CITY OF SAN MATEO
CITY OF SAN MATEO
Agenda Report
City Hall
330 W. 20th Avenue
San Mateo CA 94403
www.cityofsanmateo.org
Agenda Number: 15 Section Name: CONSENT CALENDAR Account Number: 10-2011 File ID: 26-10824 TO: City Council
FROM: Alex Khojikian, City Manager
PREPARED BY: Finance Department
MEETING DATE: January 26, 2026
SUBJECT:
Annual Comprehensive Financial Report for the Fiscal Year Ended June 30, 2025 — Approval RECOMMENDATION:
Accept the Annual Comprehensive Financial Report (ACFR) for the fiscal year ended June 30, 2025 BACKGROUND:
The City’s Charter, Section 5.26 requires that the City’s external auditor conduct an annual audit, and the City issue a complete set of financial statements within a reasonable timeframe following the end of the fiscal year. The Annual Comprehensive Financial Report (ACFR) for the fiscal year ended June 30, 2025, included as Attachment 1, contains the results of the external audit and the financial statements for the City and its component units.
The City's independent auditor, The Pun Group, a firm of licensed certified public accountants, conducts its audits in accordance with generally accepted auditing standards (GAAS). The standards require that the auditors plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. On a sample basis, they examine evidence supporting the amounts and disclosures in the financial statements. The audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall basic financial statement presentation.
The auditor has rendered an unmodified (“clean”) opinion on the City's basic financial statements as of and for the fiscal year ended June 30, 2025.
ACFR - Management’s Discussion and Analysis
Governmental Accounting Standards require a Management’s Discussion and Analysis (referred to as MD&A) to be included with the audited financial statements, with the intent of giving readers an objective and easily readable analysis of the City’s financial performance for the year. The MD&A includes a discussion of the basic financial statements, some condensed financial information, an analysis of the City’s financial position, and results of operations on both a City-wide and Fund basis. The MD&A begins on page 5 of the ACFR.
ACFR - Financial Results by Fund
The Fund Financial Statements section, which can be found on pages 37 through 52 of the financial report, presents financial data for the City's major funds, most notably the General Fund.
General Fund
The General Fund serves as the City’s primary operating fund. In FY 2024-25, it recorded $179.1 million in revenues, $176.6 million in expenditures, and $1 million in other financing uses, leading to a modest net gain of $1.5 million. As a result, the General Fund‘s total fund balance increased to $119.5 million. Below are some key financial highlights for the General
CITY OF SAN MATEO
Fund:
General Fund revenues totaled $179.1 million, reflecting a $9.0 million increase (5.3 %) from the prior year. The growth in revenue is mainly due to the increases in property tax and real property transfer tax which helped offset decreases in other tax revenues.
Property tax remained the City’s largest revenue source, generating $83.6 million, up $5 million from the prior fiscal year. Secured property tax continued to grow in FY 24-25 and the City received its full allocation of the FY 22- 23 shortfall in Vehicle License Fee (VLF) in-lieu property tax revenue. Sales tax, the City’s second largest revenue, decreased by $0.7 million (2.5 %) to $27.1 million. The decrease was primarily due to reduced allocation from the County pool. Real Property Transfer Tax (RPTT), part of Other taxes, generated $17.2 million in FY 24-25, an increase of $8.6 million from the year prior. This includes a $3.3 million increase in traditional RPTT and a $5.3 million increase in the voter approved Measure CC revenues from the prior year. Additional Other taxes, primarily consisting of Transient Occupancy Tax (TOT), business tax, and franchise fees; totaled $15.4 million and were down $1.8 million from the prior year.
General Fund expenditures totaled $176.6 million, reflecting an increase of $19.0 million (12.1 %) compared to the previous year. The increase was due to a number of factors including $9.1 million in increased expenses due to the inception of new lease liabilities per GASB 87. The lease liabilities expenses were balanced out by an increase within Other Financing Sources and did not affect the General Fund‘s fund balance. In addition, General Fund expenditures increased due to negotiated labor cost increases and rising operating expenses such as higher costs for contract services. Overall, General Fund spending was $4.2 million under budget for FY 2024-25. The favorable budget variance was largely due to vacancy savings.
The General Fund balance increased to $119.5 million due to a net gain of $1.5 million. From an accounting perspective, the City ended FY 2024-25 with a surplus. However, even though the audited financial statements reflect a surplus year, our budgetary outlook tells a different story. When reviewing available resources for spending, the City is actually facing a $2.9 million deficit due to the following factors:
$3.3 million in mark-to-market unrealized gains were recorded as investment earnings but represent non-cash accounting adjustments to meet the Accounting Standards. They are not spendable funds. $1.2 million in unspent Measure S funds (Measure S is a General Fund sub-fund) were budgeted for CIP but not yet transferred out from Measure S fund to the CIP fund.
These funds are not available for general operating needs. This distinction between accounting results and budgetary resources is critical for financial planning. While the audit confirms the City financial statements are accurate and presented fairly, our budgeting decisions must reflect the actual resources available for operations. As we continue to manage the current fiscal year budget and prepare for the next budget cycle, we will need to continue to address the budget deficit strategically.
Other Major Funds
At the close of FY 2024-25, the General Capital Projects Fund reported a fund balance of $54.7 million, down by $4.1 million (7.0 %) from the prior year. The fund incurred $34.1 million in capital project expenditures, underscoring the City’s continued investments in our facilities and infrastructure. Project investments included $11.9 million for the citywide street rehabilitation and reconstruction program, $3.2 million for storm and flood control improvements, $4.3 million for parks projects, and $14.7 million for city facilities and technology upgrades.
Proprietary Funds
Proprietary Funds are used to account for activities that are fueled by charges for the services provided by each fund.
Enterprise Funds account for external activities (largely utilities), while Internal Service Funds (ISFs) account for internal (interdepartmental) activities.
The Sewer Fund is the City’s largest enterprise fund and should be self-supporting. Service charges to sewer customers generate the revenues needed to support the enterprise’s operations, debt service, and capital needs. The Sewer Fund’s unrestricted net position was $222.5 million, an increase of $38.2 million or 20.7 %, largely
CITY OF SAN MATEO
driven by the approved rate increase of 3 % for fiscal year 2024-5 and capital contributions for the capital improvement projects of the wastewater treatment plant.
Cash and investments increased from $133.4 million to $260.3 million, mainly due to proceeds from the new loan from the Clean Water Revolving Fund Loan with the State Water Resources. Increases in investment income, charges for services, and capital contributions were also significant drivers behind the healthy cash position, which is intentional to provide strong liquidity during the construction phase of the Clean Water Program, as well as a robust debt coverage ratio consistent with the Sewer enterprise’s AA credit rating. Total revenues for the Sewer Fund were $86.1 million, while total expenditures amounted to $35.1 million.
The Storm Fund is the City’s newest enterprise fund. In January 2024, property owners voted to approve the Community Flood and Storm Protection Fee Ballot Measure. This measure allowed the City Council to levy stormwater fees starting in fiscal year 2024-25.
The unrestricted net position of the Storm Fund at the end of the fiscal year was $3.2 million, primarily from fee revenue.
Total revenues for the Storm Fund were $3.9 million, while total expenditures amounted to $0.7 million.
ACFR – Government-Wide Financial Statements
The government-wide financial statements provide a comprehensive, long-term overview of a government entity’s overall financial position and operations. They focus on the economic resources of the entity as a whole. These financial statements report not only the City’s current assets and current liabilities, but also its long-term assets and liabilities, such as unfunded pension liabilities. The government-wide financial statements can be found on pages 28 through 31 of the financial report.
Statement of Net Position
The Statement of Net Position primarily presents the City's balance sheet-type accounts: assets and deferred outflows of resources (expenditures that apply to a future period), liabilities and deferred inflows of resources (revenues that apply to a future period), and the net of the former and latter categories, reported as net position.
As of June 30, 2025, the City's entity-wide net position totaled $947.3 million, reflecting an increase of $91.5 million from the prior year. This is due to total revenues of $355.9 million exceeding total expenditures $264.4 million.
City Council Audit Committee
At the City Council Audit Committee Special Meeting on January 14, the City’s independent auditor presented to the Committee members, the Mayor and Deputy Mayor, the results of the audit and other required communications. After the review, the Committee recommended that the City Council accept and approve the year-end financial reports for the fiscal year ended June 30, 2025.
BUDGET IMPACT:
The recommended action has no budget impact.
ENVIRONMENTAL DETERMINATION:
This Annual Comprehensive Financial Report is not a project subject to CEQA, because it is an organizational or administrative activity that will not result in direct or indirect physical changes in the environment. (CEQA Guidelines Section 15378(b)(5).)
NOTICE PROVIDED
All meeting noticing requirements were met.
ATTACHMENTS
Att 1 – Annual Comprehensive Financial Report - Fiscal Year 2024-25
CITY OF SAN MATEO
STAFF CONTACT
Abby Veeser, Finance Director
[email protected]
(650) 522-7102