SECOND QUARTER FINANCIAL REPORT
FISCAL YEAR 2024-2025
Public Safety, Finance and
Strategic Support Committee
Prepared by the Finance Department
January 31, 2025
COMMITTEE AGENDA: FEBRUARY 20, 2025
ITEM: (d)1.
ATTACHMENT A
SECOND QUARTER DECEMBER 2024
DEBT MANAGEMENT REPORT
FISCAL YEAR 2024-2025
2 Outstanding Debt as of December 31, 2024: $4.25 Billion FY2024-25 Debt Issuance: $76.8 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 December 31, 2024: $3.46 Billion (Excluding Multifamily Housing Revenue Bonds)
4 DIRECT OUTSTANDING DEBT
(CITY AND ALL AGENCIES)
CSJ GO Bonds,
$497,265,000, 14.36%
CSJFA Bonds/ CP
Notes, $637,452,000,
18.40%
Airport Revenue
Bonds/ CP,
$1,047,557,096, 30.24%
Wastewater Revenue Bonds/
RWF Notes, $300,348,219,
8.67%
Successor Agency Tax
Allocation Bonds,
$981,260,000, 28.33%
DEBT ISSUANCE ACTIVITIES
OCTOBER – DECEMBER 2024
5 • California Community Choice Financing Authority Clean Energy Project Revenue Bonds, Series 2024E (Green Bonds) $1.24 billion ▪ Conduit issuance for SJCE’s energy prepayment closed November 4, 2024 • $0.4 million in Airport Commercial Paper (CP)
DEBT MANAGEMENT ACTIVITIES
OCTOBER – DECEMBER 2024
6 • CSJFA CP Letter of Credit (LOC) Request for Proposal (RFP) ▪ Released in December
• Defeasance of CSJ Airport Revenue Refunding Bonds, Series 2014 ▪ On October 28, 2024, the Escrow Agent redeemed the remaining 2014A, 2014B, and 2014C bonds and settled final payments.
RATING SURVEILLANCE
OCTOBER – DECEMBER 2024
7 • Successor Agency Subordinate Tax Allocation Bonds Series 2017B were upgraded by Fitch Ratings from AA to AA+ in October
▪ Senior Bonds Series 2017A and 2017A-T were affirmed at “AA+” • The following ratings were affirmed in by Fitch Ratings in October ▪ City Issuer Default Rating AA+
▪ City General Obligation Bonds rating AAA
▪ CSJFA Lease Revenue Bonds Series 2013B, 2020A, 2021A, 2022A (essential) rating AA ▪ CSJFA Lease Revenue Bonds Series 2020B (non-essential) rating AA- • Wastewater Revenue Bonds ratings by Fitch and KBRA were affirmed (AAA)
DEBT REPORTING
OCTOBER - DECEMBER 2024
• Comprehensive Annual Debt Report FY 2023-24
• Marks-Roos Reports FY 2023-24
• Annual Insurance Compliance Reports
• San Jose Clean Energy Q1 Compliance Report
▪ JPMorgan Credit Facility
• Continuing Disclosure/Compliance Reports FY 2023-24
• Successor Agency Recognized Obligation Payment Schedule (ROPS) Budget FY2025-26
▪ Submission to County of Santa Clara in December
8 UPCOMING DEBT MANAGEMENT ACTIVITIES
JANUARY - MARCH 2025
• CSJFA CP LOC RFP
• Notice of intend to award and negotiation with the selected bank • CP Dealer Services RFP
• Debt Management Software RFP
• Successor Agency Tax Increment Consultant RFP
• Revision to the Debt Management Policy
9 UPCOMING DEBT REPORTING
JANUARY - MARCH 2025
• SB-1029 Reports to California Debt and Investment Advisory Commission • San Jose Clean Energy Q2 Compliance Report
• Successor Agency ROPS Budget FY2025-26
• Submission to State Department of Finance in February 10 10-year history of higher rated
(“AA+”) General Obligation debt
(20-year term) yield averaged
2.93% and is currently at 4.06%
(as of 1/9/2025).
11 BOND BUYER GO BOND YIELD INDEX
2.93%
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
4.53% (as of 12/31/24).
• The City uses SOFR as a
proxy for forecasting
interest rates for various
short-term debt
instruments.
12 SOFR RATES
JAN 2024 – DEC 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
DECEMBER 31, 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:
13 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 AAA
(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 DECEMBER 31, 2024
The City of San José continues to maintain very high credit ratings. 14 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
DECEMBER 31, 2024
15 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.
SECOND QUARTER
INVESTMENT MANAGEMENT REPORT
FOR FISCAL YEAR 2024-2025
16 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 17 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)
18 PORTFOLIO PERFORMANCE SUMMARY
Size of Total Portfolio $2,428,548,357
Earned Interest Yield 3.411%
Weighted Average Maturity 647 days
Fiscal Year-to-Date Net Income Recognized $45,138,338
Exceptions to the City Investment Policy this Quarter None 19 T otal Investment Portfolio:
$2,428,548,357
20 PORTFOLIO INVESTMENTS
U.S. Treasury
$178,237,580 7.3%
U.S. Agency
$803,314,871 33.1%
Supranationals
$160,704,996 6.6%
Negotiable
Certificate of Deposit
(NCD) $25,000,000
1.0%
Commercial Paper
$29,212,500 1.2%
Corporate Notes
$466,241,964 19.2%
Asset Backed
Securities
$34,557,417 1.4%
Muni Bonds
$320,826,766
13.2%
Mortgage Backed
Securities
$259,067,163 10.7%
JPAP
$122,052,550 5.0%LAIF $29,332,550
1.2%
The $416 million in the General Fund
presented includes $400,750,041 of
General Fund monies, as well as
$14,997,615 in other, separately
tracked general funds, such as the
Depositor Fund, Developer Fees and
other smaller funds and reserves.
21 INVESTMENTS BY FUND
Internal Services Fund
$22,784,167 Airport
$371,422,056
Capital Projects
$18,612,997
Debt Service
$52,615,845
Development Fees
$54,030,719
General Fund
$415,747,656
Muni Water
$35,271,459
Parking
$33,494,590 Housing
$298,190,087
Special Revenue Funds
$367,869,578
Wastewater
$394,709,170
Trust & Agency
$6,962,574
SJ Clean Energy
$315,763,391
GENERAL FUND BALANCE
• The General Fund balances increased by $237 thousand during the quarter and ended with a balance of $416 million as of December 31, 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
22 23
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
Dec-22 Mar-23 Jun-23 Sep-23 Dec-23 Mar-24 Jun-24 Sep-24 Dec-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.
24 BENCHMARK COMPARISONS
0.00 0.50
1.00 1.50
2.00 2.50
3.00 3.50
4.00 4.50
5.00 Dec-22 Mar-23 Jun-23 Sep-23 Dec-23 Mar-24 Jun-24 Sep-24 Dec-24 Yield (%)
City LAIF BAML
Yield WAM
BAML: 4.693% 672
LAIF: 4.434% 252
CITY: 3.587% 647
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 25 SECOND QUARTER
REVENUE MANAGEMENT REPORT
FOR FISCAL YEAR 2024-2025
26 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.
27 T otal Revenue: $4.231B
Source: 2023-24 City Manager’s
Budget Office Annual Report
(Graph is updated annually)
28 REVENUE MANAGEMENT PORTFOLIO
FY 2023-24 REVENUE ($ 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)
29 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
30 OUTSTANDING RECEIVABLES
THREE-YEAR HISTORY (FY 2021-22 Q3 TO FY 2024-25 Q2)
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
$-
$20
$40
$60
$80
$100
$120
21-22
Q3
21-22
Q4
22-23
Q1
22-23
Q2
22-23
Q3
22-23
Q4
23-24
Q1
23-24
Q2
23-24
Q3
23-24
Q4
24-25
Q1
24-25
Q2
Quarter to Quarter % Change
Millions
Revenue Mangement Aging
Total Receivables Delinquent (91+ days) Delinquency Percentage Change 31 FY 2024-25 Q2 DELINQUENT RECEIVABLES
COLLECTION STATUS SUMMARY ($ IN MILLIONS*)
*Rounded
As of December 31, 2024
Write-Off Pending (A/R Only)
$0.9M
566 InvoicesLiens (A/R Only)
$1.3M
414 Invoices
Restitution,
Payment Plan (A/R Only)
$1.1M
349 InvoicesLegal,
Bankruptcy
$5.0M
666 Invoices
Collection Agency
$13.7M
11,979 Invoices
Active
$35.6M
28,646 Invoices
Total Current
$29.6M
Total Delinquent
$57.6M
COLLECTIONS & RETURN ON INVESTMENT
REVENUE MANAGEMENT COLLECTIONS (FY 2022-23 Q3 TO FY 2024-25 Q2) Target ROI: 5.0
32 5.7
5.0 4.0
8.3 5.7
3.9 4.0
7.8 0.0
5.0 10.0
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
22-23 Q3 22-23 Q4 23-24 Q1 23-24 Q2 23-24 Q3 23-24 Q4 24-25 Q1 24-25 Q2 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 Q2, Revenue Compliance and Monitoring recovered
~$903K in compliance revenue.
▪ Cannabis business tax and regulatory fees totaling ~$537K. 33 SECOND QUARTER
PURCHASING AND
RISK MANAGEMENT REPORT
FOR FISCAL YEAR 2024-2025
34 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. 35 PURCHASING TRANSACTIONS COMPLETED
SECOND QUARTER FY2024-25
DESCRIPTION
SECOND QUARTER
TRANSACTIONS
FISCAL YEAR
TO DATE
SOLICITATIONS COMPLETED (RFX) 36 79
PURCHASE ORDERS & PURCHASE ORDER ADJUSTMENTS EXECUTED 401 1044 CONTRACTS NEGOTIATED & EXECUTED 3 8
AMENDMENTS, CHANGE ORDERS, SERVICE ORDERS, & OPTIONS EXECUTED 36 74 COUNCIL MEMORANDA ISSUED 26 37
PURCHASE ORDER DOLLARS PROCURED $75,967,580 $176,157,939 CONTRACT DOLLARS PROCURED $5,100,097 $13,038,698
36 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.
37 38
RISK MANAGEMENT TRANSACTIONS COMPLETED
FY2024-25, SECOND QUARTER
Transaction T ype Second Quarter
Transactions
Fiscal Y ear to
Date
Request for Contract Insurance Specifications 285 690
Request for Insurance Compliance Review 132 295
Request for Letters of Self-Insurance 5 30
Subrogation Dollars Billed to Responsible Third Parties $31,839 $94,803 Council and Committee Memorandums Issued 0 2
OTHER SECOND QUARTER RISK
MANAGEMENT ACCOMPLISHMENTS
• Other highlights include:
▪ Negotiated $1,105,335 in insurance recoveries from property insurer related to 2023 loss at History Park
▪ Facilitated loss prevention engineering visits by the City’s property insurer to the San José Mineta International Airport, the Civic Auditorium, and the T ech Museum
39 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 40 RECOMMENDATION
(1) Accept the Second Quarter (period ended December 31, 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 Second Quarter Financial Reports for Fiscal Year 2024-2025 to the March 11, 2025 City Council meeting for full adoption.
41