Attachment — San Jose City Council, December 10, 2024 (part 1 of 2)

ANNUAL

COMPREHENSIVE

FINANCIAL
REPORT
FOR THE YEAR ENDED J UNE 30
2024
Attachment - FY 2023-2024 A nnual Comprehensive Financial Report

City of San José
California
Annual Comprehensive
Financial Report

Year Ended June 30, 2024
Prepared by the Finance Department
Drew Corbett
Acting Director of Finance
FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT
City of San José
Annual Comprehensive Financial Report
Project Team

Drew Corbett
Acting Director of Finance
Kim Hawk
Acting Assistant Director of Finance
Victor Lo, CPA
Deputy Director of Finance

Finance Department Financial Statement Review and Coordination

Philana Yang
Principal Accountant
Vicky Szeto
Principal Accountant

Kei Motonishi
Supervising Accountant
Jovilita Oliveras
Supervising Accountant

Winter Tsang
Senior Accountant
Katie Su
Senior Accountant
Kevin Cardema
Senior Accountant

Financial Statement Preparation

Accountants Accountants Accountants
Gurinder Chhina Jenny Kinney Phillip Vuong
Govind Das Kim Lam
Katrina Feng Tram Luu, CPA Accounting Technician
Lola Gomez, CPA Pedro Romero Cindy Duong
Ychi Huynh Margarita Viray Weekwan Jang

Component Unit Financial Statement Coordination

Laura Burke, Environmental Services
Principal Accountant
Mary Soo, Airport
Principal Accountant
Yen Tiet, Housing
Senior Accountant

Justine Nguyen, Environmental Services
Senior Accountant
Elsa Jacobo, Airport
Supervising Accountant
Hong Hua, Housing
Accountant II

Lillian Nguyen, Environmental Services
Senior Accountant
Csilla Kuehn, Airport
Senior Accountant
Gina Rios, Retirement Services
Senior Accountant

Jennifer Stevenson, CPA, Energy
Principal Accountant
William Phan, Energy
Senior Accountant
Nam Cao, Retirement Services
Accountant II

Special Assistance

Joseph Rois, City Auditor Yolanda Wasniewski, Finance Jim Shannon, Budget Office Qianyu Sun, Finance Miguel Bernal, Finance Alice Vurich, Finance Tanner Warner, Finance Kevin Freimarck, Finance Benjie Chua-Foy, Retirement Services Deepak Sharma, Finance Soumya Panday, Finance Barbara Hayman, Retirement Services Brian Chi, Finance Cesar Blengino, Finance

Special Assistance - Departments and Offices

Airport Energy Parks, Recreation and Neighborhood Services Budget Environmental Services Planning, Building and Code Enforcement City Attorney Fire Police
City Auditor Housing Public Works
City Clerk Human Resources Retirement Services
City Manager Information Technology Transportation
Library

TABLE OF

CONTENTS
FOR THE YEAR ENDED JUNE 30, 2024
●
Introductory Section
Letter of Transmittal I
Certificate of Achievement for Excellence in Financial Reporting (GFOA) XX Distinguished Budget Preparation Award (GFOA) XXI
Mayor and City Council XXII
City Organization by Function XXIII
●
Financial Section
Independent Auditor’s Report 1
Management’s Discussion and Analysis (Unaudited) 5
Basic Financial Statements:

Government-wide Financial Statements:

Statement of Net Position 27
Statement of Activities 28
Fund Financial Statements:

Governmental Funds:

Balance Sheet 29
Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position 31
Statement of Revenues, Expenditures and Changes in Fund Balances 33
Reconciliation of the Changes in Fund Balances of Governmental Funds to the Statement of Activities 35
Proprietary Funds:

Statement of Fund Net Position 37
Statement of Revenues, Expenses and Changes in Fund Net Position 39
Statement of Cash Flows 41

TABLE OF

CONTENTS
FOR THE YEAR ENDED JUNE 30, 2024
Fiduciary Funds:

Statement of Fiduciary Net Position 44
Statement of Changes in Fiduciary Net Position 46
Notes to Basic Financial Statements 49
Required Supplementary Information (Unaudited)
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual:

General Fund 189
Housing Activities Fund 190
Low and Moderate Income Housing Asset Fund 191
Schedule of Employer Contributions – Defined Benefit Pension Plans 192 Schedule of Changes in the Employer’s Net Pension Liability and Related Ratios for the Measurement Periods Ended June 30 - Defined Benefit Pension Plans 197
Schedule of Investment Returns - Defined Benefit Pension Plans 199 Schedule of the City’s Proportionate Share of the Net Pension Liability and Related Ratios - CalPERS 200
Schedule of Employer Contributions - CalPERS 201
Schedule of Changes in the Employer’s Net OPEB Liability and Related Ratios for the Measurement Periods Ended June 30 – Postemployment Healthcare Plans 202
Changes in Assumptions 204
Schedule of Employer Contributions – Postemployment Healthcare Plans 205 Schedule of Investment Returns - Postemployment Healthcare Plans 209 Notes to Required Supplementary Information 210
Supplemental Information
Nonmajor Governmental Funds
Combining Balance Sheet 213
Combining Statement of Revenues, Expenditures and Changes in Fund Balances 214

TABLE OF

CONTENTS
FOR THE YEAR ENDED JUNE 30, 2024
Nonmajor Special Revenue Funds
Combining Balance Sheet 219
Combining Statement of Revenues, Expenditures and Changes in Fund Balances 227
Combining Schedule of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual 235
Nonmajor Debt Service Funds
Combining Balance Sheet 252
Combining Statement of Revenues, Expenditures and Changes in Fund Balances 253
Nonmajor Capital Project Funds
Combining Balance Sheet 257
Combining Statement of Revenues, Expenditures and Changes in Fund Balances 259
Internal Service Funds
Combining Statement of Fund Net Position 264
Combining Statement of Revenues, Expenses and Changes in Fund Net Position 265
Combining Statement of Cash Flows 266
Pension Trust Funds
Combining Statement of Fiduciary Net Position 270
Combining Statement of Changes in Fiduciary Net Position 271 Combining Statement of Fiduciary Net Position - Federated City Employees’ Retirement System 272
Combining Statement of Changes in Fiduciary Net Position - Federated City Employees’ Retirement System 273
Combining Statement of Fiduciary Net Position - Police and Fire Plan 274 Combining Statement of Changes in Fiduciary Net Position - Police and Fire Plan 275

TABLE OF

CONTENTS
FOR THE YEAR ENDED JUNE 30, 2024
Private-Purpose Trust Funds
Combining Statement of Fiduciary Net Position 276
Combining Statement of Changes in Fiduciary Net Position 277 ●
Statistical Section (Unaudited)
I Net Position by Component - Last Ten Fiscal Years 280 II Change in Net Position - Last Ten Fiscal Years 281
III Fund Balances, Governmental Funds - Last Ten Fiscal Years 285 IV Changes in Fund Balances, Governmental Funds - Last Ten Fiscal Years 287
V Assessed Value and Estimated Actual Value of Taxable Property - Last Ten Fiscal Years 290
VI Property Tax Rates - All Overlapping Governments - Last Ten Fiscal Years 291
VII Principal Property Taxpayers - Current Year and Nine Years Ago 292 VIII Property Tax Levies and Collections - Last Ten Fiscal Years 293 IX Ratios of Outstanding Debt by Type - Last Ten Fiscal Years 294 X Ratio of Net General Bonded Debt Outstanding - Last Ten Fiscal Years 295 XI Schedule of Direct and Overlapping Bonded Debt 296
XII Legal Debt Margin Information - Last Ten Fiscal Years 298 XIII Revenue Bond Coverage - Last Ten Fiscal Years 299
XIV Demographic and Economic Statistics - Last Ten Fiscal Years 302 XV Principal Employers - Current Year and Nine Years Ago 303 XVI Full-Time and Part-Time City Employees - Last Ten Fiscal Years 304 XVII Operating Indicators - Last Ten Fiscal Years 306
XVIII Capital Asset Statistics by Function - Last Ten Fiscal Years 308 XIX Conduit Issuer of Multifamily Housing Revenue Bonds Outstanding 310 Introductory
Section

200 East Santa Clara St. Fl. #17, San José, CA 95113 tel (408) 535-8100 www.sanjoseca.gov November 22, 2024
HONORABLE MAYOR and CITY COUNCIL and

RESIDENTS OF THE CITY OF SAN JOSE
The Annual Comprehensive Financial Report of the City of San José We are pleased to present the Annual Comprehensive Financial Report (“ACFR”) of the City of San José (“City”) for the fiscal year July 1, 202 3, through June 30, 2024, as required by Sections 805(a) and 1215 of the City Charter. Although formally submitted to the Mayor and City Council (“Council”), the ACFR is also intended to provide relevant financial information to the residents of San José, taxpayers, creditors, investors, and other interested parties.

This letter of transmittal provides a non-technical summary of City finances, services, achievements, and economic prospects. We ask that readers who wish a more detailed discussion of the City’s financial results refer to the Management’s Discussion and Analysis contained in the Financial Section of the ACFR.

The City Administration is responsible for the accuracy of the information contained in this report, the adequacy of its disclosures, and the fairness of its presentation. We believe this ACFR to be complete and reliable in all material respects. To provide a reasonable basis for making this representation, we have established a comprehensive system of internal controls designed to protect City assets from loss, to identify and record transactions accurately, and to compile the information necessary to produce financial statements in conformity with generally accepted accounting principles.

The City contracted with Macias Gini & O’Connell LLP, a firm of Certified Public Accountants licensed to practice in the State of California, to perform the annual independent audit. The auditors expressed an opinion that the City’s financial statements for Fiscal Year 2024 (“FY 2024 ”) are fairly stated in conformity with accounting principles generally accepted in the United States. This is the most favorable conclusion and is commonly known as an “unmodified” or “clean” opinion. The independent auditor’s report is included in the Financial Section of this report.

In addition, Macias Gini & O’Connell LLP performs an audit of the City’s major program expenditures of federal funds for compliance with the requirements described in the U.S.

Office of Management and Budget’s OMB Compliance Supplement, and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. The report of the Single Audit is published separately from t his ACF R and, when completed, can be obtained from the City of San José’s website at https://www.sanjoseca.gov/your-government/appointees/city- auditor/external-financial-audits.

Office of the City Manager
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ANNUAL COMPREHENSIVE FINANCIAL REPORT

This ACFR is organized into three sections:
● The Introductory Section is intended to familiarize the reader with the organizational structure of the City, the nature and scope of City services, and specifics of the City’s legal operating environment.
● The Financial Section includes the Management’s Discussion and Analysis, Basic Financial Statements, Notes to Basic Financial Statements, Required Supplementary Information, and other Supplemental Information. The Basic Financial Sta tements include t he government-wide financial statements that present an overview of the City’s entire financial operations and the fund financial statements that present financial information for each of the City’s major funds, governmental funds, enterprise funds, internal service funds, and fiduciary funds. This section also contains the independent auditor’s report on the Basic Financial Statements.
● The Statistical Section presents up to ten years of detailed statistical data on the City’s financial trends, revenue capacity, debt capacity, demographic and economic information, and operating information as context to the information presented in the financial statements and note disclosures.

The ACFR includes all funds of the City, as well as all governmental organizations and activities for which the Council has financial accountability. These organizations include the San José -Santa Clara Clean Water Financing Authority, the City of San José Financing Authority, and the San José Diridon Development Authority.

The Successor Agency to the Redevelopment Agency of the City of San José (“SARA”) was created by State statute. The SARA is subject to the direction and oversight of a board consisting of the Mayor and the other members of the City Council (“SARA Bo ard”). Financial activities of the SARA are further overseen by the Redevelopment Dissolution Count ywide Oversight Board of Santa Clara County (“Oversight Board”). The SARA is reported in a fiduciary fund as a private-purpose trust fund.

Reporting Entity
San Jos é is a charter city that has operated under a council -manager form of government since 1916. Under the City Charter, the Mayor and Council form the legislative body that represents the community and is empowered to formulate citywide policy. The Council consists of a Mayor and ten (10) Council members. The Mayor1 is elected at-large for a four-year term and the Council members are elected by district for staggered four-year terms. The Mayor and Council members are limited to two (2) consecutive four -year terms. Under the Charter, the Mayor recommends policy, program, and budget priorities to the Council, which in turn approves policy direction for the City. The City Manager is appointed by the Council and serves as the chief administrative officer of the organization responsible for the administration of City affairs, day -to-day operations, and implementation of Council policies. In addition to the City Manager, the City Attorney, City Auditor,

1 On June 7, 2022, 55.48% of San José voters approved Mea sure B, a ballot measure amending the San J ose City Charter to (1) move the mayoral election from the gubernat orial election cycle to the presidential e lection cycle beg inning in 2024 and (2) to limit t he person elected to the Office of Mayor in 2022 to a two-year term with the option to run for th e Office of Mayor and serve as such for two additional successive four-year terms.

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City Clerk, and Independent Police Auditor are appointed by and report directly to the Council.

The City Charter provides that City Council establishes the boards of administration and appoints the majority of board members for each of the City’s retirement plans, the Federated City Employees’ Retirement System and the Police and Fire Department Retirement Plan and hires and prescribes the duties of the chief executive officer (Director of Retirement Services) and chief investment officer (Assistant Director of Retirement Services) within the Office of Retirement Services, who serve at the pleasure of the retirement boards. The City Charter also specifies certain duties and obligations of each retirement board and authorizes the chief executive officer to hire and oversee the Office of Retirement Services’ employe es, sub ject to any applicable Civil Service Rules. The retirement systems are reported as fiduciary component units.

City History
San José is the oldest city in California, developing from a Spanish pueblo established in 1777. Situated between the Diablo and Santa Cruz Mountain ranges, San José encompasses approximately 181 square miles at the south end of the San Francisco Bay and is the county seat of Santa Clara County. San José’s central location between San Francisco to the north and Monterey/Carmel to the south makes the “Capital of Silicon Valley” a gateway to adventures throughout California.

The City has transformed dramatically from the rich agricultural setting of its early years into the largest city in the Silicon Valley. Silicon Valley is a region in the Southern San Francisco Bay Area of Northern California that serves as a global center of high technology, innovation, and social media.

Silicon Valley corresponds roughly to the geographical Santa Clara Valley. The San José - Sunnyvale-Santa Clar a Metro politan Statistical Area (“San José MSA”) in the Silicon Valley has a large concentration of high-tech employment, with 337,900 workers out of a total civilian employment level of 1.16 million2. Silicon Valley is home to many of the world’s largest technology companies and is a global center of technology innovation. Commercial, retail, professional, high-tech manufacturing, electronic assembly, and service businesses all have a presence in San José. On the international front, San José attracts significant foreign investment from throughout the globe.

Successor Agency to the Redevelopment Agency of the City of San José (SARA) Beginning July 1, 2018 , pursuant to Health and Safety Code section 34179(j), the individual successor agency oversight boards within Santa Cl ara County were combined into one county wide oversight board. The Oversight Board is comprised of seven (7) member representatives with one (1) member appointed by each of the following: County Board of Supervisors, the city selection committee es tablished pursuant to Section 50270 of the Government Code, the independent special district selection committee established pursuant to Section 56332 of the Government Code, the County Superintendent of Education, the Chancellor of the California C ommunity Colleges, a public appointment made by the County Board of Supervisors, and the recognized employee organization representing the largest number of successor agency employees in the County. The Oversight Board is staffed by the County of Santa Cla ra Auditor-Controller and tasks

2 State of California, Employment Development Department, Labor Market Information Division Press Release, August 16, 2024

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have been delegated among the County Finance Agency, the Office of the County Executive, the Clerk of the Board of Supervisors, and Office of the County Counsel.

Total Redevelopment Property Tax Trust Fund (“RPTTF”) revenue distributed by the County to the SARA in FY 2024 was $144,171,792, which was used to pay debt service and debt -related expenses on the Successor Agency Senior and Subordinate Tax Allocation Bonds (“SARA TABs”) and other enforceable obligations. During the year ended June 30, 2024, the County withheld $55,901,766 in RPTTF for payments for its current year pass -through payments. Based upon the nature of the SARA’s custodial role, the SARA is reported in a fiduciary fund as a private -purpose trust fund.

Economic Condition and Fiscal Outlook
While Silicon Valley continues to show overall positive economic performance, several potential indicators of a future economic weakening continue. These economic indicators include high inflation, elevated office vacancy rates, and rising unemployment rates. While employment figures continue to be relatively strong, layoffs, especially in the technology sector, are impacting unemployment rates.

Employment and Population
The revised June 2024 employment level in th e San José MSA of 1.16 million represented a 2.3% decrease from the June 202 3 level of 1.1 9 million. Between June 202 3 and June 202 4, employment contracted by 26,900 jobs in the San José MSA, including 15,300 in the information sector, 6 ,800 in the manufac turing sector, and 5,00 0 in the mining, logging , and construction sector. Smaller changes in employment levels across all other sectors make up the remaining difference3.

The revised local unemployment rate for June 202 4 was 4.5%, which was higher than the May 2024 rate of 4.2% and the prior year unemployment rate of 3.7%. However, the June 2024 San José Metropolitan Statistical Area unemployment rate continued to be lower than the unadjusted unemployment rate for the State (5.8%) and was the same as the nation (4.5%)4.

San José is the county seat of Santa Clara County. It is the 13th largest city in the United States and the third largest in California behind Los Angeles and San Diego. According to the California Department of Finance estimates, San José had an estimated population of 969,4915 as of January 1, 2024, reflecting a decline of 0.1% over the prior year.

Construction Activity
Construction activity through June 2024 saw a 21.7% increase compared to the previous year, primarily driven by residential and industrial projects. This increase was somewhat offset by a 9.3% decline in commercial construction. Overall, construction has slightly outpaced the projections made in the 2025 - 2029 Five-Year Forecast.
• Residential Construction: Permit valuations for residential projects rose 48.4% from the previous year, reaching $547.8 million in FY 2024. New construction accounted for 70% of this total, with

3 State of California, Employment Development Department, Labor Market Information Division Press Release, August 16. 2024. 4 Ibid
5 State of California, Department of Finance, E-1 Population Estimates for Cities, Counties, and State with Annual Percentage Change – January 1, 2023 and 2024 (Released May 2024).

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significant activity in the multi -family housing sector. Notable projects include several large apartment complexes, s uch as a 300 -unit affordable housing development on W. Julian Street and other projects along Alum Rock Avenue and Meridian Avenue. • Industrial Construction : Industrial construction valuations surged by 44.1% year-over-year, with total valuations reaching $ 514.5 million. The activity was split between new construction and alterations.
• Commercial Construction : Commercial construction valuations fell 9.3% compared to the prior year, totaling $523.9 million in FY 2024. Key proje cts i nclude a new substation on San I gnacio Avenue.

Real Estate Market
The local real estate market has shown signs of recovery after a challenging start to the fiscal year. By June 2024, the median single -family home price had risen to $1.7 million, a 6.3% increase from June 2023. Homes are selling faster, with the average days -on-market dropping to 19 days, compared to 24 days in the pr ior year. While property sales declined by 20% in the first half of FY 2024 , the market rebounded in the seco nd half, with an average of 460 sal es per month—only 3.3% lower than the 476 monthly sales in FY 2023.

City Organization and Services
The City provides a range of municipal services, including police and fire protection, sanitation services, environmental management, maintenance of streets and infrastructure, library services, and recreational activities. The City operates a number of enterprises including a parking program, a municipal water system, a wastewater treatment facility, the San José Mineta International Airport , and the San José Clean Energy (“SJCE”) pro gram. In add ition, the City provides oversight of the management of convention and cultural event facilities that include the San José McEnery Convention Center, Center for the Performing Arts, California Theatre, Mexican Heritage Plaza, Ice Centre, and the SAP Center at San José – home of the San José Sharks of the National Hockey League.

The City organization is structured into six (6) City Service Areas (“CSAs”) that integrate services provided by separate departments and offices into key alignments from the community’s perspective. The CSAs are:
● Community and Economic Development: The mission of the Community and Economic Development CSA is to facilitate the equitable and focused evolution of the City to foster strong communities and a d iverse economy wi th shared pro sperity for all . The outcomes of this CSA include thriving, inclusive, and attractive co mmunities and vibrant public art; strong responsive, and equitable economy; and accessible and diverse range of business opportunities. ● Environmental and Utility Services: The mission of the Environmental and Utility Services CSA is to provide envi ronmental leadership throug h policy development, program design, and reliable utility services. The outcomes of this CSA include reliable utility infrastructure; healthy streams, rivers, marsh, and bay; “Clean and Sustainable” air, land, and energy; and safe, reliable, and sufficient water supply.

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● Neighborhood Services : The mission of the Neighborhood Services CSA is to se rve, foster, and strengthen the community by providing access to lifelong learning, opportunities to enjoy life, and preserving and stewarding healthy neighborhoods with shelter and housing opportunities for all. The outcomes for this CSA include safe and clean neighborhoods and public spaces; welcoming and vibrant neighborhoods and public life ; and equitable access to community opportunities to flourish; and housing security through supportive solutions. ● Public Safety: The mission of the Public Safe ty CSA is to engage the community to partner on public safety and emergency prevention, mitigation, preparedness, response, and recovery . The outcomes for this CSA include a safer San José with effective emergency response services; and resilient communities that are prepared for emergencies. ● Transportation and Aviation Services : The mission of the Transportation an d Aviation Servi ces CSA is to provide the community with safe, secure, and efficient surface and air transportation systems that support San José’s livability and economic vitality. The outcomes for this CSA include providing safe and secure transportation systems; provid ing viable transportation choices that promote a strong economy; ensuring travelers have a positive, reliable, and efficient experience; preserving and improving transportation assets and facilities; and providing a transportation system that enhances community livability. ● Strategic Support: The mission of the Strategic Support CSA is to effectively develop, manage, and safeguard the Ci ty’s fiscal, physical, tech nological, and human resources to enable and enhance the delivery of City services and projects. The outcomes of this CSA include ensuring a high-performing workforce that is committed to exceeding internal and external customer expectations; safe and func tional public infrastructure, facilities, and equipment; effective use of technology and data to ols that enable a collaborative, responsive, and productive City ; and sound fiscal management that facilitates meeting the needs of the community.

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Significant Accomplishments
During FY 2024, the City’s priorities were represented by the four City Council Focus Areas, City Service Area Critical/Important/Ongoing Work, and the City Manager’s Foundatio nal Strategic Support Focu s Areas as approved by City Council as part of the FY 2024 Adopted Budget as shown in the figure below.

Four City C ouncil Focus Are as were incorpo rated into the FY 2024 Adopted Budget as Investment Priorities (referred to as City Council Focus Areas) for the City. The four City Cou ncil Focus Areas bring greater organizational emphasis, resource prioritization, and regu lar governance-level reporting to make notable progress on a limited number of strategi c areas impacting the c ommunity. As described in the City O rganization and Serv ices se ction above, the CSAs a lign day -to-day Core Services provided in individual depart ments into the C ity’s six key li nes of business as viewed from the community’s perspective and show the service results of the collaboration am ong departments at a hig her organizational level. The five City Manager Foundational Strategic Support Focus Area s represented important work the City Manage r’s Office is positioned to understand and move solutions forward t o support the overall success of the organization.

The City of San José is dedicated to delivering on these priorities while continuing to provi de the core services that keep San José running on a daily basis . The following sections outline the City’s priorities and summarize the major accomplishments achieved during the fiscal year.

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City Council Focus Areas
Increasing Community Safety: Public safety is at the core of San José’s mission. The City continues to implement ref orms and strategies to ensure th e safety and security of its re sidents throu gh innovative crime reduction programs, police reform efforts, and disaster preparedness.

Significant accomplishments for FY 2024 include:
• Completed 68 new police refor m recommendations, bringing the total to 348 recommendations fulfilled.
• Enhanced emergen cy preparednes s by comp leting the constructi on of a ne w Emergency Operations Center, set to open in late 2024.
• Trained over 200 new C ommunity Emergency Response Team (C ERT) members, including large numbers of gra duates from the Vietnamese and Latino /a/x co mmunities, increasing t he community's ability to respond to emergencies.
• Implemented a catalytic conver ter theft ordina nce and traine d offi cers on new enforcement methods. Also received an $8.5 million grant to fund expanded efforts to ad dress organized retail theft.
• Responded t o over 110,000 Fire D epartment incidents at a 66% response rate for priority 1 emergency calls a nd a 90% respo nse ra te for priority 2 emergency c alls, including over 68,000 medical calls and over 1,500 fires.
• Received $34.5 million i n federal and state grants to reduce traffic fatalities. The grants include adding safety feature s to f our transit corr idors, a speed safety camera pilot project, pedes trian safety improvements at four locations with the highest traffic fatality and injury occurrences, and a grant to support bicycle and pedestrian safety.
• Installed 91 Accessible Pedestrian Signals (APS), i mproving acces sibility and safety for visually impaired pedestrians at more than one-third of the signalized intersections across the City.

Reducing Un sheltered Homelessness: Addressing homelessness remains one of San José’s top priorities. The City continues to focus o n expanding emergency and supportiv e housing while tackling the systemic issues contributing to the housing crisis.

Significant accomplishments for FY 2024 include:
• Supported a total capacity of 21,136 housing units and beds f or our homeless and low -income community, with 95% of San José households rema ining housed one year after bei ng housed in permanent supportive housing and 88% remainin g housed one year after being housed in rapid rehousing.
• Opened or began development on 8 94 affordable ho using units, i ncluding notable projec ts like Arya and Kelsey Ayer Station. Completed rehabilitation of the Arena Hotel on The Alameda, adding 89 units.
• Reduced unsheltered homelessness by 11.8%, from 4,975 individuals in 2022 to 4,386 in 2023.

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• Provided over $118 million in state grants to support housing and homelessness programs. • Started developm ent or received City Council approval for an additional 64 0 emergency interim housing units throughout San José.
• Launched San José’s first safe par king program for individuals living in RVs at the San ta Teresa Light Rail Station.

Cleaning Up Our Neighborho ods: San José is dedicated to improving the quality of lif e for all residents by revital izing neighborhoods and reducing blight. Through strate gic initiatives and community engagement, the City is making its public spaces cleaner and more vibrant.

Significant accomplishments for FY 2024 include:
• Removed over 21 m illion po unds of debris throug h BeautifySJ, addressing illegal dumping an d graffiti citywide, exceeding t he illegal du mping performance target of five business days with an average response time of 3.5 business days.
• Organized 152 dumpster events and over 400 litter clean-up efforts. • Responded to 3,527 new code enforcement comp laints from the public in residential, commercial and industrial properties, c losing 94% of the cases an d achieving an on -time initial priority inspection response time and routine in spection response time in 81% and 65% of the cases, respectively.
• Implemented programs to improve parks a nd playground s, including significant capital projects that added 4.3 acres of new parkland.
• Received $5.1 million across four grants to address water quality i mprovements at Lake Cunningham, funding for trail improvements, and downtown public recreation improvements.

Attracting Investment in Jobs and Housing: The City remains focused on stimulati ng economic growth, supporting affordable ho using, and ens uring inclusive development ac ross neighborhoods.

With the aim of creatin g a vibrant and economically pro sperous city, various initiatives were undertaken to attract investment and enhance livability.

Significant accomplishments for FY 2024 include:
• Issued building permits for 2,785 housing units, of which 1,945 were affordable units. • Financed 503 affordable housing units through funding availabil ity loans and entitled 4,540 housing units across the City.
• Launched new Fire Prevention Developme nt Services we b page to facilitate online pe rmit submittal, inspection scheduling, and access to multi -lingual policies . In addition , the building permit intake appointment requirement was eliminated, streamlinin g the building permit process, and increasing the speed of development by 30 days.
• Visits t o downtown San José increased 21% in FY 2024 to 21.4 mi llion, with downt own hote l guests contributing an additional $17.8 million more to the economy than in the prior year.

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• Successfully extended the Downtown Residential Hi gh-Rise I ncentive, re moving ba rriers to residential development in key areas of the City.
• Launched business technical assistance programs, including the first women in business program with Prosperi ty Lab, Latino Business Foundation, and Ente rprise Foundat ion, conn ecting an estimated 300 businesses to training and resources.
• Expanded support of Neighborhood B usiness District association from three to 12. In addition, expanded the Willow Glen property -based improvement district and renewed the Japantown business improvement district, solidifying a private funding source to enhance services in these two neighborhoods.

CSA Critical/Important/Ongoing Work
Community and Economic Development significant accomplishments for FY 2024 include:
• Received state certification of the 2023-2031 Housing Element to define the policies and programs that will be implemented to meet with the Ci ty’s housing needs and production, prese rvation, and protection goals.
• Retained and attracted a combined 4,200 jobs (3,500 j obs in medium to large -sized businesses and 700 jobs in small businesses) through the City ’s business development efforts, which resulted in $2.4 million additional tax revenues and additional employees working i n San José. The City received $2.90 in return for every $1.00 spent on business development outreach staff salaries. • Generated $25.5 billion in economic activity, $6.2 billion in exports, and employed 30,000 people in San José’s Foreign Trade Zone companies (including 5,000 San José residents) to drive economic growth and maintain status as a top three Foreign Trade Zone in the state. • Stabilized 178 San José households and preve nted evictions with payouts totaling $1.9 million in back rent to housing providers.
• Financed 470 affordable h ousing units f or rehabilitation to ex tend affordability an d preserve the City’s affordable housing stock.

Environmental and Utility Services significant accomplishments for FY 2024 include:
• Completed the City ’s Direct Discharg e Plan and receive d the California State Wa ter Resources Control Board approval on June 2, 2024.
• Earned Investment-Grade Credit Ratings from Moody’s Ratings and S&P Global (Moody’s issued an A2 rating and S&P Global issued an A rating) for S an José Clean E nergy thereby matching the highest credit rating of any community choice aggregator. • Obtained appro val by the City Council to amend the San José Municipal Code to form a new municipal electric utility, San José Power, and submit an interconnection agreement to LS Power.

Continued to evaluate providing this service.

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• Set energy rates to pro vide a 3% to 8% dis count to all customers and provided an add itional 10% discount to Califo rnia Alternate Rates for Energy and Family Electric R ate Assistance low -income customers. Continued to build San José Clean Energy’s operating reserve to $280 millio n, which met the initial target of 180 days of operating expenses. • Obtained City Council approval to execute six new long -term power purchase ag reements totaling approximately 118 megawatts in solar and 115 megawatt s in storage totaling over $800 million in value. Over 1 00 megawatts of s olar and 10 megawatts of new battery storage ac hieved commercial operation this year and is included in the San José Clean Energy’s power supply mix.

Neighborhood Services significant accomplishments for FY 2024 include:
• Managed new applications, annual reporting, and/or quarterly exp enditure and perfo rmance reporting for the State of California grants t otaling approximately $118 million (fiv e round s of Homeless Housing, Assistance and Prevention fun d totaling approxi mately $88 m illion, three rounds of Permanent Local Housing Allocation Program totaling approximately $19 million, and two rounds of Encampment Resolution Funds totaling approximately $11 million). • Partnered with Valley Water on the Coyot e Creek Flood Protection Project. Phase 1 i s ongoing. Of 200 displaced people, 107 exited to shelters or other destinations. Entered negotiation for Phase 2. • Began d esigning the State ’s 200 small h ome initiative at the Cerone Santa Clara Val ley Transportation Authority yard, with proje ct completion planned for July 2025. Entered the des ign phase for 110 units.
• Completed the City ’s Direct Discharge Plan and received State Water Board approval (June 2 , 2024).
• Completed 14 major capita l park pro jects, totaling approximately $20 million in improvements Citywide, including renovating seven playgrounds and adding four new City parks and 4.3 acres of new parkland. The new parks are Mariposa, Heinlenville, Pellier, and Newbury Parks. • Achieved a major milestone in th e implementation of all -inclusive playgrounds, including completed sites at Rotary Play Garden (Council District 3) and Lincoln Glen (Council District 6) and sites under construction at Emma Prusch Farm Park (Council District 5) an d Almaden Lake Park (Council District 10).
• Increased Library program offeri ngs by 20%, yielding an increase in p rogram attendance by 29%.

Increased Library visits by 24.4%, with Library users making 3,580,900 visits to lib rary locations, exceeding the perf ormance target by 10%. Su nday hour s continued to repres ent the third most popular day of service in visits per hour.
• Provided connectivity to a monthly average of 98,000 residents through the nine Community WiFi networks.
• Managed the transition of the Digi tal Inclus ion Fund from t he Califo rnia E merging Technol ogy Fund, while administering the grant program of seven grantees with $500,000 in grant funds. • Secured $2.1 million in grant funds to support hotspot data plans, upgr aded WiFi equipment at libraries, and a feasibility study for increasing Community WiFi speeds.

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• Hosted three job fairs for 521 unhoused individuals and people at ri sk of homelessness. Job fairs are inten ded to connect unhoused individuals with employers, s uch as Brightview Lands caping, Goodwill Industries, and Allied Universal.
• Provided ea rly learning opportunities for 85,794 plus children and careg ivers, with 89% of caregivers reporting an improvement in their knowledge and skills as parents/caregivers. • Increase animal intakes by 20% year -over-year for a total of 13,232 in takes, with cat intakes increasing by 28% for a total of 7,624, dog int akes increasing by 13% for a total of 4,178, and other animal types totaling 1,430 intakes.

Public Safety significant accomplishments for FY 2024 include:
• Increased Police Department recruiting efforts, res ulting in the hiring of 108 new sworn officers (102 recruits and 6 lateral officers), compared to 74 in the previous year. • Answered 82% of emergency calls for service (9-1-1) in less than 15 seconds. In FY 2024, received a total of 634,356 emergency calls.
• Completed m ajor study of 9 -1-1- calls for service to ide ntify call types p otentially s uitable for alternative responses and/or co -response initi atives, continuing wor k that will result in more effective use of police resources and better outcomes for City residents. • The Fire Department hired 22 Firefighter/Paramedics, which helped to mainta in a steady vacancy rate of 10 .4% budgeted sworn positions (excluding Senior Sta ff classifications of Fire Chief, Assistant Fire Chief, and Deputy Fire Chief) compared to 9.4% in the prior year. • The Fire Department has accredi ted 120 of the 173 total Fire fighter/Paramedics, with ei ght pending accreditation.
• Provided nearly 15,000 fire inspections (all types ), processed $5.6 mil lion in custome r payments, and issued 8,787 annual fire safety and hazardous materials permits.

Transportation and Aviation Services significant accomplishments for FY 2024 include:
• Secured $375 million in reg ional funding and a commitment for $5.1 bil lion in federal fun ding for the BART Silicon Vall ey Extension – the federal funding commitment is the seco nd highest commitment ever made to a project through the Federal Transit Admin istration’s Capital Investment Grant program, and the largest ever made outside of New York City. • Secured $5.6 million c ollectively in September 2023 from the federal Urban and Community Forestry grant program for tree inventory and forest management. • Implemented the City Forest Management Plan, resulting in 2034 trees planted, 880 of which were in parks.
• Unveiled new Airport Department partnerships to provide multiple new domestic and international air routes, including new ZIPAIR service to Tokyo ; new Frontier service to Denver, San Di ego, Las Vegas, Los Angeles, an d Phoenix; a nd new Spirit se rvice to Los Angeles, Portland , and Baltimore- Washington.

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• Became the Bay Area airport with the highest number of TSA PreCheck® subscribers, with 33% of passengers choosing the benefits of the progr am in June 2024. A ccording to the national TSA numbers, 88% of PreCheck® passengers waited less than five minutes for security checks in June 2024.
• The San José Mineta Internat ional A irport received approximately $3.3 million from the Federal Aviation Administration for zero emission shuttle busses under the Airport Improvement Program. • The Sa n José Mineta International Airport advanced to Level 2 i n the Airports Cou ncil International’s Airport Carbon Accreditation Program for SJC sustainability efforts.

Strategic Support significant accomplishments for FY 2024 include:
• Exceeded C itywide annual hiring targe ts for FY 2024 , with 856 offers accepted, su rpassing the target of 651 by 31.5%.
• Improved the outstanding Tax Allocation Bon ds rating from “AA” to “AA+” for Senio r Refunding Bonds and “AA-“ to “AA” for Subordinate Refunding Bonds (Fitch Ratings). • Founded the GovAI Coalition which includes over 500 officials at 200 local, county, and state governments to promote the responsible use of artificial intelligence in the public sector and to ensure artificial intelligence’s adoption is geared toward the benefit of all members of our society. • Working with the City Auditor’s Office, imple mented or closed 39 audit recommendations from past performance audits versus 26 new recommendations issued. • Launched disability affairs portfolio to advance inclus ion of people with disabilities and proactive accessibility across the organiz ation in the d esign, implementation, a nd funding of City policies, programs, and services , including holding five disability inclusion tr aining sessions, training more than 100 staff , and ident ifying nearly $1 million of fundin g for Ac cessible Pedestrian S ignal updates and internship opportunities for people with disabilities. • Issued or facilitated 158 letters of support or opposition for legislation as well as funding and regulatory priorities, in addition to 50 letters of support for grant applications and partner grant applications that provide a benefit to the City. City staff tracked more than 500 pieces of federal and state legislation and City staff testified on several bills in coordination with the Intergovernmental Relations team.

• Refined the Code of Ethics for Officials and Employees of the City of San José Policy, contained in the Council Policy Manual, and the Code of Ethics Policy, contained in the City Administrative Policy Manual.
• Updated the San José Municipal Code’s Open Government and Ethics Ordinance and created a new Op en Government Policy that supports more transparency around t he City’s Consolidated Open Government and Ethics Provisions.

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City Manager Foundational Strategic Support Focus Areas Delivering Excellent Customer Servic e: The City team is directly responsible for the quality of services and work products that are provided, both externally to the community and internally within the organization. Customer service was a focus area in FY 2024 to ensure that quality serv ices are delivered every day to our residents, businesses, visitors, and each other.

Significant accomplishments for FY 2024 include:
• Launched the Customer Service Center for Excellence team, with a dedicated staff that established the governance structure for the Customer Service Vision and Standards. • Received City Council and N eighborhood Services and Educ ation Committee approval to implement the Customer Service Neighborhood Association Engagement Model. • Completed 36 shor t-term opportunities to incrementally improve the custome r service experience throughout the City.

Closing Racial Inequities: The City is committed to working toward achieving raci al equity for the community and employees, developing policies, practices, a nd operations to assist in creating conditions where race no longer factors into life outcomes.

Significant accomplishments for FY 2024 include:
• Created an Equity Values and Standa rds Ordinance and Policy , expanding the mis sion of the new Office of Racial and Social Equity.
• Achieved 100% of Departments/Offices w ith active or in -progress activities related to their Racial Equity Action Plans.
• Created and launched a Civics Master Clas s online to increase participation of im migrant community in civic life.
• To improve language access for the community, 31 inte rpretation headsets were purchased to be used at community meetings and language access workshops were held, training over 150 Cit y staff.

Structurally Balancing the Gene ral Fund Budget: Maintaining financial sust ainability while ensuring fiscal responsibility is a key focus for the City. San José continued to strengthen its financial health through effective budget management, debt oversight, and innovative financial solutions.

Significant accomplishments for FY 2024 include:
• Managed a $6.1 billion total b udget, ensuring fi nancial st ability across all City operations. In addition, managed a debt portfol io of $4.8 billion, maintaining high credit ratings from national bond rating agencies, including an AAA bond rating from Fitch. • In response to City Council’s approval of the Mayor’s March Budget Message for FY 2025, brought forward the FY 2025 Proposed Operating Budget that fully resol ved the projected General Fund shortfall of approximately $50 million , continuing to deliver the broad array of City ser vices, while XIV

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making strategic reductions and reallocations to focus enhanced spending in targ eted areas that meet City Council and Administration priorities.

Driving Org anizational Per formance: Strong orga nizational performance enhances efficiency, productivity, and overall effec tiveness, enabling the organization to achieve its strategic objectiv es and deliver greater value to the community.

Significant accomplishments for FY 2024 include:
• Completed CSA pe rformance modernizations of three CSAs. In addition, imp lemented tools and conducted department trainings on performance management topics and standards. • Launched a website and fou r publi c dashboards for the City Council Focus Areas, i ncluding disaggregation functionality.
• Designed and implemented a quarterly F ocus Are a Community Survey to measure community attitudes and perception towards the City’s highest priority challenges.

Making San José a Great Place to Work : The City’s workforce is the engine behin d its success. San José is committed to fostering a dyna mic and inclusive w ork environment where employees are empowered to grow and thrive, ensuring excellent service delivery to residents.

Significant accomplishments for FY 2024 include:
• Surpassed citywide hiring goals, reducing the vacancy rate from 13.4% to 10.3% in June 2024. • Implemented diversity and equity training programs, benefiting over 400 employees. • Launched wellness initiatives, including financial wellness programs, with participation from 2,500 employees.
• Partnered with local universities and e ducational institutions to expa nd the talent pipeline for public service careers.
• Successfully ran mentorship and professional development programs, engaging over 300 employees.

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Major City Awards and Recognitions
The City received the following awards and recognitions in FY 2024. • San José Mineta International Airport was named the Best Mid size Airport in the United States by the Wall Street Journal.
• Government Finance Officers Association – Distinguished Budget Presentation Award for the Fiscal Year Beginning July 1, 2023.
• Government Fin ance Officers Association – Certificate of Achievement for Excellence in Financial Reporting Program.
• National Procurement Institute – Award of Excellence in Procurement. • Bloomberg Philanthropies What Works Cities Certificatio n (Gold Level) – Recognizing exceptional data capabilities to inform policy decisions and engage residents. • The San José Santa Clara Regional Wastewater Facility Capital Im provement Program’s Headworks Project, part of the $1.4 billion 10 -year Capital Improvement Program, received the Project of the Year award from the Northern California Chapter of the Construction Management Ass ociation of America.

The project won in the category of “Infrastructure Projects Valued between $100M - $200M”. • Center for Digita l Government – Recognized San José for its efforts in strengthening cybersecurity, transparency, digital privacy rights, and digital equity, placing second. • Department of T ransportation secured $375 mi llion in regional funding and a $5.1 billion federal commitment for the BA RT Silicon Valley Extension, one of the largest federal transit f unding commitments.
• San José was ranked as the #1 U.S. City for small businesses in Biz2Credit’s 2024 annual Top 25 Cities for Small Business study.
• San José Clean Energy – CalCCA Community Impact Award: EV Outreach and Education Campaign. • San José Fire Department – Eighth accreditation as an Emergency Medical Dispatch Accredited Center of Excellence by the International Academies of Emergency Dispatch. • Design-Build Institute of America Award of Merit – For San José Mineta International Airport’s Aircraft Rescue and Fire Fighting Station.
• Visionary Digital Inc lusion Trailblazer Award – Awarded to the Library Department by the Nat ional Digital Inclusion Alliance.
• Outstanding C ommunity Partner Award – Awarded to the Parks, Recreation, and Neighborhood Services Senior Services Team by Sourcewise for its senior programs.

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Five-Year Capital Improvement Program
The City publishes a five-year Capital Improvement Program (“CIP”) that guides the City in the planning, scheduling, and budgeting of capital improvement projects. The CIP is updated annually and approved by the City Council. The CIP maintains critical investment to sustain, enhance, and develop a wide array of public infrastr ucture to improve system reliability, enhance recreational experience, advance public safety, and ensure San José is well-positioned for further economic growth and opportunity while building on the efforts of the last several years of making targeted investments that align with the City’s economic development and community livability goals contained within the Envision San José 2040 General Plan (“General Plan”).

Over a fiv e-year period, the 2025 -2029 CIP totals $4.0 billion, a 10.3% increase over the FY 2024-2028 Adopted CI P of $3.6 b illion. The FY 2025 Adopted Capital Budget of $1.4 bil lion reflects a 9.1% decrease from the FY 2 024 Adopted Capital Budget of $1.6 billion. T he CIP focuses on renovatin g, renewing, and expanding the City infras tructure that s erves the critical day-to-day needs of our community, such as roadways, sewer collec tion and treatment systems, parks and sport s fields, fire and police facilities, and air port fa cilities. Over the n ext two years , most of the significant pro jects funded by the $650 million S an José’s Disaster Preparedness, Public Safety, and Infrastructur e Bond Measure (Measure T) will complete co nstruction or be under construction, represen ting th e accomplishment of a significant upgrade for the rehabilitati on of the City’ s critical infrastructure. The CIP also continues the work to ensure that we continu e to build equity considerations into the identification and prioritization of infrastru cture rehabilitation. While the General Plan remains the core planning tool of the C IP, the technical a nalysis nec essary to identify new or deferred infrastructure rehabilitation needs is increasingly being supplemented by the explicit consideration of equity, including the incorporation of race and income data as a factor to help prioritize the rehabilitation of deteriorated sanitary sewer pipe, to the extent legally pe rmissible, and as a prioritization criterio n for the Local and Neighborhood Pavement Maintenance Program.

While t he Administration remains focused on lever aging external State and federal r esources to supplement project funding, several of the City’s key local revenues dedicated to the CIP have d eclined or remained stagnant in the face of i ncreasing operational and r ehabilitation needs. In particular, Construction and Conv eyance Tax revenues – primarily generated by private property sales – are estimated at $40.0 million in FY 2025 before increasing through the outyears of the CIP to $55.0 million in 2028-2029. These collections are significantly lower t han the record -setting collections experienced in 2021-2022 of $64.5 million. The decline in revenue fro m previous years reduces available funding for capital infrastructure needs in the Parks and Community Facilities Development, Library, Service Yards, Fire, Communications, and Park Yards Capital Programs.

The Status Report on Deferred Infrastructure Maintenance Backlog, presented to the Transportation and Environment Committee on April 8, 2 024 (up dated on a two -year cy cle), identified an infrastructure backlog of approximately $1.7 billion, with an additional $129.1 million needed annually to maintain the City’s infrastructure in a sustained functional condition. Though the existing backlog of $1.7 billion is expected to decrease as Measure T projects are fully implemented, the City must continue to search for additional resources and leverage grant opport unities to ensure San José’s public ass ets are appropriately maintained.

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Financial Information
The City Administration is responsible for establishing and maintaining internal controls that safeguard th e City’s assets from loss, theft, or misuse, and allow the compilation of adequate accounting data for the preparation of financial statements in conformity with ge nerally accepted accounting principles. In ternal controls a re designed to provide reasonable, but not absolute, assurance these objectives are met . The concept of reasonable assurance r ecognizes the cost of a control should not exceed its likely benefits, and that the evaluation of costs and benefits is subject to management estimates and judgments.

Single Audit
As a recipient of federal, state and county funding, the City is responsible for providing assurance that adequate internal c ontrols are in place t o ensur e compliance with applicable laws a nd regulations re lating to these award programs. Internal controls are subject to periodic evaluation by management, the Office of the City Auditor, and the City’s external independent auditor s.

As part of the City’s single audit procedures, tests are performed to test the effectiveness of its internal controls over major federal award programs and the City’s compliance with applicable laws and regulations related to these award programs.

Budgetary Controls
The City maintains budgetary controls through City Council adoption of an annual appropriation ordinance and by maintaining an encumbrance accounting system. Expenditures for City operations and other purposes identified in the annual budget cannot legally exceed the bud geted amounts approved by the City Council.

The City uses encumbrance accounting as another technique for accomplishing budgetary control.

An encumbrance is a commitment of a future expenditure earmarked for a purpose that reduces the amount of budg etary authority available for general spending. At the end of the fiscal year, encumbered appropriations are carried forward and become part of the following year’s budget while appropriations that have not been encumbered lapse.

The City co ntinues to meet its re sponsibility for sound financial ma nagement as demonstrated by the statements and schedules included in the financial section of this report.

Debt Management Policy
The City’s Debt Management Policy was adopted by the City Council on May 21, 2002 and most recently revised on March 21, 20 23, and is reviewed annually. The Debt Man agement Pol icy establishes the following equally important objectives:
● Minimize debt service and issuance costs;
● Maintain access to cost-effective borrowing;
● Achieve the highest practical credit rating;
● Full and timely repayment of debt;
● Maintain full and complete financial disclosure and reporting; ● Ensure financial controls are in place with respect to proceeds of debt issuances; and ● Ensure compliance with applicable state and federal laws.

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San José Mayor & City Council
To contact members of the San José City Council by mail, send to:
200 East Santa Clara Street, Tower 18th, San José, CA 95113 Mayor Matt Mahan
(408) 535-4800
[email protected]
Sergio Jimenez
District 2
(408) 535-4902
[email protected]
Rosemary Kamei
District 1
(408) 535-4901
[email protected]
Omar Torres
District 3
(408) 535-4903
[email protected]
David Cohen
District 4
(408) 535-4904
[email protected]
Peter Ortiz
District 5
(408) 535-4905
[email protected]
Devora "Dev" Davis
District 6
(408) 535-4906
[email protected]
Bien Doan
District 7
(408) 535-4907
[email protected]
Domingo Candelas
District 8
(408) 535-4908
[email protected]
Pam Foley
District 9
(408) 535-4909
[email protected]
Arjun Batra
District 10
(408) 535-4910
[email protected]

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City Organization by Function
Residents of San José
Mayor and City Council
Council Appointees
Office of
the City
Manager
Office of
the City
Attorney
Office of the
City Auditor
Office of the
City Clerk
Office of the
Independent
Police
Auditor

RETIREMENT
BOARDS*
Office of
Retirement
Services
Boards and
Commissions

GENERAL

GOVERNMENT

DEPARTMENTS
Finance
Human Resources
Information
Technology

PUBLIC SAFETY

DEPARTMENTS
Fire
Police

CAPITAL

MAINTENANCE

DEPARTMENTS
Public Works
Transportation

COMMUNITY

SERVICES

DEPARTMENTS
Airport
Energy
Environmental
Services
Housing
Library
Parks, Recreation and
Neighborhood
Services
Planning, Building and
Code Enforcement
*Federated City Employees՚ Retirement System Board of Administration and Police and Fire Department Retirement Plan Board of Administration

GENERAL

GOVERNMENT

DEPARTMENTS

PUBLIC SAFETY

DEPARTMENTS

CAPITAL

MAINTENANCE

DEPARTMENTS

COMMUNITY

SERVICES

DEPARTMENTS

RETIREMENT
BOARDS*
Introductory
Section
Financial
Section

1 FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT
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Responsibilities of Management for the Financial Statements
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FINANCIAL

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Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from erro r, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substan tial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS and Government Auditing Standards, we:

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

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

Required Supplementary Information

Accounting principles generally accepted in the United States o f America require that the management’s discussion and analysis; the schedules of revenues, expenditures and changes in fund balance – budget and actual for the General Fund, Housing Activities Fund, and Low and Moderate Income Housing Asset Fund; the schedule of employer contributions – defined benefit pensio n plans; the schedule of changes in the employer’s net pension liability and related ratios for the mea surement periods ended June 30 – defined benefit pension plans; the schedule of investment returns – def ined benefit pension plans; the schedule of the City’s proportionate share o f the net pension liability and related ratios – CalPERS; the schedule of employer contributions – CalPERS; the schedule of changes in th e employer’s net OPEB liability and related ratios for the measurement periods ended June 30 – postemployment healthcare plans; the schedule of employer contributions – postemployment healthcare plans; an d the schedule of investment returns – postemployment healthcare plans, as listed in the table of cont ents, be presented to supplement the basic financial statements. Such information is the responsibility of management and, altho ugh not a part of the basic financial statements, is required by the Governmental Acc ounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or histori cal context. We have applied c ertain limited procedures to the required supplementary information in accordance with GAAS, which consis ted of inquiries of management about 3 FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT

the methods of preparing the information and comparing the info rmation for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not e xpress an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Supplementary Information

Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The combining and individual fund financial statements and schedules listed as supplemental information are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates di rectly to the underlying account ing and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying 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 GAAS. In our o pinion, the com bining and indi vidual fund financial statements and schedules listed as supplemental information are fairly stated, in all material respects, in relation to the basic financial statements as a whole.

Other Information

The City’s management is responsible for the other information included in the annual comprehensive financial report. The other information comprises the introduct ory and statistical sections but does not include the basic financial statements and our auditor's report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not ex press an opinion or any form of assurance thereon.

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

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards , we have also issued our report dated November 22, 2024 on our consideration of the City’s internal c ontrol 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 that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control over financial 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 22, 2024

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Management’s Discussion and Analysis
Required Supplementary Information (Unaudited)
The Management’s Discussion and Analysis (“MD&A”) provides an overview of the City of San José’s (“City”) activities and financial performance for the year ended June 30, 2024. Readers are encouraged to read the MD&A in conjunction with the basic financial statements that immediately follow, along with the letter of transmittal at the beginning of the Introductory Section and other portions of this Annual Comprehensive Financial Report (“ACFR”). All amounts in the billions and millions have been rounded to the nearest million and hundred thousand, respectively. All percentages have been rounded to the nearest one hundredth of a percent.

Financial Highlights
● The government-wide statement of net position for the City’s governmental and business-type activities indicates that as of June 30, 2024, total assets and deferred outflows of resources exceed total liabilities and deferred inflows of resources by $4.411 billion. Of this amount, a deficit balance of $1.782 billion represents unrestricted net position, which consists of a deficit balance of $2.497 billion for governmental activities, and a positive balance of $715.3 million for business-type activities. In addition, the City’s restricted net position totals $1.360 billion ($1.298 billion for governmental activities and $62.4 million for business-type activities) based on the restrictions imposed by the enabling legislation or debt covenants. Lastly, net position of $4.833 billion is the City’s net investment in capital assets, which include $3.518 billion from governmental activities and $1.315 billion from business-type activities. ● The net position increased by $195.4 million or 4.64 percent during FY 2024 to $4.411 billion from $4.216 billion. Governmental activities accounted for a $41.1 million decrease due to total expense of $2.331 billion exceeding the total revenue and transfers of $2.289 billion. Business-type activities accounted for $236.5 million of the increase due to total revenue of $1.206 billion exceeding the total expense and transfers of $969.1 million.
● Governmental funds reported a combined ending fund balance of $2.142 billion at June 30, 2024, which is $87.3 million or 3.92 percent lower than the June 30, 2023 balance. The change was attributable to an increase in the San José Financing Authority Debt Service Fund of $4.9 million, the Special Assessment Districts Fund of $1.6 million, the Housing Activities Fund of $1.1 million and offset by decreases in the Nonmajor Governmental Funds of $75.8 million, the General Fund of $9.9 million and the Low and Moderate Income Housing Asset Fund of $9.2 million.
● Unassigned fund balance of governmental funds is $128.9 million, which is 6.02 percent of the combined governmental fund balances at June 30, 2024.

Overview of the Financial Statements
This discussion and analysis introduce the City’s basic financial statements, which are comprised of four components:
● Government-wide Financial Statements
● Fund Financial Statements
● Notes to Basic Financial Statements
● Required Supplementary Information
In addition, this report also contains other supplementary information. 6 INTRODUCTORY

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Government-wide Financial Statements
Government-wide Financial Statements provide readers with a broad overview of the City’s finances in a manner like that of a private-sector business.

The statement of net position presents information on all assets, deferred outflows of resources, liabilities, and deferred inflows of resources. The difference between total assets and deferred outflows of resources and total liabilities and deferred inflows of resources is the City’s net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the City’s financial position is improving or deteriorating.

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

Both government-wide financial statements address functions principally supported by taxes and intergovernmental revenues (“governmental activities”) and other functions that intend to recover all or in part a portion of their costs through user fees and charges (“business-type activities”). The governmental activities of the City include general government, public safety, capital maintenance, community services, sanitation, and interest and fiscal charges. The City’s business-type activities include airport, wastewater treatment, water system, parking operations, and clean energy.

The government-wide financial statements include the primary government of the City and five separate components for which the City is financially accountable.

Fund Financial Statements
Fund Financial Statements report information about groupings of related accounts used to maintain control over resources segregated for specific activities or objectives. As do other state and local governments, the City uses fund accounting to ensure and demonstrate finance-related legal compliance. Each City fund falls into one of three categories: governmental funds, proprietary funds, or fiduciary funds.

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

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

The governmental funds balance sheet and the governmental funds statement of revenues, expenditures and changes in fund balances present information separately for the General Fund, the Housing Activities Fund, the Low and Moderate Income Housing Asset Fund, the Special Assessment Districts Fund, and the San José Financing Authority Debt Service Fund which are all classified as major funds. These statements also report 7 FOR THE YEAR ENDED JUNE 30, 2024

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several individual governmental funds classified as nonmajor funds such as special revenue, debt service, and capital project funds, which are aggregated into a single presentation. Individual fund data for each of the nonmajor governmental funds is provided in the form of combining statements elsewhere in this ACFR.

Proprietary funds generally account for services charged to external or internal customers through fees.

Proprietary funds provide the same type of information as shown in the government-wide financial statements for business-type activities, only in more detail. The City accounts for its airport, wastewater treatment, water system, parking operations, and clean energy program in proprietary funds.

The City accounts for its public works program support, employee benefits, and vehicle maintenance and operations as internal service funds. These services predominantly benefit governmental functions. Therefore, they are included as governmental activities in the government-wide financial statements. Individual fund data for each of the nonmajor internal service funds are provided in the form of combining statements elsewhere in this ACFR.

Fiduciary funds account for resources held for the benefit of City employees and outside parties in a similar manner as that for proprietary funds. Pension plan trust funds, private-purpose trust funds, and custodial funds are reported as fiduciary funds. The government-wide financial statements do not include fiduciary funds as their resources are not available to support City programs.

Notes to Basic Financial Statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements.

Required Supplementary Information includes the budgetary schedules for the General Fund, the Housing Activities Fund, and the Low and Moderate Income Housing Asset Fund. In addition, pension and other postemployment healthcare schedules present the City’s progress toward funding its obligations to provide future pension and other postemployment healthcare benefits for its active and retired employees.

Combining and individual fund statements and schedules provide information for nonmajor governmental funds, internal service funds, and fiduciary funds and are presented immediately following the required supplementary information.
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Government-Wide Financial Analysis
Analysis of net position: As noted earlier, net position may serve as a useful indicator of the City’s financial position. As of June 30, 2024, the City’s total assets and deferred outflows of resources exceed total liabilities and deferred inflows of resources by $4.411 billion. The following table is a condensed summary of the City’s net position for governmental and business-type activities:

Statement of Net Position
June 30, 2024 and 2023
(in thousands)
Governmental Activities Business-type Activities Totals FY 2024 FY 2023 FY 2024 FY 2023 FY 2024 FY 2023
Assets:

Current and other assets $ 2,650,290 $ 2,700,729 $ 1,428,351 $ 1,226,635 $ 4,078,641 $ 3,927,364 Capital assets 4,669,453 4,759,915 2,721,756 2,626,428 7,391,209 7,386,343 Total assets 7,319,743 7,460,644 4,150,107 3,853,063 11,469,850 11,313,707

Deferred outflows of resources:

Loss on refundings of debt 4,984 5,303 10,070 10,552 15,054 15,855 Pensions 496,056 564,766 67,910 60,072 563,966 624,838 Other postemployment benefits 112,108 134,807 15,042 28,005 127,150 162,812 Total deferred outflows of resources 613,148 704,876 93,022 98,629 706,170 803,505

Liabilities:

Current and other liabilities 333,239 328,234 177,888 165,677 511,127 493,911 Long-term liabilities 1,598,464 1,634,872 1,480,798 1,476,697 3,079,262 3,111,569 Net pension liability 2,748,816 2,857,795 345,065 346,446 3,093,881 3,204,241 Net OPEB liability 710,402 782,674 63,873 72,646 774,275 855,320 Total liabilities 5,390,921 5,603,575 2,067,624 2,061,466 7,458,545 7,665,041

Deferred inflows of resources:

Gain on refundings of debt 2,825 3,097 - - 2,825 3,097 Pensions 25,842 20,351 6,362 3,667 32,204 24,018 Other postemployment benefits 85,937 69,839 9,788 16,973 95,725 86,812 Rate stabilization reserve - - 50,000 - 50,000 - Leases 17,565 12,045 16,510 13,226 34,075 25,271 Public-private and public-public partnerships and
availability payment arrangement 91,620 97,347 - - 91,620 97,347 Total deferred inflows of resources 223,789 202,679 82,660 33,866 306,449 236,545

Net position:

Net investment in capital assets 3,517,578 3,635,710 1,315,188 1,240,108 4,832,766 4,875,818 Restricted 1,297,990 1,363,869 62,402 58,192 1,360,392 1,422,061 Unrestricted (2,497,387) (2,640,313) 715,255 558,060 (1,782,132) (2,082,253) Total net position $ 2,318,181 $ 2,359,266 $ 2,092,845 $ 1,856,360 $ 4,411,026 $ 4,215,626

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At June 30, 2024, the City reported positive balances in net position on a total basis. Net investment in capital assets (infrastructure, land, buildings, other improvements, vehicles, equipment, lease assets and SBITA less outstanding debt used to acquire assets and deferred inflows and outflows related to debt) of $4.833 billion comprises 109.56 percent of the City’s total net position. These capital assets facilitate providing services to the San José community, but are not liquid, and therefore not available for future spending.

During FY 2024, net investment in capital assets decreased by $43.1 million primarily due to the decreases of $118.1 million from governmental activities and the increase of $75.0 million from business-type activities.

A portion of the City’s net position, $1.360 billion or 30.84 percent, are subject to legal restrictions for their use, including $1.298 billion in governmental activities and $62.4 million in business-type activities. Of the total net position at June 30, 2024, a deficit balance of $1.782 billion or negative 40.40 percent represents unrestricted net position, which comprises a deficit balance of $2.497 billion for governmental activities, and a positive balance of $715.3 million for business-type activities. The primary factor contributing to the deficit in unrestricted net position is the City’s net pension and OPEB liabilities.

During FY 2024, the City’s total net position increased by $195.4 million. Notable changes in the statement of net position between June 30, 2024 and June 30, 2023 include:

Assets
● Current and other assets increased by $151.3 million or 3.85 percent due to a decrease by $50.4 million for governmental activities and an increase by $201.7 million for business-type activities. The decrease in governmental activities is mainly due to the decrease in cash and investments held with fiscal agent from higher spending on public safety and traffic projects. The increase in current assets for business- type activities is mainly due to higher cash and investments resulting from more revenue received through charges for services and capital contributions.
● Capital assets increased by $4.9 million compared to the prior fiscal year. Governmental capital assets decreased by $90.4 million and business-type capital assets increased by $95.3 million. The decrease in governmental capital assets resulted from depreciation expense of $247.3 million for major infrastructure and other assets and $2.1 million in net deletions, partially offset by additions to capital assets of $159.0 million, which included $78.5 million of additional capital projects in process, $25.7 million in vehicles and equipment, $23.9 million of contributed capital from donated infrastructure assets and $13.7 million from property acquisitions.
● Other additions include $11.5 million right-to-use assets: land, $1.9 million additions to improvements other than buildings, $1.9 million right-to-use assets: SBITA, $1.3 million right-to-use assets: buildings, $0.6 million right-to-use assets: equipment.
● The increase in business-type capital assets was primarily driven by $196.2 million in additions, mainly from the Airport and Wastewater Treatment Facility, offset by $96.5 million in depreciation and $4.4 million in net deletions.

Liabilities
● Total long-term liabilities decreased by $223.7 million to $6.947 billion at June 30, 2024, which represents a decrease by 3.12 percent compared to $7.171 billion at June 30, 2023. The primary factors leading to the decrease in long-term liabilities for governmental activities of $217.7 million was due to the decrease of net pension liability by $109.0 million, the net OPEB liability by $72.3 million, and the decrease of long-term obligations by $36.4 million. The primary factor leading to the decrease in long-term liabilities for business- type activities of $6.0 million was the result of an decrease of net pension liability by $1.4 million, and the net OPEB liability by $8.7 million, offset by the increase of long-term obligations by $4.1 million. 10 INTRODUCTORY

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● Net pension liability decreased by $110.4 million since the prior measurement date, primarily due an increase in actuarial estimate for differences between expected and actual experience, offset by the increase in the plans’ net position due to significantly improved investment performance. ● Net OPEB liability decreased by $81.0 million since the prior measurement date, primarily due to differences between expected and actual experience gain and changes in assumptions offset by an increase in the plans’ net position due to significantly improved investment performance. ● Current and other liabilities increased by $17.2 million or 3.49 percent due primarily to an increase in business-type activities. For business-type activities, current and other liabilities increased by $12.2 million, primarily due to an increase of $17.7 million in short-term notes payable, offset by a reduction of $9.2 million in unearned revenue. The increase in governmental activities of $5.0 million is mainly driven by a reduction of $14.9 million in unearned revenue and $20.1 million in short-term notes payable, offset by an increase of $34.1 million in accounts payable.

Deferred Outflows/Inflows of Resources
● Deferred outflows of resources decreased by $97.3 million to $706.2 million at June 30, 2024, which represents a decrease by 12.11 percent compared to $803.5 million at June 30, 2023. The primary factor leading to the decrease in deferred outflows of resources is the decrease in deferred outflows of resources related to pension of $60.9 million and OPEB of $35.7 million. ● Deferred inflows of resources increased by $69.9 million to $306.4 million at June 30, 2024, which represents an increase by 29.55 percent compared to $236.5 million at June 30, 2023. The increase of deferred inflows of resources was primarily due to the increase in deferred inflows of resources related to pension and OPEB of $17.1 million and a rate stabilization reserve of $50.0 million.

Net Position
● Unrestricted net position for governmental activities increased by $142.9 million or 5.41 percent with a deficit balance of $2.497 billion at June 30, 2024. The primary factors contributing to the deficit in unrestricted net position are the City’s net pension and OPEB liabilities. For business-type activities, unrestricted net position increased by $157.2 million or 28.17 percent with a positive balance of $715.3 million at June 30, 2024.

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Analysis of activities: The following table indicates the changes in net position for governmental and business-type activities:

Statement of Activities
For the Years Ended June 30, 2024 and 2023
(in thousands)
Governmental Activities Business-type Activities Totals FY 2024 FY 2023 FY 2024 FY 2023 FY 2024 FY 2023
Revenues:

Program revenues:

Fees, fines, and charges for services $ 463,541 $ 441,427 $ 1,118,032 $ 1,095,578 (a)$ 1,581,573 $ 1,537,005 Operating grants and contributions 158,094 252,204 12,341 32,690 170,435 284,894 Capital grants and contributions 171,249 117,371 23,688 14,270 194,937 131,641 General revenues:

Property and other taxes 619,705 591,517 - - 619,705 591,517 Real property transfer tax 56,280 56,280 - - 56,280 56,280 Utility 152,063 145,361 - - 152,063 145,361 Franchise 52,476 44,824 - - 52,476 44,824 Transient occupancy taxes 39,747 37,287 - - 39,747 37,287 Business taxes 86,072 89,627 - - 86,072 89,627 Sales taxes 333,411 343,472 - - 333,411 343,472 Unrestricted interest and investment income 108,066 20,666 51,172 16,043 159,238 36,709 Other revenue 46,499 43,521 (b) 401 520 (a) 46,900 44,041 Gain on sale of capital assets - 3,959 - - - 3,959 Total revenues 2,287,203 2,187,516 1,205,634 1,159,101 3,492,837 3,346,617

Expenses:

General government 216,898 159,778 - - 216,898 159,778 Public safety 780,342 735,061 - - 780,342 735,061 Community services 519,728 473,032 - - 519,728 473,032 Sanitation 223,287 225,979 - - 223,287 225,979 Capital maintenance 548,919 554,674 - - 548,919 554,674 Interest and fiscal charges 41,335 52,004 - - 41,335 52,004 San José Mineta International Airport - - 225,839 210,479 225,839 210,479 Wastewater Treatment System - - 244,530 233,947 244,530 233,947 Municipal Water System - - 62,907 58,219 62,907 58,219 Parking System - - 17,352 18,853 17,352 18,853 San José Clean Energy - - 416,300 389,416 416,300 389,416 Total expenses 2,330,509 2,200,528 966,928 910,914 3,297,437 3,111,442 Excess (deficiency) before transfers (43,306) (13,012) 238,706 248,187 195,400 235,175 Transfers 2,221 2,956 (2,221) (2,956) - -
Change in net position (41,085) (10,056) 236,485 245,231 195,400 235,175 Net position at beginning of year 2,359,266 2,369,322 1,856,360 1,611,129 4,215,626 3,980,451 Net position at end of year $ 2,318,181 $ 2,359,266 $ 2,092,845 $ 1,856,360 $ 4,411,026 $ 4,215,626

(a) Certain revenues from Airport for the year ended June 30, 2023 have been reclassified in order to be consistent with the presentation for the year ended June 30, 2024. These reclassifications had no effect on the change in net position for the year ended June 30, 2023. (b) Reclassified FY2023 State of California in-lieu balance of $1,041 to Other Revenue. 12 INTRODUCTORY

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Governmental activities: The change in net position for governmental activities decreased by $31.0 million during FY 2024 from a deficit of $10.1 million to a deficit of $41.1 million. Total expenses increased by $130.0 million and total revenues including transfers increased by $99.0 million. The major factors contributing to the decrease in net position in FY 2024 compared to FY 2023 are as follows:

Revenues
● Fees, fines, and charges for services increased by $22.1 million or 5.01 percent primarily due to a $11.6 million increase in the Convention and Cultural Facilities Funds, driven by higher facility rental revenue.

Additionally, there was a $10.2 million increase in the Integrated Waste Management Fund due to higher revenue from Recycle Plus Collection Charges. Furthermore, the Housing Fund experienced a $4.7 million decrease in revenue from lower collections of the Affordable Housing Impact fee, offset by a $4.1 million increase from Storm Drainage Service Use Charge Fund, attributed to higher revenue received from the large trash and stormwater capture devices program. ● Operating grants and contributions decreased by $94.1 million or 37.32 percent mainly due to a decrease in the General Fund, primarily attributed to a $105.9 million reduction in grant revenue collections from the American Rescue Plan Act.
● Capital grants and contributions increased by $53.9 million or 45.90 percent mainly due to higher contributions received from donated assets, from $14.5 million in FY 2023 to $39.5 million in FY 2024.

Additionally, the Measure B 2016 Pavement Fund for $18.1 million was reimbursed by Santa Clara Valley Transportation Authority and a new grant on Assembly Bill 178 - Vision Zero for $10.0 million was received by the Building and Structure Construction Tax Fund. ● Other revenues and transfers increased by $117.1 million or 8.49 percent mainly due to a $87.4 million increase in unrestricted interest and investment income, driven by higher interest income received, benefiting from the prevailing high interest rates. Additionally, revenue from General Secured Property Tax increased by $28.2 million due to increase in valuation from ownership changes.

Expenses
● Pension expense increased $30.1 million during FY 2024. Federated City Employees’ Retirement System (“FCERS”)’s pension expense increased by $15.6 million and the Police and Fire Department Retirement Plan (“PFDRP”)’s pension expense increased by $14.5 million primarily due to the investment earnings being higher than the expected return on assets, offset by the recognition of actuarial changes. ● OPEB expense increased by $4.8 million during FY 2024. FCERS’s OPEB expense increased by $3.3 million and PFDRP’s OPEB expense increased by $1.5 million primarily due to investment earnings being higher than the expected return on assets, offset by the recognition of actuarial changes. ● General government expenses increased by $57.1 million or 35.75 percent during FY 2024. This increase was driven by a $14.0 million increase in non-personnel and equipment expenses, along with a $10.0 million increase related to the Project HomeKey 2.0 initiative. Additionally, litigation claims grew by $10.1 million due to higher open claim reserves.
● Public safety expenses increased by $45.3 million or 6.16 percent primarily due to a $31.1 million increase in the General Fund, with the majority driven from higher public safety’s personnel services and workers’ compensation claims. Additionally, pension expenses increased by $13.5 million. ● Community services expenses increased by $46.7 million or 9.87 percent primarily due to higher operating expenses of $10.5 million in the Convention and Cultural Facilities Fund, a $10.0 million increase in loan reserves in the Low and Moderate Income Housing Asset Fund, a $9.0 million increase 13 FOR THE YEAR ENDED JUNE 30, 2024

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in Emergency and Housing Shelter project expenses in the Housing Activities Fund, and a $19.1 million increase in State grants for the HomeKey program passed through to the subrecipient. ● Sanitation expenses decreased by $2.7 million or 1.19 percent primarily due to reduced expenses in the Integrated Waste Management Fund. This included a $10.5 million decrease in professional and consultant services related to the Single-Family Recycle Plus Collection project. ● Capital maintenance expenses decreased by $5.8 million or 1.04 percent primarily due to a $19.3 million decrease in the Ice Center Expansion Bond Fund following the fund’s closure. Additionally, the Construction Excise Tax Fund experienced a $7.4 million decrease in expenses due to lower construction costs related to pavement maintenance. These decreases were partially offset by an $18.2 million increase in the Measure T Public Safety and Infrastructure Fund, which included construction expenses for pavement maintenance and bridge resurfacing.
● Interest and fiscal charges decreased by $10.7 million or 20.52 percent in FY 2024 primarily due to no debt service interest being paid from the General Fund in FY 2024, compared to $8.4 million paid in FY 2023. Additionally, two Community Facilities Development (CFD) programs were paid off in FY 2023, totaling $1.7 million, further contributing to the decrease.

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The chart below shows the primary components of governmental activities revenue sources for FY 2024.

Of the $2.289 billion in total revenues and transfers generated by governmental activities, 69.36 percent is attributable to four categories: property and other taxes (27.07 percent), fees, fines, and charges for services (20.25 percent), sales taxes (14.56 percent), capital grants and contributions (7.48 percent).

Governmental Activities
Revenues by Source
Fees, fines, and charges for
Fees, fines, and charges for
services: 20.25%
services: 20.25%
Fees, fines, and charges for
services: 20.25%
Operating grants & contributions: 6.91%
Operating grants & contributions: 6.91%Operating grants & contributions: 6.91% Capital grants & contributions: 7.48%
Capital grants & contributions: 7.48%Capital grants & contributions: 7.48% Property and other taxes: 27.07%
Property and other taxes: 27.07%Property and other taxes: 27.07% Real property transfer tax: 2.46%
Real property transfer tax: 2.46%Real property transfer tax: 2.46%Sales taxes: 14.56% Sales taxes: 14.56%Sales taxes: 14.56%
Utility taxes: 6.64%
Utility taxes: 6.64%Utility taxes: 6.64%
Franchise fees: 2.29%
Franchise fees: 2.29%Franchise fees: 2.29%
Transient occupancy taxes: 1.74%
Transient occupancy taxes: 1.74%Transient occupancy taxes: 1.74% Business taxes: 3.76%
Business taxes: 3.76%Business taxes: 3.76%
Other revenue: 6.74%
Other revenue: 6.74%Other revenue: 6.74%
Transfers: 0.10%
Transfers: 0.10%Transfers: 0.10%
15 FOR THE YEAR ENDED JUNE 30, 2024

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The chart below shows the major categories of FY 2024 expenses for governmental activities. Of the $2.331 billion in total expenses incurred by governmental activities, 88.91 percent is attributable to four categories:
public safety (33.48) percent, capital maintenance (23.55) percent, community services (22.30) percent, and sanitation (9.58) percent.

Governmental Activities
Expenses
General Government: 9.31%
Public Safety: 33.48%
Community Services: 22.30%
Sanitation: 9.58%
Capital Maintenance: 23.55%
Interest and fiscal charges: 1.78%
Business-type activities: Business-type activities net position increased by $236.5 million or 12.74 percent to $2.093 billion in FY 2024.

The notable components of the changes in net position for business-type activities in FY 2024 are:

Airport change in net position from current year activities showed an increase of $75.2 million in FY 2024 compared to an increase of $69.4 million in FY 2023. The increase in operating revenues, investment income, Customer Facility Charges (“CFC”) and capital contributions, along with a decrease in interest expense, were partially offset by the decrease in the ARP grant and Passenger Facility Charges (PFC) revenues, the increase in operating expenses, and the increase in net revenue sharing with participating airlines.

Net nonoperating revenues decreased $10.5 million mainly due to $18.9 million decrease in grant revenue and a $3.7 million increase in the participating airline net revenue sharing due as of June 30, 2024, partially offset by a $12.2 million increase in investment income and a $1.0 million increase in CFC revenues for debt service. Capital contributions increased by $5.1 million.

The Airport had a net operating income of $45.2 million, an increase of $11.1 million compared to prior year’s operating income of $34.1 million. Operating revenues increased by 11.57 percent from $199.1 million in FY 2023 to $222.1 million in FY 2024 mainly due to higher rental rates.

Operating expenses in FY 2024 increased by 7.25 percent or $12.0 million from $164.9 million in FY 2023 to $176.9 million in FY 2024 due to personnel and non-personnel costs resulting from higher contractual rates. 16 INTRODUCTORY

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Wastewater Treatment System net position increased by $61.6 million or 5.19 percent from $1.187 billion to $1.249 billion. The increase was primarily due to revenues exceeding expenses (before capital contributions) by $60.6 million. The largest portion of the net position, $991.2 million or 79.39 percent, was its net investment in capital assets (e.g. land, buildings, and infrastructure) less outstanding debt that was used to acquire those assets. Approximately $257.4 million, or 20.61 percent of the total net position, constitutes unrestricted net position, which may be used to finance day-to-day operations without constraints established by debt covenants or other legal requirements.

Operating revenues increased $10.6 million primarily due to higher contributions from the City of Santa Clara and the Tributary Agencies toward the Water Pollution Control Plant (“the Plant”) ongoing maintenance and replacement costs by $5.6 million, higher recycled-water revenue due to a recycled-water rate increase by $4.2 million.

Total operating expenses increased by $11.3 million compared to the prior fiscal year. The increase was mainly due to a net increase of $1.7 million in pension expense and other postemployment benefits expense, a $6.0 million increase in personal service costs, a $5.0 million increase in condition assessment expenses and capital support costs of the wastewater collection system, and a $0.8 million increase in capital asset depreciation expenses, offset by a $1.8 million decrease in the Plant’s program management costs.

Net nonoperating revenues increased by $12.4 million primarily due to a $10.4 million increase in fair value of investments, a $1.4 million increase in amortization of premium, $1.1 million bond issuance costs incurred only in the prior year, net of a $0.7 million decrease of investment income.

Municipal Water System net position increased by $16.2 million or 16.82 percent from $96.0 million to $112.2 million. Operating revenues of $72.4 million increased by $11.3 million or 18.57 percent due to increases in both user fee rates and additional consumption of potable and recycled water usage. Nonoperating revenues increased by $2.3 million mainly due to an increase of investment income and operating grants and in addition to an increase of $3.9 million in capital contributions. Operating expenses of $62.9 million increased by $4.7 million or 8.03 percent largely due to increases in wholesale water purchases, utility costs for pump stations, and personnel and benefit costs.

Parking System net position decreased by $0.3 million or 0.29 percent from $84.1 million to $83.8 million.

Operating revenues increased by $0.9 million or 5.95 percent from $15.0 million to $15.9 million. Operating expenses decreased by $1.5 million or 7.96 percent. Nonoperating revenues and expenses increased by $1.4 million or 200.84 percent. The increase of nonoperating revenues was primarily due to higher investment earnings during the current fiscal year.

San José Clean Energy (SJCE) net position increased by $83.8 million or 47.59 percent from $176.1 million to $259.9 million. Operating revenues decreased by $23.2 million or 4.51 percent from $515.5 million to $492.3 million due to a net increase in power sales of $8.0 million and an increase in other revenues of $18.7 million, offset by a deferred inflow set aside to establish a rate stabilization reserve of $50.0 million.

The rate stabilization reserve can be drawn on in years of high operational expenses, to stabilize net revenue performance allowing SJCE to better manage its financial position and compliance reporting without relying solely on near-term customer rate adjustments. Operating expenses increased by $27.2 million or 7.04 percent from $386.4 million to $413.6 million due to higher market prices in the California energy market.

As of June 30, 2024, SJCE serves approximately 350,000 customer accounts in San José with two electricity rate plans, as well as a special discount program, SJCARES, which was originally established for households that qualify for the California Alternate Rates for Energy (“CARE”) or the Family Electric Rate Assistance (“FERA”) state programs, and in fiscal year 2024 expanded to include residents living in affordable housing units and those deemed to be at significant risk of disconnection. These options provide customers with 17 FOR THE YEAR ENDED JUNE 30, 2024

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the ability to select the rate plan that best serves their financial needs while also providing access to service choices with renewable energy content that is greater than that of the electricity provided by PG&E.

Financial Analysis of the City’s Funds
As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.

As of June 30, 2024, the City’s governmental funds reported combined fund balances of $2.142 billion compared to $2.230 billion balances in FY 2023. The governmental fund balances are categorized as nonspendable, restricted, committed, assigned, or unassigned. ● $0.1 million consists of nonspendable fund balance related to advances and deposits long-term in nature that are not intended to convert into cash and do not represent currently available resources. ● $1.256 billion is reported as restricted fund balance that includes restrictions imposed by external parties or enabling legislation. This amount includes unspent bond proceeds, unspent grant revenues, and restricted tax revenues.
● $229.1 million is reported as committed fund balance that had been limited by formal Council action for a specific purpose.
● $527.7 million is reported as assigned fund balance that includes amounts that may be used for specific purposes, but do not meet the criteria to be classified as restricted or committed. ● $128.9 million is reported as unassigned fund balance that represents the residual classification for the City’s General Fund and San José Financing Authority Debt Service Fund and includes all spendable amounts not contained in the other classifications.

General Fund. The General Fund is the chief operating fund of the City. At June 30, 2024, the General Fund unassigned fund balance is $132.4 million or 19.61 percent of the $675.1 million total General Fund balance.

Comparing unassigned fund balance and total fund balance to total fund expenditures may be useful as a measure of the General Fund’s capacity to meet future obligations. At June 30, 2024, unassigned fund balance represents 9.89 percent of total General Fund expenditures of $1.339 billion, while total fund balance represents 50.43 percent of total General Fund expenditures. At June 30, 2023, the same measures were

10.17 percent and 53.91 percent, respectively.

The General Fund ending fund balance decreased by $9.9 million from $685.0 million to $675.1 million at June 30, 2024.

In FY 2024, General Fund revenues of $1.334 billion were $51.1 million or 3.69 percent lower than FY 2023 revenues of $1.385 billion. The general Secured Property Tax receipts growth of $22.2 million in FY 2024 primarily reflects an increase in assessed value due to changes in ownership or new construction.

Secured Property Tax collections were positively impacted by excess Educational Revenue Augmentation Fund (ERAF) revenue. Utility Tax collections increased by $6.7 million mainly due to the higher rates and also increased consumption of both electricity and gas. Investment income increased by $20.3 million due to rising interest rates, increase in fair value adjustment of investments, and higher cash balances. Franchise fees increased by $7.7 million due to PG&E changing the methodology for Franchise Fees remittance.

General Sales Tax receipts decreased by $10.1 million due to an decrease in merchandise that is subject to the tax. Business tax revenues decreased by $3.6 million mainly due to a decrease in General Business Tax collections over the past year. Operating grants and contributions decreased due to no funding received from the American Rescue Plan Act which is a reduction of $105.9 million versus prior year. Revenues in the Fees, 18 INTRODUCTORY

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Rates, and Charges category include various fees and charges levied to recover costs of services provided by several City departments, the largest of which are Parks, Recreation, and Neighborhood Services (“PRNS”) Department Fees. PRNS Department Fee revenue ended the year at $24.6 million, which is significantly above the FY 2023 collection level of $1.2 million. This large year over year increase in PRNS fee revenue is due to the continued reopening of PRNS programs.

FY 2024 General Fund expenditures of $1.339 billion were $68.1 million or 5.36 percent higher than FY 2023 expenditures of $1.271 billion. The increase was primarily due to an increase of $14 million in non-personal and equipment expenses, an increase of $10 million in Project Homekey 2.0, an increase of $14 million in personal services in Fire, an increase of $4 million in personal services in Public Works, and a combination of increases in personal and non-personal services, housing, and workers’ compensation claims for Police and Fire.

Housing Activities Fund. The City’s Housing Activities fund receives resources from the U.S. Department of Housing and Urban Development and the California Department of Housing and Community Development and, in FY 2024, COVID-19 related funding through the U. S. Treasury. At June 30, 2024, the fund’s loan receivable balance (net), which represents loans to developers of various affordable housing projects and first-time homebuyers, was $65.6 million. This balance includes loans to developers for various projects, including Ford and Monterey, Taylor Oaks Apartments, Donner Lofts, Japantown Seniors, The Metropolitan, Roundtable, Kings Crossing, Fourth Street Apartments, Peacock Commons, Archer Studios, Curtner Studios, Homesafe, Markham Plaza, Corde Terra Village Senior, Willow Glen Senior Housing, Leigh Avenue Senior Apartments, Second Street Studios, Kelsey Ayer Station, and Alum Rock Apartments.

Restricted fund balance increased by $1.1 million to $191.3 million as of June 30, 2024. The increase is primarily due to revenues from intergovernmental services of $58.7 million and investment and other revenues of $23.4 million exceeding expenditures for community services of $67.8 million. There was $12.6 million increase revenue primarily from the $7.9 million increase in grant revenue and $6.6 million increase in Interest Revenue due to higher interest rates and increase in fair value adjustment of investments.

Community services expenditures increased by $29.1 million or 75.10 percent compared to prior year due to higher spending on emergency shelters. In addition, $13.0 million was spent on capital outlay in the current year as compared to $23.0 million spent in the prior year.

Low and Moderate Income Housing Asset Fund. The Low and Moderate Income Housing Asset fund was created pursuant to the Redevelopment Dissolution Law to administer the housing assets and functions related to the Low and Moderate Income Housing Program retained by the City following the dissolution of the former Redevelopment Agency. At June 30, 2024, the fund’s loan receivable balance (net) was $246.7 million. This balance consists mainly of loans to developers for various projects including Almaden Family Apartments, Belovida Apartments, Brookwood Terrace, Cinnabar Commons, Corde Terra Village, Las Ventanas, Oak Tree Village, Pollard Plaza, Villas on the Park, Second Street Studios, The Metropolitan (South), Mariposa Place, Kelsey Ayer, and Quetzal Gardens. Restricted fund balance decreased by $9.1 million to $420.2 million from $429.3 million. The decrease is primarily due to higher community services expenditures in the current year compared to FY 2023.

Special Assessment Districts Fund. The Special Assessment Districts fund accounts for debt issuance and capital improvements related to the specific purposes of special assessment and community facilities districts located in different parts of the City. No special assessment and special tax bonds were outstanding as of June 30, 2024.

Restricted fund balance increased by $1.6 million from $30.9 million to $32.4 million as of June 30, 2024.

The total revenues of $14.4 million were over total expenditures of $2.6 million for FY 2024. The net 19 FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT
transfer amount of negative $10.3 million resulted in a $1.6 million change in fund balance. The decrease of expenditures for $2.0 million or 43.4 percent compared to the prior fiscal year was predominantly related to prior year principal payment of $3.5 million being paid off for the debt associated with the Silver Creek and Great Oaks - Route 85 projects.

City of San José Financing Authority Fund. The City’s Financing Authority Debt Service Fund accounts for debt activity related to lease revenue bonds and commercial paper notes, which serves as a mechanism for financing City public improvements and other eligible purposes. Total fund balance increased by $4.8 million from a deficit of $0.1 million to $4.7 million as of June 30, 2024. The increase was primarily due to the write-off of Golf Course Debt Service Fund and less debt service expenditures of the Commercial Paper Program in the current year compared to FY 2024.

Proprietary Funds. The City’s proprietary funds provide the same type of information found in the government- wide financial statements for business-type activities, but in more detail. At June 30, 2024, the unrestricted net position was $146.9 million for the Airport, $257.4 million for the Wastewater Treatment System, $27.1 million for the Municipal Water System, $25.8 million for the Parking System, and $258.1 million for the San José Clean Energy fund. Net position for proprietary funds increased from $1.856 billion at June 30, 2023 to $2.093 billion at June 30, 2024, resulting in an increase of $236.5 million or 12.74 percent.

Other aspects of proprietary fund activities are discussed in the business-type activities section above.

General Fund Budgetary Highlights
The City Charter requires the City Manager to submit balanced operating and capital budgets to the City Council prior to the beginning of a new fiscal year that begins each July 1 and ends on the following June 30.

Council approved the FY 2024 budget in June 2023.

During the year ended June 30, 2024, there was a $69.0 million increase in the budgeted revenues between the original and final amended operating budget for the General Fund. The increase in budgeted revenues was due to a $13.5 million increase in the Property Tax category and a $3 million increase in the Utility category, as well as $15.9 million increase across other various revenue categories , and $36.5 million increase in the budget for the Intergovernmental category.

Actual budgetary basis expenditures of $1.436 billion were $436.4 million less than the amended budget as of June 30, 2024, and $406.9 million less than the original budget due to planned expenditures not occurring in the year ended June 30, 2024. Personal Services expenditures for the year were $5.3 million below budgeted levels primarily due to vacancy savings. Some of the other unexpended expenditures include the Measure E Homeless Support, the Project Homekey 2.0, Fire Apparatus Replacement, and other miscellaneous projects.
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Capital Assets and Debt Administration
Capital Assets
The City’s capital assets, net of accumulated depreciation, for its governmental and business-type activities together amounted to $7.391 billion at June 30, 2024. This investment includes land, infrastructure, structures and improvements, vehicles, equipment, intangible assets, and construction in progress.

The City’s requirement to depreciate infrastructure capital assets results in recording a large non-cash depreciation expense each year that offsets additions to capital assets. For the year ended June 30, 2024, net capital assets increased by $4.9 million ($90.4 million decrease in governmental activities and $95.3 million increase in business-type activities) compared to net capital assets at June 30, 2023. The decrease of $90.4 million in governmental activities is primarily due to depreciation expense of $247.3 million and net deletions of $2.1 million. The decrease was offset by acquisitions of $159.0 million. The increase of $95.3 million in capital assets in the business-type activities resulted from depreciation expense of $96.5 million, and net deletions of $4.4 million, offset by additions of capital projects of $164.9 million, additions of $5.1 million in land, and additions of $26.2 million in other capital improvements.

Total construction in progress increased by $164.2 million from $905.4 million at June 30, 2023 to $1.07 billion at June 30, 2024. Construction in progress (“CIP”) for the governmental activities increased by $26.3 million primarily due to $78.5 million additions to CIP projects and $52.2 million net of projects being transferred into service. Major projects contributing to construction in progress include the Coyote Creek Trail, with a cost of $7.3 million, and the Police Department Training Center Relocation, with a cost of $6.0 million in FY 2024. Business-type activities contributed an increase of $137.9 million to the total CIP as additions to the Airport and the Wastewater Treatment System totaling $164.9 million were offset by $27.0 million projects that were completed and placed in service. Completed Airport projects include the Airport Accessibility Upgrade, Parking Access and Revenue Control system, Guadalupe Prototype Park-Dog Park.

The completed projects for the Wastewater Treatment System include Admin building roof replacement and Distributed Control System upgrades and replacement.

The City records infrastructure assets at historical cost in the government-wide financial statements and depreciates assets from acquisition date to the end of the current fiscal year. For governmental fund financial statements recording purposes, capital asset purchases are recorded as expenditures, rather than capitalizing and recording related depreciation. Capital assets, net of depreciation, for governmental and business-type activities in the government-wide financial statements are presented below to illustrate changes between June 30, 2024 and June 30, 2023 (in thousands):

Governmental activities Business-type activities Total 2024 2023 2024 2023 2024 2023

Land $ 582,575 $ 568,851 $ 143,048 $ 137,938 $ 725,623 $ 706,789 Intangible assets - - 13,340 12,882 13,340 12,882 Construction in progress 181,347 155,003 888,230 750,354 1,069,577 905,357 Buildings 837,044 853,365 913,216 954,279 1,750,260 1,807,644 Improvements, other than buildings 248,727 233,731 640,566 655,540 889,293 889,271 Infrastructure 2,730,506 2,868,497 - - 2,730,506 2,868,497 Furniture and fixtures, vehicles,
equipment 53,475 50,381 118,962 111,485 172,437 161,866 Right-to-use assets 22,260 13,842 2,328 790 24,588 14,632 SBITA 13,519 16,245 2,066 3,160 15,585 19,405 Total capital assets $ 4,669,453 $ 4,759,915 $ 2,721,756 $ 2,626,428 $ 7,391,209 $ 7,386,343

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ANNUAL COMPREHENSIVE FINANCIAL REPORT
Commitments outstanding as of June 30, 2024, related to governmental and business-type activities construction in progress totaled approximately $33.7 million and $222.8 million, respectively. Additional information about the City’s capital assets can be found in the Notes to Basic Financial Statements, Note III.D.

Net General Obligation Bonded Debt Limit
The City Charter limits bonded indebtedness for General Obligation bonds (principal only) to fifteen (15) percent of the total assessed valuation of all real and personal property within the City. The total assessed value of taxable property, provided by the County, for the FY 2024 tax roll was $254.1 billion, which results in a total debt limit of approximately $38.1 billion. As of June 30, 2024, the City had $628.2 million, or 1.65 percent, of General Obligation bond principal applicable to the debt limit. Accordingly, the debt margin is $37.5 billion.

General Obligation Bonds and Other Bond Ratings
The City’s General Obligation credit ratings are “Aa1” by Moody’s Investors Services Inc. (Moody’s), “AAA” by Fitch Ratings (Fitch), and “AA+” by S&P Global Ratings (S&P), all with a “Stable” outlook as of June 30, 2024. The City continues to be one of the highest rated large cities (statistics of population over 250,000) in California.

The Successor Agency to the Redevelopment Agency of the City of San José 2017 Tax Allocation Refunding Bonds Series A and A-T were upgraded by Fitch from “AA” to “AA+” and Series B from “AA-” to “AA” in October 2023. The upgrade was based on the resilience of each debt structure along with strong assessed value and tax increment revenue growth. In October 2024, Fitch made another upgrade for Series B subordinate tax allocation bonds from “AA” to “AA+”, due to strong pledged revenue growth and diminished risk of leveraging the senior lien through subordinate lien refunding. The outlook remained stable.

City of San José Financing Authority (CSJFA) Wastewater Revenue Bonds, Series 2022B credit rating was affirmed by KBRA with an “AAA” rating with stable outlook and Fitch assigned Review No Action in which the City maintained “AAA” ratings with stable outlook in November 2023. The ratings reflect the wastewater system’s strong debt coverage and cash position, and its independent legal ability to set rates.

City of San José Issuer’s Credit Rating – Moody’s maintained its credit opinion on the City of San José issuer’s rating of “Aa1” with stable outlook in December 2023, citing exceptionally vibrant and diverse economy and the City’s integration into the broader Bay Area.

San José Airport Revenue bonds maintained a credit rating of “A2” from Moody’s with a stable outlook in August 2023 and S&P re-affirmed its long-term rating of “A” with stable outlook in April 2024. Fitch affirmed its “A” rating with stable outlook and also affirmed “A-” underlying rating on the bank note associated with the Airport’s subordinated commercial paper (CP) notes in June 2024. The ratings reflect the Airport’s ongoing recovery in passenger traffic after COVID and its sound competitive position with a relatively stable market share.

SJCE was assigned a new issuer credit rating of “A2” by Moody’s with a stable outlook in May 2024 based on the strong service territory in the core of Silicon Valley with a good mix of residential and commercial customers, low opt-out rates, and strong support and integration with the City of San José. S&P assigned a new issuer credit rating of “A” with a stable outlook in June 2024 based on SJCE’s deep, diverse, and generally affluent customer base, highlighted by San José’s position in the heart of California’s Silicon Valley, with median household effective buying incomes that are 166% of U.S. levels. The rating was further supported by SJCE’s robust liquidity, with unrestricted reserves of $165 million as of June 30, 2023.

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As of June 30, 2024, the credit ratings and the outlook of the respective credit rating agencies for the City of San José Financing Authority (“Authority”), lease revenue bonds are set forth in the table below.

Series Moody’s S&P Fitch
2013B, 2020A, and 2021A Aa2 AA AA
2020B Aa3 AA AA-
2022A Aa3 AA AA
Rating Outlook Stable Stable Stable
As of June 30, 2024, the underlying credit ratings of the City of San José Airport Revenue Bonds were rated by Moody’s, S&P and Fitch: A2, A and A, respectively.

The Wastewater Revenue Bonds underlying credit ratings by S&P , Fitch, and KBRA: AAA, AAA, and AAA, respectively.

Outstanding Long-Term Debt
The City’s long-term debt service obligations include general obligation bonds, revenue bonds, lease revenue bonds and revenue notes. During the current fiscal year, the City’s outstanding long-term debt decreased by $52.1 million to $2.701 billion, comprising $1.265 billion of governmental activities and $1.436 billion of business-type activities.

The decrease of $56.8 million in governmental activities is due to $50.6 million of debt service payments, amortization of $6.2 million in premiums, and no new bond issuances.

The increase of $4.7 million in the business-type activities is primarily due to the issuance of Regional Wastewater Facility Revenue Notes in the amount of $40.0 million to finance the expenses associated with capital improvement of the San José-Santa Clara Regional Wastewater Facility.

This increase was offset by a decrease of $28.1 million in debt service payments and amortization of $7.2 million in premiums.

Additional information about the City’s long-term outstanding debt can be found in the Notes to Basic Financial Statements, Note III.F .
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Economic Factors and Next Year’s Budget
● The FY 2025 Adopted Budget includes a modest decrease to staffing levels to eliminate one-time basis positions. Overall, the level of staffing decreased by a net 54 positions, from 7,040 full-time equivalent positions in the FY 2024 Adopted Budget to 6,986 positions in the FY 2025 Proposed Budget. ● As reported in the GASB 67/68 Report as of June 30, 2024 prepared by the actuary for PFDRP , the net position of the Defined Benefit Pension Plan was 83.58 percent of the total pension liability. The total pension liability was $6.097 billion, and the fiduciary net position was $5.096 billion, resulting in a net pension liability of $1.001 billion. This actuarial information will be used to report pension amounts in the City’s FY 2025 basic financial statements. This report is for the use of the Retirement System, the City, and the auditors in preparing financial reports in accordance with applicable law and accounting requirements.
● As reported in the GASB 67/68 Report as of June 30, 2024 prepared by the actuary for FCERS, the net position of the Defined Benefit Pension Plan was 61.68 percent of the total pension liability. The total pension liability was $5.114 billion, and the fiduciary net position was $3.154 billion, resulting in a net pension liability of $1.960 billion. This actuarial information will be used to report pension amounts in the City’s FY 2025 basic financial statements. This report is for the use of the Retirement System, the City, and the auditors in preparing financial reports in accordance with applicable law and accounting requirements.
● As of June 30, 2024, the net position of PFDRP’s OPEB Plan was 37.83 percent of the total OPEB liability.

The actuary reported total OPEB liability for postemployment healthcare benefits was $909.9 million and the fiduciary net position was $344.2 million, resulting in a net OPEB liability of $565.7 million.

This actuarial information will be used to report OPEB amounts in the City’s FY 2025 basic financial statements. This report is for the use of the Retirement System, the City, and the auditors in preparing financial reports in accordance with applicable law and accounting requirements. ● As of June 30, 2024, the net position of the FCERS’s OPEB Plan was 56.67 percent of the total OPEB liability. The actuary reported total OPEB liability for postemployment healthcare benefits was $729.7 million and the fiduciary net position was $413.5 million, resulting in a net OPEB liability of $316.2 million. This actuarial information will be used to report OPEB amounts in the City’s FY 2025 basic financial statements. This report is for the use of the Retirement System, the City, and the auditors in preparing financial reports in accordance with applicable law and accounting requirements. ● For FY 2025, the City’s contribution rates and amounts for pension benefits and postemployment healthcare benefits are as follows (in thousands):

PFDRP¹ FCERS¹
Contribution Rates
Police
Tier 1
Police
Tier 2
Fire
Tier 1
Fire
Tier 2 Tier 1 Tier 2
Retirement Pension $ 101,704 ² 13.65% $ 89,336 ² 14.90% 18.63% 8.73%

Postemployment Healthcare
Benefits $ 17,976 - $ 11,917 - 4.53% 4.53%

¹ The rates are the Retirement Board adopted rates based on the June 30, 2023, actuarial valuations. ² PFDRP Tier 1 pension contributions are discounted because the City prefunded those amounts in FY 2025. 24 INTRODUCTORY

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Forward-Looking Statements and Requests for Information Forward-Looking Statements
When used in this ACFR, the words or phrases “will likely result, ” “are expected to, ” “will continue, ” “is “anticipated”, “estimate, ” “project, ” “forecast, ” “expect, ” “intend” and similar expressions identify “forward- looking statements”, but are not the exclusive means of identifying forward-looking statements in the ACFR.

Such statements are subject to risks and uncertainties that could cause actual results to differ materially from those contemplated in such forward-looking statements. Any forecast is subject to such uncertainties.

Inevitably, some assumptions used to develop the forecasts will not be realized and unanticipated events and circumstances may occur. Therefore, there are likely to be differences between forecasts and actual results, and those differences may be material.

Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this ACFR. The City undertakes no obligation to revise or update any forward-looking statements to reflect any event or circumstance that may arise after the date of the ACFR.

Requests for Information
This financial report is designed to provide our residents, taxpayers, customers, investors, and creditors with a general overview of the City’s finances. All summaries of documents contained in this ACFR are made subject to the provisions of such documents and do not purport to be complete statements of any or all such provisions.

Each reference in this ACFR to a document is qualified in its entirety by reference to such document, which is on file with the City.

Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Director of Finance, 200 East Santa Clara Street, San José, California 95113. Requests for documents may be directed to the City department designated in the ACFR as the holder of a particular document or to the Director of Finance. This report can also be found online at https:/ /www.sanjoseca.gov/ your-government/departments/finance/reports.

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Basic Financial
Statements
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City of San José
Statement of Net Position
June 30, 2024
($000’s)

Governmental
Activities
Business-Type
Activities Total
ASSETS
Equity in pooled cash and investments held in City Treasury $ 1,653,363 1,058,052 2,711,415 Receivables (net of allowances for uncollectibles) 193,835 127,523 321,358 Prepaid expenses, advances and deposits 316 10,708 11,024 Inventories 1,629 707 2,336
Leases receivable 19,451 17,390 36,841
Public-private and public-public partnerships and availability payment arrangement receivable 100,011 - 100,011 Loans receivable (net of allowances for uncollectibles) 320,231 3,000 323,231 Restricted assets:

Equity in pooled cash and investments held in City Treasury 129,435 109,609 239,044 Cash and investments held with fiscal agent 163,989 94,153 258,142 Other cash and investments 14,024 - 14,024
Receivables (net of allowances for uncollectibles) - 5,078 5,078 Other assets - 27 27
Other assets 54,006 269 54,275
Net other postemployment benefits asset - 1,835 1,835 Capital assets (net of accumulated depreciation):

Nondepreciable 763,922 1,044,160 1,808,082
Depreciable 3,905,531 1,677,596 5,583,127
Total assets 7,319,743 4,150,107 11,469,850

DEFERRED OUTFLOWS OF RESOURCES
Loss on refundings of debt 4,984 10,070 15,054
Pensions 496,056 67,910 563,966
Other postemployment benefits 112,108 15,042 127,150 Total deferred outflows of resources 613,148 93,022 706,170

LIABILITIES
Accounts payable 157,666 114,849 272,515
Accrued salaries, wages and payroll taxes 33,753 3,660 37,413 Interest payable 10,492 17,125 27,617
Due to outside agencies 486 - 486
Short-term notes payable 5,967 27,728 33,695
Unearned revenue 63,135 8,493 71,628
Advances, deposits, and reimbursable credits 8,685 6,033 14,718 Other liabilities 53,055 - 53,055
Long-term obligations:

Due within one year 169,893 50,767 220,660
Due in more than one year:

Net pension liability 2,748,816 345,065 3,093,881
Net other postemployment benefits liability 710,402 63,873 774,275 Other long-term obligations 1,428,571 1,430,031 2,858,602 Total liabilities 5,390,921 2,067,624 7,458,545

DEFERRED INFLOWS OF RESOURCES
Gain on refundings of debt 2,825 - 2,825
Pensions 25,842 6,362 32,204
Other postemployment benefits 85,937 9,788 95,725
Rate stabilization reserve - 50,000 50,000
Leases 17,565 16,510 34,075
Public-private and public-public partnerships and availability payment arrangement 91,620 - 91,620 Total deferred inflows of resources 223,789 82,660 306,449

NET POSITION
Net investment in capital assets 3,517,578 1,315,188 4,832,766 Restricted for:

Debt service 45,701 27,948 73,649
Capital projects 576,930 32,619 609,549
Community services 672,587 - 672,587
Public safety 2,772 - 2,772
Net other postemployment benefits asset - 1,835 1,835 Unrestricted (deficit) (2,497,387) 715,255 (1,782,132) Total net position $ 2,318,181 2,092,845 4,411,026
The Notes to Basic Financial Statements are an integral part of this statement. 28 INTRODUCTORY

SECTION
FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT

FINANCIAL

SECTION
City of San José
Statement of Activities
For the Year Ended June 30, 2024
($000’s)
Program Revenues
Net (Expense) Revenue and
Changes in Net Position
Functions/Programs Expenses
Fees, Fines,
and Charges
for Services
Operating
Grants and
Contributions
Capital
Grants and
Contributions
Governmental
Activities
Business -
Type
Activities Total

Governmental activities:

General government $ 216,898 10,081 4,754 - (202,063) - (202,063) Public safety 780,342 36,883 20,471 - (722,988) - (722,988) Community services 519,728 155,303 85,355 - (279,070) - (279,070) Sanitation 223,287 226,499 2,602 - 5,814 - 5,814 Capital maintenance 548,919 34,775 44,912 171,249 (297,983) - (297,983) Interest and fiscal charges 41,335 - - - (41,335) - (41,335) Total governmental
activities 2,330,509 463,541 158,094 171,249 (1,537,625) - (1,537,625) Business -Type activities:

San José Mineta International
Airport 225,839 254,617 10,315 17,291 - 56,384 56,384 Wastewater Treatment
System 244,530 282,845 - 2,395 - 40,710 40,710 Municipal Water System 62,907 72,377 1,271 4,002 - 14,743 14,743 Parking System 17,352 15,931 - - - (1,421) (1,421) San José Clean Energy 416,300 492,262 755 - - 76,717 76,717 Total business-type
activities 966,928 1,118,032 12,341 23,688 - 187,133 187,133 Total $ 3,297,437 1,581,573 170,435 194,937 (1,537,625) 187,133 (1,350,492)

General revenues:

Taxes and franchise fees:

Property and other taxes $ 619,705 - 619,705
Real property transfer tax 56,280 - 56,280
Utility 152,063 - 152,063
Franchise 52,476 - 52,476
Transient occupancy 39,747 - 39,747
Business taxes 86,072 - 86,072
Sales taxes 333,411 - 333,411
Unrestricted interest and investment income 108,066 51,172 159,238 Other revenue 46,499 401 46,900
Transfers 2,221 (2,221) -

Total general revenues and transfers 1,496,540 49,352 1,545,892

Change in net position (41,085) 236,485 195,400
Net position - beginning 2,359,266 1,856,360 4,215,626 Net position - ending $ 2,318,181 2,092,845 4,411,026 The Notes to Basic Financial Statements are an integral part of this statement. 29 FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT
City of San José
Balance Sheet
Governmental Funds
June 30, 2024
($000’s)
General Fund
Housing
Activities
Low and
Moderate
Income
Housing Asset

ASSETS
Equity in pooled cash and investments held in City Treasury $ 699,635 148,959 129,346 Receivables (net of allowance for uncollectibles) 109,756 14,851 1,084 Due from other funds 3,568 - -
Loans receivables (net of allowance for uncollectibles) 6,035 65,552 246,658 Advances and deposits 55 - -
Restricted assets:

Equity in pooled cash and investments held in City Treasury 1,459 25,633 - Cash and investments held with fiscal agent - - - Other cash and investments 12 - -
Leases receivable 19,451 - -
Public-private and public-public partnerships and availability payment arrangement receivable 5,293 - -
Other assets - 2,300 49,776
Total assets 845,264 257,295 426,864

LIABILITIES
Accounts payable 54,338 9,402 3,659
Accrued salaries, wages, and payroll taxes 29,172 155 179 Due to other funds - - -
Due to outside agencies 373 - -
Short-term notes payable - - -
Unearned revenue 12,704 35,623 -
Advances, deposits, and reimbursable credits 170 - - Other liabilities 47,920 - -
Total liabilities 144,677 45,180 3,838

DEFERRED INFLOWS OF RESOURCES
Unavailable revenue 3,019 20,862 2,862
Leases 17,565 - -
Public-private and public-public partnerships and availability payment arrangement 4,889 - -
Total deferred inflows of resources 25,473 20,862 2,862

FUND BALANCES
Nonspendable 55 - -
Restricted 300 191,253 420,164
Committed 108,515 - -
Assigned 433,870 - -
Unassigned 132,374 - -
Total fund balances 675,114 191,253 420,164
Total liabilities, deferred inflows of resources and fund balances $ 845,264 257,295 426,864

The Notes to Basic Financial Statements are an integral part of this statement. 30 INTRODUCTORY

SECTION
FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT

FINANCIAL

SECTION

Special
Assessment
Districts
San José
Financing
Authority
Debt Service
Nonmajor
Governmental
Funds
Total
Governmental
Funds

- 472 654,405 1,632,817
2,235 - 65,638 193,564
- - 2,277 5,845
- - 1,986 320,231
5 - 256 316

33,409 - 68,934 129,435
- 10,346 153,643 163,989
- - 13,469 13,481
- - - 19,451
- - 94,718 100,011

- - 1,930 54,006
35,649 10,818 1,057,256 2,633,146

1,340 - 87,923 156,662
- - 3,586 33,092
- - 5,845 5,845
- 113 - 486
- 5,967 - 5,967
- - 14,808 63,135
1,578 - 6,937 8,685
317 - 4,816 53,053
3,235 6,080 123,915 326,925

- - 28,104 54,847
- - - 17,565
- - 86,731 91,620

- - 114,835 164,032

- - - 55
32,414 8,228 604,082 1,256,441
- - 120,612 229,127
- - 93,832 527,702
- (3,490) (20) 128,864
32,414 4,738 818,506 2,142,189
35,649 10,818 1,057,256 2,633,146

31 FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT
City of San José
Reconciliation of the Governmental Funds Balance Sheet
to the Statement of Net Position
June 30, 2024
($000’s)
Total fund balances-governmental funds (page 30) $ 2,142,189

Amounts reported for governmental activities in the statement of net position are different because:

Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds. These assets consist of:

Land $ 582,575
Construction in progress 181,347
Infrastructure assets 11,658,032
Other capital assets 2,282,527
Lease assets 28,484
Subscription-based information technology arrangement assets 22,135 Accumulated depreciation (10,090,540)
Total capital assets 4,664,560

Long-term receivables are not available to pay for current period expenditures and, therefore, are reported as deferred inflows of resources in governmental funds. 54,847

Gain/loss on refundings of debt are reported as deferred inflows/outflows of resources and are not financial resources, therefore are not reported in the funds. Such costs are capitalized and amortized over the life of the corresponding bonds for purposes of the statement of net position. 2,159

Interest payable on long-term debt does not require the use of current financial resources and, therefore, interest payable is generally not accrued as a liability in the balance sheet of governmental funds. (10,482)

Internal service funds are used by management to charge the cost of public works support, employee benefits, and vehicle maintenance and operations to individual funds. The assets and liabilities are included in governmental activities in the statement of net position. 21,174

Long-term obligations are not due and payable in the current period and therefore are not reported in the funds. Those liabilities consist of:

Bonds, lease and subscription-based information technology arrangement payables $ (1,301,071) Accrued vacation, sick leave and compensatory time (90,262) Estimated liability for self-insurance (196,509)
Other (5,591)
Total long-term obligations (1,593,433)

Net pension liability and pension related deferred outflows and inflows of resources are not due in the current period and therefore are not reported in the funds. These amounts consist of:

Net pension liability $ (2,748,816)
Deferred outflows of resources 496,056
Deferred inflows of resources (25,842)
Total pension related balances (2,278,602)

Other postemployment benefits liability and related deferred outflows and inflows of resources are not due in the current period and therefore are not reported in the funds. These amounts consist of:

Net other postemployment benefits liability $ (710,402) Deferred outflows of resources 112,108
Deferred inflows of resources (85,937)
Total other postemployment benefits related balances (684,231)

Net position of governmental activities (page 27) $ 2,318,181

The Notes to Basic Financial Statements are an integral part of this statement.

FOR THE YEAR ENDED JUNE 30, 2024 32

33 FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT
City of San José
Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds
For the Year Ended June 30, 2024
($000’s)
General Fund Housing Activities
Low and
Moderate Income
Housing Asset

REVENUES
Taxes and special assessments $ 832,233 - -
Sales taxes 333,411 - -
Licenses, permits, and fines 36,014 - -
Intergovernmental 28,577 58,736 -
Charges for current services 24,585 - -
Rent - - -
Investment income 30,822 9,354 19,063
Other revenue 48,002 14,048 -
Total revenues 1,333,644 82,138 19,063

EXPENDITURES
Current:

General government 206,020 - -
Public safety 785,543 - -
Community services 211,705 67,784 27,420
Sanitation 5,244 - -
Capital maintenance 90,571 - -
Capital outlay 28,652 12,951 501
Debt service:

Principal 9,520 - -
Interest and fiscal charges 1,500 - -
Total expenditures 1,338,755 80,735 27,921
Excess (deficiency) of revenues over (under)
expenditures (5,111) 1,403 (8,858)

OTHER FINANCING SOURCES (USES)
Inception of lease 13,417 - -
Inception of subscription-based information technology arrangement 1,555 - - Proceeds from sale of capital assets 68 - -
Transfers in 11,510 - -
Transfers out (31,367) (267) (322)
Total other financing sources (uses) (4,817) (267) (322) Net change in fund balances (9,928) 1,136 (9,180)

FUND BALANCE
Beginning of year 685,042 190,117 429,344
End of year $ 675,114 191,253 420,164

The Notes to Basic Financial Statements are an integral part of this statement. 34 INTRODUCTORY

SECTION
FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT

FINANCIAL

SECTION

Special
Assessment
Districts
San José
Financing Authority
Debt Service
Nonmajor
Governmental
Funds
Total
Governmental
Funds

12,409 - 175,365 1,020,007
- - - 333,411
- - - 36,014
- - 138,171 225,484
- - 290,358 314,943
- - 58,820 58,820
1,946 496 45,259 106,940
44 1,342 60,533 123,969
14,399 1,838 768,506 2,219,588

- - 114 206,134
- - 2,700 788,243
- - 183,146 490,055
- - 220,700 225,944
2,567 - 290,772 383,910
- - 74,765 116,869

- 24,790 25,806 60,116
1 21,770 24,392 47,663
2,568 46,560 822,395 2,318,934

11,831 (44,722) (53,889) (99,346)

- - - 13,417
- - - 1,555
- - - 68
- 50,529 41,659 103,698
(10,280) (952) (63,590) (106,778)
(10,280) 49,577 (21,931) 11,960
1,551 4,855 (75,820) (87,386)

30,863 (117) 894,326 2,229,575
32,414 4,738 818,506 2,142,189

35 FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT
City of San José
Reconciliation of the Changes in Fund Balances of Governmental Funds to the Statement of Activities
For the Year Ended June 30, 2024
($000’s)
Net change in fund balances - total governmental funds (page 34) $ (87,386)

Amounts reported for governmental activities in the statement of activities are different because:

Capital outlays are reported as expenditures in governmental funds. However, in the statement of activities, the cost of capital assets is allocated over their estimated useful lives as depreciation expense. In the current period, these amounts are:

Capital outlay $ 116,869
Depreciation expense (245,893)
Excess of depreciation expense over capital outlay (129,024)

The net effect of various miscellaneous transactions involving capital assets (i.e. sales, retirements, trade-ins, donations)

Donated assets and other additions $ 39,537
Proceeds from sale of capital assets (68)
Loss on disposal of assets (2,070)
37,399
Amortization of deferred inflows of resources and deferred outflows of resources resulting from the deferred refunding gains and losses. (47)

Repayment of long-term obligation principal is reported as an expenditure in governmental funds and, thus, has the effect of reducing fund balance because current financial resources have been used. For the government- wide statements, however, the principal payments reduce the liabilities in the statement of net position and do not result in an expense in the statement of activities. The City’s long-term obligations were reduced because principal payments were made to bondholders. 50,570

Accrued interest payable on long-term debt is reported in the government-wide statement of activities, but does not require the use of current financial resources. Amortization of bond premiums and discounts should be expensed as a component of interest expense on the statement of activities. This amount represents the change in accrued interest payable and the amortization of bond premiums and discounts not reported in governmental funds.

Decrease in accrued interest payable $ 186
Amortization of premiums and discounts on bonds issued 6,190 Total net interest expense and amortization of discount/premium 6,376

Because some revenues will not be collected for several months after the City’s fiscal year end, they are not considered “available revenues” and are reported as deferred inflows of resources in the governmental funds. 26,946

Internal service funds are used by management to charge the cost of public works support, employee benefits, and vehicle maintenance and operations to individual funds. The change in net position is included in governmental activities in the statement of activities. 5,619

Some items 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. These activities consist of:

Net increase in vacation, sick leave, and compensatory time $ (5,032) Net increase in estimated liability for self-insurance (9,309) Net increase in other liabilities (25)
Net increase in lease payable (9,061)
Net decrease in subscription-based information technology arrangement payable 3,636 Total expenditures (19,791)

Changes to net pension liability and pension related deferred outflows and inflows of resources do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. 34,778

Changes to net other postemployment benefits liability and related deferred outflows and inflows of resources do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. 33,475

Change in net position of governmental activities (page 28) $ (41,085)

The Notes To Basic Financial Statements are an integral part of this statement.

FOR THE YEAR ENDED JUNE 30, 2024 36

37 FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT
City of San José
Statement of Fund Net Position
Proprietary Funds
June 30, 2024
($000’s)
Enterprise Funds

San José
Mineta
International
Airport
Wastewater
Treatment
System
Municipal
Water
System
Parking
System
San José
Clean Energy Total
Internal
Service
Funds
ASSETS
Current assets:

Equity in pooled cash and investments held in City
Treasury $ 256,238 508,695 37,485 34,284 221,350 1,058,052 20,546 Receivables (net of allowance for uncollectibles) 18,426 11,501 17,557 340 79,699 127,523 271 Lease receivable 2,956 - - - - 2,956 - Concession loan receivable 280 - - - - 280 - Prepaid expenses, advances and deposits 279 - - - 10,346 10,625 - Inventories - 707 - - - 707 1,629
Total unrestricted current assets 278,179 520,903 55,042 34,624 311,395 1,200,143 22,446

Restricted assets:

Equity in pooled cash and investments held in City
Treasury 57,243 - - 2,366 50,000 109,609 - Cash and investments held with fiscal agent 94,152 1 - - - 94,153 - Other cash and investments - - - - - - 543 Receivables (net of allowances for uncollectibles) 5,078 - - - - 5,078 - Prepaid expenses, advances and deposits 7 - - - - 7 - Current portion of prepaid bond insurance 20 - - - - 20 - Total restricted current assets 156,500 1 - 2,366 50,000 208,867 543 Total current assets 434,679 520,904 55,042 36,990 361,395 1,409,010 22,989

Noncurrent assets:

Prepaid bond insurance (net of accumulated
amortization) 269 - - - - 269 -
Concession loan receivable 2,720 - - - - 2,720 - Advances and deposits 83 - - - - 83 - Lease receivable 8,380 - - 6,054 - 14,434 - Net other postemployment benefits asset - - - - 1,835 1,835 - Capital assets (net of accumulated depreciation): - Nondepreciable 169,596 823,526 21,141 29,897 - 1,044,160 - Depreciable 1,051,726 533,510 65,705 26,295 360 1,677,596 4,893 Total noncurrent assets 1,232,774 1,357,036 86,846 62,246 2,195 2,741,097 4,893 Total assets 1,667,453 1,877,940 141,888 99,236 363,590 4,150,107 27,882

DEFERRED OUTFLOWS OF RESOURCES
Loss on refundings of debt 10,070 - - - - 10,070 - Pensions 16,941 40,992 4,717 1,117 4,143 67,910 - Other postemployment benefits 3,167 8,195 1,796 477 1,407 15,042 - Total deferred outflows of resources 30,178 49,187 6,513 1,594 5,550 93,022 - (Continued)
The Notes to Basic Financial Statements are an integral part of this statement. 38 INTRODUCTORY

SECTION
FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT

FINANCIAL

SECTION
City of San José
Statement of Fund Net Position (Continued)
Proprietary Funds
June 30, 2024
($000’s)
Enterprise Funds

San José
Mineta
International
Airport
Wastewater
Treatment
System
Municipal
Water
System
Parking
System
San José
Clean Energy Total
Internal
Service
Funds

LIABILITIES
Current liabilities:

Accounts payable $ 17,108 38,153 6,535 1,213 51,687 114,696 1,004 Accrued salaries, wages, and payroll taxes 936 2,134 254 66 270 3,660 661 Interest payable 40 2,429 8 - - 2,477 10
Short-term notes payable 27,728 - - - - 27,728 - Accrued vacation, sick leave and compensatory time 2,468 5,226 652 182 586 9,114 - Estimated liability for self-insurance 634 392 204 - - 1,230 - Advances and deposits payable 2,716 - - 85 1,378 4,179 - Leases payable 97 - 541 134 - 772 -
Subscription-based information technology
arrangement payable 846 18 - - 190 1,054 40
Current portion of bonds payable, net - 5,247 - - - 5,247 - Other liabilities - - - - - - 2
Unearned revenue 5,180 - - - 3,285 8,465 -
Total current liabilities unrestricted 57,753 53,599 8,194 1,680 57,396 178,622 1,717

Current liabilities payable from restricted assets:

Accounts payable and accrued liabilities 153 - - - - 153 - Interest payable 14,648 - - - - 14,648 -
Unearned revenue 28 - - - - 28 -
Current portion of bonds payable, net 33,350 - - - - 33,350 - Total current liabilities payable from restricted
assets 48,179 - - - - 48,179 -
Total current liabilities 105,932 53,599 8,194 1,680 57,396 226,801 1,717

Noncurrent liabilities:

Accrued vacation, sick leave and compensatory time 101 337 - - - 438 4,853 Leases payable - - 1,205 435 - 1,640 -
Subscription-based information technology
arrangement payable 747 117 - - 202 1,066 138 Estimated liability for self-insurance 792 1,213 631 - - 2,636 - Advances, deposits, and reimbursable credits - - 1,854 - - 1,854 - Pollution remediation obligation - 27,051 - - - 27,051 - Notes payable - 40,098 - - - 40,098 -
Bonds payable (net of premium) 1,066,880 290,222 - - - 1,357,102 - Net pension liability 105,134 213,402 18,411 7,606 512 345,065 - Net other postemployment benefits liability 15,607 43,241 4,095 930 - 63,873 - Total noncurrent liabilities 1,189,261 615,681 26,196 8,971 714 1,840,823 4,991 Total liabilities 1,295,193 669,280 34,390 10,651 58,110 2,067,624 6,708

DEFERRED INFLOWS OF RESOURCES
Pensions 1,538 3,951 435 105 333 6,362 -
Other postemployment benefits 1,791 5,340 1,419 394 844 9,788 - Leases 10,668 - - 5,842 - 16,510 -
Rate stabilization reserve - - - - 50,000 50,000 - Total deferred inflows of resources 13,997 9,291 1,854 6,341 51,177 82,660 -

NET POSITION
Net investment in capital assets 183,326 991,171 85,100 55,623 (32) 1,315,188 4,715 Restricted for net other postemployment benefits
asset - - - - 1,835 1,835 -
Restricted for debt service 25,582 - - 2,366 - 27,948 - Restricted for capital projects and other agreements 32,619 - - - - 32,619 - Unrestricted 146,914 257,385 27,057 25,849 258,050 715,255 16,459 Total net position $ 388,441 1,248,556 112,157 83,838 259,853 2,092,845 21,174 39 FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT
City of San José
Statement of Revenues, Expenses and Changes in Fund Net Position Proprietary Funds
For the Year Ended June 30, 2024
($000’s)
Enterprise Funds

San José
Mineta
International
Airport
Wastewater
Treatment
System
Municipal
Water
System
Parking
System
San José
Clean Energy Total
Internal
Service
Funds

OPERATING REVENUES
Charges for services $ 67,268 213,593 72,377 15,864 521,285 890,387 176,304 Rate stabilization reserve - - - - (50,000) (50,000) - Rentals and concessions 130,694 20,925 - - - 151,619 - Customer transportation fees 7,429 - - - - 7,429 - Service connection, engineering and
inspection - 2,105 - - - 2,105 -
Contributions from participating
agencies - 45,934 - - - 45,934 -
Other 16,747 - - 67 20,977 37,791 -
Total operating revenues 222,138 282,557 72,377 15,931 492,262 1,085,265 176,304

OPERATING EXPENSES
Operations and maintenance 94,557 161,571 53,579 5,415 397,487 712,609 175,646 General and administrative 25,183 35,660 5,749 9,083 15,908 91,583 - Depreciation 57,192 33,631 3,567 1,907 180 96,477 1,420 Materials and supplies - 636 - 947 - 1,583 - Total operating expenses 176,932 231,498 62,895 17,352 413,575 902,252 177,066 Operating income (loss) 45,206 51,059 9,482 (1,421) 78,687 183,013 (762)

NONOPERATING REVENUES
(EXPENSES)
Passenger facility charges 22,484 - - - - 22,484 - Customer facility charges 9,995 - - - - 9,995 - Operating grants 10,315 - 1,271 - 755 12,341 - Investment income 17,751 22,298 1,552 2,142 7,429 51,172 1,126 Lease interest income 373 - - - - 373 - Interest expense (39,805) (12,973) - - (2,725) (55,503) - Participating airline net revenue
sharing (8,790) - - - - (8,790) -
Loss on disposal of capital assets - (60) (12) - - (72) - Other revenues (expenses), net (312) - 13 15 - (284) (46) Land and building rental - 289 - - - 289 - Net nonoperating revenues
(expenses) 12,011 9,554 2,824 2,157 5,459 32,005 1,080 Income before capital
contributions and transfers 57,217 60,613 12,306 736 84,146 215,018 318

Capital contributions 17,291 2,395 4,002 - - 23,688 - Transfers in 716 - - - - 716 5,625
Transfers out - (1,432) (162) (980) (363) (2,937) (324)

Changes in net position 75,224 61,576 16,146 (244) 83,783 236,485 5,619

Net position - beginning 313,217 1,186,980 96,011 84,082 176,070 1,856,360 15,555 Net position - ending $ 388,441 1,248,556 112,157 83,838 259,853 2,092,845 21,174

The Notes to Basic Financial Statements are an integral part of this statement.

FOR THE YEAR ENDED JUNE 30, 2024 40

41 FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT
City of San José
Statement of Cash Flows
Proprietary Funds
For the Year Ended June 30, 2024
($000’s)
Enterprise Funds

San José
Mineta
International
Airport
Wastewater
Treatment
System
Municipal
Water System
Parking
System
San José
Clean Energy Total
Internal
Service
Funds

CASH FLOWS FROM OPERATING

ACTIVITIES
Receipts from customers and users $ 219,728 276,588 68,796 15,936 521,679 1,102,727 - Cash received from interfund services
provided - - - - - - 176,541
Payments to suppliers (53,165) (104,881) (43,868) (11,287) (398,803) (612,004) (141,403) Payments for employees (42,115) (108,616) (13,211) (3,282) (11,543) (178,767) (33,884) Payments for City services (26,715) (29,206) - - - (55,921) - Payments to airlines (11,701) - - - - (11,701) - Other receipts (payments) (199) 31,052 - - 17,113 47,966 - Net cash provided by operating
activities 85,833 64,937 11,717 1,367 128,446 292,300 1,254

CASH FLOWS FROM

NONCAPITAL FINANCING

ACTIVITIES
Transfers from other funds 716 - - - - 716 5,625 Transfers to other funds - (1,432) (162) (980) (363) (2,937) (324) Operating grants 10,292 - 1,271 - 755 12,318 - Advances and deposits - - 136 20 (8,313) (8,157) - Loans (1,073) - - - - (1,073) -
Net cash provided by (used in)
noncapital financing activities 9,935 (1,432) 1,245 (960) (7,921) 867 5,301

CASH FLOWS FROM CAPITAL

AND RELATED FINANCING

ACTIVITIES
Passenger facility charges received 22,813 - - - - 22,813 - Customer facility charges received 9,907 - - - - 9,907 - Capital grants received 17,049 299 - - - 17,348 - Acquisition and construction of capital
assets (60,702) (100,866) (10,342) (7,748) - (179,658) (2,332) Lease payment (109) - (504) (130) - (743) - SBITA right-to-use software asset
payment (835) (35) - - (209) (1,079) (124) Proceeds from commercial paper and
notes payable 25,545 40,000 - - - 65,545 - Principal payment on commercial paper (7,817) - - - (20,000) (27,817) - Principal paid on debt (24,155) (3,950) - - - (28,105) - Interest paid on debt (45,791) (14,058) (162) - (2,451) (62,462) - Advances and deposits received 137 - - - - 137 - Net cash (used in) capital and related
financing activities (63,958) (78,610) (11,008) (7,878) (22,660) (184,114) (2,456) (Continued)
The Notes to Basic Financial Statements are an integral part of this statement. 42 INTRODUCTORY

SECTION
FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT

FINANCIAL

SECTION
City of San José
Statement of Cash Flows (Continued)
Proprietary Funds
For the Year Ended June 30, 2024
($000’s)
Enterprise Funds

San José
Mineta
International
Airport
Wastewater
Treatment
System
Municipal
Water System
Parking
System
San José
Clean Energy Total
Internal
Service
Funds

CASH FLOWS FROM INVESTING

ACTIVITIES
Proceeds from sales and maturities of
investments $ 56,162 - - - - 56,162 - Purchases of investments (51,371) - - - - (51,371) - Interest received 16,683 22,043 1,671 1,895 6,671 48,963 1,126 Land and building rentals - 279 - - - 279 - Net cash provided by investing
activities 21,474 22,322 1,671 1,895 6,671 54,033 1,126

Net change in cash and cash equivalents 53,284 7,217 3,625 (5,576) 104,536 163,086 5,225

Cash and cash equivalents - beginning 354,349 501,479 33,860 42,226 166,814 1,098,728 15,864 Cash and cash equivalents - ending $ 407,633 508,696 37,485 36,650 271,350 1,261,814 21,089

Reconciliation of operating income (loss) to
net cash provided by operating activities
Operating income (loss) $ 45,206 51,059 9,482 (1,421) 78,687 183,013 (762) Adjustments to reconcile operating
income (loss) to net cash provided by
operating activities:

Depreciation 57,192 33,631 3,567 1,907 180 96,477 1,420 Write off construction in progress 389 - - - - 389 - Participating airline net revenue
sharing (8,790) - - - - (8,790) -
Other nonoperating revenues 45 35 13 16 22 131 18 Other nonoperating expenses - - - - - - (4) Decrease (Increase) in:

Accounts receivable (2,058) (4,080) (3,594) (10) (4,274) (14,016) 237 Inventories - (34) - - - (34) (112)
Prepaid expenses, advances and
deposits (62) - - - (2,118) (2,180) -
Increase (Decrease) in:

Accounts payable and accrued
liabilities (1,732) (11,200) 3,264 957 6,386 (2,325) 74 Accrued salaries, wages, and payroll
taxes - 616 84 25 119 844 -
Accrued vacation, sick leave and
compensatory time - 196 (9) 62 103 352 383
Estimated liability for self-insurance (715) 275 (272) - - (712) - Unearned revenue (779) - - - - (779) -
Net pension liability, deferred outflows
and inflows of pension related
resources (2,103) (2,862) (519) (108) (931) (6,523) - Net other postemployment benefits
liability, deferred outflows and inflows
of postemployment benefits related
resources (1,073) (1,798) (307) (61) (403) (3,642) - Right-to-use asset interst payable - - 8 - - 8 - Advances, deposits, and reimbursable
credits 313 - - - 675 988 -
Rate stabilization reserve - - - - 50,000 50,000 - Other liabilities - (901) - - - (901) -
Net cash provided by operating activities $ 85,833 64,937 11,717 1,367 128,446 292,300 1,254 (Continued)
The Notes to Basic Financial Statements are an integral part of this statement. 43 FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT
City of San José
Statement of Cash Flows (Continued)
Proprietary Funds
For the Year Ended June 30, 2024
($000’s)
Enterprise Funds

San José
Mineta
International
Airport
Wastewater
Treatment
System
Municipal
Water System
Parking
System
San José
Clean Energy Total
Internal
Service
Funds
Reconciliation of cash and cash equivalents
to the statement of net position:

Equity in pooled cash and investments
held in City Treasury
Unrestricted $ 256,238 508,695 37,485 34,284 221,350 1,058,052 20,546 Restricted 57,243 - - 2,366 50,000 109,609 - Cash and investments held with fiscal
agents 94,152 - - - - 94,152 -
Other cash and investments - 1 - - - 1 543 Cash and cash equivalents $ 407,633 508,696 37,485 36,650 271,350 1,261,814 21,089

Noncash noncapital, capital and related
financing, and investing activities:

Disposal of capital assets $ - (60) (12) - - (72) - Capital contributions from developers - 2,096 4,002 - - 6,098 - Amortization of bond premium, and
prepaid bond insurance costs 6,105 1,092 - - - 7,197 - Amortization of deferred outflows of
resources related to bond refundings (482) - - - - (482) - Change in capital related payables 4,261 (10,819) 4,397 131 185 (1,845) - Change in capital related receivables (242) - - (6,090) - (6,332) - Change in fair value of investments (371) 6,855 480 (729) (358) 5,877 - Change in operating grants receivables (23) - - - - (23) -

The Notes to Basic Financial Statements are an integral part of this statement. 44 INTRODUCTORY

SECTION
FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT

FINANCIAL

SECTION
City of San José
Statement of Fiduciary Net Position
Fiduciary Funds
June 30, 2024
($000’s)

Pension Trust
Funds
Private-
Purpose
Trust Funds
Custodial
Fund
ASSETS
Current assets:

Equity in pooled cash and investments held in City Treasury $ - 237 5,675 Cash and investments - 1,066 -
Investments of retirement systems:

Investments:

Public equity 4,159,626 - -
Short-term investment grade bonds 28,930 - -
Investment grade bonds 476,347 - -
Private equity 901,324 - -
Market neutral strategies 242,450 - -
Immunized cash flows 485,191 - -
Core real estate 439,137 - -
Commodities 36,789 - -
Private debt 340,386 - -
Emerging market bonds 191,217 - -
Growth real estate 344,662 - -
Treasury inflation protected securities 161,559 - - Cash and cash equivalents 564,864 - -
Private real assets 199,622 - -
Venture/growth capital 119,091 - -
Long-term government bonds 158,904 - -
High yield bonds 162,171 - -
Total investments of retirement systems 9,012,270 - - Receivables:

Accrued investment income 14,838 - 29
Employee contributions 1,958 - -
Employer contributions 7,574 - -
Other 31,064 41 -
Restricted cash and investments held with fiscal agent - 128,555 - Total current assets 9,067,704 129,899 5,704

Noncurrent assets:

Public-private and public-public partnerships and availability payment arrangement receivable - - 44,355
Accrued interest, net - 1,413 -
Loans receivable, net - 3,987 -
Advances and deposits - 5 -
Prepaid bond insurance - 1,138 -
Capital assets:

Nondepreciable - 2,078 -
Depreciable, net - 589 -
Other assets, net 4,450 - -
Total noncurrent assets 4,450 9,210 44,355
Total assets 9,072,154 139,109 50,059

DEFERRED OUTFLOWS OF RESOURCES
Loss on refundings of debt $ - 20,790 -
(Continued)
The Notes to Basic Financial Statements are an integral part of this statement. 45 FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT
City of San José
Statement of Fiduciary Net Position (Continued)
Fiduciary Funds
June 30, 2024
($000’s)

Pension Trust
Funds
Private-
Purpose
Trust Funds
Custodial
Fund

LIABILITIES
Current liabilities:

Due to brokers $ 50,390 - -
Accrued interest payable - 16,186 -
Other liabilities 13,119 - -
Total current liabilities 63,509 16,186 -

Long-term liabilities:

Due within one year - 109,659 -
Due in more than one year - 1,000,854 -
Total noncurrent liabilities - 1,110,513 -
Total liabilities 63,509 1,126,699 -

DEFERRED INFLOWS OF RESOURCES
Deferred inflows-Public-private and public-public partnerships and availability payment arrangement revenues - - 38,460

NET POSITION
Restricted for:

Employees’ pension benefits 8,250,902 - -
Employees’ postemployment healthcare benefits 757,743 - - Redevelopment dissolution and other purposes - (966,800) - Arena capital reserve - - 11,599
Total net position (deficit) $ 9,008,645 (966,800) 11,599 46 INTRODUCTORY

SECTION
FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT

FINANCIAL

SECTION
City of San José
Statement of Changes in Fiduciary Net Position
Fiduciary Funds
For the Year Ended June 30, 2024
($000’s)

Pension
Trust Funds
Private-
Purpose
Trust Funds
Custodial
Fund

ADDITIONS
Redevelopment property tax revenues $ - 200,074 -
Income:

Interest 98,781 2,527 273
Dividends 29,149 - -
Net rental income - - 1,420
Net appreciation in fair value of plan investments 669,043 - - Investment expenses (32,919) - -
Public-private and public-public partnerships and availability payment arrangement revenues - - 2,961
Total income 764,054 2,527 4,654
Contributions:

Employer 479,536 - -
Employees 89,083 - -
Total contributions 568,619 - -
Development fees and other - 66 -
Other - - 2,300
Total additions 1,332,673 202,667 6,954

DEDUCTIONS
General and administrative 14,948 289 -
Project expenses - 69 3,605
Pass through amounts to the County of Santa Clara - 55,902 - Depreciation - 27 -
Allowance for loan losses - 590 -
Interest on debt - 37,880 -
Health insurance premiums 63,334 - -
Refunds of contributions 2,253 - -
Retirement and other benefits:

Death benefits 37,816 - -
Retirement benefits 508,451 - -
Total deductions 626,802 94,757 3,605
Change in net position 705,871 107,910 3,349

Net position restricted for pension benefits, postemployment healthcare benefits and other purposes:

Beginning of year 8,302,774 (1,074,710) 8,250
End of year $ 9,008,645 (966,800) 11,599

The Notes to Basic Financial Statements are an integral part of this statement.

FOR THE YEAR ENDED JUNE 30, 2024

INDEX TO

THE NOTES
Notes to basic financial
statements June 30, 2024
47 ●
I. Summary of Significant Accounting Policies
A. Reporting Entity 49
B. Financial Statement Presentation 51
C. Measurement Focus and Basis of Accounting 54
D. Use of Estimates 54
E. New Pronouncements 55
F . Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources, and Net Position or Equity 56
●
II. Stewardship, Compliance, and Accountability
A. Deficit Net Position 67
B. Deficit Unrestricted Net Position - Governmental Activities 67 C. Deficit Fund Balance - Nonmajor Governmental Funds 67 ●
III. Detailed Notes on All Funds
A. Cash, Deposits and Investments 68

1. Cash and Investments Managed by the City Treasurer 69

2. Retirement Systems 76
B. Receivables, Net of Allowances 89
C. Loans Receivable, Net of Allowances 89
D. Capital Assets 91
E. Leases and Subscription-Based Information Technology Arrangements 92 F . Long-Term Debt and Other Obligations 103
G. Interfund Transactions 129
H. Deferred Inflows of Resources 131
I. Governmental Fund Balances 132
FOR THE YEAR ENDED JUNE 30, 2024

INDEX TO

THE NOTES
Notes to basic financial
statements June 30, 2024
48 ●
IV. Other Information
A. Defined Benefit Retirement Plans 134

1. City Sponsored Defined Benefit Pension Plans 134

2. California Public Employees’ Retirement System 152

3. Defined Contribution Retirement Plans 156

4. Postemployment Benefit Plans Other than Pension Plans 157 B. Commitments and Contingencies 168
C. Successor Agency to the Redevelopment Agency of the City of San José 181 D. Subsequent Events 187
49 FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT
NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2024
I. Summary of Significant Accounting Policies
A. Reporting Entity
The City of San José, California (the “City”), was chartered on March 25, 1850, and has operated under a Council–Manager form of government since 1916. The City has defined its reporting entity in accordance with generally accepted accounting principles (“GAAP”) in the United States of America, which provide guidance for determining which governmental activities, organizations, and functions should be included in the reporting entity.

In evaluating how to define the City for financial reporting purposes, management has considered all potential component units. The primary criteria for including a potential component unit within the reporting entity are the governing body’s financial accountability or whether the nature and significance of the relationship with the primary government is misleading to exclude.

A primary government is considered to be financially accountable if it appoints a voting majority of an organization’s governing body and is able to impose its will on the organization, or if there is a potential for the organization to provide specific financial benefits to or impose specific financial burdens on the primary government. A primary government may also be financially accountable if an organization is fiscally dependent on the primary government regardless of whether the organization has a separately elected governing board, a governing board appointed by a higher level of government, or a jointly appointed board, and there is a potential for the organization to provide specific financial benefits or impose specific financial burdens on the primary government. Based upon the application of these criteria, the following is a brief description of each component unit included within the City’s reporting entity. All such component units have been “blended” as though they are part of the primary government because the component unit’s governing body is substantially the same as the City’s primary government and there is a financial benefit or burden relationship between the City and the component unit, management of the City has operational responsibilities for the component unit, and/or the component units provide services entirely, or almost entirely, to the City or otherwise exclusively, or almost exclusively, benefits the City, even though it does not provide services directly to it, or the City is entirely or almost entirely responsible for the repayment of the debt of the component unit.
● San José – Santa Clara Clean Water Financing Authority – The San José – Santa Clara Clean Water Financing Authority (the “Clean Water Financing Authority”) was created pursuant to a Joint Exercise of Powers Agreement between the City and the City of Santa Clara. The purpose was to finance the acquisition of, and additions and improvements to, the existing San José – Santa Clara Water Pollution Control Plant (the “Plant”), currently known as the San José – Santa Clara Regional Wastewater Facility (the “RWF”). The Clean Water Financing Authority is governed by a five-member Board of Directors; three are members of the San José City Council and two are members of the City Council of the City of Santa Clara. ● City of San José Financing Authority – The City of San José Financing Authority (the “Financing Authority”) was created by a Joint Exercise of Powers Agreement between the City and the former Redevelopment Agency of the City of San José (the “Agency”). The Financing Authority was created for the purpose of facilitating the financing of public improvements and facilities within the City and is authorized to issue bonds for this purpose. The Financing Authority is governed by an 11-member Governing Board, which consists of the members of the City Council. The Financing Authority is blended in the San José Financing Authority Debt Service Fund for financial reporting purposes. ● San José Diridon Development Authority – The San José Diridon Development Authority (the “Diridon Authority”) was created in March 2011 by a Joint Exercise of Powers Agreement between the City and the Agency. The Diridon Authority was created for the purposes of overseeing the development of properties within the area of the City surrounding the San José Diridon Station, and is authorized to issue bonds for 50 INTRODUCTORY

SECTION
FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT

FINANCIAL

SECTION
NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2024
this purpose. The Diridon Authority is governed by an 11-member Governing Board, which consists of the members of the City Council.

Separate financial reports for City departments and component units for FY 2024, containing additional information and more detailed information regarding financial position, changes in financial position, and, where applicable, cash flows, can be obtained from the City of San José’s website at https:/ /www.sanjoseca.gov. They are available from the City’s Director of Finance, 200 East Santa Clara Street; 13th Floor, San José, CA 95113-1905, for the following:
● Police and Fire Department Retirement Plan (the “PFDRP”) ● Federated City Employees’ Retirement System (the “FCERS”) ● San José Mineta International Airport (the “Airport”) ● San José Clean Energy
● South Bay Water Recycling Program and System* (the “SBWR”) ● Wastewater Treatment System* (the “WWTS”)
*SBWR and WWTS standalone reports, when combined, are presented as one major proprietary enterprise fund “Wastewater Treatment System” in the City’s ACFR.

The City has two fiduciary component units:

FCERS was established in 1941 to provide retirement benefits for certain employees of the City. The current FCERS consists of a single employer Defined Benefit Pension Plan and a Postemployment Health Plan and includes all provisions of the City of San José Municipal Code (“SJMC”) Chapters 3.28, 3.44, and 3.52.

PFDRP was established in 1961 to provide retirement benefits for certain employees of the City. The current PFDRP consists of a single employer Defined Benefit Pension Plan and three Postemployment Healthcare Plans. It includes all provisions of SJMC Chapters 3.36, 3.54, and 3.56.

Both FCERS and PFDRP are considered integral parts of the City’s financial reporting entity and are featured in the City’s basic financial statements as pension trust funds. They are overseen by the Chief Executive Officer of the Office of Retirement Services, a City employee who serves at the discretion of the FCERS and PFDRP Boards. FCERS’ Board is comprised of seven members, including two City employees elected by FCERS members, a retiree representative, and three public members with significant banking or investment experience, unrelated to the City, which are approved by the City Council. Additionally, there is another public member selected by the six Board members and approved by the City Council. The PFDRP’s Board is comprised of nine members, including two City employees elected by PFDRP members, two retired Plan members elected by retiree associations, and four public members with substantial banking or investment experience, who are not affiliated with the City, which are approved by the City Council. Similarly, there is another public member chosen by the eight Board members and approved by the City Council.

Both FCERS and PFDRP are legally distinct, fiduciary component units of the City, each managed by a Pension Administrator. Both entities serve the City and are classified as pension trust funds.

Successor Agency to the Redevelopment Agency of the City of San José – The Successor Agency to the Redevelopment Agency of the City of San José (the “SARA”) was created by State statute, referred to in these notes as the Redevelopment Dissolution Law, to serve as a custodian for the assets and to wind down the affairs of the former Agency. The SARA is subject to the direction and oversight of a board consisting of the Mayor and the other members of the City Council (“SARA Board”).
51 FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT
NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2024
The SARA is also, pursuant to the Redevelopment Dissolution Law, subject to the direction and oversight of an oversight board. Beginning July 1, 2018, pursuant to Health and Safety Code Section 34179(j), the individual oversight boards within Santa Clara County were combined into one county-wide oversight board (the “Oversight Board”). The Oversight Board is comprised of seven member representatives with one member appointed by each of the following: County Board of Supervisors, the city selection committee established pursuant to Section 50270 of the Government Code, the independent special district selection committee established pursuant to Section 56332 of the Government Code, the County Superintendent of Education, the Chancellor of the California Community Colleges, a public appointment made the County Board of Supervisors, and the recognized employee organization representing the largest number of successor agency employees in the county. The Oversight Board is staffed by the County of Santa Clara Auditor-Controller and tasks are delegated among the County Finance Agency, the Office of the County Executive, the Clerk of the Board of Supervisors, and Office of the County Counsel.

In general, the SARA’s assets can only be used to pay enforceable obligations in existence at the date of dissolution (including the completion of any unfinished projects that were subject to legally enforceable contractual commitments). The SARA is allocating revenue in the amount that is necessary to pay the estimated annual installment payments on enforceable obligations of the Agency until all enforceable obligations of the Agency have been paid in full and all assets have been liquidated. Based upon the nature of the SARA’s custodial role, the SARA is reported in a fiduciary fund (private-purpose trust fund).

Separate financial report for SARA, containing additional information and more detailed information regarding fiduciary net position, changes in fiduciary net position, is available from the City’s Director of Finance, 200 East Santa Clara Street; 13th Floor, San José, CA 95113-1905.

B. Financial Statement Presentation
Government-wide Financial Statements. The government-wide financial statements, i.e. the statement of net position and the statement of activities, display information about the primary government and its component units. These statements include the financial activities of the overall government, except for fiduciary funds or component units that are fiduciary in nature. Eliminations have been made to prevent the double counting of internal activities. For example, the direct expense charges based on actual use are not eliminated, whereas indirect expense allocations made in the funds are eliminated. These statements distinguish between the governmental and business-type activities of the City. Governmental activities, which normally are supported by taxes, intergovernmental revenues and other non-exchange transactions, are reported separately from business-type activities, which rely to a significant extent on fees charged to external parties.

The statement of activities presents a comparison between direct expenses and program revenues for each business-type activity of the City and each function of the City’s governmental activities. Direct expenses are those that are specifically associated with a business-type activity or governmental function and, therefore, are clearly identifiable to a particular activity or function. Program revenues include 1) fees, fines and charges paid by the recipients of goods or services offered by the programs and 2) grants and contributions that are restricted to meet the operational or capital requirements of a particular program. 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 City’s funds, including its fiduciary funds. Separate statements for each fund category, such as governmental, proprietary and fiduciary, are presented. The emphasis of fund financial statements are on the major governmental and enterprise funds of the City and are reported separately in the accompanying financial statements. 52 INTRODUCTORY

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FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT

FINANCIAL

SECTION
NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2024
All remaining governmental funds are aggregated and reported as nonmajor funds in the accompanying financial statements.

Fund accounting is designed to demonstrate legal compliance and to aid financial management by segregating transactions related to certain government functions or activities. A fund is a separate accounting entity with a self-balancing set of accounts.

The City reports the following major governmental funds:

The General Fund is the City’s primary operating fund. It accounts for all revenues and expenditures necessary to carry out basic governmental activities of the City that are not accounted for through other funds.

The Housing Activities Fund is a special revenue fund that accounts for all of the City’s affordable housing activities funded by federal and state grants, as well as various fees.

The Low and Moderate Income Housing Asset Fund is a special revenue fund that was created to administer the housing assets and functions related to the Low and Moderate Income Housing Program retained by the City following the dissolution of the Agency on February 1, 2012. This fund is primarily funded by loan repayment program income generated from the former Agency’s housing assets.

The Special Assessment Districts Fund is a capital project fund that accounts for the capital project and debt activities related to debt issued to finance public improvements benefiting properties against which special assessments or special taxes are levied.

The San José Financing Authority Debt Service Fund is a debt service fund that accounts for the debt activities related to capital projects funded with Financing Authority debt.

The City reports the following major enterprise funds:

The San José Mineta International Airport Fund accounts for the activities of the City owned commercial service and general aviation airport.

The Wastewater Treatment System Fund accounts for the financing, construction and operations of the Plant, including the regional water reclamation program (known as South Bay Water Recycling); the San José Sewage Collection System; and the Clean Water Financing Authority.

The Municipal Water System Fund accounts for the operations of the five water system operating districts: North San José, Evergreen, Coyote, Edenvale, and Alviso.

The Parking System Fund accounts for the operations of the City owned parking garage facilities, parking lots, and parking meters located within the City.

The San José Clean Energy Fund accounts for the procurement of electricity by San José Clean Energy, a Community Choice Energy program.

The City also reports the following types of funds:

The Internal Service Funds are used to account for the public works support services provided to City- wide capital programs; the cost of operating an automotive maintenance facility used by other City departments; and employee benefits including medical, vision, dental, and unemployment insurance costs on a cost-reimbursement basis.

The Pension Trust Funds account for the accumulated resources to be used for retirement annuity and postemployment healthcare payments to members of the FCERS and the PFDRP , collectively, the “Retirement Systems”.
53 FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT
NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2024
The Private-Purpose Trust Funds account for the custodial responsibilities that are assigned to the SARA with the passage of the Redevelopment Dissolution Law and for the James Lick Fund, which holds resources in trust for the support of the EMQ Families First Agency (a.k.a. Eastfield Ming Quong).

The Custodial Fund accounts for assets held by the City in a custodial capacity with respect to the San José Arena.

Document Summaries. All summaries of documents contained in the notes to the financial statements are made subject to the provisions of such documents and do not purport to be complete statements of any or all such provisions. Each reference is qualified in its entirety by reference to such document, which is on file with or may be obtained from the City’s Director of Finance at the address set forth in Note I.A. 54 INTRODUCTORY

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FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT

FINANCIAL

SECTION
NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2024
C. Measurement Focus and Basis of Accounting
The basis of accounting determines when transactions are reported in the financial statements. The government-wide, proprietary and fiduciary funds financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Non-exchange transactions, in which the City gives (or receives) value without directly receiving (or giving) equal value in exchange, include property and sales taxes, grants, entitlements and donations. On an accrual basis, revenue from property taxes is recognized in the fiscal year for which the taxes are levied.

Revenues from sales and use, transient occupancy and utility user taxes are recognized when the underlying transactions take place. Revenues from grants, entitlements and donations are recognized in the fiscal year in which all eligibility requirements have been satisfied.

Governmental funds are reported using the current financial resources measurement focus and modified accrual basis of accounting. This focus is on the determination of, and changes in financial resources, and generally only current assets and current liabilities are included in the balance sheet. Revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the fiscal period. For this purpose, the City considers revenues as available if they are collected within sixty days after the end of the current fiscal period. Expenditures are generally recorded when a liability is incurred.

However, principal and interest on long-term debt and certain estimated liabilities, such as compensated absences and self-insurance claims, are recorded when payment is due.

In governmental funds, revenues from taxes, franchise fees, investment income, state and federal grants and charges for services associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues in the current period. All other revenue items are considered measurable and available only when cash is received by the City.

Proprietary funds distinguish between operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the City’s enterprise funds are charges to customers for sales and services. In addition, the Wastewater Treatment System Fund’s on-going contributions from other participating agencies for their allocation of the Plant’s operating and maintenance expenses, their share of debt service, and other commitments towards the Plant’s improvements are also included as operating revenues. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.

Under the terms of grant agreements, the City funds certain programs by a combination of specific cost- reimbursement grants, categorical block grants and general revenues. Thus, when program expenses are incurred, there are both restricted and unrestricted net position available to finance the program. It is the City’s policy to first apply restricted cost-reimbursement grant resources to such programs, followed by restricted categorical block grants, and then by unrestricted general revenues.

D. Use of Estimates
A number of estimates and assumptions relating to the reporting of revenues, expenditures/expenses, assets, deferred outflows of resources, liabilities and deferred inflows of resources, and the disclosure of contingent liabilities were used to prepare these financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates and assumptions. 55 FOR THE YEAR ENDED JUNE 30, 2024

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E. New Pronouncements
During the year ended June 30, 2024, the City implemented the following Governmental Accounting Standards Board (the “GASB”) Statements:

The City has adopted GASB Statement No. 99, Omnibus 2022. The requirements of this statement are related to financial guarantees and the classification and reporting of derivative instruments within the scope of Statement No. 53, Accounting and Financial Reporting for Derivative Instruments. The application of Statement No. 99 did not have any effect on the City’s financial statements.

The City has adopted GASB Statement No. 100, Accounting Changes and Error Corrections. In June 2022, GASB issued this statement as an amendment of GASB Statement No. 62. The primary objective of this statement is to enhance accounting and financial reporting requirements for accounting changes and error corrections to provide more understandable, reliable, relevant, consistent, and comparable information for making decisions or assessing accountability. This statement defines accounting changes as changes in accounting principles, changes in accounting estimates, and changes to or within the financial reporting entity and describes the transactions or other events that constitute those changes. As part of those descriptions, for (1) certain changes in accounting principles and (2) certain changes in accounting estimates that result from a change in measurement methodology, a new principle or methodology should be justified on the basis that it is preferable to the principle or methodology used before the change. That preferability should be based on the qualitative characteristics of financial reporting—understandability, reliability, relevance, timeliness, consistency, and comparability. This statement also addresses corrections of errors in previously issued financial statements. The application of Statement No. 100 did not have any effect on the City’s financial statements.

The City is currently analyzing its accounting practices to determine the potential impact on the financial statements for the upcoming GASB Statements:

In June 2022, GASB issued Statement No. 101, Compensated Absences . This statement requires that liabilities for compensated absences be recognized for (1) leave that has not been used and (2) leave that has been used but not yet paid in cash or settled through noncash means. A liability should be recognized for leave that has not been used if (a) the leave is attributable to services already rendered, (b) the leave accumulates, and (c) the leave is more likely than not to be used for time off or otherwise paid in cash or settled through noncash means. Leave is attributable to services already rendered when an employee has performed the services required to earn the leave. Leave that accumulates is carried forward from the reporting period in which it is earned to a future reporting period during which it may be used for time off or otherwise paid or settled. In estimating the leave that is more likely than not to be used or otherwise paid or settled, a government should consider relevant factors such as employment policies related to compensated absences and historical information about the use or payment of compensated absences. However, leave that is more likely than not to be settled through conversion to defined benefit postemployment benefits should not be included in a liability for compensated absences. This statement requires that a liability for certain types of compensated absences—including parental leave, military leave, and jury duty leave—not be recognized until the leave commences. This statement also requires that a liability for specific types of compensated absences not be recognized until the leave is used.

The requirements of this statement will take effect for financial statements starting with the fiscal year that ends June 30, 2025.

In December 2023, GASB issued Statement No. 102, Certain Risk Disclosures. The objective of this statement is to provide users of government financial statements with essential information about risks related to a government’s vulnerabilities due to certain concentrations or constraints. This statement defines 56 INTRODUCTORY

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a concentration as a lack of diversity related to an aspect of a significant inflow of resources or outflow of resources. A constraint is a limitation imposed on a government by an external party or by formal action of the government’s highest level of decision-making authority. Concentrations and constraints may limit a government’s ability to acquire resources or control spending. This statement requires a government to assess whether a concentration or constraint makes the primary government reporting unit or other reporting units that report a liability for revenue debt vulnerable to the risk of a substantial impact. Additionally, this statement requires a government to assess whether an event or events associated with a concentration or constraint that could cause the substantial impact have occurred, have begun to occur, or are more likely than not to begin to occur within 12 months of the date the financial statements are issued.

The requirements of this statement will take effect for financial statements starting with the fiscal year that ends June 30, 2025.

In April 2024, GASB issued Statement No. 103, Financial Reporting Model Improvements. The objective of this statement is to improve key components of the financial reporting model to enhance its effectiveness in providing information that is essential for decision making and assessing a government’s accountability.

This statement also addresses certain application issues. This statement addresses the following financial reporting topics: (1) Management’s Discussion and Analysis; (2) Unusual or Infrequent Items; (3) Presentation of the Proprietary Fund Statement of Revenues, Expenses, and Changes in Fund Net Position, (4) Major Component Unit Information, and (5) Budgetary Comparison Information.

The requirements of this statement will take effect for financial statements starting with the fiscal year that ends June 30, 2026.

In September 2024, the GASB issued Statement No. 104, Disclosure of Certain Capital Assets. The purpose of this statement is to provide users of governmental financial statements with essential information about certain types of capital assets. It requires certain types of capital assets to be disclosed separately within the capital assets note disclosures required by Statement 34. These include lease assets recognized under Statement No. 87 (Leases), intangible right-to-use assets recognized under Statement No. 94 (Public-Private and Public-Public Partnerships and Availability Payment Arrangements), and subscription assets recognized under Statement No. 96 (Subscription-Based Information Technology Arrangements). These assets must be disclosed separately by major class of underlying asset in the capital assets note disclosures.

In addition, intangible assets other than those three types must also be disclosed separately by major class.

The statement further requires additional disclosures for capital assets that are held for sale.

The requirements of this statement will take effect for financial statements starting with the fiscal year that ends June 30, 2026.

F. Assets, Deferred Outflows of Resources, Liabilities, Deferred Inflows of Resources, and Net Position or Equity

1. 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 (i.e. Director of Finance), are considered 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 demand deposit accounts. Other restricted and unrestricted investments with maturities less than three months at the time of purchase are also considered cash equivalents for purposes of the statement of cash flows. 57 FOR THE YEAR ENDED JUNE 30, 2024

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2. Equity in Pooled Cash and Investments Held in City Treasury Most cash balances of the City’s funds and some of its component units are pooled and invested by the City Treasurer unless otherwise dictated by legal or contractual requirements. Income and losses arising from the investment activity of pooled cash are allocated to the participating funds and component units on a monthly basis, based on their proportionate shares of the average weekly cash balance.

3. Deposits and Investments
Investments are accounted for in accordance with the provisions of GASB Statement No. 72, Fair Value Measurement and Application. The City categorizes its fair value measurements within the fair value hierarchy established by GAAP in the United States of America. The following levels indicate the hierarchy of inputs used to measure fair value and the primary valuation methodologies used for financial instruments measured at fair value on a recurring basis:
● Level 1 - Investments whose values are based on quoted prices (unadjusted) for identical assets in active markets that a government can access at the measurement date. ● Level 2 - Investments whose values are based on inputs – other than quoted prices included within Level 1 – that are observable for an asset, either directly or indirectly. ● Level 3 - Investments whose values are based on unobservable inputs for an asset and may require a degree of professional judgment.

Pooled Cash and Investments held in City Treasury. The City reports its investments held in the City Treasury at fair value. The fair value is based primarily on quoted market information and using pricing applications and models obtained from fiscal agents or other sources. Income from some investments is assigned to the General Fund. The assignment of the income from these investments is supported by legal or contractual provisions approved by the City Council. For the year ended June 30, 2024, the total investment income from these investments assigned and transferred to the General Fund was approximately $3.8 million.

Retirement Systems. The Retirement Systems’ investment policies authorize various types of investments.

These investments are reported at fair value. Securities traded on a national or international exchange are valued at the last reported sales price on the last business day of the fiscal year at current exchange rates, if applicable. Investments that do not have an established market, such as private equity, commingled real estate funds and certain pooled fund investments, are reported at estimated fair value based on the most recently available investor reports or audited financial statements issued by the manager of those funds. The fund manager provides an estimated unrealized gain/loss of the fund based on the most recently available audited financial statements and other fund information. Purchases and sales of securities are reflected on the date of trade. Investment income is recognized as earned.

Other Investments. Non-pooled investments are generally carried at fair value. However, investments in investment agreements are carried at cost. Income from non-pooled investments is recorded based on the specific investments held by the fund. The investment income is recorded in the fund that earned the income.

4. Inventories
Inventories of proprietary funds are reported at cost.

5. Loans Receivable, net
Long-term loans receivable, which consist of the principal amount of the loan plus accrued borrower’s deferred interest is reported in the governmental fund financial statements with an offset to unavailable 58 INTRODUCTORY

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revenue for the deferred interest accrued and to restricted fund balance for the principal amount of the loan. Long-term loans receivable reported in the governmental activities on the government-wide statement of net position is not offset by unavailable revenue as it is recorded on an accrual basis. Long-term loans receivable are recorded at their net realizable value.

6. Special Assessment Districts
Special assessments are recorded as receivables when liens are placed on properties. Special assessments not considered available are recorded as receivables and offset by deferred inflows of resources in the governmental fund financial statements. In general, special assessment and special tax bonds are fully secured by liens against the privately-owned properties benefited by the improvements for which the bonds were issued. There is no reserve for delinquent receivables since priority liens exist against the related properties and management believes full value will ultimately be received by the City. Surplus funds remaining at the completion of a special assessment district project are disposed of in accordance with the City Council’s resolutions and with the applicable laws of the State of California. A liability is recorded for the balance remaining until a final legal determination has been made.

7. Advances and Deposits
Amounts deposited mainly in connection with eminent domain proceedings are reported as advances and deposits. In the governmental fund statements, noncurrent portions of these are offset equally by either a credit or a classification of fund balance in the nonspendable, restricted or committed account.

8. Other Assets
Other assets primarily consist of real properties acquired outright and/or through foreclosure in connection with land acquired for the purpose of future development of affordable housing. These other assets are recorded at the lower of cost or estimated net realizable value.

9. Prepaid Bond Insurance, Original Issue Discounts and Premiums, and Refundings Prepaid bond insurance costs are amortized using the straight-line method over the life of the bonds.

Amortization of these balances is recorded as a component of interest expense.

In the government-wide, proprietary fund and fiduciary fund financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable financial statements. Bond premiums and discounts are deferred and amortized on a straight-line basis over the life of the bonds. Bonds payable are reported net of the applicable bond premium or discount. Gains or losses from refunding of debt are reported as deferred outflows or inflows of resources and amortized over the shorter of the life of the refunded debt or refunding debt. Amortization of these balances is recorded as a component of interest expense.

In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.

10. Restricted Assets
Assets that are restricted for specific uses by bonded debt requirements, grant provisions or other requirements are classified as restricted because their use is limited by applicable bond covenants or agreements.
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11. Capital Assets
Capital assets include land, buildings, improvements, vehicles and equipment, infrastructure, and all other tangible and intangible assets that are used in operations and that have initial useful lives in excess of one year. Capital assets are reported in the applicable governmental or business-type activity columns in the government-wide statement of net position, the proprietary funds’ statement of net position, and the private- purpose trust fund’s statement of fiduciary net position.

Capital assets are defined as assets with an initial individual cost of more than $5,000 for general capital assets and $100,000 for major infrastructure assets, and an estimated useful life in excess of one year. Such assets are recorded at historical cost if purchased or constructed. Donated capital assets are recorded at acquisition value at the time received. Capital outlay is recorded as expenditures of the governmental funds and as assets in the government-wide financial statements to the extent the City’s capitalization threshold is met. For the San José Mineta International Airport Fund and the Wastewater Treatment System Fund, interest cost incurred before the end of a construction period is recognized as an expense in the period in which the cost is incurred.

Buildings, improvements, infrastructure, vehicles and equipment, and furniture and fixtures are depreciated using the straight-line method over the following estimated useful lives:

Buildings 5 – 40 years
Improvements, other than buildings 10 - 50 years
Infrastructure 25 - 50 years
Vehicles and equipment 2 - 40 years
Furniture and fixtures 10 years
Capital assets which are used for general governmental purposes and are not available for expenditure are accounted for and reported in the government-wide financial statements. Capital assets that meet the definition of the major infrastructure networks or extend the life of existing infrastructure networks are capitalized as infrastructure. Infrastructure networks include roads, bridges, drainage systems, and lighting systems.

Consistent with GASB Statement No. 87, Leases, the City recognizes an intangible right to use lease asset when the applicable accounting criteria is met. The capitalization threshold for the City as lessee is an initial cost of more than $250,000 per item at its net present value for land, buildings, office space, vehicle, or equipment. The lease assets must also have an initial useful life of more than one year.

With GASB Statement No. 96, Subscription-Based Information Technology Arrangements (SBITA), the City recognizes an intangible right-to-use software subscription asset when the applicable accounting criteria is met. The capitalization threshold for the City as subscriber is an initial cost of more than $250,000 per item at its net present value for software subscription. The subscription asset must also have an initial useful life of more than one year. In addition, a subscription asset should be at least 75% of fair market value in order to qualify as an exchange-like transaction.

12. Leases and Subscription-Based Information Technology Arrangements (SBITA) Leases
City as Lessee : The City is a lessee for noncancellable leases of land, building, office space and airport vehicles. The City recognizes a lease liability and an intangible right-to-use lease asset in the governmental- wide and proprietary fund financial statements.
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At the commencement of a lease, the City initially measures the lease liability at the present value of payments expected to be made during the lease term. Subsequently, the lease liability is reduced by the principal portion of lease payments made. The lease asset is initially measured as the initial amount of the lease liability, adjusted for lease payments made at or before the lease commencement date, plus certain initial direct costs. Subsequently, the lease asset is amortized over the lease term.

Key estimates and judgments related to leases include how the City determines (1) the discount rate it uses to discount the expected lease payments to present value, (2) lease term, and (3) lease payments. ● The City uses the interest rate charged by the lessor as the discount rate. When the interest rate charged by the lessor is not provided, the City generally uses its estimated incremental borrowing rate as the discount rate.
● The lease term includes the noncancellable period of the lease. Lease payments included in the measurement of the lease liability are composed of fixed payments and any purchase option price that the City is reasonably certain to exercise. In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).

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

Lease assets are reported with other capital assets and lease liabilities are reported with long-term debt on the statement of net position.

Payments due under the lease contracts include fixed payments plus, for many of the City’s leases, variable payments. For office space leases that include variable payments, those include payments for the City’s proportionate share of the building’s property taxes, insurance, and common area maintenance. For office equipment leases for which the City has elected not to separate lease and non-lease components, maintenance services are provided by the lessor at a fixed cost and are included in the fixed lease payments for the single, combined lease component.

Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments:
● fixed payments (including in-substance fixed payments), less any lease incentives receivable, ● amounts expected to be payable by the City under residual value guarantees, ● the exercise price of a purchase option if the City is reasonably certain to exercise that option, and ● payments of penalties for terminating the lease, if the lease term reflects the City exercising that option.

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability. Extension and termination options are included in a number of property and equipment leases held by the City. These are used to maximize operational flexibility in terms of managing the assets used in the City’s operations. The majority of extension and termination options held are exercisable only by the City and not by the respective lessor.

The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case, the lessee’s incremental borrowing rate is used. The incremental borrowing rate is the rate that the individual lessee would have to pay to borrow the funds necessary to 61 FOR THE YEAR ENDED JUNE 30, 2024

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obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security, and conditions.

Variable payments that depend on an index or a rate (such as the Consumer Price Index or a market interest rate), are initially measured using the index or rate as of the commencement of the lease term.

City as Lessor: The City is a lessor for several noncancellable leases including but not limited to building, office space and airport hangars. The City recognizes a lease receivable and a deferred inflow of resources in the governmental fund and proprietary fund financial statements.

At the commencement of a lease, the City initially measures the lease receivable at the present value of payments expected to be received during the lease term. Subsequently, the lease receivable is reduced by the principal portion of lease payments received. The deferred inflow of resources is initially measured as the initial amount of the lease receivable, adjusted for lease payments received at or before the lease commencement date. Subsequently, the deferred inflow of resources is recognized as revenue over the life of the lease term.

Key estimates and judgments include how the City determines (1) the discount rate it uses to discount the expected lease receipts to present value, (2) lease term, and (3) lease receipts. ● The City uses its estimated incremental borrowing rate as the discount rate for leases. ● The lease term includes the noncancellable period of the lease. ● Lease receipts included in the measurement of the lease receivable is composed of fixed payments from the lessee.

The City monitors changes in circumstances that would require a remeasurement of its lease, and will re- measure the lease receivable and deferred inflows of resources if certain changes occur that are expected to significantly affect the amount of the lease receivable.

Subscription-Based Information Technology Arrangements (SBITA) The City is a subscriber of certain subscription-based information technology arrangements. The City recognizes a SBITA liability and an intangible right-to-use information technology asset (SBITA asset) in the government-wide, proprietary fund, and internal service fund financial statements.

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

Key estimates and judgments related to SBITA arrangements include how the City determines (1) the discount rate it uses to discount the expected subscription payments to present value, (2) subscription term and (3) subscription payments.

The City uses the interest rate charged by the provider as the discount rate. When the interest rate charged by the provider is not provided, the City generally uses its estimated incremental borrowing rate as the discount rate for SBITA arrangements.

The subscription term includes the noncancellable period of the SBITA arrangement. Subscription payments included in the measurement of the SBITA liability are composed of fixed payments and the purchase option price if the City is reasonably certain to exercise. In determining the subscription term, management 62 INTRODUCTORY

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considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the subscription term if the SBITA arrangement is reasonably certain to be extended (or not terminated).

The City monitors changes in circumstances that would require a remeasurement of its SBITA arrangement and will re-measure the SBITA asset and liability if certain changes occur that are expected to significantly affect the amount of the SBITA liability.

SBITA assets are reported with other capital assets and SBITA liabilities are reported with long-term debt on the statement of net position.

Payments due under the SBITA contracts include fixed payments. The City does not have any variable payment SBITA arrangements for FY 2024.

Assets and liabilities arising from a SBITA arrangement are initially measured on a present value basis.

SBITA liabilities include the net present value of the following contract payments:
● Fixed payments (including in-substance fixed payments), less any contract incentives receivable. ● Amounts expected to be payable by the City under residual value guarantees. ● The exercise price of a purchase option if the City is reasonably certain to exercise that option, and ● Payments of penalties for terminating the subscription arrangement, if the subscription term reflects the City exercising that option.

Subscription payments to be made under reasonably certain extension options are also included in the measurement of the liability. Extension and termination options are included in some of the subscription arrangements across the City.

The subscription payments are discounted using the interest rate implicit in the subscription contract. If that rate cannot be readily determined, which is generally the case for subscription arrangements in the City, the subscriber’s incremental borrowing rate is used, being the rate that the individual subscriber would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-to-use asset in a similar economic environment with similar terms, security and conditions.

13. Compensated Absences – Accrued Vacation, Sick Leave, and Compensatory Time Vacation, sick leave, compensatory time, and related benefits are accrued as determined by the agreements between the City and the respective employees’ collective bargaining group. For governmental funds, compensated absence obligations are recorded in the appropriate governmental funds when due. The portion not currently due is recorded in the government-wide financial statements. For proprietary funds, compensated absences are expensed when earned by employees. At year-end, the accrued but unpaid compensated absence obligations are recorded as current and noncurrent liabilities in the appropriate proprietary funds.

Vacation hours may be accumulated up to two times an employee’s annual accrual rate, which will vary by years of service and bargaining unit, but it generally does not exceed a maximum of 400 hours for non-sworn employees and 360 hours for employees represented by the San José Police Officer’s Association (“SJPOA”).

Employees represented by the International Association of Firefighters, Local 230 (“IAFF”), may accumulate vacation hours up to 480 hours for employees on a 40-hour workweek and 672 hours for employees on a 56-hour workweek.
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Employees in FCERS who retire with at least 15 years of service, or 20 years for police officers and firefighters in PFDRP , may be eligible to receive, upon retirement, sick leave payouts based on percentages of accumulated unused sick leave hours as determined by the respective collective bargaining agreements for represented employees. Similar terms are applicable to eligible unrepresented employees. Eligibility for sick leave payouts depends on the employee’s hire date.

Unrepresented employees and all bargaining units are eligible for sick leave payouts if they were hired before September 30, 2012 except the SJPOA and IAFF are eligible for sick leave payouts if they were hired before July 7, 2013 and September 14, 2014, respectively. The sick leave balances eligible for payouts were frozen on June 22, 2013 for unrepresented employees and all bargaining units except the SJPOA and IAFF were frozen on July 6, 2013 and June 20, 2015, respectively.

For purposes of Sick Leave Payout, employees will continue to accrue sick leave hours after the “Sick Leave Balance Frozen as of” date, but such accrued sick leave may not be used for sick leave payout purposes.

If an employee reduces their sick leave balance below what it was as of the “Sick Leave Balance Frozen as of” date, such employee will not be able to restore their sick leave balance for sick leave payout purposes.

Employees may receive pay increases subsequent to the “Rate of Pay Frozen as of” date, but the employee’s sick leave payout will be based on their rate of pay as of the “Rate of Pay Frozen as of” date.

Compensatory time is generally provided to employees who work overtime and earn compensatory time off at the rate of one and one half the number of overtime hours worked in lieu of pay. The Fair Labor Standards Act provides that general employees may accrue up to 240 hours of compensatory time, and employees responsible for law enforcement or fire suppression such as those represented by SJPOA, IAFF , and in the Public Safety Communication Dispatcher classifications may accrue up to 480 hours of compensatory time.

14. Interfund Transactions
Interfund transactions are reflected as loans, services provided, reimbursements and/or transfers. Loans and balances related to unsettled service transactions are reported as receivables and payables as appropriate, and are subject to elimination upon consolidation of similar fund types. The current portion of interfund loans and unsettled service transactions are reported as “due to/from other funds” and the noncurrent portion is reported as “advances to/from other funds”. Any residual balances outstanding between the governmental activities and the business-type activities are reported in the government-wide financial statements as “internal balances”.

Services provided are deemed to be at market or near market rates and are treated as revenues and expenditures/expenses in the fund receiving revenue or being charged. Reimbursements are defined as when one fund incurs a cost, charges the appropriate benefiting fund and reduces its related cost as a reimbursement. All other interfund transactions are treated as transfers. Transfers between governmental or proprietary funds are netted as part of the reconciliation to the government-wide presentation.

15. Insurance
The City is self-insured for workers’ compensation, general liability, auto liability, and certain other risks, except as otherwise described in Note III.F .11. The City’s workers’ compensation activities are funded and accounted for separately in the fund financial statements based upon the activities of each fund. The current portion of claims liability is accounted for in the General Fund and the enterprise funds on the basis of settlements reached or judgments entered within the current fiscal year. In the government-wide financial statements and the enterprise fund financial statements, the estimated liability for all self-insurance liability claims is recorded as a liability.
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16. Deferred Outflows/Inflows of Resources
Deferred resources related to pension expense, OPEB expense, leases, public-private and public-public partnerships and availability payment arrangements (PPPs), rate stabilization reserve, and unamortized portions of the gain and loss on refunding debt are reported as deferred outflows and deferred inflows of resources. In addition to this, when an asset is recorded in governmental fund financial statements, but the revenue is not available, a deferred inflow of resources is reported until such time as the revenue becomes available.

In 2024, the City Council approved the establishment of a Rate Stabilization Reserve to allow SJCE, beginning in fiscal year 2024, to defer revenues from the current year to a future year. In accordance with GASB 62, the deferred revenue is shown as a reduction in operating revenues and a deferred inflow of resources related to rate stabilization. The reserve is funded and a matching amount of cash is restricted. The initial deferral in fiscal year 2024 is $50,000,000.

17. Pensions
For purposes of measuring the net pension liability/(asset), deferred outflows/inflows of resources related to pensions and pension expense, the fiduciary net position of the City’s defined benefit retirement plans (PFDRP , FCERS, and the California Public Employees’ Retirement System (“CalPERS”)), and additions to/ deductions from the Retirement Systems’ and CalPERS’ fiduciary net positions have been determined on the same basis as they are reported by the plans. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms.

Investments are reported at fair value.

18. Other Postemployment Benefits (OPEB)
For purpose of measuring the net OPEB liability/(asset), deferred outflows/inflows of resources related to OPEB and OPEB expense, the fiduciary net position of the PFDRP and FCERS OPEB plans, and additions to/ deductions from the OPEB plans’ fiduciary net positions have been determined on the same basis as they are reported by the plans. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value.

19. Net Position
The government-wide and proprietary fund financial statements utilize a net position presentation. Net position is categorized as net investment in capital assets, restricted, and unrestricted. ○ Net Investment in Capital Assets – This category groups all capital assets, including infrastructure, into one component of net position. Accumulated depreciation and the outstanding balances of debt and deferred outflows/inflows of resources associated with the debt that are attributable to the acquisition, construction, or improvement of these assets reduce the balance in this category.

Capital assets include any tangible and any intangible assets used in the operations of the governments, such as leases, SBITAs, and PPPs, along with their related depreciation or amortization.

Capital-related debt/borrowings include only debt and other borrowings of the reporting unit from which the proceeds are to be used for capital purposes resulting in capital assets of the same reporting unit, including debt related to leases, SBITAs, and PPPs. All successor borrowings of the reporting unit that refinance earlier borrowings from which the proceeds were used for capital purposes assume the capital nature of their predecessors. 65 FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT
NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2024
○ Restricted Net Position – This category represents net position that has external restrictions imposed by creditors, grantors, contributors, or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabling legislation. At June 30, 2024, the government-wide statement of net position reported restricted net position of $1,297,990,000 in governmental activities and $62,402,000 in business-type activities. Of these amounts $383,134,000 and $44,026,000, respectively, are restricted by enabling legislation. ○ Unrestricted Net Position – This category represents net amounts that do not meet the criteria for “restricted” or “net investment in capital assets”. When both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted resources first, and then use unrestricted resources as needed.

20. Fund Balances
Under GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, the financial statements reporting for governmental funds classify fund balances based primarily on the extent to which the City is bound to honor constraints on the specific purposes for which those funds can be spent. Fund balance for the City’s governmental funds consists of the following categories:
○ Nonspendable Fund Balance – includes amounts that are not in a spendable form, such as inventories, prepaid items, and long-term loans and notes receivables. It also includes amounts that are legally or contractually required to be maintained intact or required to be retained in perpetuity. ○ Restricted Fund Balance – includes amounts reported as restricted when constraints placed on the use of resources are either (1) externally imposed by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments; or (2) imposed by law through constitutional provisions or enabling legislation.
○ Committed Fund Balance – includes amounts that have been limited to specific purposes as defined in the City Charter or through adoption of an ordinance by the City Council, the highest level of decision-making authority of the City. These commitments may be changed or lifted, but only by the same formal action that was used to impose the constraint originally. City Council action to commit fund balance must occur within the fiscal reporting period while the amount committed may be subsequently determined.
○ Assigned Fund Balance – includes amounts that are intended to be used by the City for specific purposes that are neither restricted nor committed through City Council budgetary action, which include the approval of appropriations and revenue sources pertaining to the next fiscal year’s budget. On June 21, 2011, the City Council adopted a resolution establishing the City’s Governmental Fund Balance Financial Reporting Policy, which states that assigned fund balances are intended to be used for specific purposes through City Council budgetary actions. Intent is expressed by (a) the City Council or (b) the City Manager to which the City Council has delegated the authority to assign amounts to be used for specific purposes.
○ Unassigned Fund Balance – includes amounts within the General Fund, the residual resources, either positive or negative, in excess of what can be properly classified in one of the other four fund balance categories. Unassigned amounts are technically available for any purpose. Other governmental funds may only report a negative unassigned balance that was created after classification in one of the other four fund balance categories. 66 INTRODUCTORY

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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.

21. Property Taxes
Property taxes are collected on behalf of and remitted to the City by the County of Santa Clara (the “County”).

The amount of property tax levied is restricted by Article 13A of the California State Constitution (commonly referred to as Proposition 13). The County assesses property values, levies, bills, and collects the related property taxes as follows:

Secured Unsecured
Valuation/lien dates January 1 January 1
Levy dates October 1 July 1
Due dates (delinquent after) 50% on November 1 (December 10) July 1 (August 31) 50% on February 1 (April 10)
The City has elected to participate in the “Teeter Plan” offered by the County whereby cities receive 100% of secured property and supplemental property taxes levied in exchange for foregoing any interest and penalties collected on the related delinquent taxes. Accordingly, property taxes levied for the fiscal year are recorded as revenue when received from the County.

General property taxes are based either on a flat 1% rate applied to the fiscal 1976 full value of the property or on 1% of the sales price of the property on sales transactions and construction that occur after the fiscal 1976 valuation. The assessed value increases each year by an inflationary rate not to exceed the percentage change for the California Consumer Price Index (“CPI”), or 2%, whichever is less.

The City’s net assessed valuation for the year ended June 30, 2024, was approximately $246.5 billion, an increase of approximately 6.5% from the previous year. The City’s tax rate was approximately $0.173 per $100 of assessed valuation, which included the City’s share of the 1% basic levy and additional levies for general obligation bonds: Measures “O” and “P” (2000), Measure “O” (2002), and Measure “T” (2018).

22. Wastewater Treatment System
The Wastewater Treatment System is an enterprise of the City and is comprised of the Plant, including South Bay Water Recycling and the San José Sewage Collection System. The Clean Water Financing Authority was established to provide financing for the capital programs of the Plant including the regional water reclamation program.

The Plant provides wastewater treatment services to the City and to six other sewage collection agencies.

The City’s sewer service rates pay for the City’s share of the Plant operations, maintenance, administration and capital costs.

In 1959, the City and the City of Santa Clara entered into an agreement to jointly own and operate the Plant.

Under the agreement, the City serves as the administering agency and is responsible for operating and maintaining the Plant. The cities share in the capital and operating costs on a pro rata basis determined by the ratio of each city’s assessed valuation to the sum of both cities’ assessed valuations. Annually, these percentages are determined and applied to the capital and operating costs on an accrual basis. For the year ended June 30, 2024 , the City’s portion of the capital and operating costs was approximately 80.1% and the City’s interest in the net position of the Plant was approximately 80.1%. 67 FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT
NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2024
II. Stewardship, Compliance, and Accountability
A. Deficit Net Position
Prior to February 1, 2012, the California Redevelopment Law provided tax increment financing as a source of revenue to redevelopment agencies to fund redevelopment activities. Once a redevelopment area was adopted, the former Agency could only receive tax increment to the extent that it could show on an annual basis that it had incurred indebtedness that must be repaid with tax increment. Due to the nature of the redevelopment financing, the former Agency liabilities exceeded assets. Therefore, the Agency historically carried a deficit, which was expected to be reduced as future tax increment revenues were received and used to reduce its outstanding long-term debt. This deficit was transferred to the SARA on February 1, 2012. As of June 30, 2024, the SARA had a deficit of $967,466,000, which will be reduced when future redevelopment property tax revenues are distributed from the Redevelopment Property Tax Trust Fund administered by the County of Santa Clara Auditor-Controller to pay SARA’s annual enforceable obligations.

B. Deficit Unrestricted Net Position – Governmental Activities As of June 30, 2024, the City reported a negative balance in unrestricted net position for its governmental activities in the amount of a deficit of $2,497,387,000 after accounting for net pension liabilities and net OPEB liabilities.

C. Deficit Fund Balance – Nonmajor Governmental Funds
As of June 30, 2024, the City reported a deficit fund balance of $20,000 for the Edward Byrne Memorial Justice special revenue fund, which was primarily due to the purchase of Motorola radio consoles in FY 2019.
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III. Detailed Notes on All Funds

A. Cash, Deposits, and Investments

As of June 30, 2024, total City cash, deposits and investments, at fair value, are as follows (in thousands):

Fiduciary Funds

Governmental
Activities
Business-Type
Activities
Pension
Trust
Private-Purpose
Trust Custodial
Carrying
Value
Equity in pooled cash and investments $ 1,653,363 $ 1,058,052 $ - $ 237 $ 5,675 $ 2,717,327 Cash and investments - - - 1,066 - 1,066
Restricted assets:

Equity in pooled cash and
investments 129,435 109,609 - - - 239,044
Cash and investments with fiscal
agents 163,989 94,153 - 128,555 - 386,697
Other cash and investments 14,024 - - - - 14,024 Investments of retirement systems - - 9,012,270 - - 9,012,270 Total deposits and investments $ 1,960,811 $ 1,261,814 $ 9,012,270 $ 129,858 $ 5,675 $ 12,370,428 Deposits $ 15,637
Investments 12,354,791
Total deposits and investments $ 12,370,428
Pooled Cash and Investments Held in City Treasury. The City maintains a cash and investment pool that is available for use by all funds and certain component units. All investment activities in the City’s investment pool are executed in compliance with the requirements set forth in the City of San José Investment Policy and California Government Code Section 53600 et seq. The City Council adopted an investment policy (Council Policy 1-12) related to the City’s cash and investment pool (the “Policy”) on April 2, 1985, which is subject to annual review and was reviewed and amended on March 5, 2024. The Policy specifically prohibits trading securities for the sole purpose of speculating or taking an un-hedged position on the future direction of interest rates. Per the Policy, the investments conform to the California Government Code and the applicable limitations contained within the Policy.

Each fund’s portion of this pool is displayed on the accompanying governmental fund balance sheets and proprietary fund and fiduciary fund statements of net position as “Equity in pooled cash and investments held in City Treasury. ”
Other Cash and Investments. The City has other cash and investments outside the City Treasury that are invested pursuant to various governing bond covenants, San José Municipal Code or California Government Code provisions.

Other cash and investments consist primarily of deposits and investments with trustees related to the issuance of bonds and to certain loan programs operated by the City. These investments are made either in accordance with bond covenants, and are pledged for payment of principal, interest, and specified capital improvements or in accordance with trust and grant agreements.

Investments of Retirement Systems. The Retirement Systems’ funds are invested pursuant to policy guidelines established by the respective Boards. The objective of each investment policy is to maximize the expected return of the funds at an agreed upon level of risk. The Retirement Boards have established percentage guidelines for types of investments to ensure the portfolio is diversified. 69 FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT
NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2024
Investment Risk. The investments are subject to certain types of risk, including interest rate risk, credit risk, concentration of credit risk, custodial credit risk and foreign currency risk. These risks are addressed separately for the investments related to governmental and business-type activities and those related to the Retirement Systems, as follows:

1. Cash and Investments Managed by the City Treasurer
Interest Rate Risk. Interest rate risk is the risk that changes in market rates will adversely affect the fair value of an investment. Generally, debt investments with fixed coupons for longer terms are subject to more variability in their value as a result of changing interest rates. The City manages its exposure to interest rate risk by capping the weighted average maturity of the investment portfolio at 2.5 years (or 913 days). Also, the City sets the maximum maturity for every investment at the time of purchase by asset class, with the longest not to exceed five years.

In practice, the City purchases a combination of short-term and long-term investments and times the cash flows to meet liquidity needs for operations. The weighted average days to maturity of the City’s pooled cash and investments at June 30, 2024, was approximately 581 days.

Credit Risk. Credit risk is the risk that an issuer of an investment will not fulfill its obligations to the holder of the investment. When investing, the City applies the Prudent Investor Standard and acts with care, prudence and diligence to safeguard the principal, maintain liquidity and seek reasonable yields. The City’s investment policy has strict rating requirements. The City manages credit risk by selecting high quality securities, diversifying the portfolio and establishing monitoring procedures.

Investment in Local Agency Investment Fund. The City is a voluntary participant in the California Local Agency Investment Fund (“LAIF”) that is governed by the California Government Code under the oversight of the Local Investment Advisory Board (“Board”). The Board consists of five members as designated by state statute. The fair value of the City’s investment in the LAIF pool is reported in the accompanying financial statements at amounts based upon the City’s pro-rata share of the fair value provided by LAIF , for the entire LAIF portfolio (in relation to the amortized cost of that portfolio). The balance available for withdrawal is based on the accounting records maintained by LAIF , which are recorded on an amortized cost basis, which is different from the fair value of the City’s position in the LAIF pool.

LAIF is part of the State’s Pooled Money Investment Account (“PMIA”) that allows cities, counties and special districts to place money into the fund. LAIF operating account allows a maximum of 15 transactions per account in a calendar month. The transaction amount shall be no less than $5,000 and in increments of a thousand dollars. LAIF allocates interest earnings once every quarter. The interest earnings can be withdrawn in exact amount at any time. LAIF bond accounts have no restrictions on the amounts allowed on deposit, but are limited to one withdrawal every 30 days.

At June 30, 2024, the City’s pooled and fiscal agent investments in LAIF were approximately $252,383,014 and the SARA’s investments in LAIF was $557,063. The weighted average days to maturity of LAIF was 217 days at June 30, 2024. The total amount recorded by all public agencies in LAIF at June 30, 2024 was approximately $21.9 billion. PMIA is not registered with the Securities and Exchange Commission (“SEC”), but is required to invest according to the California Government Code. The total amount recorded by all public agencies in PMIA at June 30, 2024 was approximately $178 billion and of that amount, 81.33% was invested in U.S. Treasuries and agencies, 11.91% in depository securities, 6.56% in commercial paper, and

0.20% in loans.
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Concentration of Credit Risk. Concentration of credit risk is the risk of loss attributed to the magnitude of a government’s investment in a single issuer. The City’s investment policy sets forth the guidelines regarding concentration of credit risk.

The following table identifies the investment types that are authorized by the Policy as of June 30, 2024:

Authorized Investment Type
Maximum
Maturity
Maximum Percentage
or Dollar of Portfolio
Maximum
Investment
in
One Issuer
U.S. Treasury Obligations 5 years None None
U.S. Government Agency Issues 5 years None None
Supranationals 5 years 20% * None
Bankers’ Acceptances 180 days 20% * 5% *
Insured Time Deposits 3 years * 10% * FDIC Limit
Uninsured Time Deposits 18 months * 5% * 2.5% *
Commercial Paper 270 days 20% * 5% *
Negotiable Certificates of Deposit 1 year * 20% * 5% * Repurchase Agreements 92 days * 20% * 5% *
Reverse Repurchase Agreements 30 days *
Lesser of $25 million or
20% * None
Corporate Medium Term Notes 5 years 30% 5% *
California Local Agency Investment Fund N/A State Treasurer Limit None Joint Powers Authority Pools N/A 20% 10%
Money Market Mutual Funds N/A 20% 10%
Municipal Bonds - Category 1 (City) 5 years 10% * 5% * Municipal Bonds - Category 2 (State of CA) 5 years 5% * 5% * Municipal Bonds - Category 3 (CA Issuers) 5 years 30% 5% * Municipal Bonds - Category 4 (Other 49 States) 5 years 30% 5% * Investment Agreements None None None
Collateralized Securities - (Issued by Governmental
Entities) 5 years 15%* None
Collateralized Securities - (Issued by Private Entities) 5 years 5% * None

* Represents where the Policy is more restrictive than the California Government Code.

Other restrictions on investments are summarized as follows:
● Purchases of United States government agency securities are limited to issues of Federal Agriculture Mortgage Corporation (“Farmer Mac”), Federal Farm Credit Banks, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, and the Federal National Mortgage Association. Investment in Farmer Mac may not exceed 10% of the total portfolio.
● Purchases of supranationals are limited to International Bank for Reconstruction and Development, International Finance Corporation and Inter-American Development Bank. Securities shall be rated in a rating category of “AA” or its equivalent or better by Moody’s Investors Services (“Moody’s”), S&P Global Ratings (“S&P”), or Fitch Ratings (“Fitch”). If rated by more than one organization, no rating may be lower than the category described in the preceding sentence at the time of purchase. 71 FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT
NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2024
● Purchases of bankers’ acceptances (“BAs”) are limited to issues by domestic U.S. or foreign bank branches that are licensed by federal or state governments. Foreign bank issued BAs must be dollar- denominated. Issuing banks must have a short-term rating of “P-1, A-1 or F-1” or better by two of the three nationally recognized statistical rating organizations, Moody’s, S&P , or Fitch, respectively. Long- term ratings of the bank or its holding company must be in a rating category of “A” or its equivalent or better by Moody’s, S&P , or Fitch. If rated by more than one organization, no rating may be lower than the category described in the preceding sentence at the time of purchase. ● Deposits up to 10% of the portfolio may be invested in banks and savings and loans and deposits shall not exceed the net worth of that depository. Depositories must have a short-term rating of “P-1, A-1, or F-1” or better by two of the three nationally recognized statistical rating organizations: Moody’s, S&P , or Fitch, respectively. Long-term ratings of the bank or its holding company must be rated in a rating category of “A” or its equivalent or better by Moody’s, S&P , or Fitch. If rated by more than one organization, no rating may be lower than the category described in the preceding sentence at the time of purchase. Deposits shall be either insured by the Federal Deposit Insurance Corporation (“FDIC”) or collateralized in the manner prescribed by State law for depositories. Rating requirements do not apply to depositories where the City’s deposits are fully insured by the FDIC. ● Commercial paper eligible for investment must be rated “P-1, A-1 or F-1” or better by two of the three nationally recognized statistical rating organizations; Moody’s, S&P , or Fitch, respectively. Issuing corporations must be organized and operating within the United States, have total assets in excess of $500,000,000 and shall issue debt, other than commercial paper, if any, that is rated in a rating category of “A” or its equivalent or better, by Moody’s, S&P , or Fitch. If rated by more than one organization, no rating may be lower than the category described in the preceding sentence at the time of purchase. ● Negotiable certificates of deposit are limited to banks and savings and loans with an issuer short-term rating of “P-1, A-1, F-1” or better by two of the three nationally recognized statistical rating organizations:

Moody’s, S&P , or Fitch, respectively. No rating may be lower than any of the ratings listed above. The outstanding debt of the bank or its holding company must be in a rating category of “A” or its equivalent or better by Moody’s, S&P or Fitch. If rated by more than one organization, no rating may be lower than the category described in the preceding sentence at the time of purchase. ● Repurchase agreements are to be executed only with primary dealers of the Federal Reserve Bank of New York, which have entered into the City’s Master Repurchase Agreement and any subsequent amendments to the Master Repurchase Agreement. Securities accepted as collateral for the repurchase agreement are limited to U.S. Treasury or U.S. Federal Government Agencies permitted under the Policy. The market value of the securities that have been accepted as collateral shall, at the time of transfer, equal at least 102 percent of face value of the repurchase agreement. For other than overnight investments, the securities transferred shall be marked to market on a daily basis and maintained at a market value to at least 102 percent of the repurchase agreement’s face value. ● Reverse repurchase agreements under the Policy are limited to the lesser of $25,000,000 or 20% of the portfolio value and to those occasions where unanticipated short-term cash requirements can be met more advantageously by initiating a reverse repurchase agreement than by selling a security into the secondary market prior to maturity.
● Corporate medium term notes eligible for investment must be in a rating category of “A” or its equivalent or better by two of the three nationally recognized statistical rating organizations Moody’s, S&P , or Fitch.

No rating may be lower than the category described in the preceding sentence at the time of purchase. 72 INTRODUCTORY

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● Funds invested in LAIF , a State of California managed investment pool, may be made up to the maximum dollar amount per separate legal entity in conformity with account balance limits authorized by the California State Treasurer. The current maximum amount authorized by the State Treasurer is $75 million.
● Funds may be invested in a Joint Powers Authority Pool (“JPAP”) organized pursuant to Government Code Section 6509.7 that invests in the securities and obligations authorized in Section 53601.

Investments in JPAPs will be limited to the California Asset Management Program (“CAMP”) and the Investment Trust of California (“CalTRUST”). Ratings of a JPAP must be in a rating category of “AAA” or its equivalent by Moody’s, S&P or Fitch. If rated by more than one organization, no rating may be lower than the category described in the preceding sentence. No more than 10% of the portfolio shall be invested in any single JPAP . JPAPs may not exceed 20% of the City’s portfolio. ● Investments in money market mutual funds are limited to those funds registered with the SEC and for which either one of the credit criteria are met: (1) obtained the highest ranking or highest letter and numerical rating provided by no less than two nationally recognized rating services or (2) retained an investment advisor registered with the SEC or exempt from the SEC registration requirements with no less than five years of experience investing in securities and obligations authorized by California Government Code Section 53601 and managing money market mutual funds with assets under management in excess of $500,000,000. Investments by the funds are restricted to U.S. Treasury and U.S. Government Agency backed securities permitted under the Policy and must be maintained at no less than $1.00 per share.
● Municipal bonds investments can be made in four categories: (1) bonds issued by the City or its agencies (as defined in the Policy), (2) by the State of California, (3) by other California local agencies, and (4) by any of the other 49 states. Eligible securities must be in a rating category of “A” or its equivalent or better by two of the three nationally recognized statistical rating organizations; Moody’s, S&P , or Fitch.

No rating may be lower than the category described in the preceding sentence at the time of purchase. ● Investment agreements may be used for the investment of bond proceeds in accordance with the permitted investment provisions of the specific bond indentures and in accordance with other safeguards outlined in the Policy to reduce the risk associated with a provider’s inability to meet its contractual obligations.
● Collateralized securities can be made in two categories: (1) Mortgage backed securities and collateralized mortgage obligations issued by governmental agencies and (2) Asset backed securities issued by private entities. Eligible securities must be in a rating category of “AA” or better by Moody’s, S&P , or Fitch. If rated by more than one organization, no rating may be lower than the category described in the preceding sentence at the time of purchase.

The Policy permits the Director of Finance to authorize investments that depart from the Policy’s numerical limits if such an action is in the best interest of the City and is otherwise consistent with the Policy and applicable City, state and federal laws. Whenever a deviation or exception to the Policy occurs, it must be reported to the City Manager within 3 business days and to the City Council within 10 days of its discovery. 73 FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT
NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2024
The following schedule indicates the interest rate risk, credit risk and concentration of credit risk of the City’s investments, as of June 30, 2024 (in thousands). The credit ratings listed are for Moody’s and S&P , respectively.

Maturity
Type of Investment Credit Rating
Under 30
Days
31 - 180
Days
181 - 365
Days
1 - 5
Years
Carrying
Value

Pooled investments in the City Treasury:

Treasury Notes Aaa / N/A $ - $ 74,168 $ 29,513 $ 29,971 $ 133,652 Treasury Discounts N/A - 59,430 - - 59,430 Federal Home Loan Bank Aaa / AA+ 49,847 136,901 - - 186,748 Federal Home Loan Bank - Callable Aaa / AA+ - 132,027 108,913 215,485 456,425 Federal National Mortgage Association Aaa / AA+ 14,705 15,175 39,485 72,344 141,709 Federal National Mortgage Association - Callable Aaa / AA+ - - 28,699 37,879 66,578 Federal Farm Credit Bank Aaa / AA+ - 9,964 - 20,291 30,255 Federal Farm Credit Bank - Callable Aaa / AA+ - 9,951 3,386 91,168 104,505 Federal Home Loan Mortgage Corporation Aaa / AA+ 69,857 14,483 23,207 128,895 236,442 Federal Home Loan Mortgage Corporation - Callable Aaa / AA+ 14,995 - 80,149 58,995 154,139 Farmer Mac Interest Bearing N/A - - - 21,073 21,073 Farmer Mac Interest Bearing-Callable N/A - - - 9,345 9,345 Supranationals Aaa / AAA - 43,715 31,969 128,413 204,097 Corporate Medium Term Notes Aaa / AAA - - 47,923 329,913 377,836 Corporate Floaters N/A - - 5,511 - 5,511
Negotiable Certificates of Deposit N/A - - 24,979 - 24,979 Commercial Paper N/A 75,000 - - - 75,000 Asset Backed Securities Aaa / AAA - - - 39,230 39,230 Municipal Bonds Aaa / AAA 2,450 46,164 47,114 263,356 359,084 Joint Powers Authority Pool Not Rated - - 221,620 - 221,620 California Local Agency Investment Fund Not Rated - - 28,658 - 28,658 Total pooled investments in the City Treasury 226,854 541,978 721,126 1,446,358 2,936,316

Investments with fiscal agents:

Treasury Notes N/A - 26,568 - - 26,568
Federal Farm Credit Bank Aaa / AA+ - - - 4,639 4,639 Money Market Mutual Funds Aaa / AAA 22,080 - - - 22,080 California Local Agency Investment Fund Not Rated - - 223,725 - 223,725 Total investments with fiscal agents 22,080 26,568 223,725 4,639 277,012

Total Citywide investments (excluding Retirement
Systems and the SARA) $ 248,934 $ 568,546 $ 944,851 $ 1,450,997 3,213,328 Trust Funds:

Total investments in Retirement Systems (See page 79) 9,012,270 Total investments in the SARA (See page 183) 129,193 Total investments $ 12,354,791
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The City has the following recurring fair value measurements as of June 30, 2024 (in thousands):

Fair Value Measurement Using
Carrying Value
Quoted Prices in
Active Markets for
Identical Assets
Significant Other
Observable Inputs
Significant
Unobservable
Inputs
6/30/24 Level 1 Level 2 Level 3
Pooled Investments in the City Treasury:

Investments by fair value level
Treasury Notes $ 133,652 $ 133,652 $ - $ -
Treasury Discounts 59,430 59,430 - -
Federal Home Loan Bank 186,748 183,763 2,985 - Federal Home Loan Bank - Callable 456,425 - 456,425 - Federal National Mortgage Association 141,709 - 141,709 - Federal National Mortgage Association - Callable 66,578 - 66,578 - Federal Farm Credit Bank 30,255 - 30,255 -
Federal Farm Credit Bank - Callable 104,505 - 104,505 - Federal Home Loan Mortgage Corporation 236,442 69,857 166,585 - Federal Home Loan Mortgage Corporation - Callable 154,139 - 154,139 - Farmer Mac Interest Bearing 21,073 - 21,073 -
Farmer Mac Interest Bearing-Callable 9,345 - 9,345 - Supranationals 204,097 - 204,097 -
Corporate Medium Term Notes 377,836 - 377,836 - Corporate Floaters 5,511 - 5,511 -
Negotiable Certificates of Deposit 24,979 - 24,979 - Commercial Paper 75,000 - 75,000 -
Asset Backed Securities 39,230 - 39,230 -
Municipal Bonds 359,084 - 359,084 -
Total Investments by fair value level 2,686,038 446,702 2,239,336 -

Investments not subject to fair value hierarchy
Joint Powers Authority Pool 221,620 - - -
California Local Agency Investment Fund 28,658 - - - Total Investments not subject to fair value hierarchy 250,278 - - - Total Pooled Investments in the City Treasury 2,936,316 446,702 2,239,336 -

Investments with fiscal agents:

Investments by fair value level
Treasury Notes 26,568 26,568 - -
Federal Farm Credit Bank 4,639 - 4,639 -
Total Investments by fair value level 31,207 26,568 4,639 -

Investments not subject to fair value hierarchy
California Local Agency Investment Fund 223,725 - - - Money Market Mutual Funds 22,080 - - -
Total Investments not subject to fair value hierarchy 245,805 - - - Total Investments with fiscal agents 277,012 26,568 4,639 -

Total Citywide investments (excluding Retirement
Systems and the SARA) 3,213,328 $ 473,270 $ 2,243,975 $ -

Trust Funds:

Total investments in Retirement Systems (See page 79) 9,012,270 Total investments in the SARA (See page 183) 129,193
Total investments $ 12,354,791
75 FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT
NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2024
Fair Value Measurement Categorization. The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. Money Market Mutual Funds and LAIF are valued by net asset value. The inputs and techniques used for securities are not necessarily an indication of risk associated with investing in these securities. The City’s investments in Money Market Mutual Funds and LAIF are not subject to the fair value hierarchy.

Securities classified in Level 1 of the fair value hierarchy include Treasury notes and certain US Agency securities. Treasury notes and US Agency securities purchased with less than 90 days to maturity are priced primarily by automated Intercontinental Exchange (ICE) institutional bond pricing with additional inputs from evaluators gathering information from market sources and integrating relative credit information, observed market movements, and sector news. All other securities in the City’s investment pool are classified in Level 2 of the fair value hierarchy. ICE applies various methodologies to price Level 2 securities depending on the asset class. For instance, most US agency notes are valued by creating a bullet spread scale for each issuer with maturities going out to forty years. Municipal bonds are valued with multi-dimensional model or series matrices utilizing standard inputs including Municipal Securities Rulemaking Board (“MSRB”) reported trades and material event notices. Corporate Notes and Supranationals are valued with evaluators gathering information from market sources and integrating relative credit information, observed market movements, and sector news. Mortgage backed and Asset backed securities, and Negotiable CDs are valued upon the given tranche, a cash flow stream model or an option adjusted spread model.

Custodial Credit Risk. Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, the City will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker - dealer) to a transaction, the City will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code requires that a financial institution secure its deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by the depository regulated under state law (unless so waived by the governmental unit). The market value of the pledged governmental securities and/or first trust deed mortgage notes held in the collateral pool must be at least 110% and 150% of the City’s deposits, respectively. The collateral is held by the pledging financial institution’s trust department and is considered held in the City’s name. As of June 30, 2024, the City’s deposits were collateralized at 110%. All investments in the City Treasury were in the City’s name. Neither deposits nor investments held by the City were subject to custodial credit risk.

Concentration of Credit Risk. Concentration of credit risk is the risk that the failure of any one issuer would place an undue financial burden on the City. The City mitigates the concentration of credit risk by diversifying the portfolio and limiting investments in any one issuer to a maximum weight in various asset classes. No more than 5% of the portfolio shall be invested in aggregate of any single institution of the following types:

Bankers’ Acceptances, Commercial Paper, Negotiable Certificates of Deposits, Repurchase Agreements, and Corporate Notes. Investments issued by or explicitly guaranteed by the U.S. government are exempt from this requirement.

As of June 30, 2024, the City’s pooled investments in the City Treasury have investments that represent 5% or more of the total pooled investments in the following:

Federal Home Loan Bank 21.90%
Federal Home Loan Mortgage Corporation 13.30%
Federal National Mortgage Association 7.09%

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Foreign Currency Risk. The risk that changes in exchange rates will adversely affect the fair value of an investment. As of June 30, 2024, the City’s Policy does not permit investments in the pool to hold foreign currency; as such the investments in the City’s investment pool were not subject to foreign currency risk.

2. Retirement Systems
Investment Policies – The City’s Municipal Code delegates authority to the Boards of Administration of PFDRP and FCERS (collectively the “Retirement Boards”) to invest monies of the respective plans as provided in the Municipal Code. Each Retirement Board has adopted detailed investment guidelines consistent with the conditions and limitations set forth in the Municipal Code.

The Board of Administration of PFDRP approved the investment policy on October 5, 2023, with the asset allocation being updated and approved on May 2, 2024. The asset allocation was prepared to align with the long-term expected returns of the underlying asset classes and PFDRP’s adopted actuarial assumed rate of return as utilized in the June 30, 2023 actuarial valuation.

The PFDRP’s investment allocation for the Defined Benefit Pension Plan is as follows:

PFDRP - Pension
Asset Class
Target
Asset Allocation Asset Class
Target
Asset Allocation
Public equity 42.0% Private real assets 4.0%
Private equity 10.0% Venture / growth capital 4.5%
Cash and cash equivalents 5.5% Market neutral strategies 3.0% Core real estate 5.0% Emerging market bonds 2.0%
Immunized cash flows 5.0% High yield bonds 2.0%
Investment grade bonds 4.5% Treasury inflation-protected securities 2.0% Growth real estate 4.0% Long-term government bonds 1.5% Private debt 5.0%

The PFDRP’s investment allocation for the Postemployment Healthcare Plan is as follows:

PFDRP - Postemployment Healthcare
Asset Class
Target
Asset Allocation
Public equity 58%
Investment grade bonds 14%
Core real estate 12%
Short-term investment grade bonds 6%
Commodities 5%
Long-term government bonds 5%
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The FCERS Defined Benefit Pension Plan investment policy was updated and approved by the FCERS’ Board of Administration on September 21, 2023, with the asset allocation being updated and approved on April 18, 2024. The asset allocation was prepared to align with the long-term expected returns of the underlying asset classes and the FCERS’ adopted actuarial assumed rate of return as utilized in the June 30, 2023 actuarial valuation.

The FCERS’ Defined Benefit Pension Plan investment asset allocation is as follows:

FCERS - Pension
Asset Class
Target
Asset Allocation Asset Class
Target
Asset Allocation
Public equity 49% Emerging market bonds 3%
Private equity 8% Private debt 3%
Investment grade bonds 6% Market neutral strategies 3% Core real estate 5% Private real assets 3%
Immunized cash flows 5% Long-term government bonds 4% Venture / growth capital 4% Treasury inflation-protected securities 2% Growth real estate 3% High yield bonds 2%

The FCERS Postemployment Healthcare Plan investment policy and asset allocation were updated and approved by the FCERS’ Board of Administration on January 20, 2022 and April 21, 2022, respectively. The asset allocation was prepared to align with the long-term expected returns of the underlying asset classes and the FCERS’ adopted actuarial assumed rate of return as utilized in the June 30, 2023 actuarial valuation.

FCERS - Postemployment Healthcare
Asset Class
Target
Asset Allocation
Public equity 58%
Investment grade bonds 14%
Core real estate 12%
Short-term investment grade bonds 6%
Commodities 5%
Long-term government bonds 5%
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At June 30, 2024, the Retirement Systems held the following investments (in thousands):

PFDRP FCERS Total
Securities and other:

Fixed income:

Investment grade bonds $ 265,736 $ 210,611 $ 476,347 Immunized cash flows 378,075 107,116 485,191
Emerging market bonds 100,743 90,474 191,217
Long-term government bonds 85,639 73,265 158,904 Private debt 225,809 114,577 340,386
Treasury inflation-protected securities 101,597 59,962 161,559 High yield bonds 99,997 62,174 162,171
Cash and cash equivalents 393,621 171,243 564,864 Short-term investment grade bonds 15,107 13,823 28,930 Total fixed income 1,666,324 903,245 2,569,569
Commodities 16,089 20,700 36,789
Core real estate 259,391 179,746 439,137
Growth real estate 223,787 120,875 344,662
Venture / growth capital 92,386 26,705 119,091
Market neutral strategies 150,060 92,390 242,450 Private equity 494,833 406,491 901,324
Private real assets 127,435 72,187 199,622
Public equity 2,410,934 1,748,692 4,159,626
Total investments $ 5,441,239 $ 3,571,031 $ 9,012,270 Investments are subject to certain types of risks, including interest rate risk, custodial credit risk, credit quality risk, foreign currency risk, and concentration of credit risk. The following describes those risks:

Market Risk - General market risk factors exist that could cause depreciation or appreciation of the Retirement Systems’ investment portfolio. These risks include general, economic, political and regulatory risks. The Retirement Systems’ investments may be impacted by changes caused by global and domestic market conditions and industry-specific economic and regulatory conditions.

Interest Rate Risk – The fair value of fixed income investments fluctuates in response to changes in market interest rates. Increases in prevailing interest rates generally translate into decreases in fair value of those instruments. The fair value of interest-sensitive instruments may also be affected by the creditworthiness of the issuer, prepayment options, and other general interest rate conditions. Certain fixed income investments have call provisions that could result in shorter maturity periods. Additionally, most other types of investments are also sensitive to changes in the interest rates, generally to a lesser extent. The Retirement Systems’ asset allocation details how much of the Systems’ investments are fixed income, as well as other types of investments. The Retirement Systems’ do not have a policy regarding interest rate risk. 79 FOR THE YEAR ENDED JUNE 30, 2024

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The following tables provide the segmented time distribution for fixed income investments based on expected maturity (in months and years) as of June 30, 2024 (in thousands):

PFDRP

0 - 3
months
3 - 6
months
6 months -
1 year 1 - 5 years 5 - 10 years
More than
10 years
Total Fair
Value Cost
Investment grade bonds (2) $ 134 $ - $ 5,046 $ 49,594 $ 84,694 $ 125,904 $ 265,372 $ 274,547 Immunized cash flows (3) 17,905 12,629 30,443 317,098 - - 378,075 381,159 Treasury inflation-protected
securities 5,064 4,478 11,271 80,784 - - 101,597 107,252 High yield bonds 265 77 1,804 61,079 36,497 275 99,997 101,848 Long-term government bonds - - - - - 85,639 85,639 117,172 Short-term investment grade bonds 15,107 - - - - - 15,107 15,106 Emerging market bonds (4) - - - 52,633 - - 52,633 50,929 Private debt (1) 2,643 - - - - - 2,643 3,197 Total fixed income $ 41,118 $ 17,184 $ 48,564 $ 561,188 $ 121,191 $ 211,818 $ 1,001,063 $ 1,051,210

FCERS

0 - 3
months
3 - 6
months
6 months -
1 year 1 - 5 years 5 - 10 years
More than
10 years
Total Fair
Value Cost
Investment grade bonds (2) $ 1,569 $ - $ 1,698 $ 34,067 $ 82,173 $ 90,125 $ 209,632 $ 215,760 Immunized cash flows (3) 6,957 4,721 11,586 83,852 - - 107,116 106,299 Treasury inflation-protected
securities 2,989 2,643 6,653 47,677 - - 59,962 63,605 High yield bonds 242 48 1,030 37,909 22,893 52 62,174 63,434 Long-term government bonds - - - - - 73,265 73,265 102,330 Short-term investment grade bonds 13,823 - - - 13,823 13,823 Emerging market bonds (4) - - - 50,942 50,942 49,816 Private debt (1) 2,786 - - - - - 2,786 3,633 Total fixed income $ 28,366 $ 7,412 $ 20,967 $ 254,447 $ 105,066 $ 163,442 $ 579,700 $ 618,700

(1) Private debt is a combination of fixed income and separately managed accounts. The separately managed accounts are not included in this table. (2) Investment grade bonds accounts consist of fixed income securities and futures. Futures are not included in this table. (3) Immunized cash flows are a combination of cash and fixed income securities. Cash is not included in this table. (4) Emerging market bonds allocated accounts consist of fixed income securities, equity securities, and different types of derivatives. The equity and derivative securities are not included in this table.

Custodial Credit Risk – Custodial credit risk is the risk that the Retirement Systems will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party, if that outside party fails. The Retirement Systems do not have a policy regarding custodial credit risk. As of June 30, 2024, all of the Retirement Systems’ investments are held in the Retirement Systems’ name and/or not exposed to custodial credit risk.

Credit Quality Risk – The Retirement Systems’ investment policy allows for investments in a wide variety of domestic and international debt securities that may carry a high rating, low rating, or be unrated. Generally credit risk is managed through establishing investment guidelines for every investment manager. Investment managers may, as part of their investment strategy, invest in securities where the issuer’s ability or willingness to pay is limited. At times, these debt securities may be converted into other debt, equity, or hybrid securities that have different risk and return characteristics than the securities initially purchased. The Retirement Systems may hedge against the possible adverse effects of currency fluctuations on the Retirement Systems’ portfolio of international fixed income obligations when it is considered appropriate. This is 80 INTRODUCTORY

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typically achieved using forward currency contracts. Short-term investments may consist of commercial paper rated at least A-1 or P-1, repurchase agreements, short-term U.S. securities, and other money market investments. Nationally recognized statistical rating organizations provide ratings of debt securities’ quality based on a variety of factors, such as the financial condition of the issuers, which provide investors with some idea of the issuer’s ability to meet its obligations.

The table provides information for the portfolios as of June 30, 2024 concerning credit risk (in thousands) and reflect only securities held in the Retirement Systems’ names.

PFDRP FCERS
S&P Quality Rating Fair Value
Fair Value as a % of
Total Fixed Income Fair Value
Fair Value as a % of
Total Fixed Income
AAA $ 21,525 2.15% $ 16,807 2.90%
AA+ 595,908 59.53% 321,124 55.39%
AA 123,493 12.34% 59,867 10.33%
AA- 3,416 0.34% 2,266 0.39%
A+ 3,527 0.35% 2,681 0.46%
A 12,218 1.22% 8,207 1.42%
A- 11,988 1.20% 8,648 1.49%
BBB+ 11,699 1.17% 8,109 1.40%
BBB 15,947 1.59% 9,720 1.68%
BBB- 68,596 6.85% 62,534 10.79%
BB+ 12,426 1.24% 6,867 1.18%
BB 18,312 1.83% 12,492 2.15%
BB- 18,595 1.86% 10,688 1.84%
B+ 20,150 2.01% 12,436 2.15%
B 11,606 1.16% 7,884 1.36%
B- 10,205 1.02% 6,356 1.10%
CCC+ 6,630 0.66% 4,154 0.72%
CCC 2,717 0.27% 1,520 0.26%
CCC- 389 0.04% 244 0.04%
Not Rated 31,716 3.17% 17,096 2.95%
Total $ 1,001,063 100.00% $ 579,700 100.00%
Foreign Currency Risk – This is the risk that changes in the exchange rates will adversely affect the fair value of underlying investments. To mitigate this risk, the Retirement Systems’ investment policies permit individual investment managers to mitigate the impact of currency fluctuation on the underlying asset value.

The Retirement Systems’ investment managers enter into international forward currency contracts, which are commitments to purchase or sell stated amounts of international currency. The Retirement Systems utilize these contracts to control exposure and facilitate the settlement of international security purchase and sale transactions. At June 30, 2024, the Retirement Systems’ net positions in these contracts are recorded at fair value as international currency contract investments. The fair values of international currency contracts are determined by quoted currency prices from national exchanges. The Retirement Systems’ commitments relating to international currency contracts are settled on a net basis. 81 FOR THE YEAR ENDED JUNE 30, 2024

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The following tables provide information as of June 30, 2024, concerning the fair value of investments that are subject to foreign currency risk (in thousands):

PFDRP
Currency Name Cash Public Equity Growth Real Estate Total Exposure Australian dollar $ - $ 2,626 $ - $ 2,626
Canadian dollar 1 8,639 - 8,640
Danish krone - 8,088 - 8,088
Euro currency 366 82,187 36,779 119,332
Hong Kong dollar - 6,284 - 6,284
Japanese yen 31 16,454 - 16,485
Norwegian krone - 4,237 - 4,237
Swedish krona 1 4,748 - 4,749
Swiss franc 13 28,072 - 28,085
United Kingdom pound 435 48,802 - 49,237
Total $ 847 $ 210,137 $ 36,779 $ 247,763

FCERS
Currency Name Cash Public Equity Private Equity
Growth Real
Estate Total Exposure
Australian dollar $ - $ 1,815 $ - $ - $ 1,815
Canadian dollar 1 5,343 - - 5,344
Danish krone - 4,099 - - 4,099
Euro currency 242 49,123 243 19,314 68,922
Hong Kong dollar - 3,787 - - 3,787
Japanese yen 41 10,555 - - 10,596
Norwegian krone - 2,924 - - 2,924
Swedish krona - 2,804 - - 2,804
Swiss franc 6 17,034 - - 17,040
Taiwanese new dollar 24 - - - 24
United Kingdom pound 277 30,985 - - 31,262
Total $ 591 $ 128,469 $ 243 $ 19,314 $ 148,617
Investment Concentration Risk – The Retirement Systems’ investment policies specify that investments shall be diversified with the intent to minimize the risk of large investment losses. The total portfolio shall be constructed in a way to provide prudent diversification with regard to the concentration of holdings in individual asset classes, issues, issuers, geographies or industries. In addition, assets will be assigned to a variety of investment managers that employ a range of investment management strategies. No single investment management firm shall be authorized to manage more than 15% of the applicable plan’s assets without approval by the applicable Retirement Board, with the exception of passive management, where the applicable plan’s assets are not held in the applicable plan’s name at the applicable plan’s custodial bank.

In such cases, there is no concentration limit. As of June 30, 2024, the Retirement Systems did not hold investments in any one issuer, excluding U.S. government guaranteed investments, that represented 5% or more of the total plan net position or total investments.

Derivative Instruments – The Retirement Systems’ investment policies allow for investments in derivative instruments that comply with the Retirement Systems’ objectives of providing a cost-effective means of managing portions of a portfolio and to manage risk through hedging activities. The Retirement Systems are currently authorized to use derivative instrument strategies to equitize cash during portfolio transitions until physical securities are in place and to reproduce or replicate a physical holding that corresponds to the applicable Retirement Board’s approved policy benchmark. In addition to the Retirement Systems’ internal derivative instrument policies, it is understood that the mandates of certain investment managers retained by the Retirement Systems may use derivative instruments.

Derivative instruments are reported at fair value. Derivative instruments traded on a national or international exchange are valued at the last reported sales price on the last business day of the fiscal year at current 82 INTRODUCTORY

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exchange rates, if applicable. Futures contracts are marked-to-market at the end of each trading day, and the settlement of gains or losses occur on the following business day through variation margins. As a result, futures have no fair value as of June 30, 2024. The fair value of international currency forwards represents the unrealized gain or loss on the related contracts, which is calculated based on the difference between the specified contract exchange rate and the exchange rate at the end of the reporting period.

The fair values and notional amounts for derivative instruments outstanding as of June 30, 2024, classified by type, and the changes in fair value of such derivative instruments for the year then ended as reported in the financial statements are as follows (in thousands):

PFDRP

Net Appreciation/(Depreciation) in Fair Value
of Investments through June 30, 2024 Fair Value at June 30, 2024 Investment Derivative Instruments Classification Amount Classification Amount Notional
Amount/Shares
Fixed income futures long Investment income $ 552 Futures $ - 33,566 Fixed income futures short Investment income (104) Futures - (817) FX forwards Investment income (42) FX fowards - $ 774 Index futures long Investment income 79 Futures - 15,934 Index futures short Investment income 153 Futures - (43,598) Total derivative instruments $ 638 $ -

FCERS

Net Appreciation/(Depreciation) in Fair Value
of Investments through June 30, 2024 Fair Value at June 30, 2024 Investment Derivative Instruments Classification Amount Classification Amount Notional
Amount/Shares
Fixed income futures long Investment income $ 1,564 Futures $ - 147,597 Fixed income futures short Investment income (16) Futures - (1,279) FX forwards Investment income (2) FX forwards - $ 351 Index futures long Investment income 19 Futures - 11,247 Index futures short Investment income 205 Futures - (31,672) Total derivative instruments $ 1,770 $ -
Investment derivative instruments are also subject to counterparty credit risk (non-exchange traded). The following describes the risks applicable to the investment derivative instruments that are reported as of June 30, 2024.

Counterparty Credit Risk – The Retirement Systems are exposed to credit risk on derivative instruments that are in asset positions and non-exchange traded. The Retirement Systems’ investments in forward currency contracts bear counterparty credit risk in that parties to the contracts may fail to perform according to the terms of the contract.

As of June 30, 2024, PFDRP’s total commitments in forward currency contracts to purchase and sell international currencies were $(774,000), and $774,000 with fair values of $(774,000) and $775,000, respectively, held by counterparties with S&P rating of at least AA+.

As of June 30, 2024, FCERS’ total commitments in forward currency contracts to purchase and sell international currencies were $(351,000), and $351,000 with fair values of $(351,000) and $351,000, respectively, held by counterparties with S&P rating of at least AA+.

Fair Value Measurements – The Retirement Systems categorize their fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The fair value hierarchy, which has three levels, is based on the valuation inputs used to measure an asset’s fair value and gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) 83 FOR THE YEAR ENDED JUNE 30, 2024

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NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2024
and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy are as follows:

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

Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for an asset or liability, either directly or indirectly. Inputs to the valuation include: 1) quoted prices for similar assets or liabilities in active markets; 2) quoted prices for identical or similar assets or liabilities in markets that are not active; 3) inputs other than quoted prices that are observable for the asset or liability; and 4) market- corroborated inputs.

Level 3 inputs are unobservable inputs for an asset or liability where there are little market activities. The inputs into the determination of fair value are based upon the best information in the circumstances and may require management judgment or estimation.
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The Retirement Systems have the following recurring fair value measurements as of June 30, 2024:

PFDRP Fair Value Measurement Using
(In Thousands) Total Level 1 Level 2 Level 3
Net Asset
Value (NAV)
Investments by fair value level
Public equity $ 2,410,934 $ 409,306 $ - $ - $ 2,001,628 Cash and cash equivalents 393,621 393,621 - - - Private equity 494,833 - - 25,362 469,471 Core real estate 259,391 - - - 259,391
Investment grade bonds 265,736 54,364 164,279 - 47,093 Growth real estate 223,787 - - - 223,787
Immunized cash flows 378,075 323,647 54,428 - - Private debt 225,809 - - 2,642 223,167
Market neutral strategies 150,060 - - - 150,060 Emerging market bonds 100,743 - - - 100,743 Treasury inflation-protected securities 101,597 101,597 - - - High yield bonds 99,997 189 89,550 - 10,258 Long-term government bonds 85,639 - - - 85,639 Private real assets 127,435 - - 68 127,367 Venture / growth capital 92,386 - - - 92,386 Short-term investment grade bonds 15,107 15,107 - - - Commodities 16,089 - - - 16,089
Total investments measured at fair value level $ 5,441,239 $ 1,297,831 $ 308,257 $ 28,072 $ 3,807,079

FCERS Fair Value Measurement Using
(In Thousands) Total Level 1 Level 2 Level 3
Net Asset
Value (NAV)
Investments by fair value level
Public equity $ 1,748,692 $ 288,453 $ - $ - $ 1,460,239 Private equity 406,491 - - 25,218 381,273
Investment grade bonds 210,611 38,368 116,060 - 56,183 Core real estate 179,746 - - - 179,746
Growth real estate 120,875 - - - 120,875
Private debt 114,577 - - 2,786 111,791
Market neutral strategies 92,390 - - - 92,390 Emerging market bonds 90,474 - - - 90,474 Immunized cash flows 107,116 95,196 11,920 - - Long-term government bonds 73,265 - - - 73,265 Cash and cash equivalents 171,243 171,243 - - - Treasury inflation-protected securities 59,962 59,962 - - - High yield bonds 62,174 - 56,267 - 5,907 Private real assets 72,187 - - 45 72,142
Commodities 20,700 - - - 20,700
Venture / growth capital 26,705 - - - 26,705 Short-term investment grade bonds 13,823 13,823 - - - Total investments measured at fair value $ 3,571,031 $ 667,045 $ 184,247 $ 28,049 $ 2,691,690 Equity and Fixed Income Securities
Debt and equity securities classified in Level 1 of the fair value hierarchy are valued using prices quoted in active markets issued by pricing vendors for these securities. Debt and equity securities classified in Level 2 of the fair value hierarchy are valued using prices determined by matrix pricing techniques maintained by the various pricing vendors for these securities. Matrix pricing is used to value securities based on the securities’ relationship to benchmark quoted prices for similar securities that are observable in the marketplace.

Debt and equity securities classified in Level 3 are securities whose inputs to valuation techniques are unobservable by the marketplace. Many of these securities are priced by the issuers or industry groups for 85 FOR THE YEAR ENDED JUNE 30, 2024

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these securities. Fair value is defined as the quoted market value on the last trading day of the period. These prices are obtained from various pricing sources by the custodian bank for PFDRP or FCERS as applicable.

Alternative Investments
For both Retirement Systems, alternative investments include public equity, private equity, core real estate, investment grade bonds, growth real estate, high yield bonds, market neutral strategies, emerging market bonds, commodities, private debt, venture/growth capital, long-term government bonds and private real assets. These are investments for which exchange quotations are not readily available and are valued at estimated fair value, as determined in good faith by the General Partner (“GP”) of each investment firm retained by the Retirement Systems. These investments are initially valued at cost with subsequent adjustments that reflect third party transactions, financial operating results and other factors deemed relevant by the GP . The assets in the Retirement Systems’ alternative investment programs are classified as Level 3 assets or at the NAV Level. A more detailed explanation of the Level 3 and NAV valuation methodologies follows.

Investments in non-public equity securities are valued by the GP using one or more valuation methodologies outlined in GASB Statement No.72, Fair Value Measurement and Application, depending upon the availability of data required by each methodology. In some cases, the GP may use multiple approaches to estimate a valuation range. For the immediate time period following a transaction, the determination of the fair value for equity securities, in which no liquid trading market exists, can generally be approximated based on the transaction price (absent any significant developments). Thereafter, or in the interim, if significant developments relating to such portfolio company or industry occur which may suggest a material change in value, the GP should value each investment by applying generally accepted valuation methods including:
(1) the market approach (such as market transaction and comparable public company multiples, which are based on a measurement of the company’s historical and projected financial performance with typical metrics including enterprise value / latest 12 months earnings before interest, taxes, depreciation, and amortization (“EBITDA”) or projected fiscal year EBITDA) or (2) the income or discounted cash flow approach.

The determination of fair value using these methodologies should take into consideration a range of factors, including but not limited to, the price at which the investment was acquired, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance, and financing transactions subsequent to the acquisition of the investment.

Because of the subjective nature of estimated fair value of the private investments, such value may differ significantly from the values that would have been used had a ready market existed for these investments.

These financial instruments have been classified as Level 3 or NAV in the fair value hierarchy, provided that the NAV is calculated and used as a practical expedient method to estimate fair value in accordance with GAAP requirements. These investments are not categorized within the fair value hierarchy. 86 INTRODUCTORY

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The following tables present the category, fair value, unfunded commitments, redemption frequency and redemption notice period for investments for which fair value is presented using the NAV as of June 30, 2024:

PFDRP
Investments Measured at the NAV
as of June 30, 2024 (In Thousands) Fair Value
Unfunded
Commitments
Redemption Frequency
(if Currently Eligible)
Redemption Notice
Period
Public equity $ 2,001,628 $ - Daily, Weekly, Monthly 1 - 30 Days Private equity 469,471 213,522 Daily, N/A 1 Day, N/A Core real estate 259,391 - Quarterly 45 - 90 Days Investment grade bonds 47,093 - Daily 1- 3 Days
Growth real estate 223,787 89,500 N/A N/A
Private debt 223,167 172,000 N/A N/A
Market neutral strategies 150,060 - Monthly, Bi-Annual 45 - 60 Days Emerging market bonds 100,743 - Daily, Quarterly 1 - 45 days High yield bonds 10,258 - Daily 3 Days
Long-term government bonds 85,639 - Daily 3 Days
Private real assets 127,367 104,500 N/A N/A
Venture / growth capital 92,386 89,700 N/A N/A
Commodities 16,089 - Daily 3 Days
Total investments measured at the NAV $ 3,807,079 $ 669,222

FCERS
Investments Measured at the NAV
as of June 30, 2024 (In Thousands) Fair Value
Unfunded
Commitments
Redemption Frequency
(if Currently Eligible)
Redemption Notice
Period
Public equity $ 1,460,239 $ - Daily, Weekly, Monthly 1 - 30 Days Private equity 381,273 101,582 Daily, N/A 1 Day, N/A Core real estate 179,746 - Quarterly 45 - 90 Days Investment grade bonds 56,183 - Daily 1 - 3 Days
Growth real estate 120,875 44,323 N/A N/A
Market neutral strategies 92,390 - Monthly, Bi-Annual 45 - 60 Days Emerging market bonds 90,474 - Daily, Quarterly 1 - 45 Days Private debt 111,791 48912 N/A N/A
Long-term government bonds 73,265 - Daily 3 Days
Private real assets 72,142 54,551 N/A N/A
Commodities 20,700 Daily 3 Days
Venture / growth capital 26,705 50,552 N/A N/A
High yield bonds 5,907 - Daily 3 Days
Total investments measured at the NAV $ 2,691,690 $ 299,920 Public equity
Public equities are shares of ownership of a firm listed on an exchange; the Retirement Systems hold global public equities in order to benefit from their total return (capital appreciation plus current yield) over a long-term horizon. The commingled funds liquidity ranges from daily to monthly and the notice periods are between one day and thirty days.

Private equity
This type generally invests in privately held companies. These investments cannot be redeemed early from the funds. Instead, the nature of the investments in this type is that distributions are received through the liquidation of the underlying assets of the fund. The only way to exit these funds is through a sale in a secondary market. The commingled investment offers daily liquidity with a one-day notice.

Core real estate
This type includes investments in open-ended real estate commingled funds. Core real estate funds typically invest in physical properties. The goal of core real estate is to produce price appreciation and income while 87 FOR THE YEAR ENDED JUNE 30, 2024

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maintaining a low correlation to stocks and bonds held by the Retirement Systems. The open-ended real estate funds offer quarterly redemptions with notice periods of three months.

Investment grade bonds
The purpose of investment grade bonds is to produce returns and income for the Retirement Systems by providing exposure to rates and credit risk. The commingled funds offer daily liquidity with a notice period of one to three days.

Growth real estate
The goal of growth real estate is to produce price appreciation and income for the Retirement Systems while maintaining a low correlation to stocks and bonds. The only way to exit these funds is through a sale in a secondary market.

Private debt
This type includes investments in private debt limited partnership funds. These investments cannot be redeemed early from the funds. Instead, the nature of the investments in this type is that distributions are received through the liquidation of the underlying assets of the fund. The only way to exit these funds is through a sale in a secondary market.

Market neutral strategies
This type includes investments in limited partnership hedge funds that invest both long and short in a wide array of securities, including listed and OTC derivative instruments, and typically use leverage and hedging to capture directional market movements or relative market mispricing. The redemption frequencies range from monthly to bi-annual with notice periods of forty-five days to sixty days.

Emerging market bonds
Emerging market bonds funds typically invest in contractual cash flows of governments and other sovereign entities, corporations, securitizations, and derivative instruments thereof in emerging market countries with a sovereign rating less than BBB-. One partnership has a quarterly redemption period with a notice period of forty-five days; the other has a daily redemption period with one-day notice period.

High yield bonds
The primary purpose of high yield bonds is to provide the Retirement Systems exposure to high yielding corporate debt. The commingled fund offers daily liquidity with a notice period of three days.

Long-term government bonds
The purpose of long-term government bonds is to provide a positive return in highly stressed market environments, with a low correlation to equity risk. The commingled fund offers daily liquidity with a notice period of three days.

Private real assets
Private real assets are physical or tangible assets that have value due to their substance and properties.

The goal of real assets is to help the portfolio maintain purchasing power through periods of inflation. The only way to exit these funds is through a sale in a secondary market. 88 INTRODUCTORY

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Venture/growth capital
This type includes investments in venture capital limited partnership funds, which generally invest in early stage privately held companies. These investments cannot be redeemed early from the funds. Instead, the nature of the investments in this type is that distributions are received through the liquidation of the underlying assets of the fund. The only way to exit these funds is through a sale in a secondary market.

Commodities
Commodities are physical or tangible assets that have value due to their substance and properties. The goal of commodities is to help the portfolio maintain purchasing power through periods of inflation. The commodities funds offer daily liquidity with three business days’ notice. 89 FOR THE YEAR ENDED JUNE 30, 2024

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B. Receivables, Net of Allowances

At June 30, 2024, receivables of the City’s major individual funds and nonmajor funds taken in aggregate, including the applicable allowance for uncollectible accounts, are as follows (in thousands):

Receivables - Governmental
Activities: General Fund
Housing
Activities
Low and
Moderate
Income
Housing
Asset
Special
Assessment
Districts
Nonmajor
Funds
Internal
Service
Funds
Total
Governmental
Activities
Taxes $ 75,190 $ - $ - $ - $ 9,844 $ - $ 85,034 Accrued interest 3,899 960 626 188 4,635 88 10,396 Grants 6,906 9,520 - - 21,548 - 37,974 Special assessments - - - 289 - - 289 Other 54,141 4,383 458 1,762 31,268 344 92,356 Less: allowance for
uncollectibles (30,380) (12) - (4) (1,657) (161) (32,214) Total receivables, net $ 109,756 $ 14,851 $ 1,084 $ 2,235 $ 65,638 $ 271 $ 193,835

Receivables - Business-Type
Activities:

San José
Mineta
International
Airport
Wastewater
Treatment
System
Municipal
Water System
Parking
System
San José
Clean Energy
Total
Business-
Type
Activities
Accounts $ 15,814 $ 9,849 $ 17,900 $ 129 $ 98,366 $ 142,058 Accrued interest 2,839 2,292 207 224 1,461 7,023 Grants 4,973 - - - - 4,973
Less: allowance for
uncollectibles (122) (640) (550) (13) (20,128) (21,453) Total receivables, net $ 23,504 $ 11,501 $ 17,557 $ 340 $ 79,699 $ 132,601 C. Loans Receivable, Net of Allowances

The composition of the City’s loans receivable balance for governmental funds, net of the allowance for uncollectible accounts, as of June 30, 2024 is as follows (in thousands):

Type of Loan General Fund
Housing
Activities
Low and
Moderate Income
Housing Asset
Nonmajor
Governmental
Funds
Total
Governmental
Activities

Housing Program Developer, rehabilitation,
second mortgage and relocation loans $ 9,240 $ 42,239 $ 515,576 $ - $ 567,055 Loans funded by federal grants - 90,805 - 3,551 94,356 Economic development, real estate
developer and other loans 1,241 - - - 1,241 Less: allowance for uncollectibles (4,446) (67,492) (268,918) (1,565) (342,421) Total loans, net $ 6,035 $ 65,552 $ 246,658 $ 1,986 $ 320,231

The City uses funds generated from the loan repayment program income as well as other state and federal funding sources to offer financial assistance to qualified developers, individuals, and families by providing loans at “below market” interest rates.
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Typical loans and related terms are summarized as follows:

Loan Type Interest Rates Due
New construction and permanent 0 - 4% up to 55 years
Multi-unit rental rehabilitation 3% 5 or more years
First time home buyer 4% 7 to 40 years
Home improvement 3 - 6% 1 to 30 years
Loans are secured by first, second, third or lower in lien-property deeds of trust except for first time homebuyer loans, which are all secured by second deeds of trust. Interest and principal are typically due in installments, except for first time homebuyer loans, which do not require payments until their maturity dates.

The City has also invested in multi-family rental housing projects serving very low to moderate income individuals through subordinate loans with terms of up to 55 years. Generally, these loans are to be repaid through fixed payments or net cash flow payments from project operations and the term and potential risk of each loan varies. Because of the net cash flow feature of these subordinate loans, there is greater risk of variability in the timing of payments and, potentially, a lower probability of eventual repayment on these subordinate loans than on other loan types.

The City maintains a valuation allowance against loans receivable comprised of an allowance for risk and an allowance for present value discount. The allowance for risk is maintained to provide for losses that can be reasonably anticipated. The allowance is based upon continuing consideration of changes in the character of the portfolio, evaluation of current economic conditions, and such other factors that, in the City’s judgment, deserve recognition in estimating potential loan losses. The allowance for risk takes into consideration maturity dates, interest rates, and other relevant factors.

In accordance with City policy, loans are funded at below market rates of interest and include amortized net cash flow deferred repayment terms. This policy exists to enhance the well-being of the recipients or beneficiaries of the financial assistance, who, as described above, are very low, low, or moderate-income individuals or families, or developers of housing for such individuals or families.

Accordingly, for financial statement purposes, the City has established an allowance account against the loans receivable balance containing a present value discount. The present value discount gives recognition to the economic cost of providing loans at interest rates below market, and represents an estimate of the present value of projected net cash flows to the City from the loan portfolio. The present value discount attributable to the loans will be recognized as interest income only as such loans are repaid in full because of the deferred nature of the loan portfolio and the high level of uncertainty relating to the likelihood that cash flows will occur as projected. The difference between the individual outstanding loan balances and the calculated net present value of the loans results in the allowance for present value discount. Losses are recognized as an addition to the allowance and any subsequent recoveries are deducted from the allowance.

The City’s management believes the combined amount of the aforementioned risk and present value discount allowances is adequate to reflect the net realizable value of the Community Development Block Grant (“CDBG”) loans, Home Investment Partnership Program (“HOME”) loans, and Low and Moderate Income Housing Asset Fund loans receivable as of June 30, 2024.

In the normal course of operations for housing programs, the City has outstanding commitments to extend credit, which have been encumbered as of June 30, 2024. These commitments involve elements of credit and interest rate risk similar to those described above for outstanding loans receivable. As of June 30, 2024, amounts committed to extend credit under normal lending agreements totaled approximately $66,538,000. 91 FOR THE YEAR ENDED JUNE 30, 2024

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D. Capital Assets

1. Summary Schedule

The following is a summary of capital assets activity for the year ended June 30, 2024 (in thousands):

Balance
July 1, 2023 Additions Deletions Transfers
Balance
June 30, 2024
Governmental activities:

Capital assets, not being depreciated:

Land $ 568,851 $ 13,724 $ - $ - $ 582,575
Construction in progress 155,003 78,530 - (52,186) 181,347 Total capital assets, not being depreciated 723,854 92,254 - (52,186) 763,922 Capital assets, being depreciated:

Buildings 1,695,377 - - 23,755 1,719,132
Improvements, other than buildings 335,417 1,917 - 24,500 361,834 Infrastructure 11,631,415 23,870 - 2,747 11,658,032 Vehicles and equipment 204,863 25,642 6,150 1,184 225,539 Furniture and fixtures 1,265 - - - 1,265
Right-to-use assets: Buildings 17,100 1,298 2,667 - 15,731 Right-to-use assets: Equipment 634 585 - - 1,219 Right-to-use assets: Land - 11,534 - 11,534 Right-to-use assets: SBITA 20,497 1,889 - - 22,386 Total capital assets, being depreciated 13,906,568 66,735 8,817 52,186 14,016,672 Less accumulated depreciation for:

Buildings (842,012) (40,076) - - (882,088)
Improvements, other than buildings (101,686) (11,421) - - (113,107) Infrastructure (8,762,918) (164,608) - - (8,927,526) Vehicles and equipment (154,749) (23,283) 5,759 - (172,273) Furniture and fixtures (998) (58) - - (1,056) Right-to-use assets: Buildings (3,829) (1,935) 920 - (4,844) Right-to-use assets: Equipment (63) (181) - - (244) Right-to-use assets: Land - (1,136) - - (1,136) Right-to-use assets: SBITA (4,252) (4,615) - - (8,867) Total accumulated depreciation (9,870,507) (247,313) 6,679 - (10,111,141) Total capital assets, being depreciated, net 4,036,061 (180,578) 2,138 52,186 3,905,531 Governmental activities capital assets, net $ 4,759,915 $ (88,324) $ 2,138 $ - $ 4,669,453 Business-type Activities:

Capital assets, not being depreciated:

Land $ 137,938 $ 5,110 $ - $ - $ 143,048
Intangible assets 12,882 - - - 12,882
Construction in progress 750,354 164,864 - (26,988) 888,230 Total capital assets, not being depreciated 901,174 169,974 - (26,988) 1,044,160 Capital assets, being depreciated:

Buildings 1,799,888 4,225 41 487 1,804,559 Improvements, other than buildings 1,464,743 14,735 3,999 9,217 1,484,696 Intangible assets - 466 - 466
Vehicles and equipment 343,305 4,223 1,571 17,284 363,241 Right-to-use assets: Buildings - 2,250 - - 2,250 Right-to-use assets: Vehicle 403 105 - - 508 Right-to-use assets: Land 848 - - - 848
Right-to-use assets: SBITA 5,055 238 474 - 4,819 Total capital assets, being depreciated 3,614,242 26,242 6,085 26,988 3,661,387 Less accumulated depreciation for:

Buildings (845,609) (45,775) 41 - (891,343)
Improvements, other than buildings (809,203) (34,927) - - (844,130) Intangible assets - (8) - (8)
Vehicles and equipment (231,820) (13,957) 1,498 - (244,279) Right-to-use assets: Buildings - (570) - - (570) Right-to-use assets: Vehicle (301) (110) - - (411) Right-to-use assets: Land (160) (137) - - (297) Right-to-use assets: SBITA (1,895) (993) 135 - (2,753) Total accumulated depreciation (1,888,988) (96,477) 1,674 - (1,983,791) Total capital assets, being depreciated, net 1,725,254 (70,235) 4,411 26,988 1,677,596 Business-type activities capital assets, net $ 2,626,428 $ 99,739 $ 4,411 $ - $ 2,721,756

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2. Depreciation

Depreciation expense charged to various governmental and business-type activities of the City for the year ended June 30, 2024 is as follows (in thousands):

Governmental activities:

General government $ 18,544
Public safety 17,087
Capital maintenance 173,244
Community services 37,018
Capital assets held by City’s internal service funds 1,420 Total depreciation expense - governmental activities $ 247,313

Business-type activities:

San José Mineta International Airport $ 57,192
Wastewater Treatment System 33,631
Municipal Water System 3,567
Parking System 1,907
San José Clean Energy 180
Total depreciation expense - business-type activities $ 96,477

3. Construction Commitments
Commitments outstanding as of June 30, 2024, related to governmental and business-type activities construction in progress totaled approximately $33,684,000 and $222,844,000, respectively.

E. Leases and Subscription-Based Information Technology Arrangements (“SBITA”)

Lease Payable

This note provides information for leases where the City is a lessee.

The City has entered into various lease agreements as lessee primarily for land, building, office space and airport buses. Most leases have initial terms of up to five years, and contain one or more renewal at the City’s option, generally for three or five year periods. We have generally included these renewal periods in the lease term when it is reasonably certain that we will exercise the renewal option. The City’s leases generally do not include termination options for either party to the lease or restrictive financial or other covenants.

Certain real estate leases require additional payments for common area maintenance, real estate taxes and insurance, which are expensed as incurred as variable lease payments. Additionally, office space leases that include variable payments, include the City’s proportionate share of the building’s property taxes, insurance, and common area maintenance in the payment. The City’s lease arrangements do not contain any material residual value guarantees. As the interest rate implicit in the City’s leases is not readily determinable, the City utilizes its incremental borrowing rate to discount the lease payments. 93 FOR THE YEAR ENDED JUNE 30, 2024

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The statement of net position includes the following amounts relating to leases (in thousands):

Governmental
Activities:

Business-type
Activities: Total
Right-to-use Assets (net of amortization):

Buildings $ 10,887 $ 1,680 $ 12,567
Land 10,398 551 10,949
Equipment 975 - 975
Vehicle - 97 97
$ 22,260 $ 2,328 $ 24,588
Lease Payable:

Current $ 2,594 $ 772 $ 3,366
Noncurrent 20,683 1,640 22,323
$ 23,277 $ 2,412 $ 25,689

The future principal and interest lease payments as of June 30, 2024 were as follows (in thousands):

Governmental
Activities:

Business-type
Activities:

Fiscal year Principal Interest Principal Interest
2025 $ 2,594 $ 987 $ 772 $ 101
2026 2,736 878 731 65
2027 2,755 761 655 27
2028 2,649 646 125 5
2029 2,477 526 26 3
2030-2034 9,359 1,040 103 6
2035-2039 415 66 - -
2040-2044 204 29 - -
2045-2049 88 3 - -
$ 23,277 $ 4,936 $ 2,412 $ 207
Lease Receivable

The City leases out its buildings, office space and airport hangars and contain one or more renewals at the City’s and lessor’s option, generally for three or five year periods. The City has generally included these renewal periods in the lease term when it is reasonably certain that the City will exercise the renewal option.

The City’s lease arrangements do not contain any material residual value guarantees. The City utilizes its incremental borrowing rate to discount the lease payments.

Although the City is exposed to changes in the residual value at the end of the current leases, the City typically enters into new operating leases and therefore will not immediately realize any reduction in residual value at the end of these leases.

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Minimum lease payments receivable on leases of investment properties are as follows (in thousands):

Governmental
Activities:

Business-type
Activities:

Principal Interest Principal Interest
2025 $ 885 $ 855 $ 2,956 $ 571
2026 1,300 819 2,938 502
2027 1,432 769 3,077 430
2028 1,385 722 758 380
2029 1,400 669 788 360
2030-2034 7,354 2,491 818 1,722
2035-2039 3,175 1,334 - 1,977
2040-2044 2,520 531 - 2,292
2045-2049 - - - 2,657
2050-2054 - - - 3,080
2055-2059 - - - 3,571
2060-2064 - - - 4,140
2065-2069 - - - 4,799
2070-2074 - - - 5,562
2075-2079 - - - 6,449
2080-2084 - - - 7,476
2085-2089 - - - 8,666
2090-2094 - - 3,944 6,101
2095-2099 - - 2,111 84
$ 19,451 $ 8,190 $ 17,390 $ 60,819

The total amount of inflows of resources relating to leases recognized in the current fiscal year are as follows (in thousands):

2024 2024
Governmental Business-type
Activities: Activities: Total
Lease revenue $ 1,852 $ 2,996 $ 4,848
Interest revenue $ 499 $ 772 $ 1,271
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Airport Leases
Leases as a Lessor
As a lessor, the Airport recognizes a lease receivable and a deferred inflow of resources at the commencement of the lease term, with certain exceptions for leases of assets held as investments, certain regulated leases, short-term leases, and leases that transfer ownership of the underlying asset to lessee. The Airport does not have any leases of assets held as investment or leases that transfer ownership of the underlying asset to lessee. As a lessor, the asset underlying the lease is not derecognized. The lease receivable is measured at the present value of the lease payments expected to be received during the lease term. The deferred inflow of resources is measured at the value of the lease receivable in addition to any payments received at or before the commencement of the lease term that relates to future periods.

Regulated Leases
In accordance with GASB Statement No. 87, the Airport does not recognize a lease receivable and a deferred inflow of resources for regulated leases. Regulated leases are certain leases that are subject to external laws, regulations, or legal rulings, e.g., the U.S. Department of Transportation and the Federal Aviation Administration regulated aviation leases between airports, air carriers, and other aeronautical users.

Regulated leases include the Airline Lease Agreement and related airline leases, as well as contracts with Fixed Based Operators (FBOs), Specialized Aviation Service Operators (SASO), and a jet fuel farm.

Airline Leases
The City entered into an Airline Lease Agreement with various passenger and cargo airlines serving the Airport, effective July 1, 2019. The Airline Lease Agreement has an initial term of ten years and is set to expire on June 30, 2029. The term of this Airline Lease Agreement may be extended for two consecutive five-year renewal periods by the mutual written agreement of the Signatory Passenger Carriers and the City.

On August 2, 2023, the Airport amended the Airline-Airport Lease and Operating Agreements to modify the Airfield and Terminal Rates and Charges calculations. The Airfield Revenue Requirement and the Airline Terminal Revenue Requirement were modified to include recovery of approved capital expenditures not financed with bonds or subordinated indebtedness.

The key provisions in the Airline Lease Agreement include compensatory rate making for the terminal cost center and residual rate making for the airfield cost center. The terminal rate per square feet is calculated based on expenses allocable to the terminal for each fiscal year divided by the total amount of rentable terminal space. Should there be any remaining net revenues generated at the Airport and all requirements of the Master Trust Agreement and any Subordinated Financing Agreements have been satisfied, including the minimum rate covenant requirement, the Passenger Carriers’ share of the remaining net terminal revenues shall be distributed as a refund once a final accounting of the Airport’s operations for the last fiscal year has been completed. After the final accounting is completed, an invoice will be sent to the Passenger Carriers if the actual expenses in the terminal were higher than the revenues. The landing fee rate is calculated by dividing the expenses allocable to the airfield, offset by airfield revenues, other than landing fees, by the projected aggregated maximum gross landed weight for all aircraft at the Airport during the fiscal year. The aggregate credit or debit, if any, resulting from the final accounting after each fiscal year shall be applied to the airfield revenue requirement for the following fiscal year.

The Airline Lease Agreement defines a Signatory Airline as either a 1) Passenger Carrier that executes the Airline Lease Agreement, or an agreement with substantially similar terms, and pays at least $500,000 per year in Terminal Rents and other charges due for its use of the Terminal, excluding PFC payments, or 2) a Cargo Carrier that has executed an Airline-Airport Cargo Operating Agreement. A Passenger Carrier cannot 96 INTRODUCTORY

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become a Signatory Airline within three years of the expiration of the Airline Lease Agreement, except for new entrants to the Airport that have not operated at the Airport at any other time during the term of the Airline Lease Agreement.

The Airline Lease Agreement includes other provisions to: 1) allocate the cost of the office and administrative space used by the City and the City’s contractors at the Airport to all terminal tenants; 2) pre-approves the Terminal Area Improvement Program (TAIP) for the Phase II of Terminal B, which can include New Federal Inspection Station (FIS) Facilities when the Airport reaches an annual rate of 550,000 international deplaning passengers for 18 consecutive months; 3) increases current spending limits for terminal and airfield projects from $5.0 million to $10.0 million without consultation or approval from the Signatory Airlines to fund a capital project; 4) requires Non-Signatory Airlines to provide a security deposit in addition to payment of a 25% premium over the rates and charges applicable to Signatory Airlines; 5) establishes revenue sharing in any year when there is remaining revenue generated at the Airport for Signatory Airlines as follows: a) the Airport will receive the first $4.0 million until the Phase II of Terminal B terminal project is completed and occupied and $2.0 million thereafter, and b) the rest of the net remaining revenue will be split 40%/60% (Airport/ Signatory Airlines) throughout the term; 6) Airlines continue to make extraordinary coverage protection for covering annual debt service and coverage requirements should revenues less operating expenses be insufficient to meet the Airport’s debt service obligations; and 7) provides continuation of the City’s indirect overhead brackets to no less than 15% and not more than 25% of the Airport’s operating budget.

Any passenger or air cargo carrier that does not meet the minimum requirements to be a Signatory Airline is given the opportunity to become a “Non-Signatory Airline” by executing a non-signatory agreement in a form similar to that of the Airline Lease Agreement. Non-Signatory Airlines are charged a premium of 25% over the rates and charges applicable to Signatory Airlines, do not participate in revenue sharing, and do not participate in the review by a “Majority of Interest” of capital projects proposed for the Airport. Non-signatory agreements may be terminated by either party on a 30-day notice. For the year ended June 30, 2024, one of eleven passenger airlines was under the Non-Signatory Airline agreement.

Any passenger or air cargo carrier operating at the Airport that is neither a Signatory Airline nor a Non- Signatory Airline will be subject to the Airline Rates and Charges Ordinance, which requires such air carriers to comply with all applicable rules and regulations as established by the Director of Aviation regarding the proper use and occupancy of the Airport or any portion thereof. In addition, the Airline Rates and Charges Ordinance establishes all rates and charges applicable to such airline’s operations at and use of the Airport or any portion thereof, including airfield and terminal rates and charges, at a 30% premium over the rates and charges as determined pursuant to the terms of the City’s then current Airline Lease Agreement.

For the year ended June 30, 2024, the Airport’s net remaining revenues as defined in its lease agreements was $20.3 million. For the year ended June 30, 2024, the Airport’s revenue as defined in its lease agreements exceeded its expenditures and reserve requirements by $12.7 million. The net remaining revenues for the year ended June 30, 2024 were divided by allocating the first $4.0 million to the Airport and then splitting the balance 40%/60% between the Airport and the Signatory Passenger Carriers, respectively, in accordance with the revenue sharing provisions of the Airline Lease Agreement.

The rights, services, and privileges, including the lease of preferentially-assigned gates, an airline has in connection with the use of the airport and its facilities are addressed in the Airline Lease Agreement. As of June 7, 2023, 27 of the Airport’s 36 gates were leased under exclusive use agreements to six airlines. The remaining nine gates were available to other airlines for rent on a per-use basis. Effective February 1, 2024, the number of preferential gates decreased to 25, increasing the per-use basis gates to 11. As of June 7, 2023, 29 of the Airport’s 53 ticket counters were leased under exclusive use agreements to seven airlines. 97 FOR THE YEAR ENDED JUNE 30, 2024

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The remaining 24 ticket counters were available to other airlines for rent on a per-use basis. Effective January 27, 2024, the number of preferential ticket counters remains at 29 under exclusive use agreements with seven airlines, with no changes in the per-use basis ticket counters of 24.

By definition, the Airline Lease Agreement is considered a regulated lease and does not recognize a receivable and corresponding deferred inflow of resources. The Airport has entered into a Signatory Airline Lease Agreement with 10 passenger airlines. For the year ended June 30, 2024, the Airport recognized terminal lease revenue of $75,522,000. Due to the variable nature of the above revenues from year to year, expected future minimum payments are indeterminable.

Ground Lease
The City entered into a facility ground lease agreement with Southwest Airlines, effective October 3, 2008.

This lease agreement is to construct and maintain a building exclusively for the use of the airline in order to support the airline’s operation, facilitate the airline’s cargo handling, and provide equipment maintenance at the Airport. The lease agreement has an initial term of 20 years from the effective date for the ground lease of 104,000 square feet. For the year ended June 30, 2024, the Airport recognized terminal lease revenue of $355,000.

The future expected minimum rentals to be received from the existing ground lease are as follows (in thousands):

As of June 30, 2024:

2025 $ 438
2026 451
2027 465
2028 478
2029 128
$ 1,960
FBO Leases
The City currently has two FBOs, Atlantic Aviation, and Signature Flight Support, that provide essential support services for business and private aviation, including refueling, hangar space, maintenance, repair and overhaul, and other services.

Atlantic Aviation, the operating business entity for San Jose Jet Center and ACM Property Services, LLC, has multiple agreements with the City. On June 25, 1985, the City entered into a ground lease of 653,000 square feet for 42 years and six-month term, which was extended to June 30, 2035, with the fifth amendment on June 17, 1994. With the sixth amendment, the City extended the term through June 30, 2038 and entered into an additional ground lease of 313,000 square feet on April 29, 2003, which resulted in a total of 966,000 square feet ground lease. On November 26, 2012, the City entered into another ground lease of 45,000 square feet and subsequently added an additional 12,000 square feet. Through various amendments, the lease term has been extended and is set to expire on June 30, 2025. Rental revenues from the ground lease contracts with Atlantic Aviation were $3,529,000 for the year ended June 30, 2024.

On December 12, 2013, the City entered into a ground lease and operating agreement with Signature, which constructed a full-service, fixed-based facility on approximately 29 acres of the Airport’s west side (Original 98 INTRODUCTORY

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Master Leasehold Parcel). The term of the agreement is 50 years from December 12, 2013 to December 11, 2063. On July 2, 2018, the City entered into the first amendment to the ground lease and operating agreement by adding a new parcel of land containing approximately four acres (Additional Premises), bringing the total lease to 33 acres. The base ground rental is subject to a consumer price index adjustment annually and by appraisal every five years. Rental revenues from the ground lease with Signature were $4,064,000 for the year ended June 30, 2024.

SASO
The City entered into a 30-year ground lease contract with Avbase on March 20, 2001 for 214,000 square feet. Rental revenues from the ground lease with Avbase were $584,000 for the year ended June 30, 2024.

The City entered into a 20-year lease agreement with SJC Hangars LLC, effective March 21, 2024, for the use of office, storage, hangar, ramp, landscape, and parking space facilities totaling 283,000 square feet. The City will receive 50% of the revenue from the Tenant’s hangar rates above $53.00 per square feet, effective upon the Certificate of Occupancy for the additional hangar space. Rental revenue from the ground lease with SJC Hangars LLC for the year ended June 30, 2024 was $597,000.

Jet Fuel Farm
On May 2, 2006, the City entered into a ground lease contract with SJC Fuel Company LLC for 242,000 square feet space for storage and fuel dispensing area. The contract expires on July 20, 2038, the 30th anniversary of the commencement date. On June 30, 2008, the first amendment to the ground lease agreement was executed under which the lessee agreed to expand the fuel storage area and relocate the fuel dispensing area resulting in the lease of an additional 34,000 square feet. As a result of the fuel dispensing area relocation, the City has provided monthly rental credits for actual additional construction costs incurred by the lessee.

The monthly credit of $2,609 was issued in FY 2024. This credit is expected to end on July 1, 2038. Net rental revenues from the ground lease with SJC Fuel were $560,000 for the year ended June 30, 2024.

The future expected minimum rentals to be received from the existing FBO, SASO, and jet fuel farm leases as of June 30, 2024, are as follows (in thousands):

Fiscal Year Ending June 30
2025 $ 13,043
2026 13,431
2027 13,831
2028 14,242
2029 14,666
2030-2034 79,593
2035-2039 79,891
2040-2044 62,963
2045-2049 46,463
2050-2054 53,781
2055-2059 62,252
2060-2064 64,025
Total minimum lease rentals $ 518,181
Leases with Variable Payments
The table below shows the amount of inflow of resources recognized for variable payments per various concession categories for the year ended June 30, 2024 (in thousands):
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Inflow of Resources
Concession Categories year ended June 30, 2024
Inflight Kitchen $ 1,333
Retail 4,334
Food & Beverage 5,045
Rental Car 17,126
$ 27,838
The leases with major concessionaires are generally based on the greater of percentage of their sales or a minimum annual guarantee (MAG). Additionally, the major concessionaire contracts include a MAG abatement clause in which, if passenger counts fall below a certain level, then their MAG is reduced by the same percentage, therefore, making the inflow of resources variable.

The City entered into an On-Airport Rental Car Operations Agreement and Lease with multiple rental car companies on February 19, 2008, which have the largest inflow of variable payments, as shown in the table above. The agreement expired on June 30, 2020 and the rental car companies were operating in hold-over until May 2023.

On May 19, 2023, the City amended the On-Airport Rental Car Operations Agreement and Lease with all seven rental car companies to extend the term retroactively from July 1, 2020 to June 30, 2030. Similar to the inflight kitchen, retail, and food and beverage concessionaires, the rental car companies also pay the greater of MAG or a percentage fee of their sales and have a MAG abatement clause if passenger levels fall below a certain amount.

Due to the variability of the payments a lease receivable value cannot be calculated. Part of the agreement is for the ground rent of the rental car facility and is discussed under Other Leases below.

Other Leases
In accordance with GASB Statement No. 87, the Airport recognizes a lease receivable and a deferred inflow of resources for leases the Airport categorizes as in-scope of GASB Statement No. 87. Effective July 31, 2007, the Airport entered into an advertising concession agreement with Clear Channel Outdoor. The agreement has been amended and restated various times since its inception. The latest amendment on April 3, 2019, extended the term through June 30, 2027, and the MAG was revised to $2.0 million effective July 1, 2019 with an annual increase of 2.5% at each July 1 thereafter. The Airport is reporting lessor lease receivables of $6,711,000 as of June 30, 2024. For the year ended June 30, 2024, the Airport reported lease revenue of $2,035,000 and interest revenue of $184,000. The amount of inflows of resources recognized for variable payment was $3,960,000 for the year ended June 30, 2024.

The future expected lease receivable and revenue balances for this in-scope GASB Statement No. 87 lease are summarized as follows (in thousands):

Fiscal Year Ending June 30:

Beginning Lease
Receivable Interest Revenue
Receivable
Reduction
Annual Lease
Revenue
Ending Lease
Receivable
2025 $ 6,711 $ 135 $ 2,128 $ 2,035 $ 4,583
2026 4,583 84 2,236 2,035 2,347
2027 2,347 30 2,347 2,035 -
On June 30, 2024, the ending lease receivable was $2,128,000 and $4,583,000 for current and noncurrent assets, respectively.

The ground rent of the rental car facility under the On-Airport Rental Car Operations Agreement and Lease is subject to a valuation under the guidelines outlined in GASB Statement No. 87. Each company’s share of the ground rent is based on its proportionate share of square feet of the ConRAC facility and is adjusted annually by an amount equivalent to the percentage change in the consumer price index. The latest amendment on 100

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May 19, 2023, extended the term through June 30, 2030. Prior to the amendment, the agreement was in hold-over. Following the amendment, the Airport recorded a lease receivable. The Airport recorded lessor lease receivable of $5,206,000 as of May 19, 2023, the date of the amendment. For the year ended June 30, 2024, the Airport reported lease revenue of $726,000 and interest revenue of $185,000. The amount of inflow of resources recognized from July 1, 2023 to June 30, 2024 was $860,000. The future expected lease receivable and revenue balances for this in-scope GASB Statement No. 87 lease are summarized as follows (in thousands):

Fiscal Year Ending June 30:

Beginning Lease
Receivable Interest Revenue
Receivable
Reduction
Annual Lease
Revenue
Ending Lease
Receivable
2025 $ 4,473 $ 159 $ 676 $ 726 $ 3,797
2026 3,797 133 703 726 3,094
2027 3,094 106 730 726 2,364
2028 2,364 77 758 726 1,606
2029 1,606 48 788 726 818
2030 818 17 818 726 -
On June 30, 2024, the ending lease receivable was $676,000 and $3,797,000 for current and noncurrent assets.

Leases as a Lessee
A lessee should recognize a lease liability and a lease asset at the commencement of the lease term unless the lease is a short-term lease or it transfers ownership of the underlying asset. The lease liability should be measured at the present value of payments expected to be made during the lease term (less any lease incentives). The lease asset should be measured at the amount of the initial measurement of the lease liability, plus any payments made to the lessor at or before the commencement of the lease term and certain direct costs.

Security Deposit
Pursuant to the terms of individual agreements entered into with the City, every Non-Signatory Airline, operator, tenant, or any other entity or person, that is party to an agreement with the City authorizing them to conduct business at the Airport, is required to maintain a security deposit on file with the City. The deposit shall be in a form and amount acceptable to the Director of Aviation, often in the form of an irrevocable letter of credit, surety bond, cashier’s check, or other forms acceptable to the Director of Aviation. The Director of Aviation has the authority to revise the amount of the security deposit at any time to protect the interests of the City. Each deposit must be maintained in full force and effect during the entire term of the agreement to ensure faithful performance by the other party of all the covenants, terms, and conditions of the agreement.

Security deposits in the form of cashier’s checks are recorded as advances and deposits payable on the accompanying statement of net position. The Airport maintains on file copies of all security deposits, in the form of letter of credit or surety bonds, which are not recorded in the financial statements. The amount on file as of June 30, 2024 totaled $47,210,000.
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Parking System Leases
Leases as a Lessor
In accordance with GASB Statement No. 87, the Parking System recognizes a lease receivable and a deferred inflow of resources for leases the Parking System categorizes as in-scope of GASB Statement No. 87.

Effective June 6, 2020, the Parking System entered into a parking premises agreement with Walton San Jose Investors III with a fifty-five (55) agreement term through June 30, 2055. The agreement has been amended and restated various times since its inception and the latest amendment was entered on May 24, 2022.

The Parking System is reporting lessor lease receivable of $6,054,000 as of June 30, 2024. The amount of inflows of resources recognized for variable payment was $5,842,000 for the year ended June 30, 2024.

Subscription-Based Information Technology Arrangements
The City recognizes a subscription liability and a subscription asset at the commencement of a SBITA term unless the subscription is a short-term SBITA. The subscription liability is measured at the present value of payments expected to be made during the subscription term, less any vendor incentives. The subscription asset is measured at the amount of the initial measurement of the subscription liability, plus any payments made to the SBITA vendor at the commencement of the subscription term, and certain initial implementation costs.

SBITA Payable

The City is obligated under contracts covering certain subscription-based information technology arrangements (SBITA) that expire at various dates during the next fourteen years. The City has entered into various SBITA contracts as lessee for information technology (IT) softwares. Most SBITA contracts have initial terms of up to five years, and contain one or more renewals at the City’s option. The City generally included these renewal periods in the subscription term when it is reasonably certain that the City will exercise the renewal option and the contract is not deemed cancellable. The City’s SBITA contracts do not contain any material residual value guarantees. As the interest rate implicit in the City’s agreements are not readily determinable, the City utilizes its incremental borrowing rate to discount the SBITA payments.

The statement of net position shows the following amounts relating to SBITA:

Governmental
Activities
Business-type
Activities Total
Right-to-use Assets (net
of amortization):

SBITA $ 13,519 $ 2,066 $ 15,585
$ 13,519 $ 2,066 $ 15,585

SBITA Payable:

Current $ 5,232 $ 1,054 $ 6,286
Noncurrent 7,472 1,066 8,538
$ 12,704 $ 2,120 $ 14,824

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The future principal and interest subscription payments as of June 30, 2024, were as follows:

Governmental Activities Business-type Activities
Fiscal year Principal Interest Principal Interest
2025 $ 5,232 $ 391 $ 1,054 $ 43
2026 2,430 217 421 23
2027 816 163 225 15
2028 792 133 230 9
2029 773 106 149 4
2030-2034 2,233 218 41 1
2035-2039 428 14 - -
Total $ 12,704 $ 1,242 $ 2,120 $ 95
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F. Long-Term Debt and Other Obligations

1. Summary Schedule of Long-Term Debt

The following is a summary of long-term debt of the City governmental activities as of June 30, 2024 (in thousands, unless otherwise noted):

Purpose
Issue
Amount Issue Date
Final
Maturity
Range of
Interest
Rates
Range of
Principal
Payments
($ millions)
Balance
June 30,
2024
Governmental Activities
City of San José
General Obligation Bonds:

Series 2019A-1 (Disaster Preparedness,
Public Safety, and Infrastructure)
Community
Facilities $ 140,360 07/25/2019 09/01/2049 5.00% 7.13-12.19 $ 140,360 Series 2019B (Disaster Preparedness, Public
Safety, and Infrastructure)
Community
Facilities 66,500 07/25/2019 09/01/2027 2.35-2.60% 3.47-22.83 66,500 Series 2019C (Libraries, Parks, Public Safety)
Community
Facilities/
Refunding 158,185 07/25/2019 09/01/2035 5.00% 2.48-22.12 151,435 Series 2019D (Libraries, Parks, Public Safety) Refunding 103,935 07/25/2019 09/01/2024 2.30% 17.08 17,075 Series 2021A (Disaster, Preparedness, Public
Safety, and Infrastructure)
Community
Facilities 151,210 07/29/2021 09/01/2051 5.00% 2.53-9.43 147,445 522,815

City of San José Financing Authority
Lease Revenue Bonds:

Series 2013B (Civic Center Garage Project) Refunding 30,445 06/19/2013 06/01/2039 3.50-5.00% 1.08-1.91 21,815 Series 2020A (Civic Center Refunding) Refunding 355,620 09/24/2020 06/01/2039 0.99-2.88% 16.83-22.55 287,325 Series 2020B (Ice Center Expansion)
Expansion/
Refunding 146,535 10/15/2020 06/01/2051 1.22-3.52% 3.36-7.78 140,820 Series 2021A (Fire Training Center and
Central Service Yard Project)
Community
Facilities 22,825 11/02/2021 10/01/2034 4.00% 1.53-2.20 19,940 Series 2022A (Convention Center Refunding) Refunding 165,815 4/21/2022 05/01/2052 3.21-4.86% 3.22-9.76 163,115 633,015

$ 1,155,830
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The following is a summary of long-term debt of the City for business-type activities as of June 30, 2024 (in thousands, unless otherwise noted):

Purpose
Issue
Amount Issue Date
Final
Maturity
Range of
Interest
Rates
Range of
Principal
Payments
($ millions)
Balance
June 30,
2024
Business-Type Activities
San José Mineta International Airport Revenue Bonds
Series 2014A (AMT) Refunding $ 57,350 10/07/2014 03/01/2026 3.38-5.00% 0.14-9.18 $ 9,315 Series 2014B (Non-AMT) Refunding 28,010 10/07/2014 03/01/2028 3.10-5.00% 7.98-10.37 28,010 Series 2014C (Non-AMT) Refunding 40,285 10/07/2014 03/01/2031 5.00% 7.30-8.86 40,285 Series 2017A (AMT) Refunding 473,595 04/11/2017 03/01/2047 4.00-5.00% 4.01-35.15 400,380 Series 2017B (Non-AMT) Refunding 150,675 04/11/2017 03/01/2047 4.00-5.00% 1.28-11.18 127,385 Series 2021A (AMT) Refunding 85,860 04/07/2021 03/01/2034 4.00-5.00% 1.28-15.01 81,480 Series 2021B (Non-AMT) Refunding 48,200 04/07/2021 03/01/2034 4.00-5.00% 0.27-10.23 47,125 Series 2021C (Taxable) Refunding 294,020 04/07/2021 03/01/2041 1.21-3.29% 5.26-28.99 286,665 1,020,645
City of San José Financing Authority
Wastewater Revenue Bonds,
Series 2022B Refunding 268,355 12/15/2022 11/01/2052 5.00% 4.16-16.85 264,405 Subordinate Wastewater Revenue
Note Public Infrastructure 200,000 10/01/2017 Anytime Variable Variable 40,098 Total Business-Type Activities - Bonds Payable $ 1,325,148

2. Summary of Default Provisions for Long-Term Debt
Governmental Activities – General Obligation Bonds
The City has five series of general obligation bonds outstanding as of June 30, 2024: Series 2019A-1 Bonds, Series 2019B Bonds, Series 2019C Bonds, Series 2019D Bonds, and Series 2021A Bonds (collectively, “General Obligation Bonds”). The City issued each series of General Obligation Bonds pursuant to a fiscal agent agreement with Wilmington Trust, National Association (“Fiscal Agent Agreement”). The events of default under the respective Fiscal Agent Agreements are as follows: (i) failure to pay principal of, or redemption premiums on the General Obligation Bonds when due; and (ii) failure to pay interest on the applicable General Obligation Bonds when due.

Under each of the Fiscal Agent Agreements, bondholders may exercise the following remedies upon the occurrence of an event of default thereunder: (a) the right, by mandamus, suit, action or proceeding, to compel the City and its members, officers, agents, or employees to perform each and every term, provision and covenant contained in the applicable Fiscal Agent Agreement, and to require the carrying out of any or all such covenants and agreements of the City and the fulfillment of all duties imposed upon it; (b) the right, by suit, action or proceeding in equity, to enjoin any acts or things which are unlawful, or the violation of any of the bond owners’ rights.

Governmental Activities – City of San José Financing Authority Lease Revenue Bonds The Financing Authority has five series of lease revenue bonds outstanding as of June 30, 2024: Series 2013B Bonds, Series 2020A Bonds, Series 2020B Bonds, Series 2021A Bonds, and Series 2022A Bonds (collectively, “Lease Revenue Bonds”). The Financing Authority issued each series of Lease Revenue Bonds pursuant to a trust agreement or an indenture of trust (each a “Trust Agreement”) with a trustee bank (“Trustee”).
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Each series of Lease Revenue Bonds is structured with the City leasing a City facility to the Financing Authority and the Financing Authority leasing it back to the City pursuant to a lease (“City Lease”). The City’s lease payments under each City Lease are the Financing Authority’s source of payment of debt service on the applicable series of Lease Revenue Bonds. The facilities subject to the City Leases are: (i) the City employees’ parking garage (Series 2013B Bonds); (ii) City Hall (Series 2020A Bonds); (iii) the Ice Center (Series 2020B Bonds); (iv) Fire Stations 29 and 34 and the site of the Fire Department Training Center (Series 2021A Bonds); and (v) City Convention Center excluding the property known as the South Hall (Series 2022A Bonds).

The Trust Agreements and the City Leases under each transaction specify the events of default for each transaction. Generally, the events of default under each Trust Agreement are: (i) failure to pay debt service when due; (ii) failure to comply with covenants and conditions of the Trust Agreement and such default shall have continued for a specified period of days following the Financing Authority’s receipt from the Trustee, or the owners of at least 25% of the aggregate principal amount of the applicable series of Lease Revenue Bonds outstanding, of written notice of the occurrence of such default, provided that such period may be extended as specified in the Trust Agreement; (iii) bankruptcy or similar debtor relief proceedings; or (iv) City’s failure to pay a lease payment under the applicable City Lease.

During the continuance of an event of default under the Trust Agreement, the Trustee may declare payment of the outstanding principal of the applicable series of Lease Revenue Bonds and accrued interest to be immediately due and payable. Each Trust Agreement provides for the application of funds upon an event of default or acceleration in the order of priority set forth in the respective Trust Agreement.

Generally, the events of default under the City Leases are: (i) failure to pay a lease payment under the City Lease when due; (ii) failure to comply with covenants and conditions of the City Lease and such default shall have continued for a specified period of days following the City’s receipt of written notice of the occurrence of such default from the Financing Authority, provided that such period may be extended as specified in the City Lease; (iii) assignment or transfer of the City Lease without the satisfaction of the condition(s) precedent specified in the City Lease; or (iv) bankruptcy or similar debtor relief proceedings under the City Lease relating to the Bonds, vacation or abandonment by the City of the facility subject to the City Lease also constitutes an event of default under the Trust Agreement.

Upon an event of default under the City Lease, the Financing Authority or the Trustee as the Financing Authority’s assignee may (i) terminate the City Lease and re-enter the facility subject to the City Lease, remove the persons and personal property occupying the facility and re-let the facility to another lessee; or (ii) without terminating the City Lease, keep the City Lease in effect and continue to collect lease payments from the City or re-enter the facility and re-let the facility to another lessee.

To further secure the Series 2022A Bonds, City, for and on behalf of the Convention Center Facilities District No. 2008-1, City of San José, County of Santa Clara, State of California (the “Convention Center Facilities District”), pursuant to a Pledge Agreement has pledged and agreed to, among other things, levy and collect special taxes within the Convention Center Facilities District to make lease payments required to be paid by the City to the Authority under the City Lease relating to the Series 2022A Bonds. Under the Pledge Agreement, the City has covenanted to monitor the collection of the special taxes and to engage in certain collection actions, including instituting foreclosure proceedings against hotel property with delinquent special taxes in accordance with foreclosure procedures under State law. The principal of the Series 2022A Bonds is not subject to acceleration under the applicable Trust Agreement as a result of delinquent or unpaid special taxes.
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Business Activities – City of San José Airport Revenue Bonds The City of San José has eight series of Airport Revenue Bonds outstanding as of June 30, 2024: Series 2014A (AMT), Series 2014B (Non-AMT), Series 2014C (Non-AMT), Series 2017A (AMT), Series 2017B (Non-AMT), Series 2021A (AMT), Series 2021B (Non-AMT), 2021C (Taxable) (collectively, “Airport Revenue Bonds”). The City issued each series of Airport Revenue Bonds pursuant to a trust agreement or an indenture of trust (“Trust Agreement”) with a trustee bank (“Trustee”). The events of default under the Master Trust Agreement (MTA) for the City of San José Airport Revenue Bonds are as follows: a) non-payment of the principal of or interest on the bonds; (b) a breach of a covenant if the default shall have continued for a period of sixty days after written notice specifying such default and requiring the same to be remedied shall have been given to the City by the Fiscal Agent or a Municipal Bond Insurer (as defined in the MTA), or to the City and the Fiscal Agent by the owners of not less than 25% in aggregate principal amount of the bonds at the time outstanding; and (c) filing a petition or answer seeking reorganization or arrangement under the federal bankruptcy laws. There is no acceleration remedy in the event of default for any current Airport Revenue Bonds and Airport Revenue Refunding Bonds (ARBs) that are outstanding.

Business Activities - City of San José Financing Authority Wastewater Revenue Bonds The Financing Authority issued Wastewater Revenue Bonds, Series 2022B (Green Bonds – Climate Bond Certified) (“2022B Bonds”) pursuant to a master indenture (“Master Indenture”) with a trustee bank (“Trustee”).

The Financing Authority’s source of repayment of the 2022B Bonds is installment payments made to the Financing Authority by the City from pledged Net System Revenues received by the City related to the Wastewater Treatment System, pursuant to a Master Installment Purchase Contract (“Master Installment Purchase Contract”) between the City and the Financing Authority, and City Resolution No. 80770, which amended and restated City Resolution No. 78382 (the “Master Resolution”), and which provides for the allocation and pledge of Net System Revenues to secure the payment of obligations payable from Wastewater Net System Revenues. Payments on the 2022B Bonds are senior to payments on the Financing Authority’s outstanding Subordinate Wastewater Revenue Notes, Series A and will be senior to payments on other Subordinate Obligations (as defined in the Master Resolution) issued in the future.

The City has covenanted in the Master Resolution that it will fix and prescribe, or cause to be fixed and prescribed, rates and charges for the use of the Wastewater System (as defined in the Master Resolution) in each fiscal year that are reasonably estimated to yield during each fiscal year Adjusted Net System Revenues (as defined in the Master Resolution) for such Fiscal Year equal to at least (1) 110% of the Debt Service on all Outstanding Parity Obligations (as defined in the Master Resolution) for the fiscal year, (2) 100% of the Debt Service on all Outstanding Parity Obligations and Outstanding Subordinate Obligations (as defined in the Master Resolution) for the fiscal year, and (3) 100% of all obligations of the City payable from Net System Revenues (as defined in the Master Resolution) in the fiscal year.

Events of Default under the Master Indenture and the Master Installment Purchase Contract include: (i) failure to pay Debt Service, or redemption premium on the 2022B Bonds when due; (ii) failure to comply with covenants and conditions of the Master Indenture or the Master Installment Purchase Contract, including failure to comply with the Master Resolution, and such default shall have continued for a specified period of days following the Financing Authority’s or the City’s receipt of notice from the Trustee, provided that such period may be extended as provided in the Master Indenture or the Master Installment Purchase Contract, as applicable; (iii) bankruptcy or similar debtor relief proceedings; and (iv) failure to pay any installment payment under the Master Installment Purchase Contract when due. 107 FOR THE YEAR ENDED JUNE 30, 2024

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Upon an event of default under the Master Indenture or the Master Installment Purchase Contract, the Trustee may, and upon the written request of the holders of a majority in principal amount of the 2022B Bonds then outstanding, and in each case so long as the Trustee is indemnified to its satisfaction therefore, shall proceed to protect or enforce its rights or the rights of the holders of 2022B Bonds under the Master Indenture by a suit in equity or action at law that the Trustee shall deem appropriate in support of any of its rights and duties.

Business Activities - City of San José Financing Authority Subordinate Wastewater Revenue Notes The City, the Financing Authority, and Wells Fargo Bank, National Association (“Wells Fargo”) are parties to a Credit Agreement dated as of October 1, 2017 as amended by subsequent amendments, including a Fourth Amendment to Credit Agreement dated June 29, 2023 (“Credit Agreement”) pursuant to which the Financing Authority has issued to Wells Fargo (i) a subordinate tax-exempt wastewater revenue note in an amount not-to-exceed $200 million and (ii) a subordinate taxable wastewater revenue note in an amount not- to-exceed $200 million outstanding at any one time. The Credit Agreement is an interim financing program under a three-year contract that enables the issuance of subordinate wastewater revenue notes that can be outstanding at any one time in an amount not to exceed $200 million to finance capital improvements at the Regional Wastewater Facility (“RWF”). Advances on the notes will be made on a regular basis to reimburse the City for capital costs incurred at the RWF .

In the event that the notes are not refinanced as anticipated, the Credit Agreement provides for repayment of the notes following the termination of the Credit Agreement. Assuming no events of default under the Credit Agreement have occurred and subject to the City and the Financing Authority making certain representations and warranties, if the Financing Authority fails to repay the unpaid Notes on the Termination Date (as defined in the Credit Agreement), the unpaid notes will bear interest at the Bank Rate (as defined in the Credit Agreement) and will be amortized in equal quarterly installments over a period ending three years following the Termination Date of the Credit Agreement.

The source of repayment of the notes, including associated fee and interest costs, is installment payments made to the Financing Authority by the City from pledged net system revenues received by the City related to the wastewater treatment system, pursuant to a subordinate installment purchase contract, dated as of October 1, 2017, by and between the City and the Financing Authority, and City Resolution No. 80770, which amended and restated City Resolution No. 78382 (the “Master Resolution”), and which provides for the allocation and pledge of net system revenues to secure the payment of wastewater revenue obligations.

Payments on the notes are subordinate to payments on the 2022B Bonds and will be subordinate to payments on long-term bonds issued in the future.

Events of default under the Credit Agreement by the City or the Financing Authority include: (i) non-payment; (ii) default under any the Related Documents (as defined in the Credit Agreement); (iii) bankruptcy; (iv) a breach of various covenants, including financial covenants to maintain 115% of Debt Service on Parity Obligations (as defined in the Master Resolution) and 110% of Debt Service on Parity Obligations and Subordinate Obligations (as defined in the Master Resolution); (v) breach of representations and warranties; (vi) default with respect to a Material Debt (as defined in the Credit Agreement); (vii) final judgment of $10 million or more against the City or the Financing Authority payable from System Revenues; (viii) City or Financing Authority contesting validity of obligations related to payment of the notes or a determination by a court of competent jurisdiction that the obligations of the City or the Financing Authority related to payment of the notes are not valid or binding; (ix) invalidity of a Lien (as defined in the Credit Agreement) created by the Credit Agreement or the Related Documents; and (x) ratings events including downgrades by any of 108

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Moody’s, S&P , Fitch, or Kroll of its long term ratings on long-term debt that constitutes Parity Obligations under the Master Resolution below “A3, ” “A-, ” “A-” or “A-, ” respectively.

Wells Fargo has certain rights and remedies upon the occurrence and continuance of specified events of default in the Credit Agreement including (i) by notice to the Financing Authority and the City to terminate Wells Fargo’s commitment to make advances under the notes; (ii) exercise rights and remedies under the Related Documents (as defined in the Credit Agreement); (iii) exercise rights and remedies at law or in equity; (iv) bring action in mandamus or other action or proceeding to compel performance by the Financing Authority and/or the City under the Master Resolution or installment purchase agreement; and (v) appointment of a trustee to protect and enforce Wells Fargo’s rights.

In addition to these rights and remedies, Wells Fargo has the right to accelerate repayment of the notes, which is automatic in the case of bankruptcy. The Credit Agreement includes subjective acceleration provisions in the event that: (i) City fails to comply with laws and contracts, which in the reasonable opinion of Wells Fargo, would materially adversely affect the rights of Wells Fargo or the City’s ability to perform its obligations under the Credit Agreement; (ii) either the City or the Financing Authority fails to promptly pay taxes, assessments or government charges which if not paid would likely result in a material adverse effect (defined below); and (iii) either the City or the Financing Authority breaches its covenant to promptly inform Wells Fargo of an event that could reasonably be expected to result in a material adverse change (defined below) or which could be expected to result in a material adverse effect. Under the Credit Agreement, material adverse change and material adverse effect are defined as any event or change, in Wells Fargo’s sole discretion, which materially and adversely affects (i) the enforceability of the Credit Agreement or any related document; (ii) the ability of the City or the Financing Authority to perform their respective obligations under the Credit Agreement or any related document; or (iii) Wells Fargo’s rights and remedies.

3. Debt Compliance
There are a number of limitations and restrictions contained in the various bond indentures. The City believes it is in compliance with all significant limitations and restrictions including various reporting requirements for which non-compliance could adversely affect the cost of debt service on future financings.

4. Legal Debt Limit and Margin
The City Charter limits bonded indebtedness for General Obligation bonds (principal only) to fifteen (15) percent of the total assessed valuation of all real and personal property within the City. The total assessed value of taxable property, provided by the County, for FY 2024 tax roll was $254.1 billion, which results in a total debt limit of approximately $38.1 billion. As of June 30, 2024, the City had $628.2 million, or approximately 1.6%, of General Obligation bond principal applicable to the debt limit. Accordingly, the debt margin is $37.5 billion.

5. Arbitrage
The Tax Reform Act of 1986 instituted certain arbitrage restrictions with respect to the issuance of tax- exempt bonds after August 31, 1986. Arbitrage regulations deal with the investment of all tax-exempt bond proceeds at an interest yield greater than the interest yield paid to bondholders. Generally, all interest paid to bondholders can be retroactively rendered taxable if applicable rebate liabilities are not reported and paid to the Internal Revenue Service (“IRS”) at least every five years. During the current year, the City performed calculations to determine the rebate liabilities for the City’s tax-exempt bond issues. However, as no bond issue with a positive rebate liability was due for a fifth-year payment, there was no rebate liability outstanding as of June 30, 2024.
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6. Conduit Debt
The City has issued multi-family housing revenue bonds to provide funds for secured loans to builders of multi-family housing projects. The purpose of the program is to provide needed rental housing for low to moderate-income households. To comply with IRS requirements in order to meet the tax-exempt status, the owner is required to set aside a certain percentage of all units built for very low to moderate-income households. The bonds are payable solely from payments made on the related secured loans. These tax- exempt housing bonds have maturity dates that are due at various dates through May 1, 2066. As of June 30, 2024, the total principal amount outstanding of conduit multi-family housing revenue bonds is $770,312,000.

In May 2019, the GASB issued Statement No. 91, Conduit Debt Obligations, which provides that a conduit debt obligation is a debt instrument that (1) involves an issuer, a third-party obligor, and a debt holder or debt trustee; (2) the issuer and the third-party obligor are not within the same financial reporting entity; (3) the debt obligation is not a parity bond of the issuer nor is it cross-collateralized with other debt of the issuer; (4) the third-party obligor or its agent, not the issuer, ultimately receives the proceeds from the debt issuance; and (5) the third-party obligor, not the issuer, is primarily obligated for the payment of all amounts associated with the debt obligation. The multi-family housing revenue bonds meet the criteria for a conduit debt obligation and are therefore not reported as a liability in the financial statements.

7. Summary of Changes in Long-term Obligations

Governmental Activities - The changes in long-term obligations for the year ended June 30, 2024 are as follows (in thousands):

July 1, 2023
Additional
Obligations,
Interest
Accretion and
Net Increases
Current
Maturities,
Retirements,
and Net
Decreases June 30, 2024
Amounts Due
Within One
Year
Governmental Activities:

Long-term debt payable:

General Obligation bonds $ 548,595 $ - $ (25,780) $ 522,815 $ 25,550 Issuance premiums:

For issuance premiums 111,191 - (5,816) 105,375 5,721 San José Financing Authority
Lease revenue bonds 657,805 - (24,790) 633,015 26,005 Issuance premiums:

For issuance premiums 4,437 - (374) 4,063 374 Total long-term debt payable 1,322,028 - (56,760) 1,265,268 57,650 Other Long-term obligations:

Accrued vacation, sick leave and compensatory time 89,700 82,800 (77,385) 95,115 72,697 Accrued landfill postclosure costs 2,325 - (75) 2,250 450 Estimated liability for self-insurance 187,200 50,646 (41,337) 196,509 31,270 Pollution remediation obligation 3,241 100 - 3,341 - Lease payable 14,216 13,417 (4,356) 23,277 2,594 SBITA payable 16,162 1,782 (5,240) 12,704 5,232 Total other long-term obligations 312,844 148,745 (128,393) 333,196 112,243 Governmental activities long-term obligations $ 1,634,872 $ 148,745 $ (185,153) $ 1,598,464 $ 169,893

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General Obligation Bonds are issued pursuant to a two-thirds majority voter authorization. In 2000 and 2002, San José voters approved three ballot measures (Measures O and P in 2000 and Measure O in 2002) that authorized the total issuance of $598,820,000 of general obligation (“Prior GO”) bonds for library, parks and public safety projects. On November 6, 2018, voters approved the Measure T ballot measure that authorized total issuance of $650,000,000 of general obligation (“GO”) bonds for the purpose of acquiring property for and constructing improvements in order to improve emergency and disaster response, repair deteriorating bridges vulnerable to earthquakes, repave streets and potholes in the worst condition, prevent flooding and water contamination including the acquisition of land in the Coyote Valley for these purposes, and repair critical infrastructure. The ad valorem property tax levy is calculated for each fiscal year to generate sufficient revenue to pay 100% of annual debt service net of other available funding sources.

On July 25, 2019, the City issued $502,020,000 of General Obligation Bonds (“2019 GO Bonds”) that included new money bonds under three separate authorizations: (1) Measure T , approved by the voters on November 6, 2018 in the not-to-exceed amount of $650,000,000 (2) Measure O (approved by the voters on November 7, 2000 in the not-to-exceed amount of $211,790,000 for library projects); and (3) Measure O (approved by the voters on March 5, 2002 in the not-to-exceed amount of $159,000,000 for public safety projects). Of the 2019 GO Bonds issued, $239.9 million was issued under the Measure T authorization for acquisition of real property and infrastructure projects; $9.2 million issued under prior and remaining Measure O authorizations (2000 and 2002) for library and public safety projects; and $252.9 million in GO refunding bonds that refunded all of the Prior GO bonds issued under Measure O (2000), Measure P (approved by the voters on November 7, 2000 in the not-to-exceed amount of $228,030,000) and Measure O (2002).

On July 29, 2021, the City issued $200,530,000 of General Obligation Bonds, Series 2021, the second round of issuances under Measure T authorization for the Disaster Preparedness, Public Safety, and Infrastructure project.

As of June 30, 2024, the City had remaining authorization under Measure T in the amount of $209,570,000.

Total aggregate principal and interest outstanding as of June 30, 2024 is $840,896,000 with final maturity of September 1, 2051.

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City of San José
General Obligation Bonds
Issuance Amounts and Outstanding Balances as of June 30, 2024 Measure T Issuance
Issuance Final Maturity
Series 2019
(Refunding)
Series 2019
(New Money)
Series 2021
(New Money)
Measure T
Total Issued
Principal
Outstanding
Series 2019A 9/1/2049 $ 173,400,000 $ 173,400,000 $ 140,360,000 Series 2019B 9/1/2027 66,500,000 66,500,000 66,500,000 Series 2019C (1) 9/1/2035 $ 158,185,000 151,435,000 Series 2019D 9/1/2024 103,935,000 17,075,000 Series 2021A 9/1/2051 $ 151,210,000 151,210,000 147,445,000 Series 2021B (2) 9/1/2022 8,450,000 8,450,000 Series 2021C (3) 9/1/2021 40,870,000 40,870,000 Total $ 262,120,000 $ 239,900,000 $ 200,530,000 $ 440,430,000 $ 522,815,000

Measure T Voter Authorization $ 650,000,000

Remaining Measure T Authorization $ 209,570,000

(1) A portion of the 2019C Bonds funded remaining projects under Measure O (2000) in the amount of $5,905,000 and under Measure O (2002) in the amount of $3,325,000.
(2) The Series 2021B Bonds matured on September 1, 2022 and are fully redeemed. (3) The Series 2021C Bonds matured on September 1, 2021 and are fully redeemed.

Lease Revenue Bonds are issued by the City of San José Financing Authority (the “Financing Authority”) primarily to finance various capital improvements, which are leased to the City and are secured by lease payments received by the Financing Authority from the City. Such lease payments are payable by the City from all legally available funds of the City. The City allocates such lease payments to departments in the General Fund and Nonmajor Governmental Funds. The lease revenue for each fiscal year is generally equal to 100% of annual debt service net of other available funding sources.

Total principal and interest remaining on lease revenue bonds as of June 30, 2024 is approximately $892.4 million, with the final payment due on May 1, 2052.

Special Tax Bonds are issued by the City to finance public improvements in special tax districts established by the City and are secured by special taxes levied on properties located within the special districts. The special taxes, as applicable, are calculated for each fiscal year to generate sufficient revenue to pay 100% of annual debt service net of other available funding sources. There are no special tax bonds currently outstanding.

Other Long-Term Obligation payments are primarily made from general revenues recorded in the General Fund.
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Business-Type Activities - The changes in long-term obligations for the year ended June 30, 2024 are as follows (in thousands):

July 1, 2023
Additional
Obligations,
Interest
Accretion
and Net
Increases
Current
Maturities,
Retirements,
and Net
Decreases
June 30,
2024
Amounts Due
Within One
Year
Business-Type Activities:

San José Mineta International Airport:

Revenue bonds $ 1,044,800 $ - $ (24,155) $ 1,020,645 $ 27,225 Issuance premiums:

For issuance premiums 85,709 - (6,125) 79,584 6,125 City of San Jose Financing Authority Wastewater:

Revenue bonds 268,355 - (3,950) 264,405 4,155 Issuance premiums:

For issuance premiums 32,157 - (1,092) 31,065 1,092 City of San José Financing Authority Subordinate Wastewater Revenue Notes:

Direct Borrowings
Notes payable 98 40,000 - 40,098 -
Total long-term debt payable 1,431,119 40,000 (35,322) 1,435,797 38,597 Other Long-term obligations:

Accrued vacation, sick leave and compensatory time 8,978 8,471 (7,897) 9,552 9,114 Estimated liability for self-insurance 4,576 865 (1,575) 3,866 1,230 Pollution remediation obligation 27,952 - (901) 27,051 - Lease payable 800 2,355 (743) 2,412 772
SBITA payable 3,272 238 (1,390) 2,120 1,054
Total other long-term obligations 45,578 11,929 (12,506) 45,001 12,170 Business-type activities long-term obligations $ 1,476,697 $ 51,929 $ (47,828) $ 1,480,798 $ 50,767

Airport Revenue Bonds are issued primarily to finance the construction of capital improvements at the San José Mineta International Airport (the “Airport”). Pursuant to the Airport’s Master Trust Agreement (the “Master Trust Agreement”), the City has irrevocably pledged the General Airport Revenues and certain other funds held or made available under the Master Trust Agreement, first to the payment of Maintenance and Operation costs of the Airport, and second, to the payment of principal of and premium, if any, and interest on the bonds. Under the Master Trust Agreement, General Airport Revenues generally include all revenues, income, receipts, and monies derived by the City from the operation of the Airport with the exception of certain expressly excluded revenues and other moneys.

The net revenues available to pay Debt Service (as defined in the Master Trust Agreement) for the year ended June 30, 2024 totaled $158,029,382 which is composed of $128,600,209 of Net General Airport Revenues (as defined in the Master Trust Agreement) and $29,429,173 of Other Available Funds (as defined in the Master Trust Agreement). Other Available Funds include surplus carryover of $8,973,461, rolling debt service coverage of $10,460,591, and Customer Facility Charges (“CFC”) Revenues of $9,995,121. The bond Debt Service paid from the General Airport Revenues and Other Available Funds amounted to $46,333,204 which is net of $23,071,577 of bond Debt Service paid from the accumulated Passenger Facility Charges (“PFC”) funds.

The City has covenanted in the Master Trust Agreement that Net General Airport Revenues available to pay Debt Service for each fiscal year plus certain Other Available Funds held or made available under the Master 113 FOR THE YEAR ENDED JUNE 30, 2024

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Trust Agreement will be at least equal to 125% of annual Debt Service for such fiscal year. Under the Master Trust Agreement, “annual debt service” means for any specified period, the sum of (a) the interest falling due on any then outstanding current interest bonds, assuming that all principal installments are paid when due, but excluding any interest funded from the proceeds of any series of bonds and applied toward payment of interest on such bonds, and (b) the principal installments payable on any then outstanding bonds, less Available PFC revenues (as defined in the Master Trust Agreement). Total principal and interest remaining as of June 30, 2024 on the bonds is $1.6 billion, with the final payment due on March 1, 2047.

City of San José Financing Authority Wastewater Revenue Bonds, Series 2022B (Green Bonds – Climate Bond Certified)
On December 15, 2022, the City of San José Financing Authority issued $268.4 million of the Wastewater Revenue Bonds, Series 2022B (Green Bonds - Climate Bond Certified) to refinance the CSJFA’s then- outstanding Subordinate Wastewater Revenue Notes, Series A. The 2022B Bonds were issued as long-term fixed-rate debt with level debt service. Total aggregate principal and interest outstanding as of June 30, 2024 is $500.8 million with final maturity of November 1, 2052.

City of San José Financing Authority Subordinate Wastewater Revenue Notes The City, the Financing Authority, and Wells Fargo Bank, National Association (“Wells Fargo”) are parties to a Credit Agreement dated as of October 1, 2017 as amended by subsequent amendments, including a Fourth Amendment to Credit Agreement dated June 29, 2023 (“Credit Agreement”) pursuant to which the Financing Authority has issued to Wells Fargo (i) a subordinate tax-exempt wastewater revenue note in an amount not-to-exceed $200 million and (ii) a subordinate taxable wastewater revenue note in an amount not- to-exceed $200 million outstanding at any one time. The Credit Agreement is an interim financing program under a three-year contract that enables the issuance of subordinate wastewater revenue notes that can be outstanding at any one time in an amount not-to-exceed $200 million to finance capital improvements at the Regional Wastewater Facility (“RWF”). Advances on the Notes will be made on a regular basis to reimburse the City for capital costs incurred at the RWF .

On June 20, 2023, the City Council and Financing Authority Board approved the Fourth Amendment to the Credit Agreement and a related fourth amended and restated fee letter agreement with Wells Fargo, which extended the termination date of the Credit Agreement through October 16, 2026, and reduced the aggregate principal amount of the Notes that can be outstanding at any one time from $300 million to $200 million.

As of June 30, 2024, the CSJFA has drawn $40.1 million of the aggregated principal amount of $200 million available under the Credit Agreement as follows (in thousands).

July 1, 2023 Issuances Redemptions June 30, 2024 Interest Rate $98 $40,000 $0 $40,098 4.67%
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8. Annual Requirements to Maturity

The annual requirements to amortize all bonds and leases outstanding as of June 30, 2024 are as follows (in thousands):

Governmental Activities Business-Type Activities

City of San José
General Obligation Bonds
City of San José Financing
Authority Bonds (1)
Airport Revenue
Bonds (1)
City of San José Financing
Authority Wastewater
Revenue Bonds (2)
Fiscal Year
Ending June 30, Principal Interest Principal Interest Principal Interest Principal Interest 2025 $ 25,550 $ 23,656 $ 26,005 $ 19,889 $ 27,225 $ 44,184 $ 4,155 $ 13,116 2026 25,480 22,948 26,945 19,461 29,965 43,022 4,365 12,903 2027 25,225 22,252 28,865 18,936 32,355 41,799 4,590 12,680 2028 24,955 21,491 29,480 18,329 33,680 40,457 4,825 12,444 2029 24,820 20,460 30,170 17,638 35,370 39,040 5,075 12,197 2030-2034 119,855 83,626 163,320 75,766 217,610 170,429 29,545 56,803 2035-2039 77,685 58,476 179,855 49,320 272,070 120,859 37,945 48,409 2040-2044 70,345 41,361 63,470 24,635 239,905 63,202 48,720 37,630 2045-2049 89,765 21,441 54,605 13,113 132,465 13,462 62,565 23,788 2050-2054 39,135 2,370 30,300 2,294 - - 62,620 6,458 Total $ 522,815 $ 318,081 $ 633,015 $ 259,381 $ 1,020,645 $ 576,454 $ 264,405 $ 236,428

(1) Does not include commercial paper notes.
(2) Does not include subordinate wastewater revenue notes.

9. Short-Term Debt Activities
Governmental Activities

City of San José Financing Authority Lease Revenue Commercial Paper Notes Payable (Short-Term Direct Borrowings)
The City’s Commercial Paper (“CP”) Program utilizes a lease revenue financing structure. Under this program, the Financing Authority is able to issue commercial paper notes (“CP Notes”) on a tax-exempt and federally taxable basis at prevailing interest rates for a term not to exceed 270 days. The CP Program was initially established on January 13, 2004, pursuant to resolutions of the City Council and the Financing Authority Board authorizing the issuance of the Financing Authority tax-exempt lease revenue CP Notes in an amount not to exceed $98,000,000. Since 2004, the City Council and the Financing Authority Board have taken actions to modify the CP Program, including increasing and decreasing the program’s capacity and authorizing the issuance of taxable lease revenue CP Notes.

On August 31, 2021, the City adopted Resolution No. 80208 authorizing the execution and delivery of amendments to certain financing documents, including an amendment to a Letter of Credit and Reimbursement Agreement, and authorizing other related actions in connection with the CP Notes in order to increase the not-to-exceed aggregate principal amount thereof to $175.0 million and to extend the expiration date and commitment available under such Letter of Credit and Reimbursement Agreement to March 2025; and the negotiation, execution and delivery of one or more additional extensions to the Letter of Credit issued under the Letter of Credit and Reimbursement Agreement or the commitment available under such Letter of 115 FOR THE YEAR ENDED JUNE 30, 2024

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Credit and Reimbursement Agreement based on substantially the same terms and conditions for a duration of time that the City Designated Officers deem necessary, advisable or prudent.

As of June 30, 2024, the maximum principal amount of CP Notes authorized to be issued is $175.0 million, consisting solely of CP Notes designated Series 2 Notes and Series 2-T Notes; CP Notes designated Series 1 Notes and Series 1-T Notes are not authorized to be issued. As of June 30, 2024, the Series 2 Notes and Series 2-T Notes were supported by a direct-pay letter of credit (“LOC”) provided by U.S. Bank National Association (“U.S. Bank”) pursuant to a Letter of Credit and Reimbursement Agreement by and among the Financing Authority, the City, and U.S. Bank, as amended (the “Reimbursement Agreement”). At June 30, 2024, the LOC had a stated amount of $187,945,000 representing the maximum principal amount of CP Notes then authorized to be issued in the amount of $175.0 million, plus interest calculated at 10% for 270 days with a stated expiration date of March 24, 2025.

The LOC of U.S. Bank supports only the payment of principal and interest on the Series 2 Notes and Series 2-T Notes. The annual commitment fee payable to U.S. Bank is 0.38%, paid quarterly in arrears during FY 2024.

The Financing Authority issues the CP Notes under State law pursuant to an Amended and Restated Trust Agreement, between the Financing Authority and Wells Fargo Bank, National Association, as trustee, as amended and supplemented from time to time (as so amended and supplemented, the “Trust Agreement”) and a Second Amended and Restated Issuing and Paying Agent Agreement between the Financing Authority and Wells Fargo Bank, National Association, as paying agent (“Issuing and Paying Agent Agreement”).

Barclays Capital Inc. currently serves as the dealer for the CP Notes pursuant to an Amended and Restated Commercial Paper Dealer Agreement.

The City has leased to the Financing Authority various City-owned facilities pursuant to a Site Lease, as amended. The Financing Authority subleased these same facilities back to the City pursuant to a Sublease, as amended (the “Sublease”) in exchange for the rental payments, subject to abatement in the event the City does not have use and occupancy of the property and not in excess of the fair rental value of the facilities.

The facilities subject to the Site Lease and Sublease are: the Animal Care Center, Fire Station No. 1, Fire Station No. 3, the Police Communications Center, the South San José Police Substation, and the Tech Museum (the “Pledged Properties”). The rental payments received by the Financing Authority from the City under the Sublease are used to reimburse U.S. Bank for draws under the LOC and, to the extent necessary, repay CP Notes.

Interest on any Principal Advances (draws under the LOC that U.S. Bank is not reimbursed by the City on the same day) are calculated at various increasing interest rates depending on the number of days the Principal Advance remains outstanding.

Interest on any Term Loan draws that are not reimbursed by the City one hundred eighty-one days after a Principal Advance or the Letter of Credit Expiration Date, whichever comes first (such date the “Term Loan Conversion Date”) are payable at the Term Loan Rate from the date of such Term Loan Conversion Date, payable monthly in arrears on the first day of each calendar month and on the date on which the final installment of the principal of the Term Loan is payable. The principal amount of each Term Loan is amortized over such a three-year period; provided, however, that the unpaid amount of each Term Loan shall be paid by the City in each year only to the extent of the then fair rental value with respect to the Pledged Property subject to the Sublease for such Base Rental Period, and to the extent not so repaid, such Term Loan shall be paid by the City during each subsequent Base Rental Period, to the extent owed, to the extent of the then fair rental value with respect to the Pledged Property subject to the Sublease for each such Base Rental Period, and such Term Loan shall continue to be an obligation of the City pursuant to the Sublease to be paid on or before the expiration of the three-year amortization period. Per the terms of the Reimbursement 116

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Agreement, U.S. Bank has the right to require that the rent payable for any of the Pledged Properties be re- determined in order to increase the amount of the rent payable.

Events of default under the Reimbursement Agreement include: (i) default under the Trust Agreement, Sublease, Issuing and Paying Agent Agreement and certain other agreements relating to the CP Notes; (ii) non-payment; (iii) breach of certain covenants set forth in the Reimbursement Agreement; (iv) bankruptcy; (v) the occurrence of certain ratings events including downgrades by any of Moody’s, S&P , or Fitch of its long- term ratings on the Financing Authority’s lease revenue debt below “Baa1, ” “BBB+” and “BBB+, ” respectively; or (vi) suspension or withdrawal of the long-term ratings on the Financing Authority’s lease revenue debt for any credit related reason.

U.S. Bank has certain rights and remedies upon the occurrence and continuance of specified events of default in the Reimbursement Agreement, including the ability, by notice to the Financing Authority and the Issuing and Paying Agent (i) to deliver a notice to the Issuing and Paying Agent (a “No-Issuance Notice”) requiring the Issuing and Paying Agent to cease authenticating CP Notes of the applicable series unless and until such No-Issuance Notice is rescinded, (ii) to reduce the unutilized portion of the applicable commitment to zero dollars ($0), (iii) to declare the Revolving Note, in whole or in part, all or some advances, as well as any other reimbursement obligations under the Reimbursement Agreement and all interest thereon to be a default advance under the Reimbursement Agreement due and payable at the Default Rate (as defined in the Reimbursement Agreement) and payable as set forth therein, or (iv) to take any other action permitted by law. The amount of the Default Advance required to be paid by the Financing Authority upon acceleration as described in clause (iii) above cannot exceed the then fair rental value with respect to the Pledged Properties subject to the Sublease.

Upon any action by U.S. Bank, as contemplated in the foregoing clauses (i) and (ii), the Stated Amount of the LOC will be permanently reduced upon, and by the amount of, each drawing under the LOC following the occurrence of an event of default. The occurrence of an event of default will not affect U.S. Bank’s obligations under the LOC with respect to Series 2 Notes and Series 2-T Notes that are outstanding at the time of the occurrence of such event of default, and the Issuing and Paying Agent will continue to have the right to draw under the LOC to pay the principal of and accrued interest on maturing Series 2 Notes and Series 2-T Notes that are outstanding at the time of the occurrence of such event of default.

As of June 30, 2024, $5,967,000 of taxable CP Notes was outstanding at an interest rate of 5.48%.

The remaining capacity under the U.S. Bank LOC as of June 30, 2024 is approximately $169.03 million. The total capacity is $175.0 million. The activity in Financing Authority commercial paper notes during the year ended June 30, 2024 is as follows (in thousands):

July 1, 2023 Additions Deletions June 30, 2024
$26,107 $952 $21,092 $5,967
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City of San José Financing Authority Commercial Paper Program as of June 30, 2024 ($175 million capacity) (in thousands):

Project CP Authorization CP Outstanding
Remaining
Authorization
Flood Improvement Recovery - PRNS $ 5,983 $ 952 $ 5,031 Energy Purchases - SJCE 75,000 - 75,000
ESCO Conservation Project - Public Works 5,015 5,015 - Muni Water - Building Infrastructure - ESD 40,000 - 40,000 Authorized, uncommitted 49,002 - 49,002
Totals $ 175,000 $ 5,967 $ 169,033

Business-Type Activities

Airport Commercial Paper Notes (Short-Term Direct Borrowings) In November 1999, the City authorized the issuance from time to time of the Airport’s Subordinated Commercial Paper Notes, Series A-1, Series A-2, Series B, and Series C (“Subordinated CP Notes”) that are secured by a lien on Surplus Revenues held in the Subordinated Debt Account of the Surplus Revenue Fund, including the earnings on such Surplus Revenues. Surplus Revenues are General Airport Revenues remaining after the payment of maintenance and operation costs of the Airport and the payment of debt service on the Airport Revenue Bonds and the funding of any reserve funds established for the Airport Revenue Bonds.

The Subordinated CP Notes may be issued for periods of maturity not to exceed 270 days. The Series A-1, Series A-2, Series B and Series C Notes may be sold at an interest rate not to exceed 12% per annum. The Series C Notes may be issued and sold either as interest bearing notes or at a discount.

The Subordinated CP Notes are issued pursuant to a Third Amended and Restated Issuing and Paying Agent Agreement, dated as of February 1, 2014 (“Issuing and Paying Agent Agreement”), as subsequently amended, by and between the City and U.S. Bank National Association (“US Bank”). Credit support for the timely payment of the principal and interest on the Subordinated CP Notes at maturity is provided through a letter of credit as described below. The City Council has authorized the Subordinated CP Notes to be issued in an aggregate principal amount of up to $600 million outstanding at any one time. However, the City has determined to limit its issuance of Subordinated CP Notes to the total credit support provided by the applicable letter of credit, as described below.

On September 12, 2018, the City substituted for the prior letter of credit supporting the Subordinated CP Notes with a letter of credit issued by Bank of America, N.A (“BANA”). Pursuant to a Letter of Credit and Reimbursement Agreement, dated as of September 1, 2018, between the City and BANA (“BANA Reimbursement Agreement”), BANA issued its irrevocable transferable letter of credit (“BANA LOC”) in the initial stated amount of approximately $81.7 million (to cover principal of $75.0 million and interest on the Subordinated CP Notes accruing calculated at a rate of 12% for 270 days based on a 365-day year). The $75.0 million principal amount of the BANA LOC was secured to provide additional capacity for the issuance of the Subordinated CP Notes to finance proposed terminal area projects. On July 15, 2024, BANA extended the expiration date of the BANA LOC from September 10, 2024, to September 10, 2026.

In connection with the issuance of the BANA LOC in 2018, other agreements governing the Subordinated CP Notes were executed, including the First Amendment to the Third Amended and Restated Issuing and Paying Agent Agreement between the City and US Bank and the Fourth Amended and Restated Dealer Agreement between the City and each of the dealers of the Subordinated CP Notes, a fee letter between the City and BANA and a bank note payable to BANA in the amount of approximately $81.7 million under which the City 118

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promises to pay principal of and interest on the unpaid principal amount of all Unreimbursed Drawings (as defined in the BANA Reimbursement Agreement) and Term Loans (as defined in the BANA Reimbursement Agreement) evidenced by the note on the dates and at the rates provided for in the BANA Reimbursement Agreement.

The ratings of the outstanding Airport Subordinated CP Notes are “A-1”, “P-1”, and “F1+” by S&P , Moody’s, and Fitch, respectively, based on the credit support provided by the BANA LOC, as of June 30, 2024.

The terms of the BANA LOC are specified in the BANA Reimbursement Agreement. In general, BANA agrees to advance funds to the Issuing and Paying Agent for the Subordinated CP Notes to pay the principal of and interest on maturing Subordinated CP Notes in an amount not to exceed the stated amount of the BANA LOC. In the event that the CP dealer is unable to find investors to purchase Subordinated CP Notes to repay the advance from BANA, the City is obligated to pay interest to BANA based on a formula specified in the BANA Reimbursement Agreement and repay principal in accordance with the schedule and the terms also specified in the BANA Reimbursement Agreement. All amounts payable by the City to BANA under the BANA Reimbursement Agreement are secured by a lien on the Surplus Revenues held in the Subordinated Debt Account of the Surplus Revenue Fund, including the earnings on such Surplus Revenues, which lien is subordinate to the lien securing the Airport Revenue Bonds.

Events of default under the BANA Reimbursement Agreement generally include, among others: (i) an event of default under the Master Trust Agreement or the Issuing and Paying Agent Agreement for the Subordinated CP Notes; (ii) non-payment of any debt secured by General Airport Revenues (as defined in the BANA Reimbursement Agreement) on a parity with, or senior to, the Subordinated CP Notes; (iii) a breach of a various covenants; (iv) bankruptcy; (v) breach of representations and warranties; (vi) default on a Secured Debt (as defined in the BANA Reimbursement Agreement); (vii) a final judgment of $10 million or more against the City payable from General Airport Revenues; (viii) the City contesting validity of obligations related to payment of the Subordinated CP Notes or a determination by a court of competent jurisdiction that certain obligations of the City related to payment of the Subordinated CP Notes are not valid or binding; (ix) Surplus Revenues are not subject to a security interest in favor of BANA, the bank note or certain other payment obligations under the BANA Reimbursement Agreement; (x) ratings events including a suspension or withdrawal of the long-term, unenhanced debt rating assigned to the Airport Revenue Bonds (other than where the City requested such withdrawal and the Airport Revenue Bonds shall continue to be rated by any two of Moody’s, Fitch, or S&P), or downgrades by any of Moody’s, Fitch, or S&P of its ratings on the Airport Revenue Bonds below “Baa2”, “BBB”, and “BBB”, respectively, for a period of 120 calendar days; and (xi) any legislation is enacted, repealed, reenacted, amended or otherwise modified which has, in the sole judgment of the BANA, a material adverse effect on the obligation of the City to make payments under the BANA Reimbursement Agreement or the security granted to secure such payments.

An event of default under the BANA Reimbursement Agreement would entitle BANA to demand that no additional Subordinated CP Notes be issued, that the City reimburse BANA immediately for draws under the BANA LOC and that all other amounts owed by the City to BANA be accelerated and become due immediately. The BANA Reimbursement Agreement includes a subjective acceleration provision in the event that any legislation is enacted, repealed, reenacted, amended or otherwise modified which has, in the sole judgment of BANA, a material adverse effect on the obligation of the City to make payments under the BANA Reimbursement Agreement or the security granted to secure such payments. In connection with the BANA LOC, the City entered into a fee letter with BANA to specify the facility fee rate and other charges payable by the Airport with respect to the BANA LOC. The facility fee rate under such fee letter was established based on the underlying credit rating of the Airport Revenue Bonds and is applied to the stated amount of the BANA LOC. The facility fee rate is subject to increase in the event that the underlying credit rating of 119 FOR THE YEAR ENDED JUNE 30, 2024

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the Airport Revenue Bonds is withdrawn, suspended, or downgraded or upon an event of default under the BANA Reimbursement Agreement. The facility fee rate in effect under the LOC issued by BANA was 0.40% as of June 30, 2024.

During the fiscal year, the City issued $17.7 million of its Subordinated CP Notes, Series A-1 (Non-AMT). Such notes were issued to build new facilities and maintenance buildings. The new facilities and maintenance buildings will be designed to be expandable and adaptable to meet the current and the anticipated future demand for facilities and maintenance services at the Airport. Additional Subordinated CP Notes, Series A-1 may be issued in FY 2025 to fund the project.

The remaining capacity under the LOC issued by BANA as of June 30, 2024 is $47.3 million. The total LOC capacity is $75.0 million. The activity in Airport commercial paper notes during the year ended June 30, 2024 is as follows (in thousands):

July 1, 2023 Additions Deletions June 30, 2024 Interest Rate $10,000 $17,728 $- $27,728 3.60%
Clean Energy Revolving Credit Agreement
In November 2018, the City entered into a Revolving Credit Agreement with Barclays Bank PLC (“Barclays”) to finance start-up costs of the City of San José Clean Energy program, purchase power, and in the case of standby Letters of Credit, secure payments under power purchase agreements and other costs associated with the Community Energy implementation plan. In connection with the execution and delivery of the Credit Agreement described below, the City elected to terminate the credit facilities under the Credit Agreement with Barclays effective on February 17, 2023.

On December 13, 2022, the City Council adopted Resolution No. 80833 authorizing the City Manager, Director of Finance, Assistant Director of Finance, and their authorized designees to negotiate, execute, and deliver a Revolving Credit Agreement with JPMorgan Chase Bank, N.A. (“JPMorgan”) including loans and letters of credit for up to $250 million outstanding at one time. Effective Feb 17, 2023, JPMorgan and the City entered into a Revolving Credit Agreement (the “Credit Agreement”) under which JPMorgan has committed to provide the City with a credit facility consisting of: (i) a $50 million Line of Credit under which JPMorgan has committed to make loans to the City for working capital and other general operational purposes of SJCE, including without limitation, the purchase of power products, and to secure the City’s payment obligations under one or more power purchase agreements; (ii) a $100 million standby Letter of Credit facility providing for the issuance of standby Letter of Credit each with a term of two years or less to secure the City’s payment obligations under one or more power purchase agreements; and (iii) a $100 million standby Letter of Credit facility providing for the issuance of standby Letter of Credit each with a term of more than two years to secure the City’s payment obligations under one or more power purchase agreements.

The City’s obligations under the Credit Agreement are secured by SJCE’s net revenues. JPMorgan’s commitment under the Credit Agreement is currently scheduled to expire on February 17, 2028. 120

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As of June 30, 2024, the balance for the JPMorgan Revolving Credit Agreement was as follows (in thousands):

Credit Facility
Available Credit
Sublimit
Less: Working Capital
Loan (1) and Letters of
Credit Commitments (2)
Remaining Available
Credit as of 6/30/2024
Working Capital Loans (1) $ 50,000 $ - $ 50,000
Standby Letter of Credit Facility (2) (3) 200,000 (29,729) 170,271 Remaining Aggregate Credit as of 6/30/24 $ 220,271

(1)Working Capital Loans are cash draws that SJCE can use to cover operating expenses and make cash collateral payments. (2)Letters of Credits are issued by JPMorgan Chase as a commitment to pay collateral calls in the event of an SJCE default. The commitment does not become a liability of SJCE unless and until a collateral call is paid by JPMorgan Chase on behalf of SJCE, which has not yet occurred. (3)The City can request the letter of credit limit to be increased incrementally up to $250 million if needed. The $50 million dedicated to the working capital loan will be incrementally reduced if this request happens to maintain a total Aggregate Credit maximum of $250 million.

The table below shows the fees and interest rates charged for the Revolving Credit facility.

Commitment Utilization Undrawn Fee
Applicable Rate
Term Benchmark Borrowing ABR Borrowing
≥ 25% 0.57% Adjusted Term SOFR + 1.425% Alternate Base Rate + 0.425% <25% 0.60% Adjusted Term SOFR + 1.500% Alternate Base Rate + 0.500% Loans made by JPMorgan to the City under the Credit Agreement will bear interest at the Alternate Base Rate plus the Applicable Rate, the Adjusted Term SOFR Rate plus the Applicable Rate or Adjusted Daily Simple SOFR plus the Applicable Rate (as such terms are defined in the Credit Agreement). Interest computed by reference to the Term SOFR Rate or Daily Simple SOFR will be computed on the basis of a year of 360 days, and actual days elapsed. Interest computed by reference to the Alternate Base Rate at times when the Alternate Base Rate is based on the Prime Rate will be computed on the basis of a year of 365 days (or 366 days in a leap year), and actual days elapsed. In each case interest will be payable for the actual number of days elapsed (including the first day but excluding the last day). Accrued interest on each Loan will be payable in arrears on each interest payment date for such Loan set forth in the Credit Agreement and upon termination of JPMorgan’s commitment thereunder.

The City agrees to pay JPMorgan the fees (computed on the basis of 360 days and actual days elapsed) and other amounts set forth in the fee agreement at the time and in the manner set forth in the fee agreement, including, but not limited to, the undrawn fee, the Letter of Credit facility fee, the termination fee and the reduction fee. All fees and other amounts payable under the fee agreement shall be paid in immediately available funds. Fees paid shall not be refundable under any circumstances.

Under the Credit Agreement, the City agrees that, so long as JPMorgan has any commitment thereunder or any amount payable thereunder remains unpaid, among other things, the debt service coverage ratio shall be not less than 1.10 to 1.00 as of the last day of the fiscal quarter most recently ended, commencing with the last fiscal quarter ended March 31, 2023; provided, however, in the event the debt service coverage ratio for any fiscal quarter is less than 1.10 to 1.00 but the days liquidity on hand for such fiscal quarter equals or exceeds 90 days (or, 75 days, so long as the long-term unenhanced rating by at least one rating agency on debt secured by net revenues shall be at or above “Baa3” (or its equivalent) with respect to Moody’s, “BBB-” (or its equivalent) with respect to S&P or “BBB-” (or its equivalent) with respect to Fitch, respectively) then the City will be deemed to be in compliance for such period (the liquidity cure right); provided, further, that in no event will the City be permitted to exercise liquidity cure rights under the Credit Agreement more than three times during any four consecutive fiscal quarter periods. 121 FOR THE YEAR ENDED JUNE 30, 2024

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In addition, the Credit Agreement permits the City to make loans from any fund, including the General Fund, to SJCE, including from proceeds of CP issued by the Financing Authority, to finance the purchase of power and/or pay other operating costs of the SJCE in an amount not to exceed $95.0 million. Such loans are subordinate to the City’s obligations to JPMorgan under the Credit Agreement. The City may incur additional debt with respect to SJCE that is payable on a basis subordinate to the City’s obligations to JPMorgan under the Credit Agreement upon the satisfaction of certain conditions specified in the Credit Agreement.

The Credit Agreement prohibits repayment of loans and other debt payable from Revenues or Net Revenues of SJCE to the City or the Financing Authority, if any, unless, among other things,: (i) the aggregate amount of Cash and Cash Equivalents (as defined in the Credit Agreement) available in the Clean Energy Fund at the end of the fiscal quarter prior to repayment, and projected per pro forma effect to the fiscal quarter following projected repayment are equal to or in excess of $50 million, and (ii) no Event of Default (as defined in the Credit Agreement) has occurred and is continuing.

Events of default under the Credit Agreement include, among others: (i) any representation or warranty shall have been incorrect or untrue in any materially adverse respect when made or deemed to have been made, (ii) non-payment, (iii) breach of covenants, including failure to maintain the required debt service coverage ratio or days liquidity on hand, as applicable, not cured within applicable cure periods, if any (iv) any material provision of the Credit Agreement or any other Basic Document (as defined in the Credit Agreement) at any time for any reason ceases to be valid and binding on the City as a result of any legislative or administrative action, or judgment, (v) bankruptcy, (vi) the default in the due performance or observance of any material term, covenant or agreement contained in the Credit Agreement and not cured within the applicable cure period, (vii) defaults on the payment of the principal of or interest on any Parity Debt or Subordinate Debt (as defined in the Credit Agreement) beyond the period of grace, if any, provided in the instrument or agreement under which such Parity Debt or Subordinate Debt was created or incurred, (viii) one or more final, unappealable judgments or orders for the payment of money in excess of $10.0 million where such judgment or order remains unsatisfied and unstayed for a period of 60 days and which is payable from revenues or net revenues of SJCE, (ix) the long-term, unenhanced ratings by any Rating Agency (as defined in the Credit Agreement) on any general-obligation bonded indebtedness of the City is withdrawn or suspended (but excluding withdrawals or suspensions if the applicable Rating Agency stipulates in writing that the rating action is being taken for non-credit related reasons) or reduced below “A1” (or its equivalent) by Moody’s, “A+” (or its equivalent) by S&P , or “A+” (or its equivalent) by Fitch, (x) any “event of default” under any Other Credit Agreement (as defined in the Credit Agreement) occurs, (xi) a debt moratorium, debt restructuring, debt adjustment, or comparable restriction is imposed on the repayment of any Parity Debt of the City, or (xii) the dissolution or termination of the existence of the City or SJCE.

Upon the occurrence and during the continuance of an event of default under the Credit Agreement, JPMorgan may exercise all of its rights and remedies available to it under the Credit Agreement and as otherwise permitted by law. JPMorgan’s rights and remedies include, among others, taking one or more of the following actions: (i) declare the commitment and the obligation of JPMorgan to make Credit Extensions (as defined in the Credit Agreement) to be terminated, (ii) by written notice to City, declare the outstanding amount of the obligations of the City under the Credit Agreement to be immediately due and payable, (iii) require the City to cash collateralize 105% of the Letter of Credit Exposure (as defined in the Credit Agreement) (which generally include the amounts available to be drawn under any Letters of Credit plus any amounts drawn by beneficiaries under such Letters of Credit but which are not reimbursed by the City as required under the Credit Agreement, plus accrued and unpaid interest thereon, (iv) and at the expense of the City, cure any event of default; provided, however that JPMorgan shall have no obligation to effect such a cure, and (v) by written notice to the City, impose the Default Rate (as defined in the Credit Agreement) with respect to the 122

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City’s obligations under the Credit Agreement (which imposition may be retroactive to the date on which the event of default first occurred).

10. Landfill Postclosure Costs
The City has five closed landfills for which postclosure and monitoring services are required. An estimated liability of $2,250,000 related to the closed landfills is recorded in the government-wide statement of net position as of June 30, 2024. The City’s Environmental Compliance group within the Environmental Services Department performs an annual evaluation of the liability. Actual costs may be higher due to inflation, changes in technology, or changes in regulations. The City does not own or operate any open landfills at this time.
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11. Insurance
The City is exposed to various risks of losses related to torts, errors and omissions, general liability, injuries to employees, unemployment claims, and employee health and dental insurance.

During FY 2024, the City maintained an all-risk property policy including boiler and machinery exposures, coverage for loss due to business interruption and flood.

The City did not carry earthquake insurance as it was not available at reasonable rates. A summary of insurable coverage for the policy period October 1, 2023 to October 1, 2024 is provided below:

City of San José
Summary of Citywide Property Insurance Coverage
(For Policy Period October 1, 2023 - October 1, 2024)

Limits Deductible
Per Occurrence (1) Per Occurrence (2)

Property(3) $1,000,000,000 $500,000

Business Interruption 300,000,000 $500,000 per Occurrence

Flood (4)(5) $10,000,000 Annual $500,000 per Location Aggregate

(1) Other sub-limits apply.
(2) Other deductibles apply.
(3) Covers “Certified Act of Terrorism” under the Terrorism Risk Insurance Act of 2002, as amended. (4) The Airport and McEnery Convention Center are subject to a $10,000,000 per Location deductible for flood. (5) The San José - Santa Clara Regional Wastewater Facility is subject to a $5,000,000 per Location deductible for flood.

Source: City of San José, Finance Department - Risk Management Unit.

To mitigate the impact of reduction to the base flood coverage from $25,000,000 to $10,000,000 as of October 1, 2019, the City has obtained an excess policy for locations not in low hazard flood zones. The excess policy provides $15,000,000 in flood limits excess of the primary property policy on a 50/50 quota share basis, where the City and excess insurers share the financing of losses on a 50/50 basis.

For the policy period of June 30, 2023 to June 30, 2024, the City maintained an Airport General Liability policy covering the Airport including Control Tower Operators, which provides a $200,000,000 combined single limit for bodily injury and property damage subject to a deductible of $0 each occurrence and annual aggregate, with a sublimit of $25,000,000 each occurrence and in the annual aggregate for personal injury, and a limit of $50,000,000 each occurrence and in the annual aggregate with respect to war liability. During the past five fiscal years, there have not been any instances that the amount of claim settlements exceeded the insurance coverage.

In addition, the Airport Liability policy also provides excess auto liability coverage with a limit of $50,000,000 that provides coverage excess of the underlying auto liability limit of $1,000,000, which is provided by a separate automobile policy issued to provide coverage for the off-premise operations of scheduled Airport vehicles including shuttle bus fleets with a limit of $1,000,000 per occurrence, combined single limit for bodily injury and property damage and subject to a $250,000 per accident retention. Physical damage coverage is obtained for the Airport Shuttle Bus Fleet and is subject to a $10,000 comprehensive and $10,000 124

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collision deductible. Settled claims have not exceeded the City’s commercial insurance coverage in any of the past five fiscal years.

For the policy period of October 1, 2023, to October 1, 2024, the City maintained an automobile liability policy covering scheduled vehicles at the San José - Santa Clara Regional Wastewater Facility with a limit of $1,000,000 per occurrence, combined single limit for bodily injury and property damage and subject to a $250,000 per accident retention.

Effective October 1, 2023, the City obtained physical damage coverage for scheduled Police Department grant funded vehicles through July 1, 2024, a policy that will renew every July 1 st thereafter. For vehicles with insurable value under $300,000, the policy is subject to a $2,000 deductible. Vehicles with insurable values of $300,000 or greater are subject to a $10,000 deductible.

For the policy period of June 30, 2023 to June 30, 2024, the City maintained an aircraft policy covering physical damage to City aircraft used by the San José Police Department’s Air Support Unit as well as liability coverage for bodily injury and property damage arising from the use of covered aircraft. The aircraft policy provides up to $50,000,000 in aggregate liability coverage for bodily injury, personal injury, or property damage caused by war and other perils and is subject to a deductible of $0 per occurrence. For the policy period of June 30, 2023, to June 30, 2024, the City maintained a separate aircraft policy to include liability and physical damage coverage for the unmanned aerial systems (UAS) programs in place at the San José Police Department and San José Fire Department (“Drone Coverage”). The Drone Coverage provides up to $2,000,000 in aggregate liability coverage for bodily injury, personal injury, or property damage.

For the policy period of October 1, 2023 to October 1, 2024, the City maintained a law enforcement liability policy that provides coverage for third party bodily injury, property damage, or personal injury arising from the law enforcement activities conducted on behalf of approved third party employers by City police officers who have been approved to participate in the Secondary Employment program. The law enforcement liability policy provides $2,000,000 in aggregate limits and is subject to a $100,000 per occurrence deductible.

The City also maintained fiduciary liability insurance policies covering the City’s defined contribution employee benefit plans: the Deferred Compensation Plans, the Voluntary Employees’ Beneficiary Association (“VEBA”) Plans; and the Defined Contribution 401(a) Plan. The policies protect the City and the members of the applicable governing board from legal liability arising from fiduciary obligations to plan beneficiaries. For the policy period from June 30, 2023, to June 30, 2024, the City purchased a fiduciary liability policy covering the Deferred Compensation Plans that provided $5,000,000 in aggregate limits subject to a $25,000 per claim retention except for a $250,000 per claim retention for Class Action Claims as defined in the policy. For the policy period from June 30, 2023, to June 30, 2024, the City purchased a fiduciary liability policy covering the VEBA Plans that provided $5,000,000 in aggregate limits subject to a $25,000 per claim retention. For the policy period from June 30, 2023, to June 20, 2024, the City purchased a fiduciary liability policy covering the Defined Contribution 401(a) Plan that provided $1,000,000 in aggregate limits subject to a $25,000 per claim retention. The City added fiduciary dishonesty coverage to all three fiduciary liability policies effective June 30, 2023. The fiduciary dishonesty coverage provides $500,000 in aggregate limits for claims arising out of employee dishonesty.

For the policy period of October 22, 2023 to October 22, 2024, the City purchased liability insurance covering cyber risks to complement the City’s cybersecurity efforts. For the policy period of October 1, 2023 to October 1, 2024, the City purchased government fidelity/crime coverage for City losses arising from employee dishonesty. Coverage is for financial or property losses and provides a $5,000,000 per occurrence limit for losses resulting from employee theft, forgery or alteration, and inside the premises – theft of money and 125 FOR THE YEAR ENDED JUNE 30, 2024

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securities, and provides for a $1,000,000 per occurrence limit for computer fraud, funds transfer fraud, money orders, and counterfeit money. All claims are subject to a $250,000 per occurrence deductible.

Claims liabilities are reported when it is probable that a loss has occurred, and the amount of the loss can be reasonably estimated. The result of the process to estimate the claims liability is not an exact amount as it depends on many complex factors, such as inflation, changes in legal doctrines, newly discovered information and damage awards. Accordingly, claims are reevaluated periodically to consider the effects of inflation, recent claims settlement trends (including frequency and amount of pay-outs), economic and social factors, newly discovered information and changes in the law. The estimate of the claims liability also includes increases or decreases to previously reported unsettled claims. The workers’ compensation estimate includes allocated loss adjustment expenses, which represent the direct cost associated with the defense of individual claims, which may be years into the future and have been discounted to their present value using a rate of approximately 2.0% for the amounts recorded.

With respect to the general liability accrual, the City has numerous unsettled lawsuits filed or claims asserted against it as of June 30, 2024. The City Attorney and, with respect to workers’ compensation claims, the City’s Department of Human Resources have reviewed these claims and lawsuits in order to evaluate the likelihood of an unfavorable outcome to the City and to arrive at an estimate of the amount or range of potential loss to the City. The City is self-insured and has included a provision for losses in its claims liability for loss contingencies that are both probable and can be reasonably estimated.

Changes in the reported liability during the past two years are as follows (in thousands):

Liability as of June 30, 2022 $183,426
Claims and changes in estimates during 2023 35,077
Claims payments (26,727)
Liability as of June 30, 2023 191,776
Claims and changes in estimates during 2024 51,511
Claims payments and other adjustments (42,912)
Liability as of June 30, 2024 $200,375
Owner Controlled Insurance Programs - On March 15, 2007, the City bound certain liability insurance coverage for the major components of the Airport’s Terminal Area Improvement Program through an owner- controlled insurance program (“TAIP OCIP”) with National Union Fire Insurance Company of Pittsburgh, PA (“AIG”), formerly known as Chartis Insurance. The OCIP is a single insurance program that provides commercial general liability, excess liability and worker’s compensation insurance coverage for construction job site risks of the project owner, general contractors and all subcontractors associated with construction at the designated project site.

The coverage for this program is as follows:

Terminal Area Improvement Program
Coverages Limits Deductible Per Occurrence

General Liability

$2 million per occurrence/ $4
million aggregate
$250,000

Workers’ Compensation Statutory $250,000
Employers’ Liability $1 million per accident $250,000 Excess Liability $200 million None
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The liability under the TAIP OCIP is based upon an estimated payroll of $92,500,000 for the covered projects and a construction period of 45 months, commencing on March 15, 2007 through December 31, 2010.

The terms of the TAIP OCIP required the City to fund a claims loss reserve fund with AIG in the amount of $8,900,000. The claims loss reserve fund is available to AIG to pay claims within the City’s deductible subject to an aggregate maximum loss exposure within coverage limits to the City of $8,900,000. The City was able to negotiate to fund 74% of the claims loss reserve and interest generated remains in the fund. The full amount of $6,500,000 was deposited with AIG in FY 2009 and was recorded as advances and deposits in the accompanying Airport enterprise fund statement of net position. The balance of the TAIP reserve fund as of June 30, 2024 was approximately $83,000.

The City was obligated to maintain the TAIP OCIP through final acceptance of the TAIP , pursuant to the terms of its design-build contract with Hensel Phelps. The TAIP Project has been completed and the policies expired on June 30, 2011. AIG will continue to hold the remaining funds in the claims loss reserve until such time as the exposure to risk of claims ceases or the City opts to cash out the remaining funds in exchange for accepting responsibility for potential future claims.

On June 30, 2017, the City bound certain liability insurance coverage for the major components of the San José-Santa Clara Regional Wastewater Facility Capital Improvement Program through an owner-controlled insurance program (“RWF OCIP I”) with the primary carrier Old Republic General Insurance Corporation (“Old Republic”). The RWF OCIP I is a single insurance program that the City sponsors and provides commercial general liability, excess liability and worker’s compensation insurance coverage for construction job site risks of the project owner, general contractors and all subcontractors associated with construction at the designated project site. In addition, the City procured Builder’s Risk and Contractor’s Pollution Liability insurance to cover liabilities associated with the work. The Contractor’s Pollution Liability insurance for RWF OCIP II provides project-specific coverage to the City arising from pollution conditions arising from contractor operations on the specific projects. The $10 million in Contractor’s Pollution Liability coverage is subject to a $100,000 per occurrence deductible.

The City was also required to establish and post a cash collateral fund of $2,657,395, to be paid in five annual installments and subject to the Old Republic’s quarterly requests to adjust based on expenditure of funds up to the maximum aggregate loss of $4,385,000. Due to positive claims experience since the inception of the program, the City negotiated a $100,000 reduction in the overall cash collateral requirement. As of July 31, 2021, the City has provided Old Republic with $2,557,395 for the cash collateral fund. The cash collateral fund is available to Old Republic to pay claims within the City’s deductible of up to $250,000 per occurrence to an aggregate maximum loss exposure within coverage limits to the City of $4,385,000.

RWF Capital Improvement Projects (OCIP I)
Coverages Limits
Deductible Per
Occurrence

General Liability

$2 million per occurrence/ $4
million aggregate
$250,000

Workers’ Compensation Statutory $250,000
Employers’ Liability $1 million per accident $250,000 Excess Liability $100 million None
The premiums of the RWF OCIP I are calculated based on the estimated hard cost of construction valued at $535,000,000 for the covered capital improvement projects to be enrolled and for work to be performed up to March 30, 2023. To accommodate five existing capital projects whose construction timelines extended 127 FOR THE YEAR ENDED JUNE 30, 2024

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beyond March 30, 2023, the City extended the expiration date of RWF OCIP I to May 31, 2024. The City has subsequently extended RWF OCIP 1 to December 31, 2024, to accommodate one existing capital project whose construction timeline has been delayed.

On January 25, 2022, the City bound certain liability insurance coverage for the major components of the capital improvement program of the Treatment Plant through a second Owner-Controlled Insurance Program (“RWF OCIP II”) with the primary carrier Ace American Insurance Company (“Chubb”). The RWF OCIP II is a single insurance program that the City sponsors and provides commercial general liability, excess liability, and worker’s compensation insurance coverage for construction jobsite risks of the project owner, general contractors and all subcontractors associated with construction at the designated project site.

The City secured Builder’s Risk insurance to provide replacement cost property coverage for scheduled RWF OCIP II capital projects with construction start dates from April 1, 2024, to April 1, 2026. The City purchased Contractor’s Pollution Liability insurance for RWF OCIP II, which provides project-specific coverage to the City arising from pollution conditions arising from contractor operations on the specific projects. The $10 million in Contractor’s Pollution Liability coverage is subject to a $100,000 per occurrence deductible.

The City also elected to purchase Excess Professional Liability insurance for RWF OCIP II. Excess Professional Liability coverage provides claims-made, project-specific coverage to the City for liabilities and exposures resulting from breach of the performance of professional services providers, including design, architecture and engineering work. The $10 million in Excess Professional Liability coverage is in excess of the individual policies of these professionals, which must provide a minimum of $2 million in professional liability coverage and applies only after exhaustion of proceeds on those policies.

The City was also required to establish and post a cash collateral fund of $1,496,471, to be paid in four annual installments and subject to Chubb’s quarterly requests to adjust based on expenditure of funds up to the maximum aggregate loss of $2,559,441. The cash collateral fund is available to Chubb to pay claims within the City’s deductible of up to $250,000 per occurrence to an aggregate maximum loss exposure within coverage limits to the City of $2,559,441. As of June 30, 2024, the City has provided Chubb with $1,122,354 for the cash collateral fund.

The coverage for the RWF OCIP II is as follows:

RWF Capital Improvement Projects (OCIP II)
Coverages Limits
Deductible Per
Occurrence

General Liability

$2 million per occurrence/ $4
million aggregate
$250,000

Workers’ Compensation Statutory $250,000
Employers’ Liability $1 million per accident $250,000 Excess Liability $100 million None
The premiums of the RWF OCIP II are calculated based on the estimated hard cost of construction valued at $310,600,000 for the covered capital improvement projects to be enrolled and for work to be performed during the policy period February 1, 2022 through February 1, 2028.

12. Pollution Remediation Obligations
The City is currently responsible for the management and cleanup of pollution remediation activities at several City sites including Las Plumas Warehouse and the former San José Fire Training Facility. Although the City has significant experience in estimating these types of cleanups, the calculation of the expected 128

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outlays related to this pollution remediation is based on estimates provided by both City engineers and consultants hired by the City. The amount of the estimated pollution remediation liability assumes that there will be no major increases in the cost of providing these cleanup services. As of June 30, 2024, the government-wide statement of net position reported a net pollution remediation obligation in the amount of $3.3 million in governmental activities.

Convention Center South Hall Site – On October 10, 2018, the City purchased the Convention Center South Hall Site (“South Hall Site”) from the SARA in “as-is” condition. The South Hall Site is contaminated with gasoline, diesel products, and lead. The San Francisco Regional Water Quality Control Board (“Water Board”) has listed the South Hall Site as an open-inactive case. The Water Board is not requiring further investigation or possible remediation at this time based upon the current use of the property as a Convention Center that is completely paved. There are no immediate plans to redevelop the South Hall Site which would likely require environmental mitigation, the cost of which is unknown and would depend on the specific redevelopment plans for the South Hall Site.

San José Santa Clara Wastewater Treatment Facility - San José Santa Clara Wastewater Treatment Facility is co-owned by the City of San José and City of Santa Clara and treats wastewater for over 1.7 million residents and thousands of businesses in the cities of San José, Santa Clara, Milpitas, Campbell, Los Gatos, Monte Sereno, Cupertino, and unincorporated areas of the County. As part of the wastewater treatment process, the water is filtered, treated, and the solids removed. The solid material byproduct is called biosolids and placed in lagoons in the RWF buffer lands where the biosolids are dredged and then dried to reduce the water content for eventual off-site disposal.

In the 1960s and 1970s, biosolids from the wastewater were kept on the RWF buffer lands and stored in lagoons over about 200-acres. These biosolids, estimated to be approximately 750,000 cubic yards, were tested for disposal purposes and found to contain several metals that characterize the biosolids as hazardous waste. The San Francisco Bay Regional Water Quality Control Board (“Water Board”) issued an order in August 2019 to require the City to remediate the biosolids. The City received approval from the Water Board to consolidate the biosolids into a smaller footprint (about 25-acres) and cap with clean soil. The City has decided to do the work in two phases. Phase 1 was completed in late 2020 at cost of about $6.2 million. The remaining biosolids will be placed in the consolidated area in a second phase implemented over several years. The project is expected to be completed in 2026 or 2027. The estimated cost for the Phase 2 removal is currently $27.0 million.
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G. Interfund Transactions

The composition of interfund balances as of June 30, 2024, with explanations of transactions, is as follows (in thousands):

1. Due from/Due to other funds

Receivable Fund Payable Fund Amount
General Fund Nonmajor Governmental Funds $ 3,568 (1)
Nonmajor Governmental Funds Nonmajor Governmental Funds 2,277 (2) $ 5,845

(1) Represents accrual of construction and conveyance tax transfer. (2) Represents short-term borrowing for working capital.

2. Long-term Advances from SARA
The City has a payable and SARA has a receivable related to an Agency advance of a portion of a loan made by the City’s Housing Department to a third party for a transitional housing project. The SARA is entitled to 24.5% of the total loan repayment. The long-term receivable of $719,320 was adjusted-down, and the remaining balance of $13,555 was fully paid off during the fiscal year.

3. Transfers in/Transfers out

Transfers are indicative of funding for capital projects, lease payments or debt service and subsidies of various City operations. The following schedules summarize the City’s transfer activity for the year ended June 30, 2024, with explanations of transactions (in thousands):

Between governmental and business-type activities:

Transfer from Transfer to Amount

Wastewater Treatment System Nonmajor Governmental Funds 1,432 (1)

Municipal Water System Nonmajor Governmental Funds 162 (2)

Parking System General Fund 801 (3)
Nonmajor Governmental Funds 179 (4)

San José Clean Energy Nonmajor Governmental Funds 363 (5)

General Fund San José Mineta International Airport 716 (6)

$ 3,653

(1) Transfer for City Hall debt service payments.
(2) Transfer for City Hall debt service payments.
(3) Transfer of $436 to the San Jose Downtown Association, and $365 for Citywide strategic support and capital improvement. (4) Transfer of $101 for City Hall debt service payments, and $78 to the Downtown Property and Business Improvement District. (5) Transfer for City Hall debt service payments.
(6) Transfer for jet fuel sales tax to the Airport Revenue Fund.

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Between governmental activities:

Transfer from Transfer to Amount

General Fund Nonmajor Governmental Funds $ 21,834 (1) Internal Service Funds 5,625 (2)
San José Financing Authority Debt Service 3,192 (3)

Housing Activities Nonmajor Governmental Funds 267 (4)

Low and Moderate Income Housing Asset Nonmajor Governmental Funds 322 (5)

Special Assessment Districts General Fund 120 (6)
San José Financing Authority Debt Service 10,160 (7)

Nonmajor Governmental Funds General Fund 10,387 (8)
Nonmajor Governmental Funds 16,026 (9)
San José Financing Authority Debt Service 37,177 (10)

Internal Service Funds General Fund 202 (11)
Nonmajor Governmental Funds 122 (12)

San José Financing Authority Debt Service Nonmajor Governmental Funds 952 (13)

$ 106,386

(1) Transfer of $17,693 for City Hall debt service payments, and $4,141 for operations and subsidies. (2) Transfer to Vehicle Maintenance and Operations Fund. (3) Transfer of $2,679 for Commercial Paper fees, interest, and principal redemption, and $513 to write-off Fund 818. (4) Transfer for City Hall debt service payments.
(5) Transfer for City Hall debt service payments.
(6) Transfer for administrative expenses.
(7) Transfer for debt service payments related to Series 2022A bonds. (8) Various transfers for debt service, interest allocation, and capital project operations. (9) Transfer of $4,232 for City Hall debt service payments, and $11,794 for operations. (10) Transfer for debt service payments related to commercial paper fees, interest, and reimbursements. (11) Transfer for interest allocation.
(12) Transfer for City Hall debt service payments.
(13) Transfer for Commercial Paper proceeds.

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H. Deferred Inflows of Resources

As of June 30, 2024, total deferred inflows of resources in the governmental funds related to the following unavailable resources (in thousands):

Description
General Fund receivables $ 25,473
Housing Activities loans receivable 20,862
Low and Moderate Income Housing Asset loans receivable 2,862 Integrated Waste Management receivables 204
Community Development Block Grant (CDBG) loans receivable 2,572 Construction Excise Tax 25,328
Community Facility Revenues 86,731
Total deferred inflows of resources $ 164,032
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I. Governmental Fund Balances

As of June 30, 2024, total fund balances for the City’s major and nonmajor governmental funds are as follows (in thousands):

General
Fund
Housing
Activities
Low &
Moderate
Income
Housing
Asset
Special
Assessment
Districts
San José
Financing
Authority
Debt Service
Nonmajor
Governmental
Funds
Total
Governmental
Funds
Nonspendable:

Advances & Deposits $ 55 $ - $ - $ - $ - $ - $ 55 Subtotal 55 - - - - - 55

Restricted for:

Affordable Housing - 191,253 420,164 - - - 611,417 Capital Projects & Improvements - - - 32,414 - 376,301 408,715 Employment/Training Services - - - - - 1,624 1,624 Drug Abuse Prevention & Control 300 - - - - 2,179 2,479 Community Development Services - - - - - 3,043 3,043 Library Services & Facilities - - - - - 4,667 4,667 Small Business Loans - - - - - 7 7
Parks, Recreation, & Neighborhood
Development - - - - - 104,010 104,010 Underground Utility Projects - - - - - 13,620 13,620 Storm Drainage Projects - - - - - 50,372 50,372 Supplemental Law Enforcement Services - - - - - 293 293 Convention Center, Auditorium, Theaters - - - - - 215 215 Debt Service - - - - 8,228 47,751 55,979 Subtotal 300 191,253 420,164 32,414 8,228 604,082 1,256,441

Committed to:

Capital Projects and Improvements 28,818 - - - - 1,106 29,924 Parks, Recreation, & Neighborhood
Development - - - - - 2,312 2,312
Development Enhancement - - - - - 775 775 Convention Center, Auditorium, Theaters - - - - - 6,549 6,549 Development Fee Program Technology 570 - - - - - 570 Residential Program Administration - - - - - 3,275 3,275 Government Functions/Services 34,558 - - - - - 34,558 Public Safety 7,997 - - - - - 7,997
Community Development Services 25,800 - - - - 58,828 84,628 Salaries & Benefits 9,334 - - - - - 9,334 Sanitation Projects 438 - - - - 47,763 48,201 Sick Leave Payment Upon Retirement 1,000 - - - - - 1,000 Debt Service - - - - - 4 4
Subtotal 108,515 - - - - 120,612 229,127

Assigned to:

Financing Authority Debt Service 6,035 - - - - - 6,035 Development Enhancement - - - - - 20 20 Community & Culture Projects - - - - - 3,987 3,987 Hayes Mansion and Ice Center Operations - - - - - 12,249 12,249 Capital Projects & Improvements - - - - - 77,576 77,576 Government Functions/Services 427,835 - - - - - 427,835 Subtotal 433,870 - - - - 93,832 527,702

Unassigned 132,374 - - - (3,490) (20) 128,864

Total Fund Balance $ 675,114 $ 191,253 $ 420,164 $ 32,414 $ 4,738 $ 818,506 $ 2,142,189 133 FOR THE YEAR ENDED JUNE 30, 2024

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City Reserves Policy. The City Council-approved Operating Budget and Capital Improvement Program Policy (Policy Number 1-18) incorporates direction on contingency funding, including general purpose reserves, the Cash Reserve Fund and the Emergency Reserve Fund. Within the General Fund, general purpose reserves are to be set aside as a safety net for general City operations. Currently, the General Fund Contingency Reserve, the General Fund Budget Stabilization Reserve, and the General Fund Workers’ Compensation/General Liability Catastrophic Reserve are available for general purposes. Each of these reserves is described below.

With the exception of the General Fund Contingency Reserve Fund, use of these reserves requires a majority vote of the City Council.

Within capital project and special revenue funds, general purpose reserves may be set aside as a safety net for City operations pertaining to the respective fund or to provide stability for customer rates when there are fluctuations to revenues and expenditures.

The Policy also identifies the Cash Reserve Fund and the Emergency Reserve Fund, which are mandated by the City Charter described below.

The General Fund Contingency Reserve Fund was created to meet unexpected circumstances arising from financial and/or public emergencies that require immediate funding that cannot be met by any other means.

The policy established a minimum of three percent of the General Fund operating budget as the reserve balance. Any use of the General Fund Contingency Reserve shall require a two-thirds vote of approval by the City Council. As of June 30, 2024, the contingency amount accounts for $50,000,000 of the unassigned fund balance.

The General Fund Budget Stabilization Reserve may be maintained at a level as determined by the City Council to be adequate. The purpose of this reserve is to provide budget stability when there are fluctuations that result in lower than projected revenues and/or higher than projected expenditures that cannot be re- balanced within existing budget resources in any given year. This reserve is intended to provide a buffer, or bridge funding, to protect against reducing service levels when these fluctuations occur. As of June 30, 2024, the budget stabilization reserve accounts for $61,000,000 of the unassigned fund balance.

The General Fund Workers’ Compensation/General Liability Catastrophic Reserve may be maintained at a level as determined by the City Council to be adequate. The purpose of this reserve is to provide funding for potential workers’ compensation or general liability claims that exceed the budgeted amounts as the City, for the most part, is self-insured. As of June 30, 2024, the workers’ compensation and general liability catastrophic reserve accounts for $15,000,000 of the unassigned fund balance.

The Cash Reserve Fund was created for the payment of any authorized expenditures of the City for any fiscal year in anticipation of and before the collection of taxes and other revenues of the City for such fiscal year, and for the payment of authorized expenses of the City for any fiscal year, which became due and payable and must be paid prior to the receipt of tax payments and other revenues for such fiscal year. A reserve shall be built up in said fund from any available sources other than restricted sources in an amount which the Council deems sufficient for said purposes. As of June 30, 2024, the cash reserve amount accounts for $6,000 of the unassigned fund balance.

The Emergency Reserve Fund was created for the purpose of meeting any public emergency involving or threatening the lives, property or welfare of the people of the City or property of the City. A reserve shall be built up in said fund from any available sources, other than restricted sources, in an amount which the Council deems desirable. As of June 30, 2024, the emergency reserve amount accounts for $111,000 of the unassigned fund balance.
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IV. Other Information
A. Defined Benefit Retirement Plans
A. 1. City Sponsored Defined Benefit Pension Plans

1. General Information about the Pension Plans
The City sponsors and administers two single employer defined benefit retirement systems, the Police and Fire Department Retirement Plan (the “PFDRP”) and the Federated City Employees’ Retirement System (the “FCERS”), and collectively, “the Retirement Systems”, which with the exception of certain unrepresented employees together cover all full-time and certain part-time employees of the City. The Retirement Systems provide general retirement benefits under single employer Defined Benefit Pension Plans, as well as the Postemployment Healthcare Plans. The Retirement Systems are accounted for in the Pension Trust Funds.

The Retirement Systems are administered by the Chief Executive Officer of the Office of Retirement Services, an employee of the City, who serves at the pleasure of the Boards of Administration for the Retirement Systems. The compensation paid to the Chief Executive Officer and the investment professional staff within the Office of Retirement Services is set by the City Council. The Boards of Administration in recommending to the City Council the compensation amounts for these positions are required under the City Charter to consider compensation of equivalent positions in comparable United States public pension plans.

The separately issued annual reports of PFDRP and FCERS, together with various chapters in Title 3 of the City’s Municipal Code, provide more detailed information about the Retirement Systems. Those reports may be obtained from the City of San José Office of Retirement Services at http:/ /www.sjretirement.com.

Benefits
The Defined Benefit Pension Plans provide general retirement benefits including pension, death, and disability benefits to members. The contribution and benefit provisions and all other requirements are established by the City Charter and the City’s Municipal Code. Benefits are based on average Final Compensation, years of service, and cost-of-living increases as specified by the City’s Municipal Code. Information regarding disability and death benefits can be found in the annual reports of the Retirement Plans and on the Office of Retirement Services website.
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Effective June 18, 2017, the PFDRP has several Tiers as follows:

PFDRP Membership Tiers
Tier Hire Date Pension
Defined Benefit
Retiree Healthcare
(Medical/Dental)
Police Tier 1 • Before August 4, 2013

• Former Tier 1 rehired on or after
June 18, 2017 who did not take a
return of contributions
Tier 1 Medical/Dental (2) (4)

Police Tier 1
Rehire
• Tier 1 employee rehired between
August 4, 2013 through June 17,
2017
Tier 1 (1) Medical/Dental (2) (4)

Fire Tier 1 • Before January 2, 2015 Tier 1 Medical/Dental (2) (4)

• Former Tier 1 rehired on or after
June 18, 2017 who did not take a
return of contributions

Fire Tier 1 Rehire • Tier 1 employee rehired between
January 2, 2015 through June 17,
2017
Tier 1 (1) Medical/Dental (2) (4)

Tier 1 Classic • “Classic” membership with
CalPERS/reciprocal agency hired
on or after August 4, 2013 for
Police and January 2, 2015 for Fire
Tier 1 (5) Not Eligible

Police Tier 2 • On or after August 4, 2013 Tier 2 Not Eligible (3) (4)

Fire Tier 2 • On or after January 2, 2015 Tier 2 Not Eligible (3) (4)

(1) Employees in these tiers are responsible for 50% of the amortization costs for having any prior years of service in Tier 2 changed to Tier 1. (2) Employees in these Tiers were provided a one-time irrevocable election to remain in the Police and Fire Healthcare Plan or opt into the Police and Fire VEBA.

Employees that opted into the Police and Fire VEBA are not eligible for the Police and Fire Healthcare Plan. The Police and Fire VEBA was implemented on March 25, 2018.
(3) Employees in these tiers were mandatorily placed into the Police and Fire VEBA. (4) Unrepresented employees were eligible to opt into a Police and Fire VEBA but are not eligible to make ongoing contributions to the Police and Fire VEBA. (5) Employees in these tiers are responsible for 50% of the amortization costs for any prior years of service in Tier 2 changed to Tier 1 for all employees in the “Classic” tier regardless of start date.
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The following tables summarize the pension benefits for the members:

PFDRP
Police Tier 1 (1) Police Tier 1 Classic (2) Police Tier 2 (3)

Pension
Service required
to leave
contributions in
retirement plan
10 years of service
(20 years must have elapsed from date
of entry into Retirement Plan to
collect pension)
10 years of service 5 years service with the City in the Retirement Plan (Years
of Service = 2080 hours worked within
applicable 12-month period)

Mandatory retirement at 70 years of age Mandatory retirement at 70 years of age A reduction factor of 7.0% per year for each year between age 57 and Tier 2
member’s age at retirement, prorated to
the closest month

Early
Retirement
50-54 with 20 years of service
(discounted pension)
Allowance reduced pursuant to
Municipal
Code Section 3.36.810
50-54 with 20 years of service
(discounted pension)
Allowance reduced pursuant to Municipal
Code Section 3.36.810
N/A

Deferred Vested
Retirement
50 with 25 years service
55 with 10 years of service only if
20 years have elapsed from date of
membership.
55 with 10 years of service only if
20 years have elapsed from date of
membership. (Members can begin
receiving benefits at age 50 with at least
25 years of service.)
At least 5 years of service with the City
in the Retirement Plan (This applies
to members who separate from City
service before retirement and leave their
contributions in the retirement plan.)

Can begin at age 50 with reduction
factor of 7.0% per year for each year
between age 57 and the Tier 2
member’s age at retirement, prorated to
the closest month.
(1) Police Tier 1 employees are those hired before August 4, 2013. (2) Employees with “Classic” membership from a CalPERS or reciprocal agency. A CalPERS “Classic” member is a member who previously worked for a CalPERS or other reciprocal agency and meets the following criteria: 1. First established CalPERS membership or membership in a CalPERS reciprocal agency prior to January 1, 2013. 2. AND is hired by the City of San José after a break in service of less than six months. 3.AND did not have concurrent (overlapping) service with the other agency. City of San José Reciprocity election form must be submitted within thirty days of the first day of employment with the City.

Employees in Tier 1 Classic are not eligible for the defined benefit retiree healthcare plan. (3) Police Tier 2 employees are those hired on or after August 4, 2013.

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PFDRP (Continued)
Police Tier 1 (1) Police Tier 1 Classic (2) Police Tier 2 (3)

Allowance First 20 years of City service: 50% of
Final Compensation^ (2.5% per year)
First 20 years of City service: 50% of
Final Compensation (2.5% per year)
First 20 years of service: 2.4% per year of
service x Final Compensation

Next 21-30 years of City service: 4%
for each full year of service x Final
Compensation (90% max)
Next 21-30 years of City service: 4% per
year of service x Final Compensation
(90% max)
Beginning of 21st year of service: 3.0%
per year of service x Final
Compensation

^ Final Compensation is limited to 108%
of the second year prior to retirement.

Beginning of 26th year of service: 3.4%
per year of service x Final
Compensation

This formula applies to deferred vested
employees if they separated from the
City of San José on or after 7/1/2006.

Please contact Retirement Services
if the separation date was prior to
7/1/2006
Final Compensation is the average
annual base pay plus any premium pays
authorized by ordinance for the highest 3
consecutive years of service (SJMC

3.36.020.05)

Maximum benefit is 80% of Final
Compensation

Reciprocity
Reciprocity As of September 30, 1994, the City of
San José adopted a reciprocal
agreement with CalPERS. This may
result in improved benefits for members
who transfer between CalPERS and this
retirement plan. Final eligibility for
reciprocity is determined at the time of
retirement.

As of September 30, 1994, the City of
San José adopted a reciprocal
agreement with CalPERS. This may
result in improved benefits for members
who transfer between CalPERS and this
retirement plan. Final eligibility for
reciprocity is determined at the time of
retirement.

Cost-of-Living Adjustments
Cost-of-Living
Adjustments
Retirees are eligible for a 3% annual
cost-of-living adjustment (COLA).

Regular COLAs are compounded and
paid each February. There is no
proration of COLA.

Retirees are eligible for a 3% annual
cost-of-living adjustment (COLA).

Regular COLAs are compounded and
paid each February. There is no
proration of COLA.

Retirees are eligible for an annual cost-
of-living adjustment (COLA) limited
to the increase in the Consumer Price
Index (San José-San Francisco-Oakland,
U.S. Bureau of Labor Statistics index,
CPI-U, December to December), capped
at 2.0% per year. COLAs are applied
annually on February 1st. The first COLA
will be prorated based on the number
of months retired prior to February 1st.

Partial months are not included in the
proration.

(1) Police Tier 1 employees are those hired before August 4, 2013. (2) Employees with “Classic” membership from a CalPERS or reciprocal agency. A CalPERS “Classic” member is a member who previously worked for a CalPERS or other reciprocal agency and meets the following criteria: 1. First established CalPERS membership or membership in a CalPERS reciprocal agency prior to January 1, 2013. 2. AND is hired by the City of San José after a break in service of less than six months. 3.AND did not have concurrent (overlapping) service with the other agency. City of San José Reciprocity election form must be submitted within thirty days of the first day of employment with the City.

Employees in Tier 1 Classic are not eligible for the defined benefit retiree healthcare plan. (3) Police Tier 2 employees are those hired on or after August 4, 2013. 138

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PFDRP
Fire Tier 1 (1) Fire Tier 1 Classic(2) Fire Tier 2 (3)

Pension
Service required
to
leave
contributions
in retirement
system
10 years of service
(20 years must have elapsed from date
of entry into the Retirement Plan to
collect pension)
10 years of service 5 years of service with the City in the Retirement Plan (Year of Service = 2080
hours worked in the applicable 12-month
period)

Service Retirement
Age/Years of
Service
50 with 25 years of service
55 with 20 years of service
30 years of service at any age (with
reciprocity, must be 50 years of age)
50 with 25 years of service
55 with 20 years of service
30 years of service at any age (with
reciprocity, must be 50 years of age)
57 with 5 years of service with the City in
the Retirement Plan
50 with 5 years of service with the City in
the Retirement Plan
A reduction factor of 7% per year for
Mandatory retirement at 70 years of age Mandatory retirement at 70 years of age each year between age 57 and the Tier 2 member’s age at retirement, prorated to
the closest month

Early Retirement
(Not Available
for Deferred
50-54 with 20 years of service
(discounted pension)
50-54 with 20 years of service
(discounted pension)
N/A
Vested members
without
Reciprocity)
Allowance reduced pursuant to
Municipal
Code Section 3.36.810
Allowance reduced pursuant to
Municipal
Code Section 3.36.810

Deferred Vested
Retirement
50 with 25 years of service
55 with 10 years of service only if
20 years have elapsed from date of
membership.
55 with 10 years of service only if
20 years have elapsed from date of
membership.
(Members can begin receiving benefits
at age 50 with at least 25 years of
service)
At least 5 years of service with the City
in the Retirement Plan. (This applies
to members who separate from City
service before retirement and leave their
contributions in the retirement plan.)
Can begin at age 50 with reduction
factor of 7% per year for each year
between age 57 and the Tier 2
member’s age at retirement, prorated to
the closest month

(1) Fire Tier 1 members are those hired before January 2, 2015. (2) Employees with “Classic” membership from a CalPERS or reciprocal agency. A CalPERS “Classic” member is a member who previously worked for a CalPERS or other reciprocal agency and meets the following criteria: 1. First established CalPERS membership or membership in a CalPERS reciprocal agency prior to January 1, 2013. 2. AND is hired by the City of San José after a break in service of less than six months. 3. AND did not have concurrent (overlapping) service with the other agency. City of San José Reciprocity election form must be submitted within thirty days of the first day of employment with the City.

Employees in Tier 1 Classic are not eligible for the defined benefit retiree healthcare plan. (3) Fire Tier 2 employees are those hired on or after January 2, 2015.

139 FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT
NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2024
PFDRP (Continued)
Fire Tier 1 (1) Fire Tier 1 Classic(2) Fire Tier 2 (3)

Allowance First 20 years of service: 50% of Final
Compensation^ (2.5% per year)
First 20 years of service: 50% of Final
Compensation (2.5% per year)
First 20 years of service: 2.4% per year
of service x Final Compensation

>20 years of service - all years convert
to 3% for each full year x Final
Compensation (90% max)
Beginning of 21st year of service: 3%
per year of service x Final
Compensation (90% max) - All years
convert to 3% after 20 years of service
Beginning of 21st year of service: 3.0%
per year of service x Final
Compensation

^ Final Compensation is limited to
108% of members second year prior to
retirement
Beginning of 26th year of service: 3.4%
per year of service x Final
Compensation

This formula applies to deferred vested
employees if the member separated
from the City of San José on or after
7/1/2008. Please contact Retirement
Services if member’s separation date
was prior to 7/1/2008
Final Compensation is the average
annual base pay plus any premium pays
authorized by ordinance for the highest 3
consecutive years of service (SJMC

3.36.020.05)

Maximum benefit is 80% of Final
Compensation

Cost-of-Living Adjustments
Cost-of-Living
Adjustments
Retirees are eligible for a 3% annual
cost-of-living adjustment (COLA).

Regular COLAs are compounded and
paid each February. There is no
proration of COLA.

Retirees are eligible for a 3% annual
cost-of-living adjustment (COLA).

Regular COLAs are compounded and
paid each February. There is no
proration of COLA.

Retirees are eligible for annual cost-of-
living adjustment (COLA) limited to the
increase in the Consumer Price Index
(San José-San Francisco-Oakland, U.S.

Bureau of Labor Statistics index, CPI-U,
December to December), capped at

2.0% per year. COLAs are applied
annually on February 1st. The first COLA
will be prorated based on the number
of months retired prior to February 1st.

Partial months are not included in the
calculation.

(1) Fire Tier 1 employees are those hired before January 2, 2015. (2) Employees with “Classic” membership from a CalPERS or reciprocal agency. A CalPERS “Classic” member is a member who previously worked for a CalPERS or other reciprocal agency and meets the following criteria: 1. First established CalPERS membership or membership in a CalPERS reciprocal agency prior to January 1, 2013. 2. AND is hired by the City of San José after a break in service of less than six months. 3. AND did not have concurrent (overlapping) service with the other agency. City of San José Reciprocity election form must be submitted within thirty days of the first day of employment with the City.

Employees in Tier 1 Classic are not eligible for the defined benefit retiree healthcare plan. (3) Fire Tier 2 employees are those hired on or after January 2, 2015. 140

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FINANCIAL

SECTION
NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2024
Effective June 18, 2017, the FCERS has several Tiers as follows:

FCERS Membership Tiers
Tier Hire Date Pension
Defined Benefit Retiree
Healthcare
(Medical/Dental)

Tier 1 • On or before September 29, 2012

• Former Tier 1 rehired on or after June 18, 2017 who did not take a return of contributions
Tier 1 Medical/Dental (2) (4)

Tier 1 Rehire • Former Tier 1 rehired between September 30, 2012 through June 17, 2017
Tier 1 (1) Medical/Dental (2) (4) (5)

Tier 1 Classic • “Classic” membership with CalPERS/reciprocal agency hired by the City of San Jose on or after June 18, 2017 Tier 1 (6) Medical/Dental

• “Classic” membership with CalPERS/reciprocal agency
hired on or after September 30, 2012, but before
September 27, 2013
Tier 1 (6)

Not Eligible (3) (4)

• “Classic” membership with CalPERS/reciprocal agency
hired on or after September 27, 2013
Tier 1 (6) Not Eligible (3) (4)

Tier 2
(or Tier 2A)
• Hired/rehired/reinstated on or after September 30,
2012, but before September 27, 2013
Tier 2 Medical/Dental (2) (4)

Tier 2B • Hired/rehired/reinstated on and after September 27, 2013 and have not met City’s eligibility for retiree
healthcare
Tier 2 Not Eligible (3) (4)

(1) Employees in these tiers are responsible for 50% of the amortization costs for having any prior years of service in Tier 2 changed to Tier 1. (2) Employees in these tiers were provided a one-time irrevocable election to remain in the Federated Healthcare Plan or opt into the Federated VEBA. Employees that opted into the Federated VEBA are not eligible for Federated Healthcare Plan. The Federated VEBA was implemented on March 25, 2018. (3) Employees in these tiers were mandatorily placed into the Federated VEBA. (4) Unrepresented employees were eligible to opt into the Federated VEBA but are not eligible to make ongoing contributions to the Federated VEBA. (5) All Tier 1 rehires formerly in Tier 2B and Tier 2C who opted to remain in the Federated Healthcare Plan began contributing to the Federated Healthcare Plan on March 25, 2018.
(6) Employees in these tiers are responsible for 50% of the amortization costs for any prior years of service in Tier 2 changed to Tier 1 for all employees in the “Classic” tier regardless of start date.
141 FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT
NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2024
FCERS
Tier 1 (1) Tier 1 Classic (2) Tier 2A (3) Tier 2B (4)

Pension
Service required to
leave
contributions in
retirement
system
5 years 5 years Federated City Service (Year of Service = 2080 hours worked in the applicable 12-month period)

Service Retirement
Age/Years of Service 55 with 5 years service
30 years service at any age
62 years with 5 years Federated City Service
May retire on or after 55 years with 5 years Federated City Service. A reduction factor of 5% per year for each year between age fifty-five (55) and the Tier 2 member’s age at retirement before age 62, prorated to the closest month

Deferred Vested
retirement
55 with 5 years service
(This applies to members who separate from City service before retirement and leave their contributions in the
retirement system.)
May commence on or after 55 years with 5 years Federated City Service with actuarial equivalent reduction. (This applies to members who separate from City service before retirement and leave their contributions in the retirement system.) Can begin at age 55 with reduction factor of 5% per year for each year between age fifty-five and the Tier 2 member’s age at retirement before age 62, prorated to the closest month

Allowance 2.5% x Years of Service x Final Compensation (75.0% max)

Final Compensation is the highest average monthly
earnable pensionable salary during 12 consecutive months, capped at 108% of the second highest 12 consecutive
months.

Tier 1: If separation takes place prior to July 1, 2001, Final Compensation is highest average monthly salary during 36 consecutive months

2.0% x Years of Federated City Service x Final
Compensation (70.0% max)

Final Compensation is the average monthly (or biweekly) base pay for the highest 3 consecutive years of Federated City Service

Excludes premium pay or any other forms of additional
compensation

Tier 1 Classic: If separation takes place on or after July 1, 2001, Final Compensation is highest average monthly
salary during 12 consecutive months. If separation takes place prior to July 1, 2001, Final Compensation is highest average monthly salary during 36 consecutive months.

Disability Retirement (Service Connected)

Minimum Service None None

Allowance 40% of Final Compensation plus 2.5% x Years of Service in excess of 16 years x Final Compensation (Maximum 75%
of Final Compensation)
2% x Years of Federated City Service x Final Compensation (Minimum of 40% and maximum of 70% of Final
Compensation)

(1) Federated Tier 1 applies to employees hired on or before September 29, 2012. (2) Employees with “Classic” membership from a CalPERS or reciprocal agency hired by the City of San José, on or after June 18, 2017. A CalPERS “Classic” member is a member who previously worked for a CalPERS or other reciprocal agency and meets the following criteria: 1. First established CalPERS membership or membership in a CalPERS reciprocal agency prior to January 1, 2013, 2. AND is hired by the City of San José after a break in service of less than six months 3. AND did not have concurrent (overlapping) service with the other agency. City of San José Reciprocity Election Form must be submitted within thirty (30) days of the first day of employment with the City. Employees in Tier 1 Classic are not eligible for the defined benefit retiree healthcare plan. (3) Tier 2A applies to employees hired between September 30, 2012 and September 27, 2013. (4) Tier 2B are employees who were newly hired on or after September 27, 2013.

142

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FINANCIAL

SECTION
NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2024
FCERS (Continued)
Tier 1 (1) Tier 1 Classic (2) Tier 2A (3) Tier 2B (4)

Disability Retirement (Non-Service Connected)
Minimum Service 5 years 5 years Federated City Service

Allowance Tier 1: 20% of Final Compensation for up to 6 years of service.

Add 2% for each year of service in excess of 6 years but less than 16 years.

Add 2.5% for each year of service in excess of 16 years of services.
(Maximum 75% of Final Compensation).

For those who entered the Retirement System on 8/31/98
or before, the calculation is as follows:
40% of Final Compensation plus 2.5% x Years of Service in excess of 16 years x Final Compensation
(Maximum 75% of Final Compensation)
If under 55 years old, subtract 0.5% for every year under age 55
2% x Years of Federated City Service x Final Compensation. (Minimum of 20% and maximum of 70.0% of Final
Compensation)

Tier 1 Classic: 40% of Final Compensation plus 2.5% years of service in excess of 16 years x Final Compensation
(Maximum 75% of Final Compensation)
If under 55 years old, subtract 0.5% for every year under age

55. For those who entered the Retirement System on 9/01/98 or later, the calculation is as follows:
20% of Final Compensation for up to 6 year of service.

Add 2% for each year of service in excess of 6 years but less than 16 years.

Add 2.5% for each year of service in excess of 16 years of service
(Maximum 75% of Final Compensation)

Reciprocity
Reciprocity As of December 9, 1994, the City of San José Federated City Employees’ Retirement System adopted a reciprocal agreement with CalPERS. This may result in improved benefits for members who transfer between this retirement system and CalPERS or certain other public agency retirement systems that also have reciprocal agreements with CalPERS. Final eligibility for reciprocity is determined at the time of retirement.

Cost-of-Living Adjustments (COLA)
Cost-of-Living
adjustments
Retirees are eligible for a 3% annual cost-of-living
adjustment (COLA). Regular COLAs are compounded and
paid each April. There is no prorating of COLA.

Retirees are eligible for annual cost-of-living adjustment (COLA) limited to the lesser of the increase in the Consumer Price Index (San José-San Francisco-Oakland, U.S. Bureau of Labor Statistics index, CPI-U, December to December), or a back-loaded 2.0% COLA per fiscal year. The back-loaded COLA shall be calculated as follows:

i. Service at retirement of 1-10 years: 1.25% per year

ii. Service at retirement of 1-10 years and hired before June 16, 2017: 1.5%
iii. Service at retirement of 11-20 years: 1.5% per year iv. Service at retirement of 21-25 years: 1.75% per year v. Service at retirement of 26 years and above: 2.0% per year

COLAs are applied annually on April 1st. The first COLA will be prorated based on the number of months retired prior to April 1st. Partial months are not included in the proration.

ANNUAL COMPREHENSIVE FINANCIAL REPORT
NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2024
Employees Covered - The current membership in the Defined Benefit Pension Plans as of June 30, 2024, is as follows:

FCERS
Tier 1
Pension Only (2)
Tier 1
Pension &
Medical (3)
Tier 2
Pension Only (2)
Tier 2
Pension &
Medical (3) Totals
Defined Benefit Pension Plan:

Retirees and beneficiaries
currently receiving benefits (1) 847 3,750 59 1 4,657 Terminated vested members
entitled to future benefits (2) 710 142 1,279 - 2,131 Active members 115 1,008 3,109 69 4,301
Total 1,672 4,900 4,447 70 11,089

(1) The combined domestic relations orders are not included in this count as their benefit payment is included in the retiree member count. (2) Includes members that are eligible for the catastrophic disability medical benefits only (VEBA) from the Postemployment Healthcare Plan. (3) Eligible for full retiree medical benefits.

Retirees and Beneficiaries (1)
Terminated Vested Members
Entitled to Future Benefits Active Members
PFDRP Tier 1 Tier 2 Tier 1 Tier 2 Tier 1 Tier 2 Totals Police
Pension & Medical (2) 1,529 - 3 - 355 - 1,887 Pension only (3) 154 2 160 192 32 612 1,152 Police Total 1,683 2 163 192 387 612 3,039 Fire
Pension & Medical (2) 908 - 4 - 353 - 1,265 Pension only (3) 57 1 38 15 33 255 399
Fire Total 965 1 42 15 386 255 1,664
Total 2,648 3 205 207 773 867 4,703

(1) Retiree counts do not include combined domestic relations orders. (2) Members are eligible for full retiree medical benefits. (3) Includes members that are eligible for the catastrophic disability medical benefits only (VEBA) from the Postemployment Healthcare Plan.

The Retirement Systems are not subject to the provisions of the Employee Retirement Income Security Act of 1974, a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans.

2. Contributions
Under GASB Statement No. 68, the City’s and the participating employees’ contributions to the Defined Benefit Pension Plans are based upon an actuarially determined percentage of each employee’s pensionable and earnable salary to arrive at an actuarially determined contribution (“ADC”) sufficient to provide adequate assets to pay benefits when due. The contribution requirements are established by City Charter Articles XV and XV-A, and Title 3 of the San José Municipal Code.
144

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FINANCIAL

SECTION
NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2024
The contribution rates for the Defined Benefit Pension Plans for the City and the participating employees for the year ended June 30, 2024 were based on the actuarial valuations performed as of June 30, 2022.

The contribution rates in effect and the amounts contributed to the pension plans for the year ended June 30, 2024 are as follows (in thousands):

PFDRP
City Participants (2)
Defined Benefit Pension
Plan
Police
Tier 1
Minimum
Dollar
Amount (3)
Police
Tier 2
Fire
Tier 1
Minimum
Dollar
Amount (3)
Fire
Tier 2
Police
Tier 1
Police
Tier 2
Fire
Tier 1
Fire
Tier 2
Actuarial Rate:
06/23/24-06/30/24 34.46% 13.65% 36.57% 14.90% 10.59% 13.65% 11.81% 14.90% 07/01/23-06/22/24 (1) 33.84% $ 72,023 14.35% 34.25% $ 69,168 15.11% 11.06% 14.35% 11.99% 15.11%

(1) The actual contribution rates paid by the City for year ended June 30, 2024 differed from what is above for Tier 1 due to the City funding the actuarially determined contribution amount based on the greater of the dollar amount reported in the actuarial valuation or the dollar amount determined by applying the percentage of payroll reported in the valuation to the actual payroll, if actual payroll exceeds the actuarial payroll, for the fiscal year. (2) Under Measure F , certain Tier 2 members who had previous Tier 1 service or prior service with a reciprocal employer were reclassified to Tier 1. Ordinance No. 30145, which became effective October 12, 2018, amended the Municipal Code to reflect these changes. Effective March 24, 2019, reclassified Tier 1 members paid an additional 1.96% in contributions, members with prior Federated Service, reclassified Tier 1 paid an additional 0.87% in contributions, and Classic Tier 1 members paid an additional 0.15% in contributions for the year ended June 30, 2024. (3) Contributions are structured as a normal cost, plus a payment on the unfunded actuarial liability (UAL). Tier 1 City contributions are administered as a normal cost contribution rate based on payroll plus a dollar amount payment on the UAL.

FCERS
City Participants
Defined Benefit Pension Plan Tier 1
Minimum Dollar
Amount (3) Tier 2 Tier 1 (2) Tier 2
Actuarial Rate:
06/23/24-06/30/24 22.81% 8.73% 6.61% 8.49%
07/01/23-06/22/24 (1) 20.16% $ 168,762 8.01% 7.34% 8.01%

(1) The actual contribution rates paid by the City for year ended June 30, 2024 differed for Tier 1 due to the City funding the actuarially determined contribution amount based on the greater of the dollar amount reported in the actuarial valuation or the dollar amount determined by applying the percentage of payroll reported in the valuation to the actual payroll, if actual payroll exceeds the actuarial payroll, for the fiscal year. (2) Under Measure F , certain Tier 2 members who had previous Tier 1 service or prior service with a reciprocal employer were reclassified to Tier 1.

Ordinance No. 30183, which became effective January 4, 2019, amended the Municipal Code to reflect these changes. Reclassified Tier 1 members paid an additional 3.00% in contributions for fiscal year ended June 30, 2024. Classic Tier 1 members paid an additional 1.02% in contributions for year ended June 30, 2024.
(3) Contributions are structured as a normal cost, plus a payment on the Unfunded Actuarial Liability (UAL). Tier 1 City contributions are administered as a normal cost contribution rate based on payroll plus a dollar amount payment on the UAL.

Annual Pension Contribution for the Year Ended 06/30/24 Defined Benefit Pension Plan City Participants Total PFDRP $ 202,700 $ 34,439 $ 237,139
FCERS $ 218,313 $ 33,933 $ 252,246
145 FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT
NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2024

3. Net Pension Liability

The City’s net pension liability for each Defined Pension Plan is measured as the total pension liability, less the pension plans’ fiduciary net position as of the measurement date of June 30, 2023. The City’s net pension liability as of June 30, 2024 of each of the Defined Pension Plan is measured as of June 30, 2023, using an annual actuarial valuation as of June 30, 2022 and rolled forward to June 30, 2023 using standard update procedures by the actuary for the respective plans. In summary, the City’s net pension liability at June 30, 2024 is as follows (in thousands):

PFDRP FCERS CalPERS Total
Net Pension Liability $ 1,117,056 $ 1,975,181 $ 1,644 $ 3,093,881

The General Fund and Enterprise Funds have historically been used to liquidate the pension liabilities. 146

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FINANCIAL

SECTION
NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2024
Changes in Net Pension Liabilities - The components of the net pension liabilities of the PFDRP and FCERS plans as of the measurement date, June 30, 2023, were as follows (in thousands):

Increase (Decrease)

PFDRP

Total
Pension
Liability
(a)
Plan
Fiduciary Net
Position
(b)
Net Pension
Liability
(a-b)
Balance at June 30, 2023
(Measurement Date June 30, 2022) $ 5,631,167 $ 4,409,870 $ 1,221,297

Changes for the Year:

Service costs 95,421 - 95,421
Interest 367,189 - 367,189
Changes of benefit terms - - -
Contributions-employer - 201,750 (201,750)
Contributions-employees - 32,661 (32,661)
Net investment income - 359,863 (359,863)
Difference between expected and actual experience 20,532 - 20,532 Changes of assumptions 58 - 58
Benefit payments, including refunds of member contributions (275,823) (275,823) - Administrative expenses - (6,833) 6,833
Net changes 207,377 311,618 (104,241)
Balance at June 30, 2024
(Measurement Date June 30, 2023) $ 5,838,544 $ 4,721,488 $ 1,117,056

Increase (Decrease)

FCERS

Total
Pension
Liability
(a)
Plan
Fiduciary Net
Position
(b)
Net Pension
Liability
(a-b)
Balance at June 30 2023
(Measurement Date June 30, 2022) $ 4,689,423 $ 2,708,026 $ 1,981,397

Changes for the Year:

Service costs 70,248 - 70,248
Interest 304,936 - 304,936
Changes of benefit terms - - -
Contributions-employer - 199,440 (199,440)
Contributions-employees - 30,561 (30,561)
Net investment income - 222,101 (222,101)
Difference between expected and actual experience 64,726 - 64,726 Changes of assumptions 518 - 518
Benefit payments, including refunds of member contributions (247,356) (247,356) - Administrative expenses - (5,458) 5,458
Net changes 193,072 199,288 (6,216)
Balance at June 30, 2024
(Measurement Date June 30, 2023) $ 4,882,495 $ 2,907,314 $ 1,975,181

Note: The schedules of changes in the net pension liability for the year ended June 30, 2023 are presented in the Required Supplementary Information. 147 FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT
NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2024
Sensitivity of the Net Pension Liabilities to Changes in Discount Rates - The discount rates used to measure the total pension liabilities were 6.625%, for both the PFDRP and FCERS plans for the valuations dated June 30, 2022 and rolled forward to June 30, 2023 using standard update procedures by the actuary for the respective plans. It is assumed that PFDRP and FCERS members’ contributions and City’s contributions will be made based on the actuarially determined rates based on the funding policy of each board. Based on those assumptions, the PFDRP’s and FCERS’s fiduciary net positions are expected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liabilities.

The following presents the net pension liabilities, calculated using the discount rates of 6.625% in effect as of the measurement date, as well as what the net pension liabilities would be if they were calculated using discount rates that are one percentage point lower (5.625%) or one percentage point higher (7.625%) than the rates used, for the PFDRP and FCERS plans, respectively (in thousands):

PFDRP - Sensitivity Analysis
1%
Decrease
(5.625%)
Measurement
Date Rate
(6.625%)
1%
Increase
(7.625%)
Total pension liability $ 6,675,448 $ 5,838,544 $ 5,160,745 PFDRP fiduciary net position 4,721,488 4,721,488 4,721,488 Net pension liability $ 1,953,960 $ 1,117,056 $ 439,257

PFDRP fiduciary net position as a
percentage of the total pension liability 70.7% 80.9% 91.5%

FCERS - Sensitivity Analysis
1%
Decrease
(5.625%)
Measurement
Date Rate
(6.625%)
1%
Increase
(7.625%)
Total pension liability $ 5,543,803 $ 4,882,495 $ 4,341,812 FCERS fiduciary net position 2,907,314 2,907,314 2,907,314 Net pension liability $ 2,636,489 $ 1,975,181 $ 1,434,498

FCERS fiduciary net position as a
percentage of the total pension liability 52.4% 59.5% 67.0%

Pension Expense and Deferrals – For the year ended June 30, 2024, the City recognized pension expense and reported deferred outflows and inflows of resources related to pensions as follows (in thousands):

PFDRP FCERS Total
Pension Expense $ 193,713 $ 185,939 $ 379,652
Schedule of Deferred Outflows and Inflows of Resources - PFDRP

Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Contributions subsequent to measurement date $ 202,700 $ - Differences between expected and actual experience 19,128 3,782 Changes in assumptions 24,619 -

Net difference between projected and actual earnings
on pension plan investments 10,377 -
Total $ 256,824 $ 3,782
148

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FINANCIAL

SECTION
NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2024
As of June 30, 2024, $202,700,000 reported as deferred outflows of resources related to contributions subsequent to the measurement date for the PFDRP will be recognized as a reduction of the net pension liability in the year ending June 30, 2025.

Other amounts reported as deferred outflows of resources and deferred inflows of resources related to the pension will be recognized as pension expense as follows (in thousands):

Fiscal Year Ending
June 30:

Deferred
Outflows / (Inflows)
of Resources
2025 $ (6,195)
2026 (42,290)
2027 112,685
2028 (13,858)
$ 50,342
Schedule of Deferred Outflows and Inflows of Resources - FCERS

Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Contributions subsequent to measurement date $ 218,313 $ - Differences between expected and actual experience 73,424 - Changes in assumptions 14,475 -

Net difference between projected and actual earnings on pension plan investments - 28,378
Total $ 306,212 $ 28,378

As of June 30, 2024, $218,313,000 reported as deferred outflows of resources related to contributions subsequent to the measurement date for the FCERS will be recognized as a reduction of the net pension liability in the year ending June 30, 2025.

Other amounts reported as deferred outflows of resources and deferred inflows of resources related to the pension will be recognized as pension expense as follows (in thousands):

Fiscal Year
Ending June 30:

Deferred
Outflows / (Inflows) of
Resources
2025 $ 9,719
2026 (21,128)
2027 79,616
2028 (8,686)
$ 59,521
149 FOR THE YEAR ENDED JUNE 30, 2024

ANNUAL COMPREHENSIVE FINANCIAL REPORT
NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2024
Recognition of Deferred Outflows and Deferred Inflows of Resources for PFDRP and FCERS Gains and losses related to changes in total pension liability and fiduciary net position are recognized in pension expense systematically over time.

One fifth of the net earnings is recognized in the first year when the gain or loss occurred for the difference between projected and actual earnings on pension plan investments. The other deferred amounts are amortized over the expected average remaining service lifetime. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to pension and are to be recognized in future pension expense.

The recognition period differs depending on the source of the gain or loss:

Net difference between projected and actual
earnings on pension plan investments
5 Years

All other amounts Expected average remaining service lifetime (EARSL) (5.0 Years at June 30, 2023 measurement date)
Long-term Expected Rate of Return on Plan Investments - The assumption for the long-term expected rates of return on PFDRP and FCERS investments of 6.625% for the valuations dated June 30, 2023 and 2022, was selected by estimating the median nominal rates of return based on long-term capital market assumptions adopted by the respective Boards, including nominal expected rates of return for each of the asset classes, and reducing the estimated median by a margin so that there is estimated to be a greater than 50 percent probability of achieving the returns.
150

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FINANCIAL

SECTION
NOTES TO BASIC FINANCIAL STATEMENTS JUNE 30, 2024
Best estimates of geometric real rates of return for each major asset class included in the target asset allocation for each plan as of the measurement date of June 30, 2023, are summarized in the following tables:

PFDRP

Target Asset
Allocation
Long-Term Expected
Real Rate of Return
Public equity 42.0% 6.4%
Cash and cash equivalents 8.0% 0.3%
Investment grade bonds 4.5% 2.1%
Private equity 9.0% 7.9%
Core real estate 5.0% 3.8%
Immunized cash flows 5.0% 0.3%
Venture / growth capital 4.0% 8.8%
Emerging market bonds 2.0% 3.5%
Growth real estate 4.0% 6.2%
Long-term government bonds 1.5% 2.3%
Market neutral strategies 3.0% 3.4%
Private debt 4.0% 6.2%
Private real assets 4.0% 6.5%
High yield bonds 2.0% 4.6%
Treasury inflation - protected securities 2.0% 1.9%

FCERS

Target Asset
Allocation
Long-Term Expected
Real Rate of Return
Public equity 49.0% 6.5%
Private equity 8.0% 7.9%
Investment grade bonds 8.0% 2.0%
Core real estate 5.0% 3.8%
Immunized cash flows 5.0% 0.3%
Venture / growth capital 4.0% 8.8%
Growth real estate 3.0% 6.0%
Emerging market bonds 3.0% 3.5%
Private debt 3.0% 6.2%
Market neutral strategies 3.0% 3.4%
Private real assets 3.0% 6.4%
Long-term government bonds 2.0% 2.3%
Treasury inflation-protected securities 2.0% 1.9%
High yield bonds 2.0% 4.6%
Cash and Cash Equivalents N/A 0.3%

The separately issued annual reports of PFDRP and FCERS provide more information about the most recent long-term expected rates of return on plan investments.

4. Actuarial Methods and Assumptions

The significant actuarial methods and assumptions used to compute the total pension liability measured as of June 30, 2023 are from the actuarial valuation report with a valuation date of June 30, 2022 and rolled forward to June 30, 2023 using standard update procedures by the actuary for the respective plans. 151 FOR THE YEAR ENDED JUNE 30, 2024

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PFDRP FCERS
Description Method/Assumption Method/Assumption
Measurement date June 30, 2023 June 30, 2023
Valuation date June 30, 2022 June 30, 2022
Inflation rate 2.50% 2.50%
Discount rate 6.625% per annum (net of investment
expenses)

6.625% per annum (net of investment
expenses)
The long-term expected return on assets
based on Meketa’s capital market assumptions
for a 10-year and 20-year time horizons is 5.9%
and 6.9%, respectively.

The Board expects a long-term rate of return of

7.2% based on Meketa’s 2022 20-year capital
market assumptions and the System’s current
investment policy. A margin for adverse
deviation was used to improve the probability
of achieving the discount rate

Post-retirement mortality
(a) Healthy retirees: 1.002 times the 2010 Public Safety Above Median Income Mortality Table (Pub(s)-
2010(A)) for healthy male and female retirees

0.995 for males and 0.960 for females, times
the 2010 Public General Mortality Table (PubG-
2010) for healthy retirees

(b) Healthy non-annuitant:

0.979 times the 2010 Public Safety Above
Median Income Mortality Table (Pub(s)-
2010(A)) for healthy males and females
employees

0.992 for males, and 1.084 for females, times
the 2010 Public General Mortality Table (PubG-
2010) for healthy employees

1.051 for males and 0.991 for females, times
the CalPERS 2009 Ordinary Disability Mortality
Table

Rates of service retirement,
withdrawal, death, disability
retirements
Based upon current experience Based upon current experience

Salary increases
Wage Inflation Reflect currently bargained across-the-board increases and 3.00% per annum (0.50% real
wage growth) thereafter. For this valuation, Fire
members have bargained increases of 3.00%
for FYE 2023. The bargaining agreement for
Police members has expired
The base wage inflation assumption of 3.00%

Merit Increase Merit component added based on an
individual’s years of service ranging from

6.50% to 0.60%
Merit/longevity increase based on years of
service ranging from 3.75% at hire to 0.10% for
members with 15 or more years of service

Cost-of-Living Adjustment Tier 1 - 3% per year Tier 1 - 3% per year Tier 2 - 2% per year Tier 2 - 1.25% to 2.0% depending on years of service
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A. 2. California Public Employees’ Retirement System (CalPERS) Plan Description. The Mayor and members of the City Council are eligible to participate in the State of California’s Public Employees’ Retirement System (“CalPERS”) Public Agency Cost-Sharing Multiple-Employer Defined Benefit Pension Plan (the “Plan”). Effective July 26, 2020, any officer or employee, who is first hired on or after November 4, 2014 in the Unit 99 positions of Chief Executive Officer, Chief Investment Officer and certain Investment Professional staff in the Office of Retirement Services is eligible to participate in CalPERS. CalPERS acts as a common investment and administrative agent for various local and state governmental agencies within the State of California. The Plan provides retirement, disability and death benefits based on the employee’s years of service, age and Final Compensation. Benefit provisions and other requirements are established by the California Public Employees’ Retirement Law, employer contract with CalPERS and by City resolution. Retiree health benefits are not provided to Mayor/Councilmembers. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information. Reports can be found on CalPERS’ website at http:/ /www.calpers.ca.gov/page/home.

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 a final average compensation period of 36 months. Members with five years of total service are eligible to retire at age 50 for Classic members and at age 52 for the Public Employees’ Pension Reform Act of 2013 plan (“PEPRA”) members with statutorily reduced benefits. The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit.

The cost-of-living adjustments for the plan are applied as specified by the Public Employees’ Retirement Law, California Government Code Sections 20000-21703.

The CalPERS Plan’s provisions and benefits in effect at June 30, 2024, are summarized as follows:

Classic Rate Plan PEPRA Rate Plan
Prior to On or after
Hire date January 1, 2013 January 1,2013
Benefit formula 2% @ 55 2% @ 62
Benefit vesting schedule 5 years of service 5 years of service Benefit payments Monthly for life Monthly for life
Retirement age 50-63 52-67
Monthly benefits, as a % of eligible compensation 1.426% to 2.418% 1.0% to 2.5% Required employee contribution rates 7.00% 6.75%

11.840% + $162,113 for 7.680% + $490 for
Required employer contribution rates unfunded liability unfunded liability

As of June 30, 2024, there were two current San José City Council members enrolled in the Classic rate plan and eleven current members, consisting of four City Council members and five Office of Retirement Services investment staff, in the PEPRA rate plan.

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 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 public employees during the year, with an additional amount to finance any unfunded accrued liability. 153 FOR THE YEAR ENDED JUNE 30, 2024

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For the year ended June 30, 2024, the amount contributed to the CalPERS plan was as follows (in thousands):

Classic Rate Plan PEPRA Rate Plan Total
Contributions - employer $ 196 $ 127 $ 323
Contributions - employee 20 127 147
Total $ 216 $ 254 $ 470
Pension Liabilities, Pension Expense and Deferred Outflows/Inflows of Resources Related to Pensions Information in this section is derived from the GASB Statement No. 68 Accounting Valuation Report for the miscellaneous risk pool at the measurement date of June 30, 2023 prepared by CalPERS. As of June 30, 2024, the City reported a net pension liability of $1,644,000 for its proportionate share of the net pension liability of the Plan. The proportion was determined based on the City’s shares of actuarial accrued liability and market value of assets as of June 30, 2022.

The City’s net pension liability for the Plan is measured as the proportionate share of the net pension liability.

The net pension liability of the Plan is measured as of June 30, 2023, and the total pension liability for the Plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2022 rolled forward to June 30, 2023 using standard update procedures by CalPERS’ actuary. The City’s proportion of the net pension liability was actuarially determined at the valuation date.

The following information is related to the City’s proportionate share of the net pension liability and pension expense (in thousands):

Plan

Proportion of the net pension liability
prior measurement date $ 1,548 0.03308%

Proportion of the net pension liability
current measurement date 1,644 0.03288%
Change - Increase (Decrease) $ 96 -0.00020%

Pension Expense $ 378
The City reported deferred outflows of resources and deferred inflows of resources related to pensions as of June 30, 2024 from the following sources (in thousands):

Deferred Outflows
of Resources
Deferred Inflows
of Resources
Pension contributions subsequent to measurement date $ 323 $ - Differences between actual and expected experience 76 12 Changes in assumptions 90 -

Change in employer’s proportion and differences
between the employer’s contributions and the
employer’s proportionate share of contributions 161 32

Net differences between projected and actual
earnings on plan investments 280 -
Total $ 930 $ 44
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As of June 30, 2024, $323,000 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending June 30, 2025.

Other amounts reported as deferred outflows of resources and deferred inflows of resources related to the pension will be recognized as pension expense as follows (in thousands):

Fiscal Year Ending
June 30:

Deferred
Outflows / (Inflows) of
Resources
2025 $ 208
2026 131
2027 217
2028 7
$ 563
Actuarial Assumptions – The collective total pension liability for the June 30, 2023 measurement period was determined by an actuarial valuation as of June 30, 2022, with update procedures used to roll forward the total pension liability to June 30, 2023. The collective total pension liability was based on the following assumptions:

Information in this section is derived from the GASB 68 Accounting Valuation Report for miscellaneous risk pool at the measurement date of June 30, 2023 prepared by CalPERS.

Plan
Valuation Date June 30, 2022
Measurement Date June 30, 2023
Actuarial Cost Method Entry Age Actuarial Cost Method
Actuarial Assumptions
Discount Rate 6.90%
Inflation 2.30%

Salary Increases Varies by entry Age and service
Mortality Rate Table (1) Derived using CalPERS’ membership data for all funds Post Retirement Benefit
The lesser of contract COLA up to 2.30% until Purchasing Power Protection
Increase Allowance floor on purchasing power Applies , 2.30% thereafter

(1) The mortality table used was developed based on CalPERS-specific data. The probabilites of mortality are based on the 2021 CalPERS Experience Study and Review of Actuarial Assumptions. Mortality rates incorporate full generational mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries. For more details on this table, please refer to 2021 experience study report from November 2021 that can be found in CalPERS website.

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

In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations. Using historical returns of all of the funds’ asset classes, expected compound (geometric) returns were calculated over the next 20 years using a building-block approach. The expected rate of return was then adjusted to account for assumed administrative expenses of 10 Basis points. 155 FOR THE YEAR ENDED JUNE 30, 2024

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The expected real rates of return by asset class are as followed:

Asset Class
Assumed
Asset
Allocation
Real Return
Years 1 - 10 (1) (2)
Global Equity - Cap-Weighted 30% 4.54%
Global Equity - Non-Cap-Weighted 12% 3.84%
Private Equity 13% 7.28%
Treasury 5% 0.27%
Mortgage-backed Securities 5% 0.50%
Investment Grade Corporates 10% 1.56%
High Yield 5% 2.27%
Emerging Market Debt 5% 2.48%
Private Debt 5% 3.57%
Real Assets 15% 3.21%
Leverage -5% -0.59%
100%
(1) An expected inflation of 2.30% used for this period. (2) Figures are based on the 2021 Asset Liability Management study.

Discount Rate - The discount rate used to measure the total pension liability was 6.90%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based on those assumptions, 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 payments to determine the total pension liability.

Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate - The following presents the proportionate share of the net pension liability calculated using a discount rate of

6.90%, as well as what the proportionate share of the net pension liability would be if it were calculated using a discount rate that is one percentage point lower (5.90%) or one percentage point higher (7.90%) than the current rate (in thousands):

Sensitivity Analysis
1%
Decrease
(5.90%)
Measurement
Date Discount Rate
(6.90%)
1%
Increase
(7.90%)

Net pension liability $ 2,653 $ 1,644 $ 752
Pension Plan Fiduciary Net Position – Detailed information about the pension plan’s fiduciary net position is available in the separately issued CalPERS financial reports. Reports can be found on CalPERS’ website at www.calpers.ca.gov.
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A. 3. Defined Contribution Retirement Plans

1. 401(a) Plan
In December 2012, the City adopted Ordinance No. 29184 amending Title 3 of the San José Municipal Code to amend various Sections of Chapter 3.28 and to add a new Chapter 3.49 for the purpose of establishing an option between the Tier 2 defined benefit plan and a defined contribution 401(a) plan that excludes participation in retiree healthcare, for Unclassified Executive Management and Professional Employees (Unit 99) who are hired on or after January 20, 2013. An employee is eligible to participate in the 401(a) plan if the employee is hired directly into Unit 99 on or after January 20, 2013 and must not have previously been a member of either of the City’s defined benefit plans. An eligible employee must sign an irrevocable election form on his or her first day of employment with the City electing to participate in the 401(a) plan.

If no irrevocable election form is signed, the employee will be automatically placed into the Tier 2 defined benefit plan.

Both eligible employees and the City are required to contribute 3.75% of participants’ annual compensation.

The City’s contributions for each employee (and interest allocated to the employee’s account) are fully vested upon the employee entering the 401(a) plan. Effective October 3, 2021, elected officials who are not members of CalPERS shall become members of the 401(a) plan. The defined contribution for elected officials is

6.55% of salary into a 401(a) plan. The City contracts with an advisor to manage the 401(a) plan with all assets being held in trust by a third-party custodian in the name of each of the plan’s participants. Each of the 401(a) plan’s participants directs the investments of their separate account. The City must authorize changes to the 401(a) plan.

There were 175 participants in the 401(a) plan as of June 30, 2024. In FY 2024, the City and the participating employees contributed $666,000 to the 401(a) plan. As of June 30, 2024, the balance of the 401(a) plan was $4,738,000.

2. PTC Deferred Compensation Plan
The City’s PTC Deferred Compensation Plan (“PTC Plan”) is described in Chapter 3.5 of the City’s Municipal Code. The PTC Plan is a mandatory in lieu of Social Security for those employees who are not eligible for membership in either the FCERS or PFDRP . The participants defer 3.75% of salary and the City makes a matching contribution (with the total capped by the maximum allowed under IRC 457). The PTC Plan currently utilizes VRIAC as its investment administrator. PTC Plan participants can only make contributions on a pre-tax basis.

Benefited part-time employees who were hired before October 1, 2006 were given the option to invest PTC contributions in the same investment options as the 457 Plan participants based on their Participation Agreements. After October 1, 2006 when the City transitioned the investment administrator services to VRIAC, those part-time employees’ PTC accounts were transferred to the 457 Plan in order for them to continue having the ability to invest in various investment options, instead of only the Stable Value Fund offered in the PTC Plan. As of June 30, 2024, there were 299 part-time employees participating in the 457 Plan, representing 12.91% of all part-time employees.

For new part-time employees hired on or after October 1, 2006, their PTC contributions are deposited and invested in the Stable Value Fund in the PTC Plan. As of June 30, 2024, there were 6,454 accounts consisting of 4,306 active and 2,148 separated employee accounts participating in the Stable Value Plan.

These participating employees contributed $3,048,000 to the plan. As of June 30, 2024, the balance of the plan was $32,989,000.
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A. 4. Postemployment Benefit Plans Other than Pension Plans

1. General Information about the Postemployment Healthcare Plans In addition to the Defined Benefit Pension Plans, the City also sponsors and administers two single employer defined benefit postemployment healthcare plans, the PFDRP Healthcare Plans, which includes the Police Department Postemployment Healthcare Plan (Section 115 Trust), the Fire Department Postemployment Healthcare Plan (Section 115 Trust), and the 401(h) Plan, and the FCERS Healthcare Plan, which includes a Section 115 Trust, together the Postemployment Healthcare Plans. These Postemployment Healthcare Plans cover eligible full-time and certain part-time employees of the City and are accounted in the Pension Trust Funds.

Generally, the defined benefit Postemployment Healthcare Plans provide medical and dental benefits to eligible retirees and their beneficiaries. Benefits are 100% of the premium cost for the lowest priced medical insurance plan available to an active City employee, and 100% of the premium cost for a dental insurance plan available to an active City employee.

Per the terms of the Frameworks discussed in Note IV A.1, the City established two separate Voluntary Employee Beneficiary Associations (“VEBA”) for retiree healthcare for the members of the PFDRP and FCERS in FY 2018. The City does not make contributions into the VEBAs and the VEBAs are not subject to the jurisdiction of the Retirement Boards.

The Internal Revenue Service approved allowing eligible employees who are rehired by the City during calendars years 2018 through 2022 to opt into the applicable VEBA and transfer the retiree healthcare contributions from the applicable Postemployment Healthcare Plan to their individual VEBA accounts.

The current membership in the Postemployment Healthcare Plans as of June 30, 2024, is as follows:

Police Fire
PFDRP Tier 1 Tier 1 Totals
Postemployment Healthcare Plan:

Retirees and beneficiaries currently receiving benefits* 1,529 908 2,437 Terminated vested members not yet receiving benefits 3 4 7 Active members 355 353 708
Total 1,887 1,265 3,152

* Payees that have health and/or dental coverage

FCERS Tier 1* Tier 2A* Totals
Postemployment Healthcare Plan:

Retirees and beneficiaries currently receiving benefits** 3,750 1 3,751 Terminated vested members not yet receiving benefits 142 - 142 Active members 1,008 69 1,077
Total 4,900 70 4,970

* Eligible for full retiree medical benefits
** Payees that have health and/or dental coverage
The separately issued annual reports of PFDRP and FCERS, together with the City’s Municipal Code, provide more detailed information about the Postemployment Healthcare Plans. As stated in Section IV.A.1 of this note, those reports may be obtained from the City of San José Office of Retirement Services. 158

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2. Contributions
Contribution amounts to the Postemployment Healthcare Plans for both the City and the participating members are based upon agreements between the City and the bargaining units. With the implementation of Measure F , Actuarially Determined Contributions (“ADC”) were calculated beginning with the year ended June 30, 2019.

On June 24, 2008, the City Council adopted Ordinance No. 28332 amending Title 3 of the San José Municipal Code to provide the City with the option to make lump sum prepayments of City required contributions for postemployment healthcare benefits to PFDRP and FCERS.

Subsequently, in October 2014, the Boards of Administration for PFDRP and FCERS approved implementing an incremental reduction approach to determining the “actuarial equivalence” for the City’s prefunding of its contribution when the economic expansion has exceeded 58 months in duration and/or the S&P 500 has returns in excess of 130%. This approach was undertaken to ensure that as business expansions and/or market valuations mature and exceed historic norms, the Retirement Systems reduce the City’s incentive to prefund its contributions when market valuations and/or economic expansions are beyond historic norms.

The incremental reduction to be applied to the discount rate to the City’s prefunding of its contribution is 15% per year, up to a maximum of 45%. In March 2022, the Boards of Administration for PFDRP and FCERS approved a modification to the incremental reduction approach that added market valuations as an additional criterion for triggering a reduction in the prefunding discount rate.

The City elected to prefund its actuarially determined OPEB contributions for PFDRP for the year ended June 30, 2024, using the reductions in the discount rate mentioned above.

The FCERS Board on February 15, 2018 and the PFDRP Board on March 1, 2018 approved a contribution policy for the respective Postemployment Healthcare Plans that sets the City’s contribution as a flat dollar amount.

Funding Policy
Historically, member and City contributions to the Postemployment Healthcare Plans were negotiated through collective bargaining and were not actuarially determined. Until the City entered into agreements with various bargaining groups in 2009 and prior to implementation of Measure F , contributions for the health and dental benefits for both the City and the participating employees of both Postemployment Healthcare Plans were based upon an actuarially determined percentage of employees’ base salary sufficient to provide adequate assets to pay benefits when due over the next 10 years for the PFDRP and the next 15 years for the FCERS.

From 2009 until the implementation of Measure F , the City had been in the process of phasing in payment of the Actuarially Required Contribution (“ARC”) for the retiree health and dental benefits provided by both Postemployment Healthcare Plans as calculated pursuant to GASB Statement No. 43 and GASB Statement No. 45 then in effect. However, the contribution rates for the City and members of the Postemployment Healthcare Plans were capped before the full ARC was reached.

The annual contribution costs for the Postemployment Healthcare Plans’ benefits are allocated to both the City and the active employee members. Contributions to the Postemployment Healthcare Plans for both the City and the participating members are based upon agreements between the City and the bargaining units.

With the implementation of Measure F , member contributions are fixed as a percentage of pay and the City’s contribution toward the explicit subsidy (premium subsidy) is an ADC determined by the Postemployment Healthcare Plans. The ADC for the Postemployment Healthcare Plans is the normal cost plus the amortization payment on the unfunded actuarial liability, less expected member contributions. The City has an option to limit its ADC for each Postemployment Healthcare Plan to a fixed percentage of the payroll of all active 159 FOR THE YEAR ENDED JUNE 30, 2024

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members of the respective pension plan. The ADC for each Postemployment Healthcare Plan is calculated beginning with FY 2019.

The City will pay the implicit subsidy on a pay-as-you go basis as part of active health premiums. An implicit subsidy for retiree health benefits exists because the medical experience for retirees under age 65 are pooled with the experience for active employees thereby resulting in a lowering of the premium paid for retirees under age 65. The implicit subsidy is included in the actuarial valuations of each Postemployment Healthcare Plan. The implicit subsidy is shown as both a contribution and payment from the Postemployment Healthcare Plans. However, the implicit subsidy is not actually contributed to or paid from the Postemployment Healthcare Plan. Rather, it is paid directly by the City on a pay-as-you-go basis as a part of active member health plan premiums. The actuary for each Postemployment Healthcare Plan separately calculates the total unfunded actuarial liability being the aggregate unfunded actuarial liability for both implicit and explicit subsidies, and the unfunded actuarial liability for only the explicit subsidy. The unfunded actuarial liability for the explicit subsidy is used to calculate the City’s ADC to each Postemployment Healthcare Plan.

Effective March 25, 2018, members remaining in the PFDRP Postemployment Healthcare Plan make contributions fixed at 8.0% of pay.

Also, as of March 25, 2018, members remaining in the FCERS Postemployment Healthcare Plan contribute

7.5% of pay.

The contribution rates/amount in effect in FY 2024 are shown below (in thousands):

PFDRP City - Board Adopted Member
Police Tier 1 Fire Tier 1 Police Tier 1 Police Tier 2 Fire Tier 1 Fire Tier 2 Actuarial Rate:

Postemployment Healthcare Plan*:
07/01/2023 - 06/30/2024 $17,588 $10,977 8.00% N/A 8.00% N/A

*Explicit subsidy amounts as shown excludes accruals, adjustments and implicit subsidy.

FCERS City - Board Adopted Member with Healthcare
Tier 1 Tier 2 Tier 1 and Tier 2
Actuarial Rate:

Postemployment Healthcare Plan*:
07/01/2023 - 06/30/2024 $19,095 7.50%

*Explicit subsidy amounts as shown excludes accruals, adjustments and implicit subsidy. 160

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3. Net OPEB Liability

The City’s net OPEB liability for each Postemployment Healthcare Plan is measured as the total OPEB liability, less the plans’ fiduciary net position as of the June 30, 2023 measurement date. The City’s net OPEB liability as of June 30, 2024 for each of the Postemployment Healthcare Plans is measured as of June 30, 2023, using an annual actuarial valuation as of June 30, 2022 and rolled forward to June 30, 2023 using standard update procedures by the actuary for the respective plans. In summary, the City’s net OPEB asset and liability at June 30, 2024 is as follows (in thousands):

Summary of OPEB liability and expense
PFDRP FCERS Total
Net OPEB Liability $ 481,943 $ 292,332 $ 774,275
Net OPEB Asset - (1,835) (1,835)
$ 481,943 $ 290,497 $ 772,440

OPEB Expense $ 10,842 $ 10,586 $ 21,428

The General Fund and Enterprise Funds have historically been used to liquidate the OPEB liabilities.

Actuarial Methods and Assumptions
PFDRP
Measurement Date June 30, 2023
Valuation Date June 30, 2022
Actuarial Cost Method: Entry Age Normal, level of percentage of pay Actuarial Assumptions:

Discount Rate 6.00%
Inflation Rate 2.50%
Merit Increase Merit component added based on an individual’s years of service ranging from 6.50% to 0.60%.

Wage Inflation Rate Reflect currently bargained across-the-board increases and 3.00% per annum (0.50% real wage growth) thereafter. For this valuation, Fire members have bargained increases of 3.00% for FYE 2023. The bargaining agreement for Police members has expired Rate of Mortality* Mortality is projected from 2010 on a generational basis using the SOA MP-2021 projection scale
Pre-Retirement Turnover** Please see below table
Healthcare Trend Rate - Medical The valuation assumes that future medical inflation will be at a rate of 7.16% to 3.94% per annum graded down over a 51 year period for medical pre-age 65 and 4.27% to 3.94% per annum for medical post-age 65. For fiscal year beginning 2023, actual calendar year 2023 premiums are combined with a trend assumption for calendar year 2024.

Healthcare Trend Rate - Dental Dental inflation is assumed to be 3.5%

*Actuarial Methods and Assumptions - PDFRP Mortality Rates

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Category Male Female
Healthy Annuitant 1.002 times the 2010 Public Safety Above Median Income Mortality Table [Pub(s) - 2010(A)] for Healthy
Retirees

1.002 times the 2010 Public Safety Above Median
Income Mortality Table [(Pub(s) - 2010(A)] for Healthy
Retirees
Healthy Non-Annuitant 0.979 times the 2010 Public Safety Above Median Income Mortality Table [(Pub(s) - 2010(A)] for Healthy
Employees

0.979 times the 2010 Public Safety Above Median
Income Mortality Table [(Pub(s) - 2010(A)] for Healthy
Employees
Beneficiaries 1.032 times the 2010 Public General Above Median Income Mortality Table (Pub(g)-2010(A)) for Healthy
Retirees

1.032 times the 2010 Public General Above Median
Income Mortality Table (Pub(g)-2010(A)) for Healthy
Retirees
Disabled Annuitant 0.915 times the Public Safety Mortality Table (PubS- 2010) for Disabled Retirees

0.915 times the Public Safety Mortality Table (PubS-
2010) for Disabled Retirees
** Rates of Pre-Retirement Turnover. Sample rates of termination are shown in the following table.

Rate of Termination
Service Police Fire
0 11.00% 8.50%
1 8.00 4.00
2 6.25 2.75
3 5.00 1.75
4 4.25 1.25
5 3.75 1.00
6 3.55 0.90
7 3.40 0.80
8 3.30 0.70
9 3.25 0.60
10 3.25 0.50
11 3.25 0.50
12 3.15 0.50
13 2.95 0.50
14 2.75 0.50
15 2.25 0.50
16 1.75 0.50
17 1.50 0.50
18 1.25 0.50
19+ 1.00 0.50
Termination rates do not apply once a member is eligible for unreduced retirement.

The assumption for the long-term expected rate of return on Postemployment Healthcare Plan investments of 6.625% for the valuation year ended June 30, 2022 and rolled forward to June 30, 2023 was selected by estimating the median nominal rate of return based on long-term capital market assumptions adopted by the PFDRP Board, including nominal expected rates of return for each asset class, and reducing the estimated median by a margin so that there is estimated to be a greater than 50 percent probability of achieving the return.
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Best estimates of geometric real rates of return for each major asset class included in the PFDRP’s target asset allocation as of June 30, 2023 measurement date are summarized in the following table:

Asset Class
Target Asset
Allocation
Long-Term
Expected Real
Rate of Return
Public equity 58.00% 6.50%
Investment grade bonds 14.00% 2.10%
Core real estate 12.00% 3.80%
Short-term investment grade bonds 6.00% 0.90%
Commodities 5.00% 3.00%
Long-term government bonds 5.00% 2.30%
Discount Rate for PFDRP
The discount rate used to measure the total OPEB liability was 6.00% for the measurement year ended June 30, 2023 and is based on the long-term expected rate of return on investments. It is assumed that PFDRP member contributions are 8.0% of pay for employees eligible to participate in the Postemployment Healthcare Plan and the City contributes the actuarially determined contribution toward the explicit subsidy up to a maximum of 11.0% of the total payroll of the employees in PFDRP and that the City also contributes the implicit subsidy on a pay-as-you-go basis. Based on those assumptions, the PFDRP’s fiduciary net position is expected to be available to make all projected future benefit payments of current plan members.

Therefore, the long-term expected rate of return on OPEB plan investments for PFDRP was applied to all periods of projected benefit payments to determine the total OPEB liability.

FCERS
Measurement Date June 30, 2023
Valuation Date June 30, 2022
Actuarial Cost Method: Entry Age Normal, level of percentage of pay Actuarial Assumptions:

Discount Rate 6.00% per year. The Board expects a long-term rate of return of 6.3% based on Meketa’s 20-year capital market assumptions and the System’s current investment policy Inflation Rate 2.50%
Merit Increase Merit component added based on an individual’s years of service ranging from 3.75% at hire to

0.10%
Wage Inflation Rate 3.00%
Rate of Mortality* Mortality is projected on a generational basis using the MP-2021 scale Pre-Retirement Turnover** Please see below table
Healthcare Trend Rate - Medical The valuation assumes that future medical inflation will be at a rate of 7.16% to 3.94% per annum graded down over a 51 year period for medical pre-age 65 and 4.27% to 3.94% per annum for medical post-age 65. For fiscal year beginning 2023, actual calendar year 2023 premiums are combined with a trend assumption for calendar year 2024, actual premiums are used.

Healthcare Trend Rate - Dental Dental inflation is assumed to be 3.5%

* Actuarial Methods and Assumptions - FCERS Mortality Rates

Category Male Female
Healthy Annuitant 0.995 times the 2010 Public General Mortality Table (PubG-2010) for Healthy Retirees

0.960 times the 2010 Public General Mortality Table
(PubG-2010) for Healthy Retirees
Healthy Non-Annuitant 0.992 times the 2010 Public General Mortality Table (PubG-2010) for Healthy Retirees

1.084 times the 2010 Public General Mortality Table
(PubG-2010) for Healthy Retirees
Disabled Annuitant 1.051 times the CalPERS 2009 Ordinary Disability Mortality Table

0.991 times the CalPERS 2009 Ordinary Disability
Mortality Table
Sample rates of termination are shown in the following table. 163 FOR THE YEAR ENDED JUNE 30, 2024

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Rate of Termination
0 15.00%
1 12.75%
2 11.75%
3 10.75%
4 9.75%
5 8.75%
6 7.75%
7 6.50%
8 5.50%
9 4.75%
10 4.25%
11 4.00%
12 3.75%
13 3.50%
14 3.25%
15+ 3.25%
Terminations do not apply once a member is eligible for retirement.

The assumption for the long-term expected rate of return on OPEB plan investments of 6.00% for the valuation year ended June 30, 2022 and rolled foward to June 30, 2023, was selected by estimating the median nominal rate of return based on long-term capital market assumptions adopted by the FCERS Board, including nominal expected rates of return for each asset class, and reducing the estimated median by a margin so that there is estimated to be a greater than 50 percent probability of achieving the return.

Best estimates of geometric real rates of return for each major asset class included in FCERS’s target asset allocation as of June 30, 2023 measurement date are summarized in the following table. The assets were invested in a 115 trust account as follows:

Asset Class
Target Asset
Allocation
Long-Term
Expected Real
Rate of Return
Public equity 58.00% 6.50%
Investment grade bonds 14.00% 2.00%
Core real estate 12.00% 3.80%
Short-term investment grade bonds 6.00% 0.90%
Commodities 5.00% 3.00%
Long-term government bonds 5.00% 2.30%

Discount Rate for FCERS
The discount rate used to measure the total OPEB liability was 6.00% for the measurement year ended June 30, 2023 and is based on the long-term expected rate of return on investments. It is assumed that FCERS member contributions remain fixed at 7.5% of pay for employees eligible to participate in the Postemployment Healthcare Plan and the City contributes the actuarially determined contribution toward the explicit subsidy up to a maximum of 14% of the total payroll. In addition, the City pays the implicit subsidy on a pay-as-you-go basis. Based on those assumptions, the FCERS’s fiduciary net position is expected to be available to make all projected future benefit payments of current plan members. Therefore, the long-term expected rate of return on OPEB plan investments for FCERS was applied to all periods of projected benefit payments to determine the total OPEB liability.
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Change in the Net OPEB Liability

The changes in the net OPEB liability for the Postemployment Healthcare Plans are as follows (dollar amounts in thousands):

PFDRP (Consolidated with Police and Fire) Increase (Decrease)

Total OPEB
Liability (a)
Plan Fiduciary
Net Position (b)
Net OPEB
Liability (a) - (b)
Balance at June 30, 2023
(Measurement Date June 30, 2022) $ 790,120 $ 265,273 $ 524,847

Changes recognized for the measurement period:

Service cost 12,112 - 12,112
Interest 44,668 - 44,668
Changes of benefits - - -
Differences between expected and actual experience (56,387) - (56,387) Changes of assumptions 18,322 - 18,322
Contributions - employer - 30,763 (30,763)
Contributions - employee - 11,299 (11,299)
Net investment income - 19,660 (19,660)
Benefit payments including refunds (27,528) (27,528) - Administrative expense - (103) 103
Net changes (8,813) 34,091 (42,904)
Balance at June 30, 2024
(Measurement Date June 30, 2022) $ 781,307 $ 299,364 $ 481,943

FCERS Increase (Decrease)

Total OPEB
Liability (a)
Plan Fiduciary
Net Position (b)
Net OPEB
Liability (a) - (b)
Balance at June 30, 2023
(Measurement Date June 30, 2022) $ 678,384 $ 349,121 $ 329,263

Changes recognized for the measurement period:

Service cost 6,972 - 6,972
Interest 38,334 - 38,334
Change of benefits - - -
Differences between expected and actual experience (36,989) - (36,989) Changes of assumptions 9,273 - 9,273
Contributions - employer - 22,997 (22,997)
Contributions - employee - 9,841 (9,841)
Net investment income - 24,268 (24,268)
Benefit payments including refunds (30,869) (30,869) - Administrative expense - (750) 750
Net changes (13,279) 25,487 (38,766)
Balance at June 30, 2024
(Measurement Date June 30, 2023) $ 665,105 $ 374,608 $ 290,497 165 FOR THE YEAR ENDED JUNE 30, 2024

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Sensitivity of the Net OPEB Liability to Changes in Discount Rates

The following presents the net OPEB liability of the City would be if it were calculated using discount rates that were one percentage point lower or one percentage point higher than the current rate, for the measurement period ended June 30, 2023:

PFDRP (consolidated with Police and Fire)

1% Decrease
(5.00%)
Current
Discount Rate
(6.00%)
1% Increase
(7.00%)
Total OPEB Liability $ 901,715 $ 781,307 $ 684,945
Plan Fiduciary Net Position 299,361 299,364 299,361 Net OPEB Liability $ 602,354 $ 481,943 $ 385,584

PFDRP plan fiduciary net position as a percentage of the total OPEB liability 33.2% 38.3% 43.7%

FCERS

1% Decrease
(5.0%)
Current
Discount Rate
(6.0%)
1% Increase
(7.0%)
Total OPEB Liability $ 757,945 $ 665,105 $ 589,559
Plan Fiduciary Net Position 374,608 374,608 374,608 Net OPEB Liability $ 383,337 $ 290,497 $ 214,951

FCERS plan fiduciary net position as a percentage of the total OPEB liability 49.4% 56.3% 63.5% Sensitivity of the Net OPEB Liability to Changes in the Health Care Cost Trend Rates

The following presents the net OPEB liability of the City would be if it were calculated using health care cost trend rates that were one percentage point lower or one percentage point higher than the current rate, for the measurement period ended June 30, 2023:

PFDRP (consolidated with Police and Fire)
1% Decrease
Health Care
Cost Trend
Rates 1% Increase
Total OPEB Liability $675,116 $781,307 $913,933
Plan Fiduciary Net Position 299,361 299,364 299,361 Net OPEB Liability $375,755 $481,943 $614,572

PFDRP plan fiduciary net position as a percentage of the total OPEB liability 44.3% 38.3% 32.8%

FCERS
1% Decrease
Health Care
Cost Trend
Rates 1% Increase
Total OPEB Liability $581,274 $665,105 $768,300
Plan Fiduciary Net Position 374,608 374,608 374,608 Net OPEB Liability $206,666 $290,497 $393,692

FCERS plan fiduciary net position as a percentage of the total OPEB liability 64.4% 56.3% 48.8% 166

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OPEB Fiduciary Net Position
The City issues the publicly available financial reports that may be obtained from the Office of Retirement Services, 1737 North First Street, Suite 600, San José, CA 95112-4505.

Recognition of Deferred Outflows and Deferred Inflows of Resources for PFDRP and FCERS Gains and losses related to changes in total OPEB liability and fiduciary net position are recognized in OPEB expense systematically over time.

One fifth of the net earnings is recognized in the first year when the gain or loss occurred for the difference between projected and actual earnings on OPEB plan investments. The other deferred amounts are amortized over the expected average remaining service lifetime. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to OPEB and are to be recognized in future OPEB expense.

The recognition period differs depending on the source of the gain or loss:

Net difference between projected and actual earnings on OPEB plan investments
5 Years
All other amounts Expected average remaining service lifetime (EARSL) (5.0 Years at June 30, 2023 measurement date)
PFDRP

For the year ended June 30, 2024, the City recognized an OPEB expense of $10,842,000. As of June 30, 2024, the City reported deferred outflows and inflows of resources related to OPEB from the following sources (dollar amounts in thousands):

PFDRP (consolidated with Police and Fire)
Deferred Outflows
of Resources
Deferred Inflows
of Resources
OPEB contributions subsequent to measurement date $ 33,167 $ - Difference between expected and actual experience - 62,746 Changes in assumptions 31,437 -
Net difference between projected and actual earnings on OPEB plan investments 9,227 -
Total $ 73,831 $ 62,746

The $33,167,000 reported as deferred outflows of resources related to contributions subsequent to the June 30, 2023 measurement date will be recognized as a reduction of the net OPEB liability during the year ending June 30, 2025.

The City’s contribution for the Postemployment Healthcare Plan during the year ended June 30, 2024, was $33,167,000. This consisted of City contributions in the amount of $28,723,000, and $4,444,000 in implicit subsidy.
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Other amounts reported as deferred outflows/(inflows) of resources related to OPEB will be recognized as expense as follows (dollar amounts in thousands):

Fiscal Year Ending June 30:

Deferred Outflows /
(Inflows) of Resources
2025 $ (15,297)
2026 (14,332)
2027 8,208
2028 (661)
$ (22,082)
FCERS

For the year ended June 30, 2024, the City recognized an OPEB expense of $10,586,000. As of June 30, 2024, the City reported deferred outflows and inflows of resources related to OPEB from the following sources (dollar amounts in thousands):

FCERS
Deferred Outflows
of Resources
Deferred Inflows
of Resources
OPEB contributions subsequent to measurement date $ 25,357 $ - Difference between expected and actual experience - 32,979 Changes in assumptions 13,637 -
Net difference between projected and actual earnings on OPEB plan investments 14,325 - Total $ 53,319 $ 32,979

The $25,357,000 reported as deferred outflows of resources related to contributions subsequent to the June 30, 2023 measurement date will be recognized as a reduction of the net OPEB liability during the year ending June 30, 2025.

The City’s contributions for the Postemployment Healthcare Plan during the year ended June 30, 2024, was $25,357,000. This consisted of City contributions in the amount of $18,951,000, and $6,406,000 in adjustments and accruals.

Other amounts reported as deferred outflows/(inflows) of resources related to OPEB will be recognized as expense as follows (dollar amounts in thousands):

Fiscal Year Ending June 30:

Deferred Outflows /
(Inflows) of Resources
2025 $ (6,728)
2026 (9,261)
2027 11,631
2028 (659)
$ (5,017)
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B. Commitments and Contingencies

1. San José Mineta International Airport
Purchase Commitments and Capital Outlay Projections. As of June 30, 2024, the Airport was obligated for purchase commitments of approximately $30.3 million primarily for the Airfield Configuration Updates, Airport Accessibility Upgrades, Terminal Paging System, Jet Bridge Refurbishment, Escalator Replacement, and various operating and maintenance agreements. The Airport has projected that it will expend or encumber approximately $479.9 million on construction related capital projects during the next five fiscal years. It is anticipated that funding for such capital projects will be provided primarily by proceeds from federal grants, CP proceeds, and other Airport revenues.

Master Plan. In 1997, after extensive planning and environmental studies, the San José City Council approved a comprehensive update to the previous 1980 Master Plan. In turn, the FAA in 1999 conditionally approved a new Airport Layout Plan (ALP) displaying the proposed Master Plan projects and unconditionally approved all the near-term projects. Both the Master Plan and the ALP , which identify facility improvements needed to accommodate forecast demand for commercial passenger service, air cargo, and general aviation, have been kept up to date through periodic amendments. Implementation of the Master Plan has been ongoing, and since 1997 has included major runway extensions, new taxiways, new terminal buildings, parking garages, roadways, and environmental mitigation programs.

The most recent amendment to the Master Plan was approved by the City Council in April 2020. This amendment extended the planning horizon year out to 2037, incorporated the airfield reconfiguration improvements recommended in an FAA-funded Runway Incursion Mitigation/Design Standards Analysis Study, modified the passenger, cargo, and general aviation facility improvement program to serve projected 2037 demand, and added a proposed business hotel to the passenger terminal complex. The Master Plan is currently intended to serve a projected 2037 demand of 22.5 million annual passengers and 184,000 annual passenger airline aircraft operations with a total of 238,000 aircraft operations. The amendment to the Airport Master Plan also includes up to 42 airline terminal gates in 1.8 million square feet of passenger terminal facilities. The FAA conditionally approved a new ALP in June 2020 displaying the amended Master Plan development program.

The Master Plan’s Terminal Area Improvement Program (TAIP) Phase II projects (also referred to as the “New Terminal Project”) will consist primarily of the design and construction of a Terminal C extending from the south end of existing Terminal B, including a total of 16 additional airline gates plus a new parking garage. Eight of those 16 future gates will replace existing interim gates bolted on to the south end of Terminal B in 2018 and 2019 to accommodate increases in airline flights and passenger volume. Two of the 16 gates will be relocated from Terminals A and B for operational efficiency. Pursuant to the terms of the current Signatory Airline-Airport Lease and Operating Agreement and subject only to prior consultation with the Signatory Airlines, the City retains sole discretion to proceed to construct the New Terminal Project upon its determination that an increase in terminal capacity to be achieved by the New Terminal Project is needed. After completing its consultation with the Signatory Airlines and having given due consideration to the information provided by the Signatory Airlines, the City may proceed with the New Terminal Project if the City determines, in its sole discretion, that the New Terminal Project continues to be needed and can be financed on reasonable terms.

At the time of this report, there are three Master Plan projects under construction. The first is the full-length New Taxiway V on the west side of the Airport, which will replace the former general aviation Runway 11/29, officially closed in 2022. The second and third Master Plan projects under construction are the Facilities and 169 FOR THE YEAR ENDED JUNE 30, 2024

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Vehicle Maintenance Campus and the San Josè Police Department Airwing Hangar, both relocating from the east side of the Airport to the southwest quadrant of the Airport.

FAA Audit of Use of Revenue. Federal law requires all airport owners that receive federal assistance, such as the City, to use airport revenues for the capital or operating costs of the Airport. Generally, any use of airport revenues by an airport owner for costs that cannot properly be considered airport capital or operating costs is deemed to be improper revenue diversion. On June 2, 2010, auditors from the FAA provided the City with a draft of its audit findings alleging improper use of Airport revenues by the City in three areas of expenditure.

On August 14, 2015, as the result of discussions and correspondence with City staff, the FAA notified the City that it has closed two of the three audit issues. The remaining audit issue is described below.

Cost Allocations - The City uses both direct and indirect methodologies to allocate costs to the Airport.

The FAA auditors found the direct cost allocations to be acceptable. The FAA contends that the City’s indirect methodology does not correlate to the cost of services actually provided by the City to the Airport.

Consequently, the auditors have recommended that the City re-allocate its costs charged to the Airport for FY 2005-2010 using an allocation methodology that reflects services actually provided to the Airport and repay any overcharges to the Airport, with interest. The City believes the allocation methodology used to allocate costs to the Airport is in compliance with federal cost allocation guidance. In an effort to resolve the issue, the City proposed and implemented a cap on the indirect cost allocations for certain City departments at 10%, which was the approximate rate charged to the Airport in pre-capital intensive years. This resulted in a total credit of $5.6 million that would be applied equally to the Airport cost allocation plan (CAP) over a seven-year period beginning in FY 2013 and ending in FY 2019. The City has adjusted its indirect cost allocation methodology in an effort to address FAA concerns, including removal of debt expenditures from the relative expenditures base started in FY 2016, continuing with the 10% cap, and monitoring a rolling five- year average of the relative expenditure base to smooth out expenditure fluctuations.

On August 14, 2015, the FAA accepted the corrective actions that the City has already taken, however, the FAA disagrees with the City’s inclusion of capital expenditures in the allocation of indirect costs.

On May 3, 2018, the City received a letter from the FAA in which the FAA requested a copy of the City’s FY 2017 indirect cost allocation plan to substantiate indirect charges to the Airport in order to finalize the FAA’s financial compliance review. The City responded to the FAA on July 20, 2018 with copies of the requested information and clarified actions taken by the City to date to implement the FAA’s recommendations.

On May 19, 2022, the City received a letter from the FAA in which the FAA continues to believe that inclusion of capital costs in the indirect cost allocation methodology results in a disproportionate share of indirect costs being charged to the Airport. The FAA notes that the Modified Total Direct Cost (MTDC) is recognized as an equitable allocation base for the distribution of indirect costs and the MTDC allocation method excludes equipment and capital expenditures. The FAA asks the City to take this final finding under advisement.

On July 15, 2022, the City responded to the FAA’s letter of May 19, 2022 regarding inclusion of capital costs in the indirect cost allocation methodology, explaining that the City is in the process of evaluating the methodology used for the City’s overall CAP . On June 23, 2022, the City posted a request for proposal (RFP) to hire an independent consultant to support this evaluation, with the RFP scope of work including an in-depth analysis of the City’s current CAP , as well as scope to develop recommendations for potential changes in the CAP methodology as it relates to all City departments. On June 4, 2024, Maximus US Services, Inc. was awarded a consultant agreement for these services. The City will follow up with the FAA once this evaluation process has been completed. The City cannot predict the final outcome of the audit.

Potential Claim from FAA Regarding Reuse of Guadalupe Gardens. In early 2002, the City Council approved a Master Plan for Guadalupe Gardens, consisting of approximately 120 acres of mostly vacant, City-owned 170

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property located south of the Airport, much of which falls within an FAA-established safety zone. The City acquired the Guadalupe Gardens properties using FAA grants for airport approach protection and noise compatibility, and the FAA grant agreements consequently required FAA approval of any planned City-use of the properties acquired with grant proceeds. By letter dated August 9, 2002, addressed to the City’s Director of Aviation, the FAA San Francisco Airport District Office (ADO) approved the City’s Master Plan for reuse of Guadalupe Gardens for runway and approach protection, and the City finalized the Master Plan in reliance upon the FAA approval.

During discussions regarding proposals to develop certain portions of the Guadalupe Gardens, the FAA has taken the position that the City must dispose of any portion of the Guadalupe Gardens that is no longer needed for noise compatibility purposes. Citing provisions of federal law that require recipients of FAA grants for acquisition of land for noise compatibility purposes to dispose of any such acquired land when no longer needed by the airport owner for noise compatibility purposes, the FAA contends that the FAA ADO erred in its 2002 approval of the Guadalupe Gardens Master Plan and that the City is obligated to prepare an inventory of the Guadalupe Gardens to identify those parcels that were acquired by the City with noise compatibility grant proceeds. This inventory would then be used to prepare for FAA review and approval of a disposition plan for those parcels no longer needed by the City for noise compatibility. Proceeds of the sale of the parcels proportional to the FAA grant share of the original purchase price would be required to be used for other approved noise compatibility projects at the Airport or returned to the FAA.

The City’s Director of Aviation, by letter dated March 16, 2023, requested that the FAA concur with the City’s approach of retaining the land for its approach zone and noise buffer area while developing the land in a manner that is consistent with the required FAA Grant Assurances. Specifically, the City requested that (1) a portion of the undeveloped area be activated for community benefit purposes, including low density park uses, (2) retain existing developer property as community benefit property in addition to serving its purpose as approach zone and noise buffer, and (3) development of some parcels within the Guadalupe Gardens Master Plan as a commercial strip to be leased at fair market value. The FAA ADO, by letter dated September 12, 2023, concurred with intent to utilize the property designated as noise sensitive land, while preventing incompatible land uses. While the City must submit additional documentation to the FAA regarding development of the Guadalupe Gardens, at this time there is no reason to believe that the FAA will require the City to dispose of any of the property within the Guadalupe gardens because the property serves approach zone and noise buffer purposes.

2. San José – Santa Clara Wastewater Treatment Facility Plant Master Plan. In November 2013, the City Council approved the Plant Master Plan (“PMP”), a 30-year planning-level document focused on long-term rehabilitation and modernization of the Plant. The PMP recommends more than 114 capital improvement projects to be implemented over a 30-year planning period at an estimated investment level of approximately $2 billion. On September 24, 2013, the City Council approved a consultant agreement with MWH Americas, Inc. to assist and support the City in developing and implementing this Capital Improvement Program (“CIP”). On June 2, 2015, a funding strategy was recommended to and approved by the City Council. An update to the strategy was approved by the City Council on January 12, 2016. For the next five years, the City’s portion of the funding for the San José-Santa Clara Regional Wastewater Facility (“Plant”) Adopted CIP is programmed into the City’s 2025-2029 CIP budget. The City’s FY 2025 approved operating budget required an average rate increase for customers for the Sewer Service and Use Charge rate of 9.0% for FY 2025.

Revenues for the 2025-2029 Adopted CIP are derived from several sources: utilization of available resources from the City’s Sewer Service and Use Charge and Sewage Treatment Plant Connection Fee; contributions 171 FOR THE YEAR ENDED JUNE 30, 2024

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from the City of Santa Clara and other tributary agencies for the treatment of sewage from their respective jurisdictions by the Plant; interest earnings; Calpine Metcalf Energy Center Facilities repayments; and other debt financing proceeds.

Pursuant to an agreement executed between the cities of San José and Santa Clara in 1959 (the “1959 Agreement”), the City of San José is co-owner and administering agency of the Plant. The Plant also provides wastewater treatment services to other neighboring agencies through five outside user agreements (“Master Agreements”) with City of Milpitas, West Valley Sanitation District, Cupertino Sanitary District, Burbank Sanitary District, and CSD 2-3 (the “Tributary Agencies”). Contributions from the City of Santa Clara and the Tributary Agencies are made pursuant to agreements with each agency based on the anticipated operation and maintenance, and capital budget. The Tributary Agencies’ proportional contribution for the operation and maintenance cost is based on the amount and characteristics of the sewage discharged into the Plant.

Each Tributary Agency’s capital contribution is based on each agency’s contractual capacity in the Plant.

The balance of the Plant budget is shared between the cities of San José and Santa Clara based on the respective city’s assessed property value relative to the total assessed property value in both jurisdictions. In the 2025-2029 Adopted CIP , contributions from the City of Santa Clara and other agencies are approximately $189,194,000.

Currently, a short-term financing has been put into place in the 2025-2029 Adopted CIP of approximately $200,000,000, which will be refunded with long-term bonds during FY 2028.

Tributary Agency Claims. On January 22, 2016 and September 7, 2016, the City, as the administering agency, received claims from the Tributary Agencies alleging a breach of contract and inequity under the Master Agreements. The Treatment Plant Advisory Committee (“TPAC”) conducted two administrative hearings, on March 24, 2016 and September 7, 2016, regarding such claims and issued reports as required by the Master Agreements. The Tributary Agencies disagreed with the reports and the parties attempted to mediate such claims, but were unable to reach resolution. All parties agreed to waive the hearings before their respective joint legislative bodies.

The Tributary Agencies filed a complaint in Santa Clara County Superior Court against the City and the City of Santa Clara on March 23, 2018, resulting in a trial in April, May, and June of 2023. The allegations in the case were substantially similar to the claims raised by the Tributary Agencies and heard through the administrative hearing process in 2016. The Tributary Agencies allege the City breached their respective Master Agreements by, among other allegations, the City charging them for capital and operating expenditures that the Tributary Agencies allege are not authorized under the Master Agreements and, the Tributary Agencies assert, are beyond the requirements to operate the Treatment Plant. The Tributary Agencies also allege that the City has improperly concealed how the funds paid by the Tributary Agencies for Treatment Plant capacity are used.

They also allege the City breached the implied covenant of good faith and fair dealing and violated certain California Constitutional provisions limiting local agencies’ imposition of property related fees, charges, and taxes. The Tributary Agencies further allege their payments resulted in unjust enrichment to the City and Santa Clara, and that the court should provide declaratory relief in accordance with their allegations.

The City and Santa Clara brought pre-trial motions that resolved in defendants’ favor the Tributary Agencies’ claims based on California Constitutional provisions. The Tributary Agencies’ remaining claims for breach of contract and breach of the implied covenant of good faith and fair dealing were tried to a jury. The Tributary Agencies sought approximately $100 million in damages. The jury rejected almost all the Tributary Agencies’ claims, finding only that the City violated the Master Agreements in the way it allocated certain capital costs, but awarding zero damages.
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The court then decided in favor of the City and Santa Clara on the Tributary Agencies’ claims for unjust enrichment and declaratory relief. The court entered judgment in the cities’ favor and awarded their costs.

West Valley Sanitation District and Burbank Sanitary District, but not the other Tributary Agencies, have appealed the judgment. The Tributary Agencies appealing will identify the specific grounds for their appeal once briefing commences.

The Tributary Agencies have fully paid their portion of the capital cost for the projects to rehabilitate the Treatment Plant to date. The City cannot predict the outcome or the timeline for resolution of this litigation.

South Bay Water Recycling Program. The South Bay Water Recycling (“SBWR”) project is a regional water reclamation program to recycle highly treated wastewater for irrigation and industrial uses in the cities of San José, Santa Clara, and Milpitas, California. This program is part of an action plan, developed by the City and other agencies tributary to the Plant and adopted by the Regional Water Quality Control Board (“RWQCB”), to control the amount of effluent discharged by the Plant into San Francisco Bay.

In FY 2016, the City and the Santa Clara Valley Water District (“SCVWD”) accepted a report that had been commissioned by both the City and the SCVWD related to SBWR, entitled: “South Bay Water Recycling Strategic and Master Planning (‘’Strategic Report”). The Strategic Report contemplates near term projects (fiscal years 2017 to 2021) at an estimated cost of $49 million and long-term improvements and expansion of the existing system (fiscal years 2020 to 2035) at an estimated cost of $243.2 million for long-term non-potable reuse projects and an additional $522 million for long-term potable use projects. No specific plan for the development or source of financing of the other near-term improvements, nor the long-term improvements identified in the Strategic Report has been developed to date. Further, the responsibility for the development of the long-term improvements has not been established and may involve the formation of a separate entity responsible for the oversight and funding of these improvements.

Recycled Water Facilities and Programs Integration Agreement between the City of San José and the Santa Clara Valley Water District (“SCVWD”). The City and the SCVWD entered into an agreement on March 2, 2010 (“Integration Agreement”) to collaborate on design, construction and operation of an advanced treated recycled water facility and related facilities now called the Silicon Valley Water Treatment Facility (“SVWTF”). In 2003, the City and SCVWD began collaborating on design, construction and operation of an advanced treated recycled water facility and related facilities, to be located on lands owned by the Plant, in order to demonstrate the treatment capability of a local facility to produce highly purified water that could be blended with existing recycled water to expand irrigation and industrial uses. The City, as the administering agency for the Plant, and the SCVWD desired to financially support the production and use of recycled water in Santa Clara County consistent with each party’s separate and distinct interests: for wastewater treatment and disposal for the City, and water quality and supply for the SCVWD, as well as to coordinate and cooperate to achieve the most cost effective, environmentally beneficial utilization of recycled water to meet both agencies’ needs. The term of the Integration Agreement is from July 1, 2010 through June 30, 2050, and co-terminus with the Ground Lease and Property Use Agreement between the City and SCVWD for construction and operation of the SVWTF on Plant lands.

The Integration Agreement between the SCVWD and the City provides various formulas based on annual operating results. SCVWD determines the operational and maintenance budget for the SVWTF and operates the facility. Separate formulas were established to determine each party’s respective share of the annual operation and maintenance cost for the SVWTF following the first full fiscal year the SVWTF became operational, which was FY 2015. The formula provides that for each fiscal year when the SBWR is operating at a net loss, the City would pay to the SCVWD an amount to support SCVWD’s operational cost up to $2,000,000. In the event that the SBWR operates at net revenue, the City would share its revenue with the 173 FOR THE YEAR ENDED JUNE 30, 2024

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SCVWD with the first 50% towards the SCVWD’s costs and the second 50% divided between the two agencies based on their respective capital investment in the recycled water infrastructure. As of June 30, 2024, the City’s investment in capitalized expenditures for the SBWR system is $248,676,000 with another $11,000,000 in contributions toward the SVWTF for a total investment of $259,676,000; and the SCVWD’s estimated investment in SVWTF as of June 30, 2024 is $65,578,000. During the most recent SBWR operating year ended June 30, 2023, an operating profit of $7,084,906 was realized. This amount was shared with the SCVWD, City of San Jose, City of Santa Clara, and the Tributary Agencies per the terms of the Integration Agreement.

Under the Integration Agreement, commencing in January 2016, the City and SCVWD are to provide the other agency with audited financial statements for the prior fiscal years for the operation of the SBWR and the SVWTF . Since the definition of net operating cost and revenue under the Integration Agreement excludes certain costs and revenues that might otherwise be considered in either party’s overall budget, each party must prepare a separate statement following the publication of each party’s annual audited financial statements, to establish each party’s respective cost share for the operation of the SVWTF . The City and SCVWD have each provided the other with its audited financial statements for the operations of the SBWR and the SVWTF , for each fiscal year from FY 2016 through FY 2023 with no adjustment to share cost. In January 2025, the audit report for the seventh year of full operations for the year ended June 30, 2024, will be completed and issued as per the terms of the Integration Agreement.

3. Bay Area Water Supply and Conservation Agency
The City belongs to the Bay Area Water Supply and Conservation Agency (“BAWSCA”), which represents the interests of 24 cities and water districts, and two private utilities that purchase water wholesale from the San Francisco regional water system. On January 31, 2013, BAWSCA issued bonds in the amount of $335,800,000 to raise the funds necessary to prepay capital commitments owed to the City and County of San Francisco by BAWSCA member agencies thereby realizing a present value savings of approximately $62,300,000 over all member agencies. For the City, this translates into an annual net savings of purchased water cost of approximately $107,000.

The BAWSCA issued revenue bonds are secured by a surcharge on BAWSCA member agencies for the term of the bonds through 2034. BAWSCA’s annual debt service amount for FY 2024 is $21,917,772. San Francisco will collect the surcharge and send the amount to BAWSCA for payment to bondholders. The annual surcharge for each agency is based upon the actual wholesale water purchase percentage from the last full year for which date is available with an annual reconciliation based upon the actual water purchased.

A true-up adjustment based on the actual year ended June 30, 2023 water use is included in the FY 2024 bond surcharge. The surcharge is on the San Francisco wholesale water bill and is accounted for by the City as operational costs.

The City’s annual bond surcharge for FY 2024 is estimated to be $678,312 based on the City’s actual wholesale water use in the year ended June 30, 2023.

4. Clean Water Act- Stormwater Permit Compliance
The federal Clean Water Act (the “CWA”) establishes the structure for federal regulation of the discharge of pollutants into the waters of the United States. Under the CWA, it is unlawful to discharge any pollutant into these waters unless the discharger has a permit under the National Pollutant Discharge Elimination System (the “NPDES”) and the permittee abides by its terms. The Regional Water Board and private parties can enforce the CWA and the terms of the Stormwater Permit. Violations can result in significant civil penalties per pollutant per day, plus criminal fines, and attorney’s fees. 174

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The City is a permittee under an NPDES permit (the “Stormwater Permit”) issued by the Regional Water Quality Control Board – San Francisco Bay Region (the “Regional Water Board”). This Regional Stormwater Permit governs 76 entities, including the City. On May 11, 2022, the Regional Water Board adopted a new permit that was effective as of July 1, 2022. The Storm Sewer Service and Use Charge rate has not increased since FY 2012. There are specific provisions in the Stormwater Permit that will increase the cost for the City and private property owners to comply. These permit requirements include green stormwater infrastructure for new development and redevelopment, roadway, trail and utility projects; regional level water quality monitoring for green infrastructure, trash outfall and in-stream monitoring; regulating polychlorinated biphenyls during demolition and certain industrial properties; water quality impacts due to firefighting emergency response operations; mapping and regulation of the impact from unhoused populations near stormwater systems and waterways near receiving waters; an annual report analyzing the ongoing programmatic, capital, operation and maintenance cost to comply with the Stormwater Permit; and development of an asset management plan that includes operations and maintenance with life cycle costs to comply with the Stormwater Permit.

San Jose City CouncilDecember 10, 2024

San Jose City Council
December 10, 2024