Milpitas City Council
December 16, 2025

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025
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 $5,350,370 $7,013,242 $12,363,612 2.74% Medium-Term Corporate Notes $4,618,775 25,861,059 31,217,146 61,696,980 13.69% U.S. Treasury Notes 2,955,396 53,633,398 72,917,539 129,506,333 28.73% California Local Agency Investment Fund 85,170,243 85,170,243 18.89% Supranationals 16,419,023 16,419,023 3.64%
Mutual Funds (U.S. Securities) 38,597,477 38,597,477 8.56% Asset Backed Securities 3,658,077 7, 954,207 20,052,780 31,665,064 7.02% Municipal Securities and Municipal Treasury Notes or Bonds 2,186,571 2,186,571 0.49% Terrace Gardens, Inc.:

Nonnegotiable Certificates of Deposit 3,416,525 3,416,525 0.76% Total Investments $138,416,493 $92, 799,034 $149,806,301 381,021,828 Demand Deposits - City of Milpitas 69,476,588 15.41%
Demand Deposits - Terrace Gardens 306,601 0.07%
Total Cash and Investments $450,805,017 100.00%
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
reports its investment in LAIF at the fair value amount provided by LAIF, which is the same as the value of the pool share. The balance is available for withdrawal on demand and is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. Each regular LAIF account is permitted to have up to 15 transactions per month, with a minimum transaction 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, 2025 these investments matured in an average of 248 days.

Mutual funds are available for withdrawal on demand and at June 30, 2025 matured in an average of 47 days. 65

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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, 2025 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 $1 ,982,438 $10,381,173 $12,363,611 Medium-Term Corporate Notes 16,300,327 $41,037,656 $4,358,997 61,696,980 Asset Backed Securities 31,665,065 31,665,065
Supranational 16,419,023 16,419,023
Mutual Funds (U.S. Securities) 38,597,477 38,597,477
Municipal Securities and Municipal Treasury Notes or Bonds 2,186,571 2,186,571 Totals $88,664,003 $28,868,071 $41, 037,656 $4,358,997 $162,928,727 Not rated:
$85,170,243 $85,170,243
Terrace Gardens, Inc.:

Nonnegotiable Certificates of Deposit 3,416,525
Exempt from credit rate disclosure:

U.S. Treasury Notes 129,506,333 129,506,333
Total Investments $214,676,576 $381,021,828
California Local Agency Investment Fund
Investment Type

Terrace Gardens, Inc. invests only in Nonnegotiable Certificates of Depo sit. At December 31, 2024, all of Terrace Gardens’ Nonnegotiable Certificates of Deposit totaling $3,416,525 were fully insured by Federal Deposit Insurance.

66

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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, 2025:

Level 2 Total
Investments by Fair Value Level:

Federal Agency Obligations $12,363,612 $12,363,612
Medium-Term Corporate Notes 61,696,980 61,696,980
U.S. Treasury Notes 129,506,333 129,506,333
Supranational 16,419,023 16,419,023
Asset Backed Securites 31,665,064 31,665,064
Municipal Securities and Municipal Treasury Notes or Bonds 2,186,571 2,186,571 Subtotal $253,837,583 253,837,583
Investments Measured at Amortized Cost:

Mutual Funds (U.S. Securities) 38,597,477
Investments Measured at Cost:

Terrace Gardens, Inc.

Nonnegotiable Certificates of Deposit 3,416,525
Investments Exempt from Fair Value Hierarchy:

California Local Agency Investment Fund 85,170,243
Total Investments $381,021,828

Federal Agency Obligations totaling $12.4 million, Medi um Term Corporate Notes of $61.7 million, U.S.

Treasury Notes totaling $129.5 million, Supranational totaling $16.4 million, and Asset Backed Securities of $31.7 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.

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CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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, 2025:

Issuer Investment Type Amount
Federal Home Loan Bank Federal Agency Obligations $5,350,370

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, 2025 were as follows:

Fund Receiving Transfers Fund Making Transfers
Amount
Transferred
Governmental Funds:

General Fund Community Facilities District Special Revenue Fund $3,675,000 (A) General Fund Solid Waste Reduction and Services Special Revenue Fund 182,066 (A) General Fund Water Utility Enterprise Fund 3,038,508 (A) General Fund Sewer Utility Enterprise Fund 1,583,148 (A) Street Improvement Capital Projects Fund General Government Capital Projects Fund 719,715 (A) (B) (C) Street Improvement Capital Projects Fund Gas Tax Special Revenue Fund 2,353,009 (B) General Government Capital Projects Fund General Fund 3,146,061 (B) General Government Capital Projects Fund Transit Area Impact Fee Fund 144,000 (B) General Government Capital Projects Fund Water Utility Enterprise Fund 687,000 (B) General Government Capital Projects Fund Sewer Utility Enterprise Fund 687,000 (B) General Government Capital Projects Fund Gas Tax Special Revenue Fund 2,110,000 (B) General Government Capital Projects Fund Lighting & Landscape Maintenance District Special Revenue Fund 98,400 (B) General Government Capital Projects Fund Public Art Capital Projects Fund 60,000 (B) General Government Capital Projects Fund Park Improvement Capital Projects Fund 150,000 (B) General Government Capital Projects Fund Equmpment Management Internal Service Fund 2,875,425 (B) Lighting & Landscape Maintenance District Special Revenue Fund General Fund 45,645 (A) Storm Drain Development Capital Projects Fund General Fund 500,000 (A) Storm Drain Development Capital Projects Fund General Government Capital Projects Fund 350,000 (B) Governmental Funds Subtotal 22,404,977
Internal Service Funds:

Equmpment Management Internal Service Fund General Fund 300,000 (A) Equmpment Management Internal Service Fund General Government Capital Projects Fund 629,850 (C) Internal Service Funds Subtotal 929,850
Total Interfund Transfers $23,334,827
(A) To Transfer for Operating Cost
(B) To Fund Capital Project
(C) To Return Unexpended Project Funds

68

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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, 2025:

Housing and Community Development Loans:

Rehabilitation Loans $3,171,744
Housing Authority Loans:

Milpitas Housing Associates 3,326,640
Parc Metropolitan Housing Development 45,256
Parc North Associates LLC 483,381
Mid-Peninsula Milpitas Affordable Housing Associates 18,402,495 KB Home South Bay Inc. 1,222,900
Western Pacific Housing Inc. 1,778,529
Shapell Industries 750,000
MIL Aspen Associates, Ltd. 3,512,516
Sango Court, L.P. 7,164,603
Total Housing Authority Loans Receivable 36,686,320
Total Loans Receivable $39,858,064

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, 2025, the City had outstanding rehabilitation loans of $3,171,744 in its Housing and Community Development Special Revenue Fund. During the year ended June 30, 2025, the City did not receive any principal payment from all participants and accrued interest of $8,972.

69

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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 2025, interest of $91,500 was accrued, and as of June 30, 2025, principal and accrued interest outstanding totaled $3,326,640.

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, 2025, the Housing Authority received principal payments of $2,426 and as of June 30, 2025, there were $45,256 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 2025, principal of $11,303 was paid and as of June 30, 2025, there were $483,381 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 2025, $288,000 was accrued, respectively, and as of June 30, 2025, principal and accrued interest outstanding totaled $18,402,495.

70

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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, 2025, there were $954,900 of loans to Parcel C households outstanding. As of June 30, 2025 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 $1,476 was repaid in fiscal year 2025 and as of June 30, 2025 there were $581,529 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, 2025, there were $1,197,000 of silent second loans outstanding.

71

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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, 2025, there were $750,000 of silent second loans outstanding.

I. MIL Aspen Associates, Ltd.

In April 2007, the former Redevelopment Agency entered into an Owner Participation Agreement with MIL Aspen Associates, Ltd. for the development of a 101- unit multi-family project, of which 100 units will be deed-restricted for very low-income households. Under the terms of the Agreement, during fiscal year 2011 the Agency provided a $2,300,000 loan to the Developer. The lo an bears 5% interest compounded annually on outstanding principal balance, and is repayable in April 17, 2037. Upon June 1 of the year
following the issuance of the final certificate of occupancy of the project and the first day of each June during the term of the loan, the Developer shall pay 50% of Surplus Cash generated by the Project, as defined in the Agreement, during the previous calendar year. During the year ended June 30, 2025, interest of $152,548 and $174,527 was paid and accrued, and as of Ju ne 30, 2025, principal and accrued interest totaled $3,512,516.

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, 2025, interest of $66 4,603 was accrued, and as of June 30, 2025, principal and accrued interest totaled $7,164,603.

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.

72

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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

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, 2025, property totaling $4,200,000 is held by the General Fund.

B. Housing Authority

The former Redevelopment Agency ha d purchased parcels of land as 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, 2025, 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. The City will be issuing a Request for Proposals in the spring of 2026 for high-density re sidential opportunities for Parcels 1-3.

73

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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, 2025, the City has issued $702,252 in reimbursements.

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 at the end of calendare year 2025. During the year ended June 30, 2025, the City issued $200,257 of sales tax to the corporation during fiscal year 2025. 74

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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, 2025.

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, 2025, total reimbursements of $5,986,485 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, 2025, 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, 2025, no reimbursements were issued, and total reimbursements of $4
,030,688 have been issued to date.

75

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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.

76

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

NOTE 8 – CAPITAL ASSETS (Continued)

A. Governmental Capital Asset Additions, Retirements and Balances

Balance at Retirements/ Balance at
June 30, 2024 Additions Ad justments Transfers June 30, 2025 Capital assets not being depreciated:

Land $97,439,105 $97,439,105
Construction in progress 77,357,235 $7, 979,005 ($572,372) ($1,537,232) 83,226,636 Total capital assets not being depreciated 174,796,340 7,979,005 (572,372) (1,537,232) 180,665,741 Capital assets being depreciated:

Buildings and improvements 173,371,133 1,278,692 174,649,825 Other improvements 39,689,988 39,689,988
Machinery and equipment 53,224,672 1,750,580 (2,141,385) 52,833,867 Landscape system 31,270,018 94,351 31,364,369
Storm system 75,570,189 258,540 75,828,729
Street system 335,407,887 5,419,271 340,827,158
Traffic system 22,204,595 1,140,472 (130,500) 23,214,567 Intangible Right-to-use subscription asset 823,502 1,484,231 (426,508) 1,881,225 Intangible Right-to-use lease asset 831,707 831,707
Total capital assets being depreciated 731,561,984 10,720,612 (2,271, 885) 1,537,232 741,121,435 Less accumulated depreciation for:

Buildings and improvements (108,831,020) (3,656,484) (112,487,504) Other improvements (26,576,943) (965,745) (27,542,688)
Machinery and equipment (40,299,465) (1,681,092) 2,040,127 (39,940,430) Landscape system (18,301,264) (630,781) (18,932,045)
Storm system (73,585,978) (170,716) (73,756,694)
Street system (233,495,803) (6,001,160) (239,496,963)
Traffic system (17,556,008) (507,333) (18,063,341)
Intangible Right-to-use subscription asset (290,648) (881,322) 426,508 (745,462) Intangible Right-to-use leased asset (166,341) (166,341) Total accumulated depreciation (518,937,129) (14,660,974) 2,040,127 (531,131,468) Net capital assets being depreciated 212,624,855 (3,940, 362) (231,758) 1,537,232 209,989,967 Governmental activities capital assets, net $387,421,195 $4,038,643 ( $804,130) $390,655,708

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 $1,881,225.

As of June 30, 2025, the City has re corded a net intangible right-to use subscription asset amounting to $1,135,763 with accumulated amortization of $745,461. The subscription asset is offset with a subscription liability as discussed in Note 11.

77

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

NOTE 8 – CAPITAL ASSETS (Continued)

Governmental activities construction in progress comprised the following at June 30, 2025:

Total Actual Unexpended
Project Budget Costs Budget
Light Rail Median Landscaping $5,996,000 $3,946,346 $2,049,654 Second SCVWD Water Reservoir & Pump Station 200,000 2,165 197,835 Lower Penitencia Creek 2,425,000 635,639 1,789,361
Montague Pedestrian Overcrossing at Piper Drive 8,750,000 6,189,979 2,560,021 SCVWD Second Water Supply Turnout #2 100,000 689 99,311 Metro Area Police Substation 310,000 47,398 262,602
(Rmb) TASP Linear Trails 3,270,000 499,261 2,770,739
S. Milpitas Blvd. Veh. Bridge at Penitencia 6,400,000 2,816,817 3,583,183 Montague Ped. Overcrossing at Penitencia 3,500,000 2,699,930 800,070 (Rmb) Metro Recycled Water Distribution 605,000 605,000 SCVWD Zone 1 Pressure Red. Valve 100,000 47 99,953
Trade Zone/Montague Park - Central 600,000 294,136 305,864 McCarthy Blvd Landscape 1,173,756 813,337 360,419
Fire Station Improvements 1,850,000 1,284,229 565,771
City Building Improvement 6,951,061 4,383,035 2,568,026 Sinclair LMD Improvements 276,625 154,234 122,391
City Building, Exterior Painting 600,000 239,992 360,008 PD Communications 3,001,000 2,955,072 45,928
City Building Roofing 1,250,000 900,298 349,702
Police Records Management 988,777 564,425 424,352
Citywide Park Playground 2,703,497 2,041,038 662,459
Annual Sidewalk, Curb & Gutter Repair 4,301,840 3,227,556 1,074,284 Technology Projects 2,015,000 1,683,123 331,877
Midtown Street Light 300,000 264,037 35,963
2017-19 Finance System Upgrade 1,250,000 1,100,549 149,451 Annual Tree Replacement Program 544,000 349,160 194,840 Fire Station #2 Replacement 13,302,800 13,300,328 2,472 Fire Station No. 1 Modular Building 1,120,000 466,398 653,602 Median Conversion Project 600,000 43,015 556,985
Citywide Electronic Record Management System 150,000 150,000 Community Center Roof Renovation 500,000 78 499,922
Community and Senior Center Energy Resilience Project 5,107,597 4,421,115 686,482 Cardoza Park Softball Fields Improvement 800,000 253,835 546,165 City Hall Air Handlers Replacement 2,500,000 2,500,000
Council Chamber AV System Replacement 800,000 799,876 124 Land Management System Replacement 1,500,000 1,500,000
Sport Center Football Bleacher Replacement 200,000 174,213 25,787 Gateway Signage 250,000 40,726 209,274
Bart Project-Storm Improvement 33,000 31,497 1,503
Flap Gate Replacement 500,000 29,132 470,868
Storm Drain System Rehab 17-19 2,616,410 1,237,134 1,379,276 Storm Supervisory Control & Data Acquisition 2,416,590 2,400,000 16,590 Alviso Adobe Renovation 8,359,272 8,307,847 51,425
McCandless Park 12,154,820 11,103,115 1,051,705
Sports Fields Turf Rehabilitation Program 776,000 170,892 605,108 Sandalwood Park Renovation 475,000 417,899 57,101
Minor Sports Courts Rehabilitation 1,200,000 808,558 391,442 Pickleball Improvement 100,000 27,208 72,792
Tyler Implementaion Stage (SBITA) 5,360,500 1,496,278 3,864,222 Total construction in progress $120,283,545 $83,226,636 $37,056,909

78

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025
NOTE 8 – CAPITAL ASSETS (Continued)
B. Business-Type Capital Asset Additions, Retirements and Balances Balance at Balance at
June 30, 2024 Additions June 30, 2025
Capital assets not being depreciated:

Land $1,133,079 $1,133,079
Construction in progress 36,600,390 $6,764,589 43,364,979 Total capital assets not being depreciated 37,733,469 6,764,589 44,498,058 Capital assets being depreciated:

Distribution facilities 81,197,041 81,197,041
Water Service lines 18,427,501 18,427,501
Sewer lines 88,483,504 88,483,504
Capacity rights 126,645,826 2,661,657 129,307,483
Intangible Right to use subscription asset 176,652 176,652 Total capital assets being depreciated 314,753,872 2,838,309 317,592,181 Less accumulated depreciation for:

Distribution facilities (58,631,516) (1,192,283) (59,823,799) Water Service lines (8,719,101) (387,965) (9,107,066)
Sewer lines (56,629,563) (1,259,877) (57,889,440)
Capacity rights (41,567,015) (3,973,504) (45,540,519)
Intangible Right to use subscription asset (88,326) (88,326) Total accumulated depreciation (165,547,195) (6,901,955) (172,449,150) Net capital assets being depreciated 149,206,677 (4,063,646) 145,143,031 Business-type activities capital assets, net $186,940,146 $2,700,943 $189,641,089 79

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

NOTE 8 – CAPITAL ASSETS (Continued)

Business-type activities construction in progress comprised the following at June 30, 2025:

Total Actual Unexpended
Project Budget Costs Budget
Bart Project-Sewer Improvement $243,323 $242,704 $619
Sewr Pump Station Rehab. Prgm 2,052,000 775,790 1,276,210 Minor Sewer Projects 313,000 144,501 168,499
Sanitary Supervisory Control & Data 316,600 300,000 16,600 Main Lift Stattion Odor Emmissions Control 2,450,000 2,415,808 34,192 Sanitary Sewer CCTV Inspections & Improvements 1,517,996 8,451 1,509,545 Forcemain "A" Project 2,940,000 240,048 2,699,952
Well Upgrade Progra
m 15,990,000 7,129,441 8,860,559
Water Syst Seismic Im 4,382,781 2,056,048 2,326,733
Hydrant Replacement 836,360 658,248 178,112
Demsey Rd Water Line 7,857,772 3,340,981 4,516,791
Automated Water Meter Replace 14,380,661 14,379,467 1,194 BART Project-Water Improvement 2,503,920 2,319,357 184,563 Supervisory Control & Data Acquisition 6,516,600 6,425,785 90,815 Minor Water Projects 3,446,000 2,541,972 904,028
Water Leak Detection & Condition Assessment Progra
m 600,000 386,378 213,622
Asset Renewal and Replacement Program 500,000 500,000
Pinewood Well Facility Rehabilitation Project 500,000 500,000 Pressure Reducing Valve Station Relocation Project 465,000 465,000 Sunnyhills Turnout Rehabilitation Project 1,165,000 1,165,000 $68,977,013 $43,364,979 $25,612,034

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, 2024:

Balance
December 31, 2023 Additions Retirement
Balance
December 31, 2024
Capital assets not being depreciated:

Land $1,565,277 $1,565,277
Total capital assets not being depreciated 1,565,277 1,565,277 Capital assets being depreciated:

Buildings 12,107,935 12,107,935
Furniture 793,080 ($351,991) 441,089
Office equipment 72,216 72,216
Improvements 2,803,128 $719,191 3,522,319
Total capital assets being depreciated 15,776,359 719,191 (351,991) 16,143,559 Less accumulated depreciation (10,744,262) (363,839) (11,108,101) Net capital assets being depreciated 5,032,097 355,352 (351,991) 5,035,458 Total capital assets, net $6,597,374 $355,352 ($351,991) $6,600,735

80

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025
NOTE 8 – CAPITAL ASSETS (Continued)
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 $593,256
Public Works 7,692,248
Engineering 2,282,149
Recreation and Community Services 1,271,472
Police 31,948
Fire 327,106
Internal Service Fund 1,415,133
Intangible Right-to-use subscription asset 881,321
Intangible Righht-to-use leased asset 166,341
Total Governmental Activities $14,660,974
Business-Type Activities:

Water Utility $1,624,411
Sewer Utility 5,189,218
Intangible Right-to-use subscription asset 88,326
Total Business-Type Activities $6,901,955
Discretely Presented Component Unit:

Terrace Gardens, Inc. $355,968
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 $129,307,484. The operation and maintenance costs are calculated based upon actual sewage flow and strengths. In fiscal year 2025, the City’s operation and maintenance share was approximately 5.745% of the total RWF operations. 81

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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, 2024 Re tirements June 30, 2025 Portion Governmental Activities Debt - Direct Borrowing:
2020 General Fund Lease Revenue Bonds

4.0%, due June 1, 2041 $18,445,000 $ 17,180,000 $570,000 $16,610,000 $625,000 Plus: Unamortized bond premium 2,952,489 173,676 2,778,813 $18,445,000 $20,132,489 $743,676 $19,388,813 $625,000
Business-type Activities Debt
Wastewater Revenue Refunding Bonds, 2017 Series

2.0% - 5.0%, due November 1, 2026 $4,725,000 $1,765,000 $560,000 $1,205,000 $590,000 Plus: Unamortized bond premium 212,567 70,855 141,712
Wastewater Revenue Bonds, 2019 Series

4.0% - 5.0%, due November 1, 2049 29,840,000 27,870, 000 560,000 27,310,000 585,000 Plus: Unamortized bond premium 4,579,553 183,182 4,396,371 Water Revenue Bonds, 2019 Series

4.0% - 5.0%, due June 1, 2049 17,210,000 15,825,000 340,000 15,485,000 355,000 Plus: Unamortized bond premium 2,551,777 102,071 2,449,706 Total Business-Type Activities $51,775,000 $52,803,897 $1,816,108 $50,987,788 $1,530,000

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.

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. 82

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

NOTE 9 – LONG-TERM DEBT (Continued)

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 2025 , net revenues amounted to $17,680,137 which represented coverage of 7.27 over the $2,427,200 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.

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 2025, net revenues amounted to $9,433,132 which represented coverage of 9.04 over the $1,046,450 debt service.

83

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

NOTE 9 – LONG-TERM DEBT (Continued)

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
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 900,000 542,000 1,150,000 1,687,275 2031-2035 5,075,000 2,139,600 6,660,000 7,501,375 2036-2040 6,190,000 1,038,800 8,490,000 5,633,500 2041-2045 1,385,000 55,400 10,595,000 3,539,500 2046-2050 11,835,000 1,215,800
16,610,000 $6,266,400 44,000,000 $26,916,800
Plus: Unamoritized bond premium 2,778,813 6,987,788
$19,388,813 $50,987,788
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.

84

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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.

85

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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, 2025, the City has one lease for an Automated License Plate Reader (ALPR) Camera 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, 2025 were:

Property Location
Original
Lease Date
Original
Term
(Years)
Extension
(Years)
Expiration
Date
Including
Options
Monthly
Revenue
as of
June 30,
Lease
Receivable
Balance at
June 30, 2025
Deferred Inflow
of Resources at
June 30, 2025
Fire Station No. 1 Grounds,
777 So. Main Street,
Mil
pitas, CA 95035
6/6/2012 15 25 6/6/2052 $2,190 $837,392 $751,770
HWY680 on CALAVERAS 2/1/2019 5 20 2/1/2044 2,893 702,073 633,438 Freeway Sign on 950 8/17/2010 10 30 8/17/2050 8,827 2,062,104 2,015,037 Advertising display on the
property 7/30/2013 30 30 7/30/2073 15,090 9,435,907 8,586,251 Total $29,000 $13,037,476 $11,986,496

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

For the Year
Ended June 30 Principal Interest Total
2026 $74,208 $276,992 $351,200
2027 82,442 275,332 357,774 2028 91,034 273,493 364,527 2029 99,997 271,467 371,464
2030 109,343 269,246 378,589
2031 - 2035 701,294 1,305,517 2,006,811 2036 - 2040 1,000,611 1,215,693 2,216,304 2041 - 2045 1,276,734 1,091,897 2,368,631 2046 - 2050 1,439,797 950,749 2,390,546 2051– 2055 1,116,867 808,922 1,925,789 2056 – 2060 1,337,678 683,783 2,021,461 2061 – 2065 1,767,585 519,511 2,287,096 2066 – 2070 2,282,518 305,121 2,587,639 2071 - 2074 1,657,368 55,699 1,713,067 Totals $13,037,476 $8,303,422 $21,340,898

86

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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, 2025, the leases had 27 years remaining. The City recognized $7,613 in lease revenue and $17,926 in interest revenue during the current fiscal year related to these leases. Also, the City has deferred inflows of resources associated with these leases that will be recognized as revenue over the lease term.

HWY 680 on CALAVERAS

As shown in the summary table, the City leases a portion of the parcel at 1325 E. Calaveras Blvd. to American Tower. The original lease terms were five years with a 20-year extension. As of June 30, 2025, the leases had 19 years remaining. The City recognized $19,287 in lease revenue and $15,179 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, 2025, the leases had 25 years remaining. The City recognized $61,291 in lease revenue and $44,632 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 on the property

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, 2025, the leases had 48 years remaining. The City recognized $178,872 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.

C. Leases Payable (City as Lessee)

A summary of the lease payable transactions for the fiscal year ended June 30, 2025, are as follows:

Balance Balance Current
June 30, 2024 Additions Retirements June 30, 2025 Portion Governmental Activities
Automated License Plate Readers (ALPR) $0 $831,707 $239,815 $591,892 $110,860 Total Leases Payable $0 $831,707 $239,815 $591,892 $110,860

Automated License Plate Readers (ALPR)

The City entered into a five-year lease agreement as lessee for the use of automated license plate reader cameras that commenced in July 2024. An initial lease liability was recorded in the amount of $831,707. As of June 30, 2025, the value of the lease liability was $591,892. The City is required to make annual principal and interest payments of $127,500. The lease bears the City’s incremental borrowing rate of 3.043%. The value of the right- to-use asset as of the end of the current fiscal year was $665,366, which is net of accumulated amortization of $166,341.
87

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

NOTE 10 – LEASES (Continued)

The future principal and interest lease payments as of June 30, 2025, were as follows:

For the Year
Ended June 30 Principal Interest Total
2026 $110,860 $16,640 $127,500
2027 114,281 13,219 127,500
2028 117,808 9,692 127,500
2029 248,943 6,057 255,000
Total $591,892 $45,608 $637,500
Governmental Activities
NOTE 11 – SUBSCRIPTION-BASED INFORMATION TECHNOLOGY ARRANGEMENTS

A summary of subscription-based information technology arrangements (SBITA) transactions for the fiscal year ended June 30, 2025, are as follows:

Balance Remeasurement / Balance Current
June 30, 2024 Ad justment Additions Retirements June 30, 2025 Portion Governmental Activities
Subscription Liabilities
Microsoft 365 - CDW Government LLC $413,126 ($269,84 2) ($143,284) Microsoft 365 - SHI International Corp. $501,820 (168,815) $333,005 $164,244 Cayenta 392,656 (186,810) 205,846 205,846
Mark 43 986,749 (685,416) 301,333 148,377
Subtotal $413,126 ($269,842) $1,881 ,225 ($1,184,325) $840,184 $518,467 Bussiness Activities
Subscription Liabilities
Ca
yenta $176,653 ($86,797) $89,856 $89,856
Total $413,126 ($269, 842) $2,057,878 ($1,27 1,122) $930,040 $608,323

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 recorded in the amount of $842,113 during fiscal year 2023, at the time the subscription was placed into se rvice. Implementation costs and prepayments made on the subscription were included in the measurement of the liability during the year ended June 30, 2023. The contract with CDW Government, LLC ended in February 2025, and the City decided not to renew.

In March 2025, the City entered into a three-year SBITA agreement with SHI International Corporation for the purchase of software and related services for Microsoft 365. An initial subscription liability of $501,820 was recorded. Implementation costs and prepayments ma de on the subscription were included in the measurement of the liability during fiscal year 2025.

In July 2020, the City entered into a six-year agreement for Cayenta support and maintenance services with N. Harris Computer Corporation. The first amendment took place in November 2023, extending the contract for another year. The second and cu rrent amendment was entered into as of October 2024, extending the contract for an additional two years. An initial subscription liability was recorded in the amount of $569,309, with $392,656 in governmental fund and $176,653 in proprietary fund.

88

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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

In June 2021, the City entered into a six-year agreement for software license and services with Mark 43, Incorporated. The first am endment took place on June 2022, and the second and current amendment was entered into as of October 2022 to add additional software services. An initial subscription liability was recorded in the amount of $986,749.

As of June 30, 2025, the value of the subscription liability was $930 ,043, with $840,184 in governmental fund and $89,856 in proprietary fund. The City is required to make annual principal and interest payments throughout the life of the subscription. The subscription has an interest rate of 2.72%. As part of the subscription, the City has recorded an intangible right to use subscription asset and accumulated amortization as disclosed in Note 8.

The future subscription and interest subscription payments as of June 30, 2025 follows:

Governmental Activities:

For the Year
Ended June 30 Principal Interest Total
2026 $518,467 $17,829 $536,296
2027 321,717 7,800 329,517
Subtotal $840,184 $25,629 $865,813
Business Activities:

For the Year
Ended June 30 Principal Interest Total
2026 $89,856 $407 $90,263
Totals $930,040 $26,036 $956,076

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.

89

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

NOTE 12 – NET POSITION AND FUND BALANCES (Continued)

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.

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.

90

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

NOTE 12 – NET POSITION AND FUND BALANCES (Continued)

Detailed classifications of the City’s Fund Balances, as of June 30, 2025, are below:

Major Major
Special Capital Projects
Revenue General
Fund OtherGovernmentTransit AreaStreet
ImpImprovementHousingGeneral GovernmentalProjectsact Fee Fund Balance Classifications Fu FundAuthoritynd Fund Fund Funds Total Nonspendable:

Loans receivable
Prepaids, materials, supplies
and deposits $950,516 $981,131$30,615
Property held for resale 4,200,000 4,200,000
Subtotal Nonspendable 5,150,516 5,181,13130,615
Restricted for:

Programs and Maintenance $5,501,784 14,235,1668,733,382 Housing and community development $41,534,342 45,358,9053,824,563 Law enforcement services 99,421 99,421
Solid waste reduction and services 2,474,7942,474,794
Assessment district services 3,926,0923,926,092
Hetch-Hetchy ground lease 1,537,5781,537,578
Community planning 218,820218,820
Community benefits 450,566450,566
Affordable housing 4,063,2954,063,295
Affordable housing unrestricted 3,305,2873,305,287
Park improvement projects 8,978,7838,978,783
Storm drain projects 7,952,1477,952,147
General government projects
Transit area capital projects $71,618,683 71,618,683
Subtotal Restricted 41,534,342 5,501,784 71,618,683 164,219,53745,564,728 Committed to:

PERS stabilization 7,252,035 7,252,035
Artificial turf replacement 1,900,000 1,900,000
Technology replacement 400,000 400,000
Facilities replacement 3,178,939 3,178,939
Subtotal Committed 12,730,974 12,730,974
Assigned to:

Change in investment market values
Uninsured claims payable 3,408,154 3,408,154
Public art projects 1,312,5111,312,511
Contracts 1,820,411 1,820,411
General government capital projects $28,262,193 28,262,193 Other assigned 2,249,648 2,249,648
Subtotal Assigned 7,478,213 28,262,193 1 37,052,917,312,511 Unassigned:

General Fund
Contingency reserve
Budget stabilization
Future deficit
ERAF reserve
Strategic Property Acquisition Revenue
Community Investment Program
Unassigned
23,431,786
23,431,786
920,172
2,764,788
710,248
1,970,801
10,862,102
23,431,786
23,431,786
920,172
2,764,788
710,248
1,970,801
10,862,102
Subtotal Unassigned 64,091,683 64,091,683
Total fund balances $89,451,386 $41,534,342 $5,501,784 $71,618 ,683 $28,262,193 $46,9 $283,276,24207,854

91

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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, 2025, 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, 2025, the reserve is set at $20,809,168 and classified in the unassigned fund balance.

92

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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.

93

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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, 2025, the capital reserve for the Water Operating Fund is set at $8,638,318 and for the Sewer Operating Fund at $4,794,755.

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, 2025:

Governmental Business-Type
Activities Activities Total
Capital Asset, Net of Accumulated Depreciation $390,655,708 $189,641,089 $580,296,797 Less Capital Debt (20,820,889) (50,987,788) (71,808,677) Plus Unspent Bond Proceeds 101,523 73,242 174,765
$369,936,342 $138,726,543 $508,662,885

94

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

NOTE 13 – PENSION PLANS

A. General Information

Plan Descriptions – All qualified permanent and probationary employees are eligible to participate in the City’s separate Safety (police and fire) and Miscellaneous (all other) Plans, agent multiple-employer defined benefit pension plans administered by the California Public Employees’ 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, 2025, are summarized as follows:

Miscellaneous
Classic Tier I Class ic 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 10.37% 10.37% 10.37% Required Unfunded Actuarial Liability Contribution $7,893,441 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 20.19% 20.19% 20.19% Required Unfunded Actuarial Liability Contribution $12,643,155

95

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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, 2025, were $7,893,441 and $12,643,155, 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, 2023 and measurement date of June 30, 2024:

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 474 270 Inactive employees entitled to but not yet receiving benefits 386 29 Active employees 74 10 167 63 9 79
Total 934 10 167 362 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, 2025, the City reported the account balanc e of the trust of $40,247,5 22. 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, 2024, using an annual actuarial valuation as of June 30, 2023 rolled forward to June 30, 2024 using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is shown below.

96

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

NOTE 13 – PENSION PLANS (Continued)

Actuarial Assumptions – The total pension liabilities as of the June 30, 2024 measurement date were determined using the following actuarial assumptions:

Miscellaneous and Safety (1)
Valuation Date June 30, 2023
Measurement Date June 30, 2024
Actuarial Cost Method Entry Age Actuarial 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 lesse r of contract COLA or 2.30% until Purchasing Power Protection Allowance floor on purchasing power applies, 2.30% thereafter
(1) Actuarial assumptions are the same for all benefit tiers (Classic Tier I, Classic Tier II, and PEPRA) (2) Varies by entry age and service
(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, 2023 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.

97

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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, 2023 (Measurement Date) $299,465,454 $204,941,414 $94,524,040 Changes in the year:

Service cost 4,906,642 4,906,642
Interest on the total pension liability 20,495,673 20,495,673 Differences between actual and expected experience 3,449,920 3,449,920 Changes of assumptions
Changes in benefit terms
Contribution - employer 10,021,582 (10,021,582)
Contribution - employee 2,380,561 (2,380,561)
Net Plan to Plan Resource Movement
Net investment income 19,635,969 (19,635,969)
Administrative expenses (166,761) 166,761
Other Miscellaneous Income/(Expense)
Benefit payments, including refunds of employee contributions (16,659,881) (16,659,881) Net changes 12,192,354 15,211,470 (3,019,116)
Balance at June 30, 2024 (Measurement Date) $311,657,808 $220,152,884 $91,504,924 Miscellaneous Plan

98

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

NOTE 13 – PENSION PLANS (Continued)

Increase (Decrease)
Total Pension
Liability
Plan Fiduciary
Net Position
Net Pension
Liability/(Asset)
Balance at June 30, 2023 (Measurement Date) $442,473,974 $277,199,543 $165,274,431 Changes in the year:

Service cost 7,878,824 7,878,824
Interest on the total pension liability 30,227,860 30,227,860 Differences between actual and expected experience 3,842,917 3,842,917 Changes of assumptions
Changes in benefit terms
Contribution - employer 16,708,481 (16,708,481)
Contribution - employee 3,369,456 (3,369,456)
Net Plan to Plan Resource Movement
Net investment income 26,690,229 (26,690,229)
Administrative expenses (225,558) 225,558
Other Miscellaneous Income/(Expense)
Benefit payments, including refunds of employee contributions (24, 342,730) (24,342,730) Net changes 17,606,871 22,199,878 (4,593,007)
Balance at June 30, 2024 (Measurement Date) $460,080,845 $299,399,421 $160,681,424 Grand Totals - Both Plans $771,738,653 $519,552,305 $252,186,348 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 $131,591,499 $221,681,328
Current Discount Rate 6.90% 6.90%
Net Pension Liability $91,504,924 $160,681,424
1% Increase 7.90% 7.90%
Net Pension Liability $58,395,776 $110,525,732

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.

99

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

NOTE 13 – PENSION PLANS (Continued)

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

For the year ended June 30, 2025, the City recognized pension expense of $14,683,606 for the Miscellaneous Plan and $22,764,745 for the Safety Plan, for total pension expense of $37,448,351. On June 30, 2025, 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 $11,363,676 Differences between actual and expected experience 3,223,746 Changes of assumptions
Net differences between projected and actual earnings
on plan investments 3,047,405
Total $17,634,827 $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 $18,294,494 Differences between actual and expected experience 6,957,695 Changes of assumptions 4,811,261
Net differences between projected and actual earnings
on plan investments 4,055,917
Total $34,119,367 $0
Grand Totals - Both Plans $51,754,194 $0
Safety Plan

$29,658,170 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, 2026. 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
2025 $2,086,099 $5,458,776
2026 6,219,237 11,041,329
2027 (903,105) 442,128
2028 (1,131,080) (1,117,360)
$6,271,151 $15,824,873
Annual Amortization

100

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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 $28,018 and the employee’s required contributions of $18,458 were made during the fiscal year ending June 30, 2025.

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, 2025, there were 347 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.

101

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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
Less than 5 PEMHCA Minimum Only
At least 5 Any employee only medical premium rate
Less than 5 PEMHCA Minimum Only
At least 5 Benefit Cap
Less than 5 PEMHCA Minimum Only
5 but less than 9 Up to 25% of the Benefit cap
9 but less than 14 Up to 50% of the Benefit Cap
14 but less than 19 Up to 75% of the Benefit Cap
At least 19 Up to 100% of the Benefit Cap
Less than 5 PEMHCA Minimum Only
At least 5 Benefit cap
Less than 5 PEMHCA Minimum Only
5 but less than 9 Up to 25% of the Benefit Cap
9 but less than 14 Up to 50% of the Benefit Cap
14 but less than 19 Up to 75% of the Benefit Cap
At least 19 Up to 100% of the Benefit Cap
Before January 1, 1989 n/a PEMHCA Minimum Only
Less than 5 PEMHCA Minimum Only
At least 5 Any employee only medical premium rate
Less than 5 PEMHCA Minimum Only
At least 5 Benefit cap
Less than 5 PEMHCA Minimum Only
5 but less than 10 Up to 25% of the Benefit Cap
10 but less than 15 Up to 50% of the Benefit Cap
15 but less than 20 Up to 75% of the Benefit Cap
At least 20 Up to 100% of the Benefit Cap
Professional /
Technical
(PROTECH)
Unrepresented
Miscellaneous and
Fire*
After August 31, 2002
After July 1, 1990 but before September 1,
2002Before July 1, 1995
After June 30, 1995 Any
AnyBefore July 1, 1995
After June 30, 1995 Any
Mid-Management
and Confidential
(LIUNA) (Began
9/2003)
After June 30, 1995
After July 1, 1990 but before 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.
102

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

NOTE 14 – EMPLOYEE BENEFITS (Continued)

Medical benefits for retirees (continued):

Eligibility Rule
(Continuous Years
Hire/Retirement Date Date of Retirement of Service) City Contribution Requirement Before January 1, 1989 n/a PEMHCA Minimum Only
Less than 5 PEMHCA Minimum Only
At least 5 Any employee only medical premium rate
Less than 5 PEMHCA Minimum Only
At least 5 Retiree Cap
Less than 5 PEMHCA Minimum Only
5 but less than 10 Up to 25% of the Retiree Cap
10 but less than 15 Up to 50% of the Retiree Cap
15 but less than 20 Up to 75% of the Retiree Cap
At least 20 Up to 100% of the Retiree Cap
Before January 1, 1990 n/a PEMHCA Minimum Only
Less than 1 PEMHCA Minimum Only
At least 1 Any employee only premium
Less than 1 PEMHCA Minimum Only
1 but less than 10 50% of any employee only premium
At least 10 100% of any employee only premium
Less than 1 PEMHCA Minimum Only
1 but less than 10
Up to 50% of the lesser of the Retiree Cap and the
premium rate
At least 10
Up to 100% of the lesser of the Retiree Cap and the
premium rate
Less than 1 PEMHCA Minimum Only
1 but less than 10 Up to 25% of the Benefit Cap
10 but less than 15 Up to 50% of the Benefit Cap
15 but less than 20 Up to 75% of the Benefit Cap
At least 20 Up to 100% of the Benefit Cap
Less than 1 PEMHCA Minimum Only
1 but less than 10 25% of the lesser of the Retiree Cap and the premium rate
10 but less than 15 50% of the lesser of the Retiree Cap and the premium rate
15 but less than 20 75% of the lesser of the Retiree Cap and the premium rate
At least 20 100% of the lesser of the Retiree Cap and the premium rate
Before February 21, 2007
After February 20, 2007
After December 31, 1994
Fire Safety
(IAFF)
Before January 1, 1995
After December 31, 1989 but before January 1,
1995
After December 31, 1994 but before February
21, 2007
After February 20, 2007
Before July 1, 1995
After June 30, 1995
Unrepresented
Police ONLY*
After December 31, 1988 but before July 1,
2003
After June 30, 2003
Any

103

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

NOTE 14 – EMPLOYEE BENEFITS (Continued)

Medical benefits for retirees (continued):

Eligibility Rule
(Continuous Years
Hire/Retirement Date Date of Retirement of Service) City Contribution Requirement Before January 1, 1989 n/a PEMHCA Minimum Only
Less than 5 PEMHCA Minimum Only
At least 5 Any employee only medical premium rate
Less than 5 PEMHCA Minimum Only
At least 5 Up to the Retiree Cap
Less than 1 PEMHCA Minimum Only
1 but less than 9 25% of any employee only premium
9 but less than 14 50% of any employee only premium
14 but less than 19 75% of any employee only premium
At least 19 100% of any employee only premium
Less than 1 PEMHCA Minimum Only
1 but less than 9 Up to 25% of the Retiree Cap
9 but less than 14 Up to 50% of the Retiree Cap
14 but less than 19 Up to 75% of the Retiree Cap
At least 19 Up to 100% of the Retiree Cap
Before July 16, 1989 n/a PEMHCA Minimum Only
Less than 5 PEMHCA Minimum Only
At least 5 Any employee only medical premium rate
Less than 5 PEMHCA Minimum Only
At least 5 Benefit Cap
Less than 1 PEMHCA Minimum Only
1 but less than 10 Up to 25% of the Benefit Cap
10 but less than 15 Up to 50% of the Benefit Cap
15 but less than 20 Up to 75% of the Benefit Cap
At least 20 Up to 100% of the Benefit Cap
Before July 1, 1996 n/a PEMHCA Minimum Only
Less than 5 PEMHCA Minimum Only
At least 5 Any employee only medical premium rate
Less than 5 PEMHCA Minimum Only
At least 5 Benefit Cap
Less than 5 PEMHCA Minimum Only
5 but less than 9 Up to 25% of the Benefit Cap
9 but less than 14 Up to 50% of the Benefit Cap
14 but less than 19 Up to 75% of the Benefit Cap
At least 19 Up to 100% of the Benefit Cap
After November 26, 2007
After June 30, 1996 and before November 27,
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)

104

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

NOTE 14 – EMPLOYEE BENEFITS (Continued)

Medical benefits for dependents:

Group Date of Hire Date of Retirement
Minimum Years of
Continuous Service
City Contribution for Dependent Medical
Premiums 1
Before July 1, 1995 After December 4, 2006 At least 5 Up to 100% of family/dependent premium 5 but less than 9 Up to 25% of the family/dependent premium 9 but less than 14 Up to 50% of the family/dependent premium 14 but less than 19 Up to 75% of the family/dependent premium At least 19 Up to 100% of the family/dependent premium
Before July 1, 1995 After January 1, 2007 At least 5 Up to 100% of family/dependent premium 5 but less than 9 Up to 25% of the family/dependent premium 9 but less than 14 Up to 50% of the family/dependent premium 14 but less than 19 Up to 75% of the family/dependent premium At least 19 Up to 100% of the family/dependent premium
Before January 1, 1996 After June 30, 2003 At least 5 100% of family/dependent premiums 5 but less than 9 Up to 25% of the family/dependent premium 9 but less than 14 Up to 50% of the family/dependent premium 14 but less than 19 Up to 75% of the family/dependent premium At least 19 Up to 100% of the family/dependent premium Before January 1, 1996 After September 4, 2007 At least 5 100% of family/dependent premiums 5 but less than 9 Up to 25% of the family/dependent premium 9 but less than 14 Up to 50% of the family/dependent premium 14 but less than 19 Up to 75% of the family/dependent premium At least 19 Up to 100% of the family/dependent premium Professional /
Technical
(PROTECH) After June 30, 1995 After December 4, 2006
Mid‐Management
and Confidential
(LIUNA) After June 30, 1995 After January 1, 2007
Unrepresented
(UNREP‐Police)2
After December 31, 1995 After June 30, 2003
Unrepresented
(UNREP‐Fire)3
After December 31, 1995 After September 4, 2007
1 Family/Dependent Medical Premium is active employee Single OR Family medical premium rate less retiree's 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.

105

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

NOTE 14 – EMPLOYEE BENEFITS (Continued)

Medical benefits for dependents (continued):

Group Date of Hire Date of Retirement
Minimum Years of
Continuous Service
City Contribution for Dependent Medical
Premiums 1
Before January 1, 1996 After June 30, 2018 At least 5 100% of family/dependent premiums 5 but less than 9 Up to 25% of the family/dependent premium 9 but less than 14 Up to 50% of the family/dependent premium 14 but less than 19 Up to 75% of the family/dependent premium At least 19 Up to 100% of the family/dependent premium 5 but less than 9 50% of family/dependent medical premiums At least 10 100% of family/dependent medical premiums
5 but less than 9 Up to 25% of the family/dependent premium 9 but less than 14 Up to 50% of the family/dependent premium 14 but less than 19 Up to 75% of the family/dependent premium At least 19 Up to 100% of the family/dependent premium Before January 1, 1996 After June 30, 2003 At least 5 100% of family/dependent premiums 5 but less than 9 Up to 25% of the family/dependent premium 9 but less than 14 Up to 50% of the family/dependent premium 14 but less than 19 Up to 75% of the family/dependent premium At least 19 Up to 100% of the family/dependent premium
Before June 30, 1996 At least 5 100% of any family/dependent medical premiums 5 but less than 10 Up to 25% of the lowest family/dependent premium 10 but less than 15 Up to 50% of the lowest family/dependent premium 15 but less than 20 Up to 75% of the lowest family/dependent premium At least 20 Up to 100% of the lowest family/dependent premium 1 Family/Dependent Medical Premium is active employee Single+1 OR Family medical premium rate less retiree's Single medical reimbursement. 4 The amounts paid for dependents are adjusted to keep the fund viable. Currently, the IAFF dependent fund pays the following amounts:
- $300 per month for 1 dependent
- $500 per month for two or more dependents
5 The Fire Chief is eligible for dependent fund benefits in Unrep Misc group.

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

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, 2025, the City’s contributions to the Plan were $2,795,021.

Employees Covered by Benefit Terms – Membership in the plan consisted of the following at the measurement date of June 30, 2024:

Active employees 393
Inactive employees or beneficiaries currently
receiving benefit payments 336
Inactive employees entitled to but not yet
receiving benefit payments 102
Total 831

106

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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, 2024, that was rolled forward using standard update procedures to determine the total OPEB liability as of June 30, 2025, based on the following actuarial methods and assumptions:

Actuarial Assumptions
Valuation Date June 30, 2023
Measurement Date June 30, 2024
Actuarial Cost Method Entry Age Normal Cost, level percent of pay Asset Valuation Method Fair Value
Actuarial Assumptions:

Discount Rate 6.25%
Inflation 2.50%
Salary Increase 3.00%
Investment Rate of Return 6.25%
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%

107

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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, 2025 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, 2024 $71,999,930 $55,933,812 $16,066,118 Changes Recognized for the Measurement Period:

Service Cost 2,122,257 2,122,257
Interest on the total OPEB liability 4,439,933 4,439,933 Changes in benefit terms
Differences between expected and actual experience
Changes of assumptions (881,178) (881,178)
Contributions from the employer 2,123,941 (2,123,941)
Net investment income 6,079,033 (6,079,033)
Plan Experience 1,000,491 1,000,491
Administrative expenses (18,247) 18,247
Benefit payments (3,856,305) (3,856,305)
Net changes 2,825,198 4,328,422 (1,503,224)
Balance at June 30, 2025 (Measurement Date 6/30/24) $74,825,128 $60,262,234 $14,562,894 Increase (Decrease)

The benefit payments and refunds include implied subsidy benefit payments in the amount of $2,618,349.

108

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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% (6.25%) Discount Rate +1%
$24,187,423 $14,562,894 $661,400

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
$5,844,717 $14,562,894 $25,304,054

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, 2024:

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

109

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

NOTE 14 – EMPLOYEE BENEFITS (Continued)

Actuarial Methods and Assumptions – The Union Dependent Funds’ total OPEB liability was measured as of June 30, 2024 and the total OPEB liability was determined by an actuarial valuation dated June 30, 2024, 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 Assumptions
Valuation Date June 30, 2023
Measurement Date June 30, 2024
Actuarial Cost Method Entry Age Normal Cost, level percent of pay Actuarial Assumptions:

Discount Rate 3.86% as of June 30, 2024
Inflation 2.50%
Salary Increase 3.00%
Investment Rate of Return 3.86%
Mortality Rate MacLeod Watts Scale of 2022 applied generationally from 2015 Healthcare Trend Rate 6.0% in 2026 fluctuati ng 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, 2023 $31,841,662
Changes Recognized for the Measurement Period:

Service Cost 1,079,540
Interest on the total OPEB liability 1,248,402
Changes in benefit terms
Differences between expected and actual experience 809,405 Changes of assumptions (295,776)
Contributions from the employer
Net investment income
Other Expenses
Plan Experience
Administrative expenses
Benefit payments (1,158,383)
Net changes 1,683,188
Balance at June 30, 2024 (Measurement Date) $33,524,850

110

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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

3.93%
$38,157,413 $33,524,850 $29,704,768
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
(6.00% - 3.90%)
$29,440,369 $33,524,850 $38,618,358
1% Decrease 1% Increase

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

For the year ended June 30, 2025, the City recognized Retiree Medical Benefits OPEB Plan and Dependent Fund OPEB Plan recognized expense of $1,089,558 and $2,281,767 respectively, for total OPEB expense of $3,371,325. At June 30, 2025, the Retiree Medical Benefits OPEB plan and Union Dependent Funds reported deferred outflows and inflows of resources related to OPEB from the following sources:

111

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

NOTE 14 – EMPLOYEE BENEFITS (Continued)

Deferred Outflows Deferred Inflows
of Resources of Resources
Employer contributions made subsequent to the measurement date $2,795,021 Differences between actual and expected experience 2,921,861 ($1,382,139) Changes of assumptions 2,434,015 (1,704,987)
Net differences between projected and actual earnings on plan investments 579,652
Total $8,730,549 ($3,087,126)
Deferred Outflows Deferred Inflows
of Resources of Resources
Employer contributions made subsequent to the measurement date $1,265,316 Differences between actual and expected experience 2,611,740 ($778,027) Changes of assumptions 2,378,891 (5,299,926)
Net differences between projected and actual earnings on plan investments
Total $6,255,947 ($6,077,953)
Grand Total, Both Plans $14,986,496 ($9,165,079)
Retiree Medical Benefits OPEB Plan
Dependent Fund OPEB Plan

Deferred outflows of resources related to contributions after the measurement date, amounting to $4,060,337 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 2026 ($482,439) ($46,175)
2027 2,706,560 (46,175)
2028 137,947 (302,098)
2029 6,006 (465,716)
2030 465,523 (527,777)
Thereafter 14,805 300,619
Total $2,848,402 ($1,087,322)
Annual Amortization

General Fund has been primarily used in prior years to liquidate OPEB liabilities. 112

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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, 2025, sick leave benefits payable increased by $848,065 and vacation benefits payable increased by $125,751. 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, 2024 $7,199,906 $482,774 $1,343,593 $108,026 Additions 3,907,643 243,191 3,688,567 162,305
Payments and adjustments (3,664,259) (360,824) (2,844,958) (157,849) Balance as of June 30, 2025 $7,443,290 $365,141 $2,187,202 $112,482 General Government $733,833 $246,429
Building 221,305 58,693
Public Works 507,166 112,942
Engineering 284,202 81,953
Planning 112,509 47,490
Recreation 277,810 103,826
Police 3,726,143 776,982
Fire 1,522,223 733,941
Water Utility $193,904 $56,602
Sewer Utility 171,237 55,880
Internal Service 58,099 24,946
Total $7,443,290 $365,141 $2,187,202 $112,482
Long-Term Portion:

Governmental activities $4,249,923 $239,524
Business-type activities $303,110 $112,482
Total long term portions $4,249,923 $303,110 $239,524 $112,482 Current Portion:

Governmental activities $3,193,367 $1,947,678
Business-type activities $62,031
Total current portions $3,193,367 $62,031 $1,947,678

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. 113

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025
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 miscellaneous employees up to a maximum of $14,000 per family, based on years of service. Claims are funded on a pay-as-you-go basis. During the year ended June 30, 2025 the City paid $1,162,534 in dental claims and administrative fees. Public safety employees are insured under various dental care insurance plans.
114

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025
NOTE 15 – RISK MANAGEMENT (Continued)
D. Liability for Uninsured Claims
The City provides for the uninsured portion of claims and judgments, including a provision for claims incurred but not reported when a loss is deemed probable of assertion and 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:
2025
Worker’s General
Compensation Liability Total 2024
Beginning balance $7,310,017 $850,204 $8,160,221 $6,352,745 Liability for current fiscal year claims 1,688,149 237,051 1,925,200 2,355,003 Increase (decrease) in estimated liability
for prior fiscal year claims and claims
incurred but not reported (IBNR) (223,930) (310,954) (534,884) 1,303,985 Claims paid (2,114,530) (107,117) (2,221,647) (1,851,512) Ending balance $6,659,706 $669,184 $7,328,890 $8,160,221 Due in one year $1,695,709 $253,406 $1,949,115 $1,748,408 Settlements have not exceeded insurance coverage in the past three fiscal years.

NOTE 16 – COMMITMENTS AND CONTINGENT LIABILITIES
A. Litigation
The City is subject to litigation arising in the normal course of business. In the opinion of the City Attorney there is no pending litigation which is likely to have a material adverse effect on the financial position of the City.

B.

Federal and State Grant Programs
The City participates in several Federal and State grant programs. These programs are subject to audit by the City’s independent accountants in accordance with the provisions of the federal Single Audit Act as amended and applicable State requirements. No cost disallowances have been proposed as a result of audits completed to date; however, these programs are still subject to further examination by the grantors and the amount, if any, of expenditures which may be disallowed by the granting agencies cannot be determined at this time.

The City expects such amounts, if any, to be immaterial. 115

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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, 2025 were as follows:

Major Governmental Funds:

General Fund $1,820,411
Housing Authority Fund 100,500
Non-Major Governmental Funds 323,269
Total Encumbrances $2,244,180

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.

116

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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 defaul ting 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 $791,844 during fiscal year 2025, which is included as a component of purchased water expenses in the Water Enterprise Fund. The surcharge for fiscal year 2026 is estimated to be $1,077,492.

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.

117

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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, 2025.

118

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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 2025 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, 2024 Retirements June 30, 2025 Portion
2015 Tax Allocation Bonds
2%-5%, due September 1, 2032 $64,455,000 $8,595,000 $55,860,000 $9,025,000 Plus: Unamortized bond premium 10,321,670 1,190,962 9,130,708 Total $74,776,670 $9,785,962 $64,990,708 $9,025,000

119

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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
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 6,565,000 893,625
2030-2033 14,590,000 946,500
55,860,000 $9,345,750
Plus: Unamortized bond premium 9,130,708
$64,990,708

4. Defeased Bonds

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

120

CITY OF MILPITAS
Notes to Basic Financial Statements
for the Year Ended June 30, 2025

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.

121

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 6/30/24 Total OPEB Liability
Service Cost $2,386,392 $2,356,491 $2,423,566 $1 ,958,563 $1,503,917 $2,077,984 $2,140,324 $2,122,257 Interest 4,794,071 5,155,080 5,462,138 3,581,088 4,100,155 3,916,381 4,070,218 4,439,933 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 (881,178) Plan experience 2,919,973 1,000,491
Benefit payments (3,325,081) (2,994,247) (3,183,858) (3 ,122,284) (3,221,642) (3,382,910) (3,727,690) (3,856,305) 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 2,825,198 Total OPEB liability - beginning 80,926,571 83,518,106 87,921,496 62,305,877 59,101,946 63,294,468 65,905,923 71,999,930 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 $74,825,128 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 $2,123,941 Contributions - employee
Net investment income 3,708,342 3,175,844 2,834, 217 1,745,028 14,164,474 (8,452,324) 3,401,636 6,079,033 Administrative expense (18,732) (21,490) (9 ,742) (24,292) (19,480) (16,234) (15,681) (18,247) Benefit payments (3,325,081) (2,994,247) (3,183,858) (3 ,122,284) (3,221,642) (3,382,910) (3,727,690) (3,856,305) 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 4,328,422 Plan fiduciary net position - beginning 33,780,048 39,104,333 44,016,612 48,308,972 51,435,598 64,102,543 54,008,340 55,933,812 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 $60,262,234 Net OPEB liability (asset) - ending (a)-(b) $44,413,773 $43,904,884 $13, 996,905 $7,666,348 ($808,075) $11,897,583 $16,066,118 $14,562,8 94 Plan fiduciary net position as a percentage of the total OPEB liability 46.82% 50.06% 77.54% 87.03% 101.28% 81.95% 77.69% 80.54% Covered-employee payroll $42,017,236 $43,375,678 $48,788 ,854 $52,202,907 $59,134,552 $59,298,425 $63,840,691 $70,982,435 Net OPEB liability as a percentage of covered-employee payroll 105.70% 101.22% 28.69% 14.69% -1.36% 20.06% 25.17% 20.52% * Fiscal year 2018 was the first year of implementation. 125

City of Milpitas
Required Supplementary Information

SCHEDULE OF CONTRIBUTIONS
Agent Multiple-Employer Retiree Medical Benefits (OPEB) Plan Last 10 fiscal years*
Fiscal Year Ended June 30, 2018 2019 2020
Explicit Implicit Total Explicit Implicit Total Explicit Implicit Total Actuarially determined contribution $3,387,020 ($219, 104) $3,167,916 $3,492,808 ($546,593) $2,946,215 $788,831 $1,545,113 $2,333,944 Contributions in relation to the
actuarially determined contribution 3,387,020 1,416,873 4,803,893 3,492,808 1,158,935 4,651,743 3,478,018 1,050,156 4,528,174 Contribution deficiency (excess) $0 ($1,635,977) ($1, 635,977) $0 ($1,705,528) ($1,705,528) ($2,689,187) $494,957 ($2,194,230) Covered-employee payroll $43,375,678 $43,375,678 $43,37 5,678 $48,788,854 $48,788,854 $48,788,854 $52,202,907 $52,202,907 $52,202,907 Contributions as a percentage of
covered-employee payroll 7.81% 3.27% 11.08% 7.16% 2.38% 9.53% 6.66% 2.01% 8.67% Fiscal Year Ended June 30, 2021 2022 2023
Explicit Implicit Total Explicit Implicit Total Explicit Implicit Total Actuarially determined contribution $655,377 $1,552, 190 $2,207,567 $655,377 $1,611,861 $2, 267,238 $1,723,519 $1,232,729 $2,956,248 Contributions in relation to the
actuarially determined contribution 655,377 1,088,216 1,743,593 682,866 1,074,399 1, 757,265 1,034,478 1,232,729 2,267,207 Contribution deficiency (excess) $0 $ 463,974 $463,974 ($27,489) $537,462 $509,973 $689,041 $0 $689,041 Covered-employee payroll $59,134,552 $59,134,552 $59,13 4,552 $59,298,425 $59,298,425 $59,298,425 $59,298,425 $59,298,425 $59,298,425 Contributions as a percentage of
covered-employee payroll 1.11% 1.84% 2.95% 1.15% 1.81% 2.96% 1.74% 2.08% 3.82% Fiscal Year Ended June 30, 2024 2025
Explicit Implicit Total Explicit Implicit Total
Actuarially determined contribution $1,660,923 $1,208,956 $2,869,879 $2, 361,754 $1,236,710 $3,598,464 Contributions in relation to the
actuarially determined contribution 885,985 1,237,956 2,123,941 1,557,898 1,237,123 2,795,021 Contribution deficiency (excess) $774,938 ($29,000) $745,938 $803,856 ($413) $803,443 Covered-employee payroll $63,840,691 $63,840,691 $63,840,691 $70,982,435 $70,982,435 $70,982,435 Contributions as a percentage of
covered-employee payroll 1.39% 1.94% 3.33% 2.19% 1.74% 3.94% Notes to Schedule
Valuation date:

Methods and assumptions used to determine contribution rates:

Valuation Date June 30, 2025
Actuarial Assumptions:

Discount Rate 6.25%
Inflation 2.50%
Salary Increase 3.00%
Investment Rate of Return 6.25%
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.

126

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 6/30/24 Total OPEB Liability
Service Cost $1,139,508 $1,402, 597 $1,767,339 $1,183,959 $1,079,540 Interest 905,377 810,987 687,094 1,069,943 1,248,402
Changes in benefit terms $28,504,872
Differences between expected and actual experience (1,465,027) 2,397,223 809,405 Changes of assumptions 3,100,405 2, 591,371 (7,639,426) (105,254) (295,776) Benefit payments (1,437,201) (1,028 ,064) (1,012,052) (1,031,989) (1,158,383) Net change in total OPEB liability 28,504,872 3,708,089 2,311,864 (6,197,045) 3,513,882 1,683,188 Total OPEB liability - beginning 28,504,872 32,212,961 34,524,825 28,327,780 31,841,662 Total OPEB liability - ending (a) $28,504,872 $32,212,961 $34,524,825 $28,327,780 $31,841,662 $33,524,850 Plan fiduciary net position
Contributions - employer $1, 437,201 $1,012,052 $1,031,989 $1,158,383 Contributions - employee
Net investment income
Administrative expense
Benefit payments (1,437,201) (1,012,052) (1,031,989) (1,158,383) 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 $0 Net OPEB liability - ending (a)-(b) $28,504,872 $32 ,212,961 $34,524,825 $28,327,780 $31,841,662 $33,524,850 Plan fiduciary net position as a percentage of the total OPEB liability 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Covered-employee payroll $48,788,854 $52,202, 907 $59,134,552 $59,298,425 $62,201,383 $63,793,790 Net OPEB liability as a percentage of covered-employee payroll 58.42% 61.71% 58.38% 47.77% 51.19% 52.55% *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.

127

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 2025 Explicit Explicit Explicit Explicit Explicit Explicit
Actuarially required contribution N/A (a) 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 $0 Contribution deficiency (excess) N/A (a) 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 $63,793,790 Contributions as a percentage of
covered-employee payroll N/A (a) 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.

128

City of Milpitas
Required Supplementary Information

SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS Miscellaneous Plan - Agent Multiple-Employer Defined Pension Plan Last 10 Years
Measurement Period 2014-15 2015-16 2016-17 2017-18
Total Pension Liability
Service Cost $2,664,628 $2,666,665 $3,008,973 $3,042,853 Interest 14,114,152 14,689,192 15,078,047 15,647,110
Differences between expected and actual experience (982,598) (18,301) (1,238,427) 1,831,444 Changes of assumptions (3,463,459) 12,475,424 (1,404,854) Changes in benefits
Benefit payments, including refunds of employee contributions (8,930,516) (9,558,779) (10,236,837) (10,906,398) Net change in total pension liability 3,402,207 7,778,777 19,087,180 8,210,155 Total pension liability - beginning 192,077,728 195,479,935 203,258,712 222,345,892 Total pension liability - ending (a) $195,479,935 $203,258,712 $2 22,345,892 $230,556,047 Plan fiduciary net position
Contributions - employer $4,076,975 $4,519,744 $5,048,143 $5,762,448 Contributions - employee 1,326,989 1,333,019 1,266,956 1,473,732 Net investment income 3,281,429 775,183 16,109,364 13,123,448 Administrative expense (164,523) (89,109) (211,414) (241,795) Benefit payments, including refunds of employee contributions (8,930,516) (9,558,779) (10,236,837) (10,906,398) Other Miscellaneous Income/Expense (459,172)
Net Plan to Plan Resource Movement (370) (370) (381)
Net change in plan fiduciary net position (409,646) (3,020,312) 11,975,842 8,751,882 Plan fiduciary net position - beginning 146,622,149 146,212,503 143,192,191 155,168,033 Plan fiduciary net position - ending (b) $146,212,503 $143,192,191 $1 55,168,033 $163,919,915 Net pension liability - ending (a)-(b) $49,267,432 $60,066,521 $6 7,177,859 $66,636,132 Plan fiduciary net position as a percentage of the total pension liability 74.80% 70.45% 69.79% 71.10%
Covered payroll $16,009,660 $16,161,589 $1 6,418,123 $18,846,066 Net pension liability as percentage of covered payroll 307.74% 371.66% 409.17% 382.47% 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).

Changes in assumptions. In 2022, the accounting discount rate reduced from 7.15% to 6.90%. In 2016, 2018, 2019, 2020, 2021, 2023,2024 and 2025, 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. 130

2018-19 2019-20 2021-22 2022-23 2023-24 2024-25
$3,361,140 $3,777,335 $4,262,309 $4,859,903 $4,745,953 $4,906,642 16,517,342 17,295,222 18,046,275 18,711,899 19,679,002 20,595,673 4,569,776 2,592,349 1,466,976 1,596,580 5,257,874 3,449,920 8,099,828
272,125
(11,589,225) (12,009,750) (12,545,846) (14,478,741) (15,578,919) (16,659,881) 12,859,033 11,655,156 11,229,714 18,789,469 14,376,035 12,292,354 230,556,047 243,415,080 255,070,236 266,299,950 285,089,419 299,465,454 $243,415,080 $255,070,236 $266,299,950 $ 285,089,419 $299,465,454 $311,757,808 $6,864,376 $7,965,270 $8,925,250 $9,800,794 $9,432,683 $10,021,582 1,569,027 1,772,996 1,998,174 1,861,769 2,143,742 2,380,561 10,774,536 8,527,794 40,453,566 (16,338,954) 12,287,794 19,635,969 (116,977) (241,663) (177,248) (134,612) (144,718) (166,761) (11,589,225) (12,009,750) (12,545,846) (14,478,741) (15,578,919) (16,659,881) 381
7,502,118 6,014,647 38,653,896 (19,289,744) 8,140,582 15,211,470 163,919,915 171,422,033 177,436,680 216,090,576 196,800,832 204,941,414 $171,422,033 $177,436,680 $216,090,576 $ 196,800,832 $204,941,414 $220,152,884 $71,993,047 $77,633,556 $50,209,374 $88,288,587 $94,524,040 $91,604,924

71.10% 69.56% 81.15% 69.03% 68.44% 70.62%
$22,079,190 $19,463,309 $25,754,131 $27,165,471 $27,088,772 $29,033,384 382.47% 398.87% 194.96% 325.00% 348.94% 315.52%
131

City of Milpitas
Required Supplementary Information

SCHEDULE OF CONTRIBUTIONS
Miscellaneous Plan - Agent Multiple-Employer Defined Pension Plan Last 10 Years
Fiscal Year Ended June 30 2016 2017 2018 2019
Actuarially determined contribution $4,236,931 $5,082,638 $6,243,904 $6,863,508 Contributions in relation to the actuarially
determined contributions 4,236,931 5,082,638 6,243,904 6,863,508 Contribution deficiency (excess) $0 $0 $0 $0
Covered payroll $16,161,589 $16,418,123 $18,846,066 $22,079,190 Contributions as a percentage of covered
payroll 26.22% 30.96% 33.13% 31.09%
Notes to Schedule
Valuation date: 6/30/2014 6/30/2015 6/30/2016 6/30/2017 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

2.75% for 2015 to 2019, 2.625% for 2020, 2.50% for 2021 and 2022, and 2.30% for 2023, 2024 and 2025.

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, 2024 and 2025, net of administrative expenses, including inflation.

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

The probabilities of mortality are base d 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 ye ars of projected mortality using 90% of Scale MP-2016 published by the Society of Actuaries. For 2023, 2024 and 2025, pre-retirement and post-retirement mortality rates include generational mortality using 80% of Scale MP-2020 published by the Society of Actuaries. 132

2020 2021 2022 2023 2024 2025
$8,337,504
$8,916,157 $9,799,723 $9,421,792 $10,017,840 $11,363,676 8,337,504 8,916,157 9,799,723 9,421,792 10,017,840 11,363,676 $0 $0 $0 $0 $0 $0
$19,463,309 $21,793,252 $25,754,131 $27,165,471 $27,088,772 $29,033,384

42.84% 40.91% 38.05% 34.68% 36.98% 39.14%
6/30/2018 6/30/2019 6/30/2020 6/30/2021 6/30/2022 6/30/2023 133

City of Milpitas
Required Supplementary Information
Measurement Period 2014-15 2015-16 2016-17 2017-18
Total Pension Liability
Service Cost $4,808,751 $5,094,318 $5,934,642 $5,975,378 Interest 20,535,893 21,663,378 22,434,283 23,331,989
Differences between expected and actual experience (2,363,470) 3,274,330 (690,685) 626,935 Changes of assumptions (5,052,089) 18,725,315 (986,630) Changes in benefits
Benefit payments, including refunds of employee contributions (13,656,196) (14,390,575) (14,864,837) (16,083,729) Net change in total pension liability 4,272,889 15,641,451 31,538,718 12,863,943 Total pension liability - beginning 280,282,332 284,555,221 300,196,672 331,735,390 Total pension liability - ending (a) $284,555,221 $300,196,672 $331,735,390 $344,599,333 Plan fiduciary net position
Contributions - employer $6,604,951 $7,230,399 $7,887,539 $8,866,550 Contributions - employee 1,887,408 2,064,277 2,233,341 2,240,962 Net investment income 4,420,615 1,031,136 22,090,936 17,931,642 Administrative expense (224,227) (121,445) (288,028) (330,577) Net Plan to Plan Resource Movement (521)
Other Miscellaneous Income/Expense (627,771)
Benefit payments, including refunds of employee contributions (13,656,196) (14,390,575) (14,864,837) (16,083,729) Net change in plan fiduciary net position (967,449) (4,186,208) 17,058,951 11,996,556 Plan fiduciary net position - beginning 200,237,534 199,270,085 195,083,877 212,142,828 Plan fiduciary net position - ending (b) $199,270,085 $195,083,877 $212,142,828 $224,139,384 Net pension liability - ending (a)-(b) $85,285,136 $105,112,795 $1 19,592,562 $120,459,949 Plan fiduciary net position as a percentage of the total pension liability 70.03% 64.99% 63.95% 65.04%
Covered payroll $18,810,920 $20,170,400 $21,078,669 $20,840,464 Net pension liability as percentage of covered payroll 453.38% 521.12% 567.36% 578.01% Notes to Schedule:

SCHEDULE OF CHANGES IN THE NET PENSION LIABILITY AND RELATED RATIOS Safety Plan - Agent Multiple-Employer Defined Pension Plan Last 10 Years
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).

Changes in assumptions. In 2017, the accounting discount rate reduced from 7.65% to 7.15%. In 2016, 2018, 2019, 2020, 2021, 2023, 2024, and 2025, 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.
134

2018-19 2019-20 2021-22 2022-23 2023-24 2024-25
$6,211,449 $6,711,730 $7,266,789 $7,801,769 $7,938,634 $7,878,824 24,560,414 25,568,359 26,671,979 27,775,910 29,060,359 30,227,860 4,563,968 981,131 2,106,663 1,878,012 5,485,493 3,842,917 14,433,785
117,478
(17,533,455) (18,278,539) (20,179,552) (21,827,081) (23,440,654) (24,342,730) 17,802,376 14,982,681 15,865,879 30,062,395 19,161,310 17,606,871 344,599,333 362,401,709 377,384,390 393,250,269 423,312,664 442,473,974 $362,401,709 $377,384,390 $393,250,269 $423,312,664 $442,473,974 $460,080,845 $10,288,856 $12,104,306 $13,294,083 $14,258,505 $15,458,966 $16,708,481 2,441,763 2,748,961 2,834,054 2,853,307 3,246,156 3,369,456 14,733,700 11,689,024 55,066,837 (22,163,861) 16,573,120 26,690,229 (159,951) (329,757) (241,588) (182,284) (195,278) (225,558) 521
(17,533,455) (18,278,539) (20,179,552) (21,827,081) (23,440,654) (24,342,730) 9,771,434 7,933,995 50,773,834 (27,061,414) 11,642,310 22,199,878 224,139,384 233,910,818 241,844,813 292,618,647 265,557,233 277,199,543 $233,910,818 $241,844,813 $292,618,647 $265,557,233 $277,199,543 $299,399,421 $128,490,891 $135,539,577 $100,631,622 $157,755,431 $165,274,431 $160,681,424

64.54% 64.08% 74.41% 62.73% 62.65% 65.08%
$21,681,207 $23,703,982 $26,167,767 $26,110,338 $26,756,435 $26,890,185 592.64% 571.80% 384.56% 604.19% 617.70% 597.55%
135

City of Milpitas
Required Supplementary Information
Fiscal Year Ended June 30 2016 2017 2018 2019
Actuarially determined contribution $7,230,399 $7,887,539 $8,866,550 $10,288,856 Contributions in relation to the actuarially
determined contributions 7,346,983 7,887,539 8,866,550 10,288,856 Contribution deficiency (excess) ($116,584) $0 $0 $0
Covered payroll $20,170,400 $21,078,669 $21,698,152 $20,840,464 Contributions as a percentage of covered
payroll 36.42% 37.42% 40.86% 49.37%
Notes to Schedule
Valuation date: 6/30/2014 6/30/2015 6/30/2016 6/30/2017 Methods and assumptions used to determine contribution rates:

Actuarial cost metho
d 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

2.75% for 2015 to 2019, 2.625% for 2020, 2.50% for 2021 and 2022, and 2.30% for 2023, 2024 and 2025.

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, 2024 and 2025, net of administrative expenses, including inflation.

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

The probabilities of mortality are based on the CalPERS Experience Study. Pre- retirement and post-retirement mortality rates include 20 years of projected mortality improvement using Scale AA published by the Society of Actuaries for 2015 to 2018.

For 2019, 2020, 2021 and 2022, pre-retirement and post-retirement mortality rates include 15 years of projected mortality using 90% of Scale MP-2016 published by the Society of Actuaries. For 2023, 2024 and 2025, pre-retirement and post- retirement mortality rates include generational mortality using 80% of Scale MP- 2020 published by the Society of Actuaries.
136

2020 2021 2022 2023 2024 2025
$12,104,306 $13,294,083 $14,258,505 $15,469,857 $16,708,481 $18,294,494 12,104,306 13,294,083 14,258,505 15,469,857 16,708,481 18,294,494 $0 $0 $0 $0 $0 $0
$21,681,207 $23,707,982 $26,167,767 $26,110,338 $26,756,435 $26,890,185

55.83% 56.07% 54.49% 59.25% 62.45% 68.03%
6/30/2018 6/30/2019 6/30/2020 6 /30/2021 6/30/2022 6/30/2023 137

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

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

COMMUNITY FACILITIES DISTRICT F
UND
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 BENEF

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

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

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

CAPITAL P
ROJECTS FUNDS:

PUBLIC ART FUND
Established to account for the acquisition and installation of public art. Financing provided by a percentage of eligible project expenditures within the City’s Annual Capital Improvement Program.

PARK

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

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

CITY OF MILPITAS

NON-MAJOR GOVERNMENTAL FUNDS

COMBINING BALANCE SHEETS
JUNE 30, 2025

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 $8,087,769 $297,023 $603,600 $2,831,225 $503,473 $3,442,959 Receivables:

Accounts
Due from other governments 587,580 616,746 147,332 21,079 16,994 Interest 58,033 295 19,577 4,167 49,822
Loans receivable 3,171,744
Prepaids, materials, supplies and deposits 1,115 4,014 3,087 16,059 Total Assets $8,733,382 $4,086,628 $751,227 $2,875,895 $510,727 $3,525,834

LIABILITIES
Accounts payable $260,950 $31,555 $101,642 $498
Accrued payroll 41,198 13,716 $77,109
Unearned revenue 620,251 235,404
Refundable deposits 18,843
Total Liabilities 260,950 651,806 397,087 14,214 77,109 Fund Balances:

Nonspendable 1,115 4,014 3,087 16,059
Restricted $8,733,382 3,824,563 99,421 2,474,794 493,426 3,432,666 Assigned
Total Fund Balances 8,733,382 3,825,678 99,421 2,478,808 496,513 3,448,725 Total Liabilities and Fund Balances $8,733,382 $4,086,628 $751,227 $2,875,895 $510,727 $3,525,834

FUND BALANCE
142

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 $1,527,353 $225,343 $1,450,566 $4,739,317 $3,282,703 $1,304,506 $8,936,969 $7,926,116 $45,158,922 1,389,731
10,225 11,655 31,572 22,584 8,900 59,899 54,258 330,987 3,171,744
3,159 2,604 577 30,615
$1,537,578 $240,157 $1,450,566 $4,773,493 $3,305,287 $1,313,983 $8,996,868 $7,980,374 $50,081,999 $50 $21,518 $11,240 $27,068 $454,521
18,112 31,631 $895 6,845 1,159 190,665
$1,000,000 654,445 2,510,100
16 18,859
18,178 1,000,000 707,594 895 18,085 28,227 3,174,145
3,159 2,604 577 30,615
$1,537,578 218,820 450,566 4,063,295 $3,305,287 8,978,783 7,952,147 45,564,728 1,312,511 1,312,511
1,537,578 221,979 450,566 4,065,899 3,305,287 1,313,088 8,978,783 7,952,147 46,907,854 $1,537,578 $240,157 $1,450,566 $4,773,493 $3,305,287 $1,313,983 $8,996,868 $7,980,374 $50,081,999

CAPITAL PROJECTS FUNDS
143

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 $499,884 $5,740,497
Franchise Fees $922,925
Use of money and property $256,315 $8,971 $26,085 89,557 15,402 139,562 Intergovernmental 4,510,336 1,087,006 458,677 129,175
Charges for services 871
Developer contributions
Other
Total Revenues 4,766,651 1,095,977 484,762 1,142,528 515,286 5,880,059 EXPENDITURES:

Current:

General Government 1,105,550 8,250 10,861
Recreation and Community Services
Public Works 918,154 377,150 1,594,505
Planning
Police 464,435
Fire
Capital outlay 4,794
Total Expenditures 1,105,550 469,229 926,404 377,150 1,605,366

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 4,766,651 (9,573) 15,533 216,124 138,136 4,274,693

OTHER FINANCING SOURCES (USES)
Transfers in 45,645
Transfers (out) (4,463,009) (182,066) (98,400) (3,675,000) Total Other Financing Sources (Uses) (4,463,009) (182,066) (52,755) (3,675,000) NET CHANGE IN FUND BALANCES 303,642 (9,573) 15,533 34,058 85,381 599,693 Fund balances at beginning of year 8,429,740 3,835,251 83,888 2,444,750 411,132 2,849,032 FUND BALANCES AT END OF YEAR $8,733,382 $3,825,678 $99,421 $2,478,808 $496,513 $3,448,725

CITY OF MILPITAS

NON-MAJOR GOVERNMENTAL FUNDS

COMBINING STATEMENTS OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED JUNE 30, 2025

SPECIAL REVENUE FUNDS
144

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 $6,240,381
922,925
$85,055 $14,978 $19,556 $176,002 $107,930 $62,618 $405,143 $429,156 1,836,330 796,577 6,981,771
294,250 295,121
4,710,898 139,439 4,850,337
343,066 343,066
85,055 309,228 19,556 972,579 107,930 405,684 5,116,041 568,595 21,469,931 41,764 1,406,236 25,352 2,598,013
20,346 20,346
110,865 3,000,674
325,183 137,368 462,551
464,435
368,744 203,890 577,428
41,764 325,183 1,543,604 25,352 20,346 368,744 314,755 7,123,447 43,291 (15,955) 19,556 (571,025) 82,578 385,338 4,747,297 253,840 14,346,484 850,000 895,645
(60,000) (150,000) (8,628,475)
(60,000) (150,000) 850,000 (7,732,830)
43,291 (15,955) 19,556 (571,025) 82,578 325,338 4,597,297 1,103,840 6,613,654 1,494,287 237,934 431,010 4,636,924 3,222,709 987,750 4,381,486 6,848,307 40,294,200 $1,537,578 $221,979 $450,566 $4,065,899 $3,305,287 $1,313,088 $8,978,783 $7,952,147 $46,907,854

CAPITAL PROJECTS FUNDSSPECIAL REVENUE FUNDS
145

CITY OF MILPITAS

BUDGETED NON-MAJOR FUNDS

COMBINING SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES

BUDGET AND ACTUAL (NON-GAAP LEGAL BASIS)
FOR THE YEAR ENDED JUNE 30, 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 $77,586 $256,315 $178,729 $8,971 $8,971 Intergovernmental 4,399,881 4,510,336 110,455 $862,507 1,087,006 224,499 Charges for services
Developer contributions
Othe
r
Total Revenues 4,477,467 4,766,651 289,184 862,507 1,095,977 233,470

EXPENDITURES
Current:

General Government:

City Manager 1,093,757 (1,093,757)
City Attorney
Finance 11,793 (11,793)
Non-departmental 19,172 19,172
Recreation and Community Services
Public Works
Engineering
Planning
Police
Fire
Total Expenditures 19,172 1,105,550 (1,086,378)

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 4,477,467 4,766,651 289,184 843,335 (9,573) (852,908)

OTHER FINANCING SOURCES (USES)
Transfers in
Transfers (out) (4,938,372) (4,463,009) 475,363
Total Other Financing Sources (Uses) (4,938,372) (4,463,009) 475,363 NET CHANGE IN FUND BALANCES ($460,905) 303,642 $764,547 $843,335 (9,573) ($852,908) ADJUSTMENT TO BUDGETARY BASIS:

Expenditures capitalized for GAAP purposes
Capital Outlay
Encumbrance adjustments
Fund balances at beginning of year 8,429,740 3,835,251
Fund balances at end of year $8,733,382 $3,825,678
146

SOLID WASTE REDUCTION
Variance Variance Variance
Actual Amounts Positive Actual Amounts Positive Actual Amounts Positive Budget Budgetary Basis (Negative) Budget Budgetary Basis (Negative) Budget Budgetary Basis (Negative) $526,840 $499,884 ($26,956)
$889,931 $922,925 $32,994
$11,926 $26,085 $14,159 15,041 89,557 74,516 12,728 15,402 2,674 484,680 458,677 (26,003) 183,687 129,175 (54,512)
871 871
275,344 (275,344)
496,606 484,762 (11,844) 1,364,003 1,142,528 (221,475) 539,568 515,286 (24,282) 9,166 8,250 916
1,243,324 918,154 325,170 491,710 377,150 114,560
573,020 464,435 108,585
573,020 464,435 108,585 1,252,490 926,404 326,086 491,710 377,150 114,560 (76,414) 20,327 96,741 111,513 216,124 104,611 47,858 138,136 90,278 45,645 45,645
(182,066) (182,066) (98,400) (98,400)
(182,066) (182,066) (52,755) (52,755)
($76,414) 20,327 $96,741 ($70,553) 34,058 $104,611 ($4,897) 85,381 $90,278 (4,794)
83,888 2,444,750 411,132
$99,421 $2,478,808 $496,513
(Continued)

LAW ENFORCEMENT SERVICES MAINTENANCE DISTRICTAND SERVICES

LIGHTING AND LANDSCAPING
147

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

REVENUES
Other taxes $5,448,531 $5,740,497 $291,966
Franchise Fees
Use of money and property 25,335 139,562 114,227 $23,668 $85,055 $61,387 Intergovernmental
Charges for services
Developer contributions
Othe
r
Total Revenues 5,473,866 5,880,059 406,193 23,668 85,055 61,387

EXPENDITURES
Current:

General Government:

City Manager
City Attorney
Finance
Non-departmental 13,748 10,861 2,887 43,100 41,764 1,336 Recreation and Community Services
Public Works 2,102,942 1,734,505 368,437
Engineering
Planning
Police
Total Expenditures 2,116,690 1,745,366 371,324 43,100 41,764 1,336

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 3,357,176 4,134,693 777,517 (19,432) 43,291 62,723

OTHER FINANCING SOURCES (USES)
Transfers in
Transfers (out) (3,675,000) (3,675,000)
Total Other Financing Sources (Uses) (3,675,000) (3,675,000) NET CHANGE IN FUND BALANCES ($317,824) 459,693 $777,517 ($19,432) 43,291 $62,723 ADJUSTMENT TO BUDGETARY BASIS:

Expenditures capitalized for GAAP purposes
Capital Outlay
Encumbrance adjustments 140,000
Fund balances at beginning of year 2,849,032 1,494,287
Fund balances at end of year $3,448,725 $1,537,578

HETCH-HETCHY GROUND LEASECOMMUNITY FACILITIES DISTRICT
148

Variance Variance Variance
Actual Amounts Positive Actual Amounts Positive Actual Amounts Positive Budget Budgetary Basis (Negative) Budget Budgetary Basis (Negative) Budget Budgetary Basis (Negative) $7,204 $14,978 $7,774 $6,017 $19,556 $13,539 $84,077 $176,002 $91,925 796,577 796,577
200,000 294,250 94,250
2 (2)
207,204 309,228 102,024 6,019 19,556 13,537 880,654 972,579 91,925 35,000 35,000 1,609,733 1,336,404 273,329
21,630 21,630
168,954 69,832 99,122
384,752 325,183 59,569 96,012 137,368 (41,356)
384,752 325,183 59,569 35,000 35,000 1,896,329 1,543,604 352,725 (177,548) (15,955) 161,593 (28,981) 19,556 48,537 (1,015,675) (571,025) 444,650 ($177,548) (15,955) $161,593 ($28,981) 19,556 $48,537 ($1,015,675) (571,025) $444,650 237,934 431,010 4,636,924
$221,979 $450,566 $4,065,899
(Continued)

COMMUNITY BENEFITS AFFORDABLE HOUSINGCOMMUNITY PLANNING 149

AFFORDABLE
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 $39,155 $107,930 $68,775 $17,599 $62,618 $45,019 Intergovernmental
Charges for services
Developer contributions 270,657 270,657
Othe
r 72,409 72,409
Total Revenues 39,155 107,930 68,775 17,599 405,684 388,085

EXPENDITURES
Current:

General Government:

City Manager 25,352 (25,352)
City Attorney
Finance
Non-departmental
Recreation and Community Services 20,346 (20,346)
Public Works
Engineering
Planning
Police
Total Expenditures 25,352 (25,352) 20,346 (20,346)

EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 39,155 82,578 43,423 17,599 385,338 367,739

OTHER FINANCING SOURCES (USES)
Transfers in
Transfers (out) (60,000) (60,000)
Total Other Financing Sources (Uses) (60,000) (60,000)
NET CHANGE IN FUND BALANCES $39,155 82,578 $43,423 ($42,401) 325,338 $367,739 ADJUSTMENT TO BUDGETARY BASIS:

Expenditures capitalized for GAAP purposes
Capital Outlay
Encumbrance adjustments
Fund balances at beginning of year 3,222,709 987,750
Fund balances at end of year $3,305,287 $1,313,088
FOR THE YEAR ENDED JUNE 30, 2024

CITY OF MILPITAS

BUDGETED NON-MAJOR FUNDS

COMBINING SCHEDULE OF REVENUES, EXPENDITURES

AND CHANGES IN FUND BALANCES

BUDGET AND ACTUAL (NON-GAAP LEGAL BASIS)

PUBLIC ARTHOUSING UNRESTRICTED
150

TOTALS
Variance
Actual Amounts Positive
Budget Budgetary Basis (Negative)
$5,975,371 $6,240,381 $265,010
889,931 922,925 32,994
320,336 1,002,031 681,695
6,727,332 6,981,771 254,439
200,000 295,121 95,121
2 270,657 270,655
275,344 72,409 (202,935)
14,388,316 15,785,295 1,396,979
1,653,899 2,463,763 (809,864)
21,630 21,630
11,793 (11,793)
244,974 122,457 122,517
20,346 (20,346)
3,837,976 3,029,809 808,167
480,764 462,551 18,213
573,020 464,435 108,585
6,812,263 6,575,154 237,109
7,576,053 9,210,141 1,634,088
45,645 45,645
(8,953,838) (8,478,475) 475,363
(8,908,193) (8,432,830) 475,363
($1,332,140) 777,311 $2,109,451
(4,794)
140,000
29,064,407
$29,976,924
151

INTERNAL SERVICE FUNDS
Internal Service Funds report any activity that provides goods or services to other funds, departments, or agencies of the primary government and its components units, or to other governments, on a cost reimbursement basis. These funds include the following:

EQUIPMENT MANAGEMENT INTERNAL SERVICE FUND
The Equipment Management Internal Service Fund is used to finance and account for the replacement of equipment used by City departments and the maintenance of computer systems on a cost reimbursement basis.

PENSION SECTION 115 INTERNAL SERVICE FUND
The Pension Section 115 Internal Service Fund is used to accumulate funds which may be used to fund either the annual actuarially determined pension contribution amounts, pay down unfunded pension liabilities with CalPERS, or reduce the length of pension cost amortization schedules with CalPERS.

CITY OF MILPITAS

INTERNAL SERVICE FUNDS

COMBINING STATEMENTS OF NET POSITION
JUNE 30, 2025
Equipment Pension
Management Section 115 Totals
ASSETS
Current Assets
Cash and investments $16,039,476 $40,247,522 $56,286,998 Interest receivable 108,788 108,788
Materials, supplies and deposits 111,093 111,093
Total current assets 16,259,357 40,247,522 56,506,879
Noncurrent Assets
Capital assets (net of accumulated depreciation) 10,854,007 10,854,007 Total noncurrent assets 10,854,007 10,854,007
Total Assets 27,113,364 40,247,522 67,360,886

LIABILITIES
Current Liabilities
Accounts payable 253,553 16,937 270,490
Refundable deposit 12 12
Accrued payroll 65,418 65,418
Accrued vacation 24,235 24,235
Noncurrent Liabilities
Accrued vacation 33,863 33,863
Sick leave payable 24,946 24,946
Total Liabilities 402,027 16,937 418,964

NET POSITION
Invested in capital assets 10,854,007 10,854,007
Restricted for pension expenses 40,230,585 40,230,585
Unrestricted 15,857,330 15,857,330
Total Net Position $26,711,337 $40,230,585 $66,941,922
155

Equipment Pension
Management Section 115 Totals

OPERATING REVENUES
Charges for services $4,993,125 $4,993,125
Other 396,318 $2,817,504 3,213,822
Total Operating Revenues 5,389,443 2,817,504 8,206,947

OPERATING EXPENSES
Personal services 1,179,078 1,179,078
Services and supplies 1,545,988 103,243 1,649,231
Depreciation and amortization 1,415,133 1,415,133
Maintenance and repairs 665,837 665,837
Total Operating Expenses 4,806,036 103,243 4,909,279
Operating Income (Loss) 583,407 2,714,261 3,297,668

NONOPERATING REVENUES (EXPENSES)
Interest income(loss) 872,536 1,147,150 2,019,686
Gain (Loss) on disposal of property 126,150 126,150
Total Nonoperating Revenues (Expenses) 998,686 1,147,150 2,145,836 Income (Loss) Before Contributions and Transfers 1,582,093 3,861,411 5,443,504 Contributions 489,147 489,147
Transfer in 929,850 929,850
Transfer out (2,875,425) (2,875,425)
Change in net position 125,665 3,861,411 3,987,076
Net position-beginning 26,585,672 36,369,174 62,954,846 Net position-ending $26,711,337 $40,230,585 $66,941,922

CITY OF MILPITAS

INTERNAL SERVICE FUNDS

COMBINING STATEMENTS OF REVENUES, EXPENSES AND

CHANGES IN FUND NET POSITION
FOR THE YEAR ENDED JUNE 30, 2025
156

Equipment Pension
Management Section 115 Totals

CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $5,389,443 $2,817,504 $8,206,947 Payments to suppliers (1,096,479) (102,292) (1,198,771) Payments to employees (1,128,295) (1,128,295)
Net cash provided by operating activities 3,164,669 2,715,212 5,879,881

CASH FLOWS FROM NONCAPITAL

FINANCING ACTIVITIES
Transfers in 929,850 929,850
Transfers out (2,875,425) (2,875,425)
Cash Flows from Noncapital Financing Activities (1,945,575) (1,945,575)

CASH FLOWS FROM CAPITAL AND RELATED

FINANCING ACTIVITIES
Acquisition of capital assets (1,160,176) (1,160,176)
Proceeds from sale of assets 126,150 126,150
Cash Flows from Capital and Related
Financing Activities (1,034,026) (1,034,026)

CASH FLOWS FROM INVESTING ACTIVITIES
Interest and dividends 855,257 1,147,150 2,002,407
Cash Flows from Investing Activities 855,257 1,147,150 2,002,407 Net increase (decrease) in cash and cash equivalents 1,040,325 3,862,362 4,902,687 Cash and investments at beginning of period 14,999,151 36,385,160 51,384,311 Cash and investments at end of period $16,039,476 $40,247,522 $56,286,998 NONCASH TRANSACTIONS:

Contributions and transfers of capital assets, net $489,147 $489,147 Reconciliation of operating income (loss) to net cash provided by operating activities:

Operating income (loss) 583,407 $2,714,261 3,297,668
Adjustments to reconcile operating income to net cash provided by operating activities:

Depreciation 1,415,133 1,415,133
Change in assets and liabilities:

Materials, supplies and deposits 970,749 970,749
Accounts and other payables 195,380 951 196,331
Net cash provided by operating activities $3,164,669 $2,715,212 $5,879,881

CITY OF MILPITAS

INTERNAL SERVICE FUNDS

COMBINING STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2025
157

STATISTICAL SECTION
This part of the City’s Annual Comprehensive Financial Report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City’s overall financial health. In contrast to the financial section, the statistical section information is not subject to independent audit.

Financial Trends
These schedules contain trend information to help the reader understand how the City’s financial performance and wellbeing have changed over time:

Net Position – Schedule 1
Changes in Net Position – Schedule 2
Fund Balances, Governmental Funds – Schedule 3
Changes in Fund Balance, Governmental Funds – Schedule 4 Revenue Capacity
These schedules contain information to help the reader assess the City’s most significant local revenue source, the property tax:

Assessed Value and Actual Value of Taxable Property – Schedule 5 Direct and Overlapping Property Taxes Rates – Schedule 6 Principal Property Taxpayers – Schedule 7
Property Tax Levies and Collections – Schedule 8
Taxable Sales by Category – Schedule 9
Direct and Overlapping S
ales Tax Rates – Schedule 10
Principal Sales Tax Payers – Schedule 11
Debt Capacity
These schedules present information to help the reader assess the affordability of the City’s current levels of outstanding debt and the City’s ability to issue additional debt in the future:

Ratios of Outstanding Debt by Type – Schedule 12
Bonded Debt Pledged Revenue Coverage, Redevelopment Agency Tax Allocation Bonds – Schedule 13 Computation of Direct and Overlapping Debt – Schedule 14 Legal Debt Margin Information – Schedule 15
Installment Payment Coverage, Sewer Certificates of Participation and Waste Water Revenue Refunding Bonds – Schedule 16
Installment Payment Coverage, Water Revenue Bonds – Schedule 17 Demographic and Economic Information
These schedules offer demographic and economic indicators to help the reader understand the environment within which the City’s financial activities take place:

Bimonthly Sewer Rates by Customer Class – Schedule 18
Bimonthly Water Rates by Customer Class – Schedule 19
Demographic and Economic Statistics – Schedule 20
Principal Employers – Schedule 21
Operating Information
These schedules contain service and infrastructure data to help the reader understand how the information in the City’s financial report relates to the services the City provides and the activities it performs:

Authorized Full-Time Equivalent Employees by Function/Program – Schedule 22 Operating Indicators by Function/Program – Schedule 23
Capital Asset Statistics by Function/Program – Schedule 24 Sources
Unless otherwise noted, the information in these schedules is derived from the Annual Comprehensive Financial Reports for the relevant year.

Schedule 1

CITY OF MILPITAS

NET POSITION

LAST TEN FISCAL YEARS
(Accrual basis of accounting)
(Dollars in Thousands)
Fiscal Year Ended June 30,
2016 2017 2018 (a) 2019 2020
Governmental activities
Net investment in capital assets and capacity rights $298,321 $312,138 $323,239 $326,564 $344,471 Restricted 100,327 108,630 109,726 145,983 158,716
Unrestricted (44,368) (30,091) (63,405) (65,799) (93,911) Total governmental activities net position $354,280 $390,677 $369,560 $406,748 $409,276 Business-type activities
Net investment in capital assets and capacity rights $118,588 $122,937 $130,736 $135,048 $99,331 Restricted 35,130 40,311 43,834 59,191 63,084
Unrestricted 15,261 20,254 15,784 8,930 47,967
Total business-type activities net position $168,979 $183,502 $190,354 $203,169 $210,382 Primary government
Net investment in capital assets and capacity rights $416,909 $435,075 $453,975 $461,612 $443,802 Restricted 135,457 148,941 153,560 205,174 221,800
Unrestricted (29,107) (9,837) (47,621) (56,869) (45,944) Total primary government net position $523,259 $574,179 $559,914 $609,917 $619,658 Fiscal Year Ended June 30
2021 2022 2023 2024 2025
Governmental activities
Net investment in capital assets and capacity rights $358,445 $365,009 $365,509 $366,987 $369,936 Restricted 189,030 176,451 179,036 188,018 205,793
Unrestricted (142,708) (118,570) (114,218) (116,040) (118,179) Total governmental activities net position $404,767 $422,890 $430,327 $438,965 $457,550 Business-type activities
Net investment in capital assets and capacity rights $125,206 $127,204 $130,978 $135,007 $138,637 Restricted 72,629 75,083 89,091 83,642 100,063
Unrestricted 18,483 21,208 12,857 27,545 20,151
Total business-type activities net position $216,318 $223,495 $232,926 $246,194 $258,851 Primary government
Net investment in capital assets and capacity rights $483,651 $492,213 $496,487 $501,994 $508,573 Restricted 261,659 251,534 268,127 271,660 305,856
Unrestricted (124,225) (97,362) (101,361) (88,495) (98,028) Total primary government net position $621,085 $646,385 $663,253 $685,159 $716,401 (a) The City implemented the provisions of GASB Statement 75 in fiscal year 2018 that required the restatement of net position. Amounts prior to 2018 have not been restated.
(200,000)
(100,000)
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
2016 2017 2018
(a)
2019 2020 2021 2022 2023 2024 2025
($ 000)
Net investment in capital assets and capacity rights Restricted Unrestricted 161

Schedule 2
2016 2017 2018 2019
Expenses
Governmental activities
General Government $18,614 $21,174 $19,111 $25,281
Building and Safety 2,513 3,389 4,148 (b)
Building, Housing and Safety (b) 5,449
Recreation and Community Services 5,890 7,020
Public Works 12,761 16,266 15,903 20,053
Engineering 5,790 (a) 6,249 (a) 5,712 (a) 6,459 (a) Planning and Neighborhood Services 2,649 (a) 3,103 (a) 3,586 (a) (b) Planning 1,851
Parks and Recreation 4,090 4,949
Police 24,556 30,270 33,840 35,868
Fire 16,400 20,499 24,194 26,535
Interest on Long Term Debt 56 48 17
Total governmental activities expenses 87,429 105,947 112,384 128,533 Business-type activities
Water Utility 19,743 20,666 23,742 25,232
Sewer Utility 10,872 9,969 12,715 12,231
Total business-type activities expenses 30,615 30,635 36,457 37,463 Total primary government expenses $118,044 $136,582 $148,841 $165,996 Program Revenues
Governmental activities:

Charges for services:

General Government $2,065 $1,970 $2,088 $2,347
Building and Safety 5,963 7,814 10,093 (b)
Building, Housing and Safety 9,718
Recreation and Community Services 2,559 2,655
Public Works (a) (a) (a) (a)
Engineering 2,863 (a) 2,720 (a) 2,465 (a) 2,379 (a) Planning and Neighborhood Services 747 292 418 (b)
Planning 226
Parks and Recreation 1,981 2,301
Police 1,138 1,184 1,089 1,130
Fire 2,440 3,224 3,326 2,172
Operating grants and contributions 7,320 7,880 6,521 8,277 Capital grants and contributions 35,195 32,256 34,003 47,194 Total government activities program revenues 59,712 59,641 62,562 76,098 Business-type activities
Charges for services:

Water Utility 18,709 26,318 29,667 29,355
Sewer Utility 15,964 16,803 17,139 17,830
Operating grants and contributions 63 89 124 114
Capital grants and contributions 1,103 4,937 2,507 2,755 Total business-type activities program revenue 35,839 48,147 49,437 50,054 Total primary government program revenues $95,551 $107,788 $111,999 $126,152 Net (Expense)/Revenue
Governmental activities ($27,717) ($46,306) ($49,822) ($52,435) Business-type activities 5,224 17,512 12,980 12,591
Total primary government net expense ($22,493) ($28,794) ($36,842) ($39,844) (a) Public Works and Engineering are separate departments beginning in fiscal year 2016. (b) Neighborhood Services is a component of Building, Housing and Sa fety, and Planning is a separate department beginning in fiscal year 2019. (c) Under the terms of a settlement agreement with the Count y Auditor - Controller, Successor Agency to the Milpitas Redevelopment Agency and other parties, the City and Economic Development Corporation transferred cash and certain capital assets to the Successor Agency and received certain capital assets from the Successor Agency. (d) Beginning in fiscal year 2025, the Building, Housing and Safety Department was realigned to be separate component under City Manager Office. Code Enforcement is a component of Planning Department.

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

CITY OF MILPITAS

CHANGES IN NET POSITION
162

Schedule 2
2020 2021 2022 2023 2024 2025
$24,050 $25,247 $25,213 $25,711 $28,302 $31,296
(b) (b) (b) (b) (b) (b)
7,418 6,705 4,943 7,940 8,376 (d)
7,095 5,174 6,114 8,410 8,514 8,555
20,342 20,219 22,063 23,657 31,702 35,183
7,314 (a) 6,826 (a) 5,047 (a) 6,006 (a) (a)
(b) (b) (b) (b) (b) (b)
2,741 2,489 1,851 2,638 2,545 3,628
43,505 38,919 29,468 39,545 46,096 44,727
31,472 31,859 29,040 31,799 31,777 36,077
37 785 838 565 676 1,293
143,974 138,223 124,577 146,271 157,988 160,759
28,750 28,959 26,898 28,070 30,029 35,999
15,240 15,982 15,622 20,226 17,839 19,113
43,990 44,941 42,520 48,296 47,868 55,112
$187,964 $183,164 $167,097 $194,567 $205,856 $215,871
$1,809 $1,710 $1,931 $1,400 $1,299 $8,054
(b) (b) (b) (b) (b) (b)
6,621 8,629 8,815 7,815 5,358 (d)
1,145 762 2,360 3,328 2,910 3,910
(a) (a) (a) 81 3,678 (a) 3,708 (a)
2,132 (a) 1,792 (a) 1,096 (a) 2,960 (a) (a)
(b) (b) (b) (b) (b) (b)
452 408 474 505 566 489
1,087 1,055 1,421 1,565 1,513 1,596
2,402 2,553 2,582 2,498 2,396 2,737
10,643 14,986 15,335 16,230 21,580 16,153
33,423 18,997 19,924 7,901 12,270 22,033
59,714 50,892 53,938 44,283 51,570 58,680
32,792 34,658 34,374 34,242 36,065 39,541
19,566 20,152 21,593 24,953 25,110 26,476
171 125 306 59 61 52
601 1,434 1,026 2,509 174 672
53,130 56,369 57,299 61,763 61,410 66,741
$112,844 $107,261 $111,237 $106,046 $112,980 $125,421
($84,260) ($87,331) ($70,639) ($101,988) ($106,418) ($102,079) 9,140 11,428 14,779 13,467 13,542 11,629
($75,120) ($75,903) ($55,860) ($88,521) ($92,876) ($90,450) (Continued)
163

Schedule 2
2016 2017 2018 2019

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

CITY OF MILPITAS

CHANGES IN NET POSITION
General Revenues and Other Changes in Net Position
Governmental activities
Taxes:

Property taxes $27,068 $30,262 $31,893 $33,811
Sales and use taxes 23,924 25,392 26,991 27,983
Hotel/Motel taxes 11,757 11,858 12,122 14,503
Other taxes 822 803 814 808
Franchise fees 3,841 3,871 4,678 5,127
Motor vehicle in lieu 29 34 39 36
Investment earnings 913 118 301 4,474
Gain on sale of capital assets/property 7,324 4
Miscellaneous 287 118 186 390
Transfers 2,625 2,923 2,511 2,489
Extraordinary item
Special Item (12,432) (c)
Total government activities 71,266 82,703 67,103 89,625 Business-type activities
Investment earnings 695 (65) 171 2,712
Transfers (2,625) (2,923) (2,511) (2,489)
Total business-type activities (1,930) (2,988) (2,340) 223 Total primary governmen
t $69,336 $79,715 $64,763 $89,848
Change in net position
Governmental activities $43,549 $36,397 $17,281 $37,190 Business-type activities 3,294 14,524 10,640 12,814
Total primary government $46,843 $50,921 $27,921 $50,004 (a) Public Works and Engineering are separate departments beginning in fiscal year 2016. (b) Neighborhood Services is a component of Building, Housing and Sa fety, and Planning is a separate department beginning in fiscal year 2019. (c) Under the terms of a settlement agreement with the Count y Auditor - Controller, Successor Agency to the Milpitas Redevelopment Agency and other parties, the City and Economic Development Corporation transferred cash and certain capital assets to the Successor Agency and received certain capital assets from the Successor Agency. 164

Schedule 2
2020 2021 2022 2023 2024 2025
$37,684 $40,979 $42,646 $47,100 $48,613 $51,076
24,173 24,170 33,210 37,344 34,617 36,992
11,377 4,213 8,013 11,190 11,537 13,399
836 791 1,070 737 819 623
5,173 5,036 5,188 5,690 7,075 7,102
60 57 87 84 101 129
2,808 965 (7,560) 1,864 5,594 4,752
43 28 198 34 (232)
446 503 1,554 765 1,272 827
4,187 6,079 4,357 4,616 5,428 5,995
86,787 82,821 88,763 109,424 115,056 120,663
2,261 588 (3,246) 580 5,154 7,024
(4,187) (6,079) (4,357) (4,616) (5,428) (5,996)
(1,926) (5,491) (7,603) (4,036) (274) 1,028
$84,861 $77,330 $81,160 $105,388 $114,782 $121,691
$2,527 ($4,510) $18,124 $7,436 $8,638 $18,584
7,214 5,937 7,176 9,431 13,268 12,657
$9,741 $1,427 $25,300 $16,867 $21,906 $31,241
165

Schedule 3

CITY OF MILPITAS

FUND BALANCES, GOVERNMENTAL FUNDS

LAST TEN FISCAL YEARS
(modified accrual basis of accounting)
(Dollars in Thousands)
Fiscal Year Ended June 30,
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
General Fund
Nonspendable $23,387 $20,209 $10,043 $10,234 $10,189 $4,783 $4,866 $4,924 $4,970 $5,151 Restricted
Committed 8,440 19,026 33,643 43,852 44,082 13,266 15,766 16,972 16,495 12,730 Assigned 9,052 8,067 8,629 5,916 6,118 6,543 6,114 6,921 7,478 7,478 Unassigned 13,410 25,440 40,496 40,655 34,387 38,128 40,038 44,685 56,307 64,092 Total General Fund $54,289 $72,742 $92,811 $100,657 $94,776 $62,720 $66,784 $73,502 $85,250 $89,451 (a) All Other Governmental Funds
Nonspendable $13 $15 $2,229 $85 $20 $28 $27 $150 $32 $30 Restricted 99,701 109,416 110,418 143,232 155,359 150,544 147,231 145,894 150,629 164,220 Assigned 29,956 29,635 24,284 28,532 29,768 39,508 22,250 26,485 28,522 29,575 Unassigned
Total all other governmental funds $129,670 $139,066 $136,931 $171,849 $185,147 $190,080 $169,508 $172,529 $179,183 $193,825 (a) (a) The change in total fund balance for the General Fund and other governmental funds is explained in Management's Discussion and Analysis.
0 50,000
100,000
150,000
200,000
250,000
300,000
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
($ 000)
Nonspendable Restricted Committed Assigned Unassigned
167

Schedule 4
2016 2017 2018 2019 2020
Revenues
Property taxes $27,068 $30,261 $31,893 $33,811 $37,799
Sales taxes 24,719 26,214 27,854 28,890 25,058
Hotel/Motel taxes 11,377 (d)
Franchise fees 5,173 (d)
Other taxes 18,737 19,349 20,429 23,386 4,632 (d)
Licenses and fines 8,051 10,497 12,758 11,757 9,039
Use of money and property 3,037 2,180 2,719 8,452 8,092 Intergovernmental 6,104 4,696 6,228 6,019 9,089
Charges for services 7,196 7,238 6,981 6,969 5,228
Developer contributions 29,410 25,637 29,065 41,153 24,684 Other 113 310 568 926 983
Total Revenues 124,435 126,382 138,495 161,363 141,154
Expenditures
Current:

General Government 13,771 17,089 15,397 21,352 19,146
Building and Safety 2,885 3,148 3,633 (c) (c)
Building, Housing and Safety 5,038 5,784
Recreation and Community Services 3,383 3,876 4,497 5,144 5,227 Human Resources and Recreation (b) (b) (b) (b) (b)
Parks and Recreation (a) (a) (a) (a) (a)
Public Works 6,020 6,839 6,983 8,151 9,588
Engineering 3,257 3,527 3,103 3,201 3,559
Planning and Neighborhood Services 2,805 2,978 3,153 (c) (c) Planning 1,648 2,116
Police 26,124 27,247 27,880 30,389 34,301
Fire 17,470 18,456 21,034 23,225 26,416
Capital outlay 24,811 26,151 27,243 23,435 32,106
Debt service:

Principal 199 728
Interest and fees 54 48 69 104 155
Total Expenditures 100,580 109,359 112,992 121,886 139,126 Excess (deficiency) of revenues over
(under) expenditures 23,855 17,023 25,503 39,477 2,028
Other Financing Sources (Uses)
Proceeds from debt issuance 952
Pa
yments to refunded debt escrow agent
Proceeds/gain from sale of properties 160 7,324 1
Loss from sale/conveyance of property (12,437) (152)
Transfers in 23,001 18,405 19,505 37,936 27,164
Transfers (out) (19,864) (14,903) (14,637) (35,449) (21,777) Total other financing sources (uses) 3,297 10,826 (7,569) 3,288 5,387 Extraordinary Items
Assets transferred to Housing Successo
r
Assets transferred to/liabilities assumed
by Successor Agency/Housing Successor
Special Item
Assets transferred to/from Successor Agency and County
Net Change in fund balances $27,152 $27,849 $17,934 $42,765 $7,415 Debt service as a percentage of
noncapital expenditures 0.1% 0.1% 0.1% 0.3% 0.7%

(a) Beginning in fiscal year 2013, parks maintenance division is part of the public works department and the recreation division is part of human resources department.

However starting in fiscal year 2016, the recreation was separated out from Human Resources as an individual department (b) Human Resources is a component of General Government and Recreation is a separate department beginning in fiscal year 2016. (c) Neighborhood Services is a component of Building, Housing and Safety, and Planning is a separate department beginning in fiscal year 2019. (d) Transient occupancy taxes and Franchise fees were reported separately from Other taxes beginning in fiscal year 2020. (e) Beginning in fiscal year 2025, the Building, Housing and Safety Department was realigned to be separate component under City Manager Office. Code Enforcement is a component of Planning Department.

CITY OF MILPITAS

CHANGES IN FUND BALANCES, GOVERNMENTAL FUNDS

LAST TEN FISCAL YEARS
(modified accrual basis of accounting)
(Dollars in Thousands)
Fiscal Year Ended June 30,
168

Schedule 4
2021 2022 2023 2024 2025
$41,093 $42,759 $47,210 $48,724 $51,181
25,114 34,364 38,476 35,836 38,101
4,213 (d) 8,012 (d) 11,189 (d) 11,529 (d) 13,379 (d)
5,036 (d) 5,188 (d) 5,690 (d) 7,075 (d) 7,102 (d)
4,889 (d) 5,940 (d) 6,154 (d) 7,141 (d) 7,248 (d)
10,993 11,287 10,147 7,663 8,921
1,505 (5,980) 3,432 9,937 13,941
12,576 15,403 16,062 20,079 14,217
4,816 6,114 6,908 7,418 7,817
15,880 9,331 2,399 2,288 10,473
642 621 935 1,315 917
126,757 133,039 148,602 159,005 173,297
22,902 24,657 22,390 25,212 32,997
(c)
6,088 5,853 7,635 7,601 (e)
3,662 5,041 6,640 6,967 7,146
(b)
(a)
10,671 10,850 12,053 16,977 23,532
3,846 3,474 3,539
(c)
2,293 2,142 2,484 2,295 3,557
34,803 35,023 37,656 39,273 42,434
28,200 29,483 29,227 28,401 35,224
33,648 33,828 21,196 17,638 15,471
275 748 652 1,070
449 737 740 719 969
146,562 151,363 144,308 145,735 162,400
(19,805) (18,324) 4,294 13,270 10,897
21,919
3 118 65 5 5
21,486 16,902 23,531 24,441 22,405
(50,724) (13,225) (20,131) (19,313) (14,464)
(7,316) 3,795 3,465 5,133 7,946
($27,121) ($14,529) $7,759 $18,403 $18,843

0.3% 0.7% 1.16% 1.08% 1.41%
Fiscal Year Ended June 30,
169

Schedule 5

CITY OF MILPITAS

ASSESSED VALUE AND ACTUAL VALUE OF TAXABLE PROPERTY

LAST TEN FISCAL YEARS
(Dollars in Thousands)
Real Property Less: Total Taxable
Fiscal Residential Commercial Industrial Tax-Exempt Assessed Total Direct Year Property Property Property Other (c) Unsecured Property (c) Value (a) Tax Rate (b) 2015-16 $8,629,667 $1,445,665 $2,788,984 $649,712 $1,844,591 ($299,860) $15,058,759 1% 2016-17 9,386,926 1,493,922 3,248,012 675,017 1,529,223 (314,291) 16,018,809 1% 2017-18 10,143,815 1,581,140 3,563,327 782,718 1,710,357 (315,999) 17,465,358 1% 2018-19 10,997,080 1,619,668 3,504,633 790,143 1,761,094 (328,719) 18,343,899 1% 2019-20 12,311,913 1,684,889 3,752,681 665,325 1,917,745 (333,527) 19,999,026 1% 2020-21 13,398,580 1,792,792 4,048,447 534,924 1,890,212 (186,858) 21,478,097 1% 2021-22 14,045,849 1,861,634 4,231,585 463,153 1,922,357 (178,163) 22,346,415 1% 2022-23 15,166,680 1,890,500 4,568,761 496,705 2,196,227 (193,979) 24,124,894 1% 2023-24 15,901,041 1,986,166 5,068,816 548,661 2,072,285 (307,593) 25,269,376 1% 2024-25 16,609,743 2,053,553 5,379,908 509,272 1,981,849 (308,707) 26,225,618 1% Source: Hdl Coren & Cone, Santa Clara County Assessor Combined Tax Rolls Notes:
(a) The State Constitution requires property to be assessed at one hundred percent of the most recent purchase price, plus an increment of no more than two percent annually, plus any local over-rides. These values are considered to be full market values. (b)
California cities do not set their own direct tax rate. The state constitution establishes the rate at 1% and allocates a portion of that amount, by an annual calculation, to all the taxing entities within a tax rate area. (c)
Corrections were made for Fiscal Years 2013-14 through 2018-19 to correct the amounts for Other and Tax-Exempt Property. Total assessed value was unchanged.
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
$14,000,000
$16,000,000
$18,000,000
$20,000,000
$22,000,000
$24,000,000
$26,000,000
$28,000,000
2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 170

Schedule 6

CITY OF MILPITAS

DIRECT AND OVERLAPPING PROPERTY TAX RATES

LAST TEN FISCAL YEARS
(Rate per $100 of assessed value)
City Direct Rates Overlapping Rates (a)
County of
Fiscal Basic Total Santa School Special
Year Rate (b) Direct Clara (c) Districts Districts
2015-16 1.00 1.00 0.0503 0.0817 0.0057
2016-17 1.00 1.00 0.0498 0.0734 0.0086
2017-18 1.00 1.00 0.0621 0.0880 0.0062
2018-19 1.00 1.00 0.0589 0.0850 0.0042
2019-20 1.00 1.00 0.0581 0.1245 0.0410
2020-21 1.00 1.00 0.0412 0.1255 0.0037
2021-22 1.00 1.00 0.0412 0.1210 0.0051
2022-23 1.00 1.00 0.0412 0.1172 0.0044
2023-24 1.00 1.00 0.0412 0.1017 0.0041
2024-25 1.00 1.00 0.0412 0.0875 0.0041
Source: County of Santa Clara, Tax Rates & Information Notes:
(a) Overlapping rates are those of local and county governments that apply to property owners within the City of Milpitas. Not all overlapping rates apply to all Milpitas property owners. These are voter approved levies in addition to the 1% State levy.
(b) The City's basic property tax rate can only be increased by a 2/3 vote of the City's residents. (c) The overlapping rates for the County of Santa Clara were corrected in prior years to include amounts that were previously omitted by mistake.
171

Schedule 7

CITY OF MILPITAS

PRINCIPAL PROPERTY TAX PAYERS
FISCAL YEARS 2024-25 and 2015-16
2024-2025 2015-2016
Percentage Percentage
of Total City of Total City
Taxable Taxable Taxable Taxable
Assessed Assessed Assessed Assessed
Taxpayer Value Rank Value Value Rank Value
Cisco Systems Inc. $862,834,650 1 3.29% $901,953,758 1 5.99% KLA Tencor Corporation 693,736,044 2 2.65% 379,480,551 2 2.52% Headway Technologies Inc 616,714,687 3 2.35% 114,487,120 10 0.76% Milpitas-District 1 Owner LLC 450,768,179 4 1.72%
Milpitas Mills LP 367,457,455 5 1.40% 310,981,136 3 2.07% McCarthy Center Holding LLC 222,454,965 6 0.85%
MG Eleanor Apartments LLC 196,900,473 7 0.75%
WH Silicon Valley VI LP 193,282,324 8 0.74%
WDMICA001 LP 192,450,000 9 0.73%
Amalfi Milpitas LLC 183,060,160 10 0.70%
Sandbox Expansion LLC 191,556,360 4 1.27%
California Diversified LLC 163,399,376 5 1.09%
Essex Portfolio LP 149,865,177 6 1.00%
Hudson Campus Center LLC 124,123,113 7 0.82%
Linear Technology Corporation 117,010,507 8 0.78%
Regency Tasman Holdings LLC 115,775,000 9 0.77%
Subtotal $3,979,658,937 15.17% $2,568,632,098 17.06%
Fiscal Year 2024-2025 Total Net Assessed Valuation $26,225,617,897 Fiscal Year 2015-2016 Total Net Assessed Valuation $15,058,758,945 Source: Hdl, Coren & Cone, Santa Clara County Assessor 2024/25 Combined Tax Rolls and the SBE Non Unitary Tax Roll 172

Schedule 8

CITY OF MILPITAS

PROPERTY TAX LEVIES AND COLLECTIONS

LAST TEN FISCAL YEARS
(Dollars in thousands)
Percent Delinquent Total
Fiscal Taxes Current of Levy Tax Taxes Percent
Year Levied (a) Collections (a) Collected Collections Collected (a) of Levy 2015-16 27,068 27,068 100.00% 0 27,068 100.00%
2016-17 30,262 30,262 100.00% 0 30,262 100.00%
2017-18 31,893 31,893 100.00% 0 31,893 100.00%
2018-19 33,811 33,811 100.00% 0 33,811 100.00%
2019-20 37,684 37,684 100.00% 0 37,684 100.00%
2020-21 41,093 41,093 100.00% 0 41,093 100.00%
2021-22 42,759 42,759 100.00% 0 42,759 100.00%
2022-23 47,210 47,210 100.00% 0 47,210 100.00%
2023-24 48,578 48,578 100.00% 0 48,578 100.00%
2024-25 51,065 51,065 100.00% 0 51,065 100.00%
(a) The City elected to participate in the "Teeter" plan offered by the County whereby cities receive 100% of the taxes levied in exchange for foregoing any interest and penalties collected on delinquent taxes.

Source: City of Milpitas Annual Comprehensive Financial Report 173

Schedule 9

CITY OF MILPITAS

TAXABLE SALES BY CATEGORY

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

CALENDAR YEARS
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Apparel Stores 321,992 324,777 314,476 325,503 328,797 135,961 235,722 268,617 283,426 294,453 General Merchandise 86,475 92,857 90,725 86,646 83,422 63,773 70,819 73,747 77,462 76,432 Food Stores 32,178 32,093 32,541 31,109 31,569 33,193 35,305 37,525 36,134 36,760 Eating and Drinking Places 246,653 262,563 278,418 285,895 299,737 176,589 261,703 344,196 374,480 381,958 Building Materials 134,128 220,330 219,627 249,678 275,936 244,481 261,419 232,726 215,277 206,624 Auto Dealers and Supplies 185,769 193,977 216,532 206,111 198,918 173,853 200,670 246,783 244,645 244,277 Service Stations 98,981 90,355 97,579 107,423 110,708 73,176 109,650 149,625 137,297 123,886 Other Retail Stores 211,504 197,511 189,900 196,586 189,972 121,752 158,734 164,914 157,910 157,132 All Other Outlets 974,998 1,052,073 1,312,460 1,156,074 1,222,433 1,168,815 1,224,812 1,421,514 1,286,677 1,396,783 Total $2,292,678 $2,466,536 $2,752,258 $2,645,025 $2,741,492 $2,191,593 $2,558,834 $2,939,647 $2,813,308 $2,918,305 Source: State Board of Equalization, California Department of Taxes and Fees Administration, State Controller's Office, The HdL Companies Note: Due to confidentiality issues, the names of the ten largest revenue payers are not available. The categories presented are intended to provide alternative information regarding the sources ot the City's revenue. (a) Adjusted for Economic Data - reflects adjustments for prior periods taxable sales in the appropriate quarters. 0 500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
($ 000)
Apparel Stores General Merchandise Food Stores Eating and Drinking Places Building Materials Auto Dealers and Supplies Service Stations Other Retail Stores All Other Outlets 174

Schedule 10CITY OF MILPITAS

DIRECT AND OVERLAPPING SALES TAX RATES

LAST TEN FISCAL YEARS
City
Fiscal Direct Santa Clara State of
Year Rate County (b) California
2015-16 1.00 1.50 6.25
2016-17 1.00 2.00 6.00
2017-18 1.00 2.00 6.00 (a)
2018-19 1.00 2.00 6.00
2019-20 1.00 2.00 6.00
2020-21 1.25 2.00 6.00
2021-22 1.25 2.13 6.00
2022-23 1.25 2.13 6.00
2023-24 1.25 2.13 6.00
2024-25 1.25 2.13 6.00
Source: California State Board of Equalization
(a) On April 1, 2017, the County increased the rate 0.50% and on January 1, 2017 the State decreased the rate 0.25%.
(b)
Corrections were made to the County and State rates in all years. 0.25% that is part of the County Transportation Fund was being counted as State rate by mistake.

Note: The City's sales tax rate may be changed only with approval of the State Legislature. 175

Schedule 11

CITY OF MILPITAS

PRINCIPAL SALES TAX PAYERS
FISCAL YEARS 2024-25 and 2015-16

IN ALPHABETICAL ORDER
Fiscal Year 2024-2025 Fiscal Year 2015-2016
Arco Acme Construction Supply Co
Best Buy Best Buy
Burlington Burlington
Cisco Systems Chevron
Coach Cisco Systems
Consolidated Electrical Distributors Coach
Envision Honda of Milpitas Consolidated Electrical Distributors Envision Toyota of Milpitas Dave & Busters
Flextronics Eplus Technology
Floor & Decor Fireeye
Headway Technologies Flextronics
Home Depot Home Depot
Hoya Corporation Usa Hoya Corporation Usa
Inspur Systems Jacklin Shell
Jacklin Shell KLA Tencor
KLA Tencor Kohls
Kz Kitchen Cabinet & Stone Marshalls
Lennox Industries Mazak Corporation
Marshalls Michael Kors
Milpitas Materials Company Milpitas Materials Company
Nike Factory Store Nike Factory Store
Teledyne Lecroy Piercey Toyota
Uniqlo South Bay Honda
Veeco Process Equipment Inc Tommy Hilfiger
Walmart Supercenter Walmart Supercenter
Sources: State Board of Equalization, California Department of Taxes and Fees Administration, State Controller's 176

Schedule 12
Business-type Activities
Lease Certificates Total Percentage
Fiscal Revenue Purchase Capital of Revenue Primary of Personal Per Year Bonds Agreement Lease Participation Bonds (c) Government Income (a) Capita (a) 2015-16 0 0 94 6,055 0 6,149 0.26% 81
2016-17 0 0 0 5,605 0 5,605 0.22% 74
2017-18 0 0 0 0 5,363 5,363 0.20% 71
2018-19 0 0 728 0 4,812 5,540 0.19% (b) 73
2019-20 0 0 0 0 59,448 59,448 1.76% 763
2020-21 21,919 0 0 0 57,882 79,801 2.11% 1,262
2021-22 21,470 0 0 0 56,246 77,716 1.47% 949
2022-23 20,826 0 0 0 54,555 75,381 1.76% 930
2023-24 20,132 0 0 0 52,804 72,936 1.49% 892
2024-25 19,389 0 0 0 50,988 70,377 1.33% 859
Note: Details regarding the city's outstanding debt can be found in the notes to the financial statements. (a) See Schedule 20 for personal income and population data. (b)
The Redevelopment Agency was dissolved as of January 31, 2012 and its debt was assumed by a Successor Agency. (c) Balance of Revenue Bonds includes unamortized Bond Premium Governmental Activities
(Dollars in thousands, except per capita)

CITY OF MILPITAS

RATIOS OF OUTSTANDING DEBT BY TYPE

LAST TEN FISCAL YEARS
177

Schedule 13

CITY OF MILPITAS

BONDED DEBT PLEDGED REVENUE COVERAGE

REDEVELOPMENT AGENCY TAX ALLOCATION BONDS

LAST TEN FISCAL YEARS
Fiscal Net
Year Redevelopment Tax Debt Service Requirements
Ended Agency Property Less Housing Increment
June 30 Tax Increments (a) Reserve Fund Revenue Principal Interest Total Coverage 2016 48,810,216 (d) 0 (b) 48,810,216 7,375,000 (d) 5,567,028 (d) 12,942,028 3.77 2017 51,563,292 (d) 0 (b) 51,563,292 6,045,000 (d) 5,682,175 (d) 11,727,175 4.40 2018 66,266,187 (d) 0 (b) 66,266,187 6,225,000 (d) 5,467,000 (d) 11,692,000 5.67 2019 71,988,412 (d) 0 (b) 71,988,412 6,475,000 (d) 5,213,000 (d) 11,688,000 6.16 2020 83,139,471 0 (b) 83,139,471 6,735,000 (d) 4,915,125 (d) 11,650,125 7.14 2021 84,805,793 0 (b) 84,805,793 7,070,000 (d) 4,570,000 (d) 11,640,000 7.29 2022 91,606,749 0 (b) 91,606,749 7,425,000 (d) 4,207,625 (d) 11,632,625 7.87 2023 99,657,121 0 (b) 99,657,121 7,800,000 (d) 3,827,000 (d) 11,627,000 8.57 2024 100,075,599 0 (b) 100,075,599 8,185,000 (d) 3,427,375 (d) 11,612,375 8.62 2025 106,669,005 0 (b) 106,669,005 8,595,000 (d) 3,007,875 (d) 11,602,875 9.19 (a) Tax increments are net of pass-through payments and administ rative fees withheld by the County prior to distribution to the Agency. (b) The Redevelopment Agency was dissolved as of Janua ry 31, 2012 and its debt was assumed by a Successor Agency.

The Successor Agency collects Property Taxes, with no distinction between housing and non-housing revenues, which are used for the repayment of the former Redevelopment Agency's Bonds. (c) Includes debt service paid by the Redevelopment Agency prio r to the dissolution and by the Successor Agency after the dissolution. (d) Tax increment reported in this table after the dissolution date is the amount calculated by the County Auditor-Controller as available for payment of enforceable obligations. Under the provisions of the laws dissolving the Redevelopment Agency, the Successor Agency only receives the funds necessary to fulfill its approved obligations.

Debt service reported was paid by the Successor Agency. $0
$5,000
$10,000
$15,000
$20,000
$25,000
$30,000
$35,000
$40,000
$45,000
$50,000
$55,000
$60,000
$65,000
$70,000
$75,000
$80,000
$85,000
$90,000
$95,000
$100,000
$105,000
$110,000
$115,000
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
($000)
Series1 Series4
178

Schedule 14CITY OF MILPITAS

COMPUTATION OF DIRECT AND OVERLAPPING DEBT

PERCENTAGE AMOUNT

APPLICABLE APPLICABLE

TO CITY OF TO CITY OF
JURISDICTION MILPITAS (1) MILPITAS
2024-25 Assessed Valuation, Direct and Overlapping Debt $26,227,211,781 OVERLAPPING TAX AND ASSESSMENT DEBT:

Santa Clara County $45,927,198
San Jose- Evergreen Community College District 115,161,058 Milpitas Unified School District 293,629,507
East Side Union High School District 7,672,603
Berryessa Union School District 10,501,949
Santa Clara Valley Water District Benefits Assessment District 940,487 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT 473,832,802

DIRECT AND OVERLAPPING GENERAL FUND DEBT
Santa Clara County General Fund Obligations $37,802,726 Santa Clara County Pension Obligation Bonds 11,978,770
Santa Clara County Board of Education Certificates of Participation 455,251 San Jose-Evergreen Community College District OPEB Bonds 5,701,712 Milpitas Unified School District General Fund Obligations 7,090,100 East Side Union High School District OPEB Bonds 232,737 Berryessa Union School District General Fund Obligations 97,747 City of Milpitas General Fund Obligations 100% 16,610,000 TOTAL GROSS DIRECT AND OVERLAPPING GENERAL FUND DEBT 79,969,043 Less: Santa Clara County supported obligations 91,258
TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT $79,877,785 OVERLAPPING TAX INCREMENT DEBT (Successor Agency) 100% $55,860,000 TOTAL DIRECT DEBT $16,610,000
TOTAL GROSS OVERLAPPING DEBT $593,051,845
TOTAL NET OVERLAPPING DEBT $592,960,587
GROSS COMBINED TOTAL DEBT $609,661,845 (2)
NET COMBINED TOTAL DEBT $609,570,587
(1) The percentage of overlapping debt applicable to the city is estimated using taxable assessed property value.

Applicable percentages were estimated by determining the portion of the overlapping district's assessed value that is within the boundaries of the city divided by the district's total taxable assessed value. (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations.

Ratios to 2024-25 Assessed Valuation:

Total Overlapping Tax and Assessment Debt 1.81%
Ratios to Assessed Valuation:

Direct Debt % 0.06%
Total Gross Debt % 2.32%
Source: Avenu Insights & Analytics, California Municipal Statistics, Inc.

JUNE 30, 2025
179

Schedule 15

CITY OF MILPITAS

LEGAL DEBT MARGIN INFORMATION

LAST TEN FISCAL YEARS
(Dollars in Thousands)
Legal Debt Margin Calculation for Fiscal Year 2024-25
Assessed value (net) - June 30, 2025 $26,227,211,781
Debt limit: 3.75% of assessed value (a) $983,520,442
Debt applicable to limit
Total Bonded Debt
Less: Tax Allocation Bonds
not subject to limit
Amount of Debt subject to limit 0
Legal debt margin $983,520,442
Total Net Debt
Applicable to the
Limit as a
Fiscal Debt Total Net Debt Legal percentage of
Year Limit Applicable to Limit Debt Margin Debt Limit
2015-16 564,703 0 $564,703 0.0%
2016-17 600,705 0 $600,705 0.0%
2017-18 654,951 0 $654,951 0.0%
2018-19 687,896 0 $687,896 0.0%
2019-20 749,963 0 $749,963 0.0%
2020-21 805,429 0 $805,429 0.0%
2021-22 837,991 0 $837,991 0.0%
2022-23 904,669 0 $904,669 0.0%
2023-24 947,601 0 $947,601 0.0%
2024-25 983,520 0 $983,520 0.0%
(a) California Government Code, Section 43605 sets the debt limit at 15%. The Code section was enacted prior to the change in being assessed value to full market value when it was previously 25% of market value. Thus, the limit shown as 3.75% is one-fourth the limit to account for the adjustment of showing assessed valuation at full cash value.

Source: City of Milpitas Finance Department
Santa Clara County Tax Assessor's Office
180

Schedule 16

CITY OF MILPITAS

INSTALLMENT PAYMENT COVERAGE

SEWER CERTIFICATES OF PARTICIPATION AND

LAST TEN FISCAL YEARS
Less: Net Installment Payments
Fiscal Gross Operating Available
Year Revenues (1) Expenses (2) Revenue Principal Interest Total Coverage 2015-16 16,408,718 7,687,848 8,720,870 435,000 249,348 684,348 12.74 2016-17 16,803,344 6,657,757 10,145,587 450,000 233,193 683,193 14.85 2017-18 17,245,001 9,031,729 8,213,272 470,000 216,055 686,055 11.97 2018-19 19,163,495 8,427,888 10,735,607 480,000 170,273 650,273 16.51 2019-20 20,664,951 10,235,463 10,429,488 460,000 808,477 1,268,477 8.22 2020-21 20,499,033 11,425,234 9,073,799 920,000 1,498,525 2,418,525 3.75 2021-22 21,592,843 9,373,484 12,219,359 980,000 1,455,875 2,435,875 5.02 2022-23 25,221,023 15,137,480 10,083,543 1,020,000 1,411,275 2,431,275 4.15 2023-24 27,580,979 12,562,514 15,018,465 1,070,000 1,361,950 2,431,950 6.18 2024-25 30,004,685 13,835,654 16,169,031 1,120,000 1,307,200 2,427,200 6.66 NOTE: The Certificates of Participation were issued on November 28, 2006 and called on January 5, 2018.

The 2017 Wastewater Revenue Refunding Bonds were issued on December 4, 2017.

The 2019 Wastewater Revenue Bonds were issued on October 22, 2019. (1) Gross Revenues include sewer service charges, other operating revenues, and interest income.

Gross Revenues exclude connection fees and capital contributions. (2) Operating Expenses include sewer treatment services, personnel services, services and supplies, and repairs and maintenance expenses.

Operating Expenses exclude depreciation and amortization expenses.

WASTEWATER REVENUE REFUNDING BONDS
181

Schedule 17

CITY OF MILPITAS

INSTALLMENT PAYMENT COVERAGE

LAST TEN FISCAL YEARS
Less: Net Installment Payments
Fiscal Gross Operating Available
Year Revenues (1) Expenses (2) Revenue Principal Interest Total Coverage 2015-16
2016-17
2017-18
2018-19
2019-20 $33,954,254 $26,919,455 $7,034,799 $155,000 $419,018 $574,018 12.26 2020-21 35,023,092 27,314,613 7,708,479 290,000 755,650 1,045,650 7.37 2021-22 32,732,692 24,593,074 8,139,618 300,000 744,050 1,044,050 7.80 2022-23 34,613,267 26,504,394 8,108,873 315,000 732,050 1,047,050 7.74 2023-24 38,808,876 28,449,404 10,359,472 325,000 719,450 1,044,450 9.92 2024-25 43,035,805 34,374,879 8,660,926 340,000 706,450 1,046,450 8.28 NOTE: The Water Revenue Bonds were issued on October 24, 2019. (1) Gross Revenues include water service charges, other operating revenues, and interest income.

Gross Revenues exclude connection fees and capital contributions. (2) Operating Expenses include wholesale water purchases, personnel services, services and supplies, and repairs and maintenance expenses.

Operating Expenses exclude depreciation and amortization expenses.

WATER REVENUE FUNDS
182

Schedule 18

CITY OF MILPITAS

BIMONTHLY SEWER RATES BY CUSTOMER CLASS

LAST TEN FISCAL YEARS
Single Family Multi-Family Mobile Home
Fiscal Per Dwelling Per Dwelling Parks Per Flat Quantity Year Unit Unit Dwelling Unit Rate Charges (a)
2015-16 90.27 69.32 56.97 14.97 3.94 - 8.34
2016-17 90.27 69.32 56.97 14.97 3.94 - 8.34
2017-18 90.27 69.32 56.97 14.97 3.94 - 8.34
2018-19 102.52 78.73 64.70 24.30 4.21 - 9.63
2019-20 111.07 85.30 70.08 25.78 4.54 - 10.65
2020-21 118.34 90.88 74.66 26.55 4.91 - 11.48
2021-22 124.14 95.34 78.28 27.35 5.31-12.09
2022-23 128.44 97.96 84.42 29.25 4.95 - 11.58
2023-24 133.58 101.88 91.05 30.43 5.15 - 12.04
2024-25 138.93 105.96 98.20 31.65 5.36 - 12.53
Source: City of Milpitas, Ordinance 208.53
(a) For each one hundred cubic feet of water used. Charge varies depending on the business or type of business.

Residential Commercial
183

Schedule 19

CITY OF MILPITAS

BIMONTHLY WATER RATES BY CUSTOMER CLASS

LAST TEN FISCAL YEARS
Potable
Commercial
Industrial
Fiscal Potable Capital 5/8 inch Institutional 5/8 to 10 inch Year Residential Surcharge Meter Charge Construction Meter Charge 2015-16 4.75 18.00 4.75 18.00 - 900.00
2016-17 5.13 1.30 19.44 5.13 19.44 - 972.00
2017-18 5.13 1.30 19.44 5.13 19.44 - 972.00
2018-19* 5.13 - 5.31 1.30 - 1.08 19.44 - 27.01 5.13 - 5.31 19.44 - 1,350.33 2019-20 5.63 1.08 28.63 5.63 26.83 - 1,431.35
2020-21 6.32 1.08 32.17 6.32 32.17-1608.26
2021-22 6.70 1.08 34.10 6.70 34.10-1704.76
2022-23 7.17 1.14 35.87 7.17 35.87-4700.56
2023-24 7.64 1.20 38.21 7.64 38.21-5006.10
2024-25 8.14 1.26 40.70 8.14 40.70-5331.50
Source: City of Milpitas, Ordinance 120.50
*Rate effective Service Period April 1, 2019 to June 30, 2019 implemented on bill dated June 17, 2019. July 2018 rate listed first, and April rate listed second.
(a) For each one hundred cubic feet of water used. Charge varies depending on the business or type of business.

Single Family Residential Commercial
184

Schedule 20

CITY OF MILPITAS

DEMOGRAPHIC AND ECONOMIC STATISTICS

LAST TEN CALENDAR YEARS
(Personal Income in Thousands)
Population Per Capita
Calendar Density Total Personal Personal School Unemployment Land Area Year Population (Sq. Mile) Income Income Enrollment Rate (%) (Sq. Mile) 2015 75,521 5,529 2,374,221 31,437 10,291 3.90% 13.66
2016 75,410 5,520 2,528,663 33,532 10,260 3.50% 13.66 2017 75,410 5,520 2,721,275 36,086 10,318 3.60% 13.66
2018 76,231 5,581 2,966,362 38,912 10,172 2.80% 13.66
2019 77,961 5,707 3,373,340 43,269 10,308 2.70% 13.66
2020 75,663 5,539 3,787,034 50,051 10,413 7.50% 13.66
2021 80,839 5,918 3,744,971 46,326 10,072 5.30% 13.66
2022 81,067 5,935 4,289,458 52,912 9,967 2.70% 13.66
2023 81,773 5,986 4,889,914 59,798 10,199 3.90% 13.66
2024 81,915 5,997 5,275,493 64,402 10,086 4.30% 13.66
Sources: HdL, Coren & Cone
City of Milpitas Annual Budget
185

Schedule 21CITY OF MILPITAS

PRINCIPAL EMPLOYERS
FISCAL YEARS 2024-25 and 2015-16
2024-25 2015-16
Percentage Percentage
Number of of Total City Number of of Total City
Employer Employees Rank Employment Employees Rank Employment Cisco Systems, Inc. (a) 3,600 1 8.29% 3,816 1 9.81%
KLA-Tencor Corporation 2,917 2 6.72% 1,922 2 4.94%
Western Digital Tech (SanDisk Corporation) 1,219 3 2.81% 1,876 3 4.82% Flextronics International (aka Vista Point Technologies) 1,160 4 2.67% 1,400 4 3.60% Milpitas Unified School District 959 5 2.21% 900 6 2.31% Headway Technologies Inc. (2 Locations) 792 6 1.82% 600 8 1.54% City of Milpitas 420 7 0.97%
Amazon - Delivery & Corporate Office 311 8 0.72%
Kaiser Permanente Medical Offices 245 9 0.56% 375 9 0.96% Nanometrics, Inc. 243 10 0.56%
Analog Devices (Linear Technology Corporation) 1,200 5 3.08% FireEye, Inc 778 7 2.00%
Walmart Supercenter 350 10 0.90%
Total Top 10 Employers 11,866 27.34% 13,217 33.98%
Total City Labor Force (1) 43,400 38,900
Source: MuniServices, LLC / Neumo
Source: City of Milpitas - ACFR FY2016 Publication
Report
(1) Total City Labor Force provided by EDD Labor Force
Data.

Notes:

Results based on direct correspondence with city's local businesses. (a) Employer has not responded to our employee count
inquires. Prior year count has been applied.
186

Schedule 22

CITY OF MILPITAS

AUTHORIZED FULL-TIME EQUIVALENT EMPLOYEES BY FUNCTION/PROGRAM

LAST TEN FISCAL YEARS
Fiscal Year Ended June 30
2016 2017 2018 2019 (d) 2020 2021 2022 2023 2024 2025
Function
General Government 64.8 64.8 69.0 60.0 64.0 67.5 66.5 68.5 71.0 72.0 Building, Safety 24.0 24.0 25.0 33.0 (b) 33.0 33.0 33.0 31.0 30.0 22.0 ( f) Housing 3.0 ( f)
Public Works 73.0 (a) 73.0 84.0 44.0 48.0 47.5 47.6 51.8 56.8 58.8 ( e ) Engineering 26.0 (a) 26.0 17.0 22.0 25.0 24.0 24.0 25.0 26.0 26.0 ( e ) Planning 17.0 17.0 17.0 9.0 (b) 10.0 10.0 9.0 9.0 9.0 12.0 ( f) Recreation 18.0 18.0 17.5 18.0 20.75 20.75 20.75 17.00 18.00 18.00 Parks and Recreation
Police:

Sworn Police 92.0 93.0 93.0 90.0 93.0 93.0 93.0 93.0 94.0 94.0 Civilians 30.0 29.0 29.0 29.0 33.0 33.0 33.0 34.0 34.0 34.0 Fire:

Firefighters and Safety
Officers 66.0 66.0 68.0 71.0 73.0 79.0 78.0 78.0 78.0 78.0 Civilians 11.0 11.0 12.0 3.0 4.0 4.0 4.0 4.0 4.0 4.0
Utilities (c) 29.5 29.5 34.5 27.5 27.5 27.5 28.4 29.2 31.2 33.2 Total 451.3 451.3 466.0 406.5 431.3 439.3 437.3 440.5 452.0 455.0 (a) Beginning in fiscal year 2016, Public Works and Engineering are separate departments. (b) Neighborhood Services is a component of Building, Housing and Safety, and Planning is a separate department beginning in fiscal year 2019. (c) Utilities is comprised of employees from Public Works and Finance. (d) In Fiscal Year 2019, the City removed unfunded authorized positions. ( e) As of December 2023, the Engineering and Public Works Departments were realigned into one department named Public Works Department. ( f) Beginning in fiscal year 2025, the Building, Housing and Safety Department was realigned to be separate component under City Manager office. Code Enforcement is a component of Planning Department.

Source: City of Milpitas, final budget
0 100
200
300
400
500
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
FTE's
General Government Building Public Works Engineering and Planning Planning and Neighborhood Services Recreation Parks and Recreation Police Fire Utilities
187

Schedule 23

CITY OF MILPITAS

OPERATING INDICATORS BY FUNCTION/PROGRAM

LAST TEN FISCAL YEARS
2016 2017 2018 2019 2020
Function/Program
Building Safety & Housing
Building permits issued 4,200 4,090 4,200 4,300 4,000
Plan review performed 1,500 1,610 1,700 1,600 4,800
Code Customer Service Requests /
Violations abated 755 800 714 784 600
Public Works
Street miles maintained 139 139 298 298 298
Customer Service Requests 2,794 2,800 3,000 2,384 4,468 Development projects reviewed 178 158 160 225 134
Planning
Applications to Planning Commission 92 92 100 419 37
Recreation
Sports Center members 1,600 1,325 1,450 1,575 1,877
Senior nutrition meals served 20,158 18,678 17,206 18,322 20,145 Police
Avg response time to emergency calls (minutes) 2:40 2:44 2:57 2:41 2:36 Number of anti-terrorist patrol checks 2,400 2,200 2,200 1,949 1,479 Crime prevention presentations 125 70 56 104 110
Number of vehicle citations issued 5,900 5,720 5,900 5,895 6,000 Fire
Emergency calls for service 5,000 5,000 5,200 5,640 5,600 Public education events 100 112 200 223 134
Permits Inspections 7,600 7,322 7,577 7,824 7,772
Plan Review 1,200 1,550 1,700 1,600 1,575
Utility
Clean sewer lines (feet) 500,000 500,000 491,244 528,051 432,022 Repair, replace or set water meters 189 152 115 147 219 Average daily consumption (thousands of gallons) 7,800 5,800 6,590 8,394 8,410 Source: City of Milpitas, final budget
Footnote: Statistic for DARE presentations: schools/students is removed from this schedule in 2022 due to no activity since 201 3 Fiscal Year Ended June 30
188

Schedule 23
2021 2022 2023 2024 2025
3,000 3,000 3,800 4,300 3,800
4,900 4,900 5,200 5,700 5,200
600 600 600 1,054 709
303 303 308 308 308
3,353 4,652 5,176 6,000 6,586
48 24 15 10 16
31 60 60 50 50
506 1,024 1,104 1,104 1,666
39,783 28,699 21,112 21,112 21,723
2:40 2:49 2:55 2:49 3:05
958 490 233 544 249
105 47 28 45 29
6,300 4,230 3,829 3,838 3,254
5,390 6,164 6,782 6,782 6,891
0 2,082 5,079 5,079 6,336
2,949 1,652 1,668 1,668 939
1,884 1,401 1,448 1,448 1,261
636,681 331,232 234,040 234,040 260,602
113 25 18 18 15
7,440 6,895 6,490 6,490 6,769
3 Fiscal Year Ended June 30
189

Schedule 24

CITY OF MILPITAS

CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM

LAST TEN FISCAL YEARS
2016 2017 2018 2019 2020
Function/Program
Public Works
Miles of streets 298 298 298 298 298
Street lights 4,577 4,581 5,119 5,141 4,418
Square feet of buildings
maintained (in thousands) 376 376 322 473 473
City vehicles 264 264 269 271 258
Signs 5,700 6,000 10,000 10,000 6,000
Signal lights 71 72 72 74 78
City Parks 33 32 32 32 36
Acres of Parkland 180 195 195 195 154
Playgrounds 34 33 30 33 33
Parks and recreation
Community centers 1 1 1 1 1
Senior centers 1 1 1 1 1
Sports centers 1 1 1 1 1
Satellite centers 0 2 2 1 2
Swimming pools 3 3 3 3 3
Tennis courts 21 21 21 21 21
Football field 1 1 1 1 1
Baseball/softball fields 9 7 7 9 9
Soccer fields 13 13 13 8 8
Basketball courts 9 10 10 10 10
Volleyball courts / Horse Shoe Pits /
Bocce Ball / Cricket Field / Par Course 10 13 12 10 10
Handball courts 5 6 6 6 6
Skate Park
Joint use:

Russell Bobbysocks Fields 0 3 3 3 3
Soccer fields 0 2 2 8 2
Open Space - Number of School Sites 0 0 0 0 0
Police
Police stations 2 2 2 2 2
Police patrol vehicles 34 29 29 29 29
Fire
Fire stations 4 4 4 4 4
Fire Apparatus 13 11 11 12 13
Fire hydrants 2,033 2,039 2,039 2,039 2,308
Utility
Miles of water mains 203 203 206 206 206
Water Tank Storage
capacity (million of gallons) 16 16 16 16 16
Miles of sanitary sewers 173 173 175 173 173
Miles of storm drain 99 99 105 99 99
Miles of recycled water main 23 21 23 26 26
Source: City of Milpitas, final budget
Fiscal Year Ended June 30
190

Schedule 24
2021 2022 2023 2024 2025
303 303 308 308 308
4,494 4,494 4,516 4,584 4,647
473 455 455 455 465
268 256 302 302 209
6,000 6,000 6,000 6,100 6,200
83 83 83 79 79
36 36 36 37 40
154 154 154 165 192
33 33 33 35 42
111 1 1
111 1 1
111 1 1
111 1 1
333 3 3
21 21 21 25 25
111 1 1
91 11 1 1 1 1 1
888 8 8
10 10 10 18 18
10 10 10 21 21
666 2 2
11 1 1
300 0 0
200 0 0
01 31 3 1 3 1 3
222 2 2
30 30 30 30 30
444 4 4
13 13 13 13 13
2,308 2,308 2,308 2,308 2,308
206 206 206 183 183
16 16 16 16 16
173 173 160 160 160
99 99 99 112 112
26 24 24 24 24
Fiscal Year Ended June 30
191

OTHER AUDIT REPORT

INDEPENDENT AUDITOR’S REPORT ON

INTERNAL CONTROL OVER FINANCIAL REPORTING

AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN

AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE

WITH GOVERNMENT AUDITING STANDARDS
To the Honorable Members of the City Council
City of Milpitas, California
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the basic financial statements of the City of Milpitas, California, as of and for the year ended June 30, 2025, and have issued our report thereon dated November 17, 2025. Our report includes a reference to other auditors who audited the financ ial statements of Terrace Gardens, Inc. , as described in our report on the City’s financial statements. This report does not include the results of the other auditors’ testing of internal control over financial reporting or on compliance and other matters that are reported on separately by those auditors.

Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we consider ed the City’s internal control over financial reporting (internal control) as a basis for desi gning the audit procedures th at are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control.

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

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficien cies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, du ring our audit we did not identify any de ficiencies in internal control that we consider to be material weaknesses. However, material weakness or significant deficiencies may exist that have not been identified.
195

Report on Compliance and Other Matters

As part of obtaining reasonable assu rance about whether the City’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statement amounts.

However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The resu lts of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards.

We have also issued a separate Memo randum on Internal Control dated Nove mber 17, 2025 which is an integral part of our audit and should be read in conjunction with this report.

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the result of that testing, and not to pr ovide an opinion on the effectiveness of the City’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s intern al control and compliance. Accord ingly, this communication is not suitable for any other purpose.

Pleasant Hill, California
November 17, 2025

196

INDEPENDENT ACCOUNTANT’S REPORT ON

APPLYING AGREED UPON PROCEDURES FOR
COMPLIANCE WITH THE PROPOSITION 111
2024-2025 APPROPRIATIONS LIMIT INCREMENT

Honorable Mayor and Members of the City Council
City of Milpitas, California

We have performed the procedures enumerated below on the Appropriations Limit Worksheet (Worksheet) of the City of Milpitas, California, for the year ended June 30, 2025. The City’s management is responsible for the Worksheet.

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

The procedures and associated findings are as follows:

A. We obtained the Workshee t and determined that the 2024 -2025 Appropriations Limit of $140,254,073 and annual adjustment factors were adopted by Resolution of the City Council. We also determined that the population and inflation options were sele cted by a recorded vote of the City Council.

B. We recomputed the 2024-2025 Appropriations Limit by multiplying the 2023-2024 Prior Year Appropriations Limit by the Total Growth Factor. We recomputed the Total Growth Factor by multiplying the population option by the inflation option.

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

We were engaged by the City to perform this ag reed-upon procedures enga gement and conducted our engagement in accordance with atte station standards established by th e American Institute of Certified Public Accountants. We were not engaged to and di d not conduct an examination or review engagement, the objective of which would be the expression of an opinion or conclusion, respectively, on the Worksheet.

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

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

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

Pleasant Hill, California
November 17, 2025

CITY OF MILPITAS

MEMORANDUM ON INTERNAL CONTROL

FOR THE YEAR ENDED JUNE 30, 2025

This Page Left Intentionally Blank

CITY OF MILPITAS

MEMORANDUM ON INTERNAL CONTROL

For the Year Ended June 30, 2025

Table of Contents

Page

Memorandum on Internal Control ................................................................................................................... 1

Schedule of Other Matters ....................................................................................................................... 3

Status of Prior Ye ar Other Matters .......................................................................................................... 9

This Page Left Intentionally Blank

MEMORANDUM ON INTERNAL CONTROL
To the City Council of
the City of Milpitas, California
We have audited the basic financial statements of the
City of Milpitas for the year ended June 30, 2025,
and have issued our report thereon dated November 12, 2025. Our opinions on the basic financial statements and this report, as far as they relate to Terrace Gardens, Inc, are ba sed solely on the report of other auditors. In planning and perf orming our audit of the basic fina ncial statements of the City of Milpitas as of and for the year ended June 30, 2025, in accordance with auditin g standards generally accepted in the United States of America, we considered the City’s internal control over financial reporting (internal control) as a basis for designi ng audit procedures that are appropriate in the circumstances for the purpose of expressing our op inions on the financial statements, but not for the purpose of expressing an opinion on th e effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control.

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

Our consideration of internal control was for the lim ited purpose described in the first paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses. In addition, because of inherent limitations in internal control, including the poss ibility of management override of controls, misstatements due to error or fraud may occur and not be detected by such controls. Given these limitations during our audit, we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

Included in the Schedule of Other Matters are recommendations not meeting the above definitions that we believe are opportunities for strengthening internal controls and operating efficiency.

Government Auditing Standards require the auditor to perform limited procedures on the City’s response to the findings identified in our audit and described in the accompanying Schedule of Other Matters. The City’s response was not subjected to the other auditing procedures appl ied in the audit of the financial statements and, accordingly, we express no opinion on the response.

This communication is intended solely for the information and use of management , City Council, others within the organization, and agencies and pass-through entities requiring compliance with Government Auditing Standards, and is not intended to be and should not be used by anyone other than these specified parties.

Pleasant Hill, California
November 17, 2025
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MEMORANDUM ON INTERNAL CONTROL

SCHEDULE OF OTHER MATTERS
2025-01 Timeliness Submission of the Quarterly Treasurer Report Criteria:

Investment account reconciliation is an importa nt element of the Department’s internal control structure. Effective internal controls require reconciliations to be completed as soon as reasonably possible after each month-end, typically within thirty days of receiving the statements, and reviewed for accuracy. Errors and unreconciled differences should be researched and corrected immediately to prevent additional errors and a decrease in efficiency.

Condition: We noted that the Quarterly Treasurer repo rt for the quarter ended December 31, 2024, was not submitted to Council review as of March 12, 20 25, which is not within 45 days after the quarter ended.

Cause: According to the Finance Manager, the dela y is due to the City’s implementation of the new financial system and reporting structure.

Potential Effect: The late submission of the Quarterly Tr easurer Reports to the City Council may subject the reporting to a higher risk of undetected errors or misstatements.

Recommendation: We recommend that the City submit th e Quarterly Treasurer Reports to City Council no later than 45 days to avoid any undetected errors Management Responses:

The Finance Department consistently reconciles quart erly investment reports received from its external investment advisors in a timely manner and did so for the quarter ended December 31, 2024. However, previous quarterly investment reports submitted to th
e City Council did not include the City's Section 115
Pension Trust investment report provided by external investment advisor PFM Asset Management LLC (PFM).

The inclusion of the Section 115 Pe nsion Trust investment report requires analytical review and integration as part of a comprehensive quarterly investment report package. The timely provision of this analysis by PFM to support conso lidated reporting to the City Coun cil represented a new reporting requirement that required coordination with the external advisor. The Finance Department elected to delay submission until the complete quarterly inve stment report package, including the Section 115 component, could be presented to the City Council at its subsequent Finance Subcommittee meeting on March 12, 2025.

The required reporting cadence and submission timeline have been clearly communicated to both external investment advisors, and the necessary external reports are now being provided with sufficient lead time to ensure timely submission to the City Council within the 45-day timeframe. 3

MEMORANDUM ON INTERNAL CONTROL

SCHEDULE OF OTHER MATTERS
2025-02: Host Compliance Syst em Inaccurate Permit Fees Criteria:

The City should ensure that all fees are accurately calculated in accordance with the approved Fee Schedule for the current fiscal year.

Condition: During our cash receipt testing, we noted a receipt for Host compliance included a base permit fee using an old rate of $520, instead of the new FY25 base fee of $533.

We retrieved the general ledger details for the entire fiscal year of 2025 for Account number 100-3178, which records host compliance receipts. We noted that the total revenue collected from Host compliance during fiscal year 2025 was $19,421.01.

Cause: The City contracted a third-party vendor to process the short-term rental permit. Due to staff turnover, the user and regulatory fee adopted in Fiscal year 24-25 was not communicated to the third-party vendor. This reason has caused the City to collect the wrong fee.

Potential Effect: The City could have undercharged the base permit fee for the Host compliance.

Recommendation:

We recommend that the City:

A. Coordinate with relevant City Staff and/or Host Compliance System Team to identify the cause of the wrong rate/calculation to ensure the correct charges are input and properly reviewed.

B. Ensure all Master Fee schedules effective for the current fiscal year have been updated in the financial system and properly reviewed and approved.

Management Responses:

This receipt that was listed above is related to a shor t-term rental permit fee. As of June 30, 2025, the City has discontinued using the third party to proce ss short-term rental permits. The short-term rental permit process has been brought in-house. The City also ensured the short-term rental permit fee listed in the existing building permit system
complies with the user and regulator y fee adopted for the Fiscal year 2025.
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MEMORANDUM ON INTERNAL CONTROL

SCHEDULE OF OTHER MATTERS

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

EFFECTIVE FISCAL YEAR 2026:

GASB 103 – Financial Reporting Model Improvements
The objective of this Statement is to improve key components of the financial reporting model to enhance its effectiveness in providing information that is essential for decision making and assessing a government’s accountability. This Statement also addresses certain application issues.

Management’s Discussion and Analysis
- This Statement continues th e requirement that the basic financial statements be preceded by management’s discussion and analysis (MD&A), which is presented as required supplementary information (RSI). MD&A pr ovides an objective and ea sily readable analysis of the government’s financial activities based on curr ently known facts, decisi ons, or conditions and presents comparisons between the current year and the prior year. This Stat ement requires that the information presented in MD&A be limited to the rela ted topics discussed in five sections: (1) Overview of the Financial Statements, (2) Financial Summary, (3) Detailed Analyses, (4) Significant Capital Asset and Long-Term Financing Activity, and (5) Curren tly Known Facts, Decisions, or Conditions.

Furthermore, this Statement stresses that the detailed analyses should explain why balances and results of operations changed rather than simply presenting th e amounts or percentages by which they changed.

This Statement emphasizes that the analysis provided in MD&A should avoid unnecessary duplication by not repeating explanations that may be relevant to multiple sections and that “boilerplate” discussions should be avoided by presenting only the most relevant information, focused on the primary government.

In addition, this Statement continues the requiremen t that information included in MD&A distinguish between that of the primary government and its discretely presented component units.

Unusual or Infrequent Items - This Statement describes unusual or infrequent items as transactions and other events that are either unusual in nature or in frequent in occurrence. Furthermore, governments are required to display the inflows and outflows related to each unusual or infrequent item separately as the last presented flow(s) of resources prior to the net change in reso urce flows in the government-wide, governmental fund, and proprietary fund statements of resource flows. 5

MEMORANDUM ON INTERNAL CONTROL

SCHEDULE OF OTHER MATTERS
GASB 103 – Financial Reporting Model Improvements (Continued) Presentation of the Proprietary Fund Statement of Revenues, Expenses, and Changes in Fund Net Position - This Statement requires that the proprietary fund statement of revenues, expenses, and changes in fund net position continue to distinguish between operating and nonoperating revenues and expenses.

Operating revenues and expenses are defined as revenu
es and expenses other than nonoperating revenues
and expenses. Nonoperating revenues and expenses are defined as (1 ) subsidies received and provided, (2) contributions to permanent and te rm endowments, (3) revenues and e xpenses related to financing, (4) resources from the disposal of capital assets and inventory, and (5) investment income and expenses.

In addition to the subtotals currently required in a proprietary fund statement of revenues, expenses, and changes in fund net position, this
Statement requires that a subtotal for operating income (loss) and noncapital subsidies be presented before reporting other nonoperating revenues and expenses. Subsidies are defined as (1) resources received from another part y or fund (a) for which the proprietary fund does not provide goods and services to th e other party or fund and (b) that directly or indirectly keep the proprietary fund’s current or future fees and charges lower than they would be otherwise, (2) resources provided to another party or fund (a) for which th e other party or fund does not provide goods and services to the proprietary fund and (b) that are r ecoverable through the proprietary fund’s current or future pricing policies, and (3) all other transfers.

Major Component Unit Information - This Statement requires go vernments to present each major component unit separately in the reporting entity’s statement of net position and statement of activities if it does not reduce the readability of the statements. If the readabi lity of those statements would be reduced, combining statements of major component units should be presented after the fund financial statements.

Budgetary Comparison Information - This Statement requires go vernments to present budgetary comparison information using a single method of communication—RSI. Governments also are required to present (1) variances between original and final budget amounts and (2) variances between final budget and actual amounts. An explanation of significant variances is required to be presented in notes to RSI.

How the Changes in This Statement Will Improve Financial Reporting The requirements for MD&A will improve the quality of the analysis of changes from the prior year, which will enhance the relevance of that informatio n. They also will provide clarity regarding what information should be presented in MD&A.

The requirements for the separate presentation of unusual or infrequent items will provide clarity regarding which items should be reported separately from other inflows and outflows of resources.

The definitions of operating revenues and expenses and of nonoperating revenues and expenses will replace accounting policies that vary from government to government, thereby improving comparability.

The addition of a subtotal for operating income (loss) and noncapital subsidies will improve the relevance of information provided in the proprietary fund statem ent of revenues, expenses, and changes in fund net position.

The requirement for presentation of major component unit information will improve comparability. 6

MEMORANDUM ON INTERNAL CONTROL

SCHEDULE OF OTHER MATTERS
GASB 103 – Financial Reporting Model Improvements (Continued) The requirement that budgetary comparison information be presented as RSI will improve comparability, and the inclusion of the specified variances and the explanations of significant variances will provide more useful information for making decisions and assessing accountability.

Effective Date: The requirements of this Statement are effec tive for fiscal years beginning after June 15, 2025, and all reporting periods thereafter. Earlier a pplication is encouraged. If a primary government chooses early implementation of this Statement, all component units also should implement this Statement in the same year, subject to the provisions of paragraph 59 of Statement 14.

GASB 104 – Disclosure of Certain Capital Assets
State and local governments are required to provide deta iled information about capital assets in notes to
financial statements. GA SB Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, requires certain information regarding capital assets to be presented by major class. The objective of this Statement is to provide users of government financial statements with essential information about certain types of capital assets.

This Statement requires certain types of capital assets to be disclosed separately in the capital assets note disclosures required by Statement 34. Lease assets recognized in accordance with GASB Statement No. 87, Leases, and intangible right-to-use assets recogniz ed in accordance with GASB Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements, should be disclosed separately by major class of underlying asset in the capital assets note disclosures. Subscription assets recognized in accordance with GASB Statement No. 96, Subscription-Based Information Technology Arrangements , also should be separately disclosed. In addition, this Statement requires intangible assets other than those three types to be disclosed separately by major class.

This Statement also requires additional disclosures fo r capital assets held for sale. A capital asset is a capital asset held for sale if (a) the government has decided to pursue the sale of the capital asset and (b) it is probable that the sale will be finalized within one year of the financial statement date. Governments should consider relevant factors to evaluate the li kelihood of the capital asset being sold within the established time frame. This Statement requires that capital assets held for sale be evaluated each reporting period. Governments should disc lose (1) the ending balance of ca pital assets held for sale, with separate disclosure for historical cost and accumulat ed depreciation by major class of asset, and (2) the carrying amount of debt for which the capital assets held for sale are pl edged as collateral for each major class of asset.

How the Changes in This Statement Will Improve Financial Reporting The requirements of this Statement will improve fi nancial reporting by providing users of financial statements with essential information about certain types of capital assets in order to make informed decisions and assess accountability. Additionally, the disclosure requ irements will improve consistency and comparability between governments.

Effective Date: The requirements of this Statement are effec tive for fiscal years beginning after June 15, 2025, and all reporting periods thereafter.
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MEMORANDUM ON INTERNAL CONTROL

STATUS OF PRIOR YEAR OTHER MATTERS
2024-01 Timeliness of Journal Entries
Criteria:

For the general ledger to be accurate and e ffective, journal entries should be prepared, reviewed, and posted timely, ideally within 30 days of the journal entries' transaction date.

Condition:
a. During our testing of journal en tries, we noted that one entry was prepared and reviewed more than one year after the date the activity occurred.
b. We also noted six journal entries were reviewed more than 30 days past the prepared date.

Cause:

According to the Finance Manager, the delays are due to the City ta king time to research and communicate with other departments and the customer.

Potential Effect: When journal entries are not posted time ly, there is an increased risk that transactions are not posted in the correct period and that accounting errors, misstatements, or unauthorized transactions may not be identified or corrected in a timely manner.

Recommendation: We recommend Finance prioritize j ournal entry processing and establish procedures to ensure monthly journal entries are prepared, reviewed, and posted timely.

Current Year Status: During our journal entry testing in the fiscal year 2025, we still noted that five out of forty journal entries tested were reviewed more than 45 days after the effective date.

Management Responses to Current Year Status:

We acknowledge the finding and will continue to im prove our timeliness on journal entry approval to

meet the approval timeline which is 45 days within th e effective date. In additio n to the reasons listed in the Cause section, the delay is also due to the Ci ty not having a comprehens ive monthly checklist to capture all journal entries from various functional group th at are posted across all general ledger periods.

The checklist must be revisited to ensure completeness.

In addition, on July 1, 2025, the City launched a new Enterprise Re source Planning (ERP) system. The new ERP has workflow capability to improve the effici ency of the approval process. The system notifies the approvers when a journal entry is ready for approval to help ensure timely posting of entries. 9

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CITY OF MILPITAS

REQUIRED COMMUNICATIONS

FOR THE YEAR ENDED
JUNE 30, 2025

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CITY OF MILPITAS

REQUIRED COMMUNICATIONS

For the Year Ended June 30, 2025

Table of Contents

Page

Required Communications ................................................................................................................................ 1

Significant Audit Matters ......................................................................................................................... 1

Qualitative Aspects of Accounting Practices ................................................................................... 1

Difficulties Encountered in Performing the Audit ........................................................................... 3

Corrected and Uncorrected Misstatements ...................................................................................... 3

Disagreements with Management .................................................................................................... 3

Management Representations ............................................................................................................ 3

Management Consultations with Other Independent Accountants ................................................. 4

Other Audit Findings or Issues .......................................................................................................... 4

Other Ma tters ............................................................................................................................................ 4

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REQUIRED COMMUNICATIONS
To the City Council of
the City of Milpitas, California
We have audited the basic financial statements of the City of Milpitas (City) fo r the year ended June 30, 2025. We did not audit the financial statements of Terrace Gardens, Inc. as of and for the year ended December 31, 2024, which represent 0.98%, 1.43%, and 2.12% of the assets, net position and revenues, respectively, of the primary government. These co mponent unit financial statements were audited by other auditors, whose report thereon ha s been furnished to us, and our opin ion, insofar as it relates to the amounts included for this entity, is based solely on the report of the other auditors.

Professional standards require that we provide yo u with information about our responsibilities under generally accepted auditing standards and Government Auditing Standards and the Uniform Guidance, as

well as certain information related to the planned scop e and timing of our audit. We have communicated such information in our letter da ted April 15, 2025. Professional standards also require that we communicate to you the following information related to our audit.

Significant Audit Matters
Qualitative Aspects of Accounting Practices
Accounting Policies - Management is responsible for the sel ection and use of appropriate accounting policies. The significant accounting policies used by the City are desc ribed in Note 1 to the financial statements. No new accounting policies were adopt ed, and the application of existing policies was not changed during the year, except the followings:

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

This Statement requires that liabilities for compen sated absences be recogni zed for (1) leave that has not been used and (2) leave that has been used but not yet paid in cash or settled through noncash means. A liability should be recognized for leave that has not been used if (a) the leave is attributable to services already rendered, (b) th e leave accumulates, and (c) the leave is more likely than not to be used for time off or otherwise paid in cash or settled through noncash means.

Leave is attributable to services already rende red when an employee has performed the services required to earn the leave. Leave that accumula tes is carried forward from the reporting period in which it is earned to a future reporting period during which it may be used for time off or otherwise paid or settled. In estimating the leave that is more li kely than not to be used or otherwise paid or settled, a government should co nsider relevant factors such as employment policies related to compensated absences and hist orical information about the use or payment of compensated absences. However, leave that is more likely than not to be settled through conversion to defined benefit postemployment bene fits should not be incl uded in a liability for compensated absences.
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This Statement requires that a liability for certain types of compensated absences—including parental leave, military leave, and jury duty leave—not be recognized un til the leave commences.

This Statement also requires that a liability for specific types of compensated absences not be recognized until the leave is used.

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

GASB 102 – Certain Risk Disclosures

GASB 102 requires governments to disclose information about certain risks related to resource concentrations (e.g., reliance on a few large employers) and constraints (e.g., legal limits on taxes) that could substantially impact their ability to provide services or meet obligations.

These disclosures are effective for fiscal year s beginning after June 15, 2024. The standard requires that a triggering event (or events) that could cause a substantial impact have occurred, are beginning to occur, or are more likely than not to occur within 12 months of the financial statement issuance date to necessitate disclosure.

Both pronouncements became effective, but did not have a material effect on the financial statements.

Unusual Transactions, Controversial or Emerging Areas - We noted no transactions entered into by the City during the year for which ther e is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period.

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

Estimated Fair Value of Investments: As of June 30, 2025, the City held approximately $450.8 million of cash and investments as measured by fa ir value as disclosed in Note 3 to the financial statements. Fair value is essentially market pricing in effect as of June 30, 2025. These fair values are not required to be adjusted for changes in ge neral market conditions oc curring subsequent to June 30, 2025.

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

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

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

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

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

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

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

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

Difficulties Encountered in Performing the Audit

We encountered no significant difficulties in dealing with management in performing and completing our audit.

Corrected and Uncorrected Misstatements

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

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

Disagreements with Management

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

Management Representations

We have requested certain representations from ma nagement that are incl uded in a management representation letter dated November 17, 2025.

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