Audit Committee
November 27, 2023

Source: City of Santa Clara

CITY OF SANTA CLARA
Last Ten Fiscal Years
(In Thousands)
(1) The required coverage is 1.00.

PLEDGED REVENUE COVERAGE

ELECTRIC REVENUE BOND

15. Pledged Revenue Coverage Electric Revenue Bond – Last Ten Fiscal Years DRAFT

234
Table 16
Per
Capita Public County City
Personal Buying Median School Unemployment Unemployment Year Population Income Income Age Enrollment Rate Rate
($000)
2013 / 14 121,229 4,739,710$ 39,097 $ 35.0 15,169 5.4% 4.9% 2014 / 15 120,973 4,952,711 40,941 34.4 15,169 3.9% 3.6% 2015 / 16 123,752 5,194,006 41,971 34.3 15,388 4.2% 3.7% 2016 / 17 123,983 5,454,137 43,991 34.3 15,409 3.8% 3.4% 2017 / 18 129,604 6,064,143 46,790 34.3 15,509 2.9% 2.7% 2018 / 19 128,717 6,121,909 47,561 33.9 15,387 2.1% 1.9% 2019 / 20 129,104 6,180,008 47,868 34.2 15,306 11.0% 9.0% 2020 / 21 130,746 6,596,037 50,449 33.9 14,808 7.0% 5.9% 2021 / 22 130,127 7,540,481 57,947 34.0 14,028 1.8% 1.6% 2022 / 23 132,476 8,953,977 67,589 34.5 13,919 3.2% 2.9% Sources: MuniServices, LLC \ Avenu Insights & Analytics (1) Population data by the California Department of Finance Projections. (2) The California Department of Finance demographics estimates now incorporate 2010 Census counts as a benchmark. (3) Unemployment and Total Employment Data are provided by the EDD's Bureau of Labor Statistics Department. (4) Student Enrollment reflects the total number of students enrolled in the Santa Clara Unified School District.

Other school districts within the City are not accounted for in this report.

CITY OF SANTA CLARA

DEMOGRAPHIC AND ECONOMIC STATISTICS
Last Ten Calendar Years

16. Demographic and Economic Statistics – Last Ten C alendar Years DRAFT

235
Table 17
Percentage of Percentage of
Number of Total City Number of Total City
Company Employees Employment Employees Employment
Applied Materials, Inc. 8,500 20.9% 8,554 7.1% Intel Corporation 7,801 19.1% 10,801 9.0% Advanced Micro Devices Inc. 3,000 7.4%
Nvidia 2,700 6.6%
California's Great America 2,500 6.1% 2,500 2.1% Dell 2,088 5.1%
Santa Clara University 2,000 4.9% 1,201 1.0% City of Santa Clara 1,650 4.0% 1,413 1.2% SVB Financial Group 1,250 3.1%
Macy's 1,200 2.9% 1,400 1.2%
Avaya Inc. - - 2,000 1.7%
EMC Corporation - - 1,418 1.2% ON Semiconductor Corporation - - 1,100 0.9% Texas Instruments - - 3,500 2.9% Total Top Ten 32,689 80.1% 33,887 28.3% All Others 8,060 19.9% 86,438 71.7%
Total Employment 40,749 100% 120,325 100% Sources: Fiscal year 2023: Reference Solutions database, Infogroup, Inc., Papillion, Nebraska Sources: Fiscal year 2014: ReferenceUSA database, infogroup, Inc., Papillion, Nebraska

CITY OF SANTA CLARA

PRINCIPAL EMPLOYERS
Current Year and Ten Years Ago
2023 2014

17. Principal Employers – Current Year and Ten Years Ago DRAFT

236
Table 18
2023 2022 2021 2020 2019 2018 2017 2016 2015 2014
City Council 9.00 9.00 9.00 10.00 10.00 11.00 10.00 9.00 8.50 8.50 City Clerk 7.00 6.00 7.00 5.00 6.00 7.00 7.00 5.00 5.00 5.00 City Attorney 8.00 8.00 8.00 7.00 7.00 6.00 6.00 6.00 6.00 6.00 City Auditor 3.00 3.00 3.00 3.00 - - - - - - City Manager 19.00 19.00 13.00 13.00 13.00 14.00 13.00 16.00 9.00 9.00 Information Technology 6.00 6.00 7.00 7.00 7.00 7.00 7.00 5.00 5.00 4.00 Human Resources 15.00 14.00 15.75 15.75 15.00 15.00 15.00 14.50 14.50 14.50 Finance 69.75 68.75 69.75 61.75 61.00 61.00 61.75 60.25 58.25 58.00 Parks & Recreation 77.75 77.75 82.75 82.75 80.75 80.75 79.00 82.75 82.75 82.00 Library 42.50 42.50 46.75 46.75 46.75 45.50 45.50 47.00 46.50 46.50 Community Development 73.00 72.00 68.75 66.00 65.00 64.00 56.00 42.00 44.00 40.00 Engineering 40.25 39.25 42.25 39.25 39.92 40.92 39.25 38.25 38.00 38.00 Building Maintenance 13.00 13.00 13.00 13.00 13.23 13.23 12.90 10.90 11.40 11.50 Street 55.60 55.50 60.60 60.60 58.60 58.60 59.60 65.35 63.10 62.00 Automotive Services 14.65 14.75 15.65 15.65 15.75 15.75 15.75 15.00 15.00 15.00 Police 231.00 221.00 239.00 239.00 239.00 239.00 231.00 222.00 219.00 222.00 Fire 155.50 154.50 168.25 167.25 167.25 167.50 166.50 179.50 179.50 179.50 Non-Departmental - - 11.00 9.00 4.00 - - - - - Electric Utility 214.00 198.00 198.00 197.00 189.00 186.00 179.00 166.00 156.00 142.00 Water Utility 50.55 50.55 50.80 50.80 50.35 50.85 52.70 50.10 47.10 45.40 Sewer Utility 22.45 22.45 22.20 22.20 22.65 22.15 21.30 19.90 17.90 15.60 TOTAL 1,127.00 1,095.00 1,151.50 1,131.75 1,111.25 1,105.25 1,078.25 1,054.50 1,026.50 1,004.50 Source: City of Santa Clara Annual Budget

CITY OF SANTA CLARA

FULL-TIME EQUIVALENT BUDGETED CITY EMPLOYEES BY PROGRAM/FUNCTION Last Ten Fiscal Years
Fiscal Year Ending June 30

18. Full-Time Equivalent Budgeted City Employees by Program/Function – Last Ten Fiscal Years DRAFT

237
Table 19
2023 2022 2021 2020 2019 2018 2017 2016 2015 2014
Culture and Recreation:

Number of library items circulated 2,152,877 1,268,965 736,301 1,598,171 2,509,201 2,612,102 2,700,315 2,479,126 2,491,553 2,260,844 Fire Protection:

Number of calls answered 10,688 10,391 8,853 9,339 9,456 8,849 8,850 8,933 8,403 8,336 Number of inspections conducted 10,143 4,004 4,303 6,404 8,470 9,696 8,260 8,067 8,784 Police Protection:

Number of calls for service
(1)
43,306 61,421 67,211 63,860 58,912 53,865 50,429 51,853 60,208 59,474 Electric System:

Maximum annual demand (MW) 693.9 649.4 590.6 579.3 587.8 586.6 568.1 526.4 491.1 482.4 Total annual energy (Mwh) 4,568,293 4,361,658 3,956,474 3,773,864 3,693,251 3,733,800 3,628,200 3,488,004 3,238,372 3,145,100 Sewer System:

Number of service connections 26,105 25,682 25,948 25,359 25,481 26,236 26,162 25,744 25,656 25,660 Peak flow (5-day average, WPCP)
(MG) 110 110 110 110 110 110 110 110 121 121 Maximum daily capacity of
treatment plant (WPCP) (MGD) 167 167 167 167 167 167 167 167 167 167 Peak flow (5-day average, City)
(MGD) 16 16 16 16 16 16 16 16 16 16 Water System:

Number of service accounts 25,894 25,371 25,592 24,904 25,293 25,670 25,714 25,716 25,656 25,530 Daily Average consumption (MG) 14 13 16 16 16 15 15 15 16.8 18.8 Maximum daily capacity of plant:

Potable Water (MGD) 80 80 80 80 80 80 80 96 87 87 Recycled Water (MGD) 15 15 15 15 15 15 30 14 15 15 Note: (1) Data Based on Calendar Year
Source: City of Santa Clara

CITY OF SANTA CLARA

OPERATING INDICATORS BY FUNCTION/ACTIVITY
Last Ten Fiscal Years
Fiscal Year Ending June 30

19. Operating Indicators by Function/Activity – Last Ten Fiscal Years

DRAFT

238

CITY OF SANTA CLARA
Table 20
2023 2022 2021 2020 2019 2018 2017 2016 2015 2014
Culture and Recreation:

Number of community centers 4 4 4 4 4 4 4 4 4 4 Number of parks 44 44 44 44 39 39 35 34 34 32 Park acreage 353 367 367 353 254 311 330 274 273 273 Number of golf courses - - - - 1 1 1 1 1 1 Number of swimming pools 11 11 11 11 11 11 11 5 5 5 Number of tennis courts 27 27 27 27 28 28 28 28 28 28 Number of lawn bowling greens 1 1 1 1 1 1 1 1 1 1 Number of lighted soccer fields 7 7 7 7 3 3 3 3 3 3 Number of lighted softball fields 4 4 4 4 7 7 7 7 7 7 Number of neighborhood park buildings 10 10 10 10 8 8 8 8 8 8 Number of gymnastic centers 1 1 1 1 1 1 1 1 1 1 Number of skate parks 1 1 1 1 1 1 1 1 1 1 Number of community theaters 1 1 1 1 1 1 1 1 1 1 Number of libraries 3 3 3 3 3 3 3 3 2 2 Cemetery 2 2 2 2 2 2 2 2 2 2 Fire Protection:

Number of stations 10 10 9 10 10 10 10 10 10 10 Police Protection:

Number of stations 1 1 1 2 2 2 2 2 2 2 Electric System:

Number of meters 59,297 59,227 58,230 57,066 55,971 55,139 54,942 53,824 53,360 52,775 Miles of high voltage lines 631 622 618 616 613 612 608 605 591 590 Number of substations 31 29 29 29 28 27 27 27 27 26 Sewerage and Storm Drain System:

Miles of sanitary sewers 288 288 288 288 288 288 288 288 288 288 Number of sanitary sewer pump stations 6 6 6 6 6 6 6 6 6 6 Miles of storm sewers 194 194 196 195 195 195 195 195 195 - Number of treatment plants 1 1 1 1 Tertiary 1 Tertiary 1 Tertiary 1 Tertiary 1 Tertiary 1 Tertiary 1 Tertiary Number of storm drain pump stations 22 22 22 22 22 22 22 22 22 22 Water System:

Miles of water mains 306 306 306 306 335 335 335 310 335 335 Number of fire hydrants 3,437 3,437 3,248 3,429 3,404 3,382 3,501 3,383 3,315 3,315 Miles of recycled watermains 34 34 34 34 33 33 33 33 33 33 Streets:

Miles of Streets 252 252 252 252 252 252 252 252 252 249 Number of Street Lights 8,431 8,429 8,404 8,235 8,187 8,118 8,112 8,103 8,097 8,054 Number of Traffic Signals 157 186 183 182 207 207 207 206 200 196 Source: City of Santa Clara

CAPITAL ASSETS STATISTICS BY FUNCTION
Last Ten Fiscal Years
Fiscal Year Ending June 30

20. Capital Assets Statistics by Function – Last Ten Fiscal Years DRAFT

239

Table 21

INSURANCE ANNUAL TERM EXPIRATION
TYPE OF POLICY COMPANY LIMITS (1) PREMIUM (3) YEARS DATE (2) Liability
Comprehensive General Self-insured (Since 1987) $3 million n/a - Ongoing Excess Liability PRISM $50 million $1,823,232 1 7/1/2023 and various other carriers
Workers' Compensation Self-insured (since 1973) $750 thousand n/a - Ongoing Excess Workers' PRISM $5 million $954,076 1 7/1/2023 Compensation and various other carriers
Property Coverage
All Risks, including flood, Alliant Property Insurance
excluding earthquake Program (APIP) $800 million $1,332,290 1 7/1/2023 Various excess carriers
Boiler and Machinery Alliant Property Insurance $100 million not available 1 7/1/2023 Program (APIP)
Various excess carriers
Financial Loss Bonds
Crime Coverage Bond PRISM $10 million $13,403 1 6/30/2023 Notes:
(1) Limits are per occurrence
(2) All policies have been renewed
(3) Boiler and Machinery APIP premium is included in All Risks premium, $1,332,290. Breakdown is unavailable.

Source: City of Santa Clara

CITY OF SANTA CLARA

STATEMENT OF INSURANCE COVERAGE
June 30, 2023

21. Statement of Insurance Coverage

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241

SUCCESSOR AGENCY CITY OF SANTA CLARA

STATISTICAL SECTION
This part of the City of Santa Clara’s Annual Comprehensive Report provides detailed information to better understand the data presented within the financial statements, note disclosures, and required supplementary information.

TABLES
REVENUE CAPACITY 1 - 3
Contains information to help the reader assess the Successor Agency’s most significant local revenue source, the property tax.

DEBT CAPACITY 4
Presents information to assess the affordability of the Successor Agency’s current levels of outstanding debts.

Successor Agency
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243

Table 1
2023 2022 2021 2020 2019 2018 2017 2016 2015 2014
Real Property Value 5,996,569$ 5,790,301$ 5,708,617$ 5,372,322$ 6,024,538$ 6,136,642$ 5,710,559$ 4,474,495$ 2,504,578$ 2,428,787$ Other Property Value 26,855 33,102 28,733 25,324 22,913 25,857 27,877 796,082 551,425 450,943 Total Project Value 6,023,424 5,823,403 5,737,350 5,397,646 6,047,451 6,162,499 5,738,436 5,270,577 3,056,003 2,879,730 Less Base Value (8,838) (8,838) (8,838) (8,838) (8,838) (8,838) 49,632 49,322 (8,829) (8,838) Increment Over Base Value 6,014,586 5,814,565 5,728,512 5,388,808 6,038,613 6,153,661 5,788,068 5,319,899 3,047,174 2,870,892 Redevelopment Property
Tax Trust Fund (RPTFF)
(1)
- - - - - - - 5,697 9,365 26,759 Total Tax Revenue -$ -$ -$ -$ -$ -$ -$ 5,697$ 9,365$ 26,759$ Notes:

Source: City of Santa Clara / Santa Clara County Auditor

SUCCESSOR AGENCY OF THE CITY OF SANTA CLARA

BAYSHORE NORTH PROJECT AREA

HISTORICAL TAX INCREMENT
Last Ten Fiscal Years
(In Thousands)
(1) With the State dissolving all RDAs on 02/01/2012, the structure of Tax Increment Revenue has changed. Starting in fiscal year 2012-13, the County's property tax distribution to the Successor Agency was changed to the Redevelopment Property Tax Trust Fund (RPTTF). The RPTTF reported in this table is the amount calculated by the County Auditor-Controller. Under the provisions of the laws dissolving the Redevelopment Agency, the Successor Agency only receives the funds necessary to fulfill its approved obligations.

1 . Historical Tax Increment – Last Ten Fiscal Years
DRAFT

244
Table 2

ASSESSED ASSESSED

PROPERTY PROPERTY PERCENT

ASSESSEE USE VALUATION OF TOTAL
1 Forty Niners SC Stadium Company LLC Commercial Office Building 777,020,014$ 12.90% 2 SI LLC Commercial Office Building 581,049,978 9.65% 3 Innovation Commons Owner LLC Commercial Office Building 284,347,972 4.72% 4 The Irvine Company Commercial Office Building 235,748,455 3.91% 5 PC Santa Clara Gateway 2 LLC Commercial Office Building 217,295,750 3.61% 6 SCT Owner LLC Commercial Office Building 200,960,600 3.34% 7 Apple Inc Commercial Office Building 196,394,587 3.26% 8 STC Venture LLC Commercial Office Building 185,164,569 3.07% 9 PRII Towers at Great America Owner LLC Commercial Office Building 174,383,234 2.90% 10 PR 3975 Freedom Circle Commercial Office Building 172,013,069 2.86% TOTAL 3,024,378,228$ 50.22%
TOTAL AGENCY ASSESSED VALUE 6,023,423,770$
Source: HDL Coren & Cone

SUCCESSOR AGENCY OF THE CITY OF SANTA CLARA

BAYSHORE NORTH PROJECT AREA

TEN LARGEST ASSESSEES - TAXABLE VALUE
June 30, 2023

2. Ten Largest Assessees – Taxable Value
DRAFT

245
Table 3

HEARING APPLICANT'S

TAX ROLL ASSESSED APPEAL DATE OPINION

NUMBER ASSESSEE VALUATION/ORIGINAL S/U
(1)

NUMBER DEADLINE STATUS VALUATION LAND USE
984-92-103 FORTY NINERS 555,214,000$ S 15.0278 88,000,000$ Commerical 984-92-104 FORTY NINERS 555,214,000 S 15.0279 88,000,000 Commerical 984-92-103 FORTY NINERS 555,214,000 S 15.028 88,000,000 Commerical 984-92-104 FORTY NINERS 555,214,000 S 15.0281 88,000,000 Commerical 984-92-103 FORTY NINERS 554,267,314 S 17.0232 140,000,000 Commerical 984-92-104 FORTY NINERS 554,267,314 S 17.0233 140,000,000 Commerical 984-92-104 FORTY NINERS 548,980,708 S 16.0256 100,000,000 Commerical 984-92-103 FORTY NINERS 548,980,708 S 16.0257 100,000,000 Commerical 984-92-103 FORTY NINERS 253,784,158 S 18.1918 250,500,000 Commerical 22-012522 APPLE INC 160,776,054 U 22.1293 50,100,000 N/A 21-081107 CEDAR FAIR S 93,154,425 U 21.3482 46,577,214 N/A 21-081108 CEDAR FAIR S 86,769,758 U 21.3483 42,989,135 N/A 21-081109 CEDAR FAIR S 62,482,975 U 21.3484 35,620,612 N/A 21-081110 CEDAR FAIR S 59,777,200 U 21.3485 29,888,601 N/A 17-018611 CEDAR FAIR S 59,280,246 U 17.1041 58,852,511 N/A 18-018278 CEDAR FAIR S 58,493,748 U 18.0594 50,547,232 N/A 18-042920 CYXTERA COMM 46,130,484 U 22.416 16,130,000 N/A 104-50-025 COHERENT INC 46,023,273 S 15.0256 15,251,322 Commerical 10-037856 SAVVIS COMMU 45,935,890 U 10.5814 40,000,000 N/A 14-032002 SAVVIS COMMU 44,195,581 U 14.171 22,000,000 N/A 5,444,155,836$ 1,490,456,627$
Note:
(1) S=secured roll, U=unsecured roll
Source: Santa Clara County Assessor's Office

SUCCESSOR AGENCY OF THE CITY OF SANTA CLARA

BAYSHORE NORTH PROJECT AREA
ASSESSMENT APPEAL ACTIVITY OF TOP 20 ASSESSEES
2022-23 Impacts

3. Assessment Appeal Activity of Top 20 Assessees
DRAFT
246
Table 4
2022-23 Assessed Valuation: 6,023,423,770$
Base Year Valuation: (8,837,956)
Incremental Valuation: 6,014,585,814$
Total Debt Project Area’s Share of
6/30/2023
%
Applicable
(1)
Debt 6/30/23
OVERLAPPING TAX AND ASSESSMENT DEBT:

Santa Clara Unified School District 1,076,510,000$ 7.385% 79,500,264$ West Valley-Mission Community College District 694,320,000 3.387% 23,516,618 Santa Clara County 1,041,125,000 0.973% 10,130,146 Santa Clara Valley Water District Benefit Assessment District 38,900,000 0.973% 378,497 El Camino Hospital District 105,480,000 0.008% 8,438 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT 113,533,963$
OVERLAPPING GENERAL FUND DEBT:

Santa Clara County General Fund Obligations 1,120,404,570$ 0.973% 10,901,536$ Santa Clara County Pension Obligations 329,741,844 0.973% 3,208,388 Santa Clara County Board of Education Certificates of Participation 935,000 0.973% 9,098 West Valley-Mission Community College District General Fund Obligations 8,160,000 3.387% 276,379 Santa Clara Unified School District Certificates of Participation 11,538,000 7.385% 852,081 City of Santa Clara General Fund Obligations 10,085,000 10.581% 1,067,094 Santa Clara County Vector Control District Certificates of Participation 1,230,000 0.973% 11,968 TOTAL OVERLAPPING GENERAL FUND DEBT 16,326,544$
Less: Santa Clara County supported obligations (102,362) COMBINED TOTAL DIRECT AND OVERLAPPING DEBT 129,860,507$ (2)
TOTAL NET DIRECT AND OVERLAPPING BONDED DEBT 1 29,758,145$ (1) Percentage of overlapping agency's assessed valuation located within boundaries of the project area (2) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease obligations Ratios to 2022-23 Assessed Valuation :

Combined Total Direct and Overlapping Debt 2.16%
Net Combined Total Direct and Overlapping Debt 2.15%

SUCCESSOR AGENCY OF THE CITY OF SANTA CLARA

BAYSHORE NORTH PROJECT AREA

COMPUTATION OF DIRECT AND OVERLAPPING BONDED DEBT
June 30, 2023

4. C
omputation of Direct and Overlapping Bonded Debt
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FOR THE YEAR ENDED JUNE 30, 2023

WITH COMPARATIVE TOTALS
AS OF JUNE 30, 2022

CITY OF SANTA CLARA, CALIFORNIA
1 500 WARBURTON AVENUE
SANTA CLARA, CA 95050-3796

CITY OF SANTA CLARA

ELECTRIC UTILITY ENTERPRISE FUND
(

SILICON VALLEY POWER)

FINANCIAL STATEMENTS

DRAFT

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CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

TABLE OF CONTENTS

Page
INDEPENDENT AUDITOR'S REPORT ................................................................................... 1 Management’s Discussion and Analysis ..................................................................................... 5 Statements of Net Position .................................................................................................... 12 Statements of Revenue, Expenses and Changes in Net Position .......................................... 14 Statements of Cash Flows ..................................................................................................... 15 Required Supplementary Information
Schedule of Proportionate Share of the Net Pension Liability .............................................. 74 Schedule of Contributions (Pension Plan) ............................................................................ 76 Schedule of Proportionate Share of the Net OPEB Liability and Related Ratios ................. 78 Schedule of Proportionate Share of the Contributions (OPEB Plan) .................................... 80

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INDEPENDENT AUDITOR’S REPORT
To the Honorable Members of the City Council
City of Santa Clara, California
Report on the Audit of the Financial Statements
Opinion
We have audited the accompanying financial statements of the City of Santa Clara Electrical Utility Enterprise Fund (Silicon Valley Power) of the City of Santa Clara, California, as of and for the year ended June 30, 2023, and the related notes to the financial statements, which collectively comprise Silicon Valley Power’s basic financial statements as listed in the Table of Contents. We did not audit the financial statements of Northern California Power Agency (NCPA), Transmission Agency of Northern California (TANC), M-S-R Energy Authority (MSR EA) and M-S-R Public Power Agency (MSR PPA) as of and for the year ended June 30, 2022, related to the calculation of the Investments in Joint Ventures. At June 30, 2023, the Investment in these Joint Ventures collectively represents 4.9%, 6.1% and 1.2%, respectively, of total assets, net position and revenues of Silicon Valley Power. The financial statements of the NCPA, TANC, MSR EA and MSR PPA were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the calculation of the Investments in Joint Ventures, is based solely on the reports of the other auditors.

In our opinion, based on our audit and the reports of the other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of Silicon Valley Power as of June 30, 2023, and the changes in financial position and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Silicon Valley Power, and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

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

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Silicon Valley Power’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. 
DRAFT
Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with generally accepted auditing standards, we:
x Exercise professional judgment and maintain professional skepticism throughout the audit. x Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. x 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 Silicon Valley Power’s internal control. Accordingly, no such opinion is expressed. x Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
x Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Silicon Valley Power’s ability to continue as a going concern for a reasonable period of time.

We a re 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.

Report on Summarized Comparative Information
We have previously audited Silicon Valley Power’s June 30, 2022 financial statements, and we expressed an unmodified audit opinion on those audited financial statements in our report dated November 30, 2022. In our opinion the summarized comparative information presented herein as of and for the year ended June 30, 2022 is consistent, in all material respects, with the audited financial statements from which it has been derived.

Emphasis of Matter
As discussed in Note 1, the financial statements present only Silicon Valley Power and do not purport to, and do not present fairly the financial position of the City as of June 30, 2023, the changes in its financial position, or, where applicable, its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter. 
DRAFT
Changes in Accounting Principles
Management adopted the provisions of Governmental Accounting Standards Board Statement No. 96, Public- Private and Public-Public Partnerships and Availability Payment Arrangements , which became effective during the year ended June 30, 2023. As a result, the balances of the SBITA payable and intangible right-to- use assets were $1,437,230 as of July 1, 2022. The Silicon Valley Power restated and increased the balances in that amount, and the net effect on the beginning net position and fund balance was zero. See the SBITA disclosure in Note 4 and 5.

The emphasis of this matter does not constitute a modification to our opinions.

Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis and other required supplementary information as listed in the Table of Contents be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 15, 2023, on our consideration of the City of Santa Clara’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters.

The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City of Santa Clara’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City of Santa Clara’s internal control over financial reporting and compliance.

Pleasant Hill, California
November 15, 2023

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5 Management’s Discussion and Analysis

MANAGEMENT’S DISCUSSION AND ANALYSIS
The Management's Discussion and Analysis (MD&A) of Silicon Valley Power (SVP) offers a comprehensive overview of SVP's financial activities during the fiscal years concluding on June 30, 2023 and 2022. The purpose of this MD&A is to provide a holistic assessment of SVP's financial performance. To gain a deeper insight into SVP's financial performance, readers are encouraged to examine this MD&A alongside the Basic Financial Statements and their accompanying notes. This combined approach will enhance their comprehension of SVP's financial performance.

SVP, a distinct enterprise fund under the jurisdiction of the City of Santa Clara (City), was created to manage and report on the City's electric power operations. SVP holds ownership of power generation facilities, maintains investments in joint ventures engaged in electricity production, and actively participates in power trading on the open market. These activities are undertaken with the primary objective of ensuring that SVP's retail customers, including the residents, institutions, and businesses within the City, have access to a dependable source of electric power at affordable rates.

The operations of SVP have been significantly influenced by the deregulation of the electric power industry in California, a topic elaborated upon in Note 9 within the financial statements.

FINANCIAL HIGHLIGHTS
Key financial highlights for the fiscal year ended June 30, 2023 are summarized as follows:
 The total assets and deferred outflows of resources surpassed the liabilities and deferred inflows of resources by $1,071.3 million, representing a notable increase of $100.5 million or 10.4% compared to the previous fiscal year's position of $970.8 million. This growth is primarily attributed to a $32.2 million expansion in the net investment of capital assets and a $68.2 million increase in unrestricted net position.  Operating revenues exhibited a robust increase of $120.1 million or 21.2%, climbing from $567.0 million to $687.1 million. This growth can be chiefly attributed to heightened consumption, the implementation of an 8% rate hike in January 2023, and the recognition of gains in wholesale future trading.
 Operating expenses surged by $104.7 million or 19.0%, ascending from $550.4 million to $655.1 million. This uptick is primarily the result of higher costs associated with purchased resources.
 SVP’s total outstanding long-term debt saw a reduction of $14.4 million, declining from $142.8 million to $128.4 million during the current fiscal year.

DRAFT

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)
6 OVERVIEW OF SVP’S BASIC FINANCIAL STATEMENTS
This annual report comprises a series of financial statements and their accompanying notes, organized to provide readers with a comprehensive understanding of SVP’s financial position.

The Basic Financial Statements consist of two key components:

1. Management’s Discussion and Analysis (this part),

2. The Basic Financial Statements, in conjunction with the Notes to these Basic Financial Statements.

The Basic Financial Statements offer insights into both the short-term and long-term financial aspects of SVP.

These statements include:
 Statements of Net Position: These statements present a comprehensive overview of SVP's financial position, encompassing all long-term liabilities on a full accrual basis.  Statements of Revenues, Expenses, and Changes in Net Position: These statements provide detailed information on all of SVP's revenues and expenses, also on a full accrual basis, with a focus on measuring the net revenues and expenses of the program.  Statements of Cash Flows: These statements offer information about cash activities during the fiscal year.

FISCAL YEAR 2022-23 FINANCIAL HIGHLIGHTS
Below is a summary of financial information extracted from the Statements of Net Position (Table1) and the Statements of Revenues, Expenses, and Changes in Net Position (Table 2).

DRAFT

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)
7 Description 2023 2022 *
Amount % 2021 *
Pooled cash and investments 461.1 $ 417.6 $ 43.5 $ 10.4% 434.9 $ Other assets 238.1 263.4 (25.3) -9.6% 179.5 Capital assets 655.8 635.3 20.5 3.2% 601.7 Total Assets 1,355.0 1,316.3 38.7 2.9% 1,216.1 Deferred outflows on derivative instruments 0.8 0.2 0.6 NA - Deferred outflows on refunding 5.3 6.2 (0.9) -14.5% 7.1

26.8 14.2 12.6 88.7% 15.4 Total Deferred Outflows of Resources 32.9 20.6 12.3 59.7% 22.5 Long-term Debt Outstanding 128.4 142.8 (14.4) -10.1% 156.5 Right-to-use liabilities 4.4 2.3 2.1 91.3% - Net OPEB liability 7.3 13.1 (5.8) -44.3% 11.9 Net pension liabilities 105.8 73.5 32.3 43.9% 98.4 Other liabilities 42.2 68.8 (26.6) -38.7% 39.6 Total Liabilities 288.1 300.5 (12.4) -4.1% 306.4 Deferred inflows on derivative instruments 23.4 42.2 (18.8) -44.5% 13.0 Deferred inflows on refunding 1.3 1.5 (0.2) -13.3% 1.8 Deferred inflows on lease revenue 2.3 2.6 (0.3) NA - Deferred inflows on pension related items 0.8 18.4 (17.6) -95.7% 0.2 Deferred inflows on OPEB related items 0.7 0.9 (0.2) -22.2% 1.8 Total Deferred Inflows of Resources 28.5 65.6 (37.1) -56.6% 16.8 Net Position:

Net investment in capital assets 527.1 494.9 32.2 6.5% 463.7 Restricted for contractual obligation 6.3 6.2 0.1 1.6% 6.8 Unrestricted 537.9 469.7 68.2 14.5% 444.9 Total Net Position 1,071.3$ 970.8$ 100.5$ 10.4% 915.4$ * Net Investment in Capital Assets were restated to exclude lease receivables and re-categorize it to unrestricted net position.

Deferred outflows on pension and OPEB
related items
Table 1
Net Position
(in millions)
Increase (Decrease)
June 30, 2023, 2022, and 2021

DRAFT

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)
8 Description 2023 2022 Amount % 2021
Revenues:

Retail 556.2 $ 497.9 $ 58.3 $ 11.7% 453.3 $ Wholesale 85.0 36.0 49.0 136.1% 22.3 Interest Revenue 8.4 6.1 2.3 37.7% 6.8 Net increase (decrease) in fair value of investments (2.8) (21.0) 18.2 86.7% (4.8) Rents and royalties 3.8 3.9 (0.1) -2.6% 3.8 Renewable energy credits 3.9 2.0 1.9 95.0% 1.9 Mandated program receipts 15.9 14.2 1.7 12.0% 13.0 Other 95.0 72.0 23.0 31.9% 32.2 - Total Revenues 765.4 611.1 154.3 25.2% 528.5 Expenses:

Retail 631.0 526.5 104.5 19.8% 432.3 Wholesale 19.4 18.3 1.1 6.0% 12.3 Interest on long term debt and swap termination
payment 2.7 3.1 (0.4) -12.9% 3.8 Mandated program disbursement 4.5 5.5 (1.0) -18.2% 5.8 Other 3.8 - 3.8 100.0% - Total Expenses 661.4 553.4 108.0 19.5% 454.2 Increase (decrease) in net position before transfers 104.0 57.7 46.3 80.2% 74.3 Contribution - - - - 1.9 Transfers in (out) (3.5) (2.3) (1.2) -52.2% (1.7) Increase (decrease) in net position 100.5 55.4 45.1 81.4% 74.5 Net Position - July 1 970.8 915.4 55.4 6.1% 840.9 Net Position - June 30 1,071.3$ 970.8$ 100.5$ 10.4% 915.4$ Table 2
Revenues, Expenses, and Changes in Net Position
(in millions)
Increase (Decrease)
For the years ended June 30, 2023, 2022 and 2021

In fiscal year 2022-23, SVP's retail operating revenues reached $556.2 million, showing substantial growth from $497.9 million in fiscal year 2021-22 and $453.3 million in fiscal year 2020-21. These figures represent significant increases of approximately 11.7% compared to the preceding fiscal year (2021-22) and 9.8% compared to the fiscal year before that (2020-21). The primary driver behind the growth in fiscal year 2022-23 was the implementation of an 8% rate increase effective as of January 1, 2023, coupled with heightened consumption levels.

In fiscal year 2022-23, SVP's retail operating expenses amounted to $631.0 million, representing a significant uptick from $526.5 million in fiscal year 2021-22 and $432.3 million in fiscal year DRAFT

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)
9 2020-21. These numbers indicate a notable increase of $104.5 million or 19.8% compared to the preceding fiscal year (2021-22) and $94.2 million or 21.8% compared to the fiscal year before that (2020-21). The higher retail operating expenses for fiscal year 2022-23 were primarily driven by the need to make additional market purchases to meet the rising demand for power.

In fiscal year 2022-23, revenues generated from wholesale resources sales, which encompass both gas and power, reached $85.0 million. This figure represents a substantial increase compared to the $36.0 million recorded in fiscal year 2021-22 and the $22.3 million reported in fiscal year 2020-21. The increase is mainly attribute to a $60 million gain recognized in the wholesale resource trading activities in fiscal year 2022-23. Simultaneously, the cost of purchasing wholesale resources for SVP was $19.4 million in fiscal year 2022-23, $18.3 million in fiscal year 2021-22, and $12.3 million in fiscal year 2020-21. The increase in wholesale resource sales in fiscal year 2022-23 can be attributed to the recognition of gains in wholesale future trading. However, the increase in wholesale power purchases during this fiscal year was primarily due to the elevated prices prevailing in the resource market.

Interest income for fiscal year 2022-23 amounted to $8.4 million, an increase from the $6.1 million reported in fiscal year 2021-22 and the $6.8 million recorded in fiscal year 2020-21. This increase in the most recent fiscal year can be primarily attributed to the higher interest rate environment. Conversely, interest expense for fiscal year 2022-23 was $2.7 million, which is a decrease from the $3.1 million in fiscal year 2021-22 and the $3.8 million in fiscal year 2020-21.

For more detailed information regarding interest income and expense, please refer to Note 5 in the financial statements.

As of June 30, 2023, SVP's net position stood at $1,071.3 million, reflecting a $100.5 million increase from the preceding fiscal year. Within this total, there was a $32.2 million increase in the net investment in capital assets, a $0.1 million increase in the amount restricted for contractual obligations, and a $68.2 million increase in unrestricted net position.

CAPITAL ASSETS
As of the end of fiscal year 2022-23, SVP had invested $655.8 million in capital assets, net of depreciation. Most of this investment was allocated to power generation facilities, with the remaining portion distributed across transmission and distribution assets, right-to-use buildings, and subscriptions for information technology arrangements.

As of June 30, 2023, SVP had several projects that were either completed or in progress. In the fiscal year 2022-23, the Capital Improvement Projects Budget included appropriations for significant investments in substation improvements for the upcoming years.

For more comprehensive information regarding SVP's capital assets, please refer to Note 4 in the financial statements.

DRAFT

MANAGEMENT’S DISCUSSION AND ANALYSIS (continued)
10 DEBT ADMINISTRATION
SVP's debt portfolio and its individual components are comprehensively outlined in Note 5 within the financial statements. As of June 30, 2023, SVP's outstanding debt consists of one issue of Revenue Bonds and three issues of Subordinate Revenue Bonds, amounting to a total of $128.4 million. These bonds are backed by the net electric revenues generated by SVP and have maturity dates spanning from fiscal years 2025 through 2033.

ECONOMIC OUTLOOK AND MAJOR INITIATIVES
For detailed information regarding the economic outlook and major initiatives of the City, as well as what is planned for the upcoming year, please refer to the Letter of Transmittal Section of the City's Annual Comprehensive Financial Report for the fiscal year concluding on June 30, 2023. This section provides an in-depth analysis and insight into the City's economic prospects and its key initiatives moving forward.

CONTACTING SVP’S FINANCIAL MANAGEMENT
These Basic Financial Statements are intended to provide citizens, taxpayers, investors, and creditors with a general overview of SVP’s finances. Questions about these Basic Financial Statements should be directed to the City of Santa Clara Finance Department, 1500 Warburton Avenue, Santa Clara, CA 95050-3796.

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DRAFT

See accompanying notes to financial statements

12 ASSETS 2023 2022
Current Assets:

Pooled cash and investments (Note 3) 461,055,857$ 417,583,298$ Investments with fiscal agent (Note 3) 16,197,916 15,196,469 Leases Receivable (Note 2R) 249,167 239,156 Receivables (net of allowances)
Accounts 91,998,401 98,415,474
Interest 1,768,781 1,614,768
Derivative instrument (Note 5G) 8,294,280 15,462,094 Due from the City of Santa Clara (Note 2E) 3,209,849 2,686,894 Inventory of materials and supplies (Note 2F) 15,827,132 13,804,838 Total Current Assets 598,601,383 565,002,991
Noncurrent Assets:

Capital assets (Note 4)
Land 14,371,743 14,371,743
Construction in progress 71,262,465 63,161,131 Buildings, improvements and infrastructure 1,101,647,613 1,065,938,843 Equipment 10,297,966 9,941,798
Right-to-use leased assets 2,916,623 2,916,623 Right-to-use SBITA 3,108,024 -
Accumulated depreciation (547,761,849) (520,990,136) Total Capital Assets (Net of Accumulated Depreciation) 655,842,585 635,340,002 Other Noncurrent Assets:

Restricted investments (Note 3) 6,324,045 6,146,358 Derivative instrument (Note 5G) 15,163,920 26,724,615 Investments in joint ventures (Note 6) 65,844,941 57,312,242 Investments with fiscal agent (Note 3) - 3,906,331 Deposits (Note 3) 11,127,179 19,518,954
Leases receivable (Note 2R) 2,112,910 2,365,415 Total Other Noncurrent Assets 100,572,995 115,973,915 Total Noncurrent Assets 756,415,580 751,313,917 Total Assets 1,355,016,963 1,316,316,908

DEFERRED OUTFLOWS OF RESOURCES
Accumulated decrease in fair value of hedging
instruments (Note 5G) 783,790 164,564
Deferred outflow on refunding of debt 5,333,697 6,192,411 Deferred outflows on OPEB related items (Note 8) 616,793 1,217,486 Deferred outflows on pension related items (Note 7) 26,223,040 13,021,377 Total Deferred Outflows of Resources 32,957,320 20,595,838

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

STATEMENTS OF NET POSITION
with Comparative Totals as of June 30, 2022
June 30, 2023

Statements of Net Position

DRAFT

See accompanying notes to financial statements

13 LIABILITIES 2023 2022
Current Liabilities:

Accrued liabilities 33,601,331 60,306,912
Interest payable 1,389,163 1,618,146
Accrued compensated absences 566,004 774,797 Current portion of long-term debt (Note 5) 15,140,000 13,580,000 Current portion derivative financial instruments (Note 5G) 783,790 164,564 Current portion of leases obligation (Note 5J) 681,619 654,044 Current portion of SBITA (Note 5K) 392,381 - Total Current Liabilities 52,554,288 77,098,463 Noncurrent Liabilities:

Long-term portion accrued compensated absences 5,888,451 5,995,836 Net pension liability (Note 7) 105,823,291 73,533,480 Net OPEB liability (Note 8) 7,288,705 13,057,945 Long-term leases obligation (Note 5J) 951,003 1,632,622 Long-term SBITA (Note 5K) 2,325,628 -
Long-term debt (Note 5) 113,302,932 129,196,165 Total Noncurrent Liabilities 235,580,010 223,416,048 Total Liabilities 288,134,298 300,514,511

DEFERRED INFLOWS OF RESOURCES
Accumulated increase in fair value of hedging instruments (Note 5G) 23,458,200 42,186,709
Deferred inflow on refunding of debt 1,280,797 1,537,064 Deferred inflow - leases related (Note 2R) 2,282,329 2,571,068 Deferred inflows pension related items (Note 7) 821,311 18,343,263 Deferred inflows OPEB related items (Note 8) 702,262 929,326 Total Deferred Inflows of Resources 28,544,899 65,567,430

NET POSITION
Net investment in capital assets, restated (Note 12) 527,101,920 494,932,518 Restricted 6,324,045 6,146,358
Unrestricted restated (Note 12) 537,869,121 469,751,929 Total Net Position 1,071,295,086 970,830,805$

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
with Comparative Totals as of June 30, 2022
(SILICON VALLEY POWER)

STATEMENTS OF NET POSITION
June 30, 2023

DRAFT

See accompanying notes to financial statements

14 2023 2022
Operating Revenues:

Residential sales 38,021,218$ 33,275,452$
Commercial sales 17,991,071 16,394,519
Industrial sales 500,189,088 448,256,676
Renewable energy credits 3,916,420 2,024,100
Wholesale resource sales (Note 9) 85,035,267 36,048,240 Mandated program receipts 15,926,482 14,223,250 Other operating revenues 26,084,529 16,802,355
Total Operating Revenues 687,164,075 567,024,592 Operating Expenses:

Operations 92,744,945 91,250,838
Maintenance 31,152,357 24,972,897
Purchased resource 480,208,227 386,053,317
Wholesale resource purchases (Note 9) 19,474,055 18,370,965 Mandated program disbursement 4,541,142 5,533,938 Amortization 1,051,552 673,067
Depreciation 25,934,672 23,547,718
Total Operating Expenses 655,106,950 550,402,740 Operating Income 32,057,125 16,621,852
Nonoperating Revenues (Expenses):

Interest revenue 8,392,327 6,065,834
Net changes in the fair value of investments (2,841,392) (21,010,694) Interest expense (2,659,346) (3,117,699)
Equity in income (losses) of joint ventures 8,532,699 14,639,161 Rents and royalties 3,845,365 3,898,215
Other revenues 60,399,404 40,626,292
Other expenses (3,763,379) -
Total Nonoperating Revenues, net 71,905,678 41,101,109 Income Before Transfers 103,962,803 57,722,961
Transfers from the City of Santa Clara 208,290 330,000 Transfers to the City of Santa Clara (3,706,812) (2,637,123) Net Income 100,464,281 55,415,838
Net Position, Beginning of Year 970,830,805 915,414,967 Net Position, End of Year 1,071,295,086$ 970,830,805$

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION For the Year Ended June 30, 2023
with Comparative Totals for the Year Ended June 30, 2022

Statements of Revenue, Expenses and Changes in Net Position

DRAFT

See accompanying notes to financial statements

15 2023 2022

CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers $ 587,190,157 $ 494,683,368 Payments to suppliers (583,494,659) (438,473,513) Payments to employees for salaries and benefits (52,546,917) (45,739,420) Rents and royalties received 3,774,218 3,823,785 Resource energy trading escrow 8,391,775 (13,996,290) Wholesale resource sales 85,035,267 36,048,240 Wholesale resource purchases (19,474,055) (18,370,965) Renewable energy credits 3,916,420 2,024,100 Other receipts 69,427,502 48,415,239
Net Cash provided by Operating Activities 102,219,708 68,414,544

CASH FLOWS FROM NONCAPITAL FINANCING

ACTIVITIES
Increase (decrease) in due from other funds (522,955) (83,679) Changes in restricted investments 177,687 (662,638) Transfers in 208,290 330,000
Transfers out (3,706,812) (2,637,123)
Net Cash (used in) Noncapital Financing Activities (3,843,790) (3,053,440)

CASH FLOWS FROM CAPITAL AND RELATED

FINANCING ACTIVITIES
Acquisition and construction of capital assets, net (45,362,719) (50,687,039) Principal payments on debt (14,573,440) (13,632,958) Interest paid on debt (3,089,729) (3,325,270) Net Cash (used in) Capital and Related Financing Activities (63,025,888) (67,645,267)

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

STATEMENTS OF CASH FLOWS
with Comparative Totals for the Year Ended June 30, 2022 For the Year Ended June 30, 2023

Statements of Cash Flows

DRAFT

See accompanying notes to financial statements

16 2023 2022

CASH FLOWS FROM INVESTING ACTIVITIES
Interest and dividends 8,236,726 5,944,739
Net increase (decrease) in the fair value of investments (2,841,392) (21,010,694) Payments made by fiscal agent 16,555,791 16,294,079 Deposits made with fiscal agent (13,650,909) (16,900,863) Net Cash (used in) Investing Activities 8,300,216 (15,672,739) Net Increase (Decrease) in Cash and Cash Equivalents 43,650,246 (17,956,902) Cash and cash equivalent at Beginning of Period 423,729,656 441,686,558 Cash and cash equivalent at End of Period 467,379,902$ 423,729,656$ Reconciliation of Operating Gain (Loss) to Net Cash
Provided (Used) by Operating activities:

Operating income 32,057,125 16,621,852
Adjustments to reconcile operating income to net cash
provided (used) by operating activities:
(Decrease) Increase in due to OPEB system (5,395,611) (438,425) (Decrease) Increase in due to retirement system 1,566,196 (4,738,491) (Decrease) Increase in due to lease and SBITA Obligation 1,006,894 616,466 Depreciation 25,934,672 23,547,718
Change in assets and liabilities:

Receivable, net 6,417,073 (21,670,483)
Inventory (2,022,294) (1,668,043)
Accrued liabilities (25,723,647) 24,350,379
Restricted cash (177,687) 662,638
Compensated absences (316,178) 602,716
Other receipts 64,244,769 44,524,507
Other expenses (3,763,379) -
Resource trading escrow 8,391,775 (13,996,290) Net Cash Provided by Operating Activities 102,219,708$ 68,414,544$ NONCASH TRANSACTIONS:

Joint Ventures
Nonoperating Income (Expense) 8,532,699$ 14,639,161$ (SILICON VALLEY POWER)

STATEMENTS OF CASH FLOWS
with Comparative Totals for the Year Ended June 30, 2022

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
For the Year Ended June 30, 2023

DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022

17 NOTE 1 – DEFINITION OF THE REPORTING ENTITY
The City of Santa Clara (the City), California’s Electric Utility Enterprise Fund, which began operating as Silicon Valley Power (SVP) in 1997, commenced operations over 100 years ago in 1896. Originally, SVP constructed a lighting plant consisting of forty-six 2000 candlepower direct current lamps and a dynamo (a type of electric generator) which entered into service in October 1896. In late 1903, SVP invested $5,000 to convert the system to alternating current and abandoned the small generating plant. Wholesale power was purchased from United Gas and Electric Company of San Jose.

Between 1903 and 1965, SVP purchased all of its electric power requirements from investor- owned utilities. In 1965, it received an allocation of power from the Federal Central Valley Project and began to diversify its resources. SVP became a charter member of the Northern California Power Agency (NCPA) in June 1968. Throughout the 1970’s, SVP and NCPA worked on behalf of all municipal electric utilities in Northern California to gain access to wholesale transmission markets and to jointly develop cost-effective electric generation resources.

In 1980, SVP became a generating utility for the first time in 73 years with the start of operations of the 6-Megawatt Cogen No. 1 power plant. In 1983, the 110 Megawatt NCPA Geothermal Project, the first municipally owned and operated geothermal power plant in the United States, entered service with SVP as lead partner holding a 55% participation share. Subsequently, SVP participated in further jointly owned power generation projects including hydroelectric, natural gas and coal fired generation. In 2005, SVP placed the 147 Megawatt Don Von Raesfeld Power Plant into service.

Today, SVP has grown to approximately 8,431 streetlights and serves approximately 59,271 electric customers. As SVP looks to the future, it continues to be responsive to the electric market development by increasing its renewable power resources, reducing its greenhouse gas (GHG) footprint, and working with its customers to enhance the value they receive from municipal ownership of their electric utility.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Presentation
SVP’s Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) as applied to government units. The Government Accounting Standards Board (GASB) is the acknowledged standard setting body for establishing accounting and financial reporting standards followed by governmental entities in the United States of America. The electric enterprise fund is included in the City’s Annual DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 2- SUMMARY OF SIGNIIFICANT ACCOUNTING POLICIES (continued) 18 Comprehensive Financial Report, and therefore, these financial statements do not purport to represent the financial position and changes in financial position of the City.

B. Basis of Accounting
SVP reports its activities as a proprietary fund type (Enterprise Fund) which is maintained on the accrual basis of accounting wherein revenues are recognized in the accounting period in which they are earned regardless of whether they are received, and expenses are recognized in the period in which the related liabilities are incurred. Certain indirect costs are included in program expenses reported for individual functions and activities.

During the year ended June 30, 2022, SVP implemented the following GASB Statement:

The GASB issued Statement No. 87 "Leases.” The objective of this Statement is to better meet the information needs of financial statement users by improving accounting and financial reporting for leases by governments. This Statement requires recognition of certain lease assets and liabilities for leases 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 the 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. To be consistent with the Citywide implementation, the provisions of this Statement were implemented during fiscal year 2022.

As a result, the beginning the balances of leases receivable and deferred inflows of resources related to leases were $2,832,684 as of July 1, 2021. The balances of the lease payable and intangible right-to-use asset were $2,916,623 as of July 1, 2021. SVP restated and increased the balances in that amount and the net effect on beginning net position was zero.

The GASB issued Statement No. 89 "Accounting for Interest Cost Incurred Before the End of a Construction Period.” The objectives of this Statement are to enhance the relevance and comparability of information about capital assets and the cost of borrowing for a reporting period and to simplify accounting for certain interest costs. This Statement requires that interest cost incurred before the end of a construction period be recognized as an expense in the period in which the cost is incurred for financial statements prepared using the economic resources measurement focus. As a result, interest cost incurred before the end of a construction period will not be included in the historical cost of a capital asset reported in the financial statements. The provisions of this Statement were implemented during fiscal year 2022. The implementation had no effect on the financial statements.

DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 2- SUMMARY OF SIGNIIFICANT ACCOUNTING POLICIES (continued) 19 The GASB issued Statement No. 93 “Replacement of Interbank Offered Rates.” The primary objective of this Statement is to address accounting and financial reporting implications that result from the replacement of an interbank offered rate (IBOR). The provisions of this Statement were implemented during fiscal year 2022. The implementation had no effect on the financial statements.

The GASB issued Statement No. 97 “Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans-An Amendment of GASB Statements No.14 and No. 84, and a Supersession of GASB Statement No. 32.” The objectives of this statement are to (1) increase consistency and comparability related to reporting of fiduciary component units in circumstances in which a potential component unit does not have a governing board and the primary government performs the duties that a governing board typically would perform; (2) mitigate costs associated with the reporting of certain defined contribution pension plans, defined contribution other postemployment benefit (OPEB) plans, and employee benefit plans other than pension plans or OPEB plans (other employee benefit plans) as fiduciary component units in fiduciary fund financial statements; and (3) enhance the relevance, consistency, and comparability of the accounting and financial reporting for Internal Revenue Code (IRC) Section 457 deferred compensation plans (Section 457 plans) that meet the definition of a pension plan and for benefits provided through those plans. This statement becomes effective for periods beginning after June 15, 2021. The implementation had no effect on the financial statements.

The GASB issued Statement No. 99 “Omnibus 2022.” The primary objective of this Statement is to enhance comparability in reporting and improve the consistency of authoritative literature by addressing practice issues identified during implementation and application of certain GASB statements. The provisions of this Statement related to LIBOR, SNAP, and Leases, were implemented during fiscal year 2022.

During the year ended June 30, 2023, SVP implemented the following GASB Statement:

The GASB issued Statement No. 91 “Conduit Debt Obligation.” The objective of this statement is to provide a single method of reporting conduit debt obligations by issuers and eliminate diversity in practices. This statement becomes effective for periods beginning after December 15, 2021. The implementation had no effect on the financial statements.

The GASB issued Statement No. 92 “Omnibus 2020.” The objective of this statement is to enhance comparability in reporting and improve the consistency of authoritative literature by addressing practice issues identified during implantation of certain GASB statements. This statement becomes effective upon issuance for requirements related to GASB 87. For GASB 73, GASB 74, and GASB 84 as well as measurement of liabilities associated with asset retirement DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 2- SUMMARY OF SIGNIIFICANT ACCOUNTING POLICIES (continued) 20 obligations, the requirements become effective for reporting periods beginning after June 15, 2021. The implementation had no effect on the financial statements.

The GASB issued Statement No. 94 “Public-Private and Public-Public Partnerships and Availability Payment Arrangements.” The objective of this statement is to address issues related to public-private and public-public partnership arrangements and to provide guidance for accounting and financial reporting for availability payment arrangements. This statement becomes effective for periods beginning after June 15, 2022. The implementation had no effect on the financial statements.

The GASB issued Statement No. 96 “Subscription-Based Information Technology Arrangements.” The objective of this statement is to provide guidance on the accounting and financial reporting for subscription-based information technology arrangements (SBITAs) for government end users. This statement becomes effective for periods beginning after June 15, 2022. The provisions of this State were implemented during the fiscal year 2022-23.

As a result, the balances of the SBITA payable and intangible right-to-use SBITA asset were $1,437,230 as of July 1, 2022. SVP restated and increased the balances in that amount, and the net effect on beginning net position and fund balance was zero. See the disclosure in Note 5.

SVP is analyzing the effects of the following pronouncements and plans to adopt them by the effective dates:

The GASB issued Statement No. 100 “Accounting Changes and Errors Corrections.” The objective of this statement is to establish accounting and financial reporting requirements for (a) accounting changes and (b) the correction of an error in previously issued financial statements.

This statement becomes effective for periods beginning after June 15, 2023. SVP is currently evaluating the impact on the financial statements.

The GASB issued Statement No. 101 “Compensated Absences.” The objective of this statement is to amend the existing requirements for the recognition of compensated absences liability. This statement becomes effective for periods beginning after December 15, 2023. SVP is currently evaluating the impact on the financial statements.

C. Measurement Focus
Enterprise funds are accounted for on a cost of services or economic resources measurement focus, which means that all liabilities associated with the activity are included on their Statement of Net Position. Enterprise fund type operating statements present increases (revenues) and decreases (expenses) in total net position. Reported net position is segregated into three categories – net investment in capital assets, restricted, and unrestricted.

DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 2- SUMMARY OF SIGNIIFICANT ACCOUNTING POLICIES (continued) 21 D. Cash and Investments
SVP’s cash and investments pool is maintained by the City except for fiscal agent cash and investments.

While maintaining safety and liquidity, the City maximizes investment return by pooling its available cash for investment purposes. Unless there are specific legal or contractual requirements to do otherwise, interest earnings are apportioned among funds according to average monthly cash and investment balances. It is generally the City's intention to hold investments until maturity. City investments are stated at fair value (see Note 3).

Cash and cash equivalents for purposes of the statement of cash flows include pooled cash and investments and cash designated for construction. Transactions with City-wide cash management pools are similar to those with external investment pools; therefore, since pooled cash and investments have the same characteristics as demand deposits in that the City's individual funds and component units may withdraw additional monies at any time without prior notice or penalty, pooled cash and investments are considered essentially demand deposit accounts.

Cash and investments with fiscal agent, a bond reserve investment pool, and amounts classified as deposits are not considered cash and cash equivalents.

E. Due from City of Santa Clara
During the course of operations, transactions occur between SVP and the City for goods provided or services rendered. The related receivables, net, are classified as “Due from the City of Santa Clara” on the accompanying statement of net position.

F. Inventory of Materials and Supplies
Inventory of materials and supplies is accounted for using the consumption method and is stated at average cost. Inventory consists of expendable supplies held for consumption by the electric utility.

G. Capital Assets
All capital equipment and right-to-use equipment with a value of $5,000 or more, buildings, improvements and infrastructure, right-to-use building with costs exceeding $20,000 or more, and the right-to-use SBITA with a value of $400,000 or more, with useful lives exceeding two years are capitalized. These assets are valued at historical cost or estimated historical cost if actual historical cost is not available except for intangible right -to-use assets, the measurement of which discussed in Note 2R and 2S below. Contributed capital assets are valued at their DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 2- SUMMARY OF SIGNIIFICANT ACCOUNTING POLICIES (continued) 22 estimated acquisition value on the date contributed. Depreciation is recorded on a straight-line basis over the estimated useful lives of the assets (buildings and improvements: 20 to 50 years; equipment: 3 to 25 years; and right-to-use SBITA assets: 3-25 years) and is charged as an expense against operations. Accumulated depreciation is reported on the statement of net position.

The cost of normal maintenance and repairs that do not add to the value of the asset or materially extend asset lives are not capitalized. Improvements are capitalized and depreciated over the remaining useful lives of the related capital assets.

Capital assets and the related obligations under lease/purchase agreements are capitalized and accounted for in accordance with Accounting Standards Codification (ASC) Topic 840. Interest is capitalized on construction in progress in accordance with ASC Topic 835, Capitalization of Interest Cost in Situations Involving Certain Tax-Exempt Borrowings, and Certain Gifts and Grants. Accordingly, interest capitalized is the total interest cost for the date of the borrowings net of any interest earned on temporary investments of the borrowed proceeds until the specified asset is ready for its intended use. There was no interest capitalized for the fiscal years ended June 30, 2022 or 2023.

H. Joint Ventures
SVP participates in several joint ventures in accordance with GAAP. If SVP’s equity in net losses of a joint venture exceeds its investments, use of the equity method is suspended except to the extent that SVP is obligated to provide further support or has guaranteed obligations of the joint venture.

SVP advances funds to certain of its joint ventures in the form of refundable advances, project advances, and operating and maintenance advances. Refundable advances accrue interest at rates stated in the related agreements. Operating, maintenance, and project advances are charged to operations when incurred.

Capitalized project costs are charged to operations in the event that a project is determined to be not economically feasible.

I. Compensated Absences
Amounts of vested or accumulated vacation leave and certain benefits that are not expected to be liquidated with expendable available financial resources are reported in the SVP financial statements as an expense and liability.

In accordance with GAAP, Accounting for Compensated Absences, a liability for sick leave and benefits is accrued using the vesting method. The vesting method provides that a governmental DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 2- SUMMARY OF SIGNIIFICANT ACCOUNTING POLICIES (continued) 23 entity estimate its accrued sick leave liability based on the sick leave accumulated at the statement of net position date by those employees who currently are eligible to receive termination payments as well as other employees who are expected to become eligible in the future to receive such payments. Estimated sick leave payments are recorded as an expense and liability by SVP.

J. Risk Management
SVP is covered under the City’s self-insurance programs via Internal Service Funds. There were no significant reductions in insurance coverage from the prior year by major categories of risk and the amount of settlements did not exceed insurance coverage for the past four fiscal years.

Additional information with respect to the City’s self-insurance programs can be found in the City’s Annual Comprehensive Financial Report.

K. Electric Resource Purchased
SVP purchases power from various suppliers and agencies (including joint powers agencies) for resale to its customers (see Note 10). SVP also engages in numerous resource energy transactions with the objective of reducing its overall cost of resource energy. Gross resource energy sales and resource energy purchases are recorded as operating revenue and expense, respectively (see Note 9).

L. Bond Discounts/Issuance Costs
Bond discounts are presented as a reduction of the face amount of bonds payable, whereas issuance costs are recognized in the current period.

M. Revenue Recognition
Operating revenues are recognized based on cycle billings periodically rendered to customers.

Operating revenues for services provided, but not billed at the end of the fiscal year, are recognized and accrued based on estimated consumption. Operating revenues primarily include the sales of electric power to residential, commercial, industrial, and municipal customers.

Non-operating revenues primarily represent interest income, grants, rents, and other non- recurring miscellaneous income.

N. Taxes on Income
As an agency of the City, SVP falls under the review of the Internal Revenue Code Section 115 and corresponding California Revenue and Taxation Code provisions. As such, it is not subject to federal income or state franchise taxes.

DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 2- SUMMARY OF SIGNIIFICANT ACCOUNTING POLICIES (continued) 24 O. Deferred Outflows/Inflows of Resources
In addition to assets, the statement of financial position includes a separate section for deferred outflows of resources. Deferred outflows of resources represent a consumption of net assets that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. SVP has three items that qualify for reporting in this category:
deferred outflow related to the refunding, pension and OPEB.

In addition to liabilities, the statement of financial position includes a separate section for deferred inflows of resources. Deferred inflows of resources represent an acquisition of net assets that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. In the government‐wide financial statements SVP reports deferred amounts related to derivative instruments, refunding, leases and deferred amounts related to pension and OPEB.

P. Net Position and Fund Equity
SVP may fund certain programs with a combination of restricted and unrestricted net position.

The policy is to first apply restricted net position followed by unrestricted net position if necessary.

Q. Use of Estimates
The preparation of financial statements in conformity with GAAP in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

R. Lease Agreements
A lease is defined as a contract that conveys control of the right to use another entity’s nonfinancial asset (the underlying asset) as specified in the contract for a period of time in an exchange or exchange-like transaction. Examples of nonfinancial assets include buildings, land, vehicles, and equipment.

Lessee - SVP is a lessee for noncancellable lease of buildings. SVP 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.

At the commencement of a lease, SVP 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 DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 2- SUMMARY OF SIGNIIFICANT ACCOUNTING POLICIES (continued) 25 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 include how SVP 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:
 SVP uses the interest rate charged by the lessor as the discount rate. When the interest rate charged by the lessor is not provided, SVP generally uses its estimated incremental borrowing rate as the discount rate for leases.
 The lease term includes the noncancellable period of the lease.  Lease payments included in the measurement of the lease liability are composed of fixed payments and purchase option price that SVP is reasonably certain to exercise.

SVP monitors changes in circumstances that would require a remeasurement of its lease and will remeasure the lease asset and liability if certain changes occur that are expected to significantly affect the amount of the lease liability.

Lease assets are reported with other capital assets and lease liabilities are reported with long-term debt on the statement of net position.

Lessor - SVP is a lessor for noncancellable leases of land and building. SVP recognizes a lease receivable and a deferred inflow of resources in the financial statements.

At the commencement of a lease, SVP initially measures 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 commencement date. Subsequently, the deferred inflow of resources is recognized as revenue over the life of the lease term.

Key estimates and judgments include how SVP 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:
 SVP uses its estimated incremental borrowing rate as the discount rate for leases.  The lease term includes the noncancellable period of the lease.

DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 2- SUMMARY OF SIGNIIFICANT ACCOUNTING POLICIES (continued) 26  Lease receipts included in the measurement of the lease receivable is composed of fixed payments from the lessee.

SVP monitors changes in circumstances 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. SVP has leases related to fiber and land use and the balances related to the leases receivable and deferred inflow of resources as of June 30, 2022 were $2,604,571 and $2,571,068, respectively. SVP recognized $11.894 in lease revenue and $68,494 in interest revenue during the fiscal year 2021-22 related to these leases. The leases receivable and deferred inflow of resources as of June 30, 2023 were $2,362,077 and $2,282,329 respectively. SVP recognized $284,929 in lease revenue and $63,636 in interest revenue during the fiscal year 2022-23 related to these leases.

S. Subscription-Based Information Technology Arrangements (SBITAs) Accounting A Subscription-Based Information Technology Arrangement (SBITA) is a contract that conveys control of the right to use another party’s (a SBITA vendor’s) IT software, alone or in combination with tangible capital assets (the underlying IT assets), as specified in the contract for a period of time in an exchange or exchange-like transaction.

At the commencement of a SBITA, SVP initially measures the subscription liability at the present value of payments expected to be made during the contract term. Subsequently, the subscription liability is reduced by the principal portion of payments made. The subscription asset is initially measured as the initial amount of the subscription liability, adjusted for payments made at or before the SBITA commencement date, plus certain initial direct costs.

Subsequently, the subscription asset is amortized on a straight‐line basis over shorter of the subscription term or the useful life of the underlying IT assets. SVP recognizes SBITA liabilities with an initial, individual value of $400,000 or more for all funds based on the future SBITA payments remaining at the start of the contract.

Key estimates and judgments related to SBITAs include how SVP determines (1) the discount rate it uses to discount the expected subscription payments to present value, (2) subscription term, and (3) subscription payments as follows:
 SVP uses the interest rate charged by the IT vendor as the discount rate. When the interest rate charged by the IT vendor is not provided, SVP uses its estimated incremental borrowing rate as the discount rate for subscription liabilities.  The subscription term includes the noncancellable period of the subscription.

DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 2- SUMMARY OF SIGNIIFICANT ACCOUNTING POLICIES (continued) 27  Subscription payments included in the measurement of the subscription liability are composed of fixed payments and purchase option price that SVP is reasonably certain to exercise.

SVP monitors changes in circumstances that would require a remeasurement of its subscription and will remeasure the subscription asset and liability if certain changes occur that are expected to significantly affect the amount of the subscription liability.

Subscription assets are reported with other capital assets and subscription liabilities are reported with liabilities on the statement of net position.

T. Prior Year Summarized Comparative Information
The basic financial statements include certain prior year summarized comparative information in total but not at the level of detail required for a presentation in accordance with generally accepted accounting principles. Accordingly, such information should be read in conjunction with the SVP’s financial statements for the year ended June 30, 2022, from which the summarized information was derived.

NOTE 3 – CASH AND INVESTMENTS
SVP’s cash and investments pool is maintained by the City except for fiscal agent cash and investments. A full description of the City’s cash and investment policy is in Note 7 of its Annual Financial Report.

A. Investments Authorized by the California Government Code and the City’s Investment Policy
The City’s Investment Policy and the California Government Code allow the City to invest in certain types of investments, provided the credit ratings of the issuers are acceptable to the City.

The table below also identifies certain provisions of the City’s Investment Policy and the California Government Code that address interest rate risk, credit risk, and concentration of credit risk.

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CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 3 – CASH AND INVESTMENTS (continued)
28 Minimum Maximum Maximum
Maximum Credit Percentage Investment
Authorized Investment Type Maturity Quality or Portfolio In One Issuer U.S. Treasury Obligations 7 years N/A 100% 100%
U.S. Agency Securities (1) 7 years Top three ratings
categories
80%(2) 40%
Negotiable Certificates of Deposit 5 years A/A1 30% 5%
Bankers Acceptances 180 days N/A 25% 5%
Commercial Paper 270 days A1 / P1 25% 5%(3)
California Local Agency Investment
Fund
N/A N/A None $75M Per A/C
Repurchase Agreements 60 days N/A 50% 20%
Reverse Repurchase Agreements
(requires City Council approval)
92 days N/A 20% 10%
Municipal Obligations 7 years N/A 20% 5%
Medium Term Corporate Notes 5 years Top three ratings
categories
20% 5%
Mutual Funds / Money Market Funds N/A Top rating category 20% 10% Joint Power Authority Investment Pools N/A Top rating category 100% 100% Supranational Obligations 5 years AA 20% 10%
Asset-Backed Securities 5 years AA 10% 5%
Non-Negotiable Certificates of Deposit 5 years N/A 10% 5% Mortgage-Backed Securities 12 years (4) AA 15% 5%
(2) Callable securities are limited to 30% of the portfolio. (3) No more than 10% of the outstanding commercial paper of any single issuer. time of purchase for Mortgage-Backed Securities (MBS). Maximum Final Maturity for MBS's = 30 years with balloon payments.
(1) Securities issued by the Federal Farm Credit Bank (FFCB), the Federal Home Loan Bank (FHLB), the Federal National Mortgage Association (FNMA), the Federal Home Loan Mortgage Corporation (FHLMC), local agencies and other U.S. government sponsored enterprises. (4) Maximum Weighted Average Life with Current Public Securities Association Assumptions =12 years at

B. Investments Authorized by Debt Agreements
The City invests bond proceeds restricted for construction in instruments that are stated in the Investment Policy and in various return-guaranteed investment agreements. These investments are invested in accordance with bond indentures and the maturities of each investment should not DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 3 – CASH AND INVESTMENTS (continued)
29 exceed the final maturity of each bond. Bond proceed investments are reported monthly to the City Council.

SVP also maintains required amounts 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 SVP 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 agreements, or certificates of participation in accordance with the ordinance, resolution, indenture, or agreement of the local agency providing for the issuance.

C. Pension Rate Stabilization Program
In February 2017, the City Council approved a Pension Rate Stabilization Program, (PRSP) Trust administered by Public Agency Retirement Services (PARS). The PRSP is an irrevocable trust and qualifies as an Internal Revenue Section 115 trust. This trust will assist the City in mitigating the CalPERS contribution rate volatility. Investments of funds held in Pension Rate Stabilization Program (PRSP) are governed by the Investment Guideline Document for the investment account and by the agreement for administrative services with the Public Agency Retirement Services (PARS), rather than the general provisions of the California Government code or the City’s investment policy. The City elected a discretionary investment approach which allows the City to maintain oversight of the investment management, control on target yield and the portfolio’ risk tolerance. The assets in this program will eventually be used to fund Pension Plan obligations.

As part of the year-end process for fiscal year 2016-17, the City Council approved SVP to designate and make an initial deposit of $3.5 million in fiscal year 2018 towards pre-funding the City’s pension obligations. As of June 30, 2023, the balance in the pension rate stabilization program trust was $6.3 million.

D. Credit and Interest Rate Risk
Credit risk is the risk that an issuer of an investment will not fulfill its obligations to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization.

Interest rate risk is the risk that changes in market interest rate will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment is the greater the sensitivity of its fair value to changes in market interest rates to be.

DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 3 – CASH AND INVESTMENTS (continued)
30 Information about the sensitivity of the fair values of SVP’s investments to market interest rate fluctuations is provided by the following table that shows the distribution to SVP’s investment by maturity.
2023 2022
Credit Under 180 181 - 365 1 - 3 3 - 5 Fair Fair
Type of Investment Rating Days Days Years Years Value Value Cash and Investments
- City Treasury:

Cash N /A 46,773,624$ -$ -$ -$ 46,773,624$ 75,462,582$ US Treasury Notes A aa 1,959,511 29,049,852 53,909,406 90,659,754 175,578,523 152,469,273 Federal Farm Credit Bank A aa - 2,137,906 19,224,572 - 21,362,478 34,991,626 Federal Home Loan Bank A aa 4,307,869 2,124,947 2,100,729 - 8,533,545 10,624,125 Federal National Mortgage Association A aa 2,229,310 - 14,160,521 - 16,389,831 20,392,852 Federal Home Loan Mortgage Corporation A aa - - 7,885,349 - 7,885,349 11,620,950 Federal Home Loan Mortgage Corporation
Mortagage-Backed Security Aaa - - - 2,217,115 2,217,115 - Corporate Notes Aaa - - 6,229,168 - 6,229,168 6,218,423 Corporate Notes Aa - 1,772,703 10,785,485 8,513,217 21,071,405 16,936,060 Corporate Notes A 284,765 9,429,224 34,437,284 5,942,324 50,093,597 44,318,210 Supranational Notes Aaa - - 4,540,810 - 4,540,810 7,529,238 Asset-Backed Securities Aaa - - 3,265,755 860,939 4,126,694 4,707,312 Municipal Notes Aaa 622,871 - 1,074,708 - 1,697,579 1,068,661 Municipal Notes Not Rated - - - - - 599,091 Certificates of Deposit A-1 - - 3,165,831 - 3,165,831 4,637,466 Wells Fargo Money Market Funds Not Rated 88,900,304 - - - 88,900,304 420,314 State Investment Pool (LAIF) Not Rated 2,490,004 - - - 2,490,004 25,587,115 Cash and Investments
- City Treasury 147,568,258 44,514,632 160,779,618 108,193,349 461,055,857 417,583,298 Cash and Investments
- Other:

Cash (Debt Fund) N/A 6,195,375 - - - 6,195,375 6,085,210 Cash (Pension Rate Stabilization Investment) N/A 4,289 - - - 4,289 - Mutual Fund - Goldman FS
- Money Market Funds
(Debt Funds) Aaam - - - - - 8,473,195 Mutual Fund - JP Morgan
- Money Market Funds
(Debt Funds) Aaam 10,002,541 - - - 10,002,541 4,544,395 Pension Rate Stabilization
Investment
(Cash and Equivalents) Not Rated 280,435 - - - 280,435 62,426 Pension Rate Stabilization
Investment
(Mutual Fund - Equity) Not Rated 1,823,569 - - - 1,823,569 1,927,138 Pension Rate Stabilization
Investment
(Mutual Fund - Fixed Income) Not Rated 4,215,752 - - - 4,215,752 4,156,794 Collateral Obligations
(Archer Daniels Midland and
CAISO) Not Rated 11,127,179 - - - 11,127,179 19,518,954 Investments - Other 33,649,140 - - - 33,649,140 44,768,112 Total Cash and Investments 181,217,398$ 44,514,632$ 160,779,618$ 108,193,349$ 494,704,997$ 462,351,410$ Maturity

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CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 3 – CASH AND INVESTMENTS (continued)
31 The City is a voluntary participant in the Local Agency Investment Fund (LAIF). LAIF is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. LAIF’s investment portfolio mainly consists of Treasuries, loans, Federal Agency securities, and collateralized mortgage obligations. Each regular LAIF account is permitted to have up to 15 transactions per month, with a minimum transaction amount of $5,000, a maximum transaction amount of $75 million and at least 24 hours advance notice for withdrawals of $10 million or more. Bond proceeds accounts are subject to one time deposit with no cap and are set up with a monthly draw down schedule. The carrying value of LAIF approximates fair value.

Mutual funds are available for withdrawal on demand. See City’s Annual Financial Report Note 7 to the financial statements for additional detail on the fiscal year 2022-23 investment portfolio.

E. Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, the City 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 City’s cash on deposit. All of the City’s 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.

The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g. broker-dealer) to a transaction, the City will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The City’s Investment Policy limits its exposure to custodial credit risk by requiring that all security transactions entered into by the City, including collateral for repurchase agreements, be conducted on a delivery-versus-payment basis. Securities are to be held by a third party custodian.

F. Fair Value Hierarchy
SVP categorizes its fair value measurements within the fair value hierarchy established by GAAP. The hierarchy is based on the valuation input used to measure the fair value of asset.

Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; Level 3 inputs are significant unobservable inputs. See City’s Annual Financial Report Note 7 to the financial statements for more detailed information.

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CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 3 – CASH AND INVESTMENTS (continued)
32 Fair Value Measurements Using
Investments and
Derivative Instruments
Measured at Fair Value
Quoted Prices in
Active Markets for
Identical Assets
Significant Other
Observable
Inputs
6/30/2023 Level 1 Level 2 Exempt (1)
Investments by Fair Value Level
Short Term Investments
US Treasury Notes 175,578,523$ 175,578,523 $ $ - $ - Federal Farm Credit Banks 21,362,478 - 21,362,478 - Federal Home Loan Banks 8,533,545 - 8,533,545 - Federal National Mortgage Association 16,389,831 - 16,389,831 - Federal Home Loan Mortgage Corp 7,885,349 - 7,885,349 - Federal Home Loan Mortgage Corporation
Mortagage-Backed Security 2,217,115 - 2,217,115 - Corporate notes 77,394,170 - 77,394,170 - Supranational 4,540,810 - 4,540,810 - Asset-Backed Securities 4,126,694 - 4,126,694 - Municipal Bonds 1,697,579 - 1,697,579 - Certificates of Deposit 3,165,831 - 3,165,831 - Wells Fargo Money Market Fund 88,900,304 - - 88,900,304 Total Short Term Investments 411,792,229 175,578,523 147,313,402 88,900,304 Debt Securities and Other
Mutual Fund - JP Morgan
- Money Market Funds (Debt Funds) 10,002,541 - - 10,002,541 Pension Rate Stabilization Investment (Cash
and Equivalents) 280,435 280,435 - - Pension Rate Stabilization Investment (Mutual
Fund - Equity) 1,823,569 1,823,569 - - Fund - Fixed Income) 4,215,752 3,811,507 404,245 - Collateral Obligations
(Archer Daniels Midland and CAISO) 11,127,179 - - 11,127,179 Total Debt Securities and Other 27,449,476 5,915,511 404,245 21,129,720 Total Investment by Fair Value Level $ 439,241,705 $ 181,494,034 $ 147,717,647 $ 110,030,024 Investments Measured at the Amortized Cost
State Investment Pool (LAIF) 2,490,004 - - 2,490,004 Total Investments 441,731,709 $ 181,494,034 $ 147,717,647 $ 112,520,028 Cash in Banks 52,973,288
Total Cash and Investment 494,704,997$
Investments Derivative Instruments
Open contract power trading - current assets 756,675$ 756,675$ Open contract gas trading - liabilities (667,540) (667,540) Open contract gas trading - liabilities (116,250) (116,250) Open contract gas trading - non-current assets 22,701,525 22,701,525 Total Investment Derivative Instruments 22,674,410$ 22,674,410$ (1) Accounts in exempt column are Mutual Fund-Money Market, Collateral Obligation and LAIF investments which are exempt from fair value hierarchy, or reported at amortized cost.

DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 3 – CASH AND INVESTMENTS (continued)
33 The City utilizes a third party pricing service to determine fair market prices for its individually held investments. Evaluations are based on market information available at the time and generated using proprietary evaluated pricing models and methodologies.

Level 1 investments are valued using a marketable actively traded assets closing price for identical assets. Level 2 investments are determined by using quoted prices for similar assets.

NOTE 4 – CAPITAL ASSETS
A. Capital Assets Summary
Capital asset activity for the years ended June 30, 2023 and 2022 is as follows:

Balance Balance
6/30/2022
(as restated) Additions Retirements Transfers June 30, 2023 Non Depreciable Assets:

Land 14,371,743$ -$ -$ -$ 14,371,743$ Construction In Progress 63,161,131 43,810,104 - (35,708,770) 71,262,465 Total Non Depreciable Assets 77,532,874 43,810,104 - (35,708,770) 85,634,208 Capital assets being depreciated:

Buildings and Improvements 1,065,938,843 - - 35,708,770 1,101,647,613 Right-to-use leased building 2,916,623 - - - 2,916,623 Right-to-use SBITA 1,437,230 1,670,794 - - 3,108,024 Machinery & Equipment 9,941,798 570,680 (214,512) - 10,297,966 Total capital assets being
depreciated
(1)
1,080,234,494 2,241,474 (214,512) 35,708,770 1,117,970,226 Less accumulated depreciation for:

Buildings and Improvements (511,596,415) (25,626,315) - - (537,222,730) Right-to-use leased building (673,067) (673,067) - - (1,346,134) Right-to-use SBITA - (378,485) - - (378,485) Machinery & Equipment (8,720,654) (308,358) 214,512 - (8,814,500) Total accumulated depreciation (520,990,136) (26,986,225) 214,512 - (547,761,849) Net Depreciable Assets
(1)
559,244,358 (24,744,751) - 35,708,770 570,208,377 Enterprise Activity Capital Assets,
Net
(1)
636,777,232$ 19,065,353$ -$ -$ 655,842,585$ (1) The Statement of Net Position for fiscal year 2021-22 was not restated for implementation of GASB 96, SBITA, discussed in Notes 2B and 5.

DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 4 – CAPITAL ASSETS (continued)
34 Balance Balance
6/30/2021
(as restated) Additions Retirements Transfers June 30, 2022 Non Depreciable Assets:

Land 14,371,743 $ - $ -$ -$ 14,371,743$ Construction In Progress 99,971,096 54,622,732 - (91,432,697) 63,161,131 Total Non Depreciable Assets 114,342,839 54,622,732 - (91,432,697) 77,532,874 Capital assets being depreciated:

Buildings and Improvements 974,506,146 - - 91,432,697 1,065,938,843 Right-to-use leased building 2,916,623 - - - 2,916,623 Machinery & Equipment 9,698,465 290,871 (47,538) - 9,941,798 Total capital assets being
depreciated 987,121,234 290,871 (47,538) 91,432,697 1,078,797,264 Less accumulated depreciation for:

Buildings and Improvements (488,361,127) (23,235,288) - - (511,596,415) Right-to-use leased building - (673,067) - - (673,067) Machinery & Equipment (8,455,762) (312,430) 47,538 - (8,720,654) Total accumulated depreciation (496,816,889) (24,220,785) 47,538 - (520,990,136) Net Depreciable Assets 490,304,345 (23,929,914) - 91,432,697 557,807,128 Enterprise Activity Capital Assets, 604,647,184$ 30,692,818 $ -$ -$ 635,340,002$

DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 4 – CAPITAL ASSETS (continued)
35 B. Construction in Progress
Construction in progress as of June 30, 2023 and 2022 consisted of the following in SVP Projects.

Projects as of June 30 , 2023 Authorized Expended Commitments Replace NRS 115/60KV Transformers 10,035,632$ 3,439,488$ 6,596,144$ Sierra Substation 15,954,547 15,695,343 259,204 Implementation Advanced Meter Infrastructure 28,132,392 27,844,679 287,713 Bucks Creek Relicensing 6,447,846 6,318,577 129,269 Electric Vehicle Charging 3,570,049 1,524,954 2,045,095 San Tomas Junction 5,162,977 1,264,724 3,898,253 Memorex Juction Substation 7,969,006 1,239,162 6,729,844 Freedom Circle Junction Substation 4,025,663 1,029,444 2,996,219 Street Light Improvement 2,884,102 1,015,901 1,868,201 Other Projects 106,544,628 11,890,193 94,654,435 Total 190,726,842$ 71,262,465$ 119,464,377$

Projects as of June 30 , 2022 Authorized Expended Commitments Replace NRS 115/60KV Transformers 9,166,995$ 1,641,462$ 7,525,533$ Sierra Substation 15,969,974 14,618,579 1,351,395 Implementation Advanced Meter Infrastructure 31,502,512 27,641,081 3,861,431 Bucks Creek Relicensing 6,450,261 6,318,577 131,684 Electric Vehicle Charging 2,492,992 1,168,048 1,324,944 San Tomas Junction 5,180,038 931,796 4,248,242 Other Projects 102,044,261 10,841,588 91,202,673 Total 172,807,033$ 63,161,131$ 109,645,902$

DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
36 NOTE 5 – LONG-TERM DEBT AND DERIVATIVE INSTRUMENTS
Changes in long-term debt for the year ended June 30, 2023, consisted of the following:

Outstanding Debt Additions and Outstanding
Type of Indebtedness as of June 30, Retired / Amortization as of June 30, Current Rate, Issue Date and Maturity 2022 Defeased of Discounts 2023 Portion Obligation Bonds:
2013 Series A Refunding Revenue Bonds
3%-5%, 04/24/13-07/01/22 4,545,000$ 4,545,000$ -$ -$ -$ 2018 Series A Refunding Revenue Bonds,
5%, 12/18/18 - 07/01/27 35,325,000 5,110,000 - 30,215,000 5,440,000 Unamortized Discount/Premium 3,766,165 - (753,233) 3,012,932 - Subtotal Electric Utility Revenue Bonds 43,636,165 9,655,000 (753,233) 33,227,932 5,440,000 Direct Placement:

Series 2020-1 Revenue Refunding Bonds,

1.74%, 04/10/2020 - 07/01/2032 52,985,000 - - 52,985,000 - Series 2020-2 Revenue Refunding Bonds,

1.31%, 04/10/2020 - 07/01/2028 34,315,000 - - 34,315,000 5,755,000 Series 2020-3 Revenue Refunding Bonds,

0.58% 04/10/2020 - 07/01/2024 11,840,000 3,925,000 - 7,915,000 3,945,000 Subtotal Electric Utility Revenue Bonds 99,140,000 3,925,000 - 95,215,000 9,700,000 Total Electric Utility Activities - Bonds
and Notes from Direct Borrowing 142,776,165$ 13,580,000$ (753,233)$ 128,442,932$ 15,140,000$

A. Electric Revenue Refunding Bonds, Series 2013A
On April 24, 2013, the City issued $64.380 million of Electric Revenue Refunding Bonds, Series 2013A (Electric 2013A Bonds), to provide funds, together with other available moneys, to refinance outstanding Electric 2003A Bonds. The Electric 2013A Bonds mature annually beginning on July 1, 2014 through July 1, 2028 and bear coupon rates ranging from 3.00% to

5.00%. Debt service on the Electric 2013A Bonds is secured by a pledge of net revenues of SVP.

As of April 1, 2020, $43.705 million of the Electric 2013A Bonds were outstanding and $30.725 million would be callable at par beginning January 1, 2023. With the passage of the Tax Cuts and Jobs Act on December 22, 2017 eliminated tax-exempt advance refunding of tax-exempt bonds beginning January 1, 2018, and therefore tax-exempt advance refunding is no longer a refinancing option.

On April 10, 2020, SVP refinanced $30.725 million callable portion of the outstanding principal amount of Electric 2013 A Bonds through a direct placement with Bank of America, N.A. under DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 5 – LONG-TERM DEBT AND DERIVATIVE INSTRUMENTS (continued)

37 a Taxable to Tax-Exempt Conversion structure. The refunding resulted in overall debt service savings of $1,706,384. The net present value of the debt service savings is called an economic gain and after an addition for prior funds on hand of $203, amounted to $1,703,470. See Notes below for Subordinated Electric Revenue Refunding Bonds, Series 2020-2.

As of June 30, 2023, SVP has paid off the entire Electric Revenue Refunding Bonds Series 2013A obligation.

B. Electric Revenue Refunding Bonds, Series 2018A
On December 18, 2018, SVP issued $48.8 million of Electric Revenue Refunding Bonds, Series 2018A (Electric 2018A Bonds) to refinance $54.58 million outstanding principal amount of Variable Rate Demand Electric Revenue Refunding Bonds, Series 2008B and terminate a related swap agreement. The Electric 2018A Bonds bear a 5% coupon rate, mature annually beginning on July 1, 2019 through July 1, 2027, and were sold at an All-In True Interest Cost of 2.32%.

Debt service on the Electric 2018A Bonds is secured by a pledge of net revenues of SVP.

In the event of default, SVP will transfer to the trustee all adjusted net revenues held by it and received thereafter and the trustee will disburse all adjusted net revenues and any other funds then held or thereafter received by the trustee under the provisions of indenture. In the case of default, the trustee will be entitled to declare the bond obligation of all bonds then outstanding to be due and payable immediately.

C. Subordinate Electric Revenue Refunding Bonds, Series 2020-1 As of April 1, 2020, all $54.830 million of the Electric 2011 A Bonds were outstanding and callable at par beginning July 1, 2021. The passage of the Tax Cuts and Jobs Act on December 22, 2017 eliminated tax-exempt advance refunding of tax-exempt bonds beginning January 1, 2018, and therefore tax-exempt advance refunding is no longer a refinancing option.

The City Council determined that it was in the best interests of the City to enter into a credit facility with a bank for the purpose of refunding all outstanding Electric 2011A Bonds; and for the indebtedness created under such credit facility to be evidenced by a subordinate electric revenue bond to be issued by the City and delivered to the bank as authorized by Resolution No. 20-8834 adopted by the City Council on April 7, 2020.

On April 10, 2020, the City entered into a loan agreement with Bank of America, N.A. (the “Bank”) and issued $52.985 million of Subordinate Electric Revenue Refunding Bonds, Series 2020-1 (Electric 2020-1 Bonds) to refinance $54.830 million outstanding principal amount of Electric Series 2011A Bonds under a Taxable to Tax-Exempt Conversion structure. The Electric 2020-1 Bonds bear 1.74% coupon rates, mature annually beginning on July 1, 2028 through July 1, 2032 and were sold at a true interest cost of 1.43% with an average coupon rate of 1.40%.

DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 5 – LONG-TERM DEBT AND DERIVATIVE INSTRUMENTS (continued)

38 Electric 2020-1 Bonds were priced at taxable rates and was converted to tax-exempt on April 2, 2021. Both the taxable rate and tax-exempt rate after conversion were fixed at time of issuance.

Starting April 2, 2021, the Bonds will bear interest at the tax exempt rate of 1.360% per annum.

Debt service on the Electric 2020-1 Bonds is secured by a pledge of Available Electric Revenues of SVP on a basis subordinate to outstanding Electric Revenue Bonds, if any.

In the event of default under the loan agreement for the 2020-1 bonds (including a failure by the City to pay principal or interest on the related bonds, a failure by the City to perform or observe its covenants, a default in other specified indebtedness or obligations of the City, certain acts of bankruptcy or insolvency, or other specified events of default), the Bank has the right, upon written notice to the City, to accelerate and declare the City’s obligation to repay the related bonds and all other obligations of the City to the Bank under such loan agreement to be immediately due and payable.

D. Subordinate Electric Revenue Refunding Bonds, Series 2020-2 The City Council determined that it was in the best interests of the City to enter into a credit facility with a bank for the purpose of refunding a portion of the outstanding Electric 2013A Bonds; and for the indebtedness created under such credit facility to be evidenced by a subordinate electric revenue bond to be issued by the City and delivered to the Bank as authorized by Resolution No. 20-8834 adopted by the City Council on April 7, 2020.

On April 10, 2020, the City entered into a loan agreement with Bank of America, N.A. (the “Bank”) and issued $34.315 million of Subordinate Electric Revenue Refunding Bonds, Series 2020-2 (Electric 2020-2 Bonds) to refinance $30.725 million of the callable portion of the outstanding Electric Revenue Refunding Bonds, Series 2013 A under a Taxable to Tax-Exempt Conversion structure. The Electric 2020-2 Bonds bear 1.31% coupon rates, mature annually beginning on July 1, 2023 through July 1, 2028 and were sold at a true interest cost of 1.21% with an average coupon rate of 1.15%. Electric 2020-2 Bonds were priced at taxable rates and will convert to a tax-exempt rate at the earlier of (i) the call date (1/1/2023) or (ii) the reversal of the advance refunding prohibition. Both the taxable rate and tax-exempt rate at conversion were fixed at the time of issuance, and once converted, the Bonds will bear interest at the tax-exempt rate of 1.02% per annum. Debt service on the Electric 2020-2 Bonds is secured by a pledge of Available Electric Revenues of SVP on a basis subordinate to outstanding Electric Revenue Bonds, if any.

In the event of default under the loan agreement for the 2020-2 Bonds (including a failure by the City to pay principal or interest on the related bonds, a failure by the City to perform or observe its covenants, a default in other specified indebtedness or obligations of the City, certain acts of bankruptcy or insolvency, or other specified events of default), the Bank has the right, upon written notice to the City, to accelerate and declare the City’s obligation to repay the related DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 5 – LONG-TERM DEBT AND DERIVATIVE INSTRUMENTS (continued)

39 bonds and all other obligations of the City to the Bank under such loan agreement to be immediately due and payable.

E. Subordinate Electric Revenue Refunding Bonds, Series 2020-3 On June 16, 2014, the City entered into a Tax-Exempt Multiple Draw Term Loan with the Bank of America Preferred Funding Corporation (the “Electric 2014 Loan Agreement”) to fund the phase-shifting transformer project and the acquisition of property for future utility use. The indebtedness created under such credit facility was evidenced by a subordinate electric revenue bond issued by the City - Subordinated Electric Revenue Bond, Series 2014. As of April 1, 2020, $19.413 million principal amount was outstanding and unpaid.

The City Council determined that it was in the best interests of the City to continue the credit facility with the bank for the purpose of refunding of the outstanding Electric 2014 Loan Agreement at lower interest rate; and for the indebtedness created under such credit facility to be evidenced by a subordinate electric revenue bond to be issued by the City and delivered to the Bank as authorized by Resolution No. 20-8834 adopted by the City Council on April 7, 2020.

On April 10, 2020, the City entered into a loan agreement with Bank of America, N.A. (the “Bank” and issued $16.720 million of Subordinate Electric Revenue Refunding Bonds, Series 2020-3 (Electric 2020-3 Bonds) to refinance $19.413 million outstanding principal amount of Subordinated Electric Revenue Bonds, Series 2014. The Electric 2020-3 Bonds bear 0.58% coupon rates mature annually beginning on July 1, 2020 through July 1, 2024 and were sold at a true interest cost of 0.70%. Debt service on the Electric 2020-3 Bonds is secured by a pledge of Available Electric Revenues of SVP on a basis subordinate to outstanding Electric Revenue Bonds, if any.

In the event of default under the loan agreement for the 2020-3 bonds (including a failure by the City to pay principal or interest on the related bonds, a failure by the City to perform or observe its covenants, a default in other specified indebtedness or obligations of the City, certain acts of bankruptcy or insolvency, or other specified events of default), the Bank has the right, upon written notice to the City, to accelerate and declare the City’s obligation to repay the related bonds and all other obligations of the City to the Bank under such loan agreement to be immediately due and payable.

F. Pledge of Future Electric Revenues
The pledge of future Electric Fund revenues ends upon repayment of the $125.4 million in outstanding principal on the bonds which is scheduled to occur in fiscal year 2032-33. For fiscal year 2022-23, Electric Fund revenues including operating revenues and non-operating interest earnings amounted to $635.1 million and operating costs including operating expenses, but not DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 5 – LONG-TERM DEBT AND DERIVATIVE INSTRUMENTS (continued)

40 interest, depreciation or amortization amounted to $602.4 million. Net revenues available for debt service amounted to $32.7 million which represented a coverage ratio of 2.01 on the $16.3 million of debt service.

G. Derivative Instruments
In fiscal year 2009-10, SVP implemented GAAP, which addresses recognition, measurement and disclosures related to derivative instruments to determine whether they meet the definition of derivative instruments, and if so, whether they effectively hedge the expected cash flows associated with the interest rate and energy exposures. Under hedge accounting, the increase (decrease) in the fair value of a hedge is reported as a deferred cash flow hedge on the statement of net position.

Notional Amounts and Fair Values – Future Derivative Instruments SVP maintains a Market Risk Management Policy, which among other things, sets forth the guidelines for the purchase and sale of certain financial instruments defined as hedge instruments in support of market power purchase and sales transactions. The primary goal of these guidelines is to provide a framework for the operation of an energy price hedging program to better manage SVP’s risk exposure in order to utilize resources, stabilize pricing and costs for the benefit of SVP and its customers.

Consistent with hedge accounting treatment meeting effectiveness tests, changes in fair value are reported as deferred flows of resources on the statement of net position until the contract expiration that occurs in conjunction with the hedged expected energy purchase/sales transaction.

When hedging contracts expire, at the time the purchase/sales transactions occur, the deferred balance is recorded as a component of Purchased Power. For energy derivatives, fair values are estimated by comparing contract prices to forward market prices quoted by third party market participants.

SVP had the following future derivative instruments outstanding at June 30, 2023 with Archer Daniels Midland Company to hedge cash flows on sales of excess resources in CAISO market in June and purchase of power from CAISO in the future months.

DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 5 – LONG-TERM DEBT AND DERIVATIVE INSTRUMENTS (continued)

41 Notional Amount (MWh)
Long Short
Effective
Date
Maturity
Date
Average
Price Classification Amount Classification Amount
18,720 6/1/2022 6/30/2023 $54.00 Derivative
Instrument 507,125$ Deferred
inflow 507,125$
20,000 7/1/2022 7/31/2023 95.00 Derivative Instrument (551,000) Deferred
outflow (551,000)
21,600 8/1/2022 8/31/2023 95.00 Derivative Instrument 139,320 Deferred
inflow 139,320
20,000 9/1/2022 9/30/2023 95.00 Derivative Instrument 88,000 Deferred
inflow 88,000
8,600 6/1/2022 7/31/2023 67.75 Derivative Instrument (110,940) Deferred
inflow (110,940)
7,800 7/1/2022 8/31/2023 67.75 Derivative Instrument 22,230 Deferred
outflow 22,230
8,000 8/1/2022 9/30/2023 67.75 Derivative Instrument (5,600) Deferred
inflow (5,600)
89,135$ 89,135$
Notional Amount (MMBtu)
Long Short
Effective
Date
Maturity
Date
Average
Price Classification Amount Classification Amount
3,655,000 7/1/2020 12/31/2025 $2.42 Derivative
Instrument 4,796,510$ Deferred
inflow 4,796,510$
3,655,000 1/1/2021 12/31/2025 0.56 Derivative Instrument 3,597,425 Deferred
inflow 3,597,425
8,840,000 1/1/2022 12/31/2025 2.64 Derivative Instrument 8,613,890 Deferred
inflow 8,613,890
8,895,000 1/1/2022 12/31/2025 1.03 Derivative Instrument 5,693,700 Deferred
inflow 5,693,700
155,000 1/1/2022 8/31/2023 2.70 Derivative Instrument (116,250) Deferred
inflow (116,250)
22,585,275$ 22,585,275$
Grand Total 22,674,410$ 22,674,410$
Fair Value Change in Fair Value
Fair Value Change in Fair Value

Credit Risk
Credit risk is the risk of loss due to a counterparty defaulting on its obligations. SVP is exposed to credit risk if hedging instruments are in asset positions. To eliminate counterparty credit risk, SVP has transacted both long term power and gas contracts on the Futures market on Intercontinental Exchange (ICE). As of June 30, 2023, SVP’s open derivative power and gas contracts were in an asset position with positive $22.7 million of Mark-to-Market. The open DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 5 – LONG-TERM DEBT AND DERIVATIVE INSTRUMENTS (continued)

42 contract was with ADM Investor Service, Inc., a clearing member of ICE and a subsidiary of Archer Daniels Midland Company who was rated A by Standard & Poor’s as of June 30, 2023.

SVP's policy for requiring collateral on hedging instruments varies based on individual contracts and counterparty credit ratings. Under the brokerage agreements with Archer Daniels Midland Company, the accounts are prefunded by SVP. If the account value falls below zero, margin calls are invoked.

It is also SVP's policy to negotiate netting arrangements whenever it has entered into more than one bilateral transactions with counterparty. Under the terms of these arrangements, should one party become insolvent or otherwise default on its obligations, the non-defaulting party may accelerate and terminate all outstanding transactions and net their fair values so that a single amount will be owed by (or to) the non-defaulting party.

Termination Risk
SVP’s futures contracts are traded over the counter and have no termination risk.

Price Risk
With respect to price risk under power Futures contracts, on purchase contracts (long positions), SVP receives the CAISO NP15 average daily rate at settlement and pays the fixed contracted rate entered into on the trade date; on sales contracts (short positions), SVP pays the CAISO NP15 average daily rate at settlement and receives the fixed contracted rate entered into on the trade date. With respect to price risk under gas Futures contracts, on purchase contracts (long positions), SVP receives PG&E Citygate average daily price at settlement and pays the fixed contracted rate entered into on the trade date; on sales contracts (short positions), SVP pays the PG&E Citygate average daily price at settlement and receives the fixed contracted rate entered into on the trade date. SVP is exposed to risk because the contract prices are different from the settlement prices.

H. Other
Various debt agreements governing SVP’s revenue bonds contain a number of covenants including those that require SVP to maintain and preserve the enterprise in good repair and working order, to maintain certain levels of insurance, and to fix and collect rates, fees, and charges so as to maintain certain debt coverage ratios. SVP is in compliance with these specific covenants and all other material covenants governing the particular revenue bond issues. No event of default as defined in the bond indentures has occurred or was occurring as of the date of this report.

DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 5 – LONG-TERM DEBT AND DERIVATIVE INSTRUMENTS (continued)

43 I. Repayment Requirements
As of June 30, 2023, the debt service requirements to maturity for SVP’s long-term debt are as follows:

Year Ending
June 30 Principal Interest Total Principal Interest Total 2024 5,440,000$ 1,374,750$ 6,814,750$ 9,700,000$ 1,075,725$ 10,775,725$ 2025 5,795,000 1,093,875 6,888,875 9,665,000 994,377 10,659,377 2026 6,005,000 798,875 6,803,875 5,910,000 923,678 6,833,678 2027 6,320,000 490,750 6,810,750 5,975,000 863,065 6,838,065 2028 6,655,000 166,375 6,821,375 6,050,000 801,737 6,851,737 2029-2033 - - - 57,915,000 1,861,041 59,776,041 30,215,000$ 3,924,625$ 34,139,625$ 95,215,000$ 6,519,623$ $101,734,623 Senior Revenue Bonds
Future Debt Service Requirements
Subordinate Revenue Bonds from
Direct Placement
Long-term Debt

Reconciliation of Long-term Debt:

Principal Outstanding as of June 30, 2023 125,430,000$
Unamortized Discount/Premium - Electric Revenue Bonds 3,012,932 Total Long-term Debt 128,442,932$

J. Lease Liabilities
SVP entered into a five‐year lease agreement as lessee for the use of office space in November 2015 and the lease was extended to October 2026. SVP is required to make monthly principal and interest payments and common area operating expenses with 3% annual escalation. The lease agreement qualifies as other than short-term leases under GASB87 and therefore, has been recorded at the present value of the future minimum lease payment as of the date of June 30, 2021. The lease liability is measured at a discount rate of 1.10% based on Applicable Federal Rates for real estate as of July 2021.

A summary of the SVP’s lease transactions for the fiscal year ended June 30, 2023 and 2022 are as follows:

DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 5 – LONG-TERM DEBT AND DERIVATIVE INSTRUMENTS (continued)

44 Balance
June 30, 2022 Addition Retirment
Balance
June 30, 2023 Current portion
Lease liabilities 2,286,666$ - $ (654,044) $ 1,632,622$ 681,619$ Balance
June 30, 2021
(As restated) Addition Retirment
Balance
June 30, 2022 Current portion
Lease liabilities 2,916,623$ - $ (629,957)$ 2,286,666$ 654,044$

The future principal and interest lease payments as of June 30, 2023, are as follows:

For the Year
Ending June 30 Principal Interest Total
2024 681,619$ 14,596$ 696,215$
2025 710,181 6,920 717,101
2026 240,822 553 241,375
Total 1,632,622$ 22,069$ 1,654,691$

K. Subscription-Based IT Arrangements and Liabilities
In fiscal year 2022-23, SVP implemented the provisions of GASB Statement No. 96, Subscription-Based Information Technology Arrangements, which required the City to record an intangible right-to-use subscription asset. As a result, a right-to-use subscription asset was recorded in the amount of $3,108,024. As of June 30, 2023, the City has recorded a net intangible right-to use subscription asset amounting to $2,729,539, with accumulated amortization of $378,485. The subscription assets are offset with subscription liabilities. A summary of the SVP’s SBITA transactions for the fiscal year ended June 30, 2023 are as follows:

Balance
June 30, 2022
(As restated) Addition Retirment
Balance
June 30, 2023 Current portion
SBITA liabilities 1,437,230$ 1,670,794$ (390,015)$ 2,718,009$ 392,381$

On August 20,2022, SVP entered into a five‐year SBITA for the purchases of software services for OASISLive subscription used for California Independent System Operator Congestion Revenue Rights market participation. An initial subscription liability was recorded in the amount of $1,670,794 during fiscal year 2023, at the time the subscription was placed into service.

DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 5 – LONG-TERM DEBT AND DERIVATIVE INSTRUMENTS (continued)

45 As of June 30, 2023, the value of the subscription liability was $2,718,009. The City is required to make annual principal and interest payments throughout the life of the subscription. The subscription has an interest rate of 2.85%.

The future principal and interest SBITA payments as of June 30, 2023, are as follows:

For the Year
Ending June 30 Principal Interest Total
2024 392,381$ 78,573$ 470,954
2025 406,699 67,322 474,021
2026 421,745 55,433 477,178
2027 437,181 43,251 480,432
2028 453,148 30,634 483,782
2029-2033 606,855 35,448 642,303
Total 2,718,009$ 310,661$ 3,028,670$

NOTE 6 – PARTICIPATION IN JOINT VENTURES
A. Investment in Joint Ventures
SVP (through the City) participates in significant joint ventures: Northern California Power Agency (NCPA), Transmission Agency of Northern California (TANC), M-S-R Public Power Agency (MSR PPA), M-S-R Energy Authority (MSR EA).

The separately issued financial statements of these joint ventures (as noted below) are available on request.

Date of latest audited
financial statement Joint venture’s address
NCPA 6/30/2022 651 Commerce Dr. Roseville, CA 95678
TANC 6/30/2022 P.O. Box 15129 Sacramento, CA 95851
MSR EA 12/31/2022 P.O. Box 4060 Modesto, CA 95352
MSR PPA 12/31/2022 P.O. Box 4060 Modesto, CA 95352
DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 6 – PARTICIPATION IN JOINT VENTURES (continued)

46 As described in paragraph (E) below, the carrying value of SVP’s investment in MSR EA is $0.

SVP’s financial statements as of June 30, 2023 and 2022 reflect the following investments in joint ventures:

Participating
percentage Investment
Participating
percentage Investment
Method of
accounting
NCPA $44,467,652 $43,222,597
Geothermal 44.39% 44.39% Equity
Hydroelectric 37.02% 37.02%
Combustion Turbine 41.67% 41.67%
Lodi Energy Center 25.75% 25.75%
TANC 9.65% 7,631,453 9.64% 6,185,241 Equity MSR EA 33.40% - 33.40% - Suspended MSR PPA 35.00% 13,745,836 35.00% 7,904,404.00 Equity * Total $65,844,941 $57,312,242
*
June 30, 2023 June 30, 2022
The equity method of accounting for investment in MSR PPA was suspended prior to fiscal year ended June 30, 2021.

Starting in fiscal year 2022, equity method was used for SVP's investment with MSR PPA.

B. Northern California Power Agency (NCPA)
NCPA was formed in 1968 as a joint powers agency in the State of California. Its membership consists of sixteen public agencies. NCPA is generally empowered to sell, purchase, generate, transmit, manage electrical energy and provide regulatory and legislative advocacy. Members participate in the projects of NCPA on an elective basis. Therefore, the participation percentage varies for each project in which it participates.

A Commission comprised of one representative from each joint venture member governs NCPA.

The Commission is responsible for the general management of the affairs, property, and business of NCPA. Under the direction of the General Manager, the staff of NCPA is responsible for providing various administrative, operating and planning services for NCPA and its associated power corporations.

Project Financing and Construction
NCPA’s project construction and development programs have been individually financed by project revenue bonds collateralized by NCPA’s assignment of all payments, revenues and proceeds associated with its interest in each project. Each project participant has agreed to pay its proportionate share of debt service and other costs of the related project, notwithstanding the DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 6 – PARTICIPATION IN JOINT VENTURES (continued)

47 suspension, interruption, interference, reduction or curtailment of output from the project for any reason. Certain of the revenue bonds are additionally supported by municipal bond insurance credit enhancements.

Hydroelectric Project
NCPA contracted to finance, manage, construct, and operate Hydroelectric Project Number One for the licensed owner, Calaveras County Water District (CCWD). In exchange, NCPA has the right to the electric output of the project for 50 years from February 1982. NCPA also has an option to purchase power from the project in excess of the CCWD’s requirements for the subsequent 50 years, subject to regulatory approval.

Geothermal Project
The NCPA Geothermal Plants have historically experienced greater than anticipated declines in steam production from the existing geothermal wells. Although initially operated as baseload generation projects at full capability (238MW), NCPA changed its steam field production from baseload to load-following and reduced average annual steam production. Along with other steam field operators in the area, the Agency began implementing various operating strategies to further reduce the rate of decline in steam production. The Agency has modified both steam turbine units and the associated steam collection system to enable generation with lower pressure steam at higher mass-flow rates to optimize the utilization of the available steam resource. In FY 19-20, NCPA began a well-workover program to restore underperforming wells.

Based upon current operation protocols and forecasted operations, NCPA expects average annual generation and peak capacity to decrease further, reaching approximately 68 MW by the year 2040.

Combustion Turbine Project No. 1
NCPA owns five dual (natural gas and fuel oil) combustion turbine units, each of which is nominally rated at 25 MW, which are collectively known as the Combustion Turbine Project No.

1. These units were completed in 1986 and are designed to provide peak power and reserve requirements and emergency support. Each purchaser is responsible under its power sales contract for paying entitlement share in Combustion Turbine Project No. 1 of all NCPA’s costs of such project.

Lodi Energy Center
On May 24, 2010, SVP entered into an agreement with NCPA for a 25.75% interest in the Lodi Energy Center, a 280 MW combined cycle natural gas fired power plant, located in Lodi, California. The project received approval from the California Energy Commission in April 2010 DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 6 – PARTICIPATION IN JOINT VENTURES (continued)

48 and was placed into operation in November 2012. In January 2020, the Lodi Energy Center suffered a catastrophic turbine failure. NCPA replaced the turbine with a newer state-of-the-art turbine which could use hydrogen as a cleaner fuel source. The majority of the replacement cost was covered by NCPA’s insurance resulting in relatively minimal financial impact to project participants.

C. Transmission Agency of Northern California (TANC)
TANC was organized under the California Government Code pursuant to a joint powers agreement entered into by 15 Northern California utilities. The purpose of TANC is to provide electric transmission and other facilities for the use of its members through its authority to plan, acquire, construct, finance, operate and maintain facilities for electric power transmission. The joint powers agreement provides that the costs of TANC’s activities can be financed or recovered through assessment of its members or from user charges through transmission contracts with its members. Each TANC member has agreed to pay a pro-rata share of the costs to operate TANC and for payment of debt service, and has the right to participate in future project agreements.

The joint powers agreement remains in effect until all debt obligations and interest thereon have been paid, unless otherwise extended by the members.

California-Oregon Transmission Project
TANC is a participant and also the Project Manager of the California-Oregon Transmission Project (Project), a 340 mile long, 500 kilovolt alternating current transmission project between Southern Oregon and Central California. As Project Manager, TANC is responsible for the overall direction and coordination of all Project operations and maintenance, additions and betterments, and for general and administrative support.

The Project was declared commercially operable on March 24, 1993, with a rated transfer capability of 1,600 megawatts and provides a third transmission path between the electric systems of the Pacific Northwest and those in California. The Project has successfully met and completed all major environmental requirements. As of June 30, 2022, the most recent data available, TANC’s investment in the Project was $549.7 million, less accumulated depreciation and amortization of $297.0 million.

In connection with its participation in the Project, TANC has an entitlement balance of the Project’s transfer capability of approximately 1,362 megawatts and is obligated to pay an average of approximately 80 percent of the operating costs associated with the Project. TANC incurred and initially capitalized all costs for project construction since they were expected to be recovered through reimbursement from Project participants and from the successful operations of the Project transmission lines. The Project agreement among the participating members provides DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 6 – PARTICIPATION IN JOINT VENTURES (continued)

49 that each member agrees to make payments, from its revenues, to TANC for project costs incurred and for payment of debt service.

SVP has historically been obligated to pay 20.47% of TANC’s COTP operating and maintenance expenses and 20.70% of TANC’s COTP debt service and 22.16% of the Vernon acquisition debt.

SVP has also been entitled to 20.4745% of TANC’s share of COTP transfer capability (approximately 278 MW net of third party layoffs of TANC) on an unconditional take-or-pay basis. Starting on July 1, 2014, SVP laid-off 147 MWs of this entitlement to other TANC members under a 25 year agreement. During the term of this agreement the parties taking on the entitlement will pay all associated debt service, operations and maintenance costs, and all administrative and general costs. SVP’s portion of the operating and maintenance expenses and the COTP debt service is 10.004 %.

D. M-S-R Public Power Agency (MSR PPA)
MSR PPA is a joint power agency formed in 1980 by the Modesto Irrigation District, the City of Santa Clara, and the City of Redding, California, to develop or acquire and manage electric power resources for the benefit of the members. The personnel of its members and contract professional staff perform the administrative and management functions of MSR PPA. The member’s income and expenses sharing ratio is as follows: Modesto Irrigation District – 50 percent, City of Santa Clara – 35 percent, and City of Redding – 15 percent.

Prior to fiscal year ended December 31, 2020, SVP’s equity in MSR PPA’s net losses exceeds its investments and, therefore, the equity method of accounting for the investment was suspended.

Starting in fiscal year ended December 31,2021, SVP was in a positive equity position. The equity method of accounting of SVP’s investment in MSR PPA was applied. Under the joint exercise of power agreement, which formed MSR PPA, SVP is responsible for funding up to 35 percent of MSR PPA’s operating cost, to the extent such funding is necessary. During the years ended June 30, 2023 and 2022, SVP funded its share of operating costs in SVP’s expenses.

MSR PPA’s principal activity is a 28.8% ownership interest in a 507-megawatt unit of a coal- fired electricity generating plant located in New Mexico (San Juan Plant). The San Juan plant was jointly owned by the Public Service Company of New Mexico (PNM) (38.5%), MSR PPA (28.8%) and other municipal power entities (32.7%). On December 31, 2017, MSR PPA divested its ownership interest in the San Juan plant and no longer receives electric energy or capacity from the San Juan Generating Station.

In 2006, MSR PPA entered into a Wholesale Purchase and Sale Agreement and a Shaping and Firming Agreement with Avangrid Renewables, Inc. to provide renewable wind energy to the Members from the Big Horn I Wind Energy Project (Big Horn I Project) with a nominal installed capacity of approximately 199.5 MW. SVP receives the power purchased by MSR PPA from DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 6 – PARTICIPATION IN JOINT VENTURES (continued)

50 the Big Horn I Project. SVP’s share equates to approximately a 105 MW share of the output.

Power deliveries commenced on October 1, 2006 and will continue through September 30, 2026.

Through an amendment of the original agreements MSR PPA has an obligation to continue to take the same output through September 30, 2031, or if the Big Horn Project is repowered MSR PPA will have a right of first offer to negotiate a long-term power purchase for such repowered project. The participation in this project is as follows:

Modesto Irrigation District 12.5%
City of Santa Clara 52.5%
City of Redding 35.0%
In 2009, MSR PPA entered into a Power Purchase Agreement and Redelivery Agreement with Avangrid Renewables Inc. to purchase additional wind power energy from the same site, called Big Horn II, with a nominal installed capacity of 50 MW for a twenty-year period. Deliveries of energy under this project began on November 1, 2010. The participation in this project is as follows: Modesto Irrigation District – 65%; City of Santa Clara – 35%.

MSR PPA San Juan
In 2015, the MSR PPA Commission approved a number of agreements (the “San Juan Restructuring Agreements”) to provide for the interests of MSR PPA and certain other San Juan Participants (the “exiting participants”) in the San Juan Generation Station to be transferred to the remaining San Juan Participants effective December 31, 2017. In addition to the ownership divesture, the San Juan Restructuring Agreements provide for, among other things, the allocation of ongoing responsibility for decommissioning costs, mine reclamation costs and any environmental remediation obligations among the exiting participants and the remaining San Juan Participants, and the establishment and funding of mine reclamation and plant decommissioning trust funds. The San Juan Restructuring Agreements were subsequently executed by all nine San Juan Generation Station owners and PNM Resources Development Company (a non-utility affiliate of PNM) and, following receipt of regulatory approvals, became effective on January 31, 2016. Various other implementing agreements and amendments to existing San Juan project agreements to effect the restructuring have also been executed. Closing of the ownership restructuring of the San Juan Generation Station and the divestiture of M-S-R PPA’s interests in San Juan Unit No. 4 was completed on schedule on December 31, 2017.

E. M-S-R Energy Authority (MSR EA)
MSR EA is a joint power agency formed in 2008 by the Modesto Irrigation District, the City of Santa Clara, and the City of Redding, California, to develop or acquire and manage natural gas resources for the benefit of the members. The personnel of its members and contract professional staff perform the administrative and management functions of MSR EA. Each DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 6 – PARTICIPATION IN JOINT VENTURES (continued)

51 member’s income and expense sharing ratio is as follows: Modesto Irrigation District – 33.3%; City of Santa Clara – 33.4%; and City of Redding – 33.3%.

SVP’s equity in MSR EA’s net losses exceeds its investment and, therefore, the equity method of accounting for the investment has been suspended. As of December 31, 2022, the date of the latest available audited financial statements, SVP’s unrecognized share of member’s deficit of MSR EA was $27.2 million. Under the joint exercise of power agreement, which formed MSR EA, SVP is responsible for funding up to 33.4% of MSR EA’s operating cost, to the extent such funding is necessary. During the years ended June 30, 2023 and 2022, SVP funded its share of operating costs in SVP’s expenses.

In 2009, the City of Santa Clara, along with the Cities of Modesto and Redding participated in the M-S-R Energy Authority Gas Prepay Project. The Gas Prepay Project provides the City, through a Gas Supply Agreement with MSR EA dated September 10, 2009, a secure and long- term supply of natural gas of 7,500 MM Btu (Million British thermal unit) daily or 2,730,500 MM Btu annually through December 31, 2012, and 12,500 MM Btu daily, or 4,562,500 MM Btu annually thereafter until September 30, 2039. The agreement provides this supply at a discounted price below the spot market price (the Pacific Gas & Electric City gate index) over the next 30 years. As of December 31, 2022, bonds issued by MSR EA to finance the City’s share of the Gas Prepay Project were outstanding in the principal amount of $500,200,000. These bonds were initially sold on August 27, 2009. Under the Gas Supply Agreement, MSR EA will bill the City for actual quantities of natural gas delivered each month on a “take-and-pay” basis.

MSR EA has contracted with Citigroup Energy, Inc. (“CEI”) to use the proceeds of the Gas Prepay bond issue to prepay CEI for natural gas. CEI has guaranteed repayment of the bonds, and responsibility for bond repayment is non-recourse to the City. Moreover, any default by the other Gas Prepay Project participants is also non-recourse to the City.

F. Contingent Liability
Under the terms of the various joint venture agreements, SVP is contingently liable for a portion of the long-term debt of the entities under take-or-pay agreements, letters of credit, guarantees or other similar agreements.

DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 6 – PARTICIPATION IN JOINT VENTURES (continued)

52 Based on the most recent audited financial statements of the individual joint ventures, SVP was contingently liable for long-term debt as of June 30, 2022 as follows:

Total Debt Silicon Valley Power's Silicon Valley Power's Agreements (Principal) Debt Share Contingent Liability
NCPA 06/30/22 547,665,968$ 34.84% 190,813,080$ TANC 06/30/22 167,800,000 9.65% 16,194,663
TOTAL 715,465,968$ 207,007,743$

In addition, SVP would be, under certain conditions, liable to pay a portion of costs associated with the operations of the entities. Under certain circumstances, such as default or bankruptcy of the other participants, SVP may also be liable to pay a portion of the debt of these joint ventures on behalf of those participants and seek reimbursement from those participants.

Take-or-Pay commitments expire upon final maturity of outstanding debt for each project. Final fiscal year debt expirations as of June 30, 2022 are as follows:

Entitlement Debt Service
Project Debt Expiration Share % Share %
NCPA - Geothermal Project (NGP) July-2024 44.3905% 44.3905% NCPA - Hydroelectric Project (NHP) July-2032 37.0200% 37.0200% NCPA - Lodi Energy Center (NLEC)** June-2040 25.7500% 34.5385% TANC - CA-OR Transmission Project (COTP) May-2039 9.6514% 9.6512% MSR PPA -San Juan Plant July-2022 35.0000% 35.0000%
** The SVP's debt service share in NLEC on issue one is 46.1588%, on issue two is 0%.

DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 6 – PARTICIPATION IN JOINT VENTURES (continued)

53 A summary of SVP’s “Take-or-Pay” contracts and related projects and its contingent liability for the debt service including principal and interest payments at June 30, 2022 is as follows:

Fiscal Year NGP NHP NLEC COTP Total
2023 2,198,863$ 12,870,163$ 7,567,678$ 1,008,307$ 23,645,011$ 2024 1,541,819 14,375,558 7,565,130 1,348,027 24,830,534 2025 1,545,765 14,399,154 7,565,513 1,465,120 24,975,552 2026 - 7,912,261 7,581,031 1,464,903 16,958,195 2027-2031 - 39,516,428 38,615,584 7,324,369 85,456,381 2032-2036 - 17,218,945 38,621,715 7,324,877 63,165,537 2037-2041 - - 37,973,144 4,394,758 42,367,902 Total 5,286,447$ 106,292,509$ 145,489,795$ 24,330,361$ 281,399,112$

NOTE 7 – RETIREMENT PLAN – DEFINED BENEFIT PENSION PLAN For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Plan and additions to/deductions from the Plan’s fiduciary net position have been determined on the same basis as they are reported by the CalPERS Financial Office. For this purpose, benefit payments (including refunds of employee contributions) are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value.

A. General Information about the Pension Plan
Plan Descriptions
All qualified regular and probationary employees are required to participate in the City’s Miscellaneous Agent Multiple-Employer defined benefit plan administered by the California Public Employees’ Retirement System (CalPERS), which acts as a common investment and administrative agent for its participating member employers. Benefit provisions under the Plan are established by State statute and City resolution. CalPERS issues a publicly available report that include a full description of the pension plan regarding benefit provisions, assumptions and membership information and can be found on the CalPERS website.

Benefits Provided
CalPERS provides service retirement and disability benefits, annual cost of living adjustments, and death benefits to plan members, who must be public employees or beneficiaries. Benefits DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 7 – RETIREMENT PLAN – DEFINED BENEFIT PENSION PLAN (continued)

54 are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for non-duty disability benefits after 5 years of service. The pre-retirement death benefit is the Optional Settlement 2W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law.

The Plan’s provisions and benefits in effect at June 30, 2023 and June 30, 2022, are summarized as follows:

Miscellaneous
Hire date
Prior to
January 1, 2013
On or after
January 1, 2013
Benefit formula 2.7% @ 55 2% @ 62
Benefit vesting schedule 5 years service 5 years service Benefit payments monthly for life monthly for life
Retirement age 50 - 55 52 - 67
Monthly benefits, as a % of eligible compensation 2.00 - 2.70% 1.00 - 2.50% Required employee contribution rates 8.00% 6.50%
Required employer contribution rates 11.160% 11.160%
June 30, 2023 June 30, 2022
Required unfunded liability contribution $8,696,424 $7,938,737

Contributions
Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer contribution rates for all public employers are determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Funding contributions are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability.

SVP is required to contribute the difference between the actuarially determined rate and the contribution rate of employees.

The contributions to the Plan were as follows:

June 30, 2023 June 30, 2022
Contributions - employer $11,321,067 $11,026,399
Miscellaneous

DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 7 – RETIREMENT PLAN – DEFINED BENEFIT PENSION PLAN (continued)

55 B. Net Pension Liability, Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions
SVP reported a net pension liability for its proportionate share of the net pension liability of the Plan as follows:

June 30, 2023 June 30, 2022
Miscellaneous 105,823,291$ 73,533,480$
Proportionate Share of Net Pension Liability

SVP’s net pension liability for the Plan is measured as the proportionate share of the net pension liability. The net pension liability of the Plan is measured as of June 30, 2022, and the total pension liability for the Plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2021 rolled forward to June 30, 2022 using standard update procedures. SVP’s proportion of the net pension liability was based on a projection of SVP’s long-term share of contributions to the pension plan relative to the projected contributions of all funds of the City. SVP’s proportionate share of the net pension liability for the Plan as of June 30, 2023 and 2022 was 32.31%.

For the years ended June 30, 2023 and 2022, SVP recognized pension expense of $12,887,264 and $6,364,608 respectively. At June 30, 2023 and 2022, SVP reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources:

Miscellaneous Plan:

Deferred Outflows Deferred Inflows
June 30, 2023 of Resources of Resources
Pension contributions subsequent to measurement date 11,321,067$ -$ Differences between expected and actual experience 602,798 (821,311) Changes in assumptions 5,541,520 -
Net differences between projected and actual earnings
on plan investments 8,757,655 -
Total 26,223,040$ (821,311)$

DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 7 – RETIREMENT PLAN – DEFINED BENEFIT PENSION PLAN (continued)

56 Deferred Outflows Deferred Inflows
June 30, 2022 of Resources of Resources
Pension contributions subsequent to measurement date 11,026,399$ -$ Differences between expected and actual experience 1,994,978 - Net differences between projected and actual earnings
on plan investments - (18,343,263)
Total 13,021,377$ (18,343,263)$

$11,878,371 reported as deferred outflows of resources related to contributions subsequent to the June 30, 2023 measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2024. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows:

Measurement Period Annual Measurement Period Annual
Ended June 30 Amortization Ended June 30 Amortization
2023 3,868,013$ 2022 (3,284,375)$
2024 3,237,809 2023 (3,704,830)
2025 1,368,749 2024 (4,335,036)
2026 5,606,091 2025 (5,024,044)
2023 2022

C. Actuarial Assumptions
For the measurement period ended June 30, 2022, the total pension liability was determined by rolling forward the June 30, 2021 total pension liability. The June 30, 2021 total pension liability was based on the following actuarial methods and assumptions:

DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)

NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 7 – RETIREMENT PLAN – DEFINED BENEFIT PENSION PLAN (continued)

57 Miscellaneous
Valuation Date June 30, 2021
Measurement Date June 30, 2022
Actuarial Cost Method Entry-Age Normal Cost Method
Actuarial Assumptions:

Discount Rate 6.90%
Inflation 2.30%
Payroll Growth 2.80%
Projected Salary Increase Varies by Entry-Age and Service Investment Rate of Return 7.00% (1)
Post Retirement Benefit Increase The lesser of Contract COLA or 2.3% until Purchasing Power Protection applies, 2.3%
thereafter
Mortality
(2) Derived using CalPERS' Membership Data for
all Funds
(1) Net of pension plan investment and administrative expenses; including inflation. (2) The probabilities of mortality are based on the 2021 CalPERS Experience Study for the period from 2001 to 2019. Pre-retirement and post-retirement mortality rates include generational mortality improvement using 80% of Scale MP-2020 published by the Society of Actuaries. For more details on this table, please refer to the CalPERS' November 2021 experience study report available on CalPERS' website.

The underlying mortality assumptions and all other actual assumptions used in the June 30, 2021 valuation were based on the results of a December 2021 actuarial experience study for the period 2000 to 2019. Further details of the Experience Study can be found on the CalPERS website.

Discount Rate
The discount rate used to measure the total pension liability for the Plan was 6.97%. The projection of cash flows used to determine the discount rate for the Plan assumed that contributions from all plan members in the Public Employees Retirement Fund (PERF) will be made at the current member contribution rates and that contributions from employers will be made statutorily required rates, actuarially determined. Based on those assumptions, the Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members for all plans in the PERF. Therefore, the long-term expected rate of return on plan investments was applied to all period of projected benefit payments to determine the total pension liability for the Plan.

DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
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NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 7 – RETIREMENT PLAN – DEFINED BENEFIT PENSION PLAN (continued)

58 The long-term expected rate of return on pension plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.

In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows.

Using historical returns of all the funds’ assets classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11+ years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the rounded single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equal to the single equivalent rate calculated above and adjusted to account for assumed administrative expenses.

The table below reflects the long-term expected real rate of return by asset class.

Asset Class(a)
Assumed Asset
Allocation Real Return (a)(b)
Global Equity - Cap-weighted 30.0% 4.54%
Global Equity - Non-Cap-weighted 12.0% 3.84%
Private Equity 13.0% 7.28%
Treasury 5.0% 0.27%
Mortgage-backed Securities 5.0% 0.50%
Investment Grade Corporates 10.0% 1.56%
High Yield 5.0% 2.27%
Emerging Market Debt 5.0% 2.48%
Private Debt 5.0% 3.57%
Real Assets 15.0% 3.21%
Leverage -5.0% -0.59%
100.0%
(b) Figures are based on the 2021 Asset Liability Management Study. (a) An expected inflation of 2.30% used ofr this period.

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CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
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NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 7 – RETIREMENT PLAN – DEFINED BENEFIT PENSION PLAN (continued)

59 Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate
The following presents SVP’s proportionate share of the net pension liability for the Plan, calculated using the discount rate for the Plan, as well as what SVP’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower or 1-percentage point higher than the current rate:

June 30, 2023 June 30, 2022
1% Decrease 5.90% 6.15%
Net Pension Liability 141,406,186$ 106,409,645$
Current Discount Rate 6.90% 7.15%
Net Pension Liability 105,823,291$ 73,533,480$
1% Increase 7.90% 8.15%
Net Pension Liability 76,286,918$ 46,131,125$
Miscellaneous

Pension Plan Fiduciary Net Position
Detailed information about the pension plan’s fiduciary net position is available in the separately issued CalPERS financial report.

D. Subsequent Events
On July 12,2021, CalPERS reported a preliminary 21.3% net return on investments for fiscal year 2020-21. Based on the thresholds specified in CalPERS Funding Risk Mitigation policy, the excess return of 14.3% prescribes a reduction in investment volatility that corresponds to a reduction in the discount rate used for funding purposes of .20% from 7.00% to 6.80%. Since CalPERS was in the final stages of the four-year Asset Liability Management (ALM) cycle, the board elected to defer any changes to the asset allocation until the ALM process concluded, and the board could make its final decision on the asset allocation in November 2021.

On November 17, 2021, the board adopted a new strategic asset allocation. The new asset allocation along with the new capital market assumptions, economic assumptions and administrative expense assumption support a discount rate of 6.90% (net of investment expense but without a reduction of administrative expense) for financial reporting purposes. This includes a reduction in the price inflation assumption from 2.50% to 2.30% as recommended in the November 2021 CalPERS Experience Study and Review of Actuarial Assumptions. This DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
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NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 7 – RETIREMENT PLAN – DEFINED BENEFIT PENSION PLAN (continued)

60 study also recommended modifications to retirement rates, termination rates, mortality rates and rates of salary increases that were adopted by the board. These new assumptions will be reflected in the GASB 68 accounting valuation reports for the June 30, 2022, measurement date.

NOTE 8 – OTHER POST EMPLOYMENT BENEFITS
A. Plan Description
The City’s agent multiple-employer defined benefit Other Post Employment Benefit (OPEB) Plan, which was established by City Council in fiscal year 2007-08 in accordance with GAAP, provides reimbursements to retirees for qualified expenses. Employees who have retired from the City with at least ten years of service and meet certain criterion based upon retirement date, household income in the most recent calendar year and age are entitled to reimbursements for qualified expenses. Annual maximum reimbursement amounts differ depending on when an employee retired from City service. The majority of retirees may be eligible for a maximum of annual reimbursements of $4,788 in the fiscal year 2022-23 and $4,626 in the fiscal year 2021-

22. Amendments to benefit provisions are negotiated by the various bargaining units at the City and must be approved by Council. In fiscal year 2007-08, the City established an irrevocable exclusive agent multiple-employer defined benefit trust which is administered by Public Agency Retirement Services (PARS). The City is the Plan administrator, and PARS administers the investment trust for the City’s Plan. The trust is used to accumulate and invest assets necessary to reimburse retirees. Separate financial reports are issued by PARS for the OPEB Plan Trust.

The report can be obtained by writing to PARS at 4350 Von Karman Avenue, Suite 100, Newport Beach, CA 92660, or by calling 1-800-540-6369.

For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the OPEB plan and additions to and deduction from the OPEB’s fiduciary net position have been determined on the same bases. For this purpose OPEB benefit payments are recognized when currently due and payable in accordance with the benefits terms. Investments are report at fair value.

Generally accepted accounting principles require that the reporting results must pertain to liability and asset information within certain defined timeframes. For the fiscal year 2022-23 and the fiscal year 2021-22, the following time frames were used.

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CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
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NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 8 – OTHER POST EMPLOYMENT BENEFITS (continued)

61 Fiscal year 2022-23
Measurement Date June 30, 2023
Measurement Period July 1, 2022 to June 30, 2023
Actuarial valuation date (1) June 30, 2022
Fiscal year 2021-22
Measurement Date June 30, 2022
Measurement Period July 1, 2021 to June 30, 2022
Actuarial valuation date
(1) June 30, 2020
(1) Update procedures were used to roll forward the Total OPEB Liability from the valuation date to the measurement date.

B. Contributions
The OPEB Plan trust annual contributions are based upon actuarial determine contributions. The contribution requirements are established and may be amended by the City Council. Plan members do not make contributions to the plan; the plan is funded entirely by employer contributions. For the fiscal year ending June 30, 2023 and June 30, 2022, SVP contributed $758 thousand and $635 thousand.

C. Actuarial Assumptions
The June 30, 2023 total OPEB liability was based on the following actuarial methods and assumptions:

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CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
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NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 8 – OTHER POST EMPLOYMENT BENEFITS (continued)

62 Significant Actuarial Assumptions Used in Total OPEB Liability Actuarial Assumption June 30, 2023 Measurement Date
Actuarial valuation date June 30, 2022
Discount rate 4.50% at June 30, 2023
Crossover analysis showed benefit payments always fully funded by plan assets Inflation 2.50%
Salary increases Aggregate 2.75%
Investment rate of return 4.75% at June 30, 2022
Funding policy Full pre-funding to PARS trust, PARS portfolio: Moderately Conservative Mortality, Disability,
Termination, and Retirement
CalPERS 2000-2019 Experience Study
Mortality Improvement Mortality projected fully generational with Scale MP-2021 Healthcare cost trend rates Non-Medicare - 8.5% for 2023 scaling down to 3.45% for year 2076 Medicare(Non-Kaiser) - 7.5% for 2023 scaling down to 3.45% for year 2076 Medicare(Kaiser) - 6.25% for 2022 scaling down to 3.45% for year 2076 Healthcare participation for future
retirees - Cash subsidy
PEMHCA minimum only: Currently covered: 50% Waived: 25% Other plans: Currently covered: 80% Waived: 25%
Healthcare participation for future
retirees - PEMHCA implied
subsidy
PEMHCA minimum only: Currently covered: 50% Waived: 25% Other plans: Currently covered: 80% Waived: 25%

The June 30, 2022 total OPEB liability was based on the following actuarial methods and assumptions:

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CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
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NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 8 – OTHER POST EMPLOYMENT BENEFITS (continued)

63 Significant Actuarial Assumptions Used in Total OPEB Liability Actuarial Assumption June 30, 2022 Measurement Date
Actuarial valuation date June 30, 2020
Discount rate 4.75% at June 30, 2022
Crossover analysis showed benefit payments always fully funded by plan assets Inflation 2.75%
Salary increases Aggregate 3%
Investment rate of return 5.25% at June 30, 2020
Funding policy Full pre-funding to PARS trust, PARS portfolio: Moderately Conservative Mortality, Disability,
Termination, and Retirement
CalPERS 1997-2015 Experience Study
Mortality Improvement Mortality projected fully generational with Scale MP-2020 Healthcare cost trend rates Non-Medicare - 7% for 2022 scaling down to 4.0% for year 2076 Medicare(Non-Kaiser) - 6.1% for 2022 scaling down to 4.0% for year 2076 Medicare(Kaiser) - 5% for 2022 scaling down to 4.0% for year 2076 Healthcare participation for future
retirees - Cash subsidy
Currently covered: 80%
Waived: 40%
Healthcare participation for future
retirees - PEMHCA implied
subsidy
Currently covered: 80%
Waived: 25%

D. Net OPEB Liability, OPEB Expenses and Deferred Outflows/Inflows of Resources Related to OPEB
SVP’s net OPEB liability for the Plan is measured as the proportionate share of the City’s net OPEB liability as of June 30. The total OPEB liability for the Plan used to calculate the net OPEB liability for the fiscal year 2022-23 was determined by an actuarial valuation as of June 30, 2022, rolled forward to June 30, 2023 using standard actuarial methods, based on actuarial methods and assumptions. The total OPEB liability for the Plan used to calculate the net OPEB liability for the fiscal year 2021-22 was determined by an actuarial valuation as of June 30, 2020, rolled forward to June 30, 2022 using standard actuarial methods, based on actuarial methods and assumptions. SVP’s proportion of the net OPEB liability was based on a projection of SVP’s long-term share of contributions to the OPEB plan relative to the projected contributions of all funds of the City. SVP’s proportionate share of the net OPEB liability for the Plan as of June 30, 2023 and 2022 was 19.32% and 32.31%.

For the year ended June 30, 2023, SVP reported a net OPEB liability of $7,289 thousand and recognized OPEB expense of $686 thousand. For the year ended June 30, 2022, SVP reported a DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
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NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 8 – OTHER POST EMPLOYMENT BENEFITS (continued)

64 net OPEB liability of $13,058 thousand and recognized OPEB expense of $753 thousand. At June 30, 2023 and 2022, SVP reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources (in thousands):

June 30, 2023
Deferred Outflows of
Resources
Deferred Inflows of
Resources
Changes of assumptions 173$ 341 $ Differences between expected and actual experience - 361 Net differences between projected and actual earnings
on OPEB plan investments 443 -
Total 616$ 702$

June 30, 2022
Deferred Outflows of
Resources
Deferred Inflows of
Resources
Changes of assumptions 377$ 669$
Differences between expected and actual experience - 260 Net differences between projected and actual earnings
on OPEB plan investments 840 -
Total 1,217$ 929$

Other amounts reported as deferred outflows of resources related to OPEB will be recognized as expense as follows:

Annual Annual
Measurement Period Amortization Measurement Period Amortization Ended June 30 (in thousands) Ended June 30 (in thousands) 2024 (147)$ 2023 (157)$
2025 47 2024 (135)
2026 156 2025 189
2027 (54) 2026 371
2028 (76) 2027 21
Thereafter (8) Thereafter -
2023 2022

E. Discount Rate
The discount rate used to measure the total OPEB liability was 4.50% as of June 30, 2023 and

4.75% as of June 30, 2022. The projection of cash flows used to determine the discount rate assumed that City contributions will be made at rate equal to the actuarially determined DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
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NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 8 – OTHER POST EMPLOYMENT BENEFITS (continued)

65 contributions rates. Based on those assumptions, the OPEB plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members.

Therefore, the long-term expected rate of return on OPEB plan investments was applied to all periods of projected benefit payments to determine the total OPEB liability.

Asset Class Target Allocation
Long-Term Expected
Real Rate of Return
Gloabal Equity 30% 4.56%
Mutual Funds - Fixed Income 65% 0.78%
Cash and equivalent 5% -0.50%
100%
Expected Inflation 2.50%
Discount Rate 4.50%
2023

Asset Class Target Allocation
Long-Term Expected
Real Rate of Return
Mutual Funds - Equity 29% 4.82%
Mutual Funds - Fixed Income 65% 1.47%
REITS 1% 3.76%
Cash and equivalent 5% 0.06%
100%
Expected Inflation 2.75%
Discount Rate 4.75%
2022

F. Sensitivity of the Net OPEB Liability to Changes in the Discount Rate The following table presents the net OPEB liability of the Plan as of June 30 as well as what the plan’s net OPEB liability would be if it were calculated using a discount rate that is 1% point lower or 1% point higher than the current rate.

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CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
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NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 8 – OTHER POST EMPLOYMENT BENEFITS (continued)

66 June 30, 2023
(In Thousands)
June 30, 2022
(In Thousands)
1% Decrease 3.50% 3.75%
Net OPEB Liability 8,951$ 15,941$
Current Discount Rate 4.50% 4.75%
Net OPEB Liability 7,289$ 13,058$
1% Increase 5.50% 5.75%
Net OPEB Liability 5,910$ 10,688$
G. Sensitivity of the Net OPEB Liability to Healthcare Cost Trend Rates The following table presents the net OPEB liability of the City, as of June 30, as well as what the City’s net OPEB liability would be if it were calculated using healthcare cost trend rates that are 1% point lower or 1% point higher than the current rate.

June 30, 2023
(In Thousands)
June 30, 2022
(In Thousands)
Net OPEB Liability
1% Decrease $5,637 $10,046
Net OPEB Liability
Current Rate $7,289 $13,058
Net OPEB Liability
1% Increase $9,330 $16,821

NOTE 9 – WHOLESALE ACTIVITIES
A. Long-term Power Purchase Contracts
SVP purchases wholesale electric power from various participants of the Western Systems Power Pool (WSPP), NCPA, MSR Public Power Agency (Note 6), Western Area Power Administration, and other sources to supply the power requirements of Silicon Valley Power’s electric utility customers under long-term power purchase agreements (PPAs). SVP actively manages the financial risks inherent in these PPAs, including the risks arising from the changing spot market prices that move above and below the contract prices and from contract disputes that may arise from time to time. The proceeds and costs related to generation, either owned or DRAFT

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NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 9 – WHOLESALE ACTIVITIES (continued)

67 under PPAs, except ancillary services are included in purchased resource expense and excluded from wholesale resources purchases.

B. Restructuring of the California Electric Industry
Deregulation Legislation and Direct Access
The passage of AB1890 in 1998 triggered fundamental changes in the structure of the electric industry in California. Generally, AB1890 provided for creation of the California Power Exchange (Cal PX), which was to be a clearinghouse for energy transactions among investor- owned utilities, independent generators and power marketers, who in turn would serve so called direct-access customers. AB1890 also created the California Independent System Operator (CAISO), which was to manage the state’s bulk transmission grid.

However, in 2000 and 2001, the price of electricity at the Cal PX became extremely high, and investor-owned utilities were unable to pay for the energy that they needed from the Cal PX.

Eventually the Cal PX filed for bankruptcy and was dismantled. Investor-owned utility PG&E and several energy marketers would also file for bankruptcy and over a decade of litigation ensued.

The CAISO, however, continues to manage the state’s bulk electric system and the day-ahead and day-of markets, and it has implemented various price controls and tariffs in an effort to avoid repeating the mistakes of 2000 and 2001. Along with balancing control area responsibility, the CAISO has also announced that it will take on the role of reliability coordinator for the region.

Energy Wholesale Trading and Risk Management
SVP participates in the wholesale gas and power market and the CAISO’s centralized market.

Since CAISO’s Market Redesign and Technology Upgrade (MRTU), CAISO has become the ultimate buyer and seller in the California day ahead market. Therefore, SVP engages in the trading of commodity forward contracts (gas and electric energy contracts) to secure fuel supply and hedge daily power purchase/sales from/to CAISO. The primary type of forward contracts SVP currently engages in is the Futures contracts SVP transacts on Intercontinental Exchange (ICE). The Futures transactions for both natural gas and power are recorded on cash basis under Wholesale Trading activities starting fiscal year 2022-23. Activities during the fiscal year were substantially considered hedging transactions and, as such, have been accounted for using the settlement method of accounting. Accordingly, related gross sales and purchases totaling $85.0 million and $19.5 million, respectively, for fiscal year ended June 30, 2023, have been separately reported on the statement of revenues, expenses and changes in net position.

The restructured electric wholesale market exposes SVP to various risks including market, credit and operational risks. Active and effective management of these risks associated with the power DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
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NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 9 – WHOLESALE ACTIVITIES (continued)

68 trading activity is critical to its continued success and contribution to the entire utility. A Risk Management Committee administers and monitors compliance with the Council approved risk policies and the related procedures on a regular basis. The City and SVP believe that it has the resource commitment, effective policies and procedures, and is continuing to improve the control structure and oversight for evaluating and managing the market and credit risks to which it is exposed.

Credit Arrangements
SVP has risk policies, regulations, and procedures that help mitigate credit risk and minimize overall credit risk exposure. The policies include transacting only with investment grade counterparties, evaluating of potential counterparties’ financial condition and assigning credit limits as applicable. These credit limits are established based on risk and return considerations under terms customarily available in the industry. For counterparties below investment grade or lack of solid financial records, SVP requires collateral in the form of parental guarantee, surety bonds, letter of credit, or cash prepayment. Additionally, The City is a signatory to the WSPP netting agreement supplement and otherwise, enters into master netting arrangements whenever possible and, where appropriate, obtains collateral prior to trade execution. Master netting agreements incorporate rights of setoff that provide for the net settlement of subject contracts with the same counterparty in the event of default.

NOTE 10 – MAJOR SUPPLIERS
SVP purchases electric energy through its participation in the NCPA and M-S-R Public Power Agency joint powers agencies, from the Western Area Power Administration, from the market via the California Independent System Operator (CAISO), and from other sources to supply its retail electric utility customers. Additionally, SVP purchases transmission services through its participation in the TANC and from the CAISO.

The purchases of energy and transmission services that represent 5% or more of the total purchased power costs are shown in the table below:

Supplier
June 30, 2023
Power Purchased
% of the Total
Purchased Power
NCPA 307,064,381$ 68.63%
M-S-R Energy Authority 53,305,412 11.91% Tri-Dam Project 33,708,170 7.53%
EDF Trading North America LLC 23,565,161 5.27% M-S-R Public Power Agency 22,424,268 5.01%

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CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
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NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 10 – MAJOR SUPPLIERS (continued)

69 Supplier
June 30, 2022
Power Purchased
% of the Total
Purchased Power
NCPA 205,500,630$ 50.81%
M-S-R Public Power Agency 37,406,667 9.25% M-S-R Energy Authority 28,856,522 7.14%
Tri-Dam Project 28,602,808 7.07%
NOTE 11 – COMMITMENTS AND CONTINGENCIES
Commitments and contingencies, undeterminable in amount, include normal recurring pending claims and litigation. In the opinion of management, based upon discussion with legal counsel, there is no pending litigation, which is likely to have a material adverse effect on the financial position of the fund.

SVP has future commitments under construction projects as stated in Construction in Progress in Notes to Financial Statements 4B.

NOTE 12 – NET POSITION AND STABILIZATION AGREEMENTS
A. Net Position
Net Position is the excess of all SVP’s assets and deferred outflow of resources over all its liabilities and deferred inflow of resources. Net Position is divided into three categories that are described below:

Net investment in capital assets describes the portion of Net Position which is represented by the current net book value of SVP’s capital assets, less the outstanding balance of any debt issued to finance these assets.

Restricted for other agreements describes the portion of Net Position which is restricted as to use by the terms and conditions of agreements with outside parties, governmental regulations, laws, or other restrictions which SVP cannot unilaterally alter.

Unrestricted describes the portion of Net Position which is not restricted as to use.

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CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
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NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 12 – NET POSITION AND STABILIZATION AGREEMENTS (continued)

70 SVP reported net position at June 30 as follows:
2023 2022
Net investment in capital assets: 527,101,920$ 494,932,518$ Restricted:

Pension benefits 6,324,045 6,146,358 Unrestricted:

Capital projects 167,116,904 126,114,987 Rate stabilization 207,542,169 167,542,169 Operations 163,210,048 176,094,773
Total Unrestricted 537,869,121 469,751,929 Total Net Position 1,071,295,086$ 970,830,805$

B. Stabilization Agreements
Rate Stabilization Fund
In 1996, SVP established the Rate Stabilization Fund and Cost Reduction Fund to assure that the rates were set properly with sufficient operating cash as well as cost reduction and financial stability of the Electric Utility. In December 2010, Council approved to transfer the Cost Reduction Fund as a subaccount to the Rate Stabilization Fund and continued to be used to offset Electric Utility costs in essentially the same manner. As of June 30, 2023, the balance of the Rate Stabilization Fund was $207,542,169.

Pension Stabilization Fund
In fiscal year 2016-17, the City established an irrevocable pension trust as a way to address unfunded pension liabilities. As part of the year-end process for 2016-17, City Council approved SVP to designate and make an initial deposit of $3.5 million in fiscal year 2018 toward prefunding pension obligations. As of June 30, 2023, the balance of the Pension Stabilization Fund was $6,324,045.

C. Prior Period Adjustment
The City of Santa Clara received review comments from the Government Finance Officers Association on the net Investment of capital assets in the Statement of Net Position in the Electric Utility Fund Statement in the Annual Comprehensive Financial Report for the fiscal year 2021-22. The calculation of the net investment in capital assets should include the capital related DRAFT

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
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NOTES TO FINANCIAL STATEMENTS

For the years ended June 30, 2023 and 2022
NOTE 12 – NET POSITION AND STABILIZATION AGREEMENTS (continued)

71 deferred outflow discount and inflow refunding premium and exclude the financial assets and lease receivables in the prior fiscal year. Management concurred the suggestion and adopted the changes in the calculation. SVP adjusted the net investment of capital assets and unrestricted net position in the statements of net position for the fiscal year 2021-22. The restated net investment of capital assets and unrestricted net position for prior year are $494,932,518 and $469,751,929.

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CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
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REQUIRED SUPPLEMENTARY INFORMATION

73 This part of the City of Santa Clara Electric Utility Enterprise Fund Financial Statements provides detailed information to better understand the data presented within the financial statements and note disclosures.

SCHEDULE OF PROPORTIONATE SHARE OF THE NET PENSION LIABILITY AND

RELATED RATIOS
Discloses the proportionate share of the net pension liability and related ratios, including the proportionate share of fiduciary net position as a percentage of the total pension liability, and proportionate share of the net pension liability as a percentage of covered payroll.

SCHEDULE OF CONTRIBUTIONS – PENSION PLAN
Contains information of the employer’s contractually required contribution rates, contributions to the pension plan and related ratios.

SCHEDULE OF PROPORTIONATE SHARE OF THE NET OPEB LIABILITY AND

RELATED RATIOS
Discloses the proportionate share of the net OPEB liability and related ratios, including proportionate share of fiduciary net position as a percentage of the total OPEB liability, and the proportionate share of the net OPEB liability as a percentage of covered employee payroll.

SCHEDULE OF PLAN CONTRIBUTIONS - OPEB PLAN
Contains information of the employer’s contractually required contribution rates, contributions to the OPEB Plan and related ratios.

Required Supplementary Information

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74 Measurement Date June 30, 2022 June 30, 2021 June 30, 2020 Plan's Proportion of the Net Position
Liability/(Asset) 32.31% 32.31% 32.31%
Plan's Proportionate Share of the Net Pension
Liability/(Asset) 105,823,291$ 73,533,480$ 98,396,395$ Plan's Covered Payroll 29,932,874$ 28,859,863$ 28,818,319$ Plan's Proportionate Share of the Net Pension
Liability/(Asset) as a Percentage of it's Covered
Payroll 353.54% 254.79% 341.44%
Plan's Proportionate Share of the Fiduciary Net
Position as a Percentage of the Plan's Total
Pension Liability 62.47% 72.48% 61.90%
Notes to Schedule:

Schedule of Proportionate Share of the Net Pension Liability City of Santa Clara Electric Utility Enterprise Fund Miscellaneous Plan, a Cost-Sharing Defined Benefit Pension Plan
Last Ten Fiscal Years for the Measurement Periods Ended June 30(1) (1) Fiscal year 2014-15 was the first year of implementation.

Schedule of Changes in the Net Pension Liability and Related Ratios Schedule of Proportionate Share of the Net Pension Liability

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75 June 30, 2019 June 30, 2018 June 30, 2017 June 30, 2016 June 30, 2015 June 30, 2014

32.31% 34.97% 34.97% 34.97% 34.97% 34.97%
92,007,139$ 94,238,259$ 92,735,319$ 84,615,916$ 74,516,387$ 69,068,338$ 28,630,755$ 26,407,732$ 24,928,548$ 21,661,244$ 20,300,577$ 20,289,905$ 321.36% 356.86% 372.00% 390.63% 367.07% 340.41%

62.72% 62.97% 62.02% 62.18% 65.57% 67.42%
Schedule of Proportionate Share of the Net Pension Liability City of Santa Clara Electric Utility Enterprise Fund Miscellaneous Plan, a Cost-Sharing Defined Benefit Pension Plan
Last Ten Fiscal Years for the Measurement Periods Ended June 30

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76 June 30, 2023 June 30, 2022 June 30, 2021
Actuarially determined contribution 11,321,067$ 11,026,399$ 10,027,454$ Contributions in relation to the actuarially
determined contributions (11,321,067) (11,026,399) (10,027,454) Contribution deficiency (excess) - $ - $ - $ Covered payroll 32,408,374$ 29,932,874$ 28,859,863$
Contributions as a percentage of
covered payroll 34.93% 36.84% 34.75%
Notes to Schedule
Valuation date 6/30/2020 6/30/2019 6/30/2018
Methods and assumptions used to determine contribution rates:

Actuarial cost method Entry age normal
Amortization method Level percentage of payroll, closed Remaining amortization period 24 years as of valuation date Asset valuation method
Inflation
Salary increases
Investment rate of return
Retirement age
Mortality
(1) Fiscal year 2014-15 was the 1st year of implementation.

7.5% for 2015 to 2018, 7.375% for 2019, 7.25% for 2020, and 7% for 2021 through 2023, net of pension plan investment expense, including inflation.

2.75% for 2015 to 2019, 2.675% for 2020, and 2.50% for
2021 through 2023.
5-year smoothed market
The probabilities of Retirement are based on the CalPERS Experience Study.

Varies by Entry Age and Service.

The probabilities of mortality are based on CalPERS
Experience Study. Pre-retirement and post-retirement mortality rates include 20 years of projected mortality improvement using Scale AA published by the Society of Actuaries for 2015 to 2018. For 2019,2020, 2021 and 2022, pre-retirement and post-retirement mortality rates include 15 years of projected mortality improvement using 90% of Scale MP-2016 published by the Society of Actuaries.

Schedule of Contributions
City of Santa Clara Electric Utility Enterprise Fund Miscellaneous Plan, a Cost-Sharing Defined Benefit Pension Plan
Last Ten Fiscal Years(1)

Schedule of Contributions (Pension Plan)
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77 June 30, 2020 June 30, 2019 June 30, 2018 June 30, 2017 June 30, 2016 June 30, 2015 9,365,958$ 8,258,503$ 8,832,105$ 7,558,410$ 6,484,674$ 5,335,643$ (9,365,958) (8,258,503) (8,832,105) (7,558,410) (6,484,674) (5,335,643) -$ - $ - $ - $ - $ - $ 28,818,319$ 28,630,755$ 26,407,732$ 24,928,548$ 21,661,244$ 20,300,577$

32.50% 28.84% 33.45% 30.32% 29.94% 26.28%
6/30/2017 6/30/2016 6/30/2015 6/30/2014 6/30/2013 6/30/2012 Schedule of Contributions
City of Santa Clara Electric Utility Enterprise Fund Miscellaneous Plan, a Cost-Sharing Defined Benefit Pension Plan
Last Ten Fiscal Years

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78 Measurement Date June 30, 2023 June 30, 2022 June 30, 2021 Plan's Proportionate Share of the Net Position Liability/(Asset) 19.32% 32.31% 32.31% Plan's Proportionate Share of the Net OPEB Liability/(Asset) 7,288,705$ 13,057,945$ 11,860,957$ Plan's Covered Payroll 34,795,415$ 54,801,960$ 52,857,221$ Plan's Proportionate Share of the Net OPEB Liability/(Asset) as a Percentage of it's Covered Payroll 20.95% 23.83% 22.44% Plan's Proportionate Share of the Fiduciary Net Position as a Percentage of the Plan's Total OPEB Liability 44.03% 40.25% 44.03% June 30, 2020 June 30, 2019 June 30, 2018
Plan's Proportionate Share of the Net Position Liability/(Asset) 32.31% 34.97% 34.97% Plan's Proportionate Share of the Net OPEB Liability/(Asset) 12,076,500$ 13,339,656$ 16,285,879$ Plan's Covered Payroll 53,127,656$ 52,963,135$ 47,313,294$ Plan's Proportionate Share of the Net OPEB Liability/(Asset) as a Percentage of it's Covered Payroll 22.73% 25.19% 34.42% Plan's Proportionate Share of the Fiduciary Net Position as a Percentage of the Plan's Total OPEB Liability 40.11% 37.14% 28.90% Notes to Schedule:

Schedule of Proportionate Share of the Net OPEB Liab ility and Related Ratios City of Santa Clara Electric Utility Enterprise Fund
OPEB Plan, A Cost-Sharing Defined Benefit Plan
Last Ten Fiscal Years Ended June 30(1)
(1) Fiscal year 2017-18 was the first year of implementation.

Schedule of Proportionate Share of the Net OPEB Liability and Related Ratios

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79 June 30, 2023 June 30, 2022 June 30, 2021
Actuarially determined contribution 950$ 1,534$ 1,559$ Contributions in relation to the actuarially
determined contributions (758) (635) (570) Contribution deficiency (excess) 192$ 899$ 989$ Covered payroll 34,795$ 54,802$ 52,857$ Contributions as a percentage of covered payroll 2.18% 1.16% 1.08% June 30, 2020 June 30, 2019 June 30, 2018
Actuarially determined contribution 1,512$ 1,856$ 1,911$ Contributions in relation to the actuarially
determined contributions (638) (748) (886) Contribution deficiency (excess) 874$ 1,108$ 1,025$ Covered payroll 53,128$ 52,963$ 47,313$ Contributions as a percentage of covered payroll 1.20% 1.41% 1.87% Notes to Schedule:
(1) Fiscal year 2017-18 was the first year of implementation. (In Thousands)
Schedule of Proportionate Share of Contributions
City of Santa Clara Electric Utility Enterprise Fund
OPEB Plan, A Cost-Sharing Defined Benefit Plan
Last Ten Fiscal Years Ended June 30 (1)

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80 Schedule of Proportionate Share of the Contributions (OPEB Plan) Actuarial valuation date June 30, 2020
Actuarial cost method Entry Age Normal, Level Percentage of Payroll Amortization method Level percent of payroll
Unfunded liability amortization
Asset valuation method
Discount rate 5.25%
General inflation 2.75%
Healthcare trend
Mortality CalPERS 1997-2015 Experience Study
Mortality improvement

CITY OF SANTA CLARA ELECTRIC UTILITY ENTERPRISE FUND
(SILICON VALLEY POWER)
Notes to Schedule of Employer Contribution (OPEB Plan)
Post-retirement mortality projected fully generational with Scale MP-2020
Methods and Assumptions for 2022-23 Actuarially Determine Contributions 15 years (open period) for method, assumption, plan changes, and gains and losses
Maximum 30-year combined period
Investment gains and losses spread over a 5-year rolling period.

Not less that 80% nor greater than 120% of fair value
Non-Medicare - 7% for 2022, decreasing to an ultimated
rate of 4% in 2076
Medicare (non-Kaiser)- 6.1% for 2022, decreasing to an ultimated rate of 4% in 2076
30 years (closed period) for initial UAAL
(17 Years remaining on June 30, 2022)
20 years (closed period) for implied subsidy on 06/30/2019 (17 years remaining on June 30, 2022)
Medicare (Kaiser)- 5% for 2022, decreasing to an ultimated rate of 4% in 2076
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CI

TY OF SANTA CLARA

REQUIRED COMMUNICATIONS
F
OR THE YEAR ENDED JUNE 30, 2023
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CITY OF SANTA CLARA

REQUIRED COMMUNICATIONS

For the Year Ended June 30, 2023

Table of Contents

Page

Required Communications ................................................................................................................... 1

Significant Audit Matters .................................................................................................................. 1

Qualitative Aspects of Accounting Practices .............................................................................. 1

Difficulties Encountered in Performing the Audit .................................................................... 3

Corrected and Uncorrected Misstatements .............................................................................. 4

Disagreements with Management.............................................................................................. 4

Management Representations ..................................................................................................... 4

Management Consultations with Other Independent Accountants .......................................... 4

Other Audit Findings or Issues ................................................................................................... 4

Other Matters .................................................................................................................................... 4

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REQUIRED COMMUNICATIONS

To the City Council of
the City of Santa Clara, California

We have audited the basic financial statements of the City of Santa Clara for the year ended June 30, 2023. We did not audit the component financial statements of the Santa Clara Stadium Authority as of and for the year ended March 31, 2023 which represent 42.7%, 6.8%, and 8.8% of the assets, net position and revenues, respectively, of the business- type activities. We also did not audit the components related to the Investment in Joint Ventures, which collectively include: Northern Californ ia Power Agency (NCPA), Transmission Agency of Northern California (TANC), M-S-R Energy Authority (MSR EA), M- S-R Public Power Agency (MSR PPA), and San Jose- Santa Clara Regional Wastewater Facility and Clean Water Financing Authority (SJSC) for the year e nded June 30, 2023, which collectively represent

9.2%, 18.7%, and 0.8%, respectively, of the assets , net position and revenues of the business-type activities. These component unit financial statements and component financial statements were audited by other auditors, whose reports thereon have been furnished to us, and our opinions , insofar as it relates to the amounts included for these entities, is based solely on the reports of the other auditors.

Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards and Government Auditing Standards and the Uniform Guidance, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our letter to you dated April 17, 2023. Professional standards also require that we communicate to you the following information related to our audit.

Significant Audit Matters

Qualitative Aspects of Accounting Practices

Accounting Policies - Management is responsible for the selection and use of appropriate accounting policies. The significant accounti ng policies used by the City are described in Note 2 to the financial statements. No new accounting policies were adopted, and the application of existing policies was not changed during the year, except t he following Governmental Accounting Standards Boa rd (GASB) pronouncements became effective:

GASB 96 – Subscription Based Information Technology Arrangements

This Statement provides guidance on the accounting and financial reporting for subscription- based information technology arrangements (SBITAs) for government end users (governments).

This Statement (1) defines a SBITA; (2) establishes that a SBITA results in a right- to-use subscription asset—an intangible asset —and a corresponding subscription liability; (3) provides the capitalization criteria for outlays other than subscription payments, including implementation costs of a SBITA; and (4) requires note disclosures regarding a SBITA. To the extent relevant, the standards for SBITAs are based on the standards established in Statement No. 87, Leases, as amended.

A SBITA is defined as a contract that conveys control of the right to use another party’s (a SBITA vendor’s) information technology (IT) software, alone or in combination with tangible capital assets (the underlying IT assets), as specified in the contract for a period of time in an exchange or exchange-like transaction.

DRAFT

The subscription term includes the period during which a government has a noncancelable right to use the underlying IT assets. The subscription term also includes periods covered by an option to extend (if it is reasonably certain that the government or SBITA vendor will exercise that option) or to terminate (if it is reasonably certain that the government or SBITA vendor will not exercise that option).

Under this Statement, a government generally should recognize a right -to-use subscription asset—an intangible asset —and a corresponding subscription liability. A government should recognize the subscription liability at the commencement of the subscription term, —wh ich is when the subscription asset is placed into service. The subscription liability should be initially measured at the present value of subscription payments expected to be made during the subscription term. Future subscription payments should be discounted using the interest rate the SBITA vendor charges the government, which may be implicit, or the government’s incremental borrowing rate if the interest rate is not readily determinable. A government should recognize amortization of the discount on the subscription liability as an outflow of resources (for example, interest expense) in subsequent financial reporting periods.

The subscription asset should be initially measured as the sum of (1) the initial subscription liability amount, (2) payments made to the SBITA vendor before commencement of the subscription term, and (3) capitalizable implementation costs, less any incentives received from the SBITA vendor at or before the commencement of the subscription term. A government should recognize amortization of the subscription asset as an outflow of resources over the subscription term.

The pronouncement became effective and was disclosed in Note 10I to the financial statements.

The following pronouncements became effective, but did not have a material effect on the financial statements:

GASB 91 – Conduit Debt Obligations
GASB 94 – Public-Private and Public -Public Partnerships and Availability Payment Arrangements

Unusual Transactions, Controversial or Emerging Areas – We noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period.

Accounting Estimates – Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimate s affecting the City’s financial statements were:

Estimated Net Pension Liabilities and Pension -Related Deferred Outflows and Inflows of Resources: Management’s estimate of the net pension liabilities and deferred outflows/inflows of resources are disclosed in Note 13 to the financial statements and are based on actuarial studies and accounting valuations determined by the California Public Employees Retirement System , which are based on the experience of the City. We evaluated the key factors and assumptions used to develop the estimate and determined that it is reasonable in relation to the basic financial statements taken as a whole.

DRAFT

Estimated Net OPEB Liability and OPEB -Related Deferred Outflows and Inflows of Resources :

Management’s estimate of the net OPEB liability and deferred outflo ws/inflows of resources is disclosed in Note 16 to the financial statements and is based on actuarial study determined by a consultant, which is based on the experience of the City. We evaluated the key factors and assumptions used to develop the estimate and determined that it is reasonable in relation to the basic financial statements taken as a whole.

Estimated Fair Value of Investments: As of June 30, 2023, the City held approximately $ 1.16 billion of cash and investments as measured by fai r value as disclosed in Note 7 to the financial statements. Fair value is essentially market pricing in effect as of J une 30, 2023. These fair values are not required to be adjusted for changes in general market conditions occurring subsequent to June 30, 2023.

Estimated Investment in Joint Ventures: Management’s estimate of the investment in joint ventures is disclosed in Note 12 to the financial statements and is based on the audited financial statements of the entities for the prior fiscal year. We evaluated the key factors and assumptions used to develop the investment in joint ventures in determining that it is reasonable in relation to the financial statements taken as a whole.

Estimate of Depreciat ion: Management’s estimate of the depreciation is based on useful lives determined by management. These lives have been determined by management based on the expected useful life of assets as disclosed in Note 2I to the financial statements. We evaluated the key factors and assumptions used to develop the depreciation estimate in Note 9 to the financial statements and determined that it is reasonable in relation to the basic financial statements taken as a whole.

Estimate of Compensated Absences: Accru ed compensated absences which are comprised of accrued vacation, holiday, and certain other compensating time is estimated using accumulated unpaid leave hours and hourly pay rates in effect at the end of the fiscal year as disclosed in Note 2L to the financial statements. We evaluated the key factors and assumptions used to develop the accrued compensated absences and determined that it is reasonable in relation to the basic financial statements taken as a whole.

Estimated Landfill Closure Liability : Management’s estimate of the landfill closure liability is disclosed in Note 11 to the financial statements and is based on the City’s estimate of future post- closure maintenance and corrective action costs required by its agreement with CalRecycle . We evaluated the key factors and assumptions used to develop the landfill closure liability in determining that it is reasonable in relation to the financial statements taken as a whole.

Estimated Claims Liabilities: Management’s estimate of the claims liabilit ies payable is disclosed in Note 19 to the financial statements and is based on actuarial studies determined by a consultant, which are based on the claims experience of the City. We evaluated the key factors and assumptions used to develop the estimate and determined that it is reasonable in relation to the basic financial statements taken as a whole.

Disclosures – The financial statement disclosures are neutral, consistent and clear.

Difficulties Encountered in Performing the Audit

We encountered no significant difficulties in dealing with management in performing and completing our audit.

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Corrected and Uncorrected Misstatements

Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. In addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to each opinion unit’s financial statements taken as a whole.

Professional standards require us to accumulate all known and likely uncorrected misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. We have no such misstatements to report to the City Council.

Disagreements with Management

For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor’s report. We are pleased to report that no such disagreements arose during the course of our audit.

Management Representations

We have requested certain representations from management that are included in a management representation letter dated November 15, 2023.

Management Consultations with Other Independent Accountants

In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves the application of an accounting principle to the City’s financial statements or a determination of the type of auditor’s opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants.

Other Audit Findings or Issues

We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the City’s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention.

Other Matters

We applied certain limited procedures to the required supplementary information that accompanies and supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did not audit the required supplementary information and do not express an opinion or provide any assurance on the required supplementary information.

DRAFT

We were engaged to report on the supplementary information that accompanies the financial statements, but is not required supplementary information. With respect to this supplementary information, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary infor mation to the underlying accounting records used to prepare the financial statements or to the financial statements themselves.

We were not engaged to report on the Introductory and Statistical Sections which accompany the financial statements, but are not required supplementary information. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance them.

******

This information is intended solely for the use of City Council and management and is not intended to be, and should not be, used by anyone other than these specified parties.

Pleasant Hill, California
November 15, 2023

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Annual Comprehensive
Financial Report
(ACFR)
Fiscal Year Ended June 30, 2023
Audit Committee Meeting
November 27, 2023
AGENDA
• Overview
• Audit Results Presentation by Maze & Associates
• Recommendation
2 OVERVIEW
• Government Finance Officers Association (GFOA) Certificate of Achievement in Excellence in Financial Reporting
– Fiscal Year ended June 30, 2022 Comprehensive Annual Financial Report – 31 consecutive years
• Maze & Associates have completed the annual audit of the City’s ACFR and Silicon Valley Power Financial Statements
• The ACFR covers the 2022-23 fiscal year (July 1, 2022 to June 30, 2023) with comparative data from the 2021-22 fiscal year included in the MD&A
• Unmodified (i.e., “clean”) opinion expressed by auditors • Reports will be available on the City’s Finance Department’s webpage 3

AUDIT RESULTS PRESENTATION

BY MAZE
4 RECOMMENDATION
• Accept the City of Santa Clara Audited Annual
Comprehensive Financial Report and Silicon Valley Power Financial Statements for Fiscal Year 2022/23 and
recommend that the reports are forwarded for note and
file at the December 12, 2023 Council and Authorities
Concurrent meeting.
5 Independent Auditor Presentation –
Audit of the Basic Financial Statements
For the fiscal year ended June 30, 2023
Audit Committee November 27, 2023
Grace Zhang, CPA
Audit Partner
1 Agenda
 Background
 Audit Reports and Other Reports
 Results of Audit
 Key Financial Highlights
 Report on Memorandum on Internal Control (MOIC)
 Required Communications
 Results of Agreed Upon Procedures
2 Background
 Maze & Associates – we are an independent CPA firm,
independent from the City of Santa Clara and its
Component Units.
 Audit was conducted in accordance with auditing
standards generally accepted in the United States of
America and Government Auditing Standards issued by
the Comptroller General of the United States of America. 3 Audit Reports
 City (Annual Comprehensive Financial Report)
 Silicon Valley Power (Electric Enterprise Fund)
(Basic Financial Statements)
 Single Audit (federal award programs –
in process – due by 3/31/24)
4 Other Reports
 San Jose-Santa Clara Clean Water
Financing Authority –
Bond Compliance Letter
 Agreed Upon Procedures Reports:
Investment Policy Compliance
Gann Limit Calculation
5 Results of Audit – ACFR and SVP
 Independent Auditor’s Reports
 (pg 1 of ACFR and SVP)
Unmodified/clean opinions… fairly stated, in all
material respects…in conformity with accounting
principles generally accepted (GAAP) in the USA.
 Includes Emphasis of a Matter –
 Change in Accounting Principles –
Implementation of GASB Statement No. 96, SBITA
6 Results of Audit – ACFR and SVP
(continued)
 Management’s Discussion and Analysis
(MD&A)
(page 5 of ACFR; page 5 of SVP)
Prepared by Finance Staff
Discusses significant activity for the fiscal year
7 Key Financial Highlights of ACFR
 Management’s Discussion and Analysis (page 5):
 Introduces the basic financial statements and provides an analytical overview of the City’s financial activities
 Basic Financial Statements (page 28)
 Includes the financial activities of the City, the Santa Clara Housing Authority, the Santa Clara Stadium Authority, the City of Santa Clara Sports and Open Space Authority, and the City of Santa Clara Public Facilities Financing Corporation (legally separate but are component units of the City)
 Notes to the Basic Financial Statements (page 59)
 An integral part of the ACFR that provides information on significant financial transactions of the City (i.e. Note 13 PERS, Note 16 Other Post Employment Benefits, Note 10 Long-term Debt)
8 Key Financial Highlights of ACFR
(continued)
 City Assets exceeded Liabilities by $2.3 billion in FY23  The City’s net position increased by $141 million
 Pension liabilities increased $214 million (change of the assumption and the discount rate)
 Outstanding long-term debt decreased by $52 million ($46 million repayment in enterprise funds)
 General Fund’s fund balance equaled $153 million, a $12 million increase
9 Key Financial Highlights of ACFR
(continued)
 General Fund – Fund Balance (Note 18 page 140)
10 DescriptionAmountCategory
Supplies, Inventory, Leases$3.4 millionNonspendable
Grants, Donations, Pension Rate Stabilization24.7 millionRestricted Land Sale Reserve, Historical Preservation18.6 millionCommitted Encumbrances13.9 millionAssigned
Budget Stabilization Reserve, Capital Project
Reserve

92.8 millionUnassigned
$153.3 millionTotal
Report on Memorandum on
Internal Control and Required
Communications (MOIC)
 Three possible categories for comments:
Material Weakness
Significant Deficiency
Other Matters
11 Required Communications
 No Changes in Accounting Policies, other than:
 Implementation of GASBs 96
12 Required Communications
(continued)
 Unusual Transactions, Controversial or Emerging Areas  Accounting Estimates
 Disclosures
 Difficulties Encountered in Performing the Audit – none  Corrected and Uncorrected Misstatements
 Disagreements with Management – none
13 Results of Agreed Upon Procedures
 Investment Policy Compliance
 No exceptions
 GANN Limit Calculation
 No exceptions
14 QUESTIONS?
15 “We are in the business to help our clients succeed”