JOINT MEETING OF THE
MILPITAS CITY COUNCIL, HOUSING
AUTHORITY, AND SUCCESSOR AGENCY
December 6, 2022 Milpitas City Council Agenda Page 1
AG E N D A
TUESDAY, DECEMBER 6, 2022
CITY COUNCIL CHAMBERS, 455 E CALAVERAS BLVD, MILPITAS, CA 7:00 PM (PUBLIC BUSINESS)
For assistance in the following languages, you may call:
Đối với Việt Nam, gọi 408-586-2400
Para sa Tagalog, tumawag sa 408-586-3051
Para español, llame 408-586-3072
The City Council meeting is held in the City Council Chamber at City Hall, 455 E. Calaveras Blvd., Milpitas and via teleconference/Zoom webinar.
You may watch the Council meeting without providing public comment by accessing it via links here.
Meeting shall be livestreamed - Go to:
Facebook: https://www.facebook.com/CityofMilpitas/
YouTube: https://www.milpitas.gov/youtube
Web Streaming: https://www.milpitas.gov/webstreaming
PUBLIC COMMENT INSTRUCTIONS
Oral public comments may be provided live during the City Council meeting in person or by registering for the zoom meeting in advance. To register you will need to provide an email address (not disclosed) and a name. To minimize technical difficulties, please make sure that you have the latest version of the Zoom Application. Below is the link to register for this meeting only:
https://ci-milpitas-ca-gov.zoom.us/webinar/register/WN_32mb8VCLThqzajXO_9IhKw After you register a link will be sent to you to join the City Council meeting in order to give your comments.
All registered meeting attendees who wish to speak must click on the “raise hand” icon when the Mayor calls for public comments. If participating by calling in on your phone, dial *9 to use the “raise hand” feature, and when you are called upon, hit *6 to unmute your phone. Your phone number will be displayed in the live meeting. The Mayor will call the speakers to begin.
All comments provided shall be limited to three minutes or less as determined by the Mayor. All members of the public will be limited to one comment per agenda item, and one comment for non-agenda items.
MILPITAS CITY COUNCIL CODE OF CONDUCT
Be respectful and courteous (words, tone, and body language). Model civility.
Avoid surprises.
Praise publicly and criticize privately.
Focus on the issue, not the person.
Refrain from using electronic devices while on the Council dais. Disclose conflicts of interest and affiliations related to agenda items. Separate governing from campaigning.
The Council speaks with one voice after making policy on issues. Respect the line between policy and administration.
Council will hold one another accountable to comply with this Code of Conduct.
1 December 6, 2022 Milpitas City Council Agenda Page 2
CALL MEETING TO ORDER by Mayor and ROLL CALL by City Clerk (7:00 PM)
PLEDGE OF ALLEGIANCE
INVOCATION (Vice Mayor Montano)
PUBLIC FORUM (7:05 PM)
Those in the audience and via Zoom are invited to address City Council on any subject not on tonight’s agenda. In-person speakers wishing to address the Council are requested, but not required to complete a Speaker Card and submit it to the Mayor. In-person speakers will then be asked to come up to the podium and state their name for the record. Those interested in speaking via Zoom may do so by following the instructions on page one (1) of the agenda. Comments may be limited to three (3) minutes or less at the Mayor’s discretion. As an item not listed on the agenda, no response is required from City staff or the Council and no action can be taken. The City Council may instruct the City Manager to place the item on a future meeting agenda.
NOTE: If a member of the public wishes to share any presentation materials for Council consideration, they must be submitted to the Clerk’s Office by email to [email protected] by 12:00 p.m. on the day of the meeting. No presentations will be accepted in person in the Council Chambers.
ANNOUNCEMENTS AND FUTURE AGENDA ITEMS (7:10 PM)
Members of the City Council or City Manager may make brief announcements at this time. Members of the City Council may also suggest future agenda items at this time. For future agenda items, the City Council shall not debate the topic or engage in discussion but shall simply state a “yes” or “no” as to whether to direct the City Manager to place the item on a future meeting agenda. If a majority of the City Council agrees to place an item on a future meeting agenda, the City Manager shall place the item on a future agenda for City Council discussion.
ANNOUNCEMENT OF CONFLICT OF INTEREST AND CAMPAIGN CONTRIBUTIONS
READING OF THE CITY COUNCIL CODE OF CONDUCT
APPROVAL OF AGENDA
CONSENT CALENDAR (7:15 PM)
Consent calendar items are considered to be routine and will be considered for adoption by one motion. There will be no separate discussion of these items unless a City Councilmember, member of the audience or staff requests the Council to remove an item from (or be added to) the consent calendar. Any person desiring to speak on any item on the consent calendar should ask to have that item removed from the consent calendar.
C1. Receive City Council Calendar of Meetings for December 2022 (Staff Contact: Suzanne Guzzetta, City Clerk, 408-586-3001)
Recommendation: Receive City Council Calendar of Meetings for December 2022.
C2. Approve City Council Regular Meeting Minutes of November 15, 2022 (Staff Contact: Suzanne Guzzetta, City Clerk, 408-586-3001)
Recommendation: Approve City Council Regular Meeting minutes of November 15, 2022.
C3. Receive the Preview List of Anticipated Items for the Next Regular City Council Meeting (Staff Contact: Suzanne Guzzetta, City Clerk, 408-586-3001)
Recommendation: Receive the list of anticipated agenda items for the next regular City Council meeting.
C4. Receive and Review the List of Agenda Items Requested by City Councilmembers (Staff Contact: Suzanne Guzzetta, City Clerk, 408-586-3001)
2 December 6, 2022 Milpitas City Council Agenda Page 3
Recommendation: Review the list of items that have been requested by City Councilmembers and provide direction to staff as necessary. No substantive discussion about any specific item shall occur and the City Council shall hold all debate about the item until it is scheduled as a full agenda item.
C5. Consider the Recommendation from Mayor Tran for Appointments to City Commissions and Declare an Unscheduled Vacancy (Contact: Mayor Tran, 408-586-3029) Recommendation: (1) Receive the recommendation from Mayor Tran and approve appointments to City Commissions; and (2) Declare an unscheduled vacancy on the Economic Development and Trade Commission and direct the City Clerk to post the notice of unscheduled vacancy.
C6. Reconfirm Findings and Determinations Under Resolution No. 9165 and Assembly Bill 361 for the Continuation of Virtual Meetings of the City Council and Legislative Bodies (Staff Contact:
Michael Mutalipassi, City Attorney, 408-586-3040)
Recommendation: Move to reconfirm findings and determinations under Resolution No. 9165 and Assembly Bill 361 for the continuation of virtual meetings of the City Council and Legislative Bodies.
C7. Authorize City Manager’s Response Letter to the October 7, 2022 Santa Clara County Civil Grand Jury Final Report “If You Only Read the Ballot, You’re Being Duped” (Staff Contact: Ashwini Kantak, Assistant City Manager, 408-586-3053; and Michael Mutalipassi, City Attorney 408-586-3040)
Recommendation: Authorize the City Manager to send a letter in response to the October 7, 2022 Santa Clara County Civil Grand Jury Final Report “If You Only Read the Ballot, You’re Being Duped” pursuant to Penal Code section 933.
C8. Receive an Update on the American Rescue Plan Act and Provide Direction to Staff (Staff Contact: Ashwini Kantak, Assistant City Manager, 408-586-3053; and Lauren Lai, Director of Finance, 408-586-3111)
Recommendation: Receive an update on the American Rescue Plan Act (ARPA) programs and provide direction to staff.
C9. Accept the City’s Annual Comprehensive Financial Report and Other Related Annual Audited Reports for the Fiscal Year Ended June 30, 2022 (Staff Contact: Lauren Lai, Finance Director, 408-586-3111)
Recommendation: Accept the City’s Annual Comprehensive Financial Report (ACFR) and other related annual audited reports for the Fiscal Year ended June 30, 2022 and find a CEQA exemption.
C10. Authorize the City Manager to Execute a Master Encroachment Agreement for Bandwidth IG, LLC, a Delaware Limited Liability Company for Installation of Network Facilities Within Public Right-of-Way (Staff Contact: Steve Erickson, Engineering Director / City Engineer, 408-586-3301; and Roberto Alonzo, Principal Civil Engineer, 408-586-3316) Recommendation: Authorize the City Manager to execute a master encroachment agreement for Bandwidth IG, LLC, a Delaware Limited Liability Company for installation of network facilities within public right-of-way and find a CEQA exemption.
C11. Adopt a Resolution Authorizing the City Manager to Execute the Purchase of Two 2023 Ford Super Duty F-250 SRW (W2B) XLT 4WD Crew Cabs for the Fire Department from Through a Sourcewell Cooperative Contract with National Auto Fleet Group in the Amount of $154,270.06 (Staff Contact: Brian Stelling, Interim Fire Chief, 408-586-2827) 3 December 6, 2022 Milpitas City Council Agenda Page 4
Recommendation: Adopt a resolution authorizing the City Manager to execute the purchase of two 2023 Ford Super Duty F-250 SRW (W2B) XLT 4WD Crew Cabs for the Fire Department through a Sourcewell Cooperative Contract with National Auto Fleet Group in the amount of $154,270.06 and find a CEQA exemption.
C12. Housing Authority/Successor Agency: Sale of the residential unit located at 600 S. Abel Street Unit #208 (Staff Contact: Alex Andrade, Economic Development Director, 408-586-3046 and Michelle Silva, Administrative Analyst II, 408-586-3244) Recommendation: (1) Adopt the resolution authorizing the Executive Director of the Milpitas Housing Authority to execute documents for the sale of the residential property located at 600 S. Abel Street Unit #208 in the amount of $314,973.00; and (2) Approve related budget amendments due to the sale of the property located at 600 S. Abel Street Unit #208 in the amount of $314,973.00.
C13. Adopt a Resolution Appointing Roger Lee as Interim Public Works Director (Liz Brown, Interim Human Resources Director, 408-586-3086)
Recommendation: Adopt a resolution appointing Roger Lee as Interim Public Works Director in accordance with California Government Code Sections 7522.56 and 21221(h) and approve, and authorize the City Manager to execute, an employment agreement with Roger Lee.
C14. Waive the Second Reading and Adopt Ordinance No. 38.849 Amending the Zoning Map of the City of Milpitas in Accordance with the Provisions of Section 3.03 of Chapter 10 of Title XI of the Milpitas Municipal Code to Change the Zoning Classification of Certain Parcels (APNs 086-38- 021, -022, and -037), Located on the East Side of South Hillview Drive and Extending Approximately 1,200 Feet Southerly From Los Coches Street, From the M2 Heavy Industrial Zoning District to the M1 Light Industrial Zoning District (Staff Contact: Ned Thomas, Planning Director, 408-586-3273)
Recommendation: Move to waive the second reading and adopt Ordinance 38.849 amending the Zoning map of the City of Milpitas in accordance with the provisions of Section 3.03 of Chapter 10 of Title XI (Zoning Ordinance) of the Milpitas Municipal Code to change the Zoning Classification of Certain Parcels (APNs 086-38-021, -022, and –037), located on the east side of South Hillview Drive and extending approximately 1200 feet southerly from Los Coches Street, from the M2 Heavy Industrial Zoning District to the M1 Light Industrial Zoning District.
C15. Waive the Second Reading and Adopt Ordinance No. 38.850 Amending Section 13 “Special Uses” of Chapter 10 “Zoning” of Title XI of the Milpitas Municipal Code Relating to Outdoor Dining (Staff Contact: Ned Thomas, Planning Director, 408-586-3273) Recommendation: Move to waive the Second Reading and Adopt Ordinance No. 38.850, amending Section 13 “Special Uses” of Chapter 10 “Zoning” of Title XI of the Milpitas Municipal Code and adding a new Subsection 13.19 Relating to Outdoor Dining and find a CEQA exemption under sections 15183 and 15061(b)(3).
C16. Report on Bids and Award Construction Contract to G&G Builders Inc. in the Amount of $872,029.00 for Rehabilitation of Up to Eleven City Parks Project (Staff Contact: Roger Lee, Interim Public Works Director, 408-586-2602)
Recommendation: (1) Receive report on bids and award a construction contract to the lowest responsible and responsive bidder, G&G Builders Inc., in the amount of $872,059.00 for the Rehabilitation of Up to Eleven City Parks project; and (2) Authorize the City Manager to negotiate and execute contract change order(s) in an aggregate amount not to exceed $468,514.00 subject to appropriation of funds and find a CEQA exemption as modifications to existing facilities. 4 December 6, 2022 Milpitas City Council Agenda Page 5
PUBLIC HEARINGS (7:20 PM)
Members of the public may be allotted up to three (3) minutes or less at the Mayor’s discretion, to comment on any public hearing item. Applicants/Appellants and their representatives may be allotted up to a total of ten (10) minutes for opening statements and up to a total of five (5) minutes maximum for closing statements. Items requested/recommended for continuance are subject to Council’s consent at the meeting.
17. Conduct a Public Hearing and Adopt Ordinance No. 65.152 for Adoption by Reference the 2022 California Building Codes and Amendments (Staff Contact: Bill Tott, Building Official, 408-586- 3263)
Recommendation: (1) Open the Public Hearing; hear testimony, then move to close the public hearing. (2) Waive the second reading and adopt Ordinance No. 65.152 amending Chapters 3, 3.5, 4, 5, 6, 7, 10,14,150, and 170 of Title II of the Milpitas Municipal Code adopting by reference the 2022 California Building Code, 2022 California Residential Code, 2021 International Property Maintenance Code, 2022 California Mechanical Code, 2022 California Electrical Code, 2022 California Plumbing Code, 2021 International Swimming Pool and Spa Code, 2022 California Existing Building Code, and 2022 California Historical Building Code, with amendments.
18. Conduct a Public Hearing and Adopt Ordinance No. 65.153 Adopting by Reference the 2022 California Energy Code; and Adopt Ordinance No. 65.154 Adopting by Reference the 2022 California Green Building Standards Code with Amendments (Staff Contact: Bill Tott, Building Official, 408-586-3263)
Recommendation: (1) Open the public hearing, hear testimony, then move to close the public hearing; (2) Waive the second reading and adopt Ordinance No. 65.153 amending Chapter 11 of Title II of the Milpitas Municipal Code adopting by reference the 2022 California Energy Code; and (3) Waive the second reading and adopt Ordinance No. 65.154 amending Chapter 19 of Title II of the Milpitas Municipal Code adopting by reference the 2022 California Green Building Standards Code with amendments and find a CEQA exemption.
19. Conduct a Public Hearing, Waive the Second Reading and Adopt Ordinance No. 133.26, Adopting by Reference with Certain Local Amendments the 2022 Edition of the California Fire Code (Staff Contact: Arthur Belton, Deputy Fire Chief/Fire Marshal, 408-586-3384) Recommendation: (1) Following the City Attorney reading aloud the title, waive the second reading beyond the title of Ordinance No. 113.26; (2) Open the public hearing and move to close following comments; and (3) Adopt Ordinance No. 113.26 adopting by reference with certain local amendments the 2022 edition of the California Fire Code, enacted as Chapter 300, Title V of the Milpitas Municipal Code.
20. Conduct a Public Hearing and Consider Adopting an Urgency Ordinance Amending Section 13 “Special Uses” of Chapter 10 “Zoning” of Title XI of the Milpitas Municipal Code Relating to Accessory Dwelling Units (ADUs) and Junior Accessory Dwelling Units (JADUs) (Staff Contact:
Ned Thomas, Planning Director, 408-586-3273)
Recommendation: (1) Conduct a public hearing and move to close the hearing following comments; and (2) Adopt an Urgency Ordinance amending Section 13 “Special Uses” of Chapter 10 “Zoning” of Title XI of the Milpitas Municipal Code to comply with Government Code Section(s) 65852.2, 65852.22, 65852.23 and Section 17980.12 of the Health and Safety Code and making findings that the proposed zoning ordinance amendment is statutorily exempt from environmental review under the California Environmental Quality Act (CEQA) pursuant to Public Resources Code section 21080.17, which exempts from CEQA any ordinance that is adopted to implement Government Code Section 65852.1 or 65852.2.
5 December 6, 2022 Milpitas City Council Agenda Page 6
21. Conduct a Public Hearing and Introduce an Ordinance Amending Section 13 “Special Uses” of Chapter 10 “Zoning” of Title XI of the Milpitas Municipal Code Relating to Accessory Dwelling Units (ADUs) and Junior Accessory Dwelling Units (JADUs) (Staff Contact: Ned Thomas, Planning Director, 408-586-3273)
Recommendation: (1) Conduct a public hearing and move to close the hearing following comments; (2) City Attorney shall read aloud the title of the Ordinance; and (3) Move to waive the first reading beyond the title and introduce an Ordinance amending Section 13 “Special Uses” of Chapter 10 “Zoning” of Title XI of the Milpitas Municipal Code relating to Accessory Dwelling Units (ADUs) and Junior Accessory Dwelling Units (JADUs) and making findings of CEQA exemption.
COMMUNITY SERVICES AND SUSTAINABLE INFRASTRUCTURE (9:30 PM)
22. Receive Staff Report on Draft Water Rates Study, Direct Staff to Proceed with Community Engagement on Proposed Rates, Including Identifying a Date for the Public Hearing and Mailing a Notice of the Public Hearing for the Proposed Water Rates (Staff Contact: Roger Lee, Interim Public Works Director, 408-586-2602; and Lauren Lai, Finance Director, 408-586-3111) Recommendation: (1) Receive staff report on Draft Water Rates Study; and (2) Direct staff to proceed with community engagement on proposed rates, including identifying a date for the public hearing and mailing a notice of the public hearing not less than 45 days prior to the hearing and find a CEQA exemption.
23. Receive Staff Report on Draft Sewer Rates Study, Direct Staff to Proceed with Community Engagement on Proposed Rates, Including Identifying a Date for the Public Hearing and Mailing a Notice of the Public Hearing for the Proposed Sewer Rates (Staff Contact: Roger Lee, Interim Public Works Director, 408-586-2602; and Lauren Lai, Director of Finance, 408-586-3111) Recommendation: (1) Receive staff report on Draft Sewer Rates Study; and (2) Direct staff to proceed with community engagement on proposed rates, including identifying a date for the public hearing and mailing a notice of the public hearing not less than 45 days prior to the hearing and find a CEQA exemption.
LEADERSHIP AND SUPPORT SERVICES (10:30 PM)
24. Adopt a Resolution Appointing Brian Stelling as Interim Fire Chief (Staff Contact: Liz Brown, Interim Human Resources Director, 408-586-3086)
Recommendation: Adopt a resolution appointing Brian Stelling as Interim Fire Chief in accordance with California Government Code Sections 7522.56 and 21221(h) and authorize the City Manager to execute an employment agreement with Brian Stelling.
ADJOURNMENT (10:45 PM)
KNOW YOUR RIGHTS UNDER THE OPEN GOVERNMENT ORDINANCE
Government’s duty is to serve the public, reaching its decisions in full view of the public. Commissions and other City agencies exist to conduct the people’s business. This ordinance assures that delib erations are conducted before the people and City operations are open to the people’s review. For more information on your rights under the Open Government Ordinance or to report a violation, contact the City Attorney’s office at Milpitas City Hall, 455 E. Calaveras Blvd., Milpitas, CA 95035 e-mail:[email protected] / Phone: 408-586-3040
The Open Government Ordinance is codified in the Milpitas Municipal Code as Title I Chapter 310 and is available online at the City’s website www.milpitas.gov by selecting the Milpitas Municipal Code link. 6 December 6, 2022 Milpitas City Council Agenda Page 7
Materials related to an item on this agenda submitted to the City Council after initial distribution of the agenda packet are available for public inspection at the City Clerk’s office at Milpitas City Hall, 3rd floor 455 E. Calaveras Blvd., Milpitas and on City website. City Council agendas and related materials can be viewed online: www.milpitas.gov/government/council/agenda_minutes.asp (select meeting date)
APPLY TO SERVE ON A CITY COMMISSION
Commission application forms are available online at www.milpitas.gov or at Milpitas City Hall.
Contact the City Clerk’s Office at 408-586-3001 for more information.
If you need assistance, per the Americans with Disabilities Act, for any City of Milpitas public meeting, please call the City Clerk at 408-586-3001 or send an e-mail to [email protected] prior to the meeting. You may request a larger font agenda.
7 Milpitas City Council Calendar
December 2022
Sunday Monday Tuesday Wednesday Thursday Friday Saturday
1 5:30 PM-Milpitas Chamber of
Commerce Board (EC)
4:00 PM-Santa Clara VTA
Special Board of Directors (CM)
5:30 PM-Santa Clara VTA Board
of Directors (CM)
7:00 PM-Tree Lighting Event
2 3
4 5
7:00 PM-Parks, Recreation &
Cultural Resources Commission
(CM)
6 7:00 PM-City Council
7 5:30 PM-Veterans Commission
(RT)
7:00 PM-Community Advisory
Commission (EC)
7:00 PM-CEDAW Task Force,
Room 7/8 Community Center (KD)
8 4:00 PM-Treatment Plant Advisory
Committee (CM)
4:00 PM-Santa Clara VTA Policy
Advisory Committee (AP)
7:00 PM-Youth Advisory
Commission (EC)
9 10
11 12
13 4:00 PM-HOPE Task Force
Meeting
14 4:30 PM-Transportation
Subcommittee (RT/CM)
7:00 PM-Silicon Valley Clean
Energy Board of Directors (EC)
(Cupertino)
7:00 PM-Planning Commission
15 10:00 AM-VTA Congestion Mgmt
Program Planning Comm (CM)
5:30 PM-Measure F Oversight
Committee
16 17
18 19
7:00 PM-Science, Technology,
and Innovation Commission (RT)
20 6:00 PM-City Council Special
Meeting – Swearing In Ceremony
7:00 PM-City Council
21 6:00 PM-Energy and
Environmental Sustainability
Commission (EC)
22 23
CITY Observed Holiday
24 25
26 CITY Observed
Holiday
27 28
29 30
31 November 2022
S M T W T F S
1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30
January 2023
S M T W T F S
1 2 3 4 5 6 7
8 9 10 11 12 13 14
15 16 17 18 19 20 21
22 23 24 25 26 27 28
29 30 31
City Hall and City Facilities Closed (Fire and Police are not affected) 8 Item # C1.
REGULAR MEETING OF THE MILPITAS
CITY COUNCIL
November 15, 2022 Milpitas City Council Agenda Page 1
M I NU TE S
TUESDAY, NOVEMBER 15, 2022
CITY COUNCIL CHAMBERS, 455 E CALAVERAS BLVD, MILPITAS, CA 7:00 PM (PUBLIC BUSINESS)
The City Council of the City of Milpitas convened on the regular City Council meeting day of November 15, 2022, in the City Council Chamber at City Hall, 455 E. Calaveras Blvd., Milpitas, and via teleconference/Zoom webinar.
CALL MEETING TO ORDER by Mayor and ROLL CALL by City Clerk Mayor Tran called the Regular City Council meeting to order at 7:00 PM. Roll Call was taken by City Clerk Guzzetta.
PRESENT: Mayor Tran, Vice Mayor Montano, Councilmembers Chua, Dominguez, and Phan (7:01 PM) ABSENT: None
PLEDGE OF ALLEGIANCE
The Pledge of Allegiance was led by Mayor Tran.
INVOCATION
Mayor Tran invited Voltaire Montemayor to present the invocation.
PUBLIC FORUM
The following people spoke under Public Forum:
1. Robin Reynolds, Bill Wilson Center
2. Voltaire Montemayor
ANNOUNCEMENTS AND FUTURE AGENDA ITEMS
City Manager McHarris advised of the upcoming City Hall closure for Thanksgiving, announced the Tree Lighting ceremony on December 1, 2022 at the Civic Center Plaza, the Veterans Appreciation Lunch on November 19, 2022, and the Build it Green Program from November 30 – December 8, 2022.
Mayor Tran thanked the community for attending the Veterans Day Ceremony. He requested the City Manager add an item regarding a food pantry.to the Council request list in January.
Councilmember Phan congratulated Mayor Elect Montano.
Vice Mayor Montano offered thanks to Councilmember Phan and the community.
Councilmember Chua congratulated Mayor Elect Montano and commented on the challenges of running for office. She also offered congratulations to incoming Councilmembers Elect Barbadillo and Lien.
9 Item # C2.
November 15, 2022 Milpitas City Council Agenda Page 2
Councilmember Dominguez offered comments on attendance at the polls and the newly elected members of the Council.
ANNOUNCEMENT OF CONFLICT OF INTEREST AND CAMPAIGN CONTRIBUTIONS City Attorney Mutalipassi asked the Mayor and City Councilmembers if they had any personal conflicts of interest. By roll call, there were no conflicts of interest. City Attorney Mutalipassi asked the Mayor and City Councilmembers if they had any reportable campaign contributions. By roll call, there were no reportable campaign contributions.
READING OF THE CITY COUNCIL CODE OF CONDUCT
Mayor Tran read the Code of Conduct.
APPROVAL OF AGENDA
Motion: to approve the November 15, 2022 Regular Meeting Agenda, postponing item 22 to first regular meeting of January 2023.
Motion/Second: Mayor Tran / Vice Mayor Montano
Motion carried by the following:
AYES: Councilmembers Chua, Dominguez, Phan, Vice Mayor Montano, Mayor Tran NOES: None
CONSENT CALENDAR
Motion: to approve the consent calendar pulling C16 for discussion.
Motion/Second: Mayor Tran / Councilmember Chua
Motion carried by the following:
AYES: Councilmembers Chua, Dominguez, Phan, Vice Mayor Montano, Mayor Tran NOES: None
C1. Receive City Council Calendar of Meetings for November and December 2022 (Staff Contact:
Suzanne Guzzetta, City Clerk, 408-586-3001)
Received the City Council Calendar of Meetings for November and December 2022.
C2. Approve City Council City Council Regular Meeting Minutes of November 1, 2022 (Staff Contact:
Suzanne Guzzetta, City Clerk, 408-586-3001)
Approved the City Council Regular Meeting minutes of November 1, 2022.
C3. Receive the Preview List of Anticipated Items for the Next Regular City Council Meeting (Staff Contact: Suzanne Guzzetta, City Clerk, 408-586-3001)
Received the list of anticipated agenda items for the next regular City Council meeting.
C4. Receive and Review the List of Agenda Items Requested by City Councilmembers (Staff Contact: Suzanne Guzzetta, City Clerk, 408-586-3001)
Reviewed the list of items that have been requested by City Councilmembers and provided direction to staff as necessary.
10 Item # C2.
November 15, 2022 Milpitas City Council Agenda Page 3
C5. Approve City Council Meeting Schedule for 2023 (Staff Contact: Suzanne Guzzetta, City Clerk, 408-586-3001)
Approved the 2023 Milpitas City Council meeting schedule, with any changes requested at the City Council meeting.
C6. Consider the Recommendation from Mayor Tran for Appointments to City Commissions (Contact: Mayor Tran, 408-586-3029)
Received the recommendation from Mayor Tran and approved appointments to City Commissions.
Arts Commission
1. Reappoint Sandeep Umarani to a term ending October 2025 Public Safety and Emergency Preparedness Commission
1. Promote Andrew Luu to Alternate #1 with an unexpired term ending June 2025
2. Appoint Rosana Cacao as Alternate #2 with an unexpired term ending June 2023.
C7. Reconfirm Findings and Determinations Under Resolution No. 9165 and Assembly Bill 361 for the Continuation of Virtual Meetings of the City Council and Legislative Bodies (Staff Contact:
Michael Mutalipassi, City Attorney, 408-586-3040)
Moved to reconfirm findings and determinations under Resolution No. 9165 and Assembly Bill 361 for the continuation of virtual meetings of the City Council and Legislative Bodies.
C8. Approve and Authorize the City Manager to Execute a Four-Year Agreement with CivicPlus for the CivicEngage Municipal Website Platform (Staff Contact: Daniel Nam, Information Technology Director, 408-586-2712)
Approved and authorized the City Manager to execute a four-year agreement with CivicPlus for the CivicEngage Government Website Platform for a total not to exceed contract amount of $200,000.00, in final form to be approved by the City Attorney.
C9. Waive the Second Reading and Adopt Ordinance No. 38.848 Amending Sections of Chapter 10 (Zoning), Title XI of the Milpitas Municipal Code Relating to Definitions and Regulations for Personal and Commercial Service Land Uses (Staff Contact: Ned Thomas, Planning Director, 408-586-3273)
Waived the second reading and adopted Ordinance No. 38.848 amending sections of Chapter 10 (Zoning) of Title XI of the Milpitas Municipal Code relating to definitions and regulations for commercial service land uses
C10. Approve and Authorize the City Manager to Execute a Stormwater Management Facilities Operation and Maintenance Agreement between the City of Milpitas and Toll West Coast, LLC for the Parkside Project at 1980 and 1992 Tarob Court and 551 Lundy Place (Staff Contact: Steve Erickson, Engineering Director / City Engineer, 408-586-3301; and Roberto Alonzo, Principal Civil Engineer, 408-586-3316)
Approved and authorized the City Manager to execute a Stormwater Management Facilities Operation and Maintenance Agreement between the City of Milpitas and Toll West Coast, LLC for the Parkside Project at 1980 and 1992 Tarob Court and 551 Lundy Place.
C11. Approve and Authorize the City Manager to Execute the Improvement Agreement with Satpreet Singh Thind and Jaspreet Kaur Thind, for Completion of Offsite Public Improvements Located at 11 Item # C2.
November 15, 2022 Milpitas City Council Agenda Page 4
250 Piedmont Road Associated with Site Development Permit (SD19-0004) (Staff Contact:
Roberto Alonzo, Principal Civil Engineer, 408-586-3316) Approved and authorized the City Manager to execute the improvement agreement with Satpreet Singh Thind and Jaspreet Kaur Thind, for completion of offsite public improvements located at 250 Piedmont Road associated with Site Development Permit (SD19-0004).
C12. Award and Approve a 5-Year Professional Services Contract with Fireworks and Stage Effects America, LLC for the Annual 4th of July and Annual Lunar New Year’s Fireworks Shows for a Not-to-Exceed Amount of $140,510.00 (Staff Contact: Renee Lorentzen, Recreation and Community Services Director, 408-586-3409)
Awarded and authorized the City Manager to execute the five-year professional services agreement with Fireworks and Stage Effects America, LLC for Annual 4th of July and Annual Lunar New Year pyrotechnical services for the not-to-exceed amount of $140,510.00.
C13. Review and Accept the 2022 Legislative Season Outcome Report (Staff Contact: Walter C.
Rossmann, Deputy City Manager, 408-586-3012)
Reviewed and accepted the 2022 Legislative Season Outcome Report.
C14. Adopt a Resolution Appointing Roger Lee as Interim Public Works Director (Staff Contact:
Jeannine Seher, Human Resources Director, 408-586-3086) Adopted Resolution No. 9199 appointing Roger Lee as Interim Public Works Director in accordance with California Government Code Sections 7522.56 and 21221(h) and approve, and authorize the City Manager to execute, an employment agreement with Roger Lee.
C15. Adopt a Resolution Appointing Liz Brown as Interim Human Resources Director (Jeannine Seher, Human Resources Director, 408-586-3086)
Adopted Resolution No. 9200 appointing Liz Brown as Interim Human Resources Director in accordance with California Government Code Sections 7522.56 and 21221(h) and approve, and authorize the City Manager to execute, an employment agreement with Liz Brown.
C16. Appointment of City Council Ad Hoc Naming Subcommittee Members (Staff Contact: Renee Lorentzen, Recreation and Community Services Director, 408-586-3409) Pulled from the Consent Calendar.
C17. FY 2022-23 1st Quarter Financial Status Report for the Quarter Ended September 30, 2022 (Staff Contact: Lauren Lai, Finance Director, 408-586-3111)
Reviewed the FY 2022-23 Quarterly Financial Status Report for the quarter ended September 30, 2022.
PUBLIC HEARINGS
18. Conduct a Public Hearing and Introduce an Ordinance Amending the Zoning Map of the City of Milpitas in Accordance with the Provisions of Section 3.03 of Chapter 10 of Title XI (Zoning) of the Milpitas Municipal Code to Change the Zoning Classification of Certain Parcels (APNs 086- 38-021, -022, and -037), Located on the East Side of South Hillview Drive and Extending Approximately 1200 Feet Southerly From Los Coches Street, From the M2 Heavy Industrial Zoning District to the M1 Light Industrial Zoning District (Staff Contact: Ned Thomas, Planning Director, 408-586-3273)
12 Item # C2.
November 15, 2022 Milpitas City Council Agenda Page 5
Planning Director Thomas introduced the item and Senior Planner Van Hua presented the report.
Mayor Tran opened the public hearing
There were the following speakers:
1. Voltaire Montemayor
Mayor Tran closed the public hearing.
Vice Mayor Montano questioned the effects of passing this ordinance. Planning Director Thomas responded that previous City Council action inadvertently affected the three parcels, and that the ordinance would have no effect on the surrounding properties. Vice Mayor Montano emphasized the importance of maintaining existing heavy industrial zoning.
City Attorney Mutalipassi read the title of the ordinance.
After discussion, motion: to waive the first reading beyond the title and introduce Ordinance No.
38.849 amending the Zoning map of the City of Milpitas in accordance with the provisions of Section
3.03 of Chapter 10 of Title XI (Zoning Ordinance) of the Milpitas Municipal Code to change the Zoning Classification of Certain Parcels (APNs 086-38-021, -022, and –037), located on the east side of South Hillview Drive and extending approximately 1200 feet southerly from Los Coches Street, from the M2 Heavy Industrial Zoning District to the M1 Light Industrial Zoning District. In addition, determine that the zoning ordinance amendment is exempt from environmental review under the California Environmental Quality Act (CEQA) in accordance with CEQA Guidelines Sections 15183 (Projects Consistent with a General Plan and Zoning) and 15061(b)(3) (Common Sense Exemption).
Motion/Second: Mayor Tran / Councilmember Chua
Motion carried by the following:
AYES: Councilmembers Chua, Dominguez, Phan, Vice Mayor Montano, Mayor Tran NOES: None
19. Conduct a Public Hearing and Introduce an Ordinance Amending Section 13 “Special Uses” of Chapter 10 “Zoning” of Title XI of the Milpitas Municipal Code Relating to Outdoor Dining (Staff Contact: Ned Thomas, Planning Director, 408-586-3273)
Planning Director Thomas presented the report.
Mayor Tran opened the public hearing
There were the following speakers:
1. Voltaire Montemayor
Mayor Tran closed the public hearing.
Vice Mayor Montano asked if the ordinance would affect existing Main Street restaurants with outdoor dining and questioned if they will need to reapply for a permit or are they grandfathered in. Planning Director Thomas noted that all restaurants using converted parking stalls, sidewalks, or patio areas for outdoor dining will need to apply for a minor site development permit under the new ordinance.
Restaurants that convert parking stalls into outdoor dining areas will be eligible for an overall parking reduction to ensure that the expanded seating doesn’t trigger the need for additional parking and that converted spaces don’t need to be replaced elsewhere on the same site..
City Attorney Mutalipassi read the title of the ordinance. 13 Item # C2.
November 15, 2022 Milpitas City Council Agenda Page 6
After discussion, motion: to waive the first reading beyond the title and introduce Ordinance No.
38.850 adding Subsection 13.19 “Outdoor Dining” to Chapter 10 “Zoning” of Title XI of the Milpitas Municipal Code Relating to Outdoor Dining Areas and determine the Zoning Ordinance Text Amendment is exempt from environmental review under the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Sections 15183 (Projects Consistent with a General Plan) and 15061(b)(3) (Common Sense Exemption).
Motion/Second: Mayor Tran / Councilmember Dominguez
Motion carried by the following:
AYES: Councilmembers Chua, Dominguez, Phan, Vice Mayor Montano, Mayor Tran NOES: None
20. Conduct a Public Hearing and Adopt a Resolution Certifying Election Results and Adding the Property Located at 1724 Sunnyhills Drive – Parcel 2 into Community Facilities District No. 2005-1 (Annexation No. 22) (Staff Contact: Steve Erickson, Engineering Director / City Engineer, 408-586-3301; and Roberto Alonzo, Principal Civil Engineer, 408-586-3316) Engineering Director / City Engineer Erickson introduced the item and Principal Civil Engineer Alonzo presented the report.
Mayor Tran opened the public hearing
There were the following speakers:
1. Voltaire Montemayor
Mayor Tran closed the public hearing.
City Clerk Guzzetta reported that one ballot was received and opened the sealed ballot. She then stated that there was one vote in favor of the proposition and it was approved.
Recommendation: to adopt Resolution No. 9201 certifying election Results and adding the property located at 1724 Sunnyhills Drive – Parcel 2 into Community Facilities District No. 2005-1 (Annexation No. 22).
Motion/Second: Mayor Tran / Vice Mayor Montano
Motion carried by the following:
AYES: Councilmembers Chua, Dominguez, Phan, Vice Mayor Montano, Mayor Tran NOES: None
COMMUNITY DEVELOPMENT
21. Receive a Report on the Homekey Project at 1000 Hillview Court (Staff Contact: Ashwini Kantak, Assistant City Manager, 408-586-3056)
Assistant City Manager Kantak presented the report joined by Jamboree Chief Impact Officer George Searcy, Abode Services Vice President of Programs Katie Fantin, Abode Services Senior Director of Health and Wellness Brittney Kirkland, Chief of Police Hernandez, Police Captain Miller, Deputy Fire Chief Schoonover, Director Consuelo Hernandez from the Santa Clara County Office of Supportive Housing, and Hyder Regional Manager Paige Range.
There were the following speakers:
14 Item # C2.
November 15, 2022 Milpitas City Council Agenda Page 7
1. Voltaire Montemayor
2. Hillview Tenants Association
3. Lisa Reeve
Mayor Tran offered observations on public safety and increasing site security. He asked the working group to review adding a perimeter fence to the apartments and explore if crimes are being committed by people that aren’t residents of the facility.
Councilmember Dominguez emphasized the importance of controlling access to the facility and voiced concerns with music volume, cannabis usage, resident safety issues, and cleanliness outside of the main floor. She offered compliments to Abode Services staff for their interactions with residents and availability on-site but noted Jamboree staff appeared to be unavailable. She suggested the tenant’s association be represented in the working group.
Councilmember Chua questioned the availability of staffing throughout the day and asked the working group to investigate the timing of public safety occurrences and if they coincide with times staff are not on site and focus on the statistics in each category regarding calls for service and address them. She also asked the working group to look into any reason that the number of calls for service in September 2022 increased.
Santa Clara County Supervisor Otto Lee commented on his recent visit, discussed actions taken in response to the letter sent in August, and commended staff and council for their work.
Vice Mayor Montano asked for staff to provide the ratio of calls compared to Citywide calls for service.
Chief of Police Hernandez responded that he would need to narrow the scope to compare it to similar apartment complexes due to factors based on the differing City dynamics. She requested the project team include a representative of the Hillview Tenants Association as part of the biweekly meetings. She suggested adding a third full time staff member to the facility management team.
No action taken.
LEADERSHIP AND SUPPORT SERVICES
22. Approve the Prioritization of Additional Workplan Items City Council Policy (Staff Contact:
Ashwini Kantak, Assistant City Manager, 408-586-3053; Walter C. Rossmann, Deputy City Manager, 408-586-3012)
Postponed to first meeting in January 2023.
ITEMS PULLED FROM CONSENT CALENDAR
C16. Appointment of City Council Ad Hoc Naming Subcommittee Members (Staff Contact: Renee Lorentzen, Recreation and Community Services Director, 408-586-3409) Motion: To defer the appointment of two Members of the City Council to January 2023 to be heard with appointments of Members of the City Council to commissions, boards, and subcommittees for the next legislative period.
Motion/Second: Vice Mayor Montano / Mayor Tran
Motion carried by the following:
AYES: Councilmembers Chua, Dominguez, Phan, Vice Mayor Montano, Mayor Tran NOES: None
15 Item # C2.
November 15, 2022 Milpitas City Council Agenda Page 8
ADJOURNMENT
Mayor Tran adjourned the meeting at 9:30 PM.
Draft meeting minutes submitted by City Clerk, Suzanne Guzzetta
16 Item # C2.
TENTATIVE CITY COUNCIL AGENDA ITEM LIST
as of 12/1/2022
December 20, 2022 – 3rd Tuesday
CLOSED SESSION
INVOCATION (assigned to Vice Mayor Montano)
PRESENTATION
AGENDA ITEMS (Special Meeting)
1. Certification of Election Results (City Clerk)
2. Presentation to Outgoing Officials
3. Swear in Newly Elected Officials
Adjourn to Reception
4. Elect New Vice Mayor
CONSENT CALENDAR
5. Receive City Council calendar for December and January 2022 (City Clerk)
6. Approve City Council Regular Meeting Minutes of November 15, 2022 (City Clerk)
7. Preview list of items for January 3, 2022 (City Clerk)
8. Councilmember Request List (City Clerk)
9. Reconfirm Findings and Determinations Under Resolution No. 9156 and Set Forth in Assembly Bill 361 for the Continuation of Virtual Meetings of the City Council and Legislative Bodies (City Attorney)
10. AB1600 Annual Report on Impact Fees (Finance)
11. Smart Cover 5-yr Agreement Authorization (Public Works)
12. Approve and Authorize the City Manager to Execute an Encroachment and Maintenance Agreement with Milpitas – District 4 Owner, LLC, for the Perpetual Maintenance and Operation of Private Sidewalk Lighting Improvements within the City Right-of-Way Located at 150 Market Street (Engineering)
13. 2nd Reading – ADU Zoning Ordinance (Planning)
17 Item # C3.
MILPITAS CITY COUNCIL
AGENDA ITEM REQUESTS
Request
No. Topic Submitted by:
Date
Requested
STATUS and/or DATE scheduled on City
Council meeting agenda:
1 Food pantry Tran 11/15/2022
2 Investigate labor policies related to Councilmember
paternity/maternity leave, clarify if Councilmembers
are employees and email to City Council prior to the
next City Council meeting. Dominguez 10/18/2022 Memo sent by City Attorney on 10/27 3 Review the City Council handbook to ensure that
Councilmembers are guaranteed paternity/maternity
leave and not made to give up their seat due to
missing consecutive meetings. Dominguez 10/18/2022 Memo sent by City Attorney on 10/27 4 Staff explore eliminating or waiving the fee for the
gym at the Milpitas Senior Center Chua 10/18/2022
Staff will evaluate this item consistent with
the Recreation and Community Service Cost
Recovery City Council Policy and bring it
back to Council for consideration as part of
approval of the FY 2023-24 Proposed Master
Fee Schedule.
5 City Attorney or City Manager draft a written policy
regarding foreign language spoken at the dais Chua 9/20/2022 Item will be brought forward as part of the
next City Council additional workplan items
prioritization in December/January
6 City Manager to look into defining either a
standalone teen center or updating information to
indicate the Senior Center also functions as a Teen
Center Chua 9/20/2022
Item will be brought forward as part of the
next City Council additional workplan items
prioritization in December/January
7 Staff look into construction in the Sunnyhills area Dominguez 9/20/2022 Staff is following up on this request and will
send a status update to Council
8 Schedule an additional ADU workshop Chua 9/6/2022 Staff is evaluating this request 9 City Manager to look into underutilized areas of
parks or a portion of parks not being used and
develop for use in the future. Chua 8/16/2022
Item will be brought forward as part of the
next City Council additional workplan items
prioritization in December/January
10 Discuss converting vacant lot that was a basketball
court into a community garden at Vasona and
Adobe Montano 8/16/2022
Item will be brought forward as part of the
next City Council additional workplan items
prioritization in December/January
11 City Manager look into implementing a workshop for
small businesses on the bidding process for
projects in the city Chua 8/9/2022
Item will be brought forward as part of the
next City Council additional workplan items
prioritization in December/January
12 Memory bench at Sunny Hills Park for one of the
founders, Dave Vohlberg, and to explore other
historical plaques or benches to remember our
history Tran 8/9/2022
Item will be brought forward as part of the
next City Council additional workplan items
prioritization in December/January
13 Review of the Milpitas Chamber of Commerce
previously approved request for funding including a
financial report dating back 12 months and the
workplan for the Art & Wine Festival Tran 8/9/2022
Staff is working with the Chamber to obtain
the requested documentation
OPEN ITEMS
NOTE: Deferred and Completed Items are not listed18
Item # C4.
MILPITAS CITY COUNCIL
AGENDA ITEM REQUESTS
Request
No. Topic Submitted by:
Date
Requested
STATUS and/or DATE scheduled on City
Council meeting agenda:
14 Quarterly or Monthly crime statistics on Homekey
Project Chua 6/7/2022
PD will present quarterly reports starting on
November 15, 2022.
15 Funding to hire a consultant for the Sunnyhills
Historical Designation on a state level Tran 6/7/2022
Request will be included with the Historic
Resources Master Plan project approved as
part of the 2023-2027 Capital Improvement
Program.
16 Request for Crossing Guards at McCandless and
Montague Expressway and review wages for
Crossing Guards Montano 4/5/2022
Staff is in the middle of a citywide traffic
study, which includes school aged pedestrian
counts around schools in the City including
the McCandless and Montague Expressway
intersection.
17 Host a Town Hall at City Hall in January, February,
and March for the community to share comments
about the issue of the unhoused. Tran 11/2/2021
This item was postponed by Mayor Tran due
to the Omicron variant and a rise in COVID-
19 cases
Request
No. Topic Submitted by:
Date
Requested
STATUS and/or DATE scheduled on City
Council meeting agenda:
18 Establish a SPAR fund modelled after the City of
Mountain View - sets asides moneys for
opportunities to buy real estate Montano 6/7/2022
Discussed at Spring Quarterly City Council
Workplan Items Prioritization Discussion;
Approved to move forward during Summer
Quarterly City Council Workplan Items
Prioritization Discussion on 9/06/2022
19 Memorial Plaque in honor of youth skateboarder
that passed away Montano 6/7/2022
Discussed at Spring Quarterly City Council
Workplan Items Prioritization Discussion;
Approved to move forward during Summer
Quarterly City Council Workplan Items
Prioritization Discussion on 9/06/2022
20 Prepare Vision Zero Action Plan Tran 6/7/2022
Discussed at Spring Quarterly City Council
Workplan Items Prioritization Discussion;
Approved to move forward during Summer
Quarterly City Council Workplan Items
Prioritization Discussion on 9/06/2022; Item
will be brought forward for funding for Council
consideration as part of the FY 2023-24
budget process.
21 Explore the policy for locking mechanisms on
shopping carts for large commercial businesses Tran 4/19/2022 Discussed at Spring Quarterly City Council
Workplan Items Prioritization Discussion;
Approved to move forward during Summer
Quarterly City Council Workplan Items
Prioritization Discussion on 9/06/2022
22 Explore an ordinance or policy to reduce thefts and
increase security in the commercial retail parking
areas Chua 4/5/2022
Discussed at Spring Quarterly City Council
Workplan Items Prioritization Discussion;
Approved to move forward during Summer
Quarterly City Council Workplan Items
Prioritization Discussion on 9/06/2022
ACTIVE ITEMS
NOTE: Deferred and Completed Items are not listed19
Item # C4.
MILPITAS CITY COUNCIL
AGENDA ITEM REQUESTS
Request
No. Topic Submitted by:
Date
Requested
STATUS and/or DATE scheduled on City
Council meeting agenda:
23 Create a plan for future solar paneling at City
facilities Montano 3/1/2022
Discussed at Spring Quarterly City Council
Workplan Items Prioritization Discussion;
Approved to move forward at the 5/03/2022
meeting; Discussed at the May 10 budget
meeting and approved funding of $25,000 in
the 2022-23 budget
24 Evaluate reopening the childcare center with a non-
profit organization running the center Montano 2/1/2022 Approved during Spring Quarterly City
Council Workplan Items Prioritization
Discussion on 5/03/2022.
25 Requested an appropriation in an amount not to
exceed $250,000 to procure a contract to address
the streetlights that are pending fieldwork. Tran 2/1/2022 At this time, staff has sufficient Council
approved resources to address the remaining
streetlight outages; however, will bring
relevant actions for Council consideration, if
needed.
26 Explore a lease for the vacant land adjacent to the
Library for City use Tran 1/18/2022
Discussed at Spring Quarterly City Council
Workplan Items Prioritization Discussion;
Approved to move forward at the 5/03/2022
meeting;
27 Staff to look into mural Art on Great Mall Parkway
on the VTA owned Light rail pillars Montano 11/16/2021
Discussed at Spring Quarterly City Council
Workplan Items Prioritization Discussion;
Approved at the 5/03/2022 meeting;
discussed funding at the 5/10/2022 budget
meeting and approved $100,000 of funding
for one site
28 Request for the City to make the temporary third-
party food deliver fee caps permanent and add
additional provisions for enforcement Phan 11/16/2021
Discussed at Spring Quarterly City Council
Workplan Items Prioritization Discussion;
Approved to move forward at the 5/03/2022
meeting
29 Have a picture of Albert Vogel Sr. put up in the
Senior Center Montano 10/19/2021
Approved to move forward at the 1/11/2022
Council meeting; Staff engaged the artist of
the existing mural regarding this Council
approved item.
30 Requested the City extend the outdoor dining
options through March of next year Phan 9/21/2021
Planning Director to provide information on
current outdoor dining extension
31 Include a bust of Maria Lemire on the Mural in front of the Senior Center Montano 8/17/2021
Approved to move forward at the 1/11/2022
Council meeting; Staff engaged the artist of
the existing mural regarding this Council
approved item.
32 Look into opening up the Senior Center on
Saturdays for half a day Chua 8/5/2021
This three-month pilot was kicked off on
Saturday Sept. 10. Per the Information
Memorandum issued on Nov. 22, 2022, due
to the success of the Saturday Day hours, the
pilot will be extended for the remainder of the
current Fiscal Year.
33 Look into bringing back a roller rink Montano 8/5/2021 Approved to move forward at the 1/11/2022
Council meeting. Funding for the program will
need to be prioritized through the FY 22-23
budget process; Discussed at 5/10/2022
budget meeting and approved $100,000
funding for a two-day event in 2023
34 Staff to create a plan on how to increase the
number of local businesses doing business with the
City Chua 4/6/2021
At 8/9/2021 Council meeting, Council voted
that this item may have to come back for
additional discussion because there may be
some legal considerations.
NOTE: Deferred and Completed Items are not listed20
Item # C4.
MILPITAS CITY COUNCIL
AGENDA ITEM REQUESTS
Request
No. Topic Submitted by:
Date
Requested
STATUS and/or DATE scheduled on City
Council meeting agenda:
35 Staff to provide information on a landmark policy for the City of Milpitas Tran 3/16/2021
8/09/2021 Council voted 5-0 to move this
item forward; this item will be included for
funding consideration in the development of
the FY 2023-27 CIP for assessment of
historical and cultural resources and
development of landmark policy; The funding
for the assessment of historical and cultural
resources and development of a landmark
policy will be included in the 2023-2027
Capital Improvement Program scheduled for
adoption on May 3, 2022. This project will be
scheduled to begin in FY 2022-23.
36 Amendment to the existing ordinance for third-party
food delivery vendor services to prohibit regulatory
response fees Phan 2/16/2021
Agendized for discussion on 3/16/2021,
deferred to 4/06/2021; CC direction for City
Attorney to prepare a report; At the
11/12/2021 Transportation Subcommittee,
the Subcommittee directed to bring back this
request to Council as part of the FY 2022-23
budget process.
37 Requested that staff study the placement of a City
sign for the Milpitas Police Department and explore
the cost of a new sign Dominguez 1/18/2021
Staff has been working on upgrading signage
and landscaping around the Police
Department and Public Works Building. Lit-
up signs mounted on the building are
scheduled to be installed by the end of
December 2022
38 Ordinance to ban vaping in the City Montano 12/15/2020 Ordinance regarding a ban on use in certain
areas adopted by Council on 6/15/2021.
Council received a follow-up presentation
from staff on 6/21/22 and provided direction
on establishing a local tobacco retail
permitting program and regulating tobacco
retail locations and the sale of flavored
tobacco and electronic cigarette products in
Milpitas. Staff is now coordinating with the
Santa Clara County Department of
Environmental Health (DEH) to set up the
program, and those arrangement will be
brought back to the Council in early 2023.
39 Consider Community Museum and Park on Main St. Phan 8/20/2019 to Rules Subcommittee 8/23/2019. Moved to
Specific Plan Community Conversation
events.
NOTE: Deferred and Completed Items are not listed21
Item # C4.
CITY OF MILPITAS
AGENDA REPORT
(AR)
Item Title: Consider the Recommendation from Mayor Tran for Appointments to City Commissions and Declare an Unscheduled Vacancy (Contact: Mayor Tran, 408- 586-3029)
Category: Consent Calendar-Leadership and Support Services Meeting Date: 12/6/2022
Recommendation: (1) Receive the recommendation from Mayor Tran and approve appointments to City Commissions; and (2) Declare an unscheduled vacancy on the Economic Development and Trade Commission and direct the City Clerk to post the notice of unscheduled vacancy.
Background:
The City of Milpitas has 13 Commissions (including the Measure F Oversight Committee), with members appointed by the Mayor and confirmed by the City Council. The Commissions advise the Milpitas elected officials on a variety of community interest and policy areas.
Any resident interested in serving on a City Commission must complete a Commission Application and submit the form to the City Clerk. Copies of the applications are provided to the Mayor for his consideration. Per Government Code 40605, in a general law city where the office of Mayor is an elective office, the Mayor with the approval of the City Council, shall make all appointments to boards, commissions, and committees unless otherwise specifically provided by statute.
Current Commissioners may seek to be reappointed upon the expiration of their current term, but reappointment to a new term is not automatic. Those Commissioners seeking reappointment must contact the City Clerk and the Mayor to convey their request. Re-appointment must be recommended by the Mayor and confirmed by the City Council.
Analysis:
Mayor Tran is making the following recommendations for appointment:
Arts Commission:
1. Appoint Helen Qiu as Alternate No. 2 with a term ending October 2025.
Community Advisory Commission:
1. Promote Monica Rodriguez to a full voting seat with an unexpired term ending January 2024.
2. Promote Kavita Sreedhar to Alternate No. 1 with an unexpired term ending January 2024.
3. Appoint Jose Geronimo as Alternate No. 2 with a term ending January 2026.
Energy and Environmental Sustainability Commission:
1. Reappoint Jeff Hogg to a term ending October 2025.
2. Reappoint Charles Lingle to a term ending October 2025.
3. Promote Felix Mbuga to a full voting seat with a term ending October 2025.
4. Promote Carmelo Coronel to Alternate No. 1 with a term ending October 2025.
5. Appoint Frank Bush as Alternate No. 2 with an unexpired term ending October 2024.
Library and Education Advisory Commission:
1. Promote Ann Anderson to a full voting seat with an unexpired term ending June 2023.
2. Appoint Trijohn Minh Tran as Alternate No. 2 with an unexpired term ending June 2024.
22 Item # C5.
Parks, Recreation, and Cultural Resources Commission:
1. Appoint Yesenia Illescas to a term ending June 2025.
Planning Commission:
1. Reappoint Mercedes Albana to a term ending December 2025.
2. Reappoint Sonia Medina-Ashby to a term ending December 2025.
Senior Advisory Commission:
1. Reappoint Jenny Berryhill to a term ending December 2025.
2. Reappoint Willy Wong to a term ending December 2025.
3. Promote Nona Tolentino to a full voting seat with a term ending December 2025.
4. Promote Barbara Jo Navarro to Alternate No. 1 with an unexpired term ending December 2023.
5. Appoint Ha Phan as Alternate No. 2 with an unexpired term ending December 2024.
All recommended Commissioner appointments have been reviewed and confirmed by the City Clerk’s office.
The Commissioner Handbook states that residents may only serve on one commission at a time. Previously, Ha Phan was appointed as an Alternate Commissioner to the Economic Development and Trade Commission.
With the appointment to the Senior Advisory Commission, the position on the Economic Development and Trade Commission becomes available and a Notice of Unscheduled Vacancy must be posted to advertise the vacancy.
Fiscal Impact:
There is no fiscal impact associated with this item.
Recommendation:
(1) Receive the recommendation from Mayor Tran and approve appointments to City Commissions; and (2) Declare an unscheduled vacancy on the Economic Development and Trade Commission and direct the City Clerk to post the notice of unscheduled vacancy.
Attachments:
1. Applications for New Appointments
23 Item # C5.
24 Item # C5.
25 Item # C5.
26 Item # C5.
27 Item # C5.
28 Item # C5.
29 Item # C5.
CITY OF MILPITAS
AGENDA REPORT
(AR)
Item Title: Reconfirm Findings and Determinations Under Resolution No. 9165 and Assembly Bill 361 for the Continuation of Virtual Meetings of the City Council and Legislative Bodies (Staff Contact: Michael Mutalipassi, City Attorney, 408-586-3040) Category: Consent Calendar-Leadership and Support Services Meeting Date: 12/6/2022
Recommendation: Move to reconfirm findings and determinations under Resolution No. 9165 and Assembly Bill 361 for the continuation of virtual meetings of the City Council and Legislative Bodies.
Background:
On March 17, 2020, in the face of the COVID -19 pandemic, Governor Gavin Newsom issued Executive Order N-29-20 suspending certain provisions of the Ralph M. Brown Act in order to allow for local legislative bodies to conduct their meetings completely telephonically or by other electronic means.
The provisions in the Brown Act that were suspended by the Governor’s Executive Order are contained at Government Code Section 54953(b)(3) and require that when teleconferencing is used, outside of a statewide emergency, that the following occur:
An agenda is required to be posted at all locations, including any teleconference locations Each teleconference location must be identified on the actual agenda Each teleconference location shall be accessible to the public A quorum of the legislative body must be in the jurisdiction With the Governor’s Executive Order, the four above requirements were suspended, allowing Councilmembers to not have to post an agenda at their teleconference location, not have to identify their location on the meeting agenda, not have to ensure public accessibility at the teleconference location, and the legislative body did not need a quorum present in the jurisdiction. As the Council is well aware, this allowed all City Council meetings and other meetings of legislative bodies of the City to be conducted by Zoom with councilmembers, commission members, committee members, and staff all joining from remote virtual locations.
The suspension of certain provisions of the Brown Act was further extended by the Governor on June 11, 2021 by the issuance of Executive Order N -08-21 which continued to allow for complete virtual meetings until September 30, 2021.
With the expiration of the Governor’s Executive Order and the uncertainty that surrounded the Governor’s potential recall, the State Legislature also took the remote meeting issue into its own hands through the adoption of Assembly Bill 361, which is explained in more depth in the Analysis section below.
On May 17. 2022, the City Council adopted Resolution No. 9156, making findings that there is an existing State of Emergency and that state or local officials continue to recommend social distancing measures to prevent the spread of COVID -19. In particular, the r esolution included reference to Cal -OSHA regulation 3205, which recommends physical distancing in the workplace. By motion and majority vote, the City Council may reconfirm the findings of Resolution No. 9156 and continue to hold virtual meetings pursuant to AB 361. 30 Item # C6.
Analysis:
On September 16, 2021, the Governor signed AB 361, which allows legislative bodies to meet virtually provided there is a state of emergency declared by the Governor, and either (1) state or local officials have imposed or recommended measures to promote social distancing; or (2) the legislative body determines by majority vote that meeting in person would present imminent risks to the health and safety of attendees. The Governor by executive order signed on September 20, 2021, suspended the effective date of AB 361 to October 1, 2021. As a result, if the City desires to have virtual meetings on or after October 1, 2021, it must do so consistent with the requirements of AB 361.
AB 361 preserves many of the provisions of the earlier executive orders , including the suspension of the four teleconferencing requirements noted above, while also adding new requirements to the management of remote and teleconference public meetings in order to better achieve the levels of transparency that the Brown Act demands. Specifically, AB 361 imposes two new rules on remote public meetings:
1. Local governments and agencies hosting teleconference meetings in lieu of traditional in -person public meetings must permit direct public comment during the teleconference and must leave open the opportunity for public comment until the comment period for a given item is closed during the ordinary course of the meeting. The opportunity to make public comment must b e of a sufficient duration so as to allow actual public participation.
2. Any action by the governing body during a public teleconference meeting must occur while the agency is actively and successfully broadcasting to members of the public through a call -in option or an internet-based service option. If a technical disruption within the agency’s control prevents members of the public from either viewing the meeting of the public agency or prevents members of the public from offering public comment, the agency must cease all action on the meeting agenda until the disruption ends and the broadcast is restored. Action taken during an agency-caused disruption may be challenged as a violation of the Brown Act.
In order to continue to qualify for AB 361’s waiver of in -person meeting requirements, the City Council must, within thirty (30) days of its first meeting under AB 361, and every thirty (30) days thereafter, make findings that (a) state or local officials continue to recommend measures to promote social distancing, or that (b) an in-person meeting would constitute an imminent risk to the safety of attendees.
The above conditions continue to exist at this time, and staff recommends that the City Council by motion reconfirm the findings made in Resolution No. 9156 so that the City Council and all other subordinate legislative bodies may continue to meet virtually.
Lastly, it is important to note that AB 361 is optional. If the City Council wishes, it may meet in person. In addition, hybrid meetings are permissible.
Policy Alternatives:
Alternative 1: Do not by motion reconfirm the findings made in the resolution making findings and determinations under Assembly Bill 361 for the continuation of virtual meetings.
Pros: None
Cons: Many of the existing Commission, Committee, and Task Force meetings will not be able to meet virtually or through a hybrid format forcing all staff, commission or committee members, and the public to attend meetings in person.
Reason not recommended: The COVID-19 pandemic continues to be a global health issue and by forcing commission, committee, and task force meetings to be in person, public health may be put at risk.
Fiscal Impact:
The City Council’s reconfirmation of the findings made in the resolution to continue with virtual meetings will maintain the status quo and no financial impact is anticipated by the reconfirmation of the findings. 31 Item # C6.
California Environmental Quality Act:
The City Council’s reconfirmation of the find ings made in the resolution is not a project under the California Environmental Quality Act (CEQA) Guideline 15378 (b)(5) as it constitutes an organizational or administrative activity of the government that will not result in direct or indirect physical changes in the environment. Further, virtual meetings are likely to reduce certain impacts associated with vehicular travel related to in-person public meetings.
Recommendation:
Move to reconfirm findings and determinations under Resolution No. 9105 and Assembly Bill 361 for the continuation of virtual meetings of the City Council and Legislative Bodies.
Attachment
1. Resolution 9165
32 Item # C6.
33 Item # C6.
34 Item # C6.
CITY OF MILPITAS
AGENDA REPORT
(AR)
Item Title: Authorize City Manager’s Response Letter to the October 7, 2022 Santa Clara County Civil Grand Jury Final Report “If You Only Read the Ballot, You’re Being Duped” (Staff Contact: Ashwini Kantak, Assistant City Manager, 408-586-3053; and Michael Mutalipassi, City Attorney 408-586-3040)
Category: Consent Calendar-Leadership and Support Services Meeting
Date:
12/6/2022
Recommendation: Authorize the City Manager to send a letter in response to the October 7, 2022 Santa Clara County Civil Grand Jury Final Report “If You Only Read the Ballot, You’re Being Duped” pursuant to Penal Code section 933.
Background:
On October 7, 2022, the City of Milpitas received the Santa Clara County Civil Grand Jury final report titled “If You Only Read the Ballot, You’re Being Duped”. The Grand Jury listed a finding and recommendations in regard to the wording of the ballot questions for initiatives and referenda presented to the voters within Santa Clara County.
Pursuant to California Penal Code 933(c), the City is required to provide a response to the Presiding Judge of the Superior Court no later than January 5, 2023.
Analysis:
The Civil Grand Jury investigation was apparently prompted by Santa Clara Valley Water District’s (“Valley Water”) 2022 Measure A. Measure A asked voters whether they wished to adopt an ordinance limiting Valley Water’s board members to four successive four-year terms, though failed to inform voters that the ordinance in place, establishing the status quo, limited Valley Water’s board members to three four-year terms. The use of the term “limiting” in a ballot measure that explicitly extended the number of terms Valley Water board members could serve was misleading.
The Civil Grand Jury conducted an Inquiry and inquiry found:
In the current environment, which is unregulated at the local level, it is easy for the author of a ballot measure question to write the question in a way that is confusing or misleading to voters.
The Civil Grand Jury made the following recommendations:
Governing entities within Santa Clara County should voluntarily submit their ballot questions to the County Counsel for review prior to submission to the Registrar of Voters, unless and until a County Good Governance Commission can be created.
Governing entities within Santa Clara County should, by March 31, 2023, adopt their own resolution or ordinance to require submission of their ballot questions to the County Counsel for review prior to submission to the Registrar of Voters until a County Good Governance Commission can be created.
Governing entities within Santa Clara County should submit their ballot questions for review by the County Good Governance in Ballots Commission once created. 35 Item # C7.
The findings and recommendations of the Grand Jury are inconsistent with the ballot measures that have been put to voters in the City of Milpitas. Measure F, which put forth a one quarter percent sales tax increase to the voters of Milpitas in 2020, is discussed in the Report. The language set forth in the Measure F ballot question mentioned local spending, an independent audit, and an oversight committee.
Nonetheless, the ballot question was honest and straightforward. All of the funds appropriated under Measure F are in fact spent locally to fund local municipal programs. Measure F appropriations are in fact subject to an independent audit. Measure F appropriations are also subject to oversight from the seven- member Measure F Oversight Committee, which meets quarterly to review and discuss information about Measure F revenues as well as programs and services funded by Measure F. Though not discussed in the report, the City of Milpitas put forth Measure F in 2022 related to changing the term limits of elected officials. The ballot question for Measure F accurately described the measure as shortening term limits for councilmembers.
The recommendations of the grand jury are neither reasonable nor warranted. The Grand Jury is recommending that the City voluntarily cede its sovereign power granted under the California Constitution and Election Code in a manner that further erodes local control in order to address a problem that does not exist in the City.
Staff recommends authorizing the City Manager to send the enclosed letter of response pursuant to California Penal Code section 933 on or before January 5, 2022.
Policy Alternatives:
Alternative 1:
Not responding to the Santa Clara County Civil Grand Jury final report on “If You Only Read the Ballot, You’re Being Duped” as required by California Penal Code section 933.
Pros: None
Cons: Pursuant to Penal Code Section 933(c), the City is required to provide a response to the Presiding Judge of the Superior Court. Not responding as directed could result in legal consequences imposed upon the City.
Reason not recommended:
The City will be out of compliance with section 933 and may face legal consequences.
Fiscal Impact:
None
California Environmental Quality Act:
Approval of the recommendation is not an activity defined as a “project” under the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines 15061(b) (3) and 15378(b)(4) either because it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment and/or because the action is financial and/or administrative and does not directly impact the environment.
Recommendation:
Authorize the City Manager to send a letter in response to the October 7, 2022 Santa Clara County Civil Grand Jury Final Report “If You Only Read the Ballot, You’re Being Duped” pursuant to Penal Code section 933.
Attachments:
1. October 7, 2022 Santa Clara County Civil Grand Jury Final Report “If You Only Read the Ballot, You’re Being Duped”
36 Item # C7.
2. City of Milpitas Response to October 7, 2022 Santa Clara County Civil Grand Jury Final Report “If You Only Read the Ballot, You’re Being Duped”
37 Item # C7.
Release date here Page 0 of 23
IF YOU ONLY READ THE BALLOT,
YOU’RE BEING DUPED
2022 Santa Clara County
Civil Grand Jury
October 7, 2022
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TABLE OF CONTENTS
GLOSSARY AND ABBREVIATIONS..........................................................................................2 SUMMARY .....................................................................................................................................4 BACKGROUND .............................................................................................................................5 METHODOLOGY ..........................................................................................................................6 INVESTIGATION ...........................................................................................................................6 CONCLUSION ..............................................................................................................................16 FINDINGS AND RECOMMENDATIONS..................................................................................17 REQUIRED RESPONSES ............................................................................................................19 REFERENCES ..............................................................................................................................21
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GLOSSARY AND ABBREVIATIONS
Attorney General The chief law officer who represents a state in legal proceedings.
Ballot Card The printed ballot, usually on high-grade paper, consisting of the ballot questions and names of individuals running for elected office.
Ballot Measure Ballot measures are proposals, usually at a county or local level, to enact new laws or repeal existing laws, which are placed on the ballot for approval or rejection by the
electorate.
Ballot Proposition
Ballot propositions are proposals, usually at the state level, to enact new laws or constitutional amendments or repeal existing laws or constitutional amendments, which are
placed on the ballot for approval or rejection by the
electorate.
Ballot Question or Ballot
Label
Boards and Commissions
For purposes of this report, Ballot Question or Ballot
Label means the 75- word or less statement of a measure that precedes “Yes” or “No” on the ballot card.
Boards and Commissions are made up of residents who
volunteer their time and expertise to assist and advi se governing bodies in the chosen capacity.
Caselaw
Law or legal precedent established by the outcome of
court cases.
County Counsel or Office of
the County Counsel
The County Counsel is the chief legal advisor and
representative for the county, including the county board of supervisors and all county agencies and departments.
Elections Code
A collection of California laws related to public elections.
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Governing Entity
A jurisdiction such as a city, county, school district, special district, or political subdivision.
Home Rule
The right of self -government that is granted by state
constitution or statute to give autonomy to a local
government. Home Rule implies that each level of
government has a separate realm of authority.
Public Opinion Pollsters
Registrar of Voters
Opinion polls are designed to represent the opinions o f a population by conducting a series of questions and then extrapolating generalities in ratio or within confidence intervals. A person who conducts polls is referred to as a pollster.
The department responsible for the operation,
administration, and direction of the elections department, with primary responsibility for the registration of voters, the holding of elections , and all matters pertaining to elections.
Single Subject Rule
Per Article II, Section 8(d) of the California Constitution, “An initiative measure embracing more than one subject
may not be submitted to the electors or have any effect.” Essentially, the rule stands for the notion that where an initiative embraces more than one subject, it can neither be submitted to, nor enacted by, the voters.
Term Limits
A specified number of terms (in years) that a person in office is allowed to serve.
Writ of Mandate
In California, writs of mandate are used by superior courts, courts of appeal , and the Supreme Court to command
lower bodies, including both courts and government
agencies, to do or not to do certain things.
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SUMMARY
It is not uncommon for the public to be confronted daily with news and information through multiple sources —tradi tional television programming, 24/7 cable news, satellite radio, social media, and phone alerts. In the context of elections, voters’ busy lives can be overwhelmed with many different voices. County and state voter information guides are required by law to be mailed to every registered voter, but voters today do not have a lot of time to read these resources. As a result, the ballot measure question printed on the ballot itself becomes a key factor in the outcome of an election.
There is an expectation in California law that ballot questions be drafted in a manner that is not false, misleading, or partial to one side.1 But there are ways to work around it. Among the fifty or so jurisdictions in Santa Clara County that are eligible to put forth a ballot measure, the 2022 Santa Clara County Civil Grand Jury (Civil Grand Jury) has seen ballot question language that is confusing, advocacy-oriented, or simply dishonest. Yes, sometimes voters are being deceived.
Many voters cannot compr ehend the complicated language or the implications of that "yes” or "no” vote. In a perfect world, voters would have the luxury of time to research these issues. In reality, however, voters almost always rely on the language of the ballot measure question itself.
What can be done about this ? The Civil Grand Jury proposes an oversight person or body, one who has taken an oath to act with integrity, is well versed in the requirements of the law, and is empowered to review and to reject ballot question wording that is false, misleading, or partial to one side. Santa Clara C ounty should have a climate whereby governing entities in Santa Clara County are discouraged from using dishonest or deceitful wording in a ballot question, especially when they know it will be reviewed and could be rejected. In so doing, due process will be strengthened. With clearer writing, ballot measure questions will be more tr ansparent and straightforward, which will lead to a better perception of government by the voters. It is time to remove impediments to good governance.
1 California Elections Code section 10403 requires a ballot question to “conform to this code governing the wording of propositions submitted to the voters at a statewide election.” The California Elections Code contains Section 9051, which provides that in a statewide election the ballot title and summary of an initiative or referendum must be a “true and impartial statement of the purpose of the measure in such language that the ballot title and summary shall neither be an argument, nor be likely to create prejudice, for or against the proposed measure.” (Elec. C. §9051(c); see also, McDonough v. Superior Ct. (2012) 204 Cal. App. 4th 1169, 1172.) 42 Item # C7.
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BACKGROUND
Ballot measures or ballot propositions are proposals to enact new laws or constitutional amendments or to repeal existing laws or constitutional amendments. They are placed on the ballot for approval or rejection by the voting public. The words “ballot mea sures” are often used by county, city, and local governing entities, whereas at the state level, the California State Legislature uses the term “ballot propositions ” to refer to the same concept. The ballot measure question, which is the subject of this report, refers to the maximum 75-word text that precedes the “Yes” or “No” selection on the ballot card itself. Because most voters never read beyond what is printed on the ballot card, it is of critical importance that ballot measure questions be concise, a ccurate, and impartial.
Recently, two local newspaper articles highlighted the tactics that governing entities have used to manipulate voters:
• Borenstein, Daniel, Tricks California Local Officials Use To Trick Voters, Bay Area News Group, January 21, 2022.
• Mercury News and East Bay Times Editorial Boards, Stop Deceiving Bay Area Voters on Local Tax Measure Costs, June 26, 2020, updated September 5, 2020.
As part of its charge, the Civil Grand Jury is responsible for identifying areas within local government that lack good governance or practices. This Civil Grand Jury identified as a problem the choice of wording used in local ballot measure questions. Specifically, the C ivil Grand Jury discovered that some local governing entities presenting measures for a public vote create ballot questions that are purposefully misleading so they may obtain their desired result. In particular, it was noted that the wording of a ballot question from the June 2022 election, although representing a relatively simple issue, created confusion among the public. When voters found out what the text of the measure actually meant, they felt deceived by the wording of the ballot question. Deception in ballot questions is worth the attention of the Civil Grand Jury. This problem must be remediated to reinstate good governance in the election process.
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METHODOLOGY
The Civil Grand Jury used the following investigative methods:
• Interviews with ten individuals who are well versed in the intricacies of the election process and experts in political science and local governments
• Three published Civil Grand Jury reports: 2021-22 Alameda County, 2021-22 Santa Cruz County, 2021 Santa Clara County
• Editorials from local and regional newspapers: Mercury News, Los Angeles Times, San Francisco Chronicle
• Close reviews of ballot measures, past and upcoming, from the counties of San Mateo, Santa Clara, Santa Cruz, and the City and County of San Francisco • Legal research of court challenges involving ballot questions
INVESTIGATION
Throughout this report, the Civil Grand Jury wa s interested only in the process of ballot measure question drafting, not the substance of the underlying ballot measure itself. In its research and analysis, the Civil Grand Jury does not examine the merits of the measure, but rather whether the question as drafted is truthful, impartial, and fair . Ballot questions must conform to statutory requirements and should provide voters with sufficient information and transparency to make informed decisions.
A straightforward ballot question can be summarized this way: A vote for “Yes” means yes and a vote for “No” means no. Unfortunately, it is common for ballot questions to be presented whereby a vote for “Yes” actually means no, and vice versa. T his wording is arguably confusing. Inching farther away from confusing questions, the research performed by the C ivil Grand Jury found ballot questions that are even worse—they are misleading.
Santa Clara Valley Water District’s Measure A
During the last election in June 2022, the question for Measure A put forth by the Santa Clara Valley Water District (Water District) employed such a tactic:
Shall the measure amending the Santa Clara Valley Water District Ordinance 11- 01 to limit Board members to four successive four-year terms be adopted?
The Water District had term limits already in place for board members to serve three four -year terms, or 12 years at most. Measure A sought to increase term limits to four four-year terms, or 16 years at most. However, the ballot question hid the fact that a term limit was already in place; it 44 Item # C7.
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asked voters whether a term limit of four terms should be adopted, thereby couching the question as a measure to adopt term limits generally, which one political science expert described to the Civil Grand Jury as a concept widely favorable to the voting public. The ballot question did not reflect what the Water District wanted to do. The Water District wanted to extend term limits, but it wrote the ballot question without using the words “extend,” “change,” or “increase.” Instead, the Water District characterized the ballot measure as setting term limits, which is a mischaracterization of what Measure A was actually about.
Further, it is notable that in November 1998, the County of Santa Clara placed a substantially similar measure on the ballot using the same tactic. Measure E asked:
Shall the County of Santa Clara amend section 202 to limit the number of terms a member of the Board of Supervisors may serve to three terms, consisting of four years each?
Again, the ballot question failed to inform the reader that each member of the County of Santa Clara Board of Supervisors was already limited to two terms and that the ballot measure proposed to extend years served, not “limit” them. By not being transparent, this tactic of ballot question drafting is tantamount to a lie by omission; it borders on deceiving the public. From Measure E in 1998 to Measure A this year, 24 years later, the climate has not changed.
Regulations that Govern Ballot Questions
Sections 9100-9190 of the California Elections Code specifically address county- level elections.
Other sections of the Elections Code, while they do not specifically address county-level elections, have import and therefore apply as well. The County of Santa Clara has not enacted local ordinance code provisions regarding ballot question language.
Under the Elections Code, the wording of a ballot measure must state the ballot question, or what the Elections Code calls the “label,” in 75 words or less (Elec. C. §9051(b), §10403, §13247). The ballot question must state “the nature” of the measure (Elec. C. §13120). The official who drafts the ballot question “shall give a true and impartial statement of the purpose of the measure in such language that the ballot title and summary shall neither be an argument, nor be likely to create prejudice, for or against the proposed measure” (Elec. C. §9051(c)). In other words, ballot measure questions shall not be false, misleading, or partial to one side.
Who is Responsible for Writing Ballot Questions?
Today, ballot questions are rarely written “from scratch.” Residing in the public domain are hundreds, if not thousands, of boilerplate questions spanning the universe of issues typically faced by government and public agencies. Putting a measure on the ba llot usually starts with selecting 45 Item # C7.
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an existing template, preferably one that had been used successfully within a reasonable timeframe and geographic proximity to the one at hand. Tweaks are then made to the chosen template to fit the measure being proposed.
Governing entities are ultimately responsible for approving the final text of the ballot question, but the actual selection of words is often the calculated and carefully calibrated work product of hired election experts, consultants, and attorneys. These outside consultants often rely on public opinion pollsters to determine the type of proposal and wording to put before voters that would achieve the desired outcome. Often, this includes using “feel good” wording that is shown to resonate with voters: “reduce crime;” “funds spent locally;” “all money locally controlled;” and “with citizen oversight.” Results from public opinion polls often dictate the structure and selection of words used within the ballot question, which is then voted on and, if successful, adopted by the governing body such as a city council, a county board of supervisors, the board members of a school district, or any governing body of a government entity operating within the county. During the course of this investigation, the Civil Grand Jury learned that local measures on the ballot that governing entities choose wording likely to be most successful at the ballot box over clarity of language to the voter.
For purposes of this investigation, the Civil Grand Jury focused on ballot questions relating to local ballot measures, not state propositions, because according to the California Elections Code, the state attorney general is responsible for providing ballot questions for state propositions. In contrast, there is no similar requirement that a certain officer provide the ballot question for local elections, so it is instead drafted by the proponent of the measure at the local level.
Advocacy and Tactical Wordplay Result in Poorly Drafted Ballot Questions
It has been widely observed today that the 75- word ballot questions are being used as advocacy pieces, at the expense of fairness and impartiality. In an aptly titled report published in June of last year, the Alameda County Civil Grand Jury advocated for “The Need for Accuracy and Impartiality of Ballot Measure Questions.” The jury explained how and why the desire to achieve a certain outcome has tainted the process to produce ballot measure questions that are not accurate and impartial:
In general, we found ballot questions suffer from a “proponent’s bias” that is a natural outgrowth of the typical process through which questions are selected, drafted, and proposed. … In general, we found that ballot questions too often fall short of what voters have a right to expect in terms of transparency and impartiality, even w hen satisfying minimum legal standards.
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The jury in Alameda reviewed and provided an in- depth analysis of six ballot questions to reach their conclusion. In so doing, they exposed the “tricks of the trade”—wording chosen for the sole purpose of increasing the odds of success at the polls. Adopting the same methodology as the Alameda report, the Civil Grand Jury reviewed past and upcoming ballot measure questions from local jurisdictions within Santa Clara County. The Santa Clara County Civil Grand Jury observed the same tricks and tactics used by governing bodies to deceive voters:
(1) Using “feel-good" words to garner voter approval. Measure F, November 2020, said “all funds spent locally,” which is meaningless when one pauses to think about it. (2) Adding favorable language even where it plainly does not apply. Measure F, November 2020, said “independent audits, citizens’ oversight” where the underlying ordinance implementing the measure makes no mention whatsoever of audit and oversight requirements.
(3) Adding misleading words to lead voters astray. Measure S, November 2020, said “until ended by voters,” falsely implying that the measure itself provided for repeal or that voters would have an opportunity to repeal the tax when they did not; Measure L, November 2020, conveyed the same with “can be ended by voters.” Measure A, March 2017, said “[funds] cannot be taken away by the State,” falsely implying that the state may access local funds when it may not.
(4) Manipulating words to divert voters from what is actually at issue. Upcoming Measure N, November 2022, which seeks authorization of $572 million in school bonds costing approximately 3 cents per $100 of assessed valuation, states “no increase in tax rates.” (5) Omitting relevant information necessary for voters to m ake informed decisions. Measure AA, November 2016, and Measure H, November 2014, made no mention of the tax increase that would be required to fund the school bonds that were at issue. (6) Putting multiple issues on a single measure, ostensibly violating the s ingle subject rule.
Measure H, November 2020, sought to increase card room tax and the number of card tables allowed in gambling facilities.
At the writing of this report, the following measures slated for the upcoming November 2022 election also rely on at least one of the tactics described:
E “all funds spent locally with no money taken by the State and spent elsewhere” - see (1) and (3) above.
G, H, J, L “until ended by voters” - see (3) above.
I “Shall the City Charter be amended to add the City's ethics and elections commission (Board of Fair Campaign and Political Practices) to the Charter; remove requirements that members of the Planning, Civil Service, and Salary Setting Commissions be electors and/or citizens; remove gender-specific language; and require the City Council to adopt equity values, standards, and assessments in making certain decisions?” - see (6) above.
O “all money staying local” - see (1) above.
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Along the same lines, it is worth noting that in June 2022, the Santa Cruz County Civil Grand Jury released its report , “Words Matter: Did Measure G Deceive Voters?” The question confronting the jury was whether the County of Santa Cruz was honoring the provisions in the ballot measure following its passage. The jury concluded that the ballot question behind the November 2018 Measure G was misleading after its investigation and research revealed no basis whatsoever for including the words “annual audits and independent citizens oversight” within the ballot question.
Arguably, these words were used for no purpose other than to elicit good feelings in the voter.
The Elephant in the Room: Big Money
Elections cost money—lots of money. In an article published June 30, 2002, updated June 22, 2022, CalMatters put it succinctly: “Ballot measures are big business.” The Civil Grand Jury learned that cost is a major factor in the decision to g et to the ballot. San Jose’s Mercury News reported that the Water District’s Measure A from the June 2022 election cost taxpayers $3.2 million.
Once the decision is made by the government entity to spend the money to go to ballot, a lot of pressure is put on the entity to do whatever it takes to secure a win. For this reason, proponents of ballot measures stay focused on the result, hiri ng high-priced election consultants, attorneys, and opinion pollsters to carefully frame the ballot question to achieve the desired outcome. Successful elections will reward those that are behind them. It does not take much imagination to understand how this practice has evolved to become “high stakes.” For example, a school district superintendent who has successfully secured funding through school bond measures may parlay these wins to rally support for a more prestigious role or a position at a larger public institution.
On the other hand, if a measure fails, individuals’ livelihoods are at stake because someone will likely have to take the blame for it —usually either someone on staff or the board proponents of the governing body. This is why proponents advocate so strongly, often—as exemplified above — sacrificing context, clarity, truthfulness, and transparency in ballot question wording in favor of pure advocacy. The Civil Grand Jury learned from those in the ballot question business that it is understood that the drafter will make sure the statement is “lawful,” but it is also understood that it will not necessarily provide full disclosure.
Eroding the Public’s Trust
Many voters in Santa Clara County felt that they were tricked by the Water District based on how Measure A was worded. The Civil Grand Jury compiled the following descriptors of Measure A from local news sources and through its interviews: “deceitful,” “deceptive ballot language,” “designed to confuse voters,” “dishonest,” “false,” “hiding the ball,” “lacks integrity,” “lie by omission,” “misleading,” “not ethical,” “not transparent,” “not clear,” “violates the norm,” 48 Item # C7.
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“violates standards of good governance,” “board must be held accountable,” “board should resign,” “board violated its fiduciary duty,” “board violated the trust of the people,” “board wasting money,” “failure of character,” “failure to represent its constituents,” “fraudulent misappropriation of public funds,” “misled t he public for political gain,” “self -serving hoodwinking of the electorate,” “self-serving dishonesty,” “unacceptable in a democracy.”
Public opinion made it clear that where a ballot question fails to provide voters with sufficient information to make an informed decision, it does so at the expense of public trust. Forming distrust between government and its citizenry hurts. What the Water District did through Measure A has severe ramifications because it creates distrust between the government agency and the people the agency is supposed to serve and protect. Going forward, Santa Clara County residents will likely question the integrity and ethical behavior of the Water District. Once the bonds of trust have been weakened, citizens are less inclined to trust the actions and decisions of this agency and more inclined to ask, “If the Water District cannot be trusted to be truthful on the ballot, how can we know them to be truthful in other matters?”
With the passage of Measure A, many residents lost confidence in the Water District. It may take a long time to regain trust from the community. While the Civil Grand Jury appreciates the desire of a government entity to advocate for itself when putting ballot measures up for a public vote, ballot questions cannot be false, misleading, or partial to one side . Based on Civil Grand Jury research and reports, too many local measures fail to meet this standard in favor of advocacy and “proponent’s bias.”
Lack of Oversight Results in Poorly Drafted Ballot Questions
Despite the number of hands that touch a proposal from inception to ballot card, the Civil Grand Jury was surprised to discover that there is no filter or oversight by an appropriate official prior to the adoption of ballot question wording. At the state level, the “Attorney General gives a true and impartial statement of the purpose of the measure in such language that the ballot title [e.g., the ballot question] and summary shall neither be an argument, nor likely to create prejudice, for or against the p roposed measure” (Elec. C. §9051(c)) . But the Attorney General does not have jurisdiction over local measures and thus does not provide the ballot question. When it comes to local measures, the Civil Grand Jury learned that there is not a similar role performed by an official, like the Attorney General, that can provide the wording for ballot questions. Rather, when the ballot question is submitted to the Santa Clara County Registrar of Voters, their review is narrowly limited to enforcement of the 75 -word limit. Staff at the County Registrar of Voters manually count the number of words to ensure that the word cap has not been stretched. They do not monitor the content of the ballot question.
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At the local level, the County of Santa Clara Office of the County Counsel performs legal services that are most analogous to the Attorney General’s role at the state level with respect to elections.
Further, County Counsel has expertise in election law and advises the County of Santa Clara Registrar of Voters. The County Counsel does not, however, have authority over cities and political subdivisions within the boundaries of the county. Therefore, when a city, school district, or special district places a local measure on the ballot, they are permitted under curren t law to draft the language themselves. They have every incentive to adopt wording proposed by their polling consultants, who will give weight to “feel good” words over simplicity, transparency, and impartiality. Fundamentally, the government entity’s self-interest dictates the ballot question wording.
The Current Sole Remedy—I nitiating a Court Challenge— Falls Short
Under current legislation, there is no realistically expedient method to challenge problematic ballot questions. When a measure is to be placed on the ballot for an upcoming election, it is subject to a 10-day public examination period during which any voter in the jurisdiction may file a lawsuit to amend the language of the measure. California Elections Code section 9295 sets forth the procedure:
During the 10-calendar-day public examination period provided by this section, any voter of the jurisdiction in which the election is being held, or the elections official, himself or herself, may seek a writ of mandate or an injunction requiring any or all of the materials to be amended or deleted. The writ of mandate or injunction request shall be filed no later than the end of the 10-calendar-day public examination period.
A peremptory writ of mandate or an injunction shall be issued only upon clear and convincing proof that the material in question is false, misleading, or inconsistent with the requirements of this chapter, and that issuance of the writ or injunction will not substantially interfere with the printing or distribution of official election materials as provided by law.
There are several reasons why the 10-calendar-day public examination period to object in a formal court setting does not work well:
(1) The public tends not to hear about ballot measures until it is too late. This is due in part to a dearth of media coverage of local news, a result of the consolidation of local news outlets by media conglomerates. It is no secret that in today’s news environment, local news coverage has been reduced significantly. Furthermore, ten days is a very short window to react, let alone mount a court challenge to remediate.
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(2) Ten days is much too short a time to locate an attorney well versed in the laws and processes of elections to file a lawsuit in this specialized field. (3) Even if an attorney can be available within the 10 -day window, it is not within the means of the average person to afford the attorney fees necessary to pursue a remedy. (4) Voters challenging the wording in a ballot question face an uphill battle because the courts give deference and considerable latitude to the original author. Further, courts uphold the ballot measure question if it substantially complies with the requirement not to be “false, misleading, or partial to one side.” (See Bibliography, Amador and McDonough decisions.) (5) There is practically no recourse to fix non- conforming ballot questions after the 10- calendar day public examination period has passed. (See Bibliography, Denny decision.) (6) Even the single subject rule —a state constitutional doctrine—has been watered down by case law; hence it is no longer vigorously enforced. (See Bibliography, Amador and Harbor decisions.)
When confronted with challenges to ballot measures, the courts have stated:
• Relief under a writ of mandate may be granted "only upon clear and convincing evidence" that the challenged election material is "false or misleading or otherwise inconsistent with the provisions." (See Bibliography, McDonough decision.) • The test is not whether the ballot quest ion could be more complete . (See Bibliography, Martinez decision.)
• The ballot title need not be the “most accurate,” “most comprehensive,” or “fairest” that a skilled wordsmith might imagine. (See Bibliography, Yes on 25, Citizens for an On- Time Budget decision.)
• The courts are not free to change an accurate statement to reflect their interpretation of the common sense understanding of the language . (See Bibliography, Yes on 25, Citizens for an On-Time Budget decision.)
• The courts are not free to wordsmith the ballot question and change it just because they believe it could be better. (See Bibliography, Martinez decision.) • The courts must give deference to the official who drafts the ballot question; “all legitimate presumptions should be indulged in favor of the propriety” of the drafter’s actions. (See Bibliography, Becerra decision.)
Solutions
The Civil Grand Jury has learned that the sole legal remedy currently available to right a wrong when it comes to ballot measure questions is insurmountable for the average citizen. Nonetheless, the Civil Grand Jury notes that there could be two potential mechanisms to improve the current process.
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1. Task an appropriate official to review ballot measure questions
Current law requires that t he individual who drafts the ballot question do so in a way that is not false, misleading, or partial to one side. In order to meet this requirement, a n objective, neutral third party is needed to speak on behalf of the voting public, ideally someone who is well versed in the law, has a fiduciary duty to uphold the law, and has taken an oath to act with integrity. The Civil Grand Jury recommends that County Counsel perform this task. F urther, the Civil Grand Jury recommends that the County of Santa Clara Board of Supervisors should endorse the County Counsel to act in a role, like that of the Attorney General, to provide for ballot question wording for all local measures.
What this might look like: After the governing entity ratifies the concept behind the proposed measure, as is the practice today, the entity’s lawyer, whether a city attorney, school district attorney, or special district attorney, would draft a ballot question that is impartial, unbiased, and non-argumentative. The proposed ballot question would then be submitted to the County Counsel, who would be charged with overseeing the narrow task of ensuring that the wording of the question is not false, misleading, or biased in favor of one view. Most importantly, County Counsel would also be authorized to reject non- conforming or deficient wording and to compel revisions. Only when the ballot question at issue conforms to statutory requirements would County Counsel approve it for use.
2. Create an independent oversight commission to review ballot questions
It is not unusual for jurisdictions to convene independent advisory commissions to assist in county governance. The County of Santa Clara alone boasts over 75 boards and commissions, ranging from an Advisory Commission on Consumer Affairs to a Youth Task Force.
For purposes of overseeing conformity of ballot measure questions, the Civil Grand Jury recommends that the County form a Good Governance in Ballots Commission (Good Governance Commission). Th is advisory commi ssion should act quickly to review and comment on ballot questions or provide recommendations to remediate questions that that are false, misleading, or partial to one side. The composition of the Good Governance Commission should, at a minimum, include an attorney member of the California S tate Bar, either to participate as a full member or act as an ex officio member without voting privileges. Because County Counsel is the attorney to most Santa Clara County advisory boards and commission s, it could therefore be tasked to help members of this commission navigate the intricacies of California’s statutory requirements.
Apart from the obvious benefits—non- partisanship and public representation—another advantage of having a single commission perform the task of reviewing ballot questions would be to maintain consistency across all governing entities. Regardless of whether a city, county, school district, or 52 Item # C7.
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other jurisdiction puts forth the measure, the output from a neutral, uninterested third party would probably help eliminate the rhetoric and advocacy inherent in the current practice.
To be successful, the Good Governance Commission should ideally have the ability to review and to reject language that is biased and partial. The power of rejection is crucial because it would also likely have the effect of encouraging the gover ning entity to self-police. It must not be merely optional for governing entities to submit their ballot questions for review. If the commission were granted mere advisory powers, then it would have very limited impact; it is reasonable to surmise that most, if not all, governing entities would choose to decline to submit their ballot questions for consideration in the interest of the time required to add a layer of review.
Unfortunately, adoption of a Good Governance Commission that has the power to reject language would require passage of a state law that would enable the County of Santa Clara to have an express grant of power to impose a requirement on other entities. This is because “[t]he board of supervisors has no inherent powers; the counties are legal subdivisions of the state, and the county board of supervisors can exercise only those powers expressly granted it by Constitution or statutes and those necessarily implied therefrom” (Hicks v. Board of Supervisors (1977) 69 Cal. App. 3d 228, 242). In general, absent other express authorization, one governmental entity cannot regulate another.
Put another way, charter cities operate under home rule, which means that they do not answer to the county the city is located in. For example, the County of Santa Clara Board of Supervisors does not have jurisdiction to compel the City of Gilroy, a charter city, to abide by a county ordinance. Absent some legislative authorization, the County of Santa Clara cannot impose a mandatory review process for ballot questions on other entities. For this reason, the Civil Grand Jury urges the County to pursue legislative solutions to facilitate a process by which the County Counsel would be required to review and approve local measure ballot questions before they are voted on.
Formation of a Good Governance in Ballots Commission
The Civil Grand Jury believes that having an independent oversight commi ssion with advisory powers will improve the local electoral process. It puts pressure on governing bodies, sending the message that their ballot questions are being monitored for clarity, truthfulness, fairness, and impartiality.
The Alameda Civil Grand Jury report provides detailed instructions around the formation, structure, and operation of an oversight committee. This can be found in Appendix B of their June 2021 report. Last, but not least, another possibility is to lean on an existing Santa Clara County advisory body, the Citizens’ Advisory Commission on Elections, to create a subcommittee focused 53 Item # C7.
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on ballot question integrity and good governance. Because time is of the essence when it comes to the elections process, the subcommittee must act within the short turnaround timeframe established by state statutes and county ordinances.
There do not appear to be any advocates for transparent and neutral language. Action must be taken. Having the Office of the County Counsel review and approve ballot questions to ensure conformity to statutory requirements would be a good start. Convening a citizen-led, independent oversight Good Governance Commission is another solution.
CONCLUSION
Civil Grand Juries are charged to help government develop practical solutions to improve government operations. Poorly worded ballot questions may not be illegal, but if they withhold information to shield what is really at issue, they are unethical. There are insufficient workable checks and balances to prevent this ongoing issue from being curtailed. Not doing anything about this only adds to the distrust of government. The Civil Grand Jury recommends that elected officials be held accountable—ballot ques tions must be transparent and clear in order to enable today’s voters to make informed decisions. The Civil Grand Jury wants governing entities to know that the public is paying attention and will not tolerate questions that are anything less than truthful, impartial, and fair. Further, ballot measure questions need to be straightforward, understandable, transparent, and honest.
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FINDINGS AND RECOMMENDATIONS
Finding 1
The Civil Grand Jury finds that in the current environment, which is unregulated at the local level, it is easy for the author of a ballot measure question to write the question in a way that is confusing or misleading to voters.
Recommendation 1a
The Board of Supervisors should ask the County Counsel to review all ballot questions submitted to it pursuant to Recommendation 1b.
Recommendation 1b
Governing entities2 within Santa Clara County should voluntarily submit their ballot questions to the County Counsel for review prior to submission to the Registrar of Voters, unless and until Recommendation 1d is implemented.
Recommendation 1c
Governing entities3 within Santa Clara County should, by March 31, 2023, adopt their own resolution or ordinance to require submission of their ballot questions to the County Counsel for review prior to submission to the Registrar of Voters, unless and until Recommendation s 1d and 1e are implemented.
Recommendation 1d
The County should create an independent, citizen-led oversight commission like the recommended Good Governance in Ballots Commi ssion as described in the “Solutions” section of this report.
The Commission should be implemented by August 1, 2024.
2 There are approximately 50 governing entities within Santa Clara County. The Civil Grand Jury has elected to address these recommendations to the County, cities, and a select number of special districts and school districts that have historically the most measures on the ballot for response. The Civil Grand Jury encourages all governing entities to adopt these recommendations.
3 Id.
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Recommendation 1e
Governing entities4 within Santa Clara County should submit their ballot questions for review by the Good Governance in Ballots Commission pursuant to Recommendation 1d.
Recommendation 1f
The County should, by March 31, 2023, take appropriate action to request that the state legislature consider amending current law to require the County Counsel to review and approve local ballot measure questions before they are voted on.
4 Id.
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REQUIRED RESPONSES
Pursuant to California Penal Code § 933(b) et seq. and California Penal Code § 933.05, the County of Santa Clara 2022 Civil Grand Jury requests responses from the following governing bodies:
Responding Agency Findings Recommendations
County of Santa Clara Board of Supervisors 1 1a, 1b, 1d, 1f City of Campbell 1 1b, 1c, 1e
City of Cupertino 1 1b, 1c, 1e
City of Gilroy 1 1b, 1c, 1e
City of Los Altos 1 1b, 1c, 1e
Town of Los Altos Hills 1 1b, 1c, 1e
Town of Los Gatos 1 1b, 1c, 1e
City of Milpitas 1 1b, 1c, 1e
City of Monte Sereno 1 1b, 1c, 1e
City of Morgan Hill 1 1b, 1c, 1e
City of Mountain View 1 1b, 1c, 1e
City of Palo Alto 1 1b, 1c, 1e
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Responding Agency Findings Recommendations
City of San Jose 1 1b, 1c, 1e
City of Santa Clara 1 1b, 1c, 1e
City of Saratoga 1 1b, 1c, 1e
City Sunnyvale 1 1b, 1c, 1e
Santa Clara Valley Water District 1 1b, 1c, 1e
Valley Transportation Authority 1 1b, 1c, 1e
El Camino Healthcare 1 1b, 1c, 1e
Foothill-DeAnza Community College District 1 1b, 1c, 1e San Jose Unified School District 1 1b, 1c, 1e
East Side Union High School District 1 1b, 1c, 1e
Cupertino Union School District 1 1b, 1c, 1e
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REFERENCES
Bibliography:
Alameda County 2020-2021 Grand Jury, Final Report, “The Need for Accuracy and Impartiality of Ballot Measure Questions,” June 2022.
Ballotpedia.org, https://ballotpedia.org/Santa_Clara_County,_California, Measure A (June 2022); Measures F, G, H, L, and S (November 2020); Measure AA (November 2016); Measure H (November 2014); Measure E (November 1998) (accessed September 22, 2022).
Borenstein, Daniel, “Tricks California Local Officials Use To Trick Voters,” The Bay Area News Group, https://www.mercurynews.com/2022/01/21/borenstein-tricks-california-local-officials- use-to-deceive-voters/ January 21, 2022 (accessed August 23, 2022).
California Elections Code sections 303, 9051, 9100-9190, 9295, 13120, and 133247.
Christopher, Ben; Kamal, Sameea, “California Ballot Measures: What You Need to Know,” https://calmatters.org/explainers/california-ballot-measures-2022/ June 30, 2022, updated July 1, 2022 (accessed August 23, 2022).
City and County of San Francisco Department of Elections, https://sfelections.sfgov.org/measures (accessed August 2, 2022).
County of Santa Clara 2020-21 Grand Jury, Final Report, “Gavilan College Measure X Bond Program: Oversight Shortchanged.” June 2022.
County of Santa Clara, Office of the Clerk of the Board of Supervisors, List of Boards and Commissions, https://stenttssaim2publicportal.blob.core.windows.net/bc- entcabodocs/MaddyReport.pdf (accessed August 24, 2022).
County of Santa Clara Registrar of Voters, Ballot Measures proposed for the upcoming November 2022 election, https://sccvote.sccgov.org/candidates-measures/november-8-2022- general-election-list-local-measures (accessed Aug 20, 2022).
Editorial, Mercury News and East Bay Times, “Stop Deceiving Bay Area Voters On Local Tax Measure Costs,” MercuryNews.com, https://www.mercurynews.com/2020/06/26/editorial-stop- deceiving-voters-on-local-tax-measure-costs/ June 26, 2020 (accessed August 23, 2022).
Kumar, Rishi, “Opinion: Why 4 Valley Water board members should resign,” MercuryNews.com, https://www.mercurynews.com/2022/05/11/opinion-why-4-valley-water- board-members-should-resign/ May 11, 2022 (accessed August 23, 2022). 59 Item # C7.
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Rogers, Paul, “Self-Serving Dishonesty: Liccardo Blasts Santa Clara Valley Water District Measure To Extend Term Limits, Even After Polling Shows Voters Oppose,” Mercury News, March 30, 2022 (accessed August 23, 2022).
Santa Cruz County 2020-2021 Grand Jury, Final Report, “Words Matter: Did Measure G Deceive Voters?” June 2022.
Caselaw:
Amador Valley Joint Union High School District v. State Board of Equalization, 22 Cal.3d. 208 (1978).
Becerra v. Superior Court, 19 Cal.App.5th 967 (2017).
Denny v. Arntz, 55 Cal.App.5th 914 (2020).
Harbor v. Deukmejian, 43 Cal.3d 1078 (1987).
Hicks v. Bd. of Supervisors, 69 Cal. App. 3d 228 (1977).
Home Gardens Sanitary Dist. v. City of Corona, 96 Cal. App. 4th 87 (2002).
Martinez v. Superior Court, 142 Cal.App.4th 1245 (2006).
McDonough v. Superior Court of Santa Clara, 204 Cal.App.4th 1169 (2012).
People v. Langdon, 54 Cal. App.3d 384 (1976).
Rodeo Sanitary Dist. v. Bd. of Supervisors, 71 Cal. App.4th 1443 (1999).
Yes on 25, Citizens for an On-Time Budget v. Superior Court, 189 Cal.App.4th 1445 (2010).
Interviews:
The Civil Grand Jury conducted interviews with ten individuals between June 28, 2022, and August 22, 2022.
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This report was ADOPTED by the Santa Clara County 2022 Civil Grand Jury on th
is 7th day of October, 2022.
______________________________
M
r. James Renalds
Foreperson
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455 EAST CALAVERAS BOULEVARD , MILPITAS , CALIFORNIA 95035 -5479 PHONE: 408 -586 -3040, FAX: 408 -586 -3056 , www.milpitas.gov
November 29, 2022
Via U.S. Mail
Honorable Beth McGowen
Presiding Judge
Santa Clara County Superior Court
191 North First Street
San Jose, CA 95113
Re: City of Milpitas Response to October 7, 2022 Santa Clara County Civil Grand Jury Final Report “If You Only Read the Ballot, You’re Being Duped”
The City of Milpitas’ responds to the October 7, 2022, Grand Jury report titled “If You Only Read the Ballot, You’re Being Duped” (the “Report”). The City is providing this response pursuant to California Penal Code section 933.
FINDINGS
Finding 1: The Civil Grand Jury finds that in the current environment, which is unregulated at the local level, it is easy for the author of a ballot measure question to write the question in a way that is confusing or misleading to voters.
City of Milpitas Response: The City of Milpitas disagrees with the entirety of the Civil Grand Jury’s finding that the writing of ballot measures is unregulated at the local level or that authors mislead voters within the City of Milpitas. All ballot measure questions are regulated under the California Elections Code and approved by the Milpitas City Council. Such regulation includes a private right of action for those who disagree with the ballot question associated with any particular ballot measure, and to date, neither the courts nor the State legislature have found that remedy to be inadequate. Measure F, which put forth a one quarter percent sales tax increase to the voters of Milpitas in 2020, is discussed in the Report. The language set forth in the Measure F ballot question mentioned local spending, an independent audit, and an oversight committee.
Nonetheless, the ballot question was honest and straightforward. All of the funds appropriated under Measure F are in fact spent locally to fund local municipal programs.
Measure F appropriations are in fact subject to an independent audit. Measure F appropriations are subject to oversight from the seven-member Measure F Oversight Committee, which meets quarterly to review and discuss Measure F revenues as well as programs and services funded by Measure F.
C I T Y O F M I L P I T A S
O F F I C E O F T H E C I T Y M A N A G E R
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Response to Grand Jury
December 7, 2022
RECOMMENDATIONS
Recommendation 1b: Governing entities within Santa Clara County should voluntarily submit their ballot questions to the County Counsel for review prior to submission to the Registrar of Voters, unless and until Recommendation 1d is implemented.
City of Milpitas Response: The City of Milpitas will not implement the recommendation because it is neither reasonable nor warranted. The City of Milpitas is a municipal corporation organized under Article XI of the California Constitution, and it possesses all of the powers inherent thereunder, independent of those powers granted to the County of Santa Clara. The California Elections Code requires that ballot questions to be considered by the electorate of the City of Milpitas are reviewed by the City Attorney. As a result of the nature of the representative system, the voters of the City of Milpitas exercise greater control over the appointment of City Attorney than over appointment of County Counsel.
Recommendation 1c: Governing entities within Santa Clara County should, by March 31, 2023, adopt their own resolution or ordinance to require submission of their ballot questions to the County Counsel for review prior to submission to the Registrar of Voters, unless and until Recommendations 1d and 1e are implemented.
City of Milpitas Response: The City of Milpitas will not implement the recommendation because it is neither reasonable nor warranted. The City of Milpitas is a municipal corporation organized under Article XI of the California Constitution, and it possesses all of the powers inherent thereunder, independent of those powers granted to the County of Santa Clara. The California Elections Code requires that ballot questions to be considered by the electorate of the City of Milpitas are reviewed by the City Attorney. As a result of the nature of the representative system, the voters of the City of Milpitas exercise greater control over the appointment of City Attorney than over County Counsel.
Recommendation 1e: Governing entities within Santa Clara County should submit their ballot questions for review by the Good Governance in Ballots Commission pursuant to Recommendation 1d.
City of Milpitas Response: The City of Milpitas will not implement the recommendation because it is neither reasonable nor warranted. The City of Milpitas is a municipal corporation organized under Article XI of the California Constitution, and it possesses all of the powers inherent thereunder, independent of those powers granted to the County of Santa Clara. The California Elections Code requires that ballot questions to be considered by the electorate of the City of Milpitas are reviewed by the City Attorney. As a result of the nature of the representative system, the voters of the City of Milpitas exercise greater control over the appointment of City Attorney than over a Commission of the County Board of Supervisors.
This completes the City of Milpitas’ response to the Report per section 933. 63 Item # C7.
Response to Grand Jury
December 7, 2022
Sincerely,
Steven G. McHarris
City Manager
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CITY OF MILPITAS
AGENDA REPORT
(AR)
Item Title: Receive an Update on the American Rescue Plan Act and Provide Direction to Staff (Staff Contact: Ashwini Kantak, Assistant City Manager, 408-586-3053; and Lauren Lai, Director of Finance, 408-586-3111)
Category: Consent Calendar-Leadership and Support Services
Meeting Date: 12/6/2022
Recommendation: Receive an update on the American Rescue Plan Act (ARPA) programs and provide direction to staff.
Background:
In March 2020, due to the rampant spread of the Coronavirus (Pandemic), a state of emergency was declared at the local, state, and federal levels and stay-at-home orders issued, which had an enormous impact on the local, state and national economy as well as the City’s finances.
On March 11, 2021, President Biden signed into law the American Rescue Plan Act (ARPA), a $1.9 trillion stimulus package, to counteract the economic impacts of the pandemic. The City’s ARPA allocation of $16,736,815 is available in two tranches, which was received in June 2021 and June 2022. Funds need to be either expended or encumbered by December 31, 2024, with all funds to be expended by December 31, 2026.
On May 11 (link to staff report), staff presented preliminary information on ARPA’s Coronavirus State and Local Fiscal Recovery Funding. Staff also provided information on other funding through ARPA that could benefit the Milpitas community since the Coronavirus Local Fiscal Recovery Funding (CLFRF) is only a portion of the total ARPA funding. Staff received Council input on ARPA Plan spending priorities in May and June (June 8 Council Meeting agenda report). A majority of the spending priorities were related to financial assistance and social services to those impacted by the pandemic, economic vitality, infrastructure, public safety, and technology.
On June 21 (link to the agenda report), Council approved the ARPA Investment Framework including the Fiscal Guidelines and Five Investment Areas. Fiscal Guidelines include the following:
1. Identify and promote other ARPA or State funding sources to the extent possible before dedicating local ARPA funds.
2. Use one-time ARPA funds for one-time expenditures such as investment in infrastructure or technology with minimum ongoing operating costs.
3. Avoid ongoing General Fund commitments with additional programs and positions.
4. Avoid creating a structural budget deficit if restoring any reduced services.
5. Leverage regional agencies, non-profit partners, and existing programs to maximize efficiency in delivering programs and services.
On August 9 (link to the agenda report), Council approved funding for 25 programs in the ARPA Investment Plan and delegated authority to the City Manager to proceed with appropriation actions and contract approvals, up to the approved amount for each program approved by Council, once compliance with ARPA procurement, contracting, and reporting requirements are confirmed. This would allow the funding to go to residents and businesses significantly impacted by the pandemic, in an efficient and expeditious manner. Moreover, Council allocated funding into Five Investment areas of Community Services, Economic Vitality, Infrastructure, Public Safety, and Technology.
On January 11, 2022 (link to the agenda report), Council approved program funding re-allocations to enhance service delivery and/or streamline implementation, especially procurement.
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On March 15, 2022 (link to the agenda report), Council provided feedback and direction as a part of the Fiscal Year 2022-23 budget development, which allocated funding into five Investment areas of Community Services, Economic Vitality, Infrastructure, Public Safety, and Technology is as follows.
Analysis:
In accordance with the August 9, 2021, Council direction and delegation, the City Manager and staff proceeded with implementing the ARPA programs. This report highlights project activities since the prior ARPA quarterly report on October 4, 2022, with an attachment that summarizes all projects.
Catalytic Converter Public Safety Initiative ($200,000) This provides funding for various catalytic converter theft deterrent program(s) to provide economic support to businesses and address this public safety challenge. Seven (7) automotive businesses are participating in the program, each have reached the 25 participant registration limit. All appointments were booked, for a total of 175 resident participants who will be served. There is a waiting list of approximately 10 residents. Staff will continue to monitor and support the program to encourage vendor and resident participation.
Community Services - Social Services ($500,000)
This Milpitas ARPA allocation funds a variety of social services such as mental health services and services to the LGBTQ plus community, at-risk youth and victims of domestic violence and abuse. The City has partnered with non-profits that are already serving in these areas. The non-profit grants have been awarded and programs began serving Milpitas residents.
Economic Development Workforce Development ($300,000)
On December 14, 2021, the Council approved the first tranche of funding recommendations in the amount of $150,000 for five (5) non-profit beneficiaries to coordinate workforce/job training programs to aide economic recovery. Since the Oct. 5, 2022 ARPA update, Build It Green launched the second training program of their Certified Green Building Professional Training which will run from November 30-December 8, 2022. The program is an opportunity for residents, building professionals, and City staff to develop an understanding of green building concepts and to encourage more environmentally friendly development. There are currently thirteen (13) participants that enrolled in the program (6 residents and 7 City staff members). City Staff participants are representing the Departments of Planning, Public Works, and Economic Development. At the conclusion of the second training session, Build It Green will have served nineteen (19) eligible participants this year. Build It Green was awarded $10,000 through ARPA funds to coordinate this workforce training program.
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Park Playground Rehabilitation ($1,116,000) CIP Project No. 3500 – Public Works ARPA funds will be used for safety improvements and retrofitting of equipment at up to eleven (11) of the City’s 36 parks. On December 6, Staff will report to Council the bids and recommend the award of contract to G&G Builders Inc for the base bid amount of $872,019 for the rehabilitation of seven (7) city parks. Staff will also request Council authorize the City Manager to negotiate and execute contract change order(s) in an aggregate amount not to exceed $468,514.00, subject to City Council appropriation of State grant funds in the amount of $224,543.00. The contingency may be used for unforeseen conditions and/or to proceed with add alternates of the remaining four (4) parks.
Park Rehabilitation ($3,270,815) Project No. 3501 - Engineering and RFP ARPA funds will be used to make repairs and improvements to twelve (12) of the City’s 36 parks that were assessed to be in poor and critical condition. The implementation of these repairs and improvements will address health and safety repairs and improve the condition of these parks. The request for proposal for engineering design services was completed and a design services agreement will be forward for signatures in early December.
Proposed process for future changes to the ARPA Investment Plan On August 9, 2021, Council approved funding for 25 programs in the ARPA Investment Plan (Attachment 1) and delegated authority to the City Manager to proceed with appropriation actions and contract approvals, up to the approved amount for each program approved by Council. Each additional program requires a significant work effort and resources. Council also approved the process to review and align the ARPA funding allocation as a part of the budget development and mid-year budget process. This maximizes efficacy of budget management and service delivery. Accordingly, in February, staff will provide the FY2022-23 mid-year budget report and in conjunction, request Council consideration of potential priorities which may warrant ARPA funding re-allocation.
Fiscal Impact:
The ARPA allocation to the City is in the amount of $16,736,815 which Council appropriated into investment areas and specific programs.
California Environmental Quality Act:
This item is not a Project under CEQA in accordance with CEQA Guidelines Section 15061(b)(3) (Common Sense Exemption) as it can be seen with certainty that a general discussion of funding priorities by the City Council will not have a significant effect on the environment. Further, the item is also not a Project pursuant to CEQA Guidelines Section 15378(b)(2) as an administrative activity which is defined in the CEQA Guidelines to include the purchase of supplies and personnel related actions. It is further exempt under CEQA Guideline 15378(b)(4) as it is a government fiscal activity that does not involve a commitment to any specific project which may result in a potentially significant physical impact on the environment. Although the use of funding will be discussed for various potential projects, future environmental analysis will be conducted for the various potential projects prior to the City making any commitment or approval of any project, or it is covered by the CEQA Guideline 15061(b)(3) and/or 15378(b)(2).
Recommendations:
Receive an Update on the American Rescue Plan Act (ARPA), programs and provide direction to staff Attachments
1. ARPA status update – All Projects
67 Item # C8.
No. Program
Approved
Appropriation
Year to Date
Expenditure Balance Current Status
1 Rent and Mortgage Relief $1,100,000 $1,251 $1,098,749 FORWARD has been selected as the fiscal agent and staff is meeting weekly with consultant. Staff and consultant are working on launching the program in Q1 2023.
2 Social Services $500,000 $166,688 $333,312 Non-profit grants awarded and programming has begun, serving Milpitas residents. 3 Financial Assistance to Low and Moderate Income Residents for Utility Payments and Childcare Costs
$575,000 $56,340 $518,660 Dispersing childcare subsidies and utility assistance monthly. Continuing to enroll participants and work directly with childcare providers. Additional marketing on available subsidies starting in January 2023. 4aBeautify Milpitas Program $100,000 $15,247 $84,753 Beautification Events are scheduled monthly and kits are ordered, assembled and distributed as needed. 4bWeed Abatement $90,000 $79,253 $10,747 Temporary staffing hired for the program. 5 Pilot Curbside Trash Pickup Program $85,000 0 $85,000 The City's waste hauler (MSI) agreed to provide the service at no additional cost to City. Expanded service will start Jan 2, 2023. 6 Homeless Outreach and Assessment $100,000 0 $100,000 Staff is awaiting Santa Clara County's comments on the draft Agreement.
Community Services Subtotal $2,550,000 $318,780 $2,231,220 7 Small Business Assistance Grant Program $1,570,000 $1,565,100 $4,900 Grants have been disbursed and program is complete. 8 Hotel Assistance Grant Program $130,000 $130,000 $0 Grants have been disbursed and program is complete. 9 Accessory Dwelling Unit Program $990,000 $243,878 $746,122 90 ADU/JADU grants; 4 Permits Finaled, 12 Issued, 3 Approved, 71 in Plan Check 10Storefront Improvement Grant Program $365,000 0 $365,000 The Outdoor Dining Ordinance was recently adopted, which allows the S. Main Street storefront improvements program to proceed.
11Community Events $125,000 $70,181 $54,819 Completed: Earth Day, Family Campout, Lantern Festival. ArtWalk, Dia de Los Muertos 12Financial Assistance to the Chamber of Commerce $200,000 0 $200,000 Financial and event documents were reviewed by the City, an Info Memo was sent to City Council on October 19. 13Workforce Development Program $300,000 $75,312 $224,688 Grants have been disbursed to all but one non-profit organization. Build It Green launched the second Certified Green Building Professional Training Program on November 30, 2022.
15Limited Term Economic Development Specialist Position $330,000 $160,047 $169,953 Position filled and ARPA program support being provided. 16Business Improvement District $75,000 0 $75,000 One firm has submitted a proposal under the recent RFP. Staff is currently evaluating the proposal. 17Sustainable Neighborhood Program $60,000 0 $60,000 Program on hold and pending Congressional approval of the 2023 Federal Budget which includes the City's Carbon Neutral Home Incentive Program .
Economic Vitality Subtotal $4,145,000 $2,244,518 $1,900,482 18Park Rehabilitation $4,386,815 $15,452 $4,371,363 Engineering's Project No. 3051: RFP process for ARPA Park Repair design services was completed and a design services agreement will be forwarded for signatures early December. The Design phase will start January 2023 and be completed within 12 months. Construction phase is anticipated to start in 2024. Public Works PH3 park improvement project (7 base bid sites and 4 add alternate sites) scheduled for Council consideration on 12/06/22. 19Public Safety Facilities' Rehabilitation $250,000 0 $250,000 Funds will be allocated to CIP projects with the FY 2022-23 Mid-year budget adjustments. 20Mobile Emergency Operations Center (MEOC) $425,000 0 $425,000 Vehicle build is in process. 20% complete. Delivery expected in Summer 2023 Infrastructure Subtotal $5,061,815 $15,452 $5,046,363
21Public Safety Staffing $1,200,000 $552,497 $647,503 Four(4) firefighters currently funded. Two(2) police officer recruitments in progress. 22Fire Pumper Truck $920,000 $455,580 $464,420 Manufacturer purchase and order in progress. 23Emergency Management Program Assessment Study $200,000 $9,850 $190,150 The first five annexes are complete. The remaining 15 will be complete by January 2023. 24Catalytic Converter Public Safety Initiative $200,000 0 $200,000 7 Businesses are participating, with a maximum of 25 residents each. All 175 resident slots have been filled. There is a waiting list of approximately 10 residents.
Public Safety Subtotal $2,520,000 $1,017,927 $1,502,073 25Human Resources Information System $1,100,000 0 $1,100,000 Request for Information (RFI) completed and 3 vendor demonstrations held 26Financial Management System $100,000 0 $100,000 A needs assessment study is underway. Propose swap of funding with General Fund at FY23 mid-year 27Cybersecurity Programs and Training $300,000 $6,428 $293,572 User training service contract completed. Staff is exploring additional systems and services. 28Technology Infrastructure $610,000 $277,563 $332,437 Initial end-user equipment purchase completed. Year 2 batch purchase in progress.
Technology Subtotal $2,110,000 $283,991 $1,826,009
29ARPA Funds Administration $350,000 $76,371 $273,629 Procurement administration in progress.
Administration Subtotal $350,000 $76,371 $273,629
Grand Total $16,736,815 $3,957,040 $12,779,776
City of Milpitas
ARPA Project Appropriation and Expenditures through Nov. 22, 2022 68 Item # C8.
CITY OF MILPITAS
AGENDA REPORT
(AR)
Item Title: Accept the City’s Annual Comprehensive Financial Report and Other Related Annual Audited Reports for the Fiscal Year Ended June 30, 2022 (Staff Contact:
Lauren Lai, Finance Director, 408-586-3111)
Category: Consent Calendar-Leadership and Support Services Meeting Date: 12/6/2022
Recommendation: Accept the City’s Annual Comprehensive Financial Report (ACFR) and other related annual audited reports for the Fiscal Year ended June 30, 2022 and find a CEQA exemption.
BACKGROUND:
Annually, Maze and Associates, the City’s external auditor audits the City’s books and staff prepares the Annual Comprehensive Financial Report (ACFR) of the City of Milpitas. In conjunction with the ACFR for the fiscal year ended June 30, 2022, this staff reports presents, Bicycle/Pedestrian Project Financial Statement, Agreed Upon Procedures Report on Compliance with the Appropriations Limit Increment, Required Communications, and the Memorandum on Internal Control (MOIC) to the City Council for review.
ANALYSIS:
The ACFR presents the operations and financial activity of all the City’s various funds, including the General Fund. It includes an unqualified (“clean”) audit opinion from Maze & Associates which means that the financial statements present fairly the results of operations for the fiscal year ended June 30, 2022, in conformance with Generally Accepted Accounting Principles (GAAP). The completion of ACFR has met the debt reporting obligation requirement. The City also achieved to apply for Government Finance Officer Association (GFOA) Certificate of Achievement for Excellence in Financial Reporting Award timely before December 31, 2022.
Highlights and items to note from the ACFR for the fiscal year ended June 30, 2022 are detailed below:
The City’s revenues in Fiscal Year 2022 have been slowly recovering since the start of the Pandemic over two years ago. The unemployment rate for the San Jose-Sunnyvale-Santa Clara metropolitan area shows an improvement in June 2022 when compared to Fiscal Year 2021. The unemployment rate was at 2.2%, a decrease of 3% from last year’s 5.2%.
The increase in Property taxes is due to a potentially one-time increase in Excess Educational Revenue Augmentation Fund (ERAF) and ongoing increases in secured prop erty tax due to higher property valuation. Sales and use tax increased significantly due to a full year of Measure F, higher consumption and historically high inflation. As people started to travel again post -pandemic, hotel/motel tax experienced some recovery, albeit still at less than 50% of pre-pandemic revenue level.
As the City continues to recover from this unprecedented pandemic, we are optimistic about the future but remain tempered by possible economic impacts that may stem from the unfortunate war in Europe, rising interest rates, rising inflation rates and other economic and political challenges.
Analysis of financial highlights for City-wide and Fund Level statement
City-wide:
The City’s total net position was $646.4 million at June 30, 2022. Of this total, $422.9 million were Governmental and $223.5 million were Business-type, a net increase of total $25.3 million from prior year’s total of $621.1 million primarily due to a net increase in assets over liabilities. 69 Item # C9.
Net asset increases w ere primarily due to increases lease receivable and capital assets and liability decreases primarily due to decrease in pension liabilities. City-wide revenues include program revenues of $111.2 million, general revenues and transfers of $88.8 million, tot aling $200 million, an increase of $11.5 million from the prior year’s total of $188.5 million primarily due to increase in charges for services, capital grants and contributions and general revenues.
Total City-wide expenses were $167.1 million, a de crease of $16 million from the prior year’s $183 million primarily due to decreases in primary government expenditure and water utility expenses.
Fund Level:
Governmental Fund balances were $238.3 million, a net decrease of $14.5 million from fiscal 2021 primarily due to expenditures exceeding revenues by $18 million in Street Improvement and General Government Capital projects. The capital project activities are funded primarily by the fund balance.
Governmental Fund revenues were $133 million in fiscal 2022, up $6.2 million from the prior year’s $126.8 million, primarily due to full year of Measure F, high inflation, consumption and resume of travel resulting in increases in Sales and Use tax and Hotel/Motel taxes. Governmental Fund expenditures were $151.4 million compared to $146.6 million in fiscal year 2021 primarily due to increases in General Government expenditure and Recreation and Community Services as programs and services resumed post-pandemic. General Fund revenues of $112.1 million represented an increase of $14 million from fiscal 2021 revenues of $98.1 million caused primarily by increase in Hotel/Motel taxes, Sales and Use taxes, Licenses and Fines and Intergovernmental revenue.
Net other financing uses of the General Fund were $3.9 milli on in fiscal 2022 while fiscal 2021 had a total of other financing uses in ($23) million. Variance due to creation of Pension Section 115 Internal Service Fund in fiscal year 2021. General Fund balance of $66.8 million at the fiscal 2022 was $4.1 million more than the fund balance at fiscal 2021.
Bicycle/Pedestrian Project Financial Statement - The Bicycle/Pedestrian Projects Financial Statements includes Projects that were developed using Transportation Development Act (TDA) grant. The auditor issued an unqualified opinion on these statements.
Memorandum on Internal Control (MOIC) - Under generally accepted auditing standards, the City’s auditors are encouraged to report certain matters regarding the City’s internal control structure. The City’s auditors have provided such a report in their Memorandum on Internal Control (“MOIC”) for the Year Ended June 30, 202 2.
There is one item reported as significant deficiency but no material weakness reported by the auditors regarding the City’s internal control structure. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is reasonable possibility that a material misstatement of the City’s financial statements will not be prevented or detected and correct on a timely basis. The auditors reported one significant deficiency related to the timeliness of year-end close. Specifically, the auditors recommend adequate resources to improve the timeliness and effectiveness of year -end close. The City was impacted by the labor market with several concurrent vacancies and a legacy financial system, which is inflexible. Since then, the City was successful in filling several critical positions and is also undergoing a financial procedures and systems assessment. Both of these efforts will improve the City’s internal controls over year-end close. The auditors also reported on another matter pertaining to bank reconciliations, wherein a few reconciliations lacked the preparer name, reviewer name and/or date. The filled staff positions, process/system assessment and improved bank reconciliation process will enhance these internal controls.
70 Item # C9.
Required Communications Report – Our auditors are required to communicate information related to the audit and financial statements under generally accepted auditing standards and Government Auditing Standards. The City’s auditors have provided such a report in their Required Communications for the Year Ended June 30, 2022. Please note the following from the Required Communications Report:
1) The City’s auditors noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period.
2) The City’s auditors encountered no significant difficulties in dealing with management in performing and completing their audit.
3) The City’s auditors discovered no material misstatements, either individually or in their aggregate, to each opinion unit’s financial statements taken as a whole.
4) The City’s auditors encountered no disagreements with management during the course of their audit.
Agreed Upon Procedures Report on Compliance with the Appropriations Limit Increment - This report shows that the auditor applied specific procedures to validate the City’s Appropriations Limit (“Gann Limit”) calculations. The appropriations limitation imposed by Propositions 4 (1979) and later amended by Proposition 111 (1990) creates a restriction on the amount of government revenue which may be appropriated in any fiscal year. The Appropriations Limit is based on actual appropriations during the base year (1986-87 or the first full year of operation) and increases each year using specified growth factors. The Appropriations Limit applies only to those revenues defined as “proceeds of taxes.” Certain expenditures of tax proceeds do not count as Appropriations Subject to Limit including those for voter approved debt, qualified capital outlay, and the costs of complying with court orders and federal mandates. Staff prepares an updated Appropriations Limit in May of each year and presents to Council for review and approval during the budget preparation process.
POLICY ALTERNATIVE(S):
Alternative 1: Do not accept the ACFR report.
Pros: There are no pros to not accept the ACFR report.
Cons: Not Accepting this ACFR report may pose challenges to Staff to remit this report as required per bond indebtedness and otherwise in the course of administering the City’s finances.
Reason not recommended: Staff is presenting annual comprehensive financial report to inform the Council and the public on the City’s audited financial status.
FISCAL IMPACT:
There is no fiscal impact from this report other than staff time to prepare the report.
California Environmental Quality Act (CEQA):
This item is not a Project under CEQA exempt under CEQA Guideline 15378(b)(4) as it is a government fiscal activity that does not involve a commitment to any specific project which may result in a potentially significant physical impact on the environment.
RECOMMENDATION:
Accept the City’s Annual Comprehensive Financial Report and other Related Annual Audited Reports for the Fiscal Year ended June 30, 2022.
Attachment(s):
1. Annual Comprehensive Financial Report for FY 2021-22
2. Bicycle/Pedestrian Project Financial Statement for FY 2021-22
3. Memorandum on Internal Control for FY 2021-22
4. Required Communications for FY 2021-22
5. Agreed Upon Procedures report on Compliance with the Appropriations Limit Increment FY 2021-22 71 Item # C9.
72 Item # C9.
73 Item # C9.
CITY OF MILPITAS, CALIFORNIA
ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE YEAR ENDED JUNE 30, 2022
Prepared by
THE FINANCE DEPARTMENT
74 Item # C9.
75 Item # C9.
CITY OF MILPITAS
Annual Comprehensive Financial Report
For the Year Ended June 30, 2022
P a g e
i
INTRODUCTORY SECTION:
Table of Contents ...................................................................................................................................................... i
Letter of Transmittal ................................................................................................................................................. v
Directory of City Officials ..................................................................................................................................... xii
Map of City’s Location ......................................................................................................................................... xiii
Organization Chart ................................................................................................................................................ xiv
GFOA Certificate of Achievement ........................................................................................................................ xv
FINANCIAL SECTION:
Independent Auditor’s Report ................................................................................................................................. 1
Management’s Discussion and Analysis ................................................................................................................ 5
Basic Financial Statements:
Government-wide Financial Statements:
Statement of Net Position ..................................................................................................................... 23
Statement of Activities .......................................................................................................................... 24
Fund Financial Statements:
Governmental Funds:
Balanc e Sheet .................................................................................................................................... 28
Statement of Revenues, Expenditur es, and Changes in Fund Balances ........................................... 30
Reconciliation of the Net Change in Fund Balances – Total Governmental Funds with th e Statement of Activities ........................................................................................ 32
Statements of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual (Non GAAP Legal Basis):
General Fund ................................................................................................................................. 33
Hous ing Authority ......................................................................................................................... 34
76 Item # C9.
CITY OF MILPITAS
Annual Comprehensive Financial Report
For the Year Ended June 30, 2022
P a g e
ii
FINANCIAL SECTION: (Continued)
Proprietary Funds:
Statement of Net Position ................................................................................................................. 35
Statement of Revenue, Expenses and Changes in Fund Net Position .............................................. 36
Statement of Cash Flows .................................................................................................................. 37
Fiduciary Funds:
Statement of Fi duciary Net Position ................................................................................................. 39
Statement of Changes in Fiduciary Net Position .............................................................................. 40
Notes to Basic Fina ncial Statements ............................................................................................................ 41
Required Supplementary Information:
Retiree Medical Benefits (OPEB) Plan - Sche dule of Changes in the Net OPEB Liability and Relate d Ratios ................................................................................................................................. 107
Retiree Medical Benefits (OPEB) Pl an - Schedule of Contributions ........................................................ 108
Schedule of Changes in the Total OP EB Liability and Related Ratios – (Dependent Fund) (OPEB) Plan .......................................................................................................... 109
Schedule of Contributions (Dep endent Fund) (OPEB) Plan ..................................................................... 110
Schedule of Changes in the Net Pension Liabil ity and Related Ratios (Miscellaneous Plan) .................. 112
Schedule of Contributions (Miscellaneous Plan) ...................................................................................... 114
Schedule of Changes in the Net Pension Li ability and Related Ratios (Safety Plan) ............................... 116
Schedule of Contribu tions (Safety Plan) ................................................................................................... 118
Supplemental Information:
Non-major Governmental Funds:
Combining Ba lance Sheets .................................................................................................................. 122
Combining Statements of Reve nues, Expenditures and Changes in F und Balances ............................................................................................................................ 124
Combining Schedule of Revenue s, Expenditures and Changes in Fund Balances - Budget and Ac tual (Non GAAP Legal Basis) ..................................................... 126
77 Item # C9.
CITY OF MILPITAS
Annual Comprehensive Financial Report
For the Year Ended June 30, 2022
P a g e
iii
FINANCIAL SECTION: (Continued)
Internal Service Funds:
Combining Statements of Net Position ................................................................................................ 133
Combining Statements of Reve nues, Expenditures and Changes in Fund Net Position ...................................................................................................................... 134
Combining Statemen ts of Cash Flows ................................................................................................. 135
STATISTICAL SECTION:
Net Position – Last Ten Fiscal Years ................................................................................................... 137
Changes in Net Position – Last Ten Fiscal Years ................................................................................ 138
Fund Balances, Governmental F unds – Last Ten Fiscal Years ........................................................... 143
Changes in Fund Balances, Government al Funds – Last Ten Fiscal Years ........................................ 144
Assessed Value and Actual Value of Taxa ble Property – Last Ten Fiscal Years ............................... 146
Direct and Overlapping Property Ta x Rates – Last Ten Fiscal Years ................................................. 147
Principal Property Tax Payers – Fiscal Years 2021-2022 and 2012-2013 .......................................... 148
Property Tax Levies and Collect ions – Last Ten Fiscal Years ............................................................ 149
Taxable Sales by Category – Last Ten Calendar Years ....................................................................... 150
Direct and Overlapping Sales Tax Rates – Last Ten Fiscal Years ...................................................... 151
Principal Sales Tax Payers – Fiscal Years 2021-2022 and 2012-2013 ............................................... 152
Ratios of Outstanding Debt by Type – Last Ten Fiscal Years ............................................................ 153
Bonded Debt Pledged Revenue Coverage Redevelopment Agency Tax Allocation Bonds – Last Ten Fiscal Years .............................................................................. 154
Computation of Direct and Overlapping Debt ..................................................................................... 155
Legal Debt Margin Informati on – Last Ten Fiscal Years .................................................................... 156
Installment Payment Coverage, Sewe r Certificates of Participation and Wastewater Revenue Refunding Bonds – Last Ten Fiscal Years .................................................. 157
Installment Payment Coverage,
Water Revenue Funds – Last Ten Fiscal Years .............................................................................. 158
78 Item # C9.
CITY OF MILPITAS
Annual Comprehensive Financial Report
For the Year Ended June 30, 2022
P a g e
iv
STATISTICAL SECTION: (Continued)
Bimonthly Sewer Rates by Customer Class – Last Ten Fiscal Years ................................................. 159
Bimonthly Water Rates by Customer Class – Last Ten Fiscal Years ................................................. 160
Demographic and Economic Statisti cs – Last Ten Calendar Years .................................................... 161
Principal Employers – Fisc al Year 2021-2022 and 2012-2013 ........................................................... 162
Authorized Full-Time Equivalent Employees by Function/Program – Last Ten Fiscal Years ..................................................................................................................... 163
Operating Indicators by Function/Pr ogram – Last Ten Fiscal Years .................................................. 164
Capital Asset Statistics by Function/ Program – Last Ten Fiscal Years .............................................. 166
OTHER AUDIT REPORT:
Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ....................................................... 169
79 Item # C9.
455 EAST CALAVERAS BOULEVARD , MILPITAS , CALIFORNIA 95035-5479 PHONE: 408-586-3000, www.ci.milpitas.ca.gov
November 15, 2022
Honorable Mayor and Members of the City Council:
Submitted herewith is the Annual Comprehensive Financ ial Report (ACFR) of the City of Milpitas (the City) for the fiscal year ended June 30, 2022 as prepared by the City’s Finance Department with support from other City departments. This report is consiste nt with generally accepted accounting principles.
Responsibility for both the accuracy of the presente d data and the completeness and fairness of t he
presentation, including all disclosures, rests with the City. The data, as presented, is accurate in all material aspects; and is presented in a manner designed to fa irly set forth the financial position and results of operations of the City as measured by the financial activity of its various funds. All disclosures necessary to enable the reader to gain the maximum understanding of the City's financial affairs have been included.
The organization of the financial report follows the guidelines set forth by the Government Finance Officers' Association of the United States and Canada.
The Reporting Entity and its Services
This report combines the financial statements of the Milpitas Public Financing Authority (MPFA), Milpitas Housing Authority (Housing Authority), the Milpitas Municipal Financing Authority (MMFA) and the Terrace Gardens Inc. with those of the City to co nstitute a single reporting entity. The MPFA, Housing
Authority, MMFA and Terrace Gardens are separate lega l entities from the City and are controlled by the City. The MPFA, Housing Authority and MMFA have the same governing board as the City and the City also has control of the Terrace Gardens’ governing bo ard. However, the Terrace Gardens Inc. issues its own component unit financial statements. The purpose and authority of the Milpitas Public Financing Authority (MPFA), Milpitas Housing Authority (Housing Authority), the Milpitas Municipal Financing Authority (MMFA) and the Terrace Gardens Inc. are described in Note 1 of this report.
Milpitas is a general law city of the State of California. The City was incorporated in 1954 and operates under a Council-Manager form of government. The City's political and legislative body is the City Council and is empowered by the general laws of the State of California to formulate citywide policy, including a fiscal program, City services, and appointment of the City Manager and City Attorney. There are four City Council members who are elected at-l arge for staggered four-year terms, and the Mayor is selected every two years in a separate citywide election.
The City provides a full range of municipal services to the community through its departments such as Building Safety and Housing, Planning, Engineerin g, Fire, Police, Public Works, and Recreation and Community Services. These departments are supported by the internal departments which include the City Manager’s Office, City Attorney’s office, Finance, Human Resources, and Information Technology.
Community members of the City desiring to assist the City Council in forming government policy may do so by serving on a City commission . The commissions act in an adviso ry capacity to the City Council.
They are: Arts Commission; Community Advisory Commission; Economic Development and Trade Commission; Energy and Environmen tal Sustainability Commission; Li brary and Education Advisory Commission; Parks, Recreation and Cultural Resources Commission; Planning Commission; Public Safety and Emergency Preparedness Commission; Science, Technology, and Innovation Commission; Senior Advisory Commission; Veterans Commission; Measure F Committee and Youth Advisory Commission.
C ITY OF M ILPITAS
v
80 Item # C9.
Economic Condition, Outlook and Activity
Milpitas is situated within the Silicon Valley regi on, known throughout the world as the home of high technology, innovation and research. Milpitas is considered the “Crossroads of Silicon Valley,” with most of its 13.6 square miles of land situated betwee n two major freeways, I-6 80 and I-880. Milpitas has experienced tremendous growth since its incorporati on in 1954. Over the past 68 years, the population growth has increased from 26,561 in 1970 to nearly 80,839 based on the latest Department of Finance data.
The economy has improved since 2021 and as of September 2022, the City’s unemployment rate was 2.3% while the State of California’s unemployment rate was 4.1% and the national unemployment rate was 3.5%.
Over two years after the National COVID-19 Emergenc y Declaration, we are tempered with the fiscal recovery and forecast ahead. At the Federal level, the American Rescue Plan Act (ARPA) injected a $2 trillion fiscal stimulus into the economy with $16.7 million allocated to the City. Various factors influence our economic outlook. These include th e tragic war in Ukraine, inflation with forty-year historically high CPI and fuel prices, rising interest rates, rising in flation rates, Federal Reserve rate hikes and monetary policies, continued supply chain challenges and labo r shortages. Another critical variable is how the Pandemic may permanently impact society, such as cut back to in-p erson commerce or services through online shopping, virtual work, conferen ces and/or leisure services to na me only a few. While the City forecasts our sales tax revenues will recover to pre-pandemic levels, we forecast the Pandemic will permanently alter business travel impairing the City hotel (transient occupancy tax) revenues.
The national GDP (Gross Domestic Product, the value of goods and services less the value of the goods and services used up in production and is the most popular indicator of the nation’s overall economic health.) growth increased at an annual rate of 2.6 percent in the third quarter of 2022 from the previous quarter (according to the BEA, or Bureau of Economic Analysis’ Advanced estimate). With inflation at its highest peak in 40 years as of Se ptember 2022, the Federal Reserve cont inues to raise interest rates to
combat high inflation. Consequently, there is volati lity in the stock market and slow-down in economic growth. As of September 2022, the Federal Reserve Bo ard’s projected change in median GDP growth is positive 1.2 percent for 2023 and positive 1.7 percent for 2024.
The CPI (Consumer Price Index), is used by the U.S. Bu reau of Labor Statistics to measure inflation. The September 2022 CPI-U (Consumer Price index for all Urban Consumers) increased 8.2 percent over the last 12 months. Core CPI (CPI less food and energy) is 6.6 percent compared to 4.0 percent in September 2021. Core CPI represents a more accurate picture of underlying inflation trends since volatile food and energy products are excluded. While the global economic activity remains uncertain, the U.S. Bureau of Labor Statistics’ Employment Projections for 2021-2022 shows a projected growth from 158.1 million to 166.5 million over the 2021-31 decade.
The housing market has remained strong in 2022. Single family residential cons truction starts decreased 3% year-over-year while multi-family construction starts increased 6% year-over-year. The median sale price of a single family residential home in Mi lpitas was $1.3 million as of September 2022, up approximately 7.7 percent from last year. Year-over-year price increases have slowed down in Santa Clara County. Santa Clara County had a 2.1 percent increase in median sale price compared to 14.4 percent increase last year. The California Association of Realtors reported an increase in value of 1.6 percent statewide. The section below entitled “Major Development Activities in the City” will discuss some of the development activities that are occurring in Milpitas.
vi
81 Item # C9.
Consumer Confidence Level
The Conference Board Consumer Confidence Index decreased to 107.8 in September 2022, up from 103.2 in August. Consumer confidence is an indicator designed to measure the degree of optimism that consumers feel about the overall state of the economy and their personal financial situation. Since consumer spending accounts for more than two-thirds of the U.S. Gross Domestic Product, th e index is a good indicator that when consumers’ confidence is high, consumers would likely make more purchases thus further boosting the economy. Employment drives consumer spending, which in turn impacts the economy greatly. Nonfarm payroll employment increased 263,000 in September 2022, and the unemployment rate declined to 3.5 percent from 3.7 percent in August 2022.

Source: The Conference Board
Top Ten Sales Tax Generators by Economic Segment
Financial markets continue to remain volatile and inflationary trends in the economy remain high. All states but two, reported year-over-year growth in total state
tax revenue collections for the first quarter of 2022.
According to Urban-Brookings Tax Policy Center, total state tax revenue collections increased 21.7 percent in nominal terms and 13.9 percent in real terms in the first quarter of 2022, compared to the year prior. The chart below provides a snapshot of the City’s sales tax revenue by major industry groups. Total amount of sales tax revenue for the major industry groups gene rates about $26.8 million. Total sales tax receipts increased by 15.3 percent from 2021. The sales tax revenue generated from major industry groups such as Fuel and Service Stations, Restaurants and Hotels, General Consumer Goods, Business and Industry, Food and Drugs, and Autos and Transportation increased over a year ago, while the Building and Construction industry group had a 14.2 percent decrease from the prior year. vii
82 Item # C9.
Major Development Activities in the City
General Plan Update – Considered the blueprint for fu ture development, the General Plan defines a long- term vision for future growth, traffic circulation, economic development, h ealth, housing and resource conservation. The Milpitas 2040 General Plan was unanimously adopted by the City Council on March 9, 2021, and this policy document will guide City decision-making and priorities over the next 20 years. The Plan identifies opportunity sites wh ere changes to land use and develo pment patterns are likely to occur and prioritizes housing and economic growth in areas served by high-quality transit. The Plan also includes policies aimed at preserving the character of existing neighborhoods and protecting the City’s hillsides and other natural resources.
Milpitas Metro Specific Plan – The City adopted a Transit Area Specific Plan (TASP) in June 2008 to encourage medium to high density development surrounding the new Mi lpitas Transit Center. The Plan was last updated in 2011. The Milpitas Transit Cent er, which opened in 2020 , provides high-quality bus and light rail connections via the Santa Clara Valley Transportation Authority (VTA) system as well as regional rapid transit services via BART. The City will adopt the Milpitas Metro Specific Plan with update policies and programs to further enhance existing neighborhoods and provide new opportunities for future housing, retail, office, and hotel uses in the pla nning area. The new Metro Plan envisions a network of landscaped open space, parks, and trails that connect housing and jobs to high-qu ality transit and provide opportunities for active and passive recreation as well as social interaction. The new Plan also envisions development of an employment-oriented Innovation Di strict near the Milpitas Transit Center to foster economic development based on the City’s excellent access to regional bus, light rail, and BART connections. The City anticipates final adoption of the new Plan and the associated Environmental Impact Report in 2023.
Residential Development – The City continues to leverage public and private resources to support planning and development of new affordable housing. The City is recognized for its award-winning online resources and interactive tools that help residents navigate the development review pro cess and find ADU designs that fit their property and need s. For more information, visit www.milpitas.gov/adu/). The City also continues to host the popular “ADU Mondays” progr am, which brings staff from various departments together to provide direct assistance to residents who wish to pursue an ADU on their property. City staff has presented information about these programs in regional and statewide forums.
In FY 2021-22, the Planning Commission has approv ed permits for several new housing development, including an 85-unit (100% affordable) multifamily residential project at 308 Sango Court, a 32-unit (15% affordable) multi-family residential projects at 200 1 Tarob Court, and an innovative 56-unit townhome project (15% affordable) with 12 ADUs on a redevelopm ent site on Houret Court. In addition, the City Council reviewed preliminary plans for a 112-unit (100% affordable) multifamily residential project at 113 South Main Street, and a 94-unit (15% affordable) mixed-use project at 265 South Main Street. The City is using $300,000 in state grant funding to devel op a Housing Opportunity Overlay Zone aimed at streamlining the review process for affordable hous ing and create new by-right housing regulations. In addition, the City received a $500,0 00 Priority Development Area (PDA) grant from ABAG to help fund the preparation of the Gateway/Main Street Specific Plan. The City also received $142,700 from ABAG’s Regional Early Action Planning (REAP) grant progra m to help fund the prep aration of the 2023-2031 Housing Element.
Non-residential Development – FY2021-22 was anot her busy year for commercial development and expansion. The Planning Commission approved development permits for the redevelopment of a former retail building into a new Stratford School campus at 125 North Main Street and the development of a new 216-room Tribute Hotel at 1851 McCarthy Blvd. In addition, development permits have been approved for a new Rainbow Childcare Center at 158 South Main Street, an expanded after-school program at the Indian Heritage Foundation at 680 Calaveras Boulevard, and a new Primrose Daycare Cetner at 1000 Jacklin Road.
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A new Chick-fil-A restaurant and franchises of Crumbl Cookies and Nothing Bundt Cakes opened in the Town Center shopping center on Calaveras Boulevard.
Accounting System and Budgetary Control
In developing and evaluating the C ity's accounting system, consideratio n is given to the adequacy of
internal accounting controls. Internal accounting co ntrols are designed to provide reasonable, but not absolute, assurances regarding: (1 ) the safeguarding of assets agai nst loss from unauthorized use or disposition; and (2) the reliability of financial record s for preparing financial statements and maintaining accountability for assets. The concep t of reasonable assurance recognizes that: (1) the cost of a control should not exceed the benefits likely to be derived; and (2) the evaluati on of costs and benefits requires estimates and judgments by management.
All internal control evaluations occur within the above framework. The Finance Department staff remains committed to improving the City's accounting system; to maintain the City's inte rnal accounting controls to adequately safeguard assets; an d to provide reasonable assurances of proper recording of financial transactions. Budgetary control is directed by the City Council by resolution when the budget is adopted each year. Expenditures may not legally exceed appropriations at the department level by fund. The City utilizes the encumbrance system as a management contro l technique to assist in controlling expenditures.
The City Manager has limited budget appropriation authority to transfer appropriations among departments and projects within any one fund, provided that the amount of the amended appropriation is $100,000 or less. Quarterly reports of revenue and expense are pr epared and distributed to the City Council and City departments to monitor spending in relation to the budget. At fiscal year-end, open encumbrances are reported under the “Assigned” fund balance classification. The City's accounting records are organized and operated on a "fund" basis, which is the basic fiscal and accounting entity in g overnmental accounting.
Each fund is classified by category and fund type:
Category and Fund Type
Governmental
Funds: General Fund, Special Reve nue Funds, Debt Service Funds, and Capital Projects Funds
Proprietary Funds: Enterprise Funds and Internal Service Fund Fiduciary Funds: Private-Purpose Trust Fund and Agency Funds Governmental Funds: The basic financial statements necessary to fairly present the financial position and operating results from major governmental funds ar e the balance sheet, and the statement of revenues, expenditures and changes in fund balance. These funds are maintained using the modified accrual basis of accounting, which is more thoroughly explained in the Notes to the Financial Statements.
Proprietary Funds: Generally accepted accounting principles applicable to private commercial business are applicable to proprietary funds of a government agency. The basic financial statements required to present the financial position and operating results from major proprietary funds are the statement of net position, statement of revenues, expenses, and changes in fund net position, and the statement of cash flows. The accrual basis of accounting is utilized as explained in the Notes to the Financial Statements.
Fiduciary Funds: Fiduciary funds are used to account for assets held by a government agency acting as a trustee or agent for individuals, assessment districts, organizations, other governmental units or other funds of the same entity. These funds are also identified in this report as a Private-Purpose Trust Fund and Agency Funds. The full accrual basis of accounting is used as explained in the Notes to the Financial Statements. Agency Funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations.
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Financial Analysis
Generally Accepted Accounting Principles (GAAP ) require that management provide a narrative
introduction, overview, and analys is to accompany the basic financ ial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it.
Long Term Financial Planning
Each year the City adopts a balanced budget by June 30. The City has fiscal policies that include the use of one-time revenues for one-time expenditures only, including capital outlay and reserves. The City also adopted reserve policies that requires unassigned fu nd balance which is made up of the Contingency Reserve to be at least 16.67% of the annual oper ating expenditures and the Bu dget Stabilization Reserve with a reserve target of 16.67% of the annual oper ating expenditures in the General Fund. Additional reserves are included in Note 11.
The City developed a five-year Capital Improvement Plan detailing specific budgeted capital projects. Each
of the projects is consistent with the budget prioritie s of the City. The fiscal year 21-22 Adopted Capital Improvement Project (CIP) Budget totaled $39.7 million . The CIP included improvements to the City’s infrastructure which includes community improvements , parks, streets, water, sewer and storm drain utilities.
In addition, the City produces an annual ten-year General Fund Foreca st. The Forecast allows the City Council and the community to assess the financial sust ainability of City services in the long term. The projection also identifies the type of commitments an d resource demands in the next ten years as known and points out areas of both opportunity and risk as th e City navigates through fiscal cycles. This long- term forecast provides an invaluable planning tool and is an indication of sound fiscal planning and strategy.
Independent Audit
Each year the City requires an independent annual audit of the City's financial records, the results of its operations, and cash flows. This report includes th e opinion of the City's independent auditors, Maze & Associates, for the basic financial statements of the City. In addition, the do cument also contains th e
auditors' report on Internal Control over Financial Reporting and on compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards.
Awards
The Government Finance Officers' Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City for its Annual Comprehensive
Financial Report for the fiscal year ended June 30, 202 1. The Certificate of Achievement is the highest form of recognition for excellence in state and local government financial reporting. The City has received this award for the last twenty-six years.
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Acknowledgments
We extend our appreciation to the entire staff in the Finance Department and other departments who assisted in the process of compiling the information for this report. In addition, we extend a special "thank you" to our external auditors who contribut ed to make this document poss ible. Their efforts and continued dedication are greatly appreciated. We sincerely th ank the Mayor and members of the City Council for their support, interest, and integrity in directing the financial affairs of the City in a responsible and prudent manner.
Respectfully submitted,
S t
e v e n G . M c H a r r i s L a u r e n L a i
City Manager Director of Finance/Risk Manager
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DIRECTORY OF OFFICIALS
June 30, 2022
City Council
Mayor Rich Tran
Vice-Mayor Carmen Montano
Councilmember Karina
R. Dominguez
Councilmember Anthony Phan
Councilmember Evelyn Chua
City Manager
Steven G. McHarris
Assistant City Manager
Ashwini Kantak
Deputy City Manager
Walter C. Rossmann
Building Safety & Housing
Bill Tott (interim Building Safety)
Alex Andrade (interim Housing)
City Attorney
Michael Mutalipassi
City Clerk
Suzanne Guzzetta
Director of Recreation & Community Services
Renee Lorentzen
Economic Development Director
Alex Andrade
Engineering Director/City Engineering
Steve Erickson
Finance Director
Lauren Lai
Fire Chief
Brian Sherrard
Human Resources Director
Jeannine Seher
Information Technology Director
Daniel Nam
Planning Director
Ned Thomas
Police Chief
Jared Hernandez
Public Information Officer
Charmaine Angelo
Interim Public Works Director
Roger Lee
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The City of Milpitas is located near the southern tip of San Francisco Bay, forty-five miles south of San Francisco.
Milpitas is often called the “Crossroads of Silicon Valley” with most of its 13.6 square miles of land situated between two major freeways (I-880 and I-680), State Rout e 237, and a county expressway. The light rail line opened for service in 2004 and an extension of BART, with a major multi-modal station, is in the planning stages. xiii
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• Arts
• Community Advisory
• Economic Development and Trade
• Public Safety and Emergency Preparedness
• Library and Education Advisory
• Parks, Recreation, and Cultural Resources
• Planning
• Energy and Environmental Sustainability
• Senior Advisory
• Science, Technology and Innovation
• Veterans
• Youth Advisory
• Measure F Oversight Committee
City Clerk
Economic
Development
Building Safety
& Housing
Engineering
Finance
Human Resources
Information
Technology
Planning
Police
Public Works
Recreation &
Community
Services
City Attorney
Fire
Mayor & City
Council
Milpitas
Community
City Commissions
City Manager
Public Information
Officer
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Government Finance Officers Association
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of Milpitas
California
For its Annual Comprehensive
Financial Report
For the Fiscal Year Ended
June 30, 2021
Executive Director/CEO
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INDEPENDENT AUDITOR’S REPORT
To the Honorable Members of the City Council
City of Milpitas, California
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Milpitas (City), California, as of and for the year ended June 30, 2022, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the Table of Contents.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City as of June 30, 2022, and the respective changes in financial position and, where applicable, cash flows thereof and the respective budgetary comparisons listed in the Table of Contents as part of the basic financial statements for the year then ended in accordance with accounting principles generally accepted in the United States of America.
We did not audit the financial statements of the discretely presented component unit financial statements of Terrace Gardens, Inc. as of and for the year ended December 31, 2021, which repres ent 1.04%, 1.56%, and 1.21% of the assets, net position, and revenues, respectively, of the pr imary government. The financial statements of the Terrace Gardens, Inc. were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for the City, is based solely on the report of the other auditors.
Basis for Opinions
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our re sponsibilities under those standards ar e further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirement 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 these 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 the financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is requi red to evaluate whether there are conditions or events, considered in the aggregate, that rais e substantial doubt about th e City’s ability to continue as a going concern for twelve months beyond the financial statement date, in cluding any currently known information that may raise substantial doubt shortly thereafter.
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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 fra ud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with ge nerally accepted auditing standards 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. Mi sstatements are considered mate rial if, individually or in the aggregate, they could reasonably be expected to influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted auditing standards 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 respon sive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, no such opinion is expressed.
Evaluate the appropriateness of acco unting policies used and the reason ableness 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, consid ered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.
Change in Accounting Principles
Management adopted the provisions of the Governmental Accounting Standards Board Statement No. 87 – Leases, which became effective during the year ended June 30, 2022.
As discussed in Note 11F to the financial statements, the beginning balances of General Fund leases receivable and deferred inflows of resources related to leases were restated and increased by $13,405,519 as of July 1, 2021. As a result, the net effect on beginning fund balance was zero.
The implementation of GASB 87 had material effects on the financial statements.
The emphasis of this matter does not constitute a modification to our opinions.
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Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis and other required supplementary information as listed in the Table of Contents 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 auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and compar ing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited
procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The accompanying Supplementary Information, as listed in the Table of Contents, is presented for purposes of additional anal ysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. 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 underlyi ng accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Supplementary Information is 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 Section and Statistical Section listed in the Table of Contents, but does not include the basic financial statements and our auditor’s report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon.
In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exits, we are required to describe it in our report.
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 7, 2022, on our consideration of the City’s internal control over financia l reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control over financial reporting or on
compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.
Pleasant Hill, California
November 7, 2022
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MANAGEMENT’S DISCUSSION AND ANALYSIS
The following discussion provides readers of the City of Milpitas’ financial statements a narrative overview and analysis of the financial activities of the City of Milpitas for the fiscal year ended June 30, 2022. Please read this document in conjunction with the ac companying Transmittal Letter and Basic Financial Statements.
FISCAL YEAR 2022 FINANCIAL HIGHLIGHTS
The City’s revenues in Fiscal Year 2022 has been sl owly recovering since the start of the Pandemic over two years ago. The unemployment rate for the San Jose-Sunnyvale-Santa Clara metropolitan area shows a slight improvement in June 2022 when compared to Fiscal Year 2021. The unemployment rate was at
2.2%, a decrease of 3% from last year’s 5.2%. By and large, General Fund revenues were higher compared to Fiscal Year 2021 with especially significant increas es in sales and use taxes of $9 Million ($5 Million attributed to Measure F), property tax of $1.6 Million and hotel/motel tax of $3.8 Million.
The increase in Property taxes are due to a poten tially one-time increase in Excess Educational Revenue Augmentation Fund (ERAF) and ongoing increases in secured property tax due to higher property valuation. Sales and use tax increased significantly du e to a full-year of Measure F, higher consumption and historically high inflation. As people started to travel again post-pandemic, hotel/motel tax experienced some recovery, albeit still at less than 50% of pre-pandemic revenue level.
As the City continues to recover from this unprecedented pandemic, we are optimistic about the future but remain tempered by possible economic impacts that ma y stem from the unfortunate war in Europe, rising interest rates, rising inflation rates and other economic and political challenges.
Fiscal 2022 financial highlights include the following:
City-wide:
The City’s total net position was $646.4 million at June 30, 2022. Of this total, $422.9 million were Governmental and $223.5 million were Busi ness-type, a net increase of total $25.3 million from prior year’s total of $621.1 million primarily due to a net increase in assets over liabilities.
Net asset increases were primarily due to increa ses in lease receivable and capital assets and liability decreases primarily due to decrease in pension liabilities. City-wide revenues include program revenues of $111.2 million, general revenues and transfers of $88.8 million, totaling $200 million, an increase of $11.5 million from the prior year’s total of $188.5 million primarily due to increase in char ges for services, capital grants and contributions and general revenues.
Total City-wide expenses were $167.1 million, a decrease of $16 million from the prior year’s $183 million primarily due to decreases in primary government expenditure and water utility expenses.
Fund Level:
Governmental Fund balances were $238.3 million, a net decrease of $14.5 million from fiscal 2021 primarily due to expenditures exceeding revenues by $18 million in Street Improvement and General Government Capital projects. The capita l project activities are funded primarily by the fund balance.
Governmental Fund revenues were $133 million in fiscal 2022, up $6.2 million from the prior year’s $126.8 million, primarily due to full-year of Measure F, high inflation, consumption and resume of travel resulting in increases in Sales and Use tax and Hotel/Motel taxes. Governmental Fund expenditures were $151.4 million compared to $146.6 m illion in fiscal year 2021 primarily due to increases in Genera l Government expenditure and Recreation and Community Services as programs and services resumed post-pandemic. 5 96
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General Fund revenues of $112.1 million represented an increase of $14 million from fiscal 2021 revenues of $98.1 million caused primarily by increase in Hotel/Motel taxes, Sales and Use taxes, Licenses and Fines and Intergovernmental revenue.
Net other financing uses of the General Fund were $3.9 million in fiscal 2022 while fiscal 2021 had a total of other financing us es in ($23) million. Variance du e to creation of Pension Section 115 Internal Service Fund in fiscal year 2021. General Fund balance of $66.8 million at the fiscal 2022 was $4.1 million more than the fund balance at fiscal 2021.
OVERVIEW OF THE ANNUAL COMPREHENSIVE FINANCIAL REPORT
This Annual Comprehensive Financial Report consists of eight parts:
1) Introductory section, which includes the Transmittal Letter and general information, 2) Management’s Discussion and Analysis (this part),
3) The Basic Financial Statements, which include the Government-wide and the Fund financial statements, along with the Notes to these financial statements, 4) Required Supplementary Information,
5) Supplementary Information,
6) Combining statements for Non-major Governmental Funds and Fiduciary Funds, 7) Statistical information,
8) Other report.
THE BASIC FINANCIAL STATEMENTS
The Basic Financial Statements comprise the City -wide Financial Statements and the Fund Financial Statements. These two sets of financial statements provide two different views of the City’s financial activities and financial position— long-term and short-term.
The City-wide Financial Statements provide a longer-t erm view of the City’s activities as a whole, and comprise the Statement of Net Posi tion and the Statement of Activities. The Statement of Net Position provides information about the financial position of the City as a whole, including all its capital assets and long-term liabilities on the full accrua l basis, similar to that used by corporations. The Statement of Activities provides information about all the City’s revenues and all its expenses, also on the full accrual basis, with the emphasis on measuring net revenues or expenses of each of the City’s programs. The Statement of Activities explains in detail the change in net position for the year.
The Fund Financial Statements report the City’s opera tions in more detail than the City-wide statements
and focus primarily on the short-term activities of the City’s General Fund and other Major Funds. The Fund Financial Statements measure only current reve nues and expenditures, current assets, liabilities, deferred inflows/outflows of resources and fund ba lances, but exclude capital assets, long-term debt and other long-term amounts.
Major Funds account for the major financial activities of the City and are presented individually, while the activities of Non-major funds are presented in summar y, with subordinate schedules presenting the detail for each of these Non-major funds. Major Funds are explained below.
The City is the Successor Agency of the Milpitas Redevelopment Agency. It holds funds to make payments according to the enforceable obligations schedules and eventually dispose of other assets and properties of the former Redevelopment Agency for the benefits of the taxing agencies. The City is also the depository agent for Local Improvement Districts and certain ot her entities. The fiduciary statements provide information about the cash balances and activities of the Successor Ag ency, Local Improvement Districts and other entities. These statements are separate from the City’s financial statements and their balances are excluded from the City’s fund balances.
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THE CITY-WIDE FINANCIAL STATEMENTS
All of the City’s basic services are considered to be governmental activities, including general government, building safety and inspection, public safety, public works maintenance, recreation, public improvements, planning and zoning, and general administration serv ices. These services are supported by general City revenues such as taxes, and by specific program revenues such as fees. The City-wide financial statements can be found in pages 23-25 of this report.
All of the City’s business-type activ ities includes water and sewer whic h are also reported in the basic financial statements. Unlike governmental services, these activities are supported by charges paid by users based on the amount of their service consumption.
The City’s financial statements include the activities of four other separate legal entities, the Milpitas Public Financing Authority (MPFA), the Milpitas Housing Authority (Housing Authority), the Milpitas Municipal Financing Authority (MMFA) and Terrace Gardens, Inc., because the City is either financially accountable for these entities or has control of these entities’ governing boards.
Citywide financial statements are prepared on the accrual basis, which means they measure the flow of all economic resources of the City as a whole.
FUND FINANCIAL STATEMENTS
Governmental Fund financial statements are prepared on the modified accrual basis, which means they measure only current financial resources and uses. Ca pital assets and other long-lived assets, along with long-term liabilities, are presented only in the citywide financial statements.
Enterprise and internal service fund financial statements are prepared on the full accrual basis and include all these funds’ assets and liabilities, both current and long-term.
The Fund financial statements provide detailed information about each of the City’s most significant funds, called Major Funds. Each Major F und is presented individually, w ith all Non-major Funds summarized and presented only in a single column. Subordinate schedules present the detail of these Non-major funds.
Major Funds present the major activiti es of the City for the year. Th e General Fund is always a Major Fund, but other funds may change from year to year as a result of changes in the pattern of the City’ s
activities.
The City has four other Major Governmental Funds in fiscal 2022 in addition to the General Fund. These are the Housing Authority Fund, the Street Improvement Fund, the Transit Area Impact Fee Fund, and the General Government Capital Projects Fund, each of which is discussed in detail below.
Both of the City’s Enterprise Funds are reported as Major Funds.
Comparisons of Budget and Actual financial information are presented only for the General Fund and other major governmental funds that are Special Revenue Funds. The City has one major Special Revenue Fund, the Housing Authority Fund.
FIDUCIARY STATEMENTS
The City is the Successor Agency of the former Redevelopment Agency and the agent for certain local improvement districts (“Districts”). The City holds property tax revenue distributed from the Redevelopment Property Tax Trust Fund (“RPTTF”) to pay outstanding recogni zed obligations for the
Successor Agency. The City also holds amounts collected from property owners which await transfer to the Districts’ bond trustees. These activities are excluded from the City’s other financial statements because the City cannot use these assets to finance its own op erations. The City’s fiduciary activities are reported in the separate Statement of Fiduciary Net Position, Statement of Changes in Fiduciary Net Position and the Agency Funds Statement of Changes in Assets and Liabilities. 7 98
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CITY-WIDE FINANCIAL ANALYSIS
This analysis focuses on the net position and changes in net position of the City as a whole. Comparisons of the current year’s net position and activities with fiscal 2021 are presented in table form. Any significant changes are analyzed and discussed.
Governmental Activities
1 Other liabilities include Accounts Payable, Unearned Revenues and Compensated Absences incurred as of June 30, 2022 2 Deferred Inflows of Resources – Related to pensions and OPEB refers to unrecognized liability changes due to plan experience which differs from what was assumed in the prior measurement period.
Table 1
Governmental Net Position at June 30
(in Millions)
Governmental Activities
2022 2021
Cash and investments $250.6 $264.2
Restricted cash and investments 2.3 16.3
Other assets 74.2 52.0
Capital assets 384.2 364
Total assets $711.3 $696.5
Deferred Outflows of Resources –
Related to pensions and OPEB 38.3 35
Net Pension liabilities 148.1 209.4
Net OPEB liability 0.0 6.5
Total OPEB liability 31.8 29.7
Long-term debt outstanding 21.5 21.9
Other liabilities1 45.0 46.0
Total liabilities 246.4 313.5
Deferred Inflows of Resources
–Related to leases
–Related to pensions and OPEB2
13.1 67.3
-
13.2 Net position:
Net investment in capital assets 365.0 358.4
Restricted 176.5 189
Unrestricted (118.6) (142.7)
Total net position $422.9 $404.7
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Item # C9.
The City’s governmental net position was $422.9 million at June 30, 2022, an increase of $18 million from 2021. This increase is reflected as Change in Net Position in the Governmental Activities column of the Statement of Activities and is also shown in Table 2 of this analysis:
Cash and investments decreased $13.6 million princi pally due to unrealized market loss of City’ s investment portfolio as the portfolio is heavily impacted by the volatile equity and bond markets. Restricted cash and investment decreased by $1 4.0 million is primarily due to capital project activities and disbursement in bond funds.
Other assets increased $22.2 million from last year due to the net activity between receivables and increase in prepaids, materials, supplies and deposits and addition of lease receivable in amount of $13.4 million in compliance with GASB 87.
Capital assets increased $20.2 million from last year, resulting from $15.0 million of depreciation, offset by $35.2 million in asset additions, net of retirements in fiscal 2022. The most significant increases were from Fire Station #2, Community and Senior Center Ener gy Resilience Project, PMIP Shared Infrastructure and Park Improvement capital projects. Deferred outflows of resources related to pension and OPEB increased $3.3 million from last year due to changes in actuarial results.
Fiscal Year 2022
Governmental Activities
As the Sources of Revenue Chart above shows, $42.6 million or 31% came from property taxes, while $33.2 million or 24% came from sales and use taxes. The remainder came from a variety of sources, including charges for services, grants and contributi
ons, franchise fees, transient occupancy taxes, and
building fees.
Public Works, <1%
Engineering,
12%
Franchise fees, 3%
Transient Occupancy Tax, 6%
General Government, 4%
Sales and use
taxes, 24%
Building, Safety & Housing,
12%
Property taxes, 31%
Planning, 1%
Fire & Police, 8%
Recreation & Community
Services, 3%
Miscellaneous, -3%
Sources of Revenue
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The Functional Expenses Chart above includes only curr ent year expenses, which are discussed in detail below. It does not include capital outlays, which are added to the City ’s capital assets. The composition of Fiscal 2022’s capital assets is shown in detail at Table 8.
General Government, 20%
Building, 4%
Public Works, 18%
Engineering and Planning, 6%
Recreation, 5%
Police, 24%
Fire, 23%
Interest on long term debt, 1%
Functional Expense
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The Statement of Activities presents program revenues and expenses and general revenues in detail. All these are elements in the Changes in Governmental Net Position as summarized below.
Table 2
Changes in Governmental Net Position
(in Millions)
Governmental Activities
2022 2021
Expenses
General Government $25.2 $25.2
Building, Safety and Housing 4.9 6.7
Recreation and Community Services 6.1 5.1
Public Works 22.1 20.2
Engineering
5.0 6.8
Planning 1.9 2.5
Police 29.5 38.9
Fire 29.0 31.9
Interest on long term debt 0.8
0.8 Total expenses 124.5 138.1
Revenues
Program revenues:
Charges for services 18.7 16.9
Operating contributions and grants 15.3 15.0
Capital Grants 19.9 19.0
Total Program Revenues 53.9 50.9
General revenues:
Taxes:
Property taxes 42.6 41.0
Sales and use taxes 33.2 24.2
Transient Occupancy taxes 8.0 4.2
Other taxes 1.1 0.8
Franchise fees 5.2 5.0
Investment earnings (7.5) 1.0
Miscellaneous 1.8 0.6
Total General Revenues 84.4 77.8
Total Revenues 138.3 127.7
Surplus (Deficit) before transfers 13.8 (10.4)
Transfers in/(out), net 4.3
6.1 Changes in net position 18.1 (4.3)
Beginning net position 404.8 409.3
Ending net position $422.9 $405.0
Table 2 compares fiscal 2022 expenses and revenues
with those of fiscal 2021 . Expenses decreased by
$13.6 million in fiscal 2022 due primarily to conti nued staff vacancies and non-personnel savings due to reduced COVID- restrictions upon City operations.
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Item # C9.
Table 2 shows that total governmental revenues increased $10.6 million in fiscal 2022. Program revenues increased $3.0 million, and general revenues increased $6.6 million. The increase in program and general revenues were primarily due to economic recovery from the pandemic.
The general revenue increased $6.6 million from fiscal 2021, the net activity was due to increase of $3.8 million in hotel/motel taxes, $0.2 million in Franchise Fee, $1.6 million in Property taxes, $1.4 million in other taxes and miscellaneous and $9.0 million in sales and uses taxes (primarily from full year of Measure F). The investment earnings decreased by $8.5 million due primarily to $12.5 million in unrealized market loss.
Table 3 presents the net cost of each of the City’s largest programs—general government, building safety and housing, recreation and community services, public works, engineering, planning, police, and fire. Net cost is defined as total program cost less the revenues generated by those specific activities. The net cost of providing such programs in fiscal year was $70.7 million.
Table 3
Governmental Activities
(in Millions)
Net (Expenses) Revenue
From Services
2022 2021
General Government $(20.1) $(22.2)
Building, Safety and Housing 11.4 6.3
Recreation and Community
Services
(1.9)
(4.1)
Public Works (22.1)
(20.2)
Engineering 11.1
15.6 Planning (0.6)
(1.6)
Police (23.4) (34.1)
Fire (24.1) (26.2)
Interest on long term debt (0.8)
(0.8)
Totals $(70.5) $(87.3)
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Business-type Activities
Table 4
Business-Type Net Position at June 30
(in Millions)
Business-Type Activities
2022 2021
Cash and investments $108.4 $122.3
Other assets 4.6 4.8
Capital assets 178.5 162.8
Total assets 291.5 289.9
Deferred Outflows of
Resources – Related to
Pensions and OPEB
1.5 1.1
Other liabilities 4.5 8.2
Net pension liabilities 2.7 3.8
Net OPEB liability 3.3 3.7
Long-term Debt 56.3 57.9
Total liabilities 66.8 73.6
Deferred Inflows of Resources
– Related to Pensions and
OPEB
2.7 1.1
Net position:
Net investment in capital assets 127.2 125.2
Restricted 75.1 72.6
Unrestricted 21.2 18.5
Total net position $223.5 $216.3
The net position of business-type activities was $223.5 million in fiscal 2022, an increase of $7.2 million from fiscal 2021. The increase in net position was due to increase in total assets of $1.6 million and a
decrease of $6.8 million in total liabilities. The in crease in total assets is comprised of $15.7 million increase in capital assets, offset by decrease of $13.9 million in cash & investment. 13 104
Item # C9.
Table 5
Changes in Business-Type Net Position
(in Millions)
Business-Type Activities
2022 2021
Expenses
Water Utility $26.9 $29.0
Sewer Utility 15.6 16.0
Total expenses 42.5 45.0
Revenues
Program revenues:
Charges for services 55.9 55.0
Operating grants 0.3 0.1
Capital grants 1.0 1.4
Total program revenues 57.2 56.5
General revenues:
Investment earnings (3.2) 0.6
Total general revenues (3.2) 0.6
Total Revenues 54.0 57.1
Excess before transfers 11.6 12.1
Net Transfers (4.4) (6.1)
Changes in net position 7.2 6.0
Beginning net position 216.3 210.3
Ending net position $223.5 $216.3
Table 5 compares fiscal 2022 expenses and revenues with those of fiscal year 2021. Total expenses decreased by $2.6 million in fiscal 2022 due to a decrease in personne l services and a decrease in wate r
purchase and contractual services. Total program revenu es increased by $0.7 milli on primarily due to an increase in charges for services related to a rate increase and an increase in operating grants and contributions. Total general revenue decreased $3.8 million from interest earnings due to unrealized market loss in investment as of June 30, 2022. The net transfers represent reimbursements of administration costs to the General Fund.
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FINANCIAL ANALYSIS OF THE CITY’S FUNDS
Table 6 below summarizes activities and balances of the governmental funds at the fund level:
Table 6
Financial Highlights of Governmental Funds at Fund Level at June 30 (in Millions)
2022 2021
Total assets $281.7 $284.6
Total liabilities 30.3 29.9
Total deferred inflow of
resources
13.1 1.8
Total fund balances 238.3
252.8
Total revenues 133.0 126.8
Total expenditures 151.4 146.6
Total other financing sources 3.8 (7.3)
At June 30, 2022, the City’s governmental funds reported combined fund balances of $238.3 million, a decrease of $14.5 million from last year. The fund balances of the Housing Authority Fund, Transit Area Impact Fee Fund, Street Improvement, Other Gove rnmental Funds and General Government Capital Improvement Fund decreased $0.1 million, $2.3 milli on, $0.5 million, $3.1 million and $12.7 million respectively. General Fund increased $4.1 million due to net operating surplus.
Revenues at the fund level totaled $133.0 million, a net increase of $6.2 milli on. Revenues received in General Fund, Street Improvement Fund, Other Government Funds increased $14.0 million, $0.6 million, and $1.4 million respectively while the Housing Au thority, Transit Area Impact Fee and General Government Capital Projects Funds and Other Governme ntal Funds has a decrease of the fund balance in fiscal year 2022.
Expenditures net increased $4.8 million this year to $151.4 million from last year’s $146.6 million. The expenditures of the General Fund, Housing Author ity, General Government Capital Improvement Fund, Other Government Funds, and Street Improvement Fund increased $4.7 million, $0.2 million, $1.1 million, $2.4 million, and $6.2 million, respectively while Transit Area Impact Fee decreased $9.9 million.
ANALYSES OF MAJOR GOVERNMENTAL FUNDS
GENERAL FUND
General Fund revenues (excluding transfers) increased to $112.1 million this fiscal year, up $14.0 million from the prior fiscal year. Hotel/Motel taxes were in creased by $3.8 million fro m $4.2 million in fiscal year 2021 to $8.0 million in fiscal year 2022.
There were increases in Property tax revenue of $1.7 million, Licenses and Permit of $0.2 million, Intergovernmental Revenue of $1.0 million, and Sales and Use taxes of $9 million. The ¼ Measure F sales tax contribute to the increase in sales and uses taxe
s. The Measure F was effective on April 1, 2021 for 8
years, and has become a new revenue source for the City.
General Fund expenditures (excluding transfers) increased $4.7 million to $111.9 million without encumbrance in fiscal 2022. The increase is due primarily to personnel cost and contractual services. 15 106
Item # C9.
Total Other Financing Sources is $3.9 million net in fiscal 2022. Net Other Financing Sources increased by $26.9 million compared to fiscal year 2021 Net Other Financing Sources of ($23.0 million). Transfers out were approximately $3.0 million in fiscal year 2022, as compared to Transfers out of $34.3 million in fiscal 2021. The reason of the decrease wa s due to transfers out of $33.1 milli on to fund the establishment of Pension Section 115 Trust in fiscal year 2021. There is no such transfer out in fiscal year 2022.
For the City’s General Fund, actual revenues of $1 12.1 million were $1.9 mi llion less than the final budgeted revenues of $114.0 million. Property taxes, Sales taxes, Licenses and Fines, and Intergovernmental exceeded budget by $1.5 million, $2.4 million, $1.0 m illion, and $4.7 million respectively. Intergovernmental is primarily Federal American Rescue Plan Act (ARPA) funding.
At the end of the year, actual General Fund expenditures were $114.4 million including encumbrance, $3.3 million less than final budget of $117.7 million. As a result of general recruitment and/or competitive labor markets, staff vacancies primarily co ntributed to the expenditures savings. Consequently, it is prudent to deem this as one-time expenditure variance that provides additional fund balance resources, instead of on- going reductions of General Fund operating budget.
HOUSING AUTHORITY
This Fund accounts for the housing activities assume d from the former Redeve lopment Agency designed to increase the amount of low and moderate-income housing available in the City. Total revenues were $0.5 million in fiscal 2022, comprised of interest, rent al income and repayment of housing loans. Total expenditures were $0.6 million for administration, in terest forgiveness related to a restructure of an affordable housing loan, management of two affordab le housing units and one commercial property with eight tenants.
STREET IMPROVEMENT CAPITAL PROJECT
This Street Improvement Capital Project Fund accounts for the majority of the street capital projects activity in the City. The Fund’s revenues were $2.9 million in fiscal 2022, an increase of $0.6 million from fiscal 2021. The increase in revenues was mainly due to receiving more reimbursement from Measure B local monies from Valley Transportation Authority (VTA) du e to increased activity in the projects. Fund expenditures were $9.0 million in fiscal 2022, an increase of $6.3 million from fiscal 2021, due to increase in capital outlay. Net transfers were $5.6 million in fiscal 2022, an increase of $5.5 million from fiscal 2021 due to increase funding in street projects from the General Government Fund, Gas Tax Special Revenue Fund, and Transit Area Impact Fee Fund.
TRANSIT AREA IMPACT FEE
The Transit Area Impact Fee Fund was established in fiscal 2009 to account for impact fees revenue collected from developers and related capital expenditures in the Transit Area. In fiscal 2022, fund revenues were $3.8 million, primarily from fees collected from developers. Expenditures were $2.5 million, primarily consisting of capital improvement projects. The fund also transferred $3.6 million in fiscal year 2022 to the Street Improvement Capital Project fund.
GENERAL GOVERNMENT CAPITAL PROJECTS
The General Government Capital Projects Fund acco unts for construction and maintenance of general government projects and assets in the City. In fiscal 2022, expenditures of $15.4 million consisted of $15.4 million of capital improvement project expenditures. The transfers in of $3.1 million were primarily from Gas Tax Fund and Public Art Fund. General Govern ment Capital Projects fund s also received funding from Community Planning Fund, Midtown Park Fund, an d Sewer Infrastructure Fund in an amount of approximately $1.3 million. The transfers out of $0.3 million were to the Storm Drain Capital Project Fund, Street Improvement Capital Project Fund, and Park Improvement Capital Project Fund 16 107
Item # C9.
OTHER GOVERNMENTAL FUNDS
These funds are not presented separately in the Basic Financial Statements, but are individually presented as Supplemental Information.
FUND BALANCE CLASSIFICATIONS
Fund balances are classified in five categories: nonspendable, restricted, committed, assigned and unassigned based on a hierarchy of constraint. Further details on fund balance classifications can be found in Note 11.
Table 7 shows the classification of the fund balances of the major governmental funds.
Table 7
Fund Balances at June 30 – Major Governmental Funds
(in Millions)
2022 2021
General
Fund
Nonspendable $4.9 $4.8
Committed 15.8 13.3
Assigned 6.1 6.5
Unassigned 40.0 38.1
Total $66.9 $62.7
Housing Authority Fund
Restricted $39.7 $39.8
Street Improvement Fund
Restricted $8.3 $8.8
Transit Area Impact Fee Fund
Restricted $60.9 $63.2
General Government Project
Fund
Assigned
Restricted
$23.4
2.2 $38.3
$25.6 $38.3
At June 30, 2022, the fund balance of the General Fu
nd was $66.9 million. $4.9 million was classified as
nonspendable, comprised of $0.6 million for prepaid materials and supplies, and $4.2 million of property held for resale. $15.8 million wa s classified as committed, comprise d of $5.1 million for PERS Rate Stabilization $1.7 million for Artificial turf replace ment, $2 million for Technology replacement and $7 million for Facilities replacement. $6.1 million was cl assified as Assigned, comprised of $2.3 million for uninsured claims and $2.5 million for encumbrances . $40.0 million was classified as unassigned, comprised of $18.5 million of contingency reserve, $18.5 million of budget stabilization reserve, $1.4 million of future deficit reserve, $1.2 million ERAF litigation conti ngency reserve, and $0.3 million of unassigned.
The fund balances of the Housing Authority Fund, Street Improvement Fund and the Transit Area Impact Fee Fund were also classified as restricted because the amounts were restricted for specific purposes. 17 108
Item # C9.
ANALYSES OF MAJOR PROPRIETARY FUNDS
Total operating revenues of major proprietary funds increased $1.1 million from last year, while operating expenses decreased $2.4 million. Total operating revenues and total operating expenses were $55.9 million and $40.3 million, respectively. Total of non-operating expenses were $5.1 milli on in fiscal 2022, an increase of $3.6 million from the prior year. Capi tal contributions decreased by $0.4 million and net transfers out increased by $3.7 million.
WATER UTILITY
Water fund revenues were $34.4 million in fiscal 2022 , a decrease of $0.3 million from prior year. The decrease in revenues was primarily due to mandated water conservation because of the historic drought.
Expenses were $26.2 million in fiscal 2022, decrease $2.2 million from prior year, primarily due to decrease in wholesale water purchase expenditure. Net position of the Water Utility Fund increased $3.8 million in the current year to a total of $94.3 million. The increase comprised of $34.3 million of operating revenues for the current year, $26.1 million of operating expe nses, which result in $8.2 million operating income before accounting for unrealized market loss and transfer out expenses. The water fund also received $0.2 million of grants, $0.4 million of capital contributions and net of interest expe nse of ($2.4) million and transfers of ($2.7) million, and this resulted in increase of net position of $3.8 million.
The Water Fund’s Net Position includes $47.0 million invested in capital assets, $36.4 million in restricted net position, and $10.9 million in unrestricted net position.
SEWER UTILITY
Sewer fund revenues were $21.6 million in fiscal 2022, up $1.4 million from th e prior year due to an increase in usage as businesses re -opened post-pandemic. Expenses we re $14.2 million in fiscal 2022, a decrease of $0.1 million from the prior year due to a decrease in services and supplies. Non-operating revenues and expenses in fiscal year 2022 consisted of $3.1 million interest expe nse. Net position of the Sewer Utility Fund was $125.8 million in fiscal year 2022. It comprised of $21.6 million of operating revenues for the current year, $14.2 million of opera ting expenses, which result in $7.4 million operating income before accounting for unrealized market loss and transfer out expenses. The sewer fund also received $0.1 million in interest income, net of intere st expense of $1.4 million, $0.6 million of capital contributions and net of transfers of ($1.7) million. In fiscal year 2022, sewer fund also received a credit of $1.5 million. This is a true-up of actual expenditure from previous fiscal year budget for both operation and capital improvement program for the San Jose Santa Clara Regional Waste Facility.
The Sewer Fund’s Net Position includes $80.2 million invested in capital assets, $38.7 million in restricted net position, and $10.3 million in unrestricted net position. 18 109
Item # C9.
CAPITAL ASSETS
The City records the cost of all its infrastructure asse ts such as roads, bridges, signals and similar assets used by the general population and computes the amount of accumulated depreciation for these assets based on their original acquisition dates. At the end of fiscal 2022, the cost of infrastructure and other capital assets recorded on the City’s financial statements was as shown in Table 8 below:
Table 8
Capital Assets at Year-end
(in Millions)
2022 2021
Governmental Activities:
Land $84.8 $84.8
Construction in progress 94.4 74.8
Buildings and improvements 173.4 173.4
Other improvements 34.0 30.8
Machinery and equipment 49.1 48.7
Landscape system 30.1 30.1
Storm system 74.5 74.5
Street system 313.8 302.4
Traffic system 20.3 20.2
Less accumulated depreciation (490.1) (475.7)
Totals $384.2 $364.0
Business-type Activities:
Land $1.1 $1.1
Construction in progress 28.5 18.8
Distribution facilities 81.2 81.2
Water Service lines 17.1 17.1
Sewer lines 87.5 87.5
Capacity rights 115.2 102.7
Less accumulated depreciation (152.0) (145.7)
Totals $178.6 $162.7
The primary additions in fiscal 2022 were due to the street improvement projects and other major projects such as fire station #2, community and senior cent er energy resilience project , McCandless Park, Alviso Adobe Renovation, Trade Zone/Montague Park and PMIP Shared Infrastructure.
The City depreciates all its capital assets over their estimated useful lives. The purpose of depreciation is to spread the cost of a capital asset over the years of its useful life so that an allocable portion of the cost of the asset is borne by all users. Additional information on depreciable lives and current year activities may be found in Note 8.
CASH AND INVESTMENTS
The City outsourced the management of the City’s investments to Chandler Asset Management effective June 1, 2020 and held in a custodial account with The Bank of New York. The managed portfolio consists of securities invested in accordance with City’s investment policy and the California Government Code.
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Item # C9.
Total cash and investments decreased $41.5 million fro m $402.8 million to $361.3 million. This decrease was due to volatile bonds and equities market. As the Fe deral Reserve continues to raise interest rates, the valuation of current City fixed income portfolio decreases because they were purchased and locked in at a lower interest rate. This decrease in value is unrealized market loss unless the City liquidates its investment holdings.
Total investment earnings for fiscal year 2022 was $2 .4 million. City’s investment income from interest and dividends on investments was $2.6 million in 2022. The ch ange in fair value fo r the portfolio for the fiscal year ending June 30, 2022 was an unrealized loss on investments of $13.2 million.
The following graphs depict the investment portfolio of $336.1 million cash and investments at June 30, 2022 and $352.0 million at June 30, 2021.
DEBT ADMINISTRATION
The City’s debt was issued to finance a few City’s projects incl ude Sewer infrastructure, Water infrastructure, energy improvement projects and replacement for Fire Station.
In fiscal 2018, the City refunded the 2006 Sewer Bonds with the 2017 Wastewater Revenue Refunding Bonds to reduce interest rate cost over the life of the bond issuance. The 2017 Bonds are pledges by net revenue from the City’s sewer system. In fiscal 20 20, Milpitas Municipal Financing Authority issued Wastewater Revenue Bonds, Series 2019 in an amount of $29.8 million to fund for certain improvement to the City’s wastewater system. The City also issued Water Revenue Bonds, Seri es 2019 in an amount of $17.1 million fund for Water system improvement projects. 20 111
Item # C9.
In fiscal 2021, Milpitas Municipal Financing Authorit y issued a Lease Revenue Bonds in an amount of $18.4 million to provide funds to fi nance a portion of Fire Station No . 2 Replacement project and variety of energy improvement projects. Each of the City’s de bt issues are discussed in detail in Note 9 to the financial statements. At June 30, 2022 the City’s debt is comprised of:
Table 9
Outstanding Debt
(in Millions)
Balance Balance
June 30, 2022 June 30, 2021
Governmental Activity Debt:
2020 General Fund Lease Revenue Bond
4.0% due June 1, 2041
$18.2 $18.4
Plus: Unamortized bond premium
3.3 3.5
Total Governmental-type Activity Debt $21.5 $21.9
Business-type Activity Debt:
Wastewater Revenue Refunding Bonds, 2017
Series
2.0% - 5.0%, due November 1, 2026 2.8 3.3
Plus: Unamortized bond premium 0.4 0.4
Wastewater Revenue Bonds, 2019 Series
4.0% - 5.0%, due November 1, 2049 28.9 29.4
Plus: Unamortized bond premium 4.9 5.1
Water Revenue, 2019 Series
4.0% - 5.0%, due June 1, 2049 16.4 16.8
Plus: Unamortized bond premium 2.8 2.9
Total Business-type Activity Debt $56.2 $57.9
ECONOMIC OUTLOOK AND MAJOR INITIATIVES
The economy of the City and its ma jor initiatives for the coming year are discussed in detail in the accompanying Transmittal Letter.
CONTACTING THE CITY’S FINANCIAL MANAGEMENT
This Comprehensive Annual Financial Report is intend ed to provide citizens, taxpayers, investors, and creditors with a general overview of the City’s finances. Questions about this Report should be directed to
the Finance Department, at 455 East Calaveras Boulevard, Milpitas, CA 95035-5479 or to the City’s website at www.ci.milpitas.ca.gov.
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STATEMENT OF NET POSITION AND
STATEMENT OF ACTIVITIES
The Statement of Net Position reports the difference betw een the City’s total assets and deferred outflows of resources and the City’s total liabilities and deferred inflows of resources, including all the City’s capital assets a nd
all its long-term debt. The Statement of Net Position focuses the reader on the composition of the City’s net position by subtracting total liabilities and deferred inflows of resources from total assets and deferred outflows of resources.
The Statement of Net Position summarizes the financial position of the City’s Governmental Activities in a single column, and the financial position of all the City’s Business-type Activities in a single column; these columns are followed by a Total column that presents the financial position of the primary government. This column is followed by a column that displays the discretely presented component unit.
The City’s Governmental Activities include the activities of its General Fund, along with all its Special Revenue, Capital Projects and Debt Service Fund s. Since the City’s Internal Serv ice Funds service these Funds, their activities are consolidated with Govern mental Activities, after eliminating in ter-fund transactions and balances.
The City’s Business-type Activities include all its Enterprise Fund activities.
The Statement of Activities reports increas es and decreases in the City’s net pos ition. It is prepared on the full accrual basis, which means it includes all the City’s revenues and all its expenses, regardless of when cash changes hands. This differs from the “modified accrual” basis used in the Fund fina ncial statements, which reflect only current assets, current liabilities, deferred inflows/outf lows of resources, available revenues and measurable expenditures.
The Statement of Activities presents the City’s expenses first, listed by the program, and follows these with the expenses of its Business-type Activities. Program revenues – that is, revenues which are generated directly by these programs – are then deducted from program expenses to arrive at the net expens e of each governmental and business-type program. The City’s general revenues are then listed in the Governmental Activities, Business-type Activities or discretely presented component unit column, as appropriate, and the Change in Net Position is computed and reconciled with the Statement of Net Position.
Both of these Statements include the financial activities of the City and the blended component units: the Milpitas Public Financing Authority (MPFA), the Milpitas Economic Development Corporation (EDC), the City of Milpitas Housing Authority (Housing Authority) and the Milpitas Municipal Financing Authority (MMFA). The Financing Authorities and Housing Authority are legally separate component units of the City, because they are controlled by the City and the City is financially accountable for their activities. The EDC is a California nonprofit public benefit Corporation that is also a legally separate component unit of the City because it is governed by a board consisting of the members of the City Council. The EDC became inactive as of June 30, 2015. The balances and the activities of the discretely presented component unit of Terrace Gardens, Inc. are includ ed in these statements as separate columns.
These financial statements along with the fund financial statements and footnotes are called Basic Financial Statements.
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CITY OF MILPITAS
STATEMENT OF NET POSITION
JUNE 30, 2022
Component
Primary Government Unit
Terrace
Gardens Inc.
Governmental Business-Type (As of
Activities
Activities Total December 31, 2021)
ASSETS
Cash and investments available for operations (Note 3) $250,611,670 $103,509,033 $354,120,703 $18,289 Restricted cash and investments (Note 3) 2,261,425 4, 909,668 7,171,093 3,333,708 Receivables:
Accounts 2,433,316 3,680,188 6,113,504 37,686
Due from other governments 10,150,299 493,222 10,643,521 Interest 499,751 204,073 703,824
Loans receivable (Note 5) 38,484,673 38,484,673
Prepaids, materials, supplies and deposits (Note 1E) 1,293,230 181,101 1,474,331 58,686 Property held for resale (Note 6) 6,533,018 6,533,018
Leases receivable (Note 10) 13,373,808 13,373,808
Net OPEB asset (Note 13C): 1,421,071 1,421,071
Capital assets and capacity rights (Note 8):
Land and construction in progress 179,219,905 29,593,472 208,813,377 1,565,277 Depreciable capital assets, net 204,997,553 148,946,745 353,944,298 5,393,776 Total assets 711,279,719 291, 517,502 1,002,797,221 10,407,422
DEFERRED OUTFLOWS OF RESOURCES
Related to pensions (Note 12D) 27,753,763 590,895 28,344,658 Related to OPEB (Note 13E) 10,668,956 863,898 11,532,854 Total deferred outflows of resources 38,422,719 1,454,793 39,877,512
LIABILITIES
Accounts payable 5,412,939 3,147,001 8,559,940 224,586
Accrued payroll 4,374,259 173,856 4,548,115 13,410
Interest payable 60,567 299,979 360,546
Uninsured claims payable (Note 14):
Due within one year 1,483,266 1,483,266
Due in more than one year 4,715,953 4,715,953
Refundable deposits 3,692,839 184,866 3,877,705 72,500
Unearned revenue 16,979,716 6,922 16,986,638 2,196
Accrued vacation (Note 13F):
Due within one year 2,647,926 366,572 3,014,498 13,346
Due in more than one year 3,492,608 102,202 3,594,810
Sick leave payable (Note 12F):
Due within one year 926,301 103,001 1,029,302
Due in more than one year 1,247,026 100,958 1,347,984
Net pension liabilities (Note 12C):
Due in more than one year 148,117,388 2,723,608 150,840,996 Net OPEB liability (Note 13C):
Due in more than one year 612,996 612,996
Total OPEB liability (Note 13D)
Due in more than one year 31,832,333 2,692,492 34,524,825 Long term debt (Note 9):
Due within one year 470,000 1,335,000 1,805,000
Due in more than one year 20,999,841 54,911,115 75,910,956 Total liabilities 246,452,962 66,760,568 313,213,530 326,038
DEFERRED INFLOWS OF RESOURCES
Related to leases (Note 10) 13,080,290 13,080,290
Related to pensions (Note 12D) 46,693,376 1,096,366 47,789,742 Related to OPEB (Note 13E) 20,585,295 1,620,699 22,205,994 Total deferred inflows of resources 80,358,961 2,717,065 83,076,026 NET POSITION (Note 11)
Net investment in capital assets and capacity rights 365,009,042 127,203,770 492,212,812 6,959,053 Restricted for:
Capital projects 92,471,590 75,083,153 167,554,743
Redevelopment and community development activities 51,841,582 51,841,582 Pension expenses 30,537,346 30,537,346
Other programs 1,600,734 1,600,734
Total restricted net position 176,451,252 75,083,153 251,534,405 Unrestricted (118,569,779) 21,207,739 (97,362,040) 3,122,331 Total net position $422,890,515 $223,494,662 $646,385,177 $10,081,384 See accompanying notes to financial statements
23 116
Item # C9.
CITY OF MILPITAS
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2022
Net (Expense) Revenue and
Changes in Net Position
Program Revenues Primary Government
Operating Capital
Charges for Grants and Grants and Governmental Business-type Functions/Programs Expenses Services Contributions Contributions Activities Activities Primary Government:
Governmental Activities:
General Government $25,212,534 $1,930,588 $3,141,300 ($20,140,646) Building, Safety and Housing 4,942,998 8,815,194 2,985,467 $4,524,610 11,382,273 Recreation and Community Services 6,114,249 2,360,243 258,301 1,564,455 (1,931,250) Public Works 22,063,208 (22,063,208)
Engineering 5,046,635 1,095,831 1,823,839 13,224,162 11,097,197 Planning 1,850,828 474,267 435,037 295,526 (645,998)
Police 29,469,175 1,420,688 4,327,544 315,000 (23,405,943) Fire 29,039,527 2,582,498 2,363,213 (24,093,816)
Interest on long term debt 837,667 (837,667)
Total Governmental Activities 124,576,821 18,679,309 15,334,701 19,923,753 (70,639,058) Business-type Activities:
Water Utility 26,898,185 34,374,429 205,447 418,344 $8,100,035 Sewer Utility 15,621,881 21,592,843 100,623 607,373 6,678,958 Total Business-type Activities 42,520,066 55,967,272 306,070 1,025,717 14,778,993 Total Primary Governmen
t $167,096,887 $74,646,581 $15,640,771 $20,949,470 (70,639,058) 14,778,993 Component Unit:
Terrace Gardens Inc. $2,361,448 $2,319,447 $48,816
General revenues:
Taxes:
Property taxes 42,647,296
Sales and use taxes 33,209,512
Hotel/Motel taxes 8,012,644
Other taxes 1,069,556
Franchise fees, unrestricted 5,187,786
Motor vehicle in-lieu, unrestricted 87,410
Investment earnings (7,560,411) (3,245,797)
Gain from sale of property 198,138
Miscellaneous 1,554,240
Transfers (Note 4) 4,356,847 (4,356,847)
88,763,018 (7,602,644)
Change in Net Position 18,123,960 7,176,349
404,766,555 216,318,313
Net position-Ending $422,890,515 $223,494,662
See accompanying notes to financial statements
Total general revenues and transfers
Net position-Beginning
24 117
Item # C9.
Net (Expense) Revenue and
Changes in Net Position
Primary Government Component Unit
Terrace
Gardens Inc.
(year ended
Total December 31, 2021)
($20,140,646)
11,382,273
(1,931,250)
(22,063,208)
11,097,197
(645,998)
(23,405,943)
(24,093,816)
(837,667)
(70,639,058)
8,100,035
6,678,958
14,778,993
(55,860,065)
$6,815
42,647,296
33,209,512
8,012,644
1,069,556
5,187,786
87,410
(10,806,208) 832
198,138
1,554,240
81,160,374 832
25,300,309 7,647
621,084,868 10,073,737
$646,385,177 $10,081,384
25 118
Item # C9.
119
Item # C9.
120
Item # C9.
Housing Street Transit Area
General Authority Improvemen t Impact Fee
ASSETS
Cash and investments available for operations (Note 3) $77,909,466 $2,195,765 $7,214,405 $60,655,097 Restricted cash and investments (Note 3) 71,453
Receivables:
Accounts 1,778,339 40,247 614,491
Due from other governments 7,190,243 1,201,936
Interest 202,825 4,775 14,939 133,397
Loans receivable, net (Note 5) 35,258,763
Prepaids, materials, supplies and deposits (Note 1E) 665,851 2,123 Property held for resale (Note 6) 4,200,000 2,333,018
Leases receivable (Note 10) 13,373,808
Total Assets $105,391,985 $39,794,444 $8,471,527 $61,402,985
LIABILITIES
Accounts payable $1,469,551 $80,026 $178,994 $465,088
Accrued payroll 4,200,926 408 1,218 4,876
Refundable deposits 3,661,700 12,100
Unearned revenue 16,195,218
Total Liabilities 25,527,395 92,534 180,212 469,964
DEFERRED INFLOWS OF RESOURCES
Leases related (Note 10) 13,080,290
Total Deferred Inflows of Resources 13,080,290
FUND BALANCES
Fund balances (Note 10):
Nonspendable 4,865,851 2,123
Restricted 39,699,787 8,291,315 60,933,021
Committed 15,766,052
Assigned 6,114,463
Unassigned 40,037,934
TOTAL FUND BALANCES 66,784,300 39,701,910 8,291,315 60,933,021 Total Liabilities, Deferred Inflows of Resources and Fund Balances $105,391,985 $39,794,444 $8,471,527 $61,402,985 Amounts reported for Governmental Activities in the Statement of Net Position are different from those reported in the Governmental Funds above because of the following:
CAPITAL ASSETS
ALLOCATION OF INTERNAL SERVICE FUND NET POSITION
in Governmental Activities in the Statement of Net Position.
LONG-TERM ASSETS AND LIABILITIES
Long-term debt
Net OPEB Asset (liability)
Total OPEB Asset(liability)
Deferred outflows/inflows of resources related to OPEB liabilities
NET POSITION OF GOVERNMENTAL ACTIVITIES
See accompanying notes to financial statements
CITY OF MILPITAS
GOVERNMENTAL FUNDS
BALANCE SHEET
JUNE 30, 2022
Non-current portion of uninsured claims payable
The assets and liabilities below are not due and payable in the current period and therefore are not reported in the Funds:
Net pension liability and pension-related deferred outflows/inflows of resources Non-current portion of accrued vacation and sick leave
Internal service funds are not governmental funds. However, they are used by management to charge the costs of certain activities, such as insurance and central services and maintenance, to individual governmental funds. The net current assets of the Internal Service Funds are therefore included Capital assets used in Governmental Activities are not current assets or financial resources and therefore are not reported in the Governmental Funds. 28 121
Item # C9.
General
Government Other Total
Capital Governmental Governmental
Projects Funds Funds
$25,065,086 $34,235,102 $207,274,921
2,189,972 2,261,425
2,433,077
95,526 1,662,594 10,150,299
49,703 68,217 473,856
3,225,910 38,484,673
24,597 692,571
6,533,018
13,373,808
$27,400,287 $39,216,420 $281,677,648
$1,812,802 $1,322,939 $5,329,400
13,626 102,480 4,323,534
18,843 3,692,643
784,498 16,979,716
1,826,428 2,228,760 30,325,293
13,080,290
13,080,290
24,597 4,892,571
2,189,972 35,896,776 147,010,871
15,766,052
23,383,887 1,066,287 30,564,637
40,037,934
25,573,859 36,987,660 238,272,065
$27,400,287 $39,216,420
384,217,458
43,681,621
(21,530,408)
(167,057,001)
1,421,071
(31,832,333)
(9,916,339)
(8,166,400)
(6,199,219)
$422,890,515
29 122
Item # C9.
Housing Street Transit Area
General Authority
Improvement Impact Fee
REVENUES
Property taxes $42,758,865
Sales taxes 34,364,274
Hotel /Motel taxes 8,012,004
Franchise fees 5,187,786
Other taxes 1,366,661
Licenses and fines 11,287,442
Use of money and property (2,931,829) $508,421 ($231,075) ($2,134,277) Intergovernmental 5,883,031 3,081,183
Charges for services 5,718,555
Developer contributions 78,174 5,914,090
Other 444,931
Total Revenues 112,091,720 508,421 2,928,282 3,779,813
EXPENDITURES
Current:
General Government 22,680,580 574,576
Building, Safety and Housing 5,011,625
Recreation and Community Services 5,040,991
Public Works 8,692,112
Engineering 3,387,968
Planning 1,853,036
Police 34,734,197
Fire 29,482,707
Capital outlay 8,962,287 2,518,369
Debt service:
Principal 275,000
Interest and fees 737,800
Total Expenditures 111,896,016 574,576 8,962,287 2,518,369
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 195,704 (66,155) (6,034,005) 1,261,444
OTHER FINANCING SOURCES (USES)
Proceeds from sale of property 117,522
Transfers in (Note 4A) 6,752,931 5,563,042
Transfers (out) (Note 4A) (3,002,406) (109) (3,578,000) Total Other Financing Sources (Uses) 3,868,047 5,562,933 (3,578,000) NET CHANGE IN FUND BALANCES 4,063,751 (66,155) (471,072) (2,316,556) Fund balances at beginning of year 62,720,549 39,768,065 8,762,387 63,249,577 FUND BALANCES AT END OF YEAR $66,784,300 $39,701,910 $8,291,315 $60,933,021 See accompanying notes to financial statements
CITY OF MILPITAS
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2022
30 123
Item # C9.
General
Government Other Total
Capital Governmental Governmental
Projects Funds Funds
$42,758,865
34,364,274
8,012,004
5,187,786
$4,573,099 5,939,760
11,287,442
($815,314) (375,439) (5,979,513)
544,684 5,893,845 15,402,743
395,538 6,114,093
200,000 3,139,176 9,331,440
176,164 621,095
(70,630) 13,802,383 133,039,989
1,401,430 24,656,586
841,486 5,853,111
5,040,991
2,158,099 10,850,211
86,301 3,474,269
289,371 2,142,407
288,914 35,023,111
29,482,707
15,435,287 6,911,928 33,827,871
275,000
737,800
15,435,287 11,977,529 151,364,064
(15,505,917) 1,824,854 (18,324,075)
117,522
3,145,118 1,441,703 16,902,794
(320,000) (6,324,809) (13,225,324)
2,825,118 (4,883,106) 3,794,992
(12,680,799) (3,058,252) (14,529,083)
38,254,658 40,045,912 252,801,148
$25,573,859 $36,987,660 $238,272,065
31 124
Item # C9.
CITY OF MILPITAS
Reconciliation of the
NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS
with the
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2022
The schedule below reconciles the Net Changes in Fund Balances reported on the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance, which measures only changes in current assets and current liabilities on the modified accrual basis, with the Change in Net Position of Governmental Activities reported in the Statement of Activities, which is prepared on the full accrual basis.
NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS ($14,529,083) Amounts reported for governmental activities in the Statement of Activities are different because of the following:
CAPITAL ASSETS TRANSACTIONS
Governmental Funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is capitalized and allocated over their estimated useful lives and reported as depreciation expense.
The capital expenditures are therefore added back to fund balance (Internal service fund additions of $2,363,427 have already been added to capital assets) 34,238,545 Retirements of capital assets are deducted from fund balance (Internal service fund retirements of $12,656 have already been deducted from capital assets)
Depreciation expense is deducted from the fund balance
(Depreciation expense is net of internal service fund depreciation of $1,190,932 which has already been allocated to serviced funds.)" (13,793,900)
LONG-TERM DEBT PROCEED AND PAYMENTS
Lease proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the Statement of Net Position. Repayment of lease principal is an expenditure in the governmental funds, but in the Statement of Net Position the repayment reduces long-term liabilities.
Capital contributions and repayment of debt principal are added back to fund balance 448,675
ACCRUAL OF NON-CURRENT ITEMS
The amounts below included in the Statement of Activities do not provide or (require) the use of current financial resources and therefore are not reported as revenue or expenditures in governmental funds (net change):
Interest payable 916
Non-current portion of accrued vacation and sick leave 523,649 Non-current portion of uninsured claims payable 701,355 Net pension liabilities and pension-related deferred outflows/inflows of resources 13,533,214 Net OPEB liabilities and OPEB-related deferred outflows/inflows of resources 2,850,016 Unavailable revenue (1,816,557)
ALLOCATION OF INTERNAL SERVICE FUND ACTIVITY
Internal Service Funds are used by management to charge the costs of certain activities, such as equipment acquisition, maintenance, and insurance to individual funds.
The portion of the net revenue (expense) of these Internal Service Funds arising ou t
of their transactions with governmental funds is reported with governmental activities, because they service those activities.
Change in Net Position - All Internal Service Funds (4,032,870) CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES $18,123,960 See accompanying notes to financial statements
32 125
Item # C9.
CITY OF MILPITAS
GENERAL FUND
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE
BUDGET AND ACTUAL (NON-GAAP LEGAL BASIS)
FOR THE YEAR ENDED JUNE 30, 2022
Variance with
Budgeted Amounts Budget
Actual Amounts Positive
Original Final
Budgetary Basis (Negative)
Revenues
Property taxes $41,269,917 $41,269,917 $42,758,865 $1,488,948 Sales taxes 31,941,250 32,921,008 34,364,274 1,443,266
Hotel /Motel taxes 7,713,639 7,469,237 8,012,004 542,767 Franchise fees 5,751,133 5,298,656 5,187,786 (110,870)
Other taxes 1,023,421 1,023,421 1,366,661 343,240
Licenses and fines 10,276,817 9,915,764 11,287,442 1,371,678 Use of money and property 500,000 300,000 (2,931,829) (3,231,829) Intergovernmental 1,154,571 10,764,737 5,883,031 (4,881,706) Charges for services 4,225,969 4,685,068 5,718,555 1,033,487 Other 370,000 388,200 444,931 56,731
Total Revenues 104,226,717 114,036,008 112,091,720 (1,944,288) Expenditures
Current:
General Government:
City Manager 4,078,928 5,942,778 5,746,429 196,349
City Attorney 1,029,100 1,049,228 991,071 58,157
Finance 4,180,126 4,333,053 4,330,428 2,625
Human Resources 1,865,271 1,821,035 1,628,823 192,212
Information Services 3,659,100 3,887,948 3,525,929 362,019 Non-departmental 7,003,749 9,283,364 7,786,453 1,496,911 Building, Safety and Housing 5,833,755 5,665,205 5,098,429 566,776 Recreation and Community Services 5,334,672 5,261,199 5,088,018 173,181 Public Works 8,789,060 9,086,558 9,083,838 2,720
Engineering 3,740,281 3,702,361 3,430,900 271,461
Planning 1,712,346 2,158,140 2,158,050 90
Police 35,606,905 34,866,311 34,842,481 23,830
Fire 26,592,973 29,651,412 29,646,775 4,637
Debt service:
Principal 275,000 275,000 275,000
Interest 737,800 737,800 737,800
Total Expenditures 110,439,066 117,721,392 114,370,424 3,350,968
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (6,212,349) (3,685,384) (2,278,704) 1,406,680
OTHER FINANCING SOURCES (USES)
Proceeds from sale of property 117,522 117,522
Proceeds from issuance of long term debt
Transfers in 6,552,931 6,852,931 6,752,931 (100,000)
Transfers (out) (340,590) (5,152,405) (3,002,406) 2,149,999 Total Other Financing Sources (Uses) 6,212,341 1,700,526 3,868,047 2,167,521 NET CHANGE IN FUND BALANCE ($8) ($1,984,858) 1,589,343 $3,574,201 Adjustments to budgetary basis:
Encumbrance expenditures 2,474,408
Change in market value of investments
Fund balance at beginning of year 62,720,549
FUND BALANCE AT END OF YEAR $66,784,300
See accompanying notes to financial statements
33 126
Item # C9.
CITY OF MILPITAS
HOUSING AUTHORITY
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCE
BUDGET AND ACTUAL (NON-GAAP LEGAL BASIS)
FOR THE YEAR ENDED JUNE 30, 2022
Variance with
Budgeted Amounts Budget
Actual Amounts Positive
Original Final
Budgetary Basis (Negative)
Revenues
Use of money and property $271,000 $508,421 $508,421
Total Revenues 271,000 508,421 508,421
Expenditures
Current:
General Government:
City Attorney 6,429 $35,301 55,262 (19,961)
Non-departmental 946,544 7,662,267 519,314 7,142,953
Total Expenditures 952,973 7,697,568 574,576 7,122,992
NET CHANGE IN FUND BALANCE ($681,973) ($7,697,568) (66,155) $7,631,413 Fund balances at beginning of year 39,768,065
FUND BALANCE AT END OF YEAR $39,701,910
See accompanying notes to financial statements
34 127
Item # C9.
MAJOR PROPRIETARY FUNDS
Proprietary funds account for City operations financed and operated in a manner similar to a private business enterprise. The intent of the City is that the cost of providing goods and services be financed primarily through user charges.
The concept of
major funds extends to Proprietary Funds. The City has identified the funds below as major proprietary funds.
Financial reporting standards do not provide for the disclosure of budget vs. actual comparisons regarding proprietary funds that are major funds.
WATER UTILITY FUND
Accounts for the provision of water services to residents and businesses of the City. All activities necessary to provide such services are accounted for in this fund, includi ng, but not limited to, administration, operations, capital improvements, maintenance, billing and collection.
SEWER UTILITY FUND
Accounts for the provision of sewer services to residents and businesses of the City. All activities necessary to provide such services are accounted for in this fund, includi ng, but not limited to, admini stration, operations, capital improvements, maintenance, financing, billing and collection. 128
Item # C9.
129
Item # C9.
CITY OF MILPITAS
PROPRIETARY FUNDS
STATEMENT OF NET POSITION
JUNE 30, 2022
Business-type Activities-Enterprise Funds Governmental
Activities-
Sewer Internal Service
Water Utility Utility Totals Funds
ASSETS
Current Assets
Cash and investments
available for operations (Note 3) $51,901,683 $51,607,350 $103,509,033 $43,336,749 Restricted cash and investments (Note 3) 4,875,479 34,189 4,909,668 Receivables:
Accounts 2,236,575 1,443,613 3,680,188 239
Due from other governments 451,027 42,195 493,222
Interest 104,186 99,887 204,073 25,895
Prepaids, materials, supplies and deposits (Note 1E) 164,242 16,859 181,101 600,659
Total current assets 59,733,192 53,244,093 112,977,285 43,963,542 Noncurrent assets:
Capital assets and capacity rights (Note 8):
Land and construction in progress 27,246,597 2,346,875 29,593,472 Depreciable capital assets, net 34,058,772 114,887,973 148,946,745 9,341,366 Total noncurrent assets 61,305,369 117,234,848 178,540,217 9,341,366 Total assets 121,038,561 170,478,941 291,517,502 53,304,908
DEFERRED OUTFLOWS OF RESOURCES
Related to pensions (Note 12D) 348,075 242,820 590,895
Related to OPEB (Note 12E) 474,754 389,144 863,898
Total deferred outflows of resources 822,829 631,964 1,454,793
LIABILITIES
Current liabilities:
Accounts payable 2,723,612 423,389 3,147,001 83,539
Accrued payroll 115,834 58,022 173,856 50,725
Interest payable 61,004 238,975 299,979
Refundable deposits 184,866 184,866 196
Unearned revenue 3,461 3,461 6,922
Accrued vacation (Note 13F) 183,286 183,286 366,572 112,221 Sick leave payable (Note 13F) 77,664 25,337 103,001 15,458 Revenue Bonds (Note 9) 315,000 1,020,000 1,335,000
Total current liabilities 3,664,727 1,952,470 5,617,197 262,139 Non-current liabilities:
Accrued vacation (Note 13F) 89,184 13,018 102,202 19,782 Sick leave payable (Note 13F) 100,958 100,958
Net pension liabilities (Note 12C): 1,604,380 1,119,228 2,723,608 Net OPEB liability (Note 12C) 218,850 394,146 612,996
Total OPEB liability (Note 13D) 1,460,368 1,232,124 2,692,492 Revenue Bonds (Note 9) 18,905,919 36,005,196 54,911,115 Total non-current liabilities 22,379,659 38,763,712 61,143,371 19,782 Total liabilities 26,044,386 40,716,182 66,760,568 281,921
DEFERRED INFLOWS OF RESOURCES
Related to pensions (Note 12D) 645,830 450,536 1,096,366 Related to OPEB (Note 13E) 898,204 722,495 1,620,699
Total deferred inflows of resources 1,544,034 1,173,031 2,717,065 NET POSITION (Note 11)
Net investment in capital assets and capacity rights 46,959,929 80,243,841 127,203,770 9,341,366 Restricted for capital projects 36,378,752 38,704,401 75,083,153 Restricted for pension expenses 30,537,346
Unrestricted 10,934,289 10,273,450 21,207,739 13,144,275 Total net position $94,272,970 $129,221,692 $223,494,662 $53,022,987 See accompanying notes to financial statements
35 130
Item # C9.
CITY OF MILPITAS
PROPRIETARY FUNDS
STATEMENT OF REVENUE, EXPENSES
AND CHANGES IN FUND NET POSITION
FOR THE YEAR ENDED JUNE 30, 2022
Business-type Activities-Enterprise Funds Governmental
Activities-
Sewer Internal Service
Water Utility Utility Totals Funds
OPERATING REVENUES
Charges for services $33,883,177 $21,338,805 $55,221,982 $3,734,444 Other operating revenue 491,252 254,038 745,290 (5,670,707) Total Operating Revenues 34,374,429 21,592,843 55,967,272 (1,936,263)
OPERATING EXPENSES
Purchased water 17,987,511 17,987,511
Sewer treatment services 5,243,468 5,243,468
Personnel services 3,714,096 2,127,958 5,842,054 1,431,811 Services and supplies 2,629,569 1,962,833 4,592,402 1,088,229 Depreciation 1,562,061 4,799,864 6,361,925 1,190,932
Repairs and maintenance 261,898 39,225 301,123 760,039
Total Operating Expenses 26,155,135 14,173,348 40,328,483 4,471,011 Operating Income (Loss) 8,219,294 7,419,495 15,638,789 (6,407,274)
NONOPERATING REVENUES (EXPENSES)
Gain on sale of capital assets 80,616
Interest income(loss) (1,641,737) (1,604,060) (3,245,797) 409,393 Interest expense (743,050) (1,448,533) (2,191,583)
Subventions and grants 205,447 100,623 306,070
Total Nonoperating Revenues (Expenses) (2,179,340) (2,951,970) (5,131,310) 490,009 Income (Loss) Before Contributions and Transfers 6,039,954 4,467,525 10,507,479 (5,917,265) Capital contributions 1,205,018
Capital contributions - connection fees 418,344 607,373 1,025,717 Transfers in (Note 4A) 11 11 890,508
Transfers (out) (Note 4A) (2,657,407) (1,699,451) (4,356,858) (211,131) Change in net position 3,800,891 3,375,458 7,176,349 (4,032,870) Net position-beginning 90,472,079 125,846,234 216,318,313 57,055,857 Net position-ending $94,272,970 $129,221,692 $223,494,662 $53,022,987 See accompanying notes to financial statements
36 131
Item # C9.
CITY OF MILPITAS
PROPRIETARY FUNDS
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2022
Business-type Activities-Enterprise Funds Governmental
Activities-
Sewer Internal Service
Water Utility Utility Totals Funds
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $34,489,216 $21,803,245 $56,292,461 ($1,936,502) Payments to suppliers (24,338,604) (7,576,107) (31,914,711) (2,423,487) Payments to employees for salaries and benefits (3,781,198) (2,231,637) (6,012,835) (1,490,216) Net cash provided by operating activities 6,369,414 11,995,501 18,364,915 (5,850,205)
CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES
Subventions and grants 205,447 100,623 306,070
Transfers in 11 11 890,508
Transfers (out) (2,657,407) (1,699,451) (4,356,858) (211,131) Cash Flows from Noncapital Financing Activities (2,451,960) (1,598,817) (4,050,777) 679,377
CASH FLOWS FROM CAPITAL FINANCING ACTIVITIES
Principal paid on long-term debt (300,000) (980,000) (1,280,000) Interest paid (846,121) (1,709,913) (2,556,034)
Proceeds from sale of capital assets 93,272
Acquisition of capital assets (8,573,331) (13,564,198) (22,137,529) 257,008 Capital contributions - connection fees 418,344 607,373 1,025,717 Cash Flows from Capital and Related
Financing Activities (9,301,108) (15,646,738) (24,947,846) 350,280
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received (1,638,614) (1,588,259) (3,226,873) 410,033 Cash Flows from Investing Activities (1,638,614) (1,588,259) (3,226,873) 410,033 Net increase (decrease) in cash and cash equivalents (7,022,268) (6,838,313) (13,860,581) (4,410,515) Cash and investments at beginning of period 63,799,430 58,479,852 122,279,282 47,747,264 Cash and investments at end of period $56,777,162 $51,641,539 $108,418,701 $43,336,749 Reconciliation of operating income to net cash provided by operating activities:
Operating income (loss) $8,219,294 $7,419,495 $15,638,789 ($6,407,274) Adjustments to reconcile operating income (loss) to net cash provide d
by operating activities:
Depreciation 1,562,061 4,799,864 6,361,925 1,190,932
Change in assets and liabilities:
Receivables, net 70,926 210,893 281,819 (239)
Materials, supplies and deposits 7,607 (1,668) 5,939 (481,042) Accrued payroll (28,763) (14,638) (43,401)
Accounts and other payables (3,401,126) (331,005) (3,732,131) (152,582) Due to retirement system 47,442 (13,801) 33,641
Due to OPEB (108,027) (73,639) (181,666)
Net cash provided by operating activities $6,369,414 $11,995,501 $18,364,915 ($5,850,205) NONCASH TRANSACTIONS:
Contributions and transfers of capital assets $1,205,018 See accompanying notes to financial statements
37 132
Item # C9.
133
Item # C9.
FIDUCIARY FUNDS
FIDUCIARY FUNDS
These funds are used to account for asse ts held by the City as an agent for individuals, private organizations, and
other governments. The financial activities of these funds are excluded from the Government-wide financial statements, but are presented in separate Fiduciary Fund financial statements.
SUCCESSOR AGENCY TO THE MILPITAS RE DEVELOPMENT AGENCY PRIVATE-PURPOSE
TRUST FUND
The Successor Agency to the Milpit as Redevelopment Agency Private-Pu rpose Trust Fund accounts for the accumulation of resources to be used to make payments that are on the Recognized Obligation Payment Schedule and to dispose of assets and property of the former Redevelopment Agency for the benefit of the taxing agencies. 134
Item # C9.
135
Item # C9.
CITY OF MILPITAS
FIDUCIARY FUNDS
STATEMENT OF FIDUCIARY NET POSITION
JUNE 30, 2022
Successor Agency
to the Milpitas
Redevelopment Agency
Private-purpose
Trust Fund
ASSETS
Cash and investments (Note 3) $13,498,390
Restricted cash and investments (Note 3) 12
Total Assets 13,498,402
LIABILITIES
Accounts payable 9,300
Interest payable 1,340,667
Long-term obligations (Note 15C):
Due in one year 10,293,124
Due in more than one year 85,343,594
Total Liabilities 96,986,685
NET POSITION (DEFICIT)
Held in trust for other governments ($83,488,283)
See accompanying notes to financial statements
39 136
Item # C9.
CITY OF MILPITAS
FIDUCIARY FUND
STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FOR THE YEAR ENDED JUNE 30, 2022
Successor Agency
to the Milpitas
Redevelopment Agency
Private-purpose
Trust Fund
Additions:
Property taxes $21,575,099
Use of money and property 19,420
Total additions 21,594,519
Deductions:
General and administrative 23,609
Debt service:
Interest and fees 6,275,133
Total deductions 6,298,742
Net change in net position 15,295,777
Net position (deficit) - beginning (98,784,060)
Net position (deficit) - ending ($83,488,283)
See accompanying notes to financial statements
40 137
Item # C9.
NOTES TO FINANCIAL STATEMENTS
138
Item # C9.
139
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The City of Milpitas was incorporated as a general law city on January 26, 1954. The City operates under the Council-Manager form of government and provides the following services: public safety; fire and building inspection; engineering; public works; water; sewer; sanitation; recreation serv ices; building and safety; planning and zoning; general administration services and economic development.
The financial statements and accounting policies of the City conform with ge nerally accepted accounting principles applicable to governments. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for governmental accounting and financial reporting principles. Significant accounting policies are summarized below:
A. Reporting Entity
The accompanying basic financial statements present the financial activity of the City, which is the primary government presented, along with the financial activities of its component units, which are entities for which the City is financially accountable. Although they are separate legal entities, blended component units are in substance part of the City’s operations and are reported as an integral part of the City’s financial statements.
Each discretely presented component unit, on the other ha nd, is reported in a separate column in the basic financial statements to emphasize it is legally separate from the government.
PRIMARY GOVERNMENT
The financial statements of the primary government of the City of Milpitas include the activities of the City as well as the Milpitas Public Financing Authority, the Milpitas Economic Development Corporation, the City of Milpitas Housing Authority and the Milpitas Municipal Financing Authority, all of which are controlled b y
and dependent on the City. While these are separate legal entities, their financial activities are integral to those of the City. Their financial activities have been aggregated and merged (termed “blended”) with those of the primary government of the City in the accompanying financial statements.
Blended Component Units
The Milpitas Public Financing Authority is a separate government entity whose purpose is to assist with the financing or refinancing of certain public capital improvements within the City. The Authority has the power to purchase bonds issued by any local agency at public or negotiated sale and may sell such bonds to public or private purchasers at public or negoti ated sale. The Authority is contro lled by the City and has the same governing body as the City, which also performs all accounting and administrative functions for the Authority.
The financial activities of the Authority are included in the Sewer Utility Enterprise Fund. 41 140
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The Milpitas Economic Development Corporation, formed in February 2011, is a California nonprofit public benefit Corporation formed by the City and the former Milpitas Redeve lopment Agency under the laws of the State of California. As discussed in Note 15, the Redevelopment Agency was dissolved effective January 31, 2012. The Corporation was organized for the pur pose of encouraging and facilitating the City’s economic development, affordable housing and other community programs. The Corporation is governed
by a board of directors consisting of the members of th e City Council. Under an operating agreement with the Redevelopment Agency, the Corporation received fu nding from the Agency and will use the funds for redevelopment purposes consistent with the California Community Redevelopment Law, Health and Safety Code Section 33000 and to implement and carry out the Redevelopment Plans. The Corporation also entered into a Service Agreement with the City under which the City will perform the necessary services on an independent contractor basis to eliminate blight, provide affordable housing, improve the public realm, facilitate public and private developments, stimulat e economic development, and create jobs. The Corporation is controlled by the City and has the same governing body as the City, which also performs all accounting and administrative functions for the Corporation. The Corpor ation became inactive as of June 30, 2015.
The City of Milpitas Housing Authority, formed in Fe bruary 2011, is a separate government entity whose purpose is to assist with the housing for the City ’s low and moderate income residents. The Housing Authority is controlled by the City and has the same governing body as the City, which also performs all accounting and administrative functions for the Housing Authority. The Financial activities of the Housing Authority are included in the Housing Authority Special Revenue Fund.
The Milpitas Municipal Financing Authority, formed in March 2016, is a separate government entity whose purpose is to assist with the financing and refinancing of public programs, projects and capital improvements for the benefit of the City and the Housing Authority. The Municipal Financing Authority has the power to purchase bonds issued by any local agency at public or negotiated sale and may sell such bonds to public or private purchasers at public or negotiated sale. The Municipal Financing Authority is controlled by the City and the Housing Authority and has the same governing body as the City, which also performs all accounting and administrative functions for the Municipal Financing Authority. The Financial activities of the Municipal Financing Authority are included in the General Government Capital Projects Fund.
Separate financial statements are not issued for the Milpitas Public Financing Authority, Milpitas Economic Development Corporation, City of Milpitas Housing Authority or Milpitas Municipal Financing Authority.
Discretely Presented Component Unit
Terrace Gardens, Inc. is a non-profit public benefit corporation organized in September 1986 for the purpose of developing and managing the operations of a re sidential complex known as Terrace Gardens, which is located in the City of Milpitas a nd is dedicated to the needs of elde rly persons. The former Milpitas Redevelopment Agency funded the construction of Te rrace Gardens. City Council can appoint a voting majority of the governing board and approves the annual budget. The C ity Council exercises control over the Board of Terrace Gardens. Therefore, the financial activities of Terrace Gardens, Inc. as of and for the year ended December 31, 2021 are discretely presented in the Terrace Gardens Inc. Component Unit column of the Statement of Net Position and the Statement of Activities.
Financial statements for Terrace Gardens, Inc. may be obtained from Terrace Gardens, Inc., 186 Beresford Court, Milpitas, CA 95035.
42 141
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) B. Basis
of Presentation
The City’s Basic Financial Statements are prepared in conformity with accounti ng principles generally accepted in the United States of America. Th e Government Accounting Standards Board is the acknowledged standard setting body for establishing accounting and financial reporting standards followed by governmental entities in the United States of America.
These Standards require that the financial statements described below be presented.
Government-wide Statements: The Statement of Net Position and the Statement of Activities display information about the primary government, the City and its blended and discretely presented component units. These statements include the financial activities of the overall City government, except for fiduciary activities. Eliminations have been made to minimize th e double counting of inte rnal activities, except for interfund services provided and used, which are not el
iminated in the process of consolidation. These
statements distinguish between the
governmental and business-type activities of the City. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchang e transactions. Business-type activities are financed in whole or in part by fees charged to external parties.
The Statement of Activities presents a comparison between direct expenses and program revenues for each segment of the business-type activities of the City and for each function of the City’s governmental activities.
Direct expenses are those that are specifically associated with a progra m or function and, therefore, are clearly identifiable to a particular function. Program re venues include (a) charges paid by the recipients of goods or services offered by the pr ograms, (b) grants and contributions that are restricted to meeting th e
operational needs of a particular program and (c) fees, grants and contributions that are restricted to financing the acquisition or constructi on of capital assets. Revenues that are not classified as program revenues, including franchise fees that are based on gross recei
pts and all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the City’s funds, including fiduciary funds and blen ded component units. Separate st atements for each fund category -
governmental, proprietary, and fiduciary-are presented. The emphasis of fund financial statements is on major individual governmental and ente
rprise funds, each of which is di splayed in a separate column. All remaining governmental and enterprise funds are aggregated and reported as nonmajor funds.
Proprietary fund operating revenues and expenses, such as charges for services and the related costs, result from exchange transactions associated
with the principal activity of the fund. Exchange transactions are those in which each party receives an d gives up essentially equal values.
Nonoperating revenues and
expenses, such as subsidies, investment earnings and any related costs, result from nonexchange transactions or ancillary activities.
43 142
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
C. Major Funds
Major funds are defined as funds that have either a ssets and deferred outflows of resources, liabilities and deferred inflows of resources, revenues or expenditures/expenses equal to ten percent of their fund-type total and five percent of the grand total. The General Fund is always a majo r fund. The City may also select other funds it believes should be presented as major funds.
The City reported the following major governmental funds in the accompanying financial statements:
General Fund - The General Fund is the genera l operating fund of the City. It is used to account for all financial resources except those required to be accounted for in another fund. The major revenue sources for this Fund are sales taxes, property taxes, hotel taxes, unrestricted revenues from the State, fines and forfeitures and interest income. Expenditures are incurred for public safety, public works, recreation services and the other governmental services described above.
Housing Authority Fund – Established to plan and address the housing needs of the City and to act as the Housing Successor of the former Redevelopment Agency. The main source of the revenue for this fund is the repayment of loans restricted for housing activities.
Street Improvement Fund – Established to account for the construction and maintenance of the street system in Milpitas. Financing is provided through State and Federal grants.
Transit Area Impact Fee Fund – Established to account for the capital projects in the transit area. A special transit area impact fee is imposed on developments to provide financing.
General Government Capital Projects Fund – Established to account for the construction and maintenance of general government projects. Financing is provided by the General Fund.
The City reported all its enterprise funds as ma jor funds in the accompanying financial statements:
Water Utility Fund – Accounts for the provision of water services to residents and businesses of the City. All activities necessary to provide such services are accounted for in this fund, including, but not limited to, administration, operations, capital improvements, maintenance, billing and collection.
Sewer Utility Fund – Accounts for the provision of sewer services to residents and businesses of the City. All activities necessary to provide such services are accounted for in this fund, including, but not limited to, administration, operations, capital improvements, maintenance, financing, and billing and collection.
44 143
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The City also reports the following fund types:
Internal Service Funds – The Equipment Management Internal Service Fund is used to finance and account for the replacement of equipment used by City departments and the maintenance of the online permit development system on a cost reimbursement basis. The Pension Section 115 Internal Service Fund is used to accumulate funds to pay down the City’s CalPERS Unfunded Accrued Liability.
Fiduciary Funds – Trust funds account for assets held by the City as an agent for various functions. The Successor Agency to the Milpitas Redevelopment Ag ency Private-Purpose Trust Fund accounts for the accumulation of resources to be used for payments at appropriate amounts and times in the future. This fund accounts for winding down the affairs of the former Milpitas Redevelopment Agency and makes payments on the Enforceable Obligation Schedule and disposes of assets and property of the former Redevelopment Agency for the benefit of taxing agencies. The financial activities of this fund is excluded from the City-wide financial statements, but is presented in separate Fiduciary Fund financial statements.
D. Basis of Accounting
The government-wide, proprietary, and fiduciary fund financial statements are reported using the economic resources measurement focus and the full accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available.
The City considers all revenues reported in the gove rnmental funds to be available if the revenues are collected within sixty days after year-end. Expendit ures are recorded when the related fund liability is incurred, except for principal and interest on general long-term debt, including lease liabilities, claims and judgments, and accumulated unpaid vacation, sick pay and other employee benefit amounts, which are recognized as expenditures to the extent they have matured. General capital asset acquisitions, including entering into contracts giving the City the right to use leased assets, are reported as expenditures in governmental funds. Proceeds of general long-term debt, financing through leases and acquisitions under capital leases are reported as other financing sources.
Non-exchange transactions, in which the City gives or receives value wi thout directly receiving or giving equal value in exchange, include property taxes, gran ts, entitlements, and donations. On the accrual basis, revenue from taxes is recognized in the fiscal year for which the taxes are levied or assessed. Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.
Other revenues susceptible to accrual are sales taxes, significant building permit fees, and interest revenue.
Forfeitures, licenses, other permits and miscellaneous revenue are not susceptible to accrual because they are not measurable until received in cas h. Grant funding received in adva nce of the related expenditure is accounted for as unearned revenue.
45 144
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Grant revenues are recognized in the fiscal year in which all eligibility requirements are met. Under the terms of grant agreements, the City may fund certain programs with a combination of cost-reimbursement grants, categorical block grants, and general revenues. Thus, both restricted and unrestricted net position may be available to finance program expenditures. Th e City’s policy is to first apply restricted grant resources to such programs, followed by unrestricted resources if necessary.
E. Prepaids, Materials, Supplies and Deposits
Certain payments to vendors reflect costs applicable to future fiscal years and are recorded as prepaid items in both government-wide and fund financial statements. The cost of prepaid items is recorded as expenditures/expenses when consumed, rather than when purchased.
Materials and supplies are valued at cost on a first-in fi rst-out basis. Supplies in the enterprise and internal funds consist principally of materials and supplies for utility and internal operations. Materials and supplies of the governmental funds consist of expendable supplie s and materials held for consumption. The cost is recorded as an expense or expenditure in the funds at the time individual inventory items are consumed.
Prepaids, materials, supplies and deposits in governme ntal funds are equally offset by nonspendable fund balance which indicates that they do not constitute available spendable resources even though they are a component of net current assets.
F. Deferred Inflows and Deferred Outflows of Resources
In addition to assets, the statement of net position or balance sheet reports a separate section for deferred outflows of resources. This separate net statement elem ent, deferred outflows of resources, represents a consumption of net assets or fund balance that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The City has pension-related deferred outflows of resources arising from certain changes in the collective net pension liability.
In addition to liabilities, the statement of net position or balance sheet reports a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net assets or fund bala nce that applies to a future period(s ) and so will not be recognized as an inflow of resources (revenue) until that time. The Ci ty has deferred inflows of resources arising from certain changes in the collective net pension liability . These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. In the government ‐wide financial statements the City reports deferred amounts related to leases and deferred amounts related to pension and OPEB.
G. Property Tax
Santa Clara County assesses properties and bills, collect s, and distributes property taxes to the City. The County remits the entire amount levied and handles all delinquencies, retainin g interest and penalties.
Secured and unsecured property taxes are levied on January 1.
Secured property tax is due in two installments, on November 1 and March 1, and becomes a lien on those dates. It becomes delinquent on December 10 and April 10, respectively. Unsecured property tax is due on July 1, and becomes delinquent on August 31. Collection of delinquent accounts is the responsibility of the County, which retains all penalties.
46 145
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The term “unsecured” refers to taxes on personal property other than real estate, land and buildings. These taxes are secured by liens on the property being taxed. Property tax revenues are recognized by the City in the fiscal year they are assessed, provided they become available as defined above.
H.
Revenue Recognition for Water Utility and Sewer Utility Revenues are recognized based on cycle billings rendered to customers. Revenues for services provided but
not billed at the end of a fiscal period are not material and are not accrued.
I. Fair
Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in a n
orderly transaction between market participants at the measurement date. The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The fair value hierarchy categorizes the inputs to valuation techniques used to measure fair value into three levels based on the extent to which inputs used in measuring fair value are observable in the market.
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 inputs are inputs – other than quoted prices included within level 1 – that are observable for an asset or liability, either directly or indirectly.
Level 3 inputs are unobservable inputs for an asset or liability.
If the fair value of an asset or liability is measured using inputs from more than one level of the fair value hierarchy, the measurement is considered to be based on the lowest priority level input that is significant to the entire measurement.
J. Use
of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make esti mates and assumptions that affect the reported amounts of assets and liabilities and disclosure of continge nt assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
47 146
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 2 – BUDGETS AND BUDGETARY ACCOUNTING
A. Budgets and Budgetary Accounting
The City adopts an annual operating budget on or before June 30 of the pr evious fiscal year, except for the Park Improvement and Storm Drain Capital Projects Funds which are budgeted on a project basis. The operating budget takes the form of a one year financial plan which is adopted in its entirety by the City Council by resolution. Because Milpitas is a general law city, it is not subject to a budgetary process prescribed by statute or charter.
The operating budget is subject to supplemental appr opriations throughout its te rm in order to provide flexibility to meet changing needs and conditions. The City Manager’s budget control remains at the level of department and/or project within any one fu nd. The City Manager may approve supplemental appropriations in the General Fund providing the total increase does not exceed 1% of the original total General Fund expenditure budget subject to the following. All additional appropriations that require the use of reserves must be approved by City Council. Expe nditures cannot exceed the appropriated budget at the department level within each fund without City Council approval.
The City Manager is authorized to amend appropriations within the various departments and projects within a fund, provided that the amount of the amended appropriation is $100,0 00 or less. Interfund transfers or transfers of an appropriation amount within a fund in which any single instan ce exceeds $100,000 require prior approval of the City Council.
Budgeted amounts are as originally adopted, or as amended by the City Council. Individual amendments were not material in relation to the original appropriations which were amended.
B. Adjustments to GAAP Basis from Budgetary Basis
The City Manager’s budget control remains at the leve l of department and/or project within any one fund.
The City Manager has discretion over the unanticipated reserve (~1% of the General Fund operating budget), adopted by Council during the budget process. All additional appropriations that require the use of reserves must be approved by City Council. Expenditures cannot exceed the appropriated budget at the department level within each fund without City Council approval.
The City Manager is authorized to amend appropriation s within the various departments and projects within a fund, provided that the amount of the amended appropriation is $100,000 or less and does not impact the overall appropriations of a fund. Interfund transfers or transfers of an appropriation amount within a fund in which any single instance exceeds $100,000 require prior approval of the City Council.
48 147
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 3 – CASH AND INVESTMENTS
The City pools cash from all sources and all funds except Cash and Investments held by Trustees, so that it can be invested at the maximum yield consistent with safety and liquidity, while individual funds can make expenditures at any time.
A. Policies
The City invests in individual invest ments, money market mutual funds, and in investment pools. Individual investments are evidenced by specific identifiable securities instruments , or by an electronic entry registering the owner in the records of the institution issuing the security, called the book entry system. In order to increase security, the City employs the Trust and Custody Department of a bank as the custodian of certain City managed investments, regardless of their form.
California Law requires banks and savings and loan in stitutions to pledge government securities with a market value of 110% of the City’s cash on deposit, or first trust deed mortgage notes with a market value of 150% of the deposit, as collatera l for these deposits. Under California Law this collateral is held in a separate investment pool by another institution in th e City’s name and places the City ahead of general creditors of the institution.
The City’s investments are carried at fair value, as required by generally accepted accounting principles.
The City adjusts the carrying value of its investments to reflect their fair value at each fiscal year end, and it includes the effects of these adjustments in income for that fiscal year.
B. Classification
Cash and investments are classified in the financial statements as shown below, based on whether or not their use is restricted under the terms of City debt instruments or other agreements.
Cash and investments available for operations $354,120,703 Restricted Cash and Investments 7,171,093
Total Primary Government cash and investments 361,291,796 Cash and investments available for operations 18,289
Restricted Cash 3,333,708
Total Component Unit cash and investments 3,351,997
Cash and investments in Fiduciary Funds (separate statement) 13,498,390 Restricted Cash and Investments in Fiduciary Funds (separate account) 12 Total Fiduciary cash and investments 13,498,402
Total cash and investments $378,142,195
Cash and Investments Available for Operations is used in preparing proprietary fund statements of cash flows because these assets are highly liquid and are expended to liquidate liabilities arising during the year.
49 148
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 3 – CASH AND INVESTMENTS (Continued)
C. Investments Authorized by the California Go vernment Code and the City’s Investment Policy
The City’s Investment Policy, update d or adopted on an annual basis, and the California Government Code allow the City to invest in the following, provided the credit ratings of the issuers are acceptable to the City; and approved percentages and maturities are not exceeded. The table below also identifies certain provisions of the California Government Code or the City’s Investment Policy where it is more restrictive:
Authorized Investment Type
Maximum
Maturity
Minimum
Credit
Quality*
Maximum
Percentage
of Portfolio
Maximum
Investment
In One Issuer
U. S. Treasury Bonds, Notes and Bills 5 Years 100% No Limit Federal Agency Obligations 5 Years 100% 30%
Bankers Acceptances 180 Days 40% 5%
Commercial Paper – Pooled Funds
Commercial Paper – Non-Pooled Funds
270 Days
270 Days
A
A
40%
25%
(A)
(A)
Negotiable Certificates of Deposit 5 Years 30% 5%
Repurchase Agreements 1 Year 100% No Limit
Time Certificates of Deposit – Banks
or Savings and Loans (Non- negotiable)
5 Years 100% No Limit
Medium-Term Corporate Notes 5 Years A 30% 5%
State of California Local Agency
Investment Fund (LAIF Pool)
Upon
Demand
100% No Limit
Money Market Funds of
Government Securities
Upon
Demand
Top
Rating
Category
20%
10%
Municipal Securities and Municipal
Treasury Notes or Bonds
Mortgage Pass-Through and Asset
Backed Securities
Collateralized Bank Deposits
5 Years
5 Years
Upon
Demand
A
AA
30%
20%
100%
5%
5%
No Limit
(A) Eligible Commercial Paper may not represent more than 5% of outstanding paper of an issuing corporation.
*At time of purchase
50 149
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 3 – CASH AND INVESTMENTS (Continued)
D.
Investments Authorized by Debt Agreements and Trust Agreements The City must maintain required amounts of cash and in vestments with trustees or fiscal agents under the terms of certain debt issues. These funds are unexpended bond proceeds or are pledged reserves to be use d
if the City fails to meet its obligations under these debt issues. The California Government Code requires these funds to be invested in accordance with City resolutions, bond indentures or State statutes. T he table
below identifies the investment types that are authorized for investments held by fiscal agents. The table also identifies certain provisions of these debt agreements:
Authorized Investment Type
Maximum
Maturity
Minimum
Credit
Quality*
Maximum
Percentage
of Portfolio
Maximum
Investment
In One Issuer
U. S. Treasury Bonds, Notes and Bills 5 Years 100% No Limit Federal Agency Obligations 5 Years 100% 30%
Time Certificates of Deposit – Banks
or Savings and Loans
5 Years 100% No Limit
Bankers Acceptances 180 Days A
20% 5%
Commercial Paper – Pooled Funds
Commercial Paper – Non-Pooled
Funds
270 Days
270 Days
A
A
40%
25%
(A)
(A)
Negotiable Certificates of Deposit
5 Years 30% No Limit
Repurchase Agreements 1 Year 100% No Limit
Medium-Term Corporate Notes 5 Years AA 30% 5%
State of California Local Agency
Investment Fund (LAIF Pool)
Upon
Demand
No Limit No Limit
Money Market and Mutual Funds Upon
Demand
Aaa/AAm 20% 10%
California Asset Management
Program (CAMP)
Upon
Demand
No Limit No Limit
(A) The combined total of commercial paper may not represent more than 10% of the outstanding paper and notes of an issuing corporation.
*At time of purchase
During the fiscal year ended June 30, 2022, the City also implemented investment guidelines for its Section 115 Pension Trust, which authorize investments in a diversified portfolio, including equities and mutual funds, in order to achieve a 3% to 6% investment earnings goal during the next 5 to 10 years.
E. Investments Authorized for Terrace Gardens Inc.
Terrace Gardens, Inc. investments conform with the California Government Code. 51 150
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 3 – CASH AND INVESTMENTS (Continued)
F. Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely a ffect the fair value of an investment. Normally, the longer the maturity of an investment, the greate r the sensitivity of its fair value to changes in market interest rates. The City generally manages its interest rate risk by holding investments to maturity.
Information about the sensitivity of the fair values of the City’s investments (including investments held by trustees) to market interest rate fluctuations is provided by the following table that shows the distribution of the City’s investments by maturity or earliest call date:
12 Months 13 to 36 36 to 60 Percentage
or less Months Months Tota l of Portfolio
City and Successor Agency:
Federal Agency Obligations $10,532,975 $32,926,432 $13,870,768 $57,330,175 15.16% Medium-Term Corporate Notes 3,996,990 29,702,597 22,518,647 56,218,234 14.87% U.S. Treasury Notes 32,178,185 46,805,811 78,983,996 20.89% California Local Agency Investment Fund 93,351,600 93,351,600 24.69% Mutual Funds (U.S. Securities) 16,323,321 16,323,321 4.32% Asset Backed Securities 13,043,478 13,414,613 26,458,091 7.00% Negotiable Certificates of Deposit 7,459,278 7,459,278 1.97% Terrace Gardens, Inc.:
Nonnegotiable Certificates of Deposit 2,232,426 2,232,426 0.59% Total Investments $133,896,590 $107,850,692 $96,609,839 338,357,121 Demand Deposits - City of Milpitas 38,665,503 10.23%
Demand Deposits - Terrace Gardens 1,119,571 0.30%
Total Cash and Investments $378,142,195 100.02%
Investment Type
The City is a participant in the Local Agency Investment Fund (LAI F) that is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The City reports its investment in LAIF at the fair value amount provided by LAIF, which is the same as the value of the pool share. The balance is available for withdrawal on demand, and is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. Each regular LAIF account is permitted to have up to 15 transactions per month, with a minimum transaction amount of $5,000, no maximum transaction amount, and at least 24 hours advance notice for withdrawal s of $10 million or more. Bond proceeds accounts are subject to a one ‐time deposit with no cap and are se t up with a monthly draw down schedule. Included in LAIF’s investment portfolio are collateralized mortgage obligations, mortgage-backed securities, other asset-backed securities, loans to certai n state funds, and floating rate securities issued by federal agencies, government-sponsored enterpri ses, United States Treasury Notes and Bills, and corporations. At June 30, 2022 these investments matured in an average of 311 days.
Mutual funds are available for withdrawal on demand and at June 30, 2022 matured in an average of 25 days. 52 151
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 3 – CASH AND INVESTMENTS (Continued)
G. Credit Risk
Credit risk is the risk that an issuer of an invest ment will not fulfill its obligat ion to the holder of the investment. This is measured by the assignment of a rating by a nationally re cognized statistical rating organization. Presented below is the actual rating as of June 30, 2022 for each of the Primary Government’s investment types as provided by Standard and Poor’s investment rating system:
AAA
AA+/AA/A
A- A+/A/A- A-1/ A-1+ BBB+/BBB Total
Federal Agency Obligations $57,330,175 $57,330,175
Medium-Term Corporate Notes $16,287,211 $38,939,515 $991,508 56,218,234 Asset Backed Securities 17,793,946 17,793,946
Mutual Funds (U.S. Securities) 16,323,321 16,323,321
Negotiable Certificates of Deposit $7,459,278 7,459,278 Totals $91,447,442 $16,287,211 $38,939,515 $7,459,278 $991,508 155,124,954 Not rated:
$93,351,600 93,351,600
Asset Backed Securities 8,664,145 8,664,145
Exempt from credit rate disclosure:
U.S. Treasury Notes 78,983,996 78,983,996
Total Investments $180,999,741 $336,124,695
California Local Agency Investm ent Fund
Investm ent Type
All of the unrated negotiable certificates of deposit were fully insured by Federal Deposit Insurance at June 30, 2022.
Terrace Gardens, Inc. invests only in Nonnegotiable Certificates of Deposit. At December 31, 2021, all of Terrace Gardens’ Nonnegotiable Certificates of Deposit totaling $2,232,426 were fully insured by Federal Deposit Insurance.
53 152
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 3 – CASH AND INVESTMENTS (Continued)
H. Fair
Value Hierarchy
The City categorizes its fair value measurements with in the fair value hierarchy established by generally accepted accounting principles.
The hierarchy is based on the valuation inputs used to measure fair value of the assets. Level 1 inputs are quoted prices in an active market for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs.
The following is a summary of the fair value hierarchy of the City’s investments as of June 30, 2022:
Level 2 Total
Investments by Fair Value Level:
Federal Agency Obligations $57,330,175 $57,330,175
Medium-Term Corporate Notes 56,218,234 56,218,234
U.S. Treasury Notes 78,983,996 78,983,996
Negotiable Certificates of Deposit 7,459,278 7,459,278
Asset Backed Securites 26,458,091 26,458,091
S
ubtotal $226,449,774 226,449,774
Investments Measured at Amortized Cost:
Mutual Funds (U.S. Securities) 16,323,321
Investments Measured at Cost:
Terrace Gardens, Inc.
Nonnegotiable Certificates of Deposit 2,232,426
Investments Exempt from Fair Value Hierarchy:
California Local Agency Investment Fund 93,351,600
Total Investments $338,357,121
Federal Agency Obligations totaling $57.3 million, Medi um Term Corporate Notes of $56.2 million, U.S.
Treasury Notes totaling $79.0 million, Negotiable Certificates of Deposit of $7.5 million and Asset Backed Securities of $26.5 million, classified in Level 2 of the fair value hierarchy, are valued using pricing techniques of matrix pricing or market corroborate d pricing, with inputs such as yield curves or indices. These prices are obtained from various pricing sources by our custodian bank. 54 153
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 3 – CASH AND INVESTMENTS (Continued)
I. Significant Investments
Investments in the securities of any individual issuers, other than U. S. Treasury securities, mutual funds and the California Local Agency Investment Fund, that repr esent 5% or more of total entity-wide investments are as follows at June 30, 2022:
Issuer Investm ent Type Am ount
Federal Bational Mortgage Association Federal Agency Obligations $21,117,115 Federal Home Loan Mortgage Corporation Federal Agency Obligations 15,843,070 Federal Farm Credit Bank Federal Agency Obligations 14,908,255 NOTE 4 – INTERFUND TRANSACTIONS
A. Transfers Between Funds
With Council approval, resources may be transferred from one City fund to another. The purpose of the m
ajority of transfers is to is to move resources from one fund to another. Less often, a transfer may be made to open or close a fund.
Transfers between funds during the fiscal year ended June 30, 2022 were as follows:
Fund Receiving Transfers Fund Making Transfers
Amount
Transferred
Governmental Funds:
General Fund Solid Waste Reduction and Services Special Revenue Fund $138,558 (A) General Fund Community Facility District Special Revenue Fund 2,560,000 (A) General Fund Water Utility Proprietary Fund 2,571,407 (A) General Fund Sewer Utility Proprietary Fund 1,482,966 (A) Street Improvement Fund General Fund 295,254 (A)
Street Improvement Fund Transit Area Impact Fee Fund 3,500,000 (B) Street Improvement Fund General Government Capital Projects Fund 100,000 (B) Street Improvement Fund Gas Tax Special Revenue Fund 1,667,788 (B) General Government Capital Projects Fund General Fund 595,039 (B), (A) General Government Capital Projects Fund Transit Area Impact Fee Fund 78,000 (B) General Government Capital Projects Fund Water Utility Proprietary Fund 86,000 (B) General Government Capital Projects Fund Sewer Utility Proprietary Fund 216,485 (B) General Government Capital Projects Fund Gas Tax Special Revenue Fund 608,947 (B)
General Government Capital Projects Fund Law Enforcement Services Special Revenue Fund 60,000 (B) General Government Capital Projects Fund Lighting & Landscape Maintenance District Special Revenue Fund 4,000 (B) General Government Capital Projects Fund Community Facilities District Special Revenue Fund 50,000 (B) General Government Capital Projects Fund Community Planning Special Revenue Fund 550,000 (B) General Government Capital Projects Fund Public Art Capital Projects Fund 326,000 (B) General Government Capital Projects Fund Park Improvement Capital Projects Fund 359,516 (B), (C) General Government Capital Projects Fund Equipment Management Internal Service Fund 211,131 (B) Gas Tax Fund Street Improvement Capital Projects Fund 98 (C) Lighting & Landscape Maintenance District Special Revenue Fund General Fund 40,590 (A) Affordable Housing Special Revenue Fund General Fund 295,254 (A) Park Improvement Capital Projects Fund General Government Capital Projects Fund 75,000 (B) Storm Drain Development Capital Projects Fund General Fund 885,761 (A) Storm Drain Development Capital Projects Fund General Government Capital Projects Fund 145,000 (B) Governmental Funds Subtotal 16,902,794
Proprietary Funds:
Sewer Utility P roprietary Fund Street Improvement Capital P rojects Fund 11 (C) Internal Service Funds Subtotal 11
Internal Service Funds:
Equipment Management Internal Service Fund General Fund 890,508 (A) Internal Service Funds Subtotal 890,508
Total Interfund Transfers $17,793,313
(A) To Transfer for Operating Cost
(B) To Fund Capital Project
(C) To Return Unexpended Project Funds
55 154
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 5 – LOANS RECEIVABLE
The City and former Redevelopment Agency entered into the loan programs below to improve the quality of housing and to increase the availability of affordable housing, and for other purposes. With the dissolution of the Redevelopment Agency as discussed in Note 16, the City agreed to beco me the successor to the Redevelopment Agency’s housing activities and as a result the City of Milpitas Housing Authority assumed the loans receivable of the Redevelopment Agency’s Housing Reserve Special Revenue Fund as of February 1, 2012.
These loans were comprised of the following at June 30, 2022:
Housing and Com m unity Developm ent Loans:
Rehabilitation Loans $3,225,910
Housing Authority Loans:
Milpitas Housing Associates 3,277,759
Parc Metropolitan Housing Developm ent 52,186
Parc North Associates LLC 533,870
Mid-Penins ula Milpitas Affordable Hous ing Ass ociates 17,676,623 KB Home South Bay Inc. 1,222,900
Western Pacific Housing Inc. 1,782,781
Shapell Industries 800,000
MIL Aspen Associates, Ltd. 3,333,041
Sango Court, L.P. 6,579,603
Total Hous ing Authority Loans Receivable 35,258,763
Total Loans Receivable $38,484,673
A. Rehabilitation Loans
The City administers a housing rehabilitation program using Housi ng and Community Development Act funds. Under the Program, individuals with incomes belo w a certain level are eligible to receive low or no interest loans, secured by deeds of trust, for construction work on their homes. At June 30, 2022, the City had outstanding rehabilitation loans of $3,225,910 in its Housing and Commun ity Development Special Revenue Fund. During the year ended June 30, 2022, the City received principal payment of $269,890 from all participants and accrued interest of $8,973.
56 155
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 5 – LOANS RECEIVABLE (Continued)
B. Milpitas Housing Associates Loan
In fiscal 1997, the former Redevelopment Agency loaned the Milpitas Housing Associates, a partnership of Bridge Housing and a developer, $3,000,000 to assist in the financing of the construction of a 306 unit apartment complex. Fifty percent of the units were made available to very low and low income tenants. The Loan bore interest at the rate of 5.45% per year, compounded annually an d is repayable in 2040, subject to certain conditions. The loan is secured by a subordinated deed of trust in the third position on the property.
In January 2020, the City Council and the Housing Authority Commission approved a restructuring of the loan, which, 1) lowered the interest rate from 5.45% to a simple interest of 3.05% effective July 1, 2017, 2) forgave accrued interest of $1,541,074 through fiscal y ear 2017, and 3) approved the foregoing of residual receipts totaling $200,000 annually. As a result, fiscal year 2018 interest was recalculated to be $91,500 and accrued and the prior fiscal year 2018 accrued interest of $247,489 was written off. During fiscal year 2022 an additional $179,741 was written off. During fiscal year 2022, interest of $91,500 was accrued, and as of June 30, 2022, principal and accrued interest outstanding totaled $3,277,759.
C. Parc Metropolitan Ho using Development Loans
The Housing Authority provides loans to eligible low-income families for the purchase of townhome units at the Parc Metropolitan Housing Development. During the year ended June 30, 2022, the Housing Authority received principal payments of $1,919 and as of June 30, 2022, there were $52,186 in loans outstanding.
D. Parc North Associates LLC Loan
In September 2003, the former Redevelopment Agency entered into an Owner Participation Agreement with Parc North Associates LLC for the development of 285 town homes and condominiums. Eighteen of the units were made available to very low income households, six of the units were made available to low income households, and thirty-four units were made available to moderate inco me households. In exchange, the Agency provided a grant of $1,823,480 to the Develo per for permits, fees, and in frastructure, along with silent-second loans to eligible low-income families for the purchase of these town homes and condominium.
Interest of 5% begins on the 61
st month after the recordation of the deeds of trust and continues until the loans are paid in full. During fiscal year 2022, principal of $17,740 was paid and as of June 30, 2022, there were $533,870 of such loans outstanding.
E. Mid-Peninsula Milpitas Affordable Housing Associates
In December 2005, the former Redevelopment Agen cy entered into a Disposition and Development Agreement with Mid-Peninsula Milpitas Affordable Housing Associates for the development of a 103-unit senior housing project with long-term affordability to extremely low and very low income seniors. Under the terms of the Agreement, the Agency provided a grant of $1 million to the Developer and will provide a development loan up to $14.6 million to the Developer. No interest is accrued on the first $5 million of loan proceeds. The remaining $9.6 million bears simple interest of 3.00% an nually. Repayment of interest and principal is payable from surplus operating cash subject to certain conditions as defined in the Agreement, and unpaid principal and accrued interest is due in D ecember 2062. The loan is secured by a second deed of trust on the property. Constructi on began in fiscal year 2006 and was completed in December 2008.
During fiscal year 2022, interest of $346,508 and $288,000 was paid an d accrued, respectively, and as of June 30, 2022, principal and accrued interest outstanding totaled $17,676,623.
57 156
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 5 – LOANS RECEIVABLE (Continued)
F. KB Home South Bay Inc. Loans
In January 2005, the former Redevelopment Agency entered into a Disposition and Development Agreement with KB Home South Bay Inc. for the development of a public park and approximately 700 housing units on the two parcels (Parcels C and D). In addition, the fo rmer Redevelopment Agency would provide a total of $4,250,000 of silent-second mortgages to eighty-five moderate income households on Parcel C, approximately $5,000,000 of subsidies to twenty-five moderate income households on Parcel D. The silent-second mortgages are not due for 45 years or upon the sale, renting or
leasing of the property. Interest begins on the 37th month after the recordation of the Deed of Trust and continues until the loans are paid in full.
Due to changes in the housing mark et and stricter lending requirem ents which had created unforeseen challenges in finding qualified buyers for the affordable units, the former Redevelopment Agency amended the Agreement in February 2009 to establish an in -lieu housing payment of $1,702,000 to remove the affordable restrictions on 46 of
the 67 remaining unsold affordable units ($37,000 for each unit). This amount was paid in equal parts to the Agency and to the County. In addition, the commitment for silent- second mortgages was reduced $2,300,000 to $1,950, 000, and the total number of affordable units was reduced from 110 to 64.
As of June 30, 2022, there were $954,900 of loans to Parcel C households outstanding. As of June 30, 2022 subsidies totaling $1,222,900 had been provided.
G. Western Pacific Housing Inc., Loans
In August 2005, t
he former Redevelopment Agency ente red into an Owner Partic ipation Agreement with Fairfield Development, LLC for the deve
lopment of a 464- unit residential apartment project called Centria, of which 93 units will be deed-restricted for very low- to moderate- income households. In November 2005, the project was purchased by Western Pacific Housing Inc. and obligations of the Owner Participation Agreement were assigned to Western Pacific Housing Inc. T
he former Redevelopment Agency will provide a grant of
$379,480 for permits, fees, and infrastructure. The f
ormer Redevelopment Agency also will provide a total of $770,000 for silent-second down payment assistance loans for the 22 very-low income units. T he loans are not
due for 25 years or upon the sale, renting or leasin g of the property. Interest will begin on the 61 st month after the recordation of the Deed of Trust and continue s until the loans are paid in full. Principal of $1,227 w
as repaid in fiscal year 2022 and as of June 30, 2022 there were $585,781 such loans outstanding.
In August 2008 the Owner Participat ion Agreement was amended to re duce the number of units to be constructed by Western Pacific Housing Inc. to 137 and provide for the conversion of 7 of the moderate income units to low income units. In addition, in August 2008 the 327 unconstructed units of the project were sold to Lyon Milpitas LLC and the Agency entered into a new Owner Participation Agreement with Lyon Milpitas LLC to complete the construction of the affordable housing units.
In September 2006, the former Rede
velopment Agency entered into an Owner Participation Agreement with Western Pacific Housing, Inc. for the development of a 147-unit townhome project called Paragon that includes nine units deed-restricted to very low income residents and twenty units deed-restricted to moderate income residents. The Agency will provide silent-second loans of $133,333 to each of the very low income households. Interest will begin on the date of the promissory note bu t will be forgiven on the fourth anniversary of the date the Deed of Trust recorded at a rate of 20% per year, and principal is due 45 years f
rom the date the Deed of Trust was recorded. As of June 30, 2022, there were $1,197,000 of silent second loans outstanding.
58 157
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 5 – LOANS RECEIVABLE (Continued)
H. Shapell Industries
In June 2004, the former Redevelo pment Agency entered into an Agre ement with Shapell Industries of Northern California for the develo pment of a 65-unit townhome developm ent, which will include twenty deed-restricted affordable housin
g units for very low- and modera te-income units. In August 2005 th e Agency entered into an Owner Par ticipation Agreement with the Deve loper that, in exchange for the development of housing units, the
Agency will provide a total of $80 0,000 silent-second mortgages to sixteen moderate-income households. In
addition, under the terms of the Agreement, the Agency assisted in the rehabilitation of four existing very low-income units in fiscal 2006. Interest will begin on the date of the promissory note, but will be forgiven on the fourth anni versary of the date the Deed of Trust recorded at a rate of 20% per year, and principal is due 45 years from the date the Deed of Trust was recorded. A s of June
30, 2022, there were $800,000 of silent second loans outstanding.
I. MIL Aspen Associates, Ltd.
In April 2007, the former Redevelopment Agency entered into an Owner Participation Agreement with MIL Aspen Associates, Ltd. for the development of a 101- unit multi-family project, of which 100 units will be deed-restricted for very low-income households. Under the terms of the Agreement, during fiscal year 2011 the Agency provided a $2,300,000 loan to the Developer. The loan bears 5% interest compounded annually on outstanding principal balance, and is
repayable in April 17, 2037. Upon June 1 of the year following the issuance of the final certificate of occupancy of the project and the first day of each June during the term of the loan, the Developer shall pay 50% of
Surplus Cash generated by the Project, as defined in the Agreement, during the previous calendar year. During the year ended June 30, 2022, in terest of $166,951 was accrued, and as of June 30, 2022, principal and accrued interest totaled $3,333,041.
J. Resources for Community Development
In November 2017, the Housing Authority entered into a development loan agreement with Resources for Community Development for certain predevelopment co sts necessary for the development of a 102-uni t
affordable rental housing project, 355 Sango Court Apartments, of which 101 will be affordable and 1 will be an above moderate income (AMI) managers unit. The unit mix will include 40 units with project based subsidy providing supportive housing for chronically homeless veterans and individuals at or below 30 % AMI, 31 units that will provide permanent housing to households with incomes at or below 30% AMI, and 30 units providing permanent housing to households with incomes at or below 60% AMI. Under the terms of the agreement, the City provided a $147,768 loan to the Developer. The loan bears interest of 3% and is repayable on May 30, 2022. During the year ended June 30, 2022 the Developer made its final principal and interest payments.
K. Sango
Court, L.P.
In May 2019, the Housing Authority entered into a development loan agreement with Sango Court, L.P. for construction of affordable housing at 355 Sango Court Apartments of wh ich 101 will be affordable and 1 will be an above moderate income (AMI) managers un it. Under the terms of the Agreement, during fiscal year 2022 the Agency provided a $6,500,000 loan to the Developer. The loan bears 3% interest compounded annually on outstanding principal bala nce and must be paid on the earlier of: (a) fifty-five (55) years from the date of conversion, or (b) December 31, 2079, or (c) by acceleration of the loan following a default.
During the year ended June 30, 2022, interest of $79,603 was accrued, and as of June 30, 2022, principal and accrued interest totaled $6,579,603.
59 158
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 6 – PROPERTY HELD FOR RESALE OR REDEVELOPMENT
A. General Fund
Pursuant to the terms of a settlem ent agreement between the City, Ec onomic Development Corporation, Housing Authority, Santa Clara County Auditor-Controller, State Controller and other parties, a land parcel was transferred from the Successor Ag ency to the Housing Authority in June 2014. However, that parcel was not subject to housing related provisions and was transferred to the City from the Housing Authority in June 2014.
The land parcel is accounted for at the lower of cost or net realizable value or agreed-upon sales price if a disposition agreement has been made with a developer.
As of June 30, 2022, property totaling $4,200,000 is held by the General Fund.
B. Housing Authority
The former Redevelopment Agency ha d purchased parcels of land as part of its efforts to develop or redevelop blighted properties within the Redevelopment areas. Such land parcels are accounted for at the lower of cost or net realizable value or agreed-upon sales price if a dispositi on agreement has been made with a developer. The City agreed to become th e successor to the Redeve lopment Agency’s housing activities and as a result the City of Milpitas Housing Authority assumed the property held for resale of the Redevelopment Agency’s Housing Reserve Fund as of February 1, 2012.
In fiscal year 2010 the Agency purchased five housing units for $1,503,718 in the Parc Metro Subdivision.
During fiscal year 2011, the Agen cy purchased one additional Parc Me tro Subdivision unit for $305,095, one Centria Subdivision housing un it for $248,056, and four KB Ho me Subdivision housing units for $1,273,892. One of the KB Home Subdivision units with a book value of $374,253 was sold in August 2011.
Two of the KB Home Subdivision units with a book value of $376,795 and $294,921 were sold in December 2012 and February 2013, respectively. Four of the Parc Metro Subdivisio n units were sold in fiscal year 2013, with a total book value of $1,245,559, and one uni t with a book value of $258,160 was sold in fiscal year 2019. The Centria unit was sold in fiscal year 2017 for $296,000. The units were purchased in order to retain them as affordable housing units and are being held for future resale. The remaining units are rented to tenants.
In February 2011, the Agency purchased additional pr operty along South Main Street in the amount of $1,800,000 which is intended to be incorporated into the Midtown Specific Plan for housing development.
The purchase of this property had been funded by a loan from the Ho using Reserve Special Revenue Fund to the Redevelopment Capital Projects Fund, and with the dissolution of the Agency as of February 1, 2012, the State Department of Finance approved the property as a housing asset and the property was transferred to the Housing Authority as the successor housing agency.
As of June 30, 2022, property totaling $2,333,018 is held by the Housing Authority. The Housing Authority is required to develop or sell the properties on or before August 31, 2022.
On July 2022, the Housing Authority has started the Ph ase II of the Environmental Site Assessment of the parcel, in which the Housing Authority has started the development process of the sale of the parcel prior to August 31, 2022. The Housing Authority is currently working with consultant on the appraisal and the parcel was expected to be sold in Spring 2023.
60 159
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 7 – DEVELOPMENT AND TAX SHARING AGREEMENTS
The City and former Redevelopment Agency have en tered into the development agreements below in an effort to provide incentives to develop new businesses, new tax revenues and affordable housing.
A. South Main Senior Lifestyles, LLC.
In August 2009, the former Redevelopment Agency entered into a Disposition and Development Agreement with the South Main Senior Lifestyles, LLC (SMSL) to develop 180 units of “Continuum of Care Senior Housing” (Phase 1 Parcel), of which 63 units will be for very low and low income households, and 207 units of family housing (Phase 2 Parcel) which will be market rate units. In accordance with the terms of the Agreement, the Agency will acquire th e properties and resell them in two phases to the developer prior to construction, subject to certain conditions in the Agreement. In November 2009, the Agency purchased the properties along South Main Street in the amount of $12,443,137. The sales price for the Phase 1 Parcel will be $5,022,129, and the sales price for the Phase 2 Parcel will equal the greater of the fair market value of the Phase 2 Parcel as defined in the Agreement or $7,377,871. In addition, the former Agency’s Housing Reserve Special Revenue Fund was to provide a grant in the amount of $7.7 million to support the development and operation of the Phase 1 Parcel project.
In March 2011, the Economic Development Corporat ion assumed the obligations of the Disposition and Development Agreement and on October 18, 2011, a two year extension to the Agreement was approved to include a more extensive high density residential development plan of sixty-three residential units available at affordable housing cost to income-qualified very low and low income households.
In November 2013, the Housing Authority amended the Disposition and Development Agreement. The amendment states the Authority will convey the pr operties with a carrying value of $12,443,137 to the developer as a grant after certain requirements are fulfilled. In addition, the amendment also eliminates the $7.7 million grant obligation included in the initial agreement. It further amended the number of affordable units from 63 to 48, all at the very low income level for seniors.
In June 2015, the Housing Authority amended the Disposition and Development Agreement to extend the deadline to convey the properties to the developer from November 19, 2015 to June 30, 2017. In April 2017, the Housing Authority amended the Disposition and Development Agreement to extend the deadline from June 30, 2017 to December 31, 2017. On April 5, 2018, the agreement was agai n amended to extend the deadline to the date on which the gr ant deed conveying the Phase 1 Parcel to the developer is recorded. In April 2018, the terms of the agreement were fulfilled and the properties were transferred to the developer.
In February 2018, the City entered into a reimburseme nt agreement with the de veloper to reimburse the developer for the full actual cost of the design and improvement to replace an existing 8-inch sanitary sewer pipe with a 12-inch pipe. As of June 30, 2022, the City has issued a total of $702,252 reimbursements to date.
B. Sales Tax Sharing Agreement
In June 2009, the City entered into a Sales Tax Sharing Agreement with a corporation that provides process control for the semiconductor and related industries. Under the terms of the Agreement, the City agreed to pay the corporation 50% of the calendar year sales and use tax revenues paid by the corporation and collected by the State Board of Equalization for the City that ex ceed the tax base. The tax base is defined in the Agreement as the average amount of annual sales tax increment received by the City from the corporation for calendar years 2006, 2007 and 2008. The agreement terminates in 2025. During the year ended June 30, 2022,
there is no payment of sales tax were made to the corporation during fiscal year 2022. 61 160
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 7 – DEVELOPMENT AND TAX SHARING AGREEMENTS (Continued)
C. Piper Montague Infrastructure Payment Cost Sharing Agreement
In August 2009, the City entered into a four-party agreement with thr ee developers in the Piper/Montague Subdistrict in which the developers agreed to share in the costs of infrastructu re improvements, including street improvements, storm drain installation and a traffic signal, and certain storm water management facilities. Under the terms of the agreement, when one of the developers undertakes a project related to the shared infrastructure improvements or storm water facilities project, that developer receives TASP fee credits equal to the other two developers pro-rata share of the improvements. The other two developers are then to reimburse the City for those TASP fee credits through the payment of the Piper Montague Infrastructure Fee Payment (PMIP), when building permits are issued, as a surcharge to the TASP fee. In the event the developers do not pay the PMIP fees within seven years of the completion date of the improvements, then the City may levy assessments or collect Mello-Roos special taxes from the applicable properties for the applicable share of the improvements. The cost of the shared infrastructure improvements and storm water facilities project is estimated to to tal $9.8 million. If a developer’s TASP fee credits resulting from the installation of the shared infrastru cture exceed its aggregate TASP Fee obligations, the developer is not entitled to a cash payment from the City, but they may be entitled to a credit against other development fees.
The developers have completed the shared infrastructure of $8,838,972 as of June 30, 2022. The balance due from the two developers was $614,491 as of June 30, 2022.
D. Milpitas Station (San Jose) Venture, LLLP
In June 2014, the City entered into a Fee Credit Agreement with Milpitas Station (San Jose) Venture, LLLP, which requires the developer to pay TASP fees of $9,932,643 to defray all or a portion of the improvements and facilities costs associated with the Milpitas Stati on Project. Under the terms of the agreement, the developer will be entitled to reimbursements totaling $1,500,000 for construction costs for roadway improvements, pole relocation improvements, and railroad crossing improvements and a park land fee credit totaling $4,244,486 for the park land dedication to be applied against projected TASP fees. During the year ended June 30, 2022, there is no reimbursements were issued, and total reimbursements of $5,744,486 have been issued to date.
E. Anton Milpitas 730 LLC and 750 LLC
In April 2018, the City entered into a Fee Reimbursement Agreement with Anton Milpitas 750 LLC and Anton Milpitas 730 LLC, which requires the developer to pay TASP fees of $19,351,735 to defray all or a portion of the improvements and facilities costs associated wi th the 730 E. Capitol and 750 E. Capitol apartment complexes. Under the terms of the agreement, the de veloper will be entitled to reimbursements totaling $8,910,221 for construction costs for pa rking and a variety of site impr ovements, including a public park.
During the year ended June 30, 2022, the City issued park improvement credits in the amount of $1,310,498, and a total fee credits of $7,220,719 have been issued to date.
62 161
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 7 – DEVELOPMENT AND TAX SHARING AGREEMENTS (Continued) F. LMC Milpitas Holdings I, LLC and Lennar Homes of California In July 2017, the City entered into a Fee Reimbursement Agreement with LMC Milpitas Holdings I LLC and Lennar Homes of California, which requires the developer to pay TASP fees of $16,029,909 to defray all or a portion of the costs of public parks and public recycled water system. Under the terms of the agreement, the developer will be entitled to reimbursements to taling $4,689,574 for construc tion and design costs for Montague Expressway and East Penitencia Creek. During the year ended June 30, 2022, no reimbursements were issued, and total reimbursements of $
3,720,718 have been issued to date.
NOTE 8 – CAPITAL ASSETS
All capital assets are valued at historical cost or estim ated historical cost if act ual historical cost is not available, except for intangible right to use lease assets, the measurement of which is discussed in Note 10 below. Contributed capital assets are valued at their
estimated acquisition value on the date contributed. The City’s policy is to capitalize all assets with costs exceeding certain minimum thresholds and with useful lives exceeding two years.
The City has recorded all its public domain (infrastructure) capital asse ts, which include landscape, storm, street, and traffic systems.
All capital assets with limited useful lives and the right to use leased assets are required to be depreciated over their estimated useful lives. The purpose of depreciation is to spread the cost of capital assets equitably among all users over the life of these assets. The amount charged to depreciation expense each year represents that year’s pro rata share of the cost of capital assets. Depreciation of all capital assets is charged as an expense against operations each year and the total amount of depreciation taken over the years is reported on the statement of net position as a reduction in the book value of capital assets.
Depreciation is provided using the straight line meth od which means the cost of the asset is divided by its expected useful life in years and the result is charged to expense each year until the asset is fully depreciated.
The general capitalization threshold is $5,000. The City has assigned the useful lives below to capital assets:
Useful Lives
Years
Buildings and improvements 30
Other improvements 20
Machinery and equipment 10
Landscape system 50
Storm system 15-25
Street system 2
5 Traffic system 20
Water system 30-61
Sewer system 5
0 Capacity rights 32
Terrace Gardens, Inc. has assigned the following useful lives to its capital assets: Buildings, 50 years; Building improvements, 10-50 years; and Equipment, 5-7 years. 63 162
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 8 – CAPITAL ASSETS (Continued)
Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase is reflected in the capitalized value of the asset constructed, net of interest earned on the invested proceeds over the same period.
A. Governmental Capital Asset Additions, Retirements and Balances
Balance at Balance at
June 30, 2021 Additions Retirements Transfers June 30, 2022 Capital assets not being depreciated:
Land $84,829,602 $84,829,602
Construction in progress 74,814,974 $22,725,740 ($3,150,411) 94,390,303 Total capital assets not being depreciated 159,644,576 22,725,740 (3,150,411) 179,219,905 Capital assets being depreciated:
Buildings and improvements 173,371,133 173,371,133
Other improvements 30,834,112 3,150,411 33,984,523
Machinery and equipment 48,732,289 977,834 ( $590,665) 49,119,458 Landscape system 30,075,716 39,505 30,115,221
Storm system 74,477,062 74,477,062
Street system 302,388,719 11,381,995 313,770,714
Traffic system 20,215,410 91,304 20,306,714
Total capital assets being depreciated 680,094,441 12,490,638 (590,665) 3,150,411 695,144,825 Less accumulated depreciation for:
Buildings and improvements (93,384,548) (5,468,249) (98,852,797) Other improvements (23,667,053) (874,775) (24,541,828)
Machinery and equipment (36,629,018) (1,644,234) 548,186 (37,725,066) Landscape system (16,478,280) (602,762) (17,081,042)
Storm system (72,973,569) (218,072) (73,191,641)
Street system (216,431,638) (5,682,022) (222,113,660)
Traffic system (16,146,520) (494,718) (16,641,238)
Total accumulated depreciation (475,710,626) (14,984,832) 548,186 (490,147,272) Net capital assets being depreciated 204,383,815 (2,494,194) (4 2,479) 3,150,411 204,997,553 Governmental activities capital assets, net $364,028,391 $20,231,546 ($42,479) $384,217,458
64 163
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 8 – CAPITAL ASSETS (Continued)
Governmental activities construction in progress comprised the following at June 30, 2022:
Total Actual Unexpended
Project Budget Costs Budget
Alviso Adobe Renovation $8,159,272 $7,955,783 $203,489
McCandless Park 12,154,820 8,393,326 3,761,494
Sports Fields Turf Rehabilitation Program 251,000 142,461 108,539 Sandalwood Park Renovation 475,000 239,347 235,653
Sports Center Skate Park 6,325,000 5,828,083 496,917
Minor Sports Courts Rehabilitation 560,000 392,332 167,668 McCarthy Blvd Landscape 1,032,256 537,614 494,642
Fire Station Improvements 1,550,000 945,625 604,375
City Building Improvement 3,315,000 2,815,269 499,731
Sinclair LMD Improvements 260,750 110,552 150,198
City Building, Exterior Painting 600,000 165,092 434,908 PD Communications 3,155,000 2,917,600 237,400
Replacement Fire Station Alert System 393,000 344,420 48,580 City Building Roofing 900,000 251,377 648,623
Police Records Management 1,599,721 502,874 1,096,847
Citywide Park Playground 2,053,497 1,716,210 337,287
Annual Sidewalk, Curb & Gutter Repair 2,176,840 1,786,225 390,615 Technology Projects 1,800,000 1,303,319 496,681
Midtown Street Light 300,000 264,037 35,963
2017-19 Finance System Upgrade 1,250,000 995,842 254,158 Annual Tree Replacement Program 419,000 321,966 97,034
Fire Station #2 Replacement 15,820,000 11,192,603 4,627,397 Fire Stations Security 200,000 200,000
Facilities Water Fixtures Retrofit Project 670,000 670,000 Community and Senior Center Energy Resilience Project 5,107,597 3,798,678 1,308,919 Storm Drain System Rehabilitation 1,190,000 937,924 252,076 Dempsey Road Storm Drain 1,660,000 230,962 1,429,038
Bart Project-Storm Improvement 33,000 33,000
Trash Removal Devices 500,000 487,188 12,812
Flap Gate Replacement 100,000 28,899 71,101
Storm Drain System Rehab 17-19 1,058,410 802,572 255,838 Storm Supervisory Control & Data Acquisition 2,416,590 1,020,000 1,396,590 Light Rail Median Landscaping 5,996,000 3,946,346 2,049,654 Second SCVWD Water Reservoir & Pump Station 200,000 825 199,175 Lower Penitencia Creek 1,825,000 352,184 1,472,816
Montague Pedestrian Overcrossing at Piper Drive 8,750,000 7,844,931 905,069 SCVWD Second Water Supply Turnout #2 100,000 643 99,357 Transit Area Police Substation 310,000 310,000
(Rmb) TASP Linear Trails 3,270,000 499,261 2,770,739
(Rmb) Trade Zone/Montague Park - North 3,100,000 1,122,237 1,977,763 S. Milpitas Blvd. Veh. Bridge at Penitencia 5,700,000 430,329 5,269,671 Montague Ped. Overcrossing at Penitencia 1,010,000 560,940 449,060 (Rmb) TASP Recycled Water Distribution 200,391 200,391
SCVWD Zone 1 Pressure Red. Valve 100,000 100,000
Trade Zone/Montague Park - Central 600,000 23,519 576,481 Total construction in progress $131,158,052 $94, 390,303 $36,767,749
65 164
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 8 – CAPITAL ASSETS (Continued)
B.
Business-Type Capital Asset Additions, Retirements and Balances Balance at Balance at
June 30, 2021 Additions Retirem ents June 30, 2022
Capital assets not being depreciated:
Land $1,133,079 $1,133,079
Construction in progress 18,838,905 $9,759,213 ($137,725) 28,460,393 Total capital assets not being depreciated 19,971,984 9,759,213 (137,725) 29,593,472 Capital assets being depreciated:
Dis tribution facilities 81,197,041 81,197,041
Water Service lines 17,067,611 17,067,611
Sewer lines 87,500,145 87,500,145
Capacity rights 102,703,605 12,516,041 115,219,646
Total capital assets being depreciated 288,468,402 12,516,041 300,984,443 Less accum ulated depreciation for:
Dis tribution facilities (55,054,668) (1,192,283) (56,246,951) Water Service lines (7,589,151) (369,778) (7,958,929)
Sewer lines (52,348,585) (1,420,580) (53,769,165)
Capacity rights (30,683,369) (3,379,284) (34,062,653)
Total accumulated depreciation (145,675,773) (6,361,925) (152,037,698) Net capital assets being depreciated 142,792,629 6,154,116 (137,725) 148,946,745 Business-type activities capital assets, net $162,764,613 $15,913,329 ($137,725) $178,540,217 66 165
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 8 – CAPITAL ASSETS (Continued)
Business-type activities construction in progress comprised the following at June 30, 2022:
Total Actual Unex pended
Project Budget Costs Budget
Sanitary Sewer Condition Assessment Program $283,472 $265,527 $17,945 BART Project-Sewer Improvement 243,323 229,730 13,593
Sewr Pump Station Rehabilitation Program 352,000 286,330 65,670 Minor Sewer Projects 163,000 89,335 73,665
Sanitary Supervisory Control & Data 316,600 116,250 200,350 Main Lift Stattion Odor Emmissions Control 2,450,000 948,069 1,501,931 2,625,000 410,134 2,214,866
Well Upgrade Program 13,975,000 6,282,842 7,692,158
Water System Seismic Improvement 4,887,951 973,862 3,914,089 Hydrant Replacement 476,360 439,218 37,142
Abel St Pipeline Extension 940,000 44,777 895,223
Dempsey Road Water Line 7,857,772 1,240,321 6,617,451
Automated Water Meter 14,047,700 11,975,290 2,072,410
BART Project-Water Improvements 2,503,920 1,820,243 683,677 Supervisory Control & Data 6,516,600 2,772,651 3,743,949 Minor Water Projects 950,000 414,472 535,528
Water Leak Detection 631,474 151,342 480,132
$59,220,172 $28,460,393 $30,759,779
Sanitary Sewer Cathodic Protection Im provem ent
C. Terrace Gardens, Inc.’s Capital Assets
The following is a summary of Terrace Gardens Inc.’s changes in capital assets for the fiscal year ended December 31, 2021:
Balance
December 31, 2020 Additions
Balance
December 31, 2021
Capital assets not being depreciated:
Land $1,
565,277 $1,565,277
Total capital assets not being depreciated 1,565,277 1,565,277 Capital assets being depreciated:
Buildings 12,107,935 12,107,935
Furniture 381,201 $59,888 441,089
Office equipment 65,096 7,120 72,216
Improvements 2,742,284 60,844 2,803,128
Total capital assets being depreciated 15,296,516 127,852 15,424,368 Less accumulated depreciation (9,651,514) (379,078) (10, 030,592) Net capital assets being depreciated 5,645,002 (251,226) 5,393,776 Total capital assets, net $7,210,279 ($251,226) $6,959,053 67 166
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 8 – CAPITAL ASSETS (Continued)
D. Depreciation Allocation
Depreciation expense is charged to functions and programs based on their usage of the related assets. The amounts allocated to each function or program are as follows:
Governmental Activities:
General Government $2,314,600
Public Works 7,435,745
Engineering 2,418,583
Recreation and Community Services 1,253,969
Police 80,908
Fire 290,095
Internal Service Fund 1,190,932
Total Governmental Activities $14,984,832
Business-Type Activities:
Water Utility $1,562,061
Sewer Utility 4,799,864
Total Business-Type Activities $6,361,925
Discretely Presented Component Unit:
Terrace Gardens, Inc. $379,078
E. Sewer Treatment Capacity Rights
The City has a contract with the San Jose/Santa Clara Wastewater Treatme nt Plant, known as the Regional Wastewater Facility (RWF), which gives Milpitas and other tributary agencies rights to a percentage of the capacity of their sewage treatment facilities. The contract terminates in 2031 and requires the City to pay its share of operations, capital expenses and debt service on the treatment plant. The City also pays capital costs based on allocated flow capacity rights of 14.25 million gallons per day or about 8.53% of the total plant capacity, 167 million gallons per day. The City has capitalized its share in the amount of $115,219,645. The operation and maintenance costs are calculated based upon actual sewage flow and strengths. In fiscal year 2022, the City’s operation and maintenance share was approximately 5.458% of the total RWF operations.
68 167
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 9 – LONG-TERM DEBT
The City generally incurs long-term debt to finance projects or purchase assets which will have useful lives equal to or greater than the related debt.
A. Current Year Transactions and Balances
The City’s debt issues and transactions are su mmarized below and discussed in detail thereafter.
Original Balance Balance Current
Issue Am ount June 30, 2021 Retirem ents June 30, 2022 Portion Gov ernmental Activ ities Debt - Direct Borrow ing:
2020 G eneral Fund Lease Rev enue Bond s
4.0%, due June 1, 2041 $18,445,000 $18,445,000 $275,000 $ 18,170,000 $470,000 Plus: Unam ortized bond prem ium 3,473,516 173,675 3,299,841 $18,445,000 $21,918,516 $448 ,675 $21,469,841 $470,000
Business-type Activities Debt
Wastew ater Rev enue Refund ing Bond s, 2017 Series
2.0% - 5.0%, due November 1, 2026 $4,725,000 $3,310,000 $495, 000 $2,815,000 $515,000 Plus: Unam ortized bond prem ium 425,135 70,856 354,279 Wastew ater Rev enue Bond s, 2019 Series
4.0% - 5.0%, due November 1, 2049 29,840,000 29,395,000 485,000 28,910,000 505,000 Plus: Unam ortized bond prem ium 5,129,099 183,182 4,945,917 Water Rev enue Bond s, 2019 Series
4.0% - 5.0%, due June 1, 2049 17,210,000 16,765,000 300,000 16,465,000 315,000 Plus: Unam ortized bond prem ium 2,857,990 102,071 2,755,919 Total Business-Type Activities $51,775,000 $57,882,224 $1,636 ,109 $56,246,115 $1,335,000
B. 2020 General Fund Lease Revenue Bonds
On November 10, 2020, the Milpitas Municipal Financing Authority issued the 2020 Lease Revenue Bonds (Capital Projects) in the original principal amount of $18,445,000 to provide funds to finance a portion of the Fire Station No. 2 Replacement project and variety of energy impr ovement projects. The Bonds bear interest rates of 4.0 %. Interest is payable every June 1 and December 1 beginning on June 1, 2021. Principal on the bonds will be payable on June 1 beginning on June 1, 2022 through 2037, followed by a term bond which will be due June 1, 2041. The Bonds were structur ed with a par optional redemption date of June 1, 2030. Bonds maturing on June 1, 2041 are subject to mandatory redemption. 69 168
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 9 – LONG-TERM DEBT (Continued)
C. Wastewater Revenue Refunding Bonds, Series 2017
On December 4, 2017, the City issued Wastewater Re
venue Refunding Bonds, Series 2017, in the original
principal amount of $4,725,000 to provide funds to prepay an Installment Sale Agreement between the City and the Milpitas Public Financing Au thority, thereby defeasing and prep aying all of the Certificates of Participation 2006 Series A and to pay the cost of issuing the 2017 Bonds. The 2006 COPs were called in January 2018. Principal on the 2017 Bonds is payable annually and interest is payable semi-annually through 2027. The 2017 Bonds contain a provision that in an event of default, the Trustee may declare the principal of the bonds, together with all accrued interest at th e date of default, immedi ately due and payable, or exercise any and all rights and remedies available to it under applicable law, including the right to enforce from the City all payments due on the 2017 Bonds, and the City will pay all reasonable fees and expenses incurred by the Trustee and those of its attorneys.
The 2017 Bonds are pledged by net revenues from the City’s Sewer System.
D. Wastewater Revenue Bonds, Series 2019
On October 22, 2019, the Milpitas Municipal Financing Authority issued Wastewater Revenue Bonds, Series 2019, in the original principal amount of $29,840,000 to provide funds for certain improvements to the City’s wastewater system.
The Bonds bear interest rates of 4.0% to 5.0%. Interest is payable every May 1 and November 1 beginning on May 1, 20 20. Principal on the bonds will be payable on November 1 beginning on November 1, 2020 through 2039, followed by a term bond which will be due on November 1, 2049. The Bonds were structured with a par optional redemption date of May 1, 2029. Bonds maturing on May 1, 2049 are subject to mandatory redemption. The Bonds co ntain a provision that in an event of default, the Trustee may declare the principal of the bonds, together with all accrued interest at the date of default, immediately due and payable, or exer cise any and all rights and remedies available to it under applicable law, including the right to enforce from the City all payments due on the Bonds, and the City will pay all reasonable fees and expenses incurred by the Trustee and those of its attorneys.
The 2019 Bonds are pledged by net revenues from the City’s Wastewater System and are on parity with the 2017 Bonds. For the fiscal year 2022 , net revenues amounted to $12,219,359 which represented coverage of 5.02 over the $2,435,875 debt service of both bond issues.
E. Water Revenue Bonds, Series 2019
On October 24, 2019, the Milpitas Municipal Financi ng Authority issued Water Revenue Bonds, Series 2019, in the original principal amount of $17,210,000 to provide funds to the City for certain improvements to the City’s water system.
The Bonds bear interest of 4.0% to 5.0% an d interest is payable every June 1 and December 1 beginning on June 1, 2020. Principal on the bonds will be payable on June 1 beginning on June 1, 2020 through 2039, followed by term bonds that are due June 1, 2044 and June 1, 2049 respectively.
The Bonds were structured with a par optional redemption date of June 1, 2029. Bonds maturing on June 1, 2044 and June 1, 2049 are subject to mandatory redemption. 70 169
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 9 – LONG-TERM DEBT (Continued)
The Bonds contain a provision that in an event of default, the Trustee may declare the principal of the bonds, together with all accrued interest at the date of default, immediately due and payable, or exercise any and all rights and remedies available to it und er applicable law, including the right to enforce from the City all
payments due on the Bonds, and the City will pay all reasonable fees and expenses incurred by the Trustee and those of its attorneys.
The Bonds are collateralized by net revenues from the Ci ty’s Water System. For the fiscal year 2022, net revenues amounted to $8,139,618 which represented coverage of 7.80 over the $1,044,050 debt service.
F. Debt
Service Requirements
Annual debt service requirements are shown below:
Governmental Activities Business-Type Activities
Year Ending Total Total Total Total
June 30 Principal Interest Principal Interest
2023 $470,000 $726,800 $1,335,000 $2,143,325
2024 520,000 708,000 1,395,000 2,081,400
2025 570,000 687,200 1,460,000 2,013,650
2026 625,000 664,400 1,530,000 1,939,275
2027 735,000 639,400 1,605,000 1,861,400
2028-2032 4,515,000 2,703,400 5,755,000 8,422,625
2033-2037 5,495,000 1,725,200 7,340,000 6,808,250
2038-2042 5,240,000 534,000 9,330,000 4,796,350
2043-2047 11,460,000 2,664,100
2048-2050 6,980,000 424,800
18,170,000 $8,388,400 48,190,000 $33,155,175
Plus: Unamoritized bond premium 3,299,841 8,056,115
$21,469,841 $56,246,115
Revenue Bonds Revenue Bonds
71 170
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 10 – LEASES
A. Policies
A lease is defined as a contract th at conveys control of the right to use another entity’s nonfinancial asset (the underlying asset) as specified in the contract fo r a period of time in an exchange or exchange-like transaction. Examples of nonfinanc ial assets include buildings, land, vehicles, and equipment. The City recognizes lease receivable or liabilities with an initial, individual value of $500,000 or more for all funds, except for Capital Project Funds whic h the threshold is set lower at $3 00,000, based on the future lease payments remaining at the start of the lease.
Lessor
The City is a lessor for noncancellable leases of buildings and facilities. The City recognizes a lease receivable and a deferred inflow of resources in the government‐wide and fund financial statements.
At the commencement of a lease, the City initially me asures 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 deferr ed inflow of resources is initially measured as the initial amount of the lease receivable, adjusted for lease payments r eceived at or before the lease commencement date. Subsequently, the deferred inflow of resources is recognized as revenue over the life of the lease term.
Key estimates and judgments include ho w the City determines (1) the discou nt rate it uses to discount the expected lease receipts to present value, (2) lease term, and (3) lease receipts as follows:
The City uses bond interest rate as the discount rate for leases. The lease term includes the noncancellable period of the lease. Lease receipts included in the measurement of the lease receivable is composed of fixed payments from the lessee.
The City monitors changes in circumstances that wo uld require a remeasurement of its lease, and will remeasure the lease receivable and deferred inflows of re sources if certain changes occur that are expected to significantly affect the amount of the lease receivable.
Lessee
The City is a lessee for miscellaneous leases. If the l ease is over the threshold, the City will recognizes a lease liability and an intangible right ‐to‐use lease asset (lease asset) in the government ‐wide financial statements.
At the commencement of a lease, City initially measures the lease liability at the present value of payments expected to be made during the l ease term. Subsequently, the lease lia bility is reduced by the principal portion of lease payments made. The lease asset is in itially measured as the initial amount of the lease liability, adjusted for lease payments made at or before the lease commencement date, plus certain initial direct costs. Subsequently, the lease asset is amortized on a straight‐line basis over its useful life.
72 171
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 10 – LEASES (Continued)
Key estimates and judgments related to leases include how City determines (1) the discount rate it uses to discount the expected lease payments to present value, (2) lease term, and (3) lease payments as follows:
The City uses the interest rate charged by the less or as the discount rate. When the interest rate charged by the lessor is not provided, City generally uses bond interest rate as the discount rate for leases.
The lease term includes the noncancellable period of the lease.
Lease payments included in the measurement of the lease liability are composed of fixed payments and purchase option price that City is reasonably certain to exercise.
The City monitors changes in circumstances that wo uld require a remeasurement of its lease and will remeasure the lease asset and liability if certain changes occur that are expected to significantly affect the amount of the lease liability.
Lease assets are reported with other capital assets an d lease liabilities are reported with long-term debt on the Statement of Net Position.
As of June 30, 2022, the City has no leases over the threshold subject to GASB 87 as a lessee.
B. Leases Receivable (City as Lessor)
The summary for the leases details and balances related to leases receivable and deferred inflows of resources recorded in the General Fund as of June 30, 2022 were:
Lessee Property Location
Orginal
Lease Date
Original
Term
(Years)
Extension
(Years)
Expiration
Date
Including
Options
Monthly
Revenue
as of
June 30,
2022
Lease
Receivable
Balance at
June 30, 2022
Deferred
Inflow of
Resources at
June 30, 2022
Capital Telecom Acquisition LLC
Fire Station No. 1 Grounds,
777 So. Main Street,
Milpitas, CA 95035
6/6/2012 15 25 6/6/2052 $1,975 $857,239 $835,559
American Tower HWY680 on CALAVERAS 2/1/2019 5 20 2/1/2044 2,648 753,902 736,378 Milpitas Auto P roperties LLC Freeway Sign on 950
Thompson 8/17/2010 10 30 8/17/2050 9,463 2,403,742 2,385,086 Clear Channel Advertising display on the
property 7/30/2013 30 30 7/30/2073 14,013 9,358,925 9,123,267 Total $28,099 $13,373,808 $13,080,290
73 172
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 10 – LEASES (Continued)
The future principal and interest lease receivables as of June 30, were as follows:
For the Year
Ended June 30 Principal Interest Total
2023 $55,726 $284,335 $340,061
2024 63,046 283,077 346,123 2025 70,691 281,660 352,351 2026 78,671 280,077 358,748 2027 86,999 278,321 365,320 2028-2032 572,949 1,358,653 1,931,602 2033-2037 840,746 1,284,098 2,124,844 2038-2042 1,167,924 1,178,003 2,345,927 2043-2047 1,340,561 1,041,233 2,381,794 2048-2052 1,424,429 890,578 2,315,007 2053–2057 1,115,304 761,822 1,877,126 2058–2062 1,500,273 623,523 2,123,796 2063–2067 1,962,597 440,283 2,402,880 2068–2072 2,515,447 203,192 2,718,639 2073–2077 578,445 6,734 585,179
Totals $13,373,808 $9,195,589 $12,861,777
Fire Station No. 1 grounds
As shown in the summary table, the City leases a part of the Tower Leases Area in 777 South Main Street to Capital Telecom Acquisition LLC. The original lease terms were 15 year s with a 25 year extension. As of June 30, 2022, the leases had 30 years remaining. The City recognized $6,250 in lease revenue and $16,785 in interest revenue during the current fiscal year related to these leases. Also, the City has deferred inflows of resources associated with these leases that will be recognized as revenue over the lease term.
HWY 680 on CALAVERAS
As shown in the summary table, the City leases a portion of the parcel in 1325 E. Calaveras Blvd. to American Tower. The original lease terms were 5 years with a 20 year extension. As of June 30, 2022, the leases had 22 years remaining. The City recognized $14,022 in lease revenue and $14,871 in interest revenue during the current fiscal year related to these leases . Also, the City has deferred inflows of resources associated with these leases that will be recognized as revenue over the lease term.
Freeway Sign on 950 Thompson
As shown in the summary table, the City leases the Pi ercey Toyota dealership site at 950 Thompson Street to Milpitas Auto Properties LLC. The original lease terms were 10 years with a 30 year extension. As of June 30, 2022, the leases had 28 years remaining. The City recognized $66,021 in lease revenue and $47,537 in interest revenue during the current fiscal year related to these leases. Also, the City has deferred inflows of resources associated with these leases that will be recognized as revenue over the lease term.
Advertising display
As shown in the summary table, the City leases parcels for purpose of advertising to be visible from the US interstate 880 to Clear Channel. The original lease terms were 30 years with a 30 year extension. As of June 30, 2022, the leases had 51 years remaining. The City recognized $125,088 in rental revenue related to these leases. Also, the City has deferred inflows of resources associated with these leases that will be recognized as revenue over the lease term.
74 173
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 11 – NET POSITION AND FUND BALANCES
Governmental fund balances represen t the net current assets of each f und. Net current assets generally represent a fund’s cash, receivables and
deferred outflows of resources, less its liabilities and deferred inflows of resources. Portions of a fund’s balance may be restricted, committed or assigned for future expenditure.
Net Position is measured on the full accrual basis while Fund Balance is measured on the modified accrual basis, as explained in Note 1D.
A. Net Position
Net Position is the excess of all assets and deferred outflows of resources over all liabilities and deferred inflows of resources. Net Position is divided into three captions. Th ese captions apply only to Net Position, which is
determined only for proprietary funds and at the Government-wide level, and are described below:
Net Investment in Capital Assets and Capacity Rights, describes the portion of Net Position which is represented by the current net book value of the City’s capital assets and capacity rights, less the outstanding balance of any debt issued to finance these assets.
Restricted describes the portion of Net Position which is restricted as to use by the terms and conditions of agreements with outside parties, governmental regulations, laws, or other restrictions which the City cannot unilaterally alter. These principa lly include developer fees received for use on capital projects and redevelopment funds restricted for community development activities.
Unrestricted describes the portion of Net Position which is not restricted as to use.
B. Fund Balances
Governmental fund balances represent the net current assets of each fund. Ne t current assets generally represent
a fund’s cash, receivables and deferred outflows of res ources, less its liabilitie s and deferred inflows of resources.
The City’s fund balances are classified based on spending constraints imposed on the use of resources. For programs with multiple funding sour ces, the City prioritizes and expe nds funds in the following order:
Restricted, Committed, Assigned, and Unassigned. E ach category in the following hierarchy is ranked according to the degree of spending constraint:
Nonspendable represents balances set aside to indicate items do not represent available, spendable resources even though they are a component of assets. Assets not expected to be converted to cash, such as prepaids, notes receivable, and property held for resale are include d. However, if proceeds realized from the sale or collection of nonspendable assets
are restricted, committed or assi gned, then nonspendable amounts are required to be presented as a component of the applicable category.
Restricted fund balances have external restrictions im posed by creditors, grantors, contributors, laws, regulations, or enabling legislation wh ich requires the resources to be us ed only for a specific purpose.
Encumbrances and nonspendable amounts subject to restrictions are included along with spendable resources.
Committed fund balances have constraints imposed by resolution of the City Council which may be altered only by formal action of the City Council. Encumb rances and nonspendable amounts subject to council commitments are included along with spendable resources. 75 174
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 11 – NET POSITION AND FUND BALANCES (Continued)
Assigned fund balances are amounts constrained by the City’s intent to be used for a specific purpose, but are neither restricted nor committed. Intent is expres sed by the City Council and may be changed at the discretion of the City Council. This category includ es: encumbrances; nonspendables, when it is the City’s intent to use proceeds or collections for a specific purpose; and resi dual fund balances, if any, of Special Revenue, Capital Projects and Debt Service Funds which have not been restricted or committed.
Unassigned fund balance represents residual amounts that have not been restricted, committed, or assigned.
This includes the residual General Fund balance and residual fund deficits , if any, of other governmental funds.
Detailed classifications of the City’s Fund Balances, as of June 30, 2022, are below:
Major Major
Special Capital Projects
Revenue General
Fund Street Transit Area Government Other
General Housing Improvement Impact Fee Projects Governmental Fund Balance Classifications Fund Authority Fund Fund Fund Funds Total Nonspendable:
Loans receivable
Prepaids, materials, supplies
and deposits $665,851 $2,123 $24,597 $692,571
Property held for resale 4,200,000 4,200,000
Subtotal Nonspendable 4,865,851 2,123 24,597 4,892,571
Restricted for:
Programs and Maintenance $8,291,315 4,424,694 12,716,009 Housing and community development 39,699,787 3,815,126 43,514,913 Law enforcement services 114,368 114,368
Solid waste reduction and services 1,043,767 1,043,767
Assessment district services 2,328,230 2,328,230
Hetch-Hetchy ground lease 1,486,366 1,486,366
Community planning 302,764 302,764
Community benefits 364,546 364,546
Affordable housing 5,105,433 5,105,433
Affordable housing unrestricted 2,544,174 2,544,174
Park improvement projects 8,347,609 8,347,609
Storm drain projects 6,019,699 6,019,699
General government projects $2,189,972 2,189,972
Transit area capital projects $60,933,021 60,933,021
Subtotal Restricted 39,699,787 8,291,315 60,933,021 2,189,972 35,896,776 147,010,871 Committed to:
PERS stabilization 5,096,052 5,096,052
Artificial turf replacement 1,670,000 1,670,000
Technology replacement 2,000,000 2,000,000
Facilities replacement 7,000,000 7,000,000
Subtotal Committed 15,766,052 15,766,052
Assigned to:
Uninsured claims payable 2,348,962 2,348,962
Public art projects 1,066,287 1,066,287
Contracts 2,516,910 2,516,910
General government capital projects 23,383,887 23,383,887 Other assigned 1,248,591 1,248,591
Subtotal Assigned 6,114,463 23,383,887 1, 066,287 30,564,637 Unassigned:
General Fund
Contingency reserve 18,542,436 18,542,436
Budget stabilization 18,542,436 18,542,436
Future deficit 1,452,576 1,452,576
ERAF reserve 1,181,451 1,181,451
Unassigned 319,035 319,035
Subtotal Unassigned 40,037,934 40,037,934
Total fund balances $66,784,300 $39,701,910 $8,291,315 $60,933 ,021 $25,573,859 $36,987,660 $238,272,065
76 175
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 11 – NET POSITION AND FUND BALANCES (Continued)
C. Fund Balance Policies
The City’s Fiscal Policies, which ar e annually approved as part of the adoption of the budget, prescribes the City’s fund balance requirements and targets.
1) The City will fund the following reserves as follows with any General Fund audited year end operating surplus after the General Fund Contingency Reserve and General Fund Budget Stabilization Reserve requirements are met and pension budgetary surplu s are allocated to the PERS Rate Stabilization Reserve:
• Part I
◦ Contingency Reserve (Policy Statement #41)
◦ General Fund Budget Stabilization Reserve (Policy Statement #42) • Part II (any remaining balance)
◦ If confirmed by actuary, 20% to PERS Rate Stabilization Reserve (Policy Statement #43) ◦ If not confirmed by actuary, 0% to PERS Rate Stabilization Reserve (Policy Statement #43); • Part III (any remaining balance)
◦ Artificial Turf Replacement ($230,000) (Policy Statement #54) • Part IV (any remaining balance)
◦ 20% to the General Government Capital Improvement Fund (Policy Statement #56); ◦ 30% to Storm Drain Fund
◦ 10% to the Affordable Housing Community Benefit Fund (Fund 216); ◦ 10% to Transportation/Transit (Fund 310)
◦ 20% to Technology Replacement Fund; and
◦ 10% Unassigned
2) The City will maintain a Contingency Reserve of at least 16.67% or two months of the annual operating expenditures in the General Fund to be used only in the case of dire need as a result of physical or financial emergencies and disasters as determined by the City Council. The City Council will set the reserve amount annually after the results of the pr ior fiscal year’s Annual Comprehensive Financial Report (ACFR) are known. For the year ended June 30, 2022, the reserve is set at $18.5 million and classified in the unassigned fund balance.
3) The City will maintain a General Fund Budget Stab ilization Reserve with a target of 16.67%, or two months, of annual operating expenditures. The purpose of this reserve is to provide budget stability when there are fluctuations that result in lower than projected revenues and or higher than projected expenditures that cannot be rebalanced within exis ting budget resources in an y given fiscal year. This reserve is intended to provide a buffer, or bridge funding, to protect against reducing service levels when these fluctuations occur. This reserve will be funded only after General Fund Contingency Reserve requirements have been met. The City Council will set the reserve amount annually after the results of the prior fiscal year’s Annual Comprehensive Financial Report (ACFR) are known. For the year ended June 30, 2022, the reserve is set at $18.5 million and classified in the unassigned fund balance.
77 176
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 11 – NET POSITION AND FUND BALANCES (Continued)
4) The City will maintain in the Pension Section 115 Internal Service Fund a Public Employees Retirement (PERS) Rate Stabilization Reserve to be funded by 20% of any General Fund or Enterprise Funds annual operating surpluses. The City’s actuary has determined that the General Fund portion of the Unfunded Actuarial Liability for the Miscellaneous Retirement Plan is 84.9% and for the Water and Sewer Utility Enterprise Funds portion of the Unfunded Actuarial Liability for the Miscellaneous Retirement Plan is
8.5% and 6.6%, respectively. The General Fund portion of the contribution to the PERS Rate Stabilization Reserve shall only be funded after General Fund Contingency Reserve and the General Fund Budget Stabilization Reserve requirements have been met. The Utility Funds’ portion of the contribution to the PERS Rate Stabilization Reserv e shall be consistent with the General Fund contributions and only be funded after the Capita l Reserve and Rate Stab ilization Reserve (RSR) requirements in the Water and Sewer utility funds have been met. If confirmed by City’s actuary that contributions are advised for that respective year , then additionally, 20% of any General Fund or Enterprise Funds annual operating surpluses shall be allocated to the PERS Rate Stabilization Reserve.
5) The City will maintain a capital reserve for artificial turf replacement w ith a target of $2 million and an annual set-aside amount of at least $230,000 until the target is reached. This re serve shall be used to accrue funding for the normal depreciation expense of the City’s artificial turf fields over their useful life. Eligible uses of this reserve may include the repl acement of the City’s artificial turf fields so as to eliminate large spikes in capital expenses and normalize annual costs.
6) Annually, the City will endeavor to transfer $300,000 from the General Fund to the Technology Replacement Fund set aside in a reserve with a target of $5 million. This reserve shall be used to accrue funding for technology projects such as the major rehabilitation or replacement of the City’s technology infrastructure or new technology initiatives.
7) The City will maintain a capital reserve for Fac ilities Replacement with a target of $10 million. This reserve shall be used to accrue funding for major rehabilitation or replacement of City facilities (buildings/structures). Eligible uses of this reserve may include both the direct funding of public facility improvements and the servicing of related debt.
8) The City will maintain a Storm Drain replacemen t reserve to replace and repair storm drain pump stations. The City will endeavor to transfer $500,000 annually from the General Fund to the Storm Drain Fund for this purpose.
9) The City will maintain a General Liability and Wo rkers’ Compensation Claims Reserve of $2 million in the General Fund, which will be reviewed for adjustments annually.
10) Other reserves designated in the General Fund for investment portfolio market gain and uninsured claims payable will be calculated adjusted annually at appropriate levels.
78 177
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 11 – NET POSITION AND FUND BALANCES (Continued)
11) The City will maintain capital rese rves in the Water and Sewer utilit y enterprise funds to provide for future capital projects and unanticip ated emergencies, such as water main break repairs, pump station repairs. The City will attempt to maintain a capital reserve of approximately 30% of the annual operating and maintenance expenses for the Water utility fund and 25% of the annual operating and maintenance expenses for the Sewer utility fund. The City Counc il will set the reserve amounts annually after the results of the prior fiscal year’s Annual Compre hensive Financial Report (ACFR) are known. For the year ended June 30, 2022, the capital reserve for the Water Operating Fund is set at $8.0 million and for the Sewer Operating Fund at $3.1 million.
12) The City will maintain a Rate Stabilization Reserv e (RSR) in the Water and Sewer utility enterprise funds with a goal of at least 16.67% or two months of the respective annual operating expenditures after the Capital Reserve requirements have been met. The RSR shall be used to mitigate the effects of occasional shortfalls in revenue or unanticipated expenditures that cannot be re-balanced within existing budgeted resources in any given fiscal year. Revenue shortfalls may result from a number of events such as weather factors (wet weather or drought events and natural disasters), increased water conservation, and poor regional economic conditions. The Rate St abilization Reserves should be used to assist in smoothing out revenue variability re sulting from these factors and ensu re that adequate resources are available during such times that mi ght otherwise require large rate in creases to utility customers. The City Council will set the reserve amounts annually af ter the results of the prior fiscal year’s Annual Comprehensive Financial Report (ACFR) are known. The RSR funding will be phased within five years, or sooner, as part of the fiscal year end closing process. Thereafter, the replenishment of these reserves may also be incorporated into the annual Adopted Operating Budget if resources are available to replenish the reserves.
13) The City will maintain $2 million infrastructure replacement funds in both the Water and Sewer Utility Enterprise Funds. The goal is to accumulate at least $2 million a year from each utility fund to set-aside for replacement of infrastructure as the infrastructure reaches the end of its useful life.
14) The City will maintain a capital reserve in the Equipment Management Internal Service Fund to enable the timely replacement of vehicles and depreciab le equipment as cost. The City will maintain a minimum fund balance of at least 30% of the repl acement costs for equipmen t accounted for in this fund.
D. Net Investment In Capital Assets
The balances related to Net Investment in Capital Assets are comprised of the following as of June 30, 2022:
G overnmental Business-Type
Activities Activities Total
Capital Asset, Net of Accumulated Depreciation $384,217,458 $178,540,217 $562,757,675 Less Capital Debt (21,469,841) (56,246,115) (77,715,956) Plus Unspent Bond Proceeds 2,261,425 4,909,668 7,171,093 $365,009,042 $127,203,770 $492,212,812
79 178
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 11 – NET POSITION AND FUND BALANCES (Continued)
F. Restatement
The City implemented the provisions of Government al Accounting Standards Bo ard Statement No. 87 – Leases during the year ended June 30, 2022. As a result, the City restated and increased beginning balances of General Fund leases receivable and deferred inflows of resources by $13,405,519 as of July 1, 2021. The net effect on General Fund beginning fund balance was zero. See the Leases disclosure in Note 10.
NOTE 12 – PENSION PLANS
A. General Information
Plan Descriptions – All qualified permanent and probationary em ployees are eligible to participate in the City’s separate Safety (police and fire) and Miscellaneous (all other) Plans, agent multiple-employer defined benefit pension plans administered by the Californi a Public Employees’ Retirement System (CalPERS), which acts as a common investment and administrative agent for its participating member employers.
Benefit provisions under the Plans ar e established by State statute and City resolution. CalPERS issues publicly available reports that include a full descript ion of the pension plans re garding benefit provisions, assumptions and membership information that can be found on the CalPERS website.
Benefits Provided – CalPERS provides service retirement and di sability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 10 years of service. The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law. 80 179
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 12 – PENSION PLANS (Continued)
T
he Plans’ provisions and benefits in effect at June 30, 2022, are summarized as follows:
Miscellaneous
Classic Tier I Classic Tier II PEPRA
Hire date
Prior to
October 9, 2011
After
October 9, 2011
On or after
January 1, 2013
Benefit formula 2.7% @ 55 2.0% @ 60 2.0% @ 62
Benefit vesting schedule 5 years service 5 years service 5 years service Benefit payments monthly for life monthly for life monthly for life Retirement age 50 - 55 50 - 67 52 - 67
Monthly benefits, as a % of eligible compensation 2.0% - 2.7% 1.092% - 2.418% 1.0% - 2.5% Required employee contribution rates 8% 7% 6.25%
Required employer contribution rates 10.290% 10.290% 10.290% Required Unfunded Actuarial Liability Contribution $7,079,203 Safety
Classic Tier I Classic Tier II PEPRA
Hire date
Prior to
April 8, 2012
After
April 8, 2012
On or after
January 1, 2013
Benefit formula 3% @ 50 3% @ 55 2.7% @ 57
Benefit vesting schedule 5 years service 5 years service 5 years service Benefit payments monthly for life monthly for life monthly for life Retirement age 50 50 - 55 50 - 57
Monthly benefits, as a % of eligible compensation 3% 2.4% - 3% 2.0% - 2.7% Required employee contribution rates 9% 9% 11%
Required employer contribution rates 19.750% 19.750% 19.750% Required Unfunded Actuarial Liability Contribution $9,505,147 Beginning in fiscal year 2016, CalPERS collects employ er contributions for the Plan as a percentage of
payroll for the normal cost portion as noted in the rates above and as a dollar amount for contributions toward the unfunded liability (UAL). The dollar amounts are billed on a monthly basis or the City can elect a lump sum payment option. The City’s required contributions for the unfunded liability in the Miscellaneous and Safety Plans for the year ende d June 30, 2022 were $7,079,203 and $9,505,147, respectively, which were made under the lump sum payment option.
Employees Covered – The following employees were covered by the benefit terms for each Plan as of the most recent actuarial valuation date of June 30, 2020 and measurement date of June 30, 2021:
Miscellaneous Safety
Classic
Tier I
Classic
Tier II
PEPRA
Tier
Classic
Tier I
Classic
Tier II
PEPRA
Tier
Inactive employees or beneficiaries currently receiving benefits 404 248 Inactive employees entitled to but not yet receiving benefits 355 28 Activ e employees 112 11 109 97 7 56
Total 871 11 109 373 7 56
81 180
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 12 – PENSION PLANS (Continued)
Contributions – Section 20814(c) of the Ca lifornia Public Employees’ Retirement Law requires that th e
employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Funding contributions for 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 fi nance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrue d liability. The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees.
In May 2021, the City established a Section 115 irrevocable trust to set aside funds to meet the City’s future pension contributions or unfunded liabilities. The Trust is owned and m onitored by the City but externally managed by investment professionals. In June 2021, the City transferred $35.4 million to the Trust, and as of June 30, 2022, the City reported the account balanc e of the trust of $30,537,3 46. This amount has been reported as cash and investments in the Pension Section 115 Internal Service Fund.
B. Net
Pension Liability
The City’s net pension liability for each Plan is measured as the total pension liability, less the pension plan’s fiduciary net position. The net pension liability of each Plan is measured as of June 30, 2021, using an annual actuarial valuation as of June 30, 2020 rolled forward to June 30, 2021 using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is shown below.
Actuarial Assumptions
– The total pension liabilities as of the June 30, 2021 measurement date were determined using the following actuarial assumptions:
Miscellaneous (1) Safety (1)
Valuation Date June 30, 2020 June 30, 2020
Measurement Date June 30, 2021 June 30, 2021
Actuarial Cost Method Entry-Age Normal Cost Method Entry-Age Normal Cost Method Actuarial Assumptions:
Discount Rate 7.15% 7.15%
Inflation 2.50% 2.50%
Payroll Growth 2.75% 2.75%
Projected Salary Increase (2) (2)
Investment Rate of Return 7.15% (3) 7.15% (3)
Mortality Derived using CalPERS Membership Data
for all Funds (4)
Derived using CalPERS Membership Data
for all Funds (4)
Post Retirement Benefit Increase The lesser of contract COLA or 2.50% until Purchasing Power Protection Allowance
Floor on Purchasing Power applies, 2.50%
thereafter
The lesser of contract COLA or 2.50% until
Purchasing Power Protection Allowance
Floor on Purchasing Power applies, 2.50%
thereafter
(1
) A
ctuarial assumptions are the same for all benefit tiers (Classic Tier I, Classic Tier II, and PEPRA) (2) D
epending on age, service and type of employment
(3) N
et of pension plan investment expenses, including inflation (4) T
he mortality table used was developed based on CalPERS' specific data. The probabilities of mortality are based on the 2017 C
alPERS Experience Study for the period from 1997 to 2015. Pre-retirement and post-retirement morta lity rates include 15 years of projected mortality improvement using 90% of Scale MP-2016 published by the Society of Actuaries. For more details on this table, please refer to the CalPERS Experience Study and Review of Actuarial Assumptions report from December 2017 that can be found on the CalPERS website.
82 181
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 12 – PENSION PLANS (Continued)
The underlying mortality assumptions and all other actuarial assumptions used in the June 30, 2020 valuation were based on the results of a December 2017 actuarial experience study for the period 1997 to 2015. Further details of the Experience Study can be found on the CalPERS website at www.calpers.ca.gov.
Discount Rate – The discount rate used to measure the total pension liability for each Plan was 7.15%. The projection of cash flows used to determine the discount rate for each Plan assumed that contributions from all plan members in the Public Employees Retirement Fund (PERF) will be made at the current member contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based on those assumptions, each Plan’s fiduciary net position was projected to be available to make all projected future benefit pa yments of current plan members for all plans in the PERF. Therefore, the long-term expected rate of return on plan invest ments was applied to all pe riods of projected benefit payments to determine the total pension liability for each Plan.
The long-term expected rate of return on pension pl an investments was determined using a building-block method in which expected future re al rates of return (expected return s, net of pension plan investment expense and inflation) are developed for each major asset class.
In determining the long-term expected rate of return, CalPERS took into account both short-term and long- term market return expectations as well as the expected pension fund cash flows. Using historical returns of all the funds’ asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11+ years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the rounded single equivalent expected return that arrived at the same present value of benefits for cash fl ows as the one calculated using both short-term and long-term returns.
The expected rate of return was then set equal to the single equivalent rate calculated above and adjusted to account for assumed administrative expenses.
The table below reflects the long-term expected real rates of return by asset class.
Asset Class (a)
Assum ed
Asset
Allocation
Real Return
Years 1 - 10(b)
Real Return
Y ears 11+(c)
Public Equity 50.0% 4.80% 5.98%
Fixed Income 28.0% 1.00% 2.62%
Inflation Assets 0.0% 0.77% 1.81%
Private Equity 8.0% 6.30% 7.23%
Real Assets 13.0% 3.75% 4.93%
Liquidity 1.0% 0.00% -0.92%
Total 100.0%
(a) In the CalPERS Annual Com prehensive Financial Report, Fix ed Incom e is included in G lobal Debt Securities; Liquidity is included in Short-Term Investm ents; Inflation Assets are included in both G lobal Equity Securities and G lobal Debt Securities. (b) An expected inflation of 2.00% used for this period. (c) An expected inflation of 2.92% used for this period.
83 182
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 12 – PENSION PLANS (Continued)
C. Changes in the Net Pension Liability
The changes in the Net Pension Liability for each Plan follows:
Increase (Decrease)
Total Pension
Liability
Plan Fiduciary
Net Position
Net Pension
Liability/(As s et)
Balance at June 30, 2020 (M easurement Date) $255,070,236 $177,436,680 $77,633,556 Changes in the year:
Service cost 4,262,309 4,262,309
Interest on the total pension liability 18,046,275 18,046,275 Differences between actual and expected experience 1,466,976 1,466,976 Changes in assumptions
Changes in benefit term s
Contribution - employer 8,925,250 (8,925,250)
Contribution - employee 1,998,174 (1,998,174)
Net Plan to Plan Resource Movement
Net investment income 40,453,566 (40,453,566)
Adm inistrative ex penses (177,248) 177,248
Other Miscellaneous Incom e/(Ex pense)
Benefit paym ents, including refunds of em ployee contributions (12,545,846) (12,545,846) Net changes 11,229,714 38,653,896 (27,424,182)
Balance at June 30, 2021 (M easurement Date) $266,299,950 $216,090,576 $50,209,374 Increase (Decrease)
Total Pension
Liability
Plan Fiduciary
Net Position
Net Pension
Liability/(As s et)
Balance at June 30, 2020 (M easurement Date) $377,384,390 $241,844,813 $135,539,577 Changes in the year:
Service cost 7,266,789 7,266,789
Interest on the total pension liability 26,671,979 26,671,979 Differences between actual and expected experience 2,106,663 2,106,663 Changes in assumptions
Changes in benefit term s
Contribution - employer 13,294,083 (13,294,083)
Contribution - employee 2,834,054 (2,834,054)
Net Plan to Plan Resource Movement
Net investment income 55,066,837 (55,066,837)
Adm inistrative ex penses (241,588) 241,588
Other Miscellaneous Incom e/(Ex pense)
Benefit paym ents, including refunds of em ployee contributions (20,179,552) (20,179,552) Net changes 15,865,879 50,773,834 (34,907,955)
Balance at June 30, 2021 (M easurement Date) $393,250,269 $292,618,647 $100,631,622 G rand Totals - Both Plans $659,550,219 $508,709,223 $150,840,996 Miscellaneous Plan
Safety Plan
84 183
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 12 – PENSION PLANS (Continued)
Sensitivity of the Net Pension Liability to Changes in the Discount Rate – The following presents the net pension liability of the City for each Plan, calculated using the discount ra te for each Plan, as well as what the City’s net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower or 1-percentage point higher than the current rate:
Miscellaneous Safety
1% Decrease 6.15% 6.15%
Net Pension Liability $84,335,623 $151,936,586
Current Discount Rate 7.15% 7.15%
Net Pension Liability $50,209,374 $100,631,622
1% Increase 8.15% 8.15%
Net Pension Liability $21,864,019 $58,203,655
Pension Plan Fiduciary Net Position – Detailed information about eac h pension plan’s fiduciary net position is available in the separately issued CalPERS financial reports.
D.
Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions For the year ended June 30, 2022, the City recognized pension expense of $3,635,318 for the Miscellaneous Plan and $6,923,337 for th e Safety Plan, for total pension expense of $10,558,655. At June 30, 2022, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:
Deferred Outflows Deferred Inflows
of Resources of Resources
Pension contributions after the measurement date $9,799,723 Differences between actual and ex pected ex perience 1,091,405 C hanges in assum ptions
Net differences between projected and actual earnings
on plan investm ents ($20,211,386)
Total $10,891,128 ($20,211,386)
Miscellaneous Plan
General Fund typically has been used in prior years to liquidate pension liabilities. 85 184
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 12 – PENSION PLANS (Continued)
Deferred Outflows Deferred Inflows
of Resources of Resources
Pension contributions after the measurement date $14,258,505 Differences between actual and expected experience 3,195,025 Changes in assumptions
Net differences between projected and actual earnings
on plan investm ents ($27,578,356)
Total $17,453,530 ($27,578,356)
G rand Totals - Both Plans $28,344,658 ($47,789,742)
Safety Plan
$24,058,228 reported as deferred outflows of reso urces related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liab ility in the year ended June 30, 2023. Other amounts reported as deferred outflows
of resources and deferred inflows of resources related
to pensions will be recognized as pension expense as follows:
Y ear Ended
June 30 Miscellaneous Safety
2023 ($4,274,209) ($5,226,650)
2024 (4,435,353) (5,678,389)
2025 (4,842,383) (6,083,317)
2026 (5,568,036) (7,394,975)
($19,119,981) ($24,383,331)
Annual Am ortization
E. Public Agency Retirement System
The Omnibus Budget Reconciliation Act of 1990 (OBRA) mandates that public sector employees who are not members of their employer’s existing retirement system as of January 1, 1992 be covered by either Social Security or an alternative plan.
The City’s part-time, seasonal and temporary employees are covered under the Public Agency Retirement System (PARS), a defined contribution plan, which requires these employees to contribute 6% and the City to contribute 1.5% of the employees pay plus administration costs.
The City’s required contributions of $23,419 and th e employee’s required contributions of $93,671 were made during the fiscal year ending June 30, 2022.
86 185
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 13 – EMPLOYEE BENEFITS
A. Deferred Compensation Plan
City employees may defer a portion of their compen sation under a City sponsored Deferred Compensation Plan created in accordance with Inte rnal Revenue Code Section 457. Un der this Plan, participants are not taxed on the deferred portion of thei r compensation until distributed to them; distributions may be made only at termination, retirement, death or in an emergency defined by the Plan.
The laws governing deferred compensation plan assets require plan assets to be held by a Trust for the exclusive benefit of plan participants and their beneficiaries. Since the assets held under these plans are not the City’s property and are not subj ect to City control, they have been excluded from these financial statements.
B. Retiree Medical Benefits
The liability for explicit subsidy be nefits for the dependents of City retirees were previously included together with other City plan OPEB liabilities. However, the City was also contributing directly toward the cost of these dependent benefits by making negotiated contributions determined as a percentage of payroll for active employees in each bargaining group, effectiv ely contributing twice. Beginning with fiscal year 2020, the total OPEB liability for th ese dependent fund benefits is no w being determined and reported separately. Further discussion is included in Note 13C and 13D.
The City provides postretirement health care benefi ts through its defined benefit Retiree Medical Benefits Agent Multiple-employers Plan to employees who retire in good standing from the City after attaining the age of 50 and to certain employees who retire due to disability. As of June 30, 2022, there were 310 participants receiving these health care benefits.
The City joined the California Employers’ Retiree Benefit Trust (CERBT), an agent multiple-employer plan administered by CALPERS, consisti ng of an aggregation of single-e mployer plans. The CERBT issues a publicly available financial report that includes financial statements and required supplementary information. That report may be obtained from the California Public Employees’ Retirement System, CERBT, P.O. Box 942703, Sacramento, CA 94229-2703.
87 186
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 13 – EMPLOYEE BENEFITS (Continued)
In order to qualify for postemployment medical and dent al benefits an employee must retire from the City and maintain enrollment in one of City’s eligible heal th plans. In addition, th ere are eligibility rules and contribution requirements defined in the Memorandum of Understanding (MOU) with each employee group.
In the MOUs, the Benefit Cap is defined as not more than the single medical premium rate paid by the City for active employees, and the Retiree Cap is 15% abov e the single Kaiser medical premium rate. The eligibility rules for each MOU are summarized below, starting with benefits for retirees, followed by benefits for dependents.
Medical Benefit for Retirees:
E ligibility Rule
(Continuous Years
Hire/Retirement Date Date of Retirement of Serv ice) City Contribution Requirement Before June 30, 1989 n/a PEMHCA Minimum Only
Less than 5 PEMHCA Minimum Only
At least 5 Any employee only medical premium rate
Less than 5 PEMHCA Minimum Only
At least 5 Benefit Cap
Less than 5 PEMHCA Minimum Only
5 but less than 9 Up to 25% of the Benefit cap
9 but less than 14 Up to 50% of the Benefit Cap
14 b u t less than 19 Up to 75% of the Benefit Cap
At least 19 Up to 100% of the Benefit Cap
Less than 5 PEMHCA Minimum Only
At least 5 Benefit cap
Less than 5 PEMHCA Minimum Only
5 but less than 9 Up to 25% of the Benefit Cap
9 but less than 14 Up to 50% of the Benefit Cap
14 b u t less than 19 Up to 75% of the Benefit Cap
At least 19 Up to 100% of the Benefit Cap
Before January 1, 1989 n/a PEMHCA Minimum Only
Less than 5 PEMHCA Minimum Only
At least 5 Any employee only medical premium rate
Less than 5 PEMHCA Minimum Only
At least 5 Benefit cap
Less than 5 PEMHCA Minimum Only
5 but less than 10 Up to 25% of the Benefit Cap
10 b u t less than 15 Up to 50% of the Benefit Cap
15 b u t less than 20 Up to 75% of the Benefit Cap
At least 20 Up to 100% of the Benefit Cap
Professional /
Technical
(PROT ECH)
Unrepresented
Miscellaneous and
Fire*
After August 31, 2002
After July 1, 1990 but before S eptember 1, 2002
Before July 1, 1995
After June 30, 1995 After August 31, 2002
AnyBefore July 1, 1995
After June 30, 1995 Any
Mid-Management
and Confidential
(LIUNA) (Began
9/2003)
After June 30, 1995
After July 1, 1990 but before S eptember 1, 2002
After August 31, 2002
Before July 1, 1995
Any
In the grid above and on the following pages, “Benefit Cap” refers to the single medical premium rate paid by the City for active employees,
currently Kaiser. “Retiree Cap” refers to 115% of the Benefit Cap. Upon reaching Medicare, the City contributes up to 100% of the employee only Medicare rates. “Vesting” percentages still apply.
88 187
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 13 – EMPLOYEE BENEFITS (Continued)
Medical benefits for retirees (continued):
E ligibility Rule
(Continuous Years
Hire/Retirement Date Date of Retirement of Serv ice) City Contribution Requirement Before January 1, 1989 n/a PEMHCA Minimum Only
Less than 5 PEMHCA Minimum Only
At least 5 Any employee only medical premium rate
Less than 5 PEMHCA Minimum Only
At least 5 Retiree Cap
Less than 5 PEMHCA Minimum Only
5 but less than 10 Up to 25% of the Retiree Cap
10 but less than 15 Up to 50% of the Retiree Cap
15 but less than 20 Up to 75% of the Retiree Cap
At least 20 Up to 100% of the Retiree Cap
Before January 1, 1990 n/a PEMHCA Minimum Only
Less than 1 PEMHCA Minimum Only
At least 1 Any employee only premium
Less than 1 PEMHCA Minimum Only
1 but less than 10 50% of any employee only premium
At least 10 100% of any employee only premium
Less than 1 PEMHCA Minimum Only
1 but less than 10
Up to 50% of the lesser of the Retiree Cap and the
premium rate
At least 10
Up to 100% of the lesser of the Retiree Cap and the
premium rate
Less than 1 PEMHCA Minimum Only
1 b u t less than 10 Up to 25% of the Benefit Cap
10 b u t less than 15 Up to 50% of the Benefit Cap
15 b u t less than 20 Up to 75% of the Benefit Cap
At least 20 Up to 100% of the Benefit Cap
Less than 1 PEMHCA Minimum Only
1 but less than 10 25% of the lesser of the Retiree Cap and the premium rate
10 but less than 15 50% of the lesser of the Retiree Cap and the premium rate
15 but less than 20 75% of the lesser of the Retiree Cap and the premium rate
At least 20 100% of the lesser of the Retiree Cap and the premium rate
Before February 21, 2007
After February 20, 2007
After December 31, 1994
Fire S afety
(IAFF)
Before January 1, 1995
After December 31, 1989 but before January 1,
1995
After December 31, 1994 but before February
21, 2007
After February 20, 2007
Before July 1, 1995
After June 30, 1995
Unrepresented
Police ONLY*
After December 31, 1988 but before July 1, 2003
After June 30, 2003
Any
89 188
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 13 – EMPLOYEE BENEFITS (Continued)
Medical benefits for retirees (continued):
E ligibility Rule
(Continuous Years
Hire/Retirement Date Date of Retirement of Service) City Contribution Requirement Before January 1, 1989 n/a PEMHCA Minimum Only
Less than 5 PEMHCA Minimum Only
At least 5 Any employee only medical premium rate
Less than 5 PEMHCA Minimum Only
At least 5 Up to the Retiree Cap
Less than 1 PEMHCA Minimum Only
1 b u t less than 9 25% of any employee only premium
9 b u t less than 14 50% of any employee only premium
14 but less than 19 75% of any employee only premium
At least 19 100% of any employee only premium
Less than 1 PEMHCA Minimum Only
1 b u t less than 9 Up to 25% of the Retiree Cap
9 b u t less than 14 Up to 50% of the Retiree Cap
14 but less than 19 Up to 75% of the Retiree Cap
At least 19 Up to 100% of the Retiree Cap
Before July 16, 1989 n/a PEMHCA Minimum Only
Less than 5 PEMHCA Minimum Only
At least 5 Any employee only medical premium rate
Less than 5 PEMHCA Minimum Only
At least 5 Benefit Cap
Less than 1 PEMHCA Minimum Only
1 b u t less than 10 Up to 25% of the Benefit Cap
10 but less than 15 Up to 50% of the Benefit Cap
15 but less than 20 Up to 75% of the Benefit Cap
At least 20 Up to 100% of the Benefit Cap
Before July 1, 1996 n/a PEMHCA Minimum Only
Less than 5 PEMHCA Minimum Only
At least 5 Any employee only medical premium rate
Less than 5 PEMHCA Minimum Only
At least 5 Benefit Cap
Less than 5 PEMHCA Minimum Only
5 but less than 9 Up to 25% of the Benefit Cap
9 b u t less than 14 Up to 50% of the Benefit Cap
14 but less than 19 Up to 75% of the Benefit Cap
At least 19 Up to 100% of the Benefit Cap
After November 26, 2007
After June 30, 1996 and before November 27,
2007Before June 30, 1995
After June 29, 1995 After November 27, 2007
Before July 1, 1996
After July 17, 1989 but before March 19, 2003
After March 18, 2003
Any
Employee
Association
(MEA)
After June 30, 1996
After June 30, 2003
Before July 1, 2003
After June 30, 2003
Before January 1, 1996
Police
(MPOA)
After December 31, 1995
After December 31, 1988 but before July 1, 2003
Sup er v iso r s
(MS A) (Ended June,
30, 2012)
90 189
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 13 – EMPLOYEE BENEFITS (Continued)
Medical benefits for dependents:
Group Date of Hire Date of Retirement
Minimum Years of
Continuous Service
City Contribution for Dependent Medical
Premiums 1
Before July 1, 1995 After December 4, 2006 At least 5 Up to 100% of family/dependent premium 5 but less than 9 Up to 25% of the family/dependent premium 9 but less than 14 Up to 50% of the family/dependent premium 14 but less than 19 Up to 75% of the family/dependent premium At least 19 Up to 100% of the family/dependent premium
Before July 1, 1995 After January 1, 2007 At least 5 Up to 100% of family/dependent premium 5 but less than 9 Up to 25% of the family/dependent premium 9 but less than 14 Up to 50% of the family/dependent premium 14 but less than 19 Up to 75% of the family/dependent premium At least 19 Up to 100% of the family/dependent premium
Before January 1, 1996 After June 30, 2003 At least 5 100% of family/dependent premiums 5 but less than 9 Up to 25% of the family/dependent premium 9 but less than 14 Up to 50% of the family/dependent premium 14 but less than 19 Up to 75% of the family/dependent premium At least 19 Up to 100% of the family/dependent premium Before January 1, 1996 After September 4, 2007 At least 5 100% of family/dependent premiums 5 but less than 9 Up to 25% of the family/dependent premium 9 but less than 14 Up to 50% of the family/dependent premium 14 but less than 19 Up to 75% of the family/dependent premium At least 19 Up to 100% of the family/dependent premium Before January 1, 1996 After June 30, 2018 At least 5 100% of family/dependent premiums 5 but less than 9 Up to 25% of the family/dependent premium 9 but less than 14 Up to 50% of the family/dependent premium 14 but less than 19 Up to 75% of the family/dependent premium At least 19 Up to 100% of the family/dependent premium Unrepresented
(UNREP‐Misc)4 After December 31, 1995 After June 30, 2018 Professional /
Technical
(PROTECH) After June 30, 1995 After December 4, 2006
Mid‐Management
and Confidential
(LIUNA) After June 30, 1995 After January 1, 2007
Unrepresented
(UNREP‐Police)2 After December 31, 1995 After June 30, 2003 Unrepresented
(UNREP‐Fire)3 After December 31, 1995 After September 4, 2007 1 Family/Dependent Medical Premium is active employee Single+1 OR Family medical premium rate less active employee Single medical premium rate. 2 If the UNREP‐Police fund is depleted, MPOA will provide funding for the dependent benefits. 3 The Fire Chief is ineligible for dependent fund benefits. 4 The Fire Chief is eligible for dependent fund benefits in UNREP Misc group. 91 190
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 13 – EMPLOYEE BENEFITS (Continued)
Medical benefits for dependents (continued):
Group Date of Hire Date of Retirement
Minimum Years of Continuous
Ser v ic e
City Contribution for Dependent Medical
Premiums
1 5 but less than 9 50% of family/dependent medical premiums At least 10 100% of family/dependent medical premiums
5 but less than 9 Up to 25% of the family/dependent premium 9 but less than 14 Up to 50% of the family/dependent premium 14 but less than 19 Up to 75% of the family/dependent premium At least 19 Up to 100% of the family/dependent premium Before January 1, 1996 After June 30, 2003 At least 5 100% of family/dependent premiums 5 but less than 9 Up to 25% of the family/dependent premium 9 but less than 14 Up to 50% of the family/dependent premium 14 but less than 19 Up to 75% of the family/dependent premium At least 19 Up to 100% of the family/dependent premium
Police (MPOA)
After December 31, 1995 After June 30, 2003
1 Family/Dependent M edical Premium is active employee Single+1 OR Family medical premium rate less active employee Single medical premium rate. 5 The amounts paid for dependents are adjusted to keep the fund viable. Currently, the IAFF dependent fund pays the following amo unts:
-
$300 per month for 1 dependent
-
$500 per month for two or more dependents
Fire Safety (IAFF) 5
Before January 1, 1995
After February 19, 2007
After December 31, 1994
After February 19, 2007
C. Net
OPEB Liability
Funding Policy and Contributions – The City’s policy is to prefund these benefits by accumulating assets with CERBT discussed above pursuant to the City’s annual budget approved by Council. For the year ended June 30, 2022, the City’s contributions to the Plan were $1,757,265.
Employees Covered by Benefit Terms – Membership in the plan consisted of the following at the measurement date of June 30, 2021:
Active em ployees 387
Inactive em ployees or beneficiaries currently
receiving benefit payments 310
Inactive em ployees entitled to but not yet
receiving benefit payments 93
Total 790
92 191
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 13 – EMPLOYEE BENEFITS (Continued)
Actuarial Methods and Assumptions – The City’s net OPEB liability was measured as of June 30, 2021 and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation dated July 1, 2021, that was rolled forward using standard update procedures to determine the total OPEB liability as of June 30, 2021, based on the following actuarial methods and assumptions:
Actuarial As s umptions
Valuation Date June 30, 2021
Measurement Date June 30, 2021
Actuarial Cos t Method Entry Age Normal Cos t, level percent of pay Actuarial As s umptions :
Discount Rate 6.15%
Inflation 2.50%
Salary Increase 3.00%
Investm ent Rate of Return 6.15%
Mortality Rate MacLeod Watts Scale of 2022 applied generationally Healthcare Trend Rate 5.80% grading down to 3.9% for years 2076 and thereafter
The underlying mortality assumptions were based on the mortality table published by CalPERS in their 2017 study, adjusted to back out 15 years of Scale MP 2016 to central year 2015 and all other actuarial assumptions used in the July 1, 2019 valuation are based on based on the result of a June 30, 2019 actuarial experience study for the period from 1997 to 2015, except for a different basis used to project future mortality improvements.
The long-term expected rate of return on OPEB plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The City’s accumulated assets are allocated using one of three diversified allocation strategies offered by CERBT. The target allocation for eac h major asset class using Strategy 2 are summarized in the following table:
Target
Asset Class Allocation
Global Equities 49.0%
Fixed Income 23.0%
Global Real Estate (REITs) 20.0%
Treasury Inflation Protected Securities 5.0%
Commodities 3.0%
Total 100.0%
Discount Rate
Explicit Subsidy Liability – The City expects the trust assets to yield 6.15 over the long term, based on information published by CalPERS as of the June 30, 2 021 valuation date. Net contributions to the trust in recent years have been set at a level to prefund the explicit portion of benefits, wi th no advance funding of the implicit subsidy liability. Accordingly, the discount rate used for the City’s ex plicit OPEB liability is
6.15%.
93 192
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 13 – EMPLOYEE BENEFITS (Continued)
Implicit Subsidy Liability – The City expects to continue to fund the implicit subsidy liability on a pay-as-
you-go basis. Therefore, the Fide lity 20 year AA General Obligation Mu nicipal Bond Index was used in determining the discount rates used to calculate the implicit subsidy liability. As of the end of the Measurement Period, the discount rates for the Fidelity index were 2.45%.
Changes in Net OPEB Liability – The changes in the net OPEB liability follows:
Total OPEB Plan Fiduciary Net OPEB
Liability Net Position Liability/(Asset)
(a) (b) (a ) - (b
)
Balance at June 30, 2020 $59,101,946 $51,435,598 $7,666,348 Changes Recognized for the Measurement Period:
Service Cost 1,503,917 1,503,917
Interest on the total OP EB liability 4,100,155 4,100,155 Changes in benefit terms
Differences between expected and actual experience
Changes of assumptions 4,971,305 4,971,305
Contributions from the employer 1,743,593 (1,743,593)
Net investment income 14,164,474 (14,164,474)
Other Expenses
Plan Experience (3,161,213) (3,161,213)
Administrative expenses (19,480) 19,480
Benefit payments (3,221,642) (3,221,642)
Net changes 4,192,522 12,666,945 (8,474,423)
Balance at June 30, 2021 (Measurement Date) $63,294,468 $64,102,543 ($808,075) Incr ea se (Decr ea se)
The benefit payments and refunds include implied subsidy benefit payments in the amount of $1,088,216.
Sensitivity of the Net OPEB Liability to Changes in the Discount Rate and Healthcare Cost Trend Rates – The following presents the net OPEB liability of the City, as well as what the City's net OPEB 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 discount rate:
Net OP EB Liability/(Asset)
Discount Rate
Discount Rate -1% (6.15%) Discount Rate +1%
$7,267,498 ($808,075) ($7,494,198)
94 193
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 13 – EMPLOYEE BENEFITS (Continued)
The following presents the net OPEB liability of the City, as well as what the City's net OPEB liability would be if it were calculated using healthcare cost trend rates that are 1-percentage-point lower or 1-percentage-point higher than the current healthcare cost trend rates:
Net OPEB Liability/(Asset)
Healthcare Cost
Trend Rates
1% Decrease (5.40%-4.00%) 1% Increase
($8,139,926) ($808,075) $8,193,223
D. Dependent Fund Post Employment Bene fit (OPEB) Plan (Total OPEB Liability)
Plan Description – The City provides continuation of medical coverage to its retiring employees and their eligible dependents, through its defined benefit Reti ree Medical Benefits Agent Multiple-employers plan.
Pursuant to various bargaining agreements with different employee groups, the City contributes a percent of total payroll toward the cost of medical coverage for the eligible dependents of retirees. The City does not define the eligibility for or amount of any such benefits paid, nor is it legally obligated to make any payments to these dependents. The extent of the City’s obligation is to make the negotiated contributions to the funds.
However, the City has determined that a liability for the projected cost of these benefits must be reported in its financial statements in accordance with current accounting standards. No assets are accumulated in a trust that meets the criteria in paragraph 4 of Governmental Accounting Standards Board Statement No. 75.
Employees Covered by Benefit Terms – Membership in the plan consisted of the following at the measurement date of June 30, 2021:
Active employees 387
Inactive employees or beneficiaries currently
receiving benefit payments 310
Inactive employees entitled to but not yet
receiving benefit payments 93
Total 790
Actuarial Methods and Assumptions – The Union Dependent Funds’ total OPEB liability was measured as of June 30, 2021 and the total OPEB liability was determined by an actuarial valuation dated June 30, 2021, that was rolled forward using standard update procedures to determine the total OPEB liability as of June 30, 2021 based on the following actuarial methods and assumptions:
95 194
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 13 – EMPLOYEE BENEFITS (Continued)
Changes in Total OPEB Liability – The changes in the total OPEB liability follows:
Increase (Decrease)
Total OPEB
Liability
(a)
Balance at June 30, 2021 $32,212,961
Changes Recognized for the Measurement Period:
Service Cost 1,402,597
Interest on the total OPEB liability 810,987
Changes in benefit terms
Differences between expected and actual experience
Changes of assumptions 2,591,371
Contributions from the employer
Net investment income
Other Expenses
Plan Experience (1,465,027)
Administrative expenses
Benefit payments (1,028,064)
Net changes 2,311,864
Balance at June 30, 2021 (Measurement Date) $34,524,825 Sensitivity of the Total OPEB Liability to Changes in the Discount Rate and Healthcare Cost Trend Rates
The following presents the total OPEB liability of the City, as well as what the City's total OPEB liability would be if it were calculated using a discount rate that is 1-percentage-point lower (2.13%) or 1- percentage point higher (4.13%) than the current discount rate:
Net OPEB Liability/(Asset)
Discount Rate
1.92%
$40,059,699 $34,524,825 $30,041,294
Discount Rate -1% Discount Rate +1%
The following presents the total OPEB liability of the City, as well as wh at the City's total OPEB liability would be if it were calculated using healthcare cost trend rates that are 1-percentage-point lower or 1- percentage-point higher than the current healthcare cost trend rates:
Net OPEB Liability/(Asset)
Healthcare Cost
Trend Rates
(5.80% - 3.90%)
$29,769,786 $34,524,825 $40,576,360
1% Decrease 1% Increase
96 195
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 13 – EMPLOYEE BENEFITS (Continued)
E. OPEB Expenses and Deferred Outflows/Inflows of Resources Related to OPEB For the year ended June 30, 2022, the City recognized Retiree Medical Benefits OPEB Plan and Dependent Fund OPEB Plan recognized expense of ($3,027,536) and $2,756,170 respectively, for total OPEB expense of ($271,366). At June 30, 2022, the Retiree Medical Benefi ts OPEB plan and Union Dependent Funds reported
deferred outflows and inflows of resources related to OPEB from the following sources:
Deferred Outflows Deferred Inflows
of Resources of Resources
Employer contributions made subsequent to the measurement date $1,757,265 Differences between actual and expected experience ($8,549,943) Changes of assumptions 4,214,638 (4,889,297)
N
et differences between projected and actual earnings on plan investments (7,473,477)
Total $5,971,903 ($20,912,717)
Deferred Outflows Deferred Inflows
of Resources of Resources
Employer contributions made subsequent to the measurement date $1,012,052 Differences between actual and expected experience ($1,293,277) Cplan investments 4,548,899
Total $5,560,951 ($1,293,277)
Grand Total, Both Plans $11,532,854 ($22,205,994)
Retiree Medical Benefits OPEB Plan
Dependent Fund OPEB Plan
$2,769,317 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the OPEB liability in the year ended June 30, 2023. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized as part of OPEB expense as follows:
Ye a r
Ended June 30 Retiree Medical Benefits Plan Dependent Fund 2023 ($4,870,916) $551,586
2024 (4,754,353) 551,586
2025 (4,554,513) 551,586
2026 (2,932,171) 551,586
2027 256,830 551,586
Thereafter 157,044 497,692
Total (16,698,079) 3,255,622
Annual Am ortization
General Fund has been primarily used in prior years to liquidate OPEB liabilities. 97 196
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 13 – EMPLOYEE BENEFITS (Continued)
F. Accrued Vacation an d Sick Leave Liabilities
Employees accrue vacation up to certain maximums, ba sed on employee classification. Employees may elect to be paid a portion of their vacation at various times according to the applicable memorandum of understanding. Sick leave may be accumulated without limit. Vested sick leave may be paid upon separation from service in good standing and is based on a vesting schedule determined by years of service.
The City measures and adjusts the liab ility for vacation and sick leave annually at its fiscal year end. During the year ended June 30, 2022, sick leave benefits payable decreased by $107,716 and vacation benefits payable decreased by $439,546. For all governmental funds, amounts expected to be paid out for permanent liquidation are recorded as fund liability; the long-term portion is recorded in the Statement of Net Position.
The changes of the Accrued Vacation and Sick Leave Liabilities and the allocation of each liability among the departments are as follows:
Accrued V acation Sick Leave
G overnm ental Business-Type G overnm ental Business-Type Activities Activities Activities Activities
Balance as of June 30, 2021 $6,600,398 $448,456 $2,281,370 $203,632 Additions 2,441,894 285,723 1,730,179 135,374
Payments and adjustments (2,901,758) (265,405) (1,838,222) (135,047) Balance as of June 30, 2022 $6,140,534 $468,774 $2,173,327 $203,959 General Government $673,940 $15,243
Building 213,029
Public Works 365,930 238,320
Engineering 323,403 87,650
Planning 160,611
Recreation 183,587 25,051
Police 2,898,029 621,188
Fire 1,190,002 1,170,417
Water Utility $272,470 $178,622
Sewer Utility 196,304 25,337
Internal Service 132,003 15,458
Total $6,140,534 $468,774 $2,173,327 $203,959
Long-Term Portion:
Governmental activities $3,492,608 $1,247,026
Business-type activities $102,202 $100,958
Total long term portions $3,492,608 $102,202 $1,247,026 $100,958 Current Portion:
Governmental activities $2,647,926 $926,301
Business-type activities $366,572 $103,001
Total current portions $2,647,926 $366,572 $926,301 $103,001
Accrued Vacation and Sick Leave are liquidated by the fund that has recorded the liability. The long-term portion of governmental activities compensated absences is liquidated primarily by the General Fund. 98 197
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 14 – RISK MANAGEMENT
A. Risk Pool
The City participates in the Pooled Liability Assu rance Network Joint Powers Authority (PLAN JPA), a joint powers authority established to provide liability insurance coverage, claims and risk management, and legal defense to its participating members. PLAN JPA provides $5,000,000 of self-funded general liability and auto coverage and $30,000,000 ex cess liability coverage per occurrenc e and is responsible for paying claims in excess of the City’s $100,000 deductib le. PLAN JPA also provides $2,000,000 employee theft coverage in excess of the City’s $10,000 deductible, and $2,000,000 of governme nt crime coverage (with various sub-limits depending on the type of crime) in excess of the City’s $10,000 deductible. PLAN JPA provides coverage for property damage up to $1 billion. The City retains a self-insured amount of $5,000 for each property and $5,000 for each vehicle per occurrence.
During the fiscal year, ended June 30, 2022, the City contributed $1,726,611 for the 2021/22 program year.
PLAN JPA is governed by a Board of Directors consis ting of representatives from member municipalities.
The Board controls the operations of PLAN JPA, cons isting of funding polices and approval of operating budgets, independent of any influence by member municipalities beyond their representation on the Board.
The City’s annual contributions to PLAN JPA are calculated based on the ratio of the City’s payroll to the total payrolls of all entities participating in the program and the City’s loss experience. Actual surpluses or losses are shared according to a formula developed fro m overall costs and spread to member entities on a percentage basis.
Financial statements may be obtained from PLAN JPA, 1750 Creekside Oaks Drive, Suite 200, Sacramento, CA 95833.
B. Workers Compensation
The City has a commercial insurance policy whic h provides workers compensation coverage up to a maximum of $20,000,000. The City has a deductible or un insured liability of up to $750,000 per claim for miscellaneous employees and $1,000,000 for public safety employees.
C. Dental
The City is self-insured for dental care for misce llaneous employees up to a maximum of $14,000 per family, based on years of service. Claims are funded on a pay-as-you-go basis. During the year ended June 30, 2022 the City paid $1,078,583 in dental claims and administrative fees. Public safety employees are insured under various dental care insurance plans.
99 198
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 14 – RISK MANAGEMENT (Continued)
D. Liability for Uninsured Claims
The City provides for the uninsured portion of claims and judgments, including a provision for claims incurred but not reported, when a loss is deemed probable of assertion and the amount of the loss is reasonably determinable.
The City’s liability for uninsured claims is limited to worker’s compensation and general liability claims, as discussed above, and was computed as follows based on claims experience:
2022
Worker’s General
Compensation Liability Total 2021
Beginning balance $6,541,981 $358,593 $6,900,574 $7,174,675 Liability for current fiscal year 1,632,650 667,859 2,300,509 1,978,589 Increase (decrease) in estimated
for prior fiscal year claims and
incurred but not reported (IBNR) (1,078,899) (391,459) (1,470,358) (247,932) Claims paid (1,291,999) (239,507) (1,531,506) (2,004,758) Ending balance $5,803,733 $395,486 $6,199,219 $6,900,574 Due in one year $1,174,799 $308,467 $1,483,266 $1,410,489 Settlements have not exceeded insurance coverage in the past three fiscal years.
NOTE 15 – COMMITMENTS AND CONTINGENT LIABILITIES
A. Litigation
The City is subject to litigation arising in the normal course of business. In the opinion of the City Attorney there is no pending litigation which is likely to have a material adverse effect on the financial position of the City.
B. Federal and State Grant Programs
The City participates in several Federal and State grant programs. These programs are subject to audit by the City’s independent accountants in
accordance with the provisions of the federal Single Audit Act as amended and applicable State requirem
ents. No cost disallowances have been proposed as a result of audits completed to date; however, these programs are still s ubject to further examination by the grantors and the amount, if any, of expenditures which may be disallowed by the granting agencies cannot be determined at this time. The City expects such amounts, if any, to be immaterial.
100
199
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 15 – COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
C. Encumbrances
The City uses an encumbrance system as an extens ion of normal budgetary accounting for governmental funds. Under this system, purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of applicable appropriations. Encumbrances outstanding at year- end are recorded as restricted, comm itted or assigned fund balance, de pending on the cla ssification of the resources to be used to liquidate the encumbrance, si nce they do not constitute expenditures or liabilities.
Outstanding encumbrances at year-end are automa tically reappropriated for the following year.
Unencumbered and unexpended appropriations lapse at year-end. Encumbrances outstanding by fund as of June 30, 2021 were as follows:
Major G overnm ental Funds:
General Fund $2,516,910
Housing Authority Fund 84,730
Non-Major G overnm ental Funds 163,829
Total Encumbrances $2,765,469
D. South Bay Water Recycling System Facility Replacement
As required by the Water Pollution Control Plant’s National Pollutant Discharge Elimination System (NPDES) permit, the regional partner agencies are responsible for maintenance and operation of the South Bay Water Recycling System. The regional partner agencies, which includes the City of Milpitas, are also responsible for the planned $2 billion rehabilitation/replacement of the facility over the next thirty years. The City’s share of the project is approximately 6.196% as discussed in Note 8E.
E. Bay Area Water Supply and Conserva tion Agency Revenue Bonds Surcharge
The City contracts with the City and County of San Francisco for the purchase of water from the Hetch Hetchy System operated by the San Francisco Public Utilities Commission (SFPUC). The City is also a member of the Bay Area Water Supply and Conservation Agency (BAWSCA) which represents the interests of all the 24 cities and water districts, as well as two private utilities, that purchase wholesale water from the SFPUC.
In 2009 the City entered into a new 25 year agreement with the SFPUC that includes a minimum water delivery level of 5.341MGD. One of the ways that the new agreement differs from the old is in how facilities constructed by the SFPUC that benefit the regional customers are treated from a rate and financial perspective.
Under the old agreement, facilities we re built, capitalized, and added to the rate base with a rate of return (interest), and then paid for over their useful lives through wholesale rates. Under the new agreement, the SFPUC issues revenue bonds and the de bt service (which also includes an interest component) is paid for through rates over the life of the bonds.
During the transition from the old to the new contracts, one of the issues addressed was how to deal with the $370 million in assets that were still being paid for by the wholesale customers under the old agreement. The assets were transferred to the new agreement, assigned a life with an agreed upon rate of return of 5.13%. Also negotiated was a provision to allow the wholesale customers to prepay any remaining existing assets’ unpaid principal balance without penalty or premium. This prepayment was executed through the issuance of bonds by BAWSCA which provide a better interest rate given the favorable rate environment.
101
200
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 15 – COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
BAWSCA issued Revenue Bonds in the principal amount of $335,780,000 in January 2013 to prepay the capital cost recovery payment obligation and fund a stabilization fund. The Bonds mature in October 2034 and are secured by surcharges to the monthly water purchase charges imposed upon the participating members.
The Bonds are not a debt obligation of any member, and BAWSCA’s failure to pay its Bonds would not constitute a default by any participating member.
Should any participating member fail to pay its shar e, BAWSCA will rely on the stabilization fund and will pursue all legal remedies to collect the shortfall from the delinquent member. In the interim, other participating members may have their portion adjusted to insure the continued payment of the debt service surcharge.
The risk of bearing the debt service expense of a defaulting member is not significantly different than the risk each member assumes currently for fluctuations in water purchase charges. Under the Bond indenture, BAWSCA maintains a stabilization fund. If surcharge re venues collected are less than needed (due to a member’s failure to pay timely), BAWSCA uses the stabilization fund to fund the debt service deficiency, and increases the surcharge in the subsequent year to ma ke up for the prior year s hortfall and reimburse the stabilization fund account. Also, given that each participating agency’s governing body adopted a Resolution to participate in the Bond issue, Management believes that default is generally very unlikely.
The annual debt service surcharges are a fixed amoun t for each participant and are calculated by taking the subsequent fiscal year’s debt service, multiplied by each participant’s actual water purchase as a percent of total wholesale customer water purchases from the prior fiscal year. One-twelfth of the annual surcharge is included in the monthly bill from SFPUC. Because each participant’s share of the debt service surcharge is proportional to the amount of water purchased during the prior fiscal year, the City’s share of the debt service will fluctuate from year to year.
The City paid its surcharge of $1,133,860 during fisc al year 2022, which is included as a component of purchased water expenses in the Water Enterprise Fund. The surcharge for fiscal year 2023 is estimated to be $949,680.
F. Sunnyhills Apartment Complex
In October 2017, the City entered in to an agreement with Sunnyhills Investors LLC to purchase affordability covenants for the Sunnyhills Apartment Complex, which has provided 149 affordable housing units to the City over the last 30 years. The City is required to pay $250,000 per year, ending January 15, 2023, beginning in fiscal year 2019. The first payment under the agreement was made in April 2018, and was for fiscal year 2019.
The City has paid a total of $1,000,000 as of June 30, 2022.
G. Housing Successor Excess Surplus
Health and Safety Code (HSC) Section 34176.1(d) defines an excess surplus as an unencumbered balance held by the housing successor that exceeds the greater of $1,000,000 or the ag gregate amount deposited into the housing successor fund during the housing successor’s preceding four fiscal years, whichever is greater. If a housing successor has an excess surplus, the HSC Section requires that the housing successor encumber the excess surplus for eligible purposes described in the HSC Section 34176.1(a)(3) or transfer the funds to another local housing successor within three fiscal years. If the housing successor fails to comply with this provision, the housing successor, within 90 days of the end of the th ird fiscal year, is required to transfer any excess surplus to the Department of Housing and Communi ty Development for expenditure pursuant to the Multifamily Housing Program or the Joe Serna, Jr. Farmworker Housing Grant Program.
102
201
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 16 – SUCCESSOR AGENCY ACTIVITIES
A. Redevelopment Dissolution
In an effort to balance its budget, the State of Ca lifornia adopted ABx1 26 on June 28, 2011, amended by AB1484 on June 27, 2012, which suspended all new re development activities except for limited specified activities as of that date and dissolved redevelopment agencies on January 31, 2012.
The suspension provisions prohibited all redevelopment agencies from a wide range of activities, including incurring new indebtedness or obligations, entering into or modifying agreements or contracts, acquiring or disposing of real property, taking actions to adopt or amend redevelopment plans and other similar actions, except actions required by law or to carry out existing enforceable obligations, as defined in ABx1 26.
Effective January 31, 2012, the Redevelopment Agency was dissolved. Certain assets of the Redevelopment Agency Housing Reserve Fund were distributed to a Housing Successor; and all remaining Redevelopment Agency assets and liabilities were distributed to a Successor Agency. The Succe ssor Agency received a finding of completion on June 27, 2014.
Under the provisions of AB 1484, the City can elect to become the Housing Successor and retain the housing assets. The City’s Housing Authority elected to beco me the Housing Successor an d on February 1, 2012, certain housing assets were transferred to the City’s Housing Authority Special Revenue Fund.
The City also elected to become the Successor Ag ency and on February 1, 2012 the Redevelopment Agency’s remaining assets were distributed to and liabilities were assumed by the Successor Agency. ABx1 26 requires the establishment of an Oversight Board to oversee the activities of the Successor Agency and one was established on March 26, 2012. The activities of the Successor Agency were subject to review and approval of the Oversight Board, which was comprised of seven members, including one member of City Council and one former Redevelopment Agency employee appointed by the Mayor.
On July 1, 2018, the duties of the Milpitas Oversight Board transferred to a new Santa Clara Countywide Consolidated Oversight Board, whic h is now responsible for overseei ng the winddown affairs of all Successor Agencies in Santa Clara County, including the Successor Agency to the Milpitas Redevelopment Agency.
The activities of the Housing Successor are reported in the Housing Authority Special Revenue Fund as the City has control of those assets, which may be used in accordance with the low and moderate income housing provisions of California Redevelopment Law.
The activities of the Successor Agency are reported in the Successor Agency to the Redevelopment Agency Private-Purpose Trust Fund as the activities are under the control of the County Oversight Board. The City provides administrative services to the Successor Agency to wind down th e affairs of the former Redevelopment Agency.
Cash and investments of the Successo r Agency as of June 30, 2022 are discussed in Note 3. Information presented in the following footnotes represents other as sets and liabilities of the Successor Agency as of June 30, 2022.
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202
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 16 – SUCCESSOR AGENCY ACTIVITIES (Continued)
B. Development Agreements
The Successor Agency assumed the
obligations of the former Redeve lopment Agency’s Disposition and Development Agreements as follows:
Installment Purchase Agreement
The Redevelopment Agency agreed to purchase two parcels of la nd comprising thirty-five acre s
surrounding the County Correctional Facility for $57 ,750,000 in cash and $135,000,000 payable over eighteen years at no interest.
The Agency also agreed to re-sell this land to developers for a total of $57,750,000, of which $40,000,000 was received in fiscal 2005 and the remainder was received on the close of escrow on the second parcel in fiscal 2006. The Agency’s intent in purchasing this land was to simultaneously re-sell it for development.
In addition, starting in 2024 the Agency is required to pay the County the greater of $2,000,000 or 50% of the sales tax revenue arising out of sales origin ating on certain properties that are in the Midtown Area, but not to exceed $5,000,000 annually, until the earlier of either June 30 , 2038, the date that tax increment revenue allocated to the Agency has reached its limit; or the termination of the Redevelopment Plan.
C. Long-Term Obligations
1. Current Year Transactions and Balances
The Successor Agency’s debt issu es and transactions are summarized below and discussed in detail thereafter.
Balance Balance C urrent
June 30, 2021 Retirements June 30, 2022 Portion
Installment Purchase Agreement
with the County of Santa Clara - Direct
Borrow ing
due June 30, 2023 $5,110,904 $2,617,780 $2,493,124 $2,493,124 2015 Tax Allocation Bond s
2%-5%, due September 1, 2032 87,865,000 7,425,000 80,440,000 7,800,000 Plus: Unamortized bond premium 13,894,556 1,190,962 12,703,594 Total $106,870,460 $11,233,742 $95,636,718 $10,293,124
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203
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 16 – SUCCESSOR AGENCY ACTIVITIES (Continued)
2. Installment Purchase Agreement with the County of Santa Clara The former Redevelopment Agency had a non-intere st bearing Installment Purchase Agreement wit h
the County of Santa Clara in the original principal amount of $135,000,000, as mentioned in Note 15B.
As discussed in Note 15B, under the Agreement, the former Redevelopmen t Agency purchased two parcels of land that were later sold to developers . The amount due under the Agreement does not bear interest and is payable annually through 2023. The Successor Agency has therefore recorded a liability of $2,493,124 at June 30, 2022,
representing the present value of future payments due under this Agreement.
3. 2015 Tax Allocation Refunding Bonds
In March 2015, the Successor Agency issued Tax Allocation Refunding Bonds in the original principal amount of $127,790,000. The proc eeds of the Bonds were used to advance refund and defease the outstanding balance of the 2003 Tax Allocation Bonds, which were redeemed on March 23, 2015. The Bonds are secured by Redevelopment Property Tax Tr
ust Fund (RPTTF) revenues. In lieu of a reserve
fund, the 2015 Bonds are secured by
a reserve insurance policy in the amount of $11,822,000, issued by Assured Guaranty Municipal Corp. Principal is pa yable annually and the interest is payable semi- annually through 2032. The 2015 Bonds contain a provision that in an event of default, the Trustee may declare the principal of the bonds, to gether with all accrued interest at the date of default, immediately due and payable, or (b) exercise any and all rights and remedies avai lable to it under applicable law, including right to enforce from the Successor Agency all payments due on the Bonds, and the Successor Agency will pay all reasonable fees and expenses incurred by the Trustee and those of its attorneys. On August 27, 2021, S&P Global Ratings (formerly Standard & Poor’s Financial Services, LLC) upgraded its Local Currency Long-Term Ratings on the Bonds from ‘AA- to AA’.
4. Debt Service Requirements
Debt service requirements are shown below for all long-term debt:
2015 Tax Allocation Bonds
Y ear Ending Total Total Total Total
June 30 Principal Interest Principal Interest
2023 $2,493,124 $3,506,876 $7,800,000 $3,827,000
2024 8,185,000 3,427,375
2025 8,595,000 3,007,875
2026 9,025,000 2,567,375
2027 9,475,000 2,104,875
2028-2032 33,420,000 4,575,000
2033 3,940,000 98,500
$2,493,124 $3,506,876 80,440,000 $19,608,000
Plus: Unamortized bond premium 12,703,594
$93,143,594
Installment Purchase Agreement with the
County of Santa Clara
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204
Item # C9.
CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2022
NOTE 16 – SUCCESSOR AGENCY ACTIVITIES (Continued)
5. Defeased Bonds
As of June 30, 2022, the outstanding balance of de feased debt was $5 ,130,000 for the Redevelopment
Agency 1997 Tax Allocation Bonds.
D. Commitments
and Contingencies
State Approval of Enforceable Obligations
The Successor Agency prepares a Recognized Obligat ion Payment Schedule (ROPS) semi-annually that contains all proposed expenditures for the subsequent six-month period. The ROPS is subject to the review and approval of the County Oversight Board as well as the State Department of Finance. Although the State Department of Finance may not questi
on items included on the ROPS in one period, they may question the same items in a future period and disallow associated activities.
The amount, if any, of current obligations
that may be denied by the State Department of Finance cannot be determined at this time. The City expects such amounts, if any, to be immaterial.
NOTE 17 – SUBSEQUENT EVENTS
On July 12, 2021, CalPERS reported
a preliminary 21.3% net return on investments for fiscal year 2020-21.
Based on the thresholds specified in CalPERS Funding Risk Mitigatio n policy approved by the CalPERS Board in 2015, the excess return of 14.3% prescribes a reduction in investment volatility that corresponds to a reduction in the discount rate used for funding purposes of 0.20%, from 7.00% to 6.80%. Since CalPERS was in the final stages of the four-year Asset Li ability Management (ALM) cycle, the CalPERS Board elected to defer any changes to the asset allocation until the ALM process concluded, and the board could make its final decision on the asset allocation in November 2021.
On November 17, 2021, the CalPERS board adopted a new strategic asset allocation. The new asset allocation along with the new capital market assumptions, economic assumptions and administrative expense assumption support a discount rate of 6.80% (net of investment expense, but without a reduction for administrative expense) for financial reporting purposes. This includes a reduction in the price inflation assumption from 2.50% to 2.30% as recommended in the November 2021 CalPERS Experience Study and Review of Actuarial Assumptions. This study also recommended modifications to retirement rates, termination rates, mortality rates and rates of salary increases that were adop ted by the CalPERS Board.
These new assumptions will be reflected in the CalPERS GASB 68 accounting valuation reports for the June 30, 2022, measurement date.
106
205
Item # C9.
REQUIRED SUPPLEMENTARY INFORMATION
206
Item # C9.
207
Item # C9.
City of Milpitas
Required Supplementary Information
SCHEDULE OF CHANGES IN THE NET OPEB LIABILITY AND RELATED RATIOS Agent Multiple-Employer Retiree Medical Benefits (OPEB) Plan L ast 10 fi scal years*
M easurement Date 6/30/17 6/30/18 6/30/19 6/30/20 6/30/21 Total OPE B Liab ility
Service Cost $2,386,392 $2,356,491 $2,423,566 $1,958,563 $1,503,917 Interest 4,794,071 5,155,080 5,462,138 3,581,088 4,100,155 Changes in benefit term s (17,098,878)
Differences between ex pected and actual ex perience (11,594,216) (3,161,213) Changes of assumptions (1,263,847) (113,934) (1,624,371) (5,621,298) 4,971,305 Benefit payments (3,325,081) (2,994,247) (3,183,858) (3,122,284) (3,221,642) Net change in total OPE B liab ility 2,591,535 4,403,390 (25,615,619) (3,203,931) 4,192,522 Total OPE B liab ility - b eginning 80,926,571 83,518,106 87,921,496 62,305,877 59,101,946 Total OPE B liab ility - end ing (a) $83,518,106 $87,921,496 $62,305,877 $59,101,946 $63,294,468 Plan fiduciary net position
Contributions - employer $4,959,756 $4,803,893 $4,651,743 $4,528,174 $1,743,593 Contributions - em ployee
Net investment income 3,708,342 3,175,844 2,834,217 1,745,028 14,164,474 Administrative expense (18,732) (21,490) (9,742) (24,292) (19,480) Benefit payments (3,325,081) (2,994,247) (3,183,858) (3,122,284) (3,221,642) Other Ex penses (51,721)
Net change in plan fiduciary net position 5,324,285 4,912,279 4,292,360 3,126,626 12,666,945 Plan fiduciary net position - beginning 33,780,048 39,104,333 44,016,612 48,308,972 51,435,598 Plan fiduciary net position - ending (b) $39,104,333 $44,016,612 $48,308,972 $51,435,598 $64,102,543 Net OPEB liability (ass et) - ending (a)-(b) $44,413,773 $43,904,884 $13,996,905 $7,666,348 ($808,075) Plan fiduciary net position as a percentage of the total OPEB liability 46.82% 50.06% 77.54% 87.03% 101.28% Covered-employee payroll $42,017,236 $43,375,678 $48,788,854 $52,202,907 $59,298,425 Net OPEB liability as a percentage of covered-employee payroll 105.70% 101.22% 28.69% 14.69% -1.36% * Fiscal year 2018 was the first year of im plem entation. 107
208
Item # C9.
City of Milpitas
Required Supplementary Information
SCHEDULE OF CONTRIBUTIONS
Agent Multiple-Employer Retiree Medical Benefits (OPEB) Plan Last 10 fiscal years*
Fiscal Y ear E nd ed June 30, 2018 2019
Explicit Implicit Total Explicit Implicit Total
Actuarially determined contribution $3,387,020 $1,652,641 $5,039,661 $3,492,808 $1,703,307 $5,196,115 Contributions in relation to the
actuarially determined contribution 3,387,020 1,059,545 4,446,565 3,492,808 1,158,935 4,651,743 Contribution deficiency (excess) $0 $593,096 $593,096 $0 $544,372 $544,372 Covered-employee payroll $43,375,678 $43,375,678 $43,375,678 $48,788,854 $48,788,854 $48,788,854 Contributions as a percentage of
covered-employee payroll 7.81% 2.44% 10.25% 7.16% 2.38% 9.53% Fiscal Y ear E nd ed June 30, 2020 2021 2022
Explicit Implicit Total Explicit Implicit Total Explicit Implicit Total Actuarially determined contribution $788,831 $1,545,113 $2,333,944 $655,377 $1,552,190 $2,207,567 $655,377 $1,611,861 $2,267,238 Contributions in relation to the
actuarially determined contribution 3,478,018 1,050,156 4,528,174 655,377 1,088,216 1,743,593 682,866 1,074,399 1,757,265 Contribution deficiency (excess) ($2,689,187) $494,957 ($2,194,230) $0 $463,974 $463,974 ($27,489) $537,462 $509,973 Covered-employee payroll $52,202,907 $52,202,907 $52,202,907 $59,134,552 $59,134,552 $59,134,552 $59,298,425 $59,298,425 $59,298,425 Contributions as a percen tage of
covered-employee payro ll 6.66% 2.01% 8.67% 1.11% 1.84% 2.95% 1.15% 1.81% 2.96% Notes to Schedule
V aluation date:
Methods and assum ptions used to determ ine contribution rates:
Valuation Date June 30, 2021
Actuarial Assum ptions:
Discount Rate 6.15%
Inflation 2.50%
Salary Increase 3.00%
Investm ent Rate of Return 6.15%
Mortality Rate MacLeod Watts Scale of 2022 applied generationally Healthcare Trend Rate 5.8% grading down to 3.9% for years 2076 and thereafter * Fiscal year 2018 was the first year of implementation. 108
209
Item # C9.
City of Milpitas
Required Supplementary Information
SCHEDULE OF CHANGES IN THE TOTAL OPEB LIABILITY AND RELATED RATIOS Dependent Fund (OPEB) Plan
Last 10 fiscal years*
M easurement Date 6/30/19 6/30/20 6/30/21
Total OPE B Liab ility
Service Cost $1,139,508 $1,402,597
Interest 905,377 810,987
Changes in benefit terms $28,504,872
Differences between ex pected and actual ex perience (1,465,027) C hanges of assum pti ons 3,100,405 2,591,371
Benefit paym ents (1,437,201) (1,028,064)
Net change in total OPE B liab ility 28,504,872 3,708,089 2,311,864 Total OPE B liab ility - b eginning 28,504,872 32,212,961 Total OPE B liab ility - end ing (a) $28,504,872 $32,212,961 $34,524,825 Plan fiduciary net position
Contributions - em ployer $1,437,201
Contributions - em ployee
Net in v es tmen t in co me
Adm inistrative ex pense
Benefit paym ents (1,437,201)
Other Ex penses
Net change in plan fiduciary net position - - - Plan fiduciary net position - beginning
Plan fiduciary net position - ending (b) $0 $0 $0
Net OPEB liability - ending (a)-(b) $28,504,872 $32,212,961 $34,524,825 Plan fiduciary net position as a percentage of the total OPEB liability 0.00% 0.00% 0.00% Covered-employee payroll $48,788,854 $52,202,907 $59,298,425 Net OPEB liability as a percentage of covered-employee payroll 58.42% 61.71% 58.22% *The liability of this Plan had been previously included together with other City plan OPEB Liabilities.
B
eginning with fiscal year 2020, the City began to report the liability of this plan seperately.
No assets are accumulated in a trust that meets the criteria in paragraph 4 of G ASB 75. 109
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Item # C9.
City of Milpitas
Required Supplementary Information
SCHEDULE OF CONTRIBUTIONS
Dependent Fund (OPEB) Plan
Last 10 fiscal years*
Fiscal Y ear E nd ed June 30, 2020 2021 2022
Explicit Explicit Explicit
Actuarially required contribution N/A (a) N/A (a) N/A (a) Contributions in relation to the
actuarially required contributions $1,028,064 $0 $1,012,052 Contribution deficiency (ex cess) N/A (a) N/A (a) N/A (a) Covered-employee payroll $52,202,907 $59,134,552 $59,298,425 Contributions as a percentage of
covered-em ployee payroll N/A (a) N/A (a) N/A (a)
*No assets are accumulated in a trust that meets the criteria in paragraph 4 of G ASB 75. (a) Due to the nature of the Plan, actuarially required contribution is not available.
S
ee Note 12D for contribution requirem ents.
110
211
Item # C9.
212
Item # C9.
City of Milpitas
Required Supplementary Information
Measurement Period 2013-14 2014-15 2015-16 2016-17
Total Pension Liability
Service Cost $2,652,510 $2,664,628 $2,666,665 $3,008,973 Interest 13,600,615 14,114,152 14,689,192 15,078,047
Differences between expected and actual experience (982,598) (18,301) (1,238,427) Changes in assumptions (3,463,459) 12,475,424
Changes in benefits
Benefit payments, including refunds of employee contributions (8,381,334) (8,930,516) (9,558,779) (10,236,837) Net change in total pension liability 7,871,791 3,402,207 7,778,777 19,087,180 Total pension liability - beginning 184,205,937 192,077,728 195,479,935 203,258,712 Total pension liability - ending (a) $192,077,728 $195,479,935 $203,258,712 $222,345,892 Plan fiduciary ne t position
Contributions - employer $3,356,909 $4,076,975 $4,519,744 $5,048,143 Contributions - employee 1,439,932 1,326,989 1,333,019 1,266,956 Net investment income 22,034,637 3,281,429 775,183 16,109,364 Administrative expense (164,523) (89,109) (211,414) Benefit payments, including refunds of employee contributions (8,381,334) (8,930,516) (9,558,779) (10,236,837) Other Miscellaneous Income/Expense
Net Plan to Plan Resource Movement (370) (370)
N
e t change in plan fiduciary ne t position 18,450,144 (409,646) (3,020,312) 11,975,842 Plan fiduciary net position - beginning 128,172,005 146,622,149 146,212,503 143,192,191 Plan fiduciary net position - ending (b) $146,622,149 $146,212,503 $143,192,191 $155,168,033 Net pension liability - ending (a)-(b) $45,455,579 $49,267,432 $60,066,521 $67,177,859 Plan fiduciary net position as a percentage of the total pension liability 76.33% 74.80% 70.45% 69.79%
Covered payroll $15,682,538 $16,009,660 $16,161,589 $16,418,123 Net pension liability as percentage of covered payroll 289.85% 307.74% 371.66% 409.17% * F
iscal year 2015 was the first year of implementation.
Changes in assumptions. In 2017, the accounting discount rate reduced from 7.65% to 7.15%. In 2016, 2018, 2019, 2020 and 2021, there were no changes. In 2015, amounts reported reflect an adjustment of the discount rate from 7.5% (net of administrative expense) to 7.65% (without a reduction for pension plan administrative expense). In 2014, amounts were based on the 7.5% discount rate.
Benef it changes.
The figures above do not include any liability impact that may have resulted from plan changes which occurred after June 30. This applies for voluntary benefit changes as well as any offers of Two Years Additional Service Credit (a.k.a. Golden Handshakes).
SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS Miscellaneous Plan - Agent Multiple-Employer Defined Pension Plan Last 10 Years*
112
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Item # C9.
City of Milpitas
Required Supplementary Information
SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS Miscellaneous Plan - Agent Multiple-Employer Defined Pension Plan Last 10 Years*
Measurement Period 2017-18 2018-19 2019-20 2020-21
Total Pension Liability
Service Cost $3,042,853 $3,361,140 $3,777,335 $4,262,309 Interest 15,647,110 16,517,342 17,295,222 18,046,275
Differences between expected and actual experience 1,831,444 4,569,776 2,592,349 1,466,976 Changes in assumptions (1,404,854)
Changes in benefits
Benefit payments, including refunds of employee contributions (10,906,398) (11,589,225) (12,009,750) (12,545,846) Net chan
ge in total pension liability 8,210,155 12,859,033 11,655,156 11,229,714 Total pension liability - beginning 222,345,892 230,556,047 243,415,080 255,070,236 Total pension liability - ending (a) $230,556,047 $243,415,080 $255,070,236 $266,299,950 Plan fiduciary net position
Contributions - employer $5,762,448 $6,864,376 $7,965,270 $8,925,250 Contributions - employee 1,473,732 1,569,027 1,772,996 1,998,174 Net investment income 13,123,448 10,774,536 8,527,794 40,453,566 Administrative expense (241,795) (116,977) (241,663) (177,248) Benefit payments, including refunds of employee contributions (10,906,398) (11,589,225) (12,009,750) (12,545,846) Other Miscellaneous Income/Expense (459,172) 381 Net Plan to Plan Resource Movement (381)
Net chan
ge in plan fiduciary net position 8,751,882 7,502,118 6,014,647 38,653,896 Plan fiduciary net position - be ginning 155,168,033 163,919,915 171,422,033 177,436,680 Plan fiduciary net position - endin g (b) $163,919,915 $171,422,033 $177,436,680 $216,090,576 Net pension liability - ending (a)-(b) $66,636,132 $71,993,047 $77,633,556 $50,209,374 Plan fiduciary net position as a percentage of the total pension liability 71.10% 70.42% 69.56% 81.15%
Covered payroll $18,846,066 $22,079,190 $19,463,309 $25,754,131 Net pension liability as percentage of covered payroll 353.58% 326.07% 398.87% 194.96% * Fiscal year 2015 was the first year of implementation. 113
214
Item # C9.
City of Milpitas
Required Supplementary Information
Fiscal Year Ended June 30 2015 2016 2017 2018
Actuarially determined contribution $3,252,668 $4,236,931 $5,082,638 $6,243,904 Contributions in relation to the actuarially
determined contributions 3,252,668 4,236,931 5,082,638 6,243,904 Contribution deficiency (excess) $0 $0 $0 $0
Covered payroll $16,009,660 $16,161,589 $16,418,123 $18,846,066 Contributions as a percentage of covered
payroll 20.32% 26.22% 30.96% 33.13%
Notes to Schedule
Valuation date: 6/30/2012 6/30/2013 6/30/2014 6/30/2015 Methods and assumptions used to determine contribution rates:
Actuarial cost method Entry age
Amortization method Level percentage of payroll
Remaining amortization period 15 Years as of the Valuation Date Asset valuation method Market Value of Assets
Inflation 2.75% for 2015 to 2019, 2.625% for 2020, and 2.50% for 2021 and 2022 Salary increases
Investment rate of return
Retirement age
Mortality
* F
iscal year 2015 was the 1st year of implementation.
The probabilities of Retirement are based on the
CalPERS Experience Study.
The probabilities of mortality are based on the CalPERS Experience Study. Pre-retirement and Post-retirement
mortality rates include 20 years of projected mortality improvement using Scale BB published by the Society
of Actuaries for 2015 to 2018. For 2019, 2020, 2021,
and 2022 pre-retirement and post-retirement mortality
rates include 15 years of projected mortality
improvement usin
g 90% of Scale MP-2016 published by
the Society of Actuaries.
SCHEDULE OF CONTRIBUTIONS
Miscellaneous P lan - Agent Multiple-Employer Defined P ension P lan Last 10 Years*
Varies by Entry Age and Service
7.50% for 2015 to 2018, 7.375% for 2019, 7.25% for
2020, and 7.00% for 2021 and 2022, net of pension plan
investment expense, including inflation.
114
215
Item # C9.
2019 2020 2021 2022
$6,863,508 $8,337,504 $8,916,157 $9,799,723
6,863,508 8,337,504 8,916,157 9,799,723 $0 $0 $0 $0
$22,079,190 $19,463,309 $21,793,252 $25,754,131
31.09% 42.84% 40.91% 38.05%
6/30/2016 6/30/2017 6/30/2018 6/30/2019
115
216
Item # C9.
City of Milpitas
Required Supplementary Information
Measurement Period 2013-14 2014-15 2015-16 2016-17
Total Pension Liability
Service Cost $4,932,970 $4,808,751 $5,094,318 $5,934,642 Interest 19,838,662 20,535,893 21,663,378 22,434,283
Differences between expected and actual experience (2,363,470) 3,274,330 (690,685) Changes in assumptions (5,052,089) 18,725,315
Changes in benefits
Benefit payments, including refunds of employee contributions (13,076,629) (13,656,196) ( 14,390,575) (14,864,837)
Net change in total pension liabilit y 11,695,003 4,272,889 15,641,451 31,538,718 Total pension liability - beginning 268,587,329 280,282,332 284,555,221 300,196,672
Total pension liability - ending (a) $280,282,332 $284,555,221 $300,196,672 $331,735,390 Plan fiduciary ne t position
Contributions - employer $5,856,270 $6,604,951 $7,230,399 $7,887,539 Contributions - employee 1,839,234 1,887,408
2,064,277 2,233,341
Net investment income 30,157,647 4,420,615
1,031,136 22,090,936
Administrative expense (224,227)
(121,445) (288,028)
Net Plan to Plan Resource Movement
Other Miscellaneous Income/Expense
Benefit payments, including refunds of employee contributions (13,076,629) (13,656,196)
(14,390,575) (14,864,837)
Ne t change in plan fiduciary ne t position 24,776,522 (967,449) (4,186,208) 17,058,951
Plan fiduciary net position - beginning 175,461,012 200,237,534 199,270,085 195,083,877
Plan fiduciary net position - ending (b) $200,237,534 $199,270,085 $195,083,877 $212,142,828 Net pension liability - ending (a)-(b) $80,044,798 $85,285,136 $105,112,795 $119,592,562 Plan fiduciary net position as a percentage of the total pension liability 71.44% 70.03% 64.99% 63.95%
Covered payroll $18,310,535 $18,810,920 $20,170,400 $21,078,669 Net pension liability as percentage of covered payroll 437.15% 453.38% 521.12% 567.36% Notes to Schedule:
* Fiscal year 2015 was the 1st year of implementation.
Changes in assumptions. In 2017, the accounting discount rate reduced from 7.65% to 7.15%. In 2016, 2018, 2019, 2020 and 2021, there were no changes. In 2015, amounts reported reflect an adjustment of the discount rate from 7.5% (net of administrative expense) to 7.65% (without a reduction for pension plan administrative expense). In 2014, amounts were based on the 7.5% discount rate.
Benef it changes. The figures above do not include any liability impact that may have resulted from plan changes which occurred after June 30. This applies for voluntary benefit changes as well as any offers of Two Years Additional Service Credit (a.k.a. Golden Handshakes).
SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS Safety Plan - Agent Multiple-Employer Defined Pension Plan Last 10 Years*
116
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Item # C9.
2017-18 2018-19 2019-20 2021-22
$5,975,378 $6,211,449 $6,711,730 $7,266,789
23,331,989 24,560,414 25,568,359 26,671,979
626,935 4,563,968 981,131 2,106,663 (986,630)
(16,083,729) (17,533,455) (18,278,539) (20,179,552) 12,863,943 17,802,376 14,982,681 15,865,879 331,735,390 344,599,333 362,401,709 377,384,390 $344,599,333 $362,401,709 $377,384,390 $393,250,269
$8,866,550 $10,288,856 $12,104,306 $13,294,083
2,240,962 2,441,763 2,748,961 2,834,054 17,931,642 14,733,700 11,689,024 55,066,837 (330,577) (159,951) (329,757) (241,588) (521)
(
627,771) 521
(16,083,729) (17,533,455) (18,278,539) (20,179,552) 11,996,556 9,771,434 7,933,995 50,773,834 212,142,828 224,139,384 233,910,818 241,844,813 $224,139,384 $233,910,818 $241,844,813 $292,618,647
$120,459,949 $128,490,891 $135,539,577 $100,631,622
65.04% 64.54% 64.08% 74.41%
$21,698,152 $23,314,576 $21,136,130 $26,167,767
555.16% 551.12% 641.27% 384.56%
117
218
Item # C9.
City of Milpitas
Required Supplementary Information
Fiscal Year Ended June 30 2015 2016 2017 2018
Actuarially determined contribution $5,904,019 $7,346,983 $8,741,506 $9,247,165 Contributions in relation to the actuarially
determined contributions 5,904,019 7,346,983 8,741,506 9,247,165 Contribution deficiency (excess) $0 $0 $0 $0
Covered payroll $18,810,920 $20,170,400 $21,078,669 $21,698,152 Contributions as a percentage of covered
payroll 31.39% 36.42% 41.47% 42.62%
Notes to Schedule
Valuation date: 6/30/2012 6/30/2013 6/30/2014 6/30/2015 Methods and assumptions used to determine contribution rates:
Actuarial cost method Entry age
Amortization method Level percentage of payroll
Remaining amortization period 15 Years as of the Valuation Date Asset valuation method Market Value of Assets
Inflation 2.75% for 2015 to 2019, 2.625% for 2020, and 2.50% for 2021 and 2022 Salary increases
Investment rate of return
Retirement age
Mortality
* F
iscal year 2015 was the 1st year of implementation.
Safety Plan - Agent Multiple-Employer Defined Pension Plan Last 10 Years*
SCHEDULE OF CONTRIBUTIONS
Varies by Entry Age and Service
7.50% for 2015 to 2018, 7.375% for 2019, 7.25% for 2020, and 7.00% for 2021 and 2022, net of pension plan
investment expense, including inflation.
The probabilities of Retirement are based on the CalP ERS Experience Study
The probabilities of mortality are based on the CalPERS Experience Study. Pre-retirement and Post-retirement
mortality rates include 20 years of projected mortality improvement using Scale BB published by the Society of
Actuaries for 2015 to 2018. For 2019, 2020, 2021 and 2022, pre-retirement and post-retirement mortality rates include 15 years of projected mortality improvement using 90% of Scale MP-2016 published by the Society of Actuaries.
118
219
Item # C9.
2019 2020 2021 2022
$10,289,680 $11,739,849 $12,866,635 $14,258,505
10,289,680 11,739,849 12,866,635 14,258,505 $0 $0 $0 $0
$23,314,576 $21,136,130 $23,212,673 $26,167,767
44.13% 55.54% 55.43% 54.49%
6/30/2016 6/30/2017 6/30/2018 6/30/2018
119
220
Item # C9.
221
Item # C9.
NON-MAJOR GOVERNMENTAL FUNDS
SPECIAL REVENUE FUNDS:
GAS TAX FUND
Established to account for the City’s share of state gasoline taxes which are restricted for use on construction and maintenance of the street system in Milpitas
.
HOUSING AND COMMUNITY DEVELOPMENT FUND
Established to account for community development block grants and expenditures.
LAW ENFORCEMENT SERVICES FUND
Established to account for the proceeds from Federal and State asset seizures. This f und also accounts for the Supplemental Law Enforcement Services grant, Local Law Enforcement Block grant, Justice Assistance grant and expenditures. These funds must be used only for specified law enforcement purposes.
SOLID WASTE REDUCTION AND SERVICES F
UND
Established to account for landfill tipping fees allocated by Santa Clara County. The County allocates a fee of $1 per ton to each City to be used in relation to the State of California Waste Reduction Act. Revenue is used for the implementation of waste reduction programs to meet the State required landfill deposits percentage reduction. The fund also accounts for special charges built into garbage rates specifically for community promotions and household hazardous waste activities.
LIGHTING AND LANDSCAPE MAINTENANCE DISTRICT FU
ND
Established to account for assessments collected within the district. Revenue is us ed for servicing and maintaining the public landscaping and additional lighting for the district.
COMMUNITY FACILITIES DISTRICT FUND
Established to account for assessments collected within the district. Revenue is used for providing City services for the district.
HETCH-HETCHY GROUND LEASE FUND
Established to account for the lease payment to the City and County of San Francisco for the permitted use of the Hetch-Hetchy land.
COMMUNITY PLANNING FUND
Established to account for fees collected to fund the General Plan update, zoning ordinance update and other long range planning documents.
COMMUNITY BENEFITS FUND
Established to account for fees collected from developers to fund Public Benefits for the Community.
AFFORDABLE HOUSING FU
ND
Established to account for fees collected from developers to fund Affordable Housing activities.
AFFORDABLE HOUSING UNRESTRICTED FUND
Established to account for Affordable Housing unrestricted activities funded by General Fund Surplus.
CAPITAL PR
OJECTS FUNDS:
PUBLIC ART FUND
Established to account for the acquisition and installation of public art. Financing provided by a percentage of eligible project expenditures within the City’s Annual Capital Improvement Program.
PARK IMPRO
VEMENT FUND
Established to account for the construction and maintenance of City parks. A special park improvement fee is imposed on developments to provide financing.
STORM DRAIN DEVELOPMENT FUND
Established to account for the construction and maintenance of st orm drain projects.
A special storm drain fee is imposed on developments to provide financing.
121
222
Item # C9.
223
Item # C9.
224
Item # C9.
CITY OF MILPITAS
NON-MAJOR GOVERNMENTAL FUNDS
COMBINING BALANCE SHEETS
JUNE 30, 2022
SPECIAL REVENUE FUNDS
Lighting and
Housing and Law Solid Waste Landscape Community
Community Enforcemen t Reduction and Maintenance Facilities Gas Tax Developmen t Services Services Distric t District ASSETS
Cash and investments available for operations $3,978,669 $593,531 $753,657 $1,219,102 $194,509 $2,156,709 Receivables:
Due from other governments 437,655 347,656 7,574 21,069 14,296 Interest 8,370 39 2,520 401 5,013
Loans receivable 3,225,910
Prepaids, materials, supplies and deposits 2,179 2,416 1,789 12,763 Total Assets $4,424,694 $4,169,276 $761,270 $1,245,107 $196,699 $2,188,781
LIABILITIES
Accounts payable $351,971 $8,266 $15,856 $1,888
Accrued payroll 210 18,153 4,349 $36,461 Unearned revenue 638,426 146,072
Refundable deposits 18,843
Total Liabilities 351,971 646,902 198,924 6,237 36,461
Fund Balances:
Nonspendable 2,179 2,416 1,789 12,763
Restricte
d $4,424,694 3,815,126 114,368 1,043,767 188,673 2,139,557 Assigned
Total Fund Balances 4,424,694 3,817,305 114,368 1,046,183 190,462 2,152,320 Total Liabilities and Fund Balances $4,424,694 $4,169,276 $761,270 $1,245,107 $196,699 $2,188,781
FUND BALANCE
122
225
Item # C9.
SPECIAL REVENUE FUNDS
Total
Hetch-Hetchy Affordable Storm Nonmajo r
Ground Community Community Affordable Housing Public Park Drain Governmental Lease Planning Benefits Housing Unrestricte d Art Improvemen t Development Funds $1,483,137 $309,763 $364,546 $5,076,140 $2,539,483 $1,063,970 $8,457,494 $6,044,392 $34,235,102 188 62,823 771,333 1,662,594
3,229 1,403 10,586 4,691 2,317 18,416 11,232 68,217
3,225,910
2,632 2,818 24,597
$1,486,366 $313,986 $364,546 $5,152,367 $2,544,174 $1,066,287 $9,247,243 $6,055,624 $39,216,420 $210 $21,394 $887,482 $35,872 $1,322,939
8,380 22,722 12,152 53 102,480
784,498
18,843
8,590 44,116 899,634 35,925 2,228,760
2,632 2,818 24,597
$1,486,366 302,764 $364,546 5,105,433 $2,544,174 8,347,609 6,019,699 35,896,776 $1,066,287 1,066,287
1,486,366 305,396 364,546 5,108,251 2,544,174 1,066,287 8,347,609 6,019,699 36,987,660 $1,486,366 $313,986 $364,546 $5,152,367 $2,544,174 $1,066,287 $9,247,243 $6,055,624 $39,216,420
CAPITAL PROJECTS FUNDS
123
226
Item # C9.
Lighting and
Housing & Law Solid Waste Landscape Community
Community Enforcement Reduction and Maintenance Facilities Gas Tax Development Services Services District District REVENUES:
Other taxes $445,034 $4,128,065
Use of money and property $61,900 $9,039 $6,863 $10,826 1,080 18,554 Intergovernmental 3,346,867 1,232,162 287,067 158,131
Charges for services 7,346
Developer contributions
Other
Total Revenues 3,408,767 1,241,201 293,930 176,303 446,114 4,146,619 EXPENDITURES:
Current:
General Government 1,241,003 8,454
Building, Safety and Housing
Public Works 556,149 208,816 1,393,134
Engineering 86,301
Planning
Police 288,914
Capital outlay
Total Expenditures 1,241,003 288,914 556,149 295,117 1,401,588
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 3,408,767 198 5,016 (379,846) 150,997 2,745,031
OTHER FINANCING SOURCES (USES)
Transfers in 98 40,590
Transfers (out) (2,276,735) (60,000) (138,558) (4,000) (2,610,000) Total Other Financing Sources (Uses) (2,276,637) (60,000) (138,558) 36,590 (2,610,000) NET CHANGE IN FUND BALANCES 1,132,130 198 (54,984) (518,404) 187,587 135,031 Fund balances at beginning of year 3,292,564 3,817,107 169,352 1,564,587 2,875 2,017,289
FUND BALANCES AT END OF YEA
R $4,424,694 $3,817,305 $114,368 $1,046,183 $190,462 $2,152,320
CITY OF MILPITAS
NON-MAJOR GOVERNMENTAL FUNDS
COMBINING STATEMENTS OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2022
SPECIAL REVENUE FUNDS
124
227
Item # C9.
Total
Hetch-Hetchy Affordable Storm Nonmajor
Ground Community Community Affordable Housing Public Park Drain Governmental Lease Planning Benefits Housing Unrestricted Art Improvement Development Funds $4,573,099
($51,851) $3,682 $3,227 $44,831 $19,448 ($37,355) ($287,469) ($178,214) (375,439) 62,823 806,795 5,893,845
265,191 123,001 395,538
1,083,650 1,505,434 550,092 3,139,176
176,164 176,164
(51,851) 268,873 3,227 1,314,305 19,448 138,809 2,024,760 371,878 13,802,383 37,014 8,891 106,068 1,401,430
841,486 841,486
2,158,099
86,301
289,371 289,371
288,914
6,024,411 887,517 6,911,928
37,014 289,371 8,891 947,554 6,024,411 887,517 11,977,529 (88,865) (20,498) (5,664) 366,751 19,448 138,809 (3,999,651) (515,639) 1,824,854 295,254 75,000 1,030,761 1,441,703
(550,000) (326,000) (359,516) (6,324,809)
(550,000) 295,254 (326,000) (284,516) 1,030,761 (4,883,106) (88,865) (570,498) (5,664) 366,751 314,702 (187,191) (4,284,167) 515,122 (3,058,252) 1,575,231 875,894 370,210 4,741,500 2,229,472 1,253,478 12,631,776 5,504,577 40,045,912 $1,486,366 $305,396 $364,546 $5,108,251 $2,544,174 $1,066,287 $8,347,609 $6,019,699 $36,987,660
CAPITAL PROJECTS FUNDSSPECIAL REVENUE FUNDS
125
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Item # C9.
CITY OF MILPITAS
BUDGETED NON-MAJOR FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL (NON-GAAP LEGAL BASIS)
FOR THE YEAR ENDED JUNE 30, 2022
HOUSING AND COMMUNITY
GAS TAX DEVELOPMENT
Variance Variance
Actual Amounts Positive Actual Amounts Positive
Budget Budgetary Basis (Negative) Budge t Budgetary Basis (Negative)
REVENUES
Other taxes
Use of money and property $61,900 $61,900 $9,039 $9,039 Intergovernmental 3,346,867 3,346,867 1,232,162 1,232,162 Charges for services
Developer contributions
Total Revenues 3,408,767 3,408,767 1,241,201 1,241,201
EXPENDITURES
Current:
General Government:
City Manage
r
City Attorney
Finance $15,000 15,000
Non-departmental 1,224,162 1,226,003 (1,841)
Building, Safety and Housing
Public Works
Engineering
Planning
Police
Fire
Total Expenditures 1,239,162 1,241,003 (1,841)
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 3,408,767 3,408,767 (1,239,162) 198 1,239,360
OTHER FINANCING SOURCES (USES)
Transfers in 98 98
Transfers (out) (2,276,735) (2,276,735)
Total Other Financing Sources (Uses) (2,276,637) (2,276,637) NET CHANGE IN FUND BALANCES 1,132,130 $1,132,130 ($1,239,162) 198 $1,239,360 ADJUSTMENT TO BUDGETARY BASIS:
Expenditures capitalized for GAAP purposes
Capital Outlay
Encumbrance adjustments
Fund balances at beginning of yea
r 3,292,564 3,817,107
Fund balances at end of year $4,424,694 $3,817,305
126
229
Item # C9.
SOLID WASTE REDUCTION
Variance Variance Variance
Actual Amounts Positive Actual Amounts Positive Actual Amounts Positive Budget Budgetary Basis (Negative) Budge t Budgetary Basis (Negative) Budge t Budgetary Basis (Negative) $445,034 $445,034
$6,863 $6,863 $10,826 $10,826 1,080 1,080
287,067 287,067 158,131 158,131
7,346 7,346
293,930 293,930 176,303 176,303 446,114 446,114
$988,542 658,966 329,576 $329,499 208,816 120,683
8,382 8,382 109,573 88,480 21,093
$777,897 370,801 407,096
38,887 (38,887)
777,897 409,688 368,209 996,924 658,966 337,958 439,072 297,296 141,776 (777,897) (115,758) 662,139 (996,924) (482,663) 514,261 (439,072) 148,818 587,890 40,590 40,590
(60,000) (60,000) (138,558) (138,558) (4,000) (4,000)
(60,000) (60,000) (138,558) (138,558) 36,590 36,590
($777,897) (175,758) $602,139 ($996,924) (621,221) $375,703 ($439,072) 185,408 $624,480 120,774 102,817 2,179
169,352 1,564,587 2,875
$114,368 $1,046,183 $190,462
(Continued)
LAW ENFORCEMENT SERVICES MAINTENANCE DISTRICTAND SERVICES
LIGHTING AND LANDSCAPING
127
230
Item # C9.
CITY OF MILPITAS
BUDGETED NON-MAJOR FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL (NON-GAAP LEGAL BASIS)
FOR THE YEAR ENDED JUNE 30, 2022
Variance Variance
Actual Amounts Positive Actual Amounts Positive
Budget Budgetary Basis (Negative) Budge t Budgetary Basis (Negative)
REVENUES
Other taxes $4,128,065 $4,128,065
Use of money and property 18,554 18,554 ($51,851) ($51,851) Intergovernmental
Charges for services
Developer contributions
Total Revenues 4,146,619 4,146,619 (51,851) (51,851)
EXPENDITURES
Current:
General Government:
City Manage
r
City Attorney
Finance
Non-departmental $8,454 8,454 $37,500 37,014 486
Building, Safety and Housing
Public Works 1,496,433 1,473,134 23,299
Engineering
Planning
Police
Total Expenditures 1,504,887 1,481,588 23,299 37,500 37,014 486
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (1,504,887) 2,665,031 4,169,918 (37,500) (88,865) (51,365)
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers (out) (2,610,000) (2,610,000)
Total Other Financing Sources (Uses) (2,610,000) (2,610,000) NET CHANGE IN FUND BALANCES ($1,504,887) 55,031 $1,559,918 ($37,500) (88,865) ($51,365) ADJUSTMENT TO BUDGETARY BASIS:
Expenditures capitalized for GAAP purposes
Capital Outlay
Encumbrance adjustments 80,000
Fund balances at beginning of yea
r 2,017,289 1,575,231
Fund balances at end of year $2,152,320 $1,486,366
HETCH-HETCHY GROUND LEASECOMMUNITY FACILITIES DISTRICT
128
231
Item # C9.
Variance Variance Variance
Actual Amounts Positive Actual Amounts Positive Actual Amounts Positive Budget Budgetary Basis (Negative) Budge t Budgetary Basis (Negative) Budge t Budgetary Basis (Negative) $3,682 $3,682 $3,227 $3,227 $44,831 $44,831
62,823 62,823
265,191 265,191 123,001 123,001
1,083,650 1,083,650
268,873 268,873 3,227 3,227 1,314,305 1,314,305
$15,000 8,891 6,109 $34,506 33,838 668
23,211 14,627 8,584
65,030 57,603 7,427
1,171,589 841,486 330,103
$289,813 289,371 442
289,813 289,371 442 15,000 8,891 6,109 1,294,336 947,554 346,782 (289,813) (20,498) 269,315 (15,000) (5,664) 9,336 (1,294,336) 366,751 1,661,087 (550,000) (550,000)
(550,000) (550,000)
($289,813) (570,498) ($280,685) ($15,000) (5,664) $9,336 ($1,294,336) 366,751 $1,661,087 875,894 370,210 4,741,500
$305,396 $364,546 $5,108,251
(Continued)
COMMUNITY BENEFITS AFFORDABLE HOUSINGCOMMUNITY PLANNING 129
232
Item # C9.
AFFORDABLE
Variance Variance
Actual Amounts Positive Actual Amounts Positive
Budget Budgetary Basis (Negative) Budge t Budgetary Basis (Negative)
REVENUES
Other taxes
Use of money and property $19,448 $19,448 ($37,355) ($37,355) Intergovernmental
Charges for services
Developer contributions 176,164 176,164
Total Revenues 19,448 19,448 138,809 138,809
EXPENDITURES
Current:
General Government:
City Manage
r
City Attorney
Finance
Non-departmental
Building, Safety and Housing
Public Works
Engineering
Planning
Police
Total Expenditures
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 19,448 19,448 138,809 138,809
OTHER FINANCING SOURCES (USES)
Transfers in 295,254 295,254
Transfers (out) (326,000) (326,000)
Total Other Financing Sources (Uses) 295,254 295,254 (326,000) (326,000) NET CHANGE IN FUND BALANCES 314,702 $314,702 (187,191) ($187,191) ADJUSTMENT TO BUDGETARY BASIS:
Expenditures capitalized for GAAP purposes
Capital Outlay
Encumbrance adjustments
Fund balances at beginning of yea
r 2,229,472 1,253,478
Fund balances at end of year $2,544,174 $1,066,287
FOR THE YEAR ENDED JUNE 30, 2022
CITY OF MILPITAS
BUDGETED NON-MAJOR FUNDS
COMBINING SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL (NON-GAAP LEGAL BASIS)
PUBLIC ARTHOUSING UNRESTRICTED
130
233
Item # C9.
TOTALS
Variance
Actual Amounts Positive
Budget Budgetary Basis (Negative)
$4,573,099 $4,573,099
90,244 90,244
5,024,227 5,024,227
272,537 272,537
1,259,814 1,259,814
11,219,921 11,219,921
$49,506 33,838 15,668
23,211 14,627 8,584
15,000 15,000
1,335,146 1,329,074 6,072
1,171,589 841,486 330,103
2,814,474 2,340,916 473,558
117,955 88,480 29,475
289,813 289,371 442
777,897 370,801 407,096
6,594,591 5,323,593 1,270,998
(6,594,591) 5,896,328 12,490,919
335,942 335,942
(5,965,293) (5,965,293)
(5,629,351) (5,629,351)
($6,594,591) 266,977 $6,861,568
305,770
21,909,559
$22,482,306
131
234
Item # C9.
235
Item # C9.
INTERNAL SERVICE FUNDS
Internal Service Funds report any activity that provides goods or services to other funds, departments, or agencies of the primary government and its components units, or to other governments, on a cost reimbursement basis. These funds include the following:
EQUIPMENT MANAGEMENT INTERNAL SERVICE FUND
The Equipment Management Internal Service Fund is used to finance and account for the replacement of equipment used by City departments and the maintenance of computer systems on a cost reimbursement basis.
PENSION SECTION 115 INTERNAL SERVICE FUND
The Pension Section 115 Internal Service Fund is used to accumulate funds which may be used to fund either the annual actuarially determined pension contribution amounts, pay down unfunded pension liabilities with CalPERS, or reduce the length of pension cost amortization schedules with CalPERS. 236
Item # C9.
237
Item # C9.
CITY OF MILPITAS
INTERNAL SERVICE FUNDS
COMBINING STATEMENTS OF NET POSITION
JUNE 30, 2022
Equipment Pension
Management Section 115 Totals
ASSETS
Current Assets
Cash and investments $12,799,403 $30,537,346 $43,336,749 Interest receivable 25,895 25,895
Total current assets 12,825,537
30,537,346 43,362,883
Noncurrent Assets
Materials, supplies and deposits 600,659 600,659
Capital assets (net of accumulated depreciation) 9,341,366 9,341,366 Total noncurrent assets 9,942,025 9,942,025
Total Assets 22,767,562 30,537,346 53,304,908
LIABILITIES
Current Liabilities
Accounts payable 83,539 83,539
Interest payable
Refundable deposit 196 196
Accrued payroll 50,725 50,725
Accrued vacation 112,221 112,221
Sick leave payable 15,458 15,458
Noncurrent Liabilities
Accrued vacation 19,782 19,782
Sick leave payable
Total Liabilities 281,921 281,921
NET POSITION
Invested in capital assets 9,341,366 9,341,366
Restricted for pension expenses 30,537,346 30,537,346
Unrestricted 13,144,275 13,144,275
Total Net Position $22,485,641 $30,537,346 $53,022,987
133
238
Item # C9.
Equipment Pension
Management Section 115 Totals
OPERATING REVENUES
Charges for services $3,734,444 $3,734,444
Other 1,696 ($5,672,403) (5,670,707)
Total Operating Revenues 3,736,140 (5,672,403) (1,936,263)
OPERATING EXPENSES
Personal services 1,431,811 1,431,811
Services and supplies 1,088,229 1,088,229
Depreciation and amortization 1,190,932 1,190,932 Maintenance and repairs 760,039 760,039
Total Operating Expenses 4,471,011 4,471,011
Operating Income (Loss) (734,871) (5,672,403) (6,407,274)
NONOPERATING REVENUES (EXPENSES)
Gain on sale of capital assets 80,616 80,616
Interest income(loss) (413,345) 822,738 409,393
Total Nonoperating Revenues (Expenses) (332,729) 822,738 490,009 Income (Loss) Before Contributions and Transfers (1,067,600) (4,849,665) (5,917,265) Contributions 1,205,018 1,205,018
Transfer in 890,508 890,508
Transfer out (211,131) (211,131)
Change in net position 816,795 (4,849,665) (4,032,870)
Net position-beginning 21,668,846 35,387,011 57,055,857 Net position-ending $22,485,641 $30,537,346 $53,022,987
CITY OF MILPITAS
INTERNAL SERVICE FUNDS
COMBINING STATEMENTS OF REVENUES, EXPENSES AND
CHANGES IN FUND NET POSITION
FOR THE YEAR ENDED JUNE 30, 2022
134
239
Item # C9.
Equipment Pension
Management Section 115 Totals
CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $3,735,901 ($5,672,403) ($1,936,502) Payments to suppliers (2,423,487) (2,423,487)
Payments to employees (1,490,216) (1,490,216)
Net cash provided by operating activities (177,802) (5,672,403) (5,850,205)
CASH FLOWS FROM NONCAPITAL
FINANCING ACTIVITIES
Transfers in 890,508 890,508
Transfers out (211,131) (211,131)
Cash Flows from Noncapital Financing Activities 679,377 679,377
CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES
Acquisition of capital assets 257,008 257,008
Proceeds from sale of capital assets 93,272 93,272
Cash Flows from Capital and Related
Financing Activities 350,280 350,280
CASH FLOWS FROM INVESTING ACTIVITIES
Interest and dividends (412,705) 822,738 410,033
Cash Flows from Investing Activities (412,705) 822,738 410,033 Net increase (decrease) in cash and cash equivalents 439,150 (4,849,665) (4,410,515) Cash and investments at beginning of period 12,360,253 35,387,011 47,747,264 Cash and investments at end of period $12,799,403 $30,537,346 $43,336,749 NONCASH TRANSACTIONS:
Contributions and transfers of capital assets, net $1,205,018 $1,205,018 Retirement of capital assets, net (12,656) (12,656)
Reconciliation of operating income (loss) to net cash provided by operating activities:
Operating income (loss) (734,871) ($5,672,403) (6,407,274) Adjustments to reconcile operating income to net cash provided by operating activities:
Depreciation 1,190,932 1,190,932
Change in assets and liabilities:
Receivables, net (239) (239)
Materials, supplies and deposits (481,042) (481,042)
Accounts and other payables (152,582) (152,582)
Net cash provided by operating activities ($177,802) ($5,672,403) ($5,850,205)
CITY OF MILPITAS
INTERNAL SERVICE FUNDS
COMBINING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2022
135
240
Item # C9.
241
Item # C9.
STATISTICAL SECTION
This part of the City’s Annual Comprehensive Financial Report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City’s overall financial health. In contrast to the financial section, the statistical section information is not subject to independent audit.
Financial Trends
These schedules contain trend information to help the reader understand how the City’s financial performance and wellbeing have changed over time:
Net Position – Schedule 1
Changes in Net Position – Schedule 2
Fund Balances, Governmental Funds – Schedule 3
Changes in Fund Balance, Governmental Funds – Schedule 4 Revenue Capacity
These schedules contain information to help the reader assess the City’s most significant local revenue source, the property tax:
Assessed Value and Actual Value of Taxable Property – Schedule 5 Direct and Overlapping Property Taxes Rates – Schedule 6 Principal Property Taxpayers – Schedule 7
Property Tax Levies and Collections – Schedule 8
Taxable Sales by Category – Schedule 9
Direct and Overlapping Sales Tax Rates – Schedule 10
Principal Sales Tax Payers – Schedule 11
Debt Capacity
These schedules present information to help the reader assess the affordability of the City’s current levels of outstanding debt and the City’s ability to issue additional debt in the future:
Ratios of Outstanding Debt by Type – Schedule 12
Bonded Debt Pledged Revenue Coverage, Redevelopment Agency Tax Allocation Bonds – Schedule 13 Computation of Direct and Overlapping Debt – Schedule 14 Legal Debt Margin Information – Schedule 15
Installment Payment Coverage, Sewer Certificates of Participation and Waste Water Revenue Refunding Bonds – Schedule 16
Installment Payment Coverage, Water Revenue Bonds – Schedule 17 Demographic and Economic Information
These schedules offer demographic and economic indicators to help the reader understand the environment within which the City’s financial activities take place:
Bimonthly Sewer Rates by Customer Class – Schedule 18
Bimonthly Water Rates by Customer Class – Schedule 19
Demographic and Economic Statistics – Schedule 20
Principal Employers – Schedule 21
Operating Information
These schedules contain service and infrastructure data to help the reader understand how the information in the City’s financial report relates to the services the City provides and the activities it performs:
Authorized Full-Time Equivalent Employees by Function/Program – Schedule 22 Operating Indicators by Function/Program – Schedule 23
Capital Asset Statistics by Function/Program – Schedule 24 Sources
Unless otherwise noted, the information in these schedules is derived from the Annual Comprehensive Financial Reports for the relevant year.
242
Item # C9.
243
Item # C9.
Schedule 1
CITY OF MILPITAS
NET POSITION
LAST TEN FISCAL YEARS
(Accrual basis of accounting)
(Dollars in Thousands)
Fiscal Year Ended June 30,
2013 (a) 2014 2015 (b) 2016 2017
Governmental activities
Net investment in capital assets and capacity rights $217,002 $291,704 $291,500 $298,321 $312,138 Restricted 88,147 90,758 103,829 100,327 108,630
Unrestricted 64,876 51,315 (84,598) (44,368) (30,091)
Total governmental activities net position $370,025 $433,777 $310,731 $354,280 $390,677 Business-type activities
Net investment in capital assets and capacity rights $106,489 $107,816 $113,232 $118,588 $122,937 Restricted 32,889 37,254 40,867 35,130 40,311
Unrestricted 19,799 20,880 11,586 15,261 20,254
Total business-type activities net position $159,177 $165,950 $165,685 $168,979 $183,502 Primary government
Net investment in capital assets and capacity rights $323,491 $399,520 $404,732 $416,909 $435,075 Restricted 121,036 128,012 144,696 135,457 148,941
Unrestricted 84,675 72,195 (73,012) (29,107) (9,837)
Total primary government net position $529,202 $599,727 $476,416 $523,259 $574,179 Fiscal Year Ended June 30
2018 (c) 2019 2020 2021 2022
Governmental activities
Net investment in capital assets and capacity rights $323,239 $326,564 $344,471 $358,445 $365,009 Restricted 109,726 145,983 158,716 189,030 176,451
Unrestricted (63,405) (65,799) (93,911) (142,708) (118,570) Total governmental activities net position $369,560 $406,748 $409,276 $404,767 $422,890 Business-type activities
Net investment in capital assets and capacity rights $130,736 $135,048 $99,331 $125,206 $127,204 Restricted 43,834 59,191 63,084 72,629 75,083
Unrestricted 15,784 8,930 47,967 18,483 21,208
Total business-type activities net position $190,354 $203,169 $210,382 $216,318 $223,495 Primary government
Net investment in capital assets and capacity rights $453,975 $461,612 $443,802 $483,651 $492,213 Restricted 153,560 205,174 221,800 261,659 251,534
Unrestricted (47,621) (56,869) (45,944) (124,225) (97,362) Total primary government net position $559,914 $609,917 $619,658 $621,085 $646,385 (a) The City implemented the provisions of GASB Statement 63 in fiscal year 2013, which replaced the term “net assets” with the term “net position” (b) The City implemented the provisions of GASB Statement 68 in fiscal year 2015 that required the restatement of net position.
Amounts prior to 2015 have not been restated.
(c) The City implemented the provisions of GASB Statement 75 in fiscal year 2018 that required the restatement of net position. Amounts prior to 2018 have not been restated.
(200,000)
(100,000)
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
2013
(a)
2014 2015
(b)
2016 2017 2018
(c)
2019 2020 2021 2022
($ 000)
Net investment in capital assets and capacity rights
Restricted
Unrestricted
137
244
Item # C9.
Schedule 2
2013 (a) 2014 2015 2016
Expenses
Governmental activities
General Government $15,329 $21,074 $18,118 $18,614
Building and Safety 2,293 2,684 2,617 2,513
Building, Housing and Safety
Recreation and Community Services
Public Works 17,700 (b) 18,664 17,509 12,761
Engineering 5,790 (d)
Planning and Neighborhood Services 2,553 2,119 2,372 2,649 (d) Planning
Parks and Recreation 3,107 (b) 3,012 3,098 4,090
Police 21,702 23,373 24,699 24,556
Fire 15,810 15,159 16,301 16,400
Interest on Long Term Debt 227 240 67 56
Total governmental activities expenses 78,721 86,325 84,781 87,429 Business-type activities
Water Utility 17,195 17,369 18,344 19,743
Recycled Water Utility (c) (c) (c) (c)
Sewer Utility 9,418 11,008 10,426 10,872
Total business-type activities expenses 26,613 28,377 28,770 30,615 Total primary government expenses $105,334 $114,702 $113,551 $118,044 Program Revenues
Governmental activities:
Charges for services:
General Government $1,700 $1,819 $1,063 $2,065
Building and Safety 4,554 6,445 5,128 5,963
Building, Housing and Safety
Recreation and Community Services
Public Works 2,668 2,472 2,644 (d)
Engineering 2,863 (d)
Planning and Neighborhood Services 301 432 700 747
Planning
Parks and Recreation 1,987 1,958 2,060 1,981
Police 1,051 1,091 1,151 1,138
Fire 1,508 2,120 1,885 2,440
Operating grants and contributions 7,487 6,195 6,201 7,320 Capital grants and contributions 8,286 15,483 14,711 35,195 Total government activities program revenues 29,542 38,015 35,543 59,712 Business-type activities
Charges for services:
Water Utility 19,801 21,354 21,136 18,709
Recycled Water Utility (c) (c) (c) (c)
Sewer Utility 12,632 12,753 14,453 15,964
Operating grants and contributions 111 57 127 63
Capital grants and contributions 1,975 1,402 710 1,103
Total business-type activities program revenue 34,519 35,566 36,426 35,839 Total primary government program revenues $64,061 $73,581 $71,969 $95,551 Net (Expense)/Revenue
Governmental activities ($49,179) ($48,310) ($49,238) ($27,717) Business-type activities 7,906 7,189 7,656 5,224
Total primary government net expense ($41,273) ($41,121) ($41,582) ($22,493) (a) The City implemented the provisions of GASB Statement 63 in fiscal year 2013, which replaced the term “net assets” with the term “net position.”
(b) The parks division is part of the Public Works department beginning in fiscal year 2013. (c) Beginning in fiscal year 2013, the Recycled Water Utility is part of the Water Utility. (d) Public Works and Engineering are separate departments beginning in fiscal year 2016. (e) Neighborhood Services is a component of Building, Housing and Sa fety, and Planning is a separate department beginning in fiscal year 2019. (f) Under the terms of a settlement agreement with the C ounty Auditor - Controller, Successor Agency to the Milpitas Redevelopment Agency and other parties, the City and Economic Development Corporation transferred cash and certain capital assets to the Successor Agency and received certain capital assets from the Successor Agency.
LAST TEN FISCAL YEARS
(accrual basis of accounting)
(Dollars in Thousands)
Fiscal Year Ended June 30,
CITY OF MILPITAS
CHANGES IN NET POSITION
138
245
Item # C9.
Schedule 2
2017 2018 2019 2020 2021 2022
$21,174 $19,111 $25,281 $24,050 $25,247 $25,213
3,389 4,148 (e) (e) (e) (e)
(e) 5,449 7,418 6,705 4,943
5,890 7,020 7,095 5,174 6,114
16,266 15,903 20,053 20,342 20,219 22,063
6,249 (d) 5,712 (d) 6,459 (d) 7,314 (d) 6,826 (d) 5,047 (d) 3,103 (d) 3,586 (d) (e) (e) (e) (e)
1,851 2,741 2,489 1,851
4,949
30,270 33,840 35,868 43,505 38,919 29,468
20,499 24,194 26,535 31,472 31,859 29,040
48 17 37 785 838
105,947 112,384 128,533 143,974 138,223 124,577
20,666 23,742 25,232 28,750 28,959 26,898
(c) (c) (c) (c) (c) (c)
9,969 12,715 12,231 15,240 15,982 15,622
30,635 36,457 37,463 43,990 44,941 42,520
$136,582 $148,841 $165,996 $187,964 $183,164 $167,097
$1,970 $2,088 $2,347 $1,809 $1,710 $1,931
7,814 10,093 (e) (e) (e) (e)
9,718 6,621 8,629 8,815
2,559 2,655 1,145 762 2,360
(d) (d) (d) (d) (d) (d)
2,720 (d) 2,465 (d) 2,379 (d) 2,132 (d) 1,792 (d) 1,096 (d) 292 418 (e) (e) (e) (e)
226 452 408 474
2,301
1,184 1,089 1,130 1,087 1,055 1,421
3,224 3,326 2,172 2,402 2,553 2,582
7,880 6,521 8,277 10,643 14,986 15,335
32,256 34,003 47,194 33,423 18,997 19,924
59,641 62,562 76,098 59,714 50,892 53,938
26,318 29,667 29,355 32,792 34,658 34,374
(c) (c) (c) (c) (c) (c)
16,803 17,139 17,830 19,566 20,152 21,593
89 124 114 171 125 306
4,937 2,507 2,755 601 1,434 1,026
48,147 49,437 50,054 53,130 56,369 57,299
$107,788 $111,999 $126,152 $112,844 $107,261 $111,237
($46,306) ($49,822) ($52,435) ($84,260) ($87,331) ($70,639) 17,512 12,980 12,591 9,140 11,428 14,779
($28,794) ($36,842) ($39,844) ($75,120) ($75,903) ($55,860) (Continued)
139
246
Item # C9.
Schedule 2
2013 (a) 2014 2015 2016
LAST TEN FISCAL YEARS
(accrual basis of accounting)
(Dollars in Thousands)
Fiscal Year Ended June 30,
CITY OF MILPITAS
CHANGES IN NET POSITION
General Revenues and Other Changes in Net Position
Governmental activities
Taxes:
Property taxes $20,469 $27,607 $24,927 $27,068
Sales and use taxes 20,196 19,014 18,779 23,924
Hotel/Motel taxes 7,933 9,336 10,917 11,757
Other taxes 516 672 664 822
Franchise fees 3,270 3,453 3,659 3,841
Motor vehicle in lieu 37 31 29 29
Investment earnings 260 844 379 913
Gain on sale of capital assets/property 46
Miscellaneous 103 200 333 287
Transfers 3,045 3,402 1,627 2,625
Extraordinary item
Special Item 49,799
Total government activities 55,875 64,559 61,314 71,266 Business-type activities
Investment earnings 94 690 383 695
Transfers (3,045) (3,402) (1,627) (2,625)
Total business-type activities (2,951) (2,712) (1,244) (1,930) Total primary governmen
t $52,924 $61,847 $60,070 $69,336
Change in net position
Governmental activities $6,696 $16,249 $12,076 $43,549
Business-type activities 4,955 4,477 6,412 3,294
Total primary government $11,651 $20,726 $18,488 $46,843 (a) The City implemented the provisions of GASB Statement 63 in fiscal year 2013, which replaced the term “net assets” with the term “net position.”
(b) The parks division is part of the Public Works department beginning in fiscal year 2013. (c) Beginning in fiscal year 2013, the Recycled Water Utility is part of the Water Utility. (d) Public Works and Engineering are separate departments beginning in fiscal year 2016. (e) Neighborhood Services is a component of Building, Housing and Sa fety, and Planning is a separate department beginning in fiscal year 2019. (f) Under the terms of a settlement agreement with the C ounty Auditor - Controller, Successor Agency to the Milpitas Redevelopment Agency and other parties, the City and Economic Development Corporation transferred cash and certain capital assets to the Successor Agency and received certain capital assets from the Successor Agency. 140
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Item # C9.
Schedule 2
2017 2018 2019 2020 2021 2022
$30,262 $31,893 $33,811 $37,684 $40,979 $42,646
25,392 26,991 27,983 24,173 24,170 33,210
11,858 12,122 14,503 11,377 4,213 8,013
803 814 808 836 791 1,070
3,871 4,678 5,127 5,173 5,036 5,188
34 39 36 60 57 87
118 301 4,474 2,808 965 (7,560)
7,324 4 43 28 198
118 186 390 446 503 1,554
2,923 2,511 2,489 4,187 6,079 4,357
(12,432) (f)
82,703 67,103 89,625 86,787 82,821 88,763
(65) 171 2,712 2,261 588 (3,246)
(2,923) (2,511) (2,489) (4,187) (6,079) (4,357)
(2,988) (2,340) 223 (1,926) (5,491) (7,603)
$79,715 $64,763 $89,848 $84,861 $77,330 $81,160
$36,397 $17,281 $37,190 $2,527 ($4,510) $18,124
14,524 10,640 12,814 7,214 5,937 7,176
$50,921 $27,921 $50,004 $9,741 $1,427 $25,300
141
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Item # C9.
249
Item # C9.
Schedule 3
CITY OF MILPITAS
FUND BALANCES, GOVERNMENTAL FUNDS
LAST TEN FISCAL YEARS
(modified accrual basis of accounting)
(Dollars in Thousands)
Fiscal Year Ended June 30,
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
General Fund
Nonspendable $468 $23,279 $23,265 $23,387 $20,209 $10,043 $10,234 $10,189 $4,783 $4,866 Restricted
Committed 5,433 5,433 5,433 8,440 19,026 33,643 43,852 44,082 13,266 15,766 Assigned 10,434 6,658 7,013 9,052 8,067 8,629 5,916 6,118 6,543 6,114 Unassigned 16,444 13,521 13,864 13,410 25,440 40,496 40,655 34,387 38,128 40,038 Total General Fund $32,779 $48,891 $49,575 $54,289 $72,742 $92,811 $100,657 $94,776 $62,720 $66,784 (a) All Other Governmental Funds
Nonspendable $11 $32 $11 $13 $15 $2,229 $85 $20 $28 $27 Restricted 89,821 62,661 92,347 99,701 109,416 110,418 143,232 155,359 150,544 147,231 Assigned 14,244 11,808 20,806 29,956 29,635 24,284 28,532 29,768 39,508 22,250 Unassigned (12,955) (6,610) (5,932)
Total all other governmental funds $91,121 $67,891 $107,232 $129,670 $139,066 $136,931 $171,849 $185,147 $190,080 $169,508 (a) (a) The change in total fund balance for the General Fund and other governmental funds is explained in Management's Discussion and Analysis.
0 50,000
100,000
150,000
200,000
250,000
300,000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
($ 000)
Nonspendable Restricted Committed
Assigned Unassigned
143
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Item # C9.
Schedule 4
2013 2014 2015 2016 2017
Revenues
Property taxes $20,466 $27,608 $24,927 $27,068 $30,261
Sales taxes 20,908 19,766 19,572 24,719 26,214
Hotel/Motel taxes
Franchise fees
Other taxes 13,343 14,992 17,505 18,737 19,349
Licenses and fines 5,875 8,193 6,971 8,051 10,497
Use of money and property 1,538 2,964 2,032 3,037 2,180 Intergovernmental 5,842 5,216 5,482 6,104 4,696
Charges for services 5,550 5,735 6,449 7,196 7,238
Developer contributions 7,987 13,975 11,614 29,410 25,637 Other 715 1,144 205 113 310
Total Revenues 82,224 99,593 94,757 124,435 126,382
Expenditures
Current:
General Governmen
t 11,871 13,204 12,814 13,771 17,089
Building and Safety 2,278 2,658 2,706 2,885 3,148
Building, Housing and Safety
Recreation and Community Services 3,383 3,876
Human Resources and Recreation 3,087 3,124 3,329 (c) (c) Parks and Recreation (a) (a) (a) (a) (a)
Public Works 9,124 8,535 9,199 6,020 6,839
Engineering 3,257 3,527
Planning and Neighborhood Services 2,030 2,202 2,570 2,805 2,978 Planning
Police 20,978 22,165 24,193 26,124 27,247
Fire 15,420 14,587 15,605 17,470 18,456
Capital outlay 7,510 10,035 14,376 24,811 26,151
Debt service:
Principal 4,209 3,828 6,000
Interest and fees 668 223 61 54 48
Total Expenditures 77,175 80,561 90,853 100,580 109,359 Excess (deficiency) of revenues over
(under) expenditures 5,049 19,032 3,904 23,855 17,023
Other Financing Sources (Uses)
Proceeds from debt issuance
Pa
yments to refunded debt escrow agent 46
Proceeds/gain from sale of properties 6 4 160 7,324
Loss from sale/conveyance of property (512)
Transfers in 13,780 7,499 25,558 23,001 18,405
Transfers (out) (10,735) (4,098) (19,305) (19,864) (14,903) Total other financing sources (uses) 2,579 3,407 6,257 3,297 10,826 Extraordinary Items
Assets transferred to Housing Successor
Assets transferred to/liabilities assumed
by Successor Agency/Housing Successor
Special Item
Assets transferred to/from Successor Agency and County (27,261) (b) Net Change in fund balances $7,628 $22,439 $10,161 $27,152 $27,849 Debt service as a percentage of
noncapital expenditures 18.5% 5.5% 7.4% 0.1% 0.1%
(a) Beginning in fiscal year 2013, parks maintenance division is part of the public works department and the recreation division is part of human resources department.
However starting in fiscal year 2016, the recreation was separated out from Human Resources as an individual department (b) Under the terms of a settlement agreement with the County Auditor - Controller, Successor Agency to the Milpitas Redevelopment Agency and other parties, the City and Economic Development Corporation transferred cash and certain capital assets to the Successor Agency and received certain capital assets from the Successor Agency. (c) Human Resources is a component of General Government and Recreation is a separate department beginning in fiscal year 2016. (d) Neighborhood Services is a component of Building, Housing and Safety, and Planning is a separate department beginning in fiscal year 2019. (e) Transient occupancy taxes and Franchise fees were reported separately from Other taxes beginning in fiscal year 2020.
Fiscal Year Ended June 30,
CITY OF MILPITAS
CHANGES IN FUND BALANCES, GOVERNMENTAL FUNDS
LAST TEN FISCAL YEARS
(modified accrual basis of accounting)
(Dollars in Thousands)
144
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Item # C9.
Schedule 4
2018 2019 2020 2021 2022
$31,893 $33,811 $37,799 $41,093 $42,759
27,854 28,890 25,058 25,114 34,364
11,377 (e) 4,213 (e) 8,012 (e)
5,173 (e) 5,036 (e) 5,188 (e)
20,429 23,386 4,632 (e) 4,889 (e) 5,940 (e)
12,758 11,757 9,039 10,993 11,287
2,719 8,452 8,092 1,505 (5,980)
6,228 6,019 9,089 12,576 15,403
6,981 6,969 5,228 4,816 6,114
29,065 41,153 24,684 15,880 9,331
568 926 983 642 621
138,495 161,363 141,154 126,757 133,039
15,397 21,352 19,146 22,902 24,657
3,633 (d) (d) (d)
5,038 5,784 6,088 5,853
4,497 5,144 5,227 3,662 5,041
(c) (c) (c) (c)
(a) (a) (a) (a)
6,983 8,151 9,588 10,671 10,850
3,103 3,201 3,559 3,846 3,474
3,153 (d) (d) (d)
1,648 2,116 2,293 2,142
27,880 30,389 34,301 34,803 35,023
21,034 23,225 26,416 28,200 29,483
27,243 23,435 32,106 33,648 33,828
199 728 275
69 104 155 449 737
112,992 121,886 139,126 146,562 151,363
25,503 39,477 2,028 (19,805) (18,324)
952 21,919
1 3 118
(12,437) (152)
19,505 37,936 27,164 21,486 16,902
(14,637) (35,449) (21,777) (50,724) (13,225)
(7,569) 3,288 5,387 (7,316) 3,795
$17,934 $42,765 $7,415 ($27,121) ($14,529)
0.1% 0.3% 0.7% 0.3% 0.7%
Fiscal Year Ended June 30,
145
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Item # C9.
Schedule 5
CITY OF MILPITAS
ASSESSED VALUE AND ACTUAL VALUE OF TAXABLE PROPERTY
LAST TEN FISCAL YEARS
(Dollars in Thousands)
Real Property Less: Total Taxable
Fiscal Residential Commercial Industrial Tax-Exempt Assessed Total Direct Year Property Property Property Other (c) Unsecured Property (c) Value (a) Tax Rate (b) 2012-13 $6,291,949 $1,348,591 $2,507,227 $355,453 $1,706,657 ($309,165) $11,900,712 1% 2013-14 6,793,845 1,388,236 2,622,328 540,230 1,764,760 (296,041) 12,813,358 1% 2014-15 7,728,283 1,427,474 2,628,858 654,879 1,887,428 (266,136) 14,060,786 1% 2015-16 8,629,667 1,445,665 2,788,984 649,712 1,844,591 (299,860) 15,058,759 1% 2016-17 9,386,926 1,493,922 3,248,012 675,017 1,529,223 (314,291) 16,018,809 1% 2017-18 10,143,815 1,581,140 3,563,327 782,718 1,710,357 (315,999) 17,465,358 1% 2018-19 10,997,080 1,619,668 3,504,633 790,143 1,761,094 (328,719) 18,343,899 1% 2019-20 12,311,913 1,684,889 3,752,681 665,325 1,917,745 (333,527) 19,999,026 1% 2020-21 13,398,580 1,792,792 4,048,447 534,924 1,890,212 (186,858) 21,478,097 1% 2021-22 14,045,849 1,861,634 4,231,585 463,153 1,922,357 (178,163) 22,346,415 1% Source: Hdl Coren & Cone, Santa Clara County Assessor Combined Tax Rolls Notes:
(a) The State Constitution requires property to be assessed at one hundred percent of the most recent purchase price, plus an i ncrement of
no more than two percent annually, plus any local over-rides. These values are considered to be full market values. (b) California cities do not set their own direct tax rate. The state constitution establishes the rate at 1% and allocates a portion of that amount,
by an annual calculation, to all the taxing entities within a tax rate area. (c) Corrections were made for Fiscal Years 2013-14 through 2018-19 to correct the amounts for Other and Tax-Exempt Property. To tal
assessed value was unchanged.
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
$18,000,000
$20,000,000
$22,000,000
$24,000,000
2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 146
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Item # C9.
Schedule 6
CITY OF MILPITAS
DIRECT AND OVERLAPPING PROPERTY TAX RATES
LAST TEN FISCAL YEARS
(Rate per $100 of assessed value)
City Direct Rates Overlapping Rates (a)
County of
Fiscal Basic Total Santa School Special
Year Rate (b) Direct Clara (c) Districts Districts
2012-13 1.00 1.00 0.0463 0.1140 0.0069
2013-14 1.00 1.00 0.0437 0.0961 0.0070
2014-15 1.00 1.00 0.0503 0.0750 0.0065
2015-16 1.00 1.00 0.0503 0.0817 0.0057
2016-17 1.00 1.00 0.0498 0.0734 0.0086
2017-18 1.00 1.00 0.0621 0.0880 0.0062
2018-19 1.00 1.00 0.0589 0.0850 0.0042
2019-20 1.00 1.00 0.0581 0.1245 0.0410
2020-21 1.00 1.00 0.0412 0.1255 0.0037
2021-22 1.00 1.00 0.0412 0.1210 0.0051
Source: County of Santa Clara, Tax Rates & Information Notes:
(a) Overlapping rates are those of local and county governments that apply to property owners within the City of Milpitas. Not all overlapping rates apply to all Milpitas property owners. These are voter approved levies in addition to the 1% State levy.
(b) The City's basic property tax rate can only be increased by a 2/3 vote of the City's residents. (c) The overlapping rates for the County of Santa Clara were corrected in prior years to include amounts that were previously omitted by mistake.
147
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Item # C9.
Schedule 7
CITY OF MILPITAS
PRINCIPAL PROPERTY TAX PAYERS
FISCAL YEARS 2021-22 and 2012-13
2021-2022 2012-2013
Percentage Percentage
of Total City of Total City
Taxable
Taxable Taxable Taxable
Assessed
Assessed Assessed Assessed
Taxpayer Value Rank Value Value Rank Value
Cisco Systems Inc. $867,898,866 1 3.88% $920,982,774 1 7.74% KLA Tencor Corporation 465,867,697 2 2.08% 218,574,011 3 1.84% Milpitas Mills LP 344,278,329 3 1.54% 327,223,683 2 2.75% Headway Technologies Inc 308,496,406 4 1.38% 97,763,124 7 0.82% Sandbox Expansion LLC 244,429,905 5 1.09% 90,412,630 8 0.76% McCarthy Center Holding LLC 199,182,830 6 0.89%
Trader Joes Company 192,903,762 7 0.86%
Western Digital Technologies Inc 190,545,438 8 0.85%
Amalfi Milpitas LLC 172,689,312 9 0.77%
Lago Vista Milpitas LLC 172,078,619 10 0.77% 0.00%
Linear Technology Corporation 127,580,218 4 1.07%
BRE Milpitas LLC 118,766,415 5 1.00%
California Diversified LLC 114,342,000 6 0.96%
EQR Fresca 2009 LP 80,692,794 9 0.68%
Silicon Valley California I LLC 77,414,549 10 0.65%
Subtotal $3,158,371,164 14.13% $2,173,752,198 18.27%
Fiscal Year 2021-2022 Total Net Assessed Valuation $22,346,415,000 Fiscal Year 2012-2013 Total Net Assessed Valuation $11,900,712,000 Source: Hdl, Coren & Cone, Santa Clara County Assessor 2021/22 Combined Tax Rolls 148
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Item # C9.
Schedule 8
CITY OF MILPITAS
PROPERTY TAX LEVIES AND COLLECTIONS
LAST TEN FISCAL YEARS
(Dollars in thousands)
Percent Delinquent Total
Fiscal Taxes Current of Levy Tax Taxes Percent
Year Levied (a) Collections (a) Collected Collections Collected (a) of Levy 2012-13 (b) $20,469 $20,469 100.00% $0 $20,469 100.00%
2013-14 27,608 27,608 100.00% 0 27,608 100.00%
2014-15 24,927 24,927 100.00% 0 24,927 100.00%
2015-16 27,068 27,068 100.00% 0 27,068 100.00%
2016-17 30,262 30,262 100.00% 0 30,262 100.00%
2017-18 31,893 31,893 100.00% 0 31,893 100.00%
2018-19 33,811 33,811 100.00% 0 33,811 100.00%
2019-20 37,684 37,684 100.00% 0 37,684 100.00%
2020-21 41,093 41,093 100.00% 0 41,093 100.00%
2021-22 42,759 42,759 100.00% 0 42,759 100.00%
(a) The City elected to participate in the "Teeter" plan offered by the County whereby cities receive 100% of the taxes levied in exchange for foregoing any interest and penalties collected on delinquent taxes.
(b) The Redevelopment Agency was dissolved effective January 31, 2012 and collections of property tax increment ceased as of that date. Subsequent to that date, a Successor Agency collects property taxes of the former Redevelopment Agency.
Source: City of Milpitas Annual Comprehensive Financial Report 149
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Item # C9.
Schedule 9
CITY OF MILPITAS
TAXABLE SALES BY CATEGORY
LAST TEN CALENDAR YEARS
(Dollars in Thousands)
Adjusted for Economic Data (a)
CALENDAR YEARS
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Apparel Stores 282,727$ 291,556 $ 300,238 $ 321,992 $ 324,754 $ 314,471 $ 325,501 $ 328,250 $ 135,581 $ 234,479$ General Merchandise 92,912 93,209 85,048 86,475 92,857 90,725 86,646 83,341 64,448 70,905 Food Stores 28,345 27,962 30,876 32,076 32,093 32,541 31,105 31,622 33,127 35,255 Eating and Drinking Places 215,651 230,422 240,297 261,608 277,250 292,114 300,096 312,895 178,556 266,523 Building Materials 53,043 58,260 90,386 134,128 219,504 217,800 245,999 273,634 246,796 261,114 Auto Dealers and Supplies 173,357 167,073 177,278 186,944 195,658 218,917 208,223 201,342 176,739 204,398 Service Stations 109,768 110,453 115,955 98,980 93,186 97,579 107,423 110,236 70,733 108,408 Other Retail Stores 303,230 241,299 197,343 211,182 198,233 191,574 194,569 192,038 123,966 158,319 All Other Outlets 757,674 686,659 764,395 959,364 1,014,866 1,291,651 1,138,049 1,201,892 1,181,873 1,193,162 Total $2,016,707 $1,906,893 $2,001,816 $2,292,749 $2,448,401 $2,747,372 $2,637,611 $2,735,250 $2,211,819 $2,532,563 Source: State Board of Equalization, California Department of Taxes and Fees Administration, State Controller's Office, The HdL Companies Note: Due to confidentiality issues, the names of the ten largest revenue payers are not available. The categories presented are intended to provide alternative inform
ation regarding the sources to the City's revenue.
(a) Adjusted for Econom
ic Data - reflects adjustments for prior periods taxable sales in the appropriate quarters. $-
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
($ 000)
Apparel Stores General Merchandise Food Stores Eating and Drinking Places Building Materials Auto Dealers and Supplies Service Stations Other Retail Stores All Other Outlets 150
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Item # C9.
Schedule 10CITY OF MILPITAS
DIRECT AND OVERLAPPING SALES TAX RATES
LAST TEN FISCAL YEARS
City
Fiscal Direct Santa Clara State of
Year Rate County (d) California
2012-13 1.00 1.50 (a) 6.25 (b)
2013-14 1.00 1.50 6.25
2014-15 1.00 1.50 6.25
2015-16 1.00 1.50 6.25
2016-17 1.00 2.00 6.00
(c)
2017-18 1.00 2.00 6.00
2018-19 1.00 2.00 6.00
2019-20 1.00 2.00 6.00
2020-21 1.25 2.00 6.00
2021-22 1.25 2.13 6.00
Source: California State Board of Equalization
(a) April 1, 2013 the County increased the rate 0.25%
(c) On April 1, 2017, the County increased the rate 0.50% and on January 1, 2017 the State decreased the rate 0.25%.
(d) Corrections were made to the County and State rates in all years. 0.25% that is part of the County Transportation Fund was being counted as State rate by mistake.
Note: The City's sales tax rate may be changed only with approval of the State Legislature. (b) On both July 1, 2012 and April 1, 2013 the State increased the State Rate 0.125% 151
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Item # C9.
Schedule 11
CITY OF MILPITAS
PRINCIPAL SALES TAX PAYERS
FISCAL YEARS 2021-22 and 2012-13
IN ALPHABETICAL ORDER
Fiscal Year 2021-2022 Fiscal Year 2012-2013
Autumn Information Systems Best Buy
Best Buy Burlington
Cisco Systems Chevron
Coach Chevron
Consolidated Electrical Distributors Cisco Systems
Envision Honda of Milpitas Coach
Envision Toyota of Milpitas Dave & Busters
Eplus Technology Flextronics
Flextronics Gap Outlet
Floor & Decor Headway Technologies
Headway Technologies Home Depot
Home Depot Jacklin Shell
Hoya Optics KLA Tencor
Independent Electric Supply Kohls
Jacklin Shell Leotek Electronics
KLA Tencor Marshalls
Marshalls Mazak Corporation
Milpitas Materials Company Milpitas Materials Company
Piercey Honda Nike Factory Store
Piercey Toyota One Workplace
Teledyne Lecroy Piercey Toyota
Veeco Process Equipment Inc Pivot Interiors
Vm Services Inc Shell
Walmart Supercenter South Bay Honda
Western Digital Technologies Walmart Supercenter
Source: HDL Coren & Cone
152
259
Item # C9.
Schedule 12
Business-type Activities
Lease Certificates Total Percentage
Fiscal Revenue Purchase Capital of Revenue Primary of Personal Per Year Bonds Agreement Lease Participation Bonds (d) Government Income (a) Capita (a) 2012-13 $0 $9,828 $360 $7,315 $0 $17,503 0.82% $258
2013-14 0 6,000 274 6,910 0 13,184 0.59% 188
2014-15 0 0 186 6,490 0 6,676 0.29% 96
2015-16 0 0 94 6,055 0 6,149 0.26% 81
2016-17 0 0 0 5,605 0 5,605 0.22% 74
2017-18 0 0 0 0 5,363 5,363 0.20% 71
2018-19 0 0 728 0 4,812 5,540 0.19% (b) 73
2019-20 0 0 0 0 59,448 59,448 1.76% 763
2020-21 21,919 0 0 0 57,882 79,801 2.11% 1,056
2021-22 21,470 0 0 0 56,246 77,716 2.08% 961
Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. (a) See Schedule 20 for personal income and population data. (b) The Redevelopment Agency was dissolved as of January 31, 2012 and its debt was assumed by a Successor Agency. (c) Data for fiscal year 2018-19 not available until May of 2020. (d) Balance of Revenue Bonds includes unamortized Bond Premium Governmental Activities
(Dollars in thousands, except per capita)
CITY OF MILPITAS
RATIOS OF OUTSTANDING DEBT BY TYPE
LAST TEN FISCAL YEARS
153
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Item # C9.
Schedule 13
CITY OF MILPITAS
BONDED DEBT PLEDGED REVENUE COVERAGE
REDEVELOPMENT AGENCY TAX ALLOCATION BONDS
LAST TEN FISCAL YEARS
Fiscal Net
Year Redevelopment Tax Debt Service Requirements
Ended Agency Property Less Housing Increment
June 30 Tax Increments (a) Reserve Fund Revenue Principal Interest Total Coverage 2013 $33,401,413 (d) $0 (b) $33,401,413 $5,595,000 (c) $7,973,533 (c) $13,568,533 2.46 2014 40,418,284 (d) 0 (b) 40,418,284 5,825,000 (d) 7,713,234 (d) 13,538,234 2.99 2015 44,843,881 (d) 0 (b) 44,843,881 6,120,000 (d) 7,414,608 (d) 13,534,608 3.31 2016 48,810,216 (d) 0 (b) 48,810,216 7,375,000 (d) 5,567,028 (d) 12,942,028 3.77 2017 51,563,292 (d) 0 (b) 51,563,292 6,045,000 (d) 5,682,175 (d) 11,727,175 4.40 2018 66,266,187 (d) 0 (b) 66,266,187 6,225,000 (d) 5,467,000 (d) 11,692,000 5.67 2019 71,988,412 (d) 0 (b) 71,988,412 6,475,000 (d) 5,213,000 (d) 11,688,000 6.16 2020 83,139,471 0 (b) 83,139,471 6,735,000 (d) 4,915,125 (d) 11,650,125 7.14 2021 84,805,793 0 (b) 84,805,793 7,070,000 (d) 4,570,000 (d) 11,640,000 7.29 2022 91,606,749 0 (b) 91,606,749 7,425,000 (d) 4,207,625 (d) 11,632,625 7.87 (a) Tax increments are net of pass-through payments and administ rative fees withheld by the County prior to distribution to the Agency. (b) The Redevelopment Agency was dissolved as of Janua ry 31, 2012 and its debt was assumed by a Successor Agency.
The Successor Agency collects Property Taxes, with no distinction between housing and non-housing revenues, which are used for the repayment of the former Redevelopment Agency's Bonds. (c) Includes debt service paid by the Redevelopment Agency prio r to the dissolution and by the Successor Agency after the dissolution. (d) Tax increment reported in this table after the dissolution date is the amount calculated by the County Auditor-Controller as available for payment of enforceable obligations. Under the provisions of the laws dissolving the Redevelopment Agency, the Successor Agency only receives the funds necessary to fulfill its approved obligations.
Debt service reported was paid by the Successor Agency. $0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
$50,000
$55,000
$60,000
$65,000
$70,000
$75,000
$80,000
$85,000
$90,000
$95,000
$100,000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
($000)
Series1 Series4
154
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Item # C9.
Schedule 14
CITY OF MILPITAS
COMPUTATION OF DIRECT AND OVERLAPPING DEBT
PERCENTAGE AMOUNT
APPLICABLE APPLICABLE
TO CITY OF TO CITY OF
JURISDICTION MILPITAS (1) MILPITAS
2021-22 Assessed Valuation, Direct and Overlapping Debt $22,346,414,172 OVERLAPPING TAX AND ASSESSMENT DEBT:
Santa Clara County $43,843,055
San Jose- Evergreen Community College District
103,598,543
Milpitas Unified School District 285,549,509
East Side Union High School District 7,188,870
Berryessa Union School District 6,004,597
Santa Clara Valley Water District Benefits Assessment District 1,866,776 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT 448,051,350
DIRECT AND OVERLAPPING GENERAL FUND DEBT
Santa Clara County General Fund Obligations $46,938,621 Santa Clara County Pension Obligation Bonds 13,012,703
Santa Clara County Board of Education Certificates of Participation 70,561 San Jose-Evergreen Community College District OPEB Bonds 5,893,765 Milpitas Unified School District General Fund Obligations 10,172,783 East Side Union High School District OPEB Bonds 204,019 Berryessa Union School District General Fund Obligations 150,468 City of Milpitas General Fund Obligations 100% 18,170,000 Santa Clara County Vector District Certifications of Participations 58,349 TOTAL GROSS DIRECT AND OVERLAPPING GENERAL FUND DEBT 94,671,269 Less: Santa Clara County supported obligations 700,914 TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT $93,970,355 OVERLAPPING TAX INCREMENT DEBT (Successor Agency) 100% $80,440,000 TOTAL DIRECT DEBT $18,170,000
TOTAL GROSS OVERLAPPING DEBT $604,992,619
TOTAL NET OVERLAPPING DEBT $604,291,705
GROSS COMBINED TOTAL DEBT $623,162,619 (2)
NET COMBINED TOTAL DEBT $622,461,705
(1) The percentage of overlapping debt applicable to the city is estimated using taxable assessed property value.
Applicable percentages were estimated by determining the portion of the overlapping district's assessed value that is within the boundaries of the city divided by the district's total taxable assessed value. (2) Excludes tax and revenue anticipation notes, revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease obligations.
Ratios to 2021-22 Assessed Valuation:
Total Overlapping Tax and Assessment Debt 2.01%
Ratios to Assessed Valuation:
Direct Debt % 0.08%
Total Gross Debt % 2.79%
Source: Avenu Insights & Analytics, California Municipal Statistics, Inc.
JUNE 30, 2022
155
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Item # C9.
Schedule 15
CITY OF MILPITAS
LEGAL DEBT MARGIN INFORMATION
LAST TEN FISCAL YEARS
(Dollars in Thousands)
Legal Debt Margin Calculation for Fiscal Year 2021-22
Assessed value (net) - June 30, 2022 $22,346,414
Debt limit: 3.75% of assessed value (a) $837,991
Debt applicable to limit
Total Bonded Debt
Less: Tax Allocation Bonds
not subject to limit
Amount of Debt subject to limit 0
Legal debt margin $837,991
Total Net Debt
Applicable to the
Limit as a
Fiscal Debt Total Net Debt Legal percentage of
Year Limit Applicable to Limit Debt Margin Debt Limit
2012-13 $446,277 $0 $446,277 0.0%
2013-14 480,501 0 480,501 0.0%
2014-15 527,280 0 527,280 0.0%
2015-16 564,703 0 564,703 0.0%
2016-17 600,705 0 600,705 0.0%
2017-18 654,951 0 654,951 0.0%
2018-19 687,896 0 687,896 0.0%
2019-20 749,963 0 749,963 0.0%
2020-21 805,429 0 805,429 0.0%
2021-22 837,991 0 837,991 0.0%
(a) California Government Code, Section 43605 sets the debt limit at 15%. The Code section was enacted prior to the change in being assessed value to full market value when it was previously 25% of market value. Thus, the limit shown as 3.75% is one-fourth the limit to account for the adjustment of showing assessed valuation at full cash value.
Source: City of Milpitas Finance Department
Santa Clara County Tax Assessor's Office
156
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Item # C9.
Schedule 16
CITY OF MILPITAS
INSTALLMENT PAYMENT COVERAGE
SEWER CERTIFICATES OF PARTICIPATION AND
LAST TEN FISCAL YEARS
Less: Net Installment Payments
Fiscal Gross Operating Available
Year Revenues (1) Expenses (2) Revenue Principal Interest Total Coverage 2012-13 $12,785,567 $6,356,621 $6,428,946 $395,000 $292,966 $687,966 9.34 2013-14 13,235,908 7,834,220 5,401,688 405,000 278,965 683,965 7.90 2014-15 14,664,759 7,263,553 7,401,206 420,000 264,528 684,528 10.81 2015-16 16,408,718 7,687,848 8,720,870 435,000 249,348 684,348 12.74 2016-17 16,803,344 6,657,757 10,145,587 450,000 233,193 683,193 14.85 2017-18 17,245,001 9,031,729 8,213,272 470,000 216,055 686,055 11.97 2018-19 19,163,495 8,427,888 10,735,607 480,000 170,273 650,273 16.51 2019-20 20,664,951 10,235,463 10,429,488 460,000 808,477 1,268,477 8.22 2020-21 20,499,033 11,425,234 9,073,799 920,000 1,498,525 2,418,525 3.75 2021-22 21,592,843 9,373,484 12,219,359 980,000 1,455,875 2,435,875 5.02 NOTE: The Certificates of Participation were issued on November 28, 2006 and called on January 5, 2018.
The 2017 Wastewater Revenue Refunding Bonds were issued on December 4, 2017.
The 2019 Wastewater Revenue Bonds were issued on October 22, 2019. (1) Gross Revenues include sewer service charges, other operating revenues, and interest income.
Gross Revenues exclude connection fees and capital contributions. (2) Operating Expenses include sewer treatment services, personnel services, services and supplies, and repairs and maintenance expenses.
Operating Expenses exclude depreciation and amortization expenses.
WASTEWATER REVENUE REFUNDING BONDS
157
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Item # C9.
Schedule 17
CITY OF MILPITAS
INSTALLMENT PAYMENT COVERAGE
LAST TEN FISCAL YEARS
Less: Net Installment Payments
Fiscal Gross Operating Available
Year Revenues (1) Expenses (2) Revenue Principal Interest Total Coverage 2012-13
2013-14
2014-15
2015-16
2016-17
2017-18
2018-19
2019-20 $33,954,254 $26,919,455 $7,034,799 $155,000 $419,018 $574,018 12.26 2020-21 35,023,092 27,314,613 7,708,479 290,000 755,650 1,045,650 7.37 2021-22 32,732,692 24,593,074 8,139,618 300,000 744,050 1,044,050 7.80 NOTE: The Water Revenue Bonds were issued on October 24, 2019. (1) Gross Revenues include water service charges, other operating revenues, and interest income.
Gross Revenues exclude connection fees and capital contributions. (2) Operating Expenses include wholesale water purchases, personnel services, services and supplies, and repairs and maintenance expenses.
Operating Expenses exclude depreciation and amortization expenses.
WATER REVENUE FUNDS
158
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Schedule 18
CITY OF MILPITAS
BIMONTHLY SEWER RATES BY CUSTOMER CLASS
LAST TEN FISCAL YEARS
Single Family Multi-Family Mobile Home
Fiscal Per Dwelling Per Dwelling Parks Per Flat Quantity Year Unit Unit Dwelling Unit Rate Charges (a)
2012-13 75.92 51.06 33.36 13.72 2.38 - 6.99
2013-14 75.92 51.06 33.36 13.72 2.38 - 6.99
2014-15 86.93 52.22 38.20 14.68 2.73 - 8.00
2015-16 90.27 69.32 56.97 14.97 3.94 - 8.34
2016-17 90.27 69.32 56.97 14.97 3.94 - 8.34
2017-18 90.27 69.32 56.97 14.97 3.94 - 8.34
2018-19 102.52 78.73 64.70 24.30 4.21 - 9.63
2019-20 111.07 85.30 70.08 25.78 4.54 - 10.65
2020-21 118.34 90.88 74.66 26.55 4-91 - 11.48
2021-22 124.14 95.34 78.28 27.35 5.31-12.09
Source: City of Milpitas, Ordinance 208.53
(a) For each one hundred cubic feet of water used. Charge varies depending on the business or type of business.
Residential
Commercial
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Schedule 19
CITY OF MILPITAS
BIMONTHLY WATER RATES BY CUSTOMER CLASS
LAST TEN FISCAL YEARS
Potable
Commercial
Industrial
Fiscal Potable Capital 5/8 inch Institutional 5/8 to 10 inch Year Residential Surcharge Meter Charge Construction Meter Charge 2012-13 2.02 - 4.50* 26.29 4.62 26.29 - 641.40
2013-14 2.30 - 4.86* 26.82 4.94 26.82 - 654.23
2014-15 2.62 - 5.29* 27.36 5.29 27.36 - 667.31
2015-16 4.75 18.00 4.75 18.00 - 900.00
2016-17 5.13 1.30 19.44 5.13 19.44 - 972.00
2017-18 5.13 1.30 19.44 5.13 19.44 - 972.00
2018-19** 5.13 - 5.31 1.30 - 1.08 19.44 - 27.01 5.13 - 5.31 19.44 - 1,350.33 2019-20 5.63 1.08 28.63 5.63 26.83 - 1,431.35
2020-21 6.32 1.08 32.17 6.32 32.17-1608.26
2021-22 6.70 1.08 34.10 6.70 34.10-1704.76
Source: City of Milpitas, Ordinance 120.48
*Residential rates were a range based on consumption amounts for the period. There were 4 levels with the lowest rate being for use under 10 hc, and the highest rate for use over 30 hcf in the period.. **Rate effective Service Period April 1, 2019 to June 30, 2019 implemented on bill dated June 17, 2019. July 2018 rate listed first, and April rate listed second.
Single Family Residential Commercial
160
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Schedule 20
CITY OF MILPITAS
DEMOGRAPHIC AND ECONOMIC STATISTICS
LAST TEN CALENDAR YEARS
(Personal Income in Thousands)
Population Per Capita
Calendar Density Total Personal Personal School Unemployment Land Area Year Population (Sq. Mile) Income Income Enrollment Rate (%) (Sq. Mile) 2012 67,894 4,970 $2,143,889 $31,577 10,033 6.70% 13.66 2013 70,092 5,131 2,234,603 31,881 10,156 5.50% 13.66
2014 69,903 5,117 2,287,366 32,722 10,281 4.90% 13.66
2015 75,521 5,529 2,374,221 31,437 10,291 3.90% 13.66
2016 75,410 5,520
2,528,663 33,532 10,260 3.50% 13.66
2017 75,410 5,520 2,721,275 36,086 10,318 3.60% 13.66
2018 76,231 5,581 2,966,362 38,912 10,172 2.80% 13.66
2019 77,961 5,707 3,373,340 43,269 10,308 2.70% 13.66
2020 75,663 5,539 3,787,034 50,051 10,413 7.50% 13.66
2021 80,839 5,918 3,744,971 46,326 10,072 5.30% 13.66
Sources: HdL, Coren & Cone
City of Milpitas Annual Budget
161
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Schedule 21
CITY OF MILPITAS
PRINCIPAL EMPLOYERS
FISCAL YEAR 2021-22 and 2012-2013
2021-22 2012-13
Percentage Percentage
Number of of Total City Number of of Total City
Employer Employees Rank Employment Employees Rank Employment Cisco Systems, Inc. 3,347 1 8.224% 2,741 1 3.36%
KLA-Tencor Corporation 2,611 2 6.415% 2,099 2 2.57%
Western Digital Tech (SanDisk Corporation) 1,773 3 4.356% 1,485 3 1.82% Analog Devices (Linear Technology Corporation) 1,283 4 3.152% 284 8 0.35% Flextronics International (aka Vista Point Technologies) 1,449 5 3.560% Milpitas Unified School District 819 6 2.012% 825 4 1.01% Headway Technologies Inc. (2 Locations) 890 7 2.187% 394 5 0.48% Walmart Supercenter 446 8 1.096% 268 10 0.33%
City of Milpitas 389 9 0.956%
Nanometrics, Inc. 281 10 0.690%
Spectra Laboratories 358 6 0.44%
Vista Healthcare Corporation 320 7 0.39%
JDS Uniphase Corporation 277 9 0.34%
Subtotal 13,288 32.6486% 9,051 11.0857%
Total Labor Force 40,700 81,646
Source: California Municipal Statistics, Inc.
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Schedule 22
CITY OF MILPITAS
AUTHORIZED FULL-TIME EQUIVALENT EMPLOYEES BY FUNCTION/PROGRAM
LAST TEN FISCAL YEARS
Fiscal Year Ended June 30,
2013 2014 2015 2016 2017 2018 2019 (e) 2020 2021 2022
Function
General Government 68.5 65.5 63.0 64.8 64.8 69.0 60.0 64.0 67.5 66.5 Building, Housing and Safe 28.0 23.0 23.0 24.0 24.0 25.0 33.0 (c) 33.0 (c) 33.0 33.0 Public Works 91.0 94.5 97.0 73.0 (b) 73.0 84.0 44.0 48.0 47.5 47.6 Engineering 26.0
(b) 26.0 17.0 22.0 25.0 24.0 24.0
Planning 16.5 18.5 18.5 17.0 17.0 17.0 9.0 (c) 10.0 (c) 10.0 9.0 Recreation 25.5 (a) 25.5 25.5 18.0 18.0 17.5 18.0 20.75 20.75 20.75 Parks and Recreation
Police:
Sworn Police 91.5 92.0 92.0 92.0 93.0 93.0 90.0 93.0 93.0 93.0 Civilians 29.5 30.0 30.0 30.0 29.0 29.0 29.0 33.0 33.0 33.0 Fire:
Firefighters and Safety
Officers 70.0 70.0 68.0 66.0 66.0 68.0 71.0 73.0 79.0 78.0 Civilians 10.0 10.0 12.0 11.0 11.0 12.0 3.0 4.0 4.0 4.0 Utilities (d) 24.0 27.5 27.5 29.5 29.5 34.5 27.5 27.5 27.5 28.4 Total 454.5 456.5 456.5 451.3 451.3 466.0 406.5 431.3 439.3 437.3 (a) B
eginning in fiscal year 2013, parks maintenance division is now under public works department and recreation division is part of human resources department, but it is reported separately here. (b)
Beginning in fiscal year 2016, Public Works and Engineering are separate departments. (c) N eighborhood Services is a component of Building, Housing and Safety, and Planning is a separate department beginning in fiscal year 2019. (d)
Utilities is comprised of employees from Public Works and Finance. (e) In Fiscal Year 2019, the City removed unfunded authorized positions.
Source: City of Milpitas, final budget
0 100
200
300
400
500
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
FTE's
General Government Building Public Works Engineering and Planning Planning and Neighborhood Services Recreation Parks and Recreation Police Fire Utilities
163
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Item # C9.
Schedule 23
2013 2014 2015 2016 2017
Function/Program
Building Safety & Housing
Building permits issued 3,400 4,300 4,300 4,200 4,090
Plan review performed 1,100 1,500 1,400 1,500 1,610
Code Customer Service Requests /
Violations abated 725 725 755 755 800
Public Works
Street miles maintained 139 139 139 139 139
Customer Service Requests 3,500 2,880 2,800 2,794 2,800 Development projects reviewed 200 205 190 178 158
Planning
Applications to Planning Commission 106 159 236 92 92
Recreation
Sports Center members 1,600 1,450 1,504 1,600 1,325
Senior nutrition meals served 22,090 20,656 21,231 20,158 18,678 Police
Avg response time to emergency calls (minutes) 2:32 2:33 2:32 2:40 2:44 Number of anti-terrorist patrol checks 1,996 2,550 2,300 2,400 2,200 Crime prevention presentations 201 200 200 125 70
Number of vehicle citations issued 4,120 3,516 3,600 5,900 5,720 Fire
Emergency calls for service 4,356 4,356 4,950 5,000 5,000 Public education events 45 45 80 100 112
Permits Inspections 4,510 4,510 4,666 7,600 7,322
Plan Review 807 807 983 1,200 1,550
Utility
Clean sewer lines (feet) 329,313 640,255 500,000 500,000 500,000 Repair, replace or set water meters 149 298 279 189 152 Average daily consumption (thousands of gallons) 9,340 9,300 9,300 7,800 5,800 Source: City of Milpitas, final budget
Footnote: Statistic for DARE presentations: schools/students is removed from this schedule in 2022 due to no activity since 201
CITY OF MILPITAS
OPERATING INDICATORS BY FUNCTION/PROGRAM
LAST TEN FISCAL YEARS
Fiscal Year Ended June 30,
164
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Item # C9.
Schedule 23
2018 2019 2020 2021 2022
4,200 4,300 4,000 3,000 3,000
1,700 1,600 4,800 4,900 4,900
714 784 600 600 600
298 298 298 303 303
3,000 2,384 4,468 3,353 4,652
160 225 134 48 24
100 419 37 31 60
1,450 1,575 1,877 506 1,024
17,206 18,322 20,145 39,783 28,699
2:57 2:41 2:36 2:40 2:50
2,200 1,949 1,479 958 490
56 104 110 105 47
5,900 5,895 6,000 6,300 4,230
5,200 5,640 5,600 5,390 6,164
200 223 134 0 2,082
7,577 7,824 7,772 2,949 1,652
1,700 1,600 1,575 1,884 1,401
491,244 528,051 432,022 636,681 331,232
115 147 219 113 25
6,590 8,394 8,410 7,440 6,895
3 Fiscal Year Ended June 30,
165
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Item # C9.
Schedule 24
2013 2014 2015 2016
Function/Program
Public Works
Miles of streets 287 287 298 298
Street lights 4,500 4,500 4,577 4,577
Square feet of buildings
maintained (in thousands) 376 376 376 376
City vehicles 242 252 260 264
Signs 8,534 5,500 5,700 5,700
Signal lights 72 72 70 71
City Parks 33 34 34 33
Acres of Parkland 179 180 180 180
Playgrounds 24 25 34 34
Parks and recreation
Community centers 1111
Senior centers 1111
Sports centers 1111
Satellite centers 0000
Swimming pools 3333
Tennis courts 20 20 21 21
Football field 1111
Baseball/softball fields 8899
Soccer fields 9 9 12 13
Basketball courts 8879
Volleyball courts / Horse Shoe Pits /
Bocce Ball / Cricket Field / Par Course 4 9 7 10
Handball courts 5555
Skate Park
Joint use:
Russell Bobbysocks Fields 0000
Soccer fields 0000
Open Space - Number of School Sites 0000
Police
Police stations 2222
Police patrol vehicles 27 29 28 34
Fire
Fire stations 4444
Fire Apparatus 22 19 19 13
Fire hydrants 1,840 1,847 2,033 2,033
Utility
Miles of water mains 213 214 213 203
Water Tank Storage
capacity (million of gallons) 16 16 16 16
Miles of sanitary sewers 179 179 179 173
Miles of storm drain 110 110 110 99
Miles of recycled water main 4 4 23 23
Source: City of Milpitas, final budget
Fiscal Year Ended June 30,
CITY OF MILPITAS
CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM
LAST TEN FISCAL YEARS
166
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Item # C9.
Schedule 24
2017 2018 2019 2020 2021 2022
298 298 298 298 303 303
4,581 5,119 5,141 4,418 4,494 4,494
376 322 473 473 473 455
264 269 271 258 268 256
6,000 10,000 10,000 6,000 6,000 6,000
72 72 74 78 83 83
32 32 32 36 36 36
195 195 195 154 154 154
33 30 33 33 33 33
111111
111111
111111
221211
333333
21 21 21 21 21 21
111111
77999 1 1
1 3 1 38888
10 10 10 10 10 10
13 12 10 10 10 10
666666
1 333330
228220
00000 1 3
222222
29 29 29 29 30 30
444444
11 11 12 13 13 13
2,039 2,039 2,039 2,308 2,308 2,308
203 206 206 206 206 206
16 16 16 16 16 16
173 175 173 173 173 173
99 105 99 99 99 99
21 23 26 26 26 24
Fiscal Year Ended June 30,
167
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Item # C9.
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OTHER AUDIT REPORT
276
Item # C9.
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Item # C9.
INDEPENDENT AUDITOR’S REPORT ON
INTERNAL CONTROL OVER FINANCIAL REPORTING
AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN
AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE
WITH
GOVERNMENT AUDITING STANDARDS
To the Honorable Members of the City Council
City of Milpitas, California
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the basic financial statements of the City of Milpitas, California, as of and for the year ended June 30, 2021, and have issued our report thereon dated November 7, 2021. Our report includes a reference to other auditors who audited the financ ial statements of Terrace Gardens, Inc. , as described in our report on the City’s financial statements. This report does not include the results of the other auditors’ testing of internal control over financial reporting or on compliance and other matters that are reported on separately by those auditors.
Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we consider ed the City’s internal control over financial reporting (internal control) as a basis for desi gning the audit procedures th at are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the City’s financial statements will not be prevented, or detected an d corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is le ss severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficien cies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit we di d not identify any deficiencies in intern al control that we consider to be material weaknesses. However, material weakness may exist that have not been identified. 169
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Item # C9.
Report on Compliance and Other Matters
As part of obtaining reasonable assu rance about whether the City’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not e xpress such an opinion. The results of our tests disclosed no instances of
noncompliance that are required to be reported under Government Auditing Standards.
We have also issued a separate Memorandum on Internal Cont rol dated November 7, 20 22 which is an integrate part of our audit and should be read in conjunction with this report.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the result of that testing, and not to pr ovide an opinion on the effectiveness of the City’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.
Pleasant Hill, California
November 7, 2022
170
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CITY OF MILPITAS
BICYCLE/PEDESTRIAN PROJECTS
FINANCIAL STATEMENTS
FOR THE YEARS ENDED
JUNE 30, 2021 AND 2022
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Bicycle/Pedestrian Projects
Financial Statement
For the Years Ended June 30, 2021 and 2022
Table of Contents
Page
Independent Auditor’s Report ........................................................................................................................... 1 Fund Financial Statements:
Balance Sheets ......................................................................................................................................... 5 Statement of Revenues, Expenditures and Changes in Fund Balances ................................................... 6 Notes to Financial Statements .................................................................................................................. 7 Independent Auditor’s Report on Internal Control Over Financial Reporting, on Compliance with the Transportation Development Act and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards .......................... 9 282
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INDEPENDENT AUDITOR’S REPORT
To the Honorable Members of the City Council
City of Milpitas, California
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements o f the Bicycle/ Pedestrian Projects (Projects) of
the City of Milpitas, California, as of and for the years ended June 30, 2022 and 2021, and the related notes to the financial statements, as listed in the Table of Contents.
In our opinion, the financial statemen ts referred to above present fair ly, in all material respects, the respective financial position of the Projects as of June 30, 2022 and 2021, and the respective changes in financial position for the years then ended in accordance with accountin g principles generally accepted in the United States of America.
Basis for Opinions
We conducted our audit in accordance with auditing sta ndards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United Stat es. 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 inde pendent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirement 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 fa ir presentation of these financial statements in accordance with accounting principles generally accep ted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error.
Emphasis of a Matter
As discussed in Note 1, the financial statements present only the Projects and do not purport to, and do not present fairly the financial position of the City as of June 30, 2022 and 2021, the changes in its financial position for the years then ended in accordance w ith accounting principles generally accepted in the United States of America. Our opinions are not modified with respect to this matter. 1 284
Item # C9.
Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance ab out whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conduc ted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists.
The risk of not detecting a material misstatement re sulting 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, individually or in the aggregate, they could reasonably be expected to influence th e judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstate ment of the financial statements, whether due to fraud or error, and design and perform audit procedures respon sive 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 a udit in order to design audit procedures that are appropriate in the circumst ances, but not for the purpose of expressing an opinion on the effectiveness of the Project’s intern al control. Accordingly, no such opinion is expressed.
• Evaluate the appropriateness of accounting policie s used and the reasonableness of significant accounting estimates made by ma nagement, 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 Projects’ 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 au dit findings, and certain internal control-related matters that we identified during the audit.
2 285
Item # C9.
Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 10, 2022, on our consideration of the Project’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulat ions, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Project’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 Project’s internal control over financial reporting and compliance.
Pleasant Hill, California
November 10, 2022
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CITY OF MILPITAS
BICYCLE/PEDESTRIAN PROJECTS
BALANCE SHEETS
JUNE 30, 2021 AND 2022
2022 2021
ASSETS
Receivable from MTC $155,316 $211,883
Total Assets $155,316 $211,883
LIABILITIES
Due to the City $155,316 $211,883
Total Liabilities 155,316 211,883
DEFERRED INFLOWS OF RESOURCES
Unavailable Revenue 155,316 211,883
Total Deferred Inflows of Resources 155,316 211,883
FUND BALANCE
Fund Balance (155,316) (211,883)
Total Fund Balance (155,316) (211,883)
Total Liabilities, Deferred Inflows , and Fund
Balance ($155,316) ($211,883)
See accompanying notes to financial statements
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CITY OF MILPITAS
BICYCLE/PEDESTRIAN PROJECTS
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
FOR THE YEARS ENDED JUNE 30, 2021 AND 2022
2022 2021
REVENUES
TDA Article 3.0 (Note 2) $211,883
Total Revenues $211,883
EXPENDITURES
ADA Curb Ramp Transition Program (22001050) $155,316
ADA Curb Ramp Transition Program (19001050) $127,587
ADA Curb Ramp Transition Program (20001031) 84,296
Total Expenditures 155,316 211,883
Net change in fund balance 56,567 (211,883)
Fund balance at beginning of year (211,883)
Fund balance at end of year ($155,316) ($211,883)
See accompanying notes to financial statements
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CITY OF MILPITAS
BICYCLE/PEDESTRIAN PROJECTS
NOTES TO FINANCIAL STATEMENTS
For the Year Ended June 30, 2022
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The has developed the Bicycle/Pedestrian Projects (Projects) under the Transportation Development Act (TDA), Article 3.0 for the construction of pedestrian pathways and wheelchair ramps and bicycle master plan studies. The Projects are funded by TDA grants.
The TDA Fund is distributed through the Metropolitan Transportation Commission (MTC) which is the agency responsible for allocation of funds to eligible claimants within the greater San Francisco Bay Area.
The following is a summary of significant accoun ting policies applicable to the Projects which conform to generally accepted accounting principles as applicable to governments.
A. Fund Accounting
The Projects are accounted for as part of the General Government Capital Projects Fund of the City.
This fund is a set of self-balancing accounts which comprise its assets, deferred inflows/outflows of resources, liabilities, fund balance, revenues and expenditures.
B. Basis of Accounting
Basis of accounting refers to when revenues an d expenditures are recognized. The Projects are accounted for in a governmental fund type and the modified accrual basis of accounting is used.
Under the modified accrual basis, revenues are recognized when they become measurable and available as net current assets. The Projects c onsiders all revenues report ed in the governmental funds to be available if the revenues are collected within forty-five days after year-end. Expenditures are recognized when they are incurred.
C. Deferred Inflows and Deferred Outflows of Resources
In addition to assets, the balance sheet will so metimes report a separate section for deferred outflows of resources. This separate financial stat ement element, deferred outflows of resources, represents a consumption of fund balance that ap plies to a future period(s) and so will not be recognized as an outflow of resources (expenditure) until then.
In addition to liabilities, the ba lance sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of fund balance that applies to a future period( s) and so will not be recognized as an inflow of resources (revenue) until that time. 7 290
Item # C9.
CITY OF MILPITAS
BICYCLE/PEDESTRIAN PROJECTS
NOTES TO FINANCIAL STATEMENTS
For the Year Ended June 30, 2022
NOTE 2 – TDA ARTICLE 3.0 REVENUE
For the year ended June 30, 2021 and 2022, the City had allocation instructions from the Metropolitan Transportation Commission for the following projects:
Instruction Grant Ex pended in Ex pended in Revenue in Revenue in Number Project Name Award June 30, 2021 June 30, 2022 June 30, 2021 Fiscal Year 202 2 20001031
pg
2020 $84,296 $84,296 $84,296
22001050
pg
2022 155,316 $155,316
19001050
pg
2019 127,587 127,587 127,587
$367,199 $211,883 $155,316 $211,883
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Item # C9.
INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL
OVER FINANCIAL REPORTING, ON COMPLIANCE WITH THE TRANSPORTATION
DEVELOPMENT ACT AND OTHER MATTERS
BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN
ACCORDANCE WITH
GOVERNMENT AUDITING STANDARDS
To the Honorable Members of the City Council
City of Milpitas, California
We have audited, in accordance w ith the auditing standards generall y accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the Un ited States, the basic financial statements of the Bicycle/ pedestrian Projects (Projects) of the City of Milpitas , California, as of and for the year ended June 30, 2022, and have issued our report thereon dated November 10, 2022. Our report included an emphasis of a matter paragraph disclosing the implementation of new accounting principles.
Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Project’s internal control over financial reporting (i nternal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of e xpressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Project’s internal control.
Accordingly, we do not express an opinion on the effectiveness of the Project’s internal control.
A deficiency in internal control exists when the design or oper ation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatemen ts on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the Project’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.
Our consideration of internal control was for the lim ited purpose described in the first paragraph of this section and was not designed to identify all deficien cies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that have not been identified. 9 292
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Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whet her the Projects’ financial statements are free from material misstatement, we performed tests of its comp liance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. Our procedures included the applicable audit procedures contained in §6666 and §6667 of Title 21 of California Co de of Regulations and tests of compliance with the applicable provisions of the Transportation Development Act and the allocation instructions and resolutions of the Metropolitan Transportation Commission. Howeve r, providing an opinion on compliance with those provisions was not an objective of our audit, and a ccordingly, we do not expres s such an opinion. The results of our tests disclosed no instances of noncom pliance or other matters that are required to be reported under Government Auditing Standards.
We have also issued a separate Me morandum on Internal Control date d November 10, 2022, which is an integral part of our audit and should be read in conjunction with this report.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testin g of internal control and compliance and the results of that testing, and not to provide an opinion on the eff ectiveness of the Project’s internal control or on compliance. This report is an inte gral part of an audit performed in accordance with Government Auditing Standards in considering the Project’s in ternal control and compliance.
Accordingly, this communication is not suitable for any other purpose.
Pleasant Hill, California
November 10, 2022
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CITY OF MILPITAS
MEMORANDUM ON INTERNAL CONTROL
FOR THE YEAR ENDED
JUNE 30, 2022
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CITY OF MILPITAS
MEMORANDUM ON INTERNAL CONTROL
For the Year Ended June 30, 2022
Table of Contents
Page
Memorandum on Internal Control ................................................................................................... 1
Schedule of Significant Deficiency. ................................................................................................... 3
Schedule of Other Matters .................................................................................................................. 5
Status of Prior Year Other Matters ................................................................................................... 17
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Item # C9.
MEMORANDUM ON INTERNAL CONTROL
To the City Council of
the City of Milpitas, California
We have audited the basic financial statements of the
City of Milpitas for the year ended June 30, 2022,
and have issued our report thereo n dated November 7, 2022. Our opinions on the basic financial statements and this report, insofar as they relate to Terrace Gardens, In c, are based solely on the report of other auditors. In planning and performing our audit of the City, in accordance with auditing standards generally accepted in the United States of America, we considered the City’s internal control over financial reporting (internal control) as a basis for de signing audit procedures that are appropriate in the circumstances for the purpose of expressing our op inions on the financial statements, but not for the purpose of expressing an opinion on th e effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control.
Our consideration of internal control was for the li mited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefor e material weaknesses or significant deficiencies may exist that were not identified. In addition, because of inherent limitations in internal control, including the possibility of management override of controls, misstatements due to error or fraud may occur and not be detected by such controls. However, as discusse d below, we identified certain defici ency in internal control that we consider to be a significant deficiency.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable po ssibility that a material misstatement of the City’s financial statements will not be prevente d, or detected and corrected on a timely basis. We did not identify any deficiencies in internal control that we consider to be material weaknesses.
A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important en ough to merit attention by those charged with governance. We consider the deficiencies in intern al control included on th e Schedule of Significant Deficiency to be a significant deficiency.
Included in the Schedule of Other Matters are recommendations not meeting the above definitions that we believe are opportunities for strengthening internal controls and operating efficiency.
Government Auditing Standards require the auditor to perform limited procedures on the City's response to the findings identified in our audit and described in the acco mpanying Schedule of Significant Deficiency and Schedule of Other Ma tters and Status of Prior Year Other Matters. The City's response was not subjected to the other auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on the response.
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This communication is intended solely for the information and use of management , City Council, others within the organization, and agencies and pass-through entities requiring compliance with Government Auditing Standards, and is not intended to be and should not be used by anyone other than these specified parties.
Pleasant Hill, California
November 7, 2022
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CITY OF MILPITAS
MEMORANDUM ON INTERNAL CONTROL
SCHEDULE OF SIGNIFICANT DEFICIENCY
2022-01 Timeliness of Year-End Close
Criteria:
Effective organizations develops plans to ensu re that adequate resources are available to analyze the City’s general ledger to ensure that all accounts are accurate and timely for the reporting year.
These resources need to be in place throughout the fisc al year to ensure proper accounting processes and procedures and allow time for the analysis of account balances and activities.
Condition: During the audit, City staff proposed numerous journal entrie s, which caused the audit team to reprocess and reanalyze the trial balance. City staff had difficulty completing closing entries prior to providing the trial balance for audit in various areas , which affected the year-end closing process and many of the City’s funds.
Cause: The tight labor market directly impacted the Ci ty’s recruitment causing multiple vacancies in the finance department. Furthermore, the City’s legacy fi nancial system is inflexible which causes staff to perform time-consuming procedures that delay year-end close.
Potential Effect: The above condition delayed the completion of the year-end closing process, which increases the risk that errors or misstatements may go undetected by staff and corrections may not be made in a timely manner.
Recommendation: The City should analyze staff resources to determine what plans can or should be made to ensure that the financial data is processed properly and timely. In addition, the City must develop procedures to ensure that accounts are analyzed throughout the fiscal year and after the year-end close to ensure that additional closing entries are not required prior to providing the general ledger for audit.
Management Response: The City continues to actively recruit and has been successful in filling several key positions. Also, the City launched a project to assess the finance procedures and systems to identify strengths, challenges, and opportunities.
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CITY OF MILPITAS
MEMORANDUM ON INTERNAL CONTROL
SCHEDULE OF OTHER MATTERS
2022-02 Missing Dates of Preparation and Review for Bank Reconciliations Criteria: Bank reconciliations should be completed as soon as reasonably possible after each month-end, usually within 30 days, and subsequently reviewed for accuracy.
Condition: Per review of February 28, 2022, Gene ral Checking bank reconciliation, there was no documentation of when it was reviewed. In addition, per review of the August 31, 2021, and October 31, 2021, Worker’s Compensation bank reconciliations, th ere was no documentation of the dates when they were prepared and reviewed.
Cause: The General checking bank reconciliation for February 2022 was reviewed however the date was erroneously omitted. The Worker’s Compensation bank reconciliation was transitioned to the City’s worker’s compensation administrator and in doing so, the process was not t horoughly defined with documentation of preparer, reviewer, and dates.
Potential Effect: Bank reconciliation is an essential element of the City’s internal control structure. In order to be an effective control, bank reconciliations should be completed as soon as reasonably possible after each month-end, usually within 30 days, and subsequently review ed for accuracy. Errors and un- reconciled differences should be investigated and co rrected immediately, so as to prevent additional errors, unauthorized transactions and decrease in efficiency.
Recommendation: The City should document the date when each bank reconciliation was prepared and reviewed in a timely manner.
Management Response: City will improve its General checking bank reconciliation and workers’ compensation bank reconciliation procedures to ensure the revised forms reflect the preparer, reviewer and dates. A project management to ol will ensure the reconciliations are performed and reviewed in a timely manner, and can be monitored accordingly.
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CITY OF MILPITAS
MEMORANDUM ON INTERNAL CONTROL
SCHEDULE OF OTHER MATTERS
NEW GASB PRONOUNCEMENTS OR PRONOUNCEMENTS NOT YET EFFECTIVE The following comment represents new pronouncements ta king affect in the next few years.
We cite
them here to keep you informed of developments:
EFFECTIVE FISCAL YEARS 2022, 2023 and 2024:
GASB 99 – Omnibus 2022
The objectives of this Statement are to enhance comparability in accounting and financial reporting and to improve the consistency of authoritative literature by addressing (1) practice issues that have been identified during implementation and application of certain GASB Statements and (2) accounting and financial reporting for financial guarantees. The pr actice issues addressed by this Statement are as follows:
Classification and reporting of derivative inst ruments within the scope of Statement No. 53, Accounting and Financial Reportin
g for Derivative Instruments, that do not meet the definition of either an investment derivative instrument or a hedging derivative instrument Clarification of provisions in Statement No. 87, Leases, as amended, related to the determination of the lease term, classification of a lease as a s hort term lease, recognition and measurement of a lease liability and a lease asset, and identification of lease incentives Clarification of provisions in Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements, related to (a) the determination of the public-private and public-public partnership (PPP) term and (b ) recognition and measurement of installment payments and the transfer of the underlying PPP asset
Clarification of provisions in Statement No. 96, Subscription-Based Information Technology Arrangements, related to the subscription-based inform ation technology arrangement (SBITA) term, classification of a SBITA as a short term SBITA, and recognition and measurement of a subscription liability
Extension of the period during wh ich the London Interbank Offere d Rate (LIBOR) is considered an appropriate benchmark interest rate for the qualitative evaluation of the effectiveness of an interest rate swap that hedges the interest rate risk of taxable debt Accounting for the distribution of benefits as part of the Supplemental Nutrition Assistanc e
Program (SNAP)
Disclosures related to nonmonetary transactions
Pledges of future revenues when resources are not received by the pledging government Clarification of provisions in Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, as amended, related to the focus of the government-wide financial statements
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CITY OF MILPITAS
MEMORANDUM ON INTERNAL CONTROL
SCHEDULE OF OTHER MATTERS
GASB 99 – Omnibus 2022 (Continued)
Terminology updates related to certain provisions of Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position Terminology used in Statement 53 to refer to resource flows statements.
The Requirements of this Statement are Effective as Follows:
The requirements in paragraphs 26–32 related to exte nsion of the use of LIBOR, accounting for SNAP distributions, disclosures of nonmonetary trans actions, pledges of future revenues by pledging governments, clarification of certain provisions in
Statement 34, as amended, and terminology updates
related to Statement 53 and Statement 63 are effective upon issuance.
The requirements in paragraphs 11–25 related to leas es, PPPs, and SBITAs are effective for fiscal years beginning after June 15, 2022, and all reporting periods thereafter.
The requirements in paragraphs 4–10 related to financ ial guarantees and the cl assification and reporting of derivative instruments within the scope of Statement 53 are effectiv e for fiscal years beginning after June 15, 2023, and all reporting periods thereafter.
Earlier application is encouraged and is permitted by individual topic.
How the Changes in This Statement Will Improve Financial Reporting The requirements of this Statement will enhance comparability in the application of accounting and financial reporting requirements and will improve the consistency of authoritative literature. Consistent authoritative literature enables gove rnments and other stakeholders to more easily locate and apply the correct accounting and financial repo rting provisions, which improves the consistency with which such provisions are applied. The comparability of financial statements also will impr ove as a result of this Statement. Better consistency and comparability improv e the usefulness of information for users of state and local government financial statements.
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CITY OF MILPITAS
MEMORANDUM ON INTERNAL CONTROL
SCHEDULE OF OTHER MATTERS
EFFECTIVE FISCAL YEAR 2022/23:
GASB 91 – Conduit Debt Obligations
The primary objectives of this Statement are to pr ovide a single method of reporting conduit debt obligations by issuers and eliminate diversity in pr actice associated with (1) commitments extended by issuers, (2) arrangements associated with conduit debt obligations, and (3) relate d note disclosures. This Statement achieves those objectives by clarifying th e existing definition of a conduit debt obligation;
establishing that a conduit debt obligation is not a liability of the issuer; es tablishing standards for accounting and financial reporting of additional commitments and voluntary commitments extended by issuers and arrangements associated with conduit debt obligations; and improving required note disclosures.
A conduit debt obligation is defined as a debt instrument having all of the following characteristics:
There are at least three parties involved:
(1) an issuer
(2) a third-party obligor, and
(3) a debt holder or a debt trustee.
The issuer and the third-party obligor are not within the same financial reporting entity. The debt obligation is not a parity bond of the issuer, nor is it cross-collateralized with other debt of the issuer.
The third-party obligor or its agent, not the issu er, ultimately receives the proceeds from the debt issuance.
The third-party obligor, not the issuer, is prim arily obligated for the payment of all amounts associated with the debt obligation (debt service payments).
All conduit debt obligations involve the issuer ma
king a limited commitment. Some issuers extend
additional commitments or voluntary commitments to support debt servic e in the event the third party is, or will be, unable to do so.
An issuer should not recognize a conduit debt obli gation as a liability. However, an issuer should recognize a liability associated with an additional commitment or a voluntary commitment to support debt service if certain recognition crite ria are met. As long as a conduit debt obligation is outstanding, an issuer that has made an additional commitment should evaluate at least annually whether those criteria are met. An issuer that has made only a limited commitment should evalua te whether those criteria are met when an event occurs that causes the issuer to reevaluate its willingnes s or ability to support the obligor’s debt service through a voluntary commitment.
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CITY OF MILPITAS
MEMORANDUM ON INTERNAL CONTROL
SCHEDULE OF OTHER MATTERS
GASB 91 – Conduit Debt Obligations (Continued)
This Statement also addresses arrangements—often characterized as leases—that are associated with conduit debt obligations. In those arrangements, cap ital assets are constructed or acquired with the proceeds of a conduit debt obligation and used by thir d-party obligors in the course of their activities.
Payments from third-party obligors are intended to cover and coincide with debt service payments.