FIRST QUARTER FINANCIAL REPORT
FISCAL YEAR 2024-2025
Public Safety, Finance and
Strategic Support Committee
Prepared by the Finance Department
November 1, 2024
PSFSS COMMITTEE AGENDA: NOVEMBER 21, 2024
ITEM: (C)1.
FILE: CC 24-436
Attachment A
FIRST QUARTER
DEBT MANAGEMENT REPORT
FISCAL YEAR 2024-2025
2 Outstanding Debt as of September 30, 2024: $4.21 Billion FY2024-25 Debt Issuance: $76.4 Million
3 OUTSTANDING DEBT ISSUED
(CITY AND ALL AGENCIES)
*YTD Debt Issuance
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
$7,000
Annual Debt Issuance
($ million)
Outstanding Debt
($ million)
Fiscal Year Ended June 30
City and Related Entity Debt Outstanding Conduit Debt Outstanding Annual Debt Issuance Outstanding Debt as of September 30, 2024: $3.47 Billion (Excluding Multifamily Housing Revenue Bonds)
4 DIRECT OUTSTANDING DEBT
(CITY AND ALL AGENCIES)
CSJ GO Bonds,
$497,265,000, 14.33%
CSJFA Bonds/ CP
Notes, $638,982,000,
18.42%
Airport Revenue
Bonds/ CP,
$1,047,167,096, 30.18%
Wastewater Revenue Bonds/
RWF Notes, $304,503,219,
8.78%
Successor Agency Tax
Allocation Bonds,
$981,260,000, 28.29%
DEBT ISSUANCE AND MANAGEMENT ACTIVITIES
(JULY– SEPTEMBER 2024)
5 • CSJ Airport Revenue Refunding Bonds, Series 2024A ($76.4 million, July 2024) • Extended the Airport CP Letter of Credit Reimbursement Agreement with Bank of America through September 10, 2026.
• Submitted Prior Period Adjustments to the CA Dept of Finance for FY22-23 for the Successor Agency.
• Execution of Agreement with Goodwin Consulting Group, Inc. ▪ Special Tax consulting services/annual administration related to the formation of the Berryessa Community Facilities District.
▪ Three-year contract with two one-year optional extensions through August 31, 2029.
UPCOMING DEBT ISSUANCES
THROUGH DECEMBER 31, 2024
• California Community Choice Financing Authority Clean Energy Project Revenue Bonds, Series 2024E (Green Bonds)
▪ Conduit issuance for SJCE’s energy prepayment
• Commercial paper issuance and remarketing for the Airport and CSJFA 6 DEBT REPORTING
THROUGH DECEMBER 31, 2024
• Annual Marks-Roos Reporting in October 2024
• FY 2023-24 Comprehensive Annual Debt Report
• FY 2023-24 Continuing Disclosure/Compliance Reporting • FY 2025-26 Successor Agency Redevelopment Obligation Payment Schedule
7 10-year history of higher rated
(“AA+”) General Obligation debt
(20-year term) yield averaged
2.91% and is currently at 3.71%
(as of 9/26/2024).
8 BOND BUYER GO BOND YIELD INDEX
2.91%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
Sep-15
Sep-16
Sep-17
Sep-18
Sep-19
Sep-20
Sep-21
Sep-22
Sep-23
Sep-24
Interest Rate
Bond Buyer 11-Bond GO Index ('AA+') avg.rating)
Index Average 9/15 - 9/24 (2.91%)
• The Daily Secured Overnight
Financing Rate (SOFR)
interest rate is currently
5.16% (as of 9/30/24).
• The City uses SOFR as a
proxy for forecasting interest
rates for various short-term
debt instruments.
9 SOFR RATES FOR OCT 2023 – SEPT 2024
4.0%
4.5%
5.0%
5.5%
6.0%
Jun-23
Jul-23
Aug-23
Sep-23
Oct-23
Nov-23
Dec-23
Jan-24
Feb-24
Mar-24
Apr-24
May-24
Jun-24
Interest Rate
Daily SOFR
BSBY3M
GENERAL OBLIGATION CREDIT RATINGS AS OF
SEPTEMBER 30, 2024
The City’s GO Ratings are higher than the State of California’s ratings and analogous to Santa Clara County’s ratings, which is to be expected given the extent of the tax base and other credit fundamentals that the City and the County share:
10 Entity Moody’s S&P Fitch
City of San José Aa1 AA+ AAA
State of California Aa2 AA- AA
Santa Clara County (1) N/A AAA AA+
(1) Moody’s does not currently rate Santa Clara County’s General Obligation Bonds but maintains an Issuer rating of Aa1.
GENERAL CREDIT RATINGS
CITY OF SAN JOSE
AS OF SEPTEMBER 30, 2024
The City of San José continues to maintain very high credit ratings. 11 T ype of Rating Moody’s S&P Fitch
Issuer Rating Aa1
(stable)
AA+
(stable)
AA+
(stable)
General Obligation Bonds Aa1
(stable)
AA+
(stable)
AAA
(stable)
Lease Revenue Bonds
(Essential Assets)
Aa2
(stable)
AA
(stable)
AA
(stable)
Lease Revenue Bonds
(Less Essential Assets)
Aa3(1)
(stable)
AA
(stable)
AA-(2)
(stable)
(1) Moody’s assigns a rating of Aa3 to CSJFA 2020B and 2022A bonds which the rating agency considers less essential assets. (2) Fitch assigns a rating of AA- to CSJFA 2020B bonds which the rating agency considers less essential assets.
OTHER CITY CREDIT RATINGS AS OF
SEPTEMBER 30, 2024
12 T ype of Rating Moody’s S&P Fitch KBRA (Kroll) 1
San José Airport
Bonds
A2
(stable)
A
(stable)
A
(stable) N/A
Wastewater
Revenue Bonds N/A AAA
(stable)
AAA
(stable)
AAA(1)
(stable)
SARA Senior T ax
Allocation Bonds N/A AA
(stable)
AA+
(stable) N/A
SARA Subordinate
T ax Allocation Bonds N/A AA-
(stable)
AA
(stable)2 N/A
San José Clean
Energy (Issuer)
A2
(stable)
A
(stable) N/A N/A
(1) KBRA (Kroll) has assigned a rating to the CSJFA Wastewater Revenue Bonds exclusively. (2) SARA Subordinate TABs were upgraded by Fitch to AA+ on 10/3/2024.
FIRST QUARTER
INVESTMENT MANAGEMENT REPORT
FOR FISCAL YEAR 2024-2025
13 INVESTMENT POLICY
(COUNCIL POLICY 1-12)
• Investments meet the requirements of the City’s Investment Policy and conform with California Government Code section 53601 • Authorized investments are only highly-rated fixed income securities • Investment Policy is reviewed annually and was last adopted by resolution of the City Council on March 5, 2024
• Investment Program is audited semi-annually for compliance purposes 14 INVESTMENT OBJECTIVES & REPORTING
• Manage investments to meet the City’s Investment Policy objectives:
▪ Safety
▪ Liquidity
▪ Yield
• Quarterly reports are available to the public:
▪ On-line
▪ In PSFSS Committee agenda packets
▪ In City Council agenda packets (for acceptance)
15 PORTFOLIO PERFORMANCE SUMMARY
Size of Total Portfolio $2,522,084,221
Earned Interest Yield 3.605%
Weighted Average Maturity 646 days
Fiscal Year-to-Date Net Income Recognized $24,022,421
Exceptions to the City Investment Policy this Quarter None 16 T otal Investment Portfolio:
$2,522,084,221
17 PORTFOLIO INVESTMENTS
U.S. Treasury
$178,363,029 7.1%
U.S. Agency
$886,684,315 35.2%
Supranationals
$200,446,975 7.9%
Negotiable Certificate
of Deposit (NCD)
$25,000,000 1.0% Corporate Notes
$423,790,288 16.8%
Asset Backed
Securities
$37,660,075 1.5%
Muni Bonds
$343,916,766
13.6%
Mortgage Backed
Securities
$256,377,304 10.2%
JPAP
$140,856,683 5.6%LAIF $28,988,786
1.1%
The $416 million in the General Fund
presented includes $403,492,133 of
General Fund monies, as well as
$12,018,399 in other, separately
tracked general funds, such as the
Depositor Fund, Developer Fees and
other smaller funds and reserves.
18 INVESTMENTS BY FUND
Internal Services Fund
$16,687,243
Airport
$342,153,557 Capital Projects
$57,688,344
Debt Service
$51,899,586
Development Fees
$54,728,531
General Fund
$415,510,532
Muni Water
$35,301,632
Parking
$34,633,779 Housing
$293,393,121
Special Revenue Funds
$438,014,432
Wastewater
$458,176,414
Trust & Agency
$7,218,345
SJ Clean Energy
$282,945,996
GENERAL FUND BALANCE
• The General Fund balances decreased by $472 million during the quarter and ended with a balance of $416 million as of September 30, 2024. This decrease is attributed to prefunding of employer contributions towards the Police and Fire Retirement Plan in July 2024, and debt service payments in August 2024. General Fund cash balances usually peak during the months of January and June, when the bulk of property taxes are received, and decline in the summer months due to retirement prefunding, debt service payments and operational expenditures.
• Projected investment maturities, cash and revenues are sufficient to cover anticipated expenditures for the next six months.
19 20
COMPARISON OF CASH BALANCES
(BY SELECT FUNDS)
The following graph compares
monthly balances of the five largest
City funds as reported by FMS.
$0
$200
$400
$600
$800
$1000
$1200
Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23 Dec-23 Mar-24 Jun-24 Dollars in millions
General Fund Wastewater Airport Housing Special Revenue Fund • City refers to City's Portfolio, and
the yield data are month-end
weighted average yields.
• LAIF refers to the State of CA
Local Agency Investment Fund and
yield data are average monthly
effective yields.
• BAML refers to Bank of America
Merrill Lynch 1-3 Year AAA-A US
Corporate & Government Index
and yield data are rolling 2-year
effective yield.
21 BENCHMARK COMPARISONS
0.00 0.50
1.00 1.50
2.00 2.50
3.00 3.50
4.00 4.50
5.00 Sep-22 Dec-22 Mar-23 Jun-23 Sep-23 Dec-23 Mar-24 Jun-24 Sep-24 Yield (%)
City LAIF BAML
Yield WAM
BAML: 4.733% 675
LAIF: 4.575% 231
CITY: 3.502% 646
INVESTMENT STRATEGY
• Continue matching known expenditures with suitable investments within the 24-month horizon
• Extend a portion of the portfolio beyond two-year term, when appropriate, to provide income and structure to the portfolio • Maintain the diversification of the portfolio
• Focus on core objectives of safety, liquidity, and yield 22 FIRST QUARTER
REVENUE MANAGEMENT REPORT
FOR FISCAL YEAR 2024-2025
23 REVENUE MANAGEMENT PROGRAMS
• Finance Department Revenue Management focuses on collecting outstanding receivables, with an emphasis on reducing delinquent accounts and enhancing revenue compliance, through four primary collection programs:
▪ Accounts Receivable
▪ Business Tax
▪ Compliance and Monitoring
▪ Utility Billing
• Efforts may span several reporting periods, and actual collections are reported as funds are received by the City.
24 T otal Revenue: $4.231B
Source: 2023-24 City Manager’s
Budget Office Annual Report
(Graph is updated annually)
25 REVENUE MANAGEMENT PORTFOLIO
FY 2023-24 REVENUE ($ IN MILLIONS)
Lodging Taxes
& Fees
$54.8M
3.8%
Franchise Fees
$52.5M
3.7%
Utility Users Tax
$129.8M
9.1%
Telephone Line Tax
$22.3M
1.6%
Real Property Transfer Tax
$50.7M
3.6%
Sales Tax
$333.4M
23.4%
Misc. Billing
$208.9M
14.6%
Business Taxes
$86.1M
6.0%
Utility Billings
$489.1M
34.3%
Revenue
Management
$1.4B
City-Wide Revenue
(excluding Revenue
Management)
$2.8B
Includes invoices billed through the
Business Tax System, the centralized
Accounts Receivable system (RevQ),
and the Utility Billing System.
(Graph is updated annually)
26 INVOICING AND PAYMENTS
FIVE-YEAR HISTORY (FY 2019-20 TO FY 2023-24)
96.5% 98.0% 96.1% 96.2% 95.4%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
$-
$100
$200
$300
$400
$500
$600
$700
$800
FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
In Millions
Payments Outstanding Percentage Collected
27 OUTSTANDING RECEIVABLES
THREE-YEAR HISTORY (FY 2021-22 Q2 TO FY 2024-25 Q1)
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
$-
$20
$40
$60
$80
$100
$120
21-22
Q2
21-22
Q3
21-22
Q4
22-23
Q1
22-23
Q2
22-23
Q3
22-23
Q4
23-24
Q1
23-24
Q2
23-24
Q3
23-24
Q4
24-25
Q1
Quarter to Quarter % Change
Millions
Revenue Mangement Aging
Total Receivables Delinquent (91+ days) Delinquency Percentage Change 28 FY 2024-25 Q1 DELINQUENT RECEIVABLES
COLLECTION STATUS SUMMARY ($ IN MILLIONS*)
*Rounded
As of September 30, 2024
Write-Off Pending (A/R Only)
$1.4M
683 Invoices
Liens (A/R Only)
$0.7M
171 Invoices
Restitution, Payment Plan (A/R Only)
$0.9M
317 Invoices
Legal, Bankruptcy
$5.0M
666 Invoices
Collection Agency
$13.4M
12,035 Invoices
Active
$36.9M
25,092 Invoices
Total
Current
$28.2M
Total Delinquent
$58.3M
COLLECTIONS & RETURN ON INVESTMENT
REVENUE MANAGEMENT COLLECTIONS (FY 2022-23 Q2 TO FY 2024-25 Q1) Target ROI: 5.0
29 5.3
5.7 5.0 4.0
8.3 5.7
3.9 4.0
0.0 5.0
10.0 $0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
22-23 Q2 22-23 Q3 22-23 Q4 23-24 Q1 23-24 Q2 23-24 Q3 23-24 Q4 24-25 Q1 Return on Investment (ROI)
Millions
Revenue Management Collections
Business Tax Accounts Receivable Actual ROI
REVENUE COMPLIANCE REVENUE
RECOVERY
• Revenue Compliance and Monitoring conducts cyclical tax and fee audits for a variety of programs (e.g., Sales and Use Tax, Hotel Taxes/Lodging Fees, Utilities, T elecommunications, and Cannabis). • In Q1, Revenue Compliance and Monitoring recovered ~$1.36M in compliance revenue, including:
▪ One-time finding of ~$249K from a single telecommunications tax audit. ▪ One-time finding of ~$221K from a single cannabis business tax audit. ▪ One-time finding of ~$169K from a single hotel lodging tax audit. 30 FIRST QUARTER
PURCHASING AND
RISK MANAGEMENT REPORT
FOR FISCAL YEAR 2024-2025
31 PURCHASING PROGRAM
The Purchasing Division of the Finance Department is responsible for the centralized procurement of equipment, supplies, materials, Information T echnology (IT), and non-consulting services, pursuant to the City of San José Municipal Code Title 4, Chapter 4.12. 32 PURCHASING TRANSACTIONS COMPLETED
FIRST QUARTER FY2024-25
DESCRIPTION
FIRST QUARTER
TRANSACTIONS
FISCAL YEAR
TO DATE
SOLICITATIONS COMPLETED (RFX) 43 43
PURCHASE ORDERS & PURCHASE ORDER ADJUSTMENTS EXECUTED 643 643 CONTRACTS NEGOTIATED & EXECUTED 5 5
AMENDMENTS, CHANGE ORDERS, SERVICE ORDERS, & OPTIONS EXECUTED 38 38 COUNCIL MEMORANDA ISSUED 11 11
PURCHASE ORDER DOLLARS PROCURED $100,190,359 $100,190,359 CONTRACT DOLLARS PROCURED $7,938,600 $7,938,600
33 RISK MANAGEMENT PROGRAM
The Division is responsible for the procurement and oversight of the City’s property and casualty insurance programs and providing contractual risk management services, property subrogation claims reporting and other key services to City Departments.
34 35
RISK MANAGEMENT TRANSACTIONS COMPLETED
FIRST QUARTER FY2024-25
Transaction T ype First Quarter
Transactions
Fiscal Y ear to
Date
Request for Contract Insurance Specifications 405 405
Request for Insurance Compliance Review 163 163
Request for Letters of Self-Insurance 25 25
Subrogation Dollars Billed to Responsible Third Parties $62,964 $62,964 Council and Committee Memorandums Issued 2 2
OTHER FIRST QUARTER RISK MANAGEMENT
ACCOMPLISHMENTS
• Other highlights include:
▪ Completed the Citywide Insurance Renewals
▪ Collaborated with the IT Department to migrate the Certificate of Insurance Database to SharePoint
▪ Facilitated loss prevention engineering visits by the City’s property insurer to the McEnery Convention Center and Police Department Substation 36 RECOMMENDATION
(1) Accept the First Quarter (period ended September 30, 2024) Financial Reports for Fiscal Year 2024-2025 for the following programs:
▪ (a) Debt Management;
▪ (b) Investment Management;
▪ (c) Revenue Management; and
▪ (d) Purchasing and Risk Management;
(2) Refer and cross-reference the First Quarter Financial Reports for Fiscal Year 2024-2025 to the December 17, 2024 City Council meeting for full adoption.
37