Agenda packet — Audit Committee, August 30, 2023

City of Santa Clara
Meeting Agenda
Audit Committee
Hybrid Meeting
CMO Staff Conference
Room/Virtual
City Hall - East Wing
1500 Warburton Avenue
Santa Clara, CA 95050
11:00 AMWednesday, August 30, 2023
The City of Santa Clara is conducting the Audit Committee meetings in a hybrid manner (in-person and continues to have methods for the public to participate remotely).

Join from a PC, Mac, iPad, iPhone or Android device:

Please click this URL to join: https://santaclaraca.zoom.us/j/99199624617 Webinar ID: 991 9962 4617
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CALL TO ORDER AND ROLL CALL

CONSENT CALENDAR

1. Audit Committee Minutes23-939
Approve the Audit Committee minutes of March 30,
2023.

Recommendation:

GENERAL BUSINESS

2. Overview of Santa Clara Stadium Authority Fiscal Year 2022/23 Annual
Financial Statements and Audit Results Presentation by

KPMG, LLP
23-938
Accept the Santa Clara Stadium Authority FY 2022/23
Annual Financial Statements and recommend that the
Stadium Authority note and file the report at the
September 19, 2023 Joint Council and Authorities
Concurrent and Stadium Authority meeting.

Recommendation:

ADJOURNMENT
Future Audit Committee Meetings will be scheduled at a later date.

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Audit Committee Meeting Agenda August 30, 2023

MEETING DISCLOSURES
The time limit within which to commence any lawsuit or legal challenge to any quasi-adjudicative decision made by the City is governed by Section 1094.6 of the Code of Civil Procedure, unless a shorter limitation period is specified by any other provision. Under Section 1094.6, any lawsuit or legal challenge to any quasi-adjudicative decision made by the City must be filed no later than the 90th day following the date on which such decision becomes final. Any lawsuit or legal challenge, which is not filed within that 90-day period, will be barred. If a person wishes to challenge the nature of the above section in court, they may be limited to raising only those issues they or someone else raised at the meeting described in this notice, or in written correspondence delivered to the City of Santa Clara, at or prior to the meeting. In addition, judicial challenge may be limited or barred where the interested party has not sought and exhausted all available administrative remedies.

If a member of the public submits a speaker card for any agenda items, their name will appear in the Minutes. If no speaker card is submitted, the Minutes will reflect "Public Speaker."
In accordance with the requirements of Title II of the Americans with Disabilities Act of 1990 ("ADA"), the City of Santa Clara will not discriminate against qualified individuals with disabilities on the basis of disability in its services, programs, or activities, and will ensure that all existing facilities will be made accessible to the maximum extent feasible. The City of Santa Clara will generally, upon request, provide appropriate aids and services leading to effective communication for qualified persons with disabilities including those with speech, hearing, or vision impairments so they can participate equally in the City’s programs, services, and activities. The City of Santa Clara will make all reasonable modifications to policies and programs to ensure that people with disabilities have an equal opportunity to enjoy all of its programs, services, and activities.

Agendas and other written materials distributed during a public meeting that are public record will be made available by the City in an appropriate alternative format.

Contact the City Clerk’s Office at 1 408-615-2220 with your request for an alternative format copy of the agenda or other written materials.

Individuals who require an auxiliary aid or service for effective communication, or any other disability-related modification of policies or procedures, or other accommodation, in order to participate in a program, service, or activity of the City of Santa Clara, should contact the City’s ADA Coordinator at 408-615-3000 as soon as possible but no later than 48 hours before the scheduled event.

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City of Santa Clara
Agenda Report
1500 Warburton Avenue
Santa Clara, CA 95050
santaclaraca.gov
@SantaClaraCity
23-939 Agenda Date: 8/30/2023

REPORT TO AUDIT COMMITTEE

SUBJECT
Audit Committee Minutes

RECOMMENDATION
Approve the Audit Committee minutes of March 30, 2023.

City of Santa Clara Printed on 8/25/2023Page 1 of 1
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City of Santa Clara
Meeting Minutes
Audit Committee
Draft
1:00 PM Hybrid Meeting
Council Conference Room/Virtual
City Hall - East Wing
1500 Warburton Avenue
Santa Clara, CA 95050
03/30/2023
The City of Santa Clara is conducting the Audit Committee meetings in a hybrid manner (in-person and continues to have methods for the public to participate remotely).

Join from a PC, Mac, iPad, iPhone or Android device:

Please click this URL to join: https://santaclaraca.zoom.us/j/99199624617 Webinar ID: 991 9962 4617
Or join by phone:

US: +1 669 900 6833

CALL TO ORDER AND ROLL CALL
Chair Park called the meeting to order at 1:15 PM.

Kevin Park, Suds Jain, and Kathy WatanabePresent 3 -

CONSENT CALENDAR

1. 23-163 Audit Committee Minutes
Recommendation: Approve the Audit Committee minutes of November 30, 2022 and February 3, 2023.

A motion was made by Committee Member Watanabe, seconded by Committee Member Jain to approve the Audit Committee Minutes of November 30, 2022 and February 3, 2023.

Aye: Park, Jain, and Watanabe3 -

PUBLIC PRESENTATIONS
None.

GENERAL BUSINESS

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03/30/2023Audit Committee Meeting Minutes

2. 23-162 Overview of the Single Audit Report for Fiscal Year Ended June 30, 2022 Recommendation: Accept the Single Audit Report for Fiscal Year Ended June 30, 2022 and recommend that the reports are forwarded to note and file to the full Council at the April 4, 2023 Council and Authorities Concurrent meeting.

Auditor Amy Meyer, Maze & Associates, gave a PowerPoint presentation.

Committee Members' questions and comments followed.

Auditor Meyer addressed the Committee Members' questions and comments.

A motion was made by Committee Member Jain, seconded by Committee Member Watanabe, to accept the Single Audit Report for Fiscal Year Ended June 30, 2022 and recommend that the reports are forwarded to note and file to the full Council at the April 4, 2023 Council and Authorities meeting.

Aye: Park, Jain, and Watanabe3 -

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03/30/2023Audit Committee Meeting Minutes

3. 23-350 Overview and Continuing Discussion of the Proposed 2023-2024 Audit Work Plan
Recommendation: Approve the proposed 2023-2024 audit work plan and recommend that the citywide risk assessment and prioritized audit workplan be forwarded for note and file to the full Council at a future Joint Council and Authorities Concurrent and Stadium Authority Meeting.

Audit Manager, David Noce, gave a PowerPoint presentation.

Committee Members' questions and comments followed.

Audit Manager Noce and Chief Assistant City Attorney Sujata Reuter addressed the Committee Members' questions and comments.

Audit Manager Noce would like to present the results of a Stadium Authority Audit at the next meeting and expects to give a status report sometime in May that would encompass the status on the previous plan and progress made in starting the new audits presented.

Committee Member Watanabe proposed meeting every other month in order to assess the status of Auditor's Office and Baker Tilly and determine if additional projects can be added to the plan.

Committee Members' questions and comments followed.

Audit Manager Noce addressed the Committee Members' questions and comments.

A motion was made by Committee Member Jain, seconded by Committee Member Watanabe, to approve the proposed Baker Tilly 2023-2024 audit work plan, recognizing that the items can be juggled between 2023 and 2024 based on staff/committee
recommendations, and that plan be forwarded for note and file to the full Council at a future Joint Council and Authorities Concurrent and Stadium Authority Meeting.

Aye: Park, Jain, and Watanabe3 -

ADJOURNMENT
Chair Park adjourned the meeting at 2:29 PM.

A motion was made by Committee Member Jain, seconded by Committee Member Watanabe, to adjourn the meeting.

Aye: Park, Jain, and Watanabe3 -

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03/30/2023Audit Committee Meeting Minutes
Future Audit Committee meetings will be scheduled at a later date.

MEETING DISCLOSURES

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03/30/2023Audit Committee Meeting Minutes
The time limit within which to commence any lawsuit or legal challenge to any quasi-adjudicative decision made by the City is governed by Section 1094.6 of the Code of Civil Procedure, unless a shorter limitation period is specified by any other provision. Under Section 1094.6, any lawsuit or legal challenge to any quasi-adjudicative decision made by the City must be filed no later than the 90th day following the date on which such decision becomes final. Any lawsuit or legal challenge, which is not filed within that 90-day period, will be barred. If a person wishes to challenge the nature of the above section in court, they may be limited to raising only those issues they or someone else raised at the meeting described in this notice, or in written correspondence delivered to the City of Santa Clara, at or prior to the meeting. In addition, judicial challenge may be limited or barred where the interested party has not sought and exhausted all available administrative remedies.

Agendas and other written materials distributed during a public meeting that are public record will be made available by the City in an appropriate alternative format.

Contact the City Clerk’s Office at 1 408-615-2220 with your request for an alternative format copy of the agenda or other written materials.

Page 5 ends

City of Santa Clara
Agenda Report
1500 Warburton Avenue
Santa Clara, CA 95050
santaclaraca.gov
@SantaClaraCity
23-938 Agenda Date: 8/30/2023

REPORT TO AUDIT COMMITTEE

SUBJECT
Overview of Santa Clara Stadium Authority Fiscal Year 2022/23 Annual Financial Statements and Audit Results Presentation by KPMG, LLP

BACKGROUND
The Santa Clara Stadium Authority (Stadium Authority), the Stadium Funding Trust, and Goldman Sachs Bank USA entered into a Credit Agreement on June 19, 2013. Section 5.1(a) of the Credit Agreement requires that the Stadium Authority Annual Financial Statements be audited by independent certified public accountants within 180 days after the end of each fiscal year. On June 25, 2021, the Stadium Authority entered into a professional services agreement with KPMG, LLP (KPMG) to perform the annual financial audit of the Stadium Authority’s Fiscal Year (FY) 2022/23 Annual Financial Statements.

The Annual Financial Statements include: (1) the Independent Auditors’ Report which describes the auditors’ responsibility and their opinion of the Financial Statements, (2) Management’s Discussion and Analysis which provides an overall review of the Stadium Authority’s financial activities, (3) the Basic Financial Statements, and (4) the Notes to the Financial Statements which have additional information pertaining to the Stadium Authority’s operations and financial position.

The Financial Statements being discussed with this report cover the Stadium Authority FY 2022/23, which runs from April 1, 2022 to March 31, 2023.

DISCUSSION
The role of the Audit Committee is to provide oversight of the Stadium Authority’s financial reporting processes, internal controls and independent auditors. KPMG will present the Stadium Authority audit results to the Audit Committee to provide a brief overview of the audit. This includes their audit report, financial statement disclosures, internal control related matters and other items.

Stadium Authority staff will be providing an overview of the Stadium Authority FY 2022/23 Annual Financial Statements including year-over-year comparison of the Stadium Authority financial position.

Lisa Avis, Managing Director, from KPMG will be presenting the Stadium Authority Audit Results.

ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environment Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(a)(4) in that it is a fiscal activity that does not involve any commitment to any specific project which may result in a potential significant impact on the environment.

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23-938 Agenda Date: 8/30/2023

FISCAL IMPACT
Costs associated with the preparation of this report are included in the Stadium Authority Operating Budget.

COORDINATION
This report has been coordinated with the Stadium Authority Counsel’s Office.

PUBLIC CONTACT
Public contact was made by posting the Audit Committee agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email [email protected] <mailto:[email protected]> or at the public information desk at any City of Santa Clara public library.

RECOMMENDATION
Accept the Santa Clara Stadium Authority FY 2022/23 Annual Financial Statements and recommend that the Stadium Authority note and file the report at the September 19, 2023 Joint Council and Authorities Concurrent and Stadium Authority meeting.

Reviewed by: Kenn Lee, Treasurer
Approved by: Jōvan D. Grogan, Executive Director

ATTACHMENTS

1. FY 2022/23 Santa Clara Stadium Authority Financial Statements Draft

2. FY 2022/23 Financial Results Overview Presentation from Staff

3. Audit Results Presentation from KPMG
City of Santa Clara Printed on 8/25/2023Page 2 of 2
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DRAFT 8/25/2023 10:42 AM KPMG Comments 506368A-

SANTA CLARA STADIUM AUTHORITY
(a Component Unit of the City of Santa Clara, California) Financial Statements
March 31, 2023 and 2022
(With Independent Auditors’ Report Thereon)
Draft

DRAFT 8/25/2023 10:42 AM KPMG Comments 506368A-

SANTA CLARA STADIUM AUTHORITY
(a Component Unit of the City of Santa Clara, California) Table of Contents
Page
Independent Auditors’ Report 1
Management’s Discussion and Analysis (Unaudited) 3
Basic Financial Statements:

Statements of Net Position 8
Statements of Revenues, Expenses, and Changes in Net Position 9 Statements of Cash Flows 10
Notes to Financial Statements 11
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1 DRAFT 8/25/2023 10:42 AM KPMG Comments 506368A-
Independent Auditors’ Report
The Board of Directors
Santa Clara Stadium Authority
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of the Sant a Clara Stadium Authority (the Stadium Authority), a component unit of the City of Santa Clara, Califor nia, as of and for the years ended March 31, 2023 and 2022, and the related notes to the financial statements, which collectively comprise the Stadium Authority’s basic financial statements for the years then ended as listed in the table of contents.

In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the financial position of the Stadium Authority as of March 31, 2023 and 2022, and the changes in its financial position and its cash flows for the years then ended, in accordance with US generally accepted accounting principles.

Basis for Opinion
We conducted our audits in accordance with auditing st andards 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 . Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Stadium Authority and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with US generally accepted accounting principles, 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 Stadium Authority’ 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.

Auditors’ 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 erro r, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit condu cted in accordance with GAAS and Go vernment 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 aggr egate, they would influence the judgment made by a reasonable user based on the financial statements.

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2 DRAFT 8/25/2023 10:42 AM KPMG Comments 506368A-
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 mate rial misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures res ponsive 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 Stadium Authority’s internal control. Accordingly, no such opinion is expressed.  Evaluate the appropriatenes s of accounting policies used and the re asonableness 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 Stadium Authority’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
US generally accepted accounting principles require that the management’s discussion and analysis 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 contex t. 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 comparin g the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audits 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 su fficient evidence to express an opinion or provide any assurance.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated ___________ __, ____ on our consideration of the Stadium Authority’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regu lations, 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 Stadium Authority’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Governm ent Auditing Standards in considerin g the Stadium Authority’s internal control over financial reporting and compliance

San Francisco, California

Date

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SANTA CLARA STADIUM AUTHORITY
(a Component Unit of the City of Santa Clara, California) Management’s Discussion and Analysis (Unaudited)
March 31, 2023 and 2022
3 DRAFT 8/25/2023 10:42 AM KPMG Comments 506368A-
The management’s discussion and analysis of the Santa Clara Stadium Authority (Stadium Authority) provides an overall review of the Stadium Authority’s financial activities for the fiscal years ended March 31, 2023 and 2022. The intent of this discussion and analysis is to look at the Stadium Authority’s financial performance as a whole. Readers should review the discussion and analysis in conjunction with the basic financial statements, including the notes to the basic finan cial statements to enhance their under standing of the Stadium Authority’s financial performance.

The Stadium Authority has elected to provide comparativ e financial statements to better assist the reader. The Stadium Authority’s fiscal year runs from April 1 through March 31 to conform to the fiscal year of the Stadium Funding Trust (FinanceCo). The Stadium Authority is a component unit of the City of Santa Clara, California (City) whose fiscal year is July 1 through June 30.

The Stadium Authority exists as a public body, separate and distinct from the City. It was established to provide for development and operation of Levi’s Stadium.

Financial Highlights
Key financial highlights for the fiscal year ended March 31, 2023 are as follows:
 The carrying value of Levi’s Stadium at March 31, 2023, net of depreciation, is $683,106,548.  During the fiscal year, there were twelve National Football League (NFL) games, seven ticketed Non-NFL events, and sixty-nine smaller special events held at Levi’s Stadium.  The Stadium Authority recognized $72,153,423 in operating revenue and $49,065,823 in operating expenses.
 The revenues from the Non-NFL events were $19,574,275 and the related expenses were $10,765,108 resulting in net Non-NFL event profit of $8,809,167.
 Debt service payments during the fiscal year tota led $48,589,277. Overall remaining outstanding debt was reduced by $35,038,955. The Stadium Authority also paid off the StadCo Subordinated Loan during the year.  The assets of the Stadium Author ity exceeded its liabilities by $109,570,809 due to income from the operation of Levi’s Stadium.
 The City received $460,000 for stadium ground rent. Addi tionally, the City is required to be fully reimbursed for all of its administration and public safety costs by either the Stadium Author ity for Non-NFL events or Forty Niners SC Stadium Company LLC (StadCo) for NFL events.

Overview of the Financial Statements
This annual report consists of a series of financia l statements and the notes to those statements. These statements are organized so the reader can understand t he Stadium Authority as a financial whole. The basic financial statements provide both a short-term and long-term view of the Stadium Authority’s financial activities and financial position.

The basic financial statements are co mprised of the statement s of net position, the statements of revenues, expenses, and changes in net position, the statements of cash flows, and the notes to the financial statements.

The statements of net position provide information about the financial position of the Stadium Authority as a whole, including all of its long-term liabilities on the full accrual basis. The statem ents of revenues, expenses, Draft

SANTA CLARA STADIUM AUTHORITY
(a Component Unit of the City of Santa Clara, California) Management’s Discussion and Analysis (Unaudited)
March 31, 2023 and 2022
4 DRAFT 8/25/2023 10:42 AM KPMG Comments 506368A-
and changes in net position provide information about all revenue and expenses. The statements of cash flows provides information about cash activities for the period.

During the fiscal year ended March 31, 2023, the Stadi um Authority implemented Governmental Accounting Standards Board (GASB) Statement No. 87 (GASB 87), Leases, which requires the Stadium Authority to recognize leases receivable and deferred inflows of resources related to lease arrangements where the Stadium Authority is a lessor. Further, the Stadium Authority is required to recognize a lease liability and an intangible right-to-use leased asset for lease arrangements where t he Stadium Authority is a lessee. Fiscal year 2021-22 balances were adjusted as detailed in Note 2(k) of the basic financial statements. Fiscal year 2020-21 balances within this Management's Discussion and Analysis were not adjusted fo r the implementation of this GASB statement.

Financial Analysis of the Stadium Authority as a Whole
The Stadium Authority’s net position at March 31, 2023, March 31, 2022, and March 31, 2021 is as follows:

FY 2022 FY 2023 FY 2022
as adjusted increase increase
FY 2023 Note 2k FY 2021 (decrease) (decrease)
Assets:

Capital assets $ 689,075,880 702,507,201 718,014,273 (13,431,321) (15,507,072) Other assets 754,629,883 754,451,912 104,012,504 177,971 650,439,408 Total assets $ 1,443,705,763 1,456,959,113 822,026,777 (13,253,350) 634,932,336 Liabilities:

Current unearned revenue $ 16,374,980 15,076,480 14,871,452 1,298,500 205,028 Other current liabilities 23,402,762 27,583,178 29,128,592 (4,180,416) (1,545,414) Long-term unearned revenue 432,484,579 425,271,742 416,092,910 7,212,837 9,178,832 Other long-term liabilities 266,286,566 296,666,155 284,264,912 (30,379,589) 12,401,243 Total liabilities 738,548,887 764,597,555 744,357,866 (26,048,668) 20,239,689 Deferred inflows of resources:

Deferred inflows leases related 595,586,067 612,602,812 — (17,016,745) 612,602,812 Total deferred inflows of resources 595,586,067 612,602,812 — (17,016,745) 612,602,812 Net position, as restated:

Net investment in capital assets 449,951,997 422,193,509 421,218,714 27,758,488 974,795 Restricted for:

Debt service 20,844,381 21,453,314 20,126,006 (608,933) 1,327,308 Capital projects and other
agreements 52,822,516 47,055,671 43,997,714 5,766,845 3,057,957 Unrestricted deficit (414,048,085) (410,943,748) (407,673,523) (3,104,337) (3,270,225) Total net position $ 109,570,809 79,758,746 77,668,911 29,812,063 2,089,835

Fiscal Year 2022-23 Analysis
Capital assets decreased when compared to the prior year by $13,431,321 due to annual depreciation, partially offset by equipment and buildings additions. Other as sets increased when compared to the prior year by Draft

SANTA CLARA STADIUM AUTHORITY
(a Component Unit of the City of Santa Clara, California) Management’s Discussion and Analysis (Unaudited)
March 31, 2023 and 2022
5 DRAFT 8/25/2023 10:42 AM KPMG Comments 506368A-
$177,971. This was due mainly to the implementation of GASB 87 for leases, increases in accounts receivables for Non-NFL event revenues and cash deposit from excess revenues distributions at year-end. Liabilities decreased by $26,048,668 compared to the prior year. The decrease was due to principal prepayment of long-term debt and implementation of GASB 87 for leases , partly offset by an increase in unearned Stadium Builder License (SBL) revenue due to collection of SBL principal that is amortized over the life of the SBL. Total net position for the Stadium Authorit y, as a whole, increased between March 31, 2022 and March 31, 2023 to $109,570,809. This increase of $29,812,063 is primarily due to an increase in capital assets and the payoff of the StadCo Subordinated Loan that financed the construction of the Stadium.

Fiscal Year 2021-22 Analysis
Capital assets decreased when compared to the prior year by $15,507,072 due to annual depreciation, partially offset by equipment and buildings additions. Other as sets increased when compared to the prior year by $650,439,048. This was due mainly to the net effect of increase in cash and restricted cash offset by a decrease in accounts receivable as result of the August 31, 2022 Settlement Agreement between Stadium Authority, StadCo and Management Co. (See Note 3). Additionally, the Stadium Authority implemented GASB 87 in fiscal year 2022-23 and restated balances in assets (see Note 2k). Liabilities increased by $20,239,689 mainly due to the implementation of GASB 87 and princi pal prepayment of long- term debt, partly offset by an increase in unearned Stadium Builder License (SBL) revenue due to colle ction of SBL principal that is amortized over the life of the SBL. Total net position for the Stadium Authority, as a whole, increased between March 31, 2021 and March 31, 2022 to $79,758,746. This increase of $2,089,835 is primarily due to the implementation of GASB 87 partially offset by a decrease in capital assets.

The Stadium Authority’s revenues, expenses, and changes in net position for the fiscal years ended March 31, 2023, March 31, 2022, and March 31, 2021 are as follows:

FY 2022 FY 2023 FY 2022
as adjusted increase increase
FY 2023 Note 2k FY 2021 (decrease) (decrease)
Operating revenues $ 72,153,423 51,123,882 38,373,955 21,029,541 12,749,927 Operating expenses (49,065,823) (51,210,463) (25,937,991) 2,144,640 (25,272,472) Operating income 23,087,600 (86,581) 12,435,964 23,174,181 (12,522,545) Nonoperating revenues 18,147,968 15,986,564 4,691,577 2,161,404 11,294,987 Nonoperating expenses (13,550,322) (14,895,722) (15,243,240) 1,345,400 347,518 Income before contributions
and other revenues 27,685,246 1,004,261 1,884,301 26,680,985 (880,040) Contributions and other revenues 2,126,817 1,085,574 282,021 1,041,243 803,553 Increase in net position 29,812,063 2,089,835 2,166,322 27,722,228 (76,487) Total net position – beginning of fiscal
period 79,758,746 77,668,911 75,502,589 2,089,835 2,166,322 Total net position – end of fiscal period $ 109,570,809 79,758,746 77,668,911 29,812,063 2,089,835

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SANTA CLARA STADIUM AUTHORITY
(a Component Unit of the City of Santa Clara, California) Management’s Discussion and Analysis (Unaudited)
March 31, 2023 and 2022
6 DRAFT 8/25/2023 10:42 AM KPMG Comments 506368A-
Fiscal Year 2022-23 Analysis
Stadium Authority operating revenues increased by $ 21,029,541 when compared with the prior year. This was mainly due to the implementation of GASB 87 and increases in rents and licenses and charges for services from NFL Games, ticketed Non-NFL events and smaller special events being held. The operating expenses decreased by $2,144,640 compared to the prior year. This decrease is primarily due to higher Stadium Manager expenses and Non-NFL events expenses offsets by zero settlement expense true-up. The Stadium Authority recognized additional expenses for the unpaid Shared Stadium Expenses and Other Expenses in fscal year 2021-22 as part of the Settlement Agreement (see Note 3).

Nonoperating revenues increased by $2, 161,404 mainly due to the implemen tation of GASB 87. Nonoperating expenses decreased by $1,345,400 mainly due to a decrease in interest expense.

Contributions and other revenues were $2,126,817, an increase of $1,041,243 over the prior fiscal year. These represent special hotel tax revenues collected to pay the CFD Advance Loan.

Fiscal Year 2021-22 Analysis
Stadium Authority operating revenues increased when compared with the prior year by $12,749,927. This was mainly due to increase in charges for services from NFL Games and smaller special events being held and increase in rents and licenses partially offset by the implementation of GASB 87. The Operating expenses increased by $25,272,472 compared to the prior year. Th is increase is primarily because, pursuant to the August 31, 2022 Settlement Agreement between StadCo, ManagementCo, and Stadium Authority, Stadium Authority paid Shared Stadium Expenses and Other Expenses from prior fiscal years’ that were previously withheld from payment (see Note 3).

Nonoperating revenues increased by $11,294,987 mainly due to the implementation of GASB 87 partially offset by a decrease in interest income from SBL. Nonoperating expenses decreased by $347,518 mainly due to a decrease in interest expense. Significant prepayments were made on the StadCo Subordinated Loan in the prior year decreasing principal and resulting in lower interest expense.

Contributions and other revenues were $1,085,574, an in crease of $803,553 over the prior fiscal year. These represent special hotel tax revenues collected to pay the CFD Advance Loan. While the overall hotel tax revenues increased significantly in the current year as we continue to recover from COVID-19, revenues were insufficient to cover the accrued interest on the loan.

Capital Assets
The capital assets of the Stadium Authority are those which are used in the performance of the Stadium Authority’s functions, including but not limited to in frastructure-related assets. These assets do not include StadCo’s tenant improvements. At March 31, 2023, capital assets totaled $689,075,880.

Further detail may be found in Note 4 to the financial statements.

Debt Administration
At March 31, 2023, the Stadium Authority had total debt outstanding of $245,274,737, as shown in detail in Note 5 to the financial statements. Stadium Authority’s debt comprised Stadium Funding Trust Term A loan of Draft

SANTA CLARA STADIUM AUTHORITY
(a Component Unit of the City of Santa Clara, California) Management’s Discussion and Analysis (Unaudited)
March 31, 2023 and 2022
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$215,415,240 and the CFD Advance Loan of $29,859,497. The StadCo Subordinate Loan has been paid off at the end of the year with year-end excess revenues distributed as instructed under Article 14.

Economic and Financial Overview
Over the last few years, Silicon Valley has seen job growth that has outpa ced the rest of the state. This growth has led to rising home prices and a significant increase in commercial and residential development, including several projects in the vicinity of Levi’s Stadium. Major financial factors impacting the Stadium Authority are:
 In May 2013, a Naming Rights Agreement with Levi Strauss & Co. (Levi’s) was approved. The name of the Stadium is “Levi’s Stadium”. The naming rights agreement calls for Levi’s to pay a total of $154.2 million to the Stadium Authority over a 20-year period. The agreement requires the Stadium Authority to hold at least 36 “Major Events” (with 25,000+ attendees) every th ree contract years. The Second Amendment to the Stadium Management Agreement states that ManagementCo would pay the Stadium Authority as liquidated damages the amount owed by the Stadium Authority to Levi’s® in the event the required number of events is not met. As of March 31, 2023, the Stadium Authority has received $62.1 million in naming rights revenue.  Stadium Builders Licenses (SBLs) entitle the license holder to priority rights to buy tickets for events at Levi’s Stadium. The total value of the currently active SBL holders’ licenses is $547.2 million. Through March 31, 2023, $522.5 million in SBL principal payments have been collected since inception. This is due in part to a number of SBL holders paying off or prepaying a large portion of their SBL, and defaulted SBLs being resold at full price. In addition to SBL collections, the Stadium Authority has collected $64.6 million in interest from license holders who financed their SBLs since inception.  The Stadium Authority generated $24.2 million in leas e revenue during the NFL season and $8.8 million net profit associated with hosting Non-NFL events for the fiscal year ended March 31, 2023.  The Stadium Authority collects a 10% surcharge on t he price of admission to all regular season NFL games and a $4 per ticket surcharge for all ticketed Non-NFL events. There were ten regular season NFL games held at Levi’s Stadium and two play-off games during fi scal year March 31, 2023, which resulted in $11.4 million in NFL ticket surcharge revenues. The Stadium Authority also recognize d $1.3 million in Non-NFL event ticket surcharge revenues from the seven ticketed events held at the Stadium.

Contacting the Stadium Authority’s Financial Management This financial report is designed to provide our resident s, taxpayers, investors, and creditors with a general overview of the Stadium Authority’s finances and to demonstrate the Stadium Author ity’s accountability for the money it receives. If you have any questions about this report or need additional financial information, contact the City of Santa Clara Finance Department at 1500 Warburton Avenue, Santa Clara, CA 95050-3796.

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SANTA CLARA STADIUM AUTHORITY
(a Component Unit of the City of Santa Clara, California) Statements of Net Position
March 31, 2023 and 2022
Assets 2023
2022
As Adjusted
Note 2k
Current assets:

Cash $ 11,286,692 20,039,971
Restricted cash 54,725,592 35,722,544
Restricted cash with fiscal agent 24,265,375 27,003,662 Accounts receivable 18,994,260 13,095,258
Lease receivable 11,669,804 11,418,381
Materials, supplies, and prepaids — 1,015,999
Total current assets 120,941,723 108,295,815
Capital assets:

Buildings, net 683,106,548 699,633,308
Machinery and equipment, net 3,873,939 2,405,127
Construction in progress 2,095,393 468,766
Total capital assets 689,075,880 702,507,201
Right-to-use leased assets 27,934,663 28,732,796
Long-term restricted cash with fiscal agent 11,536,235 11,536,235 Long-term lease receivable 594,217,262 605,887,066
Total noncurrent assets 1,322,764,040 1,348,663,298
Total assets $ 1,443,705,763 1,456,959,113
Liabilities
Current liabilities:

Accounts payable and accrued liabilities $ 1,357,581 1,229,217 Interest payable 5,948,285 6,128,361
Due to other City of Santa Clara funds 142,896 131,278 Deferred rent, current portion 495,000 460,000
Term A loan payable, current portion 15,459,000 14,723,000 Subordinated loan payable, current portion — 4,911,322 Unearned revenue, current portion 16,374,980 15,076,480 Total current liabilities 39,777,742 42,659,658
Deferred rent 7,149,723 6,665,679
Lease liability 29,321,106 29,321,106
Term A loan payable 199,956,240 215,415,239
CFD advance loan payable 29,859,497 30,374,503
Subordinated loan payable — 14,889,628
Unearned revenue 432,484,579 425,271,742
Total noncurrent liabilities 698,771,145 721,937,897
Total liabilities $ 738,548,887 764,597,555
Deferred Inflows of Resources
Deferred inflows leases related $ 595,586,067 612,602,812 Total deferred inflows of resources $ 595,586,067 612,602,812 Net Position
Net investment in capital assets $ 449,951,997 422,193,509 Restricted for:

Debt service 20,844,381 21,453,314
Capital projects and other agreements 52,822,516 47,055,671 Unrestricted deficit (414,048,085) (410,943,748)
Total net position $ 109,570,809 79,758,746
See accompanying notes to financial statements.
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SANTA CLARA STADIUM AUTHORITY
(a Component Unit of the City of Santa Clara, California) Statements of Revenues, Expenses, and Changes in Net Position Years ended March 31, 2023 and 2022
2023
2022
As Adjusted
Note 2k
Operating revenues:

Charges for services $ 33,161,155 11,720,968
Rents and licensing 38,992,268 39,402,914
72,153,423 51,123,882
Operating expenses:

Leases 1,229,044 1,215,019
Materials, services, and supplies (note 3a) 28,308,133 30,651,977 Selling, general, and administrative expenses 1,522,695 1,565,865 Depreciation 18,005,951 17,777,602
49,065,823 51,210,463
Operating (loss) income 23,087,600 (86,581)
Nonoperating revenues (expenses):

Interest revenue 17,530,057 15,986,564
Other revenue 617,911 —
Interest expense (13,550,322) (14,895,722)
Income before contributions and other revenues 27,685,246 1,004,261 Contributions and other revenues:

Contribution from Community Facilities District 2,126,817 1,085,574 Change in net position 29,812,063 2,089,835
Net position – beginning of period 79,758,746 77,668,911 Net position – end of period $ 109,570,809 79,758,746
See accompanying notes to financial statements.
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SANTA CLARA STADIUM AUTHORITY
(a Component Unit of the City of Santa Clara, California) Statements of Cash Flows
Years ended March 31, 2023 and 2022
2023 2022
Cash flows from operating activities:

Receipts from customers $ 32,312,422 24,286,339
Payments to suppliers (30,064,398) (29,446,734)
Rents and licensing received 49,947,986 41,840,919
Net cash provided by operating activities 52,196,010 36,680,524 Cash flows from noncapital financing activities:

Increase in due to other City of Santa Clara funds 629,529 7,972 Net cash provided by noncapital financing
activities 629,529 7,972
Cash flows from capital and related financing activities:

Contribution from Community Facilities District 2,248,478 818,906 Acquisition and construction of capital assets (3,108,564) (1,064,907) Principal payments on capital debt (35,038,955) (17,353,477) Interest paid on capital debt (13,918,397) (14,374,662) Net cash used in capital and related financing activities (49,817,438) (31,974,140) Cash flows from investing activity:

Interest and dividends 4,503,381 4,123,966
Net cash provided by investing activity 4,503,381 4,123,966 Net increase in cash and restricted cash 7,511,482 8,838,322 Cash and restricted cash, beginning of period 94,302,412 85,464,090 Cash and restricted cash, end of period $ 101,813,894 94,302,412 Reconciliation of operating income to cash provided by operating activities:

Operating income $ 23,087,600 8,031,807
Depreciation 18,005,951 16,979,469
Lease revenues 7,285,255
Shared stadium expenses — 5,823,817
Change in operating assets and liabilities:

Accounts receivable (5,689,607) (1,700,739)
Accounts payable and accrued liabilities (539,569) (1,375,735) Prepaid expenses 1,015,999 (1,015,999)
Unearned revenue 8,511,337 9,383,860
Deferred rent 519,044 554,044
Net cash provided by operating activities $ 52,196,010 36,680,524 See accompanying notes to financial statements.
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SANTA CLARA STADIUM AUTHORITY
(a Component Unit of the City of Santa Clara, California) Notes to Financial Statements
March 31, 2023 and 2022
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(1) Organization and Reporting Entity
(a) Organization
On June 8, 2010, residents of Santa Clara voted to adopt Measure J, the Santa Clara Stadium Taxpayer Protection and Economic Progress Act, resulting in the approval to construct a new 68,500-seat football stadium (the Stadium) to be leased to the San Francisco 49ers (49ers). In addition, Measure J called for the creation of the Santa Clara Stadium Authority to own, develop, construct, operate, and maintain the Stadium project. The City of Santa Clara, California (City) and the Ci ty of Santa Clara Redevelopment Agency (Agency) entered into a Joint Exercise of Powers Agreement (JPA Agreement) establishing the Santa Clara Stadium Authority (Stadium Authority). The JPA Agreement was later amended to add the Bayshore North Project Enhancement Authority as a member of the Stadium Authority. On June 28, 2011, the Governor signed into law Assembly Bill No. X1 26 (ABX1 26), which called for the dissolution of Redevelopment Agencies throughout the State. The California State Supreme Court upheld ABX1 26, and as a result, on February 1, 2012, all California Redevelopment Agencies were dissolved. The Successor Agency of the City of Santa Clara (Successor Agency) then assumed the obligations of the Agency under the JPA Agreement.
(b) Financial Reporting Entity
As defined by US generally accepted accounting principles (GAAP), the financial reporting entity consists of a primary government, as well as its component uni ts, which are legally separate organizations for which the elected officials of the primary government are financially accountable. Financial accountability is defined as:
1) Appointment of a voting majority of the compone nt unit’s board and either (a) the ability to impose will by the primary government or (b) the possibilit y that the component unit will provide a financial benefit to or impose a financial burden on the primary government; or 2) Fiscal dependency on the primary government.

Based upon the application of these criteria, the St adium Authority has no component units. However, the Stadium Authority is a component unit of the City because the Mayor and City Council serve as the Board of the Stadium Authority. The City Manager serves as the Executive Director. The debt which was incurred for the construction of the Stadium is the responsibility of the Stadium Authority. The City is not a party to the debt nor has the City guaranteed such debt. (2) Summary of Significant Accounting Policies
(a) Basis of Presentation
The financial statements of the Stadium Authority have been prepared in conformity with GAAP, as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing government ac counting and financial reporting principles. The Stadium Authority is included as an enterprise fund in the City’s Annual Financial Report, and therefore, these financial statements do not purport to repr esent the financial position and changes in financial position of the City.

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SANTA CLARA STADIUM AUTHORITY
(a Component Unit of the City of Santa Clara, California) Notes to Financial Statements
March 31, 2023 and 2022
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(b) Basis of Accounting and Measurement Focus
The Stadium Authority reports its activities as a business-type activity. The financial statements include statements of net position, stat ements of revenues, expenses, and changes in net position, and statements of cash flows, and are accounted for us ing the “economic resources” measurement focus and the accrual basis of accounting. Accordingly, all assets and liabilities (whether current or noncurrent) are included on the statements of net position. Reported net position is segregated into three categories – net investment in capital assets, restricted and unrestricted. The statements of revenues, expenses, and changes in net position present increases (revenues) and decreases (expenses) in total net position.

Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which a liability is incurred.

Operating revenues are those revenues that are generated from the pr imary operations of the Stadium Authority. All other revenues are reported as nonoperating. Operating expenses are those expenses that are essential to the primary operations of the f und. All other expenses are reported as nonoperating expenses.
(c) Year-End
An amendment was made to the JPA Agreement on November 13, 2012 in part to change the fiscal year of the Stadium Authority from a Ju ly 1 through June 30 fiscal year to an April 1 through March 31 fiscal year to conform with the fiscal year of Stadium Funding Trust. (d) Cash, Restricted Cash, and Restricted Cash with Fiscal Agent The Stadium Authority’s cash is not pooled with the City but is held in separate bank and trust accounts. (i) Composition of Cash, Restricted Cash, and Restricted Cash with Fiscal Agent Cash, restricted cash, and restricted cash with fiscal agent at March 31, 2023 and 2022 consist of cash deposits in banks.

Restricted cash includes revenue that has no t yet been transferred to Stadium Funding Trust accounts. On the 15
th of the following month all revenue is swept into the Stadium Funding Trust accounts as required by the Deposit and Disbursement Agreement and becomes restricted cash with fiscal agent. It also includes cash dedicated to construction and the capital expenditure and operating reserve accounts.

Restricted cash with fiscal agent consists of stadium deposits pledged to a syndicate of lenders and deposits for stadium construction. The application of these deposits is restricted to fund stadium construction and Stadium Authority operations and debt service.

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SANTA CLARA STADIUM AUTHORITY
(a Component Unit of the City of Santa Clara, California) Notes to Financial Statements
March 31, 2023 and 2022
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(ii) Investments Authorized by Debt Agreements
Stadium Authority maintains required amount of cash and investments with trustees or fiscal agents under the terms of certain debt issues. These funds are unexpended bond proceeds or are pledged reserves to be used if Stadium Authority fails to meet its obligations under these debt issues. The California Government Code 53601 (L) allows these funds to be invested in accordance with the statutory provisions governing the issuance of those bonds, indebtedness, other arrangements, or certificates of participation in accordance with the ordinance, resolution, indenture, or agreement of the local agency providing for the issuance.
(iii) 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. Under California Government Code Section 53651, depending on specific types of eligible securities, a bank must deposit eligible securities posted as collateral with its agent having a fair value of 105% to 150% of the Stadium Authority’s cash on deposit. All of the deposits are either insured by the Federal Depository Insurance Corporation (FDIC) or collateralized with pledged securities held in the trust department of the financial institutions.
(e) Accounts Receivable
Accounts receivable are recorded in the Stadium Authority’s accounts at the amounts that are contractually due. Accounts receivable include payments due from the Forty Niners Stadium Management Company, LLC (ManagementCo) as a resu lt of the operations of non-National Football League (NFL) events held at the Stadium and the overpayment of stadium manager expenses. Naming Rights revenue due from Levi’s Strauss & Co., special tax proceeds collected by the Community Facilities District (CFD) and not yet paid to Stadium Author ity pursuant to the CFD Reimbursement Agreement, and other miscellaneous receivables are also includ ed as accounts receivable in the statements of net position.
(f) Capital Assets
Capital assets are valued at historical cost or estimat ed historical cost if actual historical cost is not available. Contributed capital assets are valued at their estimated fair value on the date contributed.

Depreciation is recorded on a straight-line basis over the estimated useful lives of the assets with a value over $5,000 and is charged as an expense against operations.

Useful lives
(years)
Buildings 20–50
Machinery and equipment 2–25

The cost of maintenance, repairs, minor replacements, and renewals are charged to operations as incurred. Major replacements, renewals, and betterm ents are capitalized. Sales and retirements of depreciable property are recorded by removing the related cost and accumulated depreciation from the Draft

SANTA CLARA STADIUM AUTHORITY
(a Component Unit of the City of Santa Clara, California) Notes to Financial Statements
March 31, 2023 and 2022
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accounts. Gains or losses on sales and retirement s of property are reflected in the statements of revenues, expenses, and changes in net position.

Interest is capitalized on construction in progress in accordance with applicable guidance. (g) Unearned Revenue and Revenue Recognition
Stadium Builder License (SBL) proceeds and payments received for other license agreements are initially recorded as unearned revenue and are recognized as re venue over the term of the contracts. Rental income is recognized as revenue on a straight-line basis over the term of the Stadium Lease (Note 6(b)).

Non-NFL event revenue, NFL ticket surcharge, Non-NFL ticket surcharge, and other operating revenues are recognized as they are earned.
(h) Risk Management
Per the terms of the Stadium Lease, during operat ions, the Forty Niners SC Stadium Company LLC procures insurance and the Stadium Authority pays a proportionate share to StadCo. The Fairly Group is the insurance broker for Stadium operations.
(i) Income Taxes
The Stadium Authority falls under the purview of Internal Revenue Code, Section 115 and corresponding California Revenue and Taxation Code provisions. As such, the Stadium Authority is not subject to federal or state income taxes.
(j) Use of Estimates
The preparation of financial statements in conformity with US generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets an d liabilities at the date of the financial statements and the reported amounts of revenue and expenses duri ng the reporting period. Actual results could differ from those estimates.
(k) Lease Agreements
The Stadium Authority implemented GASB 87, Leases, during the year ended March 31, 2023.

The objective of this Statement is to better meet t he information needs of financial statement users by improving accounting and financial reporting for l eases by governments. This Statement requires recognition of certain lease assets and liabilities for le ases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. It establishes a single model for lease accounting based on the foundational principle that leases are financings of t he right to use an underlying asset. Under this Statement, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources, thereby enhancing the relevance and consistency of information about governments’ leasing activities. There was no impact to beginning net position for fiscal year 2021-22.

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SANTA CLARA STADIUM AUTHORITY
(a Component Unit of the City of Santa Clara, California) Notes to Financial Statements
March 31, 2023 and 2022
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The statements of net position for fiscal year 2021-22 was adjusted as follows:

FY 2022
previously
reported
GASB 87
adjustment
FY 2022
adjusted
Current Assets:

Lease receivable $ — 11,418,381 11,418,381
Noncurrent Assets:

Right-to-use leased assets — 28,732,796 28,732,796
Long-term lease receivable — 605,887,066 605,887,066
Total change in assets $ 646,038,243
Current Liabilities:

Interest payable $ 5,753,456 374,905 6,128,361
Noncurrent Liabilities:

Lease Liability — 29,321,106 29,321,106
Total change in liabilities 29,696,011
Deferred Inflows of Resources:

Deferred inflows leases related — 612,602,812 612,602,812 Net Position:

Unrestricted deficit (414,683,168) 3,739,420 (410,943,748) Total change in liabilities, deferred inflows of
resources and net position $ 646,038,243

The statements of revenues, expenses and changes in net position for fiscal year 2021-22 was adjusted as follows:

FY 2022
previously
reported
GASB 87
adjustment
FY 2022
adjusted
Operating Revenues:

Rents and licensing $ 46,723,169 (7,320,255) 39,402,914 Operating Expenses:

Depreciation 16,979,469 798,133 17,777,602
Total change in operating income (8,118,388)
Nonoperating Revenues:

Interest revenue 4,128,756 11,857,808 15,986,564
Total change in net position $ 3,739,420

Lessee – The Stadium Authority is a lessee for noncancelable lease of buildings. The Stadium Authority recognizes a lease liability with an initial, and individual value of $100,000 and an intangible right-to-use lease asset (lease asset) in the statement of net position financial statements.

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SANTA CLARA STADIUM AUTHORITY
(a Component Unit of the City of Santa Clara, California) Notes to Financial Statements
March 31, 2023 and 2022
16 DRAFT 8/25/2023 10:42 AM KPMG Comments 506368A-
At the commencement of a lease, the Stadium Authority initially measures the lease liability at the present value of payments expected to be made during the lease term. Subsequently, the lease liability is reduced by the principal portion of lease payments made. The lease asset is initially measured as the initial amount of the lease liability, adjusted for lease payments made at or before the lease commencement date, plus certain initial direct costs. Subsequently, the lease asset is amortized on a straight- line basis over its useful life.

Key estimates and judgments related to leases in clude how the Stadium Authority determines (1) the discount rate it uses to discount the expected lease payments to present value, (2) lease term, and (3) lease payments as follows:
 The Stadium Authority uses the interest rate charged by the lessor as the discount rate. When the interest rate charged by the lessor is not provided, the Stadium Authority generally uses its estimated incremental borrowing rate as the discount rate for leases. The Stadium Authority used a 2.18% discount rate for the expected lease payments to present value.  The lease term includes the noncancelable period of the lease.  Lease payments included in the measurement of t he lease liability are composed of fixed payments and purchase option price that the Stadium Authority is reasonably certain to exercise.

The Stadium Authority monitors changes in circumst ances that would require a remeasurement of its lease and will remeasure the lease asset and liability if certain changes occu r that are expected to significantly affect the amount of the lease liability. The Stadium Authority has the Ground Lease with the City (Note 6) and the balances related to the leases liability and right-to-use as of March 31, 2023 were $29.3 million and $27.9 million, respectively. The leases have remaining terms of 31 to 35 years as of April 1, 2022. The Stadium Authority recognized $798 thousand in lease expense and $647 thousand in interest expense during the current fiscal year related to these leases.

A summary of lease liability activity during the year ended March 31, 2023 and 2022 are as follows:

March 31, 2022
March 31, As Adjusted March 31,
2021 Additions Reductions Note 2k Additions Reductions 2023 Lease liability $ — 29,530,929 (209,823) 29,321,106 — — 29,321,106 Total lease liability $ — 29,530,929 (209,823) 29,321,106 — — 29,321,106

Right-to-use leased assets for the year ended March 31, 2023 was as follows:

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SANTA CLARA STADIUM AUTHORITY
(a Component Unit of the City of Santa Clara, California) Notes to Financial Statements
March 31, 2023 and 2022
17 DRAFT 8/25/2023 10:42 AM KPMG Comments 506368A-
Balance Balance
March 31, March 31,
2022 Additions Reductions 2023
Right-to-use leased assets being depreciated:

Buildings $ 29,530,929 — — 29,530,929
Total right-to-use leased assets 29,530,929 — — 29,530,929 Less accumulated depreciation for:

Buildings (798,133) (798,133) — (1,596,266)
Total accumulated depreciation (798,133) (798,133) — (1,596,266) Total right-to-use leased assets, net $ 28,732,796 (798,133) — 27,934,663

Right-to-use leased assets for the year ended March 31, 2022 was as follows:

Balance Balance
March 31, March 31,
2021 Additions Reductions 2022
Right-to-use leased assets being depreciated:

Buildings $ — 29,530,929 — 29,530,929
Total right-to-use leased assets — 29,530,929 — 29,530,929 Less accumulated depreciation for:

Buildings — (798,133) — (798,133)
Total accumulated depreciation — (798,133) — (798,133) Total right-to-use leased assets, net $ — 28,732,796 — 28,732,796

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SANTA CLARA STADIUM AUTHORITY
(a Component Unit of the City of Santa Clara, California) Notes to Financial Statements
March 31, 2023 and 2022
18 DRAFT 8/25/2023 10:42 AM KPMG Comments 506368A-
Future principal and interest amounts from lease liability are as follows as of March 31, 2023:

Principal Interest
Year ending March 31:
2024 $ - 495,000
2025 6,542 993,458
2026 354,518 645,482
2027 362,325 637,675
2028 370,303 629,697
2029-2033 2,390,877 3,009,123
2034-2038 3,188,462 2,711,538
2039-2043 4,077,810 2,322,190
2044-2048 5,069,480 1,830,520
2049-2053 6,175,243 1,224,757
2054-2058 7,325,546 494,454
Total $ 29,321,106 14,993,894

Lessor – The Stadium Authority is a lessor for noncancelable leases of land and building. The Stadium Authority recognizes a lease receivable and a deferred inflow of resources in the financial statements.

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

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

The Stadium Authority monitors changes in circumst ances that would require a remeasurement of its lease, and will remeasure the lease receivable and deferred inflows of resources if certain changes occur that are expected to significantly affect the amount of the lease receivable. The Stadium Authority has the Stadium Lease with StadCo (Note 6) and the balances related to the leases receivable and deferred inflow of resources as of March 31, 2023 were $605.9 million and $595.6 million, respectively. The leases have remaining terms of 31 to 35 years as of April 1, 2022. The Stadium Authority recognized $7.3 million Draft

SANTA CLARA STADIUM AUTHORITY
(a Component Unit of the City of Santa Clara, California) Notes to Financial Statements
March 31, 2023 and 2022
19 DRAFT 8/25/2023 10:42 AM KPMG Comments 506368A-
in lease revenue and $12.7 million in interest revenue during the current fiscal year related to these leases.

A summary of lease receivable activity during the year ended March 31, 2023 and 2022 are as follows:

March 31, 2022
March 31, As Adjusted March 31,
2021 Additions Reductions Note 2k Additions Reductions 2023 Lease receivable $ — 629,619,557 (12,314,110) 617,305,447 — (11,418,381) 605,887,066 Total lease receivable $ — 629,619,557 (12,314,110) 617,305,447 — (11,418,381) 605,887,066

A summary of deferred inflows of resources activity during the year ended March 31, 2023 and 2022 are as follows:

March 31, 2022
March 31, As Adjusted March 31,
2021 Additions Reductions Note 2k Additions Reductions 2023 Deferred inflows leases related $ — 628,201,495 (15,598,683) 612,602,812 — (17,016,745) 595,586,067 Total deferred inflows
leases related $ — 628,201,495 (15,598,683) 612,602, 812 — (17,016,745) 595,586,067

Future principal and interest amounts from lease receivable are as follows as of March 31, 2023:

Principal Interest
Year ending March 31:
2024 $ 11,669,804 13,092,196
2025 11,926,763 12,835,237
2026 12,189,380 12,572,620
2027 12,457,780 12,304,220
2028 12,732,090 12,029,910
2029-2033 67,991,212 55,818,788
2034-2038 75,813,743 47,996,257
2039-2043 84,536,272 39,273,728
2044-2048 94,262,345 29,547,655
2049-2053 105,107,424 18,702,576
2054-2058 117,200,252 6,609,748
Total $ 605,887,065 260,782,935

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SANTA CLARA STADIUM AUTHORITY
(a Component Unit of the City of Santa Clara, California) Notes to Financial Statements
March 31, 2023 and 2022
20 DRAFT 8/25/2023 10:42 AM KPMG Comments 506368A-
(3) Stadium Development
(a) Transaction Overview
During fiscal year 2011-12, the Stadium Authority and StadCo entered into a series of agreements in connection with the construction of the Stadium. The Stadium was constructed and is owned by the Stadium Authority; certain tenant improvement components are owned by StadCo. Construction on the Stadium began in April 2012 and it was substantially co mpleted in July 2014, in time for the 2014 NFL season.

The City owns the land on which the Stadium was constructed. The City has leased the land to the Stadium Authority under a ground lease, and the Stad ium Authority has leased the Stadium to StadCo for the six-month period from August through January (the NFL season) of each year, for an initial lease term of 40 years. The Stadium Lease commenced in August 2014 upon substantial completion of construction.

The Stadium Authority retained a design-build firm to complete the design and construction of the Stadium pursuant to a guaranteed maximum price contract. The Stadium Authority was generally responsible for amounts due to the design-builder, ex cept that StadCo was responsible for payment of costs of tenant improvements. StadCo acted as construction agent for the Stadium Authority, with primary responsibility for administering the design-build contract.

The Stadium Authority and StadCo have engaged ManagementCo, an affiliate of StadCo, to manage the Stadium on a year-round basis. The Stadium Management Agreement has an initial term of 25 years, plus a 15-year renewal option. The Stadium Authority pays ManagementCo for services related to its operations on behalf of the Stadium Authorit y. For the years ended March 31, 2023 and 2022, ManagementCo charged the Stadium Authority $8.1 million and $6.8 million in Shared Expenses, and $7.4 million and $7.8 million in Other Operating and Management Expenses, respectively.

On August 31, 2022, Stadium Authority, StadCo and ManagementCo settled the arbitration and disputes regarding the partially suspended Shared Expens es and Operating and Management Expenses from June 2019. As part of the settlement, under section 11(b)(iii), Stadium Authority agreed to recognize the $15.8 million unpaid expenses along with the $426 thousand interest expenses under the Revolving Loan incurred from fiscal year 2019-20 through fiscal year 2021-22, ManagementCo's prior unauthorized payments of the unpaid expenses through the Revo lving Loan are now treated as timely Stadium Authority payments, but without Stadium Authority agreeing to ManagementCo's actions or draws under the Revolving Loan. The $16.3 million in ManagementCo expenses were recorded in fiscal year ended March 31, 2022. These are the Shared Expenses and Operating and Management Expenses that were previously withheld in 2020 and 2021.
(b) Construction Funding
Funding for construction of the Stadium, excluding tenant improvements funded by StadCo, falls into three major categories: an initial construction loan fr om a bank syndicate, which was refinanced during Draft

SANTA CLARA STADIUM AUTHORITY
(a Component Unit of the City of Santa Clara, California) Notes to Financial Statements
March 31, 2023 and 2022
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2013 as described below; funding from the StadC o Subordinated Loan; and construction period and other revenues.
(i) Stadium Construc tion Loan Facility
The initial financing included a delayed draw term loan facility (the Construction Facility) provided by a syndicate of banks (the Lenders) to Stadium Funding Trust (FinanceCo). FinanceCo, a Delaware statutory trust, entered into the Construction Facility with the Lenders and then issued a loan facility to the Stadium Authority in the amount of $450 million (the Authority Loan). The Construction Facility had a maturity date of September 1, 2015. In Ju ne 2013, FinanceCo and the Stadium Authority refinanced the Construction Facility, resulting in FinanceCo paying off the Construction Facility and entering into a new debt structure that includes 26-year fixed rate notes and a delayed draw 5-year loan facility. FinanceCo then issued a new loan fac ility to the Stadium Authority in the amount of $450 million. The Stadium Authority’s loan facilities are discussed in Note 5. (ii) StadCo Subordinated Loan
In March 2012, StadCo agreed to loan the Stadium Authority up to $500 million (the Subloan) to be used for the construction of Levi’s Stadium. During the refinance process in June 2013, the interest rate on the Subloan was fixed and part of the then outstanding Subloan was paid down. The Subloan is discussed in Note 5.
(iii) Construction Peri od and Other Revenues
Certain revenues were collected by the Stadium Authority while the Stadium was under construction.

These construction period and other revenues primarily consist of SBL and Naming Rights revenues collected by the Stadium Authority.

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SANTA CLARA STADIUM AUTHORITY
(a Component Unit of the City of Santa Clara, California) Notes to Financial Statements
March 31, 2023 and 2022
22 DRAFT 8/25/2023 10:42 AM KPMG Comments 506368A-
(4) Capital Assets
Capital asset activity for the year ended March 31, 2023 was as follows:

Balance Balance
March 31, March 31,
2022 Additions Reductions 2023
Nondepreciable assets:

Construction in progress $ 468,766 1,754,706 (128,079) 2,095,393 Total nondepreciable
assets 468,766 1,754,706 (128,079) 2,095,393
Capital assets being depreciated:

Buildings 826,227,884 — — 826,227,884
Machinery and equipment 3,991,661 2,149,870 — 6,141,531 Less accumulated depreciation for:

Buildings (126,594,576) (16,526,760) — (143,121,336)
Machinery and equipment (1,586,534) (681,058) — (2,267,592) Net depreciable assets 702,038,435 (15,057,948) — 686,980,487 Net capital assets $ 702,507,201 (13,303,242) (128,079) 689,075,880

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SANTA CLARA STADIUM AUTHORITY
(a Component Unit of the City of Santa Clara, California) Notes to Financial Statements
March 31, 2023 and 2022
23 DRAFT 8/25/2023 10:42 AM KPMG Comments 506368A-
Capital asset activity for the year ended March 31, 2022 was as follows:

Balance Balance
March 31, March 31,
2021 Additions Reductions 2022
Nondepreciable assets:

Construction in progress $ 406,177 247,001 (184,412) 468,766 Total nondepreciable
assets 406,177 247,001 (184,412) 468,766
Capital assets being depreciated:

Buildings 826,249,132 — (21,248) 826,227,884
Machinery and equipment 2,560,605 1,431,056 — 3,991,661 Less accumulated depreciation for:

Buildings (110,067,816) (16,526,760) — (126,594,576)
Machinery and equipment (1,133,825) (452,709) — (1,586,534) Net depreciable assets 717,608,096 (15,548,413) (21,248) 702,038,435 Net capital assets $ 718,014,273 (15,301,412) (205,660) 702,507,201

Interest expense incurred during the years ended March 31, 2023 and 2022 totaled $13,550,322 and $14,895,722, respectively. No interest was capitalized.

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SANTA CLARA STADIUM AUTHORITY
(a Component Unit of the City of Santa Clara, California) Notes to Financial Statements
March 31, 2023 and 2022
24 DRAFT 8/25/2023 10:42 AM KPMG Comments 506368A-
(5) Long-Term Debt
(a) Long-Term Debt Summary
Changes in long-term debt for the year ended March 31, 2023 consisted of the following:

Outstanding Outstanding Amounts
as of as of due
Interest March 31, March 31, within one
Type of indebtedness Issue date Due date rates 2022 Additions Reductions 2023 year Business type activity debt:

Stadium Funding Trust
Loan:

Term A Loan 6/19/2013 4/1/2039 5.00 % $ 230,138,239 — (14,722,999) (1) 215,415,240 15,459,000 StadCo CFD Advance 4/1/2013 12/31/2054 5.73 30,374,503 — (515,006) 29,859,497 — StadCo Subordinated Loan 3/28/2012 3/31/2043 5.50 19,800,950 — (19,800,950) — — Total $ 280,313,692 — (35,038,955) 245,274,737 15,459,000 (1) The difference between the principal payment recorded versus amount disclosed in the prior year is mainly due to a rounding adjustment to true-up to the correct ending debt balance at March 31, 2023.

Changes in long-term debt for the year ended March 31, 2022 consisted of the following:

Outstanding Outstanding Amounts
as of as of due
Interest March 31, March 31, within one
Type of indebtedness Issue date Due date rates 2021 Additions Reductions 2022 year Business type activ ity debt:

Stadium Funding Trust
Loan:

Term A Loan 6/19/2013 4/1/2039 5.00 % $ 244,160,240 — (14,022,001) 230,138,239 14,723,000 StadCo CFD Advance 4/1/2013 12/31/2054 5.73 29,502,893 871,610 (1) — 30,374,503 — StadCo Subordinated Loan 3/28/2012 3/31/2043 5.50 23,132,426 — (3,331,476) 19,800,950 4,911,322 Total $ 296,795,559 871,610 (17,353,477) 280,313,692 19,634,322 (1) The addition to the StadCo CFD Advance is interest being added to principal due to the timing of the quarterly payments. (see note 5(c)).

(b) Stadium Funding Trust Loan
The Restated Credit Agreement by and among Financ eCo, the Stadium Authority and Goldman Sachs Bank was entered into on June 19, 2013. FinanceCo agreed to loan the Stadium Authority up to $450 million. Under the Restated Credit Agreement, the loan from FinanceCo consists of the Term A Draft

SANTA CLARA STADIUM AUTHORITY
(a Component Unit of the City of Santa Clara, California) Notes to Financial Statements
March 31, 2023 and 2022
25 DRAFT 8/25/2023 10:42 AM KPMG Comments 506368A-
Loan and the Term B Loan. On March 31, 2016, the Stadium Authority paid the remaining amount due on the Term B Loan.
(i) Term A Loan
The Term A Loan was made in the amount of $282.79 million. This loan bears interest at a fixed rate of 5%, payable semiannually, with annual principal payments due beginning in April 2018. It has a maturity date in 2039 and is subject to certain prep ayment premiums. The loan was fully drawn at closing. As of March 31, 2023, $215.4 million was outstanding. Debt service on this loan is secured by a pledge of available SBL revenues of Stadium Authority.

In the event of default under the loan agreement, FinanceCo has the right, upon written notice to the Stadium Authority, to accelerate and declare the Stadium Authority’s obligation to repay the related loan to FinanceCo to be immediately due and payable.
(c) StadCo CFD Advance
In May 2010, the City completed the proceedings to establish CFD for the purpose of financing certain publicly owned facilities and public services associated with the Stadium.

On June 11, 2013, the CFD, the Stadium Authority, and StadCo entered into a Reimbursement Agreement under which the CFD would agree to reimburse the Stadium Authority for costs of the publicly owned facilities and public services constructed for the Stadium. The reimbursement can only be made from the special tax generated by the CFD, as and when received by the CFD.

StadCo has agreed to advance to the Stadium Authority funds to pay for the CFD Infrastructure (StadCo CFD Advance). To evidence the Stadium Authority’s obligation to repay the StadCo CFD Advance, the Stadium Authority and StadCo also executed a not e on June 11, 2013. The StadCo CFD Advance has a maximum principal of $38 million and an interest rate of 5.73%.

During the year ended March 31, 2023, as the special CFD tax was submitted to the Stadium Authority, a number of payments were made on the StadCo CFD Advance. StadCo CFD Advance payments were made midway through each quarter. The interest t hat accrued between the last StadCo CFD Advance payment and the end of the year is added to principal. The Stadium Authority made $1.7 million in interest and $515 thousand in principal payments. As of March 31,2023 and 2022, $29.9 million and $30.4 million was outstanding, respectively.
(d) StadCo Subordinated Loan
The Restated StadCo Obligations Agreement dated as of June 19, 2013 was entered into by and between StadCo and the Stadium Authority as part of the take-out financing process. Under the Restated StadCo Obligations Agreement, StadCo will loan the Stadium Authority an amount not to exceed $500 million with a fixed 5.50% interest rate. Required principal repayments started in March 2016 and the Stadium Authority may prepay the loan at any time. Debt service on this loan is secured by a pledge of available Stadium Authority revenues on a basis subordinate to outstanding senior loans, if any.

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SANTA CLARA STADIUM AUTHORITY
(a Component Unit of the City of Santa Clara, California) Notes to Financial Statements
March 31, 2023 and 2022
26 DRAFT 8/25/2023 10:42 AM KPMG Comments 506368A-
Payments totaling $20.8 million were made on the loan during the year. This included $19.8 million in principal prepayment and $1 million in interest. As of March 31, 2023, the StadCo Subordinate Loan has been paid off.

In the event of default under the loan agreement, StadCo has the right, upon written notice to the Stadium Authority, to accelerate and declare the Stadium Authority’s obligation to repay the related loan to StadCo to be immediately due and payable.
(e) Management Company Revolving Loan
The Management Company Revolving Loan dated as of March 28, 2012 was entered into by and between the Stadium Authority and Managemen tCo. The Management Company Revolving Loan provides borrowing to the Stadium Authority in an amount not to exceed $25 million through the earlier of the end of the term of the Stadium Lease or the expiration of the Stadium Management Agreement, with interest at the prime rate payable quarterl y. The Management Company Revolving Loan may be used solely for the purpose of enabling the Stadium Authority to pay Covered Stadium Authority Operating Expenses (as defined in the agreement) to the extent, and only to the extent, that funds are not otherwise available.

As of March 31, 2023, there was no balance outstanding. (f) Pledge of Future Revenues
The pledge of future revenues ends upon repayment of the $215.4 million in outstanding principal on the Term A which is scheduled to occur in fiscal year 2039-40. For fiscal year 2022-23, revenues including operating revenues and nonoperating interest earni ngs amounted to $90.3 million and operating costs including operating expenses, but not interest, depreciation, or amortization amounted to $31.1 million.

Net revenues available for debt service amounted to $59.2 million, which represented a coverage ratio of 3.82 on the $15.5 million of debt service.
(g) Long-Term Debt Maturities
Future principal and interest amounts due on long-term debt are as follows as of March 31, 2023:

Principal Interest
Year ending March 31:
2024 $ 15,459,000 11,708,759
2025 7,299,896 11,343,764
2026 7,838,094 10,951,859
2027 8,404,934 10,531,613
2028 9,001,865 10,081,520
Thereafter 197,270,948 97,846,872
Total $ 245,274,737 152,464,387

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SANTA CLARA STADIUM AUTHORITY
(a Component Unit of the City of Santa Clara, California) Notes to Financial Statements
March 31, 2023 and 2022
27 DRAFT 8/25/2023 10:42 AM KPMG Comments 506368A-
(6) Leases
(a) Ground Lease
On February 28, 2012, the Stadium Authority entered into a lease (the Ground Lease) with the City whereby the City leases the Stadium site to the Stadium Authority. The Ground Lease was amended on June 19, 2013.

The Ground Lease has an initial term of 40 years. The first lease year commenced on the first day following the substantial completion of construction (August 1, 2014) and ended on the next following March 31. The subsequent lease years will start on April 1 and end on the following March 31. The Stadium Authority will have five successive extension options, each four years in duration, which would commence following the initial term expiration date.

The Ground Lease provides that th e City will receive a fixed groun d rent (Fixed Ground Rent) of $180 thousand for the first year of Stadium operation s payable by the Stadium Authority. Beginning in the second year of Stadium operat ions and annually thereafter through the tenth year of Stadium operations, the Fixed Ground Rent will increase annually by $35 thousand. Beginning in the 11th year of Stadium operations, Fixed Ground Rent will be increased to equal $1 million, and thereafter will be increased by $100 thousand every five years through the end of the initial term of the Ground Lease. If the term of the Ground Lease is extended, then, during the first extension term, the Fixed Ground Rent will equal $1.58 million; and if and to the extent the Ground Lease is further extended, the Fixed Ground Rent will be increased by $80 thousand every four years thereafter through the expiration of the term of the Ground Lease. While the Fixed Ground Rent payments vary over the course of the Ground Lease, Ground Lease expense is recorded on a straight- line basis. Therefore $979 thousand of ground lease expense was reported in each of the fiscal years ended March 31, 2023 and 2022.

The Ground Lease also provides that the City will receive a performance-based rent equal to 50% of the net income from Non-NFL events, less certain credits including 50% of the Fixed Ground Rent, payable by the Stadium Authority. If certain of the credits are not used within the year incurred or the next five succeeding years, the credits will expire. The Stadium Authority reported a net Non-NFL event profit of $8,809,167 for fiscal year 2022-23, which triggers t he performance-based rent. However, the Stadium Authority did not pay the perform ance-based rent due because the performance-based rent amount based on potential credits from public safety costs in excess of a disputed threshold are the subject of pending litigation (see Note 7).

Future minimum payments due under the lease are as follows:

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SANTA CLARA STADIUM AUTHORITY
(a Component Unit of the City of Santa Clara, California) Notes to Financial Statements
March 31, 2023 and 2022
28 DRAFT 8/25/2023 10:42 AM KPMG Comments 506368A-
Year ending March 31:
2024 $ 495,000
2025 1,000,000
2026 1,000,000
2027 1,000,000
2028 1,000,000
Thereafter 33,500,000
$ 37,995,000

(b) Stadium Lease
On March 28, 2012, the Stadium Authority entered into a lease with StadCo whereby the Stadium Authority leases the Stadium to StadCo. On June 19, 2013, the same parties entered into an Amended and Restated Stadium Lease Agreement (the Stadium Lease).

The Stadium Lease has an initial term of 40 years commencing on the first day following the substantial completion of construction (August 1, 2014) and includes five successive options to extend the term by four years each. The Stadium Lease is divided into two seasons:
 The Tenant Season, which includes the NFL season (including preseason, regular season, and postseason NFL games) and runs from August 1 through January 31; and  The Stadium Authority Season, which ru ns from February 1 through July 31.

Pursuant to the Stadium Lease, the Stadium Authority and StadCo will be entitled to receive and collect separate revenues. Initially, rent payable by StadCo to the Stadium Authority was $24.5 million per year.

This amount was established pursuant to the Stadium Lease in connection with the take-out financing, which occurred on June 19, 2013. The Stadium Lease a llowed for one opportunity to adjust the rent if operating or debt service expenses are either more or less than projected in determining the initial rent.

Based on the changes to the projected operating and debt service expenses, the provisions for a one-time rent adjustment were triggered. At the Stadium Authority Board (Board) meeting held on March 22, 2016, the Board decided not to adjust th e rent, and instead passed a motion to pursue the informal dispute resolution procedures and to proceed to the arbitration process if necessary. Thereafter, on May 3, 2016, StadCo filed for arbitration with the Stadium Authority.

On June 18, 2018, the arbitrator entered an Arbitration Award in favor of the Stadium Authority and against StadCo. This award adjusted the facility rent from $24.5 million to $24.76 million, an increase of $262,000. This increase is retroactive to the first lease year resulting in a total amount owed to the Stadium Authority of $1.31 million for the first five lease years, through March 31, 2020. In addition to the adjustment to the facility rent, the Stadium Authorit y was entitled to reimbursement of its legal fees, determined by the arbitrator to be $2.28 million. The lease also provides for a fair market rent adjustment in year 33.

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SANTA CLARA STADIUM AUTHORITY
(a Component Unit of the City of Santa Clara, California) Notes to Financial Statements
March 31, 2023 and 2022
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The Stadium Authority received $26.1 million and $25.3 million in stadium rent from StadCo in each of the fiscal years ended March 31, 2023 and 2022, respectively. There were seven additional NFL events in fiscal year 2022-23, therefore; lease revenues in fiscal year 2022-23 were higher than the prior year.

The Stadium Authority may elect to expand the Tenant Season to consist of the entire lease year, from April 1 through the next succeeding March 31 (Stadium Authority Put Right), by delivering written notice to StadCo. The Stadium Authority Put Right may be exercised at any time during lease year 13, or at any time that the Management Company Revolving Loan balance exceeds $20 million. The expansion of the Tenant Season will be effective as of the applicable Tenant Season Expansion Date as set forth in the Stadium Lease. Effective from and after the Tenant Season Expansion Date, and continuing through the remainder of the Stadium Lease term, the Tenant Season will consist of the entire lease year. (7) Contingencies
(a) Asset Retirement Obligation
Pursuant to the Ground Lease, the Stadium Authority may be required to demolish the Stadium and other improvements at the end of the lease term, upon wri tten notice from the City. Pursuant to the Stadium Lease, the Stadium Authority will est ablish reserves to fund the cost of demolishing the stadium at the end of the lease term. While such reserves are projected to cover the entire demolition cost, StadCo will be responsible for funding any shortfall.
(b) Historical SBL Buffet Costs
On April 30, 2020, the Stadium Authority received an invoice in the amount of $4,388,709 for previously unbilled “complimentary” buffet costs associated with certain SBL holders for the NFL seasons from 2014 thru 2018. On May 13, 2020, the Stadium Authorit y issued a response letter disputing the newly billed costs citing that the costs were not presented in a reasonable manner relative to the financial planning and reporting requirements of the Lease Agreement and Stadium Management Agreement and there is no justification for delaying presentment and demand for payment. The invoices presented also lack sufficient supporting documentations in order to co nfirm the validity of the costs and charges under the Lease Agreement terms. StadCo and ManagementCo ha ve initiated arbitration proceedings to dispute the Stadium Authority’s position and the dispute is still outstanding.

In fiscal year 2021-22, ManagementCo invoiced an additional $902,081 in new buffet costs to the Stadium Authority through the fiscal year 2021-22 Non-NFL events’ net loss. ManagementCo also issued a certificate of loan to the Stadi um Authority under the Management Company Revolving Loan for the buffet amount and subsequently paid off the loan through the year-end excess cash distribution. Stadium Authority objected to and disputes ManagementCo's unauthorized payment of these buffet costs through the Revolving Loan, and also the payment of that loan through year-end excess cash. Pursuant to the parties' August 31, 2022 settlement agreement and stipulation, ManagementCo's draw under the Revolving Loan will be treated as a timely Stadium Authority payment, under protest, and with a full reservation of Stadium Authority's rights and claims. The Stadium Authority recorded a receivable from ManagementCo for the loan draw on the buffet costs as of March 31, 2023.

In fiscal year 2022-23, ManagementCo reported $1,164,668 in buffet costs to be charged to the Stadium Authority for the 2022-23 season. The Stadium Authority did not re cord a liability for this cost since the dispute is still outstanding.

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SANTA CLARA STADIUM AUTHORITY
(a Component Unit of the City of Santa Clara, California) Notes to Financial Statements
March 31, 2023 and 2022
30 DRAFT 8/25/2023 10:42 AM KPMG Comments 506368A-
(c) Public Safety Costs
In June 2019, StadCo filed an Arbitration Dem and regarding alleged amounts due from the Stadium Authority under the public safety costs terms of the Stadium Lease, for fiscal year 2017-18. According to the Stadium Lease, StadCo is required to reimburse t he City for the costs incurred for providing public safety services for NFL events that exceed the re venue from off-site parking permit fees. The Stadium Lease contains a provision that cr eates a "threshold" on the amount of public safety costs that StadCo must pay for each of the NFL seasons. If the total public safety costs exceed the threshold, then the Stadium Lease requires the Stadium Authority to reimburse or credit to StadCo the costs above the threshold in the form of rent credits. The Stadium Lease includes an obligation for StadCo to negotiate a threshold increase in good faith if the total amounts ar e over the threshold for three consecutive years.

The Stadium Authority invoked the good faith negotiation process after costs exceeded the threshold for three seasons, which was in advance of the incurr ed public safety costs for fiscal year 2017-2018.

StadCo filed several amended Arbitration Demands or formal demand letters for public safety costs damages for the subsequent NFL seasons and fi scal years 2018-2019, 2019-2020, 2021-2022, and 2022-2023.

The Ground Lease contains provisions that provide rent credits to the Stadium Authority in the event that public safety costs exceed the threshold. The rent cr edit is equivalent to the public safety costs that exceed the threshold in a fiscal year. The Stadium Authority is allowed to use these excess credits to apply against the performance-based rent owed to the Ci ty in the event that public safety costs exceed the threshold, and that excess amount is not pai d directly by the Stadium Authority. Both the performance-based rent credit from the City and rent credit from the Stadium Authority expire in the next five succeeding years if not used within the year incurred. The public safety costs, threshold amount and calculations, and credits are currently under litigation with StadCo. As of March 31, 2023, the Stadium Authority did not record a liability for this cost since the dispute is still outstanding and the amount in question is not estimable.
(8) Subsequent Events
Management has evaluated subsequent events through August 30, 2023, which is the date the financial statements were available to be issued, and determined there are no other items to disclose.

Santa Clara Stadium
Authority
Overview of Santa Clara Stadium Authority Fiscal Year 2022/23 Annual Financial Statements and Audit Results Presentation by KPMG, LLP
August 30, 2023
Agenda
• Audit Limitations and Methodology
• Overview
• Key Financial Highlights
• Management’s Discussion and Analysis (MD&A)
• Basic Financial Statements
• Statements of Net Position
• Statements of Revenues, Expenses, and Changes in Net Position • Notes to the Financial Statements
• Additional Disclosures
• Audit Results Presentation by KPMG, LLP
• Recommendation
2 Audit Limitations & Methodology
• This was an audit of the Stadium Authority’s financial reports, processes, internal controls and the Stadium Authority’s shared expenses with Forty‐Niners Stadium Management Company LLC (ManCo).
• This financial audit is an independent evaluation of the Stadium Authority’s financial reports and reporting processes to provide reasonable assurance that the financial statements are accurate and complete. This is not an absolute guarantee that there were no human errors or miscommunications that could lead to a mistake. • Through various audit processes and procedures, auditors determine if controls and processes are in place to produce accurate and reasonable financial statements. • KPMG will discuss the audit processes and procedures in more detail during their presentation.
3 Overview
• KPMG has audited the Stadium Authority’s Financial Statements as required by section 5.1(a) of the Credit Agreement.
• The Financial Statements cover the 2022/23 fiscal year (April 1, 2022 to March 31, 2023) with comparative data from the 2021/22 fiscal year. • Unmodified (i.e., “clean”) opinion expressed by the auditors. • Reports will be available on the City’s Stadium Authority webpage. 4 Key Financial Highlights
• Management’s Discussion and Analysis (page 3)
• Introduces the financial statements and provides an analytical overview of the SCSA financial activities.
• SCSA’s net position increased by $29.8 million when compared to the prior year.
• Debt service payments during the fiscal year totaled $48.6 million and overall outstanding long‐term debt decreased by $35 million. 5 Key Financial Highlights
• Management’s Discussion and Analysis (page 4) continued • During this fiscal year, there were twelve National Football League (NFL) games, seven ticketed non‐NFL events and sixty‐nine smaller special events held at Levi’s Stadium. The Stadium Authority recognized $72.2 million in operating revenue and $49.1 million in operating expenses.
• Revenue from Non‐NFL events were $19.6 million, and the related expenses were $10.8 million resulting in net Non‐NFL event profit of $8.8 million.
• ManCo provided the Non‐NFL events’ year‐end documents on June 30, 2023.
6 Key Financial Highlights
• Statements of Net Position (page 8)
• Financial statement that reports the assets, liabilities, and net position of the Stadium Authority.
• Total Assets were $1.4 billion, with Levi’s Stadium being the largest asset with a carrying value of $683.1 million, net of depreciation.
• Total Liabilities were $738.5 million made up mostly of outstanding debt equaling $245.3 million and unearned revenues relating to Stadium Builder’s Licenses (SBL’s) of $442.0 million. 7 Key Financial Highlights
• Statements of Revenues, Expenses, and Changes in Net Position (page 9)
• Financial statement that reports the increases and decreases in the Stadium Authority’s net position (revenues and expenses) • Revenues –T o t a l $72.2 million
• Charges for Services were $33.2 million with $585.5 thousand from STR Marketplace for SBL resales. There were $11.4 million in NFL ticket surcharge, $1.3 million in Non‐NFL event surcharge, $19.6 million in Non‐ NFL event revenue, and $250 thousand in senior/youth fees during the year.
• Rents and Licensing revenues were $39 million with Stadium lease rent equaling $24.8 million, SBL revenue recognition of $14.1 million, and naming rights revenue of $7.7 million offset by $8 million from GASB 87 lease revenue. 8
Key Financial Highlights
• Statements of Revenues, Expenses, and Changes in Net Position (cont.)
• Expenses –T o t a l $49.1 million
• Lease Expenses were $1.2 million, which represents the Stadium ground lease, senior/youth fees, and miscellaneous expenses.
• Materials, Services and Supplies were $28.3 million with Shared Stadium Expenses of $11.7 million, Stadium Manager other general and administrative expenses of $383 thousand, SBL sales and service expenses of $2.7 million, Non‐NFL event expenses of $10.6 million, miscellaneous services and supplies of $1.6 million, and utilities of $1.2 million.
• Selling, general, and administrative expenses were $1.5 million, and Depreciation totaled $18.0 million.
9 Key Financial Highlights
• Notes to the Financial Statements (page 11)
• An integral part of the annual financial statements
• Note 4 ‐ Capital Assets
• Note 5 ‐ Long‐Term Debt
• Note 7 – Contingencies
10 Audit Results Presentation by
KPMG, LLP
11 Recommendation
• Accept the Santa Clara Stadium Authority Fiscal Year
2022/23 Annual Financial Statements and
recommend that the Stadium Authority note and file
the report at the September 19, 2023 Joint Council
and Authorities Concurrent and Stadium Authority
meeting.
12 Santa Clara Stadium
Authority (the Authority)
Discussion with Those
Charged with Governance
Audit results for the year ending March 31, 2023
August 30, 2023
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Audit results required communications and other matters Matters to communicate Response
Outstanding matters as of August 30, 2023 Testing of a limited number of accounts, finalization of manger and partner sign offs, and receipt of management representations.

Significant unusual transactions No significant u nusual transactions identified during the audit.

Uncorrected audit misstatements No uncorrected misstatements identified during the audit.

Corrected audit misstatements No corrected misstatements identified during the audit.

Financial statement presentation and disclosure omissions No matters to communicate.

Auditors’ report We expect to issue an unmodified opinion on the financial statements to the Authority.

Changes to our risk assessment and planned audit strategy No matters to report.

Significant accounting policies and practices No matters to report. See slide 5.

Related parties Certain costs, primarily staff salaries and related costs, are charged to the Authority from the City of Santa Clara. Not considered a significant related party transaction.

Going concern No matters to report.

Subsequent events No matters to report.
3© 2023 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent memb er firms affiliated with KPMG International Limited, a privat e English company limited by guarantee. All rights reserved.

Audit results required communications and other matters Matters to communicate Response
Noncompliance with laws and regulations No matters to report.

Significant difficulties encountered during the audit No matters to report.

Significant findings or issues discussed, or the subject of correspondence with management No matters to report.

Management’s consultation with other accountants No matters to report.

Difficult or contentious matters for which the auditor consulted No matters to report.

Disagreements with management No matters to report.

Other significant matters No matters to report.
4© 2023 KPMG LLP, a Delaware limited liability partnership and a member firm of the KPMG global organization of independent memb er firms affiliated with KPMG International Limited, a privat e English company limited by guarantee. All rights reserved.

Audit results required communications and other matters Illegal acts or fraud No actual or suspected fraud involving management, employees with significant roles in internal control, or where fraud results in a material misstatement in the financial statements were identified during the audit.

Written communications Engagement letter, management representation letter, including summary of uncorrected misstatements, internal control deficiency letter, and minutes representation letter to be distributed under separate covers.

Independence We hereby affirm that we are independent accountants with respect to the Authority under the relevant professional and regulatory standards.

Inquiries See slide 6.

Matters to communicate
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Significant accounting policies and practices
Description of significant accounting policies and practices Audit findings • Cash and cash equivalents and restricted cash
• Accounts Receivable
• Unearned revenue and revenue recognition
• Leases (GASB 87 adoption)
Qualitative aspects
• Refer to Note 2 of the financial statements for the detailed description of the significant accounting policies. Management has appropriately applied such policies to the Authority’s books and records as of and for the year ended March 31, 2023.
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Inquiries
Are those charged with governance aware of:
• Matters relevant to the audit, including, but not limited to, violations or possible violations of laws or regulations? • Any significant communications with regulators?
• Any developments in financial reporting, laws, accounting standards, corporate governance, and other related matters, and the effect of such developments on, for example, the overall presentation, structure, and content of the financial statements, including the following:
- The relevance, reliability, comparability, and understandability of the information presented in the financial statements - Whether all required information has been included in the financial statements, and whether such information has been appropriately classified, aggregated or disaggregated, and presented?
Do those charged with governance have knowledge of:
• Fraud, alleged fraud, or suspected fraud affecting the Company? - If so, have the instances been appropriately addressed and how have they been addressed? Additional inquiries:
• What are those charged with governance’s views about fraud risks in the Company? • Who is the appropriate person in the governance structure for communication of audit matters during the audit? • How are responsibilities allocated between management and those charged with governance? • What are the Company’s objectives and strategies and related business risks that may result in material misstatements? • Are there any areas that warrant particular attention during the audit and additional procedures to be undertaken? • What are those charged with governance’s attitudes, awareness, and actions concerning (a) the Company’s internal controls and their importance in the entity, including oversight of effectiveness of internal controls, and (b) detection of or possibility of fraud? • Have there been any actions taken based on previous communications with the auditor? • Has the Company entered into any significant unusual transactions? • Whether the entity is in compliance with other laws and regulations that have a material effect on the financial statements? • What are the other document(s) that comprise the annual report, and what is the planned manner and timing of issuance of such documents? • Have any subsequent events occurred that might affect the financial statements? kpmg.com/socialmedia
For additional information and audit committee resources, including National Audit Committee Peer Exchange series, a Quarterly webcast, and suggested publications, visit the KPMG Audit Committee Institute (ACI) at www.kpmg.com/ACIQuestions? This presentation to those charged with governance is intended solely for the information and use of those charged with governance and management and is not intended to be and should not be used by anyone other than these specified parties. This presentation is not intended for general use, circulation or publication and should not be published, circulated, reproduced or used for any purpose without our prior written permission in each specific instance.

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Audit CommitteeAugust 30, 2023

Audit Committee
August 30, 2023