Milpitas City Council
December 3, 2024

Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The accompanying Supplementary Information, as listed in the Table of Contents, is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The informa tion has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlyi ng accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Supplementary Information is fairly stated, in all material respects, in relation to the basic financial statements as a whole.

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

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

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards
, we have also issued our repo rt dated September 30, 2024, on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations,
contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.

Pleasant Hill, California
September 30, 2024
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MANAGEMENT’S DISCUSSION AND ANALYSIS
The following discussion provides readers of the City of Milpitas (City) financ ial statements a narrative overview and analysis of the financial activities of the City s for the fiscal year ended June 30, 2024. Please read this document in conjunction with the accompanying Transmittal Letter and Basic Financial Statements.

FISCAL YEAR 2024 FINANCIAL HIGHLIGHTS
During Fiscal Year 2024, City revenues continued recovering gradually since the onset of the COVID-19 Pandemic (Pandemic) over four years ago. The unemployment rate in the San José-Sunnyvale-Santa Clara metropolitan area rose to 4.2%, up slightly from 3.7% in Fiscal Year 2023. General Fund revenues increased compared to the previous year, particularly in property tax, sales tax, investment income, and intergovernmental revenues. These gains were largely driven by investment income and property tax related to the Educational Revenue Augmentation Funds (ERAF), which are subject to audit and litigation. Conversely, revenues from licenses, permits, and fines have continued to decline in Fiscal Year 2024 compared to Fiscal Year 2023.

The rise in property taxes can be attributed to ongoing increases in secu red and supplemental property tax, driven by higher property valuations. As tr avel has resumed following the Pandemic , hotel and motel tax revenues have shown signs of recovery, though they have not yet reached pre-Pandemic levels.

The economic impact of the COVID-19 pandemic remains uncertain and is influenced by factors such as the ongoing war in Ukraine, escalating conflict in the Middle East, a challenging real estate market, political uncertainty after the recent national elections, increasing income ineq uality, and continued layoffs in the tech sector. The pandemic's lasting effects on society continue to be felt, including reduced in-person commerce, a rise in online shopping, the normalization of remote work, and fewer conferences and le isure services. Although there are encouraging signs in the recovery of sales tax and transient occupancy (hotel) tax, we acknowledge that full recovery of these two sources of tax revenue may take several years.

Fiscal 2024 financial highlights include the following:

City-wide:
• The City’s total net position was $685.2 million on June 30, 2024. Of this total, $439 million was Governmental and $246.2 million was business-type, a ne t increase of total $21.9 million from the prior year total of $663.3 million primarily due to an increase in cash and investments of $24 million. • City-wide revenues include program revenues of $113 million, genera l revenues and transfers of $114.8 million, totaling $227.7 million, an in crease of $16.6 million from the pr ior year total of $211.1 million, primarily due to an increase in operating and capital grants, contributions, and general revenues. • Total City-wide expenses were $205.9 million, an increase of $11.3 m illion from the prior year’s $194.6 million, primarily due to increases in governmental expenditures related to public safety and public works personnel costs and adjustments.

Fund Level:
• Governmental Fund balances were $264.4 million, a net increase of $18.4 million from Fiscal Year 2022- 23, primarily due to revenues exceeding expenditures by $12.2 million in the General Fund and $5 million in the Transit Area Impact Fee fund.
• Governmental Fund revenues were $159 million in FY 2023-24, up $10.4 million from the prior year’s $148.6 million, primarily due to the recognition of American Rescue Plan Act (ARPA) deferred revenue and a positive return in Use of Money and Property.
• Governmental Fund expenditures were $145.7 million compared to $144.3 million in Fiscal Year 2022-23 primarily due to an increase in General Fund expenditures, aligned with budget projections. • General Fund revenues of $134.1 million represented an increase of $7.8 million from Fiscal Year 2022- 23 revenues of $126.3 million caused primarily by recognition of ARPA defe rred revenue and positive return in Use of Money and Property.
5

• Net other financing uses of the General Fund were $(0.4) million in FY 2023-24 while FY 2022-23 had a total of other financing uses of $(2.1) million. The va riance was primarily due to use of reserves to fund General Government CIP projects. The General Fund ba lance of $85.3 million at fiscal 2024 was $11.8 million more than the fund balance at fiscal 2023.

OVERVIEW OF THE ANNUAL COMPREHENSIVE FINANCIAL RE
PORT
This Annual Comprehensive Financial Report consists of eight sections:
1) Introductory section, which includes the Transmittal Letter and general information; 2) Management’s Discussion and Analysis (this section); 3) The Basic Financial Statements, which include the Government-wide and the Fund financial statements, along with the Notes to these financial statements;
4) Required Supplementary Information;
5) Supplementary Information;
6) Combining statements for Non-major Governmental Funds and Fiduciary Funds; 7) Statistical information; and
8) Other report(s).

The Basic Financial Statements
The Basic Financial Statements comprise the City-wide Financial Statements and the Fund Financial Statements.

These two sets of financial statements provide two differe nt views of the City’s financial activities and financial position – long- and short-term.

The City-wide Financial Statements provide a longer-term view of City activities as a whole and are comprised of the Statement of Net Position and the Statement of Activities. The Statement of Net Position provides information about the financial position of the City, including all its capital assets an d long-term liabilities on a full accrual basis, similar to that used by corporations. The Statement of Activities provides information about all City revenues and expenses, also on a full accrual basis, with the emphasis on measuring net revenues or expenses of each of the City programs. The Statement of Activities explains in detail the change in net position for the year.

The Fund Financial Statements report C ity operations in more detail than the City-wide statements and focus primarily on the short-term activities of the City Ge neral Fund and other Major Funds. The Fund Financial Statements measure only current revenues and expenditures, current assets, liabilities, deferred inflows/outflows of resources and fund balances, but exclude capital assets, long-term debt, and other long-term amounts.

Major Funds account for the major financial activities of the City and are presented individually, while the activities of Non-major funds are presented in summary, with subo rdinate schedules presenting the detail for each of these Non-major funds. Major Funds are explained further below.

The City is the Successor Agency of the Milpitas Redevelopment Agency. It holds funds to make payments according to the enforceable obligation s schedules and eventually dispose of other assets and properties of the former Redevelopment Agency for the be nefits of the taxing agencies. The Ci ty is also the depository agent for Local Improvement Districts and certain other entities. The fiduciary statements provide information about the cash balances and activities of the Successor Agency, Local Improvement Districts, and other entities. These statements are separate from City financial statements and their balances are excluded from City fund balances.

Together, all these statements are
called the Basic Financial Statements.
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The City-wide Financial Statements
All of the City’s basic services are considered to be governmental activities, including general government, building
safety and inspection, public safety, public works maintenance, recreation, public improvements, planning and zoning, and general administration services. These services are supported by general City revenues such as taxes, and by specific program revenues such as fees. The City-wide financial statements can be found on pages 25-26 of this report.

All of the City’s business-type activities include water a nd sewer, which are also reported in the basic financial statements. Unlike governmental services, these activitie s are supported by charges paid by users based on the amount of their service consumption.

The City’s financial statements include the activities of four other separate legal entities, the Milpitas Public Financing Authority (MPFA), the Mi lpitas Housing Authority (Housing Authority), the Milpitas Municipal Financing Authority (MMFA) and Terrace Gardens, Inc., because the City is either financially accountable for these entities or has control of these entities’ governing boards.

Citywide financial statements are prepared on an accrual basis, which means revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place.

Fund Financial Statements
Governmental Fund financial statements are prepared on a modified accrual basis, which means they measure only current financial resources and uses. Capital assets and other long-lived assets, along with long-term liabilities, are presented only in the Citywide financial statements.

Enterprise and internal service fund fi nancial statements are prepared on a fu ll accrual basis and include all these funds’ assets and liabilities, both current and long-term.

The Fund financial statements provide detailed information about each of the City’s most significant funds, called Major Funds. Each Major Fund is presented individually, with all Non-major Funds summarized and presented in a single column. Subordinate schedules present the detail of these Non-major funds. Major Funds present the major activities of the City for the year. The General Fund is always a Major Fund, bu t other funds may change categorization of “Major Fund” from year to year, depending on City’s activities.

The City has four other Major Governmental Funds in fiscal 2024 in addition to the General Fund. These are the Housing Authority Fund, the Street Improvement Fund , the Transit Area Impact Fee Fund, and the General Government Capital Projects Fund, each of which is discussed in detail below.

Both of the City’s Enterprise Funds (Water Fund and Sewer Fund) are reported as Major Funds.

Comparisons of Budget and Actual financial information are presented only for the General Fund and other major governmental funds that are Special Revenue Funds. The City has one majo r Special Revenue Fund, the Housing Authority Fund.

Fiduciary Statements
The City is the Successor Agency of the former Redevelopment Agency and the agent for certain local improvement districts (Districts). The City holds property tax revenue distributed from the Redevelopment Property Tax Trust Fund (RPTTF) to pay outstanding recognized obligations for the Successor Agency. The City also holds amounts collected from property owners which await transfer to th e Districts’ bond trustees. These activities are excluded from the City’s other financial statements because the City cannot use these assets to finance its own operations.

The City’s fiduciary activities are re ported in the separate Statement of Fiduciary Net Position, Statement of Changes in Fiduciary Net Position and the custodial Funds Statement of Changes in Assets and Liabilities. 7

CITYWIDE FINANCIAL ANALYSIS

This analysis focuses on the net positi on and changes in net position of the City as a whole. Comparisons of the current year’s net position and activities with fiscal 2023 are presented in table form. Any significant changes are analyzed and discussed.

Governmental Activities
Table 1
Governmental Net Position at June 30
(in Millions)
Governmental Activities
2024 2023
Cash and investments $276.4

$259.8
Restricted cash and investments 0.1 0.6
Other assets 75.0 74.8
Capital assets 387. 4 386.3
Total assets $738. 9 $721.5
Deferred Outflows of Resources
–Related to pensions and OPEB 82.4 80.3

Net Pension liabilities

254.9

241.5
Net OPEB liability 14.4 10.5
Total OPEB liability 29.3 26.0
Long-term debt outstanding 20.1 20.8
Other liabilities1 39.4 43.7
Total liabilities 358.1

342.5
Deferred Inflows of Resources

_Related to leases 12.5 12.9
–Related to pensions and
OPEB2

11.7 16.1
Net position:

Net investment in capital assets 367.0 365.5
Restricted 188.0 179.0
Unrestricted (116.0) (114.2)
Total net position $439. 0

$430.3

The City’s governmental net position was $439 million on June 30, 2024, an increase of $8.7 million from 2023.

This increase is reflected as Change in Net Position in the Governmental Activities column of the Statement of Activities and is also shown in Table 2 of this analysis:

1 Other liabilities include Accounts Payable, Unearned Revenues and Compensated Absences incurred as of June 30, 2024 2 Deferred Inflows of Resources – Related to pensions and OPEB refers to unrecognized liability changes due to plan experience which differs from what was assumed in the prior measurement period. 8

• Cash and investments increased $16.6 million principall y due to the positive net operating result and net market gains from the City’s investment portfolio.
• Restricted cash and investment decreased by $0.5 million primarily due to cap ital project activities and disbursement in bond funds.
• Other assets increased $0.2 million from last year due to the net activity between receivables and increase in prepaids, materials, supplies and deposits.
• Capital assets increased $1.1 million from last year, resulting from $14.5 million of depreciation, offset by $15.6 million in asset additions, net of retirements in fiscal 2024. The most significant increases were from street improvement projects.
• Deferred outflows of resources related to pension and Other Post-Employment Benefits (OPEB) increased $2.1 million from last year due to changes in actuarial results.

Fiscal Year 2024
Governmental Activities

As the Sources of Revenue Chart above shows, $48.6 million or 30% came from property taxes, while $34.6 million or 21% came from sales and use taxes. The remainder came from a variety of sources, including charges for services, grants and contributions, franchise fees, transient occupancy taxes, and building fees. 9

The Functional Expenses Chart above includes only current year expenses, which are discussed in detail below. It does not include capital outlays, which are added to the City’s capital assets. The composition of fiscal 2024 capital assets is shown in detail in Table 8.

The Statement of Activities presents program revenues and expenses and general revenues in detail. All these are elements in the Changes in Governmental Net Position as summarized below. 10

Table 2
Changes in Governmental Net Position
(in Millions)
Governmental Activities
2024 2023
Expenses
General Government $28.3 $25.7
Building, Safety and Housing 8.4 7.9
Recreation and Community Services 8.5 8.4
Public Works 31.7 29.7
Planning 2.5 2.6
Police 46.1 39.6
Fire 31.8 31.8
Interest on long term debt 0.7 0.6
Total expenses 158.0 146.3
Revenues
Program revenues:

Charges for services 17.7 20.2
Operating contributions and grants 21.6 16.2
Capital Grants 12.3 7.9
Total Program Revenues 51.6 44.3
General revenues:

Taxes:

Property taxes 48.6 47.1
Sales and use taxes 34.6 37.3
Transient Occupancy taxes 11.5 11.2
Other taxes 0.8 0.7
Franchise fees 7.1 5.7
Investment earnings 5.6 1.9
Miscellaneous 1.4 0.9
Total General Revenues 109.6 104.8
Total Revenues 161.2 149.1
Surplus (Deficit) before transfers 3.2 2.8
Transfers in/(out), net 5.4 4.6
Changes in net position 8.7 7.4
Be
ginning net position 430.3 422.9
Ending net po
sition $439.0 $430.3
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Table 2 compares fiscal 2024 expenses and revenues with those of fiscal 2023. Expenses increased by $11.7 million in fiscal 2024 due primarily to increases in pension liability in the updated GASB 68 report.

Table 2 shows total governmental revenues increased $12.1 million in fiscal 2024. Program revenues increased $7.3 million, and general revenues increase d $4.8 million. The increased in pr ogram revenues was primarily due to increase in operating contributions and grants, and capital grants.

General revenue increased $4.8 million from fiscal 2023, primarily due to an increase of investment earnings. The investment earnings increased by $3.7 million due primarily to increases in unrealized market gain.

Table 3 presents the net cost of each of the City’s largest programs – general government, building safety and housing, recreation and community services, public works, planning, police, and fire. Net cost is defined as total program cost less the revenues genera ted by those specific activities. The net cost of providing such programs in fiscal year was $102.1 million.

Table 3
Governmental Activities
(in Millions)
Net (Expenses) Revenue
From Services
2024 2023
Ge
neral Government $(16.8) $(20.0)
Building, Safety and Housing 0.0 2.4
Recreation and Community
Services
Public Works
(5.4)
(14.7)
(3.9)
(17.1)
Planning (0.9) (0.8)
Police (38.7) (33.1)
Fire (29.2) (28.9)
Interest on long term debt (0.7) (0.6)
Totals $(106.4) $(102.0)
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Business-type Activities
Table 4
Business-Type Net Position at June 30
(in Millions)
Business-Type Activities
2024 2023
Cash and investments $118.8 $111.5
Other assets 6.0 5.1
Capital assets 186.9 184.6
Total assets 311.7 301.2
Deferred Outflows of
Resources – Related to 2.5 2.3
Pensions and OPEB
Other liabilities 5.0 6.4
Net pension liabilities 4.9 4.5
Net OPEB liability 4.2 3.7
Lo
ng-term Debt 52.8 54.6
Total liabilities 66.9 69.2
Deferred Inflows of Resources
– Related to Pensions and 1.0 1.3
OPEB
Ne
t position:

Net investment in capital assets 135.0 131.0
Restricted 83.6 89.1
Unrestricted 27
.6 12.8
Total net position $246.2 $232.9
The net position of business-type activitie s was $246.2 million in fiscal 2024 , an increase of $13.3 million from fiscal 2023. The increase in net position was due to increas e in total assets of $10.5 million. The increase in total assets is primarily comprised of an increase of $2.3 million in capital assets and 7.3 million in cash & investment. 13

Table 5
Changes in Business-Type Net Position
(in Millions)
Business-Type Activities
2024 2023
Expenses
Water Utility $30.0 $28.1
Sewer Utility 17.8 20.2
Total expenses 47.8 48.3
Revenues
Program revenues:

Charges for services 61.2 59.2
Operating grants 0.1 0.1
Capital grants 0.2 2.5
Total program revenues 61.4 61.8
General revenues:

Investment earnings 5.1 0.6
Total general re
venues 5.1 0.6
To
tal Revenues 66.5 62.4
Excess before transfers 18.7 14.1
Ne
t Transfers (5.4) (4.6)
Changes in net position 13.3 9.4
Beginning net position 232.9 223.5
Ending net po
sition $246.2 $232.9
Table 5 compares fiscal 2024 expenses and
revenues with those of fiscal year 2023. Total expenses decreased by $0.5 million in fiscal 2024 due to a decrease in sewer service and supplies. Total program revenues decreased by $0.4 million primarily due to a decrease in capital grants and contributions. Total general revenue increased $4.5 million from interest earnings primarily due to positive market returns on investment as of June 30, 2024. The net transfers represent reimbursements of administration costs to the General Fund. 14

FINANCIAL ANALYSIS OF THE CITY’S FUNDS

Table 6 below summarizes activities and balances of the governmental funds at the fund level:

Table 6
Financial Highlights of Governmental Funds at Fund Level at June 30 (in Millions)

2024 2023

Total assets $298.9 $287.6
Total liabilities 22.0 28.7
Total deferred inflow of resources 12.5 12.9
Total fund balances 264.4 246.0
Total revenues 159.0 148.6
Total expenditures 145.7 144.3
Total other financing sources 5.1 3.5

At June 30, 2024, the City governmental funds reported combined fund balances of $264.4 million, an increase of $18.4 million from last year. The fu nd balances of Housing Authority, Tr ansit Area Impact Fee, and General Government increased $0.7 million, $5.0 million, and $1.3 million respectively, while the Street Improvement and Other Governmental Funds decreased $0.2 million and $0.2 million respectively. The General Fund increased $11.7 million due to net operating surplus.

Revenues at the fund level totaled $159.0 million, a net increase of $10.4 million. Revenues received in General Fund, Housing Authority, and Transit Area Impact Fee Funds increased $7.8 million, $0.2 million, and $3.4 million respectively while the Street Improvement and General Go vernment Capital Projects Funds has a decrease of the fund balance in fiscal year 2024.

Expenditures net increased $1.4 million this year to $145.7 million from last year’s $144.3 million. The expenditures of the Other Government Funds, Street Improvement Fund and Transit Area Impact Fee Fund decreased $2.7 million, $1.6 million, and $1.2 million respectively, while General Fund and General Government Capital projects fund increased $4.5 million and 2.8 million respectively.

Analyses of Major Governmental Funds
General Fund
General Fund revenues (excluding transfers) increased to $ 134.1 million this fiscal year, up $7.8 million from the prior fiscal year. Intergovernmental Revenues were increased by $4.6 million from $6.2 million in fiscal year 2023 to $10.8 million in fiscal year 2024 with recognition of American Rescue Plan Act (ARPA) deferred revenue. Use of money and property were increased by $3.2 million from $0.7 million in fiscal year 2023 to $3.9 million in fiscal year 2024.

General Fund expenditures (excluding transfers) increased to $122 million without encumbrance this fiscal year, up $4.5 million from the prior fiscal y ear. The increase is due primarily to an ticipated increases in personnel cost and contractual services.

Total Other Financing Sources is ($0.4) million net in fiscal 2024. Net Other Financing Sources increased by $1.7 million compared to fiscal year 2 023 Net Other Financing Sources of (2.1) million. Transfers out were approximately $8.6 million in fiscal year 2024, as compared to Transfers out of $9.3 million in fiscal 2023.

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For the City’s General Fund, actual re venues of $134.1 million were $0.7 million more than the final budgeted revenues of $133.4 million. Use of money and property and Property taxes exceeded budget by $3.5 million and $2.7 million respectively, primarily due to higher investment yield and property tax related to Educational Revenue Augmentation Fund (ERAF). The City’s intergovernmental revenue variance between original and final budget is due to recognition of ARPA deferred revenue.

At the end of the year, actual General Fund expenditures were $124.3 million including encumbrance, $7.4 million less than the final budget of $131.7 million. The favorable variance was pr imarily due to expenditure savings generated from staff vacancies.

Housing Authority
This Fund accounts for the housing activities, assumed from the former Redevelopment Agency, designed to increase the amount of low and moderate-income housing av ailable in the City. Total revenues were $1 million in
fiscal 2024, comprised of interest, re ntal income, and repayment of housing loans. Total expenditures were $0.2 million for administration, management one commercial property with eight tenants.

Street Improvement Capital Project
This Street Improvement Capital Project Fund accounts for the majority of the street capital projects activity in the City. The Fund’s revenues were $2 million in fiscal 2024, a decrease of $0.8 milli on from fiscal 2023. Fund expenditures were $4.5 million in fiscal
2024, a decrease of $1.6 million from fiscal 2023, due to decrease in capital outlay. Net transfers were $2.3 million in fiscal 2024, an increase of $2.2 m illion from fiscal 2023 due to increase funding in street projects from the Gas Tax Special Revenue Fund.

Transit Area Impact Fee
The Transit Area Impact
Fee Fund was established in fiscal 2009 to account for impact fees revenue collected from developers and related capital expenditures in the Transit Area. In fiscal 2024, fund revenues were $4.8 million, primarily from fees collected from deve lopers. Expenditures were $0.1 millio n, primarily consisting of capital improvement projects. The Fund also transferred $0.3 million in fiscal year 2024 to the General Government Fund for Capital Improvement Program (CIP) projects.

General Government Capital Projects
The General Government Capital Projects Fund accounts for construction and maintenance of general government projects and assets in the City. In fiscal 2024, CIP project expenditures totaled $12.2 million. The transfers in of $12 million were primarily from the General Fund, Gas Tax Fund, Water Utility Enterprise Fund and Park Improvement Fund. General Government Capital Projects funds also received funding from Public Art Fund, Transit Area Fund, Sewer Fund, Light & Landscape Ma intenance Fund and Commun ity Planning Fund in an amount of approximately $1 million. The transfers out of $0.6 million were to the General Fund and Gas Tax Special Revenue Fund.

Other Governmental
Funds
These funds are not presented separately in the Basic Financial Statements but are individually presented as Supplemental Information.
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Fund Balance Classifications

Fund balances are classified in five categories: nonspendable, restricted, committed, assigned and unassigned based on a hierarchy of constraints. Further details on fund balance classifications can be found in Note 12.

Table 7 shows the classification of the fund balances of the major governmental funds.

Table 7
Fund Balances at June 30 – Major Governmental Funds
(in Millions)

2024 2023
General Fund
Nonspendable

$5.0

$4.9
Committed 16.5 17.0
Assigned 7.5 6.9
Unassigned 56.3 44.7
Total $85.3 73.5

Housing Authority Fund
Restricted

$40.8

$40.1
Street Improvement Fund
Restricted

$4.8

$5.0
Transit Area Impact Fee Fund
Restricted

$65.8

$60.8
General Government Project
Fund
Assigned

$27.5

$25.5
Restricted $0.0 $0.7
$27.5 $26.2

On June 30, 2024, the fund balance of the General Fund wa s $85.3 million. $5 millio n was classified as non- spendable, comprised of $0.8 million for prepaid materials and supplies, and $4.2 million of property held for resale. $16.5 million was classified as committed, comprised of $8 million for PERS Rate Stabilization, $1.9 million for Artificial turf replacement, $0.4 million for Technology replacement and $6.2 million for Facilities replacement. $7.5 million was classified as Assign ed, comprised of $2.9 million for unin sured claims, $2.2 million for other assigned and $2.3 million for encumbrances. $56.3 million was classified as unassigned, comprised of $20.8 million of contingency reserve, $20.8 million of budget stabilization reserve, $1.5 m illion of future deficit reserve, $3.6 million in ERAF reserve, $0.7 milli on in Strategic Property Acquisition Revenue, $7.2 million in Community Investment Programs and $1.8 million of unassigned.

The fund balance of the General Government Capital Project Fund was $27.5 million, classified as assigned due to Council’s reserve policy.

Fund balances of the Housing Authority Fund, Street Improvement Fund and the Transit Area Impact Fee Fund were also classified as restricted because the amounts are restricted for specific purposes. 17

Analyses of Major Proprietary Funds
Total operating revenues of major proprietary funds increased $2 million from last year, while operating expenses increased $0.2 million. Total operating revenues and total operating expenses were $61.2 million and $46.1 million, respectively. Total non-operating revenu es were $3.4 million in fiscal 2024, an increase of $5.2 million from the prior year. Capital contributions decreased by $2.3 million and net transfers out decreased by $0.8 million.

Water Utility
Water Utility Fund revenues were $36.1 million in fiscal 2024, an increase of $1.9 million from prior year. The increase in revenues was primarily due to a 6% rate increase. Expenses were $29.4 million in fiscal 2024, an increase of $2.1 million from prior year, primarily due to an incr ease in wholesale water purchase rate. Net position of the Water Utility Fund increased $5.3 million in the current year to a total of $104.9 million. The increase is comprised of $36.1 million of operating revenues and $29.4 million of operating expens es, which resulted in $6.7 million operating income before accounting for unrealized market loss and transfer out expenses. The Water Utility Fund also received $0.1 million of grants, $0.1 million of capital contributions, net of interest income of $2.1 million and transfers of ($3.6) million, resulting in an increase in net position of $5.3 million. The net increase has been allocated per policy to infrastructure funding, rate stabilization, pension reserve and emergency reserve.

The Water Utility Fund’s Net Position includes $49.6 million invested in capital assets, $44.5 million in restricted net position, and $10.8 million in unrestricted net position allocated per Council policy.

Sewer Utility
Sewer Utility Fund revenues were $25.1 million in fiscal 2024, up $0.1 million fr om the prior year due to an increase
in usage as businesses re-opened post-Pandemic. Expenses were $16.7 million in fiscal 2024, a decrease of $1.9 million from the prior year. Non-operatin g revenues and expenses in fiscal ye ar 2024 consisted of $1.4 million interest income. There was $25.1 million of operating re venues for the current year, $16.7 million of operating expenses, which resulted in $8.4 million operating income before accounting for unrealized market loss and transfer out expenses. The Sewer Utility Fund also received $2.5 million in interest income, net of interest expense of $1.1 million, $0.1 million of capital contributions and net of transfers of ($1.9) million.

The Sewer Utility Fund’s Net Position includes $85.4 million invested in capital assets, $39.1 million in restricted net position, and $16.8 million in unrestricted net position, totaling $141.3 million in fiscal year 2024, allocated per Council policy.
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CAPITAL ASSETS
The City records the cost of all its infrastructure assets such as roads, bridges, signals, and similar assets used by the general population, and computes the amount of accumulated depreciation for these assets based on their original acquisition dates. At the end of fiscal 2024, the cost of infrastructure and other capital assets recorded on the City’s financial statements was as shown in Table 8 below:

Table 8
Capital Assets at Year-end
(in Millions)

2024 2023
Governmental Activities:

Land

$97.4

$97.4
Construction in progress 77.4 75.4
Buildings and improvements 173.4 173.4
Other improvements 39.7 40.0
Machinery and equipment 53.2 48.8
Landscape system 31.3 30.2
Storm system 75.6 75.6
Street system 335.4 328.3
Traffic system 22.2 21.2
Intangible Right-to-use
subscription asset

0.8 0.7
Less accumulated depreciation (518.9) (504.7)
Totals $387.4 $386.3

Business-type Activities:

Land $1.1 $1.1
Construction in progress 36.6 33.7
Distribution facilities 81.2 81.2
Water Service lines 18.4 18.4
Sewer lines 88.5 88.0
Capacity rights 126.6 120.9
Less accumulated depreciation (165.5) (158.7)
Totals $186.9 $184.6

The primary additions in fiscal 2024 were due to land and street improvement projects.

The City depreciates all its capital assets over their estimated useful lives. The purpose of depreciation is to spread the cost of a capital asset over the years of its useful life so an allocable portion of the cost of the asset is borne by all users. Additional information on depreciable lives and current year activities may be found in Note 8.

CASH AND INVESTMENTS

The City outsourced the mana gement of the City’s general investment pools to Chandler Asset Management effective June 1, 2020, and held in a custodial account with The Bank of New York. The City also established a Section 115 trust managed by PFM Asset Management. The managed portfolio consists of securities invested in accordance with respective City investment policies and California Government Code. 19

Total cash and investments increased $24 million from $370.4 million to $394.4 million. This increase was due to positive investment returns compared to the prior year’s unrealized market loss. As the Federal Reserve continues to raise interest rates, the valuation of current City fixed income portfolio may decrease because they were purchased and locked in at a lower interest rate. However, this decrease in value is an un realized market loss unless the City liquidates its investment holdings.

Total investment earnings for fiscal ye ar 2024 was $3.5 million. The change in fair value for the portfolio for the fiscal year ending June 30, 2024 was an unrealized loss on investments of $1.9 million.

The following graphs depict the investment portfolio of $343.6 million cash and investments at June 30, 2024.

DEBT ADMINISTRATION
The City has issued debt in prior fisc al periods to finance several City CI P projects include Sewer infrastructure, Water infrastructure, energy improvement projects and the replacement of Fire Station No. 2.

In fiscal 2018, the City refunded th e 2006 Sewer Bonds with the 2017 Wastewater Revenue Refunding Bonds to reduce all-in interest costs over the life of the bonds. The 2017 Bonds are supported by pledges of net revenues from the City sewer system. In fiscal 2020, the Milpitas Mu nicipal Financing Authority issued Wastewater Revenue Bonds, Series 2019 in an amount of $29.8 million to fund certain improvements to the City wastewater system. The City also issued Water Revenue Bond s, Series 2019 in an amount of $1 7.1 million fund for Water system improvement projects.
20

In fiscal 2021, the Milpitas Municipal Financing Authorit y issued Lease Revenue Bonds in an amount of $18.4 million to finance a portion of the Fire Station No. 2 Replacement project and a variety of energy improvement projects. Each of the City debt issues are discussed in detail in Note 9 to the financial statements. At June 30, 2024, the City debt is comprised of:

Table 9
Outstanding Debt
(in Millions)
Balance Balance
June 30, 2024 June 30, 2023
Governmental Activity Debt:
2020 General Fund Lease Revenue Bond

4.0% due June 1, 2041 17.1 $17.7
Plus: Unamortized bond premium 3.0 3.1
Total Governmental-type Activity Debt $20.1 $20.8
Business-type Activity De
bt:

Wastewater Revenue Refunding Bonds, 2017
Series

2.0% - 5.0%, due November 1, 2026 1.8 2.3
Plus: Unamortized bond p
remium 0.2 0.3
Wastewater Revenue Bonds, 2019 Se
ries

4.0% - 5.0%, due November 1, 2049 27.9 28.4
Plus: Unamortized bond p
remium 4.6 4.8
Water Revenue, 2019 S
eries

4.0% - 5.0%, due June 1, 2049 15.8 16.2
Plus: Unamortized bond p
remium 2.5 2.7
Total Business-type Activity Debt $52.8 $54.6

ECONOMIC OUTLOOK AND MAJOR

INITIATIVES
The economy of the City and its major initiatives for the coming year are discussed in the accompanying Transmittal Letter.

CONTACTING THE CITY’S FINANCIAL MANAGEMENT
This Annual Comprehensive Financial Report is intended to provide citizens, taxpayers, investors, and creditors with a general overview of the City’s finances. Question s about this Report should be directed to the Finance Department, at 455 East Calaveras Boulevard, Milpitas, CA 95035-5479, email us at [email protected] or at the City’s website at www.milpitas.gov. 21

STATEMENT OF NET POSITION AND

STATEMENT OF ACTIVITIES
The Statement of Net Position reports the difference betw een the City’s total assets and deferred outflows of resources and the City’s total liabilities and deferred inflows of resources, including all the City’s capital assets and all its long-term debt. The Statement of Net Position focuses the reader on the composition of the City’s net position by subtracting total liabilities and deferred inflows of resources from total assets and deferred outflows of resources.

The Statement of Net Position summarizes the financial position of the City’s Governmental Activities in a single column, and the financial position of all the City’s Business-type Activities in a single column; these columns are followed by a Total column that presents the financial position of the primary government. This column is followed by a column that displays the discretely presented component unit.

The City’s Governmental Activities include the activities of its General Fund, along with all its Special Revenue, Capital Projects and Debt Service Fund s. Since the City’s Internal Serv ice Funds service these Funds, their activities are consolidated with Govern mental Activities, after eliminating in ter-fund transactions and balances.

The City’s Business-type Activities include all its Enterprise Fund activities.

The Statement of Activities reports increas es and decreases in the City’s net pos ition. It is prepared on the full accrual basis, which means it includes all the City’s revenues and all its expenses, regardless of when cash changes hands. This differs from the “modified accrual” basis used in the Fund fina ncial statements, which reflect only current assets, current liabilities, deferred inflows/outf lows of resources, available revenues and measurable expenditures.

The Statement of Activities presents the City’s expenses first, listed by the program, and follows these with the expenses of its Business-type Activities. Program revenues – that is, revenues which are generated directly by these programs – are then deducted from program expenses to arrive at the net expens e of each governmental and business-type program. The City’s general revenues are then listed in the Governmental Activities, Business-type Activities or discretely presented component unit column, as appropriate, and the Change in Net Position is computed and reconciled with the Statement of Net Position.

Both of these Statements include the financial activities of the City and the blended component units: the Milpitas Public Financing Authority (MPFA), the Milpitas Economic Development Corporation (EDC), the City of Milpitas Housing Authority (Housing Authority) and the Milpitas Municipal Financing Authority (MMFA). The Financing Authorities and Housing Authority are legally separate component units of the City, because they are controlled by the City and the City is financially acco
untable for their activities. The EDC is a California nonprofit public benefit Corporation that is also a legally separate component unit of the City because it is governed by a board consisting of the members of the City Council. The EDC became inactive as of June 30, 2015. The balances and the activities of the discretely presented component unit of Terrace Gardens, Inc. are includ ed in these statements as separate columns.

These financial statements along with the fund financial statements and footnotes are called Basic Financial Statements.

CITY OF MILPITAS

STATEMENT OF NET POSITION
JUNE 30, 2024
Component
Primary Government Unit
Terrace
Gardens Inc.

Governmental Business-Type (As of
Activities Activities Total December 31, 2023)
ASSETS
Cash and investments available for operations (Note 3) $276,444,226 $117,958,595 $394,402,821 $139,688 Restricted cash and investments (Note 3) 110,980 870,925 981,905 3,602,701 Receivables:

Accounts 1,631,060 4,733,688 6,364,748 132,006
Due from other governments 11,293,598 211,114 11,504,712 Interest 1,455,861 721,370 2,177,231
Loans receivable (Note 5) 39,349,437 39,349,437
Prepaids, materials, supplies and deposits (Note 1E) 1,883,815 268,626 2,152,441 20,968 Property held for resale (Note 6) 6,000,000 6,000,000
Leases receivable (Note 10) 13,311,509 13,311,509
Capital assets and capacity rights (Note 8):

Land and construction in progress 174,796,340 37,733,469 212,529,809 1,565,277 Depreciable capital assets, net 212,624,855 149,206,677 361,831,532 5,032,097 Total assets 738,901,681 311,704,464 1,050,606,145 10,492,737

DEFERRED OUTFLOWS OF RESOURCES
Related to pensions (Note 13D) 65,932,324 1,224,171 67,156,495 Related to OPEB (Note 14E) 16,452,390 1,241,656 17,694,046 Total deferred outflows of resources 82,384,714 2,465,827 84,850,541

LIABILITIES
Accounts payable 6,616,042 3,912,452 10,528,494 289,054 Accrued payroll 4,300,264 177,095 4,477,359 13,294
Accrued expenses
Interest payable 57,267 281,404 338,671
Refundable deposits 3,318,054 131,648 3,449,702 76,600
Unearned revenue 7,923,612 6,922 7,930,534 277
Uninsured claims payable (Note 15):

Due within one year 1,748,408 1,748,408
Due in more than one year 6,411,812 6,411,812
Accrued vacation (Note 14F):

Due within one year 2,958,364 427,236 3,385,600 20,267
Due in more than one year 4,241,542 55,538 4,297,080
Sick leave payable (Note 14F):

Due within one year 882,110 882,110
Due in more than one year 461,483 108,026 569,509
Subscription liability (Note 11):

Due within one year 134,857 134,857
Due in more than one year 278,269 278,269
Net pension liabilities (Note 13C):

Due in more than one year 254,944,296 4,854,175 259,798,471 Net OPEB liability (Note 14C):

Due in more than one year 14,429,678 1,636,440 16,066,118 Total OPEB liability (Note 14D)
Due in more than one year 29,299,537 2,542,125 31,841,662 Long term debt (Note 9):

Due within one year 570,000 1,460,000 2,030,000
Due in more than one year 19,562,489 51,343,897 70,906,386 Total liabilities 358,138,084 66,936,958 425,075,042 399,492

DEFERRED INFLOWS OF RESOURCES
Related to leases (Note 10) 12,482,594 12,482,594
Related to OPEB (Note 14E) 11,702,072 1,039,533 12,741,605 Total deferred inflows of resources 24,184,666 1,039,533 25,224,199 NET POSITION (Note 12)
Net investment in capital assets and capacity rights 366,986,560 135,007,174 501,993,734 6,597,374 Restricted for:

Capital projects 96,887,639 83,642,091 180,529,730
Redevelopment and community development activities 53,182,542 53,182,542 Pension expenses 36,369,174 36,369,174
Other programs 1,578,175 1,578,175
Total restricted net position 188,017,530 83,642,091 271,659,621 Unrestricted (116,040,445) 27,544,535 (88,495,910) 3,495,871 Total net position $438,963,645 $246,193,800 $685,157,445 $10,093,245 See accompanying notes to financial statements
25

CITY OF MILPITAS

STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2024
Net (Expense) Revenue and
Changes in Net Position
Program Revenues Primary Government
Operating Capital
Charges for Grants and Grants and Governmental Business-type Functions/Programs Expenses Services Contributions Contributions Activities Activities Primary Government:

Governmental Activities:

General Government $28,302,461 $1,299,172 $10,212,578 ($16,790,711) Building, Safety and Housing 8,375,763 5,357,719 2,158,280 $846,793 (12,971) Recreation and Community Services 8,514,036 2,909,609 229,030 (5,375,397) Public Works 31,701,946 3,678,049 2,326,061 10,968,005 (14,729,831) Planning 2,544,694 565,817 645,546 455,025 (878,306)
Police 46,096,478 1,513,176 5,853,486 (38,729,816)
Fire 31,776,668 2,395,740 155,071 (29,225,857)
Interest on long term debt 676,123 (676,123)
Total Governmental Activities 157,988,169 17,719,282 21,580,052 12,269,823 (106,419,012) Business-type Activities:

Water Utility 30,028,756 36,064,934 61,437 72,444 $6,170,059 Sewer Utility 17,839,076 25,109,874 101,232 7,372,030
Total Business-type Activities 47,867,832 61,174,808 61,437 173,676 13,542,089 Total Primary Government $205,856,001 $78,894,090 $21,641,489 $12,443,499 (106,419,012) 13,542,089 Component Unit:

Terrace Gardens Inc. $2,521,341 $2,367,022 $173,641
General revenues:

Taxes:

Property taxes 48,613,455
Sales and use taxes 34,616,708
Hotel/Motel taxes 11,537,075
Other taxes 818,949
Franchise fees, unrestricted 7,074,973
Motor vehicle in-lieu, unrestricted 101,305
Investment earnings 5,593,649 5,153,610
Miscellaneous 1,272,107
Transfers (Note 4) 5,427,783 (5,427,783)
115,056,004 (274,173)
Change in Net Position 8,636,992 13,267,916
430,326,653 232,925,884
Net position-Ending $438,963,645 $246,193,800
See accompanying notes to financial statements
Total general revenues and transfers
Net position-Beginning
26

Net (Expense) Revenue and
Changes in Net Position
Primary Government Component Unit
Terrace
Gardens Inc.
(year ended
Total December 31, 2023)
($16,790,711)
(12,971)
(5,375,397)
(14,729,831)
(878,306)
(38,729,816)
(29,225,857)
(676,123)
(106,419,012)
6,170,059
7,372,030
13,542,089
(92,876,923)
$19,322
48,613,455
34,616,708
11,537,075
818,949
7,074,973
101,305
10,747,259 67,082
1,272,107
114,781,831 67,082
21,904,908 86,404
663,252,537 10,006,841
$685,157,445 $10,093,245
27

FUND FINANCIAL STATEMENTS

The Fund Financial Statements present individual major f unds, while non-major funds are combined in a single column. Major funds are defined genera lly as having significant activities or balances in the current year. No distinction is made between Fund types.

MAJOR GOVERNMENTAL FUNDS

The funds described below were determined to be Major Funds by the City. Individual non-major funds may be found in the Supplemental section.

GENERAL FUND

The General Fund is used for all the general revenues of the City not specifically levied or collected for other City funds and the related expenditures. The general fund accounts for all financial resources of a governmental unit, which are not accounted for in another fund.

HOUSING AUTHORITY FUND

Established to plan and address the housing needs of the C ity and to act as the Housing Successor Agency for the former Redevelopment Agency. The main source of the revenue for this fund is the repayment of loans restricted for housing activities.

STREET IMPROVEMENT FUND

Established to account for the construction and maintenance of the street system in Milpitas. Financing may be provided through state and federal grants.

TRANSIT AREA IMPACT FEE FUND

Established to account for capital proj ects in the transit area. A special transit area impact fee is imposed on developments to provide financing.

GENERAL GOVERNMENT CAPITAL PROJECT FUND

Established to account for the construction and maintenanc e of general government projects. Financing provided by the General Fund.

Housing Street Transit Area
General Authority Improvement Impact Fee
ASSETS
Cash and investments available for operations (Note 3) $84,403,475 $2,907,545 $5,123,029 $63,872,981 Restricted cash and investments (Note 3) 110,976
Receivables:

Accounts 1,625,374
Due from other governments 7,825,577 51,987 1,655,688
Interest 538,808 17,838 32,631 385,592
Loans receivable, net (Note 5) 36,105,581
Prepaids, materials, supplies and deposits (Note 1E) 770,086 Property held for resale (Note 6) 4,200,000 1,800,000
Leases receivable (Note 10) 13,311,509
Total Assets $112,785,805 $40,830,964 $5,207,647 $65,914,261

LIABILITIES
Accounts payable $2,038,061 $1,150 $447,266 $126,721
Accrued payroll 4,155,989 3,601 8,878
Refundable deposits 3,288,083 11,100
Unearned revenue 5,571,018
Total Liabilities 15,053,151 12,250 450,867 135,599

DEFERRED INFLOWS OF RESOURCES
Leases related (Note 10) 12,482,594
Total Deferred Inflows of Resources 12,482,594

FUND BALANCES
Fund balances (Note 12):

Nonspendable 4,970,086
Restricted 40,818,714 4,756,780 65,778,662
Committed 16,495,185
Assigned 7,478,213
Unassigned 56,306,576
TOTAL FUND BALANCES 85,250,060 40,818,714 4,756,780 65,778,662 Total Liabilities, Deferred Inflows of Resources and Fund Balances $112,785,805 $40,830,964 $5,207,647 $65,914,261 Amounts reported for Governmental Activities in the Statement of Net Position are different from those reported in the Governmental Funds above because of the following:

CAPITAL ASSETS

ALLOCATION OF INTERNAL SERVICE FUND NET POSITION
Internal service funds are not governmental funds. However, they are used by management to charge the costs of certain activities, such as insurance and central services and maintenance, to individual governmental funds. The net current assets of the Internal Service Funds are therefore included in Governmental Activities in the Statement of Net Position.

LONG-TERM ASSETS AND LIABILITIES
Long-term debt
Subscription liability
OPEB liability and related deferred outflows/inflows of resources

NET POSITION OF GOVERNMENTAL ACTIVITIES
See accompanying notes to financial statements

CITY OF MILPITAS

GOVERNMENTAL FUNDS

BALANCE SHEET
JUNE 30, 2024
Non-current portion of uninsured claims payable
The assets and liabilities below are not due and payable in the current period and therefore are not reported in the Funds:

Net pension liability and pension-related deferred outflows/inflows of resources Non-current portion of accrued vacation and sick leave
Capital assets used in Governmental Activities are not current assets or financial resources and therefore are not reported in the Governmental Funds. 32

General
Government Other Total
Capital Governmental Governmental
Projects Funds Funds
$30,324,764 $38,428,121 $225,059,915
4 110,980
5,686 1,631,060
323,989 1,436,357 11,293,598
151,199 238,284 1,364,352
3,243,856 39,349,437
31,887 801,973
6,000,000
13,311,509
$30,805,642 $43,378,505 $298,922,824
$3,247,221 $630,681 $6,491,100
23,962 82,171 4,274,601
18,859 3,318,042
2,352,594 7,923,612
3,271,183 3,084,305 22,007,355
12,482,594
12,482,594
31,887 5,001,973
4 39,274,566 150,628,726
16,495,185
27,534,455 987,747 36,000,415
56,306,576
27,534,459 40,294,200 264,432,875
$30,805,642 $43,378,505
376,801,378
62,954,846
(20,189,756)
(413,126)
(189,011,972)
(38,978,897)
(8,471,483)
(8,160,220)
$438,963,645
33

Housing Street Transit Area
General Authority Improvement Impact Fee

REVENUES
Property taxes $48,723,543
Sales taxes 35,836,135
Hotel /Motel taxes 11,529,102
Franchise fees 6,185,057
Other taxes 1,151,731
Licenses and fines 7,662,528
Use of money and property 3,880,404 $964,611 $96,614 $2,743,560 Intergovernmental 10,797,611 1,860,309
Charges for services 7,146,777
Developer contributions 2,093,717
Other 1,196,944
Total Revenues 134,109,832 964,611 1,956,923 4,837,277

EXPENDITURES
Current:

General Government 23,320,703 222,365 2,736
Building, Safety and Housing 7,004,089
Recreation and Community Services 6,950,182
Public Works 14,123,213 1,958
Planning 1,917,232
Police 38,870,164
Fire 28,401,218
Capital outlay 4,528,215 127,225
Debt service:

Principal 652,441
Interest and fees 719,091
Total Expenditures 121,958,333 222,365 4,528,215 131,919

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 12,151,499 742,246 (2,571,292) 4,705,358

OTHER FINANCING SOURCES (USES)
Proceeds from sale of property 4,743
Transfers in (Note 4A) 8,148,456 2,972,428 578,227
Transfers (out) (Note 4A) (8,557,651) (645,112) (324,000) Total Other Financing Sources (Uses) (404,452) 2,327,316 254,227 NET CHANGE IN FUND BALANCES 11,747,047 742,246 (243,976) 4,959,585 Fund balances at beginning of year 73,503,013 40,076,468 5,000,756 60,819,077 FUND BALANCES AT END OF YEAR $85,250,060 $40,818,714 $4,756,780 $65,778,662 See accompanying notes to financial statements

CITY OF MILPITAS

GOVERNMENTAL FUNDS

STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2024
34

General
Government Other Total
Capital Governmental Governmental
Projects Funds Funds
$48,723,543
35,836,135
11,529,102
$889,916 7,074,973
5,989,299 7,141,030
7,662,528
$1,102,875 1,148,898 9,936,962
976,344 6,444,436 20,078,700
48,322 223,040 7,418,139
194,206 2,287,923
117,674 1,314,618
2,127,541 15,007,469 159,003,653
1,665,815 25,211,619
596,684 7,600,773
16,735 6,966,917
2,852,065 16,977,236
377,739 2,294,971
402,617 39,272,781
28,401,218
12,172,292 809,940 17,637,672
652,441
719,091
12,172,292 6,721,595 145,734,719
(10,044,751) 8,285,874 13,268,934
4,743
12,010,869 730,702 24,440,682
(587,030) (9,199,106) (19,312,899)
11,423,839 (8,468,404) 5,132,526
1,379,088 (182,530) 18,401,460
26,155,371 40,476,730 246,031,415
$27,534,459 $40,294,200 $264,432,875
35

CITY OF MILPITAS
Reconciliation of the

NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS
with the

STATEMENT OF ACTIVITIES
The schedule below reconciles the Net Changes in Fund Balances reported on the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance, which measures only changes in current assets and current liabilities on the modified accrual basis, with the Change in Net Position of Governmental Activities reported in the Statement of Activities, which is prepared on the full accrual basis.

NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS $18,401,460 Amounts reported for governmental activities in the Statement of Activities are different because of the following:

CAPITAL ASSETS TRANSACTIONS
Governmental Funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is capitalized and allocated over their estimated useful lives and reported as depreciation expense.

The capital expenditures are therefore added back to fund balance (Internal service fund additions of $2,139,230 have already been added to capital assets) 12,195,343 Retirements of capital assets are deducted from fund balance (Internal service fund retirements of $365,582 have already been deducted from capital assets) (4,743)
Depreciation expense is deducted from the fund balance
(Depreciation expense is net of internal service fund depreciation of $1,289,220 which has already been allocated to serviced funds.)" (13,215,435)

LONG-TERM DEBT PROCEED AND PAYMENTS
Lease proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the Statement of Net Position. Repayment of lease principal is an expenditure in the governmental funds, but in the Statement of Net Position the repayment reduces long-term liabilities. repayment of debt principal and SBITA liabilities are added back to fund balance 693,676

ACCRUAL OF NON-CURRENT ITEMS
The amounts below included in the Statement of Activities do not provide or (require) the use of current financial resources and therefore are not reported as revenue or expenditures in governmental funds (net change):

Interest payable 1,733
Non-current portion of accrued vacation and sick leave (889,476) Non-current portion of uninsured claims payable (1,807,475) Subscription liability 151,052
Net pension liabilities and pension-related deferred outflows/inflows of resources (14,088,940) Net OPEB liabilities and OPEB-related deferred outflows/inflows of resources (35,170)

ALLOCATION OF INTERNAL SERVICE FUND ACTIVITY
Internal Service Funds are used by management to charge the costs of certain activities, such as equipment acquisition, maintenance, and insurance to individual funds.

The portion of the net revenue (expense) of these Internal Service Funds arising ou t
of their transactions with governmental funds is reported with governmental activities, because they service those activities.

Change in Net Position - All Internal Service Funds 7,234,967 CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES $8,636,992 See accompanying notes to financial statements
36

CITY OF MILPITAS

GENERAL FUND

STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL (NON-GAAP LEGAL BASIS)
Variance with
Budgeted Amounts Budget Final
Actual Amounts Positive
Original Final Budgetary Basis (Negative)
Revenues
Property taxes $46,023,851 $46,023,851 $48,723,543 $2,699,692 Sales taxes 35,868,560 36,168,560 35,836,135 (332,425)
Hotel /Motel taxes 11,811,236 11,811,236 11,529,102 (282,134) Franchise fees 5,811,868 5,811,868 6,185,057 373,189
Other taxes 1,088,586 1,088,586 1,151,731 63,145
Licenses and fines 8,662,020 9,162,020 7,662,528 (1,499,492) Use of money and property 414,000 414,000 3,880,404 3,466,404 Intergovernmental 820,572 14,645,047 10,797,611 (3,847,436) Charges for services 8,111,025 7,917,130 7,146,777 (770,353) Other 389,525 389,525 1,196,944 807,419
Total Revenues 119,001,243 133,431,823 134,109,832 678,009 Expenditures
Current:

General Government:

City Manager 4,703,815 4,785,069 4,168,932 616,137
City Attorney 1,189,895 1,224,505 1,120,312 104,193
Finance 4,926,443 4,979,345 4,679,388 299,957
Human Resources 2,017,207 2,032,773 1,862,126 170,647
Information Services 4,911,128 4,734,730 4,468,114 266,616 Non-departmental 6,543,743 10,525,501 8,343,779 2,181,722 Building, Safety and Housing 6,385,627 7,155,071 7,073,647 81,424 Recreation and Community Services 6,775,931 7,046,882 7,044,471 2,411 Public Works 15,076,150 14,592,570 14,527,817 64,753
Planning 2,024,149 2,142,420 1,964,114 178,306
Police 41,213,199 41,088,494 39,080,138 2,008,356
Fire 29,293,563 30,134,892 28,594,214 1,540,678
Debt service:

Principal 520,000 520,000 652,441 (132,441)
Interest 708,000 708,000 719,091 (11,091)
Total Expenditures 126,288,850 131,670,252 124,298,584 7,371,668

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES (7,287,607) 1,761,571 9,811,248 8,049,677

OTHER FINANCING SOURCES (USES)
Proceeds from sale of property 4,743 4,743
Proceeds from issuance of long term debt
Transfers in 8,148,456 8,148,456 8,148,456
Transfers (out) (3,243,817) (8,557,651) (8,557,651)
Total Other Financing Sources (Uses) 4,904,639 (409,195) (404,452) 4,743 NET CHANGE IN FUND BALANCE ($2,382,968) $1,352,376 9,406,796 $8,054,420 Adjustments to budgetary basis:

Encumbrance expenditures 2,340,251
Fund balance at beginning of year 73,503,013

FUND BALANCE AT END OF YEA
R $85,250,060
See accompanying notes to financial statements
37

CITY OF MILPITAS

HOUSING AUTHORITY

STATEMENT OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCE

BUDGET AND ACTUAL (NON-GAAP LEGAL BASIS)
Variance with
Budgeted Amounts Budget
Actual Amounts Positive
Original Final Budgetary Basis (Negative)
Revenues
Use of money and property $165,658 $165,658 $964,611 $798,953 Total Revenues 165,658 165,658 964,611 798,953
Expenditures
Current:

General Government:

City Attorney 8,000 8,000 8,000
Non-departmental 423,639 431,898 222,365 209,533
Total Expenditures 431,639 439,898 222,365 217,533

OTHER FINANCING SOURCES (USES)
Proceeds from sale of property
NET CHANGE IN FUND BALANCE ($265,981) ($274,240) 742,246 $1,016,486 Fund balances at beginning of year 40,076,468
FUND BALANCE AT END OF YEAR $40,818,714
See accompanying notes to financial statements
38

MAJOR PROPRIETARY FUNDS
Proprietary funds account for City operations financed and operated in a manner similar to a private business enterprise. The intent of the City is that the cost of providing goods and services be financed primarily through user charges.

The concept of major funds extends to Proprietary Funds. The City has identified the funds below as major proprietary funds.

Financial reporting standards do not provide for the disclosure of budget vs. actual comparisons regarding proprietary funds that are major funds.

WATER UTILITY FUND
Accounts for the provision of water services to residents and businesses of the City. All activities necessary to provide such services are accounted for in this fund, includi ng, but not limited to, administration, operations, capital improvements, maintenance, billing and collection.

SEWER UTILITY FUND
Accounts for the provision of sewer services to residents and businesses of the City. All activities necessary to provide

such services are accounted for in this fund, includi ng, but not limited to, admini stration, operations, capital improvements, maintenance, financing, billing and collection.

CITY OF MILPITAS

PROPRIETARY FUNDS

STATEMENT OF NET POSITION
JUNE 30, 2024
Business-type Activities-Enterprise Funds Governmental
Activities-
Sewer Internal Service
Water Utility Utility Totals Funds
ASSETS
Current Assets
Cash and investments
available for operations (Note 3) $60,206,518 $57,752,077 $117,958,595 $51,384,311 Restricted cash and investments (Note 3) 793,259 77,666 870,925 Receivables:

Accounts 2,718,283 2,015,405 4,733,688
Due from other governments 163,960 47,154 211,114
Interest 367,886 353,484 721,370 91,509
Prepaids, materials, supplies and deposits (Note 1E) 244,064 24,562 268,626 1,081,842 Total current assets 64,493,970 60,270,348 124,764,318 52,557,662 Noncurrent assets:

Capital assets and capacity rights (Note 8):

Land and construction in progress 34,917,989 2,815,480 37,733,469 Depreciable capital assets, net 32,273,924 116,932,753 149,206,677 10,619,817 Total noncurrent assets 67,191,913 119,748,233 186,940,146 10,619,817 Total assets 131,685,883 180,018,581 311,704,464 63,177,479

DEFERRED OUTFLOWS OF RESOURCES
Related to pensions (Note 13D) 697,420 526,751 1,224,171 Related to OPEB (Note 14E) 695,559 546,097 1,241,656
Total deferred outflows of resources 1,392,979 1,072,848 2,465,827

LIABILITIES
Current liabilities:

Accounts payable 3,696,867 215,585 3,912,452 124,942
Accrued payroll 106,624 70,471 177,095 25,663
Interest payable 58,871 222,533 281,404
Refundable deposits 131,648 131,648 12
Unearned revenue 3,461 3,461 6,922
Accrued vacation (Note 14F) 213,618 213,618 427,236 49,472 Sick leave payable (Note 14F)
Revenue Bonds (Note 9) 340,000 1,120,000 1,460,000
Total current liabilities 4,551,089 1,845,668 6,396,757 200,089 Non-current liabilities:

Accrued vacation (Note 14F) 27,568 27,970 55,538 15,047 Sick leave payable (Note 13F) 54,756 53,270 108,026 7,497 Net pension liabilities (Note 13C) 2,765,461 2,088,714 4,854,175 Net OPEB liability (Note 14C) 822,664 813,776 1,636,440 Total OPEB liability (Note 14D) 1,365,381 1,176,744 2,542,125 Revenue Bonds (Note 9) 18,036,777 33,307,120 51,343,897 Total non-current liabilities 23,072,607 37,467,594 60,540,201 22,544 Total liabilities 27,623,696 39,313,262 66,936,958 222,633

DEFERRED INFLOWS OF RESOURCES
Related to OPEB (Note 14E) 558,945 480,588 1,039,533
Total deferred inflows of resources 558,945 480,588 1,039,533 NET POSITION (Note 12)
Net investment in capital assets and capacity rights 49,608,395 85,398,779 135,007,174 10,619,817 Restricted for capital projects 44,502,395 39,139,696 83,642,091 Restricted for pension expenses 36,369,174
Unrestricted 10,785,431 16,759,104 27,544,535 15,965,855 Total net position $104,896,221 $141,297,579 $246,193,800 $62,954,846 See accompanying notes to financial statements
41

CITY OF MILPITAS

PROPRIETARY FUNDS

STATEMENT OF REVENUE, EXPENSES

AND CHANGES IN FUND NET POSITION
FOR THE YEAR ENDED JUNE 30, 2024
Business-type Activities-Enterprise Funds Governmental
Activities-
Sewer Internal Service
Water Utility Utility Totals Funds

OPERATING REVENUES
Charges for services $35,658,335 $24,744,543 $60,402,878 $4,032,465 Other operating revenue 406,599 365,331 771,930 2,911,073 Total Operating Revenues 36,064,934 25,109,874 61,174,808 6,943,538

OPERATING EXPENSES
Purchased water 20,713,649 20,713,649
Sewer treatment services 6,558,317 6,558,317
Personnel services 4,187,335 2,951,169 7,138,504 1,164,806 Services and supplies 2,772,169 1,923,249 4,695,418 738,639 Depreciation 1,579,352 5,276,562 6,855,914 1,289,220
Repairs and maintenance 118,888 15,721 134,609 157,489
Total Operating Expenses 29,371,393 16,725,018 46,096,411 3,350,154 Operating Income (Loss) 6,693,541 8,384,856 15,078,397 3,593,384

NONOPERATING REVENUES (EXPENSES)
Interest income(loss) 2,682,505 2,471,105 5,153,610 1,694,802 Interest expense (657,363) (1,114,058) (1,771,421)
Subventions and grants 61,437 61,437 27,200
Total Nonoperating Revenues (Expenses) 2,086,579 1,357,047 3,443,626 1,722,002 Income (Loss) Before Contributions and Transfers 8,780,120 9,741,903 18,522,023 5,315,386 Capital contributions 1,619,581
Capital contributions - connection fees 72,444 101,232 173,676 Transfers in (Note 4A) 300,000
Transfers (out) (Note 4A) (3,576,468) (1,851,315) (5,427,783) Change in net position 5,276,096 7,991,820 13,267,916 7,234,967 Net position-beginning 99,620,125 133,305,759 232,925,884 55,719,879 Net position-ending $104,896,221 $141,297,579 $246,193,800 $62,954,846 See accompanying notes to financial statements
42

CITY OF MILPITAS

PROPRIETARY FUNDS

STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2024
Business-type Activities-Enterprise Funds Governmental
Activities-
Sewer Internal Service
Water Utility Utility Totals Funds

CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $35,615,025 $24,966,868 $60,581,893 $6,943,538 Payments to suppliers (22,861,112) (10,285,541) (33,146,653) (1,382,383) Payments to employees for salaries and benefits (4,145,559) (2,642,434) (6,787,993) (1,297,733) Net cash provided by operating activities 8,608,354 12,038,893 20,647,247 4,263,422

CASH FLOWS FROM NONCAPITAL

FINANCING ACTIVITIES
Subventions and grants 61,437 61,437
Transfers in 300,000
Transfers (out) (3,576,468) (1,851,315) (5,427,783)
Cash Flows from Noncapital Financing Activities (3,515,031) (1,851,315) (5,366,346) 300,000

CASH FLOWS FROM CAPITAL FINANCING ACTIVITIES
Principal paid on long-term debt (325,000) (1,070,000) (1,395,000) Interest paid (821,521) (1,615,988) (2,437,509)
Receipts from grants and subventions 27,200
Acquisition of capital assets (2,873,354) (6,351,314) (9,224,668) (1,808,869) Capital contributions - connection fees 72,444 101,232 173,676 Cash Flows from Capital and Related
Financing Activities (3,947,431) (8,936,070) (12,883,501) (1,781,669)

CASH FLOWS FROM INVESTING ACTIVITIES
Interest received 2,557,738 2,350,710 4,908,448 1,663,718 Cash Flows from Investing Activities 2,557,738 2,350,710 4,908,448 1,663,718 Net increase (decrease) in cash and cash equivalents 3,703,630 3,602,218 7,305,848 4,445,471 Cash and investments at beginning of period 57,296,147 54,227,525 111,523,672 46,938,840 Cash and investments at end of period $60,999,777 $57,829,743 $118,829,520 $51,384,311 Reconciliation of operating income to net cash provided by operating activities:

Operating income (loss) $6,693,541 $8,384,856 $15,078,397 $3,593,384 Adjustments to reconcile operating income (loss) to net cash provide d
by operating activities:

Depreciation 1,579,352 5,276,562 6,855,914 1,289,220
Change in assets and liabilities:

Receivables, net (450,190) (143,006) (593,196)
Materials, supplies and deposits (32,047) (1,519) (33,566) (490,725) Accrued payroll (46,136) (18,150) (64,286)
Accounts and other payables 719,253 (1,717,265) (998,012) (128,457) Due to retirement system 143,231 256,407 399,638
Due to OPEB 1,350 1,008 2,358
Net cash provided by operating activities $8,608,354 $12,038,893 $20,647,247 $4,263,422 NONCASH TRANSACTIONS:

Contributions and transfers of capital assets $1,619,581 See accompanying notes to financial statements
43

FIDUCIARY FUNDS

FIDUCIARY FUNDS
These funds are used to account for asse ts held by the City as an agent for individuals, private organizations, and other governments. The financial activities of these funds are excluded from the Government-wide financial statements, but are presented in separate Fiduciary Fund financial statements.

SUCCESSOR AGENCY TO THE MILPITAS RE DEVELOPMENT AGENCY PRIVATE-PURPOSE

TRUST FUND
The Successor Agency to the Milpit as Redevelopment Agency Private-Pu rpose Trust Fund accounts for the accumulation of resources to be used to make payments that are on the Recognized Obligation Payment Schedule and to dispose of assets and property of the former Redevelopment Agency for the benefit of the taxing agencies.

CITY OF MILPITAS

FIDUCIARY FUNDS

STATEMENT OF FIDUCIARY NET POSITION
JUNE 30, 2024
Successor Agency
to the Milpitas
Redevelopment Agency
Private-purpose
Trust Fund
ASSETS
Cash and investments (Note 3) $17,311,541
Restricted cash and investments (Note 3) 708
Total Assets 17,312,249

LIABILITIES
Accounts payable 7,077
Interest payable 1,074,250
Long-term obligations (Note 17C):

Due in one year 8,595,000
Due in more than one year 66,181,670
Total Liabilities 75,857,997

NET POSITION (DEFICIT)
Held in trust for other governments ($58,545,748)
See accompanying notes to financial statements
47

CITY OF MILPITAS

FIDUCIARY FUND

STATEMENT OF CHANGES IN FIDUCIARY NET POSITION
FOR THE YEAR ENDED JUNE 30, 2024
Successor Agency
to the Milpitas
Redevelopment Agency
Private-purpose
Trust Fund
Additions:

Property taxes $16,632,252
Use of money and property 472,342
Total additions 17,104,594
Deductions:

General and administrative 2,018,767
Debt service:

Interest and fees 759,330
Total deductions 2,778,097
Net change in net position 14,326,497
Net position (deficit) - beginning (72,872,245)
Net position (deficit) - ending ($58,545,748)
See accompanying notes to financial statements
48

NOTES TO FINANCIAL STATEMENTS

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The City of Milpitas was incorporated as a general law city on January 26, 1954. The City operates under the Council-Manager form of government and provides the following services: public safety; fire and building inspection; engineering; public work s; water; sewer; sanitation; recr eation services; building and safety; planning and zoning; general administration services and economic development.

The financial statements and accounting policies of the City conform with generally accepted accounting principles applicable to governments. The Governmental Accounting Standards Board (GASB) is the accepted standard-setting body for governmental accounting and financial reporting principles. Significant accounting policies are summarized below:

A. Reporting Entity

The accompanying basic financial statements present the financial activity of the City, which is the primary government presented, along with the financial activities of its component units, which are entities for which the City is financially accountable. Although they are separate legal entities, blended component units are in substance part of the City’s operations and are reported as an integral part of the City’s financial statements.

Each discretely presented component unit, on the other hand, is reported in a separate column in the basic financial statements to emphasize it is legally separate from the government.

PRIMARY GOVERNMENT

The financial statements of the primary government of the City of Milpitas include the activities of the City as well as the Milpitas Public Financing Authority, the Milpitas Economic Development Corporation, the City of Milpitas Housing Authority and the Milpitas Municipal Financing Authority, all of which are controlled by and dependent on the City. While these are separate legal entities, their financial activities are integral to those of the City. Their financial activities have been aggregated and merged (termed “blended”) with those of the primary government of the City in the accompanying financial statements.

Blended Component Units

The Milpitas Public Financing Authority is a separate government entity whose purpose is to assist with the financing or refinancing of certain public capital improvements within the City. The Authority has the power to purchase bonds issued by any local agency at public or negotiated sale and may sell such bonds to public or private purchasers at public or nego tiated sale. The Authority is controlled by the City and has the same governing body as the City, which also performs all accounting and administrative functions for the Authority.

The financial activities of the Authority are included in the Sewer Utility Enterprise Fund.

51

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The Milpitas Economic Development Corporation, (Corporation) formed in February 2011, is a California nonprofit public benefit Corporation formed by the City and the former Milpitas Redevelopment Agency under the laws of the State of California. As di scussed in Note 17, the Redevelopment Agency was dissolved effective January 31, 2012. The Corporatio n was organized for the purpose of encouraging and facilitating the City’s economic development, affo rdable housing and other community programs. The Corporation is governed by a board of directors consis ting of the members of the City Council. Under an operating agreement with the Redevelopment Agency , the Corporation received funding from the Agency and will use the funds for redevelopment purpose s consistent with the California Community Redevelopment Law, Health and Safety Code S ection 33000 and to implement and carry out the Redevelopment Plans. The Corporation also entered into a Service Agreement with the City under which the City will perform the necessary services on an independent contractor basis to eliminate blight, provide affordable housing, improve the public realm, facilitate public and private developments, stimulate economic development, and create jobs. The Corporation is contro lled by the City and has the same governing body as the City, which also performs all accounting and administrative functions for the Corporation. The Corporation became inactive as of June 30, 2015.

The City of Milpitas Housing Authority, formed in February 2011, is a separate government entity whose purpose is to assist with housing City low and moderate income residents. The Housing Authority is controlled by the City and has the same governing body as the City, which also performs all accounting and administrative functions for the Housing Authority.

The Financial activities of the Housing Authority are included in the Housing Authority Special Revenue Fund.

The Milpitas Municipal Financing Authority, formed in March 2016, is a separate government entity whose purpose is to assist with the financing and refinancing of public programs, projects and capital improvements for the benefit of the City and the Housing Authority. The Municipal Financing Authority has the power to purchase bonds issued by any local agency at public or negotiated sale and may sell such bonds to public or private purchasers at public or negotiated sale. The Municipal Financing Authority is controlled by the City and the Housing Authority and has the same governing body as the City, which also performs all accounting and administrative functions for the Municipal Financing Authority. The Financial activities of the Municipal Financing Authority are included in the General Government Capital Projects Fund.

Separate financial statements are not issued for the Milpitas Public Financing Authority, Milpitas Economic Development Corporation, City of Milpitas Housing Authority and Milpitas Municipal Financing Authority.

Discretely Presented Component Unit

Terrace Gardens, Inc. is a non-profit public benefit corporation organized in September 1986 for the purpose of developing and managing the operations of a re sidential complex known as Terrace Gardens, which is located in the City of Milpitas and dedicated to the needs of elderl y persons. The former Milpitas Redevelopment Agency funded the construction of Te rrace Gardens. City Council can appoint a voting majority of the governing board and approves the annu al budget. The City Council exercises control over the Board of Terrace Gardens. Therefore, the financia l activities of Terrace Gardens, Inc. as of and for the year ended December 31, 2023, are discretely presented in the Terrace Gardens Inc. Component Unit column of the Statement of Net Position and the Statement of Activities.

Financial statements for Terrace Gardens, Inc. may be obtained from Terrace Gardens, Inc., 186 Beresford Court, Milpitas, CA 95035.

52

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

B. Basis of Presentation

The City’s Basic Financial Statements are prepared in conformity with accounti ng principles generally accepted in the United States of America. Th e Government Accounting Standards Board is the acknowledged standard setting body for establishing accounting and financial reporting standards followed by governmental entities in the United States of America.

These Standards require that the financial statements described below be presented.

Government-wide Statements: The Statement of Net Position and the Statement of Activities display information about the primary government, the City and its blended an d discretely presented component units. These statements include the financial activities of the overall City government, except for fiduciary activities. Eliminations have been made to minimize the double counting of internal activities, except for interfund services provided and used, which are not e liminated in the process of consolidation. These statements distinguish between the governmental and business-type activities of the City. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. Business-type activities are financed in whole or in part by fees charged to external parties.

The Statement of Activities presents a comparison between direct expenses and program revenues for each segment of the business-type activities of the City and for each function of the City’s governmental activities.

Direct expenses are those that are specifically associ ated with a program or function and, therefore, are clearly identifiable to a particular function. Program revenues include (a) charges paid by the recipients of goods or services offered by the pr ograms, (b) grants and contributions that are restricted to meeting the operational needs of a particular program and (c) fees, grants and contributions that are restricted to financing the acquisition or construc tion of capital assets. Revenues that are not classified as program revenues, including franchise fees that are based on gross receipts and all taxes, are presented as general revenues.

Fund Financial Statements: The fund financial statements provide information about the City’s funds, including fiduciary funds and blended component un its. Separate statements for each fund category- governmental, proprietary, and fiduciary-are presented. The emphasis of fund financial statements is on major individual governmental and enterprise funds, each of which is displayed in a separate column. All remaining governmental and enterprise funds are aggregated and reported as nonmajor funds.

Proprietary fund operating revenues and expenses, such as charges for services and the related costs, result from exchange transactions associated with the princi pal activity of the fund. Ex change transactions are those in which each party receives a nd gives up essentially equal values. Nonoperating revenues and expenses, such as subsidies, investment earnings and any related costs, result from nonexchange transactions or ancillary activities.

C. Major Funds

Major funds are defined as funds that have either a ssets and deferred outflows of resources, liabilities and deferred inflows of resources, revenues or expenditures/expenses equal to ten percent of their fund-type total and five percent of the grand total. The General Fund is always a major fund. The City may also select other funds it believes should be presented as major funds.

53

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The City reported the following major governmental funds in the accompanying financial statements:

General Fund - The General Fund is the general operating fund of the City. It is used to account for all financial resources except those required to be accounted for in another fund. The major revenue sources for this Fund are sales taxes, property taxes, hotel taxes, unrestricted revenues from the State, fines and forfeitures and interest income. Expenditures are incurred for public safety, public works, recreation services and the other governmental services described above.

Housing Authority Fund – Established to plan and address the housing needs of the City and to act as the Ho
using Successor of the former Redevelopment Agency. The main source of the revenue for this fund is the repayment of loans restricted for housing activities.

Street Improvement Fund – Established to account for the construction and maintenance of the street system in Milpitas. Financing is provid ed through State and Federal grants.

Transit Area Impact Fee Fund – Established to account for the capital projects in the transit area. A special transit area impact fee is imposed on developments to provide financing.

General Government Capital Projects Fund – Established to account for the construction and maintenance of general government projects. Financing is provided by the General Fund.

The City reported all its enterprise funds as major funds in the accompanying financial statements:

Water Utility Fund – Accounts for the provision of water services to residents and businesses of the City. All activities necessary to provide such services are accounted for in this fund, including, but not limited to, administration, operations, capital improvements, maintenance, billing and collection.

Sewer Utility Fund – Accounts for the provision of sewer services to residents and businesses of the City. All activities necessary to provide such services are accounted for in this fund, including, but not limited to, administration, operations, capital improvements, maintenance, financing, and billing and collection.

The City also reports the following fund types:

Internal Service Funds – The Equipment Management Internal Service Fund is used to finance and account for the replacement of equipment used by City departments and the maintenance of the online permit development system on a cost reimbursement basis. The Pension Section 115 Internal Service Fund is used to accumulate funds to pay down the City CalPERS Unfunded Accrued Liability.

Fiduciary Funds – Trust funds account for assets held by the City as an agent for various functions. The Successor Agency to the Milpitas Redevelopment Agency Private-Purpose Trust Fund accounts for the accumulation of resources to be used for payments at appropriate amounts and times in the future. This fund accounts for winding down the affairs of the former Milpitas Redevelopment Agency and makes payments on the Enforceable Obligation Schedule and disposes of assets and prop erty of the former Redevelopment Agency for the benefit of taxing agencies. The financ ial activities of this fund are excluded from the City- wide financial statements but is presented in separate Fiduciary Fund financial statements. 54

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

D. Basis of Accounting

The government-wide, proprietary, and fiduciary fund financial statements are reported using the economic resources measurement focus and the full accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place.

Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this me thod, revenues are recognized when measurable and available.

The City considers all revenues reported in the gove rnmental funds to be available if the revenues are collected within sixty days after y ear-end. Expenditures are recorded when the related fund liability is incurred, except for principal and inte rest on general long-term debt, including lease liabilities, claims and judgments, and accumulated unpaid vacation, sick pay and other employee benefit amounts, which are recognized as expenditures to the extent they have matured. General capital asset acquisitions, including entering into contracts giving the City the right to use leased assets, are reported as expenditures in governmental funds. Proceeds of general long-term debt, financing through leases and acquisitions under leases are reported as other financing sources.

Non-exchange transactions, in whic h the City gives or receives value wi thout directly receiving or giving equal value in exchange, include property taxes, gr ants, entitlements, and donations. On the accrual basis, revenue from taxes is recognized in the fiscal year for which the taxes are levied or assessed. Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied.

Other revenues susceptible to accrual are sales taxes, significant building permit fees, and interest revenue.

Forfeitures, licenses, other permits and miscellaneous revenue are not susceptible to accrual because they are not measurable until received in cas h. Grant funding received in adva nce of the related expenditure is accounted for as unearned revenue.

Grant revenues are recognized in the fiscal year in which all eligibility requirements are met. Under the terms of grant agreements, the City may fund certain programs with a combination of cost-reimbursement grants, categorical block grants, and general revenues. Thus, both restricted and unrestricted net position may be available to finance program expenditures. The City’s policy is to first apply restricted grant resources to such programs, followed by unrestricted resources if necessary.

E. Prepaids, Materials, Supplies and Deposits

Certain payments to vendors reflect costs applicable to future fiscal years and are recorded as prepaid items in both government-wide and fund financial statem ents. The cost of prepaid items is recorded as expenditures/expenses when consumed, rather than when purchased.

Materials and supplies are valued at cost on a first-in first-out basis. Supplies in the enterprise and internal funds consist principally of materials and supplies for utility and internal operations. Materials and supplies of the governmental funds consist of expendable supplie s and materials held for co nsumption. The cost is recorded as an expense or expenditure in the funds at the time individual inventory items are consumed.

Prepaids, materials, supplies and deposits in govern mental funds are equally o ffset by nonspendable fund balance which indicates that they do not constitute available spendable resources even though they are a component of net current assets.
55

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

F. Deferred Inflows and Deferred Outflows of Resources

In addition to assets, the statement of net position or balance sheet reports a separate section for deferred outflows of resources. This separate net statement elem ent, deferred outflows of resources, represents a consumption of net assets or fund balance that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The City has pension-related deferred outflows of resources arising from certain changes in the collective net pension liability.

In addition to liabilities, the statement of net position or balance sheet reports a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net assets or fund balance that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The City has deferred inflows of resources arising from certain changes in the collective net pensio n liability. These amounts are deferre d and recognized as an inflow of resources in the period that the amounts become available. In the government‐wide financial statements the City reports deferred amounts related to leases and deferred amounts related to pension and OPEB.

G. Property Tax

Santa Clara County assesses propertie s and bills, collects, and distributes property taxes to the City. The County remits the entire amount levied and handles all delinquencies, retaini ng interest and penalties.

Secured and unsecured property taxes are levied on January 1.

Secured property tax is due in two installments, on November 1 and March 1, and becomes a lien on those dates. It becomes delinquent on December 10 and April 10, respectively. Unsecured property tax is due on July 1, and becomes delinquent on August 31. Collection of delinquent accounts is the responsibility of the County, which retains all penalties.

The term “unsecured” refers to taxes on personal property other than real estate, land and buildings. These taxes are secured by liens on the property being taxed. Property tax revenues are recognized by the City in the fiscal year they are assessed, provided they become available as defined above.

H. Revenue Recognition for Water Utility and Sewer Utility

Revenues are recognized based on cycle billings rendered to customers. Revenues for services provided but not billed at the end of a fiscal period are not material and are not accrued.

56

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

I. Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The City categorizes its fair value measurements within the fair value hierarchy establ ished by generally accepted accounting principles. The fair value hierarchy categorizes the inputs to valuation techniques used to measure fair value into three levels based on the extent to which inputs used in measuring fair value are observable in the market.

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 inputs are inputs – other than quoted prices included within level 1 – that are observable for an asset or liability, either directly or indirectly.

Level 3 inputs are unobservable inputs for an asset or liability.

If the fair value of an asset or liab ility is measured using inputs from more than one level of the fair value hierarchy, the measurement is considered to be based on the lowest priority level input that is significant to the entire measurement.

J. Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make esti mates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liab ilities at the date of the fi nancial statements and the reported amounts of revenues and expenses during th e reporting period. Actual results could differ from those estimates.

K. Subscription-Based Information Techno logy Arrangements (SBITAs) Accounting

A Subscription-Based Information Technology Arrangem ent (SBITA) is 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.

At the commencement of a SBITA, the City initially measures the subscription liability at the present value of payments expected to be made during the contract term. Subsequently, the subscription liability is reduced by the principal portion of payments made. The subscription asset is initially measured as the initial amount of the subscription liability, adjusted for payments made at or before the SBITA commencement date, plus certain initial direct costs. Subsequently, th e subscription asset is amortized on a straight ‐line basis over shorter of the subscription term or the useful life of the underlying IT assets. The City recognizes SBITA 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 SBITA payments remaining at the start of the contract.

57

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Key estimates and judgments related to SBITAs include how the City determines (1) the discount rate it uses to discount the expected subscription payments to present value, (2) subscription term, and (3) subscription payments as follows:

• The City uses the interest rate charged by the IT ve ndor as the discount rate. When the interest rate charged by the IT vendor is not provided, the City uses its estimated incremental borrowing rate as the discount rate for subscription liabilities.

• The subscription term includes the noncancellable period of the subscription.

• Subscription payments included in the measurement of the subscription liability are composed of fixed payments and purchase option price that the City is reasonably certain to exercise.

The City monitors changes in circumstances that woul d require a remeasurement of its subscription and will remeasure the subscription asset and liability if certain changes occur that are expected to significantly affect the amount of the subscription liability.

Subscription assets are reported with other capital assets and subscription liabilities are reported with liabilities on the statement of net position.

NOTE 2 – BUDGETS AND BUDGETARY ACCOUNTING

A. Budgets and Budgetary Accounting

The City adopts an annual operating budget on or before June 30 of the previous fiscal year, except for the General Government Projects, the Street Improveme nt, the Park Improvement and Storm Drain Capital Projects Funds which are budgeted on a project basis. The operating budget takes the form of a one-year financial plan which is adopted in its entirety by the City Council by resolution. As Milpitas is a general law city, it is not subject to a budgetary process prescribed by statute or charter.

The operating budget is subject to supplemental appropri ations throughout its term to provide flexibility to meet changing needs and conditions. The City Manager’s budget control remains at the level of department and/or project within any one fund. The City Mana ger may approve supplemental appropriations in the General Fund providing the total increase does not exceed 1% of the original total General Fund expenditure budget subject to the following: All additional approp riations that require the use of reserves must be approved by City Council. Expenditures cannot exceed the appropriated budget at the department level within each fund without City Council approval.

The City Manager is authorized to amend appropriations within the various departments and projects within a fund, provided that the amount of the amended appr opriation is $100,000 or le ss. Interfund transfers or transfers of an appropriation amount within a fund in which any single instan ce exceeds $100,000 require prior approval of the City Council.

Budgeted amounts are as originally adopted, or as amended by the City Counc il. Individual amendments were not material in relation to the original appropriations which were amended.

58

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 2 – BUDGETS AND BUDGETARY ACCOUNTING (Continued)

B. Adjustments to GAAP Basis from Budgetary Basis

The City Manager budget control remains at the level of department and/or project within any one fund. The City Manager has discretion over an unanticipated reserve (approximately 1% of the General Fund operating budget), adopted by Council during the budget process. All additional appropriations that require the use of reserves must be approved by City Council. Expendi tures cannot exceed the appropriated budget at the department level within each fund without City Council approval.

The City Manager is authorized to amend appropriations within the various departments and projects within a fund, provided the amount of the amended appropriation is $100,000 or less and does not affect the overall appropriations of a fund. Interfund transfers or transfers of an appropriation amount within a fund in which any single instance exceeds $100,000 require prior approval of the City Council.

59

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024
NOTE 3 – CASH AND INVESTMENTS
The City pools cash from all sources and all funds except Cash and Investments held by Trustees, so that it can be invested at the maximum yield consistent with safety and liquidity, while individual funds can make expenditures at any time.

A. Policies
The City invests in individual investments, money market mutual funds, and in investment pools.

Individual investments are evidenced by specific identifiable securities instruments, or by an electronic entry registering the owner in the records of the institution issuing the security, called the book entry system. To increase security, the City employs the Trust and Custody Department of a bank as the custodian of certain City managed investments, regardless of their form.

California Law requires banks and savings and loan institutions to pledge government securities with a fair value of 110% of the City’s cash on deposit, or first trust deed mortgage notes with a fair value of 150% of the deposit, as collateral for thes e deposits. Under California Law this collateral is held in a separate investment pool by another institution in the City’s name and places the City ahea d of general creditors of the institution.

The City investments are carried at fair value, as required by generally accepted accounting principles. The City adjusts the carrying value of its investments to reflect their fair value at each fiscal year end, and it includes the effects of these adjustments in income for that fiscal year.

B.

Classification
Cash and investments are classified in the financial statements as shown below, based on whether their use is restricted under the terms of City debt instruments or other agreements.

Cash and investments available for operations $394,402,821 Restricted Cash and Investments 981,905
Total Primary Government cash and investments 395,384,726 Cash and investments available for operations 139,688
Restricted Cash 3,602,701
Total Component Unit cash and investments 3,742,389
Cash and investments in Fiduciary Funds (separate statement) 17,311,541 Restricted Cash and Investments in Fiduciary Funds (separate account) 708 Total Fiduciary cash and investments 17,312,249
Total cash and investments $416,439,364
Cash and Investments Available for Operations is used in preparing proprietary fund statements of cash flows because these assets are highly liquid and are expended to liquidate liabilities arising during the year. 60

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024
NOTE 3 – CASH AND INVESTMENTS (Continued)
C. Investments Authorized by the California Government Code and the City’s Investment Policy The Califor
nia Government Code and the City’s Investment Policy, adopted in August 2023 and updated on an annual basis, and the California allow the City to invest in the following, provided the credit ratings of the issuers are acceptable to the City; and approved percentages and maturities are not exceeded. The table below also identifies certain provisions of the California Government Code or the City’s Investment Policy where it is more restrictive:

Authorized Investment Type
Maximum
Maturity
Minimum
Credit
Quality*
Maximum
Percentage
of Portfolio
Maximum
Investment
In One Issuer
U. S. Treasury Bonds, Notes and Bills 5
Years 100% No Limit
Federal Agency Obligations 5 Years 100% 30%
Bankers Acceptances 180 Days 40% 5%
Commercial Paper – Pooled Funds
Commercial Paper – Non-Pooled Funds
270 Days
270 Days
A
A
40%
25%
(A)
(A)
Negotiable Certificates of Deposit 5 Years 30% 5%
Repurchase Agreements 1 Year 100% No Limit
Time Certificates of Deposit – Banks
or Savings and Loans (Non- negotiable) 5 Years 100% No Limit Medium-Term Corporate Notes 5 Years A 30% 5%
State of California Local Agency
Investment Fund (LAIF Pool)
Upon
Demand
100% No Limit
Money Market Funds of
Government Securities
Upon
Demand
Top
Rating
Category
20% 10%
Municipal Securities and Municipal
Treasury Notes or Bonds
Mortgage Pass-Through and Asset
Backed Securities
Collateralized Bank Deposits
5 Years
5 Years
Upon
Demand
A
AA
30%
20%
100%
5%
5%
No Limit
Supranational Securities 5 Years AA 30% 10%
(A) Eligible Commercial Paper may not represent more than 5% of outstanding paper of an issuing corporation.
*At time of purchase
61

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024
NOTE 3 – CASH AND INVESTMENTS (Continued)
D. Investments Authorized by Debt Agreements and Trust Agreements The City must maintain required amounts of cash and in vestments with trustees or fiscal agents under the terms of certain debt issues.

These funds are unexpended bond proceeds or are pledged reserves to be used if the City fails to meet its obligations under these debt issues. The California Government Code requires these funds to be invested in accordance with City resolutions, bond indentures or State statutes. The table below identifies the investment types that are authorized for investments held by fiscal agents. The table also identifies certain provisions of these debt agreements:

Authorized Investment Type
Maximum
Maturity
Minimum
Credit
Quality*
Maximum
Percentage
of Portfolio
Maximum
Investment
In One Issuer
U. S. Treasury Bonds, Notes and Bills 5 Years 100% No Limit Federal Agency Obligations 5 Years 100% 30%
Time Certificates of Deposit – Banks
or Savings and Loans
5 Years 100% No Limit
Bankers Acceptances 180 Days A 20% 5%
Commercial Paper – Pooled Funds
Commercial Paper – Non-Pooled
Funds
270 Days
270 Days
A
A
40%
25%
(A)
(A)
Negotiable Certificates of Deposit 5 Years 30% No Limit Repurchase Agreements 1 Year 100% No Limit
Medium-Term Corporate Notes 5 Years AA 30% 5%
State of California Local Agency
Investment Fund (LAIF Pool)
Upon
Demand
No Limit No Limit
Money Market and Mutual Funds Upon
Demand
Aaa/AAm 20% 10%
(A) The combined total of commercial paper may not represent more than 10% of the outstanding paper and notes of an issuing corporation.
*At time of purchase
During the fiscal year ended June 30, 2022, the City also implemented investment guidelines for its Section 115 Pension Trust, which authorize investments in a diversified portfolio, including equities and mutual funds, to achieve a 3% to 6% investment earnings goal during the next 5 to 10 years.

E. Investments Authorized for Terrace Gardens Inc.

Terrace Gardens, Inc. investments conform with the California Government Code. 62

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024
NOTE 3 – CASH AND INVESTMENTS (Continued)
F. Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment.

Normally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. The City generally manages its interest rate risk by holding investments to maturity.

Information about the sensitivity of the fair values of the City’s investments (including investments held by trustees) to market interest rate fluctuations is provided by the following table that shows the distribution of the City’s investments by maturity or earliest call date:
12 Months 13 to 36 36 to 60 Percentage
or less Months Months Total of Portfolio
City and Successor Agency:

Federal Agency Obligations $14,112,137 $16,773,949 $6,472,621 $37,358,707 8.97% Medium-Term Corporate Notes 9,225,075 21,955,200 27,572,841 58,753,116 14.11% U.S. Treasury Notes 35,273,287 40,852,598 63,304,170 139,430,055 33.48% California Local Agency Investment Fund 68,021,905 68,021,905 16.33% Supranationals 11,060,956 11,060,956 2.66%
Mutual Funds (U.S. Securities) 666,072 666,072 0.16%
Asset Backed Securities 2,086,963 9,579,384 14,473,360 26,139,707 6.28% Municipal Securities and Municipal Treasury Notes or Bonds 2,132,478 2,132,478 0.51% Terrace Gardens, Inc.:

Nonnegotiable Certificates of Deposit 3,288,218 3,288,218 0.79% Total Investments $132,673,657 $89, 161,131 $125,016,426 346,851,214 Demand Deposits - City of Milpitas 69,133,979 16.60%
Demand Deposits - Terrace Gardens 454,171 0.11%
Total Cash and Investments $416,439,364 100.00%
Investment Type
The City is a participant in the Local Agency Investment Fund (LAIF) that is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The City rep
orts its investment in LAIF at the fair value amount provided by LAIF, which is the same as the value of the pool share. The balance is available for withdrawal on demand and is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. Each regular LAIF account is permitted to have up to 15 transactions per month, with a minimum transaction amoun t of $5,000, no maximum transaction amount, and at least 24 hours advance no tice for withdrawals of $10 million or more. Bond proceeds accounts are subject to a one ‐time deposit with no cap and are set up with a monthly draw down schedule. Included in LAIF’s investment portfolio are collateralized mortgage obligations, mortgage-backed securities, other asset-backed securities, loans to certai n state funds, and floating rate securities issued by federal agencies, government-sponsored enterprise s, United States Treasury Notes and Bills, and corporations. At June 30, 2024 these investments matured in an average of 217 days.

Mutual funds are available for withdrawal on demand and at June 30, 2024 matured in an average of 44 days. 63

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024
NOTE 3 – CASH AND INVESTMENTS (Continued)
G. Credit Risk
Credit risk is the risk that an is suer of an investment will not fulfill its obligation to the holder of the investment.

This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the actual rating as of June 30, 2024 for each of the Primary Government’s investment types as provided by Standard and Poor’s investment rating system:

AAA/AAAm AA+/AA/AA - A+/A/A- BBB+/BBB Total
Federal Agency Obligations $37,358,707 $37,358,707
Medium-Term Corporate Notes 14,013,611 $43,776,426 $963,079 58,753,116 Asset Backed Securities $20,526,845 20,526,845
Supranational 11,060,956 11,060,956
Mutual Funds (U.S. Securities) 666,072 666,072
Municipal Securities and Municipal Treasury Notes or Bonds 2,132,478 2,132,478 Totals $32,253,873 $53,504,796 $4 3,776,426 $963,079 $130,498,174 Not rated:
$68,021,905 $68,021,905
Asset Backed Securities 5,612,861 5,612,861
Terrace Gardens, Inc.:

Nonnegotiable Certificates of Deposit 3,288,218
Exempt from credit rate disclosure:

U.S. Treasury Notes 139,430,055 139,430,055
Total Investments $213,064,821 $346,851,213
California Local Agency Investment Fund
Investment Type
Terrace Gardens, Inc. invests only in Nonnegotiable Certificates of Depo sit. At December 31, 2023, all of Terrace Gardens’ Nonnegotiable Certificates of Deposit totaling $3,288,218 were fully insured by Federal
Deposit Insurance.
64

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024
NOTE 3 – CASH AND INVESTMENTS (Continued)
H. Fair Value Hierarchy
The City categorizes its fair value measurements with in the fair value hierarchy established by generally accepted accounting principles.

The hierarchy is based on the valuation inputs used to measure fair value of the assets. Level 1 inputs are quoted prices in an active market for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs.

The following is a summary of the fair value hierarchy of the City’s investments as of June 30, 2024:

Level 2 Total
Investments by Fair Value Level:

Federal Agency Obligations $37,358,707 $37,358,707
Medium-Term Corporate Notes 58,753,116 58,753,116
U.S. Treasury Notes 139,430,055 139,430,055
Supranational 11,060,956 11,060,956
Asset Backed Securites 26,139,707 26,139,707
Municipal Securities and Municipal Treasury Notes or Bonds 2,132,478 2,132,478 Subtotal $272,742,541 274,875,019
Investments Measured at Amortized Cost:

Mutual Funds (U.S. Securities) 666,072
Investments Measured at Cost:

Terrace Gardens, Inc.

Nonnegotiable Certificates of Deposit 3,288,218
Investments Exempt from Fair Value Hierarchy:

California Local Agency Investment Fund 68,021,905
Total Investments $346,851,214
Federal Agency Obligations totaling $37.4 million, Medi um Term Corporate Notes of $58.8 million, U.S.

Treasury Notes totaling $139.4 million, Supranational totaling $11.1 million, and Asset Backed Securities of $26.1 million, classified in Leve l 2 of the fair value hierarchy, are valued using pricing techniques of matrix pricing or market corroborated pricing, with inputs such as yield curves or indices.

These prices are
obtained from various pricing sources by our custodian bank. 65

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 3 – CASH AND INVESTMENTS (Continued)

I. Significant Investments

Investments in the securities of any individual issuers, other than U. S. Treasury securities, mutual funds and the California Local Agency Investment Fund, that repr esent 5% or more of total entity-wide investments are as follows at June 30, 2024:

Issuer Investment Type Amount
Federal National Mortgage Association Federal Agency Obligations $15,858,854 Federal Home Loan Mortgage Corporation Federal Agency Obligations 7,069,824 Federal Home Loan Bank Federal Agency Obligations 11,550,848

NOTE 4 – INTERFUND TRANSACTIONS

A. Transfers Between Funds

With Council approval, resources may be transferred from one City fund to another. The purpose of the majority of transfers is to is to move resources from one fund to another. Less often, a transfer may be made to open or close a fund.

Transfers between funds during the fiscal year ended June 30, 2024 were as follows:

Fund Receiving Transfers Fund Making Transfers
Amount
Transferred
Governmental Funds:

General Fund General Government Capital Projects Fund $467,030 (A), (C) General Fund Community Facilities District Special Revenue Fund 3,172,000 (A) General Fund Solid Waste Reduction and Services Special Revenue Fund 136,505 (A) General Fund Water Utility Enterprise Fund 2,869,298 (A) General Fund Sewer Utility Enterprise Fund 1,503,623 (A) Street Improvement Capital Projects Fund Gas Tax Special Revenue Fund 2,972,428 (B) Transit Area Impact Fee Capital Projects Fund Street Improvement Capital Projects Fund 578,227 (C) General Government Capital Projects Fund General Fund 7,713,834 (B) General Government Capital Projects Fund Transit Area Impact Fee Fund 324,000 (B) General Government Capital Projects Fund Water Utility Enterprise Fund 707,170 (B) General Government Capital Projects Fund Sewer Utility Enterprise Fund 347,692 (B) General Government Capital Projects Fund Gas Tax Special Revenue Fund 1,715,000 (B) General Government Capital Projects Fund Lighting & Landscape Maintenance District Special Revenue Fund 89,100 (B) General Government Capital Projects Fund Community Planning Special Revenue Fund 74,073 (B) General Government Capital Projects Fund Public Art Capital Projects Fund 140,000 (B) General Government Capital Projects Fund Park Improvement Capital Projects Fund 900,000 (B) Gas Tax Special Revenue Fund Street Improvement Capital Projects Fund 66,885 (C) Gas Tax Special Revenue Fund General Government Capital Projects Fund 120,000 (C) Lighting & Landscape Maintenance District Special Revenue Fund General Fund 43,817 (A) Storm Drain Development Capital Projects Fund General Fund 500,000 (A) Governmental Funds Subtotal 24,440,682
Internal Service Funds:

Equipment Management Internal Service Fund General Fund 300,000 (A) Internal Service Funds Subtotal 300,000
Total Interfund Transfers $24,740,682
(A) To Transfer for Operating Cost
(B) To Fund Capital Project
(C) To Return Unexpe nded Project Funds

66

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 5 – LOANS RECEIVABLE

The City and former Redevelopment Agency entered into the loan programs below to improve the quality of housing and to increase the availability of affordable housing, and for other purposes. With the dissolution of the Redevelopment Agency as discussed in Note 17, the City agreed to beco me the successor to the Redevelopment Agency’s housing activities. As a result, the City of Milpitas Housing Authority assumed the loans receivable of the Redevelopment Agency’s Housing Reserve Special Revenue Fund as of February 1, 2012.

These loans were comprised of the following at June 30, 2024:

Housing and Community Development Loans:

Rehabilitation Loans $3,243,856
Housing Authority Loans:

Milpitas Housing Associates 3,235,141
Parc Metropolitan Housing Development 47,682
Parc North Associates LLC 494,685
Mid-Peninsula Milpitas Affordable Housing Associates 18,114,494 KB Home South Bay Inc. 1,222,900
Western Pacific Housing Inc. 1,780,005
Shapell Industries 750,000
MIL Aspen Associates, Ltd. 3,490,537
Sango Court, L.P. 6,970,137
Total Housing Authority Loans Receivable 36,105,581
Total Loans Receivable $39,349,437

A. Rehabilitation Loans

The City administers a housing rehabilitation program using Housin g and Community Development Act funds. Under the Program, individuals with incomes below a certain level are eligible to receive low- or no- interest loans, secured by deeds of trust, for construction work on their homes. On June 30, 2024, the City had outstanding rehabilitation loans of $3,243,856 in its Housing and Community Development Special Revenue Fund. During the year ended June 30, 2024, the City did not receive any principal payment from all participants and accrued interest of $8,973.

67

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 5 – LOANS RECEIVABLE (Continued)

B. Milpitas Housing Associates Loan

In fiscal 1997, the former Redevelopment Agency loaned the Milpitas Housing Associates, a partnership of Bridge Housing and a developer, $3,000,000 to assist in the financing of the construction of a 306-unit apartment complex. Fifty percent of the units were ma de available to very low and low income tenants.

The Loan bore interest at the rate of 5.45% per year, compounded annually and is repayable in 2040, subject to certain conditions. The loan is secured by a subordinated deed of trust in the third position on the property.

In January 2020, the City Council and the Housing Authority Commission approved a restructuring of the loan, which, 1) lowered the interest rate from 5.45% to a simple interest of 3.05% effective July 1, 2017, 2) forgave accrued interest of $1,541,074 through fiscal y ear 2017, and 3) approved the foregoing of residual receipts totaling $200,000 annually. As a result, fiscal year 2018 interest was recalculated to be $91,500 and accrued and the prior fiscal year 2018 accrued interest of $247,489 was written off. During fiscal year 2024, interest of $91,500 was accrued, and as of June 30, 2024, principal and accrued interest outstanding totaled $3,235,141.

C. Parc Metropolitan Ho using Development Loans

The Housing Authority provides loans to eligible low- income families for the purchase of townhome units at the Parc Metropolitan Housing Development. During the year ended June 30, 2024, the Housing Authority received principal payments of $2,308 and as of June 30, 2024, there were $47,682 in loans outstanding.

D. Parc North Associates LLC Loan

In September 2003, the former Redevelopment Agency entered into an Owner Participation Agreement with Parc North Associates LLC for the development of 285 town homes and condominiums. Eighteen of the units were made available to very low income households, six of the units were made available to low income households, and thirty-four units we re made available to moderate income households. In exchange, the Agency provided a grant of $1,823, 480 to the Developer for permits, f ees, and infrastructure, along with silent-second loans to eligible low-income families for the purchase of these town homes and condominium.

Interest of 5% begins on the 61
st month after the recordation of the deeds of trust and continues until the loans are paid in full. During fiscal year 2024, principal of $17,583 was paid and as of June 30, 2024, there were $494,685 of such loans outstanding.

E. Mid-Peninsula Milpitas Affordable Housing Associates

In December 2005, the former Redevelopment Agen cy entered into a Disposition and Development Agreement with Mid-Peninsula Milpitas Affordable Housing Associates for the development of a 103-unit senior housing project with long-term affordability to extremely low and very lo w income seniors. Under the terms of the Agreement, the Agency provided a grant of $1 million to the Developer and will provide a development loan up to $14.6 million to the Developer. No interest is accrued on the first $5 million of loan proceeds. The remaining $9.6 million bears simple interest of 3.00% a nnually. Repayment of interest and principal is payable from surplus operating cash subject to certain conditions as defined in the Agreement, and unpaid principal and accrued interest is due in December 2062. The loan is secured by a second deed of trust on the property. Construction began in fiscal year 2006 and was completed in December 2008. During fiscal year 2024, $138,917 and $ 288,789 was paid and accrued, resp ectively, and as of June 30, 2024, principal and accrued interest outstanding totaled $18,114,494.

68

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 5 – LOANS RECEIVABLE (Continued)

F. KB Home South Bay Inc. Loans

In January 2005, the former Redevelopment Agency entered into a Disposition and Development Agreement with KB Home South Bay Inc. for the development of a public park and approximately 700 housing units on two parcels (Parcels C and D). In addition, the former Redevelopment Agency would provide a total of $4,250,000 of silent-second mortgages to eighty-five moderate income households on Parcel C, approximately $5,000,000 of subsidies to twenty-five moderate income households on Parcel D. The silent-second mortgages are not due for 45 years or upon the sale, renting or leasing of the property. Interest begins on the 37 th month
after the recordation of the Deed of Trust and continues until the loans are paid in full.

Due to changes in the housing market and stricter lending requirements which had created unforeseen challenges in finding qualified buyers for the affordable units, the former Redevelopment Agency amended the Agreement in February 2009 to establish an in-lieu housing paym ent of $1,702,000 to remove the affordable restrictions on 46 of the 67 remaining unsold affordable units ($37,000 for each unit). This amount was paid in equal parts to the Agency and to the County. In a ddition, the commitment for silent- second mortgages was reduced $2,300,000 to $1,950, 000, and the total number of affordable units was reduced from 110 to 64.

As of June 30, 2024, there were $954,900 of loans to Parcel C households outstanding. As of June 30, 2024 subsidies totaling $1,222,900 had been provided.

G. Western Pacific Housing Inc., Loans

In August 2005, the former Redevelopment Agency ente red into an Owner Participation Agreement with Fairfield Development, LLC for the development of a 464- unit residential apartment project called Centria, of which 93 units will be deed-restricted for very low- to moderate- income households. In November 2005, the project was purchased by Western Pacific Housing Inc. and obligations of the Owner Participation Agreement were assigned to Western Pacific Housing Inc. The former Redevelopment Agency will provide a grant of $379,480 for permits, fees, and infrastructure. The former Redevelopment Agency also will provide a total of $770,000 for silent-second down payment assistance loans for the 22 very-low income units. The loans are not due for 25 years or upon the sale, renting or leasing of the property. Interest will begin on the 61 st month
after the recordation of the Deed of Trust and continue s until the loans are paid in full. Principal of $1,435 was repaid in fiscal year 2024 and as of June 30, 2024 there were $583,005 such loans outstanding.

In August 2008 the Owner Participation Agreement wa s amended to reduce the number of units to be constructed by Western Pacific Housing Inc. to 137 and provide for the conversion of 7 of the moderate-income units to low-income units. In addition, in August 2008, the 327 unconstructed units of the project were sold to Lyon Milpitas LLC and the Agency entered into a new Owner Participation Agreement with Lyon Milpitas LLC to complete the construction of the affordable housing units.

In September 2006, the former Redevelopment Agency entered into an Owner Participation Agreement with Western Pacific Housing, Inc. for the development of a 147-unit townhome project called Paragon that includes nine units deed-restricted to very low-income residents and twenty units deed-restricted to moderate income residents. The Agency will provide silent-second loans of $133,333 to each of the very low income households.

Interest will begin on the date of the promissory note 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, 2024, there were $1,197,000 of silent second loans outstanding.

69

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 5 – LOANS RECEIVABLE (Continued)

H. Shapell Industries

In June 2004, the former Redevelopm ent 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 Par ticipation 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 te rms 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 da te 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, 2024, 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-un it 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 lo an bears 5% interest compounded annually on outstanding principa l 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 genera ted by the Project, as defined in the Agreement, during the previous calendar year. During the year ended June 30, 2024, interest of $166,650 was accrued, and as of June 30, 2024, principal and accrued interest totaled $3,490,537.

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 Cour t 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) Decemb er 31, 2079, or (c) by acceleration of the loan following a default.

During the year ended June 30, 2024, interest of $47 0,137 was accrued, and as of June 30, 2024, principal and accrued interest totaled $6,970,137.

NOTE 6 – PROPERTY HELD FOR RESALE OR REDEVELOPMENT

A. General Fund

Pursuant to the terms of a settlem ent agreement between the City, Economic Deve lopment Corporation, Housing Authority, Santa Clara County Auditor-Controller, State Controller and other parties, a land parcel was transferred from the Successor Agency to the Hous ing 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, 2024, property totaling $4,200,000 is held by the General Fund. 70

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 6 – PROPERTY HELD FOR RESALE OR REDEVELOPMENT (Continued)

B. Housing Authority

The former Redevelopment Agency ha d purchased parcels of land as pa rt of its efforts to develop or redevelop blighted properties within the Redevelopment areas. Such land parcels are accounted for at the lower of cost or net realizable value or agreed-upon sales price if a dispositi on agreement has been made with a developer. The City agreed to become th e successor to the Redeve lopment Agency’s housing activities. As a result, the City of Milpitas Housing Au thority assumed the property held for resale of the Redevelopment Agency’s Housing Reserve Fund as of February 1, 2012.

In fiscal year 2010 the Agency purchased five housing units for $1,503,718 in the Parc Metro Subdivision.

During fiscal year 2011, the Agen cy purchased one additional Parc 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 Subdivisio n 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 2 017 for $296,000. In fiscal year 2023, two units were sold with a book value of $305,095 and $227,924. The units were purchase d to retain them as affordable housing units and are being held for future resale.

In February 2011, the Agency purch ased additional property along Sout h Main Street in the amount of $1,800,000 which is intended to be incorporated into the Midtown Specific Plan for housing development.

The purchase of this property had been funded by a loan from the Ho using Reserve Special Revenue Fund to the Redevelopment Capital Projects Fund, and with the dissolution of the Agency as of February 1, 2012, the State Department of Finance approved the property as a housing asset and the property was transferred to the Housing Authority as the successor housing agency.

As of June 30, 2024, 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 the end of 2022, the Housing Authority has completed a Phase II Environmental Site Assessment Study, Asbestos, and Led-based-Paint Analysis, a property appraisal, and retained broker representation to prepare Parcel 1 for sale. In June 2023, the City Co uncil directed the Office of Economic Development to pause the potential sale of Parcel 1 to explore the potential development of Parcels 1-3.

71

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 7 – DEVELOPMENT AND TAX SHARING AGREEMENTS

The City and former Redevelopment Agency have entered into the development agreements below 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 “C ontinuum 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 mark et rate units. In accordance with the terms of the Agreement, the Agency will acquire th e properties and resell them in two phases to the developer prior to construction, subject to certain conditions in the Agreement. In November 2009, the Agency purchased the properties along South Main Street in the amount of $12,443,137. The sales price for the Phase 1 Parcel will be $5,022,129, and the sales price for the Phase 2 Parcel will equal the greater of the fair market value of the Phase 2 Parcel as defined in the Agreement or $7,377,871. In addition, the former Agency’s Housing Reserve Special Revenue Fund was to provide a grant in the amount of $7.7 million to support the development and operation of the Phase 1 Parcel project.

In March 2011, the Economic Development Corporat ion assumed the obligations of the Disposition and Development Agreement and on October 18, 2011, a two-year extension to the Agreement was approved to include a more extensive high density residential development plan of sixty-three residential units available at affordable housing cost to income-qualified very low and low income households.

In November 2013, the Housing Authority amended th e Disposition and Development Agreement. The amendment states the Authority wi ll 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 Deve lopment 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 De velopment Agreement to extend the deadline from June 30, 2017, to December 31, 2017. On April 5, 2018, the agreement was agai n amended to extend the deadline to the date on which the 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 reimburseme nt 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, 2024, 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. Un der 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 receive d by the City from the corporation for calendar years 2006, 2007 and 2008. The agreement terminates in 2025. During the year ended June 30, 2024, the City issued $53,680 of sales tax to the corporation during fiscal year 2024. 72

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 7 – DEVELOPMENT AND TAX SHARING AGREEMENTS (Continued)

C. Piper Montague Infrastructure Payment Cost Sharing Agreement

In August 2009, the City entered in to a four-party agreement with thre e 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 certai n storm water management facilities. Under the terms of the agr eement, 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 cr edits 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 completed the shared infrastructure of $8,690,752 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, 2024, 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 de veloper will be entitled to reimbursements totaling $7,443,619 for construction costs for pa rking and a variety of site impr ovements, including a public park.

During the year ended June 30, 2024, the City did not issue park improvement credits; total fee credits of $7,220,719 have been issued to date.

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 fo r construction and design costs for Montague Expressway and East Penitencia Creek. During the year ended June 30, 2024, no reimbursements were issued, and total reimbursements of $4
,030,688 have been issued to date.
73

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024
NOTE 8 – CAPITAL ASSETS
All capital assets are valued at historical cost or estim ated 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 (infrastru cture) capital assets, whic h include landscape, storm, street, and traffic systems.

All capital assets with limited useful lives and the right to use leased a ssets are required to be depreciated over their estimated useful lives. The purpose of de preciation is to spread the cost of capital assets equitably among all users over the life of these a ssets. 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 th e 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 cap ital assets: Buildings, 50 years; Building improvements, 10-50 years; and Equipment, 5-7 years.

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.
74

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 8 – CAPITAL ASSETS (Continued)

A. Governmental Capital Asset Additions, Retirements and Balances

Balance at Balance at
June 30, 2023 Additions Retirements Transfers June 30, 2024 Capital assets not being depreciated:

Land $97,439,105 $97,439,105
Construction in progress 75,393,146 $3,966,164 ($2,002,075) 77,357,235 Total capital assets not being depreciated 172,832,251 3,966, 164 (2,002,075) 174,796,340 Capital assets being depreciated:

Buildings and improvements 173,371,133 173,371,133
Other improvements 39,689,988 39,689,988
Machinery and equipment 49,147,383 3,428,451 ($365,582) 1,014,420 53,224,672 Landscape system 30,157,599 124,764 987,655 31,270,018
Storm system 75,570,189 75,570,189
Street system 328,300,356 7,107,531 335,407,887
Traffic system 21,193,844 1,010,751 22,204,595
Intangible Right-to-use subscription asset 842,113 (18,611) 823,502 Total capital assets being depreciated 718,272,605 11,671,497 (36 5,582) 2,002,075 731,561,984 Less accumulated depreciation for:

Buildings and improvements (104,275,870) (4,555,150) (108,831,020) Other improvements (25,476,012) (1,100,931) (26,576,943) Machinery and equipment (39,040,071) (1,624,976) 365,582 (40,299,465) Landscape system (17,685,384) (615,880) (18,301,264)
Storm system (73,378,577) (207,401) (73,585,978)
Street system (227,694,441) (5,801,362) (233,495,803)
Traffic system (17,099,093) (456,915) (17,556,008)
Intangible Right-to-use subscription asset (148,608) (142,040) (290,648) Total accumulated depreciation (504,798,056) (14,504,655) 365,582 (518,937,129) Net capital assets being depreciated 213,474,549 (2,833,158) 2,002,075 212,624,855 Governmental activities capital assets, net $386,306,800 $1,133,006 $387,421,195

In fiscal year 2023, the City implemented the prov isions 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, 2024, the City has reco rded a net intangible right-to us e subscription asset amounting to $532,854, with accumulated amortization of $290,648. The subscription a sset 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, 2024

NOTE 8 – CAPITAL ASSETS (Continued)

Governmental activities construction in progress comprised the following at June 30, 2024:

Total Actual Unexpended
Project Budget Costs Budget
Alviso Adobe Renovation $8,359,272 $8,225,610 $133,662
McCandless Park 12,154,820 11,093,310 1,061,510
Sports Fields Turf Rehabilitation Program 776,000 162,120 613,880 Sandalwood Park Renovation 475,000 344,347 130,653
Minor Sports Courts Rehabilitation 1,070,000 641,389 428,611 Pickleball Improvement 100,000 100,000
McCarthy Blvd Landscape 1,098,756 714,265 384,491
Fire Station Improvements 1,850,000 1,137,128 712,872
City Building Improvement 5,290,000 3,846,827 1,443,173 Sinclair LMD Improvements 253,225 154,234 98,991
City Building, Exterior Painting 600,000 239,992 360,008 PD Communications 3,155,000 2,921,850 233,150
City Building Roofing 1,250,000 756,041 493,959
Police Records Management 1,099,721 988,777 110,944
Citywide Park Playground 2,653,497 1,913,595 739,902
Annual Sidewalk, Curb & Gutter Repair 3,286,840 2,522,765 764,075 Technology Projects 1,915,000 1,579,782 335,218
Midtown Street Light 300,000 264,037 35,963
2017-19 Finance System Upgrade 1,250,000 1,064,987 185,013 Annual Tree Replacement Program 544,000 341,466 202,534 Fire Station #2 Replacement 13,422,795 13,298,147 124,648 Fire Stations Security 157,000 156,194 806
Community and Senior Center Energy Resilience Project 5,107,597 4,435,225 672,372 Fire Station No. 1 Modular Building 1,000,000 21,717 978,283 Human Resources Information System 1,100,000 2,234 1,097,766 Cardoza Park Softball Fields Improvement 800,000 173,072 626,928 Financial System Enterprise Resource Planning 1,850,000 145,787 1,704,213 Median Conversion Project 300,000 21,239 278,761
Council Chamber AV System Replacement 800,000 622,090 177,910 Sport Center Football Bleacher Replacement 200,000 116,997 83,003 Gateway Signage 250,000 35,583 214,417
Dempsey Road Storm Drain 1,660,000 258,540 1,401,460
Bart Project-Storm Improvement 33,000 31,497 1,503
Flap Gate Replacement 500,000 28,899 471,101
Storm Drain System Rehab 17-19 2,616,410 1,153,476 1,462,934 Storm Supervisory Control & Data Acquisition 2,416,590 2,280,000 136,590 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 1,825,000 492,874 1,332,126
Montague Pedestrian Overcrossing at Piper Drive 8,750,000 6,189,979 2,560,021 SCVWD Second Water Supply Turnout #2 100,000 643 99,357 Metro Area Police Substation 310,000 47,398 262,602
(Rmb) TASP Linear Trails 3,270,000 499,261 2,770,739
(Rmb) Trade Zone/Montague Park - North 3,100,000 1,122,497 1,977,503 S. Milpitas Blvd. Veh. Bridge at Penitencia 6,400,000 1,246,417 5,153,583 Montague Ped. Overcrossing at Penitencia 3,500,000 2,080,251 1,419,749 (Rmb) TASP Recycled Water Distribution 605,000 605,000
SCVWD Zone 1 Pressure Red. Valve 100,000 100,000
Trade Zone/Montague Park - Central 600,000 36,232 563,768 Total construction in progress $114,450,523 $77,357,235 $37,093,288

76

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024
NOTE 8 – CAPITAL ASSETS (Continued)
B. Business-Type Capital Asset Additions, Retirements and Balances Balance at Balance at
June 30, 2023 Additions Transfer June 30, 2024
Capital assets not being depreciated:

Land $1,133,079 $1,133,079
Construction in progress 33,710,800 $3,434,602 ($545,012) 36,600,390 Total capital assets not being depreciated 34,843,879 3,434 ,602 (545,012) 37,733,469 Capital assets being depreciated:

Distribution facilities 81,197,041 81,197,041
Water Service lines 18,382,724 44,777 18,427,501
Sewer lines 87,983,269 500,235 88,483,504
Capacity rights 120,855,760 5,790,066 126,645,826
Total capital assets being depreciated 308,418,794 5,790,066 545,012 314,753,872 Less accumulated depreciation for:

Distribution facilities (57,439,233) (1,192,283) (58,631,516) Water Service lines (8,332,032) (387,069) (8,719,101)
Sewer lines (55,194,447) (1,435,116) (56,629,563)
Capacity rights (37,725,569) (3,841,446) (41,567,015)
Total accumulated depreciation (158,691,281) (6,855,914) (165,547,195) Net capital assets being depreciated 149,727,513 (1,065,848) 149,206,677 Business-type activities capital assets, net $184,571,392 $2,368,754 $186,940,146 Business-type activities construction in progress comprised the following at June 30, 2024:

Total Actual Unexpended
Project Budget Costs Budget
BART Project-Sewer Improvement $243,323 $242,704 $619
Sewer Pump Station Rehabilitation Program 1,127,000 401,966 725,034 Minor Sewer Projects 263,000 144,501 118,499
Sanitary Supervisory Control & Data 316,600 285,000 31,600 Main Lift Station Odor Emissions Control 2,450,000 1,731,407 718,593 533,000 8,404 524,596
2,000,000 2,000,000
Well Upgrade Program 14,490,000 6,783,851 7,706,149
Water System Seismic Improvement 4,382,781 977,069 3,405,712 Hydrant Replacement 656,360 649,275 7,085
Dempsey Road Water Line 7,857,772 1,701,410 6,156,362
Automated Water Meter 14,380,661 14,123,041 257,620
Water Conservation 2,503,920 2,376,188 127,732
Supervisory Control & Data 6,516,600 5,991,917 524,683
Minor Water Projects 3,446,000 865,845 2,580,155
Water Leak Detection 631,474 317,812 313,662
$61,798,491 $36,600,390 $25,198,101
Sanitary Sewer CCTV I
Force Main A Project
77

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 8 – CAPITAL ASSETS (Continued)

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, 2023:

Balance
December 31, 2022 Additions Retirement
Balance
December 31, 2023
Capital assets not being depreciated:

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

Buildings 12,107,935 12,107,935
Furniture 522,601 $270,479 793,080
Office equipment 72,216 72,216
Improvements 2,803,128 2,803,128
Total capital assets being depreciated 15,505,880 270,479 15,776,359 Less accumulated depreciation (10,388,294) (355,968) (10,744,262) Net capital assets being depreciated 5,117,586 (85,489) 5,032,097 Total capital assets, net $6,724,778 ($85,489) ($41,915) $6,597,374

D. Depreciation Allocation

Depreciation expense is charged to functions and prog rams based on their usage of the related assets. The amounts allocated to each function or program are as follows:

General Government $1,564,177
Public Works 7,579,904
Engineering 2,254,001
Recreation and Community Services 1,453,626
Police 56,428
Fire 307,299
Internal Service Fund 1,289,220
Total Governmental Activities $14,504,655
Business-Type Activities:

Water Utility $1,579,352
Sewer Utility 5,276,562
Total Business-Type Activities $6,855,914
Discretely Presented Component Unit:

Terrace Gardens, Inc. $355,968

78

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 8 – CAPITAL ASSETS (Continued)

E. Sewer Treatment Capacity Rights

The City has a contract with the San Jose/Santa Clara Wastewater Treatme nt Plant, known as the Regional Wastewater Facility (RWF), which gives Milpitas and other tributary agencies rights to a percentage of the capacity of their sewage treatment facilities. The contract terminates in 2031 and requires the City to pay its share of operations, capital expenses and debt service on the treatment plant. The City also pays capital costs based on allocated flow capacity rights of 14.25 million gallons per day or about 8.53% of the total plant capacity, 167 million gallons per day. The City has capitalized its share in the amount of $126,645,826. The operation and maintenance costs are calculated based upon actual sewage flow and strengths. In fiscal year 2024, the City’s operation and maintenance share was approximately 5.687% of the total RWF operations.

NOTE 9 – LONG-TERM DEBT

The City generally incurs long-term debt to finance projects or purchase assets which will have useful lives equal to or greater than the related debt.

A. Current Year Transactions and Balances

The City’s debt issues and transactions are su mmarized below and discussed in detail thereafter.

Original Balance Balance Current
Issue Amount June 30, 2023 Retirements June 30, 2024 Portio n Governmental Activities Debt - Direct Borrowing:
2020 General Fund Lease Revenue Bonds

4.0%, due June 1, 2041 $18,445,000 $ 17,700,000 $520,000 $17,180,000 $570,000 Plus: Unamortized bond premium 3,126,165 173,676 2,952,489 $18,445,000 $20,826,165 $693,676 $20,132,489 $570,000
Business-type Activities Debt
Wastewater Revenue Refunding Bonds, 2017 Series

2.0% - 5.0%, due November 1, 2026 $4,725,000 $2,300,000 $535,000 $1,765,000 $560,000 Plus: Unamortized bond premium 283,423 70,856 212,567
Wastewater Revenue Bonds, 2019 Series

4.0% - 5.0%, due November 1, 2049 29,840,000 28,405,000 535,000 27,870,000 560,000 Plus: Unamortized bond premium 4,762,735 183,182 4,579,553 Water Revenue Bonds, 2019 Series

4.0% - 5.0%, due June 1, 2049 17,210,000 16,150,000 325,000 15,825,000 340,000 Plus: Unamortized bond premium 2,653,848 102,071 2,551,777 Total Business-Type Activities $51,775,000 $54,555,006 $1,751,109 $52,803,897 $1,460,000

B. 2020 General Fund Lease Revenue Bonds

On November 10, 2020, the Milpitas Municipal Financing Authority issued the 2020 Lease Revenue Bonds (Capital Projects) in the original principal amount of $18,445,000 to provide funds to finance a portion of the Fire Station No. 2 Replacement project and variety of energy impr ovement projects. The Bonds bear interest rates of 4.0 %. Interest is payable every June 1 and December 1 beginning on June 1, 2021. Principal on the bonds will be payable on June 1 beginning on June 1, 2022 through 2037, followed by a term bond which will be due June 1, 2041. The Bonds were structur ed with a par optional redemption date of June 1, 2030. Bonds maturing on June 1, 2041 are subject to mandatory redemption. 79

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 9 – LONG-TERM DEBT (Continued)

C. Wastewater Revenue Refunding Bonds, Series 2017

On December 4, 2017, the City issued Wastewater Re venue Refunding Bonds, Series 2017, in the original principal amount of $4,725,000 to provide funds to prepay an Installment Sale Agreement between the City and the Milpitas Public Financing Authority, thereby defeasing and prepaying all the Certificates of Participation (COP) 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 th e 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 Sewer System.

D. Wastewater Revenue Bonds, Series 2019

On October 22, 2019, the Milpitas Municipal Financing Authority issued Wastewater Revenue Bonds, Series 2019, in the original principal amount of $29,840,000 to provide funds for certain improvements to the City’s wastewater system. The Bonds bear interest rates of 4.0% to 5.0%. Interest is payable every May 1 and November 1 beginning on May 1, 20 20. Principal on the bonds will be payable on November 1 beginning on November 1, 2020 through 2039, followed by a term bond which will be due on November 1, 2049. The Bonds were structured with a par optional redemption date of May 1, 2029. Bonds maturing on May 1, 2049 are subject to mandatory redemption. The Bonds 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 reme dies available to it under applicable law, including the right to enforce from the City a ll payments due on the Bonds, and th e 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 2024 , net revenues amounted to $16,132,523 which represented coverage of 6.62 over the $2,431,950 debt service of both bond issues.

E. Water Revenue Bonds, Series 2019

On October 24, 2019, the Milpitas Municipal Financi ng Authority issued Water Revenue Bonds, Series 2019, in the original principal amount of $17,210,000 to provide funds to the City for certain improvements to the City’s water system. The Bonds bear interest of 4.0% to 5.0% 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.

80

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024
NOTE 9 – LONG-TERM DEBT (Continued)
The Bonds contain a provision that in an event of default, the Trustee may declare the principal of the bonds, together with all accrued interest at the date of default, immediately due and payable, or exercise any and all rights and remedies available to it und er applicable law, including the right to enforce from the City all payments due on the Bonds, and the City will pay all reasonable fees and expenses incurred by the Trustee and those of its attorneys.

The Bonds are collateralized by net revenues from the City’s Water System. Fo r fiscal year 2024, net revenues amounted to $11,016,835 which represented coverage of 10.55 over the $1,044,450 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
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 870,000 576,800 1,095,000 1,742,900
2030-2034 4,880,000 2,334,800 6,345,000 7,823,500
2035-2039 5,950,000 1,276,800 8,090,000 6,044,250
2040-2044 2,720,000 164,200 10,170,000 3,957,500
2045-2049 12,390,000 1,717,500
2050 1,735,000 34,700
17,180,000 $6,953,600 45,460,000 $28,930,450
Plus: Unamoritized bond premium 2,952,489 7,343,897
$20,132,489 $52,803,897
Revenue Bonds Revenue Bonds
NOTE 10 – LEASES
A. Policies
A lease is defined as a contract that conveys control of the right to us e another entity’s nonfinancial asset (the underlying asset) as specified in the contract fo r a period of time in an exchange or exchange-like transaction.

Examples of nonfinancial assets includ e buildings, land, vehicles, and equipment. The City recognizes lease receivable or liabilities with an initia l, 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.
81

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 10 – LEASES (Continued)

Lessor

The City is a lessor for noncancell able leases of buildings and fac ilities. 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 deferr ed 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 determin es (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 wo uld 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 recognize 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, the 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 pa yments made at or before the l ease commencement date, plus certain initial direct costs. Subsequently, the lease asset is amortized on a straight‐line basis over its useful life.

Key estimates and judgments related to leases include how the City determines (1) the discount rate used to discount the expected lease payments to present value, (2) lease term, and (3) lease payments as follows:

• The City uses the interest rate charged by the less or as the discount rate. When the interest rate charged by the lessor is not provided, City generally uses bond interest rate as the discount rate for leases.

• The lease term includes the noncancellable period of the lease.

• Lease payments included in the measurement of the lease liability are composed of fixed payments and purchase option price that City is reasonably certain to exercise.

82

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 10 – LEASES (Continued)

The City monitors changes in circumstances that wo uld require a remeasurement of its lease and will remeasure the lease asset and liability if certain changes occur that are expected to significantly affect the amount of the lease liability.

Lease assets are reported with other capital assets an d lease liabilities are reported with long-term debt on the Statement of Net Position.

As of June 30, 2024, 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, 2024 were:

Property Location
Original
Lease Date
Original
Term
(Years)
Extension
(Years)
Expiration
Date
Including
Options
Monthly
Revenue
as of
June 30,
2024
Lease
Receivable
Balance at
June 30, 2024
Deferred
Inflow of
Resources at
June 30, 2024
Fire Station No. 1 Grounds,
777 So. Main Street,
Milpitas, CA 95035
6/6/2012 15 25 6/6/2052 $2,116 $845,004 $779,700
HWY680 on CALAVERAS 2/1/2019 5 20 2/1/2044 2,809 721,360 667,525 Freeway Sign on 950
Thompson 8/17/2010 10 30 8/17/2050 9,690 2,331,109 2,270,238 Advertising display on the
property 7/30/2013 30 30 7/30/2073 14,722 9,414,036 8,765,131 Total $29,337 $13,311,509 $12,482,594

The future principal and interest lease receivables as of June 30, were as follows:

For the Year
Ended June 30 Principal Interest Total
2025 $72,315 $282,847 $355,162
2026 80,333 281,229 361,562 2027 88,699 279,437 368,136 2028 97,425 277,463 374,888 2029 106,525 275,300 381,825 2030 - 2034 683,136 1,336,838 2,019,974 2035 - 2039 974,575 1,249,344 2,223,919 2040 - 2044 1,304,414 1,127,657 2,432,071 2045 - 2049 1,409,888 984,422 2,394,310 2050 – 2054 1,226,517 834,002 2,060,519 2055 – 2059 1,260,774 711,382 1,972,156 2060 – 2064 1,675,226 556,088 2,231,314 2065 – 2069 2,172,070 352,456 2,524,526 2070 - 2074 2,159,612 96,850 2,256,462 Totals $13,311,509 $8,645,315 $21,956,824

83

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024
NOTE 10 – LEASES (Continued)
Fire Station No. 1 grounds
As shown in the summary table, the City leases a portion of the Tower Leases Area at 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, 2024, the leases had 28 years remaining. The City recognized $6,599 in lease revenue and $18,076 in interest revenue during the curren
t 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 at 1325 E. Calaveras Blvd. to American Tower. The original lease terms were five years with a 20-year extension. As of June 30, 2024, the leases had 20 years remaining. The City recognized $17,889 in lease revenue and $15,574 in interest revenue during the current fiscal year related to these leases. Also, the Ci ty 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, 2024, the leases had 26 years remaining. The City recognized $65,870 in lease revenue and $50,415 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, 2024, the leases had 49 years remaining.

The City recognized $174,509 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.

NOTE 11 – SUBSCRIPTION-BASED INFORMATION TECHNOLOGY ARRANGEMENTS A summary of subscription-based info rmation technology arrangements (S BITA) transactions for the fiscal year ended June 30, 2024, are as follows:

Balance Balance Current
June 30, 2023 Retirements June 30, 2024 Portion
Subscription Liability
Microsoft 365 $564,178 ($151,052) $413,126 $134,857
Total $564,178 ($151,052) $413,126 $134,857
In 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 re corded 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. 84

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 11 – SUBSCRIPTION-BASED INFORMATION TECHNOLOGY ARRANGEMENTS (Continued)

As of June 30, 2024, the value of the subscription liability was $413,126. 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 reco rded 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, 2024 follows:

For the Year
Ended June 30 Principa l Interest Total
2025 $134,857 $8,675 $143,532
2026 137,689 5,844 143,533
2027 140,580 2,952 143,532
Totals $413,126 $17,471 $430,597

NOTE 12 – NET POSITION AND FUND BALANCES

Governmental fund balances represent the net current as sets 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 principa lly include developer fees received for use on capital projects and redevelopment funds restricted for community development activities.

Unrestricted describes the portion of Net Position which is not restricted as to use.

B. Fund Balances

Governmental fund balances represent the net current assets of each fund. Net current assets generally represent a fund’s cash, receivables and deferred outflows of res ources, less its liabilities and deferred inflows of resources.

85

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 12 – NET POSITION AND FUND BALANCES (Continued)

The City fund balances are classified based on spen ding constraints imposed on the use of resources. For programs with multiple funding sources, the City pr ioritizes and expends funds in the following order:

Restricted, Committed, Assigned, and Unassigned. Ea ch 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 e xpected to be converted to cash, such as prepaids, notes receivable, and property held for resale are included. However, if pr oceeds realized from the sale or collection of nonspendable assets are restricted, committed or assi gned, then nonspendable amounts are required to be presented as a component of the applicable category.

Restricted fund balances have external restrictions imposed by creditors, grantors, contributors, laws, regulations, or enabling legislation wh ich 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. Encumb rances and nonspendable amounts subject to council commitments are included along with spendable resources.

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.

86

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024
NOTE 12 – NET POSITION AND FUND BALANCES (Continued)
Detailed classifications of the City’s Fund Balances, as of June 30, 2024, 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 $770,086 $31,887 $801,973
Property held for resale 4,200,000 4,200,000
Subtotal Nonspendable 4,970,086 31,887 5,001,973
Restricted for:

Programs and Maintenance $4,756,780 8,429,740 13,186,520 Housing and community development $40,818,714 3,834,265 44,652,979 Law enforcement services 83,888 83,888
Solid waste reduction and services 2,439,934 2,439,934
Assessment district services 3,240,631 3,240,631
Hetch-Hetchy ground lease 1,494,287 1,494,287
Community planning 235,023 235,023
Community benefits 431,010 431,010
Affordable housing 4,633,286 4,633,286
Affordable housing unrestricted 3,222,709 3,222,709
Park improvement projects 4,381,486 4,381,486
Storm drain projects 6,848,307 6,848,307
General government projects $4 4
Transit area capital projects $65,778,662 65,778,662
Subtotal Restricted 40,818,714 4,756,780 65,778,662 4 39,274,566 150,628,726 Committed to:

PERS stabilization 7,995,185 7,995,185
Artificial turf replacement 1,900,000 1,900,000
Technology replacement 400,000 400,000
Facilities replacement 6,200,000 6,200,000
Subtotal Committed 16,495,185 16,495,185
Assigned to:

Uninsured claims payable 2,914,954 2,914,954
Public art projects 987,747 987,747
Contracts 2,340,251 2,340,251
General government capital projects 27,534,455 27,534,455 Other assigned 2,223,008 2,223,008
Subtotal Assigned 7,478,213 27,534,455 987,747 36,000,415 Unassigned:

General Fund
Contingency reserve 20,809,168 20,809,168
Budget stabilization 20,809,168 20,809,168
Future deficit 1,452,576 1,452,576
ERAF reserve 3,571,742 3,571,742
Strategic Property Acquisition Revenue 710,248 710,248
ARPA/GF Prog 7,185,440 7,185,440
Unassigned 1,768,234 1,768,234
Subtotal Unassigned 56,306,576 56,306,576
Total fund balances $85,250,060 $40,818,714 $4,756,780 $65,778,662 $27,534,459 $40,294,200 $264,432,875 87

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

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 Reserv e and General Fund Budget Stabilization Reserve requirements are met and pension budgetary surplu s are allocated to the PERS Rate Stabilization Reserve:
• Part I
◦ Contingency Reserve (Policy Statement #41)
◦ General Fund Budget Stabilization Reserve (Policy Statement #42) • Part II (any remaining balance)
◦ 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 C ity 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, 2024, the reserve is set at $20,809,168 and classified in the unassigned fund balance.

3) The City will maintain a General Fund Budget Stabilization Reserve wi th a target of 16.67%, or two months, of annual operating expenditures. The purpose of this reserve is to provide budget stability when there are fluctuations that result in lower than projected revenues and or higher than projected expenditures that cannot be rebalanced within exis ting budget resources in an y given fiscal year. This reserve is intended to provide a buffer, or bridge funding, to protect against reducing service levels when these fluctuations occur. This reserve will be fu nded 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, 2024, the reserve is set at $20,809,168 and classified in the unassigned fund balance.

88

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

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 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 Retiremen t 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 actuary that contributions are advised for that respective year, then any saving s 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 Ra te 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 C ity 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 artificia l 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 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 Facilit ies Replacement with a targ et of $10 million. This reserve shall be used to accrue funding for majo r rehabilitation or repla cement of City facilities (buildings/structures). Eligible uses of this reserve may include both the direct funding of public facility improvements and the servicing of related debt.

8) The City will maintain a Storm Drain replacemen t reserve to replace and repair storm drain pump stations. The City will endeavor to transfer $500,000 annually from the General Fund to the Storm Drain Fund for this purpose.

9) The City will maintain a General Liability and Wo rkers’ Compensation Claims Reserve of $2 million in the General Fund, which will be reviewed for adjustments annually.

10) Other reserves designated in the General Fund for investment portfolio market gain and uninsured claims payable will be calculated adjusted annually at appropriate levels.

89

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 12 – NET POSITION AND FUND BALANCES (Continued)

11) The City will maintain capital rese rves in the Water and Sewer utilit y enterprise funds to provide for future capital projects and unanticip ated emergencies, such as water main break repairs, pump station repairs. The City will attempt to maintain a capital reserve of approximately 30% of the annual operating and maintenance expenses for the Water utility fund and 25% of the annual operating and maintenance expenses for the Sewer utility fund. The City Counc il will set the reserve amounts annually after the results of the prior fiscal year’s Annual Compre hensive Financial Report (ACFR) are known. For the year ended June 30, 2024, the capital reserve for the Water Operating Fund is set at $8,638,318 and for the Sewer Operating Fund at $3,805,577.

12) The City will maintain a Rate Stabilization Reserv e (RSR) in the Water and Sewer utility enterprise funds with a goal of at least 16.67% or two months of the respective annual operating expenditures after the Capital Reserve requirements have been met. The RSR shall be used to mitigate the effects of occasional shortfalls in revenue or unanticipated expenditures that cannot be re-balanced within existing budgeted resources in any given fiscal year. Revenue shortfalls may result from a number of events such as weather factors (wet weather or drought events and natural disasters), increased water conservation, and poor regional economic conditions. The Rate St abilization Reserves should be used to assist in smoothing out revenue variability re sulting from these factors and ensu re that adequate resources are available during such times that mi ght otherwise require large rate in creases to utility customers. The City Council will set the reserve amounts annually af ter the results of the prior fiscal year’s Annual Comprehensive Financial Report (ACFR) are known. The RSR funding will be phased within five years, or sooner, as part of the fiscal year end closing process. Thereafter, the replenishment of these reserves may also be incorporated into the annual Adopted Operating Budget if resources are available to replenish the reserves.

13) The City will maintain $2 million infrastructure replacement funds in both the Water and Sewer Utility Enterprise Funds. The goal is to accumulate at least $2 million a year from each utility fund to set aside for replacement of infrastructure as the infrastructure reaches the end of its useful life.

14) The City will maintain a capital reserve in the Equipment Management Internal Service Fund to enable the timely replacement of vehicles and depreciab le equipment as cost. The City will maintain a minimum fund balance of at least 30% of the repl acement costs for equipmen t accounted for in this fund.

D. Net Investment In Capital Assets

The balances related to Net Investment in Capital Assets are comprised of the following as of June 30, 2024:

Governmental Business-Type
Activities Activities Total
Capital Asset, Net of Accumulated Depreciation $387,421,195 $186,940,146 $574,361,341 Less Capital Debt (20, 545,615) (52,803,897) (73,349,512) Plus Unspent Bond Proceeds 110,980 870,925 981,905
$366,986,560 $135,007,174 $501,993,734

90

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024
NOTE 13 – PENSION PLANS
A. General Information
Plan Descriptions – Al
l 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’ Retirem ent System (CalPERS), which acts as a common investment and administrative agent for its participating member employers.

Benefit provisions under the Plans ar e established by State statute and City resolution. CalPERS issues publicly available reports that include a full descript ion of the pension plans 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, 2024, 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 8.0% 7.0% 7.5%
Required employer contribution rates 10.70% 10.70% 10.70% Required Unfunded Actuarial Liability Contribution $6,607,504 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% 11.75%
Required employer contribution rates 20.55% 20.55% 20.55% Required Unfunded Actuarial Liability Contribution $11,031,175 91

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

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, 2024, were $6,607,504 and $11,031,175, respectively, which were made under the lump sum payment option.

Employees Covered – The following employees were covered by the benefit terms for ea ch Plan as of the most recent actuarial valuation date of June 30, 2022 and measurement date of June 30, 2023:

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 458 266 Inactive employees entitled to but not yet receiving benefits 370 26 Active employees 87 11 136 74 9 79
Total 915 11 136 366 9 79

Contributions – Section 20814(c) of the Ca lifornia 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 accrue d liability. The City is re quired 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 City made additional UAL payments in FY21, FY22 or FY23, CalPERS may have issued letter s subsequent to the FY21 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 moni tored 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, 2024, the City reported the account balanc e of the trust of $36,385,1 60. 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, 2023, using an annual actuarial valuation as of June 30, 2022 rolled forward to June 30, 2023 using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is shown below.

92

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024
NOTE 13 – PENSION PLANS (Continued)
Actuarial Assumptions – The total pension liabilities as of the June 30, 2023 measurement date were determined using the following actuarial assumptions:

Miscellaneous and Safety (1)
Valuation Date June 30, 2022
Measurement Date June 30, 2023
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 Purchasin
g Power applies, 2.30% thereafter
(1) Actuarial assumptions are the same for all benefi t 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 and Review of Actuarial Assumptions. Mortality rates incorporate full generational mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries. For more details on this table, please refer to the 2021 experience study report from November 2021 that can be found on the CalPERS website.

The underlying mortality assumptions and all other actuarial assumptions used in the June 30, 2022 valuation was 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 pe riods of projected benefit payments to determine the total pension liability for each Plan.

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

In determining the long-term expect ed rate of return, CalPERS consid ered both short-term and long-term 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. 93

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

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 5.0% 3.57%
Real Assets 15.0% 3.21%
Leverage -5.0% -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.

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, 2022 (Measurement Date) $285,089,419 $196,800,832 $88,288,587 Changes in the year:

Service cost 4,745,953 4,745,953
Interest on the total pension liability 19,679,002 19,679,002 Differences between actual and expected experience 5,257,874 5,257,874 Changes of assumptions
Changes in benefit terms 272,125 272,125
Contribution - employer 9,432,683 (9,432,683)
Contribution - employee 2,143,742 (2,143,742)
Net Plan to Plan Resource Movement
Net investment income 12,287,794 (12,287,794)
Administrative expenses (144,718) 144,718
Other Miscellaneous Income/(Expense)
Benefit payments, including refunds of employee contributions (15,578,919) (15,578,919) Net changes 14,376,035 8,140,582 6,235,453
Balance at June 30, 2023 (Measurement Date) $299,465,454 $204,941,414 $94,524,040 Miscellaneous Plan

94

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 13 – PENSION PLANS (Continued)

Increase (Decrease)
Total Pension
Liability
Plan Fiduciary
Net Position
Net Pension
Liability/(Asset)
Balance at June 30, 2022 (Measurement Date) $423,312,664 $265,557, 233 $157,755,431 Changes in the year:

Service cost 7,938,634 7,938,634
Interest on the total pension liability 29,060,359 29,060,359 Differences between actual and expected experience 5,485,493 5,485,493 Changes of assumptions
Changes in benefit terms 117,478 117,478
Contribution - employer 15,458,966 (15,458,966)
Contribution - employee 3,246,156 (3,246,156)
Net Plan to Plan Resource Movement
Net investment income 16,573,120 (16,573,120)
Administrative expenses (195,278) 195,278
Other Miscellaneous Income/(Expense)
Benefit payments, including refunds of employee contributions (23,440,654) (23,440,654) Net changes 19,161,310 11,642,310 7,519,000
Balance at June 30, 2023 (Measurement Date) $442,473,974 $277,199, 543 $165,274,431 Grand Totals - Both Plans $741,939,428 $482,140, 957 $259,798,471 Safety Plan

Sensitivity of the Net Pension Liability to Changes in the Discount Rate – The following presents the net pension liability of the City for each Plan, calculated using the discount ra te for each Plan, as well as what the City’s net pension liability would be if it were calcu lated using a discount rate that is one percentage point lower or one percentage point higher than the current rate:

Miscellaneous Safety
1% Decrease 5.90% 5.90%
Net Pension Liability $133,348,247 $224,158,773
Current Discount Rate 6.90% 6.90%
Net Pension Liability $94,524, 040 $165,274,431
1% Increase 7.90% 7.90%
Net Pension Liability $62,441,875 $116,871,265

Pension Plan Fiduciary Net Position – Detailed information about eac h pension plan’s fiduciary net position is available in the separately issued CalPERS financial reports.

95

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 13 – PENSION PLANS (Continued)

D. Pension Expenses and Deferred Outflows/I nflows of Resources Related to Pensions

For the year ended June 30, 2024, the City recognized pension expense of $17,576,807 for the Miscellaneous Plan and $24,067,299 for the Safety Plan, for total pension expense of $41,644,106. On June 30, 2024, 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 $10,017,840 Differences between actual and expected experience 3,420,820 Changes of assumptions 1,349,972
Net differences between projected and actual earnings
on plan investments 9,185,239
Total $23,973,871 $0
Miscellaneous Plan

General Fund typically has been used in prior years to liquidate pension liabilities.

Deferred Outflows Deferred Inflows
of Resources of Resources
Pension contributions after the measurement date $16,708,481 Differences between actual and expected experience 6,078,728 Changes of assumptions 8,018,769
Net differences between projected and actual earnings
on plan investments 12,376,646
Total $43,182,624 $0
Grand Totals - Both Plans $67,156,495 $0
Safety Plan

$26,726,321 reported as deferred outflows of resour ces 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, 2025. Other amounts reported as de ferred 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
2024 $5,332,729 $7,460,803
2025 1,939,432 6,149,145
2026 6,455,894 11,731,698
2027 227,976 1,132,497
$13,956,031 $26,474,143
Annual Amortization

96

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 13 – PENSION PLANS (Continued)

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 part-time, seasonal and temporary employ ees 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 required contributions of $28,655 and the em ployee’s required contributions of $114,615 were made during the fiscal year ending June 30, 2024.

NOTE 14 – EMPLOYEE BENEFITS

A. Deferred Compensation Plan

City employees may defer a portio n of their compensation under a City sponsored Deferred Compensation Plan created in accordance with Inte rnal Revenue Code Section 457. Unde r 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 City property and not subject to City control, they are excluded from these financial statements.

B. Retiree Medical Benefits

The liability for explicit subsidy be nefits for the dependents of City retirees were previously included together with other City plan OPEB liabilities. However, the City was also contributing directly toward the cost of these dependent benefits by making negotiated contributions determined as a percentage of payroll for active employees in each bargaining group, effec tively contributing twice. Be ginning with fiscal year 2020, the total OPEB liability for th ese dependent fund benefits is no w being determined and reported separately. Further discussion is included in Note 13C and 13D.

The City provides postretirement health care benefi ts through its defined benefit Retiree Medical Benefits Agent Multiple-employers Plan to employees who retire in good standing from the City after attaining the age of 50 and to certain employees who retire due to disability. As of June 30, 2024, there were 336 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 Em ployees’ Retirement System, CERBT, P.O. Box 942703, Sacramento, CA 94229-2703.

97

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 14 – EMPLOYEE BENEFITS (Continued)

To qualify for postemployment medical and dental be nefits an employee must retire from the City and maintain enrollment in one of the City eligible health plans. In a ddition, 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% abov e the single Kaiser medical premium rate. The eligibility rules for each MOU are summarized below, starting with benefits for retirees, followed by benefits for dependents.

Medical Benefit for Retirees:

Eligibility Rule
(Continuous Years
Hire/Retirement Date Date of Retirement of Service) City Contribution Requirement Before June 30, 1989 n/a PEMHCA Minimum Only
Les s than 5 PEMHCA Minimum Only
At least 5 Any em ployee only m edical prem ium rate
Les s than 5 PEMHCA Minimum Only
At least 5 Benefit Cap
Les s 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
Les s than 5 PEMHCA Minimum Only
At least 5 Benefit cap
Les s 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 Minim um Only
Les s than 5 PEMHCA Minimum Only
At least 5 Any em ployee only m edical prem ium rate
Les s than 5 PEMHCA Minimum Only
At least 5 Benefit cap
Les s 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,
2002Before July 1, 1995
After June 30, 1995 After August 31, 2002
AnyBefore July 1, 1995
After June 30, 1995 Any
Mid-
Managem ent 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.
98

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

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
Les s than 5 PEMHCA Minimum Only
At least 5 Any em ployee only m edical prem ium rate
Les s than 5 PEMHCA Minimum Only
At least 5 Retiree Cap
Les s 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
Les s than 1 PEMHCA Minimum Only
At least 1 Any em ployee only prem ium
Les s than 1 PEMHCA Minimum Only
1 but less than 10 50% of any em ployee only prem ium
At least 10 100% of any em ployee only prem ium
Les s 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
Les s th an 1 PEMHCA Min imu m On ly
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
Les s th an 1 PEMHCA Min imu m On ly
1 but less than 10 25% of the lesser of the Retiree Cap and the prem ium rate
10 but less than 15 50% of the lesser of the Retiree Cap and the prem ium rate
15 but less than 20 75% of the lesser of the Retiree Cap and the prem ium rate
At least 20 100% of the lesser of the Retiree Cap and the prem ium 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

99

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

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
Les s than 5 PEMHCA Minimum Only
At least 5 Any em ployee only m edical prem ium rate
Les s than 5 PEMHCA Minimum Only
At least 5 Up to the Retiree Cap
Les s than 1 PEMHCA Minimum Only
1 but less than 9 25% of any em ployee only prem ium
9 but less than 14 50% of any em ployee only prem ium
14 but less than 19 75% of any em ployee only prem ium
At least 19 100% of any em ployee only prem ium
Les s 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
Les s than 5 PEMHCA Minimum Only
At least 5 Any em ployee only m edical prem ium rate
Les s than 5 PEMHCA Minimum Only
At least 5 Benefit Cap
Les s 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
Les s than 5 PEMHCA Minimum Only
At least 5 Any em ployee only m edical prem ium rate
Les s than 5 PEMHCA Minimum Only
At least 5 Benefit Cap
Les s 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, 2007Before June 30, 1995
After June 29, 1995 After November 27, 2007
Before July 1, 1996
After July 17, 1989 but before March 19,
2003
After March 18, 2003
Any
Employee
Association
(MEA)
After June 30, 1996
After June 30, 2003
Before July 1, 2003
After June 30, 2003
Before January 1, 1996
Police
(MPOA)
After December 31, 1995
After December 31, 1988 but before July 1,
2003
Supervisors
(MSA) (Ended
June, 30, 2012)

100

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 14 – EMPLOYEE BENEFITS (Continued)

Medical benefits for dependents:

Group Date of Hire Date of Retirement
Minimum Ye ars 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 fam ily/dependent prem ium 9 but less than 14 Up to 50% of the fam ily/dependent prem ium 14 but less than 19 Up to 75% of the fam ily/dependent prem ium 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 fam ily/dependent prem ium 9 but less than 14 Up to 50% of the fam ily/dependent prem ium 14 but less than 19 Up to 75% of the fam ily/dependent prem ium 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 fam ily/dependent prem ium 9 but less than 14 Up to 50% of the fam ily/dependent prem ium 14 but less than 19 Up to 75% of the fam ily/dependent prem ium 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 fam ily/dependent prem ium 9 but less than 14 Up to 50% of the fam ily/dependent prem ium 14 but less than 19 Up to 75% of the fam ily/dependent prem ium At least 19 Up to 100% of the family/dependent premium Professional /
Technical
(PROTECH) After June 30, 1995 After December 4, 2006
Mid‐Managem ent
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.

101

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 14 – EMPLOYEE BENEFITS (Continued)

Medical benefits for dependents (continued):

Group Date of Hire Date of Retirement
Minimum Years of Continuous
Ser v ic e
City Contribution for Dependent Medical
Premiums
1 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 b u t less than 9 50% of family/dependent medical premiums At least 10 100% of family/dependent medical premiums
5 b u t less than 9 Up to 25% of the family/dependent premium 9 b u t 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 b u t less than 9 Up to 25% of the family/dependent premium 9 b u t 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 b u t 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 low est family/dependent premium Employee
Association (MEA) After June 29, 1996
After June 30, 2003
Police (MPOA)
After December 31, 1995 After June 30, 2003
1 Family/Dependent M edical Premium is active employee Single+1 OR Family medical premium rate less active employee Single medical reimbursement. 4 The amounts paid for dependents are adjusted to keep the fund viable. Currently, the IAFF dependent fund pays the following amo unts:
- $300 per month for 1 dependent
- $500 per month for two or more dependents
5 The fire Chied is eligible for dependent fund benefits in Unrep Misc group.

Fire S afety (IAFF)4
Before January 1, 1995
Aft er February 19, 2007
After December 31, 1994
Aft er February 19, 2007
Unrepresented
(UNREP ‐Misc)5 After December 31, 1995 After June 30, 2018

C. Net OPEB Liability

Funding Policy and Contributions – The City policy is to prefund thes e benefits by accumulating assets with CERBT discussed above pursuant to the City’s annual budget approved by Council. For the year ended June 30, 2024, the City’s contributions to the Plan were $2,123,941.

Employees Covered by Benefit Terms – Membership in the plan consisted of the following at the measurement date of June 30, 2023:

Active employees 393
Inactive employees or beneficiaries currently
receiving benefit payments 336
Inactive employees entitled to but not yet
receiving benefit payments 103
Total 832

102

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 14 – EMPLOYEE BENEFITS (Continued)

Actuarial Methods and Assumptions – The City net OPEB liability was measured as of June 30, 2023 and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation dated June 30, 2023, that was rolled forward using standard update procedures to determine the total OPEB liability as of June 30, 2024, based on the following actuarial methods and assumptions:

Actuarial As s umptions
Valuation Date June 30, 2023
Measurement Date June 30, 2023
Actuarial Cost Method Entry Age Normal Cost, level percent of pay As s et Valuation Method Fair Value
Actuarial As s umptions:

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 6.5 in 2025, fluctuates until ultimate rate of 3.9% in 2075

The underlying mortality assumptions were based on the Macleod Watts Scale 2022, which is a two- dimensional mortality improvement scale reflecting both age and year of mortality improvement. The underlying base scale is Scale MP-2021 which has two segments: (1) historical improvement rates for the period 1951-2017 and (2) an estimate of future mortality improvement for years 2018-2020 using the Scale MP-2021 methodology but utilizing the assumptions obtained from S cale MP-2015. The Macleod Watts scale then transitions from the 2020 improvement ra te to the Social Security Administration (SSA) Intermediate Scale linearly over th e 10-year period 2021- 2030. After this transitio n period, the Macleod Watts Scale uses the constant mortality improvement rate from the SSA Intermediate Scale from 2028-2042.

The SSA's Intermediate Scale has a final step down in 2045 which is reflected in the Macleod Watts scale for years 2045 and thereafter. Over the ages 95 to 117, the SSA improvement rate is graded to zero.

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 cla ss. 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 CERB T. The target allocation for each major asset class using Strategy 2 is 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%

103

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024
NOTE 14 – EMPLOYEE BENEFITS (Continued)
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, 2023 valuation date. Net contributions to the trust in recent years have been set at a level to prefund the e xplicit 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-as- you-go basis. Therefore, the Fi delity 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 3.86%.

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, 2023 $65,905,923 $54,008,340 $11,897,583 Changes Recognized for the Measurement Period:

Service Cost 2,140,324 2,140,324
Interest on the total OPEB liability 4,070,218 4,070,218 Changes of assumptions 691,182 691,182
Contributions from the employer 2,267,207 (2,267,207)
Net investment income 3,401,636 (3,401,636)
Plan Experience 2,919,973 2,919,973
Administrative expenses (15,681) 15,681
Benefit payments (3,727,690) (3,727,690)
Net changes 6,094,007 1,925,472 4,168,535
Balance at June 30, 2024 (Measurement Date 6/30/23) $71,999,930 $55,933,812 $16,066,118 Incr ea se (Decr ea se)
The benefit payments and refunds include implied subsidy benefit payments in the amount of $2,494,961. 104

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 14 – EMPLOYEE BENEFITS (Continued)

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 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%
$25,407,190 $16,066,118 $8,358,046

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
$7,677,116 $16,066,118 $26,401,720

D. Dependent Fund Post Employment Bene fit (OPEB) Plan (Total OPEB Liability)

Plan Description – The City provides continuation of medical coverage to its retiring employees and their eligible dependents, through its defined benefit Reti ree Medical Benefits Agent Multiple-employers plan.

Pursuant to various bargaining agreements with different employee groups, the City contributes a percent of total payroll toward the cost of medical coverage for the eligible dependents of retirees. The City does not define the eligibility for or amount of any such benefits paid, nor is it legally obligated to make any payments to these dependents. The extent of the City’s obligation is to make the negotiated contributions to the funds.

However, the City has determined that a liability for the projected cost of these benefits must be reported in its financial statements in accordance with current accounting standards. No assets are accumulated in a trust that meets the criteria in paragraph 4 of Governmental Accounting Standards Board Statement No. 75.

Employees Covered by Benefit Terms – Membership in the plan consisted of the following at the measurement date of June 30, 2023:

Active employees 393
Inactive dependents of retirees currently
receiving benefit payments 137
Inactive employees entitled to but not yet
receiving benefit payments 31
Total 561

105

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024
NOTE 14 – EMPLOYEE BENEFITS (Continued)
Actuarial Methods and Assumptions – The Union Dependent Funds’ total OPEB liability was measured as of June 30, 2023 and the total OPEB liability was determined by an actuarial valuation dated June 30, 2023, 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 Assum ptions
V aluation Date June 30, 2023
Measurement Date June 30, 2023
Actuarial Cost Method Entry Age Norm al Cost, level percent of pay Actuarial Ass umptions:

Discount Rate 3.86% as of June 30, 2023
Inflation 2.50%
Salary Increase 3.00%
Investm ent Rate of Return 3.86%
Mortality Rate MacLeod Watts Scale of 2022 applied generationally from 2015 Healthcare Trend Rate 6.5% in 2025 fluctuating to 3.9% for years 2076 and thereafter Changes in Total OPEB Liability – The changes in the total OPEB liability follows:

Increase (Decrease)
Total OPEB
Liability
(a)
Balance at June 30, 2022 $28,327,780
Changes Recognized for the Measurement Period:

Service Cost 1,183,959
Interest on the total OPEB liability 1,069,943
Changes in benefit terms
Differences between expected and actual experience
Changes of assumptions (105,254)
Contributions from the employer
Net investment income
Other Expenses
Plan Experience 2,397,223
Administrative expenses
Benefit payments (1,031,989)
Net changes 3,513,882
Balance at June 30, 2023 (Measurement Date) $31,841,662 106

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 14 – EMPLOYEE BENEFITS (Continued)

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 (2.86%) or 1- percentage point higher (4.86%) than the current discount rate:

Net OPEB Liability/(Asset)
Discount Rate

3.86%
$36,314,041 $31,841,662 $28,158,109
Discount Rate -1% Discount Rate +1%

The following presents the total OPEB liability of the City, as well as what the Ci ty's total OPEB liability would be if it were calculated using healthcare cost trend rates that are 1-per centage-point lower or 1- percentage-point higher than the current healthcare cost trend rates:

Net OPEB Liability/(Asset)
Healthcare Cost
Trend Rates
(6.50% - 3.90%)
$27,962,251 $31,841,662 $36,679,439
1% Decrease 1% Increase

E. OPEB Expenses and Deferred Outflows/I nflows of Resources Related to OPEB

For the year ended June 30, 2024, the City recognized Retiree Medical Benefits OPEB Plan and Dependent Fund OPEB Plan recognized expense of $1,166,650 and $2,153,202 respectively, for total OPEB expense of $3,319,852. At June 30, 2024, the Retiree Medical Benefits OPEB plan and Union Dependent Funds reported deferred outflows and inflows of resources related to OPEB from the following sources:

107

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 14 – EMPLOYEE BENEFITS (Continued)

Deferred Outflows Deferred Inflows
of Resources of Resources
Employer contributions made subsequent to the measurement date $2,123,941 Differences between actual and expected experience 2,493,700 ($3,771,407) Changes of assumptions 3,291,584 (2,078,104)
Net differences between projected and actual earnings on plan investments 3,381,470
Total $11,290,695 ($5,849,511)
Deferred Outflows Deferred Inflows
of Resources of Resources
Employer contributions made subsequent to the measurement date $1,158,383 Differences between actual and expected experience 2,142,741 ($949,777) Changes of assumptions 3,102,227 (5,942,317)
Net differences between projected and actual earnings on plan investments
Total $6,403,351 ($6,892,094)
Grand Total, Both Plans $17,694,046 ($12,741,605)
Retiree Medical Benefits OPEB Plan
Dependent Fund OPEB Plan

Deferred outflows of resources related to contributions after the measurement date, amounting to $3,282,324, will be recognized as a reduction of the OPEB liability in the subsequent fiscal year. 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 2025 ($1,583,612) ($100,700)
2026 38,730 (100,700)
2027 3,227,729 (100,700)
2028 659,116 (356,623)
2029 527,175 (520,241)
Thereafter 448,105 (468,162)
Total $3,317,243 ($1,647,126)
Annual Amortization

General Fund has been primarily used in prior years to liquidate OPEB liabilities. 108

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 14 – EMPLOYEE BENEFITS (Continued)

F. Accrued Vacation an d Sick Leave Liabilities

Employees accrue vacation up to certain maximums, ba sed on employee classification. Employees may elect to be paid a portion of their vacation at various times according to the applicable memorandum of understanding. Sick leave may be accumulated without limit. Vested sick leave may be paid upon separation from service in good standing and is based on a vesting schedule determined by years of service.

The City measures and adjusts the liability for vacation a nd sick leave annually at its fiscal year end. During the year ended June 30, 2024, sick leave benefits payable increased by $61,443 and vacation benefits payable increased by $732,044. 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 Li abilities 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, 2023 $6,513,294 $437,342 $1,249,519 $140,657 Additions 4,009,166 302,116 2,107,125 118,567
Payments and adjustments (3,322,554) (256,684) (2,013,051) (151,198) Balance as of June 30, 2024 $7,199,906 $482,774 $1,343,593 $108,026 General Government $640,113 $2,947
Building 251,735
Public Works 495,086 251,125
Engineering 240,721
Planning 183,382
Recreation 250,166 30,238
Police 3,548,380 588,456
Fire 1,525,804 463,330
Water Utility $241,186 $54,756
Sewer Utility 241,588 53,270
Internal Service 64,519 7,497
Total $7,199,906 $482,774 $1,343,593 $108,026
Long-Term Portion:

Governmental activities $4,241,542 $461,483
Business-type activities $55,538 $108,026
Total long term portions $4,241,542 $55,538 $461,483 $108,026 Current Portion:

Governmental activities $2,958,364 $882,110
Business-type activities $427,236
Total current portions $2,958,364 $427,236 $882,110

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. 109

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 15 – RISK MANAGEMENT

A. Risk Pool

The City participates in the Pool ed Liability Assurance Network Join t 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 JP A provides $5,000,000 of self-funded general liability and auto coverage and $30,000,000 excess liability co verage 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 dama ge up to $1 billion. The City reta ins a self-insured amount of $5,000 for each property and $5,000 for each vehicle per occurrence.

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

The Board controls the operations of PLAN JPA, consis ting of funding polices an d 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 an d 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 misce llaneous employees up to a maximum of $14,000 per family, based on years of service. Claims are funded on a pay-as-you-go basis. During the year ended June 30, 2024 the City paid $1,123,199 in dental claims and administrative fees. Public safety employees are insured under various dental care insurance plans.
110

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 15 – RISK MANAGEMENT (Continued)

D. Liability for Uninsured Claims

The City provides for the uninsured portion of claims an d judgments, including a provision for claims incurred but not reported when a loss is deemed probable of assertion and th e 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:

2024
Worker’s General
Compensation Liability Total 2023
Beginning balance $5,613,220 $739,525 $6,352,745 $6,199,219 Liability for current fiscal year claims 1,478,098 876,905 2,355,003 2,554,560 Increase (decrease) in estimated liability
for prior fiscal year claims and claims
incurred but not reported (IBNR) 1,696,797 (602,125) 1,094,672 (264,883) Claims paid (1,687,411) (164,101) (1,851,512) (2,136,151) Ending balance $7,100,704 $850,204 $7,950,908 $6,352,745 Due in one year $1,451,854 $296,554 $1,748,408 $1,647,769

Settlements have not exceeded insurance co verage in the past three fiscal years.

NOTE 16 – COMMITMENTS AND CONTINGENT LIABILITIES

A. Litigation

The City is subject to litigation aris ing 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 am ounts, if any, to be immaterial. 111

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

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 e xpenditure of monies are recorded to reserve that portion of applicable appropriations. Encumbrances outstanding at year-end are recorded as assigned fund balance, 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, 2024 were as follows:

Major Governmental Funds:

General Fund 2,340,251
Housing Authority Fund 46,574
Non-Major Governmental Funds 147,933
Total Encumbrances $2,534,758

D. South Bay Water Recycling System Facility Replacement

As required by the Water Pollution Control Plant’s National Pollutant Discharge Elimination System (NPDES) permit, the regional partner agencies are responsible for maintenance and operation of the South Bay Water Recycling System. The regional partner agencies, which includes the City of Milpitas, are also responsible for the planned $2 billion rehabilitation/replacement of the facility over the next thirty years. The City’s share of the project is approximately 6.196% as discussed in Note 8E.

E. Bay Area Water Supply and Conserva tion Agency Revenue Bonds Surcharge

The City contracts with the City and County of San Fr ancisco for the purchase of water from the Hetch Hetchy System operated by the San Francisco Public Utilities Commission (SFPUC). The City is also a member of the Bay Area Water Supply and Conservation Agency (BAWSCA) which represents the interests of all the 24 cities and water districts, as well as two private utilities, that purchase wholesale water from the SFPUC.

In 2009 the City entered into a new 25-year agreement with the SFPUC that includes a minimum water delivery level of 5.341MGD. One of the ways that the new agreement differs from the old is in how facilities constructed by the SFPUC that benefit the regional customers are treated from a rate and financial perspective.

Under the old agreement, facilities we re built, capitalized, and added to the rate base with a rate of return (interest), and then paid for over their useful lives through wholesale rates. Under the new agreement, the SFPUC issues revenue bonds and the de bt service (which also includes an interest component) is paid for through rates over the life of the bonds.

During the transition from the old to the new contracts, one of the issues addressed was the $370 million in assets 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 provided a better interest rate given the favorable rate environment.

112

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024
NOTE 16 – COMMITMENTS AND CONTINGENT LIABILITIES (Continued) BAWSCA issued Revenue Bonds in the principa l 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 ch arges. Under the Bond indenture, BAWSCA maintains a stabilization fund. If surcharge re venues collected are less than needed (due to a member’s failure to pay timely), BAWSCA uses the stabilization fund to fund the debt service deficiency and increases the surcharge in the subse quent year to make up for the prio r 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 partic ipant and 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 $619,012 during fiscal year 2024, which is included as a component of purchased water expenses in the Water Enterprise Fund. The surcharge for fiscal year 2025 is estimated to be $791,844.

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 ag gregate amount deposited into the housing successor fund during the housing successor’s preceding four fiscal years, whichever is greater. If a housing successor has an excess surplus, the HSC Section requires that the housing successor encumber the excess surplus for eligible purposes described in the HSC Section 34176.1(a)(3) or transfer the funds to another local housing successor within three fiscal years. If the housing successor fails to comply with this provision, the housing successor, within 90 days of the end of the th ird fiscal year, is required to transfer any excess surplus to the Department of Housing and Communi ty Development for expenditure pursuant to the Multifamily Housing Program or the Joe Serna, Jr. Farmworker Housing Grant Program. 113

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 17 – SUCCESSOR AGENCY ACTIVITIES

A. Redevelopment Dissolution

In an effort to balance its budget , the State of California adopted AB x1 26 on June 28, 2011, amended by AB1484 on June 27, 2012, which suspended all new re development activities except for limited specified activities as of that date and dissolved redevelopment agencies on January 31, 2012.

The suspension provisions prohibited all redevelopment agencies from a wide range of activities, including incurring new indebtedness or obligations, entering into or modifying agreements or contracts, acquiring or disposing of real property, taking actions to adopt or amend redevelopment plans and other similar actions, except actions required by law or to carry out existing enforceable obligations, as defined in ABx1 26.

Effective January 31, 2012, the Redevelopment Agency was dissolved. Certain assets of the Redevelopment Agency Housing Reserve Fund were distributed to a Housing Successor; and all remaining Redevelopment Agency assets and liabilities were distributed to a Successor Agency. The 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 and certain housing assets were transferred to the City’s Housing Authority Special Revenue Fund.

The City also elected to become the Successor Ag ency and on February 1, 2012 the Redevelopment Agency’s remaining assets were distributed to and liabilities were assumed by the Successor Agency. ABx1 26 requires the establishment of an Oversight Boar d 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 th e Milpitas Oversight Board transferre d to a new Santa Clara Countywide Consolidated Oversight Board, wh ich is now responsible for overseei ng the winddown affairs of all Successor Agencies in Santa Clara County, including the Successor Agency to the Milpitas Redevelopment Agency.

The activities of the Housing Successor are reported in the Housing Authority Special Revenue Fund as the City has control of those assets, which may be used in accordance with the low and moderate income housing provisions of California Redevelopment Law.

The activities of the Successor Agency are reported in the Successor Agency to the Redevelopment Agency Private-Purpose Trust Fund as the activities are under the control of the County Oversight Board. The City provides administrative services to the Successor Agency to wind down the affairs of the former Redevelopment Agency.

Cash and investments of the Successor Agency as of June 30, 2024 are discussed in Note 3. Information presented in the following footnotes represents other a ssets and liabilities of the Successor Agency as of June 30, 2024.

114

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 17 – SUCCESSOR AGENCY ACTIVITIES (Continued)

B. Development Agreements

The Successor Agency assumed the obligations of th e 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 transact ions are summarized below and discussed in detail thereafter.

Balance Balance Current
June 30, 2023 Retirements June 30, 2024 Portion
2015 Tax Allocation Bonds
2%-5%, due September 1, 2032 $72,640,000 $8,185,000 $64,455,000 $8,595,000 Plus: Unamortized bond premium 11,512,632 1,190,962 10,321,670 Total $84,152,632 $9,375,962 $74,776,670 $8,595,000

115

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024

NOTE 17 – SUCCESSOR AGENCY ACTIVITIES (Continued)

2. 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 pr oceeds 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 pa yable annually and the interest is payable semi- annually through 2032. The 2015 Bonds contain a provision that in an event of default, the Trustee may declare the principal of the bonds, 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’.

3. 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
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 6,255,000 1,214,125
2030-2033 21,155,000 1,840,125
64,455,000 $12,353,625
Plus: Unamortized bond premium 10,321,670
$74,776,670

4. Defeased Bonds

During fiscal year 2023-24, the Agency paid off the debt in full for the Redevelopment Agency 1997 Tax Allocation Bonds.

116

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2024
NOTE 17 – SUCCESSOR AGENCY ACTIVITIES (Continued)
D. Commitments and Contingencies
State Approval of Enforceable Obligations
The Successor Agency prepares a Recognized Obligat ion Payment Schedule (ROPS) semi-annually that contains all proposed expenditures for the subsequent six-month period. The ROPS is subject to the review and approval of the County Oversight Board as well as the State Department of Finance. Although the State Department of Finance may not 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 cu rrent 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.
117

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 6/30/23 Total OPEB Liability
Service Cost $2,386,392 $2,356, 491 $2,423,566 $1,95 8,563 $1,503,917 $2, 077,984 $2,140,324 Interest 4,794,071 5,155,08 0 5,462,138 3,581,088 4,1 00,155 3,916,381 4,070,218 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) 4,971,305 691,182 Plan experience 2,919,973
Benefit payments (3,325,081) (2,994,247) (3,183,858) (3,122,284) (3,221,642) (3,382,910) (3,727,690) Net change in total OPEB liability 2,591,535 4,403,390 (25,615,619) (3,203,931) 4,192,522 2,611,455 6,094,007 Total OPEB liability - beginning 80,926,571 83,518,106 87,921 ,496 62,305,877 59,101,94 6 63,294,468 65,905,923 Total OPEB liability - ending (a) $83,518,106 $87,921,496 $62, 305,877 $59,101,946 $63,294,468 $65,905,923 $71,999,930 Plan fiduciary net position
Contributions - employer $4,959,756 $4,803,893 $4, 651,743 $4,528,174 $1,743,593 $1,757,265 $2,267,207 Contributions - employee
Net investment income 3,708,342 3,1 75,844 2,834,217 1, 745,028 14,164,474 (8,452,324) 3,401,636 Administrative expense (18,732) (21,490) (9,742) (24,292) (19,480) (16,234) (15,681) Benefit payments (3,325,081) (2,994,247) (3,183,858) (3,122,284) (3,221,642) (3,382,910) (3,727,690) 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) 1,925,472 Plan fiduciary net position - beginning 33,780,048 39,104,333 44,016 ,612 48,308,972 51,435,59 8 64,102,543 54,008,340 Plan fiduciary net position - ending (b) $39,104,333 $44,016,612 $48, 308,972 $51,435,598 $64,102,543 $54,008,340 $55,933,812 Net OPEB liability (asset) - ending (a)-(b) $44,413,773 $43,904,884 $ 13,996,905 $7,666,348 ($808,075) $11,897,58 3 $16,066,118 Plan fiduciary net position as a percentage of the total OPEB liability 46.82% 50.06% 77.54% 87.0 3% 101.28% 81.95% 77.69% Covered-employee payroll $42,017,236 $43,375,678 $48,788,854 $52,202,907 $59,134,552 $59,298,425 $63,840,691 Net OPEB liability as a percentage of covered-employee payroll 105.70% 101.22% 28.69% 14.69% -1.36% 20.06% 25.17% * Fiscal year 2018 was the first year of implementation. 121

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 Im plicit 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 $48,7 88,854 $48,788,854 $48,788,854 $5 2,202,907 $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 Im plicit Total Explicit Implicit Total Actuarially determined contribution $655,377 $1,552,190 $2,207,567 $655, 377 $1,611,861 $2,267,238 $1,7 23,519 $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 1,757,26 5 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 $59,2 98,425 $59,298,425 $59,298,425 $5 9,298,425 $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% Fiscal Year Ended June 30, 2024
Explicit Implicit Total
Actuarially determined contribution $1,660,923 $1,208,956 $2,869,879 Contributions in relation to the
actuarially determined contribution 885,985 1,237,956 2,123,941 Contribution deficiency (excess) $774,938 ($29,000) $745,938 Covered-employee payroll $63,840,691 $63,840,691 $63,840,691 Contributions as a percentage of
covered-employee payroll 1.39% 1.94% 3.33%
Notes to Schedule
Valuation date:

Methods and assumptions used to determine contribution rates:

Valuation Date June 30, 2023
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. 122

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 6/30/23 Total OPEB Liability
Service Cost $1,139,508 $1,402,597 $ 1,767,339 $1,183,959 Interest 905,377 810,987 687,094 1,069,943
Changes in benefit terms $28,504,872
Differences between expected and actual experience (1,465,027) 2,397,223 Changes of assumptions 3,100,405 2,591,371 (7,639,426) (105,254) Benefit payments (1,437,201) (1,028,064) (1,012,052) (1,031,989) Net change in total OPEB liability 28,504,872 3,708,089 2,311,864 (6,197,045) 3,513,882 Total OPEB liability - beginning 28,504,872 32,212,961 3 4,524,825 28,327,780 Total OPEB liability - ending (a) $28,504,872 $32,212,961 $34, 524,825 $28,327,780 $31,841,662 Plan fiduciary net position
Contributions - employer $1,437,201 $1,012,052 $1,031,989 Contributions - employee
Net investment income
Administrative expense
Benefit payments (1,437,201) (1,012,052) (1,031,989)
Other Expenses
Net change in plan fiduciary net position - - - - - Plan fiduciary net position - beginning
Plan fiduciary net position - ending (b) $0 $0 $0 $0 $0 Net OPEB liability - ending (a)-(b) $28,504,872 $32,212,961 $34,524,825 $28,327,780 $31,841,662 Plan fiduciary net position as a percentage of the total OPEB liability 0.00% 0.00% 0.00% 0.00% 0.00% Covered-employee payroll $48,788,854 $52,2 02,907 $59,134,552 $59,298,425 $62,201,383 Net OPEB liability as a percentage of covered-employee payroll 58.42% 61.71% 58.38% 47.77% 51.19% *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. 123

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 2024
Explicit Explicit Explicit Explicit Explicit
Actuarially required contribution N/A (a) 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 $1,158,383 $0 Contribution deficiency (excess) N/A (a) 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 $62,201,383 Contributions as a percentage of
covered-employee payroll N/A (a) 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.
124

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% Changes in assumptions. In 2022, the accounting discount rate reduced from 7.15% to 6.90%. In 2016, 2018, 2019, 2020, 2021 and 2023, 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*
126

2017-18 2018-19 2019-20 2021-22 2022-23 2023-24
$3,042,853 $3,361,140 $3,777,335 $4,262,309 $4,859,903 $4,745,953 15,647,110 16,517,342 17,295,222 18,046,275 18,711,899 19,679,002 1,831,444 4,569,776 2,592,349 1,466,976 1,596,580 5,257,874 (1,404,854) 8,099,828
272,125
(10,906,398) (11,589,225) (12,009,750) ( 12,545,846) (14,478,741) (15,578,919) 8,210,155 12,859,033 11,655,156 11,229,714 18,789,469 14,376,035 222,345,892 230,556,047 243,415,080 255,070,236 266,299,950 285,089,419 $230,556,047 $243,415,080 $255,070,236 $266,299,950 $285,089,419 $299,465,454 $5,762,448 $6,864,376 $7,965,270 $8,925,250 $9,800,794 $9,432,683 1,473,732 1,569,027 1,772,996 1,998,174 1,861,769 2,143,742 13,123,448 10,774,536 8,527,794 40,453,566 (16,338,954) 12,287,794 (241,795) (116,977) (241,663) (177,248) (134,612) (144,718) (10,906,398) (11,589,225) (12,009,750) (12,545,846) (14,478,741) (15,578,919) (459,172) 381
(381)
8,751,882 7,502,118 6,014,647 38,653,896 (19,289,744) 8,140,582 155,168,033 163,919,915 171,422,033 177,436,680 216,090,576 196,800,832 $163,919,915 $171,422,033 $177,436,680 $216,090,576 $196,800,832 $204,941,414 $66,636,132 $71,993,047 $77,633,556 $50,209,374 $88,288,587 $94,524,040

71.10% 71.10% 69.56% 81.15% 69.03% 68.44%
$18,846,066 $22,079,190 $19,463,309 $25,754,131 $27,165,471 $27,088,772 382.47% 382.47% 398.87% 194.96% 325.00% 348.94%
127

City of Milpitas
Required Supplementary Information
Fiscal Year Ended June 30 2015 2016 2017 2018
Actuarially determined contribution $3,252,668 $4,236,931 $5,082,638 $6,243,904 Contributions in relation to the actuarially
determined contributions 3,252,668 4,236,931 5,082,638 6,243,904 Contribution deficiency (excess) $0 $0 $0 $0
Covered payroll $16,009,660 $16,161,589 $16,418,123 $18,846,066 Contributions as a percentage of covered
payroll 20.32% 26.22% 30.96% 33.13%
Notes to Schedule
Valuation date: 6/30/2012 6/30/2013 6/30/2014 6/30/2015 Methods and assumptions used to determine contribution rates:

Actuarial cost method Entr y 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 Retirem ent 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 and 2024, 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 and 2024,
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 and 2024.
128

2019 2020 2021 2022 2023 2024
$6,863,508 $8,337,504 $8,916,157 $9,799,723 $9,421,792 $10,017,840 6,863,508 8,337,504 8,916,157 9,799,723 9,421,792 10,017,840 $0 $0 $0 $0 $0 $0
$22,079,190 $19,463,309 $21,793,252 $25,754,131 $27,165,471 $27,088,772

31.09% 42.84% 40.91% 38.05% 34.68% 36.98%
6/30/2016 6/30/2017 6/30/2018 6/30/2019 6/30/2021 6/30/2022 129

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:

Changes in assumptions. In 2017, the accounting discount rate reduced from 7.65% to 7.15%. In 2016, 2018, 2019, 2020, 2021 and 2023, 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*
130

2017-18 2018-19 2019-20 2021-22 2022-23 2023-24
$5,975,378 $6,211,449 $6,711,730 $7,266,789 $7,801,769 $7,938,634 23,331,989 24,560,414 25,568,359 26,671,979 27,775,910 29,060,359 626,935 4,563,968 981,131 2,106,663 1,878,012 5,485,493 (986,630) 14,433,785
117,478
(16,083,729) (17,533,455) (18,278,539) (20,179,552) (21,827,081) (23,440,654) 12,863,943 17,802,376 14,982,681 15,865,879 30,062,395 19,161,310 331,735,390 344,599,333 362,401,709 377,384,390 393,250,269 423,312,664 $344,599,333 $362,401,709 $377,384,390 $393,250,269 $423,312,664 $442,473,974 $8,866,550 $10,288,856 $12,104,306 $13,294,083 $14,258,505 $15,458,966 2,240,962 2,441,763 2,748,961 2,834,054 2,853,307 3,246,156 17,931,642 14,733,700 11,689,024 55,066,837 (22,163,861) 16,573,120 (330,577) (159,951) (329,757) (241,588) (182,284) (195,278) (521)
(627,771) 521
(16,083,729) (17,533,455) (18,278,539) (20,179,552) (21,827,081) (23,440,654) 11,996,556 9,771,434 7,933,995 50,773,834 (27,061,414) 11,642,310 212,142,828 224,139,384 233,910,818 241,844,813 292,618,647 265,557,233 $224,139,384 $233,910,818 $241,844,813 $292,618,647 $265,557,233 $277,199,543 $120,459,949 $128,490,891 $135,539,577 $100,631,622 $157,755,431 $165,274,431

65.04% 64.54% 64.08% 74.41% 62.73% 62.65%
$20,840,464 $21,681,207 $23,703,982 $26,167,767 $26,110,338 $26,756,435 578.01% 592.64% 571.80% 384.56% 604.19% 617.70%
131

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
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 and 2024.

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 and 2024, 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 and 2024, pre-retirement and post-retirement mortality rates include generational mortality using 80% of Scale MP-2020 published by the Society of
Actuaries.
132

2019 2020 2021 2022 2023 2024
$10,288,856 $12,104,306 $13,294,083 $14,258,505 $15,469,857 $16,708,481 10,288,856 12,104,306 13,294,083 14,258,505 15,469,857 16,708,481 $0 $0 $0 $0 $0 $0
$20,840,464 $21,681,207 $23,707,982 $26,167,767 $26,110,338 $26,756,435

49.37% 55.83% 56.07% 54.49% 59.25% 62.45%
6/30/2016 6/30/2017 6/30/2018 6/30/2018 6/30/2021 6/30/2022 133

NON-MAJOR GOVERNMENTAL FUNDS
SPECIAL REVENUE FUNDS:

GAS TAX FUND
Established to account for the City’s share of state gasoline taxes which are restricted for use on construction and maintenance of the street system in Milpitas.

HOUSING AND COMMUNITY DEVELOPMENT FUND
Established to account for community development block grants and expenditures.

LAW ENFORCEMENT SERVICES FUND
Established to account for the proceeds from Federal and State asset seizures. This f und also accounts for the Supplemental Law Enforcement Services grant, Local Law Enforcement Block grant, Justice Assistance grant and expenditures. These funds must be used only for specified law enforcement purposes.

SOLID WASTE REDUCTION AND SERVICES FU
ND
Established to account for landfill tipping fees allocated by Santa Clara County. The County allocates a fee of $1 per ton to each City to be used in relation to the State of California Waste Reduction Act. Revenue is used for the implementation of waste reduction programs to meet the State required landfill deposits percentage reduction. The fund also accounts for special charges built into garbage rates specifically for community promotions and household hazardous waste activities.

LIGHTING AND LANDSCAPE MAINTENANCE DISTRICT FU
ND
Established to account for assessments collected within the district. Revenue is us ed for servicing and maintaining the public landscaping and additional lighting for the district.

COMMUNITY FACILITIES DISTRICT FUND

Established to account for assessments collected within the district. Revenue is used for providing City services for the district.

HETCH-HETCHY GROUND LEASE FUND
Established to account for the lease payment to the City and County of San Francisco for the permitted use of the Hetch-Hetchy land.

COMMUNITY PLANNING FUND
Established to account for fees collected to fund the General Plan update, zoning ordinance update and other long range planning documents.

COMMUNITY BENEFITS FUND
Established to account for fees collected from developers to fund Public Benefits for the Community.

AFFORDABLE HOUSING FU
ND
Established to account for fees collected from developers to fund Affordable Housing activities.

AFFORDABLE HOUSING UNRESTRICTED FUND
Established to account for Affordable Housing unrestricted activities funded by General Fund Surplus.

CAPITAL 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 IMPRO

VEMENT FUND
Established to account for the construction and maintenance of City parks. A special park improvement fee is imposed on developments to provide financing.

STORM DRAIN DEVELOPMENT FUND
Established to account for the construction and maintenance of st orm drain projects. A sp ecial storm drain fee is imposed on developments to
provide financing.

CITY OF MILPITAS

NON-MAJOR GOVERNMENTAL FUNDS

COMBINING BALANCE SHEETS
JUNE 30, 2024

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 $7,819,954 $34,998 $700,396 $2,697,740 $416,074 $2,826,947 Receivables:

Accounts
Due from other governments 561,088 761,406 80,996 22,976 9,891 Interest 48,698 250 16,515 3,050 36,912
Loans receivable 3,243,856
Prepaids, materials, supplies and deposits 986 4,816 2,122 17,411 Total Assets $8,429,740 $4,041,246 $781,642 $2,742,047 $421,246 $2,891,161

LIABILITIES
Accounts payable $205,995 $54,592 $4,039 $1,252 $7,583
Accrued payroll 16,005 8,862 34,546
Unearned revenue 643,162 258,410
Refundable deposits 18,843
Total Liabilities 205,995 697,754 297,297 10,114 42,129 Fund Balances:

Nonspendable 986 4,816 2,122 17,411
Restricted $8,429,740 3,834,265 83,888 2,439,934 409,010 2,831,621 Assigned
Total Fund Balances 8,429,740 3,835,251 83,888 2,444,750 411,132 2,849,032 Total Liabilities and Fund Balances $8,429,740 $4,041,246 $781,642 $2,742,047 $421,246 $2,891,161

FUND BALANCE
138

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 $1,485,347 $238,760 $431,010 $6,072,119 $3,203,329 $982,315 $4,589,744 $6,929,388 $38,428,121 1,436,357
8,940 3,879 26,693 19,380 5,870 25,554 42,543 238,284
3,243,856
2,911 3,638 3 31,887
$1,494,287 $245,550 $431,010 $6,102,450 $3,222,709 $988,188 $4,615,298 $6,971,931 $43,378,505 $233,596 $123,624 $630,681
$7,600 $14,504 $438 216 82,171
1,451,022 2,352,594
16 18,859
7,616 1,465,526 438 233,812 123,624 3,084,305
2,911 3,638 3 31,887
$1,494,287 235,023 $431,010 4,633,286 $3,222,709 4,381,486 6,848,307 39,274,566 987,747 987,747
1,494,287 237,934 431,010 4,636,924 3,222,709 987,750 4,381,486 6,848,307 40,294,200 $1,494,287 $245,550 $431,010 $6,102,450 $3,222,709 $988,188 $4,615,298 $6,971,931 $43,378,505

CAPITAL PROJECTS FUNDS
139

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

Other taxes $476,728 $5,512,571
Franchise Fees $889,916
Use of money and property $178,435 $8,976 $16,488 57,150 9,641 85,150 Intergovernmental 4,338,639 1,492,969 392,660 142,850
Charges for services 384
Developer contributions
Other
Total Revenues 4,517,074 1,501,945 409,148 1,090,300 486,369 5,597,721 EXPENDITURES:

Current:

General Government 1,492,970 4,124 9,157
Building, Safety and Housing
Recreation and Community Services
Public Works 792,112 373,595 1,686,358
Planning
Police 402,617
Fire
Capital outlay 39,522
Total Expenditures 1,492,970 442,139 796,236 373,595 1,695,515

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 4,517,074 8,975 (32,991) 294,064 112,774 3,902,206

OTHER FINANCING SOURCES (USES)
Transfers in 186,885 43,817
Transfers (out) (4,687,428) (136,505) (89,100) (3,172,000) Total Other Financin
g Sources (Uses) (4,500,543) (136,505) (45,283) (3,172,000) NET CHANGE IN FUND BALANCES 16,531 8,975 (32,991) 157,559 67,491 730,206 Fund balances at beginning of year 8,413,209 3,826,276 116,879 2,287,191 343,641 2,118,826 FUND BALANCES AT END OF YEAR $8,429,740 $3,835,251 $83,888 $2,444,750 $411,132 $2,849,032

CITY OF MILPITAS

NON-MAJOR GOVERNMENTAL FUNDS

COMBINING STATEMENTS OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2024

SPECIAL REVENUE FUNDS
140

Total
Hetch-Hetchy Affordable Storm Nonmajor
Ground Communit y Communit y Affordable Housin g Public Park Drain Governmental Lease Plannin g Benefits Housin g Unrestricted Art Improvement Development Funds $5,989,299
889,916
$66,188 $6,110 $8,188 $144,506 $69,509 $44,929 $209,893 $243,735 1,148,898 77,318 6,444,436
222,656 223,040
161,503 32,703 194,206
81,881 35,793 117,674
66,188 228,766 8,188 383,327 69,509 126,810 245,686 276,438 15,007,469 40,766 101,956 16,842 1,665,815
596,684 596,684
16,735 16,735
2,852,065
237,382 140,357 377,739
402,617
415,227 355,191 809,940
40,766 237,382 838,997 16,842 16,735 415,227 355,191 6,721,595 25,422 (8,616) 8,188 (455,670) 52,667 110,075 (169,541) (78,753) 8,285,874 500,000 730,702
(74,073) (140,000) (900,000) (9,199,106)
(74,073) (140,000) (900,000) 500,000 (8,468,404)
25,422 (82,689) 8,188 (455,670) 52,667 (29,925) (1,069,541) 421,247 (182,530) 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 $1,494,287 $237,934 $431,010 $4,636,924 $3,222,709 $987,750 $4,381,486 $6,848,307 $40,294,200

CAPITAL PROJECTS FUNDSSPECIAL REVENUE FUNDS
141

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, 2024

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
Franchise Fees
Use of money and property $77,647 $178,435 $100,788 $8,976 $8,976 Intergovernmental 4,350,035 4,338,639 (11,396) $1,453,029 1,492,969 39,940 Charges for services
Developer contributions
Total Revenues 4,427,682 4,517,074 89,392 1,453,029 1,501,945 48,916

EXPENDITURES
Current:

General Government:

City Manager
City Attorney
Finance
Non-departmental 1,472,201 1,492,970 (20,769)
Building, Safety and Housing
Recreation and Community Services
Public Works
Engineering
Planning
Police
Fire
Total Expenditures 1,472,201 1,492,970 (20,769)

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 4,427,682 4,517,074 89,392 (19,172) 8,975 28,147

OTHER FINANCING SOURCES (USES)
Transfers in 186,885 186,885
Transfers (out) (4,905,126) (4,687,428) 217,698
Total Other Financing Sources (Uses) (4,718,241) (4,500,543) 217,698 NET CHANGE IN FUND BALANCES ($290,559) 16,531 $307,090 ($19,172) 8,975 $28,147 ADJUSTMENT TO BUDGETARY BASIS:

Expenditures capitalized for GAAP purposes
Capital Outlay
Encumbrance adjustments
Fund balances at beginning of year 8,413,209 3,826,276
Fund balances at end of year $8,429,740 $3,835,251
142