Milpitas City Council
December 5, 2023

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 5 – LOANS RECEIVABLE (Continued)
H. Shapell Industries
In June 2004, the former Redevelopment Agency entered into an Agreement with Shapell Industries of Northern California for the development of a 65-unit townhome development, which will include twenty deed-restricted affordable housing units for very low- and moderate-income units. In August 2005 the Agency entered into an Owner Participation Agreement with the Developer that, in exchange for the development of housing units, the Agency will provide a total of $800,000 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 anniversary 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. As of June 30, 2023, there were $750,000 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, 2023, interest of $165,118 was accrued, and as of June 30, 2023, principal and accrued interest totaled $3,323,888.

J. 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 which 101 will be affordable and 1 will be an above moderate income (AMI) managers unit. 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 balance 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, 2023, interest of $274,603 was accrued, and as of June 30, 2023, principal and accrued interest totaled $6,774,603.
70

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 6 – PROPERTY HELD FOR RESALE OR REDEVELOPMENT
A. General Fund
Pursuant to the terms of a settlement agreement between the City, Economic Development Corporation, Housing Authority, Santa Clara County Auditor-Controller, State Controller and other parties, a land parcel was transferred from the Successor Agency 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, 2023, property totaling $4,200,000 is held by the General Fund.

B. Housing Authority
The former Redevelopment Agency had 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 disposition agreement has been made with a developer. The City agreed to become the successor to the Redevelopment 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 Agency purchased one additional Parc Metro Subdivision unit for $305,095, one Centria Subdivision housing unit for $248,056, and four KB Home 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 Subdivision units were sold in fiscal year 2013, with a total book value of $1,245,559, and one unit 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. In fiscal year 2023, two units were sold with a book value of $305,095 and $227,924. 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 property 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 Housing 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, 2023, property totaling $1,800,000 is held by the Housing Authority. The Housing Authority is required to develop or sell the properties on or before August 31, 2022.

As of June 30, 2023, the Housing Authority has completed a Phase II Environmental site assessment, asbestos, and led based- paint analysis, a property appraisal, and retained broker representation to help prepare parcel 1 for sale.
71

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 7 – DEVELOPMENT AND TAX SHARING AGREEMENTS
The City and former Redevelopment Agency have entered 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 the 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 Corporation 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 properties 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 again amended to extend the deadline to the date on which the grant 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 reimbursement agreement with the developer 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, 2023, 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 exceed 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, 2023, the City had issued $287,548 of sales tax were made to the corporation during fiscal year 2023. 72

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
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 three developers in the Piper/Montague Subdistrict in which the developers agreed to share in the costs of infrastructure 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 total $9.8 million. If a developer’s TASP fee credits resulting from the installation of the shared infrastructure 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 $8,690,752 as of June 30, 2023. The balance due from the two developers was $440,100 as of June 30, 2023.

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 Station 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, 2023, there was a total of $242,000 in reimbursements that 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 with the 730 E. Capitol and 750 E. Capitol apartment complexes. Under the terms of the agreement, the developer will be entitled to reimbursements totaling $8,910,221 for construction costs for parking and a variety of site improvements, including a public park.

During the year ended June 30, 2023, the City did not issue park improvement credits and a total fee credits of $7,220,719 have been issued to date.
73

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
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 totaling $4,689,574 for construction and design costs for Montague Expressway and East Penitencia Creek. During the year ended June 30, 2023, no reimbursements were issued, and total reimbursements of $4,030,688 have been issued to date.

NOTE 8 – CAPITAL ASSETS
All capital assets are valued at historical cost or estimated historical cost if actual 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 assets, 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 method 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 25
Traffic system 20
Water system 30-61
Sewer system 50
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. 74

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
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, 2022 Additions Retirements Transfers June 30, 2023 Capital assets not being depreciated:

Land $84,829,602 $12,609,503 $97,439,105
Construction in progress 94,390,303 $9,680,803 ($28,677,960) * 75,393,146 Total capital assets not being depreciated 179,219,905 9,680,803 (16,068,457) 172,832,251 Capital assets being depreciated:

Buildings and improvements 173,371,133 173,371,133
Other improvements 33,984,523 5,705,465 39,689,988
Machinery and equipment 49,119,458 352,703 ($324,778) 49,147,383 Landscape system 30,115,221 42,378 30,157,599
Storm system 74,477,062 1,093,127 75,570,189
Street system 313,770,714 6,792,487 7,737,155 328,300,356 Traffic system 20,306,714 887,130 21,193,844
Intangible Right-to-use subscription asset 842,113 842,113 Total capital assets being depreciated 695,144,825 8,916,811 (324,778) 14,535,747 718,272,605 Less accumulated depreciation for:

Buildings and improvements (98,852,797) (5,423,073) (104,275,870) Other improvements (24,541,828) (934,184) (25,476,012)
Machinery and equipment (37,725,066) (1,639,783) 324,778 (39,040,071) Landscape system (17,081,042) (604,342) (17,685,384)
Storm system (73,191,641) (186,936) (73,378,577)
Street system (222,113,660) (5,580,781) (227,694,441)
Traffic system (16,641,238) (457,855) (17,099,093)
Intagible Right-to-use subscription asset (148,608) (148,608) Total accumulated depreciation (490,147,272) (14,975,562) 324,778 (504,798,056) Net capital assets being depreciated 204,997,553 (6,058,751) 14,535,747 213,474,549 Governmental activities capital assets, net $384,217,458 $3,622,052 ($1,532,710) * $386,306,800 * In FY2023, $1,532,710 was transferred to the Sewer Fund ($217,597) and Water Fund ($1,315,113) upon completion of PMIP project In fiscal year 2023, the City implemented the provisions of GASB Statement No. 96, Subscription-Based Information Technology Arrangements, which required the City to record an intangible right-to-use subscription asset. As a result, a right-to-use subscription asset was recorded in the amount of $842,113. As of June 30, 2023, the City has recorded a net intangible right-to use subscription asset amounting to $693,505, with accumulated amortization of $148,608. The subscription asset is offset with a subscription liability as discussed in Note 11.
75

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 8 – CAPITAL ASSETS (Continued)
Governmental activities construction in progress comprised the following at June 30, 2023:

Total Actual Unexpended
Project Budget Costs Budget
Alviso Adobe Renovation $8,159,272 $8,086,203 $73,069
McCandless Park 12,154,820 11,038,933 1,115,887
Sports Fields Turf Rehabilitation Program 476,000 142,460 333,540 Sandalwood Park Renovation 475,000 239,347 235,653
Minor Sports Courts Rehabilitation 915,000 544,606 370,394 McCarthy Blvd Landscape 1,032,256 662,414 369,842
Fire Station Improvements 1,750,000 1,121,030 628,970
City Building Improvement 4,115,000 3,330,262 784,738
Sinclair LMD Improvements 230,625 138,274 92,351
City Building, Exterior Painting 600,000 239,992 360,008 PD Communications 3,155,000 2,918,044 236,956
Replacement Fire Station Alert System 345,000 344,420 580 City Building Roofing 900,000 251,377 648,623
Police Records Management 1,099,721 978,614 121,107
Citywide Park Playground 2,053,497 1,776,478 277,019
Annual Sidewalk, Curb & Gutter Repair 2,396,840 2,383,085 13,755 Technology Projects 1,800,000 1,525,190 274,810
Midtown Street Light 300,000 264,037 35,963
2017-19 Finance System Upgrade 1,250,000 1,057,152 192,848 Annual Tree Replacement Program 544,000 329,763 214,237 Fire Station #2 Replacement 14,320,000 13,137,920 1,182,080 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 4,254,387 853,210 Fire Station No. 1 Modular Building 800,000 1,786 798,214 Human Resources Information System 1,100,000 1,100,000
Cardoza Park Softball Fields Improvement 800,000 10,553 789,447 Storm Drain System Rehabilitation 1,190,000 987,655 202,345 Dempsey Road Storm Drain 1,660,000 230,962 1,429,038
Bart Project-Storm Improvement 33,000 33,000
Flap Gate Replacement 100,000 28,899 71,101
Storm Drain System Rehab 17-19 1,058,410 965,012 93,398 Storm Supervisory Control & Data Acquisition 2,416,590 2,190,000 226,590 Light Rail Median Landscaping 5,996,000 3,946,346 2,049,654 Second SCVWD Water Reservoir & Pump Station 200,000 2,118 197,882 Lower Penitencia Creek 1,825,000 356,165 1,468,835
Montague Pedestrian Overcrossing at Piper Drive 8,750,000 7,845,667 904,333 SCVWD Second Water Supply Turnout #2 100,000 643 99,357 Transit Area Police Substation 310,000 29,310 280,690
(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 6,400,000 647,239 5,752,761 Montague Ped. Overcrossing at Penitencia 3,500,000 1,071,662 2,428,338 (Rmb) TASP Recycled Water Distribution 500,391 500,391
Trade Zone/Montague Park - Central 600,000 23,643 576,357 SCVWD Zone 1 Pressure Red. Valve 100,000 100,000
Total construction in progress $107,859,019 $75,393,146 $32,465,873 76

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 8 – CAPITAL ASSETS (Continued)
B. Business-Type Capital Asset Additions, Retirements and Balances Balance at Balance at
June 30, 2022 Additions Transfer June 30, 2023
Capital assets not being depreciated:

Land $1,133,079 $1,133,079
Construction in progress 28,460,393 $5,515,934 ($265,527) 33,710,800 Total capital assets not being depreciated 29,593,472 5,515,934 (265,527) 34,843,879 Capital assets being depreciated:

Distribution facilities 81,197,041 81,197,041
Water Service lines 17,067,611 1,315,113 18,382,724
Sewer lines 87,500,145 483,124 87,983,269
Capacity rights 115,219,650 5,636,110 120,855,760
Total capital assets being depreciated 300,984,443 5,636,110 1,798,237 308,418,794 Less accumulated depreciation for:

Distribution facilities (56,246,951) (1,192,282) (57,439,233) Water Service lines (7,958,929) (373,103) (8,332,032)
Sewer lines (53,769,165) (1,425,282) (55,194,447)
Capacity rights (34,062,657) (3,662,912) (37,725,569)
Total accumulated depreciation (152,037,698) (6,653,579) (158,691,281) Net capital assets being depreciated 148,946,745 (1,017,469) 1,532,710 149,727,513 Business-type activities capital assets, net $178,540,217 $4,498,465 $1,532,710 $184,571,392 77

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 8 – CAPITAL ASSETS (Continued)
Business-type activities construction in progress comprised the following at June 30, 2023:

Total Actual Unexpended
Project Budget Costs Budget
BART Project-Sewer Improvement $243,323 $229,730 $13,593 Sewr Pump Station Rehabilitation Program 552,000 346,809 205,191 Minor Sewer Projects 213,000 132,871 80,129
Sanitary Supervisory Control & Data 316,600 262,500 54,100 Main Lift Stattion Odor Emmissions Control 2,450,000 1,280,823 1,169,177 2,625,000 500,235 2,124,765
Well Upgrade Program 14,490,000 6,409,553 8,080,447
Water System Seismic Improvement 4,887,951 973,862 3,914,089 Hydrant Replacement 566,360 563,540 2,820
Abel St Pipeline Extension 940,000 44,777 895,223
Dempsey Road Water Line 7,857,772 1,245,433 6,612,339
Automated Water Meter 14,047,700 13,343,651 704,049
BART Project-Water Improvements 2,503,920 1,820,243 683,677 Supervisory Control & Data 6,516,600 5,722,658 793,942
Minor Water Projects 1,340,000 638,713 701,287
Water Leak Detection 631,474 195,402 436,072
$60,181,700 $33,710,800 $26,470,900
Sanitary Sewer Cathodic Protection Improvement
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, 2022:

Balance
December 31, 2021 Additions
Balance
December 31, 2022
Capital assets not being depreciated:

Land $1,565,277 $41,915 $1,607,192
Total capital assets not being depreciated 1,565,277 41,915 1,607,192 Capital assets being depreciated:

Buildings 12,107,935 12,107,935
Furniture 441,089 81,512 522,601
Office equipment 72,216 72,216
Improvements 2,803,128 2,803,128
Total capital assets being depreciated 15,424,368 81,512 15,505,880 Less accumulated depreciation (10,030,592) (357,702) (10,388,294) Net capital assets being depreciated 5,393,776 (276,190) 5,117,586 Total capital assets, net $6,959,053 ($234,275) $6,724,778 78

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
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 $2,394,895
Public Works 7,341,391
Engineering 2,323,691
Recreation and Community Services 1,331,100
Police 80,908
Fire 290,095
Internal Service Fund 1,213,482
Total Governmental Activities $14,975,562
Business-Type Activities:

Water Utility $1,565,385
Sewer Utility 5,088,194
Total Business-Type Activities $6,653,579
Discretely Presented Component Unit:

Terrace Gardens, Inc. $357,702
E. Sewer Treatment Capacity Rights
The City has a contract with the San Jose/Santa Clara Wastewater Treatment 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 $120,855,760. The operation and maintenance costs are calculated based upon actual sewage flow and strengths. In fiscal year 2023, the City’s operation and maintenance share was approximately 5.458% of the total RWF operations. 79

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
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 summarized below and discussed in detail thereafter.

Original Balance Balance Current
Issue Amount June 30, 2022 Retirements June 30, 2023 Portion Governmental Activities Debt - Direct Borrowing:
2020 General Fund Lease Revenue Bonds

4.0%, due June 1, 2041 $18,445,000 $18,170,000 $470,000 $17,700,000 $520,000 Plus: Unamortized bond premium 3,299,841 173,676 3,126,165 $18,445,000 $21,469,841 $643,676 $20,826,165 $520,000
Business-type Activities Debt
Wastewater Revenue Refunding Bonds, 2017 Series

2.0% - 5.0%, due November 1, 2026 $4,725,000 $2,815,000 $515,000 $2,300,000 $535,000 Plus: Unamortized bond premium 354,279 70,856 283,423
Wastewater Revenue Bonds, 2019 Series

4.0% - 5.0%, due November 1, 2049 29,840,000 28,910,000 505,000 28,405,000 535,000 Plus: Unamortized bond premium 4,945,917 183,182 4,762,735 Water Revenue Bonds, 2019 Series

4.0% - 5.0%, due June 1, 2049 17,210,000 16,465,000 315,000 16,150,000 325,000 Plus: Unamortized bond premium 2,755,919 102,071 2,653,848 Total Business-Type Activities $51,775,000 $56,246,115 $1,691,109 $54,555,006 $1,395,000 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 improvement 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 structured with a par optional redemption date of June 1, 2030. Bonds maturing on June 1, 2041 are subject to mandatory redemption. 80

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 9 – LONG-TERM DEBT (Continued)
C. Wastewater Revenue Refunding Bonds, Series 2017
On December 4, 2017, the City issued Wastewater Revenue 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 Authority, thereby defeasing and prepaying 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 the date of default, immediately 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, 2020. 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 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 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 2023, net revenues amounted to $11,726,268 which represented coverage of 4.82 over the $2,431,275 debt service of both bond issues.

E. Water Revenue Bonds, Series 2019
On October 24, 2019, the Milpitas Municipal Financing 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% and 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. 81

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
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 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 Bonds are collateralized by net revenues from the City’s Water System. For the fiscal year 2023, net revenues amounted to $8,841,793 which represented coverage of 8.47 over the $1,047,050 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
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 830,000 610,000 1,040,000 1,795,775
2029-2033 4,700,000 2,522,800 6,045,000 8,130,375
2034-2038 5,715,000 1,505,400 7,705,000 6,435,500
2039-2043 4,005,000 324,400 9,750,000 4,376,775
2044-2048 11,915,000 2,200,000
2049-2050 4,410,000 177,700
17,700,000 $7,661,600 46,855,000 $31,011,850
Plus: Unamoritized bond premium 3,126,165 7,700,006
$20,826,165 $54,555,006
Revenue Bonds Revenue Bonds
82

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 10 – LEASES
A. Policies
A lease is defined as a contract that conveys control of the right to use another entity’s nonfinancial asset (the underlying asset) as specified in the contract for a period of time in an exchange or exchange-like transaction. Examples of nonfinancial 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 which the threshold is set lower at $300,000, 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 measures the lease receivable at the present value of payments expected to be received during the lease term. Subsequently, the lease receivable is reduced by the principal portion of lease payments received. The deferred inflow of resources is initially measured as the initial amount of the lease receivable, adjusted for lease payments received at or before the lease commencement date. Subsequently, the deferred inflow of resources is recognized as revenue over the life of the lease term.

Key estimates and judgments include how the City determines (1) the discount rate it uses to discount the expected lease receipts to present value, (2) lease term, and (3) lease receipts 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 would require a remeasurement of its lease, and will remeasure the lease receivable and deferred inflows of resources if certain changes occur that are expected to significantly affect the amount of the lease receivable.

Lessee
The City is a lessee for miscellaneous leases. If the lease 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 lease term. Subsequently, the lease liability is reduced by the principal portion of lease payments made. The lease asset is initially 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. 83

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
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 lessor 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 would 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 and lease liabilities are reported with long-term debt on the Statement of Net Position.

As of June 30, 2023, 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, 2023 were:

Lessee Property Location
Orginal
Lease Date
Original
Term
(Years)
Extension
(Years)
Expiration
Date
Including
Options
Monthly
Revenue
as of
June 30,
2023
Lease
Receivable
Balance at
June 30, 2023
Deferred Inflow
of Resources at
June 30, 2023
Capital Telecom Acquisition LLC
Fire Station No. 1 Grounds,
777 So. Main Street,
Milpitas, CA 95035
6/6/2012 15 25 6/6/2052 $2,044 $851,604 $807,629
American Tower HWY680 on CALAVERAS 2/1/2019 5 20 2/1/2044 2,727 739,249 701,611 Milpitas Auto Properties LLC Freeway Sign on 950
Thompson 8/17/2010 10 30 8/17/2050 10,036 2,482,554 2,433,401 Clear Channel Advertising display on the
property
7/30/2013 30 30 7/30/2073 14,363 9,388,313 8,944,011
Total $29,170 $13,461,720 $12,886,652
84

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
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
2024 $66,986 $286,098 $353,084
2025 74,718 284,596 359,314
2026 82,787 282,927 365,714
2027 91,205 281,082 372,287
2028 99,986 279,054 379,040
2029-2033 645,213 1,357,894 2,003,107
2034-2038 926,725 1,274,942 2,201,667
2039-2043 1,270,060 1,158,869 2,428,929
2044-2048 1,387,564 1,015,790 2,403,354
2049-2053 1,339,990 861,551 2,201,541
2054–2058 1,186,679 737,375 1,924,054
2059–2063 1,586,156 590,736 2,176,892
2064–2068 2,065,469 397,484 2,462,953
2069–2074 2,638,182 148,424 2,786,606
Totals $13,461,720 $8,956,822 $22,418,542
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 years with a 25 year extension. As of June 30, 2023, the leases had 29 years remaining. The City recognized $5,635 in lease revenue and $18,206 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, 2023, the leases had 21 years remaining. The City recognized $16,549 in lease revenue and $15,939 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 Piercey 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, 2023, the leases had 27 years remaining. The City recognized $66,785 in lease revenue and $53,651 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, 2023, the leases had 50 years remaining. The City recognized $170,253 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.
85

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 11 – SUBSCRIPTION-BASED INFORMATION TECHNOLOGY ARRANGEMENTS A summary of subscription-based information technology arrangements (SBITA) transactions for the fiscal year ended June 30, 2023, are as follows:

Balance Balance Current
June 30, 2022 Additions Retirements June 30, 2023 Portion Subscription Liability
Microsoft 365 $0 $842,113 ($277,935) $564,178 $136,679
Total $0 $842,113 ($277,935) $564,178 $136,679
On March 2022, the City entered into a three‐year SBITA for the purchases of software and software services for Microsoft 365. An initial subscription liability was recorded in the amount of $842,113 during fiscal year 2023, at the time the subscription was placed into service. Implementation costs and prepayments made on the subscription were included in the measurement of the liability during the year ended June 30, 2023.

As of June 30, 2023, the value of the subscription liability was $564,178. The City is required to make annual principal and interest payments throughout the life of the subscription. The subscription has an interest rate of

2.08%. As part of the subscription, the City has recorded an intangible right to use subscription asset and accumulated amortization as disclosed in Note 8.

The future subscription and interest subscription payments as of June 30, 2023 follows:

For the Year
Ended June 30 Principal Interest Total
2024 $136,679 $11,078 $147,757
2025 139,549 8,208 147,757
2026 142,479 5,277 147,756
2027 145,471 2,285 147,756
Totals $564,178 $26,848 $591,026
86

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 12 – NET POSITION AND FUND BALANCES
Governmental fund balances represent the net current assets of each fund. 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. These 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 principally 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. Net current assets generally represent a fund’s cash, receivables and deferred outflows of resources, less its liabilities 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 sources, the City prioritizes and expends funds in the following order:

Restricted, Committed, Assigned, and Unassigned. Each 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 included. However, if proceeds realized from the sale or collection of nonspendable assets are restricted, committed or assigned, then nonspendable amounts are required to be presented as a component of the applicable category.

Restricted fund balances have external restrictions imposed by creditors, grantors, contributors, laws, regulations, or enabling legislation which requires the resources to be used only for 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. Encumbrances and nonspendable amounts subject to council commitments are included along with spendable resources. 87

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 12 – 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 expressed by the City Council and may be changed at the discretion of the City Council. This category includes: encumbrances; nonspendables, when it is the City’s intent to use proceeds or collections for a specific purpose; and residual 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, 2023, 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 $724,275 $2,000 $118,429 $29,784 $874,488
Property held for resale 4,200,000 4,200,000
Subtotal Nonspendable 4,924,275 2,000 118,429 29,784 5,074,488 Restricted for:

Programs and Maintenance $5,000,756 8,413,209 13,413,965 Housing and community development 40,074,468 3,826,276 43,900,744 Law enforcement services 114,439 114,439
Solid waste reduction and services 2,283,705 2,283,705
Assessment district services 2,443,660 2,443,660
Hetch-Hetchy ground lease 1,468,865 1,468,865
Community planning 318,447 318,447
Community benefits 422,822 422,822
Affordable housing 5,089,723 5,089,723
Affordable housing unrestricted 3,170,042 3,170,042
Park improvement projects 5,451,027 5,451,027
Storm drain projects 6,427,060 6,427,060
General government projects 570,275 570,275
Transit area capital projects $60,819,077 60,819,077
Subtotal Restricted 40,074,468 5,000,756 60,819,077 570,275 39,429,275 145,893,851 Committed to:

PERS stabilization 6,072,492 6,072,492
Artificial turf replacement 1,900,000 1,900,000
Technology replacement 2,000,000 2,000,000
Facilities replacement 7,000,000 7,000,000
Subtotal Committed 16,972,492 16,972,492
Assigned to:

Uninsured claims payable 2,775,318 2,775,318
Public art projects 1,017,671 1,017,671
Contracts 3,627,706 3,627,706
General government capital projects 25,466,667 25,466,667 Other assigned 518,419 518,419
Subtotal Assigned 6,921,443 25,466,667 1,017,671 33,405,781 Unassigned:

General Fund
Contingency reserve 19,758,079 19,758,079
Budget stabilization 19,758,079 19,758,079
Future deficit 1,452,576 1,452,576
ERAF reserve 2,322,866 2,322,866
Strategic Property Acquisition Revenue 710,248 710,248
Unassigned 682,955 682,955
Subtotal Unassigned 44,684,803 44,684,803
Total fund balances $73,503,013 $40,076,468 $5,000,756 $60,819,077 $26,155,371 $40,476,730 $246,031,415 88

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 12 – NET POSITION AND FUND BALANCES (Continued)
C. Fund Balance Policies
The City’s Fiscal Policies, which are 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 surplus 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)
◦ Pension budgetary surplus allocated to the 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)
◦ 30% General Government Capital Improvement Fund
◦ 20% Storm Drain Fund
◦ 10% Affordable Housing
◦ 10% Transportation/transit
◦ 15% Technology Replacement
◦ 10% SPAR (Strategic Property Acquisition Revenue) (Policy #57) ◦ 5% 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 prior fiscal year’s Annual Comprehensive Financial Report (ACFR) are known. For the year ended June 30, 2023, the reserve is set at $19,758,079 and classified in the unassigned fund balance.
3) The City will maintain a General Fund Budget Stabilization 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 existing budget resources in any 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, 2023, the reserve is set at $19,758,079 and classified in the unassigned fund balance. 89

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 12 – NET POSITION AND FUND BALANCES (Continued)
4) The City will maintain in the General Fund and the Water and Sewer Utility Enterprise Funds or in a Section 115 Trust a Public Employees Retirement (PERS) Rate Stabilization Reserve. 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 contributions to the PERS Rate Stabilization Reserve from the Utility Funds shall be consistent with the General Fund contributions. If confirmed by City’s actuary that contributions are advised for that respective year, then any savings resulting from the pension budgeting methodologies shall be contributed to the PERS Rate Stabilization Reserve. However, the General Fund portion of any pension savings shall only be allocated to the PERS Rate Stabilization Reserve after the General Fund Contingency Reserve and the General Fund Budget Stabilization Reserve requirements have been met.

The Utility Funds’ portion of any pension savings shall only be allocated to the PERS Rate Stabilization Reserve after the Capital Reserve and Rate Stabilization 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 with a target of $2 million and an annual set-aside amount of at least $230,000 until the target is reached. This reserve 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 replacement 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 Facilities 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 replacement 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 Workers’ 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. 90

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 12 – NET POSITION AND FUND BALANCES (Continued)
11) The City will maintain capital reserves in the Water and Sewer utility enterprise funds to provide for future capital projects and unanticipated 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 Council will set the reserve amounts annually after the results of the prior fiscal year’s Annual Comprehensive Financial Report (ACFR) are known. For the year ended June 30, 2023, the capital reserve for the Water Operating Fund is set at $8,638,318 and for the Sewer Operating Fund at $4,132,726.
12) The City will maintain a Rate Stabilization Reserve (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 Stabilization Reserves should be used to assist in smoothing out revenue variability resulting from these factors and ensure that adequate resources are available during such times that might otherwise require large rate increases to utility customers. The City Council will set the reserve amounts annually after 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 depreciable equipment as cost. The City will maintain a minimum fund balance of at least 30% of the replacement costs for equipment 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, 2023:

Governmental Business-Type
Activities Activities Total
Capital Asset, Net of Accumulated Depreciation $386,306,800 $184,571,392 $570,878,192 Less Capital Debt (21,390,343) (54,555,006) (75,945,349) Plus Unspent Bond Proceeds 592,509 961,171 1,553,680
$365,508,966 $130,977,557 $496,486,523
91

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 13 – PENSION PLANS
A. General Information
Plan Descriptions – All qualified permanent and probationary employees 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 California Public Employees’ Retirement System (CalPERS), which acts as a common investment and administrative agent for its participating member employers.

Benefit provisions under the Plans are established by State statute and City resolution. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website.

Benefits Provided – CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 10 years of service. The death benefit is one of the following: 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.

The Plans’ provisions and benefits in effect at June 30, 2023, 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 - 63 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% 7%
Required employer contribution rates 9.99% 9.99% 9.99%
Required Unfunded Actuarial Liability Contribution $6,568,304 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% 11.25%
Required employer contribution rates 19.03% 19.03% 19.03% Required Unfunded Actuarial Liability Contribution $10,718,177 92

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 13 – PENSION PLANS (Continued)
Beginning in fiscal year 2016, CalPERS collects employer 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 ended June 30, 2023 were $6,568,304 and $10,718,177, 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, 2021 and measurement date of June 30, 2022:

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 429 259 Inactive employees entitled to but not yet receiving benefits 356 25 Active employees 104 11 115 84 8 66
Total 889 11 115 368 8 66
Contributions – Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Funding contributions for both Plans are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. Employer contribution rates may change if plan contracts are amended. If the client made additional UAL payments in FY20, FY21 or FY22, CalPERS may have issued letters subsequent to the FY20 Actuarial Valuation to revise the required UAL payment amounts.

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 monitored 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, 2023, the City reported the account balance of the trust of $32,671,513. 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, 2022, using an annual actuarial valuation as of June 30, 2021 rolled forward to June 30, 2022 using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is shown below. 93

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 13 – PENSION PLANS (Continued)
Actuarial Assumptions – The total pension liabilities as of the June 30, 2022 measurement date were determined using the following actuarial assumptions:

Miscellaneous and Safety (1)
Valuation Date June 30, 2021
Measurement Date June 30, 2022
Actuarial Cost Method Entry-Age Normal Cost Method
Actuarial Assumptions:

Discount Rate 6.90%
Inflation 2.30%
Payroll Growth 2.80%
Projected Salary Increase (2)
Investment Rate of Return 6.90% (3)
Mortality Derived using CalPERS Membership Data for all Funds (4) Post Retirement Benefit Increase The lesser of contract COLA or 2.30% until Purchasing Power Protection Allowance Floor on Purchasing Power applies, 2.30% thereafter
(1) Actuarial assumptions are the same for all benefit tiers (Classic Tier I, Classic Tier II, and PEPRA) (2) Depending on age, service and type of employment
(3) Net of pension plan investment expenses, including inflation (4) The mortality table used was developed based on CalPERS' specific data. The probabilities of mortality are based on the 2021 CalPERS Experience Study for the period from 2001 to 2019. Pre-retirement and post-retirement mortality rates include generational mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries. For more details on this table, please refer to the CalPERS Experience Study and Review of Actuarial Assumptions report from November 2021 that can be found on the CalPERS website.

The underlying mortality assumptions and all other actuarial assumptions used in the June 30, 2021 valuation were based on the results of a November 2021 actuarial experience study for the period 2001 to 2019. 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 6.90%. 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 payments of current plan members for all plans in the PERF. Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability for each Plan.

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

In determining the long-term expected rate of return, CalPERS took into account both short-term and longterm market return expectations. Using historical returns of all the funds’ asset classes, expected compound (geometric) returns were calculated over the next 20 years using a building-block approach. The expected rate of return was then adjusted to account for assumed administrative expenses of 10 basis points. 94

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 13 – PENSION PLANS (Continued)
The expected real rates of return by asset class are as follows:

Asset Class (1)
Assumed
Asset
Allocation
Real Return
(1,2)
Global Equity-Cap Weighted 30.0% 4.54%
Global Equity-Non-Cap Weighted 12.0% 3.84%
Private Equity 13.0% 7.28%
Treasury 5.0% 0.27%
Mortgage-backed Securities 5.0% 0.50%
Investment Grade Corporates 10.0% 1.56%
High Yield 5.0% 2.27%
Emerging Market Debt 5.0% 2.48%
Private Debt 5.00% 3.57%
Real Assets 15.00% 3.21%
Leverage -5.00% -0.59%
Total 100.00%
(1) An expected inflation of 2.30% used for this period. (2) Figures are based on the 2021 Asset Liability Management study. 95

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 13 – 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/(Asset)
Balance at June 30, 2021 (Measurement Date) $266,299,950 $216,090,576 $50,209,374 Changes in the year:

Service cost 4,859,903 4,859,903
Interest on the total pension liability 18,711,899 18,711,899 Differences between actual and expected experience 1,596,580 1,596,580 Changes of assumptions 8,099,828 8,099,828
Changes in benefit terms
Contribution - employer 9,800,794 (9,800,794)
Contribution - employee 1,861,769 (1,861,769)
Net Plan to Plan Resource Movement
Net investment income (16,338,954) 16,338,954
Administrative expenses (134,612) 134,612
Other Miscellaneous Income/(Expense)
Benefit payments, including refunds of employee contributions (14,478,741) (14,478,741) Net changes 18,789,469 (19,289,744) 38,079,213
Balance at June 30, 2022 (Measurement Date) $285,089,419 $196,800,832 $88,288,587 Increase (Decrease)
Total Pension
Liability
Plan Fiduciary
Net Position
Net Pension
Liability/(Asset)
Balance at June 30, 2021 (Measurement Date) $393,250,269 $292,618,647 $100,631,622 Changes in the year:

Service cost 7,801,769 7,801,769
Interest on the total pension liability 27,775,910 27,775,910 Differences between actual and expected experience 1,878,012 1,878,012 Changes of assumptions 14,433,785 14,433,785
Changes in benefit terms
Contribution - employer 14,258,505 (14,258,505)
Contribution - employee 2,853,307 (2,853,307)
Net Plan to Plan Resource Movement
Net investment income (22,163,861) 22,163,861
Administrative expenses (182,284) 182,284
Other Miscellaneous Income/(Expense)
Benefit payments, including refunds of employee contributions (21,827,081) (21,827,081) Net changes 30,062,395 (27,061,414) 57,123,809
Balance at June 30, 2022 (Measurement Date) $423,312,664 $265,557,233 $157,755,431 Grand Totals - Both Plans $708,402,083 $462,358,065 $246,044,018 Miscellaneous Plan
Safety Plan
96

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 13 – 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 rate for each Plan, as well as what the City’s net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower or 1-percentage point higher than the current rate:

Miscellaneous Safety
1% Decrease 5.90% 5.90%
Net Pension Liability $125,691,788 $214,455,733
Current Discount Rate 6.90% 6.90%
Net Pension Liability $88,288,587 $157,755,431
1% Increase 7.90% 7.90%
Net Pension Liability $57,349,896 $111,157,850
Pension Plan Fiduciary Net Position – Detailed information about each 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, 2023, the City recognized pension expense of $32,765,120 for the Miscellaneous Plan and $13,021,231 for the Safety Plan, for total pension expense of $19,743,889. At June 30, 2023, 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 $9,421,792 Differences between actual and expected experience 1,175,834 Changes of assumptions 4,724,900
Net differences between projected and actual earnings
on plan investments 9,821,396
Total $25,143,922 $0
Miscellaneous Plan
General Fund typically has been used in prior years to liquidate pension liabilities. 97

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 13 – PENSION PLANS (Continued)
Deferred Outflows Deferred Inflows
of Resources of Resources
Pension contributions after the measurement date $15,469,857 Differences between actual and expected experience 2,890,087 Changes of assumptions 11,226,277
Net differences between projected and actual earnings
on plan investments 13,160,477
Total $42,746,698 $0
Grand Totals - Both Plans $67,890,620 $0
Safety Plan
$24,891,649 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2024. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows:

Year Ended
June 30 Miscellaneous Safety
2023 $5,832,733 $6,383,097
2024 3,001,601 5,978,169
2025 659,880 4,666,511
2026 6,227,916 10,249,064
$15,722,130 $27,276,841
Annual Amortization
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 $34,064 and the employee’s required contributions of $136,248 were made during the fiscal year ending June 30, 2023.
98

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 14 – EMPLOYEE BENEFITS
A. Deferred Compensation Plan
City employees may defer a portion of their compensation under a City sponsored Deferred Compensation Plan created in accordance with Internal Revenue Code Section 457. Under this Plan, participants are not taxed on the deferred portion of their 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 subject to City control, they have been excluded from these financial statements.

B. Retiree Medical Benefits
The liability for explicit subsidy benefits 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, effectively contributing twice. Beginning with fiscal year 2020, the total OPEB liability for these dependent fund benefits is now being determined and reported separately. Further discussion is included in Note 13C and 13D.

The City provides postretirement health care benefits 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, 2023, 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, consisting of an aggregation of single-employer 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.
99

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 14 – EMPLOYEE BENEFITS (Continued)
In order to qualify for postemployment medical and dental benefits an employee must retire from the City and maintain enrollment in one of City’s eligible health plans. In addition, there 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% above 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:

Eligibility Rule
(Continuous Years
Hire/Retirement Date Date of Retirement of Service) 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 but 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 but 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 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
Professional /
Technical
(PROTECH)
Unrepresented
Miscellaneous and
Fire*
After August 31, 2002
After July 1, 1990 but before September 1,
Before July 1, 1995 2002
After June 30, 1995 After August 31, 2002
Before July 1, 1995 Any
After June 30, 1995 Any
Mid-Management
and Confidential
(LIUNA) (Began
9/2003)
After June 30, 1995
After July 1, 1990 but before September 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.
100

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 14 – EMPLOYEE BENEFITS (Continued)
Medical benefits for retirees (continued):

Eligibility 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 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 but 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
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 Safety
(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
101

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 14 – EMPLOYEE BENEFITS (Continued)
Medical benefits for retirees (continued):

Eligibility 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 but less than 9 25% of any employee only premium
9 but 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 but less than 9 Up to 25% of the Retiree Cap
9 but 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 but 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 but 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,
Before June 30, 1995 2007
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
Supervisors
(MSA) (Ended
June, 30, 2012)
102

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 14 – 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
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 reimbursement. 2 If the UNREP‐Police fund is depleted, MPOA will provide funding for the dependent benefits. Effective September 1, 2019, MPOA will Administer dependent medical benefits for Unrep Police.
3 The Fire Chief is ineligible for dependent fund benefits. 103

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 14 – EMPLOYEE BENEFITS (Continued)
Medical benefits for dependents (continued):

Group Date of Hire Date of Retirement
Minimum Years of
Continuous Service
City Contribution for Dependent Medical
Premiums 1
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
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
Before June 30, 1996 At least 5 100% of any family/dependent medical premiums 5 but less than 10 Up to 25% of the lowest family/dependent premium 10 but less than 15 Up to 50% of the lowest family/dependent premium 15 but less than 20 Up to 75% of the lowest family/dependent premium At least 20 Up to 100% of the lowest family/dependent premium 1 Family/Dependent Medical Premium is active employee Single+1 OR Family medical premium rate less active employee Single medical reimbursement. 4 The amounts paid for dependents are adjusted to keep the fund viable. Currently, the IAFF dependent fund pays the following amounts:
- $300 per month for 1 dependent
- $500 per month for two or more dependents
5 The fire Chied is eligible for dependent fund benefits in Unrep Misc group.

Fire Safety (IAFF)4
Before January 1, 1995
After February 19, 2007
After December 31, 1994
After February 19, 2007
Unrepresented
(UNREP‐Misc)5 After December 31, 1995 After June 30, 2018 Employee
Association (MEA) After June 29, 1996
After June 30, 2003
Police (MPOA) After December 31, 1995 After June 30, 2003 104

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 14 – EMPLOYEE BENEFITS (Continued)
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, 2023, the City’s contributions to the Plan were $2,267,207.

Employees Covered by Benefit Terms – Membership in the plan consisted of the following at the measurement date of June 30, 2022:

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 City’s net OPEB liability was measured as of June 30, 2022 and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation dated July 1, 2021, that was rolled forward using standard update procedures to determine the total OPEB liability as of June 30, 2023, based on the following actuarial methods and assumptions:

Actuarial Assumptions
Valuation Date June 30, 2021
Measurement Date June 30, 2022
Actuarial Cost Method Entry Age Normal Cost, level percent of pay Asset Valuation Method Market Value
Actuarial Assumptions:

Discount Rate 6.15%
Inflation 2.50%
Salary Increase 3.00%
Investment 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.
105

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 14 – EMPLOYEE BENEFITS (Continued)
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 each 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, 2022 valuation date. Net contributions to the trust in recent years have been set at a level to prefund the explicit portion of benefits, with no advance funding of the implicit subsidy liability. Accordingly, the discount rate used for the City’s explicit OPEB liability is

6.15%.

Implicit Subsidy Liability – The City expects to continue to fund the implicit subsidy liability on a pay-asyou-go basis. Therefore, the Fidelity 20 year AA General Obligation Municipal 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 3.69%. 106

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 14 – EMPLOYEE BENEFITS (Continued)
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, 2022 $63,294,468 $64,102,543 ($808,075) Changes Recognized for the Measurement Period:

Service Cost 2,077,984 2,077,984
Interest on the total OPEB liability 3,916,381 3,916,381 Changes in benefit terms
Differences between expected and actual experience
Changes of assumptions
Contributions from the employer 1,757,265 (1,757,265)
Net investment income (8,452,324) 8,452,324
Other Expenses
Plan Experience
Administrative expenses (16,234) 16,234
Benefit payments (3,382,910) (3,382,910)
Net changes 2,611,455 (10,094,203) 12,705,658
Balance at June 30, 2023 (Measurement Date 6/30/22) $65,905,923 $54,008,340 $11,897,583 Increase (Decrease)
The benefit payments and refunds include implied subsidy benefit payments in the amount of $2,308,511.

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 OPEB Liability/(Asset)
Discount Rate
Discount Rate -1% (6.15%) Discount Rate +1%
$20,311,270 $11,897,583 $4,930,109
107

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 14 – 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
$4,263,228 $11,897,583 $21,270,264
D. Dependent Fund Post Employment Benefit (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 Retiree 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, 2022:

Active employees 387
Inactive dependents of retirees currently
receiving benefit payments 171
Inactive employees entitled to but not yet
receiving benefit payments 29
Total 587
Actuarial Methods and Assumptions – The Union Dependent Funds’ total OPEB liability was measured as of June 30, 2022 and the total OPEB liability was determined by an actuarial valuation dated June 30, 2022, that was rolled forward using standard update procedures to determine the total OPEB liability as of June 30, 2022 based on the following actuarial methods and assumptions:

Actuarial Assumptions
Valuation Date June 30, 2021
Measurement Date June 30, 2022
Actuarial Cost Method Entry Age Normal Cost, level percent of pay Asset Valuation Method Market Value
Actuarial Assumptions:

Discount Rate 6.15%
Inflation 2.50%
Salary Increase 3.00%
Investment 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 108

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 14 – 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, 2022 $34,524,825
Changes Recognized for the Measurement Period:

Service Cost 1,767,339
Interest on the total OPEB liability 687,094
Changes in benefit terms
Differences between expected and actual experience
Changes of assumptions (7,639,426)
Contributions from the employer (1,012,052)
Net investment income
Other Expenses
Plan Experience
Administrative expenses
Benefit payments
Net changes (6,197,045)
Balance at June 30, 2023 (Measurement Date) $28,327,780 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 (2.69%) or 1- percentage point higher (4.69%) than the current discount rate:

Net OPEB Liability/(Asset)
Discount Rate

3.67%
$32,301,032 $28,327,780 $25,076,646
Discount Rate -1% Discount Rate +1%
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 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%)
$24,426,248 $28,327,780 $33,293,093
1% Decrease 1% Increase
109

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 14 – EMPLOYEE BENEFITS (Continued)
E. OPEB Expenses and Deferred Outflows/Inflows of Resources Related to OPEB For the year ended June 30, 2023, the City recognized Retiree Medical Benefits OPEB Plan and Dependent Fund OPEB Plan recognized expense of ($283,307) and $2,110,424 respectively, for total OPEB expense of $1,827,117. At June 30, 2023, the Retiree Medical Benefits 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 $2,267,207 Differences between actual and expected experience ($6,160,675) Changes of assumptions 3,457,971 (3,463,196)
Net differences between projected and actual earnings on plan investments 4,214,051
Total $9,939,229 ($9,623,871)
Deferred Outflows Deferred Inflows
of Resources of Resources
Employer contributions made subsequent to the measurement date $1,031,989 Differences between actual and expected experience ($1,121,527) Changes of assumptions 3,825,563 (6,743,831)
Net differences between projected and actual earnings on plan investments
Total $4,857,552 ($7,865,358)
Grand Total, Both Plans $14,796,781 ($17,489,229)
Retiree Medical Benefits OPEB Plan
Dependent Fund OPEB Plan
$3,299,196 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:

Year
Ended June 30 Retiree Medical Benefits Plan Dependent Fund 2024 ($2,285,524) ($344,009)
2025 (2,085,684) (344,009)
2026 (463,342) (344,009)
2027 2,725,657 (344,009)
2028 157,044 (599,932)
Thereafter (2,063,827)
Total (1,951,849) (4,039,795)
Annual Amortization
General Fund has been primarily used in prior years to liquidate OPEB liabilities. 110

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 14 – EMPLOYEE BENEFITS (Continued)
F. Accrued Vacation and Sick Leave Liabilities
Employees accrue vacation up to certain maximums, based 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 liability for vacation and sick leave annually at its fiscal year end. During the year ended June 30, 2023, sick leave benefits payable decreased by $987,110 and vacation benefits payable increased by $341,328. 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 Vacation Sick Leave
Governmental Business-Type Governmental Business-Type
Activities Activities Activities Activities
Balance as of June 30, 2022 $6,140,534 $468,774 $2,173,327 $203,959 Additions 2,766,805 202,280 1,093,912 77,035
Payments and adjustments (2,394,045) (233,712) (2,017,720) (140,337) Balance as of June 30, 2023 $6,513,294 $437,342 $1,249,519 $140,657 General Government $638,194 $2,246
Building 173,312
Public Works 465,553 281,537
Engineering 273,412
Planning 209,657
Recreation 488,291 29,046
Police 2,453,777 494,911
Fire 1,649,058 423,013
Water Utility $260,062 $92,549
Sewer Utility 177,280 48,108
Internal Service 162,040 18,766
Total $6,513,294 $437,342 $1,249,519 $140,657
Long-Term Portion:

Governmental activities $3,887,538 $588,448
Business-type activities $304,140 $50,163
Total long term portions $3,887,538 $304,140 $588,448 $50,163 Current Portion:

Governmental activities $2,625,756 $661,071
Business-type activities $133,202 $90,494
Total current portions $2,625,756 $133,202 $661,071 $90,494 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. 111

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 15 – RISK MANAGEMENT
A. Risk Pool
The City participates in the Pooled Liability Assurance 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 excess liability coverage per occurrence and is responsible for paying claims in excess of the City’s $100,000 deductible. PLAN JPA also provides $2,000,000 employee theft coverage in excess of the City’s $10,000 deductible, and $2,000,000 of government 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, 2023, the City contributed $2,360,851 for the 2022/23 program year.

PLAN JPA is governed by a Board of Directors consisting of representatives from member municipalities.

The Board controls the operations of PLAN JPA, consisting 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 from 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 which provides workers compensation coverage up to a maximum of $20,000,000. The City has a deductible or uninsured 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 miscellaneous 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, 2023 the City paid $1,144,091 in dental claims and administrative fees. Public safety employees are insured under various dental care insurance plans.
112

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 15 – 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:
2023
Worker’s General
Compensation Liability Total 2022
Beginning balance $5,803,733 $395,486 $6,199,219 $6,900,574 Liability for current fiscal year claims 2,001,694 552,866 2,554,560 2,300,509 Increase (decrease) in estimated liability
for prior fiscal year claims and claims
incurred but not reported (IBNR) 25,780 (290,663) (264,883) (1,470,358) Claims paid (1,901,544) (234,607) (2,136,151) (1,531,506) Ending balance $5,613,220 $739,525 $6,352,745 $6,199,219 Due in one year $1,315,630 $332,139 $1,647,769 $1,483,266 Settlements have not exceeded insurance coverage in the past three fiscal years.

NOTE 16 – 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 requirements. No cost disallowances have been proposed as a result of audits completed to date; however, these programs are still subject 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. 113

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 16– COMMITMENTS AND CONTINGENT LIABILITIES (Continued) C. Encumbrances
The City uses an encumbrance system as an extension 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 yearend are recorded as restricted, committed or assigned fund balance, depending on the classification of the resources to be used to liquidate the encumbrance, since they do not constitute expenditures or liabilities.

Outstanding encumbrances at year-end are automatically reappropriated for the following year.

Unencumbered and unexpended appropriations lapse at year-end. Encumbrances outstanding by fund as of June 30, 2023 were as follows:

Major Governmental Funds:

General Fund $2,156,892
Housing Authority Fund 8,258
Non-Major Governmental Funds 79,818
Total Encumbrances $2,244,968
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 Conservation 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 were 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 debt 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. 114

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 16 – 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 share, 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 revenues 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 make up for the prior year shortfall 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 amount 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 $820,819 during fiscal year 2023, which is included as a component of purchased water expenses in the Water Enterprise Fund. The surcharge for fiscal year 2024 is estimated to be $603,300.

F. 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 aggregate 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 third fiscal year, is required to transfer any excess surplus to the Department of Housing and Community Development for expenditure pursuant to the Multifamily Housing Program or the Joe Serna, Jr. Farmworker Housing Grant Program. 115

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 17 – SUCCESSOR AGENCY ACTIVITIES
A. Redevelopment Dissolution
In an effort to balance its budget, the State of California adopted ABx1 26 on June 28, 2011, amended by AB1484 on June 27, 2012, which suspended all new redevelopment 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 Successor 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 become the Housing Successor and 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 Agency 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, which is now responsible for overseeing 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 the affairs of the former Redevelopment Agency.

Cash and investments of the Successor Agency as of June 30, 2023 are discussed in Note 3. Information presented in the following footnotes represents other assets and liabilities of the Successor Agency as of June 30, 2023.
116

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 17 – SUCCESSOR AGENCY ACTIVITIES (Continued)
B. Development Agreements
The Successor Agency assumed the obligations of the former Redevelopment Agency’s Disposition and Development Agreements as follows:

Installment Purchase Agreement
The Redevelopment Agency agreed to purchase two parcels of land comprising thirty-five acres 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 originating 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 issues and transactions are summarized below and discussed in detail thereafter.

Balance Balance Current
June 30, 2022 Retirements June 30, 2023 Portion
Installment Purchase Agreement
with the County of Santa Clara - Direct
Borrowing
due June 30, 2023 $2,493,124 $2,493,124 $0 $0
2015 Tax Allocation Bonds
2%-5%, due September 1, 2032 80,440,000 7,800,000 72,640,000 8,185,000 Plus: Unamortized bond premium 12,703,594 1,190,962 11,512,632 Total $95,636,718 $11,484,086 $84,152,632 $8,185,000
117

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 17 – SUCCESSOR AGENCY ACTIVITIES (Continued)

2. Installment Purchase Agreement with the County of Santa Clara The former Redevelopment Agency had a non-interest bearing Installment Purchase Agreement with 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 Redevelopment 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. During fiscal year 2022-23, the Agency paid off the debt in full.

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 proceeds 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 Trust 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 payable annually and the interest is payable semiannually through 2032. The 2015 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 (b) exercise any and all rights and remedies available 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
Year Ending Total Total
June 30 Principal Interest
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 9,950,000 1,619,250
2029-2033 27,410,000 3,054,250
72,640,000 $15,781,000
Plus: Unamortized bond premium 11,512,632
$84,152,632
118

CITY OF MILPITAS
Notes to Basic Financial Statements
For the Year Ended June 30, 2023
NOTE 17 – SUCCESSOR AGENCY ACTIVITIES (Continued)

5. Defeased Bonds
As of June 30, 2023, the outstanding balance of defeased debt was $2,635,000 for the Redevelopment Agency 1997 Tax Allocation Bonds.

D. Commitments and Contingencies
State Approval of Enforceable Obligations
The Successor Agency prepares a Recognized Obligation 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 question 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.
119

REQUIRED SUPPLEMENTARY INFORMATION

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 Last 10 fiscal years*
Measurement Date 6/30/2017 6/30/2018 6/30/2019 6/30/2020 6/30/2021 6/30/22 Total OPEB Liability
Service Cost $2,386,392 $2,356,491 $2,423,566 $1,958,563 $1,503,917 $2,077,984 Interest 4,794,071 5,155,080 5,462,138 3,581,088 4,100,155 3,916,381 Changes in benefit terms (17,098,878)
Differences between expected and actual experience (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) (3,382,910) Net change in total OPEB liability 2,591,535 4,403,390 (25,615,619) (3,203,931) 4,192,522 2,611,455 Total OPEB liability - beginning 80,926,571 83,518,106 87,921,496 62,305,877 59,101,946 63,294,468 Total OPEB liability - ending (a) $83,518,106 $87,921,496 $62,305,877 $59,101,946 $63,294,468 $65,905,923 Plan fiduciary net position
Contributions - employer $4,959,756 $4,803,893 $4,651,743 $4,528,174 $1,743,593 $1,757,265 Contributions - employee
Net investment income 3,708,342 3,175,844 2,834,217 1,745,028 14,164,474 (8,452,324) Administrative expense (18,732) (21,490) (9,742) (24,292) (19,480) (16,234) Benefit payments (3,325,081) (2,994,247) (3,183,858) (3,122,284) (3,221,642) (3,382,910) Other Expenses (51,721)
Net change in plan fiduciary net position 5,324,285 4,912,279 4,292,360 3,126,626 12,666,945 (10,094,203) Plan fiduciary net position - beginning 33,780,048 39,104,333 44,016,612 48,308,972 51,435,598 64,102,543 Plan fiduciary net position - ending (b) $39,104,333 $44,016,612 $48,308,972 $51,435,598 $64,102,543 $54,008,340 Net OPEB liability (asset) - ending (a)-(b) $44,413,773 $43,904,884 $13,996,905 $7,666,348 ($808,075) $11,897,583 Plan fiduciary net position as a percentage of the total OPEB liability 46.82% 50.06% 77.54% 87.03% 101.28% 81.95% Covered-employee payroll $42,017,236 $43,375,678 $48,788,854 $52,202,907 $59,134,552 $59,298,425 Net OPEB liability as a percentage of covered-employee payroll 105.70% 101.22% 28.69% 14.69% -1.36% 20.06% * Fiscal year 2018 was the first year of implementation. 123

City of Milpitas
Required Supplementary Information

SCHEDULE OF CONTRIBUTIONS
Agent Multiple-Employer Retiree Medical Benefits (OPEB) Plan Last 10 fiscal years*
Fiscal Year Ended June 30, 2018 2019 2020
Explicit Implicit Total Explicit Implicit Total Explicit Implicit Total Actuarially determined contribution $3,387,020 ($219,104) $3,167,916 $3,492,808 ($546,593) $2,946,215 $788,831 $1,545,113 $2,333,944 Contributions in relation to the
actuarially determined contribution 3,387,020 1,416,873 4,803,893 3,492,808 1,158,935 4,651,743 3,478,018 1,050,156 4,528,174 Contribution deficiency (excess) $0 ($1,635,977) ($1,635,977) $0 ($1,705,528) ($1,705,528) ($2,689,187) $494,957 ($2,194,230) Covered-employee payroll $43,375,678 $43,375,678 $43,375,678 $48,788,854 $48,788,854 $48,788,854 $52,202,907 $52,202,907 $52,202,907 Contributions as a percentage of
covered-employee payroll 7.81% 3.27% 11.08% 7.16% 2.38% 9.53% 6.66% 2.01% 8.67% Fiscal Year Ended June 30, 2021 2022 2023
Explicit Implicit Total Explicit Implicit Total Explicit Implicit Total Actuarially determined contribution $655,377 $1,552,190 $2,207,567 $655,377 $1,611,861 $2,267,238 $1,723,519 $1,232,729 $2,956,248 Contributions in relation to the
actuarially determined contribution 655,377 1,088,216 1,743,593 682,866 1,074,399 1,757,265 1,034,478 1,232,729 2,267,207 Contribution deficiency (excess) $0 $463,974 $463,974 ($27,489) $537,462 $509,973 $689,041 $0 $689,041 Covered-employee payroll $59,134,552 $59,134,552 $59,134,552 $59,298,425 $59,298,425 $59,298,425 $59,298,425 $59,298,425 $59,298,425 Contributions as a percentage of
covered-employee payroll 1.11% 1.84% 2.95% 1.15% 1.81% 2.96% 1.74% 2.08% 3.82% Notes to Schedule
Valuation date:

Methods and assumptions used to determine contribution rates:

Valuation Date June 30, 2022
Actuarial Assumptions:

Discount Rate 6.15%
Inflation 2.50%
Salary Increase 3.00%
Investment 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. 124

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*
Measurement Date 6/30/2019 6/30/20 6/30/21 6/30/22
Total OPEB Liability
Service Cost $1,139,508 $1,402,597 $1,767,339
Interest 905,377 810,987 687,094
Changes in benefit terms $28,504,872
Differences between expected and actual experience (1,465,027) Changes of assumptions 3,100,405 2,591,371 (7,639,426)
Benefit payments (1,437,201) (1,028,064) (1,012,052)
Net change in total OPEB liability 28,504,872 3,708,089 2,311,864 (6,197,045) Total OPEB liability - beginning 28,504,872 32,212,961 34,524,825 Total OPEB liability - ending (a) $28,504,872 $32,212,961 $34,524,825 $28,327,780 Plan fiduciary net position
Contributions - employer $1,437,201 $1,012,052
Contributions - employee
Net investment income
Administrative expense
Benefit payments (1,437,201) (1,012,052)
Other Expenses
Net change in plan fiduciary net position - - - -
Plan fiduciary net position - beginning
Plan fiduciary net position - ending (b) $0 $0 $0 $0
Net OPEB liability - ending (a)-(b) $28,504,872 $32,212,961 $34,524,825 $28,327,780 Plan fiduciary net position as a percentage of the total OPEB liability 0.00% 0.00% 0.00% 0.00% Covered-employee payroll $48,788,854 $52,202,907 $59,134,552 $59,298,425 Net OPEB liability as a percentage of covered-employee payroll 58.42% 61.71% 58.38% 47.77% *The liability of this Plan had been previously included together with other City plan OPEB Liabilities.

Beginning 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 GASB 75. 125

City of Milpitas
Required Supplementary Information

SCHEDULE OF CONTRIBUTIONS
Dependent Fund (OPEB) Plan
Last 10 fiscal years*
Fiscal Year Ended June 30, 2020 2021 2022 2023
Explicit Explicit Explicit Explicit
Actuarially required contribution N/A (a) N/A (a) N/A (a) N/A (a) Contributions in relation to the
actuarially required contributions $1,028,064 $0 $1,012,052 $0 Contribution deficiency (excess) N/A (a) N/A (a) N/A (a) N/A (a) Covered-employee payroll $48,788,854 $52,202,907 $59,298,425 $59,298,425 Contributions as a percentage of
covered-employee payroll N/A (a) N/A (a) N/A (a) N/A (a) *No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB 75. (a) Due to the nature of the Plan, actuarially required contribution is not available.

See Note 12D for contribution requirements.
126

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 of 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 net 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)
Net change in plan fiduciary net 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% * Fiscal year 2015 was the first year of implementation.

Changes in assumptions. In 2022, the accounting discount rate reduced from 7.15% to 6.90%. In 2016, 2018, 2019, 2020 and 2021, there were no changes. In 2022, the accounting discount rate reduced from 7.15% to

6.90%. 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.

Benefit 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*
128

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 2021-22 2022-23 Total Pension Liability
Service Cost $3,042,853 $3,361,140 $3,777,335 $4,262,309 $4,859,903 Interest 15,647,110 16,517,342 17,295,222 18,046,275 18,711,899 Differences between expected and actual experience 1,831,444 4,569,776 2,592,349 1,466,976 1,596,580 Changes in assumptions (1,404,854) 8,099,828
Changes in benefits
Benefit payments, including refunds of employee contributions (10,906,398) (11,589,225) (12,009,750) (12,545,846) (14,478,741) Net change in total pension liability 12,859,033 8,210,155 11,655,156 11,229,714 18,789,469 Total pension liability - beginning 222,345,892 230,556,047 243,415,080 255,070,236 266,299,950 Total pension liability - ending (a) $230,556,047 $243,415,080 $255,070,236 $266,299,950 $285,089,419 Plan fiduciary net position
Contributions - employer $5,762,448 $6,864,376 $7,965,270 $8,925,250 $9,800,794 Contributions - employee 1,473,732 1,569,027 1,772,996 1,998,174 1,861,769 Net investment income 13,123,448 10,774,536 8,527,794 40,453,566 (16,338,954) Administrative expense (241,795) (116,977) (241,663) (177,248) (134,612) Benefit payments, including refunds of employee contributions (10,906,398) (11,589,225) (12,009,750) (12,545,846) (14,478,741) Other Miscellaneous Income/Expense (459,172) 381
Net Plan to Plan Resource Movement (381)
Net change in plan fiduciary net position 7,502,118 8,751,882 6,014,647 38,653,896 (19,289,744) Plan fiduciary net position - beginning 155,168,033 163,919,915 171,422,033 177,436,680 216,090,576 Plan fiduciary net position - ending (b) $163,919,915 $171,422,033 $177,436,680 $216,090,576 $196,800,832 Net pension liability - ending (a)-(b) $66,636,132 $71,993,047 $77,633,556 $50,209,374 $88,288,587 Plan fiduciary net position as a percentage of the total pension liability 71.10% 70.42% 69.56% 81.15% 69.03%
Covered payroll $18,846,066 $22,079,190 $19,463,309 $25,754,131 $27,165,471 Net pension liability as percentage of covered payroll 353.58% 326.07% 398.87% 194.96% 325.00% * Fiscal year 2015 was the first year of implementation. 129

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 4,236,931 3,252,668 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 Actuarial Cost Method
Amortization method Level percentage of payroll
Asset valuation method Fair Value of Assets.

Inflation
Salary increases
Investment rate of return
Retirement age
Mortality
* Fiscal year 2015 was the 1st year of implementation.

The probabilities of Retirement are base 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 AA 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 using 90% of Scale MP-2016 published by the Society of Actuaries. For 2023, pre-retirement and post-retirement mortality rates include generational mortality using 80% of Scale MP-2020
published by the Society of Actuaries.

SCHEDULE OF CONTRIBUTIONS
Miscellaneous Plan - Agent Multiple-Employer Defined Pension Plan Last 10 Years*
Varies by Entry Age and Service

7.5% for 2015 to 2018, 7.375% for 2019, 7.25% for 2020,

7.00% for 2021 and 2022, and 6.80% for 2023, net of
administrative expenses, including inflation.

2.75% for 2015 to 2019, 2..625% for 2020, 2.50% for
2021 and 2022, and 2.30% for 2023
130

2019 2020 2021 2022 2023
$6,863,508 $8,337,504 $8,916,157 $9,799,723 $9,421,792
6,863,508 8,337,504 8,916,157 9,799,723 9,421,792
$0 $0 $0 $0 $0
$22,079,190 $19,463,309 $21,793,252 $25,754,131 $27,165,471

31.09% 42.84% 40.91% 38.05% 34.68%
6/30/2016 6/30/2017 6/30/2018 6/30/2019 6/30/2021
131

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 of 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 liability 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 net 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) Net change in plan fiduciary net 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 2022, the accounting discount rate reduced from 7.15% to 6.90%. 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.

Benefit 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*
132

2017-18 2018-19 2019-20 2021-22 2022-23
$5,975,378 $6,211,449 $6,711,730 $7,266,789 $7,801,769
23,331,989 24,560,414 25,568,359 26,671,979 27,775,910
626,935 4,563,968 981,131 2,106,663 1,878,012
(986,630) 14,433,785
(16,083,729) (17,533,455) (18,278,539) (20,179,552) (21,827,081) 12,863,943 17,802,376 14,982,681 15,865,879 30,062,395
331,735,390 344,599,333 362,401,709 377,384,390 393,250,269 $344,599,333 $362,401,709 $377,384,390 $393,250,269 $423,312,664 $8,866,550 $10,288,856 $12,104,306 $13,294,083 $14,258,505 2,240,962 2,441,763 2,748,961 2,834,054 2,853,307
17,931,642 14,733,700 11,689,024 55,066,837 (22,163,861) (330,577) (159,951) (329,757) (241,588) (182,284)
(521)
(627,771) 521
(16,083,729) (17,533,455) (18,278,539) (20,179,552) (21,827,081) 11,996,556 9,771,434 7,933,995 50,773,834 (27,061,414)
212,142,828 224,139,384 233,910,818 241,844,813 292,618,647 $224,139,384 $233,910,818 $241,844,813 $292,618,647 $265,557,233 $120,459,949 $128,490,891 $135,539,577 $100,631,622 $157,755,431

65.04% 64.54% 64.08% 74.41% 62.73%
$20,840,464 $21,681,207 $23,703,982 $26,167,767 $26,110,338 578.01% 592.64% 571.80% 384.56% 604.19%
133

City of Milpitas
Required Supplementary Information
Fiscal Year Ended June 30 2015 2016 2017 2018
Actuarially determined contribution $5,856,270 $7,230,399 $7,887,539 $8,866,550 Contributions in relation to the actuarially
determined contributions 5,904,019 7,346,983 7,887,539 8,866,550 Contribution deficiency (excess) ($47,749) ($116,584) $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% 37.42% 40.86%
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 Actuarial Cost Method
Amortization method Level percentage of payroll
Asset valuation method Fair Value of Assets.

Inflation
Salary increases
Investment rate of return
Retirement age
Mortality
* Fiscal year 2015 was the 1st year of implementation.

Safety Plan - Agent Multiple-Employer Defined Pension Plan Last 10 Years*

SCHEDULE OF CONTRIBUTIONS
The probabilities of Retirement are base on the CalPERS Experience Study.

Varies by Entry Age and Service

2.75% for 2015 to 2019, 2.625% for 2020, 2.50% for 2021 and 2022, and 2.30% for 2023

7.5% for 2015 to 2018, 7.375% for 2019, 7.25% for 2020,

7.00% for 2021 and 2022, and 6.80% for 2023, net of
administrative expenses, including inflation.

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 AA 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 using 90% of Scale MP-2016 published by the
Society of Actuaries. For 2023, pre-retirement and postretirement mortality rates include generational mortality using 80% of Scale MP-2020 published by the Society of Actuaries. 134

City of Milpitas
Required Supplementary Information
2019 2020 2021 2022 2023
$10,288,856 $12,104,306 $13,294,083 $14,258,505 $15,469,857 10,288,856 12,104,306 13,294,083 14,258,505 15,469,857
$0 $0 $0 $0 $0
$20,840,464 $21,681,207 $23,707,982 $26,167,767 $26,110,338

49.37% 55.83% 56.07% 54.49% 59.25%
6/30/2016 6/30/2017 6/30/2018 6/30/2018 6/30/2021
135

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 fund 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 FUND
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 FUND
Established to account for assessments collected within the district. Revenue is used 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 FUND
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 PROJECTS 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 IMPROVEMENT 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 storm drain projects. A special storm drain fee is imposed on developments to provide financing.

CITY OF MILPITAS

NON-MAJOR GOVERNMENTAL FUNDS

COMBINING BALANCE SHEETS
JUNE 30, 2023

SPECIAL REVENUE FUNDS
Lighting and
Housing and Law Solid Waste Landscape Community
Community Enforcement Reduction and Maintenance Facilities Gas Tax Development Services Services District District ASSETS
Cash and investments available for operations $7,892,463 $588,802 $751,388 $2,188,999 $348,456 $2,073,382 Receivables:

Accounts 217,669
Due from other governments 501,212 187,005 15,740 64,659 Interest 19,534 90 5,880 936 11,698
Loans receivable 3,234,883
Prepaids, materials, supplies and deposits 2,440 3,486 2,509 16,298 Total Assets $8,413,209 $4,010,690 $769,658 $2,416,034 $351,901 $2,166,037

LIABILITIES
Accounts payable $184,414 $29,096 $15,578 $2,497 $3,759 Accrued payroll 748 23,135 5,763 43,452
Unearned revenue 622,935 71,287
Refundable deposits 18,843
Total Liabilities 184,414 652,779 128,843 8,260 47,211
Fund Balances:

Nonspendable 2,440 3,486 2,509 16,298
Restricted $8,413,209 3,826,276 114,439 2,283,705 341,132 2,102,528 Assigned

Total Fund Balances 8,413,209 3,826,276 116,879 2,287,191 343,641 2,118,826 Total Liabilities and Fund Balances $8,413,209 $4,010,690 $769,658 $2,416,034 $351,901 $2,166,037

FUND BALANCE
140

SPECIAL REVENUE FUNDS
Total
Hetch-Hetchy Affordable Storm Nonmajor
Ground Community Community Affordable Housing Public Park Drain Governmental Lease Planning Benefits Housing Unrestricted Art Improvement Development Funds $1,461,329 $326,441 $422,822 $5,080,213 $3,159,096 $1,012,942 $5,000,726 $6,503,153 $36,810,212 217,669
13,500 779,820 1,561,936
7,536 3,273 24,702 10,946 5,406 42,974 26,210 159,185
3,234,883
2,176 2,871 4 29,784
$1,468,865 $331,890 $422,822 $5,121,286 $3,170,042 $1,018,352 $5,823,520 $6,529,363 $42,013,669 $3,323 $372,333 $102,303 $713,303
$11,251 25,369 $677 160 110,555
694,222
16 18,859
11,267 28,692 677 372,493 102,303 1,536,939
2,176 2,871 4 29,784
$1,468,865 318,447 $422,822 5,089,723 $3,170,042 5,451,027 6,427,060 39,429,275 1,017,671 1,017,671
1,468,865 320,623 422,822 5,092,594 3,170,042 1,017,675 5,451,027 6,427,060 40,476,730 $1,468,865 $331,890 $422,822 $5,121,286 $3,170,042 $1,018,352 $5,823,520 $6,529,363 $42,013,669

CAPITAL PROJECTS FUNDS
141

Lighting and
Housing & Law Solid Waste Landscape Community
Community Enforcement Reduction and Maintenance Facilities Gas Tax Development Services Services District District REVENUES:

Other taxes $457,525 $4,651,788
Licenses and fines $1,850,693
Use of money and property $75,734 $8,971 $8,916 $16,158 11,145 30,962 Intergovernmental 3,888,101 581,154 259,641 194,142
Charges for services 20,172
Developer contributions
Other
Total Revenues 3,963,835 590,125 268,557 2,081,165 468,670 4,682,750 EXPENDITURES:

Current:

General Government 581,154 11,155
Building, Safety and Housing
Recreation and Community Services 4,611
Public Works 681,960 256,019 1,776,047
Engineering 200 90,338
Planning
Police 222,548
Fire 38,887
Capital outlay
Total Expenditures 581,154 266,046 682,160 346,357 1,787,202

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 3,963,835 8,971 2,511 1,399,005 122,313 2,895,548

OTHER FINANCING SOURCES (USES)
Transfers in 2,711,393 41,866
Transfers (out) (2,686,713) (157,997) (11,000) (2,929,042) Total Other Financing Sources (Uses) 24,680 (157,997) 30,866 (2,929,042) NET CHANGE IN FUND BALANCES 3,988,515 8,971 2,511 1,241,008 153,179 (33,494) Fund balances at beginning of year 4,424,694 3,817,305 114,368 1,046,183 190,462 2,152,320 FUND BALANCES AT END OF YEAR $8,413,209 $3,826,276 $116,879 $2,287,191 $343,641 $2,118,826

CITY OF MILPITAS

NON-MAJOR GOVERNMENTAL FUNDS

COMBINING STATEMENTS OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2023

SPECIAL REVENUE FUNDS
142

Total
Hetch-Hetchy Affordable Storm Nonmajor
Ground Community Community Affordable Housing Public Park Drain Governmental Lease Planning Benefits Housing Unrestricted Art Improvement Development Funds $5,109,313
1,850,693
$18,288 $6,215 $4,386 $72,184 $33,758 $14,769 $223,200 $68,102 592,788 51,555 438,647 5,413,240
302,712 322,884
60,000 786,631 655,993 164,259 1,666,883
80,576 80,576
18,288 308,927 64,386 910,370 33,758 95,345 1,317,840 232,361 15,036,377 35,789 6,110 95,893 118,138 848,239
792,844 792,844
1,457 6,068
2,714,026
90,538
329,185 37,290 366,475
222,548
38,887
2,928,303 1,441,653 4,369,956
35,789 329,185 6,110 926,027 118,138 1,457 2,928,303 1,441,653 9,449,581 (17,501) (20,258) 58,276 (15,657) (84,380) 93,888 (1,610,463) (1,209,292) 5,586,796 235,485 710,248 1,620,497 5,319,489
(200,000) (142,500) (1,286,119) (3,844) (7,417,215)
35,485 710,248 (142,500) (1,286,119) 1,616,653 (2,097,726) (17,501) 15,227 58,276 (15,657) 625,868 (48,612) (2,896,582) 407,361 3,489,070 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 $1,468,865 $320,623 $422,822 $5,092,594 $3,170,042 $1,017,675 $5,451,027 $6,427,060 $40,476,730

SPECIAL REVENUE FUNDS CAPITAL PROJECTS FUNDS
143

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, 2023

HOUSING AND COMMUNITY

GAS TAX DEVELOPMENT
Variance Variance
Actual Amounts Positive Actual Amounts Positive
Budget Budgetary Basis (Negative) Budget Budgetary Basis (Negative)

REVENUES
Other taxes
Licenses and fines
Use of money and property $42,674 $75,734 $33,060 $10,952 $8,971 ($1,981) Intergovernmental 3,917,532 3,888,101 (29,431) 686,922 581,154 (105,768) Charges for services
Developer contributions
Total Revenues 3,960,206 3,963,835 3,629 697,874 590,125 (107,749)

EXPENDITURES
Current:

General Government:

City Manager
City Attorney
Finance 14,578 (14,578)
Non-departmental 1,239,162 566,576 672,586
Building, Safety and Housing
Recreation and Community Services
Public Works
Engineering
Planning
Police
Fire
Total Expenditures 1,239,162 581,154 658,008

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 3,960,206 3,963,835 3,629 (541,288) 8,971 550,259

OTHER FINANCING SOURCES (USES)
Transfers in 848,458 2,711,393 1,862,935
Transfers (out) (2,789,041) (2,686,713) 102,328
Total Other Financing Sources (Uses) (1,940,583) 24,680 1,965,263 NET CHANGE IN FUND BALANCES $2,019,623 3,988,515 $1,968,892 ($541,288) 8,971 $550,259 ADJUSTMENT TO BUDGETARY BASIS:

Expenditures capitalized for GAAP purposes
Capital Outlay
Encumbrance adjustments
Fund balances at beginning of year 4,424,694 3,817,305
Fund balances at end of year $8,413,209 $3,826,276
144

SOLID WASTE REDUCTION
Variance Variance Variance
Actual Amounts Positive Actual Amounts Positive Actual Amounts Positive Budget Budgetary Basis (Negative) Budget Budgetary Basis (Negative) Budget Budgetary Basis (Negative) $459,473 $457,525 ($1,948)
$400,000 $1,850,693 $1,450,693
$22,415 $8,916 ($13,499) 36,650 16,158 (20,492) 1,878 11,145 9,267 391,487 259,641 (131,846) 413,084 194,142 (218,942)
20,172 20,172
413,902 268,557 (145,345) 849,734 2,081,165 1,231,431 461,351 468,670 7,319 4,611
988,542 697,485 291,057 329,499 256,019 73,480
8,382 200 8,182 109,573 92,736 16,837
777,897 351,397 426,500
38,887 38,887
816,784 394,895 426,500 996,924 697,685 299,239 439,072 348,755 90,317 (402,882) (126,338) 276,544 (147,190) 1,383,480 1,530,670 22,279 119,915 97,636 60,000 (60,000) 41,866 41,866
(157,996) (157,997) (1) (11,000) (11,000)
60,000 (60,000) (157,996) (157,997) (1) 30,866 30,866
($342,882) (126,338) $216,544 ($305,186) 1,225,483 $1,530,669 $53,145 150,781 $97,636 128,849 15,525 2,398
114,368 1,046,183 190,462
$116,879 $2,287,191 $343,641
(Continued)

LAW ENFORCEMENT SERVICES MAINTENANCE DISTRICT AND SERVICES

LIGHTING AND LANDSCAPING
145

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, 2023
Variance Variance
Actual Amounts Positive Actual Amounts Positive
Budget Budgetary Basis (Negative) Budget Budgetary Basis (Negative)

REVENUES
Other taxes $4,156,571 $4,651,788 $495,217
Use of money and property 52,329 30,962 (21,367) $39,539 $18,288 ($21,251) Intergovernmental
Charges for services
Developer contributions
Total Revenues 4,208,900 4,682,750 473,850 39,539 18,288 (21,251)

EXPENDITURES
Current:

General Government:

City Manager
City Attorney
Finance
Non-departmental 8,008 11,155 (3,147) 37,500 35,789 1,711 Building, Safety and Housing
Recreation and Community Services
Public Works 1,484,556 1,776,047 (291,491)
Engineering
Planning
Police
Total Expenditures 1,492,564 1,787,202 (294,638) 37,500 35,789 1,711

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 2,716,336 2,895,548 179,212 2,039 (17,501) (19,540)

OTHER FINANCING SOURCES (USES)
Transfers in
Transfers (out) (2,929,042) (2,929,042)
Total Other Financing Sources (Uses) (2,929,042) (2,929,042) NET CHANGE IN FUND BALANCES ($212,706) (33,494) $179,212 $2,039 (17,501) ($19,540) ADJUSTMENT TO BUDGETARY BASIS:

Expenditures capitalized for GAAP purposes
Capital Outlay
Encumbrance adjustments
Fund balances at beginning of year 2,152,320 1,486,366
Fund balances at end of year $2,118,826 $1,468,865

COMMUNITY FACILITIES DISTRICT HETCH-HETCHY GROUND LEASE 146

Variance Variance Variance
Actual Amounts Positive Actual Amounts Positive Actual Amounts Positive Budget Budgetary Basis (Negative) Budget Budgetary Basis (Negative) Budget Budgetary Basis (Negative) $16,846 $6,215 ($10,631) $9,414 $4,386 ($5,028) $129,124 $72,184 ($56,940) 51,555 51,555
254,000 302,712 48,712
60,000 60,000 $500,000 786,631 286,631
270,846 308,927 38,081 9,414 64,386 54,972 680,679 910,370 229,691 50,000 6,110 43,890 $34,506 33,673 833
23,211 3,399 19,812
95,030 58,821 36,209
1,021,266 792,844 228,422
269,813 329,185 (59,372) 37,290 (37,290)
269,813 329,185 (59,372) 50,000 6,110 43,890 1,174,013 926,027 247,986 1,033 (20,258) (21,291) (40,586) 58,276 98,862 (493,334) (15,657) 477,677 235,485 235,485
(200,000) (200,000)
35,485 35,485
$36,518 15,227 ($21,291) ($40,586) 58,276 $98,862 ($493,334) (15,657) $477,677 305,396 364,546 5,108,251
$320,623 $422,822 $5,092,594
(Continued)

COMMUNITY PLANNING COMMUNITY BENEFITS AFFORDABLE HOUSING 147

AFFORDABLE
Variance Variance
Actual Amounts Positive Actual Amounts Positive
Budget Budgetary Basis (Negative) Budget Budgetary Basis (Negative)

REVENUES
Other taxes
Use of money and property $56,574 $33,758 ($22,816) $30,944 $14,769 ($16,175) Intergovernmental
Charges for services
Developer contributions 80,576 80,576
Total Revenues 56,574 33,758 (22,816) 30,944 95,345 64,401

EXPENDITURES
Current:

General Government:

City Manager
City Attorney
Finance
Non-departmental 118,138 (118,138)
Building, Safety and Housing
Recreation and Community Services 1,457 (1,457)
Public Works
Engineering
Planning
Police
Total Expenditures 118,138 (118,138) 1,457 (1,457)

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 56,574 (84,380) (140,954) 30,944 93,888 62,944

OTHER FINANCING SOURCES (USES)
Transfers in 710,248 710,248
Transfers (out) (130,000) (142,500) (12,500)
Total Other Financing Sources (Uses) 710,248 710,248 (130,000) (142,500) (12,500) NET CHANGE IN FUND BALANCES $56,574 625,868 $569,294 ($99,056) (48,612) $50,444 ADJUSTMENT TO BUDGETARY BASIS:

Expenditures capitalized for GAAP purposes
Capital Outlay
Encumbrance adjustments
Fund balances at beginning of year 2,544,174 1,066,287
Fund balances at end of year $3,170,042 $1,017,675

HOUSING UNRESTRICTED PUBLIC ART
FOR THE YEAR ENDED JUNE 30, 2023

CITY OF MILPITAS

BUDGETED NON-MAJOR FUNDS

COMBINING SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES

BUDGET AND ACTUAL (NON-GAAP LEGAL BASIS)
148

TOTALS
Variance
Actual Amounts Positive
Budget Budgetary Basis (Negative)
$4,616,044 $5,109,313 $493,269
400,000 1,850,693 1,450,693
449,339 301,486 (147,853)
5,460,580 4,974,593 (485,987)
254,000 322,884 68,884
500,000 927,207 427,207
11,679,963 13,486,176 1,806,213
84,506 33,673 50,833
23,211 3,399 19,812
14,578 (14,578)
1,379,700 790,479 589,221
1,021,266 792,844 228,422
6,068 (6,068)
2,802,597 2,729,551 73,046
117,955 92,936 25,019
269,813 329,185 (59,372)
777,897 351,397 426,500
6,476,945 5,144,110 1,332,835
5,203,018 8,342,066 3,139,048
950,324 3,698,992 2,748,668
(6,217,079) (6,127,252) 89,827
(5,266,755) (2,428,260) 2,838,495
($63,737) 5,913,806 $5,977,543
146,772
22,620,352
$28,680,930
149

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.

CITY OF MILPITAS

INTERNAL SERVICE FUNDS

COMBINING STATEMENTS OF NET POSITION
JUNE 30, 2023
Equipment Pension
Management Section 115 Totals
ASSETS
Current Assets
Cash and investments $14,267,327 $32,671,513 $46,938,840 Interest receivable 60,425 60,425
Total current assets 14,327,752 32,671,513 46,999,265
Noncurrent Assets
Materials, supplies and deposits 591,117 591,117
Capital assets (net of accumulated depreciation) 8,480,587 8,480,587 Total noncurrent assets 9,071,704 9,071,704
Total Assets 23,399,456 32,671,513 56,070,969

LIABILITIES
Current Liabilities
Accounts payable 112,019 8,453 120,472
Interest payable
Refundable deposit 12 12
Accrued payroll 49,800 49,800
Accrued vacation 121,268 121,268
Sick leave payable 13,820 13,820
Capital lease
Noncurrent Liabilities
Accrued vacation 40,772 40,772
Sick leave payable 4,946 4,946
Total Liabilities 342,637 8,453 351,090

NET POSITION
Invested in capital assets 8,480,587 8,480,587
Restricted for pension expenses 32,663,060 32,663,060
Unrestricted 14,576,232 14,576,232
Total Net Position $23,056,819 $32,663,060 $55,719,879
153

Equipment Pension
Management Section 115 Totals

OPERATING REVENUES
Charges for services $3,552,091 $3,552,091
Other 65,533 $1,144,841 1,210,374
Total Operating Revenues 3,617,624 1,144,841 4,762,465

OPERATING EXPENSES
Personal services 1,538,014 1,538,014
Services and supplies 1,278,271 85,191 1,363,462
Depreciation and amortization 1,213,482 1,213,482
Maintenance and repairs 618,463 618,463
Total Operating Expenses 4,648,230 85,191 4,733,421
Operating Income (Loss) (1,030,606) 1,059,650 29,044

NONOPERATING REVENUES (EXPENSES)
Gain on sale of capital assets 12,326 12,326
Interest income(loss) 96,517 1,066,064 1,162,581
Total Nonoperating Revenues (Expenses) 108,843 1,066,064 1,174,907 Income (Loss) Before Contributions and Transfers (921,763) 2,125,714 1,203,951 Contributions 277,568 277,568
Transfer in 1,365,373 1,365,373
Transfer out (150,000) (150,000)
Change in net position 571,178 2,125,714 2,696,892
Net position-beginning 22,485,641 30,537,346 53,022,987 Net position-ending $23,056,819 $32,663,060 $55,719,879

CITY OF MILPITAS

INTERNAL SERVICE FUNDS

COMBINING STATEMENTS OF REVENUES, EXPENSES AND

CHANGES IN FUND NET POSITION
FOR THE YEAR ENDED JUNE 30, 2023
154

Equipment Pension
Management Section 115 Totals

CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $3,617,863 $1,144,841 $4,762,704 Payments to suppliers (1,858,896) (76,738) (1,935,634)
Payments to employees (1,505,594) (1,505,594)
Net cash provided by operating activities 253,373 1,068,103 1,321,476

CASH FLOWS FROM NONCAPITAL

FINANCING ACTIVITIES
Transfers in 1,365,373 1,365,373
Transfers out (150,000) (150,000)
Cash Flows from Noncapital Financing Activities 1,215,373 1,215,373

CASH FLOWS FROM CAPITAL AND RELATED

FINANCING ACTIVITIES
Acquisition of capital assets (75,135) (75,135)
Proceeds from sale of capital assets 12,326 12,326
Cash Flows from Capital and Related
Financing Activities (62,809) (62,809)

CASH FLOWS FROM INVESTING ACTIVITIES
Interest and dividends 61,987 1,066,064 1,128,051
Cash Flows from Investing Activities 61,987 1,066,064 1,128,051 Net increase (decrease) in cash and cash equivalents 1,467,924 2,134,167 3,602,091 Cash and investments at beginning of period 12,799,403 30,537,346 43,336,749 Cash and investments at end of period $14,267,327 $32,671,513 $46,938,840 NONCASH TRANSACTIONS:

Contributions and transfers of capital assets, net $277,568 $277,568 Retirement of capital assets, net
Reconciliation of operating income (loss) to net cash provided by operating activities:

Operating income (loss) (1,030,606) $1,059,650 29,044
Adjustments to reconcile operating income to net cash provided by operating activities:

Depreciation 1,213,482 1,213,482
Change in assets and liabilities:

Receivables, net 239 239
Materials, supplies and deposits 9,542 9,542
Accounts and other payables 60,716 8,453 69,169
Net cash provided by operating activities $253,373 $1,068,103 $1,321,476

CITY OF MILPITAS

INTERNAL SERVICE FUNDS

COMBINING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2023
155

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.

Schedule 1

CITY OF MILPITAS

NET POSITION

LAST TEN FISCAL YEARS
(Accrual basis of accounting)
(Dollars in Thousands)
Fiscal Year Ended June 30,
2014 2015 (b) 2016 2017 2018 (c)
Governmental activities
Net investment in capital assets and capacity rights $291,704 $291,500 $298,321 $312,138 $323,239 Restricted 90,758 103,829 100,327 108,630 109,726
Unrestricted 51,315 (84,598) (44,368) (30,091) (63,405) Total governmental activities net position $433,777 $310,731 $354,280 $390,677 $369,560 Business-type activities
Net investment in capital assets and capacity rights $107,816 $113,232 $118,588 $122,937 $130,736 Restricted 37,254 40,867 35,130 40,311 43,834
Unrestricted 20,880 11,586 15,261 20,254 15,784
Total business-type activities net position $165,950 $165,685 $168,979 $183,502 $190,354 Primary government
Net investment in capital assets and capacity rights $399,520 $404,732 $416,909 $435,075 $453,975 Restricted 128,012 144,696 135,457 148,941 153,560
Unrestricted 72,195 (73,012) (29,107) (9,837) (47,621)
Total primary government net position $599,727 $476,416 $523,259 $574,179 $559,914 Fiscal Year Ended June 30
2019 2020 2021 2022 2023
Governmental activities
Net investment in capital assets and capacity rights $326,564 $344,471 $358,445 $365,009 $365,509 Restricted 145,983 158,716 189,030 176,451 179,036
Unrestricted (65,799) (93,911) (142,708) (118,570) (114,218) Total governmental activities net position $406,748 $409,276 $404,767 $422,890 $430,327 Business-type activities
Net investment in capital assets and capacity rights $135,048 $99,331 $125,206 $127,204 $130,978 Restricted 59,191 63,084 72,629 75,083 89,091
Unrestricted 8,930 47,967 18,483 21,208 12,857
Total business-type activities net position $203,169 $210,382 $216,318 $223,495 $232,926 Primary government
Net investment in capital assets and capacity rights $461,612 $443,802 $483,651 $492,213 $496,487 Restricted 205,174 221,800 261,659 251,534 268,127
Unrestricted (56,869) (45,944) (124,225) (97,362) (101,361) Total primary government net position $609,917 $619,658 $621,085 $646,385 $663,253 (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
2014 2015
(b)
2016 2017 2018
(c)
2019 2020 2021 2022 2023
($ 000)
Net investment in capital assets and capacity rights Restricted Unrestricted 159

Schedule 2
2014 2015 2016 2017
Expenses
Governmental activities
General Government $21,074 $18,118 $18,614 $21,174
Building and Safety 2,684 2,617 2,513 3,389
Building, Housing and Safety
Recreation and Community Services
Public Works 18,664 17,509 12,761 16,266
Engineering 5,790 (d) 6,249 (d)
Planning and Neighborhood Services 2,119 2,372 2,649 (d) 3,103 (d) Planning
Parks and Recreation 3,012 3,098 4,090 4,949
Police 23,373 24,699 24,556 30,270
Fire 15,159 16,301 16,400 20,499
Interest on Long Term Debt 240 67 56 48
Total governmental activities expenses 86,325 84,781 87,429 105,947 Business-type activities
Water Utility 17,369 18,344 19,743 20,666
Recycled Water Utility (c) (c) (c) (c)
Sewer Utility 11,008 10,426 10,872 9,969
Total business-type activities expenses 28,377 28,770 30,615 30,635 Total primary government expenses $114,702 $113,551 $118,044 $136,582 Program Revenues
Governmental activities:

Charges for services:

General Government $1,819 $1,063 $2,065 $1,970
Building and Safety 6,445 5,128 5,963 7,814
Building, Housing and Safety
Recreation and Community Services
Public Works 2,472 2,644 (d) (d)
Engineering 2,863 (d) 2,720 (d)
Planning and Neighborhood Services 432 700 747 292
Planning
Parks and Recreation 1,958 2,060 1,981 2,301
Police 1,091 1,151 1,138 1,184
Fire 2,120 1,885 2,440 3,224
Operating grants and contributions 6,195 6,201 7,320 7,880 Capital grants and contributions 15,483 14,711 35,195 32,256 Total government activities program revenues 38,015 35,543 59,712 59,641 Business-type activities
Charges for services:

Water Utility 21,354 21,136 18,709 26,318
Recycled Water Utility (c) (c) (c) (c)
Sewer Utility 12,753 14,453 15,964 16,803
Operating grants and contributions 57 127 63 89
Capital grants and contributions 1,402 710 1,103 4,937
Total business-type activities program revenue 35,566 36,426 35,839 48,147 Total primary government program revenues $73,581 $71,969 $95,551 $107,788 Net (Expense)/Revenue
Governmental activities ($48,310) ($49,238) ($27,717) ($46,306) Business-type activities 7,189 7,656 5,224 17,512
Total primary government net expense ($41,121) ($41,582) ($22,493) ($28,794) (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 Safety, and Planning is a separate department beginning in fiscal year 2019. (f) 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.

LAST TEN FISCAL YEARS
(accrual basis of accounting)
(Dollars in Thousands)
Fiscal Year Ended June 30,

CITY OF MILPITAS

CHANGES IN NET POSITION
160

Schedule 2
2018 2019 2020 2021 2022 2023
$19,111 $25,281 $24,050 $25,247 $25,213 $25,711
4,148 (e) (e) (e) (e) (e)
(e) 5,449 7,418 6,705 4,943 7,940
5,890 7,020 7,095 5,174 6,114 8,410
15,903 20,053 20,342 20,219 22,063 23,657
5,712 (d) 6,459 (d) 7,314 (d) 6,826 (d) 5,047 (d) 6,006 (d) 3,586 (d) (e) (e) (e) (e) (e)
1,851 2,741 2,489 1,851 2,638
33,840 35,868 43,505 38,919 29,468 39,545
24,194 26,535 31,472 31,859 29,040 31,799
17 37 785 838 565
112,384 128,533 143,974 138,223 124,577 146,271
23,742 25,232 28,750 28,959 26,898 28,070
(c) (c) (c) (c) (c) (c)
12,715 12,231 15,240 15,982 15,622 20,226
36,457 37,463 43,990 44,941 42,520 48,296
$148,841 $165,996 $187,964 $183,164 $167,097 $194,567
$2,088 $2,347 $1,809 $1,710 $1,931 $1,400
10,093 (e) (e) (e) (e) (e)
9,718 6,621 8,629 8,815 7,815
2,559 2,655 1,145 762 2,360 3,328
(d) (d) (d) (d) (d) 81 (d)
2,465 (d) 2,379 (d) 2,132 (d) 1,792 (d) 1,096 (d) 2,960 (d) 418 (e) (e) (e) (e) (e)
226 452 408 474 505
1,089 1,130 1,087 1,055 1,421 1,565
3,326 2,172 2,402 2,553 2,582 2,498
6,521 8,277 10,643 14,986 15,335 16,230
34,003 47,194 33,423 18,997 19,924 7,901
62,562 76,098 59,714 50,892 53,938 44,283
29,667 29,355 32,792 34,658 34,374 34,242
(c) (c) (c) (c) (c) (c)
17,139 17,830 19,566 20,152 21,593 24,953
124 114 171 125 306 59
2,507 2,755 601 1,434 1,026 2,509
49,437 50,054 53,130 56,369 57,299 61,763
$111,999 $126,152 $112,844 $107,261 $111,237 $106,046
($49,822) ($52,435) ($84,260) ($87,331) ($70,639) ($101,988) 12,980 12,591 9,140 11,428 14,779 13,467
($36,842) ($39,844) ($75,120) ($75,903) ($55,860) ($55,860) (Continued)
161

Schedule 2
2014 2015 2016 2017

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 $27,607 $24,927 $27,068 $30,262
Sales and use taxes 19,014 18,779 23,924 25,392
Hotel/Motel taxes 9,336 10,917 11,757 11,858
Other taxes 672 664 822 803
Franchise fees 3,453 3,659 3,841 3,871
Motor vehicle in lieu 31 29 29 34
Investment earnings 844 379 913 118
Gain on sale of capital assets/property 7,324
Miscellaneous 200 333 287 118
Transfers 3,402 1,627 2,625 2,923
Extraordinary item
Special Item 49,799
Total government activities 64,559 61,314 71,266 82,703 Business-type activities
Investment earnings 690 383 695 (65)
Transfers (3,402) (1,627) (2,625) (2,923)
Total business-type activities (2,712) (1,244) (1,930) (2,988) Total primary government $61,847 $60,070 $69,336 $79,715 Change in net position
Governmental activities $16,249 $12,076 $43,549 $36,397 Business-type activities 4,477 6,412 3,294 14,524
Total primary government $20,726 $18,488 $46,843 $50,921 (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 Safety, and Planning is a separate department beginning in fiscal year 2019. (f) 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. 162

Schedule 2
2018 2019 2020 2021 2022 2023
$31,893 $33,811 $37,684 $40,979 $42,646 $47,100
26,991 27,983 24,173 24,170 33,210 37,344
12,122 14,503 11,377 4,213 8,013 11,190
814 808 836 791 1,070 737
4,678 5,127 5,173 5,036 5,188 5,690
39 36 60 57 87 84
301 4,474 2,808 965 (7,560) 1,864
4 43 28 198 34
186 390 446 503 1,554 765
2,511 2,489 4,187 6,079 4,357 4,616
(12,432) (f)
67,103 89,625 86,787 82,821 88,763 109,424
171 2,712 2,261 588 (3,246) 580
(2,511) (2,489) (4,187) (6,079) (4,357) (4,616)
(2,340) 223 (1,926) (5,491) (7,603) (4,036)
$64,763 $89,848 $84,861 $77,330 $81,160 $105,388
$17,281 $37,190 $2,527 ($4,510) $18,124 $7,436
10,640 12,814 7,214 5,937 7,176 9,431
$27,921 $50,004 $9,741 $1,427 $25,300 $16,867
163

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,
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
General Fund
Nonspendable $23,279 $23,265 $23,387 $20,209 $10,043 $10,234 $10,189 $4,783 $4,866 $4,924 Restricted 0 0 0 0 0 0 0 0 0 0
Committed 5,433 5,433 8,440 19,026 33,643 43,852 44,082 13,266 15,766 16,972 Assigned 6,658 7,013 9,052 8,067 8,629 5,916 6,118 6,543 6,114 6,921 Unassigned 13,521 13,864 13,410 25,440 40,496 40,655 34,387 38,128 40,038 44,685 Total General Fund $48,891 $49,575 $54,289 $72,742 $92,811 $100,657 $94,776 $62,720 $66,784 $73,502 (a) All Other Governmental Funds
Nonspendable $32 $11 $13 $15 $2,229 $85 $20 $28 $27 $150 Restricted 62,661 92,347 99,701 109,416 110,418 143,232 155,359 150,544 147,231 145,894 Assigned 11,808 20,806 29,956 29,635 24,284 28,532 29,768 39,508 22,250 26,485 Unassigned (6,610) (5,932) 0 0000000
Total all other governmental funds $67,891 $107,232 $129,670 $139,066 $136,931 $171,849 $185,147 $190,080 $169,508 $172,529 (a) (a) The change in total fund balance for the General Fund and other governmental funds is explained in Management's Discussion and Analysis.
0 50,000
100,000
150,000
200,000
250,000
300,000
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
($ 000)
Nonspendable Restricted Committed Assigned Unassigned
165

Schedule 4
2014 2015 2016 2017 2018
Revenues
Property taxes $27,608 $24,927 $27,068 $30,261 $31,893
Sales taxes 19,766 19,572 24,719 26,214 27,854
Hotel/Motel taxes
Franchise fees
Other taxes 14,992 17,505 18,737 19,349 20,429
Licenses and fines 8,193 6,971 8,051 10,497 12,758
Use of money and property 2,964 2,032 3,037 2,180 2,719 Intergovernmental 5,216 5,482 6,104 4,696 6,228
Charges for services 5,735 6,449 7,196 7,238 6,981
Developer contributions 13,975 11,614 29,410 25,637 29,065 Other 1,144 205 113 310 568
Total Revenues 99,593 94,757 124,435 126,382 138,495
Expenditures
Current:

General Government 13,204 12,814 13,771 17,089 15,397
Building and Safety 2,658 2,706 2,885 3,148 3,633
Building, Housing and Safety
Recreation and Community Services 3,383 3,876 4,497
Human Resources and Recreation 3,124 3,329 (c) (c) (c)
Parks and Recreation (a) (a) (a) (a) (a)
Public Works 8,535 9,199 6,020 6,839 6,983
Engineering 3,257 3,527 3,103
Planning and Neighborhood Services 2,202 2,570 2,805 2,978 3,153 Planning
Police 22,165 24,193 26,124 27,247 27,880
Fire 14,587 15,605 17,470 18,456 21,034
Capital outlay 10,035 14,376 24,811 26,151 27,243
Debt service:

Principal 3,828 6,000
Interest and fees 223 61 54 48 69
Total Expenditures 80,561 90,853 100,580 109,359 112,992 Excess (deficiency) of revenues over
(under) expenditures 19,032 3,904 23,855 17,023 25,503
Other Financing Sources (Uses)
Proceeds from debt issuance
Payments to refunded debt escrow agent
Proceeds/gain from sale of properties 6 4 160 7,324
Loss from sale/conveyance of property (12,437)
Transfers in 7,499 25,558 23,001 18,405 19,505
Transfers (out) (4,098) (19,305) (19,864) (14,903) (14,637) Total other financing sources (uses) 3,407 6,257 3,297 10,826 (7,569) 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 $22,439 $10,161 $27,152 $27,849 $17,934 Debt service as a percentage of
noncapital expenditures 5.5% 7.4% 0.1% 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.

CITY OF MILPITAS

CHANGES IN FUND BALANCES, GOVERNMENTAL FUNDS

LAST TEN FISCAL YEARS
(modified accrual basis of accounting)
(Dollars in Thousands)
Fiscal Year Ended June 30,
166

Schedule 4
2019 2020 2021 2022 2023
$33,811 $37,799 $41,093 $42,759 $47,210
28,890 25,058 25,114 34,364 38,476
11,377 (e) 4,213 (e) 8,012 (e) 11,189 (e)
5,173 (e) 5,036 (e) 5,188 (e) 5,690 (e)
23,386 4,632 (e) 4,889 (e) 5,940 (e) 6,154 (e)
11,757 9,039 10,993 11,287 10,147
8,452 8,092 1,505 (5,980) 3,432
6,019 9,089 12,576 15,403 16,062
6,969 5,228 4,816 6,114 6,908
41,153 24,684 15,880 9,331 2,399
926 983 642 621 935
161,363 141,154 126,757 133,039 148,602
21,352 19,146 22,902 24,657 22,390
(d) (d) (d)
5,038 5,784 6,088 5,853 7,635
5,144 5,227 3,662 5,041 6,640
(c) (c) (c)
(a) (a) (a)
8,151 9,588 10,671 10,850 12,053
3,201 3,559 3,846 3,474 3,539
(d) (d) (d)
1,648 2,116 2,293 2,142 2,484
30,389 34,301 34,803 35,023 37,656
23,225 26,416 28,200 29,483 29,227
23,435 32,106 33,648 33,828 21,196
199 728 275 748
104 155 449 737 740
121,886 139,126 146,562 151,363 144,308
39,477 2,028 (19,805) (18,324) 4,294
952 21,919
1 3 118 65
(152)
37,936 27,164 21,486 16,902 23,531
(35,449) (21,777) (50,724) (13,225) (20,131)
3,288 5,387 (7,316) 3,795 3,465
$42,765 $7,415 ($27,121) ($14,529) $7,759

0.3% 0.7% 0.3% 0.7% 0.7%
Fiscal Year Ended June 30,
167

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) 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% 2022-23 15,166,680 1,890,500 4,568,761 496,705 2,196,227 (193,979) 24,124,894 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 increment 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. Total 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
$26,000,000
2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 168

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
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
2022-23 1.00 1.00 0.0412 0.1172 0.0044
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.
169

Schedule 7

CITY OF MILPITAS

PRINCIPAL PROPERTY TAX PAYERS
FISCAL YEARS 2022-23 and 2013-14
2022-2023 2013-2014
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. $826,020,918 1 3.42% $987,389,413 1 7.71% KLA Tencor Corporation 612,263,450 2 2.54% 249,599,168 3 1.95% Headway Technologies Inc 525,346,522 3 2.18% 114,307,730 7 0.89% Milpitas-District 1 Owner LLC 452,824,710 4 1.88%
Milpitas Mills LP 352,602,886 5 1.46% 302,422,174 2 2.36% Sanbox Expansion LLC 249,318,497 6 1.03% 89,250,000 9 0.70% Anton Milpitas 236,590,987 7 0.98%
Western Digital Technologies Inc 224,214,039 8 0.93%
McCarthy Center Holding LLC 203,531,025 9 0.84%
Amalfi Milpitas LLC 176,047,464 10 0.73%
California Diversified LLC 153,500,000 4 1.20%
Linear Technology Corporation 132,393,688 5 1.03%
BRE Milpitas LLC 121,141,738 6 0.95%
Silicon Valley California I LLC 106,048,587 8 0.83%
Fairfield Murphy RD LLC 83,610,070 10 0.65%
Subtotal $3,858,760,498 15.99% $2,339,662,568 18.26%
Fiscal Year 2022-2023 Total Net Assessed Valuation $24,124,894,000 Fiscal Year 2013-2014 Total Net Assessed Valuation $12,813,358,000 Source: Hdl, Coren & Cone, Santa Clara County Assessor 2022/23 Combined Tax Rolls 170

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 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%
2022-23 47,210 47,210 100.00% 0 47,210 100.00%
(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.

Source: City of Milpitas Comprehensive Financial Annual Report 171

Schedule 9

CITY OF MILPITAS

TAXABLE SALES BY CATEGORY

LAST TEN CALENDAR YEARS
(Dollars in Thousands)
Adjusted for Economic Data (a)

CALENDAR YEARS
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Apparel Stores $291,569 $300,449 $321,992 $324,754 $314,471 $325,502 $328,545 $135,733 $235,718 $267,979 General Merchandise 93,209 85,048 86,475 92,857 90,725 86,646 83,356 63,773 70,904 73,663 Food Stores 27,962 30,876 32,076 32,093 32,541 31,105 31,622 33,133 35,305 37,683 Eating and Drinking Places 216,040 225,234 246,653 262,560 278,180 285,726 299,484 176,508 260,109 337,908 Building Materials 58,260 90,386 134,128 219,504 217,800 245,999 273,634 241,873 261,114 230,481 Auto Dealers and Supplies 167,073 177,278 186,944 195,626 218,899 208,229 201,342 176,691 204,344 249,917 Service Stations 110,416 115,955 98,981 93,188 97,579 107,423 110,121 72,722 108,410 148,616 Other Retail Stores 241,299 197,600 211,323 198,233 191,621 198,054 192,134 123,956 158,486 163,503 All Other Outlets 427,716 476,482 636,541 645,440 877,058 706,636 734,758 709,740 1,211,268 1,433,583 Total $1,633,544 $1,699,308 $1,955,113 $2,064,255 $2,318,874 $2,195,320 $2,254,996 $1,734,129 $2,545,658 $2,943,333 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 information regarding the sources ot the City's revenue. (a) Adjusted for Economic Data - reflects adjustments for prior periods taxable sales in the appropriate quarters. $0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
($ 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 172

Schedule 10 CITY OF MILPITAS

DIRECT AND OVERLAPPING SALES TAX RATES

LAST TEN FISCAL YEARS
City
Fiscal Direct Santa Clara State of
Year Rate County (b) California
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 (a)
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
2022-23 1.25 2.13 6.00
Source: California State Board of Equalization
(a) On April 1, 2017, the County increased the rate 0.50% and on January 1, 2017 the State decreased the rate 0.25%.
(b) 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. 173

Schedule 11

CITY OF MILPITAS

PRINCIPAL SALES TAX PAYERS
FISCAL YEARS 2022-23 and 2013-14

IN ALPHABETICAL ORDER
Fiscal Year 2022-2023 Fiscal Year 2013-2014
7 Eleven Best Buy
Arco Burlington
Autumn Information Systems Chevron
Best Buy Chevron
Burlington Cisco Systems
Cisco Systems Coach
Coach Dave & Busters
Consolidated Electrical Distributors Flextronics
Envision Honda of Milpitas Gap Outlet
Envision Toyota of Milpitas Headway Technologies
Eplus Technology Home Depot
Flextronics KLA Tencor
Floor & Décor Kohls
Headway Technologies Marshalls
Home Depot Mazak Corporation
Hoya Corporation USA Milpitas Materials Company
Inspur Systems Nanometrics
Jacklin Shell Nike Factory Store
KLA Tencor One Workplace
KZ Kitchen Cabinet & Stone Piercey Toyota
Marshalls Pivot Interiors
Milpitas Materials Company Shell
Teledyne Lecroy South Bay Honda
Veeco Process Equipment Inc USA Gas
Walmart Supercenter Walmart Supercenter
Source: HDL Coren & Cone
174

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) 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 2.11% 961
2022-23 20,826 0 0 0 54,555 75,381 1.76% 930
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
175

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 2014 $40,418,284 (c) $0 (b) $40,418,284 $5,825,000 (c) $7,713,234 (c) $13,538,234 2.99 2015 44,843,881 (c) 0 (b) 44,843,881 6,120,000 (c) 7,414,608 (c) 13,534,608 3.31 2016 48,810,216 (c) 0 (b) 48,810,216 7,375,000 (c) 5,567,028 (c) 12,942,028 3.77 2017 51,563,292 (c) 0 (b) 51,563,292 6,045,000 (c) 5,682,175 (c) 11,727,175 4.40 2018 66,266,187 (c) 0 (b) 66,266,187 6,225,000 (c) 5,467,000 (c) 11,692,000 5.67 2019 71,988,412 (c) 0 (b) 71,988,412 6,475,000 (c) 5,213,000 (c) 11,688,000 6.16 2020 83,139,471 0 (b) 83,139,471 6,735,000 (c) 4,915,125 (c) 11,650,125 7.14 2021 84,805,793 0 (b) 84,805,793 7,070,000 (c) 4,570,000 (c) 11,640,000 7.29 2022 91,606,749 0 (b) 91,606,749 7,425,000 (c) 4,207,625 (c) 11,632,625 7.87 2023 99,657,121 0 (b) 99,657,121 7,800,000 (c) 3,827,000 (c) 11,627,000 8.57 (a) Tax increments are net of pass-through payments and administrative fees withheld by the County prior to distribution to the Agency. (b) The Redevelopment Agency was dissolved as of January 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) 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
$105,000
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
($000)
Net Tax Increment Revenue Debt Service Requirements
176

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
2022-23 Assessed Valuation, Direct and Overlapping Debt $24,124,508,667 OVERLAPPING TAX AND ASSESSMENT DEBT:

Santa Clara County $40,572,641
San Jose- Evergreen Community College District 128,148,445 Milpitas Unified School District 269,361,281
East Side Union High School District 8,357,755
Berryessa Union School District 10,546,251
Santa Clara Valley Water District Benefits Assessment District 1,515,933 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT 458,502,306

DIRECT AND OVERLAPPING GENERAL FUND DEBT
Santa Clara County General Fund Obligations $43,662,166 Santa Clara County Pension Obligation Bonds 12,850,040
Santa Clara County Board of Education Certificates of Participation 36,437 San Jose-Evergreen Community College District OPEB Bonds 5,909,390 Milpitas Unified School District General Fund Obligations 9,207,889 East Side Union High School District OPEB Bonds 234,525 Berryessa Union School District General Fund Obligations 150,132 City of Milpitas General Fund Obligations 100% 17,700,000 Santa Clara County Vector District Certifications of Participations 47,933 TOTAL GROSS DIRECT AND OVERLAPPING GENERAL FUND DEBT 89,798,512 Less: Santa Clara County supported obligations 409,973
TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT $89,388,539 OVERLAPPING TAX INCREMENT DEBT (Successor Agency) 100% $72,640,000 TOTAL DIRECT DEBT $17,700,000
TOTAL GROSS OVERLAPPING DEBT $603,240,818
TOTAL NET OVERLAPPING DEBT $602,830,845
GROSS COMBINED TOTAL DEBT $620,940,818 (2)
NET COMBINED TOTAL DEBT $620,530,845
(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 2022-23 Assessed Valuation:

Total Overlapping Tax and Assessment Debt 1.90%
Ratios to Assessed Valuation:

Direct Debt % 0.07%
Total Gross Debt % 2.57%
Source: Avenu Insights & Analytics, California Municipal Statistics, Inc.

JUNE 30, 2023
177

Schedule 15

CITY OF MILPITAS

LEGAL DEBT MARGIN INFORMATION

LAST TEN FISCAL YEARS
(Dollars in Thousands)
Legal Debt Margin Calculation for Fiscal Year 2022-23
Assessed value (net) - June 30, 2023 $24,124,508,667
Debt limit: 3.75% of assessed value (a) $904,669,075
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 $904,669,075
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
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%
2022-23 904,669 0 $904,669 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
178

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 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 2022-23 25,221,023 13,494,755 11,726,268 1,020,000 1,411,275 2,431,275 4.82 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
179

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 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 2022-23 34,554,183 25,712,390 8,841,793 315,000 744,050 732,050 12.08 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
180

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)
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
2022-23 128.44 97.96 84.42 29.25 4.95 - 11.58
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
181

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 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
2022-23 7.17 1.14 35.87 7.17 35.87-4700.56
Source: City of Milpitas, Ordinance 120.50
*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.
(a) For each one hundred cubic feet of water used. Charge varies depending on the business or type of business.

Single Family Residential Commercial (a)
182

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) 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
2022 81,067 5,935 4,289,458 52,912 9,967 2.70% 13.66
Sources: HdL, Coren & Cone
City of Milpitas Annual Budget
183

Schedule 21

CITY OF MILPITAS

PRINCIPAL EMPLOYERS
FISCAL YEARS 2022-23 and 2013-14
2022-23 2013-14
Percentage Percentage
Number of of Total City Number of of Total City
Employer Employees Rank Employment Employees Rank Employment Cisco Systems, Inc. 3,600 1 8.759% 3,816 1 11.43%
KLA-Tencor Corporation 2,718 2 6.613% 2,402 2 7.19%
Western Digital Tech (SanDisk Corporation) 1,700 3 4.136% 1,875 3 5.61% Analog Devices (Linear Technology Corporation) 1,283 4 3.122% 1,240 4 3.71% Flextronics International (aka Vista Point Technologies) 1,139 5 2.771% 1,200 5 3.59% Milpitas Unified School District 901 6 2.192% 841 6 2.52% Headway Technologies Inc. (2 Locations) 874 7 2.127% 699 8 2.09% Amazon Delivery 639 8 1.555%
City of Milpitas 401 9 0.976%
Walmart Supercenter 325 10 0.791%
FireEye, Inc 702 7 2.10%
Spectra Laboratories 350 9 1.05%
Kaiser Permanente 350 10 1.05%
Subtotal 13,580 33.0414% 13,475 40.3443%
Total Labor Force 41,100 33,400

Source: California Municipal Statistics, Inc.
184

Schedule 22

CITY OF MILPITAS

AUTHORIZED FULL-TIME EQUIVALENT EMPLOYEES BY FUNCTION/PROGRAM

LAST TEN FISCAL YEARS
Fiscal Year Ended June 30
2014 2015 2016 2017 2018 2019 (e) 2020 2021 2022 2023
Function
General Government 65.5 63.0 64.8 64.8 69.0 60.0 64.0 67.5 66.5 69.5 Building, Housing and Safety 23.0 23.0 24.0 24.0 25.0 33.0 (c) 33.0 (c) 33.0 33.0 33.0 Public Works 94.5 97.0 73.0 (b) 73.0 84.0 44.0 48.0 47.5 47.6 52.4 Engineering 26.0 (b) 26.0 17.0 22.0 25.0 24.0 24.0 26.0 Planning 18.5 18.5 17.0 17.0 17.0 9.0 (c) 10.0 (c) 10.0 9.0 9.0 Recreation 25.5 25.5 18.0 18.0 17.5 18.0 20.75 20.75 20.75 20.75 Parks and Recreation
Police:

Sworn Police 92.0 92.0 92.0 93.0 93.0 90.0 93.0 93.0 93.0 93.0 Civilians 30.0 30.0 30.0 29.0 29.0 29.0 33.0 33.0 33.0 34.0 Fire:

Firefighters and Safety
Officers 70.0 68.0 66.0 66.0 68.0 71.0 73.0 79.0 78.0 79.0 Civilians 10.0 12.0 11.0 11.0 12.0 3.0 4.0 4.0 4.0 4.0
Utilities (d) 27.5 27.5 29.5 29.5 34.5 27.5 27.5 27.5 28.4 29.6 Total 456.5 456.5 451.3 451.3 466.0 406.5 431.3 439.3 437.3 450.3 (a) Beginning 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) Neighborhood 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
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
FTE's
General Government Building Public Works Engineering and Planning Planning and Neighborhood Services Recreation Parks and Recreation Police Fire Utilities

Schedule 23
2014 2015 2016 2017 2018
Function/Program
Building Safety & Housing
Building permits issued 4,300 4,300 4,200 4,090 4,200
Plan review performed 1,500 1,400 1,500 1,610 1,700
Code Customer Service Requests /
Violations abated 725 755 755 800 714
Public Works
Street miles maintained 139 139 139 139 298
Customer Service Requests 2,880 2,800 2,794 2,800 3,000 Development projects reviewed 205 190 178 158 160
Planning
Applications to Planning Commission 159 236 92 92 100
Recreation
Sports Center members 1,450 1,504 1,600 1,325 1,450
Senior nutrition meals served 20,656 21,231 20,158 18,678 17,206 Police
Avg response time to emergency calls (minutes) 2:33 2:32 2:40 2:44 2:57 Number of anti-terrorist patrol checks 2,550 2,300 2,400 2,200 2,200 Crime prevention presentations 200 200 125 70 56
Number of vehicle citations issued 3,516 3,600 5,900 5,720 5,900 Fire
Emergency calls for service 4,356 4,950 5,000 5,000 5,200 Public education events 45 80 100 112 200
Permits Inspections 4,510 4,666 7,600 7,322 7,577
Plan Review 807 983 1,200 1,550 1,700
Utility
Clean sewer lines (feet) 640,255 500,000 500,000 500,000 491,244 Repair, replace or set water meters 298 279 189 152 115 Average daily consumption (thousands of gallons) 9,300 9,300 7,800 5,800 6,590 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 2013

CITY OF MILPITAS

OPERATING INDICATORS BY FUNCTION/PROGRAM

LAST TEN FISCAL YEARS
Fiscal Year Ended June 30
186

Schedule 23
2019 2020 2021 2022 2023
4,300 4,000 3,000 3,000 3,800
1,600 4,800 4,900 4,900 5,200
784 600 600 600 600
298 298 303 303 308
2,384 4,468 3,353 4,652 5,176
225 134 48 24 15
419 37 31 60 60
1,575 1,877 506 1,024 1,104
18,322 20,145 39,783 28,699 21,112
2:41 2:36 2:40 2:49 2:55
1,949 1,479 958 490 233
104 110 105 47 28
5,895 6,000 6,300 4,230 3,829
5,640 5,600 5,390 6,164 6,782
223 134 0 2,082 5,079
7,824 7,772 2,949 1,652 1,668
1,600 1,575 1,884 1,401 1,448
528,051 432,022 636,681 331,232 234,040
147 219 113 25 18
8,394 8,410 7,440 6,895 6,490
Fiscal Year Ended June 30
187

Schedule 24
2014 2015 2016 2017 2018
Function/Program
Public Works
Miles of streets 287 298 298 298 298
Street lights 4,500 4,577 4,577 4,581 5,119
Square feet of buildings
maintained (in thousands) 376 376 376 376 322
City vehicles 252 260 264 264 269
Signs 5,500 5,700 5,700 6,000 10,000
Signal lights 72 70 71 72 72
City Parks 34 34 33 32 32
Acres of Parkland 180 180 180 195 195
Playgrounds 25 34 34 33 30
Parks and recreation
Community centers 11111
Senior centers 11111
Sports centers 11111
Satellite centers 00022
Swimming pools 33333
Tennis courts 20 21 21 21 21
Football field 11111
Baseball/softball fields 89977
Soccer fields 9 12 13 13 13
Basketball courts 8 7 9 10 10
Volleyball courts / Horse Shoe Pits /
Bocce Ball / Cricket Field / Par Course 9 7 10 13 12
Handball courts 55566
Skate Park
Joint use:

Russell Bobbysocks Fields 00033
Soccer fields 00022
Open Space - Number of School Sites 00000
Police
Police stations 22222
Police patrol vehicles 29 28 34 29 29
Fire
Fire stations 44444
Fire Apparatus 19 19 13 11 11
Fire hydrants 1,847 2,033 2,033 2,039 2,039
Utility
Miles of water mains 214 213 203 203 206
Water Tank Storage
capacity (million of gallons) 16 16 16 16 16
Miles of sanitary sewers 179 179 173 173 175
Miles of storm drain 110 110 99 99 105
Miles of recycled water main 4 23 23 21 23
Source: City of Milpitas, final budget

CITY OF MILPITAS

CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM

LAST TEN FISCAL YEARS
188

Schedule 24
2019 2020 2021 2022 2023
298 298 303 303 308
5,141 4,418 4,494 4,494 4,516
473 473 473 455 455
271 258 268 256 302
10,000 6,000 6,000 6,000 6,000
74 78 83 83 83
32 36 36 36 36
195 154 154 154 154
33 33 33 33 33
1 1 111
1 1 111
1 1 111
1 2 111
3 3 333
21 21 21 21 21
1 1 111
9 9 9 11 11
8 8 888
10 10 10 10 10
10 10 10 10 10
6 6 666
11 3 3 300
8 2 200
0 0 0 13 13
2 2 222
29 29 30 30 30
4 4 444
12 13 13 13 13
2,039 2,308 2,308 2,308 2,308
206 206 206 206 206
16 16 16 16 16
173 173 173 173 160
99 99 99 99 99
26 26 26 24 24
Fiscal Year Ended June 30
189

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, 2023, and have issued our report thereon dated September 25, 2022. Our report includes a reference to other auditors who audited the financial 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 considered the City’s internal control over financial reporting (internal control) as a basis for designing the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the City’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weakness or significant deficiencies may exist that have not been identified.

191

Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the 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 express 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 Control dated September 25, 2023 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 provide an opinion on the effectiveness of the City’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Pleasant Hill, California
September 25, 2023
192

CITY OF MILPITAS

BICYCLE/PEDESTRIAN PROJECTS

FINANCIAL STATEMENTS

FOR THE YEARS ENDED
JUNE 30, 2023 AND 2022

This Page Left Intentionally Blank

Bicycle/Pedestrian Projects
Financial Statement
For the Years Ended June 30, 2023 and 2022
Table of Contents
Page
Independent Auditor’s Report ........................................................................................................................... 1 Fund Financial Statements:

Balance Sheets ......................................................................................................................................... 3 Statement of Revenues, Expenditures and Changes in Fund Balances ................................................... 4 Notes to Financial Statements .................................................................................................................. 5 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 .......................... 7

This Page Left Intentionally Blank

INDEPENDENT AUDITOR’S REPORT
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 City of Milpitas Bicycle/Pedestrian Projects (Projects) of the City of Milpitas, California, as of and for the years ended June 30, 2023 and 2022, and the related notes to the 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 financial position of the Projects as of June 30, 2023 and 2022, and the changes in financial position for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinions
We conducted our audits 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 responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical 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.

Emphasis of 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, 2023 and 2022, the changes in its financial position, or, where applicable, its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Our opinions are not modified with respect to this matter.

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.
1

Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with 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 resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with 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 responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Projects’ internal control. Accordingly, no such opinion is expressed.
• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 25, 2023, on our consideration of the Projects’ internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Projects’ 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 Projects’ internal control over financial reporting and compliance.

Pleasant Hill, California
September 25, 2023
2

CITY OF MILPITAS

BICYCLE/PEDESTRIAN PROJECTS

BALANCE SHEETS
JUNE 30, 2023 AND 2022
2023 2022
ASSETS
Receivable from MTC $0 $155,316
Total Assets $0 $155,316

LIABILITIES
Due to the City $0 $155,316
Total Liabilities 0 155,316

DEFERRED INFLOWS OF RESOURCES
Unavailable Revenue 0 155,316
Total Deferred Inflows of Resources 0 155,316

FUND BALANCE
Fund Balance 0 (155,316)
Total Fund Balance 0 (155,316)
Balance $0 ($155,316)
See accompanying notes to financial statements
3

CITY OF MILPITAS

BICYCLE/PEDESTRIAN PROJECTS

STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES
FOR THE YEARS ENDED JUNE 30, 2023 AND 2022
2023 2022

REVENUES
TDA Article 3.0 (Note 2) $258,918 $211,883
Total Revenues $258,918 $211,883

EXPENDITURES
ADA Curb Ramp Transition Program (22001050) $155,316
ADA Curb Ramp Transition Program (23001046) $103,602
Total Expenditures 103,602 155,316
Net change in fund balance 155,316 56,567
Fund balance at beginning of year (155,316) (211,883)
Fund balance at end of year ($155,316)
See accompanying notes to financial statements
4

CITY OF MILPITAS

BICYCLE/PEDESTRIAN PROJECTS

NOTES TO FINANCIAL STATEMENTS
For the Years Ended June 30, 2023 and 2022

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The City of Milpitas 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 accounting 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 of Milpitas. 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 and 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 considers all revenues reported 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 sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of fund balance that applies to a future period(s) and so will not be recognized as an outflow of resources (expenditure) until then.

In addition to liabilities, the balance 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.

5

CITY OF MILPITAS

BICYCLE/PEDESTRIAN PROJECTS

NOTES TO FINANCIAL STATEMENTS
For the Years Ended June 30, 2023 and 2022

NOTE 2 – TDA ARTICLE 3.0 REVENUE
For the year ended June 30, 2023 and 2022, the City had allocation instructions from the Metropolitan Transportation Commission for the following projects:

Instruction Grant Expended in Expended in Expended in Revenue in Revenue in Revenue in Number Project Name Award June 30, 2021 June 30, 2022 June 30, 2023 June 30, 2021 June 30, 2022 Fiscal Year 2023 19001050 ADA Curb Ramp Transition Program 2019 $127,587 $127,587 $127,587 20001031 ADA Curb Ramp Transition Program 2020 84,296 84,296 84,296 22001050 ADA Curb Ramp Transition Program 2022 155,316 $155,316 $155,316 23001046 ADA Curb Ramp Transition Program 2023 103,602 $103,602 103,602 $470,801 $211,883 $155,316 $211,883 $258,918
6

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 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 financial statements of the City of Milpitas Bicycle/Pedestrian Projects (Projects) as of and for the year ended June 30, 2023, and the related notes to the financial statements, and have issued our report thereon dated September 25, 2023.

Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Projects’ internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Projects’ internal control.

Accordingly, we do not express an opinion on the effectiveness of the Projects’ 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 Projects’ financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that have not been identified. 7

Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Projects’ financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. Our procedures included the applicable audit procedures contained in §6666 and §6667 of Title 21 of California Code 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. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

We have also issued a separate Memorandum on Internal Control dated September 25, 2023 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 testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Projects’ internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Projects’ internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

This report is intended solely for the information and use of the Metropolitan Transportation Commission, management, City Council, others within the City, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties; however, this restriction is not intended to limit the distribution of this report, which is a matter of public record.

Pleasant Hill, California
September 25, 2023
8

CITY OF MILPITAS

MEMORANDUM ON INTERNAL CONTROL
FOR THE YEAR ENDED JUNE 30, 2023

This Page Left Intentionally Blank

CITY OF MILPITAS

MEMORANDUM ON INTERNAL CONTROL
For the Year Ended June 30, 2023
Table of Contents
Page
Memorandum on Internal Control ................................................................................................................... 1 Schedule of Other Matters ....................................................................................................................... 3 Status of Prior Year Significant Deficiency ............................................................................................ 7 Status of Prior Year Other Matters .......................................................................................................... 9

This Page Left Intentionally Blank

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, 2023, and have issued our report thereon dated September 25, 2023. Our opinions on the basic financial statements and this report, insofar as they relate to Terrace Gardens, Inc, are based solely on the report of other auditors. In planning and performing our audit of the basic financial statements of the City of Milpitas as of and for the year ended June 30, 2023, 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 designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the City’s financial statements will not be prevented, or detected and corrected, on a timely basis.

Our consideration of internal control was for the limited purpose described in the first paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses. 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. Given these limitations during our audit, we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

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.

Management’s written responses included in this report have not been subjected to the audit procedures applied in the audit of the financial statements and, accordingly, we express no opinion on them.

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
September 25, 2023
1

This Page Left Intentionally Blank

MEMORANDUM ON INTERNAL CONTROL

SCHEDULE OF OTHER MATTERS

NEW GASB PRONOUNCEMENTS OR PRONOUNCEMENTS NOT YET EFFECTIVE The following comment represents new pronouncements taking affect in the next few years. We cite them here to keep you informed of developments:

EFFECTIVE FISCAL YEAR 2024:

GASB 100 – Accounting for Changes and Error Corrections The primary objective of this Statement is to enhance accounting and financial reporting requirements for accounting changes and error corrections to provide more understandable, reliable, relevant, consistent, and comparable information for making decisions or assessing accountability.

This Statement defines accounting changes as changes in accounting principles, changes in accounting estimates, and changes to or within the financial reporting entity and describes the transactions or other events that constitute those changes. As part of those descriptions, for (1) certain changes in accounting principles and (2) certain changes in accounting estimates that result from a change in measurement methodology, a new principle or methodology should be justified on the basis that it is preferable to the principle or methodology used before the change. That preferability should be based on the qualitative characteristics of financial reporting—understandability, reliability, relevance, timeliness, consistency, and comparability. This Statement also addresses corrections of errors in previously issued financial statements.

This Statement prescribes the accounting and financial reporting for (1) each type of accounting change and (2) error corrections. This Statement requires that (a) changes in accounting principles and error corrections be reported retroactively by restating prior periods, (b) changes to or within the financial reporting entity be reported by adjusting beginning balances of the current period, and (c) changes in accounting estimates be reported prospectively by recognizing the change in the current period. The requirements of this Statement for changes in accounting principles apply to the implementation of a new pronouncement in absence of specific transition provisions in the new pronouncement. This Statement also requires that the aggregate amount of adjustments to and restatements of beginning net position, fund balance, or fund net position, as applicable, be displayed by reporting unit in the financial statements.

This Statement requires disclosure in notes to financial statements of descriptive information about accounting changes and error corrections, such as their nature. In addition, information about the quantitative effects on beginning balances of each accounting change and error correction should be disclosed by reporting unit in a tabular format to reconcile beginning balances as previously reported to beginning balances as restated.

Furthermore, this Statement addresses how information that is affected by a change in accounting principle or error correction should be presented in required supplementary information (RSI) and supplementary information (SI). For periods that are earlier than those included in the basic financial statements, information presented in RSI or SI should be restated for error corrections, if practicable, but not for changes in accounting principles.
3

MEMORANDUM ON INTERNAL CONTROL

SCHEDULE OF OTHER MATTERS
EFFECTIVE FISCAL YEAR 2025:

GASB 101 – Compensated Absences
The objective of this Statement is to better meet the information needs of financial statement users by updating the recognition and measurement guidance for compensated absences. That objective is achieved by aligning the recognition and measurement guidance under a unified model and by amending certain previously required disclosures.

Recognition And Measurement
This Statement requires that liabilities for compensated absences be recognized for (1) leave that has not been used and (2) leave that has been used but not yet paid in cash or settled through noncash means. A liability should be recognized for leave that has not been used if (a) the leave is attributable to services already rendered, (b) the leave accumulates, and (c) the leave is more likely than not to be used for time off or otherwise paid in cash or settled through noncash means. Leave is attributable to services already rendered when an employee has performed the services required to earn the leave. Leave that accumulates is carried forward from the reporting period in which it is earned to a future reporting period during which it may be used for time off or otherwise paid or settled. In estimating the leave that is more likely than not to be used or otherwise paid or settled, a government should consider relevant factors such as employment policies related to compensated absences and historical information about the use or payment of compensated absences. However, leave that is more likely than not to be settled through conversion to defined benefit postemployment benefits should not be included in a liability for compensated absences.

This Statement requires that a liability for certain types of compensated absences—including parental leave, military leave, and jury duty leave—not be recognized until the leave commences. This Statement also requires that a liability for specific types of compensated absences not be recognized until the leave is used.

This Statement also establishes guidance for measuring a liability for leave that has not been used, generally using an employee’s pay rate as of the date of the financial statements. A liability for leave that has been used but not yet paid or settled should be measured at the amount of the cash payment or noncash settlement to be made. Certain salary-related payments that are directly and incrementally associated with payments for leave also should be included in the measurement of the liabilities.

With respect to financial statements prepared using the current financial resources measurement focus, this Statement requires that expenditures be recognized for the amount that normally would be liquidated with expendable available financial resources.

Notes To Financial Statements
This Statement amends the existing requirement to disclose the gross increases and decreases in a liability for compensated absences to allow governments to disclose only the net change in the liability (as long as they identify it as a net change). In addition, governments are no longer required to disclose which governmental funds typically have been used to liquidate the liability for compensated absences. 4

MEMORANDUM ON INTERNAL CONTROL

SCHEDULE OF OTHER MATTERS
GASB 101 – Compensated Absences (Continued)
How the Changes in this Statement Will Improve Financial Reporting The unified recognition and measurement model in this Statement will result in a liability for compensated absences that more appropriately reflects when a government incurs an obligation. In addition, the model can be applied consistently to any type of compensated absence and will eliminate potential comparability issues between governments that offer different types of leave.

The model also will result in a more robust estimate of the amount of compensated absences that a government will pay or settle, which will enhance the relevance and reliability of information about the liability for compensated absences.
5

This Page Left Intentionally Blank

MEMORANDUM ON INTERNAL CONTROL

STATUS OF PRIOR YEAR

SIGNIFICANT DEFICIENCIES
2022-01 Timeliness of Year-End Close
Criteria: Effective organizations develops plans to ensure 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 fiscal 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 entries, 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 City’s recruitment causing multiple vacancies in the finance department. Furthermore, the City’s legacy financial 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.

Current Status: Implemented
7

This Page Left Intentionally Blank

MEMORANDUM ON INTERNAL CONTROL

STATUS OF PRIOR YEAR

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, General 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, there 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 thoroughly 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 reviewed for accuracy. Errors and un-reconciled differences should be investigated and corrected 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.

Current Status: Implemented
9

This Page Left Intentionally Blank

CITY OF MILPITAS

REQUIRED COMMUNICATIONS

FOR THE YEAR ENDED
JUNE 30, 2023

This Page Left Intentionally Blank

CITY OF MILPITAS

REQUIRED COMMUNICATIONS
For the Year Ended June 30, 2023
Table of Contents
Page
Required Communications ................................................................................................................................ 1 Significant Audit Matters ......................................................................................................................... 1 Qualitative Aspects of Accounting Practices ................................................................................... 1 Difficulties Encountered in Performing the Audit ........................................................................... 3 Corrected and Uncorrected Misstatements ...................................................................................... 3 Disagreements with Management .................................................................................................... 3 Management Representations ............................................................................................................ 4 Management Consultations with Other Independent Accountants ................................................. 4 Other Audit Findings or Issues .......................................................................................................... 4 Other Matters ............................................................................................................................................ 4

This Page Left Intentionally Blank

REQUIRED COMMUNICATIONS
To the City Council of
the City of Milpitas, California
We have audited the basic financial statements of the City of Milpitas (City) for the year ended June 30, 2023. We did not audit the financial statements of Terrace Gardens, Inc. as of and for the year ended December 31, 2022, which represent 1.02%, 1.51%, and 1.12% of the assets, net position and revenues, respectively, of the primary government. These component unit financial statements were audited by other auditors, whose report thereon has been furnished to us, and our opinion, insofar as it relates to the amounts included for this entity, is based solely on the report of the other auditors.

Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards and Government Auditing Standards and the Uniform Guidance, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter dated April 17, 2023.

Significant Audit Matters
Qualitative Aspects of Accounting Practices
Accounting Policies - Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City are described in Note 1 to the financial statements. No new accounting policies were adopted, and the application of existing policies was not changed during the year, except as follows:

GASB 96 – Subscription Based Information Technology Arrangements This Statement provides guidance on the accounting and financial reporting for subscriptionbased information technology arrangements (SBITAs) for government end users (governments).

This Statement (1) defines a SBITA; (2) establishes that a SBITA results in a right-to-use subscription asset—an intangible asset—and a corresponding subscription liability; (3) provides the capitalization criteria for outlays other than subscription payments, including implementation costs of a SBITA; and (4) requires note disclosures regarding a SBITA. To the extent relevant, the standards for SBITAs are based on the standards established in Statement No. 87, Leases, as amended.

A SBITA is defined as a contract that conveys control of the right to use another party’s (a SBITA vendor’s) information technology (IT) software, alone or in combination with tangible capital assets (the underlying IT assets), as specified in the contract for a period of time in an exchange or exchange-like transaction.

The subscription term includes the period during which a government has a noncancelable right to use the underlying IT assets. The subscription term also includes periods covered by an option to extend (if it is reasonably certain that the government or SBITA vendor will exercise that option) or to terminate (if it is reasonably certain that the government or SBITA vendor will not exercise that option).
1

Under this Statement, a government generally should recognize a right-to-use subscription asset—an intangible asset—and a corresponding subscription liability. A government should recognize the subscription liability at the commencement of the subscription term, —which is when the subscription asset is placed into service. The subscription liability should be initially measured at the present value of subscription payments expected to be made during the subscription term. Future subscription payments should be discounted using the interest rate the SBITA vendor charges the government, which may be implicit, or the government’s incremental borrowing rate if the interest rate is not readily determinable. A government should recognize amortization of the discount on the subscription liability as an outflow of resources (for example, interest expense) in subsequent financial reporting periods.

The subscription asset should be initially measured as the sum of (1) the initial subscription liability amount, (2) payments made to the SBITA vendor before commencement of the subscription term, and (3) capitalizable implementation costs, less any incentives received from the SBITA vendor at or before the commencement of the subscription term. A government should recognize amortization of the subscription asset as an outflow of resources over the subscription term.

The pronouncement became effective, and was disclosed in Note 8 for SBITA asset and Note 11 for SBITA liabilities to the financial statements.

The following pronouncements became effective, but did not have a material effect on the financial statements:

GASB 91 – Conduit Debt Obligations
GASB 94 – Public-Private and Public-Public Partnerships and Availability Payment Arrangements
Unusual Transactions, Controversial or Emerging Areas - We 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.

Accounting Estimates - Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimates affecting the City’s financial statements were:

Estimated Fair Value of Investments: As of June 30, 2023, the City held approximately $389.4 million of cash and investments as measured by fair value as disclosed in Note 3 to the financial statements. Fair value is essentially market pricing in effect as of June 30, 2023. These fair values are not required to be adjusted for changes in general market conditions occurring subsequent to June 30, 2023.

Estimate of Depreciation: Management’s estimate of the depreciation is based on useful lives determined by management. These lives have been determined by management based on the expected useful life of assets as disclosed in Note 8 to the financial statements. We evaluated the key factors and assumptions used to develop the depreciation estimate in determining that it is reasonable in relation to the basic financial statements taken as a whole. 2

Estimate of Compensated Absences: Accrued compensated absences which are comprised of accrued vacation and sick leave is estimated using accumulated unpaid leave hours and hourly pay rates in effect at the end of the fiscal year as disclosed in Note 14F to the financial statements.

We evaluated the key factors and assumptions used to develop the accrued compensated absences in determining that it is reasonable in relation to the basic financial statements taken as a whole.

Estimated Claims Liabilities: Management’s estimate of the claims liabilities payable is disclosed in Note 15 to the financial statements and is based on estimates determined by the City’s risk pool and third party claims administrator, which are based on the claims experience of the City. We evaluated the key factors and assumptions used to develop the estimate in determining that it is reasonable in relation to the basic financial statements taken as a whole.

Estimated Net Pension Liabilities and Pension-Related Deferred Outflows and Inflows of Resources: Management’s estimate of the net pension liabilities and deferred outflows/inflows of resources are disclosed in Note 13 to the financial statements and are based on accounting valuations determined by the California Public Employees Retirement System, which are based on the experience of the City. We evaluated the key factors and assumptions used to develop the estimate in determining that it is reasonable in relation to the basic financial statements taken as a whole.

Estimated Net OPEB Liability and Pension-Related Deferred Outflows and Inflows of Resources:

Management’s estimate of the net OPEB liability is disclosed in Note 14 to the financial statements and is based on actuarial study determined by a consultant, which is based on the experience of the City. We evaluated the key factors and assumptions used to develop the estimate in determining that it is reasonable in relation to the basic financial statements taken as a whole.

Disclosures - The financial statement disclosures are neutral, consistent, and clear.

Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and completing our audit.

Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. In addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to each opinion unit’s financial statements taken as a whole.

Professional standards require us to accumulate all known and likely uncorrected misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. We have no such misstatements to report to the City Council.

Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor’s report. We are pleased to report that no such disagreements arose during the course of our audit.
3

Management Representations
We have requested certain representations from management that are included in a management representation letter dated September 25, 2023.

Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the City’s financial statements or a determination of the type of auditor’s opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants.

Other Audit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the City’s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention.

Other Matters
We applied certain limited procedures to the required supplementary information that accompanies and supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did not audit the required supplementary information and do not express an opinion or provide any assurance on the required supplementary information.

We were engaged to report on the supplementary information that accompanies the financial statements, but is not required supplementary information. With respect to this supplementary information, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves.

We were not engaged to report on the Introductory and Statistical Sections which accompany the financial statements, but are not required supplementary information. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them.
******
This information is intended solely for the use of City Council and management and is not intended to be, and should not be, used by anyone other than these specified parties.

Pleasant Hill, California
September 25, 2023
4

INDEPENDENT ACCOUNTANT’S REPORT ON

APPLYING AGREED UPON PROCEDURES FOR
COMPLIANCE WITH THE PROPOSITION 111
2022-2023 APPROPRIATIONS LIMIT INCREMENT
Honorable Mayor and Members of the City Council
City of Milpitas, California
We have performed the procedures enumerated below on the Appropriations Limit Worksheet (Worksheet) of the City of Milpitas, California, for the year ended June 30, 2023. The City’s management is responsible for the Worksheet.

The City has agreed to and acknowledged that the procedures performed are appropriate to meet the intended purpose of these procedures, which were suggested by the League of California Cities and presented in their Article XIIIB Appropriations Limitation Uniform Guidelines, were performed solely to assist you in meeting the requirements of Section 1.5 of Article XIIIB of the California Constitution. This report may not be suitable for any other purpose. The procedures performed may not address all the items of interest to a user of this report and may not meet the needs of all users of this report and, as such, users are responsible for determining whether the procedures performed are appropriate for their purposes.

The procedures and associated findings are as follows:

A. We obtained the Worksheet and determined that the 2022-2023 Appropriations Limit of $129,057,419 and annual adjustment factors were adopted by Resolution of the City Council. We also determined that the population and inflation options were selected by a recorded vote of the City Council.

B. We recomputed the 2022-2023 Appropriations Limit by multiplying the 2021-2022 Prior Year Appropriations Limit by the Total Growth Factor. We recomputed the Total Growth Factor by multiplying the population option by the inflation option.

C. For the Worksheet, we agreed the Per Capita Income Factor, City Population Factor and County Population Factor to California State Department of Finance Worksheets.

We were engaged by the City to perform this agreed-upon procedures engagement and conducted our engagement in accordance with attestation standards established by the American Institute of Certified Public Accountants. We were not engaged to and did not conduct an examination or review engagement, the objective of which would be the expression of an opinion or conclusion, respectively, on the Worksheet.

Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you.

We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements related to our agreed-upon procedures engagement.

This report is intended solely for the information and use of management and the City Council and is not intended to be and should not be used by anyone other than those specified parties; however, this restriction is not intended to limit the distribution of this report, which is a matter of public record.

Pleasant Hill, California
September 25, 2023

CITY OF MILPITAS

AGENDA REPORT
(AR)
Item Title: FY 2023-24 1st Quarter Financial Status Report for the Quarter Ended September 30, 2023 (Staff Contact: Lauren Lai, Finance Director, 408-586-3111) Category: Consent Calendar-Leadership and Support Services Meeting Date: 12/5/2023
Recommendation: Review the FY 2023-24 Quarterly Financial Status Report for the quarter ended September 30, 2023.

BACKGROUND:

On June 6, 2023, the City Council approved the Fiscal Year (FY) 2023-24 Adopted Operating Budget in the amount of $231.9 million and the General Fund Budget in the amount of $129.5 million. After adoption of the budget, staff monitors revenues and expenditures for all funds with an emphasis on the General Fund and Enterprise Funds.

ANALYSIS:

This staff report provides a quarterly update on budget versus actual revenues and expenditures of the General, Water and Sewer Funds, the City’s major operating funds. The summary information below as well as the attachments comprise the FY 2023-24 Quarterly Financial Status Report for the quarter ended September 30, 2023. Major revenue sources and expenditures for these funds are discussed below. The attachments provide a more detailed summary of budget versus actual revenues and expenditures for the first quarter of FY 2023-24 as well as prior year actual for comparison purposes.

General Fund
On June 6, 2023, the City Council approved the Fiscal Year (FY) 2023-24 Adopted Operating General Fund Budget in the amount of $129.5 million. As of September 30, 2023, the City received $10.8 million in revenues, or 8.5% of the FY23-24 amended revenue budget and incurred $39.3 million in expenditures, or

29.9% of the FY23-24 amended operating budget. Revenues and expenditures are seasonal with cash flow fluctuations due to timing of revenue receipts and City serves rendered. As such, actual percentage of revenues may not match the lapsed time period of the quarterly report (i.e. 8.5% of revenue versus 25% for 3- month time period).

Revenues
As mentioned above, the three months ending September 30, 2023, the General Fund has received $10.8 million, or 8.5% of the FY 2023-24 amended revenue budget of $127.1 million, net of the facility and technology reserve sources. The General Fund revenue receipts of $10.8 million is comparable between FY23/24 and FY22/23. However, there are several categories of decline including licenses, permits & fines and hotel tax. A few categories of improvements including franchise tax and charges for services.

• Property Taxes and Redevelopment Property Tax Trust Fund: Most property tax revenue is received in December and April, so it is normal for property tax revenue to be low in the first quarter. The revenue forecast estimates $47.2 million in total property tax revenue for the City of Milpitas based on the County of Santa Clara (County) projections, net 30% for ERAF pending litigation. Compared to the County’s most recent update on November 3, 2023, the County’s property tax projections are net $1.2 million higher than the adopted budget of $46.0 million. However, the significant property tax contingencies relate to (1) ERAF allocation involved in on-going litigation (2) property tax assessed valuation being reviewed and revised downward by the Santa Clara County Assessor and (3) lower real estate transactions due to high mortgage rates.
• Sales & Use Tax: Sales tax is usually collected one quarter in arrears. As of September 30, 2023, the City has received one month of sales tax receipts. Revenues are 2.7% lower than last year at the same time. As more data becomes available from the sales tax expert consultant, sales tax revenue will continue to be monitored and may need to be adjusted accordingly at mid-year. • Sales & Use Tax – Measure F: The district tax became operative April 1, 2021 and sunsets in eight years. As of September 30, 2023, the City has received one quarter of sales tax receipt for Measure F.

Revenues are 6.7% higher than last year at the same time. As more data becomes available from the sales tax expert consultant, sales tax revenue will continue to be monitored and may need to be adjusted accordingly at mid-year.
• Franchise Fees: Revenues are 205% higher than last year at the same time. This is due to a timing difference. Specifically last year in 2022, the sanitation fees due in August (1st quarter) were not received until October (2nd quarter) thereby understating Q1 FY22-23. • Hotel/Motel (TOT) Tax: Revenues are 10.6% lower than last year at the same time. Post COVID travel remains uncertain especially for the Milpitas lodging which is focused on business related travel. Staff will continue to monitor this revenue.
• Intergovernmental Revenues: Revenues are 196.6% higher than last year at the same time due.

Intergovernmental revenues includes grant revenues which are already programed into the FY23-24 budget and appropriations offset accordingly

• Other Taxes: Revenues are 40.8% lower than last year at the same time. Other Taxes includes real estate transfer tax, business license tax and motor vehicle license tax. Due to few real estate transactions in 2023, the real estate transfer tax is 33% lower than last year at the same time. Staff will continue to monitor this revenue.
• License and Permits: Revenues are 31.7% lower than last year at the same time. This is largely due to the City processing fewer permits than prior year. Project timelines vary on a case-by-case basis and seldom within City control. Staff will continue to monitor this revenue. • Charges for Services: Revenues are 43.1% higher than last year at the same time. This is due to a timing difference. Specifically last year in 2022, the police charges were received in Q2 while in 2023 they were received in Q1. Excluding this impact, the FY23/24 Charges for Services revenues are comparable to FY22/23 within 3%
• Interest Income: Revenues are 184.2% higher than last year at the same time due. However, Q1 gains will be offset by some losses already incurred in Q2 (October 2023) as part of rebalancing the portfolio.

Staff will continue to monitor this revenue.

Expenditures
For the three months ending September 30, 2023, the General Fund has utilized $39.3 million, or 29.9%, of the FY 23-24 amended operating budget of $131.6 million. The amended operating budget represents $129.5 million of the adopted appropriation and $2.0 million of carryover encumbrances. As of September 30, 2023, General Fund expenditures are consistent with prior year as a percentage expended of the budget. Staff will continue to monitor expenditures relative to Council authorized appropriations.

Grants and Donations
In accordance with City Council approved Budget Guidelines, the City Manager has the authority to accept grants and donations up to $100,000. Staff is reporting on acceptance of these grants and donations for this quarter.

1. 2024 CAL OES CA 9-1-1 Training - $20,000

2. CA Recycle Grant FY22-23 - $20,424

Unanticipated Expenditure Reserve
In accordance with the City Council approved Budget Guidelines, as part of the quarterly financial status reports, Staff is reporting on the Unanticipated Expenditure Reserve for this quarter. There were no new appropriation and/or contract authorized for this quarter.

Water Maintenance & Operation (M&O) Fund Financial Status Revenues: For the three months ended September 30, 2023, $8.7 million of charges for services, or 25.8%, of the $33.7 million budgeted has been received. Total revenue received amounts to $8.8 million, or 25.8%, of the $34.2 million budgeted.

Expenditures: For the three months ended September 30, 2023, $25.5 million, or 75.2%, of the $33.9 million amended budget has been spent and/or encumbered. The Santa Clara Valley Water District and San Francisco Water Department wholesale water purchase contract encumbrance was posted for the full year in Q1 of FY24.

Sewer Maintenance & Operation (M&O) Fund Financial Status Revenues: For the three months ended September 30, 2023, $5.8 million of charges for services, or 24.7%, of the $23.5 million budgeted has been received. Total revenue received amounts to $5.9 million, or 24.7%, of the $23.8 million budgeted.

Expenditures: For the three months ended September 30, 2023, $9.2 million, or 53.7%, of the $17.2 million amended budget has been spent and/or encumbered. The City of San Jose wastewater treatment contract encumbrance was posted for the full year in Q1 of FY24.

POLICY ALTERNATIVE(S):

Alternative 1: Do not review the report.

Pros: There are no pros to not review the report.

Cons: Not reviewing the report may be interpreted that the data is incorrect.

Reason not recommended: Staff is reporting actual unaudited financial data to inform the Council and the public on the City’s financial status.

FISCAL IMPACT:

This is an informational report intended to provide a financial update of the City’s General, Water and Sewer funds for the quarter ended September 30, 2023. No budget amendment is recommended.

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:

Review the FY 2023-24 Quarterly Financial Status Report for the Quarter Ended September 30, 2023 Attachment(s):

A. FY 2023-24 Revenue Report for Fiscal Year-To-Date September 30, 2023 B. FY 2023-24 General Fund Expenditures by Department September 30, 2023 C. FY 2023-24 Water and Sewer Funds Financial Status for Fiscal Year-To-Date September 30, 2023

CITY OF MILPITAS
General Fund Revenues
For Fiscal Year-To-Date September 30, 2023
FY24 FY24 FY24 FY24 FY24 FY24 FY24 FY23 Percentage
General Fund Revenues Adopted Budget
Budget
Amendments
Grant
Carryover
Amended
Budget
Receipts
9/30/23
Outstanding
Favorable/
(Unfavorable) % Receipt
FY23 Receipts
9/30/2022
FY24 vs
FY23
Property Tax 46,023,851 46,023,851 $ 55,558 (45,968,293) $ 0.1% 152,697 -63.6% Sales and Use Tax 28,877,560 28,877,560 2,548,646 (26,328,914) $ 8.8% 2,619,631 -2.7% Sales and Use Tax - Measure F 6,991,000 6,991,000 577,295 $ 8.3% 540,873 6.7% (6,413,705) Licenses, Permits & Fines 8,662,020 8,662,020 1,508,298 (7,153,722) $ 17.4% 2,207,171 -31.7% Hotel/Motel Tax 11,811,236 11,811,236 1,921,022 (9,890,214) $ 16.3% 2,149,488 -10.6% Operating Transfer In 8,131,426 8,131,426 1,144,387 (6,987,039) $ 14.1% 1,072,397 6.7% Charges for Services 8,111,025 1,800 8,112,825 1,853,147 (6,259,678) $ 22.8% 1,294,625 43.1% Franchise Fees 5,811,868 5,811,868 650,600 (5,161,268) $ 11.2% 213,125 205.3% Intergovernmental 820,572 820,572 105,542 (715,030) $ 12.9% 35,585 196.6% Other Taxes 1,088,586 1,088,586 128,422 (960,164) $ 11.8% 216,793 -40.8% Other Revenues 389,525 389,525 91,828 (297,697) $ 23.6% 235,960 -61.1% Interest Income 414,000 414,000 168,649 (245,351) $ 40.7% 59,339 184.2% Total General Fund Revenue $ 1,800 127,132,669 $ - $ 127,134,469 $ 10,753,394 $ (116,381,075) $ 8.5% 10,797,684 $ -0.4% Facility & Technology Reserves 2,400,000 2,400,000
Total General Fund Revenues & Reserves $ 129,532,669 $ 129,534,469

Departments
Adopted
Budget Amendments Grants C/O Encumb. C/O
Amended
Budget Expenditure Encumbrance
Total YTD
Expenditure
% of
Amended
Budget
FY23 Expenditure
Including
Encumbrance
% of Amended
FY23 Budget
City Council 624,450 0 0 49,698 674,148 139,937 48,509 188,446 28.0% 114,049 18.7% City Manager 2,380,301 0 0 72,533 2,452,834 391,277 92,066 483,342 19.7% 641,296 27.9% City Clerk 649,839 0 0 0 649,839 135,031 0 135,031 20.8% 120,928 21.3% Economic Development 1,049,225 0 0 0 1,049,225 231,346 0 231,346 22.0% 195,012 20.2% Policy Planning 4,703,815 0 0 122,231 4,826,046 897,590 140,575 1,038,165 21.5% 1,071,285 0.0% Building Safety & Housing 6,385,627 0 0 72,446 6,458,073 1,557,766 635,113 2,192,880 34.0% 2,040,418 32.6% City Attorney 1,189,895 0 0 34,610 1,224,505 244,720 11,342 256,062 20.9% 121,143 9.8% Engineering 3,989,913 0 0 20,080 4,009,993 765,933 126,870 892,803 22.3% 877,000 21.8% Finance 4,926,443 0 0 191,249 5,117,692 1,036,771 390,733 1,427,504 27.9% 1,185,163 26.6% Fire 29,293,563 0 0 210,856 29,504,419 7,037,816 293,812 7,331,628 24.8% 7,083,410 25.0% Human Resources 2,017,207 0 0 15,566 2,032,773 468,172 148,005 616,177 30.3% 585,207 29.3% Information Technology 4,911,128 0 0 139,830 5,050,958 615,188 347,978 963,166 19.1% 944,891 23.0% Non-Departmental 7,771,743 0 0 586,370 8,358,113 4,479,166 600,074 5,079,240 60.8% 4,767,921 59.9% Planning 2,024,149 0 16,050 118,271 2,158,470 537,123 108,758 645,881 29.9% 739,579 33.1% Police 41,213,199 0 18,416 185,888 41,417,503 9,891,665 1,198,630 11,090,295 26.8% 9,371,923 24.6% Public Works 11,086,237 0 0 259,163 11,345,400 2,236,666 2,268,332 4,504,998 39.7% 3,967,685 39.3% Recreation & Community Services 6,775,931 1,800 0 74,568 6,852,299 1,937,342 468,890 2,406,232 35.1% 2,056,643 34.2% Transfers In/Out/Revenue 3,243,817 0 0 0 3,243,817 843,817 0 843,817 26.0% 341,866 100.0% Grand Total 129,532,667 1,800 34,466 2,031,128 131,600,061 32,549,736 6,739,110 39,288,847 29.9% 35,154,134 29.4% City of Milpitas
General Fund Expenditure By Department Financial Status For Fiscal Year-To-Date September 30, 2023