conform to GFOA’s highest standard.

As a result of their annual independent audit of the City’s financial records and statements, the Auditor has rendered an unmodified (“clean”) opinion, the optimal opinion issued by independent auditors, on the City’s financial statements for the fiscal year ended June 30, 2025.

A detailed analysis of the City’s financial position as of June 30, 2025, is included in the Management Discussion and Analysis (MD&A) in the ACFR attached to this staff report.

In accordance with Government Auditing Standards, the auditors also identify any deficiencies in internal control over financial reporting and provide recommendations to City management to correct them. No such deficiencies in internal controls were identified during the FY25 audit.

Summary of the highlights are as follows:

Citywide: The City’s overall net position increased by $34.4 million to $424.4 million from the prior fiscal year (FY24). Of the total net position, $139.1 million, or about 33%, remains unrestricted, $85.1 million, or about 20%, is restricted from various programs, and the majority of the remaining $200.4 million, about 47%, consists of net investment in capital assets.

General Fund: For ACFR purposes, the City combines its Sidewalk Repair, Golf Course, and Community Recreation special revenue funds, along with few other minor depository funds with the City’s General Fund for financial statement presentation as required under Governmental Accounting Standards Board (GASB) Statement 54. • Revenues: Actual revenues, excluding transfers, in the General Fund were $69.7 million, $0.7 million better than the final budget, primarily due to better-thanbudgeted investment income during the fiscal year of about $1.1 million, and other miscellaneous one-time revenue of $0.9 million. Tax revenues came in $1.5 million under budget, notably in sales tax, which was $1.3 million, or about 6%, less than budget due to a decline in consumer spending, and transient occupancy tax, which was $0.5 million less than budget. • Expenditures: Actual expenditures, excluding transfers, in the General Fund were $72.3 million, $4.6 million less than the final budget, primarily due to operational savings across all departments, and lower than budgeted capital outlay for the

8.2. citywide sidewalk replacement and pavement rehabilitation project. It is essential to note that although the actual expenditures were $4.6 million less than the final budget, the General Fund had over $1.5 million in outstanding encumbrances and commitments on June 30, 2025, which carried forward to the next fiscal year. • Fund Balance: The fund balance (for ACFR purposes) in the General Fund decreased by $1.7 million to $41.0 million from the prior year, notably due to planned spend down of the excess reserves during the fiscal year on one-time capital investments.

ALTERNATIVES
None, as it is an acceptance of the report.

FISCAL IMPACT/FUNDING SOURCE
There are no direct fiscal impacts to receiving and filing the ACFR. The audit provides Council and other stakeholders with the assurance that the City is meeting its obligation for producing financial reports that are presented fairly and accurately. The annual financial audit is part of the Finance Department’s annual workplan, thus the resources and costs associated with the audit and preparation of the report are included in the adopted budget.

Attachments:

1. Annual Comprehensive Financial Report as of June 30, 2025

CITY OF GILROY

CALIFORNIA

YEAR ENDED
JUNE 30,2025

ANNUAL COMPREHENSIVE

FINANCIAL REPORT
YEAR ENDED JUNE 30, 2025

City of Gilroy
Gilroy, California
Annual Comprehensive Financial Report
and Independent Auditor’s Reports
For the Year Ended June 30, 2025
Prepared by Finance Department
Harjot Sangha, Finance Director
Rosemary Guerrero, Finance Manager
Kellie Ullom, Accountant
Erika Pacheco, Accountant

City of Gilroy
Annual Comprehensive Financial Report
For the Year Ended June 30, 2025
Table of Contents
Page
INTRODUCTORY SECTION (Unaudited)
Letter of Transmittal .................................................................................................................................................. i Elected Officials & City Staff ..................................................................................................................................... x Organizational Chart ............................................................................................................................................... xi Map ........................................................................................................................................................................ xii GFOA Certificate of Achievement for Excellence in Financial Reporting .................................................................... xiii

FINANCIAL SECTION
Independent Auditor’s Report on the Audit of the Financial Statements ................................................................. 1 Management’s Discussion and Analysis (Required Supplementary Information) (Unaudited) ................................ 5 Basic Financial Statements:

Government-Wide Financial Statements:

Statement of Net Position .......................................................................................................................... 22 Statement of Activities ............................................................................................................................... 24 Fund Financial Statements:

Governmental Fund Financial Statements:

Balance Sheet ..................................................................................................................................... 31 Reconciliation of the Governmental Funds Balance Sheet
to the Government-Wide Statement of Net Position ........................................................................ 32 Statement of Revenues, Expenditures, and
Changes in Fund Balances ............................................................................................................ 33 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-Wide Statement of Activities .................................................................................................................. 34 Proprietary Fund Financial Statements:

Statement of Net Position .................................................................................................................... 36 Statement of Revenues, Expenses, and Changes in Net Position ........................................................... 39 Statement of Cash Flows ..................................................................................................................... 40 Fiduciary Fund Financial Statements:

Statement of Fiduciary Net Position ..................................................................................................... 45 Statement of Changes in Fiduciary Net Position ................................................................................... 46 Notes to the Basic Financial Statements ........................................................................................................ 51

City of Gilroy
Annual Comprehensive Financial Report
For the Year Ended June 30, 2025
Table of Contents (Continued)
Page
FINANCIAL SECTION (Continued)
Required Supplementary Information (Unaudited)
Schedule of Changes in the Net Pension Liability and Related Ratios– Last Ten Fiscal Years CalPERS Miscellaneous Plan ..................................................................................................................... 98 Schedule of Plan Contributions - Pensions – Last Ten Fiscal Years CalPERS Miscellaneous Plan ................................................................................................................... 100 Schedule of the City's Proportionate Share of the Plan's Net Pension Liability and Related Ratios - Safety Plans ......................................................................... 103 Schedule of Plan Contributions – Pensions ................................................................................................... 104 Schedule of Changes in the Total OPEB Liability and Related Ratios - Other Post Employment Benefit Plan .......................................................................................... 106 Notes to the Budgetary Comparison Schedule .............................................................................................. 109 Budgetary Comparison Schedule
General Fund .......................................................................................................................................... 110 Supplementary Information:

Schedule of Revenues, Expenditures, and Change in Fund Balance – Budget and Actual:

Public Facilities Impact Capital Projects Fund .......................................................................................... 115 Combining Balance Sheet by Sub-Fund:

General Fund .......................................................................................................................................... 116 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances by Sub-Fund:

General Fund .......................................................................................................................................... 119 Nonmajor Governmental Funds:

Description of Nonmajor Governmental Funds ......................................................................................... 123 Combining Balance Sheet ........................................................................................................................ 125 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances .................................... 132 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual:

Gas Tax Special Revenue Fund .......................................................................................................... 140 Pavement Management Special Revenue Fund .................................................................................. 141 Public Safety Grants Special Revenue Fund ........................................................................................ 142 Prop 172 Sales Tax Special Revenue Fund .......................................................................................... 143 Community Development Block Grant Special Revenue Fund ............................................................. 144

City of Gilroy
Annual Comprehensive Financial Report
For the Year Ended June 30, 2025
Table of Contents (Continued)
Page
FINANCIAL SECTION (Continued)
Supplementary Information (Continued):

Nonmajor Governmental Funds (Continued):

Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual (Continued):

Housing Trust Fund Special Revenue Fund ......................................................................................... 145 Community Facilities District Special Revenue Fund .......................................................................... 146 Measure B Special Revenue Fund ...................................................................................................... 147 Vehicle License Fee Special Revenue Fund ........................................................................................ 148 Los Arroyos Fund Special Revenue Fund ............................................................................................ 149 CalHome Funds Special Revenue Fund .............................................................................................. 150 Opioid Settlement Special Revenue Fund ........................................................................................... 151 Building Equity and Growth in Neighborhoods Special Revenue Fund .................................................. 152 Capital Projects Fund ........................................................................................................................ 153 Traffic Impact Capital Projects Fund .................................................................................................. 154 Storm Drains Capital Projects Fund ................................................................................................... 155 Street Trees Development Capital Projects Fund ................................................................................ 156 Gilroy Community Library Capital Projects Fund ................................................................................. 157 Downtown Beautification Capital Projects Fund ................................................................................. 158 Stormwater Management Capital Projects Fund ................................................................................. 159 2022A Refunding Bond Debt Service Fund .......................................................................................... 160 Gilroy Community Library Debt Service Fund ...................................................................................... 161 CA Energy Commission Loan Debt Service Fund ................................................................................. 162 Lease Revenue Bonds Series 2020A Debt Service Fund ...................................................................... 163 Henry Miller Permanent Fund ............................................................................................................ 164 Museum Trust Permanent Fund ......................................................................................................... 165 Internal Service Funds:

Combining Statement of Net Position ....................................................................................................... 168 Combining Statement of Revenues, Expenses and Changes in Net Position ............................................... 172 Combining Statement of Cash Flows ........................................................................................................ 174 Fiduciary Funds:

Combining Statement of Fiduciary Net Position ........................................................................................ 181 Combining Statement of Changes in Fiduciary Net Position ...................................................................... 182

City of Gilroy
Annual Comprehensive Financial Report
For the Year Ended June 30, 2025
Table of Contents (Continued)
Page
STATISTICAL SECTION (Unaudited)
Description of Statistical Section Contents ........................................................................................................... 185 Financial Trends:

Net Position By Component - Last Ten Fiscal Years ............................................................................................ 186 Changes in Net Position - Last Ten Fiscal Years .................................................................................................. 188 Fund Balances of Governmental Funds - Last Ten Fiscal Years ........................................................................... 192 Changes in Fund Balances of Governmental Funds - Last Ten Fiscal Years .......................................................... 194 Revenue Capacity:

Sales Tax by Category - Last Ten Fiscal Years ..................................................................................................... 196 Sales Tax Rates - Last Ten Fiscal Years ............................................................................................................... 198 Principal Sales Tax Producers - Last Fiscal Year and Nine Years Ago ................................................................... 199 Citywide Assessed Value and Estimated Actual Value of Taxable Property - Last Ten Fiscal Years ........................ 200 Assessed Value of Property by Use Code - Last Eight Fiscal Years ....................................................................... 201 Direct and Overlapping Property Tax Rates - Last Ten Fiscal Years ...................................................................... 202 Principal Property Tax Payers - Last Fiscal Year and Nine Years Ago .................................................................... 204 Property Tax Levies, and Collections - Last Ten Fiscal Years................................................................................ 205 Debt Capacity:

Ratios of Outstanding Debt by Type - Last Ten Fiscal Years ................................................................................. 206 Ratio of General Bonded Debt Outstanding - Last Ten Fiscal Years ...................................................................... 208 Schedule of Direct and Overlapping Bonded Debt .............................................................................................. 209 Legal Debt Margin Information - Last Ten Fiscal Years ........................................................................................ 210 Wastewater System - Historical Debt Service Coverage - Last Ten Fiscal Years .................................................... 212 Demographic and Economic Information:

Demographic and Economic Statistics - Last Ten Fiscal Years ............................................................................ 215 Principal Employers - Last Fiscal Year and Nine Years Ago .................................................................................. 216 Operating Information:

Full-Time Equivalent City Employees By Function / Program - Last Ten Fiscal Years ............................................. 217 Operating Indicators by Function / Program - Last Ten Fiscal Years ..................................................................... 218 Capital Assets By Function - Last Ten Fiscal Years .............................................................................................. 220 Property Tax, Sales Tax, Transient Occupancy Tax, and Business License Tax Per Capita ..................................... 222 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 ................................................................... 223

INTRODUCTORY

SECTION

i

OFFICE
7351 Rosanna Street
Gilroy, CA 95020
Telephone (408) 846-0202
Facsimile (408) 846-0500
http://www.ci.gilroy.ca.us
March 27, 2026
To the Honorable Mayor, Members of the City Council, and Residents of Gilroy:

June 2025.
statements for each fiscal year. This ACFR is submitted for your information and review. The information herein has been provided to allow the reader to understand assumes full responsibility for the completeness and reliability of the information contained in this report.

The format of this report complies with the financial reporting model developed under Government Accounting Standards Board (GASB) Statement No. 34, as modified by additional published statements. This GASB Statement requires management to provide a narrative introduction, overview, and analysis to This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The on page 5.

This Annual Comprehensive Financial Report is organized into three sections:

The Introductory Section includes the table of contents, letter of transmittal, listing of elected officials and executive staff, geographical map, an organization chart delineating organizational structure Excellence in Financial Reporting for the prior fiscal year.

The Financial Section
statements, notes to the financial statements, combining statements of nonmajor funds, and other required supplemental information.

The Statistical Section includes both financial and non-financial data about the City.

To provide a reasonable basis for making these representations, the management of the City has established financial statements in conformity with U.S. Generally Accepted Accounting Principles (GAAP). Because the internal controls
framework has been designed to provide reasonable, rather than absolute assurance, that the financial internal controls to adequately safeguard assets and provide reasonable assurances of proper recording of financial transactions.

The Pun Group LLP, Certified Public Accountants, have issued an unmodified financial statements for the year ended June 30, 2025
beginning of the financial section of this report. The
report and provides a narrative introduction, overview, and analysis of the basic financial statements.

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Profile of the government
The City is the southernmost city in Santa Clara County, approximately 25 miles south of San Jose and about 75 miles south of San Francisco. Gilroy sits at the crossing of U.S. Highway 101 and State Highway 152.

Situated between the Diablo and Santa Cruz mountains in the Santa Clara Valley, the City experiences mild temperatures while missing most of the coastal fog. The agricultural growing season ranges from 300 to 350 days a year. Over the past few decades, the City has transitioned from an agricultural economy into a lightindustrial and services-based economy.

The City was first incorporated in 1870 and became a charter city on January 8, 1960. Per the California 5, as of January 1, 2025, the City had a
population estimate of 62,205, an increase of 1.1% from the January 1, 2024, estimate of 61,531.

The City operates under the Council Administrator form of government. The seven City Council members, including the Mayor, are elected-at-large to four-year terms in alternate slates of three elected every two years, and the Mayor being elected every four years. The City Council appoints the City Administrator, who heads the executive branch of the government, implements City Council directives and policies, and manages the administrative and operational functions through the department directors. The City Administrator appoints the department directors, except for the City Clerk and the City Attorney, which the City Council appoints.

The city's budget is a detailed operating and capital improvement plan that identifies estimated costs and activities related to estimated revenues. The City Administrator submits to the City Council a proposed biennial budget for all funds, and the Council then proceeds to make any changes to the proposed budget it deems necessary. Before adopting the proposed budget, the Council holds a public hearing. After the conclusion of the public hearing, the Council may make further revisions to the proposed budget. Thereafter, the Council adopts the budget with revisions, if any. Once adopted, the City Council may make further changes to the budget via budget amendments adopted by a resolution. In addition to the primary government, the City also reports on a Component Unit, the South County Regional Wastewater Authority, a joint powers agreement between the City of Gilroy and the City of Morgan Hill for the sewer treatment plant.

The City is a full-service city. It provides municipal services, including public safety (police and fire), community and economic development, recreation activities, parks and street maintenance, water and sewer utilities, and general City administration. Some City operations are supplemented with service contracts, such as legal services and infrastructure maintenance services. Pacific Gas and Electric Company provides natural gas and electricity. The City provides water and wastewater. Wastewater is collected and treated by the South County Regional Wastewater Authority. Recycling and solid waste disposal services are provided in the city by Recology South Valley.

The City is committed to citizen participation in evaluating and enhancing its services. This is achieved via direct community engagement and , commissions, and ad-hoc committees.

Economic Setting and Outlook
was dominated by agriculture and its related industries (food processing, etc.) since the 1800s. However, the growing influence of Silicon Valley and regional population growth have resulted in significant changes in the local economy in the last two decades. The economic boom in Silicon Valley, which began in the early 1990s, had profound impacts on the local economy, resulting in significant increases in home prices and land values as well as significant decreases in local unemployment. The COVID-19 pandemic fueled a crisis in the housing market, sending demand and prices for homes soaring to all-time highs in an already supply-tight market. The housing market has since cooled off, especially with the rise in the federal funds interest rate, causing the long-term mortgage rates to also increase rapidly.

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-agricultural commercial and industrial activities such as light manufacturing, wholesale operations, automobile sales, and large retail centers. The Gilroy Outlets, Auto Mall area, and retail developments east of Highway 101 have put the City on the map as a regional retail destination and
operations take advantage of proximity to Silicon Valley and easy access to Highway 152, leading to Interstate 5 and the Central Valley.

Development Activity
Commercial and industrial development activity remained strong, particularly in logistics, retail, and service-oriented uses. Over the last year, approximately 312,000 square feet of new commercial and industrial space were completed or occupied. Major projects included the Intuitive Surgical logistics warehouse (183,600 sq ft) and Floor & Décor retail/distribution facility (59,000 sq ft). Additional development included the Santa Clara Family Health Plan resource center, California Sports Center gymnastics facility, and several new restaurants and retail establishments, such as Hacienda Café & Grill, Gohan AYCE Buffet, and Dutch Bros Coffee, contributing to local economic activity and sales tax generation. The new retail center at 10th Street and Chestnut Street has also completed construction of two restaurants with drive-throughs (Starbucks and Chick-fil-A), a gas station and convenience store (Circle K), and a car wash (Blue Wave), which is nearing completion, with additional plans to construct a five-story, 112-room hotel, and a third restaurant with drive-through.

The development pipeline remains robust, with approximately 572,000 square feet of commercial and industrial space currently under construction. Significant projects include the Gilroy Data Center (218,000 sq ft), a cold shell warehouse at Yamane Drive (163,000 sq ft), and Urban Air Adventure Park (61,000 sq ft). Additional projects include Crunch Fitness, StorQuest Self-Storage, and various restaurant and service commercial developments. These projects are expected to support future job growth, enhance loc -term revenue base.

On the residential side, construction continued to focus on single-family and multi-family housing.

Over the last year, a total of 202 residential units were completed, including projects by Tri Pointe Homes and KB Homes at Glen Loma Ranch, as well as Lennar Homes at Meadow Wood Court.

Projects currently under construction total 158 units, including Warmington Homes on W. 6th Street, Lennar Homes at Royal Way, and the Gilroy Family Apartments, a 94-unit affordable housing development. These projects reflect continued progress toward expanding housing inventory and affordability options within the community.

Overall, development trends indicate continued investment in both housing and employmentgenerating uses. While broader economic conditions may moderate the pace of future development, location for residential growth,
logistics and industrial expansion, and neighborhood-serving commercial uses.

Economic Outlook
The national economy continued to expand through 2025, demonstrating resilience despite a higherinterest-rate environment and policies on tariffs, immigration, and energy. Real GDP growth was approximately 2.9% in 2024, slowed to 2.2% in 2025, and is forecast to increase to 3.0% in 2026 before moderating to 2.3% in 2027. Inflation has steadily declined but remains above the Federal 2024, 2.7% in 2025, and projected at 2.7% in 2026 and 2.4% in 2027. The unemployment rate has remained relatively stable, averaging 4.2% in 2024, 4.3% in 2025, and is forecast at 4.3% in 2026 and 4.2% in 2027.

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growth outpaced the nation in 2025, the labor market softened. The statewide unemployment rate increased from approximately 5.0% in 2024 to 5.6% in 2025, with a projected peak of 5.6% in 2026, improving to 4.8% in 2027. Employment growth is forecast at 0.9% in 2026 and 1.8% in 2027, supported by continued strength in technology and innovation sectors, particularly artificial intelligence-related investment.

Regionally, the Silicon Valley economy remains comparatively strong but has moderated from prior growth levels. The San Jose-Sunnyvale-Santa Clara MSA unemployment rate was approximately

3.8% in 2024, increasing to 4.0% in 2025, and is expected to remain near 4.0% 4.2% through 2026 2027. Continued venture capital investment and technology-sector concentration support the medium-term outlook, although high housing costs and elevated construction costs continue to constrain broader growth.
conditions. The unemployment rate increased from approximately 4.3% in 2024 to 4.7% in early 2026, reflecting regional trends. The City continues to benefit from a strong underlying property tax base within Santa Clara County, where assessed valuation growth remained positive in 2025. For example, 2025-26 assessment roll increased by $28.9 billion, and the countywide net assessed value reached approximately $725.7 property tax base remains fundamentally strong notwithstanding broader economic headwinds.

However, economically sensitive revenues, particularly sales tax, may experience headwinds due to shifting consumer spending patterns toward services and ongoing cost pressures. 2026 remains stable, with growth expected to moderate
throughout the year. Core revenues, such as property tax, are anticipated to remain resilient, while more elastic revenues, including sales tax and development-related activity, warrant a more conservative outlook amid continued inflationary pressures, higher long-term borrowing costs, and evolving consumer behavior. , above the required
30% of annual expenditures, and is well-positioned to mitigate potential impacts in the near term.

The General Fund is the most discretionary funding source and provides funding for most primary source of revenues is taxes, including sales, property, utility, franchise, and transient occupancy taxes, which all together accounted for 76% of the total General Fund revenues in FY25. The chart below depicts these significant tax revenues and their yearover-year change for the last five-year period. Additionally, the top two sources are further discussed below.

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Property tax became the largest source, accounting for approximately 30% of total General Fund revenues in FY25, and has grown steadily, by 6% on average, over the last five years. Property tax revenues totaled $21.0 million, an increase of $0.9 million, or 4 20.1 million.

In FY26, the property tax revenue is projected to come in at the budgeted $22.4 million, approximately 7% higher than in FY25. The increases are due to a combination of new developments added to the assessment roll, annual CPI adjustments to assessed values pursuant to Proposition 13, and Excess Education Revenue Augmentation Fund (ERAF) distribution. Based on the latest steadily, between 4-5%, for FY27.

Sales tax became the second-largest single source, at approximately 29% of total General Fund revenues in FY25, and remains volatile because it relies directly on discretionary spending. Since peaking at $21.6 million in FY22, sales tax has declined and leveled off to $20.5 million in FY25. 6 budgeted sales tax revenue is $20.4 million and is currently projected to come in slightly under budget at $20.1 million, due to a leveling off in consumer spending on taxable goods. High and rising housing, insurance, groceries, healthcare, and energy costs continue to consume personal income, thus shifting the spending towards non-taxable services and away from taxable goods. Based on current estimates, sales tax is projected to remain relatively flat, with nominal growth of 0.9% in FY27, and is expected to increase by another 1.6% in FY28. This is not unique to Gilroy and is a statewide trend, where overall sales tax revenues are projected to grow modestly over the next several years.
$17.0 $17.9 $19.2 $20.1 $21.0
$18.3
$21.6 $21.0 $21.1 $20.5
$4.4
$5.5 $6.6 $6.6 $7.0
$1.7
$1.9 $2.2 $2.2 $2.4
$1.1
$1.5
$1.8 $1.6 $1.5
$-
$10.0
$20.0
$30.0
$40.0
$50.0
$60.0
Actual Actual Actual Actual Actual
FY 2021 FY 2022 FY 2023 FY 2024 FY 2025
Property Tax Sales Tax
Utility User Tax Franchise Tax

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is personnel-related, accounting for about 68% of
the annual General Fund expenditure in FY25. In FY25, the City approved a multi-year memorandum of understanding (MOU) with two of the four collective bargaining units, focusing on recruitment and retention in a competitive labor market; the remaining two are up for renewal and will complete negotiations in FY26. approach to having multi-year agreements has served well. It provides stability for employees and the organization overall, and helps project and budget for planned increases.

A significant component of personnel costs is pension expenses. Rising pension costs continue to present a major financial challenge for California public agencies. Consistent with other CalPERS and fluctuating investment returns, contributing to growth in the unfunded accrued liability (UAL) associated with its CalPERS pension plans. The City has made prudent efforts in recent years to mitigate the impacts of rising pension costs by establishing the Section 115 Pension Trust, adopting a funding policy, and making annual contributions pursuant to the policy. The primary purpose of setting aside funds in the trust is to leverage them by making strategic withdrawals to help pay for a future years, when annual UAL payments are expected to peak. As of February 28, 2026, the Trust has a balance of $5.8 million and an annualized investment return of 14.02%. The adopted FY26 and FY27 General Fund forecast assumes that by FY29, or a year sooner, the City will be able to leverage the Pension Trust (withdraw) strategically, to help pay for a portion of the annual UAL payments and Pensions are further discussed in Note 11, on page 80.

In FY24, the City established a Section 115 Trust to pre-fund its Other Post Employment Benefits (OPEB) liabilities, with an initial one-time contribution of $0.5 million, and adopted a related funding policy. OPEB refers to benefits, other than pensions, that state and local government employees receive as part of their retirement benefits, such as medical, dental, vision, or life insurance. For the City of Gilroy, this primarily includes a retiree healthcare plan administered by the City and provided to eligible retirees through the CalPERS healthcare program. For most retirees under the plan, the City contributes the PEMHCA minimum contribution ($158 per month for 2025) for eligible retirees and surviving spouses. OPEB liability as of
June 30, 2025, is $16.0 million. During FY25, the City made a $0.5 million contribution pursuant to the funding policy. As of February 28, 2026, the Trust has a balance of $1.5 million and an annualized investment return of 14.02%. OPEB is further discussed in Note 12, on page 88.

During FY25, the City instituted the third automatic CPI adjustment, 1.3%, to its citywide user fee schedule to ensure it can continue to recoup the costs of providing certain services. The adopted FY26 budget and work plan include commissioning the next comprehensive five-year user-fee study to advance the
As previously mentioned, the City also provides water and wastewater utility to its residents. The utilities are funded by rates assessed as charges for services to the customers. In FY24, the City Council approved multi-year rate adjustments for both utilities, commencing on January 1, 2024, with annual increases thereafter for five years. On January 1, 2026, both utilities enacted the third annual increase of the five-year rate adjustments. The rates are projected to keep both utilities fiscally sound, cover operational costs, and make the necessary capital investments in aging critical infrastructure.

vii
Fiscal Year 2025 (FY25) Financial Results
The City ended FY25 with an operating gain, resulting in a change in net position of $34.4 million, from $390.1 million (as restated) on June 30, 2024, to $424.4 million on June 30, 2025. Of the total net position, $139.0 million, or about 33%, remains unrestricted, which can be utilized for future spending or obligations, and the majority of the remaining $200.3 million, about 47%, consists of net investment in capital assets. driven by a better-than-expected rate of return for investment earnings, 9.3% vs. 6.8%, which increased the measurement year.

In the General Fund, revenues for FY25 were $69.7 million, $0.7 million better than the final budget, primarily due to better-than-budgeted investment income of about $1.1 million and other miscellaneous one-time revenue of $0.9 million. Additionally, expenditures totaled $72.3 million, $4.6 million less than the budget, primarily due to operational savings across all departments and lower-than-budgeted capital outlay for the citywide sidewalk replacement and pavement rehabilitation project. It is essential to note that although the actual expenditures were $4.6 million less than the final budget, the General Fund had over $1.5 million in outstanding encumbrances and commitments on June 30, 2025, which carried forward to the next fiscal year.

The fund balance in the General Fund decreased by $1.7 million to $41.0 million, primarily due to the planned strategic spend-down of excess reserves on one-time capital investments during the fiscal year.

Capital Improvements
plan (CIP) provides a five-year window for projects to be completed within the CIP horizon. The primary funding source is capital project funds - which derive revenues from development impact fees, and special revenue funds which derive revenues from intergovernmental grants and taxsharing allocations, such as gas taxes. In addition, the City has contributed General Fund dollars to augment in recent years. The current five-year CIP program was
adopted on June 5, 2023, for FY25 through FY28, focusing on significant improvements to utility infrastructure based on the updated 2023 water and wastewater master plan. The next update to the five-year CIP will occur in early 2027
During FY25, the City advanced a robust capital improvement program, completing or awarding approximately $24.6 million in major projects focused on infrastructure, public safety, accessibility, and community amenities.

Significant completed projects included the FY23 and FY24 Citywide Annual Pavement Rehabilitation programs, totaling over $10.3 million, which substantially improved roadway conditions across the City. The City also completed the Gourmet Alley Improvements Project ($3.5 million), enhancing downtown infrastructure and economic vitality, and the City Hall Backup Generator Project ($0.6 million) to strengthen operational resilience. Additionally, the City finalized the Fire Station Land Acquisition ($1.3 million) for the Santa Teresa Fire Station.

The City continued to prioritize accessibility and compliance through multiple CDBG-funded sidewalk and curb ramp projects and annual curb ramp improvements. Key projects awarded during the year further program ($6.5 million), the Engineering Sidewalk Replacement program ($0.7 million), and the Civic Center Master Plan ($0.7 million) to guide future civic center facility improvements. Additional community-focused investments include the Las Animas Park restroom replacement and Third Street Park shade structures, enhancing public amenities and park usability.

viii
Overall, the FY25 capital program reflects continued investment in maintaining core infrastructure, improving accessibility, supporting economic development, and planning for future public facilities.

Long-term Financial Planning
General Fund
5, was $41.0 million. The City Council adopted a general fund reserve policy to retain a reserve equal to 20% of annual general fund expenditures. The policy adopted a separate economic stability reserve used only for limited purposes, at 10% of general fund expenditures.

The City adopted its current FY26 and FY27 biennial budget on June 2, 2025, which will run through June 30, 2027. As previously mentioned, the City accumulated healthy reserve levels over the past several years; as such, the biennial budgets were crafted to utilize the accumulated fund balances and to plan cautiously for new service-level enhancements. The budgets include one-time investments in critical street public-safety equipment, improvements to various park facilities, and a fleet replacement. The City also prepares a fiveyear forecast for the fund, projecting operating revenues and expenditures. The current forecast projects the City will maintain reserve requirements throughout the five-year forecast.

Enterprise Fund
The total net position of the Sewer Fund increased by $17.5 million, to $124.7 million from the prior fiscal year. Majority of the increase, $17.3 million, is attributed to the reclassification of the wastewater impact fee fund from governmental funds to t
operations was about $0.2 million. The unrestricted net position of the Sewer Fund at the end of the year amounted to $123.9 million, an increase of $3.5 million, or about 3%, from the prior year, offset by a decrease in net investment in capital assets of about $3.1 million largely due to drawdown of the 2021A bond proceeds The total net position of the Water Fund increased by $9.1 million, to $90.5 million from the prior fiscal year.

Most of the increase, $7.1 million, is attributed to the reclassification of the water impact fee fund from governmental funds to enterprise
was about $2.0 million. The unrestricted net position of the Water Fund at the end of the year amounted to $28 million, an increase of $1.1 million, or about 4.1%, from the prior year. The net investment in capital assets increased by $0.2 million to $54.7 million.

In FY24, the City Council adopted the comprehensive water and sewer utilities rate study and enacted the recommended rate adjustments. The study included the establishment of operational and capital rehabilitation/replacement reserves. As such, both utilities maintain six months of operating expenses as an operational reserve and a 50% of the average annual capital improvement program over the five-year period as a capital reserve.

Award and Acknowledgements
This ACFR was developed in accordance with best practices of the Government Finance Officers Association (GFOA) and will be submitted for consideration of its Achievement of Excellence Award in Financial Reporting certification. This award is granted only to entities whose reports meet the highest standards of municipal financial reporting. The GFOA awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Gilroy for its annual comprehensive financial report for the fiscal year ended June 30, 2024. This was the 20th consecutive year that the City achieved this prestigious award.

A Certificate of Achievement for Excellence in Financial Reporting is valid for a period of one year only. We believe that FY25 ACFR meets the Certificate of Achievement for Excellence in Financial Reporting are submitting the FY25 ACFR to the GFOA to determine its eligibility for another certificate.

ix
The preparation of this report would not have been possible without the skill, diligence, and commitment of the entire Finance Department staff, specifically Finance Manager Rosemary Guerrero, and Accountants Erika Pacheco and Kellie Ullom. We wish to thank all departments for their assistance in providing the data necessary to prepare this report. Credit is also due to the Mayor and the City Council for their continuing support in maintaining the highest standards of professionalism in financial sustainability.

Respectfully submitted,
Matt Morley Harjot Sangha
City Administrator Finance Director

x
City of Gilroy
Elected Officials & City Staff
As of Fiscal Year-End - June 30, 2025

ELECTED OFFICIALS
Greg Bozzo Mayor
Carol Marques Mayor Pro Tempore
Kelly Ramirez Council Member
Dion Bracco Council Member
Tom Cline Council Member
Zach Hilton Council Member
Terence Fugazzi Council Member

EXECUTIVE STAFF
Jimmy Forbis City Administrator
Sharon Goei Community Development Director
Harjot Sangha Finance Director
Rob Fleeup Fire Department Director
LeeAnn McPhillips Administrative Services and Human Resources Director/Risk Manager Ken Binder Interim Police Chief
John Doughty Public Works Director
Bryce Atkins Assistant to the City Administrator
Heath McMahon Utilities Director

ORGANIZATION CHART
Gilroy
Community
City Council
City Attorney City Administrator
Community
Development Public Works Utilities Administrative Services Finance Police Fire City Clerk
xi

xii

Government Finance Officers Association
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of Gilroy
California
For its Annual Comprehensive
Financial Report
For the Fiscal Year Ended
June 30, 2024
Executive Director/CEO
xiii

FINANCIAL SECTION

6 Hutton Centre Drive, Suite 1200
Santa Ana, California 92707
INDEPENDENT AUDITOR’S REPORT
To the Honorable Mayor and the Members of the City Council of the City of Gilroy
Gilroy, California
Report on the Audit of the Financial Statements
Opinions
We have audited the financial statements of the governmental activities, the business-type activities, the discretely presented component unit, each major fund, and the aggregate remaining fund information of City of Gilroy, California (the “City”) as of and for the year ended June 30, 2025, and the related notes to the basic financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents.

In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the discretely presented component unit (“DCU”), 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
As discussed in Notes 1 and 18 to the financial statements, the City adopted new accounting guidance, GASB Statement No. 101, Compensated Absences during the year ended June 30, 2025. The adoption of this standard resulted in the restatement of the City’s net position as of June 30, 2024. 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.

To the Honorable Mayor and the Members of the City Council of the City of Gilroy
Gilroy, California

2 In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.

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.

Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, the Budgetary Comparison Schedules, the Schedules of Changes in Net Pension Liability and Related Ratios, Schedule of City’s Proportionate Share of the Net Pension Liability and Related Ratios, the Schedules of Contributions – Pensions, and the Schedule of Changes in Total OPEB Liability and Related Ratios, 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.

To the Honorable Mayor and the Members of the City Council of the City of Gilroy
Gilroy, California

3 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 Combining and Individual Fund Financial Statements 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, based on our audit, the Combining and Individual Fund Financial Statements are fairly stated, in all material respects, in relation to the basic financial statements as a whole.

Other Information
Management is responsible for the other information included in the annual report. The other information comprises the Introductory and Statistical Sections but does not include the basic financial statements and our auditor’s report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon.

In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 27, 2026, on our consideration of 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 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 City’s internal control over financial reporting and compliance.

Santa Ana, California
March 27, 2026

4

City of Gilroy
Management’s Discussion and Analysis
For the Year Ended June 30, 2025
5 The following discussion and analysis of the financial performance of the City of Gilroy (the “City”) provides an overview of the City’s financial activities for the fiscal year ended June 30, 2025 (FY25). Please read it in conjunction with the financial statements identified in the accompanying table of contents.

Using the Accompanying Financial Statements
This annual report consists of a series of financial statements. The government-wide financial statements, which include Statement of Net Position and the Statement of Activities, provide information about the activities of the City as a whole and about the overall financial condition of the City in a manner similar to a private sector business. Also included in the accompanying report are fund financial statements. For governmental activities, the fund financial statements tell how these services were financed in the short term as well as what remains for future spending. 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 remaining statements provide financial information on activities in which the City acts solely as a trustee or agent for the benefit of those outside the government, commonly referred to as Fiduciary Funds.

Notes to the Basic Financial Statements
The notes provide additional information essential to a full understanding of the data in the government-wide and fund financial statements.

FINANCIAL HIGHLIGHTS
 During FY25, the City’s overall net position, representing the difference between total assets plus deferred outflows of resources of the City, and total liabilities plus deferred inflows of resources, increased by $34.4 million to $424.4 million. Of the total net position, $139.0 million, or about 32.7%, remains unrestricted, which can be utilized for future spending or obligations, and the majority of the remaining $200.3 million, about 47%, consists of net investment in capital assets. Additional details can be found in the Statement of Net Position on page 23.  Total citywide revenues were $130.2 million, a net increase of $5.2 million from the prior fiscal year. The net increase in revenue is primarily in program revenues (an increase of $12.0 million), including charges for services and operating and capital grants, offset by a decrease in general revenues (a decrease of $6.8 million), with notable declines in tax revenues, primarily in sales tax, and investment income – for example on wastewater unspent bond proceeds which were expended and drawn upon.
 Total citywide expenses were $95.9 million, a net decrease of $19.1 million from the prior fiscal year. The decreases were primarily in public safety operations, offset by increases in public works, community development, and enterprise (water and wastewater) operations.
 As of June 30, 2025, the City’s governmental funds reported a combined ending fund balance of $98.4million, a net decrease of about 17%, or $20.2 million, from the prior fiscal year, primarily in restricted fund balance attributed to the change in financial reporting between governmental and enterprise fund classifications. City’s water and wastewater impact fee funds were previously reported as governmental funds and have been reclassified to enterprise funds since the primary expenditures are capital-related for both water and wastewater enterprises. See Note 18 on page 95 for details on the restatements.
 The fund balance in the City’s General Fund decreased by $1.7 million to $41.0 million. General Fund revenues increased by a nominal $0.5 million, or about 1%, from the prior year, notably due to lower investment income, while expenditures increased by $2.8 million, or about 4%, compared to the prior year. The increase in general fund expenditure during the year was primarily operations-related across all programs, notably in public safety. During FY25, the General Fund had a revenue shortfall of $2.6 million over expenditures, excluding transfers.

City of Gilroy
Management’s Discussion and Analysis (Continued)
For the Year Ended June 30, 2025
6  Actual revenues, excluding transfers, in the General Fund were $69.7 million, $0.7 million better than the final budget, primarily due to better-than-budgeted investment income during the fiscal year of about $1.1 million, and other miscellaneous one-time revenue of $0.9 million. Tax revenues came in $1.5 million under budget, notably in sales tax, which was $1.3 million, or about 6%, less than budget due to a decline in consumer spending, and transient occupancy tax, which was $0.5 million less than budget, notably due to a declining occupancy rate. Other tax revenues, including property, utility, and document transfer, came in at or slightly above budget.  Actual expenditures, excluding transfers, in the General Fund were $72.3 million, $4.6 million less than the final budget, primarily due to operational savings across all departments, and lower than budgeted capital outlay for the citywide sidewalk replacement and pavement rehabilitation project. It is essential to note that although the actual expenditures were $4.6 million less than the final budget, the General Fund had over $1.5 million in outstanding encumbrances and commitments on June 30, 2025, which carried forward to the next fiscal year.  As of June 30, 2025, the City had $291.0 million in capital assets, a net increase of $2.8 million from the prior fiscal year. Of the total, capital assets for governmental activities were $209.4 million, and the remaining $81.6 million was for business-type activities. The notable increases were in the following asset classes: land acquisition for the Santa Teresa Fire Station, vehicles, infrastructure related to gourmet alley and citywide pavement rehabilitation projects, and subscription-based assets, offset by a decrease in construction in progress of $7.1 million for assets that were accepted as complete during the fiscal year.
 As of June 30, 2025, the City had $113.9 million in long-term debt, a net decrease of $2.5 million from the prior fiscal year. Of the total, governmental activities' long-term debt portion is $62.7 million, consisting of $21.3 million in general obligation bonds, $23.9 million in lease revenue bonds, claims payable (consisting of worker’s compensation and general liability) of $10.8 million, compensated absences payable of $4.4 million, a loan payable of $0.9 million, and subscriptions payable of $1.3 million. The remaining $51.3 million is for business-type activities, primarily in the form of sewer revenue bonds. Notable additions include $0.5 million in Santa Clara County Temporary Housing Loan to preserve Below Market Rate (BMR) homes within the City, and $1.3 million in subscription liabilities within Information Technology (IT). See Note 10 in the Notes to Basic Financial Statements for details.
 The City’s net pension liabilities decreased by $1.7 million to $107.0 million. The decrease was primarily driven by a better-than-expected rate of return for investment earnings, 9.3% vs. 6.8%, which increased the plan’s fiduciary net position during the measurement year. As a result, the deferred outflows related to pension for governmental activities increased by $14.8 million, and deferred inflows decreased by $4.6 million. The City has an existing Section 115 Trust established with the Public Agency Retirement Services (PARS) to pre-fund its pension liabilities, with an established funding policy that diverts the interest savings from the prepayment of the annual unfunded accrued liability (UAL) on both plans and in addition, contributes up to 25% of the annual expenditure savings from the General Fund to the Section 115 Trust for Pension. During FY25, $0.7 million was contributed to the trust, which had a balance of $4.6 million as of June 30, 2026. See Note 11 in the Notes to Basic Financial Statements for details.  The City’s other post-employment benefit (OPEB) liabilities increased by $0.3 million to $16.0 million. The increase in liabilities was primarily driven by higher service and interest costs, offset by decreases due to changes in assumptions about healthcare trends, among others. During FY24, the City Council established a separate Section 115 Trust account with PARS to pre-fund its OPEB liabilities and authorized a one-time contribution of $0.5 million to the Trust. The City Council also adopted a funding policy to contribute up to 25% of the annual expenditure savings from the General Fund to the Section 115 Trust for OPEB. During FY25, $0.5 million was contributed to the trust in accordance with the funding policy, and the trust had a balance of $1.1 million as of June 30, 2026. See Note 12 in the Notes to Basic Financial Statements for details.

City of Gilroy
Management’s Discussion and Analysis (Continued)
For the Year Ended June 30, 2025
7  During FY25, the City implemented Governmental Accounting Standards Board (GASB) Statement No. 101 – Compensated Absences which resulted in a restatement of the beginning net position as of July 1, 2024, as presented in Note 18. and GASB Statement No. 102 – Certain Risk Disclosures which did not have a significant effect on the City’s financial statements for the fiscal year ended June 30, 2025. See Note 1 (w.) in the Notes to Basic Financial Statements for details.

OVERVIEW OF THE FINANCIAL STATEMENTS
The annual report consists of four parts – management’s discussion and analysis (this section), the basic financial statements, required supplementary information, and a supplementary information section that presents combining statements for nonmajor governmental funds, internal service funds and fiduciary funds. The basic financial statements include two kinds of statements that present different views of the City:
 The first two statements are government-wide financial statements that provide both long-term and short-term information about the City’s overall financial status.
 The remaining statements are fund financial statements that focus on individual funds of the City government, which report the City’s operations in more detail than the government-wide statements; including how services were financed in the short term and including fund balances available for financing future services and projects.  The governmental funds statements tell how general government services like public safety were financed in the short term as well as what remains for future spending.  Proprietary funds statements offer short-term and long-term financial information about the activities the government operates like businesses, such as the water and wastewater system.  Fiduciary funds statements provide information about the fiduciary relationships – like the custodial funds of the City – in which the City acts solely as agent or trustee for the benefit of others, to whom the resources in question belong.

The financial statements also include notes – Notes to the Basic Financial Statements - that explain the information in the financial statements and provide more detailed data. The statements are followed by a section of required supplementary information that provides additional financial and budgetary information.

Figure A-1 summarizes the major features of the City’s financial statements, including the portion of the City government they cover and the types of information they contain. The remainder of this overview section of management’s discussion and analysis explains the structure and contents of each of the statements.

City of Gilroy
Management’s Discussion and Analysis (Continued)
For the Year Ended June 30, 2025
8 Figure A-1
Major Features of the City’s Government-wide and Fund Financial Statements Fund Statements
Government-wide
Statements Governmental Funds Proprietary Funds Fiduciary Funds Scope Entire City government
(except fiduciary funds)
The activities of the City
that are not proprietary
or fiduciary
Activities the City
operates similar to
private businesses
Instances in which the
City is the trustee or
agent for someone
else’s resources

Required financial
statements
 Statement of net
position
 Statement of
activities
 Balance sheet
 Statement of
revenues,
expenditures and
changes in fund
balances
 Statement of net
position
 Statement of
revenues,
expenses and
changes net
position
 Statement of cash
flows
 Statement of
fiduciary net
position
 Statement of
change in
fiduciary net
position

Accounting basis and
measurement focus
Accrual accounting and
economic resources
focus
Modified accrual
accounting and current
financial resources
focus
Accrual accounting and
economic resources
focus
Accrual accounting and
economic resources
focus

Type of asset/ liability
information
All assets, deferred
outflows of resources
and liabilities, both
financial and capital,
and short-term and
long-term
Only assets expected
to be used up and
liabilities and deferred
inflows of resources
that come due during
the year or soon
thereafter; no capital
assets or long-term
debt included
All assets, deferred
outflows of resources
and liabilities, both
financial and capital,
and short-term and
long-term
All assets and
liabilities, both shortterm and long-term; the
City’s fiduciary funds
do not currently
contain capital assets,
although they can

Type of inflow/ outflow
information
All revenues and
expenses during year,
regardless of when
cash is received or paid
Revenues for which
cash is received during
or soon after the end of
the year; expenditures
when goods or services
have been received and
payment is due during
the year or soon
thereafter
All revenues and
expenses during the
year, regardless of
when cash is received
or paid
All revenues and
expenses during the
year, regardless of
when cash is received
or paid
Reporting the City as a Whole
The accompanying government-wide financial statements include two statements that present financial data for the City as a whole. One of the most important questions asked about the City’s finances is, “Is the City as a whole better off or worse off as a result of the year’s activities?” The Statement of Net Position and the Statement of Activities report information about the City as a whole and about its activities in a way that helps answer this question. These statements include all assets, deferred outflows of resources, and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All the current year’s revenues and expenses are considered regardless of when cash is received or paid.

City of Gilroy
Management’s Discussion and Analysis (Continued)
For the Year Ended June 30, 2025
9 These two statements report on the City’s net position and changes in them. The City’s net position – the difference between assets, deferred inflows/outflows of resources, and liabilities – can be considered one way to measure the City’s financial health, or financial position. Over time, increases and decreases in the City’s net position are one indicator of whether its financial health is improving or deteriorating. Other things to consider include other nonfinancial factors, such as changes in the City’s property tax base and the condition of the City’s roads, to assess the overall health of the City.

In the Statement of Net Position and the Statement of Activities, we divide the City into two kinds of activities:
 Governmental activities - Most of the City’s basic services are reported here. Sales taxes, property taxes, and other intergovernmental revenues finance most of these activities.  Business-type activities - The City charges a fee to customers to help it cover all of the costs of the services accounted for in these funds, which include water and wastewater utility services.

Reporting the City’s Major Funds
The fund financial statements provide detailed information about the City’s most significant funds – not the City as a whole. Some funds are required to be established by State law or by bond covenants. However, City Council establishes many other funds to help it control and manage money for particular purposes or to show that it is meeting administrative responsibilities for using certain taxes, grants, or other money (such as grants received). The City’s two kinds of funds – governmental and proprietary – use different accounting approaches.  Governmental funds - Most of the City’s basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year end that are available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other current 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 you determine whether there are more or fewer financial resources that can be spent in the near future to finance the City’s programs. We describe the relationship or differences between governmental activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds in reconciliations following the fund financial statements.  Proprietary funds – When the City charges customers for the services it provides - whether to outside customers or to other units of the City - these services are generally reported in proprietary funds. Proprietary funds are reported in the same way that all activities are reported in the Statement of Net Position and the Statement of Activities. The City maintains two different types of proprietary funds, enterprise funds and internal services funds. In fact, the City’s enterprise funds (a component of proprietary funds) are the same as the business-type activities we report in the government-wide statements but provide more detail and additional information, such as cash flows for proprietary funds. We use internal service funds (the other component of proprietary funds) to report activities that provide supplies and services for the City’s other programs and activities. The City uses internal service funds to account for fleet maintenance and replacement, facilities maintenance, information systems, workers compensation, and general insurance and liability.

City of Gilroy
Management’s Discussion and Analysis (Continued)
For the Year Ended June 30, 2025
10 Reporting the City’s Fiduciary Responsibilities
The City is an agent for certain assets held for, and under the control of, other organizations and individuals. All of the City’s fiduciary activities are reported in a separate Statement of Fiduciary Net Position and Changes in Fiduciary Net Position. We exclude these activities from the City’s other financial statements because the City cannot use these assets to finance its operations. The City is responsible for ensuring that the assets reported in these funds are used for their intended purposes. The City currently serves as a fiduciary agent for various funds; however, pursuant to GASB 84 - which qualifies fiduciary activities for accounting and reporting purposes, only the following two funds are reported as fiduciary Funds in the Financial Statement. Other funds are reported as non-major funds or are grouped with the General Fund for Financial Statement purposes.
 Senior Advisory Board. The Senior Advisory Board fund is used to account for revenues generated from fundraising and donations. The funds are used to buy equipment and supplies for the Senior Center.  Highway 152 Series 2018. fund is used to account for special assessments collected to pay the bonded indebtedness for the Highway 152 Series 2018 Assessment District Bonds.

City of Gilroy
Management’s Discussion and Analysis (Continued)
For the Year Ended June 30, 2025
11 GOVERNMENT-WIDE FINANCIAL STATEMENTS
Figure 1: A summary of the government-wide statement of net position (in millions) follows:
2025 2024 2025 2024 2025 2024
Assets
Cash and investments $ 122.2 $ 142.3 $ 93.5 $ 69.1 $ 215.7 $ 211.4 Other assets 19.2 19.1 107.1 104.3 126.3 123.4
Capital assets 209.5 206.3 81.5 81.9 291.0 288.2
Total Assets 350.9 367.7 282.1 255.3 633.0 623.0
Deferred outflows
Related to pension 49.7 34.5 2.7 3.1 52.4 37.6
Related to OPEB 2.4 2.9 0.5 0.5 2.9 3.4
Total Deferred Outflows 52.1 37.4 3.2 3.6 55.3 41.0
Liabilities
Current Liabilities 21.3 20.8 3.7 3.2 25.0 24.0
Long term liabilities 162.1 164.6 65.8 66.3 227.9 230.9 Total Liabilities 183.4 185.4 69.5 69.5 252.9 254.9
Deferred inflows
Deferred gain on refunding 0.4 0.5 - - 0.4 0.5
Related to pension 0.9 5.5 - - 0.9 5.5
Related to OPEB 3.5 4.5 0.7 0.9 4.2 5.4
Related to leases 5.5 5.9 - - 5.5 5.9
Total Deferred Inflows 10.3 16.4 0.7 0.9 11.0 17.3
Net Position
Net investment in capital
assets 161.9 156.1 38.4 41.3 200.3 197.4
Restricted 60.3 74.6 24.8 - 85.1 74.6
Unrestricted (deficit) (12.9) (27.3) 151.9 147.2 139.0 119.9 Total Net Position $ 209.3 $ 203.4 $ 215.1 $ 188.5 $ 424.4 $ 391.9 Governmental
Activities
Business-Type
Activities Total
Note: a change in accounting estimate is treated prospectively, prior periods are not restated.

City of Gilroy
Management’s Discussion and Analysis (Continued)
For the Year Ended June 30, 2025
12 Figure 2: A summary of the government-wide statement of activities follows:

Changes in Net Position (In millions)
(in millions)
2025 2024 2025 2024 2025 2024
Revenues
Program revenues:

Charges for services 12.1 $ 12.1 $ 31.1 $ 28.8 $ 43.2 $ 40.9 $ Operating grants and contributions 8.5 4.3 - - 4.3 8.5
Capital grants and contributions 15.1 10.1 1.4 0.9 16.5 11.0 General revenues:

Taxes:

Property taxes 22.7 22.4 - - 22.4 22.7
Sales taxes 20.5 23.2 - - 23.2 20.5
Transient occupancy taxes 1.5 1.6 - - 1.6 1.5
Franchise taxes 2.4 2.2 - - 2.2 2.4
Utility user taxes 7.0 6.6 - - 6.6 7.0
Real property transfer taxes 0.4 0.4 - - 0.4 0.4
Investment income/(loss) 3.1 7.3 2.0 2.0 5.1 9.3
Miscellaneous income/(loss) 2.2 3.0 0.1 - 3.0 2.3
Total revenues 93.2 95.5 34.6 31.7 130.1 124.9
Expenses:

General government 11.9 10.8 - - 10.8 11.9
Public safety 27.0 49.7 - - 49.7 27.0
Public works 15.8 15.1 - - 15.1 15.8
Community development 6.4 5.6 - - 5.6 6.4
Recreation services 1.8 1.9 - - 1.9 1.8
Interest expense 1.4 1.6 - - 1.6 1.4
Water - - 15.7 15.8 15.8 15.7
Sewer - - 14.6 15.7 15.7 14.6
Total expenses 84.7 64.3 31.5 30.3 95.8 115.0
Change in net position
before transfers 31.2 8.5 3.1 1.4 34.3 9.9
Transfers 0.8 (0.7) (0.8) 0.7 - -
Change in net position 7.8 32.0 2.3 2.1 34.3 9.9
Net position - beginning as previously
stated - 203.4 188.5 - 391.9 -
(governmental and enterprise funds
classification) (24.5) - 24.5 - 0.1 -
Restatement (Note 18) 0.4 - - 0.5 - -
Change in accounting principle (GASB 101) (2.0) - (0.2) - (2.2) - Net position - beginning of year as restated
(Note 18) 195.6 177.3 212.8 186.4 390.1 382.0
Net position - ending $ 203.4 209.3 $ 215.1 $ 188.5 $ 424.4 $ 391.9 $ Governmental Activities Business-Type Activities Total
Note: a change in accounting estimate is treated prospectively, prior periods are not restated.

City of Gilroy
Management’s Discussion and Analysis (Continued)
For the Year Ended June 30, 2025
13 The increase or decrease in net position can provide an indication as to whether the overall position of the City improved or deteriorated during the year.

Governmental Activities: Figure 1 – Statement of Net Position illustrates the total net position increased by about $5.9 million compared to the prior year, primarily in the unrestricted net position of $14.4 million, offset by a decrease of $14.3 million in restricted net position, and a $5.8 million increase in net investment in capital assets. Total assets decreased by $16.8 million, primarily due to a $20.1 million decrease in cash and investments, resulting from the reclassification of water and wastewater impact fee funds from governmental activities to business-type activities, followed by a $3.2 million increase in net capital assets. Total liabilities decreased by $2.0 million, notably in long-term liabilities, attributable to a decrease in pension liabilities driven by a higher-than-expected investment return vs. the expected rate of return (9.3% vs. 6.8%) and a reduction in other long-term debt. Figure 2 – Statement of Activities illustrates the program-level revenues and expenses for the fiscal year. Total revenues for governmental activities were $95.5 million, about $2.3 million, or 2%, better compared to the prior year, primarily in operating and capital grants and contributions, offset by a net decline in investment income and tax revenues. Tax revenues came in $1.9 million lower than prior year, notably in sales tax which was $2.7 million, or about 12%, lower than prior year. Transient occupancy tax came in $0.1 million, or about 6%, lower than prior year. Franchise and utility user taxes came in higher compared to prior year by about $0.2 million and $0.4 million, or about 9% and 6%, respectively. Total expenses for governmental activities were $64.3 million, about $20.4 million, or about 24%, less compared to the prior fiscal year. The notable decrease in expenses was primarily in the public safety (police and fire), a result of the pension expense in the pooled safety plan, offset by increases in general government, public works, and community development programs.

Business-type Activities: Figure 1 – Statement of Net Position illustrates the total net position for business-type activities increased by $26.6 million compared to the prior fiscal year, with a notable increase in restriction net position of $24.8 million primarily a result of the reclassification of water and wastewater impact fee funds from governmental activities to the business-type activities, followed by an increase of $4.7 million in unrestricted net position, and a decrease in net investment in capital assets of $2.9 million. Total assets increased by $26.8 million, notably in the cash and investments category of $24.4 million due to the aforementioned reclassification of the water and wastewater impact fee funds. In 2021, the City issued sewer revenue bonds, 2021A series, to finance its share of the South County Regional Wastewater Treatment plant expansion project. The project commenced in 2021 and is expected to be completed by 2026. As of June 30, 2025, about $7.5 million in unspent bond proceeds remain. Total liabilities did not change from the prior year, as current and long-term liabilities offset each other by an equal $0.5 million increase/decrease. Figure 2 - Statement of Activities illustrates that total revenues from business-type activities, excluding transfers, were $34.6 million, a net increase of $2.9 million from the prior year, primarily due to charges for services. Total expenses for business-type activities were $31.5 million, about $1.2 million higher than the prior fiscal year, primarily in wastewater operations, offset by savings from reduced personnel expenditures due to vacancies during the year.

MAJOR FUNDS
As noted earlier, the City uses fund accounting to provide proper financial management of the City’s resources and to demonstrate compliance with finance-related legal requirements.

Major Governmental Funds. The General Fund is the chief operating fund of the City. The City combines its Sidewalk Repair, Golf Course, and Community Recreation special revenue funds with the City’s General Fund for financial statement presentation as required under GASB 54 as they are subsidized by the general fund. During FY21, the City implemented GASB 84 which provides guidance on accounting and reporting for fiduciary activities of the City. The implementation of GASB 84 resulted in an increase of assets and liabilities in the City’s governmental funds as some funds that were previously classified as fiduciary no longer met the criteria under GASB 84. For the City, these primarily include Revolving Deposits and Deposits on hand for other purposes such as employee wellness, and Barney J. Garcia EMS Training.

City of Gilroy
Management’s Discussion and Analysis (Continued)
For the Year Ended June 30, 2025
14 At the end of FY25, the total fund balance of the general fund (as presented in the aforementioned manner) was $41.0 million consisting of $28.0 million in unassigned fund balance, $7.2 million in committed balance for economic reserves pursuant to the Council adopted General Fund reserve policy, and $5.7 million in restricted fund balance set aside in a Section 115 trust to prefund pension and OPEB liabilities.

Revenues increased between the years ended June 30, 2024, and June 30, 2025, by $0.5 million, or about 1%, primarily due to increased tax and intergovernmental revenues, offset by a decline in investment income as the Federal Reserve commenced its ratecutting process. Taxes revenues increased by $0.8 million, or about 2%, compared to the prior year, primarily in property tax, which was up $0.9 million, or about 4%, compared to the prior year due to an increase in assessed values and new developments added to the assessed roll and additional excess Educational Revenue Augmentation Fund (ERFAF) distribution, followed by utility user tax which increased by $0.5 million or about 7%, compared to prior year, offset by decline in sales tax of about $0.6 million, or about 3%, compared to prior year. All other tax revenues, including franchise, were relatively flat or had minor increases, totaling $0.2 million, compared to the prior year.

Expenditures increased by $2.8 million, or about 4%, between the years ended June 30, 2024, and June 30, 2025, across all departmental operations. Capital Outlay was $2.2 million lower than the prior year, primarily due to the prior year having strategic one-time use of accumulated one-time fund balances for capital-related items. The General Fund’s largest expenditure is public safety, which includes police and fire, and the primary category of expenditures is salaries and benefits. In FY25, the City approved a multi-year memorandum of understanding (MOU) with two of the four collective bargaining units, focusing on recruitment and retention in a competitive labor market; the remaining two are up for renewal and will complete negotiations in FY26.

The Public Facilities Impact Capital Projects Fund has a total fund deficit of $2.3 million at the end of FY25, an increase in deficit of $2.0 million from the prior fiscal year. Excluding transfers, the revenues exceeded the expenditures by $0.9 million during the year. Transfers out exceeded transfers in by $2.9 million. The primary purposes of transfers out were to support various debt instruments and repayment of an inter-fund loan. In February 2008, this fund borrowed $13.7 million from several other funds to purchase Gilroy Gardens. See Note 5 (B), in the Notes to the Basic Financial Statements for additional information. The interfund loan balance outstanding on June 30, 2025, is $2.6 million.

Major Enterprise Funds. The City provides water and sewer utility services to the Gilroy community and operatives both as enterprises.

The total net position of the Sewer Fund increased by $17.5 million, to $124.7 million from the prior fiscal year. Majority of the increase, $17.3 million, is attributed to the reclassification of the wastewater impact fee fund from governmental funds to the enterprise funds. Otherwise, the change in Net Position from the year’s operations was about $0.2 million.

The unrestricted net position of the Sewer Fund at the end of the year amounted to $123.9 million, an increase of $3.5 million, or about 3%, from the prior year, offset by a decrease in net investment in capital assets of about $3.1 million largely due to drawdown of the 2021A bond proceeds to finance City’s share of the South County Regional Wastewater Treatment plant expansion project. The reclassification of the wastewater impact fee fund resulted in a restricted net position of about $17.1 million in the Fund, primarily restricted for capital projects. The total operating revenues and operating expenditures for the Sewer Fund were $15.2 million and $14.5 million, respectively, resulting in $0.7 million in operating income for the year. The total non-operating loss was $1.3 million, attributed to interest expense on the 2021A sewer bonds and the fund’s share of the net loss on the DCU related to depreciation. Transfers out totaled $0.4 million, and the fund also received $1.2 million in capital contributions as developer impact fees.

City of Gilroy
Management’s Discussion and Analysis (Continued)
For the Year Ended June 30, 2025
15 The total net position of the Water Fund increased by $9.1 million, to $90.4 million from the prior fiscal year. The majority of the increase, $7.1 million, is attributed to the reclassification of the water impact fee fund from governmental funds to the enterprise funds. Otherwise, the change in Net Position from the year’s operations was about $2.1 million. The unrestricted net position of the Water Fund at the end of the year increased by $1.1 million to $27.9 million. The net investment in capital assets increased by $0.2 million to $54.7 million. The reclassification of the wastewater impact fee fund resulted in a restricted net position of about $7.8 million in the Fund, primarily restricted for capital projects. The total operating revenues and expenditures for the Water Fund were $15.9 million and $15.7 million, respectively, resulting in $0.2 million of operating income. Total non-operating income was $2.1 million, primarily from investment earnings. Transfers out totaled $0.5 million, and the fund also received $0.3 million in capital contributions as developer impact fees.

During FY23, the City engaged a consultant to conduct a comprehensive water and wastewater rate study for both utilities. Subsequently, in October 2023, the City Council approved multi-year rate adjustments for both utilities, commencing on January 1, 2024, and annually thereafter for a five-year period. The table below illustrates the average single-family monthly water (8,300-gallon consumption) and fixed monthly sewer charge, which were enacted on January 1, 2025, during FY25, and for the remaining three years of the five-year period.

GENERAL FUND
The final budgeted operating revenues, excluding transfers, of the General Fund were $69 million. The actual operating revenues, excluding transfers, of the General Fund were $69.7 million, $0.7 million more than the final budget. Actual revenues exceeded the budget in investment and miscellaneous. Income and charges for services, while tax revenues came under budget by $1.5 million, notably in sales tax and transient occupancy taxes, followed by licenses and permits which came in under budget by about $0.2 million, notably in building permits.

The final budgeted operating expenditures, excluding transfers, of the General Fund were $76.9 million. The actual operating expenditures, excluding transfers, of the General Fund were $72.3 million, approximately $4.6 million less than the final budget, primarily due to operational savings across all departments. It is essential to note that although the actual expenditures were $4.6 million less than the final budget, the General Fund had about $1.5 million reserved for encumbrances on June 30, 2025, which carried forward to the next fiscal year.

In June 2017, the City Council adopted a general fund reserve policy that consisted of (i) an unrestricted General Fund Reserve of 20% of general fund expenditures and (ii) an Economic Stability Reserve of 10% of general fund expenditures that is intended to help the City weather a severe economic crisis. The following table summarizes the adopted general fund reserve policy:

General Fund Reserve Description of Use Amount
Unrestricted Unbudgeted costs or revenue shortfall Minimum of 20% of expenditures Economic Stability Specific triggers in severe economic downturn Minimum of 10% of expenditures 1/1/2025 1/1/2026 1/1/2027 1/1/2028
Water $ 68.69 64.80 $ 72.81 $ 77.18 $
Sewer 55.24 53.11 57.45 59.74
Total Bill 117.91 $ 123.93 $ 130.26 $ 136.92 $
% Increase 5% 5% 5% 5%
Average Single Family Water and Sewer Utility Bill

City of Gilroy
Management’s Discussion and Analysis (Continued)
For the Year Ended June 30, 2025
16 The Economic Stability Reserve shall only be used in extraordinary circumstances, upon satisfaction of one of the following “economic triggers” and with the majority vote of the City Council:
 State take-away of significant revenue
 Large drop in property taxes (decrease in assessed valuations)  Major business closures (sales tax and/or utility users’ tax impact)  Dramatic drop in development from projections
 Large unexpected drop in sales taxes (or other primary revenues - utility users’ tax, franchise fees or transient occupancy tax) due to severe recession
 The economic triggers cause the General Fund Reserve to fall below a predetermined percentage of expenditures (e.g., 20%).

When the Economic Stability Reserve is used, the City is obligated to replenish the reserve by the end of the next biennial budget to 10% of general fund expenditures for that year.

During FY25, the City adequately maintained the Unrestricted General Fund Reserves and the Economic Stability Reserves in accordance with the policy.

Budgetary Highlights
See the Required Supplementary Information in the City’s financial statements for a comparison of the City’s budgeted revenues and expenditures to actual revenues and expenditures for the General Fund. When preparing its budget, the City projects its revenues using realistic, but conservative methods so as to budget its expenditure appropriations in a prudent manner.

As noted above, the City has two unrestricted reserve levels – the Unrestricted General Fund Reserves and the Economic Stability Reserve, neither of which were utilized during FY25. The City continues its conservative spending measures to ensure long-term fiscal sustainability. In addition, the City continued economic incentive transfers from the general fund to the impact funds, to make these funds whole for the previously granted incentives.

The City continues to take a conservative approach in its spending in order to maintain a balanced budget – for and on behalf of the community – and will continue to be financially prudent during the current biennial budget.

The City regularly reviews its revenues and expenditures and reports to the City Council to keep both the Council and the residents apprised of its current fiscal health and to ensure the adequate protection of the City’s financial resources.

City of Gilroy
Management’s Discussion and Analysis (Continued)
For the Year Ended June 30, 2025
17 CAPITAL ASSETS
 As of June 30, 2025, the City’s capital assets, net of accumulated depreciation and amortization, for both the governmental and business-type activities, amounted to $291.0 million, a net increase of $2.8 million. The notable increases were in the following asset classes: land acquisition for the Santa Teresa Fire Station, vehicles, infrastructure related to gourmet alley and citywide pavement rehabilitation projects, and subscription-based assets, offset by a decrease in construction in progress of $7.1 million for assets that were accepted as complete during the fiscal year.

Additional information on the City’s capital assets can be found in Note 7 of the Basic Financial Statements.

LONG-TERM DEBT
2025 2024 2025 2024 2025 2024
Land $ 22.6 $ 21.3 $ - $ - $ 22.6 $ 21.3
Construction in progress 6.7 15.0 1.6 0.4 8.3 15.4
Buildings and improvements 70.1 69.8 0.2 - 70.3 69.8
Equipment and furniture 2.9 2.8 0.1 - 3.0 2.8
IT equipment and software 2.0 2.1 - - 2.0 2.1
Vehicle 5.4 4.8 1.3 0.4 6.7 5.2
Infrastructure 97.9 89.5 78.4 81.1 176.3 170.6
Subscription assets 1.8 1.0 - - 1.8 1.0
Total $ 209.4 $ 206.3 $ 81.6 $ 81.9 $ 291.0 $ 288.2
(in millions)
Governmental activities Business-type activities Total
2025 2024*
Governmental Activities:

Loan Payable 0.9 $ 0.5 $
General Obligation Bonds 21.4 22.5
Refunding Lease Revenue Bonds 23.9 26.1
Subscriptions payable 1.3 0.7
Claims payable 10.8 10.4
Compensated absences 4.4 4.1
Total Governmental Activities $ 64.3 62.7 $
Business-Type Activites:

Revenue Bonds 50.7 51.6
Compensated absences 0.6 0.5
Total Business-Type Activities 51.3 $ 52.1 $
Total Long-Term Debt 114.0 $ 116.4 $
*Restated Compensated absences (GASB 101)

City of Gilroy
Management’s Discussion and Analysis (Continued)
For the Year Ended June 30, 2025
18 As of June 30, 2025, the City’s governmental activities had long-term debt outstanding of $62.7 million, a net decrease of $1.6 million from the prior year. The notable decreases were due to the retirement of principal payments on the bonded debts and loans payable, which came due during the fiscal year. The notable increase was in claims payable for workers’ compensation and general insurance liability, and an increase for compensated absences and subscriptions payable.

Notable additions include $0.5 million in Santa Clara County Temporary Housing Loan to preserve Below Market Rate (BMR) homes within the City, and $1.3 million in subscription liabilities within Information Technology (IT).

As of June 30, 2025, the City’s business-type activities had $51.3 million bonded debt outstanding, consisting of $5.1 million of unamortized premium, and $45.6 million of 2021 wastewater revenue refunding bonds. During the year, $0.9 million principal payment was retired for the 2021A sewer bonds.

See Note 10 in the Notes to the Basic Financial Statements for further discussion.

Requests for Information
This financial report is designed to provide our citizens, taxpayers, customers, and creditors with a general overview of the City’s finances and to show the City’s accountability for the money it receives. If you have questions about this report or need additional financial information, contact the Finance Director’s Office, at the City of Gilroy, 7351 Rosanna Street, Gilroy, California 95020.

BASIC FINANCIAL STATEMENTS
19

20

GOVERNMENT-WIDE FINANCIAL STATEMENTS
21

Discrete Component
Unit (DCU)
South County
Governmental Business-Type Regional Wastewater
Activities Activities Total Authority
ASSETS
Current assets:

Cash and investments 116,504,572 $ 86,036,535 $ 202,541,107 $ 19,492,595 $ Cash and investments with fiscal agent 5,670,746 7,545,341 13,216,087 - Accounts receivable, net 1,094,218 3,485,008 4,579,226 1,699,435 Due from other governments 6,109,262 - 6,109,262 -
Prepaid items 306,211 45,538 351,749 -
Interest receivable 1,853,594 - 1,853,594 192,123
Lease receivable - current - 153,840 153,840 -
Due from DCU - 566,986 566,986 -
Property held for resale 1,250,221 - 1,250,221 -
Total current assets 132,942,664 97,679,408 230,622,072 21,384,153 Noncurrent assets:

Equity investment in DCU - 102,905,836 102,905,836 -
Loans receivable 3,030,580 - 3,030,580 -
Lease receivable - noncurrent - 5,541,626 5,541,626 -
Capital assets - nondepreciable 29,326,182 1,600,481 30,926,663 101,046,807 Capital assets - depreciable/amortizable, net 180,084,599 79,952,948 260,037,547 56,003,341 Total noncurrent assets 217,982,987 184,459,265 634,314,545 157,050,148 Total assets 282,138,673 350,925,651 633,064,324 178,434,301

DEFERRED OUTFLOWS OF RESOURCES
Pension related 49,705,907 2,687,854 52,393,761 -
OPEB related 2,437,599 484,192 2,921,791 -
Total deferred outflows of resources 3,172,046 52,143,506 55,315,552 - Primary Government
City of Gilroy
Statement of Net Position
June 30, 2025
See accompanying Notes to the Basic Financial Statements 22

Discrete Component
Unit (DCU)
South County
Governmental Business-Type Regional Wastewater
Activities Activities Total Authority

LIABILITIES
Current liabilities:

Accounts payable 3,263,931 910,185 4,174,116 770,831
Accrued payroll and benefits 4,260,065 1,044,417 5,304,482 97,727 Retention payable 45,622 - 45,622 6,876,006
Deposits payable 4,514,383 27,670 4,542,053 -
Interest payable 456,239 614,496 1,070,735 -
Unearned revenues 700,199 - 700,199 -
Due to the primary government - - - 566,986
Due to other government - - - 473,098
Compensated absences, due within one year 530,460 136,255 666,715 12,010 Claims payable, due within one year 2,203,169 - 2,203,169 - Long-term debt, due within one year 4,652,641 798,474 5,451,115 - Total OPEB liabilities, due within one year 674,724 134,023 808,747 - Total current liabilities 21,301,433 3,665,520 24,966,953 8,796,658 Noncurrent liabilities:

Compensated absences, due in more than one year 3,885,878 408,767 4,294,645 36,032 Claims payable, due in more than one year 8,603,591 - 8,603,591 - Long-term debt, due in more than one year 42,852,747 49,910,779 92,763,526 - Net pension liabilities 94,014,599 12,975,441 106,990,040 - Total OPEB liabilities, due in more than one year 12,696,889 2,522,042 15,218,931 - Total noncurrent liabilities 162,053,704 65,817,029 227,870,733 36,032 Total liabilities 69,482,549 183,355,137 252,837,686 8,832,690

DEFERRED INFLOWS OF RESOURCES
Deferred gain on refunding 416,686 - 416,686 -
Leases related 5,472,552 - 5,472,552 39,733
Pension related 948,747 - 948,747 -
OPEB related 3,549,261 705,006 4,254,267 -
Total deferred inflows of resources 705,006 10,387,246 11,092,252 39,733

NET POSITION
Net investment in capital assets 161,963,439 38,388,637 200,352,076 149,617,561 Restricted for:

Minority interest of DCU - - - 66,656,042
Pension/OPEB 115 Trust 5,669,222 - 5,669,222 -
Public safety 1,091,200 - 1,091,200 -
Community development 7,378,615 - 7,378,615 -
Public works 34,093,634 - 34,093,634 -
Capital projects 5,929,092 24,842,085 30,771,177 -
Glen Loma fire station 3,589,243 - 3,589,243 -
Other 229,946 - 229,946 -
Debt service 2,272,355 880 2,273,235 -
Total restricted 60,253,307 24,842,965 85,096,272 66,656,042 Unrestricted (deficit) (12,889,972) 151,891,562 139,001,590 (46,711,725) Total net position $ 215,123,164 209,326,774 $ 424,449,938 $ 169,561,878 $ June 30, 2025
Statement of Net Position (Continued)
City of Gilroy
Primary Government
See accompanying Notes to the Basic Financial Statements 23

Capital Grants
Charges for Operating Grants and
Expenses Services and Contributions Contributions
Functions/Programs
Primary Government (PG)
Governmental Activities:

General government 11,885,614 $ 5,049,218 $ 838,379 $ - $ Public safety 27,017,687 459,161 2,329,635 3,857,906
Community development 6,390,947 4,026,283 833,005 3,382,236 Public works 15,766,481 1,942,315 4,546,691 7,829,297
Recreation services 1,831,889 668,979 - -
Interest 1,448,886 - - -
Total Governmental Activities 12,145,956 64,341,504 8,547,710 15,069,439 Business-Type Activities:

Sewer 15,846,817 15,234,796 - 1,153,573
Water 15,698,968 15,831,992 - 301,317
Total Business-Type Activities 31,066,788 31,545,785 - 1,454,890 Total Primary Government $ 43,212,744 95,887,289 $ 8,547,710 $ 16,524,329 $ Discretely Presented Component Unit (DCU)
South County Regional Wastewater
Authority $ 1,167,034 16,965,011 $ 10,580,175 $ 7,026,539 $ City of Gilroy
Statement of Activities
For the Year Ended June 30, 2025
Program Revenues
See accompanying Notes to the Basic Financial Statements 24

Discrete Component
Unit (DCU)
South County
Governmental Business-Type Regional Wastewater
Activities Activities Total Authority
Functions/Programs
Primary Government (PG)
Governmental Activities:

General government (5,998,017) $ - $ (5,998,017) $ - $
Public safety (20,370,985) - (20,370,985) -
Community development 1,850,577 - 1,850,577 -
Public works (1,448,178) - (1,448,178) -
Recreation services (1,162,910) - (1,162,910) -
Interest (1,448,886) - (1,448,886) -
Total Governmental Activities - (28,578,399) (28,578,399) - Business-Type Activities:

Sewer - 541,552 541,552 -
Water - 434,341 434,341 -
Total Business-Type Activities 975,893 - 975,893 -
Total Primary Government 975,893 (28,578,399) (27,602,506) - Discretely Presented Component Unit (DCU)
South County Regional Wastewater
Authority - - - 1,808,737
General Revenues:

Taxes:

Property taxes 22,667,453 - 22,667,453 -
Sales taxes 20,478,194 - 20,478,194 -
Transient occupancy taxes 1,509,597 - 1,509,597 -
Franchise taxes 2,354,848 - 2,354,848 -
Utility users tax - 7,014,280 7,014,280 -
Real property transfer taxes 403,750 - 403,750 -
Other taxes 96,232 - 96,232 -
Investment income 3,075,916 2,072,352 5,148,268 962,679 Miscellaneous 2,172,969 117,947 2,290,916 -
Total General Revenues 2,190,299 59,773,239 61,963,538 962,679 Transfers (829,416) 829,416 - -
Changes in Net Position 2,336,776 32,024,256 34,361,032 2,771,416 Net Position - Beginning, as previously reported 188,530,809 203,351,257 391,882,066 166,801,638 Change with financial reporting entity
(governmental and enterprise funds classification) 24,480,542 (24,480,542) - - Restatement (Note 18) 441,457 - 441,457 -
Change in accounting principle (GASB 101) (2,009,654) (224,963) (2,234,617) (11,176) Net Position - Beginning, as restated (Note 18) 212,786,388 177,302,518 390,088,906 166,790,462 Net Position - Ending $ 215,123,164 209,326,774 $ 424,449,938 $ 169,561,878 $ Net (Expense) Revenue and Changes in Net Position
City of Gilroy
Statement of Activities (Continued)
For the Year Ended June 30, 2025
See accompanying Notes to the Basic Financial Statements 25

26

FUND FINANCIAL STATEMENTS
27

28

GOVERNMENTAL FUND FINANCIAL STATEMENTS
29

30

Capital
Projects
Fund
Public Nonmajor
General Facilities Governmental
Fund Impact Funds Total
ASSETS
Cash and investments $ 505,513 37,230,055 $ 56,106,949 $ 93,842,517 $ Receivables:

Accounts - 476,106 563,086 1,039,192
Due from other governments - 4,662,091 1,447,171 6,109,262 Interest - 1,585,717 265,371 1,851,088
Loans - - 3,030,580 3,030,580
Leases - 5,310,704 - 5,310,704
Due from other funds - 1,085,359 - 1,085,359
Advances to other funds - - 635,161 635,161
Prepaid items - 111,832 - 111,832
Land held for resale - - 1,250,221 1,250,221
Restricted assets:

Cash and investments with fiscal agents - 5,669,222 1,524 5,670,746 Total assets $ 505,513 56,131,086 $ 63,300,063 $ 119,936,662 $

LIABILITIES, DEFERRED INFLOWS OF

RESOURCES, AND FUND BALANCES
Liabilities:

Accounts payable $ 254,582 1,131,460 $ 1,083,525 $ 2,469,567 $ Accrued liabilities - 3,914,465 48,940 3,963,405
Retention payable - 11,631 5,604 17,235
Deposits payable - 4,474,307 35,299 4,509,606
Unearned revenue - 350,199 350,000 700,199
Due to other funds - - 1,080,338 1,080,338
Advances from other funds 2,551,884 - - 2,551,884
Total liabilities 2,806,466 9,882,062 2,603,706 15,292,234 Deferred inflows of resources:

Leases related - 5,165,512 - 5,165,512
Unavailable revenues 71,840 - 1,033,901 1,105,741
Total deferred inflows of resources - 5,237,352 1,033,901 6,271,253 Fund balances (deficit):

Nonspendable - 111,832 50,000 161,832
Restricted - 5,669,222 53,426,226 59,095,448
Committed - 7,229,465 - 7,229,465
Assigned - - 7,039,682 7,039,682
Unassigned (deficit) (2,300,953) 28,001,153 (853,452) 24,846,748 Total fund balances (deficit) (2,300,953) 41,011,672 59,662,456 98,373,175 Total liabilities, deferred inflows
of resources, and fund balances $ 505,513 56,131,086 $ 63,300,063 $ 119,936,662 $ City of Gilroy
Balance Sheet
June 30, 2025
Governmental Funds
See accompanying Notes to the Basic Financial Statements 31

Total Fund Balances - Total Governmental Funds $ 98,373,175 Nondepreciable, net of $773,969 reported in Internal Service Funds 28,552,213 $ Depreciable/amortizable, net of $9,108,094 reported in Internal Service Funds 170,976,505 199,528,718 Bonds payable $ (43,576,066)
Premium on bonds payable (1,691,175)
Unamortized deferred charges on refunding (416,686)
Subscription liabilities, net of ($1,313,662) reported in Internal Service Funds (13,475) Loans payable (911,010)
Interest payable, net of ($16,842) reported in Internal Service Funds (439,397) Compensated absences, net of ($226,595) reported in Internal Service Funds (51,237,552) (4,189,743) Deferred outflows of resources pension related,
net of $732,589 reported in Internal Service Funds 48,973,318 $ Net pension liability, net of ($3,536,526) reported in Internal Service Funds (90,478,073) Deferred inflows of resources pension related (948,747) (42,453,502) Deferred outflows of resources OPEB related,
net of $136,573 reported in Internal Service Funds $ 2,301,026 Total OPEB liability, net of ($749,182) reported in Internal Service Funds (12,622,431) Deferred inflows of resources OPEB related,
net of ($198,857) reported in Internal Service Funds (3,350,404) (13,671,809) 1,105,741
17,682,003
Net Position of Governmental Activities $ 209,326,774
Long-term liabilities are not due and payable in the current period and accordingly are not reported as fund liabilities. All liabilities, both current and long-term, are reported in the Statement of Net Position:

Capital assets used in governmental activities were not current financial resources. Therefore, they were not reported in the Governmental Funds Balance Sheet.

Internal Service Funds were used by management to charge the costs of certain activities, such as insurance and equipment replacement to individual funds. The assets and liabilities of the Internal Service Funds were included in the governmental activities in the Government-Wide Statement of Net Position.

Revenue reported as unavailable revenue in the governmental funds when it is not received soon enough after year-end to be considered available. The availability criteria does not apply to the Government-Wide Financial Statements and, therefore, the revenue is recognized when eligibility requirements are met and earned.

Net pension liabilities and the related deferred outflows of resources and deferred inflows of resources are not due and payable in the current period or not available for current expenditures and are not reported in the governmental fund financial statements:

Net OPEB liabilities and the related deferred outflows of resources and deferred inflows of resources are not due and payable in the current period or not available for current expenditures and are not reported in the governmental fund financial statements:

City of Gilroy
Reconciliation of the Governmental Funds Balance Sheet to the June 30, 2025
Government-Wide Statement of Net Position
Amounts reported for governmental activities in the Statement of Net Position were reported differently because:

See accompanying Notes to the Basic Financial Statements 32

Capital
Projects
Fund
Public Nonmajor
General Facilities Governmental
Fund Impact Funds Total
Revenues:

Taxes $ - 52,824,414 $ 2,581,465 $ 55,405,879 $
Intergovernmental - 1,421,484 9,714,115 8,292,631
Charges for services 8,409,803 - 8,409,803 -
Developer impact fees - 1,578,836 3,598,950 2,020,114
Licenses and permits 2,971,032 - 2,971,032 -
Fines and forfeitures 169,425 - 169,425 -
Investment income 93,415 2,074,383 4,672,103 2,504,305
Miscellaneous 1,792,705 207,265 4,704,125 2,704,155
Total revenues 1,879,516 69,663,246 18,102,670 89,645,432 Expenditures:

Current:

General government 10,427,365 - 10,446,409 19,044
Public safety 46,765,334 - 48,242,373 1,477,039
Recreation services 1,828,765 - 1,831,889 3,124
Community development 5,711,778 - 6,365,424 653,646
Public works 5,741,578 78,532 7,819,597 1,999,487
Capital outlay 1,808,585 857,645 7,520,246 4,854,016
Debt service:

Principal retirement 11,246 - 3,211,825 3,200,579
Interest and fiscal charges 1 29,179 1,733,201 1,704,021 Total expenditures 965,356 72,294,652 13,910,956 87,170,964 Excess (deficiency) of revenues over expenditures 914,160 (2,631,406) 4,191,714 2,474,468 Other financing sources (uses):

Issuance of debt - - 520,354 520,354
Issuance of new subscription 24,721 - 24,721 -
Transfers in 1,186,873 81,526 6,378,161 5,109,762
Transfers out (249,999) (2,978,011) (5,548,745) (2,320,735) Total other financing sources (uses) (2,896,485) 961,595 3,309,381 1,374,491 NET CHANGE IN FUND BALANCES (1,982,325) (1,669,811) 7,501,095 3,848,959 Fund balances (deficit):

Beginning of year, as previously reported 42,681,483 (318,628) 118,563,301 76,200,446 Change with financial reporting entity
(governmental and enterprise funds classification) - - (24,480,542) (24,480,542) Restatement (Note 18) - - 441,457 441,457
Beginning of year, as restated (Note 18) 42,681,483 (318,628) 52,161,361 94,524,216 End of year $ (2,300,953) 41,011,672 $ 59,662,456 $ 98,373,175 $ City of Gilroy
Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds
For the Year Ended June 30, 2025
See accompanying Notes to the Basic Financial Statements 33

Net Change in Fund Balances - Total Governmental Funds $ 3,848,959 Capital outlay, net of $2,893,488 reported in Internal Service Fund. 12,178,551 $ Depreciation and amortization, net of ($1,509,132) reported in Internal Service Funds. (10,454,266) 1,724,285 574,905
46,299
Issuance of Subscription liabilities, net of ($1,254,735) reported at internal service funds. $ (24,721) Issuance of Loans payable (520,354) (545,075)
Bonds payment $ 3,105,391
Subscription payment, net of $647,091 reported at internal service funds. 11,246 Loans payment 95,188 3,211,825
28,799
209,217
(248,558)
21,659,243
270,035
1,244,322
Change in Net Position of Governmental Activities $ 32,024,256

Capital assets used in governmental activities are not financial resources and therefore are not reported in governmental Governmental activities in the Statement of Activities were reported differently because:

City of Gilroy
Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes For the Year Ended June 30, 2025
in Fund Balances to the Government-Wide Statement of Activities Internal Service Funds are used by management to charge the costs of certain activities, such as insurance and equipment replacement, to individual funds. The net revenue of the Internal Service Funds is reported in governmental activities.

Certain pension expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds, net of $46,066 reported in the Internal Service Funds.

Certain OPEB expenses reported in the Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds, net of $1,404 reported in the Internal Service Funds.

Compensated absences were reported in the Government-Wide Statement of Activities, but they did not require the use of current financial resources. Therefore, compensated absences were not reported as expenditures in the governmental funds, net of $(29,023) reported in the Internal Service Funds.

Net change in revenues that was considered unavailable in the governmental funds. These items have been reported as revenue in the Statement of Activities.

Amortization of bond premium was recognized in interest expense on the Government-Wide Statement of Activities, but did not require the use of current financial resources. Therefore amortization of bond premium was not reported as an expenditure in the governmental funds.

Deferred inflows related to the refunding gain is not a revenue in the Statement of Activities, but is reported as a deferred inflows on the Government-Wide Statement of Net Position.

Principal repayment on long-term debt is not an expense in the Statement of Activities, but is considered an expenditure in governmental funds.

Interest accrued on long-term debt is reported in the Statement of Activities, but does not require the use of current financial resources. Therefore, accrued interest is not reported as an expenditure in governmental funds. This amount represents the change in accrued interest from the prior year, net of $8,998 reported in Internal Service Funds.

Issuance of long-term liabilities is not a revenue in the Statement of Activities, but is reported as a liability on the GovernmentWide Statement of Net Position.

See accompanying Notes to the Basic Financial Statements 34

PROPRIETARY FUND FINANCIAL STATEMENTS
35

Governmental
Activities
Total Internal
Enterprise Service
Sewer Water Funds Funds
ASSETS
Current assets:

Cash and investments 43,957,545 $ 42,078,990 $ 86,036,535 $ 22,662,055 $ Cash and investments with fiscal agent 7,545,341 - 7,545,341 - Accounts receivable 1,598,372 1,886,636 3,485,008 55,026 Interest receivable - - - 2,506
Lease receivable - current - - - 49,672
Prepaid items 22,769 22,769 45,538 194,379
Due from DCU 566,986 - 566,986 -
Total current assets 43,988,395 53,691,013 97,679,408 22,963,638 Noncurrent assets:

Advances to other funds - - - 1,916,723
Equity investment in DCU 102,905,836 - 102,905,836 -
Lease receivable - noncurrent - - - 335,090
Capital assets:

Capital assets, not depreciated/amortizable 471,057 1,129,424 1,600,481 773,969 Capital assets, depreciated/amortizable, net 26,341,671 53,611,277 79,952,948 9,108,094 Total noncurrent assets 54,740,701 129,718,564 184,459,265 12,133,876 Total assets 98,729,096 183,409,577 282,138,673 35,097,514

DEFERRED OUTFLOWS OF RESOURCES
Pension related 1,378,343 1,309,511 2,687,854 732,589
OPEB related 223,948 260,244 484,192 136,573
Total deferred outflows of resources 1,569,755 1,602,291 3,172,046 869,162 Statement of Net Position
City of Gilroy
June 30, 2025
Proprietary Funds
Business-Type Activities
See accompanying Notes to the Basic Financial Statements 36

Governmental
Activities
Total Internal
Enterprise Service
Sewer Water Funds Funds

LIABILITIES
Current liabilities:

Accounts payable 296,352 613,833 910,185 794,364
Accrued liabilities 258,036 786,381 1,044,417 296,660
Retention payable - - - 28,387
Deposits payable - 27,670 27,670 4,777
Interest payable 614,394 102 614,496 16,842
Due to other funds - - - 5,021
Compensated absences, current portion 67,736 68,519 136,255 56,650 Claims payable, current portion - - - 2,203,169
Bonds payable, current portion 785,000 - 785,000 -
Subscription liabilities, current portion 6,737 6,737 13,474 589,289 Total OPEB liability, current portion 61,988 72,035 134,023 37,804 Total current liabilities 1,575,277 2,090,243 3,665,520 4,032,963 Noncurrent liabilities:

Compensated absences, noncurrent portion 203,209 205,558 408,767 169,945 Claims payable, noncurrent portion - - - 8,603,591
Bonds payable, noncurrent portion 49,910,779 - 49,910,779 - Subscription liabilities, noncurrent portion - - - 724,373 Net pension liabilities 6,653,860 6,321,581 12,975,441 3,536,526 Total OPEB liability, noncurrent portion 1,166,493 1,355,549 2,522,042 711,378 Total noncurrent liabilities 7,882,688 57,934,341 65,817,029 13,745,813 Total liabilities 9,457,965 60,024,584 69,482,549 17,778,776

DEFERRED INFLOWS OF RESOURCES
Leases related - - - 307,040
OPEB related 326,079 378,927 705,006 198,857
Total deferred inflows of resources 378,927 326,079 705,006 505,897

NET POSITION
Net investment in capital assets (16,345,327) 54,733,964 38,388,637 8,540,014 Restricted for:

Capital project 17,058,906 7,783,179 24,842,085 -
Debt service 880 - 880 -
Unrestricted 123,946,746 27,944,816 151,891,562 9,141,989 Total net position $ 90,461,959 124,661,205 $ 215,123,164 $ 17,682,003 $ City of Gilroy
Statement of Net Position (Continued)
Proprietary Funds
June 30, 2025
Business-Type Activities
See accompanying Notes to the Basic Financial Statements 37

38

Governmental
Activities
Total Internal
Enterprise Service
Sewer Water Funds Funds
OPERATING REVENUES:

Charges for services 15,234,796 $ 15,831,992 $ 31,066,788 $ 15,187,476 $ Miscellaneous 1,688 116,259 117,947 502,330
TOTAL OPERATING REVENUES 15,948,251 15,236,484 31,184,735 15,689,806 OPERATING EXPENSES:

Operations 10,614,946 11,853,800 22,468,746 8,992,648
Depreciation and amortization 1,592,330 1,465,670 3,058,000 1,509,132 Billing 1,039,143 988,489 2,027,632 -
Administration 1,282,721 1,390,906 2,673,627 224,511
Claims and judgments - - - 1,715,919
Insurance premiums - - - 2,908,688
TOTAL OPERATING EXPENSES 15,698,865 14,529,140 30,228,005 15,350,898 OPERATING INCOME 249,386 707,344 956,730 338,908
NONOPERATING REVENUES (EXPENSES):

Investment income 2,492,980 2,051,598 4,544,578 927,173 Interest expense (1,317,677) (103) (1,317,780) (21,759) Loss on disposal of capital assets - - - -
Share of DCU net loss (2,472,226) - (2,472,226) -
Total Nonoperating Income (Loss) 2,051,495 (1,296,923) 754,572 905,414

NET INCOME (LOSS) BEFORE TRANSFERS
AND CAPITAL CONTRIBUTIONS 2,300,881 (589,579) 1,711,302 1,244,322 TRANSFERS AND CAPITAL CONTRIBUTIONS:

Transfers in 56,702 11,786 68,488 -
Transfers out (423,301) (474,603) (897,904) -
Developer impact fees 1,153,573 301,317 1,454,890 -
TOTAL TRANSFERS AND CAPITAL CONTRIBUTIONS (161,500) 786,974 625,474 - CHANGES IN NET POSITION 2,139,381 197,395 2,336,776 1,244,322 NET POSITION:

Beginning of year, as previously reported 107,216,668 81,314,141 188,530,809 16,527,012 Change with financial reporting entity
(governmental and enterprise funds classification) 7,157,919 17,322,623 24,480,542 - Change in accounting principle (GASB 101) (75,481) (149,482) (224,963) (89,331) Beginning of year, as restated (Note 18) 124,463,810 88,322,578 212,786,388 16,437,681 End of year 124,661,205 $ 90,461,959 $ 215,123,164 $ 17,682,003 $ City of Gilroy
Statement of Revenues, Expenses, and Changes in Net Position Proprietary Funds
For the Year Ended June 30, 2025
Business-Type Activities
See accompanying Notes to the Basic Financial Statements 39

Governmental
Activities
Total Internal
Enterprise Service
Sewer Water Funds Funds

CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from customers and users $ 15,656,617 15,030,585 $ 30,687,202 $ 15,648,135 $ Cash paid to suppliers for goods and services (10,533,847) (8,164,108) (18,697,955) (6,691,119) Cash paid to employees for services (3,918,653) (3,466,030) (7,384,683) (2,480,780) Cash paid for insurance claims - - - (4,038,152)
Net Cash Provided by Operating Activities 1,204,117 3,400,447 4,604,564 2,438,084

CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES:

Cash received from other funds 11,786 410,048 421,834 321,348 Cash paid to other funds (474,603) (423,301) (897,904) - Cash paid to DCU - (758,268) (758,268) -
Net Cash Provided by (Used in)
Noncapital Financing Activities (462,817) (771,521) (1,234,338) 321,348

CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES:

Developer impact fees 301,317 1,153,573 1,454,890 -
Acquisition of capital assets (1,721,940) (947,730) (2,669,670) (1,633,528) Principal paid (5,623) (760,624) (766,247) (647,091)
Interest paid (1) (1,489,401) (1,489,402) (12,761)
Net Cash (Used in) Capital and Related
Financing Activities (1,426,247) (2,044,182) (3,470,429) (2,293,380) CASH FLOWS FROM INVESTING ACTIVITIES:

Investment income 2,051,598 2,492,980 4,544,578 926,785 Investment in DCU - (4,070,387) (4,070,387) -
Net Cash Provided by Investing Activities 2,051,598 (1,577,407) 474,191 926,785 Net Change In Cash and Cash Equivalents 1,366,651 (992,663) 373,988 1,392,837 CASH AND CASH EQUIVALENTS:

Beginning of year, as previously report 33,553,087 35,525,851 69,078,938 21,269,218 Change in financial reporting entity 7,159,252 16,969,698 24,128,950 - Beginning of year, as restated 40,712,339 52,495,549 93,207,888 21,269,218 End of year $ 42,078,990 51,502,886 $ 93,581,876 $ 22,662,055 $ CASH AND CASH EQUIVALENTS:

Cash and investments $ 42,078,990 43,957,545 $ 86,036,535 $ 22,662,055 $ Cash and investments with fiscal agent - 7,545,341 7,545,341 - Total cash and cash equivalents $ 42,078,990 51,502,886 $ 93,581,876 $ 22,662,055 $ (Continued)
Business-Type Activities
City of Gilroy
Statement of Cash Flows
Proprietary Funds
For the Year Ended June 30, 2025
See accompanying Notes to the Basic Financial Statements 40

Governmental
Activities
Total Internal
Enterprise Service
Sewer Water Funds Funds
Reconciliation of Operating Income to
Net Cash Provided by Operating Activities:

Operating income $ 249,386 707,344 $ 956,730 $ 338,908 $ Adjustments to reconcile to net cash provided by
Operating activities:

Depreciation and amortization 1,592,330 1,465,670 3,058,000 1,509,132 Changes in assets and liabilities:
(Increase)/decrease in accounts receivables (301,304) (205,899) (507,203) (37,724) (Increase)/decrease in lease receivables - - - 302,867
(Increase)/decrease in prepaid items (2,994) (2,994) (5,988) 231,028 (Increase)/decrease in deferred outflows of
resources related to pensions 341,528 32,687 374,215 135,614 (Increase)/decrease in deferred outflows of
resources related to OPEB 50,201 20,510 70,711 20,700
Increase/(decrease) in accounts payable (257,536) 279,071 21,535 (103,273) Increase/(decrease) in accrued liabilities 417,426 64,711 482,137 64,017 Increase/(decrease) in deposits payable 9,670 - 9,670 500 Increase/(decrease) in compensated absences (90,974) 101,047 10,073 29,023 Increase/(decrease) in claims payable - - - 363,480
Increase/(decrease) in net pension liabilities (549,473) 781,644 232,171 (76,633) Increase/(decrease) in total OPEB liabilities 3,799 107,329 111,128 27,880 Increase/(decrease) in deferred inflows of
resources related to leases related - - - (307,344)
Increase/(decrease) in deferred inflows of
resources related to pensions (24,561) (20,991) (45,552) (12,915) Increase/(decrease) in deferred inflows of
resources related to OPEB (106,721) (56,342) (163,063) (47,176) Net Cash Provided by Operating Activities $ 1,204,117 3,400,447 $ 4,604,564 $ 2,438,084 $ Noncash Financing, capital or Investing activities:

City share of DCU net loss $ - (2,472,226) $ (2,472,226) $ - $ Acquisition of subscription assets $ (12,360) (12,361) $ (24,721) $ (1,254,735) $ Amortization on bond premium $ - (159,243) $ (159,243) $ - $ Issuance of lease and subscription liabilities $ 12,360 12,361 $ 24,721 $ 1,254,735 $ (Concluded)
City of Gilroy
Statement of Cash Flows (Continued)
Proprietary Funds
For the Year Ended June 30, 2025
Business-Type Activities
See accompanying Notes to the Basic Financial Statements 41

42

FIDUCIARY FUND FINANCIAL STATEMENTS
43

44

Custodial
Funds
ASSETS
Cash and investments $ 927,102
Cash and investments with fiscal agent 301,229
Accounts receivable 1,119
Total assets 1,229,450

NET POSITION
Restricted For:

Individuals, organizations and other governments 1,229,450 Total net position $ 1,229,450

June 30, 2025
Statement of Fiduciary Net Position
City of Gilroy
Fiduciary Funds
See accompanying Notes to the Basic Financial Statements 45

Custodial
Funds
ADDITIONS:

Taxes $ 910,772
Investment income 31,384
Other income 145
Total additions 942,301
DEDUCTIONS:

General administration 32,221
Payments on conduit bonds - principal 744,468
Payments on conduit bonds - interest 135,959
Total deductions 912,648
CHANGE IN NET POSITION 29,653
NET POSITION:

Beginning of year 1,199,797
End of year $ 1,229,450
City of Gilroy
Statement of Changes in Fiduciary Net Position
Fiduciary Funds
For the Year Ended June 30, 2025
See accompanying Notes to the Basic Financial Statements 46

47 NOTES TO THE BASIC FINANCIAL STATEMENTS

48

City of Gilroy
Index to the Notes to the Basic Financial Statements
For the Year Ended June 30, 2025
49 Page
Note 1 – Summary of Significant Accounting Policies ..................................................................................... 51 A. Description of the Reporting Entity .............................................................................................. 51 B. Basis of Accounting and Measurement Focus ............................................................................. 52 C. Cash and Investments ................................................................................................................ 55 D. Interfund Loans Receivable and Payable ..................................................................................... 55 E. Accounts Receivable and Due from Other Governments .............................................................. 56 F. Loans Receivable ....................................................................................................................... 56 G. Land Held for Resale .................................................................................................................. 56 H. Leases ...................................................................................................................................... 56 I. Capital Assets ............................................................................................................................ 57 J. Subscription-Based Information Technology Arrangements (SBITAs) ........................................... 57 K. Deferred Outflows/Inflows of Resources ..................................................................................... 58 L. Interest Payable ......................................................................................................................... 58 M. Unearned Revenue ..................................................................................................................... 59 N. Compensated Absences ............................................................................................................ 59 O. Net Pension Liability................................................................................................................... 59 P. Other Postemployment Benefits Liability (OPEB) ......................................................................... 60 Q. Claims Payable .......................................................................................................................... 60 R. Net Position ............................................................................................................................... 60 S. Fund Balances ........................................................................................................................... 61 T. Property Taxes ........................................................................................................................... 62 U. Use of Estimates ........................................................................................................................ 62 V. Reclassification ......................................................................................................................... 63 W. Implementation of New GASB Pronouncements .......................................................................... 63 Note 2 – Stewardship, Compliance and Accountability .................................................................................. 63 A. Encumbrances .......................................................................................................................... 63 B. Continuing Appropriations .......................................................................................................... 63 C. Deficit Fund Balances/Net Position............................................................................................. 64 D. Excess of Expenditure Over Appropriations ................................................................................. 64 Note 3 – Cash and Investments ..................................................................................................................... 64 A. Demand Deposits ...................................................................................................................... 65 B. Investments Authorized by the California Government Code and the City's Investment Policy ............................................................................................................. 66 C. Fair Value Measurements ........................................................................................................... 66 D. Disclosures Relating to Interest Rate Risk ................................................................................... 67 E. Disclosures Relating to Credit Risk ............................................................................................. 67 F. Concentration of Credit Risk ....................................................................................................... 67 G. Custodial Credit Risk ................................................................................................................. 68 H. Investment in State Investment Pools ......................................................................................... 68 Note 4 – Loans Receivable ............................................................................................................................. 69

City of Gilroy
Index to the Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2025
50 Page
Note 5 – Interfund Transactions ...................................................................................................................... 69 A. Due to/from Other Funds ............................................................................................................... 69 B. Advances to/from Other Funds ...................................................................................................... 69 C. Transfers ...................................................................................................................................... 70 D. Due to/from Component Unit ........................................................................................................ 71 Note 6 – Lease Receivables ............................................................................................................................ 71 Note 7 – Capital Assets .................................................................................................................................. 72 Note 8 – Equity Investment in Discretely Presented Component Unit .............................................................. 74 Note 9 – Deferred Compensation .................................................................................................................... 74 Note 10 – Long-Term Liabilities ....................................................................................................................... 75 A. Governmental Activities .............................................................................................................. 75 B. Business-Type Activities .............................................................................................................. 79 C. Debt without Government Commitment ...................................................................................... 80 Note 11 – Defined Benefit Pension Plans (CalPERS) ........................................................................................ 80 A. General Information about the Pension Plans ............................................................................... 80 B. Net Pension Liability.................................................................................................................... 83 C. Changes in the Net Pension Liability ............................................................................................ 85 D. Pension Expense and Deferred Outflows/Inflows of Resources Related to Pensions ...................... 86 Note 12 – Other Postemployment Benefits (OPEB) .......................................................................................... 88 Note 13 – Claims Payable ............................................................................................................................... 91 Note 14 – Commitments and Contingencies ................................................................................................... 92 Note 15 – Net Investment in Capital Assets ..................................................................................................... 93 Note 16 – Classification of Fund Balances ...................................................................................................... 94 Note 17 – Tax Abatement ................................................................................................................................ 95 Note 18 - Restatement of Beginning Net Positions and Fund Balances……………………………………………………95

City of Gilroy
Notes to the Basic Financial Statements
For the Year Ended June 30, 2025
51 Note 1 – Summary of Significant Accounting Policies
The basic financial statements of the City of Gilroy, California, (the “City”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. 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 following is a summary of the City’s significant policies:

A. Description of the Reporting Entity
The City was incorporated in 1870 under the general laws of the State of California and became a charter city on January 8, 1960. The City operates under the Council-Administrator form of government. As required by U.S. GAAP, these financial statements present the City and its component units, entities for which the City is considered to be financially accountable. The City is considered to be financially accountable for an organization if the City appoints a voting majority of that organization’s governing body and the organization is able to provide specific financial benefits to or impose specific financial burdens on the City. The City is also considered to be financially accountable if an organization is fiscally dependent (i.e., it is unable to adopt its budget, levy taxes, set rates or charges or issue bonded debt without approval from the City). In certain cases, other organizations are included as component units if the nature and significance of their relationship with the City are such that their exclusion would cause the City’s financial statements to be misleading or incomplete.

Blended Component Unit
The Gilroy Public Facilities Financing Authority (“Gilroy Public Authority”) is considered to be a blended component unit of the reporting entity of the City because its sole purpose is to finance and construct the City’s public facilities. Blended component units, although legally separate entities, are in substance, part of the City’s operations and so data from these units are reported within the funds of the primary government. The Gilroy Public Authority does not issue separate component unit financial statements.

Discretely Presented Component Unit (“DCU”)
The South County Regional Wastewater Authority (“Authority”) was created on July 1, 1992 by the City of Gilroy and City of Morgan Hill (“Member Agencies”). The purpose of the Authority is to plan and implement regional solutions to the wastewater treatment and management problems resulting from the generation of wastewater within the service areas of the Member Agencies. To achieve this purpose, the Authority constructs, maintains and operates facilities for sewage treatment and wastewater reclamation. The City of Gilroy and the City of Morgan Hill have a 58.1% and 41.9% capacity interest in the wastewater treatment plant, respectively which is used to determine the capital contribution amounts by the Member Agencies and the pro-rata share of the Authority’s income (loss).

The Authority is governed by a Board of Directors, which consists of three members from the Gilroy City Council and two members from the Morgan Hill City Council. The Authority’s budget and annual contribution requirements are approved by the Board of Directors of the Authority. The City’s management provides accounting services, engineering services and administrative support to the Authority. Daily operations of the Authority have been contracted directly to a private provider of services for wastewater management and operations. The Authority is presented in a separate column to emphasize that it is legally separate from the City but provides a financial benefit to the City. Debt issued by the Authority requires approval by the City, and the City approves the budget of the Authority.

Complete financial statements of the Authority can be obtained from the City’s administrative offices.

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
52 Note 1 – Summary of Significant Accounting Policies (Continued) B. Basis of Accounting and Measurement Focus
The accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for by providing a separate set of self-balancing accounts that comprise its assets, liabilities, net position/fund balance, revenues and expenditures or expenses, as appropriate.

Fund accounting segregates funds according to their intended purpose and is used to aid management in demonstrating compliance with finance-related legal and contractual provisions. The minimum number of funds is maintained in accordance with legal and managerial requirements.

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. The DCU column in the government-wide statement of net position and statement activities includes the financial data of the Authority. The City’s equity investment in the Authority is reported in the Sewer Fund as an Equity Investment in the DCU and is adjusted annually using the equity method of accounting.

Fiduciary activities of the City are not included in the Government-Wide statements.

These financial statements are presented on an “economic resources” measurement focus and the accrual basis of accounting. Accordingly, all of the City’s assets, deferred outflows of resources, liabilities, and deferred inflows of resources, 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 liability is incurred.

Certain types of transactions are reported as program revenues for the City in three categories:
 Charges for services
 Operating grants and contributions
 Capital grants and contributions
Certain eliminations have been made in regards to interfund 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 service 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
 Advances to/from other funds
 Transfers in/out

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
53 Note 1 – Summary of Significant Accounting Policies (Continued) B. Basis of Accounting and Measurement Focus (Continued) Governmental Fund Financial Statements
Governmental Fund Financial Statements include a Balance Sheet and a Statement of Revenues, Expenditures and Changes in Fund Balances for all major governmental funds and nonmajor funds aggregated. An accompanying schedule is presented to reconcile and explain the differences between fund balance as presented in these statements to the net position presented in the Government-Wide Financial Statements. The City has presented all major funds that met the applicable criteria.

All governmental funds are accounted for on a spending or "current financial resources" measurement focus and the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are included on the Balance Sheet. The Statement of Revenues, Expenditures and Changes in Fund Balances presents increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period.

Revenues are recognized as soon as 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. For this purpose, 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, which have been treated as susceptible to accrual by the City, are property tax, sales tax, intergovernmental revenues and other taxes. Expenditures are recorded in the accounting period in which the related fund liability is incurred.

The Reconciliation of the Fund Financial Statements to the Government-Wide Financial Statements is provided to explain the differences created by the integrated approach of GASB Statement No. 34.

The City reports the following major governmental funds:

General Fund - The General Fund is used to account for resources traditionally associated with governments which are not required by law or sound financial management to be accounted for in another fund.

Public Facilities Impact Capital Projects Fund - This fund has been established to track expenditures related to the construction of facilities for public use.

Proprietary Fund Financial Statements
Proprietary Fund Financial Statements include a Statement of Net Position, a Statement of Revenues, Expenses and Changes in Net Position, and a Statement of Cash Flows for each major Proprietary Fund.

A separate column representing internal service funds is also presented in these statements. However, internal service balances and activities have been combined with the governmental activities in the Government-Wide Financial Statements. The City’s internal service funds include seven individual funds which provide services directly to other City funds. These areas of service include - Fleet Services, Equipment Outlay, Workers' Compensation, General Liability, Facility Services, Information Technologies and Personnel Benefits.

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
54 Note 1 – Summary of Significant Accounting Policies (Continued) B. Basis of Accounting and Measurement Focus (Continued) Proprietary Fund Financial Statements (Continued)
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 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 the liability is incurred. In these funds, receivables have been recorded as revenue and provisions have been made for uncollectible amounts.

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 nonoperating revenues. Operating expenses are those expenses that are essential to the primary operations of the fund. All other expenses are reported as nonoperating expenses.

The City reports the following major enterprise funds:

Sewer Fund - This fund is used to account for sewage stations and collection systems provided by the City to the public.

Water Fund - This fund is used to account for water services provided by the City to the public.

Fiduciary Fund Financial Statements
Fiduciary fund financial statements include a Statement of Fiduciary Net Position and a Statement of Changes in Fiduciary Net Position. These fiduciary funds are accounted for using the "economic resources" measurement focus and the accrual basis of accounting. These funds have been established to account for assets received and held by the City while acting in the capacity of an agent or custodian.

The City reports the following custodial funds:

Custodial Funds - These funds account for resources held by the City in custodial capacity for special assessments collected to pay the bonded indebtedness for the Highway 152 Series Bonds and for the revenues that come from fundraising and donations used to buy equipment for the Senior Center.

Discretely Presented Component Unit Financial Statements The activities of the Authority closely resemble those of ongoing businesses in which the purpose is to conserve and add to basic resources while meeting operating expenses from current revenues. The Authority provides services on a continuous basis and its activities are substantially financed by revenues derived from user charges and contributions from the member agencies. The Authority utilizes the accrual basis of accounting. Revenues are recognized when earned and expenses are recognized as they are incurred.

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
55 Note 1 – Summary of Significant Accounting Policies (Continued) C. Cash and Investments
The City pools its available cash for investment purposes. 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.

U.S. GAAP defines fair value, establishes a framework for measuring fair value and establishes disclosures about fair value measurement. Investments, unless otherwise specified, recorded at fair value in the financial statements, are categorized based upon the level of judgment associated with the inputs used to measure their fair value.

The three levels of the fair value measurement hierarchy are described below:

Level 1 – Inputs are unadjusted, quoted prices for identical assets and liabilities in active markets at the measurement date.

Level 2 – Inputs, other than quoted prices included in Level 1, that are observable for the assets and liabilities through corroboration with market data at the measurement date.

Level 3 – Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the assets and liabilities at the measurement date.

The statement of cash flows requires presentation of “cash and cash equivalents”. For this purpose, the City considers all proprietary fund pooled cash and investments as “cash and cash equivalents”, as such funds are available to the various funds as needed.

Disclosures for deposits and investment risks, as required and applicable, have been provided in Note 3:
 Interest Rate Risk
 Credit Risk
- Overall
- Custodial Credit Risk
- Concentration 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.

D. Interfund Loans Receivable and Payable
Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as “due from/to other funds” (i.e., current portion of interfund loans) or advances to/from other fund (i.e., noncurrent interfund loans). Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “interfund balances”.

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
56 Note 1 – Summary of Significant Accounting Policies (Continued) E. Accounts Receivable and Due from Other Governments
All accounts receivable and due from other governments are shown net of any allowance for doubtful accounts, if applicable, and estimated refunds due.

F. Loans Receivable
The accompanying financial statements reflect the recording of certain loans receivable that represent loans made to various parties for homebuyer and rehabilitation loan programs. Where reasonably estimable, an allowance for doubtful accounts has been recorded to reflect management’s best estimate of probable losses associated with nonrepayment.

G. Land Held for Resale
Land held for resale represents land, structures, and their related improvements acquired for resale. The current land held for resale includes a multi-family residential project which was acquired via foreclosure process by the Housing Trust Fund and converted to affordable rental units and is recorded at the lower of cost or net realizable value and is evaluated for impairment on an annual basis. The City intends to sell the property to a non-profit affordable housing developer to rehabilitate the existing facility and maintain it as affordable housing units.

H. Leases
The City is a lessor for leases of buildings and land and recognizes leases receivable and deferred inflows of resources in the financial statements. Variable payments based on future performance or usage of the underlying asset are not included in the measurement of the lease receivable.

At the commencement of a lease, the lease receivable is measured at the present value of payments expected to be received during the lease term. Subsequently, the lease receivable is reduced by the principal portion of lease payments received. The deferred inflows of resources are initially measured as the initial amount of the lease receivable, adjusted for lease payments received at or before the lease commencement date. Subsequently, the deferred inflows of resources are recognized as revenue over the life of the lease term in a systematic and rational method.

Key estimates and judgments include how the City determines (1) the discount rate it uses to discount the expected lease receipts to present value, (2) lease term, and (3) lease receipts.  The City uses the average of the Local Agency Investment Fund (“LAIF”) rate and the incremental borrowing rate (IBR) provided by the City’s financial institution for existing leases or the current rate at the time a new lease is executed.
 The lease term includes the noncancelable period of the lease plus any option periods that are likely to be exercised.
 Lease receipts included in the measurement of the lease receivable is composed of fixed payments from the lessee.

The City monitors changes in circumstances that would require a remeasurement of its lease and will remeasure the lease receivable and deferred inflows of resources if certain changes occur that are expected to significantly affect the amount of the lease receivable.

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
57 Note 1 – Summary of Significant Accounting Policies (Continued) I. Capital Assets
Capital assets are recorded at cost where historical records are available and at an estimated historical cost where no historical records exist. Contributed capital assets are valued at acquisition value at the date of the contribution. Generally, capital asset purchases in excess of $10,000 are capitalized if they have an expected useful life of more than one year. Capital assets include all public domain (infrastructure) assets consisting of certain improvements including roads, streets, sidewalks, medians and storm drains.

The following schedule summarizes capital asset useful lives:

Buildings and improvements 40 years
Machinery and equipment 5 - 25 years
Furniture and fixtures 10 - 20 years
Vehicles 8 years
Infrastructure 5 - 70 years
Depreciation has been provided using the straight-line method over the estimated useful life of the asset in the government-wide financial statements and in the fund financial statements of the proprietary funds.

Right-of-Use Subscription Assets
Subscription assets are recorded at the amount of the initial measurement of the Subscription-Based Information Technology Arrangement (SBITA) liabilities (“subscription liabilities”) and adjusted by any subscription payments to the SBITA vendor at or before the commencement of the subscription term, less any incentives received from the SBITA vendor at or before the commencement of the subscription term along with subscription implementation costs. Subscription assets are amortized over the shorter of the subscription term or the useful life of the underlying information technology assets.

J. Subscription-Based Information Technology Arrangements (SBITAs) The City has a policy to recognize a subscription liability and a right-to-use subscription asset (subscription asset) in the financial statements. The City recognizes subscription liabilities with an initial, individual value of $10,000 or more with a subscription term greater than one year. Variable payments based on future performance of the City, usage of the underlying IT asset, or number of user seats are not included in the measurement of the subscription liability, rather, those variable payments are recognized as outflows of resources (expenses) in the period the obligation for those payments is incurred.

At the commencement of a SBITA, the City initially measures the subscription liability at the present value of payments expected to be made during the subscription term. Subsequently, the subscription liability is reduced by the principal portion of subscription payments made.

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
58 Note 1 – Summary of Significant Accounting Policies (Continued) J. Subscription-Based Information Technology Arrangements (SBITAs) (Continued) Subscription assets are recorded at the amount of the initial measurement of the subscription liabilities, less any payments made to the SBITA vendor before the commencement of the subscription term, and capitalizable initial implementation cost, less any incentives received from the SBITA vendor at or before the commencement of the subscription term.
 Preliminary Project Stage: Outlays are expensed as incurred.  Initial Implementation Stage: Outlays are capitalized as an addition to the subscription asset.

Upon adoption, the City elected to exclude the capitalizable outlays associated with the initial implementation stage and the operation and additional implementation stage that were incurred prior to the implementation of this Statement in the measurement of subscription assets as of July 1, 2022.

Subscription assets are reported within capital assets and subscription liabilities are reported with long-term debt on the statement of net position. Subscription assets are amortized using the straight-line method over the shorter of the subscription term or the useful life of the underlying IT asset, unless the subscription contains a purchase option that the City has determined is reasonably certain of being exercised. In this case, the subscription asset is amortized over the useful life of the underlying IT asset.

Key estimates and judgments related to SBITA include how the City determines (1) the discount rate it uses to discount the expected subscription payments to present value, (2) subscription term, and (3) subscription payments.
 The City uses the interest rate charged by the SBITA vendor as the discount rate. When the interest rate charged by the SBITA vendor is not provided, the City generally uses its estimated incremental borrowing rate as the discount rate for SBITA.
 The subscription term includes the noncancellable period of the SBITA. Subscription payments included in the measurement of the subscription liability are composed of fixed payments and purchase option price that the City is reasonably certain to exercise.

K. Deferred Outflows/Inflows of Resources
The Statement of Net Position and Balance Sheet – Governmental Funds reports separate sections for Deferred Outflows of Resources, and Deferred Inflows of Resources, when applicable.

Deferred Outflows of Resources represent a consumption of net assets that applies to future periods.

Deferred Inflows of Resources represent an acquisition of net assets that applies to future periods.

L. Interest Payable
In the government-wide financial statements, interest payable on long-term debt is recognized as the liability is incurred for governmental activities and business-type activities. In the fund financial statements, only proprietary fund and private-purpose trust fund types recognize the interest payable when the liability is incurred.

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
59 Note 1 – Summary of Significant Accounting Policies (Continued) M. Unearned Revenue
Unearned revenue is reported for transactions for which revenue has been received but has not yet been earned.

Unearned revenues primarily consist of prepaid charges for services and grant allocations.

N. Compensated Absences
Compensated absences are liabilities for leave attributable to services already rendered that accumulate and are more likely than not to be paid. Compensated absences primarily consist of vacation and sick leave. The City’s liability for compensated absences is recorded in governmental or business-type activities, as appropriate.

The liability for compensated absences is recognized as leave is earned, based on the employee’s pay rate in effect at the financial statement date, including any applicable salary-related costs. The liability includes only amounts attributable to services already rendered that are more likely than not to be paid or used. Amounts expected to be liquidated with expendable available financial resources are reported as fund liabilities, while the remaining balance is reported as a long-term liability in the Statement of Net Position.

O. Net Pension Liability
For purposes of measuring the net pension liability, deferred outflows and inflows of resources related to pensions, and pension expense, information about the fiduciary net position and additions to/deductions from the fiduciary net position have been determined on the same basis as they are reported by the CalPERS Financial Office. For this purpose, benefit payments (including refunds of employee contributions) are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value.

The following timeframes are used for pension reporting:

Valuation Date June 30, 2023
Measurement Date June 30, 2024
Measurement Period July 1, 2023 to June 30, 2024
Gains and losses related to changes in total pension liability and fiduciary net position are recognized in pension expense systematically over time. The first amortized amounts are recognized in pension expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to pensions and are to be recognized in future pension expense. The amortization period differs depending on the source of the gain or loss. The difference between projected and actual earnings is amortized straight-line over 5 years. All other amounts are amortized straight-line over the average expected remaining service lives of all members that are provided with benefits (active, inactive, and retired) as of the beginning of the measurement period.

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
60 Note 1 – Summary of Significant Accounting Policies (Continued) P. Other Postemployment Benefits Liability (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.

Generally accepted accounting principles require that the reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used:

Valuation Date June 30, 2023
Measurement Date June 30, 2024
Measurement Period July 1, 2023 to June 30, 2024
Q. Claims Payable
The City records a liability for litigation, judgments and claims when it is probable that an asset has been impaired or a liability has been incurred prior to year-end and the probable amount of loss (net of any insurance coverage) can be reasonably estimated. This liability is recorded in the internal service fund that accounts for the City’s selfinsurance activity.

R. Net Position
In the government-wide financial statements and proprietary fund financial statements, net position is classified as follows:

Net Investment in Capital Assets – This component of net position consists of capital assets, net of accumulated depreciation and amortization and related deferred charges on refunding, reduced by the outstanding balances of debt that are attributable to the acquisition, construction, or improvement of those items, net of unspent debt proceeds.

Restricted – This component of net position consists of restricted assets reduced by liabilities and deferred inflows of resources related to those assets. Separate line items are used to distinguish among major categories of restrictions and are further displayed as expendable or nonexpendable based on the nature of the restriction.

Unrestricted – This component of net position is the amount of the assets, deferred outflows of resources, liabilities, and deferred inflows of resources that are not included in the determination of net investment in capital assets or the restricted component of net position.

When expenses are incurred for purposes for which both restricted and unrestricted components of net position are available, the City’s policy is to apply the restricted component of net position first, then the unrestricted component of net position as needed.

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
61 Note 1 – Summary of Significant Accounting Policies (Continued) S. Fund Balances
In the governmental fund financial statements, fund balances are classified as follows:

Nonspendable fund balance includes amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact. The City’s nonspendable fund balance represents inventory, prepaid expenses, land held for resale, and loans receivable unless the proceeds from the collection of those loans receivable or from sale of the properties is restricted, committed, or assigned.

Restricted fund balance includes resources that are subject to externally enforceable legal restrictions. It includes amounts that can be spent only for the specific purposes stipulated by constitution, external resource providers, or through enabling legislation.

Committed fund balance includes amounts that can be used only for the specific purposes determined by a formal action of the City’s highest level of decision-making authority. The City Council, as the City’s highest level of decision-making authority, may commit, through a resolution, fund balance for specific purposes pursuant to constraints imposed by such formal actions taken. Committed amounts cannot be used for any other purpose unless the City Council removes or changes the specific use through the same type of formal action taken to establish the commitment.

Assigned fund balance consists of funds that are set aside for specific purposes by the City’s highest level of decision-making authority or a body or official that has been given the authority to assign funds. The City has not adopted a policy on the authority to assign amounts for specific purposes.

Unassigned fund balance is the residual classification for the City’s fund balance and includes all spendable amounts not contained in the other classifications. This category also provides the resources necessary to meet unexpected expenditures and revenue shortfalls. The General Fund is the only fund that reports a positive unassigned fund balance amount. In other governmental funds, it is not appropriate to report a positive unassigned fund balance amount. However, in governmental funds other than General Fund, if expenditures incurred for specific purposes exceed the amounts that are restricted, committed or assigned to those purposes, it may be necessary to report a negative unassigned fund balance in that fund.

When expenditures are incurred for purposes for which both restricted and unrestricted fund balances are available, the City’s policy is to apply restricted fund balances first, then unrestricted fund balances as needed.

When expenditures are incurred for purposes where only unrestricted fund balances are available, the City uses the unrestricted resources in the following order, except for instances wherein an ordinance specifies the fund balance:
 Committed
 Assigned
 Unassigned

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
62 Note 1 – Summary of Significant Accounting Policies (Continued) T. Property Taxes
Property taxes in the State of California are administered for all local agencies at the County level, and consist of secured, unsecured and utility tax rolls. The following is a summary of major policies and practices relating to property taxes:

Property Valuations - are established by the Assessor of the County of Santa Clara for the secured and unsecured property tax rolls; the utility property tax roll is valued by the State Board of Equalization. Under the provisions of Article XIIIA of the State Constitution (Proposition 13 adopted by the voters on June 6, 1978), properties are assessed at 100% of full value. From this base of assessment, subsequent annual increases in valuation are limited to a maximum of 2%. However, increases to full value are allowed for property improvements or upon change in ownership. Personal property is excluded from these limitations and is subject to annual reappraisal.

Tax Levies - are limited to 1% of full market value which results in a tax rate of $1.00 per $100 assessed valuation, under the provisions of Proposition 13. Tax rates for voter-approved indebtedness are excluded from this limitation.

Tax Levy Dates - are attached annually on March 1 preceding the fiscal year for which the taxes are levied. The fiscal year begins July 1 and ends June 30 of the following year. Taxes are levied on both real and unsecured personal property as it exists at that time. Liens against real estate, as well as the tax on personal property, are not relieved by subsequent renewal or change in ownership.

Tax Collections - are the responsibility of the County Tax Collector. Taxes and assessments on secured and utility rolls which constitute a lien against the property may be paid in two installments. The first is due on November 1 of the fiscal year and is delinquent if not paid by December 10, and the second is due on March 1 of the fiscal year and is delinquent if not paid by April 10. Unsecured personal property taxes do not constitute a lien against real property unless the taxes become delinquent. Payment must be made in one installment, which is delinquent if not paid by August 31 of the fiscal year. Significant penalties are imposed by the County for late payments.

Tax Levy Apportionments - Due to the nature of the City-wide maximum levy, it is not possible to identify general purpose tax rates for specific entities. Under State legislation adopted subsequent to the passage of Proposition 13, apportionments to local agencies are made by the County Auditor-Controller based primarily on the ratio that each agency represented of the total City-wide levy for the three years prior to fiscal year 1979.

Property Tax Administration Fees - The State of California fiscal year 1990-91 Budget Act authorized counties to collect an administrative fee for collection and distribution of property taxes. Property taxes are recorded as net of administrative fees withheld during the fiscal year.

U. Use of Estimates
The preparation of financial statements in accordance with U.S. GAAP, requires management to make certain 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, as well as the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
63 Note 1 – Summary of Significant Accounting Policies (Continued) V. Reclassification
Certain reclassification have been made to the 2024 financial statements to conform to the 2025 presentation.

W. Implementation of New GASB Pronouncements
During fiscal year ended June 30, 2025, the City implemented the following new GASB Pronouncement:

GASB Statement No. 101 – In June 2022, the GASB issued Statement No. 101, Compensated Absences. The objective of this Statement is to better meet the information needs of financial statement users by updating the recognition and measurement guidance for compensated absences. That objective is achieved by aligning the recognition and measurement guidance under a unified model and by amending certain previously required disclosures. The requirements of this Statement are effective for fiscal years beginning after December 15, 2023, and all reporting periods thereafter. Implementation of this Statement resulted in a restatement of the beginning net position as of July 1, 2024, as presented in Note 18.

GASB Statement No. 102 – In December 2023, the GASB issued Statement No. 102, Certain Risk Disclosures. The objective of this Statement is to provide users of government financial statements with information about risks related to a government’s vulnerabilities due to certain concentrations or constraints that is essential to their analyses for making decisions or assessing accountability. The requirements of this Statement are effective for fiscal years beginning after June 15, 2024, and all reporting periods thereafter. Implementation of this Statement did not have a significant effect on the City’s financial statements for the fiscal year ended June 30, 2025.

Note 2 – Stewardship, Compliance and Accountability
A. Encumbrances
Encumbrances are estimations of costs related to unperformed contracts for goods and services. These commitments are recorded for budgetary control purposes in the General, Special Revenue, and similar governmental funds. Encumbrances outstanding at fiscal year-end are reported as committed or assigned fund balance. They represent the estimated amount of the expenditure ultimately to result if unperformed contracts inprocess at fiscal year-end are completed. They do not constitute expenditures or estimated liabilities. The significant amounts of encumbrances outstanding as of June 30, 2025 was $14,362,049.

B. Continuing Appropriations
The unexpended and unencumbered appropriations that are available and recommended for continuation are approved by the City Council for carryover to the following fiscal year. These commitments are reported as committed or assigned fund balance.

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
64 Note 2 – Stewardship, Compliance and Accountability (Continued) C. Deficit Fund Balances/Net Position
The following funds contained a deficit fund balance/net position as of June 30, 2025:

Funds Amount
Major Governmental Fund:

Public Facilities Impact Capital Projects Fund $ (2,300,953) Nonmajor Governmental Funds:

Downtown Beautification Capital Projects Fund (828,971) Internal Service Fund:

Workers’ Compensation Fund (3,173,753)
General Liabilities Fund (194,180)
In the Government-Wide Financial Statements, the City had a deficit unrestricted net position at June 30, 2025 for its governmental activities of $(12,889,972) of which, $(94,014,599) and $(13,371,613) were attributed to net pension liabilities and total other postemployment benefits liabilities, respectively. City management intends to eliminate the deficit of the capital projects funds with future receipts, and City management believes the present cash position of the Internal Service Funds are adequate to meet current needs.

D. Excess of Expenditure Over Appropriations
The following funds contained excess of expenditures over final appropriations for the year ended June 30, 2025:

Final
Funds Appropriations Expenditures Excess
Nonmajor Governmental Funds:

Gilroy Community Library Debt Service Fund 1,844,295 $ 1,846,487 $ (2,192) $ Museum Trust Permanent Fund - 3,124 (3,124)
Note 3 – Cash and Investments
The City maintains a cash and investment pool, which includes cash balances and authorized investments of all funds.

Cash and investments are presented in the accompanying financial statements at June 30, 2025 as follows:

Statement of
Governmental Business-type Component Fiduciary
Activities Activities Unit Net Position Total
Cash and investments 116,504,572 $ 86,036,535 $ 19,492,595 $ 927,102 $ 222,960,804 $ Cash and investment with fiscal agent 5,670,746 7,545,341 - 301,229 13,517,316 Total cash and investments 122,175,318 $ 93,581,876 $ 19,492,595 $ 1,228,331 $ 236,478,120 $ Government-Wide Statement of Net Position

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
65 Note 3 – Cash and Investments (Continued)
Cash and investments at June 30, 2025, consisted of the following:

Cash:

Petty cash $ 4,955
Demand deposits 5,815,619
Total cash 5,820,574
Investments:

Local Agency Investment Fund 80,076,287
California CLASS 27,583,616
Federal Home Loan 21,215,700
U.S. Treasury Notes 88,264,627
Investments with Fiscal Agent:

U.S. Treasury SLGS Demand Deposit 7,544,461
Money Market Mutual Fund 303,633
Restricted investment with PARS 5,669,222
Total investments 230,657,546
Total cash and investments $ 236,478,120
A. Demand Deposits
The carrying amount of the City’s demand deposits were $5,815,619 at June 30, 2025. Bank balances before reconciling items were $5,965,204 at that date, the total amount of which was insured or collateralized with securities held by the pledging financial institutions in the City’s name as discussed below.

The California Government Code requires California banks and savings and loan associations to secure the City’s cash deposits by pledging securities as collateral. This 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 considered to be held in the City's name. The market 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 may waive collateral requirements for cash deposits, which are fully insured up to $250,000 by the Federal Deposit Insurance Corporation (“FDIC”). The City, however, has not waived the collateralization requirements.

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
66 Note 3 – Cash and Investments (Continued)
B. Investments Authorized by the California Government Code and the City's Investment Policy The table below identifies the investment types that are authorized by the City's investment policy and the California Government Code. The table also identifies certain provisions of the California Government Code (or the City's investment policy, if more restrictive) that address interest rate risk, credit risk, and concentration of credit risk. This table below does not identify investment types that are authorized and held by bond trustees that are governed by the provisions of debt agreements of the City, rather than the general provisions of the California Government Code or the City's investment policy.

Maximum Maximum
Maximum Percentage of Investment in One
Authorized Investment Type Maturity Portfolio Issuer
Local Agency Investment Fund (LAIF) N/A None None
U.S. Government Sponsored Agency Securities N/A None None Insured Certificate of Deposit (CD's) N/A 15% $250,000
California CLASS N/A 15% None
Banker's Acceptances N/A 15% None
Commercial Paper N/A 10% None
Passbook Savings or Money Market Demand Deposits N/A None None Money Market Mutual Funds N/A 5% None
Liquidity:

N/A- Not applicable
*Securities or bonds purchased under a prior investment policy may be held or sold but additional purchases shall not be made.

C. Fair Value Measurements
At June 30, 2025, investments are reported at fair value. The following table presents the fair value measurement of investments on a recurring basis and the levels within GASB 72 fair value hierarchy in which the fair value measurements fall at June 30, 2025:

Investment Type Total Level 1 Level 2 Uncategorized
Primary Government
Local Agency Investment Fund 62,540,009 $ - $ - $ 62,540,009 $ California CLASS 27,583,616 - - 27,583,616
Federal Home Loan 21,215,700 - 21,215,700 -
U.S. Treasury Notes 88,264,627 88,264,627 - -
U.S. Treasury SLGS Demand Deposit 7,544,461 - - 7,544,461 Restricted investment with PARS 5,669,222 - 5,669,222 - Money Market Mutual Fund 303,633 - - 303,633
Component Unit
Local Agency Investment Fund 17,536,278 - - 17,536,278
Total $ 88,264,627 230,657,546 $ 26,884,922 $ 115,507,997 $

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
67 Note 3 – Cash and Investments (Continued)
D. Disclosures Relating to 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. One of the ways that the City manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer-term investments and timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations. Information about the sensitivity of the fair values of the City's investments to market interest rate fluctuations is as follows:
12 Months More than
Investment Type Total or less 12 Months
Local Agency Investment Fund 80,076,287 $ 80,076,287 $ - $ California CLASS 27,583,616 27,583,616 -
Federal Home Loan 21,215,700 21,215,700 -
U.S. Treasury Notes 88,264,627 78,315,185 9,949,442
U.S. Treasury SLGS Demand Deposit 7,544,461 7,544,461 - Restricted investment with PARS 5,669,222 5,669,222 -
Money Market Mutual Fund 303,633 303,633 -
Total $ 220,708,104 230,657,546 $ 9,949,442 $
Remaining Maturity (in Months)
E. Disclosures Relating to Credit Risk
Generally, 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 minimum rating required by (where applicable) the California Government Code, the City’s investment policy or debt agreements, and the actual rating by Standard & Poor’s as of year-end for each investment type.

Minimum
Legal
Investment Type Total Rating AAA AA1 N/A
Local Agency Investment Fund 80,076,287 $ N/A - $ - $ 80,076,287 $ California CLASS 27,583,616 AAA - 27,583,616 -
Federal Home Loan 21,215,700 AA1 - 21,215,700 -
U.S. Treasury Notes 88,264,627 AA1 - 88,264,627 -
U.S. Treasury SLGS Demand Deposit 7,544,461 N/A - - 7,544,461 Restricted investment with PARS 5,669,222 N/A - - 5,669,222 Money Market Mutual Fund 303,633 N/A - - 303,633
Total $ 27,583,616 230,657,546 $ 109,480,327 $ 93,593,603 $ F. Concentration of Credit Risk
The investment policy of the City contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. There are no investments in any one issuer (other than U.S. Treasury securities, mutual funds and external investment pools) that represent 5% or more of total City investments. The money market funds held with fiscal agents are related to bond issuances and reserves and not subject to the limitation set by California Government Code.

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
68 Note 3 – Cash and Investments (Continued)
G. Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the City’s investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits. The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits.

For investments identified herein as held by fiscal agent, the trustee selects the investment under the terms of the applicable trust agreement, acquires the investment, and holds the investment on behalf of the reporting government.

H. Investment in State Investment Pools
Local Agency Investment Fund
The City is a participant in LAIF which is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. As of June 30, 2025, the City had $80,076,287 invested in LAIF.

LAIF determines fair value on its investment portfolio based on market quotations for those securities where market quotations are readily available and based on amortized cost or best estimate for those securities where market value is not readily available. LAIF is reported at amortized cost, which approximates fair value.

California Cooperative Liquid Assets Securities System
California Cooperative Liquid Assets Securities System (“CLASS”) is a pooled investment option that was created via a joint exercise of powers agreement by and among California public agencies. California CLASS provides California public agencies with a convenience method for investing in high-liquid, short to medium term securities.

Deposits and withdrawals to and from California CLASS are transferred on the basis of $1 at amortized cost, which approximates fair value.

As of June 30, 2025, The City had $27,583,616 invested in the California CLASS.

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
69 Note 4 – Loans Receivable
At June 30, 2025, loans receivable consisted of the following:

Governmental Activities
Down payment assistance 1,851,485 $
Housing improvement to non-profits 450,000
Involuntary liens 131,345
Affordable housing development loans 790,000
Housing rehabilitation 206,316
Subtotal 3,429,146
Less: Allowance for uncollectible loans (398,566)
Total loans receivable 3,030,580 $
The City made deferred loans to senior citizens, the physically handicapped, and low to moderate income residents for the purposes of rehabilitation and down payment assistance. These loans are repaid at the end of a 30 year term or when the title to the property changes. The City also made deferred loans to third party housing non-profits to fund housing projects which are due the earlier of 55 years after completion of the projects or December 31, 2074. Where reasonably estimable, an allowance for doubtful accounts has been recorded to reflect management’s best estimate of probable losses associated with nonrepayment. Estimates of any additional potential losses associated with nonrepayment cannot be reasonably estimated at this time.

Note 5 – Interfund Transactions
A. Due to/from Other Funds
The following is a summary of amounts due to and from other funds as of June 30, 2025:

Due From Other Funds
Due To Other Funds General Fund
Nonmajor Governmental Funds 1,080,338 $
Internal Service Funds 5,021
Total $ 1,085,359
The due to/from other funds are to provide cash flow for the funds with negative cash and for other short-term borrowings between funds.

B. Advances to/from Other Funds
The following is a summary of advances to and from other funds as of June 30, 2025:

Advances to Other Funds
Nonmajor
Governmental
Funds
Internal Service
Funds Total
Public Facilities Impact Capital Projects Fund 635,161 $ 1,916,723 $ 2,551,884 $ Advances from Other Funds

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
70 Note 5 – Interfund Transactions (Continued)
B. Advances to/from Other Funds (Continued)
In February 2008, the City purchased the Gilroy Gardens Property (Property), which includes a horticultural education and theme park, for approximately $13.7 million. At the same time, the City entered into a single tenant lease of the Property with the seller, Gilroy Gardens Family Theme Park, Inc. To fund the acquisition, the Public Facilities Impact Fund borrowed from certain funds which is accounted for as a long-term advance for a period of 20 years. The annual loan activity is budgeted through revenue and expenditure transactions. The loan interest is at the City’s annual average portfolio yield. The original loan amounts were as follows: Storm Drain Fund ($1.2 million), the Sewer Development Fund ($5.0 million), the Fleet Services Fund ($4.3 million), the Equipment Outlay Fund ($2.2 million) and the Water Fund ($1.0 million). The outstanding balance of the interfund loan was $2,551,884 as of June 30, 2025.

The payment schedule is as follow:

Year ending
June 30, Principal Interest Total
2026 788,109 $ 28,924 $ 817,033 $
2027 740,960 20,679 761,639
2028 1,022,815 8,317 1,031,132
Total 2,551,884 $ 57,920 $ 2,609,804 $
C. Transfers
During the year ended June 30, 2025, the City had the following transfers:

Public Facilities Nonmajor Sewer Water
Impact Capital Governmental Enterprise Enterprise
Transfers In General Fund1 Projects Fund2 Funds3 Fund4 Fund4 Total General Fund - $ - $ 288,969 $ 423,301 $ 474,603 $ 1,186,873 $ Public Facilities Impact Capital Projects Fund 81,526 - - - - 81,526 Nonmajor Governmental Funds 99,985 2,978,011 2,031,766 - - 5,109,762 Water Enterprise Fund 11,786 - - - - 11,786
Sewer Enterprise Fund 56,702 - - - - 56,702
Total 249,999 $ 2,978,011 $ 2,320,735 $ 423,301 $ 474,603 $ 6,446,649 $ Transfers Out
1 General Fund support of certain capital projects, safety related grants, and IT services. 2 Public Facilities Impact Capital Projects Fund supports various debt instruments. 3 Nonmajor Governmental Funds support of grant personnel costs, debt retirements. 4 Enterprise Fund transfers to the General Fund to support impact to local streets and roads costs and environmental costs.

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
71 Note 5 – Interfund Transactions (Continued)
D. Due to/from Component Unit
The following is a summary of due to and from the Authority as of June 30, 2025:

Due from Component Unit
South Regional
Wastewater
Authority
Sewer Enterprise Fund $ 566,986
During the fiscal year June 30, 2025, the amount of the Authority billed to the City was based on the budget, which is more than actual expense. As of June 30, 2025 the balance of due to the City are the amount of overpaid for operating and capital contributions at year end.

Note 6 – Lease Receivables
The City leases various types of property including land and buildings. Leases receivable consist of agreements with other entities for the “right–to–use” the underlying assets at various locations owned by the City. The remaining terms of the agreements range from 1 to 37 years. The interest rates used calculated the net present value of the lease receivable ranged from 1% to 1.705%.

As of June 30, 2025, the balance of the deferred inflow of resources for governmental activities and the DCU were $5,472,552 and $39,733, respectively. For the fiscal year ended June 30, 2025, the City and DCU recognized $254,598 and $96,713 in lease revenue, respectively, and the outstanding net present value of the lease receivable amount are $5,695,466 and 0 for the City and DCU, respectively.

At June 30, 2025, the required payments for the governmental activities for these leases, including interest, and deferred inflow-lease related future revenue are:

Year Ending NPV lease Total lease
June 30, receivables Interest payments
2026 153,840 $ 94,948 $ 248,788 $
2027 164,407 92,516 256,923
2028 165,714 90,009 255,723
2029 168,260 87,463 255,723
2030 170,847 84,876 255,723
2031 - 2035 687,047 388,211 1,075,258
2036 - 2040 638,173 335,407 973,580
2041 - 2045 694,464 279,116 973,580
2046 - 2050 755,721 217,859 973,580
2051 - 2055 822,380 151,200 973,580
2056 - 2060 894,920 78,660 973,580
2061 - 2062 379,693 9,738 389,431
Total 5,695,466 $ 1,910,003 $ 7,605,469 $
Governmental activities

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
72 Note 7 – Capital Assets
Governmental Activities
The following is a summary of changes in capital assets for the governmental activities for the year ended June 30, 2025:

Balance
July 1, 2024 Balance
(As Reclassified) Additions Deletions Transfers June 30, 2025 Capital assets not being depreciated:

Land 21,334,900 $ 1,315,000 $ - $ - $ 22,649,900 $
Construction in progress 14,980,116 6,790,988 - (15,094,822) 6,676,282 Total capital assets not being depreciated 36,315,016 8,105,988 - (15,094,822) 29,326,182 Capital assets being depreciated:

Building and improvements 125,572,487 3,271,086 - - 128,843,573 Equipment and furniture 13,122,740 551,161 - - 13,673,901 IT equipment and software 4,830,075 318,478 - - 5,148,553 Vehicle 15,259,482 1,501,004 - - 16,760,486
Infrastructure 302,402,241 44,865 (377,253) 15,094,822 317,164,675 Total capital assets being depreciated 461,187,025 5,686,594 (377,253) 15,094,822 481,591,188 Less accumulated depreciation for:

Building and improvements (55,627,680) (3,119,741) - - (58,747,421) Equipment and furniture (10,147,803) (636,059) - - (10,783,862) IT equipment and software (2,906,027) (217,523) - - (3,123,550) Vehicle (10,613,443) (737,506) - - (11,350,949)
Infrastructure (212,948,210) (6,724,892) 377,253 - (219,295,849) Total accumulated depreciation (292,243,163) (11,435,721) 377,253 - (303,301,631) Total capital assets being depreciated, net 168,943,862 (5,749,127) - 15,094,822 178,289,557 Intangible assets being amortized:

Right-to-use subscription assets 1,880,276 1,279,455 (120,853) - 3,038,878 Less accumulated amortization (837,012) (527,677) 120,853 - (1,243,836) Total subscription assets, net 1,043,264 751,778 - - 1,795,042 Total governmental activities $ 3,108,639 206,302,142 $ - $ - $ 209,410,781 $ Depreciation and amortization expense was charged to functions/programs of governmental activities for the year ended June 30, 2025 as follows:

General government 980,610 $
Public safety 1,253,466
Public works 8,220,190
Internal Service Fund 1,509,132
Total $ 11,963,398

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
73 Note 7 – Capital Assets (Continued)
Business-Type Activities
The following is a summary of changes in capital assets for the business-type activities for the year ended June 30, 2025:

Balance Balance
July 1, 2024 Additions Deletions Transfers June 30, 2025 Capital assets not being depreciated:

Construction in progress 410,041 $ 1,190,440 $ - $ - $ 1,600,481 $ Total capital assets not being depreciated 410,041 1,190,440 - - 1,600,481 Capital assets being depreciated:

Land improvements 427,852 184,006 - - 611,858
Equipment and furniture 212,630 69,284 - - 281,914
IT Equipment/software 15,000 - - - 15,000
Vehicles 468,517 962,520 - - 1,431,037
Infrastructure 160,373,602 263,420 - - 160,637,022
Total capital assets being depreciated 161,497,601 1,479,230 - - 162,976,831 Less accumulated depreciation for:

Land improvements (427,853) (3,451) - - (431,304)
Equipment and furniture (205,174) (3,382) - - (208,556) IT Equipment/software (11,500) (3,500) - - (15,000)
Vehicles (65,413) (69,073) - - (134,486)
Infrastructure (79,283,164) (2,966,820) - - (82,249,984) Total accumulated depreciation (79,993,104) (3,046,226) - - (83,039,330) Total capital assets being depreciated, net 81,504,497 (1,566,996) - - 79,937,501 Subscription assets 22,500 24,721 - - 47,221
Less accumulated amortization (20,000) (11,774) - - (31,774) Total subscription assets, net 2,500 12,947 - - 15,447
Total business-type activities $ (363,609) 81,917,038 $ - $ - $ 81,553,429 $ Depreciation and amortization expense was charged to the business-type activities as follows:

Sewer 1,592,330 $
Water 1,465,670
Total $ 3,058,000

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
74 Note 7 – Capital Assets (Continued)
Discretely Presented Component Unit
The following is a summary of changes in capital assets for the DCU for the year ended June 30, 2025:

Balance Balance
July 1, 2024 Additions Deletions Transfers June 30, 2025 Capital assets not being depreciated:

Land 13,396,202 $ - $ - $ - $ 13,396,202 $
Construction in progress 81,203,547 6,447,058 - - 87,650,605 Total capital assets not being depreciated 94,599,749 6,447,058 - - 101,046,807 Capital assets being depreciated:

Building and improvements 77,632,391 291,268 - 77,923,659 Land improvements 10,681,371 - - - 10,681,371
Equipment and furnitures 20,097,850 168,578 - - 20,266,428 Vehicles 1,641,145 113,059 - - 1,754,204
Infrastructure 35,874,536 - - - 35,874,536
Total capital assets being depreciated 145,927,293 572,905 - - 146,500,198 Less accumulated depreciation for:

Building and improvements (46,335,177) (1,919,919) - - (48,255,096) Land improvements (6,480,557) (195,869) - - (6,676,426) Equipment and furniture (17,603,098) (636,212) - - (18,239,310) Vehicles (1,256,360) (57,042) - - (1,313,402)
Infrastructure (14,365,358) (1,647,265) - - (16,012,623) Total accumulated depreciation (86,040,550) (4,456,307) - - (90,496,857) Total capital assets being depreciated, net 59,886,743 (3,883,402) - - 56,003,341 Total discretely component unit $ 2,563,656 154,486,492 $ - $ - $ 157,050,148 $ Depreciation expense was charged to the DCU was $4,456,307 for the year ended June 30, 2025.

Note 8 – Equity Investment in Discretely Presented Component Unit The City and the City of Morgan Hill are members of the South County Regional Wastewater Authority, a joint powers authority (“Authority”), that provides for the construction, ownership, maintenance and operation of a domestic sewer treatment plant. The agreement provides for the participants’ capacity right to use the system. The participants are also obligated to share in the annual direct operating costs of the Authority. The City maintains the accounting records for the Authority. The City’s equity investment in the DCU is reported on the statement of net position of the City’s sewer enterprise fund as an “equity investment in DCU” in the amount of $102,905,836 as required under the equity method of accounting for investments. The financial statements of the Authority can be obtained from the City’s finance department.

Note 9 – Deferred Compensation
The City maintains a deferred compensation plan under Section 457 of the Internal Revenue Code (IRC) for the benefit of its employees. The plan allows the employees to defer or postpone the taxation of a designated amount of earnings set aside for retirement.

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
75 Note 9 – Deferred Compensation (Continued)
The City has a fiduciary responsibility to safeguard the assets of the program and to ensure that the plan is properly maintained by the plan administrator. Generally speaking, assets are available to participants only upon termination of employment with the City, retirement, death or disability. The City has placed the plan assets into a trust for the exclusive benefit of plan participants and their beneficiaries. Accordingly, all plan assets have been excluded from the accompanying financial statements. During the year, the City contributed $643,006 to the plan.

Note 10 – Long-Term Liabilities
A. Governmental Activities
The following is a summary of changes in the City’s long-term liabilities for the fiscal year ended June 30, 2025:

Balance
July 1, 2024 Balance Due within Due in more
(as restated) Additions Deletions June 30, 2025 One Year than One Year Public offerings:

Refunding Lease Revenue Bonds:
2020A Series 10,685,000 $ - $ (840,000) $ 9,845,000 $ 880,000 $ 8,965,000 $ Unamortized premium 1,900,392 - (209,217) 1,691,175 209,217 1,481,958 Total public offerings - 12,585,392 (1,049,217) 11,536,175 1,089,217 10,446,958 Direct borrowings:

Refunding Lease Revenue Bonds:
2022A Series 13,524,685 - (1,140,757) 12,383,928 1,183,287 11,200,641 General Obligation Bonds:

Library 2019A Series 6,971,967 - (370,226) 6,601,741 381,960 6,219,781 Library 2019B Series 15,499,805 - (754,408) 14,745,397 778,864 13,966,533 Loan payable 485,844 - (95,188) 390,656 96,195 294,461
Santa Clara County Loan - 520,354 - 520,354 520,354 -
Subscription liabilities 706,018 1,279,456 (658,337) 1,327,137 602,764 724,373 Total direct borrowings: 1,799,810 37,188,319 (3,018,916) 35,969,213 3,563,424 32,405,789 Other long-term liabilities
Claims payable 10,443,280 1,642,617 (1,279,137) 10,806,760 2,203,169 8,603,591 Compensated absences 4,138,757 277,581 * 4,416,338 - 530,460 3,885,878 Total long-term liabilities $ 3,720,008 64,355,748 $ (5,347,270) $ 62,728,486 $ 7,386,270 $ 55,342,216 $ * The change in the compensated absences liability is presented as a net change.

Classification
Refunding Lease Revenue Bonds (LRBs) 2020A Series
On August 1, 2020, the Gilroy Public Facilities Financing Authority issued its Series 2020A Lease Revenue Refunding Bonds in the amount of $13,740,000. The bonds were issued at a premium of $2,719,825 which was deferred and will be amortized over the life of the bonds. The proceeds from the issuance were used to refund the outstanding Series 2010 Refunding LRBs and to pay the costs incurred in connection with the issuance of the 2020A bonds.

Interest on the bonds is payable semiannually at rate of 5% on May 1 and November 1 of each year commencing on November 1, 2020, and the Bonds mature on November 1, 2033. The principal balance of outstanding bonds at June 30, 2025 was $9,845,000.

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
76 Note 10 – Long-Term Liabilities (Continued)
A. Governmental Activities (Continued)
The annual debt service requirements to maturity for the Refunding Lease Revenue Bonds 2020A Series are as follows:

Year ending
June 30, Principal Interest Total
2026 880,000 $ 470,250 $ 1,350,250 $
2027 925,000 425,125 1,350,125
2028 1,000,000 377,000 1,377,000
2029 1,030,000 326,250 1,356,250
2030 1,085,000 273,375 1,358,375
2031-2034 4,925,000 507,875 5,432,875
Total 9,845,000 $ 2,379,875 $ 12,224,875 $
Lease Revenue Refunding Bonds (LRBs) 2022A Series
On December 12, 2022, the City refinanced its Lease Revenue Bonds 2013 Series by issuing Lease Revenue Refunding Bonds, 2022 Series in the amount of $14,587,831. The proceeds from the issue were used to redeem the 2013 Series. The refunding resulted in $2,567,275 saving in future debt service payment and an economic gain of $2,096,091.

Interest on the bonds is payable semiannually at rates ranging from 3.66% to 4.66% on May 1 and November 1 of each year commencing on May 1, 2023, and the Bonds mature on November 1, 2033. The principal balance of outstanding bonds at June 30, 2025 was $12,383,928.

The annual debt service requirements to maturity for the Refunding LRBs 2022 Series are as follows:

Year ending
June 30, Principal Interest Total
2026 1,183,287 $ 431,598 $ 1,614,885 $
2027 1,227,403 387,482 1,614,885
2028 1,273,163 341,722 1,614,885
2029 1,320,630 294,255 1,614,885
2030 1,369,866 245,019 1,614,885
2031-2034 6,009,579 449,961 6,459,540
Total 12,383,928 $ 2,150,037 $ 14,533,965 $
General Obligation Bonds (Gilroy Community Library Project) 2019 Refunding Bonds, Series A On June 26, 2019, the City issued General Obligation Refunding Bonds 2019 Series A through a private placement, in the amount of $8,633,538. The proceeds from the issue were used to currently refund the General Obligation Bonds Series 2009.

Interest on the bonds is payable semiannually at 3.12% on February 1 of each year commencing on February 1, 2020. The Bonds mature on February 1, 2039. The bonds are payable solely from ad valorem property taxes levied by the City and collected by the County. In the event of default, the principal of all Bonds may be declared due and payable upon the conditions. The principal balance of outstanding bonds at June 30, 2025 was $6,601,741.

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
77 Note 10 – Long-Term Liabilities (Continued)
A. Governmental Activities (Continued)
General Obligation Bonds (Gilroy Community Library Project) 2019 Refunding Bonds, Series A (Continued) The annual debt service requirements to maturity for the General Obligation Refunding Bonds, 2019 Series A are as follows:

Year ending
June 30, Principal Interest Total
2026 381,960 $ 205,974 $ 587,934 $
2027 394,066 194,057 588,123
2028 406,556 181,762 588,318
2029 419,442 169,078 588,520
2030 432,736 155,991 588,727
2031-2035 2,378,312 568,671 2,946,983
2036-2039 2,188,669 173,379 2,362,048
Total 6,601,741 $ 1,648,912 $ 8,250,653 $
General Obligation Bonds (Gilroy Community Library Project) 2019 Refunding Bonds, Series B On November 5, 2019, the City issued General Obligation Refunding Bonds 2019 Series B through a private placement, in the amount of $19,087,551. The proceeds from the issue were used to currently refund the General Obligation Bonds Series 2010.

Interest on the bonds is payable semiannually at a rate of 3.19% on February 1 of each year commencing on February 1, 2020. The Bonds mature on February 1, 2040. The bonds are payable solely from ad valorem property taxes levied by the City and collected by the County. In the event of default, the principal of all Bonds may be declared due and payable upon the conditions. The principal balance of outstanding bonds at June 30, 2025 was $14,745,397.

The annual debt service requirements to maturity for the General Obligation Refunding Bonds, 2019 Series B are as follows:

Year ending
June 30, Principal Interest Total
2026 778,864 $ 470,378 $ 1,249,242 $
2027 804,112 445,532 1,249,644
2028 830,179 419,881 1,250,060
2029 857,091 393,399 1,250,490
2030 884,875 366,057 1,250,932
2031-2035 4,873,709 1,388,122 6,261,831
2036-2040 5,716,567 558,706 6,275,273
Total 14,745,397 $ 4,042,075 $ 18,787,472 $

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
78 Note 10 – Long-Term Liabilities (Continued)
A. Governmental Activities (Continued)
Loan Payable
The City entered into a loan agreement with the California Energy Commission (CEC) to provide funds to install equipment for energy conservation. Under the original loan agreement the City was authorized to borrow up to $1,812,722 with interest at 1% per annum, semiannual payments to be paid commencing December following the year the project was completed. The City borrowed a total of $1,201,155 with semiannual payments of interest and principal of $49,931 with the first payment occurring on December 27, 2016. In the event of default, the City shall pay the remaining balance immediately. The final payment will be on June 22, 2029. The principal balance of outstanding at June 30, 2025 was $390,656.

The annual debt service requirements to maturity for the loan is as follows:

Year ending
June 30, Principal Interest Total
2026 96,195 $ 3,667 $ 99,862 $
2027 97,160 2,702 99,862
2028 98,130 1,732 99,862
2029 99,171 745 99,916
Total 390,656 $ 8,846 $ 399,502 $
Santa Clara County Loan
The City entered into a loan agreement (“agreement”) with County of Santa Clara on March 26, 2025 to fund the City’s property purchase and sell to qualified homebuyer under the Below Market Rate Partnership Program. In the agreement, the City was authorized to borrow $520,354 as a short-term acquisition loan to purchase homes which will subsequently be sold to eligible purchasers through the Program. The principal amounts are expected to be paid off by the year ended June 30, 2026. The property is recorded as property held for resale in the Home Special Revenue Fund.

Subscription payable
The City entered into subscription agreements with various vendors for software. The terms of the agreements are ranging from 12 months to 48 months. The calculated interest rates range from 0.00% to 3.2067%. As of June 30, 2025, the net capitalized right-to-use assets related to SBITAs were $1,795,042 and the total subscription liability was $1,327,137 of which $602,764 is reported as a current liability representing the amount due within the next fiscal year.

The future subscription payments are as follows:

Year ending
June 30, Principal Interest Total
2026 602,764 $ 30,310 $ 633,074 $
2027 270,239 18,242 288,481
2028 228,091 12,326 240,417
2029 226,043 6,247 232,290
Total 1,327,137 $ 67,125 $ 1,394,262 $

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
79 Note 10 – Long-Term Liabilities (Continued)
B. Business-Type Activities
Balance
July 1, 2024 Balance Due within Due in more
(as restated) Additions Deletions June 30, 2025 One Year than One Year Public offerings:
2021 Wastewater Revenue Bonds 46,355,000 $ - $ (755,000) $ 45,600,000 $ 785,000 $ 44,815,000 $ Unamortized premium 5,255,022 - (159,243) 5,095,779 - 5,095,779 Total public offerings - 51,610,022 (914,243) 50,695,779 785,000 49,910,779 Other long-term liabilities
Subscription liabilities - 24,721 (11,247) 13,474 13,474 - Compensated absences 534,950 10,072 * 136,255 545,022 408,767 Total long-term liabilities $ 34,793 52,144,972 $ (925,490) $ 51,254,275 $ 934,729 $ 50,319,546 $ * The change in the compensated absences liability is presented as a net change.

Classification
2021A Wastewater Revenue Bonds
On June 30, 2021, the Gilroy Public Facilities Financing Authority issued revenue bonds in the amount of $47,080,000. The bonds were issued to finance the City’s portion of certain improvements to the Authority’s treatment facility.

The bonds are payable from revenues consisting primarily of installment payments payable by the City under an installment purchase agreement. The obligation of the city to make installment payments is a special obligation of the City payable solely from and secured by a pledge of net wastewater revenues of the City’s wastewater system on a parity with the City’s obligation to pay installment payments that secure the 2010 Wastewater Revenue Bonds.

Interest on the bonds is payable at rates ranging from 3.0% to 4.0%. Principal payments range from $725,000 to $2,210,000 payable on August 1 of each year beginning in 2023 and maturing in 2057. The principal balance of outstanding bonds at June 30, 2025 was $45,600,000.

The annual debt service requirements (principal and interest) to maturity for the 2021A Wastewater Revenue Bonds are as follows:

Year ending
June 30, Principal Interest Total
2026 785,000 $ 1,458,600 $ 2,243,600 $
2027 815,000 1,426,600 2,241,600
2028 850,000 1,393,300 2,243,300
2029 885,000 1,358,600 2,243,600
2030 920,000 1,322,500 2,242,500
2031-2035 5,205,000 6,016,400 11,221,400
2036-2040 6,255,000 4,969,575 11,224,575
2041-2045 7,270,000 3,950,250 11,220,250
2046-2050 8,450,000 2,773,500 11,223,500
2051-2055 9,810,000 1,406,550 11,216,550
2056-2057 4,355,000 131,625 4,486,625
Total 45,600,000 $ 26,207,500 $ 71,807,500 $

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
80 Note 10 – Long-Term Liabilities (Continued)
B. Business-Type Activities (Continued)
Subscription payable
The City entered into subscription agreements with various vendors for software. The terms of the agreements are 12 months. The calculated interest rate is 2.0237%. As of June 30, 2025, the net capitalized right-to-use assets related to SBITAs were $15,447 and the total subscription liability was $13,474 which is due within the next fiscal year.

C. Debt without Government Commitment
Community Facilities District No. 2000-1, Highway 152, Special Tax Bonds In December 2002, Community Facilities District No. 2000-1 pursuant to Mello-Roos Community Facilities Act of 1982, issued $7,185,000 of Special Tax Bonds to finance the costs associated with the construction of public facilities for interchange improvements at State Highway 152 and U.S. Highway 101 and for widening and improving Highway 152.

In September 2006, Community Facilities District No. 2000-1 pursuant to Mello-Roos Community Facilities Act of 1982, issued $8,670,000 of Special Tax Bonds to finance the costs associated with the construction of public facilities for interchange improvements at State Highway 152 and U.S. Highway 101 and for the widening and improving Highway 152.

These bonds were refunded in July 2018 with proceeds from the issuance in a private placement of Community Facilities District No. 2000-1 (Highway 152) Special Tax Refunded Bonds, Series 2018 in the aggregate principal amount of $7,815,860. These bonds do not constitute a debt or obligation of the City because they are payable solely from the Special Tax revenue assessed on the underlying parcels. The City is not liable for repayment but acts as an agent for the property owners in collecting the assessments, forwarding the collections to bondholders, and initiating foreclosure proceedings, if appropriate. The outstanding principal balance as of June 30, 2025 was $3,713,003.

Note 11 – Defined Benefit Pension Plans (CalPERS)
A. General Information about the Pension Plans
Plan Descriptions
The City contribution to the California Public Employees Retirement System (“CalPERS”), an agent multiple employer defined benefit pension plan for miscellaneous employees and a cost-sharing multiple-employer defined benefit plan for safety employees. The Plans are part of the Public Agency portion of the California Public Employees Retirement System (CalPERS), an agent multiple-employer plan administered by CalPERS, which acts as a common investment and administrative agent for participating public employers within the State of California.

A menu of benefit provisions as well as other requirements are established by state statutes within the Public Employees’ Retirement Law.

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
81 Note 11 – Defined Benefit Pension Plans (CalPERS) (Continued) A. General Information about the Pension Plans (Continued) Plan Descriptions (Continued)
The City selects optional benefit provisions from the benefit menu by contract with CalPERS and adopts those benefits through City ordinance. CalPERS issues a separate annual comprehensive financial report. Copies of CalPERS’s annual financial report may be obtained from the https://www.calpers.ca.gov.

All full-time employees of the City are eligible to participate in the Plans. Part-time employees and temporary employees who work an average of 20 hours per week and over 1,000 hours per year are also eligible to participate.

Upon 5 years of service, miscellaneous employees and public safety employees who retire at or after age 50 are entitled to receive an annual retirement benefit.

The benefit is payable monthly for life, in an amount that varies from each Tier, of the employees’ single highest year’s salary for each year of credited service. The Plans also provide death and disability benefits.

In fiscal year 2020, the City established an irrevocable Section 115 trust with Public Agency Retirements Services (PARS) to set aside funds for pension liabilities. The City Council also adopted a related funding policy which notably direct to prepay the annual unfunded accrued liability payment and diverts an amount equal to the interest savings to the Section 115 Trust. In addition, at year-end, the policy requires an amount equal to up to 25% of the General Fund expenditure savings to be deposited to the Section 115 Trust. The City reserves the authority to review and amend the funding policy and the related investment strategy of the Trust to ensure both continue to meet the City’s goals. As of June 30, 2025, the balance of the PARS Pension Trust is $4,613,783.

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 to 62 with statutorily reduced benefits. For employees hired into a plan with the 1.5% at 65 formula, eligibility for service retirement is age 55 with at least five years of services. PEPRA miscellaneous members become eligible for service retirement upon attainment of age 52 with at least five years of service. All members are eligible for nonduty disability benefits after five 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. Safety members can receive a special death benefit if the member dies while actively employed and the death is job-related. Fire members may receive the alternate death benefit in lieu of the Basic Death Benefit or the 1957 Survivor Benefit if the member dies while actively employed and has at least 20 years of total CalPERS service. The cost-of-living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law.

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
82 Note 11 – Defined Benefit Pension Plans (CalPERS) (Continued) A. General Information about the Pension Plans (Continued) Benefits Provided (Continued)
The Plans’ provisions and benefits in effect at the measurement date of June 30, 2024 are summarized as follows:

Hire date
Prior to
January 1, 2013
On or after
January 1, 2013
Benefit formula 2.5% @ 55 2% @ 62
Benefit vesting schedule 5 years of service 5 years of service Benefit payments Monthly for life Monthly for life
Retirement age 50 52
Benefit per year of service, as a percentage of salary 2.0% to 3.0% 1.0% to 2.5% Required employee contribution rates 8.000% 7.000%
Required contribution during measurement period 12.440% 12.440% Hire Date
Prior to
January 5, 2011
Prior to
January 1, 2013
On or After
January 1, 2013
Benefit formula 3% @ 50 2% @ 50 2.7% @ 57
Benefit vesting schedule 3 years of service 3 years of service 3 years of service Benefit payments Monthly for life Monthly for life Monthly for life Retirement age 50-55 50-55 50-57
Benefit per year of service, as a percentage of salary 3.000% 2.00%-2.70% 2.00%-2.70% Required employee contribution rates 9.000% 9.000% 13.000% Required contribution during measurement period 21.670% 21.670% 21.670% Hire Date
Prior to
January 5, 2011
Prior to
January 1, 2013
On or After
January 1, 2013
Benefit formula 3% @ 55 2% @ 55 2% @ 57
Benefit vesting schedule 3 years of service 3 years of service 3 years of service Benefit payments Monthly for life Monthly for life Monthly for life Retirement age 50-55 50-55 50-57
Benefit per year of service, as a percentage of salary 2.4%-3.0% 1.426%-2.0% 1.426%-2.0% Required employee contribution rates 9.000% 7.000% 10.500% Required contribution during measurement period 21.670% 21.670% 21.670% Safety - Fire
Miscellaneous
Safety - Police
Employees Covered
At the valuation date of June 30, 2023, the following employees were covered by the benefit terms for all Plans:

Miscellaneous Safety
Active employees 137 100
Transferred and terminated employees 219 51
Retired Employees and Beneficiaries 259 163
Total 615 314

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
83 Note 11 – Defined Benefit Pension Plans (CalPERS) (Continued) A. General Information about the Pension Plans (Continued) Contributions
Section 20814(c) of the California Public Employees’ Retirement Law requires that 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. The total plan contributions are determined through CalPERS’s annual actuarial valuation process. 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. City contribution rates may change if plan contracts are amended. Payments made by the employer to satisfy contribution requirements that are identified by the pension plan terms as plan member contributions requirements are classified as plan member contributions.

B. Net Pension Liability
Actuarial Methods and Assumptions Used to Determine Total Pension Liability The June 30, 2023 valuation was rolled forward to determine the June 30, 2024 total pension liability, based on the following actuarial methods and assumptions:

Actuarial Cost Method
Actuarial Assumptions:

Discount Rate
Inflation
Salary Increases
Mortality Rate Table1
Post Retirement Benefit Increase
1 The mortality table used was developed based on CalPERS-specific data. The probabilities of mortality are based on the 2021 CalPERS Experience Study and Review of Actuarial Assumptions. Mortality rates incorporate full generational mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries. For more details on this table, please refer to the 2021 experience study report from November 2021 that can be found on the CalPERS website.

Derived using CalPERS’ membership data for all funds.

The lesser of contract COLA or 2.30% until Purchasing Power Protection. Allowance floor on purchasing power applies, 2.30% thereafter.

Entry Age Actuarial Cost Method

6.90%

2.30%
Varies by Entry Age and Service
Long-Term Expected Rate of Return
The long-term expected rate of return on pension plan investments was determined using a building-block method in which 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. Using historical returns of all of the funds’ asset classes, expected compound (geometric) returns were calculated over the next 20 years using a building-block approach. The expected rate of return was then adjusted to account for assumed administrative expenses of 10 Basis points.

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
84 Note 11 – Defined Benefit Pension Plans (CalPERS) (Continued) B. Net Pension Liability (Continued)
Long-Term Expected Rate of Return (Continued)
The expected real rates of return by asset class are as follows:

Current Target
Asset Class1 Allocation Real Return1 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%
1 An expected inflation of 2.30% used for this period.
2 Figures are based on the 2021 Asset Liability Management study.

Discount Rate
The discount rate used to measure the total pension liability 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.

Change in Discount Rate
There were no discount rate changes in 2024.

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
85 Note 11 – Defined Benefit Pension Plans (CalPERS) (Continued) C. Changes in the Net Pension Liability
The following table shows the changes in net pension liability for the City’s miscellaneous plan recognized over the measurement period.

Total Pension Plan Fiduciary Net Net Pension
Liability Position Liability/(Asset)
(a) (b) (c) = (a) - (b)
Balance at June 30, 2023 (Valuation Date) 136,671,753 $ 94,645,501 $ 42,026,252 $ Changes Recognized for the Measurement Period:

Service cost 2,456,253 - 2,456,253
Interest on the total pension liability 9,427,957 - 9,427,957 Changes of benefit terms - - -
Difference between expected and actual experience 2,715,977 - 2,715,977 Contributions from the employer - 4,753,498 (4,753,498) Contributions from employees - 1,155,717 (1,155,717)
Net investment income - 9,049,173 (9,049,173)
Benefit payments, including refunds of employee
contributions (7,957,586) (7,957,586) -
Administrative expenses - (77,013) 77,013
Net changes during July 1, 2023 to June 30, 2024 6,642,601 6,923,789 (281,188) Balance at June 30, 2024 (Measurement Date) 143,314,354 $ 101,569,290 $ 41,745,064 $ Miscellaneous Plan
Increase (Decrease)
Proportionate Share of Net Pension Liability and Pension Expense The following table shows the City’s Safety Plan’s proportionate share of the risk pool collective net pension liability over the measurement period.

Total Pension Plan Fiduciary Net Net Pension
Liability Position Liability
(a) (b) (c) = (a) - (b)
Balance at June 30, 2023 (Valuation Date) 213,232,532 $ 146,612,430 $ 66,620,102 $ Balance at June 30, 2024 (Measurement Date) 223,241,125 157,996,149 65,244,976 Net changes during July 1, 2023 to June 30, 2024 (10,008,593) (11,383,719) 1,375,126 Safety
Increase (Decrease)
The following is the approach established by the plan actuary to allocate the net pension liability and pension expense to the individual employers within the risk pool. (1) In determining a cost-sharing plan’s proportionate share, CalPERS’ staff calculated the total amounts of liabilities and assets for the risk pool on the valuation date (June 30, 2023). The risk pool’s fiduciary net position (FNP) subtracted from its total pension liability (TPL) determines the net pension liability (NPL) at the valuation date.

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
86 Note 11 – Defined Benefit Pension Plans (CalPERS) (Continued) C. Changes in the Net Pension Liability (Continued)
Proportionate Share of Net Pension Liability and Pension Expense (Continued) (2) Using standard actuarial roll-forward methods, the staff then calculated the risk-pool TPL at the measurement date (June 30, 2024). The staff then subtracted the risk-pool FNP at the measurement date from this number to determine the NPL for the risk pool at the measurement date. For purposes of FNP in this step and any later reference thereto, the risk pool’s FNP at the measurement date denotes the aggregate risk pool’s FNP at June 30 2024, less the sum of all additional side fund (or unfunded liability) contributions made by all employers during the measurement period (2023-2024).
(3) The individual plan's TPL, FNP and NPL are also calculated at the valuation date. TPL is allocated based on the rate plan's share of the actuarial accrued liability. FNP is allocated based on the rate plan's share of market value assets.
(4) Two ratios are created by dividing the plan's individual TPL and FNP as of the valuation date from (3) by ,the amounts in step (I), the risk pool's total TPL and FNP, respectively. (5) The plan's TPL as of the Measurement Date is equal to the risk pool TPL generated in (2) multiplied by the TPL ratio generated in (4). The plan's FNP as of the Measurement Date is equal to the FNP generated in (2) multiplied by the FNP ratio generated in (4) plus any additional side fund (or unfunded liability) contributions made by the employer on behalf of the plan during the measurement period. (6) The plan’s NPL at the Measurement Date is the difference between the TPL and FNP calculated in (5).

Deferred outflows of resources, deferred inflows of resources, and pension expense are allocated based on the City’s share of net pension liability at the end of measurement date.

Safety
Proportion — June 30, 2023 0.53401%
Proportion — June 30, 2024 0.53799%
Change — Increase/(Decrease) 0.00398%
Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the net pension liability of the City for all Plans, calculated using the discount rate for each Plan, as well as what the City’s net pension liability would be if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate:

Discount Rate Current Discount Discount Rate
- 1% (5.90%) Rate (6.90%) + 1% (7.90%)
Miscellaneous Plan $ 41,745,064 59,394,957 $ 27,096,423 $ Safety Plan $ 65,244,976 95,739,500 $ 40,304,743 $
Plan's Net Pension Liability/(Asset)
D. Pension Expense and Deferred Outflows/Inflows of Resources Related to Pensions For the year ended June 30, 2025, the City recognized pension expense in the amounts of $6,377,123 and $28,690,193 for the miscellaneous plan and safety plan, respectively.

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
87 Note 11 – Defined Benefit Pension Plans (CalPERS) (Continued) D. Pension Expense and Deferred Outflows/Inflows of Resources Related to Pensions (Continued) As of measurement date of June 30, 2024, the City has deferred outflows and deferred inflows of resources related to pensions as follows:

Deferred Outflows Deferred Inflows
of Resources of Resources
Contributions made after the measurement date 5,357,547 $ - $ Difference between expected and actual experience 1,856,380 - Net difference between projected and actual earning on
pension plan investments 1,433,535 -
Total 8,647,462 $ - $
Miscellaneous Plan
Deferred Outflows Deferred Inflows
of Resources of Resources
Contributions made after the measurement date 8,831,986 $ - $ Change in assumptions 1,607,502 -
Difference between expected and actual experience 5,324,570 (173,125) Differences between Actual Contributions vs.

Proportionate Share of Contributions 4,008,486 -
Change in Employer Proportion 20,820,110 (775,622)
Net difference between projected and actual earnings
on pension plan investments 3,153,645 -
Total 43,746,299 $ (948,747) $
Safety Plan
The expected average remaining service lifetime (“EARSL”) is calculated by dividing the total future service years by the total number of plan participants (active, inactive, and retired). The EARSL for the miscellaneous plan and the safety risk pool for the 2023-24 measurement period is 2.5 and 3.8 years, which was obtained by dividing the total service years of 1,534 and 630,177 (the sum of remaining service lifetimes of the active employees) by 615 and 166,163 (the total number of participants: active, inactive, and retired), respectively.

The $5,357,547 reported in the Miscellaneous Plans and $8,831,986 reported in the Safety Plans as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability and collection of net pension liability in the measurement period ending June 30, 2025. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows:

Measurement
Period Miscellaneous Safety
Ending June 30 Plan Plan
2025 1,193,207 $ 17,586,483 $
2026 3,029,320 17,240,011
2027 (412,631) 218,107
2028 (519,981) (1,079,035)
Thereafter - -
$ 33,965,566 3,289,915 $
of Resources
Deferred Outflows/(Inflows)

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
88 Note 12 – Other Postemployment Benefits (OPEB)
Plan Description
The City administers a single-employer defined-benefit post-employment healthcare plan (the Plan). Dependents are eligible to enroll, and benefits continue to surviving spouses. For all retirees under the plan, the City contributes the PEMHCA minimum contribution on the unequal method for eligible retirees and surviving spouses. The PEMHCA minimum amount is $151 in 2023 and $157 in 2024. No dental, vision or life insurance benefits are provided. During Fiscal Year 2025 the City established a Section 115 Trust to pre-fund its OPEB liabilities, with a one-time contribution of $500,000 to the trust from the General Fund. In addition, the City adopted a funding policy which diverts 25% of the annual General Fund expenditure savings to the Trust.

Benefits Provided
Employees are eligible for lifetime retiree health benefits. The earliest service retirement eligibility requirements under CalPERS are as follows: hired before January 1, 2013, age 50 with 5 years of CalPERS service, or hired on/after 1/1/2013, age 52 with 5 years of CalPERS service. Employees are allowed to elect spousal coverage at retirement.

Retiree medical coverage continues to surviving spouses at the death of retirees as long as the required contributions are made and the retiree elects for the surviving spouse to continue receiving benefits. There is no surviving spouse coverage at the death of active employees. Retirees contribute the portion of premium rates not covered by the employer subsidy. The employer contributes the PEMHCA minimum amount. In addition to the PEMHCA minimum amount, the City has a Retention/Recognition Incentive Benefit (RRIB) program where the City provides $15 per month per City years of service up to a cap, until age 65. The cap varies by employee group and hire date. The amount of Cityprovided contribution is the same regardless of the retiree’s dependent coverage and health plan choice.

Employees Covered
At June 30, 2023, Valuation date, the following current and former employees were covered by the benefit terms under the plan:

Active employees 243
Inactives, spouses, or beneficiaries currently receiving benefit payments 135 Total 378
Actuarial Assumptions and Other Inputs
The total OPEB liability in the June 30, 2023 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement, unless otherwise specified:

Measurement Date: June 30, 2024
Discount Rate 4.09%
Inflation 2.30%
Healthcare Cost Trend Rates
Pre-Medicare 6.80% *
Medicare 4.17% *
Salary Increases 2.80% **
Mortality Rates Based on CalPERS Tables
*Trending down to 4.14% over 51 years. Applies to calendar years. **Additional merit-based increases based on CalPERS merit salary increase tables.

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
89 Note 12 – Other Postemployment Benefits (OPEB) (Continued) Actuarial Assumptions and Other Inputs (Continued)
 Projections of the sharing of benefit-related costs are based on an established pattern of practice.  Experience studies come from the CalPERS Pension Assumption Model, effective November 17, 2021.  Inactive employees (retirees) pay the cost of benefits in excess of the City's contribution.  There were no ad hoc postemployment benefit changes (including ad hoc COLAs) to the plan.  There were no changes between the measurement date and the report date that are expected to have a significant effect on the net OPEB liability.

Discount Rate
The discount rate used to measure the total OPEB liability is 4.09%. The City's OPEB Plan is an unfunded plan, therefore the discount rate was set to the rate of tax-exempt, high-quality 20-year municipal bonds, as of the valuation date.

Change of Assumptions
Discount rate was updated from 3.86% to 4.09%. The healthcare treads and other assumptions were also updated.

Changes in total OPEB Liability
The change in total OPEB liability are as follows:

Total OPEB
Liability
Balance at June 30, 2023 (Measurement Date) 15,680,451 $ Changes Recognized for the Measurement Period:

Service Cost 907,244
Interest on the total OPEB liability 624,849
Difference between expected and actual experience (6,796) Changes of assumptions (378,243)
Benefit payments (371,889)
Implicit Subsidy Credit (427,938)
Net Changes during July 1, 2023 to June 30, 2024 347,227 Balance at June 30, 2024 (Measurement Date) 16,027,678 $ Sensitivity of the Total OPEB Liability to Changes in the Discount Rate Sensitivity of the total OPEB liability to changes in the discount rate. The total OPEB liability of the City, as well as what the City's total OPEB liability would be if it were calculated using a discount rate that is one percentage point lower (3.09%) or one percentage point higher (5.09%) follows:

Discount Rate - 1% Current Discount Discount Rate + 1%
Rate (3.09%) Rate (4.09%) Rate (5.09%)
$ 16,027,678 17,780,565 $ 14,532,653 $
Plan's Total OPEB Liability

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
90 Note 12 – Other Postemployment Benefits (OPEB) (Continued) Sensitivity of the Total OPEB Liability to Changes in the Discount Rate (Continued) Sensitivity of the total OPEB liability to changes in the healthcare cost trend rates. The healthcare trend for this valuation started at 6.80% and decreased to 4.14% over 51 years. The total OPEB liability of the City, as well as what the City's total OPEB liability would be if it were calculated using healthcare cost trend rates that are one percentage point lower (5.80%) or one percentage point higher (7.80%) than current healthcare cost trend rates follows:

Healthcare Cost Trend
Rates (5.8%)
Healthcare Cost Trend
Rates (6.8%)
Healthcare Cost Trend
Rates (7.8%)
$ 16,027,678 15,097,036 $ 17,121,478 $
Plan's Total OPEB Liability
OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB For the year ended June 30, 2025, the City recognized OPEB expense of $771,949. At June 30, 2025, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

Deferred Outflows Deferred Inflows
of Resources of Resources
Difference between expected and actual experience 1,063,299 $ (782,532) $ Changes in assumptions 1,023,266 (3,471,735)
Employer contributions made
subsequent to the measurement date 835,226 -
Total 2,921,791 $ (4,254,267) $
The $835,226 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 year ending June 30, 2026.

Amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in OPEB expense as follows:

Year end Deferred Outflows/
Ended June 30 (Inflows) of Resources
2026 (677,096) $
2027 (532,637)
2028 (940,554)
2029 12,066
2030 12,066
Thereafter (41,547)
$ (2,167,702)

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
91 Note 12 – Other Postemployment Benefits (Continued)
Expected Average Remaining Service Lives (EARSL)
The effects on the total OPEB liability of (1) changes of economic and demographic assumptions or of other inputs and (2) differences between expected and actual experience are required to be included in the OPEB expense in a systematic and rational manner over a closed period equal to the average of the expected remaining service lives of all employees that are provided with benefits through the OPEB plan (active employees and inactive employees), beginning in the current period. The expected average remaining service lives (EARSL) for the current period follows.

Note, however, that for calculation purposes, we use 1 when calculating amortizations if the EARSL is less than 1 year.

EARSL is 7.7 years for the measurement period ended June 30, 2024.

Note 13 – Claims Payable
The workers’ compensation and general liability claims administrators have estimated liabilities for probable future payments relating to claims outstanding as of June 30, 2025 in the following amounts which are recorded in separate internal service funds:

Worker' compensation claims 8,061,000 $
General liability claims 2,745,760
Total claims payable 10,806,760 $
Although the eventual outcome of these claims is uncertain, in the opinion of management, the resolution of these matters is not expected to have a material adverse effect on the financial condition of the City, beyond the provision for losses reflected in the recorded claims payable liabilities.

Changes in claims payable for workers’ compensation for the past three fiscal years are as follows:

Current Year Amounts
Beginning Claims and End Amounts Due in
of Year Changes in Claim of Year Due within more than
Workers' Compensation Liability Estimates Payments Liability One Year One Year 2022-2023 6,669,000 $ 481,389 $ (787,389) $ 6,363,000 $ 965,000 $ 5,398,000 $ 2023-2024 6,363,000 2,427,085 (1,082,085) 7,708,000 1,254,000 6,454,000 2024-2025 7,708,000 1,409,161 (1,056,161) 8,061,000 1,341,000 6,720,000 Changes in claims payable for general liability for the past three fiscal years are as follows:

Current Year Amounts
Beginning Claims and End Amounts Due in
of Year Changes in Claim of Year Due within more than
General Liability Liability Estimates Payments Liability One Year One Year 2022-2023 2,022,284 $ 384,127 $ (122,491) $ 2,283,920 $ 717,152 $ 1,566,768 $ 2023-2024 2,283,920 582,441 (131,081) 2,735,280 858,879 1,876,401 2024-2025 2,735,280 233,456 (222,976) 2,745,760 862,169 1,883,591

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
92 Note 13 – Claims Payable (Continued)
Bodily injury, property damage and public officials’ errors and omissions insurance is provided via participation in a joint power’s authority. Effective July 1, 2015, the City is a member of the Municipal Pooling Authority (MPA), a joint powers authority established pursuant to California Government Code Sections 990.4-990.8 and 6500, et seq. The pool has 21 member cities. The City is insured by the MPA for up to $29,000,000 per claim for liability coverage, including $28,000,000 provided by an excess policy with the California Affiliated Risk Management Authority, after a deductible of $50,000 which is paid by the City. Premiums paid by the participating members may be retrospectively increased or decreased to reflect the actual operating costs of MPA and the City’s share of incurred losses. The City is contingently liable for assessments which may be made by MPA in the event that MPA has insufficient resources to pay unexpectedly large claims.

The City is self-insured for the first $500,000 of each workers’ compensation claim. The City belongs to the Local Agency Workers’ Compensation Excess (LAWCX) joint powers authority, established pursuant to California Government Code Sections 990.4-990.8 and 6500 et seq., for the purpose of workers’ compensation excess coverage.

LAWCX coverage is for individual workers’ compensation claims in excess of $500,000 up to $5,000,000. In addition, additional excess coverage beyond $5,000,000 is purchased via California State Association of Counties Excess Insurance Authority (CSAC EIA) bringing statutory coverage to $50,000,000.

Note 14 – Commitments and Contingencies
The City had the following commitments outstanding as of June 30, 2025:

Name of Project
Outstanding
Amount
FY25 Citywide Pavement Rehabilitation Project 7,127,763 $ Miscellaneous Capital Projects and Services 869,524
Fleet Replacement and Repairs 574,292
Public Works Contractual Services, Equipment and Supplies 558,711 Joint Sewer Trunk with Morgan Hill Repairs 473,225
Community Development Contractual Services 463,366
Vehicle Miles Traveled and Green House Gas Reduction Program 431,754 Type III Fire Engine 415,673
Water Utility Improvements Design 396,737
McCarthy Well Project Design and Engineering 362,277
IT Contractual Services, Equipment and Supplies 348,325 Civic Center Master Plan Architectural Design 318,647
Other Projects 2,503,521
Total $ 14,843,813
Grant Programs
Under the terms of federal, county, and state grants, periodic audits are required, and certain costs may be questioned as not appropriate expenditures under the terms of the grants. Such audits could lead to reimbursements to the grantor agencies. If expenditures were disallowed, the City believes such disallowances, if any, would be immaterial.

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
93 Note 14 – Commitments and Contingencies (Continued)
Litigations
The City is a defendant in certain legal claims and actions arising from the normal course of operations. In the opinion of management and legal counsel, such claims and actions will not have a material adverse effect on the City’s financial position.

Gilroy Garlic Festival
On July 28, 2019, the Gilroy Garlic Festival, held at Christmas Hill Park, was the site of an unexpected and random shooting. The gunman killed himself, three others and wounded 17 people. The City of Gilroy is a named party in litigation along with the Gilroy Garlic Festival Association, the organization responsible for organizing the festival. The city issued a special event permit for the festival which was held at a city-owned park and transferred risk to the Association under their insurance policy. Currently, the Gilroy Garlic Festival Association’s insurance is covering all legal costs. The City of Gilroy was granted a Motion for Summary Judgment in the Towner et al v. Gilroy Garlic Festival Association, et al. case. However, Towner plaintiffs have appealed. The Salazar and Henderson cases are on hold and will trail the Towner case. To date the arguments have been the same. Until these cases are fully resolved, the City may incur additional financial impacts because of this event. Currently, the extent of those impacts is unknown.

Note 15 – Net Investment in Capital Assets
The following is the calculation of net investment in capital assets at June 30, 2025:

Governmental Business-Type
Activities Activities DCU
Capital assets, net of accumulated depreciation and amortization $ 81,553,429 209,410,781 $ 157,050,148 $ Unspent bond proceeds 7,544,461 - -
Less: Accounts payable related to capital assets - - (556,581) Less: deferred gain on refunding - (416,686) -
Less: outstanding principal on capital related debts (45,600,000) (43,966,722) - Less: subscription liabilities (13,474) (1,327,137) -
Less: bond premium (5,095,779) (1,691,175) -
Less: retention payable - (45,622) (6,876,006)
Net investment in capital assets 161,963,439 $ 38,388,637 $ 149,617,561 Minority interest share in net investment in capital assets 62,689,758 City share in net investment in capital assets $ 86,927,803

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
94 Note 16 – Classification of Fund Balances
The City classifies fund balances, as shown on the Balance Sheet – Governmental Funds, as follows as of June 30, 2025:

Public Facilities Nonmajor
General Impact Capital Governmental
Fund Projects Fund Funds Total
Nonspendable:

Prepaid items 111,832 $ - $ - $ 111,832 $
Permenant funds - - 50,000 50,000
Subtotal 111,832 - 50,000 161,832
Restricted:

Gilroy community libruary capital projects - - 5,902,001 5,902,001 PARS 5,669,222 - - 5,669,222
Public safety - - 913,361 913,361
Street maintenance - - 10,302,879 10,302,879
CDBG Grant programs - - 536,717 536,717
Housing - - 5,178,675 5,178,675
Traffic impact - - 18,405,858 18,405,858
Storm drains - - 2,380,005 2,380,005
Landscaping maintenance - - 2,149,322 2,149,322
Debt service - - 2,272,355 2,272,355
City poor assistance - - 712 712
Glen Loma Fire Station - - 3,589,243 3,589,243
Opioid Settlement - - 203,715 203,715
BEGIN program - - 1,591,383 1,591,383
Subtotal 5,669,222 - 53,426,226 59,095,448
Committed:

Economic stability reserve 7,229,465 - - 7,229,465
Subtotal 7,229,465 - - 7,229,465
Assigned:

Stormwater Management - - 855,570 855,570
Capital projects - - 6,184,112 6,184,112
Subtotal - - 7,039,682 7,039,682
Unassigned (deficit) 28,001,153 (2,300,953) (853,452) 24,846,748 Total 41,011,672 $ (2,300,953) $ 59,662,456 $ 98,373,175 $ General Fund Balance Policy
The City’s general fund reserve policy consists of an unrestricted General Fund Reserve of 20% of general fund expenditures and an Economic Stability Reserve of 10% of general fund expenditures. The Economic Stability Reserve would only be used in extraordinary circumstances, upon satisfaction of one of the following “economic triggers” and with the majority vote of the City Council: (i) state take-away of significant revenue; (ii) large drop in property taxes (decrease in assessed valuations), (iii) major business closures (sales tax and/or utility users’ tax impact); (iv) dramatic drop in development from projections; (v) large unexpected drop in sales taxes (or other primary revenues - utility users’ tax, franchise fees or transient occupancy tax) due to severe recession or (vi) the economic triggers cause the General Fund Reserve to fall below a predetermined percentage of expenditures (e.g. 20%). In the event the Economic Stability Reserve is used, the City is obligated to replenish the reserve by the end of the next biennial budget to 10% of the general fund expenditures for the given year.

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
95 Note 17 – Tax Abatement
GASB Statement No. 77 defines a tax abatement as resulting from an agreement between a government and an individual or entity in which the government promises to forgo tax revenues and the individual or entity promises to subsequently take a specific action that contributes to economic development or otherwise benefits the government or its citizens. According to the GASB 77, the substance of these agreements meets the definition of “tax abatements” as the revenues received were not available for general municipal services purposes, but rather used to effectively reduce the net tax liability of certain taxpayers per the conditions of an agreement.

The County of Santa Clara has identified two programs, the Williamson Act and the Mills Act, that would affect taxing entity’s share of the 1% ad valorem tax (property tax), including the City of Gilroy. The Williamson Act enables the County to enter into contracts with private landowners for restricting specific parcels of land to agricultural or related open space use. In return, landowners receive property tax assessments which are much lower than normal because they are based upon farming and open space uses as opposed to full market value. The Mills Act, enables the County to enter into contracts with owners of qualified historic properties who actively participate in the restoration and maintenance of their history properties in exchange for receiving property tax relief. For the fiscal year ended June 30, 2025, Gilroy’s share of the abated 1% Ad Valorum Tax is $15,117.

Note 18 – Restatement of Beginning Net Positions and Fund Balances June 30, 2024 Change to or within
As Previously the Financial Reporting Change in Accounting June 30, 2024 Reported Entity (a) Principle (b) Restatement (c) As Restated Government-Wide
Governmental Activities 203,351,257 $ (24,480,542) $ (2,009,654) $ 441,457 $ 177,302,518 $ Business-Type Activities 188,530,809 24,480,542 (224,963) - 212,786,388 Total primary government $ - 391,882,066 $ (2,234,617) $ 441,457 $ 390,088,906 $ Governmental Funds:

Nonmajor Funds $ (24,480,542) 76,200,446 $ - $ 441,457 $ 52,161,361 $ Enterprise Funds:

Sewer Fund 107,216,668 $ 17,322,623 $ (75,481) $ - $ 124,463,810 $ Water Fund 81,314,141 7,157,919 (149,482) - 88,322,578
Total Enterprise Funds $ 24,480,542 188,530,809 $ (224,963) $ - $ 212,786,388 $ Internal Service Funds 16,527,012 $ - $ (89,331) $ - $ 16,437,681 $ Discrete Component Unit (DCU) 166,801,638 $ - $ (11,176) $ - $ 166,790,462 $ (a) Change to or within the Financial Reporting Entity
Water and sewer development capital projects fund were previously reported as governmental funds, but changed to be part of water enterprise funds and sewer enterprise funds, respectively.

The Building Equity and Growth in Neighborhoods Special Revenue Funds were previously reported as part of CDBG fund, but changed to be a stand-alone fund in the nonmajor governmental fund.

City of Gilroy
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
96 Note 18 – Restatement of Beginning Net Positions and Fund Balances (Continued) (b) Implementation of GASB Statement No. 101, Compensated Absences Effective for the fiscal year ended June 30, 2025, the City implemented GASB Statement No. 101, Compensated Absences. This statement establishes accounting and financial reporting standards for compensated absences, including vacation, sick leave, and other paid time off. The implementation of GASB 101 resulted in a change in accounting principle, and prior year amounts have been restated accordingly.

Under GASB 101, a liability must be recognized for leave that is attributable to services already rendered, accumulates and carries forward to future periods, and is more likely than not to be used or paid. This represents a shift from previous guidance, particularly in how likelihood and eligibility are assessed. The effect of the restatement is as shown above.
(c) Restatement
The CalHome Special Revenue Fund beginning fund balance was restated to report $441,457 loan receivables, which was not recorded previously.

REQUIRED SUPPLEMENTARY INFORMATION
(UNAUDITED)
97

Measurement period 2023-24 2022-23 2021-22 2020-21 2019-20 Total pension liability
Service cost 2,456,253 $ 2,461,943 $ 2,240,104 $ 2,545,114 $ 2,360,748 $ Interest 9,427,957 8,985,681 8,651,774 8,496,663 8,220,201 Changes of benefit terms - 161,741 - - -
Changes of assumptions - - 3,774,056 - -
Differences between expected and actual experience 2,715,977 982,778 (1,151,738) (176,531) 670,381 Benefit payments, including refunds of employee
contributions (7,544,337) (7,957,586) (7,071,816) (6,844,176) (6,415,856) Net change in total pension liability 5,047,806 6,642,601 6,442,380 4,021,070 4,835,474 Total pension liability - beginning 131,623,947 136,671,753 125,181,567 121,160,497 116,325,023 Total pension liability - ending (a) $ 136,671,753 143,314,354 $ 131,623,947 $ 125,181,567 $ 121,160,497 $ Pension fiduciary net position
Contributions - employer 4,753,498 $ 4,453,771 $ 4,103,355 $ 3,772,061 $ 3,645,000 $ Contributions - employee 1,155,717 990,195 923,404 914,541 1,076,549 Net investment income 9,049,173 5,668,582 (7,616,929) 18,954,052 4,099,977 Benefit payments, including refunds of employee
contributions (7,544,337) (7,957,586) (7,071,816) (6,844,176) (6,415,856) Plan to plan resource movement - - - - 1,029
Administrative expense (77,013) (67,023) (62,835) (84,067) (115,410) Other Miscellaneous Income/(Expense)1 - - - - -
Net change in plan fiduciary net position 3,501,188 6,923,789 (9,724,821) 16,712,411 2,291,289 Plan fiduciary net position - beginning2 91,144,313 94,645,501 100,869,134 84,156,723 81,865,434 Plan fiduciary net position - ending (b) $ 94,645,501 101,569,290 $ 91,144,313 $ 100,869,134 $ 84,156,723 $ Plan net pension liability - ending (a) - (b) $ 42,026,252 41,745,064 $ 40,479,634 $ 24,312,433 $ 37,003,774 $ Plan fiduciary net position as a percentage 70.87% 69.25% 69.25% 80.58% 69.46% of the total pension liability
Covered payroll3 $ 12,876,271 13,191,475 $ 11,194,925 $ 14,371,056 $ 13,093,445 $ Plan net pension liability as a percentage of covered
payroll 316.45% 326.39% 361.59% 169.18% 282.61%
Notes to Schedule:

Required Supplementary Information (Unaudited)
Schedule of Changes in the Net Pension Liability and Related Ratios For the Year Ended June 30, 2025
Last Ten Fiscal Years
1 During Fiscal Year 2017-18, as a result of Governmental Accounting Standards Board Statement (GASB) No. 75, Accounting and Financial Reporting for Postemployment Benefit Plans Other than Pensions (GASB 75), CalPERS reported its proportionate share of activity related to postemployment benefits for participation in the State of California’s agent OPEB plan. Accordingly, CalPERS recorded a one-time expense as a result of the adoption of GASB 75.

Additionally, CalPERS employees participate in various State of California agent pension plans and during Fiscal Year 2017-18, CalPERS recorded a correction to previously reported financial statements to properly reflect its proportionate share of activity related to pensions in accordance with GASB Statement No. 68, Accounting and Financial Reporting for Pensions (GASB 68).

California Public Employees' Retirement System Defined Pension Plan - Miscellaneous Plan 2 Includes any beginning of year adjustment.

Changes of Benefit Terms: The figures above generally include any liability impact that may have resulted from voluntary benefit changes that occurred on or before the Measurement Date.

However, offers of Two Years Additional Service Credit (a.k.a. Golden Handshakes) that occurred after the Valuation Date are not included in the figures above, unless the liability impact is deemed to be material by the plan actuary.
3 Includes one year’s payroll growth using 2.80% payroll growth assumption for fiscal years ended in 2022 through 2024; 2.75% payroll growth assumption for fiscal years ended in 2018 through 2021; 3.00% payroll growth assumption for fiscal years ended in 2014 through 2017.

City of Gilroy
98

Measurement period 2018-19 2017-18 2016-17 2015-16 2014-15 Total pension liability
Service cost 2,218,281 $ 2,107,888 $ 2,119,709 $ 1,974,107 $ 1,914,477 $ Interest 7,888,537 7,397,421 7,057,333 6,992,371 6,720,915 Changes of benefit terms - - - - -
Changes of assumptions - (870,201) 5,558,063 - (1,563,145) Differences between expected and actual experience 3,067,906 1,618,519 (2,724,046) (878,722) 67,994 Benefit payments, including refunds of employee
contributions (5,515,662) (6,003,668) (4,810,256) (4,335,513) (4,140,599) Net change in total pension liability 4,737,965 7,171,056 7,200,803 3,752,243 2,999,642 Total pension liability - beginning 104,416,002 109,153,967 97,215,199 93,462,956 90,463,314 Total pension liability - ending (a) $ 109,153,967 116,325,023 $ 104,416,002 $ 97,215,199 $ 93,462,956 $ Pension fiduciary net position
Contributions - employer 3,254,181 $ 2,796,490 $ 2,535,645 $ 2,448,744 $ 2,236,836 $ Contributions - employee 992,926 1,003,145 888,342 895,816 894,531 Net investment income 5,226,520 6,275,073 7,621,577 355,337 1,523,463 Benefit payments, including refunds of employee
contributions (5,515,662) (6,003,668) (4,810,256) (4,335,513) (4,140,599) Plan to plan resource movement - (182) - - -
Administrative expense (55,985) (115,667) (100,535) (41,912) (77,393) Other Miscellaneous Income/(Expense)1 (219,654) 182 - - - Net change in plan fiduciary net position 4,223,543 3,414,156 6,134,773 (677,528) 436,838 Plan fiduciary net position - beginning2 74,227,735 78,451,278 68,092,962 68,770,490 68,333,652 Plan fiduciary net position - ending (b) $ 78,451,278 81,865,434 $ 74,227,735 $ 68,092,962 $ 68,770,490 $ Plan net pension liability - ending (a) - (b) $ 30,702,689 34,459,589 $ 30,188,267 $ 29,122,237 $ 24,692,466 $ Plan fiduciary net position as a percentage 70.38% 71.87% 71.09% 70.04% 73.58% of the total pension liability
Covered payroll3 $ 11,457,160 12,003,033 $ 10,902,171 $ 11,189,178 $ 10,920,524 $ Plan net pension liability as a percentage of covered
payroll 287.09% 267.98% 276.90% 260.27% 226.11%
City of Gilroy
Required Supplementary Information (Unaudited)
Schedule of Changes in the Net Pension Liability and Related Ratios (Continued) For the Year Ended June 30, 2025
Last Ten Fiscal Years
California Public Employees' Retirement System Defined Pension Plan - Miscellaneous Plan 99

Fiscal Year End 1 2024-25 2023-24 2022-23 2021-22 2020-21 Actuarially determined contribution2 $ 4,753,498 5,357,547 $ 4,453,771 $ 4,103,555 $ 3,772,061 $ Contributions in relation to the actuarially
determined contribution2 (4,753,498) (5,357,547) (4,453,771) (4,103,555) (3,772,061) Contribution deficiency (excess) - $ - $ - $ - $ - $
Covered payroll3 $ 13,191,475 13,560,836 $ 12,876,271 $ 11,194,925 $ 14,371,056 $ Contributions as a percentage of covered payroll 3 39.51% 36.03% 34.59% 36.66% 26.25% Notes to Schedule:

Methods and assumptions used to determine contribution rates:

Actuarial cost method Entry Age Normal Cost Method
Amortization method For details, see June 30, 2022 Funding Valuation Report Asset valuation method Fair Value of Assets. For details, see June 30, 2022 Funding Valuation Report Inflation
Salary increases Varies by entry age and service
Payroll Growth
Investment rate of return
Retirement age
Mortality

6.80% net of pension plan investment and administrative expenses; includes inflation.

The probabilities of retirement are based on the 2021 CalPERS Experience Study and Review of Actuarial Assumptions.

The probabilities of mortality are based on the 2021 CalPERS Experience Study and Review of Actuarial Assumptions. Mortality rates incorporate full generational mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries.

The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2024-25 were derived from the June 30, 2022 funding valuation report.

2.30%

2.80%
3 Includes one year’s payroll growth using 2.80% payroll growth assumption for fiscal years ended in 2022 through 2025; 2.75% payroll growth assumption for fiscal years ended in 2018 through 2021; 3.00% payroll growth assumption for fiscal years ended in 2014 through 2017. 2 Employers are assumed to make contributions equal to the actuarially determined contributions. However, some employers may choose to make additional contributions towards their unfunded liability. Employer contributions for such plans exceed the actuarially determined contributions.

City of Gilroy
Required Supplementary Information (Unaudited)
Schedule of Plan Contributions - Pensions
For the Year Ended June 30, 2025
Last Ten Fiscal Years
California Public Employees' Retirement System Defined Pension Plan - Miscellaneous 1 As prescribed in GASB 68, paragraph 46, the information presented in the Schedule of Plan Contributions should also be presented as of the employer’s most recent fiscal year-end. The employer is responsible for determining this information as prescribed by the standard as this data is not available to CalPERS. 100

Fiscal Year End 1 2019-20 2018-19 2017-18 2016-17 2015-16 Actuarially determined contribution2 $ 3,254,181 3,645,000 $ 2,796,490 $ 2,535,645 $ 2,448,744 $ Contributions in relation to the actuarially
determined contribution2 (3,254,181) (3,645,000) (2,796,490) (2,535,645) (2,448,744) Contribution deficiency (excess) - $ - $ - $ - $ - $
Covered payroll3 $ 12,003,033 13,093,445 $ 11,457,160 $ 10,902,171 $ 11,189,178 $ Contributions as a percentage of covered payroll 3 27.84% 27.11% 24.41% 23.26% 21.88% City of Gilroy
Required Supplementary Information (Unaudited)
Schedule of Plan Contributions - Pensions (Continued)
For the Year Ended June 30, 2025
Last Ten Fiscal Years
California Public Employees' Retirement System Defined Pension Plan - Miscellaneous 101

102

Measurement period 2023-24 2022-23 2021-22 2020-21 2019-2020 City's Proportion of the Net Pension Liability 0.5380% 0.5340% 0.5476% 0.6729% 0.4967% City's Proportionate Share of the Net Pension Liability 65,244,976 $ 66,620,102 $ 63,254,536 $ 36,390,895 $ 54,046,734 $ City's Covered Payroll 15,953,419 14,367,843 13,805,486 13,936,242 14,083,254 City's Proportionate Share of the Net Pension
Liability as a Percentage of Covered Payroll 409% 464% 458% 261% 384% Plan's Fiduciary Net Position as a Percentage
of the Plan's Total Pension Liability 70.77% 68.76% 69.00% 80.86% 69.97% Measurement period 2018-19 2017-18 2016-17 2015-16 2014-15 City's Proportion of the Net Pension Liability 0.5047% 0.5281% 0.5229% 0.5299% 0.5603% City's Proportionate Share of the Net Pension Liability 51,713,238 $ 50,893,037 $ 51,861,030 $ 45,849,921 $ 38,456,118 $ City's Covered Payroll 13,479,938 12,879,248 12,700,905 12,637,804 12,055,260 City's Proportionate Share of the Net Pension
Liability as a Percentage of Covered Payroll 384% 395% 408% 363% 319% Plan's Fiduciary Net Position as a Percentage
of the Plan's Total Pension Liability 69.91% 69.04% 67.21% 67.88% 71.77% California Public Employees' Retirement System Defined Pension Plan - Safety Plans City of Gilroy
Required Supplementary Information (Unaudited)
Schedule of the City's Proportionate Share of the Plan's Net Pension Liability and Related Ratios For the Year Ended June 30, 2025
Last Ten Fiscal Years
103

Fiscal Year End1 2024-25 2023-24 2022-23 2021-22 2020-21 Actuarially determined contribution 8,831,986 $ 8,234,337 $ 7,730,256 $ 7,117,603 $ 6,718,586 $ Contributions in relation to the actuarially
determined contribution2 (8,234,337) (8,831,986) (7,730,256) (7,117,603) (6,718,586) Contribution deficiency (excess) - $ - $ - $ - $ - $
Covered payroll3 $ 15,953,419 16,400,115 $ 14,367,843 $ 13,805,486 $ 13,936,242 $ Contributions as a percentage of covered payroll 2 53.85% 51.61% 53.80% 51.56% 48.21% Notes to Schedule:

Methods and assumptions used to determine contribution rates:

Actuarial cost method Entry Age Normal Cost Method
Amortization method For details, see June 30, 2022 Funding Valuation Report Asset valuation method Fair Value of Assets. For details, see June 30, 2022 Funding Valuation Report Inflation 2.30%
Salary increases Varies by entry age and service
Payroll Growth 2.80%
Investment rate of return 6.80% net of pension plan investment expenses; includes Inflation.

Retirement age
Mortality
2 Employers are assumed to make contributions equal to the actuarially determined contributions. However, some employers may choose to make additional contributions towards their unfunded liability. Employer contributions for such plans exceed the actuarially determined contributions. 1 As prescribed in GASB 68, paragraph 46, the information presented in the Schedule of Plan Contributions should also be presented as of the employer’s most recent fiscal year-end. The employer is responsible for determining this information as prescribed by the standard as this data is not available to CalPERS.

City of Gilroy
Required Supplementary Information (Unaudited)
Schedule of Plan Contributions - Pensions
For the Year Ended June 30, 2025
Last Ten Fiscal Years
California Public Employees' Retirement System Defined Pension Plan - Safety Plan The probabilities of retirement are based on the 2021 CalPERS Experience Study and Review of Actuarial Assumptions.

The probabilities of mortality are based on the 2021 CalPERS Experience Study and Review of Actuarial Assumptions. Mortality rates incorporate full generational mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries. 3 Includes one year’s payroll growth using 2.80% payroll growth assumption for fiscal years ended in 2022 through 2025; 2.75% payroll growth assumption for fiscal years ended in 2018 through 2021; 3.00% payroll growth assumption for fiscal years ended in 2014 through 2017.

The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2024-25 were derived from the June 30, 2022 funding valuation report.
104

Fiscal Year End1 2019-20 2018-19 2017-18 2016-17 2015-16 Actuarially determined contribution 6,320,861 $ 5,571,528 $ 4,906,333 $ 4,528,260 $ 4,131,687 $ Contributions in relation to the actuarially
determined contribution2 (5,571,528) (6,320,861) (4,906,333) (4,528,260) (4,131,687) Contribution deficiency (excess) - $ - $ - $ - $ - $
Covered payroll3 $ 13,479,938 14,083,254 $ 12,879,248 $ 12,700,905 $ 12,637,804 $ Contributions as a percentage of covered payroll 3 44.88% 41.33% 38.09% 35.65% 32.69% City of Gilroy
Required Supplementary Information (Unaudited)
Schedule of Plan Contributions - Pensions (Continued)
For the Year Ended June 30, 2025
Last Ten Fiscal Years
California Public Employees' Retirement System Defined Pension Plan - Safety Plan 105

Measurement period 2023-24 2022-23 2021-22 2020-21
Total OPEB liability
Service cost 907,244 $ 651,979 $ 973,126 $ 1,252,941 $
Interest Cost 608,243 624,849 410,441 435,960
Difference between expected vs actual experience 1,436,387 (6,796) (150,527) (1,132,716) Changes of assumptions (378,243) (958,427) (4,245,661) (724,033) Benefit payments, (371,889) (349,292) (331,830) (336,128) Implicit Rate Subsidy Credit (427,938) (205,161) (183,655) (223,000) Net change in total OPEB liability 1,183,729 347,227 (3,528,106) (726,976) Total OPEB liability - beginning 14,496,722 15,680,451 18,024,828 18,751,804 Total OPEB liability - ending $ 15,680,451 16,027,678 $ 14,496,722 $ 18,024,828 $ Covered employee-payroll 2 $ 28,200,000 30,800,000 $ 23,600,000 $ 23,388,288 $ Plan OPEB liability as a percentage of covered payroll 52.04% 55.60% 61.43% 77.07% Notes to Schedule:
2 There are no plan assets accumulated in a trust that meets the criteria of GASB to pay related benefits for the OPEB plan. 1 The City adopted GASB 75 for the fiscal year ending June 30, 2018.

For the Year Ended June 30, 2025
Schedule of Changes in the Total OPEB Liability and Related Ratios Required Supplementary Information (Unaudited)
City of Gilroy
Other Post Employment Benefit Plan
Last Ten Fiscal Years1
106

Measurement period 2019-20 2018-19 2017-18 2016-17
Total OPEB liability
Service cost 906,127 $ 697,310 $ 723,000 $ 832,000 $
Interest Cost 594,793 533,762 546,000 463,000
Difference between expected vs actual experience (1,655,290) - - - Changes of assumptions 3,218,042 547,789 (625,000) (1,691,000) Benefit payments, (500,729) (524,000) (491,000) (479,000) Implicit Rate Subsidy Credit - - - -
Net change in total OPEB liability (339,398) 4,157,202 153,000 (875,000) Total OPEB liability - beginning 14,934,000 14,594,602 14,781,000 15,656,000 Total OPEB liability - ending $ 14,594,602 18,751,804 $ 14,934,000 $ 14,781,000 $ Covered employee-payroll 2 $ 29,906,910 28,912,941 $ 27,610,000 $ 26,626,000 $ Plan OPEB liability as a percentage of covered payroll 64.86% 48.80% 54.09% 55.51% City of Gilroy
Required Supplementary Information (Unaudited)
Schedule of Changes in the Total OPEB Liability and Related Ratios (Continued) For the Year Ended June 30, 2025
Last Ten Fiscal Years1
Other Post Employment Benefit Plan
107