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City Financial Management The City Council has adopted a comprehensive set of financial management policies to provide for: (i) establishing targeted general fund reserves; (ii) the prudent investment of City funds, and (iii) management of debt. The City’s practice is to incur debt only after deliberation over the effect of such debt on the City’s General Fund and other resources of the City, and in those circumstances where the use of debt would be appropriate to the scale and economic life of the asset being financed and the accumulation or availability of reserves to fund the capital requirement. General Fund Budget Stabilization Reserve Policy. The following table shows the City’s general fund Budget Stabilization Reserve Policy guidance, actual reserves for fiscal year 2020-21 and budgeted reserve for fiscal year 2021-22. CITY OF PALO ALTO GENERAL FUND BUDGET STABILIZATION RESERVE POLICY Policy Actual Budgeted Guidance FY 2020-21 FY 2021-22 % of Expenses 15% to 20%; target goal of 18.5% 23.5% 17.2% Source: City of Palo Alto Finance Department. During the 2019-20 fiscal year, the City drew $11.7 million from its Budget Stabilization Reserve (BSR) to mitigate service reductions as a result of revenue losses associated with the Covid-19 pandemic, bringing the remaining balance of the BSR to approximately $35.9 million as of June 30, 2020. During the 2020-21 fiscal year the City increased the BSR by $13.2 million through a combination of excess revenue above budgeted levels and expenditure savings, bringing the BSR balance to approximately $49.1 million as of June 30, 2021. The City’s adopted fiscal year 2021-22 budget relied on the use of $1.8 million from the BSR. The City’s fiscal year 2021-22 adopted budget reduced the BSR to $36.0 million or 17.2% of the adopted budget. This is within the targeted range of 15% to 20% but below the City Council goal of 18.5%. Since the budget adoption, the fiscal year 2021-22 BSR has been updated to reflect the final fiscal year 2020-21 BSR. The BSR is currently at $40.7 million or 19.4% of the adopted budget. As discussed in the fiscal year 2023-32 Long Range Financial Forecast, major general fund tax revenues are anticipated to be higher than budgeted levels in fiscal year 2021-22. Based on actual receipts for the first half of the fiscal year and projections for the remainder of the 2021-22 fiscal year, major tax revenues are anticipated to be $15 million over the adopted budget. Staff will return to the City Council as part of the fiscal year 2022-23 budget development process to discuss use of these funds. Investment Policy. The investment of funds of the City (except pension and retirement funds) is made in accordance with the City’s Investment Policy, most recently approved in June 2021 (the “Investment Policy”), and section 53601 et seq. of the California Government Code. The Investment Policy is subject to revision at any time and is reviewed at least annually to ensure compliance with the stated objectives of safety, liquidity, yield, and current laws and financial trends. All amounts held under the Resolution are invested at the direction of the City in Investment Securities, as defined in the Resolution, and are subject to certain limitations contained therein. See APPENDIX C—INVESTMENT POLICY OF THE CITY and APPENDIX E—SUMMARY OF THE PRINCIPAL LEGAL DOCUMENTS—TRUST AGREEMENT—Investments.
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Debt Management Policy. In accordance with section 8855(i) of the California Government Code the City adopted a debt management policy on April 11, 2017, to establish conditions for the use of debt; to ensure that debt capacity and affordability are adequately considered; to minimize the City’s interest and issuance costs; to maintain the highest possible credit rating; to provide complete financial disclosure and reporting; and to maintain financial flexibility for the City. Capital Improvement Project Practices. While the City does not have an adopted capital improvement project policy, it does have certain criteria that must be adhered to before commencing a capital improvement project including (a) that the project must have a minimum cost of $50,000 for each stand-alone unit or combined project, (b) that the project must have a useful life of at least five to seven years, and (c) that the project must extend the life of an existing asset or provide a new functional use for an existing asset for at least five years. Principal Sources of General Fund Revenues The City relies on several sources to balance its General Fund budget. The most important of these revenue sources (based on percentage of the total revenue budget) are taxes and fees including the following: property taxes, sales taxes, and transient occupancy taxes. The following table shows the City’s General Fund tax revenues by source for the four most recent fiscal years and budgeted projections for Fiscal Year 2021-22: TABLE B4 CITY OF PALO ALTO GENERAL FUND TAX REVENUES BY SOURCE (Dollars in Thousands) Fiscal Year Ending June 30, 2018 2019 2020 2021 2022 Audited Audited Audited Audited Budgeted Property Tax $ 42,839 $ 47,327 $ 51,089 $ 56,572 $ 51,228 Sales Tax 31,091 36,508 30,563 29,127 28,184 Transient Occupancy Tax 24,937 25,649 18,553 5,179 8,428 Utility User Tax 15,414 16,402 16,140 14,642 14,370 Documentary Transfer Tax 9,229 6,923 6,903 10,627 7,137 Other Taxes and Fines 2,141 1,888 1,172 683 1,434 Total Tax Revenues 125,651 134,697 124,420 116,830 $110,781 Source: City of Palo Alto 2028-21 ACFRs and City of Palo Alto Finance Department. In Fiscal Year 2019-20, the City’s General Fund tax revenues accounted for approximately $124.4 million or 69% of the City’s total General Fund revenues for Fiscal Year 2019-20. In Fiscal Year 2020-21, the City’s General Fund tax revenues accounted for approximately $116.8 million or 70% of the total General Fund revenue for Fiscal Year 2020-21. General Fund tax revenues are projected to account for approximately $110.8 million or 60.4% of the City’s total General Fund revenue budget for Fiscal Year 2021-22. Property Taxes. The County levies a tax of 1% on the assessed valuation of property within the County. The City receives approximately a 9.4% share of this 1% levy for property located within the City
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limits. In Fiscal Year 2019-20 property taxes generated approximately $51.1 million in General Fund revenues. In Fiscal Year 2020-21 property taxes generated approximately $56.5 million in General Fund revenues. Property tax revenues are budgeted to be $51.2 million, the adjusted budget is $53.2 million and projected to generate millions more in Fiscal Year 2021-22 in General Fund revenues. Property taxes are the General Fund’s largest revenue source. Property Tax revenues for Fiscal Year 2019-20 and 2020-21 have not been materially impacted by impacted by the COVID-19 Pandemic. Sales and Use Taxes. The City receives a 1% share of all taxable sales generated within its borders. In Fiscal Year 2019-20 sales and use taxes generated approximately $30.1 million in General Fund revenues. In Fiscal Year 2020-21 sales and use taxes generated approximately $29.1 million in General Fund revenues. Sales and use taxes are budgeted to be $28.2 million, however, due to better than expected economic recovery is projected to generate millions more in Fiscal Year 2021-22 in General Fund revenues. Sales and use taxes are the General Fund’s second largest revenue source. Sales and Use Tax revenues for Fiscal Years 2019-20 and 2020-21 were impacted by the COVID-19 Pandemic, primarily in lower revenues generated by high end in-person retail sales and by eating and drinking establishments. For additional discussion, see “Sales and Use Taxes.” Transient Occupancy Taxes. The City imposes a transient occupancy tax on all hotels in the City. The current rate is 15.5% of the rent charged. In Fiscal Year 2019-20 transient occupancy taxes generated approximately $18.5 million in General Fund revenues. In Fiscal Year 2020-21 transient occupancy taxes generated approximately $5.2 million in General Fund revenues. Transient occupancy taxes are budgeted at $8.4 million but based on receipts for the first half of the fiscal year is projected to generate millions more in Fiscal Year 2021-22 in General Fund revenues. Transient Occupancy Tax revenues for Fiscal Years 2019-20 and 2020-21 have been the City’s most impacted General Fund revenue source from the effects of the COVID-19 Pandemic and fall substantially below historical norms. Due to the lifting of public health restrictions and to improvements in public health including decreasing hospitalizations and mortality rate, the City expects Transient Occupancy Taxes for fiscal year 2021-22 and future years to revert to historical norms. For additional discussion, see “Transient Occupancy Tax.” Sales and Use Taxes A sales tax is imposed on the privilege of consuming personal property in the State. The State does not tax services. The tax rate is established by the State Legislature, and is presently 7.25%, statewide (of which 1% is paid to the City) (the “State Sales Tax”). In addition, many of the State’s cities, counties, districts and communities have special taxing jurisdiction to impose a transaction (sales) or use tax. These so-called district taxes increase the tax rate in a particular area by adding the local option tax to the statewide tax. While more than one district tax may be in effect for a particular location, counties, municipalities, and districts are allowed to increase the sales tax in specific jurisdictions up to a total of 10.25%. The State’s Department of Tax and Fee Administration actual administrative costs with respect to the portion of sales taxes allocable to the City are deducted before distribution and are determined on a quarterly basis. The following table shows a breakdown of the composition of the current sales and use tax rate applicable to transactions in the City:
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TABLE B5 CITY OF PALO ALTO CURRENT SALES AND USE TAX RATES Component Tax Rate State General Fund 5.75% State Local Public Safety Fund 0.50 City General Fund 1.00 County Transportation 1.88 Total 9.13% Source: City of Palo Alto The State’s Department of Tax and Fee Administration actual administrative costs with respect to the portion of sales taxes allocable to the City are deducted before distribution and are determined on a quarterly basis. Many categories of transactions are exempt for the State Sales Tax. The most important of these exemptions are the sales of food products for home consumption, prescription medicine, edible livestock and their feed, seed and fertilizer used in raising food for human consumption, and gas and electricity and water when delivered to consumers through mains, lines and pipes. In addition, occasional sales (i.e., sales of property not held or used by a seller in the course of activities for which he or she is required to hold a seller’s permit) are generally exempt from both the State Sales Tax; however, the occasional sales exemption does not apply to the sale of an entire business and other sales of machinery and equipment used in a business. Action by the State Legislature or by voter initiative could change the transactions and items upon which the State Sales Tax are imposed. Such changes or amendments could have either an adverse or beneficial effect on revenues produced by sales taxes. The City is not currently aware of any proposed legislative change that would have a material adverse effect on the State Sales Tax. Effects of COVID-19 Pandemic on Sales Tax Collections. The City’s sales tax receipts for Fiscal Years 2019-20 and 2020-21 have been impacted and may continue be impacted by the short and long-term effects of the COVID-19 Pandemic. During the COVID-19 Pandemic the City has experienced significant declines of in-person sales of high-end retail goods and declines in dining options at eating and drinking establishments, such as the stores and restaurants located at the Stanford Shopping Center. These declines have been partially offset by the strong performance in the business-to-business segment and in sales tax revenues from online sales. The City expects Sales and Use Tax Revenues to improve as the COVID-19 Pandemic wanes. Transient Occupancy Taxes The City levies a 15.5% tax on hotels and lodging establishments. The 15.5% transient occupancy tax level became effective on April 1, 2019 following the approval of an increase by 68% of the voters of the City voting in the November 6, 2018 election. Prior to April 1, 2019 the transient occupancy tax rate was 14% following an adjustment in 2014 when it was raised from 12%. The City’s transient occupancy tax is a general tax and can be used for any governmental purpose.
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The City’s historical transient occupancy tax revenue since fiscal year 2010-11 is shown in the following table. TABLE B6 CITY OF PALO ALTO HISTORICAL TRANSIENT OCCUPANCY TAX REVENUES (Dollars in Thousands) Fiscal Transient Occupancy Year Tax Revenues 2010-11 $ 8,082 2011-12 9,664 2012-13 10,794 2013-14 12,255 2014-15 16,699 2015-16 22,366 2016-17 23,477 2017-18 24,937 2018-19 25,649 2019-20 18,553 2020-21 5,179 2021-22(1) 8,484 Source: Palo Alto Finance Department (1) Budgeted Projection, for discussion, see Effects of COVID-19 Pandemic on Transient Occupancy Tax Revenues. Effects of COVID-19 Pandemic on Transient Occupancy Tax Revenues. Transient occupancy taxes are the City’s most impacted General Fund revenue source from the result of closures and reduced travel caused by the COVID-19 Pandemic. The City’s collections of transient occupancy tax revenues are down substantially in fiscal year 2019-20 and fiscal year 2020-21 as compared to historical levels. Six hotels within the City, representing approximately 16.3 percent of available rooms remained closed for the City’s entire 2020-21 fiscal year, while two other smaller hotels reopened partway though the City’s 2020-21 fiscal year. The hotels that remained open experienced significant declines in average daily room and occupancy rates in the first three quarters of fiscal year 2020-21 and partially recovered during the fourth quarter. During fiscal year 2020-21 the average occupancy rate in the City was 40.6 percent, a 33.4 percent decrease from fiscal year 2019-20 and the average room rate was $116.90, a 55.9 percent decrease from fiscal year 2019-20. In response to the severe decrease in transient occupancy tax revenues, the City instituted a number of cuts to its General Fund expenditures in fiscal years 2019-20 and 2020-21. For additional discussion, see “Reductions in General Fund Revenues and Expenditures in FY2019-20 and FY2020-21 due to the COVID-19 Pandemic.” As the COVID-19 Pandemic wanes, the City expects revenues from transient occupancy taxes to revert towoards historical norms. Additionally, two new Marriott hotels (with a combined total of 293 rooms) have recently opened during 2021. For additional information about the status of the COVID-19 Pandemic and the state’s reopening process, see “RISK FACTORS—COVID-19 Pandemic.”
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Other Sources of General Fund Revenues In addition, the City receives the following General Fund revenues: Licenses and Permits. The City charges certain permits, licenses and fees for the cost recovery of providing current planning, building inspection, recreation and other municipal services. Charges for Services. The City charges various fees and charges for services provided, including development and inspection fees, paramedic fees, charges for public works, police, fire, library and parks and recreation services. By law, the City may not charge more than the cost of providing the service. Fines, Forfeitures and Penalties. These revenues include parking citations and other fines for municipal code violations. The following table illustrates other revenue sources for the four most recent fiscal years and the budgeted data for the current fiscal year: TABLE B7 CITY OF PALO ALTO OTHER REVENUE SOURCES Fiscal Year Ending June 30, 2018 2019 2020 2021 2022 Audited Audited Audited Audited Budgeted Charges for Services $ 26,824 $ 27,346 $ 24,127 $ 25,105 $23,870 Rental Income 15,896 16,338 15,964 13,293 14,476 From Other Agencies 3,205 2,863 3,783 3,828 8,521 Permits and Licenses 8,560 8,410 7,467 7,261 8,406 Investment Earnings(1) (828) 5,672 4,037 (161) 852 Other Income 776 1,753 587 632 2,260 Total Other Revenues 54,433 62,382 55,965 49,958 $58,385 Source: City of Palo Alto Finance Department. (1) Net of actual interest earnings and unrealized (paper) gain and loss. Impact of COVID-19 Pandemic on Other Revenue Sources. Fiscal Years 2019-20 and 2020-21 revenues from charges for services and rental income were reduced as compared to prior years. The City closed or reduced operations at many of its Park & Recreation and Library facilities and has cancelled some of its programs in fiscal years 2019-20 and 2020-21 and began re-instate these programs and classes as conditions related to the COVID-19 Pandemic improved. Charges for services revenues were also offset by increased revenues generated from the City’s golf course. Tenants not paying their monthly lease and rent payments because of COVID-19 Pandemic have negatively affected the City’s rental income revenues. The City expects these revenues sources to return to historical norms as the COVID-19 Pandemic improves. Reliance on State Budget The City does not rely on the State for a material amount of revenues. Continued economic uncertainty caused by the COVID-19 outbreak will significantly affect the State’s fiscal outlook, including lower capital gains-related tax revenue due to the volatility in the financial
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markets, the likelihood that a recession is forthcoming due to pullback in activity across wide swaths of the economy, and substantially increased expenditures related to fighting the COVID-19 Pandemic. The City cannot predict the short or long-term impacts that the COVID-19 Pandemic will have on global, State-wide and local economies, which may impact City operations and local property values. There can be no assurance that future State budget difficulties will not adversely affect the City’s revenues or its ability to pay debt service on the 2022 Bonds. Labor Relations Most full-time City employees are represented by two labor union associations, the principal one being the SEIU, which represents approximately 50% of all City employees. Approximately 80% of all permanent City employees are covered by negotiated agreements with management, confidential, and city attorney employees being unrepresented. The City has never had an employee work stoppage. Negotiated agreements have the following expiration dates: TABLE B8 CITY OF PALO ALTO NEGOTIATED EMPLOYEE AGREEMENTS Contract Number of Bargaining Unit Expiration Date Employees International Association of Firefighters (IAFF) June 30, 2022 88 Fire Chiefs’ Association (FCA) June 30, 2022 4 Palo Alto Peace Officers Association (PAPOA) June 30, 2022 83 Palo Alto Police Managers Association (PAPMA) June 30, 2022 7 Service Employees International Union (SEIU) December 31, 2021 573 Service Employees International Union Hourly Unit (SEIU-H) June 30, 2021 65 Utilities Management Professional Association of Palo Alto (UMPAPA) June 30, 2020 49 Management and Professional Personnel and Council Appointees Compensation Plan June 30, 2021 220 Limited Hourly Employees Compensation Plan June 30, 2021 40 Total 1,147 Source: City of Palo Alto Risk Management Coverage. The City provides dental coverage to employees through a City plan, which is administered by a third-party service agent. The City is self-insured for dental claims. The City has a workers’ compensation insurance policy with coverage up to the statutory limit set by the State. The City retains the risk for the first $750,000 in losses for each accident and employee under this policy. The City also has public employee dishonesty insurance with a $5,000 deductible and coverage up to $1.0 million per loss. The Director of Administrative Services and City Manager each have coverage up to $4.0 million per loss. The City’s property, boiler, and machinery insurance policy has various deductibles and coverage based on the type of property.
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The City is a member of the Authority for California Cities Excess Liability (“ACCEL”), which provides excess general liability insurance coverage, including auto liability, up to $200 million per occurrence. The City retains the risk for the first $1.0 million in losses for each occurrence under this policy. ACCEL was established for the purpose of creating a risk management pool for central California municipalities. ACCEL is governed by a Board of Directors consisting of representatives of its member cities. The board controls the operations of ACCEL, including selection of claims management, general administration and approval of the annual budget. The City’s deposits with ACCEL equal the ratio of the City’s payroll to the total payroll of all entities. Actual surpluses or losses are shared according to a formula developed from overall loss costs and spread to member entities on a percentage basis after a retrospective rating. During the year ended June 30, 2021, the City paid $2.1 million to ACCEL for current year coverage. Claims Liability. The City provides for the uninsured portion of claims and judgments in the General Liabilities insurance program funds. Claims and judgments, including a provision for claims incurred but not reported, and claim adjustment expenses are recorded when a loss is deemed probable of assertion and the amount of the loss is reasonably determinable. As discussed above, the City has coverage for such claims, but it has retained the risk for the deductible or uninsured portion of these claims. The City’s liability for uninsured claims is limited to dental, general liability, and workers’ compensation claims, as discussed above. Dental liability is based on a percentage of current year actual expense. During fiscal year 2020-21 the City recorded claims payable of $12.6 million on its governmental activities’ financial statements for a class action lawsuit filed against the City that challenged the City’s gas and electric rates. The City has not incurred a claim that has exceeded its insurance coverage limits in any of the last three years, however there has been a significant reduction in insurance coverage. California municipalities’ liability claim costs have significantly increased all cities’ costs, and have caused insurance underwriters to pull back from the California insurance market. California is faced with continuing negative claims trends driven by (1) dangerous condition claims involving significant medical damages, (2) changing laws involving sexual misconduct, and (3) costly law enforcement liability claims. Settlements and verdicts for these losses have rapidly inflated in cost resulting in the reduction of insurance for California public entities. For additional information about the City’s Risk Management, see APPENDIX B—ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2021, Note 14. Joint Ventures The City participates in joint ventures through Joint Powers Authorities (“JPAs”) established under the Joint Exercise of Powers Act of the State of California. As separate legal entities, these JPAs exercise full powers and authorities within the scope of the related Joint Powers Agreement, including the preparation of annual budgets, accountability for all funds, the power to make and execute contracts and the
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right to sue and be sued. Obligations and liabilities of the JPAs, including the long-term debt in which the City participates in repayment, are not obligations and liabilities of the City, and are not reported on the City’s financial statements. Each JPA is governed by a board consisting of representatives from each member agency. Each board controls the operations of its respective JPA, including selection of management and approval of operating budgets, independent of any influence by member agencies beyond their representation on the Board. Northern California Power Agency. The City is a member of Northern California Power Agency (“NCPA”), a joint powers agency which operates under a joint powers agreement among fifteen public agencies. The purpose of NCPA is to use the combined strength of its members to purchase, generate, sell and interchange electric energy and capacity through the acquisition and use of electrical generation and transmission facilities. Each agency member has agreed to fund a pro rata share of certain assessments by NCPA and enter into take-or-pay power supply contracts with NCPA. While NCPA is governed by its members, none of its obligations are those of its members unless expressly assumed by them. During the year ended June 30, 2021, the City incurred expenses totaling $92.1 million for purchased power and assessments earned by NCPA. The City’s interest in NCPA projects and reserves, as computed by NCPA, was $8.1 million at June 30, 2021. This amount represents the City’s portion of funds, which resulted from the settlement with third parties of issues with financial consequences and reconciliations of several prior years’ budgets for programs. It is recognized that all the funds credited to the City are linked to the collection of revenue from the City’s ratepayers, or to the settlement of disputes relating to electric power supply and that the money was collected from the City’s ratepayers to pay power bills. Additionally, the NCPA Commission identified and approved the funding of specific reserves for working capital, accumulated employees’ post-retirement medical benefits, and billed property taxes for the geothermal project. The Commission also identified a number of contingent liabilities that may or may not be realized, the cost of which in most cases is difficult to estimate at this time. One such contingent liability is the steam field depletion, which will require funding to cover debt service and operational costs more than the expected value of the electric power. The General Operating Reserve is intended to minimize the number and amount of individual reserves needed for each project, protect NCPA’s financial condition and maintain its credit worthiness. There are no funds on deposit with NCPA as a reserve against these contingencies identified by NCPA. Members of NCPA may participate in an individual project of NCPA without obligation for any other project. Member assessments collected for one project may not be used to finance other projects of NCPA without the member’s permission. Calaveras Hydroelectric Project. In July 1981, NCPA agreed with Calaveras County Water District to purchase the output of the North Fork Stanislaus River Hydroelectric Development Project and to finance its construction. Debt service payments to NCPA began in February 1990 when the project was declared substantially complete and power was delivered to the participants. Under its power purchase agreement with NCPA, the City is obligated to pay 22.9 percent of this Project’s debt service and operating costs. At June 30, 2021, the book value of this Project’s plant, equipment and other assets was $303.8 million, while its long-term debt totaled $255.8 million and other liabilities totaled $44.5 million. The City’s share of the Project’s long-term debt amounted to $58.6 million at that date.
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Transmission Agency of Northern California (“TANC”). The City is a member of a joint powers agreement with 14 other entities in Transmission Agency of Northern California. TANC’s purpose is to provide electrical transmission or other facilities for the use of its members. While governed by its members, none of TANC’s obligations are those of its members unless expressly assumed by them. The City was obligated to pay 4 percent of TANC’s debt-service and operating costs. However, a Resolution was approved authorizing the execution of a Long-Term Layoff Agreement between the Cities of Palo Alto and Roseville. These two agencies desired to “layoff” their entitlement rights to the California-Oregon Transmission Project (and Roseville’s South of Tesla entitlement rights) for a period of 15 years to those acquiring members (Sacramento Municipal Utility District, Turlock Irrigation District, and Modesto Irrigation District). The effective date of this Agreement was February 1, 2009. As a result, the City is not obligated to pay TANC’s debt-service and operating costs starting February 1, 2009, for a period of fifteen years. Bay Area Water Supply and Conservation Agency (“BAWSCA”). The City is a member of a regional water district with 26 other entities, the Bay Area Water Supply and Conservation Agency. BAWSCA was created on May 27, 2003 to represent the interests of 24 cities and water districts and two private utilities in Alameda, Santa Clara and San Mateo counties that purchase water on a wholesale basis from the San Francisco regional water system. It has the power to issue debt and plan, finance, construct, and operate water supply, transmission, reclamation, and conservation projects on behalf of its members. In 2013 the City participated in a debt issuance by BAWSCA. The debt was issued to repay certain long- term costs associated with the San Francisco Public Utilities Commission water supply contract. During the 2020-21 fiscal year, the City paid its share of the annual debt service of $1.9 million, which will vary based on annual water purchases of the City compared to other BAWSCA agencies. Employee Retirement Plans The information set forth below regarding the California Public Employees’ Retirement System (“CalPERS”) program, other than the information provided by the City regarding its annual contributions thereto, has been obtained from publicly available sources which are believed to be reliable but are not guaranteed as to accuracy or completeness, and should not be construed as a representation by either the City or the Purchasers. Plan Description. Substantially all permanent employees are eligible to participate in the City’s Safety Plan (police and fire) and Miscellaneous Plan (all others), agent multiple employer defined benefit pension plans administered by the CalPERS, which acts as a common investment and administrative agent for its participating member employers. Benefit provisions under the Plans are established by State statute and City resolution. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website. Benefits Provided. CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full-time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 10 years of service. The death benefit is one of the following: the Basic Death Benefit, the 1959 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost-of-living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law.
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Employees Covered. At June 30, 2021, the following employees were covered by the benefit terms for each Plan. TABLE B9 CITY OF PALO ALTO COVERED EMPLOYEES Miscellaneous Safety Inactive employees or beneficiaries currently receiving benefits 1,223 435 Inactive employees entitled to but not yet receiving benefits 835 104 Active employees 777 174 Total 2,835 713 Source: City of Palo Alto 2020-21 ACFR. Contributions. Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Funding contributions for both Plans are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. The City’s contributions to its Miscellaneous and Safety Plans for the past four years is summarized in the following table. TABLE B10 CITY OF PALO ALTO HISTORICAL PENSION CONTRIBUTIONS (Dollars in Thousands) Fiscal Year Ending June 30, Miscellaneous Plan Safety Plans Total Contributions 2017 $ 20,638 $ 10,220 $ 30,858 2018 23,342 11,030 34,372 2019 25,423 12,370 37,793 2020 28,889 14,297 43,186 2021 32,782 14,796 47,578 Source: City of Palo Alto 2017-21 ACFRs. Section 115 Trust. In April 2017, the City established a Section 115 irrevocable trust with the Public Agency Retirement Services (“PARS”). The City Council of the City approved an initial deposit of $2.1 million in General Fund proceeds into the General Fund subaccount of the City’s PARS Trust Account. The Trust Account allows more control and flexibility in investment allocations compared to City’s portfolio which is restricted by State regulations to fixed income instruments. The City proactively contributes to the Section 115 irrevocable trust amounts reflective of what retirement costs would be if the normal cost of contributions was budgeted at a 6.2% discount rate. The City contributed $5.0 million to the
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PARS Trust during the 2020-21 fiscal year. As of June 30, 2021, the City reported the account balance of $37.1 million as restricted investments in its General Benefits Internal Service Fund. Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions. For the year ended June 30, 2021, the City recognized pension expense of $34.7 million for the Miscellaneous Plan and $25.7 million for the Safety Plans, respectively. At June 30, 2021, the City reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: TABLE B11 CITY OF PALO ALTO DEFERRED OUTFLOWS/INFLOWS OF RESOURCES FISCAL YEAR 2020-21 (Dollars in Thousands) Miscellaneous Safety Deferred Deferred Deferred Deferred Outflows Inflows Outflows Inflows of Resources of Resources of Resources of Resources Contributions after measurement date $ 32,782 $ - $ 14,796 $ - Diff. btw. actual and expected experience 5,051 - 5,157 - Changes in assumptions - - - - Diff. btw. projected and actual earnings on investment 3,887 - 1,977 - Total 41,720 - 21,930 - Source: City of Palo Alto 2020-21 ACFR. For information concerning the City’s pension obligations, including descriptions of the actuarial methods and assumptions, and an explanation of the discount rate used, please see APPENDIX B—ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2021, Note 11. Funded Status. The following table sets forth a summary of the funding progress for the City’s Miscellaneous and Safety Plans for the four most recent actuarial valuation dates.
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TABLE B12 CITY OF PALO ALTO HISTORICAL PENSION FUNDING PROGRESS (Dollars in Thousands) Date June 30, Accrued Liability Market Value of Assets Unfunded Liability Funded Ratio Annual Covered Payroll Miscellaneous Plan 2017 $714,019 $469,782 $244,237 65.8% $73,722 2018 780,729 512,924 267,805 65.7% 77,606 2019 811,330 546,669 264,661 67.4% 80,634 2020 849,004 573,840 275,164 67.6% 82,573 2021 884,335 594,063 290,272 67.2% 81,017 Safety Plans 2017 $383,556 $250,474 $133,082 65.3% $21,822 2018 415,775 268,468 147,307 64.6% 21,906 2019 439,408 280,173 159,235 63.8% 24,131 2020 456,817 289,028 167,789 63.3% 24,263 2021 477,550 294,739 182,811 61.7% 26,189 Source: City of Palo Alto 2020-21 ACFR. CalPERS Amortization Period Reform. On February 13, 2018, the CalPERS Board voted to shorten the period over which actuarial gains and losses are amortized from 30 years to 20 years for new pension liabilities. The new 20-year amortization period begins with new gains or losses accrued starting with the June 30, 2019 actuarial valuations. The first payments on the new 20-year amortization schedule will take place in 2021. A shorter amortization period will increase annual Unfunded Accrued Liability (“UAL”) contributions for cities that participate in CalPERS so long as CalPERS remains underfunded. The shortened amortization period will also lead to reductions of periods of negative amortization of the UAL, interest cost savings, and faster recoveries of funded status after market downturns. Cities that participate in CalPERS will also see additional volatility in their future UAL contributions due to market performance as gains or losses will be amortized faster under the new amortization period. The City cannot currently estimate the impact the shorter amortization period will have on its required contributions for its Miscellaneous and Safety Plans. Other Post-Employments Benefits Plan Description. In addition to providing pension benefits, the City participates in the California Public Employees’ Medical and Health Care Act program to provide certain health care benefits for retired employees. The City’s Other Post-Employment Benefit plan is an agent multiple employer defined benefit plan. Employees who retire directly from the City are eligible for retiree health benefits if they retire on or after age 50 with 5 years of service and are receiving a monthly pension from CalPERS.
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In fiscal year 2007-08 the City elected to participate in an irrevocable trust to provide a funding mechanism for retiree health benefits. The trust, California Employers’ Retirees Benefit Trust (“CERBT”), is administrated by CalPERS and managed by a separately appointed board, which is not under control of the City Council. This Trust is not considered a component unit of the City. The City’s OPEB funding policy is to prefund these benefits by accumulating assets in the CERBT pursuant to City Council Resolution. For the year ended June 30, 2021, the City’s contributions totaled $14.6 million. Employees Covered. Membership of the plan consisted of 1,011 retirees and beneficiaries receiving benefits, 75 inactive members entitled to but not yet receiving benefits and 897 active plan members at June 30, 2020, the date of the latest actuarial valuation. Funding Policy. The contribution requirements for plan members and the City are established by an MOU as negotiated by each group or bargaining unit. The required contribution is based on projected pay-as-you-go financing requirements. Changes in Net OPEB Liability. The following table shows the changes in the City’s net OPEB obligation to the Plan: TABLE B13 CITY OF PALO ALTO CHANGE IN NET OPEB LIABILITY Fiscal Year 2020-21 (Dollars in Thousands) Service cost $ 6,366 Interest on OPEB liability 16,572 Employer contributions (16,475) Investment income (4,327) Changes in benefit terms - Changes in assumptions (4,426) Difference btw. actual and expected exp. - Administrative expenses 58 Net changes (2,323) Net OPEB obligation, beginning of the year 127,030 Net OPEB obligation, end of the year 124,798 Source: City of Palo Alto 2020-21 ACFR.
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The following table shows a three-year history of the City’s outstanding OPEB obligation and covered payroll. TABLE B14 CITY OF PALO ALTO HISTORIC OPEB LIABILITY AND COVERED PAYROLL (Dollars in Thousands) Fiscal Year Ending June 30, Total OPEB Obligation Plan Net Position Net OPEB Liability (UAAL) Covered Payroll Ratio of UAAL to Covered Payroll 2018 $ 244,759 $ 91,250 $ 153,509 $ 118,774 129.24% 2019 255,630 107,810 147,820 119,090 124.12 2020 245,509 118,479 127,030 118,014 107.64 2021 251,293 126,495 124,798 125,676 99.30 Source: City of Palo Alto 2020-21 ACFR. Actuarial valuations of an ongoing plan involve estimates of the value of reported amounts and assumptions about the probability of occurrence of events far into the future. Examples include assumptions about future employment, investment returns, mortality, and the healthcare cost trend. Amounts determined regarding the funded status of the Plan and the annual required contributions of the employer are subject to continual revision as actual results are compared with past expectations and new estimates are made about the future. For information concerning the City’s OPEB obligations, including descriptions of the actuarial methods and assumptions, please see APPENDIX B—ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR THE FISCAL YEAR ENDED JUNE 30, 2021, Note 12. Debt Obligations General Obligation Bonds. Other than the Prior Bonds, the City has no outstanding general obligation bonds. Short-Term General Fund-Secured Obligations. The City has no outstanding short-term obligations secured by its general fund. Long-Term General Fund-Secured Obligations. On June 5, 2018, the City caused the execution and delivery of its $8,970,000 City of Palo Alto 2018 Certificates of Participation (Capital Improvement Project; 2002B Refinancing) (Federally Taxable) (Green Bonds) (the “2018 Certificates”) to (a) finance the costs of the renovation of the Palo Alto Municipal Golf Course, and (b) prepay, on a current basis, the outstanding City of Palo Alto Certificates of Participation (Civic Center Refinancing and Downtown Parking Improvements Project), Series 2002B (Taxable). Principal payments are due annually on November 1 and interest payments are due semi-annually on May 1 and November 1 at an average rate of 4.10 percent. The City’s average annual payments with respect to the certificates is $530,000 and the certificates mature on November 1, 2047. On March 21, 2019, the City caused the execution and delivery of its $26,785,000 City of Palo Alto 2019 Certificates of Participation, Series A (California Avenue Parking Garage) (Tax-Exempt) (the “2019A
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Certificates”), and its $10,585,000 2019 Certificates of Participation, Series B (California Avenue Parking Garage) (Federally Taxable) (the “2019B Certificates”), to finance the costs of the construction of a 636 space parking garage. Principal payments are due annually on November 1 and interest payments are due semi-annually on May 1 and November 1 at an average rate of 4.76 percent. The City’s average annual payments with respect to the certificates is $2,384,515.88 and the certificates mature on November 1, 2048. On April 7, 2021, the City caused the execution and delivery of its $101,505,000 City of Palo Alto 2021 Certificates of Participation (Public Safety Building) (the “2021 Certificates”), to finance the costs of a public safety building. Principal payments are due annually on November 1 and interest payments are due semi-annually on May 1 and November 1 at an average rate of 2.47 percent. The City’s average annual payments with respect to the certificates is $4,948,912.05 and the certificates mature on November 1, 2050.
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The following tables shows the City’s total general fund-secured debt service obligations, including the 2018 Certificates, the 2019A Certificates, the 2019B Certificates and the 2021 Certificates. TABLE B15 CITY OF PALO ALTO DEBT SERVICE REQUIREMENTS ON GENERAL FUND-SECURED OBLIGATIONS Year Ending 2018 2019A 2019B 2021 November 1 Certificates Certificates Certificates Certificates Total 2022 $ 531,791.00 $ 1,649,250.00 $ 738,248.70 $ 2,926,712.50 $ 5,846,002.20 2023 530,707.00 2,013,750.00 373,315.80 5,061,712.50 7,979,485.30 2024 529,267.00 2,009,250.00 373,315.80 5,064,962.50 7,976,795.30 2025 532,317.50 2,013,250.00 373,315.80 5,067,712.50 7,986,595.80 2026 529,814.00 2,010,250.00 373,315.80 5,069,712.50 7,983,092.30 2027 531,916.00 2,010,500.00 373,315.80 5,075,712.50 7,991,444.30 2028 533,429.00 2,013,750.00 373,315.80 5,080,212.50 8,000,707.30 2029 529,453.00 2,009,750.00 373,315.80 5,082,962.50 7,995,481.30 2030 529,653.00 2,013,750.00 373,315.80 5,083,712.50 8,000,431.30 2031 529,453.00 2,010,250.00 373,315.80 5,072,212.50 7,985,231.30 2032 533,853.00 2,009,500.00 373,315.80 5,060,412.50 7,977,081.30 2033 532,653.00 2,011,250.00 373,315.80 5,061,862.50 7,979,081.30 2034 531,053.00 2,010,250.00 373,315.80 5,060,312.50 7,974,931.30 2035 529,053.00 2,011,500.00 373,315.80 5,065,762.50 7,979,631.30 2036 531,281.00 2,009,750.00 373,315.80 5,047,912.50 7,962,259.30 2037 532,891.00 2,010,000.00 373,315.80 5,049,212.50 7,965,419.30 2038 533,883.00 2,012,000.00 373,315.80 5,049,012.50 7,968,211.30 2039 529,257.00 2,010,500.00 373,315.80 5,047,312.50 7,960,385.30 2040 529,219.00 2,010,500.00 373,315.80 5,049,112.50 7,962,147.30 2041 533,563.00 2,011,750.00 373,315.80 5,049,312.50 7,967,941.30 2042 531,683.00 2,014,000.00 373,315.80 5,052,912.50 7,971,911.30 2043 529,170.00 2,012,000.00 373,315.80 5,054,812.50 7,969,298.30 2044 531,024.00 2,010,750.00 373,315.80 5,054,712.50 7,969,802.30 2045 532,034.00 — 2,383,315.80 5,057,700.00 7,973,049.80 2046 532,200.00 — 2,380,860.70 5,063,137.50 7,976,198.20 2047 531,522.00 — 2,384,707.26 5,061,212.50 7,977,441.76 2048 — — 2,384,420.36 5,062,037.50 7,446,457.86 2049 — — — 5,065,500.00 5,065,500.00 2050 — — — 5,066,487.50 5,066,487.50 Total $13,812,139.50 $45,897,500.00 $18,484,500.42 $144,664,362.50 $222,858,502.42 Other Obligations The City has certain other outstanding obligations including utility revenue bonds. See APPENDIX B—ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR THE YEAR ENDED JUNE 20, 202—Notes to Basic Financial Statements—NOTE 7.
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Appendix C
APPENDIX C ANNUAL COMPREHENSIVE FINANCIAL REPORT OF THE CITY FOR THE YEAR ENDED JUNE 30, 2021
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ANNUAL COMPREHENSIVE
FINANCIAL REPORT
CITY OF PALO ALTO
CALIFORNIA
FISCAL YEAR ENDED
JUNE 30, 2021
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CITY OF
PALO
ALTO
Fiscal Year 2021
Annual Comprehensive
Financial Report
City of Palo Alto, CA
Fiscal Year Ended June 30, 2021
City Council
Tom DuBois, Mayor
Patrick Burt, Vice Mayor
Alison Cormack
Eric Filseth
Lydia Kou
Greer Stone
Greg Tanaka
Ed Shikada, City Manager
Kiely Nose, Director of Administrative Services/Chief Financial Officer Prepared by: Administrative Services Department
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CITY OF PALO ALTO
For the Year Ended June 30, 2021
Table of Contents
Page
INTRODUCTORY SECTION:
Transmittal Letter .................................................................................................................................... i City Officials ........................................................................................................................................... vii Organizational Structure ...................................................................................................................... viii Administrative Services Organization ......................... ...........................................................................ix GFOA Certificate of Achievement for Excellence in Financial Reporting ............................................... x
FINANCIAL SECTION:
Independent Auditor’s Report .............................................................................................................. 1 Management’s Discussion and Analysis
(Required Supplementary Information – Unaudited) ............. ......................................................... 5 Basic Financial Statements
Government‐wide Financial Statements:
Statement of Ne t Position ....................................................................................................... 31 Statement of Activities ............................................................................................................ 33 Governmental Fund Financial Statements:
Balance Sheet ................................................ .......................................................................... 35 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position ‐ Governmental Activities ................................................. 36 Statement of Revenues, Expenditures and Changes in Fund Balanc es .................................. 37 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Act ivities – Governmental Activities ...................................... ............................................................. 38 Statement of Revenues, Expenditures and Changes in Fund Balanc e – Budget and Actual – General Fund ................................................................................... 39 Proprietary Fund Financial Statements:
Statement of Ne t Position ....................................................................................................... 40 Statement of Revenues, Expenses and Changes in Fund Net Positi on ................................... 42 Statement of Cash Flows ......................................................................................................... 44 Fiduciary Fund Financial Statement:
Statement of Fiducia ry Net Position ....................................................................................... 46 Statement of Changes in Fiduciary Net Position ............... ...................................................... 47 Index to the Notes to the Basic Financial Statements ................................................................. 49 Notes to the Basic Financial Statements ...................................................................................... 51 Required Supplementary Information:
Schedule of Changes in Net Pension Liability and related Ratios – Miscellaneous Plan ............. 109 Schedule of Pension Contributions – Miscellaneous Plan ....... .................................................... 110
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CITY OF PALO ALTO
For the Year Ended June 30, 2021
Table of Contents (Continued)
Page
Required Supplementary Information:
Schedule of Changes in Net Pens ion Liability and Related Ratios – Safety Plan ......................... 111 Schedule of Pension Contributions – Safety Plan .............. .......................................................... 112 Schedule of Changes in Net OPEB Liability and Related Ratios . .................................................. 113 Schedule of Employer OPEB Contributions ...................... ........................................................... 114
Supplementary Information:
Non‐Major Governmental Funds:
Combining Balance Sheet ...................................... ................................................................ 115 Combining Statement of Revenues, Expenditures and
Changes in Fund Balances ..................................... .......................................................... 116 Non‐Major Special Revenue Funds:
Combining Balance Sheet ...................................... ................................................................ 118 Combining Statement of Revenues, Expenditures and
Changes in Fund Balances ..................................... .......................................................... 120 Combining Schedule of Revenues, Expenditures and
Changes in Fund Balances – Budget and Actual ................. ............................................ 122 Non‐Major Debt Service Funds:
Combining Balance Sheet ...................................... ................................................................ 128 Combining Statement of Revenues, Expenditures and
Changes in Fund Balances ..................................... .......................................................... 129 Combining Schedule of Revenues, Expenditures and
Changes in Fund Balances – Budget and Actual ................. ............................................ 130 Non‐Major Permanent Fund:
Schedule of Revenues, Expenditures and
Changes in Fund Balance – Budget and Actual ............................................................... 132 Internal Service Funds:
Combining Statement of Fund Net Position ..................... ..................................................... 134 Combining Statement of Revenues, Expenses and
Changes in Fund Net Position ................................. ........................................................ 135 Combining Statement of Cash Flows ............................ ......................................................... 136 Fiduciary Funds:
Combining Statement of Fiduciar y Net Position – Custodial Funds ...................................... 138 Combining Statement of Changes in Fiduciary Net Position – Cus todial Funds ................... 139
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CITY OF PALO ALTO
For the Year Ended June 30, 2021
Table of Contents (Continued)
Page
STATISTICAL SECTION:
Financial Trends:
Net Position by Component .................................... ..................................................................... 143 Changes in Net Position ...................................... ......................................................................... 144 Fund Balances of Governmental Funds .......................... ............................................................. 146 Changes in Fund Balances of Governmental Funds ..................................................................... 148 Revenue Capacity:
Electric Operating Revenue by Source ......................... ................................................................ 149 Power Supply Resources ....................................... ....................................................................... 150 Supplemental Disclosure for Water Utilities ............................................................................... 151 Supplemental Disclosure for Gas Utilities .................................................................................... 152 Assessed Value of T axable Property ............................................................................................ 153 Property Tax Rates, All Overlapping Governments .............. ....................................................... 154 Property Tax Levies and Collections .......................... .................................................................. 155 Principal Property Taxpayers ................................. ...................................................................... 156 Assessed Valuation and Parcels by Land Use .............................................................................. 157 Per Parcel Assessed Valuation of Single Family Residential ... ..................................................... 158 D e b t C a p a c i t y :
Ratio of Outstandin g Debt by Type .............................................................................................. 159 Computation of Direct and Overlapping Debt ................... .......................................................... 160 Computation of Legal Bonded Debt Margin ...................... .......................................................... 161 Revenue Bond Coverage ........................................ ...................................................................... 162 Demographic and Economic Information:
Taxable Transactions b y Type of Business ................................................................................... 163 Demographic and Econ omic Statistics ......................................................................................... 164 Principal Employers........................................... ........................................................................... 165 Operating Information:
Operating Indicators by Function/Program ..................... ............................................................ 166 Capital Asset Statistics by Function/Program .............................................................................. 168 Full‐Time Equivalent City Government Employees by Function ... ............................................... 170
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Transmittal Letter…………………………………………………...…
O F F I C E O F T H E C I T Y M A N A G E R
2 5 0 H a m i l t o n A v e , 7 t h F l o o r
P a l o A l t o , C A 9 4 3 0 1
6 5 0 . 3 2 9 . 2 6 9 2
November 15, 2021
THE HONORABLE CITY COUNCIL
Palo Alto, California
ANNUAL COMPREHENSIVE FINANCIAL REPORT
YEAR ENDED JUNE 30, 2021
Members of the Council and Citizens of Palo Alto:
I am pleased to present t he Annual Comprehensive Financial Report (ACFR) for the fiscal year ended June 30, 2021 in accordance with Article III, Section 16 and Article IV, Section 13 of the City of Palo Alto Charter. The format and content of this ACFR complies with the principles and standards of accounting and financial reporting adopted by the Governmental Accou nting Sta ndards Board (GASB) , and contains all information needed for readers to gain a reasonable understanding of City of Palo Alto (City) financial affairs. Management takes sole responsibility for the completeness and reliability of the information contained in this report, based upon a comprehensive framework of internal control that it has established for this purpose. The objective of internal controls is to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatements.
The City’s financial statements have been audited by Macias Gini & O’Connell LLP, Certified Public Accountants (MGO). The goal of the audit is to obtain reasonable assurance that the financial statements are free of material misstatement s and are fairly presented in conformity with generally accepted accounting principles (GAAP). MGO issued an unmodified opinion for the fiscal year ended June 30, 2021. Their report is presented as the first component of the financial section of this report.
While MGO has issued an unmodified opinion for this report, information and the contents of this report is the responsibility of the City.
An overview of the City’s financial activities for the fiscal year is discussed in detail in the Management’s Discussion and Analys is (MD&A) section of the ACFR. MD&A complements this transmittal letter and should be read in conjunction with it.
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CITY OF PALO ALTO PROFILE
The City was incorporated in 1894 and named after a majestic coastal redwood tree which lives along the San Francisquito Creek where early Spanish explorers settled. Located between the cities of San Francisco and San Jose, the City is a largely built -out community of approximately 66,573 residents.
The City delivers a full range of municipal services and public utilities under the Council-Manager form of government and offers an outstanding quality of life for its residents. It covers an area of twenty- six square miles and has dedicated almost one -half of the area to open spaces of parks and wildlife preserves. Public facilities include five libraries, four community centers, a cultural arts center, an adult and children’s theater, a junior museum and zoo, an airport, and a golf course. The City provides a diverse array of services for seniors and youth, an extensive continuing education program, concerts, exhibits, team sports and special events. The independent Palo Alto Unified School District (PAUSD) has achieved State and national recognition for the excellence of its programs.
City Council: The seven members are elected at -large for four-year staggered terms. At the first meeting of each calendar year, Council elects a Mayor and Vice-Mayor from its membership, with the Mayor having the duty of presiding over Council meetings. Council is the appointing authority for the positions of City Manager and three other officials, the City Attorney, City Clerk, a nd City Auditor, all of whom report to Council.
Finance Committee and Policy and Services Committee: While retaining the authority to approve all actions, Council has established two subcommittees, the Finance Committee and the Policy and Services Committee. The Finance Committee considers and make s recommendations on matters relating to finance, budget, financial audits, capital planning and debt . Each subcommittee is comprised of three Council members. Staff provides the subcommittees and Council with reports such as the ACFR, quarterly budget -versus-actual results, and various planning reports , all of which are utilized in their review of the City’s financial position.
FISCAL/ECONOMIC CONDITIONS AND OUTLOOK
The City declared a state of emergency in March 2020 and the world began to grapple with the impacts of the novel coronavirus (COVID-19), a global pandemic, and the ensuing public health emergency.
While the Fiscal Year 2020 Adopted Budget saw the most significant immediate impacts as shelter in place orders were instituted in the County of Santa Clara and State of California , work on Economic Recovery began in Fall 2020, prior to the City Council setting this priority in January 2021 . These financials reflect the one full year of the economic impacts of the pandemic – the stark, immediate results stemming from shelter in place orders through promising third calendar quarter results and widespread distribution of the COVID-19 vaccine. Throughout these times, several conversations with the City Council occurred in 2020 and 2021 that resulted in the Community and Economic Recovery workplan. This workplan includes several priority projects that connect the City Council’s Priorities and ensure organization support and capacity to further recovery efforts.
Employment Trends: The City is located in the heart of Silicon Valley and is adjacent to Stanford University, one of the premier institutions of higher education in the nation which has produced much of the talent that founded many successful high-tech companies in Palo Alto and Silicon Valley. With varied historically and relatively stable employers such as Lucille Packard Children’s Hospital, Stanford Health Care , Stanford University, Veteran’s Affairs Palo Alto Healthcare System , Palo Alto Medical Foundation, Palo Alto Unified School District, Stanford Shopping Center and businesses such as Hewlett-Packard, VMware, Tesla, SAP labs Inc. and Space Systems Loral, Palo Alto has enjoyed diverse employment and revenue bases. As of June 2021, the City’s unemployment rate was 3.2 percent
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compared to the prior year level of 5.7 percent. The County of Santa Clara’s unemployment rate was
5.2 percent compared to the prior year level of 10.7 percent. The State of California’s unemployment rate was 8.0 percent, compared to the prior year level of 14.9 percent. These levels are lower than FY 2020 but are still significantly higher than recent years as many businesses were forced to adjust their workforce and operations were severely restricted by the COVID-19 shelter in place orders.
Real Estate Market : The 2020-2021 County of Santa Clara Assessor’s Annual Report noted that the County of Santa Clara ’s annual assessment roll increased by $ 35.5 billion to $ 551.5 billion, a 6.87 percent increase over the prior year. Palo Alto’s assessment roll represents 7.69 percent of the County of Santa Clara’s assessment roll and grew 7.77 percent over the prior year to $42.4 billion. Per the Santa Clara County Association of Realtors, home prices in Palo Alto remain well above the County of Santa Clara’s average at $4.0 million as of second quarter 2021. According to Newmark, a company that tracks real estate trends throughout the county, the average asking rent in Palo Alto for commercial space during the second quarter of 2021 was $6.88 per square foot. Based on this report, leasing activities are rebounding, after a sluggi sh start in calendar year 2021. Despite continuing struggles between executives and employees as it relates to the push to return to offices, the continued focus on distribution of the vaccine, and increase confidence in the second half of calendar year 2021 will influence how quickly leasing activities will recover.
Local Trends: Mixed economic opinions and indicators existed at the time the FY 2021 budget was developed. It is important to recall t hat the actions and leadership of the City Council quickly recognized and worked to address these impacts. On March 16, 2020, the State of California and the County of Santa Clara ordered Shelter in Place directives to slow the spread of COVID -19, which continued into FY 2021 . Prior to COVID -19 and after, the Bay Area economy had sustained better performance than the state and the nation. Disruptions caused by COVID-19 are both widespread and significant to Palo Alto , the state and nation’s economic environment and community. The City’s unemployment has been elevated since the pandemic hit the region, however, the rate is significantly lower than national, State of California, and County of Santa Clara’s unemployment rates. Job growth is tep id. Economically sensitive revenue sources in FY 2020 and/or FY 2021, such as transient occupancy tax, sales and utility user’s taxes have significantly declined while documentary transfer and property taxes have been resilient with a healthy growth , however, future years will be monitored closely.
General Fund Balancing and Results: The FY 2021 budget was developed as the world grappled with COVID-19, a global pandemic with unknown financial implications impacting regional, national and global economies in response to shelter in place orders and related social distancing restrictions. The City Council provided direction to build the FY 2021 budget assuming a loss of $39.0 million in General Fund tax revenues in FY 2021. Overall, the City’s General Fund was adopted to collect $196.4 million in revenues and $196.9 million in ex penditure, a 15 percent reduction compared to the FY 2020 Adopted Operating Budget. In the General Fund, full -time staffing was reduced from 57 4.43 FTE to 509.91 FTE (a reduction of 64.52 FTE) and part-time staffing was reduced from 81.31 FTE to 55.61 FTE (a reduction of 25.70 FTE). Prioritizing essential services and reducing or eliminating discretionary services was reflected in this budget and achieved through compiling feedback throughout the May and June budget sessions with the City Council. Notwithstanding the service delivery reductions reflected in this budget, the budget balancing strategy ensured that the City continued to proactively pay for long term liabilities, maintained capital investments in its most critical infrastructure, provided resources for the City to successfully adapt from shelter in place to future service delivery models, and established funding to ensure those service delivery transitions.
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iv City of Palo Alto
Despite the financial constraints , the City maintained its commitment to addressing its long -term liabilities. Contributions towards the City’s long-term pension obligations and other post- employment obligations were maintained this fiscal year including payment to trust funds . These were made possible by cost containment strategies utilized across the organization over the past several years. In addition to the City’s past practice of planning for staffing costs contained in the agreed upon labor terms outlined in memorandums of agreement, CalPERS -determined retirement contribution levels, and a vacancy factor in the General Fund , proactive pension funding contribution s to the City’s irrevocable Section 115 Pension Trust Fund were achieved in FY 202 1. In the General Fund, this resulted in $3. 0 million in additional contributions from various departments and reflects what retirement costs would be if the “normal cost” of contributions was budgeted at a 6.2 percent discount rate (CalPERS is currently at a 7. 0 percent discount rate). As of June 30, 2021, the City’s irrevocable pension trust fund has a total of $ 32.3 million in Citywide contributions (excluding earnings from investments), of which $21.0 million is from the General Fund.
As the community grappled with the various impacts of COVID -19, the City took a hard look at both the operating and capital budgets and prioritized essential services, pared back discretionary items, and continued to monitor impacts the global pandemic had on the City’s major revenue sources and economic sectors . In addition to these challenges , the City remain ed focused on maintaining high quality services with the resources available, while addressing issues facing the City as well as the state, and nation. These issues were reflected in the setting of Council priorities for 2021:
• Economic Recovery
• Housing for Social and Economic Balance
• Social Justice
• Climate Change - Protection and Adaptation
Progress continues to be made on these priorities, which require long-term strategies. The FY 202 1 budget established a number of COVID-19 related reserves to address needs of the City organization and the community during shelter in place, as well as planning for transition to the “new normal” after restrictions were lessened.
In FY 2014, the City Council approved a $125.8 million Infrastructure Plan (IP), which included projects such as a new Public Safety Building, replacement of two Fire Stations, a Bike and Pedestrian plan, and two parking garages. As part of the development of the 202 1-2025 Capital Improvement Plan (CIP), the IP projects were updated for scope increases and cost escalations, resulting in a revised Infrastructure Plan of $260.5 million. These projects will be funded partially by debt to be repaid with voter-approved increases of 3.5 percent in the transient occupancy tax (TOT) rate and from other sources such as impact fees and Stanford University Medical Center development agreement monies.
The 2021-2025 CIP assumed the opening of new Marriott hotels in FY 2021; however, as a result of the public health emergency and its impact on revenues, the annual TOT funding is not estimated to cover the cost of the debt service related to the IP projects for several years. Staff is continually revising these figures and adjusting and planning for the se impacts in order to maintain funding for the City’s most critical infrastructure improvements.
Due to the COVID-19 pandemic, the City Council aimed to provide economic relief for residential and commercial customers by directing staff to maintain flat rates without compromising the safety and integrity of the utility systems. Rates increased in 202 1 for gas, storm water, and fiber services. In general, the size and timing of rate adjustments take into account current and future revenue requirements and reserve levels for needs such as increasing costs of commodity purchases, capital
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City of Palo Alto v
construction costs, and contractually obligated increases to compensate for inflation, usually based on the annual change to the Bay Area consumer price index (CPI).
Long Range Financial Forecast: The City produces a 10-year General Fund Long Range Financial Forecast (LRFF) annually. This comprehensive report analyzes local, state, and federal economic conditions, short and long-term revenue and expense trends, and addresses challenges such as funding long-term pension and healthcare liabilities and infrastructure nee ds. The forecast is designed to highlight finance issues which the City can address proactively. Moreover, it is a tool that allows policymakers an opportunity to prioritize funding needs over time. It sets the tone for the annual budget process and is one of the many tools and reports that Council uses for financial planning. The LRFF was developed prior to the COVID -19 pandemic, at a time when national, state, and local economic indicators were mixed. Unemployment remained low, job growth slowed, and international trade had negative impacts on economic data.
The FY 2021-2030 LRFF was presented to the Finance Committee in December 2019 and approved by the City Council in February 2020. The forecast anticipated a small surplus in FY 2021 followed by annual gaps in FY 2022 through 2025, before the revenues outpaced the expenses in FY 2026 and beyond. Staff identified and recommended a course of action that would structurally balance the General Fund in FY 2021 and largely balance the General Fund on an ongoing basis. The FY 2021 budget included a proactive pension funding contribution to the City’s irrevocable Section 115 Pension Trust Fund and reflected what retirement costs would be if the “normal cost” of contributions was budgeted at a 6.2 percent discount rate compared to the CalPERS estimated 7.0 percent discount rate.
Subsequent to the development of the LRFF, revenue and expense numbers were revised based on estimated impacts from the pandemic to recalculate the budget and reflect changes in revenues and expenses to incorporate policy direction from City Council issued after the LRFF to prioritize essential services and pare back discretionary services as discussed in the General Fund Balancing and R esults section above.
Both Moody’s and Standard and Poor’s (S&P) awarded their highest credit rating of Triple A to th e City’s general obligation bonds . This rating has been awarded to only a few cities in the State of California.
SIGNIFICANT EVENTS AND ACCOMPLISHMENTS
The City is a community dedicated to meeting the social, cultural, recreational, educational, commercial, and retail needs of its citizens and businesses. As such, open space, education, recreational facilities, cultural events and safe streets and neighborhoods are important aspects of the community and the City has been recognized for its accomplishments wi th a wide variety of awards and recognitions over the past year. Following is a sampling of those awards and accomplishments:
• Applied for and awarded the Bike Friendly Communities Gold-level Status. • Received Santa Clara County Supervisor’s Medal for Outstanding Service for staff contributions and efforts in areas of auto theft and community service. • Received the Reliable Public Power Provider (RP3) award from American Public Power Association (APPA) for industry-recognized leading practices in reliability & safety.
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vi City of Palo Alto
• Received the Smart Energy Provider Award from American Public Power Association (APPA), which recognizes utilities for demonstrating commitment and accomplishment in smart energy program planning; energy efficiency and distributed energy resources; environmental and sustainability programs; and communication and customer experience. • Launched a robust Race & Equity framework and initiative and partnered with local community organizations and stakeholders.
• Established the Uplift Local program to expand outdoor dining, retail, and more, generally supporting the business community and connecting the broader Palo Alto community together during challenging economic and public health emergencies. Continued to support key business districts such as Downtown Palo Alto, California Avenue, and the Stanford Shopping Center.
• Responded to the COVID -19 pandemic by participating in the City's Emergency Operations Center and quickly developing policies and protocols to protect firefighters and patients by minimizing exposure.
• Opened Foothills Nature Preserve to all visitors and partnered with the Environmental Volunteers and other volunteers to create a welcome video for the Preserve. • Awarded the construction contract for the Public Safety Building, a 2014 Infrastructure Plan Project, and associated debt financing.
• Substantially completed the Junior Museum and Zoo rebuilding project after 10 years in the making, with all new exhibits designed by JMZ staff, a re-imagined zoo with new animals, and a focus on inclusion, accessibility, and the highest standards in animal care. It is expected to open in Fall 2021.
• Completed construction of the new California Avenue Area Parking Garage project.
Awards: During the past year, the City received an award for the prior fiscal year (2020) ACFR from the Government Finance Officers Association (GFOA) for “excellence in financial reporting.” The 2021 ACFR will be submitted to the GFOA award program to be considered for this distinguished financial reporting award.
Acknowledgments: This ACFR reflects the hard work, talent and commitment of the staff members of the Administrative Services Department. This document could not have been accomplished without their efforts and each contributor deserves sincere appreciation. Management wishes to acknowledge the support of the entire accounting staff for the ir high level of pr ofessionalism and dedication .
Management would also like to express its appreciation to MGO, the City’s independent external auditors, who assisted and contributed to the preparation of this Annual Comprehensive Financial Report.
Special ack nowledgment must be given to City Council and th e Finance and Policy and Services Committees for their dedication to directing the financial affairs of the City in a responsible, professional and progressive manner.
Respectfully submitted,
KIELY NOSE ED SHIKADA
Chief Financial Officer City Manager
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City of Palo Alto vii
City of Palo Alto City Officials ………………………….…………
Council-Appointed Officers
City Manager
Ed Shikada
City Attorney
Molly Stump
City Clerk
Lesley Milton
City Auditor
Kyle O'Rourke
City Council
Tom DuBois, Mayor
Patrick Burt, Vice-Mayor
Alison Cormack
Eric Filseth
Lydia Kou
Greer Stone
Greg Tanaka
Finance Committee
Alison Cormack, Chair
Patrick Burt
Eric Filseth
Policy and Services Committee
Lydia Kou, Chair
Greer Stone
Greg Tanaka
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viii City of Palo Alto
City Attorney
Molly Stump
City Manager*
Ed Shikada
City Auditor
Kyle O'Rourke
City Clerk
Lesley Milton
City of Palo Alto Organization ……………………………………
1 * The Office of Transportation is situated in the City Manager’s Office.
Community Services
Kristen O’Kane, Director
Administrative Services
Kiely Nose, Director/Chief Financial Officer
Fire Department
Geoffrey Blackshire, Chief
Human Resources
Rumi Portillo, Director/Chief People Officer
Police Department
Robert Jonsen, Chief
Planning & Development Services
Jonathan Lait, Director
Utilities
Dean Batchelor, Director
Public Works
Brad Eggleston, Director
Library
Gayathri Kanth, Director
Office of Emergency Services
Kenneth Dueker, Director
Information Technology
Darren Numoto,
Chief Information Officer
Palo Alto Residents
City Council
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City of Palo Alto ix
Administrative Services Organization ………
Administrative Services Department
Administrative Division
Treasury Division
Accounting Division
Office of Management & Budget
Purchasing Division
Real Estate Division
Mission Statement
To provide proactive administrative and technical support to City departments and decision makers, and to safeguard and facilitate the optimal use of City resources.
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Government Finance Officers Association of
the United States and Canada – Award ……
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www.mgocpa.com
Macias Gini & O’Connell LLP
2121 N. California Boulevard, Suite 750
Walnut Creek, CA 94596
1 Independent Auditor’s Report
Honorable Mayor and the Members
of the City Council of
City of Palo Alto, California
Report on the Financial Statements
We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund i nformation of the City of Palo Alto, California (City), as of and for the year ended June 30, 2021, and the related notes to the financial statements, which collectively comprise the City’s basic financ ial statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements Management is responsible for t he preparation and fair presenta tion of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes 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.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial st atements based on our audit. 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. Those standards requi re that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the aud itor’s judgment, including the assessment of the risks of material misstatement of the financial statemen ts, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design aud it procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.
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2 Opinions
In our opinion, the financial statements referred to above pres ent fairly, in all material respects, the respective financial position of the governmental activities, t he business-type activities, each major fund, and the aggregate remaining fund information of the City as of June 30, 2021, and the respective changes in financial position, and, wher e applicable, cash flows thereo f and the respective budgetary comparison for the General Fund for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Emphasis of Matter
As discussed in Note 1(n) to the financial statements, as of Ju ly 1, 2020, the City implemented Governmental Accounting Standards Board (GASB) Statement No. 84, Fiduciary Activities. Our opinions are not modified with respect to this matter.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States o f America require that the management’s discussion and analysis, the schedules of changes in net pensio n liability and related ratios, the schedules of pension contributions, the schedule of changes in net OPEB liability and related ratios, and the schedule of employer OPEB contributions , as listed in the table of conten ts, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the GASB who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historic al context. We have applied certain limited procedures to the required supplementary information in accorda nce with auditing standards generally accepted in the United States of America, which consisted of in quiries 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 kno wledge we obtained during our audit of the basic financial statements. We do not express an opinion or pro vide 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 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 introductor y section, combining and individual nonmajor fund financial statements and schedules, and statistic al section, are presented for purposes of additional analysis and are not a required part of the basic financial statements.
The combining and individual nonmajor fund financial statements are the responsibility of management and were derived from and rela te directly to the underlying acc ounting and other records used to prepare the basic financial statements. Such information has been subje cted to the auditing procedures applied in the audit of the basic financial statements and certain additio nal procedures, including comparing and reconciling such information directly to the underlying account ing 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 are fairly stated, in all material respects, in relation to the basic financial statements as a whole.
The introductory and statistical sections have not been subject ed to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on them.
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3 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 15, 2021 on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regula tions, contracts, and grant agreements and other matters. The purpose of t hat 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 inte rnal control over financial rep orting 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.
Walnut Creek, California
November 15, 2021
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Management’s Discussion and Analysis (Unaudited)
Management’s Discussion and Analysis (MD&A) provides an overvie w of the City of Palo Alto’s financial performance for the fiscal year ended June 30, 2021. To obtain a complete understanding of the City’s financial condition, this document should be read in conjunction with the accompanying Transmittal Letter and Basic Financial Statements. Certain balances for prior year are reclas s i f i e d t o c o n f o r m w i t h c u r r e n t y e a r presentation.
FINANCIAL HIGHLIGHTS
The assets and deferred outflows of resources of the City of Palo Alto (City) exceeded its liabilities and deferred inflows of resources at the close of Fiscal Year (FY) 2021 by $1.2 billion. Of this amount, $24.1 million represents unrestricted net position, which may be used to meet the government’s ongoing obligations to citizens and creditors.
The City’s total net position is $1.2 billion, an increase of $ 4.8 million, or 0.4 percent over the prior fiscal year. Of this amount, $22.2 million was generated by bu siness‐type activities and offset by a decrease of $17.4 million by governmental activities.
The City’s total outstanding long‐term debt increased by $99.4 million during the current fiscal year due to the issuance of Certificat es of Participation (COPs) amo unting to $101.5 million plus a $6.5 million premium to finance the construction of a public safety building, offset by the scheduled debt retirements.
At the close of FY 2021, the City’s governmental funds reported total fund balances of $365.6 million, an increase of $98.9 million from the prior year. Approximately 13.4 percent of this amount, or $49.1 million, is unassigned fund balance and available for spending at the City’s discretion. At the end of the current fiscal year, unrestricted fund balance (the total of the committed, assigned and unassigned components of fund balance) for the General Fund was $66.3 million, or 38.1 percent of total General Fund expenditures, including transfers. In May 2021, the City received the first half of its total $13.7 million American Rescue Plan Act of 2021 (ARPA) allocation. The first distribution of $6.9 million was recorded as unearned revenue at June 30, 2021 as the funds are not earned nor spent. The second distribution is expected in May 2022. The City implemented the Governmental Accounting Standards Boar d (GASB) Statement No. 84, Fiduciary Activities, effective fiscal year ended June 30, 2021. The statement est ablishes criteria for identifying fiduciary activities of all state and local governm ents. The City evaluated all funds and activities in accordance with the statement and determined that the Cable Joint Powers Authority and the assessment district activities previously reported as agency funds should be reported as custodial funds.
OVERVIEW OF THE ANNUAL COMPREHENSIVE FINANCIAL REPORT (ACFR) The ACFR is presented in five sections:
An introductory section that includes the Transmittal Letter and general information Management’s Discussion and Analysis
The Basic Financial Statements that include the Government‐wide and Fund Financial Statements, along with the Notes to the Basic Financial Statements
Required and Other Supplemental Information
Statistical Information
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Government‐wide Financial Statements
The Government‐wide Financial St atements provide a longer‐term view of the City’s activities as a whole.
They include the Statement of Net Position and the Statement of Activities.
The Statement of Net Position includes the City’s capital assets and long‐term liabilities on a full accrual basis of accounting similar to that used by private sector companies. 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 provides information about the City ’s revenues and expenses on a full accrual basis, with an emphasis on measuring net revenues or expenses f or each of th e City’s programs. The Statement of Activities explains in detail the change in net po sition for the 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.
The amounts in the Statement of Net Position and the Statement of Activities are separated into Governmental and Business‐type Activities in order to provide a summary of each type of activity.
Governmental Activities
All of the City’s basic services are considered to be governmental activities. Included in basic services are the City Council, City Manager, City Attorney, City Clerk, City Auditor, Administrative Services, Human Resources, Public Works, Planning and Development Services, Office of Transportation, Police, Fire, Community Services, and Library. These services are supported by City’s general rev enues such as taxes, and by specific program revenues such as fees and grants.
The City’s governmental activities also include the activities of the Palo Alto Public Improvement Corporation, which is a separate legal entity financially accountable to the City.
Business‐type Activities
All of the City’s enterprise activities are reported as busines s‐type activities, including Water, Electric, Fiber Optics, Gas, Wastewater Collection, Wastewater Treatment, Refus e, Storm Drainage, and Airport. Unlike governmental services, these services are intended to recover all or a significant portion of their costs through user fees and charges.
The Government‐wide Financial Statements can be found on pages 31‐33 of this report.
Fund Financial Statements
The Fund Financial Statements provide detailed information abou t each of the City’s most significant funds, called major funds. The concept of major funds, and the determination of which funds are major funds, was established by GASB Statement No. 34. Each major fund is presented individually and all non‐major funds are combined in a single column on each fund statement. Supplemental schedules display these non‐major funds in more detail. The General Fund is always considered a major fund, but other funds may change from year to year as a result of changes in the pattern of City activities.
The Fund Financial Statements display the City’s operations in more detail than the Government‐wide Financial Statements. Fund Financial Statements include Governmental, Proprietary, and Fiduciary Funds.
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Governmental Funds
Governmental Fund Financial Statements are prepared on the modi fied accrual basis of accounting, which means they measure only current financial resources and uses. C apital assets and other long‐term assets, along with long‐term liabilities, are presented only in the Government‐wide Financial Statements. In FY 2021, the City had two major governmental funds ‐ the General Fund and the Capital Projects Fund. Data from the other governmental funds are combined into a single column for presentation. Individual fund data for each of these non‐major governmental funds is provided in the Supplemental Information section of this report.
Since 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 St atements. By doing so, readers may better understand the long‐term impact of the government’s near‐term financing decisions. Both the Governmental Fund Balance Sheet and the Governmental Fund Statement of Revenues, Expenditures and Changes in Fund Balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.
The Governmental Fund Financial Statements can be found on pages 35‐39 of this report.
Proprietary Funds
Enterprise and Internal Service Fund Financial Statements are prepared on the full accrual basis of accounting, similar to the basis of accounting that is used by private sector companies. These statements include all of the current and long‐term assets, deferred outflows of resources, current and long‐term liabilities, and deferred inflows of resources.
The City’s Internal Service Funds provide goods and services ex clusively to the City’s governmental and business‐type activities. Internal Service Funds cannot be considered major funds because their revenues are derived from other City funds. Revenues between funds are elimi nated in the Government‐wide Financial Statements, and any related profits or losses in Internal Service Funds are returned to the activities in which they were created, along with any residual net position of the Internal Service Funds.
The Proprietary Fund Financial Statements can be found on pages 40‐45 of this report.
Fiduciary Funds
Fiduciary funds are used to account for assets held by the City acting in a fiduciary capacity for other entities and individuals. Custodial Funds are fiduciary funds used to report fiduciary activities that are not required to be reported in pension (and other employee benefit) trust funds, investment trust funds, or private purpose trust funds. These include balances and activities of the Cabl e Joint Powers Authority and the assessment district. The financial activities of these funds are excluded from the government‐wide financial statements, but are presented in separate fiduciary fund financial statements.
The Fiduciary Fund Financial Statement can be found on pages 46 and 47 of this report.
Notes to the Basic Financial Statements
The Notes to the Basic Financial Statements provide additional information that is necessary to acquire a full understanding of the data provided in the Government‐wide and F und Financial Statements. The Notes to the financial statements can be found on pages 51‐108 of this report.
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Required and Other Supplemental Information
The Required Supplementary Information related to the City’s pension and Other Post‐Employment Benefits (OPEB) plans is included after the Notes to the Basic Financial Statements on pages 109‐114. The combining statements and individual fund statements and schedules referre d to earlier in connection with non‐major Governmental Funds and Internal Service Funds are presented immediately following the Required Supplementary Information and can be found on pages 115‐139 of this report.
FINANCIAL ANALYSIS OF GOVERNMENT‐WIDE FINANCIAL STATEMENTS This section focuses on the City’s net position and changes in net position of its governmental and business‐ type activities for the fiscal year ended June 30, 2021. As no ted earlier, the City’s total assets and deferred outflows of resources exceeded total liabilities and deferred inflows of resources by $1.2 billion at the end of the fiscal year, an increase in net position of $4.8 million.
CONDENSED STATEMENT OF NET POSITION
As of June 30
(in millions)
2021 2020 2021 2020 2021 2020
Cash and investments 443.4 $ 342.8 $ 285.6 $ 277.4 $ 729.0 $ 620.2 $ Other assets 76.6 60.5 47.7 52.8 124.3 113.3 Capital assets 602.0 596.3 708.5 693.2 1,310.5 1,289.5
T o t a l A s s e t s 1 , 1 2 2 . 0 999.6 1,041.8 1,023.4 2,163.8 2,023.0 Unamortized loss from refunding ‐ 0.1 0.2 0.1 0.2 Pension and OPEB related 60.8 55.8 24.1 20.9 84.9 76.7 Total Deferred Outflows of Resources 60.8 55.8 24.2 21.1 85.0 76.9 Net pension and OPEB liabilities 438.2 416.3 159.7 153.7 597.9 570.0 Long‐term debt 217.5 112.5 68.9 74.5 286.4 187.0 Other liabilities 87.6 61.5 23.8 21.7 111.4 83.2 Total Liabilities 743.3 590.3 252.4 249.9 995.7 840.2 Pension and OPEB related 16.3 24.5 6.4 9.6 22.7 34.1 Total Deferred Inflows of Resources 16.3 24.5 6.4 9.6 22.7 34.1
Net Position
Net investment in capital assets 480.6 497.4 642.0 621.3 1,122.6 1,118.7 Restricted 80.3 73.3 3.4 4.1 83.7 77.4
Unrestricted (137.7) (130.1) 161.8 159.6 24.1 29.5 Total Net Position 423.2 $ 440.6 $ 807.2 $ 785.0 $ 1,230.4 $ 1,225.6 $ Governmental
Activities
Business‐type
Activities
Government‐wide
Totals
The largest portion of the City’s net position (91.2 percent) is its net investment in capital assets such as land, buildings, infrastructure and vehicles, less any related outstanding debt that was used to acquire those assets.
The City uses these capital assets to provide a variety of services to its citizens. Accordingly, these assets are not available for future spending. Although the City’s investm ent in capital assets is reported net of related debt, it should be noted that the resources used to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.
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The restricted portion of the City’s net position (6.8 percent) represents resources that are subject to external restrictions on how they may be used. The remaining balance of $24.1 million, representing 2.0 percent of the City’s net position, is unrestricted and may be used to mee t the City’s ongoing obligations to its citizens and creditors.
Overall, the City has positive unrestricted net positions for the government on a combined basis, considering both governmental activities and business‐type activities. The unrestricted net position for governmental activities is negative due to recognition of the net pension liabilities, as required by GASB Statement No. 68, and net OPEB liabilities, as required by GASB Statement No. 75. The $137.7 million net deficit for governmental activities includes the $303.8 million net impact of net pension liabilities and its related deferred outflows of resources and $89.9 million net impact of net OPEB liabilities and its related deferred outflows of resources and deferred inflows of resources. Govern mental activities’ unrestricted net position, excluding these impacts, is $256.0 million.
Components of the $4.8 million increase in total net position a re discussed in the following sections for governmental activities and business‐type activities.
Governmental Activities – Net Position
The following analysis focuses on the net position and changes in net position of the City’s Governmental Activities presented in the Government‐wide Statement of Net Position and Statement of Activities.
Increase/
2021 2020 (Decrease)
Cash and investments 443.4 $ 342.8 $ 100.6 $ Other assets 76.6 60.5 16.1 Capital assets 602.0 596.3 5.7 Total Assets 1,122.0 999.6 122.4 Pension and OPEB related 60.8 55.8 5.0 Total Deferred Outflows of Resources 60.8 55.8 5.0 Net pension and OPEB liabilities 438.2 416.3 21.9 Long‐term debt 217.5 112.5 105.0 Other liabilities 87.6 61.5 26.1 Total Liabilities 743.3 590.3 153.0 Pension and OPEB related 16.3 24.5 (8.2) Total Deferred Inflows of Resources 16.3 24.5 (8.2)
Net investment in capital assets 480.6 497.4 (16.8)
Restricted 80.3 73.3 7.0
Unrestricted (137.7) (130.1) (7.6)
Total Net Position 423.2 $ 440.6 $ (17.4) $ CONDENSED STATEMENT OF NET POSITION
As of June 30
(in millions)
GOVERNMENTAL ACTIVITIES
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The City’s Governmental Activities total net position decreased $17.4 million to $423.2 million as of June 30, 2021 due to the following:
Assets and Deferred Outflows of Resources
Cash and investments increased $100.6 million mainly due to the issuance of COPs amounting to $101.5 million plus $6.5 million premium to finance the cons truction of a public safety building and an increase in restricted cash and investments held in the Public Agency Retirement Services Section 115 irrevocable trust (Section 115 Pension Trust). Other assets increased $16.1 million mainly due to an increase in notes receivable for the predevelopment and construction of multifamily rental housing r eserved for occupancy by extremely low, very low and low‐income households.
Capital assets increased $5.7 million due to continued construc tion of the Highway 101 Pedestrian / Bicycle overpass, Public Safety Building, and Cali fornia Avenue Parking Garage and offset by the retirements and depreciation.
Pension and OPEB related deferred outflows of resources increas ed $5.0 million due to increase of pension related deferred outflows of resources of $5.7 million offset by a decrease of OPEB related deferred outflows of resources of $0.7 million.
Liabilities and Deferred Inflows of Resources
Net pension and OPEB liabilitie s increased $21.9 million due to increase in net pension liabilities of $23.5 million offset by the decrease of net OPEB liabilities of $1.6 million. Long‐term debt increased $105.0 million due to issuance of COPs amounting to $101.5 million plus $6.5 premium to finance the construction of a public safet y building, offset by the scheduled debt retirements.
Other liabilities increased $26.1 million primarily due to $6.9 million receipt of City’s first of two distributions of the ARPA funding that was recorded as unea rned revenue as the funds are not earned nor spent. Another factor driving the increase w as the recording of a claim liability of $12.6 million for a class action lawsuit.
Pension and OPEB related deferred inflows of resources decrease d $8.2 million due to decrease of $5.8 million pension related inflows of resources a nd decrease of OPEB related deferred inflows of resources of $2.4 million.
Net position
Net investment in capital assets decreased $16.8 million to $48 0.6 million mainly due to current year depreciation for capital assets. Restricted net position increased $7.0 million to $80.3 million primarily due to increases of restricted cash and investments held in the Section 115 Pension Trust and debt service. Unrestricted net position is negative primarily due to the recognition of the net pension and OPEB liabilities as required by GASB Statements Nos. 68 and 75.
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Governmental Activities – Revenues
The table below shows that Governmental Activities revenues tot aled $198.1 million in FY 2021, a decrease of $15.2 million from prior year revenues of $213.3 million.
Increase/
Revenues by Source 2021 2020 (Decrease)
Program Revenues:
Charges for services 55.5 $ 57.1 $ (1.6) $ Operating grants and contributions 3.0 2.6 0.4
Capital grants and contributions 11.3 9.0 2.3
Total Program Revenues 69.8 68.7 1.1 General Revenues:
Property tax 60.9 55.6 5.3
Sales tax 29.1 30.6 (1.5)
Utility user tax 14.6 16.1 (1.5)
Transient occupancy tax 5.2 18.6 (13.4)
Documentary transfer tax 10.6 6.9 3.7
Other tax 2.8 2.9 (0.1)
Investment earnings 4.9 13.8 (8.9)
Miscellaneous 0.2 0.1 0.1
Total General Revenues 128.3 144.6 (16.3)
Total Revenues 198.1 $ 213.3 $ (15.2) $ GOVERNMENTAL ACTIVITIES
Revenues for the Year Ended June 30
(in millions)
Program Revenues such as charges for services, operating grants and contributions, and capital grants and contributions are generated from or restricted to ea ch activity. Total Program Revenues increased $1.1 million, or 1.6 percent, from the prior year.
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General Revenues decreased $16.3 million, or 11.3 percent, from the prior year mainly due to decreases in sales tax, utility user tax, transient occupancy tax revenues as a result of the economic impact of the COVID‐ 19 pandemic, and investment earnings due to impact of negative fair market value adjustments.
Further analysis of program revenues and general revenues can be found in the Financial Analysis of Governmental Funds section of the MD&A.
Governmental Activities – Revenues by Source
The chart below presents revenues by source for Governmental Ac tivities. General Revenues are composed of taxes and other revenues not specifically generated by, or restricted to, individual activities. All tax revenues and investment earnings are included in General Revenues.
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Governmental Activities – Expenses
The table below presents a comparison of FY 2021 and FY 2020 expenses by function, along with interest and other expenses and transfers. Total Governmental Activities functional expense was $234.6 million in FY 2021, a decrease of $8.3 million.
Increase/
Activities 2021 2020 (Decrease)
City Council 0.2 $ 0.2 $ ‐ $ City Manager 2.5 3.6 (1.1)
City Attorney 2.3 2.8 (0.5)
City Clerk 0.7 0.8 (0.1)
City Auditor 0.6 0.6 0.0
Administrative Services 23.0 15.9 7.1
Human Resources 2.5 3.0 (0.5)
Public Works 52.7 45.6 7.1
Planning and Development Services 18.1 21.7 (3.6)
Office of Transportation 3.6 4.7 (1.1)
Police 43.6 50.9 (7.3)
Fire 37.1 41.3 (4.2)
Community Services 30.3 34.2 (3.9)
Library 11.1 13.0 (1.9)
Interest and Other Expense 6.3 4.6 1.7
Total Functional Expense 234.6 242.9 (8.3)
Change in Net Position before Transfers (36.5) (29.6) (6.9) Transfers 19.1 20.2 (1.1)
Change in Net Position (17.4) (9.4) (8.0)
Net Position, Beginning 440.6 450.0 (9.4) Net Position, Ending 423.2 $ 440.6$ (17.4)$ GOVERNMENTAL ACTIVITIES
Expenses and Change in Net Position for the Year Ended June 3 0 (in millions)
Functional expenses consisted of depreciation, uncapitalized operating expenses from capital project funds, internal service funds allocation, changes in pension and OPEB liabilities due to deferred contributions, and the amortization of pension and OPEB‐related outflows and inflows of resources.
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Total functional expenses were $234.6 million in the current fi scal year, a decrease of $8.3 million from the prior year mainly due to decreases in salaries and benefits and contract services. All department functional expenses decreased except for a) Public Works which increased $ 7.1 million due to various repairs and maintenance of capital assets such as streets, sidewalks, facilities, and parks all of which are non‐capitalizable; and b) Administrative Services which increased $7.1 million mai nly due to the expenses incurred for claims related to a class action lawsuit of $12.6 million.
Further variance analysis of functional expenses can be found in the Financial Analysis of Governmental Funds section of the MD&A.
Governmental Activities – Functional Expenses
The functional expenses chart below includes only current year expenses. It does not include capital outlays, as those are added to the City’s capital assets. Functions which comprise less than 2 percent of total expenses are combined into the “All Other” category in the chart below. All Other includes City Council, City Manager, City Attorney, City Clerk, City Auditor, and Human Resources.
Community Services
13%
Library
5%
All Other
4%
Administrative
Services
10%
Public Works
22%
Interest and Other
Expense
3%
Planning &
Development Services
8%
Office Of
Transportation
1%
Fire
16%
Police
18%
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Business‐Type Activities – Net Position
The following analysis focuses on the net position and changes in net position of the City’s Business‐type Activities presented in the Government‐wide Statement of Net Position and Statement of Activities.
Increase/
2021 2020 (Decrease)
Cash and investments 285.6 $ 277.4 $ 8.2 $ Other assets 47.7 52.8 (5.1)
Capital assets 708.5 693.2 15.3
Total Assets 1,041.8 1,023.4 18.4 Unamortized loss from refunding 0.1 0.2 (0.1) Pension and OPEB related 24.1 20.9 3.2 Total Deferred Outflows of Resources 24.2 21.1 3.1 Net pension and OPEB liabilities 159.7 153.7 6.0
Long‐term debt 68.9 74.5 (5.6)
Other liabilities 23.8 21.7 2.1
Total Liabilities 252.4 249.9 2.5 Pension and OPEB related 6.4 9.6 (3.2) Total Deferred Inflows of Resources 6.4 9.6 (3.2) Net Position
Net investment in capital assets 642.0 621.3 20.7
Restricted 3.4 4.1 (0.7)
Unrestricted 161.8 159.6 2.2
Total Net Position 807.2 $ 785.0 $ 22.2 $ BUSINESS‐TYPE ACTIVITIES
As of June 30
(in millions)
CONDENSED STATEMENT OF NET POSITION
The City’s Business‐type Activities total net position increased $22.2 million to $807.2 million as of June 30, 2021 due to the following:
Assets and Deferred Outflows of Resources
Cash and investments increased $8.2 million mainly due to incre ases in net position for all enterprise funds except for the Electric Fund.
Other assets decreased $5.1 million mainly due to lower account s receivable balance in the Electric Fund.
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Capital assets increased $15.3 million to $708.5 million primarily due to capital assets addition in the Electric, Wastewater Collection, Wastewater Treatment, S torm Drainage and Airport Funds. These capital assets additions and reduction in related long term debt also contributed to the $20.7 million increase in net investment in capital assets to $642.0 million in FY 2021.
Liabilities and Deferred Inflows of Resources
Pension and OPEB related deferred outflows of resources increas ed $3.2 million due to increases of pension related def erred outflows of resources of $3.5 million offset by the decrease of OPEB related deferred outflows of resources of $0.3 million. Net pension and OPEB liabilities increased $6.0 million due to a $6.6 million increase in net pension liabilities offset by a $0.6 million decrease in net OPEB liabilities. Long term debt decreased $5.6 million due to scheduled debt retirements. Other liabilities increased $2.1 million primarily due to higher year‐end accruals in the Electric and Airport Funds.
Pension and OPEB related deferred inflows of resources decrease d $3.2 million due to a decrease of $2.3 million related pension inflows of resources a nd decrease of OPEB related deferred inflows of resources of $0.9 million.
Net Position
Unrestricted net position of $161.8 million, an increase of $2. 2 million from the prior year, represents assets available to finance day‐to‐day operations and other expenses approved by the City Council. This amount includes rate stabilization reser ves (RSR) of $51.3 million and operations reserves of $69.2 million, along with the electric s pecial projects (Calaveras) reserve of $46.7 million, the hydro stabilization reserve of $1 5.4 million and the CIP reserve of $18.6 million. The positive balances in these reserves are offset by $105.7 million net impact of net pension liabilitie s and its related deferred outf lows of resources and $36.3 million net impact of net OPEB liabilities and its related defe rred outflows of resources and deferred inflows of resources.
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Business‐Type Activities – Revenues
The table below presents the revenues by source of the City’s Business‐type Activities. The City operates the Water, Electric, Fiber Optics, Gas, Wastewater Collection, Wast ewater Treatment, Refuse, Storm Drainage, and Airport funds.
BUSINESS‐TYPE ACTIVITIES
Revenues for the Year Ended June 30
(in millions)
Increase/
Revenues by Source 2021 2020 (Decrease)
Program Revenues:
Charges for services 346.5 $ 353.0 $ (6.5) $ Operating grants and contributions 0.5 0.5 ‐ Capital grants and contributions 6.4 6.4 ‐
Total Program Revenues 353.4 359.9 (6.5) General Revenues:
Investment earnings 2.2 11.5 (9.3)
Total General Revenues 2.2 11.5 (9.3)
Total Revenues 355.6 $ 371.4 $ (15.8) $
Business‐type Activities revenues totaled $355.6 million, a dec rease of $15.8 million from the prior year.
Program revenues decreased $6.5 million year over year. Charges for services decreased $6.5 million from the prior year due to the following:
Electric fund revenue decreased due to lower demand in the comm ercial and industrial sectors as a result of continued limited businesses operations and closures. Refuse fund revenue decreased due to a reduction of commercial and industrial services due to limited business operations and shelter in place restrictions. The decreases mentioned above were partially offset by the increases in Gas Fund revenues due to a 2 percent rate increase and higher residential consumption and in Wastewater Treatment fund as a result of higher billing for capital costs. Storm Drainage and Fiber Optic rates also increased in FY 2021.
Investment earnings decreased $9.3 million from the prior year mainly due to the impact of negative fair market value adjustments.
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Business‐Type Activities – Expenses
The table below presents a comparison of the FY 2021 and FY 202 0 expenses for the City’s Business‐type Activities.
BUSINESS‐TYPE ACTIVITIES
Expenses and Change in Net Position for the Year Ended June 30 (in millions)
Increase/
Business‐type Activities 2021 2020 (Decrease)
Water 43.6 $ 43.0 $ 0.6 $
Electric 156.1 142.4 13.7
Fiber Optics 2.5 2.8 (0.3)
Gas 28.6 27.2 1.4
Wastewater Collection 19.6 18.9 0.7
Wastewater Treatment 28.4 28.8 (0.4)
Refuse 29.1 36.9 (7.8)
Storm Drainage 4.9 5.5 (0.6)
Airport 1.5 2.1 (0.6)
Total Functional Expense 314.3 307.6 6.7
Increase in Net Position before Transfers 41.3 63.7 (22.4) Transfers (19.1) (20.2) 1.1
Change in Net Position 22.2 43.5 (21.3)
Net Position, Beginning 785.0 741.5 43.5
Net Position, Ending 807.2 $ 785.0 $ 22.2 $
Business‐type Activities expenses increased $6.7 million for a total of $314.3 million mainly due to the following:
Electric Fund expenses increased $13.7 million due to higher energy purchase costs and increases in operations and maintenance. The availability of hydroelectric energy resources is lower than average and requires electricity purchases at market rates which were significantly higher during the spring of 2021.
Gas Fund expenses increased $1.4 million due to higher commodit y purchases as a result of higher natural gas prices.
Refuse Fund expenses decreased $7.8 million due to lower payments to GreenWaste of Palo Alto for reimbursement of new waste collection vehicles, decreases in facility rent and a downward adjustment to landfill post closure maintenance as a result of a maintenance cost update that was approved in FY 2021.
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FINANCIAL ANALYSIS OF GOVERNMENTAL FUNDS
As noted earlier, the City uses fund accounting to ensure and d emonstrate compliance with finance‐related legal requirements.
The focus of the City’s Governmental Funds is to provide inform ation on near‐term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In particular, the unassigned fund balance may serve as a useful m easure of a government’s net resources available for discretionary use as it represents the portion of fund balance not yet limited to use for a particular purpose by either an external party, the City itself, or an entity that has been delegated authority by the City Council to assign resources for use.
As of June 30, 2021, the City’s Governmental Funds reported com bined fund balances of $365.6 million, an increase of $98.9 million from the prior year mainly due to iss uance of COPs for the construction of a public safety building. Approximately 13.4 percent, or $49.1 million, constitutes unassigned fund balance, which is available for spending at the City’s discretion and other purposes. The remainder of the fund balance is either non‐spendable, restricted, committed, or assigned to indicate t hat it is: 1) not in spendable form ($11.9 million); 2) restricted for particular purposes ($136.8 million ); 3) committed for particular purposes ($90.0 million); or 4) assigned for particular purposes ($77.9 million).
Governmental Fund revenues decreased $13.8 million, or 6.6 percent, from the prior year to $194.9 million.
General Fund revenues decreased $13.6 million and Capital Proje cts Fund revenue increased $1.8 million.
Non‐major Governmental Funds revenue decreased $2.0 million primarily due to suspension of most parking enforcement which decreased the demand for parking permits. The violations were partially offset by an increase in housing in‐lieu fees and federal revenue.
Governmental Fund expenditures were $222.1 million, a decrease of $38.7 million from the prior year.
General Fund expenditures decreased $21.8 million, Capital Proj ects Fund expenditures decreased by $18.2 million, and Non‐major Governmental Funds expenditures increase d by $1.3 million. Details of significant changes are discussed in the following sections.
Governmental Fund other financing resources increased $112.3 million, from the prior year to $126.1 million mainly due to the issuance of COPs for the construction of a public safety building.
General Fund
Balance Sheet
The General Fund is the primary operating fund of the City. At the end of the current fiscal year, the fund balance of the General Fund was $75.6 million, compared to $61.8 million in the prior year. The fund balance is classified as follows: $9.4 million non‐spendable, $4.6 million committed, $12.5 million assigned, and $49.1 million unassigned. The unassigned amount is designated by the City Council for Budget Stabilization Reserve.
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Statement of Revenues, Expenditures and Changes in Fund Balance ‐ Revenues
The City’s General Fund revenues totaled $166.8 million in FY 2 021. This represents a decrease of $13.6 million, or 7.5 percent, compared to the prior year. The year over year change in significant revenue sources is noted in the following table.
Increase/
Revenues by Source 2021 2020 (Decrease)
Property tax 56.6 $ 51.1 $ 5.5 $
Sales tax 29.1 30.6 (1.5)
Utility user tax 14.6 16.1 (1.5)
Transient occupancy tax 5.2 18.6 (13.4)
Documentary transfer tax 10.6 6.9 3.7
Charges for services 25.1 24.1 1.0
Permits and license 7.3 7.5 (0.2)
Rental income 13.3 16.0 (2.7)
Other 5.0 9.5 (4.5)
Total Revenues 166.8 $ 180.4 $ (13.6) $ GENERAL FUND
Revenues for the Year Ended June 30
(in millions)
Property tax revenue increased $5.5 million, or 10.8 percent due to pre‐pandemic assessed value growth and an increase of $1.7 million in the Excess Educational Revenue Augmentation Fund (ERAF) distribution. The FY 2021 secured and unsecured property tax assessed values growth rates are 7.6 percent and 12.7 percent, respectively, a weighted average of 7.8 percent. These higher a ssessed values reflect continued strength in commercial and residential real estate markets. Historically, during economic downturns such as a recession and/or a pandemic, impacts to property tax are delayed a year and then the growth rate typically plateaus.
Over a seven‐year period, ERAF distribution has grown from $0.4 million in FY 2014 to $5.6 million in FY 2021.
Excess ERAF is the fund used to collect and disburse property taxes that are shifted to/from cities, the County, and special districts prior to their reallocation to K‐14 schoo l agencies. When the state shifts more local property tax than required to support schools these funds are returned and known as excess ERAF. Due to the uncertainty of whether local ag encies will continue to receive excess ERAF funds, it is not considered a permanent local revenue source.
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Sales tax receipts were $1.5 million or 4.9 percent, lower than the prior year. The decrease is lower than expected even though there is a significant decline of high‐end g o o d s a n d d i n i n g o p t i o n s a t r e g i o n a l destinations, such as the Stanford Shopping Center, which was o ffset by the strong performance in the business to business segment and online sales. As the nation t ransitions from a shopping center country to online sales, a surge in online retail sales will partially displace tax revenue from traditional industry segments to state and county pools. Online sales data that cannot be tra cked to a specific county jurisdiction are allocated to the Santa Clara County sales tax pool and then distributed to local jurisdictions based on local tax percentages. City’s average proportion of the county pool sales tax allocation is approximately 5.6 percent, a
1.5 percent decrease compared to the fourth calendar quarter of 2019 (pre‐pandemic). The sales tax growth in the second half of FY 2021 is due to high vaccination rates in the Bay Area resulting in increased employment and economic activity.
Utility user tax (UUT) revenues are $1.5 million, or 9.3 percen t, lower compared to prior year due to lower business consumption of electric and telephone services. The telephone UUT receipts declined by $1.2 million or 19.3 percent due to business closures and shelter in place restrictions which reduced the workforce present in the City.
Transient occupancy tax (TOT) continues to be the revenue sourc e most significantly impacted by the pandemic and fell to $5.2 million, a $13.4 million, or 72.0 percent decrease when compared to the prior year.
Six hotels, representing 16.3 percent of available rooms remain ed closed while two other smaller hotels reopened during the fiscal year. However, two Marriott hotels (with around 293 rooms) are newly opened in the middle and end of the fiscal year. The opened hotels average daily room and occupancy rates significantly declined in the first three quarters and partially recovered in the fourth quarter. In FY 2021, the average occupancy rate was 40.6 percent, a 33.4 percent decrease and th e average room rate was $116.90, a 55.9 percent decrease over the prior year.
Documentary transfer tax increased $3.7 million, or 53.6 percent when compared to prior year due to six large commercial property transactions that occurred in FY2021. This revenue source is volatile since it is highly dependent on sales volume and the mix of commercial and residential sales.
Charges for services increased $1.0 million, or 4.1 percent, wh en compared to prior year due to an increase of golf course revenues by $2.3 million which due to higher dem and to play golf after re‐opening during the COVID‐19 pandemic. This increase is offset by reduced programs and classes and fewer reviews and inspections due to limited operations caused by COVID‐19 restrictions.
Rental income decreased $2.7 million, or 16.9 percent, when com pared to prior year due to lower facility rentals and number of tenants due to limited economic activities and some businesses closures. The City has continued to follow the Santa Clara County Moratorium Order to give protection for small businesses and approved a rent forgiveness program.
Other revenues decreased $4.5 million, or 47.4 percent, when co mpared to prior year due to a decrease of investment earnings which resulted from negative fair market value adjustments
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Statement of Revenues, Expenditures and Changes in Fund Balance ‐ Expenditures
General Fund expenditures totaled $160.3 million for FY 2021 co mpared to $182.1 in the prior year. This amount excludes encumbrances and reappropriations. The year over year change for major functions is noted in the following table.
Increase/
Expenditures by Function 2021 2020 (Decrease)
Administrative Services 5.2 $ 6.0 $ (0.8) $ Public Works 13.3 13.6 (0.3)
Planning and Development Services 15.8 19.3 (3.5)
Police 41.3 45.7 (4.4)
Fire 34.9 36.4 (1.5)
Community Services 26.3 29.6 (3.3)
Library 8.5 10.0 (1.5)
Non‐Departmental 4.6 9.2 (4.6)
All other 10.4 12.3 (1.9)
Total Expenditures 160.3 $ 182.1 $ (21.8) $ GENERAL FUND
Expenditures for the Year Ended June 30
(in millions)
General Fund expenditures decreased by $21.8 million, or 12.0 percent compared to prior year primarily due to the decrease in salaries and benefits and reduced contract services. In response to financial uncertainties caused by the COVID‐19 pandemic, the City adopted various strategies to lower expenses such as implementing furloughs to the Management and Professional Group, leaving some vacant positions unfilled, eliminating a few positions, and deferring wage increases to most of the labor unions. The City also reduced service hours and various operating expenditures such as travel and training, program and project consultants, and other contractual services.
Planning and Development expenses decreased $3.5 million primar ily due to reduced contract services due to reorganized building inspection and plan review.
Police expenses decreased $4.4 million mainly due to decreases in salaries and benefits, including overtime, as a result of eliminated positions including specialized polic e teams, detectives, dispatchers, records staff, animal control officers, parking enforcement officers and administration.
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Fire expenses decreased $1.5 million mainly due to decreases in indirect charges such as vehicle replacement allocation and IT support.
Community Services expenses decreased $3.3 million primarily due to decreases in salaries and benefits and contract services. In response to continued governmental restrictions, Community Services Facilities reduced operating hours in community centers, museums, theater and open space preserves. Special events, art exhibits and teen programs were also reduced or eliminated.
Library expenses decreased $1.5 million which was attributed to a decrease in salaries and benefits and reduced contract services as a result of reduced library hours at all branches.
Non‐Departmental expenditures decreased $4.6 million due to red uced lease payments for the Cubberley facility and a one‐time purchase of the current City Manager’s house in FY 2020.
Statement of Revenues, Expenditures and Changes in Fund Balance‐Budget and Actual
Revenues, excluding Charges to Other Funds, were originally bud geted at $163.1 million. Budget estimates were revised downward by $3.9 million. The revenue categories t hat were adjusted are shown in the table below.
Adopted Final Increase/
Budgeted Revenues Budget Budget (Decrease)
Property tax 52.0 $ 53.2 $ 1.2 $
Sales tax 20.5 25.0 4.5
Utility user tax 15.1 14.1 (1.0)
Transient occupany tax 14.9 5.1 (9.8)
Documentary transfer tax 4.7 6.9 2.2
All other 55.9 54.9 (1.0)
163.1 159.2 (3.9)
Charges to other funds 12.0 12.0 ‐
Prior year encumbrances and appropriations ‐ 7.6 7.6 Total Budgeted Revenues 175.1 $ 178.8 $ 3.7 $ GENERAL FUND
Budgeted Revenues for the Year Ended June 30
(in millions)
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Adjustments to the original budget were based on the following:
Property tax was increased by $1.2 million due to property asse ssed value growth and change in ownership.
Sales tax was increased by $4.5 million due to the higher than expected receipts. Utility user tax decreased by $1.0 million due to the lower consumption of both utility commodity and telephone.
Transient occupancy tax decreased by $9.8 million due to contin ued declines in hotel activities and rates.
Documentary transfer tax increased by $2.2 million based on yea r‐to‐date receipts tracking higher than anticipated.
Expenditures, excluding Operating Transfers, were originally bu dgeted at $179.1 million and were revised upward by $8.4 million, for a final budgeted amount of $187.5 million.
Adopted Final Increase/ Actuals, plus
Budgeted Expenditures Budget Budget (Decrease) Encumbrances Community Services 28.4 $ 28.8 $ 0.4 $ 27.8$ Fire 33.6 35.4 1.8 35.4 Police 41.7 42.4 0.7 42.4 Library 8.4 8.7 0.3 8.6 Planning and Development Services 17.4 19.6 2.2 18.8 Public Works 18.4 19.1 0.7 18.6 Non‐Departmental 8.2 9.3 1.1 9.3 All Other 23.0 24.2 1.2 22.9 Total Budgeted Expenditures 179.1 $ 187.5 $ 8.4 $ 183.8 Less: Charges to Other Funds and Departments (11.7)
Less: Encumbrances and Reappropriations (11.8)
Net General Fund Expenditures 160.3$
GENERAL FUND
Budgeted Expenditures for the Year Ended June 30
(in millions)
Adjustments of $8.4 million to the original budget were primari ly due to the $7.6 million carry‐forward of encumbrances from prior year and reappropriations.
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Final actual expenditures totaled $183.8 million, $3.7 million lower than the final budget totaling $187.5 million. As mentioned previously, the Final budget includes enc umbrances and reappropriations carried forward from prior year, totaling $7.6 million. In closing FY 2021, $11.8 million was encumbered and reappropriated in FY 2022. The actual expenditures were lower a s compared with the budget primarily due to reduced contract services.
Transfers out were originally budgeted at $17.8 million, with t he final budget number at $13.6 million, a decrease of $4.2 million. The decrease was due to a reduction of the transfers to Capital Project Fund because of decreases in TOT revenues.
Capital Projects Fund
At the end of the current fiscal year, the fund balance of the Capital Project Fund was $165.7 million, compared to $83.6 million in the prior year. The fund balance is restricted for the Public Safety Building ($90.9 million) and library project ($0.6 million), committed for Roth building rehabilitation ($5.2 million) and Cubberley improvements ($4.7 million) and the remaining balance of $64.3 million is available for all other capital projects.
Capital Projects Fund revenues were $11.4 million in FY 2021, an increase of $1.8 million from the prior year due to federal grant reimbursements while other financing sources were $118.8 million, an increase of $87.9 million mainly due to issuance of COPs amounting to $101.5 mill ion plus $6.5 premium to finance the construction of a public safety building partially offset by the decrease of operating transfers in from General Fund due to significant decreases in revenues, including TOT.
Capital Project Fund expenditures were $48.1 million in FY 2021 , a decrease of $18.2 million. To manage resources with funding needs and balance for the City’s severe decrease in TOT revenues resulting from the pandemic, the most critical capital investments were prioritize d and project budget for other projects were deferred into later years or beyond the five‐year capital plan.
Non‐Major Governmental Funds
These funds are not presented separately in the Basic Financial Statements but are individually presented in the Other Supplemental Information.
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FINANCIAL ANALYSIS OF ENTERPRISE FUNDS
At June 30, 2021, the City’s Enterprise Funds reported total net position of $807.2 million, an increase of $22.2 million or 2.8 percent from the prior year. All Enterprise fund s contributed to this increase except Electric Fund.
The changes in net position in the Enterprise Funds are summarized in the following table.
ENTERPRISE FUNDS
Change in Net Position for the Year Ended June 30
(in millions)
Increase/
Fund Name 2021 2020 (Decrease)
Water 6.6 $ 8.0 $ (1.4)$
Electric (4.8) 18.6 (23.4)
Fiber Optics 1.5 2.9 (1.4)
Gas 3.5 3.0 0.5
Wastewater Collection 0.7 2.1 (1.4)
Wastewater Treatment 3.1 0.3 2.8
Refuse 1.9 (3.1) 5.0
Storm Drainage 3.0 2.2 0.8
Airport 6.7 5.6 1.1
Total Change in Net Position 22.2 $ 39.6 $ (17.4) $
The most significant factors in the change in net position between years for Enterprise Funds are as follows:
The Water and Fiber Optic Funds operating income has no significant change, however, the change in net position for both funds decreased $1.4 million from prior y ear due to decline in other revenues specifically interest earnings due to the impact of negative fair market value adjustments. The change in net position for Electric Fund decreased $23.4 million from prior year due to decrease in commercial retail revenues as a result of lower consumption, a decrease in investment earnings due to the impact of negative fair market value adjustments, an increase in purchases of electricity due to low hydroelectric supply, and an increase in operations and maintenance expenses. The change in net position for Wastewater Collection Fund decreased $1.4 million due to lower non‐ residential sewer charges, lower non‐operating revenue includin g interest earnings and an increase in operating expenses
The change in net position for Wastewater Treatment Fund increased $2.8 million due to higher billing to partners for capital costs and decreases in operations and maintenance expenses. The change in net position of Refuse Fund increased $5.0 millio n due to a decrease in operating expenses as a result of lower payment to GreenWaste of Palo Alto for reimbursements of new waste collections and vehicles, a decrease in facility rent and downward adjustment to landfill post closure maintenance. The decrease of operating expenses was partially o ffset by lower revenues including investment earnings.
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CAPITAL ASSETS
GASB Statement No. 34 requires that the City record all its cap ital assets, including infrastructure and intangible assets. Infrastructure includes roads, bridges, signals and similar assets used by the entire population. The table below shows capital assets and the amoun t of accumulated depreciation for these assets for Governmental and Business‐type Activities. Further detail can be found in Note 6 to the financial statements.
Increase/
2021 2020 (Decrease)
Governmental activites
Capital Assets
Land and improvements 82.1 $ 82.2 $ (0.1) Street trees 14.8 14.8 ‐
Construction in progress 137.8 139.4 (1.6) Building and improvements 272.1 251.1 21.0 Intangible assets 3.8 3.8 ‐ Equipment 17.2 15.7 1.5
Roadway network 335.3 335.2 0.1 Recreation and open space network 35.2 35.2 ‐ Less accumulated depreciation (319.3) (302.5) (16.8) Internal Service funds
Construction in progress 5.6 2.7 2.9 Equipment 63.1 63.5 (0.4) Less accumulated depreciation (45.7) (44.8) (0.9) Total Governmental Activities 602.0 $ 596.3 $ 5.7 $ Business‐Type Activities
Land 5.0 $ 5.0 $ ‐ $
Construction in progress 129.0 121.1 7.9 Buildings and improvements 74.5 74.5 ‐ Infrastructure 0.6 0.6 ‐ Transmission, distribution and treatment systems 914.8 884.8 30.0 Less accumulated depreciation (415.4) (392.8) (22.6) Total Business‐type Activities 708.5 $ 693.2 $ 15.3 $ CAPITAL ASSETS AT JUNE 30
(in millions)
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Governmental Activities’ capital assets net of depreciation increased by $5.7 million from the prior year. The increase was primarily due to activity in various projects such as the Highway 101 Pedestrian / Bicycle overpass, the Public Safety Building and California Avenue Parking Garage offset with retirements.
The City Council approved a $125.8 million Infrastructure Plan (IP) in June 2014, which includes projects such as a new Public Safety Building, replacement of two Fire Stations, a Bike and Pedestrian plan and two parking garages. Through the development of the 2021‐2025 Capital Impro vement Plan (CIP), the IP projects were updated resulting in a revised Infrastructure Plan of $260.5 million. These projects will be funded partially by debt to be repaid with voter‐approved increases of 3.5 percent in the TOT rate and from other sources such as impact fees and Stanford University Medical Center developme nt agreement monies. Staff is continually assessing the COVID‐19 impact to maintain funding for these projects.
Major Governmental Activities’ capital projects that are currently in progress, including the remaining capital commitment of each, are as follows:
Public Safety Building ‐ $97.1 million
Charleston Arastradero Corridor – $7.4 million
Municipal Service Center Improvements – $6.0 million
Churchill Ave/Alma – $4.2 million
Railroad Grade Separation – $4.0 million
Highway 101 Pedestrian/Bicycle Overpass – $3.7 million Vehicle Replacements – $3.3 million
Business‐type Activities’ capital assets net of depreciation increased by $15.3 million from the prior year. The increase is primarily due to, Electric, Wastewater Collection, Wastewater Treatment, Storm Drain and Airport Funds.
Major Business‐type Activities’ capital projects that are currently in progress, including the remaining capital commitment of each, are as follows:
Seismic Water System Upgrade – $5.3 million
Gas Main Replacement Project 23 – $6.9 million
Primary Sedimentation Tank Rehabilitation – $11.8 million Airport Apron Reconstruction Phase 1 – $23.3 million
The City depreciates its capital assets over their estimated useful lives, as required by GASB Statement No. 34.
The purpose of depreciation is to spread the cost of a capital asset over the years of its useful life so that an allocable portion of the cost of the asset is borne by all user s. Additional information on capital assets and depreciable lives are in Note 6.
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City of Palo Alto 29
DEBT ADMINISTRATION
Each of the City’s debt issues is discussed in detail in Note 7 to the financial statements. The City’s debt as of June 30, 2021 is shown in the following table.
Increase/
2021 2020 (Decrease)
Governmental Activities
General Long‐Term Obligations
General Obligation Bonds
2010 42.0 $ 43.3 $ (1.3) $
Add: unamortized premium 2.3 2.5 (0.2)
2013A 15.0 15.5 (0.5)
Add: unamortized premium 0.7 0.8 (0.1)
Certificates of Participation
2018 Capital Improvement Projects 8.6 8.7 (0.1)
2019 California Ave Parking Garage
Series A & B 36.4 37.0 (0.6)
Add: unamortized premium 4.5 4.7 (0.2)
2021 Public Safety Building 101.5 ‐ 101.5 Add: unamortized premium 6.5 ‐ 6.5
Total Governmental Activities 217.5 $ 112.5 $ 105.0 $ Business‐type Activities
Enterprise Long‐Term Obligations
Utility Revenue Bonds
1999 Refunding 5.1 $ 6.7 $ (1.6)$
2009 Series A 24.3 25.5 (1.2)
2011 Refunding 6.7 7.9 (1.2)
Add: unamortized premium 0.4 0.5 (0.1) Energy Tax Credit Bonds
2007 Series A 0.1 0.2 (0.1)
Less: unamortized discount ‐ (0.1) 0.1 State Water Resources Loan
2007 3.6 4.0 (0.4)
2009 4.8 5.3 (0.5)
2017 23.9 24.5 (0.6)
Total Business‐type Activities 68.9 $ 74.5 $ (5.6) $ LONG‐TERM DEBT AT JUNE 30
(in millions)
City‐wide long‐term debt increased by a total of $99.4 million mainly due the issuance of COPs for the construction of the public safety building in the amount of $10 1.5 million plus $6.5 million premium which was offset by the scheduled debt retirement.
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City of Palo Alto 30
ECONOMIC OUTLOOK
The COVID‐19 pandemic came with the strict orders for the safet y of the public which resulted in a drastic drop in revenues. In FY2021, the City took swift, decisive, an d difficult action to balance the budget by prioritizing essential services and reducing or eliminating discretionary services, while continue to address its long‐term liabilities such as pension and OPEB obligations. Th e fiscal challenges remain constant as the COVID‐19 pandemic continues. The City will maintain services at the same levels in previous year for the upcoming fiscal year, but these service levels are not sustaina ble for the fiscal health of the City in the long term. The FY 2022 adopted Operating and Capital reflects current fiscal reality, however, as hopeful signs for recovery continue, the City will respond quickly and adapt shoul d m o r e m o d e r a t e g r o w t h o c c u r t h a n forecasted.
More information about the economy of the City is discussed in the accompanying Transmittal Letter.
CONTACTING THE CITY’S FINANCIAL MANAGEMENT
The ACFR is intended to provide citizens, taxpayers, investors, and creditors with a general overview of the City’s finances. Questions about this report should be directed to the Administrative Services Department, located at 250 Hamilton Avenue, 4 th Floor, Palo Alto, California. The Department can also be conta cted by email at: [email protected]. This report and other financial reports can be viewed on the City of Palo Alto website at: www.cityofpaloalto.org. On the home page, select Departments, select Administrative Services, and select Financial Reporting https://www.cityofpaloalto.org/Departments/Administrative‐ Services/Financial‐Reporting. Within Financial Reporting, there are links to reports by title and reporting date.
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CITY OF PALO ALTO
Statement of Net Position
June 30, 2021
(Amounts in thousands)
Governmental Business‐Type
Activities Activities Total
ASSETS:
Cash and investments available for operations (Note 3) 310,091 $ 282,271 $ 592,362 $ Receivables, net:
Accounts and intergovernmental 16,099 43,321 59,420 Interest receivable 1,544 1,405 2,949 Notes and loans receivable (Note 5) 53,677 ‐ 53,677 Internal balances (Note 4) (298) 298 ‐ Deposits 15 ‐ 15
Due from other government agencies ‐ 2,400 2,400 Inventory of materials and supplies, prepaids and deposits 5,615 244 5,859 Restricted cash and investments with fiscal agents and trustees (Note 3) 133,264 3,340 136,604 Capital assets (Note 6):
Nondepreciable 243,923 133,909 377,832 Depreciable, net of accumulated depreciation 358,056 574,600 932,656 Total assets 1,121,986 1,041,788 2,163,774 DEFERRED OUTFLOWS OF RESOURCES:
Unamortized loss from refunding ‐ 149 149 Pension related (Note 11) 45,531 18,119 63,650 OPEB related (Note 12) 15,271 6,012 21,283 Total deferred outflows of resources 60,802 24,280 85,082 LIABILITIES:
Accounts payable and accruals 14,812 16,432 31,244 Accrued salaries and benefits 2,679 1,224 3,903 Unearned revenue 9,400 ‐ 9,400 Accrued compensated absences (Note 1):
Due in one year 6,327 ‐ 6,327 Due in more than one year 9,320 ‐ 9,320 Claims payable (Notes 14 and 16):
Due in one year 6,811 ‐ 6,811 Due in more than one year 38,339 ‐ 38,339 Landfill post‐closure liability (Note 9):
Due in more than one year ‐ 6,179 6,179 Net pension liabilities (Note 11):
Due in more than one year 349,296 123,787 473,083 Net OPEB liabilities (Note 12):
Due in more than one year 88,883 35,915 124,798 Long‐term debt (Note 7):
Due in one year 3,264 5,757 9,021 Due in more than one year 214,270 63,153 277,423 Total liabilities 743,401 252,447 995,848 DEFERRED INFLOWS OF RESOURCES:
OPEB related (Note 12) 16,250 6,402 22,652 NET POSITION (Note 10):
Net Investment in capital assets 480,620 642,018 1,122,638 Restricted for:
Transportation mitigation 12,512 ‐ 12,512 Public benefit 18,282 ‐ 18,282 Supplemental pension 37,089 ‐ 37,089 Others 6,077 ‐ 6,077
Debt service 3,749 3,340 7,089 Nonexpendable ‐ Eyerly Family 2,556 ‐ 2,556 Total restricted net position 80,265 3,340 83,605 Unrestricted (137,748) 161,861 24,113 Total net position $ 423,137 $ 807,219 $ 1,230,356 See accompanying notes to the basic financial statements. 31 12.f
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CITY OF PALO ALTO
Statement of Activities
For the Year Ended June 30, 2021
(Amounts in thousands)
Net (Expense) Revenue and
Program Revenues Changes in Net Position
Operating Capital
Charges for Grants and Grants and Governmental Business‐Type Functions/Programs Expenses Services Contributions Contributions Act ivities Activities Total Governmental Activities:
City Council 178 $ ‐ $ ‐ $ ‐ $ (178)$ ‐ $ (178)$ City Manager 2,466 ‐ ‐ ‐ (2,466) ‐ (2,466) City Attorney 2,292 ‐ ‐ ‐ (2,292) ‐ (2,292) City Clerk 702 ‐ ‐ ‐ (702) ‐ (702) City Auditor 641 ‐ ‐ ‐ (641) ‐ (641) Administrative Services 22,985 1,150 457 ‐ (21,378) ‐ (21,378) Human Resources 2,518 ‐ ‐ ‐ (2,518) ‐ (2,518) Public Works 52,727 937 ‐ 9,748 (42,042) ‐ (42,042) Planning and Development Services 18,141 21,228 1,191 ‐ 4,278 ‐ 4,278 Office of Transportation 3,636 80 ‐ 118 (3,438) ‐ (3,438) Police 43,627 2,008 414 ‐ (41,205) ‐ (41,205) Fire 37,131 9,127 888 51 (27,065) ‐ (27,065) Community Services 30,289 20,893 49 1,409 (7,938) ‐ (7,938) Library 11,145 47 34 ‐ (11,064) ‐ (11,064) Interest on long‐term debt 6,317 ‐ ‐ ‐ (6,317) ‐ (6,317) Total Governmental Activities 234,795 55,470 3,033 11,326 (164,966) ‐ (164,966) Business‐Type Activities:
Water 43,556 48,812 462 533 ‐ 6,251 6,251 Electric 156,105 162,240 ‐ ‐ ‐ 6,135 6,135 Fiber Optics 2,529 3,936 ‐ ‐ ‐ 1,407 1,407 Gas 28,556 39,520 ‐ ‐ ‐ 10,964 10,964 Wastewater Collection 19,577 20,484 ‐ 239 ‐ 1,146 1,146 Wastewater Treatment 28,403 30,522 ‐ ‐ ‐ 2,119 2,119 Refuse 29,138 30,636 ‐ ‐ ‐ 1,498 1,498 Storm Drainage 4,897 7,785 ‐ ‐ ‐ 2,888 2,888 Airport 1,499 2,585 ‐ 5,619 ‐ 6,705 6,705 Total Business‐Type Activities 314,260 346,520 462 6,391 ‐ 39,113 39,113 Total 549,055 $ 401,990 $ 3,495 $ 17,717$ (164,966) 39,113 (125,853) General Revenues:
Taxes:
Property tax 60,901 ‐ 60,901 Sales tax 29,127 ‐ 29,127
Utility user tax 14,642 ‐ 14,642 Transient occupancy tax 5,179 ‐ 5,179 Documentary transfer tax 10,627 ‐ 10,627 Other taxes 2,844 ‐ 2,844 Investment earnings 4,939 2,187 7,126 Miscellaneous 183 ‐ 183 Transfers (Note 4) 19,087 (19,087) ‐ Total general revenues and transfers 147,529 (16,900) 130,629 Change in net position (17,437) 22,213 4,776 Net position, beginning of year 440,574 785,006 1,225,580 Net position, end of year 423,137$ 807,219 $ 1,230,356$ See accompanying notes to the basic financial statements. 33 12.f
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CITY OF PALO ALTO
Governmental Funds
Balance Sheet
June 30, 2021
(Amounts in thousands)
Capital Other Total
General Projects Governmental Governmental
Fund Fund Funds Funds
ASSETS:
Cash and investments available for operations (Note 3) 67,397 $ 79,13 0$ 66,758 $ 213,285$ Receivables, net:
Accounts and intergovernmental 14,053 1,429 519 16,001 Interest receivable 645 26 389 1,060 Notes and loans receivable (Note 5) 826 ‐ 52,851 53,677 Deposits 15 ‐ ‐ 15 Prepaid items 291 ‐ ‐ 291 Due from other fund (Note 4) 943 ‐ ‐ 943 Advances to other funds (Note 4) 3,036 ‐ ‐ 3,036 Inventory of materials and supplies 5,208 ‐ ‐ 5,208 Restricted cash and investments with fiscal agents (Note 3) ‐ 91,52 0 4,655 96,175 Total assets 92,41 4$ 172,105$ 125,172 $ 389,691 $ LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES:
Liabilities:
Accounts payable and accruals 5,115 $ 5,350 $ 495 $ 10,96 0$ Accrued salaries and benefits 2,25 4 141 34 2,429 Unearned revenue 9,400 ‐ ‐ 9,400 Due to other funds (Note 4) ‐ ‐ 341 341 Total liabilities 16,769 5,491 870 23,13 0 Deferred inflows of resources
Deferred inflows of resources ‐ Unavailable revenue 9 910 ‐ 919 16,778 6,401 870 24,049 Fund balances (Note 10):
Nonspendable:
Deposits 15 ‐ ‐ 15 Prepaid items 291 ‐ ‐ 291 Inventories 5,208 ‐ ‐ 5,208 Advances to other funds 3,036 ‐ ‐ 3,036 Notes and loans receivable 826 ‐ ‐ 826 Eyerly family ‐ ‐ 2,556 2,556 Restricted for:
Transportation mitigation ‐ ‐ 12,512 12,512 Federal revenue ‐ ‐ 5,293 5,293 Street improvement ‐ ‐ 28 28 Local law enforcement ‐ ‐ 756 756 Public safety building ‐ 90,922 ‐ 90,922 Library bond project ‐ 598 ‐ 598 Public benefit ‐ ‐ 18,282 18,282 Debt service ‐ ‐ 8,40 4 8,40 4 Committed for:
Development services 3,950 ‐ ‐ 3,950 Roth building rehabilitation ‐ 5,179 ‐ 5,179 Cubberley improvements ‐ 4,726 ‐ 4,726 Developer impact fees ‐ ‐ 13,30 0 13,30 0 Housing in‐lieu ‐ ‐ 58,883 58,883 Special districts ‐ ‐ 3,186 3,186 Edgewood Plaza 701 ‐ ‐ 701 Downtown business ‐ ‐ 50 50 Assigned for:
Unrealized gains on investments 1,891 ‐ 1,052 2,943 Capital projects ‐ 64,279 ‐ 64,279 Other general government purposes 5,912 ‐ ‐ 5,912 Electric charger 30 ‐ ‐ 30 Reappropriations 4,687 ‐ ‐ 4,687 Unassigned for:
Budget Stabilization 49,089 ‐ ‐ 49,089 Total fund balances 75,636 165,70 4 124,302 365,642 Total liabilities, deferred inflows of resources, and fund balances 92,414$ 172,105$ 125,172 $ 389,691 $ Total liabilities and deferred inflows of resources
See accompanying notes to the basic financial statements. 35 12.f
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CITY OF PALO ALTO
Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position ‐ Governmental Activities June 30, 2021
Total fund balances reported on the governmental funds balance sheet 365,642 $ Amounts reported for governmental activities in the statement of net position are different from those reported in the governmental funds balance sheet because of the following:
Deferred outflows and inflows of resources in governmental activities are not financial resources and, therefore, are not reported in the governmental funds.
Deferred outflows of resources 60,802
Deferred inflows of resources (16,250)
Certain receivables are not available to pay for current period expenditures and therefore are deferred in the governmental funds. 919 Capital assets used in governmental activities are not current assets or financial resources and therefore are not reported in the governmental funds. 601,979 Internal service funds are used by management to charge the costs of activities such as insurance, equipment acquisition and maintenance, and certain employee benefits to individual funds. The assets and liabilities of the internal service funds are therefore included in governmental activities in the statement of net position (excludes capital assets, deferred outflows of resources, deferred inflows of resources, net pension liabilities and net OPEB liabilities reported herein) 80,520
Some liabilities, including bonds payable and claims payable, are not due and payable in the current period and therefore are not reported in the governmental funds:
Interest payable (2,143)
Net pension liabilities (Note 11) (349,296)
Net OPEB liabilities (Note 12) (88,883)
Claims payable (Note 14 and 16) (12,619)
Long‐term debt (Note 7) (217,534)
Net position of governmental activities 423,137 $
(Amounts in thousands)
See accompanying notes to the basic financial statements. 36 12.f
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CITY OF PALO ALTO
Governmental Funds
Statement of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2021
(Amounts in thousands)
Capital Other Total
General Projects Governmental Governmental
Fund Fund Funds Funds
REVENUES:
Property tax 56,572 $ ‐ $ 4,329$ 60,901 $ Special assessments ‐ ‐ 5 5 Sales tax 29,127 ‐ ‐ 29,127 Utility user tax 14,642 ‐ ‐ 14,642 Transient occupancy tax 5,179 ‐ ‐ 5,179 Documentary transfer tax 10,627 ‐ ‐ 10,627 Other taxes and fines 683 ‐ 2,816 3,499 Charges for services 25,105 1 ‐ 25,106 Intergovernmental 3,828 10,087 1,337 15,252 Licenses, permits and fees 7,261 ‐ 2,161 9,422 Investment earnings (161) 1,03 4 175 1,048 Rental income 13,293 ‐ ‐ 13,293 Housing In‐Lieu ‐ residential ‐ ‐ 5,80 4 5,80 4 Other revenue 632 247 154 1,033 Total revenues 166,78 8 11,369 16,781 194,93 8 EXPENDITURES:
Current:
City Council 224 ‐ ‐ 224 City Manager 2,30 4 ‐ ‐ 2,30 4 City Attorney 2,149 ‐ ‐ 2,149 City Clerk 748 ‐ ‐ 748 City Auditor 645 ‐ ‐ 645 Administrative Services 5,202 ‐ 261 5,463 Human Resources 2,421 ‐ ‐ 2,421 Public Works 13,265 ‐ 1,427 14,692 Planning and Development Services 15,83 0 ‐ 1,285 17,115 Office of Transportation 1,936 ‐ 1,437 3,373 Police 41,328 ‐ 36 41,36 4 Fire 34,918 ‐ ‐ 34,918 Community Services 26,25 4 ‐ 236 26,49 0 Library 8,528 ‐ ‐ 8,528 Non‐Departmental 4,599 ‐ 255 4,85 4 Capital outlay ‐ 48,11 4 ‐ 48,11 4 Debt service:
Principal ‐ ‐ 2,595 2,595 Interest and fiscal charges ‐ ‐ 6,147 6,147 Total expenditures 160,351 48,11 4 13,679 222,14 4 EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES 6,437 (36,745) 3,102 (27,206) OTHER FINANCING SOURCES (USES):
Issuance of debt ‐ 95,476 6,029 101,505 Original debt premium ‐ 6,52 4 ‐ 6,52 4 Proceeds from sale of capital assets 100 ‐ ‐ 100 Transfers in (Note 4) 20,88 0 19,198 3,480 43,558 Transfers out (Note 4) (13,620) (2,380) (9,564) (25,564) Total other financing sources (uses) 7,360 118,81 8 (55) 126,123 Change in fund balances 13,797 82,073 3,047 98,917 FUND BALANCES, BEGINNING OF YEAR 61,839 83,631 121,255 266,725 FUND BALANCES, END OF YEAR 75,636 $ 165,70 4$ 124,302 $ 365,642 $ See accompanying notes to the basic financial statements. 37 12.f
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CITY OF PALO ALTO
Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities ‐ Governmental Activities For the Year Ended June 30, 2021
Net change in fund balances ‐ total governmental funds 98,917 $ Amounts reported for governmental activities in the statement of activities are different from those reported in the governmental funds because of the following:
Governmental funds report capital outlays as expenditures. However, in the statement of activities, the costs of these assets are capitalized and allocated over their estimated useful lives and reported as depreciation expense. Therefore, the activities associated with capital assets are as follows:
Capital outlay added back to fund balance for current year additions 33,525 Depreciation expense is deducted from fund balance (depreciation expense is net of internal service fund depreciation of $3,153) (Note 6), which has already been allocated through the internal service fund activities below (17,136) Disposal of capital assets (12,291)
Pension and OPEB contribution made subsequent to the measurement date is an expenditure in the governmental funds, but reported as a deferred outflows of resources in the government‐wide financial statements 41,324 Pension and OPEB expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds (50,170)
Principal payments on long‐term liabilities are reported as expenditures in governmental funds when paid. The governmental activities, however, report principal payments as a reduction of long‐term debt on the statement of net position. Interest accrued on long‐term debt, amortization of premium, and changes in claims payable do not require the use of current financial resources and therefore are not reported as expenditures in governmental funds. Therefore, the activities associated with these balances are as follows:
Principal paid during the year 2,595
Proceeds from debt issuance (101,505)
Original debt premium (6,524)
Change in interest payable (575)
Amortization of bond premium 405
Change in claims payable (12,619)
Revenues earned but not available are deferred in the governmental funds but are recognized in the government‐wide financial statements. Also, revenues recognized in the governmental funds during the current year that were earned and recognized in previous years in the government‐wide financial statements are reported as beginning net position in the statement of activities (563)
Internal service funds are used by management to charge the costs of activities, such as insurance, equipment acquisition and maintenance, and employees benefits to individual funds. The portion of the net expense of these internal service funds arising out of their transactions with governmental funds is reported with governmental activities. 7,180
Change in net position of governmental activities (17,437)$ (Amounts in thousands)
See accompanying notes to the basic financial statements. 38 12.f
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Budgeted Amounts
Actual, Budgetary Variance with
Adopted Final Basis Final Budget
52,000$ 53,173 $ 56,572 $ 3,399 $ 20,500 25,030 29,127 4,097 15,100 14,080 14,642 562 14,900 5,123 5,179 56 Documentary transfer tax 4,700 6,875 10,627 3,752 1,925 392 683 291 25,984 24,41 4 25,105 691 2,448 4,580 4,222 (358) 7,770 8,366 7,708 (658) 1,145 1,145 1,062 (83) 15,949 15,331 13,293 (2,038) 674 666 732 66 163,095 159,175 168,952 9,777 11,992 11,992 11,661 (331) ‐ 7,570 7,570 ‐ 175,087 178,737 188,183 9,446 419 509 366 143 3,161 3,562 3,492 70 3,485 3,744 3,589 155 1,245 1,293 1,147 146 828 981 962 19 8,362 8,338 7,897 441 3,554 3,622 3,545 77 18,397 19,089 18,553 536 17,386 19,611 18,782 829 Office of Transportation 1,904 2,139 2,010 129 Police 41,733 42,441 42,441 ‐ 33,607 35,35 4 35,35 4 ‐ 28,379 28,839 27,769 1,070 8,421 8,655 8,636 19 8,237 9,332 9,259 73 179,118 187,509 183,802 3,707 (4,031) (8,772) 4,381 13,153 21,359 21,15 4 21,15 4 ‐ (17,801) (13,620) (13,620) ‐ 3,558 7,534 7,534 ‐ (473)$ (1,238)$ 11,915 13,153 $ Unrealized gain/loss on investments (1,297)
Changes in interfund balances (197)
Current year encumbrances and reappropriations 10,946
Prior year encumbrances and reappropriations (7,570)
13,797
61,839
75,636$
REVENUES:
CITY OF PALO ALTO
General Fund
Statement of Revenues, Expenditures and Changes in Fund Balance ‐ Budget and Actual For the Year Ended June 30, 2021
(Amounts in thousands)
Charges to other funds and departments
Sales tax
Property tax
Transient occupancy tax
Utility user tax
Other taxes and fines
Charges for services
Licenses, permits and fees
Investment earnings
Rental income
Intergovernmental
Other revenues
City Auditor
City Clerk
City Council
City Manager
Administrative Services
Prior year encumbrances
Total revenues
EXPENDITURES:
Current:
City Attorney
Community Services
Total other financing sources (uses)
Human Resources
Library
Planning and Development Services
Total expenditures
EXCESS OF REVENUES OVER EXPENDITURE
S
OTHER FINANCING SOURCES (USES):
Transfers in
Transfers out
Public Works
Non‐Departmental
Fire
FUND BALANCE AT BEGINNING OF YEAR, GAAP BASI
S
FUND BALANCE AT END OF YEAR, GAAP BASIS
EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER)
EXPENDITURES, BUDGETARY BASIS
Adjustment to Budgetary Basis:
CHANGE IN FUND BALANCE, GAAP BASIS
See accompanying notes to the basic financial statements. 39 12.f
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Fiber
Water Electric Optics Gas
ASSETS:
Current assets:
Cash and investments available for operations (Note 3) 46,602 $ 107,044 $ 35,983 $ 30,484 $ Accounts receivable, net of allowance of $1,551 6,636 19,244 864 2,996 Interest receivable 228 540 178 149 Due from other government agencies ‐ ‐ ‐ ‐ Inventory of materials and supplies ‐ ‐ ‐ ‐ Restricted cash and investments with fiscal agents and trustees (Note 3) 2,906 ‐ ‐ 434 Total current assets 56,372 126,828 37,025 34,063 Noncurrent assets:
Due from other government agencies ‐ ‐ ‐ ‐ Deposits ‐ 44 ‐ ‐ Prepaid expense 67 ‐ ‐ ‐ Capital assets (Note 6):
Nondepreciable 17,926 35,248 2,236 17,925 Depreciable, net 115,588 174,828 7,075 93,347 Total noncurrent assets 133,581 210,120 9,311 111,272 Total assets 189,953 336,948 46,336 145,335 DEFERRED OUTFLOWS OF RESOURCES:
Unamortized loss from refunding 65 ‐ ‐ 84 Pension related (Note 11) 2,660 6,164 349 2,740 OPEB related (Note 12) 757 2,284 83 961 Total deferred outflows of resources 3,482 8,448 432 3,785 LIABILITIES:
Current liabilities:
Accounts payable and accruals 2,175 4,663 275 1,185 Accrued salaries and benefits 176 413 19 182 Due to other funds ‐ ‐ ‐ ‐ Accrued compensated absences (Note 1) ‐ ‐ ‐ ‐ Current portion of long term debt (Note 7) 1,852 100 ‐ 693 Accrued claims payable (Note 14) ‐ ‐ ‐ ‐ Total current liabilities 4,203 5,176 294 2,060 Noncurrent liabilities:
Accrued compensated absences (Note 1) ‐ ‐ ‐ ‐ Accrued claims payable (Note 14) ‐ ‐ ‐ ‐ Advance from other fund (Note 4) ‐ ‐ ‐ ‐ Landfill post‐closure liability (Note 9) ‐ ‐ ‐ ‐ Net pension liabilities (Note 11) 16,803 40,376 2,587 17,532 Net OPEB liabilities (Note 12) 4,009 13,022 67 5,786 Long term debt, net of
unamortized discounts/premiums (Note 7) 26,051 (5) ‐ 3,223 Total noncurrent liabilities 46,863 53,393 2,654 26,541 Total liabilities 51,066 58,569 2,948 28,601 DEFERRED INFLOWS OF RESOURCES:
OPEB related (Note 12) 802 2,495 17 1,024 NET POSITION (Note 10):
Net Investment in capital assets 105,676 209,851 9,311 107,440 Restricted for:
Debt service 2,906 ‐ ‐ 434 Supplemental pension ‐ ‐ ‐ ‐ Unrestricted (deficit) 32,985 74,481 34,492 11,621 Total net position 141,567 $ 284,332 $ 43,803 $ 119,495 $ Some amounts reported for Business‐type Activities in the statement of net position are different because certain Internal Service Fund net positions are included with Business‐type Activities Net position reported in Business‐type Activities
Business‐Type Activities‐Enterprise Funds
CITY OF PALO ALTO
Proprietary Funds
Statement of Net Position
June 30, 2021
(Amounts in thousands)
See accompanying notes to the basic financial statements. 40 12.f
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Governmental
Non‐Major Activities ‐
Wastewater Wastewater Storm Internal Servic e
Collection Treatment Refuse Drainage Airport Totals Funds 9,358$ 16,076 $ 28,363 $ 8,361 $ ‐ $ 282,271$ 96,806 $ 2,709 2,601 3,297 890 4,084 43,321 98 46 83 139 42 ‐ 1,405 484 ‐ 300 ‐ ‐ ‐ 300 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 116 ‐ ‐ ‐ ‐ ‐ 3,340 37,089 12,113 19,060 31,799 9,293 4,084 330,637 134,593 ‐ 2,100 ‐ ‐ ‐ 2,100 ‐ ‐ ‐ ‐ ‐ ‐ 44 ‐ ‐ 133 ‐ ‐ ‐ 200 ‐ 4,784 11,152 1,952 12,121 30,565 133,909 5,587 88,204 58,783 3,076 30,801 2,898 574,600 17,354 92,988 72,168 5,028 42,922 33,463 710,853 22,941 105,101 91,228 36,827 52,215 37,547 1,041,490 157,534 ‐ ‐ ‐ ‐ ‐ 149 ‐ 1,256 3,355 765 695 135 18,119 2,578 368 930 422 152 55 6,012 844 1,624 4,285 1,187 847 190 24,280 3,422 667 1,248 3,127 127 2,965 16,432 1,709 91 242 46 37 18 1,224 250 ‐ ‐ ‐ ‐ 602 602 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 6,327 110 2,187 ‐ 815 ‐ 5,757 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 6,811 868 3,677 3,173 979 3,585 24,015 15,097 ‐ ‐ ‐ ‐ ‐ ‐ 9,320 ‐ ‐ ‐ ‐ ‐ ‐ 25,720 ‐ ‐ ‐ ‐ 3,036 3,036 ‐ ‐ ‐ 6,179 ‐ ‐ 6,179 ‐ 9,624 24,633 6,661 4,682 889 123,787 17,548 2,212 6,874 2,458 1,083 404 35,915 4,800 238 31,896 ‐ 1,750 ‐ 63,153 ‐ 12,074 63,403 15,298 7,515 4,329 232,070 57,388 12,942 67,080 18,471 8,494 7,914 256,085 72,485 392 1,001 449 163 59 6,402 897 92,640 38,252 5,028 40,357 33,463 642,018 22,941 ‐ ‐ ‐ ‐ ‐ 3,340 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 37,089 751 (10,820) 14,066 4,048 (3,699) 157,925 27,544 93,391$ 27,432 $ 19,094 $ 44,405 $ 29,764 $ 803,283 87,574 $ 3,936
807,219$
Business‐Type Activities‐Enterprise Funds
See accompanying notes to the basic financial statements. 41 12.f
Packet Pg. 318
Fiber
Water Electric Optics Gas
OPERATING REVENUES:
Sales to:
Customers 44,154 $ 124,153$ 2,878 $ 36,583$ City departments 2,532 4,167 1,045 542 Surplus energy ‐ 9,286 ‐ ‐ Service connection charges and miscellaneous 1,239 942 12 845 Charges for services ‐ ‐ ‐ ‐ Other 887 23,692 1 1,550 Total operating revenues 48,812 162,240 3,936 39,520 OPERATING EXPENSES:
Purchase of utilities:
Retail purchase of utilities 21,935 92,088 ‐ 12,750 Surplus energy ‐ 6,373 ‐ ‐ Administrative and general 5,771 9,605 873 4,285 Engineering (operating) 663 2,409 ‐ 571 Resource management and energy efficiency 1,216 6,597 ‐ 968 Operations and maintenance 7,401 17,191 1,249 6,225 Rent 2,225 5,950 52 471 Depreciation 3,127 8,637 420 3,409 Claims payments and changes in
estimated self‐insurance liability ‐ ‐ ‐ ‐ Refund of charges for services ‐ ‐ ‐ ‐ Employment benefits ‐ ‐ ‐ ‐ Total operating expenses 42,338 148,850 2,594 28,679 Operating income 6,474 13,390 1,342 10,841 NONOPERATING REVENUES (EXPENSES):
Investment earnings 366 941 268 205 Interest expense (1,476) (7,760) ‐ (104) Gain on disposal of capital assets ‐ ‐ ‐ ‐ Loss on disposal of capital assets (8) (70) ‐ (49) Other nonoperating revenues 462 ‐ ‐ ‐ Total nonoperating revenues (expenses) (656) (6,889) 268 52 Income before transfers and capital contributions 5,818 6,501 1,610 10,893 Capital contributions 533 ‐ ‐ ‐ Transfers in (Note 4) 557 2,582 ‐ ‐ Transfers out (Note 4) (268) (13,945) (118) (7,369) Change in net position 6,640 (4,862) 1,492 3,524 NET POSITION, BEGINNING OF YEAR 134,927 289,194 42,311 115,971 NET POSITION, END OF YEAR 141,567 $ 284,332 $ 43,803 $ 119,495$ Some amounts reported for Business‐type Activities in the statement of activities are different because certain Internal Service Fund activities are included with Business‐type Activities Change in net position reported in Business‐type Activities Business‐Type Activities‐Enterprise Funds
CITY OF PALO ALTO
Proprietary Funds
Statement of Revenues, Expenses and Changes in Fund Net Position For the Year Ended June 30, 2021
(Amounts in thousands)
See accompanying notes to the basic financial statements. 42 12.f
Packet Pg. 319
Governmental
Non‐Major Activities‐
Wastewater Wastewater Storm Internal Service
Collection Treatment Refuse Drainage Airport Totals Funds 19,654$ 18,883 $ 27,374 $ 7,275 $ 1,815 $ 282,769$ ‐ $ 162 10,587 860 434 ‐ 20,329 ‐ ‐ ‐ ‐ ‐ ‐ 9,286 ‐ 263 ‐ ‐ ‐ ‐ 3,301 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 115,429 405 1,052 2,402 76 770 30,835 200 20,484 30,522 30,636 7,785 2,585 346,520 115,629 10,542 ‐ 17,474 ‐ ‐ 154,789 ‐ ‐ ‐ ‐ ‐ ‐ 6,373 ‐ 2,264 ‐ 1,342 1,135 698 25,973 13,212 351 2,359 260 253 ‐ 6,866 ‐ ‐ ‐ ‐ 1,127 ‐ 9,908 ‐ 3,413 20,387 8,529 1,168 632 66,195 12,765 252 ‐ 981 19 ‐ 9,950 ‐ 2,849 4,143 81 871 69 23,606 3,153 ‐ ‐ ‐ ‐ ‐ ‐ 8,745 ‐ ‐ ‐ ‐ ‐ ‐ 115 ‐ ‐ ‐ ‐ ‐ ‐ 75,775 19,671 26,889 28,667 4,573 1,399 303,660 113,765 813 3,633 1,969 3,212 1,186 42,860 1,864 42 159 148 77 (19) 2,187 3,891 (24) (721) (197) (174) (74) (10,530) ‐ ‐ ‐ ‐ ‐ ‐ ‐ 385 (1) ‐ ‐ ‐ ‐ (128) ‐ ‐ ‐ ‐ ‐ ‐ 462 5 17 (562) (49) (97) (93) (8,009) 4,281 830 3,071 1,920 3,115 1,093 34,851 6,145 239 ‐ ‐ ‐ 5,619 6,391 ‐ ‐ ‐ ‐ ‐ ‐ 3,139 3,797 (342) ‐ (30) (154) ‐ (22,226) (2,704) 727 3,071 1,890 2,961 6,712 22,155 7,238 92,664 24,361 17,204 41,444 23,052 80,336 93,391$ 27,432 $ 19,094 $ 44,405 $ 29,764 $ 87,574 $ 58 22,213$
Business‐Type Activities‐Enterprise Funds
See accompanying notes to the basic financial statements. 43 12.f
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Fiber
Water Electric Optics Gas
Cash flows from operating activities:
Cash received from customers 45,811 $ 141,628$ 3,130 $ 36,977$ Cash payments to suppliers for goods and services (30,814) (115,045) (992) (16,679) Cash payments to employees (10,576) (23,010) (1,246) (9,123) Internal activity‐ receipts (payments) from (to) other funds 2,5 32 4,167 1,045 542 Other receipts 887 23,692 1 1,550 Net cash provided by operating activities 7,840 31,432 1,938 13,267 Cash flows from noncapital financing activities:
Repayment of loans from other funds ‐ ‐ ‐ ‐ Interest subsidy received from Build America Bonds 462 ‐ ‐ ‐ Transfers in 557 2,582 ‐ ‐ Transfers out (268) (13,945) (118) (7,369) Net cash provided by (used in)
noncapital financing activities 751 (11,363) (118) (7,369) Cash flows from capital and related financing activities:
Acquisition and construction of capital assets (3,549) (12,741) (398) (3,543) Proceeds from sale of capital assets ‐ ‐ ‐ ‐ Capital grants and contributions 533 ‐ ‐ ‐ Principal paid on long‐term debt (1,774) (99) ‐ (667) Interest paid on long‐term debt (1,501) (7,755) ‐ (134) Net cash used in capital and related
financing activities (6,291) (20,595) (398) (4,344) Cash flows from investing activities:
Investment interest received (expenses paid) 379 975 278 211 Net cash provided by investing activities 379 975 278 211 Net change in cash and cash equivalents 2,679 449 1,700 1,765 Cash and cash equivalents, beginning of year 46,829 106,595 34,283 29,153 Cash and cash equivalents, end of year $ 49,508 $ 107,044 $ 35,983 $ 30,918 Financial statement presentation:
Cash and investments available for operations 46,602 $ 107,044$ 35,983 $ 30,484 $ Restricted cash and investments with fiscal agents and trustees 2,906 ‐ ‐ 434 Cash and cash equivalents, end of year 49,508 $ 107,044$ 35,983 $ 30,918 $ Reconciliation of operating income to
net cash provided by (used in) operating activities:
Operating income 6,474 $ 13,390$ 1,342 $ 10,841$ Adjustments to reconcile operating income (loss) to
net cash provided by (used in) operating activities:
Depreciation 3,127 8,637 420 3,409 Other ‐ ‐ ‐ ‐ Change in assets and liabilities:
Accounts receivable 418 7,247 240 (451) Inventory of materials and supplies ‐ ‐ ‐ ‐ Deposit 8 ‐ ‐ ‐ Deferred outflow of resources ‐ pension plans (686) (1,389) 17 (679) Deferred outflow of resources ‐ OPEB 31 183 (83) 45 Accounts payable and accruals (2,070) 2,172 (144) (287) Accrued salaries and benefits 15 29 (5) 23 Accrued compensated absences ‐ ‐ ‐ ‐ Landfill closure and post‐closure care ‐ ‐ ‐ ‐ Accrued claims payable ‐ ‐ ‐ ‐
Net pension liability 980 2,579 129 894 Net OPEB liability (79) (314) 67 (101) Deferred inflow of resources ‐ pension plans (266) (725) (62) (274) Deferred inflow of resources ‐ OPEB (112) (377) 17 (153) Net cash provided by operating activities $ 7,840 $ 31,432 $ 1,938 $ 13,267 Business‐Type Activities‐Enterprise Funds
CITY OF PALO ALTO
Proprietary Funds
Statement of Cash Flows
For the Year Ended June 30, 2021
(Amounts in thousands)
See accompanying notes to the basic financial statements. 44 12.f
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Governmental
Non‐Major Activities‐
Wastewater Wastewater Storm Internal Service
Collection Treatment Refuse Drainage Airport Totals Funds 20,091$ 19,259 $ 27,385 $ 7,231 $ (40) $ 301,472$ 115,400 $ (11,507) (9,786) (24,905) (1,153) 2,120 (208,761) (14,110) (5,103) (13,195) (2,963) (2,422) (972) (68,610) (86,418) 162 10,587 860 434 ‐ 20,329 (5,765) 405 1,052 1,480 76 770 29,913 5 4,048 7,917 1,857 4,166 1,878 74,343 9,112 ‐ ‐ ‐ ‐ (1,354) (1,354) ‐ ‐ ‐ ‐ ‐ ‐ 462 ‐ ‐ ‐ ‐ ‐ ‐ 3,139 3,797 (342) ‐ (30) (154) ‐ (22,226) (2,704) (342) ‐ (30) (154) (1,354) (19,979) 1,093 (3,976) (5,682) ‐ (3,053) (6,050) (38,992) (4,828) ‐ ‐ ‐ ‐ ‐ ‐ 484 239 300 ‐ ‐ 5,619 6,691 ‐ (104) (2,131) ‐ (775) ‐ (5,550) ‐ (24) (719) (197) (172) (74) (10,576) ‐ (3,865) (8,232) (197) (4,000) (505) (48,427) (4,344) 49 158 168 77 (19) 2,276 3,914 49 158 168 77 (19) 2,276 3,914 (110) (157) 1,798 89 ‐ 8,213 9,775 9,468 16,233 26,565 8,272 ‐ 277,398 124,120 $ 9,358 $ 16,076 $ 28,363 $ 8,361 $ ‐ $ 285,611 $ 133,895 9,358$ 16,076$ 28,363 $ 8,361 $ ‐ $ 282,271$ 96,806 $ ‐ ‐ ‐ ‐ ‐ 3,340 37,089$ 9,358$ 16,076$ 28,363 $ 8,361 $ ‐ $ 285,611$ 133,895 $ 813$ 3,633$ 1,969 $ 3,212 $ 1,186 $ 42,860$ 1,864 $ 2,849 4,143 81 871 69 23,606 3,153 ‐ ‐ ‐ ‐ ‐ ‐ 5 174 376 11 (44) (1,855) 6,116 (67) ‐ ‐ ‐ ‐ ‐ ‐ (14) ‐ 17 ‐ ‐ ‐ 25 ‐ (145) (494) (150) (75) 77 (3,524) (275) 17 53 19 8 3 276 37 236 (226) 686 11 2,632 3,010 141 6 34 1 (7) (1) 95 47 ‐ ‐ ‐ ‐ ‐ ‐ 1,403 ‐ ‐ (922) ‐ ‐ (922) ‐ ‐ ‐ ‐ ‐ ‐ ‐ 2,818 373 1,098 375 370 (158) 6,640 681 (38) (99) (44) (16) (5) (629) (89) (179) (451) (104) (137) (60) (2,258) (462) (58) (167) (65) (27) (10) (952) (130) $ 4,048 $ 7,917 $ 1,857 $ 4,166 $ 1,878 $ 74,343 $ 9,112 Business‐Type Activities‐Enterprise Funds
See accompanying notes to the basic financial statements. 45 12.f
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Custodial
Funds
ASSETS:
Cash and investments available for operations (Note 3) 3,276 $ Accounts receivable 491
Interest receivable 16
Restricted cash and investments with fiscal agents (Note 3) 2,70 5 Total assets 6,488
LIABILITIES:
Accounts payable and accruals 411
NET POSITION:
Restricted for:
Governmental entities 1,260
Bondholders of special assessment bonds 4,817
Total net position 6,077 $
CITY OF PALO ALTO
Statement of Fiduciary Net Position
June 30, 2021
(Amounts in thousands)
See accompanying notes to the basic financial statements. 46 12.f
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Custodial
Funds
ADDITIONS:
Franchise and other fees collected 1,821 $
Special assessments collected 2,407
Investment earnings 9
Other 5
Total additions 4,242
DEDUCTIONS:
Administrative and general 39
Distribution to governmental entities 1,538
Debt services payments 2,409
Total deductions 3,986
Changes in net position 256
NET POSITION, BEGINNING OF YEAR 5,821
NET POSITION, END OF YEAR 6,077 $
CITY OF PALO ALTO
Statement of Changes in Fiduciary Net Position
For the Year Ended June 30, 2021
(Amounts in thousands)
See accompanying notes to the basic financial statements. 47 12.f
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CITY OF PALO ALTO
Index to the Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
49 Page
1. Summary of Significant Accounting Policies ........................................................................... 51
2. Budgets and Budgetary Accounting ........................................................................................ 60
3. Cash and Investments ............................................................................................................. 61
4. Interfund Transactions ............................................................................................................ 67
5. Notes and Loans Receivable .................................................................................................... 69
6. Capital Assets .......................................................................................................................... 74
7. Long‐Term Debt ....................................................................................................................... 80
8. Special Assessment Debt ......................................................................................................... 86
9. Landfill Post‐Closure Maintenance ......................................................................................... 86
10. Net Position and Fund Balances .............................................................................................. 87
11. Pension Plans ........................................................................................................................... 90
12. Other Post‐Employment Benefits (OPEB) ............................................................................... 97
13. Deferred Compensation Plan ................................................................................................ 101
14. Risk Management .................................................................................................................. 101
15. Joint Ventures ........................................................................................................................ 103
16. Commitments and Contingencies ......................................................................................... 105
17. Subsequent Event .................................................................................................................. 108
Notes are essential to present fairly the information contained in the overview level of the basic financial statements. Narrative explanations are intended to communicate information that is not readily apparent or cannot be included in the statements themselves, and to provide additional disclosures as required by the Governmental Accounting Standards Board.
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
51 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The City of Palo Alto (the City) was incorporated in 1894 and operates as a charter city, having had its first charter granted by the State of California in 1909. The City operates under the Council‐Manager form of government and provides the following services: public safety (police and fire), public works, electric, fiber optics, water, gas, wastewater, storm drain, refuse, airport, g olf course, planning and zoning, general administration services, library, open space and science, recreational and human services.
(a) Reporting Entity
The City is governed by a seven‐member council, elected by City residents. The City is legally separate and fiscally independent, which means it can issue deb t, set and modify budgets and fees, and sue or be sued. The accompanying basic financial sta tements present the financial activities of the City, which is the primary government present ed, along with the financial activities of its component unit, which is an entity for which the City is financially accountable.
Although a separate legal entity, a blended component unit is, in substance, part of the City’s operations and is reported as an integral part of the City’s fi nancial statements. The City’s component unit are described below.
Th e P a l o A l t o P u b l i c Im p r o ve m e n t C o r p o r a t i o n (the Corporation) provides financing of public capital improvements for the City through the issuance of Certi ficates of Participation (COPs), a form of debt that allows investors to participate in a stream of future lease payments. Proceeds from the COPs are used to construct projects that are leased to the City. The lease payments are sufficient in timing and amount to meet the debt service requirements of the COPs. The Board of Directors of the Corporation is composed of the same members as the City Council. The Corporation is controlled by the City, which performs all accounting and administrative functions for the Corporation. The Corporation is a blended component un it of the City. The financial activities of the Corporation are included in the non‐major Debt Service Funds.
The University Avenue Area Off‐Street Parking Assessment District (the District) provides financing for the construction of public vehicle off‐street par king improvements. The City is responsible for the governance of the District. The City can impose its will on the District but does not have a financial benefit or burden from the District. The assets associated with the District are for the benefit of the District and are not derived from the City’s provision of goods or services to the District. The District is a fiduciary component unit of the City. The financial activities of the District are included in the University Avenue Area Off‐Street Parking Assessment District Custodial Fund.
F i n a n c i a l s t a t e m e n t s f o r t h e C o r p o r a t i o n m a y b e o b t a i n e d f r o m th e C i t y o f P a l o A l t o , Administrative Services Department, 4
th Floor, 250 Hamilton Avenue, Palo Alto, CA 94301.
(b) Basis of Presentation
The City’s basic financial statements are prepared in conformit y with accounting principles generally accepted in the United States of America. The Govern mental Accounting Standards Board (GASB) is the acknowledged standard setting body for establishing accounting and financial reporting standards followed by governmental entities in the United States.
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
52 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
These standards require that the financial statements described below be presented:
Government‐wide Statements: The Statement of Net Position and the Statement of Activities display information about the primary government and its compon ent unit. These statements include the financial activities of the overall City government , except for fiduciary activities.
Eliminations have been made to minimize the double counting of internal activities. However, interfund goods and services transactions have not been eliminated in the consolidation process.
These statements distinguish between the governmental and business‐type activities of the City.
(b) Basis of Presentation (Continued)
Governmental activities generally are financed through taxes, i ntergovernmental revenues, and other non‐exchange transactions. Business‐type activities are financed in whole or in part by fees charged to external parties.
The Statement of Activities presents a comparison between direct expenses and program revenues for each segment of the business‐type activities of the City and for each function of the City’s governmental activities. Direct expenses are those that are specifically associated with a program or function and, therefore, are clearly identifiable to a particular function. Program revenues include: (a) charges paid by the recipients for goods and services offered by the programs, (b) grants and contributions that are restricted to meeting the operational needs of a particular program, and (c) fees, grants and contributions that are restricted to financing the acquisition or construction of capital assets. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the Ci ty’s funds, including fiduciary funds and its blended component unit . Separate statements for each fund category – governmental, proprietary and fiduciary – are presented. The emphasis of fund financial statements is on major individual governmental and en terprise funds, each of which is displayed in a separate column. All remaining governmental and internal service funds are aggregated and reported as non‐major funds.
Proprietary fund operating revenues, such as utilities sales an d charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Nonoperating revenues, such as subsidies and investment earnings, result fro m non‐exchange transactions or ancillary activities.
Operating expenses for enterprise funds and internal service funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All expenses not meeting this definition are reported as nonoperating expenses.
(c) Major Funds and Other Funds
The City’s major governmental and enterprise funds need to be identified and presented separately in the fund financial statements. All other funds, called non‐major funds, are combined and reported in a single column, regardless of their fund type.
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
53 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Major funds are defined as funds that have assets and deferred outflows of resources, liabilities and deferred inflows of resources, revenues or expenditures/exp enses equal to at least 10 percent of their fund type total and at least 5 percent of the grand total. The General Fund is always a major fund. The City may also select other funds it believes should be presented as major funds on a qualitative basis.
(c) Major Funds and Other Funds (Continued)
The City reported the following major governmental funds in the accompanying financial statements:
General Fund – This 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.
Capital Projects Fund – This fund accounts for resources used for the acquisition and construction of capital facilities by the City, with the exception of those assets financed by proprietary funds.
The City reported the following enterprise funds as major funds in the accompanying financial statements:
Water Services Fund – This fund accounts for all financial transactions relating to the City’s water service. Services are on a user‐charge basis to residents and business owners located in the City.
Electric Services Fund – This fund accounts for all financial transactions relating t o the City’s electric service. Services are on a user‐charge basis to resid ents and business owners located in the City.
Fiber Optics Fund – This fund accounts for all financial transactions relating t o the City’s fiber optics service. Services are on a user‐charge basis to licensees located in the City.
Gas Services Fund – This fund accounts for all financial transactions relating t o the City’s gas service. Services are on a user‐charge basis to residents and business owners located in the City.
Wastewater Collection Services Fund – This fund accounts for all financial transactions relating to the City’s wastewater collection service. Services are on a user‐charge basis to residents and business owners located in the City.
Wastewater Treatment Services Fund – This fund accounts for all financial transactions relating to the City’s wastewater treatment. Services are on a user‐charge basis to residents and business owners located in the City.
Refuse Services Fund – This fund accounts for all financial transactions relating to the City’s refuse service. Services are on a user‐charge basis to residents and business owners located in the City.
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
54 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(c) Major Funds and Other Funds (Continued)
Storm Drainage Services Fund – This fund accounts for all finan cial transactions relating to the City’s storm drainage service. Services are on a user‐charge b asis to residents and business owners located in the City.
The City also reports the following funds:
Airport Fund – This non‐major enterprise fund accounts for all financial tr ansactions relating to the Palo Alto Airport (PAO). The City assumed control over operation of PAO from the County of Santa Clara, effective August 11, 2014.
Internal Service Funds – These funds account for fleet replacement and maintenance, technology, central duplicating, printing and mailing services, administration of compensated absences and health benefits, and the City’s self‐insured workers’ compensation and general liability programs, all of which are provided to other departments on a cost‐reimbu rsement basis. Also included is the Retiree Health Benefits Internal Service Fund, which accounts for benefits to retirees.
Vehicle Replacement and Maintenance – This fund accounts for the maintenance and replacement of vehicles and equipment used by all City departme nts. The source of revenue is from reimbursement of fleet replacement and maintenance costs allocated to each department by usage of vehicle.
Technology – This fund accounts for replacement and upgrade of technology , and covers four primary areas used by all City departments: desktop, infrastructure, applications, and technology research and development. The source of revenue is from reimbu rsement of costs for support provided to other departments.
Printing and Mailing Services – This fund accounts for central duplicating, printing and mai ling s e r v i c e s p r o v i d e d t o a l l C i t y d e p a r t m e n t s . T h e s o u r c e o f r e v e nue for this fund is from reimbursement of costs for services and supplies purchased by other departments.
General Benefits – This fund accounts for the administration of compensated absences and health benefits.
Workers’ Compensation Insurance Program – This fund accounts for the administration of the City’s self‐insured workers’ compensation program.
General Liability Insurance Program – This fund accounts for the administration of the City’s self‐ insured general liability program.
Retiree Health Benefits – This fund accounts for retiree health benefits.
Custodial Funds – These funds are fiduciary funds used to report fiduciary activities that are not required to be reported in pension (and other employee benefit) trust funds, investment trust funds, or private purpose trust funds. These include balances and activities of the Cable Joint
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
55 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(c) Major Funds and Other Funds (Continued)
Powers Authority and the assessment district. The financial activities of these funds are excluded from the government‐wide financial statements, but are presente d in separate fiduciary fund financial statements.
Cable Joint Powers Authority – This fund accounts for the activities of the cable television system on behalf of the members.
University Avenue Area Off‐Street Parking Assessment District – This fund accounts for the receipts and disbursements associated with the 2012 Limited Obligation Refunding Improvement Bonds.
(d) Basis of Accounting
The government‐wide, proprietary fund, and fiduciary fund finan cial statements are reported using the economic resources measurement focus and the full accrual b asi s of acc ou n ti n g .
Revenues are recorded when earned and expenses are recorded a t the time liabilities are incurred, regardless of when the related cash flows take place.
Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recogniz ed when measurable and available. The City considers revenues susceptible to accrual reported in the governmental funds to be available if the revenues are collecte d within ninety days after year‐ end, except for property taxes, which are available if collected within sixty days after year‐end.
Expenditures are recorded when the related fund liability is in curred, except for principal and interest on general long‐term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. Ge neral capital asset acquisitions are reported as expenditures in governmental funds. Proceeds from long‐term debt and acquisitions under capital leases are reported as other financing sources.
Revenues susceptible to accrual include taxes, intergovernmental revenues, interest and charges for services.
Grant revenues are recognized in the fiscal year in which all e ligibility requirements are met.
Under the terms of grant agreements, the City may fund certain programs with a combination of cost‐reimbursement grants, categorical block grants, and general revenues. Thus, both restricted and unrestricted net position may be available to finance program expenditures. The City’s policy is to first apply restricted grant resources to such programs, followed by general revenues if necessary.
Certain indirect costs are included in program expenses reporte d for individual functions and activities. Transactions representing the exchange of interfund goods and services have also been included.
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
56 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(e) Cash and Cash Equivalents
Restricted and unrestricted pooled cash and investments held in the City Treasury, and other unrestricted investments invested by the City Treasurer, are co nsidered cash equivalents for purposes of the statement of cash flows because the City’s cash management pool and funds invested by the City Treasurer possess the characteristics of d emand deposit accounts. Other restricted and unrestricted investments with maturities of less than three months at the time of purchase are considered cash equivalents for purposes of the statement of cash flows.
(f) Investments
The City’s investments are carried at fair value, and its fair value measurements are categorized within the fair value hierarchy established by generally accepted accounting principles. Fair value is defined as the price that wou ld be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
(g) Inventory of Materials and Supplies
Materials and supplies are held for consumption and are valued at average cost. The consumption method is used to account for inventories. Under the consumpti on method, inventories are recorded as expenditures at the time inventory items are used, rather than purchased.
(h) Prepaid items
Prepaid items are recorded at cost. Using the consumption method, prepaid items are recorded as expenditures over the period that service is provided.
(i) Compensated Absences
The liability for compensated absences includes the vested port ion of vacation, sick leave, and overtime compensation pay. The City’s liability for accrued compensated absences is recorded in the General Benefits Internal Service Fund. The fund is reimbursed through payroll charges to all other funds. Earned but unpaid vacation and overtime compensat ion pay are recognized as an expense or expenditure in the proprietary and governmental fund types when earned because the City has provided financial resources for the full amount t hrough its budgetary process.
Vested accumulated sick pay is paid in the event of termination due to disability and, under certain conditions, is specified in employment agreements.
During the fiscal year ended June 30, 2021, changes to the compensated absences liabilities were as follows (in thousands):
Beginning balance 14,244 $
Additions 8,751
Payments (7,348)
Ending balance 15,647 $
Current portion 6,327 $
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Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
57 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(j) Property Tax
Santa Clara County (the County) assesses properties and bills, collects, and distributes property taxes to the City. The County remits the entire amount levied and handles all delinquencies, retaining interest and penalties.
The County assesses property values, levies bills and collects taxes as follows:
Secured Unsecured
Lien Dates January 1 January 1
Levy Dates October 1 July 1
Due Dates 50% on November 1 Upon receipt of billing
50% on February 1
Delinquent after December 10 (for November) August 31
April 10 (for February)
The term “unsecured” refers to taxes on personal property other than real estate, land and buildings. These taxes are secured by liens on the property be ing taxed. Property tax revenues are recognized by the City in the fiscal year they are assessed, provided they become available as defined previously within sixty days after year‐end.
(k) Deferred Outflows of Resources and Deferred Inflows of Reso urces
A deferred outflow of resources is the consumption of net posit ion that is applicable to a future reporting period. A deferred inflow of resources is defined as an acquisition of net position applicable to a future reporting period.
(l) Pensions and OPEB
For purposes of measuring the net pension liability and net OPEB liability, deferred outflows/inflows of resources related to pensions and OPEB, and pension and OPEB expense, information about the fiduciary net position of the City’s pens ion and OPEB plans and additions to/deductions from the plans’ fiduciary net positions have been determined on the same basis as they are reported by the California Public Employees’ Retiremen t System (CalPERS) and the California Employer’s Retiree Benefit Trust Fund Program (CERBT), respectively. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are r eported at fair value. The governmental activities’ share of net pension liability and net OPEB liability are typically liquidated by the General Fund.
(m) Rounding
All amounts included in the basic financial statements and footnotes are presented to the nearest thousand.
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Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
58 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(n) Effects of New Pronouncements
As of July 1, 2020, the City implemented the following GASB Statement:
In January 2017, the GASB issued Statement No. 84, Fiduciary Activities. The statement establishes criteria for identifying fiduciary activities of all state and local governments. The focus of the criteria generally is on (1) whether a government is controlling the assets of the fiduciary activity and (2) the beneficiaries with whom a fiduciary relationship exists. Separate criteria are included to identify fiduciary component units and postemployment benefit arrangements that are fiduciary activities. The statement provides recognition and measurement guidance for situations in which a government is a beneficiary of these agreements. Th e City evaluated all funds and activities in accordance with the statement and determine that the Cable Joint Powers Authority and the District’s activities previously reported as agency fun ds should be reported as custodial funds.
In August 2018, the GASB issued Statement No. 90, Majority Equity Interests, an amendment of GASB Statements No. 14 and No. 61. The objectives of this statement are to improve the consistency and comparability of reporting a government’s major ity equity interest in a legally separate organization and to improve the relevance of financial statement information for certain component units. Implementation of this statement did not have a significant impact on the City’s financial statements for the fiscal year ended June 30, 2021.
In October 2021, the GASB issued Statement No. 98, The Annual Comprehensive Financial Report.
This statement establishes the term annual comprehensive financial report and its acronym ACFR and eliminates the prior name and acronym in generally accepted accounting principles for state and local governments. No changes were made to the report’s structure or content.
I m p l e m e n t a t i o n o f t h i s s t a t e m e n t d i d n o t h a v e a s i g n i f i c a n t i m pact on the City’s financial statements for the fiscal year ended June 30, 2021.
The City is currently analyzing its accounting practices to determine the potential impact on the financial statements for the following GASB Statements:
In June 2017, the GASB issued Statement No. 87, Leases. The objective of this statement is to better meet the information needs of financial statement users by improving accounting and financial reporting for leases by governments. This statement increases the usefulness of governments’ financial statements by requiring recognition of c ertain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. It establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Under this statement, a lessee is required to recognize a lease liability and an intangible right‐to‐use lease asset, and a lessor is required to recognize a l e a s e r e c e i v a b l e a n d a d e f e r r e d inflow of resources, thereby enhancing the relevance and consistency of information about governments’ leasing activitie s. Th e requirements of thi s statement are effective for the City’s fiscal year ending June 30, 2022.
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
59 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(n) Effects of New Pronouncements (Continued)
In June 2018, the GASB issued Statement No. 89, Accounting for Interest Cost Incurred before the End of a Construction Period. The objectives of this statement are 1) to enhance the relev ance and comparability of information about capital assets and the c ost of borrowing for a reporting period, and 2) to simplify accounting for interest cost incurre d before the end of a construction period. The requirements of this statement are effective for the City’s fiscal year ending June 30, 2022.
In May 2019, the GASB issued Statement No. 91, Conduit Debt Obligations. The objectives of this statement are to provide a single method of reporting conduit d ebt obligations by issuers and eliminate diversity in practice associated with 1) commitments extended by issuers, 2) arrangements associated with conduit debt obligations, and 3) r elated note disclosure. The requirements of this statement are effective for the City’s fiscal year ending June 30, 2023.
In January 2020, the GASB issued Statement No. 92, Omnibus 2020. The objectives of this statement are to enhance comparability in accounting and financial reporting and to improve the consistency of authoritative literature by addressing practice issues that have been identified during implementation and application of certain GASB statement s. The requirements of this statement are effective for the City’s fiscal year ending June 30, 2022.
In March 2020, the GASB issued Statement No. 93, Replacement of Interbank Offered Rates. The objective of this statement is to address those and other accou nting and financial reporting implications that result from the replacement of an interbank offered rate. The requirements of this statement are effective for the City’s fiscal year ending June 30, 2022.
In March 2020, the GASB issued Statement No. 94, Public‐Private and Public‐Public Partnerships and Availability Payment Arrangements. The objective of this Statement is to improve financial r e p o r t i n g b y a d d r e s s i n g i s s u e s r e l a t e d t o p u b l i c ‐ p r i v a t e a n d p ublic‐public partnership arrangements (PPPs). This statement also provides guidance for accounting and financial reporting for availability payment arrangements (APAs). As defi ned in this statement, an APA is an arrangement in which a government compensates an operator fo r services that may include designing, constructing, financing, maintaining, or operating an underlying nonfinancial asset for a period of time in an exchange or exchange‐like transaction. The requirements of this statement are effective for the City’s fiscal year ending June 30, 2023.
In May 2020, the GASB issued Statement No. 96, Subscription‐Based Information Technology Arrangements. This statement provides guidance on the accounting and finan cial reporting for subscription‐based information technology arrangements (SBITAs) for government end users (governments). This statement (1) defines a SBITA; (2) establishes that a SBITA results in a right‐ to‐use subscription asset—an intangible asset—and a correspondi ng subscription liability; (3) provides the capitalization criteria for outlays other than subscription payments, including implementation costs of a SBITA; and (4) requires note disclosu res regarding a SBITA. The requirements of this statement are effective for the City’s fiscal year ending June 30, 2023.
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
60 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(n) Effects of New Pronouncements (Continued)
In June 2020, the GASB issued Statement No. 97, Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans – an Amendment of GASB Statements No. 14 and No. 84, and a Supersession of GASB Statement No. 32.
The primary objectives of this statement are to (1) increase consistency and comparability related to the reporting of fiduciary component units in circumstances in which a potential component unit does not have a governing board and the primary government performs the duties that a governing board typically would perform; (2) mitigate costs ass ociated with the reporting of certain defined contribution pension plans, defined contribution other postemployment benefit (OPEB) plans, and employee benefit plans other than pension plans or OPEB plans (other employee benefit plans) as fiduciary component units in fiduciary fund financial statements; and (3) enhance the relevance, consistency, and comparability of the accounting and financial reporting for Internal Revenue Code (IRC) Section 457 deferred compensation plans (Section 457 plans) that meet the definition of a pension plan and for benef its provided through those plans.
The requirements of this statement are effective for the City’s fiscal year ending June 30, 2022.
(o) Use of Estimates
The accompanying basic financial statements have been prepared on the modified accrual and accrual basis of accounting in accordance with generally accept ed accounting principles. This requires management to make estimates and assumptions that affe ct the amounts reported in the financial statements and accompanying notes. Actual results c o u l d d i f f e r f r o m t h o s e estimates.
NOTE 2 – BUDGETS AND BUDGETARY ACCOUNTING
1. The City Manager submits proposed operating and capital budgets to the City Council for the fiscal year commencing the following July 1. The budget includes planned expenditures and the means of financing them.
2. Public hearings are conducted to obtain comments on the proposed budgets.
3. The budget is approved with the adoption of a budget ordinance for all funds except Custodial Funds.
4. Per the Palo Alto Municipal Code, only the City Manager is auth orized to reallocate funds from contingency accounts maintained in the General Fund. Amendments to appropriations to departments in the General Fund, to total appropriations for all other budgeted funds, or to transfer of appropriations between funds, require approval by the City C ouncil. Amendments to budgeted revenue and expenditures are added to or subtracted from the Ad opted Budget and the resulting totals are reflected as Final Budget amounts.
5. As defined in the Palo Alto Municipal Code, expenditures may not exceed budgeted appropriations at the department level for the General Fund, and at the fund leve l for Enterprise, Internal Service, Special Revenue and Debt Service Funds.
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
61 NOTE 2 – BUDGETS AND BUDGETARY ACCOUNTING (Continued)
6. Budgets for governmental funds are adopted on a basis consistent with generally accepted accounting principles (GAAP), except that unrealized gains or losses on investments, changes in advances to other funds and notes receivable are not recognized on a budgetary basis and encumbrances are treated as budgetary expenditures when incurred.
7. Expenditures for the Capital Projects Fund are budgeted and maintained at a project level for the life of the project. Budget to actual comparisons for these expendi tures have been excluded from the accompanying financial statements.
NOTE 3 – CASH AND INVESTMENTS
The City pools cash from all sources and all funds, except restricted bond proceeds with fiscal agents and Public Agency Retirement Services, and invests its pooled idle cash according to State of California law and the City’s Investment Policy. The basic principles underlying the City’s investment philosophy are to ensure the safety of public funds, ensure that sufficient funds are available to meet current expenditures, and achieve a reasonable rate of return on investments.
Policies
The City invests in individual investments and in investment pools. Individual investments are evidenced by specific identifiable securities instruments, or by an elect ronic entry registering the owner in the records of the institution issuing the security, called the book entry system. In order to increase security, the City employs the trust department of a bank as the custodian of certain City managed investments.
Classification
Cash and investments are classified in the financial statements as shown below, based on whether or not their use is restricted under the terms of City debt instruments or agreements (in thousands):
Governmental Business‐Type Fiduciary
Activities Activities Funds Total
Cash and investments:
Available for operations 310,091 $ 282,271 $ 3,276 $ 595,638$ With fiscal agents and trustees 133,264 3,340 2,705 139,309 Total cash and investments 443,355$ 285,611 $ 5,981 $ 734,947$
Investments Authorized by the City’s Investment Policy, Debt Agreements and Trust Agreements The table below summarizes the investment types that are authorized by the California Government Code (Code) and the City’s Investment Policy, and includes the interest rate risk, credit risk and concentration of credit risk as outlined in the Investment Policy. In additi on, the table discloses investment of debt proceeds held by bond trustees. These investments are governed by the provisions of each debt agreement of the City, rather than the general provisions of the City’s Investment Policy.
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Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
62 NOTE 3 – CASH AND INVESTMENTS (Continued)
Maximum
Maturity
Minimum Credit
Quality
Maximum
Percentage of
Portfolio
Maximum
Investment in
One Issuer
U.S. Government Securities 10 years (*) N/A No Limit No Limit U.S. Federal Agency Securities (C) 10 years (*) N/A No Limit (A) N o Limit Certificates of Deposit 10 years (*) N/A 20% 10% of the par value of
portfolio
Bankers Acceptances 180 days (D) N/A (D) 30% $5 million Commercial Paper 270 days A‐1 15% $3 million (B)
Local Agency Investment Fund N/A N/A No Limit $75 million per account
Short‐Term Repurchase Agreements 1 year N/A No Limit No Limit City of Palo Alto Bonds N/A N/A No Limit No Limit
Money Market Mutual Funds N/A N/A (E) No Limit No Limit Mutual Funds (F) N/A N/A 20% 10%
Negotiable Certificates of Deposit 10 years (*) N/A 10% $5 million Medium‐Term Corporate Notes 5 years AA 10% $5 million
10 years (*) AA/AA2 30% No Limit
5 years AA/AA2 20% 10% of the par
value of
portfolio
(A)
(B) The lesser of $3 million or 10% of outstanding commercial pa per of any one institution.
Debt Agreements:
(C)
(D)
(E)
(F)
(*) The maximum maturity is based on the Investment Policy that is approved by the City Council and is less restrictive than the California Government Code.
Utility Revenue Bonds 2011 Refunding, General Obligation Bonds 2010 and 2013A, and University Avenue Parking Bond 2012 are allowed to invest in the California Asset Management Program.
Authorized Investment Type
Bonds of State of California Municipal
Agencies & Other U.S. States
Callable and multi‐step securities are limited to no more than 25% of the par value of the portfolio, provided that: 1) the potential call dates are known at the time of purchase, 2) the interest rates at which they "step‐up" are known at the time of purchase, and 3) the entire face value of the security is redeemable at the call date.
Utility Revenue Bonds 2011 Refunding and 1999 Refunding allow general obligations of states with a minimum credit quality rating of A2/A by Moody's and Standard & Poor's.
Utility Revenue Bonds 2011 Refunding and 1999 Refunding require a minimum credit quality rating of A‐1/P‐1 by Moody's and Standard & Poor's and maturing after no more than 360 days.
Water Revenue Bonds 2009 Series A, Utility Revenue Bonds 2011 Refunding and 1999 Refunding require a minimum credit quality rating of AAAm or AAAm‐G by Standard & Poor's.
Supranational
The City must maintain required amounts of cash and investments with trustees 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 Code requires these funds to be invested in accordance with City ordinance, bond indentures or state statute. All of these funds have been invested as permitted under the Code and the investment policy approved by the City Council.
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
63 NOTE 3 – CASH AND INVESTMENTS (Continued)
The City has implemented investment guidelines for its Public Agencies Retirement Services (PARS) Trust which authoriz es th e in vestments in U.S. Treasury securities, federal agencies and U.S. guaranteed obligations, corporate notes, certificates of deposit, bankers’ acceptances, equities investments, and mutual funds.
Fair Value Measurements
The City categorizes its fair value measurements within the fai r value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure fair value of the assets. Level 1 inputs are quoted prices in an active market for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are sig nificant unobservable inputs. All of the investments are measured using level 2 inputs, except for inves tments in money market mutual funds, California Asset Management Program and Local Agency Investment Fund, which are not subject to the fair value hierarchy.
Investment securities classified in Level 2 of the fair value h ierarchy are valued using prices determined by the use of matrix pricing techniques maintained by the prici ng vendors for these securities. Matrix pricing is used to value securities based on the securities relationship to benchmark quoted prices.
The following is a summary of the fair value measurements of the City as of June 30, 2021 (in thousands):
Type of Investment June 30, 2021 Level 2
Investments by fair value hierarchy
U.S. Federal Agency Securities 243,526$ 243,526 $
U.S. Treasury Notes 13,680 13,680
Local Government Bonds 172,085 172,085
Negotiable Certificates of Deposit 36,271 36,271 Corporate Bonds 24,491 24,491
Supranational Bonds 31,792 31,792
Total investments by fair value hierarchy 521,845 521,845 $ Investment not subject to fair value hierarchy
Money Market Mutual Funds 103,428
Equity Mutual Funds (Irrevocable for Pension) 37,089
California Asset Management Program 3,304
Local Agency Investment Fund 67,394
Total investments not subject to fair value hierarchy 211,215 Total investments measured at fair value 733,060$
Local Agency Investment Fund
The City participates in the Local Agency Investment Fund (LAIF ) which, under the oversight of the Treasury of the State of California, is regulated by California Government Code Section 16429. LAIF management calculates the fair value and cost of the entire LAI F pool. The City adjusts its cost basis invested in LAIF to fair value based on this ratio. The fair v alue of the City’s position in the pool is the same as the value of the pool share. The balance available for withdrawal on demand is based on
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Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
64 NOTE 3 – CASH AND INVESTMENTS (Continued)
accounting records maintained by LAIF, which are recorded on an amortized cost basis. LAIF is part of the State’s Pooled Money Investment Account (PMIA). The total balance of the PMIA is approximately $193.3 billion as of June 30, 2021. Of that amount, 97.7 percent was invested in nonderivative financial products and 2.3 percent in structured notes and asset backed securities . At June 30, 2021, LAIF had a weighted average maturity of 291 days.
Money Market Mutual Funds
Money market mutual funds are available for withdrawal on demand and at June 30, 2021, had a weighted average maturity of approximately 1 month.
California Asset Management Program
The City is a voluntary participant in the California Asset Man agement Program (CAMP). CAMP is an investment pool offered by the California Asset Management Trust (the Trust). The Trust is a joint powers authority and public agency created by the Declaration of Trust and established under the provisions of the California Joint Exercise of Powers Act (California Governm ent Code Sections 6500 et seq., or the “Act”) for the purpose of exercising the common power of its pa rticipants to invest certain proceeds of debt issues and surplus funds. The City’s investments are limited to investments permitted by subdivisions (a) to (n), inclusive, of Section 53601 of the California Government Code. The City reports its investments in CAMP at the fair value amounts provided by CAMP, which is the same as the value of the pool share. At June 30, 2021, the fair value approximated the City’s cost. CAMP had a weighted average maturity of 52 days at June 30, 2021.
Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates may adversely affect the fair value of an investment. Normally, the longer the maturity of an investment, the greater the sensitivity its fair value is to changes in market interest rates. As of June 30, 2021, th e City’s investments consisted of the following (in thousands):
Type of Investment
Less Than
One Year
One to
Three Years
Three to
Five Years
Over
Five Years Total
U.S. Federal Agency Securities 23,669$ 50,617 $ 75,136 $ 94,104 $ 243,526 $ U.S. Treasury Notes 1,517 9,215 2,948 ‐ 13,680 Local Government Bonds 24,545 27,492 47,841 72,207 172,085 Corporate Bonds 860 7,547 16,084 ‐ 24,491 Money Market Mutual Funds 103,428 ‐ ‐ ‐ 103,428 Equity Mutual Funds
(Irrevocable for Pension) 37,089 ‐ ‐ ‐ 37,089 Negotiable Certificates of Deposit 10,287 12,527 9,801 3,656 36,271 California Asset Management Program 3,304 ‐ ‐ ‐ 3,304 Supranational Bonds ‐ 4,257 27,535 ‐ 31,792 Local Agency Investment Fund 67,394 ‐ ‐ ‐ 67,394 Total Investments 272,093 $ 111,655 $ 179,345 $ 169,967 $ 733,060 Cash in bank and on hand 1,887
Total Cash and Investments 734,947$
Maturities
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Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
65 NOTE 3 – CASH AND INVESTMENTS (Continued)
Investment with Fair Values Highly Sensitive to Interest Rate Fluctuations At June 30, 2021, the City’s investments (including investments held by bond trustees) include U.S. Federal Agency Callable Securities totaling $137.0 million. These investments are highly sensitive to interest rate fluctuations (to a greater degree than already indicated in the information provided above) and are subject to early redemption.
Credit Risk
Credit risk is the risk that an issuer of an investment will no t fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization.
Presented below is the actual rating as provided by Standard & Poor’s, Moody’s and/or Fitch’s investment rating system as of June 30, 2021, for each investment type (in thousands):
Type of Investment Rating Total
U.S. Federal Agency Securities AA+ 243,526$
Corporate Bonds AAA 19,076
AA+ 5,415
Total Corporate Bonds 24,491
Local Government Bonds AAA 52,338
AA+ 50,433
AA 41,241
N/A 28,073
Total Government Bonds 172,085
Supranational Bonds AAA 31,792
Money Market Mutual Funds AAA 103,428
Subtotal rated investments 575,322
Not Applicable:
U.S. Treasury Notes 13,680
Not Rated:
California Asset Management Program 3,304
Local Agency Investment Fund 67,394
Negotiable Certificates of Deposit 36,271
Equity Mutual Funds (Irrevocable for Pension) 37,089
Cash in bank and on hand 1,887
Total Cash and Investments 734,947 $
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Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
66 NOTE 3 – CASH AND INVESTMENTS (Continued)
Concentration of Credit Risk
Investments in any one issuer, other than U.S. Treasury securities, mutual funds, and external investment pools, that represent 5 percent or more of total City portfolio investments are as follows at June 30, 2021 (in thousands):
Investments Reporting Type Fair Value at Year‐End
Federal Agricultural Mortgage Corporation U.S. Federal Agency Se curities 88,423$ Federal Home Loan Mortgage Corporation U.S. Federal Agency Secur ities 45,987 Federal Home Loan Bank U.S. Federal Agency Securities 43,991 Federal Farm Credit Bank U.S. Federal Agency Securities 39,439
Custodial Credit Risk
California law requires banks and savings and loan institutions to pledge government securities with a market value of 110 percent of the City’s cash on deposit or first trust deed mortgage notes with a value of 150 percent of the deposit as collateral for these deposits. Under California Law, this collateral is considered held in the City’s name and places the City ahead of general creditors of the institution. The City has waived collateral requirements for the portion of deposits covered by federal deposit insurance.
The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, the City will not be able to recover the value o f its investment or collateral securities that are in the possession of another party. The City’s Investment Policy limits its exposure to custodial credit risk by requiring that all security transactions entered into by the City be conducted on a delivery‐versus‐ payment basis. Securities are to be held by a third‐party custodian.
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
67 NOTE 4 – INTERFUND TRANSACTIONS
Transfers Between Funds
With Council approval, resources may be transferred from one City fund to another. The purpose of the majority of transfers is to subsidize a fund. Less often, a tr ansfer may be made to open or close a fund.
Transfers between City funds during fiscal year 2021 were as follows on the following page (in thousands):
Fund Making Transfer
Amount
Transferred
General Fund Nonmajor Governmental Funds 394 $ A Electric Services Fund 13 ,639 B
Gas Services Fund 6,847 B
20,880
Capital Projects Fund General Fund 9,294 C Nonmajor Governmental Funds 9,170 C
Water Services Fund 84 C
Electric Services Fund 165 C
Fiber Optics Fund 10 C
Gas Services Fund 69 C
Wastewater Collection Fund 41 C Refuse Fund 10 C
Storm Drainage Fund 150 C
Internal Service Funds 205 C
19,198
Nonmajor Governmental Funds General Fund 1,019 A Capital Projects Fund 2,380 A
Water Services Fund 13 A
Electric Services Fund 24 A
Fiber Optics Fund 1 A
Gas Services Fund 10 A
Wastewater Collection Fund 6 A Internal Service Funds 27 A
3,480
Water Services Fund Gas Services Fund 279 C Wastewater Collection Fund 278 C
557
Electric Services Fund General Fund 2,082 D Water Services Fund 137 C
Gas Services Fund 136 C
Fiber Optics Fund 102 C
Internal Service Funds 125 C
2,582
Internal Service Funds General Fund 1,225 E Water Services Fund 34 E
Electric Services Fund 117 E
Fiber Optics Fund 5 E
Gas Services Fund 28 E
Wastewater Collection Fund 17 E Refuse Fund 20 E
Storm Drainage Services Fund 4 E Internal Service Funds 2,347 F
3,797
Total 50,494 $
Fund Receiving Transfer
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Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
68 NOTE 4 – INTERFUND TRANSACTIONS (Continued)
The reasons for these transfers are set forth below:
(A) Transfer to fund street maintenance activities, to pay debt ser vice, fund City employee parking, and to return unspent project funds.
(B) Transfer to fund the return of initial investment made by gener al fund when utility department was created.
(C) Transfers of funds to construct, purchase or maintain capital assets. (D) Transfer to fund electricity costs associated with City streetlight and traffic signal costs. (E) Transfer to fund replacement and maintenance of critical desktop , s o f t w a r e , i n f r a s t r u c t u r e , vehicles and equipment.
(F) Transfer to fund for retiree healthcare.
Current Interfund Balances
Current interfund balances arise in the normal course of busine ss and are expected to be repaid shortly after the end of the fiscal year. At June 30, 2021, the non‐ma jor Street Improvement Special Revenue Fund, the non‐major Federal Revenue Special Revenue Fund, and the non‐major Airport Enterprise Fund owed the General Fund $206,000, $135,000, and $602,000, respectively.
Long‐Term Interfund Advance
On December 6, 2010, the City Council accepted an Airport Busin ess Plan of the Palo Alto Airport (PAO) and approved creation of the Airport Enterprise Fund to facilitate the transition of PAO control from the County of Santa Clara to the City. The City Council approved s ix separate general fund advances to the non‐major Airport Enterprise Fund. All advances bear interest equal to the average return yield on the City’s investment portfolio. The six separate advances and interest incurred have been consolidated and are scheduled to be repaid by June 2034. At June 30, 2021, the outstanding advances was $3.0 million.
Internal Balances
Internal balances represent the net interfund receivables and payables remaining after the elimination of all such balances within governmental and business‐type activities.
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Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
69 NOTE 5 – NOTES AND LOANS RECEIVABLE
At June 30, 2021, the City’s notes and loans receivable totaled (in thousands):
Palo Alto Housing Corporation:
Tree House Apartments 5,344 $
Emerson Street Project 375
Alma Single Room Occupancy Development 2,222
Barker Hotel 2,111
Sheridan Apartments 2,222
Oak Court Apartments, L.P. 7,834
El Dorado Palace, LLC 150
Mid‐Peninsula Housing Coalition:
Palo Alto Gardens Apartments 100
Community Working Group, Inc. 1,280
Opportunity Center Associates, L.P. 945
Home Rehabilitation Loans 46
Executive Relocation Assistance Loans 826
Below Market Rate Assessment Loans 53
Oak Manor Townhouse Water System 114
Lytton Gardens Assisted Living 101
Emergency Housing Consortium 75
Alma Gardens Apartments 1,150
2811‐2825 Alma Street Acquisition 1,890
Palo Alto Family Housing, 801 Alma Street 6,422
Palo Alto Senior Housing Project ‐ Stevenson House, LP 901 MP Palo Alto Garden, LLC 672
Colorado Park Housing Corporation 204
Buena Vista Mobile Home Park – Santa Clara County 14,500 Wilton Court Apartments 18,752
Total Notes and Loans Receivable 49,537
Less: Valuation Allowance (14,612)
Total Notes and Loans Receivable, Net 53,677$
Housing Loans
The City engages in programs designed to encourage construction or improvement in low‐to‐moderate income housing or other projects. Under these programs, grants or loans are provided under favorable terms to homeowners or developers who agree to spend these funds in accordance with the City’s terms.
These loans have been offset by restricted or committed fund ba lances, as they are not expected to be repaid immediately.
Some of these loans contain forgiveness clauses that provide for the amount loaned to be forgiven if the third party maintains compliance with the terms of the loan and associated regulatory agreements. Since some of these loans are secured by trust deeds that are subordi nated to other debt on the associated projects or are only repayable from residual cash receipts on t he projects, collectability of some of the outstanding balances may not be realized. As a result of the f orgiveness clauses and nature of these housing projects and associated cash flows, a portion of the ou tstanding balances of the loans has been offset by a valuation allowance.
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
70 NOTE 5 – NOTES AND LOANS RECEIVABLE (Continued)
Tree House Apartments
In March 2009, the City agreed to loan $2.8 million to Tree House Apartments, L.P. (THA) for the purchase of the real property located at 488 West Charleston Road. The loan accrues simple interest at the rate of 3 percent per annum. The loan was funded with $1.8 million of C ommunity Development Block Grant (CDBG) funds and $1.0 million of residential housing funds. An additional development loan in the amount of $2.5 million was approved by the City on October 18, 2010. Principal and interest payments will be deferred, however if the borrower has earned extra income, and if it is acceptable to the other entities providing final permanent sources of funds, payment of interest and principal based on the City’s proportionate share of the project’s residual receipts from net operating income shall be made by the borrower. In no event shall full payment be made by the borrow er later than concurrently with the expiration or earlier termination of the loan agreement, which is December 31, 2067.
Emerson Street Project
On November 8, 1994, the City loaned $375,000 to Palo Alto Hous ing Corporation (PAHC) for expenses necessary to acquire an apartment complex for the preservation of rental housing for low and very low‐ income households in the City. This loan is collateralized by a second deed of trust. The loan bears interest at 3 percent.
Alma Single Room Occupancy Development
On December 13, 1996, the City loaned $2.2 million to Alma Plac e Associates, L.P. for development of a 107‐unit single room occupancy development. This loan bears interest at 3 percent and is collateralized by a subordinated deed of trust. The principal balance is due in 2041.
Barker Hotel
On April 12, 1994, the City loaned a total of $2.1 million for the preservation, rehabilitation and expansion of a low‐income, single occupancy hotel. This loan was funded by three sources: $400,000 from the Housing In‐Lieu Fund, $1.0 million from HOME Investment Partnership Program Funds, and $670,000 from CDBG funds. All three notes bear no interest and are collateral i z ed b y a d eed of tru st , wh i ch i s subordinated to private financing. Loan repayments are deferred until 2035.
In July 2004, the City agreed to loan up to $41,000 to PAHC to rehabilitate the interior of the Barker Hotel.
The loan was funded with CDBG funds and is collateralized by a deed of trust on the property. Annual loan payments are deferred until certain criteria defined in the loan agreement are reached. The loan will be forgiven if the borrower satisfactorily complies with all terms and conditions of the loan agreement.
Sheridan Apartments
On December 8, 1998, the City loaned $2.2 million to PAHC for t he purchase and rehabilitation of a 57‐ unit apartment complex to be used for senior and low‐income housing (Sheridan Apartments). The loan was funded with $1.6 million in CDBG funds, and $825,000 of Hou sing In‐Lieu funds. The note is collateralized by a second deed of trust and an affordability reserve account held by PAHC. The loan was amended in June 2017. It will not accrue interest between May 1, 2017 and March 1, 2030. The loan will be forgiven on June 30, 2030 if PAHC uses the funds that would otherwise have been due to the City for another affordable housing project.
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
71 NOTE 5 – NOTES AND LOANS RECEIVABLE (Continued)
Oak Court Apartments, L.P.
On August 18, 2003, the City loaned $5.9 million to PAHC for the purchase of land. The note bears interest of 5 percent and is secured by a deed of trust. Note payments are due annually after 55 years, or beginning in 2058, unless PAHC elects to extend the note until 2102, as d efined in the regulatory agreement. The City also loaned $1.9 million to Oak Court Apartments, L.P. for the construction of a 53‐unit rental apartment complex for low and very low‐income households with children, which was completed in April 2005. The note bears no interest until certain criteria defined in the note are satisfied, at which time the note will bear an interest rate not to exceed 3 percent. The n ote is secured by a subordinate deed of trust. The principal balance is due in 2060.
El Dorado Palace, LLC
On June 22, 2015, the City approved a loan to PAHC in the amount of $375,000 to increase the supply of affordable low income housing in the City. The City loaned $52,000 and $13,000 in June 2017 and March 2018, respectively. In February 2019, the City loaned an additional $85,000. The loan bears three percent (3%) interest, however in the event of default will accrue at the lesser of 8% or the highest rate permitted by law. The term of the loan shall expire 55 years unless the City agree to extend an additional 44 years.
As of June 30, 2021, the outstanding balance was $150,000.
Palo Alto Gardens Apartments
On April 22, 1999, the City loaned $1.0 million to Mid‐Peninsula Housing Coalition (the Coalition) for the purchase and rehabilitation of a 155‐unit complex for the continuation of low‐income housing. The loan was funded with $659,000 of CDBG funds and $341,000 of Housing In‐Lieu funds. The two notes bear interest at 3 percent and are secured by second deeds of trust and a City Affordability Reserve Account held by the Coalition. The remaining principal balance is due in 2039. As of June 30, 2021, the outstanding balance was $100,000.
Community Working Group, Inc.
On May 13, 2002, the City loaned $1.3 million to Community Work ing Group, Inc. for predevelopment, relocation and acquisition of land for development of an 89‐unit complex and homeless service center for very low income households. The loan was funded with $1.3 mill ion of CDBG funds. The note bears no interest and is secured by a first deed of trust. No repayment is required as long as the borrower complies with all terms and conditions of the agreement. After 89 years of compliance with the regulatory agreement, the City’s loan would convert to a grant and its deed of trust would be re‐conveyed.
Opportunity Center Associates, L.P.
On July 19, 2004, the City loaned $750,000 for a 55‐year term t o Opportunity Center Associates, L.P. for construction of 89 units of rental housing for extremely low‐in come and very low‐income households.
The loan was funded with $750,000 of residential housing funds. The note bears 3 percent interest and is secured by a deed of trust. The loan remains outstanding and becomes due at the end of the 55‐year term. During fiscal year 2019, the City received $25,000 in principal payments. On April 17, 2019, the City approved up to an additional $220,000 loan drawn from CDBG for the improvement of rental housing. In February 2019 and April 2019, the City loaned $191,000 and $29, 000, respectively. The note bears 3 percent interest, and all payments of interest and principal shall be deferred until July 19, 2103. The loan balance owed as of June 30, 2021 was $945,000.
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
72 NOTE 5 – NOTES AND LOANS RECEIVABLE (Continued)
Home Rehabilitation Loans
The City administers a closed housing rehabilitation loan program initially funded with CDBG funds. Under this program, individuals with incomes below a certain level are eligible to receive low interest loans for rehabilitation work on their homes. These loans are secured by deeds of trust, which may be subordinated to subsequent encumbrances upon said real property with the prior written consent of the City. The loan repayments may be amortized over the life of the loans, deferred, or a combination of both.
Executive Relocation Assistance Loans
The City Council may authorize a mortgage loan as part of a rel ocation assistance package to executive staff. The loans are secured by first deeds of trust, and interest is adjusted annually based on the rate of return of invested funds of the City for the year ended June 30 plus one‐quarter of a percent. Principal and interest payments are due monthly. Employees must pay any outstanding balance on their loans within a certain period after ending employment with the City. During the year ended June 30, 2020, the City entered into a 30‐year loan with the City Manager for $845 ,000. The purchase cost for the City Manager’s home was $3.4 million and the City holds 75 percent equity share. During the year ended June 30, 2021, the City Manager paid $21,000 for capital improvements and $100,000 to the City to exercise a one‐time option to purchase a portion of the City’s equity share which decreased to 71.43 percent. As of June 30, 2021, the outstanding balance was $826,000.
Below Market Rate Assessment Loans
In December 2002, the City loaned $53,000 to below market rate homeowners with low incomes and/or very limited assets for capital repairs, special assessments an d improvements of their properties. The loans bear interest at 3 percent and are secured by a deed of trust on each property. Loan payments are deferred until 2032.
Oak Manor Townhouse Water System
On May 12, 2003, the City Council approved an allocation of $11 4,000 to Palo Alto Housing Corporation Apartments, Inc. (PAHCA) to replace the water pipes. Repayment of the loan will not be required unless the property is sold, the program is terminated or purpose of t he program is changed without City’s approval prior to July 1, 2033. The loan for this project is subordinated to the existing City loan with PAHCA dated January 7, 1991 for the acquisition of the project site, which is discussed earlier in this section.
Lytton Gardens Assisted Living
In June 2005, the City loaned $101,000 to Community Housing, Inc. to upgrade and modernize the existing kitchens at the senior residential facility known as Lytton Gar dens Assisted Living. The loan was funded with CDBG funds, and bears simple interest of 3 percent. Princ ipal and interest payments are deferred until July 1, 2035, as long as the borrower continues to comply with all terms and conditions of the agreement.
Emergency Housing Consortium
In November 2005, the City agreed to loan up to $75,000 to Emer gency Housing Consortium to cover architectural expenses that will be incurred in rehabilitating and expanding the property. The loan was funded with CDBG funds, and bears simple interest of 3 percent. Principal and interest payments are deferred until July 1, 2035, as long as the borrower continues to comply with all terms and conditions of the agreement.
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
73 NOTE 5 – NOTES AND LOANS RECEIVABLE (Continued)
Alma Garden Apartments
In March 2006, the City agreed to loan up to $1.2 million to Community Working Group, Inc. to acquire a 10‐unit multi‐family housing complex known as Alma Garden Apart ments. The loan was funded with CDBG funds. Principal and interest payments are deferred until July 1, 2061 as long as the borrower complies with all terms and conditions of the agreement.
2811‐2825 Alma Street Acquisition
On October 9, 2011, the City agreed to loan $1.3 million to PAHC to acquire properties on Alma Street for the purpose of developing an affordable rental housing project. On June 29, 2015, the City loaned PAHC an additional $0.6 million, and entered into an Amended and Res tated Acquisition and Development Agreement which combined the two loans for a total loan of $1.9 million. The loan term expires on December 8, 2066 with an option to extend the term for an addit ional 44 years. The loan bears simple interest of 3 percent, however in the event of default interest will accrue at the lesser of 8 percent or the highest rate permitted by law. Principal and interest payments are payable during the term of the agreement on a “residual receipt” basis as described in the agreement. All principal and interest is due in the event of an unauthorized transfer, a default or the expiration of the term.
Palo Alto Family Housing, 801 Alma Street
On February 14, 2011, the City agreed to loan Palo Alto Family, LP up to $9.3 million for the purposes of predevelopment expenses and acquiring certain real property for the Alma Street Affordable Multi‐Family Rental Housing Project. The loan bears simple interest of 3 per cent. Principal and interest are due and payable during the term of the agreement on a “residual receipt ” basis as described in the agreement.
Except in the case of default, all remaining principal and inte rest shall be payable on the Restriction Termination Date as defined in the agreement. As of June 30, 20 21, the outstanding amount is $6.4 million.
Palo Alto Senior Housing Project – Stevenson House, LP
On October 1, 2015, the City entered into an affordable housing fund loan agreement with PASHPI Stevenson House LP, a California limited partnership, in the principal amount of $1 million to assist in the rehabilitation of the Stevenson House. The loan bears simple in terest of 3 percent. As of June 30, 2021, the loan outstanding balance is $901,000 and is due at the end of the 55‐year term.
MP Palo Alto Garden, LLC
The City loaned $619,000 and $53,000 in March 2017 and October 2017, respectively, in CDBG funds for the rehabilitation of the property. The note bears 3% simple interest and shall be deferred until April 24, 2054. If there are no Events of Default prior to the end of the terms, the unpaid principal and interest will be treated as a grant and no repayment will be due to the City.
Colorado Park Housing Corporation
On September 8, 2014, the City entered into an affordable housi ng fund loan agreement with Colorado Park Housing Corporation (CPHC), a California nonprofit public benefit corporation, in the principal amount of $204,000. The loan bears no interest except in the ev ent of default. The principal and any accrued interest is due and payable on the earlier of (a) expir ation of the term, or (b) a default by CPHC which has not been cured as provided for in the agreement.
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
74 NOTE 5 – NOTES AND LOANS RECEIVABLE (Continued)
Buena Vista Mobile Home Park – Santa Clara County
In September 2017, the City entered into an agreement with the Santa Clara County Housing Authority (SCCHA) for the acquisition of Buena Vista Mobile Home Park. T he City loaned SCCHA $14.5 million for the acquisition. The City is entitled to twenty six percent of all residual receipts. Interest for the p r o m i s s o r y n o t e i s 3 % s i m p l e i n t e r e s t . P r i n c i p a l a n d i n t e r e s t payments commenced on September 30, 2019 and the note and all interest is payable in full on September 29, 2092.
Wilton Court Apartments
In October 2020, the City entered into a predevelopment and con struction loan agreement with Wilton ECR L.P. to construct approximately fifty‐nine (59) residential rental units on property located at 3703‐ 3709 El Camino Real with the City. Fifty‐eight (58) would be a ffordable to low, very low, and extremely low‐income households earning be tween thirty percent to sixty p ercent of area median income as determined by the United States Department of Housing and Urban Development, of which twenty‐one (21) of the units will be designated for persons with developme ntal disabilities. The City entered into a loan agreement with Wilton ECR L.P. in the amount of $18.8 mill ion. The loan bear interest rate of 0% until the date of the permanent closing and 3% commencing the date of the permanent closing. The loan matures on December 31, 2077. During the year, $18.8 million w as drawn. As of June 30, 2021, the outstanding balance was $18.8 million.
NOTE 6 – CAPITAL ASSETS
Valuation
Capital assets are valued at historical cost if purchased or co nstructed. Donated capital assets, donated works of art and similar items, and capital assets received in a service concession arrangement are recorded at acquisition value at the time received. The City’s policy is to capitalize all assets when costs are equal to or exceed $5,000 and the useful life exceeds one y ear. Infrastructure assets are capitalized when costs are equal to or exceed $100,000.
Proprietary fund capital assets are recorded at cost including significant interest costs incurred under restricted tax‐exempt borrowings, which finance the construction of capital assets. These interest costs, net of interest earned on investment of proceeds of such borrow ings, are capitalized and added to the cost of capital assets during the construction period. Maintenance and repairs are expensed as incurred.
The City has recorded all its public domain capital assets, consisting of roadway and recreation and open space, in its government‐wide financial statements. All capita l assets with limited useful lives are depreciated over their estimated useful lives. The purpose of depreciation is to spread the cost of capital assets equitably among all users over the life of those assets. The amount charged to depreciation expense each year represents that year’s pro rata share of the cost of capital assets.
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
75 NOTE 6 – CAPITAL ASSETS (Continued)
Depreciation of capital assets is charged as an expense against operations each year and the total amount of depreciation taken over the years, called accumulated deprec iation, is reported on the statement of net position as a reduction in the book value of capital assets.
Depreciation is calculated using the straight‐line method, which means the cost of the asset is divided by its expected useful life in years, and the result is charged to expense each year until the asset is fully depreciated. The City has assigned the useful lives listed below to capital assets.
Governmental Activities Years
Buildings and structures 20 ‐ 30
Equipment:
Computer equipment 3 ‐ 5
Office machinery and equipment 5
Machinery and equipment 5 ‐ 30
Intangible assets ‐ software 5‐20
Roadway network:
5 ‐ 40
Recreation and open space network:
25 ‐ 40
Business‐type Activities
Buildings and structures 25 ‐ 60
Vehicles and heavy equipment 3 ‐ 10
Machinery and equipment 10 ‐ 50
Transmission, distribution and treatment systems 10 ‐ 100 Includes pavement, striping and legends, curbs, gutters and sidewalks, parking lots, traffic signage, and bridges
Includes major park facilities, park trails, bike paths and medians
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
76 NOTE 6 – CAPITAL ASSETS (Continued)
Governmental Activities
Changes in the capital assets fo r governmental activities during the year ended June 30, 2021 were (in thousands):
Balance Balance
July 1, 2020 Additions Retirements Transfers June 30, 2021 Governmental activities
Nondepreciable capital assets:
Land and improvements 82,206 $ ‐ $ (75)$ ‐ $ 82,131$ Street trees 14,787 165 (127) ‐ 14,825 Intangible assets ‐ Easement 3,567 ‐ ‐ ‐ 3,567 Construction in progress 139,365 33,143 (11,934) (22,761) 137,813 Total nondepreciable capital assets 239,925 33,308 (12,136) (22,761) 238,336 Depreciable capital assets:
Buildings and structures 251,119 ‐ (25) 21,003 272,097 Intangible assets ‐ Software 279 ‐ ‐ ‐ 279 Equipment 15,737 217 (520) 1,758 17,192 Roadway network 335,202 ‐ ‐ ‐ 335,202 Recreation and open space network 35,186 ‐ ‐ ‐ 35,186 Total depreciable capital assets 637,523 217 (545) 22,761 659,956 Less accumulated depreciation:
Buildings and structures (105,984) (7,728) 1 ‐ (113,711) Intangible assets ‐ Software (279) ‐ ‐ ‐ (279) Equipment (8,856) (460) 389 ‐ (8,927) Roadway network (171,522) (7,694) ‐ ‐ (179,216) Recreation and open space network (15,867)
(1,254) ‐ ‐ (17,121) Total accumulated depreciation (302,508) (17,136) 390 ‐ (319,254) Depreciable capital assets, net 335,015 (16,919) (155) 22,761 340,702 Internal service fund capital assets
Construction in progress 2,723 2,864 ‐ ‐ 5,587 Equipment 63,476 1,964 (2,415) ‐ 63,025 Less accumulated depreciation (44,834) (3,153) 2,316 ‐ (45,671) Net internal service fund capital assets 21,365 1,675 (99) ‐ 22,941 Governmental activities capital assets, net 596,305 $ 18,064 $ (12,390) $ ‐ $ 601,979$
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
77 NOTE 6 – CAPITAL ASSETS (Continued)
Business‐Type Activities Capital Assets
Changes in the capital assets fo r the business‐type activities during the year ended June 30, 2021 were (in thousands):
Balance Balance
July 1, 2020 Additions Retirements Transfers June 30, 2021 Business‐type activities
Nondepreciable capital assets:
Land and improvements 4,973$ ‐ $ ‐ $ ‐ $ 4,973$ Construction in progress 121,096 38,420 ‐ (30,580) 128,936 Total nondepreciable capital assets 126,069 38,420 ‐ (30,580) 133,909 Depreciable capital assets:
Buildings and structures 74,568 ‐ ‐ ‐ 74,568 Infrastructure 633 ‐ ‐ ‐ 633 Transmission, distribution and treatment systems 884,791 572 (1,154) 30,580 914,789 Total depreciable capital assets 959,992 572 (1,154) 30,580 989,990 Less accumulated depreciation:
Buildings and structures (16,141) (1,393) ‐ ‐ (17,534) Infrastructure (65) (21) ‐ ‐ (86) Transmission, distribution and treatment systems (376,604) (22,192) 1,026 ‐ (397,770) Total accumulated depreciation (392,810) (23,606) 1,026 ‐ (415,390) Depreciable capital assets, net 567,182 (23,034) (128) 30,580 574,600 Business‐type activities capital assets, net 693,251 $ 15,386 $ (128) $ ‐ $ 708,509$
Capital Asset Contributions
Some capital assets may be acquired using federal and state grant funds, or they may be contributed by developers or other governments. Generally accepted accounting principles require that these contributions be accounted for as revenues at the time the capital assets are contributed.
Depreciation Allocation
Depreciation expense was charged to functions and programs based on their usage of the related assets.
The amount allocated to each function or program is as follows (in thousands):
Governmental Activities Business‐type Activities
City Manager 22$ Water 3,127$
City Attorney 1 Electric 8,637
City Clerk 4 Fiber Optics 420
City Auditor 1 Gas 3,409
Administrative Services 4 Wastewater Collection 2,849 Public Works 10,530 Wastewater Treatment 4,143 Planning and Development Services 419 Refuse 81 Office of Transportation 9 Storm Drainage 871 Police 89 Airport 69
Fire 392 23,606$
Community Services 3,297
Library 2,368
Internal Service Funds 3,153
20,289$
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
78 NOTE 6 – CAPITAL ASSETS (Continued)
Construction In Progress
Construction in progress as of June 30, 2021 is comprised of the following (in thousands):
Governmental Activities
Expended to
June 30, 2021
California Avenue Parking Garage 48,522 $
Highway 101 Pedestrian/Bicycle Overpass 19,617
New Public Safety Building 17,163
Charleston/Arastradero Corridor 13,136
Bicycle Boulevards Implementation Project 9,163
Traffic Signal Upgrades 4,875
Railroad Grade Separation 3,772
Technology Fund 3,748
JMZ Renovation 2,928
Animal Shelter Renovation 2,739
Rincondada Park Improvements 2,508
Vehicle Fund 1,839
Newell Road Bridge/SFC Bridge Replacement 1,829
Cubberley Track and Field Replacement 1,808
New Downtown Parking Garage 1,440
Quarry Road 1,282
Art in Public Places 1,027
Tennis & Basketball Court Resurfacing 908
Municipal Service Center Improvements 571
Emerg Vehicle Traffic Signal Preempt Sys 486
Park Wayfinding Design 475
Civic Center Electrical Upgrade 416
Other construction in progress 3,148
Total Governmental Activities 143,400 $
Business‐type Activities
Expended to
June 30, 2021
Airport's Apron Reconstruction 30,464 $
Electric distribution system improvements 22,752
Gas system extension replacements and improvements 17,800 Storm drainage structural and water quality improvements 11,779 Water quality control plant equipment replacement and lab facil ities 7,528 Sewer system rehabilitation and extensions 4,241
Water system extension replacements and improvements 2,958 Other electrical improvements projects 2,148
Other construction in progress 29,266
Total Business‐type Activities 128,936 $
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
79 NOTE 6 – CAPITAL ASSETS (Continued)
Construction In Progress Commitments
Major governmental capital projects that are currently in progress, and the remaining capital commitment of each, are as follows:
New Public Safety Building ‐ $97.1 million
Charleston Arastradero Corridor – $7.4 million
Municipal Service Center Improvements ‐ $6.0 million
Churchill Ave/Alma ‐ $4.2 million
Railroad Grade Separation ‐ $4.0 million
Highway 101 Pedestrian/Bicycle Overpass ‐ $3.7 million Vehicle Replacements ‐ $3.3 million
Major business‐type capital projects that are currently in progress, and the remaining capital commitment of each, are as follows:
Seismic Water Systems Upgrades ‐ $5.3 million
Gas Main Replacement Project 23 ‐ $6.9 million
Primary Sedimentation Tank Rehabilitation ‐ $11.8 million Airport Apron Reconstruction Phase 1 ‐ $23.3 million
Vehicle Registration Fees (VRF)
In fiscal year 2021, the City received VRF funds from the Santa Clara Valley Transportation Authority and expended the full amount on capital expenditures for the Overla y Resurfacing Project (PE‐86070) (in thousands):
Starting VRF balance July 1, 2020 ‐ $
VRF revenue 444
VRF interest earned 2
VRF expense (446)
Ending VRF balance June 30, 2021 ‐ $
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
80 NOTE 7 – LONG‐TERM DEBT
The City’s long‐term debt balances and activities, other than special assessment debt discussed in Note 8, are as follows (in thousands):
Original Balance Balance Current
Issue Amount July 1, 2020 Additions Retirements June 30, 2021 Portio n Governmental Activities Debt:
2010 General Obligation Bonds,
3.25% ‐ 5%, due 08/01/2040 55,305$ 43,295 $ ‐ $ 1,330$ 41,965 $ 1,395 $ 2013A General Obligation Bonds,
2 ‐ 5%, due 08/01/2041 20,695 15,480 ‐ 450 15,030 465 2018 Captial Improvement Project
and Refinancing Certficates of Participation,
2.2%‐ 4.22%, due 11/1/2047 8,970 8,755 ‐ 185 8,570 190 2019 California Ave Parking Garage
Certficates of Participation, Series A & B
2.5%‐5%, due 11/1/2048 37,370 36,995 ‐ 630 36,365 645 2021 Public Safety Building
Certficates of Participation,
2%‐5%, due 11/1/2050 101,505 ‐ 101,505 ‐ 101,505 ‐ Add: Unamortized Premium ‐ 7,980 6,524 405 14,099 569 Total Governmental Activities Debt 223,845 $ 112,505 $ 108,029 $ 3,000 $ 217,534$ 3,264 $
Original Issue
Amount
Balance
July 1, 2020 Additions Retirements
Balance
June 30, 2021
Current
Portion
Business‐type Activities Debt:
Utility Revenue Bonds
1999 Refunding,
5.125‐5.25%, due 06/01/2024
17,735$ 6,660 $ ‐ $ 1,540 $ 5,120 $ 1,620 $ 2009 Series A,
1.80‐5.95%, due 06/01/2035
35,015 25,510 ‐ 1,180 24,330 1,235 2011 Refunding,
3‐4%, due 06/01/2035
17,225 7,890 ‐ 1,210 6,680 1,260 Add: Unamortized Premium ‐ 479 ‐ 81 398 ‐ Energy Tax Credit Bonds
2007 Series A, 0%, Due 12/15/2021 1,500 200 ‐ 100 100 100 Less: Unamortized Discount ‐ (11) ‐ (5) (6) ‐ Total Bonds 71,475 40,728 ‐ 4,106 36,622 4,215 State Water Resources Loans
Direct Borrowings:
2007, 1.02%, due 06/30/2029 9,000 4,050 ‐ 450 3,600 450 2009, 2.6%, due 11/30/2030 8,500 5,258 ‐ 419 4,839 430 2017, 1.8%, due 5/31/2049 29,684 24,500 ‐ 651 23,849 662 Total Direct Borrowings 47,184 33,808 ‐ 1,520 32,288 1,542 Total Business‐type Activities Debt 118,659 $ 74,536 $ ‐ $ 5,626$ 68,910 $ 5,757 $
Bond premiums and discounts of long‐term debt issues are amortized over the life of the related debt.
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
81 NOTE 7 – LONG‐TERM DEBT (Continued)
Description of Long‐Term Debt Issues
2010 General Obligation Bonds (2010 GO Bonds) – On June 30, 2010, the City issued $55.3 million of 2010 GO Bonds to finance costs for constructing a new Mitchell Park Library and Community Center, and to fund substantial improvements to the Rinconada Library and the Downtown Library. Principal payments are due annually on August 1 and interest payments semi‐annuall y on February 1 and August 1 and are payable from property tax revenues.
On June 28, 2016, the City defeased $2.3 million of 2010 GO Bon ds using funds from bond premiums received at time of issue by depositing the amount in an irrevo cable trust account. The trust account assets and the liability for the defeased bonds are not included in the City’s financial statements. The City defeased amount was paid off on August 1, 2020.
2013A General Obligation Bonds (2013A GO Bonds) – On June 30, 2013, the City issued $20.7 million of 2013A GO Bonds to finance costs for constructing a new Mitchell Park Library and Community Center, as well as making substantial improvements to the Rinconada Librar y and the Downtown Library. Principal payments are due annually on August 1 and interest payments semi‐annually on February 1 and August 1 from 2 percent to 5 percent, and are payable from property tax revenues.
On June 28, 2016, the City defeased $2.8 million of 2013A GO Bonds using funds remaining at completion of the project by depositing the amount in an irrevocable trust account. The trust account assets and the liability for the defeased bonds are not included in the City’s financial statements. The City legally remains the primary obligor on the $2.8 million of defeased bonds until they are paid on August 1, 2023.
The City’s 2010 and 2013A GO Bonds are general obligations of the City, secured and payable solely from ad valorem property taxes levied by the City and collected by t he County of Santa Clara. The City is empowered and obligated to annually levy ad valorem taxes for the payment of the Bonds and the interest thereon upon all property within the City subject to taxation b y the City, without limitation of rate or amount (except certain personal property which is taxable at limited rates) until the final maturity dates of the bonds on August 1, 2040 and August 1, 2041 respectively. For the fiscal year ended June 30, 2021, the City received $4.3 million in ad valorem property taxes for principal of $1.8 million and interest of $2.6 million for the 2010 and 2013A GO Bonds.
2018 Capital Improvement (“Golf Course”) Project and Refinancin g Certificates of Participation (2018 COPs) – On June 1, 2018, the City issued taxable COPs of $9.0 million for the renovation of the Palo Alto Municipal Golf Course ($8.4 million) and to fully refinance the 2002B COPs ($0.6 million). There are two semi‐annual debt service payments, consisting of principal paym ents due annually on November 1 and interest payments due on May 1 and November 1, which are payable solely from and secured by the lease payments to be made by the City’s General Fund to the Public Improvement Corporation pursuant to the Lease Agreement. The leased property is the Palo Alto University Fire Station 1. The 2018 COPs has a final maturity date of November 1, 2047.
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
82 NOTE 7 – LONG‐TERM DEBT (Continued)
2019 California Avenue Parking Garage Series A and B Certificat es of Participation (2019A and 2009B COPs) – On March 21, 2019, the City issued tax exempt 2019A COPs of $ 26.8 million and taxable 2019B COPs of $10.6 million for the construction of the California Avenue Parking Garage. There are two semi‐ annual debt service payments, consisting of principal payments due annually on November 1 and interest payments due on May 1 and November 1. The debt service is payable solely from and secured by the lease payments to be made by the City’s General Fund to the Public Improvement Corporation pursuant to the Lease Agreement. The leased property is the Rinconada Library and after construction and the substantial readiness of the California Avenue Parking Garage project, the garage will become the leased property.
The maturity dates for the 2019A COPs and 2019B COPs are Novemb er 1, 2044 and November 1, 2048, respectively. The reserve account requirement was waived due t o the City being a highly rated bond issuer.
2021 Public Safety Building Certificates of Participation (2021 COPs) – On March 24, 2021, the City issued taxable COPs of $101.5 million for the construction of the City’s new public safety building. There are two semi‐annual debt service payments, consisting of principal paym ents due annually on November 1 and interest payments due on May 1 and November 1. The debt service is payable solely from and secured by the lease payments to be made by the City’s General Fund to the Public Improvement Corporation pursuant to the Lease Agreement. The leased property is the Cit y’s Civic Center and after construction and the substantial readiness of the Public Safety Building pro ject, the new public safety building will become the leased property. The maturity date for the 2021 COPs is November 1, 2050. The reserve account requirement was waived due to the City being a highly rated bond issuer.
1999 Utility Revenue and Refunding Bonds – The City issued $17.7 million of Utility Revenue Bonds on June 1, 1999, to refund the 1990 Utility Revenue Refunding Bonds, Series A and the 1992 Utility Revenue Bonds, Series A, and to finance rehabilitation of two Wastewater Treatment sludge incinerators. The 1990 Utility Revenue Refunding Bonds, Series A and the 1992 Utility Revenue Bonds, Series A, were subsequently retired.
The 1999 Bonds are special obligations of the City payable solely from and secured by a pledge of and lien upon certain net revenues derived by the City’s sewer system and its storm and surface water system (the “Storm Drain System”). As of June 30, 2001, the 1999 Bonds had been allocated to and were repayable from net revenues of the following enterprise funds: Wastewater Collection (10.2 percent), Wastewater Treatment (64.6 percent) and Storm Drainage (25.2 percent). Principal payments are payable annually on June 1 and interest payments semi‐annually on June 1 and December 1. The bonds have a final maturity date of the June 1, 2024.
As required by the Indenture, the City established a Reserve Account with a Reserve Requirement. At the time it issued the Bonds, the City satisfied the Reserve Requir ement with a deposit into the Reserve Account of a surety bond issued by Ambac Indemnity Corporation (renamed to Ambac Assurance Corporation in 1997).
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
83 NOTE 7 – LONG‐TERM DEBT (Continued)
The pledge of future Net Revenues for the above bonds ends upon repayment of the $5.1 million principal and $0.5 million interest as the remaining debt service on the bonds, which is scheduled to occur in fiscal year 2024. For fiscal year 2021, Net Revenues, including operat ing revenues and non‐operating interest earnings, amounted to $59.1 million; operating costs, including operating expenses but not interest, depreciation or amortization, amounted to $43.3 million. Net Revenues available for debt service amounted to $15.8 million, which represents coverage of 8.4 times over the $1.9 million in debt service.
2009 Water Revenue Bonds, Series A – On October 6, 2009, the City issued $35.0 million of Water Revenue Bonds to finance certain improvements to the City’s water utility system. Principal payments are due annually on June 1, and interest payments are due semi‐annu ally on June 1 and December 1 from
1.80 percent to 5.95 percent. The 2009 Revenue Bonds are secure d by net revenues generated by the Water Services Fund. The 2009 Bonds were issued as bonds designated as “Direct Payment Build America Bonds” under the provisions of the American Recovery and Reinve stment Act of 2009 (“Build America Bonds”). The City expects to receive a cash subsidy payment from the United States Treasury equal to 35 percent of the interest payable on the 2009 Bonds. The lien of the 1995 Bonds on the Net Revenues is senior to the lien on Net Revenues securing the 2009 Bonds and the 2011 Bonds. The City received subsidy payments amounting to $462,000, which represents 30.8 percent o f the interest payments due on December 1 and June 1.
The pledge of future Net Revenues for the above bonds ends upon repayment of the $24.3 million principal and $11.6 million intere st as the remaining debt serv ice on the bonds, which is scheduled to occur in fiscal year 2035. For fiscal year 2021, Net Revenues, including operating revenues and non‐ operating interest earnings, amounted to $49.2 million; operating costs, including operating expenses but not interest, depreciation or amortization, amounted to $39.2 m illion. Net Revenues available for debt service amounted to $10.0 million, which represented coverage of 3.9 times over the $2.6 million in debt service.
2011 Utility Revenue Refunding Bonds – On September 8, 2011, the City issued $17.2 million in Lease Revenue Bonds (2011 Bonds) to refund the outstanding 2002 Series A Utility Revenue Bonds (2002 Bonds) on a current basis. The 2002 Bonds were issued to finance impro vement to the City’s municipal water utility system and the natural gas utility system. Principal of the 2011 Bonds is payable annually on June 1, and interest on the 2011 Bonds is payable semi‐annually on June 1 and December 1. The 2011 Bonds are secured by net revenues generated by the Water Services and Gas Services Funds.
The pledge of future Net Revenues of the above bonds ends upon repayment of the $6.7 million principal and $0.6 million interest as remaining debt service on the bonds, which is scheduled to occur in fiscal year 2026. For fiscal year 2021, Net Revenues, including operating r evenues and non‐operating interest earnings, amounted to $88.9 million; operating costs, including operating expenses but not interest, depreciation or amortization, amounted to $64.5 million. Net Revenues available for debt service amounted to $24.4 million, which represented coverage of 16.7 times over the $1.5 million in debt service.
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
84 NOTE 7 –LONG‐TERM DEBT (Continued)
2007 Electric System Clean Renewable Energy Tax Credit Bonds, S eries A – In October 2007, the City issued $1.5 million of Electric Utility Clean Renewable Energy Tax Credit Bonds (CREBs), 2007 Series A, to finance the City’s photovoltaic solar panel project. The CREBs do not bear interest. In lieu of receiving periodic interest payments, bondholders are allowed annual fede ral income tax credits in an amount equal to a credit rate for such CREBs multiplied by the outstanding principal amount of the CREBs owned by the bondholders. The CREBs are payable solely from and secured solely by a pledge of the Net Revenues of the Electric system and the other funds pledged under the Indenture.
The pledge of future Electric Fund Net Revenues ends upon repayment of the $0.1 million remaining debt service on the bonds, which is scheduled to occur in fiscal year 2022. For fiscal year 2021, Net Revenues, including operating revenues and non‐operating interest earnings, amounted to $163.2 million; operating costs, including operating expenses but not interest, depreciat ion or amortization, amounted to $140.2 million. Net Revenues available for debt service amounted to $23.0 million, which represented coverage of 229.7 times over the $0.1 million in debt service.
Direct Borrowing ‐ 2007 State Water Resources Loan – In October 2007, the City approved a $9 million direct loan agreement with State Water Resources Control Board (SWRCB) to finance the City’s Mountain View/Moffett Area reclaimed water pipeline project. Under the terms of the contract, the City has agreed to repay $9 million to the State in exchange for receiving $7.5 million in proceeds to be used to fund the Project. The difference of $1.5 million between the repayment o bligation and proceeds represents in‐ substance interest on the outstanding balance. Principal payments are payable annually on June 30.
Concurrently with the loan, the City entered into various other agreements including a cost sharing arrangement with the City of Mountain View. Pursuant to that agreement, City of Mountain View agreed to finance a portion of the project with a $6.0 million loan re payable to the City. This loan has been recorded as “Due from other government agencies” in the accompa nying financial statements. The balance due to the City at June 30, 2021 was $2.4 million.
Direct Borrowing ‐ 2009 State Water Resources Loan – In October 2009, the City approved an $8.5 million direct loan agreement with SWRCB to finance the City’s Ultravio let Disinfection project. Principal and interest payments are payable annually on November 30. The loa n interest rate is 2.60 percent which represents a combination of loan service charge and interest.
Direct Borrowing ‐ 2017 State Water Resources Loan ‐ In June 2017, the SWRCB and the City executed a direct loan agreement for an award up to $30 million, payable over 30 years to finance the replacement of sewage sludge “bio‐solids” incinerators at the City’s Regional Water Quality Control Plant (RWQCP). In September 2017, due to the projected lower project costs, the agreement was amended to a lower loan amount of $29.7 million. Under the terms of the agreement, a portion of the loan amount, $4.0 million, is federally funded and has been adjusted to reflect the correc t long term obligation balance. The loan interest rate is 1.80 percent.
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
85 NOTE 7 – LONG‐TERM DEBT (Continued)
The new facility will dewater the bio‐solids and allow the material to be loaded onto trucks and taken to a separate facility for further treatment. The RWQCP provides treatment and disposal for wastewater for P a l o A l t o , M o u n t a i n V i e w , L o s A l t o s , L o s A l t o s H i l l s , E a s t P a l o Alto Sanitary District, and Stanford University. Though Palo Alto is the recipient of the loan, the City’s agreement with the partner agencies oblige them to pay their proportionate share of the principal and interest of this loan. Palo Alto’s share of the loan payment is 38.2 percent with the partner agencies paying 61.8 percent.
Debt Service Requirements (in thousands):
Debt service requirements are shown below for all long‐term debt.
For the Year Ending
June 30 Principal Interest Total Principal Interest Total Principal Interest To tal 2022 2,695$ 7,762 $ 10,457$ 4,215$ 1,797 $ 6,012$ 1,542$ 317 $ 1,859$ 2023 2,795 7,462 10,257 4,300 1,616 5,916 1,566 300 1,866 2024 5,045 7,286 12,331 4,485 1,427 5,912 1,589 283 1,872 2025 5,280 7,062 12,342 2,790 1,229 4,019 1,613 266 1,879 2026 5,545 6,802 12,347 2,900 1,121 4,021 1,638 248 1,886 2027‐2031 32,115 29,450 61,565 8,645 4,178 12,823 7,679 962 8,641 2032‐2036 39,895 21,590 61,485 8,895 1,361 10,256 4,105 602 4,707 2037‐2041 45,720 13,356 59,076 ‐ ‐ ‐ 4,488 432 4,920 2042‐2046 33,080 6,842 39,922 ‐ ‐ ‐ 4,907 246 5,153 2047‐2051 31,265 1,836 33,101 ‐ ‐ ‐ 3,161 51 3,212 Total 203,435 $ 109,448 $ 312,883 $ 36,230 $ 12,729 $ 48,959 $ 32,288 $ 3,707 $ 35,995 $ Governmental Activities
Bonds Direct Borrowings
Business‐Type Activities
Debt Call Provisions
Long‐term debt as of June 30, 2021 is callable on the following terms and conditions:
Initial Call Date
Governmental Activities Long‐Term Debt
2010 General Obligation Bonds
$6.595 million due 08/01/2032 08/01/31 (2)
$4.890 million due 08/01/2034 08/01/33 (2)
$17.725 million due 08/01/2040 08/01/35 (2)
Business‐Type Activities Long‐Term Debt
Utility Revenue Bonds
1999 Refunding 06/01/09 (1)
2011 Refunding 06/01/21 (1)
(1) Callable in inverse numerical order of maturity at par plus a premium of 2 percent beginning on the initial call date. The call price declines subsequent to the initial date. (2) Callable in any order specified by the City at par value p lus any accrued interest beginning on the initial call date.
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
86 NOTE 7 – LONG‐TERM DEBT (Continued)
Leasing Arrangements
COPs and Capital Leases are issued for the purpose of financing the construction or acquisition of projects defined in each leasing arrangement. Projects are leased to the City for lease payments which, together with unspent proceeds of the leasing arrangement, will be sufficient to meet the debt service obligations of the leasing arrangement. At the termination of the leasing arrangement, title to the project will pass to the City.
Leasing arrangements are similar to debt in that they allow inv es tor s to p a rti ci p ate i n a sh are of guaranteed payments made by the City. Because they are similar to debt, the present value of the total payments to be made by the City is recorded as long‐term debt. The City’s leasing arrangements are included in long‐term obligations discussed above.
Events of Default and Acceleration Clauses
Generally, the City is considered to be in default if the City fails to pay the principal of and interest on the outstanding long‐term debt when become due and payable. If an event of default has occurred and is continuing, the principal of the long‐term debt, together with the accrued interest, may be declared due and payable immediately.
NOTE 8 – SPECIAL ASSESSMENT DEBT
Special Assessment Debt with no City Commitment
On February 29, 2012, the District issued Limited Obligation Refunding Improvement Bonds (2012 Bonds), but the City has no legal or moral liability with respect to the payment of this debt, which is secured only by assessments on properties in this District. The City is in no way for the repayment of the Bonds, but is only acting as an agent for the property owners in collecting the assessments, forwarding the collections to bondholders, and initiating foreclosure proceedings, when ap propriate. Therefore, this debt is not included in Governmental Activities long‐term debt of the City. At June 30, 2021, the District’s outstanding debt amounted to $17.9 million. The proceeds from the 2012 Bonds, combined with available Assessment Funds, were used to redeem the outstanding University Avenue Ar ea Off‐Street Parking Assessment District Series 2001‐A and Series 2002‐A Bonds. On June 28, 2016, the District defeased $1.6 million of the 2012 Bonds using funds remaining from completion of the project . The defeased debt will be paid on September 2, 2022. Reserve and redemption funds held by the District are reported within the University Avenue Area Off‐Street Parking Assessment District Custodial Fund.
NOTE 9 – LANDFILL POST‐CLOSURE MAINTENANCE
The 126‐acre Palo Alto Refuse Disposal Site (Palo Alto Landfill) was filled to capacity and stopped accepting waste in July 2011. State and federal laws and regulations req uire the City to construct a final cover to cap the waste, and to perform certain post‐closure maintenance and monitoring activities at the site for a minimum of thirty years after closure. As of November 2015, the Palo Alto Landfill has been fully capped and subsequently converted to a pastoral park (Byxbee Park) tha t is open to the public. A final post‐ closure maintenance plan and cost estimate for the thirty‐year post‐closure maintenance related activities
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
87 NOTE 9 – LANDFILL POST‐CLOSURE MAINTENANCE (Continued)
and corrective action costs was approved by State and local reg ulatory agencies in 2014. As required by the State, an updated five‐year post‐closure maintenance plan a nd cost estimate was submitted and approved in FY 2021. This cost estimate is adjusted annually for inflation at a percentage provided by the State. Landfill post‐closure liabilities as of June 30, 2021 are $6.2 million, a decrease of $0.9 million from the previous year. The City is required by State and federal la ws and regulations to fund post‐closure maintenance activities by pledging future revenue received from Refuse customers through rate fees.
NOTE 10 – NET POSITION AND FUND BALANCES
Net Position
Net Position is the excess of the City’s assets and deferred ou tflows of resources over its liabilities and deferred inflows of resources. Net position is divided into three categories that are described below:
Net Investment in Capital Assets describes the portion of net position, which is represented by current net book value of the City’s capital assets, less the outstanding b alance of any debt issued to finance these assets.
Restricted describes the portion of net position that is reduced by liabil ities related to restricted assets.
Generally, a liability relates to restricted assets if the asse t results from a resource flow that also results in the recognition of a liability or if the liability will be liquidated with the restricted assets reported.
Unrestricted describes the portion of net position which is not restricted as to use.
Fund Balances
Governmental funds report fund balances in classifications based primarily on the extent to which the City is bound to honor constraints on the specific purposes for which amounts in the funds can be spent. Fund balances for governmental funds are made up of the following:
Nonspendable – This category is comprised of amounts that are: (a) not in s pendable form, or (b) legally or contractually required to be maintained intact. The “not in spendable form” criterion includes items that are not expected to be converted to cash, for example: prepaid items. The corpus of the permanent fund is contractually required to be maintained intact.
Restricted – This category is comprised of amounts that can be spent only for the specific purposes stipulated by external resource providers, constitutionally or through enabling legislation. Restrictions may effectively be changed or lifted only with the consent of resource providers.
Committed – This category is comprised of amounts that can only be used for the specific purposes determined by the action that constitutes the most binding constraint (i.e. ordinance) of the City’s highest level of decision‐making authority, the City Council. Commitmen ts may be changed or lifted only by the City taking the same formal action that imposed the constraint originally.
Assigned – This category is comprised of amounts intended to be used by the City for specific purposes that are neither restricted nor committed. Intent is expressed by the City Council or the City Manager, to whom the City Council has delegated the authority to assign amounts to be used for specific purposes.
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
88 NOTE 10 – NET POSITION AND FUND BALANCES (Continued)
Unassigned –This category is the residual classification for the General Fund and includes all amounts not contained in the other classifications. Unassigned amounts are technically available for any purpose.
Other governmental funds may report negative unassigned fund balance, which occurs when a fund has a residual deficit after allocation of fund balance to the nonspendable, restricted or committed categories.
The fund balances of all governmental funds are presented by th e above‐mentioned categories on the face of the financial statements. In circumstances when an expenditure is made for a purpose for which amounts are available in multiple fund balance categories, fund balance is depleted in the order of restricted, committed, assigned, and unassigned.
The General Fund Budget Stabilization Reserve (BSR) is establis hed by authority of the General Fund Reserve Policy, which is approved by the City Council and inclu ded in the City’s annual adopted budget.
The BSR is maintained in the range of 15 to 20 percent of Gener al Fund expenditures and operating transfers, with a target of 18.5 percent. Any reserve level below 15 percent requires City Council approval.
At the discretion of the City Manager, a reserve balance above 18.5 percent may be transferred to the Infrastructure Reserve within the Capital Projects Fund. The purpose of the General Fund BSR is to fund unbudgeted, unanticipated one‐time costs. The BSR is not meant to fund ongoing, recurring General Fund expenditures.
As of June 30, 2021, total outstanding encumbrances and reappropriations related to governmental funds were $10.9 million for the General Fund, $148.0 million for the Capital Projects Fund, and $3.2 million for the Special Revenue Funds.
Enterprise Funds
At June 30, 2021, enterprise funds’ unrestricted net position (in thousands) were as follows:
Water Electric Fiber Optics Gas
Wastewater
Collection
Wastewater
Treatment Refuse
Storm
Drainage Airport Total
Unrestricted
Rate stabilization
Supply ‐ $ ‐ $ ‐ $ 2,766$ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ 2,766$ Distribution 9,070 ‐ 33,343 ‐ 342 (4,988) 20,014 4,745 (14,006) 48,520 9,070 ‐ 33,343 2,766 342 (4,988) 20,014 4,745 (14,006) 51,286 Operations
Supply ‐ 19,875 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 19,875 Distribution 20,773 10,026 ‐ 11,982 6,578 ‐ ‐ ‐ ‐ 49,359 20,773 29,901 ‐ 11,982 6,578 ‐ ‐ ‐ ‐ 69,234 Emergency plant replacement ‐ ‐ 1,000 ‐ ‐ 1,980 ‐ ‐ ‐ 2,980 Electric special projects ‐ 46,665 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 46,665 Reappropriations 4,451 10,050 202 443 716 ‐ ‐ 3,553 ‐ 19,415 Commitments 6,181 7,142 2,186 8,709 541 18,760 1,484 831 11,469 57,303 Underground loan ‐ 727 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 727 Notes and loans ‐ ‐ ‐ ‐ ‐ 1,651 ‐ ‐ ‐ 1,651 Landfill corrective action ‐ ‐ ‐ ‐ ‐ ‐ 681 ‐ ‐ 681 Hydro stabilization reserve ‐ 15,400 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 15,400 Public benefit program ‐ 3,028 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 3,028 Reserve for LCFS ‐ 6,944 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 6,944 CIP reserve 10,707 880 ‐ 3,820 3,178 ‐ ‐ ‐ ‐ 18,585 Geng Road reserve ‐ ‐ ‐ ‐ ‐ ‐ 268 ‐ ‐ 268 Cap & Trade ‐ 1,189 ‐ 4,542 ‐ ‐ ‐ ‐ ‐ 5,731 GASB 68 Pension (14,143) (34,212) (2,238) (14,792) (8,368) (21,278) (5,896) (3,987) (754) (105,668) GASB 75 OPEB (4,054) (13,233) (1) (5,849) (2,236) (6,945) (2,485) (1,094) (408) (36,305) Total 32,985 $ 74,481 $ 34,492 $ 11,621 $ 751 $ (10,820)$ 14,066 $ 4,048 $ (3,699) $ 157,925 $
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
89 NOTE 10 – NET POSITION AND FUND BALANCES (Continued)
The City Council has set aside unrestricted net position for general contingencies, and future capital and debt service expenditures including operating and capital contingencies for unusual or emergency expenditures.
Internal Service Funds
At June 30, 2021, Internal Service Funds unrestricted net position (in thousands) were as follows:
Vehicle
Replacement
and
Maintenance Technology
Printing and
Mailing
Services
General
Benefits
Workers'
Compensation
Insurance
Program
General
Liabilities
Insurance
Program
Retiree Health
Benefits Total
Unrestricted net position:
Commitments 4,608 $ 3,236 $ 40 $ 325 $ 178 $ 11 $ ‐ $ 8,398 $ Future catastrophic losses ‐ ‐ ‐ ‐ ‐ 3,670 ‐ 3,670 Retiree health care ‐ ‐ ‐ ‐ ‐ ‐ 2,694 2,694 GASB 68 pension (3,235) (11,509) (263) ‐ 37 ‐ ‐ (14,970) GASB 75 OPEB (1,549) (3,162) (142) ‐ ‐ ‐ ‐ (4,853) Available 7,065 18,557 85 5,572 1,326 ‐ ‐ 32,605 Total 6,889 $ 7,122 $ (280) $ 5,897 $ 1,541 $ 3,681 $ 2,694 $ 27,544 $
Commitments represent the portion of net position set aside for open purch ase orders and reappropriations.
Future catastrophic losses represent the portion of net position to be used for unforesee n future losses.
Retiree health care represents the portion of net position set aside to defer futu re costs of retiree health care coverage.
GASB 68 pension represents the net impact of net pension liability and related deferred outflows/inflows of resources balances.
GASB 75 OPEB represents the net impact of net OPEB liability and related deferred outflows/inflows of resources balances.
Deficit Fund Balance and Net Position:
At June 30, 2021, the City’s Printing and Mailing Services internal service fund had a deficit net position of $254,000. The deficit is due to the impact of Pension and OPEB liabilities and related balances. The deficit is expected to be funded by future internal service charges to other City funds.
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
90 NOTE 11 – PENSION PLANS
(a) General Information about the Pension Plans
P l a n D e s c r i p t i o n s ‐ Substantially all permanent City employees are eligible to par ticipate in the City’s separate Safety (police and fire) and Miscellaneous (all other) Plans, agent multiple‐employer defined benefit pension plans administered by CalPERS, which acts as a common investment and administrative agent for its participating member employers. Benefits provisions under the Plans are established by State statute and City resolution. CalPERS issues publicly available reports that include a full description of the pension plans including benefits provisions, assumptions and me mbership information. The reports can be found on the CalPERS website at www.calpers.ca.gov.
Benefits Provided ‐ CalPERS provides retirement and disability benefits, annual cost of living adjustments and death benefits to Plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service (equal to one year of full‐time em ployment), age at retirement and final compensation. The death benefit is one of the following: the 1959 Survivor Benefit, or the pre‐retirement option 2W Death Benefit for local fire members only.
The Plans’ provisions and benefits in effect at June 30, 2021, are summarized in the following table.
Contribution rates are based on the Actuarial Valuation Report as of June 30, 2018.
Fire Fighters,
Fire Chief
Association,
Police Officers,
Fire Fighters,
Fire Chief Association
Police Officers,
Police Management
Fire Fighters,
Fire Chief
Association,
Police Officers,
Hire Date Prior to June 8, 2012
On or after June 8,
2012
On or after Dec. 8,
2012
On or after Jan 1,
2013
Benefit formula1 3% at 55 3% at 55 3% at 50 2.7% at 57
Benefit vesting schedule 5 years service 5 years service 5 years s ervice 5 years service Benefit payment monthly for life monthly for life monthly for life monthly for life Retirement age 50 55 1 551 571
Monthly benefit as % of eligible compensation 3% 3% 3% 2.7% Actuarially determined contribution rate ‐ EE 9% 9% 9% 11.25% Actuarially determined contribution rate ‐ ER 65.332% 65.332% 65.3 32% 65.332% Hire Date Prior to July 17, 2010
On or after July 17,
2010
On or after Jan 1,
2013
Benefit formula 2.7% at 55 2 2% at 602 2% at 623
Benefit vesting schedule 5 years service 5 years service 5 years s ervice Benefit payments monthly for life monthly for life monthly for lif e Retirement age 55 2 602 623
Monthly benefit as % of eligible compensation 2 2.70% 2.0% ‐ 2.418% 2% Actuarially determined contribution rate ‐ EE 8% 7% 6.25% Actuarially determined contribution rate ‐ ER 38.367% 38.367% 38.3 67% 1 Employees can retire at age 50 with reduced benefits of 2.4% ‐ 2.88% if hired before Jan 1, 2013, or 2.0% ‐ 2.6% if hired on or after Jan 1, 2013.
2 Employees can retire at age 50 with reduced benefits of 2.0% ‐ 2.56% if hired before July 17, 2010, or 1.092% ‐ 1.874% if hired on or after July 17, 2010.
3 Employees can retire at age 52 with reduced benefits of 1.0% ‐ 1.9% Miscellaneous Plan
Safety Plan
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
91 NOTE 11 – PENSION PLANS (Continued)
Employees Covered – Based on the Actuarial Valuation Report as of June 30, 2020, th e most recent information available, the following employees were covered by the benefits terms for each Plan:
Miscellaneous
Plan Safety Plan
Inactive employees or beneficiaries currently receiving benefit s 1,223 435 Inactive employees entitled to but not yet receiving benefits 83 5 104 Active employees 777 174
Total 2,835 713
Contributions – Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Funding contributions for the Plans are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liabi lity. The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. Further detail of contributions can be found in the Required Supplement al Information Schedules of Pension Contributions.
In April 2017, the City established a Section 115 irrevocable t rust with the Public Agency Retirement Services (PARS). The Council approved an initial deposit of $2.1 million in General Fund proceeds into the General Fund subaccount of the City’s PARS Trust Account. The Trust Account allows more control and flexibility in investment allocations compared to City’s portfolio which is restricted by State regulations to fixed income instruments. The City proactively contributes to the Section 115 irrevocable trust amounts reflective of what retirement costs would be if the normal cost of contributions was budgeted at a 6.2% discount rate. During the year, the City contributed $5.0 million to the PARS Trust. As of June 30, 2021, the City reported the account balance of $37.1 million as restr icted investments in the General Benefits Internal Service Fund.
(b) Net Pension Liability
The City’s net pension liability for each plan is measured as t he total pension liability, less each plan’s fiduciary net position. Net pension liability is measured as o f June 30, 2020 (measurement date), using the Actuarial Valuation Report as of June 30, 2019 rolled forward to June 30, 2020 using standard update procedures.
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
92 NOTE 11 – PENSION PLANS (Continued)
Actuarial Assumptions ‐ The total pension liabilities were determined using the foll owing actuarial assumptions:
Valuation Date
Measurement Date
Actuarial Cost Method
Actuarial Assumptions:
Discount Rate
Inflation
Salary Increases
Mortality
1 Post Retirement Benefit Increase
Derived using CalPERS membership data
for all funds.
The lessor of contract COLA or 2.50% until
Purchasing Power Protection Allowance
Floor on purchasing power applies, 2.50%
thereafter.
Varies by Entry Age and Service
1 The mortality table used was developed based on CalPERS' speci fic data. The probabilities of mortality are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015. Pre‐retirement and post‐retirement mortality rates includes 15 years of projected mortality improvements using 90% of Scale MP‐2016 published by the Society of Actuaries. For more details on this table, please refer to the 2017 CalPERS Experience Study available on the CalPERS website.
Miscellaneous and Safety Plans
June 30, 2019
June 30, 202
0 Entry Age Normal
7.15%
2.50%
All other actuarial assumptions used in the June 30, 2019 actua rial valuation were based on the 2017 CalPERS Experience Study for the period from 1997 to 2015, including updates to salary increase, mortality and retirement rates. Further details of the 2017 CalPERS Experience Study can be found on the CalPERS website under Forms and Publications.
Discount Rate – The discount rate used to measure the total pension liability was 7.15 percent for each Plan. The projection of cash flows used to determine the discou nt rate assumed that the contributions from employers will be made at current member contribution rates and that contributions from employers will be made at statutorily required rates, actuariall y d e t e r m i n e d . B a s e d o n t h o s e assumptions, the Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members. Therefore, the long‐ term expected rate of return on plan investments was applied to all periods of projected benefit pay ments to determine the total pension liability.
The long‐term expected rate of return on pension plan investmen ts was determined using a building‐ block method in which expected future real rates of return (exp ected returns, net of pension plan investment expense and inflation) are developed for each major asset class.
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
93 NOTE 11 – PENSION PLANS (Continued)
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. 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‐te rm (11+ years) using a building‐block approach. Using the expected nominal returns for both short‐ter m and long‐term, the present value of benefits was calculated for each fund. The expected rate of ret urn was set by calculating the rounded single equivalent expected return that arrived at the same pres ent 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 equal to the single equivalent rate calculated and adjusted to account for assumed administrative expenses.
The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. The long‐term expected real rate of return by asset class and the target allocation adopted by the CalPERS Board effective on July 1, 2019, are as follows:
Asset Class
Current
Target
Allocation
Real Return
Years 1 ‐ 10 1
Real Return
Years 11+ 2
Global Equity 50.0% 4.80% 5.98%
Global Fixed Income 28.0 1.00 2.62
Inflation Sensitive 0.0 0.77 1.81
Private Equity 8.0 6.30 7.23
Real Estate 13.0 3.75 4.93
Liquidity 1.0 0.00 (0.92)
(1) An expected inflation rate of 2.00% is used for this period. (2) An expected inflation rate of 2.92% is used for this period.
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
94 NOTE 11 – PENSION PLANS (Continued)
(c) Changes in the Net Pension Liability
The following table is based on the GASB 68 Accounting Valuatio n Report and shows the changes in the net pension liability for the Miscellaneous and Safety Plans (in thousands):
Total Pension
Liability
Plan Net
Position
Net Pension
Liability
Miscellaenous Plan:
Balances calculated at July 1, 2020 849,004 $ 573,840$ 275,164$ Changes for the year:
Service cost 14,267 ‐ 14,267 Interest on total pension liability 59,995 ‐ 59,995 Differences between expected and actual experiences 4,85 0 ‐ 4,85 0 Contributions from employer ‐ 28,889 (28, 889) Contributions from employees ‐ 7,189 (7, 189) Net investment income ‐ 28,735 (28, 735) Benefit payments, including refunds of employee contributions (4 3,781) (43, 781) ‐ Administrative expense ‐ ( 809) 809 Net changes 35,331 20,223 15,108 Balances reported at June 30, 2021 884,335 594,063 290,272 Safety Plan:
Balances calculated at July 1, 2020 456,817 $ 289,028$ 167,789$ Changes for the year:
Service cost 7,898 ‐ 7,898 Interest on total pension liability 32,469 ‐ 32,469 Differences between expected and actual experiences 6,314 ‐ 6,314 Contributions from employer ‐ 14,297 (14, 297) Contributions from employees ‐ 3,459 (3, 459) Net investment income ‐ 14,310 (14, 310) Benefit payments, including refunds of employee contributions (2 5,948) (25, 948) ‐ Administrative expense ‐ ( 407) 407 Net changes 20,733 5,711 15,022 Balances reported at June 30, 2021 477,550 294,739 182,811 Total 1,361,885 $ 888,802$ 473,083$
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
95 NOTE 11 – PENSION PLANS (Continued)
Sensitivity of the Net Pension Liability to Changes in the Discount Rate ‐ The following table presents the net pension liability of the Plans as of the measurement date, calculated using the discount rate of 7.15 percent, compared to a discount rate that is 1 percentage point lower (6.15 percent) or 1 percentage point higher (8.15 percent). Amounts shown below are in thousands:
Discount Rate ‐ 1%
(6.15%)
Current Discount Rate
(7.15%)
Discount Rate + 1%
(8.15%)
Miscellaneous Plan:
Plan's Net Pension Liability 401,532 $ 290,272 $ 197,747$ Safety Plan:
Plan's Net Pension Liability 244,169 $ 182,811 $ 132,093$
Plan Fiduciary Net Position – Detailed information about the Plan’s fiduciary net position is available in the separately issued CalPERS financial report.
(d) Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions
For the year ended June 30, 2021, the City recognized a pension expense of $34.7 million and $25.7 million for the Miscellaneous and Safety Plan, respectively, for a total of $60.4 million. At June 30, 2021, the City reported pension related deferred outflows of resources for the Miscellaneous and Safety Plans from the following sources (in thousands):
Miscellaneous Plan:
Deferred
Outflows
of Resources
Pension contributions subsequent to
measurement date 32,782 $
Difference between expected and actual experience 5,051 Net difference between projected and actual earnings
on plan investments 3,887
Balance reported at June 30, 2021 41,720
Safety Plan:
Pension contributions subsequent to
measurement date 14,796
Difference between expected and actual experience 5,157 Net difference between projected and actual earnings
on plan investments 1,977
Balance reported at June 30, 2021 21,930
Total, Miscellaneous and Safety Plans 63,650$
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
96 NOTE 11 – PENSION PLANS (Continued)
The $47.6 million reported as deferred outflows of resources relates to contributions paid by the City from July 1, 2020 through June 30, 2021 which is subsequent to the City’s measurement date of June 30, 2020 for both the Miscellaneous and Safety Plans. This amount will be recognized as a reduction of the net pension liability in the year ended June 30, 2022.
The net differences reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in future pension expense as follows (in thousands):
Year Ended June 30,
Miscellaneous
Plan
Safety
Plan Total
2022 975 $ 1,931$ 2,906 $ 2023 2,732 2,505 5,237
2024 2,849 1,494 4,343
2025 2,382 1,204 3,586
8,938$ 7,134 $ 16,072$
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
97 NOTE 12 – OTHER POST‐EMPLOYMENT BENEFITS (OPEB)
(a) General Information about the OPEB Plan
In addition to providing pension benefits, the City participates in the California Public Employees’ Medical and Health Care Act program to provide certain health care bene fits for retired employees. The City’s Other Post‐Employment Benefit plan is an agent multiple‐employer defined benefit plan. Employees who retire directly from the City are eligible for retiree health benefits if they retire on or after age 50 with 5 years of service and are receiving a monthly pension from CalPE RS. Details of benefits to retirees are noted in the following tables:
Unit Hired Before
Retiree
Coverage1
Dependent
Coverage
Retired on or
After
Retiree
Contribution
Management & Professional2 1/1/2004 100% 100% 5/1/2011 Flat rate 4 Police Management2 1/1/2004 100% 100% 6/1/2012 Flat rate 4 Fire Fighters2 1/1/2004 100% 100% 12/1/2011 Flat rate 4 Fire Chiefs Association2 1/1/2004 100% 100% 1/1/2013 Flat rate 4 SEIU2 1/1/2005 100% 100% 5/1/2011 Flat rate 4
Police Officers3 1/1/2006 100% 100% 4/1/2015 Flat rate 4 Utilities Managers & Professional2 1/1/2004 100% 100% 5/1/2011 10% 2 Effective 1/1/2007 plan capped at the second highest CalPERS B ay Area Basic plan premium. 3 Effective 7/1/2014 plan capped at the second highest CalPERS B ay Area Basic plan premium. 4 For the year ended June 20, 2021, City pays $840‐$871 for empl oyee, $1,680‐1,742 for employee +1, and $2,180‐$2,260 for famil y.
Unit
Hired on or
After
Retiree
Coverage1
Dependent
Coverage2
Management & Professional 1/1/2004 50%‐100% Max. 90%
Police Management 1/1/2004 50%‐100% Max. 90%
Fire Fighters 1/1/2004 50%‐100% Max. 90%
Fire Chiefs Association 1/1/2004 50%‐100% Max. 90%
Utilities Managers & Professional 1/1/2004 50%‐100% Max. 90% SEIU 1/1/2005 50%‐100% Max. 90%
Police Officers 1/1/2006 50%‐100% Max. 90%
specified employer contribution, with the City portion incre asing by 5% for each additional year of service credit. 2 The City will contribute an additional 90 percent of the weigh ted average of the additional premiums required for enrollment of those family members, during the benefit year to which the forumla is applied. 1 100% of benefits if the employee has five years CalPERS servic e credit and the employee retired from the City. 1 Employees with ten years of CalPERS service, at least five of which are at the City of Palo Alto, receive 50% of the Retiree contributions for units with the following hire dates a re determined by Government Code Section 22893, 20 year graduated schedule:
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
98 NOTE 12 – OTHER POST‐EMPLOYMENT BENEFITS (OPEB) (Continued)
In fiscal year 2008, the City elected to participate in an irrevocable trust to provide a funding mechanism for retiree health benefits. The Trust, California Employers’ Retirees Benefit Trust (CERBT), is administrated by CalPERS and managed by a separately appointed board, which is not under control of the City Council. This Trust is not considered a component unit of the City.
Employees Covered – Employees covered by the benefit terms as of June 30, 2020, the most recent information available, are as follows:
Inactive employees or beneficiaries currently
receiving benefits 1,011
Inactive employees entitled to but not yet
receiving benefits 75
Active employees 897
Total 1,983
Contributions – The City’s OPEB funding policy is to contribute 100 percent o r more of the actuarially determined contribution each year pursuant to City Council Resolution. For the year ended June 30, 2021, the City’s contributions totaled $14.6 million.
(b) Net OPEB Liability
The City’s net OPEB liability is measured as the total OPEB lia bility, less the OPEB plan’s fiduciary net position. The net OPEB liability is measured as of June 30, 2020, using an annual actuarial valuation as of June 30, 2019 rolled forward to June 30, 2020 using standard update procedures. A summary of principal assumptions and methods used to determine the net OPEB liability is shown below.
Valuation Date June 30, 2019
Measurement Date June 30, 2020
Actuarial Cost Method Entry‐Age, level percentage of payroll Actuarial Assumptions:
Discount Rate 6.75%
Inflation 2.75%
Payroll Growth 3.00%
Projected Salary Increase 2017 CalPERS Experience Study for the period from 1997 to 2015
Medical Trend Non‐Medicare ‐ 7.25% for 2021, decreasing to an ultimate rate of 4.0% in 2076
Medicare ‐ 6.3% for 2021, decreasing to an ultimate
rate of 4.0% in 207
6 Disability, Termination, Retirement CalPERS 1997‐2015 Exper ience Study Mortality 2017 CalPERS Experience Study for the period from 1997 to 2015
Mortality Improvement Post‐retirement mortality projected f ully generational with Society of Actuaries Scale MP‐
2019
Increase to Group 3 Flat Dollar Caps 1/2 of Medical Trend, not less than assumed inflation (2.75%)
Healthcare Participation for Future Future retirees: 95‐98 %, based on Plan experience ACA Excise Tax None
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
99 NOTE 12 – OTHER POST‐EMPLOYMENT BENEFITS (OPEB) (Continued)
Change of Assumptions – During measurement period 2020, actuarial assumptions for ACA Exercise Tax was changed from 2% load on cash subsidy to none.
Discount Rate – The discount rate used to measure the total OPEB liability was 6.75%. The projection of cash flows used to determine the discount rate assumed that the City’s contribution will be made equal to the actuarially determined contribution. Based on those ass umptions, the OPEB plan’s fiduciary net position was projected to be available to make all projected OPEB payments for current active and inactive employees. Therefore, the long‐term expected rate of return on OPEB plan investments applied to all periods of projected benefit payments to determine the total OPEB liability.
The long‐term expected rate of return for OPEB plan investments was 6.75%. The asset class target allocation and geometric real rates of return for each major as set class are summarized in the following table.
Asset Class
Current
Target
Allocation
Expected Real
Rate of Return
Global Equity 59.0% 4.82%
Fixed Income 25.0 1.47
TIPS 5.0 1.29
Commodities 3.0 0.84
REITS 8.0 3.76
Assumed long‐term rate of inflation of 2.75%
(c) Changes in the Net OPEB Liability
The following table shows the changes in the net OPEB liability (in thousands):
Total OPEB
Liability
Plan Fiduciary
Net Position
Net OPEB
Liability
Balance at June 30, 2020 245,509 $ 118,479 $ 127,030 $ Changes during the measurement period:
Service cost 6,366 ‐ 6,366 Interest on the total OPEB liability 16,572 ‐ 16,572 Changes in assumptions (4,426) ‐ (4,426) Contributions ‐ employer ‐ 16,475 (16,475) Investment income ‐ 4,327 (4,327) Administrative expenses ‐ (58) 58 Benefit payments (12,728) (12,728) ‐ Net changes 5,784 8,016 (2,232) Balance at June 30, 2021 251,293 $ 126,495 $ 124,798 $ Increase (Decrease)
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
100
NOTE 12 – OTHER POST‐EMPLOYMENT BENEFITS (OPEB) (Continued)
Sensitivity of the Net OPEB Liability to Changes in the Discoun t Rate – The following presents the net OPEB liability of the City as of the measurement date, calculated using the discount rate of 6.75 percent, as well as what the City’s net OPEB liability would be if it we re calculated using a discount rate that is 1 percentage‐point lower (5.75 perc ent) or 1 percentage‐point hig her (7.75 percent) than the current discount rate:
Discount Rate
‐1% (5.75%)
Current
Discount Rate
(6.75%)
Discount Rate
+1% (7.75%)
157,131$ 124,798 $ 98,126 $
Sensitivity of the Net OPEB Liability to Changes in the Healthca r e C o s t T r e n d R a t e – The following presents the net OPEB liability of the City, as well as what the City’s net OPEB liability would be if it were calculated using healthcare cost trends rates that are 1% lower or 1% higher than the current healthcare cost trend rates.
Healthcare Trend
Rate ‐ 1%
Healthcare Trend
Current Rate
Healthcare Trend
Rate + 1%
94,719$ 124,798 $ 161,763 $
OPEB Plan Fiduciary Net Position – Detailed information about the OPEB plan’s fiduciary net positi on is available in the separately issued CalPERS financial report.
(d) OPEB Expenses and Deferred Outflows/Inflows of Resources Related to OPEB
For the fiscal year ended June 30, 2021, the City recognized an OPEB expense of $10.0 million for the OPEB plan. At June 30, 2021, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources (in thousands):
Deferred
Outflows
of Resources
Deferred
Inflows
of Resources
OPEB contributions subsequent to
measurement date $ 14,592 $ ‐ Differences between expected and
actual experience ‐ 19,031 Changes in assumptions 4,491 3,621 Net differences between projected and actual
earnings on plan investments 2,200 ‐ Total $ 21,283 $ 22,652
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
101
NOTE 12 – OTHER POST‐EMPLOYMENT BENEFITS (OPEB) (Continued)
The $14.6 million reported as deferred outflows of resources re lates to contributions made by the City from July 1, 2020 through June 30, 2021, which is subsequent to the City’s measurement date of June 30, 2020. This amount will be recognized as a reduction o f the net OPEB liability in the fiscal year ended June 30, 2022.
The net differences reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized in future OPEB expense as follows (in thousands):
Fiscal Year Ending June 30,
2022 (4,964) $
2023 (4,336)
2024 (4,125)
2025 (2,135)
2026 (401)
Total (15,961) $
NOTE 13 – DEFERRED COMPENSATION PLAN
City employees may defer a portion of their compensation under City sponsored Deferred Compensation Plans created in accordance with Internal Revenue Code Section 457. Under these Plans, participants are not taxed on the deferred portion of their compensation until d istributed to them. Distributions may be made only at termination, retirement, death or in an emergency as defined by the Plans.
The laws governing deferred compensation plan assets require pl an assets to be held by a Trust for the exclusive benefit of plan participants and their beneficiaries. Since the assets held under these plans are not the City’s property and are not subject to City control, they have been excluded from these financial statements.
NOTE 14 – RISK MANAGEMENT
Coverage
The City provides dental coverage to employees through a City plan, which is administered by a third party service agent. The City is self‐insured for dental claims.
The City has a workers’ compensation insurance policy with coverage up to the statutory limit set by the State of California. The City retains the risk for the first $750,000 in losses for each accident and employee under this policy.
The City also has public employee dishonesty insurance with a $5,000 deductible and coverage up to $1.0 million per loss. The Director of Administrative Services/CFO and City Manager each have coverage up to $4.0 million per loss.
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
102
NOTE 14 – RISK MANAGEMENT (Continued)
The City’s property, boiler, and machinery insurance policy has various deductibles and coverage based on the type of property.
The City is a member of the Authority for California Cities Excess Liability (ACCEL), which provides excess general liability insurance coverage, including auto liability, up to $200 million per occurrence. The City retains the risk for the first $1.0 million in losses for each occurrence under this policy.
ACCEL was established for the purpose of creating a risk management pool for central California municipalities. ACCEL is governed by a Board of Directors consi sting of representatives of its member cities. The board controls the operations of ACCEL, including s election of claims management, general administration and approval of the annual budget.
The City’s deposits with ACCEL equal the ratio of the City’s payroll to the total payroll of all entities. Actual surpluses or losses are shared according to a formula developed from overall loss costs and spread to member entities on a percentage basis after a retrospective rating.
During the year ended June 30, 2021, the City paid $2.1 million to ACCEL for current year coverage.
Audited financial statements are available from ACCEL at 100 Pi ne Street, 11 th Floor, San Francisco,
California 94111.
Claims Liability
The City provides for the uninsured portion of claims and judgm ents in the General Liabilities insurance program funds. Claims and judgments, including a provision for claims incurred but not reported, and claim adjustment expenses are recorded when a loss is deemed probable of assertion and the amount of the loss is reasonably determinable. As discussed above, the City has coverage for such claims, but it has retained the risk for the deductible or uninsured portion of these claims.
The City’s liability for uninsured claims is limited to dental, general liability, and workers’ compensation claims, as discussed above. Dental liability is based on a perc entage of current year actual expense.
General and workers’ compensation liabilities are based on the results of actuarial studies, and include amounts for claims incurred but not reported as follows as of June 30 (in thousands):
2021 2020
Beginning balance 29,713 $ 28,365 $
Claims expense, including claims incurred but not
reported (IBNR) 11,197 6,914
Claims paid (8,379) (5,566)
Ending balance 32,531 $ 29,713 $
Current portion 6,811 $ 6,198 $
Year Ended June 30
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
103
NOTE 14 – RISK MANAGEMENT (Continued)
The City also recorded claims payable of $12.6 million on its governmental activities’ financial statements for a class action lawsuit filed against the City that challenged the City’s gas and electric rates. See Note
16. The City has not incurred a claim that has exceeded its insuran ce coverage limits in any of the last three years, nor have there been any significant reductions in insurance coverage.
NOTE 15 – JOINT VENTURES
General
The City participates in joint ventures through Joint Powers Authorities (JPAs) established under the Joint Exercise of Powers Act of the State of California. As separate legal entities, these JPAs exercise full powers and authorities within the scope of the related Joint Powers Ag reement, including the preparation of annual budgets, accountability for all funds, the power to make and execute contracts and the right to sue and be sued. Obligations a nd liabilities of the JPAs, inclu ding the long‐term debt in which the City participates in repayment, are not obligations and liabilities of the City, and are not reported on the City’s financial statements.
Each JPA is governed by a board consisting of representatives f rom each member agency. Each board controls the operations of its respective JPA, including selection of management and approval of operating budgets, independent of any influence by member agencies beyond their representation on the Board.
Northern California Power Agency
The City is a member of Northern California Power Agency (NCPA), a joint powers agency which operates under a joint powers agreement among fifteen public agencies. T he purpose of NCPA is to use the combined strength of its members to purchase, generate, sell an d interchange electric energy and capacity through the acquisition and use of electrical generation and transmission facilities. Each agency member has agreed to fund a pro rata share of certain assessmen ts by NCPA and enter into take‐or‐pay power supply contracts with NCPA. While NCPA is governed by its members, none of its obligations are those of its members unless expressly assumed by them.
During the year ended June 30, 2021, the City incurred expenses totaling $92.1 million for purchased power and assessments earned by NCPA.
The City’s interest in NCPA projects and reserves, as computed by NCPA, was $8.1 million at June 30, 2021.
This amount represents the City’s portion of funds, which resulted from the settlement with third parties of issues with financial consequences and reconciliations of several prior years’ budgets for programs. It is recognized that all the funds credited to the City are linked to the collection of revenue from the City’s ratepayers, or to the settlement of disputes relating to electr ic power supply and that the money was collected from the City’s ratepayers to pay power bills. Additionally, the NCPA Commission identified and approved the funding of specific reserves for working capital, accumulated employees’ post‐retirement
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
104
NOTE 15 – JOINT VENTURES (Continued)
medical benefits, and billed property taxes for the geothermal project. The Commission also identified a number of contingent liabilities that may or may not be realized, the cost of which in most cases is difficult to estimate at this time. One such contingent liability is the steam field depletion, which will require funding to cover debt service and operational costs in excess of the expected value of the electric power.
The General Operating Reserve (G OR) is intended to minimize the number and amount of individual reserves needed for each project, protect NCPA’s financial cond ition and maintain its credit worthiness.
There are no funds on deposit with NCPA as a reserve against these contingencies identified by NCPA.
Members of NCPA may participate in an individual project of NCP A without obligation for any other project. Member assessments collected for one project may not be used to finance other projects of NCPA without the member’s permission.
NCPA’s financial statements can be obtained from NCPA, 651 Commerce Drive, Roseville, CA 95678.
Calaveras Hydroelectric Project
In July 1981, NCPA agreed with Calaveras County Water District to purchase the output of the North Fork Stanislaus River Hydroelectric Development Project and to finance its construction. Debt service payments to NCPA began in February 1990 when the project was declared su bstantially complete and power was delivered to the participants. Under its power purchase agreement with NCPA, the City is obligated to pay
22.9 percent of this Project’s debt service and operating costs . At June 30, 2021, the book value of this Project’s plant, equipment and other assets was $303.8 million, while its long‐term debt totaled $255.8 million and other liabilities totaled $44.5 million. The City’s share of the Project’s long‐term debt amounted to $58.6 million at that date.
Transmission Agency of Northern California (TANC)
The City is a member of a joint powers agreement with 14 other entities in Transmission Agency of Northern California (TANC). TANC’s purpose is to provide electrical transmission or other facilities for the use of its members. While governed by its members, none of TANC’s obligations are those of its members unless expressly assumed by them. The City was obligated to pay 4 percent of TANC’s debt‐service and operating costs. However, a Reso lution was approved authorizing the execution of a Long‐Term Layoff Agreement (LTLA) between the Cities of Palo Alto and Roseville. These two agencies desired to “layoff” their entitlement rights to the California‐Oregon Transmission Project (COTP) (and Roseville’s South of Tesla entitlement rights) for a period of 15 years to those acq uiring members (Sacramento Municipal Utility District, Turlock Irrigation District, and Modesto Irri gation District). The effective date of this Agreement was February 1, 2009. As a result, the City is not ob ligated to pay TANC’s debt‐service and operating costs starting February 1, 2009, for a period of fifteen years.
TANC’s financial statements can be obtained from TANC, P.O. Box 15129, Sacramento, CA 95851.
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Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
105
NOTE 15 – JOINT VENTURES (Continued)
Bay Area Water Supply and Conservation Agency (BAWSCA)
The City is a member of a regional water district with 26 other entities, the Bay Area Water Supply and Conservation Agency (BAWSCA). BAWSCA was created on May 27, 2003 to represent the interests of 24 cities and water districts and two private utilities in Alameda , Santa Clara and San Mateo counties that purchase water on a wholesale basis from the San Francisco regi onal water system. It has the power to issue debt and plan, finance, construct, and operate water supply, transmission, reclamation, and conservation projects on behalf of its members.
In 2013 the City participated in a debt issuance by BAWSCA. Th e debt was issued to repay certain long‐ term costs associated with the San Francisco Public Utilities Commission (SFPUC) water supply contract.
During the fiscal year, the City paid its share of the annual d ebt service of $1.9 million, which will vary based on annual water purchases of the City compared to other BAWSCA agencies.
BAWSCA’s financial statements can be obtained from BAWSCA, 155 Bovet Road, Suite 650, San Mateo, California 94402.
NOTE 16 – COMMITMENTS AND CONTINGENCIES
Palo Alto Unified School District – The City leased 27 acres of the former Cubberley School site and twelve extended day care sites from Palo Alto Unified School District (PAUSD) through December 31, 2019. The City and the PAUSD reached new agreements for the Cubberley School site through December 31, 2024, and the twelve extended day care sites through June 30, 2022. Under the new Cubberley lease, the City leases approximately 65,046 rentable square feet of building area and 15.94 acres of outdoor recreational area. The City has the right to reduce the leased premises by surrendering the Junior Museum and Zoo (JMZ) Building and/or the Building S. The City intends to surrender the JMZ Building after the completion of the new museum building that is not located on the property.
The total lease expenditures for the year ended June 30, 2021 amounted to $4.1 million. Future minimum annual lease payments are as follows (in thousands):
Year Ending
June 30 Payment
2022 3,406 $
2023 2,568
2024 2,568
2025 1,284
9,826$
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
106
NOTE 16 – COMMITMENTS AND CONTINGENCIES (Continued)
GreenWaste of Palo Alto – GreenWaste of Palo Alto is the City’s contractor for waste co llection, transportation, and processing services. The agreement expires June 30, 2026. The base compensation for GreenWaste is adjusted annually based on CPI indicators stipulated in the contract. In fiscal year 2021 payments to GreenWaste were $11.0 million.
City of Palo Alto Regional Water Quality Control Plant – The cities of Palo Alto, Mountain View and Los Altos (the Partners) participate jointly in the cost of maintai ning and operating the City of Palo Alto Regional Water Quality Control Plant and related system (the Plant). The City is the owner and administrator of the Plant, which provides the transmission, tr eatment and disposal of sewage for the Partners. The cities of Mountain View and Los Altos are entitle d to use a portion of the capacity of the Plant for a specified period of time. Each partner has the right to rent unused capacity from/to the other partners. The expenses of operations and maintenance are paid q uarterly by each partner based on its pro rata share of treatment costs. Additionally, joint system r evenues are shared by the partners in the same ratio as expenses are paid. The amended agreement will terminate on December 31, 2060, but may be terminated by any partner upon ten years’ written notice to the other partners. All sewage treatment property, plant and equipment are included in the Wastewater Treatment Enterprise Fund’s capital assets balance. If the City initiates the termination of the contracts, it is required to pay the other partners their unamortized contribution towards the capital assets.
Sunnyvale Materials Recovery and Transfer Station (SMaRT Station) – On September 30, 1991, as amended on June 9, 1992, the City, the City of Sunnyvale, and the City of Mountain View, entered into a Memorandum of Understanding (MOU) to participate in the constru ction and operation of the SMaRT Station, which recovers recyclable materials from the municipal solid waste delivered from participating cities. Per the MOU, the City has a capital share of 21.3 perce nt of this facility and reimburses its proportionate capital share of design, construction and operation costs to Sunnyvale.
In fiscal year 2008, the members agreed to finance an Equipment Replacement Project from existing reserves and proceeds from the Solid Waste Revenue Bond, Series 2007. The City has committed to repay
27.8 percent of the remaining debt service on the Bonds. During the year ended June 30, 2021, the City made the last debt service payment of $0.2 million and the City ’s obligation to pay related debt service payments is completed. The MOU is expiring on December 31, 2021.
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
107
NOTE 16 – COMMITMENTS AND CONTINGENCIES (Continued)
UTILITIES ENERGY RESOURCE MANAGEMENT
Electric Power Supply Purchase Agreements
– The City has numerous power purchase agreements with
power producers to purchase capacity and energy to supply a por tion of its load requirements. As of June 30, 2021, the approximate minimum obligations for the contracts, assuming the energy is delivered over the next four years, are as follows:
Fiscal Year Projected Obligation
2022 $63.66 million
2023 $57.61 million
2024 $55.60 million
2025 $52.02 million
2026 $52.63 million
Contractual Commitments beyond 2022 (Electricity) – Several of the City’s purchase power and transmission contracts extend beyond the five‐year summary pres ented above. These contracts expire between 2026 and 2051 and provide for power under various terms and conditions. The City also has a new solar power purchase agreement that is schedule to start in January 2023. The City estimates that its annual minimum commitments under all of its contracts, assu ming the energy is delivered, ranges between $62.06 million in 2025 and $67.13 million in 2034. The City’s largest single purchase power source is the Western Base Resource contract, whereby the City receives 12.31 percent of the amount of energy made available by Western, after meeting Central Valley Project use requirements, in any given year at a 12.31 percent share of their revenue requirement. The Western contract expires on December 31, 2024. The City has the option to extend the Weste rn contract for an additional 30‐year period beyond 2024, although at a slightly lower share of the total energy output and revenue requirement (12.06 percent instead of 12.31 percent).
Gas Transmission and Local Transportation Rates – The City relies on Pacific Gas and Electric Company’s (PG&E) natural gas pipeline infrastructure, including both high ‐pressured transmission and medium‐ pressure local transportation, to move gas from the California border to the City’s distribution system.
Rates are determined through proceedings at the California Public Utilities Commission. The gas transmission and local transportation rates increased by 26% and 8%, respectively, from fiscal year 2020 to fiscal year 2021. The gas transmission and local transporta tion rates are expected to increase by 4% and 3%, respectively, in fiscal year 2022.
San Francisco Public Utilities Commission – The City purchases water from the San Francisco Public Utilities Commission (SFPUC) under a Water Supply Agreement (WS A) terminating in 2034. The City’s wholesale water rate under this contract is determined by a rat emaking process under the authority of the SFPUC, with contractual limitations on the types of costs t hat may be allocated to wholesale water purchasers like the City. The WSA contains certain restriction s regarding water purchases from other water suppliers, though those restrictions do not apply to recy cled water or emergency water supplies.
The City’s cost of water under this contract is projected to remain flat through 2022.
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CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2021
108
NOTE 16 – COMMITMENTS AND CONTINGENCIES (Continued)
Litigation
The City is subject to litigation arising in the normal course of business. In the opinion of the City Attorney, there is no pending litigation, claims or assessments that are likely to have a materially adverse effect on the City’s financial condition.
A class action lawsuit was filed against the City in October 2016 that challenged the City’s gas and electric rates under Proposition 26. On June 24, 2021, a trial court entered judgment partially against the City and ordered the City to pay $12.6 million to a common fund to refun d gas rate payers and for payment of incurred litigation costs. The City and the plaintiffs have appealed the trial court’s judgment. Payment of refunds due to gas rate payers under the trial court judgment are stayed pending a decision by the Court of appeal (expected in late 2022/early 2023) on the parties’ re spective appeals. While the ultimate outcome of the claim is uncertain, the City has recorded a claims payable equal to the trial court judgment.
This liability is not due and payable at June 30, 2021 and the City recorded a non‐current claims payable of $12.6 million on its governmental activities’ financial statements for this lawsuit. In 2022, the City has set aside funding in the General Fund for the potential financial impacts.
A personal injury lawsuit was filed against the City in August 2018. Plaintiff, a bicyclist, alleges that the City created a dangerous condition of public property that caused him to suffer catastrophic injuries. The City Attorney is of the opinion that a loss is reasonably possi ble but cannot be reasonably estimated at this time.
Grant Programs
The City participates in Federal and State grant programs. These programs have been audited by the City’s independent auditors in accordance with the provisions of the F ederal Single Audit Act amendments of 1996 and applicable State requirements. No costs were questioned as a result of these audits; however, these programs are still subject to further examination by the grantors and the amount, if any, of expenditures which may be disallowed by the granting agencies c annot be determined at this time. The City expects such amounts, if any, to be immaterial.
Uncertainties
In March 2020, the World Health Organization declared coronavir us COVID‐19 a global pandemic. This contagious disease outbreak and any related adverse public health developments have adversely affected workforces, customers, economies, and financial markets globall y. It has also disrupted the normal operations of many governments, including the City. The City e xpects this outbreak to impact the City’s operations for future reporting periods. It is not possible for the City to predict the duration or magnitude of the adverse results of the outbreak and its effects on the City’s operations.
Note 17 – SUBSEQUENT EVENT
On July 12, 2021, the SWRCB and the City executed a direct loan agreement for an award up to $17.5 million to finance the rehabilitat e and upgrade the RWQCP prima ry sedimentation tanks and ancillary systems. The loan interest rate is 0.9% and has a final maturity on February 15, 2053.
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CITY OF PALO ALTO
Required Supplementary Information (Unaudited)
Last 7 Fiscal Years*
109
I. SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS – MISCELLANEOUS PLAN (In thousands)
Fiscal year 2020‐21 2019‐20 2018‐19 2017‐18 2016‐17 2015‐16 2014‐15 Measurement Period 2019‐20 2018‐19 2017‐18 2016‐17 2015‐16 2014‐15 2013‐14 Total pension liability
Service cost 14,267 $ 15,045 $ 14,724 $ 14,423 $ 12,582 $ 12,183 $ 12,442 $ Interest 59,995 57,523 54,903 52,831 51,531 49,345 46,963 Changes of assumptions ‐ ‐ (5,673) 42,239 ‐ (11, 552) ‐ Difference between expected and actual experience 4,850 6,230 4,271 (6,378) 757 3,507 ‐ Benefit payments, including refunds of employee contributions (4 3,781) (41,124) (37,624) (36,405) (34,825) (32, 980) (31,781) Net change in total pension liability 35,331 37,674 30,601 66,710 30,045 20,503 27,624 Total pension liability ‐ beginning 849,004 811,330 780,729 714,019 683,974 663,471 635,847 Total pension liability ‐ ending (a) 884,335 $ 849,004 $ 811,330 $ 780,729$ 714,019 $ 683,974 $ 663,471$ Plan fiduciary net position
Contributions ‐ employer 28,889 $ 25,423 $ 23,342 $ 20,638 $ 18,840 $ 18,610 $ 17,400 $ Contributions ‐ employee 7,189 6,939 6,654 6,314 5,812 5,730 6,345 Net investment income 28,735 36,322 43,690 53,259 2,464 10,597 70,989 Benefit payments, including refunds of employee contributions (4 3,781) (41,124) (37,624) (36,405) (34,825) (32, 980) (31,781) Administrative expense (809) (390) (799) (694) (291) ( 538) ‐ Other non‐investment income (expenses) ‐ 1 (1,518) 30 ‐ ‐ ‐ Net change in fiduciary net position 20,223 27,171 33,745 43,142 (8,000) 1,419 62,953 Plan fiduciary net position ‐ beginning 573,840 546,669 512,924 469,782 477,782 476,363 413,410 Plan fiduciary net position ‐ ending (b) 594,063 $ 573,840 $ 546,669 $ 512,924$ 469,782 $ 477,782 $ 476,363$ Plan net pension liability/(asset) ‐ Ending (a) ‐ (b) 290,272 $ 275,164 $ 264,661 $ 267,805$ 244,237 $ 206,192 $ 187,108$ Plan fiduciary net position as a percentage of total pension liability 67.18% 67.59% 67.38% 65.70% 65.79% 69.85% 71.80% Covered payroll 81,017 $ 82,573 $ 80,634 $ 77,606 $ 73,722 $ 69,837 $ 66,373 $ Plan net pension liability/(asset) as a percentage of covered payroll 358.29% 333.24% 328.23% 345.08% 331.29% 295.25% 281.90% Notes to Schedule:
Change in assumptions ‐ During measurement period 2014, the discount rate was 7.50%. During measurement period 2015, the discount rate was increased from 7.50 percent to 7.65 percent. There is no change in discount rate during measurement period 2016. During measurement period 2017, the discount rate was reduced from 7.65 percent to
7.15 percent. During measurement period 2018, demographic assumptions and inflation rate were changed in accordance to the CalPERS Experience Study and Review of Actuarial Assumptions December 2017. There are no change in assumptions during measurement periods 2019 and 2020. * Fiscal year ended June 30, 2015 was the first year of implementation of GASB Statement No. 68, therefore only seven years of information is shown.
Benefit changes ‐ The figures above do not include any liability that may have re sulted from plan changes which occurred after the June 30, 2019 valuation date. This applies for voluntary benefit changes as well as any offers of two year s additional service credit (a.k.a. Golden Handshake).
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CITY OF PALO ALTO
Required Supplementary Information (Unaudited)
Last 8 Fiscal Years*
110
II. SCHEDULE OF PENSION CONTRIBUTIONS– MISCELLANEOUS PLAN (In thousands)
Fiscal Year 2020‐21 2019‐20 2018‐19 2017‐18 2016‐17 2015‐16 2014‐15 201 3‐14 Contractually required
contribution (actuarially determined) 32,782 $ 28,889 $ 25,423 $ 23,342 $ 20,638 $ 18,840 $ 18,610 $ 17,400 $ Actual contribution (32,782) (28,889) (25,423) (23,342) (20,638) (18,840) (18,610) (17,400) Contribution deficiency/(excess) ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ Covered payroll 87,177 $ 81,017 $ 82,573 $ 80,634 $ 77,606 $ 73,722 $ 69,837 $ 66,373 $ Contributions as percentage of covered payroll 37.60% 35.66% 30.79 % 28.95% 26.59% 25.56% 26.65% 26.22%
Notes to Schedule:
The actuarial methods and assumptions used to set the actuarially determined contributions for fiscal year 2021 contribution rates are as follows:
ADC for fiscal year June 30, 2021
Actuarial valuation date June 30, 2018
Actuarial cost method Entry‐Age Normal Cost Method
Asset valuation method Actuarial value of assets
Inflation 2.50%
Salary increases Varies by entry age and services
Payroll growth 2.75%
Investment rate of return
Retirement age
Mortality
7.00%, net of pension plan investment and administrative expens es, includes inflation.
The probabilities of retirement are based on the 2017 CalPERS Experience Study for the period 1997 to 2015.
The probabilities of mortality are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015. Pre‐retirement and post‐ retirement mortality rates includes 15 years of projected mortality improvements using 90% of Scale MP‐2016 published by the Society of Actuaries.
* Fiscal year ended June 30, 2015 was the first year of implementation of GASB Statement No. 68, therefore only eight years of information is shown.
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CITY OF PALO ALTO
Required Supplementary Information (Unaudited)
Last 7 Fiscal Years*
111
III. SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS – SAFETY PLAN (In thousands)
Fiscal year 2020‐21 2019‐20 2018‐19 2017‐18 2016‐17 2015‐16 2014‐15 Measurement Period 2019‐20 2018‐19 2017‐18 2016‐17 2015‐16 2014‐15 2013‐14 Total pension liability
Service cost 7,898 $ 7,259 $ 7,168 $ 6,584 $ 5,916 $ 5,959 $ 6,221 $ Interest 32,469 31,066 29,871 28,272 27,816 27,047 26,113 Changes of assumptions ‐ ‐ (1, 374) 22,566 ‐ (6, 327) ‐ Difference between expected and actual experience 6,314 3,841 11,604 (2,790) (1,516) 75 ‐ Benefit payments, including refunds of employee contributions (2 5,948) (24,757) (23, 636) (22,413) (21,669) (21, 148) (19,985) Net change in total pension liability 20,733 17,409 23,633 32,219 10,547 5,606 12,349 Total pension liability ‐ beginning 456,817 439,408 415,775 383,556 373,009 367,403 355,054 Total pension liability ‐ ending (a) 477,550 $ 456,817$ 439,408 $ 415,775$ 383,556 $ 373,009 $ 367,403$ Plan fiduciary net position
Contributions ‐ employer 14,297 $ 12,370 $ 11,030 $ 10,220 $ 9,403 $ 8,617 $ 7,616 $ Contributions ‐ employee 3,459 3,225 2,799 2,475 2,059 2,047 2,762 Net investment income 14,310 18,217 22,724 28,112 1,259 5,774 40,033 Benefit payments, including refunds of employee contributions (2 5,948) (24,757) (23, 636) (22,413) (21,669) (21, 148) (19,985) Administrative expense (407) (201) ( 418) (370) (157) ( 290) ‐ Other non‐investment income (expenses) ‐ 1 ( 794) (30) ‐ ‐ ‐ Net change in fiduciary net position 5,711 8,855 11,705 17,994 (9,105) (5, 000) 30,426 Plan fiduciary net position ‐ beginning 289,028 280,173 268,468 250,474 259,579 264,579 234,153 Plan fiduciary net position ‐ ending (b) 294,739 $ 289,028$ 280,173 $ 268,468$ 250,474 $ 259,579 $ 264,579$ Plan net pension liability/(asset) ‐ Ending (a) ‐ (b) 182,811 $ 167,789$ 159,235 $ 147,307$ 133,082 $ 113,430 $ 102,824$ Plan fiduciary net position as a percentage of total pension liability 61.72% 63.27% 63.76% 64.57% 65.30% 69.59% 72.01% Covered payroll 26,189 $ 24,263 $ 24,131 $ 21,906 $ 21,822 $ 21,912 $ 21,896 $ Plan net pension liability/(asset) as a percentage of covered payroll 698.04% 691.54% 659.88% 672.45% 609.85% 517.66% 469.60% Notes to Schedule:
Benefit changes ‐ The figures above do not include any liability that may have re sulted from plan changes which occurred after the June 30, 2019 valuation date. This applies for voluntary benefit changes as well as any offers of two year s additional service credit (a.k.a. Golden Handshake). * Fiscal year ended June 30, 2015 was the first year of implementation of GASB Statement No. 68, therefore only seven years of information is shown.
Change in assumptions ‐ During measurement period 2014, the discount rate was 7.50%. During measurement period 2015, the discount rate was increased from 7.50 percent to 7.65 percent. There is no change in discount rate during measurement period 2016. During measurement period 2017, the discount rate was reduced from 7.65 percent to
7.15 percent. During measurement period 2018, demographic assumptions and inflation rate were changed in accordance to the CalPERS Experience Study and Review of Actuarial Assumptions December 2017. There are no change in assumptions during measurement periods 2019 and 2020.
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CITY OF PALO ALTO
Required Supplementary Information (Unaudited)
Last 8 Fiscal Years*
112
IV. SCHEDULE OF PENSION CONTRIBUTIONS – SAFETY PLAN
(In thousands)
Fiscal Year 2020‐21 2019‐20 2018‐19 2017‐18 2016‐17 2015‐16 2014‐15 201 3‐14 Contractually required
contribution (actuarially determined) 14,796 $ 14,297 $ 12,370 $ 11,030 $ 10,220 $ 9,403 $ 8,617 $ 7,616 $ Actual contribution (14,796) (14,297) (12,370) (11,030) (10,220) (9,403) (8,617) (7,616) Contribution deficiency/(excess) ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ Covered payroll 25,615 $ 26,189 $ 24,263 $ 24,131 $ 21,906 $ 21,822 $ # 21,912$ 21,896 $ Contributions as percentage of covered payroll 57.76% 54.59% 50.98 % 45.71% 46.65% 43.09% 39.33% 34.78%
Notes to Schedule:
The actuarial methods and assumptions used to set the actuarially determined contributions for fiscal year 2021 contribution rates are as follows:
ADC for fiscal year June 30, 2021
Actuarial valuation date June 30, 2018
Actuarial cost method Entry‐Age Normal Cost Method
Asset valuation method Actuarial value of assets
Inflation 2.50%
Salary increases Varies by entry age and services
Payroll growth 2.75%
Investment rate of return
Retirement age
Mortality
7.00%, net of pension plan investment and administrative expens es, includes inflation.
The probabilities of retirement are based on the 2017 CalPERS Experience Study for the period 1997 to 2015.
The probabilities of mortality are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015. Pre‐retirement and post‐ retirement mortality rates includes 15 years of projected mortality improvements using 90% of Scale MP‐2016 published by the Society of Actuaries.
* Fiscal year ended June 30, 2015 was the first year of implementation of GASB Statement No. 68, therefore only eight years of information is shown.
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CITY OF PALO ALTO
Required Supplementary Information (Unaudited)
Last 4 Fiscal Years*
113
V. SCHEDULE OF CHANGES IN NET OPEB LIABILITY AND RELATED RATIOS (In thousands)
Fiscal year 2020‐21 2019‐2 0 2018‐19 2017‐18
Measurement Period 2019‐20 2018‐19 2017‐18 2016‐17
Total OPEB liability
Service cost 6,366 $ 6,622 $ 6,429 $ 6,242 $ Interest 16,572 17,292 16,546 15,853 Changes in benefit terms ‐ 972 ‐ ‐ Changes of assumptions (4,426) 7,057 ‐ ‐ Difference between expected and actual experience ‐ (29,907) ‐ ‐ Benefit payments, including refunds of employee contributions (1 2,728) (12,157) (12, 104) (11,916) Net change in total OPEB liability 5,784 (10,121) 10,871 10,179 Total OPEB liability ‐ beginning 245,509 255,630 244,759 234,580 Total OPEB liability ‐ ending (a) 251,293 $ 245,509 $ 255,630$ 244,759 $ Plan fiduciary net position
Contributions ‐ employer 16,475 $ 15,997 $ 21,349 $ 14,739 $ Net investment income 4,327 6,852 7,519 8,628 Benefit payments, including refunds of employee contributions (1 2,728) (12,157) (12, 104) (11,916) Administrative expense (58) (23) ( 204) (44) Net change in fiduciary net position 8,016 10,669 16,560 11,407 Plan fiduciary net position ‐ beginning 118,479 107,810 91,250 79,843 Plan fiduciary net position ‐ ending (b) 126,495 $ 118,479 $ 107,810$ 91,250 $ Plan net OPEB liability/(asset) ‐ Ending (a) ‐ (b) 124,798 $ 127,030 $ 147,820$ 153,509 $ Plan fiduciary net position as a percentage of total OPEB liability 50.34% 48.26% 42.17% 37.28% Covered employee payroll 125,676 $ 118,014 $ 119,090$ 118,774 $ Plan net OPEB liability/(asset) as a percentage of covered employee payroll 99.30% 107.64% 124.12% 129.24% Notes to Schedule:
Benefit changes ‐ The figures above do not include any liability that may have re sulted from plan changes which occurred after the measurement dates.
Changes in assumptions ‐ During measurement period 2020, demographic assumptions were change in accordance to the 2017 CalPERS Experience Study while mortality improvement scale was updated to Scale MP‐2019. * Fiscal year ended June 30, 2018 was the first year of implementation of GASB Statement No. 75, therefore only four years of information is shown.
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CITY OF PALO ALTO
Required Supplementary Information (Unaudited)
Last 5 Fiscal Years*
114
VI. SCHEDULE OF EMPLOYER OPEB CONTRIBUTIONS
(In thousands)
Fiscal Year 2020‐21 2019‐20 2018‐19 2017‐18 2016‐17
Contractually required contribution (actuarially determined) 14, 566$ 16,482 $ 15,997 $ 16,938 $ 16,365 $ Actual contribution (14,592) (16,475) (15,997) (21,349) (14,739) Contribution deficiency/(excess) (26) $ 7 $ ‐ $ (4,411)$ 1,626 $ Covered employee payroll 120,869 $ 125,676 $ 118,014 $ 119,090 $ 118,774 $ Contributions as percentage of covered employee payroll 12.07% 13 .11% 13.56% 17.93% 12.41%
Notes to Schedule:
The actuarial methods and assumptions used to set the actuarially determined contributions for fiscal year 2021 contribution rates are as follows:
ADC for fiscal year June 30, 2021
Actuarial valuation date June 30, 2019
Actuarial cost method Entry‐Age, level percentage of payroll Amortization method Level percent of pay
Amortization period 24‐year fixed period for 2020/21
Asset valuation method Market value, no smoothing
Inflation 2.75%
Payroll growth 3.00%
Investment rate of return
Medical trend
Mortality
Mortality Improvement
6.75%
* Fiscal year ended June 30, 2018 was the first year of implementation of GASB Statement No. 75, therefore only five years of information is shown.
Non‐Medicare ‐ 7.25% for 2021, decreasing to an ultimate rate of 4.0% in 2076 Medicare ‐ 6.3% for 2021, decreasing to an ultimate rate of 4.0% in 2076 CalPERS 1997‐2015 Experience Study
Post‐retirement mortality projected fully generational with Soc iety of Actuaries Scale MP‐2019
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Total
Special Debt Other
Revenue Service Permanent Governmental
Funds Funds Fund Funds
ASSETS:
Cash and investments available for operations 60,487 $ 3,728 $ 2,543 $ 66,758 $ Receivables, net:
Accounts and intergovernmental 517 2 ‐ 519 Interest 357 19 13 389 Notes and loan receivable 52,851 ‐ ‐ 52,851 Restricted cash and investments with fiscal agents ‐ 4,655 ‐ 4,655 Total assets 114,212 $ 8,40 4$ 2,556 $ 125,172$ Liabilities:
Accounts payable and accruals 495 $ ‐ $ ‐ $ 495 $ Accrued salaries and benefits 34 ‐ ‐ 34 Due to other funds 341 ‐ ‐ 341 Total liabilities 870 ‐ ‐ 870 Fund balances:
Nonspendable
Eyerly family ‐ ‐ 2,556 2,556 Restricted for:
Transportation mitigation 12,512 ‐ ‐ 12,512 Federal revenue 5,293 ‐ ‐ 5,293 Street improvement 28 ‐ ‐ 28 Local law enforcement 756 ‐ ‐ 756 Public benefit 18,282 ‐ ‐ 18,282 Debt service ‐ 8,40 4 ‐ 8,40 4 Committed for:
Developer impact fee 13,30 0 ‐ ‐ 13,30 0 Housing In‐Lieu 58,883 ‐ ‐ 58,883 Special districts 3,186 ‐ ‐ 3,186 Downtown business 50 ‐ ‐ 50 Assigned for:
Unrealized gain on investment 1,052 ‐ ‐ 1,052 Total fund balances 113,342 8,40 4 2,556 124,302 Total liabilities and fund balances 114,212$ 8,40 4$ 2,556 $ 125,172$ LIABILITIES AND FUND BALANCES:
CITY OF PALO ALTO
Non‐major Governmental Funds
Combining Balance Sheet
June 30, 2021
(Amounts in thousands)
115
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Total
Special Debt Other
Revenue Service Permanent Governmental
Funds Funds Fund Funds
REVENUES:
Property tax ‐ $ 4,329$ ‐ $ 4,329$ Special assessments 5 ‐ ‐ 5 Other taxes and fines 2,816 ‐ ‐ 2,816 Intergovernmental 1,337 ‐ ‐ 1,337 Licenses, permits and fees:
University Avenue Parking 83 ‐ ‐ 83 California Avenue Parking 22 ‐ ‐ 22 Other licenses, permits and fees 2,056 ‐ ‐ 2,056 Investment earnings 169 (10) 16 175 Housing In‐Lieu ‐ residential 5,804 ‐ ‐ 5,804 Other revenue 154 ‐ ‐ 154 Total revenues 12,446 4,319 16 16,781 EXPENDITURES:
Current:
Administrative Services 261 ‐ ‐ 261 Public Works 1,427 ‐ ‐ 1,427 Planning and Development Services 1,285 ‐ ‐ 1,285 Office of Transportation 1,437 ‐ ‐ 1,437 Police 36 ‐ ‐ 36 Community Services 236 ‐ ‐ 236 Non‐Departmental 255 ‐ ‐ 255 Debt service:
Principal retirement ‐ 2,595 ‐ 2,595 Interest and fiscal charges ‐ 6,147 ‐ 6,147 Total expenditures 4,937 8,742 ‐ 13,679 EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES 7,509 (4,423) 16 3,102 OTHER FINANCING SOURCES (USES):
Transfers in 570 2,910 ‐ 3,480 Transfers out (9,564) ‐ ‐ (9,564) Total other financing sources (uses) (8,994) 8,939 ‐ (55) Change in fund balances (1,485) 4,516 16 3,047 FUND BALANCES, BEGINNING OF YEAR 114,827 3,888 2,540 121,255 FUND BALANCES, END OF YEAR 113,342 $ 8,404 $ 2,556 $ 124,302$ CITY OF PALO ALTO
Non‐major Governmental Funds
Combining Statement of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2021
(Amounts in thousands)
116
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117
NON‐MAJOR GOVERNMENTAL FUNDS
SPECIAL REVENUE FUNDS
Street Improvement
This fund accounts for revenues received from state gas tax. Allocations must be spent on the construction and maintenance of the road network system of the City.
Federal Revenue
This fund accounts for grant funds received under the Community Development Act of 1974 and HOME Investment Grant Programs, for activities approved and subject to federal regulations.
Housing In‐Lieu
This fund accounts for revenues from commercial and residential developers to provide housing under the City’s Below Market Rate program.
Special Districts
This fund accounts for revenues from parking permits and for maintenance of various parking lots within the City’s parking districts.
Transportation Mitigation
This fund accounts for revenues from fees or contributions requ ired for transportation mitigation issues encountered as a result of City development.
Local Law Enforcement
This fund accounts for revenues received in support of City’s law enforcement program.
Asset Seizure
This fund accounts for seized property and funds associated with drug trafficking. Under California Assembly Bill No. 4162, the monies are released to the City for specific expenditures related to law enforcement activities.
Developer Impact Fee
This fund accounts for fees imposed on new developments to be u sed for parks, community centers and libraries.
Downtown Business Development District
The Downtown Business Developmen t District Fund was established to account for the activities of the Palo Alto Downtown Business Development District, which was established to enhance the viability of the downtown business district.
Public Benefit
This fund accounts for the activities of the Stanford University Medical Center (SUMC) Development Agreement (DA) whereby SUMC will enhance and expand their facilities and the City will grant SUMC the right to develop the facilities in accordance with the DA.
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Street Federal Housing Special
Improvement Revenue In‐Lieu Districts
ASSETS:
Cash and investments available for operations ‐ $ ‐ $ 11,573$ 3,546 $ Receivables, net:
Accounts and intergovernmental 234 283 ‐ ‐ Interest ‐ ‐ 92 27 Notes and loan receivable ‐ 5,351 47,50 0 ‐ Total assets 234 $ 5,63 4$ 59,165 $ 3,573 $ Liabilities:
Accounts payable and accruals ‐ $ 203 $ 10 $ 282 $ Accrued salaries and benefits ‐ 3 1 26 Due to other funds 206 135 ‐ ‐ Total liabilities 206 341 11 308 Fund balances:
Restricted
Transportation mitigation ‐ ‐ ‐ ‐ Federal revenue ‐ 5,293 ‐ ‐ Street improvement 28 ‐ ‐ ‐ Local law enforcement ‐ ‐ ‐ ‐ Public benefit ‐ ‐ ‐ ‐ Committed
Developer impact fee ‐ ‐ ‐ ‐ Housing In‐Lieu ‐ ‐ 58,883 ‐ Special districts ‐ ‐ ‐ 3,186 Downtown business ‐ ‐ ‐ ‐ Assigned
Unrealized gains on investments ‐ ‐ 271 79 Total fund balances 28 5,293 59,15 4 3,265 Total liabilities and fund balances 234$ 5,63 4$ 59,165 $ 3,573 $ LIABILITIES AND FUND BALANCES:
CITY OF PALO ALTO
Non‐major Special Revenue Funds
Combining Balance Sheet
June 30, 2021
(Amounts in thousands)
118
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Downtown Total
Business Special
Transportation Local Law Asset Developer Development Public Revenue Mitigation Enforcement Seizure Impact Fee District Benefit Funds 12,635$ 760 $ 3 $ 13,446$ 51 $ 18,473$ 60,487 $ ‐ ‐ ‐ ‐ ‐ ‐ 517 64 3 ‐ 73 ‐ 98 357 ‐ ‐ ‐ ‐ ‐ ‐ 52,851 12,699$ 763 $ 3 $ 13,519$ 51 $ 18,571$ 114,212$ ‐$ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ 495 $ ‐ ‐ ‐ 4 ‐ ‐ 34 ‐ ‐ ‐ ‐ ‐ ‐ 341 ‐ ‐ ‐ 4 ‐ ‐ 870 12,512 ‐ ‐ ‐ ‐ ‐ 12,512 ‐ ‐ ‐ ‐ ‐ ‐ 5,293 ‐ ‐ ‐ ‐ ‐ ‐ 28 ‐ 753 3 ‐ ‐ ‐ 756 ‐ ‐ ‐ ‐ ‐ 18,282 18,282 ‐ ‐ ‐ 13,30 0 ‐ ‐ 13,30 0 ‐ ‐ ‐ ‐ ‐ ‐ 58,883 ‐ ‐ ‐ ‐ ‐ ‐ 3,186 ‐ ‐ ‐ ‐ 50 ‐ 50 187 10 ‐ 215 1 289 1,052 12,699 763 3 13,515 51 18,571 113,342 12,699$ 763 $ 3 $ 13,519$ 51 $ 18,571$ 114,212$ 119
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Street Federal Housing Special
Improvement Revenue In‐Lieu Districts
REVENUES:
Special assessments ‐ $ ‐ $ ‐ $ ‐ $ Other taxes and fines 2,793 ‐ ‐ 23 Intergovernmental ‐ 1,172 ‐ ‐ Licenses, permits and fees:
University Avenue Parking ‐ ‐ ‐ 83 California Avenue Parking ‐ ‐ ‐ 22 Other licenses, permits and fees ‐ ‐ ‐ 49 Investment earnings (3) ‐ 9 1 Housing In‐Lieu ‐ residential ‐ ‐ 5,804 ‐ Other revenue ‐ ‐ 85 29 Total revenues 2,790 1,172 5,898 207 EXPENDITURES:
Current:
Administrative Services ‐ ‐ ‐ 261 Public Works ‐ ‐ ‐ 1,427 Planning and Development Services ‐ 1,100 179 6 Office of Transportation ‐ ‐ ‐ 1,437 Police ‐ ‐ ‐ ‐ Community Services ‐ ‐ ‐ 32 Non‐Departmental ‐ ‐ 75 160 Total expenditures ‐ 1,100 254 3,323 EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES 2,790 72 5,644 (3,116) OTHER FINANCING SOURCES (USES):
Transfers in ‐ ‐ ‐ 400 Transfers out (2,837) ‐ ‐ (838) Total other financing sources (uses) (2,837) ‐ ‐ (438) Change in fund balances (47) 72 5,644 (3,554) FUND BALANCES, BEGINNING OF YEAR 75 5,221 53,510 6,819 FUND BALANCES, END OF YEAR 28 $ 5,293$ 59,154 $ 3,265 $ CITY OF PALO ALTO
Non‐major Special Revenue Funds
Combining Statement of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2021
(Amounts in thousands)
120
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Downtown Total
Business Special
Transportation Local Law Asset Developer Development Public Revenue Mitigation Enforcement Seizure Impact Fee District Benefit Funds ‐$ ‐ $ ‐ $ ‐ $ 5 $ ‐ $ 5 $ ‐ ‐ ‐ ‐ ‐ ‐ 2,816 ‐ 165 ‐ ‐ ‐ ‐ 1,337 ‐ ‐ ‐ ‐ ‐ ‐ 83 ‐ ‐ ‐ ‐ ‐ ‐ 22 429 ‐ ‐ 1,578 ‐ ‐ 2,056 66 7 ‐ 14 ‐ 75 169 ‐ ‐ ‐ ‐ ‐ ‐ 5,804 ‐ ‐ ‐ 40 ‐ ‐ 154 495 172 ‐ 1,632 5 75 12,446 ‐ ‐ ‐ ‐ ‐ ‐ 261 ‐ ‐ ‐ ‐ ‐ ‐ 1,427 ‐ ‐ ‐ ‐ ‐ ‐ 1,285 ‐ ‐ ‐ ‐ ‐ ‐ 1,437 ‐ 36 ‐ ‐ ‐ ‐ 36 ‐ ‐ ‐ 204 ‐ ‐ 236 ‐ ‐ ‐ ‐ 20 ‐ 255 ‐ 36 ‐ 204 20 ‐ 4,937 495 136 ‐ 1,428 (15) 75 7,509 ‐ ‐ ‐ 170 ‐ ‐ 570 (400) ‐ ‐ (3,539) ‐ (1,950) (9,564) (400) ‐ ‐ (3,369) ‐ (1,950) (8,994) 95 136 ‐ (1,941) (15) (1,875) (1,485) 12,604 627 3 15,456 66 20,446 114,827 12,699$ 763 $ 3 $ 13,515$ 51 $ 18,571$ 113,342 121
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Street Improvement Federal Revenue
Actual, Actual,
Budget Budgetary Basis Variance Budget Budgetary Basis Variance REVENUES:
Special assessments ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ Other taxes and fines 2,793 2,793 ‐ ‐ ‐ ‐ Intergovernmental ‐ ‐ ‐ 1,384 1,172 (212) Licenses, permits and fees
University Avenue Parking ‐ ‐ ‐ ‐ ‐ ‐ California Avenue Parking ‐ ‐ ‐ ‐ ‐ ‐ Other licenses, permits and fees ‐ ‐ ‐ ‐ ‐ ‐ Investment earnings 9 (1) (10) ‐ ‐ ‐ Rental income ‐ ‐ ‐ ‐ ‐ ‐ Housing In‐Lieu ‐ residential ‐ ‐ ‐ ‐ ‐ ‐ Other:
Loan payoffs ‐ ‐ ‐ ‐ ‐ ‐ Other revenue ‐ ‐ ‐ ‐ ‐ ‐ Total revenues 2,802 2,792 (10) 1,384 1,172 (212) EXPENDITURES:
Current:
Administrative Services ‐ ‐ ‐ ‐ ‐ ‐ Public Works ‐ ‐ ‐ ‐ ‐ ‐ Planning and Development Services ‐ ‐ ‐ 1,886 1,462 424 Office of Transportation ‐ ‐ ‐ ‐ ‐ ‐ Police ‐ ‐ ‐ ‐ ‐ ‐ Community Services ‐ ‐ ‐ ‐ ‐ ‐ Non‐Departmental ‐ ‐ ‐ ‐ ‐ ‐ Total expenditures ‐ ‐ ‐ 1,886 1,462 424 Excess (deficiency) of revenues
over (under) expenditures 2,802 2,792 (10) (502) (290) 212 OTHER FINANCING SOURCES (USES):
Transfers in ‐ ‐ ‐ ‐ ‐ ‐ Transfers out (2,837) (2,837) ‐ ‐ ‐ ‐ Total other financing sources (uses) (2,837) (2,837) ‐ ‐ ‐ ‐ Change in fund balances, budgetary basis (35) $ (45) (10)$ (502)$ (290) 212 $ Adjustment to Budgetary Basis:
Unrealized gain (loss) on investments (2) ‐ Changes in notes receivable ‐ ‐
Current year encumbrances/reappropriations ‐ 362 (47) 72
FUND BALANCES, BEGINNING OF YEAR, GAAP BASIS 75 5,221 FUND BALANCES, END OF YEAR, GAAP BASIS 28 $ 5,293 $ CHANGE IN FUND BALANCE, GAAP BASIS
(Amounts in thousands)
CITY OF PALO ALTO
Non‐major Special Revenue Funds
Combining Schedule of Revenues, Expenditures and Changes in Fund Balances ‐ Budget and Actual
For the Year Ended June 30, 2020
122
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Housing In‐Lieu Special Districts Transportation Mitigation Actual, Actual, Actual,
Budget Budgetary Basis Variance Budget Budgetary Basis Variance Budge t Budgetary Basis Variance ‐$ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ ‐ ‐ 52 23 (29) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 2,464 83 (2,381) ‐ ‐ ‐ ‐ ‐ ‐ 880 22 (858) ‐ ‐ ‐ ‐ ‐ ‐ 1,198 49 (1,149) 276 429 153 463 366 (97) 109 92 (17) 260 217 (43) 9 ‐ (9) ‐ ‐ ‐ ‐ ‐ ‐ 2,150 5,804 3,654 ‐ ‐ ‐ ‐ ‐ ‐ 25 ‐ (25) ‐ ‐ ‐ ‐ ‐ ‐ 170 85 (85) ‐ 29 29 ‐ ‐ ‐ 2,817 6,255 3,438 4,703 298 (4,405) 536 646 110 ‐ ‐ ‐ 330 261 69 ‐ ‐ ‐ ‐ ‐ ‐ 1,697 1,634 63 ‐ ‐ ‐ 20,462 20,720 (258) 1 7 (6) ‐ ‐ ‐ ‐ ‐ ‐ 3,539 2,005 1,534 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 43 42 1 ‐ ‐ ‐ 695 75 620 206 410 (204) ‐ ‐ ‐ 21,157 20,795 362 5,816 4,359 1,457 ‐ ‐ ‐ (18,340) (14,540) 3,800 (1,113) (4,061) (2,948) 536 646 110 ‐ ‐ ‐ 400 400 ‐ ‐ ‐ ‐ ‐ ‐ ‐ (838) (838) ‐ (400) (400) ‐ ‐ ‐ ‐ (438) (438) ‐ (400) (400) ‐ (18,340)$ (14,540) 3,800 $ (1,551)$ (4,499) (2,948) $ 136 $ 246 110 $ (357) (91) (151) 18,752 ‐ ‐
1,789 1,036 ‐
5,644 (3,554) 95
53,510 6,819 12,604
59,154$ 3,265 $ 12,699 $
123
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Local Law Enforcement Asset Seizure
Actual, Actual,
Budget Budgetary Basis Variance Budget Budgetary Basis Variance REVENUES:
Special assessments ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ Other taxes and fines ‐ ‐ ‐ ‐ ‐ ‐ Intergovernmental 105 165 60 ‐ ‐ ‐ Licenses, permits and fees
University Avenue Parking ‐ ‐ ‐ ‐ ‐ ‐ California Avenue Parking ‐ ‐ ‐ ‐ ‐ ‐ Other licenses, permits and fees ‐ ‐ ‐ ‐ ‐ ‐ Investment earnings 7 11 4 ‐ ‐ ‐ Rental income ‐ ‐ ‐ ‐ ‐ ‐ Housing In‐Lieu ‐ residential ‐ ‐ ‐ ‐ ‐ ‐ Other:
Loan payoffs ‐ ‐ ‐ ‐ ‐ ‐ Other revenue ‐ ‐ ‐ ‐ ‐ ‐ Total revenues 112 176 64 ‐ ‐ ‐ EXPENDITURES:
Current:
Administrative Services ‐ ‐ ‐ ‐ ‐ ‐ Public Works ‐ ‐ ‐ ‐ ‐ ‐ Planning and Development Services ‐ ‐ ‐ ‐ ‐ ‐ Office of Transportation ‐ ‐ ‐ ‐ ‐ ‐ Police 105 36 69 ‐ ‐ ‐ Community Services ‐ ‐ ‐ ‐ ‐ ‐ Non‐Departmental ‐ ‐ ‐ ‐ ‐ ‐ Total expenditures 105 36 69 ‐ ‐ ‐ Excess (deficiency) of revenues
over (under) expenditures 7 140 133 ‐ ‐ ‐ OTHER FINANCING SOURCES (USES):
Transfers in ‐ ‐ ‐ ‐ ‐ ‐ Transfers out ‐ ‐ ‐ ‐ ‐ ‐ Total other financing sources (uses) ‐ ‐ ‐ ‐ ‐ ‐ Change in fund balances, budgetary basis 7 $ 140 133 $ ‐ $ ‐ ‐ $ Adjustment to Budgetary Basis:
Unrealized gain (loss) on investments (4) ‐ Changes in notes receivable ‐ ‐
Current year encumbrances/reappropriations ‐ ‐ 136 ‐
FUND BALANCES, BEGINNING OF YEAR, GAAP BASIS 627 3 FUND BALANCES, END OF YEAR, GAAP BASIS 763 $ 3 $ CHANGE IN FUND BALANCE, GAAP BASIS
(Amounts in Thousands)
CITY OF PALO ALTO
Non‐major Special Revenue Funds
Combining Schedule of Revenues, Expenditures and Changes in Fund Balances ‐ Budget and Actual
For the Year Ended June 30, 2021
124
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Developer Impact Fee Downtown Business Improvement District Actual, Actual, Actual,
Budget Budgetary Basis Variance Budget Budgetary Basis Variance Budge t Budgetary Basis Variance ‐$ ‐ $ ‐ $ 140 $ 5 $ (135)$ ‐ $ ‐ $ ‐ $ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 875 1,578 703 ‐ ‐ ‐ ‐ ‐ ‐ 352 227 (125) ‐ ‐ ‐ 370 324 (46) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 40 40 ‐ ‐ ‐ ‐ ‐ ‐ 1,227 1,845 618 140 5 (135) 370 324 (46) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 203 204 (1) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 203 20 183 ‐ ‐ ‐ 203 204 (1) 203 20 183 ‐ ‐ ‐ 1,024 1,641 617 (63) (15) 48 370 324 (46) 170 170 ‐ ‐ ‐ ‐ ‐ ‐ ‐ (3,539) (3,539) ‐ ‐ ‐ ‐ (1,950) (1,950) ‐ (3,369) (3,369) ‐ ‐ ‐ ‐ (1,950) (1,950) ‐ (2,345)$ (1,728) 617 $ (63) $ (15) 48 $ (1,580)$ (1,626) (46) $ (213) ‐ (249)
‐ ‐ ‐
‐ ‐ ‐
(1,941) (15) (1,875) 15,456 66 20,446
13,515$ 51 $ 18,571$
Public Benefit
125
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126
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127
NON‐MAJOR GOVERNMENTAL FUNDS
DEBT SERVICE FUNDS
2018 Golf Course Capital Improvement
This fund accounts for revenues received from the General Fund to provide payment of principal and interest associated with the 2018 Golf Course Capital Improveme nt Certificates of Participation as they become due.
2019 California Avenue Parking Garage COPs
This fund accounts for revenues received from the General Fund to provide payment of principal and interest associated with the 2019 California Avenue Parking Gar age Certificates of Participation as they become due.
Library Projects
This fund accounts for revenues received from property taxes to provide payment of principal and interest associated with the 2010 and 2013A General Obligation Bonds as they become due.
Public Safety Building
This fund accounts for revenues received from the General Fund to provide payment of principal and interest associated with the 2021 Public Safety Building Certificates of Participation as they become due.
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CITY OF PALO ALTO
Non‐major Debt Service Funds
Combining Balance Sheet
June 30, 2021
(Amounts in thousands)
2018 Golf Course 2019 California Total
Capital Avenue Parking Library Public Safety Debt Service Improvement Garage COPs Projects Building Funds
ASSETS:
Cash and investments available for operations 1 $ 5 $ 3,722$ ‐ $ 3,728$ Receivables:
Accounts and intergovernmental ‐ ‐ 2 ‐ 2 Interest ‐ ‐ 19 ‐ 19 Restricted cash and investments with fiscal agents 18 16 ‐ 4,621 4,655 Total assets 19 $ 21 $ 3,743$ 4,621 $ 8,404 $ FUND BALANCES:
Restricted:
Debt service 19 $ 21 $ 3,743$ 4,621 $ 8,404 $ 128
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CITY OF PALO ALTO
Non‐major Debt Service Funds
Combining Statement of Revenues, Expenditures and Changes in Fund Balances For the Year Ended June 30, 2021
(Amounts in thousands)
2018 Golf Course 2019 California Total
Capital Avenue Parking Library Public Safety Debt Service Improvement Garage COPs Projects Building Funds
REVENUES:
Property tax ‐ $ ‐ $ 4,329$ ‐ $ 4,329$ Investment earnings ‐ ‐ (10) ‐ (10) Total revenues ‐ ‐ 4,319 ‐ 4,319 EXPENDITURES:
Debt service:
Principal retirement 185 630 1,780 ‐ 2,595 Interest and fiscal charges 345 1,748 2,646 1,408 6,147 Total expenditures 530 2,378 4,426 1,408 8,742 EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES (530) (2,378) (107) (1,408) (4,423) OTHER FINANCING SOURCES (USES):
Issuance of debt ‐ ‐ ‐ 6,029 6,029 Transfers in 530 2,380 ‐ ‐ 2,910 Total other financing sources (uses) 530 2,380 ‐ 6,029 8,939 Change in fund balances ‐ 2 (107) 4,621 4,516 FUND BALANCES, BEGINNING OF YEAR 19 19 3,850 ‐ 3,888 FUND BALANCES, END OF YEAR 19 $ 21 $ 3,743$ 4,621 $ 8,40 4$ 129
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Actual, Actual, Actual, Actual,
Budgetary Budgetary Budgetary Budgetary
Budget Basis Variance Budget Basis Variance Budget Basis Variance Budget Basis Variance REVENUES:
Property tax ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ ‐ $ 4,559$ 4,329 $ (230) $ ‐ $ ‐ $ ‐ $ Investment earnings ‐ ‐ ‐ ‐ ‐ ‐ 29 32 3 ‐ ‐ ‐ Total revenues ‐ ‐ ‐ ‐ ‐ ‐ 4,588 4,361 (227) ‐ ‐ ‐ EXPENDITURES:
Debt service:
Principal retirement 185 185 ‐ 630 630 ‐ 1,780 1,780 ‐ ‐ ‐ ‐ Interest and fiscal charges 345 345 ‐ 1,750 1,748 2 2,646 2,646 ‐ 1,408 1,408 ‐ Total expenditures 530 530 ‐ 2,380 2,378 2 4,426 4,426 ‐ 1,408 1,408 ‐ Excess (deficiency) of revenues
over (under) expenditures (530) (530) ‐ (2,380) (2,378) 2 162 (65) (227) (1,408) (1,408) ‐ OTHER FINANCING SOURCES (USES):
Issuance of debt ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 6,029 6,029 ‐ Transfers in 530 530 ‐ 2,380 2,380 ‐ ‐ ‐ ‐ ‐ ‐ ‐ Total other financing sources (uses) 530 530 ‐ 2,380 2,380 ‐ ‐ ‐ ‐ 6,029 6,029 ‐ Change in fund balances, budgetary bas ‐$ ‐ ‐ $ ‐ $ 2 2 $ 162$ (65) (227)$ 4,621 $ 4,621 ‐ $ Adjustment to Budgetary Basis:
Unrealized gain (loss) on investments ‐ ‐ (42) ‐ ‐ 2 (107) 4,621
FUND BALANCES, BEGINNING OF YEAR 19 19 3,850 ‐ FUND BALANCES, END OF YEAR 19 $ 21 $ 3,743 $ 4,621 $ CHANGE IN FUND BALANCE, GAAP BASIS
(Amounts in thousands)
CITY OF PALO ALTO
Non‐major Debt Service Funds
Combining Schedule of Revenues, Expenditures and Changes in Fund Balances ‐ Budget and Actual
For the Year Ended June 30, 2021
2018 Golf Course Capital
Improvement
2019 California Avenue Parking
Garage COPs Library Projects Public Safety Building
130
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131
NON‐MAJOR GOVERNMENTAL FUNDS
PERMANENT FUND
Eyerly Family
This fund accounts for the revenues received from assets donated by Mr. and Mrs. Fred Eyerly for the City and or its citizenry.
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Eyerly Family Permanent Fund
Variance
Actual, Positive
Budget Budgetary Basis (Negative)
REVENUES:
Investment earnings 42 $ 44 $ 2 $ Change in fund balance 42 $ 44 2 $ Adjustment to Budgetary Basis:
Unrealized gain (loss) on investments (28)
16 FUND BALANCE, BEGINNING OF YEAR 2,540
FUND BALANCE, END OF YEAR 2,556 $
CHANGE IN FUND BALANCE, GAAP BASIS
(Amounts in thousands)
CITY OF PALO ALTO
Non‐major Permanent Fund
Schedule of Revenues, Expenditures and Changes in Fund Balance ‐ Budget and Actual
For the Year Ended June 30, 2021
132
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133
INTERNAL SERVICE FUNDS
INTRODUCTION
Internal Service Funds are used to finance and account for special activities and services performed by a designated department for other departments in the City on a cost reimbursement basis.
Vehicle Replacement and Maintenance
This fund accounts for the maintenance and replacement of vehic les and equipment used by all City departments. The source of revenue is from reimbursement of fleet replacement and maintenance costs allocated to each department by usage of vehicle.
Technology
This fund accounts for replacement and upgrade of technology, and covers four primary areas used by all City departments: desktop, infrastructure, applications, and technology research and development. The source of revenue is from reimbursement of costs for support provided to other departments.
Printing and Mailing Services
This fund accounts for central duplicating, printing and mailing services provided to all City departments.
Source of revenue for this fund is from reimbursement of costs for services and supplies purchased by other departments.
General Benefits
This fund accounts for the administration of compensated absences and health benefits.
Workers’ Compensation Insurance Program
This fund accounts for the administration of the City’s self‐insured workers’ compensation programs.
General Liabilities Insurance Program
This fund accounts for the administration of the City’s self‐insured general liability programs.
Retiree Health Benefits
This fund accounts for the retiree health benefits contributions.
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Vehicle Printing Workers' General Total
Replacement and Compensation Liabilities Retiree Internal and Mailing General Insurance Insurance Health Services Maintenance Technolog y Services Benefits Program Program Benefits Funds ASSETS:
Current Assets:
Cash and investments available for operations 11,524$ 22,009 $ 231 $ 22,833$ 27,555 $ 9,970 $ 2,684 $ 96,806$ Accounts receivable, net 70 ‐ ‐ 16 12 ‐ ‐ 98 Interest receivable 62 119 1 108 134 50 10 484 Inventory of materials and supplies 116 ‐ ‐ ‐ ‐ ‐ ‐ 116 Restricted cash and investments with fiscal agents and trustees ‐ ‐ ‐ 37,089 ‐ ‐ ‐ 37,089 Total current assets 11,772 22,128 232 60,046 27,701 10,020 2,694 134,593 Noncurrent Assets:
Capital assets:
Nondepreciable 1,839 3,748 ‐ ‐ ‐ ‐ ‐ 5,587 Depreciable, net 15,419 1,909 26 ‐ ‐ ‐ ‐ 17,35 4 Total noncurrent assets 17,258 5,657 26 ‐ ‐ ‐ ‐ 22,941 Total assets 29,030 27,785 258 60,046 27,701 10,020 2,694 157,53 4 DEFERRED OUTFLOWS OF RESOURCES:
Pension related 469 2,058 10 ‐ 41 ‐ ‐ 2,578 OPEB related 271 552 10 ‐ 11 ‐ ‐ 844 Total deferred outflows of resources 740 2,610 20 ‐ 52 ‐ ‐ 3,422 LIABILITIES:
Current Liabilities:
Accounts payable and accruals 62 195 105 1,253 94 ‐ ‐ 1,709 Accrued salaries and benefits 37 140 2 ‐ 71 ‐ ‐ 250 Accrued compensated absences ‐ ‐ ‐ 6,327 ‐ ‐ ‐ 6,327 Accrued claims payable ‐ current ‐ ‐ ‐ 160 4,240 2,411 ‐ 6,811 Total current liabilities 99 335 107 7,740 4,405 2,411 ‐ 15,097 Noncurrent liabilities:
Accrued compensated absences ‐ ‐ ‐ 9,320 ‐ ‐ ‐ 9,320 Accrued claims payable ‐ ‐ ‐ ‐ 21,792 3,928 ‐ 25,720 Net pension liabilities 3,704 13,567 273 ‐ 4 ‐ ‐ 17,548 Net OPEB liabilities 1,532 3,127 141 ‐ ‐ ‐ ‐ 4,800 Total noncurrent liabilities 5,236 16,69 4 414 9,320 21,796 3,928 ‐ 57,388 Total liabilities 5,335 17,029 521 17,060 26,201 6,339 ‐ 72,485 DEFERRED INFLOWS OF RESOURCES:
OPEB related 288 587 11 ‐ 11 ‐ ‐ 897 NET POSITION:
Net Investment in capital assets 17,258 5,657 26 ‐ ‐ ‐ ‐ 22,941 Restricted for supplemental pension ‐ ‐ ‐ 37,089 ‐ ‐ ‐ 37,089 Unrestricted 6,889 7,122 (280) 5,897 1,541 3,681 2,694 27,54 4 Total net position 24,147 $ 12,779 $ (254) $ 42,986$ 1,541 $ 3,681 $ 2,694 $ 87,57 4$ CITY OF PALO ALTO
Internal Service Funds
Combining Statement of Fund Net Position
June 30, 2021
(Amounts in thousands)
134
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Vehicle Printing Workers' General Total
Replacement and Compensation Liabilities Retiree Internal and Mailing General Insurance Insurance Health Services Maintenance Technology Services Benefits Program Program Benefits Fund s OPERATING REVENUES:
Charges for services 6,522 $ 12,322$ 1,314 $ 72,224$ 6,578 $ 2,892 $ 13,577$ 115,429$ Other ‐ 27 ‐ ‐ 162 11 ‐ 200 Total operating revenues 6,522 12,349 1,314 72,224 6,740 2,903 13,577 115,629 OPERATING EXPENSES:
Administrative and general 1,478 7,801 948 137 613 2,208 27 13,212 Operations and maintenance 3,269 7,463 253 1,577 203 ‐ ‐ 12,765 Depreciation 2,751 395 7 ‐ ‐ ‐ ‐ 3,153 Claim payments and change in estimated
self‐insured liability ‐ ‐ ‐ 1,524 6,075 1,146 ‐ 8,745 Refund of charges for services 105 10 ‐ ‐ ‐ ‐ ‐ 115 Employment benefits ‐ ‐ ‐ 61,205 ‐ ‐ 14,570 75,775 Total operating expenses 7,603 15,669 1,208 64,443 6,891 3,354 14,597 113,765 Operating income (loss) (1,081) (3,320) 106 7,781 (151) (451) (1,020) 1,864 NONOPERATING REVENUES (EXPENSES):
Investment earnings 83 83 (1) 3,380 224 65 57 3,891 Gain on disposal of capital assets 385 ‐ ‐ ‐ ‐ ‐ ‐ 385 Other nonoperating revenues 5 ‐ ‐ ‐ ‐ ‐ ‐ 5 Total nonoperating revenues (expenses) 473 83 (1) 3,380 224 65 57 4,281 Income (loss) before transfers (608) (3,237) 105 11,161 73 (386) (963) 6,145 Transfers in 105 1,340 ‐ ‐ ‐ 5 2,347 3,797 Transfers out (326) (31) ‐ (2,347) ‐ ‐ ‐ (2,704) Change in net position (829) (1,928) 105 8,814 73 (381) 1,384 7,238 NET POSITION, BEGINNING OF YEAR 24,976 14,707 (359) 34,172 1,468 4,062 1,310 80,336 NET POSITION, END OF YEAR 24,147 $ 12,779 $ (254) $ 42,986$ 1,541 $ 3,681 $ 2,694 $ 87,574$ CITY OF PALO ALTO
Internal Service Funds
Combining Statement of Revenues, Expenses and Changes in Fund Net Position For the Year Ended June 30, 2021
(Amounts in thousands)
135
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Vehicle Printing Workers' General Total
Replacement and Compensation Liabilities Retiree Internal and Mailing General Insurance Insurance Health Services Maintenance Technology Services Benefits Program Program Benefits Fund s Cash flows from operating activities:
Cash received from customers 6,455$ 12,354$ 1,314 $ 72,225$ 6,572 $ 2,903 $ 13,577$ 115,400$ Cash payments to suppliers for goods and services (2,895) (7,615) (1,011) 59 (430) (2,218) ‐ (14,110) Cash payments to employees (2,191) (7,694) (146) (61,422) (368) ‐ (14,597) (86,418) Cash payments for judgments and claims ‐ ‐ ‐ (1,524) (3,814) (427) ‐ (5,765) Other cash receipts 5 ‐ ‐ ‐ ‐ ‐ ‐ 5 Net cash flows provided by (used in)
operating activities 1,374 (2,955) 157 9,338 1,960 258 (1,020) 9,112 Cash flows from noncapital financing activities:
Transfers in 105 1,340 ‐ ‐ ‐ 5 2,347 3,797 Transfers out (326) (31) ‐ (2,347) ‐ ‐ ‐ (2,704) Net cash flows provided by (used in)
noncapital financing activities (221) 1,309 ‐ (2,347) ‐ 5 2,347 1,093 Cash flows from capital and related financing activities:
Acquisition of capital assets (3,317) (1,511) ‐ ‐ ‐ ‐ ‐ (4,828) Proceeds from sale of capital assets 484 ‐ ‐ ‐ ‐ ‐ ‐ 484 Net cash flows (used in)
capital and related financing activities (2,833) (1,511) ‐ ‐ ‐ ‐ ‐ (4,344) Cash flows from investing activities:
Investment interest received (expenses paid) 88 110 (1) 3,377 223 66 51 3,914 Net change in cash and cash equivalents (1,592) (3,047) 156 10,368 2,183 329 1,378 9,775 Cash and cash equivalents, beginning of year 13,116 25,056 75 49,554 25,372 9,641 1,306 124,120 Cash and cash equivalents, end of year $ 11,524 $ 22,009 $ 231 $ 59,922 $ 27,555 $ 9,970 $ 2 ,684 $ 133,895 Financial statement presentation:
Cash and investments available for operations 11,524$ 22,009 $ 231 $ 22,833$ 27,555 $ 9,970 $ 2,684 $ 96,806$ Restricted cash and investments with
fiscal agents and trustees ‐ ‐ ‐ 37,089 ‐ ‐ ‐ 37,089 Cash and cash equivalents, end of year 11,524$ 22,009 $ 231 $ 59,922$ 27,555 $ 9,970 $ 2,684 $ $ 133,895 Reconciliation of operating income (loss) to net cash
flows provided by (used in) operating activities:
Operating income (loss) (1,081) $ (3,320) $ 106 $ 7,781$ (151) $ (451)$ (1,020)$ 1,864 $ Adjustments to reconcile operating income (loss)
to net cash provided by (used in) operating activities:
Depreciation 2,751 395 7 ‐ ‐ ‐ ‐ 3,153 Othe
r 5 ‐ ‐ ‐ ‐ ‐ ‐ 5 Change in assets and liabilities:
Accounts receivable (67) 5 ‐ 1 (6) ‐ ‐ (67) Inventory of materials and supplies (14) ‐ ‐ ‐ ‐ ‐ ‐ (14) Deferred outflows of resources ‐ pension plans 32 (330) 23 ‐ ‐ ‐ ‐ (275) Deferred outflows of resources ‐ OPEB 12 24 1 ‐ ‐ ‐ ‐ 37 Accounts payable and accruals (74) (16) 63 153 25 (10) ‐ 141 Accrued salaries and benefits 3 9 (2) ‐ 37 ‐ ‐ 47 Accrued compensated absences ‐ ‐ ‐ 1,403 ‐ ‐ ‐ 1,403 Accrued claims payable ‐ ‐ ‐ ‐ 2,099 719 ‐ 2,818 Net pension liability 8 747 (33) ‐ (41) ‐ ‐ 681 Net OPEB liability (29) (58) (2) ‐ ‐ ‐ ‐ (89) Deferred inflows of resources ‐ pension plans (131) (326) (3) ‐ (2) ‐ ‐ (462) Deferred inflows of resouces ‐ OPEB (41) (85) (3) ‐ (1) ‐ ‐ (130) Net cash flows provided by (used in)
operating activities 1,374 $ (2,955)$ 157 $ 9,338$ 1,960 $ 258 $ (1,020)$ 9,112 $ CITY OF PALO ALTO
Internal Service Funds
Combining Statement of Cash Flows
For the Year Ended June 30, 2021
(Amounts in thousands)
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FIDUCIARY FUNDS
INTRODUCTION
Fiduciary Funds are used to account for assets held by the City acting in a fiduciary capacity for other entities and individuals. The funds are operated to carry out t he specific actions required by the trust agreements, ordinances and other governing regulations.
Fiduciary Funds are presented separately from the Citywide and Fund financial statements.
Custodial Funds are fiduciary funds used to report fiduciary activities that are not required to be reported in pension (and other employee benefit) trust funds, investment trust funds, or private purpose trust funds. The City maintains two agency custodial funds as follows:
Cable Joint Powers Authority
The fund was established to account for the activities of the c able television system on behalf of the members.
University Avenue Area Off‐Street Parking Assessment District The fund accounts for the receipts and disbursements associated with the Series 2012 Limited Obligation Refunding Improvement Bonds.
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University Avenue
Cable Area Off‐Street
Joint Powers Parking Assessment
Authority District Total
ASSETS:
Cash and investments available for operations (Note 3) 1,207$ 2,069 $ 3,276 $ Accounts receivable 459 32 491 Interest receivable 5 11 16 Restricted cash and investments with fiscal agents (Note 3) ‐ 2,705 2,705 Total assets 1,671 4,817 6,488 LIABILITIES:
Accounts payable and accruals 411 ‐ 411 NET POSITION:
Restricted for:
Governmental entities 1,260 ‐ 1,260 Bondholders of special assessment bonds ‐ 4,817 4,817 Total net position 1,260 $ 4,817 $ 6,077 $ CITY OF PALO ALTO
Custodial Funds
Combining Statement of Fiduciary Net Position
June 30, 2021
(Amounts in thousands)
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University Avenue
Cable Area Off‐Street
Joint Powers Parking Assessment
Authority District Total
ADDITIONS:
Franchise and other fees collected 1,821 $ ‐ $ 1,821$ Special assessments collected ‐ 2,407 2,407 Investment earnings 14 (5) 9 Other ‐ 5 5 Total additions 1,835 2,407 4,242 DEDUCTIONS:
Administrative and general 34 5 39 Distribution to governmental entities 1,538 ‐ 1,538 Debt services payments ‐ 2,409 2,409 Total deductions 1,572 2,414 3,986 Changes in net position 263 (7) 256 NET POSITION, BEGINNING OF YEAR 997 4,824 5,821 NET POSITION, END OF YEAR 1,260 $ 4,817 $ 6,077 $ CITY OF PALO ALTO
Custodial Funds
Combining Statement of Changes in Fiduciary Net Position For the Year Ended June 30, 2021
(Amounts in thousands)
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STATISTICAL SECTION
The statistical section contains comprehensive statistical data, which relates to physical, economic, social and political characteristics of the City. It is intended to provide users with a broader and more complete understanding of the City and its financial affairs than is pos sible from the financial statements and supporting schedules included in the financial section.
In this section, readers will find comparative information related to the City’s revenue sources, expenditures, property tax valuations, levies and collections, general obligation bonded debt, utility revenue debt service, and demographics. Where available, the comparative information is presented for the last ten fiscal years.
In addition, this section presents information related to the City’s legal debt margin computation, principal taxpayers, notary and security bond coverages, and other miscel laneous statistics pertaining to services provided by the City.
In contrast to the financial section, the statistical section information is not usually subject to independent audit.
Financial Trends
These schedules contain trend information to help the reader un derstand how the City’s financial performance and well‐being have changed over time:
Net Position by Component
Changes in Net Position
Fund Balances of Governmental Funds
Changes in Fund Balances of Governmental Funds
Revenue Capacity
These schedules contain information to help the reader assess t he City’s most significant local revenue sources, property tax and electric charges:
Electric Operating Revenue by Source
Power Supply Resources
Supplemental Disclosure for Water Utilities
Supplemental Disclosure for Gas Utilities
Assessed Value of Taxable Property
Property Tax Rates, All Overlapping Governments
Property Tax Levies and Collections
Principal Property Taxpayers
Assessed Valuation and Parcels by Land Use
Per Parcel Assessed Valuation of Single Family Residential
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:
Ratio of Outstanding Debt by Type
Computation of Direct and Overlapping Debt
Computation of Legal Bonded Debt Margin
Revenue Bond Coverage
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STATISTICAL SECTION
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:
Taxable Transactions by Type of Business
Demographic and Economic Statistics
Principal Employers
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 servi ces the City provides and the activities it performs:
Operating Indicators by Function/Program
Capital Asset Statistics by Function/Program
Full‐Time Equivalent City Government Employees by Function
Sources
Unless otherwise noted, the information in these schedules is d erived from the Annual Comprehensive Financial Reports for the relevant year.
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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Governmental Activities
Investment in capital assets 370,111 $ 378,047 $ 386,696$ 405,921 $ 425,179 $ 453,878 $ 473,233$ 493,706 $ 497,378 $ 480,620 $ Restricted 52,934 71,717 68,331 55,963 47,907 38,138 46,724 59,669 73,274 80,265 Unrestricted 142,102 165,810 187,386 1,972 37,905 35,273 (92,587) (103,392) (130,078) (137,748) Total Governmental Activities Net Position 565,147$ 615,574 $ 642,413 $ 463,856 $ 510,991 $ 527,289 $ 427,370 $ 449,983 $ 440,574 $ 423,137 $ Business‐type Activities
Investment in capital assets 437,151 $ 446,597 $ 473,795$ 490,874 $ 512,918 $ 532,063 $ 573,688$ 602,136 $ 621,354 $ 642,018 $ Restricted ‐ 4,060 4,166 4,142 4,115 4,073 4,014 4,016 4,060 3,340 Unrestricted 262,602 269,926 266,794 172,802 162,806 163,158 110,429 135,391 159,592 161,861 Total Business‐type Activities Net Position 699,753$ 720,583 $ 744,755 $ 667,818 $ 679,839 $ 699,294 $ 688,131 $ 741,543 $ 785,006 $ 807,219 $ Primary Government
Investment in capital assets 807,262 $ 824,644 $ 860,491$ 896,795 $ 938,097 $ 985,941 $ 1, 046,921$ 1,095,842 $ 1,118,732 $ 1,122,638 $ Restricted 52,934 75,777 72,497 60,105 52,022 42,211 50,738 63,685 77,334 83,605 Unrestricted 404,704 435,736 454,180 174,774 200,711 198,431 17,842 31,999 29,514 24,113 Total Primary Government Net Position 1,264,900$ 1,336,157 $ 1,387,168 $ 1,131,674 $ 1,190,830 $ 1,226,583 $ 1,115,501 $ 1,191,526 $ 1,225,580 $ 1,230,356 $ Notes:
Source: Annual Financial Statements, Statement of Net Position
The City implemented GASB Statement No. 68, Accounting and Financial Reporting for Pensions, effective July 1, 2014, and GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pension, effective July 1, 2017. The City's unrestricted net position decreased in FY 2015 and again in FY 2018 as a result.
Fiscal Year Ended June 30
CITY OF PALO ALTO
Net Position by Component
Last Ten Fiscal Years
(Amounts in thousands)
(Accrual basis of accounting)
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
$ Thousands
Primary Government
Investment in capital assets Restricted Unrestricted
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PROGRAM REVENUES 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Governmental Activities
Charges for services
Administrative Services 1,647 $ 15,629$ 4,055 $ 5,460 $ 9,444 $ 5,242 $ 6,536 $ 6,413 $ 5,758 $ 1,150 $ Public Works 1,008 1,314 1,093 1,209 599 878 781 1,478 990 937 Planning & Community Environment 31,491 28,768 12,896 8,090 9,071 6,067 5,119 11,997 ‐ ‐ Development Services1&2 ‐ ‐ ‐ 12,019 12,570 11,768 16,000 13,904 ‐ ‐ Planning & Development Services2 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 16,173 21,228 Office of Transportation3 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 1,161 80 Public Safety 15,658 16,139 14,902 15,726 13,945 12,670 13,507 14,179 12,101 11,135 Community Services 11,365 13,808 20,882 20,912 21,551 20,472 21,285 22,805 20,808 20,893 Library 1,600 187 166 137 198 139 145 134 94 47 Operating grants and contributions 3,441 5,038 5,360 5,300 2,164 1,990 14,054 2,100 2,619 3,033 Capital grants and contributions 1,064 515 917 619 344 1,929 1,534 8,247 9,021 11,326 Total Governmental Activities
Program Revenues 67,274 81,398 60,271 69,472 69,886 61,155 78,961 81,257 68,725 69,829 Business‐type Activities
Charges for services
Water 31,467 37,746 40,291 35,847 37,588 42,678 45,087 45,571 48,740 48,812 Electric 118,886 121,805 121,916 120,842 120,743 137,543 154,142 163,514 169,389 162,240 Fiber Optics 3,662 4,382 4,485 4,627 4,505 4,553 4,529 4,657 4,576 3,936 Gas 41,774 34,633 35,737 30,751 30,212 36,431 37,044 42,113 37,402 39,520 Wastewater Collection 14,942 16,077 15,599 16,182 16,496 17,748 17,990 20,219 20,933 20,484 Wastewater Treatment 22,200 21,528 18,460 24,120 23,825 23,649 27,382 27,573 29,310 30,522 Refuse 30,645 30,583 30,297 31,576 32,169 33,918 34,647 33,996 32,695 30,636 Storm Drainage 5,892 6,053 6,183 6,281 6,520 6,693 6,964 7,249 7,543 7,785 Airport ‐ ‐ ‐ 683 826 1,286 2,382 2,483 2,362 2,585 Operating grants and contributions 605 572 549 534 744 512 501 488 473 462 Capital grants and contributions 1,526 2,224 2,005 2,080 1,061 4,265 14,19 4 6,677 6,449 6,391 Total Business‐type Activities
Program Revenues 271,599 275,603 275,522 273,523 274,689 309,276 344,862 354,540 359,872 353,373 Total Primary Government
Program Revenues 338,873$ 357,001 $ 335,793 $ 342,995 $ 344,575 $ 370,431 $ 423,823 $ 435,797 $ 428,597 $ 423,202 $
EXPENSES
Governmental Activities
City Council 345 $ 94 $ 387$ 271 $ 352 $ 329 $ 345 $ 270 $ 172 $ 178 $ City Manager 1,960 1,237 2,180 2,155 2,662 1,975 2,757 3,336 3,616 2,466 City Attorney 1,656 1,642 1,797 1,759 2,472 2,140 2,511 3,086 2,845 2,292 City Clerk 908 330 641 680 582 762 931 822 748 702 City Auditor 235 464 489 362 414 847 994 1,081 645 641 Administrative Services 10,100 7,614 11,388 9,980 10,637 11,887 13,949 19,169 15,919 22,985 Human Resources 1,071 1,420 1,346 1,464 2,224 2,272 2,674 3,021 3,060 2,518 Public Works 14,568 20,816 24,577 21,075 24,613 25,539 30,349 36,617 45,609 52,727 Planning & Community Environment2 12,074 13,549 14,926 8,423 10,208 10,918 11,357 12,169 ‐ ‐ Development Services1&2 ‐ ‐ ‐ 10,449 11,158 11,102 12,664 12,622 ‐ ‐ Planning & Development Services2 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 21,725 18,141 Office of Transportation3 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 4,693 3,636 Public Safety (Police and Fire) 62,817 59,452 62,883 58,660 56,653 73,320 83,923 89,189 92,187 80,758 Community Services 21,915 22,705 23,822 24,688 28,547 27,866 33,709 36,815 34,147 30,289 Library 7,323 7,319 7,758 7,721 10,825 11,437 12,208 12,557 12,971 11,145 Interest on long term debt 2,575 2,562 3,367 3,658 3,552 2,846 2,761 3,653 4,576 6,317 Total Governmental
Activities Expenses 137,547 139,204 155,561 151,345 164,899 183,240 211,132 234,407 242,913 234,795 Business‐type Activities
Water 29,093 30,707 31,593 33,205 35,120 37,535 40,836 40,606 43,034 43,556 Electric 102,030 106,438 113,004 122,499 120,319 128,603 146,033 139,605 142,426 156,105 Fiber Optics 1,489 1,437 1,661 1,891 2,107 2,159 2,653 2,476 2,761 2,529 Gas 28,878 26,749 26,869 23,525 20,879 26,783 27,930 30,915 27,212 28,556 Wastewater Collection 14,825 14,313 13,235 14,595 15,199 16,405 16,801 17,324 18,877 19,577 Wastewater Treatment 20,712 20,635 21,018 21,553 22,546 23,498 27,518 27,070 28,755 28,403 Refuse 31,900 28,542 28,413 27,974 30,370 30,665 28,808 30,391 36,947 29,138 Storm Drainage 3,103 3,703 3,644 3,721 3,735 4,106 5,059 4,951 5,514 4,897 Airport 153 246 466 1,004 970 1,274 1,656 1,790 2,131 1,499 Total Business‐type
Activities Expenses 232,183 232,770 239,903 249,967 251,245 271,028 297,294 295,128 307,657 314,260 Total Primary
Government Expenses 369,730$ 371,974 $ 395,464 $ 401,312 $ 416,144 $ 454,268 $ 508,426 $ 529,535 $ 550,570 $ 549,055 $ CITY OF PALO ALTO
Changes in Net Position
Last Ten Fiscal Years
(Accrual basis of accounting)
(Amounts in thousands)
Fiscal Year Ended June 30
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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
NET (EXPENSE)/REVENUE
Governmental Activities (70,273) $ (57,806)$ (95,290)$ (81,873)$ (95,013)$ (122,085)$ (132,171)$ (153,150)$ (174,188)$ (164,966)$ Business‐type Activities 39,416 42,833 35,619 23,556 23,44 4 38,248 47,568 59,412 52,215 39,113 Total Primary Government
Net (Expense)/Revenue (30,857)$ (14,973)$ (59,671)$ (58,317)$ (71,569)$ (83,837)$ (84,603)$ (93,738)$ (121,973)$ (125,853)$ GENERAL REVENUES AND OTHER CHANGES IN NET POSITION
Governmental Activities
Taxes
Property tax 30,104 $ 31,929 $ 35,299 $ 38,750 $ 41,189 $ 43,953 $ 47,170 $ 51,718 $ 55,604 $ 60,901 $ Sales tax 22,132 25,606 29,424 29,675 30,018 29,923 31,091 36,508 30,563 29,127 Utility user tax 10,834 10,861 11,008 10,861 12,469 14,240 15,414 16,402 16,140 14,642 Transient occupancy tax 9,664 10,794 12,255 16,699 22,366 23,477 24,937 25,649 18,553 5,179 Other taxes 8,173 10,504 9,660 11,867 7,868 8,989 11,337 9,525 9,775 13,471 Investment earnings 6,238 (1,228) 5,859 5,010 8,639 (711) 420 15,375 13,850 4,939 Miscellaneous 14,943 518 2,575 3,428 894 168 1,973 1,906 60 183 Transfers 17,426 19,249 17,103 16,405 18,705 18,34 4 19,077 18,680 20,23 4 19,087 Total Governmental Activities 119,514 108,233 123,183 132,695 142,148 138,383 151,419 175,763 164,779 147,529 Business‐type Activities
Investment earnings 7,605 (2,754) 6,379 4,857 7,282 (449) 596 12,680 11,482 2,187 Transfers (17,426) (19,249) (17,103) (16,405) (18,705) (18,344) (19,077) (18,680) (20,234) (19,087) Total Business‐type Activities (9,821) (22,003) (10,724) (11,548) (11,423) (18,793) (18,481) (6,000) (8,752) (16,900) Total Primary Government 109,693$ 86,230 $ 112,459$ 121,147 $ 130,725 $ 119,590 $ 132,938 $ 169,763 $ 156,027 $ 130,629 $ CHANGE IN NET POSITION
Governmental Activities 49,241 $ 50,427 $ 27,893 $ 50,822 $ 47,135 $ 16,298 $ 19,248 $ 22,613 $ (9,409) $ (17,437)$ Business‐type Activities 29,595 20,830 24,895 12,008 12,021 19,455 29,087 53,412 43,463 22,213 Total Primary Government
Change in Net Position 78,836$ 71,257 $ 52,788 $ 62,830 $ 59,156 $ 35,753 $ 48,335 $ 76,025$ 34,054$ 4,776 $ Notes: 1The Development Services Department was formed in FY15.
Source: Annual Financial Statements, Statement of Activities 2In FY20, the Development Services Department was combined with the Planning and Community Environment Department to form the Planning and Development Services Department.
3In FY20, the City established the Office of Transportation.
Fiscal Year Ended June 30
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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
General Fund
Nonspendable 6,007$ 5,749 $ 6,188 $ 6,296 $ 7,088 $ 7,709 $ 8,049 $ 7,647 $ 8,967 $ 9,376 $ Committed ‐ ‐ ‐ ‐ ‐ ‐ 373 5,100 4,505 4,651 Assigned 6,400 5,415 5,432 7,976 8,261 7,280 7,098 7,657 12,496 12,520 Unassigned 29,616 30,913 36,690 48,198 51,582 48,118 52,826 54,811 35,871 49,089 Total General Fund 42,023$ 42,077 $ 48,310 $ 62,470 $ 66,931 $ 63,107 $ 68,346 $ 75,215 $ 61,839 $ 75,636 $ Source: Annual Financial Statements, Balance Sheet
Fiscal Year Ended June 30
CITY OF PALO ALTO
Fund Balances of Governmental Funds (General Fund)
Last Ten Fiscal Years
(Modified accrual basis of accounting)
(Amounts in thousands)
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
$ Thousands
Nonspendable Committed Assigned Unassigned
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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
All Other Governmental Funds
Nonspendable 11,112 $ 18,189 $ 14,869 $ 1,468 $ 1,505$ 1,499$ 1,498$ 2,438$ 2,540$ 2,556$ Restricted 61,324 84,688 68,468 59,650 47,113 35,298 40,317 85,940 55,548 136,795 Committed 14,284 20,400 27,145 48,434 65,745 71,566 72,781 84,616 83,973 85,324 Assigned 33,264 45,514 55,211 52,627 64,411 63,225 68,261 56,842 62,825 65,331 Unassigned ‐ ‐ ‐ ‐ ‐ ‐ (32) (32) ‐ ‐ Total All Other
Governmental Funds 119,984$ 168,791 $ 165,693 $ 162,179 $ 178,774 $ 171,588 $ 182,825 $ 229,804 $ 204,886 $ 290,006 $ Source: Annual Financial Statements, Balance Sheet
Fiscal Year Ended June 30
CITY OF PALO ALTO
Fund Balances of Governmental Funds (All Other Governmental Funds) Last Ten Fiscal Years
(Modified accrual basis of accounting)
(Amounts in thousands)
$0
$50,000
$100,000
$150,000
$200,000
$250,000
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
$ Thousands
Nonspendable Restricted Committed Unassigned
($50,000)
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
$ Thousands
Nonspendable Restricted Committed Assigned Unassigned
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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Revenues
Property tax 30,216 $ 32,040 $ 35,393 $ 38,836 $ 41,289 $ 44,050 $ 47,242 $ 51,776 $ 55,628 $ 60,906 $ Sales tax 22,132 25,606 29,424 29,675 30,018 29,923 31,091 36,508 30,563 29,127 Other taxes and fines 29,231 32,141 35,305 41,576 44,909 48,875 53,837 53,525 45,729 33,947 Contributions5 ‐ ‐ ‐ ‐ ‐ ‐ 11,733 ‐ ‐ ‐ Charges for services 46,273 38,976 23,962 25,973 23,910 22,267 26,835 27,346 24,127 25,106 From other agencies 1,116 4,109 5,700 7,727 4,417 5,443 5,392 4,689 12,315 15,252 Permits and licenses 7,136 8,218 8,990 9,179 11,228 10,523 12,786 17,759 13,144 9,422 Interest and rentals 18,583 12,136 18,445 18,658 22,269 15,348 16,288 32,905 26,123 20,145 Other revenue 12,739 17,570 7,471 12,837 13,827 4,985 6,067 7,955 1,091 1,033 Total Revenues 167,426 170,796 164,690 184,461 191,867 181,414 211,271 232,463 208,720 194,938 Expenditures
Administration1 9,412 8,291 9,961 10,806 11,501 13,192 14,721 15,799 16,527 13,954 Public Works 11,304 11,489 12,439 12,276 13,112 14,485 15,426 14,764 14,793 14,692 Planning and Community Environment3 11,966 13,474 14,761 8,628 9,722 10,568 10,332 10,911 ‐ ‐ Development Services2, 3 ‐ ‐ ‐ 11,152 10,643 10,908 11,749 11,549 ‐ ‐ Planning and Development Services2 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 20,170 17,115 Office of Transportation4 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 4,175 3,373 Public Safety (Police and Fire) 62,418 59,537 62,028 61,447 63,784 71,164 73,916 76,344 82,173 76,282 Community Services 20,860 21,661 22,644 23,553 25,511 25,408 29,831 31,619 29,868 26,490 Library 7,072 6,902 7,340 7,980 7,960 8,953 9,120 9,288 9,988 8,528 Non‐departmental 6,819 4,567 8,135 6,180 8,068 6,566 7,579 12,231 9,498 4,854 Capital Outlay 29,154 29,542 37,035 41,754 24,457 39,643 40,971 46,914 66,362 48,114 Debt service ‐ principal payments 1,743 1,489 1,524 1,948 7,130 2,066 2,961 2,101 2,280 2,595 Debt service ‐ interest and fiscal fees 2,757 2,659 3,196 3,404 4,266 3,032 2,956 3,398 5,025 6,147 Payment to bond refunding escrow 586 540 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ Total Expenditures 164,091 160,151 179,063 189,128 186,154 205,985 219,562 234,918 260,859 222,144 Excess (Deficiency) of Revenues
Over (Under) Expenditures 3,335 10,645 (14,373) (4,667) 5,713 (24,571) (8,291) (2,455) (52,139) (27,206) Other Financing Sources (Uses)
Issuance of Debt ‐ ‐ ‐ ‐ ‐ ‐ 8,970 42,297 ‐ 101,505 Original debt premium ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 6,524 Proceeds from sale of capital assets ‐ ‐ ‐ ‐ ‐ ‐ ‐ 2,442 ‐ 100 Transfers in 47,200 50,343 41,683 45,137 61,835 58,331 56,882 54,711 58,397 43,558 Transfers out (29,782) (33,833) (24,175) (29,824) (46,492) (44,770) (41,085) (43,147) (44,552) (25,564) Proceeds from long term debt 3,222 21,706 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ Payments to refund bond escrow (3,104) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ Total Other Financing Sources (Uses) 17,536 38,216 17,508 15,313 15,343 13,561 24,767 56,303 13,845 126,123 Net Change in Fund Balances 20,871$ 48,861 $ 3,135 $ 10,646$ 21,056 $ (11,010)$ 16,476 $ 53,848 $ (38,294)$ 98,917 $ Debt Service as a Percentage of
Non‐Capital Expenditures 3.3% 2.6% 2.6% 2.8% 6.1% 2.5% 2.7% 2.3% 2.8% 4.6% Notes:
Source: Annual Financial Statements, Governmental Funds, Stateme nt of Revenues, Expenditures and Changes in Fund Balances 4In FY20, the City established the Office of Transportation. 5Represents contributions from the Stanford University Medical Center in FY18. 2The Development Services Department was formed in FY15.
Fiscal Year Ended June 30
CITY OF PALO ALTO
Changes in Fund Balances of Governmental Funds
Last Ten Fiscal Years
(Modified accrual basis of accounting)
(Amounts in thousands)
1Comprised of the following departments: City Council, City Manager, City Attorney, City Clerk, City Auditor, Administrative Services, and Human Resources. 3In FY20, the Development Services Department was combined with the Planning and Community Environment Department to form the Planning and Development Services Department.
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Fiscal Commercial & City of
Year Residential Industrial Palo Alto Total
2012 20,328 85,895 3,352 109,575 2013 19,951 86,998 3,265 110,214 2014 18,744 88,419 3,225 110,388 2015 17,404 88,257 3,234 108,895 2016 18,191 86,715 3,127 108,033 2017 20,269 90,635 3,780 114,684 2018 22,764 100,200 4,264 127,228 2019 23,613 103,509 4,404 131,526 2020 25,466 107,335 4,286 137,087 2021 26,719 98,582 4,167 129,468 * The electric operating revenues include sales to customers and City departments, and excludes the sale of surplus energy, utility billing discounts, and bad debt expense.
City of Palo Alto Municipal
Communications & Power Industries (CPI) Research
Lucille Packard Children's Hospital Hospital
Space Systems/Loral, LLC Satellite & Satellite Systems
Stanford Health Care Hospital/Health Care
Stanford Hospital & Clinics Hospital
Tesla, Inc. Manufacturing
Varian Medical Systems, Inc. Manufacturing
Veterans Administration Hospital Hospital
VMware, Inc. Computer
Average Kilowatt‐hour
Installations Billed
1 Sales (kWh) Revenue
Residential 25,074 165,102,659 26,719 $ Commercial 3,599 501,635,237 81,235 Industrial 62 122,154,960 17,347 City of Palo Alto 143 24,991,825 4,167 Total 28,878 813,884,681 129,468 $ Source: City of Palo Alto, Utilities and Accounting Departments 1Values provided are in terms of average number of meters (installations) billed per month. Individual customers may utilize multiple meters or facilities within Palo Alto which encompass one or more designations (commercial, industrial and/or residential), thus aggregation on the basis of ‘number of customers’ does not hold for this type of breakdown. The number of active meters in any given month may vary due to patterns of move in, move outs, as well as meter reading cycles. 1The top ten customers accounted for approximately 38.1% of total kWh consumption (309,840,850 kWh) and 33.9% of revenue ($45,815,976). The largest top ten customer accounted for 9.4% of total kWh consumption and 8.1% of revenue. The smallest top ten customer accounted for 2% of total kWh consumption and 1.9% of revenue. Revenue used to determine top ten electric customers includes metered and non‐metered charges, adjustments, surcharges and discounts. Revenue does not include Utility Users Tax (UUT) and deposits.
Customer (alphabetical order) Type of Business
CITY OF PALO ALTO
Electric Operating Revenue by Source *
Last Ten Fiscal Years
(Amounts in thousands)
Top Ten Electric Customers by Revenue1
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Source
Capacity Available
(MW)
Actual Energy
(GWh)
Percent of
Total Energy
Purchased Power:
Solar 130 311 38% Wind 21 120 15% Landfill Gas 14 104 13% Hydro (NCPA) 58 49 6% Hydro (Western) 182 246 30% Net Forward Market Sales/Purchases 60 (30) ‐4% Net Spot Market Sales/Purchases ‐ 27 3% Total N/A 1 827 100%
Notes:
Source: City of Palo Alto, Utilities Department
In the fiscal year ended June 30, 2021, Palo Alto's average cost of power delivered to the Palo Alto electric system was approximately $0.10 per kWh.
CITY OF PALO ALTO
For the Fiscal Year Ended June 30, 2021
1Capacity availability varies by season and is not necessarily additive at any given time.
Department of Utilities
Power Supply Resources
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Top Ten Largest Water Utility Customers (alphabetical order) City of Palo Alto
Palo Alto Hills Golf & Country Club
Lucille Packard Children's Hospital
Palo Alto Unified School District
Simon Property Group
Stanford Hospital & Clinics
Stanford West Management
Veterans Administration Hospital
Vi at Palo Alto
VMware, Inc.
The top ten customers total consumption is 866,031 CCF with revenue of $8,293,613.
This amount accounts for approximately 18.2% of total consumption and 16.6% of total revenue. The largest top ten customer (other than the City of Palo Alto) accounted for 2.1% of consumption and 2.1% of revenue. The smallest top ten customer accounted for 0.7% of consumption and 0.6% of revenue. Revenue used to determine top ten water utility customers includes metered and non‐metered charges, adjustments, surcharges and discounts. Revenue does not include Utility Users Tax (UUT) and deposits.
Note:
Source: City of Palo Alto, Utilities Department
This schedule is provided as required by the Continuing Disclosure Agreement for the City's Utility Revenue Bond and is not required by Governmental Accounting Standards Board (GASB).
CITY OF PALO ALTO
Supplemental Disclosure for Water Utilities
For the Fiscal Year Ended June 30, 2021
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Top Ten Largest Gas Utility Customers (alphabetical order) City of Palo Alto
Genencor International
Lucille Packard Children's Hospital
Palo Alto Unified School District
Space Systems/Loral, LLC
Stanford Health Care
Stanford Hospital & Clinics
Stanford University
Veterans Administration Hospital
VMWare, Inc.
The top ten customers total consumption is 5,993,550 THM with revenue of $7,292,737.
This amount accounts for approximately 23.4% of total consumption and 18.9% of total revenue. The largest top ten customer (other than the City of Palo Alto) accounted for 8.1% of consumption and 6.3% of revenue. The smallest top ten customer accounted for 0.9% of consumption and 0.8% of revenue.
Note:
Source: City of Palo Alto, Utilities Department
This schedule is provided as required by the Continuing Disclosure Agreement for the City's Utility Revenue Bond and is not required by Governmental Accounting Standards Board (GASB).
CITY OF PALO ALTO
Supplemental Disclosure for Gas Utilities
For the Fiscal Year Ended June 30, 2021
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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Net Local Secured Roll
Land 11,352,993 $ 12,255,515$ 13,357,851$ 14,409,837$ 15,718,665$ 17,333,969$ 18,770,642$ 20,386,904$ 22,186,582$ 24,028,178$ Improvements 11,703,597 12,381,306 12,984,735 13,633,986 14,998,502 16,752,295 18,642,970 19,845,666 21,183,768 22,706,856 Personal property 257,436 287,296 307,499 290,590 310,929 306,576 300,352 181,381 194,646 198,396 23,314,026 24,924,117 26,650,085 28,334,413 31,028,096 34,392,840 37,713,964 40,413,951 43,564,996 46,933,430 Less:
Exemptions net of state aid (2,346,728) (2,589,653) (2,610,521) (2,761,495) (3,409,836) (4,244,500) (5,203,968) (5,522,323) (6,233,220) (6,781,123) Total Net Local Secured Roll 20,967,298 22,334,464 24,039,564 25,572,918 27,618,260 30,148,340 32,509,996 34,891,628 37,331,776 40,152,307 Public utilities 2,573 2,573 2,573 2,573 2,573 2,573 2,573 7,004 7,004 7,004 Unsecured property 1,516,837 1,355,970 1,493,922 1,622,636 1,794,921 1,803,468 1,922,170 1,902,781 1,946,680 2,194,615 Total Assessed Value 22,486,708$ 23,693,007$ 25,536,059$ 27,198,127$ 29,415,754$ 31,954,381$ 34,434,739$ 36,801,413$ 39,285,460$ 42,353,926$ Total Direct Tax Rate 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%
Note: The State Constitution requires property to be assessed at 100% of the most recent purchase price, plus an increment of no more than 2% annually, plus any local over‐rides. These values are considered to be full market values.
Source: County of Santa Clara Assessor's Office
CITY OF PALO ALTO
Assessed Value of Taxable Property
Last Ten Fiscal Years
(Amounts in thousands)
Fiscal Year Ended June 30
$20,000,000
$22,000,000
$24,000,000
$26,000,000
$28,000,000
$30,000,000
$32,000,000
$34,000,000
$36,000,000
$38,000,000
$40,000,000
$42,000,000
$44,000,000
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
$ Thousands
Total Assessed Value
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Basic County County Total
County County Hospital City Library Santa Clara Affordable Direct an d Fiscal Wide Retirement G.O. Bond G.O. Bond Valley Water School Communi ty Midpeninsula Housing Bond Overlapping Year Levy Levy (Measure A) (Measure N) District District College Open Space1 (Measure A)2 Rates
2012 1.00 0.0388 0.0047 0.0155 0.0064 0.0742 0.0297 ‐ ‐ 1.17 2013 1.00 0.0388 0.0051 0.0129 0.0069 0.0718 0.0287 ‐ ‐ 1.16 2014 1.00 0.0388 0.0035 0.0177 0.0070 0.0655 0.0290 ‐ ‐ 1.16 2015 1.00 0.0388 0.0091 0.0159 0.0065 0.0657 0.0276 ‐ ‐ 1.16 2016 1.00 0.0388 0.0088 0.0148 0.0057 0.0604 0.0240 0.0008 ‐ 1.15 2017 1.00 0.0388 0.0086 0.0129 0.0086 0.0591 0.0234 0.0006 ‐ 1.15 2018 1.00 0.0388 0.0082 0.0118 0.0062 0.0570 0.0220 0.0009 0.0127 1.16 2019 1.00 0.0388 0.0072 0.0111 0.0042 0.0858 0.0217 0.0018 0.0105 1.18 2020 1.00 0.0388 0.0069 0.0106 0.0041 0.0783 0.0208 0.0016 0.0100 1.17 2021 1.00 0.0388 0.0069 0.0096 0.0037 0.1113 0.0364 0.0015 ‐ 1.21 Notes: 1The Midpeninsula Regional Open Space District Bond Issue and Property Tax, Measure AA, passed in 2014.
Rates were first levied for the 2015‐16 fiscal year.
2The Santa Clara County Affordable Housing Bond ‐ Measure A 2016 passed on November 8, 2016.
Rates were first levied for the 2017‐18 fiscal year.
Source: County of Santa Clara, Tax Rates and Information CITY OF PALO ALTO
Property Tax Rates
All Overlapping Governments
Last Ten Fiscal Years
$1.14
$1.15
$1.16
$1.17
$1.18
$1.19
$1.20
$1.21
$1.22
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Rate per $100 of Assessed Value
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Fiscal Year Total Tax Percentage Collections in Percentage of Ended June 30 Levy for FY1 Amount of Levy Subsequent Years2 Amount Levy 2012 26,494$ 26,494 $ 100% ‐ 26,494$ 100% 2013 28,742 28,742 100% ‐ 28,742 100% 2014 30,587 30,587 100% ‐ 30,587 100% 2015 34,117 34,117 100% ‐ 34,117 100% 2016 36,607 36,607 100% ‐ 36,607 100% 2017 39,381 39,381 100% ‐ 39,381 100% 2018 42,839 42,839 100% ‐ 42,839 100% 2019 47,327 47,327 100% ‐ 47,327 100% 2020 51,089 51,089 100% ‐ 51,089 100% 2021 56,572 56,572 100% ‐ 56,572 100% Notes:
Source: Annual Financial Statements, Government Funds, Statement of Revenues, Expenditures and Changes in Fund Balances.
1During fiscal year 1995, the County of Santa Clara began providing the City 100% of its tax levy under an agreement which allows the County to keep all interest and delinquency charges collected.
2Effective fiscal year 1994, the City is on the Teeter Plan, under which the County of Santa Clara pays the full tax levy due.
CITY OF PALO ALTO
Property Tax Levies and Collections
Last Ten Fiscal Years
(Amounts in thousands)
Collected within the
Fiscal Year of the Levy Total Collections to Date
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Taxable
Assessed
Value Rank
Percentage of
Total Taxable
Assessed Value
Taxable
Assessed
Value Rank
Percentage of
Total Taxable
Assessed Value
Leland Stanford Jr. University 6,529,897 $ 1 15.4% 3,035,075 $ 1 13.5% Google Inc. 303,697 2 0.7%
ARE‐San Francisco 80 LLC 291,000 3 0.7%
SVF Sherman Palo Alto Corporation 143,575 4 0.3% ARE‐San Francisco 69 LLC 141,494 5 0.3%
395 Page Mill LLC 123,083 6 0.3%
530 Lytton Owner LLC 119,850 7 0.3%
Hohbach Realty Co. LP 110,392 8 0.3%
SI 45 LLC 84,423 9 0.2%
PA Hotel Holdings LLC 82,600 10 0.2%
Space Systems/Loral, Inc. 226,246 2 1.0%
Arden Realty Limited Partnership 112,472 3 0.5% Whisman Ventures, LLC 105,066 4 0.5%
ECI 2 Bayshore LLC/ECI Hamilton LLC 73,901 5 0.3% Ronald & Ann Williams Charitable Foundation 58,804 6 0.3% Blackhawk Parent LLC 50,196 7 0.2%
300 / 400 Hamilton Associates 41,433 8 0.2% Thoit Bros., Inc. 31,740 9 0.1%
529 Bryant St. 31,737 10 0.1%
Total 7,930,011 $ 18.7% 3,766,670 $ 16.7%
Total City Taxable Assessed Value:
FY 2021 42,353,926 $
FY 2012 22,486,708 $
Source: California Municipal Statistics, Inc.
Fiscal Year 2021 Fiscal Year 2012
Taxpayer
CITY OF PALO ALTO
Principal Property Taxpayers
Current Year and Nine Years Ago
(Amounts in thousands)
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2020‐2021 No. of
Assessed % of No. of % of Taxable % of
Valuation1 Total Parcels Total Parcels Total
Non‐Residential:
Agricultural/forest 37,697,860 $ 0.09 % 49 0.23 % 31 0.15 % Commercial 2,192,486,496 5.46 459 2.20 457 2.23 Professional/office 6,506,771,625 16.21 560 2.68 540 2.64 Industrial/research & development 2,295,767,267 5.72 230 1.10 229 1.12 Recreational 77,145,645 0.19 16 0.08 14 0.07 Government/social/institutional 44,228,709 0.11 115 0.55 50 0.24 Miscellaneous 11,435,20 6 0.03 18 0.09 17 0.08 Subtotal Non‐Residential 11,165,532,808 27.81 1,447 6.92 1,338 6.53 Residential:
Single family residence 23,266,022,527 57.94 15,096 72.20 15,024 73.31 Condominium/townhouse 2,863,724,800 7.13 3,151 15.07 3,146 15.35 Mobile Home 114,938 0.00 8 0.04 8 0.04 2‐4 Residential units 534,551,067 1.33 497 2.38 497 2.43 5+ Residential units 1,944,144,849 4.84 345 1.65 329 1.61 Subtotal Residential 28,608,558,181 71.25 19,097 91.33 19,004 92.73 Vacant Parcels 378,215,314 0.94 365 1.75 151 0.74 Total 40,152,306,303$ 100 % 20,909 100 % 20,493 100 % Notes: This schedule is provided as required by the Continuing D isclosure Agreement for the City's 2010 and 2013A General Obligation Bonds and is not required by Governmental Accounting Standards Board (GASB).
Therefore, ten years of comparison data is not presented. 1Local secured assessed valuation, excluding tax‐exempt property.
Source: California Municipal Statistics, Inc.
CITY OF PALO ALTO
Assessed Valuation and Parcels by Land Use
As of June 30, 2021
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No. of
Taxable Average
Parcels1 Assessed Valuation
Single Family Residential 15,024 $1,548,590
No. of % of Cumulative % of Cumulative
Taxable Total % of Total Total Total % of Total
Parcels1 Parcels Parcels Valuation Valuation Valuation
774 5.15 % 5.15 % 62,751,790$ 0.27 % 0.27 % 1,627 10.83 15.98 226,741,96 6 0.97 1.24 736 4.90 20.88 181,708,519 0.78 2.03 636 4.23 25.11 221,115,384 0.95 2.98 552 3.67 28.79 248,397,391 1.07 4.04 565 3.76 32.55 311,648,230 1.34 5.38 604 4.02 36.57 392,667,685 1.69 7.07 534 3.55 40.12 401,042,038 1.72 8.79 445 2.96 43.08 377,885,136 1.62 10.42 517 3.44 46.53 492,018,891 2.11 12.53 517 3.44 49.97 542,105,280 2.33 14.86 484 3.22 53.19 557,127,718 2.39 17.26 432 2.88 56.06 539,458,161 2.32 19.58 361 2.40 58.47 487,217,064 2.09 21.67 392 2.61 61.08 566,176,362 2.43 24.10 369 2.46 63.53 571,850,964 2.46 26.56 353 2.35 65.88 582,441,439 2.50 29.07 325 2.16 68.04 567,977,334 2.44 31.51 297 1.98 70.02 548,853,685 2.36 33.87 283 1.88 71.90 551,751,152 2.37 36.24 4,221 28.10 100.00 14,835,086,33 8 63.76 100.00 15,024 100.00 % 23,266,022,52 7$ 100.00 % Notes:
Source: California Municipal Statistics, Inc.
This schedule is provided as required by the Continuing Disclosure Agreement for the City's 2010 and 2013A General Obligation Bonds and is not required by Governmental Accounting Standards Board (GASB). Therefore, ten years of comparison data is not presented.
1Improved single family residential parcels. Excludes condominiums and parcels with multiple family units. $1,900,000‐1,999,999
$2,000,000 and greater
Total
$1,800,000‐1,899,999
$700,000‐799,999
$800,000‐899,999
$900,000‐999,999
$1,000,000‐1,099,999
$1,100,000‐1,199,999
$1,200,000‐1,299,999
$1,300,000‐1,399,999
$1,400,000‐1,499,999
$1,500,000‐1,599,999
$1,600,000‐1,699,999
$1,700,000‐1,799,999
$600,000‐699,999
$23,266,022,527 $1,096,758
2020‐2021
Assessed Valuation
$0‐99,999
$100,000‐199,999
$200,000‐299,999
$300,000‐399,999
$400,000‐499,999
$500,000‐599,999
Assessed Valuation
Assessed Valuation
2020‐2021 Median
CITY OF PALO ALTO
Per Parcel Assessed Valuation of Single Family Residential As of June 30, 2021
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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
1,685$ 1,560$ 1,430$ 1,285$ 1,135$ 975 $ 8,970$ 46,305$ 45,750 $ 146,440$ 54,540 74,235 73,215 71,795 65,210 63,710 62,140 60,500 58,775 56,995 2011 Lease‐Purchase Agreement 2,764 2,400 2,026 1,643 1,248 842 426 ‐ ‐ ‐ Add: unamortized premium 3,514 4,400 4,242 4,084 3,926 3,768 3,610 8,331 7,980 14,099 62,503 82,595 80,913 78,807 71,519 69,295 75,146 115,136 112,505 217,534 65,879 63,104 60,224 57,224 54,095 50,825 47,400 43,815 40,060 36,130 Energy Tax Credits 1,000 900 800 700 600 500 400 300 200 100 State Water Resources Loan 15,900 15,109 14,309 13,500 12,681 15,034 17,711 29,589 33,808 32,288 580 543 867 803 737 673 608 544 468 392 83,359 79,656 76,200 72,227 68,113 67,032 66,119 74,248 74,536 68,910
Outstanding Debt 145,862$ 162,251 $ 157,113 $ 151,034 $ 139,632 $ 136,327 $ 141,265 $ 189,384$ 187,041 $ 286,444 $
3.36% 3.36% 3.24% 2.94% 2.42% 2.22% 2.13% 2.64% 2.48% 3.81% Population 65,544 66,368 66,861 66,029 66,968 66,478 66,649 67,082 67,019 66,573
2.23$ 2.44 $ 2.35 $ 2.29 $ 2.09 $ 2.05 $ 2.12 $ 2.82 $ 2.79 $ 4.30 $ Notes:
Sources:
2020 Official City Data Set (population)
California Department of Transportation Long‐Term Socio‐Economic Forecasts (personal income) Annual Financial Statements and Note 7 Long‐Term Debt
Debt Per Capita
1See the schedule of Demographic and Economic Statistics for personal income data. Per capita personal income is only available for Santa Clara County, therefore personal income is the product of the countywide per capita amount and the City's population.
County of Santa Clara (assessed valuation)
Percentage of Personal Income1
Certificates of Participation
General Obligation Bonds
Total Governmental Activities
Business‐type Activities
Utility Revenue Bonds
Add: unamortized premium
(discount), net
Total Business‐type Activities
Total Primary Government
Governmental Activities
CITY OF PALO ALTO
Ratio of Outstanding Debt by Type
Last Ten Fiscal Years
(Amounts in thousands)
Fiscal Year Ended June 30
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
$ Thousands
Total Governmental Activities Total Business‐type Activities 159
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2020‐2021 Assessed Value 42,353,925,962$
Percentage Amount
Applicable Applicable
Total Debt to City of to City of
Outstanding Palo Alto1 Palo Alto
Santa Clara County 812,685,000 $ 7.69% 62,471,096 $ Foothill‐DeAnza Community College District 707,932,142 21.92% 155,214,122 Palo Alto Unified School District 241,738,172 90.39% 218,499,882 Fremont Union High School District 617,160,088 0.01% 55,544 Los Gatos‐Saratoga Joint Union High School District 86,585,000 0.01% 11,256 Mountain View‐Los Altos Union High School District 207,011,101 0.85% 1,755,454 Cupertino Union School District 284,223,303 0.02% 48,318 Los Altos School District 164,070,000 1.13% 1,860,554 Mountain View‐Whisman School District 279,115,000 0.61% 1,691,437 Saratoga Union School District 19,249,458 0.03% 5,775 Whisman School District 8,380,054 1.62% 135,505 City of Palo Alto 56,995,000 100% 56,995,000 El Camino Hospital District 116,290,000 0.07% 82,566 Midpeninsula Regional Open Space District 86,400,000 12.58% 10,872,576 City of Palo Alto Special Assessment Bonds 17,915,000 100% 17,915,000 Santa Clara Valley Water District Benefit Assessment District 57,010,000 7.69% 4,382,359 Total Direct and Overlapping Tax and Assessment Debt 531,996,444 914,957,860 7.69% 70,332,811
341,399,194 7.69% 26,243,356
2,670,000 7.69% 205,243
22,085,000 21.92% 4,842,136
1,709,000 0.01% 222
2,489,970 0.85% 21,11 5
2,750,000 0.03% 825
Los Altos School District Certificates of Participation 1,954,070 1.13% 22,159 City of Palo Alto General Fund Obligations 146,440 ,000 100% 146,440,000 1,765,000 7.69% 135,676
Midpeninsula Regional Open Space Park District General Fund Obligation s 106,000,600 12.58% 13,339,116 $ 261,582,659
1,943,066
$ 259,639,593
$ 791,636,037
Ratio to
Assessed Value
Total Direct Debt 0.51% 217,534,000 $ 3
Total Overlapping Debt 1.39% 588,201,037
Total Direct and Overlapping Debt 1.90% 805,735,037 $ 2 Notes:
2Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non‐bonded capital lease obligations Source: California Municipal Statistics, Inc .
3Includes unamortized premium of $14,099,000.
Santa Clara County Pension Obligations
Santa Clara County Board of Education Certificates of Participation Foothill‐DeAnza Community College District Certificates of Participation Los Gatos‐Saratoga Joint Union High School District Certificates of Participation Mountain View‐Los Altos Union High School District Certificates of Participation Saratoga Union High School District Certificates of Participation Less: Santa Clara County supported obligations
Total Net Direct and Overlapping General Fund Debt
Santa Clara County Vector Control District Certificates of Participation Total Gross Direct and Overlapping General Fund Debt
Total Combined Debt
1The percentage of overlapping debt applicable to the City is estimated using taxable assessed property value. Applicable percentages were estimated by determining the portion of the overlapping district's assessed value that is within the boundaries of the City divided by the district's total taxable assessed value.
Santa Clara County General Fund Obligations
CITY OF PALO ALTO
Computation of Direct and Overlapping Debt
As of June 30, 2021
Direct and Overlapping Tax and Assessment Debt
Direct and Overlapping General Fund Debt
160
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Assessed Valuation:
Secured property assessed value,
net of exempt real property 42,353,92
6$
Bonded Debt Limit (3.75% of Assessed Value) 1
1,588,272
Direct Debt:
Certificates of Participation 146,44 0
General Obligation bonds 56,995
Total Direct Debt3 203,435
Less: Amount of Debt Not Subject to Limit 2
146,440
Total Net Debt Applicable to Limit 56,995
Legal Bonded Debt Margin 1,531,277$
Total Bonded Total Net Debt Legal Total Net Debt Ratio of Net General Fiscal Assessed Debt Limit Applicable to Bonded Debt Applicable as % of Debt to Bonded Debt Year Value (AV) (3.75% of AV) Limit Margin Population Bonded Debt Limit Assessed Value Per Capita 2012 22,486,70 8 843,252 54,54 0 788,712 65,54 4 6.47% 0.002 4 0.83 2013 23,693,00 7 888,48 8 74,235 814,253 66,36 8 8.36% 0.0031 1.12 2014 25,536,05 8 957,602 73,215 884,38 7 66,861 7.65% 0.0029 1.10 2015 27,198,12 7 1,019,93 0 71,795 948,135 66,029 7.04% 0.0026 1.09 2016 29,415,75 4 1,103,09 1 65,21 0 1,037,88 1 66,96 8 5.91% 0.0022 0.97 2017 31,954,38 1 1,198,28 9 63,71 0 1,134,57 9 66,47 8 5.32% 0.0020 0.96 2018 34,434,73 9 1,291,30 3 62,14 0 1,229,16 3 66,649 4.81% 0.0018 0.93 2019 36,801,41 3 1,380,05 3 60,50 0 1,319,55 3 67,082 4.38% 0.0016 0.90 2020 39,285,46 0 1,473,20 5 58,775 1,414,43 0 67,019 3.99% 0.0015 0.88 2021 42,353,92 6 1,588,27 2 56,995 1,531,27 7 66,573 3.59% 0.0013 0.86 Notes:
Source: Annual Financial Statements, Assessed Value of Taxable P roperty and Note 7 Long‐Term Debt 2In accordance with California Government Code Section 43605, only the City's General Obligation bonds are subject to the legal debt limit of 15%.
Enterprise Fund debt is not subject to legal debt margin.
CITY OF PALO ALTO
Computation of Legal Bonded Debt Margin
As of June 30, 2021
(Amounts in thousands)
1California Government Code, Section 43605 sets the debt limit at 15% of the assessed value of all real and personal property of the City. Because this Code section was enacted when assessed value was 25% of market value, the limit is calculated at one‐fourth, or 3.75%. This legal debt margin applies to General Obligation debt. Prior year limits have been adjusted to conform to the current year methodology. 3Total direct debt excludes any premiums, discounts or other amortization amounts. 161
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Less: Net Revenue
Fiscal Gross Direct Operating Available for
Year Revenue Expenses2 Debt Service Principal Interest3 Total Coverage Ratio 2012 235,160 169,777 65,383 2,945 2,959 5,904 11.07 2013 237,842 173,510 64,332 2,875 3,167 6,042 10.65 2014 239,948 176,718 63,230 2,980 3,073 6,053 10.45 2015 234,025 188,276 45,749 3,100 2,954 6,054 7.56 2016 235,386 186,793 48,593 3,230 2,823 6,053 8.03 2017 264,734 205,102 59,632 3,370 2,678 6,048 9.86 2018 288,610 231,255 57,355 3,525 2,524 6,049 9.48 2019 306,237 227,824 78,413 3,685 2,359 6,044 12.97 2020 313,317 237,223 76,094 3,855 2,419 6,274 12.13 2021 309,363 247,962 61,401 4,030 2,008 6,038 10.17 Notes: 1Airport, Refuse and Fiber Optics funds have no debt and are therefore excluded from this schedule. 2Excludes depreciation and amortization expense.
3Excludes joint venture debt service and federal interest subsidy.
Source: City of Palo Alto , Accounting Department
Debt Service
CITY OF PALO ALTO
Revenue Bond Coverage
Business‐type Activities1
Last Ten Fiscal Years
(Amounts in thousands)
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
$ Thousands
Net Revenue Available for Debt Service Total Debt Service 162
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Fiscal
Year
2012 2,445 2,937 1,590 1,492 387 722 257 5,049 7,034 21,913 2013 2,478 3,160 1,465 1,656 424 765 259 4,056 13,729 27,992 2014 2,097 3,541 1,555 2,041 392 772 444 4,845 9,890 25,577 2015 2,398 3,894 1,672 1,708 435 699 265 3,674 11,253 25,998 2016 2,250 4,134 1,410 1,694 448 582 257 4,949 12,423 28,147 2017 2,036 4,079 1,513 1,794 542 502 259 3,810 14,325 28,860 2018 2,001 4,224 1,716 1,647 428 614 243 3,184 15,663 29,720 2019 1,934 4,299 1,795 1,994 409 706 810 2,245 22,254 36,446 2020 1 1,260 3,488 1,421 1,391 417 572 1,413 1,597 18,313 29,872 2021 1 1,125 2,410 980 1,283 332 489 700 2,062 18,744 28,125 Source: California State Board of Equalization, compiled by MuniServices LLC Sales Tax Rates for the Fiscal Year Ended June 30, 2021 State Rate: 7.25%
Special District Tax Rates:
Santa Clara County Transit District (SCCT) 0.50%
Santa Clara County Valley Transportation Authority (SCVT) 0.50% Santa Clara VTA BART Operating and Maintenance Transactions and Use Tax (SVTB) 0.125% Santa Clara Retail Transactions and Use Tax (SCCR) 0.125% Silicon Valley Transportation Solutions Tax (SVTS) 0.50% Total Sales and Use Tax Rate: 9.000%
Notes: 1Decrease due to the adverse impact of coronavirus COVID‐19 since March 2020.
Source: California Stat e Board of Equalization
CITY OF PALO ALTO
Taxable Transactions by Type of Business
Last Ten Fiscal Years
(Amounts in thousands)
Total
ECONOMIC SEGMENT
Department
Stores Restaurants
Furniture/
Appliance
Food
Markets
Service
Stations
Drug
Stores Other Retail All Other
Apparel
Stores
Department Stores
4%
Restaurants
9% Furniture/ Appliance
3%
Apparel Stores
5%Food Markets
1%
Service Stations
2%
Drugs Stores 2%
Other Retail
7%
All Other
67%
Fiscal Year 2019
Department Stores 0
5% Restaurants 0
12%
Furniture/ Appliance 0
5%
Apparel Stores 0
6%
Food Markets 0
1%
Service Stations 0
2%
Drugs Stores 2%
Other Retail 0
6%
All Other 0
61%
Fiscal Year 2019
Department Stores
4%
Restaurants 9%
Furniture/ Appliance3%
Apparel Stores 5%
Food Markets 1%
Service Stations 2%
Drugs Stores 2%
Other Retail7%
All Other
67%
Fiscal Year 2021
163
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Santa Clara
City of Palo Alto City of Palo Al to Santa Clara City Population Co unty Total Santa Clara Fiscal City of Palo Alto Unemploym ent School County as a Percentage of Personal Income County Per Capita Year Population Rate Enrollment Population County Population (in thousands) Personal Income 2012 65,544 4.7% 12,286 1, 813,860 3. 61% 120,100,000 66,212 2013 66,368 3.6% 12,396 1, 840,218 3. 61% 134,000,000 72,817 2014 66,861 2.8% 12,483 1, 866,208 3. 58% 135,200,000 72,446 2015 66,029 2.7% 12,532 1, 890,929 3. 49% 147,300,000 77,898 2016 66,968 2.9% 12,488 1, 919,736 3. 49% 165,300,000 * 86,106 * 2017 66,478 2.4% 12,261 1, 933,839 3. 44% 178,500,000 * 92,303 * 2018 66,649 2.5% 12,230 1, 945,829 3. 43% 193,700,000 * 99,546 * 2019 67,082 2.1% 11,938 1, 955,946 3. 43% 209,000,000 * 106,854 * 2020 67,019 5.7% 11,683 1, 961,117 3. 42% 220,400,000 * 112,385 * 2021 66,573 3.2% 10,801 1, 967,525 3. 38% 222,200,000 112,934 Note: Data on personal income and per capita personal income is only available for Santa Clara County.
Source:
State of California Employment Development Office (unemployment rate) Palo Alto Unified School District (school enrollment)
* California Department of Transportation Long‐Term Socio‐Economic Forecasts (personal income). Forecasts from prior years are updated.
CITY OF PALO ALTO
Demographic and Economic Statistics
Last Ten Fiscal Years
Beginning in 2015 City population is sourced from the US Census Bureau American Community Survey (via the City of Palo Alto's Official City Data Set).
63,000
64,000
65,000
66,000
67,000
68,000 City Population
10,000
10,500
11,000
11,500
12,000
12,500
13,000 School Enrollment
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
City Unemployment Rate
164
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Number of
Employees Rank
Percentage of Total
City Employment
Number of
Employees
Rank
Percentage of Total
City Employment
Stanford Health Care2 5,500 1 4.1% 5,059 2 4.6% Hewlett‐Packard Company2 5,000 2 3.7% 2,201 5 2.0% Stanford University2 4,060 3 3.0% 10,680 1 9.7% Veteran's Affairs Palo Alto Health Care System 3,900 4 2.9% 3,500 4 3.2% Stanford Children's Health/Lucile Packard Children's H 3,500 5 2.6% 4,750 3 4.3% VMware Inc. 3,500 6 2.6%
SAP Labs Inc. 3,500 7 2.6%
Varian Medical Systems 3,300 8 2.5%
Tesla Inc. 2,650 9 2.0%
Palo Alto Medical Foundation2 2,200 10 1.6% 2,200 6 2.0% Space Systems/Loral 1,870 7 1.7%
Wilson Sonsini Goodrich & Rosati 1,650 8 1.5% Palo Alto Unified School District 1,362 9 1.2% City of Palo Alto 1,017 10 0.9%
Total 37,110 27.6% 34,289 31.2%
Estimated Total City Day Population:
FY 2021 134,582
FY 2012 110,000
Notes:
Source:
Employer
1Available data sources are limited and may be unreliable. The City does not affirm the validity of this data. 2021 numbers are rounded. Figures may include employees not located within City limits. 2FY21 data was not available. Prior years data was used. 2020 Official City Data Set (total City day population); AtoZ databases; Stanford Comprehensive Plan Economic Impact Report, Stanford University Land Use Planning, "Stanford Facts 2021." CITY OF PALO ALTO
Principal Employers
Current Year and Nine Years Ago
FY 20211 FY 2012
165
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2011 2012 2013 2014
Governmental activities
Community Services
Number of theater performances 175 175 184 108 Total hours of athletic field usage2 42,687 44,226 ‐ ‐ Number of rounds of golf 67,381 65,653 60,153 46,527 Enrollment in recreation classes (includes summer camps) 12,310 11,703 11,598 11,997 Planning and Community Environment
Planning applications completed 238 204 307 310 Building permits issued 3,559 3,320 3,682 3,624 Caltrain average weekday boarding3 4,923 5,730 6,763 7,564 Police
Calls for service 52,159 51,086 54,628 58,559 Total arrests 2,288 2,212 2,274 2,589 Parking citations issued 40,426 41,875 43,877 36,551 Animal Services
Number of service calls 2,804 3,051 2,909 2,398 Number of animals handled 3,323 3,379 2,675 2,480 Fire
Calls for service 7,555 7,796 7,904 7,829 Number of fire incidents 165 186 150 150 Number of fire inspections4 1,807 1,654 2,069 1,741 Library
Total number of cardholders 53,246 60,283 51,007 46,950 Total number of items in collection 314,101 306,160 277,749 361,103 Total checkouts 1,476,648 1,559,932 1,512,975 1,364,872 Public Works
Street resurfacing (lane miles) 29 40 36 36 Number of potholes repaired 2,986 3,047 2,726 3,418 Sq. ft. of sidewalk replaced or permanently repaired 71,174 72,787 82,118 74,051 Number of trees planted 150 143 245 148 Tons of materials recycled or composted 56,586 51,725 47,941 49,594 Business‐type activities
Electric
Number of customer accounts 29,708 29,545 29,299 29,338 Residential MWH consumed 160,318 160,604 156,411 153,190 Gas
Number of customer accounts 23,816 23,915 23,659 23,592 Residential therms consumed 11,476,609 11,522,999 10,834,793 10,253,776 Water
Number of customer accounts 20,248 20,317 20,043 20,037 Residential water consumption (CCF) 2,442,415 2,513,595 2,521,930 2,496,549 Wastewater collection
Number of customer accounts 22,320 22,421 22,152 22,105 Millions of gallons processed 8,652 8,130 7,546 7,186 Notes:
2According to the department, this measure was not accurately tracked during FY13, FY14 and FY20 and thus are not presented. 3Beginning 2015, data source is Official City Data Set. In FY20 the count was not provided due to COVID‐19.
Source:
FUNCTIONS/PROGRAMS
4The method for calculating the number of fire inspections changed in FY17. The department uses a more detailed feature which categorizes inspections by type and location.
CITY OF PALO ALTO
Operating Indicators by Function/Program
Last Ten Fiscal Years1
City of Palo Alto Performance Report (formerly the Service Efforts and Accomplishments Report); Official City Data Set (Caltrain); 2019 and 2020 data supplied by City of Palo Alto Departments. 1Ten most recent years available.
Fiscal Year Ended June 30
166
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2015 2016 2017 2018 2019 2020
172 161 171 160 175 191 47,504 65,723 71,431 65,443 67,608 ‐ 42,048 42,573 ‐ 6,790 54,619 42,429 12,586 12,974 11,649 10,652 13,553 12,997 335 383 365 376 327 262 3,844 3,492 2,970 3,105 2,918 2,476 8,294 9,622 9,994 9,977 10,400 ‐ 59,795 53,870 53,901 55,480 54,479 48,394 3,273 2,988 2,745 2,678 2,388 1,568 41,412 37,624 33,661 37,441 33,496 20,261 2,013 2,421 1,674 1,737 2,550 3,081 2,143 2,184 2,211 2,077 2,125 2,361 8,548 8,882 9,153 8,981 8,843 8,102 135 150 155 189 133 140 1,964 2,806 5,476 9,581 10,984 9,602 51,792 57,307 54,676 56,159 68,034 66,530 429,460 461,292 427,548 472,895 485,157 515,032 1,499,406 1,400,926 1,524,614 1,538,118 1,467,038 1,048,676 31 39 39 31 10 7 2,487 3,435 3,449 2,835 2,929 1,761 120,776 115,293 17,275 38,557 66,662 48,847 305 387 319 411 403 346 50,546 56,438 60,582 57,744 55,900 51,852 29,065 29,304 29,616 29,475 29,616 29,849 145,284 150,112 148,986 149,526 146,036 153,976 23,461 23,467 23,637 23,395 23,664 23,770 8,537,754 9,535,377 10,233,669 10,261,276 9,794,177 10,382,762 20,061 19,994 20,213 20,000 20,012 20,608 2,052,176 1,696,383 1,856,879 2,120,588 2,058,663 2,241,461 21,990 22,016 22,216 21,979 22,216 22,410 6,512 6,387 7,176 6,464 6,958 6,294 Fiscal Year Ended June 30
167
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2012 2013 2014 2015 2016
FUNCTION/PROGRAM
Public Safety
Fire:
Fire Stations Operated 7 7 7 7 7 Police:
Police Stations 1 1 1 1 1 Police Patrol Vehicles 30 30 30 30 30 Community Services
Acres ‐ Downtown/Urban Parks2 157 157 157 157 ‐ Acres ‐ Open Space2 3,744 3,744 3,744 3,752 ‐ Acres ‐ Parks and Preserves2 ‐ ‐ ‐ ‐ 3,921 Acres ‐ Open Space2 ‐ ‐ ‐ ‐ 4,489 Acres ‐ Municipal Golf Course2 ‐ ‐ ‐ ‐ ‐ Parks and Preserves3 36 36 36 36 36 Golf Course (see above for acreage) 1 1 1 1 1 Tennis Courts 51 51 51 51 51 Athletic Center 4 4 4 4 4 Community Centers 4 4 4 4 4 Theaters 3 3 3 3 3 Cultural Center/Art Center 1 1 1 1 1 Junior Museum and Zoo 1 1 1 1 1 Swimming Pools 1 1 1 1 1 Nature Center 3 3 3 3 3 Libraries
Libraries 5 5 5 5 5 Public Works:
Number of Trees Maintained 31,890 31,923 31,757 31,652 31,699 Electric Utility1
Miles of Overhead Lines 223 222 223 223 222 Miles of Underground Lines 245 246 249 262 268 Water Utility
Miles of Water Mains 234 233 236 236 235 Gas Utility
Miles of Gas Mains 210 210 214 211 209 Waste Water
Miles of Sanitary Sewer Lines 217 217 217 217 216 Note:
Source: City of Palo Alto
1The City of Palo Alto Utilities Department completed the conversion of its electric system maps to a GIS mapping system database. Therefore, the distances reported for FY 11/12 and forward are more accurate than the distances reported in previous years.
3Williams Park is excluded from the list as the City does not operate it as a park. Located near downtown and across from Heritage Park, the land is leased to a non‐profit that operates it as the Museum of American Heritage.
CITY OF PALO ALTO
Capital Asset Statistics by Function/Program
Last Ten Fiscal Years
Fiscal Year Ended June 30
2Beginning in 2016 park acreage is sourced from the Official City Data Set. The discrepancy between FY16 and FY17 is because FY16 numbers were derived off GIS parcels identified as parks or zoned in the Open Space Zoning District.
For FY17, Council approved Parks Master Plan numbers were used. 168
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2017 2018 2019 2020 2021
7 7 7 7 7 1 1 1 1 1 30 30 30 29 29 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 174 174 174 174 174 4,030 4,030 4,030 4,018 4,018 181 181 181 181 181 36 36 36 36 36 1 1 1 1 1 51 51 51 50 50 4 4 4 4 4 4 4 4 4 4 3 3 3 3 3 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 3 3 3 3 3 5 5 5 5 5 31,712 31,849 31,815 31,819 31,716 223 222 220 220 221 264 272 274 279 287 236 236 236 236 236 210 210 210 210 211 216 216 216 216 216 Fiscal Year Ended June 30
169
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2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Governmental Funds
General Fund:
Administration 83 85 83 84 86 87 89 87 86 85 Community Services 74 74 74 76 77 78 79 78 76 75 Development Services5 ‐ ‐ ‐ 38 38 36 36 36 ‐ ‐ Fire 122 119 116 107 107 109 109 98 98 98 Library 41 41 42 44 48 48 48 48 47 47 Office of Emergency Services4 ‐ ‐ 3 3 3 3 3 3 3 3 Planning and Community Environment5 43 48 49 28 31 32 30 30 ‐ ‐ Planning and Development Services5 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 62 62 Office of Transportation6 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 6 6 Police 157 154 155 155 155 155 155 155 149 149 Public Works1
56 5 7 5 6 5 3 5 4 5 6 5 5 5 1 4 9 5 1 Subtotal General Fund 576 578 578 588 599 604 604 586 576 576 All Other Funds:
Capital Projects Fund 24 26 27 27 28 31 34 33 36 36 Special Revenue Fund 2 2 9 1 0 9 1 0 9 1 0 1 1 1 1 Total Governmental Funds 602 606 614 625 636 645 647 629 623 623 Enterprise Funds
Public Works2 115 104 99 100 95 99 101 101 101 101 Utilities3
251 254 255 258 256 255 257 257 257 257 Total Enterprise Funds 366 358 354 358 351 354 358 358 358 358 Internal Service Funds
Printing and Mailing 2 2 2 2 2 2 2 2 2 2 Technology 30 31 32 32 34 35 36 36 36 36 Vehicle Replacement 16 1 7 1 7 1 7 1 7 1 6 1 6 1 6 1 6 1 6 Total Internal Service Funds 48 50 51 51 53 53 54 54 54 54 Total 1,016 1,014 1,019 1,034 1,040 1,052 1,059 1,041 1,035 1,035 Notes: 1Fleet and Facilities Management
2Refuse, Storm Drainage, Wastewater Treatment
Numbers adjusted for rounding purposes.
Source: City of Palo Alto ‐ Fiscal Year 2021 Adopted Operating Budget 5ln FY15, staff was moved from Planning and Community Environment (PC&E), Public Works and Fire to create Development Services; In FY20, the Development Services Department was combined with the Planning and Community Environment Department to form the Planning and Development Services Department. 6ln FY20, the City established the Office of Transportation. Staffing in prior years was included in the Development Services Department and Planning and Community Environment Department. 4In FY14, emergency services and disaster preparation activities were transferred from the Fire Department and are shown in newly created Office of Emergency Services.
3Electric, Fiber Optics, Gas, Wastewater Collection, Water Fund CITY OF PALO ALTO
Full‐Time Equivalent City Government Employees by Function Last Ten Fiscal Years
Full Time Equivalent Employees as of June 30
0 5
10 15
20 25
30 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Full Time Equivalents
Governmental Funds Internal Service Funds
0 200
400
600
800
1,000
1,200
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Full Time Equivalents
Governmental Funds Enterprise Funds Internal Service Funds 0 200
400
600
800
1,000
1,200
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Full Time Equivalents
Governmental Funds Enterprise Funds Internal Service Funds 170
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Americans with Disabilities Act Statement
IN COMPLIANCE WITH
AMERICANS WITH DISABILITIES ACT (ADA) OF 1990,
THIS DOCUMENT MAY BE PRO
VIDED
IN OTHER ACCESSIBLE FORMATS.
For information contact:
ADA Coor
dinator
City of Palo Alto
250 Hamilton Ave
(650) 329-2550
[email protected]
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CITY OF PALO ALTO
250 HAMILTON AVENUE,
PALO ALTO, CA 94301
P 650.329.2100
W CITYOFPALOALTO.ORG
Spanish explorers named the area
for the tall, twin-trunked redwood
tree they camped beneath in 1769.
Palo Alto incorporated in 1894 and
the State of California granted its
first charter in 1909. The City has
long been known for its innovative
people and its exploration of ideas
that have changed the world. In
Palo Alto, our history has always
been about the future.
PALO ALTO
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Appendix D
APPENDIX D CITY INVESTMENT POLICY
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1 CITY OF PALO ALTO
Investment Policy
Fiscal Year 2021-22
(Adopted June 21, 2021)
INTRODUCTION
The City of Palo Alto invests its pooled idle cash according to State of California law and the charter of the City of Palo Alto. In particular, the City follows “The Prudent Investor Standard” cited in the State Government Code (Section 53600.3). Under this standard, all gove rning bodies of local agencies or persons authorized to make investment decisions on behalf of the City are trustees and therefore fiduciaries subject to the prudent investor standar d. When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the agency.
INVESTMENT PHILOSOPHY
The basic principles underlying Palo Alto's investment philosophy is to ensure the safety of public funds, provide that sufficient money is always available to meet current expenditures, and achieve a reasonable rate of return on its investments.
The City's preferred and chief practice is to buy securities and to hold them to their date of maturity rather than to trade or sell securities prior to maturity. The City may, however, elect to sell a security prior to its maturity should there be a significant financial need. If securities are purchased and held to their maturity date, then any changes in the market value of those securities during their life will have no effect on their principal value. Under a buy and hold philosophy, the City is able to protect its invested principal. The economy, the money markets, and various financial institutions (such as the Federal Reserve System) are monitored carefully to make prudent investments and to assess the condition of the City’s portfolio.
INVESTMENT OBJECTIVES
The primary objectives, in priority order, of investment activities shall be safety, liquidity, and yield:
1. Safety: Safety of principal is the foremost objective of the investment program.
Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. The objective will be to mitigate credit risk and interest
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2 rate risk.
a) Credit risk is the risk that an obligation will not be paid and a loss will result. The City will seek to minimize this risk by:
Limiting investment to the safest types of securities or minimum credit quality rating as listed in the “Authorized Investment” section Diversifying its investments among the types of securities that are authorized under this investment policy
b) Interest rate risk is the risk that changes in interest rates will adversely affect the value of an investor’s portfolio. For example, an investor with large holdings in long-term bonds has assumed significant interest rate risk because the value of the bonds will fall if interest rates rise. The City can minimize this risk by:
Buying and holding its securities until maturity
Structuring the investment portfolio so that securities mature to meet cash flow requirements
To further achieve the objective of safety, the amount that can be invested in all investment categories, excluding obligations of the U.S. Government and its agencies, is limited either as a percentage of the por tfolio or by a specific dollar amount. These limits are defined under the “Authorized Investments” section.
2. Liquidity: Liquidity is the second most important objective of the investment program. The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is accomplished by maintaining a portion of the portfolio in liquid money ma rket mutual funds or local government investment pools. In addition, the City w ill maintain one month’s net cash needs in short term and/or liquid investments and at least $50 million shal l be maintained in securities maturing in less than two years. Although the City’s practice is to buy and hold securities to maturity, since all possible cash demands cannot be anticipated, the portfolio will consist of securities with active secondary or resale markets should the need to sell a security prior to maturity arises.
3. Yield: Yield on the City’s portfolio is last in priority among investment objectives.
The investment portfolio shall be designed to obtain a market rate of return that reflects the authorized investments, risk constraints, and liquidity needs outlined in the City’s investment policy. Compared to similar sized cities, the City of Palo Alto should be able to take advantage of its relatively large reserve balances to achieve higher yields through long-term investments. In addition, the City will strive to maintain the level of investment of idle funds as close to 100 percent as possible.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) RESPONSIBILITIES
In addition to and subordinate to the Safety, Liquidity, and Yield investment objectives,
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3 investments that support sound environmental, social and governance (ESG) objectives are also considered. While the City’s portfolio is not classified as an ESG portfolio, investments in entities that support community well-being through practices that emphasize safe and environmentally sound objectives; fair labor practices; and equality of rights regardless of sex, race, age, disability, or sexual orientation, is encouraged. Direct investments in entities that manufacture tobacco products, firearms, and engage in direct production or drilling of fossil fuels is discouraged.
This section applies to new investments (after November 5, 2018) only and does not require divestment of existing investments. Investments in Certificates of Deposit (CDs) and Negotiable Certificates of Deposit are exempt from the ESG investing objective.
SCOPE
A. This investment policy shall apply to all financial assets of the City of Palo Alto as accounted for in the Annual Comprehensive Financial Report (ACFR), including but not limited to the following funds:
1. General Fund
2. Special Revenue Funds
3. Debt Service Funds
4. Capital Project Fund
5. Enterprise Funds
6. Internal Service Funds
7. Trust and Agency Funds
B. The policy does not cover funds held by the California Public Employees Retirement System (CalPERS), the California Employers’ Retiree Benefit Trust (CERBT), Deferred Compensation programs (e.g. ICMA, Hartford), the Authority for California Cities Excess Liability (ACCEL), and the Public Agency Retirement Services (PARS) Section 115 Irrevocable Trust.
C. Investments of bond proceeds shall be govern ed by the provisions of the related bond indentures.
GENERAL INVESTMENT GUIDELINES
1. The maximum stated final maturity of individual securities in the portfolio should be ten years.
2. A maximum of 30 percent of the par value of the portfo lio shall be invested in securities with maturities beyond five years.
3. The City shall maintain a minimum of one month’s net cash needs in short term and/or liquid investments.
4. At least $50 million shall be maintained in securities maturing in less than two (2)
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4 years.
5. Should the ratio of the market value of the portfolio to the book value of the portfolio fall below 95 percent, the Administrative Services Department will report this fact to the City Council within a reasonable time frame and evaluate whether there is any risk of holding any of the securities to maturity.
6. Commitments to purchase securities newly introduced on the market shall be made no more than three (3) working days before pricing.
7. Whenever possible, the City will obtain three or more quotations on the purchase or sale of comparable securities and take the higher yield on purchase or higher price on sale. This rule will not a pply to new issues, which are purchased at market no more than three (3) working days before pricing, as well as to LAIF, City of Palo Alto bonds, money market accounts and mutual fu nds, all of which shall be evaluated separately.
8. Where the Investment Policy specifies a percentage limitation for a particular category of investment, that percentage is applicab le only at the date of purchase. A later increase or decrease in a percentage resulting from a change in the portfolio’s assets or values shall not constitute a violation of that restriction. As soon as possible, percentage limitations will be restored as investments mature in each category.
AUTHORIZED INVESTMENTS
The California Government Code (Sections 53600 et seq.) governs investment of City funds. The following investments are authorized:
1. U.S. Government Securities (e.g. Treasury notes, bonds and bills) Securities that are backed by the full faith and credit of the United States
a) There is no limit on purchase of these securities.
b) Securities will not exceed 10 years maturity.
c) All purchased securities must have an explicit or a de facto backing of the full faith and credit of the U.S. Government.
2. U.S. Government Agency Securities – Obligations issued by the Federal Government agencies (e.g. Federal National Mortgage Association, etc.).
a. There is no limit on purchase of these securities except for:
Callable and Multi-step-up securities provided that:
- The potential call dates are known at the time of purchase - The interest rates at which they “step-up” are known at the time
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5 of purchase
- The entire face value of the security is redeemed at the call date - No more than 25 percent of the par value of the portfolio
b. Securities will not exceed 10 years maturity.
3. California State, California Local Government Agencies, and other United States State Bonds
a) Having at time of investment a minimum Double A (AA/Aa2) rating as provided by a nationally recognized rating service (e.g. Moody’s, Fitch, and/or Standard and Poor’s).
b) May not exceed 40 percent of the par value of the portfolio.
c) Investments include:
i) Registered state warrants or treasury notes or bonds of the State of California and bonds, notes, warrant s, or other evidences of indebtedness of any local agency within California, including bonds payable solely out of the reve nues from a reve nue producing property owned, controlled, or operated by the state or local agency or by a department, board, agency, or authority of the state or local agency.
ii) Registered treasury notes or bond of any of the 49 United States in addition to the State of California, including bonds payable solely out of the revenues from a re venue-producing property owned, controlled, or operated by a state or by a department, board, agency or authority of any of the other 49 United States, in addition to the State of California.
4. Certificates of Deposit (CD) - A debt instrument issued by a bank for a specified period of time at a specified rate of interest. Purchase of CD’s are limited to:
a) May not exceed 20 percent of the par value of the portfolio.
b) No more than 10 percent of the par value of the port folio in collateralized CDs in any institution.
c) Purchase collateralized deposits only from federally insured large banks that are rated by a nationally rec ognized rating service (e.g. Moody’s, Fitch, and/or Standard and Poor’s).
d) For non-rated banks, deposit should be limited to amounts federally insured (FDIC). – See Appendix C
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6 e) Rollovers are not permitted without specific instruction from authorized City staff.
5. Banker's Acceptance Notes (BA) – Bills of exchange or time drafts drawn on and accepted by commercial banks. Purchase of banker’s acceptances are limited to:
a) No more than 30 percent of the par value of the portfolio.
b) Not to exceed 180 days maturity.
c) No more than $5 million with any one institution.
6. Commercial Paper - Short-term unsecured obligations issued by banks, corporations, and other borrowers. Purchases of commercial paper are limited to:
a) Having highest letter or numerical rating as provided for by a nationally recognized rating service (e.g. Moody’s, Fitch, and/or Standard and Poor’s).
b) No more than 15 percent of the par value of the portfolio.
c) Not to exceed 270 days maturity.
d) No more than $3 million or 10 percent of the outstanding commercial paper of any one institution, whichever is lesser.
7. Local Agency Investment Fund (LAIF) – A State of California managed investment pool may be used up to the maximum permitted by California State Law.
8. Short-Term Repurchase Agreements (REPO) – A contractual agreement between a seller and a buyer, usually of U.S. government securities, whereby the seller agrees to repurchase the securities at an agreed upon price and, us ually, at a stated time.
Purchases of REPO’s must:
a) Not to exceed 1 year.
b) Market value of securities that underlay a repurchase agreement shall be valued at 102 percent or greater of the funds borrowed against those securities.
c) A Master Repurchase agreement must be signed with the bank or dealer.
9. Money Market Deposit Accounts – Liquid bank accounts which seek to maintain a net asset value of $1.00.
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7 10. Mutual Funds which seek to maintain a net asset value of $1.00 and which are limited essentially to the above investments and further defined in note 9 of Appendix A
a) No more than 20 percent of the par value of the portfolio.
b) No more than 10 percent of the par value with any one institution.
11. Negotiable Certificates of Deposit (NCD) issued by nationally or state-chartered banks and state or federal savings institutions and fu rther defined in note 11 of Appendix A. Purchases of negotiable certificates of deposit:
a) May not exceed 20 percent of the par value of the portfolio.
b) No more than $5 million in any one institution.
12. Medium-Term Corporate Notes – Issued by corporation organized and operating within the United States or by depository institutions licensed by the United States or any state and operating with the United States.
a) Not to exceed 5 years maturity.
b) Securities eligible for investment shall have a minimum rating of AA or Aa2 from a nationally re cognized rating service (e.g. Moody’s, Fitch, and/or Standard & Poor’s).
c) No more than 10 percent of the par value of the portfolio.
d) No more than $5 million of the par value may be invested in securities of any single issuer, other than the U.S. Government, its agencies and instrumentality.
e) If securities owned by th e City are downgraded by Moody’s, Fitch, or Standard & Poors to a level below AA or Aa2, it shall be the City’s policy to review the credit situation and make a determination as to whether to sell or retain such securities in the portfolio.
13. Supranational Organizations Securities – Supranational organizations refer to International Bank for Reconstruction a nd Development (IBRD), International Finance Corporation (IFC) and Inter-American Development Bank (IADB).
a. Securities will not exceed 5 years maturity.
b. No more than 20 percent of the par value of the portfolio. c. No more than 10 percent of the par value with any one institution. d. Securities eligible for investment shall have a minimum rating of AA or Aa2 from a nationally re cognized rating service (e.g. Moody’s, Fitch, and/or Standard & Poor’s).
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8 e. Limited to United States dolla r denominated senior unsecured unsubordinated obligations issued or unconditionally guaranteed by IBRD, IFC, and IADB.
Appendix A provides a more detailed description of each investment vehicle and its security and liquidity features. Most of the City's short-term investments will be in securities which pay principal upon maturity, while long-term investments may be in securities that periodically repay principal, as well as interest. Most of the C ity's investments will be at a fi xed rate. However, some of the investments may be at a variable rate, so long as that rate changes on specified dates in pre- determined increments.
PROHIBITED INVESTMENTS:
Includes all investments not specified above, and in particular:
1. Reverse repurchase agreements
2. Derivatives, as defined in Appendix B
Appendix B provides a more detailed description of each investment, which is prohibited, for City investment.
AUTHORIZED INVESTMENT PERSONNEL
Idle cash management and invest ment transactions are the res ponsibility of th e Administrative Services Department. The Administrative Services Department is under the control of the Director of Administrative Services (Director), as treasurer, who is subject to the direction and supervision of the City Manager.
The Assistant Directors of Administrative Services (Assistant Director), who reports to the Director, are authorized to make all investment transactions allowed by the Statement of Investment Policy.
The Assistant Director may authorize the Manager of Treasury, Debt & Investments and/or Senior Management Analyst (Manager and/or Analyst) to enter into investments within clearly specified parameters.
The Investment function is under the supervision of the Assistant Director. The Assistant Director is charged with the responsibility to manage the investment program (por tfolio), which includes developing and monitoring the C ity's cash flow model and deve loping long-term revenue and financing strategies and forecasts.
The Manager and/or Analyst are subject to the direction and supervision of the Assistant Director.
The Manager and/or Analyst assist the Assistant Director, in the purchase and sale of securities. The Manager and/or Analyst also prepare the quarter ly report, and record daily all investment transactions as to the type of investment, amo unt, yield, and maturity. Ca sh flow projections are prepared as needed.
In all circumstances, approval from the Director of Administrative Services is required before selling
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9 securities from the City's portfolio. The Manager and/or Analyst may also transfer no more than a total of $10 million a day from the City's general account to any one financial institution, without the prior approval of the Assistant Director.
No other person has authority to make investment transactions without the written authority of the Director or Assistant Director of Administrative Services.
USE OF BROKERS AND DEALERS
The Administrative Services Department maintains a list of acceptable dealers. A dealer acts as a principal in security transactions, selling securities from and buying securities for their own position.
A dealer must have:
a) At least three years experience operating with California municipalities;
b) Maintain an inventory of trading securities of at least $10 million; and
c) Be approved by the Assistant Director before being added to the City's list of approved dealers; including individual traders or agents representing a dealer:
A dealer will be removed from the list should there develop a history of problems to include: failure to deliver securities as promised, failure to honor transactions as quote d, or failure to provide accurate information.
SAFEKEEPING AND CUSTODY
All securities shall be delivered to the City's safekeeping custodian and held in the name of the City of Palo Alto, with the exception of the following investments:
a) Certificates of deposit, which may be held by the City itself.
b) City shares in pooled investment funds, under contract.
c) Mutual funds
d) Local Agency Investment Fund (LAIF)
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10 POLICY REVIEW AND REPORTING ON INVESTMENTS
Monthly, the Administrative Services Department will review performance in relation to Council adopted Policy. Quarterly, the Department will report to Council investment activity, including: the portfolio’s performance in comparison to policy, explain any variances from policy, provide any recommendations for policy changes, and discuss overall compliance with the City’s Investment Policy. In addition, the Department will provide Council with:
a) A detailed list of all securities, investments and monies held by the City, and b) Report on the City’s ability to meet expenditure requirements over the next six months.
Annually, the Administrative Services Department will present a Proposed Statement of Investment Policy, to include the delegation of investment authority, to the City Council for review during the annual budget process. All proposed changes in policy must be approved by the Council prior to implementation.
Adopted by City Council October 22, 1984 Amended by City Council June 11, 2001 Monthly reporting effective January 1985 Amended by City Council June 17, 2002 Amended and Adopted by City Council June 24, 1985 Amended by City Council June 17, 2003 Amended by City Council December 2, 1985 Amended by City Council June 28, 2004 Amended by City Council June 23, 1986 Amended by City Council June 20, 2005 Amended by City Council June 22, 1987 Amended by City Council June 12, 2006 Amended by City Council August 8, 1988 Amended by City Council June 11, 2007 Amended by City Council November 28, 1988 Amended by City Council June 09, 2008 Amended by City Council June 26, 1989 Amended by City Council June 15, 2009 Amended by City Council May 14, 1990 Am ended by City Council June 28, 2010 Amended by City Council June 24, 1991 Amended by City Council June 20, 2011 Amended by City Council June 22, 1992 Amended by City Council June 18, 2012 Amended by City Council June 23, 1993 Amended by City Council June 03, 2013 Amended by City Council June 20, 1994 Amended by City Council June 16, 2014 Amended by City Council June 19, 1995 Amended by City Council June 15, 2015 Amended by City Council June 24, 1996 Amended by City Council June 13, 2016 Amended by City Council June 23, 1997 Amended by City Council June 27, 2017 Amended by City Council January 26, 1998 Am ended by City Council November 5, 2018 Amended by City Council June 22, 1998 Amended by City Council June 24, 2019 Amended by City Council June 28, 1999 Adopted by City Council June 22, 2020 Amended by City Council June 19, 2000 Amended by City Council June 21, 2021
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11 APPENDIX A
EXPLANATION OF PERMITTED INVESTMENTS
1. U.S. Government Securities: United States Treasury notes, bonds, bills, or certificates of indebtedness or those for which the faith and credit of the Un ited States are pledged for the payment of principal and interest.
2. U.S. Government Agency Securities: U.S. Government Agency Obligations include the securities of the Federal National Mortgage Association (FNMA), Federal Land Banks (FLB), Federal Intermediate Credit Banks (FICB), banks for cooperatives, Federal Home Loan Banks (FHLB), Government National Mortgage Association (GNMA), Federal Home Loan Mortgage Corporation (FHLMC), Student Loan Mark eting Association (SLMA), Small Business Administration (SBA), Federal Farm Credit (FFC), and Federal Agricultural Mortgage Corporation (FAMC or FMAC). Federal Agen cy securities are debt obligations that essentially result from lending programs of the Government. Federal agency securities differ from other types of securities, as well as among themselves. Their characteristics depend on the issuing agency. It is possi ble to distinguish three types of issues: (A) participation certificates (pooled securities), (B) Certificates of interest (pooled loans), (C) notes, bonds, and debentures. The securities of a few agencies are explicitly backed by the full faith and credit of the U.S. Government. All other issues pur chased by the City have the de facto backing from the federal government, and it is highly unlikely that the government would let any agency default on its obligations.
3. Certificates of Deposit: A certificate of deposit (CDs) is a receipt for funds deposited in a bank, savings bank, or savings and loan association for a specified period of time at a specified rate of interest. Denominations are $250,000 a nd up. The first $250,000 of a certificate of deposit is guaranteed by the Federal Deposit Insurance Corporation (FDIC), if the deposit is with a bank or savings bank, or the Savings Association Insurance Fund (SAIF), if the deposit is with a savings and loan. CDs with a face value in excess of $250,000 can be collateralized by U.S. Government Agency and Treasury Depart ment securities or first mortgage loans.
Government securities must be at least 110 percent of the face value of the CD collateralized in excess of the first $250,000. The value of first mortgages must be at least 150 percent of the face value of the CD balance insured in excess of the first $250,000. Generally, CDs are issued for more than 30 days and the maturity can be selected by the purchaser.
4. Bankers' Acceptance: A Banker's Acceptance (BA) is a ne gotiable time draft or bill of exchange drawn on and accepted by a commercial bank. Acceptance of the draft irrevocably obligates the bank to pay the bearer the face amount of the draft at maturity. BAs are usually created to finance the import and export of goo ds, the shipment of goods within the United States and storage of readily marketable staple commodities. In over 70 years of usage in the United States, there has been no known instance of principal loss to any investor in BAs. In addition to the guarantee by the accepting bank, th e transaction is identified with a specific commodity. Warehouse receipts verify that the pledged commodities exist, and, by definition, these commodities are r eadily marketable. The sale of the underlying goods generates the necessary funds to liquidate the indebtedness.
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12 BAs enjoy marketability since the Federal Reserve Bank is authorized to buy and sell prime BAs with maturities of up to nine months. The Federal Reserve Bank enters into repurchase agreements in the normal course of open market operations with BA dealers.
As are sold at a discount from par. An accepta nce is tied to a specific loan transaction; therefore, the amount and maturity of the acceptance is fixed.
5. Commercial Paper: Commercial paper notes are unsecured promissory notes of industrial corporations, utilities, and ba nk holding companies. Interest is discounted from par and calculated using actual number of days on a 360-day year. The notes are in bearer form, with maturities up to 270 days selected by the pur chaser, and denominations generally start at $100,000. There is a small secondary market for commercial paper notes and an investor may sell a note prior to maturity.
Commercial paper notes are backed by unused lines of credit from major banks. Some issuer's notes are insured, while some are backed by irre vocable letters of credit from major banks.
State law limits a City to investments in United States corporations having assets in excess of five hundred million dolla rs with an "A" or higher rati ng by a nationally recognized rating service for the issuer's debentures. Cities may not invest more than 25 percent of idle cash in commercial paper.
6. Local Agency Investment Fund Demand Deposit: The Local Agency Investment Fund LAIF) was established by the State to enable treasurers to place funds in a pool for investments. The City is limited to an investment of the amount allowed by LAIF (currently $75 million). LAIF has been particularly beneficial to those jurisdictions with small portfolios.