San Marcos City Council
January 13, 2026

1. The foregoing recitals are true and correct and are incorporated herein as though fully set forth at this point.

2. Existing San Marcos Municipal Code Section 20.400.180 is hereby amended to read as shown in the clean and redlined versions attached hereto as Exhibit “A” and Exhibit “B,” respectively, and incorporated herein by this reference.

3. The proposed Text Amendments to Title 20 (Zoning Ordinance) of the San Marcos Municipal Code are exempt from the California Environmental Quality Act (CEQA) because this is not a project within the meaning of Section 15378 of the CEQA Guidelines because there is no potential for it to result in a physical change in the environment, either directly or indirectly. In the event this Ordinance is found to be subject to CEQA, it is exempt from CEQA pursuant to the exemption contained in CEQA Guidelines Section 15061(b)(3) because it can be seen with certainty that there is no possibility of a significant effect on the environment.

4. The proposed Text Amendments to Title 20 (Zoning Ordinance) of the San Marcos Municipal Code will not adversely affect the implementation of the General Plan in that it does not conflict with any goal, objective, or policy of the General Plan.

5. The proposed Text Amendments to Title 20 (Zoning Ordinance) of the San Marcos Municipal Code will not be detrimental to the public health, safety, morals, and welfare in that the Text Amendment will not specifically authorize development and any proposed development will be subject to review for consistency with applicable regulations designed in part to find that the project is not detrimental to public health, safety, morals, and welfare.

INTRODUCED at a regular meeting of the City Council of the City of San Marcos, California, held on the 9th day of December, 2025.

PASSED, APPROVED, AND ADOPTED by the City Council of the City of San Marcos, California, at a regular meeting thereof, held on this __________ day of ____________, by the following roll call vote:

AYES: COUNCIL MEMBERS:

NOES: COUNCIL MEMBERS:

ABSENT: COUNCIL MEMBERS:

APPROVED:

Rebecca D. Jones, Mayor

779
Ordinance No. 2025-1574
TA24-0004
December 9, 2025

ATTEST: APPROVED AS TO FORM:

Phillip Scollick, City Clerk Helen Holmes Peak, City Attorney

Attachment(s):

Exhibit A – Amended SMMC Section 20.400.180 (Clean)
Exhibit B – Amended SMMC Section 20.400.180 (Redlined)

780
ORDINANCE 2025-1574

EXHIBIT A

SECTION 20.400.180 CLEAN
781
Section 20.400.180 Self-Storage
Self-storage shall be subject to the permit requirements of the applicable Zone. In all cases, except for the Self-Storage Overlay Zone of the University District Specific Plan, the following criteria for mini-storage facilities shall apply as minimum requirements:

A. Demand A
nalysis. Preparation of a City-initiated marketing demand analysis (paid for by the applicant) that substantiates the need for such a facility in the City and the region, and demonstrates a positive fiscal benefit to the City.

B. Limitations. Proposed mini-storage facilities shall not be permitted within the following areas:

1. Any existing or proposed planned industrial park, unless a marketing analysis can indicate that no negative impact will result to the build-out of the industrial park and its absorption.

2. Any SPA Zone.

3. The State Route 78 view corridor.

C. Required Access. Any proposed mini-storage site shall have direct access to a six (6)-lane public ROW.

D. Minimum Setback. All storage buildings shall have a minimum setback of two hundred fifty (250) feet from any public ROW.

E. Screening. Proposed mini-storage facilities shall be fully screened from the street and adjacent residential uses by virtue of landscaping, exterior walls, or building design.

Site plans submitted for Site Development Plan Review shall adequately detail the screening ability of these features to the satisfaction of the Director.

F. Mitigation. Proposed mini-storage facilities shall require the mitigation of economic impacts for non-tax and non-job-producing uses.

G. Loading. Side loading areas and doors are permitted but must be screened by a concrete or masonry wall not less than twelve (12) feet high, textured or colored to match the main building and not closer to a street than the applicable parking setback requirement(s).
782
ORDINANCE 2025-1574

EXHIBIT B
SECTION 20.400.180

STRIKEOUT
783
Section 20.400.180 Self-Storage
Self-storage shall be subject to the permit requirements of the applicable Zone. In all cases, except for the Self-Storage Overlay Zone of the University District Specific Plan, the following criteria for mini-storage facilities shall apply as minimum requirements:

A. D
emand Analysis. Preparation of a City-initiated marketing demand analysis (paid for by the applicant) that substantiates the need for such a facility in the City and the region, and demonstrates a positive fiscal benefit to the City.

B. Limitations. Proposed mini-storage facilities shall not be permitted within the following areas:

1. Any existing or proposed planned industrial park, unless a marketing analysis can indicate that no negative impact will result to the build-out of the industrial park and its absorption.

2. Any SPA Zone.

3. The State Route 78 view corridor.

C. Required Access. Any proposed mini-storage site shall have direct access to a six (6)-lane public ROW.

D. Minimum Setback. All storage buildings shall have a minimum setback of two hundred fifty (250) feet from any public ROW.

E. Screening. Proposed mini-storage facilities shall be fully screened from the street and adjacent residential uses by virtue of landscaping, exterior walls, or building design.

Site plans submitted for Site Development Plan Review shall adequately detail the screening ability of these features to the satisfaction of the Director.

F. Mitigation. Proposed mini-storage facilities shall require the mitigation of economic impacts for non-tax and non-job-producing uses.

G. Loading. Side loading areas and doors are permitted but must be screened by a concrete or masonry wall not less than twelve (12) feet high, textured or colored to match the main building and not closer to a street than the applicable parking setback requirement(s).
784
City of San Marcos
Staff Report
1 Civic Center Drive
San Marcos, CA 92069
File #:TMP-2357
MEETING DATE:

JANUARY 13, 2026
SUBJECT:

FISCAL YEAR 2024-25 ANNUAL COMPREHENSIVE FINANCIAL REPORT (ACFR) Recommendation
NOTE AND FILE the City’s Annual Comprehensive Financial Report (ACFR) for the fiscal year ended June 30, 2025 along with the independent auditors’ letter to the City Council regarding audit results.

Board or Commission Action
Not applicable
Relevant Council Strategic Theme
Good Governance
Relevant Department Goal
Maintain Fiscal Health of the City
Executive Summary
At the end of each fiscal year, financial statements are prepared by the City and audited by independent auditors who are contracted through a competitive procurement process.

The Annual Comprehensive Financial Report (ACFR) communicates the City’s financial condition and activity in a transparent and organized manner for the fiscal year ended June 30, 2025. Overall, the City’s operations continue to show signs of stability, a result of prudent and sound management practices and efforts of the City of San Marcos.

The City received the independent auditor’s unmodified (clean) opinion on the ACFR for the fiscal year ended June 30, 2025. The unmodified (clean) opinion communicates to users that the financial statements are fairly presented and that the information used in the report is reliable. The City’s independent audit firm has also issued a letter to the City Council communicating audit findings and other matters, as required by the Auditing Standards Board of the American Institute of Certified Public Accountants (AICPA).

Discussion
At the end of each fiscal year, financial statements are prepared by the City and audited by independent auditors who are contracted through a competitive procurement process. The City’s independent audit firm for City of San Marcos Printed on 1/6/2026Page 1 of 3
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File #:TMP-2357
the ACFR was Rogers, Anderson, Malody & Scott, LLP.

The ACFR is used to communicate the City’s financial condition and activity in a transparent and organized manner. In addition, the ACFR presents historical and comparative information that can be useful to City staff, elected officials, and external users, such as debt rating agencies, businesses, other public agencies and the City’s residents. The most recent ACFR (see Attachment 1) is also available on the City’s website.

The General Fund for ACFR reporting purposes is comprised of the City’s general operating fund, the City’s Infrastructure, Facility, and Vehicle and Equipment Replacement and Rehabilitation Funds, and the Measure Q Fund. The Fiscal Year 2024-25 General Fund ended with a $132.8 million fund balance. Of this amount, $9.1 million was assigned to the City’s infrastructure, facility, and vehicle and equipment replacements and rehabilitations and $35.6 million was unassigned or available for operational spending at the City’s discretion.

During the year, unassigned and one-time revenues were appropriately accounted for per the City Council’s Fiscal Management Policy and reserves remained in accordance with the City’s Council’s General Fund Reserve Policy.

At the end of the fiscal year, the City is able to report positive balances for the government as a whole, as well as for its separate governmental and business-type activities. The same situation held true for the prior fiscal year. The City’s total net position increased $30.7 million from the prior fiscal year due to an increase in property taxes, operating contributions and grants and capital contributions and grants, and a loan repayment during the fiscal year.

Audit industry standards, established by the AICPA, require auditors to provide an opinion on specific areas of the City’s financial statements based on observations, inquiries, testing of transactions and analysis. An unmodified (clean) opinion communicates to users that the financial statements are fairly presented and that the information used in the report is reliable. The City received an unmodified (clean) opinion on the ACFR for the fiscal year ended June 30, 2025.

The Auditing Standards Board of the AICPA requires the independent auditors to communicate significant audit findings to those charged with governance. As a result, the City’s independent audit firm has also issued a letter to the City Council dated December 17, 2025 to comply with these requirements (see Attachment 2).

Environmental Review
Not Applicable
Fiscal Impact
Not applicable
Attachment(s)
Attachment 1: Annual Comprehensive Financial Report for Fiscal Year Ended June 30, 2025 Attachment 2: Letter to the City Council on Summary of Audit Results City of San Marcos Printed on 1/6/2026Page 2 of 3
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File #:TMP-2357
Prepared/Submitted by: Jeffrey Jorgenson, Accounting and Treasury Manager Reviewed by: Donna Apar, Finance Director
Approved by: Michelle Bender, City Manager
City of San Marcos Printed on 1/6/2026Page 3 of 3
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793

City of San Marcos,
California

ANNUAL COMPREHENSIVE

FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2025
Prepared by the San Marcos Finance Department
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City of San Marcos
Annual Comprehensive Financial Report
For the Year Ended June 30, 2025

TABLE OF CONTENTS

INTRODUCTORY SECTION:

Letter of Transmittal ................................................................................................................ i Organizational Chart ............................................................................................................. vii List of Principal Officials ....................................................................................................... viii GFOA Certificate of Achievement for Excellence in Financial Reporting .............................. ix

FINANCIAL SECTION:

Independent Auditor's Report ................................................................................................ 1 Management's Discussion and Analysis ................................................................................ 4 Basic Financial Statements:

Government-Wide Financial Statements:

Statement of Net Position ......................................................................................... 16 Statement of Activities .............................................................................................. 17 Fund Financial Statements:

Balance Sheet – Governmental Funds .................................................................... 19 Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position ................................................................................... 20 Statement of Revenues, Expenditures and Changes in Fund Balances - Governmental Funds .......................................................................................... 21 Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities .............. 22 Statement of Net Position – Proprietary Funds ........................................................ 23 Statement of Revenues, Expenses and Changes in Fund Net Position - Proprietary Funds ............................................................................................... 24 Statement of Cash Flows – Proprietary Funds ......................................................... 25 Statement of Fiduciary Net Position – Fiduciary Funds ........................................... 26 Statement of Changes in Fiduciary Net Position – Fiduciary Funds ........................ 27 Index to Notes to Basic Financial Statements ................................................................ 28

Required Supplementary Information:

Schedule of Changes in Net Pension Liability and Related Ratios ................................ 88 Schedule of Plan Contributions – Agent Plan ................................................................ 90 Schedule of City’s Proportionate Share of the Plan’s Net Pension Liability and Related Ratios as of the Measurement Date .................................................... 91 Schedule of Plan Contributions – Cost-Sharing Plan ..................................................... 92 Schedule of Changes in Total OPEB Liability and Related Ratios as of the Measurement Date .................................................................................... 93

796
City of San Marcos
Annual Comprehensive Financial Report
For the Year Ended June 30, 2025
TABLE OF CONTENTS, (Continued)

FINANCIAL SECTION, (Continued):

Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget to Actual:

General Fund ..................................................................................................... 94 San Marcos Affordable Housing Fund ................................................................ 95 Notes to Required Supplementary Information .............................................................. 96 Supplementary Schedules:

Non-Major Governmental Funds:

Combining Balance Sheet ...................................................................................... 100 Combining Statement of Revenues, Expenditures and Changes in Fund Balances ................................................................................................. 101 Non-Major Special Revenue Funds:

Combining Balance Sheet ...................................................................................... 102 Combining Statement of Revenues, Expenditures and Changes in Fund Balances ................................................................................................. 104 Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual:

Gas Tax Special Revenue Fund ...................................................................... 106 Traffic Safety Special Revenue Fund ............................................................... 107 Community Facilities District 98-02 Special Revenue Fund ............................. 108 Street Lighting District Special Revenue Fund ................................................. 109 Senior Nutrition Grant Special Revenue Fund ................................................. 110 Community Development Block Grant Special Revenue Fund ........................ 111 HOME Grant Special Revenue Fund ............................................................... 112 Center Drive Maintenance Special Revenue Fund .......................................... 113 Art in Public Places Special Revenue Fund ..................................................... 114 Public, Education and Government Special Revenue Fund ............................. 115 Congestion Management CFD Special Revenue Fund .................................... 116 CalHOME Grant Special Revenue Fund .......................................................... 117 State CASp Fee Special Revenue Fund .......................................................... 118 Gas Tax RMRA Special Revenue Fund ........................................................... 119 Non-Major Debt Service Funds:

Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual:

San Marcos Public Facilities Authority Debt Service Fund ......................... 120 Non-Major Capital Projects Funds:

Combining Balance Sheet ...................................................................................... 121 Combining Statement of Revenues, Expenditures and Changes in Fund Balance ................................................................................................... 123 Custodial Funds:

Combining Statement of Fiduciary Net Position ..................................................... 125 Combining Statement of Changes in Fiduciary Net Position .................................. 126

797
City of San Marcos
Annual Comprehensive Financial Report
For the Year Ended June 30, 2025
TABLE OF CONTENTS, (Continued)

STATISTICAL SECTION (UNAUDITED):

Net Position by Component ............................................................................................... 128 Changes in Net Position ..................................................................................................... 130 Fund Balances of Governmental Funds ............................................................................. 134 Changes in Fund Balances of Governmental Funds ......................................................... 136 Assessed Value and Estimated Actual Value of Taxable Property .................................... 138 Direct and Overlapping Property Tax Rates ...................................................................... 139 Property Tax Levies and Collections .................................................................................. 140 Ratios of Outstanding Debt by Type .................................................................................. 141 Ratios of General Bonded Debt Outstanding ..................................................................... 142 Legal Debt Margin Information ........................................................................................... 143 Pledged-Revenue Coverage .............................................................................................. 145 Direct and Overlapping Debt .............................................................................................. 146 Demographic and Economic Statistics ............................................................................... 147 Principal Employers ........................................................................................................... 148 Full-Time and Part-Time City Employees by Function ....................................................... 149 Operating Indicators by Function ....................................................................................... 150 Capital Asset Statistics by Function/Program .................................................................... 152

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Transmittal Letter

..

. December 1, 2025 Members of the Council and Citizens of San Marcos: It is our pleasure to present the City of San Marcos (City) Fiscal Year 2024-25 Annual Comprehensive Financial Report (ACFR). This report has been prepared in conformity with generally accepted accounting principles (GAAP) and has been audited in accordance with generally accepted auditing standards by Rogers, Anderson, Malody & Scott, LLP, a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, if any, and evaluating the overall financial statement presentation. The auditors concluded that there was a reasonable basis for rendering an unmodified (clean) opinion. The independent auditors’ report is presented as the first component of the financial section of this report. The ACFR consists of management’s representations concerning the finances of the City. Consequently, management assumes full responsibility for the completeness and reliability of all information presented in this report. To provide a reasonable basis for making these representations, management has established a comprehensive internal control framework that is designed both to protect the City’s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the financial statements in conformity with GAAP. Because the cost of internal controls should not outweigh their benefits, the City’s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatements. Management asserts that, to the best of our knowledge and belief, this report is complete and reliable in all material respects. GAAP requires that a narrative introduction, overview, and analysis be provided along with the financial statements in the form of Management’s Discussion and Analysis (MD&A). The City’s MD&A can be found immediately following the report of the independent auditors. This letter of transmittal is designed to complement the MD&A and should be read in conjunction. -i- 800
ii
CITY OF SAN MARCOS PROFILE The City was incorporated in 1963 and chartered on July 4, 1994. According to historical legends, the Spaniards, while pursuing the Native Americans in the late 18th century, came upon a fertile valley, which was named Los Vallecitos de San Marcos. Today, often nicknamed still as “Valley of Discovery”, the City offers rugged beautiful rolling hills, bustling commercial districts, and leading educational institutions. The City is located approximately twenty-four miles north of downtown San Diego and ninety miles south of Los Angeles, in the northern coastal/inland region of San Diego County (County). The Cerros Las Posas, Merriam and San Marcos foothills and a series of valleys are the chief topographic features. The City is accessible to San Diego, Orange, Imperial, San Bernardino, Riverside and Los Angeles counties. It is situated along the State Highway 78 corridor (78 Corridor) and is bordered by Escondido to the east, Vista to the north and west, Carlsbad to the south and west, and unincorporated areas of the San Diego County to the north and south. The City’s sphere of influence covers approximately thirty-three square miles. The City continues to be the smallest yet fastest growing population along the 78 Corridor and is one of the highest in median household income along the 78 corridor. Additional population and income information for the City can be found in the Community Profile on the City’s Economic Development website. The City delivers a full range of municipal services under the Council-Manager form of government, and offers an outstanding quality of life for its residents. Public facilities include an expanding citywide trail system, a variety of parks, recreational facilities and a County library. The City provides a diverse array of services for seniors and youth, extensive continuing educational programs, team sports, and special events. The City Council is comprised of five council members for a term of four years, on a staggered basis. The Mayor is directly elected, at large, for a four-year term. The City Council appoints the City Manager and the City Attorney. The City Council, the City’s chief policy-making body, enacts laws known as ordinances, sets policies known as resolutions, and adopts an annual Operations and Capital Improvement Program budget. The City Council also oversees a variety of advisory commissions, such as the Traffic Commission and Planning Commission, to address specific issues. These advisory commission members are appointed by the City Council. -i- 801
iii
ECONOMIC CONDITIONS AND OUTLOOK Education & Employment The City is home to several academic institutions with the second highest educational attainment among the five 78 corridor cities. The City is home to the San Marcos Unified School District (SMUSD), which has achieved local and state recognition for excellence. Several higher education institutions, including California State University San Marcos and Palomar College, also have established campuses in the City. The growth of these academic institutions contributes to the creation, support and sustainability of a professional workforce within the City. The City is home to a robust and well-balanced base of employers including wholesale trade, retail trade, food services, healthcare, and manufacturing. The City is also home to a diverse and talented labor force with over 4,200 businesses. The resiliency of local businesses has been a key to San Marcos’ economy. The current unemployment rate is 4.8% as of August 2025, which is lower than the 5.5% rate reported for the entire State for the same month. Real Estate Market Although home prices in San Marcos were down slightly compared to the prior year, the real estate market in the City is strong and has remained competitive with a median sales price of $950,000 through September 2025. This is slightly higher than the median sales price in the County, which was reported to be $890,000 during the same time. The City continues to see a steady stream of housing stock construction, including the large Hill District in the North City area, and has potential for new development in the future. Local Trends The City continues to create interest in infill development opportunities with new commercial, residential and mixed-use development projects to produce additional revenue streams. The City is currently experiencing an exceptional rate of growth and development, including the mixed-use North City development, with additional housing being developed in the surrounding area as well.

Property tax revenue receipts are expected to increase approximately 5% over prior year due to new housing construction in the City. Sales tax revenue outlook is currently optimistic as Fiscal Year 2025- 26 will mark the first full year of funding from Measure Q, the 1% local sales tax passed by voters November 5, 2024. Measure Q funds are focused on public safety and emergency response, roads and infrastructure maintenance, and parks and community spaces. -i - 802
iv
Future Capital & Infrastructure Improvements As North San Diego County grows, the challenges of increased traffic and congestion, affordable housing, and demand for services intensifies. The City Council is focused on balancing these competing priorities within the framework of their strategic themes of dynamic and responsive service delivery, economic development, good governance, quality of life, and planning for the future through the Capital Improvement Program (CIP). The CIP budget reflects the City’s foreseeable needs over the next five years and is developed in accordance with the City Council adopted policies and priorities in mind. The Fiscal Year 2025-26 CIP budget appropriation was $19.1 million. A large portion of the total CIP budget is in “Creek District” projects, which are intended to mitigate traffic congestion and provide recreational opportunities and additional services for the community. Street improvement and rehabilitation projects throughout the City also account for a large portion of the total CIP budget. Long Range Financial Forecast A five-year general fund financial forecast is developed as part of the budgeting process, which serves to guide the long-range fiscal planning and budget development process. This forecast details the City’s major revenue and expenditure items to provide long-term trend analysis and projections.

While the City continues to closely monitor cost of goods and services and implement efficiencies wherever possible, rising costs continue to be a challenge for the City. The passage of Measure Q will provide crucial funding to maintain the City’s services, infrastructure, and quality of life. Funding from Measure Q in Fiscal Year 2025-26 is estimated at $22 million. The funds will support important community needs and priorities such as maintaining fire protection, cleaning and maintaining local parks, fixing potholes, and cleaning and maintaining local lakes, creeks and waterways. During the 10-year lifespan of the measure, the City will allocate the funds to prioritize deferred maintenance of essential City facilities and delayed improvements like a new fire station to address the City’s growing population. -i - 803
v
The Fiscal Year 2025-26 Operating budget was approximately $98.0 million, an increase of 4.6% from the prior year adopted budget. While the City is expected to experience increases in general fund expenditure in future years, staff remain diligent to ensure revenues are sufficient to cover expenses while also maintaining investments in the City’s infrastructure funds. To ensure fiscal health, the City continues to proactively take steps to mitigate increased costs by continually seeking other funding source opportunities and investing in our revenue-generating real estate portfolio, capping the City’s share of employee healthcare expenses, engaging in best value analysis to economically deliver services, as well as engaging in a strategic planning approach for deferred projects and new initiatives. In addition, the City and its collective bargaining groups, through negotiations, work collaboratively toward solutions to help relieve the City’s growing operational obligations and pension burden in the coming years. The City’s Budget Amendment and Transfer Policy authorizes the City Manager to transfer budgeted amounts between departments or functions as long as the total City Council approved budget is not exceeded. Any budget adjustments that include transfers at the fund level or that result in an increase or decrease that directly affects the service level and/or project scope to the originally approved budget require City Council approval. The City Council’s adoption of the Fiscal Management Policy provides for a general fund contribution to the City’s Infrastructure, City Facility, and City Vehicles and Equipment funds to plan for the future and for rehabilitation and replacement of City infrastructure. The City is committed to maintaining the General Fund Reserve Policy, which requires unassigned fund balance (liquid, spendable assets) to be divided into three categories designated as the Catastrophic/Emergency Reserve, One-time Recurring Savings/Opportunity Reserve and Economic Contingency/Pension Stabilization Reserve. At year-end, the unassigned general fund balance shall be maintained at a minimum of forty percent of the annual operating expenditures. This figure is then allocated between the Catastrophic/Emergency Reserve (33.3 percent), One-time Recurring Savings/Opportunity Reserve (33.3 percent), and Economic Contingency/Pension Stabilization Reserve (33.3 percent). The City continues to focus on the City Council strategic goals such as comprehensive planning and action in land use and transportation, infrastructure funding, economic development and the development of fiscal policies to provide financial resilience and prosperity. - - 804
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City of San Marcos
Organizational Chart
June 30, 2025

SAN MARCOS VOTERS

CITY COUNCIL

CITY MANAGER

City Attorney

LEAN Government
Administrative
Services
Parks & Recreation
Economic Development
& Public Affairs
City Clerk
Development Services
Finance Fire
Law Enforcement Housing &
Neighborhood Services
Assistant City Manager
(Vacant)
Public Works
806

City of San Marcos
List of Principal Officials
June 30, 2025
City Council
Mayor Rebecca Jones
Deputy Mayor Mike Sannella
Council Member María Nuñez
Council Member Ed Musgrove
Council Member Danielle LeBlang
Administration
City Manager/Treasurer Michelle Bender
Assistant City Manager Vacant
City Attorney Helen Holmes Peak
City Clerk Phillip Scollick
Department/Division Heads
Administrative Services Director Janelle Laughlin
Development Services Director Isaac Etchamendy
Economic Development and Public Affairs Director Tess Sangster Finance Director Donna Apar
Fire Chief and Public Safety Director Daniel Barron
Housing and Neighborhood Services Director Sylvia Daniels LEAN Government Director Kristina Ray
Parks and Recreation Director Darren Chamow
Planning Division Director Joseph Farace
Public Works Director Tim Selke
Sheriff Station Captain Kevin Ralph
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809
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Independent Auditor's Report
To the Honorable City Council
City of San Marcos, California
Report on the Audit of the Financial Statements
Opinions
We have audited the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component unit, each major fund, and the aggregate remaining fund information of the City of San Marcos, as of and for the year ended June 30, 2025, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents.

In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, the aggregate discretely presented component unit, each major fund, and the aggregate remaining fund information of the City, as of June 30, 2025, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinions

We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States (Government Auditing Standards). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Emphasis of Matter

As discussed in Note 1 to the financial statements, the City adopted provisions of Governmental Accounting Standards Board Statement No. 101, Compensated Absences and No. 102, Certain Risk Disclosures. Our opinions are not modified with respect to this matter.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. 810
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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 error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial 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 financial 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 purpose 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 the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

Conclude whether, in our judgment, there are conditions or events, 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 governance 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 of America require that the management’s discussion and analysis and required supplementary information, as listed in the table of contents be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting 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 historical context. We have applied certain limited procedures to the required supplementary information in accordance with GAAS, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express 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.

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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 nonmajor fund financial statements 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 directly to the underlying accounting 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 accounting 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 opinion, the accompanying supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole.

Other Information

Management is responsible for the other information included in the annual comprehensive financial report.

The other information comprises the introductory 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 express an opinion or any form of assurance thereon.

In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists 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 December 17, 2025, on our consideration of City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, 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 reporting 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.

San Bernardino, California
December 17, 2025
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City of San Marcos
Management’s Discussion and Analysis
For the Year Ended June 30, 2025
-4-
The management of the City of San Marcos (the City) offers readers of the City's financial statements this narrative overview and analysis of the financial activities for the fiscal year ended June 30, 2025. Readers are encouraged to consider the information presented here in conjunction with additional information that is furnished in the letter of transmittal, which can be found beginning on page i of this report.

FINANCIAL HIGHLIGHTS
• The assets and deferred outflows of resources of the City exceeded its liabilities and deferred inflows of resources at the close of the most recent fiscal year by $1,123,883,638 (net position). Of this amount, $133,007,985 represents unrestricted net position, which represents the majority of investments in real estate and joint venture. • The City’s total net position increased $30,696,513 from the prior fiscal year due to an increase in property taxes, operating contributions and grants and capital contributions and grants, and a loan repayment in the current year.
• At the close of the current fiscal year, the City’s governmental funds reported combined fund balances of $257,237,240, an increase of $27,398,409 in comparison with the prior year. Approximately 8.3% of this amount or $21,353,342 is available for spending at the government's discretion (unassigned fund balance).
• At the end of the current fiscal year, unrestricted fund balance (the total of the assigned, and unassigned components of fund balance) for the General Fund was $44,717,034, or approximately 42.48% of total General Fund expenditures.

OVERVIEW OF THE ANNUAL COMPREHENSIVE FINANCIAL REPORT (ACFR) The discussion and analysis provided here is intended to serve as an introduction to the City of San Marcos' basic financial statements. The City’s basic financial statements consist of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to basic financial statements. This report also includes supplementary information intended to furnish additional detail to support the basic financial statements themselves.

Government-Wide Financial Statements. The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to a private-sector business.
814
City of San Marcos
Management’s Discussion and Analysis
For the Year Ended June 30, 2025
-5-
The statement of net position presents financial information on all of the City’s assets, liabilities, and deferred inflows/outflows of resources, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating.

The statement of activities presents information showing how the City’s net position changed during the current 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 for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but unused vacation leave).

Both of the government-wide financial statements mentioned above distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City include general government, community development, public safety, highways, streets, and parks, and culture and recreation. The business-type activities of the City include Creekside Marketplace.

The government-wide financial statements include not only the City itself (known as the primary government), but also the following component units: the San Marcos Community Foundation (Foundation), the San Marcos Public Facilities Authority (Facilities Authority), the California Mobile Home Financing Authority (CAMPFA), and the San Marcos Public Financing Authority (Financing Authority), for which the City is financially accountable. The Foundation, Facilities Authority, CAMPFA, and the Financing Authority, although also legally separate, functions for all practical purposes as a department of the City, and therefore have been included as an integral part of the primary government.

The government-wide financial statements can be found on pages 16-18 of this report.

Fund Financial Statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds.

Governmental Funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements.

However, unlike the government-wide financial statements, governmental fund 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 assessing a governments near-term financing requirements. 815
City of San Marcos
Management’s Discussion and Analysis
For the Year Ended June 30, 2025
-6-
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 City’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

The City maintains twenty-three individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the General Fund, the San Marcos Affordable Housing Fund, and the Capital Improvements Fund, which are considered to be major funds. Data from the other twenty governmental funds are combined into a single aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements in the combining and individual fund statements and schedules section of this report.

The City adopts an annual appropriated budget for its General Fund. A budgetary comparison schedule has been provided for the General Fund to demonstrate compliance with this budget, as noted in the table of contents.

The basic governmental fund financial statements can be found on pages 19-22 of this report.

Proprietary Funds. The City maintains one type of proprietary fund. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for the activity of Creekside Marketplace, a City-owned shopping center and other non-municipal use leased space.

Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide information for these business-type activities, which is considered to be a major fund of the City.

The basic proprietary fund financial statements can be found on pages 23-25 of this report.

Fiduciary Funds. Fiduciary funds are used to account for resources held for the benefit of parties outside of the government. Fiduciary funds are not reported in the government-wide financial statements because the resources of those funds are not available to support the City’s own programs. The accounting used for fiduciary funds is much like that used for proprietary funds.
816
City of San Marcos
Management’s Discussion and Analysis
For the Year Ended June 30, 2025
-7-
The City maintains two different types of fiduciary funds. The Custodial Funds account for funds held in trust for specific purposes and the Private-Purpose Trust Fund account for the City of San Marcos Successor Agency.

The fiduciary fund financial statements can be found on pages 26-27 of this report.

Notes to Basic Financial Statements. The notes provide additional information that is necessary to acquire a full understanding of the data provided in the government-wide and fund financial statements. The notes to basic financial statements can be found on pages 30-87 of this report.

Other Information. In addition to the basic financial statements and accompanying notes, this report also presents required supplementary information concerning the City’s schedule of changes in the net pension liability and related ratios (miscellaneous employees), schedule of City’s proportionate share of the net pension liability and related ratios as of the measurement date (safety employees), schedules of plan contributions (both miscellaneous and safety employees), schedule of changes in the net OPEB liability and related ratios, and General Fund and major special revenue funds’ budgetary schedules.

Required supplementary information can be found on pages 88-96 of this report.

The combining statements referred to earlier in connection with non-major governmental funds are presented immediately following the required supplementary information. Combining and individual fund statements and schedules can be found on pages 100-105 of this report.

GOVERNMENT-WIDE OVERALL FINANCIAL ANALYSIS

As noted earlier, net position over time, may serve as a useful indicator of a government’s financial position. In the case of the City, assets and deferred outflows of resources exceeded liabilities by $1,123,883,638, at the close of the most recent fiscal year. 817
City of San Marcos
Management’s Discussion and Analysis
For the Year Ended June 30, 2025
-8-
City of San Marcos' Net Position

2025 2024 2025 2024 2025 2024
Current and other assets 513,275,432$ 498,101,079$ 86,197,448$ 87,726,135$ 599,472,880$ 585,827,214$ Capital assets, net 657,039,993 643,595,601 - - 657,039,993 643,595,601 Total assets 1,170,315,425 1,141,696,680 86,197,448 87,726,135 1,256,512,873 1,229,422,815 Deferred outflows
of resources 20,884,127 30,045,728 - - 20,884,127 30,045,728 Non-current liabilities 95,620,764 98,679,846 - - 95,620,764 98,679,846 Other liabilities 36,782,526 42,190,355 936,250 1,195,345 37,718,776 43,385,700 Total Liabilities 132,403,290 140,870,201 936,250 1,195,345 133,339,540 142,065,546 Deferred inflows
of resources 20,173,822 24,215,872 - - 20,173,822 24,215,872 Net position
Net investment in
capital assets 652,490,153 640,830,413 - - 652,490,153 640,830,413 Restricted 338,385,500 320,575,291 - - 338,385,500 320,575,291 Unrestricted 47,746,787 45,250,631 85,261,198 86,530,790 133,007,985 131,781,421 Total net position 1,038,622,440$ 1,006,656,335$ 85,261,198 $ 86,530,790$ 1,123,883,638$ 1,093,187,125$ Total
Business-Type
Activities
Governmental
Activities
A s of June 30
By far, the largest portion of the City’s net position (58.06%) reflects its investment in capital assets (e.g., land, buildings, furniture, infrastructure, and right-to-use assets), less any related outstanding debt that was used to acquire those assets. The City uses these capital assets to provide a variety of services to its citizens. Accordingly, these assets are not available for future spending. Although the City’s investment in capital assets is reported net of related debt, it should be noted that the resources used to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

An additional portion of the City’s net position (30.11%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of $133,007,985 is unrestricted, however, that amount represents the majority of investments in real estate and joint venture.

At the end of the current fiscal year, the City is able to report positive balances for both the government as a whole, as well as for its separate governmental and business-type activities.

The same situation held true for the prior fiscal year.

The City’s overall net position increased $30,696,513 from the prior fiscal year. The reasons for this overall increase are discussed in the following sections for governmental activities and business-type activities.
818
City of San Marcos
Management’s Discussion and Analysis
For the Year Ended June 30, 2025
-9-
Governmental Activities. During the current fiscal year, net position for governmental activities increased $31,966,105 from the prior fiscal year for an ending balance of $1,38,622,440. The increase in the overall net position of governmental activities is the result of regular current year operating activities along with an increase miscellaneous revenues related to a large loan repayment in the current year.

City of San Marcos’ Changes in Net Position

2025 2024 2025 2024 2025 2024
Revenues
Program revenues:

Charges for services 40,021,816$ 42,260,426$ 6,276,397$ 5,907,754$ 46,298,213$ 48,168,180$ Operating contributions and
grants 35,887,033 24,490,215 - - 35,887,033 24,490,215 Capital contributions and grants 10,814,003 7,504,803 - - 10,814,003 7,504,803 General revenues:

Property taxes 33,211,869 31,183,549 - - 33,211,869 31,183,549 Transient occupancy taxes 1,792,415 1,728,507 - - 1,792,415 1,728,507 Business license tax 239,936 233,690 - - 239,936 233,690 Motor vehicle license 151,361 119,411 - - 151,361 119,411 Franchise fees 5,677,289 5,825,364 - - 5,677,289 5,825,364 Rental income 6,244,699 6,084,709 - - 6,244,699 6,084,709 Sales taxes shared state
revenue, unrestricted 21,081,416 21,567,605 - - 21,081,416 21,567,605 Investment income, restricted 129,458 129,061 - - 129,458 129,061 Investment income, unrestricted 5,103,892 5,999,119 94,413 (5,543,590) 5,198,305 455,529 Gain (loss) on disposal of
capital assets 9,129 373,652 - - 9,129 373,652 Miscellaneous 9,012,182 732,805 1,601 16,772 9,013,783 749,577 Total Revenues 169,376,498 148,232,916 6,372,411 380,936 175,748,909 148,613,852 Expenses
General government 35,505,664 31,242,559 - - 35,505,664 31,242,559 Community development 15,196,731 13,171,260 - - 15,196,731 13,171,260 Public safety 52,134,589 48,504,380 - - 52,134,589 48,504,380 Highways, streets and parks 31,941,782 32,345,449 - - 31,941,782 32,345,449 Culture and recreation 4,948,708 5,486,692 - - 4,948,708 5,486,692 Interest on long-term debt 182,919 118,939 - - 182,919 118,939 Creekside Marketplace - - 5,142,003 5,725,820 5,142,003 5,725,820 Total Expenses 139,910,393 130,869,279 5,142,003 5,725,820 145,052,396 136,595,099 Increase in Net Position
Before Transfers 29,466,105 17,363,637 1,230,408 (5,344,884) 30,696,513 12,018,753 Transfers 2,500,000 2,500,000 (2,500,000) (2,500,000) - - Change in Net Position 31,966,105 19,863,637 (1,269,592) (7,844,884) 30,696,513 12,018,753 Net Position, Beginning 1,006,656,335 986,792,698 86,530,790 94,375,674 1,093,187,125 1,081,168,372 Net Position, Ending 1,038,622,440$ 1,006,656,335$ 85,261,198 $ 86,530,790$ 1,123,883,638$ 1,093,187,125$ For the year ended June 30,
Total
Governmental
Activities
Business-Type
Activities

819
City of San Marcos
Management’s Discussion and Analysis
For the Year Ended June 30, 2025
-10-
Increase
(Decrease) Percent
Percent From Increase
Revenue Source 2025 of Total 2024 (Decrease)
Charges for services 40,021,816 $ 23.3% (2,238,610) $ -5.6% Operating contributions and grants 35,887,033 20.9% 11,396,818 31.8% Capital contributions and grants 10,814,003 6.3% 3,309,200 30.6% Property taxes 33,211,869 19.3% 2,028,320 6.1% Franchise fees 5,677,289 3.3% (148,075) -2.6% Rental income 6,244,699 3.6% 159,990 2.6% Sales taxes shared state revenue 21,081,416 12.3% (486,189) -2.3% Other general revenue and transfers 18,938,373 11.0% 7,122,128 37.6% Total revenue 171,876,498 $ 100.0% 21,143,582 $ 12.3%

820
City of San Marcos
Management’s Discussion and Analysis
For the Year Ended June 30, 2025
-11-
Increase
(Decrease) Percent
Percent From Increase
Function 2025 of Total 2024 (Decrease)
General government 35,505,664 $ 25.4% 4,263,105 $ 12.0% Community development 15,196,731 10.9% 2,025,471 13.3% Public safety 52,134,589 37.3% 3,630,209 7.0% Highways, streets and parks 31,941,782 22.8% (403,667) -1.3% Culture and recreation 4,948,708 3.5% (537,984) -10.9% Interest on long-term debt 182,919 0.1% 63,980 35.0% Total expenses 139,910,393 $ 100.0% 9,041,114 $ 6.5% Business-type Activities. For the City’s business-type activities, the results for the current fiscal year were negative. Overall net position decreased to an ending balance of $85,261,198.

The Creekside Marketplace Enterprise Fund accounts for the activity of a City-owned shopping center. The total decrease in net position for business-type activities was $1,269,592 or 1.5% from the prior fiscal year, mainly due to an increase in investment income resulting from appraisals in the prior fiscal year which included a vacant ground lease, offset by a transfer to the General Fund for funding of operational costs.
821
City of San Marcos
Management’s Discussion and Analysis
For the Year Ended June 30, 2025
-12-

FINANCIAL ANALYSIS OF GOVERNMENTAL FUNDS

As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.

Governmental Funds. The focus of the City of San Marcos’ governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s financing requirements.

In particular, unassigned fund balance may serve as a useful measure of a government's net resources available for discretionary use as they represent the portion of fund balance which has not yet been limited to use for a particular purpose by either an external party, the City itself, or a group or individual that has been delegated authority to assign resources for use for particular purposes by the City’s Council.

On June 30, 2025, the City’s governmental funds reported combined fund balances of $257,237,240, an increase of $27,398,409 in comparison to the prior year. Approximately 8.3% or $21,353,342 of this amount constitutes an unassigned fund balance, which is available for spending at the government's discretion. The remainder of the fund balance is either non- spendable, restricted, or assigned to indicate that it is 1) not in spendable form $85,085,036, 2) restricted for particular purposes $141,684,092, or 3) assigned for particular purposes $9,114,770.

Intergovernmental revenues increased $6,090,608, or 13.8% from the prior year, largely due to the receipt of Measure Q Funds.

Revenue from developer fees increased $10,746,933, or 412.3% from the prior year, due to large developments in affordable housing, parks and trails, the highway 78 widening and the circulation element streets.

General government expenditures increased by $3,274,683, or 11.0% from the prior year, primarily due to increases in personnel costs, contractual service costs and increased software costs.

Major Funds

The General Fund is the chief operating fund of the City. At the end of the current fiscal year, unassigned fund balance of the General Fund was $35,602,264, while the total fund balance increased by $9,557,675 or 7.8% to $132,779,824 largely resulting from a large loan repayment in the current year. As a measure of the General Fund's liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total General Fund expenditures.

Unassigned fund balance represents approximately 33.8% of total General Fund expenditures, while total fund balance represents approximately 126.1% of that same amount.

822
City of San Marcos
Management’s Discussion and Analysis
For the Year Ended June 30, 2025
-13-
The San Marcos Affordable Housing Special Revenue Fund accounts for funds intended to improve or preserve the community’s supply of affordable housing. This Fund ended the year with a fund balance of $49,247,461. To assist with the construction of affordable housing projects, an additional $6,693,907 was loaned to housing developers during the fiscal year. The additional loaned amounts are offset by a large developer receipt in the current year.

The Capital Improvement Capital Projects Fund accounts for capital projects funded with Federal and other grants and developer contributions. This fund ended the year with a deficit fund balance of ($12,279,724). The primary decrease is related to an overall decrease of grant reimbursements due to significant bridge projects near completion.

GENERAL FUND BUDGETARY HIGHLIGHTS

The General Fund, as presented in the ACFR and for purposes of financial reporting in conformity with generally accepted accounting principles (GAAP), is comprised of five funds including the General Operating Fund, and the Infrastructure Replacement/Rehabilitation Fund, Facilities Replacement/Rehabilitation Fund, the Vehicle & Equipment Acquisition/ Replacement Fund (Rehabilitation and Replacement Funds) and the Measure Q Fund. However, in the City’s approved budget document, these funds are separately presented.

During the year, amendments to the original budgeted appropriations were authorized by the City Council and minor amendments to reallocate appropriations among departments took place. The movement of the appropriations between departments was not significant and did not increase the overall operating budget. Due to continuing post-pandemic economic volatility, the City adopted a budget for FY 2024-2025 that was balanced as a result of utilizing one-time revenues. At the time of approval of the mid- year budget adjustments, departments continued to find efficiencies in operations and certain revenue categories were exhibiting better than anticipated performance, maintaining the projected balanced budget. Ultimately, the General Fund expenditure budget came in lower than the amended budget in large part due to delays in some services that were not completed during the Fiscal Year. Additionally, the General Fund revenues exceeded amended budgeted due in part to higher franchise agreement fees and higher charges for services resulting from updated user fees and new developments, producing in a modest surplus at the end of the Fiscal Year.

CAPITAL ASSETS AND DEBT ADMINISTRATION

Capital Assets. The City’s investment in capital assets for its governmental and business-type activities as of June 30, 2025, amounts to $657,039,993 (net of accumulated depreciation). This investment in capital assets includes land, land improvements, buildings, furniture and equipment, infrastructure, and right-to-use assets. The total increase in capital assets for the current fiscal year was $13,444,392 or approximately 2.09% due to an increase in infrastructure and land received resulting from a loan renegotiation retuning properties as a loan repayment.

823
City of San Marcos
Management’s Discussion and Analysis
For the Year Ended June 30, 2025
-14-
City of San Marcos’ Capital Assets
(Net of accumulated depreciation)

2025 2024 2025 2024 2025 2024
Land and Improvements 305,263,604$ 300,489,984$ - $ - $ 305,263,604$ 300,489,984$ Construction in progress 68,056,847 154,776,305 - - 68,056,847 154,776,305 Buildings 33,354,452 34,499,560 - - 33,354,452 34,499,560 Furniture and Equipment 5,417,521 5,154,193 - - 5,417,521 5,154,193 Infrastructure 240,850,250 146,549,097 - - 240,850,250 146,549,097 Right-to-use equipment 3,865,928 1,943,746 - - 3,865,928 1,943,746 Right-to-use subcription assets 231,391 182,716 - - 231,391 182,716 Total 657,039,993$ 643,595,601$ - $ - $ 657,039,993$ 643,595,601$ Activities Activities Total
Governmental Business-Type
The progress and completion of several capital asset & infrastructure improvements during the fiscal year including ongoing construction of the San Marcos Creek District project.

Additional information on the City’s capital assets can be found in Note 7 on page 53 of this report.

Non-Current Liabilities. At the end of the current fiscal year, the City had total non-current outstanding liabilities of $95,620,764. Of this amount, $1,215,000 is debt backed by the full faith and credit of the government. The remainder of the City’s long-term obligations comprises pension-related debt, OPEB debt, note and loans payables, worker’s compensation claims, compensated absences, leases and subscriptions.

City of San Marcos’ Non-Current Outstanding Liabilities

2025 2024 Net Change
Loans payable - CEC 238,822$ 332,696$ (93,874)$ Loans payable - Safety Center 1,215,000 1,565,000 (350,000) Compensated absences 5,336,001 5,071,693 264,308 Claims payable 1,273,756 1,100,778 172,978 Leases payable 2,962,847 757,123 2,205,724 Subscriptions payable 156,562 145,458 11,104 Net pension liability 78,568,413 82,314,508 (3,746,095) Total OPEB liability 5,869,363 7,392,590 (1,523,227) Total 95,620,764$ 98,679,846$ (3,059,082)$ Governmental
Activities

The City’s total non-current liabilities decreased by $3,059,082, or 3.1% during the current fiscal year. The decrease was due to change in net pension liability and total OPEB liability offset by an increase in leases. Additional information on the City’s long-term liabilities can be found in Note 8, on pages 54-57 of this report and also at Notes 11 and 12. 824
City of San Marcos
Management’s Discussion and Analysis
For the Year Ended June 30, 2025
-15-

ECONOMIC FACTORS AND NEXT YEAR'S BUDGET
The economy of the City is discussed in the accompanying Transmittal Letter.

The City Continues to practice fiscal prudence and emphasizes long-term strategic planning, which is reflected in the Fiscal Year 2025-26 budget. As General Fund revenues continue to grow at a modest pace with an overall increase of 5% compared to the prior year signaling local economic stability, the affordability of goods and services remains a challenge, with ongoing uncertainty surrounding these conditions and how they will impact future City budgets.

Therefore, the City continues to be agile in its operations and fiscal planning to maximize service delivery to the Community. Already to date, several services have been shifted from contracted services to in-house and vice versa as a result of the City’s best value analysis program, and these efforts continue within our City departments to maintain the fiscal health of the City. Therefore, the City budget for Fiscal Year 2025-26 represents a balanced budget, and staff continue to diligently monitor current economic conditions in order to ensure the budget remains balanced.

Other mitigation efforts to ensure long-term fiscal health include the passage of the Measure Q sales tax measure in November 2024, with initial revenue received in Quarter 4 of FY 2045-25.

Measure Q also allows the City to resume critical investments into the City’s infrastructure funds per policy. Infrastructure investments anticipated as a result of the Measure Q passage in the coming years include maintenance of storm drains and roads, purchase of fire vehicles for community safety, and playground replacements and restroom upgrades at City parks. The passage of Measure Q will ensure continued delivery of essential services, which will maintain and enhance the high quality of life for the City’s residents, businesses, and visitors.

Further information about the economic analysis, revenue assumptions, and other budgetary process parameters utilized in the budget preparation, can be obtained from the City’s FY 2025- 26 budget book, available on the City’s website or through the Finance Department.

REQUESTS FOR INFORMATION
This financial report is designed to provide a general overview of the City’s finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Finance Department, 1 Civic Center Drive, San Marcos, California, 92069. 825
City of San Marcos

Statement of Net Position
June 30, 2025

The accompanying notes are an integral part of these financial statements. -16-
Permanent Fund
Governmental Business-Type Community
Activities Activities Total Foundation
ASSETS
Cash and investments (note 2) 175,474,250 $ 1,885,492$ 177,359,742$ 29,138 $ Cash and investments with fiscal agent (note 2) 903,969 - 903,969 - Pension trust cash and investments (note 2) 2,977,754 - 2,977,754 - Investments in real estate (note 2) 68,690,000 86,780,000 155,470,000 - Investment in joint venture (note 14) 7,894,166 - 7,894,166 - Receivables:

Taxes and special assessments 7,675,609 - 7,675,609 - Accounts 5,918,340 129,928 6,048,268 - Interest 759,059 6,625 765,684 - Notes (note 3) 202,618,834 - 202,618,834 - Leases 15,827,218 - 15,827,218 - Other (note 4) 1,119,641 583,167 1,702,808 - Due from other governments 9,434,134 - 9,434,134 - Internal balances 5,300,000 (5,300,000) - - Deposits 8,060,276 2,112,236 10,172,512 1,377,028 Land held for resale 622,182 - 622,182 - Capital assets, not depreciated (note 7) 373,320,451 - 373,320,451 - Capital assets, net of depreciation (note 7) 283,719,542 - 283,719,542 - Total Assets 1,170,315,425 86,197,448 1,256,512,873 1,406,166

DEFERRED OUTFLOWS OF RESOURCES
Pension related 19,602,884 - 19,602,884 - Loss on defeasance of debt 23,391 - 23,391 - OPEB related 1,257,852 - 1,257,852 - Total Deferred Outflows of Resources 20,884,127 - 20,884,127 -

LIA BILITIES
Accounts payable 15,750,945 622,461 16,373,406 20,397 Accrued liabilities 3,774,109 8,798 3,782,907 - Unearned revenue (note 6) 3,332,869 201,344 3,534,213 - Deposits payable 13,924,603 103,647 14,028,250 - Noncurrent liabilities:

Due within one year (note 8) 3,263,132 - 3,263,132 - Due in more than one year (note 8) 7,919,856 - 7,919,856 - Net pension liability, due in more than one year 78,568,413 - 78,568,413 - Total OPEB liability, due within one year 217,533 - 217,533 - Total OPEB liability, due in more than one year 5,651,830 - 5,651,830 - Total Liabilities 132,403,290 936,250 133,339,540 20,397

DEFERRED INFLOWS OF RESOURCES
Lease related 14,672,881 - 14,672,881 - Pension related 414,453 - 414,453 - OPEB related 5,086,488 - 5,086,488 - Total Deferred Inflows of Resources 20,173,822 - 20,173,822 - NET POSITION (NOTE 10)
Net investment in capital assets 652,490,153 - 652,490,153 - Restricted for:

Affordable housing 245,791,336 - 245,791,336 - Transportation 19,839,560 - 19,839,560 - Lighting and landscape 23,774,708 - 23,774,708 - Public facilities 39,339,106 - 39,339,106 - Other purposes 9,640,790 - 9,640,790 1,385,769 Unrestricted 47,746,787 85,261,198 133,007,985 - Total Net Position 1,038,622,440 $ 85,261,198 $ 1,123,883,638$ 1,385,769 $

826
City of San Marcos

Statement of Activities
For the Year Ended June 30, 2025

The accompanying notes are an integral part of these financial statements. -17-
Operating Capital
Charges for Grants and Grants and
Functions/Programs Expenses Services Contributions Contributions Governmental activities:

General government 35,505,664 $ 2,445,986$ 5,529,460$ - $ Community development 15,196,731 4,811,537 4,257,990 2,031,834 Public safety 52,134,589 17,023,577 630,731 176,905 Highways, streets, and parks 31,941,782 12,835,910 25,056,891 8,605,264 Culture and recreation 4,948,708 2,904,806 411,961 - Interest on long-term debt 182,919 - - - Total governmental activities 139,910,393 40,021,816 35,887,033 10,814,003 Business-type activities:

Creekside Marketplace 5,142,003 6,276,397 - - Total Primary Government 145,052,396$ 46,298,213$ 35,887,033$ 10,814,003$ Component Unit:

Permanent Fund Community
Foundation 83,314 $ - $ 10,000$ - $ Total Component Unit 83,314 $ - $ 10,000$ - $ Program Revenues

827

-18-
Permanent
Fund
Governmental Business-Type Community
Functions/Programs Activities Activities Total Foundation Governmental activities:

General government (27,530,218) $ - $ (27,530,218)$ - $ Community development (4,095,370) - (4,095,370) - Public safety (34,303,376) - (34,303,376) - Highways, streets, and parks 14,556,283 - 14,556,283 - Culture and recreation (1,631,941) - (1,631,941) - Interest on long-term debt (182,919) - (182,919) - Total governmental activities (53,187,541) - (53,187,541) - Business-type activities:

Creekside Marketplace - 1,134,394 1,134,394 - Total Primary Government (53,187,541) 1,134,394 (52,053,147) - Component Unit:

Permanent Fund Community
Foundation - - - (73,314) Total Component Unit - - - (73,314) General revenues:

Taxes:

Property taxes 33,211,869 - 33,211,869 - Transient occupancy taxes 1,792,415 - 1,792,415 - Business license tax 239,936 - 239,936 - Motor vehicle license tax 151,361 - 151,361 - Franchise fees 5,677,289 - 5,677,289 - Rental income 6,244,699 - 6,244,699 - Sales taxes shared state revenue, unrestricted 21,081,416 - 21,081,416 - Investment income, restricted 129,458 - 129,458 143,265 Investment income, unrestricted 5,103,892 94,413 5,198,305 - Gain on disposal and sale of capital assets 9,129 - 9,129 - Miscellaneous income 9,012,182 1,601 9,013,783 - Transfers (note 5) 2,500,000 (2,500,000) - - Total general revenues and transfers 85,153,646 (2,403,986) 82,749,660 143,265 Change in Net Position 31,966,105 (1,269,592) 30,696,513 69,951 Net Position
Beginning 1,006,656,335 86,530,790 1,093,187,125 1,315,818 Ending 1,038,622,440 $ 85,261,198$ 1,123,883,638$ 1,385,769 $ Net (Expense) Revenue
and Changes in Net Position
828
City of San Marcos

Balance Sheet
Governmental Funds
June 30, 2025

The accompanying notes are an integral part of these financial statements. -19-
Special Revenue Total
San Marcos Non-Major
Affordable Capital Governmental
General Housing Improvements Funds Total
Cash and investments (note 2) 42,081,370$ 46,864,958$ - $ 86,527,922$ 175,474,250$ Cash and investments with fiscal agents (note 2) - - - 903,969 903,969 Pension trust cash and investments (note 2) 2,977,754 - - - 2,977,754 Investments in real estate (note 2) 68,690,000 - - - 68,690,000 Investment in joint venture (note 14) 7,894,166 - - - 7,894,166 Receivables: -
Taxes and special assessments 7,640,548 - - 35,061 7,675,609 Accounts 4,388,079 1,361,330 91,809 77,122 5,918,340 Interest 275,497 159,737 12,711 311,114 759,059 Notes, net (note 3) 3,144,728 197,601,078 - 1,873,028 202,618,834 Leases 14,223,511 - - 1,603,707 15,827,218 Other, net (note 4) 999,125 - - 120,516 1,119,641 Due from other governments 7,709,286 - 579,716 1,145,132 9,434,134 Deposits 8,060,276 - - - 8,060,276 Due from other funds (note 5) 5,330,732 - - - 5,330,732 Advances to other funds (note 5) - 870,872 - 6,300,000 7,170,872 Land held for resale 440,594 181,588 - - 622,182 Total Assets 173,855,666 $ 247,039,563$ 684,236 $ 98,897,571$ 520,477,036$

RESOURCES AND FUND BALANCES
Liabilities:

Accounts payable 8,029,951 $ 100,623$ 6,329,258$ 1,291,113$ 15,750,945$ Accrued liabilities 3,021,608 45,590 32,789 668,800 3,768,787 Due to other funds (note 5) - - 3,635,690 1,695,042 5,330,732 Advances from other funds (note 5) 1,870,872 - - - 1,870,872 Unearned revenue (note 6) 963,276 - 2,369,593 - 3,332,869 Deposits payable 9,119,001 34,498 596,630 4,174,474 13,924,603 Total Liabilities 23,004,708 180,711 12,963,960 7,829,429 43,978,808 Unavailable revenue (note 6) 4,946,154 197,611,391 - 2,030,562 204,588,107 Lease related 13,124,980 - - 1,547,901 14,672,881 Total Deferred Inflows or Resources 18,071,134 197,611,391 - 3,578,463 219,260,988 Nonspendable:

Deposits 8,060,276 - - - 8,060,276 Land held for resale 440,594 - - - 440,594 Investments in real estate (note 2) 68,690,000 - - - 68,690,000 Investment in joint venture (note 2) 7,894,166 - - - 7,894,166 Restricted:

Affordable housing - 49,247,461 - - 49,247,461 Transportation - - - 19,838,115 19,838,115 Lighting and landscape - - - 23,755,510 23,755,510 Pension trust 2,977,754 - - - 2,977,754 Capital improvements - - - 1,123,587 1,123,587 Public facilities - - - 39,202,216 39,202,216 Other purposes - - - 5,539,449 5,539,449 Assigned 9,114,770 - - - 9,114,770 Unassigned 35,602,264 - (12,279,724) (1,969,198) 21,353,342 Total Fund Balances 132,779,824 49,247,461 (12,279,724) 87,489,679 257,237,240 Total Liabilities, Deferred Inflows of Resources
and Fund Balances 173,855,666 $ 247,039,563$ 684,236 $ 98,897,571$ 520,477,036$

LIABILITIES, DEFERRED INFLOWS OF
Deferred Inflows of Resources:

Fund Balances (note 9)(deficit):

ASSETS
829
City of San Marcos

Reconciliation of the Balance Sheet of Governmental Funds to the Statement of Net Position June 30, 2025

The accompanying notes are an integral part of these financial statements. -20-
Fund balances of governmental funds 257,237,240 $
Amounts reported for governmental activities in the Statement of Net Position are different because:

Capital assets, not depreciated 373,320,451 $
Capital assets, being depreciated/amortized 595,502,591 Less: accumulated depreciation/amortization (311,783,049) 657,039,993 23,391
debt has not been reported in the governmental funds. Therefore, interest payable is not reported as a liability in governmental funds. (5,322) reported in the governmental funds.

Pension related deferred outflows of resources 19,602,884 Pension related deferred inflows of resources (414,453) 19,188,431 reported in the governmental funds.

OPEB related deferred outflows of resources 1,257,852
OPEB related deferred inflows of resources (5,086,488) (3,828,636) are not reported in the funds.

Compensated absences (5,336,001)
Claims payable (1,273,756)
Lease liability (2,962,847)
Subscription liability (156,562)
Loans payable (1,453,822)
Net pension liability (78,568,413)
Total OPEB liability (5,869,363) (95,620,764)
204,588,107
Net position of governmental activities 1,038,622,440 $ expenditures and, therefore, are reported as unavailable revenue in the funds.

Long-term liabilities are not due and payable in the current period and therefore Deferred inflows and outflows of resources related to pensions have not been Deferred inflows and outflows of resources related to OPEB have not been Capital assets used in governmental activities are not financial resources, and therefore, are not reported in the governmental funds.

Deferred loss on defeasance of debt is deferred and amortized over the life of bonds in the Statement of Net Position.

Other long-term assets are not available to pay for current period Accrued interest payable for the current portion of interest due on long-term 830
City of San Marcos

Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds
For the Year Ended June 30, 2025

The accompanying notes are an integral part of these financial statements. -21-
Special Revenue Total
San Marcos Non-Major
Affordable Capital Governmental
General Housing Improvements Funds Total

REVENUES
Taxes and special assessments 35,244,221$ - $ -$ 12,183,282$ 47,427,503$ Licenses and permits 8,077,371 - - - 8,077,371 Intergovernmental 27,220,157 1,315,676 3,752,328 17,908,137 50,196,298 Charges for services 23,722,245 - - - 23,722,245 Developer fees 8,711 2,878,987 200,935 10,264,791 13,353,424 Fines and forfeitures 536,408 - - - 536,408 Investment and rental income 10,300,528 3,893,210 231,562 4,197,526 18,622,826 Miscellaneous 9,718,373 196,210 - 64,805 9,979,388 Total Revenues 114,828,014 8,284,083 4,184,825 44,618,541 171,915,463

EXPENDITURES
Current:

General government 32,106,827 965,057 - - 33,071,884 Community development 7,988,343 6,851,356 - 225,934 15,065,633 Public safety 47,154,017 - - - 47,154,017 Highways, streets, and parks 8,904,813 - - 11,392,699 20,297,512 Culture and recreation 4,312,549 - - 477,569 4,790,118 Capital outlay 3,597,864 - 24,533,640 115,551 28,247,055 Debt service:

Principal 1,057,553 - - 443,874 1,501,427 Interest and fiscal charges 136,881 - - 36,037 172,918 Total Expenditures 105,258,847 7,816,413 24,533,640 12,691,664 150,300,564 Excess (Deficiency) of Revenues
Over (Under) Expenditures 9,569,167 467,670 (20,348,815) 31,926,877 21,614,899

OTHER FINA NCING SOURCES (USES)
Lease/subscription acquisition 3,274,381 - - - 3,274,381 Proceeds from sale of capital assets 9,129 - - - 9,129 Transfers in (note 5) 2,524,000 - 19,595,236 831,000 22,950,236 Transfers out (note 5) (5,819,002) - - (14,631,234) (20,450,236) Total Other Financing Sources (Uses) (11,492) - 19,595,236 (13,800,234) 5,783,510 Net Change in Fund Balances 9,557,675 467,670 (753,579) 18,126,643 27,398,409

FUND BALANCES (DEFICIT)
Beginning, as previously reported 122,319,587 49,682,353 (11,526,145) 69,363,036 229,838,831 Restatement - correction of an error 902,562 (902,562) - - - Beginning, as restated 123,222,149 48,779,791 (11,526,145) 69,363,036 229,838,831 Ending 132,779,824 $ 49,247,461$ (12,279,724)$ 87,489,679$ 257,237,240$ 831
City of San Marcos

Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the Year Ended June 30, 2025

The accompanying notes are an integral part of these financial statements. -22-
Net change in fund balances - total governmental funds 27,398,409 $ Amounts reported for governmental activities in the Statement of Activities are different because:

Capital asset expenditures capitalized 25,929,099 $
Depreciation/amortization expense, net of deletions to capital assets (13,338,526) Contributed capital 1,012,186
Construction in progress projects deemed not viable (158,367) 13,444,392 change during the year.

Long-term loans receivable (3,560,280) (3,560,280) Principal payments on long-term debt 1,501,427
Subscription/lease acquisition (3,274,381)
Changes in pension related items (3,321,803)
Changes in OPEB related items 225,628 (4,869,129) Change in compensated absences (264,308)
Change in claims payable (172,978)
Change in accrued interest 1,697
Amortization of deferred loss (11,698) (447,287) Change in net position of governmental activities 31,966,105 $ expenditures in governmental funds.

Some expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as The issuance of long-term debt (i.e. bonds, leases) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial premiums, discounts, and similar items when the debt is first issued, whereas these amounts are deferred and amortized in the statement of resources of governmental funds. Neither transaction, however, has any effect on net position. Also, governmental funds report the effect of activities.

Governmental funds report capital outlays as expenditures. However, in Certain revenues in the governmental funds are deferred inflows of because they are measurable but not available under the modified basis of accounting. However, the revenues are included on the accrual basis used in the government-wide statements. This amount represents the statement of activities the cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. This is the amount by which depreciation exceeded capital outlays in the current period.

832
City of San Marcos

Statement of Net Position
Proprietary Funds
June 30, 2025

The accompanying notes are an integral part of these financial statements. -23-
Enterprise Fund
Creekside
Marketplace
Current Assets:

Cash and investments (note 2) 1,885,492 $
Investments in real estate (note 2) 86,780,000
Receivables:

Accounts 129,928
Interest 6,625
Deposits 2,112,236
Total Current Assets 90,914,281
Noncurrent Assets:

Other receivable (note 4) 583,167
Total Noncurrent Assets 583,167
Total Assets 91,497,448
Current Liabilities:

Accounts payable 622,461
Interest payable 8,798
Unearned revenue 201,344
Deposits payable 103,647
Advances from other funds (note 5) 5,300,000
Total Liabilities 6,236,250
Unrestricted 85,261,198
Total Net Position 85,261,198 $

LIABILITIES

NET POSITION
ASSETS

833
City of San Marcos

Statement of Revenues, Expenses and Changes in Fund Net Position Proprietary Funds
For the Year Ended June 30, 2025

The accompanying notes are an integral part of these financial statements. -24-
Enterprise Fund
Creekside
Marketplace

OPERATING REVENUES
Rental income 5,229,724 $
Common area maintenance charges 1,046,673
Total Operating Revenues 6,276,397

OPERATING EXPENSES
Property management 788,550
Janitorial 238,755
Repairs and maintenance 4,114,698
Total Operating Expenses 5,142,003
Operating Income 1,134,394

NON-OPERATING REVENUES
Investment income 94,413
Other revenues 1,601
Total Non-Operating Revenues 96,014
Income Before Transfers 1,230,408

TRANSFERS
Transfers out (note 5) (2,500,000)
Total Transfers (2,500,000)
Change in Net Position (1,269,592)

NET POSITION
Beginning 86,530,790
Ending 85,261,198 $
834
City of San Marcos

Statement of Cash Flows
Proprietary Funds
For the Year Ended June 30, 2025

The accompanying notes are an integral part of these financial statements. -25-
Enterprise Fund
Creekside
Marketplace

CA SH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers 8,250,308 $
Payments to suppliers for goods and services (5,142,003) Net cash provided by (used for) operating activities 3,109,906

CA SH FLOWS FROM NONCAPITAL FINANCING

ACTIVITIES
Receipts from settlement agreement 19,493
Transfer to general fund (2,500,000)
Net cash provided by (used for) noncapital
financing activities (2,480,507)

CA SH FLOWS FROM INVESTING ACTIVITIES
Interest received 95,199
Net cash provided by (used for) investing activities 95,199 Net increase in cash and cash equivalents 724,598
Cash and cash equivalents, beginning 1,160,894
Cash and cash equivalents, ending 1,885,492 $

RECONCILIATION OF OPERATING INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:

Operating income 1,134,394 $
Adjustments to reconcile operating income to net
cash provided by operating activities:

Other revenues 1,601
(Increase) decrease in operating receivables:

Accounts receivable (22,260)
Deposits 2,255,266
Increase (decrease) in operating liabilities:

Accounts payable (290,071)
Due to other funds 4,399
Deposits payable 7,590
Unearned revenue 18,987
Net cash provided by (used for) operating activities 3,109,906$ 835
City of San Marcos

Statement of Fiduciary Net Position
Fiduciary Funds
June 30, 2025

The accompanying notes are an integral part of these financial statements. -26-
Private-Purpose CustodialTrust Fund FundsCash and investments -$ 6,897$ Receivables:Accounts 250,612 - Special assessments - 24,156 Interest - 305 Direct financing lease 1,052,422 - Due from other governments 26,250 - Prepaid expenses 198,875 - Restricted Assets:Cash and investments withfiscal agent 37,650,824 10,101,661 Total Assets 39,178,983 10,133,019 Loss on defeasance of debt 6,269,754 - Accounts payable 35,396 174,674 Accrued liabilities 7,621 - Accrued interest payable 1,894,717 - Due to other governments 7,004,792 6,156 Noncurrent Liabilities:Due within one year 14,310,000 - Due in more than one year 178,626,304 - Total Liabilities 201,878,830 180,830 Restricted for:Other taxing entities and other agencies (156,430,093)$ 9,952,189$ LIABILITIESNET POSITION (DEFICIT)DEFERRED OUTFLOWS OF RESOURCESASSETS

836
City of San Marcos

Statement of Changes in Fiduciary Net Position
Fiduciary Funds
For the Year Ended June 30, 2025

The accompanying notes are an integral part of these financial statements. -27-
Private-Purpose CustodialTrust Fund FundsADDITIONSTax and special assessments 18,967,823$ 7,342,985$ Income from property and investments 1,450,794 198,300 Other revenue 177,956 - Total Additions 20,596,573 7,541,285 DEDUCTIONSGeneral and administrative 742,779 799,659 Interest expense and fees 8,043,336 - Payments to fiscal agent on behalf of other agencies - 4,952,139 Total Deductions 8,786,115 5,751,798 Change in Net Position 11,810,458 1,789,487 NET POSITION (DEFICIT)Beginning (168,240,551) 8,162,702 Ending (156,430,093)$ 9,952,189$

837
City of San Marcos

Index to Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-28-
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES...................................................... 30 A) Description of Reporting Entity......................................................................................... 30 B) Basis of Presentation....................................................................................................... 32 C) Measurement Focus, Basis of Accounting, and Financial Statement Presentation........ 32 D) Fund Classifications

..
.
33 E) Financial Statement Elements
(1) Cash and Investments ............................................................................................. 34 (2) Receivables and Payables....................................................................................... 34 (3) Prepaid Items............................................................................................................ 35 (4) Land Held for Resale................................................................................................ 35 (5) Notes Receivable ..................................................................................................... 35 (6) Deferred Outflows/Inflows of Resources................................................................. 35 (7) Program Revenues.................................................................................................. 36 (8) Property Taxes......................................................................................................... 36 (9) Proprietary Funds Operating and Nonoperating Revenues and Expenses............. 36 (10) Capital/and intangible Assets................................................................................... 37 (11) Compensated Absences
...................................................................................... 37 (12) Reclassifications and Eliminations........................................................................... 37 (13) Long-Term Obligations ............................................................................................ 38 (14) Postemployment Benefits other than Pensions (OPEB) .................................... 38
(15) Pension Plans
...................................................................................................... 38 (16) Use of Estimates ..................................................................................................... 39 (17) Fund Balances ......................................................................................................... 39 (18) Net Position Flow Assumption.................................................................................. 40 (19) New Accounting Pronouncements 40
NOTE 2 CASH AND INVESTMENTS................................................................................................... 41 NOTE 3 NOTES RECEIVABLE........................................................................................................... 48 NOTE 4 OTHER RECEIVABLES........................................................................................................ 50 NOTE 5 INTERFUND RECEIVABLES AND TRANSFERS................................................................. 51 NOTE 6 UNAVAILABLE/UNEARNED REVENUE................................................................................ 52 NOTE 7 CAPITAL ASSETS

.............................................................................................. 53 NOTE 8 LONG-TERM LIABILITIES

.............................................................................................. 54 NOTE 9 FUND BALANCE CLASSIFICATIONS

57 NOTE 10 NET POSITION CLASSIFICATIONS

.............................................................................. 58 838
City of San Marcos

Index to Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-29-
NOTE 11 RETIREMENT PLAN

.

........................................................ 59 NOTE 12 OTHER POSTEMPLOYMENT BENEFITS (OPEB)

70 NOTE 13 INSURANCE
....................................................................................................................... 74 NOTE 14 JOINT VENTURES

......................................................................................................... 77 NOTE 15 ASSESSMENT DISTRICT, COMMUNITY FACILITIES DISTRICTS BONDS AND CONDUIT DEBT...................................................................................................... 79 NOTE 16 COMMITMENTS AND CONTINGENT LIABILITIES............................................................... 80 NOTE 17 SUCCESSOR AGENCY TRUST FOR ASSETS OF FORMER
REDEVELOPMENT AGENCY......................................................................................... 80 NOTE 18 OTHER REQUIRED NOTE DISCLOSURES....................................................................... 87 NOTE 19 PRIOR PERIOD RESTATEMENT........................................................................................ 87

839
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-30-
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A) Description of Reporting Entity

The City of San Marcos, California (the City) was incorporated on January 25, 1963 and became a Charter City on July 4, 1994. The City operates under a Council-Manager form of government and provides the following services as authorized by its charter: general government, community development, public safety, highways, streets and parks, public works, and culture and recreation.

These financial statements present the financial status of the City and its component units, which are included in the City’s reporting entity because of the significance of their operational or financial relationships with the City.

Component Units
Component units are entities for which the City is considered to be financially accountable, in accordance with generally accepted accounting principles. The City is considered to be financially accountable for an organization if the City appoints a voting majority of that organization's governing body and (1) it is able to impose its will on that organization, or (2) there is a potential for the organization to provide specific financial benefits to or impose specific financial burdens on the City. The City is also considered to be financially accountable if an organization is fiscally dependent (i.e., it is unable to adopt its budget, levy taxes, set rates or charges, or issue bonded debt without approval from the City). In certain cases, other organizations are included as component units if the nature and significance of their relationship with the City are such that their exclusion would cause the City's financial statements to be misleading or incomplete. Blended component units, although legally separate entities, are, in substance, part of the City's operations, and data from these units are combined with data of the primary government. Based on the criteria above, the City has four component units, one discretely presented component unit and three blended component units. These component units are described as follows:

Discretely Presented Component Unit
The San Marcos Community Foundation (Foundation) was established, and by-laws were adopted on October 27, 1987. On June 10, 1988, the San Marcos Community Foundation was incorporated and organized under the California Nonprofit Public Benefit Corporation Law for public and charitable purposes. As part of the by-laws, the City of San Marcos is to provide financial and investment services to the Foundation at no cost. The Foundation provides financial and other assistance to worthy programs which benefit the City and residents of San Marcos. Assets of the Foundation are reported in a Permanent Fund as only the interest earnings on the original principal of $1,000,000 can be spent on Foundation activity. The amount that is available for spending is the balance over the original endowment and is reported on the balance sheet as restricted fund balance. No less than 4% or more than 5% of total assets may be distributed in any one year as long as total assets do not fall below the original principal.
840
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-31-
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued)

A) Description of Reporting Entity, (continued)

Blended Component Units
The San Marcos Public Facilities Authority (Facilities Authority) is a joint powers authority organized pursuant to the State of California Government Code, Section 6500. The Facilities Authority exists under a Joint Exercise of Power Agreement dated June 1989, between the City of San Marcos and the former Redevelopment Agency of the City of San Marcos (now the Successor Agency). Its purpose is to facilitate financing for public capital improvements of the City and the Agency.

The California Mobilehome Financing Authority (CAMPFA) is a joint powers authority organized pursuant to the State of California Government Code, Section 6500. CAMPFA exists under a Joint Exercise of Powers Agreement dated May 9, 1995, between the City of San Marcos and the former Redevelopment Agency of the City of San Marcos (now the Successor Agency). Its purpose is to facilitate financing for public capital improvements to be owned by its members and to establish a vehicle which may reduce local borrowing costs and promote the greater use of existing and new financial instruments and mechanisms.

The San Marcos Public Financing Authority (Financing Authority) was established pursuant to a Joint Exercise of Powers Agreement, dated December 14, 1993, a subsequently amended and restated by an Amended and Restated Joint Exercise of Powers Agreement, dated January 10, 2012, each by and between the City and the Fire Protection District (FPD).

The Financing Authority was created for the purpose of financing and refinancing of public capital improvements for, and working capital requirements of, the City, the FPD or any other local agency, including community facilities districts created by the City or the FPD, through the construction and/or acquisition by the Financing Authority of such public capital improvements and/or by the Financing Authority of bonds of the City, FPD or any other local agency pursuant the bond purchase agreements and/or the lending of funds by the Financing Authority to the City, the FPD or any other local agency. The Financing Authority is governed by a board of five directors, which is composed of the member of the City Council. The Executive Director of the Financing Authority is the City Manager of the City. The Financing Authority is specifically granted all of the powers specified in the Bond Law, including but not limited to the power to issue bonds and to sell such bonds to public or private purchasers at public or negotiated sale. The Financing Authority is entitled to exercise powers common to its members and necessary to accomplish the purpose for which it was formed. The Financing Authority has no independent staff, and consequently it will be completely dependent upon the officers and employees of the City to administer its program.

Separate financial statements are not prepared for these entities. 841
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-32-
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued)

B) Basis of Presentation

The City’s basic financial statements are prepared in conformity with accounting principles generally accepted in the United States of America. The Governmental Accounting Standards Board is the acknowledged standard setting body for establishing accounting and financial reporting standards followed by governmental entities in the United States of America.

Government-Wide Financial Statements
The Government-Wide Financial Statements (i.e., the Statement of Net Position and the Statement of Activities) report information on all of the nonfiduciary activities of the City and its blended component units. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely to a significant extent on user fees and charges for support.

The Statement of Activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable to a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not classified as program revenues are reported as general revenues.

As a general rule the effect of interfund activity has been removed from the government-wide financial statements. However, the effect of interfund services provided and used between functions has not been eliminated in the statement of activities.

Fund Financial Statements
Separate financial statements are provided for governmental funds, proprietary funds, and fiduciary funds, even though the latter are excluded from the Government-Wide Financial Statements. Major individual governmental funds and major individual enterprise funds are reported in separate columns in the Fund Financial Statements.

C) Measurement Focus, Basis of Accounting, and Financial Statement Presentation

The Government-Wide Financial Statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the Proprietary Fund Financial Statements. Custodial funds use the economic resources measurement focus. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. In applying the susceptible to accrual concept to intergovernmental revenues, the legal and contractual requirements of the individual programs are used as guidance. Property taxes are recognized as revenues in the year for which they are levied. 842
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-33-
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued)

C) Measurement Focus, Basis of Accounting, and Financial Statement Presentation, (continued)

Governmental Fund Financial Statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. Reimbursements under state and federal grants are accrued if received within 180 days. Revenues that are accrued generally include real property taxes, sales tax, transient occupancy taxes, franchise fees, vehicle license fees, highway users’ tax, interest, and some state and federal grants.

Expenditures generally are recorded when a liability is incurred, as under accrual accounting.

However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due.

D) Fund Classifications

The City reports the following major governmental funds:

General Fund
The General Fund is the City’s primary operating fund. It accounts for all financial resources of the City, except those required to be accounted for in another fund.

San Marcos Affordable Housing Fund
The San Marcos Affordable Housing Fund accounts for the in-lieu revenue received from developers to provide for affordable housing. The fund also accounts for the low and moderate income housing receivables of the former City of San Marcos Redevelopment Agency.

Capital Improvements Fund
The Capital Improvements Fund is used to account for capital projects funded with Federal and other grants and developer contributions.

The City reports the following major proprietary fund:

Creekside Marketplace Fund
The Creekside Marketplace Fund accounts for the activities of a City-owned shopping center. 843
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-34-
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued)

D) Fund Classifications, (continued)

Additionally, the City reports the following fund types:

Private-Purpose Trust Fund
The Private-Purpose Trust Fund accounts for the activities of the Redevelopment Obligation Retirement Funds, which accumulates resources for obligations previously incurred by the former City of San Marcos Redevelopment Agency.

Custodial Funds
The Custodial Funds account for assets held by the City in a custodial capacity. These funds include refundable deposits and also account for the collection of special assessments levied on various Assessment Districts and Community Facilities Districts property owners for the payment of debt service on no commitment debt.

E) Financial Statement Elements

(1) Cash and Investments

The City follows the practice of pooling cash and investments of all funds except for funds required to be held by outside fiscal agents under the provisions of bond indentures. Each fund’s share in this pool is displayed in the accompanying financial statements as cash and investments. Interest income earned on pooled cash and investments is allocated monthly to the various funds based on the month-end cash and investment balances. Interest income from cash and investments with fiscal agents is credited directly to the related fund.

The City’s cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturities of three months or less from the date of acquisition.

Investments are reported at fair value. The State Treasurer’s Investment Pool operates in accordance with appropriate state laws and regulations. The reported value of the pool is the same as the fair value of the pool shares.

(2) Receivables and Payables

Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” (i.e., the current portion of interfund loans) or “advances to/from other funds” (i.e., the non- current portion of interfund loans). Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances.”
844
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-35-
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued)

E) Financial Statement Elements, (continued)

Advances between funds, as reported in the fund financial statements, are offset by a fund balance reserve in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources.

(3) Prepaid Items

Certain payments to vendors for costs applicable to future accounting periods are recorded as prepaid items in both government-wide and fund financial statements using the consumption method.

(4) Land Held for Resale

Land held for resale is valued at the lower of cost or market once such amount becomes determinable upon entering into a contract for sale. Land held for resale is reflected as nonspendable or restricted fund balance in the fund financial statements to indicate that the asset does not constitute available, spendable resources.

(5) Notes Receivable

The accompanying financial statements reflect the recording of certain notes receivable that represent loans made to private developers and other parties. In certain cases, the amount of collection is dependent upon future residual receipts to be generated by the property or contingent upon the ability of the owner to sell the property at an amount sufficient to pay all liens against the property.

(6) Deferred Outflows/Inflows of Resources

In addition to assets, the statement of net position (balance sheet) will sometimes report a separate section for deferred outflows of resources. This separate financial element, deferred outflows of resources, represents a consumption of net assets or fund balance that applies to future periods and so will not be recognized as an outflow of resources (expense/expenditure) until then. In addition to liabilities, the statement of net position (balance sheet) will sometimes report a separate section for deferred inflows of resources.

This separate financial element, deferred inflows of resources, represents an acquisition of net assets or fund balance that applies to future periods and so will not be recognized as an inflow of resources (revenue) until that time.
845
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-36-
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued)

E) Financial Statement Elements, (continued)

(7) Program Revenues

Amounts reported as program revenues include 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions. Internally dedicated resources, such as taxes, are reported as general revenues rather than program revenues.

(8) Property Taxes

Property taxes attach as an enforceable lien on property as of March 1. Taxes are levied on July 1 and are payable in two installments on December 10 and April 10. The County of San Diego (the County) bills and collects the property taxes and remits them to the City in installments during the year. City property tax revenues are recognized when levied to the extent that they result in current receivables.

The County is permitted by State Law (Proposition 13) to levy taxes at 1% of assessed value.

The assessed value can only increase each year by inflation with a maximum of 2%. The City receives a share of this basic levy proportionate to what it received in the 1976 to 1978 period.

(9) Proprietary Funds Operating and Nonoperating Revenues and Expenses

Proprietary funds distinguish 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 proprietary funds are charges to customers for sales and services and lease revenue. The City also recognizes new account charges, late fees and contributions from other agencies as operating revenues. Operating expenses for the enterprise funds include the cost of sales and services, and general and administrative expenses. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.

846
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-37-
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued)

E) Financial Statement Elements, (continued)

(10) Capital and Intangible Assets

Capital assets, which include property, buildings, equipment, and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items) are reported in the applicable governmental or business-type activities columns in the government-wide financial statements and the enterprise funds in the fund financial statements. Capital assets are defined by the government as assets with an initial individual cost of $5,000 or more and an estimated useful life in excess of three years. Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at the estimated acquisition value at the time of acquisition. Intangible assets are recorded at the value of the liability recognized and amortized on a straight-line basis over the life of the liability.

The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets lives are not capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed.

Capital assets are depreciated using the straight-line method over the following estimated useful lives. Depreciation starts the year following acquisition.

Years
Buildings 50
Furniture and Equipment 3-10
Infrastructure 20-50
(11) Compensated Absences

Vacation pay is payable to employees at the time used or upon termination of employment.

Sick leave accrued but unused is cumulative from year to year. Employees are allowed to cash out sick leave hours over certain balances once a year and upon termination. All vacation pay and applicable sick leave is accrued when incurred in the government-wide financial statements. A liability for these amounts is reported in governmental funds as required per Governmental Accounting Board Statement No. 101, Compensated Absences.

(12) Reclassifications and Eliminations

Interfund balances must generally be eliminated in the government-wide statements, except for net residual amounts due between governmental activities. Amounts involving fiduciary funds should be reported as external transactions. Any allocations must reduce the expenses of the function from which the expenses are being allocated, so that the expenses are reported only once in the function in which they are allocated.

847
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-38-
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued)

E) Financial Statement Elements, (continued)

(13) Long-Term Obligations

In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities. Bond premiums and discounts are deferred and amortized over the life of the bonds using the straight-line method.

Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are expensed during the current period.

In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.

(14) Postemployment Benefits other than Pensions (OPEB)

For purposes of measuring the total OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the City’s plan (OPEB Plan) and additions to/deductions from the OPEB Plan’s fiduciary net position have been determined on the same basis. For this purpose, benefit payments are reported at fair value.

GASB Statement No. 75, which was implemented in the current year, requires that the reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used:

Valuation Date June 30, 2024
Measurement Date June 30, 2024
Measurement Period July 1, 2023 to June 30, 2024

(15) Pension Plans

For purposes of measuring the net pension liability, deferred outflows and inflows of resources related to pensions, and pension expense, information about the fiduciary net position and additions to/deductions from the fiduciary net position have been determined on the same basis as they are reported by the CalPERS Financial Office. For this purpose, benefit payments (including refunds of employee contributions) are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value.

848
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-39-
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued)

E) Financial Statement Elements, (continued)

Generally accepted accounting principles requires that the reported results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used.

Valuation Date (VD) June 30, 2023
Measurement Date (MD) June 30, 2024
Measurement Period (MP) July 1, 2023 to June 30, 2024 (16) Use of Estimates
The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and necessarily include amounts based on estimates and assumptions by management. Actual results could differ from those amounts.
(17) Fund Balances
Fund balances are reported in the fund financial statements in the following classifications:

Nonspendable Fund Balance – this includes amounts that cannot be spent because they are either not spendable in physical form (such as inventory) or that are legally or contractually required to be maintained intact (such as endowments).

Restricted Fund Balance – this includes amounts that can be spent only for specific purposes stipulated by external legal requirements imposed by other governments, external resource providers, or creditors. Restrictions imposed by the City Council do not create restricted fund balance unless the legal document that initially authorized the revenue (associated with that portion of fund balance) also included language that specified the limited use for which the authorized revenues were to be expended.

Committed Fund Balance – this includes amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the City Council. Those committed amounts cannot be used for any other purpose unless the City Council removes or changes the specified use by taking the same type of action that it employed to previously commit those amounts. If the Council action that limits the use of the funds was separate from the action that initially created the revenues that form the basis for the fund balance, then the resultant fund balance is considered to be committed, not restricted. The City Council considers a resolution to constitute a formal action of the City Council for the purposes of establishing committed fund balance.
849
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-40-
1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (continued)

E) Financial Statement Elements, (continued)

Assigned Fund Balance – this includes amounts that are intended to be used for specific purposes as indicated either by the City Council or by persons to whom the City Council has delegated the authority to assign amounts for specific purposes. The City Council has not delegated such authority to others in the City, and therefore retains its authority to assign fund balance.

Unassigned Fund Balance – this includes negative fund balance in governmental funds and the remaining spendable amounts which are not included in one of the other classifications in the General Fund. The General Fund is the only fund that reports a positive unassigned fund balance amount.

In order to calculate the amounts to report as restricted, committed, assigned, and unassigned fund balance in the governmental fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the City’s policy that restricted resources will be applied first, followed by (in order of application) committed, assigned, and unassigned resources, in the absence of a formal policy adopted by the City Council.

(18) Net Position Flow Assumption

Sometimes the City will fund outlays for a particular purpose from both restricted (e.g. restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted net position and unrestricted net position in the financial statements a flow assumption must be made about the order in which the resources are considered to be applied. It is the City’s policy to consider restricted net position to have been depleted before unrestricted net position is applied.

(19) New Accounting Pronouncements

During the fiscal year ended June 30, 2025, the City implemented the following GASB standards:

GASB Statement No. 101 – The Governmental Accounting Standards Board (GASB) has issued Statement No. 101, Compensated Absences. The objective of this Statement is to better meet the information needs of financial statement users by updating the recognition and measurement guidance for compensated absences.

GASB Statement No. 102 – The Governmental Accounting Standards Board (GASB) has 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.

850
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-41-
2) CASH AND INVESTMENTS

Cash and investments are classified in the accompanying financial statements as follows:

Statement of net position:

Cash and investments $ 177,359,742
Cash and investments with fiscal agents 903,969 Pension trust cash and investments 2,977,754 Investments in real estate 155,470,000
Investment in joint venture 7,894,166
Statement of fiduciary net position:

Private-Purpose Trust Fund
Cash and investments with fiscal agents 37,650,824 Custodial Funds
Cash and investments 6,897
Cash and investments with fiscal agents 10,101,661 Total Cash and Investments $ 392,365,013
Cash and investments at June 30, 2025 consisted of the following:

Demand deposits $ 6,924,639
Joint Venture 7,894,166
Subtotal 14,818,805
Federal Agency Securities 4,184,850
U.S. Treasury Obligations 29,769,572
U.S. Corporate 17,831,206
Municipal Obligations 1,177,502
Asset-Backed Securities 6,599,430
Collateralized Mortgage Obligations 6,463,521 Supranational 2,747,180
Money Market Mutual Funds 52,105,020
Local Agency Investment Fund (LAIF) 53,791,619 California Asset Management Program (CAMP) 47,406,308 Real Estate 155,470,000
Total investments 377,546,208
Total Cash and Investments $ 392,365,013

851
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-42-
2) CASH AND INVESTMENTS, (continued)

Investments Authorized by the California Government Code and the City’s Investment Policy The table below identifies the investment types that are authorized by the California Government Code and the City’s investment policy. In addition to the table below, the investment policy specifies that the City may invest in other investments that are, or may become, legal investments through the State of California Government Code and with prior approval of the City Council.

The table also identifies certain provisions of the City’s investment policy that address interest rate risk and concentration of credit risk. This table does not address investments of debt proceeds held by bond trustee that are governed by the provisions of debt agreements rather than the general provisions of the California Government Code or the City’s investment policy.

Authorized Maximum Maximum
Investment Type B y City Maximum Percenta ge Investmen t Authorized by State Law Polic y Maturit y of Portfolio in One Issuer U.S. Treasury Obligations Yes 5 years None None
Federal Agency Securities Yes 5 years None None
Municipal Obligations Yes 5 years 30% 5%
Supranationals Yes 5 years 30% 10%
Bankers’ Acceptances Yes 180 days 40% 10%
Commercial Paper Yes 270 days 15% 5%
Negotiable Certificates of
Deposit

Yes

5 years

30%

5%
Repurchase Agreements Yes 30 days 50% None
Reverse Repurchase
Agreements

No

1 year

20%

None
US Corporate Medium
Term Notes

Yes

5 years

30%

None
Mutual Funds No N/A 20% 10%
Money Market Mutual
Funds

Yes

N/A 20% 10%
Mortgage Pass-Through
Securities

Yes

5 years

10%

5%
Asset-Backed Securities Yes 5 years 10% None
Collateralized Mortgage
Obligations

Yes

5 years

10%

None
Local Agency Investment
Fund (LAIF) Yes N/A None
$75 million per
entity
California Asset
Management Program
(CAMP)

Yes

N/A

None

None
County Pooled
Investment Funds

No

N/A

None

None

852
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-43-
2) CASH AND INVESTMENTS, (continued)
Investments Authorized by Debt Agreements
Investments of debt proceeds held by bond trustee are governed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the City’s investment policy. The table below identifies the investment types that are generally authorized for investments held by bond trustee. The table also identifies certain provisions of these debt agreements that address interest rate risk and concentration of credit risk.

Maximum Maximum
Maximum Percentage Investment
Authorized Investment Type Maturity Allowed in One Issuer U.S. Treasury Obligations None None None
Federal Agency Securities None None None
Bankers’ Acceptances 180 days None None
Commercial Paper 270 days None None
Repurchase Agreements 180 days None None
Money Market Mutual Funds N/A None None
Local Agency Investment Fund (LAIF) N/A None $75 million per entity Investment Contracts None None None

Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater is the sensitivity of its fair value to changes in market interest rates. One of the ways that the City manages its exposure to interest rate risk is by purchasing a combination of shorter term and longer-term investments and by timing cash flows from maturities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations.

The remainder of this page left intentionally blank
853
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-44-
2) CASH AND INVESTMENTS, (continued)

Interest Rate Risk, (continued)
Information about the sensitivity of the fair values of the City’s investments (including investments held by bond trustee) to market interest rate fluctuations is provided by the following table that shows the distribution of the City’s investments by maturity:
12 Months 13 to 36 37 to 60
Total or Less Months Months N/A
Federal Agency Securities 4,184,850$ 1,282,842$ 651,232$ 2,250,776$ - $ U.S. Treasury Obligations 29,769,572 4,466,027 8,943,988 16,359,557 - U.S. Corporate 17,831,206 749,845 4,890,717 12,190,644 - Municipal Obligations 1,177,502 - - 1,177,502 - Asset-Backed Securities 6,599,430 21,062 1,839,226 4,739,142 - Collateralized Mortgage Obligations 6,463,521 505,180 4,565,296 1,393,045 - Supranational 2,747,180 633,537 - 2,113,643 - Money Market Mutual Funds 502,574 502,574 - - - LAIF 53,791,619 53,791,619 - - - CAMP 47,406,308 47,406,308 - - - Section 115 Trust
Money Market Mutual Funds 2,977,754 2,977,754 - - - Held by bond trustees:

Money Market Mutual Funds 48,624,692 48,624,692 - - - Real Estate 155,470,000 - - - 155,470,000 Total 377,546,208 $ 160,961,440$ 20,890,459$ 40,224,309$ 155,470,000$ Investment Type

The remainder of this page left intentionally blank
854
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-45-
2) CASH AND INVESTMENTS, (continued)

Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by the California Government Code, the City’s investment policy, or debt agreements and the actual rating as of year-end for each investment type.

Minimum Standard &
Legal Poor's Rating
Total Rating as of Year End
Federal Agency Securities $ 4,184,850 N/A AA+
U.S. Treasury Obligations 29,769,572 N/A A-1+/AA+ U.S. Corporate 17,831,206 N/A A- to Aaa
Municipal Obligations 1,177,502 N/A AA
Asset-Backed Securities 6,599,430 N/A Aaa
Collateralized Mortgage Obligations 6,463,521 N/A Aaa Supranational 2,747,180 N/A Aaa
Money Market Mutual Funds 502,574 N/A Aaa LAIF 53,791,619 N/A Not Rated
CAMP 47,406,308 N/A Aaa
Section 115 Trust
Money Market Mutual Funds 2,977,754 N/A Aaa Held by bond trustees:

Money Market Mutual Funds 48,624,692 A Not Rated Real Estate 155,470,000 N/A Not Rated
Total $ 377,546,208
Investment Type
Concentration of Credit Risk
The investment policy of the City contains no limitations on the amount that can be invested in any one issuer beyond that stipulated by the California Government Code. Investments in any one issuer other than external investment pools and mutual funds that represent 5% or more of the total City investments (or 5% or more of any major fund or non-major funds in the aggregate) must be disclosed. There are no investments at June 30, 2025 that meet the above criteria.

Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government 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, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. 855
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-46-
2) CASH AND INVESTMENTS, (continued)

Custodial Credit Risk, (continued)
The California Government Code requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law. The market value of the pledged securities in the collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of the secured public deposits. The City’s investment policy requires that all securities owned by the City be held in safekeeping by a third party bank trust department acting as agent for the City under the terms of a custody agreement executed by the bank and by the City. At June 30, 2025, the City deposits (bank balances) were collateralized under California Law.

Investment in State Investment Pool
The City is a voluntary participant in the Local Agency Investment Fund (LAIF), which is part of the Pooled Money Investment Account that is regulated by the California Government Code under the oversight of the State Treasurer, Director of Finance and State Controller. The City may invest up to $75 million in LAIF funds. Investments in LAIF are highly liquid, as deposits can be converted to cash within 24 hours without loss of interest. The balance available for withdrawal is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. All investments with LAIF are secured by the full faith and credit of the State of California. Separate LAIF financial statements are available from the California State Treasurer’s Office on the Internet at http://www.treasurer.ca.gov. Currently, LAIF does not have an investment rating. LAIF has a minimum $5,000 transaction amount in increments of $1,000 with a maximum of 15 transactions (combination of deposits and withdrawals) per month. LAIF requires a one-day prior notice for deposits and withdrawals of $10 million or more.

The value of the City’s investment in this pool is 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). LAIF’s (and the City’s) exposure to risk (credit, market or legal) is not currently available.

Investment in California Asset Management Program Pool
The City is a voluntary participant in the California Asset Management Program (CAMP). CAMP is an investment pool offered by the California Asset Management Trust (the Trust). The Trust is a joint powers authority and public agency created by the Declaration of Trust and established under the provisions of the California Joint Exercise of Powers Act (California Government Code Sections 6500 et seq., or the “Act”) for the purpose of exercising the common power of its Participants to invest certain proceeds of debt issues and surplus funds. The Trust’s activities are directed by a Board of Trustees, all of whom are employees of the California public agencies which are participants in the Trust.

856
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-47-
2) CASH AND INVESTMENTS, (continued)

Investment in California Asset Management Program Pool, (continued) The Pool’s investments are limited to investments permitted by subdivision (a) to (n), inclusive, of Section 53601 of the California Government Code. The City reports investments in CAMP at the fair value amounts provided by CAMP, which is the same as the value of the pool share.

CAMP is not registered with the Securities and Exchange Commission.

Fair Value Measurements
GASB Statement No. 72, Fair Value Measurements and Application, establishes a fair value hierarchy consists of three broad levels: Level 1 inputs consist of quoted prices (unadjusted) for identical assets and liabilities in active markets that a government can access at the measurement date, Level 2 inputs consist of inputs other than quoted prices that are observable for an asset or liability, either directly or indirectly, that can include quoted prices for similar assets or liabilities in active or inactive markets, or market-corroborated inputs, and Level 3 inputs have the lowest priority and consist of unobservable inputs for an asset or liability. The valuation method used for rental properties is the Leased Fee Market method, which is dependent on the income generated from the rental properties.

The following table presents the balances of the assets measured at fair value on a recurring basis of June 30, 2025.

Total Level 1 Level 2 Level 3
Federal Agency Securities 4,184,850$ - $ 4,184,850$ - $ U.S. Treasury Obligations 29,769,572 - 29,769,572 - U.S. Corporate 17,831,206 - 17,831,206 - Municipal Obligations 1,177,502 - 1,177,502 - Asset-Backed Securities 6,599,430 - 6,599,430 - Collateralized Mortgage Obligations 6,463,521 - 6,463,521 - Supranational 2,747,180 - 2,747,180 - Money Market Mutual Funds 502,574 502,574 - - Real Estate 155,470,000 - - 155,470,000 Total Investments by Fair Value Level 224,745,835 502,574 $ 68,773,261$ 155,470,000$ Not subject to the fair value hierarchy:

LAIF 53,791,619
CAMP 47,406,308
Section 115 Trust
Money Market Mutual Funds 2,977,754
Held by bond trustees:

Money Market Mutual Funds 48,624,692
Total 377,546,208 $
Investments by Fair Value Level
Fair Value Measurement Using

857
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-48-
3) NOTES RECEIVABLE

At June 30, 2025, notes receivable consisted of the following:
3,144,728$
710,388
190,869,606
1,990,667
The City of San Marcos affordable housing program has made various loans to individuals to acquire and own property within mobile home parks. These loans are at various low simple interest rates. Principal and interest are due in 30 years from the date of the note unless the property is sold or the individual no longer qualifies under low or moderate income requirements. Due to the long-term nature of the loans, unavailable revenue has been recorded in the Affordable Housing Special Revenue Fund.

The City loaned $8,672,500 to AOA San Marcos LLC for
construction financing of a mixed use complex. The loan was renegotiated during fiscal year 2025 and bears an interest rate of

5.25% per annum. Due to the long-term nature of the loan, unavailable revenue has been recorded in the General Fund. The balance at June 30, 2025 includes accrued interest of $421,412.

The principal amount of $6,222,500 along with accrued interesest was paid off during fiscal year 2025.

The City and former City of San Marcos Redevelopment Agency made several loans to various housing developers for the acquisition, construction or rehabilitation of low and moderate housing. Upon the dissolution of the Redevelopment Agency, these loans were transferred to the City’s affordable housing program. The loans were made in fiscal years 1997 through 2011 at various amounts and at interest rates ranging from 0.25% to

5.9% per annum. Principal and interest are due at various maturity dates but no later than 55 years from the date of the note. Due to the long-term nature of the loans, unavailable revenue has been recorded in the Affordable Housing Special Revenue Fund.

In June 2001, the City loaned $1,320,000 to a developer for the acquisition, development and construction of a commercial pad.

The loan has a term of thirty years and bears an interest rate of 3%. Payments from residual receipts, if any, are to be made on an annual basis beginning with May 15 of the year first following the date the project is completed. Due to the long-term nature of the loan, unavailable revenue has been recorded in the Affordable Housing Special Revenue Fund. The balance at June 30, 2025 includes accrued interest of $670,667.

858
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-49-
3) NOTES RECEIVABLE, (continued)

835,722$
2,718,591
1,873,028
476,104
202,618,834$
The former City of San Marcos Redevelopment Agency provided loans to individuals under a mortgage assistance program. The loans are to be repaid in 30 years and bear an interest of 3%.

Upon the dissolution of the Redevelopment Agency, these loans were transferred to the City’s affordable housing program. Due to the long-term nature of the loans, deferred revenue has been recorded in the Affordable Housing Special Revenue Fund.

Total notes receivable
The City made two loans for a total amount of $1,845,625 to ALFA to assist with the development of a 100-unit affordable rental housing project. The loan is payable in full on June 1, 2040 and bears an interest rate of 3%. Due to the long-term nature of the loan, unavailable revenue has been recorded in the Affordable Housing Special Revenue Fund. The balance at June, 30, 2025 includes accrued interest of $872,966.

The City has provided loans to several individuals under a Federal (HOME) and a State (CalHOME) mortgage assistance loan
programs. The loans are to be repaid in 30 years and bear an interest rate of 3%. Due to the long-term nature of these loans, unavailable revenue has been recorded in the HOME Grant and the CalHOME Grant Special Revenue Funds.

In December 2004, the City loaned $700,000 to Assisted Living Foundation of America (ALFA), a non-profit corporation, to assist with the development of a 120-unit senior housing project. The loan is payable in full on June 1, 2038 and bears an interest rate of 1%. Due to the long-term nature of the loan, unavailable revenue has been recorded in the Affordable Housing Special Revenue Fund. The balance at June 30, 2025 includes accrued interest of $135,722.

859
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-50-
4) OTHER RECEIVABLES

At June 30, 2025, other receivables consisted of the following:

Governmental Funds:
$ 120,516
999,125
$ 1,119,641
The City has entered into an agreement with a property owner whereby certain public facilities fees are being deferred. The revenue has been deferred in the governmental funds.

Total other receivables – governmental funds
Other miscellaneous receivables
Proprietary Funds:
$ 583,167
In June 2004, the City entered into a Release and Settlement Agreement with a contractor whereby $974,652 is to be remitted to the City over the next fifty years as compensation for the loss of lease space. Payments of $1,624 are to be made on the fifteenth day of each month beginning on or about June 15, 2005 through May 15, 2055.

Lease Receivables
During the current fiscal year, the City entered into various lease receivable agreements for the use of buildings and land. The leases range from 12-396 months in term to fiscal year 2056. The leases have receipts that range from $2,400 to $826,160 and interest rates that range from

0.4750% to 3.7420%. As of June 30, 2025, the total combined value of the lease receivable is $15,827,218, the total combined value of the short-term lease receivable is $2,835,090, and the combined value of the deferred inflow of resources is $14,672,881. For the fiscal year ended June 30, 2025, the City recognized $2,729,106 in lease revenue and $330,270 in interest revenue.

The schedule of future payments of principal and interest for the lease receivable is as follows:

Year Ending
June 30, Principal Interest
2026 2,835,090$ 284,990 $
2027 2,672,802 232,665
2028 2,209,444 185,235
2029 1,481,010 153,636
2029 1,438,786 126,789
2030-2034 3,884,879 330,242
2035-2039 1,114,290 88,164
2040-2044 86,686 17,396
2045-2049 41,506 11,553
2050-2055 52,174 5,218
2056 10,551 145
Totals 15,827,218$ 1,436,033 $

860
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-51-
5) INTERFUND RECEIVABLES AND TRANSFERS

Short term loans between funds (Due to/Due from) were as follows at June 30, 2025:

Amount
General Fund Capital Improvements 3,635,690 $
General Fund Non-Major Governmental Funds 1,695,042
Total 5,330,732 $
Receivable Fund Payable Fund
The loans from the General Fund to the Non-Major Governmental Funds were made to eliminate short-term cash deficits.

Long term loans between funds (Advances to/Advances from) were as follows at June 30, 2025:

Amount
San Marcos Affordable Housing General Fund 870,872$
Non-Major Governmental Funds General Fund 1,000,000
Non-Major Governmental Funds Creekside Marketplace Fund 5,300,000 Total 7,170,872 $
Receivable Fund Payable Fund
The loan from the San Marcos Affordable Housing Fund to the General Fund was made for the purchase of a proportional share of the Next Generation Regional Communications System (NextGen RCS), which provides public safety and public service radio communications to San Diego and Imperial Counties. The loan from the Public Facility Fund to the Creekside Marketplace Fund and the Real Property Management Fund (within General Fund) was made for the purpose of funding capital project obligations.

Interfund transfers were as follows:

Non-Major Total
General Capital Governmental Transfers
Fund Improvements Funds Out
Transfers Out:

General Fund - $ 4,988,002$ 831,000$ 5,819,002$ Non-major Governmental
Funds 24,000 14,607,234 - 14,631,234 Creekside Marketplace
Enterprise Fund 2,500,000 - - 2,500,000 Total Transfers In: 2,524,000$ 19,595,236$ 831,000 $ 22,950,236$ Transfers In
All of the transfers were made as budgeted. The transfer of $2,500,000 was transferred from the Creekside Marketplace Enterprise Fund to the General Fund to fund operations. $4,988,002 from the General Fund to the Capital Improvements Fund was to fund Capital Improvement projects.

The $14,607,234 of transfers from the Non-Major Governmental Funds to the Capital Improvements Fund were also to fund the CIP projects.
861
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-52-
6) UNAVAILABLE/UNEARNED REVENUE

Governmental funds report unavailable revenue in connection with receivables for revenues that are not considered to be available to liquidate liabilities of the current period. Governmental funds also defer revenue recognition in connection with resources that have been received, but not yet earned. At the end of the current fiscal year, the various components of unavailable revenue and unearned revenue reported in the governmental funds were as follows:

Unavailable Unearned
Revenue Revenue Total
Revenue received prior to recognition
period - $ 963,276$ 963,276$ Revenue received from developers
prior to earning - 2,369,593 2,369,593 Revenues earned but not available
within 60 days after the close of
the fiscal year 343,221 - 343,221 Fees receivable from property owners
under various agreements 649,401 - 649,401 Long-term loans to mobile home
owners 710,388 - 710,388 Long-term loans to individuals under
under a mortgage assistance program 2,349,132 - 2,349,132 Long-term loans to developers for
the acquisition, construction or
rehabilitation of affordable housing 198,545,298 - 198,545,298 Long-term loan to a developer for
the acquisition, development and
construction of a commercial pad 1,990,667 - 1,990,667 Total unavailable/unearned revenue
for governmental funds 204,588,107$ 3,332,869$ 207,920,976$ 862
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-53-
7) CAPITAL ASSETS

Capital asset activity was as follows for the year ended June 30, 2025:

Governmental A ctivities: Balance Balance
June 30, 2024 Additions Deletions June 30, 2025
Capital assets, not depreciated:

Land 233,618,921$ 4,773,620 $ - $ 238,392,541$ Land improvements 66,871,063 - - 66,871,063 Construction in progress 154,776,305 18,326,832 (105,046,290) 68,056,847 Total capital assets, not
depreciated 455,266,289 23,100,452 (105,046,290) 373,320,451 Capital assets, being depreciated/amortized:

Buildings 73,256,572 323,925 - 73,580,497 Furniture and equipment 22,367,387 1,993,591 (1,500,889) 22,860,089 Infrastructure 388,495,329 102,680,412 - 491,175,741 Right-to-use equipment 3,881,769 3,597,863 - 7,479,632 Right-to-use subscription assets 290,850 132,965 (17,183) 406,632 Total capital assets, being depreciated/amortized 488,291,907 108,728,756 (1,518,072) 595,502,591 Less accumulated depreciation/amortization for:

Buildings (38,757,012) (1,469,033) - (40,226,045) Furniture and equipment (17,213,194) (1,730,263) 1,500,889 (17,442,568) Infrastructure (241,946,232) (8,379,259) - (250,325,491) Right-to-use equipment (1,938,023) (1,675,681) - (3,613,704) Right-to-use subscription assets (108,134) (84,290) 17,183 (175,241) Total accumulated depreciation/amortization (299,962,595) (13,338,526) 1,518,072 (311,783,049) Total capital assets, being
depreciated/amortized, net 188,329,312 95,390,230 - 283,719,542 Total governmental activities $ 643,595,601 $118,490,682 $(105,046,290) $ 657,039,993 Depreciation/amortization expense was charged to functions/programs of the primary government as follows:

Governmental Activities:

General government $ 1,858,992
Public safety 2,315,124
Highways, streets and parks 9,034,366
Culture and recreation 130,044
Total depreciation/amprtization expense – governmental activities $ 13,338,526

863
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-54-
8) LONG-TERM LIABILITIES

The following is a summary of changes in long-term liabilities for Governmental Activities for the year ended June 30, 2025:

Balance Balance Due Within
June 30, 2024 Additions Deletions June 30, 2025 One Year Governmental Activities:

Long-term debt
Direct borrow ing:

Loans payable $ 332,696 $ - (93,874)$ 238,822$ 94,815$ Safety center private placement
financing 1,565,000 - (350,000) 1,215,000 360,000 Subtotal long-term debt 1,897,696 - (443,874) 1,453,822 454,815 Other long-term liabilities
Compensated absences* 5,071,693 264,308 - 5,336,001 1,334,000 Claims payable 1,100,778 374,036 (201,058) 1,273,756 600,000 Leases payable 757,123 3,151,416 (945,692) 2,962,847 779,998 Subscriptions payable 145,458 122,965 (111,861) 156,562 94,319 Subtotal other long-term 7,075,052 3,912,725 (1,258,611) 9,729,166 2,808,317 liabilities
Total long-term liabilities 8,972,748$ 3,912,725$ (1,702,485)$ 11,182,988$ 3,263,132$ *net change is shown
The entire net pension and total OPEB liabilities are reported as a noncurrent liabilities in the accompanying Statement of Net Position in accordance with GASB Statement Nos. 68 and 75, respectively. Net pension and total OPEB liabilities are generally liquidated by the City’s General Fund. See notes 11 and 12, respectively, for more information.

Loans Payable - Direct Borrowing
238,822$
In March 2014, the City entered into a loan agreement with the California Energy Resources Conservation and Development Commission (the Energy Commission) for a preliminarily approved amount of $1,100,000, at an annual interest rate of 1.0%. The loan is for an energy savings project consisting of retrofitting 2,000 LED streetlight fixtures throughout the City. The City receives the loan proceeds on a cost reimbursement basis. The project was completed, and the amount of the loan was finalized on May 3, 2016 at $1,049,332. The semi-annual loan repayments of $48,484 from the Community Facilities District 98-02 and the Street Light District Special Revenue Funds are due each December 22 and June 22 through year 2027. In the event annual cost savings fail to equal or exceed the amount due under the loan agreement, the agreement may be renegotiated to assure that the repayment amount does not exceed the actual energy savings or avoided costs resulting from the project.

864
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-55-
8) LONG-TERM LIABILITIES, (continued)

Loans Payable - Direct Borrowing, (continued)
The annual requirements to amortize the loans payable are as follows:

Year Ending
June 30, Principal Interest Total
2026 94,815$ 3,094$ 97,909$
2027 95,765 2,153 97,918
2028 48,242 1,203 49,445
Total 238,822$ 6,450 $ 245,272$
Safety Center Private Placement Financing - Direct Borrowing $1,215,000
In November 2017, the San Marcos Public Financing Authority entered into a private placement financing agreement in the amount of $3,535,000 to refund the San Marcos Public Facilities Authority 2006 Lease Revenue Refunding Bonds for the construction of a safety center. The interest and principal are due semi-annually on May 1 and November 1 commencing May 1, 2018 at interest rate of 2.37%.

Payments due are funded by the revenues generated from the use of the safety center from various entities. The reserve requirement was fully funded at the end of the fiscal year.

Debt service requirements to maturity are as follows:

2026 360,000$ 28,795$ 388,795$
2027 370,000 20,263 390,263
2028 380,000 11,494 391,494
2029 105,000 2,488 107,488
Total 1,215,000$ 63,040 $ 1,278,040$
Principal Interest Total
Year Ending
June 30,

865
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-56-
8) LONG-TERM LIABILITIES, (continued)

Compensated Absences
GASB Statement No. 101 identifies certain items that should be accrued as a liability as the benefits are earned by the employees but only to the extent it is probable that the employer will compensate the employees for the benefits through cash payments conditioned on the employee’s termination or retirement.

City employees accumulate earned but unused benefits that can be converted to cash at termination of employment. The accrued liability for these vested benefits, payable in accordance with various collective bargaining agreements, totals $5,336,001 as of June 30, 2025.

Claims Payable
Claim and judgment liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated. The City records the estimated loss, net of any insurance coverage under its self-insurance program (See note 13). The amount outstanding as of June 30, 2025 was $1,273,756.

Leases Payable
As of June 30, 2025, the City had 84 active leases. The leases have payments that range from $1,649 to $246,143 and interest rates that range from 0.3623% to 4.9500%. As of June 30, 2025, the total combined value of the lease liability is $2,962,847, the total combined value of the short- term lease liability is $779,998. The combined value of the right to use assets are included in the right-to-use equipment line item in Note 7.

Future lease payments under the leases are as follows:

Year Ending
June 30, Principal Interest Total
2026 779,998$ 94,286$ 874,284$
2027 808,447 64,565 873,012
2028 639,250 41,124 680,374
2029 478,401 22,717 501,118
2030 256,751 8,912 265,663
Total 2,962,847$ 231,604 $ 3,194,451$
Subscriptions Payable
As of June 30, 2025, the City had 7 active subscriptions. The subscriptions have payments that range from $15,000 to $34,248 and interest rates that range from 2.0240% to 3.1100%. As of June 30, 2025, the total combined value of the subscription liability is $156,562, and the total combined value of the short-term subscription liability is $94,319. The combined value of the right to use assets is included in the right-to-use subscriptions line item in Note 7. 866
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-57-
8) LONG-TERM LIABILITIES, (continued)

Future subscription payments under the leases are as follows:

Year EndingJune 30, Principal Interest Total
2026 94,319$ 3,816$ 98,135$
2027 62,243 1,530 63,773
Total 156,562$ 5,346 $ 161,908$

9) FUND BALANCE CLASSIFICATIONS

Fund balance for governmental funds are classified as (1) nonspendable, (2) restricted, (3) assigned, or (4) unassigned. The details of the governmental fund balances as of June 30, 2025 are presented below:

Total
San Marcos Non-Major
Affordable Capital Governmental
General Housing Improvements Funds Total
Fund Balances:

Nonspendable:

Land held for resale 440,594$ - $ - $ - $ 440,594$ Deposits 8,060,276 - - - 8,060,276 Investments in real estate 68,690,000 - - - 68,690,000 Investment in joint venture 7,894,166 - - - 7,894,166 Subtotal 85,085,036 - - - 85,085,036 Restricted for:

Affordable housing - 49,247,461 - - 49,247,461 Transportation - - - 19,838,115 19,838,115 Lighting and landscape - - - 23,755,510 23,755,510 Pension trust 2,977,754 - - - 2,977,754 Capital improvements - - - 1,123,587 1,123,587 Public facilities - - - 39,202,216 39,202,216 Other purposes - - - 5,539,449 5,539,449 Subtotal 2,977,754 49,247,461 - 89,458,877 141,684,092 Assigned to:

City facilities replacement/
rehabilitation 4,925,404 - - - 4,925,404 City infrastructure replacement/
rehabilitation 4,189,366 - - - 4,189,366 Subtotal 9,114,770 - - - 9,114,770 Unassigned (deficit) 35,602,264 - (12,279,724) (1,969,198) 21,353,342 Total 132,779,824 $ 49,247,461$ (12,279,724)$ 87,489,679$ 257,237,240$

867
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-58-
10) NET POSITION CLASSIFICATIONS

Net position for governmental activities and business-type activities is classified as (1) net investment in capital assets, (2) restricted, or (3) unrestricted. The details of the net position as of June 30, 2025 are presented below:

Permanent
Fund
Governmental Business-Type Community
Activities Activities Total Foundation
Net Investment in Capital Assets:

Capital assets, net of accumulated
depreciation 657,039,993 $ - $ 657,039,993$ - $ Loss on defeasance of debt 23,391 - 23,391 - Less capital related debt balances:

Private placement financing (1,215,000) - (1,215,000) - Leases payable (2,962,847) - (2,962,847) - Subscriptions payable (156,562) - (156,562) - Loans payable (238,822) - (238,822) - Total Net Investment in Capital Assets 652,490,153 - 652,490,153 - Restricted for:

Permanent fund - not expendable - - - 1,000,000 Permanent fund - expendable - - - 385,769 Affordable housing 245,791,336 - 245,791,336 - Transportation 19,839,560 - 19,839,560 - Lighting and landscape 23,774,708 - 23,774,708 - Public facilities 39,339,106 - 39,339,106 - Pension trust 2,977,754 - 2,977,754 - Capital improvements 1,123,587 - 1,123,587 - Other purposes 5,539,449 - 5,539,449 - Total Restricted 338,385,500 - 338,385,500 1,385,769 Unrestricted 47,746,787 85,261,198 133,007,985 - Total 1,038,622,440 $ 85,261,198 $ 1,123,883,638$ 1,385,769 $

868
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-59-
11) DEFINED BENEFIT PENSION PLAN

A) General Information about the Pension Plans

Plan Descriptions
The Plans consist of an agent multiple-employer defined benefit pension plan and a public agency cost-sharing multiple-employer defined benefit pension plan administered by the California Public Employees’ Retirement System (CalPERS).

Miscellaneous – Agent, Multiple-Employer Defined Benefit Pension Plan The Plan is an agent multiple-employer defined benefit pension plan administered by the California Public Employees’ Retirement System (CalPERS). A full description of the pension plan regarding number of employees covered, benefit provisions, assumptions (for funding, but not accounting purposes), and membership information are listed in the Plan’s June 30, 2023 Annual Actuarial Valuation Report (funding valuation). Details of the benefits provided can be obtained in Appendix B of the actuarial valuation report. This report and CalPERS’ audited financial statements are publicly available reports that can be obtained at CalPERS’ website.

Safety – Cost Sharing, Multiple-Employer Defined Benefit Pension Plan

All qualified permanent and probationary employees are eligible to participate in the Public Agency Cost-Sharing Multiple-Employer Defined Benefit Pension Plan (Plan or PERF C) administered by the California Public Employees’ Retirement System (CalPERS.) The Plan consists of a miscellaneous pool and a safety pool (also referred to as “risk pools”), which are comprised of individual employer miscellaneous and safety rate plans, respectively. Plan assets may be used to pay benefits for any employer rate plan of the safety and miscellaneous pools. Accordingly, rate plans within the safety or miscellaneous pools are not separate plans under generally accepted accounting principles. Individual employers may sponsor more than one rate plan in the miscellaneous or safety risk pools. The City participates in four rate plans (one miscellaneous and three safety). Benefit provisions under the Plan are established by State statute and City resolution. CalPERS issues publicly available reports that include a full description of the pension plan regarding benefit provisions, assumptions and membership information that can be found on the CalPERS’ website, at www.calpers.ca.gov.

Benefits Provided
CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full-time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 5 years of service. 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 each plan are applied as specified by the Public Employees’ Retirement Law. 869
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-60-
11) DEFINED BENEFIT PENSION PLAN, (continued)

A) General Information about the Pension Plans, (continued)

The Plan operates under the provisions of the California Public Employees’ Retirement Law (PERL), the California Public Employees’ Pension Reform Act of 2013 (PEPRA), and the regulations, procedures and policies adopted by the CalPERS Board of Administration. The Plan’s authority to establish and amend the benefit terms are set by the PERL and PEPRA, and may be amended by the California state legislature and in some cases require approval by the CalPERS Board.

The Plan operates under the provisions of the California Public Employees’ Retirement Law (PERL), the California Public Employees’ Pension Reform Act of 2013 (PEPRA), and the regulations, procedures and policies adopted by the CalPERS Board of Administration. The Plan’s authority to establish and amend the benefit terms are set by the PERL and PEPRA, and may be amended by the California state legislature and in some cases require approval by the CalPERS Board.

The Plans’ provisions and benefits in effect at June 30, 2025, are summarized as follows:

On or After May 15, 2012 On or After
Hire date Prior to May 15, 2012 Prior to January 1, 2013 January 1, 2013 Benefit formula 2.7% @ 55 2.0% @ 55 2.0% @ 62
Benefit vesting schedule 5 years service 5 years service 5 years of service Benefit payments monthly for life monthly for life monthly for life Retirement age 50 - 55 50 - 63 52 - 67
Monthly benefits, as a % of eligible compensation 2.0% to 2.7% 1.4% to 2.4% 1.0% to 2.5% Required employee contribution rates 8.00% 7.00% 8.00%
Required employer contribution rates 11.390% 11.390% 11.390% On or After May 15, 2012 On or After
Hire date Prior to May 15, 2012 Prior to January 1, 2013 January 1, 2013 Benefit formula 3.0% @ 50 3.0% @ 55 2.7% @ 57
Benefit vesting schedule 5 years service 5 years service 5 years of service Benefit payments monthly for life monthly for life monthly for life Retirement age 50 50 - 55 50 - 57
Monthly benefits, as a % of eligible compensation 3.0% 2.4% to 3.0% 2.0% to 2.7% Required employee contribution rates 9.00% 9.00% 14.50% Required employer contribution rates 29.300% 24.960% 14.720% Miscellaneous Plan
Safety Plan

870
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-61-
11) DEFINED BENEFIT PENSION PLAN, (continued)

A) General Information about the Pension Plans, (continued)

Employees Covered
At June 30, 2023 (valuation date), the following employees were covered by the benefit terms:

Miscellaneous Plan
Inactive employees or beneficiaries
currently receiving benefits 237
Inactive employees entitled to but
not yet receiving benefits 373
Active employees 186
Total 796
Contributions
Section 20814(c) of the California Public Employees’ Retirement Law (PERL) requires that the employer contribution rates for all public employers are determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate.

The total plan contributions are determined through CalPERS’ annual actuarial valuation process.

Miscellaneous – Agent, Multiple-Employer Defined Benefit Pension Plan The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The employer is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. Employer contribution rates may change if plan contracts are amended. Payments made by the employer to satisfy contribution requirements that are identified by the pension plan terms as plan member contribution requirements are classified as plan member contributions. Employer contributions to the Plan for the fiscal year ended June 30, 2025 were $6,663,813.

Safety – Cost Sharing, Multiple-Employer Defined Benefit Pension Plan

The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The employer is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. Employer contribution rates may change if plan contracts are amended. Payments made by the employer to satisfy contribution requirements that are identified by the pension plan terms as plan member contribution requirements are classified as plan member contributions. Employer Contributions to the Plan for the fiscal year ended June 30, 2025 were $3,906,818. 871
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-62-
11) DEFINED BENEFIT PENSION PLAN, (continued)

B) Net Pension Liability

The City’s net pension liability for the Plan is measured as the total pension liability, less the pension plan’s fiduciary net position. The net pension liability of the Plan is measured as of June 30, 2024, using an annual actuarial valuation as of June 30, 2023 rolled forward to June 30, 2024 using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is as follows.

Actuarial Methods and Assumptions Used to Determine Total Pension Liability 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:

Valuation Date June 30, 2023
Measurement Date June 30, 2024
Actuarial Cost Method Entry Age Actuarial Cost Method
Asset Valuation Method: Fair Value of Assets
Actuarial Assumptions:

Discount Rate 6.90%
Inflation 2.30%
Salary Increase Varies by entry age and service
Mortality Rate Table(1) Derived using CalPERS' membership data for all funds
Post Retirement Benefit Increase The lesser of contract COLA up to

2.30% until Purchasing Power
Protection Allowance Floor on
Purchasing Power applies, 2.30%
thereafter
(1) The mortality table used w as developed based on CalPERS' specific data. The probabilities of mortality are based on the 2021 CalPERS Experience Study for the period from 2001 to 2019. Pre-retirement and Post-retirement mortality rates include generational mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries. For more details on this table, please refer to the 2021 experience study report from November 2021 that can be found on the CalPERS w ebsite.
872
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-63-
11) DEFINED BENEFIT PENSION PLAN, (continued)

B) Net Pension Liability, (continued)

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.

The expected real rates of return by asset class are as follows:

Asset Class1
Current Target
Allocation Real Return1,2
Global equity - cap-weighted 30.0% 4.54%
Global equity - non-cap-weighted 12.0% 3.85%
Private equity 13.0% 7.28%
Treasury 5.0% 0.27%
Mortgage-backed securities 5.0% 0.50%
Investment grate corporates 10.0% 1.56%
High yield 5.0% 2.27%
Emerging market debt 5.0% 2.48%
Private debt 5.0% 3.57%
Real assets 15.0% 3.21%
Leverage -5.0% -0.59%
Total 100%
2 Figures are based on the 2021 Asset Liability Management study 1An expected inflation of 2.30% is used for this period.

873
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-64-
11) DEFINED BENEFIT PENSION PLAN, (continued)

B) Net Pension Liability, (continued)

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.

Subsequent Events
There were no subsequent events that would materially affect the results presented in this disclosure.

Pension Plan Fiduciary Net Position
Information about the pension plan’s assets, deferred outflows of resources, liabilities, deferred inflows of resources, and fiduciary net position are presented in CalPERS’ audited financial statements, which are publicly available reports that can be obtained at CalPERS’ website, at www.calpers.ca.gov. The plan’s fiduciary net position and additions to/deductions from the plan’s fiduciary net position have been determined on the same basis used by the pension plan, which is the economic resources measurement focus and the accrual basis of accounting. Benefits and refunds are recognized when due and payable in accordance with the terms of the plan. Investments are reported at fair value.

874
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-65-
11) DEFINED BENEFIT PENSION PLAN, (continued)

C) Changes in Net Pension Liability
Miscellaneous – Agent, Multiple-Employer Defined Benefit Pension Plan The following table shows the Plan’s change in net pension liability over the measurement period.

Total Pension
Liability
(a)
Plan Fiduciary
Net Position
(b)
Net Pension
Liability/(Asset)
(c) = (a) - (b)
Balance at: 6/30/2023 (VD) 174,895,623$ 121,303,459$ 53,592,164$ Changes Recognized for the
Measurement Period:
• Service Cost 2,704,732 - 2,704,732 • Interest on the Total
Pension Liability 11,905,249 - 11,905,249 • Differences between
Expected and Actual
Experience 1,298,099 - 1,298,099 • Contributions from
Employers - 5,966,773 (5,966,773) • Contributions from
Employees - 1,615,780 (1,615,780) • Net Investment Income - 11,741,594 (11,741,594) • Benefit Payments,
including Refunds of
Employee Contributions (10,012,482) (10,012,482) - • Administrative Expense - (98,705) 98,705 Net Changes during 2023-24 5,895,598 9,212,960 (3,317,362) Balance at: 6/30/2024 (MD) 180,791,221$ 130,516,419$ 50,274,802$ Increase (Decrease)
Valuation Date (VD), Measurement Date (MD).

Safety – Cost Sharing, Multiple-Employer Defined Benefit Pension Plan The following table shows the cost sharing, multiple-employer Plans’ proportionate share of the net pension liability over the measurement period.

Plan Total Pension
Liability
(a)
Plan Fiduciary Net
Position
(b)
Plan Net Pension
Liability
(c) = (a) - (b)
Balance at: 6/30/2023 (VD) 106,800,707$ 78,078,363$ 28,722,344$ Balance at: 6/30/2024 (MD) 113,865,377 85,571,766 28,293,611 Net changes during 2023-24 7,064,670$ 7,493,403$ (428,733)$ Valuation Date (VD), Measurement Date (MD).

Increase (Decrease)

875
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-66-
11) DEFINED BENEFIT PENSION PLAN (continued)

C) Changes in Net Pension Liability, (continued)

The City’s proportion of the net pension liability was determined by CalPERS using the output from the Actuarial Valuation System and the fiduciary net position, as provided in the CalPERS Public Agency Cost-Sharing Allocation Methodology Report, which is a publicly available report that can be obtained at CalPERS’ website, at www.calpers.ca.gov. The City’s proportionate share of the net pension liability for the safety plan as of the June 30, 2023 and 2024 measurement dates was as follows:

Safety Plan
Proportion - June 30, 2023 0.38425%
Proportion - June 30, 2024 0.38807%
Change - Increase (Decrease) 0.00382%
Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the City’s proportionate share of the net pension liability of each Plan as of the measurement date, calculated using the discount rate of 6.90 percent, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage-point lower (5.90 percent) or 1 percentage-point higher (7.90 percent) than the current rate:

Discount Rate - 1%
(5.90%)
Current Discount
Rate (6.90%)
Discount Rate + 1%
(7.90%)
Miscellaneous Plans'
Net Pension Liability 74,364,772$ 50,274,802$ 30,491,423$ Safety Plans' Net
Pension Liability 43,847,512$ 28,293,611$ 15,572,706$ 876
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-67-
11) DEFINED BENEFIT PENSION PLAN, (continued)

C) Changes in Net Pension Liability, (continued)

Amortization of Deferred Outflows and Deferred Inflows of Resources Gains and losses related to changes in total pension liability and fiduciary net position are recognized in pension expense systematically over time.

The first amortized amounts are recognized in pension expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to pensions and are to be recognized in future pension expense.

The amortization period differs depending on the source of the gain or loss:

Net difference between
projected and actual earnings
on pension plan investments
5 year straight-line amortization
All other amounts Straight-line amortization over the expected average remaining services lives (EARSL) of
all members that are provided with benefits
(active, inactive and retired) as of the
beginning of the measurement period

The remainder of this page left intentionally blank
877
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-68-
11) DEFINED BENEFIT PENSION PLAN, (continued)

D) Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions

Miscellaneous – Agent, Multiple-Employer Defined Benefit Pension Plan As of the start of the measurement period (July 1, 2023), the City’s net pension liability was $53,592,164. For the measurement period ending June 30, 2024 (the measurement date), the City incurred a pension expense of $8,490,282 for the Plan.

Safety – Cost Sharing, Multiple-Employer Defined Benefit Pension Plan As of the start of the measurement period (July 1, 2023), the City’s net pension liability for the safety plans was $28,722,344. For the measurement period ending June 30, 2024 (the measurement date), the City incurred a pension expense of $6,370,122 for the Plan.

The aggregate amount of pension expenses for the Miscellaneous and Safety plans for the measurement period ending June 30, 2024 is $14,860,404.

As of June 30, 2025, the City has deferred outflows and deferred inflows of resources related to pensions as follows:

Deferred
Outflows of
Resources
Deferred Inflows
of Resources
Deferred
Outflows of
Resources
Deferred
Inflows of
Resources
Differences between Expected and
Actual Experience 1,907,352 $ - $ 2,309,010$ (75,076) $ Changes of Assumptions - - 697,096 - Net Difference between Projected and
Actual Earnings on Pension Plan
Investments 1,724,228 - 1,367,584 - Change in Employer's Proportion - - 700,366 - Differences between the employer's
contributions and the employer's
proportionate share of contributions - - 326,617 (339,377) Pension Contributions Subsequent to
Measurement Date 6,663,813 - 3,906,818 - 10,295,393$ - $ 9,307,491$ (414,453)$ SafetyMiscellaneous

878
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-69-
11) DEFINED BENEFIT PENSION PLAN, (continued)

D) Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions, (continued)

These amounts above are net of outflows and inflows recognized in the 2023-24 measurement period expense. Contributions subsequent to the measurement date of $6,663,813 and $3,906,818 reported with deferred outflows of resources will be recognized as a reduction of the net pension liability in the upcoming fiscal year. Other amounts reported as deferred outflows and deferred inflows of resources related to pensions will be recognized in future pension expense as follows:

Fiscal Year
Ended
June 30, Miscellaneous Safety
2026 $ 1,365,887 2,056,200$
2027 3,511,137 3,344,365
2028 (552,914) 53,580
2029 (692,530) (467,925)
2030 - -
Thereafter - -
Deferred Outflows/(Inflows) of
Resources, Net

E) Payable to the Pension Plan

At June 30, 2025, the City reported a payable of $0 for the outstanding amount of contributions to the pension plan required for the year ended.

F) Defined Contribution Pension Plan

The City provides pension benefits for all of its part-time employees through a defined contribution plan. In a defined contribution plan, benefits depend solely on amounts contributed to the plan plus investment earnings. The plan is administered as part of the City’s 457 plan. All part-time employees are eligible to participate from the date of employment.

Federal legislation requires contributions of at least 7.5% to a retirement plan, and the City Council has resolved to pay 1.9% for City employees of the required contribution. The City’s contributions for each employee (and interest earned by the accounts) are fully vested immediately.

For the year ended June 30, 2025, the City’s total payroll and covered payroll for part-time employees was $1,893,429. The City made employer contributions of $35,975 (1.9% of current covered payroll), and employees contributed $106,032 (5.6% of current covered payroll).

879
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-70-
12) OTHER POSTEMPLOYMENT BENEFITS (OPEB)

A) General Information about the OPEB Plans

Plan Description
Safety – Single Employer Defined Benefit Plan

Effective January 12, 1999, the City of San Marcos City Council and the San Marcos Fire Protection District (SMFPD) Board of Directors authorized the merger of the City and SMFPD contracts for the California Public Employees’ Retirement System (CalPERS) for the Safety employees. For Safety retirees who retired before the merger, the City continues to contribute the amount necessary to pay the full cost of enrollment in the CalPERS Health Plan, including the enrollment of eligible family members, as passed by resolution by the SMFPD Board of Directors on April 12, 1977. The surviving spouse of an eligible retiree who elected spouse coverage under CalPERS is eligible for the employer contribution upon the death of the retiree. For Safety retirees who retired after the merger, the City provides the minimum required employer contribution under the CalPERS Health Plan for eligible retirees and surviving spouses in receipt of a pension benefit from CalPERS. The surviving spouse of an eligible retiree who elected spouse coverage under CalPERS is eligible for the employer contribution upon the death of the retiree. The scheduled minimum required employer contributions for each eligible retiree under the CalPERS Health Plan are $158 per month in 2025.

Miscellaneous – Single Employer Defined Benefit Plan

For non-safety or Miscellaneous employees, the City offers retirees and eligible dependents to continue on the City’s miscellaneous employee health plan until they are eligible for Medicare benefits. Retirees may participate in the health plan at their own cost.

The City does not issue any financial report for the plans. A separate financial report is not prepared for the plans.

Employees Covered
As of the June 30, 2024 measurement date, the following current and former employees were covered by the benefit terms under the Plan:

Active employees 229
Inactive employees or beneficiaries currently receiving benefits 27 Inactive employees entitled to, but not yet receiving benefits 23 Total 279

880
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-71-
12) OTHER POSTEMPLOYMENT BENEFITS (OPEB), (continued)

A) General Information about the OPEB Plans, (continued)

Contributions
The City pays the portion of the employer related health insurance premiums for the current retirees and their spouses/dependents on a pay-as-you-go basis (no prefunding). For fiscal year ended June 30, 2025, the City paid $232,942 for other postemployment benefits.

B) Total OPEB Liability

The City’s total OPEB liability was measured as of June 30, 2024 and the total OPEB liability used to calculate the total OPEB liability was determined by an actuarial valuation dated June 30, 2024 to determine the June 30, 2025 total OPEB liability, based on the following actuarial methods and assumptions:

Actuarial Assumptions June 30, 2024 Measurement Date
Actuarial Valuation Date June 30, 2024
Contribution Policy No pre-funding
Discount Rate 3.93% at June 30, 2024 (Bond Buyer 20-Bond Index)

3.65% at June 30, 2023 (Bond Buyer 20-Bond Index)
General Inflation 2.50% annually
Mortality, Retirement,
Disability, Termination
Based on CalPERS 2000-2019 Experience Study
Salary increases Aggregate - 2.75% annually
Merit - CalPERS 2000-2019 Experience Study
Medical Trend Non-Medicare – 7.90% for 2026, decreasing to an ultimate rate of 3.45% in 2076
Medicare (Non-Kaiser) – 6.90% for 2026, decreasing
to an ultimate rate of 3.45% in 2076
Medicare (Kaiser) – 5.65% for 2026, decreasing to an
ultimate rate of 3.45% in 2076
PEMHCA Minimum Increase 3.50%
Healthcare ParticipationCurrent Actives:

Miscellaneous - 60%
Safety - 60%
Current Retirees:
100% if covered, 5% re-elect PEMHCA at 65, if
waived
Discount Rate
A discount rate of 3.93 percent was used in the valuation for measurement date June 30, 2024.
881
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-72-
12) OTHER POSTEMPLOYMENT BENEFITS (OPEB), (continued)

B) Total OPEB Liability, (continued)

Changes in the Total OPEB Liability
The changes in the total OPEB liability for the Plan are as follows:

Total OPEB
Liability
Balance at June 30, 2024
(6/30/23 measurement date) 7,392,590$
Changes recognized for the measurement period:

Service cost 422,486
Interest 281,000
Differences between expected and
actual experience (1,549,852)
Changes of assumptions (443,919)
Benefit payments (232,942)
Net changes (1,523,227)
Balance at June 30, 2025
(6/30/24 measurement date) 5,869,363$
Sensitivity of the total OPEB Liability to Changes in the Discount Rate The following presents the total OPEB liability of the City if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate, for measurement period ended June 30, 2024:
1% Decrease
(2.93%)
Current Discount
Rate (3.93%)
1% Increase
(4.93%)
Total OPEB Liability 6,644,712$ 5,869,363$ 5,226,817$ Sensitivity of the Total OPEB Liability to Changes in the Health Care Cost Trend Rates The following presents the total OPEB liability of the City if it were calculated using health care cost trend rates that are one percentage point lower or one percentage point higher than the current rate, for measurement period ended June 30, 2024:
1% Decrease
Current Healthcare
Cost Trend Rates 1% Increase
Total OPEB Liability 5,077,278$ 5,869,363$ 6,863,452$ 882
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-73-
12) OTHER POSTEMPLOYMENT BENEFITS (OPEB), (continued)

B) Total OPEB Liability, (continued)

OPEB Plan Fiduciary Net Position
As the City is not prefunding with an OPEB trust, Plan Fiduciary Net Position was $0 at the June 30, 2024 measurement date. The City does not have assets accumulated in a trust that meets the criteria of GASB 75 to pay related benefits.

Recognition of Deferred Outflows and Deferred Inflows of Resources Gains and losses related to changes in total OPEB liability and fiduciary net position are recognized in OPEB expense systematically over time. Amounts are first recognized in OPEB expense for the year the gain or loss occurs. 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 net difference between projected and actual earnings on OPEB plan investments is amortized using the straight-line method over 5 years, while all other amounts are amortized over the expected average remaining service lifetime (EARSL) of plan participants.

OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB For the fiscal year ended June 30, 2025, the City recognized OPEB income of $10,806. As of fiscal year ended June 30, 2025, the City reported deferred outflows of resources related to OPEB from the following sources:

Deferred Outflows
of Resources
Deferred Inflows of
Resources
Changes between expected and actual experience $ 190,954 $ (3,304,899) Changes of assumptions 852,076 (1,781,589) Contributions to OPEB plan subsequent
to the measurement date 214,822 -
Total 1,257,852 $ (5,086,488)$

883
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-74-
12) OTHER POSTEMPLOYMENT BENEFITS (OPEB), (continued)

B) Total OPEB Liability, (continued)

The $214,822 reported as deferred outflows of resources related to contributions subsequent to the June 30, 2024 measurement date will be recognized as a reduction of the total OPEB liability during the fiscal year ending June 30, 2026. Other amounts reported as deferred outflows or inflows of resources related to OPEB will be recognized as expense as follows:

Fiscal Year
Ended June 30
Deferred
Outflows/(Inflows)
of Resources
2026 (665,998)$
2027 (618,998)
2028 (538,052)
2029 (431,271)
2030 (571,916)
Thereafter (1,217,223) 13) INSURANCE

A) California Joint Powers Insurance Authority

(1) Description of Self-Insurance Pool Pursuant the Joint Powers Agreement

The City of San Marcos is a member of the CALIFORNIA JOINT POWERS INSURANCE AUTHORITY (Authority). The Authority is composed of 126 California public entities and is organized under a joint powers agreement pursuant to California Government Code §6500 et seq. The purpose of the Authority is to arrange and administer programs for the pooling of self-insured losses, to purchase excess insurance or reinsurance, and to arrange for group purchased insurance for property and other lines of coverage. The California JPIA began covering claims of its members in 1978. Each member government has an elected official as its representative on the Board of Directors. The Board operates through a nine-member Executive Committee.

(2) Self-Insurance Programs of the Authority

Each member pays an annual contribution at the beginning of the coverage period. The total funding requirement for primary self-insurance programs is based on an actuarial analysis.

Costs are allocated to individual agencies based on payroll and claims history, relative toother members of the risk-sharing pool.

884
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-75-
13) INSURANCE, (continued)

A) California Joint Powers Insurance Authority, (continued)

Primary Liability Program

Claims are pooled separately between police and general government exposures. (1) The payroll of each member is evaluated relative to the payroll of other members. A variable credibility factor is determined for each member, which establishes the weight applied to payroll and the weight applied to losses within the formula. (2) The first layer of losses includes incurred costs up to $100,000 for each occurrence and is evaluated as a percentage of the pool’s total incurred costs within the first layer. (3) The second layer of losses includes incurred costs from $100,000 to $500,000 for each occurrence and is evaluated as a percentage of the pool’s total incurred costs within the second layer. (4) Incurred costs from $500,000 to $50 million, are distributed based on the outcome of cost allocation within the first and second loss layers.

The overall coverage limit for each member, including all layers of coverage, is $50 million per occurrence. Subsidence losses also have a $50 million per occurrence limit. The coverage structure is composed of a combination of pooled self-insurance, reinsurance, and excess insurance. Additional information concerning the coverage structure is available on the Authority’s website: https://cjpia.org/coverage/risk-sharing-pools/

(3) Purchased Insurance
Pollution Legal Liability Insurance
The City of San Marcos participates in the pollution legal liability insurance program which is available through the Authority. The policy covers sudden and gradual pollution of scheduled property, streets, and storm drains owned by the City of San Marcos. Coverage is on a claims-made basis. There is a $250,000 deductible. The Authority has an aggregate limit of $20 million.

Property Insurance

The City of San Marcos participates in the all-risk property protection program of the Authority. This insurance protection is underwritten by several insurance companies. City of San Marcos property is currently insured according to a schedule of covered property submitted by the City of San Marcos to the Authority. City of San Marcos property currently has all-risk property insurance protection in the amount of $281,230,009. There is a $10,000 deductible per occurrence except for non-emergency vehicle insurance which has a $2,500 deductible.

885
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-76-
13) INSURANCE, (continued)
A) California Joint Powers Insurance Authority, (continued) Earthquake and Flood Insurance
The City of San Marcos purchases earthquake and flood insurance on a portion of its property. The earthquake insurance is part of the property protection insurance program of the Authority. City of San Marcos property currently has earthquake protection in the amount of $192,997,613. There is a deductible of 5% per unit of value with a minimum deductible of$100,000.

Crime Insurance

The City of San Marcos purchases crime insurance coverage in the amount of $1,000,000 with a $2,500 deductible. The fidelity coverage is provided through the Authority.

Special Event Tenant User Liability Insurance

The City of San Marcos further protects against liability damages by requiring tenant users of certain property to purchase low-cost tenant user liability insurance for certain activities on agency property. The insurance premium is paid by the tenant user and is paid to the City of San Marcos according to a schedule. The City of San Marcos then pays for the insurance. The insurance is facilitated by the Authority.

(4) Adequacy of Protection

During the past three fiscal years, none of the above programs of protection experienced settlements or judgments that exceeded pooled or insured coverage. There were also no significant reductions in pooled or insured liability coverage in 2024-25.

The remainder of this page left intentionally blank
886
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-77-
13) INSURANCE, (continued)

B) Public Agency Self-Insurance System (PASIS)

Workers Compensation

The City is a member of the Public Agency Self-Insurance System (PASIS) which is a joint powers authority of nine fire districts in San Diego County and the City of San Marcos.

PASIS’ purpose is to provide for payment of workers’ compensation claims, purchase claims examiner services, general counsel services and excess insurance coverage. Members are responsible for paying their own claims and related expenses.

For claims arising prior to July 1, 2001, the City was responsible for the first $250,000 of each loss. For claims arising during the year ended June 30, 2002, the deductible amount was $400,000. For claims arising between July 1, 2002 and June 30, 2009, the deductible amount was $500,000. The deductible for claims arising after June 30, 2009 is $300,000.

PASIS carries excess insurance through a commercial insurance company to cover amounts over the self-insured retention. PASIS requires the City to maintain a minimum of $300,000 cash deposit with PASIS. At June 30, 2025, the City had $412,599 on deposit with PASIS and claims payable of $1,273,756.

14) JOINT VENTURES

North County Dispatch Joint Powers Authority
The City is a member of the North County Dispatch Joint Powers Authority (the JPA). The JPA was formed on June 11, 1984, and other member agencies include the Rancho Santa Fe Fire Protection District, the North County Fire Protection District and the cities of Vista, Solana Beach, Oceanside, Encinitas, and Carlsbad. The purpose of the JPA is to provide dispatching and emergency communication services for fire protection, security, and medical services. Each member provides an annually determined contribution towards the ongoing operation. In the event of dissolution of the JPA, available assets shall be distributed to the member agencies in proportion to the aggregate contribution made by each member agency during the entire term of the agreement.

The activities of the JPA are supervised by a board consisting of eight directors who are appointed by each member’s governing body.
887
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-78-
14) JOINT VENTURES, (continued)

North County Dispatch Joint Powers Authority, (continued) Summarized audited information of the JPA for the fiscal year ended June 30, 2025, the most current available information, is as follows:

Assets $ 13,293,203
Deferred outflows 1,128,319
Liabilities (2,657,626)
Deferred inflows (397,506)
Net position $ 11,366,390
Revenues $ 8,024,936
Expenses (7,448,481)
Change in net position $ 576,455
The City’s share of the JPA’s assets, liabilities, equity, and changes therein during the year is not available and is not material to the City’s financial statements. Separate financial statements of the JPA are available at 16936 El Fuego Drive (P.O. Box 410), Rancho Santa Fe, CA 92067.

Rancheros Commercial Park
The former City of San Marcos Redevelopment Agency (the Agency) entered into a Disposition and Development Agreement with LBP Partnership on March 6, 1989. In accordance with that Agreement, the Agency and LBP Partnership formed a Limited Partnership known as Rancheros Commercial Park, a Limited Partnership. The purpose of this Limited Partnership was to engage in the business of leasing, developing, constructing, maintaining and operating certain commercial/industrial property. Each of the Partners leased to the Partnership certain real property owned by the General and Limited Partners. The capital contributions to be made by Partners were to be adjusted to match, on a percentage basis, the proportionate land areas leased by the Partners to the Partnership. The net profits of the Partnership are allocated to, and net losses suffered by the Partnership are borne by, the Partners in proportion to their respective contributions of capital and real estate. On March 26, 2010, the Agency’s interest in this partnership was transferred to the City. The City’s equity interest in this Limited Partnership is $7,894,166 as of June 30, 2025. Separate financial statements for this joint venture are not available.

888
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-79-
15) ASSESSMENT DISTRICT, COMMUNITY FACILITIES DISTRICTS BONDS AND CONDUIT DEBT

Bonds issued to finance public improvement projects in certain assessment districts and community facilities districts are liabilities of the property owners and are secured by liens against the assessed property. The City acts as an agent for the collection of special assessments from the property owners and the payment of principal and interest to the bondholders. The City has no obligation or duty to pay any delinquency out of any available funds of the City. Neither the faith and credit nor the taxing power of the City is pledged to the payment of the bonds. Therefore, none of the following obligations are included in the accompanying financial statements. The balance in the reserve account at the end of the fiscal year for each bond issue was above the reserve requirement.

Amount Outstanding
of Issue June 30, 2025
City of San Marcos Community Facilities District
No. 88-1, Special Tax Refunding Bonds,
Series 2012, (Improvement Area No. 1, 2, 3 ) $ 22,425,000 3,600,000$ City of San Marcos Community Facilities District
No. 99-01, Special Tax Refunding Bonds,
Series 2021 (Improvement Area C2B, I1, I2) 9,720,000 7,500,000 City of San Marcos Community Facilities District
No. 2002-01 (University Commons), Special
Tax Refunding Bonds, Series 2021
(Improvement Area No. 1) 10,575,000 7,985,000
City of San Marcos Community Facilities District
No. 99-01, 2018 Special Tax Refunding
Bonds (Improvement Area D2L, D2U, D3,
D4, E1, E2, H2, H3) 16,955,000 12,620,000
City of San Marcos Community Facilities District
No. 99-01, 2024 Special Tax Refunding
Bonds (Improvement Area A1, A2, B1, B2,
C1, D1, F2/V2, G3, H1A, H1B, J, M, N1, N2,
R1, R2, V1A) 17,595,000 17,595,000
Total 77,270,000 $ 49,300,000$
Type of Debt
889
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-80-
15) ASSESSMENT DISTRICT, COMMUNITY FACILITIES DISTRICTS BONDS AND CONDUIT DEBT, (continued)

The City, the Successor Agency to the former Redevelopment Agency, the San Marcos Public Facilities Authority, San Marcos Public Financing Authority, and the California Mobile Home Financing Authority have issued bonds to provide financing for the acquisition, construction and/or development of various residential dwelling units, industrial facilities, school facilities, facilities for the elderly and rental housing for low and moderate income persons. However, neither the faith and credit nor the general taxing power of the City, Successor Agency or Authorities have been pledged to the payments of the bonds. Furthermore, the City, Agency or Authorities do not have any obligations for the payments of the bonds in the case of default.

Therefore, none of the following obligations are included in the accompanying financial statements.

OutstandingType of Debt June 30, 2025$39,815,000 Successor Agency to the San MarcosRedevelopment Agency 2018 Pass-Through Tax RevenueRefunding Bonds Project Area #3 - San Marcos UnifiedSchool District $ 32,240,000

16) COMMITMENTS AND CONTINGENT LIABILITIES

The City is a defendant in certain legal actions arising in the normal course of operations. The amount of loss, if any, that may result from those actions cannot be reasonably estimated at this time.

17) SUCCESSOR AGENCY TRUST FOR ASSETS OF FORMER REDEVELOPMENT AGENCY

On December 29, 2011, the California Supreme Court upheld Assembly Bill 1X 26 (the Bill) that provides for the dissolution of all redevelopment agencies in the State of California. This action impacted the reporting entity of the City of San Marcos that previously had reported a redevelopment agency within the reporting entity of the City as a blended component unit.

The Bill provides that upon dissolution of a redevelopment agency, either the City or another unit of local government will agree to serve as the “successor agency” to hold the assets until they are distributed to other units of state and local government. On January 10, 2012, the City Council elected to become the Successor Agency for the former Redevelopment Agency in accordance with the Bill as part of City resolution number 2012-7607. 890
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-81-
17) SUCCESSOR AGENCY TRUST FOR ASSETS OF FORMER REDEVELOPMENT AGENCY, (continued)

After enactment of the law, which occurred on June 28, 2011, redevelopment agencies in the State of California cannot enter into new projects, obligations or commitments. Subject to the control of a newly established oversight board, remaining 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).

In future fiscal years, successor agencies will only be allocated revenue in the amount that is necessary to pay the estimated annual installment payments on enforceable obligation of the former redevelopment agency until all enforceable obligations of the prior redevelopment agency have been paid in full and all assets have been liquidated.

The Bill directs the State Controller of the State of California to review the propriety of any transfers of assets between redevelopment agencies and other public bodies that occurred after January 1, 2011. If the public body that received such transfers is not contractually committed to a third party for the expenditure or encumbrance of those assets, the State Controller is required to order the available assets to be transferred to the public body designated as the successor agency by the Bill.

Management believes, in consultation with legal counsel, that the obligations of the former Redevelopment Agency due to the City are valid enforceable obligations payable by the Successor Agency Trust under the requirements of the Bill. The ability of the Successor Agency to repay the City is dependent upon the sufficiency of available tax revenues to fund such repayment. Revenues are only available for repayment to the extent that all other obligations of the Successor Agency have been provided for in accordance with a complex computation set forth in California Assembly Bill No. 1484. The City believes that there will be sufficient tax revenue to permit eventual repayment in full to the City.

After the date of dissolution, the assets and activities of the dissolved Redevelopment Agency are reported in a fiduciary fund (private-purpose trust fund) in the financial statements of the City, pending the liquidation and distribution of the assets and liabilities of the former Redevelopment Agency to other taxing entities in accordance with state law. 891
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-82-
17) SUCCESSOR AGENCY TRUST FOR ASSETS OF FORMER REDEVELOPMENT AGENCY, (continued)

Net Investment in Direct Financing Lease
In fiscal year 1992-93, the former San Marcos Redevelopment Agency entered into a direct financing lease with the San Marcos Unified School District whereby the Agency had agreed to lease 50% of the Public Works Yard to the School District, with a purchase option at the end of the lease. The lease was amended in fiscal year 2001-02 due to the refinancing of the Civic Center/Public Works Yard Bond issue. Upon the dissolution of the Redevelopment Agency, this lease was transferred to the Successor Agency of the former Redevelopment Agency.

The terms of the amended lease call for semi-annual payments of $98,906 including interest at

5.87% each July and January 15 commencing July 15, 2002 to July 15, 2031 and payments of $62,663 with no interest from July 15, 2002 to July 15, 2022. A net investment in direct financing lease has been recorded in the Successor Agency Trust to account for the net present value of the lease payments at June 30, 2025.

The following lists the components of the net investment in the direct financing lease as of June 30, 2025:

Total minimum lease payments to be received $ 2,828,982 Less unearned income (1,776,560)
Net investment in direct financing lease $ 1,052,422 At June 30, 2025, the future minimum lease payments are as follows:

Year Ending
June 30, Amount
2026 137,802 $
2027 146,010
2028 154,706
2029 163,921
2030 173,685
2031-2032 276,298
Total 1,052,422 $

892
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-83-
17) SUCCESSOR AGENCY TRUST FOR ASSETS OF FORMER REDEVELOPMENT AGENCY, (continued)

Long-Term Liabilities
The following is a summary of changes in long-term liabilities for the year ended June 30, 2025:

Balance Balance Due Within
June 30, 2024 Additions Deletions June 30, 2025 One Year Bonds payable 177,795,000$ - $ (13,765,000)$ 164,030,000$ 14,310,000$ Plus (less) deferred amounts:

Issuance premium 7,081,486 - (505,821) 6,575,665 - Issuance discount (1,102,099) 157,442 - (944,657) - Total bonds payable 183,774,387 157,442 (14,270,821) 169,661,008 14,310,000 Cooperation agreement 23,275,296 - - 23,275,296 - Total 207,049,683 $ 157,442 $ (14,270,821)$ 192,936,304$ 14,310,000$

The remainder of this page left intentionally blank
893
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-84-
17) SUCCESSOR AGENCY TRUST FOR ASSETS OF FORMER REDEVELOPMENT AGENCY, (continued)

Bonds Payable
$ 23,300,000
51,345,000
89,385,000
Total bonds payable 164,030,000$
In July 2015, the Successor Agency to the San Marcos Redevelopment Agency (Agency) issued $84,710,000 Tax Allocation Refunding Bonds, Series 2015A, to refund certain outstanding obligations of the Agency.

The bonds consists of serial bonds of $84,710,000 maturing from 2016 to 2034 on October 1 in annual installments of $2,705,000 to $6,985,000.

Interest is payable semi-annually on October 1 and April 1 commencing October 1, 2015 at rates ranging from 2.00% to 5.00%. Bonds maturing on and after October 1, 2026 are subject to redemption in whole or in part at the option of the Agency on any date on or after October 1, 2025. An original issue premium of $12,381,067 is being amortized over the life of the debt. The reserve requirement was fully funded at the end of the fiscal year.

In July 2015, the Successor Agency to the San Marcos Redevelopment Agency (Agency) issued $139,285,000 Taxable Tax Allocation Refunding Bonds, Series 2015B, to refund certain outstanding obligations of the Agency. The bonds consist of serial bonds of $44,160,000 maturing from 2016 to 2025 in annual installments of $5,125,000 to $6,410,000 and term bonds of $95,125,000 maturing from 2024 to 2038. Interest is payable semi-annually on October 1 and April 1 commencing October 1, 2015 at rates ranging from 1.09% to 5.002%. Bonds maturing on or after October 1, 2026, other than the Term Bonds maturing on October 1, 2029, are subject to optional redemption, in whole or in part, on any date on or after October 1, 2025. Bonds maturing on October 1, 2024, October 1, 2027, October 1, 2029, October 1, 2034, and October 1 , 2038 are subject to redemption in whole, or in part by lot, on October 1, of each year commencing October 1, 2023. A net original discount of $747,191 is being amortized over the life of the debt. The reserve requirement was fully funded at the end of the fiscal year.

In December 2017, the Successor Agency to the San Marcos Redevelopment Agency (Agency) issued $47,800,000 Tax Allocation Refunding Bonds, Series 2017, to refund the outstanding $52,805,000 San Marcos Redevelopment Agency Housing Set-Aside Tax Allocation Bonds, Series 2010, (Taxable). The bonds consist entirely of serial bonds of $47,800,000 maturing from 2018 to 2030 in annual installments of $3,150,000 to $4,595,000. Interest is payable semi-annually on April 1 and October 1 commencing April 1, 2018 at rates ranging from 1.5% to

3.25%. Bonds maturing on or after October 1, 2028 are subject to optional redemption, in whole or in part, on any date on or after October 1, 2027. A discount of $1,000,315 is being amortized over the life of the debt. The reserve requirement was met by the issuance of a municipal bond debt service reserve insurance policy issued by Assured Guaranty Municipal Corp. at the end of the fiscal year.

894
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-85-
17) SUCCESSOR AGENCY TRUST FOR ASSETS OF FORMER REDEVELOPMENT AGENCY, (continued)

Bonds Payable, (continued)
In January 2011, the former Redevelopment Agency issued $52,805,000 2010 Tax Allocation Bonds to finance costs of low and moderate income housing projects, including the acquisition of land and improvements and the construction of certain infrastructure improvements. The bonds consist of serial bonds of $10,590,000 maturing from 2013 to 2021 in annual installments of $1,655,000 to $2,565,000 and term bonds of $42,215,000 maturing from 2018 to 2030.

Interest is payable semi-annually on April 1 and October 1 commencing April 1, 2011 at rates ranging from 3.25% to 8.5%.

These bonds were paid in full in the current year by the Successor Agency to the San Marcos Redevelopment Agency Taxable Tax Allocation Refunding Bonds, Series 2017. As a result of the current refunding, the Successor Agency decreased its debt service cash flow by $15,193,410, resulting in an economic gain of $7,052,139 (calculated as the difference between the debt service payments under the old and new debt discounted to present value using the effective interest rate).

Bond debt service requirements to maturity are as follows:

Year Ending
June 30
2026 14,310,000$ 9,291,522$ 23,601,522$
2027 15,210,000 8,604,097 23,814,097
2028 15,825,000 7,848,897 23,673,897
2029 15,955,000 7,058,497 23,013,497
2030 16,215,000 6,220,411 22,435,411
2031-2035 60,995,000 15,537,496 76,532,496
2036-2040 25,520,000 2,830,634 28,350,634
Total 164,030,000$ 57,391,554$ 221,421,554$
TotalPrincipal Interest

895
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-86-
17) SUCCESSOR AGENCY TRUST FOR ASSETS OF FORMER REDEVELOPMENT AGENCY, (continued)

Cooperation Agreement
In fiscal year 1993-94, the former Redevelopment Agency entered into a cooperation agreement with the County of San Diego (the County) to alleviate any financial burden or detriment caused to the County as a result of amending the Redevelopment Plan for Project Area No. 1. The amount owed to the County increases each year by an annual amount equal to the County’s portion of actual Agency tax revenue after deducting the housing set-aside. The unpaid principal and interest amount bears a 4% annual interest rate between fiscal year 1993-94 and the trigger year (the fiscal year in which the amount of tax revenue that has been allocated and paid to the Agency exceeds the amount of $100,000,000) and a floating interest rate thereafter. Payments consisting of 68% of the County’s portion of tax increment are to be made annually beginning in the trigger year. Beginning in fiscal year 2012-13, the Agency is to annually pay the County the following percentages of gross Agency tax revenue:
2018-19 through 2022-23 30%
2023-24 through 2027-28 35%
2028-29 through 2032-33 40%
2033-34 through 2037-38 45%
2038-39 and thereafter 50%
$ 23,275,296 Once the County has been fully paid all principal and interest, if theAgency is still entitled to receive Agency tax revenue, annualpayments to the County will equal the County’s portion afterdeducting the housing set-aside.

Subsequent Event
On July 10, 2025, the Successor Agency issued Tax Allocation Refunding Bonds, Series 2025A to refund the Tax Allocation Refunding Bonds, Series 2015A for a total of $43,360,000, with an issue premium of $4,248,446. The Successor Agency used $5,095,825 of funds held in the fiscal agent accounts to refund the total outstanding bonds. The Department of Finance issued a letter approving the issuance of the 2025A bonds on June 6, 2025.

896
City of San Marcos
Notes to Basic Financial Statements
For the Year Ended June 30, 2025

-87-
18) OTHER REQUIRED NOTE DISCLOSURES
Deficit Fund Balances
As of June 30, 2025, the following funds presented a deficit fund balance.

Amount
Capital Improvements Fund (12,279,724) $
Special Revenue Funds
Street Lighting District (1,694,754) $
Senior Nutrition Grant (274,444)
Governmental Funds - Major Funds
Governmental Funds - Non-Major

The deficit fund balances will be remedied by requesting reimbursement of CIP expenses from various grants.

Expenditures in Excess of Appropriations
For the year ended June 30, 2025 the following funds had expenditures in excess of appropriations.

Final
Budget Expenditures Excess
Special Revenue Funds:

Street Lighting District 1,788,679 $ 1,909,326$ (120,647)$ Congestion Management CFD 171,000 178,086 (7,086) Governmental Funds - Non-Major Fund

19) PRIOR PERIOD RESTATEMENT

As of the fiscal year ended June 30, 2025, the City identified an error that caused them to restate the beginning fund balance for the General Fund and San Marcos Affordable Housing Fund. The error was a result of an outstanding interfund payment between these two funds that was repaid in previous years and not recorded. There was no net effect to fund balance as the interfund asset/liability net to each other. See below for the changes.

San Marcos
Affordable
General Fund Housing
Fund balance - beginning, as previously reported 122,319,587$ 49,682,353$ Correction of an error 902,562 (902,562)
Fund balance - beginning, as restated 123,222,149$ 48,779,791$

897

REQUIRED SUPPLEMENTARY

INFORMATION

898

This page intentionally left blank.

899
City of San Marcos
Required Supplementary Information
Schedule of Changes in Net Pension Liability and Related Ratios Last Ten Years
-88-
Miscellaneous Plan

Measurement Measurement Measurement Measurement
Period Period Period Period
6/30/2015 6/30/2016 6/30/2017 6/30/2018

TOTAL PENSION LIABILITY
Service Cost 2,559,947 $ 2,553,229$ 2,805,674$ 2,898,829$ Interest 8,083,219 8,584,986 8,918,976 9,287,287 Changes of Benefit Terms - - - - Difference Between Expected and Actual Experience (2,717,435) 898,809 (697,183) 283,350 Changes of Assumptions (2,000,140) - 7,506,452 (933,150) Benefit Payments, Including Refunds of Employee Contributions (4,587,163) (5,372,003) (5,737,609) (6,202,870) Net Change in Total Pension Liability 1,338,428 6,665,021 12,796,310 5,333,446 Total Pension Liability - Beginning 111,394,182 112,732,610 119,397,631 132,193,941 Total Pension Liability - Ending (a) 112,732,610 $ 119,397,631$ 132,193,941$ 137,527,387$

PLAN FIDUCIARY NET POSITION
Net Plan to Plan Resource Movement - $ - $ - $ (225)$ Contributions - Employer 4,558,184 4,385,959 9,542,711 4,278,656 Contributions - Employee 1,302,378 1,348,496 1,169,316 1,126,769 Net Investment Income 1,709,531 438,181 8,627,538 7,721,226 Benefit Payments, Including Refunds of Employee Contributions (4,587,163) (5,372,003) (5,737,609) (6,202,870) Administrative Expense (85,688) (46,382) (113,479) (140,788) Other Miscellaneous Income/(Expense)1 - - - (267,358) Net Change in Fiduciary Net Position 2,897,242 754,251 13,488,477 6,515,410 Plan Fiduciary Net Position - Beginning 73,208,466 76,105,708 76,859,959 90,348,436 Plan Fiduciary Net Position - Ending (b) 76,105,708 $ 76,859,959$ 90,348,436$ 96,863,846$ Plan Net Pension Liability - Ending (a) - (b) 36,626,902 $ 42,537,672$ 41,845,505$ 40,663,541$ Plan Fiduciary Net Position as a Percentage of the Total Pension Liability 67.51% 64.37% 68.35% 70.43% Covered Payroll 14,085,514 $ 14,012,521$ 14,219,367$ 14,197,035$ Plan Net Pension Liability as a Percentage of Covered Payroll 260.03% 303.57% 294.29% 286.42% Notes to Schedule:

Changes in Benefit Terms: There were no changes to benefit terms that applied to all members of the Public Agency Pool. Additionally, the figures above do not include any liability impact that may have resulted from Golden Handshakes that occurred after the June 30, 2021 valuation date, unless the liability impact is deemed to be material to the Public Agency Pool.
900
City of San Marcos
Required Supplementary Information
Schedule of Changes in Net Pension Liability and Related Ratios (continued) Last Ten Years
-89-
Miscellaneous Plan, (continued)

Measurement Measurement Measurement Measurement Measurement Measurement Period Period Period Period Period Period
6/30/2019 6/30/2020 6/30/2021 6/30/2022 6/30/2023 6/30/2024 2,938,266$ 2,703,721$ 2,546,641$ 2,529,711$ 2,703,714$ 2,704,732$ 9,846,868 10,335,678 10,782,695 10,925,107 11,496,728 11,905,249 - - - - 154,718 - 2,125,402 1,290,024 1,095,442 (3,119,020) 3,456,996 1,298,099 - - - 5,709,463 - - (6,806,974) (7,435,808) (8,172,791) (8,593,937) (9,144,408) (10,012,482) 8,103,562 6,893,615 6,251,987 7,451,324 8,667,748 5,895,598 137,527,387 145,630,949 152,524,564 158,776,551 166,227,875 174,895,623 145,630,949$ 152,524,564$ 158,776,551$ 166,227,875$ 174,895,623$ 180,791,221$ -$ - $ - $ - $ - $ - $ 4,615,503 5,080,583 4,969,430 5,497,659 5,888,165 5,966,773 1,104,152 1,102,880 946,753 1,303,526 1,460,599 1,615,780 6,421,470 5,149,684 24,035,409 (9,733,183) 7,234,270 11,741,594 (6,806,974) (7,435,808) (8,172,791) (8,593,937) (9,144,408) (10,012,482) (69,124) (143,977) (105,770) (79,459) (85,264) (98,705) 225 - - - - - 5,265,252 3,753,362 21,673,031 (11,605,394) 5,353,362 9,212,960 96,863,846 102,129,098 105,882,460 127,555,491 115,950,097 121,303,459 102,129,098$ 105,882,460$ 127,555,491$ 115,950,097$ 121,303,459$ 130,516,419$ 43,501,851$ 46,642,104$ 31,221,060$ 50,277,778$ 53,592,164$ 50,274,802$

70.13% 69.42% 80.34% 69.75% 69.36% 72.19%
14,148,630$ 13,872,161$ 11,811,814$ 13,535,022$ 14,370,884$ 16,243,016$ 307.46% 336.23% 264.32% 371.46% 372.92% 309.52%
901
City of San Marcos
Required Supplementary Information
Schedule of Plan Contributions – Agent Plan
Last Ten Years
-90-
Miscellaneous Plan

Fiscal Year
Actuarially
Determined
Contribution
Contributions in
Relation to the
Actuarially
Determined
Contribution
Contribution
Deficiency
(Excess)
Employer's
Covered Payroll
Contributions as
a Percentage of
Covered Payroll
6/30/2016 3,975,080$ (3,975,080)$ - $ 14,012,521$ 28.37% 6/30/2017 4,499,034 (9,499,034) (5,000,000) 14,219,367 66.80% 6/30/2018 4,274,518 (4,274,518) - 14,197,035 30.11% 6/30/2019 4,613,016 (4,613,016) - 14,148,630 32.60% 6/30/2020 5,024,888 (5,024,888) - 13,872,161 36.22% 6/30/2021 6,321,721 (6,321,721) - 11,811,184 53.52% 6/30/2022 5,497,462 (5,497,462) - 13,535,022 40.62% 6/30/2023 5,888,164 (5,888,164) - 14,370,884 40.97% 6/30/2024 5,966,773 (5,966,773) - 14,829,363 40.24% 6/30/2025 6,663,813 (6,663,813) - 16,243,016 41.03% Notes to Schedule:

Actuarial Cost Method
Amortization Method/Period
Asset Valuation Method
Actuarial Assumptions:

Discount Rate
Inflation
Salary Increases
Mortality Rate Table
Post Retirement Benefit Increase The lesser of contract COLA or 2.30% until Purchasing Power Protection Allowance floor on purchasing power applies, 2.30% thereafter.

Fair value of assets
Entry Age Actuarial Cost Method
For details, see June 30, 2022, Funding Valuation Report.

The actuarial methods and assumptions used to set the actuarially determined contributions for Fiscal Year 2024-25 were from the June 30, 2022 Funding Valuation Report.

2.30%
Varies by Entry Age and Service
The mortality table used was developed based on CalPERS-specific data. The probabilities of mortality are based on the 2021 CalPERS Experience Study for the period from 2001 to 2019. Pre- retirement and Post-retirement mortality rates include generational mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries.

6.90%

902
City of San Marcos
Required Supplementary Information
Schedule of City’s Proportionate Share of the Plan’s Net Pension Liability and Related Ratios as of the Measurement Date
Last Ten Years
-91-
Safety Plan

Measurement Date
Employer's
Proportion of the
Collective Net
Pension Liability1
Employer's
Proportionate
Share of the
Collective Net
Pension Liability
Employer's
Covered Payroll
Employer's
Proportionate
Share of the
Collective Net
Pension
Liability as a
Percentage of
the Employer's
Covered Payroll
Pension Plan
Fiduciary Net
Position as a
Percentage of
the Total
Pension Liability
6/30/2015 0.166126% 11,402,729$ 6,725,963$ 169.53% 78.40% 6/30/2016 0.171957% 14,879,594 8,996,362 165.40% 74.06% 6/30/2017 0.175583% 17,413,036 6,816,670 255.45% 73.31% 6/30/2018 0.182753% 17,610,602 6,582,579 267.53% 75.26% 6/30/2019 0.190512% 19,521,871 6,690,455 291.79% 75.26% 6/30/2020 0.200112% 21,773,049 6,854,243 317.66% 75.10% 6/30/2021 0.222720% 12,045,303 6,838,996 176.13% 88.29% 6/30/2022 0.225200% 26,012,574 7,274,045 357.61% 76.68% 6/30/2023 0.384250% 28,722,344 7,428,741 386.64% 76.21% 6/30/2024 0.388070% 28,293,611 7,753,751 364.90% 78.08% 1 Proportion of the collective net pension liability represents the plan's proportion of PERF C, which includes both the Miscellaneous and Safety Risk Pools excluding the 1959 Survivors Risk Pool.

903
City of San Marcos
Required Supplementary Information
Schedule of Plan Contributions – Cost Sharing Plan
Last Ten Years
-92-
Safety Plan

Fiscal Year
Actuarially
Determined
Contribution
Contributions in
Relation to the
Actuarially
Determined
Contribution
Contribution
Deficiency
(Excess)
Employer's
Covered
Payroll
Contributions
as a
Percentage of
Covered Payroll
6/30/2016 1,976,541$ (1,976,541)$ - $ 8,996,362$ 21.97% 6/30/2017 1,550,376 (1,550,376) - 6,816,670 22.74% 6/30/2018 2,179,053 (2,179,053) - 6,582,579 33.10% 6/30/2019 2,456,542 (2,456,542) - 6,690,455 36.72% 6/30/2020 2,639,604 (2,639,604) - 6,854,243 38.51% 6/30/2021 2,878,444 (2,878,444) - 6,838,996 42.09% 6/30/2022 3,121,569 (3,121,569) - 7,274,045 42.91% 6/30/2023 3,268,116 (3,268,116) - 7,428,741 43.99% 6/30/2024 3,502,969 (3,502,969) - 7,753,751 45.18% 6/30/2025 3,906,818 (3,906,818) - 7,853,103 49.75% Notes to Schedule:

Change in Assumptions: There were no assumption changes in 2023 or 2024. Effective with the June 30, 2021, valuation date (June 30, 2022, measurement date), the accounting discount rate was reduced from 7.15% to 6.90%. In determining the long-term expected rate of return, CalPERS took into account long-term market return expectations as well as the expected pension fund cash flows. In addition, demographic assumptions and the price inflation assumption were changed in accordance with the 2021 CalPERS Experience Study and Review of Actuarial Assumptions. The accounting discount rate was 7.15% for measurement dates June 30, 2017, through June 30, 2021, and 7.65% for measurement dates June 30, 2015, through June 30, 2016.

Changes in Benefit Terms: There were no changes to benefit terms that applied to all members of the Public Agency Pool. However, individual employers in the Plan may have provided a benefit improvement to their employees such as Golden Handshakes, service purchases, and other prior service costs. Employers that have done so may need to report this information as a separate liability in their financial statement as CalPERS considers such amounts to be separately financed employer-specific liabilities. These employers should consult with their auditors. Additionally, the figures above do not include any liability impact that occurred after the June 30, 2023, valuation date, unless the liability impact is deemed to be material to the Public Agency Pool.

904
City of San Marcos
Required Supplementary Information
Schedule of Changes in the Total OPEB Liability and Related Ratios as of the Measurement Date
Last Ten Years*
-93-
Fiscal Year 2017-18 2018-19 2019-20 2020-21 2021-2022 2022-2023 Measurement Period 2016-17 2017-18 2018-19 2019-20 2020-2021 2021-2022 Total OPEB Liability
Service cost 600,000 $ 533,323$ 409,539$ 454,666$ 616,808$ 642,301$ Interest 248,000 302,110 269,366 272,594 226,597 235,445 Differences between expected and
actual experience - (1,812,466) - 407,944 - (2,128,594) Changes of assumptions (815,000) (130,218) 351,334 1,451,482 72,371 (1,818,843) Benefit payments (206,000) (267,000) (227,858) (266,812) (301,131) (287,522) Net change in total OPEB liability (173,000) (1,374,251) 802,381 2,319,874 614,645 (3,357,213) Total OPEB liability - beginning 8,212,000 8,039,000 6,664,749 7,467,130 9,787,004 10,401,649 Net OPEB liability - ending 8,039,000$ 6,664,749$ 7,467,130$ 9,787,004$ 10,401,649$ 7,044,436$ Plan fiduciary net position as a percentage
of the total OPEB liability 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Covered-employee payroll 25,017,697$ 24,297,000$ 23,281,622$ 21,370,676$ 24,093,404$ 23,289,922$ Total OPEB liability as a percentage of
covered-employee payroll 32.1% 27.4% 32.1% 45.8% 43.2% 30.2% Fiscal Year 2023-2024 2024-2025
Measurement Period 2022-2023 2023-2024
Total OPEB Liability
Service cost 420,635 $ 422,486$
Interest 260,144 281,000
Differences between expected and
actual experience - (1,549,852)
Changes of assumptions (99,929) (443,919)
Benefit payments (232,696) (232,942)
Net change in total OPEB liability 348,154 (1,523,227) Total OPEB liability - beginning 7,044,436 7,392,590 Net OPEB liability - ending 7,392,590$ 5,869,363$
Plan fiduciary net position as a percentage
of the total OPEB liability 0.0% 0.0%
Covered-employee payroll 23,721,844$ 26,432,421$
Total OPEB liability as a percentage of
covered-employee payroll 31.2% 22.2%
The City does not have assets accumulated in a trust that meet the criteria of GASB 75 to pay related benefits. * Fiscal year 2017-18 (measurement date June 30, 2017) was the first year of implementation, therefore, only eight years are presented.

905
City of San Marcos
Required Supplementary Information
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual General Fund
For the Year Ended June 30, 2025
-94-
Variance with
Original Final Actual Final Budget

REVENUES
Taxes and special assessments 34,004,093$ 35,590,145$ 35,244,221$ (345,924)$ Licenses and permits 7,453,350 7,313,426 8,077,371 763,945 Intergovernmental 23,298,650 27,099,536 27,220,157 120,621 Charges for services 21,062,063 22,435,426 23,722,245 1,286,819 Developer fees 18,000 18,000 8,711 (9,289) Fines and forfeitures 395,700 415,700 536,408 120,708 Investment and rental income 8,960,171 7,960,171 10,300,528 2,340,357 Miscellaneous 721,455 937,381 9,718,373 8,780,992 Total Revenues 95,913,482 101,769,785 114,828,014 13,058,229

EXPENDITURES
Current:

General government 29,612,405 33,752,687 32,106,827 1,645,860 Community development 8,372,582 9,845,462 7,988,343 1,857,119 Public safety 46,818,637 47,518,981 47,154,017 364,964 Highways, streets and parks 10,843,975 10,529,725 8,904,813 1,624,912 Culture and recreation 4,495,965 7,007,928 4,312,549 2,695,379 Capital outlay 300,000 2,961,670 3,597,864 (636,194) Debt service:

Principal 297,965 297,965 1,057,553 (759,588) Interest and fiscal charges 51,522 217,232 136,881 80,351 Total Expenditures 100,793,051 112,131,650 105,258,847 6,872,803 Excess (Deficiency) of Revenues
over Expenditures (4,879,569) (10,361,865) 9,569,167 19,931,032

OTHER FINANCING SOURCES (USES)
Lease/subscription acquisition - - 3,274,381 3,274,381 Proceeds from sale of capital assets - - 9,129 9,129 Transfers in 3,804,800 3,732,800 2,524,000 (1,208,800) Transfers out (1,177,000) (23,623,430) (5,819,002) 17,804,428 Total Other Financing Sources (Uses) 2,627,800 (19,890,630) (11,492) 19,879,138 Net Change in Fund Balance (2,251,769) (30,252,495) 9,557,675 39,810,170

FUND BA LANCE
Beginning, as restated 123,222,149 123,222,149 123,222,149 - Ending 120,970,380 $ 92,969,654$ 132,779,824$ 39,810,170$ Budgeted Amounts
906
City of San Marcos
Required Supplementary Information
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual San Marcos Affordable Housing
For the Year Ended June 30, 2025
-95-
Variance with
Original Final Actual Final Budget

REVENUES
Intergovernmental -$ 1,315,676$ 1,315,676$ - $ Developer fees 1,300,000 1,300,000 2,878,987 1,578,987 Investment and rental income 1,541,000 1,541,000 3,893,210 2,352,210 Miscellaneous 235,000 235,000 196,210 (38,790) Total Revenues 3,076,000 4,391,676 8,284,083 3,892,407

EXPENDITURES
Current:

General government 950,043 988,570 965,057 23,513 Community development 16,251,293 9,019,512 6,851,356 2,168,156 Total Expenditures 17,201,336 10,008,082 7,816,413 2,191,669 Excess (Deficiency) of Revenues
Over Expenditures (14,125,336) (5,616,406) 467,670 6,084,076

OTHER FINANCING SOURCES
Transfers out - (30,000) - 30,000 Total Other Financing Sources - (30,000) - 30,000 Net Change in Fund Balance (14,125,336) (5,646,406) 467,670 6,114,076

FUND BALA NCE
Beginning, as restated 48,779,791 48,779,791 48,779,791 - Ending 34,654,455 $ 43,133,385$ 49,247,461$ 6,114,076$ Budgeted Amounts

907
City of San Marcos
Notes to Required Supplementary Information
June 30, 2025
-96-
1) BUDGETARY INFORMATION

The City adopts an operating budget annually during June to be effective July 1, for the ensuing fiscal year. Budgeted expenditures are adopted through the passage of a resolution. This resolution constitutes the maximum authorized expenditures for the fiscal year and cannot legally be exceeded except by subsequent amendments of the budget by the City Council.

Budgets for all governmental type funds are adopted on a basis substantially consistent with generally accepted accounting principles (GAAP). Annual budgets are adopted for the General, Special Revenue, Debt Service Funds. Annual budgets are not adopted for all of the Capital Projects Funds. Therefore, budget and actual financial statements have not been prepared for them because a comparison of such budgetary amounts to annual revenues and expenditures is not meaningful.

The City uses an encumbrance system as an extension of normal budgetary accounting for the General, Special Revenue, and Capital Projects Funds. Under this system, purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of applicable appropriations. Encumbrances outstanding at year-end are recorded as reservations of fund balance since they do not constitute expenditures or liabilities. Outstanding encumbrances at year-end are automatically re-appropriated for the following year. Unencumbered and unexpended appropriations lapse at year-end unless City Council takes action in the form of a resolution to continue the appropriations into the following fiscal year.

908
City of San Marcos
Non-Major Governmental Funds
-97-
Special Revenue Funds
Special revenue funds are used to account for specific revenues that are legally restricted to expenditure for particular purposes.

The Gas Tax Fund is used to account for the Highway Users Tax revenues received from the State of California under Sections 2105, 2106, 2107, & 2107.5 of the California Streets and Highways Code.

These funds are used by the Public Works Street Maintenance Division and are earmarked for the maintenance, rehabilitation or improvement of public streets.

The Traffic Safety Fund is used to account for traffic safety expenditures. Financing is provided by City-assessed traffic signal fees and traffic fines collected by the State.

The Community Facilities District 98-02 Fund is used to account for the costs of providing street lighting, traffic signals, and landscape services including parks, medians, parkways and trails, to certain properties. Properties within the Community Facilities District 98-02 are assessed for a portion of the annual costs and legally required operating and capital replacement reserves.

The Street Lighting District Fund is used to account for the costs of providing street lighting and landscaping services to certain properties. The benefiting properties are assessed for a portion of the costs.

The Senior Nutrition Grant Fund is used to account for Federal grant revenues received through the County of San Diego for the operations of the Senior Nutrition Program.

The Community Development Block Grant Fund is used to account for transactions related to the Community Development Block Grant Program provided by the Federal Government. Funds are mostly utilized for capital improvement projects, fair housing services, and non-profit coordination, benefiting low-and-moderate income areas within the City.

The HOME Grant Fund is used to account for transactions related to the HOME Grant provided by the Federal Government. The grant is used to fund the San Marcos Mortgage Assistance Program.

The Center Drive Maintenance District Fund is used to account for the cost of providing street maintenance services to certain properties. The benefiting properties are assessed for a portion of the costs.

The Art in Public Places Fund is used to account for public art in-lieu fee, which was created to assist in promoting art and cultural initiatives that enrich the artistic and educational climate of the City.

The City Council designated the San Marcos Community Foundation to implement a grant program, which makes available funding to eligible organizations implementing artistic and cultural events and/or activities that generally benefit the San Marcos community.

The Public, Education and Government Fund (PEG) is used to account for revenue received from local cable operators in San Marcos. PEG payments are calculated as 1 percent of gross receipts received by cable operators and may be used for capital equipment purchases that support airing public meetings on the City’s PEG channel.

909
City of San Marcos
Non-Major Governmental Funds
-98-
Special Revenue Funds, (continued)
The Congestion Management CFD Fund is used to account for the future costs of providing intra City public transportation services, facilities, and equipment. Properties within the CFD fund 2011-01 are assessed for a portion of the costs.

The CalHOME Grant Fund is used to account for transactions related to the CalHOME Grant provided by the State of California. The grant is used to help fund the San Marcos Mortgage Assistance Program.

The State CASp Fee Fund is used to account for the Certified Access Specialists (CASp) fee collected through business licenses. The CASp fee is mandated by the California SB 1186, AB 1379 and Government Code Section 4467 and its purpose is to increase disability access and compliance with construction-related accessibility requirements. The majority of the fee is retained by the City to support the CASp program and the remainder is sent to the California Department of General Services, Division of State Architect (DSA) to maintain oversight of the CASp program.

The Gas Tax RMRA Fund is used account for the Road Maintenance and Rehabilitation (RMRA) revenues received from the State of California under the California Streets and Highways Code Section 2032. These funds are earmarked for specific capital improvement program projects involving the rehabilitation or improvement of public streets.

Debt Service Funds
Debt service funds are used to account for debt service transactions including revenue collection and payments of principal and interest on long-term obligations.

The San Marcos Public Facilities Authority Fund is used to account for the accumulation of resources for and the payment of principal and interest of the various debt obligations of the San Marcos Public Facilities Authority.

Capital Projects Funds
Capital projects funds are used to account for the acquisition and construction of major capital facilities other than those financed by proprietary funds.

The Public Facility Fund is used to account for the accumulation of resources for the payment of public facility related costs. The primary funding source is developer fees.

The Community Facilities District 99-1 Fund is used to account for the proceeds of bonds issued by the City of San Marcos Community Facilities District 99-1 pursuant to the Mello-Roos Community Facilities Act of 1982. The proceeds are used to finance, refinance or provide reimbursement for the cost of land, buildings, equipment and other public capital improvements.

The Transportation Sales Tax Fund is used to account for receipts and expenditures of money associated with the widening of State Highway 78, local streets and roads maintenance, and other local public capital improvements.
910
City of San Marcos
Non-Major Governmental Funds
-99-
Capital Projects Funds, (continued)
The Community Facilities District 02-01 Fund is used to account for the proceeds of bonds issued by the City of San Marcos Community facilities District 02-01 pursuant to the Mello-Roos Community Facilities Act of 1982. The proceeds are used to finance, refinance or provide reimbursement for the cost of land, buildings, equipment and other public capital improvements.

The Transportation Impact Fee Fund is used to account for fees collected by the County of San Diego Department of Public Works for future road improvements as a result of indirect impacts of private developments occurring in the unincorporated area within the City’s boundaries. The fees will be used for qualifying congestion relief type improvements.

911
City of San Marcos

Combining Balance Sheet
Non-Major Governmental Funds
June 30, 2025
-100-
Debt Service
Fund
Total San Marcos Total Total
Special Public Capital Non-Major
Revenue Facilities Projects Governmental
Funds Authority Funds Funds
Cash and investments (note 2) 50,785,528$ 1,084,786$ 34,657,608$ 86,527,922$ Cash and investments with fiscal agents (note 2) - 107,768 796,201 903,969 Receivables:

Taxes and special assessments 35,061 - - 35,061 Accounts 59,788 960 16,374 77,122 Interest 176,112 39,357 95,645 311,114 Notes, net (note 3) 1,873,028 - - 1,873,028 Leases - 1,603,707 - 1,603,707 Other, net (note 4) - - 120,516 120,516 Due from other governments 1,145,132 - - 1,145,132 Advances to other funds (note 5) - - 6,300,000 6,300,000 Total Assets 54,074,649 $ 2,836,578$ 41,986,344$ 98,897,571$

RESOURCES AND FUND BALA NCES
Liabilities:

Accounts payable 1,291,113 $ - $ - $ 1,291,113$ Accrued liabilities 650,717 - 18,083 668,800 Due to other funds (note 5) 1,695,042 - - 1,695,042 Deposits payable 4,174,474 - - 4,174,474 Total Liabilities 7,811,346 - 18,083 7,829,429 Unavailable revenue (note 6) 1,893,672 - 136,890 2,030,562 Lease related - 1,547,901 - 1,547,901 Total Deferred Inflows of Resources 1,893,672 1,547,901 136,890 3,578,463 Restricted:

Transportation 18,332,547 - 1,505,568 19,838,115 Lighting and landscape 23,755,510 - - 23,755,510 Capital improvements - - 1,123,587 1,123,587 Public facilities - - 39,202,216 39,202,216 Other purposes 4,250,772 1,288,677 - 5,539,449 Unassigned (1,969,198) - - (1,969,198) Total Fund Balances 44,369,631 1,288,677 41,831,371 87,489,679 Total Liabilities, Deferred Inflows of
Resources and Fund Balances 54,074,649$ 2,836,578$ 41,986,344$ 98,897,571$

LIABILITIES, DEFERRED INFLOWS OF
Deferred Inflows of Resources:

Fund Balances (Deficit):

ASSETS
912
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913
City of San Marcos

Combining Statement of Revenues, Expenditures and Changes in Fund Balance Non-Major Governmental Funds
For the Year Ended June 30, 2025

-101-
Debt Service
Fund
Total San Marcos Total Total
Special Public Capital Non-Major
Revenue Facilities Projects Governmental
Funds Authority Funds Funds

REVENUES
Taxes and special assessments 12,183,282$ - $ - $ 12,183,282$ Intergovernmental 6,207,402 - 11,700,735 17,908,137 Developer fees 38,109 - 10,226,682 10,264,791 Investment and rental income 2,319,714 616,622 1,261,190 4,197,526 Miscellaneous 55,505 - 9,300 64,805 Total Revenues 20,804,012 616,622 23,197,907 44,618,541

EXPENDITURES
Current:

Community development 225,934 - - 225,934 Highways, streets and parks 11,241,729 - 150,970 11,392,699 Culture and recreation 477,569 - - 477,569 Capital outlay - - 115,551 115,551 Debt service:

Principal 93,874 350,000 - 443,874 Interest and fiscal charges 3,094 32,943 - 36,037 Total Expenditures 12,042,200 382,943 266,521 12,691,664 Excess (Deficiency) of Revenues
Over (Under) Expenditures 8,761,812 233,679 22,931,386 31,926,877

OTHER FINA NCING SOURCES (USES)
Transfers in (note 5) 831,000 - - 831,000 Transfers out (note 5) (5,250,919) - (9,380,315) (14,631,234) Total Other Financing Sources (Uses) (4,419,919) - (9,380,315) (13,800,234) Net Change in Fund Balances 4,341,893 233,679 13,551,071 18,126,643

FUND BA LA NCES
Beginning 40,027,738 1,054,998 28,280,300 69,363,036 Ending 44,369,631 $ 1,288,677$ 41,831,371$ 87,489,679$ 914
City of San Marcos

Combining Balance Sheet
Non-Major Special Revenue Funds
June 30, 2025

-102-
Community Street Senior Community
Traffic Facilities Lighting Nutrition Development
Gas Tax Safety District 98-02 District Grant Block Grant Cash and investments 8,013,366 $ 1,218,728$ 24,663,809$ - $ - $ 127,099$ Receivables:

Taxes and special assessments - - 32,046 1,663 - - Accounts - - 24,991 360 - - Interest 29,347 4,305 86,265 - - - Notes, net - - - - - - Due from other governments 231,145 6,860 - - 21,433 424,049 Total Assets 8,273,858 $ 1,229,893$ 24,807,111$ 2,023 $ 21,433$ 551,148$

RESOURCES A ND FUND BALANCES
Liabilities:

Accounts payable 60,899 $ 28,322$ 877,028$ 240,614$ 17,493$ 22,541$ Accrued liabilities - 3,352 155,447 23,044 16,389 8,872 Due to other funds - - - 1,433,047 261,995 - Deposits payable - 10,389 - - - - Total Liabilities 60,899 42,063 1,032,475 1,696,705 295,877 31,413 Unavailable revenue - - 19,126 72 - - Restricted
Transportation 8,212,959 1,187,830 - - - - Lighting and landscape - - 23,755,510 - - - Other purposes - - - - - 519,735 Unassigned - - - (1,694,754) (274,444) - Total Fund Balances 8,212,959 1,187,830 23,755,510 (1,694,754) (274,444) 519,735 Total Liabilities, Deferred Inflows of
Resources, and Fund Balances 8,273,858$ 1,229,893$ 24,807,111$ 2,023 $ 21,433$ 551,148$ Fund Balances (Deficit):

Deferred Inflows of Resources:

LIA BILITIES, DEFERRED INFLOWS OF

A SSETS

915

-103-
Center Drive Public, Congestion
HOME Maintenance Art in Education and Management CalHOME State Gas Tax Grant District Public Places Government CFD Grant CASp Fee RMRA Total 340,131$ 190,205$ 983,657$ 1,903,247$ 5,969,704$ 344,722$ 153,386$ 6,877,474$ 50,785,528$ .
- 365 - - 987 - - - 35,061 - - - 30,020 4,417 - - - 59,788 - 747 3,448 6,694 20,688 - - 24,618 176,112 1,222,809 - - - - 650,219 - - 1,873,028 - - - - - - - 461,645 1,145,132 1,562,940$ 191,317$ 987,105$ 1,939,961$ 5,995,796$ 994,941$ 153,386$ 7,363,737$ 54,074,649$ -$ 2,107$ - $ 33,690$ 7,841$ - $ 578$ - $ 1,291,113$ - - - - 443,613 - - - 650,717 - - - - - - - - 1,695,042 - - - - 4,164,085 - - - 4,174,474 - 2,107 - 33,690 4,615,539 - 578 - 7,811,346 1,222,809 - - - 1,446 650,219 - - 1,893,672 - 189,210 - - 1,378,811 - - 7,363,737 18,332,547 - - - - - - - - 23,755,510 340,131 - 987,105 1,906,271 - 344,722 152,808 - 4,250,772 - - - - - - - - (1,969,198) 340,131 189,210 987,105 1,906,271 1,378,811 344,722 152,808 7,363,737 44,369,631 1,562,940$ 191,317$ 987,105$ 1,939,961$ 5,995,796$ 994,941$ 153,386$ 7,363,737$ 54,074,649$ 916
City of San Marcos

Combining Statement of Revenues, Expenditures and Changes in Fund Balance Non-Major Special Revenue Funds
For the Year Ended June 30, 2025
-104-
Community Street Senior Community
Traffic Facilities Lighting Nutrition Development
Gas Tax Safety District 98-02 District Grant Block Grant

REVENUES
Taxes and special assessments -$ - $ 10,322,329$ 530,928 $ - $ - $ Intergovernmental 2,710,630 49,931 - - 131,903 695,239 Developer fees - - - - - - Investment and rental income 377,397 60,808 1,092,761 - - - Miscellaneous - - - - 25,907 - Total Revenues 3,088,027 110,739 11,415,090 530,928 157,810 695,239

EXPENDITURES
Current:

Community development - - - - - 225,934 Highways, streets and parks 243,341 142,394 8,714,932 1,883,823 - - Culture and recreation - - - - 394,942 - Debt Service:

Principal - - 69,185 24,689 - - Interest and fiscal charges - - 2,280 814 - - Total Expenditures 243,341 142,394 8,786,397 1,909,326 394,942 225,934 Excess (Deficiency) of Revenues
Over (Under) Expenditures 2,844,686 (31,655) 2,628,693 (1,378,398) (237,132) 469,305

OTHER FINANCING SOURCES (USES)
Transfers in - - - 660,000 171,000 - Transfers out (1,564,582) (3,243) - - - (465,208) Total Other Financing Sources (Uses) (1,564,582) (3,243) - 660,000 171,000 (465,208) Net Change in Fund Balances 1,280,104 (34,898) 2,628,693 (718,398) (66,132) 4,097

FUND BALANCES (DEFICIT)
Beginning 6,932,855 1,222,728 21,126,817 (976,356) (208,312) 515,638 Ending 8,212,959 $ 1,187,830$ 23,755,510$ (1,694,754)$ (274,444)$ 519,735$ 917

-105-
Center Drive Public, Congestion
HOME Maintenance Art in Education and Management CalHOME State Gas Tax Grant District Public Places Government CFD Grant CASp Fee RMRA Total -$ 25,417$ - $ 132,357$ 1,172,251$ - $ - $ - $ 12,183,282$ - - - - - - - 2,619,699 6,207,402 - - 17,200 - - - 20,909 - 38,109 16,110 9,614 49,909 90,903 250,189 1,000 - 371,023 2,319,714 29,598 - - - - - - - 55,505 45,708 35,031 67,109 223,260 1,422,440 1,000 20,909 2,990,722 20,804,012 - - - - - - - - 225,934 - 4,231 - 72,170 178,086 - 2,752 - 11,241,729 - - 82,627 - - - - - 477,569 - - - - - - - - 93,874 - - - - - - - - 3,094 - 4,231 82,627 72,170 178,086 - 2,752 - 12,042,200 45,708 30,800 (15,518) 151,090 1,244,354 1,000 18,157 2,990,722 8,761,812 - - - - - - - - 831,000 - (24,000) - - - - - (3,193,886) (5,250,919) - (24,000) - - - - - (3,193,886) (4,419,919) 45,708 6,800 (15,518) 151,090 1,244,354 1,000 18,157 (203,164) 4,341,893 294,423 182,410 1,002,623 1,755,181 134,457 343,722 134,651 7,566,901 40,027,738 340,131$ 189,210$ 987,105$ 1,906,271$ 1,378,811$ 344,722$ 152,808$ 7,363,737$ 44,369,631$ 918

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919
City of San Marcos
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Gas Tax Special Revenue Fund
For the Year Ended June 30, 2025
-106-
Variance with
Original Final Actual Final Budget

REVENUES
Intergovernmental 2,699,047$ 2,699,047$ 2,710,630$ 11,583 $ Investment and rental income 70,000 70,000 377,397 307,397 Total Revenues 2,769,047 2,769,047 3,088,027 318,980

EXPENDITURES
Current:

Highways, streets and parks 806,050 374,705 243,341 131,364 Total Expenditures 806,050 374,705 243,341 131,364 Excess (deficiency) of
revenues over expenditures 1,962,997 2,394,342 2,844,686 450,344

OTHER FINA NCING SOURCES (USES)
Transfers out - (9,350,030) (1,564,582) 7,785,448 Total other financing
sources (uses) - (9,350,030) (1,564,582) 7,785,448 Net Change in Fund Balance 1,962,997 (6,955,688) 1,280,104 8,235,792

FUND BALANCE
Beginning 6,932,855 6,932,855 6,932,855 - Ending 8,895,852 $ (22,833)$ 8,212,959$ 8,235,792$ Budgeted Amounts

920
City of San Marcos
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Traffic Safety Special Revenue Fund
For the Year Ended June 30, 2025
-107-
Variance with
Original Final Actual Final Budget

REVENUES
Intergovernmental 125,000 $ 125,000$ 49,931$ (75,069)$ Investment and rental income 21,000 21,000 60,808 39,808 Total Revenues 146,000 146,000 110,739 (35,261)

EXPENDITURES
Current:

Highways, streets and parks 215,094 259,489 142,394 117,095 Total Expenditures 215,094 259,489 142,394 117,095 Excess (deficiency) of
revenues over expenditures (69,094) (113,489) (31,655) 81,834

OTHER FINA NCING SOURCES (USES)
Transfers out - (69,671) (3,243) 66,428 Total other financing
sources (uses) - (69,671) (3,243) 66,428 Net Change in Fund Balance (69,094) (183,160) (34,898) 148,262

FUND BA LANCE
Beginning 1,222,728 1,222,728 1,222,728 - Ending 1,153,634 $ 1,039,568$ 1,187,830$ 148,262$ Budgeted Amounts
921
City of San Marcos
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Community Facilities District 98-02 Special Revenue Fund For the Year Ended June 30, 2025
-108-
Variance with
Original Final Actual Final Budget

REVENUES
Taxes and special assessments 9,478,000$ 10,250,000$ 10,322,329$ 72,329 $ Investment and rental income 300,000 300,000 1,092,761 792,761 Total Revenues 9,778,000 10,550,000 11,415,090 865,090

EXPENDITURES
Current:

Highways, streets and parks 8,470,757 9,061,486 8,714,932 346,554 Debt Service:

Principal 65,166 69,185 69,185 - Interest and fiscal charges 6,299 2,280 2,280 - Total Expenditures 8,542,222 9,132,951 8,786,397 346,554 Excess (deficiency) of
revenues over expenditures 1,235,778 1,417,049 2,628,693 1,211,644

OTHER FINANCING SOURCES (USES)
Transfers out (958,800) (1,208,800) - 1,208,800 Total Other Financing
Sources (Uses) (958,800) (1,208,800) - 1,208,800 Net Change in Fund Balance 276,978 208,249 2,628,693 2,420,444

FUND BALANCE
Beginning 21,126,817 21,126,817 21,126,817 - Ending 21,403,795 $ 21,335,066$ 23,755,510$ 2,420,444$ Budgeted Amounts

922
City of San Marcos
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Street Lighting District Special Revenue Fund
For the Year Ended June 30, 2025
-109-
Variance with
Original Final Actual Final Budget

REVENUES
Taxes and special assessments 530,000$ 530,000$ 530,928$ 928 $ Total Revenues 530,000 530,000 530,928 928

EXPENDITURES
Current:

Highways, streets and parks 1,718,554 1,763,176 1,883,823 (120,647) Debt Service:

Principal 23,254 24,689 24,689 - Interest and fiscal charges 2,248 814 814 - Total Expenditures 1,744,056 1,788,679 1,909,326 (120,647) Excess (deficiency) of
revenues over expenditures (1,214,056) (1,258,679) (1,378,398) (119,719)

OTHER FINANCING SOURCES
Transfers in 660,000 660,000 660,000 - Total Other Financing
Sources 660,000 660,000 660,000 - Net Change in Fund Balance (554,056) (598,679) (718,398) (119,719)

FUND BALANCE (DEFICIT)
Beginning (976,356) (976,356) (976,356) - Ending (1,530,412) $ (1,575,035)$ (1,694,754)$ (119,719)$ Budgeted Amounts

923
City of San Marcos
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Senior Nutrition Grant Special Revenue Fund
For the Year Ended June 30, 2025
-110-
Variance with
Original Final Actual Final Budget

REVENUES
Intergovernmental 114,061 $ 134,061$ 131,903$ (2,158)$ Miscellaneous 26,500 26,500 25,907 (593) Total Revenues 140,561 160,561 157,810 (2,751)

EXPENDITURES
Current:

Culture and recreation 425,899 445,899 394,942 50,957 Total Expenditures 425,899 445,899 394,942 50,957 Excess (deficiency) of
revenues over expenditures (285,338) (285,338) (237,132) 48,206

OTHER FINA NCING SOURCES (USES)
Transfers in 171,000 171,000 171,000 - Total Other Financing
Sources (Uses) 171,000 171,000 171,000 - Net Change in Fund Balance (114,338) (114,338) (66,132) 48,206

FUND BALANCE (DEFICIT)
Beginning (208,312) (208,312) (208,312) - Ending (322,650) $ (322,650)$ (274,444)$ 48,206 $ Budgeted Amounts

924
City of San Marcos
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Community Development Block Grant Special Revenue Fund
For the Year Ended June 30, 2025
-111-
Variance with
Original Final Actual Final Budget

REVENUES
Intergovernmental 710,208 $ 662,806$ 695,239$ 32,433$ Total Revenues 710,208 662,806 695,239 32,433

EXPENDITURES
Current:

Community development 335,764 233,482 225,934 7,548 Total Expenditures 335,764 233,482 225,934 7,548 Excess (deficiency) of
revenues over expenditures 374,444 429,324 469,305 39,981

OTHER FINA NCING SOURCES (USES)
Transfers out - (1,397,732) (465,208) 932,524 Total other financing
sources (uses) - (1,397,732) (465,208) 932,524 Net Change in Fund Balance 374,444 (968,408) 4,097 972,505

FUND BA LANCE
Beginning 515,638 515,638 515,638 - Ending 890,082 $ (452,770)$ 519,735$ 972,505$ Budgeted Amounts

925
City of San Marcos
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual HOME Grant Special Revenue Fund
For the Year Ended June 30, 2025
-112-
Variance with
Original Final Actual Final Budget

REVENUES
Investment and rental income -$ - $ 16,110$ 16,110$ Miscellaneous 50,000 50,000 29,598 (20,402) Total Revenues 50,000 50,000 45,708 (4,292)

EXPENDITURES
Current:

Community development 100,000 100,000 - 100,000 Total Expenditures 100,000 100,000 - 100,000 Net Change in Fund Balance (50,000) (50,000) 45,708 95,708

FUND BALANCE
Beginning 294,423 294,423 294,423 - Ending 244,423 $ 244,423$ 340,131$ 95,708$ Budgeted Amounts
926
City of San Marcos
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Center Drive Maintenance District Special Revenue Fund
For the Year Ended June 30, 2025
-113-
Variance with
Original Final Actual Final Budget

REVENUES
Taxes and special assessments 25,000$ 25,000$ 25,417$ 417 $ Investment and rental income 2,000 2,000 9,614 7,614 Total Revenues 27,000 27,000 35,031 8,031

EXPENDITURES
Current:

Highways, streets and parks 26,020 26,020 4,231 21,789 Total Expenditures 26,020 26,020 4,231 21,789 Excess (deficiency) of
revenues over expenditures 980 980 30,800 29,820

OTHER FINA NCING SOURCES (USES)
Transfers out - (24,000) (24,000) - Total Other Financing
Sources (Uses) - (24,000) (24,000) - Net Change in Fund Balance 980 (23,020) 6,800 29,820

FUND BA LA NCE
Beginning 182,410 182,410 182,410 - Ending 183,390 $ 159,390$ 189,210$ 29,820$ Budgeted Amounts
927
City of San Marcos
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Art in Public Places Special Revenue Fund
For the Year Ended June 30, 2025
-114-
Variance with
Original Final Actual Final Budget

REVENUES
Developer fees 50,000 $ 50,000$ 17,200$ (32,800)$ Investment and rental income 18,000 18,000 49,909 31,909 Total Revenues 68,000 68,000 67,109 (891)

EXPENDITURES
Current:

Culture and recreation 185,000 185,000 82,627 102,373 Total Expenditures 185,000 185,000 82,627 102,373 Net Change in Fund Balance (117,000) (117,000) (15,518) 101,482

FUND BALANCE
Beginning 1,002,623 1,002,623 1,002,623 - Ending 885,623 $ 885,623$ 987,105$ 101,482$ Budgeted Amounts

928
City of San Marcos
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Public, Education and Government Special Revenue Fund
For the Year Ended June 30, 2025
-115-
Variance with
Original Final Actual Final Budget

REVENUES
Taxes and special assessments 180,000$ 180,000$ 132,357$ (47,643)$ Investment and rental income 26,000 26,000 90,903 64,903 Total Revenues 206,000 206,000 223,260 17,260

EXPENDITURES
Current:

Highways, streets and parks 125,000 125,000 72,170 52,830 Total Expenditures 125,000 155,000 72,170 82,830 Net Change in Fund Balance 81,000 51,000 151,090 100,090

FUND BALA NCE
Beginning 1,755,181 1,755,181 1,755,181 - Ending 1,836,181 $ 1,806,181$ 1,906,271$ 100,090$ Budgeted Amounts

929
City of San Marcos
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Congestion Management CFD Special Revenue Fund
For the Year Ended June 30, 2025
-116-
Variance with
Original Final Actual Final Budget

REVENUES
Taxes and special assessments 965,000$ 1,203,000$ 1,172,251$ (30,749)$ Investment and rental income 61,000 61,000 250,189 189,189 Total Revenues 1,026,000 1,264,000 1,422,440 158,440

EXPENDITURES
Current:

Highway, streets and parks 4,000 171,000 178,086 (7,086) Total expenditures 4,000 171,000 178,086 (7,086) Net Change in Fund Balance 1,022,000 1,093,000 1,244,354 151,354

FUND BALANCE
Beginning 134,457 134,457 134,457 - Ending 1,156,457 $ 1,227,457$ 1,378,811$ 151,354$ Budgeted Amounts
930
City of San Marcos
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual CalHOME Grant Special Revenue Fund
For the Year Ended June 30, 2025
-117-
Variance with
Original Final Actual Final Budget

REVENUES
Investment and rental income 113,000$ 113,000$ 1,000 $ (112,000)$ Total Revenues 113,000 113,000 1,000 (112,000)

EXPENDITURES
Current:

Community development 200,000 200,000 - 200,000 Total Expenditures 200,000 200,000 - 200,000 Net Change in Fund Balance (87,000) (87,000) 1,000 88,000

FUND BALANCE
Beginning 343,722 343,722 343,722 - Ending 256,722 $ 256,722$ 344,722$ 88,000$ Budgeted Amounts
931
City of San Marcos
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual State CASp Fee Special Revenue Fund
For the Year Ended June 30, 2025
-118-
Variance with
Original Final Actual Final Budget

REVENUES
Developer fees 21,000 $ 21,000$ 20,909$ (91) $ Total Revenues 21,000 21,000 20,909 (91)

EXPENDITURES
Current:

Community development 2,150 2,150 2,752 (602) Total Expenditures 2,150 2,150 2,752 (602) Net Change in Fund Balance 18,850 18,850 18,157 (693)

FUND BALANCE
Beginning - 134,651 134,651 - Ending 18,850 $ 153,501$ 152,808$ (693) $ Budgeted Amounts

932
City of San Marcos
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual Gas Tax RMRA Special Revenue Fund
For the Year Ended June 30, 2025
-119-
Variance with
Original Final Actual Final Budget

REVENUES
Intergovernmental 2,448,285 $ 2,448,285$ 2,619,699$ 171,414$ Investment and rental income 70,000 70,000 371,023 301,023 Total Revenues 2,518,285 2,518,285 2,990,722 472,437

OTHER FINANCING SOURCES (USES)
Transfers out - (10,202,304) (3,193,886) 7,008,418 Total other financing
sources (uses) - (10,202,304) (3,193,886) 7,008,418 Net Change in Fund Balance 2,518,285 (7,684,019) (203,164) 7,480,855

FUND BALANCE
Beginning 7,566,901 7,566,901 7,566,901 - Ending 10,085,186 $ (117,118)$ 7,363,737$ 7,480,855$ Budgeted Amounts

933
City of San Marcos
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual San Marcos Public Facilities Authority Debt Service Fund For the Year Ended June 30, 2025
-120-
Variance with
Original Final Actual Final Budget

REVENUES
Investment and rental income 401,943$ 401,943$ 616,622$ 214,679$ Total Revenues 401,943 401,943 616,622 214,679

EXPENDITURES
Debt service:

Principal 350,000 350,000 350,000 - Interest and fiscal charges 32,943 32,943 32,943 - Total Expenditures 382,943 382,943 382,943 - Net Change in Fund Balance 19,000 19,000 233,679 214,679

FUND BALANCE
Beginning 1,054,998 1,054,998 1,054,998 - Ending 1,073,998 $ 1,073,998$ 1,288,677$ 214,679$ Budgeted Amounts
934
City of San Marcos
Combining Balance Sheet
Non-Major Capital Projects Funds
June 30, 2025
-121-
CommunityPublic Facilities TransportationFacility District 99-1 Sales TaxCash and investments 32,816,315$ 6,025$ 1,418,577$ Cash and investments with fiscal agents - 796,201 - Receivables:Accounts 16,374 - - Interest 94,156 21 - Other, net 120,516 - - Advances to other funds 6,300,000 - - Total Assets 39,347,361$ 802,247$ 1,418,577$ LIA BILITIES, DEFERRED INFLOWS OFRESOURCES AND FUND BA LANCESAccrued liabilities 8,255$ -$ 9,828$ Total Liabilities 8,255 - 9,828 Unavailable revenue 136,890 - - Restricted:Transportation - - 1,408,749 Capital improvements - 802,247 - Public facilities 39,202,216 - - Total Fund Balances 39,202,216 802,247 1,408,749 Total Liabilities, Deferred Inflows of Resources and Fund Balances 39,347,361$ 802,247$ 1,418,577$ Liabilities:Deferred Inflows of Resources:Fund Balances (Deficit):

ASSETS

935
-122-
Community
Facilities Transportation
District 02-01 Impact Fee Total
320,212$ 96,479$ 34,657,608$
- - 796,201
- - 16,374
1,128 340 95,645
- - 120,516
- - 6,300,000
321,340$ 96,819$ 41,986,344$
-$ - $ 18,083$
- - 18,083
- - 136,890
- 96,819 1,505,568
321,340 - 1,123,587
- - 39,202,216
321,340 96,819 41,831,371
321,340$ 96,819$ 41,986,344$

936
City of San Marcos
Combining Statement of Revenues, Expenditures and Changes in Fund Balance Non-Major Capital Projects Funds
For the Year Ended June 30, 2025
-123-
Community
Public Facilities Transportation
Facility District 99-1 Sales Tax

REVENUES
Intergovernmental - $ - $ 11,700,735$ Developer fees 10,226,682 - - Investment and rental income 1,177,916 30,614 32,502 Miscellaneous 9,300 - - Total Revenues 11,413,898 30,614 11,733,237

EXPENDITURES
Current:

Highways, streets and parks 181 - 150,789 Capital outlay 115,551 - - Total Expenditures 115,732 - 150,789 Excess (Deficiency) of Revenues
Over (Under) Expenditures 11,298,166 30,614 11,582,448

OTHER FINA NCING SOURCES
Transfers out (note 5) (2,075,498) - (7,304,817) Total Other Financing Sources (2,075,498) - (7,304,817) Net Change in Fund Balances 9,222,668 30,614 4,277,631

FUND BALANCES (DEFICIT)
Beginning 29,979,548 771,633 (2,868,882) Ending 39,202,216 $ 802,247 $ 1,408,749$

937
-124-
Community
Facilities Transportation
District 02-01 Impact Fee Total
-$ - $ 11,700,735$
- - 10,226,682
15,491 4,667 1,261,190
- - 9,300
15,491 4,667 23,197,907
- - 150,970
- - 115,551
- - 266,521
15,491 4,667 22,931,386
- - (9,380,315)
- - (9,380,315)
15,491 4,667 13,551,071
305,849 92,152 28,280,300
321,340$ 96,819$ 41,831,371$
938
City of San Marcos
Combining Statement of Fiduciary Net Position
Custodial Funds
June 30, 2025
-125-
Community Community Community Community Total
Facilities Facilities Facilities Facilities Custodial
District 88-1 District 99-1 District 02-01 District 11-01 Funds Cash and investments (note 2) 5,813$ 1,084$ - $ - $ 6,897$ Receivables:

Special assessments 2,675 18,350 3,131 - 24,156 Interest 165 133 7 - 305 Restricted Assets:

Cash and investments with
fiscal agents (note 2) 2,941,902 5,982,005 1,177,754 - 10,101,661 Total Assets 2,950,555 6,001,572 1,180,892 - 10,133,019 Accounts payable 174,674 - - - 174,674 Due to other governments - - 5,559 597 6,156 Total Liabilities 174,674 - 5,559 597 180,830 Restricted for:

Other taxing entities and other agencies 2,775,881$ 6,001,572$ 1,175,333$ (597) $ 9,952,189$

LIABILITIES

NET POSITION (DEFICIT)
Custodial Funds
ASSETS

939
City of San Marcos
Combining Statement of Changes in Fiduciary Net Position Custodial Funds
For the Year Ended June 30, 2025
-126-
Community Community Community Community Total
Facilities Facilities Facilities Facilities Custodial
District 88-1 District 99-1 District 02-01 District 11-01 Funds

A DDITIONS
Tax and special assessments 1,568,785$ 4,900,905$ 873,295$ - $ 7,342,985$ Income from property and investments 2,080 161,029 35,191 - 198,300 Total Additions 1,570,865 5,061,934 908,486 - 7,541,285

DEDUCTIONS
Administrative expense 204,674 514,985 80,000 - 799,659 Payments to fiscal agent on behalf
of other agencies 1,253,019 2,859,446 839,674 - 4,952,139 Total Deductions 1,457,693 3,374,431 919,674 - 5,751,798 Change in Net Position 113,172 1,687,503 (11,188) - 1,789,487

NET POSITION (DEFICIT)
Beginning 2,662,709 4,314,069 1,186,521 (597) 8,162,702 Ending 2,775,881 $ 6,001,572$ 1,175,333$ (597) $ 9,952,189$ Custodial Funds

940
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941
City of San Marcos
Statistical Section
-127-
This section of the City’s annual comprehensive financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the government’s overall financial health.

Page
Financial Trends 128
Revenue Capacity 138
Debt Capacity 141
Demographic and Economic Information 147
Operating Information 149
These schedules contain service and infastructure data to help the reader understand how the information in the City's financial report relates to the services the government provides and the activities it performs.

CONTENTS
These schedules contain trend information to help the reader understand how the City's financial performance and well being have changed over time.

These schedules contain information to help the reader assess one of the City's most significant local revenue source, the property tax.

These schedules present information to help the reader assess the affordability of the City's current levels of outstanding debt and its ability to issue additional debt in the future.

These schedules offer demographic and economic indicators to help the reader understand the environment within which the City's financial activities take palce.

Sources: Unless otherwise noted, the information in these schedules is derived from the annual comprehensive financial reports for the relevant year.

942
City of San Marcos
Net Position by Component
Last Ten Fiscal Years
(accrual basis of accounting)
-128-
Fiscal Year
2016 2017 2018 2019
Governmental Activities:

Net investment in capital assets 623,187,760$ 607,795,162$ 599,739,265$ 600,656,145$ Restricted for:

Affordable housing 182,174,655 192,984,712 197,267,954 204,874,361 Transportation - - - - Lighting and landscape 12,073,491 12,410,105 12,833,499 14,734,771 Public facilities 32,111,994 36,384,666 3,186,646 1,008,537 Other purposes 2,187,164 2,461,175 44,845,897 42,359,172 Unrestricted 48,523,274 60,067,467 48,322,111 46,006,938 Total governmental activities net position 900,258,338$ 912,103,287$ 906,195,372$ 909,639,924$ Business-type activities:

Unrestricted 94,924,105 $ 95,225,519$ 94,972,155$ 95,293,994$ Total business-type activities net position 94,924,105$ 95,225,519$ 94,972,155$ 95,293,994$ Component unit:

Not expendable 1,000,000 $ 1,000,000$ 1,000,000$ 1,000,000$ Expendable 157,923 230,885 258,593 250,742 Total component unit net position 1,000,000$ 1,000,000$ 1,258,593$ 1,250,742$ Primary Government:

Net investment in capital assets 623,187,760$ 607,795,162$ 599,739,265$ 600,656,145$ Restricted for:

Affordable housing 182,174,655 192,984,712 197,267,954 204,874,361 Transportation - - - - Lighting and landscape 12,073,491 12,410,105 12,833,499 14,734,771 Public facilities 32,111,994 36,384,666 3,186,646 1,008,537 Other purposes 2,187,164 2,461,175 44,845,897 42,359,172 Unrestricted 143,447,379 155,292,986 143,294,266 141,300,932 Total primary government net position 995,182,443$ 1,007,328,806$ 1,001,167,527$ 1,004,933,918$ Component unit:

Restricted 1,000,000 $ 1,000,000$ 1,258,593$ 1,250,742$ Total component unit net position 1,000,000$ 1,000,000$ 1,258,593$ 1,250,742$ 943
-129-
Fiscal Year
2020 2021 2022 2023 2024 2025
594,590,985$ 591,038,322$ 596,923,771$ 625,379,612$ 640,830,413$ 652,490,153$ 214,394,691 222,040,542 227,818,434 238,874,604 244,273,429 245,791,336 - - - - 16,132,948 19,839,560 15,104,188 16,803,353 17,688,560 19,185,250 21,146,015 23,774,708 1,004,808 1,005,625 43,506,990 40,430,216 30,116,438 39,339,106 51,842,888 54,134,938 19,957,186 19,226,068 8,906,461 9,640,790 35,895,754 35,934,735 46,052,370 43,696,948 45,250,631 47,746,787 912,833,314$ 920,957,515$ 951,947,311$ 986,792,698$ 1,006,656,335$ 1,038,622,440$ 96,901,655$ 97,147,813$ 92,682,011$ 94,375,674$ 86,530,790$ 85,261,198$ 96,901,655$ 97,147,813$ 92,682,011$ 94,375,674$ 86,530,790$ 85,261,198$ 1,000,000$ 1,000,000$ 1,000,000$ 1,000,000$ 1,000,000$ 1,000,000$ 219,405 475,316 216,026 258,781 315,818 385,769 1,219,405$ 1,475,316$ 1,216,026$ 1,258,781$ 1,315,818$ 1,385,769$ 594,590,985$ 591,038,322$ 596,923,771$ 625,379,612$ 640,830,413$ 652,490,153$ 214,394,691 222,040,542 227,818,434 238,874,604 244,273,429 245,791,336 - - - - 16,132,948 19,839,560 15,104,188 16,803,353 17,688,560 19,185,250 21,146,015 23,774,708 1,004,808 1,005,625 43,506,990 40,430,216 30,116,438 39,339,106 51,842,888 54,134,938 19,957,186 19,226,068 8,906,461 9,640,790 132,797,409 133,082,548 138,734,381 138,072,622 131,781,421 133,007,985 1,009,734,969$ 1,018,105,328$ 1,044,629,322$ 1,081,168,372$ 1,093,187,125$ 1,123,883,638$ 1,219,405$ 1,475,316$ 1,216,026$ 1,258,781$ 1,315,818$ 1,385,769$ 1,219,405$ 1,475,316$ 1,216,026$ 1,258,781$ 1,315,818$ 1,385,769$

944
City of San Marcos
Changes in Net Position
Last Ten Fiscal Years
(accrual basis of accounting)
-130-
Fiscal Year
2016 2017 2018 2019
Expenses:

Governmental Activities:

General government 18,256,401 $ 15,819,492$ 19,444,881$ 24,545,665$ Community development 12,890,498 1,679,942 6,368,611 5,036,267 Public safety 32,564,134 38,312,609 40,504,526 42,703,434 Highways, streets and parks 23,904,189 29,012,619 32,201,548 31,533,558 Culture and recreation 3,951,699 3,873,784 4,209,685 4,025,485 Interest on long-term debt 262,067 243,974 295,292 183,847 Total governmental activities expenses 91,828,988 88,942,420 103,024,543 108,028,256 Business-type activities:

Creekside Marketplace 2,069,680 1,572,337 771,106 969,539 Total business-type activities expenses 2,069,680 1,572,337 771,106 969,539 Total primary government expenses 93,898,668 90,514,757 103,795,649 108,997,795 Component Unit:

Permanent Fund Community
Foundation 56,622 65,283 69,946 71,223 Total component unit expenses 56,622$ 65,283$ 69,946$ 71,223$ Program Revenues:

Governmental Activities:

Charges for services:

General government (2) 1,843,724$ 1,151,920$ 1,038,094$ 1,704,211$ Community development (2) 2,252,007 4,554,470 6,363,423 2,485,165 Public safety 9,103,730 10,358,412 10,979,615 12,001,681 Highways, streets, and parks (1) (2) 8,196,772 7,931,273 8,605,163 7,860,930 Culture and recreation (2) 2,364,561 2,575,892 2,100,449 2,466,095 Operating grants and contributions 11,893,755 13,919,753 11,094,309 17,606,841 Capital contributions and grants 4,294,066 3,523,253 1,345,661 4,437,779 Total governmental activities program revenues 39,948,615 44,014,973 41,526,714 48,562,702 Business-type activities:

Charges for services:

Creekside Marketplace 3,335,509 4,924,764 5,188,034 5,510,983 Total business-type activities program revenues 3,335,509 4,924,764 5,188,034 5,510,983 Total primary government program revenues 43,284,124 48,939,737 46,714,748 54,073,685 Component Unit:

Permanent Fund Community
Foundation - - - - Total component unit revenues - $ - $ - $ -$ Net (expenses) revenues:

Governmental activities (51,880,373) (44,927,447) (61,497,829) (59,465,554) Business-type activities 1,265,829 3,352,427 4,416,928 4,541,444 Total primary government net (expenses)/revenues (50,614,544)$ (41,575,020)$ (57,080,901)$ (54,924,110)$ Component Unit:

Permanent Fund Community
Foundation (56,622) (65,283) (69,946) (71,223) Total component unit net (expenses)/revenues (56,622) (65,283) (69,946) (71,223) Notes:
(1) Amounts have been restated to reflect lighting and landscaping expenditures as part of highways, streets, 945
-131-
Fiscal Year
2020 2021 2022 2023 2024 2025
26,598,227$ $24,133,604 $32,589,843 $34,816,393 $31,242,559 $35,505,664 10,631,212 13,174,383 12,423,814 12,813,037 13,171,260 15,196,731 42,461,674 45,837,054 42,170,941 44,417,299 48,504,380 52,134,589 32,356,482 33,373,256 32,747,776 35,825,013 32,345,449 31,941,782 3,982,454 3,557,335 4,119,671 5,060,347 5,486,692 4,948,708 227,552 259,529 148,236 137,987 118,939 182,919 116,257,601 120,335,161 124,200,281 133,070,076 130,869,279 139,910,393 1,339,226 974,272 2,391,450 4,392,110 5,725,820 5,142,003 1,339,226 974,272 2,391,450 4,392,110 5,725,820 5,142,003 117,596,827 121,309,433 126,591,731 137,462,186 136,595,099 145,052,396 51,361 84,837 76,844 78,320 76,347 83,314 51,361$ 84,837$ 76,844$ 78,320$ 76,347$ 83,314$ 1,580,692$ 1,447,664$ 1,384,202$ 4,990,742$ 8,212,662$ 2,445,986$ 1,813,367 2,499,892 5,416,289 7,786,718 4,199,876 4,811,537 11,883,120 13,464,941 14,862,440 13,752,035 14,901,259 17,023,577 9,294,971 9,658,671 8,976,054 10,506,534 12,089,341 12,835,910 1,543,846 946,994 2,466,721 2,561,230 2,857,288 2,904,806 23,979,367 24,626,457 23,654,054 31,864,335 24,490,215 35,887,033 7,053,470 22,305,574 23,424,439 23,338,882 7,504,803 10,814,003 57,148,833 74,950,193 80,184,199 94,800,476 74,255,444 86,722,852 4,808,776 4,617,947 4,713,033 7,075,704 5,907,754 6,276,397 4,808,776 4,617,947 4,713,033 7,075,704 5,907,754 6,276,397 61,957,609 79,568,140 84,897,232 101,876,180 80,163,198 92,999,249 - - - - - 10,000 -$ - $ - $ - $ - $ 10,000$ (59,108,768) (45,384,968) (44,016,082) (38,269,600) (56,613,835) (53,187,541) 3,469,550 3,643,675 2,321,583 2,683,594 181,934 1,134,394 (55,639,218)$ (41,741,293)$ (41,694,499)$ (35,586,006)$ (56,431,901)$ (52,053,147)$ (51,361) (84,837) (76,844) (78,320) (76,347) (73,314) (51,361) (84,837) (76,844) (78,320) (76,347) (73,314)

946
City of San Marcos
Changes in Net Position, (continued)
Last Ten Fiscal Years
(accrual basis of accounting)
-132-
Fiscal Year
2016 2017 2018 2019
General Revenues and Other Changes in Net
Positions:

Governmental activities:

Taxes:

Property taxes 16,627,912 $ 18,604,256$ 19,825,953$ 21,542,823$ Transient occupancy taxes 829,724 873,863 978,498 1,303,446 Business license 213,173 228,040 231,933 232,733 Motor vehicle license tax - - - 49,502 Franchise fees 3,907,803 4,031,275 3,897,771 4,042,123 Rental income 5,790,384 5,950,030 5,556,365 5,477,226 Sales tax shared state revenue and in lieu, unrestricted 16,209,302 16,868,051 16,418,302 17,274,843 Investment income 937,647 1,731,178 1,242,804 1,305,351 Gain/(Loss) on sale of capital assets 1,810,932 187,956 227,020 258,282 Miscellaneous income 982,947 529,653 96,331 223,593 Transfers (3,850,425) 4,500,000 3,317,138 5,000,000 Total governmental activities 43,459,399 53,504,302 51,792,115 56,709,922 Business-type activities:

Investment income 8,184 16,289 2,855 6,759 Other - - - - Transfers 3,850,425 (4,500,000) (3,317,138) (5,000,000) Total business-type activities 3,858,609 (4,483,711) (3,314,283) (4,993,241) Total primary government 47,318,008 49,020,591 48,477,832 51,716,681 Component Unit:

Investment income, restricted - (11,645) 138,220 97,654 Other - - 25 - Total component unit - (11,645) 138,245 97,654 Change in Net Position:

Governmental activities (8,420,974) 8,576,855 (9,705,714) (2,755,632) Business-type activities 5,124,438 (1,131,284) 1,102,645 (451,797) Total primary government (3,296,536) $ 7,445,571$ (8,603,069)$ (3,207,429)$ Component Unit:

Permanent Fund Community
Foundation - $ - $ (81,591)$ 67,022$ Total primary government - $ - $ (81,591)$ 67,022$ Source: City of San Marcos, Finance Department
947
-133-
Fiscal Year
2020 2021 2022 2023 2024 2025
24,982,707$ 24,980,971$ 26,695,907$ 28,629,629$ 31,183,549$ 33,211,869$ 1,068,175 871,393 1,416,495 1,615,411 1,728,507 1,792,415 226,950 230,340 241,640 242,260 233,690 239,936 79,818 72,985 111,588 96,966 119,411 151,361 4,282,862 4,220,898 4,644,009 5,256,055 5,825,364 5,677,289 5,140,403 7,290,221 5,626,286 5,866,922 6,084,709 6,244,699 19,306,999 17,308,573 21,966,581 21,935,697 21,567,605 21,081,416 10,303,109 2,031,411 10,062,092 3,684,135 6,128,180 5,233,350 229,032 (74,079) 191,367 4,155,018 373,652 9,129 982,103 1,026,771 549,913 632,894 732,805 9,012,182 3,500,000 3,400,000 3,500,000 1,000,000 2,500,000 2,500,000 70,102,158 61,359,484 75,005,878 73,114,987 76,477,472 85,153,646 1,636,309 2,483 (3,287,385) 3,560 (5,543,590) 94,413 1,802 - - 6,509 16,772 1,601 (3,500,000) (3,400,000) (3,500,000) (1,000,000) (2,500,000) (2,500,000) (1,861,889) (3,397,517) (6,787,385) (989,931) (8,026,818) (2,403,986) 68,240,269 57,961,967 68,218,493 72,125,056 68,450,654 82,749,660 19,998 340,748 (182,446) 121,075 133,384 143,265 26 - - - - - 20,024 340,748 (182,446) 121,075 133,384 143,265 10,993,390 15,974,516 30,989,796 34,845,387 19,863,637 31,966,105 1,607,661 246,158 (4,465,802) 1,693,663 (7,844,884) (1,269,592) 12,601,051$ 16,220,674$ 26,523,994$ 36,539,050$ 12,018,753$ 30,696,513$ 46,293$ (64,813)$ 255,911$ 42,755$ 57,037$ 69,951$ 46,293$ (64,813)$ 255,911$ 42,755$ 57,037$ 69,951$

948
City of San Marcos
Fund Balances of Governmental Funds
Last Ten Fiscal Years
(modified accrual basis of accounting)
-134-
2016 2017 2018 2019
Nonspendable 10,031,405 $ 66,369,312$ 65,059,911$ 64,997,746$ Restricted - - - - Assigned 5,984,790 11,653,634 11,313,621 11,059,665 Unassigned 82,608,491 27,053,317 28,500,274 30,443,892 Total General Fund 98,624,686 105,076,263 104,873,806 106,501,303 Restricted 82,451,468 87,132,962 98,836,674 99,243,047 Unassigned (33,867) - (148,263) (378,551) Total all other governmental funds 82,417,601 87,132,962 98,688,411 98,864,496 Total governmental funds 181,042,287$ 192,209,225$ 203,562,217$ 205,365,799$ Source: City of San Marcos, Finance Department
Fiscal Year
949
-135-
Fiscal Year
2020 2021 2022 2023 2024 2025
62,506,999$ 61,913,706$ 74,313,510$ 76,188,631$ 81,216,522$ 85,085,036$ 2,492,150 2,889,350 2,398,726 2,517,379 2,727,743 2,977,754 10,023,351 11,864,630 11,864,630 12,552,407 10,650,747 9,114,770 32,505,397 40,069,078 31,357,566 28,397,360 27,724,575 35,602,264 107,527,897 116,736,764 119,934,432 119,655,777 122,319,587 132,779,824 110,557,067 109,842,378 120,236,691 125,297,479 123,098,939 138,706,338 (5,099,687) (11,385,046) (9,175,364) (18,388,355) (15,579,695) (14,248,922) 105,457,380 98,457,332 111,061,327 106,909,124 107,519,244 124,457,416 212,985,277$ 215,194,096$ 230,995,759$ 226,564,901$ 229,838,831$ 257,237,240$

950
City of San Marcos
Changes in Fund Balances of Governmental Funds
Last Ten Fiscal Years
(modified accrual basis of accounting)
-136-
2016 2017 2018 2019
Revenues:

Taxes and special assessments (3) 43,388,689$ 28,386,492$ 30,734,448$ 37,396,482$ Licenses and permits 5,190,125 5,184,798 5,567,081 4,829,046 Intergovernmental (3) 8,388,620 22,446,951 24,240,158 22,558,222 Charges for services 15,644,089 15,756,224 16,391,482 16,112,574 Developer fees 5,680,240 6,770,876 10,269,151 5,217,642 Fines and forfeitures 492,091 632,114 592,516 498,336 Investment and rental income 9,887,780 9,814,976 8,625,937 11,496,722 Miscellaneous 3,003,475 1,656,344 2,170,216 1,873,724 Total Revenues 91,675,109 90,648,775 98,590,989 99,982,748 Expenditures:

Current:

General government (2) 15,769,553 20,232,292 17,619,187 21,862,137 Community development (2) 9,218,570 9,224,684 6,419,708 4,795,779 Public safety 33,512,449 36,449,543 37,334,894 37,782,655 Highways, streets, and parks (1) (2) 16,739,415 19,258,048 18,924,332 18,575,680 Culture and recreation (1) 3,611,161 3,814,190 3,930,935 3,759,978 Capital outlay 11,115,705 10,255,091 6,235,184 19,258,698 Debt service:

Principal retirement 677,198 970,360 1,474,503 860,105 Interest and fiscal charges 259,734 286,705 246,947 155,238 Cost of issuance - - 108,311 - Total expenditures 90,903,785 100,490,913 92,294,001 107,050,270 Excess/(deficiency) of Revenues Over Expenditures 771,324 (9,842,138) 6,296,988 (7,067,522) Other financing sources (uses):

Issuance of debt 1,036,580 - - - Subscription acquisition - - - - Proceeds from sale of capital assets - - - 4,521,104 Capital leases 432,248 2,018,392 - - Transfers in 6,441,564 5,470,561 9,820,141 11,859,523 Transfers out (1,941,564) (2,153,423) (4,820,141) (7,509,523) Total other financing sources (uses) 5,968,828 5,335,530 5,000,000 8,871,104 Net Change in Fund Balances 6,740,152 $ (4,506,608)$ 11,296,988$ 1,803,582$ Debt service as a percentage of noncapital expenditures 1.05% 1.20% 2.28% 1.01% Notes:
(1) Amounts have been restated to reflect lighting and landscaping expenditures as part of highways, streets, and parks instead of culture and recreation.
(2) Beginning in fiscal year 2009-2010, all costs relating to the construction inspection function are reported under community development instead of highways, streets, and parks. Also, the storm water management function is under general government instead of highways, streets, and parks.
(3) Beginning in fiscal year 2016-2017, all sales tax related revenue is recorded under the intergovernmental revenue category instead of taxes and special assessments revenue category.

Source: City of San Marcos, Finance Department
Fiscal Year
951
-137-
Fiscal Year
2020 2021 2022 2023 2024 2025
35,074,453$ 35,336,432$ 38,014,722$ 40,963,794$ 44,408,575$ 47,427,503$ 4,982,848 5,758,317 6,229,489 6,577,183 7,196,130 8,077,371 30,208,872 50,774,854 50,768,628 54,411,026 44,105,690 50,196,298 15,608,463 17,466,496 20,530,129 19,271,585 21,237,059 23,722,245 7,775,654 7,826,185 12,959,166 13,654,904 2,606,491 13,353,424 389,034 257,569 68,465 1,241,181 1,230,052 536,408 19,363,307 8,782,267 15,259,941 12,021,546 18,433,726 18,622,826 1,556,989 1,163,325 1,617,335 3,286,479 2,565,543 9,979,388 114,959,620 127,365,445 145,447,875 151,427,698 141,783,266 171,915,463 24,474,209 22,215,742 31,048,583 33,833,175 29,797,201 33,071,884 9,921,546 13,323,540 12,240,828 12,840,820 12,680,319 15,065,633 39,103,687 42,204,560 42,816,495 43,091,788 44,563,590 47,154,017 18,682,862 18,038,640 17,536,047 25,010,953 20,937,875 20,297,512 3,416,437 3,248,975 4,084,656 4,472,130 5,019,593 4,790,118 16,762,011 31,070,090 24,629,033 45,066,432 27,390,505 28,247,055 907,466 1,111,330 1,042,598 999,388 873,121 1,501,427 219,983 225,850 144,339 134,128 120,785 172,918 - - - - - - 113,488,201 131,438,727 133,542,579 165,448,814 141,382,989 150,300,564 1,471,419 (4,073,282) 11,905,296 (14,021,116) 400,277 21,614,899 - - - - - - - - - 257,840 - 3,274,381 1,138,302 2,427,572 396,367 8,332,418 373,653 9,129 1,509,757 585,414 - - - - 14,722,108 17,515,183 11,302,783 20,819,402 24,148,802 22,950,236 (11,222,108) (14,115,183) (7,802,783) (19,819,402) (21,648,802) (20,450,236) 6,148,059 6,412,986 3,896,367 9,590,258 2,873,653 5,783,510 7,619,478$ 2,339,704$ 15,801,663$ (4,430,858)$ 3,273,930$ 27,398,409$

1.11% 1.18% 1.12% 0.80% 0.87% 1.36%
952
City of San Marcos
Assessed Value and Estimated Actual Value of Taxable Property (1) Last Ten Fiscal Years
-138-
Fiscal
Year Secured Unsecured Less: Exemptions
Taxable Assessed
Value
Direct Tax
Rate (2)
2016 10,811,344,739$ 329,112,145 $ (559,042,771)$ 10,581,414,113$ 0.0883 2017 11,407,192,886 337,739,348 (570,825,511) 11,174,106,723 0.0883 2018 12,146,122,751 348,333,349 (595,248,906) 11,899,207,194 0.0883 2019 12,991,489,372 370,104,590 (619,191,733) 12,742,402,229 0.0883 2020 13,815,539,662 379,261,628 (579,152,010) 13,615,649,280 0.0883 2021 14,506,330,312 384,186,012 (654,981,947) 14,235,534,377 0.0883 2022 15,119,698,651 313,927,047 (753,940,771) 14,679,684,927 0.0883 2023 16,204,222,773 399,106,990 (842,763,196) 15,760,566,567 0.0883 2024 17,491,188,954 345,103,829 (1,013,865,302) 16,822,427,481 0.0883 2025 18,609,150,603 557,102,696 (1,210,436,365) 17,955,816,934 0.0883 Notes:
(2) Tax Rate Area 13-066.

Source: San Diego County Assessor's Office
(1) In 1978 the voters of the State of California passed Proposition 13 which limited property taxes to a total maximum rate of 1% based upon the assessed value of the property being taxed. Each year, the assessed value of property may be increased by an "inflation factor" (limited to a maximum increase of 2%). With few exceptions, property is only re-assessed at the time that it is sold to a new owner. At that point, the new assessed value is re-assessed at the purchase price of the property sold. The assessed valuation data shown above represents the only data currently available with respect to the actual market value of taxable property and is subject to the limitations described above. 953
City of San Marcos
Direct and Overlapping Property Tax Rates (1)
Last Ten Fiscal Years
(rate per $100 of assessed value)
-139-
Direct Rate Overlapping Rates
Fiscal
Year
City of San
Marcos
San
Marcos
Unified
School
District
San
Marcos
Fire
Protection
District
San
Diego
County Others
Voter
Approved
Debt
Total Tax
Rate (2)
2016 0.0883 0.3805 0.0632 0.2481 0.2200 0.1180 1.1180 2017 0.0883 0.3805 0.0632 0.2481 0.2200 0.1175 1.1175 2018 0.0883 0.3805 0.0632 0.2481 0.2200 0.0910 1.0911 2019 0.0883 0.3805 0.0632 0.2481 0.2200 0.0908 1.0908 2020 0.0883 0.3805 0.0632 0.2481 0.2200 0.0970 1.0970 2021 0.0883 0.3805 0.0632 0.2481 0.2200 0.0804 1.0804 2022 0.0883 0.3805 0.0632 0.2481 0.2200 0.0777 1.0777 2023 0.0883 0.3805 0.0632 0.2481 0.2200 0.0752 1.0753 2024 0.0883 0.3805 0.0632 0.2481 0.2200 0.0723 1.0724 2025 0.0883 0.3805 0.0632 0.2481 0.2200 0.0719 1.0719 Notes:
(1) Tax rates are for Tax Rate Area 13-066.
(2) In 1978, California voters passed Proposition 13 which sets the property tax rate at a 1% fixed amount. This 1% is shared by all taxing agencies in which the subject property resides. In addition to the 1% fixed amount, property owners are charged taxes as a percentage of assessed property values for the payment of various voter-approved bonds.

Source: San Diego County Auditor and Controller Office Allocation of 1% Ad Valorem Property Taxes

954
City of San Marcos
Property Tax Levies and Collections
Last Ten Fiscal Years (1)
-140-
Taxes Levied Collections in
Fiscal for the Fiscal Percentage Subsequent
Year Year Amount of Levy Years Amount Percentage
2016 6,875,051$ 6,704,823$ 97.52 71,299 $ 6,776,122$ 98.56 2017 7,280,193 7,082,528 97.28 85,022 7,167,550 98.45 2018 7,584,842 7,402,491 97.60 83,773 7,486,264 98.70 2019 8,110,254 7,879,445 97.15 90,958 7,970,403 98.28 2020 8,257,634 7,990,099 96.76 125,751 8,115,850 98.28 2021 8,671,538 8,522,190 98.28 111,723 8,633,913 99.57 2022 9,291,999 8,889,705 95.67 113,330 9,003,035 96.89 2023 9,925,652 9,530,480 96.02 152,338 9,682,818 97.55 2024 10,278,653 9,918,155 96.49 132,086 9,918,155 96.49 2025 10,970,848 10,601,907 96.64 N/A 10,601,907 96.64 Notes:
(1) The amounts presented include the City and Fire District property taxes.

Source: San Diego County Auditor and Controller Office Collected within the Fiscal
Year of the Levy Total Collections to Date
955
City of San Marcos
Ratios of Outstanding Debt by Type
Last Ten Fiscal Years
-141-
Governmental Activities (1)
Fiscal
Year
General
Obligation
Bonds
Revenue
Bonds
Notes
Payable
Lease
Liabilities
SBITA
Liabilities Loans Payable
(3)
Total Primary
Government
Percentage of
Personal Income
Per
Capita
2016 -$ 4,390,999$ 274,934$ 633,034$ - $ 1,432,155$ 6,731,122$ 12.78% 73 2017 - 4,118,332 141,146 2,250,022 - 1,271,983 7,781,483 14.14% 83 2018 (2) - - - 1,731,711 - 4,643,642 6,375,353 10.89% 66 2019 - - - 1,334,885 - 4,158,664 5,493,549 8.95% 57 2020 - - - 2,413,785 - 3,682,055 6,095,840 9.46% 63 2021 - - - 2,376,171 - 3,193,753 5,569,924 7.96% 58 2022 - - - 1,759,679 - 2,767,647 4,527,326 6.51% 48 2023 - - - 1,260,227 200,526 2,335,627 3,796,380 5.08% 40 2024 - - - 757,123 145,458 1,897,696 2,800,277 - (4) 30 2025 - - - 2,962,847 156,562 1,453,822 4,573,231 - (5) 47 Note:
(1) General bonded debt is debt payable with governmental fund resources. Details regarding the City's outstanding debt can be found in the notes to basic financial statements. (2) Revenue Bonds refunded as of November 29, 2017
(3) Beginning 2018 includes Safety Center Private Placement Financing (4) At the time of publication, personal income and per capita personal income data for 2024 was not made available by the federal Bureau of Economic Analysis (5) Personal income data for 2025 is unavailable.

Source: City of San Marcos, Finance Department
956
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957
City of San Marcos
Ratios of General Bonded Debt Outstanding
Last Ten Fiscal Years
-142-
Fiscal
Year
General
Obligation
Bonds
Revenue
Bonds (1) Total
Percent of
Assessed
Value (2) Per Capita
2016 -$ 4,390,999$ 4,390,999$ 0.041 47 2017 - 4,118,332 4,118,332 0.037 44 2018 (3) - - - 0.000 - 2019 - - - 0.000 - 2020 - - - 0.000 - 2021 - - - 0.000 - 2022 - - - 0.000 - 2023 - - - 0.000 - 2024 - - - 0.000 - 2025 - - - 0.000 - Notes:
(1) The revenue bonds are secured by lease payments to be made by the City and the County of San Diego.
(2) Assessed value has been used because actual value of taxable property is not readily available in the State of California.
(3) Revenue Bonds refunded as of November 29, 2017
Source: City of San Marcos, Finance Department
958
City of San Marcos
Legal Debt Margin Information
Last Ten Fiscal Years
-143-
2016 2017 2018 2019
Total assessed valuation 11,140,456,884$ 11,744,932,234$ 12,494,456,100$ 13,361,593,962$ Conversion percentage 25% 25% 25% 25%
Adjusted assessed valuation 2,785,114,221 2,936,233,059 3,123,614,025 3,340,398,491 Debt limit percentage 15% 15% 15% 15%
Debt limit 417,767,133 440,434,959 468,542,104 501,059,774 Total net debt applicable to limit:

General obligation bonds - - - - Legal debt margin 417,767,133$ 440,434,959$ 468,542,104$ 501,059,774$ Total debt applicable to the limit
as a percentage of debt limit 0.000% 0.000% 0.000% 0.000% Note:

The Government Code of the State of California provides for a legal debt limit of 15% of gross assessed valuation.

However, this provision was enacted when assessed valuation was based upon 25% of market value. Effective with the 1981-82 fiscal year, each parcel is now assessed at 100% of market value (as of the most recent change in ownership for that parcel). The computations shown above reflect a conversion of assessed valuation data for each fiscal year from the current full valuation perspective to the 25% level that was in effect at the time that the legal debt margin was enacted by the State of California for local governments located within the State.

Source: City of San Marcos, Finance Department
County of San Diego Tax Assessor's Office
Fiscal Year
959
-144-
2020 2021 2022 2023 2024 2025
14,194,801,290$ 14,890,516,324$ 15,433,625,698$ 16,603,329,763$ 17,836,292,783$ 19,166,253,299$ 25% 25% 25% 25% 25% 25%
3,548,700,323 3,722,629,081 3,858,406,425 4,150,832,441 4,459,073,196 4,791,563,325 15% 15%
532,305,048
15%
558,394,362
15%
578,760,964
15%
622,624,866
15%
668,860,979 718,734,499
- - - - - -
532,305,048$ 558,394,362$ 578,760,964$ 622,624,866$ 668,860,979$ 718,734,499

0.000% 0.000% 0.000% 0.000% 0.000% 0.000%
Fiscal Year
960
City of San Marcos
Pledged-Revenue Coverage
Last Ten Fiscal Years
-145-
Revenue Bonds (1)
Debt Service (2)
Fiscal Year Revenue Principal Interest Coverage
2016 471,524$ 265,000$ 206,524$ 1.00 2017 470,353 275,000 195,353 1.00 2018 (3) - - - 1.00 2019 - - - 1.00 2020 - - - 1.00 2021 - - - 1.00 2022 - - - 1.00 2023 - - - 1.00 2024 - - - 1.00 2025 - - - 1.00 Notes:
(1) Revenue bonds are secured by lease payments to be made by the City and the County of San Diego. (2) Debt service shown is annual debt service.
(3) Revenue Bonds refunded as of November 29, 2017
Source: City of San Marcos, Finance Department
961
City of San Marcos
Direct and Overlapping Debt
As of June 30, 2025
-146-
2024-25 Assessed Valuation: (1) $18,049,376,134
Estimated
Percentage Outstanding Debt Share of Overlapping
DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT: Applicable (2) June 30, 2025 (3) Debt Metropolitan Water District 0.432% $17,155,000 74,110 $ Palomar Community College District 10.585% 611,941,649 64,774,024 $ San Marcos Unified School District 62.855% 426,751,637 268,234,741$ San Marcos Unified School District Community Facilities District No. 4 64.617% 10,020,000 6,474,623 $ San Marcos Unified School District Community Facilities District No. 7 100.000% 6,605,000 6,605,000$ San Marcos Unified School District Community Facilities District No. 8 100.000% 3,010,000 3,010,000$ San Marcos Unified School District Community Facilities District No. 12 100.000% 5,310,000 5,310,000$ San Marcos Unified School District Community Facilities District No. 15, I.A. A 100.000% 3,465,000 3,465,000$ San Marcos Unified School District Community Facilities District No. 16 100.000% 2,230,000 2,230,000$ Other School Districts Various 1,002,421,671 343,775 $ Palomar Pomerado Hospital 11.884% 381,893,263 45,384,195 $ City of San Marcos 100.000% - - $ City of San Marcos Community Facilities District No. 88-1 100.000% 3,706,797 3,706,797$ City of San Marcos Community Facilities District No. 99-01 100.000% 37,715,002 37,715,002$ City of San Marcos Community Facilities District No. 2002-1 100.000% 7,985,000 7,985,000$ 100.000% 3,245,000 3,245,000$
TOTAL DIRECT AND OVERLAPPING TAX AND ASSESSMENT DEBT 458,557,267.00 $ DIRECT AND OVERLAPPING GENERAL FUND DEBT:

San Diego County General Fund Obligations 2.435% $351,065,000 8,548,433 San Diego County Pension Obligation Bonds 2.435% 140,370,000 3,418,010 San Diego County Superintendent of Schools Obligations 2.435% 5,125,000 124,794 Palomar Community College District General Fund Obligations 10.585% 1,030,000 109,026 San Marcos Unified School District General Fund Obligations 62.855% 85,066,741 53,468,700 Other School District Certificates of Participation Various 129,791,150 91,593 City of San Marcos General Fund Obligations 100.000% 4,573,231 (4) 4,573,231 TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT 70,333,787 OVERLAPPING TAX INCREMENT DEBT (Successor Agency): 100.000% 196,270,000$ 196,270,000 TOTAL DIRECT DEBT 4,573,231
TOTAL OVERLAPPING DEBT 720,587,823
COMBINED TOTAL DEBT (3) (4) 725,161,054
Direct Debt 0.00%
Total Direct and Overlapping Tax and Assessment Debt 2.54% Combined Direct Debt ($2,787,975) 0.03%
Combined Total Debt 4.02%
Ratios to Redevelopment Incremental Valuation ($12,305,939,964):

Total Overlapping Tax Increment Debt 1.59%
Notes:
(1) Total gross assessed valuation less all other exemptions except homeowners. (2) The percentage of overlapping debt applicable to the City is estimated using taxable assessed property value. Applicable percentages were estimated by determining the portion of the overlapping district's assessed value that is within the boundaries of the City divided by the district's total taxable assessed value. (3) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded lease obligations. (4) Includes non-bonded lease obligations of the City.

Source: California Municipal Statistics, Inc.

City of San Marcos, Finance Department
California Statewide Communities Development Authority
Assessment District No. 22-01
962
City of San Marcos
Demographic and Economic Statistics
Last Ten Fiscal Years
-147-
Fiscal
Year
Square
Miles Population
Population
Percentage
Change
Personal Income
(1)
Per Capita
Personal
Income (1)
Unemployment
Rate
2016 33.07 93,242 1.27 5,268,732,452 $ 56,506 $ 3.66 2017 33.07 94,258 (2) 1.09 5,502,782,040 58,380 3.41 2018 33.07 95,768 1.60 5,855,925,896 61,147 3.30 2019 33.07 96,335 0.59 6,139,333,215 63,729 2.80 2020 33.07 97,209 0.91 6,441,651,594 66,266 5.68 2021 33.07 96,302 -0.93 6,995,088,374 72,637 3.20 2022 33.07 93,585 -2.82 6,955,798,710 74,326 4.10 2023 33.07 94,530 1.01 7,479,402,660 79,122 3.30 2024 33.07 94,188 -0.36 - (3) (3) 4.50 2025 33.07 97,123 3.12 - (4) - (4) 4.90 Notes:
(1) Data presented is for San Diego/Chula Vista/Carlsbad economic area. FY2023 data was updated. (2) Fiscal Year 2017 Population was revised by the State Department of Finance. (4) Personal income and per capita personal income data for 2025 is unavailable.

Sources: Population information provided by the State Department of Finance.

Personal income data provided by the U.S. Department of Commerce. (3) At the time of publication, personal income and per capita personal income data for 2024 was not made available by the federal Bureau of Economic Analysis.
963
City of San Marcos
Principal Employers
Current Year and Nine Years Ago
-148-
Employer
Number of
Employees Rank
Percent of
Total
Employment
(2)
Number of
Employees Rank
Percent of Total
Employment (1)
San Marcos Unified School District 3,570 1 7.72% 2240 1 5.59% California State University San Marcos 2,826 2 6.11% 1515 3 3.78% Palomar Community College 2,307 3 4.99% 1627 2 4.06%
Hunter Industries, Inc. 776 4 1.68% 742 4 1.85%
United Parcel Service, Inc. 551 5 1.19% 501 6 1.25%
Costco Wholesale (3) 504 6 1.09% 350 10 0.87%
Southern California Permanente Medical Group 477 7 1.03% 403 8 1.00% University of St Augustine for Health 339 8 0.73%
Hughes Circuits Inc. 263 9 0.57%
Hollandia Dairy, Inc. 250 10 0.54%
Lusardi Construction Co. 250 11 0.54%
TrueCare (2) 250 12 0.54% 700 5 1.75%
Fluid Components International 224 13 0.48%
Wal-Mart Stores, Inc. 211 14 0.46% 350 9 0.87%
Veterinary Specialty Hospital 190 15 0.41%
Home Depot 184 16 0.40%
Sunset Distributing, LLC (4) 175 17 0.38%
K-Tech Machine, Inc 165 18
Southern Contracting 150 19
Tri-State General Contractors, Inc. 150 20
City of San Marcos (5) 452 7 1.13%
Total 13,812 28.85% 8,880 22.15%
Notes:
(1) Total Employment as used above represents the total employment of all employers located within the City limits. (2) Formerly the "North County Health Services"
(3) Represents 2 Costco's; Wholesale - Nordahl (370) and Business Center - Grand Ave (118) (4) Formerly the "Stone Distributing Co., LLC"
(5) After FY 2019-2020, the principal employer list only includes non-City employers.

Sources: City of San Marcos, Business License Directory City of San Marcos, Economic Development Department
2025 2016
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City of San Marcos
Full-time and Part-time Employees by Function
Last Ten Fiscal Years
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Function/Program 2016 2017 2018 2019 2020 (2) 2021 2022 2023 2024 2025 General government 56 52 43 67 40 48 60 56 59 58
Community development 26 29 33 40 25 34 41 38 42 34
Public safety (1) 105 108 104 129 108 121 114 119 119 134 Highways, streets and parks 84 88 92 97 82 65 71 65 63 73 Culture and recreation 181 177 158 200 73 121 121 135 178 177 Total 452 454 430 533 328 389 407 413 461 476
Note:
(1) Includes Fire services only. Police services are provided to the City by the County. (2) Due to the COVID-19 pandemic, employment numbers are significantly lower than previous years. (3) FY 2025, the Building division was moved from Development Services (Community Development) to Fire (Public Safety).

Source: City of San Marcos, Finance Department
Fiscal Year

966
City of San Marcos
Operating Indicators by Function (1)
Last Ten Years
-150-
Function/Program 2016 2017 2018 2019
General Government:

Number of business licenses issued 5,762 5,916 5,898 6,086 Number of requests for public information 355 346 353 379 Number of new hires including part-time 182 150 144 165 Number of invoices processed 12,813 12,287 12,123 12,123 Public Safety:

Police:

Contracts with the San Diego
County Sheriff's Department for
full service law enforcement
Fire:

Number of emergency calls 10,719 11,258 11,458 11,275 Number of fire inspections 2,419 2,431 3,168 2,748 Highways and Streets:

Number of street lights added in current year 5 30 15 6 Number of traffic signals added in current year 3 1 - 4 Miles of streets swept 12,090 12,090 12,157 12,157 Miles of centerline streets added - - - -
Storm drain structures cleaned and repaired(2) 602 719 1,109 282 Culture and Recreation (3):

Number of facility rentals 862 925 931 1,052 Number of swim program participants 40,711 38,105 33,955 21,338 Number of adult sports participants 50,814 55,809 59,361 64,025 Number of youth sports participants 26,415 27,013 32,092 33,603 Number of senior nutrition program meals served 10,813 10,997 12,024 11,450 Community Development:

Number of building permits issued 2,390 2,198 2,326 2,337 Approximate number of building inspections conducted 12,150 10,641 16,829 11,999 Number of new business licenses issued 1,519 1,407 1,346 1,385 Note:

Source: Various City of San Marcos Departments
(1) Water and sewage treatment services are provided primarily by the Vallecitos Water District.
(2) The significant increase in FY2018 was due to equipment acquisition which increased cleaning capabilities.
(3) Due to the COVID-19 pandemic, many Parks and Recreation programs were shut down for much of 2020 through June 2021, hence the decrease in number of participants and facility rentals.

Fiscal Year
967
-151-
2020 2021 2022 2023 2024 2025
5,808 5,450 5,660 5,706 5,639 5,840 492 693 714 686 797 781 83 117 163 185 136 127 12,290 10,624 10,423 12,179 11,617 11,688
10,838 11,603 12,464 12,062 12,094 12,425
1,745 1,482 6,957 2,414 2,333 3,077 6 - 8 19 - 2 3 - - 5 - 6 12,354 12,354 12,219 12,220 12,219 12,219
- - - - 1 - 487 448 750 478 638 467 641 107 393 429 479 530 11,634 3,705 1,581 1,230 1,295 1,921
59,056 1,470 6,886 7,103 7,988 7,906
21,256 4,112 6,333 8,303 8,452 8,526
11,642 12,846 9,112 12,174 13,643 13,760
2,200 2,409 2,763 4,266 2,020 1,743 9,127 10,669 14,726 19,544 13,638 11,240
1,166 1,138 1,264 1,216 974 1,179 Fiscal Year
968
City of San Marcos
Capital Asset Statistics by Function/Program
Last Ten Fiscal Years
-152-
Function/Program 2016 2017 2018 2019
Public Safety:

Police (1)
Fire
Number of fire stations 4 4 4 4
Number of emergency vehicles 44 47 47 50
Highways and Streets:

Miles of streets (2) 197 197 198 204
Number of street lights 2,713 2,743 2,758 2,760
Culture and Recreation:

Parks (3) 35 36 36 36
Acres of park and trail land (3) 384 333 333 333
Pools 2 2 2 2
Notes:
(1) The City contracts with the San Diego County Sheriff's Department for full service law enforcement. (2) An audit of the City's street inventory was conducted during FY2012 and it was determined that private streets were being included in the total miles of streets. Private street have now been removed from the total.
(3) An audit of the City's parks and trails was conducted in FY2018 and it was determined that acres of park land reported in the prior years included trail land. Also, the number of parks has been revised to included parks owned by the City and developers, which the City maintains and has the right to use. The numbers are revised starting in FY2017.

Sources: Various City Departments.

Fiscal Year
969
-153-
2020 2021 2022 2023 2024 2025
4 4 4 4 4 4
50 50 50 56 56 56
204 204 204 204 205 205
2,789 2,789 2,797 2,816 2,816 2,816
37 39 39 41 44 44
287 256 256 294 298 308
2 2 2 2 2 2
Fiscal year

970
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Tel. 909-889-0871 | www.ramscpa.net | 735 E. Carnegie Dr. Suite 100, San Bernardino, CA 92408

CERTIFIED PUBLIC ACCOUNTANTS

-1-

December 17, 2025

To the Honorable City Council
City of San Marcos, California

We have audited the financial statements of the City of San Marcos (the City) as of and for the year ended June 30, 2025 , and have issued our report thereon dated December 17, 2025. Professional standards require that we advise you of the following matters relating to our audit.

Our Responsibility in Relation to the Financial Statement Audit

As communicated in our engagement letter dated May 8, 2025, our responsibility, as described by professional standards, is to form and express opinions about whether the financial statements that have been prepared by management with your oversight are presented fairly, in all material respects, in accordance with accounting principles generally accepted in the United States of America. Our audit of the financial statements does not relieve you or management of your respective responsibilities.

Our responsibility, as prescribed by professional standards, is to plan and perform our audit to obtain reasonable, rather than absolute, assurance about w hether the financial statements are free of material misstatement. An audit of financial statements includes consideration of the system of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control over financial reporting. Accordingly, as part of our audit, we consider ed the system of internal control of the City solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control.

We are also responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilit ies in overseeing the financial reporting process.

However, we are not required to design procedures for the purpose of identifying other matters to communicate to you.

Planned Scope and Timing of the Audit

We conducted our audit consistent with the planned scope and timing we previously communicated to you.

Compliance with All Ethics Requirements Regarding Independence

The engagement team, others in our firm, as appropriate, and our firm have complied with all relevant ethical requirements regarding independence.

We have evaluated whether certain nonattest services performed by our firm during the audit have created a significant threat to our independence in relation to the City. We have identified a threat to our independence (preparation of the City’s financial stat ements, creating a self-rev iew threat) that if not reduced to an acceptable level, would impair our i ndependence. In order to reduce the threat to an acceptable level, we have applied the following safeguard:

Prior to the issuance of the City’s financial statements, another partner or manager, independent of the engagement, will review the financial statements. 972

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Significant Risks Identified

We have identified the possibility of the following significant risks:

Management's override of internal c ontrols over financial reporting – Management override of internal controls is the intervention by management in handling financial information and making decisions contrary to internal control policy.

Revenue recognition – Revenue recognition is a generally accepted accounting principle that refers to the conditions under which an City can recognize a transaction as revenue. Auditing standards indicate that recognizing revenue is a presumed fr aud risk and usually classified as a significant risk in most audits.

These significant risks are presumptive in most audits and merit attention by the auditors due to the direct impact over financial reporting and internal control processes. Although identified as significant risks, we noted no matters of management override of controls or deviations from generally accepted accounting principles which caused us to modify our audit procedures or any related matters which are required to be communicated to those charged with governance due to these identified risks.

Qualitative Aspects of the City’s Significant Accounting Practices

Significant Accounting Policies

Management has the responsibility to select and use appropriate accounting policies. A summary of the significant accounting policies adopted by the City is included in Note 1 to the financial statements. The City adopted GASB Statement No. 101, Compensated Absence, and GASB Statement No. 102, Certain Risk Disclosures during 2025. No matters have come to our attention that would require us, under professional standards, to inform you about (1) t he methods used to account for significant unusual transactions and (2) the effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus.

Significant Accounting Estimates and Related Disclosures

Accounting estimates and related disclosures are an integral part of the financial statements prepared by management and are based on management’s current judgments. Those judgments are normally based on knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ markedly from management’s current judgments.

The most sensitive accounting estimates affecting the City’s financial statements are:

Management’s estimate of the net pension liab ility and related deferred inflows and outflows of resources are based on actuarial reports by independent actuaries. We evaluated the key factors and assumptions used to develop the estimate in determining that it is reasonable in relation to the basic financial statements taken as a whole and in relation to the applicable opinion units.

Management’s estimate of the liability for ot her post-employment benef its (OPEB) and related deferred inflows and outflows of resources are based on actuarial reports provided by independent actuaries. We evaluated the key factors and assumptions used to develop the estimate in determining that it is reasonable in relation to the basic financial statements taken as a whole and in relation to the applicable opinion units.

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Management’s estimate of the investments in real estate are based on a valuation of the property.

We evaluated the key factors and assumptions used to develop the estimate in determining that it is reasonable in relation to the basic financial st atements taken as a whole and in relation to the applicable opinion units.

Financial Statement Disclosures

Certain financial statement disclosures involve significant judgment and are particularly sensitive because of their significance to financial statement users.

The most sensitive disclosures affecting the City’s financial statements relate to:

The disclosure of fair value of investments in the basic financial statements represents amounts susceptible to market fluctuations.

The disclosure of capital assets (and related accumulated depreciation) in the basic financial statements is based on historical information which could differ from actual useful lives of each capitalized item.

The disclosure of net pension liability and related deferred inflows and outflows of resources in the basic financial statements is based on actuarial assumptions. Actual future liabilities and actuarial deferred inflows and outflows may vary from disclosed estimates.

The disclosures of the other post-employment benefits (OPEB) liability and related deferred inflows and outflows of resources in the basic financial statements is based on actuarial assumptions.

Actual future liabilities and actuarial deferred inflows and outflows may vary from disclosed estimates.

The disclosure of claims payable in the basic financial statements is based on claims loss reports from third party claims management companies. Act ual future liabilities may vary from disclosed estimates.

The disclosure of leases and subscription liabilities, right-to-use assets, and asset amortization in the basic financial statements is based on certain terms and assumptions in the agreements which could differ from actual amounts.

Significant Difficulties Encountered during the Audit

We encountered no significant difficulties in dealing wi th management relating to the performance of the audit.

Uncorrected and Corrected Misstatements

For purposes of this communication, professional standards require us to accumulate all known and likely misstatements identified during the aud it, other than those that we belie ve are trivial, and communicate them to the appropriate level of management. Furthe r, professional standards require us to also communicate the effect of uncorrect ed misstatements related to prior periods on the relevant classes of transactions, account balances or disclosures, and the financial statements as a whole and each applicable opinion unit. There were no uncorrected misstatements noted.

In addition, professional standards require us to communicate to you all material, corrected misstatements that were brought to the attenti on of management as a result of our audit procedures. None of the misstatements identified by us as a result of our audit procedures and corrected by management were material, either individually or in the aggregate, to the financial statements taken as a whole or applicable opinion unit.

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Disagreements with Management

For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter, which could be significant to the City’s financial statements or the auditor’s report. No such disagreements arose during the course of the audit.

Representations Requested from Management

We have requested certain written representations from management, which are included in the attached letter dated December 17, 2025.

Management’s Consultations with Other Accountants

In some cases, management may decide to consult with other accountants about auditing and accounting matters. Management informed us that, and to our knowledge, there were no consultations with other accountants regarding auditing and accounting matters.

Other Significant Matters, Findings, or Issues

In the normal course of our professional association with the City, we generally discuss a variety of matters, including the application of accounting principles and auditing standards, significant events or transactions that occurred during the year, operating and regulatory conditions affecting the City, and operational plans and strategies that may affect the ri sks of material misstatement. None of the matters discussed resulted in a condition to our retention as the City’s auditors.

Other Information Included in Annual Reports

Pursuant to professional standards, our responsibility as auditors for other information, whether financial or nonfinancial, included in the City’s annual reports, does not extend beyond the information identified in the audit report, and we are not required to perform any pr ocedures to corroborate such other information.

However, in accordance with such standards, we have:

Read the transmittal letter and statistical section (or “other information”) and considered whether a material inconsistency existed between the other the information and the basic financial statements, or the other information otherwise appears to be materially misstated. Our opinion(s) on the basic financial statements do not cover t he other information, and we do not express an opinion or any form of assurance thereon.

Our responsibility also includes communicating to you any information which we believe is a material misstatement of fact. Nothing came to our attention that caused us to believe that such information, or its manner of presentation, is materially inconsistent wi th the information, or m anner of its presentation, appearing in the financial statements.

This report is intended solely for the information and use of the City Council and management of the City and is not intended to be and should not be used by anyone other than these specified parties.

Very truly yours,

975

Rogers, Anderson, Malody & Scott, LLP
This representation letter is provided in connection with your audit of the financial statements of the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information of the City of San Marcos (the entity) which compromise the statement of financial position as of June 30, 2025 and the respective change in financial position and, where applicable, cash flows for the year then ended, and the related notes to the financial statements, for the purpose of expressing opinions on whether the financial statements of the various opinion units are presented fairly, in all material respects, in accordance with accounting principles generally accepted for governments in the United States of America (U.S.

GAAP).

Certain representations in this letter are described as being limited to matters that are material. Items are considered material, regardless of size, if they involve an omission or misstatement of accounting information such that, in the light of surrounding circumstances, there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

We confirm that, to the best of our knowledge and belief, having made such inquiries as we considered necessary for the purpose of appropriately informing ourselves as of December 17, 2025:

Financial Statements
We have fulfilled our responsibilities, as set out in the terms of the audit engagement letter dated May 8, 2025, for the preparation and fair presentation of the financial statements of the various opinion units referred to above in accordance with U.S. GAAP.

The financial statements refer to above have been fairly presented in accordance with U.S. GAAP and include all properly classified funds, required supplementary information, and noted to the basic financial statements.

We acknowledge our responsibility for the design, implementation, and maintenance of the system of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

We acknowledge our responsibility for the design, implementation, and maintenance of internal control to prevent and detect fraud.

The methods, data and significant assumptions used by us in making accounting estimates and their related disclosures, are appropriate to achieve recognition, measurement, or disclosure that is reasonable in the context of U.S. GAAP.

All related party relationships and transactions have been appropriately accounted for and disclosed in accordance with the requirements of U.S. GAAP.

All events subsequent to the date of the financial statements and for which U.S. GAAP requires adjustment or disclosure have been adjusted or disclosed.

We acknowledge our responsibility for compliance with the laws, regulations, and provisions of contracts and grant agreements.

The effects of all known actual or possible litigation and claims have been accounted for and disclosed in accordance with U.S. GAAP.
976

All component units, as well as joint ventures with an equity interest, if any, are included and other joint ventures and related organizations are properly disclosed.

All funds and activities are properly classified.

All funds that meet the quantitative criteria in GASB Statement No. 34, Basic Financial Statementsand Management's Discussion and Analysisfor State and Local Governments, GASB Statement No. 37, Basic Financial Statementsand Management's Discussion and Analysisfor State and Local Governments:

Omnibus as amended, and GASB Statement No. 65, Items Previously Reported as Assets and Liabilities, for presentation as major are identified and presented as such and all other funds that are presented as major are considered important to financial statement users.

All components of net position, nonspendable fund balance, and restricted, committed, assigned, and unassigned fund balance are properly classified and, if applicable, approved.

Our policy regarding whether to first apply restricted or unrestricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position/fund balance are available is appropriately disclosed and net position/fund balance is properly recognized under the policy.

All revenues within the statement of activities have been properly classified as program revenues, general revenues, contributions to term or permanent endowments, or contributions to permanent fund principal.

All expenses have been properly classified in or allocated to functions and programs in the statement of activities, and allocations, if any, have been made on a reasonable basis.

All interfund and intra-entity transactions and balances have been properly classified and reported.

Special items and extraordinary items have been properly classified and reported.

Deposit and investment risks have been properly and fully disclosed.

Capital assets, including infrastructure assets, are properly capitalized, reported, and if applicable, depreciated.

Nonexchange and exchange financial guarantees, either written or oral, under which it is more likely than not that a liability exists have been properly recorded, or if we are obligated in any manner, are disclosed We have reviewed, approved, and taken responsibility for the financial statements and related notes.

We have evaluated all of our lease and subscription agreements and have given you our assessment as to whether each agreement is subject to GASB Statement No. 87, Leases and GASB Statement No. 96, Subscription Based Information Technology Arrangements.

With regard to investments and other instruments reported at fair value:

ability to carry out its stated courses of action.

The measurement methods and related assumptions used in determining fair value are appropriate in the circumstances and have been consistently applied.

The disclosures related to fair values are complete, adequate, and in accordance with U.S. GAAP.

There are no subsequent events that require adjustments to the fair value measurements and disclosures included in the financial statements.

With regard to pensions and OPEB:

We believe that the actuarial assumptions and methods used to measure pension and OPEB liabilities and costs for financial accounting purposes are appropriate in the circumstances.

We are unable to determine the possibility of a withdrawal liability from the OPEB Plan and the Pension miscellaneous and safety plans, of which we are a sponsor and are not currently contemplating withdrawing from the Plans.

Increases in benefits, elimination of benefits and all similar amendments have been disclosed in accordance with U.S. GAAP and are included in the most recent actuarial valuation, or disclosed as a subsequent event.
977

We have conducted a comprehensive risk assessment and disclosed all material concentrations and constraints in accordance with GASB Statement No. 102, Certain Risk Disclosures. These disclosures provide sufficient detail to enable users of financial statements to understand the nature of the circumstances concentration or constraint, if applicable.

We have evaluated the concentrations and constraints, including those that occur subsequent to the statement of net position date but before the financial statements are issued and have been properly disclosed in the financial statements as subsequent events.

With respect to preparation of the financial statements, we have performed the following:

Made all management decisions and performed all management functions; Assigned a competent individual to oversee the services; Evaluated the adequacy of the services performed;
Evaluated and accepted responsibility for the result of the service performed; and Established and maintained internal controls, a process to monitor the system of internal controls.

There have been no changes or updates to legal information disclosed to you by our attorney(s) since the date of such legal response and now.

Information Provided
We have provided you with:

Access to all information, of which we are aware that is relevant to the preparation and fair presentation of the financial statements of the various opinion units referred to above, such as records, documentation, meeting minutes, and other matters;
Additional information that you have requested from us for the purpose of the audit; and Unrestricted access to persons within the entity from whom you determined it necessary to obtain audit evidence.

A written acknowledgement of all the documents that we expect to issue that will be included in the annual report and the planned timing and method of issuance of that annual report; A final version of the annual report (including all the documents that, together, comprise the annual .

The financial statements and any other information included in the annual report are consistent with one another, and the other information does not contain any material misstatements.

All information provided in electronic form are true representations of the original documents.

All transactions have been recorded in the accounting records and are reflected in the financial statements.

We have disclosed to you the results of our assessment of the risk that the financial statements may be materially misstated as a result of fraud.

significant conditions and events present, concentrations and constraints, and we believe that our use of the going concern basis of accounting is appropriate.

We have no knowledge of any fraud or suspected fraud that affects the entity and involves:

Management;
Employees who have significant roles in internal control; or Others where the fraud could have a material effect on the financial statements.

We have no knowledge of any instances, that have occurred or are likely to have occurred, of fraud and noncompliance with provisions of laws and regulations that have a material effect on the financial statements or other financial data significant to the audit objectives, and any other instances that warrant the attention of those charged with governance, whether communicated by employees, former employees, vendors (contractors), analysts, regulators, or others.
978

We have no knowledge of any instances that have occurred or are likely to have occurred, of noncompliance with provisions of contracts and grant agreements that has a material effect on the determination of financial statement amounts or other financial data significant to the audit objectives.

We have no knowledge of any instances that have occurred or are likely to have occurred of abuse that could be quantitatively or qualitatively material to the financial statements or other financial data significant to the audit objectives.

We have a process to track the status of audit findings and recommendations.

We have identified for you all previous audits, attestation engagements, and other studies related to the audit objectives and whether related recommendations have been implemented.

We have disclosed to you all known actual or possible litigation, claims, and assessments whose effects should be considered when preparing the financial statements.

relationships and transactions of which we are aware.

There have been no communications from regulatory agencies concerning noncompliance with or deficiencies in accounting, internal control, or financial reporting practices.

The entity has no plans or intentions that may materially affect the carrying value or classification of assets and liabilities.

For nonexchange financial guarantees where we have declared liabilities, the amount of the liability recognized is the discounted present value of the best estimate of the future outflows expected to be incurred as a result of the guarantee. Where there was no best estimate but a range of estimated future outflows has been established, we have recognized the minimum amount within the range.

We have disclosed to you all significant estimates and material concentrations known to management that are required to be disclosed in accordance with GASB Statement No. 62 (GASB-62), Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. Significant estimates are estimates at the balance sheet date that could change materially within the next year. Concentrations refer to volumes of business, revenues, available sources of supply, or markets or geographic areas for which events could occur that would significantly disrupt normal finances within the next year.

We have identified and disclosed to you the laws, regulations, and provisions of contracts and grant agreements that could have a direct and material effect on financial statement amounts, including legal and contractual provisions for reporting specific activities in separate funds.

We are not aware of any pending or threatened litigation, claims, or assessments, or unasserted claims or assessments that are required to be accrued or disclosed in the financial statements in accordance with GASB Statement No. 62 (GASB-62), Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements (FASB Accounting Standards CodificationTM (ASC) 450, Contingencies), and we have not consulted a lawyer concerning litigation, claims, or assessments.

We have disclosed to you all nonexchange financial guarantees, under which we are obligated and have declared liabilities and disclosed properly in accordance with GASB Statement No. 70, Accounting and Financial Reporting for Nonexchange Financial Guarantees, for those guarantees where it is more likely than not that the entity will make a payment on any guarantee.

There are no:

Violations or possible violations of laws or regulations, or provisions of contracts or grant agreements whose effects should be considered for disclosure in the financial statements or as a basis for recording a loss contingency, including applicable budget laws and regulations. 979

Unasserted claims or assessments that our lawyer has advised are probable of assertion and must be disclosed in accordance with GASB-62.

Other liabilities or gain or loss contingencies that are required to be accrued or disclosed by GASB-62 Continuing disclosure consent decree agreements or filings with the Securities and Exchange Commission and we have filed updates on a timely basis in accordance with the agreements (Rule 240, 15c2-12).

The entity has satisfactory title to all owned assets, and there are no liens or encumbrances on such assets nor has any asset or future revenue been pledged as collateral, except as disclosed to you.

We have complied with all aspects of grant agreements and other contractual agreements that would have a material effect on the financial statements in the event of noncompliance.

Use of a Specialist
We agree with the findings of specialists in evaluating the entitynet pension and net other post-employment benefit liabilities and related deferred amounts and have adequately considered the qualifications of the specialist in determining the amounts and disclosures used in the financial statements and underlying accounting records. We did not give or cause any instructions to be given to specialists with respect to the values or amounts derived in an attempt to bias their work, and we are not otherwise aware of any matters that have had an impact on the independence or objectivity of the specialists.

Cybersecurity
There have been no cybersecurity breaches or other cyber events whose effects should be considered for disclosure in the financial statements, as a basis for recording a loss contingency, or otherwise considered when preparing the financial statements.

Supplementary Information in Relation to the Financial Statements as a Whole With respect to supplementary information accompanying the financial statements:

We acknowledge our responsibility for the presentation of the supplementary information in accordance with accounting principles generally accepted in the United States of America.

We believe the supplementary information, including its form and content, is fairly presented in accordance with accounting principles generally accepted in the United States of America.

The methods of measurement or presentation have not changed from those used in the prior period.

We believe any significant assumptions or interpretations underlying the measurement or presentation of the supplementary information, and the basis for our assumptions and interpretations, are reasonable and appropriate in the circumstances.

When the supplementary information is not presented with the audited financial statements, management will make the audited financial statements readily available to the intended users of the supplementary information no later than the date of issuance by
report thereon.

document containing the supplementary information and that indicates the auditor reported on such supplementary information.

We acknowledge our responsibility to present the supplementary information with the audited financial statements or, if the supplementary information will not be presented with the audited financial statements, to make the audited financial statements readily available to the intended users of the supplementary report thereon.
980
Required Supplementary Information
With respect to the required supplementary information accompanying the financial statements:

We acknowledge our responsibility for the presentation of the required supplementary information in accordance with U.S. GAAP.

We believe the required supplementary information, including its form and content, is measured and fairly presented in accordance with U.S. GAAP.

The methods of measurement or presentation have not changed from those used in the prior period.

We believe the significant assumptions or interpretations underlying the measurement or presentation of the required supplementary information, and the basis for our assumptions and interpretations, are reasonable and appropriate in the circumstances.

Accounting Estimates and Related Disclosures
The significant judgments made in making the accounting estimates have taken into account all relevant information of which we are aware.

We have consistently and appropriately selected and applied methods, assumptions, and data when making accounting estimates.

The assumptions we used in making and disclosing accounting estimates appropriately reflect our intent and ability to carry out specific courses of action on behalf of the entity, when relevant to the accounting estimates and disclosures.

The disclosures related to accounting estimates, including those disclosures describing estimation uncertainty, are complete and are reasonable in the context of the applicable financial reporting framework.

We have obtained and applied appropriate specialized skills and expertise in making accounting estimates, if needed.

We are not aware of any events subsequent to the date of the financial statements that require adjustment to our accounting estimates and related disclosures included in the financial statements.

Michelle Bender, City Manager
Donna Apar, Finance Director
981
City of San Marcos
Staff Report
1 Civic Center Drive
San Marcos, CA 92069
File #:TMP-2356
MEETING DATE:

January 13, 2026
SUBJECT:

RESOLUTION NO. SA 2026-037 - APPROVING THE 26-27 RECOGNIZED OBLIGATION PAYMENTS

SCHEDULE (ROPS) AND ADMINISTRATION BUDGET AS REQUIRED BY HEALTH & SAFETY CODE SECTION 34177
Recommendation
ADOPT a Successor Agency resolution approving the Recognized Obligation Payment Schedule (ROPS) and Administration Budget for the required filing period of July 1, 2026 through June 30, 2027.

Board or Commission Action
Not Applicable
Relevant Council Strategic Theme
Planning for the Future
Relevant Department Goal
Not Applicable
Executive Summary
The required filing period for the Recognized Obligation Payment Schedule (ROPS) 26-27 is July 1, 2026 through June 30, 2027, as required by AB X1 26, AB 1484, and SB 107. The Successor Agency is responsible for operation of the former Redevelopment Agency’sprograms, within the limits of the statute, and dissolution of its assets. The City of San Marcos (City) assumed such Successor Agency obligations following the dissolution of redevelopment by the State. The ROPS recognizes existing obligations of the former Redevelopment Agency as expenditures to be made for the fiscal year relative to the respective ROPS period.

Under the timelines established by AB 1484 and SB 107, as the Successor Agency the City must annually submit an approved ROPS by February 1 to the Department of Finance (DOF), State Auditor Controller and the County Auditor Controller. Failure to submit the ROPS by the designated deadline can subject the City to $10,000 per day penalty for each day the ROPS is delinquent, per Health & Safety Code section 34177(m)(1) (B).

Discussion
The required filing period for the ROPS 26-27 is July 1, 2026 through June 30, 2027, as required by AB X1 26, AB 1484, and SB 107. The City, acting as the Successor Agency, is responsible for operation of the former Redevelopment Agency’sprograms, within the limits of the statute, and dissolution of its assets. The ROPS City of San Marcos Printed on 1/9/2026Page 1 of 3
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Redevelopment Agency’sprograms, within the limits of the statute, and dissolution of its assets. The ROPS recognizes existing obligations of the former Redevelopment Agency as expenditures to be made for the fiscal year relative to the respective ROPS period.

The ROPS is required to be prepared each year, covering a twelve month period from July to June. The ROPS sets forth the payment amounts, source of funds and due dates of payments required by enforceable obligations for each ROPS cycle. The current ROPS reflects the most accurate costs associated with the enforceable obligations as approved by the DOF at this time. Enforceable obligations include:
· Bonds;
· Loans borrowed by an Agency;
· Payments required by federal or state government or for employee pension obligations; · Judgments or settlements;
· “Any legally binding and enforcement agreement or contract that is not otherwise void as violating the debt limit or public policy”; and
· Contract for administration or operation of the Agency.

The ROPS also recognizes existing obligations of the former Redevelopment Agency as expenditures to be made for the fiscal year relative to the respective ROPS period. These include:
· Recognition of existing enforceable obligations (contracts, OPAs, DDAs, etc); · Administrative costs and support for former Redevelopment Agency operations in accordance with the budget;
· Allowance for debt service payments that will be made and repaid in accordance with Trust Indentures; and
· Reservations for expenditures of bond proceeds for capital projects.

Under the timelines established by AB 1484 and SB 107, the City must annually submit an approved ROPS by February 1 to the DOF, State Auditor Controller, and the County Auditor Controller. Failure to submit the ROPS by the designated deadline can subject the City to $10,000 per day penalty for each day the ROPS is delinquent per Health & Safety Code section 34177(m)(1)(B).

Staff recommends that the City Council adopt the proposed resolution, which approves the ROPS documents and authorizes staff to make adjustments to the information on the forms in the event additional guidance, direction, or information is requested by the Oversight Board and/or DOF prior to the submission to ensure prompt submission of a complete and accurate ROPS.

Environmental Review
Not Applicable
Fiscal Impact
Adoption of the ROPS allows for appropriation of funding for the enforceable obligations from the ROPS to be made. Failure to timely adopt and submit the ROPS to DOF could result in substantial daily penalties or loss of reimbursement of the Successor Agency’s administrative expenses, as provided in AB 1484 and SB 107.

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Attachment(s)
Attachment 1: Resolution
Attachment 2: San Marcos Recognized Obligation Payment Schedules Prepared/Submitted by: Jeffrey Jorgenson, Accounting and Treasury Manager Reviewed by: Donna Apar, Finance Director
Approved by: Michelle Bender, City Manager
City of San Marcos Printed on 1/9/2026Page 3 of 3
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984

RESOLUTION NO. SA 2026-__

A RESOLUTION OF THE CITY OF SAN MARCOS SUCCESSOR AGENCY, ACTING

SOLELY IN ITS CAPACITY AS THE DESIGNATED SUCCESSOR AGENCY TO THE

FORMER SAN MARCOS REDEVELOPMENT AGENCY, ADOPTING A

RECOGNIZED OBLIGATION PAYMENT SCHEDULE AND ADMINISTRATION

BUDGET AS REQUIRED BY CALIFORNIA HEALTH & SAFETY CODE SECTION 34177

WHEREAS, the City Council of the City of San Marcos (“City”) adopted the Redevelopment Plan for Project Area No. 1 of the San Marcos Redevelopment Agency (“Agency”) on or about July 12, 1983, the Redevelopment Plan for Project Area No. 2 on or about July 19, 1985, and the Redevelopment Plan for Project Area No. 3 on or about July 11, 1989, for the purpose of considering and pursuing redevelopment activities in the commun ity pursuant to the Community Redevelopment Law, California Health & Safety Code sections 33000, et. seq. (“CRL”); and

WHEREAS, pursuant to Assembly Bill X1 26 (“AB X1 26”), as supplemented in the decision of the California Supreme Court entitled California Redevelopment Association, et al. v. Ana Matosantos, et al, Supreme Court matter S194861, which decision was issued on December 29, 2011, redevelopment agencies have been dissolved by the State as of February 1 , 2012 and no longer exist as public bodies, corporate or politic, successor agencies were designated to provide for the payment of enforceable obligations of each redevelopment agency and the administration of the wind-down of each such redevelopment agency; and

WHEREAS, pursuant to Resolution No. 2012-7607, approved and adopted by the City on January 10, 2012, the City elected to serve as the Successor Agency to the Agency following its dissolution; and

WHEREAS, pursuant to CRL section 34177, as modified by AB 1484 and SB 107, an Oversight Board-approved Recognized Obligation Payment Schedule (“ROPS”) for the period July through June is required to be annually submitted by successor agencies by February 1, with a copy to be submitted to the county auditor-controller, the State Controller’s office, and the Department of Finance, and is required to be posted to the successor agencies’ internet websites; and

WHEREAS, the City, as the designated Successor Agency, does not waive any right that it may have pursuant to or in connection with any obligation listed on such ROPS, including without limitation, the right to modify, amend, terminate or challenge any obligation listed on such 985
Resolution No. SA 2026-__