Hillsborough City Council
December 8, 2025

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

A G E N D A
MONDAY, DECEMBER 8, 2025
4:30 PM CLOSED SESSION
6:00 PM CITY COUNCIL MEETING
Hillsborough Town Hall
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. Speakers may speak for up to three minutes.

To participate in the meeting via Zoom Video Conference:
• Log in to the meeting at https://us06web.zoom.us/j/84195481911?pwd=8eS9UGuVK58BnRkVZwnsuzyppR3jbP.1 • Dial-in via phone:
+1 669 444 9171 US
Meeting ID: 841 9548 1911
Passcode: 515410
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 for up to three minutes.

CLOSED SESSION (4:30 pm)

CALL TO ORDER

ROLL CALL

ANNOUNCEMENT OF CONFLICT OF INTEREST ON CLOSED SESSION ITEM(S) This portion of the agenda is for Councilmembers to disclose any conflict of interest related to the item(s) 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.

Agenda – Hillsborough City Council
Monday, December 8, 2025

CLOSED SESSION ITEMS
A. CONFERENCE WITH LABOR NEGOTIATOR
Pursuant to Government Code Section 54957.6
Agency Negotiator: City Manager Doug Davis
Unrepresented employees: Accountant, Administrative Services Manager, Assistant City Manager, Assistant Director of Building and Planning, Assistant Director of Finance, Assistant Engineer, Assistant Planner, Associate Engineer, Associate Planner, Budget Analyst, Building Official, Chief Building Official, Chief of Police, City Clerk, Communications Manager, Deputy City Clerk, Deputy Director of Public Works, Director of Building and Planning, Director of Finance, Director of Public Works-City Engineer, GIS Coordinator, GIS Technician, Human Resources Manager, Management Analyst, Management Assistant, Planning Manager, Police Captain, Police Lieutenant, Public Works Superintendent, Senior Accountant, Senior Civil Engineer, Senior Management Analyst, Senior Planner, Support Services Manager B. PUBLIC EMPLOYEE PERFORMANCE EVALUATION
Pursuant to Government Code Section 54957(b)(1)
Title: City Manager
C. CONFERENCE WITH LABOR NEGOTIATORS
Pursuant to Government Code Section 54957.6
Unrepresented employee: City Manager
Agency Designated Negotiator: Mayor Sophie Cole

PUBLIC COMMENT ON CLOSED SESSION ITEM(S)
Members of the public may provide public comments on the item(s) 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.

ADJOURN CLOSED SESSION
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
Agenda – Hillsborough City Council
Monday, December 8, 2025

VIII. PRESENTATIONS
• Legislative Update by Assemblymember Diane Papan
• Police Department Drone First Responder Update
IX. TOWN UPDATE
X. PUBLIC COMMENT ON ITEMS NOT ON THE AGENDA
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. Approve City Council Meeting Minutes of November 10, 2025

2. Monthly Claims: November 1 through November 30, 2025

3. Acceptance of the Annual Comprehensive Financial Report (ACFR) Together with the Independent Auditors’ Report on Internal Control of Financial Reporting for the Year Ended June 30, 2025

4. Resolution Implementing Previously Approved Increases to Water Service Charges and Volume Charges Effective January 2026

5. Appoint a Town of Hillsborough Representative to the San Mateo County Mosquito & Vector Control District Board of Trustees

6. Resolution Establishing the Local Appointments List for Calendar Year 2026

7. Resolution Adopting the Classification Specification for the Position of Code Compliance Coordinator I/II and the Position of Public Works Assistant Superintendent

8. Resolution Adopting Policy 516, Grants Management Policy, to Establish Grant Management Guidelines
Agenda – Hillsborough City Council
Monday, December 8, 2025

9. Resolution Approving and Authorizing the City Manager to Execute a Purchase Agreement with IT Management Corporation for Town Network and Server Infrastructure Equipment Replacement in the Amount of $166,405.04 with a 10% Contingency in the Amount of $16,641.00 for a Total not-to-Exceed Amount of $183,046.04

10. Approve and Authorize the Mayor to Sign Letters of Support for AB 1243 and SB 684:

Polluters Pay Superfund Climate Act of 2025
XIII. PUBLIC HEARING

11. Adoption of an Ordinance Adopting 2025 Title 24 of the California Code of Regulations ("California Buildings Standards Code") by Reference, and Modifying Title 15 of the Hillsborough Municipal Code ("Buildings and Construction") by Amending, Repealing, and Replacing Various Chapters, Under CEQA Guidelines 15061(B)(3) and 15378 XIV. OLD BUSINESS

12. 40 Baywood Avenue Property Donation Proposal Discussion 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.

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 under 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].

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.

LEGISLATIVE UPDATE
2025
Assemblymember Diane Papan
-1-
2025-2026 CALIFORNIA STATE BUDGET
• Budget Total :
$321.1B
• Shortfall of $12
billion closed via:
⚬ fu n d s h ift s
⚬ reserve
d rawdowns
⚬ program
a d ju s t m e n t s
Current
• Continued revenue declines
• Sustained operating deficits
• Sp e n d in g g ro w t h t o exceed
revenue growth
• Unstable Revenue
• Rising Costs fo r C o n t in u in g
Ob lig a t io n s
• Federal Instability
2026 -27 Projections & Future Challenges
-2-

VEHICLE LICENSE FEE (VLF)
2004
2004 VLF Backfill Deal : State reduced Vehicle
License Fees significantly but agreed to backfill the
VLF loss to counties from the Educational Revenue
Augmentation Fund (ERAF).

Persistent shortfall : This ERAF payment structure
uniquely disadvantages SM County due to a shortfall
in the ERAF pot of money used to backfill the VLF loss.

Shortfall:
$32.8 million
restored to the
County
Shortfall:
$114 million
Backfill (2/3):
$76.5 million
restored to the
County
2025
Shortfall:
$70 million
restored to the
County
2023 2024
2026 Projected Shortfall: $162 million
Pro je c t io n s fo r C o m in g Ye a rs : Larger shortfalls 2026 and Beyond
Distributed from the State General Fund
2 years after being allocated in the budget
-3-
2025

LEGILSATIVE EFFORTS
-4-
• Bans the manufacture and
sale of cosmetic products
containing musk ingredients
starting January 1, 2027
• Aligns California with
European Union regulations
• Reduces harmful chemical
exposure
-5-
• Requires the California
Natural Resources Agency
(CNRA) to develop a new
stewardship plan in the 2027
30x30 progress report
reflecting:
⚬ St e w a rd s h ip b e n e fit s
⚬ Workforce needs
⚬ Ba c klo g g e d , c rit ic a l, re c u rrin g ,
a nd future needs
-6-
• Establishes consistent
recertification standards
across all transit operators
• Modernizes recertification
options to be phone, mail -in, or
online submissions.
• Implements a uniform five -
year recertification cycle
• Reduces administrative
burden on transit providers
-7-
2-YEAR BILL
• Requires energy providers to
credit Caltrain for the energy
generated by new electric
trains.
• Caltrain will be compensated
at Net Billing Tariff rates,
saving taxpayers $2M
annually.
-8-
Sought to improve the housing
e le m e n t re vie w p ro c e s s in t w o ke y
ways:

1. St a rt t h e Re g io n a l Ho u s in g
Ne e d s As s e s s m e n t (RNHA)
p ro c e s s 6 m o n t h s e a rlie r
t h e re b y a llo w in g m u n ic ip a lit ie s
m o re t im e t o e n g a g e w it h t h e
De p a rt m e n t o f Ho u s in g a n d
C o m m u n it y De ve lo p m e n t (HC D)

2.Re q u ire HC D t o p ro vid e
co n s is t e n t fe e d b a c k

TO BE RE-INTRODUCED
-9-
• Required data centers to
self -certify their anticipated
and actual water use during
the business license
process.
• Provides a pragmatic
solution that balances
resource sustainability and
revenue benefits of data
center expansion

TO BE RE-INTRODUCED
-10-
Equity & Local Safeguards :
• Requires >40% of funds go to projects benefiting
low -income or disadvantaged communities
• Disadvantaged communities are determined using
area median income
⚬ Ensuring San Mateo County remains fully
eligible for grant funding
Early Deployment & Local Benefits :
• 2025-2 6 fu n d in g s t re a m s in c lu d e :
⚬ $ 1.0 7 b illio n fo r water infrastructure
⚬ $325 m illio n fo r wildfire/forest resilience
⚬ $286 m illio n fo r biodiversity/nature -based
solutions
C A vo t e rs a p p ro ve d Pro p 4 in No v. 2 0 2 4:
• Au t h o rize d $10 billion in b o n d s fo r c lim a t e a n d e n viro n m e n t a l re s ilie n c e .

PROPOSITION 4: CLIMATE BOND
AB 156 7 (Papan c o - authored) got Prop 4 o n t h e b a llo t . -11-
CAP & INVEST HAS BEEN REAUTHORIZED THROUGH 2045
California’s “Cap and Invest” Program is a market -based system for reducing greenhouse gas (“GHG”) emissions.

CAP
St a t e im p o s e s a GHG e m is s io n s
C AP o n p o llu t e rs b y is s u in g a
c e rt a in n u m b e r o f “Allo w a n c e s .”
Po llu t e rs p u rc h a s e a d d it io n a l
Allo w a n c e s a t a u c t io n s
INVEST
Re ve n u e g e n e ra t e d fro m t h e
a u c t io n o f Allo w a n c e s is
in ve s t e d in t o p ro g ra m s t o
c o u n t e ra c t p o llu t io n .

Declining CAP
Ove r t im e , t h e St a t e w ill re d u c e
t h e n u m b e r o f Allo w a n c e s t o
e n c o u ra g e p o llu t e rs t o in ve s t in
c le a n e r t e c h n o lo g ie s .

CAP & INVEST
-12-
$1.5B
in wildfire prevention

1.6M acres
conserved or restored
$9.2B
benefitting communities most
severely impacted by climate
change
116.1 MMTCO2e
(Million Metric Tons of Carbon
Dioxide )
e s t im a t e d GHG re d u c t io n s

13.6K
a ffo rd a b le h o u s in g u n it s
1,386
122K t ra n s it p ro je c t s jo b s c re a t e d
560K rebates
for zero - e m is s io n ve h ic le s
$15B
in u t ilit y b ill c re d it s

INVESTMENTS IN STATE AUTHORIZED PROJECTS
-13-
AROUND TOWN!
-14-

THANK YOU
Stay Connected
@asmpapan
-15-
-16-

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

CITY COUNCIL MEETING
DECEMBER 8, 2025

AGENDA STAFF REPORT
ITEM SUBJECT: Approve City Council Meeting Minutes of November 10, 2025 -17-

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

UNAPPROVED MINUTES
MONDAY, NOVEMBER 10, 2025
3:00 PM STUDY SESSION
4:30 PM CLOSED SESSION
6:00 PM CITY COUNCIL MEETING
Hillsborough Town Hall
Meetings of the City Council are held in-person at Town Hall. 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.

STUDY SESSION

CALL TO ORDER
Mayor Cole called the meeting to order at 3:07 p.m.

ROLL CALL

Present: Adams, Chuang, Krolik, Ragsdale, Cole
A. Study Session: Town of Hillsborough Long-Range Financial Funding Plan Finance Director Jan Cooke provided the staff report. Drew Corbett, Principal, DKG Consultants, and Wing-See Fox, Managing Director, Urban Futures, Inc., City Manager Doug Davis and City Attorney Christopher Diaz provided additional information.

Mayor Cole opened public comment.

Paul Regan, speaking for himself, stated that Building & Planning Department cost recovery needs to go up significantly from 39 percent, suggested that the public safety parcel tax be restored, recommended renegotiation of the Central County Fire Department contract, and provided comments regarding the sensitivity of revenue projection in reference to slides 2 and 15 of the presentation.

Mayor Cole closed public comment.

Chick Adams, Chair, Financial Advisory Committee, stated that he does not believe it would be in the purview of the Financial Advisory Committee to address the subject matter of parcel tax polling, but within the purview of the City Council, and stated that the percentage of the General Fund budget that goes to public safety is very high and the Town could devote 100 percent of any level of property tax that is authorized to public safety and it would free up General Fund monies for other purposes. Mr. Adams stated that he believes polling could be done only on a public safety tax and other objectives could still be achieved.

Paul Regan stated that the public safety tax passed with 77 percent of the vote in 1998.

Following discussion, by consensus, the City Council directed staff to implement the Financial Advisory Committee Subcommittee recommendations with a modification to Item 2 regarding polling:

1. Implement Efficiency Study recommendations

1. Study for Building & Planning Department for recovery of costs.

2. Increase contribution from Central County Fire Department (CCFD) toward Town Finance services provided to CCFD.

3. Consider changing terms with CCFD for cost share between the three cities. -18-
Unapproved Minutes – Hillsborough City Council
Monday, November 10, 2025

2. Pursue hiring a public opinion research firm and return to Council with more information before conducting a public opinion poll for a potential parcel tax measure.

ADJOURN STUDY SESSION
Mayor Cole adjourned the meeting at 4:41 p.m.

CLOSED SESSION

CALL TO ORDER
Mayor Cole called the meeting to order at 4:42 p.m.

ROLL CALL

Present: Adams, Chuang, Krolik, Ragsdale, Cole

ANNOUNCEMENT OF CONFLICT OF INTEREST ON CLOSED SESSION ITEM(S) There were no announcements of conflict of interest.

CLOSED SESSION ITEMS
A. CONFERENCE WITH LEGAL COUNSEL – INITIATION OF LITIGATION Pursuant to Government Code Section 54956.9(d)(4)
One Potential Case
B. CONFERENCE WITH LEGAL COUNSEL – EXISTING LITIGATION
Pursuant to Government Code Section 54956.9(d)(1)
Town of Hillsborough v. All Persons Interested in the Matter of the Proceedings for Resolution No. 22-83 Adopting Maximum Rates for Water Service Charges San Mateo Superior Court Case No. 23CIV01028

PUBLIC COMMENT ON CLOSED SESSION ITEM(S)
There were no speakers.

ADJOURN CLOSED SESSION
The Closed Session adjourned at 6:02 p.m.

REGULAR CITY COUNCIL MEETING
I. CALL TO ORDER
Mayor Cole called the meeting to order at 6:06 p.m.

II. ROLL CALL

Present: Adams, Chuang, Krolik, Ragsdale, Cole
III. PLEDGE OF ALLEGIANCE
Mayor Cole led the Pledge of Allegiance.

IV. REPORT FROM CLOSED SESSION
City Attorney Christopher Diaz stated the City Council convened in Closed Session and reported regarding Item A that the City Council voted unanimously, 5-0, to initiate litigation and the particulars would be shared at the time that the amended complaint is filed.

V. MAYOR’S APPLAUSE – CHIEF OF POLICE MELISSA COLLA
-19-
Unapproved Minutes – Hillsborough City Council
Monday, November 10, 2025

Mayor Cole recognized Melissa Colla for her appointment as Chief of Police. Chief Colla provided brief comments.

VI. RECOGNITION
• RethinkWaste Poster Contest - Elementary School Category 1st Place Winner Meghan Pletsch, Environmental Educator, RethinkWaste, provided information regarding the RethinkWaste poster contest and introduced Madeleine, Elementary School Category 1st Place Winner. Councilmember Adams, RethinkWaste Board Member, presented a certificate of recognition. Madeleine provided brief comments regarding her poster.

VII. PRESENTATIONS
• Legislative Update by California Public Policy Group (CPPG) Dane Hutchings, CEO and Founder, California Public Policy Group, and Claire Sullivan, Associate Lobbyist, provided the presentation and responded to City Council questions.

Mayor Cole opened public comment. There were no speakers. Mayor Cole closed public comment.
• City/County Association of Governments of San Mateo County (C/CAG) and San Mateo County Transportation Authority (SMCTA) Countywide Transportation Plan (CTP) Update
Deputy Director of C/CAG Kaki Cheung provided the presentation. Councilmembers provided individual comments regarding availability of shuttles, user-friendly signage to connect different travel modes and e-bike safety measures.

Mayor Cole opened public comment.

Dennis Moore, Skyfarm neighborhood, provided comments regarding first/last mile barriers discussed in the presentation and separation of the transit networks in the County, and spoke in opposition to opting into funding via the Connect Bay Area Act, SB 63 or other such measures.

Mayor Cole closed public comment.

VIII. TOWN UPDATE
City Manager Doug Davis provided an update on events and activities in the town.

IX. PUBLIC COMMENT ON ITEMS NOT ON THE AGENDA
Arlene Rosenberg, Mc Creery Drive, requested the City Council send a letter to the California legislature in support of the Polluters Pay Climate Superfund Act of 2025 and provided information regarding the bill.

Josh Burns stated that the Federal Communications Commission released a Notice of Proposed Rulemaking titled Build America: Eliminating Barriers to Wireless Deployments, FCC Docket No. 25-276, that would streamline deployment of towers and other wireless infrastructure and reported an upcoming deadline to submit comments.

Mayor Cole announced an upcoming tentative Study Session date of January 12, 2026 to further discuss Telecommunications in the Town.

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

XI. CONSENT CALENDAR
-20-
Unapproved Minutes – Hillsborough City Council
Monday, November 10, 2025

Councilmember Krolik expressed appreciation to the incumbents being reappointed to the Architecture and Design Review Board and Financial Advisory Committee in Item 3.

Member of the public Nicolas Bechwati requested to remove Item 4 from the Consent Calendar.

Councilmember Krolik requested to remove Item 8 from the Consent Calendar.

On motion by Councilmember Chuang, seconded by Councilmember Krolik and unanimous on voice vote, Consent Calendar Items 1, 2, 3, 5, 6, 7 and 9 were approved.

1. Approve City Council Meeting Minutes of October 13, 2025 The City Council meeting minutes of October 13, 2025 were approved as submitted.

2. Monthly Claims: October 1 through October 31, 2025
The monthly claims for October 2025 were approved as submitted.

3. Resolution Appointing Two Members to the Architecture and Design Review Board and One Member to the Financial Advisory Committee for Terms January 1, 2026 through December 31, 2028
The resolution appointing two members to the Architecture and Design Review Board and one member to the Financial Advisory Committee for terms January 1, 2026 through December 31, 2028 was adopted.

4. Resolution Awarding to and Authorizing the City Manager to Execute a Contract with EPS, Inc. dba Express Plumbing for the Parrott Drive Sanitary Sewer Project - Phase 1 in the Amount of $993,198.00, with a 20% Contingency in the Amount of $198,640.00, for a Total Cost of $1,191,838.00, Under CEQA Guideline 15301 Nicolas Bechwati, Owner, EPS, Inc., provided comments regarding his company and stated the labor union’s allegations against his company are unfounded.

On motion by Councilmember Adams, seconded by Councilmember Chuang and unanimous on roll call vote, the resolution awarding to and authorizing the City Manager to execute the contract with EPS, Inc. dba Express Plumbing for the Parrott Drive Sanitary Sewer Project - Phase 1 and Replacement Project in the amount of $993,198.00 with a 20% contingency in the amount of $198,640.00 if needed, for a total construction budget of $1,191,838.00 was adopted.

5. Resolution Accepting as Complete the Contract with APB General Engineering for the 2024 Sanitary Sewer Rehabilitation & Replacement Project in the Amount of $1,040,994.00, Under CEQA Guideline 15301
The resolution accepting as complete the contract with APB General Engineering for the 2024 Sanitary Sewer Rehabilitation and Replacement Project, the final amount of which is $1,040,994.00, and authorizing staff to file a Notice of Completion for the project and release withheld retention in accordance with state prompt payment laws was adopted.

6. Resolution Accepting the Summary Vacation of an Existing Five-Foot-Wide Sewer Easement and the Grant of a Ten-Foot-Wide Sewer Easement at 1180 Marlborough Road Under CEQA Guideline 15301
The resolution accepting the summary vacation of an existing five-foot-wide sewer easement and the grant of a ten-foot-wide sewer easement at 1180 Marlborough Road under CEQA Guideline 15301 was adopted.

7. Resolution Accepting as Complete the Contract with JV Lucas Paving, Inc. for the 2025 Street Resurfacing Project in the Amount $2,709,588.52, Under CEQA Guideline 15301 -21-
Unapproved Minutes – Hillsborough City Council
Monday, November 10, 2025

The resolution accepting as complete the contract with JV Lucas Paving, Inc. for the 2025 Street Resurfacing Project, the final amount of which is $2,709,588.52 and authorizing staff to file a Notice of Completion for the project and release withheld retention in accordance with state prompt payment laws was adopted.

8. Resolution Approving and Authorizing the City Manager to Execute the Design-Build Agreement with Power Engineering Construction Company for the Tartan Trail Road Bridge Emergency Repair Project – Phase 1 in the Amount of $589,191.00, Under CEQA Guideline 15301
Director of Public Works Paul Willis responded to City Council questions.

On motion by Councilmember Krolik, seconded by Councilmember Chuang and unanimous on voice vote, the resolution approving and authorizing the City Manager to execute a Design-Build agreement with Power Engineering Construction Company for the Tartan Trail Road Bridge Emergency Repair Project – Phase 1 in the amount of $589,191.00, under CEQA Guideline 15301 was adopted.

9. Introduction of an Ordinance Adopting 2025 Title 24 of the California Code of Regulations (“California Building Standards Code”) by Reference, and Modifying Title 15 of the Hillsborough Municipal Code (“Buildings and Construction”) by Amending, Repealing, and Replacing Various Chapters, Under CEQA Guidelines 15061(B)(3) and 15378 and Setting December 8, 2025 as the Public Hearing Date for Adoption of the Ordinance Consistent with Government Code Section 50022.3 An ordinance titled, "Ordinance Adopting 2025 Title 24 of the California Code of Regulations (“California Building Standards Code”) by Reference, and Modifying Title 15 of the Hillsborough Municipal Code (“Buildings and Construction”) by Amending, Repealing, and Replacing Various Chapters, Under CEQA Guidelines 15061(B)(3) and 15378" was introduced and further reading was waived, and the public hearing date for adoption of the ordinance consistent with Government Code Section 50022.3 was set for December 8, 2025.

XII. PUBLIC HEARING

10. Proposition 218 Hearing: Resolution Approving Maximum Rates for the Town of Hillsborough's Solid Waste Charges for a Five-Year Period Assistant Finance Director Rich Santiago introduced the item. Rick Simonson, Senior Vice President, HF&H, provided the report.

Mayor Cole opened the Public Hearing at 7:57 p.m.

There were no speakers.

City Clerk Lisa Natusch reported that the Town received two protests that did not meet the requirements of a Proposition 218 written protest; therefore, no valid written protests were received. City Clerk Natusch reported that to achieve a majority protest, the Town would have needed to receive 1,956 valid written protests.

Mayor Cole closed the Public Hearing at 7:58 pm.

On motion by Councilmember Krolik, seconded by Councilmember Adams and unanimous on roll call vote, the resolution approving maximum rates for the Town of Hillsborough's solid waste charges for a five-year period was adopted.

XIII. OLD BUSINESS

11. Resolution Adopting the Bicycle and Pedestrian Master Plan Under CEQA Guideline 15306
Deputy Director of Public Works Natalie Gribben provided the staff report. Kaitlin Scott, Planning Associate, Alta Planning + Design, provided additional information. -22-
Unapproved Minutes – Hillsborough City Council
Monday, November 10, 2025

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

On motion by Councilmember Chuang, seconded by Councilmember Krolik and unanimous on roll call vote, the resolution adopting the Bicycle and Pedestrian Master Plan under CEQA Guideline 15306 was adopted.

XIV. CITY COUNCIL ITEMS
Councilmember Adams provided a presentation and reported her attendance at the RethinkWaste poster contest event, reminded the community of the upcoming Veterans Day event, reported her attendance at the San Mateo County Council of Cities dinner hosted by the City of South San Francisco, a session of the Leadership Council San Mateo County CORPS program and the League of California Cities Annual Conference in Long Beach, and provided information regarding the Telecommunications Study Session that was held and encouraged members of the public to submit comments for future discussions.

Councilmember Chuang reported her attendance at a Youth Climate Rally led by resident Kayla Ling and a graduation for 32 Community Emergency Response Team (CERT) trainers, and reported regarding her service on the SamTrans Board of Directors that in a recent SamTrans survey, 82% of riders were happy with their ride experience, and announced SamTrans will be rolling out Clipper 2.0 for bus riders and a podcast highlighting transit.

Councilmember Chuang announced an upcoming food drive in support of Samaritan House.

Councilmember Krolik reported her attendance at a meeting of the Financial Advisory Committee Long-Term Financial Funding Plan Subcommittee and announced she will be singing at the Veterans Day event. Councilmember Krolik stated that donations for Memorial Day have been received through the Hillsborough Beautification Foundation (HBF) for those that need to donate to a 501(c)(3) and reported that HBF has indicated they no longer wish to do that, and suggested that a Hillsborough Community Fund could be set up as a 501(c)(3) that could be used for receipt of donations for various Town fundraising efforts.

Councilmember Krolik stated she received a request from a young person to collect sports equipment at Town Hall and would discuss it with the City Manager, and regarding Item 9, suggested that perhaps address identification in the town could be an Eagle Scout project.

Vice Mayor Ragsdale provided a presentation regarding her activities in the last month including attendance at the Hillsborough Youth Commission Tech Day event, a meeting with staff and a resident who had concerns regarding speeding on their street, and reported that a Youth Commissioner would like to assist with updating the Town’s Climate Action Plan and staff has been in contact with them. Vice Mayor Ragsdale reported regarding her service on the Peninsula Clean Energy Board of Directors that the agency’s new name is going to be West Light Energy and it will be rolled out next year, reported her attendance at a State Water Board Meeting on behalf of her role on the BAWSCA Board of Directors, and reported her attendance at the Coalition for Safe Schools and Communities Leadership Breakfast.

Mayor Cole thanked her colleagues for their reports.

XV. ADJOURNMENT
Mayor Cole adjourned the meeting at 8:38 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 8, 2025

AGENDA STAFF REPORT
ITEM SUBJECT: Monthly Claims: November 1 Through November 30, 2025 SUMMARY: The monthly claims for the month of November 2025 in the amount of $5,034,284.35 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 2025 as submitted. -25-
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TOWN OF HILLSBOROUGH
San Mateo County
1600 Floribunda Avenue
Hillsborough, CA 94010
3 CONSENT CALENDAR

CITY COUNCIL MEETING
DECEMBER 8, 2025

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, 2025
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, 2025, from its auditor, Eide Bailly. 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 23 years. Staff believes the June 30, 2025 report will qualify for the award.

Summary of Financial Results
The General Fund has a net excess revenue of $0.8 million for the fiscal year ending June 30, 2025, which adds to reserves. General Fund revenues exceeded budget by $2.2 million (6%) due to a conservative budget for investment income as an economic downturn was projected at budget time, and recovery of Property Taxes in Lieu of Motor Vehicle License Fees (“VLF”) shortfall paid by the state. General Fund expenditures were lower than budget by $0.8 million (2%) primarily due to lower than budgeted legal fees and timing of professional and contractual services on projects.

Transfers from the General Fund of $2.1 million are for the Highline water project and governmental facility capital improvements.

The Water Fund's operating revenues increased $2.3 million compared to the prior year, primarily due to higher water unit sales and a rate increase in January 2025. The Sewer Fund's operating revenues increased $0.6 million compared to the prior year, primarily due to a rate increase effective July 2024. The combined net position of the Sewer and Water Enterprise Funds increased by $6.7 million in fiscal year 2024-25. Total net position of $93.6 million on June 30, -33-
Agenda Staff Report - Hillsborough City Council
December 8, 2025

2025 shows $32.7 million unrestricted, $60.4 million invested in net capital assets, and $0.4 million restricted for debt service.

The Town's net pension liability decreased $0.4 million from the prior year, for a total liability of $38.3 million, primarily due to changes in CalPERS’ investment returns.

Results by Fund
The financial highlights are summarized in the Management’s Discussion and Analysis (MD&A), which can be found on pages 5 through 19 of the financial report.

General Fund
The General Fund is the Town's primary operating fund. The fiscal year-end results showed a net excess revenue of $0.8 million in the General Fund that adds to reserves. The General Fund ending fund balance on June 30, 2025, is $33.7 million, of which $17.6 million is reserved for contingencies by policy and $5.7 million is restricted in the Section 115 pension trust. The remaining funds are assigned to and held for capital projects and future contingencies. The General Fund contingency reserve policy calls for a minimum of 30% of operating expenditure with a goal of 50%. This reserve is held for contingencies such as disaster, economic downturn, or other financial impacts.

General Fund revenues, including transfers in, for the fiscal year 2024-25 are $38.1 million. They are $2.2 million (6%) higher than budget primarily due to improved investment returns and receipt of VLF monies.

General Fund expenditures, including transfers out, for the fiscal year 2024-25 are $37.4 million and are below budget by $0.8 million (2%), primarily driven by lower legal costs and timing of services for projects. The expenditures are $1.3 million (4%) higher compared to the prior fiscal year, primarily driven by increases for the contribution to the Central County Fire Department JPA (which primarily increased labor-related costs), increase in salaries for filling of open positions and cost of living increases, and increase in required annual retirement contributions.

Proprietary Funds – Water and Sewer Enterprise
Proprietary funds are used to account for activities funded by service charges. Enterprise Funds account for the 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 for water customers.

Water Enterprise Fund’s operating revenue is $17.6 million, $2.3 million above the prior year and is attributable to a 9% increase in water unit sales and a water rate increase. Investment earnings are $0.1 million above the prior year, and transfers in from the General Fund are $1.7 million in FY 2024-25 for the Water Highline project (with no transfer in for FY 2023-24). -34-
Agenda Staff Report - Hillsborough City Council
December 8, 2025

Total operating expenses are $16.1 million, $1.6 million above the prior year. Water unit purchases were 7% above the previous fiscal year. On July 1, 2024, SFPUC increased wholesale water rates by 8.8%.

The Water Fund capital infrastructure outlay is $1.2 million. Water projects in FY 2024-25 included Water main replacement, Highline water connection, Darrell tank site improvement, Marlborough pump station, and water master plan update. Projects are encumbered for three years.

The Water Enterprise's net position of $40.5 million on June 30, 2025, increased $3.3 million over the prior year. The net position comprises a net investment of $31.4 million in capital assets and $9.1 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 operating revenue is $16.4 million, $0.6 million above the prior year. A 4% increase in sewer rates was adopted on July 1, 2024. Total operating expenses are $12.8 million, $0.9 million above the prior year primarily due to wastewater treatment prior year’s true ups. The treatment costs are billed by San Mateo and Burlingame at budget, and after year end the final operational statistics and costs used for allocating the costs are tabulated and a true up is applied.

Debt service includes principal and interest on the State Revolving Fund loan, the long-term funding agreement with the City of San Mateo for the Town’s contribution to the Clean Water (treatment plant) program, and the 2023 Revenue Refunding Bonds.

The Sewer Fund’s capital infrastructure outlay is $3.0 million for priority basins infiltration and inflow (I&I) rehabilitation program, sewer lift station repair, storm drain improvements, Parkside Ave culvert replacement, Shady land improvement, and 80 Delmonte storm drain replacement.

The Sewer Enterprise Fund's net position of $53.1 million on June 30, 2025, increased $3.4 million over the prior year. Net position consists of $29.1 million in net capital investment, $0.4 million restricted for debt service, and $23.6 million in unrestricted net position. Reserves are restricted for use solely in the Sewer Enterprise Fund.

Capital
The Town spent $9.6 million on capital purchases and infrastructure, with $1.9 million on governmental-type activities for vehicles, IT equipment, and building improvements and $7.7 million on business-type activities for water, sewer, and storm drain improvements, and an addition to the treatment plant capacity rights. The Town’s 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 increased due to an increase in the percentage of completion on the project. 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 (90%). See the Long-Term Liabilities explanation below. -35-
Agenda Staff Report - Hillsborough City Council
December 8, 2025

Debt and Long-Term Liabilities
On June 30, 2025, government-wide long-term liabilities totaled $112.6 million, comprised of debt, funding agreement with the City of San Mateo, compensated absences, subscription liability, pension, and other post-employment benefits (OPEB). There is a net decrease of $1.1 million from the prior year, primarily due to bond principal payments and lower pension and OPEB liabilities due to investment returns, offset somewhat by an increase in the percentage completion increase on the San Mateo Clean Water loan agreement and compensated absences liability. The compensated absences liability complies with the new Governmental Account Standard Board statement no. 101 effective for June 30, 2025. The Long-Term Debt footnote to the financial statements outlines each source of debt and the key terms and payment schedule.

The Town maintains AAA rating from S&P on the Revenue Refunding Bonds Series 2023.

Government-Wide Net Position
The Town’s financial condition is presented in the Statement of Net Position on page 20 of the report. This statement is prepared using a full accrual accounting method, reflecting capital assets and liabilities in the net position.

The Government-wide net position is $120.6 million on June 30, 2025. The Town's net position increased by $5.5 million (4.8%). Net position comprises $24.5 million in governmental activities and $96.1 million in business-type activities. The governmental activities decrease of $0.3 million is attributable to expenses exceeding revenues, primarily for a transfer out of $1.7 million for the Highline water project, accounted for in the Water Enterprise Fund. The project is funded by a combination of water use rates and a General Fund contribution. The increase in business-type activities of $6.9 million is attributable to revenues exceeding expenses of $5.2 million and a transfer in of $1.7 million for capital improvement projects. The revenues exceeding expenses is attributable to rate increases in water and sewer charges, higher water unit sales, and was offset somewhat by an increase in water purchase cost due to SFPUC rate increase and higher unit purchases, as well as increase in contractual service for wastewater treatment plant and labor related costs for cost of living and contractual retirement contributions. The $1.7 million transfer in from the General Fund is a contribution to the Highline Water project.

Governmental Activities Net Position, which includes the General Fund and the other governmental funds, was $24.5 million on June 30, 2025. It comprises $10.8 million in unrestricted, $10.6 million in net investment in capital assets, and $3.1 million restricted for capital projects.

Business-Type Activities Net Position is $96.1 million on June 30, 2025, and comprises $35.3 million in unrestricted, $60.4 million in net investment in capital assets, and $0.4 million restricted for debt service.

Other
The Town continues to monitor results in critical areas:

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

2. VLF – There continues to be a VLF shortall due to cities going into Basic Aid status. Each year, the County files a claim for the shortall with the State Department of Finance to place the -36-
Agenda Staff Report - Hillsborough City Council
December 8, 2025

shortfall in the State budget for the following year. The State cut the amount owed to 2/3 for the August 2025 payment. The Town continues to partner with the County and cities for a longterm solution.

3. CalPERS’s changes in the discount rate or other policy changes will increase the Town’s annual contribution, which puts pressure on the budget. The Asset Liability Management review occurs every four years, and CalPERS is nearing the end of the current cycle.

4. 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, 2025, the project is 90% complete, and the town continues to monitor the project costs.

The Financial Advisory Committee reviewed the audit results and ACFR at its regularly scheduled meeting on December 2, 2025 and recommended accepting the report.

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

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.

PREPARED BY: Jan Cooke, Finance Director
ATTACHMENT: Annual Comprehensive Financial Report for the Fiscal Year Ended June 30, 2025 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, 2025.
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Cover image should be inserted towards the end
All charts are not live linked to Excel and
Therefore, if an update impacts the tables, they must be relinked I would not live link any charts because it causes the
automatic years to show 1899
Keep these instructions but paste cover page on top
to preserve them for next year
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Town of Hillsborough, California
Hillsborough, California
Annual Comprehensive Financial Report
Fiscal year Ended June 30, 2025
Prepared by the Finance Department
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TOWN OF HILLSBOROUGH

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2025

TABLE OF CONTENTS
Page

INTRODUCTORY SECTION
Letter of Transmittal i
GFOA Certificate of Achievement viii
Organization Chart and Principal Officials ix

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

Government-wide Financial Statements:

Statement of Net Position 19
Statement of Activities 21
Fund Financial Statements:

Balance Sheet - Governmental Funds 22
Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds 23
Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to
the Statement of Activities 24
Statement of Fund Net Position - Proprietary Funds 25
Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds 27
Statement of Cash Flows - Proprietary Funds 28
Notes to the Financial Statements 29
Required Supplementary Information:

Schedule of Revenues, Expenditures and Changes in Fund
Balances - Budget and Actual - General Fund 62
Schedule of Revenues, Expenditures and Changes in Fund
Balances - Budget and Actual - Police and Fire Special Tax Fund 63 Schedule of Proportionate Share of the Net Pension Liability 64 Schedule of Contributions 65
Schedule of Changes in the Net OPEB Liability and Related Ratios 66 Schedule of OPEB Contributions 67
Notes to the Required Supplementary Information 68
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TOWN OF HILLSBOROUGH

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2025

TABLE OF CONTENTS (CONTINUED)
Supplementary Information:

Combining Statements and Individual Fund Schedules:

Nonmajor Governmental Funds:

Combining Balance Sheet 70
Combining Statement of Revenues, Expenditures and Changes in Fund Balances 71
Schedule of Revenues, Expenditures and Changes in Fund
Balances - Budget and Actual
Gas Tax Fund 72
Measure "A" Fund 73
Measure "W" Fund 74
Police Grants Fund 75
Capital Assets Used in the Operation of Governmental Funds:

Comparative Schedules by Source 76
Schedule by Function and Activity 77
Schedule of Changes by Function and Activity 78

STATISTICAL SECTION
Net Position by Component 80
Changes in Net Position 81
Governmental Activities Tax Revenues by Source 83
Fund Balances of Governmental Funds 84
Changes in Fund Balances 85
Property Tax Dollar Breakdown 86
Net Taxable Assessed Value History 87
Direct and Overlapping Property Tax Rates 88
Principal Property Taxpayers 89
Property Tax Levies and Collections 90
Ratio of Outstanding Debt by Type 91
Computation of Direct and Overlapping Debt 92
Legal Debt Margin Information 93
Schedule of Enterprise Funds Bond Coverage 94
Water and Sewer Rates 95
Demographic and Economic Statistics 96
County of San Mateo and Neighboring Cities 97
Full-Time Equivalent City Government Employees by Function 98 Operating Indicators by Function 99
Capital Assets Statistics by Function 100
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INTRODUCTORY SECTION
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i
December 1, 2025
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, 2025, 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 Finance Department prepared the report, 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 management to provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of management’s discussion 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 independent auditor's report.

The Annual Comprehensive Financial Report is organized into three sections:
• The Introductory Section includes the transmittal letter, the Town’s organization chart, 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.
• 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 and non-major governmental and other funds. Also included in this section is the independent auditor’s report on the financial statements and schedules. -46-
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• 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 controlled by or dependent upon the Town City Council. The Hillsborough Public Improvement Corporation (HPIC) operations were established to assist in financing the acquisition of public improvements on behalf of the Town. These financial statements combine HPIC with the Town’s Water and Sewer funds. The City Council is its Board of Directors and has full accountability for its operations. The HPIC does not issue a separate financial report.

INDEPENDENT AUDIT
Eide Bailly, a firm of licensed certified public accountants, has audited the Town of Hillsborough’s financial statements. 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, 2025, 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, 2025, 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 commendable support to the municipal government through advisory bodies, a community beautification foundation, a neighborhood network for emergency and other purposes, and communication through a quarterly newsletter and weekly bulletin. The Town has excellent, awardwinning schools. Public institutions include three distinguished elementary schools and a middle school.

There are three private schools located in the community.

The Town has a land area of approximately 6.23 square miles and a population of approximately 11,000. It is empowered to levy a property tax on both real and personal property located within its boundaries. The Town residents approved a special tax designated for public safety operations and capital expenditures, including paramedic and fire automatic aid response programs. -47-
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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, and 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 Central County Fire Department Joint Powers Authority for fire services with the City of Burlingame. The JPA provides fire services to the City of Millbrae on a contractual basis.

ACCOUNTING AND BUDGETING SYSTEMS
A general introduction to our accounting and budgeting systems helps us to better understand the Town's financial picture. These systems provide the means for allocating available resources and properly controlling and recording 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 ensure 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 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 with 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 inquire 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 on its 2023 Revenue Refunding bonds. The Town also has a State Water Resources Control Board loan for its improvements to the sewer system, a California Resources Conservation and Development Commission loan for its energy savings projects, and a loan with the City of San Mateo for Capacity Rights at the new wastewater treatment plant.

Additional information about 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 is the foundation for the Town of Hillsborough’s financial planning and control. The Town’s departments must submit requests for appropriation to the city manager, who will use these requests as the starting point for developing a proposed budget. Before June 30 of each year, the City Manager submits a proposed operating and capital budget for review to the City Council.

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

Budget-to-actual comparisons are provided in the Annual Comprehensive Financial Report for each 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, based on assessed values, are one of the Town’s most significant sources of revenue, accounting for approximately 60% of Town’s General Fund revenues. The fiscal year 2024-25 property tax revenues were $22.5 million, up 3.6% from the prior year. According to data from the San Mateo County Assessor, the Town had a total assessed value of $13.9 billion for the fiscal year 2024-25, an increase of $0.6 billion, or 4.5% from the prior year.

The Town operates a Water and 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 revenue requirements to ensure adequate revenues to cover expenses and to determine the need for rate adjustments. -49-
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The biennial street repaving program continues to improve street quality. Streets are funded from several sources, including general revenues and 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 policy requires a minimum of 30% of operating expenditures, with a goal of 50%. 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 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 INFORMATION
General Fund
The 2025-26 Adopted Budget projects a General Fund Reserve balance of $31.1 million with $19.8 million reserved per policy, $5.5 million restricted for Section 115 pension trust, and the remainder reserved for future uses such as projects, capital, or other items approved by the City Council. To balance the financial picture, the Town also has $41.9 million in long-term pension and OPEB liabilities.

The Town provides an extended financial projection as part of the budget process, allowing the Town to seek short-term and long-term budget solutions proactively. The projection considers various financial and economic factors received from multiple sources and includes information such as property value trends, consumer price indices, state budgets, and other qualitative trends. The projection indicates a narrowing of the revenue over expenditures in the long-term projections, which will progressively deplete General Fund reserves. This operating budget gap is driven by revenues not keeping pace with expenditures, driven by capital outlay from the General Fund, as well as revenue volatility from certain revenue sources, such as vehicle license fees (discussed below), and other expenditure growth for services and projects. To address this financial picture, a city council fiscal year 2025-26 goal is to conduct a long-term financial funding plan.

Revenue volatility continues with the property taxes in lieu of motor vehicle license fees (VLF). Any shortfall in VLF must be included in the state budget and is subject to approval in the state budget process.

Total VLF revenue was $1.6 million or 4% of revenue in FY 2024-25. Background: Educational Revenue Augmentation Fund (ERAF) revenue is difficult to anticipate due to complicated State school funding formulas. In the 1990s, the State shifted property taxes from cities, counties, and special districts to school districts to supplant funding that the State provided 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 on the formula prescribed by State law. Any funds remaining in ERAF are returned to the cities, counties, and special districts in proportion to the amount they contributed. Excess ERAF revenue to the Town was $3.3 million or nearly 9% of revenue in FY 2024-25. Similarly, VLF is paid from the property tax pool, and as the number of school districts shifts to Basic Aid, the amount in the pool to pay VLF is reduced.
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vi
Water and Sewer Enterprise Funds
The Town’s water, sewer, and storm drain infrastructure requires rehabilitation. The five-year capital improvement program is $12.7 million for water, $29.4 million for sewer, and $11.5 million for storm drains and projects, which are prioritized in the master plan. Storm Drain capital is paid for from the General Fund as the only dedicated source of funding for this major long-term capital program is a $7.34 per parcel tax, earning $28k per year). The Town also pays its proportionate share of capital improvements to the San Francisco Hetch Hetchy water system and its water source.

The Town pays for treatment plant services in Burlingame and San Mateo under 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, costing $47.6 million (excluding interest) over thirty years.

The Highline Water project is under way to be “shovel ready”. It is a $45 million project that provides a reliable, cost-effective water line at a higher elevation tied to the Harry Tracy plant, protects health and safety in a natural disaster, and provides operational cost savings for energy and other costs. The Town is pursuing a state grant for 70% of the funding, and the remainder would be paid for by the cities of Burlingame, Millbrae and Hillsborough. As the lead agency on the project, the Town will need to provide the cash flow funding for the project, for the timing between construction outlay and grant reimbursement.

This will require short-term financing during construction, and a long-term debt for the Town’s share of the project at construction completion.

Other
CalPERS’ pension policies continue to have an impact on the Town’s long-term projections. Annual required contributions will increase significantly (more than 50%) over the next ten years and then will start to trend 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.

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, 2024. This was the twenty-second consecutive year that the government has achieved this prestigious award. In order to be awarded a certificate of A\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 thank all the departments who contributed financial information to the report. -51-
vii
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 town's financial operations in a responsible and progressive manner.

Respectfully submitted,
Signature Signature
Doug Davis Jan Cooke
City Manager Finance Director
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ix
GFOA Certificate of Achievement
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FINANCIAL SECTION
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1 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, 2025, 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, as of June 30, 2025, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

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

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.
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2 In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the 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.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit.
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3 Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’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 individual and 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, 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 individual and 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, 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. -59-
4 In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.

Report on Summarized Comparative Information
We have previously audited the Town of Hillsborough’s financial statements for the year ended June 30, 2024, and we expressed an unmodified opinion on those financial statements in our report dated December 9, 2024. In our opinion, the summarized Comparative Schedules by Source of Capital Assets Used in the Operation of Governmental Funds, presented herein as of and for the year ended June 30, 2024, is consistent, in all material respects, with the audited financial statements from which it has been derived.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated [REPORT DATE] 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, 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.

Eide Bailly Signature
Menlo Park, California
Report Date
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TOWN OF HILLSBOROUGH
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2025
5 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, 2025 with comparative information for the fiscal year ended June 30, 2024. 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 i to vii of this report.

Financial Highlights
 The Town’s net position increased $6.6 million (5.7%) in fiscal year 2024-25. On June 30, 2025, net position totaled $120.6 million, comprised of $24.5 million for governmental activities and $96.1 million for business-type activities. Of the $120.6 million net position, $46.1 million is unrestricted and can be used to meet the Town’s ongoing obligations to citizens and creditors.  The net position in governmental activities decreased by $0.3 million (1.2%), and the net position in business-type activities increased by $6.9 million (7.7%). o The decrease in Government activities is attributable to expenses exceeding revenues, primarily for a transfer out of $1.7 million for the Highline water capital improvement project, accounted for in the Water Enterprise Fund. The project is funded by a combination of water user rates and a General Fund contribution.
o The increase in Business-type activities is attributable to revenues exceeding expenses by $5.2 million and a transfer in of $1.7 million for capital improvement projects. The revenues exceeding expenses is attributable to rate increases in water and sewer charges, higher water unit sales, and was offset somewhat by an increase in water purchase cost due to SFPUC rate increase and higher unit purchases, as well as increase in contractual services for wastewater treatment plant and labor related costs for cost of living and contractual retirement contributions. The $1.7 million transfer in from the General Fund is a contribution toward the Highline water project.  General Fund revenues and transfers of $38.1 million were $.8 million (2%) above the prior year.

Property tax revenue of $22.5 million, the Town’s largest General Fund revenue source, increased by $0.8 million (3.6%) compared to the prior year due to continued strong residential property assessed valuations in the Town and Bay Area region. The Town’s assessed valuation tax roll grew by 5% in fiscal year 2024-25 to $13.9 billion. Also contributing to the growth over the prior year was improved permitting revenue, service charges, and other taxes, offset somewhat by lower investment income and one-time miscellaneous revenues in the prior year. The permitting revenue and service charges increases are driven by higher permitting activity and plan reviews. The other tax increase is attributable to higher property transfer taxes, driven by increased property sales activity, as well as higher excess ERAF (educational revenue augmentation fund) revenue. Excess ERAF is a function of the property tax pool availability to pay property taxes and school funding, with any excess refunded back to the cities and county.
 General Fund expenditures, including transfers out, of $37.4 million lower than the adopted budget by $0.8 million (2.3%) and are attributable to lower professional services costs due to timing of projects.  General Fund net excess revenues (revenues greater than expenditures) totaled $0.3 million, with an additional amount for net transfer out of $0.4 million, resulting in a net change in fund balance of $0.7 million that adds to the Town’s reserves. The prior year’s net change in fund balance reported in the General Fund was $1.3 million. The decrease is attributable to the drivers outlined above, including higher revenues, offset by higher expenditures on cost of living and contractual increases, and a lower net transfer out. The amount of transfer out varies from year-to-year based upon capital improvement program timing.
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TOWN OF HILLSBOROUGH
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2025
6  The General Fund’s fund balance is $33.7 million on June 30, 2025. The Town’s General Fund reserve policy is 30% to 50% of budgeted operating expenditures and is maintained for contingencies. The fund balance includes $17.6 million for this reserve requirement (included in the unassigned category on the financial statements), $2.7 million assigned for capital and other projects, $5.7 million restricted in a pension trust for future pension liabilities, and $7.7 million in unassigned reserves. When considering the complete financial picture, this reserve balance must be weighed with the long-term debt, pension, and OPEB liabilities.
 The Town funded the annual required contribution of $1.5 million for the Other Post-Employment Benefits (OPEB) liability.
 The Sewer Fund's operating revenues increased $0.6 million (3.9%) compared to the prior year, primarily due to a rate increase effective July 2024.
 The Water Fund's operating revenues increased $2.3 million compared to the prior year, primarily due to higher water unit sales and a rate increase January 2025.  The combined net position of the Sewer and Water Enterprise Funds increased by $6.7 million in fiscal year 2024-25. Total net position of $93.6 million on June 30, 2025 shows $32.7 million unrestricted, $60.4 million invested in net capital assets, and $0.4 million restricted for debt service. The increase in net position is primarily attributable to an increase in cash and capital assets, which is largely attributable to timing of spending on projects.
 The Town spent $9.5 million on capital purchases and infrastructure, comprised of $1.8 million in governmental activities for vehicles, IT equipment, and building improvements, and $7.7 million on systems and transmissions in the water and sewer enterprise funds. Improvements were made to water main replacement, Highline water connection, Darrell tank site improvement, Marlborough pump station, water master plan update, priority basins infiltration and inflow rehabilitation program, priority basin improvements, and storm drain improvements.
o Included in the business-type activities acquisitions, the Town increased the intangible capital asset by $3.5 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. The current construction includes wastewater treatment capacity for the south portion of the Hillsborough sewer collection system. The asset reflects the project completion percentage (90%). See the Long-term Liabilities explanation below. o In addition, the intangible asset for subscription-based information technology arrangements (SBITA) increased by $75 thousand from the prior year. The net assets reflect the discounted cash flow of the remaining contract, offset by annual amortization.  Government-wide long-term liabilities total $118.2 million on June 30, 2025, and are comprised of debt, the funding agreement with the City of San Mateo, compensated absences, pension and other post-employment benefits (OPEB), and subscription payable.  The Town implemented new Governmental Accounting Standards Board Statements No. 101 Compensated Absences and No. 102 Certain Risk Disclosures. The Town restated its beginning compensated absences balances as part of the implementation of Statement No. 101. -62-

TOWN OF HILLSBOROUGH
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2025
7 Overview of the Financial Statements
This discussion and analysis are intended to introduce 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 supplementary information besides the basic financial statements, such as the discussion and analysis of this management.

Government-wide financial statements. The government-wide financial statements are designed to provide readers with a broad overview of the town’s finances, similar to those of 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 town's financial position 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).

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

The Government-Wide Financial Statements can be found on pages 19 through 21 of this report.

Fund financial statements. A fund is a grouping of related accounts used to control resources that have been segregated for specific activities or objectives. Like other state and local governments, the Town, 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 account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, and 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.
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TOWN OF HILLSBOROUGH
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2025
8 Overview of the Financial Statements (Continued)
Because the focus of governmental funds is narrower than that of the government-wide financial statements, comparing the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements is helpful. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. 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 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, and all are considered 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. To demonstrate compliance with this budget, a budgetary comparison statement has been provided for the general fund.

The basic financial statements can be found on pages 22 and 24 of this report.

Proprietary funds. The Town maintains two different types of proprietary funds. Enterprise funds report the same functions as business-type activities in 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 replacing the fleet and other equipment and accumulating funds to pay unfunded liabilities from pension and other post-employment benefits. Because this service predominantly benefits governmental rather than businesstype functions, 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 financial statements for proprietary funds 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 25 through 28 of this report.

Notes to the financial statements. The notes provide additional information essential to fully understanding the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on page 29 of this report.

Other information. In addition to the basic financial statements and accompanying notes, this report 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 62 of this report.

The combining statements for non-major governmental funds are presented immediately following the required supplementary information. Combining statements and individual fund schedules can be found on page 69 of this report.
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TOWN OF HILLSBOROUGH
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2025
9 Government-wide Financial Analysis
The following table provides a condensed Statement of Net Position as of June 30, 2025. 2025 2024 2025 2024 2025 2024
Assets:

Current and other assets $ 57,626,150 $ 56,891,979 $ 42,905,215 $ 38,410,360 $ 100,531,365 $ 95,302,339 Capital assets 11,087,812 10,986,876 126,594,369 124,624,667 137,682,181 135,611,543 Total assets 68,713,962 67,878,855 169,499,584 163,035,027 238,213,546 230,913,882 Deferred outflows of resources 12,687,209 16,637,855 2,764,451 3,430,608 15,451,660 20,068,463 Liabilities:

Long-term liabilities 43,924,649 44,774,367 68,654,994 68,917,690 112,579,643 113,692,057 Other liabilities 11,043,525 10,849,305 7,330,518 7,786,874 18,374,043 18,636,179 Total liabilities 54,968,174 55,623,672 75,985,512 76,704,564 130,953,686 132,328,236 Deferred inflows of resources 1,939,469 3,276,157 163,139 319,764 2,102,608 3,595,921 Net position
Net investment in capital assets 10,586,698 10,347,727 60,430,440 59,204,019 71,017,138 69,551,746 Restricted 3,069,887 1,982,659 431,801 431,801 3,501,688 2,414,460 Unrestricted 10,836,943 13,286,495 35,253,143 29,805,487 46,090,086 43,091,982 Total net position $ 24,493,528 $ 25,616,881 $ 96,115,384 $ 89,441,307 $ 120,608,912 $ 115,058,188 *The 2024 compensated absences and net position amounts were not restated.

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 refunding charges, pensions, and other post-employment benefits exceeded liabilities and deferred inflows of resources for leases, pensions, and other post-employment benefits by $120.6 million on June 30, 2025. The change in Government-wide net position was an increase of $6.6 million (5.7%) for the year. The decrease in governmental activities' net position of $0.3 million (1.2%) is primarily due to fluctuations in pension and OPEB-related liabilities. The increase in business-type activities' net position of $6.9 million (7.7%) is primarily due to increased current assts and capital assets, lower long-term and other liabilities. The increase in current assets is due to timing of capital projects, and the reduction of long-term liability is primarily driven by principal paid down on debt service.

On June 30, 2025, the Town reported positive balances in all three categories of net position for the government as a whole and 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 58.9% of the 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.
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TOWN OF HILLSBOROUGH
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2025
10 Government-wide Financial Analysis (Continued)
The Town’s restricted net position of $3.5 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 for business-type activities, and $3.1 million is restricted for street and police related projects of governmental activities. In addition, the Section 115 pension trust monies of $5.7 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 $46.1 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, 2025. Analysis for governmental activities and business-type activities is outlined separately below. 2025 2024 2025 2024 2025 2024
REVENUES:

Program revenues:

Charges for service $ 4,398,187 $ 3,772,425 $ 34,046,157 $ 31,086,951 $ 38,444,344 $ 34,859,376 Operating grants, transfers and functional taxes 2,352,062 2,966,712 - 2,352,062 - 2,966,712 General revenues:

Property taxes 22,463,588 21,685,506 - 22,463,588 - 21,685,506 Other taxes 9,485,327 9,286,228 - 9,485,327 - 9,286,228 Investment earnings 2,450,233 2,784,772 1,476,573 1,445,387 3,926,806 4,230,159 All others 579,677 1,157,379 - 579,677 - 1,157,379
Total revenues 41,729,074 41,653,022 35,522,730 32,532,338 77,251,804 74,185,360 EXPENSES:

General government 3,137,602 2,635,187 - 3,137,602 - 2,635,187 Public safety 26,285,038 23,879,234 - 26,285,038 - 23,879,234 Community services 6,102,285 5,968,725 - 6,102,285 - 5,968,725 Streets 4,794,432 8,788,267 - 4,794,432 - 8,788,267
Interest expense 24,854 32,335 - 24,854 - 32,335
Water - 16,539,823 - 14,959,677 16,539,823 14,959,677
Sewer - 13,793,450 - 13,024,026 13,793,450 13,024,026
Total expenses 40,344,211 41,303,748 30,333,273 27,983,703 70,677,484 69,287,451

EXCESS (DEFICIENCY) OF REVENUES
OVER(UNDER) EXPENSES 1,384,863 349,274 5,189,457 4,548,635 6,574,320 4,897,909

TRANSFERS
Transfers in - 1,696,000 - 1,830,000 1,696,000 1,830,000 Transfers out (1,696,000) (1,830,000) - (1,696,000) - (1,830,000) Total transfers (1,696,000) (1,830,000) 1,696,000 1,830,000 - - Increase in net position (311,137) (1,480,726) 6,885,457 6,378,635 6,574,320 4,897,909 Net position - beginning, as restated 25,616,880 27,097,607 89,441,307 83,062,672 115,058,187 110,160,279 Net position - ending $ 24,493,528 $ 25,616,881 $ 96,115,384 $ 89,441,307 $ 120,608,912 $ 115,058,188 *The 2024 compensated absences and net position amounts were not restated.

Governmental Activities* Business-type Activities* Total* Governmental Activities. Governmental activities decreased the Town’s net position by $0.3 million (1.2%), with a total net position of $24.5 million at the end of the fiscal year. The decrease was attributable to increased expenditures compared to the prior fiscal year. Public safety police increased with cost of living and retirement contractual costs, and the contribution to the Central County Fire Department increased due to labor-related cost increases and an additional mid-year contribution for the Town’s share of the hiring of twelve new firefighters for the re-opening of station 36. Streets expenses decreased primarily due to the bi-annual street resurfacing project that was completed in the prior fiscal year.
-66-

TOWN OF HILLSBOROUGH
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2025
11 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 are 65.2% of expenses and are comprised of police and fire services. Public Safety program revenues primarily comprise of alarm permitting and public safety sales tax. The remainder of public safety costs are funded by general revenues (general revenues not included in the chart below).

Governmental Activities – Revenues by Source
The following chart breaks down governmental activities' general revenues by source. The major general revenue sources are property taxes (54%), Excess ERAF (8%), user charges, and public safety special taxes. -67-

TOWN OF HILLSBOROUGH
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2025
12 Business-type Activities. The net position for business-type activities increased by $6.9 million (7.7%) for a total net position of $96.1 million on June 30, 2025. The increase results from excess revenues over expenses of $5.2 million and transfers of $1.7 million from the General Fund for storm drain capital projects. The increase is attributable to revenues that exceeded expenses, driven by higher growth in rate revenues than operating expense growth. The revenue and expense growth are explained further below. The net excess is held in reserve for timing of capital projects.

Business-type Activities revenue increased $2.9 million (9.2%) over the prior year primarily due to a rate increase in sewer charges effective July 1, 2024, and water rate increases on January 1, 2025, and an increase in water unit sales.

Business-type Activities expenses increased $2.3 million (8.4%) over the prior year due to increased personnel costs associated with labor agreements, contractual increases in contractual services for wastewater treatment, and water purchase cost due to an SFPUC rate increase and an increase in units purchased.

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 results of the governmental funds.

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 helps assess the Town’s financial requirements. Unassigned fund balance may be a valuable measure of the Town’s net resources available for spending at the end of a fiscal year.

As of June 30, 2025, the Town’s governmental funds reported combined ending fund balances of $41.3 million – up $1.8 million (4.4%) from the prior year, primarily from excess revenues over expenditures in the General Fund of $0.3 million due to increased revenues, lower capital transfers, offset somewhat by increased costs, as well as excess revenues over expenditures in the non-major funds, primarily due to timing of revenue and capital projects.

Capital Projects Fund and other non-major fund revenues are accumulated to support the timing of capital projects, with spending on the major street resurfacing program every other year. Of the $33.7 million General Fund fund balance on June 30, 2025, $25.3 million is classified as unassigned, and the remainder is classified as restricted, committed, and non-spendable for various purposes. Of the $25.3 million unassigned, $17.6 million is held for contingencies per policy.
-68-

TOWN OF HILLSBOROUGH
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2025
13 Financial Analysis of the Governmental Funds (Continued) General Fund
General Fund Revenues
General Fund revenues grew $0.7 million (2%) compared to the prior year. The table below outlines the details of the revenue sources. The property tax increase of $0.8 million is attributable to increased assessed real estate values in the region. The assessment tax roll increased 5% in fiscal year 2024-25 for Hillsborough. Permitting revenue increased over the prior year due to increased activity, driven by the solid local real estate market. Investment earnings decreased due to a lower mark to market valuation and a lower LAIF rate as compared to the prior fiscal year. The All-Others revenue category decreased $0.5 million, primarily due to receiving a one-time settlement in the prior fiscal year.

REVENUES AND OTHER
FINANCING SOURCES 2025 2024
Increase
(Decrease)
Percent
Change
Property taxes $ 22,463,588 $ 21,685,506 $ 778,082 4%
Public safety special tax transfer 2,284,537 2,191,876 92,661 4% Excess ERAF 3,312,334 3,233,269 79,065 2%
Permits 1,831,149 1,471,141 360,008 24%
Service charges 1,243,442 1,116,657 126,785 11%
In lieu of MVLF 1,556,159 1,666,666 (110,507) -7%
Franchise taxes 909,629 900,682 8,947 1%
Business license tax 792,609 728,547 64,062 9%
Property transfer tax 469,243 334,558 134,685 40%
Rental income 479,083 453,718 25,365 6%
Sales and use tax 143,727 120,051 23,676 20%
Public safety sales tax 176,423 174,086 2,337 1%
Federal, State and local grants 146,226 127,168 19,058 15% Transfer from Measure A 250,000 250,000 0% -
Investment earnings 1,739,890 2,113,319 (373,429) -18%
All others 350,192 855,493 (505,301) -59%
Total $ 38,148,231 $ 37,422,737 $ 725,494 2%
-69-

TOWN OF HILLSBOROUGH
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2025
14 Financial Analysis of the Governmental Funds (Continued) General Fund Expenditures
General Fund expenditures increased by $1.3 million (4%) as compared to the prior year. Total personnel costs increased $2.7 million (14%) due to the filling of new and open positions, a one-time labor settlement, cost of living and step increases, and contractual CalPERS pension contribution increases. The contractual contribution to Central County Fire Department Joint Powers Authority for fire services increased by $1.1 million (11%) for the annual required contribution paid to Central County Fire Department JPA, including an additional mid-year budget amendment to pay for the new firefighters hired for the reopening of station 36. Materials and services increased by $.6 million (5%), primarily for increases in information technology software and contractual increases. Transfers include capital improvement funding for the Highline water project, facility improvements, and asset replacements and reserves.

EXPENDITURES AND OTHER
FINANCING USES 2025 2024
Increase
(Decrease)
Percent
Change
Salaries $ 12,078,907 $ 10,802,139 $ 1,276,768 12%
Overtime 807,471 765,554 41,917 5%
Temporary 102,049 69,875 32,174 46%
Medicare/FICA 629,684 571,139 58,545 10%
Retirement 4,586,986 3,900,755 686,231 18%
Insurances 2,030,530 1,780,802 249,728 14%
Retirees' health insurance 1,585,165 1,472,201 112,964 8% Workers' compensation 231,387 160,409 70,978 44%
All others 297,597 125,295 172,302 138%
Total personnel costs 22,349,776 19,648,169 2,701,607 14% Contribution for fire operations 10,655,834 9,581,385 1,074,449 11% Materials and services 11,608,978 11,056,193 552,785 5% Reimbursement for other programs (9,658,889) (7,020,104) (2,638,785) 38% Transfers (including internal service) 2,423,500 2,779,834 (356,334) -13% Total $ 37,379,199 $ 36,045,477 $ 1,333,722 4%
-70-

TOWN OF HILLSBOROUGH
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2025
15 Financial Analysis of the Governmental Funds (Continued) General Fund Budgetary Highlights
The table below summarizes the fiscal year 2024-25 budget variances:

Original Revised
Budget Budget Actual Variance %

REVENUES
Service charges $ 1,288,870 $ 1,288,870 $ 1,243,442 $ (45,428) -4% Franchise taxes 915,476 915,476 909,629 (5,847) -1%
Business license 700,000 700,000 792,609 92,609 13%
Property taxes 22,708,200 22,708,200 22,463,588 (244,612) -1% Permits 1,665,900 1,665,900 1,831,149 165,249 10%
Intergovernmental 1,062,221 1,062,221 1,761,696 699,475 66% Investment earnings 696,000 696,000 1,739,890 1,043,890 150% Excess ERAF 3,215,224 3,215,224 3,312,334 97,110 3%
All others 3,706,770 3,706,770 4,093,894 387,124 10%
Total 35,958,661 35,958,661 38,148,231 2,189,570 6%

EXPENDITURES
Police 13,919,026 13,792,226 13,868,026 (75,800) -1%
Fire 10,517,226 10,880,834 10,857,048 23,786 0%
Community services 5,735,907 5,862,707 5,169,333 693,374 12% Streets 3,498,594 3,498,594 3,015,192 483,402 14%
All others 2,373,702 4,171,702 4,469,600 (297,898) -7%
Total 36,044,455 38,206,063 37,379,199 826,864 2%
NET CHANGE $ (85,794) $ (2,247,402) $ 769,032 $ 3,016,434 134%

Revenues exceeded budget by $2.2 million (6%) due to conservative budget for investment returns as a downturn due to inflation was projected at budget time, and recovery of MVLF shortfall paid by the state (included in the Intergovernmental category on the table above), offset somewhat by lower than budgeted supplemental property taxes. The supplemental property taxes budget was based on historical trend, and the lower actuals are attributable to lower sales activity in 2024-25, which is consistent with other cities’ trend in San Mateo County. Expenditures were lower than the budget by $0.8 million (2%) primarily due to lower legal costs due to fewer projects, and to timing of professional and contractual services on projects.

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

The Water Fund's net position increased $3.3 million (8.8%) in the fiscal year 2024-25. On June 30, 2025 the net position was $40.5 million, with $31.4 million invested in net capital assets and $9.1 million unrestricted. Net investment in capital assets increased by $0.6 million, and the unrestricted net position increased by $2.6 million.

The increase in net position is attributable to higher operating revenue generated by an increase in user rates and unit sales and the timing of capital projects.
-71-

TOWN OF HILLSBOROUGH
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2025
16 Financial Analysis of the Proprietary Funds (Continued) The Sewer Fund's net position increased by $3.4 million (6.8%) in the fiscal year 2024-25. On June 30, 2025, the net position was $53.1 million, with $29.1 million invested in net capital assets, $0.4 million restricted for debt service, and $23.6 million unrestricted. Net investment in capital assets increased by $.6 million, and the unrestricted net position increased by $2.6 million, resulting from increased revenue from rate increases and the timing of capital improvement projects.

Water and sewer operating revenues increased by $3.0 million (9.5%), primarily due to sewer and water rate increases.

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, 2025, amounted to $137.7 million (net of accumulated depreciation). This investment in capital assets includes land, buildings and systems, improvements, machinery and equipment, streets, intangible assets under construction, and subscription assets (intangible). The intangible asset under construction totaling $46.7 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 90%. The City of San Mateo provides sewer treatment to the town, and the asset reflects the town’s share on a percentage completion basis of the project. The $2.0 million increase in BusinessType Activities capital assets (being depreciated) is attributable to sewer and water infrastructure project spending.

Additional information on the Town’s capital assets can be found in Note 4 to the financial statements. -72-

TOWN OF HILLSBOROUGH
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2025
17 Capital Asset and Debt Administration (Continued)
2025 2024 2025 2024 2025 2024
Intangible Asset Under Construction $ - $ 46,659,638 - $ $ 43,157,836 $ 46,659,638 $ 43,157,836 Land 1,456,560 1,456,560 - 1,456,560 - 1,456,560
Land improvements 345,894 482,179 - 345,894 - 482,179
Buildings 2,580,351 2,360,559 - 2,580,351 - 2,360,559
Machinery and equipment 3,468,508 3,064,133 63,987 68,356 3,532,495 3,132,489 Infrastructure 2,684,163 2,942,738 - 2,684,163 - 2,942,738 Water and sewer lines - 78,321,382 - 80,577,510 78,321,382 80,577,510 Construction in Progress - - 1,549,362 820,965 1,549,362 820,965 Subscriptions 552,336 680,707 - 552,336 - 680,707
Total $ 11,087,812 $ 10,986,876 $ 126,594,369 $ 124,624,667 $ 137,682,181 $ 135,611,543 Governmental Activities Business-type Activities Total
Long-term Debt. On June 30, 2025, the Town had long-term debt outstanding of $66.6 million (excludes longterm liabilities for compensated absences, claims, pension, OPEB, and subscriptions). The Town’s share of the City of San Mateo’s new Clean Water wastewater treatment plant increased which reflects an 90% completion basis.

The other debt liabilities decreased for principal payments and amortization on the subscription liability. A summary of the Town’s most significant debt is as follows:
2025 2024
Governmental Activities
Subscription liabilities $ 501,114 $ 639,149
Business-Type Activities
Refunding bonds, including premiums 17,111,964 19,196,468 Loan Payable - California Energy Program 129,655 193,520 Loan Payable - State Revolving Fund Loan 7,954,797 8,254,526 Funding Agreement with City of San Mateo 40,870,846 38,797,301 Total Government-Wide $ 66,568,376 $ 67,080,964
The total principal paid during the year was $3.5 million, comprised of $1.4 million on the San Mateo loan, $0.3 million on the State Revolving Fund Loan, $0.1 million on the California Energy loan, and $1.7 million on the 2023 Refunding Bonds.

Town maintains ratings of AAA 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 45 of this report. -73-

TOWN OF HILLSBOROUGH
MANAGEMENT’S DISCUSSION AND ANALYSIS
FOR THE YEAR ENDED JUNE 30, 2025
18 Current Factors and Conditions Affecting Future Financial Position The Town’s real estate conditions remain solid in Hillsborough and the Bay Area. Property tax is a significant source of revenue for the Town’s General Fund, which is real-estate driven and 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 State backfills any funds from the shortfall from non-basic aid school districts used for this purpose. San Mateo County submits a reimbursement claim for 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 FY 2023-24 shortfall, recognized in FY 2024-25, was only paid by the State at 2/3rds of the amount owed, and therefore the County of San Mateo initiated a lawsuit against the State on behalf of the County and San Mateo cities.

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. 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 57 to 61.

Storm drain capital improvements are currently being funded by the General Fund for $1.2 million annually. The only current dedicated funding source 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 excess revenues no longer be available, a dedicated source of funding will 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 is seeking a state grant to fund 70% of the High Line Water project, an alternative source of water that will build a new pump station at the SFPUC Harry Tracy Plant and will provide a reliable source of water for all three communities (Hillsborough, Burlingame, and Millbrae). A cost-sharing agreement with the cities of Burlingame and Millbrae is in place, and the Town’s share of the project is approximately $6.7 million, funded with a General Fund contribution, long-term financing, and water rates. As the lead agency on the project, the Town will incur the project costs, apply the grant and city contributions, and use a short-term line of credit for cash flow timing differences.

Requests for Information
This financial report is designed to provide a general overview of the Town’s finances for those interested in the Town’s finances. Questions concerning any 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.
-74-

BASIC FINANCIAL STATEMENTS
-75-

GOVERNMENT-WIDE FINANCIAL STATEMENTS
-76-

TOWN OF HILLSBOROUGH

STATEMENT OF NET POSITION
JUNE 30, 2025
The notes to the financial statements are an integral part of this statement. 19 Governmental Business-Type
Activities Activities Total
ASSETS:

Cash and investments $ 52,042,342 $ 35,601,153 $ 87,643,495 Restricted cash and investments 5,698,575 765,407 6,463,982 Receivables, net of an estimated allowance 318,283 3,815,156 4,133,439 Interest receivable 675,429 2,015 677,444
Taxes receivable 629,273 - 629,273
Internal balances (2,546,965) 2,546,965 -
Prepaid items 10,334 - 10,334
Supplies 174,519 - 174,519
Leases receivable 798,879 - 798,879
Capital assets, net of accumulated depreciation and amortization Land 1,456,560 - 1,456,560
Intangible and other asset under construction 48,209,000 - 48,209,000 Land improvements 345,894 - 345,894
Buildings 2,580,351 - 2,580,351
Machinery and equipment 3,468,508 63,987 3,532,495
Infrastructure 2,684,163 - 2,684,163
Water and sewer lines 78,321,382 - 78,321,382
Right-to-use subscription assets 552,336 - 552,336
Total assets 68,713,962 169,499,584 238,213,546
DEFERRED OUTFLOWS OF RESOURCES:

Refunding charges 928,333 - 928,333
Deferred outflows related to other postemployment benefits 2,314,015 286,101 2,600,116 Deferred outflows related to pensions 10,373,194 1,550,017 11,923,211 Total deferred outflows of resources 12,687,209 2,764,451 15,451,660 LIABILITIES:

Accounts payable and other current liabilities 2,302,749 2,218,390 4,521,139 Accrued payroll liabilities 564,733 81,218 645,951
Deposits 6,318,213 1,048,606 7,366,819
Accrued interest payable 35,072 165,563 200,635
Noncurrent liabilities:

Due within one year:

Claims liability 325,000 27,150 352,150
Compensated absences 1,364,659 151,946 1,516,605
Subscription liability 133,099 - 133,099
Loans payable 1,537,714 - 1,537,714
Refunding bonds 2,099,931 - 2,099,931
Due in more than one year:

Compensated absences 1,627,365 181,198 1,808,563
Subscription liability 368,015 368,015 -
Loans payable 47,417,584 - 47,417,584
Refunding bonds 15,012,033 - 15,012,033
Net OPEB liability 8,599,330 1,063,843 9,663,173
Net pension liability 33,329,939 4,980,336 38,310,275
Total liabilities 54,968,174 75,985,512 130,953,686
-77-

TOWN OF HILLSBOROUGH
STATEMENT OF NET POSITION (Continued)
JUNE 30, 2025
The notes to the financial statements are an integral part of this statement. 20 Governmental Business-Type
Activities Activities Total
DEFERRED INFLOWS OF RESOURCES:

Deferred inflows related to leases 755,949 755,949 -
Deferred inflows related to other postemployment benefits 531,185 65,664 596,849 Deferred inflows related to pensions 652,335 97,475 749,810 Total deferred inflows of resources 1,939,469 163,139 2,102,608 NET POSITION:

Net investment in capital assets 10,586,698 60,430,440 71,017,138 Restricted for:

Street projects 1,715,261 1,715,261 -
Police projects 1,354,626 1,354,626 -
Debt service 431,801 - 431,801
Unrestricted 10,836,943 35,253,143 46,090,086
Total net position $ 24,493,528 $ 96,115,384 $ 120,608,912 -78-

TOWN OF HILLSBOROUGH

STATEMENT OF ACTIVITIES
FOR THE FISCAL YEAR ENDED JUNE 30, 2025
The notes to the financial statements are an integral part of this statement. 21 Operating Business
Charges for Grants and Governmental -Type
Functions/Programs Expenses Services Contributions Activities Activities Total Governmental activities:

General government $ 3,137,602 $ 540,587 $ (2,597,015) - $ $ (2,597,015) - $ Public safety 26,285,038 477,279 (25,613,096) 194,663 (25,613,096) - Community services 6,102,285 2,315,385 (3,786,900) - (3,786,900) - Streets 4,794,432 1,064,936 2,157,399 (1,572,097) (1,572,097) - Interest expense 24,854 - (24,854) - (24,854) -
Total governmental
activities 40,344,211 4,398,187 2,352,062 (33,593,962) (33,593,962) - Business-type activities:

Water 16,539,823 17,602,717 - 1,062,894 - 1,062,894
Sewer 13,793,450 16,443,440 - 2,649,990 - 2,649,990
Total business-type
activities 30,333,273 34,046,157 - 3,712,884 - 3,712,884 Total $ 70,677,484 $ 38,444,344 $ 2,352,062 (33,593,962) 3,712,884 (29,881,078) General Revenues:

Property tax 22,463,588 22,463,588 -
Public safety tax 2,247,480 2,247,480 -
Property transfer tax 469,243 469,243 -
Franchise tax 909,629 909,629 -
Sales tax 143,727 143,727 -
Motor vehicle license tax 1,556,159 1,556,159 -
Business license tax 792,609 792,609 -
ERAF refund 3,312,334 3,312,334 -
HOPTR 54,146 54,146 -
All others 579,677 579,677 -
Net investment income 2,450,233 1,476,573 3,926,806
Transfers (1,696,000) 1,696,000 -
Total general revenues and transfers 33,282,825 3,172,573 36,455,398 Change in net position (311,137) 6,885,457 6,574,320
Net position - beginning 25,616,880 89,441,307 115,058,187 (812,215) (211,380) (1,023,595)
Net position - beginning, as restated 24,804,665 89,229,927 114,034,592 Net position - ending $ 24,493,528 $ 96,115,384 $ 120,608,912 Net (Expense) Revenues and
Program Revenues Changes in Net Position
Restatement - Change in Accounting Principle
-79-

TOWN OF HILLSBOROUGH

BALANCE SHEET

GOVERNMENTAL FUNDS
JUNE 30, 2025
The notes to the financial statements are an integral part of this statement. 22 Police and Fire Capital Total Total
General Special Tax Projects Nonmajor Governmental
Fund Fund Fund Funds Funds
ASSETS:

Cash and investments $ 34,500,832 $ 5,409,956$ - $ 2,924,015 $ 42,834,803 Restricted cash and investments 5,698,575 - - 5,698,575 - Receivables 261,229 348 - 56,706 318,283
Interest receivable 675,429 - - 675,429 -
Taxes receivable 540,107 - - 89,166 629,273
Prepaid items 10,334 - - 10,334 -
Leases receivable 798,879 - - 798,879 -
Total assets $ 42,485,385 $ 5,410,304$ - $ 3,069,887 $ 50,965,576 LIABILITIES:

Accounts payable and other current liabilities 1,158,317 $ $ 822,261$ - $ 1,980,578 - $ Accrued payroll 564,733 - - 564,733 -
Deposits payable 6,318,213 - - 6,318,213 -
Total liabilities 8,041,263 822,261 - 8,863,524 -
DEFERRED INFLOWS OF RESOURCES:

Lease related 755,949 - - 755,949 -
FUND BALANCES:

Nonspendable 53,264 - - 53,264 -
Restricted:

Streets projects - - - 1,715,261 1,715,261
Police projects - - - 1,354,626 1,354,626
Retiree benefits 5,698,575 - - 5,698,575 -
Assigned 2,663,000 4,588,043 - 7,251,043 -
Unassigned 25,273,334 - - 25,273,334 -
Total fund balances 33,688,173 4,588,043 - 3,069,887 41,346,103 Total liabilities, deferred inflows of resources,
and fund balances $ 42,485,385 $ - $ 5,410,304 $ 3,069,887 $ 50,965,576 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:
$ 7,640,217
9,785,998
(23,609,080)
(6,816,500)
(325,000)
(2,992,024)
(536,186)
Net position of governmental activities $ 24,493,528
Subscription liabilities, and related accrued interest, 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 liability are not due and payable in the current period and therefore are not reported in the governmental funds.
-80-

TOWN OF HILLSBOROUGH

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES

IN FUND BALANCES

GOVERNMENTAL FUNDS
FOR THE FISCAL YEAR ENDED JUNE 30, 2025
The notes to the financial statements are an integral part of this statement. 23 Police and Fire Capital Total Total
General Special Tax Projects Nonmajor Governmental
Fund Fund Fund Funds Funds
REVENUES:

Property taxes $ 22,463,588 $ - $ - $ 22,463,588 - $
Public safety special taxes 2,247,480 - - 2,247,480 -
Franchise taxes 909,629 - - 909,629 -
Business license taxes 792,609 - - 792,609 -
All others taxes 4,101,727 - - 4,101,727 -
Permits 1,831,149 98,488 - 1,929,637 -
Intergovernmental 1,761,696 197,520 - 1,909,828 3,869,044 Service charges 1,243,442 - - 1,243,442 -
Other fees and charges - 846,192 - 846,192 -
Fines and forfeitures 48,330 - - 48,330 -
Investment earnings 1,739,890 207,697 - 99,684 2,047,271 Miscellaneous 721,634 4,467 - 726,101 -
Total revenues 35,613,694 2,247,480 1,354,364 2,009,512 41,225,050 EXPENDITURES:

Current:

General government 2,144,638 228,269 - 2,372,907 -
Public safety 24,725,074 9,331 - 24,734,405 -
Community services 5,169,333 329,457 - 31,448 5,530,238 Streets 3,015,192 1,324,624 - 4,339,816 -
Debt service
Principal 213,073 - - 213,073 -
Interest 15,889 - - 15,889 -
Capital outlay - 217,957 - 268,110 486,067
Total expenditures 35,283,199 9,331 2,100,307 299,558 37,692,395 Excess (deficiency) of
revenues over expenditures 330,495 2,238,149 (745,943) 1,709,954 3,532,655

OTHER FINANCING
SOURCES (USES):

Transfers in 2,534,537 726,338 - 3,260,875 -
Transfers out (2,096,000) (2,284,537) (576,338) - (4,956,875) Total Other Financing
Sources (Uses) 438,537 (2,284,537) 726,338 (576,338) (1,696,000) Net change in fund balances 769,032 (46,388) (19,605) 1,133,616 1,836,655 Fund balances - beginning 32,919,141 46,388 4,607,648 1,936,271 39,509,448 Fund balances - ending $ 33,688,173 $ 4,588,043 - $ $ 3,069,887 $ 41,346,103 -81-

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, 2025
The notes to the financial statements are an integral part of this statement. 24 Amounts reported for governmental activities in the statement of activities are different because:

Net change in fund balances - total governmental funds $ 1,836,655 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. (400,009)
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 (486,853)
Subscription liabilities 213,073
Accrual of interest related to subscription liabilities (8,965) Pension expense (2,315,527)
Other postemployment benefits expense 749,500
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. 100,989 Change in net position of governmental activities $ (311,137) -82-

TOWN OF HILLSBOROUGH

STATEMENT OF FUND NET POSITION

PROPRIETARY FUNDS
JUNE 30, 2025
The notes to the financial statements are an integral part of this statement. 25 Governmental
Activities
Water Sewer Total Internal Service
Fund Fund Enterprise Funds Fund
ASSETS:

Current assets:

Cash and investments $ 8,832,721 $ 26,768,432 $ 35,601,153 $ 9,207,539 Restricted cash and investments 394,361 371,046 765,407 - Receivables, net 3,802,686 12,470 3,815,156 -
Interest receivable 2,015 - 2,015 -
Supplies and other current assets 156,609 17,910 174,519 - Total current assets 13,188,392 27,169,858 40,358,250 9,207,539 Noncurrent assets:

Capital assets:

Assets under construction 1,549,362 46,659,638 48,209,000 - Machinery and equipment 703,481 227,984 931,465 8,139,628 Water and sewer lines 87,767,952 99,498,263 187,266,215 - Less accumulated depreciation (51,143,069) (58,669,242) (109,812,311) (4,692,033) Total noncurrent assets 38,877,726 87,716,643 126,594,369 3,447,595 Total assets 52,066,118 114,886,501 166,952,619 12,655,134 DEFERRED OUTFLOWS OF RESOURCES:

Refunding charges 417,750 510,583 928,333 -
Deferred outflows related to other
postemployment benefits 154,208 131,893 286,101 -
Deferred outflows related to pension 834,624 715,393 1,550,017 - Total deferred outflows of resources 1,406,582 1,357,869 2,764,451 - LIABILITIES:

Current liabilities:

Accounts payable 542,016 1,676,374 2,218,390 322,171
Accrued payroll liabilities 43,143 38,075 81,218 -
Deposits 1,048,606 1,048,606 - -
Claims liability 12,450 14,700 27,150 -
Accrued interest payable 29,154 136,409 165,563 -
Loans Payable 64,505 1,473,209 1,537,714 -
Refunding bonds 944,969 1,154,962 2,099,931 -
Compensated absences 82,264 69,682 151,946 -
Total current liabilities 2,767,107 4,563,411 7,330,518 322,171 Noncurrent liabilities:

Compensated absences 98,101 83,097 181,198 -
Loans Payable 65,246 47,352,338 47,417,584 -
Refunding bonds 6,755,415 8,256,618 15,012,033 -
Net other postemployment liability 561,579 502,264 1,063,843 - Net pension liability 2,681,719 2,298,617 4,980,336 -
Total noncurrent liabilities 10,162,060 58,492,934 68,654,994 - Total liabilities 12,929,167 63,056,345 75,985,512 322,171 Business-Type Activities
-83-

TOWN OF HILLSBOROUGH

STATEMENT OF FUND NET POSITION
PROPRIETARY FUNDS (Continued)
JUNE 30, 2025
The notes to the financial statements are an integral part of this statement. 26 Governmental
Activities
Water Sewer Total Internal Service
Fund Fund Enterprise Funds Fund
DEFERRED INFLOWS OF RESOURCES:

Deferred inflows related to other
postemployment benefits 35,602 30,062 65,664 -
Deferred inflows related to pensions 52,486 44,989 97,475 - Total deferred outflows of resources 88,088 75,051 163,139 - NET POSITION:

Net investment in capital assets 31,373,341 29,057,099 60,430,440 3,447,595 Restricted for debt service - 431,801 431,801 -
Unrestricted 9,082,104 23,624,074 32,706,178 8,885,368
Total net position $ 40,455,445 $ 53,112,974 $ 93,568,419 $ 12,332,963 2,546,965
Net position of business-type activities $ 96,115,384
Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds
Business-Type Activities
-84-

TOWN OF HILLSBOROUGH

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

PROPRIETARY FUNDS
FOR THE FISCAL YEAR ENDED JUNE 30, 2025
The notes to the financial statements are an integral part of this statement. 27 Governmental
Activities
Water Sewer Total Internal Service
Fund Fund Enterprise Funds Fund
OPERATING REVENUES:

Sale of water $ 12,341,222 $ 12,341,222 - $ $ -
Water meter charges 5,241,853 5,241,853 - -
Sewer service charges 16,413,985 - 16,413,985 -
Other services - - - 915,532
Miscellaneous revenue 19,642 29,455 49,097 58,031
Total operating revenues 17,602,717 16,443,440 34,046,157 973,563 OPERATING EXPENSES:

Water purchases, utilities and pumping 7,842,933 7,842,933 - - Sewage treatment services and utilities 3,334,623 - 3,334,623 - Personnel, overhead and facilities 4,581,513 4,017,074 8,598,587 - Materials, supplies and other 2,232,001 1,229,292 3,461,293 211,318 Depreciation and amortization 1,485,035 4,262,287 5,747,322 867,574 Total operating expenses 16,141,482 12,843,276 28,984,758 1,078,892 Operating income (loss) 1,461,235 3,600,164 5,061,399 (105,329)

NONOPERATING
REVENUES (EXPENSES):

Investment earnings 420,013 1,056,560 1,476,573 402,961 Interest expense (281,524) (1,263,634) (1,545,158) -
Total nonoperating revenue (expenses) 138,489 (207,074) (68,585) 402,961 Income before transfers 1,599,724 3,393,090 4,992,814 297,632 Transfers in 1,696,000 1,696,000 - -
Change in net position 3,295,724 3,393,090 6,688,814 297,632 Net position - beginning 37,267,035 49,823,950 87,090,985 12,035,331 Restatement (107,314) (104,066) (211,380) -
Net position - beginning, as restated 37,159,721 49,719,884 86,879,605 12,035,331 Net position - ending $ 40,455,445 $ 53,112,974 $ 93,568,419 $ 12,332,963 196,643
Change in net position of business-type activities $ 6,885,457 Business-Type Activities
Adjustment to reflect the consolidation of internal service fund activities related to enterprise funds
-85-

TOWN OF HILLSBOROUGH

STATEMENT OF CASH FLOWS

PROPRIETARY FUNDS
FOR THE FISCAL YEAR ENDED JUNE 30, 2025
The notes to the financial statements are an integral part of this statement. 28 Governmental
Activities
Water Sewer Total Internal Service
Fund Fund Enterprise Funds Fund

CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers and users $ 17,092,844 $ 16,769,245 $ 33,862,089 $ - Receipts from interfund services provided - - - 975,740 Payment to suppliers (10,424,718) (4,445,319) (14,870,037) - Payment to employees (4,422,753) (3,929,419) (8,352,172) - Net cash provided (used) by operating activities 2,245,373 8,394,507 10,639,880 975,740

CASH FLOWS FROM NONCAPITAL

FINANCING ACTIVITIES
Transfers from other funds 1,696,000 - 1,696,000 -
Net cash provided (used) by
noncapital financing activities 1,696,000 - 1,696,000 -

CASH FLOWS FROM CAPITAL AND RELATED

FINANCING ACTIVITIES
Acquisition and construction of capital assets (1,203,735) (3,011,487) (4,215,222) (1,293,482) Loan principal paid (63,864) (1,727,987) (1,791,851) -
Principal paid on debt (785,250) (959,750) (1,745,000) - Interest paid on debt (395,754) (1,608,798) (2,004,552) - Net cash provided (used) by capital and related
financing activities (2,448,603) (7,308,022) (9,756,625) (1,293,482)

CASH FLOWS FROM INVESTING ACTIVITIES
Investment income 420,013 1,056,560 1,476,573 402,961
Net increase (decrease) in cash and cash equivalents 1,912,783 2,143,045 4,055,828 85,219 Cash and cash equivalents - beginning 7,314,299 24,996,433 32,310,732 9,122,320 Cash and cash equivalents - ending $ 9,227,082 $ 27,139,478 $ 36,366,560 $ 9,207,539 Reconciliation of operating income to net cash
provided by operating activities:

Operating income (loss) $ 1,461,235 $ 3,600,164 $ 5,061,399 $ (105,329) Adjustments to reconcile operating income to net
cash provided (used) by operating activities:

Depreciation and amortization expense 1,485,035 4,262,287 5,747,322 867,574 Increase (decrease) in pension
and OPEB related amounts 135,779 117,585 253,364 -
Effect of Changes in:
(Increase) decrease in accounts receivable (521,472) 325,805 (195,667) - (Increase) decrease in inventories and prepaids (43,062) (3,655) (46,717) - Increase (decrease) in deposits 11,599 - 11,599 -
Increase (decrease) in accounts payable (306,722) 122,251 (184,471) 213,495 Increase (decrease) in accrued payroll 1,456 (23,022) (21,566) - Increase (decrease) in compensated absences 21,525 (6,908) 14,617 - Total adjustments 784,138 4,794,343 5,578,481 1,081,069 Net cash provided (used) by operating activities $ 2,245,373 $ 8,394,507 $ 10,639,880 $ 975,740

NONCASH CAPITAL, INVESTING, AND FINANCIAL ACTIVITIES
Schedule of non-cash capital and related financing activities: Wastewater treatment funding agreement, $3,501,802.

Business-Type Activities
-86-

NOTES TO THE FINANCIAL STATEMENTS
-87-
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-88-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
29 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 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. -89-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
30 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.
-90-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
31 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 of capital assets. All revenues and expenses not meeting this definition are reported as non-operating 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.
-91-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
32 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. -92-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
33 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. -93-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
34 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. In accordance with GASB Statement No. 101, Compensated Absences, the Town recognizes a liability for:

1. Leave that has not been used when that leave:
(a) is attributable to services already rendered,
(b) accumulates for use or payment in a future period, and (c) is more-likely-than-not to be used for time off or otherwise paid or settled; and

2. Leave that has been used but not yet paid or settled as of the financial statement date.

The Town applies the First-In-First-Out (FIFO) flow assumption in calculating compensated absences liabilities.

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 pensions, other postemployment benefits, and refunding charges. -94-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
35 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 apply 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 leases, 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 they are 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, 2024, the Town implemented the following GASB Statement:

GASB Statement No. 101 – Effective July 1, 2024, the Town adopted Governmental Accounting Standards Board (GASB) Statement No. 101, Compensated Absences. GASB 101 establishes a unified recognition and measurement model for compensated absences, including vacation, sick leave, and other paid time off, and supersedes the previous guidance under GASB Statement No. 16. Under GASB 101, a liability for compensated absences is recognized for leave that is attributable to services already rendered, accumulates for use or payment in a future period, and is more-likely-than-not to be used for time off or otherwise paid or settled. The liability is measured at employees’ pay rates in effect at the financial statement date and includes salary-related payments that are direct and incremental to payments for leave. Amounts of leave that are more-likely-than-not to be converted to defined benefit pension or OPEB service credit are excluded from the compensated absences liability.

The Town applied GASB 101 retroactively by restating beginning net position. The effect of the implementation of GASB 101 on beginning net position for governmental activities and business-type activities is disclosed in Note

15. -95-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
36 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 $7,640,217 relates to capital asset, ($2,992,024) relates to compensated absences, ($23,609,080) relates to pension liabilities and related deferrals, ($6,816,500) relates to OPEB liabilities and related deferrals, ($536,186) relates to subscription liabilities, $9,785,998 relates to the incorporation of the internal service fund into the governmental activities and ($325,000) 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 ($400,009) difference are as follows:

Capital outlay $ 486,067
Depreciation and amortization (886,076)
Net adjustment to decrease net changes in fund balances - total governmental funds to arrive at changes in net position of governmental activities $ (400,009) 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.” ($486,853) relates to increases in compensated absences from sick leave and vacation vesting on certain employees, $213,073 relates to subscription liability change, accrued interest on subscriptions liability ($8,965), and ($2,315,527) relates to pension and $749,500 relates to OPEB credit. Another element of the reconciliation includes the incorporation of the net revenue of the internal service fund for $100,989. -96-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
37 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, 2025, are as follows:

Cash and investments, including restricted cash, as of June 30, 2025, consist of the following. Restricted cash of $6,463,982 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 20,897,732
Total cash and bank deposits 20,906,032
Investments 11,638,880
Participation in LAIF pool 61,562,565
Total investments 73,201,445
Total cash and investments $ 94,107,477
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 2024-25, the mutual fund investment type is held in the Section 115 pension trust.
-97-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
38 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
-98-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
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 $ 61,562,565 $ 61,562,565 $ - $ - $ 61,562,565
Mutual Funds 6,454,937 6,454,937 - - 6,454,937
U.S. Treasury Notes 5,183,943 1,392,520 775,938 3,015,485 5,183,943 Totals $ 73,201,445 $ 69,410,022 $ 775,938 $ 3,015,485 $ 73,201,445 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 $ 61,562,565 $ 61,562,565 - $
Mutual Funds 6,454,937 6,454,937 -
U.S. Treasury Notes 5,183,943 5,183,943 -
Totals $ 73,201,445 $ 5,183,943 $ 68,017,502
-99-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
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 except for 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 had $61,562,565 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, 2025:

Interest earned $ 3,784,049
Change in fair value 142,757
Net investment income $ 3,926,806
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. -100-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
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, 2025 were generally comprised of U.S. Treasury bills and notes, Federal agencies, 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, 2025 by multiplying its account balance with LAIF of $61,488,882 times a fair value factor of 1.001198310 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, 2025, the Town’s investment in LAIF stated at fair value equaled $61,562,565.

Level 1 Level 2 Level 3
Investment Type Inputs Inputs Inputs Uncategorized
LAIF $ - $ - $ - $ 61,562,565
Mutual Funds - - - 6,454,937
U.S. Treasury Notes 5,183,943 - - -
Total Investment Portfolio $ 5,183,943 $ - $ 68,017,502 - $ Fair Value Measurement Using
-101-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
NOTE 4 – CAPITAL ASSETS
Capital asset activity for the year ended June 30, 2025 was as follows. The increase in fiscal year 2024-25 of $3.5 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 Right-to-use subscription (intangible) asset reflects the discounted cash flow of future payments on the information technology agreements and is amortized over each agreement period.

Beginning Ending
Balance Increases Decreases Balance
Governmental Activities:

Land - not being depreciated $ 1,456,560 $ - -$ 1,456,560 $ Capital assets, being depreciated
Land improvements 3,579,317 - - 3,579,317
Buildings 5,875,919 486,067 (456,920) 5,905,066
Machinery and equipment 7,844,919 1,293,481 (551,176) 8,587,224 Infrastructure 15,247,443 - - 15,247,443
Total capital assets being depreciated 32,547,598 1,779,548 (1,008,096) 33,319,050 Less accumulated depreciation for:

Land improvements (3,097,138) (136,285) - (3,233,423)
Buildings (3,515,360) (266,275) 456,920 (3,324,715)
Machinery and equipment (4,780,786) (889,106) 551,176 (5,118,716) Infrastructure (12,304,705) (258,575) - (12,563,280)
Total accumulated depreciation (23,697,989) (1,550,241) 1,008,096 (24,240,134) Total capital assets, being depreciated, net 8,849,609 229,307 - 9,078,916 Intangible assets, being amortized:

Right-to-use subscription assets 1,064,419 75,038 - 1,139,457 Total intangible assets being amortized 1,064,419 75,038 - 1,139,457 Accumulated amortization:

Right-to-use subscription assets (383,712) (203,409) - (587,121) Total intangible assets, being amortized, net 680,707 (128,371) - 552,336 Governmental activities capital assets, net $ 10,986,876 $ 100,936 -$ 11,087,812 $ -102-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
43 NOTE 4 – CAPITAL ASSETS (Continued)
Beginning Ending
Balance Increases Decreases Balance
Business-type Activities:

Capital assets, not being depreciated
Treatment plant capacity rights $ 43,157,836 $ 3,501,802 -$ 46,659,638 $ Construction in progress 820,965 728,397 - 1,549,362
Total capital assets, not being depreciated 43,978,801 4,230,199 - 48,209,000 Capital assets, being depreciated
Machinery and equipment 931,465 - - 931,465
Systems and transmissions 185,281,146 3,486,825 (1,501,756) 187,266,215 Total capital assets being depreciated 186,212,611 3,486,825 (1,501,756) 188,197,680 Less accumulated depreciation for:

Machinery and equipment (863,109) (4,369) - ( 867,478)
Systems and transmissions (104,703,636) (5,742,953) 1,501,756 (108,944,833) Total accumulated depreciation (105,566,745) (5,747,322) 1,501,756 (109,812,311) Total capital assets, being depreciated, net 80,645,866 (2,260,497) - 78,385,369 Business-type activities capital assets, net $ 124,624,667 $ 1,969,702 -$ 126,594,369 $ Depreciation and amortization expense by functions/program is as follows:

Governmental Activities:

General government $ 205,326
Public safety 137,687
Public works 339,655
Subtotal 682,668
Capital assets held by the Town's internal service funds are charged to the various functions based on their usage of the assets. 867,574 Total depreciation expense - governmental activities $ 1,550,242 Business-type Activities:

Water $ 1,485,035
Sewer 4,262,287
Total depreciation expense - business-type activities $ 5,747,322 NOTE 5 – LEASES
Leases receivable – The Town has six wireless communications facilities contracts. The leases expire through fiscal year 2036. The discount rates range from 1.69% to 3.25%. As of June 30, 2025 Town’s receivable for lease payments was $798,879 and the related deferred inflow of resources which will be recognized as lease revenue over the lease term was $755,949.
-103-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
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 six multi-year software licensing agreements through fiscal year 2029. In Fiscal Year 2025, the Town paid $228.962 in interest and principal. 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
2026 $ 133,099 $ 12,746 $ 145,845
2027 136,521 9,324 145,845
2028 114,311 5,814 120,125
2029 117,183 2,942 120,125
Total $ 501,114 $ 30,826 $ 531,940
Governmental Activities
NOTE 7 – INTERFUND TRANSACTIONS
The following is a summary of the interfund transactions for the year ended June 30, 2025:

General Capital Projects Water
Transfer Out Fund Fund Fund Total
General Fund $ 400,000 - $ $ 1,696,000 2,096,000$
Police and Fire Special Tax Fund 2,284,537 - 2,284,537 - Nonmajor Governmental Funds 250,000 326,338 576,338 -
Total $ 2,534,537 $ 726,338 $ 1,696,000 4,956,875$
Transfer In
Governmental Activities
Activities Business-Type
The transfers into the General Fund included a $2,284,537 transfer from the Police and Fire Special Tax Fund to help cover costs of police and fire service. A transfer of $250,000 and $326,338 from the Measure A Fund to the General Fund and the Capital Projects Fund, respectively, was to cover street-related costs incurred in the General Fund. The transfers into the Water Fund were for the Town share of the Highline CIP Project. The transfers into the Capital Projects Fund from the General Fund were primarily for miscellaneous capital projects. -104-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
45 NOTE 8 – LONG-TERM LIABILITIES
Long-term liability activity, excluding pension and other post-employment benefits (OPEB) liabilities, for the year ended June 30, 2025, were as follows:

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

Compensated absences* $ 2,505,171 $ 486,853 $ 2,992,024 - $ 1,364,659$ Subscriptions payable 639,149 75,038 213,073 501,114 133,099 Total governmental activity longterm liabilities $ 2,067,988 $ 561,891 $ 213,073 $ 3,493,138 1,497,758$ Business-type activities:

Compensated absences* $ 318,527 $ 103,790 $ 89,173 $ 333,144 151,946$ Funding Agreement - wastewater treatment 38,797,301 3,501,802 1,428,257 40,870,846 1,168,714 State Clean Water loan - Direct Borrowing 8,254,526 299,729 - 7,954,797 304,525 ECE-ARRA loan - Direct Borrowing 193,520 63,865 - 129,655 64,505 Refunding bonds 17,510,000 1,745,000 - 15,765,000 1,785,000 Premiums 1,686,468 339,504 - 1,346,964 314,930
Total business-type activity longterm liabilities $ 66,548,962 $ 3,605,592 $ 3,965,528 $ 66,400,406 3,789,620$ *Restated in accordance with GASB Statement No. 101, Compensated Absences 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 paid 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, 2025 are summarized in the following table:

Year Ending
June 30 Principal Interest Total
2026 $ 64,505 $ 1,136 $ 65,641
2027 65,150 489 65,639
Total $ 129,655 $ 1,625 $ 131,280
Business-Type Activities
-105-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
46 NOTE 8 – LONG-TERM DEBT (Continued)
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 all future debt service payments on the refunded certificates of participation. On June 30, 2025, $0 of defeased bonds remain outstanding.

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

As of June 30, 2025, the debt service requirements of the refunding bonds are summarized in the following table.

Year Ending
June 30 Principal Interest Total
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 2,095,000 500,500 2,595,500
2030 2,240,000 395,750 2,635,750
2031-2035 5,675,000 747,790 6,422,790
Total $ 15,765,000 $ 3,734,540 $ 19,499,540
Business-Type Activities
-106-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
47 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 from the Sewer Fund. There are limitations and covenants contained in the agreement. The Town complies with all restrictive limitations and covenants on June 30, 2025. The debt service requirements for the loan on June 30, 2025 are summarized in the following table:

Year Ending
June 30 Principal Interest Total
2026 $ 304,525 $ 127,277 $ 431,802
2027 309,397 122,404 431,801
2028 314,347 117,454 431,801
2029 319,377 112,424 431,801
2030 324,487 107,314 431,801
2031-2035 1,701,994 457,014 2,159,008
2036-2040 1,842,580 316,427 2,159,007
2041-2045 1,994,780 164,227 2,159,007
2046-2047 843,310 20,293 863,603
Total $ 7,954,797 $ 1,544,834 $ 9,499,631
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, 2025, 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 $ 4,122,716 $ 1,175,997 351%
Sewer revenue 10,417,537 1,865,336 558%
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. -107-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
48 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 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.

As of June 30, 2025, the Town’s share was $52,779,436 including principal payments of $5,305,511 since fiscal year 2021-22. In fiscal year 2024-25, principal paid was $1,428,257.

As of June 30, 2025, the City of San Mateo completed 90% of the construction and therefore, the Town’s share of the liability was $40,870,846. The future payments on this obligation to date are as follows:

Year Ending
June 30 Principal Interest Total
2026 $ 1,168,714 $ 772,313 $ 1,941,027
2027 1,191,197 749,830 1,941,027
2028 1,214,112 726,914 1,941,026
2029 1,237,468 703,558 1,941,026
2030 1,261,273 679,753 1,941,026
2031-2035 6,679,791 3,025,342 9,705,133
2036-2040 7,347,495 2,357,638 9,705,133
2041-2045 8,081,942 1,623,191 9,705,133
2046-2050 8,889,803 815,330 9,705,133
2051-2052 3,799,051 82,105 3,881,156
Total $ 40,870,846 $ 11,535,974 $ 52,406,820
Business-type Activities
-108-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
49 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 Cities Group JPA is dissolving on December 31, 2025, and the Town is in the process of evaluating a JPA to join for workers compensation coverage and claims handling starting January 1, 2026.

The Town participates in the Pooled Liability Assurance Network (PLAN) Joint Powers Authority. The PLAN provides $35,000,000 coverage for general and automobile liability in excess of the Town’s $50,000 deductible.

The Town also participates in PLAN pool for 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 of $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. The Town’s remaining exposure for claims filed under this program is minimal.

The Town is self-insured for all other insurable risks, except for excess insurance coverage provided by commercial insurance companies that are limited to the following: Employment Practices Liability in excess of $200,000 each claim but limited to a maximum of $3,000,000. In April 2025, the city council adopted a resolution to join Employment Risk Management Authority (ERMA), a self-insured joint powers authority created solely for employment practices liability coverage. The coverage will commence July 1, 2025. 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, 2025 and 2024.
2025 2024
Beginning balance $ 352,150 $ 127,150
Claims incurred and changes in estimates for prior year claims 217,017 471,111 Claims paid (217,017) (246,111)
Ending balance $ 352,150 $ 352,150
-109-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
50 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 many 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 $36,011. 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 ReThink Waste, also known as South Bayside Waste Management Authority, 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 ReThink Waste, 1245 San Carlos Avenue, Suite E, 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. In 2024, the CCFD Board entered into a Federal SAFER grant agreement to hire twelve firefighters for the re-opening of Station 36. The SAFER grant is a three-year term and $8.1 million award, and the cities of Burlingame, Hillsborough and Millbrae will be required to pay for the ongoing cost in their annual contributions after the grant period ends. CCFD is a stand-alone employer recognized by the California Public Employees’ Retirement System (CalPERS). The Town paid $9.6 million for fire services for the year ended June 30, 2025 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, 2025, 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 leases receivable. -110-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
51 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, additional action does not normally have to be taken for the removal of an assignment. Conversely, as discussed above, 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.

Fund balances for all the major and nonmajor governmental funds as of June 30, 2025, are as follows:

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

Prepaid items $ 10,334 $ - $ - $ 10,334 - $
Related to leases 42,930 - - 42,930 -
Sub-total: 53,264 - - 53,264 -
Restricted:

Retiree benefits 5,698,575 - - 5,698,575 -
Streets - - 1,715,261 - 1,715,261
Public Safety - Police - - 1,354,626 - 1,354,626
Sub-total: 5,698,575 - 3,069,887 - 8,768,462
Assigned
Capital projects - 4,588,043 - 4,588,043 -
Tree replacement 263,000 - - 263,000 -
Storm drain capital 2,400,000 - - 2,400,000 -
Sub-total: 2,663,000 4,588,043 - 7,251,043 -
Unassigned 25,273,334 - - 25,273,334 -
Total $ 33,688,173 $ 4,588,043 - $ $ 3,069,887 $ 41,346,103 NOTE 11 – FUND BALANCES (Continued)
-111-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
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 $2,650,745 and $1,934,430 as of June 30, 2025 and 2024 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.

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 $1,103,701 and $1,027,634 for years ended June 30, 2025 and 2024 respectively.

At June 30, 2025, the Town has outstanding construction contracts and commitments for capital projects of $6,767,644 primarily for capital improvements for street resurfacing, water tank, sewer basin, lift stations, and Highline water project.

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 57. On page 61, 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. -112-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
53 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 post-retirement 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 employees 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 June 30, 2024 measurement date, the following current and former employees were covered by the benefit terms under the healthcare plan:

Active plan members 91
Inactive employees or beneficiaries currently receiving benefit payments 96 Inactive employees entitled to but not yet receiving benefit payments 3 Total 190
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 Statement No. 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.
-113-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
NOTE 13 – POSTEMPLOYMENT HEALTHCARE PLAN (Continued)
Significant Assumptions – The Town’s net OPEB liability was measured as of June 30, 2024 and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation dated June 30, 2023, based on the following actuarial methods and assumptions:

Actuarial Assumption June 30, 2024 Measurement Date
Actuarial Valuation Date June 30, 2023
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 2000-2019 experience study.

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

Medical Trend Non-Medicare - 8.50% for 2025, decreasing to an ultimate rate of

3.45% in 2076 and later years.

Medicare (Non-Kaiser) - 7.50% for 2025, decreasing to an ultimate rate of 3.45% in 2076 and later years.

Medicare (Kaiser) - 6.25% for 2025, decreasing to an ultimate rate of

3.45% 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
Global Equity 49.00% 4.56%
Fixed Income 23.00% 1.56%
Treasury Inflation Protection Securities 5.00% -0.08%
Real Estate Investment Trusts 20.00% 4.06%
Commodities 3.00% 1.22%
Total 100.00%
1 An expected net rate of return of 6.25%
2 An expected inflation of 2.50%
-114-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
55 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, 2024 $ 20,511,553 $ 9,823,826 $ 10,687,727 Changes recognized for year:

Service cost 188,633 188,633 -
Interest 1,250,377 1,250,377 -
Employer Contributions 1 1,392,471 - (1,392,471)
Net investment income 1,078,436 - (1,078,436)
Benefit payments (1,388,330) (1,388,330) -
Administrative expenses (7,343) - 7,343
Net changes 50,680 1,075,234 (1,024,554)
Balance at June 30, 2025 $ 20,562,233 $ 10,899,060 $ 9,663,173 1 Includes $4,141 of administrative expenses paid outside of trust.

Increase (Decrease)
Sensitivity of the Net OPEB Liability to Changes in the Discount Rate and to Changes in the Health Care Cost Trend Rates – The following presents the net OPEB liability 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, 2025:

Discount Rate - 1%
(5.25%)
Current Discount
Rate (6.25%)
Discount Rate + 1%
(7.25%)
$ 11,927,548 $ 9,663,173 $ 7,768,554
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, 2025:

Trend Rate - 1%
Healthcare Cost
Trend Rates Trend Rate + 1%
$ 7,558,834 $ 9,663,173 $ 12,170,068
Plan's Net OPEB Liability
-115-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
56 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) (5.6 Years at June 30, 2023)
5 years
OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB – For the fiscal year ended June 30, 2025, the Town recognized OPEB expense of $627,737. As of fiscal year ended June 30, 2025, 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 $ 1,469,872 $ - Changes in assumptions 1,021,027 -
Net difference between projected and actual earnings 109,217 - Difference between expected and actual experience - (596,849) $ 2,600,116 $ (596,849)
The amount of $1,469,872 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 next fiscal year. 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
2026 $ (160,402)
2027 566,191
2028 147,457
2029 (19,849)
$ 533,397
-116-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
57 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 employers 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 addition to creating new retirement formulas for newly hired members, PEPRA also effectively closed all existing active risk pools to new employees.

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 7.00% / 8.00% 8.25% Required employer contribution rates 18.32% / 10.93% 8.18% Required employer dollar UAL payment (annual) $1,378,078/ $9,854 $8,545 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 9.00% 14.50%
Required employer contribution rates 29.30% 14.72%
Required employer dollar UAL payment (annual) $1,589,977 $5,822 Miscellaneous
Safety - Police
-117-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
58 NOTE 14 – EMPLOYEE RETIREMENT SYSTEMS (Continued)
The Plans’ provisions and benefits in effect on June 30, 2025, are as follows:

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.

For the year ended June 30, 2025, the contributions to the Plan were as follows:

Miscellaneous Safety Total
Contributions - employer $ 2,349,386 $ 2,580,792 $ 4,930,178 Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions As of June 30, 2025, 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 $ 17,884,360 $ 20,425,915 $ 38,310,275 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, 2025 the Town’s Section 115 trust is reflected in the restricted cash balance of $6,463,982. 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, 2024 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, 2023 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, 2025 is as follows:

Miscellaneous Safety
Proportion - June 30, 2024 0.35992% 0.27696%
Proportion - June 30, 2025 0.36977% 0.28016%
Change - Increase (decrease) 0.00985% 0.00320%
-118-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
59 NOTE 14 – EMPLOYEE RETIREMENT SYSTEMS (Continued)
At the year ended June 30, 2025, the Town recognized pension expense of $7,591,704. On June 30, 2025, 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 $ 2,349,386 $ - 2,580,792 $ $ - Changes in assumptions - 459,665 - 503,253
Net difference between projected and actual earnings 1,029,581 - - 987,296 Change in proportion 14,628 (188,380) 219,664 (136,014) Difference between expected and actual experiences 1,546,267 (60,334) 1,666,936 (54,199) Difference between actual and projected contribution 175,172 (100,917) 390,571 (209,966) $ 5,574,699 $ (349,631) $ 6,348,512 $ (400,179)
Miscellaneous Safety - Police
The amount of $4,930,178 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the next fiscal year.

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

Year Ended June 30, Year Ended June 30,
2026 $ 886,754 2026 $ 1,317,775
2027 2,302,738 2027 2,364,968
2028 39,014 2028 22,605
2029 (352,825) 2029 (337,808)
$ 2,875,681 $ 3,367,540
Miscellaneous Safety - Police
Actuarial Assumptions – The total pension liabilities in the June 30, 2023 actuarial valuations were determined using the following actuarial assumptions.

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

Discount Rate 6.90%
Inflation 2.30%
Payroll Growth 2.80%
Projected Salary Increase Varies by Entry Age and Service Investment Rate of Return 6.90% 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
2 Purchasing Power Protection Allowance (PPPA) is a benefit designed to restore the original purchasing power of CalPERS retirees to a predetermined limit.
1 The 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.
-119-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
60 NOTE 14 – EMPLOYEE RETIREMENT SYSTEMS (Continued)
The underlying mortality assumptions and all other actuarial assumptions used in the June 30, 2023 valuation was based on the results of a 2021 actuarial experience study. 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 6.90 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 6.90 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.

In determining the long-term expected rate of return, CalPERS considered both short-term and long-term market return expectations as well as the expected pension fund cash flows. 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
Strategic
Allocation
Real Return
Years [1] [2]
Global Equity - Cap-weighted 30.0% 4.54%
Global Equity - Non-Cap-weighted 12.0% 3.84%
Private Equity 13.0% 7.28%
Treasury 5.0% 0.27%
Mortgage-backed Securities 5.0% 0.50%
Investment Grade Corporates 10.0% 1.56%
High Yield 5.0% 2.27%
Emerging Market Debt 5.0% 2.48%
Private Debt 5.0% 3.57%
Real Assets 15.0% 3.21%
Leverage -5.0% -0.59%
Total 100.0%
[1] An expected inflation of 2.30% used for this period. [2] Figures are based on the 2021-2022 Asset Liability Management study. -120-

TOWN OF HILLSBOROUGH

NOTES TO THE FINANCIAL STATEMENTS
JUNE 30, 2025
61 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 5.90% 5.90%
Net Pension Liability $ 26,930,771 $ 30,279,350
Current Discount Rate 6.90% 6.90%
Net Pension Liability $ 17,884,360 $ 20,425,915
1% Increase 7.90% 7.90%
Net Pension Liability $ 10,437,833 $ 12,367,188
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 Net Position due to Change in Accounting Principle Effective July 1, 2024, the Town adopted GASB Statement No. 101, Compensated Absences. This Statement replaces GASB Statement No. 16 and establishes a unified recognition and measurement model for compensated absences, including recognition based on a more-likely-than-not assessment and inclusion of certain salary-related amounts in the measurement. The Town applied the standard by restating beginning net position. As a result, the opening government-wide net position as of July 1, 2024 was decreased by $812,215 and business-type net position as of July 1, 2024 was decreased by $211,380.

The effect of this change in accounting principle is described in the table below:

Governmental
Activities
Business-Type
Activities Water Fund Sewer Fund
Net Position, previously reported as of July 1, 2024 25,616,880 $ $ 89,441,307 $ 37,267,035 $ 49,823,950 Change in accounting principle (812,215) (211,380) (107,314) (104,066) Net Position, restated as of July 1, 2024 $ 24,804,665 $ 89,229,927 $ 37,159,721 $ 49,719,884 -121-

REQUIRED SUPPLEMENTARY INFORMATION
-122-

TOWN OF HILLSBOROUGH

GENERAL FUND

SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN

FUND BALANCES - BUDGET AND ACTUAL
FOR THE FISCAL YEAR ENDED JUNE 30, 2025
62 Variance with
Final Budget -
Original Final Positive
Budget Budget Actual (Negative)
REVENUES:

Property taxes $ 22,708,200 $ 22,708,200 $ 22,463,588 $ (244,612) Franchise taxes 915,476 915,476 909,629 (5,847)
Business license taxes 700,000 700,000 792,609 92,609
All others taxes 738,915 738,915 789,393 50,478
Permits 1,665,900 1,665,900 1,831,149 165,249
Intergovernmental 1,062,221 1,062,221 1,761,696 699,475 Service charges 1,288,870 1,288,870 1,243,442 (45,428)
Fines and forfeitures 4,000 4,000 48,330 44,330
Investment earnings 696,000 696,000 1,739,890 1,043,890 Excess ERAF 3,215,224 3,215,224 3,312,334 97,110
Miscellaneous 475,020 475,020 721,634 246,614
Total Revenues 33,469,826 33,469,826 35,613,694 2,143,868 EXPENDITURES:

Current:

General government 1,973,702 2,071,702 2,144,638 (72,936) Public safety 24,436,252 24,673,060 24,725,074 (52,014) Community services 5,735,907 5,862,707 5,169,333 693,374 Streets 3,498,594 3,498,594 3,015,192 483,402
Debt Service:

Principal - 213,073 - (213,073)
Interest - 15,889 - (15,889)
Total Expenditures 35,644,455 36,106,063 35,283,199 822,864 Excess (deficiency of revenues
over (under) expenditures) (2,174,629) (2,636,237) 330,495 2,966,732 OTHER FINANCING SOURCES (USES):

Transfers in 2,488,835 2,488,835 2,534,537 45,702
Transfers out (400,000) (2,100,000) (2,096,000) 4,000
Total Other Financing Sources (Uses) 2,088,835 388,835 438,537 49,702 Net change in fund balances (85,794) (2,247,402) 769,032 3,016,434 Fund balances - beginning 32,919,141 32,919,141 32,919,141 - Fund balances - ending $ 32,833,347 $ 30,671,739 $ 33,688,173 $ 3,016,434 -123-

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, 2025
63 Variance with
Final Budget -
Original Final Positive
Budget Budget Actual (Negative)
REVENUES:

Police and Fire Special Tax $ 2,246,910 $ 2,246,910 $ 2,247,480 $ 570 Total Revenues 2,246,910 2,246,910 2,247,480 570
EXPENDITURES:

Current:

Public Safety 8,075 8,075 9,331 (1,256)
Total Expenditures 8,075 8,075 9,331 (1,256)
Excess of Revenues Over Expenditures 2,238,835 2,238,835 2,238,149 (686) OTHER FINANCING USES:

Transfers Out (2,238,835) (2,238,835) (2,284,537) (45,702) Net change in fund balances - (46,388) - (46,388)
Fund balances - beginning - - 46,388 -
Fund balances - ending $ - $ - $ (46,388) - $
-124-

TOWN OF HILLSBOROUGH

SCHEDULE OF PROPORTIONATE SHARE OF THE NET

PENSION LIABILITY
FOR THE FISCAL YEAR ENDED JUNE 30, 2025
64 2025 2024 2023 2022 2021 2020 2019 2018 2017 2016
Plan's proportion of the net pension liability 0.36977% 0.35992% 0.36036% 0.43967% 0.33844% 0.32820% 0.31889% 0.31113% 0.30336% 0.29385% $ 17,884,360 $ 17,997,467 $ 16,862,194 $ 8,348,406 $ 14,275,476 $ 13,142,862 $ 12,017,999 $ 12,264,964 $ 10,538,348 $ 8,061,622 Plan's covered payroll $ 8,374,888 $ 7,830,416 $ 6,943,540 $ 6,308,969 $ 5,976,685 $ 5,827,215 $ 5,757,169 $ 5,276,692 $ 4,997,179 $ 5,328,728 213.55% 229.84% 242.85% 132.33% 226.27% 219.90% 206.24% 213.04% 199.72% 161.32% Plan's fiduciary net position
as a percentage of the plan's
total pension liability 79.91% 77.97% 78.19% 90.49% 77.71% 77.73% 77.69% 75.39% 75.87% 79.89% 2025 2024 2023 2022 2021 2020 2019 2018 2017 2016
Plan's proportion of the net pension liability 0.28016% 0.27696% 0.27979% 0.29015% 0.24710% 0.24027% 0.23573% 0.22838% 0.22878% 0.22146% $ 20,425,915 $ 20,702,296 $ 19,226,235 $ 10,182,645 $ 16,462,675 $ 14,999,065 $ 13,831,502 $ 13,646,123 $ 1,848,792 $ 9,125,242 Plan's covered payroll $ 5,010,632 $ 4,871,224 $ 4,067,727 $ 3,946,245 $ 3,617,868 $ 3,613,676 $ 3,375,853 $ 2,985,147 $ 2,893,042 $ 3,036,912 407.65% 424.99% 472.65% 258.03% 417.17% 414.58% 382.75% 404.23% 61.93% 315.42% Plan's fiduciary net position
as a percentage of the plan's
total pension liability 76.66% 74.87% 76.52% 86.61% 73.12% 73.37% 73.39% 71.74% 72.69% 77.27% 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.

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
-125-

TOWN OF HILLSBOROUGH

SCHEDULE OF CONTRIBUTIONS
FOR THE FISCAL YEAR ENDED JUNE 30, 2025
65 2025 2024 2023 2022 2021 2020 2019 2018 2017 2016
Actuarially determined contributions 2,349,386$ 2,095,158$ 1,966,621$ 1,817,419$ 1,621,338$ 1,450,935$ 1,299,618$ 1,149,750$ 1,043,360$ 928,895$ Contributions in relation to the
actuarially determined contribution (2,349,386) (2,095,158) (1,966,621) (1,817,419) (1,621,338) (1,450,935) (1,299,618) (1,149,750) (1,043,360) (928,895) Contribution deficiency (excess) -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Covered payroll 9,131,957$ 8,374,888$ 7,830,416$ 6,943,540$ 6,308,969$ 5,976,685$ 5,827,215$ 5,757,169$ 5,276,692$ 4,997,179$ Contributions as a percentage
of covered payroll 25.73% 25.02% 25.12% 26.17% 25.70% 24.28% 22.30% 19.97% 19.77% 18.59% 2025 2024 2023 2022 2021 2020 2019 2018 2017 2016
Actuarially determined contributions 2,580,792$ 2,280,206$ 2,175,615$ 2,031,035$ 1,861,252$ 1,635,957$ 1,429,239$ 1,262,347$ 1,114,629$ 964,025$ Contributions in relation to the
actuarially determined contribution (2,580,792) (2,280,206) (2,175,615) (2,031,035) (1,861,252) (1,635,957) (1,429,239) (1,262,347) (1,114,629) (964,025) Contribution deficiency (excess) -$ -$ -$ -$ -$ -$ -$ -$ -$ -$ Covered payroll 5,604,051$ 5,010,632$ 4,871,224$ 4,067,727$ 3,946,245$ 3,617,868$ 3,613,676$ 3,375,853$ 2,985,147$ 2,893,042$ Contributions as a percentage
of covered payroll 46.05% 45.51% 44.66% 49.93% 47.17% 45.22% 39.55% 37.39% 37.34% 33.32% Miscellaneous
Safety
-126-

TOWN OF HILLSBOROUGH

SCHEDULE OF CHANGES IN THE NET OPEB LIABILITY AND RELATED RATIOS FOR THE FISCAL YEAR ENDED JUNE 30, 2025
66 2025 2024 2023 2022 2021 2020 2019 2018*
Changes in Total OPEB Liability
Service cost $ 188,633 $ 256,635 $ 249,766 $ 308,513 $ 313,340 $ 325,000 $ 331,000 $ 321,000 Interest 1,250,377 1,170,327 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 (320,244) - - (2,384,685) (350,000) - - - Changes of assumptions 1,611,041 - - 107,550 (490,000) - - - Benefit payments, including refunds of employee contributions (1,388,330) (1,349,598) (1,342,273) (1,329,344) (1,193,000) (1,043,000) (1,030,000) (982,000) Changes of benefit terms - - - - - - - -
Net changes 50,680 1,368,161 73,053 (1,906,097) 484,436 (176,000) 640,000 637,000 Total OPEB Liability (beginning) at June 30 20,511,553 19,143,392 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 $ 20,562,233 $ 20,511,553 $ 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 $ 1,392,471 $ 1,353,646 $ 1,345,253 $ 1,332,255 $ 1,368,000 $ 1,346,000 $ 1,351,000 $ 1,321,000 Contributions - employee - - - - - - - -
Net investment income 1,078,436 592,924 (1,427,290) 2,299,995 281,614 445,000 506,000 576,000 Benefit payments, including refunds of employee contributions (1,388,330) (1,349,598) (1,342,273) (1,329,344) (1,193,000) (1,043,000) (1,030,000) (982,000) Administrative expenses (7,343) (6,730) (5,681) (6,077) (6,868) (4,000) (12,000) (5,000) Changes of assumptions - - - - - - - -
Net changes 1,075,234 590,242 (1,429,991) 2,296,829 449,746 744,000 815,000 910,000 Total OPEB Fiduciary Net Position (beginning) at June 30 9,823,826 9,233,584 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 $ 10,899,060 $ 9,823,826 $ 9,233,584 $ 10,663,575 $ 8,366,746 $ 7,917,000 $ 7,173,000 $ 6,358,000 Net OPEB liability $ 9,663,173 $ 10,687,727 $ 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 53.0% 47.9% 48.2% 55.9% 39.9% 38.6% 34.7% 31.7% Covered employee payroll $ 12,733,620 $ 12,733,620 $ 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 75.9% 83.9% 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. -127-

TOWN OF HILLSBOROUGH

SCHEDULE OF OPEB CONTRIBUTIONS
FOR THE FISCAL YEAR ENDED JUNE 30, 2025
67 2025 2024 2023 2022 2021 2020 2019 2018*
Actuarially Determined Contribution (ADC) $ 1,131,000 $ 1,011,000 $ 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 (1,469,872) (1,392,471) (1,353,646) (1,345,253) (1,332,255) (1,368,000) (1,346,000) (1,351,000) Contribution deficiency/(excess) $ (338,872) $ (381,471) $ (337,646) $ (26,253) $ (40,255) $ (2,000) $ (2,000) $ - Covered employee payroll for the period ended June 30 $ 14,780,200 $ 13,385,521 $ 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 9.9% 10.4% 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. -128-

TOWN OF HILLSBOROUGH

NOTES TO REQUIRED SUPPLEMENTARY INFORMATION
JUNE 30, 2025
68 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 governmental funds on June 30, 2025. 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 2024-25 were below budget by $0.8 million, primarily for timing of projects. The Police and Fire Special Tax Fund actual expenditures in Fiscal Year 2024-25 were in excess of the budget by $1,256. 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.

The City Manager submits a proposed operating budget to the city council for review prior to June 30. The 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.

The City Council must approve any revisions that alter the total expenditures of any fund. The fund level is the legal level of budgetary control (i.e., the level at which expenditures may not legally exceed appropriations). 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 CalPERS administer the Town’s pension liabilities 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 of pension liability and the schedule of contributions show ten-year trend information, where available, about these amounts, and they are changing from one 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 ten-year trend information, where available, about these amounts, which change from year to year. -129-

COMBINING STATEMENTS AND INDIVIDUAL FUND

SCHEDULES
-130-

TOWN OF HILLSBOROUGH

COMBINING STATEMENTS AND INDIVIDUAL

FUND SCHEDULES
JUNE 30, 2025
69 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.
-131-

TOWN OF HILLSBOROUGH

NONMAJOR GOVERNMENTAL FUNDS

COMBINING BALANCE SHEET
JUNE 30, 2025
70 Total
Nonmajor
Gas Police Governmental
Tax Measure A Measure W Grants Funds
ASSETS
Cash and investments 609,866$ 621,923$ 337,600$ 1,354,626$ $ 2,924,015 Accounts receivable - - 56,706 - 56,706
Taxes receivable 27,634 61,532 - - 89,166
Total assets 637,500$ 683,455$ 394,306$ 1,354,626$ $ 3,069,887

FUND BALANCES
Restricted for streets projects 637,500$ 683,455$ 394,306$ -$ 1,715,261 $ Restricted for police projects - - - 1,354,626 1,354,626 Total fund balances 637,500$ 683,455$ 394,306$ 1,354,626$ $ 3,069,887 Special Revenue Funds
-132-

TOWN OF HILLSBOROUGH

NONMAJOR GOVERNMENTAL FUNDS

COMBINING STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES
FOR THE FISCAL YEAR ENDED JUNE 30, 2025
71 Total
Nonmajor
Gas Police Governmental
Tax Measure A Measure W Grants Funds
REVENUES:

Intergovernmental 632,938$ 749,999$ $ 332,228 $ 194,663 $ 1,909,828 Investment earnings 8,728 29,870 4,955 56,131 99,684
Total revenues 641,666 779,869 337,183 250,794 2,009,512 EXPENDITURES:

Current:

Community services 31,448 - - 31,448 -
Capital outlay - - 268,110 - 268,110
Total expenditures 31,448 - 268,110 - 299,558
Excess of revenues
over expenditures 610,218 779,869 337,183 (17,316) 1,709,954

OTHER FINANCING
SOURCES (USES):

Transfers Out - (576,338) - (576,338) -
Net change in fund balances 610,218 203,531 337,183 (17,316) 1,133,616 Fund balances - beginning 27,282 479,924 57,123 1,371,942 1,936,271 Fund balances - ending 637,500$ 683,455$ $ 394,306 $ 1,354,626 $ 3,069,887 Special Revenue Funds
-133-

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, 2025
72 Variance with
Final Budget -
Original Final Positive
Budget Budget Actual (Negative)
REVENUES:

Intergovernmental $ 611,530 $ 611,530 $ 632,938 $ 21,408 Investment earnings - 8,728 - 8,728
Total revenues 611,530 611,530 641,666 30,136
EXPENDITURES:

Current:

Streets 31,448 31,448 31,448 -
Total Expenditures 31,448 31,448 31,448 -
Excess of revenues over expenditures 580,082 580,082 610,218 30,136 Net change in fund balances 580,082 580,082 610,218 30,136 Fund balances - beginning 27,282 27,282 27,282 -
Fund balances - ending $ 607,364 $ 607,364 $ 637,500 $ 30,136 -134-

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, 2025
73 Variance with
Final Budget -
Original Final Positive
Budget Budget Actual (Negative)
REVENUES:

Intergovernmental $ 688,348 $ 688,348 $ 749,999 $ 61,651 Investment earnings 3,670 3,670 29,870 26,200
Total revenues 692,018 692,018 779,869 87,851
OTHER FINANCING USES:

Transfers Out (250,000) (250,000) (576,338) (326,338)
Net change in fund balances 442,018 442,018 203,531 (238,487) Fund balances - beginning 479,924 479,924 479,924 -
Fund balances - ending $ 921,942 $ 921,942 $ 683,455 $ (238,487) -135-

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, 2025
74 Variance with
Final Budget -
Original Final Positive
Budget Budget Actual (Negative)
REVENUES:

Intergovernmental $ 305,932 $ 305,932 $ 332,228 $ 26,296 Investment earnings - - 4,955 4,955
Total revenues 305,932 305,932 337,183 31,251
Net change in fund balances 305,932 305,932 337,183 31,251 Fund balances - beginning 57,123 57,123 57,123 -
Fund balances - ending $ 363,055 $ 363,055 $ 394,306 $ 31,251 -136-

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, 2025
75 Variance with
Final Budget -
Original Final Positive
Budget Budget Actual (Negative)
REVENUES:

Intergovernmental $ 100,000 $ 100,000 $ 194,663 $ 94,663 Investment earnings 100 100 56,131 56,031
Total revenues 100,100 100,100 250,794 150,694
EXPENDITURES:

Current:

Capital Outlay 100,000 100,000 268,110 (168,110)
Excess of revenues over expenditures 100 100 (17,316) (17,416) Net change in fund balances 100 100 (17,316) (17,416)

Fund balances - beginning 1,371,942 1,371,942 1,371,942 - Fund balances - ending $ 1,372,042 $ 1,372,042 $ 1,354,626 $ (17,416) -137-

TOWN OF HILLSBOROUGH

CAPITAL ASSETS USED IN THE OPERATION OF

GOVERNMENTAL FUNDS
COMPARATIVE SCHEDULES BY SOURCE (1)
JUNE 30, 2025
76 2025 2024
Governmental funds capital assets:

Land $ 1,456,560 $ 1,456,560
Land improvements 3,579,317 3,579,317
Building and improvements 5,905,066 5,875,919
Machinery and equipment 447,596 447,597
Infrastructure 15,247,443 15,247,443
Total governmental funds capital assets $ 26,635,982 $ 26,606,836 Investments in governmental funds capital assets by source:

General fund $ 829,272 $ 829,273
Special revenue fund 100,192 100,192
Capital projects funds 19,760,369 19,731,222
Other - unclassified 5,946,149 5,946,149
Total governmental funds capital assets $ 26,635,982 $ 26,606,836 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 -138-

TOWN OF HILLSBOROUGH

CAPITAL ASSETS USED IN THE OPERATION OF

GOVERNMENTAL FUNDS
SCHEDULE BY FUNCTION AND ACTIVITY (1)
JUNE 30, 2025
77 Governmental Governmental
Funds Capital Funds Capital
Assets Assets
July 1, 2024 Additions Retirements June 30, 2025
General Government:

Council $ 13,046 -$ -$ 13,046 $
Finance 94,401 - - 94,401
General Services 6,067,745 92,785 18,235 6,142,295
Total General Government 6,175,192 92,785 18,235 6,249,742 Public Safety:

Police 802,880 310,483 - 1,113,363
Fire 1,697,078 82,798 34,695 1,745,181
Total Public Safety 2,499,958 393,281 34,695 2,858,544
Community Services:

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

Streets and Improvements 17,762,154 - 403,990 17,358,164 Total Public Work 17,762,154 - 403,990 17,358,164
Total Governmental Funds
Capital Assets $ 26,606,836 486,066$ 456,920$ $ 26,635,982 (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. -139-

TOWN OF HILLSBOROUGH

CAPITAL ASSETS USED IN THE OPERATION OF

GOVERNMENTAL FUNDS
SCHEDULE OF CHANGES BY FUNCTION AND ACTIVITY (1)
JUNE 30, 2025
78 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 1,434,291 226,033 59,880 6,142,295 Total General Government 1,456,560 2,965,531 1,440,446 327,325 59,880 6,249,742 Public Safety:

Police 49,751 - 1,113,306 (49,694) 1,113,363 -
Fire 46,735 - 1,565,765 132,681 1,745,181 -
Total Public Safety 96,486 - 2,679,071 82,987 2,858,544 - 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 - 1,674,681 (64,713) 15,187,563 17,358,164 Total Public Work 560,633 - 1,674,681 (64,713) 15,187,563 17,358,164 Total Governmental Funds
Capital Assets $ 1,456,560 $ 3,579,317 $ 5,905,066 $ 447,596 $ 15,247,443 $ 26,635,982 (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. -140-
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-141-
79 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 80
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 83
These schedules contain information to help the reader assess the Town’s most significant local revenue source, the property tax.

Debt Capacity 91
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 96
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 98
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.
-142-

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

LAST TEN FISCAL YEARS
80 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Governmental activities:

Net investments in
capital assets $ 11,452,814 $ 10,792,547 $ 10,665,462 $ 10,403,101 $ 10,005,668 $ 9,426,844 $ 9,506,356 $ 10,622,901 $ 10,347,727 $ 10,586,698 Restricted 280,529 281,094 545,609 647,100 837,627 2,020,966 1,198,230 2,556,388 1,982,659 3,069,887 Unrestricted 10,699,690 12,377,163 1,585,599 5,967,436 7,437,812 7,194,656 9,330,033 13,918,318 13,286,495 10,836,943 Total governmental activities
net position 22,433,033 23,450,804 12,796,670 17,017,637 18,281,107 18,642,466 20,034,619 27,097,607 25,616,881 24,493,528 Business-type activities:

Net investment in capital assets 16,043,824 25,925,584 27,303,121 29,365,910 34,969,122 39,047,391 40,560,774 48,305,856 59,204,019 60,430,440 Restricted 1,265,000 1,131,835 1,131,835 1,181,801 1,181,801 1,181,801 1,181,801 431,801 431,801 431,801 Unrestricted 20,082,986 17,950,317 19,749,223 24,431,777 25,869,289 28,532,950 35,223,976 34,325,015 29,805,487 35,253,143 Total business-type activities
net position 37,391,810 45,007,736 48,184,179 54,979,488 62,020,212 68,762,142 76,966,551 83,062,672 89,441,307 96,115,384 Primary government:

Net investments in
capital assets 27,496,638 36,718,131 37,968,583 39,769,011 44,974,790 48,474,235 50,067,130 58,928,757 69,551,746 71,017,138 Restricted 1,545,529 1,412,929 1,677,444 3,898,199 2,019,428 3,202,767 2,380,031 2,988,189 2,414,460 3,501,688 Unrestricted 30,782,676 30,327,480 21,334,822 28,329,915 33,307,101 35,727,606 44,554,009 48,243,333 43,091,982 46,090,086 Total primary government
net position $ 59,824,843 $ 68,458,540 $ 60,980,849 $ 71,997,125 $ 80,301,319 $ 87,404,608 $ 97,001,170 $ 110,160,279 $ 115,058,188 $ 120,608,912 Governmental Activities Net Position: The decrease in FY 24/25 is primarily due to transfer from governmental to business-type for the Highline water capital project, offset somewhat by an increase in property taxes. The restricted net position change is due to the timing of spending in the street and police COPS/SLESF funds. With the biennial street resurfacting program, monies accumulate in one year and are drawn down in the next year. The decrease in FY 17/18 is due to the implementation of GASB 75 – Other Post-Employment Benefits (OPEB), which decreases net position due to the OPEB liabilities being added into the Statement of Net Position.

Business-Type Activities Net Position: The increase in FY 24/25 is primarily due to an increase in revenues driven by user rate increase and an increase in water unit sales, a transfer from the General Fund for the Highline Water project, as well as timing of capital spending in the water and sewer enterprises. -143-

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

LAST TEN FISCAL YEARS
81 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Expenses:

Governmental activities:

General government $ 1,237,668 $ 1,101,642 $ 1,651,645 $ 1,772,674 $ 2,343,943 $ 2,273,947 $ 1,990,984 $ 1,727,443 $ 2,635,187 $ 3,137,602 Public safety 13,934,621 16,183,032 16,711,271 17,525,119 19,341,808 20,058,933 20,223,279 18,685,885 23,879,234 26,285,038 Community services 2,668,325 2,740,114 2,447,628 2,753,950 3,126,283 3,863,894 3,934,667 3,723,761 5,968,725 6,102,285 Streets 4,253,687 2,609,530 5,086,027 4,081,758 4,341,759 5,065,221 6,290,672 3,518,522 8,788,267 4,794,432 Interest expense - - - - - - 14,666 - 32,335 24,854
Total governmental activities expenses 22,094,301 22,634,318 25,896,571 26,133,501 29,153,793 31,261,995 32,439,602 27,670,277 41,303,748 40,344,211 Business-type activities:

Water 10,845,215 12,302,076 13,083,410 12,272,300 13,194,795 14,714,173 13,066,074 13,749,371 14,959,677 16,539,823 Sewer 10,122,581 8,932,190 10,704,394 9,611,847 10,523,977 11,359,129 10,649,566 12,517,293 13,024,026 13,793,450 Total business-type activities 20,967,796 21,234,266 23,787,804 21,884,147 23,718,772 26,073,302 23,715,640 26,266,664 27,983,703 30,333,273 Program Revenues:

Governmental activities:

Charges of services:

General government 705,961 741,268 772,233 818,055 805,114 831,057 550,956 554,318 497,493 540,587 Public safety 468,667 435,396 407,497 462,095 442,062 352,437 374,505 445,955 481,753 477,279 Community services 1,617,138 1,810,631 1,792,327 2,073,463 1,499,212 1,843,575 2,183,888 2,133,123 1,954,617 2,315,385 Streets 719,496 804,199 826,645 926,610 580,944 1,210,566 944,024 871,152 838,562 1,064,936 Operating grants and functional taxes 1,241,798 1,204,673 1,399,235 1,311,308 1,710,116 1,811,351 5,034,025 2,135,945 2,966,712 2,352,062 Total governmental activities
program revenues 4,753,060 4,996,167 5,197,937 5,591,531 5,037,448 6,048,986 9,087,398 6,140,493 6,739,137 6,750,249 Business-type activities:

Charges for services:

Water 12,290,648 13,692,123 14,702,348 14,468,790 15,792,826 16,405,140 14,693,894 13,428,299 15,266,249 17,602,717 Sewer 9,357,385 10,278,455 11,187,404 12,332,212 13,078,529 14,091,293 14,523,404 15,223,102 15,820,702 16,443,440 Capital grants, contributions and other
non-operating revenues 1,409,826 - - - - - - - - -
Total business-type program revenues 21,648,033 25,380,404 25,889,752 26,801,002 28,871,355 30,496,433 29,217,298 28,651,401 31,086,951 34,046,157 26,401,093 30,376,571 31,087,689 32,392,533 33,908,803 36,545,419 38,304,696 34,791,894 37,826,088 40,796,406 Net (Expense)/Revenue:

Governmental activities (17,341,241) (17,638,151) (20,698,634) (20,541,970) (24,116,345) (25,213,009) (23,352,204) (21,529,784) (34,564,611) (33,593,962) Business-type activities 680,237 4,146,138 2,101,948 4,916,855 5,152,583 4,423,131 5,501,658 2,384,737 3,103,248 3,712,884 Total primary government net revenues (16,661,004) (13,492,013) (18,596,686) (15,625,115) (18,963,762) (20,789,878) (17,850,546) (19,145,047) (31,461,363) (29,881,078) -144-

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

LAST TEN FISCAL YEARS
82 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
General Revenues and Other
Changes in Net Position
Governmental activities:

Taxes:

Property tax $ 13,783,039 $ 14,872,305 $ 15,785,068 $ 16,680,762 $ 17,413,680 $ 18,455,541 $ 19,324,411 $ 20,647,291 $ 21,685,506 $ 22,463,588 Public safety taxes 2,242,334 2,242,686 2,243,038 2,243,876 2,244,228 2,246,340 2,247,128 2,246,910 2,247,481 2,247,480 Property transfer tax 345,986 380,016 380,986 380,950 316,893 623,797 621,578 404,621 334,558 469,243 Franchise tax 723,843 739,249 741,207 714,541 768,487 771,157 800,915 872,162 900,682 909,629 Sales tax 73,853 98,856 100,563 128,297 207,880 143,535 171,454 112,343 120,051 143,727 Motor vehicle license tax 1,108,302 1,188,946 1,261,095 1,330,092 1,343,173 839,339 1,396,460 1,818,496 1,666,666 1,556,159 Business license tax 633,949 664,654 683,726 675,464 519,581 935,893 854,351 785,666 728,547 792,609 ERAF Refund 1,432,614 1,470,846 1,693,630 2,209,536 2,300,581 2,381,601 3,153,308 2,900,861 3,233,269 3,312,334 HOPTR 66,261 65,236 63,293 61,428 59,611 58,841 58,508 56,837 54,974 54,146 All others 54,655 212,368 190,715 492,275 226,314 414,574 592,396 743,271 1,157,379 579,677 Unrestricted investment earnings 109,988 196,501 363,702 1,045,716 1,179,383 903,750 (1,674,854) 924,314 2,784,772 2,450,233 Miscellaneous (3,346,214) (95,000) (2,229,769) (1,200,000) (1,200,000) (2,200,000) (2,801,295) (2,920,000) (1,830,000) (1,696,000) Total governmental activities 20,479,824 18,785,449 21,277,254 24,762,937 25,379,811 25,574,368 24,744,360 28,592,772 33,083,885 33,282,825 Business-type activities:

Investment earnings 104,118 123,575 233,973 678,454 688,141 118,799 (98,549) 791,383 1,445,387 1,476,573 Miscellaneous 95,000 3,346,214 2,229,769 1,200,000 1,200,000 2,200,000 2,801,295 2,920,000 1,830,000 1,696,000 Total business-type activities 199,118 3,469,789 2,463,742 1,878,454 1,888,141 2,318,799 2,702,746 3,711,383 3,275,387 3,172,573 Total primary government 20,678,942 22,255,238 23,740,996 26,641,391 27,267,952 27,893,167 24,447,106 32,304,155 36,359,272 36,455,398 Change in Net Position
Governmental activities 3,138,583 1,147,298 578,620 4,220,967 1,263,466 361,359 1,392,157 7,062,988 (1,480,726) (311,137) Business-type activities 879,355 7,615,927 4,565,690 6,795,309 7,040,724 6,741,930 8,204,404 6,096,120 6,378,635 6,885,457 Total primary government $ 4,017,938 $ 8,763,225 $ 5,144,310 $ 11,016,276 $ 8,304,190 $ 7,103,289 $ 9,596,561 $ 13,159,108 $ 4,897,909 $ 6,574,320 Governmental Activities: The Change in the Net Position of Governmental Activities in FY 24/25 is the result of higher expenses for the filling of open positions, increased required annual pension contributions, offset by lower expenses as compared to the prior year due one-time winter storm repairs to police building and other governmental facilities in the prior year. These costs are somewhat offset by higher property taxes. The property tax increase is driven by higher assessed valuations.

Business-Type Activities: The Change in Net Position of Business-Type Activities in FY 24/25 improved over the prior year, primarily attributable to timing of capital spending as well an increase in water and sewer revenue driven primarily by user rate increases and higher water unit sales and a transfer from the General Fund for the Highline Water project. -145-

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

LAST TEN FISCAL YEARS
83 (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
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 23/24 21,685,506 2,247,481 3,233,269 1,666,666 334,558 900,682 120,051 728,547 24/25 22,463,588 2,247,480 3,312,334 1,556,159 469,243 909,629 143,727 792,609 (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%. $-
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25 Four Largest Tax Revenues
Property
Tax
Police and Fire
Special Tax
Excess
ERAF
Vehicle
License Tax
-146-

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

LAST TEN FISCAL YEARS
84 Special Capital
Fiscal Non- Revenue Funds Projects Fund(1)
Year Spendable Restricted(2) Assigned(3) Unassigned Total Restricted Assigned Total 15/16 $ 5,479 -$ $ - $ 19,880,416 $ 16,251,879 $ 280,529 $ 3,213,579 $ 3,494,108 16/17 8,065 - - 20,085,943 19,885,895 281,094 4,237,398 4,518,492 17/18 8,571 - - 22,495,369 20,094,008 545,609 2,439,001 2,984,610 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 23/24 5,156,520 51,531 5,863,000 21,848,090 32,919,141 1,982,659 4,607,648 6,590,307 24/25 5,698,575 53,264 2,663,000 25,273,334 33,688,173 3,069,887 4,588,043 7,657,930 (1) Fluctuations in the Capital Projects Fund fund balance is timing of capital spending, primarily in street repaving program, which is on a biennial cycle. (3) The Assigned balance is held for capital projects, including storm drain, sewer and tree replacement. (2) The Restricted balance is held in a Section 115 pension trust for future pension obligations.

General Fund
-147-

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

LAST TEN FISCAL YEARS
85 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25 Revenues:

Taxes (3) $ 19,381,521 $ 20,625,423 $ 21,761,555 $ 23,174,591 $ 23,912,273 $ 25,707,422 $ 27,338,357 $ 28,142,845 $ 29,424,180 $ 30,515,033 Permits 1,296,528 1,382,578 1,433,876 1,626,587 1,154,983 1,890,169 1,760,441 1,638,930 1,522,474 1,929,637 Intergovernmental 2,308,153 2,331,557 2,730,058 2,707,593 3,126,785 2,709,566 6,411,744 3,962,838 4,654,018 3,869,044 Service charges 1,150,751 1,119,679 1,090,405 1,218,912 1,176,300 961,695 1,454,288 1,264,934 1,116,657 1,243,442 Fines and forfeitures 49,718 148,187 159,528 197,322 23,777 38,850 21,534 15,752 14,222 48,330 Other fees and charges (1) 510,121 641,144 630,260 642,978 395,277 854,306 666,826 778,976 763,848 846,192 Investment earnings 95,590 140,791 303,068 869,798 1,001,271 903,750 (1,683,071) 731,583 2,389,866 2,047,271 Miscellaneous 517,858 550,205 528,962 882,935 590,881 712,886 618,844 744,452 1,310,864 726,101 Total revenues 25,310,240 26,939,564 28,637,712 31,320,716 31,381,547 33,778,644 36,588,963 37,280,310 41,196,129 41,225,050 Expenditures:

Current:

General government 1,083,386 1,193,117 1,319,841 1,598,755 1,756,749 1,928,027 1,825,699 2,113,529 1,965,593 2,372,907 Public safety 14,684,875 15,689,634 16,195,735 16,990,728 17,808,901 18,795,622 19,918,895 21,299,326 22,766,981 24,734,405 Community services 2,672,549 2,719,138 2,729,304 3,086,589 3,425,185 3,836,232 3,902,093 4,086,103 5,604,707 5,530,238 Streets 3,896,794 2,392,966 5,255,841 3,435,091 3,876,263 4,485,333 6,065,777 3,296,897 8,376,116 4,339,816 Debt service
Principal - - - - - - - - 213,034 213,073
Interest - - - - - - - - 20,895 15,889
Capital outlay - - 522,941 637,304 200,015 488,670 311,029 816,110 180,845 486,067 Total expenditures 22,337,604 21,994,855 26,023,662 25,748,467 27,067,113 29,533,884 32,023,493 31,611,965 39,128,171 37,692,395 Excess of revenues over (under)
expenditures 2,972,636 4,944,709 2,614,050 5,572,249 4,314,414 4,244,760 4,565,470 5,668,345 2,067,958 3,532,655 Other Financing Sources (Uses):

Transfers in 3,435,093 3,279,368 3,363,402 4,270,579 4,342,785 3,515,248 5,752,124 3,718,456 5,290,418 3,260,875 Transfers out (2) (3,792,469) (6,991,582) (5,101,402) (5,395,579) (5,542,785) (5,715,248) (8,553,419) (6,974,456) (7,120,418) (4,956,875) Total Other Financing Sources (Uses) (357,376) (3,712,214) (1,738,000) (1,125,000) (1,200,000) (2,200,000) (2,801,295) (3,256,000) (1,830,000) (1,696,000) NET CHANGE IN FUND BALANCES $ 2,615,260 $ 1,232,495 $ 876,050 $ 4,447,249 $ 3,114,414 $ 2,044,760 $ 1,764,175 $ 2,412,345 $ 237,958 $ 1,836,655

NET CHANGE IN FUND BALANCES -
GENERAL FUND (3) $ 3,634,015 $ 208,112 $ 2,409,932 $ 3,794,718 $ 2,536,884 $ 1,142,176 $ 1,843,694 $ (279,532) $ 1,377,260 $ 769,032 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% (2) Net change in the General Fund Fund Balance in FY 24/25 is primarily due to revenues exceeding expenditures, driven by an increase in property taxes, offset by growth in expenditures primarily in salaries and benefits and Central County Fire Department contribution. Total Governmental Fund Net excess before transfers increased primarily for increased property tax revenue, offset somewhat by timing of street related expenditures. (1) Transfers generally are for capital improvement contributions and the annual transfer of the Police and Fire Safety Tax from the special revenue funds to the General Fund. In FY 24/25, transfers are primarily for Highline water project, other governmental capital, and the safety tax transfer to the General Fund. In FY 15/16, the transfer included new water automated meter readers. In FY 22/23, transfer included transfers for American Rescue Plan capital projects in the Water and Sewer Funds. -148-

TOWN OF HILLSBOROUGH

PROPERTY TAX DOLLAR BREAKDOWN
FOR THE FISCAL YEAR ENDED JUNE 30, 2025
86 Data Source: San Mateo County Assessor 2024/25 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.

-149-

TOWN OF HILLSBOROUGH

NET TAXABLE ASSESSED VALUE HISTORY

LAST TEN FISCAL YEARS
87 Total Direct
Lien Year Secured Unsecured SBE Nonunitary Net Total AV % Change Tax Rate 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 2023/24 13,271,737,393 7,111,378 - 13,278,848,771 6.23% 0.15772 2024/25 13,926,110,036 9,534,274 - 13,935,644,310 4.95% 0.15771 SBE N i Ud Sd
This report is not to be used in support of debt issuance or continuing disclosure statements without the written consent of HdL, Coren & Cone.
-150-

TOWN OF HILLSBOROUGH

DIRECT AND OVERLAPPING PROPERTY TAX RATES
(RATE PER $100 OF TAXABLE VALUE)
88 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2024/25 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 0.0636 0.0568 0.0762 0.0706 0.0633 0.0658 0.0728 0.0503 0.0595 0.0544 Hillsborough Elementary 0.0264 0.0256 0.0276 0.0271 0.0292 0.0289 0.0297 0.0296 0.0583 0.0563 San Mateo Community College 2005 Series B - - - - 0.00 0.0037 - - - - San Mateo Junior College 0.0250 0.0247 0.0235 0.0175 0.0231 0.0176 - - - - San Mateo Junior Comm College 0.0227 0.0193 0.0190 0.0178 San Mateo Union High 0.0466 0.0415 0.0433 0.0407 0.0385 0.0449 0.0488 0.0504 - - Total Direct & Overlapping² Tax Rates 1.1616 1.1486 1.1706 1.1559 1.1576 1.1609 1.1740 1.1496 1.1844 1.1730 City's Share of 1% Levy Per Prop 13³ 0.1871 0.1871 0.1871 0.1599 0.1599 0.1599 0.1599 0.1599 0.1598 0.1598 Total Direct Rate4 0.15767 0.15782 0.15779 0.15778 0.15777 0.15775 0.15774 0.15773 0.15772 0.15771 Data Source: San Mateo County Assessor 2015/16 - 2024/25 Tax Rate 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 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. The ERAF portion of the City's Levy has been subtracted where known.
⁴Total 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. -151-

TOWN OF HILLSBOROUGH

PRINCIPAL PROPERTY TAXPAYERS
FISCAL YEAR 2023-24 COMPARED TO NINE YEARS PRIOR
89 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 $ 36,278,195 1 0.26% $ 29,800,000 1 0.35% GATSBY 2 0 LLC 31,212,000 2 0.22%
THEODORE H KRUTTSCHNITT 27,595,342 3 0.20% 23,419,944 2 0.28% 123 NEW PLACE LLC 27,167,549 4 0.20%
QUAM DELIGHT PROPERTIES LLC 26,864,890 5 0.19%
JEFFREY R WILSON TRUST 23,814,113 6 0.17%
PETER SPIRO STAMOS TRUST 22,401,965 7 0.16% 13,500,000 9 0.16% 2120 RAH LLC 20,996,394 8 0.15%
GOENKA SANGINI TRUST 20,808,000 9 0.15%
BRIDGEWAY PROPERTIES LLC 20,612,022 10 0.15%
DELIGHT WISE INVESTMENTS LIMITED 22,800,000 3 0.27%
CHRISTOPHER R REDLICH JR TRUST 17,763,297 4 0.21%
AUGUST MOON 1971 LLC 16,523,676 5 0.20%
GEORGE HSU TRUST 16,134,415 6 0.19%
OTTO J MILLER 13,896,548 7 0.16%
JAMES ROBERT MEYERS TRUST 13,621,405 8 0.16%
JINCHEN AN 13,319,939 10 0.16%
$ 257,750,470 1.85% $ 180,779,224 2.14%
Source: San Mateo Tax Assessor's Office
2024-25 2015-16
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TOWN OF HILLSBOROUGH
PROPERTY TAX LEVIES AND COLLECTIONS (1)

LAST TEN FISCAL YEARS
90 % of
Tax Levy (1) ERAF Shift Net Levy Chg Amount % of Levy
15/16 15,630,336 $ $ 2,264,366 $ 13,365,970 7% 13,385,540 $ 100% 16/17 16,956,940 2,442,572 14,514,368 9% 14,445,762 100% 17/18 17,993,645 2,591,569 15,402,076 6% 15,378,546 100% 18/19 18,893,426 2,736,956 16,156,470 5% 16,197,533 100% 19/20 20,025,328 2,885,025 17,140,303 6% 17,121,136 100% 20/21 21,106,412 3,041,105 18,065,307 5% 17,966,303 99% 21/22 21,909,150 3,174,001 18,735,149 4% 18,810,659 100% 22/23 23,306,746 3,355,554 19,951,192 6% 20,002,608 100% 23/24 24,775,568 3,566,283 21,209,285 6% 21,199,718 100% 24/25 26,022,511 3,743,884 22,278,627 5% 22,278,627 100% (1) Includes Secured, Unsecured, HOPTR, and Unitary taxes. Secured taxes are paid under the TEETER PLAN, which requires full payment of the tax levy with no deductions for delinquencies. However, secured property tax collections may include adjustments and refunds processed throughout the year.

Unsecured, HOPTR, and Unitary taxes are based on actual collections and the tax levy is an estimate only.

Total Collections to Date (1)
Source: San Mateo County Assessor's Office and Town of Hillsborough Finance Department -153-

TOWN OF HILLSBOROUGH

RATIO OF OUTSTANDING DEBT BY TYPE

LAST TEN FISCAL YEARS
91 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25 Governmental Activities
Subscription Liability $ - $ - $ - $ - $ - $ - $ - $ 852,183 $ 639,149 $ 501,114 Total Governmental Activities - - - - - - - 852,183 639,149 501,114 Business Type Activities
Certificates of Participation 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 38,797,302 40,870,846 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 8,254,526 7,954,797 ECE-ARRA lona- Direct Borrowing 682,124 623,157 563,599 503,445 442,700 381,333 319,350 256,746 193,521 129,655 Refunding Bonds - - - - - - - 19,250,000 17,510,000 15,765,000 Premiums - - - - - - - 2,039,875 1,686,468 1,346,964
Total Business-Type Activities $ 37,994,330 $ 38,754,391 $ 36,982,848 $ 36,322,283 $ 34,489,678 $ 32,637,022 $ 57,353,047 $ 64,610,925 $ 66,441,817 $ 66,067,262 Property Assessment Roll (1) $ 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 $ 13,278,848,771 $ 13,935,644,310 Percentage of Net Taxable Values of Property 0.45% 0.42% 0.38% 0.36% 0.32% 0.29% 0.48% 0.52% 0.51% 0.48% Percentage of Personal Income 2.7% 2.8% 2.8% 2.6% 2.2% 2.0% 3.2% 3.6% 3.5% 3.6% Population (2) 11,687 11,753 11,543 11,769 11,418 11,391 11,018 10,962 11,116 11,254 Debt Per Capita $ 3,251 $ 3,297 $ 3,204 $ 3,086 $ 3,021 $ 2,865 $ 5,205 $ 5,972 $ 6,035 $ 5,915 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 -154-

TOWN OF HILLSBOROUGH

COMPUTATION OF DIRECT AND OVERLAPPING DEBT
92 2024-25 Assessed Valuation $13,935,644,310
Total Debt Applicable Town's Share of
6/30/2025 Percentage (1) Debt 6/30/2025
DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT:

San Mateo Community College District $ 655,171,697 4.280% $ 28,041,349 San Mateo Union High School District 668,248,421 12.620% 84,326,268 Hillsborough School District 134,153,355 99.880% 133,985,663 Burlingame School District 183,683,022 1.000% 18,368
Town of Hillsborough - 100.000% -
Total Direct and Overlapping Tax and Assessment Debt $ 246,371,648 OVERLAPPING GENERAL FUND DEBT:

San Mateo County General Fund Obligations $ 530,970,772 4.280% $ 22,725,549 San Mateo County Board of Education Certificates of Participation 533,000 4.280% 228,124 San Mateo Mosquito and Vector Contril District General Fund Obligations 3,185,295 4.280% 136,331 Town of Hillsborough 501,114 0.004% 501,114
Total Gross Overlapping General Fund Obligation Debt $ 23,591,118 TOTAL DIRECT DEBT $ 501,114
TOTAL OVERLAPPING DEBT $ 269,461,652
COMBINED TOTAL DEBT (2) $ 269,962,766
(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 1.77% Combined Total Debt 1.94%
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
93 Total
Net Debt Legal
Fiscal Assessed Debt Limit Applicable Debt
Year Value (2) 3.75% (1) to Limit Margin
15/16 $ 8,469,300,223 $ 317,598,758 $ 317,598,758 - $
16/17 9,127,467,353 342,280,026 342,280,026 -
17/18 9,678,343,545 362,937,883 362,937,883 -
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 -
23/24 13,278,848,771 497,956,829 497,956,829 -
24/25 13,935,644,310 522,586,662 522,586,662 -
(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
94 Net Revenues Interest and Total
Fiscal Available for Fiscal Debt
Year Revenues Expenses (1) Debt Service Principal(3) Charges Service Coverage 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 (3) 29,820,444 19,336,403 10,484,041 5,512,736 1,545,158 7,057,894 1.49 23/24 (4) 32,164,909 20,247,163 11,917,746 2,913,297 1,911,950 4,825,247 2.47 24/25 (4) 35,286,037 18,460,614 16,825,423 3,536,851 1,791,827 5,328,678 3.16 (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.
(4) 'FY 23/24 and 24/25 includes debt service on SRF loan, ARRA loan, San Mateo Treatment plan loan, and first year of debt service on the 2023 Revenue Refunding bonds. The Q1-Q3 payments for the Treatment plant were paid in FYE 6/30/24; Q4 is paid in FYE 6/30/25 due to timing of billing and payment.

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

WATER AND SEWER RATES

LAST TEN FISCAL YEARS
95 Fiscal Year (1) 1st Tier % of Change Residential % of Change 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%
23/24 6.77 10% 3,985 4%
24/25 7.11 5% 4,145 4%
Source: Town's Finance Department
(1) Rates shown are for bimonthly billing. Generally, Water rates are effective January and Sewer rates in July.

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
96 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
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%
2023 11,116 1,896,909 170,646 2.9% 46.5 98.5% 82.6%
2024 11,254 1,869,191 166,091 4.7% 46.8 98.8% 82.6%
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 -159-

TOWN OF HILLSBOROUGH

COUNTY OF SAN MATEO AND NEIGHBORING CITIES

LARGEST EMPLOYERS ON THE PENINSULA
97 Name (1) Description Industry
1 Tower Place SSF So San Francisco Real Estate
3SIXTY Bistro Burlingame Full-Service Restaurant
Bart Station-Daly City Daly City Transit Lines
Electric Charging Station Menlo Park Research Service
Electric Arts Inc Redwood City Game Designers (mfrs)
Fisher Investments San Mateo Investment Management
Fisher Investments Woodside Investments
Forced Dump Debris Box Svc Burlingame Garbage Collection Franklin Resources Inc San Mateo Asset Management
Greentech Inc So San Francisco Biotechnology Products & 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, 2025 1st Edition -160-

TOWN OF HILLSBOROUGH

FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION

LAST TEN FISCAL YEARS
98 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25 Function
General Government:

City Manager 4 4 5 5 5 6 6 6 6 7
Finance 5 5 6 6 6 6 6 6 6 7
Community Services 8 8 8 8 8 9 9 10 12 12
Public Safety:

Police 34 35 36 36 37 37 37 38 38 38
Public Works:

Administration 10 11 11 11 11 11 11 12 12 12
Maintenance:

Streets 5 5 5 5 6 6 6 6 6 6
Water 9 9 9 9 8 8 8 8 8 8
Sewer 8 8 8 8 8 8 8 8 8 8
Total 83 85 88 88 89 91 91 94 96 98
Source: Town of Hillsborough's Finance Department.
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TOWN OF HILLSBOROUGH

OPERATING INDICATORS BY FUNCTION

LAST TEN YEARS (WHEN AVAILABLE)
99 15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25 Function:

Police
Total Incidents N/A 26,888 35,145 34,477 29,772 31,530 29,339 31,232 29,676 37,335 Officer Initiated Incidents N/A 18,048 25,871 22,752 18,835 21,101 20,532 22,770 22,356 28,699 Calls for Service N/A 8,840 9,274 11,725 10,937 10,429 8,807 8,462 7,320 8,636 Average Response time (all calls) 5:35 5:15 6:10 5:32 6:23 6:09 5:54 6:40 7:11 6:55 Average Response time
(emergency calls) 3:26 2:31 3:01 2:49 3:11 2:45 2:12 4:05 2:44 2:17 Burglar Alarm Activations 2,500 2,608 2,253 2,281 2,118 1,648 1,608 1,639 1,710 1,525 Arrests:

Adult 45 62 93 146 69 61 59 55 41 60
Juvenile 3 4 7 1 2 - - - 1 1
Traffic Activity:

Fatal Injury Accidents - - - - - - - - -
Traffic Stops N/A 1,826 875 2,291 1,630 898 1,284 858 931 1,162 Injury Accidents 14 7 8 7 11 7 10 7 13 12
Non-injury Accidents 36 43 52 56 27 27 40 48 33 53
Moving Citations 127 225 425 464 385 387 514 174 273 491 Courtesy Warning Citations 355 435 721 404 322 135 34 178 260 183 Criminal Activity:

Residential Burglary N/A 34 20 35 24 33 39 48 28 22
Auto Theft N/A 3 5 - 2 6 4 4 7 5
Attempted Murder N/A - 2 - - - 1 - - -
Murder N/A - - - - - - - - -
Assault with Deadly Weapon N/A 4 2 - 2 4 2 1 1 -
Sexual Assault N/A 2 3 4 1 3 3 - 1 1
Robbery N/A 1 - 1 - 1 1 5 - -
Domestic Violence N/A 5 9 9 5 7 6 3 2 1
CPS Investigations N/A 23 30 31 22 26 20 14 18 22
Planning - Design Review
New Houses Approved 25 20 13 27 6 15 12 12 11 8
Other Applications Approved 307 273 249 271 175 266 191 262 171 217 Building
# of Permits Issued 1,493 1,402 1,452 1,417 1,228 1,822 1,586 1,524 1,757 1,709 # of Projects 526 501 511 504 231 307 312 361 259 263
Valuation of Permits Issued (in 000's) 72,217$ 84,430$ 78,012$ 79,695$ 54,639$ 105,977$ 94,101$ 89,293$ 79,121$ 92,099$ Total New Dwellings 13 20 11 11 6 3 2 3 11 2
Streets
Street resurfacing (miles) - 16 22 1 15 27 16 - 28 4
Potholes repaired 51 60 47 50 20 18 14 21 27 14
Guardrail replacement (LF) 100 45 40 50 - 75 150 158 12 - Storm drains cleaned 1,250 1,350 1,425 1,400 164 88 278 256 1,173 713 After hour callbacks 47 46 31 50 13 4 13 54 25 21
Water
New connections 2 3 5 3 3 0 1 2 1 -
Water mains breaks 24 18 10 28 19 44 19 15 29 9
Water purchased (in thousand units) 1,050 1,139 1,214 1,125 1,281 1315 1,141 1,001 1,057 1,130 Retail water sales (in thousand units) 1,027 981 1,149 1,094 1,188 1268 1,109 951 993 1,077 Meter replacements 10 4,277 29 54 23 22 31 58 28 50
No of meter reads (calendar year) 40,277 51,208 n/a n/a n/a n/a n/a n/a n/a n/a After hour callbacks 120 69 115 95 49 135 58 88 80 67
Wastewater
Average daily flow (sewer-MGD)
San Mateo 0.46 0.82 0.47 0.75 0.42 0.68 0.77 1.16 0.90 0.90 Burlingame 0.35 0.48 0.23 0.48 0.41 0.37 0.41 0.45 0.44 0.44 Total 0.81 1.30 0.70 1.23 0.83 1.05 1.18 1.16 1.34 1.34 After hour callbacks 29 27 22 54 30 16 31 24 15 17
The Police Department statistical database changed starting FY 16/17 and FY 15/16 is not provided due to comparabiilty and availability.

Source: Various Departments - Town of Hillsborough
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TOWN OF HILLSBOROUGH

CAPITAL ASSETS STATISTICS BY FUNCTION

LAST TEN FISCAL YEARS (WHEN AVAILABLE)
100
15/16 16/17 17/18 18/19 19/20 20/21 21/22 22/23 23/24 24/25 Function:

Public Safety
Police:

Stations 2 2 2 2 2 2 2 2 2 2
Patrol units 17 17 17 17 17 21 21 21 25 25
Patrol motorcycles 4 4 4 4 4 3 3 3 2 1
Fire:

Fire Stations (1) 2 2 2 2 2 2 2 2 2 2
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 1,020 1,020 1,020 1,020 1,020 1,020 1,021 1,021 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 9,000 Sewer
Sanitary sewers (miles) 98 96 96 96 96 98 94 98 98 98
Source: Various Departments - Town of Hillsborough
Note: No capital asset indicators are available for the general government function. (1) Fire services are provided by Central County Fire Department Joint Powers Authority, between the Town of Hillsborough and the City of Burlingame. Fire services are provided by the JPA to the City of Millbrae on a contractual basis. Millbrae shares in 30% of the costs of Central County Fire Department operations. The Fire Stations included on this chart reflect the fire stations the Town owns that CCFD operates within the Hillsborough city limits. -163-
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-164-

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

CITY COUNCIL MEETING
DECEMBER 8, 2025

AGENDA STAFF REPORT
ITEM SUBJECT: Resolution Implementing Previously Approved Increases to Water Service Charges and Volume Charges Effective January 2026
SUMMARY: This item is being brought to the City Council for review of the annual water rate update and, if appropriate, adoption of a resolution implementing the maximum allowable rates for volumetric and service charges adopted under Resolution No. 22-83, effective January 1, 2026.

The Town reviews the need for potential water rates to increase annually or as needed to ensure that revenues are sufficient to cover the costs of the Water Enterprise Fund for wholesale purchased water, operating and debt service costs, and capital improvement requirements. The Town adopted a five-year rate series in 2022. It implemented the first three rate increases on July 1, 2023 (Resolution No.22-83), January 1, 2024 (Resolution No. 23-82), January 1, 2025 (Resolution No. 24-64), and SFPUC rate pass-through on July 1, 2024, and 2025.

The annual water rate update is a revenue requirement update only, used to evaluate whether revenue/reserves are sufficient to meet the system's costs and whether rates under the adopted resolution should be implemented at or below the maximum (or no rate increase) for the upcoming year. In any one year, an increase in rates may not be needed, rates may need to be increased to the maximum allowable rate previously approved by the Council, or the revenue requirement exceeds the adopted maximum allowable rates, indicating the need for a new rate study and Proposition 218 proceeding to correct the insufficiency. An annual water rate update differs from a comprehensive cost-of-service study conducted periodically to evaluate the rate structure in addition to the revenue requirement.

A five-year projection is updated with current information as part of the annual water rate update, and the current report indicates that the maximum allowable rates adopted under Resolution 22-83 are sufficient to cover the projected revenue requirement for January 1, 2026. The projection indicates that the rates are insufficient to cover the projected revenue requirement as early as January 1, 2027. Results will be tracked to determine the necessary timing for a new rate study, and any rate increases above the Resolution No. 22-82 adopted rates must be adopted pursuant to Proposition 218.

The Town contracted HF&H Consultants, LLC. (“HF&H”) to prepare the annual rate update, and HF&H has issued the 2025 Water Rate Update Report (“the report”) with their findings. The report proposes adopting the maximum allowable rates for January 1, 2026, as adopted in Resolution No. 22-83. Volume and service charges for all customers would increase by 4% and would be implemented by resolution within the currently adopted Proposition 218 notice. -165-
Agenda Staff Report - Hillsborough City Council
December 8, 2025