CITY OF PACIFICA
COUNCIL AGENDA SUMMARY REPORT
2/23/2026
1 SUBJECT:
Annual Comprehensive Financial Report (ACFR) for the fiscal year ended June 30, 2025 RECOMMENDED ACTION:
Accept the City of Pacifica Annual Comprehensive Financial Report (ACFR), Independent Auditor’s Report, and other related documentation for the fiscal year ended June 30, 2025.
STAFF CONTACT:
Marisol Gómez, Administrative Services and Finance Director (650) 501-0257
[email protected]
Lucy Xie, Deputy Finance Director
(650) 738-7395
[email protected]
BACKGROUND:
The City of Pacifica annually conducts an independent audit of financial transactions and issues the Annual Comprehensive Financial Report (ACFR), prepared by the City’s independent auditing firm and the Finance staff. The attached ACFR report reflects the City's financial position as of June 30, 2025, and is presented as an informational item for the Council’s acceptance.
The ACFR Report has been prepared in conformity with the Governmental Accounting and Financial Reporting Standards and with the Governmental Accounting Standards Board (GASB) Statement 34, which requires dual perspective basic financial statements:
1) Government-wide view of the City’s financial transactions that distinguishes between governmental activities and business activities, which is prepared on a full accrual basis of accounting, and
2) Fund financial view of the results of operations and financial position of each of the City’s major and enterprise (proprietary) funds, reported as follows:
Major Funds
General Fund
Disaster Accounting Fund
Proprietary Funds
Sewer Utility Enterprise Fund
Beach Parking Fund
Internal Service Funds
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The independent auditing firm of Badawi & Associates (Badawi) has completed the City’s Fiscal Year 2024-25 audit in conformity with generally accepted auditing standards that require:
• An independent Certified Public Accounting firm to plan and perform the audit. • Examination of evidence to support the amounts and disclosure in the financial statements.
• Expression of an audit opinion on the fairness of the presentation of the financial position and the results of operations of the basic financial statements of the City, in conformity with Generally Accepted Accounting Principles (GAAP) as applicable to local governments.
Section 12410.6 (b) of the Government Code requires the rotation of public accounting firms providing audit services or lead audit partners responsible for performing or reviewing the audit for local agencies every six years to ensure audit independence. Pursuant to this requirement, the City issued an RFP and selected Badawi and Associates as the new audit firm early last year. This marks the second year of their engagement with the City.
FY 2024-25 ACFR received an unqualified opinion from the auditing firm, which means that it is the opinion of the auditors that the ACFR report represents fairly, in all material respects, the financial position of the City as of June 30, 2025, and that the financial statements were prepared in conformity with generally accepted accounting principles. The auditors noted no material weaknesses or deficiencies.
In performing an audit of the financial statements, the auditors also considered the City’s internal controls over financial reporting to determine the appropriate audit procedures for expressing opinions on the financial statements. The auditors did not find any internal control deficiencies and issued a clean audit opinion.
The City’s Annual Comprehensive Financial Report (ACFR) presents an easily readable and organized report of the City’s financial transactions and provides the users of government financial statements with a wide variety of information needed to help them evaluate the City's financial condition. The final step in the formal process of preparing these statements is to present them to the City Council for its acceptance.
The ACFR report is composed of the following parts:
• Introductory Section, including the letter of transmittal • Financial Section
a. Independent Auditors’ Report
b. Management Discussion and Analysis (MD&A)
c. Basic Government-wide and fund-level financial statements d. Explanatory notes to financial statements, supplemental schedules e. Supplementary information
• Statistical Section
The transmittal letter provides information regarding the City’s demographics and discussion on the City’s budget process, as well as factors affecting the City’s financial conditions, including State budget and local economy, long-term financial planning, risk management, and employee benefit cost.
The Financial Section includes the Management’s Discussion and Analysis (MD&A) that summarizes the financial results for the fiscal year ending June 30, 2025, and provides a brief and easily readable analysis of the City’s fiscal activities, overview of the financial highlights, and a discussion of significant financial changes from the prior year.
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The financial statements and notes to the financial statements are presented next. Following the financial statements is the statistical section of the report, which includes tables that contain ten years of data that illustrate financial trends and a section with demographic and other data that is useful in analyzing the financial condition and performance of the City.
The comprehensive format of the annual financial report is designed to provide detailed information for all city government activities in one document. Rather than reviewing cover to cover, it is suggested that readers initially concentrate on the summary schedules in the MD&A before moving to the full statements, budget comparison statements, and the combined statements presented in the report's financial section.
DISCUSSION
The statement of Net position presents complete information on the City’s assets and deferred outflows of resources and liabilities and deferred inflows of resources, with the difference reported as net position. Net position may serve as a valuable indicator of the city’s financial position over time. The overall Citywide net assets exceeded its liabilities on June 30, 2025, by $114.2 million, which is an $8.9 million increase from the prior year’s restated net position of $105 million, as shown in Table 1 Comparative Statement of Net Position.
Key Changes in Net Positions are as follows:
• Increase in Net Investment in Capital Assets from $124.3 to $144.8 million. The City’s Capital Assets are calculated as the current net book value of the assets, less the outstanding balance of any debt issued to finance these assets. An increase over the prior year of $8.8 million in governmental activities and $11.7 million in business-type activities is a result of the capitalization of projects such as the Esplanade/Palmetto Bike Pathway project and Sharp Park construction project for governmental activities and mainly two Wastewater projects, Lower Linda Mar wastewater collection systems and Ultraviolet Disinfection System.
• Restricted net position decreased $1.9 million from the prior year to $20.3 million in governmental funds. The restricted portion of the Net position describes obligations restricted by the terms and conditions of agreements with outside parties, governmental regulations, laws, or other restrictions that the City cannot unilaterally alter. This may Pacifica City Council 4
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include capital projects, revolving loan programs, and other various grant programs. • Unrestricted net position describes the portion of a net position that is not restricted to use. The negative net position exists when liabilities exceed assets. As further described in the MD&A, the City’s negative net position figure is a direct result of the City’s recognition of net pension and OPEB liability as required by GASB 68 and 75, respectively. It is important to note that the unfunded pension and OPEB obligations do not represent a liability due and payable immediately. The City’s unrestricted net position had an unfavorable change from negative $41.1 million in the prior year to negative $50.9 million in the current year. The decline in unrestricted was primarily driven by business-type activities, as unrestricted balances were applied toward capital investments, which corroborates why business-type net investments in capital assets increased. Finance staff will continue monitoring year-to-year changes in unrestricted net position, which will remain negative in future years primarily due to the unfunded pension and OPEB liabilities. The pension and OPEB prefunding policy will also be reviewed during the annual budget process.
Additional information on the changes in net position and net investment in capital assets can be found in Note 10. Net Position and Fund Balances in the ACFR.
The Statement of Activities, Table 2, provides information about the City’s revenue and expenses, with an emphasis on measuring net revenues or expenses in each program, explaining in detail the change in Net Position for the year.
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Key points regarding the Statement of Activities are as follows:
• Total Revenues - The citywide total revenues were $86.8 million as of June 30, 2025, an increase of $9.0 million from the previous fiscal year, with Governmental and Business-Type activities increasing by $7.8 million and $1.2 million, respectively. o Program revenue for both Governmental and Business-type activities increased by $5.2 million from $33.4 million to $38.6 million, with an increase of $2.3 million in capital grants in Governmental activities and an increase of $1.6 million in charges for services.
o Revenues from all taxes increased by $1.2 million from $36.4 million to $37.6 million, which includes increases of $0.4 million in property taxes and $0.8 million in all other taxes.
o Motor Vehicle in-Lieu (VLF) revenue increased by $1.0 million in FY 2025 to $4.8 million. The timing of this source of funding is dependent on the State’s budgeting and the remittance process.
• Total Expenses - The citywide total expenses were $77.9 million, an increase of $3.4 million or 5% over the prior fiscal year of $74.4 million. The Governmental activities expense increased by $1.9 million. The Business-Type activities expenses increased by $1.5 million.
o Sewer operation included a $1.1 million increase in depreciation expense and $0.4 million increase in transfer out to motor pool for equipment purchase. o Other categories stayed fairly consistent with the prior year. • Transfers - Transfers in are shown as a positive amount and Transfers (out) are shown in parenthesis. The purpose of most transfers is to move resources from one fund to another. These transfers are usually approved at budget adoption or during the mid-year review. A summary of all transfers is located in the ACFR Note 9. Interfund Transactions.
A governmental transfer in of $1.7 million to the Internal Service Funds was received by a business-type transfer (out) from the Sewer Utility fund to pay for a portion of the General Liability insurance costs and motor pool replacements.
The Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances presented in the ACFR report is a useful snapshot of the City’s fiscal indicator for the year. Governmental funds include all funds except for proprietary (Sewer) and internal service funds. The Net Change in Fund Balances, reflecting all revenues, expenditures, and transfers, was an increase of $4.6 million or 11.4% from the prior year balance of $40.6 million to $45.2 million in FY 2024-25. The net change consists of a $3.9 million increase in the General Fund fund balance, an increase of $2.9 million in Disaster Accounting Fund, and a $2.3 million decrease in combined fund balances of the City’s remaining governmental funds. The Disaster Accounting Fund was reclassified as a major fund this year as a result of the major vs. nonmajor fund test.
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As part of the annual audit process, certain reclassifications were made to ensure that transactions and balances were reported in the appropriate funds and financial statement line items in accordance with GAAP and GASB requirements. These reclassifications did not change the City’s overall financial condition, cash balances, or net position, but improved the accuracy and clarity of financial statement presentation.
For FY 2024-25, restatements primarily related to capital asset accounting, internal service fund activity, and the implementation of updated accounting guidance, namely GASB Statement No. 101. These adjustments are technical in nature in governmental audits, they did not impact cash balances or General Fund reserves, and they enhance transparency and comparability of the City’s financial statements.
The General Fund is the City’s primary operating fund. It receives unrestricted revenues and provides general administrative services, law enforcement, and animal control services, and land development-related activities such as planning, building, and engineering.
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The General Fund balance of $22.6 million as of June 30, 2025, showed an increase of $3.9 million from the prior fiscal year’s restated balance of $18.7 million. The City Council assigned $5.6 million in reserves for specific purposes, as described in Note 10 of the Notes to the Basic Financial Statements. A total of $16.4 million of the General Fund balance remains unassigned, showing a positive increase of $3.8 million from the prior year of $12.6 million.
General Fund highlights are as follows:
• General Fund revenues totaled $50.6 million in the current fiscal year compared to $46.5 million in the prior fiscal year. This $4.1 million, or 8.8%, increase is a result of the following main factors:
o an increase of $1.3 million in property tax
o an increase of $1.5 million in intergovernmental receipts o an increase of $1.0 million in charges for services
o a modest increase of $0.1 million in recreational program revenues • General Fund expenditures totaled $45.5 million, an increase of $4.3 million or 10.4%, compared to $41.2 million in the prior year:
o General Government expenditures increased by $1.1 million from $7.0 million in FY 2024, driven mainly by higher personnel costs ($0.4 million), and increased legal, litigation-related activities ($0.6 million).
o Public Safety expenditures increased as well, with Police Department costs rising by $0.7 million due to higher personnel costs associated with the implementation of new Pacifica City Council 8
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memorandum of understanding (MOU) provisions and increased overtime resulting from staffing challenges. Fire Department expenditures increased by $1.0 million, due to higher emergency response and increased overtime costs of $0.7 million, and $0.3 million increase in retirement costs.
o The Community Development Department expenditures increased by $0.8 million primarily due to higher contractual services in the Planning Division. o Public Works expenditures increased by $0.2 million, mainly due to an increase in Engineering Services.
o Parks, Beaches, and Recreation expenditures rose by $0.5 million, primarily due to filling vacancies and other program increases.
Other areas of importance include but are not limited to, long-term debt, other post-employment benefits (OPEB), and pension plans.
• Long term debt - The City generally incurs debt to finance projects or purchase assets, which will have useful lives equal to or greater than the related debt. The City’s debt issues and transactions related to both governmental and business-type activities are summarized in ACFR Note 5. Long Term Debt. No new debt was issued in FY 2025. • OPEB - The City’s total OPEB liability was measured as of June 30, 2024, and was determined by an actuarial valuation as of June 30, 2024, to determine the total net OPEB liability of $3.6 million as of June 30, 2025, which is a $1.1 million decrease from the prior year. Further details are provided in the ACFR Note 6. Other Post-Employment Benefits (OPEB).
• Pension - The City’s current actuarially determined long-term net pension liability of $69.6 million showed a 5.1% decrease from the prior fiscal year’s $73.4 million, based on the most recent actuarial valuation and CalPERS Actuarial assumptions, and amortized over a combination of 30 and 20-year schedules. Further details are provided in Note 7. Pensions Plans.
Additional information on other operating and capital funds can be found in the attached financial report, MD&A section, and notes to the financial statements.
In addition to ACFR, the auditors have prepared and issued an Audit Report on Measure W Funds, Attachment 2, Measure A funds, Attachment 3, and Transportation Development Act Program, Attachment 4, as summarized below.
Audit Report on Measure W Funds
The agreement between the City and San Mateo County Transportation Authority for the distribution of San Mateo County Measure W funds for local transportation purposes in accordance with the San Mateo County Congestion Relief Plan requires the City to submit a compliance audit report on the funds received. The audit report found that the City has complied, in all material respects, with the requirements for the year ended June 30, 2025.
Additional information is available in Attachment 2.
Audit Report on Measure A Funds
The annual audit report on Measure A funds found that the City has complied, in all material respects, with the requirements for the year ended June 30, 2025. Additional information is available in Attachment 3. These reports include additional financial statements and supplemental data that together with ACFR summarize the results of the operations of all funds and give a comprehensive overview of the City’s financial position for the fiscal year that ended on June 30, 2025.
Audit Report on Transportation Development Act (TDA) Funds The annual audit of the City’s Transportation Development Act (TDA) Article 3 Program, which Pacifica City Council 9
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provides funding through the Metropolitan Transportation Commission for the Palmetto & Esplanade Bike and Pedestrian Improvements project, included both a financial statement audit and a compliance review in accordance with Government Auditing Standards and Section 6666 of the California Administrative Code. The auditors issued an unmodified opinion, finding that the TDA Program financial statements present fairly, in all material respects, the financial position of the Program for the year ended June 30, 2025, and that the City complied, in all material respects, with the applicable compliance requirements governing TDA funds. No instances of noncompliance or material weaknesses in internal control were identified.
Additional information is available in Attachment 4.
In an effort to further enhance transparency and accessibility, the City will be issuing its first-ever Popular Annual Financial Report (PAFR). The PAFR is a streamlined, reader-friendly summary of the Annual Comprehensive Financial Report (ACFR), designed to present key financial information in clear language with visual charts and graphics for residents and stakeholders.
While the ACFR provides detailed financial statements in accordance with governmental accounting standards, the PAFR focuses on high-level results, trends, and fiscal highlights to make the City’s financial story more understandable to the broader community. Staff anticipates publishing the FY 2024-25 PAFR by the end of February.
We would like to take the opportunity to acknowledge the hard work of the Finance Department staff in bringing this report forward. We also appreciate the competence and diligence displayed by the auditors’ team in assisting the City staff with the preparation and timely completion of the ACFR document. Finally, we would like to thank the entire City Council for their unfailing support of maintaining the highest standards in managing the City’s finances, emphasizing transparency, ethics, and fiscal responsibility.
The City has been a proud recipient of the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association (GFOA) for four consecutive years, and we are confident that the attached document will continue to meet these high standards. We included GFOA recommendations to further improve the quality of this document and plan to submit this ACFR report for the award’s consideration again this year. Should the City receive the Government Finance Officers Association Award for Outstanding Achievement in Popular Annual Financial Reporting again, Pacifica would qualify for the GFOA “Triple Crown” distinction, recognizing excellence in budgeting, financial reporting, and popular reporting.
RELATION TO CITY COUNCIL GOALS AND WORK PLAN:
The City's annual audit is a critical check on the City’s financial practices, impacting all City Council Goals.
FISCAL IMPACT:
There is no fiscal impact associated with the Council’s acceptance of the ACFR report. The attached reports present the City's financial results for the last Fiscal Year 2024-25, and they will be factored-in the development of the FY 2026-27 budget.
ALTERNATIVES:
There is no reasonable alternative to the staff recommendation to accept the report, as not accepting the Annual Comprehensive Financial Report will not change the City’s audited financial position as of June 30, 2025.
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ORIGINATED BY:
Finance Department
ATTACHMENT LIST:
Attachment A: City of Pacifica's Annual Comprehensive Financial Report (ACFR) for the Fiscal Year Ended June 30, 2025 (PDF)
Attachment B: City of Pacifica FY 2024-25 Measure W (PDF) Attachment C: City of Pacifica FY 2024-25 Measure A (PDF) Attachment D: City of Pacifica FY 2024-25 Transportation Development Act Program (TDA) (PDF)