Audit Committee
January 23, 2023

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www.modestogov.com
AGENDA
City of Modesto

SPECIAL AUDIT COMMITTEE / COUNCIL WORKSHOP
Held Via Teleconference
(To Access Meeting Please See Instructions Below)
Monday, January 23, 2023 at 10:00 AM
*Roll Call: Sue Zwahlen, Chair
David Wright, Vice-Chair
Nick Bavaro, Member
Alternates: Eric Alvarez, Rosa Escutia-Braaton, Chris Ricci, Jeremiah Williams * Please Note: In order to respond to COVID-19, and pursuant to AB 361, the City will hold this meeting via teleconference and Committee Members will be calling in. “Wordly” can translate into 25+ different languages! To access written translation during the meeting, please scan the QR Code or click this link https://attend.wordly.ai/join/RJDY-6364.
"Wordly" puede traducir a más de 25 idiomas diferentes! Para acceder a la traducción durante la reunión, por favor escanee el código QR o haga clic en el enlace https://attend.wordly.ai/join/RJDY-6364.

THIS MEETING WILL NOT BE PHYSICALLY OPEN TO THE PUBLIC
In order to minimize the spread of the COVID-19 virus, this meeting will be conducted pursuant to AB 361, which amended the Brown Act’s teleconferencing provisions and will not be physically open to the public. You may observe and participate in the meeting via teleconference as indicated below.

PARTICIPATING IN COMMITTEE MEETINGS IN CONFORMANCE
WITH AB 361
The City of Modesto is providing alternatives to observe and participate in Committee meetings.

If you wish to make either a general public comment or to comment on a specific agenda item, you may use one of the following options:
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SUBMITTING COMMENTS BY E-MAIL
Written comments may be submitted via email to: [email protected] (include Agenda Item Number in the subject line). All comments will be shared with the Committee Members and placed in the record but will not be read aloud during the meeting. Written comments must be received two hours before the meeting.

VIRTUAL PARTICIPATION BY ZOOM VIDEO

CONFERENCING AND TELEPHONE
Joining the Committee meeting via Zoom
The City of Modesto is now offering the ability to view and participate in Committee meetings via telephonic conferencing via “Zoom” video conferencing computer technology. The meeting may be accessed through the use of Zoom using the following options:
 Enter the following link into an Internet Browser
https://us02web.zoom.us/j/86945970570,
 Enter the following link into an Internet Browser https://zoom.us/ and using the Webinar ID 869 4597 0570
 Passcode 84326
To use Zoom, please visit: https://zoom.us/ and either sign-up for a free Zoom account or continue as a guest. Once you have downloaded the app onto your mobile device, joined from your web browser, or downloaded the Zoom software on your computer you will be ready for the upcoming Committee meeting.

Joining the Committee meeting via Telephone
If you don’t have a smart phone or computer to access the meeting via Zoom, you can participate by phone, by calling 1-877-853-5257 (Toll Free) or 1-888-475-4499 (Toll Free) and enter the Webinar ID 869 4597 0570 Passcode 84326
Providing Public Comment on Zoom and by Telephone
The Committee Chairman will request public comment during the Public Comment periods on the meeting agendas and during each Regular Calendar Item on the Committee Agenda. Once the Chairman has announced the public comment period, please do one of the following.

USING A COMPUTER OR SMART PHONE APP:
 Click on the “Raise Hand” feature in the webinar controls. This will notify City staff that you have raised your hand.
 City staff will unmute your microphone when it is your turn to provide public comment.
 A prompt will appear to confirm you would like to be unmuted and then you will have three minutes to provide public comment.
 Once your public comment has ended, you will be muted again. - 2 -
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USING A REGULAR PHONE (not using a computer or smart phone APP):
 Dial *9 (star 9), this will notify City staff that you have “raised your hand” for public comment.
 City staff will unmute your microphone when it is your turn to provide public comment.
 You will hear “you are unmuted” and then you will have three minutes to provide public comment.
 Once your public comment has ended, you will be muted again.  If your phone is unmuted, and you are unable to be heard, the host may ask that you Dial *6 to toggle mute on/off in Zoom.

Additional Zoom resources/support
Please visit Zoom’s website support page on helpful tips to prepare for the meeting:
https://support.zoom.us/hc/en-us/categories/201146643
Council has not delegated directive or final approval authority to the Committees. Committee actions are recommendations to the full City Council, not final decisions on an issue.

PUBLIC COMMENTS
Please refer to special public comment instructions above.

Three-minute time limit per speaker
Only interested persons in the audience may present these matters. Under State law, Committee Members may respond to matters being presented under this item only as follows:
a. Briefly respond to statements made or questions raised. b. Ask a question for clarification.
c. Provide a reference to staff or other resources for factual information. d. Request staff to report back at a subsequent meeting. e. Finally, a Committee Member or the Committee itself may take action to direct staff to place a matter of business on a future agenda.

CONSENT ITEMS – ROLL CALL VOTE REQUIRED:

Information concerning the consent items listed below has been forwarded to each Committee Member prior to this meeting for study. Unless some member of the audience or Committee Member has a question concerning an item and asks that it be withdrawn from the consent list, the Committee approves the items at one time. The action taken by the Committee in approving consent items is set forth in the explanation of this individual item.

Any and all of the following agenda items are subject to action by the Modesto City Council. - 3 -
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This Agenda is on file at the Modesto-Stanislaus Library Reference Room, 1500 I Street, Modesto, in the City Clerk’s Office, Sixth Floor, 10th Street Place, and is available on the City’s Web site at www.modestogov.com.

In accordance with the requirements of Title II of the Americans with Disabilities Act (“ADA”) of 1990, the Fair Employment & Housing Act (“FEHA”), the Rehabilitation Act of 1973 (as amended), Government Code section 11135 and other applicable codes, the City of Modesto (“City”) will not discriminate against individuals on the basis of disability in the City’s services, programs, or activities. For more information, please visit the City of Modesto website at https://www.modestogov.com/865/Americans-with-Disabilities-Act-ADA In compliance with the Americans with Disabilities Act, if you need special assistance to participate in this meeting, please contact the City Clerk (209) 577-5396. Notification 48 hours prior to the meeting will enable the City to make reasonable arrangements to ensure accessibility to this meeting.

NEW BUSINESS

1. Consider approving the Audited Financial Statements and various Audit Reports for Fiscal Year 2021-2022, audited by external auditors Hudson Henderson & Company, Inc. for the City’s Annual Comprehensive Financial Report (ACFR), twelve (12) Community Facilities Districts (CFDs), Measure L, Single Audit, and various Joint Powers Agencies and forwarding to Council for approval. (Funding Source: Not Applicable)
 Motion accepting the Audited Financial Statements and various Audit Reports for Fiscal Year 2021-2022 audited by external auditors Hudson Henderson & Company, Inc. for the City’s Annual Comprehensive Financial Report (ACFR), twelve (12) Community Facilities Districts (CFDs) and various Joint Powers Agencies (JPAs), and forwarding to Council for approval.  Motion accepting the audited Fiscal Year 2021-2022 Federal Single Audit report for the City of Modesto, and forwarding to Council for approval.  Motion accepting the Fiscal Year 2021-2022 Auditor’s Report on compliance of the Measure L: Local Roads First Transportation Funding Measure, and forwarding to Council for approval.

FINANCE DEPARTMENT; Maria Garnica, 209-577-5249,
[email protected]

2. Consider accepting an informational update for the Transient Occupancy Tax Audit and forwarding to Council for approval. (Funding Source: General Fund)  Motion approving the informational update for the Transient Occupancy Tax Audit and forwarding to Council for approval.

FINANCE DEPARTMENT; Gina Brown, 209-577-5381, [email protected]

3. Consider approving the Citywide Risk Assessment prepared by Sjoberg Evashenk Consulting, Inc. and forwarding to Council. (Funding Source: General Fund) - 4 -
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 Motion accepting the Citywide Risk Assessment Report completed by Sjoberg Evashenk Consulting and forwarding to Council for approval.

FINANCE; DeAnna Christensen, 209-577-5387, [email protected]

ADJOURNMENT
Posted pursuant to Government Code Section 54954.2 on the bulletin board at Tenth Street Place on at by
date time signature
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CITY OF MODESTO

COMMITTEE AGENDA REPORT
DATE OF MEETING:

January 23, 2023
Date: December 9, 2022
TO: Audit Committee
Sue Zwahlen, Chair
David, Wright, Vice-Chair
Nick Bavaro, Member
THROUGH: Joseph P. Lopez, City Manager
FROM: DeAnna Christensen, Director of Finance
SUBJECT: Fiscal Year 2021-2022 Audited Financial Statements CONTACT: Maria Garnica, Accounting Manager, [email protected], 209-577-5249 DESCRIPTION:

Consider approving the Audited Financial Statements and various Audit Reports for Fiscal Year 2021-2022, audited by external auditors Hudson Henderson & Company, Inc. for the City’s Annual Comprehensive Financial Report (ACFR), twelve (12) Community Facilities Districts (CFDs), Measure L, Single Audit, and various Joint Powers Agencies and forwarding to Council for approval. (Funding Source: Not Applicable)
STRATEGIC PLAN ELEMENT:

This item supports the City of Modesto 2020-2025 Strategic Plan focus of Governance and Service Delivery under Goal H: Achieve Financial Sustainability.

BACKGROUND:

Annual Comprehensive Financial Report (ACFR) and Other Annual financial Reports The Modesto City Charter requires an annual audit, which shall be presented to the Council, as follows:

SECTION 1306. INDEPENDENT AUDIT.

The Council shall employ, at the beginning of each fiscal year, an independent certified public accountant who, at such time or times as may be specified by the Council, at least annually, shall examine the books, records, inventories, and reports of all officers and employees who receive, handle or disburse public funds and all such other officers and employees and departments as the Council may direct.

As soon as practicable after the end of the fiscal year, a final audit and report shall be submitted by such accountant to the Council, one (1) copy thereof to be #1..
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Audit Committee, January 23, 2023
Fiscal Year 2021-2022 Audited Financial Statements

distributed to each member, one (1) to the City Auditor, one (1) to the City Manager and one (1) to the City Attorney respectively, and three (3) additional copies to be placed on file in the office of the City Clerk, where they shall be available for inspection by the general public.

The City’s Annual Comprehensive Financial Report (ACFR), for the Fiscal Year ending June 30, 2022, is an annual report which includes audited financial statements with an external auditor’s opinion on the financial condition and the results of operations for the period under audit. The accounting firm Hudson Henderson & Company, Inc. conducted the Fiscal Year 2021-2022 audit for the City.

Federal Single Audit
The City of Modesto Single Audit report is federally mandated by the provisions of the Federal Single Audit Act Amendments of 1996 and Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), which requires an audit to be conducted for any non-Federal entity that expends $750,000 or more a year in Federal awards. This audit was conducted by the City’s external auditor, Hudson Henderson & Company, Inc. and the main objectives were to ensure a fair presentation of the basic financial statements and the schedule of expenditures of Federal awards, and to also audit the City's internal controls and compliance with legal requirements, with special emphasis on internal controls and legal requirements involving the administration of federal awards expended during the fiscal year.

Measure L
In November of 2016 the voters of Stanislaus County approved the county wide, 25-year, half cent sales tax increase known as Measure L. As part of the safe guards built into the expenditure plan an annual independent audit and annual reporting must be completed. On page 8 of the expenditure plan, the ordinance states “Annual fiscal and compliance audits will be conducted by a CPA, to assure that the revenues expended are necessary and reasonable.” The ordinance also requires an audit annually to ensure that administrative expenses were no more than 1% of revenues expended and that the jurisdiction meets its maintenance of effort.

On December 12, 2017, per Resolution 2017-505, Council approved the Measure L master funding agreement with the Stanislaus Council of Governments (StanCOG). The agreement states in Article II: Funding Prerequisites and Requirement that the recipient shall annually submit to StanCOG, “An annual independent audit of all of recipients Measure L accounts which audit shall be conducted at recipient’s sole cost and expense.” For the audit related to FY 2021-2022, the City received information from StanCOG that they would be continuing to conduct the annual audit and that it would be at the expense of StanCOG as part of the 1% allowable administrative expenses within the Measure L ordinance.

The accounting firm of Hudson Henderson & Company, Inc., as selected by StanCOG conducted the Fiscal Year 2021-2022 audit report.

DISCUSSION:

Annual Comprehensive Financial Report (ACFR) and Other Annual financial Reports The independent auditors concluded for the ACFR that there was a reasonable basis for rendering an unmodified (clean) opinion and that the statements were fairly presented in accordance with generally accepted accounting principles. In conjunction with this audit, #1..
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Fiscal Year 2021-2022 Audited Financial Statements

Hudson Henderson & Company, Inc. also performed certain agreed-upon procedures as applied to the Appropriations Limitation (GANN Limit) prescribed by Article XIII-B of the California Constitution. Copies of these reports are attached.

Community Facilities Districts (CFDs)
In addition, our independent auditors examined the financial statements of twelve (12) Community Facilities Districts (CFDs) and concluded that there was a reasonable basis for rendering an unmodified (clean) opinion and that the statements were fairly presented in accordance with generally accepted accounting principles. The twelve (12) CFDs examined include:

1. Community Facilities District Number 1998-2 (Carver-Bangs/Pelandale-Snyder)

2. Community Facilities District Number 2000-2 (Coffee-Claratina)

3. Community Facilities District Number 1998-1 (Enterprise Business Park)

4. Community Facilities District Number 2003-1 (Fairview Village)

5. Community Facilities District Number 2007-2 (Kiernan Business Park West)

6. Community Facilities District Number 1997-1 (North Beyer Park)

7. Community Facilities District Number 2002-1 (Northpointe)

8. Community Facilities District Number 2004-1 (Village One #2)

9. Community Facilities District Number 1996-1 (Village One)

10. Community Facilities District Number 2016-1 (Kiernan Business Park East #2)

11. Community Facilities District Number 2007-1 (North Beyer #2)

12. Community Facilities District Number 2016-2 (The Vintage) Joint Powers Agencies (JPAs) and Smaller Programs
The City is the financial administrator for several joint powers agencies (JPAs) which require an independent audit of their financial statements. The joint powers agencies and mandated audit reports included in this report are:

1. Abandoned Vehicle Abatement (AVA)

2. Modesto-Ceres Fire Protection Agency

3. Tuolumne River Regional Park (TRRP)

4. Transportation Development Agency (TDA)

5. Transportation Development Agency (TDA) National Transit Database (NTD) Reporting Forms
Based on the attached Auditors’ Reports, the financial statements for ACFR, GANN Limit, CFDs and JPAs were prepared and presented fairly in all material respects.

Federal Single Audit
And finally, the City also directly receives funding from various state and federal agencies that mandate annual audit reports. On an annual basis the auditors select a number of programs based on specific criteria in accordance with auditing standards which are deemed Major Programs which require auditing. For Fiscal Year 2021-2022, the Major Programs selected were:

Emergency Rental Assistance Program – American Rescue Plan Act Coronavirus State and Local Fiscal Recovery Funds
Staffing for Adequate Fire and Emergency Response as the major programs #1..
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Fiscal Year 2021-2022 Audited Financial Statements

As part of the City’s Fiscal Year 2021-2022 Single Audit report, no findings were reported for any of the grant funding received from the various federal agencies.

Measure L
As part of the City’s Fiscal Year 2021-2022 Measure L Program Audit, the accounting firm, Hudson Henderson & Company, Inc., verified the revenues and expenditures, fund balances, and that the Maintenance of Effort requirement was met.

In order to accomplish the audit, the City provided the following information to the firm:
 Receipt of payment for all cash received from StanCOG  Detail of all payroll charges and expenditures supporting documentation  Copies of completed monthly reports submitted to StanCOG  Revenue and Expenditure General Ledger detail and the trial balance for all Measure L funds
 Copy of the certification for the maintenance of effort  List of all Measure L projects and a copy of the Strategic Plan After all information was provided, staff worked closely with the firm to ensure that any requested documents and questions asked were addressed in a timely manner.

On October 19, 2022, Hudson Henderson & Company, Inc. issued the final independent auditor’s report of the Measure L program for the fiscal year ending in June 30, 2022. In addition, on October 20, 2022, the firm issued a letter to the Policy Board of Stanislaus Council of Governments with the final report. Both the final report and the letter to StanCOG did not have any findings for the year ending June 30, 2022.

FISCAL IMPACT:

While the information contained in these reports discloses the financial performance for the City, there is no direct fiscal impact.

RECOMMENDED COMMITTEE ACTION:

Staff Recommendations:

Motion accepting the Audited Financial Statements and various Audit Reports for Fiscal Year 2021-2022 audited by external auditors Hudson Henderson & Company, Inc. for the City’s Annual Comprehensive Financial Report (ACFR), twelve (12) Community Facilities Districts (CFDs) and various Joint Powers Agencies (JPAs), and forwarding to Council for approval.

Motion accepting the audited Fiscal Year 2021-2022 Federal Single Audit report for the City of Modesto, and forwarding to Council for approval.

Motion accepting the Fiscal Year 2021-2022 Auditor’s Report on compliance of the Measure L:

Local Roads First Transportation Funding Measure, and forwarding to Council for approval.

Approved by:

DeAnna Christensen, Director of Finance
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Audit Committee, January 23, 2023
Fiscal Year 2021-2022 Audited Financial Statements

Joseph P. Lopez, City Manager
Attachments:

1. Annual Comprehensive Financial Report FY 2021-2022

2. GANN Limit Report FY 2021-2022

3. Community Facilities District Number 1998-2 (Carver-Bangs/Pelandale-Snyder)

4. Community Facilities District Number 2000-2 (Coffee-Claratina)

5. Community Facilities District Number 1998-1 (Enterprise Business Park)

6. Community Facilities District Number 2003-1 (Fairview Village)

7. Community Facilities District Number 2007-2 (Kiernan Business Park West)

8. Community Facilities District Number 1997-1 (North Beyer Park)

9. Community Facilities District Number 2002-1 (Northpointe)

10. Community Facilities District Number 2004-1 (Village One #2)

11. Community Facilities District Number 1996-1 (Village One)

12. Community Facilities District Number 2016-1 (Kiernan Business Park East #2)

13. Community Facilities District Number 2007-1 (North Beyer #2)

14. Community Facilities District Number 2016-2 (The Vintage)

15. Abandoned Vehicle Abatement (AVA)

16. Modesto-Ceres Fire Protection Agency Financial Statements

17. Tuolumne River Regional Park (TRRP)

18. Transportation Development Agency (TDA)

19. Federal Single Audit Report FY 2021-2022

20. Independent Auditors’ Reports and Schedule of Measure L Revenues and Expenditures for Fiscal Year Ended June 30, 2022.

21. Letter to the Policy Board of Stanislaus Council of Governments #1..
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CITY OF
Modesto, California

ANNUAL COMPREHENSIVE FINANCIAL REPORT
Fiscal Year Ended June 30, 2022
Prepared by
Finance Department
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CITY OF MODESTO
June 30, 2022

TABLE OF CONTENTS

INTRODUCTORY SECTION
Transmittal Letter .......................................................................................................................... iii - xxiii Certificate of Achievement for Excellence in Financial Reporting ...................................................... xxiv City of Modesto Organizational Chart.................................................................................................. xxv

FINANCIAL SECTION
Independent Auditors’ Report .............................................................................................................. 3-5 Management’s Discussion and Analysis ........................................................................................... 6-14 Basic Financial Statements:

Government-wide Financial Statements:

Statement of Net Position ........................................................................................................ 17 Statement of Activities ........................................................................................................ 18-19 Fund Financial Statements:

Balance Sheet – Governmental Funds .................................................................................... 20 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position – Governmental Activities ............................................................. 21 Statement of Revenues, Expenditures, and Changes in Fund Balances - Governmental Funds .............................................................................................................. 22 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities – Governmental Activities ......................................................................................................... 23 Statement of Net Position – Proprietary Funds ........................................................................ 24 Statement of Revenues, Expenses, and Changes in Fund Net Position - Proprietary Funds ................................................................................................................... 25 Statement of Cash Flows – Proprietary Funds .................................................................. 26-27 Statement of Fiduciary Net Position ........................................................................................ 28 Statement of Changes in Fiduciary Net Position – Fiduciary Funds…………...…….……… …29 Notes to Basic Financial Statements ........................................................................................ 30-77 Required Supplementary Information:

Schedule of Changes in the Net Pension Liability and Related Ratios ..................................... 81-82 Schedule of Plan Contributions....................................................................................................... 83 Schedule of Changes in the OPEB Liability and Related Ratios .................................................... 84 Schedule of Contributions ............................................................................................................... 85 Schedule of Revenues – Budget (GAAP Basis) and Actual – General Fund ................................. 86 Schedule of Expenditures by Function – Budget (GAAP Basis) and Actual – General Fund ......... 87 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget (GAAP Basis) and Actual – Operating Grants Special Revenue Fund ........................................................... 88 Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget (GAAP Basis) and Actual –Housing and Community Development Special Revenue Fund .......................... 89 Notes to Required Supplementary Information ......................................................................... 91-92 Combining and Individual Fund Statements and Schedules:

Nonmajor Governmental Funds:

Combining Balance Sheet ................................................................................................ 98-100 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances ............................................................................................................. 102-104 #1..
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Schedules of Revenues, Expenditures, and Changes in Fund Balance – Budget (GAAP Basis) and Actual:

Local Transportation Special Revenue Fund ................................................................... 105 Traffic Safety Special Revenue Fund .............................................................................. 106 Transportation Special Tax Revenue Fund…………………………………………………107 Downtown Improvement District Special Revenue Fund................................................. 108 Strategic Planning and Development Special Revenue Fund……………………………..109 Nonmajor Enterprise Funds:

Combining Statement of Net Position ............................................................................ 112-113 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position ......................................................................................................... 114-115 Combining Statement of Cash Flows ............................................................................ 116-119 Internal Service Funds:

Combining Statement of Net Position ............................................................................ 122-123 Combining Statement of Revenues, Expenses, and Changes in Fund Net Position ......................................................................................................... 124-125 Combining Statement of Cash Flows ............................................................................. 126-129 Investment Trust Funds:

Combining Statement of Fiduciary Net Position Fiduciary Funds – Investment Trust Funds……………………………………………………………………………132
Combining Statements in Changes in Fiduciary Net position – Fiduciary Funds - Investment Trust Funds ....................................................................................................... 133

STATISTICAL SECTION
Financial Trends:

Net Position by Component .......................................................................................................... 138 Changes in Net Position ....................................................................................................... 139-140 Fund Balances of Governmental Funds ....................................................................................... 141 Changes in Fund Balances of Governmental Funds .................................................................... 142 Revenue Capacity:

Water Utility System .................................................................................................................... 143 Debt Capacity:

Ratio of Outstanding Debt by Type ............................................................................................... 144 Computation of Direct and Overlapping Debt ............................................................................... 145 Computation of Legal Debt Margin ............................................................................................... 146 Revenue Bond Coverage, Wastewater Revenue Bonds .............................................................. 147

Demographic and Economic Information:

Demographic and Economic Statistics ......................................................................................... 148 Principal Employers ...................................................................................................................... 149 Principal Property Taxpayers ........................................................................................................ 150

Operating Information:

Full-Time City Government Employees by Function ..................................................................... 151 Operating Indicators by Function .................................................................................................. 152 Capital Asset Statistics by Function/Program ............................................................................... 153

CONTINUING DISCLOSURE SECTION
Continuing Disclosure Requirements Information ....................................................................... 158-168 #1..
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INTRODUCTORY TAB
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INTRODUCTORY SECTION
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Department of Finance
P.O. Box 642
Modesto, California 95353
209.577.5369
Modestogov.com
Hearing and Speech Impaired Only
TDD 209.526.9211
December 09, 2022
To the Honorable Mayor, Members of the City Council, and Citizens of the City of Modesto:

We are pleased to present to you the Annual Comprehensive Financial Report (ACFR) for the City of Modesto (the City). The City Charter and Municipal Code require that a complete ACFR, which is comprised of financial statements and reports on the finances of the City, be submitted to the City Council at the end of each fiscal year. This report fulfills that requirement for the year ending on June 30, 2022.

City management assumes full responsibility for the completeness and reliability of the information contained in this report. We believe the data fairly represents the financial position and results of operations of the City. The disclosures necessary to enable the reader to understand the City's financial affairs have been included. The City's accounting system has been developed and maintained with due consideration given to the adequacy of internal controls. Because the cost of internal controls should not exceed the anticipated benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatements. The evaluation of the costs and benefits of a particular control requires estimates and judgments by management.

The Modesto City Charter also requires an annual audit be performed by an independent certified public accountant selected by the Modesto City Council. The accounting firm of Hudson Henderson and Company, Inc. was selected in 2018 to perform the City's annual financial audits. The auditors have issued an unmodified (“clean”) opinion on the financial statements for the fiscal year ending on June 30, 2022 which is presented on page 3. In addition to meeting the City Charter audit requirements, the audit was also designed to meet the requirements of the Federal Single Audit Act Amendments of 1996 and Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). The auditors’ reports related specifically to the Single Audit will be presented separately at a later date.

Management’s discussion and analysis (MD&A) immediately follows the independent auditors’ report and provides a narrative introduction, overview, and analysis of the basic financial statements. The MD&A is designed to be read in conjunction with this transmittal letter.

City of Modesto Profile
Modesto is located in the heart of California's San Joaquin Valley and is the County Seat of Stanislaus County. It is also the retail, service and financial center of Stanislaus County. The City currently occupies a land area of 37.4 square miles and serves a population of 217,880. The City has a diverse economy and population with a strong sense of community pride.

Incorporated as a municipal city in 1884, the City adopted its City Charter on March 12, 1951, with a CouncilManager form of government. The Modesto City Council (Council) is the City’s legislative body and is made up of seven elected officials serving overlapping 4-year terms. The Mayor is elected at-large by the entire City, while the six Councilmembers are elected by district and are limited to two terms.

The Council sets policy and tax rates, approves budgets, and passes ordinances and resolutions, which govern the City. The Council also appoints citizens to advisory boards, committees and commissions, and iii
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appoints the City Manager, City Attorney, City Clerk, and City Auditor. The City Manager is responsible for carrying out Council policy and managing the day-to-day affairs of the City.

The City is a “full-service” city including police and fire; public works; water and sewer; community and economic development; parks and recreation; and cultural and convention visitor services.

The City’s financial reporting entity includes all funds and activities of the City as the primary government and its component units, which are legally separate entities that operate under the auspices of the City and provide services that supplement City services. The City’s component units are blended into the City’s funds because there is a financial benefit/burden relationship when the City or management has operational responsibility over the component unit. These component units are the Modesto Public Financing Authority and the City of Modesto Community Facilities Districts.

The annual operating budget serves as the foundation for the City’s financial planning and control. The proposed budget is adopted annually prior to July 1 by Council ordinance. The Council’s legally-adopted budget level is at the fund level. Throughout the fiscal year, the budget may be modified. The Council has also adopted fiscal policies that delineate the delegated budget control authority to the following parties:

Council, the City Manager, and the Budget Manager.

Local Economy
A major center for local commerce, the City attracts thousands to its environs for work, shopping, and entertainment. Major employment sectors include manufacturing, healthcare, education, and retail.

Modesto and its surrounding communities contain canneries, packing plants, and warehouses which ship agricultural products across the nation and the world. An active farm-to-table movement has been spearheaded by the area’s large production of nuts, dairy, poultry, and other locally grown products.

The unemployment rate within the county-wide Modesto Statistical Area (MSA) decreased during the 2021- 2022 fiscal year, turning up slightly at the end of the fiscal year. Unemployment reached its lowest level in the City at 4.5% in May 2022. As of June 30, 2022, the City’s unemployment rate was recorded at 5.2%, down from the 8.9% rate of a year ago due to lessening economic impacts from COVID-19.

According to Zillow, the ZHVI (Zillow Home Value Index) for homes listed in Modesto was $453,000 (as of June 30, 2022), an increase of 18.2% over 2021. CoStar Realty Information stated the average Modesto MSA multifamily unit asking rent was $1,478, up 8.7% from $1,360 in 2021. Modesto building permit activity during fiscal year 2021-2022 ended with a total of 4,690 permits issued with a valuation of $216,000,327.

Modesto is a prime and central location for business, and has attracted both start-ups and expanding firms.

Specialized health care facilities like HealthSouth and Central Valley Specialty Hospital have chosen to expand their services and operations in Modesto. There is also a strong culture of entrepreneurship and innovation. Datapath, a technology management company with headquarters in Modesto, has been recognized by Inc. Magazine as one of the fastest-growing private companies in America. E&J Gallo Winery, also based in Modesto, is the world’s largest privately-owned winery and the leading US exporter of California wines. The Gallo Glass Company is a state-of-the-art glass manufacturer and a leading producer of wine and spirits glass bottles in the US.

The Coronavirus Aid, Relief and Economic Security (CARES) Act provides CDBG-CV funding to enable the City to prevent, prepare for, and respond to coronavirus through providing quality subsidized housing and expanding economic opportunities for low-and moderate-income persons through Department of Housing and Urban Development (HUD) programs.

Eligible CDBG-CV activities include:
 Public Service activities
 Housing-Related activities
 Public Improvements and Facilities
 Activities to acquire real property
 Economic development activities
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 General administrative and planning activities
For fiscal year 2021-2022, $297,794 were competitively awarded to assist local non-profits to respond to COVID-19 initiatives that serve the low- and moderate-income populations.

The ESG-CV funds may only be used to prevent, prepare for, and respond to the coronavirus, among individuals and families who are homeless or receiving homeless assistance, and to support additional homeless assistance and homelessness prevention activities to mitigate the impacts created by the coronavirus. People experiencing homelessness shall not be required to receive treatment or perform and other prerequisite activities as a condition for receiving assistance.

Eligible ESG-CV activities include:
 Street outreach
 Emergency shelter
 Homelessness prevention
 Rapid rehousing assistance
 Homeless Management Information System (HMIS)
 Administrative activities
For fiscal year 2021-2022, $1,529,689 was utilized to continue our Camp2Home initiatives to bolster the homeless and homeless prevention response systems to assist those most vulnerable in the community to COVID-19.

COVID-19 Recovery and New Growth
In April 2021, President Biden signed into law the American Rescue Plan Act (ARPA) a $1.9 trillion emergency relief measure intended to provide relief to address the impact of COVID-19. Key allocations from the American Rescue Plan have been made available directly from the federal government for the community including direct support for businesses, homeowners, renters, and restaurant/bar owners. This legislation made a historic investment into local governments that includes $45,897,056 available to the City of Modesto to help address the local impact of COVID-19. The $45.89 million is being made available by the U.S Treasury directly to the City in two tranches: 50 percent was made available in May 2021, and the remaining 50 percent was received on June 6, 2022. The deadline to obligate funds is December 31, 2024 and the deadline to expend the funds is December 31, 2026 The Modesto Forward strategy was approved by Resolution 2021-194 on May 25, 2021 and was later modified by Resolution 2022-104 on February 8, 2022. It included various allocations of funding approved by Council identified in the 2021 spending plan, totaling $22.9 million. At the time of this report, $7.3 million of the Year 1 Spending Plan has been expended, $11.5 million is allocated to programs currently in progress and $4 million is in the research phase.

To arrive at the Year 2 expenditure plan, staff solicited priorities from the public and the Council at the three standing City Council Committees: Economic Development, Safety and Communities, and Finance. Staff also released a 10-question survey intended to gauge the priority areas of the community and received approximately 700 responses to the survey. Key priorities identified in the survey and in the standing committees include the following: housing stability/ homeownership, neighborhood safety, and improvements to roads and sidewalks. The Council and community expressed an interest in continuing many of the pilot initiatives that were launched as part of the 2021 spending plan and expressed a desire to extend the program periods with funds made available from the second allotment of ARPA funds.

Approximately $11.1 million was recommended for allocation for the half of the second allotment in anticipation of another surge in COVID-19 cases.
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Proposed Funding for ARPA Funds
Eligible Category Year Description Allocation
Exp Claim / Rev Loss 1 Revolving loan fund for attraction of downtown development $1,000,000 Exp Claim / Rev Loss 1 Revolving loan fund for water/sewer connection fees $1,000,000 Exp Claim / Rev Loss 1 Tuolumne River – Economic Development $750,000 Exp Claim / Rev Loss 1 Relief Across Downtown Card $708,500 Business Support 1 Small biz support with expansion and retention $610,000 Business Support 1 Implementation of a workforce development program $500,000 Exp Claim / Rev Loss 1 Support for Children’s Museum $500,000 Exp Claim / Rev Loss 1 Support for Awesome Spot Playground $500,000 Exp Claim / Rev Loss 1 Support for Car Museum $500,000
Affordable Housing 1 Affordable Housing Trust $500,000
Exp Claim / Rev Loss 1 Support for Convention and Visitor’s Bureau $250,000 Broadband Infrastructure 1 Expanded Wi-Fi downtown and available at community facilities $200,000 Exp Claim / Rev Loss 1 Funding to support the development of Enhanced Infrastructure Financing District $200,000
Business Support 1 Support for the Arts $200,000
Business Support 1 Opportunity Stanislaus $100,000
Business Support 1 Stanislaus Equity Partners $100,000
Business Support 1 Stanislaus 2030 Initiative $90,000
Exp Claim / Rev Loss 2 Downtown Quiet Zone $1,000,000
Exp Claim / Rev Loss 2 Parking Infrastructure $250,000
Exp Claim / Rev Loss 2 Support for Convention and Visitor's Bureau $250,000 Public Health/Safety Labor 1 COVID-19 labor expenses $4,630,000 Behavioral Health 1 Mental Health Clinician Program – Partnership with BHRS $800,000 Exp Claim / Rev Loss 1 Blight Abatement $750,000
Exp Claim / Rev Loss 1 Downtown Beautification $700,000 Homeless Services 1 Homeless Support Program: Park Rangers $624,000 COVID-19 Expenditures 1 Emergency Medical Service equipment $600,000 Homeless Services 1 Homeless Support Program $276,000
Revenue Loss 1 Grants to neighborhoods $120,000
Homeless Services 2 Downtown Streets Team $1,800,000
Exp Claim / Rev Loss 2 Park Improvements (including turf at Mary Grogan) $1,000,000 Behavioral Health 2 Mental Health Response $850,000
Exp Claim / Rev Loss 2 Blight Abatement $650,000
Homeless Services 2 Homeless Support Program: Park Ranger Extension $624,000 Homeless Services 2 Community Assistance Team $400,000
Exp Claim / Rev Loss 2 Multifamily Bulky Item Program $180,000 Business Support 2 West Modesto Collaborative $43,000
Exp Claim / Rev Loss 1 Fire Station 1 Deferred Maintenance $2,000,000 Exp Claim / Rev Loss 1 Forestry Program Enhancements $1,850,000 Exp Claim / Rev Loss 1 Address deferred maintenance at various parks and public facilities $1,270,028 Exp Claim / Rev Loss 1 General Plan Update $700,000
Exp Claim / Rev Loss 1 Discoverer Replacement $500,000
Exp Claim / Rev Loss 1 Cybersecurity Mitigation $490,000 Exp Claim / Rev Loss 1 TSP Battery Back Up System Upgrade $250,000 Exp Claim / Rev Loss 1 Innovation Lab $100,000
Exp Claim / Rev Loss 1 Upgrade secure online service application software for Utility billing $60,000 Exp Claim / Rev Loss 2 Forestry Maintenance $1,000,000
Governance and Service Delivery
Quality of Life
Economic Vitality
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 The COVID-19 pandemic challenged services that are made available to the community, and further exacerbated existing gaps in service. In the area of dispatch, the City is currently exploring methods to improve services and this allocation will fund the necessary infrastructure to enhance 911 dispatch services, and the overall response from public safety personnel.  The community and Council expressed an interest in investing funds to convert the downtown area into a quiet zone alongside several private sector partners to help spur economic and housing development in downtown.
 The City is also recommending critical investments to improve the development of affordable housing, spur tourism and economic recovery, and address gaps in service with investments like the creation of a pilot multi-family bulky item pick up program.

Entertainment and Tourism
Modesto features vibrant arts, entertainment, sports and cultural expression. With the Modesto Convention and Visitor’s Bureau and Tourism Marketing District, Modesto is committed to attracting visitors by promoting and marketing Modesto as a convention, sports, tourism, and leisure travel destination.

As the community emerged out of COVID-19, the community welcomed back some of its treasured events like the Holiday of Lights Parade, Historic Graffiti Cruise Route Parade, and MoBand summer concert series at Mancini Bowl. It is nice to see our visitors return to Modesto to enjoy all the wonderful places and events we have to offer.

Some examples are:
 Downtown Modesto is home to the world-class Gallo Center that brings national and international entertainment, arts and multicultural programming to the Central Valley region. Downtown, you can experience the Historic Graffiti Cruise Route, the Legends of the Cruise Walk of Fame, and the Classic Community Mural Series celebrating the cruising culture phenomenon born in Modesto and immortalized by native son George Lucas in American Graffiti. Live entertainment is a prominent feature in the Civic Plaza and nearby clubs, and a busy calendar of entertaining and educational events can be experienced just across the street at the Modesto Centre Plaza.  Baseball with the Modesto Nuts baseball team is just minutes from the city center, and golfers enjoy two-highly rated 18-hole courses. Modesto is gaining recognition for its bike routes and trails, and is a recently hosted the Norcal Interscholastic Cycling League at Tuolumne River Regional park and have plans to return to Modesto annually. Additionally, water lovers have river parks and kayaking.
 The McHenry Mansion and McHenry Museum anchor the city’s loving preservation of its historical heritage, drawing visitors from all over the world. The city’s annual Architectural Festival offers free tours, exhibits, workshops and films in the iconic State Theatre featuring one of the best collections of mid-century modernism in the nation. Arts live year-round with monthly Art Walks, and seasonal activities including the Graffiti Cruise, parades, the Modesto on Ice downtown skating rink, the Dickens Faire, ModShop arts and crafts walk, and PorchFest community music stroll bring joy to residents and visitors. Modesto truly offers something great for everyone.

Eligible Category Year Description Allocation
Exp Claim / Rev Loss 1 Employee Recognition Program $20,000 Public Health/Safety Labor 2 Reserve $8,151,528
Public Health/Safety Labor 2 FY22-23 Budget Funding $4,500,000 Public Health/Safety Labor 2 911 Dispatch Services $1,000,000 Exp Claim / Rev Loss 2 Deferred Maintenance at Parks and Facilities $500,000 Exp Claim / Rev Loss 2 LED Lighting $250,000
TOTAL $45,897,056
Governance and Service Delivery (continued)
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Our Strategic Priorities
During 2020, the City adopted the 2020-2025 Strategic Plan to incorporate input from newly elected Councilmembers and to reaffirm our strategic priorities. Our priorities bring the City’s vision and values to life in our community and define our overall direction as a city. It also confirms our commitment to our citizens. While the priorities are individually important, they are also interconnected and cannot be addressed in isolation. In addition, they are the basis of our scorecard that measures success and upon which our performance metrics are built.
 Quality of Life: Engage partners across the community to ensure the safety, resilience, and attractiveness of Modesto.
 Economic Vitality: Retain and attract residential, commercial, and industrial development to meet the community’s needs today and for the next generation.  Governance and Service Delivery: Build community trust in City government through responsive, transparent and efficient service delivery.

Long-Term Financial Planning
The City continues to refine its 10-year forecasting model and update estimates and assumptions used to project future operations. At the end of fiscal year 2021-22, General Fund Balance was as follows:

Restricted and Nonspendable: $10.5 million; Committed: $18.4 million; Assigned: $0.6 million; and Unassigned: $9.9 million. The Committed Fund Balance allows the City to respond to unplanned circumstances and maintain adequate working capital to meet its cash flow needs.

The City’s long-term maintenance of a stable fund balance is a direct reflection of the Mayor and Council’s leadership and prudent fiscal management. The City will continue to monitor the revenue impacts and monitor the General Fund reserves to address any shortfall during the current fiscal year.

SIGNIFICANT EVENTS / ACCOMPLISHMENTS
Quality of Life
• The Forestry Division resolved 3,069 broken limb issues and completed 8,162 tree pruning activities. • The Solid Waste Division collected 2,789 tons of bulky items and recycled 2,150 waste tires and 592 mattresses.
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• Increased the Community Health and Assistance Team (CHAT) from 4 to 6 Outreach Specialists.

Secured funding for 5 additional years for the CHAT program including expansion to 10 Outreach Specialists total and 2 Supervisors.
• Reduced overall collisions by 36% and injury traffic accidents by 31%. • The Homeless Engagement and Response Team (HEART) and CHAT offered services to homeless individuals over 2,800 times.
• The Blight Abatement Team removed 936 abandoned homeless camps and over 460,000 lbs. of trash. • Implemented a pilot Park Ranger program to address quality of life issues at city parks, trails and outdoor recreational areas.
• The Modesto Police Department (MPD) Street Gang Unit took 229 firearms off the street. • The Major Crimes Unit seized over $1.6 million dollars in illegal criminal enterprise money. • The MPD license plate reader program was expanded to four additional intersections. • MPD secured the Board of State and Community Corrections’ California Violence Intervention and Prevention (CalVIP) grant in the amount of $2.2 million in partnership with the Parks, Recreation & Neighborhoods Department, the Boys & Girls Club of Stanislaus County, Legacy Alliance Outreach and El Concilio California.
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• The Parks, Recreation and Neighborhoods Department celebrated the City’s win of the prestigious Helen Putnam Award of Excellence for Community Services and Economic Development. The City’s partnership with Operation 9-2-99 and the Dry Creek Trails Coalition successfully coordinated monthly river and trail clean ups. The results at Dry Creek and Tuolumne River Regional Parks have had a profound impact on the cityscape and residents. Their efforts continue to pave the way to becoming a recreation destination and gateway for outdoor adventure.

• Golf revenues for Dryden and Creekside Golf Courses exceeded projection by 26%. • The Modesto Senior Citizens Center successfully reopened in August of 2021 with COVID-19 protocols in place to safeguard the participants/community and at limited capacities. During the past year there have been 10,200 senior participants combined in virtual and in-person programs. • Recreation programming reopened and served nearly 1,700 participants in youth and adaptive programing including Winter Camp, Adaptive Bowling, Friday Night Out, Archery, Dance, Tennis, Crime Scene Investigation (CSI) Camp and Driver’s Education. Over 1,600 registered for men’s, women’s and coed adult softball leagues (133 teams) at Beyer and Davis Parks. • Reopened limited aquatics programming taught 1,307 children to swim through our Learn-to-Swim program; re-opened for Senior/Disabled Swim serving 218 participants at Susan Burris Pool for the first-time post-pandemic; Hired & trained 70 Lifeguards for the Summer Season. The American Red Cross identifies Lifeguards as certified first responder. The primary responsibility as a lifeguard is to prevent drowning and other injuries from occurring. Our lifeguards are put through rigorous routine x
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training to maintain their rescue skill. They are tasked with Customer Service, maintain proper water chemistry, providing swim lessons and so much more!
 Welcomed back seasonal events with the return of the traditional Celebration of Lights Parade (“Hometown Traditions”) and Tree Lighting Ceremony and 7 MoBand Concerts in the Park at Graceada Park. Both events had over 20,000 in attendance.
• Mary Grogan Park served 588 rental contracts totaling 5,413 hours of use. This is the most hours of use recorded in the history of the park and an increase of 263 hours from the park’s last full year of use in the FY18-19.
• The Parks, Recreation and Neighborhoods Department coordinated the City’s volunteer efforts at 48 events, including Love Modesto, historical properties, and river trail clean-ups. Overall there were 1,787 volunteers that provided 6,545 hours of service with a total leveraged value of $206,227. • Increased our website and social media presence leveraging free platforms like Instagram and Facebook to connect directly with our community and have another form of communication to answer questions.
o Facebook followers- 7,084 followers, increased by 1,391 followers o Instagram followers- 2,783 followers, increased by 1,750 followers o Virtual Recreation Website- 1,447 pageviews
o PRND Homepage Website- 17,442 pageviews
o PRND Activity Guide Website- 15,152 pageviews
• After a year of online only or hybrid student participation, After School Education and Safety (ASES) welcomed students back to in-person programming in fall 2021, with a total of 685 students at seven school sites attended over 17,765 days.
• The City Council approved to reinstate the City of Modesto Youth Commission. Throughout the 2021- 2022 school year students and City staff met monthly to work on the details for a reimagined City of Modesto Youth Commission.
• Maddux Youth Center reopened its doors and welcomed back youth (ages 6-12) in our community for a variety of programs & fun activities including All Sports Camp, After-School Activities, creative projects, homework assistance and fitness/nutrition classes. xi
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• Junior Giants Baseball returned for the first time since FY 19-20, serving over 750 kids this season! Junior Giants is a completely free, youth baseball league that focuses on the fundamentals of baseball while teaching children the importance of confidence, integrity, leadership and teamwork. • Reopened the McHenry Mansion and McHenry Museum for tours on a limited schedule. Between the two historical sites, over 5,500 visited.
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• For the first time in its history, Norcal Interscholastic Cycling League chose Modesto for one of its Northern California races. The 2-day race wound through the Gateway Parcel at Tuolumne River Regional Park. Over 1,000 junior and senior high schoolers participated while friends and family cheered them on.
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• The Economic Development division celebrated the grand opening of Dave and Buster’s in Vintage Faire Mall.

Dave and Buster’s at Vintage Faire Mall
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• Construction of two new hotel projects in Kiernan Business Park (84 room Courtyard by Marriott and a 74 room Home2 Suites by Hilton extended stay), the reconstruction of the Ramada Hotel (by Wyndham) on McHenry Avenue.
• On August 3, 2021, the Modesto Fire Department (MFD) entered into a contract to provide fire protection to the City of Ceres. This contract is a milestone in advancing fire protection services in the County, which will allow for an increased level of service to the citizens and community of Ceres through an increase in staffing, implementation of a paramedic level engine company and overall cost savings. • 32 total firefighters graduated from the academy: 15 in January and 17 in June. Several employees were also promoted, including Deputy Fire Marshal, Deputy Chiefs, Battalion Chiefs, Captains and Engineers.
• In December 2021, the new Engine 29 was placed in service. With the new engine came many upgrades, including a 1,000-gallon tank, advance scene lighting and a more powerful engine. xiv
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• Through the City’s Park Partners Program, multiple projects were completed: a memorial bench was installed at East La Loma Park, fundraising was continued for The Awesome Spot Playground, and a new toddler playground was installed at Enslen Park.
• The Parks, Recreation and Neighborhoods Department moved the Boys & Girls Clubs’ building from Dr. Martin Luther King Jr Park to a parcel south of the Dryden Golf Course Parking Lot. The building will be occupied by the Boys & Girls Clubs and First Tee for its programming. In collaboration with the City, they entered into a Memorandum of Understanding, and were instrumental in the planning of future development at the new location. Plans for a playground, sports field, driving range, putting green, and 3-hole golf course are underway.
• Completed dog park renovations and installed new benches, drinking fountain, and made safety repairs throughout the park and parking lot.

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• Park Operations staff completed fire breaks at 10 locations in the parks system. • The Community Development Division partnered with Parks, Recreation, and Neighborhood Department for relocation of the Boys and Girls club module from Martin Luther King Jr. Park to 920 Sunset Ave.
• Funding the Development of a new park near Ralston Tower currently under development by the Parks, Recreation, and Neighborhood Department to develop The Senior playground features may include open area for Tai Chi, seating area, drinking fountain, and low-impact and durable exercise features designed to improve strength, balance, and coordination. This park is a public facility open to all citizens.
• Partnered with Center for Human Services for a State of California’s Homekey 2.0 award in the amount of $3,973,353 for the conversion of a commercial space at 1208 9th Street to serve as permanent supportive housing for youth 18-24.
• Camp2Home program has assisted 32 individuals in obtaining employment and has housed a total of 21 individuals.
• Partnered with Stanislaus Equity Partners for the State of California’s Homekey 2.0 grant in the amount of $1,654,175 for the acquisition of a 7-unit apartment building to operate as permanent supportive affordable housing.
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• The Homeowner Repair Program assisted 10 homeowners with Americans with Disabilities Act (ADA) improvements, energy efficiency upgrades, lead compliance and safety clearance totaling $270,000.

Provided below are Before and After images of a Homeowner Repair Program project. • The Planning Division, working with consultant Opticos, completed a draft Comprehensive Housing Plan for the City that provides strategies and recommendations on how to increase housing supply in Modesto.
• The City, working with Stanislaus County and other cities in the County, developed pre-approved building plans for an Accessory Dwelling Units (ADU), which will help to facilitate additional housing opportunities in the community
• Aligning with the State’s ruling on impact fee exemptions for an ADU below 750 sq. ft., the Infrastructure Financing Program Division exempted 24 ADUs from impact fees (also known as Capital Facilities Fees).
• The Neighborhood Preservation Unity abated a total of 703 code enforcement issues, including 10 illegal Cannabis grows, 174 trash and debris issues and 20 unlawful camping cases.

Economic Vitality
• The Building Services Division permitted 201 multifamily units, 163 single family dwellings, 9 commercial buildings and 30 ADUs.
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• The Building Services Division completed 2,279 work orders and installed 15 replacement HVAC units throughout City facilities.
• The Compost Division processed over 42,600 tons of residential and commercial organics into compost.
• The Fleet Division successfully operated a bus fleet of 130 buses and rebranded buses to a new paint scheme.
• The Solid Waste Division collected and recycled 4.72 tons of California Redemption Value (CRV) keeping it out of the waste stream.
• The Solid Waste Division recycled 156,147 gallons of used oil and 1,979 used oils filters. • The Streets Division completed 40.7 lane miles of crack seal application and 120.87 lane miles of slurry seal application.
• The Streets Division replaced 13,350 square feet of sidewalk, replaced 2,319 linear feet of curb and gutter, and completed 21,878 linear feet of offset grinding. • The Traffic Division replaced 3,183 traffic signs and completed 201,712 square feet of striping for legends and crosswalks.
• The Traffic Division converted 78 high voltage lights to regular voltage. • The Traffic Division installed 236 traffic detection cameras. • The Community and Economic Development Department initiated the first comprehensive update of the City’s General Plan since 1995, working with the City’s consultant, PlaceWorks, and has been conducting extensive public outreach efforts with a broad spectrum of the community in support of the visioning phase of the update.
• The Community and Economic Development Department has been working on the implementation of the Tivoli Specific Plan, the City’s major new growth area. Included in this effort has been the approval of the first subdivision map in the plan area, which will create 213 new residential lots, and the formation of a new Community Facilities District to provide funding for new infrastructure in the area. Two additional maps, totaling 228 lots, are currently under review. • The Planning Division completed an annexation of 178 acres in the Fairview area, and approval of a new subdivision that will provide 217 new residential lots. • Two new subdivisions were approved on Wells Avenue west of McHenry Avenue totaling 112 lots. • The Planning Division approved a new 436-unit apartment complex near the Kaiser Hospital on Healthcare Way, and a 90-unit senior housing complex on Mable Avenue. • An amendment to the Kiernan Business Park Specific Plan was approved to allow a new mixedresidential project south of Bangs Avenue of approximately 500 dwelling units. • A new 4-story, 85-room hotel was approved on Dale Road opposite the Kaiser Hospital. • A new 8,300 sf credit union/community center for Self Help Enterprises was approved on Crows Landing Road.
• Two new industrial buildings were approved, a 181,500-sf warehouse building on Graphics Drive and a 326,000-sf industrial building on Whitmore Avenue and Lodi Avenue. xviii
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• The Planning Division initiated a rezoning of the former Longs Drug site at 1625 McHenry Avenue to facilitate the reuse of site for mixed use development
• The Planning Division completed amendments to the City’s zoning regulations to allow mobile food vendors in all commercial zones in the City.
• The Transportation Engineering and Design division completed construction of the Right-Turn Lane at Southbound McHenry Avenue to Briggsmore Avenue Project. • The Transportation Engineering and Design division completed construction of the Scenic Drive Phase I Pavement Rehabilitation as part of the Claus Road to Lakewood Avenue project. xix
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• The Transportation Engineering and Design division completed construction of the Paradise Road as part of the Carpenter to Sheridan project.
• The Transportation Engineering and Design division completed construction of the Crows Landing Road Pavement Rehabilitation as part of the Pecos Avenue to Hatch Road project. • The Transportation Engineering and Design division completed construction of the 2016 Pavement Rehabilitation project in the La Loma area.
• The Parks, Recreation & Neighborhoods Department assisted friends of Carole Whiteside, former community leader and City Manager, in dedicating a bench and shaded tree area in her honor at Graceada Park.

Governance and Service Delivery
• Submitted our first application to the National Procurement Institute Achievement of Excellence in Procurement Award (AEP) for procurement excellence and received our first award as a recipient for this award.
• Implemented a City-wide policy management software to centralize all City policies and manage timely review and updates of these policies.
• Received funding through the California Water and Wastewater Arrearage Payment Program in the amount of $4 million to assist with delinquent wastewater and water arrearage for Modesto utility customers.
• Enrolled as Direct Pay participant in State Low Income Household Water Assistance Program which assists utility customers with one-time payments on past due utility bills • Facilitated a Transient Occupancy Tax audit with seven (7) hotels to audit the financial records of these hotels and ensure tax compliance under our City code.
• The pandemic continued to drive the need to reduce and/or eliminate most in-person meetings and replace them with virtual meetings.
• The Information Technology (IT) Department expanded its abilities to allow City staff to work remotely from home throughout the COVID-19 pandemic with over 400 staff taking advantage to provide seamless service to City residents.
• With working remotely from home came introduction of more strict security protocols in order to protect the City’s IT assets primarily involving the implementation for dual-factor authentication tools. • The City began livestreaming Council meetings on the City YouTube Channel and providing archived meeting videos on this channel that can be viewed with YouTube’s Closed Captioning. • The City’s Internet connection was upgraded from 100 Mbps to 250 Mbps while reducing the cost by over $12,000 annually.
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• IT Staff upgraded the City’s site-to-site communications systems increasing bandwidth between City Facilities and reducing costs by $770,000 over seven years. • To support public engagement, the City Manager’s Office implemented a virtual meeting program with closed captioning to support the City Council and Standing Committee meetings. • As part of the new virtual City Council meetings, the IT Department working with the City Manager’s Office began testing a real-time translation solution named “Wordly” that allows the online viewer to see real-time remarks being spoken in any 1 of 22 different languages of their choice. • IT Department implemented expanded Geographical Information System capabilities to enhance Lucity Work Order mapping helping staff accurately determine where the work must be performed. • IT Implemented a new Building Permitting system making is easier for residents to submit applications and obtain new building permits
• Human Resources developed a comprehensive Diversity, Equity, and Inclusion program to focus on the workforce and the services delivered to the community. • MPD’s Crisis Response Unit and MFD held an active shooter training/table top exercise with school Staff at Chrysler Elementary School.
• MPD Officers participated in several Youth Sports Outreach Programs to include the Miracle Baseball League, Basketball game versus Beyer High School Varsity Team, and coached a team in the City of Modesto Jr. Giants Program.
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• Modesto Special Weapons Attack Team (SWAT) officers have provided 14 active shooter trainings to businesses/school employees and 6 site safety assessments. • Held “Slow Speed/Distracted Driving” training for MPD employees. Officer involved collisions are down 5% YTD.
• The MPD Public Information Officer (PIO) Team created a “60 Second Scoop” social media video as an innovative way to connect with the community and update them on the current events of the police department.
• Remodel of the MPD public meeting room was completed, providing a great location for public meetings, press conferences, and trainings to take place. • The MPD received a De-Escalation grant which has allowed the reinstitution of the 40-hour Crisis Intervention Training (CIT) course for up to 80 personnel. This grant also provides for the department to send staff to courses to become experts in de-escalation techniques, and to standardize the department’s training model for integrated training (training multiple concepts within training days). • MPD hosted the first ever Youth Academy at the police department, bringing in high school aged students to expose them to several aspects of policing and community service. • MPD entered a contract to provide for 4 Cultural Relations Community Coaching Series classes over the next two years.
• MPD went live with California Incident Based Reporting System (CIBRS) and National Incident Based Reporting System (NIBRS) as of January 1, 2022 and met the required submission for 6 months with an error rate of less than 3%.
• Implemented a Critical Incident reintegration program. When any person is involved in a Critical Incident (OIS, in custody death, critical incident), the employees will participate in a one-week reintegration course. This course focuses on the mental health of officers and provides them scenario-based situations to reacclimate them back into duty in a static environment. This course is held with police mental health experts.
• The Forestry Division responded to 3,720 forestry service requests. • The Traffic Division had 100% implementation of Lucity online work order program giving the ability to log and track field tasks electronically.
• Planning staff initiated a comprehensive update to the City’s General Plan, the first comprehensive update since 1995, which will provide a strategy to address Modesto’s on-going housing shortage. xxii
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• Approved an omnibus update to the City’s zoning regulations.

Awards / Acknowledgments

The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Modesto for its annual comprehensive financial report for the fiscal year ended June 30, 2021. This was the 39th consecutive year that the government has achieved this prestigious award. In order to be awarded a Certificate of Achievement, a government must publish an easily readable and efficiently organized annual comprehensive financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. We believe that our current annual comprehensive financial report continues to meet the Certificate of Achievement Program’s requirements and we are submitting it to the GFOA to determine its eligibility for another certificate.

The Annual Comprehensive Financial Report (ACFR) is the result of the cooperative work of many people.

We wish to convey our appreciation to all of the City departments and members of the Finance Department team who prepared and contributed to its successful completion. Without their hard work, this report would not be possible.

The City submitted and received for the second time the distinguished Budget Presentation Award from GFOA for fiscal year ended June 30, 2021. To receive this prestigious award a government must demonstrate they meet the program criteria and excel as a policy document, financial plan, operations guide, and communication tool.

In addition, the City submitted and received an award from the GFOA for its fifth year for the Popular Annual Financial Report (PAFR) for fiscal year ended June 30, 2021. A PAFR presents financial information in a manner that appeals to the reader, is understandable and shows creativity and usefulness. The PAFR award is valid for one year and the City intends to submit its 2022 PAFR to the GFOA for consideration.

As a result of receiving the GFOA awards for PAFR, ACFR and Budget Presentation for fiscal year ended June 30, 2020, the City received GFOA’s Triple Crown Award for the first time. The GFOA’s Triple Crown designation recognizes governments who meet the high standards of all three separate award programs.

The City will continue to strive to achieve this awards for future fiscal years.

Finally, we would like to express our appreciation to the City Council, City employees, and community for their leadership and support. We look forward to the next year’s challenges and opportunities.

Respectfully submitted,

Joseph P. Lopez DeAnna Christensen
City Manager Director of Finance
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Government Finance Officers Association
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of Modesto
California
For its Annual Comprehensive
Financial Report
For the Fiscal Year Ended
June 30, 2021
Executive Director/CEO
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FINANCIAL SECTION TAB
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FINANCIAL SECTION

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7473 N. INGRAM AVE., SUITE 102 ⬧ FRESNO, CA 93711
_______________________________________________________________________________________________ P (559) 412-7576 ⬧ F (559) 493-5325 ⬧ WWW.HHCCPAS.COM
INDEPENDENT AUDITORS’ REPORT
To the City Council
City of Modesto, California
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Modesto, California (the City), as of and for the year ended June 30, 2022, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City, as of June 30, 2022, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinions
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Change in Accounting Principle
As described in Note II-G to the financial statements, in 2022, the City adopted new accounting guidance, GASB Statement No. 87, Leases. Our opinion is not modified with respect to this matter.

Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.
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4 Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinions.

Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for a reasonable period of time.

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

Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, schedule of changes in the net pension liability and related ratios, schedule of plan contributions, schedule of changes in the OPEB liability and related ratios, schedule of contributions, and budgetary comparison information for the General Fund, Operating Grants Special Revenue Fund and Housing and Community Development Special Revenue Fund, as listed in the table of contents be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. #1..
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5 Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The accompanying combining and individual nonmajor fund financial statements and schedules are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the combining and individual nonmajor fund financial statements and the schedule of expenditures of federal awards are fairly stated, in all material respects, in relation to the basic financial statements as a whole.

Other Information
Management is responsible for the other information included in the annual comprehensive financial report. The other information comprises the introductory, statistical section, and continuing disclosure section, but does not include the basic financial statements and our auditors’ report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon.

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

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 9, 2022, on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.

HUDSON HENDERSON & COMPANY, INC.

Fresno, California
December 9, 2022
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Management’s Discussion and Analysis
This section of the City of Modesto (the City) annual comprehensive financial report presents a discussion and analysis of the City’s financial performance during the fiscal year ended June 30, 2022. Please read it in conjunction with the transmittal letter at the front of this report and the basic financial statements following this section.

FINANCIAL HIGHLIGHTS
• The assets plus deferred outflows of resources of the City exceeded liabilities plus deferred inflows of resources at the close of the 2022 fiscal year by $1,282,811,649 (total net position). Of this amount, $211,712,445 is restricted for a specific purpose (restricted net position), $1,145,260,423 is net investment in capital assets and ($74,161,219) is unrestricted (unrestricted net position). • The City’s total deferred outflows of resources decreased by $23,539,453 as compared to the prior year. • The City’s total deferred inflows of resources increased by $104,086,531 as compared to the prior year. • The City’s total liabilities decreased by $166,041,518 as compared to the prior year. • The City’s total net position increased by $65,345,377 compared to the prior year. This increase is attributed mainly to an increase in intergovernmental revenues in the amount of $22,119,920 as compared to prior year, an increase in charges for services revenues in the amount of $6,086,857 as compared to prior year, a decrease in public safety expenses in the amount of $8,110,392 as compared to prior year and a decrease in community development expenses in the amount of $10,167,141as compared to prior year. • As of June 30, 2022, the City’s governmental funds reported combined fund balances of $195,002,088 an increase of $22,485,445 in comparison with the prior year. • As of June 30, 2022, 25.22% of the General fund balance, $9,942,398 is available to meet the City’s current and future needs (General Fund unassigned fund balance). • At the end of the fiscal year, the General Fund balance was $39,419,125 or 25.2% of total General Fund expenditures. Of this, $8,157,536 is the restricted fund balances. The unassigned fund balance of $9,942,398 represents 5.9% of total General Fund outflows. The City Council has adopted a goal of maintaining a General Fund reserve at a minimum level of no less than the average of two months of regular General Fund operating expenditures.
• The City’s total long-term liabilities showed a net decrease of $17,435,311 in comparison with the prior year.

This decrease was attributed to reduction in debt from the principal payments made during the fiscal year.

OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis are intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements comprise three components 1) Government-wide financial statements; 2) Fund financial statements and 3) Notes to basic financial statements. Required Supplementary Information is included in addition to the basic financial statements.

Government-wide Financial Statements are designed to provide readers with a broad overview of the City finances, in a manner similar to a private-sector business.

The Statement of Net Position presents information on all the City assets and liabilities, deferred outflows of resources and deferred inflow of resources, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating.

The Statement of Activities presents information showing how net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave).

Both of these government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a portion of their costs through user fees and charges (business-type activities). The governmental activities 6 #1..
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Management’s Discussion and Analysis (continued)
of the City include general government, community development, highways and streets, public works, parks and recreation, and public safety. The business-type activities of the City include the Water, Sewer, Parking, Storm Drain, Compost, Airport, Golf, Community Center and Abatement and Public Nuisance operations. Effective July 1, 2021 Bus fund activities seized operations, due to the formation of the Stanislaus Regional Transit Agency (StanRTA).

Component units are included in our basic financial statements and consist of legally separate entities for which the City is financially accountable and that have substantially the same board as the City Council, or provide services entirely to the City or the City has operational responsibility for the entities. Examples are the Community Facilities Districts, Redevelopment Successor Agency of the City of Modesto and the Modesto Public Financing Authority.

The government-wide financial statements can be found on pages 17-19 of this report.

Fund Financial Statements are groupings of related accounts that are used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate finance-related legal compliance. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds and fiduciary funds.

Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental funds financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating the City’s near-term financing requirements.

Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental funds balance sheet and the governmental funds statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

The City reports 18 individual governmental funds. Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures and changes in fund balances for the General Fund, Operating Grants Fund, Housing and Community Development and Capital Grants Fund, and. Data from the other governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements elsewhere in this report.

The governmental funds financial statements can be found on pages 20-23 of this report.

Proprietary funds are maintained two ways. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its Water, Sewer, Parking, Storm Drain, Compost, Airport, Bus, Golf, Community Center and Abatement and Public Nuisance operations. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City’s various functions. The City uses internal service funds to account for its Fleet Management, Central Services, Information and Technology Services, Insurance, Employee Benefits Management and Building Services functions. Because these services predominantly benefit governmental rather than businesstype functions, they have been included within governmental activities in the government-wide financial statements with the exception of portions of the compensated absences that have been included within business-type activities.

The rest of internal services benefiting business-type functions have been allocated as “internal balances”.

Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The Water, Sewer and Bus funds are considered to be major funds of the City. The City’s six internal service funds are combined into a single, aggregated presentation in the proprietary funds financial statements. Individual fund data for the internal service funds is provided in the form of combining statements elsewhere in this report.

The proprietary funds financial statements can be found on pages 24-27 of this report.

Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City's own programs. Private Purpose and Investment trust funds account for assets held by the City as an agent for individuals, governmental entities and non-public organizations. The accounting used for fiduciary, private purpose, and investment trust funds is much like that used for proprietary funds. 7 #1..
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Management’s Discussion and Analysis (continued)
The fiduciary fund financial statements can be found on page 28-29 of this report.

Notes to Basic Financial Statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes can be found on pages 30-77 of this report.

Required Supplementary Information is also presented. The City adopts an annual appropriated budget.

Budgetary comparison schedules for the major governmental funds have been provided to demonstrate compliance with this budget. This section also includes the schedules for net pension liability and OPEB.

Required supplementary information can be found on pages 81-92 of this report.

The combining and individual fund statements and schedules referred to earlier provide information for nonmajor governmental, enterprise and internal service funds and are presented immediately following the required supplementary information. Combining and individual fund statements and schedules can be found on pages 98- 133 of this report.

GOVERNMENT-WIDE FINANCIAL ANALYSIS
As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. In the case of the City, assets plus deferred outflows exceeded liabilities plus deferred inflows by $1,282,811,649 at the close of the most recent fiscal year.

Net Position
The largest portion of the City’s net position, $1,145,260,423 or 89.3%, reflects its investment in capital assets (e.g. land, water rights, buildings, improvements, furnishings and equipment, buses and fare boxes, pipelines, and infrastructure), less any related debt used to acquire those assets that are still outstanding. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending.

Although the City’s net investment in capital assets is reported net of debt and related deferred outflows and inflows, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

Another significant portion of the City’s net position represents unrestricted net position of ($74,161,219) or (5.8%).

The remaining balance of the City’s net position of $211,712,445 or 16.5% represents resources that are subject to external restrictions on how they may be used.

The City’s net position increased by $82,661,652 during the current fiscal year was largely due to the increases to intergovernmental revenues in the amount of $22,119,920, and increase in charge for services revenues in the amount of $6,086,857, an increase in loss in transfer of operations of the Bus fund in the amount of $19,461,712, a decrease in community development expenses in the amount of $10,167,141, and a decrease in public safety expenses in the amount of $8,110,392.

Governmental activities Business-type activities Total
2022 2021 2022 2021 2022 2021
Current and other assets $383,654,540 $349,006,744 $332,053,761 $320,714,732 $715,708,301 $669,721,476 Capital assets 493,364,112 441,036,275 861,979,595 933,364,414 1,355,343,707 1,374,400,689 Total assets 877,018,652 790,043,019 1,194,033,356 1,254,079,146 2,071,052,008 2,044,122,165 Deferred outflows of resources 49,483,707 54,764,137 27,477,247 45,736,270 76,960,954 100,500,407 Current and other liabilities 292,993,303 378,238,239 88,256,585 151,617,856 381,249,888 $529,856,095 Long-term liabilities 90,280,751 90,831,883 286,850,508 303,734,687 377,131,259 394,566,570 Total liabilities 383,274,054 469,070,122 375,107,093 455,352,543 758,381,147 924,422,665 Deferred inflows of resources 79,721,948 2,147,163 27,098,218 586,472 106,820,166 2,733,635 Net position:

Net investment in capital assets 457,620,157 407,347,307 687,640,266 648,609,186 1,145,260,423 1,055,956,493 Restricted net position 195,793,646 183,357,207 15,918,799 17,004,338 211,712,445 200,361,545 Unrestricted net position (189,907,446) (217,114,643) 115,746,227 178,262,877 (74,161,219) (38,851,766) Total net position $463,506,357 $373,589,871 $819,305,292 $843,876,401 $1,282,811,649 $1,217,466,272 8 #1..
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Management’s Discussion and Analysis (continued)
The following table indicates the changes in net position for governmental and business-type activities, as well as comparative data for the prior year:

Changes in Net Position
Governmental activities. Governmental activities increased the City’s net position by $94,818,288. The long-term liabilities decrease was attributed to the principal payments of about $3.4 million and $20.5 million in claim additions made during the fiscal year.

Intergovernmental revenue increased by $22.1 million due to establishing the new revenue source beginning in Fiscal Year 2017-18 from the Stanislaus County county-wide, 25-year, half-cent sales tax increase known as Measure L. Measure L will be utilized to fund local transportation improvements.

Expenses in total decreased compared to the prior year by $12,572,601 this decrease is mainly attributed to a decrease in salary and benefit costs due to vacancy savings within community development, and public safety.

Business-type activities. Business-type activities decreased the City’s net position by $12,156,636. The decrease was mainly attributed to the loss in operation of the bus funds in the amount of $19,461,712, due to the transfer of operations to the newly formed Stanislaus Regional Transit Authority (StanRTA).

FINANCIAL ANALYSIS OF THE CITY’S FUNDS
As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.

Governmental activities Business-type activities Total
2022 2021 2022 2021 2022 2021
Revenues:

Program revenues:

Charges for services $40,589,213 $34,364,395 $174,581,470 $174,719,431 $215,170,683 $209,083,826 Operating grants and contributions 15,352,734 12,010,918 1,644,338 29,310,591 16,997,072 41,321,509 Capital grants and contributions 12,835,899 57,825,011 2,452,983 8,672,597 15,288,882 66,497,608 General revenues:

Taxes 71,192,182 69,342,539 212,978 266,272 71,405,160 69,608,811 Intergovernment revenue not
restricted for specific purposes 143,542,419 121,422,499 - - 143,542,419 121,422,499 Unrestricted investment earnings (3,911,830) (287,088) (8,124,559) (192,489) (12,036,389) (479,577) Miscellaneous 1,643,071 2,184,677 1,301,658 1,686,667 2,944,729 3,871,344 Tot al revenues 281,243,688 296,862,951 172,068,868 214,463,069 453,312,556 511,326,020 Expenses:

General government 20,268,611 14,727,031 - - 20,268,611 14,727,031 Community development 20,615,432 30,782,573 - - 20,615,432 30,782,573 Highways and streets 27,463,523 25,863,042 - - 27,463,523 25,863,042 Public works 3,086,419 3,126,390 - - 3,086,419 3,126,390 Parks and recreation 12,439,250 13,750,865 - - 12,439,250 13,750,865 Public safety 121,675,443 129,785,835 - - 121,675,443 129,785,835 Interest on long-term debt 1,954,306 2,039,849 - - 1,954,306 2,039,849 Water - - 73,421,868 68,792,875 73,421,868 68,792,875
Sewer - - 44,263,767 46,500,454 44,263,767 46,500,454
Bus - - - 28,889,011 - 28,889,011
Parking - - 1,926,834 1,700,607 1,926,834 1,700,607
Storm drain - - 5,965,352 5,585,980 5,965,352 5,585,980 Compost - - 11,497,333 12,022,746 11,497,333 12,022,746 Airport - - 1,686,375 1,865,063 1,686,375 1,865,063
Golf - - 3,229,764 2,865,795 3,229,764 2,865,795
Community center - - 1,570,818 1,961,576 1,570,818 1,961,576 Abatement and Pubic Nuisance - - 124,097 82,166 124,097 82,166 Total expenses 207,502,984 220,075,585 143,686,208 170,266,273 351,189,192 390,341,858 Change in net position before
transfers 73,740,704 76,787,366 28,382,660 44,196,796 102,123,364 120,984,162 Transfers 21,077,584 824,609 (21,077,584) (824,609) - - Total transfers 21,077,584 824,609 (21,077,584) (824,609) - - Special item - - (19,461,712) - (19,461,712) -
Change in net position 94,818,288 77,611,975 (12,156,636) 43,372,187 82,661,652 120,984,162 Net position - beginning 373,589,871 303,665,151 843,876,401 802,061,369 1,217,466,272 1,105,726,520 Prior year adjustments (4,901,802) (7,687,255) (12,414,473) (1,557,155) (17,316,275) (9,244,410) Net position - ending $463,506,357 $373,589,871 $819,305,292 $843,876,401 $1,282,811,649 $1,217,466,272 9 #1..
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Management’s Discussion and Analysis (continued)
Governmental funds. The general government functions are contained in the general, special revenue, capital projects, and debt service funds. The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year.

At June 30, 2022, the City’s governmental funds reported combined fund balances of $195,002,088 an increase of $22,485,445 from the prior year. The total unassigned fund balance for the governmental funds was $4,598,944 which includes a positive $9,942,398 which represents the General Fund unassigned fund balance that is available to meet the City’s current and future needs. The remainder of fund balance is nonspendable, restricted, committed and assigned to indicate that it is not available for new spending because certain constraints have been placed on the use of the balances. The unassigned fund balance for the General Fund increased by $3,546,485.

The General Fund is the chief operating fund of the City. At June 30, 2022, unassigned fund balance of the General Fund was $9,942,398 while total fund balance was $39,419,125. As a measure of the General Fund’s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures.

Unassigned fund balance represents 5.9% of total General Fund expenditures, while total fund balance represents

25.2% of that same amount. The prior year ratios were 4.6% and 22.23%, respectively.

The Operating Grants fund accounts for receipts and disbursements of a variety of Governmental Fund Operating grants. At June 30, 2022, total fund balance was $2,478,337 this is an increase of $374,817 from prior year.

The Housing and Community Development fund accounts for the grants and funds received to disburse for projects developed and administered under the Housing and Community Development Act. At June 30, 2022, total fund balance was $33,813,927 a decrease of $333,059 from prior year.

The Capital Grants fund accounts for receipts and disbursements of a variety of Governmental Fund capital grants.

At June 30, 2022, total fund balance was ($2,182,116) which was a decrease of $319,764 from prior year. During fiscal year 2021-22, construction for the State Route 132 project has been on-going. This is a large-scale construction project which is funded by grants from various local and State agencies.

Revenues of governmental funds totaled $277,965,768 in fiscal year 2021-22, which represents an increase of $17,803,267 from fiscal year 2020-21.

Expenditures of governmental funds totaled $257,225,112 in fiscal year 2021-22, representing an increase of $25,324,994 from fiscal year 2020-21.

The following table presents governmental fund revenues from various sources, with comparisons to the prior year:

Revenues Classified by Source – Governmental Funds
• Taxes – Revenues for property and business license taxes came in higher than the prior year due to an ongoing positive upturn in the economy and the increased collection and compliance efforts by the City staff. • Licenses and Permits – Revenues decreased by $39,575 due to a decrease in Cannabis annual permit fees. • Intergovernmental – Revenues increased by $12.4 million due to an increase in Federal and State grants awarded to the City for the mitigation efforts against the novel coronavirus (COVID-19). As well as an increase Increase
(Decrease)
Revenues by Source Amount Percent Amount Amount % Change Taxes $71,192,182 25.6% $69,342,539 $1,849,643 2.7%
Licenses and permits $434,118 0.2% 473,693 ($39,575) -8.4% Intergovernmental 166,804,885 60.1% 154,356,852 $12,448,033 8.1% Charges for services 33,744,323 12.1% 28,378,842 $5,365,481 18.9% Special assessments 5,578,262 2.0% 4,851,750 $726,512 15.0% Interest and rent 2,191,466 0.8% 1,320,686 $870,780 65.9% Net increase (decrease) in fair value (4,317,623) -1.6% (985,713) ($3,331,910) 338.0% Fines and forfeits 832,510 0.3% 660,110 $172,400 26.1%
Donations and contributions 44,338 0.0% 370,958 ($326,620) -88.0% Miscellaneous 1,461,307 0.5% 1,392,784 $68,523 4.9%
Total $277,965,768 100.0% $260,162,501 $17,803,267 6.8% FY 2022 FY 2021
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Management’s Discussion and Analysis (continued)
• in the revenue source for the Stanislaus County county-wide, 25 year, half-cent sales tax increase known as Measure L to assist with the funding for local transportation improvements for the City. • Charges for Services – Revenues increased by $5.4 million due primarily to service agreements between the City and other adjacent Cities for fire protection services beyond the City’s current jurisdictions. Additionally, the City was able to reopen parks and recreation activities closed during the prior year due to the effects of COVID19 and the County and State COVID-19 safety guidelines. • Interest and Net decrease in fair value – The decrease in interest earned along with the decrease in fair market value of the city’s investment portfolio is down to current market conditions. With Federal Treasuries hitting historic lows for most of the fiscal year, the City’s investment returns have been lower and the yields of investments purchased with reinvested funds has reduced the fair market value of the City’s portfolio.

The following table presents expenditures by function compared to prior year amounts.

Expenditures by Function – Governmental Funds
The following provides an explanation of the expenditures by function that changed significantly over the prior year:
• Community Development – Expenditures decreased by $4.8 million or 18.3% over the prior year, due to the high number of vacancies which resulted in fewer community development projects been worked on during the fiscal year.
• Highways and Streets – Expenditures increased by $4,357,631 or 35.9% over the prior year, due mainly to the ongoing construction of State Route 132 and the high costs of materials due to inflation. • Parks and Recreations – Expenditures increased by $1,308,500 or 11.2% over the prior year due to the reopening of parks and recreational activities which had been closed during the prior year due to the effects of COVID19 and State mandates.
• Public safety – Expenditures increased by $16,373,387 million or 14.7% over the prior year mainly due to an increase in services that are provided and equipment purchases, based on grant fund availability that fluctuates year to year depending on grants awarded. Additionally, Other financing sources and uses are presented below to illustrate changes from the prior year:

Transfers - The City uses interfund transfers to: (1) move resources from a fund to other funds that will utilize them in accordance with statutory and budgetary requirements, (2) utilize unrestricted resources collected in the General FY 2022 FY 2021
Increase
(Decrease)
Exp by Function Amount Percent Amount Amount % Change
General government $21,110,258 8.2% $12,483,217 $8,627,041 69.1% Community development 21,429,140 8.3% 26,215,559 ($4,786,419) -18.3% Highways and streets 16,510,434 6.4% 12,152,803 $4,357,631 35.9% Public works 3,215,409 1.3% 2,635,907 $579,502 22.0%
Parks and recreation 12,943,340 5.0% 11,634,840 $1,308,500 11.2% Public safety 126,649,307 49.3% 110,275,920 $16,373,387 14.8% Capital outlay 50,042,664 19.5% 51,533,054 ($1,490,390) -2.9% Debt Service-principal retirement 3,362,904 1.3% 2,931,077 $431,827 14.7% Debt Service-interest charges 1,913,046 0.7% 1,985,927 ($72,881) -3.7% Debt Service-other 48,610 0.0% 51,814 ($3,204) -6.2%
Total $257,225,112 100.0% $231,900,118 $25,324,994 10.9% Increase/(Decrease)
FY 2022 FY 2021 Amount Percent
Transfers in $15,993,594 $14,249,431 $1,744,163 12.2%
Transfers out (17,677,119) (15,500,194) (2,176,925) 14.0% Proceeds from finance purchase agreements 3,741,926 3,741,926 100.0% - Sale of assets 32,551 1,934 30,617 1583.1%
Net financing (uses) $2,090,952 ($1,248,829) $3,339,781 -267.4% 11 #1..
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Management’s Discussion and Analysis (continued)
Fund to help finance various programs and capital projects accounted for in other funds in accordance with budgetary authorization, and (3) move cash to pay debt service to the funds that are responsible for payment as those payments become due.
• The net financing (uses) from governmental funds for 2022 were $2,090,952 compared to ($1,248,829) in the prior year. This net transfer is to various City funds including transferring funds from the General Fund, Housing and Community Development fund, Local Transportation fund, Transportation Special Tax fund, Special Fund for Capital Outlays, Parks funds, Community Facilities Districts fund, Capital Facility Fee funds, Fleet Fund, Information Technology Services fund, and Building Services fund, to cover the debt service payments, fleet replacement, funding for capital projects and various transfers to cover City grant matches.

The fund balance of the City’s General Fund increased by $8,520,033 during the fiscal year. This result is consistent with the City Council’s budgetary direction to reduce spending and identify additional revenue sources that would allow the General Fund to retain an unrestricted reserve that meets the City Council’s adopted reserve requirements level of no less than the average of two months of regular General Fund expenditures.

Proprietary funds. The City’s proprietary fund disclosures provide the same type of information found in the government-wide financial statements, but in more detail.

The following table shows actual revenues, expenses and results of operations of enterprise funds for the current fiscal year:

The Water fund had a rate increased of 2% effective October 1, 2021. This rate was approved on April 6, 2021 to be implemented during fiscal year 2021, but was deferred to fiscal year 2022 due to the economic impact of COVID19 on Citizens.

A pollution remediation liability was reported for the Water and Sewer fund in the amounts of $5,248,885 and $6,587,713, respectively based on net recoveries the City has received from various settlements. Additional information regarding these liabilities can be found under Note II-N.

GENERAL FUND BUDGETARY HIGHLIGHTS
Budget to actual information for the General Fund is presented as Required Supplementary Information, beginning on page 86-87 of this report.

While the City Council amended the budget several times through the year, the differences between the original budget and the final amended budget for the General Fund were increased overall mainly due to an increase in intergovernmental revenues. The estimated revenues increased about $9,781,688 while total appropriations increased by $12,440,571. These amendments were to adjust the actual beginning balances and carryovers after closing the prior fiscal year, and to reflect adjustments to current estimates based on the periodic monitoring of revenue and expenditures throughout the year.

Revenues came in $9,211,369 more than final estimates. Variances in Franchise Tax $561,467, Utility Users Tax $208,653, Transient Occupancy Tax $227,980, Business License Tax $1,711,425, Intergovernmental $5,702,565, Charges for services $1,940,857 and Interest and Rent Revenue $177,294 were due to a decrease in collection efforts, a quicker recovery from the pandemic than was anticipated and stronger property values.

Major Funds Nonmajor Funds
Water Sewer Bus Other Total
Operating revenues $86,231,116 $63,896,567 - $22,982,937 $173,110,620 Operating expenses (67,027,688) (41,564,125) - (25,819,246) (134,411,059) Operating income (loss) 19,203,428 22,332,442 (2,836,309) 38,699,561 Nonoperating revenues (expenses), net (9,695,946) (3,885,390) - 1,513,843 (12,067,493) Income (loss) before capital contributions
and transfers 9,507,482 18,447,052 - (1,322,466) 26,632,068 Contributions and transfers (605,643) 1,084,549 (19,328,695) 225,188 (18,624,601) Special item - loss in tranfser of
operations - (19,461,712) - (19,461,712) -
Changes in net position $8,901,839 $19,531,601 ($38,790,407) ($1,097,278) ($11,454,245) 12 #1..
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Management’s Discussion and Analysis (continued)
Expenditures, overall, were $8,087,079 under budget, primarily due to efforts of departments to realize savings, and certain purchases being deferred to future periods.

CAPITAL ASSETS AND DEBT ADMINISTRATION
Capital assets
The City’s net investment in capital assets for its governmental and business-type activities as of June 30, 2022, amounted to $1,355,343,707 (net of accumulated depreciation). The total decrease in the City’s net investment in capital assets compared to 2021 was 1.0%.

Capital assets net of depreciation, for the governmental and business-type activities are presented below to illustrate changes from the prior year.

Major capital asset events during the current fiscal year included the following:
• Improvements – The Del Rio replacement well was completed in fiscal year 2021-22 in the amount of 3.4 million.

The Dryden Box & Influent Fume project was completed in fiscal year 2021-22 in the amount of $16.6 million and the Headworks Improvement at Sutter Water Quality and Control (WGC) was completed in fiscal year 2021- 22 in the amount of $6.6 million.
• Water rights – Depreciation expense for fiscal year 2021-22 in the amount of $11.9 million. • Streets – The Carpenter Street Improvement project was completed in fiscal year 2021-22 in the amount of $2.7M. Depreciation expense for fiscal year 2021-22 in the amount of $10.4 million. • Pipelines – The Wastewater Treatment Phase 2 Tertiary Infrastructure was completed in fiscal year 2021-22 in the amount of $126.6 million.
• Construction in progress – Ongoing water construction projects related to improvements to the City’s water infrastructure were made during fiscal year 2021-22, ongoing construction of the Jennings water quality control (WQC) entrance, Sutter Trunk, West Trunk Crossing Highway 132, and River Trunk Gravity system, as well as the ongoing construction of the State Route 132 project.

The City’s infrastructure assets are recorded at historical cost in the government-wide financial statements.

Depreciation expense is recorded using the straight-line method, based on estimated useful life of the asset.

Additional information on the City’s capital assets can be found in note II-B on pages 43-44 of this report.

The City had major capital commitments for contracts awarded for various construction projects. As of June 30, 2022, there were major ongoing contracts awarded for, State Route 132 Project, in the amount of $105.01 million, Increase
Governmental Business-type Total (decrease)
Percent
2022 2021 Restated 2022 2021 2022 2021 Restated Change $ Change Land $33,774,611 $29,149,707 $30,452,365 $34,512,819 $64,226,976 $63,662,526 88% $564,450 Capitalized interest - - 4,474,666 4,979,452 4,474,666 $4,979,452 -10% (504,786) Buildings 21,906,089 9,550,072 30,854,543 28,509,168 52,760,632 $38,059,240 39% 14,701,392 Improvements 53,086,977 53,703,767 243,092,019 232,549,815 296,178,996 $286,253,582 4% 9,925,414 Furnishings and equipment 2,969,784 2,607,797 3,084,741 4,754,283 6,054,525 $7,362,080 -18% (1,307,555) Intangible assets 1,586,708 1,996,365 3 6,122 1,586,711 $2,002,487 -21% (415,776) Equipment pool 16,124,455 13,965,126 - - 16,124,455 $13,965,126 16% 2,159,329 Service animals 24,756 7,282 - - 24,756 $7,282 240% 17,474 Water rights - - 214,936,012 226,876,902 214,936,012 $226,876,902 -5% (11,940,890) Streets 160,217,427 167,919,567 - - 160,217,427 $167,919,567 -5% (7,702,140) Signalization 5,974,925 6,463,638 - - 5,974,925 $6,463,638 -8% (488,713) Bridges 25,905,120 26,646,691 - - 25,905,120 $26,646,691 -3% (741,571) Buses & fareboxes 25,103 25,103 - 16,744,648 25,103 $16,769,751 -100% (16,744,648) Pipelines 405,839 411,414 276,142,582 153,869,665 276,548,421 $154,281,079 79% 122,267,342 Construction in progress 170,696,297 124,500,840 58,491,351 230,561,540 229,187,648 $355,062,380 -36% (125,874,732) Right to use Leases
Buildings 77,317 224,950 - - 77,317 - 100% 77,317
Equipment pool 8,644 17,287 - - 8,644 - 100% 8,644
Land 580,060 662,695 451,313 - 1,031,373 - 100% 1,031,373 Total $493,364,112 $437,852,301 $861,979,595 $933,364,414 $1,355,343,707 $1,370,311,783 -1% ($14,968,076) 13 #1..
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Management’s Discussion and Analysis (continued)
and the purchase of additional fleet vehicles in the amount of $1.1 million. Additional information on the City’s commitments can be found in note III-D on page 66-67 of this report.

Long-term debt and liabilities
At June 30, 2022, the City had total long-term liabilities outstanding of $377,131,259 net of unamortized discounts and premiums, as compared to $394,566,570 in the prior year. This amount was comprised of $44,355,000 of lease revenue bonds, $43,703,037 of certificates of participation, $113,398,481 of revenue bonds payable, $99,555,726 of reimbursement agreement related to Modesto Irrigation District bonds, $11,962,073 of estimated compensated absences, $26,858,298 of claims liability, $27,132,391 of loans payable, $699,342 of developer advances, $7,352,773 of finance purchase obligations, $1,129,138 of lease payables and $985,000 of notes payable.

For the governmental and business activities, the long-term debt decreased was mainly due to the principal payments made during the fiscal year. Additional information on the City’s long-term debt can be found in Note II-D on pages 46-58 of this report.

The City maintains a current bond rating for the various bonds listed below.

BONDS Moody’s Rating S & P Rating Fitch Rating
2008 Lease Revenue Bonds A1 AA+/A-1 AA2008 Water Certificates of Participation Aa1 Wastewater Revenue Bonds, Series 2018A
AA+/A-1+
AA
Wastewater Revenue Bonds, Series 2020A AA
Wastewater Revenue Bonds, Series 2020B AA
With the implementation of GASB Statement No. 75 “Accounting and Financial Reporting for Postemployment Benefits Other than Pension, the City’s net OPEB liability as of June 30, 2022 was $29.6 million. Additional information on the City’s net OPEB liability and Pension can be found in Notes III-F and III-G.

With the implementation of GASB Statement No. 87 “Leases”, the City reported lease receivables in the amount of $17,234,681, deferred inflows of resources-leases in the amount of $17,102,727, and lease liability in the amount of $1,129,138 as of June 30, 2022.

Economic Factors and Next Year’s Budget and Rates
• Consumer Price Index – Growth in the CPI has been relatively stable during the past ten years and serves as a measure for the growth in the cost for supplies and services used by the City. In the second half of fiscal year ended June 30, 2022, the CPI-Western Urban Index did see a continuous increased up to 8.8%. • Utility Service Charges – Wastewater rates increased by 3.5% for residential, commercial, industrial, and septage sewer and 2.% for canary segregation, effective July 1, 2022. Rate increases were approved by City Council on April 4, 2022.

All of these factors were considered in preparing the City’s budget for fiscal year 2021-22.

During the current fiscal year, fund balance in the General Fund increased by $8,520,033, to $39,419,125 which represents 23.6% of total General Fund outflows which exceeds the City’s target value of minimal level of no less than the average of two months of regular general fund operating outflows as unassigned fund. The budget adopted for fiscal year 2021-22 reflects the Council policy reserve level of a minimum $18.4 million emergency reserve policy.

This amount is reported as part of the committed fund balance.

Requests for Information
This financial report is designed to provide a general overview of the City’s finances for all those with an interest in the City’s financial condition. Questions concerning any of the information provided in this report and requests for additional financial information should be addressed to the City of Modesto, Attention: Finance Department, P.O.

Box 642, Modesto, CA 95353.
14 #1..
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BASIC FINANCIAL STATEMENTS
15 #1..
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CITY OF MODESTO

STATEMENT OF NET POSITION
JUNE 30, 2022
Governmental Business-type
Activities Activities Total
ASSETS
Cash and cash equivalents $ 135,251,800 $ 273,821,955 $ 409,073,755 Accounts receivable, net 3,284,040 3,691,152 6,975,192
Interest receivable 360,687 655,511 1,016,198
Utility billings receivable, net 1,858,288 19,854,164 21,712,452 Taxes receivable 14,574,439 - 14,574,439
Leases receivable 7,170,137 10,064,544 17,234,681
Due from governments, net 47,523,489 3,748,047 51,271,536 Prepaid expenses 330,831 2,370,314 2,701,145
Internal balances 1,801,854 (1,801,854) -
Inventories 1,808,468 89,603 1,898,071
Investments in joint ventures 7,138,476 - 7,138,476
Restricted assets:

Cash and cash equivalents 77,271,356 15,918,799 93,190,155 Cash and cash equivalents with fiscal agent 13,176,128 3,641,526 16,817,654 Due from governments, net 330,314 - 330,314
Reimbursement agreement 12,862,950 - 12,862,950
Notes and loan receivable, net 58,911,283 - 58,911,283
Capital assets:

Land and construction in progress 204,470,908 88,943,716 293,414,624 Other capital assets, net of accumulated depreciation 288,893,204 773,035,879 1,061,929,083 Total assets 877,018,652 1,194,033,356 2,071,052,008

DEFERRED OUTFLOWS OF RESOURCES
Deferred OPEB 6,095,273 1,745,781 7,841,054
Deferred pensions 39,297,830 6,902,156 46,199,986
Loss on refunding - 488,601 488,601
Accumulated decrease in fair value of hedging derivatives 4,090,604 18,340,709 22,431,313 Total deferred outflows of resources 49,483,707 27,477,247 76,960,954 Total assets and deferred outflows of resources 926,502,359 1,221,510,603 2,148,012,962

LIABILITIES
Accounts payable 40,286,771 6,593,786 46,880,557
Accrued salaries and benefits 3,006,604 851,704 3,858,308 Approved loans payable 76,529 - 76,529
Interest payable 14,646 524,538 539,184
Unearned revenue 2,139,859 3,584,313 5,724,172
Refundable deposits 7,176,712 2,414,878 9,591,590
Derivative instrument - interest swap 4,090,604 18,340,709 22,431,313 Pollution remediation liability - 12,792,649 12,792,649 Long-term liabilities:

Due within one year 11,424,086 16,321,881 27,745,967
Due in more than one year 78,856,665 270,528,627 349,385,292 Net OPEB liability 22,749,222 6,802,648 29,551,870
Net pension liability 213,452,356 36,351,360 249,803,716 Total liabilities 383,274,054 375,107,093 758,381,147

DEFERRED INFLOWS OF RESOURCES
Deferred OPEB 695,782 220,417 916,199
Deferred pensions 71,854,139 16,947,101 88,801,240
Deferred leases 7,172,027 9,930,700 17,102,727
Total deferred inflows of resources 79,721,948 27,098,218 106,820,166 Total liabilities and deferred inflows of resources 462,996,002 402,205,311 865,201,313

NET POSITION
Net investment in capital assets 457,620,157 687,640,266 1,145,260,423 Restricted for:

Capital projects 77,245,135 - 77,245,135
Housing and community development 69,995,123 - 69,995,123 Pollution remediation - 13,503,921 13,503,921
Health and human services 8,624,000 - 8,624,000
Public safety 19,991,017 - 19,991,017
Refundable deposits - 2,414,878 2,414,878
General government and support services 19,938,371 - 19,938,371 Unrestricted (189,907,446) 115,746,227 (74,161,219)
Total net position $ 463,506,357 $ 819,305,292 $ 1,282,811,649 The notes to basic financial statements are an integral part of this statement. 17 #1..
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CITY OF MODESTO

STATEMENT OF ACTIVITIES
FISCAL YEAR ENDED JUNE 30, 2022
Operating Capital
Charges for Grants and Grants and
Expenses Services Contributions Contributions
FUNCTIONS/PROGRAMS:

Governmental activities:

General government $ 20,268,611 $ 6,572,771 $ $ - -
Community development 20,615,432 19,488,129 9,039,445 684,429 Highways and streets 27,463,523 651,082 11,726,044 -
Public works 3,086,419 2,711,433 109,057 -
Parks and recreation 12,439,250 2,205,344 - -
Public safety 121,675,443 8,960,454 6,204,232 425,426
Interest on long-term debt 1,954,306 - - -
Total governmental activities 207,502,984 40,589,213 15,352,734 12,835,899 Business-type activities:

Water 73,421,868 86,231,116 246,174 151,294
Sewer 44,263,767 65,367,417 389,802 2,301,689
Parking 1,926,834 1,281,097 - -
Storm drain 5,965,352 6,216,242 - -
Compost 11,497,333 10,944,785 430,119 -
Airport 1,686,375 722,767 578,243 -
Golf 3,229,764 3,010,990 - -
Community center 1,570,818 166,370 - -
Abatement and public nuisance 124,097 640,686 - -
Total business-type activities 143,686,208 174,581,470 1,644,338 2,452,983 Total $ 351,189,192 $ 215,170,683 $ 16,997,072 $ 15,288,882 General revenues:

Taxes:

Utility users tax
Property taxes, levied for general purposes
Property taxes, generated by and allocated to the airport Transient occupancy tax
Franchise tax
Cannabis tax
Business license tax, levied for general purposes
Business license tax, levied for downtown improvement district Intergovernmental revenue:

Sales tax (state appropriation)
Motor vehicle license fee
Transportation tax funding
Special assessments, levied
Proceeds from Modesto Regional Fire Authority dissolution Other
Unrestricted investment earnings
Connection fees
Miscellaneous
Transfers, net
Special items
Total general revenues, transfers, and special items
Changes in net position
Net position, July 1
Prior year adjustments
Net position, June 30
Program Revenues
The notes to basic financial statements are an integral part of this statement. 18 #1..
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Governmental Business-type
Activities Activities Total
$ (13,695,840) $ $ (13,695,840) -
8,596,571 - 8,596,571
(15,086,397) (15,086,397) -
(265,929) - (265,929)
(10,233,906) (10,233,906) -
(106,085,331) (106,085,331) -
(1,954,306) (1,954,306) -
(138,725,138) (138,725,138) -
13,206,716 13,206,716 -
23,795,141 23,795,141 -
- (645,737) (645,737)
- 250,890 250,890
- (122,429) (122,429)
- (385,365) (385,365)
- (218,774) (218,774)
(1,404,448) (1,404,448) -
- 516,589 516,589
34,992,583 34,992,583 -
(138,725,138) 34,992,583 (103,732,555)
20,918,653 20,918,653 -
19,757,550 19,757,550 -
- 212,978 212,978
3,621,190 - 3,621,190
7,402,770 - 7,402,770
4,022,799 - 4,022,799
15,263,225 15,263,225 -
205,995 - 205,995
40,389,650 40,389,650 -
19,881,139 19,881,139 -
23,404,322 23,404,322 -
5,578,262 - 5,578,262
-
54,289,046 54,289,046 -
(3,911,830) (8,124,559) (12,036,389)
1,643,071 1,301,658 2,944,729
21,077,584 (21,077,584) -
(19,461,712) (19,461,712) -
233,543,426 (47,149,219) 186,394,207
94,818,288 (12,156,636) 82,661,652
373,589,871 843,876,401 1,217,466,272
(4,901,802) (12,414,473) (17,316,275)
$ 463,506,357 $ 819,305,292 $ 1,282,811,649
Changes in Net Position
Net (Expense) Revenue and
19 #1..
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CITY OF MODESTO

BALANCE SHEET - GOVERNMENTAL FUNDS
JUNE 30, 2022
Housing and
Operating Community Capital Other Total
General Grants Development Grants Governmental Governmental ASSETS
Cash and cash equivalents $ 23,671,472 $ 42,016,152 $ 1,158,509 $ 284,949 $ 43,456,315 $ 110,587,397 Receivables:

Accounts, net 2,080,591 107,295 147,586 - 438,722 2,774,194 Interest 32,648 5,686 - - 228,786 267,120
Utilities, net 1,858,288 - - - - 1,858,288
Taxes 14,433,128 1,094 - - 140,217 14,574,439
Leases 4,635,221 - - - 1,515,797 6,151,018
Due from governments 506,572 941,508 4,329,993 28,238,053 12,044,331 46,060,457 Prepaid expenditures 212,543 26,810 1,559 - 4,365 245,277 Restricted assets:

Cash and cash equivalents 3,989,829 - - - 67,893,671 71,883,500 Cash and cash equivalents with
fiscal agent 3,867,707 705,822 - 3,161,068 5,245,920 12,980,517 Due from governments 300,000 - - - 30,314 330,314
Notes receivable, net - 70,179 56,630,104 - 2,211,000 58,911,283 Advances to other funds 2,129,441 - - - - 2,129,441
Total assets $ 57,717,440 $ 43,874,546 $ 62,267,751 $ 31,684,070 $ 133,209,438 $ 328,753,245

LIABILITIES, DEFERRED INFLOWS OF

RESOURCES, AND FUND BALANCES
Liabilities:

Accounts payable $ 2,927,630 $ 2,481,022 147,525 $ 28,435,760 $ 2,147,777 $ 36,139,714 Accrued salaries and benefits 2,450,087 125,085 18,929 - 156,725 2,750,826 Accrued interest payable - 1,199 1,119 - 857 3,175
Approved loans payable - - 76,529 - - 76,529
Unearned revenue 333,128 - - - 1,733,065 2,066,193
Refundable deposits 7,137,266 - - - 39,446 7,176,712
Advances from other funds 708,973 - - - 1,235,182 1,944,155 Total liabilities 13,557,084 273,809 2,577,599 28,435,760 5,313,052 50,157,304 Deferred inflows of resources:

Unavailable revenue 127,340 41,122,400 25,876,225 5,430,426 4,930,823 77,487,214 Leases 4,613,891 - - - 1,492,748 6,106,639
Total deferred inflows of resources 4,741,231 41,122,400 25,876,225 5,430,426 6,423,571 83,593,853 Fund balances:

Nonspendable 2,341,984 26,810 1,559 - 4,365 2,374,718
Restricted 8,157,536 2,451,527 33,812,368 3,161,068 75,390,366 122,972,865 Committed 18,397,817 - - - - 18,397,817
Assigned 579,390 - - - 46,078,354 46,657,744
Unassigned 9,942,398 - - (5,343,184) (270) 4,598,944 -
Total fund balances 39,419,125 2,478,337 33,813,927 (2,182,116) 121,472,815 195,002,088 Total liabilities, deferred inflows of
resources, and fund balances $ 57,717,440 $ 43,874,546 $ 62,267,751 $ 31,684,070 $ 133,209,438 $ 328,753,245 The notes to basic financial statements are an integral part of this statement. 20 #1..
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CITY OF MODESTO

RECONCILIATION OF THE BALANCE SHEET OF GOVERNMENTAL FUNDS

TO THE STATEMENT OF NET POSITION - GOVERNMENTAL ACTIVITIES JUNE 30, 2022
Total fund balances - governmental funds $ 195,002,088
Amounts reported for governmental activities in the statement of net position are different because:

Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the governmental funds.

General capital assets:

Nondepreciable $ 193,234,294
Depreciable 178,800,768
Accumulated depreciation on general capital assets (113,550,336) Lease assets - right to use 887,645
Accumulated amortization on lease assets, righ tto use (230,268) Infrastructure:

Depreciable 581,233,381
Accumulated depreciation on infrastructure (388,730,075) 451,645,409 Other long-term assets are not available to pay for current-period expenditures and, therefore, are:

Deferred in the governmental funds $ 77,487,214
Reimbursement agreement with Successor Agency 12,862,950 Investments in joint ventures 7,138,476 97,488,640
Derivative instruments:

Rate swaps are not reported in governmental funds. $ (4,090,604) Deferred outflows of resources used to accumulate decreases in fair value of hedging derivatives also are not reported in governmental funds. 4,090,604 - Internal service funds are used by management to charge the costs of activities to individual funds. The assets, deferred outlows of resources, liabilities, and deferred inflows of recources of internal service funds are included in governmental activities in the statement of net position. 22,508,903
Deferred outflows and inflows of resources for pension items in governmental activities are not financial resources and, therefore, are not reported in the governmental funds.

Deferred outflows of resources $ 37,410,476
Deferred inflows of resources (67,220,052) (29,809,576) Deferred outflows and inflows of resources for net OPEB items in governmental activities are not financial resources and, therefore, are not reported in the governmental funds.

Deferred outflows of resources $ 5,605,730
Deferred inflows of resources (636,387) 4,969,343
Some liabilities, are not due and payable in the current period and therefore are not reported in the funds.

Net pension liability $ (203,512,288)
Net OPEB liability (20,922,228)
Bonds payable, and other long-term debt (53,852,825)
Accrued interest (11,109) (278,298,450)
Net position - governmental activities $ 463,506,357
The notes to basic financial statements are an integral part of this statement. 21 #1..
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CITY OF MODESTO

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES

IN FUND BALANCES - GOVERNMENTAL FUNDS
Housing and
Operating Community Capital Other Total
General Grants Development Grants Governmental Governmental REVENUES:

Taxes $ 68,997,168 $ 359,352 $ - $ - $ 1,835,662 $ 71,192,182 Licenses and permits 389,431 43,632 - - 1,055 434,118
Intergovernmental 77,648,238 12,794,384 8,000,014 42,385,064 25,977,185 166,804,885 Charges for services 18,248,428 4,492,533 776,012 - 10,227,350 33,744,323 Special assessments levied 397,261 71,619 - - 5,109,382 5,578,262 Interest and rent 851,323 172,001 - - 1,168,142 2,191,466 Net (decrease) in fair value of investments (467,680) (68,027) - - (3,781,916) (4,317,623) Fines and forfeits 617,607 - - - 214,903 832,510
Donations and contributions - 44,338 - - - 44,338
Miscellaneous 1,070,605 183,692 - - 207,010 1,461,307
Total revenues 167,752,381 18,093,524 8,776,026 42,385,064 40,958,773 277,965,768 EXPENDITURES:

Current:

General government 13,508,887 244,407 7,356,964 - - 21,110,258 Community development 5,916,615 7,612,089 - 1,773,672 6,126,764 21,429,140 Highways and streets - 63,169 - 3,088,046 13,359,219 16,510,434 Public works 3,215,409 - - - - 3,215,409
Parks and recreation 12,696,983 69,229 - 67,380 109,748 12,943,340 Public safety 119,431,734 6,707,310 - - 510,263 126,649,307 Capital outlay 3,781,648 315,784 - 40,933,273 5,011,959 50,042,664 Debt service:

Principal retirement 675,904 - 297,000 - 2,390,000 3,362,904 Interest 182,269 - 30,150 - 1,700,627 1,913,046
Other - - 638 - 47,972 48,610
Total expenditures 156,194,040 18,227,397 7,684,752 45,862,371 29,256,552 257,225,112

EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES 11,558,341 (133,873) 1,091,274 (3,477,307) 11,702,221 20,740,656

OTHER FINANCING SOURCES
(USES):

Transfers in 4,270,678 512,230 - 3,182,231 8,028,455 15,993,594 Transfers out (11,050,912) (3,540) (1,078,170) (24,688) (5,519,809) (17,677,119) Proceeds from finance purchase agreements 3,741,926 - - - - 3,741,926 Sale of assets - - - - 32,551 32,551

TOTAL OTHER FINANCING
SOURCES (USES) (3,038,308) 508,690 (1,078,170) 3,157,543 2,541,197 2,090,952 CHANGES IN FUND BALANCES 8,520,033 374,817 13,104 (319,764) 14,243,418 22,831,608 FUND BALANCES, JULY 1 30,899,092 2,103,520 34,146,986 (1,862,352) 107,229,397 172,516,643 PRIOR PERIOD ADJUSTMENTS - - (346,163) - - (346,163)
FUND BALANCES, JUNE 30 $ 39,419,125 $ 2,478,337 $ 33,813,927 $ (2,182,116) $ 121,472,815 $ 195,002,088 The notes to basic financial statements are an integral part of this statement.

FISCAL YEAR ENDED JUNE 30, 2022
22 #1..
- 68 -

CITY OF MODESTO

RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND

BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES - GOVERNMENTAL ACTIVITIES FISCAL YEAR ENDED JUNE 30, 2022
Net change in fund balances - governmental funds $ 22,831,608 Amounts reported for governmental activities in the statement of activities are different because:

Governmental funds report capital outlay as expenditures. However, in the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense.

Capital outlay $ 50,042,664
Depreciation expense (19,111,515) 30,931,149
In the statement of activities, only the gain or loss on the sales and transfer of capital assets is reported, whereas in the governmental funds, the proceeds from such sales or transfer increase financial resources. Thus, the change in net position differs from the change in fund balances by the cost of the assets sold. (11,364,624) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds.

Change in unearned revenues $ 5,631,479
Change in investments in joint ventures (654,641) 4,976,838 Recognition of Successor Agency annual payment for their Reimbursement Agreement receivable associated with long-term debt. (749,650)
The issuance of long-term debt provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position.

Principal retirement 3,362,904
Proceeds of long-term debt (3,741,926)
(379,022)
Some expenses reported in the statement of activities require the use of current financial resources and therefore are not reported as expenditures in governmental funds.

Change in accrued interest $ 7,353
OPEB expense associated with net OPEB liability (302,724) Pension expense associated with net pension liability 30,579,221 30,283,850 Internal service funds are used by management to charge the costs of certain activities to individual funds. The net revenue (expense) of internal service funds is reported with governmental activities. 18,288,139 Change in net position - governmental activities $ 94,818,288 The notes to basic financial statements are an integral part of this statement. 23 #1..
- 69 -

CITY OF MODESTO

STATEMENT OF NET POSITION - PROPRIETARY FUNDS
JUNE 30, 2022
Enterprise
Other Total Internal
Water Sewer Bus Enterprise Enterprise Service
ASSETS
Current assets:

Cash and cash equivalents $ 138,470,018 $ 119,837,512 $ $ 15,514,425 $ 273,821,955 $ 24,664,403 - Receivables:

Accounts, net 55,189 831,556 - 2,804,407 3,691,152 509,846 Interest 313,789 299,771 - 41,951 655,511 93,567
Utilities, net 11,128,798 7,606,590 - 1,118,776 19,854,164 - Leases 21,244 22,754 - 279,397 323,395 51,738
Prepaid expenses 2,299,942 66,284 - 4,088 2,370,314 85,554 Due from governments 1,559,422 650,541 - 1,538,084 3,748,047 1,463,032 Inventories 35,435 - - 54,168 89,603 1,808,468
Total current assets 153,883,837 129,315,008 21,355,296 304,554,141 28,676,608 - Noncurrent assets:

Advances to other funds 3,720,000 1,698,976 - 158,642 5,577,618 - Restricted cash and cash equivalents 5,528,112 9,740,808 - 649,879 15,918,799 5,387,856 Restricted cash and cash equivalents with fiscal agent 2,917,320 58,833 - 665,373 3,641,526 195,611 Leases receivable 182,587 299,383 - 9,259,179 9,741,149 967,381 Land and construction in progress 34,839,418 43,096,467 11,007,831 88,943,716 11,236,614 - Other capital assets, net of accumulated depreciation 394,491,474 348,832,784 29,260,308 772,584,566 30,473,445 - Intangible assets right-to-use, net of accumulated amortization 451,313 - - - 451,313 8,644 Total noncurrent assets 442,130,224 403,727,251 51,001,212 896,858,687 48,269,551 - Total assets 596,014,061 533,042,259 72,356,508 1,201,412,828 76,946,159 - Deferred OPEB 821,867 552,810 - 371,104 1,745,781 489,543 Deferred pensions 2,625,309 2,830,513 - 1,446,334 6,902,156 1,887,354 Loss on refunding 333,089 155,512 - - 488,601 -
Accumulated decrease in fair value of hedging derivatives 18,340,709 - - 18,340,709 - - Total deferred outflows of resources 22,120,974 3,538,835 - 1,817,438 27,477,247 2,376,897 Total assets and deferred outflows of resources $ 618,135,035 $ 536,581,094 $ $ 74,173,946 $ 1,228,890,075 $ 79,323,056 -

LIABILITIES
Current liabilities:

Accounts payable $ 3,083,061 $ 2,604,208 $ $ 906,517 $ 6,593,786 $ 4,147,057 - Accrued salaries and benefits 318,546 321,361 - 211,797 851,704 255,778 Interest payable 2,662 509,644 - 12,232 524,538 362
Current portion - compensated absences - - - - - 1,533,757 Current portion - claims liability - - - - - 6,297,828
Current portion - long-term debt 6,273,476 9,012,668 - 462,352 15,748,496 - Current portion - developer advances 83,725 - - - 83,725 - Current portion - leases 181,795 - - - 181,795 8,651
Unearned revenue 39,171 2,294,197 - 1,250,945 3,584,313 73,666 Total current liabilities 9,982,436 14,742,078 - 2,843,843 27,568,357 12,317,099 Noncurrent liabilities:

Payable from restricted assets -
refundable deposits 1,365,777 1,049,101 - - 2,414,878 - Advances from other funds - - - 5,762,904 5,762,904 -
Compensated absences - - - - 10,428,316 -
Claims liability - - - - 20,560,470 -
Derivative instrument - interest swap 18,340,709 - - 18,340,709 - - Pollution remediation liability 5,248,885 6,587,713 - 956,051 12,792,649 - Long-term debt:

Reimbursement agreement related to MID debt 93,760,726 - - 93,760,726 - - Revenue bonds payable 105,274,842 - - 105,274,842 - -
Finance purchase obligations - - - 1,001 1,001 -
Loans payable 290,830 25,424,053 - 25,714,883 - -
Certificates of participation 42,313,037 - - 480,000 42,793,037 - Developer advances 615,617 - - - 615,617 -
Leases payable long-term 275,290 - - - 275,290 -
Net OPEB liability 2,936,341 2,152,583 - 1,713,724 6,802,648 1,826,994 Net pension liability 13,826,630 14,907,373 - 7,617,357 36,351,360 9,940,068 Total noncurrent liabilities 178,973,842 155,395,665 16,531,037 350,900,544 42,755,848 - Total liabilities 188,956,278 170,137,743 19,374,880 378,468,901 55,072,947 - Deferred OPEB 83,411 69,774 - 67,232 220,417 59,395
Deferred pensions 6,446,012 6,949,857 - 3,551,232 16,947,101 4,634,087 Deferred leases 199,525 315,508 - 9,415,667 9,930,700 1,065,388 Total deferred inflows of resources 6,728,948 7,335,139 13,034,131 - 27,098,218 5,758,870

NET POSITION
Net investment in capital assets 289,943,232 357,706,875 39,990,159 687,640,266 41,718,703 - Restricted for pollution remediation 4,162,335 8,691,707 - 649,879 13,503,921 - Restricted refundable deposits 1,365,777 1,049,101 - - 2,414,878 5,583,467 Unrestricted 126,978,465 (8,339,471) - 1,124,897 119,763,891 (28,810,931) Total net position 422,449,809 359,108,212 41,764,935 - 823,322,956 18,491,239 Total liabilities, deferred inflows of resources, and net position $ 618,135,035 $ 536,581,094 $ $ 74,173,946 - $ 79,323,056 Adjustment to reflect the consolidation of internal service fund activities (4,017,664) Net position of business-type activities $ 819,305,292
The notes to basic financial statements are an integral part of this statement.

DEFERRED OUTFLOWS OF RESOURCES

DEFERRED INFLOWS OF RESOURCES
24 #1..
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CITY OF MODESTO

STATEMENT OF REVENUES, EXPENSES, AND CHANGES

IN FUND NET POSITION - PROPRIETARY FUNDS
FISCAL YEAR ENDED JUNE 30, 2022
Other Total Internal
Water Sewer Bus Enterprise Enterprise Service
OPERATING REVENUES:

Charges for services $ 84,975,835 $ 63,788,443 $ $ 22,528,456 $ 171,292,734 $ 92,171,064 - Miscellaneous 1,255,281 108,124 - 454,481 1,817,886 426,888 Total operating revenues 86,231,116 63,896,567 - 22,982,937 173,110,620 92,597,952 OPERATING EXPENSES:

Salaries and wages 9,322,014 9,286,687 - 5,493,802 24,102,503 8,174,460 Cost of goods sold - - - - - 4,022,553
Contractual services 10,059,945 2,957,393 - 6,446,733 19,464,071 5,468,196 Utilities 2,817,179 3,477,745 - 666,037 6,960,961 528,085 Maintenance and supplies 7,655,748 5,131,651 - 5,231,563 18,018,962 10,797,675 Water purchases 10,784,117 - - - 10,784,117 -
Insurance 486,996 1,114,123 - 587,457 2,188,576 20,656,448 Claims - - - - - 8,649,263
Employee benefits 2,851,672 3,000,086 - 1,908,468 7,760,226 32,558,398 Administration services 1,204,837 1,832,417 - 3,191,385 6,228,639 1,290,230 Allocated indirect administrative costs 1,404,346 821,002 - 553,218 2,778,566 412,063 Depreciation 20,440,834 13,943,021 - 1,740,583 36,124,438 3,993,945 Total operating expenses 67,027,688 41,564,125 - 25,819,246 134,411,059 96,551,316 OPERATING INCOME (LOSS) 19,203,428 22,332,442 - (2,836,309) 38,699,561 (3,953,364)

NONOPERATING REVENUES (EXPENSES)
Operating grants 246,174 389,802 - 1,008,362 1,644,338 - Gain (loss) on disposition of capital assets 3,680 4,950 - 27,550 36,180 (87,687) Tax revenue - - - 212,978 212,978 -
Tax expense (124,478) (70,686) - (20,637) (215,801) -
Interest income 1,221,482 1,174,516 - 291,145 2,687,143 513,094 Net (decrease) in fair value of investments (5,172,019) (4,945,856) - (693,827) (10,811,702) (1,644,126) Connection fees - 1,470,850 - - 1,470,850 -
Rental income 44,023 513,625 - 744,009 1,301,657 5,381
Interest expense and amortization (5,914,655) (2,419,591) - (52,202) (8,386,448) (8,659) Trustee and letter of credit fees (153) (3,000) - (3,535) (6,688) - Total nonoperating revenues (expenses) (9,695,946) (3,885,390) - 1,513,843 (12,067,493) (1,221,997)

INCOME (LOSS) BEFORE CAPITAL
CONTRIBUTIONS AND TRANSFERS 9,507,482 18,447,052 - (1,322,466) 26,632,068 (5,175,361) Capital contributions 151,294 2,301,689 - - 2,452,983 - Transfers in 413,899 14,592 - 4,188,221 4,616,712 26,802,546 Transfers out (1,170,836) (1,231,732) (19,328,695) (3,963,033) (25,694,296) (4,041,437) Total contributions and transfers (605,643) 1,084,549 (19,328,695) 225,188 (18,624,601) 22,761,109

SPECIAL ITEM
Loss in transfer of operations - (19,461,712) - (19,461,712) - - CHANGES IN NET POSITION 8,901,839 19,531,601 (38,790,407) (1,097,278) (11,454,245) 17,585,748 NET POSITION, JULY 1 423,902,035 341,532,098 38,763,577 42,993,964 1,925,460 PRIOR YEAR ADJUSTMENTS (10,354,065) (1,955,487) 26,830 (131,751) (1,019,969) NET POSITION, JUNE 30 $ 422,449,809 $ 359,108,212 $ $ 41,764,935 - $ 18,491,239 Adjustment to reflect the consolidation of internal service funds (702,391) Change in net position of business-type activities $ (12,156,636) Enterprise
The notes to basic financial statements are an integral part of this statement. 25 #1..
- 71 -
Enterprise
Other Total Internal
Water Sewer Bus Enterprise Enterprise Service
CASH FLOWS FROM OPERATING ACTIVITIES:

Receipts from customers and users $ 86,480,080 $ 63,665,252 $ 304,695 $ 22,472,662 $ 172,922,689 $ 1,456,601 Receipts from interfund services provided 277,603 7,176 - - 284,779 92,171,064 Payments to suppliers (28,015,556) (10,946,830) (3,394,620) (8,473,163) (50,830,169) (42,334,360) Payment of insurance claims - - - - - (10,544,495)
Payments to employees (13,903,757) (14,063,099) (88,159) (8,238,650) (36,293,665) (40,182,681) Payments for interfund services used (8,803,023) (6,090,830) - (8,589,412) (23,483,265) (2,752,596) Net cash provided (used) by operating activities 36,035,347 32,571,669 (3,178,084) (2,828,563) 62,600,369 (2,186,467)

CASH FLOWS FROM NONCAPITAL FINANCING
ACTIVITIES:

Operating grants received 246,174 389,802 49,127 1,008,362 1,693,465 - Operating grant payments - - (4,659,274) - (4,659,274) - Taxes received - - - 212,978 212,978 -
Transfers in 413,899 14,592 - 4,188,221 4,616,712 7,499,928 Transfers out (1,170,836) (1,231,732) (26,077) (3,963,033) (6,391,678) (4,041,437) Advances from/to other funds 620,000 501,973 (471,416) (601,319) 49,238 - Net cash provided (used) by noncapital financing
activities 109,237 (325,365) (5,107,640) 845,209 (4,478,559) 3,458,491

CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES:

Acquisition and construction of capital assets (6,496,191) (10,458,160) - (253,307) (17,207,658) (9,240,858) Proceeds from sale of capital assets 14,818 4,950 - 27,550 47,318 14,075 Principal repayments (6,640,344) (9,866,016) - (435,000) (16,941,360) - Interest paid (6,095,181) (2,419,591) - (55,534) (8,570,306) (8,297) Trustee and letter of credit fees (153) (3,000) - (3,535) (6,688) - Capital contributions 151,294 2,301,689 - - 2,452,983 - Connection fees for capital purposes - 1,470,850 - - 1,470,850 - Net cash provided (used) by capital and related
financing activities (19,065,757) (18,969,278) - (719,826) (38,754,861) (9,235,080) CASH FLOWS FROM INVESTING ACTIVITIES:

Interest received 1,197,258 1,180,230 19,897 253,220 2,650,605 523,671 Net (decrease) in the fair value of investments (5,172,019) (4,945,856) - (693,828) (10,811,703) (1,644,126) Rental income received 44,023 513,625 - 744,009 1,301,657 5,381 Net cash provided (used) by investing activities (3,930,738) (3,252,001) 19,897 303,401 (6,859,441) (1,115,074) Net increase (decrease) in cash and cash equivalents 13,148,089 10,025,025 (8,265,827) (2,399,779) 12,507,508 (9,078,130) CASH AND CASH EQUIVALENTS, JULY 1 133,767,361 119,612,128 8,265,827 19,229,456 280,874,772 39,326,000 CASH AND CASH EQUIVALENTS, JUNE 30 $ 146,915,450 $ 129,637,153 $ - $ 16,829,677 $ 293,382,280 $ 30,247,870 RECONCILIATION TO STATEMENT OF NET POSITION:

Cash and cash equivalents $ 138,470,018 $ 119,837,512 $ - $ 15,514,425 $ 273,821,955 $ 24,664,403 Restricted cash and cash equivalents 5,528,112 9,740,808 - 649,879 15,918,799 5,387,856 Restricted cash and cash equivalents with fiscal agent 2,917,320 58,833 - 665,373 3,641,526 195,611 TOTAL CASH AND CASH EQUIVALENTS $ 146,915,450 $ 129,637,153 $ - $ 16,829,677 $ 293,382,280 $ 30,247,870 (continued)
The notes to basic financial statements are an integral part of this statement.

CITY OF MODESTO

STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS
FISCAL YEAR ENDED JUNE 30, 2022
26 #1..
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CITY OF MODESTO
STATEMENT OF CASH FLOWS - PROPRIETARY FUNDS (Continued) FISCAL YEAR ENDED JUNE 30, 2022
Enterprise
Other Total Internal
Water Sewer Bus Enterprise Enterprise Service

RECONCILIATION OF OPERATING INCOME (LOSS)

TO NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES:

Operating income (loss) $ 19,203,428 $ 22,332,442 $ $ (2,836,309) $ 38,699,561 $ (3,953,364) - Adjustments to reconcile operating income (loss) to
net cash provided (used) by operating activities:

Depreciation 20,440,834 13,943,021 - 1,740,583 36,124,438 3,993,945 Taxes paid (124,478) (70,686) - (20,637) (215,801) -
Change in assets, liabilities, and deferred resources:
(Increase) decrease in accounts receivable (9,526) 825,951 304,695 (1,150,877) (29,757) 962,786 (Increase) in utilities receivable (568,798) (605,728) - (111,360) (1,285,886) - (Increase) decrease in due from governments 1,070,340 51,418 - 219,249 1,341,007 (1,434,130) (Increase) decrease in prepaid expenses 640,510 16,735 5,582 1,046 663,873 (63,825) (Increase) in inventories - - - (114,619) (114,619) (462,136) Increase (decrease) in accounts payable (2,106,507) (1,278,161) (3,400,202) (326,519) (7,111,389) 1,157,915 Increase (decrease) in accrued salaries and benefits 43,473 27,358 (88,159) 32,872 15,544 65,115 (Decrease) in compensated absences - - - - - (313,587)
(Increase) decrease in net OPEB liability and deferred resources (194,435) (109,993) - (66,114) (370,542) 1,950,073 (Decrease) in net pension liability and deferred resources (1,579,112) (1,693,691) - (801,206) (4,074,009) (2,277,697) (Decrease) in claims liability - - - - (1,894,559) -
Increase (decrease) in pollution remediation liability (814,936) (371,219) - 51,099 (1,135,056) - Increase (decrease) in unearned revenue 7,720 (499,564) - 577,497 85,653 36,728 (Increase) decrease in lease receivable - (6,629) - (23,268) (29,897) 46,269 Increase in refundable deposits 26,834 10,415 - - 37,249 - Total adjustments 16,831,919 10,239,227 (3,178,084) 7,746 23,900,808 1,766,897 Net cash provided (used) by operating activities $ 36,035,347 $ 32,571,669 (3,178,084) $ (2,828,563) $ 62,600,369 $ (2,186,467)

NONCASH INVESTING, CAPITAL AND FINANCING
ACTIVITIES:

Transfer of fixed assets upon transfer of operations $ $ - $ 38,737,483 - $ 38,737,483 - $ - Relief of payroll related debt and associated deferred outflows/inflows upon trasnfer of operations - - 3,782,751 - 3,782,751 - TOTAL NONCASH INVESTING, CAPITAL AND FINANCING ACTIVITIES $ $ - $ 42,520,234 - $ $ 42,520,234 - $ The notes to basic financial statements are an integral part of this statement. 27 #1..
- 73 -
Redevelopment Special Total Investment
Succesor Agency Districts Private Purpose Trust Funds
ASSETS
Cash and cash equivalents $ $ 2,383,760 1,059,107 $ $ 3,442,867 605,459 Cash and cash equivalents held with fiscal agent 1,977,349 2,938,523 4,915,872 - Interest receivable 5,582 4,706 10,288 1,159
Taxes receivable - 76,612 76,612 25,136
Assessments receivable - 27,900,105 27,900,105 -
Leases receivable - - - 1,214,758
Due from governments - - - 23,884
Land and construction in progress - - - 3,024,743
Other capital assets, net of accumulated depreciation Other assets -- -- -- 4,142,152 -
Total assets 4,366,691 31,979,053 8,358,739 9,037,291
Deferred outflows of resources:

Loss on refunding - 974,255 974,255 -

LIABILITIES
Accounts payables and other liabilities 36,859 2,500 39,359 340,899 Due to local governments 1,492,004 - 1,492,004 -
Interest payable 26,655 416,766 443,421 -
Long-term liabilities:

Due within one year 2,284,650 1,081,659 3,366,309 -
Due in more than one year 14,128,300 27,757,678 41,885,978 - - Total liabilities 17,968,468 29,258,603 340,899
Deferred inflows of resources
Leases - - - 1,184,964
Unavailable revenues - 759,097 759,097 -
Total deferred inflows of resources - 759,097 759,097 1,184,964

NET POSITION
Net invested in capital assets - - - 7,166,895
Restricted - 2,938,523 2,938,523 -
Unrestricted (13,601,777) (2,915) (13,604,692) 344,533
Total net position (deficit) $ (13,601,777) $ 2,935,608 $ (10,666,169) $ 7,511,428

CITY OF MODESTO

STATEMENT OF FIDUCIARY NET POSITION
JUNE 30, 2022
The notes to basic financial statements are an integral part of this statement.

Private Purpose Funds
28 #1..
- 74 -
Redevelopment Special Total Investment
Succesor Agency Districts Private Purpose Trust Funds
ADDITIONS:

Contributions:

Members investment pool $ $ - $ - $ - 408,800
Total contributions
Collections on behalf of other governments:

Special assessments - 2,318,519 2,318,519 292,007
Property taxes 3,258,912 - 3,258,912 371,696
Other - - - 114,471
Total collections on behalf of other governments 3,258,912 2,318,519 5,577,431 778,174 Interest and investment earnings:

Interest earnings 21,304 17,945 39,249 4,722
Net (decrease) in fair value of investments (85,952) (73,446) (159,398) (22,490) Total interest and investment earnings (64,648) (55,501) (120,149) (17,768) Total additions 3,194,264 2,263,018 5,457,282 1,169,206 DEDUCTIONS:

Distribution of property taxes to other taxing entities 503,146 - 503,146 640,927 Obligation retirements:

Principal retirement - 915,000 915,000 -
Interest expense 186,238 1,257,714 1,443,952 -
Trustee fees - 4,301 4,301 -
City administrative expenses 467,232 37,397 504,629 146,490 Other expenses - 5,047 5,047 -
Depreciation expense - - - 438,683
Operating expenses - - - 416,689
Total deductions 1,156,616 2,219,459 3,376,075 1,642,789 Net increase (decrease) in fiduciary net position 2,037,648 43,559 2,081,207 (473,583) Net position, July 1 - restated (15,639,425) 2,892,049 (12,747,376) 7,983,878 Prior year adjustment - - - 1,133
Net position (deficit), June 30 $ (13,601,777) $ 2,935,608 $ (10,666,169) $ 7,511,428

CITY OF MODESTO

STATEMENT OF CHANGES IN FIDUCIARY NET POSITION -

FIDUCIARY FUNDS
FISCAL YEAR ENDED JUNE 30, 2022
The notes to basic financial statements are an integral part of this statement.

Private Purpose Funds
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CITY OF MODESTO

NOTES TO BASIC FINANCIAL STATEMENTS
FISCAL YEAR ENDED JUNE 30, 2022
I. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. THE FINANCIAL REPORTING ENTITY
The City of Modesto (the City) was incorporated in 1884 and operates under a Council-Manager form of government as authorized by its charter adopted in 1951. The City Council consists of seven elected members. The following services are provided by the City to its citizens: public safety (fire and police), highways and streets, drinking water, wastewater collection and treatment, storm drainage, recreation, public improvements, community development, planning and zoning, and general administrative services.

These financial statements present the financial status of the City and its component units. The component units discussed in the following paragraphs are included in the City's reporting entity because the City is financially accountable for their operations.

1. The MPFA (Modesto Public Financing Authority) was established as a separate legal entity whose sole purpose is to provide financing for various City capital projects.

2. The City of Modesto has established several Community Facilities (The Districts) to provide funding and reimbursement mechanisms for public facilities and services required by each District Specific Plan. These Districts are the vehicles used to ensure that all landowners in the Districts contribute to the cost of public improvements.

There are currently twelve active Districts, which are combined for presentation in these financial statements.

Individual component unit financial statements are prepared for each District.

The Redevelopment Successor Agency (Successor Agency) operates under the auspices of a legislatively formed Oversight Board comprised of representatives of the local agencies that serve the development project area. The Oversight Board, in its fiduciary capacity, has authority over the operations and the timely dissolution of the former Redevelopment Agency (RDA). It is tasked with fulfilling the obligations of the former RDA, and is also responsible for revenue collection, maintaining necessary loan reserves and disposing of excess property. This agency is reported as a private-purpose trust fund based on the generally accepted accounting standards requirement.

Although these component units are legally separate from the City, they are reported on a blended basis as part of the primary government because their boards consist of all seven members of the City Council and operational responsibility. There is an operational responsibility for the City related to these component units and for the MPFA it provides services solely for the City. Component unit financial statements may be obtained from the City's Finance Department.

The joint ventures and jointly governed organizations described in Note III-E are not considered part of the reporting entity because the City is not financially accountable for their operations.

B. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS
The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the non-fiduciary activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on fees and charges for support.

The statement of activities demonstrates the degree to which the direct expenses of a given function or segment, are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment.

Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenues are reported instead as general revenues. 30 #1..
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Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the government-wide financial statements. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements.

C. BASIS OF PRESENTATION, BASIS OF ACCOUNTING, AND MEASUREMENT FOCUS The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund statements. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Agency funds have no measurement focus. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows.

Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available.

Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. For grant revenues, the City considers this type of revenue to be available if collected within 180 days. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, principal and interest, compensated absences, claims and judgement expenditures are recorded as fund liabilities when due or when amounts have been accumulated in the debt service funds for payments to be made early in the following year.

Substantially all property taxes, taxpayer-assessed taxes (such as sales and use, utility users, business license, transient occupancy, franchise fees, and gas taxes), interest, special assessments levied, state and federal grants, and charges for current services are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Revenues from licenses, permits, and fines and forfeits are considered to be measurable and available only when cash is received by the City.

The City reports the following major governmental funds:

The General Fund is the City’s primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund.

The Capital Grants Fund to account for receipts and disbursements of a variety of Governmental Fund capital grants.

The Operating Grants Fund to account for a variety of governmental fund operating grants, including law enforcement grants.

The Housing and Community Development Fund to account for various grant funds received from Federal Community Development Block grants to be used for a variety of housing related programs primarily targeted at loincome housing. Additionally, this fund accounts for the City’s revolving fund, which provides housing loans to lowincome individuals and accounts for emergency shelter grant revenue received from the Housing and Urban Development Department.

The City reports the following major proprietary funds:

The Water Fund accounts for all revenues collected by the City for the purpose of financing the construction, operation, and maintenance of the City water distribution system. Revenues are derived from water service charges and various installation fees.

The Sewer Fund accounts for revenues collected by the City for the purpose of financing the construction, operation, and maintenance of the City sewer system. Revenues include, but are not limited to, sewer service charges and sewer lateral charges.

The Bus Fund accounts for operations, maintenance, and capital expenditures of the City’s mass transportation service. Effective July 1, 2021 the City transferred all of its transit operations to Stanislaus Regional Transit Authority (StanRTA). This led to the closing of the Bus enterprise fund of the City. 31 #1..
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Additionally, the City reports the following fund types:

Private-purpose Trust Fund accounts as the fiduciary fund type used by the City to report trust arrangements under which principal and income benefit other governments. The fund reports the assets, liabilities, and net position of the Successor Agency. Additionally, the fund also reports the assets, primarily cash and investment, and related liabilities and net position of Special Districts which are used to account for collection of special assessment from property owners which are collected and forwarded to trustees for payment to bondholders.

Investment Trust Funds accounts for the assets and investments in the City’s investment pool, of legally separate entities held by the City as an agent of various assessment districts, governmental entities and non-profit organizations.

Internal service funds account for fleet management, central services, information and technology services, insurance, employee benefits management, and building services provided to other departments or agencies of the City on a cost-reimbursement basis.

As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements.

Exceptions to this general rule are exchange or exchange-like transactions between functions of the government.

Eliminations of these charges would distort the direct costs and program revenues reported for the various functions concerned.

Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the enterprise and internal service funds are charges to customers for sales and services. The Sewer Fund also recognize as non-operating revenue the portion of tap fees intended to recover the cost of connecting new customers to the systems. Operating expenses for enterprise and internal service funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.

When both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted resources first, then unrestricted resources as they are needed.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period including the note disclosures. Actual results could differ from those estimates.

D. ASSETS, DEFERRED OUTFLOWS OF RESOURCES, LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND

NET POSITION/FUND BALANCE

1. Cash and Cash Equivalents
Cash and investments (including restricted assets) held in the City's investment pool are reported as cash and cash equivalents on the statement of net position and balance sheet because funds can spend cash at any time without prior notice or penalty. All investments with fiscal agents are also considered cash equivalents because they are highly liquid and have maturities of 3 months or less at the time of purchase. Investments are stated at fair value.

Valuations are obtained based on various levels identified further under Note II-A – Fair value measurements.

2. Restricted Assets - Cash and Cash Equivalents
Refundable deposits which reside in the Trust Deposits of the General Fund are classified as restricted assets – cash and cash equivalents on the governmental funds balance sheet because their use is restricted for repayment of those refundable deposits. Legal or contractual obligations associated with the nonmajor governmental funds have been reported as restricted assets due to the restrictions identified on the revenue sources generated from these funds. Refundable deposits in the Water and Sewer funds are also reported as restricted assets on the proprietary funds statement of net position. In addition, certain proceeds of Water certificates of participation and Sewer revenue bonds are considered restricted assets because their use is limited by applicable debt covenants.

These proceeds are reported as part of “restricted assets – cash and cash equivalents” on the proprietary funds statement of net position. The Employee Benefits Management Fund collects funds which are restricted for future payouts for leave balances due to employees who terminate or retire from the City as well as any severance 32 #1..
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payouts. These assets are restricted due to management’s designation of assets for future payments for employee uses.

3. Receivables and Payables
Balances representing lending/borrowing transactions between funds outstanding at the end of the fiscal year are reported as either "due from/due to other funds" (amounts due within one year), or "advances to/from other funds" (non-current portions of interfund lending/borrowing transactions). Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances.” Advances to other funds and prepaid items are offset by a nonspendable fund balance in applicable governmental funds to indicate they are not available for appropriation and are not expendable available financial resources to indicate that they are not in spendable form.

All property taxes are collected and allocated by the County of Stanislaus to the various taxing entities. Property taxes are determined annually as of March 1 and attach as an enforceable lien on real property as of January 1.

Taxes are due November 1 and February 1 and are delinquent if not paid by December 10 and April 10, respectively.

The City participates in the County "Teeter Plan" method of property tax distribution. Under the Teeter Plan, the County remits property taxes to the City based on assessments, not on collections, according to the following schedule: 55 percent in December, 40 percent in April, and 5 percent at the end of the fiscal year. Property taxes are recognized in governmental funds when it is available and measurable. The City considers property tax as available if it is received within 60 days after year-end.

Revenue from taxpayer-assessed taxes (sales and use, business license, transient occupancy, utility users, gas, and franchise fees) are accrued in the governmental funds when they are both measurable and available. The City considers these revenues available if they are received during the period when settlement of prior fiscal year accounts payable occurs. Historically, the majority of these taxes are received within 60 days of the fiscal year end; therefore, revenue from taxpayer-assessed taxes is accrued if it is received by August 31.

Grant and entitlement revenues are recorded as receivables in the funds when they are susceptible to accrual (i.e., when all eligibility requirements have been met). The corresponding governmental fund revenues are recorded when they become available, with the differences recorded as deferred inflows of resources. The corresponding proprietary fund revenues are recorded as nonoperating revenues when the receivables are recorded. Some grant and entitlement revenues are not susceptible to accrual, in which case the corresponding revenues are recorded when received. The total amount due from governments for grants, entitlements, and shared receivables and revenues at June 30, 2022 is $51,601,850.

Utility service accounts receivable are $21,712,452 net of an allowance for doubtful collections of $1,419,507 and include unbilled receivables using actual amounts billed in July for June services for all City funds. City accounts receivable of $6,975,192 are reported net of an allowance for doubtful collections of $867,626 and are based on miscellaneous receivables from the City’s invoice system as well as other receivables accrued at year-end.

The City is a lessee for noncancelable leases of land, buildings, office space, and equipment and recognizes the liability and an intangible right-to-use lease asset at the inception of the lease agreement at the current present value of future payments, in the government-wide and proprietary fund financial statements.

The City is a lessor for noncancelable leases of buildings, hangers, office space and land use and parking spaces.

The City recognizes a lease receivable and a deferred inflow of resources in the government-wide, proprietary fund and governmental fund financial statements at the inception of the lease agreement at current present value of all future payments.

4. Inventories and Prepaid Expenses/Expenditures
Inventories of material and supplies held by governmental and proprietary funds are stated at average cost. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid expenses/expenditures. The consumption method is used to record the prepaid expenses/expenditures.

5. Capital Assets
Capital assets, which include property, plant and equipment, intangible assets and infrastructure assets (e.g., 33 #1..
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streets, bridges, sidewalks, and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the government as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of one year. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets received in a service concession agreement and all other types are recorded at acquisition value rather than fair value.

In the case of the initial capitalization of infrastructure assets reported by governmental activities, the City chose to include them regardless of their acquisition date or amount. Historical values were estimated.

The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized.

Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase of capital assets of business-type activities and enterprise funds are not included as part of the capitalized value of the assets constructed.

Depreciation is recorded using the straight line method over the estimated useful lives of the assets, which are 75 years for pipelines, 30 years for buildings, 20 years for improvements, 3 to 10 years for buses, 3 to 10 years for furnishings and equipment, 3 to 10 years for vehicles, 3 to 5 years for intangible assets, 30 to 50 years for streets, 20 years for signalization, 30 years for water rights, 5 years for service animals, and 50 years for bridges. Operating expenses include depreciation on all depreciable capital assets.

Leases are recorded as an asset and an obligation at an amount equal to the present value at the beginning of the lease term of minimum lease payments during the lease term. Non-cancellable lease agreements exceeding a 12- month term are recorded as an intangible right-to-use asset with an amortization calculated based on the term of the lease agreement.

6. Deferred Outflows and Inflows of Resources
The Governmental Accounting Standards Board (GASB) establishes criteria for recognizing deferred outflows and inflows of resources. A deferred outflow of resources is defined as a consumption of net assets by the government that is applicable to a future reporting period. A deferred inflow of resources is defined as an acquisition of net assets by the government that is applicable to a future reporting period. Refer to Note II for a detail listing of the deferred outflows and inflows of resources the City has recognized.

7. Compensated Absences
All earned vacation, holiday, management leave, bilingual leave and compensating time off, as well as a portion of accumulated sick leave payable upon termination or retirement, are accrued in the Employee Benefits Management Internal Service Fund as compensated absences. Estimated sick leave termination payments have been calculated using the GASB Statement 16 vesting method. Under this method, a liability is accrued for a portion of the sick leave balances of all employees who are currently eligible, or are assumed to become eligible in the future, to receive a payment for sick leave upon termination. As of June 30, 2022, the total estimated liability for all compensated absences, including vacation and sick leave, is $11,962,073.

8. Fund Balance
In the fund financial statements, governmental funds report fund balance as nonspendable, restricted, committed, assigned or unassigned based primarily on the extent to which the City is bound to honor constraints on how specific amounts can be spent.
 Nonspendable fund balance – amounts that cannot be spent because they are either (a) not spendable in form or (b) legally or contractually required to be maintained intact.  Restricted fund balance – amounts with constraints placed on their use that are either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments; or (b) imposed by law through constitutional provisions or enabling legislation. 34 #1..
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 Committed fund balance – amounts that can only be used for specific purposes determined by formal action of the City’s highest level of decision-making authority (City Council) and that remain binding unless removed in the same manner. The underlying action that imposed the limitation needs to occur no later than the close of the reporting period.
 Assigned fund balance – amounts that are constrained by the City’s intent to be used for specific purposes. The intent can be established at either the highest level of decision making, which includes City Council or by an official designated such as the City Manager for such purpose.  Unassigned fund balance – the residual classification for the City’s General Fund that includes amounts not contained in other classifications. In other funds, the unassigned classification is used only if expenditures incurred for specific purposes exceed the amounts restricted, committed or assigned to those purposes.

The City establishes and modifies or rescinds fund balance commitments by passage of an ordinance. This is typically done through adoption and amendment of the budget. A fund balance commitment is further indicated in the budget as a commitment of the fund, such as approved construction contracts. Assigned fund balance is established by the City through adoption or amendment of the budget or future year budget plan as intended for a specific purpose.

When both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted resources first, followed by the unrestricted committed, assigned, and unassigned resources as they are needed.

9. Fund Balance Policy
The City believes that sound financial management principles require that sufficient funds be retained by the City to provide a stable financial base at all times. To retain this stable financial base, the City needs to maintain unrestricted fund balance in its City funds sufficient to fund cash flows of the City and to provide financial reserves for unanticipated expenditures and/or revenue shortfalls of an emergency nature. Committed, assigned and unassigned fund balances are considered unrestricted.

The purpose of the City’s fund balance policy is to maintain a prudent level of financial resources to protect against reducing service levels or raising taxes and fees because of temporary revenue shortfalls or unpredicted one-time expenditures.

The City has adopted a policy to achieve and maintain a General Fund reserve at a minimum level of no less than the average of two months of regular General Fund operating expenditures.

E. OTHER SIGNIFICANT ACCOUNTING POLICIES

1. Employee Benefits
The City established the Employee Benefits Management Internal Service Fund to account for all compensated absences and non-insurance benefits. Insurance benefits for current employees are paid from the Insurance Internal Service Fund. The Employee Benefits Management Fund is reimbursed based on actual benefits paid and leave taken, through payroll charges to the City's operating funds. Leave earned but not taken is being funded over a reasonable period of time.

2. Pensions
For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the California Public Employees’ Retirement System (CalPERS) Safety (police and fire) and Miscellaneous (all other) Plans and additions to/deductions from the Plans’ fiduciary net position have been determined on the same basis as they are reported by CalPERS. For this purpose, the benefit payments (including refunds of employee contributions) are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value. GASB 68 requires that the reported results must pertain to the liability and asset information within certain defined timeframes. For this report, the following:
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Valuation Date: June 30, 2020
Measurement Date: June 30, 2021
Measurement Period: July 1, 2020 to June 30, 2021

3. Other Postemployment Benefits (OPEB)
For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the net position of the City’s plan (OPEB Plan) and additions to/deductions from the OPEB Plan’s net position have been determined on the same measurement basis.

For this purpose, benefit payments are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value.

GASB 75 requires that the reported results must pertain to liability information within certain defined timeframes.

For this report, the following timeframes are used:

Valuation Date: June 30, 2020
Measurement Date: June 30, 2021
Measurement Period: June 30, 2020, to June 30, 2021

4. Interfund Transactions
The City transfers resources among funds in the course of normal operations. Interfund services provided and used, such as equipment pool rental, are accounted for as revenues and expenditures or expenses. Transactions to reimburse a fund for expenditures/expenses initially made from it that are applicable to another fund are recorded as expenditures/expenses in the correct fund and as reductions of expenditures/expenses in the original fund. All other interfund transactions are reported as transfers.

5. Change in Accounting Principles
During the fiscal year ended June 30, 2022, the City adopted new accounting guidance by implementing the provisions of GASB Statement No. 87, Leases, which establishes criteria for identifying and reporting noncancelable lease agreements. This provision defines a lease as a contract that conveys control of the right to use another entity’s nonfinancial asset as specified in the contract for a period of time in an exchange or exchange-like transaction. Under this provision a lessee is required to recognize a lease liability and an intangible right-to-use asset and a lessor is required to recognize a lease receivable and a deferred inflow of resources.

F. NEW ACCOUNTING STANDARDS
During the fiscal year ended June 30, 2022, the City implemented the following GASB Standards:

GASB Statement No. 87 – Leases. The requirements of this statement are effective for reporting periods beginning after December 15, 2019. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to reporting periods beginning after June 15, 2021.

GASB Statement No. 92 – Omnibus 2020. The requirements of this statement are effective for reporting periods beginning after June 15, 2020. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to reporting periods beginning after June 15, 2021.

GASB Statement No. 97 – Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans. The requirements of this statement are effective for reporting periods beginning after June 15, 2021.

Released GASB Statements to be implemented in future financial statements are as follows:

GASB Statement No. 91 – Conduit Debt Obligations – The requirement of these statements are effective for reporting periods beginning after December 15, 2020. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to reporting periods beginning after December 15, 2021.

GASB Statement No. 93 – Replacement off Interbank Offered Rates. The requirements of this statements are effective 36 #1..
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for reporting periods beginning after June 15, 2021. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to reporting periods beginning after June 15, 2022.

GASB Statement No. 94 – Public-Private and Public-Public Partnerships and Availability Payment Arrangements. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.

GASB Statement No. 96 – Subscription-Based Information Technology Arrangements. The Requirements of this statement are effective for reporting periods beginning after June 15, 2022.

GASB Statement No. 99 – Omnibus 2022. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.

GASB Statement No. 100 – Accounting Changes and Error Corrections. The requirements of this statement are effective for periods beginning after June 15, 2023.

GASB Statement No. 101 – Compensated Absences. The requirements of this statement are effective for reporting periods beginning after December 15, 2023.

II. DETAILED NOTES
A. CASH AND INVESTMENTS
The City maintains a cash and investment pool that is used by all funds. Each fund’s portion of the City’s cash and investment pool is displayed on the balance sheet and proprietary and fiduciary fund statements of net position as “cash and cash equivalents.” Each fund is allocated interest on average monthly cash balances held by the funds throughout the year. Certain deposits held in trust are displayed on the governmental funds balance sheet and the proprietary funds statement of net position as “restricted assets – cash and cash equivalents.” The City also maintains “cash and cash equivalents with fiscal agent”, which represent monies held by fiscal agents for payment of various City debt and capital projects costs.

The City’s cash and investments are reported as follows:

Investments Authorized by the California Government Code and the City’s Investment Policy The City’s investment policy and the California Government Code allow the City to invest in the following types of instruments, and the table also identifies certain provisions of the California Government Code, or the City’s investment policy where it is more restrictive:

Primary Government:

Cash and cash equivalents $ 409,073,755
Restricted cash and cash equivalents 93,190,155
Cash and cash equivalents held with fiscal agent 16,817,654 Sucessor Agency Private-Purpose Trust Fund
Cash and cash equivalents 2,383,760
Cash and cash equivalents held with fiscal agent 1,977,349 Private Purpose and Investment Trust Funds
Cash and cash equivalents 1,664,566
Cash and cash equivalents held with fiscal agent 2,938,523 Total cash and investments $ 528,045,762
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Investment Type Maximum
Maturity
Maximum Specified
% of Portfolio
Maximum
% per
Issuer
Minimum Quality
Requirements
Local Agency Bonds 5 Years None None None
Treasury Obligations 5 Years None None None
State Obligations 5 Years None None A rating
CA Local Agency Obligations 5 Years None None A rating
Federal Agencies 5 Years None None None
Supranationals 5 Years 30 percent 5 percent AA
Banker’s Acceptances 180 days 40 percent 5 percent Federal Reserve eligible
Commercial Paper 270 days 25 percent 5 percent A1/P1 rating Negotiable Certificates of Deposit 5 Years 30 percent 5 percent A rating Certificates of Deposit 1 Year 20 percent 5 percent FDIC insured or collateralized
Repurchase Agreements 90 days None 5 percent None
Reverse Repurchase Agreements 92 days 20 percent of
combined base value 5 percent None
Medium Term Notes 5 Years 30 percent 5 percent A rating Money Market Mutual Funds N/A 20 percent 10 percent Multiple Mortgage and Asset-backed Securities 5 Years 20 percent 5 percent AA Rating CAMP N/A None None N/A
LAIF N/A N/A None N/A
The City is a voluntary participant in the California Asset Management Program (CAMP). CAMP is an investment pool offered by the California Asset Management Trust (the Trust). The Trust is a joint powers authority and public agency created by the Declaration of Trust and established under the provisions of the California Joint Exercise of Powers Act (California Government Code Sections 6500 et seq., or the “Act”) for the purpose of exercising the common power of its participants to invest certain proceeds of debt issues and surplus funds. The Pool’s investments are limited to investments permitted by subdivisions (a) to (n), inclusive, of Section 53601 of the California Government Code. Security types prohibited include, but are not limited to: Investments in inverse floaters, range notes, or interest only strips that are derived from a pool of mortgages. At June 30, 2022, the fair value approximated the City’s cost. At June 30, 2022, these investments range from a maximum maturity of 5 years to some maturity limits of 270 days or less. The City reports its investments in CAMP at the fair value amounts provided by CAMP.

Investments Authorized by Debt Agreements
The City must maintain required amounts of cash and investments with trustees or fiscal agents under the terms of certain debt issues. These funds are unexpended bond proceeds or are pledged as reserves to be used if the City fails to meet its obligations under these debt issues. The California Government Code requires these funds to be invested in accordance with City ordinance, bond indentures or State statute. 38 #1..
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Custodial Credit Risk – Deposits
The Custodial Credit Risk for Deposits is the risk that, in the event of the failure of a depository financial institution, the City will not be able to recover deposits, or will not be able to recover collateral securities that are in the possession of an outside party. The City does not, currently, have a Custodial Credit Risk – Deposits Policy. Under California Government Code Section 53651, depending on specific types of eligible securities, a bank must deposit eligible securities posted as collateral with its Agent having a fair value of 110% to 150% of the City’s cash on deposit. All of the City’s deposits are either insured by the Federal Depository Insurance Corporation (FDIC), collateralized with pledged securities held by Wells Fargo Bank, or by Letters of Credit from the Federal Home Loan Bank of San Francisco.

The City of Modesto has 6 deposit accounts at Bank of the West that are monitored for deposit collateral purposes. As per the CA Government Code, the bank must provide collateral for the collected deposit balances at 110% for securities and 105% for letters of credit coverage. As of June 30, 2022, the City had collected deposit balances of $10,087,403. On this amount, the FDIC insurance coverage was $250,000.

For further information, as of June 30, 2022, Bank of the West has over $6.14 billion in public fund deposits and over 3,200 accounts that are collateralized in accordance with the state’s government codes and other applicable laws. Of the total $6.14 billion public fund deposits, the minimum collateral required is $5.38 billion and the market value of pledged securities (aka related collateral) is $8.58 billion.

Custodial Credit Risk – Investments
The Custodial Credit Risk for Investments is the risk that, in the event of the failure of the counterparty (e.g. broker-dealer) to a transaction, the City will not be able to recover the value of investment or collateral securities that are in the possession of an outside party. The City’s investment policy limits its exposure to custodial credit risk by requiring that all security transactions entered into by the City, including collateral for repurchase agreements, be conducted on a delivery-versuspayment basis. Securities are to be held by a third-party custodian.

The City’s investments consist of pooled investments, dedicated investments, and other funds held by trustees. The dedicated investment funds represent restricted funds and relate to bond proceeds of the Water and Sewer Enterprise Funds, assessment districts (reported under Agency Funds) and the Successor Agency. The other funds held by trustees are made either in accordance with bond covenants and are pledged for payment of principal, interest, and specified capital improvements or in accordance with trust agreements. All investments held by a custodian are in the City’s name excluding the Successor Agency.

Interest Rate Risk
Interest Rate Risk is the risk that interest rates will rise and reduce the fair value of an investment. Long-term fixed-income securities have the greatest amount of interest rate risk, due to their duration, or sensitivity to interest rate changes, being greater.

As of June 30, 2022, the City owned eleven callable bonds. Of the eleven, nine were Corporate bonds, and the other two were Municipal and US Government bonds. Information on those bonds has been provided as follows:

Amount Maturity Date Call Date Call Terms
$3,119,505 1/28/2026 12/28/2025 Callable on and any time after 12/28/2025 $2,032,377 11/13/2025 10/13/2025 Callable on and any time after 10/13/2025 $2,265,434 9/21/2023 9/21/2022 Callable on and any time after 9/21/2022 $2,208,728 2/14/2025 1/14/2025 Callable on and any time after 1/14/2025 $1,346,524 9/16/2024 9/16/2023 Callable annually after 9/16/2023 $2,853,479 2/5/2024 1/5/2024 Callable on and any time after 1/5/2024 $808,343 6/1/2025 6/1/2024 Callable one-time on 6/1/2024 $3,430,738 3/15/2024 2/15/2024 Callable on and any time after 2/15/2024 39 #1..
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Disclosures Related to Credit Risk
Generally, Credit Risk is the risk that an issuer 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. The City may from time to time be invested in a security whose rating is downgraded subsequent to the date of purchase. In the event a rating drops below the minimum allowed rating category for that given investment type, the investment advisor shall notify the Finance Director and recommend a plan of action. The City will limit investments in any one non-government issuers, except investment pools to no more than 5% regardless of security type.

The following table summarizes the City’s various investments based on maturity dates and credit ratings:

Amount Maturity Date Call Date Call Terms
$2,883,210 8/8/2026 5/8/2026 Callable on and any time after 5/8/2026 $3,980,840 7/8/2024 4/15/2023 Callable on and any time after 4/15/2023 $679,674 5/15/2025 4/15/2025 Callable on and any time after 4/15/2025 Standard &
Poor's
Moody's
Investors
Service Total
12 Months or
Less 13 to 24 Months 25 to 60 Months
Investments Held by City
Foreign Government Bonds AAA Aaa $ 5,595,113 $ 1,725,256 - $ $ 3,869,857 US Treasury Bonds and Notes AA+ Aaa 201,562,992 13,516,947 52,744,230 135,301,815 US Agencies AA+ Aaa 73,661,469 14,669,714 22,875,296 36,116,459 Short-Term Fixed Deposits AA+ Aaa 1,244,573 1,244,573 - - Commercial Paper A-1 P-1 39,832,700 39,832,700 - -
Corporate Bonds and Notes See Below See Below 46,945,101 8,088,327 13,357,233 25,499,541 Corporate Paydown Securities See Below See Below 7,027,175 113,615 2,091,777 4,821,783 Municipal Bonds See Below See Below 7,214,069 2,291,312 - 4,922,757 CAMP AAAm Not Rated 75,106,115 75,106,115 - -
Total Investments Held by City $ 458,189,307 $ 152,571,991 $ 95,085,104 $ 210,532,212 Investments Held by Fiscal Agent
Money Market Funds AAAm Aaa-mf $ 8,391,946 $ 8,391,946 $ - $ - CAMP AAAm Not Rated 9,473,872 9,473,872 - -
PARS – OPEB Not Rated Not Rated 1,387,318 1,387,318 - - PARS – Pension Not Rated Not Rated 2,480,390 2,480,390 - - Total Investments Held by Fiscal Agent $ 21,733,526 $ 21,733,526 $ - $ - City of Modesto Banking Accts &
Cash on Hand A/A-1 A1/P1 29,838,676
Timing Differences for Deposit &
Electronic Vendor Payments (1,011,055)
Fund Overdraft 19,295,308
Total Cash and Investments $ 528,045,762
Credit Rating Remaining Maturity (in Months)
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The following is a table indicating the credit ratings for the City’s investment in Corporate Bonds and Notes:

The following is a table indicating the credit ratings for the City’s investment in Corporate Paydown Securities:

The following is a table indicating the credit ratings for the City's investment in Municipal Bonds:

Concentration of Credit Risk
The City’s investment policy contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. Investments in any one issuer, other than U.S. Treasury securities, mutual funds, and external investment pools that represent 5% or more of total entity-wide investments are as follows at June 30, 2022:

Issuer Investment Type
Reported
Amount
Percent of
Portfolio
Fannie Mae (FNMA) Federal agency securities $44,386,707 8.41%

Fair Value Measurement and Application
The Pool categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. These principles recognize a three-tiered fair value hierarchy, of which levels 1 & 2 apply to the City as follows:
 Level 1: Valuations are based on quoted prices in active markets for identical assets or liabilities. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgement. Examples would be securities with prices derived from the major exchanges.

Amount Standard &
Poors
Moody's
Investors Service
$ 2,883,210 AAA Aaa
4,906,958 AA A1
3,980,840 AA Aa2
2,208,728 AA- A1
8,088,327 A-1 P-1
5,659,009 A+ A1
8,316,593 A+ A2
3,119,505 A A1
338,585 A A2
7,443,346 A- A2
$ 46,945,101
Amount Standard &
Poors
Moody's
Investors Service
$ 2,664,507 AAA Aaa
2,682,047 AAA Not Rated
1,680,621 Not Rated Aaa
$ 7,027,175
Amount Standard &
Poors
Moody's
Investors Service
$ 587,084 AAA Aaa
93,475 AAA Aa1
852,767 AA+ Aaa
679,674 AA Aa2
1,684,098 AA Aa3
2,853,866 AA- Aa2
463,105 AA- A1
$ 7,214,069
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 Level 2: Valuations are based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuations for which all significant assumptions are observable or can be corroborated by observable market data.

Examples would be securities with prices derived from market corroborated sources such as indices and yield curves; and matrix pricing, such as for most debt securities.

US Bank is the custodian of the City’s investments. Fair value is measured by using all assumptions utilized by marketplace participants, including risk assumptions considered by those participants. The measurement of fair value assumes an orderly, hypothetical transaction in the principal market for the asset or liability. However, if the volume and level of market activity for an asset or liability has significantly decreased, and transactions in a particular market are not orderly, other factors are considered in estimating fair value. Moreover, if no principal market exists, and there are multiple markets, then the most advantageous market is used.

The Pool has the following recurring fair value measurements as of June 30, 2022:

Fair Value Measurements Using

Investments Held by City
Quoted Prices in
Active Markets for
Identical Assets
Significant Other
Observable Inputs
(Level 1) (Level 2)
Investments by Fair Value Level
US Treasury Bonds and Notes $ 201,562,992 $ 201,562,992 $ - Short-Term Fixed Deposits 1,244,573 1,244,573 -
US Agencies 73,661,469 - 73,661,469
Foreign Government Bonds 5,595,113 - 5,595,113
Commercial Paper 39,832,700 - 39,832,700
Corporate Bonds and Notes 46,945,101 - 46,945,101
Corporate Paydown Securities 7,027,175 - 7,027,175
Municipal Bonds 7,214,069 - 7,214,069
Total Investments by Fair Value Level 383,083,192 $ 202,807,565 $ 180,275,627

Investments Not Subject to Fair Value Hierarchy
CAMP 75,106,115
Total Investments Held by City $ 458,189,307
Investments Held by Fiscal Agents
Investments Not Subject to Fair Value Hierarchy
CAMP $ 9,473,872
Money Market Funds 8,391,946
PARS – OPEB 1,387,318
PARS – Pension 2,480,390
Total Investments Held by Fiscal Agents 21,733,526
Grand Total of Investments $ 479,922,833

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B. CAPITAL ASSETS
Capital asset activity for the fiscal year ended June 30, 2022 was as follows:

Depreciation expense was charged to functions/programs as follows:

Governmental activities:

General government $ 512,226
Community development 1,246,804
Highways and streets 12,219,085
Public works 118,085
Parks and recreation 482,060
Public safety 4,533,255
Beginning Balance
Restated
Transfers/Adjus
t-ments Additions Deletions Ending Balance
Governmental activities:

Capital assets, not being depreciated:

Land $ 29,149,707 $ 4,060,454 $ 564,450 $ - 33,774,611 $ Construction in progress 124,500,840 52,772,112 - (6,576,655) 170,696,297 Total capital assets, not being depreciated: 153,650,547 4,060,454 53,336,562 (6,576,655) 204,470,908 Capital assets being depreciated:

Buildings 33,010,345 23,503,116 489,905 57,003,366 -
Improvements other than buildings 127,265,389 2,923,067 2,835,270 (45,097) 132,978,629 Furnishings & equipment 13,952,568 1,054,091 896,231 (60,250) 15,842,640 Buses and fareboxes 278,852 - - 278,852
Service animals 38,512 38,512 22,653 (7,439) 53,726
Intangible assets 7,974,303 7,974,303 - 7,974,303 -
Equipment pool 44,448,389 164,472 5,575,641 (1,322,932) 48,865,570 Infrastructure
Streets 515,740,549 515,740,549 2,666,168 518,406,717 - Signals 25,329,952 25,329,952 - 25,329,952 -
Bridges 37,078,565 37,078,565 - 37,078,565 -
Pipeline 418,147 418,147 - - 418,147
Right-to-use Leases
Buildings 224,950 224,950 - - 224,950
Equipment 17,287 17,287 - - 17,287
Land 662,695 662,695 - - 662,695
Total capital assets, being depreciated: 806,440,503 615,129,706 12,485,868 (1,435,718) 845,135,399 Less accumulated depreciation for:

Buildings (23,460,273) (9,998,071) (1,638,933) (35,097,277) - Improvements (73,561,622) (1,197,077) (5,182,812) 49,858 (79,891,653) Furnishings & equipment (11,344,771) (817,879) (710,885) (12,872,856) 679 Buses and fareboxes (253,749) - - - (253,749)
Service animals (31,230) - (5,195) 7,455 (28,970)
Intangible assets (5,977,938) - (409,657) (6,387,595) - Equipment pool (30,483,263) (158,667) (3,314,900) 1,215,716 (32,741,114) Infrastructure
Streets (347,820,982) (10,368,313) - (358,189,295) -
Signals (18,866,314) - (488,713) (19,355,027) -
Bridges (10,431,874) - (741,571) (11,173,445) -
Pipelines (6,733) - (5,570) - (12,303)
Right-to-use Leases
Buildings - - (147,633) - (147,633)
Equipment - - (8,643) - (8,643)
Land - - (82,635) - (82,635)
Total accumulated depreciation (522,238,749) (12,171,694) (23,105,460) 1,273,708 (556,242,195) Total capital assets being depreciated, net 284,201,754 602,958,012 (10,619,592) (162,010) 288,893,204 Governmental activities capital assets, net 437,852,301 $ $ 607,018,466 $ 42,716,970 $ (6,738,665) $ 493,364,112 43 #1..
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Capital assets held by the government’s internal
3,993,945
service funds are charged to the various functions
based on their usage of the assets
Total depreciation expense – Governmental activities $ 23,105,460 Business-type activities:

Water $20,440,834
Sewer 13,943,021
Parking 385,570
Storm drain 435,928
Compost 70,107
Airport 738,556
Golf 48,634
Community center 61,788
Total depreciation expense – Business-type activities $36,124,438 Beginning Balance
Restated
Transfers/Adjustments Additions Deletions Ending Balance Business-type activities:

Capital assets not being depreciated:

Land $ 34,512,819 $ (4,060,454) $ $ - $ 30,452,365 -
Construction in progress 219,953,672 14,432,556 (175,894,877) 58,491,351 Total capital assets, not being depreciated: 254,466,491 (4,060,454) 14,432,556 (175,894,877) 88,943,716 Capital assets being depreciated:

Capitalized interest 19,496,181 - - 19,496,181
Buildings 101,986,294 (23,503,116) 17,601,528 (300,370) 95,784,336 Improvements other than buildings 459,300,112 (2,923,068) 29,547,193 (1,730,467) 484,193,770 Furnishings and equipment 16,004,077 (1,218,563) 247,205 (1,999,785) 13,032,934 Intangible assets 403,384 - - 403,384
Water rights 358,226,691 - - 358,226,691
Buses and fareboxes 36,638,465 - (36,638,465) -
Pipelines 206,457,321 126,648,760 - 333,106,081
Right-to-use Leases -
Land - 631,838 - - 631,838
Total capital assets, being depreciated: 1,198,512,525 (27,012,909) 174,044,686 (40,669,087) 1,304,875,215 Less accumulated depreciation for:

Capitalized interest (14,516,729) (504,786) - (15,021,515) Buildings (73,477,126) 9,993,716 (1,577,745) 131,362 (64,929,793) Improvements other than buildings (226,750,297) 1,220,366 (16,832,629) 1,260,809 (241,101,751) Furnishings and equipment (11,249,794) 933,644 (705,901) 1,073,858 (9,948,193) Intangible assets (397,262) (6,119) - (403,381)
Water rights (131,349,789) (11,940,890) (143,290,679) - Buses and fareboxes (19,893,817) - 19,893,817 -
Pipelines (52,587,656) (4,375,843) - (56,963,499)
Right-to-use Leases -
Land - - (180,525) - (180,525)
Total accumulated depreciation (530,222,470) 12,147,726 (36,124,438) 22,359,846 (531,839,336) Total capital assets being depreciated, net 668,290,055 (14,865,183) 137,920,248 (18,309,241) 773,035,879 Business-type activities capital assets, net $ 922,756,546 $ (18,925,637) $ 152,352,804 $ (194,204,118) $ 861,979,595 44 #1..
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C. LEASES RECEIVABLE
The City is a lessor for leases of buildings, hangers and office space, land use and parking spaces. The City uses the interest rate contained within the agreements as the discount rate except in cases when the interest rate charged is not provided; in those situations, the City uses the incremental borrowing rate as provided by the California State Controller’s Office.

Payment increases include flat percentage increases and the use of an index (such as the consumer price index). For those leases that have payment increases utilizing an index; they were initially calculated using the index at the measurement period.

The length of the lease period includes any noncancellable period of the lease as well as any extension options that are reasonably certain to be taken.

The City's lease receivable of $17,234,681 was composed of the following:

Governmental Activities
Buildings, hangers and office space leases - annual payments totaling $130,922 plus interest at rates ranging from 0.2% to 1.5% and annual increases in base payments per CPI or flat increase. Final payment dates range from 2024 through 2027.

Land use leases (including land use for cell towers) - annual payments totaling $268,792 plus interest at rates ranging from 0.2% to 1.5% and annual increases in base payments per CPI or flat increase.

Final payment dates range from 2023 through 2064.
$ 1,388,085
5,782,052
Total Principal Balances - Governmental Activities $ 7,170,137 Payments for the lease receivables are expected to be received in the following subsequent years:

Governmental Activities
Year Ending
June 30, Principal Interest
2023 $ 399,713 $ 104,532
2024 390,829 98,542
2025 366,268 92,861
2026 365,050 87,356
2027 348,774 82,037
2028 - 2032 1,509,007 339,500
2033 - 2037 1,230,510 234,837
2038 - 2042 928,091 154,511
2043 - 2047 762,256 93,031
2048 - 2052 644,377 41,532
2053 - 2057 134,422 9,605
2058 - 2062 59,368 4,711
2063 - 2067 31,472 559
Total $ 7,170,137 $ 1,343,614
Business-Type Activities
Buildings, hangers and office space leases - annual payments totaling $71,287 plus interest at rates ranging from 0.2% to 1.5% and annual increases in base payments per CPI or flat increase. Final payment dates range from 2025 through 2053. $ 2,484,838 45 #1..
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Land use leases (including land use for cell towers) - annual payments totaling $146,857 plus interest at rates ranging from 0.2% to 1.5% and annual increases in base payments per CPI or flat increase. Final payment dates range from 2023 through 2064.

Parking spaces lease - annual payments totaling $105,247 plus interest at a rate of 1.5% and annual increases in base payments per CPI or flat increase. Final payment date is 2053 3,388,068
4,191,638
Total Principal Balances – Business-Type Activities $ 10,064,544 Payments for the lease receivables are expected to be received in the following subsequent years:

Business-Type Activities
Year Ending
June 30, Principal Interest
2023 $ 323,393 $ 148,693
2024 331,144 143,809
2025 325,757 138,850
2026 312,889 132,290
2027 316,183 129,389
2028 - 2032 1,492,810 578,454
2033 - 2037 1,190,338 478,087
2038 - 2042 1,310,345 385,653
2043 - 2047 1,382,677 283,344
2048 - 2052 1,494,010 176,931
2053 - 2057 767,433 81,896
2058 - 2062 534,316 42,399
2063 - 2067 283,249 5,033
Total $10,064,544 $2,724,828
D. LONG-TERM DEBT
Loans Payable
Governmental Activities:

No-interest loan payable to the Stanislaus County Economic Development Bank loan program, to pay costs incurred by the City for the Kiernan Business Park East Project; loan intended to be repaid when the financing mechanism is established. As of June 30, 2022, no payments have been made to the Stanislaus County Economic Development Bank. According to the agreement, the Project will be completed as of the date the City first issues building permits within the Kiernan Business Park East area. To date, no building permits have been issued. Kiernan Business Park East project revenues, mainly CFD special taxes, have been pledged as collateral.

$ 500,000
Business-Type Activities:

Water Enterprise Fund:

Loan payable to State of California Department of Public Health, also known as ARRA Water Grant.

This Agreement constitutes funding in the form of a loan with forgiveness of principal made by the State under the provisions of California Safe Drinking Water State Revolving Fund Law of 1997, and the American Recovery and Reinvestment Act of 2009 (ARRA) Public Law 11 1-5. The purpose of the funding is to assist in financing construction of a project, which will enable the City to meet safe drinking water standards or to address other health concerns, herein referred to as the “Project”.

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The total amount for the project was $1,136,656, of which 50% was to be repaid as a loan. This original loan amount of $568,328 has a payment term of 20 years at 2.5017% interest rate. Water Enterprise fund revenues have been pledged as collateral.

The following are significant terms that pertain to the ARRA Water Grant. Acceleration Clause: In event of default, State may declare the Supplier's obligations immediately due and payable. Events of Default: default allows State to alter principal forgiveness, accelerate, terminate further disbursements, file lawsuit. Termination Events: Any funds already disbursed to Supplier under the terms of this Agreement shall be an obligation immediately due and payable to State. $ 319,308 Sewer Enterprise Fund:

Loan payable to California State Water Resources Control Board, State Revolving Fund. The Project, commonly known as North Valley Regional Recycled Water Program generally consists of constructing improvements to the City’s existing pump station. The City will then distribute the recycled water to the Del Puerto Water District for agricultural use increasing recycled water supplies by 5.4 billion gallons per year within the first 5 years of operation and 9.9 billion gallons per year at build out. Completion of construction date was established as June 30, 2018. Project completion date was established as December 31, 2018.

The City agrees to repay all project funds at an interest rate of zero percent (0%) per annum and an administrative service charge of one percent (1%) per annum. The total final loan amount was $29,747,008, including $68,857 of approved Construction Period Interest. The loan repayment term is 30 years (final payment due on June 30, 2048) and after an initial payment of $1,104,284, in the fiscal year ending June 30, 2019, the annual principal and interest payment is $1,152,162 beginning in the fiscal year ending June 30, 2020. Sewer Enterprise fund net revenues have been pledged as collateral.

The following are significant terms that pertain to the California State Water Resources Control Board, State Revolving Fund loan payable related to the North Valley Regional Recycled Water Program. Acceleration and Termination Events Clauses: the City immediately repays to the State Water Board an amount equal to Project Funds disbursed under the Installment Sale Agreement and Grant, accrued interest, penalty assessments, and Additional Payments. In the event of termination, interest shall accrue on all amounts due at the highest legal rate of interest from the date that notice of termination is mailed to the City to the date all monies due have been received by the State Water Board. Events of Default: default allows State Water Resources Control Board to terminate obligation, which results in acceleration. 26,313,083 Total Principal Balances – Business-Type Activities $ 26,632,391 Annual debt service requirements to maturity for loans payable are as follows:

Governmental Activities Business-Type Activities
Year Ending
June 30, Principal Interest Principal Interest
2023 $ - $ - $ 917,508 $ 270,941
2024 - - 927,116 261,334
2025 500,000 - 936,830 251,620
2026 - - 946,653 241,798
2027 - - 956,584 231,865
2028-2032 - - 4,935,843 1,006,412
2033-2037 - - 5,009,406 751,401
2038-2042 - - 5,264,936 495,871
2043-2047 - - 5,533,501 227,306
2048-2049 - - 1,204,014 12,040
Total $ 500,000 $ - $ 26,632,391 $ 3,750,588
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Certificates of Participation:

Business-Type Activities:

Golf Enterprise Fund:
1993 Refunding Certificates of Participation issued to refund earlier certificates for the Creekside Golf Course capital project; issued with an aggregate principal of $8,130,000, with final maturity in 2023. Annual principal payments are due November 1st and beginning in 2010 range from $250,000 to $480,000, ending in 2023. The certificates are repayable from any source of available funds of the City. However, the City has elected to repay the certificates with revenues of the Golf Enterprise Fund.

The following are significant Events of Default terms that pertain to the 1993 Refunding COPs. Trust Agreement: Upon the occurrence and continuance of an Event of Default or other occasion giving rise to a right in the Trustee to represent the Bondholders, the Trustee in its discretion may, upon written request of >25% of bondholders, initiate lawsuit; Lease Agreement: In an Event of Default under the Lease Agreement, the Authority at its option may terminate the Lease Agreement and release all or any portion of the Project, and the City agrees to pay to the Authority all costs, loss or damages howsoever arising or occurring payable at the same time and in the same manner as provided in the Lease Agreement in the case of payment of Lease payments.

$ 940,000
Water Enterprise Fund:
2008 Water Refunding Revenue Certificates of Participation issued to refund the 2006 issue, to provide funding for construction of new downstream water facilities and various water distribution system improvements in connection with Modesto Irrigation District’s expansion of the regional water treatment plant; variable rate securities maturing October 1, 2036, with interest initially calculated weekly, fluctuating according to market conditions. The Certificates may be converted to a daily, term, flexible, or fixed rate.

While the 2008 COPs are in the Weekly Mode, they are subject to optional tender and mandatory tender for purchase. Funds for the payment of the purchase price of 2008 COPs that are tendered for purchase and that are not remarketed by the Remarketing Agent will be available (subject to certain conditions) under a Standby Certificate Purchase Agreement, dated May 1, 2008 (the “Liquidity Facility”). The Liquidity Facility does not support, secure or guarantee the payments of the principal or interest with respect to the 2008 COPs. Subject to the terms and conditions of the Liquidity Facility, the Liquidity Facility Provider is to provide funds for the payment of the purchase price on each purchase of 2008 COPS up to $47,625,000 in principal amount (the “Available Principal Commitment”) and $548,014 an amount equal to 35 days’ interest on the Available Principal Commitment at an assumed rate of 12% and accrued interest on 2008 COPs subject to the Weekly Rate tendered or deemed tendered for purchase in the event that remarketing proceeds are not sufficient to pay the purchase price of such 2008 COPs.

The Liquidity Facility will not provide for the payment of principal and interest on any 2008 COPs other than with respect to the purchase price of the 2008 COPs tendered or deemed tendered and not remarketed. Barring an event of default, any such draws on the Letter of Credit will be repaid under the terms of the Reimbursement Agreement. Under the terms of the Reimbursement Agreement, the City will repay the amount drawn in ten equal semi-annual installments of principal, plus monthly interest at the Bank Rate, over a five-year period. However, the entire balance of the amount drawn shall become due immediately if the 2008 COPs are cancelled or prepaid, are remarketed, or converted to bear interest at a rate other than a daily rate or weekly rate; an alternate credit facility is secured; or an event of default occurs. The Credit Facility and Reimbursement Agreement initially expired May 29, 2011, was subsequently extended to July 14, 2017 at a commitment fee of 0.875%, then again to June 15, 2020 at a commitment fee of 0.7%, then again to June 15, 2023 at a commitment fee of 0.575%.
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The City entered into a 30-year interest rate swap agreement as discussed below. The combination of the variable rate 2008 COPs and the floating rate swap creates a synthetic fixed-rate debt for the City. The average synthetic fixed-rate was 3.295% for the fiscal year ending June 30, 2022.

The following are significant terms that pertain to the 2008 COPs. Acceleration Clauses: in the event of late payment, Authority shall accelerate bond payments; in the event of other default, Authority may choose to accelerate bond payments. Events of Default: in the event of nonpayment, insolvency, or loss of bond insurance, the obligation of the Letter of Credit provider shall terminate; in the event of nonpayment of Letter of Credit fees or downgrade of Bonds to below investment grade, the Letter of Credit provider may terminate the Letter of Credit. Termination Events: The termination of the Letter of Credit triggers mandatory tender; termination of swap triggers on-time termination payment.

42,840,000

Total Principal Balances – Business-Type Activities 43,780,000 Less:

Unamortized Bond Discount – 2008 Water Refunding Certificates of Participation

(76,963)
Total Business-Type Activities – Certificates of Participation $ 43,703,037

The City has pledged all Gross Revenues of the Water Utility System to repay the 2008 Certificates of Participation. The City has pledged future Golf Enterprise Fund revenues (net proceeds of the Certificates held in Escrow Fund and certain other moneys held under the Trust Agreement relating to the Golf Course Certificates) to pay the 1993 Certificates of Participation for the Golf Course Refinancing project. The Water and Golf Funds combined total principal and estimated total interest remaining to be paid on the certificates is $45,326,712. The Water Fund’s principal, interest and other debt service cost paid on certificates for the current year, along with payments for the ARRA loan payable and payments to Modesto Irrigation District under the Treatment and Delivery Agreement, totaled $12,576,351, and net operating revenues of the Fund were $34,886,874, which represented coverage of 277%. The Golf Fund’s principal and interest paid on certificates totaled $491,506, and net operating revenues of the Fund were $430,919, which represented coverage of

87.67%.

Annual debt service requirements to maturity for Certificates of Participation for 2008 Water and 1993 Golf are as follows:

Business-Type Activities
Year Ending
June 30, Principal Interest
2023 $ 910,000 $ 217,758
2024 2,780,000 183,274
2025 2,410,000 160,807
2026 2,515,000 150,355
2027 2,595,000 139,541
2028-2032 14,700,000 519,922
2033-2037 17,870,000 175,055
Total $ 43,780,000 $ 1,546,712
Lease Revenue Bonds:

Governmental Activities:

Regularly scheduled payments of principal and interest are supported by an irrevocable, direct pay Letter of Credit (the “Credit Facility”) issued by Bank of the West on June 13, 2019, which replaced a Letter of Credit previously issued by Bank of America, N.A. The Trustee can draw funds under the Credit Facility to pay the purchase price of tendered bonds that are not remarketed. Barring an event of default, any such draws on the Letter of Credit will be paid under

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the terms of the Reimbursement Agreement. Under the terms of the Reimbursement Agreement, the City will repay the amount drawn in equal quarterly installments of principal plus monthly interest, at the Bank Rate, over a three-year amortization period. However, the entire balance of the amount drawn shall become due immediately if the tendered bonds are remarketed or defeased, or an alternate credit facility is secured, or an event of default occurs. The Credit Facility and Reimbursement Agreement are scheduled to expire June 13, 2023 and contain a commitment fee of 0.375%.

The combination of the variable rate 2008 bonds and the floating rate swap creates a synthetic fixed-rate debt for the City. The average synthetic fixed-rate was 3.47% for the fiscal year ending June 30, 2022.

The following are significant terms that pertain to the 2008 Lease Revenue Bonds. Acceleration Clauses: in the event of late payment, Trustee may accelerate bond payments; in the event of an Event of Default occurring under the Lease Agreement, the Trustee may take whatever action the Authority would be entitled to take, and shall take whatever action the Authority would be required to take, pursuant to the Lease Agreement in order to remedy the default. Events of Default: in Event of Default, Letter of Credit provider may declare all unpaid amounts drawn under the Letter of Credit and the corresponding Bank Bonds, together with all interest accrued and unpaid thereon, and all other amounts payable to the Letter of Credit provider under the Reimbursement Agreement to be immediately due and payable, without presentment, demand, protest or nay notice of any kind. Termination Events: the termination of Letter of Credit triggers mandatory tender; termination of swap triggers on-time termination payment; in the event that the City files a bankruptcy petition or the City makes a general assignment for the benefit of creditors, all amounts drawn under the Letter of Credit and the corresponding Bank Bonds, together with all interest accrued thereon and all other amounts owed to the Bank under the Reimbursement Agreement shall be immediately due and payable, without notice to the City or the Authority and without presentment, demand, protest or further notice of any kind.

$ 44,355,000
Annual debt service requirements to maturity for Lease Revenue Bonds are as follows:

Governmental Activities
Year Ending
June 30, Principal Interest
2023 $ 2,585,000 $ 269,003
2024 2,785,000 249,258
2025 2,990,000 229,968
2026 3,240,000 209,823
2027 3,470,000 188,208
2028-2032 20,010,000 576,131
2033-2034 9,275,000 39,819
Total $ 44,355,000 $ 1,762,210
Revenue Bonds
Business-Type Activities:

Sewer Enterprise Fund:

Wastewater Revenue Refunding Bonds, Series 2020 A&B; interest payable on November 1 and May 1; principal is payable in annual installments on each November 1. Principal repayments for the 2020A federally taxable bonds commence November 1, 2021 and pause November 1, 2026, with interest rates from 0.38% to 1.2%. Principal repayments for the 2020B federally tax-exempt bonds commence November 1, 2027 and end November 1, 2030, with interest rates of 5%. Principal repayments for the 2020A federally taxable bonds recommence November 1, 2031 and end 50 #1..
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November 1, 2036 with interest rates from 2.079% to 2.479%. Payment of principal and interest on the Series 2020 A&B Bonds is secured by a pledge of Net Revenues of the Sewer Enterprise Fund.

The Series 2020 A&B Bonds constitute “Parity Debt” under the Indenture.

On October 27, 2020, the City issued the Series 2020 A&B Bonds as a Parity Debt to fully payoff the loan payable to California State Water Resources Control Board, State Revolving Fund. The proceeds were used to repay the loan and cost of issuance in connection with the financing. The loan payable has been fully paid off, the City will realize annual savings of around $510,000 in cash flow with an overall economic gain of 6.61% or $7,056,050 in present value savings.

The original loan was taken out in connection with the Tertiary Treatment Phase 1B Project, generally consisting of constructing a 12.6 million gallon per day tertiary treatment plant. Completion of construction date was established as June 1, 2016, and project completion date was established as December 1, 2016.

The following are significant terms that pertain to the Wastewater Revenue Refunding Bonds, Series 2020 A&B. Acceleration Clause: upon violation by the City of any material provision of the Project Finance Agreement, the State Water Board may terminate agreement by written notice during construction of the Project, or thereafter at any time prior to complete repayment by the City, upon which the City agrees, upon demand, to immediately repay to the State Water Board an amount equal to Installment Payments due under the Project Finance Agreement, including accrued interest, and all penalty assessments due. In the event of termination, interest shall accrue on all amounts due at the highest legal rate of interest from the date that notice of termination is mailed to the Recipient to the date of full repayment by the Recipient. Events of Default: upon violation by the City of any material provision, State Water Board may terminate agreement which triggers acceleration. Termination Events: upon termination of the agreement by the State Water Board, the City agrees to immediately repay to the State Water including accrued interest, and all penalty assessments due. In the event of termination, interest shall accrue on all amounts due at the highest legal rate of interest from the date that notice of termination is mailed to the Recipient to the date of full repayment by the City.

Wastewater Revenue Refunding Bonds, Series 2018A; interest payable on November 1 and May 1; principal is payable in annual installments on each November 1, commencing November 1, 2025 and ending November 1, 2036, with interest rates from 4% to 5%. Payment of principal and interest on the Series 2018A Bond is secured by a pledge of Net Revenues of the Sewer Enterprise Fund.

The Series 2018A Bond constitutes “Parity Debt” under the Indenture.

On April 19, 2018, the City issued the Series 2018A Bond as a Parity Debt to fully refund the 2006A Wastewater Revenue Bonds. The proceeds were used to refund the 2006A Wastewater Revenue Bonds and pay cost of issuance in connection with the financing. The Series 2006A has been fully redeemed, and the City will realize significant savings from the refunding of the 2006A bonds.

The following are significant terms that pertain to the Wastewater Revenue Refunding Bonds, Series 2018A. Acceleration Clause: in each and every such case during the continuance of an Event of Default (and subject to any rights granted to any insurer of the Bonds with respect to the enforcement of remedies upon an Event of Default pursuant to a Supplemental Indenture), the Owners of not less than a majority in aggregate amount of Bond Obligation of the Bonds at the time Outstanding shall be entitled, upon notice in writing to the City, to declare the principal of all of the bonds then Outstanding, and the interest accrued thereon, to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, anything in the Indenture or in the Bonds contained to the contrary notwithstanding. Events of Default: upon the occurrence and continuance of an Event of Default or other occasion giving rise to a right in the Trustee to represent the Bondholders, the Trustee in its discretion may, and upon written request of the Owners of not less than 25% in aggregate amount of Bond Obligation of the Bonds then Outstanding, initiate a lawsuit.

Wastewater Revenue Refunding Bond Series 2015 - Direct Placement; interest payable on November 1 and May 1, commencing May 1, 2016. Principal is payable in annual installments on each November 1, commencing November 1, 2016 and ending November 1, 2024. The Series 2015 $ 88,920,000
11,340,000
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Annual debt service requirements to maturity for the Wastewater Revenue Refunding Bond Series 2015 - Direct Placement are as follows:

Bond shall bear interest at a rate equal to 2.42% per annum; The Series 2015 Bond constitutes “Parity Debt” under the Indenture; Payment of principal and interest on the Series 2015 Bond is secured by a pledge of Net Revenues of the Sewer Enterprise Fund (i.e., 1) all fees and charges received by the City for the services of the Enterprise; 2) all other income and revenue howsoever derived by the City from the ownership; 3) all sums deposited, or required under the Indenture to be deposited, in the Sewer Enterprise Fund; less the amount of Operating Expenses becoming payable during such period).

On October 30, 2015, the City issued the Series 2015 Bond, as a Parity Debt to fully refund the 2005A and partially refund the 2006A Wastewater Revenue Bonds. The proceeds were used to: 1) Refund the Wastewater Revenue Refunding Bonds, Series 2005A, which refinanced the acquisition and construction of improvements to the City’s wastewater enterprise, 2) refund a portion of the Wastewater Revenue Bonds, Series 2006A, and 3) pay cost of issuance in connection with the financing. The Series 2005A Bonds have been fully redeemed and the 2023 and 2024 maturities of Series 2006A Bonds were redeemed. The City will realize significant savings from the refunding of the 2005A and 2006A Bonds.

The following are significant terms that pertain to the Wastewater Revenue Refunding Bond Series 2015 - Direct Placement. Acceleration Clauses: in each and every such case during the continuance of an Event of Default (and subject to any rights granted to any insurer of the Bonds with respect to the enforcement of remedies upon an Event of Default pursuant to a Supplemental Indenture), the Owners of not less than a majority in the aggregate amount of Bond Obligation of the Bonds at the time Outstanding shall be entitled, upon notice in writing to the City, to declare the principal of all of the Bonds then Outstanding, and the interest accrued thereon, to be due and payable immediately, and upon any such declaration the same shall become and shall be immediately due and payable, anything in the Indenture or in the Bonds contained to the contrary notwithstanding. Events of Default: upon the occurrence and continuance of an Event of Default or other occasion giving rise to a right in the Trustee to represent the Bondholders, the Trustee in its discretion may, upon written request of >25% of bondholders, initiate lawsuit. 4,483,201
Total Principal Balances – Business-Type Activities 104,743,201

Add: Unamortized Bond Premium – 2018A Wastewater Bonds
Unamortized Bond Premium – 2020B Wastewater Bonds
1,630,510
7,024,770
Total Business-Type Activities Revenue Bonds

$ 113,398,481
Business-Type Activities
Year Ending
June 30, Principal Interest
2023 $ 2,708,639 $ 75,719
2024 876,795 32,335
2025 897,767 10,862
Total $ 4,483,201 $ 118,916
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Annual debt service requirements to maturity for total Revenue Bonds are as follows:

Annual debt service requirements to maturity for this Notes Payable are as follows:

Governmental Activities
Year Ending
June 30, Principal Interest
2023 $ 312,000 $ 22,838
2024 328,000 14,424
2025 345,000 4,916
Total $ 985,000 $ 42,178
Business-Type Activities
Year Ending
June 30, Principal Interest
2023 $ 8,123,639 $ 2,955,762
2024 6,316,795 2,883,412
2025 6,377,767 2,822,250
2026 6,240,000 2,743,524
2027 6,350,000 2,637,112
2028-2032 36,295,000 8,614,528
2033-2037 35,040,000 2,128,043
Total $ 104,743,201 $ 24,784,631
Notes Payable
Governmental Activities:

On March 26, 2015, the City received notice of a public offering to refinance the existing HUD Section 108 Loan note, with an outstanding balance of $2,789,000. The City agreed to refinance the note, as it reduced the interest on the HUD Section 108 Loan, a net savings of approximately $502,908. The public offering date was May 28, 2015. The terms of the new promissory note include semi-annual payments in August and February through the maturity date of August 1, 2024. The interest rates range from 0.28% through 2.85%. No new security provisions were required, as the Contract for Fixed Rate Note incorporates the previous additional security provisions. Housing revenues are pledged as collateral.

The following are significant terms that pertain to the HUD Section 108 Loan. Acceleration Clause:
upon a Default or declaration of Default, the Secretary may accelerate the Note with respect to amounts subject to Optional Redemption. Events of Default: the Secretary may withhold the guarantee of any or all obligations not yet guaranteed on behalf of the Borrower under outstanding commitments, and/or direct the Borrower's financial institution to: refuse to honor any instruments drawn upon, or withdrawals from, the Guaranteed Loan Funds Account or the Loan Repayment Account initiated by the Borrower, and/or refuse to release obligations and assignments by the Borrower from the Guaranteed Loan Funds Investment Account or the Loan Repayment Investment Account. $ 985,000
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Reimbursement Agreement
Business-Type Activities:

Water Enterprise Fund:

In 1992, the City entered into a treatment and delivery agreement with the Modesto Irrigation District (MID) and the Del Este Water Company (Del Este). The City assumed Del Este’s interest and obligations under the agreement when it acquired Del Este in July 1995. Under the agreement, MID built and operates a surface water treatment plant on the Tuolumne River for the purpose of providing a long-term source of domestic treated water for the City. MID is the sole owner of the project, and has all management and operations responsibility. In exchange for the treated water, the City has agreed to pay: all debt service on bonds issued by MID for the construction of the project; a raw water charge as set forth in the agreement; project operation, administration, and maintenance costs; and insurance on the project. Gross revenues of the City's Water Fund are irrevocably pledged for the punctual payment of the MID debt service and all obligations of the City under any parity debt. Current parity debt of the City consists of the 2008 Water Revenue Certificates of Participation and the California Safe Drinking Water Act loan (as described previously). The treatment plant completed all tests and began commercial operations on May 15, 1995, at which time the City began paying for raw water and operations.

The City and MID have agreed upon an expansion of the initial Domestic Water Project facilities beyond the existing design capacity of 36 million gallons per day (“mgd”) to a design capacity of 72 mgd. In June 2007, the MID issued $93,190,000 Domestic Water Project revenue bonds pursuant to the terms of the existing treatment and delivery agreement. On August 14, 2013, Modesto Irrigation District Financing Authority refunded the 1998 D Bonds, with 2013 G Bonds. As of June 30, 2022, the total outstanding on the MID bonds is: $5,795,000 for the 2013 G Bonds and $93,190,000 for the 2007 F Bonds, for a total of $98,985,000. For the 2013 G Bonds, the annual principal payments began on September 1, 2014 and mature on September 1, 2022, the final payment amount is $5,795,000 at an interest rate of 2.5%. For the 2007 F Bonds, the annual principal payments begin on September 1, 2023 and mature on September 1, 2037 in amounts from $4,275,000 to $11,870,000, with variable interest rates fluctuating according to market conditions.

The following are significant terms that pertain to the 2007 F Bonds. Acceleration Clause: in the event of late payment, Authority shall accelerate bond payments; in the event of other default, Authority may choose to accelerate bond payments.

In event of default, Trustee may, with consent of Bond Insurer, and shall, at the direction of Bond Insurer or the owners of >50% of the bonds (with consent of Bond Insurer) accelerate bond payments. Events of Default: in event of default, Trustee may, with consent of Bond Insurer, and shall, at the direction of Bond Insurer or the owners of >50% of the bonds (with consent of Bond Insurer) initiate a lawsuit. Termination Events: the termination of swap triggers a one-time termination payment.

The following are significant terms that pertain to the 2013 G Bonds. Acceleration and Events of Default Clauses: Trust Agreement - In the event of an Event of Default (as defined in the Trust Agreement or Installment Purchase Contract), and in each and every such case during the continuance of such event of default, the Trustee may, and shall, at the direction of the Owners of not less than a majority in aggregate principal amount of the Series 2013G Water Bonds then Outstanding, by notice in writing to the Authority, declare the principal of all Series 2013G Water bonds then Outstanding and then interest accrued thereon to be due and payable immediately, and upon any such declaration the same shall become due and payable, anything contained in the Trust Agreement or in the Series 2013G Water Bonds to the contrary notwithstanding; Installment Purchase Contract - In the event that default is made in the due and punctual payment of any Domestic Water Installment Payment or any Domestic Water Contract or Domestic Water Bond when and as the same shall be due and payable, then and in each and every such case during the continuance of such Event of Default specified, the Authority shall and for any other Event of Default, the Authority may, by notice in writing to the District, declare the entire principal amount of the unpaid Domestic Water Installment Payments and the accrued interest thereon to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable, anything contained in the Installment Purchase Contract notwithstanding. Termination Events: the termination of swap triggers onetime termination payment.

The City has entered into interest-rate swap agreements for the 2007F bonds to synthetically fix the rates that the City pays at 4.38% and 4.44%. Refer to the Interest Rate Swap agreement section below with more information about the debt schedule.
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Annual debt service payments to maturity for the Reimbursement Agreement are as follows:

Business-Type Activities
Year Ending
June 30, Principal Interest
2023 $ 5,795,000 $ 2,298,057
2024 4,275,000 2,223,411
2025 4,455,000 2,110,384
2026 4,650,000 2,001,583
2027 4,885,000 1,884,388
2028-2032 27,955,000 7,443,972
2033-2037 35,100,000 3,507,426
2038 11,870,000 74,154
Total $ 98,985,000 $ 21,543,375
Interest Rate Swap Agreements:

Objective of the swaps – The primary objective of the swaps is to mitigate the effect of fluctuations in variable interest rates by paying a fixed-rate and receiving a floating rate on the swap. Combining a pay-fixed receive-variable rate swap with variable debt results in what is termed “synthetic” fixed-rate debt. It is called synthetic because the economics are similar to fixed-rate debt, but another instrument is involved unlike regular fixed-rate debt. Each time the City created synthetic fixed-rate debt a comparison and determination were made that the fixed-rate on regular debt would have been higher than the synthetic fixed rate on the swap.

During fiscal year 2007, the City entered into an interest swap agreement in connection with the 2006 Water Revenue Certificates of Participation. This transaction was updated due to the refunding of the 2006 Certificates by the 2008 Water Refunding Revenue Certificates of Participation (COPs). The swap agreement allows the City to create a synthetic fixedrate on the COPs, protecting it against increases in short-term interest rates.

During fiscal year 2008, the City entered into an interest swap agreement in connection with the 2008 Lease Revenue Bonds. The swap agreement allows the City to create a synthetic fixed rate on the Lease Revenue Bonds, protecting it against increases in short-term interest rates. The terms, fair value and credit risk of these swap agreements are disclosed below.

Additionally, in May 2007, the City approved the issuance of revenue bonds by the Modesto Irrigation District Financing Authority related to the financing of Phase 2 of the Domestic Water Treatment and Delivery System of the Modesto Irrigation District. The MID Water Refunding Bonds were issued with an interest swap feature with Bear Sterns, which was subsequently acquired by JP Morgan. Under the agreement between MID and JP Morgan, the City must post collateral when our negative position exceeds the Pledgor’s Threshold of $20 million. This negative position represents the present value of declining interest rates to date from issuance of bonds. In June 2010, the City Council authorized the City to post collateral up to $18 million, which would support a negative position of $38 million. In July 2010, the City Council increased the City’s authorization to post collateral from $18 million to up to $20 million. Due to the negative position of the revenue bonds being less than the Pledgor’s Threshold of $20 million, at the end of fiscal year 2022, the City did not have any collateral posted.

Terms – The terms, including the counterparty credit rating of the outstanding swaps, as of June 30, 2022 are shown in the table below. The swap agreements contain scheduled reductions to the outstanding notional amounts that are expected to follow scheduled principal reductions in the associated debt issues. 55 #1..
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Related Debt Issue
Current
Notional
Amount
Effective
Date Counterparty
Credit
Rating
(S&P)
Fixed
Rate
Paid
Variable Rate
Received
Termination
Date
2008 Water RefundingRevenue COPs $ 42,840,000 5/30/2008 Bank of America A+ 3.47%

63.7% of

USD-LIBOR,
plus .154% 10/1/2036
2008 Lease Revenue
Refunding and Capital
Improvement 44,355,000 8/28/2008
Bank of
America A+ 3.61%

63.7% of

USD-LIBOR,
plus .154%
9/1/2033
2007 MID Domestic
Water Revenue Bonds
Series 2007F 23,370,000 6/26/2007
JP Morgan
Chase Bank A+ 4.38%
67% of 3
Month LIBOR
+ 0.58% 9/1/2027
2007 MID Domestic
Water Revenue Bonds
Series 2007F 69,820,000 6/26/2007
JP Morgan
Chase Bank A+ 4.44%
67% of 3
Month LIBOR
+ 0.63% 9/1/2037
Based on the swap agreement the City owes interest calculated at a fixed rate to the counterparty (Bank of America and JP Morgan). In return, the counterparty owes the City interest based on the variable rate that approximates the rate required by the associated COPs and lease revenue bonds. Debt principal is not exchanged; it is only the basis on which the swap receipts and payments are calculated.

GASB Statement 53 (GASB 53) addresses the recognition measurement and disclosure of information regarding derivative instruments entered into by state and local governments. All derivatives are to be reported on the statement of net position at fair value and all hedges must be tested for effectiveness to qualify for hedge accounting. The tests are outlined in GASB 53. Depending on the test results, the changes in fair value are either reported on the statement of net position as a deferral or in the statement of activities as investment revenue or loss.

Fair value – Fair value takes into consideration the prevailing interest rate environment, the specific terms and conditions of each transaction and any upfront payments that may have been received. Fair value was estimated using the zerocoupon discounting method, which calculates the future payments required by the swap, assuming that the current forward rates implied by the LIBOR swap yield curve are the market’s best estimate of future spot interest rates. These payments are then discounted using the spot rates implied by the current yield curve for a hypothetical zero-coupon rate bond due on the date of each future net settlement on the swaps.

As of June 30, 2022, the fair value of the swaps was in favor of the counterparty as shown in the following table:

Bond Issue Fair Value
2008 Water Refunding Rev. Certificates of Participation ($ 4,583,298) 2008 Lease Revenue Bonds ($ 4,090,604)
2007 MID Domestic Water Revenue Bonds ($ 13,757,411)
Credit risk - As of June 30, 2022, the City was not exposed to credit risk on the swaps because the swaps had negative fair value. However, if interest rates increase and the fair value becomes positive, the City would be exposed to credit risk.

The City will be exposed to interest rate risk only if the counterparty to the swap defaults or if the swap is terminated.

Basis risk - Basis risk is the risk that the interest rate paid by the City to the bondholders on the underlying variable rate bonds temporarily differs from the variable swap rates received from the counterparty. The swaps have basis risk since the City receives a percentage of the LIBOR Index to offset the actual variable bond rates the City pays on the underlying certificates of participation. The City is exposed to basis risk should the floating rate that it receives on the swap be less than the actual variable rate the City pays on the bonds. Depending on the magnitude and duration of any basis risk shortfall, the expected cost of the basis risk may vary.

A portion of this basis risk is tax risk. The City is exposed to tax risk when the relationship between the taxable LIBOR based swaps and tax-exempt variable rate bonds changes as a result of a reduction in federal and state income tax rates.

Should the relationship between LIBOR and the underlying tax-exempt variable rate bonds converge the City is exposed to this basis risk.
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Termination risk - The City may terminate the swap contracts if the other party fails to perform under the terms of the contracts. The City will be exposed to variable rates if the counterparty defaults or if the swap contract is terminated. A termination of the swap contract may also result in the City’s making or receiving a termination payment based on market interest rates at the time of the termination. If at the time of termination, the swap has a negative fair value, the City would be liable to the counterparty for a payment equal to the swap’s fair value.

Swap payments and associated debt - Using rates as of June 30, 2022, debt service requirements of the 2008 Water Refunding Revenue Certificates of Participation, the 2008 Lease Revenue Refunding Bonds, and the 2007 MID Domestic Water Revenue Bonds, including net swap payments and broker fees, are as shown in the following table assuming current interest rates remain the same for their term. The bond interest payments and net swap payments will vary as interest rates vary.

Variable-Rate Bonds Net Swap Payments,
Letter of Credit, &
Remarketing Fees
Year Ending
June 30, Principal Interest Total
2023 $ 3,035,000 $ 2,749,320 $ 3,972,270 $ 9,756,590
2024 9,360,000 2,643,944 3,837,700 15,841,644
2025 9,855,000 2,501,160 3,619,491 15,975,651
2026 10,405,000 2,361,763 3,384,149 16,150,912
2027 10,950,000 2,212,138 3,141,407 16,303,545
2028-2032 62,665,000 8,540,026 11,651,118 82,856,144
2033-2037 62,245,000 3,722,301 4,392,120 70,359,421
2038 11,870,000 74,155 189,359 12,133,514
Total $ 180,385,000 $ 24,804,807 $ 34,187,614 $ 239,377,421 Changes in Long-Term Obligations
Long-term obligations activity for the year ended June 30, 2022, was as follows:

Governmental Activities:

Beginning
Balance Additions Reductions Ending Balance
Due Within
One Year
Loans Payable $ 500,000 $ - $ - $ 500,000 $ -
Lease Revenue Bonds 46,745,000 - (2,390,000) 44,355,000 2,585,000 Notes Payable 1,282,000 - (297,000) 985,000 312,000
Leases Payable - 856,576 (184,523) 672,053 229,243
Finance Purchase Obligations 4,098,878 3,741,926 (491,381) 7,349,423 774,123 Total Governmental Activities $ 52,625,878 $4,598,502 $ (3,362,904) $ 53,861,476 $ 3,900,366 Business-Type Activities:

Loans Payable $ 27,540,403 $ - $ (908,012) $ 26,632,391 $ 917,508 Certificates of Participation 44,640,000 - (860,000) 43,780,000 910,000 Unamortized Discount (82,460) - (5,497) (76,963) -
Leases Payable - 496,799 (39,714) 457,085 181,795
Finance Purchase Obligations 5,625 - (2,275) 3,350 2,349 MID Bonds 104,500,000 - (5,515,000) 98,985,000 5,795,000 Unamortized Premium 1,141,454 - (570,728) 570,726 -
Sewer Bonds 105,650,000 - (5,390,000) 100,260,000 5,415,000 Unamortized Premium 9,606,953 - (951,673) 8,655,280 -
Sewer Bonds – Direct Placement 7,127,315 - (2,644,114) 4,483,201 2,708,639 Developer Advances 782,885 - (83,543) 699,342 83,725
Total Business-Type Activities $ 300,912,175 $ 496,799 $ (16,970,556) $ 284,449,412 $ 16,014,016 57 #1..
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Principal balances are reported on the government-wide and enterprise funds statements of net position, net of unamortized issuance discounts and premiums. Deferred losses on refunding are reported as deferred outflows of resources. Internal service funds, predominantly serve the governmental funds. Accordingly, any long-term liabilities for the internal service funds are included as part of the above totals for governmental activities. At year-end, internal service funds obligations were zero under notes payable, and zero in capital leases. In fiscal year 2022 the City adopted GASB Statement No. 87, Leases. Existing leases in effect July 1, 2021 were added to the table as additions.

E. CHANGES IN OTHER LONG-TERM LIABILITIES
Other long-term liability activity for the year ended June 30, 2022, was as follows:

Governmental Activities:

Beginning
Balance Additions Reductions
Ending
Balance
Due Within
One Year
Compensated Absences $ 9,453,148 $ 10,785,621 $ 10,677,793 $ 9,560,977 $ 1,225,892 Claims Liability 28,752,857 6,754,708 8,649,267 26,858,298 6,297,828 Total Governmental Activities $ 38,206,005 $ 17,540,329 $ 19,327,060 $ 36,419,275 $ 7,523,720 Business-Type Activities:

Compensated Absences $ 2,822,512 $ 3,795,818 $ 4,217,235 $ 2,401,096 $ 307,865 Total Business-Type Activities $ 2,822,512 $ 3,795,818 $ 4,217,235 $ 2,401,096 $ 307,865 The compensated absences and claims liability balances relate to the internal service funds, and as such they are liquidated by the internal service funds. The predominant contributors for these internal service funds include the General Fund, Water Fund, and Sewer Fund.

F. FINANCE PURCHASE OBLIGATIONS
Governmental Activities
As of June 30, 2022, the City has three governmental activities finance purchase obligations. Two with Pierce Manufacturing Inc. for the purchase of Velocity Pumpers and Velocity Tillers valued at $9,625,682, less accumulated depreciation of $2,039,165. The other with Turf Tank for the purchase of one Autonomous Robot valued at $39,204, less accumulated depreciation of $7,080.

The following is a schedule of the future minimum lease payments, as of June 30, 2022:

Year Ending
June 30, Amount
2023 $ 952,375
2024 952,375
2025 952,375
2026 945,376
2027 945,376
2028-2032 3,512,777
Total minimum payments 8,260,654
Less: amount representing interest (911,231)
Present value of minimum payments $ 7,349,423
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Business-Type Activities
As of June 30, 2022, the City has one business-type activities active finance purchase obligation with Cushman for the purchase of the Hauler 800 Utility Golf Cart valued at $9,079, less accumulated depreciation of $1,436.

The following is a schedule of the future minimum payments, as of June 30, 2022:

Year Ending
June 30, Amount
2023 $ 2,422
2024 1,009
Total minimum payments 3,431
Less: amount representing interest (81)
Present value of minimum payments $ 3,350
G. LEASES PAYABLE
The City is a lessee for leases of land, buildings and office space, and equipment. The City uses the interest rate charged by the lessor as the discount rate except in cases when the interest rate charged by the lessor is not provided; in those situations, the City uses the incremental borrowing rate as provided by the California State Controller’s Office.

Payment increases include flat percentage increases and the use of an index (such as the consumer price index). For those leases that have payment increases utilizing an index; they were initially calculated using the index at the measurement period.

The length of the lease period includes any noncancellable period of the lease as well as any extension options that are reasonably certain to be taken.

The City's lease payable of $ $1,129,138 was composed of the following:

Governmental Activities
Buildings and office space leases - annual payments totaling $177,519 plus interest at rates ranging from 0.2% to 0.9% and annual increases in base payments per CPI or flat increase. Final payment dates range from 2023 through 2026.

Equipment lease - annual payments totaling $8,651 plus interest at 0.2% and annual increases in base payments per CPI or flat increase. Final payment date is 2023.

Land leases - annual payments totaling $43,073 plus interest at rates ranging from 0.2% to 0.9% and annual increases in base payments per CPI or flat increase. Final payment dates range from 2023 through 2025.
$ 8,651
553,940
109,462
Total Principal Balances - Governmental Activities $ 672,053 Annual debt service requirements to maturity for loans payable are as follows:

Governmental Activities
Year Ending
June 30, Principal Interest
2023 $ 229,243 $ 3,341
2024 189,883 2,270
2025 175,996 1,207
2026 76,931 289
Total $ 672,053 $ 7,107
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Business-Type Activities
Land leases - annual payments totaling $181,795 plus interest at 0.9% and annual increases in base payments per CPI or flat increase. Final payment dates are all in 2025. $ 457,085 Total Principal Balances – Business-Type Activities $ 457,085 Annual debt service requirements to maturity for loans payable are as follows:

Business-Type Activities
Year Ending
June 30, Principal Interest
2023 $ 181,795 $ 2,838
2024 183,178 1,453
2025 92,112 204
Total $ 457,085 $ 4,495

H. DEVELOPER ADVANCES
The Del Este Water Company (Del Este) entered into various agreements with developers under which infrastructure components were either constructed on behalf of Del Este or cash was advanced to the company to construct the infrastructure. Agreements in existence at the time of the City’s acquisition of Del Este were assumed by the City. The terms of repayment call for no interest, with principal paid over a 40-year period. As of June 30, 2022, the total outstanding balance due under the agreements is $699,342. The total annual payments fluctuate depending on the ending date of each agreement. At June 30, 2022, the amount of $83,725 due during fiscal year 2023 has been reported as “current portion-developer advances” on the Water Enterprise Fund statement of net position. The remaining $615,617 of outstanding principal has been reported under noncurrent liabilities, as “developer advances.” I. INTERFUND BALANCES
Interfund balances as of June 30, 2022 consist of the following:

Balances reported as “advance to/from” were for capital projects expenditures and are either in the process of being repaid or have scheduled repayments in future years.

Advances from General Fund to:

Other governmental funds $ 804,737
Other enterprise funds 1,324,704
Advances from General Fund 2,129,441
Advances from Water Fund to other enterprise funds 3,720,000 Advances from Sewer Fund to:

General Fund 708,973
Other governmental funds 271,803
Other enterprise funds 718,200
Advances from Sewer Fund 1,698,976
Advances from other enterprise funds to other governmental funds 158,642 Total Advances from/Advances to $ 7,707,059
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J. FUND BALANCE
Detailed classifications of the City’s Fund Balances, as of June 30, 2022, are provided below:

K. DEFICIT FUND EQUITY
The Capital Grants Fund has a fund balance deficit of $2,182,116, which will be recovered through future grant revenues and local matches covered through the General Fund or other City funds.

The Downtown Improvement District Fund has a fund balance deficit of $270 which will be recovered through future tax revenues and special assessments levied.

The Compost Fund has a net position deficit of $7,374,565, due mainly to other post-employment benefit liability and net pension liability for the employees which reside in this fund, in addition to the pollution remediation liability reported for the Carpenter Landfill and Geer Road Landfill. The remediation funding has been incorporated into the utility fees related to garbage rates to cover the anticipated costs.

The Central Services Fund has a net position deficit of $312,713, which will be recovered through future overhead charges.

The Employee Benefits Management Fund has a net position deficit of $7,122,850. It exists partially because the total compensated absences and other post-employment benefit balance for the employees which reside in this fund previously classified as debt of the governmental funds was included in this fund at its inception several years ago, and has never been fully funded. The City is continuing to charge a higher benefit rate to help reduce this deficit. In addition, one-time revenues having to do with employee benefits are deposited to this fund.

The Insurance Fund has a net position deficit of $10,575,329 due mainly to the recognition of settlements that were reached both in the current and prior fiscal year which have been reported as liabilities of the Liability Insurance Fund. Both settlements involved matters that represented city-wide policies and practices and therefore are allocable to all of the funds that make annual contributions to the liability insurance program. The liability insurance program will recover the full amount of the settlement from charges to the funds that participate in the liability insurance program over a period of 5 Housing and Total
General Operating Community Capital Other Governmental
Fund Grants Development Grants Governmental Funds
Nonspendable
Advances to other funds $ 2,129,441 $ - $ - $ - $ - $ 2,129,441 Prepaid Items 212,543 26,810 1,559 - 4,365 245,277
Total Nonspendable Fund Balance 2,341,984 26,810 1,559 - 4,365 2,374,718 Restricted
Capital Facility Fees - - - - 38,758,551 38,758,551
Cash with Fiscal Agent 3,867,707 705,822 - 3,161,068 5,245,920 12,980,517 Community Facilities District - - - - 21,585,855 21,585,855 Grants and Donations - 1,675,526 - - 5,430,237 7,105,763 Notes Receivable - 70,179 33,812,368 - 30,314 33,912,861 Deposits 3,989,829 - - - - 3,989,829
Loan for Settlement 300,000 - - - - 300,000
Traffic Fines - - - - 4,339,489 4,339,489
Total Restricted Fund Balance 8,157,536 2,451,527 33,812,368 3,161,068 75,390,366 122,972,865 Committed
General Fund Set-Aside 18,397,817 - - - - 18,397,817
Total Committed Fund Balance 18,397,817 - - - - 18,397,817 Assigned
Encumbrances - Vendor Contracts 579,390 - - - - 579,390 Successor Redevelopment Housing Agency - - - - 788,838 788,838 Transportation Tax Funding - - - - 43,338,627 43,338,627 Strategic Planning and Development - - - - 1,949,491 1,949,491 Debt Service - - - - 1,398 1,398
Total Assigned Fund Balance 579,390 - - - 46,078,354 46,657,744 Unassigned - General Fund 9,942,398 - - - - 9,942,398
Unassigned - Special Revenue Funds - - - - (270) (270)
Unassigned - Capital Project Funds - - - (5,343,184) - (5,343,184) Total Unassigned Fund Balance 9,942,398 - - (5,343,184) (270) 4,598,944 Total Fund Balance $ 39,419,125 $ 2,478,337 $ 33,813,927 $ (2,182,116) $ 121,472,815 $ 195,002,088 61 #1..
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years based on this methodology being factored into the Internal Service Fund allocation that is distributed to City departments.

L. INTERFUND TRANSFERS
The following is a schedule of interfund transfers.

In general, the City uses interfund transfers to (1) move revenues from the funds that collect them to the funds that statute or budget requires to expend them, (2) use unrestricted revenues collected in the General Fund to help finance various programs and capital projects accounted for in other funds in accordance with budgetary authorization, and (3) move cash to debt service funds from the funds responsible for payment as debt service payments become due.

M. SUCCESSOR AGENCY TRUST FOR ASSETS OF FORMER REDEVELOPMENT AGENCY On December 29, 2011, the California Supreme Court upheld Assembly Bill 1X 26 (Bill) that provides for the dissolution of all redevelopment agencies in the State of California. This action impacted the reporting entity of the City that previously had reported a redevelopment agency blended component unit. The Bill provides that upon dissolution of a redevelopment agency, either the City or another unit of local government will agree to serve as the “successor agency” to hold the assets until they are distributed to other units of state and local government. On January 24, 2012, the City Council elected to become the Successor Agency for the former Redevelopment Agency (RDA) in accordance with the Bill as part of County Resolution number 12-7.

After enactment of the law, which occurred on June 28, 2011, redevelopment agencies in the State of California cannot enter into new projects, obligations or commitments. Subject to the control of a newly established oversight board, remaining assets can only be used to pay enforceable obligations in existence at the date of dissolution (including the completion of any unfinished projects that were subject to legally enforceable contractual commitments).

In future fiscal years, successor agencies will only be allocated revenue in the amount that is necessary to pay the estimated annual installment payments on enforceable obligations of the former redevelopment agency until all enforceable obligations of the prior redevelopment agency have been paid in full and all assets have been liquidated.

The Bill directs the State Controller to review the propriety of any transfers of assets between redevelopment agencies and other public bodies that occurred after January 1, 2011. If the public body that received such transfers is not contractually committed to a third party for the expenditure or encumbrance of those assets, the State Controller is required to order the available assets to be transferred to the public body designated as the successor agency by the Bill.

Management believes, in consultation with legal counsel, that the obligations of the former RDA due to the City are valid enforceable obligations payable by the Successor Agency trust under the requirements of the Bill.

In accordance with the timeline set forth in the Bill (as modified by the California Supreme Court on December 29, 2011), all redevelopment agencies in the State of California were dissolved and ceased to operate as a legal entity as of February 1, 2012.

After the date of dissolution, as allowed under Section 34176(a) of the Bill, the City elected to retain the housing assets and functions previously performed by the former RDA. The assets and activities for the Successor Agency Housing fund continue to be reported in the City’s governmental fund financial statements. The remaining assets, liabilities, and activities Housing Other Other
General Operating and Urban Capital Govern- Enterprise Internal Transfers (in) to: Fund Grants Development Grants mental Water Sewer Bus Funds Service Total General Fund - - - - $ 404,164 $ 65,000 $ 68,640 - - $ 3,732,874 $ 4,270,678 Capital Grants - - $ 845,917 - 2,310,200 37 - - - 26,077 3,182,231 Operating Grants $ 142,114 - 231,322 - - - - - - 138,794 512,230 Other Governmental 5,410,315 - - $ 24,688 2,573,717 - 19,735 - - - 8,028,455 Water - - - - 31494 - 344,404 - $ 38,001 - 413,899
Sewer - - 4,736 - - - 9,856 - 14,592
Other Enterprise 3,485,451 - - - 2,770 700,000 - - - - 4,188,221 Internal Service 2,013,032 $ 3,540 931 - 192,728 405,799 798,953 $19,328,695 3,915,176 143,692 26,802,546 Grand Total $11,050,912 $ 3,540 $ 1,078,170 $ 24,688 $ 5,519,809 $ 1,170,836 $ 1,231,732 $19,328,695 $ 3,963,033 $ 4,041,437 $47,412,852 Transfers from (out):
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of the dissolved RDA, are reported in the Successor Agency fiduciary fund (private-purpose trust fund) in the financial statements of the City.

State Senate Bill (SB) 107 was then passed in 2015. This bill included many significant changes to the operation of the Successor Agencies. Among these changes were the Annual Recognized Obligation Payment Schedule (ROPS), the Last and Final ROPS, a single Countywide Oversight Board, and the requirement for the County Auditor-Controller to review the obligation payments made by the Successor Agency. Some of these changes like the County Oversight Board and the requirement for the County Auditor-Controller to review the obligation payments made by the Successor Agency become effective July 1, 2018. The Modesto RDA Successor Agency has complied with all aspects of the changes that are specified in SB 107 and all ROPS starting with the ROPS submitted for the Fiscal Year 2019-20 period will now be submitted for approval by the Stanislaus Countywide Successor Agency Oversight Board.

As of June 30, 2022, one of the obligations under the Successor Agency trust is associated with the 10th Street Place Project:

Reimbursement agreement with the City totaling $19,566,862. The original loan is from the City’s 1998 Lease Revenue Bonds and the 2007 Lease Revenue Bonds that pertain to the Successor Agency. On August 28, 2008, the City refinanced the entire outstanding balance of the City’s 1998 Lease Revenue Bonds and the 2007 Lease Revenue Bonds with variable rate 2008 Lease Revenue Bonds. The new balance has been provided as of June 30, 2022 that pertains to the Successor Agency. Additional information related to the 2008 Lease Revenue bonds is provided in Note II-C under the Lease Revenue Bonds – Governmental Activities section.

$ 12,862,950
Annual debt service requirements to maturity are as follows:

Year Ending
June 30, Principal Interest Total
2023 $ 749,650 $ 78,011 $ 827,661
2024 807,650 72,285 879,935
2025 867,100 66,691 933,791
2026 939,600 60,849 1,000,449
2027 1,006,300 54,580 1,060,880
2028-2032 5,802,900 167,078 5,969,978
2033-2034 2,689,750 11,548 2,701,298
Total $ 12,862,950 $ 511,042 $ 13,373,992
The reserves for the Reimbursement Agreement are recorded in the Public Financing Authority debt service fund for the City.

No-interest loan payable to the Stanislaus County Economic Development Bank loan program, for the purpose of funding the Kansas Avenue Business Park Project’s Master Plan costs. The Agency has no obligation to begin repayment until the Project is completed and revenues begin.

Future debt service requirements to maturity for loans payable, as of June 30, 2022, are as follows:

Year Ending
June 30, Principal Total
2022 $ - $ -
2023 - -
2024 405,000 405,000
Total $ 405,000 $ 405,000
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As of June 30, 2022, the Successor Agency was obligated for the following long-term debt in conjunction with the Community Center Project:
1993 Refunding Certificates of Participation; serial certificates with annual payments on November 1 in amounts ranging from $1,090,000 to $1,610,000 beginning in 2011 with a final maturity in November 2023. $ 3,145,000 Future debt service requirements to maturity for the Certificates of Participation, as of June 30, 2022, are as follows:

Year Ending
June 30, Principal Interest Total
2023 $ 1,535,000 $ 118,875 $ 1,653,875
2024 1,610,000 40,250 1,650,250
Total $ 3,145,000 $ 159,125 $ 3,304,125
The former RDA also has a few outstanding obligations related to reimbursements for parking expenses with Westland Development Company and payments to the Tenth Street Joint Power Agency for maintenance for common areas in the Tenth Street Place. These amounts are all reported in the Successor Agency in the Fiduciary financial statements under the Private-Purpose Trust Fund.

N. NOTES AND LOANS RECEIVABLE
The notes receivable in the Operating Grants Fund and Other Governmental Funds of $58,911,283 net of $111,012 allowance for doubtful accounts, consist of loans made for low-income housing rehabilitation, first-time homebuyers, property improvement and small business origination. The loans are collateralized by deeds of trust on the improved properties or business assets, and are generally bearing annual interest at 3 or 5 percent. Some direct loans may be subject to forgiveness, some are interest free and require no repayment of principal until the loans reach maturity, and some are subject to residual receipt payment agreements. Loan terms range from 5 to 55 years.

O. APPROVED LOANS PAYABLE
The approved loans payable in the Housing and Community Development Special Revenue Fund of $76,529 consist of amounts being held for housing projects using funds provided by federal grants. This liability is expected to be liquidated in less than a year.

P. POLLUTION REMEDIATION LIABILITY
The City reported a liability in the Water and Sewer Enterprise funds, which represents the recoveries the City has collected less any remediation and legal costs incurred in pursuit of mitigating damages from the manufacturers of perchlorethylene, or PCE, a common chemical used in the dry-cleaning industry. This chemical has seeped into the groundwater through sewer lines when improperly disposed, and threatens the City’s groundwater supplies. Modesto has been proactive in attempting to recover damages and future cleanup costs from the dry cleaners and their insurers, and has also initiated litigation with the manufacturers. As of June 30, 2022, the City reported a pollution remediation liability from the Water and Sewer funds in the amount of $5,248,885 and $6,587,713, respectively.

The City also records a liability for two landfill pollution remediation efforts. For the Carpenter Road Landfill Fund, a liability was reported related to the Carpenter Road Landfill which is a 39-acre City owned landfill, located on both the east and west sides of Carpenter Road between Kenneth and Robertson Roads and the Tuolumne River, which was in operation from 1956 to 1968. This landfill precedes Subtitle-D and had no liner or leachate collection or removal system. In 1993, six methane gas monitoring wells were installed. In December 2005, there was a spike in the methane gas level at the landfill’s Northern boundary. The State required the City to determine the cause and develop a mitigation and monitoring plan to ensure the landfill remained in compliance with the state statutes. In November of 2010, a Corrective Action Plan was proposed for the landfill involving a hydrogen releasing compound injection. In October 2014, a revised Corrective Action Plan and post closure maintenance plan was submitted to the Central Valley Regional Water Quality Control Board (CVRWQCB). In March 2015, a Cleanup and Abatement Order was issued to the City of Modesto for the Carpenter Road 64 #1..
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Landfill by the California Regional Water Quality Control Board to complete the clean closure correction action plan by January 15, 2017. Construction was to begin in Spring of 2017, however, due to flooding during the Winter of 2016, the groundwater level increased to a level too high to begin construction. The City submitted a request to the CVRWQCB to delay the project until Spring of 2018. The waters receded, the project went out to bid, and was awarded to Pacific States Environmental Contractors in August 2018. A permitting delay pushed the project start but as of September 2021, all waste has been moved from the eastern fill to the western fill, a storm water retention basin is complete, and final, small or cosmetic work is being completed. The City will submit completion and permitting paperwork when the project is complete.

Monitoring continued throughout the project on functional gas and groundwater wells. As of June 30, 2022, the City reported a pollution remediation liability from Carpenter Road Landfill Fund in the amount of $288,102.

For the Geer Road Landfill Mitigation Costs Fund, a liability was reported related to the Geer Road Landfill which is located in Stanislaus County, 8 miles southeast of the City of Modesto on the Tuolumne River. The site is jointly owned by Stanislaus County and the City of Modesto, but was formerly operated by Stanislaus County Department of Environmental Resources. It consists of 168 acres and accepted an estimated 4.5 million tons of waste from 1970 until July of 1990. This landfill precedes Subtitle-D and had no liner or leachate collection or removal system. The landfill closed in 1995 and a geomembrane liner was overlain by vegetative soil. Closure was approved in July 1996, and post closure and correction action requirements, as well as requirements to maintain financial assurances and conduct monitoring, were prescribed in the Waste Discharge Requirements (WDR’s). Pollution was first identified in 1985 and since that time, several investigations were completed. In 1993, a groundwater extraction and treatment system of 12 extraction wells that pump water to a treatment plant, as well as 34 monitoring wells were installed. The treated water was then released to a leach field where it was recharged to groundwater. The landfill methane gas was monitored by 83 gas probes in and around the landfill connected to a landfill gas flare facility. To cover the potential liability, the City of Modesto established a fee within the Garbage rates to collect around $200,000 annually. As of June 30, 2022, the City reported a pollution remediation liability from the Geer Road Landfill Mitigation Costs Fund in the amount of $667,949.

Q. DEFERRED INFLOWS/OUTFLOWS OF RESOURCES
Pursuant to GASB Statement No. 63, “Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position”, the City recognized deferred outflows and inflows of resources in the entity-wide and governmental fund statements. These items are an acquisition of net position by the City that is applicable to a future reporting period. The General Fund, Operating Grants, Housing and Community Development, Capital Grants and other governmental funds reported deferred inflows of resources in the amount of $4,741,231, $41,122,400, $25,876,225 $5,430,426, and $6,423,571 for unavailable resources related to note, grant receivables and lease receivables not meeting the period of availability. Previous financial reporting standards do not include guidance for reporting these in the financial statements, which are distinct from assets and liabilities. The items relate to outflows and inflows for net pension liability (Note III-G), OPEB liability (Note III-F), swap hedging (Note II-C) and loss on refunding.

III. OTHER INFORMATION
A. RISK MANAGEMENT
The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to and illnesses of employees; and natural disasters. The City maintains the Insurance Internal Service Fund to account for and finance its risks of loss. Under this program, the City is self-insured for the following risks up to the maximum amount per claim/occurrence as follows: workers' compensation $750,000; liability $1,000,000. The City purchases commercial insurance for property loss, airport liability, miscellaneous coverage, and for claims in excess of the preceding self-insured limits.

For liability claims, the City is one of thirteen members of the Authority for California Cities Excess Liability (ACCEL) risk pool. This pool covers City claims between $1,000,000 and $10,000,000. The purpose of the pool is to spread the adverse effect of losses among the member agencies and leverages buying power in the commercial insurance market for excess coverage. The City contributes its pro rata share of anticipated losses to the pool. Should actual losses among participants be greater than anticipated, the City will be assessed its pro rata share of that deficiency. Conversely, if the actual losses are less than anticipated, the City will be refunded its pro rata share of the excess subject to the board approval and current conditions. Commercial insurance, covers claims over $10,000,000 in several excess layers for a total coverage of $55,000,000 per claim. Settled claims have not exceeded this commercial coverage in any of the past five fiscal years.

General liability claims are handled by the City’s third-party administrator George Hills Company of Rancho Cordova, CA. and risk management. Litigated claims are defended by the City Attorney. 65 #1..
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All operating funds participate in the program and make payments to the Insurance Fund based on historical cost and/or actuarial estimates of the amounts needed to pay prior and current year claims, and to allow accrual of estimated incurred but not reported claims and allocated loss adjustment expenses. Insurance premiums to commercial insurers are also processed through the Insurance Fund. The total claims liability at June 30, 2022 is $26,858,298 consisting of $18,891,230 workers' compensation, $7,722,826 general liability, $203,096 dental, and $41,146 vision. Workers’ compensation and general liability claims liabilities are estimated on an actuarial basis, and are reported at their net present value using an expected future investment yield assumption of 3% (general liability) and 3% (workers’ compensation). The undiscounted workers’ compensation and liability claims totaled $22,155,452 and $8,183,413 respectively. The actuarial liability for workers’ compensation and general liability were based on 2022 actuarial reports.

The current portion of the total liability claims, is estimated to be $6,297,828 and the balance of $20,560,470 is reported as a long-term liability on the statement of net position. Changes in the Insurance Fund claims liability during the fiscal years ended June 30, 2022 through June 30, 2022 were:

Claims Liability
July 1
Current-Year Claims and
Changes in Estimates
Current-Year
Claim Payments
Claims liability
June 30
2020-21 $ 26,169,123 $ 12,358,612 $ (9,774,878) $ 28,752,857 2021-22 28,752,857 6,751,885 (8,646,444) 26,858,298
B. COMMUNITY FACILITIES DEBT WITHOUT CITY COMMITMENT
Special assessment and community facilities districts have been established in various areas of the City to provide improvements to properties located in those districts. Properties are assessed for the cost of the improvements; these assessments are payable solely by the property owners over the term of the debt issued to finance the improvements. The City is not legally obligated to pay these debts or be the purchaser of last resort of foreclosed properties in the special assessment districts, nor is it obligated to advance City funds to repay this debt in the event of default by any property owners. The City functions as an agent for the property owners by collecting assessments and forwarding collections to trustees for payment to bond holders.

At June 30, 2022, the balance of these districts’ outstanding debt was as follows:

Debt Issued Outstanding Amount
Village One #2 Community Facilities District $ 24,345,000 Fairview Village Community Facilities District $ 3,550,000

C. CONDUIT DEBT OBLIGATIONS
From time to time, the City has issued revenue bonds to provide financial assistance to private-sector entities for the acquisition and construction of industrial, commercial, health care, and multiple-family housing facilities deemed to be in the public interest. The bonds are secured by the property financed and are payable solely from developer payments on the underlying mortgage loans. Upon repayment of the bonds, ownership of the acquired facilities transfers to the privatesector entity served by the bond issuance. Neither the City, the State, nor any political subdivision thereof is obligated in any manner for repayment of the bonds. Accordingly, the bonds are considered conduit debt obligations and are not reported as liabilities in the accompanying financial statements.

As of June 30, 2022, there were two series of conduit revenue bonds outstanding. The aggregate principal amount payable for these multiple-family housing bond issues, issued between 1994 and 2002, was $4,275,000.

D. COMMITMENTS AND CONTINGENCIES
The City is involved in litigation relating to tort claims, workers' compensation claims and other claims such as contract actions and inverse condemnation actions for which the City is self-insured, as disclosed in Note III-A. The City is a defendant in various matters of litigation.

The City receives funding from a number of federal, state and local grant programs, principally the Federal Highway Administration, Community Development Block Grants, and Federal Transit Administration grants. These programs are subject to financial and compliance review by the grantors. Accordingly, the City's compliance with applicable grant 66 #1..
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requirements will be determined at some future date. Expenditures, if any, which may be disallowed by the granting agencies, cannot be determined at this time. The City does not expect the undeterminable amounts of disallowed expenditures, if any, to materially affect the basic financial statements. Receipt of these federal, state and local grant revenues is not assured in the future.

The City has both operating and capital commitments of $26,279,485 for the City’s governmental funds as of June 30, 2022 for contracts awarded but not completed and other outstanding purchase requisitions and orders. This amount consists of $579,390 in the General Fund, $358,142 in the Operating Grants Fund, $711,754 in the Housing and Community Development, and $8,153,027 in the Capital Grants Fund, and $16,477,172 in other governmental funds.

Commitments of the governmental funds are recorded in one of the classifications of fund balance based on the various funding restrictions on the balance sheet. As of June 30, 2022, there are major contracts for State Route 132 project (WSP USA Inc $12,240,251 Bay Cities Paving and Grading $92,805,772), and Fleet Management (Western Truck Center $514,130 and Towne Ford Sales $602,868).

In the process of completing the work mandated by the Regional Water Control Board, additional waste was discovered in the southern wall of the bank of the Tuolumne River. The City provided this information to the Regional Water Control Board in May of 2021, they asked the City to submit a general plan and schedule to investigate and ultimately address the residual waste materials that were found in the area and appear to be on Army Corps lands. The State is planning to complete their review of the report into the additional waste during calendar year 2022.

A feasibility study will be undertaken to provide guidance to City staff in order to make informed decisions on the future of the City’s composting operations and compliance with SB1383. Necessary improvements are required to ensure compliance with violations received from the regional water board and other areas of concern notifications received from CalRecycle. A consultant will assess what improvements are needed and the City will hire an engineering firm to complete the necessary work. The feasibility study is anticipated to start in January 2023.

Management has determined the events regarding the novel coronavirus require disclosure in accordance with the accounting standards. On March 4, 2020 Governor Newsom issued an emergency proclamation declaring a state of emergency in California due to the novel coronavirus (COVID-19). The COVID-19 outbreak is ongoing, and the ultimate geographic spread of the virus, the duration and severity of the outbreak and the economic and other actions that may be taken by government authorities to contain the outbreak or treat its impact are uncertain. The ultimate impact of COVID19 on operations and finances of the City remain unknown.

E. JOINT VENTURES AND JOINTLY GOVERNED ORGANIZATION
Tuolumne River Regional Park
The City participates with Stanislaus County and the City of Ceres in the operation and development of the Tuolumne River Regional Park (TRRP). The governing body consists of 2 members from the County Board of Supervisors, 2 members from the Modesto City Council, and 1 member from the Ceres City Council. The TRRP board prepares the annual budget, which must be approved by both cities' councils and the board of supervisors. Each participant has an equity interest in the capital assets of TRRP based on the percentage of cumulative contributions paid. The City's contribution to TRRP was $186,193 for the fiscal year ended June 30, 2022. As of June 30, 2022, the City's investment in this joint venture was $1,486,946, and is included in governmental activities on the statement of net position. Financial statements for TRRP are prepared by the City of Modesto Finance Department.

City-County Capital Improvements and Financing Agency
The City and Stanislaus County formed the City-County Capital Improvements and Financing Agency (Agency) to provide for the design, construction, ownership, operation, management and financing of a City-County administration center located in Modesto’s downtown redevelopment area. The governing body is a commission consisting of two (2) members of the City Council, two (2) members of the County Board of Supervisors, the County Chief Executive Officer, and the City Manager. The commission is responsible for developing an annual budget and determining the annual contribution rates, subject to approval by both the City and the County. The Stanislaus County Auditor Controller was the fiscal administrator during the construction phase, which was final at the end of June 2003. Starting in July 1, 2010 the County Auditor Controller became the fiscal administrator. For the fiscal year ended June 30, 2022, the City’s payments to the Agency were $1,142,649 for operations and capital reserve. The City’s equity interest in the Agency is $5,651,530, equal to its capital asset contributions to date net of depreciation, and is reported in governmental activities as investments in joint ventures in the statement of net position. Financial statements of the Agency are prepared by the Stanislaus County 67 #1..
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Auditor Controller office.

Stanislaus Waste-to-Energy Financing Agency
The City participates with Stanislaus County in the Stanislaus Waste-to-Energy Financing Agency (Agency). The Agency was created to provide financing for a facility that generates power from solid waste. The costs of operating the Agency, if any, are shared equally by the participants. The governing body consists of 2 members each from the County Board of Supervisors and the Modesto City Council. As of June 30, 2022, the City has no equity interest. Stanislaus County Treasurer's office prepares the Agency's financial statements.

Consolidated Emergency Dispatch Agency
The Modesto/Stanislaus Consolidated Emergency Dispatch Agency (the MSCEDA) was created on September 1, 1999, pursuant to a joint exercise of powers agreement between the City of Modesto and the County of Stanislaus. The MSCEDA is administered by a seven-member commission consisting of one member of the City Council, one member of the County Board of Supervisors, the County Chief Executive Officer, the City Manager, two members from the Dispatch Advisory Board, and one member from the City of Ceres’ City Council or one member selected by the City Council of another participating City. The purpose of the MSCEDA is to consolidate the public safety communications system. The responsibilities of the agency include approval of annual budget, claims, liabilities, and the use of MSCEDA property as collateral. Each participant will contribute sufficient funds to pay for all costs and expenses associated with providing Emergency Dispatch Services. Upon termination of the agreement, assets will be distributed equally to the City and County, unless otherwise approved. The financial statements may be obtained by writing to the Modesto/Stanislaus Consolidated Emergency Dispatch, Office Manager, 3705 Oakdale Road, Modesto, California 95357.

North County Corridor Transportation Expressway Authority On April 1, 2008, the City Council approved the establishment of a Joint Powers Authority between the County and the cities of Modesto, Oakdale and Riverbank to create the North County Corridor Transportation Expressway Authority (NCCTEA). The purpose of the Authority is to prepare, identify, and adopt a precise alignment, and prepare and certify environmental documents for a route to improve east/west traffic circulation in the County.

The intent of the NCCTEA is to provide a high capacity high speed east-west roadway to accommodate anticipated traffic growth, alleviate traffic on parallel roads, and to accommodate multi-modal travel. Under the terms of the agreement, the County will incur 40% of the costs of the project while each of the participating cities will be contributing 20%. The preliminary project development costs will be funded by State Transportation Program and Public Facility Fees. The NCCTEA Board of Directors will be comprised of two directors appointed by the County, and one director from each participating city. The board acts autonomously from the respective member agencies. The County of Stanislaus Public Works Director is designated as the NCCTEA’s manager. Upon completion of the agreement, all assets will be distributed to the respective parties of the agreement as determined by the Board of Directors of the Authority. Financial statements may be obtained by writing to the County of Stanislaus, Public Works Department, 1716 Morgan Road, Modesto, CA 95358.

Stanislaus Animal Services Agency
The Stanislaus Animal Services Agency (SASA) was created October 27, 2009, pursuant to a joint power’s agreement among the cities of Ceres, Hughson, Modesto, Patterson, Waterford, and the County of Stanislaus. SASA is administered by a six-member board comprised of the City Manager of each partner agency, and the Chief Executive Officer of the County. The purpose of SASA is to operate a regional agency providing animal services to their respective communities.

The SASA Executive Director is responsible for the annual budget which must be approved by the SASA Board of Directors.

Each partner agency will contribute sufficient funds to pay for all costs approved in the budget to provide animal services.

Upon termination of the agreement, assets will be distributed in accordance with the joint power’s agreement. The financial statements may be obtained by writing to the Stanislaus Animal Services Agency, Executive Director, 3647 Cornucopia Way, Modesto, CA 95358.

Regional Fire Training Center
The City has entered into an agreement with the Yosemite Community College District (YCCD) and Stanislaus County for the use and management of the regional fire training center at Modesto Junior College. The executive board consists of the YCCD Chancellor, the President of Modesto Junior College, the City Manager of the City of Modesto, and the Chief Executive Officer of Stanislaus County. The YCCD is responsible for accounting and for monitoring the center's budget.

All three entities share in the operating costs. Initial construction costs were paid by the YCCD from borrowed funds, with the City and County reimbursing a portion of these costs in exchange for future use of the center. The City has paid its 68 #1..
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share of the construction costs in full. Title to the constructed asset is held by the YCCD; therefore, the City has no equity interest.

North Valley Regional Recycled Water Program (NVRRWP)
The City participates in the NVRRWP, which was established by the City of Modesto and Del Puerto Water District in November 2014. The purpose of this agreement is to develop, construct, operate and maintain water supply facilities and service. Through this agreement all partner agencies will cooperate and collaborate to use their best efforts regarding the submission of grants, loans and other funding resources to cover future cost related to the design and construction on future projects. At the end of the fiscal year June 30, 2022, the City has no equity interest.

F. OTHER POSTEMPLOYMENT BENEFITS (OPEB)
I. Plan Description
In addition to the pension benefits described below in Note III-G, the City provides health care benefits to employees who retire from the City based on certain criteria related to their hired and retirement dates, their employee bargaining unit, and their grandfathered sick leave at retirement.

For employees that retire from the Modesto City Firefighters Association (MCFFA) bargaining unit, the City contributes toward the cost of retiree medical coverage for the retiree's lifetime or until coverage is discontinued. MCFFA is covered by a 1995 resolution with the California Public Employees' Retirement System defining the level of the City's contribution toward the cost of medical plan premiums for employees and retirees to be the minimum employer contribution (MEC). The MEC is $149 in 2021, and $151 in 2022.

All other full-time employees hired before January 1, 2011, are eligible to convert their accumulated grandfathered sick leave towards a contribution for future health care costs at retirement (sick leave conversion). The City has no obligation to pay health insurance allowance for retirees with no grandfathered sick leave. Any employee who retires after January 1, 2017, or retirees who elect the buy-out option, receive a contribution to a Retiree Health Savings Account. Those employees are then removed from the City’s medical plan and ineligible to re-enroll.

The City has no assets accumulated in a qualified OPEB trust that meets the criteria as per GASB Statement No. 75.

II. Employees Covered
As of June 30, 2021, actuarial valuation, the following current and former City employees were covered by the OPEB plan membership:

Active employees 467
Inactive employees 351
Total 818
III. Contributions
The OPEB plan and its contribution requirements are established by Memoranda of Understanding with the applicable employee bargaining units and may be amended by the agreements between the City and the bargaining units. The annual contribution is based on the actuarially determined contribution. For the fiscal year ended June 30, 2022, the City’s cash contributions were $4,114,604 in payments made by the employer and no estimated subsidy was determined. 69 #1..
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IV. Total OPEB Liability
The City’s total OPEB liability was measured as of June 30, 2021 and the total OPEB liability used to calculate the net OPEB liability was determined by an actuarial valuation dated June 30, 2020, based on the following actuarial methods and assumptions:

Actuarial Assumptions:

Discount Rate 2.16% at June 30, 2021. 2.21% at June 30, 2020 (Bond Buyer 20-Bond Index) General Inflation 2.5% annually
Salary Increases 3%
Medical Trend 5.8% for 2021, fluctuating to an ultimate rate of 4.0% in 2076 Mortality, Retirement,
Disability, Termination CalPERS 1997-2015 Experience Study Mortality Improvement MacLeod Watts Scale 2020 applied generationally from 2015 V. Discount Rate
The discount rate used to measure the total OPEB liability was 2.16 percent. The projection of the cash flows used to determine the discount rate assumed that the City contributions will be made at rates equal to the actuarially determined contribution rates. Based on these assumptions, the OPEB City’s net position was projected to be available to make all projected OPEB payments for current active and inactive employees and beneficiaries based on the ‘pay as you go’ annual contributions.

VI. Changes in the OPEB Liability
The change in the OPEB Liability is as follows:

Total OPEB Liability
Balance at June 30, 2021 (Measurement Date June 30, 2020) $ 30,427,400 Changes recognized for the measurement period:

Service cost 1,196,410
Interest 667,183
Changes of Assumptions 129,927
Benefit Payments (2,869,050)
Net Changes (875,530)
Balance at June 30, 2022 (Measurement Date June 30, 2021) $ 29,551,870 VII. Sensitivity of the Net OPEB Liability to Changes in the Discount Rate The following presents the Net OPEB liability of the Plan as of the measurement date, calculated using the discount rate of 2.16 percent, as well as what the Net OPEB liability would be if it were calculated using a discount rate that is 1 percentage-point lower (2.16 percent) or 1 percentage-point higher (3.16 percent) than the current rate:

1% Decrease
Current
Discount Rate 1% Increase

1.16% 2.16% 3.16%
Net OPEB Liability $ 32,407,343 $ 29,551,870 $ 27,159,350 70 #1..
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VIII. Sensitivity of the Net OPEB Liability to Changes in the Health Care Cost Trend Rates The following presents the Net OPEB liability of the Plan if it were calculated using health care cost trend rates that are one percentage point lower or one percentage point higher than the current rate, for measurement period ended June 30, 2021:

IV. OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to OPEB As of the start of the measurement period (June 30, 2020), the OPEB liability was $30,427,400.

For the measurement period ended June 30, 2021 (the measurement date), the City incurred an OPEB expense of $2,426,924.

Components of OPEB Expense
Service cost $ 1,196,410
Interest 667,183
Expensed portion of current-period changes of assumptions or other inputs 563,331 OPEB Expense $ 2,426,924
As of June 30, 2022, the City has deferred outflows and deferred inflows of resources related to the Net OPEB liability as follows:

Deferred Outflows
of Resources
Deferred Inflows
of Resources
Contributions subsequent to measurement period $ 4,114,604 $ - Changes of assumptions or other inputs 2,635,772 750,130 Difference between actual and expected experience in the Total OPEB Liability 1,090,678

166,069
Total $ 7,841,054 $ 916,199
The amounts above are net of outflows and inflows recognized in the 2020-2021 measurement period expense. The amounts above reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending June 30, 2023.

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

Fiscal Year Ended
June 30,
Deferred outflows/inflows
of resources related to
OPEB expense
2023 $ 563,331
2024 802,506
2025 1,055,142
2026 380,320
2027 8,952
Thereafter $ -
G. PENSION PLANS
I. General Information about the Pension Plans
Plan Descriptions
All City of Modesto qualified employees are eligible to participate in the City of Modesto separate Safety (police and fire) 1% Decrease Current Trend 1% Increase
Net OPEB Liability $ 27,690,354 $ 29,551,870 $ 31,940,987 71 #1..
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and Miscellaneous (all other) Plans, agent multi-employer defined benefit pension plans administered by the California Public Employees’ Retirement System (CalPERS), which acts as a common investment and administrative agent for its participating member employers. Benefit provisions under the Plans are established by the State statute and City resolution. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website. This report is available online at www.calpers.ca.gov.

The California Legislature passed and the Governor signed the “Public Employees’ Pension Reform Act of 2013” (PEPRA) on September 12, 2012. PEPRA contained a number of provisions intended to reduce future pension obligations. PEPRA primarily affects new pension plan members who are enrolled for the first time after December 2012. Benefit provisions and other requirements are established by State statute.

Benefits Provided
The benefits for the Plans are based on members’ years of service, age, final compensation, and benefit formula. Benefits are provided for disability, death, and survivors of eligible members or beneficiaries. Members become fully vested in their retirement benefits earned to date after five years of credited service.

The Plans’ provisions and benefits in effect at June 30, 2022 are summarized as follows:

Miscellaneous Plan:

Hire date
Prior to
January 17, 2012
January 17, 2012 to
December 31, 2012
On or after
January 1, 2013
Benefit formula 2% @ 55 2% @ 60 2% @ 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 to 67 50 to 67 52 to 67
Monthly benefits, as a % of eligible compensation 1.426 to 2.418% 1.092 to 2.418% 1.0 to 2.5% Safety Plan:

Hire date
Prior to
September 11,
2012
September 11, 2012
to December 31, 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 to 55 50 to 55 50 to 57
Monthly benefits, as a % of eligible compensation 3.0% 2.4 to 3.0% 2.0 to 2.7% Contributions
Section 20814(c) of the California Public Employees Retirement Law (PERL) 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. The total plan contributions are determined through the CalPERS’ annual actuarial valuation process. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees.

For the measurement period ended June 30, 2021 (the measurement date) for the Plans, the average active employee contribution rate was 7.00% of annual pay for Miscellaneous and 10.14% for Safety and the employer’s contribution rate is 8.13% of annual payroll for Miscellaneous and 20.45% for Safety. The employee and employer contributions made for fiscal year June 30, 2022 was $17.995 million for the Miscellaneous plan and $28.266 million for the Safety plan. Employer contribution rates may change if plan contracts are amended.

II. 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 of the Plans is measured as of June 30, 2021, using an annual actuarial valuation as of June 30, 2020 rolled forward to June 30, 2021 using standard update procedures. 72 #1..
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A summary of principal assumptions and methods used to determine the net pension liability is shown below:

Miscellaneous Plan Safety Plan
Actuarial Cost Method Entry-Age Normal Entry-Age Normal Actuarial Assumptions:

Discount Rate 7.15% 7.15%
Inflation 2.5% 2.5%
Salary Increases Varies by Entry Age and Service Varies by Entry Age and Service Investment Rate of Return 7.00% (1) 7.00% (1)
Mortality Rate Table(2) CalPERS Membership Data CalPERS Membership Data Post Retirement Benefit Increase Up to 2.75% Up to 2.75% (1) Net of Pension Plan Investment and Administrative Expenses; includes inflation (2) The mortality table used was developed based on CalPERS specific data. The table includes 20 years of mortality improvements using Society of Actuaries Scale BB. For more details on this table, please refer to the 2017 experience study report.

All other actuarial assumptions used in the June 30, 2021 valuation were based on the results of an actuarial experience study for the period from 1997 to 2015, including updates to salary increase, mortality and retirement rates. The Experience Study report can be obtained at CalPERS website under Forms and Publications.

Discount Rate
The discount rate used to measure the total pension liability was 7.15 percent. To determine whether the municipal bond rate should be used in the calculation of a discount rate for each plan, CalPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the tested plans run out of assets. Therefore, the current 7.15 percent discount rate is adequate and the use of the municipal bond rate calculation is not necessary. The long-term expected discount rate of 7.15 percent is applied to all plans in the Public Employees Retirement Fund. The stress test results are presented in a detailed report called “GASB Crossover Testing Report” that can be obtained at CalPERS’ website under the GASB 68 section.

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

In determining the long-term expected rate of return CalPERS took, into account both short-term and long-term market return expectations as well as the expected pension fund cash flows. Such cash flows were developed assuming that both members and employers will make their required contributions on time and as scheduled in all future years. Using historical returns of all the funds’ asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one-quarter of one percent.

The table below reflects long-term expected real rate of return by asset class as of the target allocation for the June 30, 2021 measurement date. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These geometric rates of return are net of administrative expenses.

Asset Class(1) New Strategic Allocation Real Return Years 1 – 10(2) Real Return Years 11+(3) Global Equity 50.0% 4.8% 5.98%
Global Fixed Income 28.0 1.00 2.62
Inflation Sensitive - 0.77 1.81
Private Equity 8.0 6.30 7.23
Real Assets 13.0 3.78 4.93
Liquidity 1.0 - (0.92)
(1) In the System's ACFR, Fixed Income is included in Global Debt Securities; Liquidity is included in Short-term Investments; Inflation Assets are included in both Global Equity Securities and Global Debt Securities. (2) An expected inflation of 2.00% used for this period. (3) An expected inflation of 2.92% used for this period 73 #1..
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III. Changes in the Net Pension Liability
The changes in the Net Pension Liability for each Plan follows:

Miscellaneous Plan Increase (Decrease)
Total Pension
Liability (a)
Plan Fiduciary
Net Position
(b)
Net Pension
Liability/(Asset)
(c) = (a) - (b)
Balance at June 30, 2020 (1) $ 497,269,825 $ 358,840,146 $ 138,429,679 Changes Recognized for the Measurement Period:

Service Cost 7,916,536 - 7,916,536
Interest on the Total Pension Liability 34,981,202 - 34,981,202 Differences between Expected and Actual Experience 1,935,811 - 1,935,811 Contributions - Employer - 13,607,488 (13,607,488)
Contributions - Employees - 3,732,886 (3,732,886)
Net Investment Income - 80,411,612 (80,411,612)
Benefit Payments, including Refunds of Employee
Contributions (27,832,629) (27,832,629) -
Administrative Expense - (358,459) 358,459
Net Change during 2020-21 17,000,920 69,560,898 (52,559,978) Balance at June 30, 2021 (1) $ 514,270,745 $ 428,401,044 $ 85,869,701 Safety Plan Increase (Decrease)
Total Pension
Liability (a)
Plan Fiduciary
Net Position
(b)
Net Pension
Liability/(Asset)
(c) = (a) - (b)
Balance at June 30, 2020 (1) $ 654,391,208 $ 428,570,245 $ 225,820,963 Changes Recognized for the Measurement Period:

Service Cost 11,100,896 - 11,100,896
Interest on the Total Pension Liability 46,176,343 - 46,176,343 Differences between Expected and Actual Experience 3,056,480 - 3,056,480 Contributions - Employer - 21,650,057 (21,650,057)
Contributions - Employees - 3,864,069 (3,864,069)
Net Investment Income - 97,134,657 (97,134,657)
Benefit Payments, including Refunds of Employee
Contributions (34,350,284) (34,350,284) -
Administrative Expense - (428,116) 428,116
Net Change during 2020-21 25,983,435 87,870,383 (61,886,948) Balance at June 30, 2021 (1) $ 680,374,643 $ 516,440,628 $ 163,934,015 (1) The fiduciary net position includes receivables for employee service buybacks, deficiency reserves, fiduciary self-insurance and OPEB expense. This may differ from the plan assets reported in the funding actuarial valuation report.

Sensitivity of the Net Pension Liability to Changes in the Discount Rate

The following presents the net pension liability of the Plan as of the measurement date, calculated using the discount rate of 7.15 percent, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage-point lower (6.15 percent) or 1 percentage-point higher (8.15 percent) than the current rate:

Mis Miscellaneous Plan Discount Rate -
1% (6.15%)
Current Discount
Rate (7.15%)
Discount Rate
+1% (8.15%)
Plan’s Net Pension Liability/(Asset) $ 149,440,659 $ 85,869,701 $ 32,969,782 74 #1..
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IV. Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions As of the start of the measurement period (July 1, 2020), the net pension liability was $138,429,679 for the Miscellaneous Plan and $225,820,963 for the Safety Plan.

For the measurement period ended June 30, 2021 (the measurement date), the City incurred a pension expense of $3,226,307 for the Miscellaneous Plan and $13,451,817 for the Safety Plan.

As of June 30, 2021, the City has deferred outflows and deferred inflows of resources related to pensions as follows:

Miscellaneous Plan Deferred Outflows
of Resources
Deferred Inflows
of Resources
Differences between Expected and Actual Experiences $ 1,996,018 $ (17,106) Net Difference between Projected and Actual Earnings
on Pension Plan Investments - (40,015,578)
Contributions subsequent to the measurement date 14,308,353 - Total $ 16,304,371 $ (40,032,684)
Safety Plan Deferred Outflows
of Resources
Deferred Inflows
of Resources
Change of Assumptions $ - $ (115,921)
Differences between Expected and Actual Experiences 6,563,992 (48,652,635) Contributions subsequent to the measurement date 23,331,623 - Total $ 29,895,615 $ (48,768,556)
The amounts above are net of outflows and inflows recognized in the 2020-2021 measurement period expense. The amounts above reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending June 30, 2023.

Other amounts reported as deferred inflows and outflows of resources related to pensions will be recognized in future pension expense (not including contributions subsequent to the measurement date) as follows:

Fiscal Year
Ended June 30
Miscellaneous
Plan
Safety Plan
2022 $ (8,984,959) $ (8,066,548)
2023 (8,673,547) (9,988,667)
2024 (9,343,823) (10,776,835)
2025 (11,034,337) (13,372,514)
Total $ (38,036,666) $ (42,204,564)
H. DEFICIENCY OF EXPENDITURES OVER APPROPRATIONS
For the fiscal year ended June 30, 2022, expenditures exceeded appropriations as follows:

General Fund
Expenditures Amount
Parks and recreations – Administration $25,885
Parks and recreations - Convention visitors bureau 381,958 Mis Safety Plan Discount Rate -
1% (6.15%)
Current Discount
Rate (7.15%)
Discount Rate
+1% (8.15%)
Plan’s Net Pension Liability/(Asset) $ 255,625,142 $ 163,934,015 $ 88,712,807 75 #1..
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Operating Grants Special Revenue Fund
Expenditures Amount
Highways and Streets $8,817
Public Safety 117,563
Housing and Community Development Special Revenue Fund
Expenditures Amount
Debt Service - Other $638
Transfers out 222,200
Local Transportation Special Revenue Fund
Expenditures Amount
Parks and recreation $1,060
Strategic Planning and Development Special Revenue Fun Amount Transfers out $2,770

I. PRIOR YEAR ADJUSTMENTS
Governmental Activities
A prior year adjustment was made to the Governmental Activities to decrease the net position in the amount of $3,535,670 to account for the correction to Construction Work In Progress (CWIP) from prior years.

A prior period adjustment was made to the Housing and Community Development to decrease fund balance in the amount of $346,163 to correct loans booked in the prior year.

A prior year adjustment was made to the Central Service Fund to decrease the net position in the amount of $466,728 to account for the correction to Construction Work In Progress (CWIP) from prior years.

A prior year adjustment was made to the Information Technology Fund to decrease the net position in the amount of $553,241 to account for the correction to Construction Work In Progress (CWIP) from prior years.

Total Governmental Activities prior year adjustments: ($4,901,802) Business-type Activities
A prior year adjustment was made to the Water Fund to decrease the net position in the amount of $10,354,065 to account for the correction to Construction Work In Progress (CWIP) from prior years.

A prior year adjustment was made to the Sewer Fund to decrease the net position in the amount of $1,955,487 to account for the correction to Construction Work In Progress (CWIP) from prior years.

A prior year adjustment was made to the Bus Fund to increase the net position in the amount of $26,830 to correct revenues from prior years.

A prior year adjustment was made to the Storm Drain Fund to decrease the net position in the amount of $131,751 to account for the correction to Construction Work In Progress (CWIP) from prior years.

Total Business-type Activities prior year adjustments: ($12,414,473)

Total prior year adjustments: ($17,316,275)

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J. SUBSEQUENT EVENTS
On June 28, 2022 the Council called an election to be held on November 8, 2022 for voter consideration of a ballot measure seeking voter approval to impose a one-cent transaction and use (sales) tax for general City services. On November 8, 2022 Modesto Citizens voted to increase the sales tax from 7.875% to 8.875%. This increase to the sales tax rate is expected to generate $39 million annually to the City’s general fund which will be used to fund public safety, cleaner and safer parks, blight and to address homelessness, amongst other things.

On September 13, 2022, the Council authorized an agreement between the City of Modesto and the Salida Fire Protection District for a five-year term, with a two-year extension option in which the City of Modesto agrees to provide fire protection services beyond the City’s current jurisdictional boundaries. This agreement will generate approximately $9.5 million in new revenues to the General Fund over the five- year term. The approximate anticipated expenses to the General Fund in order to fulfill this agreement are approximately $9.2 million.

On September 20, 2022, trial began in a case brought by the City against the Dow Chemical Company and PPG involving tetrachloroethylene also known as PCE, a chemical manufactured by Dow and PPG Industries for use in dry cleaning. The complaints in the case were originally filed in 1998 and the case has been through multiple trials and appeals over the last 24 years. The current trial involves more than fifteen(15) dry cleaning sites, each of which will be tried separately. It will take several years to try all sites, and no final judgment will be entered until all sites have been tried. The first site to be tried involved the former Vogue Cleaners location. The jury awarded the City $4 million in compensatory damages and $56.3 million in punitive damages, but these awards are subject to challenge and will not in any event become final until after the rest of the case is tried.

K. DISPOSAL OF TRANSIT OPERATIONS
On January 6, 2021, the City Council authorized the Joint Powers Agency Agreement to form the Stanislaus Regional Transit Authority (StanRTA), which consolidated Stanislaus County’s public transportations services and City of Modesto’s public transportations services into one regionalized public transportation agency. This consolidation has the potential to enhance transit service, reduce overall costs of service and will lead to a ore “easy to use” public transportation option for residents by having a more coordinated transit service in the County. Effective July 1, 2021, the City Transferred all of its transit operations to StanRTA. This led to the closing of the Bus Enterprise Fund, transit assets and liabilities were transferred to StanRTA to support the new transit operator for the County. All remaining transit assets held by the City after the dissolution of the Bus Fund were transferred to other City funds. This disposal of transit operations led to a loss of transfer of operations of $19,461,712 for year ended June 30 2022. 77 #1..
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Miscellaneous Plan
Measurement Period 2020-2021 2019-2020 2018-2019 2017-2018 2016-2017 2015-2016 2014-2015 2013-2014

TOTAL PENSION LIABILITY
Service Cost $ 7,916,536 $ 7,723,070 $ 7,583,252 $ 7,365,767 $ 6,992,542 $ 6,092,179 $ 5,768,082 $ 6,400,912 Interest on Total Pension Liability 34,981,202 33,802,792 32,749,831 31,433,420 30,399,913 29,752,178 28,873,755 28,037,915 Changes of Assumptions - - (2,477,241) - 24,124,929 (6,709,358) - - Difference Between Expected and Actual Experience 1,935,811 (39,916) 3,777,379 2,514,973 (1,956,450) (2,005,545) (3,177,191) - Benefit Payments, Including Refunds of Employee Contributions (27,832,629) (26,321,649) (24,951,032) (23,596,900) (22,727,426) (21,686,131) (20,945,229) (20,334,821) Net Change in Total Pension Liability 17,000,920 15,164,297 19,159,430 15,240,019 36,833,508 12,152,681 3,810,059 14,104,006 Total Pension Liability – Beginning 497,269,825 482,105,528 462,946,098 447,706,079 410,872,571 398,719,890 394,909,831 380,805,825 Total Pension Liability – Ending (a) $ 514,270,745 $ 497,269,825 $ 482,105,528 $ 462,946,098 $ 447,706,079 $ 410,872,571 $ 398,719,890 $ 394,909,831

PLAN FIDUCIARY NET POSITION
Contributions – Employer $ 13,607,488 $ 11,857,136 $ 10,158,019 $ 8,553,955 $ 8,382,192 $ 6,920,358 $ 5,632,179 $ 4,654,055 Contributions – Employee 3,732,886 3,522,762 3,479,149 3,393,722 3,396,338 3,349,400 3,061,157 2,853,492 Net Investment Income 80,411,612 17,470,077 22,333,423 27,586,156 33,859,910 1,667,540 7,093,159 48,702,803 Benefit Payments, Including Refunds of Employee Contributions (27,832,629) (26,321,649) (24,951,032) (23,596,900) (22,727,426) (21,686,131) (20,945,229) (20,334,821) Plan to Plan Resource Movement - - - (181) 505 (1,118) (188) - Administrative Expense (358,459) (497,374) (244,082) (510,454) (450,482) (192,011) (355,544) - Other Miscellaneous Income/(Expense) (1) - - 796 (969,360) - - - - Net Change in Fiduciary Net Position 69,560,898 6,030,952 10,776,273 14,456,938 22,461,037 (9,941,962) (5,514,466) 35,875,529 Plan Fiduciary Net Position – Beginning (2) 358,840,146 352,809,194 342,032,921 327,575,983 305,114,946 315,056,908 320,571,374 284,695,845 Plan Fiduciary Net Position – Ending (b) 428,401,044 358,840,146 352,809,194 342,032,921 327,575,983 305,114,946 315,056,908 320,571,374 Plan Net Pension Liability – Ending (a) - (b) $ 85,869,701 $ 138,429,679 $ 129,296,334 $ 120,913,177 $ 120,130,096 $ 105,757,625 $ 83,662,982 $ 74,338,457 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 83.30% 72.16% 73.18% 73.88% 73.17% 74.26% 79.02% 81.18% Covered-Employee Payroll(3) $ 53,688,851 $ 53,453,630 $ 50,907,972 $ 49,812,447 $ 46,735,345 $ 45,207,621 $ 41,562,776 $ 44,125,963 Plan Net Pension Liability as a Percentage of Covered-Employee Payroll(3) 159.94% 258.97% 253.98% 242.74% 257.04% 233.94% 201.29% 168.47% NOTE: There are no assets accumulated in a trust to pay related benefits for the pension plan. (1)
(2) Includes any beginning of year adjustment.
(3)
* The pension schedules are required to show ten years of data and the additional years’ information will be displayed as it becomes available.

Includes one year’s payroll growth using 2.75% payroll growth assumption for fiscal years ended June 30, 2018-19; 3% payroll growth assumption for fiscal years ended June 30, 2014-17.

During fiscal year 2017-18, as a result of Governmental Accounting Standards Board Statement (GASB) No. 75, Accounting and Financial Reporting for Postemployment Benefit Plans Other than Pensions (GASB 75), CalPERS reported its proportionate share of activity related to postemployment benefits for participation in the State of California’s agent OPEB plan. Accordingly, CalPERS recorded a one-time expense as a result of the adoption of GASB 75. Additionally, CalPERS employees participate in various State of California agent pension plans and during fiscal year 2017-18, CalPERS recorded a correction to previously reported financial statements to properly reflect its proportionate share of activity related to pensions in accordance with GASB Statement No. 68, Accounting and Financial Reporting for Pensions (GASB 68).

City of Modesto
Schedule of Changes in the Net Pension Liability and Related Ratios For the Year Ended June 30th
Last Ten Fiscal Years *
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Safety Plan
Measurement Period 2020-2021 2019-2020 2018-2019 2017-2018 2016-2017 2015-2016 2014-2015 2013-2014

TOTAL PENSION LIABILITY
Service Cost $ 11,100,896 $ 10,961,188 $ 9,984,949 $ 9,648,518 $ 9,298,519 $ 8,193,455 $ 8,633,865 $ 8,970,868 Interest on Total Pension Liability 46,176,343 44,407,891 42,759,837 40,490,329 39,048,366 38,004,835 36,721,112 35,310,732 Changes of Assumptions - - (2,434,317) - 33,217,275 (9,188,394) - - Difference Between Expected and Actual Experience 3,056,480 2,147,305 12,017,379 2,992,729 (3,102,753) (2,184,871) (849,707) - Benefit Payments, Including Refunds of Employee Contributions (34,350,284) (33,173,358) (31,487,589) (29,678,588) (28,147,381) (26,911,771) (25,426,619) (24,313,823) Net Change in Total Pension Liability 25,983,435 24,343,026 33,274,576 21,018,671 50,314,026 17,101,648 9,890,257 19,967,777 Total Pension Liability – Beginning 654,391,208 630,048,182 596,773,606 575,754,935 525,440,909 508,339,261 498,449,004 478,481,227 Total Pension Liability – Ending (a) $ 680,374,643 $ 654,391,208 $ 630,048,182 $ 596,773,606 $ 575,754,935 $ 525,440,909 $ 508,339,261 $ 498,449,004

PLAN FIDUCIARY NET POSITION
Contributions – Employer $ 21,650,057 $ 20,241,960 $ 16,758,148 $ 14,809,730 $ 12,812,060 $ 11,137,899 $ 10,210,101 $ 8,963,542 Contributions – Employee 3,864,069 3,770,808 3,402,676 3,400,369 3,165,011 2,962,566 2,800,626 2,939,117 Net Investment Income 97,134,657 20,809,917 26,427,421 32,428,941 39,443,735 1,898,536 8,215,387 56,385,743 Benefit Payments, Including Refunds of Employee Contributions (34,350,284) (33,173,358) (31,487,589) (29,678,588) (28,147,381) (26,911,771) (25,426,619) (24,313,823) Plan to Plan Resource Movement - - - (1,551) (505) 1,118 211 - Administrative Expense (428,116) (588,586) (287,372) (597,550) (526,677) (224,190) (414,089) - Other Miscellaneous Income/(Expense) (1) - - 936 (1,134,757) - - - - Net Change in Fiduciary Net Position 87,870,383 11,060,741 14,814,220 19,226,594 26,746,243 (11,135,842) (4,614,383) 43,974,579 Plan Fiduciary Net Position – Beginning (2) 428,570,245 417,509,504 402,695,284 383,468,690 356,722,447 367,858,289 372,472,672 328,498,093 Plan Fiduciary Net Position – Ending (b) 516,440,628 428,570,245 417,509,504 402,695,284 383,468,690 356,722,447 367,858,289 372,472,672 Plan Net Pension Liability – Ending (a) - (b) $ 163,934,015 $ 225,820,963 $ 212,538,678 $ 194,078,322 $ 192,286,245 $ 168,718,462 $ 140,480,972 $ 125,976,332 Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 75.91% 65.49% 66.27% 67.48% 66.60% 67.89% 72.36% 74.73% Covered-Employee Payroll(3) $ 40,453,345 $ 38,050,908 $ 33,819,770 $ 32,259,582 $ 30,608,378 $ 30,022,552 $ 31,202,983 $ 31,090,551 Plan Net Pension Liability as a Percentage of Covered-Employee Payroll(3) 405.24% 593.47% 628.45% 601.61% 628.21% 561.97% 450.22% 405.19% NOTE: There are no assets accumulated in a trust to pay related benefits for the pension plan. (1)
(2) Includes any beginning of year adjustment.
(3)
* The pension schedules are required to show ten years of data and the additional years’ information will be displayed as it becomes available.

Includes one year’s payroll growth using 2.75% payroll growth assumption for fiscal year ended 2018-19; 3% payroll growth assumption for fiscal years ended June 30, 2014-17.

City of Modesto
Schedule of Changes in the Net Pension Liability and Related Ratios (continued) For the Year Ended June 30th
Last Ten Fiscal Years *
During fiscal year 2017-18, as a result of Governmental Accounting Standards Board Statement (GASB) No. 75, Accounting and Financial Reporting for Postemployment Benefit Plans Other than Pensions (GASB 75), CalPERS reported its proportionate share of activity related to postemployment benefits for participation in the State of California’s agent OPEB plan. Accordingly, CalPERS recorded a one-time expense as a result of the adoption of GASB 75. Additionally, CalPERS employees participate in various State of California agent pension plans and during fiscal year 2017-18, CalPERS recorded a correction to previously reported financial statements to properly reflect its proportionate share of activity related to pensions in accordance with GASB Statement No. 68, Accounting and Financial Reporting for Pensions (GASB 68). 82 #1..
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Miscellaneous Plan
Fiscal Year 2021-2022 2020-2021 2019-2020 2018-2019 2017-2018 2016-2017 2015-2016 2014-2015 Actuarially Determined Contribution (2) $ 14,308,353 $ 12,406,705 $ 11,856,209 $ 10,158,019 $ 8,553,955 $ 8,382,192 $ 6,920,358 $ 5,632,179 Contributions in Relation to the Actuarially Determined Contribution (2) (14,308,353) (12,406,705) (11,856,209) (10,158,019) (8,553,955) (8,382,192) (6,920,358) (5,632,179) Contribution Deficiency (Excess) $ - $ - $ - $ - $ - $ - $ - $ - Covered-Employee Payroll (3) $ 53,475,967 $ 53,688,651 $ 53,453,630 $ 50,907,972 $ 49,812,447 $ 46,735,345 $ 45,207,621 $ 41,562,776 Contributions as a Percentage of Covered-Employee Payroll (3) 26.76% 23.11% 22.18% 19.95% 17.17% 17.94% 15.31% 13.55% Safety Plan
Fiscal Year 2021-2022 2020-2021 2019-2020 2018-2019 2017-2018 2016-2017 2015-2016 2014-2015 Actuarially Determined Contribution (2) $ 23,331,623 $ 18,745,767 $ 18,940,948 $ 16,758,148 $ 14,809,730 $ 12,812,060 $ 11,137,889 $ 10,210,101 Contributions in Relation to the Actuarially Determined Contribution (2) (23,331,623) (18,745,767) (18,940,948) (16,758,148) (14,809,730) (12,812,060) (11,137,889) (10,210,101) Contribution Deficiency (Excess) $ - $ - $ - $ - $ - $ - $ - $ - Covered-Employee Payroll (3) $ 36,824,044 $ 36,973,443 $ 38,050,908 $ 33,819,770 $ 32,259,582 $ 30,608,378 $ 30,022,552 $ 31,202,983 Contributions as a Percentage of Covered-Employee Payroll (3) 63.36% 50.70% 49.78% 49.55% 45.91% 41.86% 37.10% 32.72% NOTE: There are no assets accumulated in a trust to pay related benefits for the pension plan. (1)
(2)
(3)
City of Modesto
Schedule of Plan Contributions (1)
Last Ten Fiscal Years*
* The pension schedules are required to show ten years of data and the additional years’ information will be displayed as it becomes available.

Includes one year’s payroll growth using 2.75% payroll assumption for fiscal year 2017- 18; 3% payroll assumption for fiscal years ended June 30, 2014-17.

Historical information is required only for fiscal year for which GASB 68 is applicable. As prescribed in GASB 68, paragraph 46, the information presented in the Schedule of Plan Contributions should also be determined as of the employer’s most recent fiscal year-end. The employer is responsible for determining this information as prescribed by the standard as this data is not available to CalPERS.

Employers are assumed to make contributions equal to the actuarially determined contributions. However, some employers may choose to make additional contributions towards their unfunded liability. Employer contributions for such plans exceed the actuarially determined contributions.
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FY 2021-2022 FY 2020-21 FY 2019-2020 FY 2018-2019 FY 2017-2018 Measurement Period June 30, 2021 June 30, 2020 June 30, 2019 June 30, 2018 June 30, 2017 Total OPEB liability
Service cost $ 1,196,410 $ 836,292 $ 811,934 $ 963,490 $ 935,427 Interest 667,183 903,896 1,013,863 1,038,035 892,669
Differences between expected and actual experience - 1,737,964 - (468,009) - Changes of assumptions 129,927 3,430,611 754,247 (1,306,633) (1,600,635) Benefit payments (2,869,050) (2,941,351) (3,012,214) (2,733,246) (2,430,468) Net change in total OPEB liability (875,530) 3,967,412 (432,170) (2,506,363) (2,203,007) Total OPEB liability ‐ beginning 30,427,400 26,459,988 26,892,158 29,398,521 31,601,528 Total OPEB liability ‐ ending (a) $ 29,551,870 $ 30,427,400 $ 26,459,988 $ 26,892,158 $ 29,398,521 Covered-Employee Payroll $ 52,545,565 $ 54,106,179 $ 50,879,818 $ 49,647,245 $ 55,637,076 Total OPEB liablity as a Percentage of Covered-Employee Payroll 56.24% 56.24% 52.00% 54.17% 52.84% Notes to Schedule:
*There are no assets accumulated in a trust to pay related benefits for the OPEB plan. *Amounts presented above were determined as of June 30th. Additional years will be presented as they become available. *Historical information is required only for measurement periods for which GASB 75 is applicable. Future years’ information will be displayed up to 10 years as City of Modesto
Schedule of Changes in the OPEB Liability and Related Ratios Last Ten Fiscal Years*
84 #1..
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Fiscal Year 2021-2022 2020-2021 2019-2020 2018-2019 2017-2018 2016-2017 2015-2016 Actuarially Determined Contribution (ADC) $ 4,114,604 $ 2,869,050 $ 3,569,890 $ 3,012,214 $ 2,733,246 $ 2,430,468 $ 2,527,076 Contributions in Relation to the ADC (4,114,604) (2,869,050) (3,569,890) (3,012,214) (2,733,246) (2,430,468) (2,527,076) Contribution Deficiency (Excess) $ - $ - $ - $ - $ - $ - $ - Covered-Employee Payroll $52,727,185 $52,545,565 $54,106,179 $50,879,818 $49,647,245 $55,637,076 $49,552,706 Contributions as a Percentage of Covered-Employee Payroll 7.80% 5.46% 6.60% 5.92% 5.51% 4.37% 5.10% Notes to schedule:

The actuarial methods and assumptions used to set the actuarially determined contributions for fiscal year 2019-20 were as follows for June 30, 2019 measurement date actuarial valuations.

Actuarial Cost Method Entry Age Normal
Discount Rate 2.21% at June 30, 2020 (Bond Buyer 20-Bond Index).

3.5% at June 30, 2019 (Bond Buyer 20-Bond Index).

Asset Valuation Method N/A – Couldn’t find this in the 2020 report General Inflation 2.5% annually
Salary Increases 3%
Trend 5.8% for 2021, fluctuating to an ultimate rate of 4.0% in 2076 Retirement Age CalPERS 1997-2015 Experience Study
Mortality CalPERS 1997-2015 Experience Study
Post-retirement mortality projected fully generational with MW Scale 2020 *Historical information is required only for measurement periods for which GASB 75 is applicable. Future years’ information will be displayed up to 10 years as information becomes available. *There are no assets accumulated in a trust to pay related benefits for the OPEB plan.

City of Modesto
Schedule of Contributions
Last Ten Fiscal Years *
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Variance with
Original Final Actual Final Budget
TAXES
Utility users tax $ 20,510,000 $ 20,710,000 $ 20,918,653 $ 208,653 Property tax 20,020,000 20,020,000 19,757,550 (262,450) Transient occupancy tax 3,266,575 3,393,210 3,621,190 227,980 Franchise tax 4,852,284 4,852,284 5,413,751 561,467
Cannabis tax 5,200,000 5,200,000 4,022,799 (1,177,201)
Business license tax 13,400,000 13,551,800 15,263,225 1,711,425 Total taxes 67,248,859 67,727,294 68,997,168 1,269,874
LICENSES AND PERMITS 421,350 421,350 389,431 (31,919)

INTERGOVERNMENTAL
Sales tax 33,090,991 37,191,553 40,389,650 3,198,097
Motor vehicle license fees 19,704,039 19,770,039 19,881,139 111,100 State 975,000 975,000 1,366,939 391,939
County 44,482 44,482 231,185 186,703
Other intergovernmental 7,998,107 13,964,599 15,779,325 1,814,726 Total intergovernmental 61,812,619 71,945,673 77,648,238 5,702,565

CHARGES FOR SERVICES
General government 2,899,604 2,850,261 2,598,192 (252,069) Community development 2,860,077 2,859,942 2,585,310 (274,632) Parks and recreation 2,659,498 2,657,900 1,793,195 (864,705) Public safety 5,059,992 4,358,128 7,691,560 3,333,432
Indirect cost recovery 3,894,887 3,581,340 3,580,171 (1,169) Total charges for services 17,374,058 16,307,571 18,248,428 1,940,857 SPECIAL ASSESSMENT 315,425 411,111 397,261 (13,850)
INTEREST AND RENT 674,029 674,029 851,323 177,294

NET DECREASE IN FAIR VALUE
OF INVESTMENTS - - (467,680) (467,680)
FINES AND FORFEITS 375,753 516,753 617,607 100,854

MISCELLANEOUS
Mandated cost recovery 70,000 70,000 155,145 85,145
Other 467,231 467,231 915,460 448,229
Total miscellaneous 537,231 537,231 1,070,605 533,374
Total revenues $ 148,759,324 $ 158,541,012 $ 167,752,381 $ 9,211,369 Budget
The notes to required supplementary information are an integral part of this schedule.

SCHEDULE OF REVENUES - BUDGET (GAAP BASIS) AND ACTUAL - GENERAL FUND

CITY OF MODESTO
FISCAL YEAR ENDED JUNE 30, 2022
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Variance with
Original Final Actual Final Budget
General government:

City council $ 469,386 $ 462,357 $ 459,016 $ 3,341
Human resources 1,716,639 1,749,913 1,679,381 70,532
City manager 2,775,294 3,119,767 3,074,402 45,365
City attorney 1,866,358 1,898,763 1,888,706 10,057
City clerk/auditor 948,865 955,718 600,050 355,668
Finance 5,822,592 5,963,137 5,401,192 561,945
Other 433,100 981,981 445,862 536,119
Total general government 14,032,234 15,131,636 13,548,609 1,583,027 Community development: 6,615,651 6,752,465 5,916,615 835,850 Parks and recreation:

Administration 803,593 823,436 849,321 (25,885)
Planning and development 853,982 869,265 763,419 105,846 Convention visitors bureau 682,000 493,210 875,168 (381,958) Operations service and maintenance 6,120,465 6,213,104 5,836,567 376,537 Facilities 1,316,265 1,791,815 1,264,453 527,362
Recreation division 4,468,415 4,559,231 3,108,055 1,451,176 Total parks and recreation 14,244,720 14,750,061 12,696,983 2,053,078 Public safety:

Fire protection 44,939,064 56,032,196 56,032,196 -
Police protection 71,403,334 70,752,132 67,141,464 3,610,668 Total public safety 116,342,398 126,784,328 123,173,660 3,610,668 Debt service:

Principal retirement 491,383 680,360 675,904 4,456
Interest expenditures 114,162 182,269 182,269 -
Total debt service 605,545 862,629 858,173 4,456
Total expenditures $ 151,840,548 $ 164,281,119 $ 156,194,040 $ 8,087,079 The notes to required supplementary information are an integral part of this schedule.

Budget

CITY OF MODESTO

SCHEDULE OF EXPENDITURES BY FUNCTION - BUDGET
(GAAP BASIS) AND ACTUAL - GENERAL FUND
FISCAL YEAR ENDED JUNE 30, 2022
NOTE: The expenditures by function amounts listed above include the capital outlay expenditures within each department. 87 #1..
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Variance with
Original Final Actual Final Budget
REVENUES:

Taxes $ 380,000 $ 359,352 380,000 $ (20,648)
Licenses and permits 35,000 35,000 43,632 8,632
Intergovernmental 13,707,347 16,774,749 12,794,384 (3,980,365) Charges for services 5,764,999 5,764,999 4,492,533 (1,272,466) Special assessments 69,474 69,474 71,619 2,145
Interest and rent 65,690 90,056 172,001 81,945
Net (decrease) in fair value of investments - - (68,027) (68,027) Donations and contributions 353,273 412,005 44,338 (367,667) Miscellaneous 224,670 261,670 183,692 (77,978)
Total revenues 20,600,453 23,787,953 18,093,524 (5,694,429) EXPENDITURES:

General government 282,917 336,578 244,407 92,171
Community development 9,832,106 10,892,543 7,612,089 3,280,454 Highways and streets - 54,352 63,169 (8,817)
Public works 3,964,288 4,735,478 3,215,409 1,520,069
Parks and recreation 2,428,579 2,490,182 69,229 2,420,953 Public safety 4,515,331 6,899,531 7,017,094 (117,563)
Total expenditures 21,023,221 25,408,664 18,221,397 7,187,267

EXCESS (DEFICIT) OF REVENUES OVER
(UNDER) EXPENDITURES (422,768) (1,620,711) (127,873) 1,492,838 OTHER FINANCING SOURCES (USES):

Transfers in 416,552 964,436 512,230 (452,206)
Transfers out - (3,686) (3,540) 146
TOTAL OTHER FINANCING SOURCES (USES) 416,552 960,750 508,690 (452,060) CHANGES IN FUND BALANCE (6,216) (659,961) 380,817 1,040,778 FUND BALANCE, JULY 1 2,103,520 2,103,520 2,103,520 -
FUND BALANCE, JUNE 30 $ 2,097,304 $ 1,443,559 $ 2,484,337 $ 1,040,778

SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE -

CITY OF MODESTO
FISCAL YEAR ENDED JUNE 30, 2022

BUDGET (GAAP BASIS) AND ACTUAL - OPERATING GRANTS SPECIAL REVENUE FUND Budget
The notes to required supplementary information are an integral part of this schedule.

NOTE: The expenditures by function amounts listed above include the capital outlay expenditures within each department. 88 #1..
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Variance with
Original Final Actual Final Budget
REVENUES:

Intergovernmental - federal grants $ 13,666,091 $ 22,670,437 $ 8,000,014 $ (14,670,423) Charges for services 1,069,606 1,069,606 776,012 (293,594) Total revenues 14,735,697 23,740,043 8,776,026 (14,964,017) EXPENDITURES:

Community development 17,309,336 28,292,930 7,356,964 20,935,966 Debt service:

Principal retirement 297,000 297,000 297,000 -
Interest 30,150 30,150 30,150 -
Other - - 638 (638)
Total expenditures 17,636,486 28,620,080 7,684,752 20,935,328

EXCESS (DEFICIT) OF REVENUES OVER
(UNDER) EXPENDITURES (2,900,789) (4,880,037) 1,091,274 5,971,311 OTHER FINANCING SOURCES (USES):

Transfers out (550,000) (855,970) (1,078,170) (222,200) TOTAL OTHER FINANCING SOURCES (USES) (550,000) (855,970) (1,078,170) (222,200) CHANGES IN FUND BALANCE (3,450,789) (5,736,007) 13,104 5,749,111 FUND BALANCE, JULY 1 34,146,986 34,146,986 34,146,986 - PRIOR PERIOD ADJUSTMENT - - (346,163) (346,163)
FUND BALANCE, JUNE 30 $ 30,696,197 $ 28,410,979 $ 33,813,927 $ 5,402,948 FISCAL YEAR ENDED JUNE 30, 2022

AND COMMUNITY DEVELOPMENT SPECIAL REVENUE FUND

FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL - HOUSING

SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN

CITY OF MODESTO
Budget
NOTE: The expenditures by function amounts listed above include the capital outlay expenditures within each department. 89 #1..
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90 #1..
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CITY OF MODESTO

NOTES TO REQUIRED SUPPLEMENTARY INFORMATION
FISCAL YEAR ENDED JUNE 30, 2022
BUDGETARY INFORMATION - The City follows these procedures annually in establishing the budgetary data reflected in the budgetary comparison schedules for operating, non-capital multi-year, and capital budgets:

1. The City Manager submits to the City Council a proposed budget for the fiscal year commencing the following July 1. The budget includes proposed expenditures and the means of financing them for operating, non-capital multi-year and capital projects.

2. The City Council reviews the proposed budget at specially scheduled sessions, which are open to the public. The Council also conducts a public hearing on all proposed budgets to obtain comments from interested persons.

3. Prior to July 1, the budget is legally adopted through adoption of a resolution. This budget is reported as the Original Budget in the budgetary comparison schedules.

4. During the fiscal year, changes to the Adopted Budget may be authorized, as follows:
a. Authority to approve any adjustment in the amount of $25,000 or less is delegated to the Budget Manager.
b. Authority to approve any adjustment in an amount between $25,000 and $50,000 is delegated to the City Manager.
c. Authority for any budget adjustment more than $50,000 is delegated to the parties described below:
a. Items requiring City Council Action – appropriation of undesignated reserves; appropriation of new revenues; transfers of appropriations between funds (inter-fund transfers); creation of inter-fund loans; creation of, or increase in, any multi-year appropriation. b. Items delegated to the City Manager – transfer appropriations between departments within a fund; changing any capital equipment appropriation; appropriation of reserves for litigation on a case-by-case basis; appropriation of developer payments not previously budgeted. c. Items delegated to the Budget Manager – appropriation of grant interest; revise the allocation of Internal Service Fund charges between departments provided that the total allocated amount does not increase; changing any capital improvement budget line item appropriation; make technical budget corrections to implement the intent of Council approved actions and resolutions.
d. Items delegated to Department Directors – transfer appropriations within a department, within a single fund.

5. Formal budgetary accounting is employed as a management tool for all funds. Annual budgets are legally adopted and amended as required for the general, special revenue, enterprise and internal service funds. Project length budgets are adopted for the capital projects funds. All budgets are prepared on a basis consistent with generally accepted accounting principles (GAAP), and budgetary comparisons for the general and major special revenue funds are presented on this basis in the required supplementary information. A debt service payment schedule for the debt service funds is also approved as part of the budget process.

6. Budget amounts are reflected after all authorized amendments and revisions. This budget is reported as the Final Budget in the budgetary comparison schedules. 91 #1..
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CITY OF MODESTO

NOTES TO REQUIRED SUPPLEMENTARY INFORMATION (CONTINUED) FISCAL YEAR ENDED JUNE 30, 2022

7. For each legally adopted operating budget, expenditures may not exceed budgeted appropriations at the appropriation unit level. The legal appropriation basis is at the level called "department". A "department" for legal appropriation purposes may be a single organization (e.g., City Attorney), or an entire department having multiple organizations within the same fund (e.g., Operations and Maintenance), or an entire fund (e.g., Downtown Improvement District). All departments and funds completed the year within their legally authorized expenditures. Encumbrance accounting, under which purchase orders, contracts and other commitments are recorded to reserve the applicable appropriations, is employed in the governmental funds.

The City does, however, honor the contracts represented by year-end encumbrances and the subsequent year's appropriations provide authority to complete these transactions. 92 #1..
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COMBINING AND INDIVIDUAL FUND

STATEMENTS AND SCHEDULES
93 #1..
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94 #1..
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Nonmajor Governmental Funds
Nonmajor Special Revenue Funds
Special Revenue Funds include funds which are restricted as to use by the Federal or State governments, and special purpose funds established by authority of the City Council. Nonmajor Special Revenue Funds include:

LOCAL TRANSPORTATION FUND – To account for revenues and expenditures of Local Transportation Fund allocations for streets, urban trails, and non-motorized facilities. Allocations for the City bus system are reported directly in the Bus Enterprise Fund.

TRAFFIC SAFETY FUND – To account for receipts and expenditures of traffic safety fines.

DOWNTOWN IMPROVEMENT DISTRICT FUND – To account for the fiscal activities of Business Improvement Area A and Downtown Modesto Community Benefit District of the City of Modesto.

STRATEGIC PLANNING AND DEVELOPMENT FUND – Established to provide a funding source for future village planning, general plan update and other large expenses related to planning and development. This fund was originally financed with an apportionment of the PERS rebate related to AB702. Subsequent funding has been provided by transfers from the General Fund. Future funding will be provided by fees imposed on private development.

TRANSPORTATION SPECIAL TAX FUND – To account for state-collected, locally-shared gas tax, 25 year, ½ cent sales tax Measure L, SB-1 (Road Repair and Accountability Act of 2017) monies. This fund may be used for all road and traffic purposes including construction, purchase of rights-of-way, and maintenance.

Nonmajor Capital Projects Funds
Capital Projects Funds are used to account for financial resources to be used for the acquisition or construction of major capital facilities other than those financed by proprietary funds. Nonmajor Capital Projects Funds include:

SPECIAL FUND FOR CAPITAL OUTLAYS – To account for capital outlay authorized by the City Council. No monies placed in this fund are to be disbursed except for this purpose unless authorized by a vote of the people.

PARKS FUND – To account for a discretionary transfer of General Fund property tax revenue to provide for the development of parks within the City, as directed by the City Council.

SECURITIES FOR FUTURE IMPROVEMENTS FUND – To account for the collection of impact fees for approved development projects to construct facilities needed for future development.

COMMUNITY FACILITIES DISTRICTS FUND – To account for the construction of public improvements deemed to benefit properties against which special taxes are levied.

SUCCESSOR REDEVELOPMENT HOUSING AGENCY FUND – To account for the housing redevelopment capital projects financed by the Successor Redevelopment Housing Agency of the City of Modesto.

CAPITAL FACILITY FEES FUND – To account for special fees collected on new building permits to be used for construction of certain growth related projects. The fees and related capital projects include police department expansion, fire department expansion, expressway loop, street lights, street improvements, parks, new traffic signals, City downtown, wastewater treatment, public transportation, and air quality improvements. 95 #1..
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Nonmajor Capital Projects Funds (continued)
TRANSPORTATION SPECIAL TAX CAPITAL FUND – To account for receipts and disbursements of Governmental Fund capital projects funded through locally-shared gas tax, 25 year, ½ cent sales tax Measure L, and SB-1 (Road Repair and Accountability Act of 2017) monies.

Nonmajor Debt Service Fund
Debt Service Funds are used to account for the accumulation of resources for, and the payment of, general longterm debt principal and interest. Nonmajor Debt Service Fund includes:

PUBLIC FINANCING AUTHORITY FUND – To account for payment of debt issued to finance projects authorized by the Modesto Public Financing Authority.
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97 #1..
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Downtown Strategic
Local Traffic Improvement Planning and Transportation
Transportation Safety District Development Special Tax
ASSETS
Cash and cash equivalents $ 1,733,065 $ 4,104 $ 223,179 $ 2,134,297 $ 38,659,471 Receivables:

Accounts, net - - - - 438,082
Interest - - 174 3,717 83,284
Taxes - - 51,695 - -
Leases - - - - -
Due from governments - - - - 5,050,003
Prepaid expenditures - - - 83 3,806
Restricted assets:

Cash and cash equivalents 1,774 4,309,175 - - -
Cash and cash equivalents with fiscal agent - - - - -
Due from governments - 30,314 - - -
Notes receivable, net - - - - -
Total assets $ 1,734,839 $ 4,343,593 $ 275,048 $ 2,138,097 $ 44,234,646

LIABILITIES AND

AND FUND BALANCES
Liabilities:

Accounts payable $ $ - $ 275,318 - $ 29,881 $ 730,517
Accrued salaries and benefits - 4,104 - - 133,784
Interest payable - - - - -
Unearned revenue 1,733,065 - - - -
Payable from restricted assets:

Refundable deposits - - - - -
Advances from other funds - - - 158,642 -
Total liabilities 1,733,065 4,104 275,318 188,523 864,301 Deferred inflows of resources:

Unavailable revenue - - - - 27,912
Leases - - - - -
Total deferred inflows of resources - - - - 27,912
Fund balances:

Nonspendable - - - 83 3,806
Restricted 1,774 4,339,489 - - -
Assigned - - - 1,949,491 43,338,627
Unassigned - - (270) - -
Total fund balances 1,774 4,339,489 (270) 1,949,574 43,342,433 Total liabilities and fund balances $ 1,734,839 $ 4,343,593 $ 275,048 $ 2,138,097 $ 44,234,646 Special Revenue

CITY OF MODESTO

COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS
JUNE 30, 2022
98 #1..
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Special Fund Securities Community Successor Capital Transportation for Capital for Future Facilities Redevelopment Facility Special Tax Outlays Parks Improvements Districts Housing Agency Fees Capital $ 265,516 $ $ - $ 194,381 - $ $ 38,306 - $ 104,330
- - - 40 - 600 -
6,287 1,562 - 47,648 - 86,114 -
- - - 88,522 - - -
- 424,203 - 1,091,594 - - -
- - - - 1,192,004 5,802,324 -
- - - 251 - - -
2,552,453 612,068 73,795 21,585,855 38,758,551 - -
- - - - - - -
- - - - - - -
- - - - 2,211,000 - -
$ 2,824,256 $ 1,037,833 $ 73,795 $ 23,008,291 $ 3,403,004 $ 44,685,895 $ 104,330 $ $ - $ $ 183,650 - $ 256,582 $ 469,231 $ 104,330
- - - 18,837 - - -
- - - - 857 - -
- - - - - - -
- - - 39,446 - - -
271,803 - - 50,279 145,727 608,731 -
271,803 - 292,212 403,166 1,077,962 104,330
- - - 53,529 - 4,849,382 -
- 416,304 - 1,076,444 - - -
- 416,304 - 1,129,973 - 4,849,382 -
- - - 251 - - -
2,552,453 621,529 73,795 21,585,855 2,211,000 38,758,551 - - - - 788,838 - -
- - - - - - -
2,552,453 621,529 73,795 21,586,106 2,999,838 38,758,551 - $ 2,824,256 $ 1,037,833 $ 73,795 $ 23,008,291 $ 3,403,004 $ 44,685,895 $ 104,330 Capital Projects
99 #1..
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Debt Service
Public
Financing
Authority Total
ASSETS
Cash and cash equivalents $ $ 43,456,315 99,666
Receivables:

Accounts, net - 438,722
Interest - 228,786
Taxes - 140,217
Leases - 1,515,797
Due from governments - 12,044,331
Prepaid expenditures 225 4,365
Restricted assets:

Cash and cash equivalents - 67,893,671
Cash and cash equivalents with fiscal agent 5,245,920 5,245,920 Due from governments - 30,314
Notes receivable, net - 2,211,000
Total assets $ 5,345,811 $ 133,209,438

LIABILITIES AND FUND

BALANCES
Liabilities:

Accounts payable $ $ 2,147,777 98,268
Accrued salaries and benefits - 156,725
Interest payable - 857
Unearned revenue - 1,733,065
Payable from restricted assets:

Refundable deposits - 39,446
Advances from other funds - 1,235,182
Total liabilities 98,268 5,313,052
Deferred inflows of resources:

Unavailable revenue - 4,930,823
Leases - 1,492,748
- 6,423,571
Fund balances:

Nonspendable 225 4,365
Restricted 5,245,920 75,390,366
Assigned 1,398 46,078,354
Unassigned - (270)
Total fund balances 5,247,543 121,472,815
Total liabilities and fund balances $ 5,345,811 $ 133,209,438

CITY OF MODESTO
COMBINING BALANCE SHEET - NONMAJOR GOVERNMENTAL FUNDS (continued) JUNE 30, 2022
100
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101
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Downtown Strategic
Local Traffic Improvement Planning and Transportation
Transportation Safety District Development Special Tax
REVENUES:

Taxes $ $ - $ 205,995 - $ $ 1,629,667 -
Licenses and permits - - - - 1,055
Intergovernmental 428,475 - - - 23,404,322
Charges for services - 287,941 - 210,131 930,997
Special assessments levied - - 706,624 - -
Interest and rent 665 - 425 15,072 338,030
Net increase (decrease) in fair
value of investments - - (2,294) (57,134) (1,329,675)
Fines and forfeits - 214,903 - - -
Miscellaneous - - - 100,000 72,220
Total revenues 429,140 502,844 910,750 268,069 25,046,616 EXPENDITURES:

Current:

Community development - - 911,060 422,513 -
Highways and streets - - - - 13,058,980
Parks and recreation 1,060 - - - -
Public safety - 510,263 - - -
Capital outlay:

Community development - - - - -
Highways and streets - - - - 171,381
Parks and recreation - - - - -
Public safety - 40,540 - - -
Debt service:

Principal retirement - - - - -
Interest - - - - -
Other - - - - -
Total expenditures 1,060 550,803 911,060 422,513 13,230,361

EXCESS (DEFICIENCY) OF

REVENUES OVER (UNDER)
EXPENDITURES 428,080 (47,959) (310) (154,444) 11,816,255 OTHER FINANCING SOURCES (USES):

Transfers in - - - 705,000 1,564,793
Transfers out (428,082) - - (2,770) (2,776,356)
Sale of assets - - - - 32,551

TOTAL OTHER FINANCING
SOURCES (USES) (428,082) - - 702,230 (1,179,012)
CHANGES IN FUND BALANCES (2) (47,959) (310) 547,786 10,637,243 FUND BALANCES, JULY 1 1,776 4,387,448 40 1,401,788 32,705,190 FUND BALANCES, JUNE 30 $ 1,774 $ 4,339,489 $ (270) $ 1,949,574 $ 43,342,433 Special Revenue

CITY OF MODESTO

COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES

IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS
FISCAL YEAR ENDED JUNE 30, 2022
102
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Special Fund Securities Community Successor Capital Transportation for Capital for Future Facilities Redevelopment Facility Special Tax Outlays Parks Improvements Districts Housing Agency Fees Capital $ $ - $ - $ - $ - $ - $ - -
- - - - - - -
- - - - - 948,142 -
- 5,525 - 962,740 - 7,830,016 -
- - - 4,402,758 - - -
27,419 50,384 191 240,799 99,686 387,165 -
(110,724) (22,200) - (795,810) 17,525 (1,481,604) -
- - - - - - -
- 22,000 - - - 12,790 -
(83,305) 55,709 191 4,810,487 117,211 7,696,509 -
- - - 3,239,875 - 208,419 1,344,897
- - - - - 300,239 -
- 108,688 - - - - -
- - - - - - -
- - - - - 16,555 37,178
- - - - - 3,514,996 1,143,874
- 1,346 - - - 43,002 35,064
- - - - - - 8,023
- - - - - - -
- - - - - - -
- - - - - - -
- 110,034 - 3,239,875 - 4,083,211 2,569,036
(83,305) (54,325) 191 1,570,612 117,211 3,613,298 (2,569,036) 120,000 28,681 - - - 241,838 2,569,036
(4,736) - - (11,356) - (2,296,509) -
- - - - - - -
115,264 28,681 - (11,356) - (2,054,671) 2,569,036
31,959 (25,644) 191 1,559,256 117,211 1,558,627 -
2,520,494 647,173 73,604 20,026,850 2,882,627 37,199,924 - $ 2,552,453 $ 621,529 $ 73,795 $ 21,586,106 $ 2,999,838 $ 38,758,551 $ - Capital Projects
103
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Debt Service
Public
Financing
Authority Total
REVENUES:

Taxes $ $ 1,835,662 -
Licenses and permits - 1,055
Intergovernmental 1,196,246 25,977,185
Charges for services - 10,227,350
Special assessments levied - 5,109,382
Interest and rent 8,306 1,168,142
Net increase (decrease) in fair
value of investments - (3,781,916)
Fines and forfeits - 214,903
Miscellaneous - 207,010
Total revenues 1,204,552 40,958,773
EXPENDITURES:

Current:

Community development - 6,126,764
Highways and streets - 13,359,219
Parks and recreation - 109,748
Public safety - 510,263
Capital outlay:

Community development - 53,733
Highways and streets - 4,830,251
Parks and recreation - 79,412
Public safety - 48,563
Debt service:

Principal retirement 2,390,000 2,390,000
Interest 1,700,627 1,700,627
Other 47,972 47,972
Total expenditures 4,138,599 29,256,552

EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER)
EXPENDITURES (2,934,047) 11,702,221
OTHER FINANCING SOURCES (USES):

Transfers in 2,799,107 8,028,455
Transfers out - (5,519,809)
Sale of assets - 32,551

TOTAL OTHER FINANCING
SOURCES (USES) 2,799,107 2,541,197
CHANGES IN FUND BALANCES (134,940) 14,243,418
FUND BALANCES, JULY 1 5,382,483 107,229,397
FUND BALANCES, JUNE 30 $ 5,247,543 $ 121,472,815

CITY OF MODESTO

COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - NONMAJOR GOVERNMENTAL FUNDS (continued) FISCAL YEAR ENDED JUNE 30, 2022
104
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Variance with
Original Final Actual Final Budget
REVENUES:

Intergovernmental $ $ - $ 428,475 - $ 428,475
Interest and rent - - 665 665
Total revenues - - 429,140 429,140
EXPENDITURES:

Highways and streets 125,000 125,000 - 125,000
Parks and recreation - - 1,060 (1,060)
Total expenditures 125,000 125,000 1,060 123,940
EXCESS OF REVENUES OVER EXPENDITURES (125,000) (125,000) 428,080 553,080 OTHER FINANCING SOURCES (USES):

Transfers out - (931,082) (428,082) 503,000
TOTAL OTHER FINANCING SOURCES (USES) - (931,082) (428,082) 503,000 CHANGES IN FUND BALANCE (125,000) (1,056,082) (2) 1,056,080 FUND BALANCE, JULY 1 1,776 1,776 1,776 -
FUND BALANCE (DEFICIT), JUNE 30 $ (123,224) $ (1,054,306) $ $ 1,056,080 1,774 NOTE: The expenditures by function amounts listed above include the capital outlay expenditures within each department.

FISCAL YEAR ENDED JUNE 30, 2022
Budget

BUDGET (GAAP BASIS) AND ACTUAL - LOCAL TRANSPORTATION SPECIAL REVENUE FUND

SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE -

CITY OF MODESTO
105
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Variance with
Original Final Actual Final Budget
REVENUES:

Charges for services $ 220,000 $ 220,000 $ 287,941 $ 67,941 Fines and forfeits 300,000 300,000 214,903 (85,097)
Total revenues 520,000 520,000 502,844 (17,156)
EXPENDITURES:

Public safety 747,740 768,000 550,803 217,197
Total expenditures 747,740 768,000 550,803 217,197

EXCESS (DEFICIT) OF REVENUES OVER
(UNDER) EXPENDITURES (227,740) (248,000) (47,959) 200,041 CHANGES IN FUND BALANCE (227,740) (248,000) (47,959) 200,041 FUND BALANCE, JULY 1 4,387,448 4,387,448 4,387,448 -
FUND BALANCE, JUNE 30 $ 4,159,708 $ 4,139,448 $ 4,339,489 $ 200,041 NOTE: The expenditures by function amounts listed above include the capital outlay expenditures within each department.

Budget
FISCAL YEAR ENDED JUNE 30, 2022

BUDGET (GAAP BASIS) AND ACTUAL - TRAFFIC SAFETY SPECIAL REVENUE FUND

SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE -

CITY OF MODESTO
106
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Variance with
Original Final Actual Final Budget
REVENUES:

Intergovernmental:

State $ 18,736,521 $ 23,736,521 $ 23,404,322 $ (332,199) Taxes 1,200,000 1,200,000 1,629,667 429,667
Licenses and permits - - 1,055 1,055
Charges for services 875,252 749,005 930,997 181,992
Interest and rent - - 338,030 338,030
Net (decrease) in fair value of investments - - (1,329,675) (1,329,675) Miscellaneous 10,000 10,000 72,220 62,220
Total revenues 20,821,773 25,695,526 25,046,616 (648,910) EXPENDITURES:

Current:

Highway and streets 14,692,181 16,363,641 13,230,361 3,133,280 EXCESS OF REVENUES OVER EXPENDITURES 6,129,592 9,331,885 11,816,255 2,484,370 OTHER FINANCING SOURCES (USES):

Transfers in 1,540,105 1,540,105 1,564,793 24,688
Transfers out (13,835,753) - (2,776,356) 11,059,397
Sale of assets - - 32,551 32,551
TOTAL OTHER FINANCING SOURCES (USES) 1,540,105 (12,295,648) (1,179,012) 11,116,636 CHANGES IN FUND BALANCE 7,669,697 (2,963,763) 10,637,243 13,601,006 FUND BALANCE, JULY 1 32,705,190 32,705,190 32,705,190 - FUND BALANCE, JUNE 30 $ 40,374,887 $ 29,741,427 $ 43,342,433 $ 13,601,006 NOTE: The expenditures by function amounts listed above include the capital outlay expenditures within each department.

Budget

CITY OF MODESTO

SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN

FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL

TRANSPORTATION SPECIALTAX REVENUE FUND
FISCAL YEAR ENDED JUNE 30, 2022
107
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Variance with
Original Final Actual Final Budget
REVENUES:

Taxes $ 175,000 $ 222,386 $ 205,995 $ (16,391)
Special assessments levied - 780,150 706,624 (73,526)
Interest and rent - - 425 425
Net (decrease) in fair value of investments - - (2,294) (2,294) Total revenues 175,000 1,002,536 910,750 (91,786)

EXPENDITURES:

Current:

Community development 175,000 1,002,536 911,060 91,476
Total expenditures 175,000 1,002,536 911,060 91,476

EXCESS (DEFICIENCY) OF REVENUES OVER
(UNDER) EXPENDITURES - - (310) (310)
CHANGES IN FUND BALANCE - - (310) (310)
FUND BALANCE, JULY 1 40 40 40 -
FUND BALANCE (DEFICIT), JUNE 30 $ $ 40 $ 40 $ (270) (310) NOTE: The expenditures by function amounts listed above include the capital outlay expenditures within each department.

Budget

CITY OF MODESTO

SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND

BALANCE - BUDGET (GAAP BASIS) AND ACTUAL - DOWNTOWN

IMPROVEMENT DISTRICT SPECIAL REVENUE FUND
FISCAL YEAR ENDED JUNE 30, 2022
108
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Variance with
Original Final Actual Final Budget
REVENUES:

Charges for services $ 10,000 $ 430,701 $ 210,131 $ (220,570) Intergovernmental 70,000 647,284 - (647,284)
Interest and rent - - 15,072 15,072
Net (decrease) in fair value of investments - - (57,134) (57,134) Donations and contributions 150,000 150,000 - (150,000) Miscellaneous - - 100,000 100,000
Total revenues 230,000 1,227,985 268,069 (959,916)
EXPENDITURES:

Community development 1,197,905 2,896,262 422,513 2,473,749 Total expenditures 1,197,905 2,896,262 422,513 2,473,749

EXCESS (DEFICIT) OF REVENUES OVER
(UNDER) EXPENDITURES (967,905) (1,668,277) (154,444) 1,513,833 OTHER FINANCING SOURCES (USES):

Transfers in 905,181 1,610,181 705,000 (905,181)
Transfers out - - (2,770) (2,770)
TOTAL OTHER FINANCING SOURCES (USES) 905,181 1,610,181 702,230 (907,951) CHANGES IN FUND BALANCE (62,724) (58,096) 547,786 605,882 FUND BALANCE, JULY 1 1,401,788 1,401,788 1,401,788 -
FUND BALANCE, JUNE 30 $ 1,339,064 $ 1,343,692 $ 1,949,574 $ 605,882 NOTE: The expenditures by function amounts listed above include the capital outlay expenditures within each department.

Budget

CITY OF MODESTO

SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN

FUND BALANCE - BUDGET (GAAP BASIS) AND ACTUAL - STRATEGIC

PLANNING AND DEVELOPMENT SPECIAL REVENUE FUND
FISCAL YEAR ENDED JUNE 30, 2022
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Nonmajor Enterprise Funds
Enterprise Funds are established to account for activities that render services on a user-charge basis to the general public. Nonmajor Enterprise Funds include:

PARKING FUND – Revenues in this fund consist of charges for off-street parking and the downtown parking garage, as well as in-lieu parking fees. The revenue is used to develop and maintain parking facilities.

STORM DRAIN FUND – To account for storm drain improvements, operations and maintenance. The activities of the fund include street cleaning, rock well maintenance, and compliance with Federal and State water quality standards on storm water discharge.

COMPOST FUND – To account for tip fees charged at the City’s composting facility for processing various compostable materials and the sale of compost product. Excess revenues over expenses are set aside to protect the enterprise against market fluctuations, and to provide for capital improvements to the facility infrastructure.

AIRPORT FUND – To account for all airport operations as stipulated in the City-Stanislaus County agreement of January 1968. Amounts received from the Federal government, State of California, and Stanislaus County, requiring matching amounts by the City, are recorded in this fund and are appropriated to finance approved capital projects.

GOLF FUND – Revenues in this fund consist of fees charged for using the City’s golf courses. The revenue is used to improve, operate, and maintain golf courses.

COMMUNITY CENTER FUND – Accounted for in this fund are all amounts collected for the purpose of operating and maintaining the Modesto Centre Plaza Community Center. Revenues include room rental, catering fees, ticket sales, and other charges for using the center.

ABATEMENT AND PUBLIC NUISANCE FUND – To account the activity for expenses and recovery for the cost for both dangerous and unsafe building and property abatements. 111
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Storm
Parking Drain
Current assets:

Cash and cash equivalents $ 139,149 $ 10,112,811
Receivables:

Accounts 1,695 370
Interest 432 22,624
Utilities, net - 611,843
Leases 110,723 -
Prepaid expenses 152 1,125
Due from governments 101,250 18,152
Inventories - -
Total current assets 353,401 10,766,925
Noncurrent assets:

Advances to other funds - -
Restricted cash and cash equivalents - -
Restricted cash and cash equivalents with fiscal agent - - Leases receivable 4,097,588 -
Land and construction in progress 3,131,803 928,316
Other capital assets, net of accumulated depreciation 3,006,954 13,451,547 Total noncurrent assets 10,236,345 14,379,863
Total assets 10,589,746 25,146,788
Deferred OPEB 48,681 42,437
Deferred pensions 103,826 110,215
Total deferred outflows of resources 152,507 152,652
Total assets and deferred outflows of resources $ 10,742,253 $ 25,299,440

LIABILITIES
Current liabilities:

Accounts payable $ $ 28,447 71,371
Accrued salaries and benefits 19,185 14,113
Interest payable - -
Unearned revenue - -
Current portion - long-term debt - -
Total current liabilities 47,632 85,484
Noncurrent liabilities:

Pollution remediation liability - -
Finance purchase obligations - -
Certificates of participation - -
Advances from other funds - 1,324,704
Net OPEB liability 195,590 183,662
Net pension liability 546,815 580,467
Total noncurrent liabilities 742,405 2,088,833
Total liabilities 790,037 2,174,317
Deferred OPEB 6,536 4,345
Deferred pensions 254,927 270,615
Deferred leases 4,156,779 -
Total deferred inflows of resources 4,418,242 274,960
Net investment in capital assets 6,138,757 14,379,863
Restricted for pollution remediation - -
Unrestricted (604,783) 8,470,300
Total net position 5,533,974 22,850,163
Total liabilities, deferred inflows of resources, and net position $ 10,742,253 $ 25,299,440

CITY OF MODESTO
JUNE 30, 2022

NET POSITION

DEFERRED OUTFLOWS OF RESOURCES
ASSETS

DEFERRED INFLOWS OF RESOURCES

COMBINING STATEMENT OF NET POSITION - NONMAJOR ENTERPRISE FUNDS 112
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Community Abatement and
Compost Airport Golf Center Public Nuisance Total
$ 2,007,342 $ 2,638,753 $ $ 234,080 91,486 $ 290,804 $ 15,514,425 1,319,419 70,129 330,313 55,760 1,026,721 2,804,407
11,636 5,708 997 - 554 41,951
506,933 - - - - 1,118,776
- 71,288 89,174 8,212 - 279,397
2,218 319 - 274 - 4,088
129,505 - - 1,289,177 - 1,538,084
- - 54,168 - - 54,168
3,977,053 2,786,197 566,138 1,587,503 1,318,079 21,355,296 - - - - 158,642 158,642
649,879 - - - - 649,879
- - 665,373 - - 665,373
- 2,413,550 2,731,241 16,800 - 9,259,179
1,140,000 1,352,141 788,551 3,667,020 - 11,007,831
886,782 8,441,515 919,737 2,553,773 - 29,260,308
2,676,661 12,207,206 5,104,902 6,237,593 158,642 51,001,212 6,653,714 14,993,403 5,671,040 7,825,096 1,476,721 72,356,508 249,084 - - 30,902 - 371,104
1,036,136 103,994 - 92,163 - 1,446,334
1,285,220 103,994 - 123,065 - 1,817,438
$ 7,938,934 $ 15,097,397 $ 5,671,040 $ 7,948,161 $ 1,476,721 $ 74,173,946 $ 455,375 $ $ 254,674 29,869 $ $ 54,354 $ 906,517 12,427 121,627 13,323 24,480 19,069 - 211,797
4,403 - 7,829 - - 12,232
107,325 - 665,952 - 477,668 1,250,945
- - 462,352 - - 462,352
688,730 43,192 1,415,287 73,423 490,095 2,843,843
956,051 - - - - 956,051
- - 1,001 - - 1,001
- - 480,000 - - 480,000
4,438,200 - - - - 5,762,904
1,179,273 - - 155,199 - 1,713,724
5,456,983 547,702 - 485,390 - 7,617,357
12,030,507 547,702 481,001 640,589 - 16,531,037
12,719,237 590,894 1,896,288 714,012 490,095 19,374,880 50,202 - - 6,149 - 67,232
2,544,060 255,340 - 226,290 - 3,551,232
- 2,464,607 2,762,962 31,319 - 9,415,667
2,594,262 2,719,947 2,762,962 263,758 - 13,034,131
2,026,782 9,793,656 1,430,308 6,220,793 - 39,990,159
649,879 - - - - 649,879
(10,051,226) 1,992,900 (418,518) 749,598 986,626 1,124,897 (7,374,565) 11,786,556 1,011,790 6,970,391 986,626 41,764,935 $ 7,938,934 $ 15,097,397 $ 5,671,040 $ 7,948,161 $ 1,476,721 $ 74,173,946 113
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- 161 -
Parking Storm Drain
OPERATING REVENUES:

Charges for services $ 1,280,754 $ 6,212,032
Miscellaneous 343 4,210
Total operating revenues 1,281,097 6,216,242
OPERATING EXPENSES:

Salaries and wages 452,381 335,948
Contractual services 301,227 480,619
Utilities 141,026 25,468
Maintenance and supplies 155,037 2,253,677
Insurance 107,726 15,621
Employee benefits 145,168 7,718
Administration services 167,920 2,237,584
Allocated indirect administrative costs 39,850 152,335
Depreciation 385,570 435,928
Total operating expenses 1,895,905 5,944,898
OPERATING INCOME (LOSS) (614,808) 271,344
NONOPERATING REVENUES (EXPENSES):

Gain on disposition of capital assets - 11,050
Operating grants - -
Tax revenue - -
Tax expense (20,525) -
Interest income 58,950 100,566
Net (decrease) in fair value of investments (3,517) (410,581) Rental income 131,708 -
Interest expense and amortization - -
Trustee fees - -
Total nonoperating revenues (expenses) 166,616 (298,965)

INCOME (LOSS) BEFORE CAPITAL
CONTRIBUTIONS AND TRANSFERS (448,192) (27,621)
Transfers in - 700,000
Transfers out (11,089) (2,522,774)
CHANGES IN NET POSITION (459,281) (1,850,395)
NET POSITION (DEFICIT), JULY 1 5,993,255 24,832,309
PRIOR PERIOD ADJUSTMENTS - (131,751)
NET POSITION (DEFICIT), JUNE 30 $ 5,533,974 $ 22,850,163

CITY OF MODESTO

COMBINING STATEMENT OF REVENUES, EXPENSES, AND

CHANGES IN FUND NET POSITION - NONMAJOR ENTERPRISE FUNDS FISCAL YEAR ENDED JUNE 30, 2022
114
#1..
- 162 -
Abatement and
Community Public Nuisance
Compost Airport Golf Center Fund Total
$ 10,580,262 $ 700,255 $ 2,974,821 $ 139,646 $ 640,686 $ 22,528,456 364,523 22,512 36,169 26,724 - 454,481
10,944,785 722,767 3,010,990 166,370 640,686 22,982,937 3,831,444 328,556 - 545,473 - 5,493,802
2,582,520 121,043 2,600,087 327,995 33,242 6,446,733
28,819 110,030 70,114 290,580 - 666,037
2,259,424 133,334 263,263 166,828 - 5,231,563
330,330 56,347 33,321 44,112 - 587,457
1,559,377 109,379 1,096 85,730 - 1,908,468
505,361 53,783 95,192 41,447 90,098 3,191,385
289,042 27,304 44,687 - - 553,218
70,107 738,556 48,634 61,788 - 1,740,583
11,456,424 1,678,332 3,156,394 1,563,953 123,340 25,819,246 (511,639) (955,565) (145,404) (1,397,583) 517,346 (2,836,309) 16,500 - - - - 27,550
430,119 578,243 - - - 1,008,362
- 212,978 - - - 212,978
- - (112) - - (20,637)
32,732 57,145 39,363 325 2,064 291,145
(137,039) (86,767) (46,758) - (9,165) (693,827)
- 192,524 112,216 307,561 - 744,009
- - (52,202) - - (52,202)
- - (3,535) - - (3,535)
342,312 954,123 48,972 307,886 (7,101) 1,513,843
(169,327) (1,442) (96,432) (1,089,697) 510,245 (1,322,466) 1,463,916 - 647,429 1,374,106 2,770 4,188,221
(1,409,374) (11,555) (326) (7,589) (326) (3,963,033)
(114,785) (12,997) 550,671 276,820 512,689 (1,097,278)
(7,259,780) 11,799,553 461,119 6,693,571 473,937 42,993,964 - - - - - (131,751)
$ (7,374,565) $ 11,786,556 $ 1,011,790 $ 6,970,391 $ 986,626 $ 41,764,935 115
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Storm
Parking Drain
CASH FLOWS FROM OPERATING ACTIVITIES:

Receipts from customers and users $ 1,241,627 $ 6,170,429 Payments to suppliers (455,550) (1,383,844)
Payments to employees (641,368) (577,693)
Payments for interfund services used (470,102) (3,887,881) Net cash provided (used) by operating activities (325,393) 321,011

CASH FLOWS FROM NONCAPITAL FINANCING
ACTIVITIES:

Operating grants received - -
Taxes received - -
Transfers in - 700,000
Transfers out (11,089) (2,522,774)
Settlements and recoveries Advances from/to other funds -- -- Net cash provided (used) by noncapital financing
activities (11,089) (1,822,774)

CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES:

Acquisition and construction of capital assets - (88,333) Proceeds from sale of capital assets - 11,050
Principal repayments - -
Interest paid - -
Trustee fees - -
Net cash provided (used) by capital and related
financing activities - (77,283)
CASH FLOWS FROM INVESTING ACTIVITIES:

Interest received 59,014 101,230
Net (decrease) in the fair value of investments (3,517) (410,581) Rental income received 131,708 -
Net cash provided (used) by investing activities 187,205 (309,351) Net increase (decrease) in cash and cash equivalents (149,277) (1,888,397) CASH AND CASH EQUIVALENTS, JULY 1 288,426 12,001,208
CASH AND CASH EQUIVALENTS, JUNE 30 $ 139,149 $ 10,112,811 RECONCILIATION TO STATEMENT OF NET POSITION:

Cash and cash equivalents $ 139,149 $ 10,112,811
Restricted cash and cash equivalents - -
Restricted cash and cash equivalents with fiscal agent - - TOTAL CASH AND CASH EQUIVALENTS $ 139,149 $ 10,112,811

CITY OF MODESTO

COMBINING STATEMENT OF CASH FLOWS - NONMAJOR ENTERPRISE FUNDS FISCAL YEAR ENDED JUNE 30, 2022
116
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- 164 -
Abatement and
Community Public Nuisance
Compost Airport Golf Center Fund Total
$ 10,835,517 $ 894,188 $ 3,069,407 $ 166,370 $ 95,124 $ 22,472,662 (2,968,629) (191,681) (2,775,159) (677,485) (20,815) (8,473,163) (5,782,359) (514,484) - (722,746) - (8,238,650)
(3,395,058) (290,571) (249,238) (206,464) (90,098) (8,589,412) (1,310,529) (102,548) 45,010 (1,440,325) (15,789) (2,828,563) 430,119 578,243 - - - 1,008,362
- 212,978 - - - 212,978
1,463,916 - 647,429 1,374,106 2,770 4,188,221
(1,409,374) (11,555) (326) (7,589) (326) (3,963,033)
(654,200) -
-- -- -- 52,881 - (601,319)
(169,539) 779,666 1,366,517 647,103 55,325 845,209
- - (164,974) - - (253,307)
16,500 - - - - 27,550
- - (435,000) - - (435,000)
- - (55,534) - - (55,534)
- - (3,535) - - (3,535)
16,500 (659,043) - - - (719,826)
35,467 54,943 281 325 1,960 253,220
(137,039) (86,768) (46,758) - (9,165) (693,828)
- 192,524 112,216 307,561 - 744,009
(101,572) 160,699 65,739 307,886 (7,205) 303,401
(1,565,140) 837,817 98,809 234,078 32,331 (2,399,779)
4,222,361 1,800,936 658,050 2 258,473 19,229,456
$ 2,657,221 $ 2,638,753 $ 756,859 $ 234,080 $ 290,804 $ 16,829,677 $ 2,007,342 $ 2,638,753 $ $ 234,080 91,486 $ 290,804 $ 15,514,425 649,879 - - - - 649,879
- - 665,373 - - 665,373
$ 2,657,221 $ 2,638,753 $ 756,859 $ 234,080 $ 290,804 $ 16,829,677 (continued)
117
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- 165 -
Storm
Parking Drain

RECONCILIATION OF OPERATING INCOME (LOSS)
TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:

Operating income (loss) $ (614,808) $ 271,344
Adjustments to reconcile operating income (loss) to
net cash provided (used) by operating activities:

Depreciation 385,570 435,928
Taxes paid (20,525) -
Change in assets, liabilities, and deferred resources:
(Increase) decrease in accounts receivable 113,615 15,495 (Increase) in utilities receivable - (64,721)
(Increase) decrease in due from other governments (101,250) 8,607 Increase (decrease) in accounts payable 7,796 (115,028) (Increase) in inventories - -
(Increase) decrease in prepaid expenses (137) 3,413
Increase in accrued salaries and benefits 2,374 4,115
(Decrease) in net pension liability and deferred resources (35,942) (230,789) (Increase) decrease in net OPEB liability and deferred resources (10,251) (7,353) Increase pollution remediation - -
Increase (decrease) in unearned revenue (303) -
(Increase) decrease in lease receivable (51,532) -
Total adjustments 289,415 49,667
Net cash provided (used) by operating activities $ (325,393) $ 321,011

CITY OF MODESTO
COMBINING STATEMENT OF CASH FLOWS - NONMAJOR ENTERPRISE FUNDS (Continued) FISCAL YEAR ENDED JUNE 30, 2022
118
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- 166 -
Abatement and
Community Public Nuisance
Compost Airport Center Fund Total
$ (511,639) $ (955,565) $ (145,404) $ (1,397,583) $ 517,346 $ (2,836,309) 70,107 738,556 48,634 61,788 - 1,740,583
- - (112) - - (20,637)
(165,451) (41,877) (4,179) (55,760) (1,012,720) (1,150,877) (46,639) - - - - (111,360)
7,116 239,001 - 65,775 - 219,249
(417,072) 19,601 195,066 (29,309) 12,427 (326,519)
- - (114,619) - - (114,619)
(2,218) (12) - - - 1,046
15,495 3,193 3,028 4,667 - 32,872
(358,489) (79,742) - (96,244) - (801,206)
(48,544) - - 34 - (66,114)
51,099 - - - - 51,099
95,706 (5,472) 20,408 - 467,158 577,497
(20,231) - 42,188 6,307 - (23,268)
(798,890) 853,017 190,414 (42,742) (533,135) 7,746
$ (1,310,529) $ (102,548) $ 45,010 $ (1,440,325) $ (15,789) $ (2,828,563) 119
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This page is intentionally left blank.
120
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Internal Service Funds
Internal Service Funds are established to finance and account for services and commodities furnished by a designated agency of a governmental unit to other departments of the same governmental unit. Since the services and commodities are supplied exclusively to other departments of a governmental jurisdiction, they are distinguishable from those public services which are rendered to the public in general and which are accounted for in General, Special Revenue, or Enterprise Funds. Internal Service Funds include:

FLEET MANAGEMENT FUND – To provide the maintenance necessary for the City’s equipment pool, which serves the needs of all City departments.

CENTRAL SERVICES FUND – To provide office supplies, various maintenance and construction materials, records storage, and mail services to all City departments.

INFORMATION AND TECHNOLOGY SERVICES FUND – To finance and account for the replacement, upgrade and maintenance of the City’s network and technology infrastructure, and to develop and implement a coordinated city-wide information technology plan.

INSURANCE FUND – To finance and account for the City’s insurance and risk management programs.

EMPLOYEE BENEFITS MANAGEMENT FUND – To account for all compensated absences and other employee benefits. Insurance benefits for current employees are accounted for in the Insurance Fund.

BUILDING SERVICES FUND – To account for the true cost of occupying and maintaining office space, to better reflect the value of that space, and to accumulate amounts for future building repair costs. 121
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- 169 -
Fleet Central
Management Services
ASSETS
Current assets:

Cash and cash equivalents $ 2,926,182 $ 3,435
Receivables:

Accounts 10,093 37,850
Interest 2,886 117
Leases - -
Prepaid expenses 18,669 1,382
Due from governments 1,380,210 -
Inventories - 1,808,468
Total current assets 4,338,040 1,851,252
Noncurrent assets:

Restricted assets - cash and cash equivalents - -
Restricted assets - cash from fiscal agent - -
Leases receivable - -
Land and construction in progress 9,121,399 -
Other capital assets, net of accumulated depreciation 23,876,198 - Intangible assets right-to-use, net of accumulated amortization - 8,644 Total noncurrent assets 32,997,597 8,644
Total assets 37,335,637 1,859,896
Deferred OPEB 161,697 -
Deferred pensions 639,554 82,927
Total deferred outflows of resources 801,251 82,927
Total assets and deferred outflows of resources $ 38,136,888 $ 1,942,823

LIABILITIES
Current liabilities:

Accounts payable $ 1,680,648 $ 1,590,363
Accrued salaries and benefits 103,851 16,160
Interest payable 362 -
Unearned revenue - -
Current portion - compensated absences - -
Current portion - claims liability - -
Current portion - leases - 8,651
Total current liabilities 1,784,861 1,615,174
Noncurrent liabilities:

Compensated absences - -
Claims liability - -
Net OPEB liability 694,884 -
Net pension liability 3,368,320 436,748
Total noncurrent liabilities 4,063,204 436,748
Total liabilities 5,848,065 2,051,922
Deferred OPEB 27,583 -
Deferred pensions 1,570,320 203,614
Deferred leases - -
Total deferred inflows of resources 1,597,903 203,614

NET POSITION
Net investment in capital assets 32,997,597 8,644
Restricted - -
Unrestricted (2,306,677) (321,357)
Total net position 30,690,920 (312,713)
Total liabilities, deferred inflows of resources, and net position $ 38,136,888 $ 1,942,823

DEFERRED OUTFLOWS OF RESOURCES

DEFERRED INFLOWS OF RESOURCES

CITY OF MODESTO

COMBINING STATEMENT OF NET POSITION - INTERNAL SERVICE FUNDS JUNE 30, 2022
122
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- 170 -
Information Employee
& Technology Benefits Building
Services Insurance Management Services Total
$ 3,549,207 $ 16,559,643 $ $ 1,625,936 - $ 24,664,403
- 423,353 33,750 4,800 509,846
7,495 64,531 14,778 3,760 93,567
- - - 51,738 51,738
3,206 60,972 1,296 29 85,554
- - - 82,822 1,463,032
- - - - 1,808,468
3,559,908 17,108,499 49,824 1,769,085 28,676,608
- 329,094 5,058,762 - 5,387,856
- 195,611 - - 195,611
- - - 967,381 967,381
- - - 2,115,215 11,236,614
3,980,904 - - 2,616,343 30,473,445
- - - - 8,644
3,980,904 524,705 5,058,762 5,698,939 48,269,551
7,540,812 17,633,204 5,108,586 7,468,024 76,946,159
315,055 - - 12,791 489,543
856,266 105,024 37,145 166,438 1,887,354
1,171,321 105,024 37,145 179,229 2,376,897
$ 8,712,133 $ 17,738,228 $ 5,145,731 $ 7,647,253 $ 79,323,056 $ $ 201,889 $ 556,080 $ 14,548 $ 4,147,057 103,529
99,674 14,520 5,125 16,448 255,778
- - - - 362
- 73,666 - - 73,666
- - 1,533,757 - 1,533,757
- 6,297,828 - - 6,297,828
- - - - 8,651
301,563 6,942,094 1,553,430 119,977 12,317,099
- - 10,428,316 - 10,428,316
- 20,560,470 - - 20,560,470
1,067,455 - - 64,655 1,826,994
4,509,670 553,125 195,631 876,574 9,940,068
5,577,125 21,113,595 10,623,947 941,229 42,755,848
5,878,688 28,055,689 12,177,377 1,061,206 55,072,947
28,617 - - 3,195 59,395
2,102,420 257,868 91,204 408,661 4,634,087
- - - 1,065,388 1,065,388
2,131,037 257,868 91,204 1,477,244 5,758,870
3,980,904 - - 4,731,558 41,718,703
- 524,705 5,058,762 - 5,583,467
(3,278,496) (11,100,034) (12,181,612) 377,245 (28,810,931) 702,408 (10,575,329) (7,122,850) 5,108,803 18,491,239
$ 8,712,133 $ 17,738,228 $ 5,145,731 $ 7,647,253 $ 79,323,056 123
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- 171 -
Fleet Central
Management Services
OPERATING REVENUES:

Charges for services $ 13,316,941 $ 5,090,307
Miscellaneous 218,977 -
Total operating revenues 13,535,918 5,090,307
OPERATING EXPENSES:

Salaries and wages 2,820,630 251,062
Cost of goods sold - 4,022,553
Contractual services 331,237 103,179
Utilities 159,132 5,099
Maintenance and supplies 8,141,576 89,921
Insurance 134,748 8,334
Claims - -
Employee benefits 1,717,633 263,253
Administration services 600,275 154,403
Allocated indirect administrative costs 395,144 -
Depreciation 3,068,688 -
Total operating expenses 17,369,063 4,897,804
OPERATING INCOME (LOSS) (3,833,145) 192,503
NONOPERATING REVENUES (EXPENSES):

Gain (loss) on disposition of capital assets (87,687) - Interest income 16,557 3,187
Net (decrease) in fair value of investments (62,122) (2,304) Rental income - -
Interest expense and amortization - (8,659)
Total nonoperating revenues (expenses) (133,252) (7,776)

INCOME (LOSS) BEFORE CAPITAL
CONTRIBUTIONS AND TRANSFERS (3,966,397) 184,727
Transfers in 19,091,700 -
Transfers out (76,344) (5,222)
CHANGES IN NET POSITION 15,048,959 179,505
NET POSITION (DEFICIT), JULY 1 15,641,961 (25,490)
PRIOR PERIOD ADJUSTMENTS - (466,728)
NET POSITION (DEFICIT), JUNE 30 $ 30,690,920 $ (312,713)

COMBINING STATEMENT OF REVENUES, EXPENSES, AND CHANGES

IN FUND NET POSITION - INTERNAL SERVICE FUNDS
FISCAL YEAR ENDED JUNE 30, 2022

CITY OF MODESTO
124
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- 172 -
Information Employee
& Technology Benefits Building
Services Insurance Management Services Total
$ 8,776,769 $ 31,490,296 $ 30,060,014 $ 3,436,737 $ 92,171,064 - 143,830 9,510 54,571 426,888
8,776,769 31,634,126 30,069,524 3,491,308 92,597,952
2,835,181 325,736 1,424,654 517,197 8,174,460
- - - - 4,022,553
936,151 2,241,796 238,404 1,617,429 5,468,196
125,993 777 2,008 235,076 528,085
2,040,640 4,467 7,613 513,458 10,797,675
94,811 20,390,273 3,492 24,790 20,656,448
- 8,646,444 2,819 - 8,649,263
579,675 159,184 29,552,372 286,281 32,558,398
6,563 142,849 278,829 107,311 1,290,230
- - - 16,919 412,063
645,233 - - 280,024 3,993,945
7,264,247 31,911,526 31,510,191 3,598,485 96,551,316
1,512,522 (277,400) (1,440,667) (107,177) (3,953,364)
- - - - (87,687)
32,666 233,057 197,179 30,448 513,094
(138,788) (1,087,441) (289,147) (64,324) (1,644,126)
- - - 5,381 5,381
- - - - (8,659)
(106,122) (854,384) (91,968) (28,495) (1,221,997)
1,406,400 (1,131,784) (1,532,635) (135,672) (5,175,361) 37,838 - 2,731,617 4,941,391 26,802,546
(200,994) (9,489) (3,733,200) (16,188) (4,041,437)
1,243,244 (1,141,273) (2,534,218) 4,789,531 17,585,748
12,405 (9,434,056) (4,588,632) 319,272 1,925,460
(553,241) - - - (1,019,969)
$ 702,408 $ (10,575,329) $ (7,122,850) $ 5,108,803 $ 18,491,239 125
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Fleet Central
Management Services
CASH FLOWS FROM OPERATING ACTIVITIES:

Receipts from customers and users $ $ 224,515 -
Receipts from interfund services provided 13,316,941 5,090,307 Payments to suppliers (9,768,374) (4,399,642)
Payment of insurance claims - -
Payments to employees (2,810,629) (453,845)
Payments for interfund services used (1,554,711) (217,682) Net cash provided (used) by operating activities (592,258) 19,138 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:

Transfers in 4,730,473 -
Transfers out (76,344) (5,222)
Net cash provided (used) by noncapital financing activities 4,654,129 (5,222)

CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES:

Acquisition and construction of capital assets (8,502,174) - Proceeds from sale of capital assets 14,075 -
Interest paid 362 (8,659)
Net cash provided (used) by capital and related financing activities (8,487,737) (8,659) CASH FLOWS FROM INVESTING ACTIVITIES:

Interest received 34,574 481
Net (decrease) in the fair value of investments (62,122) (2,304) Rental income received - -
Net cash provided (used) by investing activities (27,548) (1,823) Net increase (decrease) in cash and cash equivalents (4,453,414) 3,434 CASH AND CASH EQUIVALENTS, JULY 1 7,379,596 1
CASH AND CASH EQUIVALENTS, JUNE 30 $ 2,926,182 $ 3,435
RECONCILIATION TO STATEMENT OF NET POSITION:

Cash and cash equivalents $ 2,926,182 $ 3,435
Restricted cash and cash equivalents - -
Restricted cash and cash equivalents with fiscal agent - - TOTAL CASH AND CASH EQUIVALENTS $ 2,926,182 $ 3,435

CITY OF MODESTO

COMBINING STATEMENT OF CASH FLOWS - INTERNAL SERVICE FUNDS FISCAL YEAR ENDED JUNE 30, 2022
126
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Information Employee
& Technology Benefits Building
Services Insurance Management Services Total
$ $ 1,157,071 327 $ $ 33,267 $ 1,456,601 41,421
8,776,769 31,490,296 30,060,014 92,171,064 3,436,737
(2,900,031) (22,790,326) (333,197) (2,142,790) (42,334,360) - (10,541,003) (3,492) - (10,544,495)
(4,201,494) (607,841) (31,293,697) (815,175) (40,182,681) (178,013) (197,793) (312,540) (291,857) (2,752,596)
1,497,558 (1,489,596) (1,849,645) 228,336 (2,186,467)
37,838 - 2,731,617 - 7,499,928
(200,994) (9,489) (3,733,200) (16,188) (4,041,437)
(163,156) (9,489) (1,001,583) (16,188) 3,458,491
(738,684) - - - (9,240,858)
- - - - 14,075
- - - - (8,297)
(738,684) - - (9,235,080) -
31,528 229,229 198,890 28,969 523,671
(138,788) (1,087,441) (289,147) (64,324) (1,644,126)
- - - 5,381 5,381
(107,260) (858,212) (90,257) (29,974) (1,115,074)
488,458 (2,357,297) (2,941,485) 182,174 (9,078,130)
3,060,749 19,441,645 8,000,247 1,443,762 39,326,000
$ 3,549,207 $ 17,084,348 $ 5,058,762 $ 1,625,936 $ 30,247,870 $ 3,549,207 $ 16,559,643 $ $ 1,625,936 $ 24,664,403 -
- 329,094 5,058,762 - 5,387,856
- 195,611 - - 195,611
$ 3,549,207 $ 17,084,348 $ 5,058,762 $ 1,625,936 $ 30,247,870 127
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Fleet Central
Management Services

RECONCILIATION OF OPERATING INCOME (LOSS) TO
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES:

Operating income (loss) $ (3,833,145) $ 192,503
Adjustments to reconcile operating income (loss) to
net cash provided (used) by operating activities:

Depreciation 3,068,688 -
Change in assets, liabilities, and deferred resources:
(Increase) decrease in accounts receivable 632 (37,850) (Increase) decrease in due from governments (1,375,304) - (Increase) decrease in prepaid expenses (17,985) (1,382) (Increase) in inventories - (462,136)
Increase (decrease) in accounts payable 1,001,345 229,683 Increase (decrease) in accrued salaries and benefits 48,993 7,606 (Decrease) in compensated absences - -
(Increase) decrease in net OPEB liability and deferred resources (49,662) - (Increase) decrease in net pension liability and deferred resources 564,180 90,714 Increase in unearned revenue - -
Decrease in lease receivable - -
(Decrease) in claims liability - -
Total adjustments 3,240,887 (173,365)
Net cash provided (used) by operating activities $ (592,258) $ 19,138

NONCASH INVESTING, CAPITAL AND FINANCING
ACTIVITIES:

Transfer of fixed assets from Bus funds upon transfer of operations $ 14,361,227 $ -

CITY OF MODESTO
COMBINING STATEMENT OF CASH FLOWS - INTERNAL SERVICE FUNDS (Continued) FISCAL YEAR ENDED JUNE 30, 2022
128
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Information Employee
& Technology Benefits Building
Services Insurance Management Services Total
$ 1,512,522 $ (277,400) $ (1,440,667) $ (107,177) $ (3,953,364) 645,233 - - 280,024 3,993,945
- 976,134 23,730 140 962,786
327 379 27 (59,559) (1,434,130)
14,139 (60,405) 767 1,041 (63,825)
- - - - (462,136)
111,975 (147,552) (116,831) 79,295 1,157,915
4,405 4,324 1,404 (1,617) 65,115
- - (313,587) - (313,587)
2,003,575 - - (3,840) 1,950,073
(2,794,618) (127,245) (4,488) (6,240) (2,277,697)
- 36,728 - - 36,728
- - - 46,269 46,269
- (1,894,559) - - (1,894,559)
(14,964) (1,212,196) (408,978) 335,513 1,766,897
$ 1,497,558 $ (1,489,596) $ (1,849,645) $ 228,336 $ (2,186,467) $ - $ - $ 4,941,391 $ 19,302,618 -
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Investment Trust Funds
Investment Trust Funds account for assets held by the City as an agent for individuals, governmental entities and non-public organizations.

TUOLUMNE RIVER REGIONAL PARK - To account for cash and investments of the Tuolumne River Regional Park, a joint powers agency between the City of Modesto, Stanislaus County and City of Ceres. The agency provides financing, development, and maintenance of the Tuolumne River Regional Park facilities. The cash and investments of the Park are invested as part of the City’s investment pool.

MODESTO-CERES FIRE PROTECTION AGENCY - To record and distribute the special assessments for fire protection that were established under the Industrial Fire District. This is a joint powers agency between the Modesto Regional Fire Authority, the City of Ceres, and the Industrial Fire District. Cash and investments of the Agency are invested in the City’s investment pool.

CITY/COUNTY JOINT POWERS FINANCING AUTHORITY - To account for cash and investments of the City/County Capital Improvements and Financing Agency, a joint powers agency between the City of Modesto and Stanislaus County. The agency builds and maintains a joint City-County government complex in downtown Modesto. The cash and investments of the Agency are invested as part of the City’s investment pool. 131
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City/County Joint
Tuolumne River Modesto-Ceres Powers Financing
Regional Park Fire Protection Agency Authority Total
ASSETS
Cash and cash equivalents $ 345,403 $ 260,056 $ $ - 605,459 Restricted cash and cash equivalents
held with fiscal agent - - - -
Receivables:

Interest receivable - 1,159 - 1,159
Taxes receivable - 25,136 - 25,136
Assessments receivable - - - -
Leases receivable 1,214,758 - - 1,214,758
Due from governments 23,884 - - 23,884
Land and construction in progress 3,024,743 - - 3,024,743 Other capital assets, net of 4,142,152 - - 4,142,152
Total assets 8,750,940 286,351 - 9,037,291
Deferred outflows of resources:

Loss on refunding - - - -

LIABILITIES
Accounts payable and other liabilities 55,707 285,192 - 340,899 Interest payable - - - -
Long-term liabilities:

Due within one year - - - -
Due in more than one year - - - -
Total liabilities 55,707 285,192 - 340,899
Deferred inflows of resources:

Leases 1,184,964 - - 1,184,964
Unavailable revenues - - - -
Total deferred inflows of resources 1,184,964 - - 1,184,964

NET POSITION
Net invested in capital assets 7,166,895 - - 7,166,895
Restricted - - - -
Unrestricted 343,374 1,159 - 344,533
Total net position $ 7,510,269 $ $ 1,159 $ - 7,511,428

CITY OF MODESTO

COMBINING STATEMENT OF FIDUCIARY NET POSITION

FIDUCIARY FUNDS - INVESTMENT TRUST FUNDS
JUNE 30, 2022
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City/County Joint
Tuolumne River Modesto-Ceres Powers Financing
Regional Park Fire Protection Agency Authority Total
ADDITIONS:

Contributions:

Members investment pool $ $ 408,800 $ - $ - 408,800
Total contributions 408,800 - - 408,800
Collections on behalf of other governments:

Special assessments - 292,007 - 292,007
Property taxes - 371,696 - 371,696
Other 114,471 - - 114,471
Total collections on behalf of other governments 114,471 663,703 - 778,174 Interest and investment earnings:

Interest and rent earnings 2,230 2,454 38 4,722
Net (decrease) in fair value of investments (9,509) (12,917) (64) (22,490) Total interest and investment earnings (7,279) (10,463) (26) (17,768) Total additions 515,992 653,240 (26) 1,169,206
DEDUCTIONS:

Distribution of property taxes to other taxing entities - 640,927 - 640,927 Obligation retirements:

Principal retirement - - - -
Interest expense - - - -
Trustee fees - - -
City administrative expenses 143,522 2,968 - 146,490
Other expenses - - - -
Depreciation expense 438,683 - - 438,683
Operating expenses 385,583 9,321 21,785 416,689
Total deductions 967,788 653,216 21,785 1,642,789
Net increase (decrease) in net position (451,796) 24 (21,811) (473,583) Net position, July 1 7,962,065 2 21,811 7,983,878
Prior year adjustment - 1,133 - 1,133
Net position, June 30 $ 7,510,269 $ $ 1,159 $ - 7,511,428

CITY OF MODESTO

COMBINING STATEMENTS OF CHANGES IN FIDUCIARY NET POSITION

FIDUCIARY FUNDS - INVESTMENT TRUST FUNDS
JUNE 30, 2022
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STATISTICAL SECTION TAB
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STATISTICAL SECTION
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Statistical Section
This part of the Annual Comprehensive Financial Report presents detailed information to aid in 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 has changed over time:

1. Net Position by Component

2. Changes in Net Position

3. Fund Balances of Governmental Funds

4. Changes in Fund Balances of Governmental Funds
Revenue Capacity
This schedule gives information on the City’s most significant local revenue source, the water usage charges:

1. Water Utility System – Ten Largest Customers

2. Water revenues by customer class

3. Water rates
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:

1. Ratio of Outstanding Debt by Type

2. Computation of Direct and Overlapping Debt

3. Computation of Legal Debt Margin

4. Revenue Bond Coverage, Wastewater Revenue Bonds
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:

1. Demographic and Economic Statistics

2. Principal Employers

3. Principal Property Taxpayers
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:

1. Full-Time City Government Employees by Function

2. Operating Indicators by Function

3. Capital Asset Statistics by Function/Program
Sources: Unless otherwise noted, the information in these schedules is derived from the Annual Comprehensive Financial Reports for the relevant year.
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2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Governmental activities
Net investment in capital assets $ 361,582,237 $ 347,647,419 $ 378,145,625 $ 381,887,289 $ 376,743,556 $ 377,529,238 $ 401,515,805 $ 374,618,780 $ 407,347,307 $ 457,620,157 Restricted (2) 63,381,356 77,564,677 121,105,182 115,619,807 123,851,082 130,192,278 127,885,787 135,818,614 183,357,207 195,793,646 Unrestricted (1,102,658) 9,167,253 (179,570,210) (173,275,294) (191,483,628) (182,197,396) (191,345,565) (206,772,243) (217,114,643) (189,907,446) Total governmental activities net position $ 423,860,935 $ 434,379,349 $ 319,680,597 $ 324,231,802 $ 309,111,010 $ 325,524,120 $ 338,056,027 $ 303,665,151 $ 373,589,871 $ 463,506,357 Business-type activities
Net investment in capital assets $ 476,681,835 $ 502,684,950 $ 527,784,338 $ 539,821,175 $ 555,163,217 $ 571,811,118 $ 607,813,261 $ 647,695,354 $ 648,609,186 $ 687,640,266 Restricted (2) 25,571,860 22,398,957 20,622,619 22,052,595 21,525,961 21,071,542 15,569,107 15,857,655 17,004,338 15,918,799 Unrestricted 162,882,299 150,187,831 99,450,370 92,324,550 113,595,981 130,146,975 148,005,231 138,508,360 178,262,877 115,746,227 Total business-type activities net position $ 665,135,994 $ 675,271,738 $ 647,857,327 $ 654,198,320 $ 690,285,159 $ 723,029,635 $ 771,387,599 $ 802,061,369 $ 843,876,401 $ 819,305,292 Primary government
Net investment in capital assets $ 838,264,072 $ 850,332,369 $ 905,929,963 $ 921,708,464 $ 931,906,773 $ 949,340,356 $ 1,009,329,066 $ 1,022,314,134 $ 1,055,956,493 $ 1,145,260,423 Restricted 88,953,216 99,963,634 141,727,801 137,672,402 145,377,043 151,263,820 143,454,894 151,676,269 200,361,545 211,712,445 Unrestricted 161,779,641 159,355,084 (80,119,840) (80,950,744) (77,887,647) (52,050,421) (43,340,334) (68,263,883) (38,851,766) (74,161,219) Total primary government net position $ 1,088,996,929 $ 1,109,651,087 $ 967,537,924 $ 978,430,122 $ 999,396,169 $ 1,048,553,755 $ 1,109,443,626 $ 1,105,726,520 $ 1,217,466,272 $ 1,282,811,649 (1) Accounting standards require that net position be reported in three components in the financial statements: net investment in capital assets; restricted; and unrestricted. Net position is considered restricted when (a) externally imposed by creditors (such as debt covenants), grantors, contributors, or laws or regulations of other governments or (b) imposed by law through constitutional provisions or enabling legislation. (2) Starting in fiscal year 2015, the significant decrease in net position was due to the implementation of GASB 68 related to the City's net pension liability.

CITY OF MODESTO
NET POSITION BY COMPONENT (1)

LAST TEN FISCAL YEARS
(ACCRUAL BASIS OF ACCOUNTING)
($100)
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
$1,100
$1,200
Net investment in capital assets Restricted Unrestricted 138
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2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Expenses
Governmental activities:

General government $ 12,041,953 $ 11,221,704 $ 12,085,051 $ 12,838,583 $ 13,945,824 $ 15,432,617 $ 13,973,768 $ 14,808,371 $ 14,727,031 $ 20,268,611 Community development 25,162,533 13,002,466 11,888,475 12,552,115 15,419,529 17,268,926 15,720,280 25,698,343 30,782,573 20,615,432 Highways and streets 20,525,496 21,316,315 21,269,704 20,149,011 22,481,002 22,997,140 23,937,423 25,858,611 25,863,042 27,463,523 Public works 4,064,497 3,241,135 9,810,989 10,749,465 13,169,149 8,674,538 3,472,405 3,736,696 3,126,390 3,086,419 Parks and recreation 13,036,579 11,659,816 4,641,611 3,493,743 3,947,898 4,456,508 15,680,980 14,725,590 13,750,865 12,439,250 Public safety 83,857,207 72,301,682 86,782,741 86,907,876 104,348,464 120,629,673 111,059,794 140,709,104 129,785,835 121,675,443 Interest on long-term debt 3,193,997 2,958,471 3,204,203 2,691,894 2,500,849 2,510,224 2,402,299 2,302,626 2,039,849 1,954,306 Total governmental activities expenses $ 161,882,262 $ 135,701,589 $ 149,682,774 $ 149,382,687 $ 175,812,715 $ 191,969,626 $ 186,246,949 $ 227,839,341 $ 220,075,585 $ 207,502,984 Business-type activities:

Water $ 1,252,660 $ 1,605,829 $ 54,718,239 $ 59,127,625 $ 63,008,231 $ 56,526,729 $ 62,745,688 $ 69,187,391 $ 68,792,875 $ 73,421,868 Sewer 48,656,862 63,498,896 30,281,361 33,093,921 36,248,877 41,444,220 41,216,914 45,832,671 46,500,454 44,263,767 Bus (1) 24,155,935 31,895,568 18,614,175 19,709,745 21,979,360 20,538,934 24,276,760 25,261,736 28,889,011 - Parking 4,239,567 6,372,418 1,513,185 1,625,943 1,628,226 1,553,258 1,899,479 1,905,382 1,700,607 1,926,834 Storm drain 4,350,079 4,951,441 3,913,204 5,312,896 6,119,472 5,202,444 7,157,290 7,384,884 5,585,980 5,965,352 Compost 1,534,242 2,291,222 7,841,048 11,998,345 9,648,481 9,652,175 8,477,947 10,330,237 12,022,746 11,497,333 Airport 18,025,010 19,618,547 2,025,146 1,787,081 1,744,557 1,578,654 1,646,800 1,841,645 1,865,063 1,686,375 Golf 2,197,368 2,845,109 2,998,505 3,130,536 2,871,167 2,616,077 3,052,785 2,939,639 2,865,795 3,229,764 Community center 1,864,996 2,031,928 1,852,585 1,981,307 1,934,179 1,780,010 1,541,592 1,603,302 1,961,576 1,570,818 Abatement and public nuisance 42,879 31,877 93,067 84,152 51,624 351,557 63,312 142,124 82,166 124,097 Total business-type activities expenses 106,319,598 135,142,835 123,850,515 137,851,551 145,234,174 141,244,058 152,078,567 166,429,011 170,266,273 143,686,208 Total primary government expenses $ 268,201,860 $ 270,844,424 $ 273,533,289 $ 287,234,238 $ 321,046,889 $ 333,213,684 $ 338,325,516 $ 394,268,352 $ 390,341,858 $ 351,189,192 Program revenues
Governmental activities:

Charges for services:

General government $ 6,262,963 $ 5,825,407 $ 5,912,157 $ 6,539,908 $ 5,082,405 $ 6,544,581 $ 6,387,743 $ 5,973,621 $ 6,237,530 $ 6,572,771 Community development 4,123,811 4,537,984 3,385,050 6,885,850 10,378,999 16,049,727 12,106,237 17,327,298 16,611,118 19,488,129 Highway and streets 761,394 873,566 1,744,505 1,154,290 1,101,813 758,952 748,319 909,580 651,061 651,082 Public works 3,565,048 4,146,641 6,621,704 5,469,419 5,908,332 1,637,024 2,779,546 2,921,053 2,869,808 2,711,433 Parks and recreation 3,623,647 3,004,001 1,344,923 771,733 1,614,443 2,346,211 2,450,965 3,358,983 2,145,685 2,205,344 Public safety 3,668,302 3,123,758 4,218,000 3,868,346 4,847,914 5,127,433 4,502,546 11,354,045 5,849,193 8,960,454 Operating grants and contributions 16,477,474 5,868,684 5,862,566 3,630,185 5,050,771 5,802,634 6,591,435 16,838,122 12,010,918 15,352,734 Capital grants and contributions 9,046,762 8,206,154 5,878,550 1,708,602 2,117,867 3,062,292 8,831,664 5,894,717 57,825,011 12,835,899 Total government activities program revenues 47,529,401 35,586,195 34,967,455 30,028,333 36,102,544 41,328,854 44,398,455 64,577,419 104,200,324 68,777,846 Business-type activities:

Charges for services:

Water $ 1,169,293 $ 1,092,347 $ 59,800,535 $ 55,992,533 $ 69,075,873 $ 74,842,451 $ 76,806,740 $ 82,796,199 $ 87,713,122 $ 86,231,116 Sewer 61,474,235 60,254,110 46,193,997 47,859,680 49,905,078 52,799,102 57,562,619 58,168,552 63,614,677 65,367,417 Bus 43,414,773 46,046,304 3,424,662 3,352,615 3,253,046 3,305,910 3,176,134 2,443,208 1,624,167 - Parking 5,780,644 5,831,133 1,239,439 1,289,211 1,284,269 1,434,311 1,519,954 1,264,938 983,353 1,281,097 Storm drain 8,012,611 4,853,133 5,874,349 5,588,169 5,910,988 6,004,682 6,133,801 6,114,242 6,167,491 6,216,242 Compost 619,904 634,530 7,191,145 7,352,767 8,903,917 8,934,075 10,090,662 10,216,018 10,433,758 10,944,785 Airport 2,946,937 2,989,504 551,373 622,383 596,152 651,693 737,072 651,447 686,923 722,767 Golf 1,568,532 2,196,280 2,574,496 2,431,904 2,236,100 2,485,688 2,419,938 2,005,588 3,343,027 3,010,990 Community center 263,581 230,801 257,991 326,839 305,436 294,524 285,685 188,589 36,914 166,370 Abatement and public nuisance 302,563 201,825 128,636 166,641 117,677 112,199 231,167 67,181 115,999 640,686 Operating grants and contributions 13,766,061 13,721,179 14,223,954 14,153,568 15,975,703 17,858,762 25,668,280 21,780,920 29,310,591 1,644,338 Capital grants and contributions 4,282,549 4,971,940 13,820,127 4,753,223 19,617,513 7,196,698 5,198,721 546,375 8,672,597 2,452,983 Total business-type activities program revenues 143,601,683 143,023,086 155,280,704 143,889,533 177,181,752 175,920,095 189,830,773 186,243,257 212,702,619 178,678,791 Total primary government program revenues $ 191,131,084 $ 178,609,281 $ 190,248,159 $ 173,917,866 $ 213,284,296 $ 217,248,949 $ 234,229,228 $ 250,820,676 $ 316,902,943 $ 247,456,637 Net (Expense)/Revenue
Governmental activities $ (114,352,861) $ (100,115,394) $ (114,715,319) $ (119,354,354) $ (139,710,171) $ (150,640,772) $ (141,848,494) $ (163,261,922) $ (115,875,261) $ (138,725,138) Business-type activities 37,282,085 7,880,251 31,430,189 6,037,982 31,947,578 34,676,037 37,752,206 19,814,246 42,436,346 34,992,583 Total primary government net expense $ (77,070,776) $ (92,235,143) $ (83,285,130) $ (113,316,372) $ (107,762,593) $ (115,964,735) $ (104,096,288) $ (143,447,676) $ (73,438,915) $ (103,732,555) (continued)

CITY OF MODESTO

CHANGES IN NET POSITION

LAST TEN FISCAL YEARS
(ACCRUAL BASIS OF ACCOUNTING)
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2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
General Revenues and Other Changes in Net Position
Governmental activities:

Taxes:

Utility users tax $ 20,399,116 $ 20,153,653 $ 19,591,170 $ 19,564,921 $ 20,113,023 $ 20,609,874 $ 19,803,859 $ 19,803,218 $ 20,764,694 $ 20,918,653 Property taxes, levied for general purposes (1) 11,618,481 12,304,010 13,551,827 14,552,304 15,384,518 16,356,095 17,316,735 18,113,180 19,106,595 19,757,550 Transient occupancy tax 1,884,188 1,879,825 2,097,952 2,523,087 2,669,484 2,826,160 2,961,406 2,727,061 2,850,229 3,621,190 Franchise tax 5,785,355 5,003,130 5,768,146 6,194,733 6,431,223 6,433,869 6,762,101 6,996,152 7,117,014 7,402,770 Cannabis tax (5) - - - - - - 352,208 3,201,364 5,379,402 4,022,799 Business license tax, levied for general purposes 10,176,791 10,573,820 11,421,759 11,944,291 12,255,062 13,053,199 13,715,997 13,269,468 13,899,554 15,263,225 Business license tax, levied for downtown improvement district 170,222 181,689 188,247 186,123 192,540 189,070 202,014 190,543 225,051 205,995 Grants and contributions not restricted to specific programs: (4) Sales tax (state appropriation) 27,110,911 27,651,939 28,437,594 29,878,815 30,204,125 31,302,950 31,665,700 30,534,694 35,670,236 40,389,650 Motor vehicle license fee 12,038,983 12,494,642 13,871,248 14,548,427 15,385,069 16,206,760 17,057,003 17,977,807 18,855,971 19,881,139 Transportation tax funding - - 5,924,101 4,533,572 3,968,029 5,672,563 19,002,236 19,438,347 22,501,876 23,404,322 Community facilities district fees - - 4,570,403 3,829 1,830 274,494 8,432 16,567 14,628 - Special assessments, levied - - 1,924,623 3,168,260 3,014,768 5,715,030 4,260,281 4,622,697 4,851,750 5,578,262 Proceeds from Modesto Regional Fire Authority dissolution - - 2,500,721 - - - - - - - Other 12,844,926 15,269,250 25,866,105 13,101,149 15,842,047 17,469,209 13,832,686 27,469,638 39,528,038 54,289,046 Unrestricted investment earnings 52,893 441,383 564,314 582,565 362,856 726,199 5,753,083 6,044,156 (287,088) (3,911,830) Miscellaneous 1,861,660 5,402,480 2,281,008 2,440,696 515,206 818,542 3,421,783 3,660,429 2,184,677 1,643,071 Transfers 1,055,670 (41,312) (775,377) (567,177) (1,750,401) (354,287) (1,675,373) 479,917 824,609 21,077,584 Total government activities 104,999,196 111,314,509 137,783,841 122,655,595 124,589,379 137,299,727 154,440,151 174,545,238 193,487,236 233,543,426 Business-type activities:

Taxes:

Property taxes, generated by and allocated to the airport 257,687 254,200 237,546 206,854 199,124 207,849 201,931 190,995 266,272 212,978 Unrestricted investment earnings 1,184,422 2,726,148 554,180 2,247,061 872,935 1,047,604 7,290,802 8,082,331 (192,489) (8,124,559) Connection fees (2) 1,200,800 524,914 - - - - - - - -
Miscellaneous - - 1,214,729 1,368,761 1,316,801 1,472,809 1,528,727 1,390,820 1,686,667 1,301,658 Settlements (1,055,670) 41,317 13,851 - - - - - - -
Transfers, net 116,711 110,376 775,377 567,177 1,750,401 354,287 1,675,373 (479,917) (824,609) (21,077,584) Special item (3) (6) (1,143,257) (1,356,418) - - - - - - - (19,461,712) Total business-type activities 560,693 2,300,537 2,795,683 4,389,853 4,139,261 3,082,549 10,696,833 9,184,229 935,841 (47,149,219) Total primary government $ 105,559,889 $ 113,615,046 $ 140,579,524 $ 127,045,448 $ 128,728,640 $ 140,382,276 $ 165,136,984 $ 183,729,467 $ 194,423,077 $ 186,394,207 Change in Net Position
Governmental activities $ (9,353,665) $ 11,199,115 $ 23,068,522 $ 3,301,241 $ (15,120,792) $ (13,341,045) $ 12,591,657 $ 11,283,316 $ 77,611,975 $ 94,818,288 Business-type activities 37,842,778 10,180,788 34,225,872 10,427,835 36,086,839 37,758,586 48,449,039 28,998,475 43,372,187 (12,156,636) Total primary government $ 28,489,113 $ 21,379,903 $ 57,294,394 $ 13,729,076 $ 20,966,047 $ 24,417,541 $ 61,040,696 $ 40,281,791 $ 120,984,162 $ 82,661,652 (1) Due to the dissolution of the Redevelopment agencies, no tax increments will be reported on the entity-wide statements. (2) Starting in fiscal year 2015, connection fee revenues were reported as part of program revenues for the Water fund. (3) Starting in fiscal year 2015, the special item related to pollution remediation has been reported as a liability. Any expenses incurred will be accounted for as a reduction to the liability. (4) Starting in fiscal year 2015, general revenues for grants and contributions not restricted to specific programs other related governmental activities were reclassified to provide more specific category revenue types. (5) During fiscal years 2019 and 2020, Cannabis tax was previously reported as Business license tax levied for general purposes. In fiscal year 2021 financials have been updated to report Cannabis tax as such. (6) Effective July 1, 2021 bus fund operations seized at the City of Modesto, due to the formation of the reionalized transit agency, Stanislaus Regional Transit Agency (StanRTA), resulting in a loss in transfer of operations for the City.

City of Modesto

CHANGES IN NET POSITION

LAST TEN FISCAL YEARS
(ACCRUAL BASIS OF ACCOUNTING)
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2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
General Fund
Nonspendable $ 126,603 $ 102,152 $ 2,770,844 $ 2,647,692 $ 2,515,146 $ 2,881,523 $ 2,723,032 $ 2,503,547 $ 2,388,852 $ 2,341,984 Restricted 3,713,640 3,718,682 1,341,972 2,092,126 1,970,622 2,674,200 2,209,485 2,137,896 3,367,488 8,157,536 Committed - 3,000,000 3,000,000 3,000,000 15,800,000 18,397,817 18,397,817 18,397,817 18,397,817 18,397,817 Assigned 1,173,377 1,024,149 3,119,753 6,503,769 4,854,307 1,096,566 509,751 309,114 349,022 579,390 Unassigned 11,758,746 12,069,864 14,586,931 12,822,134 4,509,693 1,695,476 1,742,785 2,407,575 6,395,913 9,942,398 Total General Fund $ 16,772,366 $ 19,914,847 $ 24,819,500 $ 27,065,721 $ 29,649,768 $ 26,745,582 $ 25,582,870 $ 25,755,949 $ 30,899,092 $ 39,419,125 All Other Governmental Funds
Nonspendable $ 746 $ 3,907 $ 88,057 $ 86,242 $ 81,007 $ 23,816 $ 13,290 $ 101,173 $ 543,554 $ 32,734 Restricted 106,724,809 108,672,378 79,643,971 80,563,574 85,531,411 91,786,367 89,210,020 104,838,269 111,141,528 114,815,329 Assigned 3,965,851 3,700,733 14,962,522 10,063,058 7,975,865 17,126,893 19,304,837 26,193,552 34,308,329 46,078,354 Unassigned (32,965,286) (34,656,617) (3,866,450) (724,841) (3,156,679) (1,723,380) (2,809,303) (7,112,005) (4,375,860) (5,343,454) Total all other governmental funds 77,726,120 $ $ 77,720,401 $ 90,828,100 $ 89,988,033 $ 90,431,604 $ 107,213,696 $ 105,718,844 $ 124,020,989 $ 141,617,551 $ 155,582,963 The change in total fund balance for the General Fund and other governmental funds is explained in Management's Discussion and Analysis.

Note: The City has elected to show ten years of data for this schedule.

FUND BALANCES OF GOVERNMENTAL FUNDS

LAST TEN FISCAL YEARS
(MODIFIED ACCRUAL BASIS OF ACCOUNTING)

CITY OF MODESTO
141
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2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Revenues
Taxes $ 50,034,153 $ 50,096,127 $ 52,619,101 $ 54,965,459 $ 57,045,850 $ 59,468,267 $ 61,114,320 $ 64,300,986 $ 69,342,539 $ 71,192,182 Licenses and permits 175,720 174,734 149,888 186,624 201,445 153,226 344,855 408,645 473,693 434,118 Intergovernmental 75,737,161 67,426,885 88,906,770 76,317,229 72,069,739 85,629,758 96,174,839 125,072,949 154,356,852 166,804,885 Charges for services 19,800,718 19,457,298 22,337,357 20,429,860 24,454,286 25,467,795 23,226,714 36,147,116 28,378,842 33,744,323 Special assessments levied 1,781,896 2,063,784 1,924,623 3,168,260 3,014,768 5,715,030 4,260,281 4,622,697 4,851,750 5,578,262 Interest and rent 835,994 1,019,357 957,846 1,297,734 1,402,387 1,574,347 2,219,282 2,018,446 1,320,686 2,191,466 Net increase (decrease) in fair value of investments (584,090) (423,827) (320,398) 102,422 (572,616) (645,593) 1,294,543 1,728,158 (985,713) (4,317,623) Fines and forfeits 2,004,133 1,844,607 1,171,076 904,802 1,263,407 1,127,877 1,143,506 666,120 660,110 832,510 Donations and Contribution - - - - - - - - 370,958 44,338 Miscellaneous 2,081,776 4,653,746 2,784,295 2,286,597 516,844 818,542 722,662 989,858 1,392,784 1,461,307 Total Revenues 151,867,461 146,312,711 170,530,558 159,658,987 159,396,110 179,309,249 190,501,002 235,954,975 260,162,501 277,965,768 Expenditures
Current:

General government 11,169,669 11,643,579 11,334,202 12,414,982 11,542,131 11,837,635 12,262,797 12,028,015 12,483,217 21,110,258 Community development 23,673,373 12,589,817 11,511,154 12,453,678 13,264,050 13,234,820 13,796,154 20,945,194 26,215,559 21,429,140 Highways and streets 8,560,717 8,744,899 9,672,790 8,498,783 9,240,654 8,936,163 10,102,646 11,039,619 12,152,803 16,510,434 Public works 2,993,702 3,088,701 9,228,780 10,393,169 10,919,102 6,509,418 3,017,247 3,035,851 2,635,907 3,215,409 Parks and recreation 11,299,979 11,947,862 4,212,301 3,385,484 3,269,360 3,420,453 13,843,885 11,944,940 11,634,840 12,943,340 Public safety 74,094,399 74,595,533 81,353,131 84,022,670 86,475,891 92,341,706 97,411,634 114,540,829 110,275,920 126,649,307 Capital outlay 26,616,638 12,901,002 30,339,677 19,817,025 21,431,186 19,037,250 38,522,334 38,425,318 51,533,054 50,042,664 Debt service:

Principal retirement 1,451,000 1,596,000 1,789,335 2,345,362 2,535,093 2,849,343 2,562,498 2,734,132 2,931,077 3,362,904 Interest 2,330,962 2,159,672 2,417,840 2,043,278 2,075,202 2,114,488 1,897,384 1,996,806 1,985,927 1,913,046 Other 932,460 872,350 783,264 697,405 430,779 396,686 506,333 307,928 51,814 48,610 Total Expenditures 163,122,899 140,139,415 162,642,474 156,071,836 161,183,448 160,677,962 193,922,912 216,998,632 231,900,118 257,225,112 Excess of revenues over
(under) expenditures (11,255,438) 6,173,296 7,888,084 3,587,151 (1,787,338) 18,631,287 (3,421,910) 18,956,343 28,262,383 20,740,656 Other Financing Sources (Uses)
Transfers in 18,230,774 7,962,817 8,157,278 6,960,425 5,559,720 10,707,217 21,496,638 15,292,128 14,249,431 15,993,594 Transfers out (18,417,413) (11,164,994) (10,682,539) (10,572,346) (6,659,759) (13,568,675) (20,760,150) (17,397,619) (15,500,194) (17,677,119) Capital leases - 1,070,472 - 330,947 5,883,756 - 39,204 - 3,741,926 - Sale of assets 72,489 200,838 94,489 106,582 31,239 154,458 87,608 132,485 1,934 32,551 Total other financing sources (uses) (114,150) (3,001,339) (1,360,300) (3,174,392) 4,814,956 (2,707,000) 824,096 (1,933,802) (1,248,829) 2,090,952 Change in fund balances (11,369,588) 3,171,957 6,527,784 412,759 3,027,618 15,924,287 (2,597,814) 17,022,541 27,013,554 22,831,608 FUND BALANCES, July 1 108,343,964 94,498,486 97,635,248 115,647,600 117,053,754 120,081,372 133,959,278 131,301,714 149,776,938 172,516,643 PRIOR PERIOD ADJUSTMENTS (2,475,890) (35,195) 11,484,568 993,395 - (2,046,381) (59,750) 1,452,683 (4,273,849) (346,163) FUND BALANCES, June 30 $94,498,486 $97,635,248 $115,647,600 $117,053,754 $120,081,372 $133,959,278 $131,301,714 $149,776,938 $172,516,643 $195,002,088 Debt service as a percentage of
noncapital expenditures 2.77% 2.95% 3.18% 3.22% 3.30% 3.50% 2.87% 2.65% 2.73% 2.55% The debt service percentage was revised to only include principal and interest.

CITY OF MODESTO

CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS

LAST TEN FISCAL YEARS
(MODIFIED ACCRUAL BASIS OF ACCOUNTING)
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Ten Largest Customers of Water Utility System, Year Ended 06/30/2022 % of Total Water Sales % of Total Water
Customer Usage (ccf) (1) Usage Revenue ($) Sales Revenue 1) Modesto City Schools 550,206 2.42% 1,442,306 $ 1.89% 2) City of Modesto 368,439 1.62% 1,161,840 1.52%
3) Foster Farms 422,907 1.86% 870,256 1.14%
4) Stanislaus Food Products 349,278 1.54% 763,063 1.00% 5) Sunopta 262,791 1.16% 553,119 0.72%
6) E & J Gallo Winery 169,453 0.74% 478,601 0.63%
7) Stanislaus Housing Authority 165,745 0.73% 510,052 0.67% 8) Modesto Irrigation District 161,256 0.71% 406,260 0.53% 9) Yosemite Community College 102,041 0.45% 313,365 0.41% 10) STANCO 83,700 0.37% 319,533 0.42%
Total Top Ten 2,635,816 11.60% 6,818,395 $ 8.93%
Total Flat/Metered Revenues (Water Sales) $ 76,482,992
(1) "ccf" means "hundred cubic feet"
Residential - Flat Rates $ 1,414,328
Commercial, Industrial and Municipal - Metered Rates 75,068,664 Total Water Sales (2) $ 76,482,992
The average monthly flat rate service charge for residential customers is: 69.44$ Commercial Accounts:

Meter Size
3/4" $ 25.44
1" 36.83
1 1/2" 65.32
2" 99.50
3" 207.73
4" 367.24
6" 748.90
8" 1,375.53
10" 2,173.05
12" 2,856.63
In addition to these minimum charges, commercial accounts are charged $2.02 per 100 cubic feet of water used. (2) Water sales only reflect the revenues in the Water Operating Fund and do not include revenue generated from developer fees and fleet replacement revenues.

Source:

City of Modesto-Utilities Division
Water Rates and Charges as of 07/01/2021
Water Sales Revenue, Year Ended 06/30/2022

CITY OF MODESTO

REVENUE CAPACITY - MOST SIGNIFICANT LOCAL REVENUE SOURCE

WATER UTILITY SYSTEM
(YEAR ENDED JUNE 30, 2022)
143
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Lease Finance Purchase
Fiscal Loans Revenue Notes Obligations
Year Payable Bonds Payable and Leases(7) Total
2013 500,000 60,870,000 3,201,000 502,622 65,073,622
2014 500,000 59,475,000 3,000,000 256,945 63,231,945
2015 500,000 57,970,000 2,789,000 1,070,472 62,329,472
2016 500,000 56,305,000 2,568,000 942,057 60,315,057
2017 500,000 54,470,000 2,335,000 6,358,720 63,663,720
2018 500,000 52,775,000 2,090,000 5,449,379 60,814,379
2019 500,000 50,915,000 1,834,000 5,002,881 58,251,881
2020 500,000 48,915,000 1,565,000 4,576,954 55,556,954
2021 500,000 46,745,000 1,282,000 4,098,878 52,625,878
2022 500,000 44,355,000 985,000 8,021,476 53,861,476
Certificates Reimbursement Total Percentage
Fiscal Loans of Agreement Revenue Obligations Primary of Personal Per Year Payable (3)(6) Participation (5) related to MID (4)(5) Bonds (3)(4)(5)(6) and Leases(7) Total Government Income (1) Capita (1) 2013 41,921,784 49,681,357 - 187,251,865 - 278,855,006 343,928,628 7.53% 1,670 2014 88,922,403 49,634,062 - 182,792,914 - 321,349,379 384,581,324 8.15% 1,860 2015 117,690,257 48,989,556 137,055,810 39,057,561 - 342,793,184 405,122,656 8.63% 1,937 2016 125,787,342 48,330,053 132,375,084 33,945,516 - 340,437,995 400,753,052 8.21% 1,891 2017 124,280,500 47,630,552 127,484,358 31,605,936 - 331,001,346 394,665,066 8.13% 1,859 2018 147,366,700 46,916,049 122,378,632 28,090,694 73,589 344,825,664 405,640,043 7.31% 1,894 2019 141,471,062 46,146,545 117,047,906 25,522,898 19,510 330,207,921 388,459,802 7.20% 1,807 2020 135,251,891 45,357,043 111,472,183 22,892,869 7,825 314,981,811 370,538,765 6.41% 1,696 2021 27,540,402 44,557,540 105,641,454 122,384,268 5,625 300,129,289 352,755,167 5.89% 1,613 2022 26,632,391 43,703,037 99,555,726 113,398,481 460,435 283,750,070 337,611,546 5.52% 1,550 (1) See Demographic and Economic Statistics for personal income and population data. (2) In fiscal year 2012 the Loans Payable increase is from the bond reimbursements related to the State Revolving Fund loan approved for the construction of a new tertiary treatment plant. (3) Until fiscal year 2015, the MID Treatment and Delivery issued by MID on behalf of the City was reported as a City liability under Revenue Bonds. (4) In fiscal year 2015, the Reimbursement agreement with MID was reclassified from revenue bonds payable to reimbursement agreement related to MID since this long-term debt is listed under MID but is the City's liability due to nature of the treatment and delivery agreement. (5) Starting in fiscal year 2016, the amounts presented include net of unamortized premiums or discounts. (6) In fiscal year 2021 the decrease in Loans Payable and increase in Revenue Bonds is due to the issuance of Revenue Bonds to pay off the State Revolving Fund loan for the tertiary treatment plant.
(7) In fiscal year 2022 the City adopted GASB Statement No. 87, Leases Finance Purchase

CITY OF MODESTO

RATIO OF OUTSTANDING DEBT BY TYPE
Last Ten Fiscal Years
Business-Type Activities
Governmental Activities
0 50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
350,000,000
400,000,000
2013 2014 2015 2016 2017 2018 2019 2020 2021
Series1 Series2
0 50,000,000
100,000,000
150,000,000
200,000,000
250,000,000
300,000,000
350,000,000
400,000,000
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Total Governmental Total Business
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CITY OF MODESTO

COMPUTATION OF DIRECT AND OVERLAPPING DEBT
JUNE 30, 2022
Percentage Amount
Net Debt Applicable to Applicable to
Jurisdiction Outstanding (1) City of Modesto (2) City of Modesto Direct debt:

City of Modesto $ 53,861,476 100% $ 53,861,476
Overlapping General Obligation debt - school districts:

Ceres Unified School District 83,682,988.00 5.37% 4,493,737 Hart-Ransom Union School District 3,401,989.00 31.40% 1,068,354 Modesto Elementary School District(3) 84,826,674.00 77.05% 65,360,578 Modesto High School District 18,519,795.00 67.38% 12,478,046 Paradise Elementary School District 250,000.00 0.00% 0
Salida Union Elementary District 9,165,000.00 27.86% 2,553,127 Stanislaus Union School District 18,545,000.00 75.02% 13,912,413 Sylvan School District 30,271,098.00 78.26% 23,690,193
Yosemite Community College District(4) 263,621,372.00 33.11% 87,281,613 Total overlapping debt 512,283,916 210,838,061
Total direct and overlapping debt $ 566,145,392 $ 264,699,537 (1) Gross debt outstanding less applicable amounts in debt service funds. (2) Determined by ratio of assessed valuation of property subject to taxation in overlapping portion to valuation of all property subject to taxation in the jurisdiction. (3) Increase from Modesto Elementary 2018, Mearsure D & E, General Obligation Bond Series B (4) Increase from Yosemite 2020 General Obligation Bonds refunding Series A & B.

Note: Source of data for School Districts: Stanislaus County Auditor. 145
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Net assessed value (1)(3) 18,963,538,995
Plus homeowners' exemption (1)(3) 197,561,852
Gross assessed value (1)(3) $ 19,161,100,847
Debt limit - 15% of gross assessed value (2) $ 2,874,165,127 Legal debt margin $ 2,874,165,127
Total Net Debt
Applicable to the
Total Net Debt Limit as a
Applicable Legal Percentage of
Fiscal Year Debt Limit to Limit Debt Margin Debt Limit
2013 1,724,049,678 - 1,724,049,678 0%
2014 1,825,518,342 - 1,825,518,342 0%
2015 2,017,621,335 - 2,017,621,335 0%
2016 2,120,160,392 - 2,120,160,392 0%
2017 2,232,042,092 - 2,232,042,092 0%
2018(4) 2,354,367,851 - 2,354,367,851 0%
2019 2,476,468,235 - 2,476,468,235 0%
2020 2,606,133,716 - 2,606,133,716 0%
2021 2,734,540,136 - 2,734,540,136 0%
2022 2,874,165,127 - 2,874,165,127 0%
(1) Source: Stanislaus County Auditor.
(2) Section 43605 California Government Code.
(3) Figures are based on Stanislaus County.
(4) Fiscal year 2018 was updated after a discussion with Stanislaus County made apparent that the wrong Tax Year was originally pulled from their records.

Note: The City has elected to show ten years worth of data for this schedule.

CITY OF MODESTO

COMPUTATION OF LEGAL DEBT MARGIN
JUNE 30, 2022
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Net Revenue Debt
Fiscal Gross Operating Available for Service
Year (3) Revenue (1) Expenses (2) Debt Service Requirements Coverage 2013 45,018,125 19,586,799 25,431,326 4,019,558 6.33
2014 47,233,028 19,860,430 27,372,598 4,261,980 6.42
2015 46,853,368 21,207,025 25,646,343 4,150,322 6.18
2016 50,207,559 25,418,140 24,789,419 4,570,286 5.42
2017 50,907,228 25,212,214 25,695,014 11,311,098 2.27
2018 53,770,230 27,227,948 26,542,282 13,536,703 1.96
2019 62,618,527 27,144,632 35,473,895 11,958,407 2.97
2020 64,094,389 29,019,732 35,074,657 12,706,004 2.76
2021 67,012,041 29,187,910 37,824,131 12,560,711 3.01
2022 65,071,038 32,152,205 32,918,833 12,232,431 2.69
(1) Consists of all receipts of the Sewer fund not dedicated to capital spending purposes and including charges for services, connection fees, interest and rental income. (2) Reflects total sewer fund operating expenses less depreciation; also includes certain transfers out that are made for operational costs incurred in other funds.
(3) The amount reported in fiscal year 2014 was corrected from $28.20m to $19.86m. The former amount included $8.34m for the State Revolving Fund loan which should not have been included in the calculation.

CITY OF MODESTO

REVENUE BOND COVERAGE

WASTEWATER REVENUE BONDS

LAST TEN FISCAL YEARS

0.00 1.00

2.00 3.00

4.00 5.00

6.00 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Coverage
Fiscal Year
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Total Per Capita Stanislaus City
Fiscal City Personal Personal Unemployment County Population Year (1)(2)(3) Population Income Income Rate (%) Population % of County 2013 205,987 4,566,113,829 22,167 12.70% 524,124 39.30% 2014 206,785 4,719,247,270 22,822 11.00% 526,042 39.31% 2015 209,186 4,693,924,654 22,439 9.30% 532,297 39.30%
2016 211,903 4,880,973,702 23,034 9.10% 540,214 39.23%
2017 212,287 4,856,701,986 22,878 7.80% 541,466 39.21%
2018 214,181 5,549,643,891 25,911 7.20% 549,976 38.94%
2019 215,030 5,396,177,850 25,095 6.50% 554,108 38.81%
2020 218,440 5,779,485,520 26,458 13.30% 550,660 39.67% 2021 218,745 5,984,425,710 27,358 7.60% 552,878 39.56%
2022 217,880 6,111,969,760 28,052 5.20% 552,999 39.40%
(1) The population for 2020 was previously overreported as 222,335 (2) In 2020, unemployment rates increased due to the effects of the novel coronarivus, COVID-19. (3) The population for 2021 was previoulsy overreported as 219,294 based on demographic data reported by California Department of Finance Demographic Research Unit.

Source: State of California, Department of Finance (population) State of California, Employment Development Department (unemployment rate) U.S. Department of Commerce, Census Bureau (income)

CITY OF MODESTO

DEMOGRAPHIC AND ECONOMIC STATISTICS

LAST TEN FISCAL YEARS

0.00%

2.00%

4.00%

6.00%

8.00%

10.00%

12.00%

14.00%

16.00%

18.00%
2013201420152016201720182019202020212022
Unemployment Rate (%)
$0
$1,000,000,000
$2,000,000,000
$3,000,000,000
$4,000,000,000
$5,000,000,000
$6,000,000,000
$7,000,000,000
2013201420152016201720182019202020212022
Total Personal Income
$20,000
$22,000
$24,000
$26,000
$28,000
$30,000
$32,000
$34,000
2013201420152016201720182019202020212022
Per Capita Personal Income

38.00%

38.25%

38.50%

38.75%

39.00%

39.25%

39.50%

39.75%

40.00%

40.25%

40.50%
2013201420152016201720182019202020212022
Population % of County
148
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2021/22 2013/14
Percentage Percentage
Number of (1) of Total City Number of (1) of Total City Employer Employees Rank Employment Employees Rank Employment E & J Gallo Winery 6,700 1 2.77% 3,300 1 3.21%
Stanislaus County 3,886 2 1.61%
Modesto City Schools 3,200 3 1.32% 3,189 2 3.10%
Dotors Medical Center 2,600 4 1.07% 2,100 6 2.04%
Memorial Medical Ctr 2,087 5 0.86% 2,600 3 2.53%
Foster Farms Poultry 2,000 6 0.83%
Del Monte Foods Inc 1,500 7 0.62% 2,300 4 2.24%
City of Modesto 1,273 8 0.53% 1,139 9 1.11%
Sylvan Union School District 900 9 0.37%
Modesto Junior College 783 10 0.32% 1,322 8 1.28%
Stanislaus Food Products 1,850 7 1.80%
Seneca 2,275 5 2.21%
Kaiser Permanente 800 10 0.78%
Subtotal 24,929 10.30% 20,875 20.30%
Total Labor Force 242,000
Total City Population 217,880
Source: Stanislaus Economic Development & Workforce Alliance (1) The number of employees include both part-time and full time.

CITY OF MODESTO

PRINCIPAL EMPLOYERS
149
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2021/22 2013/14
Employer
Taxable Assessed
Value Rank
Percentage of
Total City
Taxable
Assessed Value
Taxable Assessed
Value Rank
Percentage of
Total City
Taxable
Assessed Value
E & J GALLO WINERY $ 518,460,818 1 2.71% 252,167,204 $ 3 2.07% PACIFIC GAS & ELECTRIC COMPANY 450,820,701 2 2.35% 252,073,862 1 2.07% GALLO GLASS CO 417,164,747 3 2.18% 234,940,295 4 1.93%
FRITO LAY INC 198,547,420 4 1.04% 111,694,570 8 0.92%
CALIFORNIA DAIRIES INC 184,489,203 5 0.96%
HUNT WESSON FOODS INC 171,861,417 6 0.90%
DOCTORS MED CENTER OF MOD INC 150,180,956 7 0.78% 125,232,140 6 1.03% EXCEL MONTE VISTA LP 146,959,364 8 0.77%
BRONCO WINE COMPANY 139,213,770 9 0.73% 132,153,060 5 1.09% BLUE DIAMOND GROWERS 137,717,449 10 0.72%
WORLD INTERNATIONAL(1) 20,540,046 2 0.17%
WW GRAINGER, INC 91,340,280 9 0.75%
HUNT WESSON FOODS, INC 118,373,997 7 0.97%
FRESNO FARMING 90,307,837 10 0.74%
Subtotal $ 2,515,415,845 13.14% 1,428,823,291 $ 11.74%
Total assessed value of $ $ 19,161,100,847 $ 12,170,122,277 (1) Formerly World International LLC; should utilize AV in combination with "taxes" paid, if so taxpayer is not in the top 10. Not top 10 in relation to ad valorem t Source: Stanislaus Country Treasurer-Tax Collector
Note: Information based on entire Stanislaus County

CITY OF MODESTO

PRINCIPAL PROPERTY TAXPAYERS
150
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2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Function
General Government 112.00 108.00 112.10 79.00 80.00 90.00 84.00 84.00 85.00 86.00 Community Development 74.00 73.80 60.75 67.00 70.00 81.00 72.00 76.00 69.00 73.00 Public Works and Utilities 69.00 60.00 83.00 107.00 78.00 157.00 56.00 56.00 53.00 63.00 Parks and Recreation 97.50 75.38 16.50 18.50 17.50 17.50 54.75 56.75 51.75 51.75 Public Safety 474.00 455.00 456.50 462.50 490.50 490.50 480.50 510.50 482.00 528.00 Parking 6.00 6.00 7.00 6.00 6.00 6.00 6.00 6.00 7.00 7.00 Water 91.00 104.00 126.00 128.00 134.00 101.00 135.00 136.00 127.00 126.00 Sewer 111.00 124.00 139.00 139.00 157.00 146.80 158.00 158.00 157.00 155.00 Storm Drain 17.00 9.00 9.00 8.00 8.00 2.00 8.00 8.00 8.00 6.00 Compost 8.00 24.80 57.80 61.80 58.80 48.00 57.80 57.80 58.00 63.00 Airport 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 6.00 Bus(1) 20.00 20.00 23.00 24.00 24.00 16.00 24.00 24.00 24.00 - Community Center 5.50 5.50 6.00 5.00 11.00 3.00 2.00 2.00 1.00 1.00 Internal Services 52.00 67.30 76.00 82.00 79.00 56.00 81.00 81.00 79.00 108.00 Total 1,143.00 1,138.78 1,178.65 1,193.80 1,219.80 1,220.80 1,225.05 1,262.05 1,207.75 1,273.75 (1) Effective July 1, 2021, bus services at the City of Modesto seized due to the formation of the Stanislaus Regional Transit Authority (StanRTA).

Source: City of Modesto

CITY OF MODESTO

FULL-TIME CITY GOVERNMENT EMPLOYEES BY FUNCTION

LAST TEN FISCAL YEARS
0 100
200
300
400
500
600
700
800
900
1,000
1,100
1,200
1,300
1,400
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Position Allocations
Fiscal Year
Internal Services
Community Center
Bus(1)
Airport
Compost
Storm Drain
Sewer
Water
Parking
Public Safety
Parks and Recreation
Public Works and Utilities
Community Development
General Government
151
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2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Function/Program
Public safety:

Fire:

Fire calls for service(1) 22,846 24,281 24,712 21,135 26,288 28,444 30,341 31,415 30,741 32,618 Primary fire inspections conducted 818 989 1,050 764 1,060 1,509 2,011 2,687 1,993 2,167 Police:

Communication Center calls answered
Police calls for service 174,113 123,357 122,270 129,439 129,802 194,931 181,430 178,649 165,126 148,710 Law violations: (6)
Part I and Part II crimes 52,272 53,032 50,729 53,609 53,142 53,543 47,141 36,898 33,067 28,204 Physical arrests (adult and juvenile) 12,418 15,039 18,634 12,303 11,760 13,247 12,388 13,302 12,360 10,962 Traffic violations 14,761 15,477 12,700 11,451 15,428 16,930 17,098 16,263 13,767 7,978 Parking violations 12,150 12,327 5,493 6,139 10,841 9,414 7,443 3,781 477 429 Public works
Streets:

Street resurfacing (Slurry Seal lane miles) 6 12 8 4 12 4 8 1 123 118 Potholes repaired (Total # of repairs) 13,282 12,573 14,515 24,059 8,745 25,004 36,709 2,831 21,863 9,230 Water utility customer repaired (sq. ft) 81,261 29,108 611 - - - - - - - Crack sealing (lane miles) 20 33 12 37 29 48 29 23 43 32 Airport:

Number of passengers enplaned (2) 16,532 11,703 - - - - - - - - Number of tenant aircraft 184 172 162 173 162 153 167 160 164 156 Number of hangars 118 118 119 119 119 119 119 119 119 119 Number of runways 2 2 2 2 2 2 2 2 2 2
Annual fuel consumption in gallons 653,153 682,769 582,473 443,272 582,602 580,383 631,891 511,928 540,226 647,631 Bus service:(5)
Number of buses 65 55 56 60 59 57 61 61 69 -
Number of routes 20 20 21 21 21 17 17 17 19 -
Total route miles 362 362 362 362 362 245 245 245 338 - Average weekday number of passengers 11,616 12,538 11,598 12,441 10,523 9,354 8,869 7,475 6,686 - Total number of passengers carried 3,434,409 3,666,824 3,416,314 3,664,689 3,108,307 2,762,922 2,589,049 2,182,079 1,987,698 - Community development
Building safety & NPU:

Permits issued 3,566 3,871 4,511 4,939 4,973 5,033 4,335 4,146 4,808 4,690 Estimated cost of construction $ 81,095,370 $ 58,850,241 $ 137,453,763 $ 92,768,634 $ 118,527,812 $ 172,595,385 $ 112,433,029 $ 170,765,326 $ 201,953,969 $ 216,000,327 Building Inspections made 27,816 30,034 31,571 23,187 36,158 42,891 39,086 34,218 34,730 21,064 Traffic electrical:

Street lights 13,765 13,761 13,764 13,764 13,764 13,764 13,764 13,764 13,764 13,764 Traffic signals 144 144 147 151 153 155 155 156 156 156 Lighted ped walks 28 29 28 28 28 24 26 26 26 26
Beacons 8 11 11 11 11 3 4 4 4 4
Four way flashers 10 10 10 10 10 5 3 3 3 3
School flashers 22 22 22 23 24 16 13 14 14 14
CCTV 41 41 41 41 41 30 24 24 24 24
Hubs 6 6 6 6 6 2 6 6 6 6
Culture and recreation:

Recreation class participants(3) 264,670 150,514 151,323 150,091 150,500 154,000 160,656 116,131 28,240 58,426 Solid waste:

Recyclables processed (tons per year) 37,647 46,936 55,020 56,493 71,155 62,701 60,947 62,617 60,332 17,008 Organic Waste(4) - - - - - - - - - 29,111
Green Waste(4) 55,147 39,117 48,832 58,730 62,859 64,873 66,017 82,866 46,373 14,691 Commercial food waste 765 827 817 845 914 1,550 1,145 1,192 2,783 3,368 Waste tires 1,674 4,969 4,152 4,497 4,931 4,285 4,320 5,089 4,501 4,883 (1) Fiscal year 2012-2013 Fire calls for service was originally reported incorrectly due to duplicate entries found on the National Fire Incident Report System (NFIRS) reports. This figure was corrected October 24, 2014. (2) The enplanements subsided with the loss of commercial service in fiscal year 2013-2014. (3) Fiscal year 2020-2021 Recreation class participants had decreased due the COVID-19 outbreak and classes were suspended. (4) Fiscal year 2021-2022 Yard waste is to be changed to Green Waste and was split into Organic Waste and Green Waste. This was the first year for recording Organic Waste. (5) Effective July 1, 2021, the operations of the Bus services seized as the newly regional transit agency, Stanislaus Regional Transit Agency (StanRTA) formed and took over the public transit services within some areas of Stanislaus County.

Source: City of Modesto - Various Departments

CITY OF MODESTO

OPERATING INDICATORS BY FUNCTION
(6) Effective January 1, 2021, every law enforcement is now required to use the National Incident Based Reporting System (NIBRS), which has a focus on whether the crime was attempted or completed. Under prior reporting requirements, attempted crimes and completed crimes were reported as crimes. 152
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2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Function/Program
Public safety:

Fire stations 11 11 11 11 11 11 11 11 11 11
Police stations 1 1 1 1 1 1 1 1 1 1
Police patrol units 105 105 105 105 104 104 100 105 100 105 Public works
Streets:

Miles of streets (1) 684 691 691 692 692 692 693 693 694 700 Water:

Miles of water mains 1,009 1,009 914 887 887 908 908 914 916 914 Fire hydrants 7,584 7,596 7,748 7,845 7,859 7,921 7,974 8,026 8,043 8,077 Storage capacity (gallons) 12,300,000 12,300,000 12,300,000 18,300,000 18,300,000 18,300,000 22,300,000 22,300,000 22,550,000 22,545,000 Wastewater:

Miles of sanitary sewers 639 639 639 639 655 656 656 656 657 650 Miles of storm sewers 183 183 183 183 170 170 170 170 170 165 Number of treatment plants (2) 2 2 2 2 2 2 2 2 2 2
Treatment capacity (millions of gallons) (5) 70 70 70 70 19 19 19 19 19 19 Community services:

City parks (3) 76 76 76 76 76 76 76 76 76 76
City parks acreage 1,110 1,110 1,110 1,240 1,240 1,240 1,240 1,240 1,246 1,246 Playgrounds (6) 55 55 58 58 58 58 58 54 55 55
City trails (7) 7 7 6 6 6 6 6 6 9 9
City trails miles 14 14 15 15 15 16 16 17 17 17
Regional park acreage (8) 324 324 375 375 375 375 375 375 653 653 Regional park facilities:

Golf courses (18 holes) 2 2 2 2 2 2 2 2 2 2
Golf courses (9 holes) 1 1 1 1 1 1 1 1 1 1
Clubhouse and banquet facility 8 8 8 8 8 8 8 8 8 8
Historic house (4) 4 4 4 3 3 3 3 3 3 3
Community gardens 2 2 2 2 1 1 1 1 1 1
Community centers 7 7 7 7 7 7 7 7 7 7
Senior centers 1 1 1 1 1 1 1 1 1 1
Sports centers 1 1 1 1 1 1 1 1 1 1
Performing arts centers 1 1 1 1 1 1 1 1 1 1
Swimming pools 4 4 4 4 1 1 1 1 1 1
Tennis courts 37 37 37 37 37 37 37 37 37 37
Baseball/softball diamonds (8) 24 24 24 24 24 24 24 24 29 29 Soccer/football fields(8) 29 29 29 29 29 29 29 29 31 31 Splash play in Existing parks 10 10 10 10 10 10 9 9 9 9 (1) Information reported from the City's GIS system.
(2) The City has both a Primary and a Secondary treatment facility. (3) The number of parks for fiscal years 2013, 2014, 2015 was reported incorrectly as 77. Figures have been corrected to reflect accurately since FY 2016. (4) The number of historic houses was reduced by one due to the Crismon House burning down. There are no plans to rebuild. (5) The City has a new process and permit. Previous permit was 70 million gallons daily seasonal Oct. through May. Current permit is 19 million gallons daily year round. (6) In 2020 the number of playgrounds was reduced as playgrounds were removed to rebuild. (7) Bike trails are being combined with City trails.
(8) Starting in 2021, the full survey of Parks, Sports fields & inventory methodology was changed. Park acreage is now defined more exactly.

Source: City of Modesto - Various Departments

CITY OF MODESTO

CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM
153
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CONTINUING DISCLOSURE TAB
.
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.
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CONTINUING DISCLOSURE

SECTION
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Continuing Disclosure Section
This part of the Annual Comprehensive Financial Report provides information in order to comply with the City’s contractual commitment established by certain continuing disclosure undertaking of the City, entered into in accordance with Securities and Exchange Commission Rule 15c2-12 (the “Rule”) for the City’s bond obligations listed below. In contrast to the financial section, the continuing disclosure section information is not subject to independent audit.

1. Wastewater Revenue Refunding Bonds, Series 2018A

2. Wastewater Revenue Refunding Bonds, Series 2020A

3. Wastewater Revenue Refunding Bonds, Series 2020B

4. Water Revenue Refinancing Certificates of Participation, 2008 Series A

5. Modesto Irrigation District Financing Authority Domestic Water Project Refunding Revenue Bonds, Series 2013G

6. Modesto Irrigation District Financing Authority Domestic Water Project Revenue Bonds, Series 2007F 157
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CITY OF MODESTO

CONTINUING DISCLOSURE REQUIREMENTS INFORMATION
YEAR ENDED JUNE 30, 2022
Connection charge information: The Sewer Enterprise imposes connection fees on an on-time basis to new users of the sewer system and to users who significantly expand their usage. The fees have three components:

Capacity charge: $2,643 per Equivalent Dwelling Unit for residential units. Commercial and industrial property charged based on type of business.

Sub-trunk sewer charge: $645 per acre
Connection (lateral) charge: $33 per linear foot of lot frontage adjacent to the sewer line.

Customer Base by Type of Account
Number of % of Total % of Sewer Fee
Category Accounts Accounts Operating Revenue
Residential 59,183 94.7% 58.12%
Commercial 3,259 5.2% 18.46%
Industrial 53 0.1% 23.42%
Total 62,495 100.00% 100.00%
Ten Largest Users of Sewer Facilities, Year Ended 6/30/22 Sewer Fee % of Sewer Fee
User Revenue Operating Revenue
1) E & J Gallo Winery $ 2,954,100 5.07%
2) Foster Farms $ 2,185,852 3.75%
3) Stanislaus Food Products $ 1,883,398 3.23%
4) Del Monte Foods $ 1,469,156 2.52%
5) City of Ceres $ 1,390,571 2.38%
6) Frito-Lay, Inc. $ 1,186,446 2.03%
7) Sunopta $ 797,023 1.37%
8) Rizo Food Company $ 698,971 1.20%
9) Nestle Food Company $ 584,567 1.00%
10) Paleteria $ 518,577 0.89%
Total (Top Ten Customers) $ 13,668,661 23.44%
Total (All Customers) $ 58,314,864
The average single-family residence monthly sewer charge is: $41.78 Charge
Commercial Group Per 1,000 Gallons Fixed Charge
Group 1 (no food, just toilets or working facilities) $3.69 $4.68 Group 2 (commercial laundromats, service stations, hotels without food) $4.89 $4.68 Group 3 (industrial laundromats, hotels with food) $6.08 $4.68 Group 4 (restaurants, bakeries, auto steam, markets) $7.52 $4.68 Industrial users pay a minimum account charge of $4.86 with additional charges of: $3,739.76 per million gallons of flow, $278.79 per 1,000 pounds of excess biochemical oxygen demand (BOD), and $519.81 per 1,000 pounds of Total Suspended Solids (TSS).

Industrial users on the Cannery Segregation line pay a minimum account charge of $4.86 with additional charges of: $2,852.34 per million gallons of flow, $19.01 per 1,000 pounds of biochemical oxygen demand (BOD), and $37.46 per 1,000 pounds of Total Suspended Solids (TSS) while in production during the months of July, August and September.

The Annual Budget of the City of Modesto is available from the City of Modesto Finance Department.

Updates of other required disclosures may be found elsewhere in this report, as follows:

Statement of Revenues, Expenses and Changes in Fund Net Position Page 25 Principal Amount of Bonds and Other Parity Debt Page 50-53 (Note III-C) Historical Debt Service Coverage Page 147
(continued)
Wastewater Revenue Refunding Bonds, Series 2015,
Wastewater Revenue Refunding Bonds, Series 2018 A, and
Wastewater Revenue Refunding Bonds, Series 2020 A & B
158
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Residential, commercial and industrial rates have increased according to the following approved schedule.

Fiscal Year Percent Increase
2012-13 6.0%
2013-14 6.0%
2014-15 2.0%
2015-16 3.0%
2016-17 6.0%
2017-18 6.0%
2018-19 6.0%
2019-20 6.0%
2020-21 4.0%
2021-22 4.0%
Comparative Monthly Wastewater Service Charges.

The City's residential charges as of July 1, 2021 are set forth below with a comparison to other Central Valley and Northern California cities.

City
Monthly
Residential
Charge
Fresno $ 25.75
Lodi 43.37
Modesto 41.78
Stockton 45.19
Tracy 34.00
Turlock 28.95

CITY OF MODESTO

WASTEWATER COMPARISON INFORMATION
YEAR ENDED JUNE 30, 2022
Ten Year History of Rate Increases

WASTEWATER SYSTEM

CITY OF MODESTO
CONTINUING DISCLOSURE REQUIREMENTS INFORMATION (continued)

CITY OF MODESTO

WASTEWATER SYSTEM
Monthly Sewer Charge Comparison
Residential Service
As of July 1, 2021
159
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CITY OF MODESTO

WASTEWATER SYSTEM
Wastewater Connection Fees Comparison
As of July 1, 2021
City Connection Fee
Fresno (1) $ 2,119.00
Lodi (2) 5,686.00
Modesto 2,643.00
Stockton 2,288.25
Tracy 9,476.00
Turlock 2,461.00

CITY OF MODESTO
CONTINUING DISCLOSURE REQUIREMENTS INFORMATION (continued) YEAR ENDED JUNE 30, 2022
(1) Connection fees are based on the size of the lot & location. (2) Connection fees are based on the size of the water meter. 160
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Water Revenue Refinancing Certificates of Participation, 2008 Series A Modesto Irrigation District Financing Authority Domestic Water Project Refunding Revenue Bonds, Series 2013G(1) Modesto Irrigation District Financing Authority Domestic Water Project Revenue Bonds, Series 2007F(1) Reserve Account Requirement as of 6/30/22 $ 4,011,410
Surety Policy Value: 2,082,513
Balance in Parity Reserve Account as of 6/30/22 1,934,534 Shortfall/(Excess) Reserve Coverage: $ (5,637)
Ten Largest Customers of Water Utility System, Year Ended 6/30/22 % of Total Water Sales % of Total Water
Customer Business Type Usage (ccf) (2) Usage Revenue ($) Sales Revenue 1) Modesto City Schools Education 550,206 2.42% 1,442,306 $ 1.89% 2) City of Modesto Local Government 368,439 1.62% 1,161,840 1.52% 3) Foster Farms Dairy Processor 422,907 1.86% 870,256 1.14% 4) Stanislaus Food Products Cannery 349,278 1.54% 763,063 1.00% 5) Sunopta Cannery 262,791 1.16% 553,119 0.72%
6) Stanislaus Housing Authority Housing Authority 165,745 0.73% 510,052 0.67% 7) E & J Gallo Winery Processor 169,453 0.74% 478,601 0.63% 8) Modesto Irrigation District Power Company 161,256 0.71% 406,260 0.53% 9) STANCO Local Government 83,700 0.37% 319,533 0.42%
10) Yosemite Community College Education 102,041 0.45% 313,365 0.41% Total Top Ten 2,635,816 11.60% $6,818,395 8.93%
Total Flat/Metered Revenues (Water Sales) $ 76,482,992
(1) Grover Landscaping maintains City parks
(2) "ccf" means "hundred cubic feet"
Water Sales Revenue, Year Ended 6/30/2022
Residential - flat rates $ 1,414,328
Commercial, industrial and municipal - metered rates 75,068,664 Total Water Sales $ 76,482,992
The average monthly flat rate service charge for residential customers is: $ 69.44 Meter Size
3/4" $ 25.44
1" 36.83
1 1/2" 65.32
2" 99.50
3" 207.73
4" 367.24
6" 748.90
8" 1,375.53
10" 2,173.05
12" 2,856.63
In addition to these minimum charges, commercial accounts are charged $1.98 per 100 cubic feet of water used.

The Annual Budget of the City of Modesto is available from the City of Modesto Finance Department. (1)

(2) Water sales only reflect the revenues in the Water Operating Fund and do not include revenue generated from developer fees and fleet replacement revenues.

Current Water Rates as of 07/01/2021- Commercial Accounts

CITY OF MODESTO
CONTINUING DISCLOSURE REQUIREMENTS INFORMATION (continued) YEAR ENDED JUNE 30, 2022
Water Fund parity debt obligations, issued by the Modesto Irrigation District Financing Authority, on behalf of the City, and pursuant to the 1992 Treatment and Delivery Agreement between the District and the City. In fiscal year 2013- 2014 Modesto Irrigation District Financing Authority refunded the 1998 D Bond, with the 2013 G Bond. At fiscal year end 2021-2022, the balance of the 2013 G Bond was $5,795,000 and the balance of the 2007 F Bond was $93,190,000. 161
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2013 (1) 2014 (9) 2015 (7) 2016 (8) 2017 2018 (13) 2019 (14) 2020(16) 2021 2022 (17) Charges for services $ 56,906,488 $ 56,940,812 $ 54,779,417 $ 51,489,077 $ 63,253,114 $ 68,928,504 $ 71,952,653 $ 76,996,091 $ 80,908,193 $ 79,318,075 Connection charges 295,632 357,432 1,024,626 935,987 1,435,654 1,661,151 1,081,913 1,904,330 1,559,621 1,194,261 Refunds, damages & recoveries 260,802 215,271 20,988 511,063 57,533 (121,929) 95,591 92,786 (801,155) (4,141,774) Interest and rental income 174,224 235,246 353,305 535,823 574,899 689,500 999,269 1,086,126 864,989 971,868 Service credits 3,201,951 2,678,999 3,033,487 3,026,911 3,304,911 3,408,238 3,309,703 3,576,012 3,654,881 3,405,150 Miscellaneous (15) 150,949 154,700 365,808 2,979,500 231,134 1,117,571 1,120,960 1,243,999 1,738,084 1,995,136 Total gross operating revenues 60,990,046 $ $ 60,582,460 $ 59,577,631 $ 59,478,361 $ 68,857,245 $ 75,683,035 $ 78,560,089 $ 84,899,344 $ 87,924,613 $ 82,742,716 Operating expenses (2) (12) $ 28,530,554 $ 36,598,298 $ 33,773,198 $ 38,722,320 $ 35,508,887 $ 35,685,576 $ 38,806,127 $ 39,167,326 $ 42,088,154 $ 47,165,967 Operating transfers (3) 838,421 765,000 765,000 765,954 765,000 1,239,943 3,129,583 2,241,135 3,283,246 689,875 Total operating expenses (4) $ 29,368,975 $ 37,363,298 $ 34,538,198 $ 39,488,274 $ 36,273,887 $ 36,925,519 $ 41,935,710 $ 41,408,461 $ 45,371,400 $ 47,855,842 Net operating revenues 31,621,071 $ $ 23,219,162 $ 25,039,433 $ 19,990,087 $ 32,583,358 $ 38,757,516 $ 36,624,379 $ 43,490,883 $ 42,553,213 $ 34,886,874 2008 Revenue Certificates of Participation $ 2,632,225 $ 2,648,783 $ 2,531,179 $ 2,313,857 $ 2,468,593 $ 2,268,298 $ 2,121,410 $ 2,309,687 $ 2,130,448 $ 2,138,850 MID Treatment & Delivery Agreement(5) 10,889,760 8,885,208 9,930,040 10,203,352 10,202,108 10,208,384 10,214,947 10,213,274 10,709,280 10,400,158 CDWR Loan 264,719 264,719 262,692 131,322 - - - - - -
ARRA Grant 36,289 36,103 36,095 36,089 36,084 36,080 37,123 39,350 37,540 37,343 Total debt service 13,822,993 $ $ 11,834,813 $ 12,760,006 $ 12,684,620 $ 12,706,785 $ 12,512,762 $ 12,373,480 $ 12,562,311 $ 12,877,268 $ 12,576,351 Debt service coverage (10) (11) 2.29 1.96 1.96 1.58 2.56 3.10 2.96 3.46 3.30 2.77 (1) In fiscal year 2012-13, the amount reported for Charges for Services was incorrectly reported in the amount of $59,906,488. The correct amount is $56,906,488 which is reflected in the table above. (2) Reduced fiscal year 2015- 2016 Operating Expenses as the $131,322 CDWR Loan payment (along with 2 dollars attributed to rounding error) were counted both in Operating Expense and in the debt service section.
(3) Includes operating transfers for building rental fee of $65,000 annually and commencing in fiscal year 2009-2010 $700,000 annual transfer to the Storm Drain Fund to actively protect the groundwater supply source from contamination. In fiscal year 2011-12 $668,610 a one time transfer for information technology internal service funds. (4) Total operating expenses excludes depreciation and amortization, as well as the debt service component under the Treatment and Delivery Agreement. fiscal year 2015-2016 Total operating expense reduced from $39,619,604 to $39,488,274 since the Operating expenses was adjusted (see note 2) (5) Increased fiscal year 2014-2015 2008 Revenue Certificates of Participation from $2,501,891 to $2,531,179 to account for actual expenditure instead of the internal transfer. (7) The sale of the Waterford-Hickman Water System for $2.6 million had a significant impact to the Water Fund debt service calculation. Without the sale of this system Water Fund debt service coverage would have been 1.35. Reduced fiscal year 2015-2016 Operating Expenses as the $131,322 Del Estate Water Company loan payment (along with $2 dollars attributed to rounding error) were counted both in Operating Expense and in the Debt service section.
(8) Del Estate Water Company (CDWR) loan payment for fiscal year 2014-2015 was reduced from $264,719 to $262,692 and fiscal year 2015-2016 reduced from $264,719 to $131,322. Loan repayment was completed in fiscal year 2015-2016.
(9) Changed fiscal year 2014-2015 ARRA Grant from $36,290 to $36,095 and changed fiscal year 2015-2016 ARRA Grant from $36,290 to $36,089. Fiscal year 2012-2013 rate was reported incorrectly in previous reports. (10) Fiscal year 2015-2016 Debt service coverage increased from 1.55 to 1.57 and fiscal year 2014-2015 Debt service coverage increased from 1.45 to 1.96 after above stated changes were made. (11) The financial figures reported only reflect net operating revenues in the Water Operating Fund. (12) Fiscal year 2017-2018 Miscellaneous revenues include $1,048,863 of one-time transfer as result of the dissolution of the Central Stores Fund. (13) Fiscal year 2018-2019 Operating Transfers of $3,129,583 includes $2,300,000 in one-time loan to fund 4893 (Carpenter Road Landfill) to be repaid over 6 years. (14) Fiscal year 2019-2020 Miscellaneous revenues include the first, interest-only payment of the fiscal year 2018-2019 Loan from the Water fund to the Carpenter Road Landfill Fund. year 2018-2019.
(16) Fiscal year 2020-2021, Negative refunds, damages, and recoveries is due to large negative change in Fair Market Value. Operating Transfers include a new $1,540,000 loan to the Carpenter Road Landfill. (17) Fiscal Year 2021-2022 Negative refunds, damages, and recoveries is due to large negative change in Fair Market Value. Miscellaneous Revenues includes repayment of the Carpenter Road Landfill loan.

Source: City of Modesto
(6) Reduced fiscal year 2014-2015 Operating expenses from $40,349,338 to $33,773,198.

Historical Debt Service Coverage

CITY OF MODESTO

CITY WATER- HISTORICAL DEBT SERVICE COVERAGE
CONTINUING DISCLOSURE REQUIREMENTS INFORMATION (continued)

LAST TEN FISCAL YEARS

CITY WATER UTILITY SYSTEM
(15) Fiscal year 2019-2020 Operating Transfers of $2,241,135 include $900,000 in one-time loan to fund 4893 (Carpenter Road Landfill). This $900,000 is in addition to the $2,300,000 that was borrowed in fiscal 162
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Fiscal Year
Projected 2023
Fiscal Year
Projected 2024
Fiscal Year
Projected 2025
Fiscal Year
Projected 2026
Fiscal Year
Projected 2027
Charges for services(1) $ 82,110,000 $ 81,232,793 $ 81,232,793 $ 81,232,793 $ 81,232,793 Connection charges $ 1,220,500 $ 1,244,910 $ 1,269,808 $ 1,295,204 $ 1,321,108 Refunds, damages & recoveries $ 10,000 $ 10,200 $ 10,404 $ 10,612 $ 10,824 Interest and rental income $ 542,000 $ 492,840 $ 448,697 $ 409,071 $ 373,512 Service credits $ 3,062,214 $ 3,092,836 $ 3,123,764 $ 3,155,002 $ 3,186,552 Miscellaneous $ 200,902 $ - $ - $ - $ -
6-year Loan Repayment from fund 4893
(Carpenter Road Landfill) $ 707,421 $ 707,421 $ 707,421 $ 707,421 $ 707,421 Total gross operating revenues $ 87,853,037 $ 86,781,000 $ 86,792,887 $ 86,810,103 $ 86,832,210 Operating expenses $ 49,542,114 $ 49,871,276 $ 50,831,983 $ 51,848,623 $ 52,885,597 Operating transfers $ 765,000 $ 765,000 $ 765,000 $ 765,000 $ 765,000 Total operating expenses $ 50,307,114 $ 50,636,276 $ 51,596,983 $ 52,613,623 $ 53,650,597 Net operating revenues $ 37,545,923 $ 36,144,724 $ 35,195,904 $ 34,196,480 $ 33,181,613 2008 Revenue Certificates of Participation $ 2,164,623 $ 4,244,303 $ 4,240,014 $ 4,240,014 $ 4,240,014 MID Treatment & Delivery Agreement $ 9,075,200 $ 8,398,606 $ 8,409,205 $ 8,409,205 $ 8,409,205 ARRA Grant $ 46,723 $ 36,600 $ 36,600 $ 36,600 $ 36,600 $ - $ - $ - $ - Total debt service $ 11,286,546 $ 12,679,509 $ 12,685,819 $ 12,685,819 $ 12,685,819 Debt service coverage 3.33 2.85 2.77 2.70 2.62
Source: City of Modesto.

The City has prepared the following table of projections of operating results of the Water Utility System for the five fiscal years 2023-27. The projected amounts set forth below are based on certain assumptions made by the City. To the extent that actual future conditions vary from those assumed in preparing the projections, the actual results will vary.

CITY OF MODESTO

CITY WATER UTILITY SYSTEM
PROJECTED OPERATING RESULTS (1)
CONTINUING DISCLOSURE REQUIREMENTS INFORMATION (continued) 163
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2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Number of Service Accounts 75,357.0 75,006.0 74,665.0 72,825.0 73,135.0 73,423.0 73,591.0 73,897.0 74,094.0 74,356.0 Total Water Production (MG) (1) 21,606.0 20,630.0 17,692.0 15,155.0 15,319.5 16,782.0 16,059.0 17,141.6 17,569.0 17,018 Capacity (MGD)(2)(3) 175.2 175.2 175.2 175.2 175.2 168.0 168.2 170.3 135.0 130.0 Peak Daily Distribution (MGD) 99.8 95.3 84.6 74.7 84.3 77.5 83.5 75.1 75.9 73.63 Average Daily Distribution (MGD) 59.2 56.5 48.5 41.5 42.0 46.0 44.0 47.0 48.1 46.62 (1) "MG" means million gallons.
(2) "MGD" means million gallons daily.
(3) Capacity for FY 2021 was reported using source (wells) and surface water capacity; will be reported this way moving forward.

Well Water Total
2013 10.62 10.99 21.61
2014 10.72 9.91 20.63
2015 10.63 5.85 16.48
2016 9.22 5.02 14.24
2017 8.63 5.86 14.49
2018 9.82 6.23 16.05
2019 5.45 9.86 15.31
2020 7.71 8.76 16.47
2021 7.12 9.56 16.68
2022 8.81 8.21 17.02
City
Fresno (1)
Lodi (2)
Modesto
Stockton (1)
Tracy (2)
Turlock (1)
(1) Water is metered. Charge varies per meter size.
(2) Water is both metered and flat rate. Charge varies per meter and dwelling size.

CITY OF MODESTO
CONTINUING DISCLOSURE REQUIREMENTS INFORMATION (continued)

CITY WATER UTILITY SYSTEM
Average Monthly Water Rates Comparison
Flat Rate (1" Service)

33.90 YEAR ENDED JUNE 30, 2022

CITY WATER UTILITY SYSTEM STATISTICS
(Calendar Years 2013 through 2022)
Surface Water
Fiscal Year
Ended

CITY WATER UTILITY SYSTEM
Service Area Total Production (Billion Gallons)
(Fiscal Years 2012 through 2021)
105.00
As of July 1, 2021
Flat Rate Typical Home
$17.90

34.01 30.90

69.44 164
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5/8" meter** 2,202$
1" meter 3,671
1-1/2" meter 7,341
2" meter 11,746
3" meter 25,695
4" meter 46,250
6" meter 95,437
8" meter 176,191
10" meter 278,970
12" meter 367,065
**NOTE- Single-family residences qualify for the 5/8" connection fee only under the following conditions:

Single story, single-family residences on a lot of 4,000 square feet or less.

Two-story single family residence on a lot of 4,000 square feet or less, provided the request for such a service accompanied by a report from a licensed professional engineer that certifies that the 5/8" service is adequate to meet the needs of the proposed dwelling.

A 5/8" "service" shall not be allowed for a single-family dwellings of greater than 2 stories on lots less than 4,000 square feet.

CONTINUING DISCLOSURE REQUIREMENTS INFORMATION (continued) YEAR ENDED JUNE 30, 2022

CITY OF MODESTO
Meter Size Connection Fees
Connection Fees Comparison
Except Multiple Family Units

CITY WATER UTILITY SYSTEM
(Fiscal Year 2021-2022)
The following table sets forth connection fees for all users except multi-family units by meter size for year 2021-2022:
165
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2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Revenues
Residential (Flat Rates) $12,955,005 $10,723,594 $9,037,477 $7,320,096 $6,767,446 $5,506,216 $4,385,017 $3,450,868 $2,533,090 $1,414,328 Commercial, Industrial and
Municipal (Metered) 42,452,862 44,093,862 43,118,855 40,242,493 51,960,729 60,113,019 62,933,627 70,175,513 76,169,202 $75,068,664 Total Water Sales $55,407,867 $54,817,456 $52,156,332 $47,562,589 $58,728,175 $65,619,235 $67,318,644 $73,626,381 $78,702,292 $76,482,992 Lot Size 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 0-5,000 sq. ft. lot $39.89 $40.81 $40.81 $40.81 $47.38 $48.77 $52.97 $56.11 $59.48 $60.66 5,001-7,000 sq. ft. lot 45.34 46.38 46.38 46.38 54.72 56.23 60.89 64.23 68.08 69.44 7,001-11,000 sq. ft. lot 53.80 55.04 55.04 55.04 69.22 70.98 76.52 80.26 85.08 86.78 11,001-17,000 sq. ft. lot 57.12 58.43 58.43 58.43 90.88 93.00 99.87 104.22 110.47 112.68 over 17,000 sq. ft. lot 67.15 68.69 68.69 68.69 101.80 104.10 111.65 116.3 123.28 125.75 (1) Single family residential properties with water meters that are read for billing purposes, are charged the meter water rate.

NOTE: Additional financial information available at www.modestogov.com (Year Ended June 30, 2022)

CITY OF MODESTO
CONTINUING DISCLOSURE REQUIREMENTS INFORMATION (continued) YEAR ENDED JUNE 30, 2022

CITY WATER UTILITY SYSTEM
Sale of Water
The table below sets forth the adopted single family residential flat rates effective each fiscal year

CITY WATER UTILITY SYSTEM
Monthly Single Family Residential Flat Water Rates (1)
166
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2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Volume-based Rate ($/hcf) $ 1.37 $ 1.40 $ 1.40 $ 1.40 $ 1.79 $ 1.82 $ 1.93 $ 1.98 $ 1.98 $ 2.02 Fixed Monthly Meter Charge
(in addition to volume-based charges)
5/8"-3/4" meter $ 14.69 $ 15.03 $ 15.03 $ 15.03 $ 20.79 $ 21.47 $ 23.34 $ 24.94 $ 24.94 $ 25.44 1" meter 20.85 21.33 21.33 21.33 29.30 30.39 33.48 36.11 36.11 36.83 1-1/2" meter 36.07 36.90 36.90 36.90 50.58 52.71 58.83 64.04 64.04 65.32 2" meter 54.43 55.68 55.68 55.68 76.11 79.49 89.25 97.55 97.55 99.50 3" meter 103.42 105.80 105.80 105.80 156.98 164.30 185.59 203.66 203.66 207.73 4" meter 158.48 162.13 162.13 162.13 276.14 289.28 327.55 360.04 360.04 367.24 6" meter 311.31 318.47 318.47 318.47 561.28 588.33 667.24 734.22 734.22 748.90 8" meter 494.82 506.20 506.20 506.20 1,029.42 1,079.32 1,224.95 1,348.56 1,348.56 1,375.53 10" meter 708.95 725.26 725.26 725.26 1,625.23 1,704.21 1,934.76 2,130.44 2,130.44 2,173.05 12" meter 1,320.55 1,350.92 1,350.92 1,350.92 2,135.93 2,239.84 2,543.16 2,800.62 2,800.62 2,856.63 Note: Additional financial information is available at www.modestogov.com Commercial Accounts

CITY OF MODESTO
CONTINUING DISCLOSURE REQUIREMENTS INFORMATION (continued) YEAR ENDED JUNE 30, 2022

CITY WATER UTILITY SYSTEM
Water Rates and Charges
The following table sets forth the adopted monthly service charge and volume charge for commercial accounts through fiscal year 2021-22. 167
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Bonds Moody's Rating Standard & Poor's Rating Fitch Rating 2008 Lease Revenue Bonds A1 AA+/A-1 AA2008 Water Certificates of Participation Aa1 Wastewater Revenue Bonds, Series 2018A AA
Wastewater Revenue Bonds, Series 2020A AA
Wastewater Revenue Bonds, Series 2020B AA
Sources: www.moodys.com
www.standardandpoors.com
www.Fitchratings.com

CITY OF MODESTO

BOND RATINGS
FISCAL YEAR ENDED JUNE 30, 2022
CONTINUING DISCLOSURE REQUIREMENTS INFORMATION (continued) 168
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CITY OF MODESTO
INDEPENDENT ACCOUNTANTS’ REPORT ON APPLYING

AGREED-UPON PROCEDURES RELATED TO THE

ARTICLE XIII-B APPROPRIATIONS LIMIT

FOR THE YEAR ENDED
JUNE 30, 2022
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7473 N. INGRAM AVE., SUITE 102 FRESNO, CA 93711 _______________________________________________________________________________________________ P (559) 412-7576 F (559) 493-5325 WWW.HHCCPAS.COM INDEPENDENT ACCOUNTANTS’ REPORT ON APPLYING

AGREED-UPON PROCEDURES RELATED TO THE

ARTICLE XIII-B APPROPRIATIONS LIMIT
To the Honorable City Council
City of Modesto, California
We have performed the procedures enumerated below to the accompanying calculation of the Appropriations Limit of the City of Modesto, California (the City) for the year ended June 30, 2022. These procedures, which were agreed to by the City and recommended by the California Committee on Municipal Accounting (CCMA) (as presented in the CCMA White Paper entitled Agreed-upon Procedures Applied to the Appropriations Limitation Prescribed by Article XIII-B of the California Constitution) were performed solely to assist the City in meeting the requirements of Section

1.5 of Article XIII-B of the California Constitution. The City’s management is responsible for the Appropriations Limit Calculation.

The sufficiency of these procedures is solely the responsibility of those parties specified in this report. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose.

The procedures and associated findings are as follows:
1) We obtained the City’s calculation of the June 30, 2022 appropriations limit and compared the limit and annual adjustment factors included in the calculation to the limit and annual adjustment factors that were adopted by the resolution of the City Council. We also compared the population and inflation factors included in the aforementioned worksheet to those that were selected by a recorded vote of the City Council.

Finding: No exceptions were noted as a result of our procedures. 2) For the accompanying calculation, we added last year’s limit to the total adjustments and compared the resulting amount to this year’s limit.

Finding: No exceptions were noted as a result of our procedures. 3) We compared the current year information used to determine the current year limit to the appropriations limit calculation prepared by the City and to the information provided by the State Department of Finance.

Finding: No exceptions were noted as a result of our procedures. 4) We compared the prior year appropriations limit calculation presented in the accompanying appropriations limit calculation to the prior year appropriations limit adopted by the City Council for the prior year.

Finding: No exceptions were noted as a result of our procedures. #1..
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2 This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. We were not engaged to and did not conduct an audit, the objective of which would be the expression of an opinion, on the accompanying Appropriations Limit Calculation.

Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. No procedures have been performed with respect to the determination of the appropriation limit for the base year, as defined by Article XIII-B of the California Constitution.

This report is intended solely for the use of the City Council and City’s management and should not be used by anyone other than these specified parties. However, this report is a matter of public record and its distribution is not limited.

HUDSON HENDERSON & COMPANY, INC.

Fresno, California
September 23, 2022
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3 CITY OF MODESTO

APPROPRIATIONS LIMIT CALCULATION
FOR THE YEAR ENDED JUNE 30, 2022
Appropriations Limit, fiscal year 2021 $ 491,651,797
Adjustment Factors:

Inflation factor, as adopted (1) 1.0573
Population factor, as adopted (2) x 1.0039
Calculation of factor FY 21-22 1.0614
Annual adjustment in dollars 30,187,420
Appropriations limit, fiscal year 2022, as adopted $ 521,839,217 (1) The inflation factor is based on the current year cost of living increase, as determined by the percentage change in per capita personal income for California. The inflation factor was provided by the State of California’s Department of Finance.
(2) The population factor is based on the annual change in the City of Modesto’s population for the calendar year preceding the beginning of the fiscal year for which the appropriations limit is to be determined. The population factor was provided by the State of California’s Department of Finance. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 1998-2 CARVER-BANGS/PELANDALE-SNYDER

CITY OF MODESTO, CALIFORNIA

BASIC FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS’ REPORT

FOR THE YEAR ENDED
JUNE 30, 2022
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TABLE OF CONTENTS
Page
Independent Auditors’ Report.......................................................................................................................... 1 Management’s Discussion and Analysis (Unaudited) ....................................................................................... 3 Basic Financial Statements:

Statement of Net Position – Governmental Activities ........................................................................ 10 Statement of Activities – Governmental Activities ............................................................................. 11 Balance Sheet – Governmental Funds ................................................................................................ 13 Reconciliation of the Balance Sheet – Governmental Funds to the Statement of Net Position – Governmental Activities ........................................................................ 14 Statement of Revenues, Expenditures, and Changes in
Fund Balances – Governmental Funds................................................................................................ 15 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balance of Governmental Funds to the Statement of Activities Change in Net Position of Governmental Activities............................................................................ 16 Statement of Revenues, Expenditures, and Changes in
Fund Balance - Special Revenue Fund – Budget and Actual................................................................ 17 Notes to Basic Financial Statements.................................................................................................................. 18 Independent Auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards...................................................................................................................... 24 #1..
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7473 N. INGRAM AVE., SUITE 102 ⬧ FRESNO, CA 93711
_______________________________________________________________________________________________ P (559) 412-7576 ⬧ F (559) 493-5325 ⬧ WWW.HHCCPAS.COM
INDEPENDENT AUDITORS’ REPORT
The Honorable City Council
of the City of Modesto, California
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the governmental activities and each major fund of the City of Modesto Community Facilities District Number 1998-2 (Carver-Bangs/Pinedale-Snyder) (the District), a component unit of the City of Modesto, California, as of and for the year ended June 30, 2022, the budgetary comparison for the special revenue fund and the related notes to the financial statements, which collectively comprise the District’s basic financial statements as listed in the table of contents.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the District as of June 30, 2022, and the respective changes in financial position, and the respective budgetary comparison for the special revenue fund for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinions
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the District and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the District’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.

Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinions.

Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
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2 In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the District’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the District’s ability to continue as a going concern for a reasonable period of time.

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

Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 3-8 be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 7, 2022, on our consideration of the District’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the District’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District’s internal control over financial reporting and compliance.

HUDSON HENDERSON & COMPANY, INC.

Fresno, California
November 7, 2022
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3 COMMUNITY FACILITIES DISTRICT
NUMBER 1998-2 CARVER-BANGS/PELANDALE-SNYDER

CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)
FOR THE YEAR ENDED JUNE 30, 2022
The City of Modesto Community Facilities District No. 1998-2 (Carver-Bangs/Pelandale-Snyder) (the District) has issued its financial statements in the format prescribed by the provisions of Governmental Accounting Standards Board (GASB) Statement No. 34, which requires the District to provide this overview of its financial activities for the fiscal year.

Please read this overview in conjunction with your reading of the accompanying basic financial statements.

THE PURPOSE OF THE DISTRICT
The District is a blended component unit of the City of Modesto, California (the City). It is controlled by the City, and the City Council is the District’s governing body. City employees perform most of the duties and functions required of the District, but certain tasks are provided by third parties under contract.

The District’s purpose under California law is to provide a funding mechanism for public facilities and services authorized by the District. The District is the vehicle that will be used to ensure that all landowners in the Specific Plan area contribute to the cost of the public facilities and services. Additional information on the District can be found below, and in Note 1 to the accompanying financial statements.

BACKGROUND AND MANAGEMENT’S DISCUSSION
The Carver-Bangs Specific Plan (Resolution No. 97-1 61) was adopted by the City Council on April 1, 1997, and was subsequently amended on November 4, 1997 (Resolution No. 97-633). The Carver-Bangs Specific Plan has been developed under the City’s Village Residential guidelines and should yield approximately 800 single-family residential units. On January 16, 1996, the City Council approved the Pelandale-Snyder Specific Plan (Resolution No. 95-16) and amended the Pelandale-Snyder Specific Plan on March 18, 1997 (Resolutions 97-136 and 97-139). The PelandaleSnyder Specific Plan area contains approximately 227 acres designated as single-family residential and approximately 57 acres are designated multi-family residential.

In December 1998, the City formed the District to provide a funding and reimbursement mechanism for public facilities and services required to serve the Carver-Bangs and Pelandale-Snyder Specific Plan areas in the City and to fund ongoing maintenance costs. Portions of both Specific Plan areas were included within the initial boundaries of the District and the remainder of the property within both Specific Plan areas, excluding a remainder parcel, have annexed to the District.

As a condition of development, developers are required to install various public improvements that will serve the increased population generated from the projects. Many of these improvements must be provided in the early stages of development and, therefore, the first developer(s) to build within the Specific Plan areas must install the improvements. The District was established as a funding/reimbursement for many of the improvements. Up until a few years ago, developers installed most of the improvements. The developers received a cash reimbursement or tax credit equal to the cost of that improvement(s) as set forth in the Public Report adopted in connection with the formation of the District.

Over the past several years, the City has designed and overseen the installation of the improvements. Construction of the storm drain pump stations located at the East and West Basins on Prescott Road between Pelandale and Snyder was completed in the summer of 2007 while the Snyder Avenue widening project between Prescott Road and Carver Road commenced in the spring of 2008. Design of the bike trail commenced in 2009. #1..
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4 COMMUNITY FACILITIES DISTRICT
NUMBER 1998-2 CARVER-BANGS/PELANDALE-SNYDER

CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FISCAL YEAR 2022 FINANCIAL HIGHLIGHTS
Financial highlights of the year include the following:

Government-Wide:
• The District’s total net position in fiscal year 2022 decreased to $1,970,631. • Total District revenues were $35,138 and expenses were $100,785.

Funds Basis:
• Capital Projects Fund revenues decreased from $705 in the prior year to ($46,314) for fiscal year 2022 and expenditures of $0 had no change from the prior year. The decrease in revenues is attributed to the decrease in maintenance special tax and increase in investment loss. • Special Revenue Fund revenues of $81,704 were $9,842 less than the prior year due to decrease in change in fair value of investments. Expenditures of $100,785 were $6,983 more than the prior year due to an increase in service expenditures. The Special Revenue Fund balance decreased by $19,081 to an ending fund balance of $393,284.

THE BASIC FINANCIAL STATEMENTS
The basic financial statements comprise the government-wide financial statements and the fund financial statements; these two sets of financial statements provide two different views of the District’s financial activities and financial position.

Government-Wide Financial Statements
The government-wide financial statements provide a long-term view of the District’s activities as a whole and are comprised of the Statement of Net Position and the Statement of Activities. The Statement of Net Position provides information about the financial position of the District as a whole, including all its capital assets and long-term liabilities. The Statement of Activities provides information about the District’s revenues and all its expenses. The Statement of Activities explains in detail the change in net position for the year.

The Statement of Net Position and the Statement of Activities present information about the following:

Governmental activities - All of the District’s basic services are considered to be governmental activities, including formation, financing, construction, and maintenance activities. These services are supported by formation deposits, special facilities taxes, and annual maintenance assessments. Government-wide financial statements are prepared on the accrual basis of accounting, which means they measure the flow of all economic resources of the District as a whole, similar to that used by the private sector.
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5 COMMUNITY FACILITIES DISTRICT
NUMBER 1998-2 CARVER-BANGS/PELANDALE-SNYDER

CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022

FINANCIAL ACTIVITIES OF THE DISTRICT AS A WHOLE
This analysis focuses on the net position and changes in net position of the District’s governmental activities in the government-wide financial Statement of Net Position and Statement of Activities that follow.

As of June 30, 2022, total assets of $1,977,190 were offset by liabilities of $6,559. The District’s net position from governmental activities decreased to $1,970,631 in 2022 from $2,036,728 in 2021. The District’s net position has restrictions as follows: $1,576,684 for acquisition or construction and $393,947 for District maintenance.

The following is a condensed Statement of Net Position as of June 30, 2022 and 2021:
2022 2021 Change
Cash and investments $ 1,970,974 $ 2,036,580 $ (65,606) Assessments receivable 1,939 1,895 44
Interest receivable 4,277 3,962 315
Total assets 1,977,190 2,042,437 (65,247)
Current and other liabilities 6,559 6,159 400
Net position:

Restricted for:

Capital projects 1,576,684 1,622,998 (46,314)
District maintenance 393,947 413,280 (19,333)
Total net position $ 1,970,631 $ 2,036,278 $ (65,647)
Statement of Net Position - Governmental Activities
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6 COMMUNITY FACILITIES DISTRICT
NUMBER 1998-2 CARVER-BANGS/PELANDALE-SNYDER

CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FISCAL YEAR 2022 GOVERNMENTAL ACTIVITIES
The District’s fiscal year 2022 revenue came primarily from maintenance special taxes of $91,579 offset by investment earnings (loss) of ($56,441). Facilities special tax revenue was not collected in fiscal year 2022, as these revenues are collected at the time of building permit issuance, and no such development occurred in the District in fiscal year 2022. District expenses of $100,785 were primarily for community development.

The following is a condensed Statement of Activities for the years ended June 30, 2022 and 2021, and the respective changes:
2022 2021 Change
Revenues:

General revenues:

Maintenance special tax $ 91,579 $ 92,523 $ (944)
Investment earnings (loss) (56,441) 643 (57,084)
Total revenues 35,138 93,166 (58,028)
Expenses:

Community development 100,785 93,802 6,983
Change in net position (65,647) (636) $ (65,011)
Net position, beginning of year 2,036,278 2,036,914
Net position, end of year $ 1,970,631 $ 2,036,278
Statement of Activities - Governmental Activities
Fund Financial Statements
The fund financial statements report the District’s operations in more detail than the government-wide financial statements and focus primarily on the short-term activities of the District’s two funds. The fund financial statements measure only current revenues and expenditures and fund balances; they exclude capital assets, long-term debt, and other long-term amounts.

The fund financial statements provide detailed information about each of the District’s most significant funds, called major funds. Major funds present the major activities of the District for the year and may change from year to year as a result of changes in the pattern of the District’s activities. All of the District’s funds are presented here as major funds; their purpose is explained in Note 1 to the financial statements. #1..
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7 COMMUNITY FACILITIES DISTRICT
NUMBER 1998-2 CARVER-BANGS/PELANDALE-SNYDER

CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
All the District’s funds are governmental funds; financial statements for these funds are prepared on the modified accrual basis of accounting, which means they measure only current financial resources and uses.

The following is a condensed Statement of Revenues, Expenditures, and Changes in Fund Balance for both the Capital Projects Fund and the Special Revenue Fund for the years ended June 30, 2022 and 2021, and the respective changes:
2022 2021 Change
Revenues $ (46,314) $ 705 $ (47,019)
Expenditures - - -
Changes in fund balances (46,314) 705 $ (47,019)
Fund balances, beginning of year 1,622,998 1,622,293
Fund balances, end of year $ 1,576,684 $ 1,622,998
2022 2021 Change
Revenues $ 81,704 $ 91,546 $ (9,842)
Expenditures 100,785 93,802 6,983
Changes in fund balances (19,081) (2,256) $ (16,825)
Fund balances, beginning of year 412,365 414,621
Fund balances, end of year $ 393,284 $ 412,365
Statement of Revenues, Expenditures, and
Changes in Fund Balances - Capital Projects Fund
Statement of Revenues, Expenditures, and
Changes in Fund Balances - Special Revenue Fund
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8 COMMUNITY FACILITIES DISTRICT
NUMBER 1998-2 CARVER-BANGS/PELANDALE-SNYDER

CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
THE DISTRICT’S FUND FINANCIAL STATEMENTS
At June 30, 2022, the District’s governmental funds reported a combined fund balance of $1,969,968, a decrease of $65,395 compared from fiscal year 2021. The Capital Projects Fund realized a $46,314 decrease, primarily due to the change in fair value of investments. The Special Revenue Fund realized a $19,081 decrease due to the increase in professional service expenditures and investment loss.

CAPITAL ASSETS
Under GASB Statement No. 34, the District is required to record all its capital assets, including infrastructure, at their historical cost, and to depreciate these assets over their estimated useful lives. However, title to all infrastructure assets acquired or constructed by the District is turned over to the City upon completion and acceptance.

Accordingly, capital outlay expenditures are reported in both the District’s fund and government-wide financial statements. Therefore, the District reports no long-term capital assets.

CONTACTING THE DISTRICT’S FINANCIAL MANAGEMENT
These basic financial statements are intended to provide citizens, taxpayers, investors, and creditors with a general overview of the District’s finances. Questions about this report should be directed to the City of Modesto, Administrator, Infrastructure Financing Programs, P.O. Box 642, Modesto, California 95353. #1..
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9 COMMUNITY FACILITIES DISTRICT
NUMBER 1998-2 CARVER-BANGS/PELANDALE-SNYDER

CITY OF MODESTO, CALIFORNIA

STATEMENT OF NET POSITION

AND STATEMENT OF ACTIVITIES
The Statement of Net Position and the Statement of Activities summarize the entire District’s financial activities and financial position. They are prepared on the same basis of accounting as that used by most businesses, which means they include all the District’s assets and all its liabilities, as well as all its revenues and expenses. This is known as the full accrual basis of accounting – the effect of all the District’s transactions is taken into account, regardless of whether or when cash changes hands, but all material internal transactions between District funds have been eliminated.

The Statement of Net Position reports the difference between the District’s total assets and deferred outflows of resources and the District’s total liabilities and deferred inflows of resources, including all the District’s capital assets and all its long-term debt. The Statement of Net Position focuses the reader on the composition of the District’s net position, by subtracting total liabilities from total assets. The Statement of Net Position summarizes the financial position of the District in a single column.

The Statement of Activities reports increases and decreases in the District’s net position. It is also prepared on the full accrual basis of accounting, which means it includes all the District’s revenues and all its expenses, regardless of when cash changes hands. This differs from the “modified accrual” basis of accounting used in the fund financial statements, which reflect only current assets, current liabilities, available revenues, and measurable expenditures.

The format of the Statement of Activities presents the District’s expenses, which are listed by program, first. Program revenues – that is, revenues which are generated directly by these programs – are then deducted from program expenses to arrive at the net program revenue (expense). General revenues – that is, revenues which are not generated directly by these programs – are then added to arrive at the change in net position and reconciled with the Statement of Net Position.
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The accompanying notes are an integral part of the financial statements. 10 COMMUNITY FACILITIES DISTRICT
NUMBER 1998-2 CARVER-BANGS/PELANDALE-SNYDER

CITY OF MODESTO, CALIFORNIA
STATEMENT OF NET POSITION – GOVERNMENTAL ACTIVITIES
JUNE 30, 2022
ASSETS
Cash and investments $ 1,970,974
Assessments receivable 1,939
Interest receivable 4,277
Total Assets 1,977,190

LIABILITIES
Accounts payable 6,559
Total Liabilities 6,559

NET POSITION
Restricted for:

Capital projects 1,576,684
District maintenance 393,947
Total Net Position $ 1,970,631
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The accompanying notes are an integral part of the financial statements. 11 COMMUNITY FACILITIES DISTRICT
NUMBER 1998-2 CARVER-BANGS/PELANDALE-SNYDER

CITY OF MODESTO, CALIFORNIA
STATEMENT OF ACTIVITIES – GOVERNMENTAL ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2022
Operating Grants Governmental
Functions/Programs Expenses & Contributions Activities
Community Development $ 100,785 $ - $ (100,785)
$ 100,785 $ - (100,785)
General Revenues:

Maintenance special tax 91,579
Investment earnings (loss) (56,441)
Total General Revenues 35,138
(65,647)
Net Position, Beginning of Year 2,036,278
Net Position, End of Year $ 1,970,631
Revenues
Change in Net Position
Program
Net (Expense)
Revenue and
Changes in Net
Position
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12 COMMUNITY FACILITIES DISTRICT
NUMBER 1998-2 CARVER-BANGS/PELANDALE-SNYDER

CITY OF MODESTO, CALIFORNIA

FUND FINANCIAL STATEMENTS
Major funds are defined generally as having significant activities or balances in the current year.

The District determined all its funds to be major funds. They are:

The Capital Projects Fund accounts for all financial resources and uses related to acquisition, construction, and formation/annexation activities.

The Special Revenue Fund accounts for all financial resources and uses related to maintenance of parkways and open space within the District.
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The accompanying notes are an integral part of the financial statements. 13 COMMUNITY FACILITIES DISTRICT
NUMBER 1998-2 CARVER-BANGS/PELANDALE-SNYDER

CITY OF MODESTO, CALIFORNIA
BALANCE SHEET – GOVERNMENTAL FUNDS
JUNE 30, 2022
Capital Special
Projects Revenue
Fund Fund Total
ASSETS
Cash and investments $ 1,573,181 $ 397,793 $ 1,970,974
Assessments receivable - 1,939 1,939
Interest receivable 3,503 774 4,277
Total Assets $ 1,576,684 $ 400,506 $ 1,977,190

LIABILITIES
Accounts payable $ - $ 6,559 $ 6,559
Total Liabilities - 6,559 6,559

DEFERRED INFLOWS OF RESOURCES
Unavailable revenue - 663 663
Total Deferred Inflows of Resources - 663 663

FUND BALANCES
Restricted for:

Capital projects 1,576,684 - 1,576,684
District maintenance - 393,284 393,284
Total Fund Balances 1,576,684 393,284 1,969,968
Total Liabilities, Deferred Inflows
of Resources and Fund Balances $ 1,576,684 $ 400,506 $ 1,977,190 #1..
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The accompanying notes are an integral part of the financial statements. 14 COMMUNITY FACILITIES DISTRICT
NUMBER 1998-2 CARVER-BANGS/PELANDALE-SNYDER

CITY OF MODESTO, CALIFORNIA
RECONCILIATION OF THE BALANCE SHEET – GOVERNMENTAL FUNDS TO THE STATEMENT OF NET POSITION – GOVERNMENTAL ACTIVITIES
JUNE 30, 2022
Reconciliation of the Balance Sheet of the Governmental Funds to the Statement of Net Position:

Total Fund Balances - Governmental Funds $ 1,969,968
Adjustments to the Balance Sheet of the Governmental Funds to reconcile with the Statement of Net Position:

Revenues not available for current-period expenditures are deferred in governmental funds, but are considered earned in the Statement of Net Position. 663
Total Net Position - Governmental Activities $ 1,970,631 #1..
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The accompanying notes are an integral part of the financial statements. 15 COMMUNITY FACILITIES DISTRICT
NUMBER 1998-2 CARVER-BANGS/PELANDALE-SNYDER

CITY OF MODESTO, CALIFORNIA

STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES – GOVERNMENTAL FUNDS
FOR THE YEAR ENDED JUNE 30, 2022
Capital Special
Projects Revenue
Fund Fund Total

REVENUES
Maintenance special tax $ - $ 91,831 $ 91,831
Interest income 15,377 3,327 18,704
Change in fair value of investments (61,691) (13,454) (75,145) Total Revenues (46,314) 81,704 35,390

EXPENDITURES
Services - professional and other - 87,252 87,252
Utilities - 13,533 13,533
Total Expenditures - 100,785 100,785
Changes in Fund Balances (46,314) (19,081) (65,395)
Fund Balances, Beginning of Year 1,622,998 412,365 2,035,363 Fund Balances, End of Year $ 1,576,684 $ 393,284 $ 1,969,968 #1..
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The accompanying notes are an integral part of the financial statements. 16 COMMUNITY FACILITIES DISTRICT
NUMBER 1998-2 CARVER-BANGS/PELANDALE-SNYDER

CITY OF MODESTO, CALIFORNIA

RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND

CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT

OF ACTIVITIES CHANGE IN NET POSITION OF GOVERNMENTAL ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2022
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of the Governmental Funds to the Statement of Activities:

Changes in Fund Balances - Governmental Funds $ (65,395) Adjustments to the Statement of Revenues, Expenditures, and changes in Fund Balances of the Governmental Funds to reconcile with the Statement of Activities:

Revenues that are considered earned in the Statement of Actvities that did not provide current financial resources in the current year were not reported as revenues in the governmental funds. (252) Change in Net Position - Governmental Activities $ (65,647) #1..
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The accompanying notes are an integral part of the financial statements. 17 COMMUNITY FACILITIES DISTRICT
NUMBER 1998-2 CARVER-BANGS/PELANDALE-SNYDER

CITY OF MODESTO, CALIFORNIA

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN
FUND BALANCE – SPECIAL REVENUE FUND – BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2022
Actual Variance with
Original Final Amounts Final Budget

REVENUES
Maintenance special tax $ 111,000 $ 111,000 $ 91,831 $ (19,169) Interest income - - 3,327 3,327
Change in fair value
of investments - - (13,454) (13,454)
Total Revenues 111,000 111,000 81,704 (29,296)

EXPENDITURES
Services - professional
and other 94,570 94,570 87,252 7,318
Utilities 16,000 16,000 13,533 2,467
Total Expenditures 110,570 110,570 100,785 9,785
Changes in Fund Balance $ 430 $ 430 (19,081) $ (19,511) Fund Balance, Beginning of Year 412,365
Fund Balance, End of Year $ 393,284
Budgeted Amounts
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COMMUNITY FACILITIES DISTRICT
NUMBER 1998-2 CARVER-BANGS/PELANDALE-SNYDER

CITY OF MODESTO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
18 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description and Reporting Entity: The Community Facilities District Number 1998-2 (Carver-Bangs/Pelandale-Snyder) (the District) was formed in December 1998 by a vote of the property owners within the proposed district. The District, a separate legal entity, was formed to provide a funding and reimbursement mechanism for public facilities and services required by the District Specific Plans. The District is the vehicle that will be used to ensure that all landowners in the District pay their share of the public improvements. The District is a proposed 480-acre project bounded on the East by Carver Road, on the North by Bangs Avenue, on the West by Dale Road, and the Modesto Irrigation District canal and Snyder Avenue on the South. The District is expected to yield 3,413 residential dwelling units at buildout; in addition, 36 acres of the District will be used for an elementary school site, a City park, and a church.

The District is an integral part of the City of Modesto, California (the City) and the accompanying financial statements are included as a blended component unit of the basic financial statements prepared by the City. A component unit is a separate governmental unit, agency, or nonprofit corporation which, when combined with all other component units, constitutes the reporting entity as defined in the City’s basic financial statements.

Government-Wide and Fund Financial Statements: The government-wide financial statements (i.e., the Statement of Net Position and Statement of Activities) report information on all of the activities of the District. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities normally are supported by taxes and intergovernmental revenues.

The Statement of Activities demonstrates the degree to which direct expenses are offset by program revenues.

Direct expenses are those that are clearly identifiable with the community development function. Program revenues include grants and contributions that are restricted to meeting the operational requirements of the community development function. Investment earnings, and other items which are not properly included among program revenues, are reported instead as general revenues. Separate financial statements are provided for governmental funds. Major individual governmental funds are reported as separate columns in the fund financial statements.

Basis of Presentation, Basis of Accounting, and Measurement Focus: The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Taxes are recognized as revenues in the year for which they are levied.

Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the District considers revenues to be available if they are collected within 180 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under the accrual basis of accounting. Substantially all taxes and interest, including the net increase (decrease) in the fair value of investments, are considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Miscellaneous revenues are considered to be measurable and available only when cash is received by the District.

The District reports the following major governmental funds:

The Capital Projects Fund accounts for all financial resources and uses related to acquisition, construction, and formation/annexation activities.

The Special Revenue Fund accounts for all financial resources and uses related to maintenance of parkways and open space within the District.
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COMMUNITY FACILITIES DISTRICT
NUMBER 1998-2 CARVER-BANGS/PELANDALE-SNYDER

CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
19 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Management’s Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Maintenance Special Taxes: The maintenance special taxes are collected by the County of Stanislaus on the property tax bill. The special taxes are due November 1 and February 1 and are delinquent if not paid by December 10 and April 10, respectively. The County of Stanislaus bills and collects the special taxes and remits them to the District.

The Rate and Method of Apportionment of Special Tax (RMA), set forth in the District’s Public Report, describes how the tax will be allocated among properties in the District. The Public Report was established during the formation of the District. A cost of living adjustment is applied to the special taxes annually.

Fund Balance: In the fund financial statements, governmental funds report fund balance as nonspendable, restricted, committed, assigned, or unassigned based primarily on the extent to which the District is bound to honor constraints on how specific amounts can be spent.
• Nonspendable – Amounts that are not in spendable form (such as inventory) or are required either legally or contractually to be maintained intact.
• Restricted – Amounts with constraints placed on their use that are either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments or (b) imposed by law through constitutional or enabling legislation.
• Committed - Amounts constrained to specific purposes by the District itself, using the District’s highest level of decision-making authority (the City Council). To be reported as committed, amounts cannot be used for any other purpose unless the District takes the same highest level action to remove or change the constraint. The underlying action that imposed the limitation needs to occur no later than the close of the reporting period.
• Assigned - Amounts the District intends to use for a specific purpose. Intent can be expressed by the District at either the highest level of decision-making or by an official or body to which the District delegates the authority.
• Unassigned - The residual classification for the District that includes amounts not contained in the other classifications. In other funds, the unassigned classification is used only if expenditures incurred for specific purposes exceed the amounts restricted, committed, or assigned to those purposes.

The District establishes and modifies or rescinds fund balance commitments by passage of an ordinance or policy.

This is typically done through adoption or amendment of the budget. A fund balance commitment is further indicated in the budget as a designation or commitment of the fund, such as approved construction contracts.

Assigned fund balance is established by the District through adoption or amendment of the budget or future year budget plan as intended for a specific purpose.

When both restricted and unrestricted resources are available for use, it is the District’s policy to use restricted resources first, followed by the committed, assigned, and unassigned resources as they are needed. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 1998-2 CARVER-BANGS/PELANDALE-SNYDER

CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
20 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Deferred Outflows and Inflows of Resources: Pursuant to GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, and GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, the District recognizes deferred outflows and inflows of resources.

In addition to assets, the Statement of Net Position will sometimes report a separate section for deferred outflows of resources. A deferred outflow of resources is defined as a consumption of net position by the District that is applicable to a future reporting period.

In addition to liabilities, the Statement of Net Position will sometimes report a separate section for deferred inflows of resources. A deferred inflow of resources is defined as an acquisition of net position by the District that is applicable to a future reporting period. Deferred inflows reported by the District consist of unearned deferred assessments that have been billed as of year-end, but not yet collected.

Net Position: Net position represents the residual interest in the District’s assets after liabilities are deducted. In accordance with GASB Statement No. 63, the fund equity section on the Statement of Net Position was combined to report total net position and present it in three broad components:
• Net investment in capital assets – Amount consists of capital assets, including infrastructure, net of accumulated depreciation and outstanding principal balances of debt attributable to the acquisition, construction, or improvement of those assets.
• Restricted – Amount consists of net position restricted by external creditors, grantors, contributors, or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabled legislature.
• Unrestricted – Amount consists of all net position that does not meet the definition “net investment in capital assets” or “restricted” net position.

When both restricted and unrestricted net position are available, restricted resources are depleted first before unrestricted resources are used.

Governmental Accounting Standards Update: During the year ended June 30, 2022, the District implemented the following Governmental Accounting Standards Board (GASB) standards with no financial impact:

GASB Statement No. 87 – Leases. The requirements of this statement are effective for reporting periods beginning after December 15, 2019. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to reporting periods beginning after June 15, 2021.

GASB Statement No. 92 – Omnibus 2020. The requirements of this statement are effective for reporting periods beginning after June 15, 2020. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to June 15, 2021.

GASB Statement No. 97 – Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans. The requirements of this statement are effective for reporting periods beginning after June 15, 2021.

GASB Statement No. 98 – The Annual Comprehensive Financial Report. The requirements of this statement are effective for reporting periods beginning after December 15, 2021. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 1998-2 CARVER-BANGS/PELANDALE-SNYDER

CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
21 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Governmental Accounting Standards Update (continued):

Released GASB Statements to be implemented in future financial statements are as follows:

GASB Statement No. 91 – Conduit Debt Obligations. The requirements of this statement are effective for reporting periods beginning after December 15, 2020. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to reporting periods beginning after December 15, 2021.

GASB Statement No. 93 – Replacement of Interbank Offered Rates. The requirements of this statement are effective for reporting periods beginning after June 15, 2021. Subsequent to issuance, GASB Statement No. 95 postponed the certain requirements of this statement to reporting periods beginning after June 15, 2022.

GASB Statement No. 94 – Public-Private and Public-Public Partnerships and Availability Payment Arrangements. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.

GASB Statement No. 96 – Subscription-Based Information Technology Arrangements. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.

GASB Statement No. 99 – Omnibus 2022. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.

GASB Statement No. 100 – Accounting Changes and Error Corrections. The requirements of this statement are effective for reporting periods beginning after June 15, 2023.

GASB Statement No. 101 – Compensated Absences. The requirements of this statement are effective for reporting periods beginning after December 15, 2023.

Subsequent Events: In compliance with accounting standards, management has evaluated events that have occurred after year-end to determine if these events are required to be disclosed in the financial statements. Management has determined that no events require disclosure in accordance with accounting standards. These subsequent events have been evaluated through November 7, 2022, which is the date the financial statements were available to be issued.

NOTE 2 – CASH AND INVESTMENTS
Cash and investments of the District are pooled with other City of Modesto funds. Interest earned on pooled cash and investments is credited to each participant in the pool based on each participant’s average monthly cash balance. Credit quality ratings are not available for the District’s investments as all cash is invested as part of the common cash and investment pool of the City of Modesto.

Cash in the City Pool is considered unclassified as to credit risk because it is not evidenced by securities that exist in physical or book entry form. The District does not have any deposits with financial institutions as of June 30, 2022. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 1998-2 CARVER-BANGS/PELANDALE-SNYDER

CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
22 NOTE 2 – CASH AND INVESTMENTS (continued)
Cash and investments as of June 30, 2022 are classified in the accompanying financial statements as follows:

Statement of Net Position- Governmental Activities:

Cash and investments $ 1,970,974
Total cash and investments $ 1,970,974
Deposits with City of Modesto
Cash and investment pool $ 1,970,974
Total cash and investments $ 1,970,974
Concentration of Credit Risk
The District is required to disclose investments that represent a concentration of five percent or more of investments in any one issuer held by individual funds in the securities of issuers other than U.S. Treasury securities, mutual funds, and external investment pools. At June 30, 2022, no investments represented a concentration of five percent or more of investments in any one issuer held by the District in the securities of issuers other than U.S. Treasury securities, mutual funds, and external investment pools.

Fair Value Hierarchy
The District categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the 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 inputs and techniques used for valuing securities are not necessarily an indication of risk associated with investing in those securities. The District’s investment in the City’s pool and money market fund are exempt from fair value measurement disclosures.

Detailed information concerning the City of Modesto’s pooled cash and investments, including information regarding the fair value of investments, may be found in the City of Modesto’s Annual Comprehensive Financial Report. As of June 30, 2022, the fair value of the District’s position in the pool is the same as the value of its pool shares. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 1998-2 CARVER-BANGS/PELANDALE-SNYDER

CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
23 NOTE 3 – RESTRICTED FUND BALANCES
Restrictions of Fund Balances: Fund balances are all presented in the restricted category (see Note 1 for a description of fund balance categories). As of June 30, 2022, restrictions included:

Restricted for Capital Projects - the portion of fund balance legally restricted for the acquisition, construction, and formation/annexation activities.

Restricted for District Maintenance - the portion of fund balance legally restricted for maintenance of parkways and open space within the District.

NOTE 4 – DELINQUENCIES AND FORECLOSURES
The District has made a covenant under the Trust Indenture of the Special Tax Bonds that will initiate foreclosures proceedings against delinquent parcels as follows:
a. Any parcel that is delinquent for three consecutive payments. Foreclosure against these parcels is to be initiated within the 120 days after the third delinquency. b. All parcels delinquent at June 30 when the District received Special Taxes totaling less than 95% of the total Special Tax levied for that fiscal year. Foreclosure against these parcels is to be initiated by September 1 following the end of the fiscal year.

At June 30, 2022, the District had 11 parcels that were delinquent for a total of $663, four of which were delinquent for more than three consecutive payments.

The District received 99.70% of the Special Revenue Fund and Debt Service Fund facilities and maintenance special taxes levied during the year ended June 30, 2022. The delinquencies total of $254 at June 30, 2022 is included in assessments receivable on the Statement of Net Position and Balance Sheet.

NOTE 5 – CONTINGENCY
Coronavirus Pandemic
Management has determined the events regarding the Novel Coronavirus require disclosure in accordance with accounting standards. On March 4, 2020, Governor Newsom issued an emergency proclamation declaring a state of emergency in California due to the Novel Coronavirus (COVID-19). The COVID-19 outbreak is ongoing, and the ultimate geographic spread of the virus, the duration and severity of the outbreak and the economic and other actions that may be taken by government authorities to contain the outbreak or treat its impact are uncertain. A vaccination has been created and is being administered throughout the state, including the District’s service area.

The ultimate impact of COVID-19 on the operations and finances of the District remains unknown. #1..
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7473 N. INGRAM AVE., SUITE 102 ⬧ FRESNO, CA 93711
_______________________________________________________________________________________________ P (559) 412-7576 ⬧ F (559) 493-5325 ⬧ WWW.HHCCPAS.COM
INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE

AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH

GOVERNMENT AUDITING STANDARDS
The Honorable City Council
of the City of Modesto, California
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities and each major fund of the City of Modesto Community Facilities District Number 1998-2 (Carver-Bangs/Pelandale-Snyder) (the District), as of and for the year ended June 30, 2022, the budgetary comparison for the special revenue fund and the related notes to the financial statements, which collectively comprise the District’s basic financial statements, and have issued our report thereon dated November 7, 2022.

Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the District’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District’s internal control. Accordingly, we do not express an opinion on the effectiveness of the District’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 entity’s financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

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

Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the District’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 statements.

However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. #1..
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25 Purpose of This Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’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 entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

HUDSON HENDERSON & COMPANY, INC.

Fresno, California
November 7, 2022
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COMMUNITY FACILITIES DISTRICT
NUMBER 2000-2 COFFEE-CLARATINA

CITY OF MODESTO, CALIFORNIA

BASIC FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS’ REPORT

FOR THE YEAR ENDED
JUNE 30, 2022
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TABLE OF CONTENTS
Page
Independent Auditors’ Report.......................................................................................................................... 1 Management’s Discussion and Analysis (Unaudited) ....................................................................................... 3 Basic Financial Statements:

Statement of Net Position – Governmental Activities ........................................................................ 9 Statement of Activities – Governmental Activities ............................................................................. 10 Balance Sheet – Governmental Fund .................................................................................................. 12 Statement of Revenues, Expenditures, and Changes in
Fund Balances – Governmental Fund.................................................................................................. 13 Statement of Revenues, Expenditures, and Changes in
Fund Balance - Special Revenue Fund – Budget and Actual................................................................ 14 Notes to Basic Financial Statements.................................................................................................................. 15 Independent Auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards...................................................................................................................... 20 #1..
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7473 N. INGRAM AVE., SUITE 102 ⬧ FRESNO, CA 93711
_______________________________________________________________________________________________ P (559) 412-7576 ⬧ F (559) 493-5325 ⬧ WWW.HHCCPAS.COM
INDEPENDENT AUDITORS’ REPORT
To the Honorable City Council
of the City of Modesto, California
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the governmental activities and major fund of the City of Modesto Community Facilities District Number 2000-2 (Coffee-Claratina) (the District), a component unit of the City of Modesto, California, as of and for the year ended June 30, 2022, the budgetary comparison for the special revenue fund, and the related notes to the financial statements, which collectively comprise the District’s basic financial statements as listed in the table of contents.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and major fund of the District as of June 30, 2022, and the respective changes in financial position, and the respective budgetary comparison for the special revenue fund for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinions
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the District and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the District’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.

Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinions.

Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. #1..
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2 Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the District’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the District’s ability to continue as a going concern for a reasonable period of time.

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

Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 3-7 be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 7, 2022, on our consideration of the District’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the District’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District’sinternal control over financial reporting and compliance.

HUDSON HENDERSON & COMPANY, INC.

Fresno, California
November 7, 2022
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3 COMMUNITY FACILITIES DISTRICT
NUMBER 2000-2 COFFEE-CLARATINA

CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED)
FOR THE YEAR ENDED JUNE 30, 2022
The City of Modesto Community Facilities District No. 2000-2 (Coffee-Claratina) (the District) has issued its financial statements in the format prescribed by the provisions of Governmental Accounting Standards Board (GASB) Statement No. 34, which requires the District to provide this overview of its financial activities for the fiscal year.

Please read this overview in conjunction with your reading of the accompanying basic financial statements.

THE PURPOSE OF THE DISTRICT
The District is a blended component unit of the City of Modesto, California (the City). It is controlled by the City, and the City Council is the District’s governing body. City employees perform most of the duties and functions required of the District, but certain tasks are provided by third parties under contract.

The District’s purpose under California law is to provide a funding mechanism for public facilities and services authorized by the District. The District is the vehicle that will be used to ensure that all landowners in the Specific Plan area contribute to the cost of the public facilities and services. Additional information on the District can be found below, and in Note 1 to the accompanying financial statements.

BACKGROUND AND MANAGEMENT’S DISCUSSION
In November 1999, the City Council approved the Coffee-Claratina Specific Plan that set forth a plan for development of 170 acres that includes up to 1,000 residential dwelling units, 40 acres of “Regional Commercial” property and 15 acres of “Mixed Community Commercial” development. The District was formed in December 2000 to provide a funding source for maintenance and repair of the storm drain basin and dual-use flood control/recreation facility and for maintenance of median, bikeway, round-about, and miscellaneous planting areas within the Coffee-Claratina Specific Plan.

FISCAL YEAR 2022 FINANCIAL HIGHLIGHTS
Financial highlights of the year include the following:

Government-Wide:
• The District’s net position increased to $191,388 for fiscal year 2022. • Total District revenues were $194,269.

Fund Basis:
• Special Revenue Fund revenues of $195,317 were $45,308 more than the prior year due to increased maintenance special tax collections. Expenditures of $169,545 were $12,789 more than the prior year due to an increase in professional service expenditures. The Special Revenue Fund balance increased by $25,772 to an ending fund balance of $190,542.
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4 COMMUNITY FACILITIES DISTRICT
NUMBER 2000-2 COFFEE-CLARATINA

CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022

THE BASIC FINANCIAL STATEMENTS
The basic financial statements comprise the government-wide financial statements and the fund financial statements; these two sets of financial statements provide two different views of the District’s financial activities and financial position.

Government-Wide Financial Statements
The government-wide financial statements provide a long-term view of the District’s activities as a whole and are comprised of the Statement of Net Position and the Statement of Activities. The Statement of Net Position provides information about the financial position of the District as a whole, including all its capital assets and long-term liabilities. The Statement of Activities provides information about the District’s revenues and all its expenses. The Statement of Activities explains in detail the change in net position for the year.

The Statement of Net Position and the Statement of Activities present information about the following:

Governmental activities - All of the District’s basic services are considered to be governmental activities, including formation, financing, construction, and maintenance activities. These services are supported by formation deposits, special facilities taxes, and annual maintenance assessments. Government-wide financial statements are prepared on the accrual basis of accounting, which means they measure the flow of all economic resources of the District as a whole, similar to that used by the private sector.

FINANCIAL ACTIVITIES OF THE DISTRICT AS A WHOLE
This analysis focuses on the net position and changes in net position of the District’s governmental activities in the government-wide financial statement of net position and statement of activities that follow.

As of June 30, 2022, total assets of $198,183 were offset by liabilities of $6,795. The District’s net position from governmental activities increased to $191,388 in 2022 from $166,664 in 2021. All of the District’s net position is restricted for maintenance.
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5 COMMUNITY FACILITIES DISTRICT
NUMBER 2000-2 COFFEE-CLARATINA

CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FINANCIAL ACTIVITIES OF THE DISTRICT AS A WHOLE (continued) The following is a condensed Statement of Net Position as of June 30, 2022 and 2021:
2022 2021 Change
Cash and investments $ 195,634 $ 169,750 $ 25,884
Assessments receivable 2,171 3,990 (1,819)
Interest receivable 378 299 79
Total assets 198,183 174,039 24,144
Current and other liabilities 6,795 7,375 (580)
Net position:

Restricted for:

District maintenance 191,388 166,664 24,724
Total net position $ 191,388 $ 166,664 $ 24,724
Statement of Net Position - Governmental Activities
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6 COMMUNITY FACILITIES DISTRICT
NUMBER 2000-2 COFFEE-CLARATINA

CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
FISCAL YEAR 2022 GOVERNMENTAL ACTIVITIES
The District’s fiscal year 2022 revenue came primarily from maintenance special tax of $198,452 offset by investment earnings (loss) of ($4,183). Facilities special tax revenue was not collected in fiscal year 2022, as these revenues are collected at the time of building permit issuance, and no such development occurred in the District in fiscal year 2022. District expenses of $169,545 were for professional services and utilities.

The following is a condensed Statement of Activities for the years ended June 30, 2022 and 2021, and the respective changes:
2022 2021 Change
Revenues:

General revenues:

Maintenance special tax $ 198,452 $ 152,057 $ 46,395
Investment earnings (loss) (4,183) (154) (4,029)
Total revenues 194,269 151,903 42,366
Expenses:

Community development 169,545 156,756 12,789
Change in net position 24,724 (4,853) $ 29,577
Net position, beginning of year 166,664 171,517
Net position, end of year $ 191,388 $ 166,664
Statement of Activities - Governmental Activities
Fund Financial Statements
The fund financial statements report the District’s operations in more detail than the government-wide financial statements and focus primarily on the short-term activities of the District’s special revenue fund. The fund financial statements measure only current revenues and expenditures and fund balances; they exclude capital assets, longterm debt, and other long-term amounts.

The fund financial statements provide detailed information about the District’s most significant funds called major funds. Major funds present the major activities of the District for the year and may change from year to year as a result of changes in the pattern of the District’s activities. All of the District’s funds are presented here as major funds; their purpose is explained in Note 1 to the financial statements. The District’s one fund is a governmental fund; financial statements for this fund are prepared on the modified accrual basis of accounting, which means they measure only current financial resources and uses.
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7 COMMUNITY FACILITIES DISTRICT
NUMBER 2000-2 COFFEE-CLARATINA

CITY OF MODESTO, CALIFORNIA
MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) (continued) FOR THE YEAR ENDED JUNE 30, 2022
The following is a condensed Statement of Revenues, Expenditures, and Changes in Fund Balance for the Special Revenue Fund for the years ended June 30, 2022 and 2021, and the respective changes:
2022 2021 Change
Revenues $ 195,317 $ 150,009 $ 45,308
Expenditures 169,545 156,756 12,789
Changes in fund balances 25,772 (6,747) $ 32,519
Fund balances, beginning of year 164,770 171,517
Fund balances, end of year $ 190,542 $ 164,770
Statement of Revenues, Expenditures, and
Changes in Fund Balances - Special Revenue Fund
THE DISTRICT’S FUND FINANCIAL STATEMENTS
At June 30, 2022, the District’s governmental fund reported a fund balance of $190,542, which was a $25,772 increase from fiscal year 2021. The Special Revenue Fund realized a $25,772 increase due to maintenance special tax exceeding professional services and utilities.

CAPITAL ASSETS
Under GASB Statement No. 34, the District is required to record all its capital assets, including infrastructure, at their historical cost, and to depreciate these assets over their estimated useful lives. However, title to all infrastructure assets acquired or constructed by the District is turned over to the City upon completion and acceptance.

Accordingly, capital outlay expenditures are reported in both the District’s fund and government-wide financial statements. Therefore, the District reports no long-term capital assets.

CONTACTING THE DISTRICT’S FINANCIAL MANAGEMENT
These basic financial statements are intended to provide citizens, taxpayers, investors, and creditors with a general overview of the District’s finances. Questions about this report should be directed to the City of Modesto, Administrator, Infrastructure Financing Programs, P.O. Box 642, Modesto, California 95353. #1..
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8 COMMUNITY FACILITIES DISTRICT
NUMBER 2000-2 COFFEE-CLARATINA

CITY OF MODESTO, CALIFORNIA

STATEMENT OF NET POSITION

AND STATEMENT OF ACTIVITIES
The Statement of Net Position and the Statement of Activities summarize the entire District’s financial activities and financial position. They are prepared on the same basis of accounting used by most businesses, which means they include all the District’s assets and all its liabilities, as well as all its revenues and expenses. This is known as the full accrual basis of accounting – the effect of all the District’s transactions is taken into account, regardless of whether or when cash changes hands, but all material internal transactions between District funds have been eliminated.

The Statement of Net Position reports the difference between the District’s total assets and deferred outflows of resources and the District’s total liabilities and deferred inflows of resources, including all the District’s capital assets and all its long-term debt. The Statement of Net Position focuses the reader on the composition of the District’s net position, by subtracting total liabilities from total assets. The Statement of Net Position summarizes the financial position of the District in a single column.

The Statement of Activities reports increases and decreases in the District’s net position. It is also prepared on the full accrual basis of accounting, which means it includes all the District’s revenues and all its expenses, regardless of when cash changes hands. This differs from the “modified accrual” basis of accounting used in the fund financial statements, which reflect only current assets, current liabilities, available revenues, and measurable expenditures.

The format of the Statement of Activities presents the District’s expenses, which are listed by program, first. Program revenues – that is, revenues which are generated directly by these programs – are then deducted from program expenses to arrive at the net program revenue (expense). General revenues – that is, revenues which are not generated directly by these programs – are then added to arrive at the change in net position and reconciled with the Statement of Net Position.
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The accompanying notes are an integral part of the financial statements. 9 COMMUNITY FACILITIES DISTRICT
NUMBER 2000-2 COFFEE-CLARATINA

CITY OF MODESTO, CALIFORNIA
STATEMENT OF NET POSITION – GOVERNMENTAL ACTIVITIES
JUNE 30, 2022
ASSETS
Cash and investments $ 195,634
Assessments receivable 2,171
Interest receivable 378
Total Assets 198,183

LIABILITIES
Accounts payable 6,795
Total Liabilities 6,795

NET POSITION
Restricted for:

District maintenance 191,388
Total Net Position $ 191,388
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The accompanying notes are an integral part of the financial statements. 10 COMMUNITY FACILITIES DISTRICT
NUMBER 2000-2 COFFEE-CLARATINA

CITY OF MODESTO, CALIFORNIA
STATEMENT OF ACTIVITIES – GOVERNMENTAL ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2022
Operating Grants Governmental
Functions/Programs Expenses & Contributions Activities
Community Development $ 169,545 $ - $ (169,545)
$ 169,545 $ - (169,545)
General Revenues:

Maintenance special tax 198,452
Investment earnings (loss) (4,183)
Total General Revenues 194,269
24,724
Net Position, Beginning of Year 166,664
Net Position, End of Year $ 191,388
Revenues
Change in Net Position
Program
Net (Expenses)
Revenues and
Changes in Net
Position
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11 COMMUNITY FACILITIES DISTRICT
NUMBER 2000-2 COFFEE-CLARATINA

CITY OF MODESTO, CALIFORNIA

FUND FINANCIAL STATEMENTS
Major funds are defined generally as having significant activities or balances in the current year.

The District determined its funds to be a major fund. That is:

The Special Revenue Fund accounts for all financial resources and uses related to maintenance of parkways and open space within the District.
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The accompanying notes are an integral part of the financial statements. 12 COMMUNITY FACILITIES DISTRICT
NUMBER 2000-2 COFFEE-CLARATINA

CITY OF MODESTO, CALIFORNIA
BALANCE SHEET – GOVERNMENTAL FUND
JUNE 30, 2022
Special
Revenue
Fund
ASSETS
Cash and investments $ 195,634
Assessments receivable 2,171
Interest receivable 378
Total Assets $ 198,183

LIABILITIES
Accounts payable $ 6,795
Total Liabilities 6,795

DEFERRED INFLOWS OF RESOURCES
Unavailable revenues 846
Total Deferred Inflows of Resources 846

FUND BALANCE
Restricted for:

District maintenance 190,542
Total Fund Balance 190,542
Total Liabilities, Deferred Inflows of Resources, and Fund Balance $ 198,183 Reconciliation of the Balance Sheet of the Governmental Fund to the Statement of Net Position:

Total Fund Balance - Governmental Fund $ 190,542
Adjustments to the Balance Sheet of the Governmental Fund to reconcile with the Statement of Net Position:

Revenues not available for current-period expenditures are deferred in the governmental fund, but are considered earned in the Statement of Net Position. 846
Total Net Position - Governmental Activities $ 191,388
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The accompanying notes are an integral part of the financial statements. 13 COMMUNITY FACILITIES DISTRICT
NUMBER 2000-2 COFFEE-CLARATINA

CITY OF MODESTO, CALIFORNIA

STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES – GOVERNMENTAL FUND
FOR THE YEAR ENDED JUNE 30, 2022
Special
Revenue
Fund

REVENUES
Maintenance special tax $ 199,500
Interest income 1,310
Change in fair value of investments (5,493)
Total Revenues 195,317

EXPENDITURES
Services - professional and other 134,831
Utilities 34,714
Total Expenditures 169,545
Changes in Fund Balance 25,772
Fund Balance, Beginning of Year 164,770
Fund Balance, End of Year $ 190,542
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of the Governmental Fund to the Statement of Activities:

Changes in Fund Balance - Governmental Fund $ 25,772
Adjustments to the Statement of Revenues, Expenditures, and changes in Fund Balances of the Governmental Fund to reconcile with the Statement of Activities:

Revenues that are considered earned in the Statement of Activities that did not provide current financial resources in the current year were not reported as revenues in the governmental fund. (1,048) Change in Net Position - Governmental Activities $ 24,724 #1..
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The accompanying notes are an integral part of the financial statements. 14 COMMUNITY FACILITIES DISTRICT
NUMBER 2000-2 COFFEE-CLARATINA

CITY OF MODESTO, CALIFORNIA

STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN
FUND BALANCE – SPECIAL REVENUE FUND – BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2022
Actual Variance with
Original Final Amounts Final Budget

REVENUES
Maintenance special tax $ 170,000 $ 170,000 $ 199,500 $ 29,500 Interest income - - 1,310 1,310
Change in fair value
of investments - - (5,493) (5,493)
Total Revenues 170,000 170,000 195,317 25,317

EXPENDITURES
Services - professional
and other 120,868 135,628 134,831 797
Utilities 46,500 46,500 34,714 11,786
Total Expenditures 167,368 182,128 169,545 12,583
Changes in Fund Balance $ 2,632 $ (12,128) 25,772 $ 37,900 Fund Balance, Beginning of Year 164,770
Fund Balance, End of Year $ 190,542
Budgeted Amounts
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COMMUNITY FACILITIES DISTRICT
NUMBER 2000-2 COFFEE-CLARATINA

CITY OF MODESTO, CALIFORNIA

NOTES TO BASIC FINANCIAL STATEMENTS
15 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description and Reporting Entity: The Community Facilities District Number 2000-2 (Coffee-Claratina) (the District) was formed in October 2000 by vote of the property owners within the proposed district. The District, a separate legal entity, was formed for the purpose of setting forth a plan of rehabilitation and development for the site, which is located on the south side of Claratina Avenue, bound by Coffee Road on the East, McHenry on the West, and the Modesto City limits to the South. Coffee-Claratina is a 170-acre project designated for a maximum of 1,000 residential dwelling units, 40 acres designated “Regional Commercial,” and 15 acres of “Mixed Community Commercial.” In addition, the District is intended to fund the maintenance of median, bikeway, round-about, and miscellaneous planting areas, in addition to the funding maintenance and repair of a storm drain basin and dual-use flood control/recreation facility.

The District is an integral part of the City of Modesto, California (the City) and the accompanying financial statements are included as a blended component unit of the basic financial statements prepared by the City. A component unit is a separate governmental unit, agency, or nonprofit corporation which, when combined with all other component units, constitutes the reporting entity as defined in the City’s basic financial statements.

Government-Wide and Fund Financial Statements: The government-wide financial statements (i.e., the Statement of Net Position and Statement of Activities) report information on all of the activities of the District. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities normally are supported by taxes and intergovernmental revenues.

The Statement of Activities demonstrates the degree to which direct expenses are offset by program revenues.

Direct expenses are those that are clearly identifiable with the community development function. Program revenues include grants and contributions that are restricted to meeting the operational requirements of the community development function. Investment earnings, and other items which are not properly included among program revenues, are reported instead as general revenues. Separate financial statements are provided for governmental funds. Major individual governmental funds are reported as separate columns in the fund financial statements.

Basis of Presentation, Basis of Accounting, and Measurement Focus: The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Taxes are recognized as revenues in the year for which they are levied.

Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the District considers revenues to be available if they are collected within 180 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred, as under the accrual basis of accounting. Substantially all taxes and interest, including the net increase (decrease) in the fair value of investments, are considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Miscellaneous revenues are considered to be measurable and available only when cash is received by the District.

The District reports the following major governmental fund:

The Special Revenue Fund accounts for all financial resources and uses related to maintenance of parkways and open space within the District.
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COMMUNITY FACILITIES DISTRICT
NUMBER 2000-2 COFFEE-CLARATINA

CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
16 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Management’s Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

Deferred Outflows and Inflows of Resources: Pursuant to GASB Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, and GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, the District recognizes deferred outflows and inflows of resources.

In addition to assets, the Statement of Net Position will sometimes report a separate section for deferred outflows of resources. A deferred outflow of resources is defined as a consumption of net position by the District that is applicable to a future reporting period.

In addition to liabilities, the Statements of Net Position will sometimes report a separate section for deferred inflows of resources. A deferred inflow of resources is defined as an acquisition of net position by the District that is applicable to a future reporting period. Deferred inflows reported by the District consist of unearned deferred assessments that have been billed as of year-end, but not yet collected.

Maintenance Special Taxes: The maintenance special taxes are collected by the County of Stanislaus on the property tax bill. The special taxes are due November 1st and February 1st and are delinquent if not paid by December 10th and April 10th, respectively. The County of Stanislaus bills and collects the special taxes and remits them to the District. The Rate and Method of Apportionment of Special Tax (RMA), set forth in the District’s Public Report, describes how the tax will be allocated among properties in the District. The Public Report was established during the formation of the District. A cost of living adjustment is applied to the special taxes annually.

Fund Balance: In the fund financial statements, governmental funds report fund balance as nonspendable, restricted, committed, assigned, or unassigned based primarily on the extent to which the District is bound to honor constraints on how specific amounts can be spent.
• Nonspendable – Amounts that are not in spendable form (such as inventory) or are required either legally or contractually to be maintained intact.
• Restricted – Amounts with constraints placed on their use that are either (a) externally imposed by creditors, grantors, contributors, or laws or regulations of other governments or (b) imposed by law through constitutional or enabling legislation.
• Committed - Amounts constrained to specific purposes by the District itself, using the District’s highest level of decision-making authority (the City Council). To be reported as committed, amounts cannot be used for any other purpose unless the District takes the same highest-level action to remove or change the constraint. The underlying action that imposed the limitation needs to occur no later than the close of the reporting period.
• Assigned - Amounts the District intends to use for a specific purpose. Intent can be expressed by the District at either the highest level of decision-making or by an official or body to which the District delegates the authority.
• Unassigned - The residual classification for the District that includes amounts not contained in the other classifications. In other funds, the unassigned classification is used only if expenditures incurred for specific purposes exceed the amounts restricted, committed, or assigned to those purposes.

The District establishes and modifies or rescinds fund balance commitments by passage of an ordinance or policy.

This is typically done through adoption or amendment of the budget. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 2000-2 COFFEE-CLARATINA

CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
17 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Fund Balance (continued):

A fund balance commitment is further indicated in the budget as a designation or commitment of the fund, such as approved construction contracts. Assigned fund balance is established by the District through adoption or amendment of the budget or future year budget plan as intended for a specific purpose.

When both restricted and unrestricted resources are available for use, it is the District’s policy to use restricted resources first, followed by the committed, assigned, and unassigned resources as they are needed.

Net Position: Net position represents the residual interest in the District’s assets after liabilities are deducted. In accordance with GASB Statement No. 63, the fund equity section on the Statement of Net Position was combined to report total net position and present it in three broad components:
• Net investment in capital assets – Amount consists of capital assets, including infrastructure, net of accumulated depreciation and outstanding principal balances of debt attributable to the acquisition, construction, or improvement of those assets.
• Restricted – Amount consists of net position restricted by external creditors, grantors, contributors, or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabled legislature.
• Unrestricted – Amount consists of all net position that does not meet the definition “net investment in capital assets” or “restricted” net position.

When both restricted and unrestricted net position are available, restricted resources are depleted first before unrestricted resources are used.

Governmental Accounting Standards Update: During the year ended June 30, 2022, the District implemented the following Governmental Accounting Standards Board (GASB) standards with no financial impact:

GASB Statement No. 87 – Leases. The requirements of this statement are effective for reporting periods beginning after December 15, 2019. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to reporting periods beginning after June 15, 2021.

GASB Statement No. 92 – Omnibus 2020. The requirements of this statement are effective for reporting periods beginning after June 15, 2020. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to June 15, 2021.

GASB Statement No. 97 – Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans. The requirements of this statement are effective for reporting periods beginning after June 15, 2021.

GASB Statement No. 98 – The Annual Comprehensive Financial Report. The requirements of this statement are effective for reporting periods beginning after December 15, 2021.

Released GASB Statements to be implemented in future financial statements are as follows:

GASB Statement No. 91 – Conduit Debt Obligations. The requirements of this statement are effective for reporting periods beginning after December 15, 2020. Subsequent to issuance, GASB Statement No. 95 postponed the requirements of this statement to reporting periods beginning after December 15, 2021. #1..
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COMMUNITY FACILITIES DISTRICT
NUMBER 2000-2 COFFEE-CLARATINA

CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
18 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Governmental Accounting Standards Update (continued):

GASB Statement No. 93 – Replacement of Interbank Offered Rates. The requirements of this statement are effective for reporting periods beginning after June 15, 2021. Subsequent to issuance, GASB Statement No. 95 postponed the certain requirements of this statement to reporting periods beginning after June 15, 2022.

GASB Statement No. 94 – Public-Private and Public-Public Partnerships and Availability Payment Arrangements. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.

GASB Statement No. 96 – Subscription-Based Information Technology Arrangements. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.

GASB Statement No. 99 – Omnibus 2022. The requirements of this statement are effective for reporting periods beginning after June 15, 2022.

GASB Statement No. 100 – Accounting Changes and Error Corrections. The requirements of this statement are effective for reporting periods beginning after June 15, 2023.

GASB Statement No. 101 – Compensated Absences. The requirements of this statement are effective for reporting periods beginning after December 15, 2023.

Subsequent Events: In compliance with accounting standards, management has evaluated events that have occurred after year-end to determine if these events are required to be disclosed in the financial statements. Management has determined that no events require disclosure in accordance with accounting standards. These subsequent events have been evaluated through November 7, 2022, which is the date the financial statements were available to be issued.

NOTE 2 – CASH AND INVESTMENTS
Cash and investments of the District are pooled with other City of Modesto funds. Interest earned on pooled cash and investments is credited to each participant in the pool based on each participant’s average monthly cash balance. Credit quality ratings are not available for the District’s investments as all cash is invested as part of the common cash and investment pool of the City of Modesto.

Cash in the City Pool is considered unclassified as to credit risk because it is not evidenced by securities that exist in physical or book entry form. The District does not have any deposits with financial institutions as of June 30, 2022.

Cash and investments as of June 30, 2022 are classified in the accompanying financial statements as follows:

Statement of Net Position- Governmental Activities:

Cash and investments $ 195,634
Total cash and investments $ 195,634
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COMMUNITY FACILITIES DISTRICT
NUMBER 2000-2 COFFEE-CLARATINA

CITY OF MODESTO, CALIFORNIA
NOTES TO BASIC FINANCIAL STATEMENTS (continued)
19 NOTE 2 – CASH AND INVESTMENTS (continued)
Deposits with City of Modesto
Cash and investment pool $ 195,634
Total cash and investments $ 195,634
Detailed information concerning the City of Modesto’s pooled cash and investments, including information regarding the fair value of investments, may be found in the City of Modesto’s Annual Comprehensive Financial Report. As of June 30, 2022, the fair value of the District’s position in the pool is the same as the value of its pool shares.

NOTE 3 – RESTRICTED FUND BALANCES
Restrictions of Fund Balances: Fund balances are all presented in the restricted category (see Note 1 for a description of fund balance categories). As of June 30, 2022, restrictions included:

Restricted for District Maintenance - the portion of fund balance legally restricted for maintenance of parkways and open space within the District.

NOTE 4 – DELINQUENCIES AND FORECLOSURES
The District has made a covenant under the Trust Indenture of the Special Tax Bonds that will initiate foreclosure proceedings against delinquent parcels as follows:
a. Any parcel that is delinquent for three consecutive payments. Foreclosure against these parcels is to be initiated within 120 days after the third delinquency.
b. All parcels delinquent at June 30 when the District received Special Taxes totaling less than 95% of the total Special Tax levied for that fiscal year. Foreclosure against these parcels is to be initiated by September 1st following the end of the fiscal year.

At June 30, 2022, the District had 2 parcels that were delinquent for a total of $846, none of which were delinquent for more than three consecutive payments.

The District received 99.58% of the Special Revenue Fund maintenance special taxes levied during the year ended June 30, 2022. The delinquencies total of $846 at June 30, 2022 is included in assessments receivable on the Statement of Net Position and Balance Sheet.

NOTE 5 – CONTINGENCIES
Coronavirus Pandemic: Management has determined the events regarding the Novel Coronavirus (COVID-19) require disclosure in accordance with accounting standards. On March 4, 2020, Governor Newsom issued an emergency proclamation declaring a state of emergency in California due to COVID-19. The COVID-19 outbreak is ongoing, and the ultimate geographic spread of the virus, the duration and severity of the outbreak and the economic and other actions that may be taken by government authorities to contain the outbreak or treat its impact are uncertain. A vaccination has been created and is being administered throughout the state, including the District’s service area. The ultimate impact of COVID-19 on the operations and finances of the District is unknown. #1..
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7473 N. INGRAM AVE., SUITE 102 ⬧ FRESNO, CA 93711
_______________________________________________________________________________________________ P (559) 412-7576 ⬧ F (559) 493-5325 ⬧ WWW.HHCCPAS.COM
INDEPENDENT AUDITORS’ REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE

AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH

GOVERNMENT AUDITING STANDARDS
To the Honorable City Council
of the City of Modesto, California
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities and major fund of the City of Modesto Community Facilities District Number 2000-2 (Coffee-Claratina) (the District), as of and for the year ended June 30, 2022, the budgetary comparison for the special revenue fund, and the related notes to the financial statements, which collectively comprise the District’s basic financial statements, and have issued our report thereon dated November 7, 2022.

Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the District’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District’s internal control. Accordingly, we do not express an opinion on the effectiveness of the District’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 District’s financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

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

Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the District’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 statements.

However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. #1..
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21 Purpose of This Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the District’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 District’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

HUDSON HENDERSON & COMPANY, INC.

Fresno, California
November 7, 2022
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COMMUNITY FACILITIES DISTRICT
NUMBER 1998-1 ENTERPRISE BUSINESS PARK

CITY OF MODESTO, CALIFORNIA

BASIC FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS’ REPORT

FOR THE YEAR ENDED
JUNE 30, 2022
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TABLE OF CONTENTS
Page
Independent Auditors’ Report.......................................................................................................................... 1 Management’s Discussion and Analysis (Unaudited) ....................................................................................... 3 Basic Financial Statements:

Statement of Net Position – Governmental Activities ........................................................................ 9 Statement of Activities – Governmental Activities ............................................................................. 10 Balance Sheet – Governmental Fund.................................................................................................. 12 Reconciliation of the Balance Sheet – Governmental Funds to the Statement of Net Position – Governmental Activities ........................................................................ 13 Statement of Revenues, Expenditures, and Changes in
Fund Balance – Governmental Fund ................................................................................................... 14 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities Change in Net Position of Governmental Activities ........................................................ 15 Statement of Revenues, Expenditures, and Changes in
Fund Balance - Special Revenue Fund – Budget and Actual................................................................ 16 Notes to Basic Financial Statements.................................................................................................................. 17 Independent Auditors’ Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards...................................................................................................................... 22 #1..
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7473 N. INGRAM AVE., SUITE 102 ⬧ FRESNO, CA 93711
_______________________________________________________________________________________________ P (559) 412-7576 ⬧ F (559) 493-5325 ⬧ WWW.HHCCPAS.COM
INDEPENDENT AUDITORS’ REPORT
The Honorable City Council
of the City of Modesto, California
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the governmental activities and major fund of the City of Modesto Community Facilities Park Number 1998-1 (Enterprise Business Park) (the Park), a component unit of the City of Modesto, California, as of and for the year ended June 30, 2022, the budgetary comparison for the special revenue fund and the related notes to the financial statements, which collectively comprise the Park’s basic financial statements as listed in the table of contents.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and major fund of the Park as of June 30, 2022, and the respective changes in financial position, and the respective budgetary comparison for the special revenue fund for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinions
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Park and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Park’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.

Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinions.

Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
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2 In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit. • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Park’s internal control. Accordingly, no such opinion is expressed. • Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. • Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Park’s ability to continue as a going concern for a reasonable period of time.