Shafter City Council
February 3, 2026

2. $724,021
($87,581)
P. DEFERRED REVENUES AND AVAILABLE RESERVES AS OF JUNE 30, 2024 -- enter here and on Line A, Part 5 (Sections J-O)
O. FY 2023-2024 PROJECTED EXPENSES & USES (Sections K+L+M+N)

CLAIMANT: City of Shafter
($87,581)
$0

1. FTA Planning Assistance $0

2. FTA Operating Assistance $124,347

3. FTA Capital Assistance $0

4. 5311 $273,412

1. State Capital Grants - LCTOP

2. State Capital Grants - SOGR $0

1. 470210-SJVAPCD-San Joaquin Air Control $398,480

2. $0

3. $0

1. Passenger Fares $26,993

2. Special Fares

3. School Bus Service

4. Freight Tariffs

5. Charters

1. County of Kern--Service Contract(s) $29,033

2. $764,684
G. Other Revenues (Source/Amount):

I. FY 2024-2025 NONCURRENT TDA & OTHER BUDGETED RESOURCES--enter here and on Part 6, Line J (Sections A+B+C+D+E+F+G)
B. Interest Earnings--interest earnings on claimant cash balances through June 30, 2025 C. Federal Grants and Reimbursements:

D. State Grants and Reimbursements (Source/Amount):

E. Non-TDA Local Cash Grants and Reimbursement (Source/Amount):

I. FY 2024-2025 NONCURRENT TDA & OTHER BUDGETED RESOURCES A. Deferred Revenues & Available Reserves-- unexpended prior year cash receipts and reserves held in the claimant's treasury as of June 30, 2024 (From Part 4, Line P) F. Operating Revenues:

Kern Council of Governments
PART 5 OF 8--BUDGETED PUBLIC TRANSIT RESOURCES
For Fiscal Year 2024-2025

CLAIMANT: City of Shafter
$764,684

1. Administrative Salaries & Wages $46,437

2. Operating Salaries & Wages $135,096

3. Other Salaries & Wages $0

4. Fringe Benefits $210,736

1. Professional Services $6,773

2. Maintenance Services $2,913

3. Other Services (Admin Charges) $107,567

4. Vehicle Maintenance & Supplies $35,093

5. Utilities $19,706

6. Insurance $20,191

7. Purchased Transportation Services

8. Miscellaneous $154,104

9. Expense & Inter-fund Transfers $49,855

10. Interest

11. Lease & Rentals

12. Other (training, travel, Other ) $3,299

1. 470210-SJVAPCD-San Joaquin Air Control

2. 3.

4. 5.

1. Regional Planning Contribution (from most recent TDA estimate) $38,057

2. Capital Outlay Reserve Contribution
$829,827
P. FY 2024-2025 UNFUNDED BALANCE (Line J-O) ($65,143)
Kern Council of Governments
PART 6 OF 8--BUDGETED PUBLIC TRANSIT EXPENSES
For Fiscal Year 2024-2025
J. FY 2024-2025 NONCURRENT TDA & OTHER BUDGETED RESOURCES (From Part 5, Line I)
II. FY 2024-2025 BUDGETED EXPENSES & USES
K. Personnel:

L. Services & Supplies:

M. Capital Assets (Itemize and identify funding source - i.e., TDA, FTA 5311, CMAQ):

N. Other Uses:

O. FY 2024-2025 BUDGETED EXPENSES & USES (Sections K+L+M+N)

CLAIMANT: City of Shafter
($65,143)

1. LTF--Regional Planning (PUC 99262) (Same as Part 6, Line N1) $38,057

2. LTF--Operations/Capital (PUC 99260a)

3. LTF--Capital Reserve Withdrawal (CCR 6648)

4. LTF--Social Service Transit (PUC 99275)

5. LTF--Contracted/Purchased Transit Services (PUC 99400c)

6. LTF--Capital Res. Contrib.(CCR 6648) (Same as Part 6, Line N2)

7. STAF--Operations (CCR 6730a) $62,274

8. STAF--Capital (CCR 6730b)

9. STAF--Contracted/Purchased Transit Services ( CCR 6731b)

10. STAF--Social Service Transit (CCR 6731c)

11. 12.
$100,331
$35,188
I. FY 2024-2025 UNFUNDED BALANCE (From Part 6, Line P)
II. FY 2024-2025 TDA TRANSIT FUNDING CLAIM
III. FY 2024-2025 TDA FUNDING CLAIM (Should equal line I) UNEXPENDED RESOURCES AS OF JUNE 30, 2025 (Line I+Line III)(Should be $0) Kern Council of Governments
PART 7 OF 8--TDA FUNDING CLAIM
For Fiscal Year 2024-2025

Kern Council of Governments
PART 8.1 OF 8--SUPPLEMENTAL PUBLIC TRANSIT INFORMATION
For Fiscal Year 2024-2025
1) A copy of the governing body's authorization to execute and file this claim. 5) A copy of the Department of California Highway Patrol form number CHP339, "Transit Operator Compliance Certificate", dated within the past 13 months, documenting participation in the California Department of Motor Vehicles "Driver Pull Notice Program.
4) A copy of the "unmet transit needs" documentation, including a legal notice of a public hearing, the minutes of the public hearing held by the local governing body and a resolution making the appropriate "unmet transit needs finding".
3) A listing of all transit service subcontractors (BELOW) and a copy of the contract document, if not previously submitted.

Attach the following documents:
2) A completed copy of the attached questionnaire (BELOW) on system characteristics and any additional documentation required as a result of responding to each query. 6) Date of the most recent completed annual TDA internal audit: Month: Day: Year

(NOTE: Place an "X" in the proper column)
Question YES NO

1. Have all recommendations for corrective action from the FY 2023-2024 independent financial audit report been implemented ? IF NO, PLEASE

SUBMIT A CORRECTIVE ACTION PLAN COVERING EACH
RECOMMENDATION NOT ADDRESSED. X

2. Have all recommendations for corrective action from the FY 2022-2023 performance audit report been implemented ? IF NO, PLEASE SUBMIT A

CORRECTIVE ACTION PLAN COVERING EACH RECOMMENDATION
NO ADDRESSED. X

3. Have all past transportation development plan recommendations been implemented ? IF NO, PLEASE SUBMIT A CORRECTIVE ACTION PLAN COVERING EACH RECOMMENDATION NOT ADDRESSED. X

4. Does the claimant maintain it's financial records in accordance with the California State Controller's approved "uniform system of accounts and records ? X

5. Has the claimant submitted it's "Annual Report of Financial Transactions of Transit Operators" to the California State Controller for the fiscal year ended June 30, 2023 ? X

6. Is the system expected to meet the applicable farebox revenue ratio requirement for FY 2023-2024 ? (10% for rural and 20% for urbanized operators) X

7. Is the system budgeted to meet the applicable farebox revenue ratio requirement for FY 2024-2025 ? (10% for rural and 20% for urbanized operators) X

8. If the answer to questions 6 or 7 is NO (i.e. fares revenues alone are insufficient to meet the applicable revenue ratio requirement), has the claimant committed sufficient "local funds" to supplement fares and thereby comply ?

9. Does the claimant expect to qualify for and claim an "extension of service exemption" for either FY 2023-2024 or FY 2024-2025 ? X

10. Is a budget increase in excess of 15% proposed for FY 2024-2025 ? X

11. Is an increase or decrease in excess of 15% in the scope of operations or capital budget provisions proposed for FY 2024-2025 ? X PART 8.2 OF 8--SYSTEM CHARACTERISTICS QUESTIONNAIRE
For Fiscal Year 2024-2025
Kern Council of Governments

(NOTE: Place an "X" in the proper column)
Question YES NO
(NOTE: If the answer to question 11 or 12 is YES, PLEASE SUBMIT A

STATEMENT WHICH DESCRIBES THE COMPONENTS OF THE

INCREASE/DECREASE AND JUSTIFIES OR SUBSTANTIATES THE
CHANGE.)

12. Is the claimant proposing an increase in executive level salaries for FY 2024-2025 ? IF YES, PLEASE SUBMIT A STATEMENT WHICH
DEFINES AND JUSTIFIES THE INCREASE. X

13. Is the claimant precluded by contract from contracting with common carriers or persons operating under franchise or license ? X

14. Does the claimant expect to subcontract with outside parties for the provision of operator services in FY 2024-2025 ? IF YES, PLEASE

SUBMIT A COPY OF ALL NEW OR AMENDED CONTRACTS NOT
PREVIOUSLY SUBMITTED. X

15. Is the claimant precluded by contract from employing part-time drivers ? X

16. Does the claimant routinely staff public transportation vehicles designed to be operated by one person with two or more persons ? X

17. Has the claimant's participation in the California Department of Motor Vehicle "Driver Pull Notice Program" been certified by the California Highway Patrol within the past 13 months ? IF YES, PLEASE SUBMIT A COPY OF FORM chp 339, "TRANSIT OPERATOR COMPLIANCE
CERTIFICATE". X

18. Is the claimant's retirement system fully funded with respect to it's officers and employees ? X

19. Does the claimant have a private pension plan ? X

20. If the answer to question 19 is YES and the plan is a "defined benefit plan", does the claimant do each of the following:
a. Conduct periodic actuarial studies of it's employee pension plans to determine the annual cost of future pension benefits ?
b. Set aside and invest, on a current basis, funds sufficient to provide for the payment of future pension benefits ?
Kern Council of Governments
PART 8.3 OF 8--SYSTEM CHARACTERISTICS QUESTIONNAIRE
For Fiscal Year 2024-2025

3. PART 8.4 OF 8--SYSTEM CHARACTERISTICS QUESTIONNAIRE
For Fiscal Year 2024-2025
City of Shafter
Kern Council of Governments

1. LISTING OF SUBCONTRACTORS

2. 8.
(NOTE: If the contract is new or amended from prior years, please submit a copy.) None

9. 10.

6. 7.

4. 5.

CONSENT CALENDAR

CITY OF SHAFTER

CITY COUNCIL REPORT
MEETING DATE: February 3, 2026
DEPARTMENT: Kyle Ditty, Finance Analyst II, Rogelio Sanchez, Finance Director SUBJECT: TRANSIT DEVELOPMENT ACT ARTICLE 8 CLAIM FOR FISCAL YEAR 2024-2025 RESOLUTION ADOPTION

RECOMMENDATION
Council find the action is not defined as a “project” per Section 15378(b)(4) of the CEQA Guidelines; adopt Resolution 3060, a Resolution of the City Council of the City of Shafter, approving the execution and filing of a Transit Development Act (TDA) Article 8 Claim for Fiscal Year 2024-2025.

BACKGROUND
Annually, the City must submit to the Kern Council of Governments claims for Local Transit Assistance (Article 4) and Streets and Roads Maintenance and Improvement (Article 8). Claims to reflect the local allocation of State and Federal monies authorized by the Transportation Development Act of 1971, as amended, shall be prepared and transmitted to the Kern Council of Governments. Those claims will reflect the projects which were either completed or proposed in the City of Shafter multiple year budgets, or as otherwise approved by the City Council.

ANALYSIS
The City of Shafter had available Local Transportation Funds (LFT) allocation for FY 2024-2025 estimated at $1,230,507 and a prior year balance of LTF funds at KernCOG in the amount of $1,744,354 for a total of $2,974,861. Of this total, $38,057 is being used for the City’s Regional Planning Contribution and $0 for Public Transportation (Article 4). This leaves $3,015,516 plus $0 in projected interest, available for streets and roads projects (Article 8).

The City had $2,598 in TDA Funds on hand on June 30, 2024. This balance plus the TDA funding and projected interest outlined above totals $2,977,459, which is also the total TDA streets and roads projects reported in this claim. Staff has prepared the attached Article 8 Claim form in the amount of $1,307,347 to draw down the additional TDA funding needed to complete the $1,309,945 in street projects. Individual projects will be presented for City Council approval when construction bids and/or quotes are received.

FISCAL IMPACT

TRANSIT DEVELOPMENT ACT ARTICLE 8 CLAIM FOR FISCAL YEAR 2024-2025 RESOLUTION

ADOPTION
- 2 -
The funds for Article 8 are annually budgeted, and the funding source is used for street and road maintenance and construction throughout the City. The prepared Article 8 claim in the amount of $1,307,347 must be approved by the City Council to secure the available funding for these projects. As individual projects proceed, they will be brought before the City Council for approval. No budget amendment is required at this time.

CEQA ANALYSIS
The action is not defined as a “project” per Section 15378(b)(4) of the CEQA Guidelines because the action is the approval of a resolution for Transit Development Act Article 8 claims and therefore, it is the creation of a governmental funding mechanism or other fiscal activity that does not involve any commitment to a specific project that can result in a potentially significant impact and not subject to CEQA.

APPROVED BY THE CITY ATTORNEY
No

ATTACHMENTS

1. Resolution No. 3060

2. Final TDA 8

RESOLUTION NO. 3060

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SHAFTER

APPROVING THE EXECUTION AND FILING OF A TRANSIT DEVELOPMENT ACT ARTICLE 8 CLAIM FOR FISCAL YEAR 2024-2025
WHEREAS, Transportation Development Act of 1971 provides for the disbursement of funds from the Local Transportation Fund held in trust by the Kern County Auditor-Controller for use by eligible claimants for the purpose authorized by Article 8, Section 99400 Streets and Roads; and
WHEREAS, an eligible claimant wishing to receive an allocation from the Local Transportation Fund must file its application with the Kern County Council of Governments pursuant to the rules and regulations that have been adopted by the Secretary of the Business and Transportation Agency of the State of California in accordance with the provisions of the aforementioned legislation; and
WHEREAS, funds from the Local Transportation fund will be required to maintain the street and road system and provide public transportation; and NOW THEREFORE BE IT RESOLVED by the City Council of the City of Shafter that the City Manager is authorized to execute and file an appropriate claim pursuant to the terms of the Transportation Development Act of 1971, as amended, and pursuant to applicable rules and regulations promulgated thereunder, together with all necessary supporting documents, with the Kern County Council of Governments for fiscal year 2024-2025 Transportation Development Act monies; and be it further
RESOLVED that a copy of this Resolution be transmitted to the Kern County Council of Governments in conjunction with the filing of the claim; and the Kern County Council of Governments be requested to concur in these findings and grant the allocation of funds specified in the Article 8 Claim.

PASSED AND ADOPTED this 3rd day of February, 2026.
______________________________
Chad Givens, Mayor
ATTEST:
______________________________
Yazmina Pallares, City Clerk
APPROVED AS TO FORM:
______________________________
Marco A. Martinez, City Attorney

I. Claimant
Agency: City of Shafter
Mailing Address: 336 Pacific Avenue
Office Address: 336 Pacific Avenue
City/State/Zip: Shafter, CA 93263
Telephone: (661) 746-5001
WEB Site: https://www.shafter.com
II. Contact Person
Name: Roger Sanchez
Title: Finance Director
Department: Finance
Office Address: 336 Pacific Avenue
City/State/Zip: Shafter, CA 93263
Telephone: (661) 745-5043
E-mail: [email protected]
2024-2025
2023-2024
Kern Council of Governments

TRANSPORTATION DEVELOPMENT ACT
STREETS AND ROADS CLAIM (FY 2024-2025 )
Part 1 of 6 - CLAIMANT INFORMATION

A. CLAIM: The City of Shafter hereby claims all Local Transportation Fund City of Shafter
et seq. and California Administrative Code Section 6600, et seq., as amended, it shall ensure that:

City of Shafter
Claimant
Signature Date
Finance Director
Title
City of Shafter
State of California.

Signature Date
Finance Director
Title
hereby certifies that, as a condition of receiving funds pursuant to Public Utilities Code Section 99200, City of Shafter

TRANSPORTATION DEVELOPMENT ACT

STREETS AND ROADS CLAIM
B. COMPLIANCE ASSURANCES: The
Part 2 of 6 - Claim and Assurances
For Fiscal Year 2024-2025
apportionments and allocations for the 2024-2025 fiscal year plus all unencumbered fund balances and/or deferred revenues held in its local treasury less funds first allocated for transit uses.

1. All funds will be expended in compliance with the requirements of Public Utilities Code Sections 99200 through 99408, California Administrative Code Sections 6600 through 6684, Office of the State Controller "Guidelines Relating to Gas Tax Expenditures" and Kern Council of Governments' Transportation Development

2. All funds will be expended in accordance with the budgets described in Parts 4 and 5 of this claim, Act Rules and Regulations.
attached hereto and made a part hereof, by this reference.

These assurances are given in consideration of and for the purpose of obtaining any and all funds allocated C. FINANCIAL ASSURANCES: As the chief financial officer of the I hereby attest to the reasonableness and accuracy of the financial information presented in this claim and declare it to be consistent with the uniform system of accounts and records adopted by the Controller of the for streets and roads purposes pursuant to Public Utilities Code, Division 10, Part 11, Chapter 4 of the State of California.

The person whose signature appears below has been authorized to provide the assurances cited above and prepare, submit and execute this claim on behalf of:
01/27/2026
01/27/2026

Amount
$ 1,444,652
$ -
$ 2,598
$ -
$ 1,447,250
$ 435,612
$ 1,009,040
K. TOTAL FY 2023-2024 EXPENDITURES (Lines F+G+H+I+J) 1,444,652 $ $ 2,598
City of Shafter

TRANSPORTATION DEVELOPMENT ACT

STREETS AND ROADS CLAIM
Part 3 of 6 - FY 2023-2024 Revenues and Expenditures
Account/Description
I. Prior Year Available Resources
A. Deferred Revenues - Actual unexpended prior year TDA cash receipts held in claimant's treasury as of June 30, 2023 (from prior year audit report) B. Prior Year Cash Receipts from trust funds - TDA cash receipts through June 30, 2024

1. Local Transportation Fund
J. Other
C. Prior Year Interest Earned - interest earnings on claimant cash balances through June 30, 2024
E. TOTAL FY 2023-2024 AVAILABLE RESOURCES (Lines A+B1+C+D) II. FY 2023-2024 Expenditures
D. Fund Balance - Actual fund balances or reserves held in claimant's treasury as of June 30, 2023 (from prior year audit report) L. AVAILABLE RESOURCES AT JUNE 30, 2024 -enter here and Part 4, Line A (Line E-K)
F. Administration and Engineering
G. Maintenance
H. Construction
I. Equipment

Amount
$ 2,598
$ 1,744,354
$ 1,230,507
$ 38,057
$ -
$ 3,015,516
$ -
$ -
$ 38,057
$ 2,977,459
$ 494,828
$ 815,117
$ 1,309,945
$ -
$ 1,667,514
FY 2024-2025 NET CLAIM AMOUNT (Line M - Line A) $ 1,307,347 N. Capital Outlay Reserve Allocations

1. Local Transportation Fund
L. Other
M. TOTAL FY 2024-2025 ESTIMATED EXPENDITURES-Itemize in Part 5 (Line H+I+J+K+L)
I. Maintenance
J. Construction
K. Equipment
II. FY 2024-2025 Planning & Transit Allocations
F. Local Transportation Fund
G. NET ESTIMATED PRIOR YEAR AVAILABLE RESOURCES (Line E-F1-F2) III. FY 2024-2025 Estimated Expenditures

1. Public Transit (from transit claim)

2. Regional Planning Contribution (from Fund Estimate, Schedule B)

TRANSPORTATION DEVELOPMENT ACT

STREETS AND ROADS CLAIM
Part 4 of 6 - Object Budget
Account/Description
O. DEFERRED REVENUES OR FUND BALANCE AT JUNE 30, 2025
(Line G-M-N1)
For Fiscal Year 2024-2025

1. Local Transportation Fund

2. Regional Planning Contribution
balances through June 30, 2025
C. FY 2024-2025 Trust Fund Apportionments - (from Kern COG estimate) D. FY 2023-2024 Interest Earned - estimated interest earnings on claimant cash B. Trust Fund Balances at June 30, 2024

1. Local Transportation Fund
E. TOTAL ESTIMATED FY 2024-2025 AVAILABLE RESOURCES
(Line A+B1+C1+C2+D)
I. Prior Year Available Resources
A. Available Resources - estimated unexpended prior year TDA cash receipts held in claimant's treasury as of June 30, 2024 (from Part 3, Line L) H. Administration and Engineering

Location/Description Type Expenditures
Requires project location and description of project
ST00011ADA Imp. - Streets & Sidewalks M 9,997 $
ST00022NPNS Street & Road Improvements M 15,663 $
ST00023Street Striping – Roadways M 158,538 $
ST000327th Standard Rd#2 LN Reconstruction C 36,944 $
ST00036Lerdo Hwy Reconstruction Proj. SB1 C 49,176 $
ST00006.24Sand Sealing 2024 M 310,630 $
ST00021.24Residential Road Reconstructn 2024 C 719,851 $ ST00038.1RSTP - Lerdo Highway Reconstruction C 9,146 $
$ 1,309,945
City of
TOTAL FY 2023-2024 PROJECT EXPENDITURES (Equal to Part 4, Line M) For Fiscal Year 2024-2025

TRANSPORTATION DEVELOPMENT ACT

STREETS AND ROADS CLAIM
Part 5 of 6 - Project Budget

City of Shafter

TRANSPORTATION DEVELOPMENT ACT

STREETS AND ROADS CLAIM
Part 6 of 6 - Supplemental Information
For Fiscal Year 2024-2025
Attach the following documentation:

1. A copy of the proof of publication for the public notice regarding conduct of a hearing for the purpose of receiving public testimony regarding transit needs within the claimant's service area.

2. A copy of the governing body's resolution or minute order which makes one of the following findings:
a. There are no unmet transit needs.
b. There are no unmet transit needs that are reasonable to meet. c. There are unmet transit needs, including needs that are reasonable to meet.

3. A copy of the governing body's authorization to execute and file this claim.

CONSENT CALENDAR

CITY OF SHAFTER

CITY COUNCIL REPORT
MEETING DATE: February 3, 2026
DEPARTMENT: Lance Lippincott, City Manager
SUBJECT: LETTER OF OPPOSITION TO LEAGUE OF CALIFORNIA CITIES PROPOSAL TO RE-ALLOCATE BRADLEY BURNS ECOMMERCE SALES TAX

RECOMMENDATION
Council find the action is not defined as a “project” per Section 15378(b)(5) of the California Environmental Quality Act Guidelines; authorize submittal of a letter signed by the Mayor on behalf of the City of Shafter opposing the League of California Cities proposal to re-allocate Bradley Burnes e-commerce sales tax.

BACKGROUND
The City of Shafter is a member of the League of California Cities, an advocacy entity that assists California cities in supporting, opposing, or introducing new legislation to the benefit of local jurisdictions. On January 22, 2026, the League of California Cities Revenue and Taxation Policy Committee met to discuss a 50/50 split of Bradley-Burns e-commerce sales and use tax from 100% to the point of distribution, to 50% to the point of distribution and 50% to the point of sale. The City of Shafter has a significant e-commerce and logistics sector, with current Bradley-Burns e-commerce sales and use tax being used to offset the impacts of warehousing through investments in infrastructure and public safety. If this item advances, the City of Shafter could see a large reduction in sales tax and a decreased ability to offset impacts. Conversely, benefiting cities under this item do not have any costs associated with warehousing impacts, but would receive 50% of the e-commerce based sales tax that is on its face, inequitable. This opposition letter will be submitted in advance of future meetings on this topic.

FISCAL IMPACT
There is no direct fiscal impact to the City associated with approval of this opposition letter.

CEQA ANALYSIS
The action is not defined as a “project” per Section 15378(b)(5) of the CEQA Guidelines because the action is approval of a letter of support and therefore, it is organizational and administrative activity that will not result in direct or indirect physical changes to the environment and not subject to CEQA.

LETTER OF OPPOSITION TO LEAGUE OF CALIFORNIA CITIES PROPOSAL TO RE-ALLOCATE

BRADLEY BURNS E-COMMERCE SALES TAX
- 2 -

APPROVED BY THE CITY ATTORNEY
No

ATTACHMENTS

1. Cal Cities Opposition Letter

City Manager
(661) 746-5000
Fax (661) 746-0607
Public Works/Engineering
(661) 746-5004
Fax (661) 746-9125
Finance
(661) 746-5001
Fax (661) 746-1002
Human Resources
(661) 746-5003
Fax (661) 746-2645
Planning/Building
(661) 746-5002
Fax (661) 746-9125
336 Pacific Avenue • Shafter, California 93263
League of California Cities (CalCities)
1400 K Street, Suite 400
Sacramento, CA 95814
January 30, 2026
RE: Opposition to the Cal Cities City Managers Department Sales Tax Working Group’s Proposed Recommendations to Change the Allocation of the Bradley-Burns 1% Sales Tax on E-Commerce Transactions - Protecting City of Shafter’s Financial Stability Dear CEO/Executive Director Carolyn Coleman and CalCities Board Members, On behalf of the City of Shafter, I am writing to express our strong opposition to the Sales Tax Working Group’s proposed recommendation to alter the Bradley-Burns 1% sales tax allocation by implementing a 50/50 revenue split between point-of-sale and destination jurisdictions for ecommerce transactions. This proposed shift would severely undermine the City of Shafter’s fiscal stability and penalize a City that has planned responsibly, invested strategically, and assumed the full burden of supporting the state’s logistics and e-commerce economy.

Over the past twenty years, the City of Shafter has deliberately positioned itself as a regional logistics and distribution hub. Through thoughtful planning, infrastructure investment, and strong economic development policies, we have successfully attracted major employers, including Amazon, Ross, Target, Walmart, Williams Sonoma, and many others, each operating large-scale fulfillment and distribution centers in our city. These developments have transformed City of Shafter into a critical link in California’s supply chain and have supplied the area with tens of thousands of good paying jobs. Soon, the City of Shafter will add to this portfolio with a substantial inland port facility providing critical opportunities to reduce truck emissions through the utilization of rail.

However, these benefits have come with considerable costs. The City of Shafter has invested hundreds of millions of dollars in infrastructure improvements, widening roads, building interchanges, enhancing traffic flow, and increasing public safety services to accommodate the heavy truck and employee traffic associated with e-commerce operations. Most of these facilities operate 24/7, placing ongoing strain on city resources including public works, fire protection, code enforcement, and policing.

The point-of-sale sales tax revenue generated by these centers has been a vital source of funding to help offset these burdens. Under the current tax structure, these revenues support millions of dollars of expenditures below:
• Public safety services, including additional police officers and paramedic staffing in high-traffic

industrial zones along with the need to have the appropriate firefighting equipment which require expensive ladder trucks in order to be able to properly fight industrial fires. • Street repair and maintenance, particularly for roadways affected by constant heavy truck traffic. • Economic development initiatives that continue to attract businesses and create local employment.
• Traffic management and infrastructure improvements, including signal upgrades and intersection enhancements.

Should the proposed 50/50 split be enacted, the City of Shafter stands to lose millions annually, for an estimated decrease between 20% to 35% of current general fund revenue. This reduction would force the City to consider significant cuts to essential services, most notably in public safety, road maintenance, and neighborhood services.

The proposal also creates a structural imbalance: while point-of-sale cities like the City of Shafter continue to bear the full responsibility for the impacts of logistics operations, they would receive only half of the associated revenue, while destination cities, which bear none of the direct infrastructure or public safety costs, would receive an equal share of the sales tax. This is inequitable, unsustainable, and fundamentally undermines the integrity of California’s local revenue framework as well as Cal Cities spirit of maintaining local control.

Furthermore, the proposal would retroactively penalize cities that made long-term investments in economic development based on the existing tax structure. It disincentivizes future investment in large-scale commerce and erodes the trust between cities and the State when it comes to financial planning and infrastructure partnerships.

We respectfully urge CalCities to reject this proposal and advocate for a more balanced and equitable approach, one that reflects the real costs born by point-of-sale cities and preserves the fiscal viability of those communities that have supported California’s e-commerce economy.

We remain committed to collaborating on fair and sustainable policy solutions and appreciate your ongoing efforts to protect the interests of California’s municipalities.

Sincerely,
Chad Givens
Mayor
City of Shafter

PUBLIC HEARINGS

CITY OF SHAFTER

CITY COUNCIL REPORT
MEETING DATE: February 3, 2026
DEPARTMENT: Alan Cazares, Associate Planner
SUBJECT: INTRODUCE ORDINANCE NO. 777 TO ADOPT ZONE CODE AMENDMENT NO. 25-23

RECOMMENDATION
That the Shafter City Council conduct a public hearing and introduce for first reading, by title only, and waive reading of Ordinance No. 777, an Ordinance of the City Council of the City of Shafter, approving Zone Code Amendment No. 25-23, an amendment to Title 17 (Zoning Ordinance) Section 11.200 of the Shafter Municipal Code relating to Accessory Dwelling Units (ADUs) and Junior Accessory Dwelling Units (JADUs) to comply with recent changes in state law, and (2) find that the adoption of the proposed ordinance is statutorily exempt from review under the California Environmental Quality Act (CEQA) per Public Resources Code Section 21080.17.

BACKGROUND
The proposed ordinance (Exhibit 1) will amend Title 17 (Zoning Ordinance) Section

11.200 of the Shafter Municipal Code to comply with recent changes to state law that impose new limits on local authority to regulate Accessory Dwelling Units (ADUs) and Junior Accessory Dwelling Units (JADUs). Except as otherwise noted, these new laws took effect on January 1, 2026.

In recent years, the California Legislature has approved, and the Governor has signed into law, a number of bills that impose new limits on local authority to regulate ADUs and JADUs. In late 2025, four new bills were enacted that further amended state ADU law as summarized below.

AB 462 – Coastal Development Permits; Disaster-Affected Areas AB 462 modifies several permitting requirements associated with processing Coastal Development Permits for ADUs located in the Coastal Zone. Beyond changes to CDP processing, AB 462 modifies the rules governing the issuance of a certificate of occupancy (CofO) for an ADU. Historically, state law has prohibited a local agency from issuing a CofO for an ADU before one is issued for the primary dwelling (i.e., the primary dwelling must have a CofO before the ADU can receive one). AB 462 creates a narrow exception to this prohibition for detached ADUs when all of the following conditions are satisfied: (1) the Governor has declared a state of emergency for the county on or after February 1, 2025; (2) the primary dwelling was substantially damaged or destroyed by an event referenced in the state of emergency proclamation;

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and (3) the ADU has been issued construction permits and passed all required inspections. (Gov. Code, § 66328(b).) If these conditions are satisfied, the detached ADU can receive a CofO before the primary dwelling. In all other scenarios, the primary dwelling still needs a CofO before one can be issued for an ADU.

AB 462 was enacted as an urgency measure that took effect immediately when signed by the Governor (on October 10, 2025). The following three bills were enacted as nonurgency measures and took effect on January 1, 2026.

AB 1154 – JADU Owner-Occupancy; Short-Term Rental
When a JADU is developed, existing state law requires a property owner to reside in the JADU or remaining portion of the single-family dwelling. AB 1154 narrows this requirement to now only apply when a JADU shares sanitation facilities (bathroom) with the single-family dwelling. If the JADU has its own bathroom, then the property owner does not have to reside on the property at all. (See amended Gov. Code, § 66333(b).) AB 1154 also expressly prohibits JADUs from being used as short-term rentals (i.e., rented for a term shorter than 30 days). (See amended Gov. Code, § 66333(g).) Most ADU ordinances already included this prohibition (as well as prohibiting ADUs from being used as short-term rentals). But now it’s required by state law.

SB 9; SB 543 – ADU Ordinance Submittal to HCD; Approval Under existing law, local agencies are required to submit a copy of their ADU ordinance to the California Department of Housing and Community Development (HCD) within 60 days of adoption.

This year’s SB 9 and SB 543 create a penalty for failing to do so by rendering null and void any local ordinance that is not submitted to HCD within 60 days of adoption. (See amended Gov. Code, § 66326(d); new Gov. Code, § 66333.5(d).) The bills further specify that a local ADU ordinance is null and void if HCD issues findings that the ordinance does not comply with state law and the local agency fails to respond to HCD within 30 days.

SB 543 – ADU Size; Number of ADUs; Impact Fees; Application Timeline SB 543 makes numerous changes and clarifications to state ADU law, the most notable of which are summarized below.

ADU & JADU Size
Existing law limits the maximum size of a JADU to 500 square feet and prohibits local ADU ordinances from imposing certain development standards that would prevent an ADU created under Government Code section 66314 through 66322 from being at least 800 square feet.

SB 543 amends state ADU law to specify that allowable square footage of an ADU or JADU refers to square footage of “interior livable space.” (See amended Gov. Code, § 66313(d), 66321(b)(2).)

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Impact Fees
Existing law exempts ADUS that are 750 square feet or smaller from development impacts fees (DIFs). SB 543 clarifies that DIFs may not be imposed on an ADU that has 750 or fewer square feet of interior livable space or on a JADU with 500 or fewer square feet of interior livable space. The bill also exempts an ADU or JADU with fewer than 500 square feet of interior livable space from school impact fees. (See amended Gov. Code, § 66311.5.)
Quantity of ADUs Created Under Government Code Section 66323 Existing state law creates four categories of ADUs that must be approved if they comply with the limited standards provided in Government Code section 66323(a)(1)–(4).

These are:

1. a converted ADU and JADU created on a lot with a proposed or existing singlefamily dwelling (Gov. Code, § 66323(a)(1));

2. a detached ADU created on a lot with a proposed or existing single-family dwelling (Gov. Code, § 66323(a)(2));

3. converted ADUs created in an existing multifamily dwelling (Gov. Code, § 66323(a)(3)); and

4. detached ADUs created on a lot with a proposed or existing multifamily dwelling.

For some time, there has been uncertainty as to whether ADUs created under Government Code section 66323 could be combined. Some practitioners interpreted the statute to not require local agencies to allow combinations. Initially, HCD took the same position, in its 2020 ADU Handbook. But for the last few years, HCD has taken the opposite position: that yes, combinations are permitted. (See HCD January 2025 ADU Handbook, at p. 19 [“Pursuant to Government Code section 66323, subdivision (a), local governments must allow units created pursuant to subparagraphs (1) and (2) together or (3) and (4) together”].)
SB 543 codifies HCD’s most recent interpretation by amending Government Code section 66323 to specifically allow combinations. Thus, a lot with a multifamily dwelling can now have a converted ADU or ADUs created under section 66323(a)(3) and detached ADUs created under section 66323(a)(4). And a lot with a single family dwelling can now have a converted ADU and a JADU created under section 66323(a)(1) and a detached ADU created under section 66323(a)(2).

ADU Permitting Process
Existing law has long required local agencies to approve or deny an ADU application within 60 days of receiving a complete application. However, state law was silent with respect to incompleteness determinations, subsequent resubmittals, and appealing local decisions on ADU applications. SB 543 requires local agencies to now:

1. determine whether an ADU application is complete within 15 business days of submittal;

2. if the application is incomplete, within the same 15 days provide the applicant with a list of incomplete items and how to address them;

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3. review a resubmitted application for completeness within 15 business days;

4. provide the applicant with a written appeal process for any incompleteness determination or denial (to the Planning Commission or City Council, or both); and

5. provide a final written determination on the appeal within 60 business days of receiving the appeal). (See amended Gov. Code, §§ 66317 [ADUs], 66335 [JADUs].)
NEXT STEPS & RECOMMENDATION:

AB 462 took effect immediately when signed, but technically it doesn’t require any change to a local ADU ordinance; the City just needed to follow the new rules for CDP processing and issuance of a CofO, if applicable. Since the city of Shafter is not within the coastal zone, AB 462 was not an issue. However, the remaining bills took effect on January 1, 2026, and for the City’s ADU ordinance to remain valid and enforceable, it needed to comply with the new changes in state law. As a result, at the December 16th City Council regular meeting, the Shafter City Council approved and adopted an Urgency Ordinance effective immediately to comply with the new ADU laws prior to the January 1st effective date of the aforementioned laws.

However, the adoption of a zoning urgency measure carries some legal risk with the Attorney General’s Office, so the City is now going through the normal municipal code amendment process for re-adoption. This non-urgency ordinance is the same in form and content as the adopted urgency ordinance of December 16th. Adopting the proposed ordinance changes (Exhibit A to Exhibit 1) under the formal Zone Code Amendment process ensures that the City’s ADU ordinance (Title 17 Section 11.200) remains in compliance with state ADU law and meets the normal zoning ordinance adoption requirements. Approval and adoption of Ordinance No. 777 (Exhibit 1) ensures that the City protects itself from any potential legal challenges.

On January 13, 2026, the Shafter Planning Commission held a duly noticed public hearing to consider the proposed Zone Code Amendment No. 25-23 and thereafter voted unanimously to recommend approval of the ZCA and adoption of the nonurgency ordinance to the City Council. Staff now recommend that the City Council proceed in accordance with the recommendation set forth above. The second-reading and actual adoption of the attached Ordinance No. 777 is tentatively scheduled for the February 17th City Council meeting.

FISCAL IMPACT
There is no fiscal impact directly resulting from the proposed action. Indirectly, the adoption of the urgency ordinance may expedite the development of accessory dwelling units and junior accessory dwelling units. Development of residential projects typically results in increased one-time building-related revenues.

CEQA ANALYSIS
Under California Public Resources Code section 21080.17, CEQA does not apply to the adoption of an ordinance by a city or county implementing the provisions of Chapter 13

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of Division 1 of Title 7 of the California Government Code, which is California’s ADU law. Therefore, the adoption of the proposed ordinance is statutorily exempt from CEQA in that the proposed Zone Code Amendment 25-23 implements state ADU law.

APPROVED BY THE CITY ATTORNEY
Not Applicable

ATTACHMENTS

1. Ordinance No. 777

2. Exhibit A of Ordinance No. 777

EXHIBIT 1
ORDINANCE NO. 777

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SHAFTER APPROVING ZONE CODE AMENDMENT NO. 25-23, AMENDING TITLE 17 (ZONING ORDINANCE) SECTION 11.200 OF THE SHAFTER MUNICIPAL CODE RELATING TO ACCESSORY DWELLING UNITS (ADUs) AND JUNIOR
ACCESSORY DWELLING UNITS (JADUs), AND FINDING THE ACTION TO BE

STATUTORILY EXEMPT FROM CEQA UNDER PUBLIC RESOURCES CODE § 21080.17
WHEREAS, the City of Shafter, California (“City”) is a municipal corporation, duly organized under the constitution and laws of the State of California; and WHEREAS, state law authorizes cities to act by ordinance to provide for the creation and regulation of accessory dwelling units (“ADUs”) and junior accessory dwelling units (“JADUs”); and
WHEREAS, in recent years, the California Legislature has approved, and the Governor has signed into law, numerous bills that, among other things, amend various sections of the Government Code to impose new limits on local authority to regulate ADUs and JADUs; and WHEREAS, in 2025, the California Legislature approved, and the Governor signed into law, Assembly Bill 462 (“AB 462”), Assembly Bill 1154 (“AB 1154”), Senate Bill 9 (“SB 9”), and Senate Bill 543 (“SB 543”), which further amend state ADU law; and WHEREAS, the new updates to state ADU law took effect on January 1, 2026, and for the City’s ADU ordinance to remain valid, it must be amended to reflect the requirements of AB 462, AB 1154, SB 9, and SB 543; and
WHEREAS, the City desires to amend its local regulatory scheme for the construction of ADUs and JADUs to reflect the most recent changes to state law; and WHEREAS, on January 13, 2026, the Planning Commission held a duly-noticed public hearing and considered the staff report, recommendations by staff, and public testimony concerning this proposed Ordinance. Following the public hearing, the Planning Commission voted to forward the Ordinance to the City Council with a recommendation in favor of its adoption; and
WHEREAS, on February 03, 2026, the City Council held a duly-noticed public hearing to consider the Ordinance, including: (1) the public testimony and agenda reports prepared in connection with the Ordinance, (2) the policy considerations discussed therein, and (3) the consideration and recommendation by the Shafter Planning Commission; and WHEREAS, all legal prerequisites to the adoption of the Ordinance have occurred.

NOW, THEREFORE, the City Council of the City of Shafter does ordain as follows:

Shafter City Council Ordinance No. 777
February 17, 2026

SECTION 1. Incorporation. The recitals above are each incorporated by reference and adopted as findings by the City Council.

SECTION 2. CEQA. Under California Public Resources Code section 21080.17, the California Environmental Quality Act (“CEQA”) does not apply to the adoption of an ordinance by a city or county implementing the provisions of Chapter 13 of Division 1 of Title 7 of the California Government Code, which is California’s ADU law. Therefore, adoption of the Ordinance is statutorily exempt from CEQA in that it implements state ADU law.

SECTION 3. General Plan. The City Council hereby finds that the adoption of the Ordinance is consistent with the General Plan as a matter of law under Government Code section 66314(c).

SECTION 4. Code Amendment Title 17 Section 11.200 of the Shafter Municipal Code is hereby amended and restated to read in its entirety as provided in Exhibit “A,” attached hereto and incorporated herein by reference.

SECTION 5. Effective Date. This Ordinance takes effect 30 days after its adoption.

SECTION 6. HCD Submittal. In accordance with Government Code sections 66326 and 66333.5, the City Clerk is directed to submit a copy of this Ordinance to the California Department of Housing and Community Development within 60 days after adoption.

SECTION 7. Publication. The City Clerk is directed to certify to the adoption of this Ordinance and post or publish this Ordinance as required by law.

SECTION 8. Custodian of Records. The custodian of records for this Ordinance is the City Clerk and the records comprising the administrative record are located at 336 Pacific Avenue, Shafter, CA 93263.

SECTION 9. Severability. If any provision of this Ordinance or its application to any person or circumstance is held to be invalid by a court of competent jurisdiction, such invalidity has no effect on the other provisions or applications of the Ordinance that can be given effect without the invalid provision or application, and to this extent, the provisions of this Ordinance are severable. The City Council declares that it would have adopted this Ordinance irrespective of the invalidity of any portion thereof.
(Continues on next page)

Shafter City Council Ordinance No. 777
February 17, 2026

PASSED AND ADOPTED THIS 17th DAY OF FEBRUARY, 2026
________________________________
Chad Givens, Mayor
ATTEST:
________________________________
Yazmina Pallares, City Clerk
APPROVED AS TO FORM:
________________________________
Marco A. Martinez, City Attorney

Shafter City Council Ordinance No. 777
February 17, 2026

EXHIBIT A
Proposed Ordinance Changes
(follows this page)

CITY OF SHAFTER DEVELOPMENT CODE ERROR! NO TEXT OF SPECIFIED STYLE IN DOCUMENT. 1 Administration

1.190 DEFINITIONS
The following definitions and those set forth throughout this Title shall apply when interpreting the intent or meaning of the requirements and guidelines of this Title.

Accessory Dwelling Unit (ADU)
An attached or a detached residential dwelling unit that provides complete independent living facilities for one or more persons and is located on a lot with a proposed or existing primary residence. An accessory dwelling unit also includes the following:
• An efficiency unit, as defined by section 17958.1 of the California Health and Safety Code; and
• A manufactured home, as defined by section 18007 of the California Health and Safety Code.

Accessory Structure
A structure that is accessory and incidental to a dwelling located on the same lot. An accessory structure may be erected only after the principal structure is established.

ADU
See “Accessory Dwelling Unit.”
Efficiency Kitchen
A kitchen that includes (1) a cooking facility with appliances and (2) a food preparation counter and storage cabinets that are of a reasonable size in relation to the size of the JADU.

JADU
See “Junior Accessory Dwelling Unit.”
Junior Accessory Dwelling Unit (JADU)
A residential unit that satisfies all of the following:
• It is no more than 500 square feet of interior livable space in size. • It is contained entirely within the an existing or proposed single-family structure. An enclosed use within the residence, such as an attached garage, is considered to be a part of and contained within the single-family structure.
• It includes its own separate sanitation facilities or shares sanitation facilities with the existing or proposed single-family structure. • If the unit does not include its own separate bathroom, then it contains an interior entrance to the main living area of the exitingexisting or proposed single family structure in addition to an exterior entrance that is separate from the main entrance to the primary dwelling.
• It includes an efficiency kitchen, as defined here in Section 1.190.

EXHIBIT A

Administration 2
Nonconforming Zoning Condition
A physical improvement on a property that does not conform with current zoning standards.

Parking (Tandem)
Parking space configuration where two or more parking spaces are lined up one behind the other.

Passageway
A pathway that is unobstructed clear to the sky and extends from a street to one entrance of the ADU or JADU.

Public Transit
A location, including, but not limited to, a bus stop or train station, where the public may access buses, trains, subways, and other forms of transportation that charge set fares, run on fixed routes, and are available to the public.

CITY OF SHAFTER DEVELOPMENT CODE ERROR! NO TEXT OF SPECIFIED STYLE IN DOCUMENT. 1 Specific Use Development Standards

11.200 ACCESSORY DWELLING UNITS (ADUs) AND JUNIOR ACCESSORY DWELLING UNITS (JADUs)

1. Purpose
The purpose of this section is to allow and regulate accessory dwelling units (ADUs) and junior accessory dwelling units (JADUs) in compliance with Chapter 13 of Division 1 of Title 7 of the California Government Code.

2. Effect of Conforming
An ADU or JADU that conforms to the standards in this section will not be a. (1) dDeemed to be inconsistent with the city’s general plan and zoning designation for the lot on which the ADU or JADU is located; b. (2) Ddeemed to exceed the allowable density for the lot on which the ADU or JADU is located;
c. (3) cConsidered in the application of any local ordinance, policy, or program to limit residential growth;
d. and (4) Rrequired to correct a nonconforming zoning condition, defined as a physical improvement on a property that does not conform with current zoning standards, but this does not prevent the city from enforcing compliance with applicable building standards in accordance with Health and Safety Code Section 17980.12.

3. Approvals
The following approvals apply to ADUs and JADUs created under this section. a. Ministerial ADU and Building Permits Required. Every ADU and JADU requires an ADU permit and a building permit. The city will review and approve permit applications in accordance with subsection (d)(3) below.Building-permit Only. If an ADU or JADU complies with each of the general requirements in subsection 4 below, it is allowed with only a building permit in the following scenarios:
(1) Converted on Single-family Lot: One ADU as described in this subsection 3a(1) and one JADU on a lot with a proposed or existing single-family dwelling on it, where the ADU or JADU:
(a) Is either: within the space of a proposed single-family dwelling; within the existing space of an existing singlefamily dwelling; or (in the case of an ADU only) within the existing space of an accessory structure, plus up to 150 additional square feet if the expansion is limited to accommodating ingress and egress; and
(b) Has exterior access that is independent of that for the single-family dwelling; and
(c) Has side and rear setbacks sufficient for fire and safety, as dictated by applicable building and fire codes.

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(d) The JADU complies with the requirements of
Government Code Sections 66333 through 66339.
(2) Limited Detached on Single-family Lot: One detached, newconstruction ADU on a lot with a proposed or existing singlefamily dwelling (in addition to any JADU that might otherwise be established on the lot under subsection 3a(1) above), if the detached ADU satisfies each of the following limitations:
(a) The side- and rear-yard setbacks are at least four feet. (b) The total floor area is 800 square feet or smaller. (c) The peak height above grade does not exceed the
applicable height limit in subsection 4b below.
(3) Converted on Multifamily Lot: One or more ADUs within portions of existing multifamily dwelling structures that are not used as livable space, including but not limited to storage rooms, boiler rooms, passageways, attics, basements, or garages, if each converted ADU complies with state building standards for dwellings. Under this subsection 3a(3), at least one converted ADU is allowed within an existing multifamily dwelling, up to a quantity equal to 25 percent of the existing multifamily dwelling units.
(4) Limited Detached on Multifamily Lot: No more than two detached ADUs on a lot with a proposed multifamily dwelling, or up to eight detached ADUs on a lot with an existing
multifamily dwelling, if each detached ADU satisfies all of the following.
(a) The side- and rear-yard setbacks are at least four feet.

If the existing multifamily dwelling has a rear or side yard setback of less than four feet, the city will not
require any modification to the multifamily dwelling as a condition of approving the ADU.
(b) The peak height above grade does not exceed the
applicable height limit provided in subsection 4b below. (c) If the lot has an existing multifamily dwelling, the quantity of detached ADUs does not exceed the
number of primary dwelling units on the lot.
b. Processing Fee. The city may charge a fee to reimburse it for costs incurred in processing ADU permits, including the costs of adopting or amending the city’s ADU ordinance. The ADU-permit processing fee is determined by the Planning Director and approved by the city council by resolution.ADU Permit
(1) Except as allowed under subsection 3a above, no ADU may be created without a building permit and an ADU permit in compliance with the standards set forth in subsections 4 and 5 below.

CITY OF SHAFTER DEVELOPMENT CODE ERROR! NO TEXT OF SPECIFIED STYLE IN DOCUMENT. 3 Specific Use Development Standards
(2) The city may charge a fee to reimburse it for costs incurred in processing ADU permits, including the costs of adopting or amending the city’s ADU ordinance. The ADU-permit
processing fee is determined by the director of community development and approved by the city council by resolution. c. Process and Timing
(1) An ADU permit is considered and approved ministerially, without discretionary review or a hearingCompleteness.
(a) Determination in 15 days. The city will determine
whether an application to create or serve an ADU or
JADU is complete and will provide written notice of the determination to the applicant within 15 business days
after the city receives the application submittal.
(b) Incomplete items. If the city’s determination under subsection (3)(c)(1)(a) above is that the application is incomplete, the city’s notice must list the incomplete
items and describe how the application can be made
complete.
(c) Cure. After receiving a notice that the application is incomplete, the applicant may cure and address the
items that were deemed by the city to be incomplete.
(d) Subsequent submittals. If the applicant submits
additional information to address incomplete items,
within 15 business days of the subsequent submittal
the city will determine in writing whether the additional information remedies all the incomplete items that the
city identified in its original notice. The city may not require the application to include an item that was not included in the original notice.
(e) Deemed complete. If the city does not make a timely determination as required by this subsection (1), the
application or resubmitted application is deemed
complete for the purposes of subsection (3)(c)(3)
below.
(f) Appeal of incompleteness. An applicant may appeal
the city’s determination that the application is
incomplete by submitting a written appeal to the city
clerk. The planning commission will review the written
appeal and affirm or reverse the completeness
determination and provide a final written determination to the applicant within 60 business days after receipt of the appeal
(2) No discretion or hearing. Ministerial permits for an ADU or JADU are considered and approved without discretionary
review or a hearing. The city must approve or deny an
application to create an ADU or JADU within 60 days from the date that the city receives a completed application. If the city

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has not approved or denied the completed application within 60 days, the application is deemed approved unless either:
(a) The applicant requests a delay, in which case the 60-day time period is tolled for the period of the requested delay, or (b) When an application to create an ADU or JADU is submitted with a permit application to create a new single-family or multifamily dwelling on the lot, the city may delay acting on the permit application for the ADU or JADU until the city acts on the permit application to create the new single-family or multifamily dwelling, but the application to create the ADU or JADU will still be considered ministerially without discretionary review or a hearing.
(3) Deadline to approve or deny ministerial approvals. The city must approve or deny an application to create an ADU or JADU within 60 days from the date that the city receives a complete application. If the city has not approved or denied the complete application within 60 days, the application is deemed approved unless either:If the city denies an application to create an ADU or JADU, the city must provide the applicant with comments that include, among other things, a list of all the defective or deficient items and a description of how the application may be remedied by the applicant. Notice of the denial and
corresponding comments must be provided to the applicant within the 60-day time period established by subsection 3c(2) above.
(a) The applicant requests a delay, in which case the 60- day time period is tolled for the period of the requested delay, or
(b) When an application to create an ADU or JADU is
submitted with a permit application to create a new
single-family or multifamily dwelling on the lot, the city may delay acting on the permit application for the ADU
or JADU until the city acts on the permit application to create the new single-family or multifamily dwelling, but the application to create the ADU or JADU will still be considered ministerially without discretionary review or a hearing.
(4) Denial. If the city denies an application to create an ADU or JADU, the city must provide the applicant with comments that include, among other things, a list of all the defective or deficient items and a description of how the application may be remedied by the applicant. Notice of the denial and
corresponding comments must be provided to the applicant within the 60-day time period established by subsection (3)(c)(3) aboveA demolition permit for a detached garage that is to be replaced with an ADU is reviewed with the application for the ADU and issued at the same time.

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(5) Appeal of denial. An applicant may appeal the city’s denial of the application by submitting a written appeal to the city clerk.

The planning commission will review the written appeal and affirm or reverse the denial and provide a final written determination to the applicant within 60 business days after receipt of the appeal.
(6) Concurrent review of demolition. A demolition permit for a detached garage that is to be replaced with an ADU is reviewed with the application for the ADU and issued at the same time.

4. Classes.
a. Class 1: Statutorily Regulated. Class 1 ADUs and JADUs are approved under Government Code section 66323. If an ADU or JADU complies with each of the general requirements in subsection (5) below, it is allowed in each of the scenarios provided in this subsection (4)(a). An ADU and JADU approved under subsection (4)(a)(1) may be combined with an ADU approved under subsection (4)(a)(2), and ADUs approved under subsection (4)(a)(3) may be combined with ADUs approved under subsection (4)(a)(4).
(1) Converted on Lot with Single-Family: One ADU as described in this subsection (4)(a)(1) and one JADU on a lot with a proposed or existing single-family dwelling on it, where the ADU or JADU:
(a) Is either: within the space of a proposed single-family dwelling; within the existing space of an existing singlefamily dwelling; or (in the case of an ADU only) within the existing space of an accessory structure, plus up to 150 additional square feet if the expansion is limited to accommodating ingress and egress; and
(b) Has exterior access that is independent of that for the single-family dwelling; and
(c) Has side and rear setbacks sufficient for fire and safety, as dictated by applicable building and fire codes.
(d) The JADU complies with the requirements of
Government Code sections 66333 through 66339
(2) Limited Detached on Lot with Single-Family: One detached, new-construction ADU on a lot with a proposed or existing single-family dwelling, if the detached ADU satisfies each of the following limitations:
(a) The side- and rear-yard setbacks are at least four feet. (b) The total floor area is 800 square feet of livable space or smaller.
(c) The peak height above grade does not exceed the
applicable height limit in subsection (5)(b) below.
(3) Converted on Lot with Multifamily: One or more ADUs within portions of existing multifamily dwelling structures that are not

ERROR! NO TEXT OF SPECIFIED STYLE IN DOCUMENT. CITY OF SHAFTER DEVELOPMENT CODE Specific Use Development Standards 6
used as livable space, including but not limited to storage rooms, boiler rooms, passageways, attics, basements, or garages, if each converted ADU complies with state building standards for dwellings. Under this subsection (4)(a)(3), at least one converted ADU is allowed within an existing
multifamily dwelling, up to a quantity equal to 25 percent of the existing multifamily dwelling units.
(4) Limited Detached on Lot with Multifamily: No more than two detached ADUs on a lot with a proposed multifamily dwelling, or up to eight detached ADUs on a lot with an existing
multifamily dwelling, if each detached ADU satisfies all of the following:
(a) The side- and rear-yard setbacks are at least four feet.

If the existing multifamily dwelling has a rear or side yard setback of less than four feet, the city will not
require any modification to the multifamily dwelling as a condition of approving the ADU.
(b) The peak height above grade does not exceed the
applicable height limit provided in subsection (5)(b)
below.
(c) If the lot has an existing multifamily dwelling, the quantity of detached ADUs does not exceed the
number of primary dwelling units on the lot
b. Class 2: Locally Regulated. Class 2 ADUs are approved under Government Code sections 66314–66322. Except for Class 1 ADUs approved under subsection (4)(a) above, all ADUs are subject to the standards set forth in subsections (5) and (6) below.

5. General ADU and JADU Requirements. The following requirements apply to all Class 1 and Class 2 ADUs and JADUs that are approved under subsections 3a or 3b above:
a. Zoning
(1) A Class 1 ADU approved under subsection (4)(a) may An ADU or JADU subject only to a building permit under subsection 3a above may be created on a lot in a residential or mixed-use zone.
(2) A Class 2 ADU approved under subsection (4)(b) aboveAn ADU or JADU subject to an ADU permit under subsection 3b above may be created on a lot that is zoned to allow singlefamily dwelling residential use or multifamily dwelling residential use.
(3) In accordance with Government Code section 66333(a), a JADU may only be created on a lot zoned for single-family residences.
b. Height

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(1) Except as otherwise provided by subsections 54b(2) and 54b(3) below, a detached ADU created on a lot with an existing or proposed single family or multifamily dwelling unit may not exceed 16 feet in height.
(2) A detached ADU may be up to 18 feet in height if it is created on a lot with an existing or proposed single family or multifamily dwelling unit that is located within one-half mile walking distance of a major transit stop or a high quality transit corridor, as those terms are defined in Section 21155 of the Public Resources Code, and the ADU may be up to two additional feet in height (for a maximum of 20 feet) if necessary to accommodate a roof pitch on the ADU that is aligned with the roof pitch of the primary dwelling unit.
(3) A detached ADU created on a lot with an existing or proposed multifamily dwelling that has more than one story above grade may not exceed 18 feet in height.
(4) An ADU that is attached to the primary dwelling may not exceed 25 feet in height or the height limitation imposed by the underlying zone that applies to the primary dwelling, whichever is lower. Notwithstanding the foregoing, ADUs subject to this subsection 54b(4) may not exceed two stories.
(5) For purposes of this subsection 54b, height is measured from existing legal grade or the level of the lowest floor, whichever is lower, to the peak of the structureheight is measured above existing legal grade to the peak of the structure.
c. Fire Sprinklers
(1) Fire sprinklers are required in an ADU or JADU if sprinklers are required in the primary residence.
(2) The construction of an ADU or JADU does not trigger a requirement for fire sprinklers to be installed in the existing primary dwelling.
d. Rental Term. No ADU or JADU may be rented for a term that is shorter than 30 days. This prohibition applies regardless of when the ADU or JADU was created.
e. No Separate Conveyance. An ADU or JADU may be rented, but except as otherwise provided in Government Code Section 66341, no ADU or JADU may be sold or otherwise conveyed separately from the lot and the primary dwelling (in the case of a single-family lot) or from the lot and all of the dwellings (in the case of a multifamily lot). f. Septic System. If the ADU or JADU will connect to an onsite wastewater-treatment system, the owner must include with the application a percolation test completed within the last five years or, if the percolation test has been recertified, within the last 10 years. g. Owner Occupancy

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(1) ADUs. ADUs are not subject to an owner-occupancy
requirementAn ADU that is permitted on or after January 1, 2020 is not subject to any owner-occupancy requirement. (2) JADUs.
a. As required by state law, all JADUs are generally
subject to an owner-occupancy requirement. A natural
person with legal or equitable title to the property must reside on the property, in either the primary dwelling or JADU, as the person’s legal domicile and permanent
residence.
b. Exceptions. The owner-occupancy requirement in this
subsection (5)(g)(2) does not apply in either of the
following situations:
(1) The JADU has separate sanitation facilities
(i.e., does not share sanitation facilities with the
existing primary dwelling unit structure).
(2) The property is entirely owned by another
governmental agency, land trust, or housing
organizationHowever, the owner-occupancy
requirement in this subsection 4g(2) does not
apply if the property is entirely owned by
another governmental agency, land trust, or
housing organization.
h. Deed Restriction. Prior to issuance of a building permit for an ADU or JADU, a deed restriction must be recorded against the title of the property in the County Recorder’s office and a copy filed with the Planning Director. The deed restriction must run with the land and bind all future owners. The form of the deed restriction will be provided by the city and must provide that:
(1) Except as otherwise provided in Government Code Section 66341, the ADU or JADU may not be sold separately from the primary dwelling. (2) The ADU or JADU is restricted to the approved size and to other attributes allowed by this section.
(3) The deed restriction runs with the land and may be enforced against future property owners.
(4) The deed restriction may be removed if the owner eliminates the ADU or JADU, as evidenced by, for example, removal of the kitchen facilities. To remove the deed restriction, an owner may make a written request of the Director, providing evidence that the ADU or JADU has in fact been eliminated. The Director may then determine whether the evidence supports the claim that the ADU or JADU has been eliminated. Appeal may be taken from the Director’s determination consistent with other provisions of this Code. If the ADU or JADU is not entirely physically removed but is only eliminated by virtue of having a necessary component of an ADU or JADU removed, the remaining

CITY OF SHAFTER DEVELOPMENT CODE ERROR! NO TEXT OF SPECIFIED STYLE IN DOCUMENT. 9 Specific Use Development Standards
structure and improvements must otherwise comply with applicable provisions of this Code.
(5) The deed restriction is enforceable by the director or his or her designee for the benefit of the city. Failure of the property owner to comply with the deed restriction may result in legal action against the property owner, and the city is authorized to obtain any remedy available to it at law or equity, including, but not limited to, obtaining an injunction enjoining the use of the ADU or JADU in violation of the recorded restrictions or abatement of the illegal unit. i. Rent Reporting. In order to facilitate the city’s obligation to identify adequate sites for housing in accordance with Government Code sections 65583.1 and 66330, the following requirements must be satisfied:
(1) With the building-permit application, the applicant must provide the city with an estimate of the projected annualized rent that will be charged for the ADU or JADU.
(2) Within 90 days after each January 1 following issuance of the building permit, the owner must report the actual rent charged for the ADU or JADU during the prior year. If the city does not receive the report within the 90-day period, the owner is in violation of this Code, and the city may send the owner a notice of violation and allow the owner another 30 days to submit the report. If the owner fails to submit the report within the 30-day period, the city may enforce this provision in accordance with applicable law.
j. Building and Safety
(1) Must comply with building code. Subject to subsection 54ij(2) below, all ADUs and JADUs must comply with all local building code requirements.
(2) No change of occupancy. Construction of an ADU does not constitute a Group R occupancy change under the local
building code, as described in Section 310 of the California Building Code, unless the Bbuilding Oofficial or cCode
Eenforcement Oofficer makes a written finding based on
substantial evidence in the record that the construction of the ADU could have a specific, adverse impact on public health and safety. Nothing in this subsection 54ij(2) prevents the city from changing the occupancy code of a space that was
uninhabitable space or that was only permitted for
nonresidential use and was subsequently converted for
residential use in accordance with this section.
j. Certificate of Occupancy Timing.
(1) Generally. No certificate of occupancy for an ADU or JADU may be issued before the certificate of occupancy is issued for the primary dwelling unit
(2) Limited Exception for State-declared Emergencies.

Notwithstanding subsection (5)(j)(1) above, a certificate of

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occupancy for an ADU may be issued before a certificate of occupancy for the primary dwelling if each of the following requirements are met:
(a) The county is subject to a proclamation of a state of emergency made by the California Governor on or after
February 1, 2025.
(b) The primary dwelling was substantially damaged or
destroyed by an event referenced in the Governor’s
state of emergency proclamation.
(c) The ADU has been issued construction permits and
has passed all required inspections.
(d) The ADU is not attached to the primary dwelling.

56. Specific ADU Requirements. The following requirements apply only to Class 2 ADUs that require an ADU permitapproved under subsection 3(4)(b)b above.

This subsection (6) does not apply to Class 1 ADUs or JADUs approved under subsection (4)(a) above.
a. Maximum Size
(1) The maximum size of a detached or attached ADU subject to this subsection (6)5 is 850 square feet of interior livable space for a studio or one-bedroom unit and 1,0001,200 square feet of interior livable space for a unit with two or more bedrooms. (2) An attached ADU that is created on a lot with an existing primary dwelling is further limited to 50 percent of the floor area of the existing primary dwelling.
(32) Application of other development standards in this subsection (65), such as FAR setbacks or lot coverage, might further limit the size of the ADU, but no application of the percent-based size limit in subsection 5a(2) above or of a FAR, front setback, lot coverage limit, or open-space requirementa development standard in this subsection (6) may require the ADU have less than 800 square feet of interior livable spaceto be less than 800 square feet.
b. Floor Area Ratio (FAR). No ADU subject to this subsection 5 may cause the total FAR of the lot to exceed 45 percent, subject to subsection 5a(3) above.
cb. Setbacks
(1) An ADU that is subject to this subsection (56) must conform to 4-foot side- and rear-yard setbacks. An ADU that is subject to this subsection (6) must conform to a 25-foot front-yard setback, subject to subsection 5a(3(6)(a)(3) above.
(2) An ADU that is subject to this subsection 5 must conform to 4- foot side- and rear-yard setbacks.

CITY OF SHAFTER DEVELOPMENT CODE ERROR! NO TEXT OF SPECIFIED STYLE IN DOCUMENT. 11 Specific Use Development Standards
(23) No setback is required for an ADU that is subject to this subsection (56) if the ADU is constructed in the same location and to the same dimensions as an existing structure.
dc. Lot Coverage. No ADU subject to this subsection (56) may cause the total lot coverage of the lot to exceed 50 percent, subject to subsection 5a(6)(a)(3) above.
e. Minimum Open Space. No ADU subject to this subsection 5 may cause the total percentage of open space of the lot to fall below 50 percent, subject to subsection 5a(3) above.
fe. Passageway. No passageway, defined as a pathway that is unobstructed clear to the sky and extends from a street to one entrance of the ADU or JADU, is required for an ADU.
gf. Parking
(1) Generally. One off-street parking space is required for each ADU, or bedroom, whichever is less. The parking space may be provided in setback areas or as tandem parking, defined as two or more automobiles that are parked on a driveway or in any other location on a lot, lined up behind one another. (2) Exceptions. No parking under subsection (56)(fg)(1) is required in the following situations:
(a) The ADU is located within one-half mile walking
distance of public transit, defined as a location
including, but not linmited to, a bus stop or train station, where the public may access buses, trains, subways,
and other forms of transportation that charge set fares, run on fixed routes, and are available to the public.
(b) The ADU is located within an architecturally and
historically significant historic district.
(c) The ADU is part of the proposed or existing primary residence or an accessory structure under subsection
3a(1) above.
(d) When on-street parking permits are required but not offered to the occupant of the ADU.
(e) When there is an established car share vehicle stop located within one block of the ADU.
(f) When the permit application to create an ADU is
submitted with an application to create a new singlefamily or new multifamily dwelling on the same lot, provided that the ADU or the lot satisfies any other
criteria listed in subsections (56)(gf)(2)(a) through (fe) above.
(3) No Replacement. When a garage, carport, or covered parking structure, or uncovered parking space is demolished in
conjunction with the construction of an ADU or converted to an

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ADU, those off-street parking spaces are not required to be replaced.
(4) No off-street parking is required for a JADU.
hg. Architectural Requirements
(1) The materials and colors of the exterior walls, roof, and windows and doors must match the appearance and
architectural design be the same asof those of the primary dwelling.
(2) The roof slope must match that of the dominant roof slope of the primary dwelling. The dominant roof slope is the slope shared by the largest portion of the roof.
(3) The exterior lighting must be limited to down-lights or as otherwise required by the building or fire code.
(4) The ADU must have an independent exterior entrance, apart from that of the primary dwelling.
(5) The interior horizontal dimensions of an ADU must be at least 10 feet wide in every direction, with a minimum interior wall height of seven feet.
(65) No window or door of the ADU may have a direct line of sight to an adjoining residential property. Each window and door must either be located where there is no direct line of sight or screened using fencing, landscaping, or privacy glass to prevent a direct line of sight.
(7) All windows and doors in an ADU are less than 30 feet from a property line that is not a public right-of-way line must either be (for windows) clerestory with the bottom of the glass at least six feet above the finished floor, or (for windows and for doors) utilize frosted or obscure glass.
i. Landscape Requirements. Evergreen landscape screening must be planted and maintained between the ADU and adjacent parcels as follows:
(1) At least one 15-gallon size plant shall be provided for every five linear feet of exterior ADU wall. Alternatively, at least one 24” box size plant shall be provided for every ten linear feet of exterior ADU wall.
(2) Plant specimens must be at least six feet tall when installed.

As an alternative, a solid fence of at least 6 feet in height may be installed.
(3) All landscaping must be drought-tolerant.
(4) All landscaping must be from the city’s approved plant list. j. Historical Protections. An ADU that is on or within 600 feet of real property that is listed in the California Register of Historic Resources must be located so as to not be visible from any public right-of-way.

CITY OF SHAFTER DEVELOPMENT CODE ERROR! NO TEXT OF SPECIFIED STYLE IN DOCUMENT. 13 Specific Use Development Standards
ki. Allowed Stories. No ADU subject to this subsection 5 may have more than one story, except that an ADU that is attached to the primary dwelling may have the stories allowed under subparagraph 4b(5)(b)(4) of this section.

67. Fees. The following requirements apply to all Class 1 ADUs and JADUs and Class 2 ADUs all ADUs that are approved under subsections 3a (4)(a) or 3b (4)(b) above.
a. Impact Fees
(1) No impact fee is required for a JADU or for an ADU that hais less than 750 square feet in sizeof interior livable space. For purposes of this subsection 6a(7)(a), “impact fee” means a “fee” under the Mitigation Fee Act (Government Code Section 66000(b)) and a fee under the Quimby Act (Government Code Section 66477). “Impact fee” here does not include any
connection fee or capacity charge for water or sewer service. (2) A JADU or ADU with less than 500 square feet of interior livable space does not increase assessable space by 500 square feet for purposes of Education Code section 17620(a)(1)(C), and is therefore not subject to school fees under Education Code section 17620.
(3) Any impact fee that is required for an ADU that hais 750 square feet or more of interior livable space larger in size must be charged proportionately in relation to the square footage of the primary dwelling unit. (e.g., the floor area of the ADU, divided by the floor area of the primary dwelling, times the typical fee amount charged for a new dwelling.)
b. Utility Fees
(1) If an ADU or JADU is constructed with a new single-family home, a separate utility connection directly between the ADU or JADU and the utility and payment of the normal connection fee and capacity charge for a new dwelling are required. (2) Except as described in subsection 6b(7)(b)(1), JADUs and converted ADUs on a single-family lot that are created under subsection 3a(4)(a)(1) above are not required to have a new or separate utility connection directly between the JADU or ADU and the utility. Nor is a connection fee or capacity charge required. Notwithstanding the rest of this paragraph, a direct utility connection is required for separate conveyance of an ADU when separate conveyance is allowed under this code. (3) Except as described in subsection 6b(7)(b)(1), all ADUs that are not covered by subsection 6b(7)(b)(2) require a new, separate utility connection directly between the ADU and the utility for any utility that is provided by the city. All utilities that are not provided by the city are subject to the connection and fee requirements of the utility provider.

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(a) The connection is subject to a connection fee or
capacity charge that is proportionate to the burden
created by the ADU based on either the floor area or
the number of drainage-fixture units (DFU) values, as
defined by the Uniform Plumbing Code, upon the water
or sewer system.
(b) The portion of the fee or charge that is charged by the city may not exceed the reasonable cost of providing
this service.

78. Nonconforming Zoning Code Conditions, Building Code Violations, and Unpermitted Structures
a. Generally. The city will not deny an ADU or JADU application due to a nonconforming zoning condition, building code violation, or unpermitted structure on the lot that does not present a threat to the public health and safety and that is not affected by the construction of the ADU or JADU.
b. Unpermitted ADUs and JADUs constructed before 2020.
(1) Permit to Legalize. As required by state law, the city may not deny a permit to legalize an existing but unpermitted ADU or JADU that was constructed before January 1, 2020, if denial is based on either of the following grounds:
(a) The ADU or JADU violates applicable building
standards, or
(b) The ADU or JADU does not comply with state ADU or
JADU law or this ADU ordinance (section 11.200).
(2) Exceptions:
(a) Notwithstanding subsection 7b(8)(b)(1) above, the city may deny a permit to legalize an existing but
unpermitted ADU or JADU that was constructed before
January 1, 2020, if the city makes a finding that
correcting a violation is necessary to comply with the
standards specified in California Health and Safety
Code section 17920.3.
(b) Subsection 7b(8)(b)(1) above does not apply to a
building that is deemed to be substandard in
accordance with California Health and Safety Code
section 17920.3.

89. Nonconforming ADUs and Discretionary Approval. Any proposed ADU or JADU that would otherwise be allowed under this section but that does not conform to the objective design or development standards set forth in subsections 1 through 7 8 of this section may be allowed by the city with a conditional use permit, in accordance with the other provisions of Section 2.50 of this title.

MANAGEMENT REPORT

CITY OF SHAFTER

CITY COUNCIL REPORT
MEETING DATE: February 3, 2026
DEPARTMENT: Rogelio Sanchez, Finance Director
SUBJECT: ANNUAL COMPREHENSIVE FINANCIAL REPORT (ACFR) FOR FISCAL YEAR 2024-2025

RECOMMENDATION
Council find the action is not defined as a "project" pursuant to Section 15378(b)(4) of the CEQA Guidelines; accept the Annual Comprehensive Financial Report (ACFR), Federal Single Audit, and SAS 114 letter, for the year ended June 30, 2025.

BACKGROUND
The Annual Comprehensive Financial Report (ACFR) for Fiscal Year 2024-25 has been completed and audited by the City’s independent auditors, The Pun Group, LLP. The audit resulted in an unqualified audit opinion, commonly referred to as a “clean opinion,” indicating that the City’s financial statements are presented fairly, in all material respects, in accordance with Generally Accepted Accounting Principles (GAAP).

City staff has included the ACFR for City Council’s review. A representative from The Pun Group will attend the meeting remotely to provide an overview of the audit results and to address any questions from the City Council or the public.

The Letter of Transmittal and Management’s Discussion and Analysis (MD&A) sections of the ACFR provide important context and analysis, including highlights of the City’s financial position, year-over-year trends, and discussion of major operational and financial activities for the fiscal year ended June 30, 2025. These sections are intended to be read in conjunction with the basic financial statements to support a comprehensive understanding of the City’s financial results.

The Independent Auditor’s Report, located at the beginning of the ACFR, confirms the issuance of an unqualified opinion. Due to timing constraints associated with the audit completion, the FY 2024-25 ACFR was submitted to the Government Finance Officers Association (GFOA) for consideration under the Certificate of Achievement for Excellence in Financial Reporting program this year.

For Fiscal Year 2024-25, the City’s federal expenditures were below the threshold requiring a Single Audit under the Uniform Guidance (2 CFR Part 200). As a result, a Single Audit was not required or performed for the fiscal year.

ANNUAL COMPREHENSIVE FINANCIAL REPORT (ACFR) FOR FISCAL YEAR 2024-2025 - 2 -
In addition, The Pun Group has issued the Statement on Auditing Standards (SAS) 114 / AU-C 260 communication, which summarizes key matters communicated to those charged with governance. This letter addresses significant accounting policies, audit findings, internal control considerations, corrected and uncorrected misstatements, and any significant difficulties encountered during the audit. The auditors will be available during the City Council meeting to present these items and respond to questions.

Overall, the ACFR, together with the MD&A and related audit communications, provides a comprehensive and transparent overview of the City’s financial condition and operations for Fiscal Year 2024-25 and is submitted for City Council review and acceptance.

Note: The Final ACFR will be available at https://www.shafter.com/153/FinancialReports.

FISCAL IMPACT
There is no direct fiscal impact associated with the presentation of the Annual Comprehensive Financial Report (ACFR). The costs related to the audit and preparation of the ACFR were previously budgeted in the City's Finance Department expenditures for Fiscal Year 2024-25.

CEQA ANALYSIS
The action is not defined as a “project” per Section 15378(b)(4) of the CEQA Guidelines because the action is the acceptance of a comprehensive financial report and therefore, it is the creation of a governmental funding mechanism or other fiscal activity that does not involve any commitment to a specific project that can result in a potentially significant impact and not subject to CEQA.

APPROVED BY THE CITY ATTORNEY
No

ATTACHMENTS

1. FY25 Shafter ACFR_Secured

ANNUAL COMPREHENSIVE

FINANCIAL REPORT

ANNUAL COMPREHENSIVE

FINANCIAL REPORT
2024-2025 2024-2025

City of Shafter
Shafter, California
Annual Comprehensive Financial Report
For the Fiscal Year Ended June 30, 2025
Prepared by
Administrative Services Department

City of Shafter
Annual Comprehensive Financial Report
For the Year Ended June 30, 2025
Table of Contents
i
Page
INTRODUCTORY SECTION (Unaudited)
Table of Contents ........................................................................................................................................................ i Letter of Transmittal ................................................................................................................................................... v Organization Chart .................................................................................................................................................. xiv Principal Officers ..................................................................................................................................................... xv

FINANCIAL SECTION
Independent Auditor’s Report ................................................................................................................................ 1 Management’s Discussion and Analysis (Unaudited) ........................................................................................... 5 Basic Financial Statements:

Government-Wide Financial Statements:

Statement of Net Position ............................................................................................................................ 32 Statement of Activities ................................................................................................................................ 34 Fund Financial Statements:

Governmental Funds Financial Statements:

Balance Sheet ....................................................................................................................................... 40 Reconciliation of the Governmental Funds Balance Sheet
to the Government-Wide Statement of Net Position ...................................................................... 43 Statement of Revenues, Expenditures, and Changes in Fund Balances ............................................... 44 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-Wide Statement of Activities and Changes in Net Position ..................................................................... 46 Proprietary Funds Financial Statements:

Statement of Net Position ..................................................................................................................... 48 Statement of Revenues, Expenses and Changes in Net Position .......................................................... 50 Statement of Cash Flows ...................................................................................................................... 52 Fiduciary Funds Financial Statements:

Statement of Fiduciary Net Position ..................................................................................................... 57 Statement of Changes in Fiduciary Net Position .................................................................................. 58 Notes to Basic Financial Statements ............................................................................................................... 65

City of Shafter
Annual Comprehensive Financial Report
For the Year Ended June 30, 2025
Table of Contents (Continued)
ii
Page
FINANCIAL SECTION (Continued)
Required Supplementary Information (Unaudited):

Notes to the Required Supplementary Information ......................................................................................... 107 Budgetary Comparison Schedules:

General Fund ............................................................................................................................................. 109 Transportation Special Revenue Fund ...................................................................................................... 110 Schedule of Changes in Total OPEB Liability and Related Ratios ................................................................... 111 Schedules of Proportionate Share of the Net Pension Liability:

Miscellaneous Plan .................................................................................................................................... 112 Safety Plan ................................................................................................................................................. 113 Schedules of Contributions:

Miscellaneous Plan .................................................................................................................................... 114 Safety Plan ................................................................................................................................................. 115 Supplementary Information:

Non-Major Governmental Funds:

Combining Balance Sheet ......................................................................................................................... 120 Combining Statement of Revenues, Expenditures and Changes in Fund Balances ................................................................................................................................. 124 Schedule of Revenues, Expenditures and Changes in
Traffic Mitigation Improvement Capital Projects Fund ..................................................................... 128 Federal Grants Special Revenue Fund ................................................................................................ 129 State Grants Special Revenue Fund .................................................................................................... 130 Traffic Safety Special Revenue Fund ................................................................................................. 131 SLESF Grants Special Revenue Fund ................................................................................................ 132 State Gasoline Tax Special Revenue Fund ......................................................................................... 133 Police Services Special Revenue Fund ............................................................................................... 134 Asset Forfeiture Special Revenue Fund .............................................................................................. 135 Road Maintenance and Rehabilitation Act Special Revenue Fund .................................................... 136 Low and Moderate Income Housing Fund Special Revenue Fund .................................................... 137 Lighting and Landscaping District Special Revenue Fund ................................................................. 138 Water Capital Improvement Capital Projects Fund ............................................................................ 139 Wastewater Capital Improvement Capital Projects Fund ................................................................... 140 Refuse Capital Improvement Capital Projects Fund ........................................................................... 141 Park Capital Improvement Capital Projects Fund............................................................................... 142 Capital Assets Replacement Capital Projects Fund ............................................................................ 143 Median Mitigation Improvement Fund ............................................................................................... 144 Non-Major Enterprise Funds:

Combining Statement of Net Position ....................................................................................................... 147 Combining Statement of Revenues, Expenses, and Changes in Net Position ........................................... 149 Combining Statement of Cash Flows ........................................................................................................ 150

City of Shafter
Annual Comprehensive Financial Report
For the Year Ended June 30, 2025
Table of Contents (Continued)
iii
Page
FINANCIAL SECTION (Continued)
Supplementary Information (Continued):

Internal Service Funds:

Combining Statement of Net Position ....................................................................................................... 155 Combining Statement of Revenues, Expenses, and Changes in Net Position ........................................... 156 Combining Statement of Cash Flows ........................................................................................................ 157 STATISTICAL SECTION (Unaudited)
Table of Contents ................................................................................................................................................... 161 Financial Trends:

Net Position by Component – Last Ten Fiscal Years ...................................................................................... 162 Changes in Net Position – Last Ten Fiscal Years ............................................................................................ 164 Governmental Activities Tax Revenue by Source– Last Ten Fiscal Years ..................................................... 168 Governmental Activities Sales Tax Revenues by Business Category– Last Ten Fiscal Years ....................... 169 Fund Balances of Governmental Funds – Last Ten Fiscal Years .................................................................... 170 Changes in Fund Balances of Governmental Funds – Last Ten Fiscal Years ................................................. 172 General Governmental Revenues by Source – Last Ten Fiscal Years ............................................................. 174 Revenue Capacity:

Assessed Value of Taxable Property – Last Ten Fiscal Years......................................................................... 175 Direct and Overlapping Property Tax Rates – Last Ten Fiscal Years ............................................................. 176 Principal Property Tax Payers – Current Year and Nine Years Ago ............................................................... 178 Property Tax Levies and Collections – Last Ten Fiscal Years ........................................................................ 179 Debt Capacity:

Ratios of Outstanding Debt by Type – Last Ten Fiscal Years ......................................................................... 180 Historical and Overlapping Debt – Last Ten Fiscal Years .............................................................................. 181 Direct and Overlapping Debt ........................................................................................................................... 182 Demographic and Economic Information:

Demographic and Economic Statistics – Last Ten Fiscal Years ..................................................................... 183 Principal Employers – Last Fiscal Year and Nine Years Ago ......................................................................... 184 Operating Information:

Full-Time and Part-Time City Employees by Function – Last Ten Fiscal Years ............................................ 185 Operating Indicators by Function – Last Ten Fiscal Years ............................................................................. 186 Capital Assets Statistics by Function – Last Ten Fiscal Years ........................................................................ 188

iv
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336 Pacific Avenue, Shafter, California 93263
v
January 27, 2026
Honorable Mayor
Members of the City Council
Citizens of the
City of Shafter
Annual Comprehensive Financial Report (ACFR) Submission The Annual Comprehensive Financial Report (ACFR) of the City of Shafter (City) for the fiscal year ended June 30, 2025, is hereby submitted. The accuracy, completeness, and fairness of this report, including all disclosures, are the responsibility of the City. To ensure reliable financial reporting, the City has implemented a comprehensive internal control framework designed to safeguard assets against loss, theft, or misuse while ensuring the preparation of financial statements in accordance with Accounting Principles Generally Accepted in the United States of America (GAAP). Recognizing that the cost of internal controls should not outweigh their benefits, this framework provides reasonable, not absolute, assurance against material misstatement. Management asserts that, to the best of its knowledge and belief, this financial report is complete and reliable in all material respects.

Independent Audit
The City financial statements have been audited by The Pun Group, LLP. The objective of this independent audit was to obtain reasonable assurance that the City’s financial statements for the fiscal year ended June 30, 2025, are free from material misstatement.

The audit involved evaluating evidence supporting financial disclosures, assessing accounting principles and significant estimates, and reviewing overall financial statement presentation. Based on this audit, the independent auditor issued an unmodified opinion, concluding that the City’s financial statements are fairly presented in conformity with GAAP. The independent auditor’s report is included as the first component of the financial section of this report.

The City’s financial audit is also part of a broader, federally mandated Single Audit, designed to meet federal grantor agency requirements. This audit evaluates both financial statement accuracy and compliance with legal and regulatory requirements, particularly regarding federal award administration. The results of this audit are available in the City’s separately issued Single Audit Report.

Management’s Discussion and Analysis (MD&A)
GAAP requires management to provide a narrative introduction, overview, and analysis to accompany the financial statements in the form of a Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The MD&A immediately follows the independent auditor’s report.

vi
Profile of the City of Shafter
The City is located in the southern San Joaquin Valley in Kern County, California. This primarily rural region is heavily invested in agriculture and oil and gas production. Founded in 1913 and incorporated in 1938, the City became a Charter City in 1995. Covering approximately 38.82 square miles, it serves a population of approximately 23,455. The City operates under a Council-Manager government structure, with a five-member City Council elected at large for staggered four-year terms. Council elections are held in November of even-numbered years.

The City provides a range of essential services, including police protection, refuse collection, water and wastewater services, rail operations, infrastructure maintenance, and recreational programs. Fire protection is contracted through Kern County, and ambulance services are provided by a private contractor. This report encompasses all fund types and account groups related to the City and the Successor Agency to the Shafter Community Development Agency.

Several other governmental entities operate within the City’s limits, including the State of California, Kern County, and various local districts. These entities, such as the Kern High School District, Richland School District, and Shafter Recreation and Park District, are legally separate and not considered component units of the City. For additional details on the reporting entity, see Note 1 to the financial statements.

Financial Planning and Budgeting
The annual budget is the cornerstone of the City’s financial planning and control. Each department submits budget requests to the City Manager, who collaborates with the Finance Director to develop a proposed budget. The City prioritizes sustainable budgeting, ensuring that ongoing expenditures do not exceed conservatively estimated revenues.

The City Manager presents the proposed budget to the City Council by June 1st, and the Council adopts the final budget by June 30th. The City Manager has the authority to transfer funds between departments, while supplemental appropriations require Council approval and certification of available funds. Budget-to-actual comparisons for each governmental fund are included in the Required Supplementary Information (RSI) section of this report.

Factors Affecting Financial Condition
The City maintains a strong financial position, with recurring revenues consistently exceeding recurring expenditures and sufficient fund balances to cover liabilities and maintain prudent reserves. This stability results from long-term financial planning, conservative fiscal policies, and proactive economic development initiatives that have fostered business growth.

The City’s general fund balance is structured to cover outstanding pension liabilities, postemployment benefit obligations, contingent commitments, and strategic capital improvements while maintaining a healthy reserve.

The City’s revenue structure is heavily reliant on sales tax, with a significant portion generated by a small number of businesses, particularly in the oil services sector.

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To mitigate this concentration risk, the City Council has adopted a Fund Balance Policy requiring a minimum unassigned fund balance of 50% of the following year’s general fund operating expenditures. Current fund balance levels exceed this threshold. Additionally, portions of the general fund balance are assigned for one-time strategic projects and payments toward unfunded liabilities, excluding them from minimum fund balance calculations.

Economic Outlook
The gross domestic product (GDP) in the US advanced an annualized 4.3% in Q3 2025, the most in two years compared to 3.8% in Q2, and forecasts of 3.3%, the delayed estimate showed. The growth mainly reflected increases in consumer spending, exports, and government spending. Consumer spending rose 3.5%, the most so far this year (vs

2.5% in Q2), led by both goods (3.1% vs 2.2%) and services (3.7% vs 2.6%), mostly health care, international travel, information processing equipment and prescription drugs. Fixed investment continued to rise although at a slower pace (1% vs 4.4%), supported by equipment (5.4% vs 8.5%) and intellectual property products (5.4% vs 15%) while investment in structures (-6.3% vs -7.5%) and residential (-5.1% vs -5.1%) continued to decline. Also, exports rebounded sharply (8.8% vs -1.8%) due to capital and nondurable goods and imports declined further (-4.7% vs -29.3%). Government spending recovered (2.2% vs -0.1%) and the drag from private inventories was smaller (-0.22 pp vs -3.44 pp). source: U.S. Bureau of Economic Analysis
United States GDP Growth Rate:
https://tradingeconomics.com/united-states/gdp-growth

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Source: https://www.bls.gov/regions/west/news-release/consumerpriceindex_losangeles.htm Unemployment Rate Historical Trend (California vs Kern County):
(Source: US Bureau of Labor Statistics)

9.4 9.0

8.1 4.4

5.3 5.6
-

2.0 4.0

6.0 8.0

10.0 12.0

14.0 16.0

18.0 20.0
18-Jan
18-Apr
18-Jul
18-Oct
19-Jan
19-Apr
19-Jul
19-Oct
20-Jan
20-Apr
20-Jul
20-Oct
21-Jan
21-Apr
21-Jul
21-Oct
22-Jan
22-Apr
22-Jul
22-Oct
23-Jan
23-Apr
23-Jul
23-Oct
24-Jan
24-Apr
24-Jul
24-Oct
25-Jan
25-Apr
25-Jul
Rate
Year-Month
CA vs Kern Unemployment
Kern CA

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There is no reliable data source available to measure the specific unemployment rate in the City. However, the City’s economic development efforts have successfully created thousands of new jobs in recent years, primarily in logistics, warehousing, and the oil and gas sectors. These job opportunities continue to benefit City’s unemployed workforce. 10-Year Price per Barrel of Crude Oil
Source: https://tradingeconomics.com/commodity/brent-crude-oil Review of the City’s Housing Market
The City’s housing market continued to demonstrate strong performance in 2024 - 2025, aligning with broader state and national trends while outperforming much of the region.

The City once again set a record for the highest number of single-family residential permits issued, reflecting sustained demand and ongoing development activity.

Nationally, median home prices increased by nearly 5 percent between 2024 and 2025.

While appreciation is expected to continue, most housing experts project a slower pace of growth, with national price increases forecast between 1 and 4 percent. California’s housing market experienced mixed conditions, with Kern County recording a modest median home price increase of approximately 1.79 percent. In contrast, the City significantly exceeded county trends, posting a 6.5 percent increase in home values.

Housing inventory within the City’s historic core remained limited; however, new residential construction helped moderate supply constraints. During the past year, the City permitted approximately 100 new single-family homes, increased the number of residential lots to 252, and advanced three housing developments across a range of price points. Several additional residential tracts are scheduled to begin construction in 2026, further supporting long-term growth within the historic core.

x
Residential development in southeast Shafter, near the City of Bakersfield, continues to play a major role in the local housing market. The Gossamer Grove and Marcona Preserve developments by Lennar Homes - planned for a combined total of 3,827 single-family homes - maintained an annual build-out pace of approximately 250 to 350 units, with more than 450 homes permitted in the past year alone. These projects remain key contributors to population growth, rising home values, and increased assessed valuation. In addition, the fully entitled Mission Lakes development and ongoing mass grading for approximately 2,000 additional residential lots further reinforces this area’s long-term development outlook.

As a result of sustained residential activity, the City’s population grew by approximately

3.8 percent over the past year, placing the City among the fastest-growing communities in Kern County and among the fastest-growing cities statewide. This growth reflects the City’s continued desirability, expanding housing opportunities, and economic vitality, positioning the City for continued success in the years ahead.

Economic Development:

The City’s economic development program has evolved in response to changes in State policy and regional market conditions. Following the dissolution of redevelopment agencies in 2012, the City advanced a locally driven approach centered on infrastructure investment, streamlined permitting, and maintaining an environment where businesses can operate successfully. This approach has supported sustained industrial activity and economic diversification.

Agriculture and energy have historically served as foundational components of City’s economy, with agriculture continuing to represent a significant share of regional employment. The City’s geographic location in the center of California, positioned between Interstate 5 and State Route 99 and supported by City-owned rail infrastructure connected to the BNSF mainline, has enabled the City to function as a logistics, distribution, and industrial center.

Industrial development in the City has been anchored by the Wonderful Industrial Park, encompassing approximately 1,600 acres of master-planned industrial land. Since the early 2000s, the City has attracted firms engaged in logistics, distribution, manufacturing, and industrial services. Industrial facilities in the City account for millions of square feet of developed space, support a substantial employment base, and benefit from rail-served and large-format industrial sites that remain a defining asset of the local economy.

In addition to logistics and distribution, the City’s industrial base includes construction and building materials suppliers, oil and gas service firms, and agricultural technology operations. The City’s ag-technology presence includes businesses engaged in agricultural research, plant development, and value-added crop innovation. Collectively, these sectors contribute to a diversified industrial profile and broaden the City’s employment base.

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The City has demonstrated adaptability during changes in California’s energy and regulatory environment. Since 2017, several legacy energy-related facilities have transitioned to new industrial or manufacturing uses, maintaining productive utilization of industrial properties and continued employment activity.

Residential development and population growth have supported corresponding increases in retail and service activity. The City’s population is projected to grow from approximately 22,000 residents to 30,000 by 2030, providing additional support for commercial development and diversification of the tax base.

Over the past decade, the City has invested significant resources in infrastructure necessary to support economic activity, including transportation improvements, water and wastewater capacity, City-owned rail operations, and a fiber-optic network. These investments have aligned economic growth with service capacity and long-term fiscal sustainability.

The City’s economic development efforts continue to focus on supporting existing industries and facilitating reinvestment, maintaining infrastructure readiness to accommodate future growth, encouraging a balanced mix of industrial, manufacturing, and commercial activity, and aligning economic development with long-term fiscal and operational objectives.

The City’s economic development strategy has supported sustained industrial investment, employment opportunities, and growth in the City’s tax base. The City’s location, infrastructure assets, and diversified industrial base continue to position the City as a stable and competitive economic center within Kern County and the Central Valley.

Enterprise funds. All enterprise functions of the City are expected to cover their full share of direct and indirect costs. To ensure financial sustainability, the City conducted a rate analysis for Water, Wastewater, and Refuse utilities, resulting in a five-year series of rate adjustments. The first increase took effect on July 1, 2025.

These rate adjustments provide the necessary funding to keep pace with rising operational costs, new regulatory requirements for wastewater treatment and recycling, water treatment expenses to maintain clean drinking water, and essential capital improvements.

The Infrastructure of Community
The Community Services department includes the Shafter Library & Learning Center, the Shafter Aquatic Center and downtown revitalization. These projects are diverse, however, they can all be considered part of the community infrastructure of the City. Some areas of the City organization have responsibility for infrastructure that is crucial for safety and survival. For example, the removal of waste, the provision of clean water, and enforcing the law to protect residents from violence. Libraries, public pools, and a vibrant downtown are infrastructure of a different kind. They enable a community to thrive.

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The City is increasingly focused on community infrastructure and this reorganization is evidence of that.

1. Shafter Library & Learning Center: The centerpiece of the City’s educational initiatives, the Shafter Library & Learning Center, has a mission to nurture discovery, learning, and connection in the community. Established through a series of developments since 2014, it now offers:
o A full-service library.
o Educational programming including classes, author visits, and science demonstrations.
o Partnerships with institutions like Bakersfield College for additional classes and services.
o Five-day-a-week operations with extended hours.
o In 2025 the Center averaged 858 visitors attending classes or programs and 1,866 book circulations per month.
o “Scoutmobile,” our mobile library, supports outreach at public events and provides library services to outlying areas.
o A chess garden, set to be constructed in 2026, will extend our library to our exterior patio to serve as additional gathering space for patrons.

2. Shafter Aquatic Center: Reopening under City management in 2026, the Aquatic Center will support youth competition, recreation, and fitness opportunities for residents.

3. Downtown Revitalization: The City’s efforts to revitalize downtown Shafter are in the early stages. They include:
o Downtown events like First Fridays and the Shafter Farmers Market. o A Downtown Façade Grant Program, designed to support businesses and business owners as they invest in exterior building improvements to make downtown Shafter thrive.
o Community and business engagement to develop and implement the downtown component of the City's strategic plan.

Together, these initiatives represent a substantial investment in the growth of individual residents, families, and connections across the community.

Cash and investment policies and practice. The City continues to maintain an Investment Policy, which is submitted annually to the City Council, along with quarterly Treasurer’s Reports reporting investment activity and portfolio balances during the fiscal year. The goals of the policy are to invest public funds in a manner which will provide in this order: security, liquidity, and return; while conforming to all State and local statutes governing the investment of public funds.

Cash temporarily idle during the year was invested in demand deposits, certificates of deposit, Local Agency Investment Fund of the State of California (LAIF), California Cooperative Liquid Assets Securities System (California CLASS), Corporate Bonds and obligations of the U.S. Treasury.

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Source: https://www.treasurer.ca.gov/pmia-laif/historical/quarterly.asp The City’s investment portfolio follows the City’s investment policy. The safety and liquidity policy objectives were placed above rates of return considerations in making deposits and investments. Accordingly, deposits were either insured by federal depository insurance, collateralized or backed by the full faith of the federal government. For additional information, see Note 2 to the financial statements.

Pension and other post-employment benefits. The City provides pension benefits for its safety and non-safety employees in separate plans managed by the California Public Employees Retirement System (CalPERS). The City is subject to the Public Employees’ Pension Reform Act of 2013 (PEPRA) which imposes a lower pension benefit level and mandated employee cost sharing on new members. Each year a CalPERS actuary calculates the amount of the annual contribution that the City must make to the pension plan to ensure that the plan will be able to fully meet its obligations to retired employees on a timely basis. This payment is calculated as a percentage of payroll and remitted to CalPERS with each payroll cycle. As a matter of policy, the City fully funds each year’s annual required contribution to the pension plans as determined by the actuary.

Respectfully submitted,
Roger Sanchez
Finance Director 0.5%

0.4%

0.2%

0.2%

0.3%

0.6%

0.9%

1.9%

2.6%

1.5%

0.3%

0.8%

3.2%

4.6%

4.4%

0.0%

0.5%

1.0%

1.5%

2.0%

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3.0%

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4.0%

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'11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 LAIF Rate
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LAIF Rate Apportionment Rate as of June

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xv
City of Shafter
Principal Officers
as of June 30, 2025
City Council (Elected) Chad Givens, Mayor
Gustavo Olvera, Jr., Mayor Pro Tem
Gilbert T. Alvarado, Councilmember
Pete Espinoza, Councilmember
Cathy Prout, Councilmember
City Manager
Human Resources Director
Planning Director
Chief Building Official
Community Services Director
Economic Development Director
Public Works Director
Chief of Police
City Clerk
Information Technology
Finance Director
Community Engagement Manager
Lance Lippincott
Carol Chavolla
Steve Esselman
Dennis Fidler
David Franz
Kamal Siada
Michael James
Randy Milligan
Yazmina Pallares
Johnny Rubio
Roger Sanchez
Rachel Zermeno

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6 Hutton Centre Drive, Suite 1200
Santa Ana, California 92707
INDEPENDENT AUDITOR’S REPORT
To the Honorable Mayor and Members
of the City Council of the City of Shafter
Shafter, California
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Shafter, California (the “City”), as of and for the year ended June 30, 2025, and the related notes to the basic financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents.

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

Basis for Opinions
We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City, and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Emphasis of a Matter
Change in Accounting Principle
As discussed in Notes 1 and 14 to the financial statements, the City implemented Governmental Accounting Standards Board (“GASB”) Statement No. 101, Compensated Absences, effective July 1, 2024. The implementation of this standard required the City to change its method of accounting for compensated absences and resulted in a restatement of beginning net position as of July 1, 2024. Our opinion is not modified with respect to this matter.

Correction of Error
As discussed in Note 14 to the financial statements, during the current fiscal year we identified an error in the recording of revenue in prior periods. The correction of this error resulted in a restatement of beginning fund balance and net position as of July 1, 2024. Our opinion is not modified with respect to this matter.

To the Honorable Mayor and Members
of the City Council of the City of Shafter
Shafter, California

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

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.

Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions.

Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards, we
 exercise professional judgment and maintain professional skepticism throughout the audit.  identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.  obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, no such opinion is expressed.  evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.  conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

To the Honorable Mayor and Members
of the City Council of the City of Shafter
Shafter, California

3 Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, Budgetary Comparison Schedules, Schedule of Changes in Net Pension Liability and Related Ratios, Schedules of Contributions – Pension Plans, and Schedule of Changes in Total OPEB Liability and Related Ratios, as listed in the accompanying table of contents, be presented to supplement the basic financial statements. Such information, 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.

Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The Combining and Individual Fund Financial Statements and Budgetary Comparison Schedules are presented for purposes of additional analysis and are not a required part of the basic financial statements.

Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the Combining and Individual Fund Financial Statements and Budgetary Comparison Schedules are fairly stated, in all material respects, in relation to the basic financial statements as a whole.

Other Information
Management is responsible for the other information included in the annual report. The other information comprises the Introductory and Statistical Sections but does not include the basic financial statements and our auditor’s report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon.

In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.

To the Honorable Mayor and Members
of the City Council of the City of Shafter
Shafter, California

4 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 27, 2026, on our consideration of City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of City’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering City’s internal control over financial reporting and compliance.

Santa Ana, California
January 27, 2026

CITY OF SHAFTER
Management’s Discussion and Analysis (Unaudited)
For the Fiscal Year ended June 30, 2025
5 As management of the City of Shafter (the “City”), we present this Management’s Discussion and Analysis (MD&A) as part of the City’s Annual Comprehensive Financial Report (ACFR) for the fiscal year ended June 30, 2025. This section provides a clear and concise overview of the City’s financial performance, financial position, and significant financial activities during the year. The MD&A is intended to assist readers in understanding how current-year results compare with prior years, the factors that influenced those results, and the City’s overall fiscal health. Readers are encouraged to consider this discussion in conjunction with the letter of transmittal, the basic financial statements, and the accompanying notes, which together provide a comprehensive view of the City’s financial condition and operations.

FINANCIAL HIGHLIGHTS FOR FISCAL YEAR 2024-2025
 At June 30, 2025, the City’s assets and deferred outflows of resources exceeded liabilities and deferred inflows of resources by approximately $253.32 million, reflecting a continued strengthening of the City’s overall financial position.
 Total net position increased by approximately $20.97 million which includes the prior year adjustment as a result to the implementation of GASB 101during fiscal year 2025. Governmental activities accounted for an increase of approximately $20.42 million, while business-type activities reported a modest increase of approximately $0.55 million, as reported in the Statement of Activities.  As of June 30, 2025, the City’s governmental funds reported a combined ending fund balance of approximately $147.59 million, of which approximately $35.98 million, or 24.38%, was unassigned, providing significant liquidity and financial flexibility.  The General Fund reported an unassigned fund balance of approximately $36.35 million, representing approximately 120.08% of total General Fund operating expenditures of $30.27 million, substantially exceeding the City’s minimum reserve policy.
 Year-end General Fund revenues totaled approximately $38.13 million, representing 114.13% of the final budget estimate of $33.40 million, and exceeding budgeted expectations by approximately $4.71 million.
 Tax revenues exceeded budget by approximately $2.29 million, or 9.26%.  Licenses, permits, and fees exceeded budget by approximately $1.39 million, or 58.20%, reflecting higher-than-anticipated development and service activity.  Investment earnings exceeded budget by approximately $1.95 million, driven by higher interest rates and the investment of elevated cash balances during fiscal year 2024–2025.  All proprietary funds reported operating losses during fiscal year 2025, reflecting continued cost pressures across enterprise operations. The Water Fund reported an operating loss of approximately $1.72 million, while the Wastewater Fund reported an operating loss of approximately $0.68 million.  Changes in labor costs varied by fund, with decreases in the Water Fund and increases in the Wastewater Fund, primarily attributable to market-based salary adjustments and higher repairs and maintenance expenditures. The Wastewater Fund’s operating loss was more than offset by approximately $1.00 million in transfers in, resulting in a net increase in fund net position, while the Water Fund experienced a net decrease in fund net position for the year. Overall, the impact of operating losses on unrestricted net position varied by fund, depending on the availability of nonoperating revenues and transfers.

CITY OF SHAFTER
Management’s Discussion and Analysis (Unaudited) (Continued) For the Fiscal Year ended June 30, 2025
6 OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis introduces the reader to the City of Shafter’s basic financial statements. The City of Shafter’s basic financial statements consist of three components: 1) government-wide financial statements; 2) fund financial statements and, 3) notes to the financial statements. This report also contains supplemental information to help the reader develop a full understanding of the City’s financial activities.

Government-Wide Financial Statements
The government-wide financial statements include the Statement of Net Position and the Statement of Activities and Changes in Net Position. These statements are intended to provide a reader with a broad overview of the City’s finances. They are presented in a manner that is similar to private-sector business.

The Statement of Net Position presents information on all the City’s assets, deferred outflows of resources, liabilities, and deferred inflows of resources, with the difference between the two reported as net position.

Increases and decreases in net position that occur over time may serve as an indicator of the City’s financial position.

The Statement of Activities and Changes in Net Position presents information showing how the City’s net position changed during the most recent fiscal year. All changes in net position are reported using the Accrual Basis of Accounting. Changes are reported as soon as the underlying event causing the changes occurs, regardless of the timing of the related cash flows. Therefore, revenue and expenses are reported in this statement for some items that will only result in cash flows in future fiscal years, such as revenues related to uncollected taxes or earned but unused employee leave.

Both of the government-wide financial statements distinguish functions of the City that are supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to be selfsupporting. The self-supporting functions are called “Business-Type Activities” or enterprise funds and are intended to recover all or a significant portion of their costs through user fees and charges for services.

The governmental activities of the City include general government administration, public safety (police, fire, and animal control), public works, culture and recreation, City planning, park, recreation and payments on long-term debt.

The self-supporting, business-type activities include Shafter’s water services, wastewater services, refuse collection, transit operations, rail operations, and network operations.

Fund Financial Statements
A fund is a grouping of related accounts that are used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal and accounting requirements.

The City’s funds can be divided into three categories: governmental funds, proprietary funds and fiduciary funds.

Governmental funds are used to account for the same functions reported as governmental activities in the government-wide financial statements. These statements focus on how cash and other financial assets can readily be converted to available resources. They also show fund balances that are left at the end of the fiscal year and distinguish between amounts that are restricted for specific purposes versus funds that are available for spending.

CITY OF SHAFTER
Management’s Discussion and Analysis (Unaudited) (Continued) For the Fiscal Year ended June 30, 2025
7 Governmental Funds
Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

The City of Shafter maintains several individual funds that are organized according to their type. Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures and changes in fund balances for these funds based on major funds and non-major funds aggregated. There are three major governmental funds, the General Fund, and the transportation fund.

Financial information from the remaining governmental funds is combined into a single, aggregated presentation called non-major governmental funds.

Proprietary Funds
Proprietary funds are used to account for services and activities for which the City charges customers. The City of Shafter maintains two different types of propriety funds.

Enterprise Funds. These are funds that are used to report business-type activities in government-wide financial statements. The City of Shafter has four major enterprise funds: water, wastewater, rail, and fiber optic and communication tower fund. All other enterprise funds are aggregated as non-major funds.

Internal Service Funds. These funds are used to allocate and accumulate costs internally among the City’s functions. The City uses internal service funds to account for the maintenance and replacement of its fleet, maintenance of City buildings and facilities, risk management, and information technology. These funds are included in the governmental activities of the government-wide financial statements because their activities support governmental activities. The internal service funds are combined into a single, aggregated presentation in the proprietary fund financial statements.

Fiduciary Funds
Fiduciary funds are used to account for financial resources held for the benefit of parties outside the City government. Fiduciary funds are not reflected in the government-wide statements because the resources of these funds are not available to support the City of Shafter’s governmental activities. The City maintains four fiduciary funds, one private purpose trust fund for the RDA Successor Agency and three agency funds for third party moneys held by the City relating to the operation of the modified community correctional facility.

Notes to Basic Financial Statements
The notes to basic financial statements provide information that will help the reader gain a full understanding of the data provided in the government-wide and individual fund financial statements.

Required Supplemental Information
This report also presents certain required supplementary information concerning the City’s progress in its obligation to provide pension benefits to its employees and the budget-to-actual information for the City’s General Fund.

CITY OF SHAFTER
Management’s Discussion and Analysis (Unaudited) (Continued) For the Fiscal Year ended June 30, 2025
8 GOVERNMENT-WIDE FINANCIAL ANALYSIS
As noted earlier, net position may serve over time as a useful indicator of a government’s financial positions.

Therefore, prior-year information is made available for a comparative analysis of government-wide data.

Analysis of Net Position
As of June 30, 2025, the City of Shafter reported total assets of $281.86 million (FY 24-25 ACFR, Statement of Net Position), deferred outflows of resources of $5.78 million, total liabilities of $28.79 million, and deferred inflows of resources of $5.53 million. As a result, total net position amounted to $253.32million, representing an increase of $20.97 million, or 9.3%, compared to the prior fiscal year.

A significant portion of the City’s net position, $109.78 million, represents the City’s net investment in capital assets, including land, buildings, infrastructure, and equipment. These assets are essential to the delivery of municipal services and are not available for discretionary spending. Restricted net position totaled $36.71 million and is constrained by external legal or contractual requirements. Unrestricted net position totaled $106.82 million, providing the City with substantial financial flexibility. It should be noted that even though the City’s capital assets are reported net of related debt, the resources needed to repay this debt must be provided from other sources because capital assets typically cannot be used to liquidate these liabilities.

During fiscal year 2025, the City’s total net position increased by $20.97 million. Governmental activities reported an increase in net position of $20.42 million, while business-type activities reported an increase of $0.55 million.

The increase in governmental activities was primarily driven by higher investment earnings resulting from elevated interest rates and strong cash balances, continued growth in property and motor vehicle-related tax revenues, and disciplined expenditure control despite inflationary pressures.

Business-type activities reported a net increase in net position of approximately $0.55 million during fiscal year 2025. While operating expenses increased across the enterprise funds, particularly within the Water and Wastewater Funds, these pressures were partially offset by stable service charges, nonoperating revenues, and interfund transfers.

The Water Fund generated operating revenues of approximately $5.6 million against operating expenses of approximately $7.3 million, resulting in an operating loss of approximately $1.7 million and a net decrease in fund net position of approximately $0.3 million which includes the prior period adjustments as a result to implementation of GASB 101 for the fiscal year.

The Wastewater Fund reported operating revenues of approximately $2.7 million and operating expenses of approximately $3.4 million, resulting in an operating loss of approximately $0.7 million. However, nonoperating revenues and transfers totaling approximately $1.1 million more than offset the operating shortfall, resulting in a net increase in fund net position of approximately $0.4 million for the fiscal year.

Collectively, these offsetting results, together with performance in the City’s other enterprise funds, contributed to a modest but positive change in net position at the government-wide level, indicating that while operating cost pressures persist, overall business-type activities remained financially stable in fiscal year 2025.

CITY OF SHAFTER
Management’s Discussion and Analysis (Unaudited) (Continued) For the Fiscal Year ended June 30, 2025
9 The following table is a condensed Statement of Net Position for the City as of June 30, 2025 and 2024:
2025 2024 2025 2024 2025 2024
Current and other assets $ 169.10 $ 140.39 $ 2.93 $ 4.51 $ 172.03 $ 144.90 Capital assets 62.51 60.01 47.31 45.63 109.82 105.64
Total assets 231.61 200.40 50.24 50.14 281.85 250.54
Deferred outflows of resources 4.98 7.66 0.80 0.73 5.78 8.39 Long-term liabilities 6.23 5.76 1.04 0.61 7.27 6.37
Other liabilities 20.33 11.99 1.19 2.00 21.52 13.99
Total liabilities 26.56 17.75 2.23 2.61 28.79 20.36
Deferred inflows of resources 3.47 4.17 2.05 2.06 5.52 6.23 Net position
Net investment
in capital assets 62.51 58.51 47.27 45.56 109.78 104.07 Restricted 36.71 21.90 - 36.71 - 21.90
Unrestricted 107.34 105.73 (0.51) 0.64 106.83 106.37
Total net position $ 206.56 $ 186.14 $ 46.76 $ 46.20 $ 253.32 $ 232.34 City of Shafter
Governmental activities Business-type activities Total
(Amounts In Millions)
For Years ended June 30, 2025 and 2024
Statement of Net Position
Changes in Net Position
The City’s total net position increased by $20.97 million during fiscal year 2025, reflecting continued improvement in the City’s overall financial condition. As of June 30, 2025, the City reported a total net position of $253.31 million, representing an increase of approximately 9.3% compared to the prior fiscal year. As illustrated in the accompanying chart, this growth continues a multi-year upward trend driven primarily by increases in assets and deferred outflows of resources, while liabilities and deferred inflows have grown at a slower pace.

Governmental activities accounted for the majority of the increase, with net position rising by approximately $20.41 million, largely attributable to strong revenue performance, favorable investment earnings, and continued capital investment. Business-type activities reported a modest increase in net position of approximately $0.55 million, as operating cost pressures within the enterprise funds were partially offset by nonoperating revenues and interfund transfers, resulting in an overall positive outcome at the governmentwide level. It is worth noting that vacancies mitigated budget pressures. 164.4 166.4 169.7 179.3 191.6 200.9
227.3 235.6
258.9
287.63

15.1 14.1 13.6 11.1 16.4 15.3 19.4 18.8 26.6 34.32
149.4 152.2 156.1 168.2 175.3 185.6
208.0 216.7 232.4
253.3
-

50.0 100.0
150.0
200.0
250.0
300.0
350.0
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Millions USD
City of Shafter - Changes in Net Position
Assets & Deferred Outflows Liabilities & Deferred Inflows Net Position

CITY OF SHAFTER
Management’s Discussion and Analysis (Unaudited) (Continued) For the Fiscal Year ended June 30, 2025
10 The following table presents a condensed Statement of Activities and Changes in Net Position for the City for the fiscal years ended June 30, 2025 and 2024, highlighting the primary sources of revenues and expenses and the resulting changes in net position for governmental and business-type activities. 2025 2024 2025 2024 2025 2024
Revenues:

Program revenues:

Charges for services $ 14.23 $ 9.28 $ 10.97 $ 10.60 $ 25.20 $ 19.88 Operating grants and contributions 2.34 3.40 0.55 0.15 2.89 3.55 Capital grants and contributions 6.89 3.05 - 0.01 6.89 3.06 General revenues: - - - - - -
Property taxes 3.81 3.33 - 3.81 - 3.33
Sales taxes 16.44 18.85 - 16.44 - 18.85
Motor vehicle taxes 4.86 4.43 - 4.86 - 4.43
Other taxes 1.79 2.09 - 0.15 1.79 2.24
Investment earnings 7.13 4.54 0.18 0.07 7.31 4.61
Miscellaneous revenue 0.18 0.06 0.31 0.49 - 0.06
Total revenues 57.67 49.03 12.00 10.98 69.67 60.01

Expenses:

General government 12.76 9.56 - 12.76 - 9.56
Public safety 12.55 10.26 - 12.55 - 10.26
Public works 8.38 10.74 - 8.38 - 10.74
Culture and recration 0.87 0.86 - 0.87 - 0.86
Interest on Long-term Debt 0.02 - - 0.02 - -
Water services - 7.31 - 6.95 7.31 6.95
Wastewater services - 3.41 - 3.16 3.41 3.16
Refuse collection - 2.10 - 1.99 2.10 1.99
Transit operations - 0.82 - 0.69 0.82 0.69
Fiber optic & communication tower - 0.35 - 0.44 0.35 0.44 Rail spur services - - 0.32 0.36 0.32 0.36
Total expenses 34.58 31.42 14.31 13.59 48.89 45.01

Increase/(decrease) in net position
before other financing sources and uses 20.59 17.61 0.19 (2.62) 20.77 15.00 Loss on the disposal of assets - - - - - -
Adjustment (0.17) - 0.37 - 0.20 -
Transfers (2.50) (0.69) 2.50 0.69 (0.00) -
Change in net position 20.42 16.92 0.55 (1.93) 20.98 15.00 Net position - beginning, as restated 186.14 169.22 46.20 48.12 232.34 217.34 Net position - ending $ 206.56 $ 186.14 $ 46.76 $ 46.20 $ 253.32 $ 232.34 Governmental Business-Type
Total
Statement of Activities and Changes in Net Position
For Years ended June 30, 2025 and 2024
Activities Activities
(Amounts In Millions)
The following table presents a condensed Statement of Activities and Changes in Net Position for the City for the fiscal years ended June 30, 2025 and 2024. This summary highlights the City’s primary revenue sources, major functional expenditures, and the resulting changes in net position for both governmental and businesstype activities. As shown, fiscal year 2025 reflects continued strength in governmental activities and modest improvement in business-type activities, contributing to an overall increase in the City’s financial position.

CITY OF SHAFTER
Management’s Discussion and Analysis (Unaudited) (Continued) For the Fiscal Year ended June 30, 2025
11 Governmental Activities
Net position in the governmental activities increased by $20.59 million in fiscal year 2025 due to the following:

Revenue Breakdown:
 Taxes Collected: The City collected $30.84 million in tax revenue, reflecting a decrease of $1.03 million (4.43%) from the previous year's $32.21 million. The decrease was mainly attributed to changes in Sales Tax agreements.
 Fees increased by $1.60 million (14.52%), which is largely attributed to illegal dumping fee collected, offsite plan check and inspections and roughly $.531million increase in utility user fee.  Impact Fees increased by $5.07 million (124.97%), suggesting a spike in development-related revenue as the new building codes normally triggers contractors to pulling permits before code changes.  Licenses & Permits increased by $855,358 (65.82%), due to additional encroachment permits and business licenses which indicates business sentiment adapting to price fluctuations in the market. Most notably is increase in building permits which is primarily driven by building code changes that contractor want to avoid, therefore, permits are pulled in advance.  Fines increased by $4,785 (8.26%), showing a slight rise in revenue from public safety fines and asset forfeitures.
 Rents decreased by $390,117 (-96.22%), due to sale of leased property.  Interest Revenue saw a strong increase of $1,118,623 (91.12%), benefiting from higher interest rates.  Grants increased significantly by $728,541 (22.00%), suggesting a increase in grant funding.

Expense Breakdown:
 Wages & Benefits increased by $2.2 million (11.20%), reflecting higher personnel costs from the hiring of vacant positions and COLA increases to wages.
 Planned Operations increased by $1.04 million (10.50%), indicating an increase in professional services.
 Utility Bills rose by $302,905 (8.99%), suggesting an increase in mandatory expenses with rate hikes from utility providers.
 Operations - Internal saw a significant increase of $1,044,443 (10.50%), due to expanded internal projects or services.
 Capital Outlay increased by $1.33 million (182.52%), indicating a significant investments for fixed assets.
 Capital Projects decreased by $2.22 million (-17.91%).

CITY OF SHAFTER
Management’s Discussion and Analysis (Unaudited) (Continued) For the Fiscal Year ended June 30, 2025
12 The General Fund’s tax revenues have displayed notable variability over the past seven fiscal years, reflecting changes in economic conditions, development activity, and revenue structure. Total tax revenues increased steadily from $23.4 million in FY 2018–19 to a peak of $33.4 million in FY 2022–23, driven primarily by growth in sales tax revenues, which remained the City’s largest tax source throughout the period.

In fiscal year 2023–24, total tax revenues declined to $28.7 million, followed by a further decrease to $27.1 million in FY 2024–25. The recent decline is largely attributable to a reduction in sales tax revenues, which decreased from $25.2 million in FY 2022–23 to $16.5 million in FY 2024–25, reflecting changes in sales tax agreements and broader economic conditions.

Despite the decline in sales tax revenues, property tax revenues and property tax in lieu of vehicle license fees (VLF) increased over the period, providing a stabilizing effect on total tax revenues. Property-related revenues rose from a combined $4.1 million in FY 2018–19 to $8.8 million in FY 2024–25, partially offsetting volatility in sales tax and contributing to a more diversified and resilient tax base. $18.7 M
$22.4 M $22.0 M $23.7 M $25.2 M
$18.9 M $16.5 M
$1.9 M
$2.0 M $2.4 M
$2.6 M
$3.0 M
$3.4 M
$3.9 M
$2.2 M
$2.5 M $2.8 M
$3.1 M
$4.0 M
$4.4 M $0.6 M $4.9 M
$0.8 M $0.9 M
$1.1 M
$1.3 M
$2.0 M
$1.8 M $23.4 M
$27.7 M $28.2 M
$30.5 M
$33.4 M
$28.7 M
$27.1 M
$0.0 M
$5.0 M
$10.0 M
$15.0 M
$20.0 M
$25.0 M
$30.0 M
$35.0 M
$40.0 M
18/19
Actual
19/20
Actual
20/21
Actual
21/22
Actual
22/23
Actual
23/24
Actual
24/25
Actual
Million USD
General Fund Taxes
Sales Taxes Property Taxes Property Tax In Lieu of VLF
Franchise Tax Total Taxes

CITY OF SHAFTER
Management’s Discussion and Analysis (Unaudited) (Continued) For the Fiscal Year ended June 30, 2025
13 General Fund charges, fees, and related revenues have shown notable variability over the past seven fiscal years, reflecting changes in development activity, grant funding, and investment performance. Total revenues from these sources increased from $4.8 million in FY 2018–19 to $6.7 million in FY 2020–21, before declining sharply to $3.9 million in FY 2021–22, largely due to reductions in grants and investment earnings during that period.

In fiscal years 2022–23 and 2023–24, total charges and fees stabilized at approximately $5.3 million, supported by consistent levels of charges for services, licenses and permits, and a recovery in investment earnings. $0.8 M $0.9 M
$1.7 M
$1.2 M
$1.6 M
$1.0 M
$2.0 M
$1.3 M $1.1 M
$1.8 M
$1.4 M
$1.7 M
$1.2 M
$2.1 M
$0.4 M $0.3 M
$0.3 M
$0.3 M
$0.5 M
$0.6 M
$0.3 M
$2.2 M
$1.7 M
$0.8 M
$0.8 M
$1.3 M
$2.2 M
$2.9 M
$0.2 M
$0.1 M
$1.0 M
$0.0 M
$1.7 M
$4.8 M
$5.2 M
$6.7 M
$3.9 M
$5.3 M $5.3 M
$9.5 M
$0.0 M
$1.0 M
$2.0 M
$3.0 M
$4.0 M
$5.0 M
$6.0 M
$7.0 M
$8.0 M
$9.0 M
$10.0 M
18/19 Actual 19/20 Actual 20/21 Actual 21/22 Actual 22/23 Actual 23/24 Actual 24/25 Actual Million USD
General Fund Charges and Fees
Charges for Services License & Permits Fines, Forfeitures, Rents & Concessions Investment Earnings Grants & Donations Other GF Revenue Total GF Charges & Fees

CITY OF SHAFTER
Management’s Discussion and Analysis (Unaudited) (Continued) For the Fiscal Year ended June 30, 2025
14 As of June 30, 2025, total General Fund charges and fees increased significantly to approximately $9.5 million, representing the highest level in the period shown. This increase was driven primarily by higher investment earnings of approximately $2.9 million, increased charges for services of approximately $2.0 million, and stronger licenses and permits revenue of approximately $2.1 million, reflecting a combination of elevated cash balances, higher interest rates, and increased development and service activity.

Overall, the composition of charges and fees has shifted over time, with investment earnings emerging as a more significant revenue component in recent years, increasing both total revenue levels and exposure to market and interest rate conditions.

Governmental Activities Expenses
Fiscal year 2024–25 governmental activities continued to exhibit a structural imbalance between program revenues and program expenses across most functional areas. As illustrated in the accompanying chart, general government activities generated approximately $13.2 million in program revenues compared to $12.8 million in program expenses, resulting in near full cost recovery for this function.

While, public safety activities incurred approximately $12.6 million in program expenses while generating only $0.2 million in program revenues, reflecting the City’s continued reliance on general revenues to support essential police services. Public works activities reported approximately $8.4 million in program expenses compared to $0.9 million in program revenues, indicating limited cost recovery for infrastructure-related services. Culture and recreation activities also operated with minimal program revenue, requiring subsidy from general revenues.

While projected labor costs were expected to increase during the fiscal year, vacancies within the police department partially mitigated overall expenditure growth, and maintenance and operating costs remained elevated due to inflationary pressures. Overall, expenditure levels remained consistent with the prior year, while program revenue coverage varied significantly by function. $13.2
$0.2 $0.9 $-
$12.8 $12.6
$8.4
$0.9
$-
$5.0
$10.0
$15.0
General government Public safety Public works Culture and recreation Millions $
City of Shafter
Governmental Activities Program Revenues and Expenses
Progam Revenues Program Expenses

CITY OF SHAFTER
Management’s Discussion and Analysis (Unaudited) (Continued) For the Fiscal Year ended June 30, 2025
15 General Fund operating expenditures remain concentrated in a limited number of core service areas, with public safety and economic development–related activities accounting for the largest share of departmental spending. As illustrated in the chart, the Police Department continued to represent the City’s single largest operating expenditure, increasing from $7.9 million in FY 2023–24 to $9.4 million in FY 2024–25, reflecting the partial filling of vacant positions, wage adjustments, and higher operating costs. It is worth nothing that vacancies mitigated budget pressures.
$6.8 M
$11.9 M
$1.6 M
$1.0 M
$1.1 M
$1.2 M
$1.1 M
$1.1 M
$0.4 M
$0.5 M
$0.9 M
$0.5 M
$0.4 M
$0.4 M
$0.3 M
$0.0 M
$0.1 M
$0.0 M
$0.1 M
$7.9 M
$3.2 M
$2.2 M
$1.3 M
$1.1 M
$1.0 M
$0.9 M
$0.9 M
$0.7 M
$0.6 M
$0.6 M
$0.5 M
$0.5 M
$0.4 M
$0.2 M
$0.0 M
$0.1 M
$0.1 M
$0.1 M
$9.4 M
$2.7 M
$2.2 M
$1.5 M
$1.3 M
$1.0 M
$0.9 M
$1.0 M
$0.6 M
$0.7 M
$0.9 M
$0.5 M
$0.5 M
$0.4 M
$0.3 M
$0.2 M
$0.1 M
$0.1 M
$0.1 M
$0.0 M $4.0 M $8.0 M $12.0 M
Police
Business Incentives
Streets
Public Facilities
Building Inspection
Education Partnership
Engineering
Finance
Business Development
City Manager
Planning
Animal Control
Human Resources
City Attorney
City Clerk
Risk Management
Code Compliance
Veterinary Care
City Council
General Fund Operating
Expenditures by Department
24/25 Actual 23/24 Actual 22/23 Actual

CITY OF SHAFTER
Management’s Discussion and Analysis (Unaudited) (Continued) For the Fiscal Year ended June 30, 2025
16 Business Incentives expenditures declined significantly in FY 2024–25 to approximately $2.7 million, compared to $3.2 million in FY 2023–24 and $11.9 million in FY 2022–23, reflecting the completion of several large, nonrecurring incentive and development-related programs. This decline materially reduced overall expenditure volatility within the General Fund.

Expenditures across most administrative and support departments, including Finance, Human Resources, City Clerk, City Attorney, and Planning, remained relatively stable year over year, generally ranging between $0.3 million and $1.0 million per department, indicating continued cost containment and consistent service delivery.

Infrastructure-related functions, including Streets and Public Facilities, increased modestly in FY 2024–25, reflecting ongoing maintenance and operational needs. Overall, General Fund operating expenditures increased in fiscal year 2024–25 but remained aligned with budgetary expectations, with changes driven primarily by personnel-related costs and the timing of nonrecurring programs rather than broad-based expenditure growth.

General Fund expenditures have varied over the past six fiscal years, reflecting changes in staffing levels, program activity, and the timing of nonrecurring expenditures. Total General Fund expenditures increased from $31.0 million in FY 2019–20 to a peak of $34.6 million in FY 2021–22, followed by a decline to $27.3 million in FY 2023–24. In fiscal year 2024–25, expenditures increased to $30.3 million, reflecting a partial normalization of spending levels.
$10.8 M $11.7 M $12.0 M $12.7 M $14.7 M $16.9 M
$2.9 M $2.9 M $3.2 M $4.4 M
$4.2 M
$4.6 M
$1.3 M $1.9 M $1.6 M
$1.7 M
$2.9 M
$3.3 M
$0.0 M $0.0 M $0.0 M
$0.2 M
$0.0 M
$0.1 M
$12.3 M
$12.8 M $13.0 M
$11.9 M
$2.9 M
$2.4 M $0.2 M
$0.4 M $0.1 M $0.8 M
$0.6 M
$1.1 M $3.0 M
$0.0 M $1.7 M $0.0 M
$1.6 M $0.0 M
$0.0 M
$0.0 M
$31.0 M $31.9 M
$34.6 M
$32.6 M
$27.3 M
$30.3 M
$0.0 M
$5.0 M
$10.0 M
$15.0 M
$20.0 M
$25.0 M
$30.0 M
$35.0 M
$40.0 M
19/20 Actual 20/21 Actual 21/22 Actual 22/23 Actual 23/24 Actual 24/25 Actual Millions
General Fund Expenditures by Category
Wages & Benefits Planned Operations Required Operations Operations -Internal Debt Service Other Non-Operationa
Capital Outlay Capital Projects Transfers-Out
Totals

CITY OF SHAFTER
Management’s Discussion and Analysis (Unaudited) (Continued) For the Fiscal Year ended June 30, 2025
17 Wages and benefits remained the largest expenditure category throughout the period and increased steadily from $10.8 million in FY 2019–20 to $16.9 million in FY 2024–25, reflecting market-based salary adjustments, benefit cost increases, and the gradual filling of vacant positions.

Planned operations are the second largest cost category and increased from $2.9 million in FY 2019–20 to $4.6 million in FY 2024–25, consistent with higher service demands and inflationary pressures.

Other non-operational expenditures were elevated in fiscal years 2020–21 through 2022–23, peaking at approximately $13.0 million, before declining significantly to $2.9 million in FY 2023–24 and $2.4 million in FY 2024–25, indicating the completion of several large, nonrecurring initiatives.

Business-Type Activities
Business-type activities continued to experience operating cost pressures during fiscal year 2024–25, with program expenses exceeding program revenues across most enterprise functions, as illustrated in the accompanying chart. The Water Fund reported approximately $5.6 million in program revenues compared to $7.3 million in program expenses, resulting in an operating loss for the year. Similarly, the Wastewater Fund generated approximately $2.7 million in program revenues against $3.4 million in program expenses, reflecting continued cost pressures.

Refuse operations remained relatively balanced, with program revenues of approximately $2.2 million and program expenses of approximately $2.1 million, while Transit and other enterprise activities continued to rely on operating subsidies due to limited revenue generation.

The increase in operating costs was primarily attributable to higher labor costs, equipment and supply expenses, repairs and maintenance, and utility costs. Additional analysis of operating results, nonoperating revenues, transfers, and long-term sustainability is provided in the enterprise funds section of this discussion.

Management continues to evaluate enterprise fund rate structures to ensure that user charges remain sufficient to recover operating costs and support long-term capital needs.

5.6 2.7 2.2

0.2 0.2

7.3 3.4 2.1 0.8 0.7
-

5.0 10.0
Water Wastewater Refuse Transit Other
Millions $
City of Shafter
Business-type Activities Program Revenues and Expenses
Progam Revenues Program Expenses

CITY OF SHAFTER
Management’s Discussion and Analysis (Unaudited) (Continued) For the Fiscal Year ended June 30, 2025
18 FINANCIAL ANALYSIS OF THE CITY’S FUNDS
As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements.

Governmental Funds
The City of Shafter’s governmental funds statements provide information on the short-term inflows, outflows, and balances of resources that are available for spending. This information is useful in assessing the City’s financial requirements. In particular, the unreserved fund balance may serve as a useful measure of City funds that are available for spending at the end of the fiscal year.

As reported in the Statement of Revenues, Expenditures, and Changes in Fund Balances, total governmental fund revenues increased to $56.35 million in fiscal year 2025, compared to $51.30 million in fiscal year 2024, representing an increase of $5.05 million, or 9.86%. This rebound follows a revenue decline in fiscal year 2024 and reflects stronger overall revenue performance during fiscal year 2025.

Over the six-year period shown in the accompanying table, governmental fund revenues have demonstrated volatility, with noticeable growth in fiscal year 2023 (36.34%), followed by a contraction in fiscal year 2024 (11.86%), and a strong recovery in fiscal year 2025. This pattern reflects the City’s sensitivity to economic conditions, intergovernmental revenues, and one-time funding sources.

The General Fund accounted for the majority of the revenue increase, with operating revenues (excluding internal transfers, charges, and grants) increasing by $5.05 million compared to the prior year. Among major revenue categories, tax revenues experienced the largest growth, increasing by $2.88 million, driven primarily by sales tax growth of $1.49 million. In addition, licenses and permits increased by $1.10 million, representing a 57.31% increase, reflecting heightened development activity and permitting volumes during the fiscal year.

Investment
Earnings
0%
Charges for
services
92%
Operating grants
and contributions
8%
Capital grants
and contributions
0%
City of Shafter
Business-Type Activities Revenues by Source

CITY OF SHAFTER
Management’s Discussion and Analysis (Unaudited) (Continued) For the Fiscal Year ended June 30, 2025
19 Overall, the increase in governmental fund revenues during fiscal year 2025 strengthened fund balances and improved the City’s capacity to support ongoing operations and future capital and service demands. The following represents the City’s governmental revenues for the last five years. .
2021 2022 2023 2024 2025
$ 44,315,308 $ 42,531,113 $ 58,198,465 $ 51,296,291 $ 56,354,972 Dollar Change: 2,121,332 (1,784,195) 15,667,352 (6,902,174) 5,058,681 Percentage Change: 5.03% -4.03% 36.84% -11.86% 9.86%
Revenue
City of Shafter
Governmental Funds - Revenues
Expenditures for governmental funds totaled $37.99 million in fiscal year 2025, representing an increase of $2.01 million, or 5.59%, compared to $35.98 million in fiscal year 2024. This increase follows a relatively flat expenditure year in fiscal year 2024, when expenditures declined slightly by $98,650, or 0.27%, compared to fiscal year 2023.

The increase in fiscal year 2025 expenditures reflects a return to more normal operating levels following prioryear cost containment. While labor costs were projected to increase, vacancies within the Police Department continued to partially offset anticipated personnel-related growth. As a result, salary and benefit expenditures increased at a more moderate pace than originally projected. The following represents the City’s governmental expenditures for the last five years.
.
2021 2022 2023 2024 2025
Expenditures $ 34,087,464 $ 36,413,105 $ 36,082,804 $ 35,984,154 $ 37,995,664 Dollar Change: (569,482) 2,325,641 (330,301) (98,650) 2,011,510 Percentage Change: -1.64% 6.82% -0.91% -0.27% 5.59%
Governmental Funds - Expenditures
City of Shafter
The City of Shafter’s governmental funds experienced a fund balance increase of $20.64 million during fiscal year 2025, representing a 16.26% increase compared to the prior year. This follows a $14.51 million increase (12.90%) in fiscal year 2024, continuing a multi-year trend of strengthening governmental fund balances.

As of June 30, 2025, the City’s governmental funds reported a combined ending fund balance of $147.59 million, up from $126.95 million in fiscal year 2024. The increase in fiscal year 2025 was primarily driven by strong revenue performance, particularly within the General Fund, combined with continued expenditure controls that limited the rate of spending compared to revenues.

The growth in fiscal year 2025 builds upon the significant fund balance gains realized in fiscal year 2024, which represented the largest single-year increase in governmental fund balance over the prior six-year period.

Together, these results reflect sustained fiscal discipline, conservative budgeting practices, and favorable revenue conditions that have strengthened the City’s financial position and enhanced its capacity to absorb economic volatility and fund future priorities. The following represents the City’s governmental fund balance for the last five years.
2021 2022 2023 2024 2025
Fund Balance $ 88,504,904 $ 90,195,147 $ 112,444,824 $ 126,955,443 $ 147,598,789 Dollar Change: 10,118,452 1,690,243 22,249,677 14,510,619 20,643,346 Percentage Change: 12.91% 1.91% 24.67% 12.90% 16.26%
City of Shafter
Governmental Funds - Fund Balance

CITY OF SHAFTER
Management’s Discussion and Analysis (Unaudited) (Continued) For the Fiscal Year ended June 30, 2025
20 Of the $87,772,858 General Fund balance as of June 30, 2025:
 $0.75 million or 0.85% was non-spendable.
 $50.67 million or 57.74% was assigned.
 $36.35 million or 41.42% was unassigned.

Nonspendable fund balance consists primarily of amounts that are not in a spendable form, such as advances to other funds and amounts due from the former redevelopment agency, a fiduciary fund. Assigned fund balance represents resources that the City has expressed intent to use for specific purposes, including strategic initiatives, contingencies, and planned capital projects. Unassigned fund balance represents resources that are available for appropriation and use without external or internal restrictions.

The General Fund is the City’s primary operating fund. As of June 30, 2025, the General Fund reported an unassigned fund balance of $36.35 million, reflecting an increase of $5.56 million, or 18.05%, compared to the prior fiscal year. This increase continues the upward trend in unassigned reserves observed over the past several years.

As a measure of liquidity, unassigned fund balance is compared to total General Fund operating expenditures.

As of June 30, 2025, the General Fund’s unassigned fund balance represented 129.99% of General Fund operating expenditures, net of capital outlay. This level significantly exceeds the City’s minimum reserve policy threshold of 50.00%.

In addition to unassigned reserves, the City maintains substantial assigned fund balances that may be reallocated at the City Council’s discretion, including amounts designated for capital projects or available for internal financing. Strong revenue performance combined with disciplined expenditure management has allowed the City to fund ongoing operations without reliance on reserves. These reserve levels provide flexibility to address future capital needs, economic uncertainty, and opportunities to invest in projects that reduce longterm operating costs or generate positive returns. The following represents the General Fund’s unassigned fund balance for the last five years.
2021 2022 2023 2024 2025
Fund Balance $ 21,746,015 $ 19,915,650 $ 25,166,220 $ 30,793,501 $ 36,351,863 Dollar Change: 1,640,063 (1,830,365) 5,250,570 5,627,281 5,558,362 Percentage Change: 8.16% -8.42% 26.36% 22.36% 18.05%
City of Shafter
General Fund - Unassigned Fund Balance
Proprietary Funds
The City’s proprietary fund statements provide financial information similar to the government-wide financial statements, with a focus on services financed primarily through user charges. The City of Shafter operates seven enterprise funds, of which four are reported as major funds: the Water Fund, Wastewater Fund, Rail Fund, and Telecommunications Fund. The Refuse Fund and Transit Services Fund are reported as non-major enterprise funds.

For fiscal year 2025, total proprietary fund revenues totaled $12.00 million, representing an increase of $1.02 million, or 9.31%, compared to $10.98 million in fiscal year 2024. This increase follows a 4.42% revenue increase in fiscal year 2024 and represents continued recovery after significant revenue declines experienced in fiscal years 2021 and 2022.

CITY OF SHAFTER
Management’s Discussion and Analysis (Unaudited) (Continued) For the Fiscal Year ended June 30, 2025
21 While proprietary fund revenues have improved over the past two fiscal years, the historical trend reflects revenue volatility, particularly within enterprise operations subject to external economic and market conditions.

Revenue performance in the Water and Wastewater Funds remained relatively stable, while fluctuations in other enterprise funds contributed to year-to-year variability.

Overall, the revenue growth reported in fiscal year 2025 reflects improved operating conditions and stabilizing user charge collections across the City’s enterprise operations. The following represents the City’s proprietary revenues for the last five years.
2021 2022 2023 2024 2025
Revenue: $ 13,595,857 $ 9,667,871 $ 10,516,824 $ 10,981,946 $ 12,004,304 Dollar Change: (8,232,718) (3,927,986) 848,953 465,122 1,022,358 Percentage Change: -37.72% -28.89% 8.78% 4.42% 9.31%
City of Shafter
Proprietary Funds - Revenues
As of June 30, 2025, total proprietary fund expenses amounted to $14.32 million, reflecting an increase of $0.73 million, or 5.38%, compared to $13.59 million in fiscal year 2024. This increase follows a 49.53% increase in fiscal year 2023, after two consecutive years of significant expenditure declines in fiscal years 2021 (−40.23%) and 2022 (−42.61%).

Expense fluctuations within the proprietary funds are primarily driven by the City’s major enterprise operations, including the Water, Wastewater, Rail, and Telecommunications Funds, which are subject to variations in operating demands, infrastructure maintenance requirements, and capital-related activities. The increases observed in fiscal years 2024 and 2025 indicate a return to more typical operating expenditure levels following the unusually low spending experienced during fiscal years 2021 and 2022.

While proprietary fund expenditures increased in fiscal year 2025, the rate of growth remained moderate, reflecting continued cost control efforts despite inflationary pressures affecting labor, utilities, materials, and contracted services. Management continues to monitor enterprise fund cost structures to ensure that expenditures remain aligned with service delivery requirements and long-term infrastructure needs. The following represents the City’s proprietary expenses for the last five years. 2021 2022 2023 2024 2025
Expenses: $ 15,130,860 $ 8,684,075 $ 12,985,060 $ 13,586,291 $ 14,316,729 Dollar Change: (10,182,659) (6,446,785) 4,300,985 601,231 730,438 Percentage Change: -40.23% -42.61% 49.53% 4.63% 5.38%
City of Shafter
Proprietary Funds - Expenses
As of June 30, 2025, the ending net position of the City’s proprietary funds totaled $46.75 million, reflecting an increase of $0.55 million, or 1.20%, compared to $46.20 million in fiscal year 2024. This modest increase follows several consecutive years of declining net position after the proprietary funds peaked at $51.52 million in fiscal year 2021.

The stabilization in fiscal year 2025 reflects a combination of improved revenue performance and moderated expenditure growth across the City’s enterprise operations. While proprietary funds continued to experience operating cost pressures, especially within the Water, Wastewater, Rail, and Telecommunications Funds, expenditure increases were partially offset by growth in user charge revenues and controlled cost management.

CITY OF SHAFTER
Management’s Discussion and Analysis (Unaudited) (Continued) For the Fiscal Year ended June 30, 2025
22 While the stabilization of proprietary fund net position represents a positive development, continued monitoring remains important. Management continues to evaluate cost recovery levels, operating efficiencies, and longterm capital needs to ensure that enterprise operations remain financially sustainable and capable of supporting required infrastructure investments. The following represents the City’s proprietary net position for the last five years.
2021 2022 2023 2024 2025
Ending Net Position $ 51,519,202 $ 50,483,556 $ 48,119,048 $ 46,204,488 $ 46,759,180 Dollar Change: (1,061,331) (1,035,646) (2,364,508) (1,914,560) 554,692 Percentage Change: -2.02% -2.01% -4.68% -3.98% 1.20%
City of Shafter
Proprietary Funds Ending Net Position
Water Services Fund
The Water Fund plays a critical role in supporting the City’s potable water and sanitation infrastructure and is funded primarily through charges for services, supplemented by investment earnings, interfund transfers, and limited grant activity. Over the past several fiscal years, the Water Fund has experienced moderate revenue fluctuations and steadily increasing operating costs, reflecting rising regulatory requirements, infrastructure maintenance needs, and inflationary pressures.

Total Water Fund revenues for fiscal year 2024–25 totaled approximately $7.1 million. Charges for services remained the primary revenue source, increasing from $5.34 million in fiscal year 2023–24 to $5.59 million in fiscal year 2024–25, following prior-year peaks of $5.60 million in fiscal year 2022–23. Investment earnings declined from $37,668 in fiscal year 2023–24 to $20,201 in fiscal year 2024–25, reflecting changes in cash balances and investment activity during the year. In addition, the Water Fund received $1.49 million in transfers in, primarily related to the funding of water infrastructure projects supported by American Rescue Plan Act (ARPA) resources.

Total Water Fund expenses increased by 4.31%, from $6.95 million in fiscal year 2023–24 to $7.31 million in fiscal year 2024–25. Wages and benefits decreased by $86,367, primarily due to vacant positions during the fiscal year. Planned operations increased by $85,729, rising from $0.91 million to $0.99 million, largely attributable to higher water treatment supply costs. Required operations increased by 11.13%, from $2.00 million to $2.24 million, reflecting higher regulatory compliance and maintenance expenditures.

Internal operations costs increased in recent years as shared services and administrative support costs were allocated to the Water Fund, contributing to overall expense growth. While expenditure increases were partially offset by higher service charge revenues and transfer support, operating costs continued to grow at a faster pace than recurring revenues during fiscal year 2024–25.

As a result, management continues to evaluate operating efficiencies, cost containment opportunities, and long-term rate adequacy to ensure the Water Fund remains financially sustainable and capable of supporting required infrastructure investments.

Wastewater Services Fund
The Wastewater (Sewer) Fund provides an essential public service to the City and is financed primarily through charges for services, supplemented by investment earnings, grant revenues, and occasional interfund transfers. Over the past five fiscal years, the fund has experienced variability in revenues and steadily increasing operating costs, reflecting changes in external funding, rate structures, and ongoing operational requirements.

CITY OF SHAFTER
Management’s Discussion and Analysis (Unaudited) (Continued) For the Fiscal Year ended June 30, 2025
23 Total revenues for the Wastewater Fund have fluctuated significantly over the five-year period. Peak revenues of $7.07 million in fiscal year 2019–20 were largely attributable to a one-time transfer in of $5.01 million, which supported infrastructure or operational needs. Following that one-time event, revenues declined sharply to $2.41 million in fiscal year 2020–21, before gradually recovering to $2.59 million in fiscal year 2021–22, $2.54 million in fiscal year 2022–23, and $3.07 million in fiscal year 2023–24.

In fiscal year 2024–25, Wastewater Fund revenues continued to strengthen, driven primarily by growth in service charges. Charges for services increased from $2.59 million in fiscal year 2023–24 to $2.72 million in fiscal year 2024–25, reflecting rate adjustments and changes in customer usage. Investment earnings declined modestly from the prior year, decreasing by $9,286 (26.53%), consistent with changes in cash balances and investment activity during the fiscal year.

Total Wastewater Fund expenses increased by 6.10%, rising from $3.19 million in fiscal year 2023–24 to $3.41 million in fiscal year 2024–25. Wages and benefits increased by $89,784 (16.12%), from $552,316 to $642,100, reflecting staffing changes, market-based salary adjustments, and benefit cost increases. Planned operations increased from $897,335 to $952,005, indicating higher operating, maintenance, and service-related costs.

Despite rising operating expenses, total revenues, inclusive of service charges and a transfer in, exceeded expenses in fiscal year 2024–25, resulting in a favorable change in net position for the Wastewater Fund.

Revenues increased by 25.12% year over year, while expenses rose by 6.10%, reflecting continued pressure from labor, maintenance, and regulatory costs. The transfer in played a meaningful role in offsetting these cost increases, supporting the fund’s overall financial position during the year. Management will continue to monitor cost trends, rate adequacy, reliance on transfers, and long-term capital needs to ensure the Wastewater Fund remains financially sustainable and capable of meeting ongoing regulatory and infrastructure requirements.

Refuse Services
The Refuse Fund accounts for the City’s solid waste collection and related services. A significant structural change occurred in fiscal year 2022–23, when refuse operations were outsourced to American Refuse. This transition altered the fund’s cost structure, shifting expenses away from internal staffing toward contracted service costs. The financial results over the past five fiscal years reflect this realignment.

Total revenues for the Refuse Fund have increased steadily, reaching $1.99 million in fiscal year 2023–24 and rising further to $2.19 million in fiscal year 2024–25, representing a 14.86% year-over-year increase. This growth has been driven primarily by service charges. Charges for services increased from $1.04 million in fiscal year 2019–20 to $1.97 million in fiscal year 2023–24, and continued to grow in fiscal year 2024–25, reflecting rate adjustments and changes in service demand. Investment earnings, while modest, increased gradually from $12,282 in fiscal year 2019–20 to $15,005 in fiscal year 2023–24 and $17,220 in fiscal year 2024–25.

Grant revenues were limited and episodic, peaking in fiscal year 2022–23, declining in fiscal year 2023–24, and absent in fiscal year 2024–25.

Total Refuse Fund expenses increased by 6.19%, rising from $1.99 million in fiscal year 2023–24 to $2.10 million in fiscal year 2024–25. Following the outsourcing of refuse services, wages and benefits declined from $122,217 to $85,200, reflecting the reduced need for in-house staffing. Conversely, planned operations increased from $1.81 million to $1.94 million, consistent with higher contracted service costs associated with outsourced operations.

The outsourcing of refuse services has shifted the fund’s cost profile toward contracted operating expenditures while reducing internal staffing and related overhead. Although operating expenses increased modestly in fiscal year 2024–25, revenue growth continued to outpace expense growth, supporting the fund’s ongoing financial stability. Management will continue to evaluate service costs, contract terms, and rate adequacy to ensure long-term operational efficiency and fiscal sustainability.

CITY OF SHAFTER
Management’s Discussion and Analysis (Unaudited) (Continued) For the Fiscal Year ended June 30, 2025
24 GENERAL FUND HIGHLIGHTS
General Fund revenues increased modestly over the two most recent fiscal years, rising from $37.13 million in fiscal year 2023–24 to $38.13 million in fiscal year 2024–25. Over the longer term, revenues have generally trended upward, reflecting growth in key revenue categories and improved investment earnings, while remaining sensitive to economic and development conditions.

Taxes, the City’s largest General Fund revenue source, increased steadily from $27.69 million in fiscal year 2019–20 to a peak of $33.39 million in fiscal year 2022–23, before declining to $28.71 million in fiscal year 2023–24 and further to $27.03 million in fiscal year 2024–25. The recent decline reflects changes in taxable activity and revenue arrangement, mainly within sales and related tax categories.

Fees for services and licenses and permits exhibited greater volatility over the period, peaking in fiscal years 2020–21 and 2022–23, declining in fiscal year 2023–24, and rebounding in fiscal year 2024–25 to $3.78 million.

The increase in the most recent year suggests renewed development activity and higher demand for fee-based services.

Investment earnings emerged as a significant driver of revenue growth. Earnings increased from $1.26 million in fiscal year 2022–23 to $2.19 million in fiscal year 2023–24, and rose sharply to $4.60 million in fiscal year 2024–25, reflecting higher interest rates and increased average cash balances during the year.

General Fund expenditures peaked at $37.07 million in fiscal year 2021–22, declined to $27.25 million in fiscal year 2023–24, and then increased to $30.27 million in fiscal year 2024–25, representing an 11.08% year-overyear increase. The increase in fiscal year 2024–25 reflects rising personnel costs and moderate growth in operational spending.

Wages and benefits continued to represent the largest expenditure category, increasing from $14.68 million in fiscal year 2023–24 to $16.89 million in fiscal year 2024–25, an increase of 13.91%, driven by salary adjustments, staffing levels, and benefit cost increases. Planned and required operations rose from $4.16 million in fiscal year 2023–24 to $4.60 million in fiscal year 2024–25, a 9.25% increase, reflecting higher service delivery and maintenance costs.

Other non-operational expenses declined significantly from historical levels exceeding $11 million, totaling $2.87 million in fiscal year 2023–24 and decreasing further by $435,338 (8.59%) in fiscal year 2024–25, indicating continued cost containment and reduced discretionary spending. Capital projects and capital outlay expenditures also declined, falling from $1.42 million in fiscal year 2023–24 to $1.23 million in fiscal year 2024– 25, a 16.93% decrease, reflecting fewer large-scale infrastructure projects funded through the General Fund.

The General Fund continues to demonstrate a positive structural balance in that revenues can sustain operating expenses, with revenues exceeding expenditures in fiscal year 2024–25 and strong investment earnings supporting financial flexibility amid rising personnel and operating costs.

0.00 20.00

40.00 60.00
2019 2020 2021 2022 2023 2024 2025
Millions
City of Shafter - General Fund Revenues and Expenditures Revenues Expenditures

CITY OF SHAFTER
Management’s Discussion and Analysis (Unaudited) (Continued) For the Fiscal Year ended June 30, 2025
25 2025 2024 2025 2024 2025 2024
Land $ 8,719,997 $ 9,694,125 $ 628,861 $ 628,861 $ 9,348,858 $ 10,322,986 Buildings and improvements 11,505,248 9,616,887 2,624,109 2,795,800 14,129,357 12,412,687 Improvements other than buildings 4,270,835 3,772,373 1,781,236 1,872,831 6,052,071 5,645,204 Machinery and equipment 1,657,738 692,240 2,391,166 2,571,069 4,048,904 3,263,309 Automotive equipment 1,551,158 956,374 616,740 579,443 2,167,898 1,535,817 Infrastructure 30,756,393 23,393,648 37,186,613 33,690,554 67,943,006 57,084,202 Construction in process 3,548,496 10,131,229 2,025,949 3,418,974 5,574,445 13,550,203 Intangible Right to Use Asset 502,145 707,587 51,957 75,636 554,102 783,223 Total $ 62,512,010 $ 58,964,463 $ 47,306,631 $ 45,633,168 $ 109,818,641 $ 104,597,631 Capital Assets Net of Depreciation And Amortization
City of Shafter
As of June 30, 2025 and 2024
Activities Activities Total
Governmental Business-Type
Capital Assets
As of June 30, 2025, the City of Shafter reported total capital assets, net of accumulated depreciation and amortization, of $109.82 million, an increase of $5.22 million (5.0%) from $104.60 million in fiscal year 2024.

This increase reflects continued investment in infrastructure and facilities, partially offset by annual depreciation.

Governmental activities accounted for $62.51 million of total capital assets, increasing by $3.55 million (6.0%) from $58.96 million in the prior year. The most significant growth occurred in infrastructure, which increased by $7.37 million, from $23.39 million in 2024 to $30.76 million in 2025, reflecting continued investment in streets, drainage, and related public works assets. Buildings and improvements also increased by $1.88 million, rising from $9.62 million to $11.51 million, largely due to completed facility projects placed into service during the year. These increases were partially offset by depreciation in machinery, automotive equipment, and intangible right-to-use assets.

Business-type activities reported capital assets totaling $47.31 million, an increase of $1.67 million (3.7%) from $45.63 million in fiscal year 2024. The increase was driven primarily by infrastructure additions, which rose by $3.50 million, from $33.69 million to $37.19 million, reflecting ongoing investment in the City’s water, wastewater, and utility systems.

Construction in progress declined significantly on a Citywide basis, decreasing from $13.55 million in 2024 to $5.57 million in 2025, a reduction of $7.98 million. This decrease indicates the completion and capitalization of several major capital projects during the fiscal year, which transitioned from construction in progress to depreciable infrastructure and building assets.

The City’s capital asset portfolio remains heavily concentrated in long-lived infrastructure assets, which support essential service delivery. Continued attention to capital planning, asset condition assessments, and sustainable funding strategies will be critical to maintaining service levels and addressing future replacement and rehabilitation needs.

CITY OF SHAFTER
Management’s Discussion and Analysis (Unaudited) (Continued) For the Fiscal Year ended June 30, 2025
26 Long-term debt.

As of June 30, 2025, the City had no bonded debt.

The City of Shafter has no general obligation debt. The City’s limit for general obligation debt exceeds $200 million, which represents 10% of the total assessed valuation of the city.

During the current fiscal year, the City of Shafter did not issue any new debt or refinance any existing debt.

Additional information pertaining to City of Shafter’s debt administration and outstanding long-term obligations can be found in Note 6, Long-Term Debt, of the Notes to the Financial Statements.

Claims and litigation liabilities are not recorded as the City has sufficient reserves with the Central San Joaquin Risk Management Authority to cover outstanding claim reserves for workers’ compensation claims and liability claims.

ECONOMIC FACTORS AND NEXT YEAR’S BUDGET AND RATES
The following factors were taken into consideration in preparation of the fiscal year 2025-26 budget.

Budgeting Approach: The City of Shafter conducts financial planning on a “Recurring Revenues versus Recurring Expenditure Basis” to insure financial stability. One-time revenues are not used to pay for recurring operating expenditures. Detailed projections are developed throughout the year and used to monitor recurring revenues and drive decisions regarding any cost or service level increase. This approach has served the city well over the years and resulted in a strong balance sheet and stable annual operations.

Employee Wages and Benefits: Cost-of–living increases were incorporated into the 2025-2026 budget. The City Council did authorize the payment of the increases to health, dental and life insurance costs for City employees. As commercially available health insurance has been increasing by double digits, the City made a shift in 2017 to pool with other public agencies for health insurance through two Joint Powers Authorities (JPA).

These JPA agreements typically require a three-year minimum commitment and are the assumed providers for 2020-2021.

Capital Projects: The City spent $11.34 million in CIP projects for the fiscal year 24-25. The following table lists related projects and expenses within the same period.

CITY OF SHAFTER
Management’s Discussion and Analysis (Unaudited) (Continued) For the Fiscal Year ended June 30, 2025
27 Economic Factors and Future Outlook
The City enters fiscal year 2026 in a strong financial position. Economic factors influencing future financial performance include continued residential and industrial development, sales tax variability tied to major contributors, and elevated but stabilizing interest rates.

Management will continue to emphasize conservative revenue forecasting, sustainable recurring revenues, disciplined expenditure control, and strategic capital investment to preserve long-term financial stability.

Investment earnings are projected to increase with higher interest rates and larger cash balances. Shafter is home to several oil related businesses. Sales taxes had significant decreases from the top five major contributors; however, there was an unexpected boost from the recent fulfilment center which allowed sales taxes to exceed all expectations. Gossamer Grove, a roughly 3,500 lot housing development in Southeast Shafter is continuing under construction and selling homes. Additionally, there are a couple of large industrial developments currently permitted or under construction in the Wonderful Industrial Park. With all this development we are anticipating continued growth in assessed valuation and population over the next few years.

Project NO ProjTitle 2020 2021 2022 2023 2024 2025 2026 Total PF00002 Shafter Aquatic Center Proj. $ 9,707$ - -$ -$ 1,811,001 $ 1,834,649 $ 51,677$ 3,707,034$ WW00002 Southeast Shafter Sewer Imp. 2,523,855 143,112 109,457 18,893 18,915 4,481 1,265 2,819,978 WA00015 Well 21 Development 181,330 2,750 10,499 428,735 828,249 893,981 61 2,345,605 WW00010 WWTP Expansion Project 286,740 1,337,569 588,102 2,212,412 WA00007 Water Meter Retrofits 360,704 67,126 799,524 406,972 264,577 129,714 181,340 2,209,959 PK00008 North Shafter Community Park 222,675 79,558 96,100 1,753,849 2,152,183 PF00004 Shafter Aquatic Center Building Con 51,332 433,291 1,667,080 2,151,703 PD00001 Police Substation at 7th Std. Rd. 10,420 16,102 167,379 320,640 1,297,494 1,812,034 ST00035 Santa Fe Way Resurfacing Project 13,713 14,368 1,763,504 1,791,585 WA00017 Water Meter - New Installations 367,464 1,141,153 1,508,617 ST00042 Roundabout @ 7th Standard & Hwy 43 690,925 639,667 1,330,592 WA00001 Major Well or Casing Repairs 193,701 264,621 207,492 310,351 148,644 78,768 1,203,575 PK00007.1 Stringham Park Amenities Project 1,000,844 74,386 1,075,230 ST00036 Lerdo Hwy Reconstruction Proj. SB1 946,321 619 49,176 996,116 WA00002 Water Tank Improvements 180,152 654,207 80,415 32,276 18,999 20,000 986,050 ST00002 Widen 7th Std.Rd.- Santa Fe to 43 147,200 331,432 107,676 91,828 41,459 198,404 917,999 PK00009 Skate Park Improvements 707,120 3,164 36,293 15,336 761,913 PK00012 Veterans Park Soccer Field Lighting 16,454 738,022 754,476 ST00032 7th Standard Rd#2 LN Reconstruction 712,699 50 36,944 749,694 ST00039.24 2024 RMRA-Road Improvement Project 721,834 608 722,443 ST00021.24 Residential Road Reconstructn 2024 719,851 719,851 IT00003 Citywide Broadband Fiber Expansion 149,840 337,170 487,010 ST00022 NPNS Street & Road Improvements 48,515 9,999 219,794 91,808 370,116 WA00003 Well Maintenance Projects 24,000 26,015 131,093 5,967 26,402 1,920 127,533 342,931 PK00006 Veterans Park Imp. Basketball Court 3,350 8,471 300,208 28,118 340,147 ST00006.24 Sand Sealing 2024 310,630 310,630
Others 86,607 83,753 64,150 77,103 433,113 962,961 402,705 2,110,390 $ 1,881,069$ 1,737,412$ 1,490,089 3,126,706 $ 8,452,330$ 11,344,073 $ 8,858,593 $ 36,890,272 $

CITY OF SHAFTER
Management’s Discussion and Analysis (Unaudited) (Continued) For the Fiscal Year ended June 30, 2025
28 REQUESTS FOR INFORMATION
The financial report is designed to provide our citizens, taxpayers, customers and investors and creditors with a general overview of the City’s finances and to demonstrate the City’s accountability for the money it receives.

Individuals are free to contact the City of Shafter’s Finance Department with questions or requests for additional financial information.

All inquiries can be made by calling 661-746-5001 or visit us at https://www.shafterca.gov/42/Finance.

BASIC FINANCIAL STATEMENTS
29

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GOVERNMENT-WIDE FINANCIAL STATEMENTS
31

Governmental Business-Type
Activities Activities Total
ASSETS
Current assets:

Cash and investments 156,402,396 $ 3,492,020 $ 159,894,416 $ Accounts receivable, net 199,592 447,017 646,609
Interest receivable 796,008 22,388 818,396
Intergovernmental receivable 7,043,531 335,873 7,379,404 Lease receivable - due within one year 165,962 108,763 274,725 Internal balances 3,107,039 (3,107,039) -
Total current assets 167,714,528 1,299,022 169,013,550
Noncurrent assets:

Due from Fiduciary Funds 745,013 - 745,013
Lease receivable - due in more than one year 646,563 1,636,205 2,282,768 Capital assets:

Non-depreciable/amortizable 12,268,493 2,654,810 14,923,303 Depreciable/amortizable, net 50,243,517 44,651,821 94,895,338 Total capital assets 62,512,010 47,306,631 109,818,641
Total noncurrent assets 63,903,586 48,942,836 112,846,422 Total assets 50,241,858 231,618,114 281,859,972

DEFERRED OUTFLOWS OF RESOURCES
Related to OPEB 264,873 30,835 295,708
Related to pensions 4,715,512 770,270 5,485,782
Total deferred outflows of resources 801,105 4,980,385 5,781,490 Primary Government
City of Shafter
Statement of Net Position
June 30, 2025
See accompanying Notes to the Basic Financial Statements. 32

Governmental Business-Type
Activities Activities Total

LIABILITIES
Current liabilities:

Accounts payable 3,811,504 666,667 4,478,171
Accrued payroll 634,042 67,169 701,211
Deposits 14,541,902 179,127 14,721,029
Interest payable 7,843 756 8,599
Unearned revenue 531,982 139,752 671,734
Compensated absences - due within one year 540,416 107,427 647,843 Subscription liability, due within one year 176,998 19,863 196,861 Total OPEB liability - due within one year 83,368 9,543 92,911 Total current liabilities 20,328,055 1,190,304 21,518,359 Noncurrent liabilities:

Compensated absences - due in more than one year 1,580,468 389,028 1,969,496 Subscription liability, due in more than one year 264,841 29,218 294,059 Total OPEB liability - due in more than one year 748,606 87,315 835,921 Aggregate net pension liability 3,638,564 533,347 4,171,911 Total noncurrent liabilities 6,232,479 1,038,908 7,271,387 Total liabilities 2,229,212 26,560,534 28,789,746

DEFERRED INFLOWS OF RESOURCES
Related to OPEB 402,678 46,881 449,559
Related to pensions 2,273,618 412,036 2,685,654
Related to leases 801,071 1,595,654 2,396,725
Total deferred inflows of resources 2,054,571 3,477,367 5,531,938

NET POSITION
Net investment in capital assets 62,512,010 47,272,138 109,784,148 Restricted:

Public safety 3,473,545 - 3,473,545
Transportation 2,961,187 - 2,961,187
Capital improvements 17,863,432 - 17,863,432
Other purposes 12,415,621 - 12,415,621
Total restricted 36,713,785 - 36,713,785
Unrestricted (deficit) 107,334,803 (512,958) 106,821,845 Total net position $ 206,560,598 $ 46,759,180 $ 253,319,778 City of Shafter
Statement of Net Position (Continued)
June 30, 2025
Primary Government
See accompanying Notes to the Basic Financial Statements. 33

Operating Capital
Charges for Grants and Grants and
Functions/Programs Expenses Services Contributions Contributions Total Primary government:

Governmental activities:

General government 12,757,653 $ 13,225,141 $ - $ - $ 13,225,141 $ Public safety 12,548,862 145,519 2,283,613 - 2,429,132
Public works 8,381,690 862,390 59,044 6,885,554 7,806,988 Culture and recreation 870,381 - - - -
Interest on long-term debt 21,727 - - - -
Total governmental activities 34,580,313 14,233,050 2,342,657 6,885,554 23,461,261 Business-type activities:

Water services 7,313,136 5,553,568 - 5,553,568
Wastewater services 3,408,601 2,728,402 - - 2,728,402
Rail Spur services 317,143 - - - -
Fiber optic and communication tower 349,826 227,490 487,010 - 714,500 Refuse collection services 2,106,348 2,195,827 - - 2,195,827 Transit services 821,675 261,960 59,102 - 321,062
Total business-type activities 14,316,729 10,967,247 546,112 - 11,513,359 Total primary government $ 25,200,297 48,897,042 $ 2,888,769 $ 6,885,554 $ 34,974,620 $

City of Shafter
Statement of Activities
For the Year Ended June 30, 2025
Program Revenues
See accompanying Notes to the Basic Financial Statements. 34

Governmental Business-type
Functions/Programs Activities Activities Total
Primary government:

Governmental activities:

General government 467,488 $ - $ 467,488 $
Public safety (10,119,730) - (10,119,730)
Public works - (574,702) (574,702)
Culture and recreation (870,381) - (870,381)
Interest on long-term debt (21,727) - (21,727)
Total governmental activities (11,119,052) - (11,119,052) Business-type activities:

Water services (1,759,568) - (1,759,568)
Wastewater services (680,199) - (680,199)
Rail Spur services (317,143) - (317,143)
Fiber optic & communication tower - 364,674 364,674
Refuse collection services - 89,479 89,479
Transit services (500,613) - (500,613)
Total business-type activities - (2,803,370) (2,803,370) Total primary government (2,803,370) (11,119,052) (13,922,422) General Revenues and Transfers:

General revenues:

Taxes:

Property taxes 3,811,932 - 3,811,932
Sales taxes 16,439,791 - 16,439,791
Unrestricted motor vehicle license tax 4,859,115 - 4,859,115 Vehicle license fee in lieu tax 35,044 - 35,044
Franchise tax 1,750,482 - 1,750,482
Other taxes - 176,000 176,000
Total taxes 27,072,364 - 27,072,364
Investment earnings 7,127,999 176,347 7,304,346
Miscellaneous revenue 4,777 314,598 319,375
Transfers 2,498,143 (2,498,143) -
Total general revenues and transfers 2,989,088 31,706,997 34,696,085 Change in net position 185,718 20,587,945 20,773,663
Net Position:

Beginning of year, as previously reported 186,143,227 46,204,488 232,347,715 Adjustments 368,974 (170,574) 198,400
Beginning of year, as restated (Note 14) 185,972,653 46,573,462 232,546,115 End of year $ 46,759,180 206,560,598 $ 253,319,778 $
and Changes in Net Position
Net (Expense) Revenue
City of Shafter
Statement of Activities (Continued)
For the Year Ended June 30, 2025
See accompanying Notes to the Basic Financial Statements. 35

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36

FUND FINANCIAL STATEMENTS
37

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38

Governmental Funds Financial Statements
General Fund - The General Fund is used to account for resources traditionally associated with government which are not required legally or by sound financial management to be accounted for in another fund.

Transportation Special Revenue Fund - This fund is used to account for the City's share of motor fuel tax revenues and special state grants that are legally restricted to construction and maintenance of local roads within the City limits.

Traffic Mitigation Improvement Capital Projects Fund - This fund was established to account for expenditures for the cost of traffic related projects.
39

Transportation Traffic Mitigation
General Special Revenue Improvement Capital
Fund Fund Project Fund
ASSETS
Cash and investments $ 97,113,837 $ 98,556 $ 20,497,577 Receivables:

Accounts receivable, net 199,592 - -
Interest 458,257 227 121,869
Intergovernmental 3,957,480 2,872,401 -
Lease 812,525 - -
Due from other funds 3,539,781 - -
Due from Fiduciary Fund 745,013 - -
Total assets $ 106,826,485 $ 2,971,184 $ 20,619,446

LIABILITIES, DEFERRED INFLOWS OF

RESOURCES, AND FUND BALANCES
Liabilities:

Accounts payable $ 2,597,385 $ 9,997 $ 805,624
Accrued payroll 603,928 - -
Unearned revenues 506,982 - -
Deposits payable 14,541,902 - -
Due to other funds - - -
Total liabilities 18,250,197 9,997 805,624
Deferred inflows of resources
Unavailable revenue 2,359 1,307,347 -
Related to leases 801,071 - -
Total deferred inflows of resources 803,430 1,307,347 - Fund Balances:

Nonspendable 745,013 - -
Restricted - 1,653,840 -
Assigned 50,675,982 - 19,813,822
Unassigned (deficit) 36,351,863 - -
Total fund balances 87,772,858 1,653,840 19,813,822
Total liabilities, deferred inflows of
resources, and fund balances $ 106,826,485 $ 2,971,184 $ 20,619,446 Major Funds
City of Shafter
Balance Sheet
Governmental Funds
June 30, 2025
See accompanying Notes to the Basic Financial Statements. 40

Non-major Total
l Governmental Governmental
Funds Funds
ASSETS
Cash and investments $ 156,299,666 38,589,696 $
Receivables:

Accounts receivable, net 199,592 -
Interest 796,008 215,655
Intergovernmental 7,043,531 213,650
Lease 812,525 -
Due from other funds 3,539,781 -
Due from Fiduciary Fund 745,013 -
Total assets $ 169,436,116 39,019,001 $

LIABILITIES, DEFERRED INFLOWS OF

RESOURCES, AND FUND BALANCES
Liabilities:

Accounts payable 3,746,943 333,937
Accrued payroll 603,928 -
Unearned revenues 531,982 25,000
Deposits payable 14,541,902 -
Due to other funds 233,805 233,805
Total liabilities 19,658,560 592,742
Deferred inflows of resources
Unavailable revenue 1,377,696 67,990
Related to leases 801,071 -
Total deferred inflows of resources 2,178,767 67,990
Fund Balances:

Nonspendable 745,013 -
Restricted 35,398,781 33,744,941
Assigned 75,474,298 4,984,494
Unassigned (deficit) 35,980,697 (371,166)
Total fund balances 147,598,789 38,358,269
Total liabilities, deferred inflows of
resources, and fund balances $ 39,019,001 $ 169,436,116 City of Shafter
Balance Sheet (Continued)
Governmental Funds
June 30, 2025
See accompanying Notes to the Basic Financial Statements. 41

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42

Total Fund Balances - Total Governmental Funds $ 147,598,789

Grant revenue earned but not received within 60 days is categorized as a deferred inflow in the fund financial statement but grant revenue in the government wide statements. 1,377,696

Capital Assets used in the governmental activities were not financial resources and therefore were not reported in the Governmental Funds Balance Sheet.

Government-Wide Statement of Net Position 62,512,010
Less: amount reported in Internal Service Funds (530,846) Total capital assets 61,981,164
Long-term liabilities are not due and payable in the current period and therefore were not reported in the Governmental Funds Balance Sheet.

Amount reported in Government-Wide Statement of Net Position Compensated absences (2,120,884)
Subscription liability (441,839)
Total OPEB liability (831,974)
Aggregate net pension liability (3,638,564)
Less: amount reported in Internal Service Funds:

Compensated absences 160,439
Subscription liability 70,354
Total OPEB liability 46,298
Aggregate net pension liability 203,363
Total long-term liabilities (6,552,807)
Interest payable on long-term debt did not require current financial resources. Therefore, interest payable was not reported as a liability in the governmental funds, net of $925 in internal service funds. (6,918) Deferred outflows of resources related to OPEB and pensions are not available for current period and, therefore, are deferred in the governmental funds or not recorded in the governmental funds.

Amount reported in Government-Wide Statement of Net Position Deferred outflows of resources related to OPEB 264,873
Deferred outflows of resources related to pensions 4,715,512 Less: amount reported in Internal Service Funds:

Deferred outflows of resources related to OPEB (14,740) Deferred outflows of resources related to pensions (303,156) Total deferred outflows of resources 4,662,489
Deferred inflows of resources related to OPEB and pensions are not available for current period and, therefore, are deferred in the governmental funds or not recorded in the governmental funds.

Amount reported in Government-Wide Statement of Net Position Deferred inflows of resources related to OPEB (402,678) Deferred inflows of resources related to pensions (2,273,618) Less: amount reported in Internal Service Funds:

Deferred inflows of resources related to OPEB 22,408
Deferred inflows of resources related to pensions 160,264 Total deferred inflows of resources (2,493,624)
Internal service funds are used by management to charge the cost of fleet management, risk management, information technology, and building maintenance to individual funds. The assets and liabilities of the internal service funds are included in the governmental activities in the statement of net position. (6,191) Net Position of Governmental Activities $ 206,560,598
Amounts reported for Governmental Activities in the Statement of Net Position were different because:

City of Shafter
Reconciliation of the Governmental Funds Balance Sheet
to the Government-Wide Statement of Net Position
June 30, 2025
See accompanying Notes to the Basic Financial Statements. 43

Transportation Traffic Mitigation
General Special Revenue Improvement Capital
Fund Fund Project Fund
REVENUES:

Property taxes and special assessments $ 3,851,860 $ - $ - Property taxes in lieu of VLF 4,859,115 - -
Sales tax 16,439,791 - -
Franchise tax 1,750,482 - -
Other taxes 136,071 - -
Licenses, permits and fees 3,783,191 - 5,247,808
Fines, forfeitures and penalties 48,038 - -
Investment earnings 4,652,835 31,916 954,290
Intergovernmental 468,303 1,565,054 -
Charges for current services 2,097,810 - -
Other 39,210 - -
Total revenues 38,126,706 1,596,970 6,202,098

EXPENDITURES:

Current:

General government 9,829,033 - -
Public safety 11,543,659 - 363,434
Public works 6,257,722 - -
Culture and recreation 187,477 - -
Capital outlay 2,308,760 1,298,604 1,776,389
Debt Service:

Principal 134,616 - -
Interest 12,771 - -
Total expenditures 30,274,038 1,298,604 2,139,823

REVENUES OVER (UNDER) EXPENDITURES 7,852,668 298,366 4,062,275 OTHER FINANCING SOURCES (USES):

Proceeds from sale of property 1,685,191 - -
Transfers in 262,460 - -
Transfers out - - -
Total other financing sources (uses) 1,947,651 - -
NET CHANGE IN FUND BALANCES 9,800,319 298,366 4,062,275 FUND BALANCES (DEFICIT):

Beginning of year, as previously reported 77,972,539 (1,741,516) 15,751,547 Adjustments - 3,096,990 -
Beginning of year, as restated (Note 14) 77,972,539 1,355,474 15,751,547 End of year $ 87,772,858 $ 1,653,840 $ 19,813,822
Major Funds
City of Shafter
Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds
For the Year Ended June 30, 2025
See accompanying Notes to the Basic Financial Statements. 44

Non-major Total
Governmental Governmental
Funds Funds
REVENUES:

Property taxes and special assessments $ 1,140,990 $ 4,992,850 Property taxes in lieu of VLF - 4,859,115
Sales tax 16,439,791 -
Franchise tax - 1,750,482
Other taxes 1,208,388 1,344,459
Licenses, permits and fees 4,302,472 13,333,471
Fines, forfeitures and penalties 27,660 75,698
Investment earnings 1,785,297 7,424,338
Intergovernmental 1,917,332 3,950,689
Charges for current services 47,059 2,144,869
Other - 39,210
Total revenues 10,429,198 56,354,972
EXPENDITURES:

Current:

General government - 9,829,033
Public safety 11,907,093 -
Public works 565,235 6,822,957
Culture and recreation - 187,477
Capital outlay 3,717,964 9,101,717
Debt service:

Principal - 134,616
Interest - 12,771
Total expenditures 4,283,199 37,995,664

REVENUES OVER (UNDER) EXPENDITURES 6,145,999 18,359,308 OTHER FINANCING SOURCES (USES):

Proceeds from sale of property - 1,685,191
Transfers in 88,237 350,697
Transfers out (2,848,840) (2,848,840)
Total other financing sources (uses) (2,760,603) (812,952) NET CHANGE IN FUND BALANCES 3,385,396 17,546,356
FUND BALANCES (DEFICIT):

Beginning of year, as previously reported 34,972,873 126,955,443 Adjustments - 3,096,990
Beginning of year, as restated (Note 14) 34,972,873 130,052,433 End of year $ 38,358,269 $ 147,598,789
City of Shafter
Statement of Revenues, Expenditures, and Changes in Fund Balances (Continued) Governmental Funds
For the Year Ended June 30, 2025
See accompanying Notes to the Basic Financial Statements. 45

Net Change in Fund Balances - Total Governmental Funds $ 17,546,356

Governmental funds reported capital outlay as expenditures. However, in the Government-Wide Statement of Activities, the cost of those assets was allocated over their estimated useful lives as depreciation and amortization expenses. This is the amount of capital assets recorded in the current period (net of $406,681 added in internal service funds) ($247,108 of the governmental fund capital outlay balance were for repairs and maintenance expenditures). 8,854,609 Depreciation and amortization expense on capital assets was reported in the Government-Wide Statement of Activities and Changes in Net Position, but they did not require the use of current financial resources. Therefore, depreciation and amortization expense, net of internal service funds of $135,562 was not reported as expenditures in the Governmental Funds. (3,775,215)
The net effect of various miscellaneous transactions involving capital assets (i.e. sales, trade-ins, and donations) decreased net position. (1,802,960)

Repayment of long-term liabilities was an expenditures in governmental funds, but the repayment reduced long-term liabilities in the Government-Wide Statement of Net Position.

Principal payment of long-term debt, net of internal services funds of $54,654. 134,616 Interest expense on long-term debt was reported in the Government-Wide Statement of Activities, but it did not require the use of current financial resources. This amount represented the changes in accrued interest from prior year (net of $2,038 in internal service funds). (6,918)
Compensated absences expenses reported in the Government-Wide Statement of Activities do not require the use of current financial resources and, therefore, are not reported as expenditures in the governmental funds (net of $26,402 in internal service funds). (42,546)
Revenues in the Government-Wide Statement of Activities that do not provide current financial resources and are not reported as revenue in the governmental funds. 1,307,347

Certain pension expenses reported in the Government-Wide Statement of Activities do not require the use of current financial resources and therefore, are not reported as expenditures in governmental funds.

Changes in pension related deferred outflows of resources (2,625,436) Changes in net pension liabilities 445,172
Changes in pension related deferred inflows of resources 643,208 Certain OPEB expenses reported in the Government-Wide Statement of Activities do not require the use of current financial resources and therefore, are not reported as expenditures in governmental funds.

Changes in OPEB related deferred outflows of resources (5,750) Changes in total OPEB liabilities 56,821
Changes in OPEB related deferred inflows of resources (100,243) The internal service funds are used by management to charge the costs of fleet maintenance, facilities maintenance, and technology to individual funds. The net revenue of certain activities of internal service funds is reported with governmental activities. (41,116)
Change in Net Position of Governmental Activities $ 20,587,945 Amounts reported for governmental activities in the Statement of Activities were different because:

City of Shafter
Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-Wide Statement of Activities and Changes in Net Position For the Year Ended June 30, 2025
See accompanying Notes to the Basic Financial Statements. 46

Proprietary Funds Financial Statements
Water Services Fund - This fund is used to account for the activities of the City's water pumping, treatment and distribution operations.

Wastewater Services Fund - This fund is used to account for the activities of the City's wastewater collection and treatment operations.

Rail Spur Services Fund - This fund is used to account for the activities of the City's Rail operations created with the construction of an initial rail spur within the City. The enterprise account is being built and significant operational revenue is expected in future years. The revenue from this operation is initially pledged for repayment of a loan advanced by the General Fund.

Fiber Optic and Communication Tower - This fund is used to account for the activities of the City's fiber optic distribution operations to separate service areas within the City. The enterprise account is being built and operational revenue is expected in future years. The revenue from this operation is initially pledged for repayment of a loan advanced by the General Fund.

Internal Service Funds - These funds are used to provide goods and services by one department or agency to other departments or agencies of the City on a cost reimbursement basis. 47

Fiber Optic and
Water Wastewater Rail Spur Communication
Services Services Services Tower
ASSETS
Current assets:

Cash and investments $ 2,874,051 - $ - $ - $
Receivables:

Accounts receivable, net 95,796 105,090 9,280 145,776
Interest 10,995 7,181 - 1,113
Intergovernmental - - - -
Lease - 18,505 - 90,258
Total current assets 130,776 2,980,842 9,280 237,147
Noncurrent assets:

Lease receivable 778,487 - - 857,718
Capital assets:

Non-depreciable 973,167 1,681,643 - -
Depreciable, net 19,811,153 13,727,726 7,576,392 2,922,470 Total capital assets 20,784,320 15,409,369 7,576,392 2,922,470 Total noncurrent assets 15,409,369 21,562,807 7,576,392 3,780,188 Total assets 18,390,211 21,693,583 7,585,672 4,017,335

DEFERRED OUTFLOW OF RESOURCES
Related to OPEB 16,954 7,890 426 -
Related to pensions 444,063 203,525 8,888 -
Total deferred outflow of resources 461,017 211,415 9,314 -

LIABILITIES
Current liabilities:

Accounts payable 270,496 166,912 193 393
Accrued payroll 36,524 16,214 428 -
Due to other funds 215,217 1,838,087 - 658,589
Deposits 107,468 10,250 - -
Interest payable 290 238 - -
Unearned revenue - - - -
Compensated absences, due within one year 67,061 28,147 2,051 - Subscription liability, due within one year 6,567 7,698 - - Total OPEB liability, due within one year 2,442 5,247 132 - Total current liabilities 710,001 230,770 1,840,891 658,982 Noncurrent liabilities:

Compensated absences, due in more than one year 105,194 245,432 6,778 - Subscription liability, due in more than one year 11,238 8,990 - - Total OPEB liability, due in more than one year 48,006 22,342 1,206 - Aggregate net pension liability 140,924 307,476 6,154 - Total noncurrent liabilities 612,152 277,450 14,138 -
Total liabilities 508,220 1,322,153 1,855,029 658,982

DEFERRED INFLOWS OF RESOURCES
Related to OPEB 25,775 11,996 648 -
Related to pensions 237,540 108,870 4,755 -
Related to leases 722,691 - 872,963 -
Total deferred inflows of resources 986,006 120,866 5,403 872,963

NET POSITION
Net investment in capital assets 20,765,384 15,393,812 7,576,392 2,922,470 Unrestricted (deficit) (918,943) 2,578,728 (1,841,838) (437,080) Total net position (deficit) $ 19,846,441 $ 17,972,540 $ 5,734,554 $ 2,485,390 Major Funds
June 30, 2025
Proprietary Funds
Statement of Net Position
City of Shafter
See accompanying Notes to the Basic Financial Statements. 48

Governmental
Activities
Non-major Internal
Funds Total Service Funds
ASSETS
Current assets:

Cash and investments $ 3,492,020 617,969 $ 102,730 $
Receivables:

Accounts receivable, net 91,075 447,017 -
Interest 22,388 3,099 -
Intergovernmental 335,873 335,873 -
Lease 108,763 - -
Total current assets 4,406,061 1,048,016 102,730
Noncurrent assets:

Lease receivable 1,636,205 - -
Capital assets:

Non-depreciable 2,654,810 - -
Depreciable, net 44,651,821 614,080 530,846
Total capital assets 47,306,631 614,080 530,846
Total noncurrent assets 48,942,836 614,080 530,846
Total assets 53,348,897 1,662,096 633,576

DEFERRED OUTFLOW OF RESOURCES
Related to OPEB 30,835 5,565 14,740
Related to pensions 770,270 113,794 303,156
Total deferred outflow of resources 801,105 119,359 317,896

LIABILITIES
Current liabilities:

Accounts payable 666,667 228,673 64,561
Accrued payroll 67,169 14,003 30,114
Due to other funds 3,107,039 395,146 198,937
Deposits 179,127 61,409 -
Interest payable 756 228 925
Unearned revenue 139,752 139,752 -
Compensated absences, due within one year 10,168 107,427 47,695 Subscription liability, due within one year 19,863 5,598 45,782 Total OPEB liability, due within one year 9,543 1,722 4,562 Total current liabilities 4,297,343 856,699 392,576
Noncurrent liabilities:

Compensated absences, due in more than one year 31,624 389,028 112,744 Subscription liability, due in more than one year 29,218 8,990 24,572 Total OPEB liability, due in more than one year 15,761 87,315 41,736 Aggregate net pension liability 78,793 533,347 203,363
Total noncurrent liabilities 135,168 1,038,908 382,415
Total liabilities 991,867 5,336,251 774,991

DEFERRED INFLOWS OF RESOURCES
Related to OPEB 46,881 8,462 22,408
Related to pensions 412,036 60,871 160,264
Related to leases 1,595,654 - -
Total deferred inflows of resources 2,054,571 69,333 182,672

NET POSITION
Net investment in capital assets 614,080 47,272,138 501,712 Unrestricted (deficit) 106,175 (512,958) (507,903)
Total net position (deficit) $ 720,255 $ 46,759,180 $ (6,191) City of Shafter
Statement of Net Position (Continued)
Proprietary Funds
June 30, 2025
See accompanying Notes to the Basic Financial Statements. 49

Fiber Optic and
Water Wastewater Rail Spur Communication
Services Services Services Tower
OPERATING REVENUES:

Charges for services $ 5,553,568 $ 2,728,402 $ 227,490 - $ Other 37,945 - 2,196 -
Total operating revenues 5,591,513 2,728,402 229,686 -
OPERATING EXPENSES:

Salaries and wages 1,562,030 707,036 26,287 -
Administration 1,360,138 733,914 87,600 139,087
Contractual 600,411 20,760 585 3,430
Materials - - - -
Maintenance and repair 216,568 865,397 282 20,699
Utilities 2,293,011 82,723 2,469 15,614
Parts and supplies 24,043 114,302 2,271 -
Depreciation/amortization 1,256,536 884,136 199,920 168,725 Total operating expenses 7,312,737 3,408,268 317,143 349,826 OPERATING (LOSS) (1,721,224) (679,866) (317,143) (120,140) NONOPERATING REVENUES (EXPENSES):

Investment earnings 20,600 114,937 14,732 -
Interest expense (399) (333) - -
Grants - - 487,010 -
Total nonoperating revenues (expenses) 20,201 114,604 501,742 - INCOME(LOSS) BEFORE TRANSFERS (1,701,023) (565,262) (317,143) 381,602 TRANSFERS:

Transfers in 1,495,879 1,002,264 - -
Total transfers 1,495,879 1,002,264 - -
Changes in net position (205,144) 437,002 (317,143) 381,602 NET POSITION (DEFICIT):

Beginning of year, as previously reported 20,148,311 17,579,016 6,052,281 2,103,788 Adjustments (96,726) (43,478) (584) -
Beginning of year, as restated (Note 14) 20,051,585 17,535,538 6,051,697 2,103,788 End of year $ 19,846,441 $ 17,972,540 $ 5,734,554 $ 2,485,390 Major Funds
City of Shafter
Statement of Revenues, Expenses, and Changes in Net Position Proprietary Funds
For the Year Ended June 30, 2025
See accompanying Notes to the Basic Financial Statements. 50

Formerly
Major Fund Governmental
Refuse Activities
n Collection Non-major Internal
Fund Funds Total Service Funds
OPERATING REVENUES:

Charges for services $ 2,457,787 $ 10,967,247 $ 4,144,175 Other 274,457 314,598 1,578
Total operating revenues 2,732,244 11,281,845 4,145,753 OPERATING EXPENSES:

Salaries and wages 516,305 2,811,658 1,120,531
Administration 178,494 2,499,233 600,084
Contractual 1,950,597 2,575,783 1,555,163
Materials - - -
Maintenance and repair 30,927 1,133,873 248,934
Utilities 15,660 2,409,477 223,304
Parts and supplies 65,865 206,481 305,335
Depreciation/amortization 169,890 2,679,207 135,562
Total operating expenses 2,927,738 14,315,712 4,188,913 OPERATING (LOSS) (195,494) (3,033,867) (43,160)
NONOPERATING REVENUES (EXPENSES):

Investment earnings 26,078 176,347 4,082
Interest expense (285) (1,017) (2,038)
Grants 59,102 546,112 -
Total nonoperating revenues (expenses) 84,895 721,442 2,044 INCOME(LOSS) BEFORE TRANSFERS (110,599) (2,312,425) (41,116) TRANSFERS:

Transfers in 2,498,143 - -
Total transfers - 2,498,143 -
Changes in net position (110,599) 185,718 (41,116)
NET POSITION (DEFICIT):

Beginning of year, as previously reported 407,994 (86,902) 46,204,488 95,316 Adjustments (407,994) 917,756 368,974 (60,391)
Beginning of year, as restated (Note 14) 830,854 - 46,573,462 34,925 End of year $ 720,255 - $ $ 46,759,180 $ (6,191)
For the Year Ended June 30, 2025
City of Shafter
Statement of Revenues, Expenses, and Changes in Net Position (Continued) Proprietary Funds
See accompanying Notes to the Basic Financial Statements. 51

Fiber Optic and
Water Wastewater Rail Spur Communication
Services Services Services Tower
CASH FLOWS FROM OPERATING ACTIVITIES:

Cash receipts from customers $ 5,750,976 $ 2,770,840 -$ 237,490 $ Cash payments to suppliers (4,862,073) (1,778,278) (91,533) (200,379) Cash payments to or on behalf of employees (1,393,255) (630,291) (31,116) - Net cash provided by (used in) operating activities (504,352) 362,271 (122,649) 37,111 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:

Interfund receipts 1,495,879 1,002,264 - -
Interfund payments 215,217 122,649 - (196,419)
Intergovernmental receipts - - 487,010 -
Intergovernmental payments - - - -
Net cash provided by (used in) noncapital financing activities 1,002,264 1,711,096 122,649 290,591

CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES:

Acquisition of capital assets (2,469,628) (1,636,667) - (342,301) Principal payments on capital debt (7,547) (6,438) - -
Interest paid on capital debt (1,086) (907) - -
Proceed from sale of capital assets 262,930 - - -
Net cash (used in) capital and related financing activities (2,215,331) (1,644,012) - (342,301) CASH FLOWS FROM INVESTING ACTIVITIES:

Investment earnings 20,752 103,942 14,599 -
Net cash provided by investing activities 103,942 20,752 - 14,599 Net change in cash and cash equivalents (987,835) (175,535) - - CASH AND CASH EQUIVALENTS:

Beginning of year 3,049,586 987,835 - -
End of year $ 2,874,051 - $ - $ - $

RECONCILIATION OF OPERATING (LOSS) TO NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:

Operating (loss) $ (1,721,224) $ (679,866) $ (317,143) $ (120,140) Adjustments to reconcile operating (loss) to net
cash provided by (used in) operating activities:

Depreciation/amortization 1,256,536 884,136 199,920 168,725 Accounts receivable 173,282 63,221 24,811 -
Lease receivable - 16,935 - 89,833
Prepaid items and inventories 54,124 2,788 6 693
Deferred outflows - OPEB related 5,210 664 73 -
Deferred outflows -pension related (39,990) (47,537) (255) - Accounts payable (422,028) 36,026 (601) (19,971)
Accrued payroll 1,705 376 (256) -
Compensated absences 28,760 10,754 (7,652) -
Aggregate net pension liability 66,205 113,923 2,018 -
Total OPEB liability (19,415) (3,265) (217) -
Deposits payable 4,499 (20,783) - -
Unearned revenue - - - -
Deferred inflows - OPEB related 2,703 1,702 135 -
Deferred inflows - pension related 46,849 76,882 1,323 - Deferred inflows - leases (35,253) - - (106,840)
Total adjustments 1,042,137 1,216,872 194,494 157,251
Net cash provided by (used in) operating activities $ (504,352) $ 362,271 $ (122,649) $ 37,111 Major Funds
City of Shafter
Statement of Cash Flows
Proprietary Funds
For the Year Ended June 30, 2025
See accompanying Notes to the Basic Financial Statements. 52

Governmental
Activities
n Non-major Internal
Funds Total Service Funds
CASH FLOWS FROM OPERATING ACTIVITIES:

Cash receipts from customers $ 3,275,713 $ 12,035,019 $ 4,160,116 Cash payments to suppliers (2,165,585) (9,097,848) (2,914,996) Cash payments to or on behalf of employees (478,685) (2,533,347) (1,026,457) Net cash provided by (used in) operating activities 403,824 631,443 218,663 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:

Interfund receipts 2,498,143 - -
Interfund payments (147,322) (5,875) (94,407)
Intergovernmental receipts 546,112 59,102 -
Intergovernmental payments (335,355) (335,355) -
Net cash provided by (used in) noncapital financing activities (423,575) 2,703,025 (94,407)

CASH FLOWS FROM CAPITAL AND
RELATED FINANCING ACTIVITIES:

Acquisition of capital assets (166,790) (4,615,386) (406,681) Principal payments on capital debt (5,495) (19,480) (54,654) Interest paid on capital debt (775) (2,768) (4,939)
Proceed from sale of capital assets 262,930 - -
Net cash (used in) capital and related financing activities (173,060) (4,374,704) (466,274) CASH FLOWS FROM INVESTING ACTIVITIES:

Investment earnings 162,272 22,979 4,082
Net cash provided by investing activities 162,272 22,979 4,082 Net change in cash and cash equivalents 57,787 (1,105,583) (337,936) CASH AND CASH EQUIVALENTS:

Beginning of year 4,597,603 560,182 440,666
End of year $ 3,492,020 617,969 $ 102,730 $

RECONCILIATION OF OPERATING (LOSS) TO NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:

Operating (loss) $ (195,494) $ (3,033,867) $ (43,160)
Adjustments to reconcile operating (loss) to net
cash provided by (used in) operating activities:

Depreciation/amortization 169,890 2,679,207 135,562
Accounts receivable 522,383 783,697 14,363
Lease receivable 106,768 - -
Prepaid items and inventories 715 58,326 11,498
Deferred outflows - OPEB related 1,300 7,247 7,034
Deferred outflows -pension related 11,701 (76,081) 41,146 Accounts payable 75,239 (331,335) 6,327
Accrued payroll 5,177 3,352 4,319
Compensated absences (4,566) 27,296 26,402
Aggregate net pension liability 201,108 18,962 28,282
Total OPEB liability (4,977) (27,874) (21,593)
Deposits payable 8,054 (8,230) -
Unearned revenue 13,032 13,032 -
Deferred inflows - OPEB related 15,160 10,620 7,854
Deferred inflows - pension related 1,232 126,286 629
Deferred inflows - leases - (142,093) -
Total adjustments 3,437,691 826,937 261,823
Net cash provided by (used in) operating activities $ 403,824 631,443 $ 218,663 $ Statement of Cash Flows (Continued)
City of Shafter
Proprietary Funds
For the Year Ended June 30, 2025
See accompanying Notes to the Basic Financial Statements. 53

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54

Fiduciary Funds Financial Statements
Custodial Funds - These funds account for assets held by the City in a Fiduciary capacity for individuals, private organizations, and other governments that are not held in trusts or equivalent arrangements.

RDA Successor Agency Private Purpose Trust Fund - This fund is used to account for monies received from the Kern County Auditor Controller for the repayment of the enforceable obligations of the former Shafter Community Development Agency. These funds are restricted for the sole purpose of payment of items on an approved Recognized Payment Obligation Schedule (ROPS).
55

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56

RDA
Successor Agency
Private Purpose
Custodial Funds Trust Fund
ASSETS
Cash and investments $ 952,151 116,649 $
Cash and investments with fiscal agent 555 -
Due from other governments - 6,894
Prepaid bonds insurance 58,910 -
Total assets $ 1,011,616 123,543 $

LIABILITIES
Deposits payable $ - 120,188 $
Interest payable 61,884 -
Due to City 745,013 -
Long-term debt:

Due in one year 565,000 -
Due in more than one year 7,770,043 -
Total liabilities 9,141,940 120,188

NET POSITION (DEFICIT)
Restricted for individuals, organizations, and other governments - 3,355 Restricted for redevelopment (deficit) and other purposes (8,130,324) - Total net position (deficit) $ (8,130,324) 3,355 $
City of Shafter
Statement of Fiduciary Net Position
Fiduciary Funds
June 30, 2025
See accompanying Notes to the Basic Financial Statements. 57

RDA
Successor Agency
Private Purpose
Custodial Funds Trust Fund
ADDITIONS:

Redevelopment Property Tax Trust Fund (RPTTF) - $ 1,408,593 $ Special assessments for other governments 13,022 -
Total additions 1,408,593 13,022
DEDUCTIONS:

Administrative expenses 250,000 1,321
Interest expense and fiscal charges 362,445 -
Principal payments on conduit debt 5,200 -
Interest payments on conduit debt - 3,146
Depreciation 16,423 -
Total deductions 628,868 9,667
Changes in net position 779,725 3,355
NET POSITION (DEFICIT):

Beginning of year (8,910,049) -
End of period $ (8,130,324) 3,355 $
City of Shafter
Statement of Changes in Fiduciary Net Position
Fiduciary Funds
For the Year Ended June 30, 2025
See accompanying Notes to the Basic Financial Statements. 58

59 NOTES TO THE BASIC FINANCIAL STATEMENTS

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City of Shafter
Index of Notes to the Basic Financial Statements
For the Year Ended June 30, 2025
61 Note 1 – Reporting Entity and Summary of Significant Accounting Policies ....................................................... 65 A. Financial Reporting Entity ........................................................................................................................ 65 B. Basis of Presentation, Accounting and Measurement Focus ..................................................................... 65 C. Deferred Outflows and Inflows of Resources ........................................................................................... 69 D. Cash, Cash Equivalents and Investments .................................................................................................. 70 E. Receivables ................................................................................................................................................ 71 F. Inventories and Prepaid Items ................................................................................................................... 71 G. Interfund Transactions ............................................................................................................................... 71 H. Leases ........................................................................................................................................................ 71 I. Subscription-Based Information Technology Arrangements (SBITAs) ................................................... 72 J. Capital Assets ............................................................................................................................................ 72 K. Interest Payable ......................................................................................................................................... 73 L. Compensated Absences ............................................................................................................................. 73 M. Bond Premiums and Discounts ................................................................................................................. 74 N. Long-Term Debt ........................................................................................................................................ 74 O. Pensions ..................................................................................................................................................... 74 P. Other Postemployment Benefits (OPEB) .................................................................................................. 75 Q. Net Position ............................................................................................................................................... 75 R. Fund Balances ........................................................................................................................................... 75 S. Spending Policy ......................................................................................................................................... 76 T. Property Taxes ........................................................................................................................................... 76 U. Use of Accounting Estimates .................................................................................................................... 76 V. Implementation of New GASB Pronouncements for the Year Ended June 30, 2025 ............................... 77 W. Upcoming Government Accounting Standards Implementations ............................................................. 77 Note 2 – Cash and Investments .................................................................................................................................. 78 A. Demand Deposits ....................................................................................................................................... 78 B. Investments Authorized by the California Government
Code and the City’s Investment Policy ............................................................................................... 79 C. Fair Value Measurement ........................................................................................................................... 79 D. Risk Disclosure .......................................................................................................................................... 80 E. California CLASS ..................................................................................................................................... 81 F. Investment in State Investment Pool ......................................................................................................... 82 Note 3 – Leases Receivable ......................................................................................................................................... 82 A. Governmental Activities ............................................................................................................................ 82 B. Business-Type Activities ........................................................................................................................... 82 Note 4 – Interfund Balances and Transactions ........................................................................................................ 83 A. Due To / Due From Other Funds ............................................................................................................... 83 B. Transfers .................................................................................................................................................... 84

City of Shafter
Index of Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2025
62 Page
Note 5 – Capital Assets ................................................................................................................................................ 84 A. Governmental Activities ............................................................................................................................ 84 B. Business-Type Activities ........................................................................................................................... 85 Note 6 – Long-Term Debt ........................................................................................................................................... 86 A. Governmental Activities ............................................................................................................................ 86 B. Business-Type Activities ........................................................................................................................... 86 C. Fiduciary Funds ......................................................................................................................................... 87 Note 7 – Special Assessment Debt with No City Commitment ................................................................................ 88 Note 8 – Compensated Absences ................................................................................................................................ 88 A. Governmental Activities ............................................................................................................................ 88 B. Business-Type Activities ........................................................................................................................... 89 Note 9 – Pension Plans ................................................................................................................................................. 90 A. Summary .................................................................................................................................................... 90 B. General Information about the Pension Plans ............................................................................................ 91 C. Pension Liabilities, Pension Expenses
and Deferred Outflows/Inflows of Resources Related to Pensions ................................................... 92 D. Payable to the Pension Plan ....................................................................................................................... 96 Note 10 – Other Post Employment Health Benefits.................................................................................................. 96 A. Summary .................................................................................................................................................... 96 B. General Information about OPEB .............................................................................................................. 97 C. Total OPEB Liability, OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB ......................................................................................................... 97 Note 11 – Risk Management and Self-Insurance ...................................................................................................... 99 A. Coverage .................................................................................................................................................. 100 Note 12 – Classification of Fund Balances ............................................................................................................... 101 Note 13 – Other Required Disclosures ..................................................................................................................... 102 A. Deficit Net Position/Fund Balances ......................................................................................................... 102 B. Expenditures Exceeding Appropriations .................................................................................................. 102

City of Shafter
Index of Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2025
63 Page
Note 14 – Adjustments and Restatements of Beginning Balances ......................................................................... 102 Note 15 – Commitments and Contingencies ............................................................................................................ 103 A. Litigation .................................................................................................................................................. 103 B. Grants ....................................................................................................................................................... 103 C. State Board of Equalization Local Sales Tax Allocation Petitions .......................................................... 104 D. Contractual Commitments ....................................................................................................................... 104

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City of Shafter
Notes to the Basic Financial Statements
For the Year Ended June 30, 2025
65 Note 1 – Reporting Entity and Summary of Significant Accounting Policies The basic financial statements of the City of Shafter, California (City) have been prepared in conformity with Accounting Principles Generally Accepted Accounting in the United States of America (U.S. GAAP) as applied to governmental agencies. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting standards in the United States. The more significant of the City’s accounting policies are described below.

A. Financial Reporting Entity
The City was incorporated in 1938 and became a Charter City in 1995. The local government is comprised of five Council members who are elected every four years and act under powers granted under a City Charter. The City provides a variety of services including general administration, public safety, street and highway maintenance, maintenance of water, wastewater and refuse, and operation of a correctional facility, however the correctional facility was closed in October 2020.

In evaluating how to define the City for financial reporting purposes, management has considered all potential component units. The primary criteria for including a potential component unit within the reporting entity are the governing body’s financial accountability and a financial benefit or burden relationship and whether it is misleading to exclude. A primary government is financially accountable and shares a financial benefit or burden relationship if it appoints a voting majority of an organization’s governing body and it is able to impose its will on the organization, or if there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on the primary government. A primary government may also be financially accountable if an organization is fiscally dependent on the primary government regardless of whether the organization has a separately elected governing board, a governing board appointed by a higher level of government, or a jointly appointed board, and there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on the primary government.

Blended and Discretely Presented Component Units
The financial reporting entity consists of the primary government, the City, and its component units. Component units are legally separate entities for which the elected officials of the primary government are financially accountable. In addition, component units can be other organizations for which the primary government is accountable and their exclusion would cause the reporting entity’s financial statements to be misleading or incomplete. Blended component units, although legally separate entities, are, in substance part of the government’s operation and so data from these units are combined with data of the primary government. The City has no blended component units.

B. Basis of Presentation, Accounting and Measurement Focus The accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for by providing a separate set of self-balancing accounts that comprise its assets, deferred outflows of resources, liabilities, deferred inflows of resources, fund equity, revenues and expenditures or expenses, as appropriate. Fund accounting segregates funds according to their intended purpose and is used to aid management in demonstrating compliance with finance-related legal and contractual provisions.

The minimum number of funds is maintained in accordance with legal and managerial requirements.

City of Shafter
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
66 Note 1 – Reporting Entity and Summary of Significant Accounting Policies (Continued) B. Basis of Presentation, Accounting and Measurement Focus (Continued) Government - Wide Financial Statements
The City’s Government-Wide Financial Statements include a Statement of Net Position and a Statement of Activities and Changes in Net Position. These statements present summaries of governmental and business-type activities for the City accompanied by a total column. Fiduciary activities of the City are not included in these statements.

These financial statements are presented on an “economic resources” measurement focus and the accrual basis of accounting. Accordingly, all of the City’s assets and liabilities, including capital assets, as well as infrastructure assets, and Long-Term Debt, are included in the accompanying Statement of Net Position. The Statement of Activities presents changes in net position.

Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. Under the accrual basis of accounting, revenues, expenses, gains, losses, assets, deferred outflows of resources, liabilities, and deferred inflows of resources resulting from exchange and exchange-like transactions are recognized when the exchange takes place.

Revenues, expenses, gains, losses, assets, deferred outflows of resources, liabilities and deferred inflows of resources resulting from non-exchange transactions are recognized in accordance with the requirements of U.S.

GAAP.

Program revenues include charges for services, special assessments, and payments made by parties outside of the reporting government's citizenry if that money is restricted to a particular program. Program revenues are netted with program expenses in the statement of activities to present the net cost of each program. Program revenues for the City are classified in three categories:
 Charges for services
 Operating grants and contributions
 Capital grants and contributions
Certain eliminations have been made in regards to interfund activities, payables and receivables. All internal balances in the Statement of Net Position have been eliminated except those representing balances between the governmental activities and the business-type activities, which are presented as internal balances and eliminated in the total primary government column. In the Statement of Activities and Changes in Net Position, internal service fund transactions have been eliminated; however, those transactions between governmental and business-type activities have not been eliminated. The following interfund activities have been eliminated:
 Due to/from other funds
 Transfers in/out
Governmental Fund Financial Statements
Governmental Fund Financial Statements include a Balance Sheet and a Statement of Revenues, Expenditures and Changes in Fund Balances. An accompanying schedule is presented to reconcile and explain the differences in Net Position as presented in these statements to the Net Position presented in the Government-Wide Financial Statements. The City has presented all major funds that met the applicable criteria.

City of Shafter
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
67 Note 1 – Reporting Entity and Summary of Significant Accounting Policies (Continued) B. Basis of Presentation, Accounting and Measurement Focus (Continued) Governmental Fund Financial Statements (Continued)
All governmental funds are accounted for on a spending or "current financial resources" measurement focus and the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are included on the Balance Sheet. The Statement of Revenues, Expenditures and Changes in Fund Balances presents increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets.

Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period. Measurable means that the amounts can be estimated, or otherwise determined. Available means that the amounts were collected during the reporting period or soon enough thereafter to be available to finance the expenditures accrued for the reporting period. The City uses an availability period of 60 days for all revenues except grants, which use a six-month availability period.

Sales taxes, property taxes, franchise taxes, gas taxes, motor vehicle in-lieu, transient occupancy taxes, grants and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period to the extent normally collected within the availability period.

Other revenue items are considered to be measurable and available when cash is received by the government.

Revenue recognition is subject to the measurable and available criteria for the governmental funds in the fund financial statements. Exchange transactions are recognized as revenues in the period in which they are earned (i.e., the related goods or services are provided). Locally imposed derived tax revenues are recognized as revenues in the period in which the underlying exchange transaction upon which they are based takes place. Imposed non-exchange transactions are recognized as revenues in the period for which they were imposed. If the period of use is not specified, they are recognized as revenues when an enforceable legal claim to the revenues arises or when they are received, whichever occurs first. Government-mandated and voluntary non-exchange transactions have been recognized as revenues when all applicable eligibility requirements have been met.

The Reconciliation of the Fund Financial Statements to the Government-Wide Financial Statements is provided to explain the differences created by the integrated approach of GASB Statement No. 34.

The City reports the following major Governmental Funds:

General Fund - The General Fund is used to account for resources traditionally associated with government which are not required legally or by sound financial management to be accounted for in another fund.

Transportation Special Revenue Fund - This fund is used to account for the City’s share of motor fuel tax revenues and special state grants that are legally restricted to construction and maintenance of local roads within the City limits.

Traffic Mitigation Improvement Capital Project Fund - This Fund was established to account for expenditure for the cost of traffic related projects.

Proprietary Fund Financial Statements
Proprietary Fund Financial Statements include a Statement of Net Position, a Statement of Revenues, Expenses and Changes in Fund Net Position, and a Statement of Cash Flows for each major Proprietary Fund and an aggregate column for all nonmajor funds.

City of Shafter
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
68 Note 1 – Reporting Entity and Summary of Significant Accounting Policies (Continued) B. Basis of Presentation, Accounting and Measurement Focus (Continued) Proprietary Fund Financial Statements (Continued)
A separate column representing internal service funds is also presented in these statements. However, internal service balances and activities have been combined with the governmental activities in the Government-Wide Financial Statements. The City’s internal service funds include funds which provide services directly to other City funds. These areas of service include fleet maintenance, facilities maintenance, and technology.

Proprietary funds are accounted for using the "economic resources" measurement focus and the accrual basis of accounting. Accordingly, all assets and liabilities (whether current or noncurrent) are included on the Statement of Net Position. The Statement of Revenues, Expenses and Changes in Fund Net Position presents increases (revenues) and decreases (expenses) in total Net Position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred.

In these funds, receivables have been recorded as revenue and provisions have been made for uncollectible amounts.

Operating revenues in the proprietary funds are those revenues that are generated from the primary operations of the fund. All other revenues are reported as non-operating revenues. Operating expenses are those expenses that are essential to the primary operations of the fund. All other expenses are reported as non-operating expenses.

The City reports the following major Proprietary Funds:

Water Services Fund - This fund is used to account for the activities of the City's water pumping, treatment and distribution operations.

Wastewater Services Fund - This fund is used to account for the activities of the City's wastewater collection and treatment operations.

Rail Spur Services Fund - This fund is used to account for the activities of the City's Rail operations created with the construction of an initial rail spur within the City.

Fiber Optic and Communication Tower Fund - This fund is used to account for the activities of the City's fiber optic distribution operations to separate service areas within the City.

Internal Service Funds
Internal Service Funds are used to provide goods and services by one department or agency to other departments or agencies of the City on a cost reimbursement basis.

The City reports the following Internal Service Funds:

Building Maintenance Fund - This fund is used to account for the accumulation and allocation of costs associated with the maintenance of the City Hall building.

Liability Coverage Fund - This fund is used to account for the accumulation and allocation of costs associated with risk management.

Vehicle Maintenance Fund - This fund is used to account for the accumulation and allocation of costs associated with the maintenance of the City fleet of vehicles.

City of Shafter
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
69 Note 1 – Reporting Entity and Summary of Significant Accounting Policies (Continued) B. Basis of Presentation, Accounting and Measurement Focus (Continued) Internal Service Funds (Continued)
Information Technology Fund - This fund is used to account for the costs associated with automation maintenance of the City's various computers, servers and interdepartmental electronic communications.

Fiduciary Fund Financial Statements
Fiduciary fund financial statements include a Statement of Net Position and a Statement of Changes in Fiduciary Net Position. The City’s fiduciary funds represent custodial funds and private purpose trust funds. Fiduciary funds are accounted for using the "economic resources" measurement focus and the accrual basis of accounting. Fiduciary fund types are accounted for according to the nature of the fund.

Custodial funds are used to report fiduciary activities that are not required to be reported in pension (and other employee benefit) trust funds, investment trust funds, or private-purpose trust funds. They are also used to account for various assessment districts for which the City acts as an agent for debt service activity, as the City is prohibited from levying additional taxes for these districts. Such funds include the North Park/Norther Shafter Custodial Fund account for resources of all other trust arrangements in which principal and income benefit individuals, private organizations, or other governments (i.e., unclaimed property/escheat property). The City’s private purpose trust fund is a fiduciary fund type used by the City to report assets, liabilities and activities of the Successor Agency to the Redevelopment Agency (Successor Agency) for the City. Its results of operations are presented on the Statement of Changes of Fiduciary Net Position.

RDA Successor Agency Private Purpose Trust Fund
The Redevelopment Obligation Retirement Fund was created to serve as a custodian for the assets and to wind down the affairs of the RDA on February 1, 2012, pursuant to Assembly Bill x1 26. Its purpose is to expeditiously wind down the affairs of the dissolved Redevelopment Agency (RDA). The Successor Agency is a separate public entity from the City, subject to the direction of an oversight board. The City Council serves as the governing board of the Successor Agency. In general, the Successor Agency’s assets can only be used to pay enforceable obligations in existence at the date of dissolution (including the completion of any unfinished projects that were subject to legally enforceable contractual commitments). In future fiscal years, the Successor Agency will only be allocated revenue in the amount that is necessary to pay the estimated annual installment payments on enforceable obligations of the former RDA until all enforceable obligations of the former RDA have been paid in full and all assets have been liquidated. Based upon the nature of the Successor Agency’s custodial role, the Successor Agency has been included in the accompanying basic financial statements as a private purpose trust fund.

C. Deferred Outflows and Inflows of Resources
The Statement of Net Position and Balance Sheet – Governmental Funds reports separate sections for Deferred Outflows of Resources, and Deferred Inflows of Resources, when applicable.

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.

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.

City of Shafter
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
70 Note 1 – Reporting Entity and Summary of Significant Accounting Policies (Continued) D. Cash, Cash Equivalents and Investments
The City's dependence on property tax receipts, which are received semi-annually, requires it to maintain significant cash reserves to finance operations during the remainder of the year. The City pools cash from all sources and all funds except Cash and Investments with Fiscal Agents so that it can be invested at the maximum yield, consistent with safety and liquidity, while individual funds can make expenditures at any time. It is the City's intent to hold investments to maturity.

Investments are reported in the accompanying financial statements at fair value, except for certain investment contracts that are reported at cost because they are not transferable and they have terms that are not affected by changes in market interest rates. Changes in fair value that occur during a fiscal year are recognized as investment income reported for that fiscal year, and may result in negative investment income in the accompanying financial statements. Investment income includes interest earnings, changes in fair value, and any gains or losses realized upon the liquidation, maturity, or sale of investments.

Investment income earned by the pooled investments is allocated to the various funds based on each fund's average cash and investment balance, except for investment income associated with funds not legally required to receive pooled investment income which has been assigned to and recorded as revenue of the general fund, as provided by California Government Code Section 53647.

For purposes of the statement of cash flows, amounts reported as cash and cash equivalents, include amounts on deposit in the City pool and any short-term, highly liquid investments that are both readily convertible to known amounts of cash or so near their maturity that they present insignificant risk of changes in value because of changes in interest rates.

Certain disclosure requirements, if applicable, for deposits and investment risks in the following areas:
 Interest rate risk
 Credit risk
- Overall
- Custodial credit risk
- Concentration of credit risk
 Foreign currency risk
In addition, other disclosures are specified including use of certain methods to present deposits and investments, highly sensitive investments, credit quality at year-end and other disclosures.

U.S. GAAP establishes a framework for measuring fair value, and establishes disclosures about fair value measurement. Investments, unless otherwise specified, recorded at fair value in the financial statements, are categorized based upon the level of judgment associated with the inputs used to measure their fair value.

Levels of inputs are as follows:

Level 1 – Inputs are unadjusted, quoted prices for identical assets or liabilities in active markets at the measurement date.

Level 2 – Inputs, other than quoted prices included in Level 1, which are observable for the assets or liabilities through corroboration with market data at the measurement date.

Level 3 – Unobservable inputs that reflect management’s best estimate of what market participants would use in pricing the assets or liabilities at the measurement date.

City of Shafter
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
71 Note 1 – Reporting Entity and Summary of Significant Accounting Policies (Continued) E. Receivables
Customer or trade receivables are reported as “accounts receivable” and are shown net of an allowance for uncollectible accounts based on historical and management estimates.

F. Inventories and Prepaid Items
Inventories are valued at cost, using the weighted-average method. Inventories of the Enterprise Funds. consist primarily of water storage held for future use. Certain payments to vendors reflect costs applicable to future fiscal years and are recorded as prepaid items in both government-wide and fund financial statements. The cost of prepaid items is recorded as expenditures/expenses when consumed, rather than when purchased. Prepaid items in governmental funds are equally offset by nonspendable fund balance which indicates that they do not constitute available spendable resources even though they are a component of net current assets.

G. Interfund Transactions
Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either “due to/from other funds” or “advances to/from other funds” (i.e., the current portion of interfund loans). Any residual balances outstanding between the governmental activities and businesstype activities are reported in the Governmental-Wide Financial Statements as “internal balances.” H. Leases
Lessor
The City is a lessor for leases of special purpose facilities, office and commercial space, and land. The City recognizes leases receivable and deferred inflows of resources in the financial statements.

At the commencement of a lease, the City 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 inflows of resources are 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 inflows of resources are recognized as revenue over the life of the lease term in a systematic and rational method.

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

The City 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.

City of Shafter
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
72 Note 1 – Reporting Entity and Summary of Significant Accounting Policies (Continued) I. Subscription-Based Information Technology Arrangements (SBITAs) The City has a policy to recognize a SBITA liability and a right‐to‐use subscription asset (SBITA asset) in our financial statements with an initial, individual value of $10,000 or more with a subscription term greater than one year.

At the commencement of a subscription, when the subscription asset is placed into service, the SBITA liability is measured at the present value of payments expected to be made during the subscription term. Future subscription payments are discounted using the City's incremental borrowing rate and the City recognizes amortization of the discount on the subscription liability as interest expense in subsequent financial reporting periods.

SBITA assets are measured as the sum of the initial subscription liability, payments made to the SBITA vendor before the commencement of the lease term, and capitalizable implementation costs less any incentives received from the SBITA vendor at or before the commencement of the subscription term. Subscription assets are amortized using the straight-line method over the subscription term. Key estimates and judgments related to SBITAs include how the City determines (1) the discount rate it uses to discount the expected subscription payments to present value, (2) subscription term, and (3) subscription payments. - The City uses the interest rate charged by the SBITA vendor as the discount rate. When the interest rate charged by the SBITA vendor is not provided, the City generally uses its estimated incremental borrowing rate as the discount rate for SBITAs.
- The subscription term includes the period during which the City has a noncancelable right to use the underlying IT asset. The subscription term also includes periods covered by an option to extend if it is reasonably certain to be exercised.
- Subscription payments included in the measurement of the subscription liability are composed of fixed payments and purchase option years that the City is reasonably certain to exercise. The City monitors changes in circumstances that would require a remeasurement of a subscription and will remeasure any subscription asset and liability if certain changes occur that are expected to significantly affect the amount of the subscription liability.

Right-to-use subscription assets are reported along with other capital assets and subscription liabilities are reported with long-term debt on the statement of net position.

J. Capital Assets
Capital assets, which include land, buildings, improvements, equipment and infrastructure assets (e.g. roads, bridges, sidewalks, and similar items), are reported in the applicable governmental or business-type activities in the Government-Wide Financial Statements. Capital assets are recorded at historical cost or estimated historical cost if actual cost is not available. Gifts or contributions of capital assets are recorded at acquisition value when received.

City policy has set the capitalization threshold for reporting capital assets at $5,000 and for reporting infrastructure assets at $10,000. Depreciation is recorded on a straight-line basis over the useful lives of the assets as follows:

Asset Type Years
Buildings and improvements 10-40
Machinery and equipment 3-40
Infrastructure 15-60
Subscription assets Shorter of the subscription assets's Useful life or the subscription term

City of Shafter
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
73 Note 1 – Reporting Entity and Summary of Significant Accounting Policies (Continued) J. Capital Assets (Continued)
The City defines infrastructure as the basic physical assets that allow the City to function. The assets include:
 Street system
 Site amenities such as parking and landscaped areas used by the City in the conduct of its business Each major infrastructure system can be divided into subsystems. For example, the street system can be subdivided into pavement, curb and gutters, sidewalks, medians, streetlights, traffic control devices (signs, signals and pavement markings), landscaping and land. These subsystems were not delineated in the Basic Financial Statements. The appropriate operating department maintains information regarding the subsystems.

For all infrastructure systems, the City elected to use the Basic Approach for infrastructure reporting. Estimated historical costs were developed in one of three ways: (1) historical records; (2) standard unit costs appropriate for the construction/acquisition date; or (3) present cost indexed by a reciprocal factor of the price increase from the construction/acquisition date to the current date. The accumulated depreciation, defined as the total depreciation from the date of construction/acquisition to the current date on a straight line, unrecovered cost method was computed using industry accepted life expectancies for each infrastructure subsystem. The book value was then computed by deducting the accumulated depreciation from the estimated historical cost.

K. Interest Payable
In the Government-Wide Financial Statements and the Proprietary Fund Financial Statements, interest payable of long-term debt is recognized as the liability is incurred.

L. Compensated Absences
The City recognizes a liability for compensated absences for leave time that (1) has been earned for services previously rendered by employees, (2) accumulates and is allowed to be carried over to subsequent years, and (3) is more likely than not to be used as time off or settled (for example paid in cash to the employee or payment to an employee flex spending account) during or upon separation from employment. Based on the criteria listed, two types of leave qualify for liability recognition for compensated absences – vacation and sick leave. The liability for compensated absences includes salary-related benefits, where applicable.

Vacation: The City’s policy permits employees to accumulate earned but unused vacation benefits, which are eligible for payment at the employee’s current pay rate upon separation from employment.

Sick Leave: The City’s policy permits employees to accumulate earned but unused sick leave. All sick leave lapses when employees leave the employ of the City and, upon separation from service, no monetary obligation exists.

However, a liability for estimated value of sick leave that will be used by employees as time off is included in the liability for compensated absences.

In the Government-Wide Financial Statements and the Proprietary Fund Financial Statements, compensated absences are recorded as expenses when earned.

In the Governmental Fund Financial Statements, compensated absences are recorded as expenditures in the year paid. In proprietary funds, compensated absences are expensed to the various funds in the period they are earned, and such fund’s share of the unpaid liability is recorded as a long-term liability of the fund.

City of Shafter
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2025
74 Note 1 – Reporting Entity and Summary of Significant Accounting Policies (Continued) M. Bond Premiums and Discounts
In the Government-Wide Financial Statements and the Proprietary Fund Financial Statements, bond premiums and discounts are deferred and amortized over the life of the bonds using a straight-line method. Bonds payable are reported net of the applicable bond premium or discount.

In the Governmental Fund Financial Statements, bond premiums and discounts are recognized during the current period. Bond proceeds are reported as other financing sources of the applicable premium or discount.

N. Long-Term Debt
In the Government-Wide Financial Statements and the Proprietary Fund Financial Statements, long-term debt and other financial obligations are reported as liabilities in the appropriate funds. Bond premiums and discounts are deferred and amortized over the life of the bonds using straight line method. Bonds payable are reported net of the applicable premium or discount. Issuance costs are expensed when incurred. Gains or losses on bond refunding are reported as either deferred outflows of resources or deferred inflows of resources and amortized over the term of the related debt.

In the Governmental Fund Financial Statements, long-term debt is not included but are shown in the Reconciliation of the Governmental Funds Balance Sheet to the Government-Wide Statement of Net Position. Governmental fund types recognize bond premiums and discounts during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Debt issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures.

O. Pensions
For purposes of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the plans and additions to/deductions from the plans’ fiduciary net position have been determined on the same basis as they are reported by the plans (Note 9). For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with benefit terms. Investments are reported at fair value. The General Fund and Internal Service Funds are typically used to liquidate the pension liability related to the City's governmental activities while the pension liability for Business-type activities is liquidated from the respective Enterprise Funds.

The following timeframes are used for pension reporting:

Valuation date June 30, 2023
Measurement date June 30, 2024
Measurement period July 1, 2023 to June 30, 2024
Gains and losses related to changes in total pension liability and fiduciary net position are recognized in pension expense systematically over time. The first amortized amounts are recognized in pension expense for the year the gain or loss occurs. The remaining amounts are categorized as deferred outflows and deferred inflows of resources related to pensions and are to be recognized in future pension expense. The amortization period differs depending on the source of the gain or loss. The difference between projected and actual earnings is amortized straight-line over 5 years. All other amounts are amortized straight-line over the average expected remaining service lives of all members that are provided with benefits (active, inactive, and retired) as of the beginning of the measurement period.