Agenda — Hillsborough City Council, December 11, 2023 (part 1 of 2)

TOWN OF HILLSBOROUGH
San Mateo County
Christine Krolik, Mayor 1600 Floribunda Avenue
Sophie Cole, Vice Mayor Hillsborough, CA 94010
Marie Chuang, Councilmember www.hillsborough.net
Leslie Marden Ragsdale, Councilmember Phone 650-375-7400 Alvin L. Royse, Councilmember

A G E N D A
MONDAY, DECEMBER 11, 2023
5:00 PM CLOSED SESSION
6:00 PM CITY COUNCIL MEETING
Hillsborough Town Hall and Video Conference
Meetings of the City Council are held in-person in Council Chambers. As a courtesy and technology permitting, the meeting will also be held virtually via Zoom Video Conference. However, the Town cannot guarantee that the public’s access to the Zoom virtual platform will be uninterrupted, and technical difficulties may occur from time to time. In those instances, so long as the public may still attend the meeting in person, the meeting will continue.

In the event a Councilmember is participating remotely under the requirements of Government Code Section 54953 with regard to “just cause” or an “emergency” situation as those terms are defined in the Brown Act, the Town will stop the meeting if there is any technology disruption until such time that the public is reconnected to the live in person meeting and able to provide comment.

To attend the meeting in person:
1600 Floribunda Avenue, Hillsborough, CA 94010.

To provide Public Comment in person:

Members of the public wishing to speak on the agenda item are requested to complete a yellow speaker card and submit it to the City Clerk.

To participate in the meeting via Zoom Video Conference:
• Log in to the meeting at https://us06web.zoom.us/j/83696200067?pwd=M6TZfQ1FA0XEuv07ZRnmNLIoWbajIP.1 • Dial-in via phone:
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Meeting ID: 836 9620 0067
Passcode: 305554
To provide Public Comment via Zoom Video Conference:

Live verbal public comments may be made by requesting to speak using the “raise hand” feature in Zoom or, if calling in by phone, by pressing *9 on the telephone keypad prior to the close of the public comment period for the item. In response, the Town will unmute the speaker and allow them to speak up to three minutes.

CLOSED SESSION (5:00 p.m.)
Agenda – Hillsborough City Council
Monday, December 11, 2023

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CALL TO ORDER

ROLL CALL

ANNOUNCEMENT OF CONFLICT OF INTEREST
This portion of the agenda is for Councilmembers to disclose any conflict of interest related to the item on the Closed Session agenda.

Any Councilmember who has confirmed a conflict of interest or has reason to believe they have a conflict of interest should disclose the conflict for the record and abide by the disqualification requirements contained in FPPC regulations.

CLOSED SESSION ITEM
A. CONFERENCE WITH LABOR NEGOTIATOR
Pursuant to Government Code Section 54957.6
Agency Negotiator: Sevag Shirvanian
Employee Organization: Teamsters Local 350 - Public Works Supervisors

PUBLIC COMMENT
Members of the public may provide public comments on the item on the Closed Session agenda. Members of the public participating in person are requested to complete a yellow speaker card and submit it to the City Clerk before addressing the City Council. Members of the public participating via the Zoom platform may use the “raise hand” feature or, if calling in by phone, press *9 on the telephone keypad. Speakers are limited to one comment per Closed Session item.

REGULAR CITY COUNCIL MEETING (6:00 pm)
I. CALL TO ORDER
II. ROLL CALL
III. PLEDGE OF ALLEGIANCE
IV. REPORT FROM CLOSED SESSION
V. MAYOR'S STATE OF THE TOWN
VI. SELECTION OF MAYOR
VII. SELECTION OF VICE MAYOR
VIII. RECOGNITION
• RECOGNITION OF RETHINKWASTE POSTER CONTEST WINNERS
• RECOGNITION IN HONOR OF THE MEMORY OF FORMER TOWN OF

HILLSBOROUGH MAYOR ANDREW BERWICK
• RECOGNITION IN HONOR OF THE MEMORY OF FORMER SAN MATEO COUNTY

SHERIFF AND MEMBER OF THE BOARD OF SUPERVISORS DON HORSLEY IX. PRESENTATIONS
Agenda – Hillsborough City Council
Monday, December 11, 2023

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• FIREWISE UPDATE BY DR. DAVID WEINBERG
• MAYOR'S APPLAUSE
X. PUBLIC COMMENT I
This portion of the meeting is reserved for persons wishing to address the City Council on any matter not on the agenda.

Members of the public participating in person are requested to complete a yellow speaker card and submit it to the City Clerk before addressing the City Council. Members of the public may provide comments via the Zoom platform by using the “raise hand” feature or, if calling in by phone, by pressing *9 on the telephone keypad. In response, the Town will unmute the speaker and allow them to speak on any topic for up to three minutes. If there appears to be a large number of speakers, speaking time may be reduced to no less than 2 minutes, at the discretion of the Mayor. Members of the public are limited to one comment at this time. State law prohibits the Council from discussing or acting on non-agenda items, and generally limits the ability of the Council to respond to any public comments made regarding non-agenda items.

XI. ANNOUNCEMENT OF CONFLICT OF INTEREST
This portion of the agenda is for Councilmembers to disclose any conflict of interest related to any item on the agenda. Any Councilmember who has confirmed a conflict of interest or has reason to believe they have a conflict of interest should disclose the conflict for the record and abide by the disqualification requirements contained in FPPC regulations.

XII. CONSENT CALENDAR
The Consent Calendar includes routine items, which do not require discussion. A Councilmember may remove an item for discussion, and any member of the audience may request a Councilmember to remove an item for discussion. The items are approved in one motion.

1. APPROVAL OF CITY COUNCIL MEETING MINUTES OF JULY 10, 2023

2. MONTHLY CLAIMS: NOVEMBER 1 THROUGH NOVEMBER 30, 2023 PURSUANT TO CEQA GUIDELINE 15378

3. ACCEPTANCE OF THE ANNUAL COMPREHENSIVE FINANCIAL REPORT (ACFR) TOGETHER WITH THE INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING FOR THE YEAR ENDED JUNE 30, 2023 PURSUANT TO CEQA GUIDELINE 15378

4. ADOPTION OF AN ORDINANCE AMENDING SECTION 1.28.040 OF THE MUNICIPAL

CODE RELATING TO CLAIMS AGAINST THE TOWN AND ADOPTION OF A RESOLUTION AMENDING TOWN POLICY NO. 415: SETTLEMENT AUTHORITY

REGARDING CLAIMS AND LITIGATION AGAINST THE TOWN, PURSUANT TO CEQA GUIDELINE SECTION 15378

5. RESOLUTION ADOPTING THE TOWN OF HILLSBOROUGH 2024 LEGISLATIVE PLATFORM PURSUANT TO CEQA GUIDELINE 15378

6. RESOLUTION ESTABLISHING THE LOCAL APPOINTMENTS LIST FOR CALENDAR YEAR 2024 PURSUANT TO CEQA GUIDELINE 15378

7. RESOLUTION AWARDING TO AND AUTHORIZING THE CITY MANAGER TO EXECUTE A CONTRACT WITH CHARLES ELECTRIC, INC. TO REPLACE THE GENERATOR AT FIRE STATION 32 IN THE AMOUNT OF $188,640.00 PURSUANT TO CEQA GUIDELINE 15301
Agenda – Hillsborough City Council
Monday, December 11, 2023

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8. RESOLUTION APPROVING THE PURCHASE AND REPLACEMENT OF THE POLICE DEPARTMENT’S BASE STATION RADIO EQUIPMENT FROM

TELECOMMUNICATIONS ENGINEERING ASSOCIATES IN THE AMOUNT OF $268,110.00 AND APPROVING A FISCAL YEAR 2023-24 BUDGET AMENDMENT IN

THE POLICE SUPPLEMENTAL LAW ENFORCEMENT SERVICES FUND IN THE AMOUNT OF $268,110.00 PURSUANT TO CEQA GUIDELINE 15378

9. RESOLUTION APPROVING AND AUTHORIZING THE CITY MANAGER TO EXECUTE A FIVE-YEAR AGREEMENT WITH BRINC DRONES, INC. FOR THE PURCHASE OF ONE LEMUR 2 DRONE IN THE AMOUNT OF $109,374.53 AND APPROVING A FISCAL YEAR 2023-24 BUDGET AMENDMENT IN THE POLICE SUPPLEMENTAL LAW ENFORCEMENT SERVICES FUND IN THE AMOUNT OF $109,374.53 PURSUANT TO CEQA GUIDELINE 15378
XIII. PUBLIC COMMENT II
This portion of the meeting is reserved for persons wishing to address the City Council on any matter not on the agenda.

XIV. TOWN UPDATE
XV. CITY COUNCIL ITEMS
This section of the agenda provides the City Council an opportunity to report their participation in activities related to any intergovernmental committee assignments. No action can be taken on any item not on the agenda.

XVI. ADJOURNMENT
SPECIAL ACCOMMODATIONS:

If you need a disability-related modification or accommodation, including auxiliary aids or services, to participate in the City Council meeting, or if you need an agenda in an alternate form, please contact the City Clerk’s Office at 375-7412 at least 24 hours before the scheduled City Council meeting.

ADDRESSING THE CITY COUNCIL:

Members of the public may provide written comments to the City Council regarding any item on the agenda up to two hours before the meeting to [email protected] or by mail/in person at 1600 Floribunda Avenue, Hillsborough, CA 94010. Any writings or documents provided to a majority of the City Council regarding any item on this agenda prior to the deadline, except as exempt from public disclosure under applicable law, will be available for public inspection on the Town website, and in the City Clerk’s Office at 1600 Floribunda Avenue, Hillsborough, CA 94010, during regular business hours. All oral comments made at public meetings, including a speaker’s name, are recorded and included as part of the public record in the meeting minutes. Meeting minutes are publicly accessible via the Town website and via various internet search engines. Written comments, including a commenter’s name, are a public record and subject to disclosure on the Town website and/or upon request pursuant to the California Public Records Act (with personal contact information including personal email addresses and personal phone numbers redacted).

AUDIO / VISUAL ADVISORY:

Those persons who wish to use PowerPoint or other mediums when presenting to the City Council will be required to submit media items to the City Clerk by 12:00 p.m. on the day of the meeting. Media items can be emailed to [email protected].

Agenda – Hillsborough City Council
Monday, December 11, 2023

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AUDIO OR VIDEO RECORDINGS:

Please be advised that under the Brown Act, any person has the right to record the City Council meeting, including the audience in attendance, using an audio or video recording device subject to certain exceptions. Please be aware that by attending a City Council meeting, you may be audio or video recorded.

TOWN OF HILLSBOROUGH
San Mateo County
1600 Floribunda Avenue
Hillsborough, CA 94010
1 CONSENT CALENDAR

CITY COUNCIL MEETING
DECEMBER 11, 2023

AGENDA STAFF REPORT
ITEM SUBJECT: APPROVAL OF CITY COUNCIL MEETING MINUTES OF JULY 10, 2023 -1-

UNAPPROVED MINUTES
MONDAY, JULY 10, 2023
4:30 PM CLOSED SESSION
6:00 PM CITY COUNCIL MEETING
Hillsborough Town Hall and Zoom Video Conference
Meetings of the City Council are held in-person. As a courtesy, and in compliance with applicable state law, staff and members of the public participated in the meeting in person at Town Hall or virtually via Zoom Video Conference.

CLOSED SESSION

CALL TO ORDER
Mayor Krolik called the meeting to order at 4:30 p.m.

ROLL CALL

Present: Chuang, Ragsdale, Royse, Cole, Krolik

ANNOUNCEMENT OF CONFLICT OF INTEREST
There were no announcements of conflict of interest.

CLOSED SESSION ITEMS
A. CONFERENCE WITH LEGAL COUNSEL – ANTICIPATED LITIGATION Pursuant to Government Code Section 54956.9(d)(2)
Town as Defendant – Three Potential Cases (see agenda packet for claim forms received by the Town)
B. CONFERENCE WITH LEGAL COUNSEL – ANTICIPATED LITIGATION Pursuant to Government Code Section 54956.9(d)(2)
Town as Defendant – One Potential Case
Grievance/Arbitration Filed by Former Town of Hillsborough Employee Regarding Employment C. CONFERENCE WITH LABOR NEGOTIATORS
Pursuant to Government Code Section 54957.6
Agency designated representatives: Mayor Christine Krolik, Councilmember Alvin L. Royse Unrepresented employee: City Manager

PUBLIC COMMENT
There were no speakers.

ADJOURN CLOSED SESSION
The Closed Session adjourned at 5:55 p.m.

REGULAR CITY COUNCIL MEETING
I. CALL TO ORDER
Mayor Krolik called the meeting to order at 6:00 p.m.

II. ROLL CALL

Present: Chuang, Ragsdale, Royse, Cole, Krolik
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Monday, July 10, 2023

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III. PLEDGE OF ALLEGIANCE
Former Mayor Jess E. (Jay) Benton led the Pledge of Allegiance.

IV. REPORT FROM CLOSED SESSION
City Attorney Christopher Diaz reported that the City Council voted unanimously, 5-0, to reject the claim by Agger/Bellamy based on the decision from the Town’s insurance and directed staff to speak with Mr. Agger to discuss the claim; the City Council voted unanimously, 5-0, to reject the claim by Ghoneimy/Chow based on the decision from the Town’s insurance; and the City Council voted unanimously, 5-0, to accept the Nguyen/Pan claim in the amount of $18,351.91.

V. MINUTES: Special Meetings of January 23, 2023 and June 21, 2023 On motion by Councilmember Ragsdale, seconded by Councilmember Chuang and unanimous on voice vote, the minutes of the special meetings of January 23, 2023 and June 21, 2023 were approved.

VI. RECOGNITION
• RECOGNITION OF JESS E. (JAY) BENTON FOR HIS SERVICE AS THE TOWN'S

REPRESENTATIVE ON THE BOARD OF DIRECTORS OF THE BAY AREA WATER

SUPPLY & CONSERVATION AGENCY (BAWSCA) AND BAY AREA REGIONAL

WATER SYSTEM FINANCING AUTHORITY (RFA)
Mayor Krolik and members of the City Council provided comments in recognition of Jess E. (Jay) Benton for his service as the Town’s representative on the Board of Directors of BAWSCA and the Bay Area Regional Water System Financing Authority. Mr. Benton provided comments.

VII. PRESENTATIONS
• MAYOR'S APPLAUSE
Mayor Krolik provided comments of recognition of the Hillsborough Little League 2023 California Minors Superbowl District 52 Championship players, the 9-10 All-Star players and the 11-12 All-Star players for their wins and presented the players and coaches with certificates of recognition for their achievements. Coaches and managers Billy Seybold, Chase Rowbotham and Tim Luceno provided comments.
• CENTRAL COUNTY FIRE DEPARTMENT (CCFD) COMMUNITY RISK ASSESSMENT:

STANDARDS OF COVER & DEPLOYMENT ANALYSIS
Fire Chief Bruce Barron provided the presentation and responded to City Council questions. Firewise Chair Dr. David Weinberg provided comments. • PRESENTATION BY BILL CHIANG, GOVERNMENT RELATIONS, PG&E Bill Chiang, Local Government Affairs, PG&E, provided an update from PG&E and responded to City Council questions. Mary Snyder, Vegetation Management Program Manager, PG&E, and Cindy Mama, Project Manager, PG&E, provided additional information.

Mayor Krolik opened public comment.

Dennis Moore expressed concerns regarding power reliability in the town and provided information regarding the number of hours of outages in the Skyfarm neighborhood and requested that PG&E provide data for every outage impacting the town so that it can be reviewed for understanding and future prevention.

Joshua Cooperman, 15 Creekwood Way, expressed concerns regarding the timeline for future undergrounding of power lines in Hillsborough and inquired about Federal funding -3-
Unapproved Minutes – Hillsborough City Council
Monday, July 10, 2023

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secured by PG&E for undergrounding and whether it can be deployed to communities such as Hillsborough. Cooperman provided information about safety concerns with a gas meter off Hayne Road.

Dr. David Weinberg, Chair, Firewise, expressed concerns regarding debris left behind following PG&E tree work and recommended that the companies hired to do the work be required to remove the debris in the interest of fire safety.

Dan Capon provided information regarding an incident on Woodridge Road on July 8th with a PG&E contractor that hit a gas line.

Mayor Krolik closed public comment.

Mr. Chiang provided comments, responded to questions raised during public comment and stated that members of the public can also follow up with PG&E directly for additional information.

Public Works Director Paul Willis requested PG&E notify the Public Works Department of work orders for removal of piles of debris as Town staff may be able to assist with the removal.

Mayor Krolik re-opened public comment.

Katie Haggarty, 420 Darrell Road, inquired regarding a strong smell in the area of the PG&E project at Skyline and the impacts on health and safety and requested additional communications from the town.

Dennis Moore reiterated his earlier request for circuit data for outages and the location of the circuits.

Mayor Krolik closed public comment.

Following discussion, Mayor Krolik summarized action items for PG&E related to the comments made by the public and staff: look into the gas meter at Hayne Road to make it more secure, look into the incident reported on Woodridge, look into the possibility of adding sectionalizing devices to increase power reliability, outreach to PG&E subcontractors regarding cleaning up debris following tree work, and to follow up on the request for data regarding outages, and for the Town: potential consideration of writing a letter to request undergrounding of lines, to report debris that is left behind to PG&E, and to keep residents informed.

VIII. PUBLIC COMMENT I
Dan Capon provided additional comments regarding an incident with a PG&E contractor on Woodridge Road.

IX. ANNOUNCEMENT OF CONFLICT OF INTEREST
Councilmember Ragsdale reported regarding Consent Calendar Item 1, Monthly Claims, that she has stock in Ford and the small shareholder exception applies under the Political Reform Act and the non-interest exception applies under Government Code Section 1090.

X. CONSENT CALENDAR
Dan Capon requested to remove Consent Calendar Item 4.

On motion by Councilmember Chuang, seconded by Councilmember Ragsdale and unanimous on voice vote, Consent Calendar Items 1, 2, and 3 were approved.

1. MONTHLY CLAIMS: JUNE 1 THROUGH JUNE 30, 2023 PURSUANT TO CEQA GUIDELINE 15378
The monthly claims for June 1 through June 30, 2023 were approved as submitted. -4-
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Monday, July 10, 2023

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2. QUARTERLY TREASURER'S REPORT FOR THE QUARTER ENDING JUNE 30, 2023 PURSUANT TO CEQA GUIDELINE 15378
The Quarterly Treasurer’s Report for the Quarter Ending June 30, 2023 was adopted.

3. RESOLUTION AWARDING TO AND AUTHORIZING THE CITY MANAGER TO EXECUTE THREE (3) THREE-YEAR CONTRACTS WITH THE DAVEY GROUP,

CALTLC, AND THE OAKLEY GROUP FOR ARBORICULTURAL SERVICES FOR A THREE YEAR NOT TO EXCEED TOTAL AMOUNT OF $150,000.00 PURSUANT TO CEQA GUIDELINES 15061(B)(3), 15307, 15308, AND 15378
The resolution awarding to and authorizing the city manager to execute three (3) threeyear contracts with the Davey Group, CALTLC, and the Oakley Group for arboricultural services for a three year not-to-exceed total amount of $150,000.00 was adopted.

4. RESOLUTION AWARDING TO AND AUTHORIZING THE CITY MANAGER TO EXECUTE A CONTRACT WITH NORGO ENGINEERING CO. FOR THE 150 WOODRIDGE ROAD PIPE EXTENSION PROJECT IN THE AMOUNT OF $179,785.00, WITH 10% CONTINGENCY IN THE AMOUNT OF $17,978.50 IF NEEDED, FOR A TOTAL PROJECT BUDGET OF $197,763.50 PURSUANT TO CEQA GUIDELINE 15301
Dan Capon stated that he lives near the project, did not receive notification, and expressed concerns regarding the project.

Public Works Director Paul Willis provided information regarding the project and process.

On motion by Councilmember Royse, seconded by Vice Mayor Cole and unanimous on voice vote, the resolution awarding to and authorizing the city manager to execute a contract with Norgo Engineering Co. for the 150 Woodridge Road pipe extension project in the amount of $179,785.00, with 10% contingency in the amount of $17,978.50, if needed, for a total project budget of $197,763.50 was adopted.

XI. PUBLIC HEARING

5. RESOLUTION AUTHORIZING PLACEMENT OF SEWER SERVICE AND STORM

DRAINAGE CHARGES, SPECIAL TAX FOR POLICE PROTECTION AND FIRE

PROTECTION AND PREVENTION, AND THE FLAT CHARGE COMPONENT OF THE GARBAGE COLLECTION FEE ON THE FISCAL YEAR 2023-24 COUNTY TAX ROLL

AND AUTHORIZING THE COUNTY TAX COLLECTOR TO COLLECT SUCH CHARGES PURSUANT TO CEQA GUIDELINE 15378
Assistant Finance Director Rich Santiago provided the staff report. Assistant Director Santiago noted a correction to the sewer service charge in the first clause in the resolution, which should be $3,985.00 as presented on the screen, and stated the City Clerk will ensure it is corrected when finalizing the resolution.

Mayor Krolik opened the public hearing at 9:01 p.m. There were no speakers. Mayor Krolik closed the public hearing at 9:01 p.m.

On motion by Councilmember Royse, seconded by Vice Mayor Cole and unanimous on voice vote, the resolution authorizing placement of sewer service and storm drainage charges, special tax for police protection and fire protection and prevention, and the flat charge component of the garbage collection fee on the Fiscal Year 2023-24 County tax roll and authorizing the County Tax Collector to collect such charges was adopted with an amendment to the first clause in the resolution to reflect the revised amount of $3,985.00.

XII. NEW BUSINESS

6. RESOLUTION APPOINTING DOUG DAVIS TO THE POSITION OF CITY MANAGER

AND APPROVING AND AUTHORIZING THE MAYOR TO EXECUTE AN
EMPLOYMENT AGREEMENT PURSUANT TO CEQA GUIDELINE 15378
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City Attorney Christopher Diaz provided the staff report and reported in compliance with the Brown Act the total annual salary of $273,182.00, that the agreement provides for standard leaves applicable to any executive Town employee and includes a 4 percent deferred compensation plan, and stated that any dispute under the agreement is subject to arbitration. Councilmember Royse reported that he and Mayor Krolik served as the Council-appointed subcommittee for the contract negotiations.

Mayor Krolik opened public comment. There were no speakers. Mayor Krolik closed public comment.

On motion by Councilmember Chuang, seconded by Vice Mayor Cole and unanimous on roll call vote, the resolution appointing Doug Davis to the position of City Manager and approving and authorizing the Mayor to execute an employment agreement was adopted.

XIII. PUBLIC COMMENT II
There were no speakers.

XIV. CITY COUNCIL ITEMS
Councilmember Chuang reported her attendance at the National CERT Conference and that the Town welcomed a Taiwanese All Star baseball team to Hillsborough who participated in training and tournaments with Hillsborough teams during their visit.

Councilmember Royse reported related to his participation on the SFO/Community Roundtable an online Noise 101 Seminar and the submittal of a comment letter to the FAA in response to their request for input on noise and noise policies, and the drafting of a letter to Congress regarding the FAA reauthorization. Councilmember Royse also reported his attendance at a meeting of the SBWMA Board.

Councilmember Ragsdale reported the appointment of Shawn Marshall as Peninsula Clean Energy CEO, her attendance at a meeting of commute.org and announced upcoming meetings of the Age-Friendly Initiative task force. Councilmember Ragsdale also reported an upcoming meeting with staff in relation to her Sustainability Commissioner role.

Vice Mayor Cole provided updates from Firewise including the status of WUI inspections and the importance of fire safety measures. Vice Mayor Cole announced an upcoming San Mateo County Annual Disaster Preparedness Day.

Mayor Krolik expressed appreciation to Mike Chuang for providing translation services at the National CERT conference, to Councilmember Chuang for coordinating activities for the Taiwanese All Star baseball team visit and to Town staff for their service.

XV. CITY MANAGER'S UPDATE
City Manager Doug Davis provided an informational update on the Town’s ADU Dashboard and events and activities in the town.

XVI. ADJOURNMENT
Mayor Krolik adjourned the meeting at 9:21 p.m.
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TOWN OF HILLSBOROUGH
San Mateo County
1600 Floribunda Avenue
Hillsborough, CA 94010
2 CONSENT CALENDAR

CITY COUNCIL MEETING
DECEMBER 11, 2023

AGENDA STAFF REPORT
ITEM SUBJECT: MONTHLY CLAIMS: NOVEMBER 1 THROUGH NOVEMBER 30, 2023 PURSUANT TO CEQA GUIDELINE 15378
SUMMARY: The monthly claims for the month of November 2023 in the amount of $4,713,602.85 are submitted for approval.

FISCAL IMPACT: Claims have been expended pursuant to the approved budget.

ENVIRONMENTAL ISSUES: The proposed action is exempt from environmental review pursuant to the California Environmental Quality Act (CEQA) Guidelines sections 15378(b)(2) and 15378(b)(5) as ongoing administrative or organizational activities that will not result in direct or indirect physical changes in the environment.

ATTACHMENTS: Monthly Claims Listing
PREPARED BY: Richard Santiago, Assistant Finance Director RECOMMENDATION: Approve the monthly claims for November 2023 as submitted. -7-

TOWN OF HILLSBOROUGH

REPORT OF GOODS & SERVICES PURCHASED
DURING THE MONTH OF NOVEMBER 2023
PREPARED BY:

Alan Singh
DocuSign Envelope ID: 260D6217-8B82-4D62-BAA8-0FC064B556DE -8-

TOWN OF HILLSBOROUGH

SUMMARY OF PURCHASES
DURING THE MONTH OF NOVEMBER 2023
GOODS & SERVICES PURCHASED $1,824,536.42
NET SALARIES & TAXES PAID 1,028,101.40
HEALTH BENEFIT PREMIUMS 169,727.99
BOND PAYMENTS 462,534.70
CCFD FUNDING 703,368.00
SAN FRANCISCO WATER PAYMENTS 525,334.34
TOTAL COST OF GOODS & SERVICES TO BE APPROVED $4,713,602.85

FINANCE DIRECTOR DATE

CITY MANAGER DATE
DocuSign Envelope ID: 260D6217-8B82-4D62-BAA8-0FC064B556DE 12/5/2023
12/5/2023
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COMPARATIVE SUMMARY
For the Month of NOVEMBER 2023
Nov-23 Nov-22 Nov-21
Goods & Services Purchased:

Operations 1,034,428.00 1,292,796.70 860,814.06
Capital 790,108.42 663,089.96 562,068.02
Net Salaries & Taxes Paid 1,028,101.40 903,591.49 910,020.85 Health Benefit Premiums 169,727.99 154,778.58 153,798.33 Bond Payments 462,534.70 168,784.91 264,040.16
CCFD Funding 703,368.00 654,879.00 602,441.00
San Francisco Water Payments 525,334.34 436,896.80 283,572.81 Total $4,713,602.85 $4,274,817.44 $3,636,755.23
NOTES:

Operations -
Capital -
Net Salaries & FY 23/24 payroll is consistent with the prior year, and the increase is primarily attributable Taxes Paid - to timing of filling open positions and cost of living increase effective January 1, 2023.

Debt Service
outstanding Certificates of Participation and to terminate the related interest rate swaps.

Interest on the new bonds is now paid twice a year.

CCFD -
Water -
FY 23/24 spending is lower compared to FY 22/23 spending due to timing of various Capital project spending in November 2023 is primarily for the Street Resurfacing project, Priority Basins I & I Rehab, Eucalyptus Pathway, and the Storm Drain repairs.

In June 2023, the Revenue Refunding Bond Series 2023 was issued to refinance the Town's FY 23/24 contribution is based on budget/contract.

There was an SFPUC wholesale water rate increase on July 1, 2023 to $5.21 (from $4.75, a 9.6 % increase). The increase in FY 23/24 as compared to FY 22/23 is attributed reoccurring payments, as well as lower deposit refunds. to the SFPUC rate increase, as well as higher units purchased.

DocuSign Envelope ID: 260D6217-8B82-4D62-BAA8-0FC064B556DE -10-

TOWN OF HILLSBOROUGH
PURCHASES MADE DURING NOVEMBER 2023
CK # VENDOR DESCRIPTION AMOUNT
13547 AECOM TECHNICAL SERVICES, INC. HISTORICAL DESIGN REVIEW BP 4,599.50 13548 AFLAC OCT '23 INSURANCE PREMIUM HR 1,563.96
13549 AIXTEK OCT '23 IT MANAGEMENT SERVICE/SOFTWARE IT 35,123.80 13550 ALLIANT INSURANCE INSURANCE - VOLUNTEER RECOGNITION EVENT 12/6/23 266.00 13551 AMAZON WEB SERVICES, INC SEP '23 - BACKUP STORAGE IT 8,008.33 13552 ANN STAR FORMAN FEE - NOTARY SERVICES OCT '23 BP 525.00 13553 AT&T 9/20/23-10/19/23 MULTIPLE ACCOUNTS 1,822.14
13554 BAY PRO NOV'23 LANDSCAPE MAINT VARIOUS SITES HB 2,516.00 13555 BAYSIDE BUILDING MATERIALS INC MATERIALS - VARIOUS ITEMS PW 442.18 13556 BEST BEST & KRIEGER LLP SEP '23 LEGAL SERVICE 61,824.14 13557 BIG STATE INDUSTRIAL SUPPLY, INC UNIFORM - COVERALLS PW 245.83 13558 BKF ENGINEERS EUCALYPTUS PATHWAY DESIGN PW 1,002.60 13559 BOSCO OIL COMPANY GAS/DIESEL PW/PD 4,687.00
13560 BURNETT LANDSCAPE DEVELOPMENT INC MAINT - NOV '23 HBF LANDSCAPE VARIOUS SITES 5,256.00 13561 CALIFORNIA ELECTRIC CO. INSTALL - WIRING OFFICE REMODEL PD 5,909.05 13562 CENTRAL COUNTY FIRE DEPARTMENT NOV '23 FISCAL CONTRIBUTION 703,368.00 13563 CITY OF FOSTER CITY 7/1/23-6/30/24 CALOPPS FEE HR 3,795.00 13564 CITY OF SAN MATEO NOV '23 LIBRARY SERVICES CM 22,546.09 13565 COMCAST SEP '23 CALNET NONCGEN LINE IT 4,838.20
13566 QUALITY ASSURANCE ENGINEERING, INC DARRELL TANK PRJ MATERIALS TESTING PW 4,829.00 13567 CSG CONSULTANTS, INC. BUILDING INSPECT SERVICE SEP '23 BP 4,294.00 13568 DAVID R CAPPS MAINT - GLASS TABLE TOP TOWN HALL PW 320.00 13569 DEBORAH YACOBELLIS CONSULT - CRW/TRACK IT OCT '23 BP 7,192.50 13570 ESA ENVIRONMENTAL COMPLIANCE VARIOUS PRJ 5/23 PW 715.13 13571 FARALLON COMPANY REPAIR - EXTERIOR WATERPROOF/DRAINAGE PD PW 16,590.00 13572 FERGUSON US HOLDINGS, INC PARTS - VALVE/PIPES PW 12,020.32 13573 FLOWATER EQUIP - OCT '23 WATER STATION FN 164.06
13574 FRANK M BOOTH INC REPAIR - HVAC TOWN HALL PW 1,630.00 13575 FREDCO MARKETING PRINT/MAIL - BUSINESS LICENSE RENEWALS FN 5,951.25 13576 GLENN BERKHEIMER OCT '23 LABOR RELATIONS HR 1,700.00 13577 GRAINGER PARTS - VARIOUS ITEMS TANK LEVEL REPAIR PW 298.27 13578 HILLSBOROUGH RACQUET CLUB DEPOSIT/FEE - EMPLOYEE APPRECIATION EVENT 1,800.00 13579 HOME DEPOT CREDIT SERVICES AUG '23 VARIOUS PARTS & SUPPLIES PW 5,929.70 13580 HOUSEAL LAVIGNE ASSOCIATES,LLC GENERAL PLAN/HOUSING ELEMENT JUL-SEP '23 BP $5,787.50 13581 HYDRANTGUARD LLC PARTS - CHECK VALVES PW 2,703.75 13582 INFOSEND, INC. JUL '23/AUG '23 UTILITY BILLING FN 3,678.04 13583 INTRADO LIFE & SAFETY SOLUTIONS SOFTWARE - DISPATCH SUPPORT 11/20/23-2/19/24 PD 3,119.14 13584 REBECCA BURNSIDE SEP '23 HR SERVICES 20,080.43
13585 JMB CONSTRUCTION, INC. EMERGENCY STORM REPAIR SANDRA/HAYNE PW 18,562.07 13586 LITTLER, MENDELSON, P.C. SEP '23 LEGAL RETAINER CM 4,000.00 13587 MARK D HUDAK LEGAL SERVICES - SEP 2023 CM 2,025.00 13588 MASTERPIECE GARDENERS, INC MAINT - SEP '23/OCT '23 HBF LANDSCAPE VARIOUS 1,450.00 13589 CA METRO MOBILE COMMUNICATIONS INC REPAIR - RADIO CAR #11 PD 514.00 13590 NOR-CAL CYCLES, LLC MAINT - 2009 HARLEY DAVIDSON PD 872.27 13591 NWESTCO LLC REPAIR - FUEL GAUGE STATION 32 PW 1,062.26 13592 ODYSSEY POWER CORPORATION MAINT - GENERATOR SUGAR HILL PW 1,353.90 13593 JAMES & FRANCES OU REFUND - PERMIT FEE VOID BP 3,287.48 13594 S. CHRISTINE ZANELLO REFUND - GRADE DEPOSIT BP 40,000.00 13595 SRIRAM VISWANATHAN REFUND - ADR/PUBLIC NOTICE FEES BP 752.00 13596 CHRISTOPHER REY REIMB - TRAVEL EXP ICI CORE COURSE 10/15-27/23 PD 2,467.25 13597 LESLIE MARDEN RAGSDALE REIMB - CALCITIES CONFERENCE EXP 9/20-22/23 CO 730.43 13598 AVDG LLC EQUIP - PORTABLE PODIUM CM 6,362.87
13599 TAN ED REFUND - 7/16/23 TICKET FEE PD 25.00
13600 OWEN EQUIPMENT COMPANY TRAIN - VACTOR TRUCK STAFF PW 1,495.00 13601 PG & E 9/15/23-10/16/23 MULTIPLE ACCOUNTS 1,504.52 13602 PRIORITY 1 MAINT - MULTIPLE VEHICLES PD 3,300.00
13603 QUENCH USA, INC EQUIP - WATER STATION 10/28/23-11/27/23 PD 80.94 DocuSign Envelope ID: 260D6217-8B82-4D62-BAA8-0FC064B556DE -11-

TOWN OF HILLSBOROUGH
PURCHASES MADE DURING NOVEMBER 2023
13604 REDGWICK CONSTRUCTION COMPANY EUCALYPTUS PATHWAY PRJ PW 49,583.62 13605 RENNE PUBLIC LAW GROUP LLP LEGAL RETAINER SEP'23 CM 4,000.00 13606 ROBERT HALF INTERNATIONAL INC TEMP SERVICE - W/E 10/27/23 FN 3,097.00 13607 SAN MATEO CO ENVIRONMENT SERVICES AGENCY FE - STORAGE TANK CORP YARD PW 1,363.69 13608 SCOTT BUSCHMAN PHOTOGRAPHY - OFFICER PHOTO SESSION PD 765.63 13609 SFPUC FEE - 23/24 CHERRY CREEK PUMP STATION PW 67.84 13610 SFPUC FINANCIAL SERVICES AUG '23 - WATER QUALITY ANALYSIS PW 2,190.00 13611 STAPLES ADVANTAGE OFFICE SUPPLIES - ALL DEPARTMENTS 570.52 13612 STATE WATER RESOURCES CONTROL FEE - WATER OPERATOR EXAM T1 STAFF PW 50.00 13613 STATE WATER RESOURCES CONTROL FEE - WATER OPERATOR EXAM D1 STAFF PW 50.00 13614 STATE WATER RESOURCES CONTROL FEE - WATER OPERATOR EXAM D2 STAFF PW 65.00 13615 SUTTER HEALTH 2023 EMPLOYEE ASSIST U SAP SERVICES HR 553.00 13616 TELECOMMUNICATIONS ENGINEER ASSOC RIMS CAD/RMS TECH SERVICES 7/1/23-9/30/23 PD 2,500.00 13617 TYLER TECHNOLOGIES, INC. TRAIN- ERP FINANCIAL SYSTEM 10/11/23-10/12/23 FN 3,560.00 13618 VERIZON WIRELESS 9/11/23-10/10/23 PD 1,478.11
13619 WRA, INC SANDRA/HAYNE DRAIN REPLACE PRJ PW 9,731.72 13620 ONE-TIME VENDOR (MISC) CLAIMS EXPENSE FN 50,000.00 13621 THE BANK OF NEW YORK MELLON HILLSBOROUGH REV REFUNDING BOND SER 2023 FN 462,534.70 13622 ADP, LLC NOV '23 MASTERTAX SOFTWARE SUPPORT FN 81.40 13623 AGUILAR & SONS REPAIR - PARK STRIP/CURB/GUTTER TOWNHALL PW 17,327.00 13624 ALEXANDER & ASSOCIATES, INC. LAND SURVEY SHADY LANE PW 2,800.00 13625 ALL FENCE COMPANY, INC. REPAIR - FENCE/GATE REDDINGTON PW 4,470.00 13626 AP TECHNOLOGY LLC 2024 EZ SIGNER MAINT FN 285.00
13627 ARAMARK SERVICES, INC COFFEE & SUPPLIES BP 155.53 13628 AT&T 9/20/23-10/19/23 PD 65.40
13629 AUTO PRIDE CAR WASH, INC SEP '23/OCT '23 CAR WASHES PD 710.69 13630 AUTOMOBILI COUNTRY CLUB, LLC MAINT - AUTO DETAILING 2015 FORD EXPLORER PD 250.00 13631 BAY PRO MAINT - NOV '23 HAYNE/DARRELL ISLAND PW 225.00 13632 BAYSIDE BUILDING MATERIALS INC PARTS - SPRINKLER PW 9.41 13633 BETTER SOURCE LIQUIDATORS FURNITURE - ADMIN OFFICE PW 2,864.75 13634 BOSCO OIL COMPANY GAS/DIESEL PW/PD 8,808.53
13635 CAL-STEAM, INC. #2504 PARTS - LIGHT BULBS/TOILET PW 1,538.45 13636 CALIFORNIA ELECTRIC CO. INSTALL - ACCESS POINTS/PANEL ADMIN OFFICE PW 14,535.22 13637 CINTAS CORPORATION NO 3 UNIFORM CLEANING SERVICE MULTIPLE INVOICES PW 1,476.08 13638 KENNETH TATOLA INSPECT - ANNUAL BACKFLOW TESTING/DEVICES PW 6,390.00 13639 CITY OF FOSTER CITY 7/1/23-6/30/24 CALOPPS FEE BALANCE HR 180.00 13640 CLARK PEST CONTROL PEST CONTROL PD 99.00
13641 CO OF SAN MATEO INFO SERVICES DEPT. SEP'23/OCT'23 MICRO CHANNEL LINES PD 326.02 13642 CO OF SAN MATEO PUBLIC SAFETY COMM OCT-DEC'23 MESSAGE SWITCH PD 2,155.75 13643 COMCAST 10/16/23-11/15/23 MULTIPLE ACCOUNTS PW 486.09 13644 CONCORD TRAILER WORLD, INC REPAIR - ROOF '21 POLARIS PW 2,898.08 13645 COUNTY OF SAN MATEO FY 23-24 ANIMAL CARE SHELTER CONSTRUCTION COST 12,789.00 13646 CSG CONSULTANTS, INC. CIP ADM SEWER 7/29/23-8/25/23 & VARIOUS PRJ PW 125,392.50 13647 D & M TOWING, INC. TOW - VEHICLE TO PD 285.00
13648 DEPARTMENT OF JUSTICE FINGERPRINTING SERVICE PD 720.00 13649 DU-ALL SAFETY, LLC OCT '23 SAFETY CONSULT/NOV '23 SAFETY TESTING PW 7,195.00 13650 EMPLOYMENT DEVELOPMENT DEPT. JUL-SEP'23 UNEMPLOYMENT INSURANCE FEE HR 2,250.00 13651 FARALLON COMPANY INSTALL - DIGITAL SIGN FOUNDATION STATION 33 PW 6,055.00 13652 FLOWATER EQUIP - OCT '23/NOV '23 WATER STATION PW 217.66 13653 G. BORTOLOTTO & CO 2023 STREET RESURFACING PRJ PW 424,593.65 13654 GEVEKO MARKINGS, INC SUPPLIES - OPTAMARK PAVEMENT MARKINGS PW 597.80 13655 GRAINGER SUPPLIES - VARIOUS ITEMS PW 287.11
13656 GRANITE ROCK COMPANY MATERIALS - VARIOUS ITEMS PW 521.57 13657 GRAY'S PAINT & WALLPAPER SUPPLIES - PAINT COUNTRY CLUB PRJ PW 311.13 13658 HASSETT HARDWARE-SAN MATEO SUPPLIES - NAILS PW 6.03 13659 HOUSEAL LAVIGNE ASSOCIATES,LLC GENERAL PLAN/HOUSING ELEMENT FEB '23/APR '23 BP 11,512.50 13660 INFINITY TECHNOLOGIES OCT '23 GIS SERVICE PW 812.50 13661 INTERSTATE TRAFFIC CONTROL PRODUCT PARTS - POST CAPS PW 442.97 13662 JUDY ANN PARDINI FEE - LIVE SCAN FINGERPRINT STAFF PD 595.00 13663 KELLY MOORE PAINT CO., INC SUPPLIES - PAINT PW 733.88 DocuSign Envelope ID: 260D6217-8B82-4D62-BAA8-0FC064B556DE -12-

TOWN OF HILLSBOROUGH
PURCHASES MADE DURING NOVEMBER 2023
13664 KEVIN KASHIWAHARA BACKGROUND INVESTIGATION NEW HIRE PD 2,197.66 13665 LC ACTION POLICE SUPPLY EQUIP - FIREARMS STAFF/HOLSTERS PD 39,216.91 13666 LEXIPOL, LLC SOFTWARE - LAW WELLNESS APP 11/1/23-10/31/24 PD 4,999.00 13667 LITTLER, MENDELSON, P.C. LEGAL SERVICES SEP '23 CM 2,750.00 13668 MAGNET FORENSICS USA, INC SOFTWARE - 2024 AXIOM BUNDLE PD 4,345.00 13669 CA METRO MOBILE COMMUNICATIONS INC EQUIP - REMOTE SPEAKER MICROPHONE PD 738.36 13670 METROPOLITAN PLANNING GROUP INC CONSULT - OCT '23 PLANNER SERVICES BP 7,713.75 13671 NAPA AUTO PARTS - BURLINGAME PARTS - BATTERY BOX #593 PW 99.30 13672 NOEL L. MILLER, INC. REPAIR - WINDSHIELD FORD F350 #321 PW 651.96 13673 ODYSSEY POWER CORPORATION REPAIR - GENERATOR FIRE STATION #33 PW 928.00 13674 PAKPOUR CONSULTING GROUP,INC 23/24 WATER & SEWER REPLACE PRJ DESIGN PW 12,785.00 13675 PG & E 9/30/23-10/31/23 MULTIPLE ACCOUNTS 2,192.99 13676 PLAN JPA OCT '23 DEDUCTIBLE CLAIMS VARIOUS ITEMS 4,865.50 13677 POWER DMS, INC SOFTWARE-POWERTIME SUBSCRIPTION 11/1/23-10/31/24 2,312.50 13678 PRIORITY 1 MAINT - MULTIPLE VEHICLES PD 10,643.17 13679 QUENCH USA, INC EQUIP - WATER STATION 9/28/23-10/27/23 PD 80.94 13680 R & A JANITORIAL SERVICE, LLC OCT '23/NOV '23 JANITORIAL SERVICES PW 20,887.44 13681 REDWOOD GENERAL TIRE CO. MAINT - TIRES TRUCK MULTIPLE VEHICLES PW 1,677.85 13682 ROBERT HALF INTERNATIONAL INC TEMP SERVICE - W/E 10/20/23-11/10/23 FN 8,965.00 13683 SAN MATEO COUNTY FORENSIC LAB SEP'23/OCT'23 CRIME LAB SERVICES PD 5,493.86 13684 SAN MATEO LUMBER CO., INC MATERIALS - WOOD PW 24.48 13685 SELWAY CONSTRUCTION REPAIR - ROOF/WALLS CORP YARD GARAGE PW 58,750.00 13686 SHAWN KIRBY SEP '23 POOL SERVICE 1640 RENTAL PW 200.00 13687 STANDARD INSURANCE COMPANY NOV '23 GRP LIFE/ADD/LTD ASSESSMENT 2,878.51 13688 STAPLES ADVANTAGE OFFICE SUPPLIES - ALL DEPARTMENTS 639.65 13689 STATE WATER RESOURCES CONTROL FEE - WATER OPERATOR CERTIFICATE D2 STAFF PW 180.00 13690 TELECOMMUNICATIONS ENGINEER ASSOC OCT'23/NOV'23 COMMUNICATION CENTER/BASE PD 4,691.00 13691 TESCO CONTROLS, LLC MAINT - SCADA SUPPORT SERVICE PW 8,680.47 13692 THIRKETTLE CORPORATION SOFTWARE - ANNUAL SET UP ANALYTICS/SUPPORT PW 5,638.63 13693 THOMSON WEST SEP '23/OCT '23 INVESTIGATIVE WEBSITE PD 2,030.00 13694 TRAFFIC LOGIX CORPORATION SOFTWARE - CLOUD ACCESS 11/3/23-11/3/30 SIGNS PW 4,000.00 13695 TURBO DATA SYSTEMS, INC. SEP'23/OCT'23 CITATION PROCESSING & SCANNER PD 3,410.78 13696 VERIZON WIRELESS 9/24/23 - 10/23/23 MULTIPLE ACCOUNTS PW/PD 2,143.88 13697 VIKING SHRED LLC NOV '23 DESTRUCTION SERVICES PD 82.99 TOTAL GOODS & SERVICES FOR THE MONTH PAID BY CHECK $2,539,498.01 CALPERS RETIREMENT CONTRIBUTIONS 334,864.73
VISA PAYMENTS 35,512.43
RETIREE HEALTH REIMBURSEMENTS 80,563.95
OTHER ELECTRONIC PAYMENTS 0.00
TOTAL GOODS & SERVICES FOR THE MONTH $ 2,990,439.12
DocuSign Envelope ID: 260D6217-8B82-4D62-BAA8-0FC064B556DE -13-

TOWN OF HILLSBOROUGH
San Mateo County
1600 Floribunda Avenue
Hillsborough, CA 94010
3 CONSENT CALENDAR

CITY COUNCIL MEETING
DECEMBER 11, 2023

AGENDA STAFF REPORT
ITEM SUBJECT: ACCEPTANCE OF THE ANNUAL COMPREHENSIVE FINANCIAL REPORT (ACFR) TOGETHER WITH THE INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING FOR THE YEAR ENDED JUNE 30, 2023 PURSUANT TO CEQA GUIDELINE 15378
SUMMARY: Local ordinances and state statutes require that the Town publish a complete set of financial statements at the close of each fiscal year presented in conformity with generally accepted accounting principles (GAAP) and audited in accordance with generally accepted auditing standards (GAAS) by a firm of licensed, certified public accountants. Pursuant to that requirement, the Town’s ACFR, audited by Eide Bailly, is hereby submitted.

Audit and Annual Comprehensive Financial Report
The Town has received an unmodified opinion on the financial statements for the fiscal year ending June 30, 2023, from Eide Bailly's auditors. The audit firm conducts its audit in accordance with generally accepted auditing standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. The standards require that the auditors plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The auditors’ unmodified opinion is presented in the Annual Comprehensive Financial Report.

The Town participates in the Certificate of Achievement in Financial Reporting award program administered by the Government Finance Officers of America. It has successfully obtained the award for the past twenty-one years. Staff believes the June 30, 2023, report will qualify for the award.

Fiscal Year Financial Results
Executive Summary
The General Fund is a net deficit (draw) on reserves on June 30, 2023. General Fund revenues were $1.5 million (5%) higher than the budget primarily due to the one-time release of property tax in lieu of vehicle license fees (MVLF) and improved investment income. General Fund expenditures, excluding transfers, are $0.1 million under budget due to the timing of services and projects. Transfers out of $4.2 million comprise a one-time transfer of $2.7 million for approved American Rescue Plan Act (ARPA) capital projects and $1.5 million for storm drain capital improvements. The ARPA revenues were received in the prior year and held in Assigned General Fund reserves, anticipating a transfer from the General Fund to the Water and Sewer funds for approved capital projects in 2022-23.
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December 11, 2023

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The Water Fund revenues were below budget and the prior year’s level, primarily due to lower usage for drought conservation and significant wet winter.

The Sewer Fund revenues are on budget and grew by 4.8% from the prior year. The Sewer Fund Statement on Net Position reflects the liability and capacity right assets (intangible) for the City of San Mateo for the Town’s capacity share at the new wastewater treatment plant. On June 30, 2023, the project is accounted for at a 78% completion basis.

On June 8, 2023, the Town refunded the Water and Sewer Funds’ Certificates of Participation (COP) and terminated the interest rate swaps with 2023 Revenue Refunding bonds. The debt service on the new bonds is projected to be comparable to the COP debt service in the Water and Sewer funds, and the debt risk profile is improved with this transaction. The financial results as of June 30, 2023, incorporate the final accounting for this transaction, including a one-time transfer from the Sewer Fund to the Water Fund of approximately $1.1 million.

The net pension liability for the Town increased $17.7 million over the prior year, for a total liability of $36.1 million, primarily due to CalPERS’ investment loss from FY 2021-22.

The Statement of Net Position reflects the implementation of GASB 96-Subscription-Based Information Technology Arrangements. Staff reviewed over fifty information technology agreements and determined that approximately seven agreements are subject to the accounting standard. The Government-Wide statements reflect the intangible asset of $1.1 million and the liability of $0.9 million.

Results by Fund
The financial highlights are summarized in the Management’s Discussion and Analysis (MD&A), which can be found on pages 6 through 18 of the financial report.

General Fund
The General Fund is the primary operating fund of the Town. The fiscal year-end results showed a net deficit of $0.3 million in the General Fund drawn from reserves. The General Fund ending fund balance on June 30, 2023, is $31.5 million, of which $15.2 million is reserved for contingencies by policy and $5.3 million is restricted in the Section 115 pension trust. The remaining funds are assigned and held for capital projects and future contingencies. The General Fund contingency reserve policy calls for a minimum of 30% of operating expenditures with a goal of 50%. This reserve is held for contingencies such as disaster, economic downturn, or other financial impacts.

General Fund revenues for the fiscal year 2022-23 are $34.4 million and are $1.5 million (5%) higher than budget primarily due to higher excess ERAF, Motor Vehicle License Fees, and Investment Income. The MVLF distribution included a one-time release of FY 2020-21 reserves.

General Fund expenditures for the fiscal year 2022-23 are $34.7 million and $0.2 million (-1%) favorable to budget, primarily driven by the timing of projects. The expenditures are $2.7 million (8%) higher compared to last fiscal year, primarily driven by increases in salaries and benefits, one-time transfers for ARPA-approved capital projects, the contribution to the Central County Fire Department JPA (which primarily increased labor-related costs), and an increase in materials and -16-
Agenda Staff Report - Hillsborough City Council
December 11, 2023

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services. The materials and services increase are attributable to an increase in legal costs, winter storm repairs (reimbursable), and information technology software.

Proprietary Funds – Water and Sewer Enterprise
Proprietary funds are used to account for activities that are fueled by charges for the services.

Enterprise Funds account for external activities of the water and sewer utilities, while the Internal Service Fund accounts for internal (interdepartmental) activities for replacing vehicles and equipment.

The Town’s water and sewer enterprise funds should be self-supporting; the sale of water and the service charges to sewer customers generate the revenue needed to support these utilities' operations, debt service, and capital needs.

Water Enterprise Fund
The Water Enterprise Fund's operating revenue is generated from charges to water customers.

Total Water Enterprise Fund’s revenue is $16 million and is $1.1 million below budget. The variance is attributable to lower water operating revenue (-$2.5 million) due to reduced usage from conservation and a significant wet winter, offset by higher investment income ($0.4 million) due to improved market conditions and higher transfer revenue ($1.0 million) for the final accounting allocation on the one-time bond transaction. Water unit sales were 14% below last fiscal year.

Total operating expenses are $13.6 million and are $0.7 million (5%) below budget. Water purchases are $0.8 million (14%) below budget and 1% below last year. Water unit purchases were 12% below the previous fiscal year. The SFPUC adopted a wholesale water rate increase to $4.75 per ccf. (16% increase) on July 1, 2022.

Water Fund capital infrastructure outlay is $1.8 million below budget, primarily due to the timing of the Darrell Tank Site Improvement project. Water projects in FY 2022-23 included Water main replacement, Highline water connection, Darrell tank site improvement, Water tank improvements, Scada improvements, and Darrell pump line rehabilitation and replacement project. Projects are encumbered for three years.

The Water Enterprise's net position of $36.4 million on June 30, 2023, increased $2.0 million over the prior year. Net position consists of $24.8 million net investment in capital assets and $11.6 million in unrestricted net position. Reserves are restricted for use solely in the Water Enterprise Fund.

Sewer Enterprise Fund
The sewer charge is placed annually on the property tax bill for residential customers and the water bill for non-residential customers. Total Sewer Enterprise Fund’s revenue is $17.4 million and is $0.4 million (2%) above budget. A 4% increase in sewer rates was adopted on July 1, 2022.

The transfer revenue of $1.7 million is for storm drain capital improvements ($0.6 million) and approved ARPA capital improvements ($1.091 million).
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Agenda Staff Report - Hillsborough City Council
December 11, 2023

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Investment income is $0.4 million above budget due to improved market conditions.

Total expenses are $13.9 million and are on budget.

Debt service includes principal and interest on the State Revolving Fund loan, the Certificates of Participation, and the first year of debt service on the long-term funding agreement with the City of San Mateo for the Town’s contribution to the Clean Water (treatment plant) program. The budget and actual also reflect the one-time initial principal payment of $2.4 million to the City of San Mateo on the agreement.

The Sewer Fund’s capital infrastructure outlay is $6.4 million and is above budget due to the timing of project spending (projects are encumbered for three years). Capital projects included smoke testing and video inspection, priority basin I/II rehabilitation program, flow metering/modeling, Sandra/Hayne storm drain, and high-priority storm drain improvements.

The Sewer Enterprise Fund's net position of $44.5 million on June 30, 2023, increased $3.5 million over the prior year. Net position consists of $23.5 million in net capital investment, $0.4 million restricted for debt service, and $20.6 million in unrestricted net position. Reserves are restricted for use solely in the Sewer Enterprise Fund.

Capital
The Town spent $10.5 million on capital purchases and infrastructure, $1.3 million on governmental activities for vehicles, IT equipment, and building improvements, and $9.2 million in infrastructure in the Water and Sewer Enterprise Funds. Improvements were made to the Darrell water tank. water mains and pump stations, sewer priority basins, flow metering, sewer main video inspection, and storm drain improvements.

In addition, the Town added $11.4 million to the intangible capital asset for sewer treatment plant capacity rights for the Town’s share of the City of San Mateo’s Clean Water treatment plant. The Town contracts for sewer treatment with the City of San Mateo for sewer flow from the southern wastewater treatment on the south half of the Town. The current construction includes wastewater treatment capacity for the southern portion of the Hillsborough sewer collection system. The asset reflects the percentage completion of the project (78%). See the Long-Term liabilities explanation below.

Debt and Long-Term Liabilities
Entity-wide long-term liabilities totaled $113 million on June 30, 2023, comprised of debt, funding agreement with the City of San Mateo, compensated absences, pension, and other postemployment benefits (OPEB). There is a net increase of $27 million over the prior year. The LongTerm Debt footnote to the financial statements outlines each source of debt and the key terms and payment schedule.
• The Revenue Refunding Bonds Series 2023 (“Series 2023”) refunded the Certificates of Participation (“COP”) and terminated the interest rate swaps in June 2023. Debt service on Series 2023 is expected to be comparable to the previous COP debt service in the Water and Sewer Fund, and the new debt improves the risk profile of the Town’s debt. -18-
Agenda Staff Report - Hillsborough City Council
December 11, 2023

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• The net pension liability increased significantly ($17.5 million) over the prior year, primarily due to the CalPERS investment loss in FY 2021-22.
• The Town’s long-term funding agreement for its share of the San Mateo Clean Water Treatment Plant is a 30-year payment schedule. The loan payable on the Sewer Enterprise Statement of Net Position reflects a percentage completion of 78%. FY 2022-23 debt service includes the first year of principal and interest and a one-time initial principal payment of $2.4 million.

The Town received an AAA-A1 rating on the new Revenue Refunding Bonds Series 2023.

Government-Wide Net Position
The Town’s financial condition is presented in the Statement of Net Position on page 23 of the report. This statement is prepared on a full accrual basis of accounting; therefore, it reflects capital assets and liabilities in the net position.

Total entity-wide net position is $110.2 million on June 30, 2023. The Town's net position increased by $13.2 million (13.6%). Net position comprises $27.1 million in governmental activities and $83.1 million in business-type activities. The governmental activities increase of $7.1 million (35.5%) is attributable to revenues that exceed expenses by $9.9 million, offset by transfers out for capital funding of $2.9 million. The business-type activities increase of $6.1 million (7.9%) is attributable to revenues exceeding expenses of $3.2 million and capital transfer of $2.9 million.

Governmental Activities Net Position, which includes the General Fund and the other governmental funds, is $20.0 million on June 30, 2023, and is comprised of $9.3 million in unrestricted, $9.5 million in net investment in capital assets, and $1.2 million that is restricted for capital projects.

Business-Type Activities Net Position is $77.0 million on June 30, 2023, and comprises $35.2 million in unrestricted, $40.5 million in net investment in capital assets, and $1.2 million restricted for debt service.

Other
The Town continues to monitor results in risk areas:

1. Water Fund reserve levels and water sales are monitored to ensure adequate funds are available to withstand conservation caused by drought.

2. Excess ERAF and Property Taxes In Lieu of Motor Vehicle License Fees (MVLF) – There has been an MVLF shortfall in the last few years. The process requires that the County file a claim with the State Department of Finance for the shortfall. The item is subject to approval by the State in each budget cycle, but it is not a guaranteed item. The Town partners with the County of San Mateo on more permanent solutions to these unpredictable revenue streams.

3. Investment income - Market conditions are expected to remain unpredictable.

4. CalPERS’s changes in the discount rate or other policy changes will increase the Town’s annual contribution, which puts pressure on the budget. -19-
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December 11, 2023

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5. The Town has an agreement with the City of San Mateo to share in the costs of the new San Mateo Clean Water treatment plant. As of June 30, 2023, the project is 78% complete. The Town continues to monitor the project costs.

6. The High Line water project funding is anticipated from a Federal BRIC grant and city contributions shared by the Town of Hillsborough and the cities of Millbrae and Burlingame. Project and cost-sharing agreements are under review with the cities.

The Financial Advisory Committee reviewed the audit results and ACFR at its regularly scheduled meeting on November 30. 2023 and recommended acceptance of the report.

FISCAL IMPACT: There is no fiscal impact with the acceptance of the report.

PREPARED BY: Jan Cooke, Finance Director
ATTACHMENT:

1. Annual Comprehensive Financial Report for the Fiscal Year Ended June 30, 2023

2. Auditor’s Communication with Those Charged With Governance RECOMMENDATION: Accept and file the Annual Comprehensive Financial Report together with the Independent Auditors’ Report on Internal Control over Financial Reporting for the fiscal year ended June 30, 2023.
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Annual
Comprehensive
Financial Report
For the Fiscal Year Ended June 30, 2023
Town of Hillsborough
Phone: (650) 375-7400
Fax: (650) 375-7475
1600 Floribunda Avenue, Hillsborough, CA 94010
www.hillsborough.net -21-
ATTACHMENT 1
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Town of Hillsborough, California
Hillsborough, California
Annual Comprehensive Financial Report
Fiscal year Ended June 30, 2023
Prepared by the Finance Department
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TOWN OF HILLSBOROUGH

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2023

TABLE OF CONTENTS
Page

INTRODUCTORY SECTION
Letter of Transmittal ii
GFOA Certificate of Achievement x
Organization Chart and Principal Officials xi

FINANCIAL SECTION
Independent Auditor’s Report 2
Management’s Discussion and Analysis 6
Basic Financial Statements:

Government-wide Financial Statements:

Statement of Net Position 23
Statement of Activities 25
Fund Financial Statements:

Balance Sheet - Governmental Funds 26
Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds 27
Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to
the Statement of Activities 28
Statement of Fund Net Position - Proprietary Funds 29
Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds 31
Statement of Cash Flows - Proprietary Funds 32
Notes to the Financial Statements 35
Required Supplementary Information:

Schedule of Revenues, Expenditures and Changes in Fund
Balances - Budget and Actual - General Fund 75
Schedule of Revenues, Expenditures and Changes in Fund
Balances - Budget and Actual - Police and Fire Special Tax Fund 76 Schedule of Proportionate Share of the Net Pension Liability 77 Schedule of Contributions 78
Schedule of Changes in the Net OPEB Liability and Related Ratios 79 Schedule of OPEB Contributions 80
Notes to the Required Supplementary Information 81
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TOWN OF HILLSBOROUGH

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2023

TABLE OF CONTENTS (CONTINUED)
Supplementary Information:

Combining Statements and Individual Fund Schedules:

Nonmajor Governmental Funds:

Combining Balance Sheet 84
Combining Statement of Revenues, Expenditures and Changes in Fund Balances 85
Schedule of Revenues, Expenditures and Changes in Fund
Balances - Budget and Actual
Gas Tax Fund 86
Measure "A" Fund 87
Measure "W" Fund 88
Police Grants Fund 89
Capital Assets Used in the Operation of Governmental Funds:

Comparative Schedules by Source 90
Schedule by Function and Activity 91
Schedule of Changes by Function and Activity 92

STATISTICAL SECTION
Net Position by Component 95
Changes in Net Position 96
Governmental Activities Tax Revenues by Source 98
Fund Balances of Governmental Funds 99
Changes in Fund Balances 100
Property Tax Dollar Breakdown 101
Net Taxable Assessed Value History 102
Direct and Overlapping Property Tax Rates 103
Principal Property Taxpayers 104
Property Tax Levies and Collections 105
Ratio of Outstanding Debt by Type 106
Computation of Direct and Overlapping Debt 107
Legal Debt Margin Information 108
Schedule of Enterprise Funds Bond Coverage 109
Water and Sewer Rates 110
Demographic and Economic Statistics 111
County of San Mateo and Neighboring Cities 112
Full-Time Equivalent City Government Employees by Function 113 Operating Indicators by Function 114
Capital Assets Statistics by Function 115
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i

INTRODUCTORY SECTION
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ii
December 1, 2023
Honorable Mayor and Members of the City Council,
Members of the Financial Advisory Committee,
And Citizens of the Town of Hillsborough
Town of Hillsborough, California

ANNUAL COMPREHENSIVE FINANCIAL REPORT
The Annual Comprehensive Financial Report of the Town of Hillsborough for the fiscal year ended June 30, 2023 is hereby submitted. The financial report contains a complete set of audited financial statements prepared in accordance with Generally Accepted Accounting Principles (GAAP) as promulgated by the Governmental Accounting Standards Board (GASB).

The report was prepared by the Finance Department, which is responsible for both the accuracy of the presented data and the completeness and fairness of the presentation of this report, including all disclosures.

Information contained in this report is based upon a comprehensive framework of internal controls that has been established for this purpose. The objective of internal controls is to provide reasonable, rather than absolute, assurance that the Annual Comprehensive Financial Report information is accurate in all material aspects. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material respects.

The Town prepared the Annual Comprehensive Financial Report using the financial reporting requirements as prescribed by generally accepted accounting principles. This GASB Statement requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of management’s discuss and analysis (MD&A). This letter of transmittal is designed to complete the management’s discussion and analysis and should be read in conjunction with it. The management’s discussion and analysis can be found immediately following the report of the independent auditor.

The Annual Comprehensive Financial Report is organized into three sections:
• The Introductory Section includes the transmittal letter, the Town’s organization charge and a list of principal officials. This section is intended to familiarize the reader with the organizational structure of the Town, the nature and scope of the services it provides, and the specifics of its legal operating environment.
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• The Financial Section includes the management’s discussion and analysis, the basic financial statements, notes, and other required supplementary information. The basic financial statements include the government-wide financial statements that present an overview of the Town’s entire financial operations and the fund financial statements that present the financial information for each of the Town’s major funds, as well as non-major governmental and other funds. Also included in this section is the independent auditor’s report on the financial statements and schedules. • The Statistical Section contains comprehensive statistical data on the Town’s financial, physical, economic, and demographic characteristics.

The Town’s Annual Comprehensive Financial Report presents the government and its component units, entities for which the government is considered financially accountable. Blended component units, although legally separate entities, are, in substance, part of the government’s operations. For financial reporting purposes, the Town’s basic financial statements include all funds that are controlled by or are dependent upon the Town City Council. The operations of the Hillsborough Public Improvement Corporation (HPIC) were established to assist in the financing of the acquisition of public improvements on behalf of the Town.

HPIC is combined with that of the Town’s Water and Sewer funds in these financial statements. The City Council sits as its Board of Directors and has full accountability for its operations. The HPIC does not issue a separate financial report.

INDEPENDENT AUDIT
The Town of Hillsborough’s financial statements have been audited by Eide Bailly, a firm of licensed certified public accountants. The goal of the independent audit is to provide reasonable assurance that the financial statements of the Town of Hillsborough for the fiscal year ended June 30, 2023, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded based upon the audit, that there was a reasonable basis for rendering an unmodified opinion that the Town of Hillsborough’s financial statements for the fiscal year ended June 30, 2023 are fairly presented in conformity with GAAP.

PROFILE OF THE GOVERNMENT
The Town of Hillsborough is a residential community located in San Mateo County, California and incorporated on May 5, 1910. The Town initially included a series of large estates, some of which, over time, were divided into the now existing mix of large estate parcels, acreage, and minimum one-half acre lots. The Town is located west of Highway 101 and El Camino Real and east of Highway 280 within a short commute to San Francisco and minutes from San Francisco International Airport. The community location offers excellent weather and a geographic advantage to its residents. Greenbelt canyons are located throughout the community’s hilly topography. The community is well known for its trees and rural nature.

The community’s residents provide a commendable level of support to the municipal government through advisory bodies, a community beautification foundation, neighborhood network for emergency and other purposes, and communication through a quarterly newsletter and monthly E-Announcements. The Town has excellent, award-winning schools. Public institutions include three distinguished elementary schools and a middle school. There are three private schools located in the community. -30-
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The Town has a land area of approximately 6.23 square miles and a population of approximately 10,900. It is empowered to levy a property tax on both real and personal property located within its boundaries. The Town residents approved a public safety special tax designated for public safety operations and capital expenditures including paramedic and fire automatic aid response programs.

The Town operates under the council-manager form of government. Policy-making and legislative authority are vested in the governing city council, which consists of a mayor, a vice-mayor and three city council members. City Council members are elected to overlapping four-year terms, in even numbered years. The City Council members select the Mayor and Vice-Mayor every year. The City Council is responsible among other things, for passing ordinances, adopting the budget, appointing commission and board members, and hiring the City Manager and the City Attorney. The City Manager is responsible for carrying out the policies and ordinances of the governing city council, overseeing the day-to-day operations of the Town, and appointing department heads.

The Town of Hillsborough provides a full range of services, including police and fire protection, building permitting and inspection, land use management, maintenance of streets, public facilities, water, sewer, and storm drain infrastructure. The Town contracts for recreation and library services. The Town is a member of the Central County Fire Department Join Powers Authority for fire with the City of Burlingame and the JPA provides fire services to the City of Millbrae on a contractual basis.

ACCOUNTING AND BUDGETING SYSTEMS
The Town’s financial picture is more readily understood with the general introduction to our accounting and budgeting systems. These systems provide the means for allocating available resources and for the proper control and recording of revenues and expenditures.

Accounting System and Fund Accounting: All governmental funds use the modified accrual basis of accounting. Revenues are recorded when measurable and available, rather than when received, and expenditures are recorded when the liability is incurred, rather than when paid. Conversely, the accrual basis of accounting is used for proprietary funds. All governmental funds are accounted for on a spending (or funds flow) measurement focus.

Internal Controls: Town management is responsible for establishing and maintaining adequate internal controls to ensure that Town assets are protected from loss, theft, or misuse and to assure that adequate accounting data is compiled to allow for the preparation of financial statements that conform to generally accepted accounting principles. Internal controls are designed to provide reasonable, but not absolute assurance that these objectives are met. The concept of reasonable assurance recognizes that that the cost of a control should not exceed the benefits to be derived and that cost-benefit analysis requires prudent estimates and judgments by management.

The Finance Department establishes internal accounting controls to provide management reasonable assurance regarding the safeguarding of assets and the reliability of financial records for preparing financial statements and maintaining asset accountability. The Town’s finance staff, and the independent auditor consider the internal controls over financial reporting in planning and performing the annual audit. The independent auditors test the Town’s internal controls and make inquiries into the staff’s knowledge of fraud or the occurrence of fraud.
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Cash Management: The Town pools cash from all operating sources to manage cash flow and invest idle funds. The Finance Director serves as the Town’s Treasurer and manages the portfolio of funds in accordance with the City Council’s adopted Investment Policy and the California Government Code Sections 53601 and 56535. The Finance Director submits a quarterly investment report to the City Council.

Debt Administration: The Town has a AAA general credit rating, and the Town’s Enterprise Fund longterm bond ratings are AAA by S&P Global Ratings with a stable outlook. The Town also has a State Water Resources Control Board loan for its improvements to the sewer system, and a California Resources Conservation and Development Commission loan for its energy savings projects and a loan with the City of Mateo for Capacity Rights at the new wastewater treatment plant. The Town annually evaluates each outstanding debt obligation that is subject to arbitrage rebate requirements and determined that there was no arbitrage rebate liability as of June 30. 2023. Additional information pertaining to the Town’s outstanding long-term debt can be found under Long-Term Debt in the Notes to the Basic Financial Statements and in the Statistical Section under Legal Debt Margin.

Budget Process and Control: The annual budget serves as the foundation for the Town of Hillsborough’s financial planning and control. The Town’s departments are required to submit requests for appropriation to the City Manager who uses these requests as the starting point for developing a proposed budget. Prior to June 30 of each year, the City Manager submits to the City Council a proposed operating and capital budget for review. The City Council holds public hearings, and a final budget is adopted on or before June

30. The appropriated budget is prepared by fund, function, and department. The department heads may make transfers of appropriations within a department. The City Manager may transfer budgeted amounts within any fund. Any revisions that alter the total expenditures of any fund must be approved by the City Council.

The legal level of budgetary control (i.e., the level at which expenditures may not legally exceed appropriations) is the fund level.

Budget-to-actual comparisons are provided in the Annual Comprehensive Financial Report for each individual governmental fund for which an appropriated annual budget has been adopted. For the general fund and other major governmental fund(s), this comparison is presented as part of the required supplementary information in this report. For governmental funds other than the major funds, with appropriated annual budgets, this comparison is presented in the governmental fund subsection of this report.

LOCAL ECONOMY
The Town is a purely residential community except for its schools and private clubs. The Town’s major revenues are from property taxes and various property value-based revenues.

Property taxes, which are based on assessed values, are one of the Town’s largest sources of revenue, accounting for approximately 65% of Town’s General Fund revenues. Fiscal year 2022-23 property tax revenues were $20.6 million, up 7% from the prior year. According to data obtained from the San Mateo County Assessor, the Town had a total assessed value of $12.5 billion for the fiscal year 2022-23, an increase of $0.7 billion, or 5.7% from prior year.

The Town operates a Water Enterprise and a Sewer Enterprise for water and sewer services. The cost of operations, debt service and capital improvements are primarily funded through user charges. The Town tracks the revenue requirements to ensure that there are adequate revenues to cover expenses and to determine the need for adjustments to rates.
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The biennial street repaving program continues to improve the street quality. Streets are funded from several sources including general revenues as well as special revenues such as Gas Tax, Measure A, Measure W, Measure M and Road Maintenance Rehabilitation Act (RMRA) monies.

RELEVANT FINANCIAL POLICIES
One of the Town’s key financial policies is the General Fund Reserve Policy. The General Fund reserve policy requires a minimum of 30% of operating expenditures, with a goal of 50% of operating expenditures.

The reserve policy serves as a contingency reserve to mitigate revenue volatility, an economic downturn, a natural disaster, or other financial impact.

The Town has Policy No. 409 - Budget and Fiscal Policies to maintain sound fiscal practices. The policy outlines budget and fiscal policies that range from the financial objectives, financial reporting and budget administration, user fee cost recovery goals, Enterprise Fund fees and rates, investments, appropriations limitations, fund balance designations and reserves, capital improvement management and financing, debt management and other key areas to promote sound fiscal practices.

LONG-TERM FINANCIAL PLAN
The Town provides an extended financial projection as part of the budget process, allowing the Town to be proactive in seeking both short-term and long-term budget solutions. The projection takes into consideration various financial and economic factors received from multiple sources and includes information such as property value trends, consumer price indices, state budget and other qualitative trends.

The FY 2023-24 Adopted Budget projects a General Fund Reserve balance of $29.4 million with $17.5 million reserved per policy, $5 million restricted for Section 115 pension trust and the remainder reserved for future uses such as projects, capital or other items approved by City Council. To balance the financial picture, the Town also has $46 million in long-term pension and OPEB liabilities.

The Town’s water, sewer and storm drain infrastructure requires rehabilitation. The five-year capital improvement program is $18.9 million for water, $20.3 million for sewer, and $10.7 million for storm drains and projects are prioritized in the master plan. The Town is also paying its proportionate share of capital improvements to the San Francisco Hetch Hetchy water system, its water source.

The Town pays for treatment plant services in Burlingame and San Mateo pursuant to the disposal contracts, and the San Mateo treatment plant is undergoing major improvements with the Clean Water Program. The Town and the City of San Mateo finalized an amended agreement for the Town’s participation in the program, with a cost of $47.6 million (excluding interest) over thirty years. -33-
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CalPERS’ pension policies continue to have an impact on the Town’s long-term projections. CalPERS’ four-year Asset Liability Management review cycle occurred in 2021 and results in increased required contributions starting in FY 2024-25. Contributions are currently projected to double over the next ten years and then start to taper downward. The Town has been proactive in managing its costs for many years including paying down its side fund liabilities, collaborating with employees to pay a share of the employer contribution, implementing an additional pension formula tier for miscellaneous plan employees, and funding nearly $5 million into a Section 115 pension trust that will be used to smooth the budget impact of increasing required pension contributions. The notes to the financial statements include further disclosures on the pension liability.

Educational Revenue Augmentation Fund (ERAF) revenue is difficult to anticipate due to complicated State school funding formulas, which impacts the Town’s property taxes in-lieu of motor vehicle license fees (MVLF) and Excess ERAF annual revenue. In the 1990’s, the State shifted property taxes from cities, county, and special districts to school districts to supplant funding that the State was providing to school districts. The County Controller places funds that shifted from local government agencies to the ERAF Fund. The Controller then disburses these funds to school districts based upon the formula prescribed by State law. Any funds remaining in ERAF are returned to the cities, county, and special districts in proportion to the amount they contributed. Excess ERAF revenue to the Town was $2.9 million or 9% of revenue in FY 2022-23. Similarly, MVLF is paid from the property tax pool and as the number of school districts shift to Basic Aid, the amount in the pool to pay MVLF is reduced. Any shortfall in MVLF has to be applied for in the State budget and is subject to approval in the State budget process. Although the State has provided for these shortfalls in prior years, future funding is unpredictable. The Town and cities are partnering with the County of San Mateo on identifying permanent fixes.

MAJOR INITIATIVES
The major initiatives outlined in the FY 2023-24 Adopted Budget are:

Community and Customer Service
• Improve transparency by updating the Town’s methods of communication and implementing new systems to provide access and ease of use for accessing documents and conducting business with the Town (Agenda Management system and Records Retention system, Permitting Tracking Software). • Develop the High Line Water project to provide disaster resiliency and cost savings by starting the water supply at a higher elevation at the Harry Tracy Water Treatment Plant. FY 2023-24 includes developing the partner city agreements, securing grant funding for the project, and completing design and environmental reviews.
• Develop the Safety Element of the Town’s General Plan which sets forth the Town’s goals and policies which are intended to minimize risk to people, and property associated with natural and manmade hazards. • Implement the Tree Ordinance by providing written policy and educational materials to residents. • Develop a Bike/Pedestrian Master Plan, work with local students to develop a Youth Council/Summit and explore additional REACH code/electrification opportunities. • Monitor and implement legislative and regulatory requirements including wireless, storm water, water conservation and flood inundation regulations, gas powered landscape equipment, and water drought. • Continue emergency preparedness training and community education, including a community evacuation drill using the Zone Haven online tool.
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Financial Stability
• Prepare long term financing plan for storm drain capital program and facilities. • Implement new financial system (phase two for utility billing). • Complete American Rescue Plan Project spending.
• Track and apply for grant funding where available.

Land Use Planning
• Implement the policies and programs of the Housing Element. • Complete CEQA for specific areas in the Housing Element. • Complete design and construction of Eucalyptus Pathway. • After adoption of Housing Element, develop work plan for additional elements of the General Plan Land Use, Circulation, Conservation, Open Space, Noise, Safety, and Climate. • Update, if necessary, the Objective Design Standards used in reviewing plans in conjunction with Housing Element.
• Engage community in process to explore Town Hall Campus options that support a new police facility, housing as outlined in the Housing Element, and opportunities for community space. • Conduct community forums to engage with residents on Accessory Dwelling Unit program (ADU) and Design, Permitting and Construction Process Forum.
• Monitor and work with trustee on plans for the Baywood property donation. • Enhance the leaf blower education and programs and explore expansion of all electric options. • Work with Firewise to review options to expand Chapter 7A regulations that require additional home hardening for fire safety.
• Explore opportunities for new parks and/or dog park sites.

Community Partnerships
• Continue to provide community events including Memorial Day parade, Shred-It event, Concours d’Elegance, Veteran’s Day event, and Light Up the Town. • Review and revise fundraising permit requirements.
• Work with Hillsborough Recreation to support their programs and work collaboratively to increase recreational opportunities for older adults.
• Continue to collaborate with community groups including Hillsborough City School District, Hillsborough Beautification Foundation, Hillsborough Neighborhood Network, Firewise, Concours d’Elegance, Carolands and other private groups that serve the Town. • Develop an “Adopt A Storm Drain” program.

Regional Partnerships
• Conduct studies and develop partnerships for the new High Line Water Project. • Continue participation/representation in Peninsula Clean Energy JPA, BAWSCA, 21 Elements, RICAPS, NPDES, Airport Community Roundtable, Council of Cities, PLAN, and SBWMA. • Participate in the Age Friendly City program.
• Work with Town’s lobbyist to implement Council’s Legislative Platform. -35-
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AWARDS AND ACKNOWLEDGEMENTS
Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the Town of Hillsborough for its Annual Comprehensive Financial Report for the fiscal year ended June 30, 2022. This was the twentieth consecutive year that the Town has achieved this prestigious award. To be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized Annual Comprehensive Financial Report. This report must satisfy both generally accepted accounting principles and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. We believe that our current Annual Comprehensive Financial Report continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate.

We wish to extend our appreciation to all the departments who contributed financial information to the report.

We would also like to thank the members of the City Council and the Financial Advisory Committee for their interest and support in planning and conducting the financial operations of the Town in a responsible and progressive manner.

Respectfully submitted,
Doug Davis Jan Cooke
City Manager Finance Director
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ORGANIZATIONAL CHART AND PRINCIPAL OFFICIALS
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1 FINANCIAL SECTION
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2 Independent Auditor’s Report
To the Honorable Mayor and Members of the City Council
of the Town of Hillsborough
Hillsborough, California
Report on the Audit of the Financial Statements
Opinions
We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Town of Hillsborough, California (Town), as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise the Town’s basic financial statements as listed in the table of contents.

In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the Town of Hillsborough, California, as of June 30, 2023, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinions
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States (Government Auditing Standards). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Town 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.

Adoption of New Accounting Standard
As discussed in Note 15 to the financial statements, the Town has adopted the provisions of Government Accounting Standards Board (GASB) Statement No. 96, Subscription-Based Information Technology Arrangements, for the year ended June 30, 2023. Accordingly, a restatement has been made to the governmental activities net position as of July 1, 2022, to restate the beginning net position. Our opinions are not modified with respect to this matter.

What inspires you, inspires us. | eidebailly.com
4040 Campbell Ave., Ste. 200 | Menlo Park, CA 94025-1053 | T 650.522.3400 | F 650.645.7393 | EOE What inspires you, inspires us. | eidebailly.com
4040 Campbell Ave., Ste. 200 | Menlo Park, CA 94025-1053 -41- | T 650.522.3400 | F 650.645.7393 | EOE 3 Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Town’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 Town’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 Town’s ability to continue as a going concern for a reasonable period of time.
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4 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, schedule of revenues, expenditures and changes in fund balances – budget and actual for the general fund, schedule of revenues, expenditures and changes in fund balances – budget and actual for the police and fire special tax fund, schedule of proportionate share of the net pension liability, schedule of contributions, schedule of changes in the net OPEB liability and related ratios and the schedule of OPEB contributions be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with GAAS, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Town’s basic financial statements. The combining nonmajor fund information and schedules, schedules of revenues, expenditures and changes in fund balances – budget and actual for the gas tax fund, Measure “A” fund, Measure “W” fund, and police grants fund, and the capital assets used in the operation of governmental funds are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with GAAS. In our opinion, the combining nonmajor fund information and schedules, schedules of revenues, expenditures, and changes in fund balances – budget and actual for the gas tax fund, Measure “A” fund, Measure “W” fund, and police grants fund, and the capital assets used in the operation of governmental funds 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. -43-
5 In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 1, 2023, on our consideration of the Town’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Town’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Town’s internal control over financial reporting and compliance.

December 1, 2023
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TOWN OF HILLSBOROUGH
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2023
6 The Town of Hillsborough (Town) offers readers of the Town’s financial statements this narrative overview and analysis of the financial activities of the Town for the fiscal year ended June 30, 2023. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found on pages ii to ix of this report.

Financial Highlights
 The Town’s total net position increased $13.2 million (13.6%) in FY 2022-23. On June 30, 2023, net position totaled $110.2 million, comprised of $27.1 million for governmental activities and $83.1 million for business-type activities. Of the $110.2 million net position, $48.2 million is unrestricted and can be used to meet the Town’s ongoing obligations to citizens and creditors.  Net position in governmental activities increased $7.1 million (36%) and net position in business-type activities increased $6.1 million (7.9%).
o The Governmental activities increase is attributable to revenues that exceed expenses by $9.9 million offset by transfers out for capital funding of $2.9 million. o The Business-type activities increase is attributable to revenues that exceed expenses by $3.2 million, as well as a transfer in of $2.9 million for capital improvement projects.  General Fund revenues of $34.4 million were $0.5 million (2%) above the prior year. Property tax revenue of $20.6 million, the Town’s largest General Fund revenue source, increased by $1.3 million as compared to the prior year due to continued strong property assessed valuations in the Town and Bay Area region. Also contributing to the growth was improved investment income and receipt of a one-time release of reserve on Property Taxes in Lieu of Motor Vehicle License Fees (MVLF).  General Fund expenditures of $34.7 million were lower than adopted budget by $0.2 million (1%) and is attributable to timing of projects, offset somewhat by higher legal costs, winter storm repairs (reimbursable), and information technology software.
 General Fund net excess revenues (revenues greater than expenditures) totaled $1.4 million, offset by net transfer expenditures of $1.7 million, resulting in a net change in fund balance of $0.3 million that draws on reserves. The net transfer out was higher in FY 2022-23 for the timing of the ARPA capital project transfer of $2.6 million for storm drain and water capital projects.  The General Fund’s fund balance of $31.5 million on June 30, 2023 decreased by $0.3 million compared to the prior fiscal year. The Town’s General Fund reserve policy is 30% to 50% of budgeted operating expenditures and is maintained for contingencies. The fund balance includes $15.2 million for this reserve requirement, along with $5.9 million assigned for capital and other projects, $4.7 million restricted in a pension trust for future pension liabilities and $5.7 million in unassigned reserves. This reserve balance needs to be weighed with the long-term debt, pension and OPEB liabilities when considering the full financial picture.
 The Town funded the annual required contribution of $1.3 million for the Other Post-Employment Benefits (OPEB) liability.
 The Sewer Fund operating revenues increased $0.7 million (4.8%) as compared to prior year, primarily due to a rate increase effective July 2022.
 The Water Fund operating revenues decreased $1.3 million (8.6%) as compared to prior year primarily due to lower water unit sales from drought conservation and a wet winter. -45-

TOWN OF HILLSBOROUGH
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2023
7  The Sewer and Water Enterprise Fund’s net position increased $5.6 million in FY 2022-23. Total net position of $80.9 million on June 30, 2023 shows $32.2 million unrestricted, $48.3 million invested in net capital assets, and $0.4 million restricted for debt service.  The Town spent $10.5 million for capital purchases and infrastructure, with $1.3 million in governmental activities for vehicles and IT equipment and building improvements, and $9.2 million in infrastructure in the water and sewer enterprise funds. Improvements were made to water mains, tanks and pump stations, sewer priority basins, flow metering, sewer main video inspection, and storm drain improvements.
o In addition, the Town increased the intangible capital asset by $11.4 million for sewer treatment plant capacity rights for the Town’s share of the San Mateo Clean Water treatment plant. The Town contracts for sewer treatment with the City of San Mateo for sewage flows from the southern half of the Town and the current construction includes wastewater treatment capacity for the southern portion of the Hillsborough sewer collection system. The asset reflects the percentage completion on the project (78%). See Long-term liabilities explanation below. o In addition, the Town added an intangible asset of $1.1 million for subscription-based information technology arrangements, in connection with implementing Governmental Accounting Standard No. 96. The net assets reflect the discounted cash flow of the remaining contract, offset by annual amortization.
 Entity-wide long-term liabilities total $113 million on June 30, 2023, and are comprised of debt, the funding agreement with the City of San Mateo, compensated absences, pension and other postemployment benefits (OPEB), and subscription payable. There is a net increase of $27 million over the prior year, driven by $19 million in pension and OPEB for the impact of investment losses, $11.4 million in capacity rights in the San Mateo Clean Water wastewater treatment plant, $1 million subscription liability, offset somewhat by principal payments on debt and the debt refunding (see Debt Footnote). The CalPERS investment of 6.1% in FY 2021-22 increased the pension liability in FY 2022- 23 due to the timing of the CalPERS actuarial valuation cycle. Similarly, the investment gain of 5.8% reported for FY 2022-23 will reverse a portion of the pension liability impact incurred in FY 2022-23.  In prior year, the Town recorded revenue of $2.7 million in the General Fund for the American Rescue Plan – State and Local Funding Relief Fund distribution. The current year transfer to the Water and Sewer Funds is used to fund the capital improvements for water and storm drain projects.  In FY 2022-23, the Town implemented Governmental Accounting Standards Board No, 96 – Subscription Based Information Technology Arrangements. The contracts are recorded as a liability of $0.8 million and an intangible asset of $0.8 million at June 30, 2023. -46-

TOWN OF HILLSBOROUGH
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2023
8 Overview of the Financial Statements
This discussion and analysis are intended to serve as an introduction to the Town’s basic financial statements made up of three components: 1) government-wide financial statements, 2) fund financial statements and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements such as this management’s discussion and analysis.

Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the Town’s finances, in a manner similar to a private-sector business.

The statement of net position presents information on all the Town’s assets plus deferred outflows of resources and liabilities plus deferred inflows of resources, with the difference between the two, reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the Town is improving or deteriorating.

The statement of activities presents information showing how the Town’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows.

Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., earned but unused vacation leave).

Both of these government-wide financial statements distinguish functions of the Town that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the Town include general government, public safety, community services and streets. The businesstype activities of the Town include the water and sewer operations.

The government-wide financial statements can be found on pages 22 through 24 of this report. -47-

TOWN OF HILLSBOROUGH
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2023
9 Overview of the Financial Statements (Continued)
Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The Town, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All the funds of the Town can be divided into two categories: governmental funds and proprietary funds.

Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements.

Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

The Town maintains seven individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund, the police and fire special tax fund, and the capital projects fund which are considered to be major funds. Data from the other four governmental funds are combined into a single, aggregated presentation.

Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report.

The Town adopts an annual appropriated budget for its general fund. A budgetary comparison statement has been provided for the general fund to demonstrate compliance with this budget.

The basic financial statements can be found on pages 26 and 28 of this report. -48-

TOWN OF HILLSBOROUGH
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2023
10 Overview of the Financial Statements (Continued)
Proprietary funds. The Town maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The Town uses enterprise funds to account for the water and sewer operations. Internal service funds are an accounting device used to accumulate and allocate costs internally among the Town’s various functions. The Town uses an internal service fund to account for the replacement of the fleet and other equipment, and to accumulate funds to pay unfunded liabilities from pension and other post-employment benefit. Because this service predominantly benefits governmental rather than business-type function, it has been included within governmental activities in the government-wide financial statements.

Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the internal service fund and the water and sewer operations, with the latter being considered major funds.

The basic proprietary fund financial statements can be found on page 29 through 32 of this report.

Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on page 34 of this report.

Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the Town’s funding for OPEB, information on the pension liability and contributions, and a summary of major fund budgetary schedules. Required supplementary information can be found on page 74 of this report.

The combining statements referred to earlier in connection with non-major governmental funds are presented immediately following the required supplementary information. Combining statements and individual fund schedules can be found on page 83 of this report.
-49-

TOWN OF HILLSBOROUGH
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2023
11 Government-wide Financial Analysis
The following table provides a condensed Statement of Net Position as of June 30, 2023. 2023 2022 2023 2022 2023 2022
Assets:

Current and other assets $ 56,702,752 $ 52,596,521 $ 41,959,851 $ 44,539,970 $ 98,662,603 $ 97,136,491 Capital assets 10,622,901 9,506,356 112,916,781 97,913,818 123,539,682 107,420,174 Total assets 67,325,653 62,102,877 154,876,632 142,453,788 222,202,285 204,556,665 Deferred outflows of resources 16,103,511 7,672,595 3,470,666 2,715,378 19,574,177 10,387,973 Liabilities:

Long-term liabilities 41,761,949 24,836,973 67,357,037 57,354,351 109,118,986 82,191,324 Other liabilities 9,906,956 7,951,858 7,411,150 8,544,827 17,318,106 16,496,685 Total liabilities 51,668,905 32,788,831 74,768,187 65,899,178 126,437,092 98,688,009 Deferred inflows of resources 4,662,652 16,952,022 516,439 2,303,437 5,179,091 19,255,459 Net position
Net investment in capital asset 10,622,901 9,506,356 48,305,856 40,560,774 58,928,757 50,067,130 Restricted 2,556,388 1,198,230 431,801 1,181,801 2,988,189 2,380,031 Unrestricted 13,918,318 9,330,033 34,325,015 35,223,976 48,243,333 44,554,009 Total net position $ 27,097,607 $ 20,034,619 $ 83,062,672 $ 76,966,551 $ 110,160,279 $ 97,001,170 Governmental
Activities Total
Business-type
Activities
The net position over time, may serve as a useful indicator of the Town’s financial position. The Town’s assets and deferred outflows of resources for pensions, and other post-employment benefits exceeded liabilities and deferred inflows of resources for leases, pension and other post-employment benefits by $110.2 million on June 30, 2023.

The change in Government-wide net position was an increase of $13.2 million (13.6%) for the year. The increase in governmental activities net position of $7.1 million (35%) is due to fluctuations in the pension and OPEB-related liabilities driven by the June 30, 2022 investment loss. The increase in business-type activities net position of $6.1 million (7.9%) is primarily due to an increase in capital assets, offset somewhat by higher long-term liabilities. The significant increase in capital assets and long-term liabilities is for the Town’s share of the City of San Mateo’s Clean Water wastewater treatment plant.

On June 30, 2023, the Town reports positive balances in all three categories of net position, both for the government as a whole, as well as for its separate governmental and business-type activities.

The Town’s net investment in capital assets (e.g., land, buildings, machinery, equipment, and infrastructure) less any related debt used to acquire those assets represents 53.4% of net position. The Town uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the Town’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.
-50-

TOWN OF HILLSBOROUGH
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2023
12 Government-wide Financial Analysis (Continued)
The Town’s restricted net position of $2.9, includes $0.4 million in resources that are subject to external restrictions on how they may be used – specifically, the reserve requirement relating to the State Revolving Fund loan of the business-type activities and $2.5 million is restricted for capital projects of the governmental-type activities. In addition, the Section 115 pension trust monies of $5.3 million are included in the unrestricted Governmental Activities but are restricted in the Governmental Fund Balance Sheet for future pension obligations.

The unrestricted net position of $48.2 million may be used to meet the Town’s ongoing obligations to citizens and creditors.

The following table provides a Condensed Statement of Activities for the fiscal year ended June 30, 2023. Analysis for governmental activities and business-type activities is outlined separately below. 2023 2022 2023 2022 2023 2022
REVENUES:

Program revenues:

Charges for service $ 4,004,548 $ 4,053,373 $ 28,651,401 $ 29,217,298 $ 32,655,949 $ 33,270,671 Operating grants, transfers and functional
taxes 2,135,945 5,034,025 - 2,135,945 - 5,034,025
Capital grants, contributions
and other non-operating - - - - - -
General revenues:

Property taxes 20,647,291 19,324,411 - 20,647,291 - 19,324,411 Other taxes 9,197,896 9,303,702 - 9,197,896 - 9,303,702 Investment earnings 924,314 (1,674,851) 791,383 (98,549) 1,715,697 (1,773,400) All others 743,271 592,396 - 743,271 - 592,396
Total revenues 37,653,265 36,633,056 29,442,784 29,118,749 67,096,049 65,751,805 EXPENSES:

General government 1,727,443 1,990,984 - 1,727,443 - 1,990,984 Public safety 18,685,885 20,223,279 - 18,685,885 - 20,223,279 Community services 3,723,761 3,934,667 - 3,723,761 - 3,934,667 Streets 3,518,522 6,290,672 - 3,518,522 - 6,290,672
Interest expense 14,666 - - 14,666 - -
Water - 13,749,371 - 13,066,074 13,749,371 13,066,074
Sewer - 12,517,293 - 10,649,566 12,517,293 10,649,566
Total expenses 27,670,277 32,439,602 26,266,664 23,715,640 53,936,941 56,155,242

EXCESS(DEFICIENCY) OF REVENUES
OVER(UNDER) EXPENSES 9,982,988 4,193,454 3,176,120 5,403,109 13,159,108 9,596,563

TRANSFERS
Transfers in - 2,920,000 - 2,801,295 2,920,000 2,801,295 Transfers out (2,920,000) (2,801,295) - (2,920,000) - (2,801,295) Total transfers (2,920,000) (2,200,000) 2,920,000 2,801,295 - - Increase in net position 7,062,988 1,392,159 6,096,120 8,204,404 13,159,108 9,596,563 Net position - beginning, as restated 20,034,619 18,642,460 76,966,552 68,762,147 97,001,171 87,404,607 Net position - ending $ 27,097,607 $ 20,034,619 $ 83,062,672 $ 76,966,551 $ 110,160,279 $ 97,001,170 *Beginning 2022 net position was not restated for the implementation of GASB statement no. 96, Subscription-Based Information Governmental Activities* Business-type Activities Total* Governmental Activities. Governmental activities increased the Town’s net position by $7.1 million (35.5%), with a total net position of $27.1 million at the end of the fiscal year. The increase was attributable to total governmental revenues that exceeded total expenses by $9.9 million, prior to transfers out of $2.9 million. -51-

TOWN OF HILLSBOROUGH
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2023
13 Government-wide Financial Analysis (Continued)
Governmental Activities – Expenses and Program Revenues The following graph reflects functional program revenues and expenses for governmental activities. Public safety costs, comprised of police and fire services, comprise 67.5% of the expenses. Public Safety program revenues are primarily comprised of alarm permitting and public safety sales tax. The remainder of public safety costs are funded by general revenues including the Public Safety Special Tax (general revenues not included in chart below).

Governmental Activities – Revenues by Source
The following chart breaks down governmental activities general revenues by source. Major general revenue sources are property taxes (61%), Excess ERAF (9%), user charges, and public safety special tax.

Property Tax
53%
Property Transfer Tax
1%
ERAF Refund
9%
HOPTR
>1%
Franchise Tax
2%
Business License
Tax
2%
Motor Vehicle
License Tax
4%
Public Safety
Special Tax
6%
Other Functional
Taxes/Grants
14%
Sales Tax
>1% All Others
0%
Investment Earnings
0%
User Charges
11%

GOVERNMENTAL ACTIVITIES - GENERAL REVENUES BY
SOURCE
-52-

TOWN OF HILLSBOROUGH
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2023
14 Business-type Activities. The net position for business-type activities increased by $6.1 million (7.9%) for a total net position of $83.1 million on June 30, 2023. The increase is the result of excess revenues over expenses of $3.9 million and transfers in of $2.9 million from the General Fund for storm drain capital projects.

Business-type Activities revenue increased $0.3 million (1.0%) over the prior year primarily due to a rate increase in sewer charges effective July 1, 2022, offset by lower water revenue from fewer units sold caused by drought conservation.

Business-type Activities expenses increased $2.6 million (10.8%) over the prior year due to an increase in personnel costs associated with labor agreements, filling of open positions, and contractual costs.

Financial Analysis of the Governmental Funds
The Town uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.

Below is an outline of the governmental funds’ results.

Governmental Funds. The focus of the Town’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is helpful in assessing the Town’s financing requirements. Unassigned fund balance may be a useful measure of the Town’s net resources available for spending at the end of a fiscal year.

As of June 30, 2023, the Town’s governmental funds reported combined ending fund balances of $39.3 million – up $2.4 million (6.5%) from the prior year, primarily from excess revenues over expenditures in the General Fund of $1.4 million. Capital Projects Fund and other non-major funds revenues are accumulated to support the timing of capital projects. Of the $39.3 million fund balance on June 30, 2023, $20.9 million is classified as unassigned and the remainder is classified as restricted, committed, and non-spendable for a variety of purposes. Of the $20.9 million unassigned, $15.2 million is held for contingencies per policy. -53-

TOWN OF HILLSBOROUGH
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2023
15 Financial Analysis of the Governmental Funds (Continued) General Fund
General Fund Revenues
General Fund revenues grew $0.5 million (2%) as compared to the prior year. The table below outlines the detail of the revenue sources. The property tax increase of $1.3 million (7%) is attributable to increased assessed real estate values in the region. MVLF increased $0.4 million, primarily due to a one-time release of reserve. Investment earnings increase is due to a recovery of the market. The All Others revenue category decreased $2.8 million, primarily due to the receipt of $2.7 million of one-time American Rescue Plan Act monies in prior year.

Increase Percent
REVENUES 2023 2022 (Decrease) Change
Property taxes $ 20,647,291 $ 19,324,411 $ 1,322,880 7% Public safety special tax transfer 2,237,795 2,238,231 (436) 0% Excess ERAF 2,900,861 3,153,308 (252,447) -8%
Permits 1,590,490 1,683,174 (92,684) -6%
Service charges 1,264,934 1,454,288 (189,354) -13%
In lieu of MVLF 1,818,496 1,396,460 422,036 30%
Franchise taxes 872,162 800,915 71,247 9%
Business license tax 785,666 854,351 (68,685) -8%
Property transfer tax 404,621 621,578 (216,957) -35%
Rental income 441,449 203,444 238,005 117%
Sales and use tax 112,343 171,454 (59,111) -34%
Public safety sales tax 172,991 165,212 7,779 5%
Federal, State and local grants 26,338 112,409 (86,071) -77% Transfer from Measure A 250,000 250,000 0% -
Investment earnings (loss) 604,887 (1,684,182) 2,289,069 -136% All others 281,113 3,128,344 (2,847,231) -91%
Total $ 34,411,437 $ 33,873,397 $ 538,040 2%
-54-

TOWN OF HILLSBOROUGH
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2023
16 Financial Analysis of the Governmental Funds (Continued) General Fund Expenditures
General Fund expenditures increased by $2.6 million (8%) as compared to the prior year. Total personnel costs increased $0.7 million (4%) due to filling of open positions, cost of living and contractual CalPERS pension contribution increases. The contractual contribution to fire operations increased $0.7 million (8%) for the annual contribution paid to Central County Fire Department JPA for fire services. Materials and services increased $1.4 million (21%) for higher legal costs, winter storm repairs (reimbursable), and information technology software.

Transfers include capital improvement funding for storm drains and water tank.

Increase Percent
EXPENDITURES 2023 2022 (Decrease) Change
Salaries $ 10,141,173 $ 9,889,934 $ 251,239 3%
Overtime 835,903 902,496 (66,593) -7%
Temporary 60,126 48,502 11,624 24%
Medicare/FICA 506,017 503,439 2,578 1%
Retirement 3,723,087 3,492,954 230,133 7%
Insurances 1,560,839 1,486,605 74,234 5%
Retirees' health insurance 1,392,929 1,208,991 183,938 15% Workers' compensation 176,514 121,732 54,782 45%
All others 113,486 130,179 (16,693) -13%
Total personnel costs 18,510,074 17,784,832 725,242 4%
Contribution for fire operations 9,023,098 8,334,250 688,848 8% Materials and services 7,787,256 6,414,694 1,372,562 21% Reimbursement for other programs (5,285,460) (4,649,368) (636,092) 14% Transfers (including internal service) 4,656,000 4,145,295 510,705 12% Total $ 34,690,968 $ 32,029,703 $ 2,661,265 8%
-55-

TOWN OF HILLSBOROUGH
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2023
17 Financial Analysis of the Governmental Funds (Continued) General Fund Budgetary Highlights
The table below summarizes FY 2022-23 budget variances:

Original Revised
Budget Budget Actual Variance %

REVENUES
Service charges $ 1,176,097 $ 1,176,097 $ 1,264,934 $ 88,837 8% Franchise taxes 832,633 832,633 872,162 39,529 5%
Business license 600,000 600,000 785,666 185,666 31%
Property taxes 20,581,503 20,581,503 20,647,291 65,788 0% Permits 1,672,900 1,672,900 1,590,490 (82,410) -5%
Intergovernmental 1,072,832 1,072,832 1,901,671 828,839 77% Investment earnings (loss) 250,000 250,000 604,887 354,887 142% Excess ERAF 2,800,000 2,800,000 2,900,861 100,861 4%
All others 3,915,753 3,915,753 3,843,475 (72,278) -2%
Total 32,901,718 32,901,718 34,411,437 1,509,719 5%

EXPENDITURES
Police 11,985,287 11,985,287 12,042,381 (57,094) 0%
Fire 9,248,098 9,248,098 9,247,830 0% 268
Community services 4,525,559 4,525,559 4,086,103 439,456 10% Streets 3,157,795 3,157,795 3,053,125 104,670 3%
All others 3,274,433 5,587,728 6,261,529 (673,801) -12% Total 32,191,172 34,504,467 34,690,968 (186,501) -1%
NET CHANGE $ 710,546 $ (1,602,749) $ (279,531) $ 1,323,218 83% Revenues exceeded budget by $1.5 million (5%), primarily due to one-time release of MVLF reserves and improved investment returns. Expenditures were higher than budget by $0.2 million (1%) primarily due to litigation costs and capital transfers.

Financial Analysis of Proprietary Funds
Proprietary Funds. The Town’s proprietary funds provide the same type of information found in the governmentwide financial statements for business-type activities, but with more details.

The Water Fund net position increased $2.0 million (5.8%) in FY 2022-23. On June 30, 2023, the net position was $36.4 million, with $24.8 million invested in net capital assets, and $11.6 million unrestricted. Net investment in capital assets increased $2.9 million and unrestricted net position decreased $0.4 million, resulting from lower revenue due to less water use during drought conditions and the timing of capital improvements. -56-

TOWN OF HILLSBOROUGH
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2023
18 Financial Analysis of the Proprietary Funds (Continued) The Sewer Fund net position increased $3.5 million (8.6%) in FY 2022-23. On June 30, 2023, the net position was $44.5 million, with $23.5 million invested in net capital assets, $0.4 million restricted for debt service, and $20.6 million unrestricted. Net investment in capital assets increased $4.9 million and unrestricted net position increased $1.0 million resulting from increased revenue from rate increase, offset somewhat by lower net transfers in.

Water and sewer operating revenues decreased $0.6 million (1.9%) primarily due to a sewer rate increase effective July 1, 2022, offset by a decrease in water revenue from decreased water units sold from drought conditions.

Capital Asset and Debt Administration
Capital Assets. The Town’s investment in capital assets for its governmental and business-type activities as of June 30, 2023, amounted to $122.7 million (net of accumulated depreciation). This investment in capital assets includes land, buildings and system, improvements, machinery and equipment, streets, intangible asset under construction, and subscription asset (intangible). The intangible asset under construction totaling $38.0 million is the Town’s capacity rights to the City of San Mateo’s Clean Water wastewater treatment plant, calculated on a percentage completion basis using 78%. The City of San Mateo provides sewer treatment to the Town, and the asset reflects the Town’s share on a percentage completion basis on the project. The subscription asset is added in FY 2022-23 for the implementation of GASB No. 96 – Subscription Based Information Technology Arrangements.

Additional information on the Town’s capital assets can be found in Note 4 to the financial statements. $0
$2
$4
$6
$8
$10
$12
$14
$16
$18
$20
Water Sewer
Millions

ENTERPRISE-OPERATING AND NONOPERATING

REVENUES AND EXPENSES
Revenues
Expenses
-57-

TOWN OF HILLSBOROUGH
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2023
19 Capital Asset and Debt Administration (Continued)
2023 2022 2023 2022 2023 2022
Intangible Asset Under Construction -$ 38,034,536 -$ $ 26,588,799$ $ 38,034,536 $ 26,588,799 Land 1,456,560 1,456,560 - - 1,456,560 1,456,560
Land improvements 620,123 759,725 - - 620,123 759,725
Buildings 2,426,100 2,229,435 - - 2,426,100 2,229,435
Machinery and equipment 2,028,798 1,578,592 5,726 - 2,028,798 1,584,318 Infrastructure 3,202,759 3,482,044 - - 3,202,759 3,482,044 Water and sewer lines - 74,882,245 - 71,319,293 74,882,245 71,319,293 Subscriptions 888,561 - - - 888,561 -
Total 10,622,901$ 9,506,356$ $ 112,916,781 97,913,818$ $ 123,539,682 $ 107,420,174 Governmental Activities Business-type Activities Total
Long-term Debt. On June 30, 2023, the Town had total long-term debt outstanding of $64.6 million (excludes long-term liabilities for compensated absences, pension, OPEB and subscriptions). The increase over the prior year is for the Town’s share of City of San Mateo’s new Clean Water wastewater treatment plant, which reflect a 78% completion basis.

In addition, the Town refunded the Certificates of Participation and terminated the interest rate swap early with 2023 Revenue Refunding bonds. The debt service is projected to be comparable to the Certificates of Participation, and the debt profile has improved with this transaction. 2023 2022
Certificates of participation $ - $ 21,605,000
Refunding bonds, including premiums 21,289,875 -
Loan Payable - California Energy Program 256,746 319,350 Loan Payable - State Revolving Fund Loan 8,549,535 8,839,898 Funding Agreement with City of San Mateo 34,514,769 26,588,799 Total $ 64,610,925 $ 57,353,047

LONG TERM DEBT
Business-type Activities
Total principal paid during the year was $3.9 million, comprised of $3.5 million principal on the San Mateo loan, and $0.4 million on the SRF and California Energy loan. Of the $3.5 million, $2.4 million was a one-time initial principal payment on the San Mateo loan and the $1.1 million was the annual principal debt service.

Town maintains ratings of AAA -A1 from Standard and Poor’s on the 2023 Revenue Refunding Bonds.

Additional information on the Town’s long-term debt can be found in Notes 8 on page 52 of this report. -58-

TOWN OF HILLSBOROUGH
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2023
20 Current Factors and Conditions Affecting Future Financial Position The Town’s General Fund financial condition is stable and real estate conditions remain solid in Hillsborough and the Bay Area. As a significant source of revenue of the Town’s General Fund is real-estate driven, this is a key metric for the financial health of the Town’s revenues. The Town will continue to monitor and respond to any changing economic conditions. In addition, the Town is monitoring the MVLF revenue. The two sources of funding for MVLF include ERAF monies that non-basic aid school districts are entitled to receive, and then, if needed, the property tax revenues of non-basic aid school districts. Any monies from the non-basic aid school districts that are used for this purpose are backfilled by the State. San Mateo County submits a reimbursement claim on behalf of the County and cities. Historically, the State appropriates funds to cover the shortfall amount in its subsequent budget and makes the County and cities whole around 14 months after the year in which the MVLF shortfall occurs. The reimbursement from the State is not automatic. The Town works with the County and other avenues to ensure the shortfall continues to be included in the State’s future budgets.

The Town’s annual required pension contributions are estimated to nearly double over the next ten to fifteen years due to changes in actuarial assumptions and policies implemented by the California Public Employees Retirement System (CalPERS). To address the increasing costs, the City Council funded a Section 115 pension trust to mitigate the future budget impact of rising pension contributions to CalPERS. For many years the Town has taken steps to mitigate pension costs such as adding a new tier pension formula for miscellaneous plan employees, paying off the pension side fund ($10 million), and partnering with employees to pay a portion of the employer costs. Detailed information on the pension liability can be found in the Notes to the Basic Financial Statements under Note 14 on page 67 to 73.

Storm drain capital improvements are currently being funded from the General fund for $1.2 to $2.2 million per year. The only current dedicated source of funding is the annual storm drain assessment of $7.34 per parcel (annual revenues of approximately $30,000). The Storm Drain master plan outlines $55 million in capital improvements over the next 30 years. Should the General Fund resources diminish with excess revenues no longer be available, a dedicated source of funding may be required to ensure continuity of the storm drain program.

City Council continues to monitor conditions to ensure that water and sewer rates are sufficient to cover the cost of the water and sewer enterprise.

The Town entered into the agreement with the City of San Mateo to pay the Town’s share of capacity costs for the San Mateo Clean Water wastewater treatment plant. The agreement is a 30-year commitment totaling $47.6 million (excluding interest).

Requests for Information
This financial report is designed to provide a general overview of the Town’s finances for all those with an interest in the Town’s finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Finance Director, Town of Hillsborough, 1600 Floribunda Avenue, Hillsborough, CA 94010.
-59-
21 BASIC FINANCIAL STATEMENTS
-60-
22 GOVERNMENT-WIDE FINANCIAL STATEMENTS
-61-

TOWN OF HILLSBOROUGH

STATEMENT OF NET POSITION
JUNE 30, 2023
The notes to the financial statements are an integral part of this statement. 23 Governmental Business-Type
Activities Activities Total
ASSETS:

Cash and investments $ 52,205,758 $36,210,202 $ 88,415,960 Restricted cash and investments 4,672,481 638,140 5,310,621 Receivables, net of an estimated allowance 251,452 2,803,886 3,055,338 Interest receivable 508,008 508,008 -
Taxes receivable 232,511 232,511 -
Internal balances (2,182,500) 2,182,500 -
Prepaid items 7,912 - 7,912
Supplies 125,123 - 125,123
Leases receivable 1,007,130 1,007,130 -
Capital assets, net of accumulated depreciation and amortization Land 1,456,560 1,456,560 -
Intangible asset under construction 38,034,536 - 38,034,536 Land improvements 620,123 620,123 -
Buildings 2,426,100 2,426,100 -
Machinery and equipment 2,028,798 2,028,798 -
Infrastructure 3,202,759 3,202,759 -
Water and sewer lines 74,882,245 - 74,882,245
Subscriptions 888,561 888,561 -
Total assets 67,325,653 154,876,632 222,202,285
DEFERRED OUTFLOWS OF RESOURCES:

Refunding charges 1,114,000 - 1,114,000
Deferred outflows related to other postemployment benefits 1,924,292 237,933 2,162,225 Deferred outflows related to pensions 14,179,219 2,118,733 16,297,952 Total deferred outflows of resources 16,103,511 3,470,666 19,574,177 LIABILITIES:

Accounts payable and other current liabilities 1,558,508 3,012,038 4,570,546 Accrued payroll liabilities 549,551 549,551 -
Unearned revenues 178,304 178,304 -
Deposits 6,771,086 1,004,207 7,775,293
Uninsured claims 100,000 27,150 127,150
Accrued interest payable 14,666 165,196 179,862
Noncurrent liabilities:

Due within one year:

Compensated absences - due next year 521,807 74,674 596,481 Subscription liability - due next year 213,034 213,034 - Loans payable 1,217,895 - 1,217,895
Refunding bonds - due next year 1,909,990 - 1,909,990
Due in more than one year:

Compensated absences 907,032 91,528 998,560
Subscription liability 639,149 639,149 -
Loans payable 42,103,155 - 42,103,155
Refunding bonds 19,379,885 - 19,379,885
Net OPEB liability 8,818,835 1,090,973 9,909,808
Net pension liability 31,396,933 4,691,496 36,088,429
Total liabilities $ 51,668,905 $74,768,187 $ 126,437,092 -62-

TOWN OF HILLSBOROUGH
STATEMENT OF NET POSITION (Continued)
JUNE 30, 2023
The notes to the financial statements are an integral part of this statement. 24 Governmental Business-Type
Activities Activities Total
DEFERRED INFLOWS OF RESOURCES:

Deferred inflows related to leases 978,398 978,398 -
Deferred inflows related to other postemployment benefits 1,319,920 163,148 1,483,068 Deferred inflows related to pensions 2,364,334 353,291 2,717,625 Total deferred inflows of resources 4,662,652 516,439 5,179,091 NET POSITION:

Net investment in capital assets 10,622,901 48,305,856 58,928,757 Restricted for:

Street projects 1,315,353 1,315,353 -
Police projects 1,241,035 1,241,035 -
Debt service 431,801 - 431,801
Unrestricted 13,918,318 34,325,015 48,243,333
Total net position $ 27,097,607 $83,062,672 $ 110,160,279 -63-

TOWN OF HILLSBOROUGH

STATEMENT OF ACTIVITIES
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
The notes to the financial statements are an integral part of this statement. 25 Operating Business
Charges for Grants and Governmental -Type
Functions/Programs Expenses Services Contributions Activities Activities Total Governmental activities:

General government $ 1,727,443 $ 554,318 $ (1,173,125) - $ $ (1,173,125) - $ Public safety 18,685,885 445,955 (18,074,659) 165,271 (18,074,659) - Community services 3,723,761 2,133,123 (1,590,638) - (1,590,638) - Streets 3,518,522 871,152 1,970,674 (676,696) (676,696) - Interest expense 14,666 - (14,666) - (14,666) -
Total governmental
activities 27,670,277 4,004,548 2,135,945 (21,529,784) (21,529,784) - Business-type activities:

Water 13,749,371 13,428,299 - (321,072) - (321,072)
Sewer 12,517,293 15,223,102 - 2,705,809 - 2,705,809
Total business-type
activities 26,266,664 28,651,401 - 2,384,737 - 2,384,737 Total $ 53,936,941 $ 32,655,949 $ 2,135,945 (21,529,784) 2,384,737 (19,145,047) General Revenues:

Property tax 20,647,291 20,647,291 -
Public safety tax 2,246,910 2,246,910 -
Property transfer tax 404,621 404,621 -
Franchise tax 872,162 872,162 -
Sales tax 112,343 112,343 -
Motor vehicle license tax 1,818,496 1,818,496 -
Business license tax 785,666 785,666 -
ERAF refund 2,900,861 2,900,861 -
HOPTR 56,837 56,837 -
All others 743,271 743,271 -
Net investment income 924,314 791,383 1,715,697
Transfers (2,920,000) 2,920,000 -
Total general revenues and transfers 28,592,772 3,711,383 32,304,155 Change in net position 7,062,988 6,096,120 13,159,108
Net position - beginning, as restated 20,034,619 76,966,552 97,001,171 Net position - ending $ 27,097,607 $ 83,062,672 $ 110,160,279 Net (Expense) Revenues and
Program Revenues Changes in Net Position
-64-

TOWN OF HILLSBOROUGH

BALANCE SHEET

GOVERNMENTAL FUNDS
JUNE 30, 2023
The notes to the financial statements are an integral part of this statement. 26 Police and Fire Capital Total Total
General Special Tax Projects Nonmajor Governmental
Fund Fund Fund Funds Funds
ASSETS:

Cash and investments $ 34,830,558 $ 5,321,472$ - $ 2,406,691 $ 42,558,721 Restricted cash and investments 4,672,481 - - 4,672,481 - Receivables 55,263 46,492 - 149,697 251,452
Interest receivable 508,008 - - 508,008 -
Taxes receivable 232,511 - - 232,511 -
Prepaid items 7,912 - - - 7,912
Leases Receivable 1,007,130 - - 1,007,130 -
Total assets $ 41,313,863 $ 5,367,964$ - $ 2,556,388 $ 49,238,215 LIABILITIES:

Accounts payable and other current liabilities 1,294,643 $ $ 194,743$ - $ 1,489,386 - $ Accrued payroll 549,551 - - 549,551 -
Unearned revenues 178,304 - - 178,304 -
Deposits payable 6,771,086 - - 6,771,086 -
Total liabilities 8,793,584 194,743 - 8,988,327 -
DEFERRED INFLOWS OF RESOURCES:

Lease related 978,398 - - 978,398 -
FUND BALANCES:

Nonspendable 36,644 - - 36,644 -
Restricted:

Streets projects - - - 1,315,353 1,315,353
Police projects - - - 1,241,035 1,241,035
Retiree benefits 4,672,481 - - 4,672,481 -
Assigned 5,863,000 5,173,221 - 11,036,221 -
Unassigned 20,969,756 - - 20,969,756 -
Total fund balances 31,541,881 5,173,221 - 2,556,388 39,271,490 Total liabilities, deferred inflows of resources,
and fund balances $ 41,313,863 $ - $ 5,367,964 $ 2,556,388 $ 48,259,817 Reconciliation of the balance sheet of governmental funds to the statement of net position:

Amounts reported for governmental activities in the statement of net position are different because:
$ 7,767,284
9,362,471
(19,582,048)
(8,214,463)
(100,000)
(1,428,839)
21,712
Net position of governmental activities $ 27,097,607
Subscription liabilities are not due and payable in the current period and therefore are not reported in the governmental funds.

The internal service fund is used by the Town to charge the costs of fleet and other equipment management and the management information systems to individual funds. The assets and liabilities of the internal service fund are included in the governmental activities in the statement of net position.

Pension liabilities and related deferrals are not due and payable in the current period and therefore are not reported on the governmental funds.

Other postemployment liabilities and related deferrals are not due and payable in the current period and therefore are not reported on the governmental funds.

Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the governmental funds.

Compensated absences are not due and payable in the current period and therefore are not reported in the governmental funds.

Claims liabilities are not due and payable in the current period and therefore are not reported in the governmental funds.
-65-

TOWN OF HILLSBOROUGH

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
The notes to the financial statements are an integral part of this statement. 27 Police and Fire Capital Total Total
General Special Tax Projects Nonmajor Governmental
Fund Fund Fund Funds Funds
REVENUES:

Property taxes $ 20,647,291 $ - $ - $ 20,647,291 - $
Public safety special taxes 2,246,910 - - 2,246,910 -
Franchise taxes 872,162 - - 872,162 -
Business license taxes 785,666 - - 785,666 -
All others taxes 3,590,816 - - 3,590,816 -
Permits 1,590,490 48,440 - 1,638,930 -
Intergovernmental 1,901,671 155,720 1,905,447 - 3,962,838 Service charges 1,264,934 - - 1,264,934 -
Other fees and charges - 778,976 - 778,976 -
Fines and forfeitures 15,752 - - 15,752 -
Investment earnings 604,887 85,324 - 41,372 731,583
Miscellaneous 649,973 94,479 - 744,452 -
Total revenues 31,923,642 2,246,910 1,162,939 1,946,819 37,280,310 EXPENDITURES:

Current:

General government 2,113,529 - - 2,113,529 -
Public safety 21,290,211 9,115 - 21,299,326 -
Community services 4,086,103 - - 4,086,103 -
Streets 3,053,125 243,772 - 3,296,897 -
Capital outlay - 816,110 - 816,110 -
Total expenditures 30,542,968 9,115 1,059,882 31,611,965 - Excess (deficiency) of
revenues over expenditures 1,380,674 2,237,795 103,057 1,946,819 5,668,345

OTHER FINANCING
SOURCES (USES):

Transfers in 2,487,795 1,230,661 - 3,718,456 -
Transfers out (4,148,000) (2,237,795) (588,661) - (6,974,456) Total Other Financing
Sources (Uses) (1,660,205) (2,237,795) 1,230,661 (588,661) (3,256,000) Net change in fund balances (279,531) 1,333,718 - 1,358,158 2,412,345 Fund balances - beginning 31,821,412 3,839,503 1,198,230 - 36,859,145 Fund balances - ending $ 31,541,881 $ 5,173,221 - $ $ 2,556,388 $ 39,271,490 -66-

TOWN OF HILLSBOROUGH

RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO

THE STATEMENT OF ACTIVITIES
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
The notes to the financial statements are an integral part of this statement. 28 Amounts reported for governmental activities in the statement of activities are different because:

Net change in fund balances - total governmental funds $ 2,412,345 Governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over the estimated useful lives and reported as depreciation expense. This is the amount by which depreciation exceeded capital outlays in the current period. (241,517)
Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds.

Compensated absences 40,743
Subscription liabilities 21,712
Pension expense 3,054,496
Other postemployment benefits 1,017,457
The internal service fund is used by the Town to charge the costs of fleet and other equipment management and management information systems to individual funds and to accumulate funds to service the Town's unfunded liabilities. 757,752 Change in net position of governmental activities $ 7,062,988 -67-

TOWN OF HILLSBOROUGH

STATEMENT OF FUND NET POSITION

PROPRIETARY FUNDS
JUNE 30, 2023
The notes to the financial statements are an integral part of this statement. 29 Governmental
Activities
Water Sewer Total Internal Service
Fund Fund Enterprise Funds Fund
ASSETS:

Current assets:

Cash and investments $ 12,394,638 $ 23,815,564 $ 36,210,202 $ 9,647,037 Restricted cash and investments 330,637 307,503 638,140 - Receivables, net 2,803,886 2,803,886 - -
Supplies and other current assets 110,706 14,417 125,123 - Total current assets 15,639,867 24,137,484 39,777,351 9,647,037 Noncurrent assets:

Capital assets:

Intangible asset under construction 38,034,536 - 38,034,536 - Buildings and improvements 292,176 49,161 341,337 -
Machinery and equipment 703,481 148,627 852,108 6,108,813 Water and sewer lines 82,816,085 92,005,448 174,821,533 - Less accumulated depreciation (49,194,713) (51,938,020) (101,132,733) (4,141,757) Total noncurrent assets 34,617,029 78,299,752 112,916,781 1,967,056 Total assets 50,256,896 102,437,236 152,694,132 11,614,093 DEFERRED OUTFLOWS OF RESOURCES:

Refunding charges 501,300 612,700 1,114,000 -
Deferred outflows related to pension 1,140,856 977,877 2,118,733 - Deferred outflows related to other
postemployment benefits 127,934 109,999 237,933 -
Total deferred outflows of resources 1,770,090 1,700,576 3,470,666 - LIABILITIES:

Current liabilities:

Accounts payable 1,276,294 1,735,744 3,012,038 69,122
Deposits 1,004,207 1,004,207 - -
Uninsured claims 12,450 14,700 27,150 -
Accrued interest payable 25,599 139,597 165,196 -
Funding Agreement - Loans Payable 61,892 1,156,003 1,217,895 - Refunding bonds - due next year 859,496 1,050,494 1,909,990 - Compensated absences - due next year 31,358 35,308 66,666 - Total current liabilities 3,271,296 4,131,846 7,403,142 69,122 Noncurrent liabilities:

Compensated absences 65,123 34,413 99,536 -
Funding Agreement - Loans Payable 194,948 41,908,207 42,103,155 - Refunding bonds 8,720,948 10,658,937 19,379,885 -
Net other postemployment liability 576,377 514,596 1,090,973 - Net pension liability 2,526,190 2,165,306 4,691,496 -
Total noncurrent liabilities 12,083,586 55,281,459 67,365,045 - Total liabilities 15,354,882 59,413,305 74,768,187 69,122 Business-Type Activities
-68-

TOWN OF HILLSBOROUGH

STATEMENT OF FUND NET POSITION
PROPRIETARY FUNDS (Continued)
JUNE 30, 2023
The notes to the financial statements are an integral part of this statement. 30 Governmental
Activities
Water Sewer Total Internal Service
Fund Fund Enterprise Funds Fund
DEFERRED INFLOWS OF RESOURCES:

Deferred inflows related to other
postemployment benefits 88,775 74,373 163,148 -
Deferred inflows related to pensions 190,233 163,058 353,291 - Total deferred outflows of resources 279,008 237,431 516,439 - NET POSITION:

Net investment in capital assets 24,779,745 23,526,111 48,305,856 1,967,056 Restricted for debt service 431,801 - 431,801 -
Unrestricted 11,613,351 20,529,164 32,142,515 9,577,915 Total net position $ 36,393,096 $ 44,487,076 $ 80,880,172 $ 11,544,971 2,182,500
Net position of business-type activities $ 83,062,672
Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds
Business-Type Activities
-69-

TOWN OF HILLSBOROUGH

STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION

PROPRIETARY FUNDS
FPR THE FISCAL YEAR ENDED JUNE 30, 2023
The notes to the financial statements are an integral part of this statement. 31 Governmental
Activities
Water Sewer Total Internal Service
Fund Fund Enterprise Funds Fund
OPERATING REVENUES:

Sale of water $ 8,625,430 $ 8,625,430 - $ $ -
Water meter charges 4,856,180 4,856,180 - -
Sewer service charges 15,151,603 - 15,151,603 -
Other services - - 1,179,302 -
Miscellaneous revenue (53,311) 71,499 18,188 143,923
Total operating revenues 13,428,299 15,223,102 28,651,401 1,323,225 OPERATING EXPENSES:

Water purchases, utilities and pumping 6,113,623 6,113,623 - - Sewage treatment services and utilities 2,716,990 - 2,716,990 - Personnel, overhead and facilities 4,018,510 3,639,039 7,657,549 - Materials, supplies and other 2,051,084 797,157 2,848,241 171,213 Depreciation and amortization 1,403,819 4,243,390 5,647,209 391,871 Total operating expenses 13,587,036 11,396,576 24,983,612 563,084 Operating income (loss) (158,737) 3,826,526 3,667,789 760,141

NONOPERATING
REVENUES (EXPENSES):

Investment earnings (loss) 338,289 453,094 791,383 192,730 Interest expense (393,378) (1,420,793) (1,814,171) -
Total nonoperating revenue (expenses) (55,089) (967,699) (1,022,788) 192,730 Income before contributions
and transfers (213,826) 2,858,827 2,645,001 952,871
Transfers in 2,251,826 1,720,000 3,971,826 336,000
Transfers out (1,051,826) - (1,051,826) -
Change in net position 2,038,000 3,527,001 5,565,001 1,288,871 Net position - beginning 34,355,096 40,960,075 75,315,171 10,256,100 Cumulative effect of a change in accounting - - - -
Net position - beginning, as restated 34,355,096 40,960,075 75,315,171 10,256,100 Net position - ending $ 36,393,096 $ 44,487,076 $ 80,880,172 $ 11,544,971 531,119
Change in net position of business-type activities $ 6,096,120 Business-Type Activities
Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds
-70-

TOWN OF HILLSBOROUGH

STATEMENT OF CASH FLOWS

PROPRIETARY FUNDS
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
The notes to the financial statements are an integral part of this statement. 32 Governmental
Activities
Water Sewer Total Internal Service
Fund Fund Enterprise Funds Fund

CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers and users $ 13,454,343 $15,223,102 $ 28,677,445 $ - Receipts from interfund services provided - - - 832,170 Payment to suppliers (8,322,286) (2,645,615) (10,967,901) - Payment to employees (4,314,765) (3,901,373) (8,216,138) - Net cash provided by operating activities 817,292 8,676,114 9,493,406 832,170

CASH FLOWS FROM NONCAPITAL

FINANCING ACTIVITIES
Operating grants received 124 - 124 -
Transfers from other funds 1,200,000 1,720,000 2,920,000 336,000 Net cash provided by
noncapital financing activities 1,200,124 1,720,000 2,920,124 336,000

CASH FLOWS FROM CAPITAL AND RELATED

FINANCING ACTIVITIES
Acquisition and construction of capital assets (2,968,683) (6,235,752) (9,204,435) (861,372) Loan principal paid (62,511) (3,810,223) (3,872,734) -
Principal paid on debt (741,393) (898,607) (1,640,000) - Payment on refunded bonds (9,623,454) (11,761,988) (21,385,442) - Proceeds from sale of refunding bonds 9,623,454 11,761,988 21,385,442 - Interest paid on debt (292,994) (1,290,614) (1,583,608) - Net cash used in capital and related
financing activities (4,065,581) (12,235,196) (16,300,777) (861,372)

CASH FLOWS FROM INVESTING ACTIVITIES
Investment gain 338,289 453,094 791,383 192,730
Net increase (decrease) in cash and cash equivalents (1,709,876) (1,385,988) (3,095,864) 499,528 Cash and cash equivalents - beginning 14,435,151 25,509,055 39,944,206 9,147,509 Cash and cash equivalents - ending $ 12,725,275 $24,123,067 $ 36,848,342 $ 9,647,037 Reconciliation of operating income to net cash
provided by operating activities:

Operating income (loss) $ (158,737) $ 3,826,526 $ 3,667,789 $ 760,141 Adjustments to reconcile operating income to net
cash provided (used) by operating activities:

Depreciation and amortization expense 1,403,819 4,243,390 5,647,209 391,871 Increase (decrease) in pension
and OPEB related amounts (314,358) (267,814) (582,172) - (Increase) decrease in deferred inflows (848,837) (727,574) (1,576,411) - Increase (decrease) in net pension liability 1,229,016 1,053,443 2,282,459 - Increase (decrease) in net OPEB liability (68,593) (57,160) (125,753) - Increase (decrease) in deferred outflows (625,944) (536,523) (1,162,467) - Effect of Changes in:
(Increase) decrease in accounts receivable 1,484 - 1,484 - (Increase) decrease in inventories and prepaids 10,222 3,547 13,769 - Increase (decrease) in deposits 24,560 - 24,560 -
Increase (decrease) in accounts payable (167,801) 864,985 697,184 (319,842) Increase (decrease) in compensated absences 18,103 5,480 23,583 - Total adjustments 976,029 4,849,588 5,825,617 72,029
Net cash provided (used) by operating activities $ 817,292 $ 8,676,114 $ 9,493,406 $ 832,170 Business-Type Activities
-71-
33 NOTES TO THE FINANCIAL STATEMENTS
-72-
34 The page is intentionally left blank.
-73-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
35 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the Town’s accounting policies:

A. Reporting Entity
The Town of Hillsborough (the Town) is a municipal corporation governed by a five-member council. The accompanying financial statements present the Town and its component units, entities for which the government is considered to be financially accountable. Blended component units, although legally separate entities, are, in substance, part of the government’s operations.

Blended Component Unit - The operations of the Hillsborough Public Improvement Corporation (HPIC) was established to assist in the financing of the acquisition of public improvements on behalf of the Town. HPIC is combined with that of the Town’s Water and Sewer funds in these financial statements. The City Council sits as its Board of Directors and has full accountability for its operations. The Corporation does not issue a separate financial report.

B. Government-wide and Fund Financial Statements
The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the activities of the Town and its component unit. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support.

The statement of activities demonstrates the degree to which the direct expenses of a given function or segment, are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not included among program revenues are reported as general revenues.

Separate financial statements are provided for the governmental funds and proprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements.

The Town does not have any fiduciary funds or fiduciary-type component units.

C. Measurement Focus, Basis of Accounting, and Financial Statement Presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. -74-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
36 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. 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 Town considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due.

Property taxes, franchise taxes, licenses, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable and available only when cash is received by the Town.

The Town reports the following major governmental funds:

The General Fund is the Town’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund.

The Police and Fire Special Tax Fund is used to account for revenues apportioned under a Town voter-approved special tax which proceeds are restricted for public safety operations and capital expenditures.

The Capital Projects Fund is used to account for the acquisition and construction of major capital facilities other than those financed by proprietary funds.

The Town reports the following major proprietary funds:

The Water Fund accounts for the activities associated with the distribution and transmission of potable water to the Town’s residents.

The Sewer Fund accounts for activities associated with the treatment and transmission of sewage.

Additionally, the Town reports an Internal Service Fund that accounts for fleet management and the replacement of other equipment provided to other departments on a cost reimbursement basis.

The Town does not have any fiduciary fund and fiduciary-type component unit; hence, no such statements are included in this financial report.

Generally, the effect of interfund activity has been eliminated from the government-wide financial statements.

Exceptions to this general rule are charges between the government’s water and sewer and various other functions of the Town. Elimination of these charges would distort the direct costs and program revenues reported for the various functions concerned.
-75-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
37 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with the water and sewer funds’ principal ongoing operations. The principal operating revenues of the water and sewer funds, and of the Town’s internal service fund, are charges to customers for sales and services. The Town also recognizes as operating revenues the portion of connection fees intended to recover the cost of connecting new customers to the system. Operating expenses for the enterprise and the internal service funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.

When both restricted and unrestricted resources are available for use, it is the Town’s policy to use restricted resources first, then unrestricted resources as they are needed.

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.

D. Assets, Deferred Outflows, Liabilities, Deferred Inflows, and Net Position

1. Deposits and Investments
The Town’s cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition.

The Town’s investment policy and the California Government Code allow the Town to invest in the US Government, time certificates of deposits placed with commercial banks, negotiable certificates of deposit, banker’s acceptances, commercial paper, money market funds, repurchase agreements, the County of San Mateo Pooled Fund, and the California Local Agency Investment Fund (LAIF) pool. The California Government Code Section 16429 under the oversight of the State Treasurer regulates LAIF. The Town reports its investment in LAIF at the fair value amount LAIF provided. The Town’s position in the pool is approximately the same as the value of the pool shares. LAIF is not registered with the SEC and is unrated. Cash and investments with the Trustee, if any, are invested pursuant to governing bond covenants or trust endowments.

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

Receivables are shown net of an allowance for uncollectible where applicable. Unbilled services revenues in the Enterprise Funds are accrued at year-end.
-76-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
38 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

3. Leases and Subscription Based Information Technology Arrangements (SBITA) As lessor: The Town is a lessor for noncancellable leases of Town property for wireless communications facilities.

The Town recognizes a lease receivable and a deferred inflow of resources in the government‐wide and governmental fund financial statements. At the commencement of a lease, the Town initially measures the lease receivable 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 inflow of resources is 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 inflow of resources is recognized as revenue over the life of the lease term.

As lessee/subscriber: At the commencement of a lease/subscription based information technology arrangement (SBITA), the Town initially measures the lease/subscription liability at the present value of payments expected to be made during the lease/subscription term. Subsequently, the lease liability is reduced by the principal portion of lease/subscription payments made. The lease/subscription asset is initially measured as the initial amount of the lease/subscription liability, adjusted for lease/subscription payments made at or before the lease/subscription commencement date, plus certain initial direct costs. Subsequently, the lease/subscription asset is amortized on a straight‐line basis over its useful life.

Key estimates and judgments include how the Town determines (1) the discount rate it uses to discount the expected lease/subscription receipts/payments to present value, (2) lease/subscription term, and (3) lease receipts. Lease receipts included in the measurement of the lease receivable is composed of fixed payments from the lessee. The Town monitors changes in circumstances that would require a remeasurement of its lease/subscription and will remeasure the lease/subscription if certain changes occur that are expected to significantly affect the amount of the lease/subscription.

Lease/subscription assets are reported with other capital assets and lease/subscription liabilities are reported with long-term debt on the statement of net position.

4. Property Taxes
Property taxes become an enforceable lien on property as of January 1, levied on July 1; secured taxes are payable in two installments on November 1 and February 1 and delinquent on December 10 and April 10. Unsecured taxes are due on July 1 and delinquent on August 31. The County bills and collects the property taxes and remits them to the City.
“Unsecured” refers to taxes on personal property other than land and buildings. -77-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
39 The County is permitted by State Law (Proposition 13) to levy taxes at 1% of the full market value of the property (at time of purchase) and can increase the assessed property valuation by no more than 2% per year. This tax levy is distributed to the different governmental agencies under the State-mandated alternate method of apportioning taxes (commonly referred to as the “Teeter Plan”). All local agencies with historical tax delinquency rates less than 3%, receive from the County 100% of their respective shares of the amount of ad valorem taxes levied, without regard to the actual collection of taxes levied. The County handles all delinquencies, retaining interest and penalties.

5. Inventories and Prepaid Items
All inventories are valued at cost using the first-in/first-out (FIFO) method. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased.

Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in the financial statements. Prepaid items in governmental funds are recorded as expenditures when consumed.

6. Restricted Assets
Certain bond and loan proceeds of the Town’s Enterprise Fund are classified as restricted assets on the statement of net position because their use is limited by the applicable bond covenant. In addition, the Section 115 pension trust assets are classified as restricted assets on the statement of net position because their use is limited by the pension trust.

7. Capital Assets
Capital assets, which include property, plant, equipment, infrastructure (e.g., roads, sidewalks, and similar items), and water and sewer systems, are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. The government defines capital assets as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of two years.

Major outlays for capital assets and improvements are capitalized as projects are constructed. Initial capitalization of general infrastructure assets (i.e., those reported by governmental activities) is included regardless of their acquisition date or amount. The Town estimated the historical cost for the initial reporting of these assets through back trending (i.e., estimating the current replacement cost of the infrastructure to be capitalized and using a pricelevel index to deflate the cost to the acquisition or estimated acquisition year). As the Town constructs or acquires additional capital assets each period, including infrastructure assets, they are capitalized and reported at historical cost. The reported value excludes normal maintenance and repairs which are essentially amounts spent in relation to capital assets that do not increase the capacity or efficiency of the item or extend its useful life beyond the original estimate. The Town values donations of capital assets at the acquisition value of the item at the date of its donation. -78-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
40 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Property, plant, and equipment are depreciated using the straight-line method over the following estimated useful lives:

Assets Years
Buildings 40 years
Land Improvements 30 years
Machinery and Equipment 3 - 15 years
Infrastructure 30 - 50 years
Water and Sewer Lines (Transmission and distribution systems) 40 years Sewer Treatment Plant Capacity Rights 30 years
Subscription-Based Information Technology – Intangible Asset 1 - 7 years Intangible Assets – Sewer Capacity Right
The Town entered into the Interim Agreement for Payment of Capital Costs of Clean Water Program Projects with the City of San Mateo. Costs are capitalized in the Sewer Fund and once placed in service, these costs are amortized using the straight-line method of amortization.

8. Compensated Absences
It is the Town’s policy to permit employees to accumulate earned but unused vacation up to a certain amount. Sick leave credit vests in varying amounts depending on bargaining units and groups. Both are accrued when incurred in the government-wide and proprietary fund financial statements. A liability for these amounts is reported in governmental funds only if they have matured, for example, because of employee resignations and retirements.

Compensated absences due within one year represent an estimate of the compensated absences that will be utilized within the next year. All compensated absences for governmental activities are paid out of the General Fund.

9. Long-Term Obligations
In the government-wide financial statements, and proprietary fund types in the fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, businesstype activities, or proprietary fund type statement of net position.

10. Deferred Outflows/Inflows of Resources
In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net assets that applies to a future period and will not be recognized as an outflow of resources (expense) until then.

The Town reports deferred outflows related to leases, pensions, other postemployment benefits, and refunding charges.
-79-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
41 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) In addition to liabilities, the statement of net position and the governmental funds will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net assets that applies to a future period and will not be recognized as an inflow of resource (revenue) until that time. The Town reports deferred inflows related to pensions and other postemployment benefits.

11. Pensions
For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Town’s Public Employees Retirement System (CalPERS) plans and additions to/deductions from the Plan’s fiduciary net position have been determined on the same basis as they are reported by CalPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

12. Other Postemployment Benefits (OPEB)
For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the Town’s plan (OPEB Plan) and additions to/deductions from the OPEB Plan’s fiduciary net position have been determined on the same basis as they are reported by CalPERS. For this purpose, benefit payments are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value.

13. Effects of New Pronouncements
As of July 1, 2022, the Town implemented the following GASB Statement:

GASB Statement No. 96 – In May 2020, GASB issued Statement No. 96, Subscription-Based Information Technology Arrangements. The objectives of this Statement is to provide guidance on the accounting and financial reporting for subscription-based information technology arrangements (SBITAs) for government end users (governments). This Statement (1) defines a SBITA; (2) establishes that a SBITA results in a right-to-use subscription asset—an intangible asset—and a corresponding subscription liability; (3) provides the capitalization criteria for outlays other than subscription payments, including implementation costs of a SBITA; and (4) requires note disclosures regarding a SBITA. The provisions of this statement have been implemented as further described at Note 6.

The Town is currently analyzing its accounting practices to determine the potential impact on the financial statements for the following GASB statements:
-80-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
42 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) GASB Statement No. 99 – In April 2022, GASB Issued Statement No. 99, Omnibus 2022. The objectives of this Statement are to enhance comparability in accounting and financial reporting and to improve the consistency of authoritative literature by addressing (1) practice issues that have been identified during implementation and application of certain GASB Statements and (2) accounting and financial reporting for financial guarantees. Certain requirements of this statement have been implemented as of June 30, 2022. The requirements related to leases, PPPs, and SBITAs are effective for fiscal years beginning after June 15, 2022, and all reporting periods thereafter.

The requirements related to financial guarantees and the classification and reporting of derivative instruments within the scope of Statement 53 are effective for fiscal years beginning after June 15, 2023, and all reporting periods thereafter.

GASB Statement No. 100 – In June 2022, GASB Issued Statement No. 100, Accounting Changes and Error Corrections – an amendment of GASB Statement No. 62. The objective of this Statement is to enhance accounting and financial reporting requirements for accounting changes and error corrections to provide more understandable, reliable, relevant, consistent and comparable information for making decisions or assessing accountability. The requirements of this Statement are effective for accounting changes and error corrections made in fiscal years beginning after June 15, 2023 and all reporting periods thereafter.

GASB Statement No. 101 – In June 2022, GASB Issued Statement No. 101, Compensated Absences. The objective of this Statement is to better meet the information needs of the 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.
-81-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
43 NOTE 2 – RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS A. Explanation of certain differences between the governmental fund balance sheet and the government-wide statement of net position.

The governmental fund balance sheet includes reconciliation between fund balance – total governmental funds and net position – governmental activities as reported in the government-wide statement of net position. Long-term liabilities are not due and payable in the current period and are therefore not reported in the governmental funds. In addition, capital assets are not financial resources and are therefore not reported in the governmental funds. This year’s difference in the amount of $7,767,284 relates to capital asset, ($1,428,839) relates to compensated absences, ($19,582,048) relates to pension liabilities and related deferrals, ($8,214,463) relates to OPEB liabilities and related deferrals, $21,712 relates to subscription liabilities, $9,362,471 relates to the incorporation of the internal service fund into the governmental activities and $100,000 relates to uninsured claims incurred but not paid.

B. Explanation of certain differences between the governmental fund statement of revenues, expenditures and changes in fund balances and the government-wide statement of activities.

The governmental fund statement of revenues, expenditures and changes in fund balances includes reconciliation between net changes in fund balances – total governmental funds and changes in net position of governmental activities as reported in the government-wide statement of activities. One significant element of that reconciliation explains “governmental funds report capital outlays as expenditures. However, in the statement of activities, the cost of those assets is allocated over the estimated useful lives and reported as depreciation expense.” The details of this ($241,517) difference are as follows:

Capital Outlay $ 914,030
Depreciation (672,513)
Net adjustment to decrease net changes in fund balances - total governmental funds to arrive at changes in net position of governmental activities $ 241,517 Another element of that reconciliation states, “some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds.” ($40,743) relates to increases in compensated absences from sick leave vesting on certain employees, $21,712 relates to subscription liabilities, and $3,054,496 relates to pension and $1,017,457 relates to an OPEB credit.

Another element of the reconciliation includes the incorporation of the net revenue of the internal service fund for $757,752.
-82-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
44 NOTE 3 – CASH AND INVESTMENTS
The Town’s deposits and investments are invested pursuant to its investment policy guidelines. The objectives of the policy are, in order of priority, preservation of capital, liquidity and yield. The policy addresses the soundness of financial institutions in which the Town will deposit funds, types of investment instruments as permitted by the California Government Code, and the percentage of the portfolio that may be invested in certain instruments with longer terms to maturity. Total Town cash and investments at fair value on June 30, 2023, are as follows:

Cash and investments, including restricted cash, as of June 30, 2023, consist of the following. Restricted cash of $5,310,621 is included in the investment balance and is a restricted Internal Revenue Service (IRS) Section 115 pension trust. The trust is funded to mitigate rising cost of pensions. The trust was adopted in fiscal year 2018-19.

Cash on hand $ 8,300
Deposits with financial institutions 21,492,390
Total cash and bank deposits 21,500,690
Investments 8,784,085
Participation in LAIF pool 63,441,806
Total investments 72,225,891
Total cash and investments $ 93,726,581
Investments Authorized by the California Government Code and the Town’s Investment Policy The table below identifies the investment types that are allowed by the California Government Code and are authorized by the Town’s more restrictive investment policy. The second part of the table relates to investments of debt proceeds held by bond trustees and governed by the provisions of the Town’s debt agreements. The table addresses interest rate risk, credit risk, and concentration of credit risk. Investments held in trust accounts, such as a Section 115 pension trust, are governed by the trust documents. In fiscal year 2022-23, the mutual fund investment type is held in the Section 115 pension trust.
-83-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
45 NOTE 3 – CASH AND INVESTMENTS (Continued)
Maximum Maximum
Maximum Percentage Investment in
Authorized Investment Type Maturity of Portfolio One Issuer Authorized for the Town:

U.S. Treasury Obligations 2 years
2 - 5 years
50%
50% None
Banker's Acceptances 180 days 20% Lower of $1M or 10%
Time Certificate of Deposit 2 years None $500,000
Commercial Paper 180 days 10% $1M up to 3 months
$500,000 up to 6
Local Agency Investment Fund (LAIF) N/A None N/A
Repurchase Agreements 30 days 20% 20%
Negotiable Certificates of Deposit 5 years 30% None
County Pooled Investment Funds N/A 10% N/A
Money Market Mutual Funds (Custodial Accounts Only) N/A None None Authorized By Debt Agreements:

U.S. Treasury Obligations None None None
U.S. Agency Securities None None None
Certificates of Deposits/Bankers Acceptances 360 days None None Commercial Paper 270 days None None
Money Market Funds N/A None None
Local Agency Bonds None None None
Investment Contracts None None None
Repurchase Agreements N/A None None
Local Agency Investment Funds (LAIF) N/A None $65M
-84-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
46 NOTE 3 – CASH AND INVESTMENTS (Continued)
Interest Rate Risk
Changes in market interest rates will affect the fair value of an investment. Generally, investments with longer maturities are more sensitive to changes in market interest rates. The Town manages its exposure to interest rate risk by purchasing a combination of shorter and longer-term investments and by timing cash flows from maturities, so that investments mature evenly over time as necessary to provide the cash flow and liquidity needed for operations. The Town also manages its interest rate risk by holding most investments to maturity, thus reversing unrealized gains and losses. The mutual funds are investments held in the Section 115 pension trust and are restricted in their use. The following table shows the distribution of the Town’s investments by maturity:
12 Months 13-24 25-60
Investment Type Amount or Less Months Months Total
LAIF $ 63,441,806 $ 63,441,806 $ - $ 63,441,806 - $
Mutual Funds 5,310,619 5,310,619 - 5,310,619 -
Negotiable Certificates of Deposit 430,674 237,898 192,776 430,674 - U.S. Treasury Notes 3,042,792 390,048 2,652,744 - 3,042,792 Totals $ 72,225,891 $ 69,380,371 $ 192,776 $ 2,652,744 $ 72,225,891 Credit Risk
Credit risk, when an issuer of an investment does not fulfill its obligation to the holder of an investment, is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the actual rating as of year-end for each investment type:

Exempt
From Not
Investment Type Amount Disclosure Rated
LAIF $ 63,441,806 $ 63,441,806 - $
Mutual Funds 5,310,619 5,310,619 -
Negotiable Certificates of Deposit 430,674 430,674 -
U.S. Treasury Notes 3,042,792 3,042,792 -
Totals $ 72,225,891 $ 3,042,792 $ 69,183,099
-85-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
47 NOTE 3 – CASH AND INVESTMENTS (Continued)
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. Custodial credit risk for investments is the risk, that, in the event of the failure of the counterparty (e.g., broker-dealer used by the Town to buy the securities), the 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 Town’s investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments with the exception of the following provision. A financial institution is required to secure deposits in excess of $250,000 made by state and local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law secured by US government securities at a constant margin ratio of 110% for government securities.

Investment in the State Investment Pool
As of year-end, the Town has $63,441,806 participation in the Local Agency Investment Fund (LAIF) regulated by the California Government Code under the oversight of the Treasurer of the State of California.

Interest and Investment Income
Interest and investment income consists of the following on June 30, 2023:

Interest earned $ 2,693,032
Change in fair value (977,335)
Net investment income $ 1,715,697
Fair Value Measurements
The Town categorizes the fair value measurements of its investments based on the hierarchy established by generally accepted accounting principles. The fair value hierarchy has three levels used to measure an asset's fair value. The following provides a summary of the hierarchy used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets that the Town has the ability to access at the measurement date. Level One assets may include debt and equity securities that are traded in an active exchange market and that are highly liquid and are actively traded in over-the-counter markets.

Level 2 - Observable inputs other than Level One prices such as quoted prices for similar assets in active markets, quoted prices for identical or similar assets in markets that are not active, or other inputs that are observable, such as interest rates and curves observable at commonly quoted intervals, implied volatilities, and credit spreads. For financial reporting purposes, if an asset has a specified term, a Level two input is required to be observable for substantially the full term of the asset. The Town uses matrix pricing to value its level II investments. -86-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
48 NOTE 3 – CASH AND INVESTMENTS (Continued)
Level 3 - Unobservable inputs should be developed using the best information available under the circumstances, which might include the Town’s own data. The Town should adjust that data if reasonable available information indicates that other market participants would use different data or certain circumstances specific to the city are not available to other market participants.

Uncategorized - Investments in the Local Agency Investment Funds/State Investment Pool and mutual funds are not measured using the input levels above because the Town’s transactions are based on a stable net asset value per share.

All contributions and redemptions are transacted at $1.00 net asset value per share.

The LAIF and Mutual Funds investment types are classified as Uncategorized for the Fair Value Measurement based on generally accepted accounting principles. LAIF investments on June 30, 2023 were generally comprised of U.S. Treasury bills and notes, Federal agencies, supranational debentures, certificates of deposits, bank notes, commercial paper, time deposits, and AB 55 and GF Loans. As stated in Note 3, LAIF is regulated by the California Government Code under the oversight of the Treasurer of the State of California. The Mutual Funds are investments in the Section 115 pension trust and are comprised of various mutual funds in the categories of domestic equities, fixed income, international equities, and real estate. As stated in Note 3 the Section 115 pension trust is governed by the trust documents.

The Town valued its investment in LAIF as of June 30, 2023 by multiplying its account balance with LAIF of $64,419,141 times a fair value factor of 0.984828499 computed by LAIF. This fair value factor was determined by dividing all LAIF participants aggregated amortized costs by a total aggregate fair value. Accordingly, as of June 30, 2023, the Town’s investment in LAIF stated at fair value equaled $63,441,806.

Level 1 Level 2 Level 3
Investment Type Inputs Inputs Inputs Uncategorized
LAIF $ - $ - $ - $ 63,441,806
Mutual Funds - - - 5,310,619
Negotiable Certificates of Deposit - 430,674 - -
U.S. Treasury Notes 3,042,792 - - -
Total Investment Portfolio $ 3,042,792 $ 430,674 $ 68,752,425 - $ Fair Value Measurement Using
-87-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
49 NOTE 4 – CAPITAL ASSETS
Capital asset activity for the year ended June 30, 2023 was as follows. The increase in FY 2022-23 of $11.5 million for Treatment Plant Capacity Rights is the Town’s share of cost for the City of San Mateo’s Clean Water wastewater treatment plant. The Town contracts for sewer treatment with the City of San Mateo for sewage from the southern half of the Town. The addition of Intangible Asset - Subscription in FY 2022-23 is for the implementation of GASB No. 96 – Subscription-Based Information Technology Arrangements (SBITA). The asset reflects the discounted cash flow of future payments on the information technology agreements and is amortized over the period of each agreement.

Beginning Ending
Balance Increases Decreases Balance
Governmental Activities:

Land - not being depreciated $ 1,456,560 -$ -$ 1,456,560 $ Capital assets, being depreciated
Land improvements 3,690,406 - (111,089) 3,579,317
Buildings 5,392,372 430,996 (23,406) 5,799,962
Machinery and equipment 6,315,941 861,373 (620,904) 6,556,410 Infrastructure 15,256,987 - (9,544) 15,247,443
Total capital assets being depreciated 30,655,706 1,292,369 (764,943) 31,183,132 Less accumulated depreciation for:

Land improvements (2,930,681) (139,602) 111,089 (2,959,194) Buildings (3,162,937) (234,331) 23,406 (3,373,862)
Machinery and equipment (4,737,349) (411,167) 620,904 (4,527,612) Infrastructure (11,774,944) (279,284) 9,544 (12,044,684) Total accumulated depreciation (22,605,911) (1,064,384) 764,943 (22,905,352) Total capital assets, being depreciated, net 8,049,795 227,985 - 8,277,780 Intangible assets, being amortized:

Subscription assets 1,077,761 - - 1,077,761
Accumulated amortization:

Subscription assets (189,200) - - (189,200)
Total intangible assets, being amortized, net 1,077,761 (189,200) - 888,561 Governmental activities capital assets, net $ 10,584,116 38,785$ -$ 10,622,901 $ -88-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
50 NOTE 4 – CAPITAL ASSETS (Continued)
Beginning Ending
Balance Increases Decreases Balance
Business-type Activities:

Capital assets, not being depreciated
Treatment plant capacity rights $ 26,588,799 11,445,737$ -$ 38,034,536 $ Capital assets, being depreciated
Buildings 341,337 - - 341,337
Machinery and equipment 1,086,409 - (234,301) 852,108
Systems and transmissions 170,141,704 9,204,435 (4,524,606) 174,821,533 Total capital assets being depreciated 171,569,450 9,204,435 (4,758,907) 176,014,978 Less accumulated depreciation for:

Buildings (341,337) - - (341,337)
Machinery and equipment (1,080,683) (5,726) 234,301 (852,108) Systems and transmissions (98,822,411) (5,641,483) 4,524,606 (99,939,288) Total accumulated depreciation (100,244,431) (5,647,209) 4,758,907 (101,132,733) Total capital assets, being depreciated, net 71,325,019 3,557,226 - 74,882,245 Business-type activities capital assets, net 97,913,818 15,002,963 - 112,916,781 Depreciation expense by functions/program is as follows:

Governmental Activities:

General government $ 202,040
Public safety 110,108
Public works 360,365
Subtotal 672,513
Capital assets held by the Town's internal service funds are charged to the various functions based on their usage of the assets. 391,871 Total depreciation expense - governmental activities $ 1,064,384 Business-type Activities:

Water $ 1,403,819
Sewer 4,243,390
Total depreciation expense - business-type activities $ 5,647,209 NOTE 5 – LEASES
Leases receivable – The Town has multiple lease contracts for lease of Town property for wireless communications facilities. The leases expire between fiscal years 2023 through 2036. The discount rates range from 0.15% to 0.27%.

The Town recognized $203,232 in lease revenue and $26,559 in interest revenue during the current fiscal year. As of June 30, 2023 Town’s receivable for lease payments was $1,007,130. Also, the Town has a deferred inflow of resources associated with these leases that will be recognized as revenue over the lease term. As of June 30, 2023 the balance of the deferred inflow of resources was $978,398. -89-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
51 NOTE 6 – SUBSCRIPTION-BASED TECHNOLOGY ARRANGEMENTS
A subscription-based information technology arrangement (SBITA) is a contractual agreement that conveys control of the right-to-use another entity’s information technology asset, alone, or in conjunction with a tangible capital asset, for a minimum contractual period of greater than one year, in an exchange or exchange-like transaction. The Town entered into seven multi-year software licensing agreements through fiscal year 2029. As the licensee, the Town recognizes a subscription liability and an associated intangible subscription.

The Town’s schedule of future payments included in the measurement of subscription payable is as follows:

Year Ending
June 30 Principal Interest Total
2024 $ 213,034 $ 20,895 $ 233,929
2025 187,365 15,877 203,242
2026 108,779 11,346 120,125
2027 111,511 8,614 120,125
2028 114,311 5,814 120,125
2029 117,183 2,943 120,126
Total $ 852,183 $ 65,489 $ 917,672
Government Activities
NOTE 7 – INTERFUND TRANSACTIONS
The following is a summary of the interfund transactions for the year ended June 30, 2023:

Internal
General Capital Projects Water Sewer Service
Transfer Out Fund Fund Fund Fund Fund Total
General Fund $ 892,000 - $ $ 1,200,000 $ 1,720,000 336,000$ 4,148,000$ Police and Fire Special Tax Fund 2,237,795 - - - - 2,237,795 Nonmajor Governmental Funds 250,000 338,661 - - - 588,661 Sewer Fund - 1,051,826 - - - 1,051,826
Total $ 2,487,795 $ 1,230,661 $ 2,251,826 $ 1,720,000 336,000$ 8,026,282$ Transfer In
The transfers into the General Fund included a $2,237,795 transfer from the Police and Fire Special Tax Fund to help cover costs of police and fire service and $250,000 from the Measure A Fund to cover street-related costs incurred in the General Fund. The transfers into the Water Fund are for capital improvements to the Darrell Water Tank and the transfers into the Sewer Fund are to cover storm drain/sewer capital improvements. The transfers into the Capital Projects Fund were primarily for street repaving projects. -90-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
52 NOTE 8 – LONG-TERM LIABILITIES
Long-term liability activity, excluding pension and other post-employment benefits (OPEB) liabilities, for the year ended June 30, 2023, was as follows:

Beginning Ending Due within
Balance Additions Reductions Balance One Year
Governmental activities:

Compensated absences $ 1,569,582 $ 1,076,356 $ 1,217,099 $ 1,428,839 521,807$ Subscriptions payable 1,077,761 225,578 - 852,183 213,034 Total governmental activity longterm liabilities $ 2,647,343 $ 1,076,356 $ 1,442,677 $ 2,281,022 734,841$ Business-type activities:

Compensated absences $ 142,619 $ 173,973 $ 150,390 $ 166,202 74,674$ Funding Agreement - wastewater treatment 26,588,799 11,445,830 3,519,860 34,514,769 859,661 State Clean Water loan - Direct Borrowing 8,839,898 290,363 - 8,549,535 295,009 ECE-ARRA loan - Direct Borrowing 319,350 62,604 - 256,746 63,225 Refunding bonds 19,250,000 - 19,250,000 - 1,740,000
Certificates of participation 21,605,000 21,605,000 - - - Premiums 2,039,875 - 2,039,875 - 169,990
Total business-type activity longterm liabilities $ 57,495,666 $ 32,909,678 $ 25,628,217 $ 64,777,127 3,202,559$ California Energy Resources Conservation and Development Commission Loan – Original Principal $908,700.

In 2010, the Town entered into an agreement with the California Energy Resources Conservation and Development Commission (the “Commission”) to receive financial assistance for energy savings projects consisting of premium efficiency pumps and the Supervisory Control and Data Acquisition (SCADA) system software with control sensors for its water system. The loan is due in semi-annual installment payments at an interest of 1 percent starting December 2012 and will be fully amortized in June 2027. The annual payments are to come from annual energy savings. The Town is required to maintain compliance with all provisions of the loan. The remaining debt service requirements for the loan on June 30, 2023 are summarized in the following table:

Year Ending
June 30 Principal Interest Total
2024 $ 63,225 $ 2,416 $ 65,641
2025 63,865 1,776 65,641
2026 64,505 1,136 65,641
2027 65,151 489 65,640
Total $ 256,746 $ 5,817 $ 262,563
Business-Type Activities
-91-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
53 NOTE 8 – LONG-TERM DEBT (Continued)
Certificates of Participation Advance Refund and Revenue Refunding Bonds Series 2023.

The certificates of participation (“COPs”) Series 2000A, 2000B, 2003A, and 2006A were refunded in fiscal year 2022-23. The certificates of participation are recorded in the Enterprise Funds and were issued by the Public Improvement Corporation. Two issues on June 1, 2000, comprised of $4,900,000 Series A, proceeds of which were used to advance refund the 1997 COPs that were called on June 1, 2007, and $9,700,000 Series B that were used to refund and retire the 1995 COPs and to finance the acquisition, construction, and installation of certain improvements to the Town’s water and sewer systems. The Town issued $15,000,000 of 2003 Series A variable rate certificates of participation (water and sewer system projects) in August 2003 to finance various water and wastewater projects. An additional $12,000,000 of variable rate certificates of participation (water and sewer system projects) 2006 Series A were issued to finance various water and wastewater projects consistent with the enterprise’s ten-year capital improvement plan. Contracts associated with the COPs, including the bond standby purchase agreement, interest rate swap (hedging instrument), and other services were terminated in connection with the refunding transaction.

In June of 2023, the Town issued $19.25 million in Revenue Refunding Bonds Series 2023 (“the bonds”) with an interest rate of five percent to advance refund $19.96 million of 2000 Series A and B, 2003 Series A and 2006 Series A. The net proceeds of $20.2 million were used to purchase U.S. government securities. Those securities were deposited in an irrevocable trust with an escrow agent to provide for all future debt service payments on the refunded certificates of participation. As a result, the refunded certificates of participation are considered to be defeased, and the liability for the defeased bonds is not reported on the statement of net position. 2023 Series Bonds Proceeds $ 19,250,000
Premium, Net of Underwriter Discount 2,039,876
Direct termination payment on swap (1,114,000)
Net proceeds $ 20,175,876
Certificates of Participation Refunding 19,965,000
Cost of Issuance 210,876
Total uses $ 20,175,876
Sources
Uses
-92-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
54 The advance refunding resulted in a difference between the reacquisition price of the new debt and the net carrying amount of the old debt in the amount of $1,114,000.

The Town’s current rating for the Series 2023 Refunding Bonds is AAA-A1 from Standard and Poor’s.

As of June 30, 2023, the debt service requirements of the refunding bonds are summarized in the following table.

Year Ending
June 30 Principal Interest Total
2024 $ 1,740,000 $ 943,785 $ 2,683,785
2025 1,745,000 875,500 2,620,500
2026 1,785,000 788,250 2,573,250
2027 1,915,000 699,000 2,614,000
2028 2,055,000 603,250 2,658,250
2029-2033 8,640,000 1,540,500 10,180,500
2034-2038 1,370,000 103,500 1,473,500
Total $ 19,250,000 $ 5,553,785 $ 24,803,785
Business-Type Activities
-93-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
55 NOTE 8 – LONG-TERM DEBT (Continued)
State Clean Water Loan
On March 23, 2015, the Town entered into an Installment Sale Agreement with the Clean Water State Revolving Fund for construction financing on its sewer system, referred to as the State Revolving Fund loan (SRF loan). The loan provides for up to $12 million and debt service commenced in September 2017 and is a 30-year loan. The debt bears interest at 1.6% per annum. The debt is secured by a pledge of net revenues of the Sewer Fund. There are limitations and covenants contained in the agreement. The Town complies with all restrictive limitations and covenants on June 30, 2023. The debt service requirements for the loan on June 30, 2023 are summarized in the following table:

Year Ending
June 30 Principal Interest Total
2024 $ 295,009 $ 136,793 $ 431,802
2025 299,729 132,072 431,801
2026 304,525 127,277 431,802
2027 309,397 122,404 431,801
2028 314,347 117,454 431,801
2029-2033 1,648,810 510,198 2,159,007
2034-2038 1,785,003 374,004 2,159,007
2039-2043 1,932,447 226,560 2,159,007
2044-2048 1,660,268 66,938 1,727,206
Total $ 8,549,535 $ 1,813,700 $ 10,363,235
Business-type Activities
The Town’s refunding bonds and State loan outstanding are secured by the pledging of the certain revenues. Debt service payments as a ratio of the pledged gross revenue, less certain expenses as required by the debt agreement, for the year ended June 30, 2023, are indicated in the following table:

Description of
Pledged Revenue
Annual
Amount of
Net Pledged
Revenue
Annual
Debt
Service
Payments
Pledged
Revenue
Coverage
Water revenue $ 1,740,478 $ 1,136,646 153%
Sewer revenue 8,743,561 1,760,620 497%
Funding Agreement with City of San Mateo
In June 2022, the Town entered into an agreement with the City of San Mateo for the Town’s share of cost of City of San Mateo’s new Clean Water wastewater treatment plant. The Clean Water Program capital improvement projects are necessary for capacity assurance and reliability, and to meet regulatory compliance requirements contained in the Cease-and-Desist Order and NPDES permits. The Town contracts for sewer treatment with the City of San Mateo for sewage flows from the southern half of the Town and the current construction includes wastewater treatment capacity for the southern portion of the Hillsborough sewer collection system. -94-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
56 NOTE 8 – LONG-TERM DEBT (Continued)
In the interim agreement, the City of San Mateo recognizes the work that the Town of Hillsborough is doing to reduce inflow and infiltration and the need for additional capacity at the San Mateo facility. For the first five years of the cost share agreement, the Town will make payments based on the Town’s share of flow data and projections from the initial study. At five years, there will be a “true up” or “look back” based on the actual flow. The true up criteria are outlined in the agreement. The agreement provides an incentive for Hillsborough to reduce infiltration and inflow and thereby reduce capacity requirements and pay a lower share of the capital costs.

The new wastewater treatment plant will significantly increase treatment capacity. The effective treatment capacity of the current plan is 40 million gallons per day (MGD). The new plant is designed to treat wet weather flows up to 78 MGD. Also, a new upstream retention system will create additional effective capacity, along for a total of 86.2 MGD of sewer to be treated daily, more than double the current capacity, which reduces accidental discharges and overflows. For purposes of calculating the Town’s share of payments under the agreement for the first five years, the Town’s the percentage share will be 7.6% of wastewater treatment plant project costs, 8.2% of Dale Avenue Pump Station projects, 8.2% of Underground Flow Equalization System projects and 5.7% of Program Management Office cost. If during the first five years Town’s meter flows for any two-hour period never exceed 4.5 MGD, the Town’s share of project costs is reduced to the true-up amounts.

The agreement requires an initial principal payment of $2,415,000 by the Town, and $1.9 million annually (including interest) for the first five years. In fiscal year 2022-23, principal paid totaled $3,519,860, comprised of the initial $2,415,000 and four quarterly principal payments.

As of June 30, 2023, the City of San Mateo completed 78% of the construction and therefore, the Town’s share of the liability was $31,514,769. The future payments on this obligation to date are as follows:

Year Ending
June 30 Principal Interest Total
2024 $ 859,661 $ 653,088 $ 1,512,749
2025 878,892 636,525 1,515,417
2026 894,440 619,643 1,514,083
2027 911,646 602,436 1,514,082
2028 929,184 584,899 1,514,083
2029-2033 4,921,020 2,649,393 7,570,413
2034-2038 5,412,919 2,157,494 7,570,413
2039-2043 5,953,988 1,616,425 7,570,413
2044-2048 6,549,141 1,021,272 7,570,413
2049-2053 7,203,878 366,627 7,570,505
Total $ 34,514,769 $ 10,907,802 $ 45,422,571
Business-type Activities
-95-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
57 NOTE 9 – RISK MANAGEMENT
The Town is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters for which the Town carries commercial insurance. The Town has established a limited risk management program of these types of risks.

The Town participates in a public-entity risk pool (The Cities Group – a Joint Power Authority) that operates a Workers’ Compensation self-insured program. The pool indemnifies the membership for their Workers’ Compensation losses and recovers those costs from the members through a retrospective, loss experience-based contribution-rating plan. The pool’s self-insured retention is $1 million per occurrence for miscellaneous employees and $1.5 million for safety employees. Claims in excess of these amounts are insured up to $12.2 million. The Town has no deductible for these claims. Financial statements for the pool may be obtained from The Cities Group, P O Box 111, Burlingame, CA 94011.

The Town participates in the Pooled Liability Assurance Network (PLAN) Joint Powers Authority. The PLAN provides $30,000,000 coverage for general and automobile liability in excess of the Town’s $50,000 deductible.

The Town also participates in PLAN pool for the commercial property including boiler and machinery coverage, with $5,000 per incident deductible and certain specified limits. The Town also participates in PLAN Cyber Liability Insurance ($1 million with excess at $2 million).

Liabilities are reported when it is probable that a loss has occurred, and the amount of the loss can be reasonably estimated. The result of the process to estimate the claims liability is not an exact amount as it depends on many complex factors, such as inflation, changes in legal doctrines, and damage awards. Accordingly, claims are reevaluated periodically to consider these factors, estimated recoveries from salvage or subrogation, and other economic and social factors. The estimate of the claims liability also includes amounts for incremental claim adjustment expenses related to specific claims and other claim adjustment expenses regardless of whether allocated to specific claims. The amount recorded as liability for known claims is based on the recommendation of the thirdparty administrator. No accrued liability for incurred but not reported claims (IBNRs) has been recorded, as amounts for such claims cannot be reasonably estimated. The Town’s remaining exposure for claims filed under this program is minimal.

The Town is self-insured for all other insurable risk, except for excess insurance coverage provided by commercial insurance companies that are limited to the following: Employment Practices Liability in excess of $100,000 each claim but limited to a maximum of $2,000,000.

There is no significant change in insurance coverage from that of the prior year and there were no settlements that exceeded coverage for each of the past three years. Below is a reconciliation of changes in the claims liability for fiscal years ending June 30, 2023 and 2022.
2023 2022
Beginning balance $ 27,150 $ 27,150
Claims incurred and changes in estimates for prior year claims 344,879 24,698 Claims paid (244,879) (24,698)
Ending balance $ 127,150 $ 27,150
-96-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
58 NOTE 10 – JOINT POWERS AGREEMENT
The Town participates in the City/County Association of Governments of San Mateo County (C/CAG), which is governed by a board consisting of a representative from each member. The board controls the operations of C/CAG, including selection of management and approval of operating budget. The association was established under a 1990 Joint Exercise of Powers Agreement between the Town, San Mateo County, and a majority of cities within the County to develop State-mandated plans such as an integrated waste management plan. The Town makes annual nonrefundable contributions to C/CAG used along with other member contributions, to finance C/CAG operations.

The Town’s contribution during the year totaled $34,509. Financial information related to the association may be obtained from the City of San Carlos, 600 Elm Street, San Carlos, CA 94070. The Town’s share of year-end assets, liabilities or fund equity has not been calculated by C/CAG.

The Town is one of eleven members of the South Bayside Waste Management Authority (SBWMA), a joint powers authority formed for the purpose of joint ownership, financial and administration of waste management. The JPA also includes a transfer station and a recycling center as well as the planning, administration management, review, monitoring, enforcement and reporting of solid waste and recyclable material collection within Authority’s service area. The Authority’s financial statements are available from the SBWMA, c/of City of San Carlos, 600 Elm Street, San Carlos, CA 94070.

Effective July 1, 2010, the Town is a member of the Central County Fire Department (CCFD) a Joint Powers Authority (JPA) that provides fire, emergency medical, and disaster preparedness services to the Town and the City of Burlingame, and by contract to the City of Millbrae. CCFD’s audited financial statements are available on the CCFD website. CCFD is a stand-alone employer recognized by the California Public Employees’ Retirement System (CalPERS). The Town paid $9.0 million for fire services for the year ended June 30, 2023 some of which represents pension contributions made by CCFD to CalPERS. AB 1912, which became effective on January 1, 2019, requires participating members of a joint powers authority (“JPA”) that contracts with CalPERS for pension benefits to allocate the pension liabilities of the JPA only in the event that the JPA decides to terminate its pension contract with CalPERS. There is no indication that CCFD will terminate its CalPERS contract. As such, under current generally accounting standards, the pension liability is not reported on the member agency financial statements and instead only the contributions are reported when they are made.

NOTE 11 – FUND BALANCES
Governmental funds report fund balance in classifications based primarily on the extent to which the Town is bound to honor constraints on the specific purposes for which amounts in the funds can be spent. As of June 30, 2023, fund balances for governmental funds are comprised of the following:
• Nonspendable Fund Balance – includes amounts that are (a) not in spendable form, or (b) legally or contractually required to be maintained intact. The “not in spendable form” criterion includes items that are not expected to be converted to cash, for example: inventories, prepaid amounts, and long-term notes receivable. -97-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
59 NOTE 11 – FUND BALANCES (Continued)
• Restricted Fund Balance – includes amounts that can be spent only for the specific purposes stipulated by external resource providers, constitutionally or through enabling legislation. Restrictions may effectively be changed or lifted only with the consent of resource providers. • Committed Fund Balance – includes amounts that can only be used for the specific purposes determined by a council resolution of the City Council. Commitments may be changed or lifted only by the Council taking the same formal action that imposed the constraint originally. • Assigned Fund Balance – represents amounts that are intended to be used by the Town of Hillsborough for specific purposes but do not meet the criteria to be classified as committed. The Council has by resolution assigned fund balance. The Council may also assign fund balance, as it does when appropriating fund balance to cover a gap between estimated revenue and appropriations in the subsequent year’s appropriated budget.

Unlike commitments, assignments generally only exit temporarily. In other words, an additional action does not normally have to be taken for the removal of an assignment. Conversely, as discussed above, an additional action is essential to either remove or revise a commitment. • Unassigned Fund Balance – is the residual classification for the General Fund and includes all amounts not contained in the other classifications. Unassigned amounts are technically available for any purpose. The general fund is the only fund that reports a positive unassigned fund balance. Additionally, any deficit fund balance within the other governmental fund types is reported as unassigned.

In circumstances when an expenditure is made for a purpose for which amounts are available in multiple fund balance classifications, fund balance is depleted in the order of restricted, committed, assigned, and unassigned. -98-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
60 NOTE 11 – FUND BALANCES (Continued)
Fund balances for all the major and nonmajor governmental funds as of June 30, 2023, are as follows:

Police and Fire
General Special Tax Capital Projects Nonmajor
Fund Fund Fund Funds Total
Nonspendable:

Prepaid items $ 36,644 $ - $ - $ 36,644 - $
Restricted:

Retiree benefits 4,672,481 - - 4,672,481 -
Streets - - 1,315,353 - 1,315,353
Public Safety - Police - - 1,241,035 - 1,241,035
Sub-total: 4,672,481 - 2,556,388 - 7,228,869
Assigned
Capital projects - 5,173,221 - 5,173,221 -
Tree replacement 263,000 - - 263,000 -
Sewer capital 2,000,000 - - 2,000,000 -
Storm drain capital 3,600,000 - - 3,600,000 -
Sub-total: 5,863,000 5,173,221 - 11,036,221 -
Unassigned 20,969,756 - - 20,969,756 -
Total $ 31,541,881 $ 5,173,221 - $ $ 2,556,388 $ 39,271,490 The Town’s Policy No. 409 – Budget and Fiscal Policies – includes guidelines for fund balance reporting and minimum amounts to maintain in each category. The Town will strive to maintain unassigned funds of at least 30% of operating expenditures in the General Fund – the minimum level necessary to maintain the City’s creditworthiness and to adequately provide for 1) economic uncertainties, local disasters, and other financial hardships or downturns in the local or national economy; 2) contingencies for unseen operating or capital needs and 3) cash flow requirements.

NOTE 12 – COMMITMENTS AND CONTINGENT LIABILITIES
The Town is obligated through cost sharing agreements with other municipalities to pay its pro-rata share of operating expenses, capital expenses and debt service for the operation of wastewater treatment plants. The Town is billed its portion of expenses pursuant to agreements it entered into with the municipalities. The costs incurred by the Town under these agreements amounted to $2,001,788 and $1,720,052 as of June 30, 2023 and 2022 respectively. In June 2022, the Town entered into a funding agreement with the City of San Mateo for the Town’s share of the San Mateo’s Clean Water wastewater treatment plant. See Note 8- Long-Term Debt. -99-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
61 NOTE 12 – COMMITMENTS AND CONTINGENT LIABILITIES (Continued) The Town is also obligated to pay a portion of the cost of operations of the local libraries, which are operated, by the Cities of Burlingame and San Mateo. The portion of these costs paid by the Town amounted $1,017,693 and $952,876 for years ended June 30, 2023 and 2022 respectively.

At June 30, 2023, the Town has outstanding construction contracts and commitments for capital projects of $14,493,424 primarily for street resurfacing, water tank, and storm drain capital improvements.

The Town is obligated to pay annual required contributions to CalPERS for pension obligations. In order to maintain the sustainability of the plan, the CalPERS Board periodically adjusts actuarial assumptions, amortization and funding policies and discount rates based on actual experience. Adjustments typically result in the member agencies paying an increased annual required contribution. The CalPERS Board conducted their Asset Liability Management Review cycle in 2021. Details of the pension liability are included in Notes to the Financial Statements – Note 14 on pages 66. On page 72, a Sensitivity of the Net Pension Liability to Changes in Discount Rate is outlined for a 1% increase or 1% decrease as compared to the current rate.

The Town is subject to litigation arising in the normal course of business. In the opinion of the Town’s management, there is no pending litigation, which is likely to have a material adverse effect on the financial position of the Town. -100-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
62 NOTE 13 – POSTEMPLOYMENT HEALTHCARE PLAN
Plan Description – The Town’s retiree healthcare plan (Plan) is provided through California Employers’ Retirement Benefit Trust (CERBT), an agent multiple-employer defined benefit healthcare program administered by CalPERS. The Town provides postretirement health benefits to certain eligible retirees pursuant to various Town Employee Associations’ Memoranda of Understanding. CalPERS issues a publicly available entity-wide financial report that includes financial statements and required supplementary information pertaining to CERBT. This report is on the CalPERS website at: http://www.calpers.ca.gov. The Town offers medical benefits to retired employees and employee and spouses/domestic partners for life and dependent children until age 26 unless otherwise meeting the requirements of the Social Security Administration as a continued dependent. The Plan does not offer dental, vision or life benefits to the Town’s retirees. Benefits provided are dependent on the hire date. All retired employees of the Town receive a contribution amount equal to the CalPERS Public Employee Medical and Hospital Care Act (PEMHCA) at a minimum and depending on the hire date and retirement date, retired employees may receive an additional reimbursement from the Town for their medical plan election. Employees hired prior to March 1, 2002 in the Police Unit, or January 1, 2002 for all other employees will receive reimbursement equal to the maximum health contribution given to active employees, as of the date of their retirement.

As of the June 30, 2022 measurement date, the following current and former employees were covered by the benefit terms under the healthcare plan:

Active plan members 90
Inactive employees or beneficiaries currently receiving benefit payments 103 Inactive employees entitled to but not yet receiving benefit payments 1 Total 194
Contributions – The contribution requirement of plan members and the Town are established under a funding policy approved by the City Council and may be amended by the Town from time to time. The Plan is currently fully funded by employer contributions with no requirement for matching or employee contributions for eligible employees. Concurrently with the implementation of GASB 75, the Town also adopted to prefund the actuarial liability. The funding policy is to contribute contributions sufficient to pay the current year’s retiree premium and plan expenses, with an additional amount to pre-fund benefits as determined by the Town’s actuary on a biennial basis.
-101-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
63 NOTE 13 – POSTEMPLOYMENT HEALTHCARE PLAN (Continued) Significant Assumptions – The Town’s net OPEB liability was measured as of June 30, 2022 and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation dated June 30, 2022, based on the following actuarial methods and assumptions:

Actuarial Assumption June 30, 2022 Measurement Date
Actuarial Valuation Date June 30, 2021
Contribution Policy Pre-funded full ADC through CERBT asset allocation Strategy 1.

Discount Rate 6.25%
Expected Long-Term Rate of Return on
Investments
Same as discount rate. Plan assets projected to be sufficient to pay all benefits from trust.

General Inflation 2.50% per annum
Mortality, Retirement, Disability,
Termination CalPERS 1997-2015 experience study.

Mortality Improvement Mortality projected fully generational with Scale MP-2021.

Medical Trend Non-Medicare - 6.50% for 2023, decreasing to an ultimate rate of

3.75% in 2076 and later years.

Medicare (Non-Kaiser) - 5.65% for 2023, decreasing to an ultimate rate of 3.75% in 2076 and later years.

Medicare (Kaiser) - 4.60% for 2023, decreasing to an ultimate rate of

3.75% in 2076
The long-term expected rate of return on OPEB plan investments was determined using a building block method in which expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table:

Asset Class 1
Target
Allocation
Long-Term
Expected Real
Rate of Return 2

49.00% 4.56%

23.00% 1.56%

5.00% -0.08%

20.00% 4.06%

3.00% 1.22%
100.00%
Global Equity
Fixed Income
Treasury Inflation Protection Securities
Real Estate Investment Trusts
Commodities
Total
1 An expected net rate of return of 6.25%
2 An expected inflation of 2.50%
-102-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
64 NOTE 13 – POSTEMPLOYMENT HEALTHCARE PLAN (Continued) Discount Rate – The discount rate used to measure the total OPEB liability was 6.25 percent. The projection of cash flows used to determine the discount rate assumed that Town contributions would be made at rates equal to the actuarially determined contribution rates. Based on those assumptions, the OPEB plan’s fiduciary net position was projected to be available to make all projected OPEB payments for current active and inactive employees and beneficiaries. Therefore, the long-term expected rate of return on OPEB plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability.

Changes in the OPEB Liability – The changes in the net OPEB liability for the Health Care Plan are as follows:

Total OPEB
Liability
Plan
Fiduciary Net
Position
Net OPEB
Liability
Balance at June 30, 2022 $19,070,339 $10,663,575 $8,406,764 Changes recognized for year:

Service cost $249,766 249,766 -
Interest 1,165,560 1,165,560 -
Changes of benefit terms - - -
Difference between expected and actual experience - - - Changes of assumptions - - -
Contributions:

Employer 1 1,345,253 - (1,345,253)
Net investment income (1,427,290) - 1,427,290
Benefit payments, including refunds of employee
contributions (1,342,273) (1,342,273) -
Administrative expenses (5,681) - 5,681
Net changes (1,429,991) 73,053 1,503,044
Balance at June 30, 2023 $ 19,143,392 $ 9,233,584 $ 9,909,808 1 Includes $2,980 of administrative expenses paid outside of trust.

Increase (Decrease)
-103-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
65 NOTE 13 – POSTEMPLOYMENT HEALTHCARE PLAN (Continued) Sensitivity of the Net OPEB Liability to Changes in the Discount Rate and to Changes in the Health Care Cost Trend Rates – The following presents the net OPEB liability of the Town if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate, for year ended June 30, 2023:

Discount Rate - 1%
(5.25%)
Current Discount
Rate (6.25%)
Discount Rate + 1%
(7.25%)
$ 11,999,549 $ 9,909,808 $ 8,158,058
Plan's Net OPEB Liability
The following presents the net OPEB liability of the Town if it were calculated using health care cost trend rates that are one percentage point lower or one percentage point higher than the current rate, for the year ended June 30, 2023:

Trend Rate - 1%
Healthcare Cost
Trend Rates Trend Rate + 1%
$ 7,929,815 $ 9,909,808 $ 12,270,397
Plan's Net OPEB Liability
-104-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
66 NOTE 13 – POSTEMPLOYMENT HEALTHCARE PLAN (Continued) Gains and losses related to changes in total OPEB liability and fiduciary net position are recognized in OPEB expense systematically over time.

Amounts are first recognized in OPEB expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to OPEB and are to be recognized in future OPEB expense.

The recognition period differs depending on the source of the gain or loss:

Net difference between projected and actual earnings
on OPEB plan investments
All other amounts Expected average remaining service lifetime (EARSL) (5 Years at June 30, 2021)
5 years
OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB – For the fiscal year ended June 30, 2023, the Town recognized OPEB expense of $210,436. As of fiscal year ended June 30, 2023, the Town reported deferred outflows of resources related to OPEB from the following sources:

Deferred Outflows of
Resources
Deferred Inflows of
Resources
OPEB contributions subsequent to measurement date $ 1,353,646 $ - Changes in assumptions 62,738 (54,000)
Net difference between projected and actual earnings on OPEB plan investments 745,841 -
Difference between expected and actual experience - (1,429,068) $ 2,162,225 $ (1,483,068)
The amount of $1,353,646 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net OPEB liability in the year ended June 30, 2024. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized as OPEB expense as follows:

Fiscal Year Ended
June 30:

Deferred
Outflows/(Inflows)
of Resources
2024 $ (433,182)
2025 (352,183)
2026 (307,858)
2027 418,735
$ (674,488)
-105-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
67 NOTE 14 – EMPLOYEE RETIREMENT SYSTEMS
The CalPERS Plan (Plan) consists of a miscellaneous pool and a safety pool (referred to as "risk pools"), which are comprised of individual employer miscellaneous and safety rate plans, respectively. The risk pools are included within the Public Employees’ Retirement Fund C (PERF C).

Plan Descriptions – All qualified permanent and probationary employees are eligible to participate in the Town's separate Safety (police) and Miscellaneous (all other) Employee Pension Plan, cost sharing multiple employer defined benefit pension plan administered by the California Public Employees’ Retirement System (CalPERS).

Benefit provisions under the Plan are established by State statute and Town resolution. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information can be found on the CalPERS website at: http://www.calpers.ca.gov.

Benefits Provided – CalPERS provides retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full-time employment. Members with five years of total service are eligible to retire at age 50 with full benefits for plans prior to January 1, 2013 and age 52 for Miscellaneous Plan and age 55 for Safety Plan on or after January 1, 2013. All members are eligible for non-duty disability benefits after 10 years of service. The death benefit is one of the following: the Special Death Benefit, the 1959 Survivor Benefit (Level 4), or the Optional Settlement 2W Death Benefit. The cost-of-living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law.

On January 1, 2013, the Public Employees’ Pension Reform Act of 2013 (PEPRA) took effect. In additional to creating new retirement formulas for newly hired members, PEPRA also effectively closed all existing active risk pools to new employees.
-106-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
68 NOTE 14 – EMPLOYEE RETIREMENT SYSTEMS (Continued)
The Plans’ provisions and benefits in effect on June 30, 2023, are as follows:

Prior to
January 1, 2013
On or after
January 1, 2013
Tier 1 / Tier 2 Plan
Formula 3% at 60 / 2% at 60 2% at 62
Benefit vesting schedule 5 years of service 5 years of service Benefit payments monthly for life monthly for life
Earliest retirement age 50 52
Required employee contribution rates 7.81% / 6.83% 7.25% Required employer contribution rates 16.17% / 9.3% 7.76% Required employer dollar UAL payment (annual) $1,203,095 / $13,665 $17,073 Prior to
January 1, 2013
On or after
January 1, 2013
Formula 3% at 50 2.7% at 57
Benefit vesting schedule 5 years of service 5 years of service Benefit payments monthly for life monthly for life
Earliest retirement age 50 50
Required employee contribution rates 8.99% 13.750%
Required employer contribution rates 25.6% 13.660%
Required employer dollar UAL payment (annual) $1,356,342 $3,531 Miscellaneous
Safety - Police
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 rate. Funding contributions for both Plans are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The Town is required to contribute the difference between the actuarially determined rate and the contribution rates of employees.
-107-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
69 NOTE 14 – EMPLOYEE RETIREMENT SYSTEMS (Continued)
For the year ended June 30, 2023, the contributions to the Plan were as follows:

Miscellaneous Safety Total
Contributions - employer $ 1,966,621 $ 2,175,615 $ 4,142,236 Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions As of June 30, 2023, the Town’s reported net pension liabilities for its proportionate share of the pension liability of each Plan as follows:

Miscellaneous Safety Total
Net pension liability $ 16,862,194 $ 19,226,235 $ 36,088,429 The Town adopted and funded a Section 115 pension trust in fiscal year 2018-19 to help mitigate against the rising cost of pension contributions. On June 30, 2023 the Town’s Section 115 trust is reflected in the restricted cash balance of $5,310,621. See Note 3 for further discussion.

The Town’s net pension liability for the Plan is measured as the proportionate share of the net pension liability. The net pension liability of each Plan is measured as of June 30, 2022 and the total pension liability for each Plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2021 with a roll forward to calculate the beginning net pension liability. The Town’s proportion of the net pension liability was based on a projection of the Town’s long-term share of contributions to the pension plans relative to the projected contributions of all participating employers, actuarially determined. The Town’s proportionate share of the net pension liability for each Plan as of June 30, 2023 is as follows:

Miscellaneous Safety
Proportion - June 30, 2022 0.43967% 0.29015%
Proportion - June 30, 2023 0.36036% 0.27979%
Change - Increase (decrease) -0.07930% -0.01035%
-108-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
70 NOTE 14 – EMPLOYEE RETIREMENT SYSTEMS (Continued)
At the year ended June 30, 2023, the Town recognized pension expense of $3,510,917. On June 30, 2023, the Town reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Deferred
Outflows of
Resources
Deferred Inflows of
Resources
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Pension contributions subsequent to measurement date $ 1,966,621 $ - 2,175,615 $ $ - Changes in assumptions 1,727,884 - 1,938,586 -
3,088,706 - 3,036,091 -
Change in proportion 84,326 (319,394) 1,145,793 -
Difference between expected and actual experiences 338,626 (226,797) 795,704 (208,782) Difference between actual and projected contribution - - (1,334,099) (628,553) $ 7,206,163 $ (1,174,744) $ 9,091,789 $ (1,542,881)
Safety - Police
Net difference between projected and actual earnings on pension plan investments
Miscellaneous
The amount of $4,142,236 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2024.

Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows:

Year Ended June 30, Year Ended June 30,
2024 $931,212 2024 $1,560,912
2025 800,510 2025 1,258,399
2026 443,918 2026 701,929
2027 1,889,158 2027 1,852,054
$ 4,064,798 $ 5,373,294
Miscellaneous Safety - Police
-109-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
71 NOTE 14 – EMPLOYEE RETIREMENT SYSTEMS (Continued)
Actuarial Assumptions – The total pension liabilities in the June 30, 2021 actuarial valuations were determined using the following actuarial assumptions.

Valuation Date June 30, 2021
Measurement Date June 30, 2022
Actuarial Cost Method Entry Age Normal
Actuarial Assumptions:

Discount Rate 6.80%
Inflation 2.30%
Payroll Growth 2.80%
Projected Salary Increase Varies by Entry Age and Service Investment Rate of Return 6.8% Net of Pension Plan Investment Expenses, includes Inflation Mortality Rate Table1 Derived using CalPERS membership data for all funds Post Retirement Benefit Increase Contract COLA up to 2.3% until Purchasing Power Protection Allowance2 Floor on Purchasing Power applies, 2.3% thereafter
2Purchasing Power Protection Allowance (PPPA) is a benefit designed to restore the original purchasing power of CalPERS retirees to a predetermined limit. 1The mortality table was developed based on CalPERS-specific data. The rates incorporate Generational Mortality to capture ongoing morality improvement using 80% of Scale MP 2020 published by the Society of Actuaries. For more details, please refer to the 2021 experience study report that can be found on the CalPERS website The underlying mortality assumptions and all other actuarial assumptions used in the June 30, 2021 valuation was based on the results of a December 2017 actuarial experience study for the period of 1997 to 2015. Further details of the Experience Study are on the CalPERS website at: http://www.calpers.ca.gov.

Discount Rate – To determine whether the municipal bond rate should be used in the calculation of a discount rate for the plan, CalPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing of the plans, the tests revealed the assets would not run out. Therefore, the current 6.8 percent discount rate is appropriate, and the use of the municipal bond rate calculation is not deemed necessary. The long-term expected discount rate of 6.8 percent is applied to all plans in the Public Employees Retirement Fund. The stress test results are presented in a detailed report called “GASB Crossover Testing Report” that can be obtained at CalPERS’ website under the GASB 68 section.

The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimated ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. -110-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
72 NOTE 14 – EMPLOYEE RETIREMENT SYSTEMS (Continued)
In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Such cash flows were developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years. Using historical returns of all the funds’ asset classes, expected compound (geometric) returns were calculated over the shortterm (first 10 years) and the long-term (11+ years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent.

The table below reflects long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These rates are net of administrative expenses:

Asset Class
Current Target
Allocation
Real Return
Years 1 - 10 1
Real Return
Years 11+ 2
Global Equity 50.0% 4.80% 5.98%
Global Fixed Income 28.0% 1.00% 2.62%
Inflation Sensitive 0.0% 0.77% 1.81%
Private Equity 8.0% 6.30% 7.23%
Real Assets3 13.0% 3.75% 4.93%
Liquidity 1.0% 0.00% -0.92%
100.0%
1 An expected inflation of 2.00% used for this period.
2 An expected inflation of 2.92% used for this period.
3 The Real Assets Program consists of three distinct portfolios: Real Estate, Infrastructure, and Forestland. These investments are acquired and managed through separate accounts, joint ventures, and commingled funds between CalPERS and investment management firms. The role of the Real Assets Program is to provide a stable and predictable cash yield, diversification of equity risk, and inflation protection. -111-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2023
73 NOTE 14 – EMPLOYEE RETIREMENT SYSTEMS (Continued)
Sensitivity of the Net Pension Liability to Changes in the Discount Rate – The following presents the net pension liability of the Town for the Plan, calculated using the discount rate for the Plan, as well as what the Town’s net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower or 1-percentage point higher than the current rate:

Miscellaneous Safety
1% Decrease 5.80% 5.80%
Net Pension Liability $ 25,338,892 $ 28,382,777
Current Discount Rate 6.80% 6.80%
Net Pension Liability $ 16,862,194 $ 19,226,235
1% Increase 7.80% 7.80%
Net Pension Liability $ 9,887,974 $ 11,742,830
Pension Plan Fiduciary Net Position – Detailed information about the pension plans’ fiduciary net position is available in the separately issued CalPERS financial reports.

NOTE 15 – RESTATEMENT OF PRIOR YEAR NET POSITION
As of July 1, 2022, the Town adopted GASB Statement No. 96, Subscription-Based Information Technology Arrangements (GASB 96). As a result of the implementation of GASB 96, the Town changed its accounting for these arrangements by recognizing an intangible capital asset and the related subscription payable. The following table describes the effect of the implementation on beginning net position:

Governmental Activities
Net Position, previously reported as of July 1, 2022 $ 20,034,619 Recognition of a subscription asset 1,077,761
Recognition of a subscription liability (1,077,761)
Net Position, restated as of July 1, 2022 $ 20,034,619
-112-
74 REQUIRED SUPPLEMENTARY INFORMATION
-113-

TOWN OF HILLSBOROUGH

GENERAL FUND

SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN

FUND BALANCES - BUDGET AND ACTUAL
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
75 Variance with
Final Budget -
Original Final Positive
Budget Budget Actual (Negative)
REVENUES:

Property taxes $ 20,581,503 $ 20,581,503 $ 20,647,291 65,788$ Franchise taxes 832,633 832,633 872,162 39,529
Business license taxes 600,000 600,000 785,666 185,666
All others taxes 975,281 975,281 689,955 (285,326)
Permits 1,672,900 1,672,900 1,590,490 (82,410)
Intergovernmental 1,072,832 1,072,832 1,901,671 828,839 Service charges 1,176,097 1,176,097 1,264,934 88,837
Fines and forfeitures 4,000 4,000 15,752 11,752
Investment earnings (loss) 250,000 250,000 604,887 354,887 Excess ERAF 2,800,000 2,800,000 2,900,861 100,861
Miscellaneous 447,201 447,201 649,973 202,772
Total Revenues 30,412,447 30,412,447 31,923,642 1,511,195 EXPENDITURES:

Current:

General government 1,765,433 1,765,433 2,113,529 (348,096) Public safety 21,233,385 21,233,385 21,290,211 (56,826) Community services 4,525,559 4,525,559 4,086,103 439,456 Streets 3,157,795 3,157,795 3,053,125 104,670
Total Expenditures 30,682,172 30,682,172 30,542,968 139,204 Excess (deficiency of revenues
over (under) expenditures) (269,725) (269,725) 1,380,674 1,650,399 OTHER FINANCING SOURCES (USES):

Transfers in 2,489,271 2,489,271 2,487,795 (1,476)
Transfers out (1,509,000) (3,822,295) (4,148,000) (325,705) Total Other Financing Sources (Uses) 980,271 (1,333,024) (1,660,205) (327,181) Net change in fund balances 710,546 (1,602,749) (279,531) 1,323,218 Fund balances - beginning 31,821,412 31,821,412 31,821,412 - Fund balances - ending $ 32,531,958 $ 30,218,663 $ 31,541,881 1,323,218$ -114-

TOWN OF HILLSBOROUGH

POLICE AND FIRE SPECIAL TAX FUND

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN

FUND BALANCES - BUDGET AND ACTUAL
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
76 Variance with
Final Budget -
Original Final Positive
Budget Budget Actual (Negative)
REVENUES:

Police and Fire Special Tax $ 2,247,346 $ 2,247,346 $ 2,246,910 $ (436) Total Revenues 2,247,346 2,247,346 2,246,910 (436)
EXPENDITURES:

Current:

Public Safety 8,075 8,075 9,115 (1,040)
Total Expenditures 8,075 8,075 9,115 (1,040)
Excess of Revenues Over Expenditures 2,239,271 2,239,271 2,237,795 (1,476) OTHER FINANCING USES:

Transfers Out (2,239,271) (2,239,271) (2,237,795) 1,476 Net change in fund balances - - - -
Fund balances - beginning - - - -
Fund balances - ending $ - $ - $ - $ -
-115-

TOWN OF HILLSBOROUGH

SCHEDULE OF PROPORTIONATE SHARE OF THE NET

PENSION LIABILITY
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
77 2023 2022 2021 2020 2019 2018 2017 2016 2015*
Plan's proportion of the net pension liability 0.36036% 0.43967% 0.33844% 0.32820% 0.31889% 0.31113% 0.30336% 0.29385% 0.28185% $ 16,862,194 $ 8,348,406 $ 14,275,476 $ 13,142,862 $ 12,017,999 $ 12,264,964 $ 10,538,348 8,061,622$ 6,965,900$ Plan's covered payroll $ 6,943,540 $ 6,308,969 $ 5,976,685 $ 5,827,215 $ 5,757,169 $ 5,276,692 $ 4,997,179 4,883,273$ 5,328,728$ 242.85% 132.33% 226.27% 219.90% 206.24% 213.04% 199.72% 161.32% 130.72% Plan's proportionate share of the fiduciary
as a percentage of the plan's
total pension liability 78.19% 90.49% 77.71% 77.73% 77.69% 75.39% 75.87% 79.89% 81.15% 2023 2022 2021 2020 2019 2018 2017 2016 2015*
Plan's proportion of the net pension liability 0.27979% 0.29015% 0.24710% 0.24027% 0.23573% 0.22838% 0.22878% 0.22146% 0.20805% $ 19,226,235 $ 10,182,645 $ 16,462,675 $ 14,999,065 $ 13,831,502 $ 13,646,123 $ 1,848,792 9,125,242$ 7,803,992$ Plan's covered payroll $ 4,067,727 $ 3,946,245 $ 3,617,868 $ 3,613,676 $ 3,375,853 $ 2,985,147 $ 2,893,042 3,036,912$ 5,328,728$ 472.65% 258.03% 417.17% 414.58% 382.75% 404.23% 61.93% 315.42% 146.45% Plan's proportionate share of the fiduciary
as a percentage of the plan's
total pension liability 76.52% 86.61% 73.12% 73.37% 73.39% 71.74% 72.69% 77.27% 78.83% Notes to Schedule:

Significant changes in assumptions: The discount rate was changed from 7.65% to 7.15% in fiscal year 2017 and to 6.9% in 2023. * Fiscal year 2015 was the first year of implementation of the pension standards.

Plan's proportionate share of
the net pension liability
Net pension liability as a percentage
of covered payroll
Plan's proportionate share of
the net pension liability
Net pension liability as a percentage
of covered payroll
Miscellaneous
Safety
-116-

TOWN OF HILLSBOROUGH

SCHEDULE OF CONTRIBUTIONS
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
78 2023 2022 2021 2020 2019 2018 2017 2016 2015*
Actuarially determined contributions 1,966,621$ 1,817,419$ 1,621,338$ 1,450,935$ 1,299,618$ 1,149,750$ 1,043,360$ 928,895$ 779,265$ Contributions in relation to the
actuarially determined contribution (1,966,621) (1,817,419) (1,621,338) (1,450,935) (1,299,618) (1,149,750) (1,043,360) (928,895) (779,265) Contribution deficiency (excess) -$ -$ -$ -$ -$ -$ -$ -$ -$ Covered payroll 7,830,416$ 6,943,540$ 6,308,969$ 5,976,685$ 5,827,215$ 5,757,169$ 5,276,692$ 4,997,179$ 4,883,273$ Contributions as a percentage
of covered payroll 25.12% 26.17% 25.70% 24.28% 22.30% 19.97% 19.77% 18.59% 15.96% 2023 2022 2021 2020 2019 2018 2017 2016 2015*
Actuarially determined contributions 2,175,615$ 2,031,035$ 1,861,252$ 1,635,957$ 1,429,239$ 1,262,347$ 1,114,629$ 964,025$ 825,461$ Contributions in relation to the
actuarially determined contribution (2,175,615) (2,031,035) (1,861,252) (1,635,957) (1,429,239) (1,262,347) (1,114,629) (964,025) (825,461) Contribution deficiency (excess) -$ -$ -$ -$ -$ -$ -$ -$ -$ Covered payroll 4,871,224$ 4,067,727$ 3,946,245$ 3,617,868$ 3,613,676$ 3,375,853$ 2,985,147$ 2,893,042$ 3,036,912$ Contributions as a percentage
of covered payroll 44.66% 49.93% 47.17% 45.22% 39.55% 37.39% 37.34% 33.32% 27.18% * Fiscal year 2015 was the first year of implementation of the pension standards.

Miscellaneous
Safety
-117-

TOWN OF HILLSBOROUGH

SCHEDULE OF CHANGES IN THE NET OPEB LIABILITY AND RELATED RATIOS FOR THE FISCAL YEAR ENDED JUNE 30, 2023
79 2023 2022 2021 2020 2019 2018*
Changes in Total OPEB Liability
Service cost $ 249,766 $ 308,513 $ 313,340 $ 325,000 $ 331,000 $ 321,000 Interest 1,165,560 1,391,869 1,364,096 1,382,000 1,339,000 1,298,000 Changes of benefit terms - - - - - -
Difference between expected and actual experience (2,384,685) - (350,000) - - - Changes of assumptions 107,550 - (490,000) - - -
Benefit payments, including refunds of employee contributions (1,342,273) (1,329,344) (1,193,000) (1,043,000) (1,030,000) (982,000) Changes of benefit terms - - - - - -
Net changes 73,053 (1,906,097) 484,436 (176,000) 640,000 637,000 Total OPEB Liability (beginning) at June 30 19,070,339 20,976,436 20,492,000 20,668,000 20,028,000 19,391,000 Total OPEB Liability (ending) at June 30 $ 19,143,392 $ 19,070,339 $ 20,976,436 $ 20,492,000 $ 20,668,000 $ 20,028,000 Changes in Plan Fiduciary Net Position
Contributions - employer $ 1,345,253 $ 1,332,255 $ 1,368,000 $ 1,346,000 $ 1,351,000 $ 1,321,000 Contributions - employee - - - - - -
Net investment income (1,427,290) 2,299,995 281,614 445,000 506,000 576,000 Benefit payments, including refunds of employee contributions (1,342,273) (1,329,344) (1,193,000) (1,043,000) (1,030,000) (982,000) Administrative expenses (5,681) (6,077) (6,868) (4,000) (12,000) (5,000) Changes of assumptions - - - - - -
Net changes (1,429,991) 2,296,829 449,746 744,000 815,000 910,000 Total OPEB Fiduciary Net Position (beginning) at June 30 10,663,575 8,366,746 7,917,000 7,173,000 6,358,000 5,448,000 Total OPEB Fiduciary Net Position (ending) at June 30 $ 9,233,584 $ 10,663,575 $ 8,366,746 $ 7,917,000 $ 7,173,000 $ 6,358,000 Net OPEB liability $ 9,909,808 $ 8,406,764 $ 12,609,690 $ 12,575,000 $ 13,495,000 $ 13,670,000 Plan fiduciary net position as a percentage of the total OPEB liability 48.2% 55.9% 39.9% 38.6% 34.7% 31.7% Covered employee payroll $ 12,319,766 $ 11,709,815 $ 11,127,000 $ 11,065,894 $ 10,578,649 $ 10,232,831 Net OPEB Liability as a percentage of covered employee payroll 80.4% 68.2% 107.7% 113.0% 122.0% 133.6% * Fiscal year 2018 was the first year of implementation of the OPEB standards. -118-

TOWN OF HILLSBOROUGH

SCHEDULE OF OPEB CONTRIBUTIONS
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
80 2023 2022 2021 2020 2019 2018*
Actuarially Determined Contribution (ADC) $ 1,016,000 $ 1,319,000 $ 1,292,000 $ 1,366,000 $ 1,344,000 $ 1,351,000 Contributions in relation to the actuarially determined contribution (1,353,646) (1,345,253) (1,332,255) (1,368,000) (1,346,000) (1,351,000) Contribution deficiency/(excess) $ (337,646) $ (26,253) $ (40,255) $ (2,000) $ (2,000) $ - Covered employee payroll for the period ended June 30 $12,733,620 12,319,766 $ $ 11,709,815 $ 11,127,000 $ 11,065,894 $ 10,578,649 Contributions as a percentage of covered employee payroll 10.6% 10.9% 11.4% 12.3% 12.2% 12.8% * Fiscal year 2018 was the first year of implementation of the OPEB standards. -119-

TOWN OF HILLSBOROUGH

NOTES TO REQUIRED SUPPLEMENTARY INFORMATION
JUNE 30, 2023
81 Budgetary Information
The Town adopts annual budgets on a basis consistent with generally accepted accounting principles for all governmental funds except the capital projects funds, which adopt project-length budgets. All appropriations lapse at fiscal year-end. Encumbrances, which are commitments related to unperformed contracts for goods or services at year-end lapse and are automatically re-appropriated and re-encumbered in the subsequent fiscal year. There are no outstanding encumbrances in the governmental funds on June 30, 2023. Budgets are also adopted and controlled for the proprietary funds. Budget comparisons for these funds are not legally mandated and thus are not presented.

General Fund actual expenditures in Fiscal Year 2022-23 were below budget. The Police and Fire Special Tax Fund actual expenditures in Fiscal Year 2022-23 were in excess of the budget by $1,040. It is unusual for the Town to have expenditure exceeding budgeted amounts. These excess amounts were the result of the budget being an estimate for expenditures.

Prior to June 30, the City Manager submits to the City Council a proposed operating budget for review. The City Council holds public hearings, and a final budget is adopted on or before June 30.

The appropriated budget is prepared by fund, function, and department. The Town’s department heads may make transfers of appropriations within a department. The City Manager may transfer budgeted amounts within any fund.

Any revisions that alter the total expenditures of any fund must be approved by the City Council. The legal level of budgetary control (i.e., the level at which expenditures may not legally exceed appropriations) is the fund level.

Budget amounts shown in these financial statements include all supplemental appropriations made during the year for the General and the Special Revenue funds.

Net Pension, Net OPEB Liability and Contributions to Pension and OPEB Plans The Town’s pension liabilities are administered by CalPERS cost sharing plans. The Town’s pension liabilities are calculated based on the Town’s proportionate share of the overall pension liabilities and related deferrals. The schedule pension liability and the schedule of contributions show a ten-year trend information, where available, about these amounts and they are changing from year to another.

The Town’s OPEB liability is administered as an agent multiple employer plan, which is also administered by CalPERS. The schedule of changes in Net OPEB liability and the schedule of contributions show a ten-year trend information, where available, about these amounts and they are changing from year to another. -120-
82 COMBINING STATEMENTS AND INDIVIDUAL FUND

SCHEDULES
-121-

TOWN OF HILLSBOROUGH

COMBINING STATEMENTS AND INDIVIDUAL

FUND SCHEDULES
JUNE 30, 2023
83 NONMAJOR GOVERNMENTAL FUNDS
Special Revenue Funds
The special revenue funds are used to account for specific revenues that are legally restricted or committed to expenditure for particular purposes.

Gas Tax Fund - This fund is used to account for receipts and disbursements of funds apportioned under Streets and Highway Code Sections 2103, 2105, 2106, 2107, 2107.5 and 2031 of the State of California and the Road Repair and Accountability Act of 2017 (RMRA) for the purpose of financing major street construction projects.

Measure "A" Fund - This fund is used to account for receipts and disbursements of a San Mateo County half-cent sales tax approved by the voters in June 1988 (Measure A) and again in November 2004 extending it for an additional 25 years, beginning January 2009, for the purpose of improving local transportation including streets and roads.

Measure "W" Fund - This fund is used to account for receipts and disbursements of a San Mateo County half-cent sales tax approved by the voters in November 2018 (Measure W) beginning July 2019 and goes for 30 years, for the purpose of improving local transportation including bicycle and pedestrian facilities, streets, and roads.

Police Grants Fund - This fund is used to account for activities funded by proceeds from various police grants and programs.
-122-

TOWN OF HILLSBOROUGH

NONMAJOR GOVERNMENTAL FUNDS

COMBINING BALANCE SHEET
JUNE 30, 2023
84 Total
Nonmajor
Gas Police Governmental
Tax Measure A Measure W Grants Funds
ASSETS
Cash and investments 205,867$ 587,771$ 372,018$ 1,241,035$ $ 2,406,691 Accounts receivable 25,608 62,007 62,082 - 149,697
Total assets 231,475$ 649,778$ 434,100$ 1,241,035$ $ 2,556,388

FUND BALANCES
Restricted for streets projects 231,475 649,778 434,100 - 1,315,353 Restricted for police projects - - - 1,241,035 1,241,035 Total fund balances 231,475$ 649,778$ 434,100$ 1,241,035$ $ 2,556,388 Special Revenue Funds
-123-

TOWN OF HILLSBOROUGH

NONMAJOR GOVERNMENTAL FUNDS

COMBINING STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
85 Total
Nonmajor
Gas Police Governmental
Tax Measure A Measure W Grants Funds
REVENUES:

Intergovernmental 543,039$ 833,722$ 363,415$ $ 165,271 $ 1,905,447 Investment earnings (loss) 5,428 8,112 3,291 24,541 41,372 Total revenues 548,467 841,834 366,706 189,812 1,946,819

OTHER FINANCING
SOURCES (USES):

Transfers Out (338,661) (250,000) - (588,661) -
Total Other Financing Sources (Uses) (338,661) (250,000) - (588,661) - Net change in fund balances 209,806 591,834 366,706 189,812 1,358,158 Fund balances - beginning 21,669 57,944 67,394 1,051,223 1,198,230 Fund balances - ending 231,475$ 649,778$ 434,100$ $ 1,241,035 $ 2,556,388 Special Revenue Funds
-124-

TOWN OF HILLSBOROUGH

GAS TAX FUND

SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
86 Variance with
Final Budget -
Original Final Positive
Budget Budget Actual (Negative)
REVENUES:

Intergovernmental $ 597,909 $ 597,909 $ 543,039 $ (54,870) Investment earnings (loss) 2,200 2,200 5,428 3,228
Total revenues 600,109 600,109 548,467 (51,642)
EXPENDITURES:

Current:

Streets 6,079 6,079 6,079 -
Excess of revenues over expenditures 594,030 594,030 548,467 (45,563) OTHER FINANCING USES:

Transfers Out (338,662) (338,662) (338,661) 1
Net change in fund balances 255,368 255,368 209,806 (45,562) Fund balances - beginning 21,669 21,669 21,669 -
Fund balances - ending $ 277,037 $ 277,037 $ 231,475 $ (45,562) -125-

TOWN OF HILLSBOROUGH
MEASURE "A" FUND

SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
87 Variance with
Final Budget -
Original Final Positive
Budget Budget Actual (Negative)
REVENUES:

Intergovernmental $ 648,834 $ 648,834 $ 833,722 $ 184,888 Investment earnings 3,670 3,670 8,112 4,442
Total revenues 652,504 652,504 841,834 189,330
EXPENDITURES:

Current:

Streets 23,676 23,676 23,676 -
Total Expenditures 23,676 23,676 23,676 -
Excess of revenues over expenditures 628,828 628,828 841,834 213,006 OTHER FINANCING USES:

Transfers Out (250,000) (250,000) (250,000) -
Net change in fund balances 378,828 378,828 591,834 213,006 Fund balances - beginning 57,944 57,944 57,944 -
Fund balances - ending $ 436,772 $ 436,772 $ 649,778 $ 213,006 -126-

TOWN OF HILLSBOROUGH
MEASURE "W" FUND

SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
88 Variance with
Final Budget -
Original Final Positive
Budget Budget Actual (Negative)
REVENUES:

Intergovernmental $ 288,371 $ 288,371 $ 363,415 $ 75,044 Investment earnings - 3,291 - 3,291
Total revenues 288,371 288,371 366,706 78,335
EXPENDITURES:

Current:

Streets - - - -
Total Expenditures - - - -
Excess of revenues over expenditures 288,371 288,371 366,706 78,335 OTHER FINANCING USES:

Transfers Out - - - -
Net change in fund balances 288,371 288,371 366,706 78,335 Fund balances - beginning 67,394 67,394 67,394 -
Fund balances - ending $ 355,765 $ 355,765 $ 434,100 $ 78,335 -127-

TOWN OF HILLSBOROUGH

POLICE GRANTS FUND

SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES - BUDGET AND ACTUAL
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
89 Variance with
Final Budget -
Original Final Positive
Budget Budget Actual (Negative)
REVENUES:

Intergovernmental $ 100,000 $ 100,000 $ 165,271 $ 65,271 Investment earnings 100 100 24,541 24,441
Total revenues 100,100 100,100 189,812 89,712
EXPENDITURES:

Current:

Public safety 320,000 320,000 320,000 -
Total Expenditures 320,000 320,000 320,000 -
Excess of revenues over expenditures (219,900) (219,900) 189,812 409,712 Net change in fund balances (219,900) (219,900) 189,812 409,712 Fund balances - beginning 1,051,223 1,051,223 1,051,223 - Fund balances - ending $ 831,323 $ 831,323 $ 1,241,035 $ 409,712 -128-

TOWN OF HILLSBOROUGH

CAPITAL ASSETS USED IN THE OPERATION OF

GOVERNMENTAL FUNDS
COMPARATIVE SCHEDULES BY SOURCE (1)
JUNE 30, 2023
90 2023 2022
Governmental funds capital assets:

Land $ 1,456,560 $ 1,456,560
Land improvements 3,579,317 3,690,406
Building and improvements 5,799,962 5,392,372
Machinery and equipment 447,597 447,597
Infrastructure 15,247,443 15,256,987
Total governmental funds capital assets $ 26,530,879 $ 26,243,922 Investments in governmental funds capital assets by source:

General fund $ 829,273 $ 889,059
Special revenue fund 100,192 114,888
Capital projects funds 19,655,265 19,293,826
Other - unclassified 5,946,149 5,946,149
Total governmental funds capital assets $ 26,530,879 $ 26,243,922 assets reported in the internal service fund are excluded from the above amounts. Generally, the capital assets of internal service funds are included as governmental activities in the statement of net position. (1) This schedule presents only the capital asset balances related to governmental funds. Accordingly, the capital -129-

TOWN OF HILLSBOROUGH

CAPITAL ASSETS USED IN THE OPERATION OF

GOVERNMENTAL FUNDS
SCHEDULE BY FUNCTION AND ACTIVITY (1)
JUNE 30, 2023
91 Governmental Governmental
Funds Capital Funds Capital
Assets Assets
July 1, 2022 Additions Retirements June 30, 2023
General Government:

Council $ 13,046 -$ -$ 13,046 $
Finance 94,401 - - 94,401
General Services 5,849,990 346,447 134,495 6,061,942
Total General Government 5,957,437 346,447 134,495 6,169,389 Public Safety:

Police 802,880 - - 802,880
Fire 1,542,375 84,549 - 1,626,924
Total Public Safety 2,345,255 84,549 - 2,429,804
Community Services:

Building 169,532 - - 169,532
Total Community Services 169,532 - - 169,532
Public Work:

Streets and Improvements 17,771,698 - 9,544 17,762,154
Total Public Work 17,771,698 - 9,544 17,762,154
Total Governmental Funds
Capital Assets $ 26,243,922 430,996$ 144,039$ $ 26,530,879 (1) This schedule presents only the capital asset balances related to governmental funds. Accordingly, the capital assets reported in the internal service fund are excluded from the above amounts. Generally, the capital assets of the internal service fund are included as governmental activities in the statement of net position. -130-

TOWN OF HILLSBOROUGH

CAPITAL ASSETS USED IN THE OPERATION OF

GOVERNMENTAL FUNDS
SCHEDULE OF CHANGES BY FUNCTION AND ACTIVITY (1)
JUNE 30, 2023
92 Machinery
Land Buildings and and
Function and Activity Land Improvements Improvements Equipment Infrastructure Total General Government:

Council $ - $ - $ 6,155 $ 6,891 $ 13,046 - $
Finance - - 94,401 - 94,401 -
General Services 1,456,560 2,965,531 1,353,938 226,033 59,880 6,061,942 Total General Government 1,456,560 2,965,531 1,360,093 327,325 59,880 6,169,389 Public Safety:

Police 49,751 - 802,823 (49,693) 802,881 -
Fire 46,735 - 1,447,507 132,681 1,626,923 -
Total Public Safety 96,486 - 2,250,330 82,988 2,429,804 - Community Services:

Building (43,333) - 110,868 101,997 169,532 -
Total Community Services (43,333) - 110,868 101,997 169,532 - Public Work:

Streets and Improvements 560,633 - 2,078,671 (64,712) 15,187,562 17,762,154 Total Public Work 560,633 - 2,078,671 (64,712) 15,187,562 17,762,154 Total Governmental Funds
Capital Assets $ 1,456,560 $ 3,579,317 $ 5,799,962 $ 447,598 $ 15,247,442 $ 26,530,879 (1) This schedule presents only the capital asset balances related to governmental funds. Accordingly, the capital assets reported in the internal service fund are excluded from the above amounts. Generally, the capital assets of the internal service fund are included as governmental activities in the statement of net position. -131-
93 The page is intentionally left blank.
-132-
94 STATISTICAL SECTION
This part of the Town’s Annual Comprehensive Financial Report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the Town’s overall financial health.

Contents Page
Financial Trends 95
These schedules contain trend information to help the reader understand how the Town’s financial performance and well-being have changed over time.

Revenue Capacity 99
These schedules contain information to help the reader assess the Town’s most significant local revenue source, the property tax.

Debt Capacity 106
These schedules present information to help the reader assess the affordability the Town’s current levels of outstanding debt and the Town’s ability to issue additional debt in the future.

Demographic and Economic Information 111
This schedule offers demographic and economic indicators to help the reader understand the environment within which the Town’s financial activities taken place.

Operating Information 113
These schedules contain service and infrastructure data to help the reader understand how the information in the Town’s financial report relates to the services the Town provides and activities it performs.

Source: Unless otherwise noted, the information in these schedules is derived from the Annual Comprehensive Financial Reports for the relevant year.
-133-

TOWN OF HILLSBOROUGH
NET POSITION BY COMPONENT (accrual basis of accounting)

LAST TEN FISCAL YEARS
95 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Governmental activities:

Net investments in
capital assets $ 11,723,890 $ 11,122,842 $ 11,452,814 $ 10,792,547 $ 10,665,462 $ 10,403,101 $ 10,005,668 $ 9,426,844 $ 9,506,356 $ 10,622,901 Restricted 328,497 483,242 280,529 281,094 545,609 647,100 837,627 2,020,966 1,198,230 2,556,388 Unrestricted 25,116,929 7,688,366 10,699,690 12,377,163 1,585,599 5,967,436 7,437,812 7,194,656 9,330,033 13,918,318 Total governmental activities
net position 37,169,316 19,294,450 22,433,033 23,450,804 12,796,670 17,017,637 18,281,107 18,642,466 20,034,619 27,097,607 Business-type activities:

Net investment in capital asset 11,592,114 14,228,241 16,043,824 25,925,584 27,303,121 29,365,910 34,969,122 39,047,391 40,560,774 48,305,856 Restricted 750,000 750,000 1,265,000 1,131,835 1,131,835 1,181,801 1,181,801 1,181,801 1,181,801 431,801 Unrestricted 23,728,010 21,534,214 20,082,986 17,950,317 19,749,223 24,431,777 25,869,289 28,532,950 35,223,976 34,325,015 Total business-type activities
net position 36,070,124 36,512,455 37,391,810 45,007,736 48,184,179 54,979,488 62,020,212 68,762,142 76,966,551 83,062,672 Primary government:

Net investments in
capital assets 23,316,004 25,351,083 27,496,638 36,718,131 37,968,583 39,769,011 44,974,790 48,474,235 50,067,130 58,928,757 Restricted 1,078,497 1,233,242 1,545,529 1,412,929 1,677,444 3,898,199 2,019,428 3,202,767 2,380,031 2,988,189 Unrestricted 48,844,939 29,222,580 30,782,676 30,327,480 21,334,822 28,329,915 33,307,101 35,727,606 44,554,009 48,243,333 Total primary government
net position $ 73,239,440 $ 55,806,905 $ 59,824,843 $ 68,458,540 $ 60,980,849 $ 71,997,125 $ 80,301,319 $ 87,404,608 $ 97,001,170 $ 110,160,279 Governmental Activities Net Position: The increase in FY 22/23 is primarily due to revenue growth in the General Fund from property taxes. The restricted net position change is due to the timing of street and other capital improvement projects. With the biennial cycle, monies accumulate in one year and are drawn down in the next year when the improvements are spent. The decrease in FY 14/15 is primarily due to the implementation of GASB 68 - Pension and in FY 17/18 for GASB 75 – Other Post-Employment Benefits (OPEB), which decreases net position due to the net pension and OPEB liabilities being added into the Statement of Net Position.

Business-Type Activities Net Position: The increase in FY 22/23 is primarily due to rate increase, and a transfer from the General Fund for storm drain and ARPA capital projects, as well as timing of capital spending in the water and sewer enterprises.
-134-

TOWN OF HILLSBOROUGH
CHANGES IN NET POSITION (accrual basis of accounting)

LAST TEN FISCAL YEARS
96 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Expenses:

Governmental activities:

General government $ 2,331,055 $ 1,440,949 $ 1,237,668 $ 1,101,642 $ 1,651,645 $ 1,772,674 $ 2,343,943 $ 2,273,947 $ 1,990,984 $ 1,727,443 Public safety 13,013,443 13,415,141 13,934,621 16,183,032 16,711,271 17,525,119 19,341,808 20,058,933 20,223,279 18,685,885 Community services 2,540,073 2,583,821 2,668,325 2,740,114 2,447,628 2,753,950 3,126,283 3,863,894 3,934,667 3,723,761 Streets 4,158,492 2,390,733 4,253,687 2,609,530 5,086,027 4,081,758 4,341,759 5,065,221 6,290,672 3,518,522 Interest expense - - - - - - - - 14,666 -
Total governmental activities expenses 22,043,063 19,830,644 22,094,301 22,634,318 25,896,571 26,133,501 29,153,793 31,261,995 32,439,602 27,670,277 Business-type activities:

Water 10,569,641 10,173,406 10,845,215 12,302,076 13,083,410 12,272,300 13,194,795 14,714,173 13,066,074 13,749,371 Sewer 6,925,551 8,535,762 10,122,581 8,932,190 10,704,394 9,611,847 10,523,977 11,359,129 10,649,566 12,517,293 Total business-type activities 17,495,192 18,709,168 20,967,796 21,234,266 23,787,804 21,884,147 23,718,772 26,073,302 23,715,640 26,266,664 Program Revenues:

Governmental activities:

Charges of services:

General government 691,624 716,896 705,961 741,268 772,233 818,055 805,114 831,057 550,956 554,318 Public safety 444,598 440,242 468,667 435,396 407,497 462,095 442,062 352,437 374,505 445,955 Community services 1,613,213 1,830,985 1,617,138 1,810,631 1,792,327 2,073,463 1,499,212 1,843,575 2,183,888 2,133,123 Streets 749,237 818,772 719,496 804,199 826,645 926,610 580,944 1,210,566 944,024 871,152 Operating grants and functional taxes 1,475,280 1,292,466 1,241,798 1,204,673 1,399,235 1,311,308 1,710,116 1,811,351 5,034,025 2,135,945 Total governmental activities
program revenues 4,973,952 5,099,361 4,753,060 4,996,167 5,197,937 5,591,531 5,037,448 6,048,986 9,087,398 6,140,493 Business-type activities:

Charges for services:

Water 13,349,064 11,650,371 12,290,648 13,692,123 14,702,348 14,468,790 15,792,826 16,405,140 14,693,894 13,428,299 Sewer 8,174,809 8,847,036 9,357,385 10,278,455 11,187,404 12,332,212 13,078,529 14,091,293 14,523,404 15,223,102 Capital grants, contributions and other
non-operating revenues 1,117,463 99,572 1,409,826 - - - - - - - Total business-type program revenues 21,623,445 21,614,870 21,648,033 25,380,404 25,889,752 26,801,002 28,871,355 30,496,433 29,217,298 28,651,401 26,597,397 26,714,231 26,401,093 30,376,571 31,087,689 32,392,533 33,908,803 36,545,419 38,304,696 34,791,894 Net (Expense)/Revenue:

Governmental activities (17,069,111) (14,731,283) (17,341,241) (17,638,151) (20,698,634) (20,541,970) (24,116,345) (25,213,009) (23,352,204) (21,529,784) Business-type activities 4,128,253 2,905,702 680,237 4,146,138 2,101,948 4,916,855 5,152,583 4,423,131 5,501,658 2,384,737 Total primary government net revenues (12,940,858) (11,825,581) (16,661,004) (13,492,013) (18,596,686) (15,625,115) (18,963,762) (20,789,878) (17,850,546) (19,145,047) -135-

TOWN OF HILLSBOROUGH
CHANGES IN NET POSITION (accrual basis of accounting), Continued

LAST TEN FISCAL YEARS
97 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
General Revenues and Other
Changes in Net Position
Governmental activities:

Taxes:

Property tax $ 11,780,737 $ 12,629,286 $ 13,783,039 $ 14,872,305 $ 15,785,068 $ 16,680,762 $ 17,413,680 $ 18,455,541 $ 19,324,411 $ 20,647,291 Public safety taxes 2,451,066 2,240,792 2,242,334 2,242,686 2,243,038 2,243,876 2,244,228 2,246,340 2,247,128 2,246,910 Property transfer tax 423,638 371,174 345,986 380,016 380,986 380,950 316,893 623,797 621,578 404,621 Franchise tax 734,990 715,352 723,843 739,249 741,207 714,541 768,487 771,157 800,915 872,162 Sales tax 14,175 65,277 73,853 98,856 100,563 128,297 207,880 143,535 171,454 112,343 Motor vehicle license tax 962,067 1,016,527 1,108,302 1,188,946 1,261,095 1,330,092 1,343,173 839,339 1,396,460 1,818,496 Business license tax 685,902 658,006 633,949 664,654 683,726 675,464 519,581 935,893 854,351 785,666 ERAF Refund 1,368,369 2,144,753 1,432,614 1,470,846 1,693,630 2,209,536 2,300,581 2,381,601 3,153,308 2,900,861 Triple flip 106,834 - - - - - - - - -
HOPTR 66,878 66,635 66,261 65,236 63,293 61,428 59,611 58,841 58,508 56,837 All others 12,649 76,314 54,655 212,368 190,715 492,275 226,314 414,574 592,396 743,271 Unrestricted investment earnings 65,238 72,299 109,988 196,501 363,702 1,045,716 1,179,383 903,750 (1,674,854) 924,314 Miscellaneous 160,000 160,000 (3,346,214) (95,000) (2,229,769) (1,200,000) (1,200,000) (2,200,000) (2,801,295) (2,920,000) Total governmental activities 18,832,543 20,216,415 20,479,824 18,785,449 21,277,254 24,762,937 25,379,811 25,574,368 24,744,360 28,592,772 Business-type activities:

Investment earnings 65,901 76,710 104,118 123,575 233,973 678,454 688,141 118,799 (98,549) 791,383 Miscellaneous (160,000) (160,000) 3,346,214 95,000 2,229,769 1,200,000 1,200,000 2,200,000 2,801,295 2,920,000 Total business-type activities (94,099) (83,290) 199,118 3,469,789 2,463,742 1,878,454 1,888,141 2,318,799 2,702,746 3,711,383 Total primary government 18,738,444 20,133,125 20,678,942 22,255,238 23,740,996 26,641,391 27,267,952 27,893,167 24,447,106 32,304,155 Change in Net Position
Governmental activities 1,763,432 5,485,132 3,138,583 1,147,298 578,620 4,220,967 1,263,466 361,359 1,392,157 7,062,988 Business-type activities 4,034,154 2,822,412 879,355 7,615,927 4,565,690 6,795,309 7,040,724 6,741,930 8,204,404 6,096,120 Total primary government $ 5,797,586 $ 8,307,544 $ 4,017,938 $ 8,763,225 $ 5,144,310 $ 11,016,276 $ 8,304,190 $ 7,103,289 $ 9,596,561 $ 13,159,108 Business-Type Activities: The Change in Net Position of Business-Type Activities in FY 22/23 improved over the prior year, primarily attributable to timing of capital spending as well as an increase in the transfer from General Fund for capital projects. Program revenues decreased due to lower water usage, offset somewhat by an increase in sewer rates.

Governmental Activities: The Change in the Net Position of Governmental Activities in FY 22/23 improved over the prior year due to an increase in property taxes and a one-time release of reserve on motor vehicle license fees. Property tax increases are attributable to strong real estate activity in the city and region. Expenses decreased primarily for changes in transfers, offset somethwat by increases fpr contractual salary and pension contribution expenses, contractual increases for services and timing of street repaving program.
-136-

TOWN OF HILLSBOROUGH
GOVERNMENTAL ACTIVITIES TAX REVENUES BY SOURCE (accrual basis of accounting)

LAST TEN FISCAL YEARS
98 (1) (2) (3)
Fiscal
Year
Property
Tax
Police and Fire
Special Tax
Excess
ERAF
Vehicle
License Tax
Property
Transfer Tax
Franchise
Tax
Sales
Tax/In-Lieu
Business
License Tax
13/14 11,780,737 2,451,066 1,368,369 962,067 423,638 734,990 14,175 685,902 14/15 12,629,286 2,240,792 2,144,753 1,016,527 371,174 715,352 65,277 658,006 15/16 13,783,039 2,242,334 1,432,614 1,108,302 345,986 723,843 73,853 633,949 16/17 14,872,305 2,242,686 1,470,846 1,188,946 380,016 739,249 98,856 664,654 17/18 15,785,068 2,243,038 1,693,630 1,261,095 380,986 741,207 100,563 683,726 18/19 16,680,762 2,243,876 2,209,536 1,330,092 380,950 714,541 128,297 675,464 19/20 17,413,680 2,244,228 2,300,581 1,343,173 316,893 768,487 207,880 519,581 20/21 18,455,541 2,246,340 2,381,601 839,339 623,797 771,157 143,535 935,893 21/22 19,324,411 2,247,128 3,153,308 1,396,460 621,578 800,915 171,454 854,351 22/23 20,647,291 2,246,910 2,900,861 1,818,496 404,621 872,162 112,343 785,666 (1) The Police and Fire Special Tax was approved by the voters on June 1998 to replace the existing General Fund Tax and used solely to help maintain and enhance police protection, fire protection and prevention services. (2) Starting FY 03/04, property tax contributions to the Education Revenue Augmentation Fund (ERAF) in San Mateo County reached a level where such contributions were in excess of State mandated school funding. The excess contributions are returned to the County agencies and other taxing districts. (3) Vehicle license fee is backfilled by the State of California starting in 1998 when the State reduced the rate from 2% to .65%. $0
$5
$10
$15
$20
$25
13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 $ Millions

FOUR LARGEST REVENUES
Property
Tax
Police and Fire
Special Tax
Excess
ERAF
Vehicle
License Tax
-137-

TOWN OF HILLSBOROUGH
FUND BALANCES OF GOVERNMENTAL FUNDS (modified accrual basis of accounting)

LAST TEN FISCAL YEARS
99 Special Capital
Fiscal Non- Revenue Funds Projects Fund (2)
Year Spendable Restricted(3) Assigned(4) Unassigned Total Restricted Assigned Total 13/14 $ 16,678 -$ $ 12,059,156 - $ $ 8,846,881 $ 328,497 $ 3,276,077 $ 4,360,496 14/15 5,864 - 16,246,015 - 12,075,834 ( 483,242 4,029,620 3,604,574 15/16 5,479 - 19,880,416 - 16,251,879 280,529 3,213,579 4,512,862 16/17 8,065 - 20,085,943 - 19,885,895 281,094 4,237,398 3,494,108 17/18 8,571 - 22,495,369 - 20,094,008 545,609 2,439,001 4,518,492 18/19 2,069,298 8,570 5,863,000 18,357,790 26,298,658 647,100 2,990,041 3,637,141 19/20 5,041,521 5,930 5,863,000 17,925,091 28,835,542 837,627 3,377,044 4,214,671 20/21 5,348,587 11,817 5,863,000 18,754,314 29,977,718 2,020,966 3,096,289 5,117,255 21/22 4,384,217 26,095 8,587,000 18,824,100 31,821,412 1,198,230 3,839,502 5,037,732 22/23 4,672,481 36,644 5,863,000 20,969,756 31,541,881 2,556,388 5,173,221 7,729,609 (1) Increase in General Fund fund balance in FY 14/15 is primarily attributable to increase in property tax revenues and strong expenditure containment. (2) Fluctuations in the Capital Projects Fund fund balance is timing of capital spending, primarily in street repaving program, which is on a biennial cycle. (4) The Assigned balance is held for capital projects, including storm drain, sewer and tree replacement. (3) The Restricted balance is held in a Section 115 pension trust for future pension obligations.

General Fund
$-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23

GENERAL FUND FUND BALANCE
-138-

TOWN OF HILLSBOROUGH
CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS (modified accrual basis of accounting)

LAST TEN FISCAL YEARS
100
13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 Revenues:

Taxes (3) $ 18,022,939 $ 19,544,649 $ 19,381,521 $ 20,625,423 $ 21,761,555 $ 23,174,591 $ 23,912,273 $ 25,707,422 $ 27,338,357 $ 28,142,845 Permits 1,263,697 1,293,814 1,296,528 1,382,578 1,433,876 1,626,587 1,154,983 1,890,169 1,760,441 1,638,930 Intergovernmental 2,598,876 2,307,932 2,308,153 2,331,557 2,730,058 2,707,593 3,126,785 2,709,566 6,411,744 3,962,838 Service charges 1,089,867 1,179,642 1,150,751 1,119,679 1,090,405 1,218,912 1,176,300 961,695 1,454,288 1,264,934 Fines and forfeitures 96,766 194,506 49,718 148,187 159,528 197,322 23,777 38,850 21,534 15,752 Other fees and charges (1) - 510,121 - 641,144 630,260 642,978 395,277 854,306 666,826 778,976 Investment earnings 58,428 63,256 95,590 140,791 303,068 869,798 1,001,271 903,750 (1,683,071) 731,583 Miscellaneous 506,369 561,125 517,858 550,205 528,962 882,935 590,881 712,886 618,844 744,452 Total revenues 23,636,942 25,144,924 25,310,240 26,939,564 28,637,712 31,320,716 31,381,527 33,778,644 36,588,963 37,280,310 Expenditures:

General government 1,070,319 1,032,408 1,083,386 1,193,117 1,319,841 1,598,755 1,756,749 1,928,027 1,825,699 2,113,529 Public safety 12,855,768 13,682,047 14,684,875 15,689,634 16,195,735 16,990,728 17,808,901 18,795,622 19,918,895 21,299,326 Community services 2,536,784 2,561,612 2,672,549 2,719,138 2,729,304 3,086,589 3,425,185 3,836,232 3,902,093 4,086,103 Streets 1,975,604 2,292,809 3,896,794 2,392,966 5,255,841 3,435,091 3,876,263 4,485,333 6,065,777 3,296,897 Capital outlay 2,233,720 - - 522,941 - 637,304 200,015 488,670 311,029 816,110 Total expenditures 20,672,195 19,568,876 22,337,604 21,994,855 26,023,662 25,748,467 27,067,113 29,533,884 32,023,493 31,611,965 Excess of revenues over (under)
expenditures 2,964,747 5,576,048 2,972,636 4,944,709 2,614,050 5,572,249 4,314,414 4,244,760 4,565,470 5,668,345 Other Financing Sources (Uses):

Transfers in 3,679,700 3,253,766 3,435,093 3,279,368 3,363,402 4,270,579 4,342,785 3,515,248 5,752,124 3,718,456 Transfers out (2) (4,171,416) (3,745,482) (3,792,469) (6,991,582) (5,101,402) (5,395,579) (5,542,785) (5,715,248) (8,553,419) (6,974,456) Total Other Financing Sources (Uses) (491,716) (491,716) (357,376) (3,712,214) (1,738,000) (1,125,000) (1,200,000) (2,200,000) (2,801,295) (3,256,000) NET CHANGE IN FUND BALANCES $ 2,473,031 $ 5,084,332 $ 2,615,260 $ 1,232,495 $ 876,050 $ 4,447,249 $ 3,114,414 $ 2,044,760 $ 1,764,175 $ 2,412,345

NET CHANGE IN FUND BALANCES -
GENERAL FUND (3) $ 3,228,953 $ 4,176,045 $ 3,634,015 $ 208,112 $ 2,409,932 $ 3,794,718 $ 2,536,884 $ 1,142,176 $ 1,843,694 $ (279,531) DEBT SERVICE EXPENDITURES $ - $ - $ - $ - $ - $ - $ - $ - $ - $ -

RATIO OF DEBT SERVICE TO
NONCAPITAL EXPENDITURES 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% (1) Starting in FY 15/16, the fees and charges for the Capital Fund street related fees are broken out separately as Other Fees and Charges. In prior years, these amounts are included in Taxes. (2) Transfers typically include one-time capital improvement contributions. In FY 15/16, the transfer included new water automated meter readers. In FY 22/23, transfer included transfers for ARPA capital projects in the Water and Sewer Funds. (3) Net change in the General FundFund Balance is a reduction in FY 22/23, primarily due to one-time capital transfers out. Total Governmental Fund Net excess before transfers increased primarily for increased property tax revenue and lower street expenditures due to timing of street related projects.
-139-

TOWN OF HILLSBOROUGH

PROPERTY TAX DOLLAR BREAKDOWN
FOR THE FISCAL YEAR ENDED JUNE 30, 2023
101
ATI (Annual Tax Increment) Ratios for Tax Rate Area 006-001, Excluding Redevelopment Factors & Additional Debt Service Data Source: San Mateo County Assessor 2022/23 Annual Tax Increment Tables This report is not to be used in support of debt issuance or continuing disclosure statements without the written consent of HdL, Coren and Cone.
$ 0.01066 Peninsula Hospital District
$ 0.00409 County Harbor District
$ 0.00242 Bay Area, Air Pollution
$ 0.00223 Mosquito Abatement
$ 1.0000
$ 0.12083 ERAF Share of San Mateo County
$ 0.1541 San Mateo County
$ 0.2005 San Mateo Union High School District
$ 0.1985 Hillsborough Elementary General Purp
$ 0.02721 ERAF Share of Hillsborough General
$ 0.1599 Hillsborough General Fund
$ 0.0787 San Mateo Junior College General Purp
$ 0.0409 County Education Tax
-140-

TOWN OF HILLSBOROUGH

NET TAXABLE ASSESSED VALUE HISTORY

LAST TEN FISCAL YEARS
102
Total Direct
Lien Year Secured Unsecured SBE Nonunitary Net Total AV % Change Tax Rate 2013/14 $ 7,377,527,987 $ 4,556,205 $ - $ 7,382,084,192 6.59% 0.15736 2014/15 7,833,939,940 5,908,200 - 7,839,848,140 6.20% 0.15767 2015/16 8,460,687,856 8,612,367 - 8,469,300,223 8.03% 0.15782 2016/17 9,121,371,245 6,096,108 - 9,127,467,353 7.77% 0.15781 2017/18 9,673,123,078 5,220,467 - 9,678,343,545 6.04% 0.15779 2018/19 10,210,348,568 5,112,653 - 10,215,461,221 5.55% 0.15778 2019/20 10,757,039,454 5,454,728 - 10,762,494,182 5.35% 0.15777 2020/21 11,331,663,036 7,428,937 - 11,339,091,973 5.36% 0.15775 2021/22 11,821,444,062 8,820,787 - 11,830,264,849 4.33% 0.15774 2022/23 12,493,154,078 7,425,944 - 12,500,580,022 5.67% 0.15773 This report is not to be used in support of debt issuance or continuing disclosure statements without the written consent of HdL, Coren & Cone.

Data Source: San Mateo County Assessor 2013/14 - 2022/23 Combined $-
$2,000,000,000
$4,000,000,000
$6,000,000,000
$8,000,000,000
$10,000,000,000
$12,000,000,000
$14,000,000,000
Secured Unsecured
-141-

TOWN OF HILLSBOROUGH

DIRECT AND OVERLAPPING PROPERTY TAX RATES
(RATE PER $100 OF TAXABLE VALUE)
103
2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 Agency
Basic Levy¹ 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 Burlingame Elementary 0.0649 0.0744 0.0636 0.0568 0.0762 0.0706 0.0633 0.0658 0.0728 0.0503 Hillsborough Elementary 0.0274 0.0271 0.0264 0.0256 0.0276 0.0271 0.0292 0.0289 0.0297 0.0296 San Mateo Community College 2005 Series B - - - - - - 0.00 0.0037 - - San Mateo Junior College 0.0194 0.0190 0.0250 0.0247 0.0235 0.0175 0.0231 0.0176 - - San Mateo Junior Comm College 0.0227 0.0193
San Mateo Union High 0.0355 0.0475 0.0466 0.0415 0.0433 0.0407 0.0385 0.0449 0.0488 0.0504 Total Direct & Overlapping² Tax Rates 1.1472 1.1680 1.1616 1.1486 1.1706 1.1559 1.1576 1.1609 1.1740 1.1496 City's Share of 1% Levy Per Prop 13³ 0.1871 0.1871 0.1871 0.1871 0.1871 0.1599 0.1599 0.1599 0.1599 0.1599 Voter Approved City Debt Rate
Redevelopment Rate⁴
Total Direct Rate5 0.15739 0.15736 0.15767 0.15782 0.15779 0.15778 0.15777 0.15775 0.15774 0.15773 Last Ten Fiscal Years
Notes:
¹In 1978, California voters passed Proposition 13 which set the property tax rate at a 1.00% fixed amount. This 1.00% is shared by all taxing agencies for which the subject property resides within.

In addition to the 1.00% fixed amount, property owners are charged taxes as a percentage of assessed property values for the payment of any voter approved bonds. ²Overlapping rates are those of local and county governments that apply to property owners within the City. Not all overlapping rates apply to all city property owners. ³City's Share of 1% Levy is based on the City's share of the general fund tax rate area with the largest net taxable value within the City. ERAF general fund tax shifts may not be included in tax ratio figures.
⁴Redevelopment Rate is based on the largest RDA tax rate area and only includes rate(s) from indebtedness adopted prior to 1989 per California State statute. RDA direct and overlapping rates are applied only to the incremental property values. The approval of ABX1 26 eliminated Redevelopment from the State of California for the fiscal year 2012/13 and years thereafter. ⁵Total Direct Rate is the weighted average of all individual direct rates applied by the City/Agency preparing the statistical section information and excludes revenues derived from aircraft.

Beginning in 2013/14 the Total Direct Rate no longer includes revenue generated from the former redevelopment tax rate areas. Challenges to recognized enforceable obligations are assumed to have been resolved during 2012/13. For the purposes of this report, residual revenue is assumed to be distributed to the City/Agency in the same proportions as general fund revenue.

This report is not to be used in support of debt issuance or continuing disclosure statements without the written consent of HdL, Coren & Cone.

Data Source: San Mateo County Assessor 2013/14 - 2022/23 Tax Rate -142-

TOWN OF HILLSBOROUGH

PRINCIPAL PROPERTY TAXPAYERS
FISCAL YEAR 2022-23 COMPARED TO NINE YEARS PRIOR
104
Percentage of Percentage of
Taxable Total Taxable Taxable Total Taxable
Assessed Assessed Assessed Assessed
Taxpayer (Number of Parcels) Value Rank Value Value Rank Value ALPHA YIELD HOLDINGS LIMITED $ 34,869,473 1 0.28%
GATSBY 2 0 LLC 30,000,000 2 0.24%
2120 RAH LLC 28,614,179 3 0.23%
NICOLE R WEBB TRUST 26,595,111 4 0.21% 17,938,821 3 0.24% THEODORE H KRUTTSCHNITT 26,523,787 5 0.21%
DELIGHT WISE INVESTMENTS LIMITED 25,821,696 6 0.21%
123 NEW PLACE LLC 24,822,601 7 0.20%
PETER SPIRO STAMOS TRUST 21,532,072 8 0.17%
GOENKA SANGINI TRUST 20,000,000 9 0.16%
899 SHARON AVENUE LLC 19,254,859 10 0.15%
JAMES G B III DE MARTINI TRUST 26,050,000 1 0.35%
AUGUST MOON 1971 LLC 18,917,797 2 0.26%
CHRISTOPHER R REDLICH JR TRUST 17,336,634 3 0.23%
GEORGE HSU AND ANNA KUK SAU TRUST 15,064,901 5 0.20%
PETER SPIRO STAMOS TRUST 13,500,000 6 0.18%
OTTO J MILLER 11,917,639 7 0.16%
FRANK NONG WANG-LU TRUST 11,214,526 8 0.15%
DAVID J STEIRMAN 10,961,868 9 0.15%
DEB DIPANJAN TRUST 10,600,000 10 0.14%
$ 258,033,778 2.06% $ 153,502,186 2.06%
Source: San Mateo Tax Assessor's Office
2022-23 2013-14
-143-

TOWN OF HILLSBOROUGH
PROPERTY TAX LEVIES AND COLLECTIONS (1)

LAST TEN FISCAL YEARS
105
% of
Tax Levy (2)
ERAF Shift Net Levy Chg Amount % of Levy Amount % of Levy 13/14 13,666,852 $ $ 1,970,189 $ 11,696,663 4% 11,511,840 $ 98% 11,511,840 $ 98% 14/15 14,530,754 2,094,115 12,436,639 7% 12,332,000 99% 12,332,000 99% 15/16 15,630,336 2,264,366 13,365,970 6% 13,385,540 100% 13,385,540 100% 16/17 16,956,939 2,442,572 14,514,368 7% 14,445,762 100% 14,445,762 100% 17/18 17,993,645 2,591,569 15,402,076 9% 15,378,546 100% 15,378,546 100% 18/19 18,893,426 2,736,956 16,156,470 5% 16,197,533 100% 16,197,533 100% 19/20 20,025,328 2,885,025 17,140,303 6% 17,121,136 100% 17,121,136 100% 20/21 21,106,412 3,041,105 18,065,307 5% 17,966,305 99% 17,966,305 99% 21/22 21,909,150 3,174,001 18,735,149 4% 18,810,659 100% 18,810,659 100% 22/23 23,306,746 3,355,554 19,951,192 4% 20,002,608 100% 20,002,608 100% (1) Secured taxes are paid under the TEETER PLAN which requires full payment of the tax levy with no deductions for delinquencies.

However, collections may include adjustments and refunds processed throughout the year. (2) Includes Secured, Unsecured, HOPTR and Unitary
(3) Information regarding collections in subsequent years is not available.

Collected within FY Total Collections to Date
$-
$5
$10
$15
$20
$25
13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 $ Millions

PROPERTY TAX COLLECTIONS
-144-

TOWN OF HILLSBOROUGH

RATIO OF OUTSTANDING DEBT BY TYPE

LAST TEN FISCAL YEARS
106
13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 Governmental Activities
None
Total Governmental Activities $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Business Type Activities
Certificates of Participation $ 32,790,000 $ 31,565,000 $ 30,330,000 $ 29,080,000 $ 27,615,000 $ 26,135,000 $ 24,640,000 $ 23,130,000 $ 21,605,000 $ - Funding Agreement- Wastewater Treatment Plant - - - - - - - - 26,588,799 34,514,769 State Clean Water Loan - Direct Borrowing - - 6,982,206 9,051,234 8,804,249 9,683,838 9,406,978 9,125,689 8,839,898 8,549,535 ECE-ARRA lona- Direct Borrowing 798,288 740,486 682,124 623,157 563,599 503,445 442,700 381,333 319,350 256,746 Refunding Bonds - - - - - - - - - 19,250,000
Premiums - - - - - - - - - 2,039,875
Total Business-Type Activities $ 33,588,288 $ 32,305,486 $ 37,994,330 $ 38,754,391 $ 36,982,848 $ 36,322,283 $ 34,489,678 $ 32,637,022 $ 57,353,047 $ 64,610,925 Property Assessment Roll $ 7,382,084,192 $ 7,839,848,140 $ 8,469,300,223 $ 9,127,467,353 $ 9,678,343,545 $ 10,215,461,221 $ 10,762,494,182 $ 11,339,091,973 $ 11,830,246,849 $ 12,500,580,022 Percentage of Net Taxable Values of Property (1) 0.45% 0.41% 0.45% 0.42% 0.38% 0.36% 0.32% 0.29% 0.48% 0.52% Percentage of Personal Income 2.5% 2.5% 2.7% 2.8% 2.8% 2.6% 2.2% 2.0% 3.2% 3.6% Population (2) 11,260 11,266 11,687 11,753 11,543 11,769 11,418 11,391 11,018 10,962 Debt Per Capita $ 2,983 $ 2,868 $ 3,251 $ 3,297 $ 3,204 $ 3,086 $ 3,021 $ 2,865 $ 5,205 $ 5,894 Source: Town Records
(1) Net Taxable Assessed Value can be found on Net Taxable Assessed Values page (2) Population can be found on Demographic and Economic Page -145-

TOWN OF HILLSBOROUGH

COMPUTATION OF DIRECT AND OVERLAPPING DEBT
107
2022-23 Assessed Valuation $12,500,580,022
Total Debt Applicable Town's Share of
6/30/2023 Percentage (1) Debt 6/30/2023
DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT:

San Mateo Community College District $ 708,837,622 4.334% $ 30,721,023 San Mateo Union High School District 637,551,532 12.856% 81,963,625 Hillsborough School District 101,179,306 99.867% 101,044,738 Burlingame School District 156,676,360 0.012% 18,801
Town of Hillsborough - 100.000% -
Total Direct and Overlapping Tax and Assessment Debt $ 213,748,187 OVERLAPPING GENERAL FUND DEBT:

San Mateo County General Fund Obligations $ 589,931,687 4.334% $ 25,567,639 San Mateo County Board of Education Certificates of Participation 6,120,000 4.334% 265,241 San Mateo Mosquito and Vector Contril District General Fund Obligations 3,617,831 4.334% 156,797 Total Gross Overlapping General Fund Obligation Debt $ 25,989,677 TOTAL DIRECT DEBT $ -
TOTAL OVERLAPPING DEBT $ 239,737,864
COMBINED TOTAL DEBT (2) $ 239,737,864
(2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations.

RATIOS TO ASSESSED VALUATION:

Direct Debt 0.00%
Total Direct and Overlapping Tax and Assessment Debt 1.71% Combined Total Debt 1.92%
Source: California Municipal Statistics, Inc.

Jurisdiction
(1) The percentage of overlapping debt applicable to the town is estimated using taxable assessed property value. Applicable percentages were estimated by determining the portion of the overlapping district's assessed value that is within the boundaries of the town divided by the district's total taxable assessed value.
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TOWN OF HILLSBOROUGH

LEGAL DEBT MARGIN INFORMATION

LAST TEN FISCAL YEARS
108
Total
Net Debt Legal
Fiscal Assessed Debt Limit Applicable Debt
Year Value (2) 3.75% (1) to Limit Margin
13/14 $ 7,382,084,192 $ 276,828,157 $ 259,704,449 - $
14/15 7,839,848,140 293,994,305 276,828,157 -
15/16 8,469,300,223 317,598,758 293,994,305 -
16/17 9,127,467,353 342,280,026 317,598,758 -
17/18 9,678,343,545 362,937,883 342,280,026 -
18/19 10,215,461,221 383,079,796 383,079,796 -
19/20 10,762,494,182 403,593,532 403,593,532 -
20/21 11,339,091,973 425,215,949 425,215,949 -
21/22 11,830,246,849 443,634,257 443,634,257 -
22/23 12,500,580,022 468,771,751 468,771,751 -
(1) Pursuant to California Government Code Section 43605 (15% of 25% of full cash value). (2) Net Taxable Assessed Values can be found in the Net Taxable Assessed Values history page.

Source: Town of Hillsborough Finance Department.
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TOWN OF HILLSBOROUGH

SCHEDULE OF ENTERPRISE FUNDS DEBT COVERAGE

LAST TEN FISCAL YEARS
109
Net Revenues Interest and Total
Fiscal Available for Fiscal Debt
Year Revenues Expenses (1) Debt Service Principal(3) Charges(3) Service Coverage 13/14 21,689,347 $ $ 16,495,819 $ 5,193,528 1,267,228$ $ 1,383,641 2,650,869$ 1.96 14/15 20,574,117 (2) 13,530,875 7,043,242 1,282,802 1,330,150 2,612,952 2.70 15/16 21,853,129 (2) 14,294,305 7,558,824 1,293,362 1,399,018 2,692,380 2.81 16/17 24,094,147 (2) 15,854,082 8,240,065 1,308,966 1,297,414 2,606,380 3.16 17/18 26,123,725 18,257,869 7,865,856 1,771,543 1,288,616 3,060,159 2.57 18/19 27,479,456 16,673,966 10,805,490 1,830,308 1,210,879 3,041,187 3.55 19/20 29,559,496 17,881,478 11,678,018 1,832,606 1,131,802 2,964,408 3.94 20/21 30,615,232 19,852,024 10,763,208 1,852,656 1,152,449 3,005,105 3.58 21/22 29,118,749 17,565,676 11,553,073 1,872,608 1,059,140 2,931,748 3.94 22/23 29,820,444 19,336,403 10,484,041 5,512,736 1,814,171 7,326,907 1.43 (1) Total expenses excludes depreciation and interest.
(2) Expenses exclusive of capital contributions for a water treatment plant and other contracts. In Fiscal Years 14/15, 15/16, and 16/17, expenses excluded El Cerrito sewer project contributions.
(3) FY 22/23 includes debt service on SRF loan, ARRA loan, Certificates of Participation, and San Mateo Treatment plan loan. FY 22/23 is the first year of debt service on the San Mateo loan, and the principal includes one year of debt service plus a one-time principal payment of $2.4 million.

Source: Town of Hillsborough's Finance Department.
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TOWN OF HILLSBOROUGH

WATER AND SEWER RATES

LAST TEN FISCAL YEARS
110
Fiscal
Year (1) 1st Tier % of Change Residential % of Change
13/14 6.32 13% 2,031 7%
14/15 7.14 13% 2,173 7%
15/16 8.74 22% 2,325 7%
16/17 5.54 n/a 2,558 10%
17/18 5.98 8% 2,814 10%
18/19 5.98 0% 3,095 10%
19/20 5.98 0% 3,312 7%
20/21 5.98 0% 3,543 7%
21/22 6.16 3% 3,832 4%
22/23 6.16 0% 3,985 4%
Source: Town's Finance Department
(1) Rates shown are for bimonthly billing.

See the Town's budget document for the Master Fee Schedule that outlines all fees and charges Water Sewer
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TOWN OF HILLSBOROUGH

DEMOGRAPHIC AND ECONOMIC STATISTICS

LAST TEN FISCAL YEARS
111
Calendar
Year Population
Personal
Income
(Thousands)
Per Capita
Personal Income
Unemployment
Rate
Median
Age
% of Pop 25+
with High
School Degree
% of Pop 25+
with Bachelor's
Degree
Note 1
2013 11,260 1,331,518 118,252 1.8% 46.4 95.1% 73.5%
2014 11,266 1,309,199 116,208 3.6% 46.6 96.1% 76.0%
2015 11,687 1,425,471 121,970 2.9% 46.3 96.8% 75.7%
2016 11,753 1,367,991 116,395 2.6% 47.8 97.6% 78.6%
2017 11,543 1,314,050 113,839 2.6% 47.2 97.5% 77.1%
2018 11,769 1,390,438 118,144 2.3% 47.6 97.1% 75.7%
2019 11,418 1,593,255 139,538 2.1% 47.8 96.6% 77.2%
2020 11,391 1,612,232 141,535 5.6% 47.9 96.5% 78.9%
2021 11,018 1,798,989 163,277 4.0% 46.6 97.5% 81.1%
2022 10,962 1,810,334 165,146 2.3% 46.3 98.6% 83.1%
The Department of Finance applies regional growth assumptions, yet the Town is nearly fully built out and does not grow at the same rate as the region.

The Town estimates that population is typically below the figure reported by the Department of Finance.

Notes and Data Sources:

Note 1: The above population figures as stated by the California State Department of Finance are typically higher than the actual results that are taken at census for the Town.

Projections are developed by incorporating all of the prior census data released to date. Demographic Data is totaled from Census Block Groups that overlap the City's boundaries 2010 and later - Income, Age and Education Data - US Census Bureau, most recent American Community Survey -150-

TOWN OF HILLSBOROUGH

COUNTY OF SAN MATEO AND NEIGHBORING CITIES

LARGEST EMPLOYERS ON THE PENINSULA
112
Name Description Industry
Bart Daly City Station Daly City Transit Lines
Box Inc Redwood City Prepackaged Software
Electric Charging Station Menlo Park Research Service
Electronic Arts Inc Redwood City Game Designers (mfrs)
Fisher Investments Woodside Investment Management
Fisher Investments San Mateo Investment Management
Forced Dump Debris Box Svc Burlingame Garbage Collection Franklin Resources Inc San Mateo Asset Management
Genentech Inc South San Francisco Biotechnology Products & Services Gilead Sciences Inc Foster City Biological Products (mfrs) Kaiser Permanente Redwood City Redwood City Hospitals
Kaiser Permanente South Sn South San Francisco Hospitals Meta Platforms Inc Menlo Park Social Media
Mills-Peninsula Medical Ctr Burlingame Hospitals
Palo Alto VA Hosp Med Ctr Menlo Park Government-Specialty Hosp Ex Psychiatric Plateau Systems San Mateo Computer Software
San Francisco Intl Airport-Sfo San Francisco Airports
San Mateo County Behavior San Mateo Government Offices-County San Mateo County Tax Collector Redwood City Tax Return Preparation & Filing San Mateo Medical Ctr San Mateo Hospitals
Sciex LLC Redwood City Scientific Apparatus & Instruments-Mfrs SRI International Menlo Park Engineers-Research
Visa Inc Foster City Credit Card & Other Credit Plans
Youtube LLC San Bruno Online Services
Sources: California Employment Development Department
(1) This list of major employers was extracted from the America's Labor Market Information System (ALMIS) Employer Database, 2022 1st Edition https://labormarketinfo.edd.ca.gov/majorer/countymajorer.asp?CountyCode=000081 -151-

TOWN OF HILLSBOROUGH

FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION

LAST TEN FISCAL YEARS
113
13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 Function
General Government:

City Manager 4 4 4 4 5 5 5 6 6 6
Finance 5 5 5 5 6 6 6 6 6 6
Community Services 8 8 8 8 8 8 8 9 9 10
Public Safety:

Police 31 32 34 35 36 36 37 37 37 38
Fire (1)
Public Works:

Administration 7 9 10 11 11 11 11 11 11 12
Maintenance:

Streets 7 6 5 5 5 5 6 6 6 6
Water 10 8 9 9 9 9 8 8 8 8
Sewer 8 8 8 8 8 8 8 8 8 8
Total 80 80 83 85 88 88 89 91 91 94
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TOWN OF HILLSBOROUGH

OPERATING INDICATORS BY FUNCTION

LAST TEN YEARS (WHEN AVAILABLE)
114
13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 Function:

Police
Total Incidents N/A N/A N/A 26,888 35,145 34,477 29,772 31,530 29,339 31,232 Officer Initiated Incidents N/A N/A N/A 18,048 25,871 22,752 18,835 21,101 20,532 22,770 Calls for Service N/A N/A N/A 8,840 9,274 11,725 10,937 10,429 8,807 8,462 Average Response time (all calls) 5:50 6:09 5:35 5:15 6:10 5:32 6:23 6:09 5:54 6:40 Average Response time
(emergency calls) 3:42 3:40 3:26 2:31 3:01 2:49 3:11 2:45 2:12 4:05 Burglar Alarm Activations 2,580 2,586 2,500 2,608 2,253 2,281 2,118 1,648 1,608 1,639 Arrests:

Adult1 23 36 45 62 93 146 69 61 59 55
Juvenile 9 11 3 4 7 1 2 - - 0
Traffic Activity:

Fatal Injury Accidents - - - - 0
Traffic Stops N/A N/A N/A 875 1,826 2,291 1,630 898 1,284 858 Injury Accidents 12 8 14 7 8 7 11 7 10 7
Non-injury Accidents 57 50 36 43 52 56 27 27 40 48
Moving Citations 150 171 127 225 425 464 385 387 514 174 Courtesy Warning Citations 588 162 355 435 721 404 322 135 34 178 Criminal Activity:

Residential Burglary N/A N/A N/A 34 20 35 24 33 39 48
Auto Theft N/A N/A N/A 3 5 - 2 6 4 4
Attempted Murder N/A N/A N/A - 2 - - - 1 -
Murder N/A N/A N/A - - - - - - -
Assault with Deadly Weapon N/A N/A N/A 4 2 - 2 4 2 1
Sexual Assault N/A N/A N/A 2 3 4 1 3 3 -
Robbery N/A N/A N/A 1 - 1 - 1 1 5
Domestic Violence N/A N/A N/A 5 9 9 5 7 6 3
CPS Investigations N/A N/A N/A 23 30 31 22 26 20 14
Fire
Number of calls answered2 4,338 4,715 4,263 7,668 6,584 7,493 6,574 7,004 8,350 9507 Inspections 2,017 2,201 1,179 1,454 1,528 1,366 1,152 1,036 1,472 904 Planning - Design Review
New Houses Approved 16 23 25 20 13 27 6 15 12 12
Other Applications Approved 293 254 307 273 249 271 175 266 191 262 Building
# of Permits Issued 1,513 1,410 1,493 1,402 1,452 1,417 1,228 1,822 1,586 1,524 # of Projects 386.00 509 526 501 511 504 231 307 312 361 Valuation of Permits Issued (in 000's) $73,441 $77,430 $72,217 $84,430 $78,012 $79,695 $54,639 $105,977 $94,101 49 Total New Dwellings 19 13 13 20 11 11 6 3 2 89,293
Streets 3
Street resurfacing (miles) 1.00 - - 16 22 1 15 27 16
Potholes repaired 65 55 51 60 47 50 20 18 14 -
Guardrail replacement (LF) 60 50 45 100 40 50 - 75 150 21 Storm drains cleaned 1,050 1,150 1,250 1,350 1,425 1,400 164 88 278 158 After hour callbacks 16 21 47 46 31 50 13 4 13 256
Water 54
New connections 2 8 2 3 5 3 3 0 1 2
Water mains breaks 22 28 24 18 10 28 19 44 19 15
Water purchased (in thousand units) 1,600 1,226 1,050 1,139 1,214 1,125 1,281 1315 1,141 1,001 Retail water sales (in thousand units) 1,505 1,177 981 1,027 1,149 1,094 1,188 1268 1,109 951 Meter replacements 11 39 10 4,277 29 54 23 22 31 58
No of meter reads (calendar year)3 26,238 28,424 40,277 51,208 n/a n/a n/a n/a n/a n/a After hour callbacks 37 67 69 120 115 95 49 135 58 88
Wastewater
Average daily flow (sewer-MGD)
San Mateo 0.53 0.53 0.46 0.82 0.47 0.75 0.42 0.68 0.77
Burlingame 0.37 0.41 0.35 0.48 0.23 0.48 0.41 0.37 0.41 1.16 Total 0.90 0.94 0.81 1.30 0.70 1.23 0.83 1.05 1.18 0.45 After hour callbacks 37 37 29 27 22 54 30 16 31 1.16
Source: Various Departments - Town of Hillsborough 24
1 Arrests are up due to reaching maximum staffing levels, proactive burglary suppression and an increase in number of drunk drivers. 2 The total number of calls answered for CCFD include Burlingame, Hillsborough and Millbrae starting in FY 16/17. FY 16/17 reflects the first full year that Millbrae was contracting for fire services from CCFD.
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TOWN OF HILLSBOROUGH

CAPITAL ASSETS STATISTICS BY FUNCTION

LAST TEN FISCAL YEARS (WHEN AVAILABLE)
115
13/14 14/15 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 Function:

Public Safety
Police:

Stations 2 2 2 2 2 2 2 2 2 2
Patrol units 17 17 17 17 17 17 17 21 21 21
Patrol motorcycles 4 4 4 4 4 4 4 3 3 0
Fire:

Fire Stations 4 6 6 6 6 6 6 6 6 6
Administrative Office 1 1 1 1 1 1 1 1 1 1
Fire Engines 4 7 7 7 7 7 7 7 7 7
Reserve Engines 2 3 3 3 3 3 3 3 3 3
Streets and Storm Drains
Streets (miles) 81 81 81 81 81 81 81 81 81 81
Storm drains (miles) 34 34 34 34 34 34 34 34 34 34
Water
Water mains (miles) 108 108 108 108 108 108 108 108 108 108 Fire Hydrants 1,010 1,010 1,010 1,020 1,020 1,020 1,020 1,020 1,020 1,021 Maximum daily capacity
(Million Gallons) 8,325 8,325 8,325 8,325 8,325 8,325 8,325 8,325 8,325 8,325 Sewer
Sanitary sewers (miles) 98 98 98 96 96 96 96 98 94 98
Source: Various Departments - Town of Hillsborough
Note: No capital asset indicators are available for the general government function. (1) In FY 03/04, the Town of Hillsborough and the City of Burlingame approved a Joint Power Agreement for fire combined services in which, except for certain items, operation costs are shared 40%/60% respectively. In FY 14/15, CCFD started providing fire services to the City of MIllbrae on a contractual basis, and Millbrae shares in 30% of the costs of Central County Fire Department operations. The above statistics reflect the addition of Millbrae fire stations and equipment starting in FY 14/15
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1 December 1, 2023
To the Honorable Mayor and Members of the City Council
Of the Town of Hillsborough
Hillsborough, California
We have audited the financial statements of Town of Hillsborough, California (Town) as of and for the year ended June 30, 2023, and have issued our report thereon dated December 1, 2023. Professional standards require that we advise you of the following matters relating to our audit.

Our Responsibility in Relation to the Financial Statement Audit under Generally Accepted Auditing Standards and Government Auditing Standards
As communicated in our letter dated June 26, 2023, our responsibility, as described by professional standards, is to form and express an opinion about whether the financial statements that have been prepared by management with your oversight are presented fairly, in all material respects, in accordance with accounting principles generally accepted in the United States of America. Our audit of the financial statements does not relieve you or management of its respective responsibilities.

Our responsibility, as prescribed by professional standards, is to plan and perform our audit to obtain reasonable, rather than absolute, assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, as part of our audit, we considered the internal control of Town solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control.

We are also responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the financial reporting process.

However, we are not required to design procedures for the purpose of identifying other matters to communicate to you.

We have provided our comments regarding internal controls during our audit in our Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards dated December 1, 2023.

Compliance with All Ethics Requirements Regarding Independence The engagement team, others in our firm, as appropriate, our firm, and other firms utilized in the engagement, if applicable, have complied with all relevant ethical requirements regarding independence.

Significant Risks Identified
As stated in our auditor’s report, professional standards require us to design our audit to provide reasonable assurance that the financial statements are free of material misstatement whether caused by fraud or error.

In designing our audit procedures, professional standards require us to evaluate the financial statements and assess the risk that a material misstatement could occur. Areas that are potentially more susceptible to misstatements, and thereby require special audit considerations, are designated as “significant risks.” We have identified the following as significant risks.

Intergovernmental Revenues – awards from grants may have varied eligibility requirements and restrictions. The town must receive acknowledgement of award and track expenditures for each grant to submit reimbursement requests.

Qualitative Aspects of the Entity’s Significant Accounting Practices Significant Accounting Policies
Management has the responsibility to select and use appropriate accounting policies. A summary of the significant accounting policies adopted by Town is included in Note 1 to the financial statements. There have been no initial selection of accounting policies and no changes in significant accounting policies or their application during the fiscal year, other than the implementation of GASB Statement No. 96, SubscriptionBased Information Technology Arraignments. No matters have come to our attention that would require us, under professional standards, to inform you about (1) the methods used to account for significant unusual transactions and (2) the effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus.

Significant Accounting Estimates
Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s current judgments. Those judgments are normally based on knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ markedly from management’s current judgments.

The most sensitive accounting estimates affecting the financial statements are as follows:

Management’s estimate of the pension and other postemployment benefits is based on actuarial valuations prepared in accordance with the methods prescribed by governmental accounting standards.
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3 We evaluated the key factors and assumptions used to develop the significant accounting estimates and determined that they are reasonable in relation to the basic financial statements taken as a whole.

Financial Statement Disclosures
• Notes 13 and 14 describes the valuation of the Town’s net pension liability, other postemployment benefits liability, and related deferred outflows and inflows of resources. Such amounts are sensitive to the underlying actuarial assumptions used including, but not limited to, the investment rate of return and discount rate. As disclosed, a one percent increase or decrease in the discount rate has a material effect on the Town’s net pension liability.

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

Uncorrected and Corrected Misstatements
For purposes of this communication, professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that we believe are trivial, and communicate them to the appropriate level of management. Further, professional standards require us to also communicate the effect of uncorrected misstatements related to prior periods on the relevant classes of transactions, account balances or disclosures, and the financial statements as a whole. Uncorrected misstatements or matters underlying those uncorrected misstatements could potentially cause futureperiod financial statements to be materially misstated, even though the uncorrected misstatements are immaterial to the financial statements currently under audit. There were no uncorrected or corrected missstatements identified as a result of our audit procedures.

Disagreements with Management
For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter, which could be significant to the financial statements or the auditor’s report. No such disagreements arose during the course of the audit.

Circumstances that Affect the Form and Content of the Auditor’s Report For purposes of this letter, professional standards require that we communicate any circumstances that affect the form and content of our auditor’s report. Our report contains an emphasis of matter for the implementation of the GASB Statement 87, Leases.

Representations Requested from Management
We have requested certain written representations from management which are included in the management representation letter dated December 1, 2023.
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4 Management’s Consultations with Other Accountants
In some cases, management may decide to consult with other accountants about auditing and accounting matters. Management informed us that, and to our knowledge, there were no consultations with other accountants regarding auditing and accounting matters.

Other Significant Matters, Findings, or Issues
In the normal course of our professional association with the Town, we generally discuss a variety of matters, including the application of accounting principles and auditing standards, significant events or transactions that occurred during the year, operating conditions affecting the entity, and operating plans and strategies that may affect the risks of material misstatement. None of the matters discussed resulted in a condition to our retention as Town’s auditors.

Other Information Included in Annual Reports
Pursuant to professional standards, our responsibility as auditors for other information, whether financial or nonfinancial, included in the Town’s annual report, does not extend beyond the financial information identified in the audit report, and we are not required to perform any procedures to corroborate such other information. However, in accordance with such standards, we have read the other information and considered 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.

Our responsibility also includes communicating to you any information which we believe is a material misstatement of fact. Nothing came to our attention that caused us to believe that such information, or its manner of presentation, is materially inconsistent with the information, or manner of its presentation, appearing in the financial statements.

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

Menlo Park, California
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TOWN OF HILLSBOROUGH
San Mateo County
1600 Floribunda Avenue
Hillsborough, CA 94010
4 CONSENT CALENDAR

CITY COUNCIL MEETING
DECEMBER 11, 2023

AGENDA STAFF REPORT
ITEM SUBJECT: ADOPTION OF AN ORDINANCE AMENDING SECTION 1.28.040 OF THE

MUNICIPAL CODE RELATING TO CLAIMS AGAINST THE TOWN AND ADOPTION OF A RESOLUTION AMENDING TOWN POLICY NO. 415: SETTLEMENT AUTHORITY REGARDING

CLAIMS AND LITIGATION AGAINST THE TOWN, PURSUANT TO CEQA GUIDELINE SECTION 15378
SUMMARY: Town Policy No. 415 was last updated in 2005. The revisions to the settlement authority presented at the November 13, 2023 City Council meeting will assist with the efficient processing and timely resolution of claims and litigation. For claims where liability is clear and the dollar value is relatively low, scheduling the claim for City Council consideration in Closed Session causes inefficiencies due to administrative burden and can result in unnecessary costs to the Town. As such, revisions to the policy delegate authority to the City Manager, or his designee, to make decisions to settle or reject claims, threatened lawsuits, or lawsuits where the amount to be paid does not exceed $50,000, rather than the current $5,000 settlement authority. In addition, the policy has been expanded to provide the City Manager, with approval of the City Attorney, authority to enter into agreements on behalf of the Town as necessary to effectuate resolution or settlement of any claims, threatened litigation, or pending litigation up to $50,000. Additionally, a clean-up was made to remove the reference to an “Administration Commissioner” position that is not defined in Town policy.

The modification to the Town’s Ordinance Section 1.28.040 Claims Against the Town modifies the language to clarify the delegation of authority to the City Manager, and the revisions to Policy No. 415 outline the authority levels. At the City Council meeting on November 13, 2023, the City Council voted unanimously to introduce the ordinance with further reading waived and directed staff to bring back Policy 415 for approval with the adoption of the ordinance, with an addition to the policy to specify that staff provide a quarterly report to the City Council regarding the claims that have been settled under the City Manager’s authority. In addition, staff will include a report of those claims that have been rejected under the City Manager’s authority.

FISCAL IMPACT: There is no fiscal impact associated with this agenda item.

ENVIRONMENTAL ISSUES: The proposed action is exempt from environmental review pursuant to the California Environmental Quality Act (CEQA) Guidelines sections 15387(b)(2) and 15378(b)(5) as ongoing administrative or organizational activities that will not result in direct or indirect physical changes to the environment.

ATTACHMENTS:

1. Ordinance
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Agenda Staff Report - Hillsborough City Council
December 11, 2023

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Hillsborough City CouncilDecember 11, 2023

Hillsborough City Council
December 11, 2023