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Home My WebLink AboutFin Year-End Financial Statements and Related Audit ReportsAgenda Item No: 6.a Meeting Date: November 16, 2020 SAN RAFAEL CITY COUNCIL AGENDA REPORT Department: FINANCE Prepared by: Nadine Atieh Hade, Finance Director City Manager Approval: __________ TOPIC: YEAR-END FINANCIAL STATEMENTS AND RELATED AUDIT REPORTS SUBJECT: FISCAL YEAR 2019-2020 ANNUAL FINANCIAL REPORT; GANN APPROPRIATIONS LIMIT; MEMORANDUM ON INTERNAL CONTROL; REPORT OF REQUIRED COMMUNICATIONS; CHILD DEVELOPMENT PROGRAM FINANCIAL REPORT; AND THE TRANSPORTATION DEVELOPMENT ACT FINANCIAL REPORT RECOMMENDATIONS: Accept the Fiscal Year 2019-2020 Annual Financial Report, Gann Appropriations Limit Report, Memorandum on Internal Control, Report of Required Communications, Child Development Program Financial Report, and the Transportation Development Act Financial Report. BACKGROUND: As required by local code, State law, bond covenants, and best practices, the City of San Rafael completes an annual audit of its financial activities. The auditing firm of Maze and Associates, Accountancy Corporation conducted the audit for fiscal year 2019-2020. Their work was completed in accordance with generally accepted auditing standards, issued by the Comptroller General of the United States; and the provisions of Office of Management and Budget Circular A- 133, Audits of State and Local Government and Non-Profit Organizations. The requirements of Section 1.5 of Article XIIIB of the California Constitution are met with an agreed-upon procedure report applied to the Gann Appropriation Limit calculated for the year ending June 30, 2021. A Memorandum on Internal Control is also prepared by the auditors to address the City’s controls over its financial activities. These reports are attached to this staff report. As part of the fiscal year-end activities, the Finance and Library & Recreation departments worked with the auditors to complete the annual audit of the City’s childcare program, as required by the State of California. For the year ending June 30, 2020, the City received funds under the purview of the Transportation Development Act. As part of the fiscal year-end activities, the Finance and Public Works departments worked with the auditors to complete the audit of the funds received, as required by the State of California. ____________________________________________________________________________________ FOR CITY CLERK ONLY Council Meeting: November 16, 2020 Disposition: Accepted reports SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 2 On November 4, 2020, these final reports were presented to the City Council Finance Committee, at which time it was agreed that staff would bring the reports forward to the full City Council. ANALYSIS: Overview Fiscal Year 2019-2020 was a tale of two halves, with the first showing strong signs of growth and the second a sharp decline resulting from the COVID-19 pandemic. Property tax revenues remained strong, with growth in line with prior years, whereas sales taxes decreased year-over- year by $1.8 million. The decrease in sales tax revenues, although significant, did not dip as low as expected as construction, auto sales, and allocations from the County pool stemming from the Wayfair decision finished the year stronger than forecasted. The City was forced to tap into its General Fund Emergency Reserves to continue to provide essential services during the economic downturn and prudent fiscal management will be necessary to restore it to the target level of ten percent of operating expenses established by City Council Policy. Although the City weathered the initial storm, challenges remain for the future as the effects of the pandemic continue while we simultaneously work on recovery. Fiscal year 2019-2020 marks the sixth year of implementation of the pension accounting standard issued by the Governmental Accounting Standards Board (GASB) known as GASB 68, and the fourth year of implementation of the new Other Postemployment Benefits (OPEB) accounting standard issued by GASB known as GASB 75. These requirements, which affect all public agencies with defined benefit retiree plans, are designed to enhance the comparability of financial statements by requiring the measurement of pension-related assets and liabilities at fair value, using a consistent and detailed definition of fair value and accepted valuation techniques. The net impact of reporting under GASB 68 lowers the City’s net position as of June 30, 2020 by $114.5 million from a reporting perspective. The net pension liability as of this date was measured to be $133.9 million. The net impact of reporting under GASB 75 lowers the City’s net position as of June 30, 2020 by $27.3 million. The net OPEB liability as of this date was measured to be $26.6 million. The full annual funding of the City’s Retiree and OPEB costs have been incorporated into the adopted fiscal year 2020-2021 budget; therefore, there is no negative impact on City operations or services resulting from the reporting of financial information under these reporting standards. The City made major progress on the Public Safety Facility initiative using Measure E funds, completing Fire Station 57 and the Public Safety Center. Construction expenses for the year totaled $23.6 million, of which 90% were in support of the Public Safety Center and the remainder mainly in support of Station 57. Total project-to-date spending is approximately $72 million. Fiscal Year 2019-20 Annual Financial Report – Citywide Financial Results The actual results of the City’s financial activities are presented in the attached Comprehensive Annual Financial Report. The report includes Government-wide financial statements with governmental activities and business-type activities presented separately. Net position is one indicator of the City’s financial position. At the end of the fiscal year, net position of the City governmental activities inclusive of all governmental funds, all assets of the City (including infrastructure) and all liabilities (including long-term debt) was $138.1 million, an increase of $1.2 million from the prior year adjusted balance. This increase is largely attributable to the reduction of expenses in the latter part of the year as a result of reduced capital project activity from shelter- in-place orders. The Parking Fund, reported as a business-type activity, ended the fiscal year with a net position of $9.9 million, or $57 thousand more than that of the previous fiscal year. The fund’s cash balance makes up 27% of total net position. SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 3 Additional explanatory information is provided in the Management’s Discussion and Analysis (MD&A) section beginning on page five of the attached CAFR. The MD&A provides key highlights and a summary view of financial activities for the year. Financial Results: General Fund General fund operating expenditures exceeded revenues by $2.7 million. Measure E revenues of $4.1 million dedicated to public safety facilities construction and infrastructure were transferred out of the General Fund in support of the projects whereas $2.2 million was transferred from bond proceeds in the Essential Facilities Capital Projects Fund to cover interest payments. The fund balance of the General Fund as of June 30, 2020 was $9.8 million (a decrease of $2.7 million from the prior year balance): $8 thousand is non-spendable and $9.8 million is assigned. The assigned portion of the balance includes $7.8 million for emergency and cash flow needs. As forecasted as part of the Fiscal Year 2020-2021 Budget Staff report presented on June 15, 2020, the full amount of unassigned (one-time) available funds saved over prior years, $2.2 million were absorbed to cover the deficit as well a small portion of the General Fund Emergency Reserves, $100 thousand and $404 thousand of the General Plan fund balance. Gann Appropriations Limit The Agreed-Upon Procedures report for the Gann Appropriations Limit required three procedures to be performed including testing the accuracy of the calculations and comparison of information presented. No exceptions were noted in these procedures for compliance with the Proposition 111 fiscal year 2020-2021 Appropriations Limit calculation. Memorandum on Internal Control The auditors are required to communicate to the City Council matters that come to their attention relating to the audit in a report entitled Memorandum on Internal Control. Findings of deficiencies in internal controls were mainly due to lack of documentation of review and approval, as well as segregation of duties in certain cash operations. Staff responses addressing each comment are included in the Memorandum. Required Communications Professional standards require that certain information regarding significant audit findings related to the audit be communicated to those charged with governance. These communications include minor changes to accounting policies, new accounting pronouncements, and a discussion of significant accounting estimates among other items. No adverse communications were noted. Child Development Program (Childcare) Financial Report The Childcare Program had negative operating results resulting from the pandemic, with $3.2 million in total revenues and $3.7 million in expenditures for the fiscal year. The fund balance decreased from $1.7 million to $1.3 million of which funds have been accumulated for capital improvements. The audit resulted in no adverse findings. This report still requires a closeout letter from the State of California as it needs to match to the dollar to the State numbers. The State is running behind on their closeout letters which results in a delay for the City in finalizing the Report. No material adjustments are expected, if any. Staff recommends moving forward with the acceptance of all reports and if there are any material changes, the Child Care Program Report will be brought back to Council prior to finalizing. Transportation Development Act Financial Report SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 4 The City has developed pedestrian and bicycle capital projects of which the Transportation Development Act provides funding assistance for eligible construction. These funds are distributed by the Metropolitan Transportation Commission and are included in the Gas Tax fund. The City has expended $423,983 of a total grant amount of $492,443 and has received reimbursement of the total amount expended as of June 30, 2020. The audit resulted in no adverse findings. FISCAL IMPACT: No fiscal impact occurs by the City Council’s acceptance of these reports. The fiscal year 2019- 2020 Comprehensive Annual Financial Report and related reports are presented as the actual results of the City and related entities’ financial activities for the year. RECOMMENDATION: Staff recommends that City Council accept the reports as presented. The reports will remain as “draft” until City Council has accepted the reports. ATTACHMENTS: 1. FY 2019-20 Draft Comprehensive Annual Financial Report 2. FY 2019-20 Draft Gann Appropriations Limit 3. FY 2019-20 Draft Memorandum of Internal Controls 4. FY 2019-20 Draft Required Communications 5. FY 2019-20 Draft Child Development Program Financial Report 6. FY 2019-20 Draft Transportation Development Act Financial Report COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDING JUNE 30, 2020 Mental Health Comfort Dog, Blue DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2020 City of San Rafael, California 1400 Fifth Avenue San Rafael, California 94901 Prepared by the Finance Department of the City of San Rafael DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT China Camp INTRODUCTORY SECTION DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended June 30, 2020 Table of Contents i INTRODUCTORY SECTION TABLE OF CONTENTS Letter of Transmittal .................................................................................................................................... v Mission Statement and Vision Statement ................................................................................................... xi City Council and Staff ............................................................................................................................... xii Location Map ............................................................................................................................................ xiii Organizational Chart ................................................................................................................................. xiv Certificate of Achievement for Excellence in Financial Reporting ........................................................... xv FINANCIAL SECTION Independent Auditor's Report .................................................................................................................. 1 Management’s Discussion and Analysis .................................................................................................. 5 Basic Financial Statements: Government-wide Financial Statements: Statement of Net Position ............................................................................................................. 25 Statement of Activities .................................................................................................................. 26 Fund Financial Statements: Major Governmental Funds: Balance Sheet ............................................................................................................................ 30 Balance Sheet - Reconciliation of Governmental Fund Balances to Net Position of Governmental Activities .............................................................................. 31 Statement of Revenues, Expenditures, and Changes in Fund Balances .................................... 32 Reconciliation of the Net Change in Fund Balances - Total Governmental Funds with the Statement of Activities ................................................................................. 33 Proprietary Funds: Statement of Net Position .......................................................................................................... 36 Statement of Revenues, Expenses, and Changes in Fund Net Position .................................... 37 Statement of Cash Flows ........................................................................................................... 38 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended June 30, 2020 Table of Contents ii FINANCIAL SECTION (Continued) Fiduciary Funds: Statement of Fiduciary Net Position ......................................................................................... 40 Statement of Changes in Fiduciary Net Position ....................................................................... 41 Notes to Basic Financial Statements .................................................................................................. 43 Required Supplementary Information: Schedule of the City’s Proportionate Share of the Net Pension Liability ..................................... 95 Schedule of Contributions – Defined Benefit Pension Plan ......................................................... 96 Schedule of Changes in Net OPEB Liability and Related Ratios ............................................... 102 Schedule of Contributions – OPEB ............................................................................................ 103 Schedules of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual - Budgetary Basis General Fund ........................................................................................................................... 108 Traffic and Housing Mitigation Special Revenue Fund .......................................................... 109 Gas Tax Special Revenue Fund ............................................................................................... 110 Supplementary Information: Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual Budgetary Basis Essential Facilities Capital Projects Fund ................................................................................ 112 Non-major Governmental Funds: Combining Balance Sheets ......................................................................................................... 116 Combining Statements of Revenues, Expenditures, and Changes in Fund Balance ................................................................................................................... 122 Budgeted Non-major Governmental Funds: Combining Schedules of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual ...................................................................... 128 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended June 30, 2020 Table of Contents iii FINANCIAL SECTION (Continued) Internal Service Funds: Combining Statements of Net Position ....................................................................................... 138 Combining Statements of Revenues, Expenses and Changes in Fund Net Position ................... 140 Combining Statements of Cash Flows ........................................................................................ 142 Agency Funds: Combining Statements of Changes in Assets and Liabilities ...................................................... 146 STATISTICAL SECTION Financial Trends: Net Position by Component – Last Ten Fiscal Years ....................................................................... 150 Changes in Net Position – Last Ten Fiscal Years ............................................................................. 152 Fund Balances of Governmental Funds – Last Ten Fiscal Years ..................................................... 156 Changes in Fund Balance of Governmental Funds – Last Ten Fiscal Years .................................... 158 Revenue Capacity: Assessed and Estimated Actual Value of Taxable Property – Last Ten Fiscal Years ...................... 160 Property Tax Rates - All Overlapping Governments– Last Ten Fiscal Years .................................. 161 Property Tax Rates – Direct & Overlapping Governments – Last Ten Fiscal Years (Rate Per $100 of Assessed Value) .......................................................... 162 Principal Property Tax Payers – Current Year and Nine Years Ago ................................................ 163 Property Tax Levies and Collections – Last Ten Fiscal Years ......................................................... 164 Debt Capacity: Ratio of Outstanding Debt by Type – Last Ten Fiscal Years ........................................................... 165 Computation of Direct and Overlapping Debt .................................................................................. 166 Computation of Legal Bonded Debt Margin .................................................................................... 167 Revenue Bond Coverage Parking Facility – Last Ten Fiscal Years ................................................. 168 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended June 30, 2020 Table of Contents iv STATISTICAL SECTION (Continued) Demographic and Economic Information: Demographic and Economic Statistics – Last Ten Fiscal Years ...................................................... 169 Principal Employers – Last Ten Calendar Years .............................................................................. 170 Operating Information: Full-Time Equivalent City Government Employees by Function – Last Ten Fiscal Years ................................................................................................................. 173 Operating Indicators by Function/Program – Last Ten Fiscal Years ................................................ 174 Capital Asset Statistics by Function/Program – Last Ten Fiscal Years ............................................ 176 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT Gary O. Phillips, Mayor • Kate Colin, Vice Mayor • Maribeth Bushey, Councilmember • Andrew Cuyugan McCullough, Councilmember • John Gamblin, Councilmember November 9, 2020 Honorable Mayor, Members of the City Council and Residents of San Rafael: The Comprehensive Annual Financial Report (“CAFR”) of the City of San Rafael (“City”) for the year ended June 30, 2020, is hereby submitted as required by local ordinances, state statutes and bond covenants. This financial report has been prepared in conformance with Generally Accepted Accounting Principles (GAAP) as promulgated by the Governmental Accounting Standards Board (GASB) and includes the report of the independent certified public accounting firm, Maze and Associates Accountancy Corporation, which has issued an unmodified, or “clean” opinion on the City’s financial statements for the fiscal year ended June 30, 2020. The independent audit of the financial statements is part of a broader, federally mandated examination known as a “Single Audit”, which is designed to meet the needs of federal grantor agencies. The standards governing Single Audits require the independent auditor to report on the audited agency’s internal controls and compliance with legal requirements, with special emphasis on such controls and requirements involving the administration of federal funding. These reports will be available in the City’s separately issued Single Audit Report. City Management is responsible for both the data accuracy, and the completeness and fairness of the presentation of this report. To the best of our knowledge and belief, the data presented is accurate in all material respects and is reported in a manner that presents fairly the financial position and results of operations of the various funds and component units of the City. Further, the CAFR is prepared in accordance with procedures and policies set by the Government Finance Officers Association. The analysis of the financial condition and the result of operations can be found in the financial section of the Management’s Discussion and Analysis document. The CAFR is organized into three sections: 1. Introductory section, which is unaudited, includes this letter of transmittal, an organizational chart and a list of the City’s elected and appointed officials. 2. Financial section, includes the basic financial statements, related footnote disclosures, and the combining and individual fund financial statements and schedules, as well as the independent auditors' report. 3. Statistical section, which is unaudited, includes selected financial and demographic information, presented on a multi-year basis. Generally, ten-year data is presented for expenditures, revenues, assessed valuation for local properties and construction activity. v DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT Gary O. Phillips, Mayor • Kate Colin, Vice Mayor • Maribeth Bushey, Councilmember • Andrew Cuyugan McCullough, Councilmember • John Gamblin, Councilmember REPORTING ENTITY – PROFILE OF THE GOVERNMENT The City of San Rafael is located 17 miles north of San Francisco in Marin County. Protected by its Mediterranean like setting along the shores of the San Francisco Bay, the City enjoys a mild climate year-round. As the County seat, San Rafael is considered the commercial, financial, cultural and civic hub of Marin County. Abundant recreational facilities are available in and around the City. The City’s park and recreational resources include 19 city parks, 393 acres of developed parkland, city and county open space, and China Camp State Park. San Rafael is close to other attractions, including the Golden Gate Bridge, Muir Woods, Point Reyes National Seashore, Mount Tamalpais, multiple state parks, San Francisco, Oakland and the Sonoma and Napa wine country. In 1874, the City of San Rafael became the first incorporated city in the county, later becoming a charter city in 1913 by vote of City residents. The City Council comprises five members; four are elected at-large to four-year terms while the mayor is elected separately to a four-year term. The City’s land area is 22 square miles, including seventeen square miles of land and 5 of water and tidelands. San Rafael's population on January 1, 2020 was 59,807. In a normal year Downtown San Rafael is the location of many community events, including the Thursday night Summer Market Festivals, Second Friday Art Walks, the Twilight Criterium Bike Race, Mill Valley Film Festival, Winter Wonderland/Parade of Lights. and is one of only 14 Cultural Arts Districts in the State of California. San Rafael is also the heart of the County’s cultural activities with venues such as the Marin Center, which presents numerous ballets, concerts, speaking engagements as well as the award- winning Marin County Fair; the Falkirk Cultural Center, providing art exhibits and children's programming; the Christopher B. Smith Film Center, and a host of other diverse dining and entertainment venues. The City is also one of only 14 Cultural Arts Districts in the State of California. The City of San Rafael provides a full range of municipal services required by statute or charter, namely: police and fire protection, construction and maintenance of streets, parks, storm drains and other infrastructure, recreation, childcare, permits, planning, code enforcement, and a library system serving two locations along with a temporary pop-up at the Northgate Mall. The City performed certain infrastructure construction and economic development activities through a separate Redevelopment Agency until its dissolution on February 1, 2012. The City of San Rafael accepted the role of Successor Agency to the Redevelopment Agency per Council action on January 3, 2012, and now conducts its economic development activities with funding from its General Fund. The City and California Municipal Finance Authority compose the San Rafael Joint Powers Financing Authority, originally established by the City and former Redevelopment Agency vi DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT Gary O. Phillips, Mayor • Kate Colin, Vice Mayor • Maribeth Bushey, Councilmember • Andrew Cuyugan McCullough, Councilmember • John Gamblin, Councilmember for the purpose of financing redevelopment and other projects. The San Rafael Sanitation District is a discretely presented component unit of the City of San Rafael and is presented independent of City financial information. For a further explanation of these entities, refer to Note 1 – Summary of Significant Accounting Policies in the Financial Section of the CAFR. The City participates in various organizations through formally organized and separate entities established under the Joint Exercise of Powers Act of the State of California. As separate legal entities, these agencies exercise full powers and authorities within the scope of the related Joint Powers Agreement including the preparation of annual budgets, accountability for all funds, and the power to make and execute contracts. Obligations and liabilities of the separate entities are not those of the City. For a further explanation of these separate entities, refer to Note 12 – Jointly Governed Organizations in the CAFR. During fiscal year 2019-2020, the City made significant progress towards improving our essential facilities. Building from over a decade of community efforts to address San Rafael's aging essential public safety facilities, the Essential Facilities project targets several buildings recommended for either replacement or renovation, including a new public safety center across the street from City Hall. These new buildings will be seismically safe and provide modern facilities for our firefighters, police officers, paramedics and dispatchers. They include an upgraded dispatch and communications center, and a new classroom and training tower for emergency preparedness. The architectural review for Fire Station 54 and Fire Station 55 commenced in mid-2019. Construction of Fire Station 57 located at 3530 Civic Center Drive was completed in November 2019, Fire Station 52 located at 210 3rd Street was completed in April 2019, and the Public Safety Center was completed in August of 2020. ECONOMIC FACTORS The City has a diversified economic base, which includes an assortment of high-tech, financial, service-based, entertainment and industrial businesses. Downtown San Rafael provides a mix of restaurants, retail shops and financial institutions. The City’s varied economic base is reflected in its property tax base, which is 74% residential, 20% commercial, 2% industrial, and 4% unsecured and others. The top 25 sales tax producers provide 49% of overall sales tax revenues. The COVID-19 pandemic has severely impacted the California economy. Where the unemployment rate had fallen to record lows pre-pandemic it stands at 11% as of September 2020. Initial forecasts of a sharp, or V shaped, recovery have been tempered by the re-emergence of the virus which has paused re-opening plans. California has a challenging road ahead as prospects of a prolonged recovery appear more likely as time passes. vii DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT Gary O. Phillips, Mayor • Kate Colin, Vice Mayor • Maribeth Bushey, Councilmember • Andrew Cuyugan McCullough, Councilmember • John Gamblin, Councilmember Locally, Marin County is also reeling from the effects of the pandemic, however, as the county’s workforce is more concentrated in the finance, science and information sectors there is hope the region’s employment figures will outperform much of the state that relies more heavily on personal service and retail. A bright spot in an otherwise murky landscape for post-COVID recovery. Demographic Data The following is a sample of demographic and economic attributes that make San Rafael an exceptional place to live and work.  Economic development organizations in San Rafael include the San Rafael Chamber of Commerce, Downtown Business Improvement District, and the Marin Economic Forum.  Marin County’s top 10 employers include Kaiser Permanente, Marin Health Medical Center, Dominican University of California, Marin Community Clinics, Novato Community Hospital, Hospice by the Bay, W Bradley Electric, Wells Fargo, Community Action Marin, and BioMarin.  Major shopping areas, as measured in available retail square footage, include the Downtown corridor (938,000 aggregate), Northgate Mall (725,000), Montecito Center (130,000) and Northgate One (113,900).  The top three sales tax categories in 2019 for San Rafael were: 1. Autos and Transportation (24.1%), 2. Building and Construction (17.7%), and 3. State and County Pools (15.9%).  Several hotels and motels support tourism activity, led by a combined 471 rooms in the Embassy Suites and Four Points Sheraton. Citywide, the total number of hotel rooms is 787.  Establishing and maintaining affordable residential housing for sale and lease continues to be a challenge both in San Rafael and throughout Marin County. The median rent for an apartment in San Rafael is $2,672. The median home value in San Rafael is $1,100,740. Recent growth and economic vibrancy:  San Rafael ranked No. 3 on the SMU National Center for Arts Research Vibrancy Index. This overall index is composed of three dimensions: supply, demand, and government support. Supply is assessed by the total number of arts providers in the community, including the number of arts and culture organizations and employees, independent artists, and entertainment firms. Demand is gauged by the total nonprofit arts dollars in the community, including program revenue, contributed revenue, total expenses, and total compensation. Lastly, the level of government support is based on state and federal arts dollars and grants. viii DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT Gary O. Phillips, Mayor • Kate Colin, Vice Mayor • Maribeth Bushey, Councilmember • Andrew Cuyugan McCullough, Councilmember • John Gamblin, Councilmember  The City of San Rafael is also enjoying a boost in development of hotel rooms thanks to a new AC Marriott Hotel currently under construction in the heart of our Downtown. A dual-brand Hampton Inn/H2 Hotel is also coming soon in the East San Rafael neighborhood to serve a variety of large retailers and businesses as well as workers within the traditionally industrial area. These two hotels combined are expected to add 325 new hotel rooms to the City and generate much needed Transit Occupancy Tax (TOT).  The Downtown San Rafael Arts District (DSRAD) and the arts community continues to thrive. We have made numerous artistic improvements throughout our Downtown, including a facelift to our parking garage, rotating public art on wayfinding signage, pop-up art in vacant windows in Downtown storefronts, and custom bike racks highlighting San Rafael as a cultural district. We have developed the first ever arts and culture plan for the City and are proud to continue to have many arts organizations and stakeholders in our Downtown representing the many voices and perspectives of our diverse arts community.  San Rafael continues to serve our local business and restaurant community, especially during the COVID-19 pandemic, where we have supported our restaurants by expanding temporary outdoor dining options in our parking stalls, sidewalks, and parking lots. In coordination with the Business Improvement District, the City has also closed streets during our weekly ‘Dining Under The Lights’ event where patrons can enjoy a meal outdoors under the newly extended Tivoli lights that crisscross above the heart of our Downtown.  Construction of the Public Safety Center was recently completed with an official opening expected in the coming months.  Sonoma-Marin Area Rail Transit completed and began commercial service on the Larkspur Extension connecting Downtown San Rafael with the Larkspur Ferry terminal. FINANCIAL INFORMATION The City's management is responsible for establishing and maintaining internal controls to ensure that the City's assets are adequately protected from loss, theft or misuse. In addition, management controls ensure that proper accounting data is collected so as to prepare reports in conformance with generally accepted accounting principles. Internal accounting controls are designed to provide reasonable, but not absolute, assurance regarding: (1) the safeguarding of assets against loss from unauthorized use or disposition; and (2) the reliability of financial records for preparing financial statements and maintaining accountability for assets. The concept of reasonable assurance recognizes that the cost of a control should not exceed the benefits likely to be derived. All internal control evaluations occur within the above framework. It is management’s belief that the City's internal accounting controls adequately safeguard assets and provide reasonable assurance that financial transactions are properly recorded. ix DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT x DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT MISSION STATEMENT The Mission of the City of San Rafael is to enhance the quality of life and to provide for a safe, healthy, prosperous and livable environment in partnership with the community. VISION STATEMENT Our vision for San Rafael is to be a vibrant economic and cultural center reflective of our diversity, with unique and distinct neighborhoods in a beautiful natural environment, sustained by active and informed residents and a responsible innovative local government. January 1996 xi DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT City Council and Staff As of November 9, 2020 City Council Gary O. Phillips, Mayor Kate Colin, Vice Mayor Maribeth Bushey, Councilmember John Gamblin, Councilmember Andrew McCullough, Councilmember Elected Officials Rob Epstein, City Attorney Lindsay Lara, City Clerk Executive Team Jim Schutz, City Manager Cristine Alilovich, Assistant City Manager Diana Bishop, Chief of Police Darin White, Fire Chief Bill Guerin, Public Works Director Paul Jensen, Community Development Director Susan Andrade-Wax, Library & Recreation Director Nadine Atieh Hade, Finance Director Rebecca Woodbury, Director of Digital Service & Open Government Shibani Nag, Human Resources Director Andrew Hening, Homeless Initiatives Director xii DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT xiii DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT ORGANIZATIONAL CHART Electorate City ClerkCity Attorney Mayor & City Council Boards & Commissions Assistant City Manager Finance Volunteer and Sustainability Programs Human Resources Parking Services Police Department Fire Department Library and Recreation Public WorksEconomic Development City Manager Digital Service and Open Government Community Development Homeless Initiativesxiv DRAFTDRAFTREVIEW DRAFT 11-9-20DRAFT Government Finance Officers Association Certificate of Achievement for Excellence in Financial Reporting Presented to City of San Rafael California For its Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2019 Executive Director/CEO xv DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT Fire Boat San Rafael FINANCIAL SECTION DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT INDEPENDENT AUDITOR’S REPORT To the Honorable Mayor and Members of the City Council City of San Rafael, California Report on Financial Statements 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 San Rafael (City), California, as of and for the year ended June 30, 2020, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the Table of Contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the component unit financial statements of the San Rafael Sanitation District, which represents 25%, 60%, and 18%, respectively, of the assets, net position, and revenues of the primary government. Those financial statements were audited by other auditors, whose report thereon has been furnished to us and our opinion, insofar as it relates to the amounts included for the San Rafael Sanitation District, is based solely on the report of those auditors. 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the City’s preparation and fair presentation of the financial statements 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, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. 1 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT Opinions In our opinion, based on our audit and the report of other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, the aggregate remaining fund information and the discretely presented component unit of the City as of June 30, 2020, 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. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that Management’s Discussion and Analysis and required supplementary information, as listed in the Table of Contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other 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 Introductory Section, Supplementary Information, and Statistical Section as listed in the Table of Contents are presented for purposes of additional analysis and are not required parts of the basic financial statements. The Supplementary 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 Supplementary Information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. The Introductory and Statistical Sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we do not express an opinion or provide any assurance on them. 2 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 9, 2020 on our consideration of the 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 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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance. Pleasant Hill, California November 9, 2020 3 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2020 This analysis of the City of San Rafael’s (City) financial performance provides an overview of the City’s financial activities for the fiscal year ended June 30, 2020. Please read it in conjunction with the basic financial statements and the accompanying notes to those basic financial statements. FINANCIAL HIGHLIGHTS Government-wide:  Net Position – The assets and deferred outflows of the City exceeded its liabilities and deferred inflows as of June 30, 2020 by $148 million.  Activities – During the fiscal year the City’s total revenues of $112.2 were greater than expenses of $110.9 million for governmental and business-type activities.  Changes in Net Position – The City’s total net position increased by $1.3 million in fiscal year 2019-2020 as compared to the net position of the previous year. Net position of governmental activities increased by $1.2 million, while net position of the business-type activities increased by $57 thousand. Fund Level:  Governmental Funds – As of the close of fiscal year 2019-2020, the City’s governmental funds reported combined ending fund balances of $46.1 million, a decrease of $21.7 million primarily due expenditure of bond proceeds from the fund balance of the prior year. Of this total amount, $15 thousand is nonspendable, $34.3 million is restricted, $1.9 million is committed, $9.9 million is assigned, and ($11 thousand) is unassigned.  Governmental fund revenues totaled $106.8 million, a decrease of $10.9 million from the those of the previous fiscal year. Approximately $8.1 million was due to a reduction of grant and federal reimbursements for expenses incurred on capital projects when compared to the prior year in the Gas Tax and Essential Facilities Capital Projects funds. The remainder was due to impacts of the COVID-19 pandemic that were partially offset by strong revenue collections earlier in the year.  Governmental fund expenditures decreased by $9.1 million to $129.8 million, from $138.9 million in the prior year, due primarily to the reduction in activities as a result of the COVID-19 pandemic.  Enterprise fund operating revenue decreased $299 thousand to a total of $5.1 million as a result of shelter- in-place orders in response to the COVID-19 pandemic. Enterprise operating expenditures totaled $4.3 million, a decrease of $0.6 million over the previous year. OVERVIEW OF FINANCIAL STATEMENTS The Comprehensive Annual Financial Report is composed of the following: 1. Introductory section, which includes the Transmittal Letter and general information 2. Management’s Discussion and Analysis (this part) 3. Basic Financial Statements, which include the Government-wide and the Fund financial statements along with the Notes to these financial statements 4. Combining statements for Non-Major Governmental Funds, Internal Service Funds, and Agency Fund 5. Statistical Information 5 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2020 This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements, which have three components: 1) Government-wide Financial Statements, 2) Fund Financial Statements, and 3) Notes to the Basic Financial Statements. The basic financial statements include the City (primary government) and all legally separate entities (component units) for which the government is financially accountable. This report also contains other supplementary information in addition to the basic financial statements for further information and analysis. Government-wide Financial Statements The government-wide financial statements present the financial picture of the City and provide readers with a broad view of the City’s finances. These statements present governmental activities and business-type activities separately and include all assets of the City (including infrastructure) as well as all liabilities (including long-term debt). Additionally, certain interfund receivables, payables, and other interfund activity have been eliminated as prescribed by generally accepted accounting principles. The Statement of Net Position and the Statement of Activities and Changes in Net Position report information about the City as a whole. These statements include all assets and liabilities of the City using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the current year’s revenues and expenses are taken into account, regardless of when cash is received or paid. The Statement of Net Position presents information on all of the City’s assets, deferred outflows/inflows of resources, and liabilities, with the difference reported as net position. Over time, increases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating. The Statement of Activities and Changes in Net Position presents information showing how the City’s net position changed during the year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of timing of related cash flows. In the Statement of Net Position and the Statement of Activities and Changes in Net Position, City activities are separated as follows: Governmental Activities – Most of the City’s basic services are reported in this category, including Public Safety, Public Works and Parks, Community Development, Cultural and Recreation, and Government Administration (finance, human resources, legal, City Clerk and City Manager operations). Property tax, sales and use taxes, user fees, interest income, franchise fees, hotel taxes, business licenses, and property transfer taxes, plus state and federal grants finance these activities. Business-type Activities – The City charges fees to customers to cover the full costs of certain services it provides. The City’s Parking Services program is the City’s sole business-type activity. Discretely Presented Component Units – The government–wide financial statements include not only the City itself (the primary government), but also the San Rafael Sanitation District, a legally separate entity for which the City is financially accountable. Financial information for the San Rafael Sanitation District is reported separately from the financial information presented for the primary government. The government-wide financial statements can be found on pages 25 through 27 of this report. 6 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2020 Fund Financial Statements and Major Component Unit Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City are divided into three categories: governmental funds, proprietary funds, and fiduciary funds. The fund financial statements provide detailed information about each of the City’s most significant funds called major funds. Each major fund is presented individually with all non-major funds summarized and presented in a single column. Further detail on the non-major funds is presented on pages 116 through 146 of this report. Governmental Funds – Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financial capacity. 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 government 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. These reconciliations are presented on the page immediately following each governmental fund financial statement. The City has thirty-two governmental funds, of which four are considered major funds for presentation purposes. Each major fund is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances. The City’s four major funds are: the General Fund, Traffic and Housing Mitigation, Gas Tax and Essential Facilities Capital Projects. Data from the other twenty- eight governmental funds are combined into a single, aggregated presentation. The basic governmental fund financial statements can be found on pages 30 through 33 of this report. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements on pages 116 through 136 of this report. Proprietary Funds – The City maintains two different types of proprietary funds - enterprise funds and internal service funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses an enterprise fund to account for its Parking Services program and reports it as a major fund. Internal service funds are used to accumulate and allocate costs internally among the City’s various functions. The City uses internal service funds to account for its building maintenance; vehicle, equipment and computer replacement; workers’ compensation; general liability; self-insured dental program; other employee and retiree benefits programs. Because these services predominantly benefit governmental rather than business-type functions, they have been included within governmental activities in the government wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. Like the government-wide financial statements, proprietary fund financial statements use the accrual basis of accounting. There is no reconciliation needed between the government-wide financial statements for business-type activities and the proprietary fund financial statements. The proprietary fund financial statements can be found on pages 36 through 38 of this report. 7 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2020 Fiduciary Funds – Fiduciary funds are used to account for resources held for the benefit of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City’s own programs. The City acts as an agent on behalf of others, holding amounts collected, and disbursing them as directed or required. The City’s fiduciary activities are reported in the separate Statements of Fiduciary Net Position and the Agency Funds Statement of Changes in Assets and Liabilities. The City’s fiduciary funds include a private purpose trust fund to account for activities of the City of San Rafael Successor Agency and an agency fund that accounts for resources held by the City in a custodial capacity for the Pt. San Pedro Road Assessment District. Information for the fiduciary funds can be found on pages 40 through 41 of this report. Notes to the Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes to the financial statements can be found on pages 43 through 94 of this report. Required Supplementary Information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information. One section includes budgetary comparison statements for the General Fund and major funds (general, gas tax, and traffic and housing mitigation). The other section includes schedules of funding progress for the Marin County Employees’ Retirement System and the City’s OPEB plan. All budgeted positions that are filled by either full-time or permanent part-time employees (working seventy-five percent of full-time equivalent) are eligible to participate in the System and the OPEB plan. Required supplementary information can be found on pages 95 through 110 of this report. 8 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2020 GOVERNMENT-WIDE FINANCIAL ANALYSIS Statement of Net Position Net position is one measurement of the City’s financial position. During this fiscal year, the net position of the City was $138.1 million from Governmental Activities and $9.9 million from Business-type Activities, for a total of $148 million. This represents an increase of $1.3 million from the prior year net position. The following is the condensed Statement of Net Position for the fiscal years ended June 30, 2020 and 2019: Current governmental assets decreased by $17.5 million, primarily due to the expenditure of bond proceeds for public safety facility construction and improvements. The $19.4 million increase in capital assets reflects project-to-date activity for the public safety facility construction and improvements in combination with major traffic infrastructure improvements. The increase of $8.1 million in deferred outflows is primarily a result of a 3% increase in the City’s proportionate share of the Unfunded Actuarial Liability per the June 30, 2018 actuarial valuation. This change in proportion was mainly attributable to the disproportionate reduction of the County’s Unfunded Actuarial Liability as a result of larger than expected investment gains and contributions. Current and other liabilities increased by approximately $1 million, primarily due to an increase in current claims payable. Noncurrent governmental liabilities increased by $15.1 million a result of the increase in net pension liability, partially offset by the reduction in Net OPEB liability, when compared to the prior year (Note 11). Deferred inflows decreased by $7.4 million as a result of the difference between projected and actual earnings on investments per the June 30, 2018 actuarial valuation. In order to decrease the volatility of the measurement of net pension liability gains and losses in excess of those projected are capitalized and amortized over a five-year period. Increase Increase 2020 2019 (Decrease) 2020 2019 (Decrease) Current and other assets $85,240 $102,788 ($17,548) $3,371 $3,283 $88 Capital assets 273,513 254,163 19,350 15,731 15,941 (210) Total assets 358,753 356,951 1,802 19,102 19,224 (122) Deferred outflows (Notes 9 and 11)46,498 38,415 8,083 1,506 1,364 142 Current and other liabilities 15,423 14,479 944 432 477 (45) Noncurrent liabilities 223,220 208,131 15,089 9,386 8,953 433 Total liabilities 238,643 222,610 16,033 9,818 9,430 388 Deferred inflows (Notes 9 and 11)28,481 35,838 (7,357) 890 1,060 (170) Net Position: Net investment in capital assets 230,737 231,844 (1,107) 11,104 11,023 81 Restricted 23,522 23,289 233 0 0 0 Unrestricted (116,133) (118,215) 2,082 (1,204) (1,179) (25) Total net position $138,126 $136,918 $1,208 $9,900 $9,844 $56 Governmental Activities Business-Type Activities Summary of Net Position (in thousands) 9 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2020 The net position in business-type activities reflects the fiscal activity of the Parking Services program and increased by $56 thousand from the previous year. Capital assets decreased by $210 thousand due to current year depreciation. The increase in deferred outflows was due to the proportion change of net pension liability mentioned above. The $388 thousand increase in noncurrent liabilities is driven by the increase in net pension liabilities. At June 30, 2020, the largest portion of total net position in the amount of $241.8 million consisted of the City’s investment in capital assets net of related debt. This component represents the total amount of funds required to acquire capital assets less any related debt used for such acquisition that is still outstanding. The City uses these assets to provide services to residents. The capital assets of the City are not sources of income for repayment of debt as most assets are not revenue generating and generally are not liquidated to repay debt. Therefore, debt service payments are funded from other sources available to the City. A portion of the City's total net position, $23.5 million, is subject to external restrictions, the use of which is determined by those restrictions whether legal or by covenant. The remaining portion, unrestricted negative $117.3 million, represents the extent to which the net investment in capital assets and restricted net position exceed total net assets. Invested in Capital Assets (net)$241,841 Restricted 23,522 Unrestricted (117,337) Total Net Position $148,026 Net Position as of 6/30/2020 (in thousands) 10 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2020 Statement of Activities - Governmental The following is the condensed Statement of Activities and Changes in Net Position for the fiscal years ended June 30, 2020 and 2019: Increase 2020 2019 (Decrease) REVENUES Program revenues: Charges for services $19,142 $19,904 ($762) Operating grants and contributions 5,546 4,585 961 Capital grants and contributions 1,348 8,042 (6,694) Total program revenues 26,036 32,531 (6,495) General revenues: Property taxes 26,492 25,903 589 Sales taxes 33,783 35,627 (1,844) Paramedic tax 4,923 4,936 (13) Transient occupancy tax 2,411 3,203 (792) Franchise tax 4,029 3,627 402 Business license tax 2,825 2,788 37 Other taxes 2,153 1,783 370 Investment earnings 1,908 1,450 458 Miscellaneous 2,471 5,905 (3,434) Total general revenues 80,995 85,222 (4,227) TOTAL REVENUES 107,031 117,753 (10,722) EXPENS ES General government 15,630 11,968 3,662 Public safety 50,001 49,899 102 Public works and parks 21,661 19,271 2,390 Community/economic development 5,314 5,782 (468) Culture and recreation 11,828 12,819 (991) Interest on long-term debt 1,975 1,848 127 TOTAL EXPENSES 106,409 101,587 4,822 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENSES 622 16,166 (15,544) Transfers in 586 609 (23) Total Other Financing Sources (Uses)586 609 (23) Net Change in Net Position 1,208 16,775 (15,567) Beginning Net Position 136,918 120,143 16,775 Ending Net Position, June 30 $138,126 $136,918 $1,208 Governmental Activities Summary of Changes in Net Position (in thousands) 11 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2020 The City’s governmental activities net position increased by $1.2 million during fiscal year 2019-2020. Year-over- year decreases in revenues of $10.7 million resulting from the pandemic were still able to absorb the increase in expenses of $4.8 million. Revenue decreases were concentrated in areas affected by the shelter-in-place coronavirus pandemic orders such as sales taxes, transient occupancy taxes, and capital grants. Increases in program expenses were concentrated in general government and public works. Although there was a decrease in operating expenses as a result of the pandemic, a total increase in expenditures for general government and public works are the result of required pension and OPEB related adjustments as well as increased claims and workers compensation expenditures as determined by outside Actuarial reports. Due to the nature of allocations of expenses in the government-wide statements, fluctuation analysis on program expenses is better performed on the fund level financial statements. Growth in property taxes stemmed from the 2% proposition 13 inflation adjustment that was unaffected by the pandemic. The year-over-year $1.8 million decrease in sales taxes is due to reduced economic activity resulting from shelter-in- place orders to guard against the coronavirus pandemic. The recently enacted Wayfair decision played a crucial role in helping to mitigate the loss as sales shifted on-line and greater tax revenues were allocated to the City from the County pool responsible for distributing taxes on on-line purchases. The increase in fiscal year 2019-2020 governmental expenses was due, in part, to pension expense adjustments recorded under GASB 68, as well as increased internal service fund expenditure allocations resulting primarily from Workers’ Compensation premiums and claims during the year. The following graph shows governmental revenues by source: 12 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2020 Total expenses for governmental activities were $104.4 million (excluding interest on long-term debt of $2 million). Program revenues offset total expenses as follows:  Those who directly benefited from programs contributed $19.1 million in charges for services.  A total of $6.9 million in operating and capital projects were funded by outside agencies through operating grants, capital grants, and contributions. As a result, total expenses that were funded by tax revenues, investment income, other general revenues and fund balance were $78.4 million. Functional expenses for the year ended June 30, 2020 were as follows: Expenses by Function (in thousands) Function Amount Percent of Total General government $15,630 14.7% Public safety 50,001 47.0% Public works and parks 21,661 20.4% Community development 5,314 5.0% Culture and recreation 11,828 11.1% Interest on debt 1,975 1.9% Total expenses $106,409 100% 13 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2020 The net position for business-type activities increased from the prior year by $57 thousand.  Parking services is the City’s only business-type activity with income derived from program revenues of $5.1 million. Program revenues include parking meter coin income of $1.5 million and parking garage hourly and monthly parking income of $1 million. Revenues also include parking and non-vehicle code fines totaling $2.5 million. Total expenses for parking services were $4.5 million and transfers out to general fund and non- major governmental fund for support totaled $586 thousand during the fiscal year 2019-2020. The year-over- year decreases in revenues and expenses were directly attributable to the coronavirus pandemic and shelter- in-place orders. Increase 2020 2019 (Decrease) Revenues Program revenues: Charges for services $5,063 $5,362 ($299) Total program revenues 5,063 5,362 (299) General revenues: Investment Income 71 64 7 Total general revenues 71 64 7 TOTAL REVENUES 5,134 5,426 (292) Expenses General government 4,491 5,039 (548) TOTAL EXPENSES 4,491 5,039 (548) EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENSES 643 387 256 OTHER FINANCING SOURCES (USES) Transfers out (586) (608) 22 Total Other Financing sources (uses) Net Change in Net Position 57 (221) 278 Net Position, Beginning 9,843 10,064 (221) Net Position, Ending $9,900 $9,843 $57 Summary of Changes in Net Position For the periods ended June 30, 2020 and 2019 (in thousands) Business-Type Activities 14 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2020 FINANCIAL ANALYSIS OF INDIVIDUAL FUNDS Governmental Funds Fund Balance Classifications Fund balances are classified in five categories: nonspendable, restricted, committed, assigned, and unassigned based on a hierarchy of constraint. Further details on fund balance classifications can be found in Note 8B. The focus of the City’s governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s financial capacity. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of June 30, 2020, the City reported a combined ending fund balance of $46.1 million for all governmental funds (a decrease of $21.7 million from the prior year): $15 thousand is non-spendable, $34.3 million is restricted, $1.9 million is committed, $9.9 million is assigned, and ($11) thousand is unassigned. General Fund – The General Fund is the primary operating fund of the City. General Fund – The fund balance of the General Fund as of June 30, 2020 was $9.8 million (a decrease of $2.7 million from the prior year balance): $8 thousand is non-spendable and $9.8 million is assigned. The assigned portion of the balance includes $7.8 million for emergency and cash flow needs. General Fund Budgetary Highlights: The original adopted General Fund budget projected total revenue of $80.7 million and transfers-in of $4.7 million for total resources of $85.4 million. This budget appropriated expenditures of $80.3 million and transfers-out of $6.1 million for total appropriations of $86.4 million. Expenditures were later increased to $81.3 million to accommodate increased public safety overtime expenditures as well as increased liability claims. Transfers-out were increased by $546 thousand based on increased support of recreation fund expenditures as a result of the pandemic and project support. Actual revenues, at $80.3 million, were lower than the original budgeted revenues by $0.4 million. The was due to a decrease in tax revenues as a result of the coronavirus pandemic that were partially offset by larger than expected tax receipts earlier in the year as well as large one-time collections for fees related to large development projects. Expenditures of $81.2 million were greater than the original budgeted expenditures by $0.8 million, primarily due to increased liability claims. 15 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2020 Fiscal year 2019-2020 General Fund expenditures, operating and capital transfers out of $87.7 exceeded revenues and transfers of $85 million by $2.7 million. Prior year assigned and unassigned fund balances including the General Fund Emergency and Cash Flow Reserve were utilized to absorb the loss. Traffic and Housing Mitigation Fund – The City uses this fund to collect developer contributions to be used for major street improvement and housing infrastructure projects. During the year, the fund balance decreased from $5.2 million to $4.2 million. Revenues totaled $1 million, while $2 million was charged against this fund to support the maintenance of the City-wide traffic model. Installation of a multi-use pathway along Francisco Boulevard accounted for charges of $763 thousand, the Innovative Deployment of Enhanced Arterial project designed to proactively identify and correct traffic signal performance accounted for $467 thousand, and a project to install new queue cutter signals on 2nd and 3rd streets next to the rail crossing accounted for $365 thousand. The balance in the fund is being held in anticipation of major street projects identified in the General Plan 2040 and other qualifying expenditures. Gas Tax Fund – The City uses this fund to manage its allocation of State gasoline taxes and local funding for street maintenance projects. Gas tax revenues exceeded expenditures and net transfers by $1.8 million in fiscal year 2019- 2020 resulting in an increase in fund balance from $4.7 million to $6.5 million. The activities for the year were all planned and approved project work. Expenditures during fiscal year 2019-2020 totaled $5.8 million. In addition to routine street-related maintenance of $1.8 million, major expenditures included $3.1 million for street resurfacing and restriping, $570 thousand for a multi-use path along Francisco Boulevard, $398 thousand for emergency slide repair at 70 Irwin, $155 thousand for sidewalk improvements along Francisco Boulevard, $113 thousand to for the Grand Avenue pathway connector project, and $258 thousand related to studies and improvements to Third Street. The largest sources of revenues were $1.7 million in development impact fees, $1.4 million from State gasoline taxes, $1.2 million in local Measure A funding, and $1.1 million in State RMRA (Road Maintenance and Rehabilitation Account) funding. Adopted Budget Revised Budget Actual Revenues $80,676 $80,876 $80,287 Transfers in 4,701 4,737 4,737 Note Proceeds 24 Total resources 85,377 85,613 85,048 Expenditures 80,286 $81,308 81,151 Operating transfers out 2,000 2,440 2,440 Capital Transfers out 4,077 4,183 4,183 Total uses 86,363 87,931 87,774 Net Results ($986) ($2,318) ($2,726) Summary of General Fund Budget and Actual For the fiscal year ended June 30, 2020 (in thousands) 16 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2020 Essential Facilities Capital Projects Fund – The City uses this fund to account for major capital improvements to public safety facilities. During the year, construction of Fire Station 57 was completed and the Public Safety Center was substantially complete. Expenditures during fiscal year 2019-2020 totaled $23.6 million, of which $4.2 million was transferred from the General Fund from an allocation of Measure E Transaction and Use Tax and $950 thousand was allocated from paramedic tax funds. Non-major Governmental Funds – The City’s non-major funds are presented in the basic financial statements in the aggregate. At June 30, 2020, non-major funds had a total fund balance of $13.1 million, a $100 thousand increase over that of the previous year. The largest fund balance decrease, $473 thousand, was recorded in the Childcare Fund as result of reduced charges for services from closure during shelter-in-place orders. The largest fund balance increase, $487 thousand, was recorded in the Stormwater Fund as budgeted activity was hindered by the pandemic. Of the ending total non-major fund balances of $13.0 million: $11.1 million (85%) is legally restricted for specific purposes by external funding source providers, $1.9 million (14%) is committed for special purposes by the City Council, $121 thousand (1%) is assigned, $8 thousand (less than 1%) is nonspendable, and a negative balance of $11 thousand is unassigned. The negative balance resulted from wildfire prevention activities performed in advance of Measure C – Wildfire Prevention Fund revenue collection in order to prepare for the upcoming fire season. Additional information about these aggregated non-major funds is presented in the combining statements which immediately follow the required supplementary information. Proprietary Funds The City’s proprietary funds are presented in the basic financial statements in a manner similar to that found in the government-wide financial statements, but in more detail. As noted in the Summary of Changes in Net Position – Business-type Activities at page 26, the City’s enterprise fund net position increased by $72 thousand during the fiscal year. The Parking Services Fund is the City’s sole business-type (Enterprise) activity. The proprietary fund operating revenue decreased by $299 thousand in fiscal year 2019-2020 to $5.1 million. The enterprise fund operating expenses were $4.3 million in fiscal year 2019-2020, a decrease of $0.6 million over the prior fiscal year. The change in operating revenues and expenses was primarily driven by the State shelter-in-place orders. The City’s Internal Service Funds are also reported in this Proprietary Fund classification. In fiscal year 2019-2020, the Internal Services Funds were comprised of: Building Maintenance, Vehicle Replacement, Equipment Replacement, Employee Benefits, Liability Insurance, Workers’ Compensation, Dental Insurance, Employee Retirement, OPEB/Retiree Medical, Radio Replacement, Telephone Replacement and Sewer Maintenance. The net position of the Internal Service Funds increased by $3.3 million. Net investment in capital assets decreased by $196 thousand, while unrestricted fund balance increased by $3.5 million. The decrease in capital assets resulted primarily from depreciation of existing capital assets. The increase in unrestricted fund balance reflected increased allocations to the Liability Fund and Employee Retirement Fund to support increased claims and funding two years of pension obligation bond debt service, respectively. The other Internal Service Funds reported small-to-moderate changes to their respective net positions. 17 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2020 CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets The City’s investment in capital assets for its governmental and business-type activities as of June 30, 2020 amounts to $289.2 million, net of accumulated depreciation of $189.1 million. This investment in capital assets includes land, buildings, improvements, machinery and equipment, infrastructure and construction in progress. Infrastructure assets are items that are normally immovable and of value only to the City such as roads, bridges, streets and sidewalks, drainage systems, lighting systems, and similar items. The net addition to the City’s investment in capital assets for the current fiscal year was $19.1 million, offset by accumulated depreciation of $6.6 million. Additions to capital assets during fiscal year 2019-2020 included:  Building and structure projects: $29.3 million  Fire Station 52 - $13.3 million  Fire Station 57 - $13.5 million  Energy Efficiency Upgrades - $1.1 million  City Hall Switchgear Replacement - $642 thousand  Boyd House Renovations - $390 thousand  Bret Hart Restroom - $305 thousand  Infrastructure: $3.5 million  Grand Avenue Pathway - $2.9 million  Grand Avenue Pathway Connector - $612k The City’s Capital Assets for the fiscal years ending June 30, 2020 and 2019 were as follows: Additional information on the City’s capital assets can be found in Note 5 on pages 61 through 63 of this report. 2020 2019 Governmental Activities Land $83,662 $83,662 Construction in progress 62,961 69,822 Land improvements 9,763 9,763 Buildings and structures 73,514 44,247 Machinery and equipment 20,842 20,948 Infrastructure 207,290 203,818 Less accumulated depreciation (184,519) (178,097) Subtotal Governmental Activities 273,513 254,163 Business-type Activities Land 8,621 8,621 Buildings and structures 10,714 10,714 Machinery and equipment 1,009 1,042 Less accumulated depreciation (4,613)(4,436) Subtotal Business-type Activities 15,731 15,941 Total Capital Assets $289,244 $270,104 Summary of Capital Assets (in thousands) 18 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2020 Debt Administration The City’s debt obligations were stable year-over-year and reflect payments of principal made during the year. The debt of the former Redevelopment Agency is reported under the Successor Agency, which is presented as Private- Purpose Trust Fund on the Statement of Fiduciary Net Position. (See Note 6 of the financial statements for additional information on the debt obligations of the City and Note 15 for additional information on the Successor Agency.) The City’s long-term obligations for the fiscal years ending June 30, 2020 and 2019 were as follows: 2020 2019 Governmental Activity Debt: 2018 Authority Lease Revenue Bond $52,596 $53,104 2010 Taxable Pension Obligation Bonds 3,320 3,765 PG & E City Hall HVAC Retrofit Note Payable 113 146 PG & E Street Light Retrofit Note Payable 7 PG & E Efficiency Note Payable 972 1,081 Subtotal Governmental Activity Debt 57,001 58,103 Business-Type Activity Debt: PG & E Parking Lot Lighting Retrofit Note Payable 21 28 2012 Authority Lease Revenue Refunding Bonds, as adjusted 4,606 4,890 Subtotal Business-Type Activity Debt 4,627 4,918 Total Long-Term Obligations $61,628 $63,021 Summary of Long-Term Debt (in thousands) 19 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2020 ECONOMIC CLIMATE AND NEXT YEAR’S BUDGET In early 2020 the globe was sent into an economic and social crisis from the rapid outbreak of COVID-19. Economies went into freefall as efforts to combat the virus disrupted the global supply chain. The United States saw its gross domestic product fall 9.5 percent in the second quarter and unemployment jump to 14.7 percent in April. Stimulus measures such as cutting interest rates and direct payments have helped to mitigate the toll on the American economy. The road to recovery is beginning to appear lengthier than some may have predicted, and the country is likely to continue to face ongoing challenges in the years ahead. California faces the new year with a $54.3 billion budget deficit and an unemployment rate of 11% as of September, a stark contrast from the record low unemployment rates and record expansion reported just a year ago. The State has been slow to reopen as new cases hold near levels seen in the spring and conditions will remain restrictive for businesses in the near term. It remains to be seen how the reopening will impact case numbers, but all indications are that a prolonged recovery should be expected. Locally, Marin County’s unemployment rate fares better than all but one California county at 6.5% as of September as its workforce is more concentrated in the finance, science and information sectors sheltering the County from larger adverse effects of the pandemic. The real estate market in Marin has seen a recent boom with home sales up 37% and median home sales prices increasing 21% year over year which should translate to increased gains in property taxes. In San Rafael, economic impacts remain mixed. Property taxes are continuing to grow and the recent housing boom in Marin is expected to bolster that trend going forward whereas sales and use tax revenue, transient occupancy tax, and business licenses will continue to see adverse impacts of the pandemic as the reopening and recovery appears likely to take a prolonged approach. The City’s general fund, after years of solid operating results, is seeing a reversal that is expected to continue through the next few fiscal years. Staffing levels have decreased and the City has tapped into the emergency reserve to maintain vital services and, at the same time, the City is fully funding its actuarially-determined, required contributions for both pension and retiree medical (OPEB) obligations. Reductions in staffing and service levels, coupled with deferred maintenance of City facilities as methods of coping with the economic downturn means additional revenue sources will be required to get back to service and maintenance levels that were the norm prior to the pandemic. Sales tax and transactions and use tax (Measure E) combined, represent the City’s largest tax revenue generators. The City’s second largest tax generator is property tax. The City is expecting the fiscal year 2020-2021 tax roll to increase by approximately five percent over the previous year. Other tax and non-tax revenues are expected to decline as we enter a fiscal year that is expected to be entirely affected by the economic toll of the pandemic. The City’s largest expenditure relates to personnel costs. Salaries and benefits are tied to the labor agreements with each bargaining group. With the exception of SEIU-Childcare, which has a two-year contract expiring on October 31, 2021, the City’s labor units are all operating under extensions of two-year contracts that expire on June 30, 2021. In the bond markets, the San Rafael name is recognized as a high credit municipal entity given both the City’s financial strength and solid financial management. Because the City’s bonds are highly sought by investors and are competitive in the marketplace, the City can borrow funds at reasonably attractive rates. The City maintains an AA issuer credit rating with Standard & Poor’s Ratings Services. 20 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2020 REQUEST FOR INFORMATION This financial report is designed to provide our residents, businesses, customers, and investors and creditors with a general overview of the City’s finances and to demonstrate the City’s accountability for providing high quality services within the limits of our fiscal resources. If you have questions about this report or need additional financial information, contact the City of San Rafael – Finance Department at 1400 Fifth Avenue, Room 204, San Rafael, California 94901. 21 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL STATEMENT OF NET POSITION AND STATEMENT OF ACTIVITIES The Statement of Net Position and the Statement of Activities summarize the entire City’s financial activities and financial position. They are also referred to as Government-wide financial statements. The Statement of Net Position reports the difference between the City’s total assets and deferred outflows of resources and the City’s total liabilities and deferred inflows of resources, including all the City’s capital assets and all its long-term debt. The Statement of Net Position focuses the reader on the composition of the City’s net position, by subtracting total liabilities and deferred inflows of resources from total assets and deferred outflows of resources. The Statement of Net Position summarizes the financial position of all of the City’s Governmental Activities in a single column, and the financial position of all the City’s Business-type Activities in a single column; these columns are followed by a total column which presents the financial position of the entire City. The City’s Governmental Activities include the activities of its General Fund, along with all its Special Revenue, Capital Projects and Debt Service Funds. Since the City’s Internal Service Funds service these Funds, their activities are consolidated with Governmental Activities, after eliminating inter-fund transactions and balances. The City’s Business-type Activities include all its Enterprise Fund activities. The Statement of Activities reports increases and decreases in the City’s net position. It is also prepared on the full accrual basis, which means it includes all the City’s revenues and all its expenses, regardless of when cash changes hands. This differs from the “modified accrual” basis used in the Fund financial statements, which reflect only current assets, current liabilities, deferred outflows/inflows of resources, available revenues and measurable expenditures. The Statement of Activities presents the City’s expenses first, listed by program, and follows these with the expenses of its business-type activities. Program revenues - that is, revenues which are generated directly by these programs - are then deducted from program expenses to arrive at the net expense of each governmental and Business-type program. The City’s general revenues are then listed in the Governmental Activities or Business-type Activities column, as appropriate, and the Change in Net Position is computed and reconciled with the Statement of Net Position. Both these Statements include the financial activities of the City and the San Rafael Joint Powers Financing Authority which are legally separate but are considered to be component units of the City because they are controlled by the City, which is financially accountable for their activities. The balances and the activities of the San Rafael Sanitation District, a discretely presented component unit, are included in these statements in a separate column. 23 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL STATEMENT OF NET POSITION JUNE 30, 2020 Component Primary Government Unit San Rafael Governmental Business-type Sanitation Activities Activities Total District ASSETS Cash and investments available for operations (Note 2)$57,442,045 $2,675,950 $60,117,995 $38,895,857 Restricted cash and investments (Note 2)12,187,976 12,187,976 Receivables: Accounts, net 2,418,709 695,398 3,114,107 1,498,788 Intergovernmental 6,711,914 6,711,914 Grants 825,201 825,201 Interest 208,479 208,479 Loans (Note 4)302,894 302,894 Long-term receivable from the Successor Agency (Note 15D)190,444 190,444 Long-term receivable from San Rafael Sanitation District (Note 4F)4,937,049 4,937,049 Prepaid expenses and others 15,353 15,353 62,461 Capital assets (Note 5): Nondepreciable 146,623,585 8,620,853 155,244,438 1,492,971 Depreciable, net 126,889,000 7,110,590 133,999,590 51,985,289 Total Assets 358,752,649 19,102,791 377,855,440 93,935,366 DEFERRED OUTFLOWS OF RESOURCES Deferred outflows related to pension (Note 9)40,529,874 1,357,747 41,887,621 Deferred outflows related to OPEB (Note 11) 5,967,993 148,007 6,116,000 Total Deferred Outflows of Resources 46,497,867 1,505,754 48,003,621 LIABILITIES Accounts payable 7,785,711 60,621 7,846,332 521,435 Deposits payable 274,326 274,326 Interest payable 40,322 40,322 Developer deposits payable 692,819 692,819 Unearned revenue 172,395 19,116 191,511 Claims payable (Note 13): Due in one year 3,338,607 3,338,607 Due in more than one year 9,081,670 9,081,670 Compensated absences (Note 1L): Due in one year 595,494 14,841 610,335 Due in more than one year 4,168,460 103,886 4,272,346 Long-term debt (Note 6): Due in one year 2,563,711 296,816 2,860,527 Due in more than one year 54,436,960 4,329,876 58,766,836 Long-term payable to the City of San Rafael, due in more than one year (Note 4F)4,937,049 Net OPEB liability, due in more than one year (Note 11)25,963,111 643,889 26,607,000 Net pension liability, due in more than one year (Note 9)129,569,578 4,307,953 133,877,531 Total Liabilities 238,642,842 9,817,320 248,460,162 5,458,484 DEFERRED INFLOWS OF RESOURCES Deferred inflows related to pension (Note 9)21,832,237 725,882 22,558,119 Deferred inflows related to OPEB (Note 11)6,649,101 164,899 6,814,000 Total Deferred Inflows of Resources 28,481,338 890,781 29,372,119 NET POSITION (Note 8): Net investment in capital assets 230,737,025 11,104,751 241,841,776 53,478,260 Restricted for: Special revenue projects: Housing and street improvements 11,633,043 11,633,043 Stormwater 889,468 889,468 Emergency medical services 726,002 726,002 Other 8,002,418 8,002,418 Capital projects 2,100,674 2,100,674 Debt service 171,143 171,143 Total Restricted Net Position 23,522,748 23,522,748 Unrestricted (116,133,437) (1,204,307) (117,337,744) 34,998,622 Total Net Position $138,126,336 $9,900,444 $148,026,780 $88,476,882 See accompanying notes to financial statements 25 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2020 Program Revenues Operating Capital Charges for Grants and Grants and Functions/Programs Expenses Services Contributions Contributions Primary Government Governmental Activities: General government $15,629,601 $394,882 $142,780 Public safety 50,000,809 5,824,555 1,254,541 Public works and parks 21,661,442 3,082,495 3,946,827 $1,348,640 Community development 5,314,692 5,470,010 Culture and recreation 11,828,353 4,370,442 201,583 Interest on long-term debt and fiscal charges 1,974,834 Total Governmental Activities 106,409,731 19,142,384 5,545,731 1,348,640 Business-type Activities: Parking services 4,491,375 5,063,318 Total Business-type Activities 4,491,375 5,063,318 Total Primary Government $110,901,106 $24,205,702 $5,545,731 $1,348,640 Component Unit San Rafael Sanitation District $13,853,263 $16,874,361 $5,719 $175,217 General revenues: Taxes: Property Sales: Sales and Use Measure E half-cent sales Measure E quarter-cent sales Paramedic Transient occupancy Franchise Business license Other Investment earnings Miscellaneous Transfers (Note 3A) Total general revenues and transfers Change in Net Position Net Position, beginning of year Net Position, end of year See accompanying notes to financial statements 26 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT Component Primary Government Unit San Rafael Governmental Business-type Sanitation Activities Activities Total District ($15,091,939)($15,091,939) (42,921,713)(42,921,713) (13,283,480)(13,283,480) 155,318 155,318 (7,256,328)(7,256,328) (1,974,834)(1,974,834) (80,372,976)(80,372,976) $571,943 571,943 571,943 571,943 (80,372,976)571,943 (79,801,033) $3,202,034 26,491,505 26,491,505 1,833,137 21,602,988 21,602,988 8,121,188 8,121,188 4,060,594 4,060,594 4,923,092 4,923,092 2,410,745 2,410,745 4,029,050 4,029,050 2,824,722 2,824,722 2,152,617 2,152,617 1,907,591 71,583 1,979,174 876,369 2,470,926 2,470,926 489 586,387 (586,387) 81,581,405 (514,804) 81,066,601 2,709,995 1,208,429 57,139 1,265,568 5,912,029 136,917,907 9,843,305 146,761,212 82,564,853 $138,126,336 $9,900,444 $148,026,780 $88,476,882 Net (Expenses) Revenues and Changes in Net Position 27 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT FUND FINANCIAL STATEMENTS Major funds are defined generally as having significant activities or balances in the current year. Only individual major funds are presented in the Fund Financial Statements, while non-major funds are combined in a single column. Individual non-major funds may be found in the Supplemental Section. The funds described below were determined to be major funds by the City in fiscal year 2019-2020: GENERAL FUND Established to account for all financial resources necessary to carry out basic governmental activities of the City which are not accounted for in another fund. The General Fund supports essential City services such as police and fire protection, building and street maintenance, libraries, recreation, parks and open space maintenance. TRAFFIC AND HOUSING MITIGATION SPECIAL REVENUE FUND Established to maintain long-term developer contributions for major housing and street improvement projects. GAS TAX SPECIAL REVENUE FUND Established to receive and expend the City’s allocation of the State gasoline taxes. ESSENTIAL FACILITIES CAPITAL PROJECTS FUND Established to account for major capital improvements to public safety facilities. 29 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2020 Traffic and Essential Other Total General Housing Facilities Capital Governmental Governmental Fund Mitigation Gas Tax Projects Fund Funds Funds ASSETS Cash and investments available for operations (Note 2) $7,491,237 $4,223,837 $5,976,389 $3,217,016 $12,073,469 $32,981,948 Restricted cash and investments (Note 2)578,156 10,905,111 704,709 12,187,976 Receivables: Accounts 1,483,130 23,951 834,452 2,341,533 Intergovernmental 6,083,065 235,017 393,832 6,711,914 Grants 774,216 47,313 821,529 Interest 173,480 31,655 3,344 208,479 Loans (Note 4)2,873 37,145 262,876 302,894 Long-term receivable from the Successor Agency (Note 15D)190,444 190,444 Due from other funds (Note 3B)131,504 131,504 Prepaids 7,540 7,813 15,353 Total Assets $16,141,429 $4,284,933 $6,985,622 $14,153,782 $14,327,808 $55,893,574 LIABILITIES Accounts payable $4,441,030 $63,151 $468,015 $1,678,854 $600,813 $7,251,863 Deposits payable 179,190 95,136 274,326 Developer deposits payable 440,612 252,207 692,819 Due to other funds (Note 3B)131,504 131,504 Unearned revenue 172,395 172,395 Total Liabilities 5,060,832 63,151 468,015 1,678,854 1,252,055 8,522,907 DEFERRED INFLOWS OF RESOURCES Unavailable revenue: SB90 reimbursement receivable 1,083,473 1,083,473 Long-term receivable from Successor Agency 190,444 190,444 Total Deferred Inflows of Resources 1,273,917 1,273,917 Fund Balances (Note 8): Nonspendable 7,540 7,813 15,353 Restricted 4,221,782 6,517,607 12,474,928 11,073,985 34,288,302 Committed 1,884,153 1,884,153 Assigned 9,799,140 120,920 9,920,060 Unassigned (11,118) (11,118) Total Fund Balances 9,806,680 4,221,782 6,517,607 12,474,928 13,075,753 46,096,750 Total Liabilities, Deferred Inflows of Resources and Fund Balances $16,141,429 $4,284,933 $6,985,622 $14,153,782 $14,327,808 $55,893,574 Special Revenue Funds See accompanying notes to basic financial statements 30 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL GOVERNMENTAL FUNDS BALANCE SHEET - RECONCILIATION OF GOVERNMENTAL FUND BALANCES TO NET POSITION OF GOVERNMENTAL ACTIVITIES JUNE 30, 2020 Total fund balances reported on the governmental funds balance sheet $46,096,750 Amounts reported for Governmental Activities in the Statement of Net Position are different from those reported in the Governmental Funds because of the following: Capital assets used in Governmental Activities are not financial resources and, therefore, are not reported in the Governmental Funds. 260,321,608 Internal service funds are used by management to charge the cost of management of 24,777,797 Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the Governmental Funds. (57,000,671) Compensated absences (4,763,954) Unavailable revenue 1,273,917 Long-term receivables from San Rafael Sanitation District 4,937,049 Deferred outflows related to pension 40,529,874 Net pension liability (129,569,578) Deferred inflows related to pension (21,832,237) Deferred outflows related to OPEB 5,967,993 Deferred inflows related to OPEB (6,649,101) Net OPEB liability (25,963,111) Net Position of governmental activities $138,126,336 building, workers' compensation, employee benefits, insurance, and post-retirement healthcare benefits to individual funds. The assets and liabilities are included in Governmental Activities in the Statement of Net Position. See accompanying notes to financial statements 31 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2020 Traffic and Essential Other Total Housing Facilities Capital Governmental Governmental General Mitigation Gas Tax Projects Fund Funds Funds REVENUES Taxes and special assessments $69,242,196 $7,168,501 $76,410,697 Licenses and permits 3,047,144 3,047,144 Fines and forfeitures 349,563 825 350,388 Use of money and properties 371,231 $116,876 $106,175 $599,667 343,920 1,537,869 Intergovernmental 3,229,127 4,887,201 1,170,853 9,287,181 Charges for services 3,105,656 612,867 2,132,590 7,983,730 13,834,843 Other revenue 942,435 286,551 199,893 189,864 690,483 2,309,226 Total Revenues 80,287,352 1,016,294 7,325,859 789,531 17,358,312 106,777,348 EXPENDITURES Current: General government 16,119,613 569,913 16,689,526 Public safety 41,615,327 8,456,204 50,071,531 Public works and parks 12,349,130 99,232 4,273,277 732,184 17,453,823 Community development 5,276,887 5,276,887 Culture and recreation 2,689,531 8,489,879 11,179,410 Capital outlay 505,588 1,531,254 23,593,767 354,139 25,984,748 Debt service: Principal 618,316 618,316 Interest and fiscal charges 2,482,778 2,482,778 Total Expenditures 81,151,582 604,820 5,804,531 23,593,767 18,602,319 129,757,019 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (864,230) 411,474 1,521,328 (22,804,236) (1,244,007) (22,979,671) OTHER FINANCING SOURCES (USES) Note issued (Note 6)23,999 23,999 Transfers in (Note 3A)4,737,499 1,168,168 5,123,865 2,767,994 13,797,526 Transfers out (Note 3A)(6,623,159) (1,387,068) (900,000) (2,235,200) (1,439,789) (12,585,216) Total Other Financing Sources (Uses) (1,861,661) (1,387,068) 268,168 2,888,665 1,328,205 1,236,309 Net Change in Fund Balances (2,725,891) (975,594) 1,789,496 (19,915,571) 84,198 (21,743,362) FUND BALANCES, BEGINNING OF YEAR 12,532,571 5,197,376 4,728,111 32,390,499 12,991,555 67,840,112 FUND BALANCES, END OF YEAR $9,806,680 $4,221,782 $6,517,607 $12,474,928 $13,075,753 $46,096,750 See accompanying notes to financial statements Special Revenue Funds 32 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL Reconciliation of the NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS with the STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2020 NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS ($21,743,362) Amounts reported for Governmental Activities in the Statement of Activities are different because of the following: Capital Assets Transactions Governmental funds report capital outlays as expenditures. However, in the Statement of Activities the cost of those assets is capitalized and allocated over their estimated useful lives and reported as depreciation expense. Capital outlay and improvement expenditures are added back to fund balance 26,072,936 Loss on disposal of capital assets is deducted from fund balance (23,413) Depreciation expense is deducted from fund balance (6,504,027) (Depreciation expense is net of internal service fund depreciation of $1,309,673, which has already been allocated to serviced funds.) Long-Term Debt Proceeds and Payments Governmental funds record proceeds and payments as other financing sources and expenditures. However, in the Statement of Net Position, those costs are reversed as increases and decreases in long-term liabilities. Repayments on long-term debt principal 618,316 Amortized bond premium expense is added back to fund balance 507,944 Issuance of debt is deducted from fund balance (23,999) Accrual of Non-Current Items The amount below included in the Statement of Activities does not require the use of current financial Compensated absences (439,110) Unavailable revenue (200,602) Long-term receivable from San Rafael Sanitary District 323,086 Net Pension Liability Transactions Governmental funds record pension expense as it is paid. However, in the Statement of Activities those costs are reversed as deferred outflows/(inflows) and an increase/(decrease) in net pension liability. (2,317,973) Net OPEB Liability Transactions Governmental funds record OPEB expense as it is paid. However, in the Statement of Activities those costs are reversed as deferred outflows/(inflows) and an increase/(decrease) in net OPEB liability. 1,586,196 Allocation of Internal Service Fund Activities Internal service funds are used by management to charge the costs of certain activities to individual funds. The net revenue of the internal service fund is reported with governmental activities. 3,352,437 Change in Net Position of Governmental Activities $1,208,429 See accompanying notes to financial statements resources and therefore is not reported as revenue or expenditures in governmental funds (net change): 33 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT PROPRIETARY FUND FINANCIAL STATEMENTS Proprietary funds account for City operations financed and operated in a manner similar to a private business enterprise. The intent of the City is that the cost of providing goods and services be financed primarily through user charges, whether external or internal. The City reports its only enterprise fund as a major fund. PARKING SERVICES FUND Established to maintain parking garages, lots and spaces in the Downtown Parking District, and to pay for parking enforcement and meter collection. INTERNAL SERVICE FUNDS Established to account for department services and financing performed for other departments within the same governmental jurisdiction. Funding comes from charges assessed to the departments benefiting from the service. 35 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL PROPRIETARY FUNDS STATEMENT OF NET POSITION JUNE 30, 2020 Business-type Activities - Governmental Enterprise Fund Activities Parking Internal Services Service Funds ASSETS Current Assets: Cash and investments available for operations (Note 2)$2,675,950 $24,460,097 Receivable: Accounts, net 695,398 77,176 Grants 3,672 Total Current Assets 3,371,348 24,540,945 Noncurrent Assets: Capital assets (Note 5): Nondepreciable 8,620,853 555,908 Depreciable, net 7,110,590 12,635,069 Total Noncurrent Assets 15,731,443 13,190,977 Total Assets 19,102,791 37,731,922 DEFERRED OUTFLOWS OF RESOURCES Deferred outflows related to pension (Note 9)1,357,747 Deferred outflows related to OPEB (Note 11) 148,007 Total Deferred Outflows of Resources 1,505,754 LIABILITIES Current Liabilities: Accounts payable 60,621 533,848 Interest payable 40,322 Unearned revenue 19,116 Compensated absences, due in one year (Note 1L)14,841 Claims payable, due in one year (Note 13)3,338,607 Long-term debt, due in one year (Note 6)296,816 Total Current Liabilities 431,716 3,872,455 Noncurrent Liabilities: Compensated absences (Note 1L)103,886 Claims payable (Note 13)9,081,670 Long-term debt (Note 6)4,329,876 Net OPEB liability (Note 11)643,889 Net pension liability (Note 9)4,307,953 Total Noncurrent Liabilities 9,385,604 9,081,670 Total Liabilities 9,817,320 12,954,125 DEFERRED INFLOWS OF RESOURCES Deferred inflows related to pension (Note 9)725,882 Deferred inflows related to OPEB (Note 11)164,899 Total Deferred Inflows of Resources 890,781 NET POSITION (Note 8): Net investment in capital assets 11,104,751 13,190,977 Unrestricted (1,204,307) 11,586,820 Total Net Position $9,900,444 $24,777,797 See accompanying notes to financial statements 36 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL PROPRIETARY FUNDS STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION FOR THE YEAR ENDED JUNE 30, 2020 Business-type Activities - Governmental Enterprise Fund Activities Parking Internal Services Service Funds OPERATING REVENUES Charges for current services $2,515,793 $21,143,188 Other operating revenues 2,547,525 911,696 Intergovernmental 29,476 Total Operating Revenues 5,063,318 22,084,360 OPERATING EXPENSES Personnel 2,586,635 3,895,342 Insurance premiums and claims 9,423,296 Maintenance and repairs 100,723 286,579 Depreciation (Note 5) 235,885 1,309,673 General and administrative 1,385,075 3,381,025 Total Operating Expenses 4,308,318 18,295,915 Operating Income 755,000 3,788,445 NONOPERATING REVENUES (EXPENSES) Investment income 71,583 454,833 Interest expense (167,700) Miscellaneous income 194 Gain from sale of capital assets 58,459 Loss on retirement of capital assets (463,928) Total Nonoperating Revenues (Expenses) (96,117) 49,558 Income Before Contributions and Transfers 658,883 3,838,003 CAPITAL CONTRIBUTIONS 125,000 TRANSFERS IN (Note 3A)52,840 TRANSFERS OUT (Note 3A) (586,387) (678,763) Change in Net Position 72,496 3,337,080 NET POSITION, BEGINNING OF YEAR 9,827,948 21,440,717 NET POSITION, END OF YEAR $9,900,444 $24,777,797 *Reconciliation of the Change in Net Position with the Statement of Activities Change in Net Position $72,496 Some amounts reported for business-type activities in the Statement of Activities are different because the portion of the net income of certain internal service funds is reported with the business-type activities which those funds serviced.(15,357) Change in Net Position of Business-type Activities $57,139 See accompanying notes to financial statements 37 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL PROPRIETARY FUNDS STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2020 Business-type Activities - Governmental Enterprise Fund Activities Parking Internal Services Service Funds CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers/other funds $2,515,793 $21,233,692 Cash payments to suppliers for goods and services (1,547,567) (13,241,534) Cash payments to employees for salaries and benefits (2,426,694) (1,302,099) Other revenues 1,902,644 911,890 Cash Flows from Operating Activities 444,176 7,601,949 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Interfund receipts 52,840 Interfund payments (586,387)(678,763) Cash Flows from Noncapital Financing Activities (586,387)(625,923) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal payments on revenue bonds and note payable (291,815) Interest expenses and fiscal charges (169,113) Acquisition of capital assets (26,120)(982,738) Proceeds from sale of property 110,768 Cash Flows from Capital and Related Financing Activities (487,048)(871,970) CASH FLOWS FROM INVESTING ACTIVITIES Interest received 71,583 454,832 Cash Flows from Investing Activities 71,583 454,832 NET CHANGE IN CASH AND CASH EQUIVALENTS (557,676)6,558,888 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 3,233,626 17,901,209 CASH AND CASH EQUIVALENTS, END OF YEAR $2,675,950 $24,460,097 Reconciliation of operating income to net cash provided by operating activities: Operating income $755,000 $3,788,445 Adjustments to reconcile operating income to cash flows from operating activities: Depreciation 235,885 1,309,673 Miscellaneous income 194 Net change in assets and liabilities: Accounts receivable (663,997)61,028 Prepaids 3,400 OPEB system (3,804) Accounts payable (65,169)(256,120) Unearned revenue 19,116 Compensated absence obligations (19,734) Retirement system 183,479 Claims payable 2,698,729 Net Cash Provided by Operating Activities $444,176 $7,601,949 NON-CASH TRANSACTIONS: Capital contributions $125,000 Retirement of capital assets ($4,702)($516,237) Amortization of bond discount $725 See accompanying notes to basic financial statements 38 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT FIDUCIARY FUND FINANCIAL STATEMENTS Fiduciary funds are used to account for assets held by the City as an agent or custodian for other entities. The financial activities of such funds are excluded from the Government-wide financial statements and presented in fund statements that consist of a Statement of Net Position. SUCCESSOR AGENCY TO THE REDEVELOPMENT AGENCY – PRIVATE PURPOSE TRUST FUND Established to account for the activities of the Successor Agency to the San Rafael Redevelopment Agency. PT. SAN PEDRO ROAD ASSESSMENT DISTRICT AGENCY FUND Established to accumulate funds for payment of principal and interest for Pt. San Pedro Road Median Landscaping Assessment District bonds. 39 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT Successor Agency to the Pt. San Pedro Redevelopment Road Assessment Agency District Private-Purpose Agency Trust Fund Fund ASSETS Cash and investments (Note 2)$40,058 $238,892 Receivable: Taxes 3,451,205 690 Total Assets 3,491,263 $239,582 LIABILITIES Interest payable 21,643 $23,014 Other long-term obligations (Note 15D)190,444 Due to bondholders 216,568 Long-term debt (Note 15C): Due within one year 3,350,000 Due more than one year 6,793,892 Total Liabilities 10,355,979 $239,582 NET POSITION (DEFICIT) Held in trust for private purpose ($6,864,716) See accompanying notes to financial statements CITY OF SAN RAFAEL FIDUCIARY FUNDS STATEMENT OF FIDUCIARY NET POSITION JUNE 30, 2020 40 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FOR THE YEAR ENDED JUNE 30, 2020 Successor Agency to the Redevelopment Agency Private-Purpose Trust Fund ADDITIONS Property taxes $3,908,118 Use of money and property 1,714 Return of disallowed administrative costs 103,243 Total Additions 4,013,075 DEDUCTIONS General government 150,069 Interest expense 493,403 Total Deductions 643,472 Change in Net Position 3,369,603 NET POSITION HELD IN TRUST FUND FOR OTHER PURPOSES Beginning of year (10,234,319) End of year ($6,864,716) See accompanying notes to financial statements 41 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Description of the Financial Reporting Entity As required by generally accepted accounting principles, the financial statements present the City of San Rafael (the City) as the Primary Government, with its component units for which the City is considered financially accountable. The component units discussed below are included in the City's reporting entity because of the significance of their operational and financial relationships with the City. B. Description of Blended Component Units The accompanying basic financial statements include all funds and boards and commissions that are controlled by the City Council. The basic financial statements include the City’s blended component units, entities for which the City is considered to be financially accountable. A blended component unit, although a legally separate entity, is in substance, part of the City’s operations and so data from this entity is combined with the City. The City’s blended component units are described below. San Rafael Joint Powers Financing Authority – The San Rafael Joint Powers Financing Authority (Authority) was formed by the City of San Rafael and the former San Rafael Redevelopment Agency (Agency) pursuant to Articles 1 and 2 of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California for the purpose of assisting in the financing and refinancing of certain assessment district and redevelopment-related activities in the City. On March 18, 2013, the Agency was replaced by the California Municipal Finance Authority (CMFA) in order that the life of the Authority would extend beyond that of the Agency. The Authority is administered by a governing board whose members are the City Council of the City. Activities of the Authority related to the 2012 Authority Lease Revenue Refunding Bonds are reported in the Parking Services Enterprise Fund. Activities of the Authority related to the 2018 Authority Lease Revenue Bonds are reported in the City’s General Fund and the Essential Facilities Capital Projects Fund. Separate financial statements are not prepared for the Authority. C. Description of Discretely Presented Component Unit San Rafael Sanitation District – The San Rafael Sanitation District (District) was formed in 1947 under Section 4700 of the California Health and Safety Code to provide wastewater transmission over the southern two-thirds of the City and adjacent unincorporated areas. The District is governed by a three-member Board of Directors who are appointed to four-year terms. The City Council of the City appoints two out of the three board members and has the ability to remove the two board members at will. The City contracts with the District to maintain the collection systems in the City and surrounding unincorporated areas. These employees are paid through the City’s payroll department and participate in the City’s cost-sharing multiple-employer defined benefit pension plan administered by the Marin County Employees’ Retirement Association. The employees also participate in the City’s healthcare benefits plan which includes a provision for postemployment benefits. These costs are the obligation of the District and not the City. As discussed in Note 4F, a receivable from the District has been established. 43 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The District’s activities are reported as a discretely presented component unit in a separate column in the basic financial statements which includes the District’s assets, liabilities, revenues, expenses, results of operations and cash flows. The District’s fiscal year ends on June 30 and its separately issued component unit financial statements can be obtained at the San Rafael Sanitation District, 111 Morphew Street, San Rafael, California 94901. D.Basis of Presentation Government-wide Statements – The Statement of Net Position and the Statement of Activities display information about the primary government (the City) and its component units. These statements include the financial activities of the overall City government, except for fiduciary activities. Interfund transfers and amounts owed between funds within the primary government have been eliminated from the statements. Amounts representing interfund services and uses remain in the statements. These statements distinguish between the governmental and business- type activities of the City. Governmental activities generally are financed through taxes, intergovernmental revenues, and other nonexchange transactions. Business-type activities are financed in whole or in part by fees charged to external parties. The Statement of Activities presents a comparison between direct expenses and program revenues for each segment of the business-type activities of the City and for each function of the City’s governmental activities. Direct expenses are those that are specifically associated with a program or function. Program revenues include (a) charges paid by the recipients of goods or services offered by the programs, (b) grants and contributions that are restricted to meeting the operational needs of a particular program and (c) fees, grants and contributions that are restricted to financing the acquisition or construction of capital assets. Revenues that are not classified as program revenues, including all taxes, are presented as general revenues. Fund Financial Statements – The fund financial statements provide information about the City’s funds, including fiduciary funds and blended component units. Separate statements for each fund category – governmental, proprietary, and fiduciary – are presented. The emphasis of fund financial statements is on major individual governmental and enterprise funds, each of which is displayed in a separate column. All remaining governmental and enterprise funds are aggregated and reported as non-major funds. Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Nonoperating revenues, such as subsidies and investment earnings, result from nonexchange transactions or ancillary activities. E.Major Funds and Other Reported Funds Major funds are defined as funds that have either assets and deferred outflows of resources, liabilities and deferred inflows of resources, revenues or expenditures/expenses equal to ten percent of their fund-type total and five percent of the grand total. The General Fund is always a major fund. The City may also select other funds it believes should be presented as major funds. 44 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The City reported the following major governmental funds in the accompanying financial statements: General Fund – Established to account for all financial resources necessary to carry out basic governmental activities of the City which are not accounted for in another fund. Traffic and Housing Mitigation Special Revenue Fund – Established to maintain long-term developer contributions for major housing and street improvement projects. Gas Tax Special Revenue Fund – Established to receive and expend the City’s allocation of State gasoline taxes. Essential Facilities Capital Projects Fund – Established to account for major capital improvements to public safety facilities. The City reported its only enterprise fund as a major fund in the accompanying financial statements. The enterprise fund is: Parking Services Fund – Established to maintain parking garages, lots and spaces in the Downtown Parking District, and to pay for parking enforcement, meter collection, and downtown enforcement services. The City also reports the following fund types: Internal Service Funds – These funds account for: building maintenance; vehicle, equipment computer, radio, and telephone replacement; employee benefits; liability insurance; workers’ compensation; dental insurance; employee retirement; retiree medical (OPEB); and sewer maintenance. Fiduciary Funds – These funds include: Successor Agency to the Redevelopment Agency Private- Purpose Trust Fund – which accounts for the accumulation of resources held by the Successor Agency to the Redevelopment Agency to be used for payments at appropriate amounts and times in the future; and Pt. San Pedro Road Assessment District Agency Fund – which accumulates funds for the payment of principal and interest for Pt. San Pedro Road Median Landscaping District bonds. The financial activities of these funds are excluded from the government-wide financial statements, but are presented in the separate Fiduciary Fund financial statements. F. Basis of Accounting The government-wide, proprietary, fiduciary and discretely presented component unit financial statements are reported using the economic resources measurement focus and the full accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the time liabilities are incurred, regardless of when the related cash flows take place. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. 45 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Governmental funds are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The City considers all revenues reported in the governmental funds to be available if the revenues are collected within sixty days after year-end with the exception of sales and use tax revenues which are reported as available if collected within ninety days of year- end. Expenditures are recorded when the related fund liability is incurred, except for principal and interest on long-term debt, claims and judgments, and compensated absences, which are recognized as expenditures to the extent they have matured. General capital asset acquisitions are reported as expenditures in governmental funds. Proceeds from long-term debt and acquisitions under capital leases are reported as other financing sources. Those revenues susceptible to accrual are property and sales taxes, certain intergovernmental revenues, interest revenue, charges for services, fines and forfeitures. Other receipts and taxes are recognized as revenue when the cash is received. Non-exchange transactions, in which the City gives or receives value without directly receiving or giving equal value in exchange include taxes, grants, entitlements, and donations. On the accrual basis, revenue from taxes is recognized in the fiscal year for which the taxes are levied or assessed. Revenue from grants, entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been satisfied. Under the terms of grant agreements, the City may fund certain programs with a combination of cost-reimbursement grants, categorical block grants, and general revenue. Thus, both restricted and unrestricted net position may be made available to finance program expenditures. The City’s policy is to first apply restricted grant resources to such programs, followed by general revenues if necessary. The City considers restricted shared state revenues such as gasoline taxes and public safety sales taxes, restricted locally imposed transportation sales taxes, fines, forfeitures, licenses, permits, charges for services, and program grants as program revenues. Certain indirect costs are included in program expenses reported for individual functions and activities. G. Deferred Outflows/Inflows of Resources In addition to assets, the statement of financial position or balance sheet will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net position or fund balance that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. 46 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) In addition to liabilities, the statement of financial position or balance sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net position or fund balance that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. Unavailable revenue, a type of deferred inflow of resources, is reported in the governmental funds balance sheet. The governmental funds report unavailable revenues from three sources: taxes receivable, interest on interfund advances and loans receivable. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available. H. Budgets, Budgetary Accounting, and Encumbrances The City adopts an annual budget which is effective July 1 for the ensuing fiscal year. The budget reflects estimated revenues and expenditures, except for the capital projects funds and the Peacock Gap Assessment District and Mariposa Assessment District Debt Service Funds. Appropriations and spending authorizations for projects in the capital projects funds and some special revenue funds are approved by the City Council on a multi-year basis. From the effective date of the budget, which is adopted at the department level, the amounts stated therein as proposed expenditures become appropriations to the various City departments. The City Council may amend the budget by resolution during the fiscal year in order to respond to emerging needs, changes in resources, or shifting priorities. Expenditures may not exceed appropriations at the fund level, which is the legal level of control. The City Manager is authorized to transfer budgeted amounts between accounts, departments or funds; the Council must approve any increase in the City’s operating expenditures, appropriations for capital projects, and transfers between major funds and reportable fund groups. Budgets are adopted on a basis consistent with Generally Accepted Accounting Principles for the General Fund, Special Revenue Funds and the 1997 Financing Authority Revenue Bonds Debt Service Fund. Encumbrance accounting, under which purchase orders for expenditures are recorded in order to reserve that portion of the applicable appropriation, is employed as an extension of the budgetary process. All unencumbered appropriations lapse at year end. I. Cash Equivalents For purposes of the statement of cash flows, the City considers all highly liquid investments (including all restricted assets) with maturities of three months or less when purchased to be cash equivalents. The City maintains a cash and investment pool that is available for use by all funds. As the proprietary funds' share of this pool is readily available when needed, such share is also considered to be cash equivalent. J. Prepaids Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both the government-wide and fund financial statements. The cost of prepaid items is recorded as expenditures/expenses when consumed rather than when purchased. 47 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) K. Capital Assets City Contributed capital assets are valued at their estimated acquisition value on the date contributed. Donated capital assets, donated works of art and similar items, and capital assets received in a service concession arrangement are recorded at acquisition value. All other capital assets are valued at historical cost or estimated historical cost if actual historical cost is not available. Major outlays for capital assets and improvements are capitalized as projects are constructed. Interest incurred during the construction phase is reflected in the capitalized value of the asset constructed, net of interest earned on the invested proceeds over the same period. City policy has set the capitalization thresholds for reporting capital assets at the following: General capital assets ranging from $5,000 to $50,000 Infrastructure capital assets ranging from $25,000 to $250,000 Depreciation is provided using the straight-line method which means the cost of the asset is divided by its expected useful life in years and the result is charged to expense each year until the asset is fully depreciated. The purpose of depreciation is to spread the cost of capital assets equitably among all users over the life of these assets. The amount charged to depreciation expense each year represents that year’s pro rata share of the cost of capital assets. The City has assigned the useful lives listed below to capital assets: Buildings, improvements, and structures 20 – 50 years Machinery and equipment 4 – 20 years Infrastructure 15 – 50 years District Collection systems and facilities purchased or constructed are stated at cost. Assets contributed are recorded at the estimated acquisition value at the date received. Interest is capitalized for assets constructed when applicable. The costs of normal repairs and maintenance that do not add to the value of an asset or materially extend asset lives are not capitalized. Improvements are capitalized and depreciated over the remaining useful lives of the related capital assets, as applicable. Applicable capital assets must be capitalized for amounts $1,000 or above and may be capitalized for amounts from $500 to $1,000 if determined to be sensitive. Depreciation is provided by the straight-line method over the estimated useful lives of capital assets as follows: Subsurface lines 50 – 80 years Sewage collection facilities 5 – 50 years General plant and administrative facilities 3 – 15 years 48 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) L. Compensated Absences Compensated absences are accrued as earned. Upon termination, employees are paid for all unused vacation at their current hourly rates. Unused sick leave may be compensable up to 600 hours, depending upon the provisions of the MOUs, which vary by bargaining unit. The long-term portion of the liability for compensated absences for governmental fund type operations is recorded as compensated absences in the government-wide financial statements. Compensated absences are liquidated by the fund that has recorded the liability. Proprietary fund liabilities are recorded within their respective funds. The long-term portion of governmental activities compensated absences is liquidated primarily by the General Fund. The changes of the compensated absences were as follows: Governmental Business-Type Activities Activities Total Beginning Balance $4,324,844 $138,461 $4,463,305 Additions 3,147,672 74,942 3,222,614 Payments (2,708,562) (94,676) (2,803,238) Ending Balance $4,763,954 $118,727 $4,882,681 Current Portion $595,494 $14,841 $610,335 M. Property Tax Levy, Collection and Maximum Rates – City State of California Constitution Article XIII A provides that the combined maximum property tax rate on any given property may not exceed 1% of its assessed value unless an additional amount for general obligation debt has been approved by voters. Assessed value is calculated at 100% of market value as defined by Article XIII A and may be adjusted by no more than 2% per year unless the property is sold, transferred, or substantially improved. The State Legislature has determined the method of distribution of receipts from a 1% tax levy among the counties, cities, school districts and other districts. Marin County assesses properties, bills for and collects property taxes on the schedule that follows: Secured Unsecured Valuation/lien dates January 1 January 1 Levy dates July 1 July 1 Due dates (delinquent as of) 50% on November 1 (December 10) July 1 (August 31) 50% on February 1 (April 10) 49 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) For assessment and collection purposes, property is classified as either “secured” or “unsecured” and is listed accordingly on separate parts of the assessment roll. The “secured roll” is that part of the assessment roll containing State-assessed property and real property having a tax lien that is sufficient, in the opinion of the Country Assessor, to secure payment of the taxes. Unsecured property comprises all taxable property not attached to land, such as personal property or business property. Every tax levied by a county that becomes a lien on secured property has priority over all present and future private liens arising pursuant to State law on the secured property, regardless of the time of the creation of the other liens. A tax levied on unsecured property does not become a lien against the taxed unsecured property, but may become a lien on other property owned by the taxpayer. Property taxes are levied and recorded as revenue when received in the fiscal year of levy because of the adoption of the “alternate method of property tax distribution,” known as the Teeter Plan, by the City and the County of Marin. The Teeter Plan authorized the auditor-controller of the County of Marin to allocate 100% of the secured property taxes billed, but not yet paid. The County of Marin remits tax monies to the City in three installments, as follows: 55% remitted on December 15 40% remitted on April 15 5% remitted on June 15 N. Sewer Charges – District Sewer charges are billed and collected on behalf of the District by the County of Marin as a special assessment on annual property tax billings. Property taxes are levied on January 1 and are due in two equal installments on November 1 and February 1 and become delinquent December 10 and April 10, for the first and second installments, respectively. In accordance with the Teeter Plan, the County remits to the District all charges which are assessed and the county retains responsibility for collecting past due amounts. The Teeter Plan provides that the County advance the District its share of the annual gross levy of secured property taxes and special assessments. In consideration, the District gives the County of Marin its rights to penalties and interest on delinquent secured property tax receivables and actual proceeds collected. O. Connection Fees – District Connection fees represent a one-time contribution of resources to the District imposed on contractors and developers for the purpose of financing capital improvements. Connection fees are recognized after non-operating revenues (expenses) in the statement of revenues, expenses and changes in net position. The District utilizes connection fees received on a first-in-first-out basis to finance current year capital projects. Accordingly, if there is a balance of connection fees available at year-end, it is classified as restricted net position. 50 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) P. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The fair value hierarchy categorizes the inputs to valuation techniques used to measure fair value into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are inputs – other than quoted prices included within level 1 – that are observable for an asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for an asset or liability. If the fair value of an asset or liability is measured using inputs from more than one level of the fair value hierarchy, the measurement is considered to be based on the lowest priority level input that is significant to the entire measurement. Q. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent asset and liabilities at the dates of the financial statements and the reported amounts of revenues and expenditures/expenses during the reporting periods. Actual results could differ from those estimates. R.New Fund In fiscal year 2019-2020, the City established a Special Revenue Fund, Measure C – Wildfire Prevention, for the purpose of reporting tax revenue and expenditures related to coordinated wildfire prevention activities authorized by Measure C, a parcel tax measure approved on March 3, 2020 by a two-thirds supermajority vote. This is a ten-year parcel tax levying up to 10 cents per building square foot tax and $75 per multifamily unit. NOTE 2 - CASH AND INVESTMENTS A. Policies The City maintains an investment policy that emphasizes safety, liquidity and reasonable market yield. This policy is reviewed and approved by the City Council annually. The City invests in individual investments and in investment pools. Individual investments are evidenced by specific identifiable securities instruments, or by an electronic entry registering the owner in the records of the institution issuing the security, called the book entry system. In order to increase security, the City employs the trust department of a bank as the custodian of certain City managed investments, regardless of their form. 51 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 2 - CASH AND INVESTMENTS (Continued) California Law requires banks and savings and loan institutions to pledge government securities with a market value of 110% of the City’s cash on deposit, or first trust deed mortgage notes with a market value of 150% of the deposit, as collateral for these deposits. Under California Law this collateral is held in a separate investment pool by another institution in the City’s name and places the City ahead of general creditors of the institution. The City’s investments are carried at fair value, as required by generally accepted accounting principles. The City adjusts the carrying value of its investments to reflect their fair value at each fiscal year end, and it includes the effects of these adjustments in income for that fiscal year. B. Classification Cash and investments as of June 30, 2020, are classified in the financial statements as shown below, based on whether or not their use is restricted under the terms of City debt instruments or agency agreements. Statement of Net Position: City of San Rafael: Cash and investments available for operations $60,117,995 Restricted cash and investments 12,187,976 Total Primary Government Cash and Investments 72,305,971 San Rafael Sanitation District (Component Unit): Cash and investments available for operations 38,895,857 Total San Rafael Sanitation District Cash and Investments 38,895,857 Statement of Fiduciary Net Position (separate statement): Successor Agency to the Redevelopment Agency: Cash available for operations 40,058 Total Successor Agency Cash 40,058 Pt. San Pedro Road Assessment District Agency Fund: Restricted cash 238,892 Total Fiduciary Cash 278,950 Total Cash and Investments $111,480,778 The City does not normally allocate investments by fund. Each proprietary fund’s portion of Cash and Investments Available for Operations is in substance a demand deposit available to finance operations, and is considered a cash equivalent in preparing the statement of cash flows. 52 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 2 - CASH AND INVESTMENTS (Continued) C. Investments Authorized by the California Government Code and the City’s Investment Policy The City’s investment policy and the California Government Code allow the City to invest in the following securities provided the credit ratings of the issuers are acceptable to the City and approved percentages and maturities are not exceeded. The table below also identifies certain provisions of the California Government Code, or the City’s Investment Policy where it is more restrictive: Minimum Maximum Maximum Maximum Credit Percentage of Investment in Authorized Investment Type Maturity Quality (A) Portfolio (A)One Issuer U.S. Government Obligation 5 years N/A No limit No limit U.S. Agency Securities and Instruments 5 years N/A No limit No limit Repurchase Agreements 1 year A-1 No limit No limit Prime Commercial Paper 270 days A-1 25% 10% of total outstanding commercial paper Bankers’ Acceptances 180 days A-1 40%$2,000,000 Medium-Term Corporate Notes 5 years A 30%5% of portfolio Negotiable Certificates of Deposit 5 years A-1 30%5% of portfolio Non-negotiable Certificates of Deposit 5 years N/A 30%5% of portfolio Local Agency Investment Fund N/A N/A N/A $75m Per Account Money Market Funds N/A AAA 10%N/A Mortgage and Asset-Backed Obligations 5 years AA 20%N/A Supranational Securities 5 years AA 15%N/A Limited Obligation Improvement Bonds Related to Special Assessment Districts and Special Tax Districts 30 years N/A N/A N/A (A) At time of purchase The San Rafael Sanitation District maintains all of its cash in the County of Marin pooled investment fund for the purpose of increasing interest earnings through pooled investment activities. The County Pool includes both voluntary and involuntary participation from external entities. The District is a voluntary participant. The State of California statutes require certain special districts and other governmental entities to maintain their cash surplus with the County Treasurer. The District has approved by resolution, the investment policy of the County of Marin which complies with the California Government Code. 53 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 2 - CASH AND INVESTMENTS (Continued) D. Investments Authorized by Debt Agreements The City must maintain required amounts of cash and investments with trustees or fiscal agents under the terms of certain debt issues. These funds are unexpended bond proceeds or are pledged as reserves to be used if there are insufficient resources to meet debt repayment obligations. The California Government Code requires these funds to be invested in accordance with City ordinance bond indentures or State statute. The table below identifies the investment types that are authorized for investments held by fiscal agents. The table also identifies certain provisions of these debt agreements: Maximum Maturity U.S. Treasury Obligations 5 years to no maximum N/A No Limit U.S. Agency Securities 3 - 5 years N/A No Limit U.S. Agency Instruments 5 years N/A No Limit Repurchase Agreements 1 year A-1 No Limit Bankers’ Acceptances 360 days Highest Category Rating No Limit Money Market Mutual Funds N/A Highest Category Rating No Limit Prime Commercial Paper 270 days Highest Category Rating No Limit N/A Highest Category Rating No Limit Municipal Obligations N/A Two Highest Category Ratings No Limit Medium-Term Corporate Notes 5 Years A No Limit Non-Negotiable Certificates of Deposit 180 Days N/A No Limit Negotiable Certificates of Deposit 5 Years N/A No Limit Local Agency Investment Fund N/A N/A No Limit California Asset Management Program N/A N/A No Limit Deposit Accounts N/A A No Limit State or Local Bonds N/A A No Limit Defeasance Securities N/A N/A No Limit (A) At time of purchase. (B) Guaranteed Investment Contracts must be fully collateralized with U.S. Treasury Obligations or U.S. Agency Obligations. Maximum Percentage of Portfolio Guaranteed Investment Contracts (fully collateralized) (B) Authorized Investment Type Minimum Credit Quality (A) 54 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 2 - CASH AND INVESTMENTS (Continued) E. Fair Value Hierarchy The following is a summary of the fair value hierarchy of the fair value of investments of the City as of June 30, 2020: (a)(b)(c) Level 1 Level 2 Level 3 Total City: Money Market Funds $2,386,866 $2,386,866 U.S. Treasury Notes $2,476,875 2,476,875 U.S. Agency Securities and Instruments 12,218,670 12,218,670 Medium-Term Corporate Notes 6,749,717 6,749,717 Investment in Pt. San Pedro Bonds $1,141,739 (d)1,141,739 $2,476,875 $21,355,253 $1,141,739 24,973,867 Investments Exempt from Fair Value Hierarchy: California Asset Management Program 10,904,216 Local Agency Investment Fund 33,279,296 Marin County Investment Pool 80,464 Total Investments 69,237,843 Cash in banks and on hand 3,068,128 Total City Cash and Investments 72,305,971 Fiduciary: Cash in banks and on hand 278,950 Total Fiduciary Cash 278,950 Total City and Fiduciary Cash 72,584,921 San Rafael Sanitary District: Marin County Investment Pool 38,895,857 38,895,857 Total Cash and Investments $111,480,778 Source: The above fair value classifications into the different Input Levels are provided by US Bank Institutional Trust & Custody. (a)Level 1 inputs are quoted prices in active market for identical assets. These are quoted prices in active markets for identical assets at the measurement date. An active market for the asset is a market in which transactions for the asset occur with sufficient frequency and volume to provide pricing information on an ongoing basis. (b)Level 2 inputs are significant other observable inputs. These inputs include: a) Quoted prices for similar assets in active markets; b) Quoted prices for identical or similar assets in markets that are not active; and c) Inputs other than quoted prices that are observable for an asset. (c)Level 3 inputs are significant unobservable inputs. These inputs shall be used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset at the measurement date. (d)This pertains to the City-owned bonds of its investments in Pt. San Pedro that has no trading market and is thus listed under Level 3. This bond is valued using discounted cash flow techniques. District's Total Cash and Investments 55 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 2 - CASH AND INVESTMENTS (Continued) F. Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Normally, the longer the maturity of an investment, the greater the sensitivity of its fair value to changes in market interest rates. The City also manages its interest rate risk by holding most investments to maturity, thus reversing unrealized market gains and losses. Information about the sensitivity of the fair values of the City’s investments (including investments held by bond trustee) to market interest rate fluctuations is provided by the following table that shows the distribution of the City’s investments by maturity or earliest call date: 12 Months More than Type of Investment or Less 12 Months Total City: Money Market Funds $2,386,866 $2,386,866 California Asset Management Program 10,904,216 10,904,216 Local Agency Investment Fund 33,279,296 33,279,296 Marin County Investment Pool 80,464 80,464 U.S. Treasury Notes 1,001,200 $1,475,675 2,476,875 U.S. Agency Securities and Instruments 3,545,460 8,673,210 12,218,670 Medium-Term Corporate Notes 4,117,787 2,631,930 6,749,717 Investment in Pt. San Pedro Bonds 1,141,739 1,141,739 Total Investments $55,315,289 $13,922,554 69,237,843 Cash in banks and on hand 3,068,128 Total City Cash and Investments 72,305,971 Fiduciary: Cash in banks and on hand 278,950 Total Fiduciary Cash 278,950 Total City and Fiduciary Cash 72,584,921 San Rafael Sanitary District: Marin County Investment Pool 38,895,857 Total District's Cash and Investments 38,895,857 Total Cash and Investments $111,480,778 56 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 2 - CASH AND INVESTMENTS (Continued) The City is a participant in the Local Agency Investment Fund (LAIF) that is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The City reports its investment in LAIF at the fair value amount provided by LAIF, which is the same as the value of the pool share. The balance is available for withdrawal on demand, and is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. Each regular LAIF account is permitted to have up to 15 transactions per month, with a minimum transaction amount of $5,000, a maximum transaction amount of $75 million and at least 24 hours advance notice for withdrawals of $10 million or more. Bond proceeds accounts are subject to a one‐time deposit with no cap and are set up with a monthly draw down schedule. Included in LAIF’s investment portfolio are collateralized mortgage obligations, mortgage-backed securities, other asset-backed securities, loans to certain state funds, and floating rate securities issued by federal agencies, government-sponsored enterprises, United States Treasury Notes and Bills, and corporations. At June 30, 2020, these investments matured in an average of 191 days. Money Market Mutual Funds are available for withdrawal on demand. The investment portfolio of the Money Market Mutual Fund had an average maturity of 46 to 48 days at June 30, 2020. The City invests the proceeds of the 2018 Authority Lease Revenue Bonds with the California Asset Management Program (CAMP). CAMP is a California Joint Powers Authority established in 1989 to provide California public agencies with professional investment services. The CAMP Pool is a permitted investment for all local agencies under California Government Code Section 53601(p). CAMP is directed by a Board of Trustees, which is made up of experienced local government finance directors and treasurers. CAMP investments are limited to investments permitted by subdivisions (a) to (n), inclusive, of Section 53601 of the California Government Code. The City reports its investments in CAMP at the fair value amounts provided by CAMP, which is the same as the value of the pool share in accordance with GASB 79 requirements. At June 30, 2020, the fair value was approximate to the City’s cost. At June 30, these investments had an average maturity of 53 days. The City, as a CAMP shareholder, may withdraw all or any portion of the funds in its CAMP account at any time by redeeming shares. The CAMP Declaration of Trust permits the CAMP trustee to suspend the right of withdrawal from CAMP or to postpone the date of payment of redemption proceeds if the New York Stock Exchange is closed other than for customary weekend and holiday closings, if trading on the New York Stock Exchange is restricted, or if, in the opinion of the CAMP trustees, an emergency exists such that disposal of the CAMP pool securities or determination of its net asset value is not reasonably practicable. If the right of withdrawal is suspended, the City may either withdraw its request for that withdrawal or receive payment based on the net asset value of the CAMP pool next determined after termination of the suspension of the right of withdrawal. 57 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 2 - CASH AND INVESTMENTS (Continued) The County’s investment pool is not registered with the Securities and Exchange Commission as an investment company. The pool has a credit rating of “AAA/V1.” Investments made by the Treasurer are regulated by the California Government Code and by the County’s investment policy. The objectives of the policy are in order of priority, safety, liquidity, yield, and public trust. The County has established a treasury oversight committee to monitor and review the management of public funds maintained in the investment pool in accordance with Article 6 Section 27131 of the California Government Code. The oversight committee and the Board of Supervisors review and approve the investment policy annually. The County Treasurer prepares and submits a comprehensive investment report to the members of the oversight committee and the investment pool participants every month. The report covers the types of investments in the pool, maturity dates, par value, actual costs and fair value. G. Credit Risk Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the actual rating as of June 30, 2020, for each of the City’s or District’s investment types as provided by Standard and Poor’s or Moody’s investment rating systems, except as noted: Percentage Amount of Investments Invested Investments NRSRO Rating City: Money Market Funds $2,386,866 3% Aaa/AAA California Asset Management Program 10,904,216 16%AAAm Marin County Investment Pool 80,464 < 1%Aaa/AAA U.S. Treasury Notes 2,476,875 4%AA+ U.S. Agency Securities and Instruments 12,218,670 18%AA+ Medium-Term Corporate Notes 6,749,717 10% AA+, AA, AA-, A+, A, A- Local Agency Investment Fund 33,279,296 48%Not Rated Investment in Pt. San Pedro Bonds 1,141,739 2%Not Rated Total City Investments 69,237,843 San Rafael Sanitary District: Marin County Investment Pool 38,895,857 AAA/V1 Total Investments $108,133,700 H. Concentration Risk Included in the table at Note G above are the following significant investments in any one issuer other than U. S. Treasury securities, mutual funds, and external investment pools. Reporting Unit Issuer Investment Type Amount Entity-wide Federal National Mortgage Association U.S. Agency Securities $5,266,939 Entity-wide Federal Home Loan Bank U.S. Agency Securities 3,738,250 58 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 3 - INTER-FUND TRANSACTIONS A. Transfers Resources may be transferred from one City fund to another. Transfers routinely fund capital projects or capital outlays, lease or debt service payments, and operating expenses. Transfers between funds during the fiscal year ended June 30, 2020, were as follows: From Fund To Fund Amount General Fund Essential Facilities Capital Projects Fund $4,174,065 (A) Non-Major Governmental Funds 2,449,094 (B) Traffic and Housing Mitigation Special Revenue Fund Gas Tax Special Revenue Fund 1,168,168 (C) Non-Major Governmental Funds 218,900 (B) Gas Tax Special Revenue Fund General Fund 900,000 (C) Essential Facilities Capital Projects Fund General Fund 2,235,200 (D) Parking Services Enterprise Fund General Fund 486,387 (D) Non-Major Governmental Funds 100,000 (B) Employee Retirement Internal Service Fund General Fund 678,763 (D) Non-Major Governmental Funds General Fund 437,149 (C) Essential Facilities Capital Projects Fund 949,800 (A) Building Maintenance Internal Service Fund 52,840 (B) $13,850,366 (A) Transfers for Public Safety Center Projects. (B) Transfers for administrative costs, grant matching, recreation, and other program support. (C) Transfers for street maintenance support and administrative costs. (D) Transfers for debt service. B. Current Interfund Balances Current interfund balances arise in the normal course of business and represent short-term borrowings occurring as a result of expenditures which are paid prior to the receipt of revenues. These balances are expected to be repaid shortly after the end of the fiscal year when revenues are received. At June 30, 2020, the General Fund is due $131,504 from Non-Major Governmental Funds for negative cash positions. 59 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 4 – LOANS RECEIVABLE A. Summary of Loans Receivable The City has identified the portion of fund balance represented by these loans as nonspendable or restricted as discussed in Note 8. At June 30, 2020, these loans totaled: Employee Loans $2,873 Centertown Associates 262,876 One "H" Street Associates 37,145 Total $302,894 B. Employee Loans The City administers a computer loan program that supports the use of technology by employees. Employees are permitted to borrow up to $1,500 for the purchase of computer hardware and software. The loans are interest-free, have maximum terms of one year, and are repaid through automatic payroll deductions. As of June 30, 2020, the balance of the employee loans receivable was $2,873. C. Centertown Associates Loan On August 20, 1990, the former Redevelopment Agency loaned Centertown Associates, Ltd, $303,000 at 3% interest due semiannually. The loan was made for the construction of a 60-unit affordable Centertown apartment complex and is fully secured by a deed of trust. The final payment is due on July 31, 2065. With the dissolution of the Redevelopment Agency effective February 1, 2012, the assets of the Agency’s Low and Moderate Income Housing Fund, including the Centertown Associates loan, were assumed by the City’s Low and Moderate Income Housing Special Revenue Fund. As of June 30, 2020, the balance of the loan including principal and accrued interest was $262,876. D. One “H” Street Associates Loan On January 18, 1994, the City loaned One “H” Street Associates $100,000 at zero percent interest with annual payments of $2,857 and the final payment is due January 18, 2034. As of June 30, 2020, the balance of this loan was $37,145. E. Fire Chief Loan On September 17, 2007, the City Council approved a Home Loan Agreement to provide the Fire Chief with housing assistance. Under the Agreement, which was executed on October 3, 2007, the City loaned the Fire Chief $600,000 to assist in the purchase of his primary residence. The loan is secured by a recorded deed of trust. The initial interest rate to be charged was 5.25% through August 31, 2008. On September 1, 2008, and on each September 1 following, until the loan is paid off, the interest rate of the loan will be adjusted based upon the then reported quarter- to-date Local Agency Investment Fund rate on the City’s investment portfolio. The loan was repaid during the fiscal year ended June 30, 2020. 60 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 4 - LOANS RECEIVABLE (Continued) F. Other Receivables – Long-Term Receivable from San Rafael Sanitation District The City provides staffing to San Rafael Sanitation District (District) under a contractual arrangement originated in 1987 that requires the District to pay all related employee costs incurred by the City on its behalf. Accordingly, the cost of providing pension and post- employment health benefits incurred by the City for the District staff but not yet funded are reflected by the District as an obligation, and by the City as a noncurrent receivable. The obligation as of June 30, 2020 is $4,937,049, and is composed of the following: Defined benefit pension liability allocation $3,721,988 Other post-employment benefit liability allocation 1,215,061 Total long-term receivable from San Rafael Sanitation District $4,937,049 NOTE 5 - CAPITAL ASSETS Changes in capital assets during the fiscal year consisted of: Balance Additions/Balance June 30, 2019 Adjustments Retirements Transfers June 30, 2020 Governmental Activities Capital assets not being depreciated: Land $83,662,359 $83,662,359 Construction in progress 69,822,414 $26,331,046 ($453,747) ($32,738,487) 62,961,226 Total capital assets not being depreciated 153,484,773 26,331,046 (453,747) (32,738,487) 146,623,585 Capital assets being depreciated: Land improvements 9,762,567 9,762,567 Buildings and structures 44,247,122 29,266,611 73,513,733 Machinery and equipment 20,948,495 1,371,414 (1,477,514)20,842,395 Infrastructure 203,818,320 3,471,876 207,290,196 Total capital assets being depreciated 278,776,504 1,371,414 (1,477,514) 32,738,487 311,408,891 Less accumulated depreciation for: Land improvements (6,607,750) (265,055)(6,872,805) Buildings and structures (20,847,593) (1,328,763)(22,176,356) Machinery and equipment (14,014,768) (1,221,265) 1,391,611 (13,844,422) Infrastructure (136,627,691) (4,998,617)(141,626,308) Total accumulated depreciation (178,097,802) (7,813,700) 1,391,611 (184,519,891) Total net capital assets being depreciated 100,678,702 (6,442,286) (85,903) 32,738,487 126,889,000 Total governmental activity capital assets $254,163,475 $19,888,760 ($539,650)$273,512,585 61 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 5 - CAPITAL ASSETS (Continued) Balance Balance June 30, 2019 Additions Retirements June 30, 2020 Business-type Activities Capital assets not being depreciated: Land $8,620,853 $8,620,853 Total capital assets not being depreciated 8,620,853 8,620,853 Capital assets being depreciated: Buildings and structures 10,713,814 10,713,814 Machinery and equipment 1,042,697 $30,822 ($64,389) 1,009,130 Total capital assets being depreciated 11,756,511 30,822 (64,389) 11,722,944 Less accumulated depreciation for: Buildings and structures (3,510,684) (205,363)(3,716,047) Machinery and equipment (925,472) (30,522)59,687 (896,307) Total accumulated depreciation (4,436,156) (235,885)59,687 (4,612,354) Total net capital assets being depreciated 7,320,355 (205,063)(4,702) 7,110,590 Total business-type activity capital assets $15,941,208 ($205,063) ($4,702) $15,731,443 Balance Transfers &Balance June 30, 2019 Additions Retirements Adjustments June 30, 2020 San Rafael Sanitation District Capital assets not being depreciated: Land and easements $115,329 $115,329 Construction in progress 1,534,375 $2,597,207 ($2,753,940)1,377,642 Total capital assets not being depreciated 1,649,704 2,597,207 (2,753,940)1,492,971 Capital assets being depreciated: Subsurface lines 38,750,212 180,840 2,522,078 41,453,130 Sewage collection facilities 44,700,569 80,484 231,862 45,012,915 General plant and administration 1,749,793 480,893 2,230,686 Total capital assets being depreciated 85,200,574 742,217 2,753,940 88,696,731 Less accumulated depreciation for: Subsurface lines (12,442,764)(571,301)(13,014,065) Sewage collection facilities (20,863,276) (1,404,852)(22,268,128) General plant and administration (1,251,346)(177,903)(1,429,249) Total accumulated depreciation (34,557,386) (2,154,056)(36,711,442) Total net capital assets being depreciated 50,643,188 (1,411,839)2,753,940 51,985,289 Total District's capital assets $52,292,892 $1,185,368 $53,478,260 Capital Asset Contributions - Some capital assets may have been acquired using Federal and State grant funds, or were contributed by developers or other governments. These contributions are accounted for as revenues at the time the capital assets are contributed. 62 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 5 - CAPITAL ASSETS (Continued) Depreciation Allocation - Depreciation expense is charged to functions and programs based on their usage of the related assets. The amounts allocated to each function or program are as follows: Governmental Activities General government $112,721 Public safety 709,207 Public works and parks 4,914,244 Community development 38,733 Culture and recreation 729,122 Internal service funds 1,309,673 Total Governmental Activities $7,813,700 Business-type Activities Parking services $235,885 Total Business-type Activities $235,885 NOTE 6 - LONG TERM DEBT The City generally incurs long-term debt to finance projects or purchase assets which will have useful lives equal to or greater than the related debt. A summary of governmental and business-type activities transactions for the fiscal year ended June 30, 2020, are as follows: Authorized Balance Balance Current and Issued June 30, 2019 Additions Retirements June 30, 2020 Portion Governmental Activities Bonds: 2018 Authority Lease Revenue Bonds 4.00%-5.00%, due 6/1/2034 $45,485,000 $45,485,000 $45,485,000 $1,910,000 Add: unamortized bond premium 7,619,153 $507,944 7,111,209 2010 Taxable Pension Obligation Bonds 6.00%-6.25%, due 7/1/2025 4,490,000 3,765,000 445,000 3,320,000 475,000 Total Governmental Activities Bonds 56,869,153 952,944 55,916,209 2,385,000 Governmental Activities - Direct Borrowing: PG & E City Hall HVAC Retrofit Note Payable 0.00%, due 11/30/2023 334,585 145,998 33,280 112,718 33,280 PG & E Street Light Retrofit Note Payable 0.00%, due 8/31/2019 233,896 6,981 6,981 PG & E CEC Efficiency Note Payable 1.00%, due 12/22/2026 1,104,799 1,080,800 $23,999 133,055 971,744 145,431 Total Governmental Activities - Direct Borrowing 1,233,779 23,999 173,316 1,084,462 178,711 Total Governmental Activities Debt $58,102,932 $23,999 $1,126,260 $57,000,671 $2,563,711 Business-type Activities: Direct Borrowing: PG & E Parking Lot Lighting Retrofit Note Payable 0.00%, due 11/30/2023 $66,380 $27,755 $6,816 $20,939 $6,816 2012 Authority Lease Revenue Refunding Bonds 2.00-4.00%, due 4/1/2033 6,750,000 4,899,999 284,999 4,615,000 290,000 Less: unamortized bond discount (9,972)(725) (9,247) Total Business-type Activities Bonds 4,890,027 284,274 4,605,753 290,000 Total Business-type Activities $4,917,782 $291,090 $4,626,692 $296,816 63 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 6 - LONG-TERM DEBT (Continued) A. 2018 Authority Lease Revenue Bonds On March 5, 2018, the Authority issued 2018 Authority Lease Revenue Bonds in the amount of $45,485,000 bearing interest at rates from 4.00% to 5.00%. The proceeds of the bonds were provided for replacement of two fire stations and construction of a public safety center. The Authority has pledged revenue pursuant to a site and facility lease between the City and the Authority for the public safety center. The lease rental payments are due semi-annually and are in an amount sufficient to make payments on the Bonds. Interest on the Bonds is payable semiannually on June 1 and December 1. Principal payable on the Bonds will be paid on June 1 starting on June 1, 2021. The Bonds maturing on or prior to June 1, 2028, are not subject to optional redemption prior to their maturity. The Bonds maturing on or after June 1, 2029, are subject to optional redemption as a whole or in part on any date after June 1, 2028, at the option of the Authority, at a redemption price equal to the principal amount of the Bonds subject to redemption, plus accrued interest to the date fixed for redemption, without premium. The Bonds are payable from any source of available funds of the City. The bond covenants contain events of default that require the revenue of the City to be applied by the Trustee as specified in the terms of the agreement if any of the following conditions occur: default on debt service payments; the failure of the City to observe or perform the conditions, covenants, or agreement terms of the debt; bankruptcy filing by the City; or if any court or competent jurisdiction shall assume custody or control of the City. B.2010 Taxable Pension Obligation Bonds On July 1, 2010, the City issued 2010 Taxable Pension Obligation Bonds in the amount of $4,490,000 bearing interest at rates from 6.00% to 6.25%. Principal payments are due annually on July 1 and interest is payable semiannually on January 1 and July 1. The Bonds were issued to prefund a portion of the obligations of the City to the Marin County Employees’ Retirement Association. Payment of the principal and interest on the Bonds is not limited to any special source of funds and is payable from any legally available moneys of the City. The City is not empowered or obligated to levy or pledge taxes to make payments on the Bonds. The bond covenants contain events of default that require the revenue of the City to be applied by the Trustee as specified in the terms of the agreement if any of the following conditions occur: default on debt service payments; the failure of the City to observe or perform the conditions, covenants, or agreement terms of the debt; bankruptcy filing by the City; or if any court or competent jurisdiction shall assume custody or control of the City. C.Pacific Gas and Electric Notes Payable PG&E HVAC and Lighting Retrofit On September 30, 2013, the City executed a note payable agreement with Pacific Gas and Electric (PG&E) in the amount of $634,861, which does not bear interest. The debt was assumed as a means to finance energy-efficient retrofit projects which include updating the existing heating, ventilation and air conditioning (HVAC) unit in City Hall and converting the street and parking lot lights to light emitting diode (LED). $334,585 of the loan is for the HVAC projects and $300,276 of the loan is for the LED projects. Repayment of the loan commenced in December 2013, and is due monthly until paid in full in 2023. 64 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 6 - LONG-TERM DEBT (Continued) PG&E CEC Efficiency On September 5, 2017, City Council approved the execution of a note payable agreement with PG&E in an amount up to $1,178,813, bearing interest at 1%. The debt was assumed as a means to finance the execution of various energy efficiency system upgrades to City facilities and street lights. The upgrades will include interior and exterior lighting upgrades and energy management control systems. The City made the final draw on the loan and the final loan obligation was $1,104,799. Payments commenced in December 2019, and are due semi-annually until paid in full in December 2026. D. 2012 Authority Lease Revenue Refunding Bonds On August 7, 2012, the Authority issued 2012 Authority Lease Revenue Refunding Bonds in the amount of $6,750,000 bearing interest at rates from 2.00% to 4.00%. The proceeds of the Series 2012 Bonds were used to repay the Authority’s 2003 Authority Lease Revenue Bonds that financed the construction of the 3rd and C Street parking structure and achieved lower interest rates and lower annual debt service payments. The refunding resulted in a net present value savings to the City in debt service of $670,496. In addition, the requisition price exceeded the net carrying amount of the old debt by $295,278. The Series 2012 Bonds are payable from lease payments made by the City to the Authority for leasing the City facilities. The rights to these lease payments have been irrevocably transferred by the Authority to the Trustee. Activities related to the Series 2012 Bonds are reported in the Parking Services Enterprise Fund. Principal payments are due annually on April 1 and interest is payable semiannually on October 1 and April 1. The Bonds maturing on or prior to April 1, 2022, are not subject to optional redemption prior to their maturity. The Bonds maturing on or after April 1, 2023, are subject to optional redemption as a whole or in part on any date after April 1, 2022, at the option of the Authority, at a redemption price equal to the principal amount of the Bonds subject to redemption, plus accrued interest to the date fixed for redemption, without premium. The Bonds are payable from any source of available funds of the City. The bond covenants contain events of default that require the revenue of the City to be applied by the Trustee as specified in the terms of the agreement if any of the following conditions occur: default on debt service payments; the failure of the City to observe or perform the conditions, covenants, or agreement terms of the debt; bankruptcy filing by the City; or if any court or competent jurisdiction shall assume custody or control of the City. 65 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 6 - LONG-TERM DEBT (Continued) E. Future Debt Service Future debt service requirements, including interest, at June 30, 2020, are as follows: Governmental Activities For the Year Bonds Direct Borrowing Ended June 30 Principal Interest Principal Interest 2021 $2,385,000 $2,426,512 $178,711 $9,356 2022 2,575,000 2,320,081 180,169 7,898 2023 2,775,000 2,204,781 181,642 6,425 2024 3,000,000 2,058,406 162,714 4,951 2025 3,245,000 1,900,250 151,351 3,436 2026 - 2030 17,480,000 7,010,256 229,875 2,305 2031 - 2034 17,345,000 2,149,250 Totals 48,805,000 $20,069,536 1,084,462 $34,371 Reconciliation of Long-term debt: Add: unamortized premium 7,111,209 $55,916,209 $1,084,462 Business-type Activities For the Year Bonds Direct Borrowing Ended June 30 Principal Interest Principal 2021 $290,000 $161,288 $6,816 2022 300,000 152,588 6,816 2023 310,000 143,588 6,816 2024 320,000 134,288 491 2025 330,000 124,288 2026 - 2030 1,810,000 447,042 2031 - 2034 1,255,000 100,588 Totals 4,615,000 $1,263,670 20,939 Reconciliation of Long-term debt: Less: unamortized discount (9,247) $4,605,753 $20,939 66 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 7 - DEBT WITHOUT CITY COMMITMENT A. Special Assessment Debt Without City Commitment Special assessment districts have been established in various parts of the City to provide improvements to properties located in those districts. Properties in these districts are assessed for the cost of improvements; these assessments are payable solely by property owners over the term of the debt issued to finance these improvements. The City is not legally or morally obligated to pay these debts or be the purchaser of last resort of any foreclosed properties in these special assessment districts, nor is it obligated to advance City funds to repay these debts in the event of default by any of these districts. The City does act as an agent for the property owners and bondholders and at June 30, 2020, the balances of these Districts’ outstanding debt were as follows: Project Original Outstanding Description Amount June 30, 2020 Pt. San Pedro Road Median Landscaping Pt. San Pedro Road Assessment District Limited Obligation Bonds-2012 Median Landscaping $1,750,000 $1,315,100 B. Conduit Debt The City has assisted private-sector entities by sponsoring their issuance of debt for purposes the City deems to be in the public interest. These debt issues are secured solely by the property financed by the debt. The City is not legally or morally obligated to pay these debts or be the purchaser of last resort of any foreclosed properties secured by these debts, nor is it obligated to advance City funds to repay these debts in the event of default by any of these issuers. At June 30, 2020, the balance of this issuers’ outstanding debt was as follows: Project Original Outstanding Description Amount June 30, 2020 San Rafael Redevelopment Agency 162-175 Belvedere Multifamily Housing Revenue Bonds-2000A Apartments $3,590,529 $949,900 California Statewide Communities Development Authority Revenue Bonds-2001 St. Marks School 5,605,000 2,935,000 San Rafael Redevelopment Agency San Rafael Commons Multifamily Housing Revenue Bonds-2002 Apartments 6,100,000 4,530,000 San Rafael Redevelopment Agency Multifamily Housing Revenue Bonds-2007 Series A Martinelli House Project 6,000,000 1,792,612 Multifamily Housing Revenue Bonds-2007 Series B Martinelli House 1,000,000 158,641 Total $22,295,529 $10,366,153 NOTE 8 - NET POSITION AND FUND BALANCE A. Net Position Net Position is the excess of all the City’s assets and deferred outflows of resources over all its liabilities and deferred inflows of resources, regardless of fund. Net Position is divided into three captions. These captions apply only to Net Position, which is determined only at the Government-wide level and business type activity and are described below: 67 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 8 - NET POSITION AND FUND BALANCE (Continued) Net Investment in Capital Assets describes the portion of Net Position which is represented by the current net book value of the City’s capital assets, less the outstanding balance of any debt issued to finance these assets. Restricted describes the portion of Net Position which is restricted to use by the terms and conditions of agreements with outside parties, governmental regulations, laws, or other restrictions which the City cannot unilaterally alter. Unrestricted describes the portion of Net Position which is not restricted to use. B. Fund Balance In the fund financial statements, fund balances represent the net current assets of each fund. Net current assets generally represent a fund’s cash and receivables, less its liabilities. The City’s fund balances are classified in accordance with generally accepted accounting principles, which require the City to classify its fund balances based on spending constraints imposed on the use of resources. For programs with multiple funding sources, the City prioritizes and expends funds in the following order: Restricted, Committed, Assigned, and Unassigned. Each category in the following hierarchy is ranked according to the degree of spending constraint: Nonspendable represents balances set aside that do not represent available, spendable resources even though they are a component of assets. Fund balances required to be maintained intact, such as Permanent Funds, and assets not expected to be converted to cash, such as prepaids, loans receivable, and land held for redevelopment are included. However, if proceeds realized from the sale or collection of nonspendable assets are restricted, committed or assigned, then Nonspendable amounts are required to be presented as a component of the applicable category. Restricted fund balances have external restrictions imposed by creditors, grantors, contributors, laws, regulations, or enabling legislation which requires the resources to be used only for a specific purpose. Nonspendable amounts subject to restrictions are included along with spendable resources. Committed fund balances have constraints imposed by resolution of the City Council which may be altered only by resolution of the City Council. Nonspendable amounts subject to Council commitments are included along with spendable resources. Assigned fund balances are amounts constrained by the City’s intent that they be used for a specific purpose, but are neither restricted nor committed. Intent is expressed by the City Manager, as designated by the City Council, and may be changed at the discretion of the City Council or City Manager. This authorization is given through Resolution No. 13173 which adopted the City’s Fund Balance Policy. This category includes nonspendables, when it is the City’s intent to use proceeds or collections for a specific purpose; and residual fund balances, if any, of Special Revenue, Capital Projects and Debt Service Funds which have not been restricted or committed. 68 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 8 - NET POSITION AND FUND BALANCE (Continued) Unassigned fund balance represents residual amounts that have not been restricted, committed, or assigned. This includes the residual General Fund balance and residual fund deficits, if any, of other governmental funds. Detailed classifications of the City’s fund balances, as of June 30, 2020, are below: Capital Project Funds General Fund Traffic and Housing Mitigation Gas Tax Essential Facilities Capital Projects Fund Other Governmental Funds Total Fund balances: Nonspendable: Prepaids $7,540 $7,813 $15,353 Total Nonspendable 7,540 7,813 15,353 Restricted for: Assessment District capital projects 304,206 304,206 Baypoint Lagoons Assessment District 209,692 209,692 Bedroom tax capital projects 94,907 94,907 Childcare 1,274,086 1,274,086 Development services 264,039 264,039 Emergency medical services 718,189 718,189 1997 financing authority revenue bonds debt service 151,695 151,695 Street improvements and Maintenance (Gas Tax)$6,517,607 6,517,607 Grant funded programs 744,405 744,405 Household hazmat facility 411,456 411,456 Library 2,455,840 2,455,840 Library assessment 732,221 732,221 Loch Lomond Assessment District 755,032 755,032 Loch Lomond Assessment District #2 364,900 364,900 Low and Moderate Income Housing 893,654 893,654 Mariposa Assessment District debt service 16,573 16,573 Measure A - Open space 169,700 169,700 Measure E - Public Safety Facility $12,474,928 12,474,928 Measure G - Cannabis 75,973 75,973 Parkland dedication 289,985 289,985 Peacock Gap Assessment District debt service 2,875 2,875 Public safety 121,144 121,144 Pt. San Pedro- Maintenance Portion 87,501 87,501 Recreation revolving 46,444 46,444 Storm water 889,468 889,468 Traffic and housing mitigation $4,221,782 4,221,782 Total Restricted 4,221,782 6,517,607 12,474,928 11,073,985 34,288,302 Committed to: Capital improvement capital projects 1,873,329 1,873,329 Park capital projects 10,824 10,824 Total Committed 1,884,153 1,884,153 Assigned to: Contractual commitments 83,455 83,455 Emergency and cash flow 7,800,643 7,800,643 Infrastructure Reserve 600,000 600,000 General plan / long range planning 1,315,042 1,315,042 Open space capital projects 120,920 120,920 Total Assigned 9,799,140 120,920 9,920,060 Unassigned (11,118) (11,118) Total Fund Balances $9,806,680 $4,221,782 $6,517,607 $12,474,928 $13,075,753 $46,096,750 Special Revenue Funds 69 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 8 - NET POSITION AND FUND BALANCE (Continued) C. Minimum Fund Balance Policy The City Council adopted a General Fund Reserve Policy in November 2014 to establish target reserve levels and the methodology for calculating reserve levels. The Policy also establishes criteria for the use of reserves and a process to replenish reserves. The Policy requires the City to strive to maintain the following fund balances: 1)Emergency and Cash Flow Reserve (10% minimum) An emergency and cash flow reserve will be maintained for the purposes of (1) sustaining General Fund operations in the case of a public emergency, such as a natural disaster or other unforeseen catastrophic event; and (2) to cover sudden operating shortfalls caused by (a) a severe drop in revenues that cannot be sufficiently offset by a corresponding reduction in expenditures and/or other available resources, or (b) an unforeseen, unavoidable expenditure that must be paid from the General Fund. This reserve level is measured as a percentage of annual operating expenditures. Budgeted operating expenditures are to be used for the purposes of budget allocations and projections, and actual operating expenditures are to be used for the purpose of measuring this reserve at fiscal year-end. This reserve may be expended only when the City Council determines by resolution that such action is consistent with the purpose and intent of this policy. In the event the balance in the Emergency and Cashflow Reserve falls below the minimum level, the City Manager, shall recommend a plan to replenish the fund within a timeframe not to exceed three years. This recommendation shall be approved by the City Council no later than the time at which the next annual budget is adopted. Any variance from the stipulations established within this policy shall require approval by the City Council along with a statement of findings supporting the temporary or ongoing modification to this policy. The required reserve was $8,042,891 at June 30, 2020 and the balance of the reserve, included in the General Fund’s assigned fund balance was $7,800,643 at that date. The balance of the reserve was less than the requirement because City Council approved the one- time use of up to $721,542 of the reserve to offset the revenue strain caused by COVID-19 of which $242,248 of the reserve was used during the year ended June 30, 2020. As noted above, under the General Fund Reserve Policy, the balance of the reserve must be replenished by June 30, 2023. 2)Measure E - Public Safety Facilities Reserve In November 2013, the San Rafael voters passed Measure E, a three-quarter percent transactions and use tax (TUT), effective April 1, 2014. On May 5, 2014, the City Council directed staff to set aside one-quarter percent (or one-third of these tax proceeds) for the purpose of public safety facility planning, construction and major improvements. This portion of Measure E revenues are assigned to this reserve, so that they can be used later to directly fund facility-related costs, or to cover debt service costs and payments associated with the financing of these improvements. 70 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 8 - NET POSITION AND FUND BALANCE (Continued) The City Manager is directed to assign these funds (i.e., the one-quarter percent TUT) to this reserve as they are received, and is authorized to expend these funds for qualified public safety facility costs as described above. The City Manager shall report periodically to the City Council on the status of these funds. Since fiscal year 2017-2018, funds received each year continue to be fully expended for qualified Public Safety facility costs and as of June 30, 2020 the reserve balance in the General Fund was $0. 3)Other Facilities and Infrastructure The purpose of the infrastructure assigned reserve is to accumulate funds to be used for the purpose of non-public safety facility construction and major improvements (e.g., library, administrative and non-safety buildings, streets and the stormwater system). This was $600,000 at June 30, 2020. The General Plan/Long Range Planning reserve included in the General Fund’s assigned fund balance was $1,315,042 at June 30, 2020 which is specifically assigned to the City’s General Plan, a state required plan that must address eight topic areas – Neighborhoods, Community Design, Economic Vitality, Infrastructure, Governance, Culture and Arts, Parks and Recreation and Air and Water Quality. NOTE 9 - PENSION PLAN A. Plan Description The City’s defined benefit retirement plan is administered by the Marin County Employees’ Retirement Association (MCERA), a retirement system established in July 1950 and governed by the California Constitution; the County Employees Retirement Law of 1937 (CERL or 1937 Act, California government Code Section 31450 et seq.); the Public Employees’ Pension Reform Act of 2013 (PEPRA, Government Code Section 7522); the provisions of California Government Code Section 7500 et seq; and the bylaws, procedures, and policies adopted by MCERA’s Board of Retirement. The Marin County Board of Supervisors may also adopt resolutions, as permitted by the CERL and PEPRA, which may affect the benefits of MCERA members. MCERA operates as a cost-sharing multiple employer defined benefit plan for the City and eight other participating employers: County of Marin, Local Agency Formation Commission (LAFCO), Marin City Community Services District, Marin County Superior Court, Marin/Sonoma Mosquito and Vector Control District, Novato Fire Protection District, Southern Marin Fire Protection District and Tamalpais Community Services District. Separate actuarial valuations are performed for these other agencies and districts, and the responsibility for funding their plans rest with those entities. Post-retirement benefits are administered by MCERA to qualified retirees. Copies of MCERA’s annual financial reports, which include required supplementary information (RSI) for the plan may be obtained from their office at One McInnis Parkway, Suite 100, San Rafael, CA 94903 or online at www.mcera.org. 71 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 9 - PENSION PLAN (Continued) B. Benefit Provisions Service Retirement: MCERA’s service retirement benefits are based on the years of credited service, final average compensation, and age at retirement, according to the applicable statutory formula. Members who qualify for service retirement are entitled to receive monthly retirement benefits for life. General members hired prior to January 1, 2013 are eligible to retire once they attain the age of 50 (except Misc Tier 2, whereby the minimum age is 55) and have acquired 10 or more years of retirement service credit. A member with 30 years of service is eligible to retire regardless of age. A member who is age 70 or older is eligible to retire regardless of service credit. General members who are first hired on or after January 1, 2013 are eligible to retire once they have attained the age of 52, and have acquired 5 years of retirement service credit, or age 70, regardless of service. Safety members hired prior to January 1, 2013 are eligible to retire once they attain the age of 50 and have acquired 10 or more years of retirement service credit. A member with 20 years of service is eligible to retire regardless of age. A member who is age 70 or older is eligible to retire regardless of service. Safety members who are first hired on or after January 1, 2013 are eligible to retire once they have attained the age of 50, and have acquired 5 years of retirement service credit, or age 70, regardless of service. Disability Retirement: A member with five years of service, regardless of age, who becomes permanently incapacitated for the performance of duty is eligible to apply for a non-service connected disability retirement. Any member who becomes permanently incapacitated for the performance of duty as a result of injury or disease arising out of and in the course of employment is eligible to apply for a service-connected disability retirement, regardless of service length or age. Death Benefits: MCERA provides specified death benefits to beneficiaries and members’ survivors. The death benefits provided depend on whether the member is active or retired. The basic active member death benefit consists of a members’ retirement contributions plus interest plus one month’s pay for each full year of service (up to a maximum of six month’s pay). Retiring members may choose from five retirement benefit payment options. Most retirees elect to receive the unmodified allowance which provides the maximum benefit to the retiree and continuance of 60% of the retiree’s allowance to the surviving spouse or registered domestic partner after the retiree’s death. Other death benefits may be available based on the years of service, marital status, and whether the member has minor children. Cost of Living Adjustment: Retirement allowances are indexed for inflation. Most retirees receive automatic basic cost of living adjustments (COLA’s) based upon the Urban Consumer Price Index (UCPI) for the San Francisco Bay Area. These adjustments go into effect on April 1 of each year. Annual COLA increases are statutorily capped at 2%, 3%, or 4% depending upon the member’s retirement tier. When the UCPI exceeds the maximum statutory COLA for the member’s tier, the difference is accumulated for use in future years when the UCPI is less than the maximum statutory COLA. The accumulated percentage carryover is known as the COLA Bank. 72 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 9 - PENSION PLAN (Continued) C. Funding Policy The funding policy of MCERA provides for actuarially determined periodic contributions by the City at rates such that sufficient assets will be available to pay plan benefits when due. The employer rates for normal cost are determined using the Entry Age Normal Actuarial Cost Method, which takes into account those benefits that are expected to be earned in the future as well as those already accrued. The City contribution rates for the year ended June 30, 2020 were as follows: Employer Employee Contribution Rate Contribution Rate Benefit Basis City of San Rafael Misc Tier 1 50.93%0.00% - 16.13% 2.7% @ 55 Highest year City of San Rafael Misc Tier 2 49.89%7.34% - 11.76% 2.0% @ 55 Average three highest years City of San Rafael Fire Tier 1 70.33%0.00% - 19.59% 3.0% @ 55 Highest year City of San Rafael Fire Tier 2 68.40% 11.40% - 17.36% 3.0% @ 55 Average three highest years City of San Rafael Safety Police Tier 1 69.61%0.00% - 19.59% 3.0% @ 55 Highest year City of San Rafael Safety Police Tier 2 69.28% 11.40% - 17.36% 3.0% @ 55 Average three highest years PEPRA Misc 42.84% 9.22% 2.0% @ 62 Average three highest years PEPRA Safety 59.13%14.43% 2.7% @ 57 Average three highest years These rates were determined by MCERA, based on the actuarial valuation dated June 30, 2018. The actual rate of return on investments during that year was 9.65% on a market value basis net of investment expenses, as compared to the prior year’s 7.00% assumption. The City uses the actuarially determined percentages of payroll to calculate and pay contributions to MCERA. Contributions to the plan from the City were $20,031,614 for the year ended June 30, 2020, based on a total payroll of $43,506,444, of which $32,887,922 represented the basis for the plan contributions. Of the total payroll subject to plan contributions, $1,377,621 is attributable to the San Rafael Sanitation District (SRSD), a component unit of the City. Effective with the June 30, 2013 valuation, the Unfunded Actuarial Liability (UAL) as of June 30, 2013 is being amortized over a closed 17-year period (12 years remaining as of June 30, 2018), except for the additional UAL attributable to the outstanding unfunded actuarial loss from 2009, which is being amortized over a separate closed period (currently 20 years). Effective with the June 30, 2014 valuation, any new sources of UAL due to actuarial gains and losses or method changes are amortized over a closed 24-year period, with a 5-year ramp up period at the beginning of the period, a 4-year ramp down at the end of the period, and 15 years of level payments as a percentage of payroll between the ramping periods. This amortization method for gains and losses is similar to a 20-year amortization period with level payments as a percentage of payroll, in conjunction with a traditional 5-year asset smoothing. Assumption changes are amortized over a closed 22-year period, with a 3-year ramp up period, 2- year ramp down period, and 17 years of level payments as a percentage of payroll. 73 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 9 - PENSION PLAN (Continued) D. Pension Liability and Pension Expense The City’s net pension liability (NPL) has been determined for the financial reporting period ended June 30, 2020 based on the following methodology: The City’s NPL as of June 30, 2018 was updated to the measurement date of June 30, 2019 using the actual City’s plan assets as of June 30, 2019 and estimating the change in the City’s liabilities between July 1, 2018 and June 30, 2019. This estimate is based on a projection of the City’s long-term contributions to the pension plan relative to the projected contributions of all participating employers. The resulting NPL for the City under this calculation is $133,877,531, or 36.6081% of the total MCERA NPL of $365,704,670 (reference MCERA’s GASB 67/68 report as of June 30, 2019). This compares to the previous year’s NPL of $110,567,858, or 34.4752% of the total MCERA NPL of $330,297,827 (reference MCERA’s GASB 67/68 report as of June 30, 2018). In addition to the reporting of the NPL as of June 30, 2020, the City reported deferred inflows of $22,558,119 and deferred outflows of $21,856,007 as of the measurement date June 30, 2019. The City reported post-measurement date outflows of $20,031,614 from actual fiscal year 2019- 2020 pension contributions. Deferred outflows include deferred investment gains and adjustments to assumptions based on actual positive results. Deferred outflows have a positive impact on net assets (offsetting the NPL) and will be recognized in future reporting periods. Deferred inflows include deferred investment losses, adjustments to assumptions based on actual negative results, and contributions made after the measurement date. Deferred inflows have a negative impact on net assets (similar to the NPL) and will be recognized in future reporting periods. The net impact of these pension liability related entries on the City’s Statement of Net Position before allocations to the San Rafael Sanitation District was $114,548,029. After allocations to the San Rafael Sanitation District, the net impact on the City’s Statement of Net Position was $110,826,041. Under generally accepted accounting principles, the City’s pension expense is based on the Plan’s pension expense, adjusted for the City’s actual contributions and net pension liability. Three components are used to calculate pension expense: (1) changes in the net pension liability; (2)changes in benefit terms (if any): and (3) changes in actuarial assumptions and experience. Pension expense is calculated using a different methodology than that used to derive the actuarially determined annual contribution to the Plan. Actual pension contributions during the reporting year were $20,031,614. Because pension expense is affected by annual changes in the net pension liability, volatility is to be expected. For the current measurement period, investment returns above the assumed rate were responsible for the decrease in net pension liability and had a corresponding impact on pension expense. 74 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 9 - PENSION PLAN (Continued) The table below provides a summary of the key results during the reporting period: Measurement Date Measurement Date Description 6/30/2019 6/30/2018 Net Pension Liability $133,877,531 $110,567,858 Deferred Inflows 22,558,119 34,181,686 Deferred Outflows (21,856,007) (12,350,764) Impact on Net Position before Deferred Outflows from Contributions 134,579,643 132,398,780 Additional Deferred Outflows - Contributions Subsequent to Measurement Date (20,031,614) (20,352,203) Impact on Statement of Net Position before Allocations 114,548,029 112,046,577 Allocation of NPL to SRSD 4,354,685 3,487,083 Allocation of Deferred Inflows (measurement date) to SRSD 733,756 1,078,020 Allocation of Deferred Outflows (measurement date) to SRSD (710,919) (389,518) Impact on Net Position before Allocation of Deferred Outflows from Contributions to SRSD 4,377,522 4,175,585 Allocation of Additional Deferred Outflows (Contributions) to SRSD (655,534) (655,399) Long-Term Receivable from SRSD, due to pension obligations (see Note 4F)3,721,988 3,520,186 Impact on Statement of Net Position, net of receivable from SRSD $110,826,041 $108,526,391 Pension Expense $22,533,040 $18,704,394 Summary of Results Projection of Total Pension Liability and Net Pension Liability Total Pension Liability (TPL) is the actuarial present value of projected benefit payments attributed to past periods of employee service. MCERA and the City have adopted a measurement date of June 30, 2019. The beginning of year measurement of TPL is based on the actuarial valuation as of June 30, 2018. The TPL at the end of the measurement year, June 30, 2019, is also measured as of the valuation date of June 30, 2018 and projected to June 30, 2019. The Plan Fiduciary Net Position (FNP) is the fair or market value of assets. The FNP at the beginning of the year is based on the actuarial valuation as of June 30, 2018. The FNP at the end of the measurement year, June 30, 2019, is also measured as of the valuation date of June 30, 2018 and projected to June 30, 2019. 75 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 9 - PENSION PLAN (Continued) The Net Pension Liability (NPL) is the City’s liability for benefits provided through its defined benefit plan administered by MCERA. It is calculated by reducing the TPL by the FNP. The long- term portion of the governmental activities’ NPL is liquidated primarily by the General Fund. Actuarial assumptions: The total pension liability as of June 30, 2019 (measurement date) was determined by an actuarial valuation as of June 30, 2018, using the following actuarial assumptions applied to all prior periods included in the measurement. The key assumptions in the valuation were: Expected Return on Assets 7.00 percent per year, net of investment expenses Discount Rate 7.00 percent per year Price Inflation 2.75% per year Salary Increases 3% per year plus merit component based on employee classification and years of service. Administrative Expenses Administrative expenses in the actuarial valuation are assumed to be $5.065 million for FY 2018-19, to be split between employees and employers based on their share of the overall contributions. Administrative expenses shown in this report are based on the actual FY 2018-19 amounts. Post-Retirement COLA Post-retirement COLAs are assumed at a rate of 2.7% for members with a 4% COLA cap, 2.6% for members with a 3% COLA cap, and 1.9% for members with a 2% COLA cap. Mortality Rates for Rates of mortality for active members are specified by CalPERS 2017 Healthy Members Pre-Retirement Non-Industrial Death Rates (plus Duty-Related Death and Inactives rates for Safety members), with the 15-year static projection used by CalPERS replaced by generational improvements from a base year of 2014 using Scale MP-2017. Mortality Rates for Rates of mortality among disabled members are given by CalPERS 2017 Retired Disabled Disability Mortality rates (Non-Industrial rates for Miscellaneous members Members and Industrial Disability rates for Safety members), adjusted by 90% for Males (Miscellaneous and Safety) and 90% for Miscellaneous Females, with the 15-year static projection used by CalPERS replaced by generational improvements from a base year of 2014 using Scale MP-2017. 76 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 9 - PENSION PLAN (Continued) Asset Allocation Policy and Expected Long-Term Rate of Return by Asset Class The Board of Retirement has adopted an Investment Policy Statement (IPS), which provides the framework for the management of MCERA’s investments. The IPS establishes MCERA’s investment objectives and defines the principal duties of the Retirement Board, the custodian bank, and the investment managers. The asset allocation plan is an integral part of the IPS and is designed to provide an optimum and diversified mix of asset classes with return expectations to satisfy expected liabilities while minimizing risk exposure. MCERA currently employs external investment managers to manage its assets subject to the provisions of the policy. Plan assets are managed on a total return basis with a long term objective of achieving and maintaining a fully funded status for the benefits provided through the Plan. The following was the Retirement Board’s adopted asset allocation policy as of June 30, 2019: Long-Term Expected Rate Target Long-Term Expected of Return Asset Class Allocation Real Rate of Return (with the effect of inflation) Domestic Equity 32% 4.90% 7.65% International Equity 22% 5.00% 7.75% Fixed Income 23% 1.50% 4.25% Public Real Assets 7% 3.65% 6.40% Real Estate 8% 4.00% 6.75% Private Equity 8% 6.25% 9.00% Total 100% The Long-Term returns are calculated using a 10-year geometric return derived from arithmetic returns and the associated risk (standard deviation). Determination of Discount Rate The discount rate used to measure the Total Pension Liability was 7.00%. Related to the discount rate is the funding assumption that employees will continue to contribute to the plan at the required rates and employers will continue the historical and legally required practice of contributing to the plan based on an actuarially determined contribution, reflecting a payment equal to annual normal cost, a portion of the expected administrative expenses, an amortization payment for the extraordinary losses from 2009 amortized over a closed period (20 years remaining as of the June 30, 2018 actuarial valuation), and an amount necessary to amortize the remaining Unfunded Actuarial Liability as a level percentage of payroll over a closed period (12 years remaining as of the June 30, 2018 actuarial valuation). A change in the discount rate would affect the measurement of the TPL. A lower discount rate results in a higher TPL and higher discount rates results in a lower TPL. Because the discount rate does not affect the measurement of assets, the percentage change in the NPL can be significant for a relatively small change in the discount rate. A one percent decrease in the discount rate increases the TPL by approximately 13% and increases the NPL by approximately 106%. A one percent increase in the discount rate decreases the TPL by approximately 11% and decreases the NPL by approximately 87%. 77 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 9 - PENSION PLAN (Continued) The table below shows the sensitivity of the NPL to a one percent decrease and a one percent increase in the discount rate: 1%Discount 1% Decrease Rate Increase Description 6.00%7.00%8.00% Total Pension Liability $1,224,363,380 $1,082,900,638 $966,384,252 Fiduciary Net Position 949,023,107 949,023,107 949,023,107 Net Pension Liability $275,340,273 $133,877,531 $17,361,145 77.5%87.6%98.2%Fiduciary Net Position as a Percentage of the Total Pension Liability Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Pension Resources The impact of experience gains or losses and assumption changes on the Total Pension Liability (TPL) are recognized in the proportionate share of the pension expense over the average expected remaining service life of all active and inactive members of the plan. As of the measurement date, this recognition period was 4 years. The following tables show the current balance and sources of deferred outflows and inflows related to the City’s defined benefit retirement plan, and the scheduled recognition of these deferred amounts: Deferred Deferred Outflows of Inflows of Description Resources Resources Differences between expected and actual experience $4,591,103 $707,470 Changes in assumptions 7,468,359 Change in proportion 9,796,545 2,113,429 Difference between City contributions and proportionate share of contributions 10,791,098 Actual FY 19-20 contributions (post measurement date)20,031,614 Net difference between projected and actual earnings on pension plan investments 8,946,122 Deferred Inflows and Outflows Before Allocations $41,887,621 $22,558,119 Allocation of Deferred Inflows and Outflows to SRSD As of measurement date $710,919 $733,756 Post-measurement date 655,534 Net Deferred Inflows and Outflows $40,521,168 $21,824,363 78 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 9 - PENSION PLAN (Continued) The $20,031,614 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2021. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows: Amortization Year ended June 30 Amount 2021 $215,815 2022 (4,089,261) 2023 458,691 2024 2,712,643 Total ($702,112) NOTE 10 - PUBLIC AGENCY RETIREMENT SYSTEM (DEFINED CONTRIBUTION RETIREMENT PLAN) The City contributes to the Public Agency Retirement System (PARS), which administers a defined contribution retirement plan. A defined contribution retirement plan provides retirement benefits in return for services rendered, provides an individual account for each participant, and specifies how contributions to the individual’s accounts are determined instead of specifying the amount of benefits the individual is to receive. The benefits a participant will receive depend on the amount contributed to the participant’s account, and the returns earned on investments on those contributions. The Plan’s trust administrator is Phase II, P.O. Box 12919, Newport Beach, California 92658. As established by the plan, all eligible part-time and temporary employees of the City become participants in the plan from the date that they are hired. An eligible employee is any employee who, at any time during which the employer maintains this plan, is not accruing a benefit under the Marin County Employees’ Retirement Fund. As determined by the plan, each employee must contribute 3.75% of gross earnings to the plan. The City contributes an additional 3.75% of the employee’s gross earnings. Contributions made by an employee and the employer vest immediately. During the year, the City and employees each contributed $105,676. The total covered payroll of employees participating in the plan for the year ended June 30, 2020, was $2,818,030. 79 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 11 - POST-EMPLOYMENT HEALTH CARE BENEFITS Plan Description The City provides certain health care benefits for retired employees and their spouses under an Agent Multiple-Employer Defined Benefit Plan. The benefit provisions were established under the authority of the 1937 Act, Section 31450, et. seq. of the Government Code. Employees who meet the vesting criteria become eligible for these benefits if they receive a retirement benefit from the Marin County Employees’ Retirement Association within 120 days of retirement from City employment. The provisions and benefits of the City’s Other Post Employment Benefit Plan, in effect at June 30, 2020, are summarized as follows: Elected Officials, Mid-Management, & Unrepresented Management All other Bargaining Units Eligibility -Age 50 (age 55 if hired > 7/1/11) with 10 years services (Including reciprocity) OR - -Age 70 - Disability Retirement Benefit Hired < 1/1/09 Full premium/cap Hired < 1/1/10 Up to cap Hired ≥ 1/1/09 PEMHCA Min Hired ≥ 1/1/10 PEMHCA Min Surviving Spouse Benefit Continuation to surviving spouse Medicare Part B Hired < 4/1/07 Full reimbursement None Hired ≥ 4/1/07 None Other No Dental, Vision, or Life Benefits Retire directly from the City: 30 years service (Miscellaneous), 20 years service (Safety) OR Membership in the plan consisted of the following at June 30, 2019, the measurement date: Active plan members 328 Inactive employees or beneficiaries currently receiving benefit payments 359 Inactive employees entitled to but not yet receiving benefit payments 75 Total 762 Funding Policy and Actuarial Assumptions The City’s net OPEB liability was measured using a Total OPEB Liability and Fiduciary Net Position measured as of June 30, 2019, using an actuarial valuation as of June 30, 2019. The following actuarial assumptions were used in the valuation: (a) 6.75% investment rate of return and (b) 2.75% of general inflation increase, and (c) a healthcare trend of declining annual increases ranging from 7.5% in 2020 to 4.0% for the years starting 2076. In addition, the fixed dollar benefit amounts are assumed to be held flat in the future and the premium related benefits are assumed to increase with the healthcare trend rate. 80 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 11 - POST-EMPLOYMENT HEALTH CARE BENEFITS (Continued) The actuarial assumptions used in the June 30, 2019 valuation were based on the results of an actuarial experience study for the period July 1, 2018 through June 30, 2019. The long-term expected rate of return on OPEB plan investments was determined using a building- block method in which best-estimate ranges of expected future real rates of return (expected returns, net of OPEB plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighing the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return for each major asset class are summarized in the following table: Long-Term Expected Long-Term Rate of Return Target Expected (with the effect Asset Class Allocation Real Rate of Return of inflation) Global Equity 59%4.82%7.57% Fixed Income 25%1.47%4.22% TIPS 5%1.29%4.04% Commodities 3%0.84%3.59% REITs 8%3.76%6.51% Total 100% Assumed Long-Term Rate of Inflation 2.75% Assumed Long-Term Investment Expenses n/a Expected Long-Term Net Rate of Return 6.75% Discount Rate 6.75% The Expected Long-Term Rate of Return is provided by CalPERS’ Strategic Asset Allocation Overview in August 2014 – Strategy 1. Discount Rate The discount rate used to measure the total OPEB liability was 6.75%. The projection of cash flows used to determine the discount rate assumed that City contributions will be made at rates equal to the actuarially determined contribution rates. Based on these assumptions, the OPEB plan's fiduciary net position was projected to be sufficient to make projected benefit payments and the plan assets are expected to be invested using the strategy to achieve the expected return. 81 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 11 - POST-EMPLOYMENT HEALTH CARE BENEFITS (Continued) Change in Net OPEB Liability Total OPEB Plan Fiduciary Net Net OPEB Liability Position Liability/(Asset) (a)(b)(c) = (a) - (b) Balance at June 30, 2019 (6/30/18 measurement date) $52,810,000 $19,811,000 $32,999,000 Changes Recognized for the Measurement Period: Service Cost 805,000 805,000 Interest on the total OPEB liability 3,515,000 3,515,000 Changes in benefit terms Difference between expected and actual experience (3,040,000) (3,040,000) Changes of assumptions (2,735,000) (2,735,000) Contributions from the employer 3,725,000 (3,725,000) Net investment income 1,224,000 (1,224,000) Administrative expenses (12,000)12,000 Benefit payments and refunds (3,072,000) (3,072,000) Net Changes during July 1, 2019 to June 30, 2020 (4,527,000) 1,865,000 (6,392,000) Balance at June 30, 2020 (6/30/19 measurement date)$48,283,000 $21,676,000 $26,607,000 Increase (Decrease) The benefit payments and refunds include implied subsidy benefit payments in the amount of $663,000. Sensitivity of the net OPEB liability to changes in the discount rate The following presents the net OPEB liability of the City, as well as what the City's net OPEB liability would be if it were calculated using a discount rate that is 1-percentage-point lower (5.75 percent) or 1-percentage-point higher (7.75 percent) than the current discount rate: Discount Rate -1% Current Discount Discount Rate +1% (5.75%) Rate (6.75%) (7.75%) $31,956,000 $26,607,000 $22,098,000 Plan's Net OPEB Liability/(Asset) Sensitivity of the net OPEB liability to changes in the health care cost trend rates The following presents the net OPEB liability of the City, as well as what the City’s net OPEB liability would be if it were calculated using healthcare trend rates that are 1-percentage-point lower or 1-percentage-point higher than the current rates. Healthcare Cost Trend Rate -1% Trend Rates Trend Rate +1% $23,640,000 $26,607,000 $30,212,000 Plan's Net OPEB Liability/(Asset) 82 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 11 - POST-EMPLOYMENT HEALTH CARE BENEFITS (Continued) Detailed information about the OPEB plan’s fiduciary net position is available in the separately issued plan financial report. That report may be obtained from the California Public Employees’ Retirement System, CERBT, P.O. Box 942703, Sacramento, CA, 94229. OPEB Expense and Deferred Outflows of Resources and Deferred Inflows of Resources related to OPEB Components of OPEB Expense for fiscal year 2019-2020 were as follows: Service Cost $805,000 Interest on Total OPEB Liability 3,515,000 Projected earning on investments (1,338,000) Administrative expense 12,000 Recognition of deferred outflows/inflows: Experience (1,232,000) Assumptions 361,000 Asset Returns 71,000 OPEB Expense $2,194,000 Components of deferred outflows of resources and deferred inflows of resources related to OPEB at June 30, 2020 were as follows: Governmental Business-Type Activities Activities Total Deferred outflows of resources: Changes of assumptions $2,275,566 $56,434 $2,332,000 Employer contributions made subsequent to the measurement date 3,692,427 91,573 3,784,000 Total deferred outflows of resources $5,967,993 $148,007 $6,116,000 Deferred inflows of resources: Differences between expected and actual experience $4,390,124 $108,876 $4,499,000 Changes of assumptions 2,208,235 54,765 2,263,000 Net difference between projected and actual earnings on plan investments 50,742 1,258 52,000 Total deferred inflows of resources $6,649,101 $164,899 $6,814,000 The difference between projected OPEB plan investment earnings and actual earnings is amortized over a five-year period. The remaining gains and losses are amortized over the expected average remaining service life. 83 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 11 - POST-EMPLOYMENT HEALTH CARE BENEFITS (Continued) $3,784,000 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the OPEB liability in the year ended June 30, 2021. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized as future OPEB expense as follows: Measurement Period Amortized Ended June 30 Amount 2021 ($800,000) 2022 (996,000) 2023 (917,000) 2024 (974,000) 2025 (795,000) Thereafter - ($4,482,000) The table below provides a summary of the key results during this reporting period. Measurement Date Measurement Date Description June 30, 2019 June 30, 2018 Net OPEB Liability $26,607,000 $32,999,000 Deferred Inflows 6,814,000 2,786,000 Deferred Outflows (2,332,000) (3,165,000) Impact on Net Position before deferred contributions 31,089,000 32,620,000 Additional Deferred Outflows - Contributions subsequent to measurement date (3,784,000) (3,725,000) Impact on Statement of Net Position before Allocations 27,305,000 28,895,000 Allocation of NOL to SRSD 1,184,000 1,249,127 Allocation of Deferred Inflows (measurement date) to SRSD 303,220 105,460 Allocation of Deferred Outflows (measurement date) to SRSD (103,773) (119,806) Impact on Net Position before deferred contributions to SRSD 1,383,447 1,234,781 Allocation of Additional Deferred Outflows (contributions) to SRSD (168,386) (141,004) Long-Term Receivable from SRSD, due to OPEB obligations (see Note 4F)1,215,061 1,093,777 Impact on Statement of Net Positions, net of receivable from SRSD $26,089,939 $27,801,223 OPEB Expense $2,194,000 $3,267,000 Covered Employee Payroll $40,496,000 $36,350,000 Summary of Results 84 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 12 - JOINTLY GOVERNED ORGANIZATIONS The City participates in the jointly governed organizations discussed below through formally organized and separate entities established under the Joint Exercise of Powers Act of the State of California. As separate legal entities, these entities exercise full powers and authorities within the scope of the related Joint Powers Agreements including the preparation of annual budgets, accountability for all funds, the power to make and execute contracts and the right to sue and be sued. Each joint organization is governed by a board consisting of representatives from member municipalities. Each board controls the operations of the respective joint organization, including selection of management and approval of operating budgets, independent of any influence by member municipalities beyond their representation on that board. Obligations and liabilities of this joint organization are not the City’s responsibility and the City does not have an equity interest in the assets of each joint organization except upon dissolution of the joint organization. A. The Marin County Integrated On-Line Library System (System) The MARINet Library Consortium was formed to provide for the procurement, ownership, operation, maintenance, and governance of shared library services among the libraries, public and academic, in Marin County. Current services shared and paid for on a consortial level through annual membership dues include an integrated library system including patron database, cataloging system, and online catalog of materials; delivery of items between libraries in Marin, a statewide library delivery service called Link+, numerous online resources, and more. The Governing Board of the System consists of the library director or designated alternate of each participant in the System. In accordance with the cost sharing formula developed by the library directors of the participants, the City’s share of annual operating costs was $271,360 for the year ended June 30, 2020. Financial statements of the System can be obtained from the County Librarian, Marin County Free Library, Marin County Civic Center, 3501 Civic Center Drive, San Rafael, California 94903. B. The Marin General Services Authority (MGSA) The MGSA was formed by the County of Marin and twelve local agencies to acquire street light facilities, operate the facilities during an eminent domain action against PG&E, and coordinate the subsequent transfer of the facilities to the individual local agencies. Each of the local agency’s share of contributions was based on the number of street lights to be acquired in the local agency’s individual jurisdiction in relation to the total number of street lights to be acquired by the Marin Streetlight Acquisition Joint Powers Authority. MGSA services now include street light maintenance, abandoned vehicle abatement, taxicab regulation and administrative responsibility for MarinMap. The City’s contribution to MGSA was $689,013 for the year ended June 30, 2020. Financial statements of the MGSA can be obtained at 555 Northgate Drive, Suite 230, San Rafael, California 94903. 85 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 12 - JOINTLY GOVERNED ORGANIZATIONS (Continued) C. The Marin Emergency Radio Authority (MERA) MERA was formed on February 28, 1998, by the County of Marin and 25 local agencies within the County to plan, finance, implement, manage, own, and operate a County-wide public safety and emergency radio system. The Governing Board consists of one representative from each member. In February 2010, MERA refinanced its 1999 Revenue Bonds; the 1999 bonds were originally issued in the amount of $26,940,000 to finance the acquisition of the system. The 2010 refunding bonds were issued at a premium of $934,832 above their par value of $18,575,000. These bonds mature annually through 2021 and bear interest from 2% to 4%. Similar to the original bonds, the refunding bonds are special obligations of MERA and are secured by the Members’ service payments. One February 1, 2007, MERA borrowed $2,250,000 from Citizens Business Bank. The note is being amortized over 14 ½ years at an annual interest rate of 4.43%. Loan Payments are funded by member operating payments. The costs of maintenance, operation, and debt service are divided on a pro rata share based on an agreed-upon formula established by a majority of the Governing Board. The members entered into a Project Operating Agreement on February 1, 1999. Under the Operating Agreement, members are obligated to contribute service payments to cover the Authority’s operations and debt service. The City’s portion of the obligation is 16.913%. The first operating service payment was in July 1999. The first debt service payment was in August 2002. The City contributed $688,083 of the Authority’s operation and debt service for the fiscal year ended June 30, 2020. The City has established a reserve in its internal service funds to pay future service payments. Financial statements of the MERA can be obtained at 95 Rowland Way, Novato, California 94945. D.The Marin Telecommunications Agency The Agency was established to regulate the rates for cable television service and equipment and to advise the participants of their license authority. The Governing Board of the Marin Telecommunications Agency consists of one member from each of the ten participating agencies. As of June 30, 2020, the member agencies have adopted an ordinance to terminate the Agency and a resolution to authorize the MGSA to collect franchise and Public, Education, and Government access fees previously collected by the Agency. On May 14, 2020, the MGSA adopted a resolution accepting the assignment of agreements from the Agency to affect the transfer of program responsibilities to MGSA July 1, 2020. The City’s contribution to the Agency was $65,164 for the year ended June 30, 2020. Financial statements of the Agency can be obtained at 555 Northgate Drive, Suite 230, San Rafael, California 94903. E. The Marin County Hazardous and Solid Waste Joint Powers Authority The Authority was established by the County, local cities, and waste franchising districts to finance, prepare and implement source reduction and recycling elements on a county-wide integrated waste management plan as required by State Assembly Bill 939. The City’s contribution to the Authority was $17,850 for the year ended June 30, 2020. Financial statements of the Authority can be obtained at 3501 Civic Center Drive, San Rafael, California 94903. 86 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 12 - JOINTLY GOVERNED ORGANIZATIONS (Continued) F. Central Marin Sanitation Agency (CMSA) In October 1979, the District entered into a joint powers agreement with three neighboring sanitation agencies in central Marin County forming the Central Marin Sanitation Agency (CMSA). CMSA serves as a regional wastewater treatment plant for its four member agencies and San Quentin Prison (SQ) and is governed by a five-member Board of Commissioners, two appointed by the Board of Directors of the District, two appointed by the governing board of the Ross Valley Sanitary District, and one appointed by the governing board of Sanitary District No. (SD 2). Total project costs for the joint venture were funded from federal (75%) and state (12.5%) clean water grants and from local shares (12.5% total) allocated among the member agencies and SQ based upon the weighted average of the strength and volume of sewage flows per member at inception of the project. CMSA derives its annual funding for its operations and capital programs almost exclusively from service charges to member agencies. The joint powers agreement does not provide an explicit measurable right as required to establish an equity interest for any of the joint venture participants, and in addition to, stipulates that all excess capital funds, if any, and all excess administration, operations and maintenance funds from whatever source, if any, are the property of CMSA. The financial statements of the CMSA are available at the CMSA office at 1301 Anderson Drive, San Rafael, CA 94901 and online at www.cmsa.us. NOTE 13 - RISK MANAGEMENT A. City The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The City established the Risk Management Internal Service Fund to account for and finance its uninsured risks of loss. The City manages risk by participating in a public entity risk pool (described below), purchasing insurance and by retaining certain risks. Risk Coverage Liability Coverage The City is a member of the California Joint Powers Risk Management Authority (CJPRMA) which covers general liability claims up to $40,000,000. The purpose of CJPRMA is to spread the adverse effects of general liability losses among the member agencies. The City also purchases commercial insurance for property damage claims with an insured amount of $114,220,740. The City is self-insured up to $500,000 for each general liability claim and $25,000 for each property damage claim. Once the self-insured retention is met CJPRMA becomes responsible for payment of all liability claims up to the limit. The City contributed a total of $441,334 in liability coverage premiums during the fiscal year ended June 30, 2020. Five years after settlement of all general liability claims for a program year, CJPRMA will retroactively adjust premium deposits for any excess or deficiency in deposits related to paid claims and reserves. Financial statements for the risk pool may be obtained from CJPRMA at 3201 Doolan Road, Suite 285, Livermore, California 94551. 87 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 13 - RISK MANAGEMENT (Continued) Workers’ Compensation Coverage The City purchases insurance for workers’ compensation through Safety National Casualty Corporation Excess Workers’ Compensation and Employers Liability Insurance with coverage up to statutory limits. The City is self-insured up to $1,000,000 for each worker’s compensation claim. Insurance Internal Service Funds and Financial Reporting The City records estimated liabilities for claims filed up to the amounts for which it retains risk in the General Liability and Workers Compensation Internal Service Funds. Charges to the General Fund and other funds are based on relative general liability and workers compensation risk associated with the activities of each fund. Charges are recorded in the funds as expenditures or expenses and as revenues in the respective internal service funds. Generally accepted accounting principles require municipalities to record the liability for uninsured claims and to reflect the current portion of this liability as an expenditure in the financial statements. As discussed above, the City has coverage for such claims, but it has retained the risk for the deductible or uninsured portion of these claims. The City’s liability for uninsured general liability claims and workers’ compensation claims, including claims incurred but not reported, are reported in the Statements of Net Position. The City’s present value liability for uninsured claims below include a provision for claims incurred but not reported using a discount rate of 2%. General Workers'Totals, as of June 30 Liability * Compensation * 2020 2019 Balance, beginning of year $3,616,065 $6,105,483 $9,721,548 $9,543,675 Current year claims and changes in estimates 1,395,645 3,049,980 4,445,625 2,007,097 Claims paid (657,802) (1,089,094) (1,746,896) (1,829,224) Balance, end of year $4,353,908 $8,066,369 $12,420,277 $9,721,548 Due in one year $1,794,573 $1,544,034 $3,338,607 $2,353,275 Due in more than one year 2,559,335 6,522,335 9,081,670 7,368,273 Total claim liabilities $4,353,908 $8,066,369 $12,420,277 $9,721,548 * Liability based on an actuarial valuation as of December 31, 2019, extrapolated to June 30, 2020 The claims settlements have not exceeded insurance coverage for the past three years. 88 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 13 - RISK MANAGEMENT (Continued) C.District The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; injuries to employees and natural disaster. The District participates in a joint powers agreement with other entities forming the California Sanitation Risk Management Authority (CSRMA), a public entity risk pool operating as a common risk management and insurance program for 60 member entities. CSRMA is governed by a Board of Directors composed of one representative from each member agency and meets three times per year in conjunction with conferences of the California Association of Sanitation Agencies. The Board controls the operations of CSRMA, including selection of management and approval of operating budgets, independent of any influence by member entities. The District pays annual premiums to CSRMA for its primary insurance and property insurance programs. Primary and property insurance programs are fully insured wherein CSRMA purchases insurance as a group thereby reducing its costs. CSMRA provides both fully insured and pooled insurance programs for its participating member entities. Because all employees of the District are contracted employees from the City of San Rafael, workers’ compensation insurance is not carried by the District but is provided through the City. CSRMA’s primary and property insurance programs transfer risk to commercial insurance policies for claims above deductibles, while the District retains risk for claims to the extent of deductibles. Settled claims for the District have not exceeded coverage provided by CSRMA in any of the past three fiscal years. The following summarizes active insurance policies as of June 30, 2020 together with coverage limits for each insured event: Insurance Program Limits Coverage Description CSRMA - Allied World Ins.$3,000,000 Gen/Mgt liability - aggregate CSRMA - Allied World Ins.$1,000,000 Gen/Mgt liability - occurrence CSRMA - Allied World Ins.$1,000,000 Auto liability - accident CSRMA - Allied World Ins.$4,000,000 Excess liability CSRMA - Public Entity Property Insurance Program (P.E.P.I.P.)$13,126,769 Special form property CSRMA - Illinois Union Ins.$25,000,000 Pollution liability - tier 1 CSRMA - Illinois Union Ins.$2,000,000 Pollution liability - tier 2 CSRMA - Lloyds of London $2,000,000 Cyber liability - third party CSRMA - Lloyds of London $2,000,000 Cyber liability - third party CSRMA - Travelers Ins.$25,000 Identity theft CSRMA - Lloyds of London $2,500,00 Deadly weapons - aggregate The financial statements of CSRMA are available at their office: 100 Pine Street, 11th Floor, San Francisco, CA 94111. 89 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 14 - COMMITMENTS AND CONTINGENCIES A.City Litigation The City is a defendant in several lawsuits arising from its normal operations. City management is of the opinion that the potential claims against the City not covered by insurance resulting from such litigation would not materially affect the basic financial statements of the City. B.District As of June 30, 2020, SRSD had several contracts for sewer improvement projects with remaining obligations of approximately $2,830,000, the majority of which are expected to be completed within the 2020-2021 fiscal year. NOTE 15 - SUCCESSOR AGENCY TO THE REDEVELOPMENT AGENCY PRIVATE-PURPOSE TRUST FUND (SUCCESSOR AGENCY) ACTIVITIES A. Redevelopment Dissolution In an effort to mitigate its budget deficit, the State of California adopted ABx1 26 on June 28, 2011, amended by AB1484 on June 27, 2012, which suspended all new redevelopment activities except for limited specified activities as of that date and dissolved redevelopment agencies on January 31, 2012. The suspension provisions prohibited all redevelopment agencies from a wide range of activities, including incurring new indebtedness or obligations, entering into or modifying agreements or contracts, acquiring or disposing of real property, taking actions to adopt or amend redevelopment plans and other similar actions, except actions required by law or to carry out existing enforceable obligations, as defined in ABx1 26. In addition, ABx1 26 and AB1484 directed the State Controller to review the activities of all redevelopment agencies and successor agencies to determine whether an asset transfer between an agency and any public agency occurred on or after January 1, 2011. If an asset transfer did occur and the public agency that received the asset is not contractually committed to a third party for the expenditure or encumbrance of the asset, the legislation requires the State Controller to order the asset returned to the redevelopment agency. This review was performed in May 2013, and a report issued on July 29, 2013 (see section B of this footnote). The City elected to become the Successor Agency to the Redevelopment Agency, and on February 1, 2012, the Redevelopment Agency’s remaining net assets were distributed to the Successor Agency. ABx1 26 requires the establishment of an Oversight Board to oversee the activities of the Successor Agency and one was established on April 2, 2012. On July 1, 2018, the County of Marin formed a county-wide Oversight Board to oversee the activities of all Successor Agencies within the County, including San Rafael. The activities of the Successor Agency are subject to review and approval of the Oversight Board, which is comprised of seven members. The activities of the Successor Agency are reported in the Successor Agency to the Redevelopment Agency Private-Purpose Trust Fund as the activities are under the control of the Oversight Board. The City provides administrative services to the Successor Agency to wind down the affairs of the former Redevelopment Agency. 90 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 15 - SUCCESSOR AGENCY TO THE REDEVELOPMENT AGENCY PRIVATE-PURPOSE TRUST FUND (SUCCESSOR AGENCY) ACTIVITIES (Continued) Pursuant to the dissolution of the City of San Rafael Redevelopment Agency, certain assets of the Redevelopment Agency were distributed to the Housing Successor and all remaining Redevelopment Agency assets and liabilities were distributed to the Successor Agency. The City elected to become the Housing Successor and on February 1, 2012. Assets and Liabilities relating to the Housing Successor are reported in the City’s Low and Moderate Income Housing Special Revenue Fund. B. Redevelopment Property Tax Trust Fund (RPTTF) The Successor Agency’s primary source of revenue comes from the RPTTF allocation distributed by the County. Property tax revenues for each Project Area are deposited into the RPTTF, which redistributes each Project Area’s tax increment under specified formulas. The County Auditor administers the RPTTF and disburses twice annually from this fund pass-through payments to affected taxing entities, an amount equal to the total of obligation payments that are required to be paid from tax increment as denoted on the Recognized Obligation Payment Schedule (“ROPS”). The disbursements are established in the treasury of the Successor Agencies, and various allowed administrative fees and allowances. Any remaining balance is then distributed by the County Auditor back to affected taxing entities under a prescribed method that accounts for pass-through payments. The County Auditor is also responsible for the distributing other monies received from the Successor Agency (from sale of assets, etc.) to the affected taxing entities. Successor agencies in turn will use the amounts deposited into their respective funds to make payments for principal and interest on loans and monies advanced to or indebtedness incurred by the dissolved redevelopment agencies. C. Long-Term Debt 1999 Tax Allocation Bonds and Capital Appreciation Bonds On June 16, 1999, the former Agency issued Tax Allocation Bonds in the amount of $23,504,004. The bonds were issued as Current Interest Bonds in the aggregate principal amount of $21,115,000 and as Capital Appreciation Bonds in the original amount of $2,389,004. The proceeds of the bonds were used to finance certain redevelopment activities of benefit to the former Agency’s Central San Rafael Redevelopment Project Area. In December 2009 of the former Agency exercised the redemption option of the Current Interest Bonds. The outstanding balance of the Bonds was refunded, on a current basis, through the issuance of the 2009 Tax Allocation Refunding Bonds as discussed below. The Capital Appreciation Bonds mature annually after December 1 from 2018 to 2022, in amounts ranging from $1,440,000 to $2,070,000 and bear interest at rates from 5.58% to 5.60%. Interest on the Capital Appreciation Bonds will compound on each interest premium date and will be payable solely at maturity. The bonds are secured, on parity with the 1992 and 1995 bonds (refunded in 2002), by a pledge and a lien on tax revenues and amounts on deposit in certain funds and accounts held by the fiscal agent. 91 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 15 - SUCCESSOR AGENCY TO THE REDEVELOPMENT AGENCY PRIVATE-PURPOSE TRUST FUND (SUCCESSOR AGENCY) ACTIVITIES (Continued) 2002 Tax Allocation Refunding Bonds On October 9, 2002, the former Agency issued Tax Allocation Refunding Bonds in the amount of $25,020,000. The proceeds of the bonds were used to refund the 1992 Tax Allocation Refunding Bonds and the 1995 Tax Allocation Bonds. The Bonds mature annually each December 1 from 2002 to 2022, in amounts ranging from $540,000 to $1,920,000 and bear interest at rates ranging from 2.00% to 5.25%. Interest is payable semiannually on June 1 and December 1. The Bonds maturing on or after December 1, 2013, are subject to optional redemption prior to maturity, in whole or in part, and by lot within any one maturity, prior to their respective maturity dates, on any date on or after December 1, 2012, at a price equal to the principal amount, plus accrued interest on the redemption date. The bonds are payable from tax revenues to be derived from the redevelopment activities of the former Agency related to the Central San Rafael Redevelopment Project Area. 2009 Tax Allocation Refunding Bonds On December 14, 2009, the former Agency issued 2009 Tax Allocation Refunding Bonds in the amount of $14,660,000 bearing interest at rates from 3.00% to 5.00%. The proceeds of the Series 2009 Bonds were used to refund the former Agency’s 1999 Tax Allocation Current Interest Bonds and to advance funds to the City to finance street and parking improvements for the benefit of the Agency’s Central San Rafael Redevelopment Project. Principal payments are due annually on December 30 and interest payable semiannually on June 30 and December 30. The Series 2009 Bonds maturing on or before December 1, 2019, are not subject to optional redemption prior to their respective stated maturities. The Series 2009 Bonds maturing on or after December 1, 2020, are subject to optional redemption as a whole or in part either on a pro rata basis among maturities or in inverse order of maturity, and by lot within any one maturity, prior to their respective maturity dates, at the option of the Agency, on any date on or after December 1, 2019, at a price equal to the principal amount of such Series 2009 Bonds called for redemption, together with interest accrued on the date fixed for redemption, without premium. Use of Tax Increment The former Agency pledged all future tax increment revenues for the repayment of the 1999 Capital Appreciation Bonds, and the 2002 and 2009 Tax Allocation Refunding Bonds. The pledge of all future tax increment revenues ends upon repayment of $10.1 million in remaining debt service on the Bonds, which is scheduled to occur in 2023. For fiscal year June 30, 2020, tax increment revenue amounted to $3.9 million which was used to make the debt service payment of $3.8 million. The bond covenants contain events of default that require the revenue of the Agency to be applied by the Trustee as specified in the terms of the agreement if any of the following conditions occur: default on debt service payments; the failure of the Agency to observe or perform the conditions, covenants, or agreement terms of the debt; bankruptcy filing by the Agency; or if any court or competent jurisdiction shall assume custody or control of the Agency. The Agency’s bonds also contain a subjective acceleration clause that allows the trustees or holders, who hold the majority of the aggregate principal amount of the notes, to accelerate payment of the entire principal amount outstanding and interest accrued to become immediately due if they determine that a material adverse change occurs. 92 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 15 - SUCCESSOR AGENCY TO THE REDEVELOPMENT AGENCY PRIVATE-PURPOSE TRUST FUND (SUCCESSOR AGENCY) ACTIVITIES (Continued) The following table summarizes the activity for the fiscal year ended June 30, 2020: Authorized Balance Balance Current and Issued June 30, 2019 Additions Retirements June 30, 2020 Portion San Rafael Redevelopment Agency 1999 Tax Allocation Bonds Capital Appreciation Bonds 5.58%-5.6%, due 12/1/2022 $2,389,004 $5,686,850 $282,463 $1,440,000 $4,529,313 $1,440,000 2002 Tax Allocation Refunding Bonds 2.00%-5.25%, due 12/1/2021 25,020,000 1,770,000 565,000 1,205,000 590,000 2009 Tax Allocation Refunding Bonds 3.00%-5.00%, due 12/1/2022 14,660,000 5,435,000 1,265,000 4,170,000 1,320,000 Add: deferred bond premium costs 319,440 79,861 239,579 Total Successor Agency Long-term Debt $13,211,290 $282,463 $3,349,861 $10,143,892 $3,350,000 Debt Service Requirements Annual debt service requirements are shown below: For the Year Ended June 30 Principal Interest 2021 $3,350,000 $214,175 2022 3,445,000 120,819 2023 3,530,000 36,500 Totals 10,325,000 $371,494 Reconciliation of long-term debt: Less: unaccreted discount (420,687) Less: deferred bond premium costs 239,579 $10,143,892 D. Other Long-Term Obligations During the fiscal year ending June 30, 2013, the San Rafael Successor Agency Oversight Board approved two personnel-related obligations of the former Redevelopment Agency. On August 30, 2012, the Oversight Board approved the inclusion of $1,904,431, representing the unfunded pension liability attributable to former Redevelopment Agency employees; the repayment is being made in ten equal, annual installments. The following table summarizes the activity for the fiscal year ended June 30, 2020: Approved Balance Balance Amount June 30, 2019 Retirements June 30, 2020 Unfunded Pension Liabilit y $1,904,431 $380,887 $190,443 $190,444 Annual repayment requirements are shown below: For the Year Ended June 30 Principal 2021 $190,444 93 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2020 NOTE 15 - SUCCESSOR AGENCY TO THE REDEVELOPMENT AGENCY PRIVATE-PURPOSE TRUST FUND (SUCCESSOR AGENCY) ACTIVITIES (Continued) E. Commitment and Contingencies State Approval of Enforceable Obligation The Successor Agency prepares a Recognized Obligation Payment Schedule (ROPS) semi- annually that contains all proposed expenditures for the subsequent six-month period. The ROPS is subject to the review and approval of the Oversight Board as well as the State Department of Finance. As of June 30, 2020, the Successor Agency had prepared thirteen ROPS, all of which have been approved by the Oversight Board and the California Department of Finance. The Department of Finance has stated that all items on a future ROPS are subject to a subsequent review. The amount, if any, of current obligations that may be denied by the Department of Finance cannot be determined at this time. The City expects such amounts, if any, to be immaterial. 94 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2020 Measurement date 6/30/2014 6/30/2015 6/30/2016 6/30/2017 6/30/2018 City's proportionate share 30.0453% 36.7394% 34.9538% 32.7180% 33.4752% Proportionate share of total pension liability $677,753,565 $907,195,058 $900,629,287 $878,483,703 $947,923,920 Proportionate share of fiduciary net position 603,499,779 764,871,931 733,574,437 757,834,016 837,356,062 Proportionate share of the net pension liability $74,253,786 $142,323,127 $167,054,850 $120,649,687 $110,567,858 Plan fiduciary net position as a percentage of the total pension liability 89.04%84.31%84.31%86.27%88.34% Covered payroll (report date)$31,073,560 $32,126,272 $32,885,135 $36,349,651 $33,106,430 Net pension liability as a percentage of covered payroll 238.96%443.01%508.00%331.91%333.98% Measurement date 6/30/2019 City's proportionate share 36.6081% Proportionate share of total pension liability $1,082,900,638 Proportionate share of fiduciary net position 949,023,107 Proportionate share of the net pension liability $133,877,531 Plan fiduciary net position as a percentage of the total pension liability 87.64% Covered payroll (report date)$32,887,922 Net pension liability as a percentage of covered payroll 407.07% * - The fiscal year ended June 30, 2015 was the first year of implementation, therefore only six years are shown. Cost-Sharing Multiple Employer Plan Schedule of the City's Proportionate Share of the Net Pension Liability Last 10 years* 95 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2020 Schedule of Contributions Cost-Sharing Multiple Employer Defined Benefit Pension Plan Last 10 years (subject to available information: first year of implementation was Fiscal Year ended June 30, 2015) Fiscal year ended, June 30 2015 Contractually required contribution $17,802,358 Contributions in Relation to the Contractually required contribution 17,802,358 Contribution Deficiency/ (Excess)-$ Covered payroll $31,073,560 Contributions as a percentage of covered payroll 57.29% Notes to Schedule Valuation Date / Timing 6/30/2013 (for contributions made in FY2014-2015) Key Methods and Assumptions Used to Determine Contribution Rates (for FY2014-15): Actuarial cost method Entry Age Normal Cost Method Amortization method Level percentage of payroll with separate period for Extraordinary Actuarial Loss from 2009 Remaining Amortization period Unfunded liability - 17 years / Extraordinary Actuarial Loss - 25 years Asset valuation method 5-year smoothed market, 80% /120% corridor around market Inflation 3.25% Salary increases 3.25% plus merit component based on employee classification and years of service Investment Rate of Return 7.50% Retirement Age Healthy Mortality Sex distinct RP-2000 Combined Mortality projected to 2010 using Scale AA with ages set back one year for male members / two years for female members Disabled Mortality Sex distinct RP-2000 Combined Mortality projected to 2010 using Scale AA with ages set forward three years for all members Classic Tiers: Safety - 50, Miscellaneous - 55; PEPRA Tiers: Safety - 57, Miscellaneous - 62 96 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2020 Fiscal year ended, June 30 2016 Contractually required contribution $19,339,577 Contributions in Relation to the Contractually required contribution 19,339,577 Contribution Deficiency/ (Excess)-$ Covered payroll $32,126,272 Contributions as a percentage of covered payroll 60.20% Notes to Schedule Valuation Date / Timing 6/30/2014 (for contributions made in FY2015-2016) Key Methods and Assumptions Used to Determine Contribution Rates (for FY2015-16): Actuarial cost method Entry Age Normal Cost Method Amortization method Level percentage of payroll with separate period for Extraordinary Actuarial Loss from 2009 Remaining Amortization period Unfunded liability - 16 years / Extraordinary Actuarial Loss - 24 years Asset valuation method 5-year smoothed market, 80% /120% corridor around market Inflation 3.25% Salary increases 3.25% plus merit component based on employee classification and years of service Investment Rate of Return 7.25% Retirement Age Healthy Mortality CalPERS 2014 Pre-Retirement Non-Industrial Death rates (plus Duty-Related Death rates for Safety Members), with the 20-year static projection used by CalPERS replaced by generational improvements from a base year of 2009 using Scale MP-2014 Disabled Mortality CalPERS 2014 Disability Mortality rates (Non-Industrial rates for Miscellaneous members and Industrial Disability rates for Safety members), adjusted by 90% for Males and Females (Miscellaneous and Safety) with the 20-year static projection used by CalPERS replaced by generational improvements from a base year of 2009 using Scale MP-2014 Schedule of Contributions Classic Tiers: Safety - 50, Miscellaneous - 55; PEPRA Tiers: Safety - 57, Miscellaneous - 62 Defined Benefit Pension Plan Last 10 years (subject to available information: first ye ar of implementation was Fiscal Year ended June 30, 2015) (Continued) Cost-Sharing Multiple Employer 97 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2020 Fiscal year ended, June 30 2017 Contractually required contribution $20,003,001 Contributions in Relation to the Contractually required contribution 20,003,001 Contribution Deficiency/ (Excess)-$ Covered payroll $32,885,135 Contributions as a percentage of covered payroll 60.83% Notes to Schedule Valuation Date / Timing 6/30/2015 (for contributions made in FY2016-2017) Key Methods and Assumptions Used to Determine Contribution Rates (for FY2016-17): Actuarial cost method Entry Age Normal Cost Method Amortization method Level percentage of payroll with separate period for Extraordinary Gains or Losses (24 years remaining as of 6/30/14), the remaining UAL as of June 30, 2013 (16 years as of 6/30/14), and additional layers for unexpected changes in UAL after 6/30/13 (24 years for gains and losses with a 5-year phase-in/out and 22 years for assumption changes with a 3-year phase-in/out). Remaining Amortization period 19 years remaining as of June 30, 2016 Asset valuation method Market Value Inflation 2.75% per year Salary increases 3.00% plus merit component based on employee classification and years of service Investment Rate of Return 7.25% Retirement Age Healthy Mortality Sex distinct RP-2000 combined mortality projected to 2010 using Scale AA with ages set back one year for male members/two years for female members Disabled Mortality Sex distinct RP-2000 combined mortality projected to 2010 using Scale AA with ages set forward three years for all members Schedule of Contributions Defined Benefit Pension Plan Last 10 years (subject to available information: first year of implementation was Fiscal Year ended June 30, 2015) Classic Tiers: Safety - 50, Miscellaneous - 55; PEPRA Tiers: Safety - 57, Miscellaneous - 62 (Continued) Cost-Sharing Multiple Employer 98 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2020 Fiscal year ended, June 30 2018 Contractually required contribution $20,167,435 Contributions in Relation to the Contractually required contribution 20,167,435 Contribution Deficiency/ (Excess)-$ Covered payroll $36,349,651 Contributions as a percentage of covered payroll 55.48% Notes to Schedule Valuation Date / Timing 6/30/2016 (for contributions made in FY2017-2018) Key Methods and Assumptions Used to Determine Contribution Rates (for FY2017-18): Actuarial cost method Entry Age Normal Cost Method Amortization method Level percentage of payroll with separate period for Extraordinary Gains or Losses (22 years remaining as of 6/30/16), the remaining UAL as of June 30, 2013 (14 years as of 6/30/16), and additional layers for unexpected changes in UAL after 6/30/13 (24 years for gains and losses with a 5-year phase-in/out and 22 years for assumption changes with a 3-year phase-in/out). Remaining Amortization period 18 years remaining as of June 30, 2017 Asset valuation method Market Value Inflation 2.75% per year Salary increases 3.00% plus merit component based on employee classification and years of service Investment Rate of Return 7.25% Retirement Age Healthy Mortality Sex distinct CalPERS 2014 Pre-Retirement Non-Industrial Death rates (plus Duty-Related death rates for Safety members) Disabled Mortality Sex distinct RP-2000 combined mortality projected to 2010 using Scale AA with ages set forward three years for all members Disabled Mortality Rates of mortality among disabled members are given by CalPERS 2017 Disability Mortality rates (Non-Industrial rates for Miscellaneous members and Industrial Disability rates for Safety members), adjusted by 90% for Males (Miscellaneous and Safety) and 90% for Miscellaneous Females, with the 15-year static projection used by CalPERS replaced by generational improvements from a base year of 2014 using Scale MP-2017. Schedule of Contributions Cost-Sharing Multiple Employer Defined Benefit Pension Plan Last 10 years (subject to available information: first ye ar of implementation was Fiscal Year ended June 30, 2015) (Continued) Classic Tiers: Safety - 50, Miscellaneous - 55; PEPRA Tiers: Safety - 57, Miscellaneous - 62 99 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2020 Fiscal year ended, June 30 2019 Contractually required contribution $20,352,203 Contributions in Relation to the Contractually required contribution 20,352,203 Contribution Deficiency/ (Excess) $0 Covered payroll $33,106,430 Contributions as a percentage of covered payroll 61.48% Notes to Schedule Valuation Date / Timing 6/30/2017 (for contributions made in FY2018-2019) Key Methods and Assumptions Used to Determine Contribution Rates (for FY2018-19): Actuarial cost method Entry Age Normal Cost Method Amortization method Level percentage of payroll with separate period for Extraordinary Gains or Losses (21 years remaining as of 6/30/17), the remaining UAL as of June 30, 2013 (13 years as of 6/30/17), and additional layers for unexpected changes in UAL after 6/30/13 (24 years for gains and losses with a 5-year phase-in/out and 22 years for assumption changes with a 3-year phase-in/out). Remaining Amortization period 17 years remaining as of June 30, 2018 Asset valuation method Market Value Inflation 2.75% per year Salary increases 3.00% plus merit component based on employee classification and years of service Investment Rate of Return 7.00% Retirement Age Healthy Mortality Rates of mortality for active members are specified by CalPERS 2017 Pre-Retirement Non-Industrial Death Rates (plus Duty-Related Death rates for Safety members), with the 20-year static projection used by CalPERS replaced by generational improvements from a base year of 2014 using Scale MP-2017. Disabled Mortality Rates of mortality among disabled members are given by CalPERS 2017 Disability Mortality rates (Non-Industrial rates for Miscellaneous members and Industrial Disability rates for Safety members), adjusted by 90% for Males (Miscellaneous and Safety) and 90% for Miscellaneous Females, with the 20-year static projection used by CalPERS replaced by generational improvements from a base year of 2014 using Scale MP-2017. Cost-Sharing Multiple Employer Schedule of Contributions Defined Benefit Pension Plan Last 10 years (subject to available information: first ye ar of implementation was Fiscal Year ended June 30, 2015) (Continued) Classic Tiers: Safety - 50, Miscellaneous - 55; PEPRA Tiers: Safety - 57, Miscellaneous - 62 100 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2020 Fiscal year ended, June 30 2020 Contractually required contribution $20,031,614 Contributions in Relation to the Contractually required contribution 20,031,614 Contribution Deficiency/ (Excess) -$ Covered payroll $32,887,922 Contributions as a percentage of covered payroll 60.91% Notes to Schedule Valuation Date / Timing 6/30/2018 (for contributions made in FY2019-2020) Key Methods and Assumptions Used to Determine Contribution Rates (for FY2019-20): Actuarial cost method Entry Age Normal Cost Method Amortization method Level percentage of payroll with separate period for Extraordinary Gains or Losses (20 years remaining as of 6/30/18), the remaining UAL as of June 30, 2013 (12 years as of 6/30/18), and additional layers for unexpected changes in UAL after 6/30/13 (24 years for gains and losses with a 5-year phase-in/out and 22 years for assumption changes with a 3-year phase-in/out). Remaining Amortization period 12 years remaining as of June 30, 2018 Asset valuation method Market Value Inflation 2.75% per year Salary increases 3.00% plus merit component based on employee classification and years of service Investment Rate of Return 7.00% Retirement Age Healthy Mortality Disabled Mortality Rates of mortality for active members are specified by CalPERS 2017 Pre-Retirement Non-Industrial Death rates (plus Duty-Related Death rates for Safey members), with the 15-year static projection used by CalPERS replaced by generational improvements from a base year of 2014 using Scale MP-2017. 0% of all Miscellaneous and 95% of all Safety pre-retirement deaths are assumed to be service-connected. Rates of mortality for retired members and their beneficiaries are given by CalPERS 2017 Post-Retirement Healthy Morality rates, adjusted by 90% for Males (Miscellaneous and Safety), with the 15-year static projection used by CalPERS replaced by generational improvements from a base year of 2014 using Scale MP-2017. Schedule of Contributions Defined Benefit Pension Plan Last 10 years (subject to available information: first ye ar of implementation was Fiscal Year ended June 30, 2015) (Continued) Classic Tiers: Safety - 50, Miscellaneous - 55; PEPRA Tiers: Safety - 57, Miscellaneous - 62 Cost-Sharing Multiple Employer 101 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2020 Measurement period 2015-16 2016-17 2017-18 2018-19 Total OPEB liability Service cost $766,000 $789,000 $822,000 $805,000 Interest 3,447,000 3,540,000 3,435,000 3,515,000 Differences between expected and actual experience (4,107,000) (3,040,000) Assumption changes 4,831,000 (2,735,000) Benefit payments, including refunds of employee contributions (2,896,000) (3,015,000) (3,028,000) (3,072,000) Net change in total OPEB liability 1,317,000 2,038,000 1,229,000 (4,527,000) Total OPEB liability - beginning 48,226,000 49,543,000 51,581,000 52,810,000 Total OPEB liability - ending (a)$49,543,000 $51,581,000 $52,810,000 $48,283,000 OPEB fiduciary net position Contributions - employer $2,896,000 $3,475,000 $3,573,000 $3,725,000 Net investment income 157,000 1,675,000 1,425,000 1,224,000 Benefit payments, including refunds of employee contributions (2,896,000) (3,015,000) (3,028,000) (3,072,000) Administrative expense (7,000) (8,000) (44,000) (12,000) Net change in plan fiduciary net position 150,000 2,127,000 1,926,000 1,865,000 Plan fiduciary net position - beginning 15,608,000 15,758,000 17,885,000 19,811,000 Plan fiduciary net position - ending (b)$15,758,000 $17,885,000 $19,811,000 $21,676,000 Plan net OPEB liability - ending (a) - (b)$33,785,000 $33,696,000 $32,999,000 $26,607,000 Plan fiduciary net position as a percentage of the total OPEB liability 31.81%34.67%37.51%44.89% Covered employee payroll (Report Date)$32,885,000 $36,350,000 $40,496,000 $39,920,000 Plan net OPEB liability as a percentage of covered employee payroll 102.74% 92.70% 81.49% 66.65% Historical information is required only for the measurement periods for which GASB 75 is applicable. Other Post-Employment Benefits (OPEB) SCHEDULE OF CHANGES IN NET OPEB LIABILITY AND RELATED RATIOS Last Ten Fiscal Years Agent Multiple Employer Defined Benefit Plan 102 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2020 SCHEDULE OF CONTRIBUTIONS Agent Multiple Employer Defined Benefit Plan Last Ten Fiscal Years Other Post-Employment Benefits (OPEB) Fiscal year 2016-17 Actuarially determined contribution $3,450,000 Contributions in relation to the actuarially determined contribution (3,475,000) Contribution deficiency (excess)($25,000) Covered employee payroll $32,885,000 Contributions as a percentage of covered employee payroll 10.49% GASB 75 requires this information for plans funding with OPEB trusts be reported in the employer's Required Supplementary Information for 10 years or as many years as are available upon implementation. The June 30, 2017 actuarial valuation provided the Actuarially Determined Contributions for fiscal years ending 06/30/17. Notes to Schedule: Actuarially determined contribution rates are calculated as of June 30, two years prior to the end of the fiscal year in which contributions are reported. Methods and assumptions used to determine contribution rates: Valuation Date June 30, 2015 Actuarial Cost Method Entry Age Normal, Level Percentage of Payroll Amortization Method Level dollar amount, over approximate 10-year period Remaining Amortization 19 years remaining as of June 30, 2016 Asset Valuation Method Investment gains and losses spread over 5-year rolling period Discount Rate 7.25% Contribution Policy City contributes full ADC General Inflation 2.75% per annum Mortality, Retirement, Disability, Termination Same as June 30, 2015 actuarial valuation Mortality Improvement Expected Long-Term Rate of Return on Investments Salary Increases Aggregate - 3% Merit - 6/30/14 MCERA assumptions Medical Trend Non-Medicare - 6.5% for 2017, decreasing 0.5% per year to an ultimate rate of 4.50% for 2021 and Medicare - 6.7% for 2017, decreasing to an ultimate rate of 4.5% for 2021 and later years Healthcare participation for future retirees Capped benefit: 100% currently covered, 80% currently waived PEMHCA minimum - 60% Cap Increases None Mortality projected fully generational with Scale MP-14, modified Same as discount rate - expected City contributions projected to 103 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2020 SCHEDULE OF CONTRIBUTIONS Last Ten Fiscal Years Other Post-Employment Benefits (OPEB) (Continued) Fiscal year 2017-18 Actuarially determined contribution $3,530,000 Contributions in relation to the actuarially determined contribution (3,563,000) Contribution deficiency (excess)($33,000) Covered employee payroll $36,350,000 Contributions as a percentage of covered employee payroll 9.80% GASB 75 requires this information for plans funding with OPEB trusts be reported in the employer's Required Supplementary Information for 10 years or as many years as are available upon implementation. The June 30, 2017 actuarial valuation provided the Actuarially Determined Contributions for fiscal years ending 6/30/18 and 6/30/19. Notes to Schedule: Actuarially determined contribution rates are calculated as of June 30, two years prior to the end of the fiscal year in which contributions are reported. Methods and assumptions used to determine contribution rates: Valuation Date June 30, 2017 Actuarial Cost Method Entry Age Normal, Level Percentage of Payroll Amortization Method Level dollar amount, over approximate 10-year period Remaining Amortization 18 years remaining as of June 30, 2017 Asset Valuation Method Investment gains and losses spread over 5-year rolling period Discount Rate 6.75% at June 30, 2017; 7.25% at June 30, 2016 Contribution Policy City contributes full ADC General Inflation 2.75% per annum Mortality, Retirement, Disability, Termination Same as June 30, 2017 actuarial valuation Mortality Improvement Expected Long-Term Rate of Return on Investments Salary Increases Aggregate - 3% Merit - 6/30/17 MCERA assumptions Medical Trend Non-Medicare - 7.5% for 2019, decreasing to 4.00% for 2076 and later years and Medicare - 6.5% for 2019, decreasing to 4.00% for 2076 and later years Healthcare participation for future retirees Capped benefit: 100% currently covered, 80% currently waived PEMHCA minimum - 60% Cap Increases None Agent Multiple Employer Defined Benefit Plan Post-retirement mortality: projected fully generational with Scale MP- Pre-retirement mortality: projected 15-year static with 90% of Scale MP-2016 Same as discount rate - expected City contributions projected to keep sufficient plan assets to pay all benefits from trust 104 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2020 SCHEDULE OF CONTRIBUTIONS Last Ten Fiscal Years Other Post-Employment Benefits (OPEB) (Continued) Fiscal year 2018-19 Actuarially determined contribution $3,612,000 Contributions in relation to the actuarially determined contribution (3,725,000) Contribution deficiency (excess) ($113,000) Covered employee payroll $40,496,000 Contributions as a percentage of covered employee payroll 9.20% GASB 75 requires this information for plans funding with OPEB trusts be reported in the employer's Required Supplementary Information for 10 years or as many years as are available upon implementation. The June 30, 2017 actuarial valuation provided the Actuarially Determined Contributions for fiscal years ending 6/30/18 and 6/30/19. Notes to Schedule: Actuarially determined contribution rates are calculated as of June 30, two years prior to the end of the fiscal year in which contributions are reported. Methods and assumptions used to determine contribution rates: Valuation Date June 30, 2017 Actuarial Cost Method Entry Age Normal, Level Percentage of Payroll Amortization Method Level dollar amount, over approximate 10-year period Remaining Amortization 18 years remaining as of June 30, 2017 Asset Valuation Method Investment gains and losses spread over 5-year rolling period Discount Rate 6.75% at June 30, 2017; 7.25% at June 30, 2016 Contribution Policy City contributes full ADC General Inflation 2.75% per annum Mortality, Retirement, Disability, Termination Same as June 30, 2017 actuarial valuation Mortality Improvement Expected Long-Term Rate of Return on Investments Salary Increases Aggregate - 3% Merit - 6/30/17 MCERA assumptions Medical Trend Non-Medicare - 7.5% for 2019, decreasing to 4.00% for 2076 and later years and Medicare - 6.5% for 2019, decreasing to 4.00% for 2076 and later years Healthcare participation for future retirees Capped benefit: 100% currently covered, 80% currently waived PEMHCA minimum - 60% Cap Increases None Agent Multiple Employer Defined Benefit Plan Pre-retirement mortality: projected 15-year static with 90% of Scale MP-2016 Post-retirement mortality: projected fully generational with Scale MP-2017 Same as discount rate - expected City contributions projected to keep sufficient plan assets to pay all benefits from trust 105 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2020 SCHEDULE OF CONTRIBUTIONS Last Ten Fiscal Years Other Post-Employment Benefits (OPEB) (Continued) Fiscal year 2019-20 Actuarially determined contribution $3,677,000 Contributions in relation to the actuarially determined contribution (3,784,000) Contribution deficiency (excess)($107,000) Covered employee payroll $39,920,000 Contributions as a percentage of covered employee payroll 9.48% GASB 75 requires this information for plans funding with OPEB trusts be reported in the employer's Required Supplementary Information for 10 years or as many years as are available upon implementation. The June 30, 2019 actuarial valuation provided the Actuarially Determined Contributions for fiscal years ending 6/30/20 and 6/30/21. Notes to Schedule: Actuarially determined contribution rates are calculated as of June 30, two years prior to the end of the fiscal year in which contributions are reported. Methods and assumptions used to determine contribution rates: Valuation Date June 30, 2019 Actuarial Cost Method Entry Age Normal, Level Percentage of Payroll Amortization Method Level dollar amount, over approximate 10-year period Remaining Amortization 16 years remaining as of June 30, 2019 Asset Valuation Method Investment gains and losses spread over 5-year rolling period Discount Rate 6.75% at June 30, 2019 and June 30, 2018, respectively Contribution Policy City contributes full ADC General Inflation 2.75% per annum Mortality, Retirement, Disability, Termination Same as June 30, 2017 actuarial valuation Mortality Improvement Expected Long-Term Rate of Return on Investments Salary Increases Aggregate - 3% Merit - 6/30/19 MCERA assumptions Medical Trend Non-Medicare - 7.25% for 2021, decreasing to an ultimate rate of 4.0% in 2076 and Medicare - 6.3% for 2021, decreasing to an ultimate rate of 4.00% in 2076 Healthcare participation for future retirees Capped benefit: 90% currently covered, 70% currently waived PEMHCA minimum - 60% Cap Increases None Agent Multiple Employer Defined Benefit Plan Mortality projected fully generational with Scale MP-2019 Same as discount rate - expected City contributions projected to keep sufficient plan assets to pay all benefits from trust 106 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT GENERAL FUND AND MAJOR SPECIAL REVENUE FUND BUDGET-TO-ACTUAL STATEMENTS Generally accepted accounting principles dictate that budget-to-actual information in the basic financial statements should be limited to the General Fund and major Special Revenue Funds. This section is provided for the presentation of Budget-to-Actual Statements for the General Fund, Traffic and Housing Mitigation, and the Gas Tax Special Revenue Funds. Budgets are adopted on a basis consistent with Generally Accepted Accounting Principles for the General Fund and Special Revenue Funds. 107 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL GENERAL FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2020 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Taxes and special assessments $70,938,000 $71,138,000 $69,242,196 ($1,895,804) Licenses and permits 2,629,170 2,629,170 3,047,144 417,974 Fines and forfeitures 383,000 383,000 349,563 (33,437) Use of money and properties 195,527 195,527 371,231 175,704 Intergovernmental 3,391,000 3,391,000 3,229,127 (161,873) Charges for services 2,524,325 2,524,325 3,105,656 581,331 Other revenue 615,000 615,000 942,435 327,435 Total Revenues 80,676,022 80,876,022 80,287,352 (588,670) EXPENDITURES Current: General government 13,221,991 14,022,796 16,119,613 (2,096,817) Public safety 43,119,639 43,252,779 41,615,327 1,637,452 Public works and parks 12,014,274 12,102,400 12,349,130 (246,730) Community development 5,549,524 5,549,526 5,276,887 272,639 Culture and recreation 3,334,072 3,334,071 2,689,531 644,540 Capital outlay 92,776 92,776 92,776 Debt service: Principal 485,261 485,261 618,316 (133,055) Interest and fiscal charges 2,468,963 2,468,963 2,482,778 (13,815) Total Expenditures 80,286,500 81,308,572 81,151,582 156,990 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 389,522 (432,550) (864,230) (431,680) OTHER FINANCING SOURCES (USES) Note proceeds 23,999 23,999 Transfers in 4,701,350 4,737,499 4,737,499 Transfers out (6,077,000) (6,623,159) (6,623,159) Total Other Financing Sources (Uses) (1,375,650) (1,885,660) (1,861,661) 23,999 Net Change in Fund Balance ($986,128) ($2,318,210) (2,725,891) ($407,681) FUND BALANCE, BEGINNING OF YEAR 12,532,571 FUND BALANCE, END OF YEAR $9,806,680 108 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL TRAFFIC AND HOUSING MITIGATION SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2020 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Taxes and special assessments Use of money and properties $59,661 $59,661 $116,876 $57,215 Charges for services 100,000 100,000 612,867 512,867 Other revenue 286,551 286,551 Total Revenues 159,661 159,661 1,016,294 856,633 EXPENDITURES Current: General government 25,000 25,000 25,000 Public works and parks 100,000 335,559 99,232 236,327 Capital outlay 776,826 505,588 271,238 Total Expenditures 125,000 1,137,385 604,820 532,565 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 34,661 (977,724) 411,474 1,389,198 OTHER FINANCING SOURCES (USES) Transfers Out (1,387,068) (1,387,068) Total Other Financing Sources (Uses) (1,387,068) (1,387,068) Net Change in Fund Balance $34,661 ($2,364,792) (975,594) $1,389,198 5,197,376 FUND BALANCE, END OF YEAR $4,221,782 FUND BALANCE, BEGINNING OF YEAR 109 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL GAS TAX SPECIAL REVENUE FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2020 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Use of money and properties $45,770 $45,770 $106,175 $60,405 Intergovernmental 3,826,537 9,660,041 4,887,201 (4,772,840) Charges for services 1,043,600 1,043,600 2,132,590 1,088,990 Other revenue 199,893 199,893 Total Revenues 4,915,907 10,749,411 7,325,859 (3,423,552) EXPENDITURES Current: General government Public works and parks 1,335,000 7,300,949 4,273,277 3,027,672 Capital outlay 50,000 5,215,121 1,531,254 3,683,867 Total Expenditures 1,385,000 12,516,070 5,804,531 6,711,539 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 3,530,907 (1,766,659) 1,521,328 3,287,987 OTHER FINANCING SOURCES (USES) Transfers in 1,168,168 1,168,168 Transfers out (900,000) (900,000) (900,000) Total Other Financing Sources (Uses) (900,000) 268,168 268,168 Net Change in Fund Balance $2,630,907 ($1,498,491) 1,789,496 $3,287,987 FUND BALANCE, BEGINNING OF YEAR 4,728,111 FUND BALANCE, END OF YEAR $6,517,607 110 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT SUPPLEMENTARY INFORMATION DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL ESSENTIAL FACILITIES CAPITAL PROJECTS FUND SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2020 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Use of money and property $599,667 $599,667 Other revenue 189,864 189,864 Total Revenues 789,531 789,531 EXPENDITURES Capital outlay $25,000,000 $25,795,248 23,593,767 2,201,481 Total Expenditures 25,000,000 25,795,248 23,593,767 2,201,481 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (25,000,000) (25,795,248) (22,804,236) 2,991,012 OTHER FINANCING SOURCES (USES) Transfers in 4,148,000 5,123,865 5,123,865 Transfers out (2,235,200) (2,235,200) (2,235,200) Total Other Financing Sources (Uses) 1,912,800 2,888,665 2,888,665 Net Change in Fund Balance ($23,087,200) ($22,906,583) (19,915,571) $2,991,012 FUND BALANCE, BEGINNING OF YEAR 32,390,499 FUND BALANCE, END OF YEAR $12,474,928 112 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT NON-MAJOR GOVERNMENTAL FUNDS SPECIAL REVENUE FUNDS Recreation Revolving Fund – Established to administer the Community Services Department’s program and facility rental charge and accounts for the Recreation Memorial Fund. Baypoint Lagoons Assessment District Fund – The Baypoint Lagoons Lighting and Landscape District was formed to protect and enhance wildlife habitat and water quality in Baypoint (Spinnaker) Lagoon and the adjacent diked salt marsh. Household Hazmat Facility Fund – Established to account for State mandated hazardous materials information, collection, and reporting. Expenditures include inspection of businesses for compliance with regulations. This fund also serves as the depository for countywide Household Hazardous Waste Program. Childcare Fund – Established to administer and account for childcare programs at eight sites throughout the City. Loch Lomond #10 Community Facilities District Fund – Established to provide maintenance for stormwater and geotechnical mitigation facilities. A Mello Roos District was formed to fund this maintenance. Loch Lomond Marina #2 Community Facilities District Fund – Established to report tax assessments and maintenance expenditures of the District. Library Fund – Established to account for restricted library activities that are intended to be self- funding. Library Assessment Fund – Established to account for a special parcel tax dedicated to public library services and facilities, equipment, and technology improvements. Public Safety Fund – Established for special police services, which are intended to be self-funding. Stormwater Fund – Established to provide for self-funding storm drain maintenance program plus separate programs through the County and Bay Area to educate residents about urban runoff pollution. Development Services Fund – Established to account for development activities that are supported by external sources of funds. This fund does not account for the operating costs of building, planning, and engineering, which are located in the General Fund. Grants Fund – Established to account for grants for the Library, Childcare, Police and Falkirk Cultural Center. Parkland Dedication Fund – Established to account for long-term developer deposits used to enhance and maintain the park structure within City limits. Emergency Medical Services Fund – Established to account for the Emergency Medical Services and Transportation program that provides services to all segments of the community. Business Improvement Fund – Established to account for activities held in Downtown San Rafael. 113 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT NON-MAJOR GOVERNMENTAL FUNDS (Continued) Pt. San Pedro Maintenance Portion Special Revenue Fund – Established to account for ongoing maintenance needs within the Pt. San Pedro assessment district. Low and Moderate Income Housing Special Revenue Fund – Established to account for the activities related to the assets assumed by the City as Housing Successor to the San Rafael Redevelopment Agency for the housing activities of the former Redevelopment Agency. Measure A Open Space Special Revenue Fund – Established to account for the use of proceeds distributed by the County of Marin from Measure A, as well as other supplementary matching or City- funding for the operation or maintenance of open space, park or recreation lands. Measure G – Cannabis Special Revenue Fund – Established for the purpose of reporting tax revenue and expenditures related to Cannabis activities authorized by Measure G. Measure C – Wildfire Prevention Special Revenue Fund – Established for the purpose of reporting tax revenue and expenditures related to coordinated wildfire prevention activities authorized by Measure C, a parcel tax measure approved on March 3, 2020 by a two-thirds supermajority vote. This is a ten-year parcel tax levying up to 10 cents per building square foot tax and $75 per multifamily unit. DEBT SERVICE FUNDS Peacock Gap Assessment District Fund – Established to accumulate funds for the payment of principal and interest for the 1993 Bonds which matured in 2005. The proceeds were used to refund the 1984 Bonds, which provided for the construction of public improvements in the project area. Financing is to be provided by property tax increments generated within the specific geographic region described by the bond assessment district. Mariposa Assessment District Fund – Established to accumulate funds for the payment of principal and interest for the 1993 Bond, which matured in 2008. The proceeds were used to finance the grading and paving of Mariposa Road. 1997 Financing Authority Revenue Bonds Fund – Established to accumulate funds for the payment of principal and interest for the 1997 Revenue Bonds which matured in 2011. The proceeds were used to purchase the previously issued special assessment bonds. Financing is to be provided by property tax increments generated within the specific geographic region described by the bond assessment district. CAPITAL PROJECTS FUNDS Capital Improvement Fund – Established for the costs associated with major capital improvement projects not tied to specific funds elsewhere. Improvements could include medians, parkways, sidewalks, and other public assets. Bedroom Tax Fund – Established to collect funds from multiple-unit housing used to pay for maintaining and developing parks within local neighborhoods. Assessment Districts Fund – Established to account for ongoing construction and improvement needs within the following assessment districts: Peacock Gap, Kerner Boulevard, Sun Valley/Lucas Valley Open Space, East San Rafael Drainage Assessment District 1. Park Capital Projects Fund – Established to account for capital improvements for all City owned parks, whether paid for by City funds, grants, donations, or partnership with the community. 114 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEETS FOR THE YEAR ENDED JUNE 30, 2020 SPECIAL REVENUE FUNDS Baypoint Loch Lomond Lagoons Household #10 Recreation Assessment Hazmat Community Revolving District Facility Childcare Facilities Dist. ASSETS Cash and investments $225,194 $209,565 $472,848 $1,270,651 $754,925 Restricted cash and investments Receivables: Accounts 71,753 452,261 17,400 Taxes 127 107 Grants 36,910 Interest Loans Prepaids Total Assets $296,947 $209,692 $925,109 $1,324,961 $755,032 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $78,108 $265,081 $50,875 Deposits payable Developer deposits payable 248,572 Due to other funds Unearned revenue 172,395 Total Liabilities 250,503 513,653 50,875 Fund Balances: Nonspendable Restricted 46,444 $209,692 411,456 1,274,086 $755,032 Committed Assigned Unassigned Total Fund Balances 46,444 209,692 411,456 1,274,086 755,032 Total Liabilities and Fund Balances $296,947 $209,692 $925,109 $1,324,961 $755,032 116 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT SPECIAL REVENUE FUNDS Loch Lomond Marina #2 Community Library Public Development Facilities Dist. Library Assessment Safety Stormwater Services Grants $364,502 $2,456,131 $739,500 $121,144 $911,328 $347,232 $753,106 398 4,014 $364,900 $2,456,131 $739,500 $121,144 $915,342 $347,232 $753,106 $291 $7,279 $25,874 $79,558 $8,701 3,635 291 7,279 25,874 83,193 8,701 $364,900 2,455,840 732,221 $121,144 889,468 264,039 744,405 364,900 2,455,840 732,221 121,144 889,468 264,039 744,405 $364,900 $2,456,131 $739,500 $121,144 $915,342 $347,232 $753,106 (Continued) 117 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEETS FOR THE YEAR ENDED JUNE 30, 2020 SPECIAL REVENUE FUNDS Low and Emergency Pt. San Pedro Moderate Parkland Medical Business Maintenance Income Dedication Services Improvement Portion Housing ASSETS Cash and investments $290,302 $466,514 $8,141 $99,968 $615,662 Restricted cash and investments Receivables: Accounts 278,483 14,555 Taxes 21,679 652 Grants Interest 561 Loans 262,876 Prepaids 7,813 Total Assets $290,302 $774,489 $8,141 $100,620 $893,654 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $317 $48,487 $8,141 $13,119 Deposits payable Developer deposits payable Due to other funds Unearned revenue Total Liabilities 317 48,487 8,141 13,119 Fund Balances: Nonspendable 7,813 Restricted 289,985 718,189 87,501 $893,654 Committed Assigned Unassigned Total Fund Balances 289,985 726,002 87,501 893,654 Total Liabilities and Fund Balances $290,302 $774,489 $8,141 $100,620 $893,654 118 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CAPITAL PROJECTS SPECIAL REVENUE FUNDS DEBT SERVICE FUNDS FUND 1997 Measure C - Peacock Gap Mariposa Financing Measure A Measure G - Wildfire Assessment Assessment Authority Capital Open Space Cannabis Prevention District District Revenue Bonds Improvement $2,875 $16,573 $151,695 $1,345,220 624,245 $220,704 $146,151 10,403 2,783 $220,704 $146,151 $2,875 $16,573 $151,695 $1,982,651 $295 $501 $102,445 6,877 50,709 $70,178 10,617 51,004 70,178 11,118 109,322 169,700 75,973 $2,875 $16,573 $151,695 1,873,329 (11,118) 169,700 75,973 (11,118) 2,875 16,573 151,695 1,873,329 $220,704 $146,151 $2,875 $16,573 $151,695 $1,982,651 (Continued) 119 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEETS FOR THE YEAR ENDED JUNE 30, 2020 CAPITAL PROJECTS FUNDS Total Park Non-Major Bedroom Assessment Capital Open Governmental Tax Districts Projects Space Funds ASSETS Cash and investments $94,907 $223,742 $10,824 $120,920 $12,073,469 Restricted cash and investments 80,464 704,709 Receivables: Accounts 834,452 Taxes 393,832 Grants 47,313 Interest 3,344 Loans 262,876 Prepaids 7,813 Total Assets $94,907 $304,206 $10,824 $120,920 $14,327,808 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $600,813 Deposits payable 95,136 Developer deposits payable 252,207 Due to other funds 131,504 Unearned revenue 172,395 Total Liabilities 1,252,055 Fund Balances: Nonspendable 7,813 Restricted $94,907 $304,206 11,073,985 Committed $10,824 1,884,153 Assigned $120,920 120,920 Unassigned (11,118) Total Fund Balances 94,907 304,206 10,824 120,920 13,075,753 Total Liabilities and Fund Balances $94,907 $304,206 $10,824 $120,920 $14,327,808 120 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT Baypoint Loch Lomond Lagoons Household #10 Recreation Assessment Hazmat Community Revolving District Facility Childcare Facilities Dist. REVENUES Taxes and special assessments $25,368 $21,399 Fines and forfeitures Use of money and properties $44,276 5,610 $6,099 $38,734 $16,777 Intergovernmental 43,074 433,552 Charges for services 1,517,329 173,940 2,751,787 Other revenue 13,893 600 23,870 Total Revenues 1,618,572 30,978 180,639 3,247,943 38,176 EXPENDITURES Current: General government Public safety 135,601 Public works and parks 73,700 15,943 Culture and recreation 3,824,456 3,667,862 Capital outlay Total Expenditures 3,824,456 73,700 135,601 3,667,862 15,943 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (2,205,884) (42,722) 45,038 (419,919) 22,233 OTHER FINANCING SOURCES (USES) Transfers in 2,250,000 59,439 Transfers out (52,840) (848) Total Other Financing Sources (Uses) 2,250,000 (52,840) 58,591 Net Change in Fund Balances 44,116 (42,722) 45,038 (472,759) 80,824 Fund Balance, Beginning 2,328 252,414 366,418 1,746,845 674,208 Fund Balance, Ending $46,444 $209,692 $411,456 $1,274,086 $755,032 SPECIAL REVENUE FUNDS CITY OF SAN RAFAEL COMBINING STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2020 122 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT Loch Lomond Marina #2 Community Library Public Development Facilities Dist. Library Assessment Safety Stormwater Services Grants $79,695 $1,067,786 $825 7,566 $56,867 11,832 8,368 $46,705 $4,691 23,681 $63,694 416,556 5,911 836,240 7,017 73,868 4,735 87,261 93,476 1,079,618 137,562 850,168 46,705 421,247 71,818 5,079 206,065 518,443 316,859 87,171 903,867 46,385 5,079 87,171 903,867 206,065 363,244 590,261 82,182 6,305 175,751 (68,503) 486,924 46,705 (169,014) 100,000 139,655 (414,041) (22,260) 100,000 (414,041) 117,395 82,182 6,305 175,751 31,497 486,924 (367,336) (51,619) 282,718 2,449,535 556,470 89,647 402,544 631,375 796,024 $364,900 $2,455,840 $732,221 $121,144 $889,468 $264,039 $744,405 (Continued) SPECIAL REVENUE FUNDS 123 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL COMBINING STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2020 Low and Emergency Pt. San Pedro - Moderate Parkland Medical Business Maintenance Income Dedication Services Improvement Portion Housing REVENUES Taxes and special assessments $26,271 $4,922,517 $136,339 Fines and forfeitures Use of money and properties 6,489 20,491 854 $23,964 Intergovernmental 158,434 Charges for services 2,698,523 Other revenue 504,324 61,925 Total Revenues 32,760 8,304,289 137,193 85,889 EXPENDITURES Current: General government 87,962 Public safety 7,441,833 Public works and parks 317 170,365 Culture and recreation Capital outlay Total Expenditures 317 7,441,833 170,365 87,962 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 32,443 862,456 (33,172) (2,073) OTHER FINANCING SOURCES (USES) Transfers in Transfers out (949,800) Total Other Financing Sources (Uses) (949,800) Net Change in Fund Balances 32,443 (87,344) (33,172) (2,073) Fund Balance, Beginning 257,542 813,346 120,673 895,727 Fund Balance, Ending $289,985 $726,002 $87,501 $893,654 SPECIAL REVENUE FUNDS 124 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CAPITAL PROJECTS SPECIAL REVENUE FUNDS DEBT SERVICE FUNDS FUND 1997 Measure C - Peacock Gap Mariposa Financing Measure A Measure G - Wildfire Assessment Assessment Authority Capital Open Space Cannabis Prevention District District Revenue Bonds Improvement $468,662 $409,882 626 $39,639 31,862 251 469,288 410,133 71,501 410,133 138,065 $11,118 155,000 6,523 307,519 299,588 410,133 11,118 307,519 169,700 (11,118) (236,018) 218,900 218,900 169,700 (11,118) (17,118) 75,973 $2,875 $16,573 151,695 1,890,447 $169,700 $75,973 ($11,118) $2,875 $16,573 $151,695 $1,873,329 (Continued) 125 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL COMBINING STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2020 CAPITAL PROJECTS FUNDS Total Park Non-Major Bedroom Assessment Capital Open Governmental Tax Districts Projects Space Funds REVENUES Taxes and special assessments $10,582 $7,168,501 Fines and forfeitures 825 Use of money and properties $1,551 $2,781 343,920 Intergovernmental 1,170,853 Charges for services 7,983,730 Other revenue 690,483 Total Revenues 10,582 1,551 2,781 17,358,312 EXPENDITURES Current: General government 569,913 Public safety 8,456,204 Public works and parks 732,184 Culture and recreation 8,489,879 Capital outlay 235 354,139 Total Expenditures 235 18,602,319 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 10,582 1,316 2,781 (1,244,007) OTHER FINANCING SOURCES (USES) Transfers in 2,767,994 Transfers out (1,439,789) Total Other Financing Sources (Uses)1,328,205 Net Change in Fund Balances 10,582 1,316 2,781 84,198 Fund Balance, Beginning 84,325 302,890 $10,824 118,139 12,991,555 Fund Balance, Ending $94,907 $304,206 $10,824 $120,920 $13,075,753 126 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL BUDGETED NONMAJOR GOVERNMENTAL FUNDS COMBINING SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2020 SPECIAL REVENUE FUNDS Recreation Revolving Baypoint Lagoons Assessment District Variance Variance Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) REVENUES Taxes and special assessments $25,500 $25,368 ($132) Fines and forfeitures Use of money and properties $43,781 $44,276 $495 2,396 5,610 3,214 Intergovernmental 64,945 43,074 (21,871) Charges for services 2,203,862 1,517,329 (686,533) Other revenue 470 13,893 13,423 Total Revenues 2,313,058 1,618,572 (694,486) 27,896 30,978 3,082 EXPENDITURES Current: General government Public safety Public works and parks 146,400 73,700 72,700 Culture and recreation 4,454,440 3,824,456 629,984 Capital outlay Total Expenditures 4,454,440 3,824,456 629,984 146,400 73,700 72,700 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (2,141,382) (2,205,884) (64,502) (118,504) (42,722) 75,782 OTHER FINANCING SOURCES (USES) Transfers in 2,250,000 2,250,000 Transfers out Total Other Financing Sources (Uses) 2,250,000 2,250,000 NET CHANGE IN FUND BALANCE $108,618 44,116 ($64,502) ($118,504) (42,722) $75,782 FUND BALANCES, BEGINNING OF YEAR 2,328 252,414 FUND BALANCES, END OF YEAR $46,444 $209,692 128 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT Loch Lomond #10 Household Hazmat Facility Childcare Variance Variance Variance Final Positive Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) Budget Actual (Negative) $21,399 $21,399 $2,460 $6,099 $3,639 $15,341 $38,734 $23,393 6,055 16,777 $10,722 355,784 433,552 77,768 174,117 173,940 (177) 3,825,000 2,751,787 (1,073,213) 600 600 23,870 23,870 176,577 180,639 4,062 4,196,125 3,247,943 (948,182) 27,454 38,176 10,722 182,491 135,601 46,890 15,943 15,943 4,413,331 3,667,862 745,469 182,491 135,601 46,890 4,413,331 3,667,862 745,469 15,943 15,943 (5,914) 45,038 50,952 (217,206) (419,919) (202,713) 11,511 22,233 10,722 59,439 59,439 (52,840) (52,840) (848) (848) (52,840) (52,840) 58,591 58,591 ($5,914) 45,038 $50,952 ($270,046) (472,759) ($202,713) $70,102 80,824 $10,722 366,418 1,746,845 674,208 $411,456 $1,274,086 $755,032 (Continued) Community Facilities District SPECIAL REVENUE FUNDS 129 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT Library Variance Variance Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) REVENUES Taxes and special assessments $80,000 $79,695 ($305) Fines and forfeitures Use of money and properties 1,967 7,566 5,599 $21,472 $56,867 $35,395 Intergovernmental 1,000 23,681 22,681 Charges for services 7,500 5,911 (1,589) Other revenue 7,000 7,017 17 Total Revenues 81,967 87,261 5,294 36,972 93,476 56,504 EXPENDITURES Current: General government Public safety Public works and parks 137,200 5,079 132,121 Culture and recreation 100,000 87,171 12,829 Capital outlay Total Expenditures 137,200 5,079 132,121 100,000 87,171 12,829 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (55,233) 82,182 137,415 (63,028) 6,305 69,333 OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total Other Financing Sources (Uses) NET CHANGE IN FUND BALANCE ($55,233) 82,182 $137,415 ($63,028) 6,305 $69,333 FUND BALANCES, BEGINNING OF YEAR 282,718 2,449,535 FUND BALANCES, END OF YEAR $364,900 $2,455,840 BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2020 CITY OF SAN RAFAEL BUDGETED NONMAJOR GOVERNMENTAL FUNDS COMBINING SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES Community Facilities District SPECIAL REVENUE FUNDS Loch Lomond Marina #2 130 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT SPECIAL REVENUE FUNDS Library Assessment Public Safety Stormwater Variance Variance Variance Final Positive Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) Budget Actual (Negative) $1,078,803 $1,067,786 ($11,017) $5,000 $825 ($4,175) 3,845 11,832 7,987 $356 ($356) 4,715 8,368 3,653 90,000 $63,694 (26,306) 827,900 836,240 8,340 75,000 73,868 (1,132) 5,000 4,735 (265) 1,082,648 1,079,618 (3,030) 165,356 137,562 (27,794) 842,615 850,168 7,553 282,388 206,065 76,323 942,020 316,859 625,161 1,123,924 903,867 220,057 163,526 46,385 117,141 1,123,924 903,867 220,057 282,388 206,065 76,323 1,105,546 363,244 742,302 (41,276) 175,751 217,027 (117,032) (68,503) 48,529 (262,931) 486,924 749,855 100,000 100,000 100,000 100,000 ($41,276) 175,751 $217,027 ($17,032) 31,497 $48,529 ($262,931) 486,924 $749,855 556,470 89,647 402,544 $732,221 $121,144 $889,468 (Continued) 131 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT Grants Variance Variance Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) REVENUES Taxes and special assessments Fines and forfeitures Use of money and properties $44,323 $46,705 $2,382 $6,041 $4,691 ($1,350) Intergovernmental 547,750 416,556 (131,194) Charges for services Other revenue Total Revenues 44,323 46,705 2,382 553,791 421,247 (132,544) EXPENDITURES Current: General government 1,000 1,000 131,005 71,818 59,187 Public safety 761,569 518,443 243,126 Public works and parks Culture and recreation Capital outlay Total Expenditures 1,000 1,000 892,574 590,261 302,313 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 43,323 46,705 3,382 (338,783) (169,014) 169,769 OTHER FINANCING SOURCES (USES) Transfers in 139,655 139,655 Transfers out (414,041) (414,041) (22,260) (22,260) Total Other Financing Sources (Uses) (414,041) (414,041) 117,395 117,395 NET CHANGE IN FUND BALANCE ($370,718) (367,336) $3,382 ($221,388) (51,619) $169,769 FUND BALANCES, BEGINNING OF YEAR 631,375 796,024 FUND BALANCES, END OF YEAR $264,039 $744,405 BUDGET AND ACTUAL CITY OF SAN RAFAEL BUDGETED NONMAJOR GOVERNMENTAL FUNDS COMBINING SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2020 SPECIAL REVENUE FUNDS Development Services 132 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT Parkland Dedication Emergency Medical Services Business Improvement Variance Variance Variance Final Positive Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) Budget Actual (Negative) $26,271 $26,271 $4,953,000 $4,922,517 ($30,483) $5,416 6,489 1,073 1,354 20,491 19,137 202,803 158,434 (44,369) 2,550,000 2,698,523 148,523 220,000 504,324 284,324 5,416 32,760 27,344 7,927,157 8,304,289 377,132 7,878,441 7,441,833 436,608 100,000 317 99,683 100,000 317 99,683 7,878,441 7,441,833 436,608 (94,584) 32,443 127,027 48,716 862,456 813,740 (949,800) (949,800) (949,800) (949,800) ($94,584) 32,443 $127,027 ($901,084) (87,344) $813,740 257,542 813,346 $289,985 $726,002 (Continued) SPECIAL REVENUE FUNDS 133 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT Low and Moderate Income Housing Variance Variance Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) REVENUES Taxes and special assessments $90,000 $136,339 $46,339 Fines and forfeitures Use of money and properties 854 854 $5,380 $23,964 $18,584 Intergovernmental Charges for services Other revenue 61,925 61,925 Total Revenues 90,000 137,193 47,193 5,380 85,889 80,509 EXPENDITURES Current: General government 95,000 87,962 7,038 Public safety Public works and parks 170,366 170,365 1 Culture and recreation Capital outlay Total Expenditures 170,366 170,365 1 95,000 87,962 7,038 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (80,366) (33,172) 47,194 (89,620) (2,073) 87,547 OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total Other Financing Sources (Uses) NET CHANGE IN FUND BALANCE ($80,366) (33,172) $47,194 ($89,620) (2,073) $87,547 FUND BALANCES, BEGINNING OF YEAR 120,673 895,727 FUND BALANCES, END OF YEAR $87,501 $893,654 FOR THE YEAR ENDED JUNE 30, 2020 CITY OF SAN RAFAEL BUDGETED NONMAJOR GOVERNMENTAL FUNDS COMBINING SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL Pt. San Pedro-Maintenance Portion SPECIAL REVENUE FUNDS 134 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT SPECIAL REVENUE FUNDS Measure A Open Space Measure G - Cannabis Measure C - Wildfire Prevention Variance Variance Variance Final Positive Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) Budget Actual (Negative) $500,000 $468,662 ($31,338) $120,000 $409,882 $289,882 1,487 626 (861) 251 501,487 469,288 (32,199) 120,000 410,133 289,882 410,133 410,133 190,509 138,065 52,444 $11,118 $11,118 155,000 155,000 6,523 (6,523) 141,671 141,671 487,180 299,588 187,592 410,133 410,133 11,118 11,118 14,307 169,700 155,393 (290,133) 290,133 (11,118) (11,118) $14,307 169,700 $155,393 ($290,133) $290,133 ($11,118) (11,118) 75,973 $169,700 $75,973 ($11,118) (Continued) 135 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL BUDGETED NONMAJOR GOVERNMENTAL FUNDS COMBINING SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL FOR THE YEAR ENDED JUNE 30, 2020 DEBT SERVICE FUND 1997 Financing Authority Revenue Bonds Variance Final Positive Budget Actual (Negative) REVENUES Taxes and special assessments Fines and forfeitures Use of money and properties $1,377 ($1,377) Intergovernmental Charges for services Other revenue Total Revenues 1,377 (1,377) EXPENDITURES Current: General government Public safety Public works and parks Culture and recreation Capital outlay Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 1,377 (1,377) OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total Other Financing Sources (Uses) NET CHANGE IN FUND BALANCE $1,377 ($1,377) FUND BALANCES, BEGINNING OF YEAR $151,695 FUND BALANCES, END OF YEAR $151,695 136 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT INTERNAL SERVICE FUNDS Internal service funds account for department services and financing performed for other departments within the same governmental jurisdiction. Funding comes from charges assessed to the departments benefiting from the service. Building Maintenance Fund – Established to account for construction projects and cyclical large dollar maintenance tasks (roof, painting) completed on City owned buildings. Vehicle Replacement Fund – Established to provide for the replacement of vehicles. Equipment Replacement Fund – Established to provide for the replacement of computers and equipment. Employee Benefits Fund – This fund is utilized for the payment of retiree benefits, unemployment insurance, accumulated leave requirements and other negotiated benefits not tied to a specific department. Liability Insurance Fund – Established to maintain sufficient reserves for outstanding claims. All costs associated with liability premiums are paid from this fund. Workers’ Compensation Fund – Established to maintain sufficient reserves for injury claims. All costs associated with workers compensation, including safety training, wellness programs, claim expenses and insurance premiums are paid from this fund. Dental Insurance Fund – Set up to maintain sufficient reserves for dental claims. All costs associated with dental claims and administrations are paid from this fund. Employee Retirement Fund – Established to maintain sufficient reserves to fund debt service payments on the 2010 Taxable Pension Obligation Bonds and other pension related obligations. OPEB/Retiree Medical Fund – Established to account for activities related to the funding, administration and procurement of retiree medical benefits. Radio Replacement Fund – Established to meet radio system operating costs, capital acquisition and replacement, and operating lease obligations for the Public Works, Fire, Community Development and Police Departments. The Marin Emergency Radio Authority (MERA) is a countywide JPA that has taken the roll in procurement and installation of a new digital radio system. This fund supports San Rafael's portion of the MERA efforts and related contractual obligations. Telephone Replacement Fund – Established to provide ongoing support services for telephone equipment and usage throughout the organization. Sewer Maintenance Fund – Established to record both the cost of providing services to the San Rafael Sanitation District and the charges for those services. 137 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL INTERNAL SERVICE FUNDS COMBINING STATEMENTS OF NET POSITION JUNE 30, 2020 Building Vehicle Equipment Employee Liability Maintenance Replacement Replacement Benefits Insurance ASSETS Current Assets: Cash and investments $572,812 $2,011,019 $2,676,216 $643,873 $5,364,517 Accounts receivable 3,473 2,128 Grants receivable 3,672 Capital assets: Nondepreciable assets 555,908 Depreciable assets, net 6,016,888 6,322,160 296,021 Total Assets 7,152,753 8,335,307 2,972,237 643,873 5,364,517 LIABILITIES Current Liabilities: Accounts payable 4,067 19,690 155,523 110,012 10,607 Claims payable - due in one year 1,794,573 Non-current Liabilities: Claims payable - due in more than one year 2,559,335 Total Liabilities 4,067 19,690 155,523 110,012 4,364,515 NET POSITION: Net investment in capital assets 6,572,796 6,322,160 296,021 Unrestricted 575,890 1,993,457 2,520,693 533,861 1,000,002 Total Net Position $7,148,686 $8,315,617 $2,816,714 $533,861 $1,000,002 138 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT OPEB/ Workers' Dental Employee Retiree Radio Telephone Sewer Compensation Insurance Retirement Medical Replacement Replacement Maintenance Total $8,666,513 $287,234 $3,361,453 $471,274 $59,237 $213,222 $132,727 $24,460,097 71,575 77,176 3,672 555,908 12,635,069 8,666,513 287,234 3,361,453 542,849 59,237 213,222 132,727 37,731,922 144 7,176 38,070 55,832 132,727 533,848 1,544,034 3,338,607 6,522,335 9,081,670 8,066,513 7,176 38,070 55,832 132,727 12,954,125 13,190,977 600,000 280,058 3,361,453 504,779 59,237 157,390 11,586,820 $600,000 $280,058 $3,361,453 $504,779 $59,237 $157,390 $24,777,797 139 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT Building Vehicle Equipment Employee Liability Maintenance Replacement Replacement Benefits Insurance OPERATING REVENUES Charges for current services $900,000 $1,402,000 $1,838,761 $966,200 $3,119,707 Intergovernmental 29,476 Other revenues 43,868 94 Total Operating Revenues 973,344 1,402,000 1,838,761 966,200 3,119,801 OPERATING EXPENSES Personnel 853,403 266,957 Insurance premiums and claims 1,935,058 Maintenance and repairs 162,408 24,817 99,354 General and administrative 572 1,888,603 218,528 Depreciation expense 167,605 1,045,129 96,939 Total Operating Expenses 330,585 1,069,946 2,084,896 1,071,931 2,202,015 Operating Income (Loss)642,759 332,054 (246,135) (105,731) 917,786 NONOPERATING REVENUES (EXPENSES) Investment income 8,303 34,449 61,804 50,292 81,859 Miscellaneous income 194 Gain from sale of capital assets 58,459 Loss on retirement of capital assets (430,334)(33,594) Total Nonoperating Revenues (Expenses)(422,031) 93,102 28,210 50,292 81,859 Net income (loss) before contributions and transfers 220,728 425,156 (217,925) (55,439) 999,645 CAPITAL CONTRIBUTIONS 125,000 TRANSFERS IN 52,840 TRANSFERS OUT Change in Net Position 273,568 550,156 (217,925) (55,439) 999,645 NET POSITION, BEGINNING OF YEAR 6,875,118 7,765,461 3,034,639 589,300 357 NET POSITION, END OF YEAR $7,148,686 $8,315,617 $2,816,714 $533,861 $1,000,002 CITY OF SAN RAFAEL INTERNAL SERVICE FUNDS COMBINING STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION FOR THE YEAR ENDED JUNE 30, 2020 140 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT OPEB/ Workers' Dental Employee Retiree Radio Telephone Sewer Compensation Insurance Retirement Medical Replacement Replacement Maintenance Total $3,213,259 $493,269 $2,364,125 $3,070,000 $648,660 $437,363 $2,689,844 $21,143,188 29,476 904 858,329 8,501 911,696 3,213,259 494,173 2,364,125 3,928,329 648,660 437,363 2,698,345 22,084,360 181,739 2,593,243 3,895,342 3,241,388 315,249 3,931,601 9,423,296 286,579 2,000 688,082 478,138 105,102 3,381,025 1,309,673 3,423,127 315,249 2,000 3,931,601 688,082 478,138 2,698,345 18,295,915 (209,868) 178,924 2,362,125 (3,272) (39,422) (40,775) 3,788,445 169,511 4,220 39,323 254 4,818 454,833 194 58,459 (463,928) 169,511 4,220 39,323 254 4,818 49,558 (40,357) 183,144 2,401,448 (3,018) (39,422) (35,957) 3,838,003 125,000 52,840 (678,763) (678,763) (40,357) 183,144 1,722,685 (3,018) (39,422) (35,957) 3,337,080 640,357 96,914 1,638,768 507,797 98,659 193,347 21,440,717 $600,000 $280,058 $3,361,453 $504,779 $59,237 $157,390 $24,777,797 141 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL INTERNAL SERVICE FUNDS COMBINING STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2020 Building Vehicle Equipment Employee Liability Maintenance Replacement Replacement Benefits Insurance CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers/other funds $991,487 $1,399,872 $1,838,761 $966,200 $3,119,707 Cash payments to suppliers for goods and services (309,611) (24,817) (2,098,452) (118,250) (1,193,985) Cash payments to employees for salaries and benefits (853,403) (266,957) Other operating revenues 43,868 194 94 Cash Flows from Operating Activities 725,744 1,375,249 (259,691) (5,453) 1,658,859 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Interfund receipts 52,840 Interfund payments Cash Flows from Noncapital Financing Activities 52,840 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition and construction of capital assets (311,145) (671,593) Proceeds from sale of property 110,768 Cash Flows from Investing Activities (311,145) (560,825) CASH FLOWS FROM INVESTING ACTIVITIES Interest received 8,303 34,449 61,803 50,292 81,859 Cash Flows from Investing Activities 8,303 34,449 61,803 50,292 81,859 Net increase (decrease) in cash and cash equivalents 475,742 848,873 (197,888) 44,839 1,740,718 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 97,070 1,162,146 2,874,104 599,034 3,623,799 CASH AND CASH EQUIVALENTS, END OF YEAR $572,812 $2,011,019 $2,676,216 $643,873 $5,364,517 Reconciliation of operating income (loss) to net cash provided by operating activities: Operating income (loss) $642,759 $332,054 ($246,135) ($105,731) $917,786 Adjustments to reconcile operating income to cash flows from operating activities: Depreciation 167,605 1,045,129 96,939 Miscellaneous income 194 Net change in assets and liabilities: Accounts receivable 62,011 (2,128) Accounts payable (146,631) (110,495) 100,278 3,230 Claims payable 737,843 Net Cash Provided by (Used in) Operating Activities $725,744 $1,375,249 ($259,691) ($5,453) $1,658,859 NON-CASH TRANSACTIONS: Contributions $125,000 Retirement of capital assets ($430,334) ($52,309) ($33,594) 142 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT OPEB/ Workers' Dental Employee Employee Radio Telephone Sewer Compensation Insurance Retirement Retirement Replacement Replacement Maintenance Total $3,213,259 $493,269 $2,364,125 $3,071,145 $648,660 $437,363 $2,689,844 $21,233,692 (1,297,200) (311,707) (2,000) (3,915,482) (688,082) (453,069) (2,828,879) (13,241,534) (181,739)(1,302,099) 904 858,329 8,501 911,890 1,734,320 182,466 2,362,125 13,992 (39,422) (15,706) (130,534) 7,601,949 52,840 (678,763) (678,763) (678,763) (625,923) (982,738) 110,768 (871,970) 169,511 4,220 39,323 254 4,818 454,832 169,511 4,220 39,323 254 4,818 454,832 1,903,831 186,686 1,722,685 14,246 (39,422) (10,888) (130,534) 6,558,888 6,762,682 100,548 1,638,768 457,028 98,659 224,110 263,261 17,901,209 $8,666,513 $287,234 $3,361,453 $471,274 $59,237 $213,222 $132,727 $24,460,097 ($209,868) $178,924 $2,362,125 ($3,272) ($39,422) ($40,775) $3,788,445 1,309,673 194 1,145 61,028 (16,698) 3,542 16,119 25,069 (130,534) (256,120) 1,960,886 2,698,729 $1,734,320 $182,466 $2,362,125 $13,992 ($39,422) ($15,706) ($130,534) $7,601,949 $125,000 ($516,237) 143 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT AGENCY FUND Agency Funds account for assets held by the City as agent for individuals, governmental entities, and non-public organizations. Pt. San Pedro Road Assessment District Fund - Established to accumulate funds for payment of principal and interest for Pt. San Pedro Road Median Landscaping Assessment District bonds. 145 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL AGENCY FUNDS COMBINING STATEMENTS OF CHANGES IN ASSETS AND LIABILITIES FOR THE YEAR ENDED JUNE 30, 2020 Balance Balance June 30, 2019 Additions Deductions June 30, 2020 Pt. San Pedro Road Assessment District Assets Restricted cash and investments $282,954 $23,739 $67,801 $238,892 Taxes receivable 725 690 725 690 Total Assets $283,679 $24,429 $68,526 $239,582 Liabilities Interest payable $24,276 $23,014 $24,276 $23,014 Due to bondholders 259,403 1,415 44,250 216,568 Total Liabilities $283,679 $24,429 $68,526 $239,582 146 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT Dining Under the Lights STATISTICAL SECTION DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT STATISTICAL SECTION This part of the City’s Comprehensive Annual Financial Report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City’s overall financial health. In contrast to the financial section, the statistical section information is not subject to independent audit. Financial Trends These schedules contain trend information to help the reader understand how the City’s financial performance and well- being have changed over time: 1.Net Position by Component 2.Changes in Net Position 3.Fund Balances of Governmental Funds 4.Changes in Fund Balance of Governmental Funds Revenue Capacity These schedules contain information to help the reader assess the City’s most significant local revenue source, the property tax: 1.Assessed and Estimated Actual Value of Taxable Property 2.Property Tax Rates, All Overlapping Governments 3.Principal Property Taxpayers 4.Property Tax Levies and Collections Debt Capacity These schedules present information to help the reader assess the affordability of the City’s current levels of outstanding debt and the City’s ability to issue additional debt in the future: 1.Ratio of Outstanding Debt by Type 2.Computation of Direct and Overlapping Debt 3.Computation of Legal Bonded Debt Margin 4.Revenue Bond Coverage Parking Facility Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the City’s financial activities take place: 1.Demographic and Economic Statistics 2.Principal Employers Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the City’s financial report relates to the services the City provides and the activities it performs: 1.Full-Time Equivalent City Government Employees by Function 2.Operating Indicators by Function/Program 3.Capital Asset Statistics by Function/Program Sources Unless otherwise noted, the information in these schedules is derived from the Comprehensive Annual Financial Reports for the relevant year. 149 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL NET POSITION BY COMPONENT Last Ten Fiscal Years (accrual basis of accounting) Fiscal Year Ended June 30, 2011 2012 2013 2014 Governmental activities Net investment in capital assets $174,281,922 $192,361,245 $193,222,791 $190,286,275 Restricted 21,322,937 24,693,205 35,780,412 37,339,141 Unrestricted (8,170,324) 10,652,263 11,151,318 (196,824) Total governmental activities net position $187,434,535 $227,706,713 $240,154,521 $227,428,592 Business-type activities Net investment in capital assets $10,793,592 $10,650,558 $10,670,190 $10,786,591 Unrestricted 1,948,447 2,495,889 2,501,498 2,049,957 Total business-type activities net position $12,742,039 $13,146,447 $13,171,688 $12,836,548 Primary government Net investment in capital assets $185,075,514 $203,011,803 $203,892,981 $201,072,866 Restricted 21,322,937 24,693,205 35,780,412 37,339,141 Unrestricted (6,221,877) 13,148,152 13,652,816 1,853,133 Total primary government net position $200,176,574 $240,853,160 $253,326,209 $240,265,140 (a) The City adjusted certain beginning balances during fiscal years 2013-2014, 2014-2015 and 2016-2017. Financial data shown for proceeding years were not adjusted for the presentation. ($130,000) ($80,000) ($30,000) $20,000 $70,000 $120,000 $170,000 $220,000 $270,000 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Thousands Net investment in capital assets Restricted Unrestricted 150 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT 2015 2016 2017 2018 2019 2020 $190,621,085 $193,707,175 $199,202,842 $217,170,376 $231,844,210 $230,737,025 33,389,224 31,286,725 29,225,643 25,549,583 23,288,874 23,522,748 (82,336,534) (93,273,480) (112,913,181) (122,577,233) (118,215,177) (116,133,437) $141,673,775 $131,720,420 $115,515,304 $120,142,726 $136,917,907 $138,126,336 $10,744,952 $10,958,058 $10,968,642 $10,951,518 $11,023,426 $11,104,751 (938,519) (1,136,050) (871,620) (886,848) (1,180,121) (1,204,307) $9,806,433 $9,822,008 $10,097,022 $10,064,670 $9,843,305 $9,900,444 $201,366,037 $204,665,233 $210,171,484 $228,121,894 $242,867,636 $241,841,776 33,389,224 31,286,725 29,225,643 25,549,583 23,288,874 23,522,748 (83,275,053) (94,409,530) (113,784,801) (123,464,081) (119,395,298) (117,337,744) $151,480,208 $141,542,428 $125,612,326 $130,207,396 $146,761,212 $148,026,780 151 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT Fiscal Year Ended June 30, 2011 2012 2013 2014 Expenses Governmental Activities: General government $8,269,846 $10,171,332 $10,202,530 $9,085,672 Public safety 44,735,486 39,876,910 41,966,065 43,800,158 Public works and parks 17,408,038 17,423,033 17,695,164 22,125,336 Community development 7,804,650 4,587,557 3,403,158 3,451,244 Culture and recreation 11,487,999 11,020,663 11,330,058 11,846,818 Interest on long-term debt and fiscal charges 1,621,605 1,224,991 283,805 327,350 Total Governmental Activities Expenses 91,327,624 84,304,486 84,880,780 90,636,578 Business-Type Activities: Parking services 3,785,751 3,446,482 3,545,387 4,125,476 Total Business-Type Activities Expenses 3,785,751 3,446,482 3,545,387 4,125,476 Total Primary Government Expenses $95,113,375 $87,750,968 $88,426,167 $94,762,054 Component Unit: San Rafael Sanitation District $9,677,630 $10,185,779 $10,169,082 $11,378,055 Program Revenues Governmental Activities: Charges for services: General government $1,636,542 $1,986,791 $2,655,749 $2,838,940 Public safety 6,167,925 7,122,396 6,478,321 6,014,034 Public works and parks 4,141,103 5,214,267 7,837,472 6,101,460 Community development 2,676,663 3,255,367 3,984,204 3,279,251 Culture and recreation 5,362,497 5,873,147 6,075,129 6,417,003 Operating grants and contributions 3,651,902 3,158,281 4,085,073 4,698,142 Capital grants and contributions 1,857,670 2,705,696 5,876,993 762,719 Total Government Activities Program Revenues 25,494,302 29,315,945 36,992,941 30,111,549 Business-Type Activities: Charges for services: Parking services 4,011,333 3,901,175 3,990,706 4,485,394 Total Business-Type Activities Program Revenues 4,011,333 3,901,175 3,990,706 4,485,394 Total Primary Government Program Revenues $29,505,635 $33,217,120 $40,983,647 $34,596,943 Component Unit: San Rafael Sanitation District Charges for service $12,223,779 $12,368,889 $12,413,123 $13,732,496 Operating grants and contributions Capital grants and contributions Total Component Unit Program Revenues $12,223,779 $12,368,889 $12,413,123 $13,732,496 Net (Expense)/Revenue Governmental Activities ($65,833,322) ($54,988,541) ($47,887,839) ($60,525,029) Business-Type Activities 225,582 454,693 445,319 359,918 Total Primary Government Net Expense ($65,607,740) ($54,533,848) ($47,442,520) ($60,165,111) Component Unit Activities $2,546,149 $2,183,110 $2,244,041 $2,354,441 CITY OF SAN RAFAEL CHANGES IN NET POSITION Last Ten Fiscal Years (Accrual Basis of Accounting) 152 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT 2015 2016 2017 2018 2019 2020 $9,099,858 $12,952,983 $10,996,269 $9,835,941 $11,967,641 $15,629,601 39,968,631 55,399,798 44,366,734 53,231,197 49,899,296 50,000,809 16,893,164 22,929,289 19,845,719 22,084,433 19,270,613 21,661,442 3,128,373 4,307,269 4,242,743 4,040,195 5,781,826 5,314,692 11,198,151 15,026,680 14,131,000 13,285,563 12,819,429 11,828,353 284,288 277,263 271,263 884,336 1,848,263 1,974,834 80,572,465 110,893,282 93,853,728 103,361,665 101,587,068 106,409,731 4,249,597 4,762,851 4,188,152 4,627,716 5,038,553 4,491,375 4,249,597 4,762,851 4,188,152 4,627,716 5,038,553 4,491,375 $84,822,062 $115,656,133 $98,041,880 $107,989,381 $106,625,621 $110,901,106 $11,375,239 $11,654,767 $11,255,194 $12,235,868 $12,601,257 $13,853,263 $1,379,523 $526,495 $421,393 $517,542 $377,606 $394,882 4,966,251 4,939,658 4,264,939 5,628,478 5,304,832 5,824,555 3,078,267 5,157,289 1,804,698 2,362,375 4,158,338 3,082,495 3,796,684 4,004,178 3,850,107 3,814,892 4,312,259 5,470,010 6,537,646 6,683,059 6,941,013 6,819,303 5,750,846 4,370,442 4,185,450 4,678,338 3,965,351 5,142,670 4,584,855 5,545,731 1,308,027 1,470,953 1,702,993 974,603 8,042,524 1,348,640 25,251,848 27,459,970 22,950,494 25,259,863 32,531,260 26,036,755 5,173,557 5,212,181 5,268,991 5,203,585 5,362,016 5,063,318 5,173,557 5,212,181 5,268,991 5,203,585 5,362,016 5,063,318 $30,425,405 $32,672,151 $28,219,485 $30,463,448 $37,893,276 $31,100,073 $14,629,758 $15,414,530 $16,014,016 $16,829,908 $16,964,083 $16,874,361 36,945 58,440 5,907 5,719 79,245 105,734 1,433,871 175,217 $14,629,758 $15,414,530 $16,130,206 $16,994,082 $18,403,861 $17,055,297 ($55,320,617) ($83,433,312) ($70,903,234) ($78,101,802) ($69,055,808) ($80,372,976) 923,960 449,330 1,080,839 575,869 323,463 571,943 ($54,396,657) ($82,983,982) ($69,822,395) ($77,525,933) ($68,732,345) ($79,801,033) $3,254,519 $3,862,215 $4,875,012 $4,758,214 $5,802,604 $3,202,034 153 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL CHANGES IN NET POSITION (continued) Last Ten Fiscal Years (Accrual Basis of Accounting) 2011 2012 2013 2014 General Revenues and Other Changes in Net Position Governmental Activities: Taxes: Property $21,632,733 $20,107,637 $17,317,772 $18,439,619 Sales 21,623,445 22,355,749 24,262,282 27,758,971 Special assessments Paramedic 3,661,064 3,807,545 3,804,985 3,816,070 Motor vehicles 297,425 Transient occupancy 1,644,262 1,866,575 2,185,287 2,332,277 Franchise 2,990,539 3,076,094 3,331,160 3,260,958 Business license 2,296,460 2,332,146 2,507,785 2,588,728 Other 1,930,531 3,574,918 2,929,915 3,452,171 Investment earnings 176,502 205,413 991,762 184,171 Gain (Loss) on disposal of assets Miscellaneous 1,496,174 542,816 2,580,882 1,140,743 Special item - Court fines repayment Transfers 463,600 57,960 423,817 449,917 Total Government Activities 58,212,735 57,926,853 60,335,647 63,423,625 Business-Type Activities: Investment earnings 11,878 7,675 3,739 4,375 Aid from other government agencies Transfers (463,600) (57,960)(423,817)(449,917) Total Business-Type Activities (451,722) (50,285)(420,078)(445,542) Total Primary Government $57,761,013 $57,876,568 $59,915,569 $62,978,083 Component Unit: San Rafael Sanitation District Property Taxes $1,214,519 $1,192,566 $1,177,469 $1,345,018 Investment earnings 59,265 38,191 25,591 151,729 Miscellaneous Aid from other governmental agencies 6,499 9,613 56,589 22,125 Total Component Unit $1,280,283 $1,240,370 $1,259,649 $1,518,872 Special Item Governmental Activities Component Unit Activities Change in Net Position Governmental Activities ($7,620,587) $2,938,312 $12,447,808 $2,898,596 Business-Type Activities (226,140) 404,408 25,241 (85,624) Total Primary Government ($7,846,727) $3,342,720 $12,473,049 $2,812,972 Change in Net Position Component Unit Activities $3,826,432 $3,423,480 $3,503,690 $3,873,313 Fiscal Year Ended June 30, 154 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT 2015 2016 2017 2018 2019 2020 $19,039,443 $19,998,567 $23,343,140 $24,627,373 $25,903,240 $26,491,505 32,269,915 34,348,089 31,819,259 34,119,502 35,626,646 33,784,770 3,820,240 4,226,020 5,485,637 4,923,148 4,934,584 4,923,092 2,661,878 3,063,263 2,984,758 3,115,151 3,203,499 2,410,745 3,272,390 3,418,277 3,610,824 3,726,841 3,627,254 4,029,050 2,670,071 2,824,664 2,774,803 2,790,212 2,788,496 2,824,722 3,295,751 3,465,193 1,824,830 2,245,882 1,783,170 2,152,617 216,066 300,091 210,628 556,745 1,450,434 1,907,591 2,254,901 1,387,315 2,448,604 5,991,713 5,904,968 2,470,926 432,630 448,478 536,000 632,657 608,698 586,387 69,933,285 73,479,957 75,038,483 82,729,224 85,830,989 81,581,405 7,008 14,723 10,810 24,436 63,870 71,583 (432,630)(448,478)(536,000)(632,657)(608,698)(586,387) (425,622)(433,755)(525,190)(608,221)(544,828)(514,804) $69,507,663 $73,046,202 $74,513,293 $82,121,003 $85,286,161 $81,066,601 $1,319,852 $1,367,172 $1,528,047 $1,620,584 $1,727,221 $1,833,137 171,804 46,225 97,090 234,379 519,793 876,369 10,690 7,768 489 35,090 $1,526,746 $1,413,397 $1,625,137 $1,865,653 $2,254,782 $2,709,995 $4,462,815 ($4,462,815) $19,075,483 ($9,953,355) $4,135,249 $4,627,422 $16,775,181 $1,208,429 498,338 15,575 555,649 (32,352)(221,365)57,139 $19,573,821 ($9,937,780) $4,690,898 $4,595,070 $16,553,816 $1,265,568 $318,450 $5,275,612 $6,500,149 $6,623,867 $8,057,386 $5,912,029 155 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY SAN RAFAEL FUND BALANCES OF GOVERNMENTAL FUNDS Last Ten Fiscal Years (Modified Accrual Basis of Accounting) Fiscal Year Ended June 30, 2011 2012 2013 2014 (b) General Fund Nonspendable $589,833 $527,509 $527,235 $503,338 Restricted 200,238 76,188 Committed 555,561 651,121 800,876 Assigned 5,439,879 1,516,644 2,476,676 6,866,149 Unassigned Total General Fund $6,785,511 $2,771,462 $3,804,787 $7,369,487 All Other Governmental Funds Nonspendable $377,180 $788,031 $51,521 $8,719 Restricted 19,289,367 16,856,959 20,769,546 30,185,064 Committed 3,864,322 5,135,257 8,447,495 2,185,825 Assigned 4,124,029 5,283,559 6,511,850 4,959,533 Unassigned Total all other governmental funds $27,654,898 $28,063,806 $35,780,412 $37,339,141 (a) The change in total fund balance for the General Fund and other governmental funds is explained in Management's Discussion and Analysis. (b) The City adjusted certain beginning balances during fiscal years 2013-2014, 2014-2015 and 2015-2016. Financial data shown for preceding years were not adjusted for the presentation. ($5,000) $15,000 $35,000 $55,000 $75,000 $95,000 2011 2012 2013 2014 (b) 2015 (b) 2016 (b) 2017 2018 2019 2020Thousands Total Fund Balance 156 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT 2015 (b) 2016 (b) 2017 2018 2019 2020 (a) $399,299 $476,316 $508,446 $1,008,234 $37,271 $7,540 12,374,002 16,440,910 14,900,945 11,214,720 11,391,084 9,799,140 1,588,500 1,772,577 1,295,041 1,104,216 $14,361,801 $18,689,803 $16,704,432 $12,222,954 $12,532,571 $9,806,680 $2,359 $9,449 $302,366 $27,627 $7,813 31,742,184 27,552,245 $25,812,405 73,489,688 53,260,504 34,288,302 931,871 3,799,421 3,491,708 1,754,983 1,901,271 1,884,153 712,810 119,183 115,103 115,942 118,139 120,920 (11,118) $33,389,224 $31,480,298 $29,419,216 $75,662,979 $55,307,541 $36,290,070 157 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS Last Ten Fiscal Years (Modified Accrual Basis of Accounting) 2011 2012 2013 2014 Revenues Taxes and special assessments $51,448,130 $51,395,116 $51,549,306 $56,686,142 Licenses and permits 1,416,772 1,648,890 1,929,387 1,934,755 Fines and forfeitures 862,820 801,758 734,005 669,553 Use of money and properties 380,720 315,561 325,043 363,089 Intergovernmental 11,864,127 10,537,396 11,869,889 11,953,308 Charges for services 15,888,750 19,649,433 23,575,374 19,949,333 Other revenue 1,026,845 870,957 4,092,411 2,045,407 Total Revenues 82,888,164 85,219,111 94,075,415 93,601,587 Expenditures Current: General government 6,863,142 8,783,873 10,529,480 8,678,833 Public safety 40,967,352 39,311,551 41,377,062 41,900,762 Public works and parks 10,666,176 11,518,822 12,002,448 13,697,957 Community development 4,527,351 3,755,504 2,961,275 3,296,375 Culture and recreation 10,067,822 10,345,673 10,591,057 11,106,367 Capital outlay 1,745,483 1,312,383 4,009,454 2,154,900 Capital improvement/special projects 6,240,861 3,604,171 5,284,720 7,168,776 Debt service: Principal 2,530,338 2,518,320 208,642 Interest and fiscal charges 1,448,910 735,221 283,805 327,350 Total Expenditures 85,057,435 81,885,518 87,039,301 88,539,962 Excess (deficiency) of revenues over (under) expenditures (2,169,271)3,333,593 7,036,114 5,061,625 Other Financing Sources (Uses) Issuance of debt Proceeds from PG&E loans 568,481 Transfers in 5,806,834 4,539,646 8,425,474 3,655,302 Transfers (out)(4,657,326)(4,864,293)(6,711,657)(3,053,865) Total other financing sources (uses)1,149,508 (324,647)1,713,817 1,169,918 Extraordinary Item Transfer to Successor Agency (2,352,584) Net Change in fund balances ($1,019,763)$3,008,946 $6,397,347 $6,231,543 Debt service as a percentage of noncapital expenditures 5.2%4.2%0.4%0.7% Fiscal Year Ended June 30, 158 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT 2015 2016 2017 2018 2019 2020 $61,804,228 $65,866,218 $71,166,891 $74,893,789 $77,101,185 $76,410,697 2,456,820 2,588,411 2,559,841 2,718,166 2,661,500 3,047,144 556,076 435,829 400,283 384,268 337,680 350,388 444,757 460,206 349,349 654,531 1,583,060 1,537,869 13,233,503 13,685,003 8,063,156 8,878,974 15,602,264 9,287,181 15,346,794 14,366,744 13,425,161 14,660,094 15,166,876 13,834,843 1,777,003 3,208,749 1,842,053 5,219,414 5,158,042 2,309,226 95,619,181 100,611,160 97,806,734 107,409,236 117,610,607 106,777,348 10,203,687 11,349,079 10,557,416 10,010,100 12,553,499 16,689,526 43,954,515 47,071,166 49,018,153 51,805,708 51,678,876 50,071,531 12,758,643 14,390,699 16,752,961 17,647,312 15,617,622 17,453,823 3,416,859 3,670,108 3,759,564 4,051,224 4,988,260 5,276,887 11,616,777 12,048,104 12,646,728 12,823,771 12,468,008 11,179,410 4,498,924 4,813,757 2,100,926 22,815,967 38,701,047 25,984,748 2,186,986 4,826,576 7,403,249 75,172 75,172 175,172 280,172 495,172 618,316 284,288 277,263 271,263 1,005,636 2,356,207 2,482,778 88,995,851 98,521,924 102,685,432 120,439,890 138,858,691 129,757,019 6,623,330 2,089,236 (4,878,698)(13,030,654)(21,248,084)(22,979,671) 46,565,800 23,999 4,348,149 7,533,364 9,287,007 68,351,964 15,482,297 13,797,526 (3,051,499)(6,582,555)(8,454,762)(68,373,222)(14,280,034)(12,585,216) 1,296,650 950,809 832,245 46,544,542 1,202,263 1,236,309 $7,919,980 $3,040,045 ($4,046,453) $33,513,888 ($20,045,821) ($21,743,362) 0.4%0.4%0.5%1.3%2.8%3.0% 159 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS Real Property Total Real Total Fiscal Residential Commercial Industrial Secured Unsecured Total Estimated Direct Year Property Property Property Other Property Property Assessed (a) Full Market (a) Tax Rate (b) 2011 7,215,965,203$ 2,056,985,417$ 247,409,955$ 124,426,487$ 9,644,787,062$ 383,414,952$ 10,028,202,014$ 10,028,202,014$ 0.17851% 2012 7,317,280,602 2,036,262,351 247,485,238 118,579,648 9,719,607,839 384,950,872 10,104,558,711 10,104,558,711 0.17827% 2013 7,265,617,525 1,987,170,644 245,917,096 115,453,836 9,614,159,101 384,534,108 9,998,693,209 9,998,693,209 0.17456% 2014 7,558,708,224 2,009,718,415 245,674,195 130,594,237 9,944,695,071 402,261,887 10,346,956,958 10,346,956,958 0.11985% 2015 7,991,224,952 2,120,065,908 249,864,918 115,675,852 10,476,831,630 417,217,272 10,894,048,902 10,894,048,902 0.11657% 2016 8,511,358,216 2,221,843,976 263,830,302 108,982,883 11,106,015,377 400,942,059 11,506,957,436 11,506,957,436 0.11672% 2017 9,025,896,811 2,390,814,514 267,468,956 135,689,202 11,819,869,483 423,545,667 12,243,415,150 12,243,415,150 0.11693% 2018 9,522,645,933 2,532,439,852 276,751,912 128,305,868 12,460,143,565 417,902,554 12,878,046,119 12,878,046,119 0.11709% 2019 10,042,494,232 2,681,917,170 285,601,803 107,472,477 13,117,485,682 409,129,431 13,526,615,113 13,526,615,113 0.11742% 2020 10,545,909,554 2,850,424,603 293,144,677 127,151,762 13,816,630,596 442,888,708 14,259,519,304 14,259,519,304 0.11724% (a) (b) Data Source: Marin County Assessor 2010/11 - 2019/20 Combined Tax Rolls The State Constitution requires property to be assessed at one hundred percent of the most recent purchase price, plus an increment of no more than two percent annually, plus any local over-rides. These values are considered to be full market values. California cities do not set their own direct tax rate. The state constitution establishes the rate at 1% and allocates a portion of that amount, by an annual calculation, to all the taxing entities within a tax rate area. $0 $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Millions Unsecured Property Secured Property 160 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL PROPERTY TAX RATES ALL OVERLAPPING GOVERNMENTS LAST TEN FISCAL YEARS Fiscal School Misc. Special Year City County (1)Districts Districts Total 2011 0.154 0.295 0.7542 0.0461 1.2489 0.17851% 2012 0.154 0.295 0.7831 0.0461 1.2779 0.17827% 2013 0.154 0.295 0.7743 0.0461 1.2691 0.17456% 2014 0.154 0.295 0.7890 0.0461 1.2838 0.11985% 2015 0.154 0.295 0.7651 0.0461 1.2599 0.11657% 2016 0.154 0.295 0.7846 0.0695 1.3028 0.11672% 2017 0.154 0.295 0.8251 0.0553 1.3291 0.11693% 2018 0.154 0.295 0.8127 0.0661 1.3275 0.11709% 2019 0.154 0.295 0.8495 0.0650 1.3635 0.11742% 2020 0.154 0.295 0.8289 0.0635 1.3414 0.11724% Notes: (1) Like other cities, San Rafael includes several property tax rate areas with different rates. A mean average is indicated. Data Source: Marin County Assessors Office 2010/11 - 2019/20 Tax Rate Tables Total Direct Rate 161 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 Basic Levy (1) 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 1.00000 Dixie School Bonds 0.01860 0.01840 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 Marin Community College Bonds 0.01360 0.01750 0.01780 0.02040 0.01800 0.01650 0.01420 0.03380 0.03390 0.02690 Marin Healthcare Bond 0.00000 0.00000 0.00000 0.00000 0.00000 0.02350 0.00930 0.02010 0.01900 0.01750 Miller Creek School Bonds 0.00000 0.00000 0.01540 0.01500 0.01470 0.04170 0.03830 0.02090 0.03450 0.03280 Ross Elementary School 0.06070 0.06550 0.06640 0.06570 0.06030 0.06150 0.06030 0.06190 0.06180 0.05710 Ross Valley School Bonds 0.03250 0.06130 0.06110 0.05960 0.05700 0.05550 0.05370 0.05680 0.05390 0.05270 San Rafael Elementary Bonds 0.04740 0.04740 0.02170 0.03320 0.02620 0.02570 0.05350 0.05030 0.07290 0.07050 San Rafael High Bonds 0.02790 0.02680 0.04960 0.05130 0.04850 0.04710 0.07100 0.05680 0.06170 0.06000 Tamalpais Union High School 0.04820 0.04100 0.03710 0.03860 0.03520 0.03130 0.02880 0.02690 0.02580 0.02390 Total Direct & Overlapping Tax Rates 1.24890 1.27790 1.26910 1.28380 1.25990 1.30280 1.32910 1.32750 1.36350 1.34140 City's Share of 1% Levy Per Prop 13 0.12292 0.12311 0.12313 0.12306 0.12233 0.12233 0.12233 0.12233 0.12232 0.12232 Total Direct Rate 0.17851 0.17827 0.17456 0.11985 0.11657 0.11672 0.11693 0.11709 0.11742 0.11724 Notes: Data Source: Marin County Assessors Office 2010/11 - 2019/20 Tax Rate Tables CITY OF SAN RAFAEL PROPERTY TAX RATES DIRECT & OVERLAPPING GOVERNMENTS LAST TEN FISCAL YEARS (RATE PER $100 OF ASSESSED VALUE) (1) In 1978, California voters passed Proposition 13 which set the property tax rate at a 1.00% fixed amount. This 1.00% is shared by all taxing agencies for which the subject property resides within. In addition to the 1.00% fixed amount, property owners are charged taxes as a percentage of assessed property values for the payment of any voter approved bonds. 162 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL PRINCIPAL PROPERTY TAX PAYERS CURRENT FY 2019/20 AND FY 2010/2011 Percentage Percentage of Total City of Total City Taxable Taxable Taxable Taxable Assessed Assessed Assessed Assessed Taxpayer Value Value Value Value California Corporate Center ACQ LLC 280,855,165$ 1.97% MGP XI Northgate LLC 226,813,293 1.59% Professional Financial Investors Inc 140,335,593 0.98% BRE Properties Inc 64,906,940 0.46% South Valley Apartments LLC 55,198,648 0.39% Kaiser 49,986,713 0.35% Regency Center II Associates LP 48,748,966 0.34% 41,605,911$ 0.41% Northbay Properties II 47,786,871 0.34% 38,739,218 0.39% Bay Apartment Communities Inc 45,263,334 0.32% Barbara Fasken 1995 Trust Etal 45,074,118 0.32% Northgate Mall Associates 124,804,203 1.24% SR Corporation Center Phase 1 78,722,382 0.79% SR Corporation Center Phase 2 71,885,994 0.72% Corac LLC 59,878,503 0.60% Sutter Health 48,295,644 0.48% Robert Dickson Trust 43,972,278 0.44% Marin Sanitary Service 38,498,898 0.38% Kilroy Realty LP 36,499,999 0.36% Subtotal 1,004,969,641$ 7.05% 582,903,030$ 5.81% Total Net Assessed Valuation: Fiscal Year 2019-2020 14,259,519,304$ Fiscal Year 2010-2011 10,028,202,014$ FY 2019-2020 FY 2010-2011 163 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT Delinquent taxes Fiscal as a Percent of Year Rate Levies Allocations Collections Apportionments Delinquencies Allocations 2011 1.00 (2)21,632,731$ (2)21,632,731$ (2)0.0% 2012 1.00 (2)20,704,368 (2)20,704,368 (2)0.0% 2013 1.00 (2)20,883,041 (2)20,883,041 (2)0.0% 2014 1.00 (2)22,001,357 (2)22,001,357 (2)0.0% 2015 1.00 (2)22,376,457 (2)22,376,457 (2)0.0% 2016 1.00 (2)23,636,093 (2)23,636,093 (2)0.0% 2017 1.00 (2)25,173,651 (2)25,173,651 (2)0.0% 2018 1.00 (2)26,088,961 (2)26,088,961 (2)0.0% 2019 1.00 (2)27,718,712 (2)27,718,712 (2)0.0% 2020 1.00 (2)28,709,606 (2)28,709,606 (2)0.0% Notes: (1)Includes deductions for County property tax administration. (2)Information not applicable. All general purpose property taxes are levied by the county and allocated to other governmental entities. CITY OF SAN RAFAEL PROPERTY TAX LEVIES AND COLLECTIONS (1) LAST TEN FISCAL YEARS $6 $9 $12 $16 $19 $22 $25 $28 $31 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020MillionsAllocations Apportionments 164 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL RATIO OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS RDA Tax Financing Court Fine Capitalized Pension Lease Fiscal Allocation Authority Note Promissory Lease Obligation Revenue Year Bonds Revenue Bonds Payable Note Obligations Bonds Bonds Total 2011 33,298,499$ - 169,000$ 124,222$ 69,098$ 4,490,000$ 38,150,819$ 2012 - - 169,000 - - 4,490,000 4,659,000 2013 - - 169,000 - - 4,490,000 4,659,000 2014 - - 528,839 - - 4,490,000 5,018,839 2015 - - 453,667 - - 4,490,000 4,943,667 2016 - - 378,495 - - 4,490,000 4,868,495 2017 - - 303,323 - - 4,390,000 4,693,323 2018 - - 1,308,951 - - 4,185,000 53,612,097$ 59,106,048 2019 - - 1,233,779 - - 3,765,000 53,104,153 58,102,932 2020 - - 1,084,462 - - 3,320,000 52,596,209 57,000,671 Parking Total Percentage Fiscal Services Note Primary of Personal Per Year Bonds Payable Total Government Income (a)Capita (a) 2011 6,630,000$ 6,630,000$ 44,780,819$ 1.87% 770.28 2012 6,445,000 6,445,000 11,104,000 0.46% 190.45 2013 6,445,000 6,445,000 11,104,000 0.44% 190.85 2014 6,186,403 61,836$ 6,248,239 11,267,078 0.43% 192.38 2015 5,942,128 55,020 5,997,148 10,940,815 0.41% 184.77 2016 5,692,853 48,204 5,741,057 10,609,552 0.38% 175.13 2017 5,433,577 41,388 5,474,965 10,168,288 0.35% 167.13 2018 5,164,303 34,572 5,198,875 64,304,923 2.04% 1,060.25 2019 4,890,027 27,755 4,917,782 63,020,714 2.00% 1,049.54 2020 4,605,753 20,939 4,626,692 61,627,363 n/a In August 2012, the series 2003 parking services bonds were refunded with series 2012 refunding bonds. Data Sources:City of San Rafael State of California, Department of Finance (population) U.S. Department of commerce, Bureau of the Census (income) (a) See Schedule of Demographic and Economic Statistics for personal income and population data. Governmental Activities Business-Type Activities $- $10 $20 $30 $40 $50 $60 $70 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020MillionsTotal Governmental Total Business 165 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL COMPUTATION OF DIRECT AND OVERLAPPING DEBT June 30, 2020 2019-20 Assessed Valuation:14,259,519,304$ Total Debt City's Share of OVERLAPPING TAX AND ASSESSMENT DEBT:6/30/2020 % Applicable (1) Debt 6/30/2020 Marin Community College District 447,905,000$ 17.305% 77,509,960$ San Rafael High School District 176,566,390 78.305% 138,260,312 Tamalpais Union High School District 96,260,000 0.074%71,232 Dixie School District 29,935,810 66.698% 19,966,587 Ross School District 17,094,191 1.422% 243,079 Ross Valley School District 41,046,096 0.012%4,926 San Rafael School District 136,475,785 83.413% 113,838,547 Marin Healthcare District 366,045,000 20.746% 75,939,696 Marin Emergency Radio Authority Parcel Tax Obligations 31,375,000 17.280% 5,421,600 City of San Rafael 1915 Act Bonds 1,315,100 100.000% 1,315,100 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT 432,571,039$ DIRECT AND OVERLAPPING GENERAL FUND DEBT: Marin County Certificates of Participation 82,489,789$ 17.280% 14,254,236$ Marin County Pension Obligation Bonds 78,120,000 17.280% 13,499,136 Marin County Transit District General Fund Obligations 47,200 17.280%8,156 Marin Municipal Water District General Fund Obligations 38,400 21.994%8,446 Marin Community College District Certification of Participation 12,960,834 17.305% 2,242,872 San Rafael School District Certificates of Participation 3,000,000 83.413% 2,502,390 City of San Rafael General Fund Obligations 58,972,044 100.000% 58,972,044 (2) City of San Rafael Pension Obligations 3,320,000 100.000% 3,320,000 TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT 94,807,280 Less: City of San Rafael lease revenue bonds supported by parking revenues 4,605,753 TOTAL NET DIRECT AND OVERLAPPING GENERAL FUND DEBT 90,201,527$ OVERLAPPING TAX INCREMENT DEBT (Successor Agency)6,801,408$ 100.000% 6,801,408$ TOTAL GROSS DIRECT DEBT 62,292,044 TOTAL NET DIRECT DEBT 57,686,291 TOTAL OVERLAPPING DEBT 471,887,683 GROSS COMBINED TOTAL DEBT 534,179,727 (3) NET COMBINED TOTAL DEBT 529,573,974 (1) The percentage of overlapping debt applicable to the city is estimated using taxable assessed property value. Applicable percentages were estimated by determining the portion of the overlapping district's assessed value that is within the boundaries of the city divided by the district's total taxable assessed value. (2) Includes share of Marin Emergency Radio Authority refunding revenue bonds and $1,084,462 PG&E notes. Ratios to 2019-20 Assessed Valuation: Total Overlapping Tax and Assessment Debt 3.03% Total Gross Direct Debt ($62,292,044) 0.44% Total Net Direct Debt ($57,686,291) 0.40% Gross Combined Total Debt 3.75% Net Combined Total Debt 3.71% Ratios to Redevelopment Incremental Valuation ($3,108,004,332) Total Overlapping Tax Increment Debt 0.22% Data Source: MuniServices (3) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease obligations. 166 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT ASSESSED VALUATION:14,259,519,304$ BONDED DEBT LIMIT (3.75% OF ASSESSED VALUE) (a) 534,731,974 LESS AMOUNT OF DEBT SUBJECT TO LIMIT: 0 LEGAL BONDED DEBT MARGIN 534,731,974$ Total net debt Total Net Debt Legal applicable to the limit Fiscal Debt Applicable to Debt as a percentage Year Limit Limit Margin of debt limit 2011 376,057,576$ 38,150,819$ 337,906,757$ 11.29% 2012 378,920,952 4,659,000 374,261,952 1.24% 2013 374,950,995 4,659,000 370,291,995 1.26% 2014 388,010,886 5,018,839 382,992,047 1.31% 2015 408,526,834 4,943,667 403,583,167 1.22% 2016 431,510,904 4,868,495 426,642,409 1.14% 2017 459,128,068 4,693,323 454,434,745 1.03% 2018 482,926,729 59,106,048 423,820,681 13.95% 2019 507,248,067 58,102,932 449,145,135 12.94% 2020 534,731,974 0 534,731,974 0.00% NOTE: (a) Source: City of San Rafael's Finance Department CITY OF SAN RAFAEL COMPUTATION OF LEGAL BONDED DEBT MARGIN June 30, 2020 California Government Code, Section 43605 sets the debt limit at 15%. The Code section was enacted prior to the change in basing assessed value to full market value when it was previously 25% of market value. Thus, the limit shown as 3.75% is one-fourth of that value. 167 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL REVENUE BOND COVERAGE PARKING FACILITY LAST TEN FISCAL YEARS Debt Service Requirements Net Revenue Fiscal Gross Operating Available for Year Revenue (1) Expenses (2) Debt Service Principal Interest Total Coverage 2011 4,023,211$ 3,101,411$ 921,800$ 175,000$ 319,391$ 494,391$ 1.86 2012 3,908,664 2,870,718 1,037,946 185,000 312,291 497,291 2.09 2013 3,994,446 3,121,964 872,481 310,000 240,012 550,012 1.59 2014 4,489,769 3,716,552 773,217 245,000 210,063 455,063 1.70 2015 5,180,554 4,031,161 1,149,393 245,000 205,163 450,163 2.55 2016 5,226,904 3,739,321 1,487,583 250,000 199,613 449,613 3.31 2017 5,279,801 2,425,281 2,854,520 260,000 192,038 452,038 6.31 2018 5,219,721 4,320,695 899,026 270,000 184,163 454,163 1.98 2019 5,425,883 4,283,754 1,142,130 275,000 176,025 451,025 2.53 2020 5,134,901 4,072,433 1,062,468 284,999 167,700 452,699 2.35 Notes: On March 26, 2003, the City Financing Authority issued lease revenue bonds for the design and construction of a new parking facility. On August 12, 2012, the City Financing Authority refunded the series 2003 lease revenue bonds with series 2012 lease revenue refunding bonds to take advantage of lower interest rates. (1) Includes all Parking Facility Operating Revenues and Non-operating Interest Revenue (2) Includes all Parking Facility Operating Expenses less Depreciation and Interest Data Source: San Rafael Finance Department Revenue and Expenditure Status Reports 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Coverage 168 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS Personal Per Capita Average Marin City Fiscal City Income (2)Personal Unemployment County Population Year Population (1)(in thousands)Income (2) Rate (3)Population % of County 2011 58,136 2,389,222$ 40,978$ 8.80% 254,692 22.83% 2012 58,305 2,438,291 41,908 5.50% 254,790 22.88% 2013 58,182 2,538,895 43,351 4.70% 254,007 22.91% 2014 58,566 2,621,228 44,531 4.50% 255,846 22.89% 2015 59,214 2,699,436 44,558 3.70% 258,972 22.87% 2016 60,582 2,817,497 46,308 3.40% 262,274 23.10% 2017 60,842 2,943,227 48,374 3.30% 263,604 23.08% 2018 60,651 3,152,985 52,509 2.30% 263,886 22.98% 2019 60,046 3,156,708 52,781 2.20% 262,879 22.84% 2020 59,807 n/a n/a n/a 260,831 22.93% Source: (1) State of California, Department of Finance - Demographic Research Unit. The data represents the City's population as of January 1, of each year. (2) US Census Bureau, most recent American Community Survey (3)Unemployment Data: California Employment Development Department 0.00% 2.50% 5.00% 7.50% 10.00% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Unemployment Rate (%) 22.00% 22.50% 23.00% 23.50% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 City Population as a % of County Population $0 $500,000 $1,000,000 $1,500,000 $2,000,000 $2,500,000 $3,000,000 $3,500,000 Personal Income (2) (in thousands) $30 $35 $40 $45 $50 $55 ThousandsPer Capita Personal Income (2) 169 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL PRINCIPAL EMPLOYERS FISCAL YEAR 2019-2020 LAST TEN CALENDAR YEARS Employer # (A) # (A) # (A) # (A) Kaiser Permanente 2,014 6.22% 2,092 6.62% 2,061 6.52% 662 2.02% BioMarin Pharmaceutical Inc.950 2.93% San Rafael Elementary/High Schools Dist 700 2.16% 700 2.22% 700 2.22% 650 1.98% City of San Rafael 410 1.27% 410 1.30% 454 1.44% 577 1.76% Dominican University of California 421 1.30% 319 1.01% 456 1.44% 485 1.48% Guide Dogs for the Blind 227 0.70% 200 0.63% 203 0.64% 225 0.69% Buckelew Programs 103 0.32% 106 0.34% 240 0.76% 186 0.57% Lifehouse 100 0.31% EO Products 150 0.46% Toyota Marin 141 0.44% Totals 5,216 16.10% 4,708 14.90% 5,853 18.52% 5,314 16.20% #Number of FTE employees in Marin locations (A)Percentage of total employment Data Sources: State of California, Employment Development Department, Labor Market Information Division & North Bay Business Journal (Annual Book of Lists) 20162019 20172018 Note: From the EDD website, it shows that the Total 2019 Employment in the City of San Rafael was 32,400 of which it is used as the denominator for the 2019 percentages are calculated. 170 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT #(A) #(A) #(A) #(A) #(A) #(A) 1,575 4.82% 1,637 5.26% 1,756 5.74% 1,803 6.68% 1,330 4.93% 1,311 4.88% 650 1.99% 600 1.93% 600 1.96% 600 2.22% 600 2.22% 600 2.23% 581 1.78% 666 2.14% 643 2.10% 521 1.93% 592 2.19% 630 2.34% 422 1.29% 354 1.14% 347 1.13% 346 1.28% 336 1.24% 370 1.38% 287 1.07% 5,620 17.19% 6,025 19.37% 6,079 19.87% 6,715 24.87% 6,007 22.25% 6,092 22.67% 2014 2013 2012 2011 20102015 171 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Function General Government 54.35 55.23 53.23 55.11 58.11 60.61 62.11 60.11 63.11 62.11 Public Safety 166.00 162.00 163.00 168.00 171.75 175.75 176.55 175.35 175.65 175.30 Public Works and Parks 62.80 62.00 60.00 61.00 62.00 62.00 63.00 66.67 66.00 68.00 Community Development 26.75 18.25 18.25 17.80 17.80 19.80 20.00 21.00 22.00 21.75 Culture and Recreation 89.82 81.56 80.76 83.66 84.23 84.25 84.35 87.35 85.82 78.07 Total 399.72 379.04 375.24 385.57 393.89 402.41 406.01 410.48 412.58 405.23 Data Source: City of San Rafael's Finance Department CITY OF SAN RAFAEL FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION LAST TEN FISCAL YEARS 0 50 100 150 200 250 300 350 400 450 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020FTE'sGeneral Government Public Safety Public Works and Parks Community Development Culture and Recreation 173 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL OPERATING INDICATORS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS 2011 2012 2013 2014 Function/Program Public safety: Fire: Inspection permit issued 294 282 307 261 Police: Police calls for service 39,512 39,537 42,707 51,261 Law violations: Part I crimes 2,180 2,101 2,523 2,289 Physical arrests (adult and juvenile)3,102 2,981 2,951 3,227 Traffic violations 8,190 4,048 3,448 4,498 Parking violations 34,590 32,492 30,881 38,814 Public works Street resurfacing (miles) (Eng Div)7.40 N/A 2.70 9.00 Potholes repaired (square miles)N/A N/A N/A N/A Asphalt used for street repairs (tons)10,809 178.9 7,500 10,700 Culture and recreation: Recreation class participants 9,000 12,075 7,082 9,857 Recreation Facility Rentals Childcare School-Age program participants Library: Items in collection 158,296 159,180 125,920 168,620 Total items borrowed 435,661 366,460 392,230 478,960 Note: N/A denotes information not available. 174 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT 2015 2016 2017 2018 2019 2020 282 198 233 186 123 167 55,805 57,026 53,567 51,013 47,919 47,968 2,533 2,523 2,392 2,326 1,893 2,988 3,450 3,453 2,526 2,019 1,923 2,527 4,168 3,252 3,341 2,758 2,944 2,342 36,398 34,803 36,169 36,208 40,407 28,029 6.40 6.76 2.32 2.50 4.30 14.30 N/A N/A N/A N/A N/A 967 11,000 7,195 5,800 4,730 7,200 5,885 10,023 12,725 13,493 12,842 N/A N/A 5,146 3,875 7,592 6,270 127,763 227,890 117,354 115,812 123,432 140,610 443,639 469,790 327,297 324,452 356,301 199,903 175 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS 2011 2012 2013 2014 Function/Program Public safety: Fire stations 6666 Police stations 1111 Police Fleet Public works Miles of streets 173 173 173 173 Street lights 4,435 4,435 4,435 4,435 Parking District lights Traffic Signals 89 89 89 89 Culture and recreation: Community services: City parks 20 20 20 20 City parks acreage 42424242 Playgrounds 14 14 14 14 City trails 20 20 20 20 Community gardens 1111 Cultural Art Centers Community centers 4444 Senior centers 0000 Sports centers 0000 Performing arts centers 0000 Swimming pools 1111 Tennis courts 10 10 10 10 Basketball Courts 5555 Baseball/softball diamonds 5555 Soccer/football fields 2222 Library: City Libraries 2222 Wastewater: Miles of sanitary sewers 179 179 179 145 Data Source: City of San Rafael's Finance Department 176 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT 2015 2016 2017 2018 2019 2020 666666 111111 173 173 173 173 173 173 4,435 4,435 4,435 4,435 4,435 4,435 89 89 89 89 89 90 20 20 20 20 20 28 42 42 42 42 42 113 14 14 14 14 14 14 20 20 20 20 20 20 111112 1 444443 000000 000000 000000 111111 10 10 10 10 10 10 555556 555555 222222 222222 145 145 145 145 145 145 177 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT INDEPENDENT ACCOUNTANT’S REPORT ON APPLYING AGREED UPON PROCEDURES FOR COMPLIANCE WITH THE PROPOSITION 111 2020-2021 APPROPRIATIONS LIMIT INCREMENT Honorable Mayor and Members of the City Council City of San Rafael, California We have performed the procedures below, which were agreed to by the City of San Rafael, on the Appropriations Limit Worksheet (Worksheet) for the year ended June 30, 2021. The City’s management is responsible for the Worksheet. These procedures, which were suggested by the League of California Cities and presented in their Article XIIIB Appropriations Limitation Uniform Guidelines, were performed solely to assist you in meeting the requirements of Section 1.5 of Article XIIIB of the California Constitution. The sufficiency of these procedures is solely the responsibility of the City. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose. The procedures and associated findings were as follows: A. We obtained the Worksheet (Exhibit A to the Resolution) and determined that the 2020-2021 Appropriations Limit of $143,208,909 and annual adjustment factors were adopted by Resolution of the City Council. We also determined that the population and inflation options were selected by a recorded vote of the City Council. However, the Resolution indicated that the change in the population of San Rafael was selected, but the Worksheet shows that the larger change in the population of Marin County was used for the calculation of the 2020-2021 Appropriation Limit. B. We recomputed the 2020-2021 Appropriations Limit by multiplying the 2019-2020 Prior Year Appropriations Limit by the Total Growth Factor. We recomputed the Total Growth Factor by multiplying the population option by the inflation option. C. For the Worksheet, we agreed the Per Capita Income Factor, Change in Assessment Roll for Nonresidential Construction Factor, City Population Factor and County Population Factor to California State Department of Finance Worksheets. This agreed-upon procedures engagement was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants. We were not engaged to and did not conduct an examination or review, the objective of which would be the expression of an opinion or conclusion, respectively, on the Worksheet. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the information and use of management and the City Council and is not intended to be and should not be used by anyone other than those specified parties; however, this restriction is not intended to limit the distribution of this report, which is a matter of public record. Pleasant Hill, California November 9, 2020 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL MEMORANDUM ON INTERNAL CONTROL FOR THE YEAR ENDED JUNE 30, 2020 DRAFT DRAFT REVIEW DRAFT 11-12-20 DRAFT This Page Left Intentionally Blank DRAFT DRAFT REVIEW DRAFT 11-12-20 DRAFT CITY OF SAN RAFAEL MEMORANDUM ON INTERNAL CONTROL For the Year Ended June 30, 2020 Table of Contents Page Memorandum on Internal Control .................................................................................................. 1 Schedule of Significant Deficiencies ...................................................................................... 3 Schedule of Other Matters ...................................................................................................... 5 DRAFT DRAFT REVIEW DRAFT 11-12-20 DRAFT This Page Left Intentionally Blank DRAFT DRAFT REVIEW DRAFT 11-12-20 DRAFT MEMORANDUM ON INTERNAL CONTROL To the City Council of the City of San Rafael, California We have audited the basic financial statements of the City of San Rafael for the year ended June 30, 2020 and have issued our report thereon dated November 9, 2020. Our opinions on the basic financial statements and this report, insofar as they relate to San Rafael Sanitation District (District), are based solely on the report of other auditors. In planning and performing our audit of the basic financial statements of the City, in accordance with auditing standards generally accepted in the United States of America, we considered the City’s internal control over financial reporting (internal control) as a basis for designing our auditing procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control. Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore material weaknesses or significant deficiencies may exist that were not identified. In addition, because of inherent limitations in internal control, including the possibility of management override of controls, misstatements due to error or fraud may occur and not be detected by such controls. However, as discussed below, we identified certain deficiencies in internal control that we consider to be significant deficiencies. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the City’s financial statements will not be prevented, or detected and corrected on a timely basis. We did not identify any deficiencies in internal control that we consider to be material weaknesses. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the deficiencies in internal control included on the Schedule of Significant Deficiencies to be significant deficiencies. Included in the Schedule of Other Matters are recommendations not meeting the above definitions that we believe are opportunities for strengthening internal controls and operating efficiency. Management’s written responses included in this report have not been subjected to the audit procedures applied in the audit of the financial statements and, accordingly, we express no opinion on them. 1 DRAFT DRAFT REVIEW DRAFT 11-12-20 DRAFT This communication is intended solely for the information and use of management, City Council, others within the organization, and agencies and pass-through entities requiring compliance with Government Auditing Standards, and is not intended to be and should not be used by anyone other than these specified parties. Pleasant Hill, California November 9, 2020 2 DRAFT DRAFT REVIEW DRAFT 11-12-20 DRAFT CITY OF SAN RAFAEL MEMORANDUM ON INTERNAL CONTROL SCHEDULE OF SIGNIFICANT DEFICIENCIES 2020-01 Documentation of Review of Changes to the Vendor Database Accounts payable staff should not normally have access to make changes to the Vendor Database. In the event the system does not allow such a segregation of duties, changes to the Vendor Database should be reviewed and approved by a person who is not making changes to the database, so that two employees are involved in the process of adding, removing, or modifying vendor information. We noted that more than one staff charged with processing accounts payable has access to the vendor database. We also understand that the City has a process for reviewing the changes made to the vendor database on a quarterly basis, however, the review process is not documented. We understand City staff did not realize that the review process should be documented. Without an independent review, the City is exposed to the risk of phantom vendors and unauthorized changes to vendor accounts. The City should develop procedures to document the quarterly review and approval of change to the vendor database in some formal manner. Management’s Response: Finance Management reviews changes made to the Vendor Database on a quarterly basis in order to detect phantom vendors and unauthorized changes to vendor accounts. Management reviews a report in Eden, the City’s Financial System. Going forward, to formalize the review process, the report will be printed to PDF and signed by the reviewer. 2020-02 Documentation of Review of Eden Employee Audit Reports Payroll staff should not normally have access to make any changes to the Payroll Database. In the event the system does not allow such a segregation of duties, changes to the Payroll Database should be reviewed and approved by a person who is not making the changes to the database, so that two employees are involved in the process of adding, removing, or modifying employee information. We noted that although the Human Resources Department is tasked with making changes to the Payroll Database, more than one staff charged with processing payroll in the Finance Department has access to edit base pay, incentives, and benefits in the payroll database. To mitigate the control risk, we understand that the City has a process to review the employee audit reports each pay period for accuracy and to ensure no unauthorized changes were made to the employee database. However, we selected three pay periods (November 15, 2019, January 31, 2020 and May 15, 2020) for testing of review of the employee audit report and noted that there was no documentation of the review. 3 DRAFT DRAFT REVIEW DRAFT 11-12-20 DRAFT CITY OF SAN RAFAEL MEMORANDUM ON INTERNAL CONTROL SCHEDULE OF SIGNIFICANT DEFICIENCIES 2020-02 Documentation of Review of Eden Employee Audit Reports (Continued) We understand City staff did not realize that the review process should be documented. However, without proper documentation of the review process, we cannot determine if the above internal control procedure is in place. The City should develop procedures to document the review of employee audit reports in some formal manner. Management’s Response: The Finance Director reviews an employee audit report in Eden each pay period to ensure no unauthorized changes are made to the employee database. Going forward, to formalize the review process, the report will be printed to PDF and signed by the reviewer. 2020-03 Cash Collection Procedures – Parking Department Parking Department employees that are tasked with collecting cash receipts should use individually assigned login credentials when performing any receipting transactions so that collection activity can be identified by employee. During our review of the cash collection procedures at the Parking Department, we noted that employees who collect cash receipts do not log out of their assigned login credentials when they take breaks throughout the day. We also noted that the other employees who collect cash receipts may use other employees’ unique assigned login while covering for the employee during their break, without logging out and using their own assigned login credentials. We understand Parking Department staff did not realize that they should log out of the system when leaving for breaks. The Parking Department should develop procedures to ensure that employees tasked with collecting cash receipts use their own assigned login credentials when performing any receipting transactions at all times so inconsistencies can be identified by employee, if necessary. Management’s Response: Finance Management agrees and will work with the Parking Department to develop guidance and explanation on the importance of this control. Finance Management will also recommend disciplinary action to the Parking Department should staff not follow this control. 4 DRAFT DRAFT REVIEW DRAFT 11-12-20 DRAFT CITY OF SAN RAFAEL MEMORANDUM ON INTERNAL CONTROL SCHEDULE OF OTHER MATTERS 2020-04 Health and Safety Code Expenditure Limitations and Reporting Requirements for the Housing Successor Senate Bill No. 341 was approved on October 13, 2013 and amended and added to the Health and Safety Code (HSC) effective January 1, 2014 to change provisions relating to the functions performed by a Housing Successor. The amendments to HSC Section 34176 were minor and primarily included defining the “entity that assumed the housing functions of a former redevelopment agency” as the Housing Successor. HSC Section 34176.1 imposes spending limitations and reporting requirements related to the housing assets of the former Redevelopment Agency held by the Housing Successor. HSC Section 34176.1 states that the Housing Successor must submit an annual progress report for the prior fiscal year to the Department of Housing and Community Development by April 1 each year and that report must also be posted to the City’s website. The City serves as Housing Successor for the housing activities of the former San Rafael Redevelopment Agency and the activities of the Housing Successor are reported in the City’s Low and Moderate Income Housing Special Revenue Fund. We noted that the City did not file the annual progress report to the Department of Housing and Community Development for fiscal year 2019 that was due by April 1, 2020 and the report has not been posted to the City’s website. The City, as Housing Successor, should file the delinquent report and develop procedures to ensure ongoing compliance with the provisions of HSC Section 34176.1, including the annual reporting requirements. Management’s Response: The City understands the filing requirement and will file the delinquent report. The City was relying on its outside consultant to file this on their behalf and going forward, will add this annual filing to its calendar of due dates so it is not missed. 2020-05 Treasurer’s Report Frequency of Reporting The Reporting section of the City’s Investment Policy requires quarterly reporting to City Council. However, the Delegation of Authority section of the Policy delegates the authority to invest the funds of the City under California Government Code Section 53607, which requires monthly reporting of transactions to the legislative body. The City should determine whether the quarterly reporting requirement is sufficient under the Government Code, or if the Investment Policy and reporting frequency should be revised to conform with the Code requirements. Management’s Response: The Finance Director believes that the GC 53607 requirement was included because in many cities, the City’s Treasurer is elected and may not be a financial professional. However, the City of San Rafael delegated the responsibility of investment decisions to the Finance Director who also acts as the City Treasurer. Therefore, the oversight GC 53607 attempts to provide is unnecessary at this time and the existing City Investment Policy requiring quarterly reports is sufficient. 5 DRAFT DRAFT REVIEW DRAFT 11-12-20 DRAFT CITY OF SAN RAFAEL MEMORANDUM ON INTERNAL CONTROL SCHEDULE OF OTHER MATTERS NEW GASB PRONOUNCEMENTS OR PRONOUNCEMENTS NOT YET EFFECTIVE The following comment represents new pronouncements taking affect in the next few years. We have cited them here to keep you informed of developments: EFFECTIVE FISCAL YEAR 2020/21: GASB 84 – Fiduciary Activities The objective of this Statement is to improve guidance regarding the identification of fiduciary activities for accounting and financial reporting purposes and how those activities should be reported. This Statement establishes criteria for identifying fiduciary activities of all state and local governments. The focus of the criteria generally is on (1) whether a government is controlling the assets of the fiduciary activity and (2) the beneficiaries with whom a fiduciary relationship exists. Separate criteria are included to identify fiduciary component units and postemployment benefit arrangements that are fiduciary activities. An activity meeting the criteria should be reported in a fiduciary fund in the basic financial statements. Governments with activities meeting the criteria should present a statement of fiduciary net position and a statement of changes in fiduciary net position. An exception to that requirement is provided for a business-type activity that normally expects to hold custodial assets for three months or less. This Statement describes four fiduciary funds that should be reported, if applicable: (1) pension (and other employee benefit) trust funds, (2) investment trust funds, (3) private-purpose trust funds, and (4) custodial funds. Custodial funds generally should report fiduciary activities that are not held in a trust or equivalent arrangement that meets specific criteria. A fiduciary component unit, when reported in the fiduciary fund financial statements of a primary government, should combine its information with its component units that are fiduciary component units and aggregate that combined information with the primary government’s fiduciary funds. This Statement also provides for recognition of a liability to the beneficiaries in a fiduciary fund when an event has occurred that compels the government to disburse fiduciary resources. Events that compel a government to disburse fiduciary resources occur when a demand for the resources has been made or when no further action, approval, or condition is required to be taken or met by the beneficiary to release the assets. 6 DRAFT DRAFT REVIEW DRAFT 11-12-20 DRAFT CITY OF SAN RAFAEL MEMORANDUM ON INTERNAL CONTROL SCHEDULE OF OTHER MATTERS GASB 90 - Majority Equity Interests—an amendment of GASB Statements No. 14 and No. 61) The primary objectives of this Statement are to improve the consistency and comparability of reporting a government’s majority equity interest in a legally separate organization and to improve the relevance of financial statement information for certain component units. It defines a majority equity interest and specifies that a majority equity interest in a legally separate organization should be reported as an investment if a government’s holding of the equity interest meets the definition of an investment. A majority equity interest that meets the definition of an investment should be measured using the equity method, unless it is held by a special-purpose government engaged only in fiduciary activities, a fiduciary fund, or an endowment (including permanent and term endowments) or permanent fund. Those governments and funds should measure the majority equity interest at fair value. For all other holdings of a majority equity interest in a legally separate organization, a government should report the legally separate organization as a component unit, and the government or fund that holds the equity interest should report an asset related to the majority equity interest using the equity method. This Statement establishes that ownership of a majority equity interest in a legally separate organization results in the government being financially accountable for the legally separate organization and, therefore, the government should report that organization as a component unit. This Statement also requires that a component unit in which a government has a 100 percent equity interest account for its assets, deferred outflows of resources, liabilities, and deferred inflows of resources at acquisition value at the date the government acquired a 100 percent equity interest in the component unit. Transactions presented in flows statements of the component unit in that circumstance should include only transactions that occurred subsequent to the acquisition. The requirements of this Statement are effective for reporting periods beginning after December 15, 2019. Earlier application is encouraged. The requirements should be applied retroactively, except for the provisions related to (1) reporting a majority equity interest in a component unit and (2) reporting a component unit if the government acquires a 100 percent equity interest. Those provisions should be applied on a prospective basis. 7 DRAFT DRAFT REVIEW DRAFT 11-12-20 DRAFT CITY OF SAN RAFAEL MEMORANDUM ON INTERNAL CONTROL SCHEDULE OF OTHER MATTERS EFFECTIVE FISCAL YEAR 2021/22: GASB 87 – Leases The objective of this Statement is to better meet the information needs of financial statement users by improving accounting and financial reporting for leases by governments. This Statement increases the usefulness of governments’ financial statements by requiring recognition of certain lease assets and liabilities for leases that previously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. It establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Under this Statement, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources, thereby enhancing the relevance and consistency of information about governments’ leasing activities. A lease is defined as a contract that conveys control of the right to use another entity’s nonfinancial asset (the underlying asset) as specified in the contract for a period of time in an exchange or exchange-like transaction. Examples of nonfinancial assets include buildings, land, vehicles, and equipment. Any contract that meets this definition should be accounted for under the leases guidance, unless specifically excluded in this Statement. GASB 89 – Accounting for Interest Cost Incurred before the End of a Construction Period The objectives of this Statement are (1) to enhance the relevance and comparability of information about capital assets and the cost of borrowing for a reporting period and (2) to simplify accounting for interest cost incurred before the end of a construction period. This Statement establishes accounting requirements for interest cost incurred before the end of a construction period. Such interest cost includes all interest that previously was accounted for in accordance with the requirements of paragraphs 5–22 of Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements, which are superseded by this Statement. This Statement requires that interest cost incurred before the end of a construction period be recognized as an expense in the period in which the cost is incurred for financial statements prepared using the economic resources measurement focus. As a result, interest cost incurred before the end of a construction period will not be included in the historical cost of a capital asset reported in a business-type activity or enterprise fund. This Statement also reiterates that in financial statements prepared using the current financial resources measurement focus, interest cost incurred before the end of a construction period should be recognized as an expenditure on a basis consistent with governmental fund accounting principles. 8 DRAFT DRAFT REVIEW DRAFT 11-12-20 DRAFT CITY OF SAN RAFAEL MEMORANDUM ON INTERNAL CONTROL SCHEDULE OF OTHER MATTERS GASB 92 – Omnibus 2020 The objectives of this Statement are to enhance comparability in accounting and financial reporting and to improve the consistency of authoritative literature by addressing practice issues that have been identified during implementation and application of certain GASB Statements. This Statement addresses a variety of topics and includes specific provisions about the following:  The effective date of Statement No. 87, Leases, and Implementation Guide No. 2019-3, Leases, for interim financial reports  Reporting of intra-entity transfers of assets between a primary government employer and a component unit defined benefit pension plan or defined benefit other postemployment benefit (OPEB) plan  The applicability of Statements No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68, as amended, and No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, as amended, to reporting assets accumulated for postemployment benefits  The applicability of certain requirements of Statement No. 84, Fiduciary Activities, to postemployment benefit arrangements  Measurement of liabilities (and assets, if any) related to asset retirement obligations (AROs) in a government acquisition  Reporting by public entity risk pools for amounts that are recoverable from reinsurers or excess insurers  Reference to nonrecurring fair value measurements of assets or liabilities in authoritative literature  Terminology used to refer to derivative instruments. GASB 93 – Replacement of Interbank Offered Rates Some governments have entered into agreements in which variable payments made or received depend on an interbank offered rate (IBOR)—most notably, the London Interbank Offered Rate (LIBOR). As a result of global reference rate reform, LIBOR is expected to cease to exist in its current form at the end of 2021, prompting governments to amend or replace financial instruments for the purpose of replacing LIBOR with other reference rates, by either changing the reference rate or adding or changing fallback provisions related to the reference rate. Statement No. 53, Accounting and Financial Reporting for Derivative Instruments, as amended, requires a government to terminate hedge accounting when it renegotiates or amends a critical term of a hedging derivative instrument, such as the reference rate of a hedging derivative instrument’s variable payment. In addition, in accordance with Statement No. 87, Leases, as amended, replacement of the rate on which variable payments depend in a lease contract would require a government to apply the provisions for lease modifications, including remeasurement of the lease liability or lease receivable. 9 DRAFT DRAFT REVIEW DRAFT 11-12-20 DRAFT CITY OF SAN RAFAEL MEMORANDUM ON INTERNAL CONTROL SCHEDULE OF OTHER MATTERS GASB 93 – Replacement of Interbank Offered Rates (Continued) The objective of this Statement is to address those and other accounting and financial reporting implications that result from the replacement of an IBOR. This Statement achieves that objective by:  Providing exceptions for certain hedging derivative instruments to the hedge accounting termination provisions when an IBOR is replaced as the reference rate of the hedging derivative instrument’s variable payment  Clarifying the hedge accounting termination provisions when a hedged item is amended to replace the reference rate  Clarifying that the uncertainty related to the continued availability of IBORs does not, by itself, affect the assessment of whether the occurrence of a hedged expected transaction is probable  Removing LIBOR as an appropriate benchmark interest rate for the qualitative evaluation of the effectiveness of an interest rate swap  Identifying a Secured Overnight Financing Rate and the Effective Federal Funds Rate as appropriate benchmark interest rates for the qualitative evaluation of the effectiveness of an interest rate swap  Clarifying the definition of reference rate, as it is used in Statement 53, as amended Providing an exception to the lease modifications guidance in Statement 87, as amended, for certain lease contracts that are amended solely to replace an IBOR as the rate upon which variable payments depend. GASB 97 – Certain Component Unit Criteria, and Accounting for and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans The primary objectives of this Statement are to (1) increase consistency and comparability related to the reporting of fiduciary component units in circumstances in which a potential component unit does not have a governing board and the primary government performs the duties that a governing board typically would perform; (2) mitigate costs associated with the reporting of certain defined contribution pension plans, defined contribution other postemployment benefit (OPEB) plans, and employee benefit plans other than pension plans or OPEB plans (other employee benefit plans) as fiduciary component units in fiduciary fund financial statements; and (3) enhance the relevance, consistency, and comparability of the accounting and financial reporting for Internal Revenue Code (IRC) Section 457 deferred compensation plans (Section 457 plans) that meet the definition of a pension plan and for benefits provided through those plans. This Statement requires that for purposes of determining whether a primary government is financially accountable for a potential component unit, except for a potential component unit that is a defined contribution pension plan, a defined contribution OPEB plan, or an other employee benefit plan (for example, certain Section 457 plans), the absence of a governing board should be treated the same as the appointment of a voting majority of a governing board if the primary government performs the duties that a governing board typically would perform. 10 DRAFT DRAFT REVIEW DRAFT 11-12-20 DRAFT CITY OF SAN RAFAEL MEMORANDUM ON INTERNAL CONTROL SCHEDULE OF OTHER MATTERS GASB 97 – Certain Component Unit Criteria, and Accounting for and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans (Continued) This Statement also requires that the financial burden criterion in paragraph 7 of Statement No. 84, Fiduciary Activities, be applicable to only defined benefit pension plans and defined benefit OPEB plans that are administered through trusts that meet the criteria in paragraph 3 of Statement No. 67, Financial Reporting for Pension Plans, or paragraph 3 of Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, respectively. This Statement (1) requires that a Section 457 plan be classified as either a pension plan or an other employee benefit plan depending on whether the plan meets the definition of a pension plan and (2) clarifies that Statement 84, as amended, should be applied to all arrangements organized under IRC Section 457 to determine whether those arrangements should be reported as fiduciary activities. This Statement supersedes the remaining provisions of Statement No. 32, Accounting and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans, as amended, regarding investment valuation requirements for Section 457 plans. As a result, investments of all Section 457 plans should be measured as of the end of the plan’s reporting period in all circumstances. The requirements of this Statement that (1) exempt primary governments that perform the duties that a governing board typically performs from treating the absence of a governing board the same as the appointment of a voting majority of a governing board in determining whether they are financially accountable for defined contribution pension plans, defined contribution OPEB plans, or other employee benefit plans and (2) limit the applicability of the financial burden criterion in paragraph 7 of Statement 84 to defined benefit pension plans and defined benefit OPEB plans that are administered through trusts that meet the criteria in paragraph 3 of Statement 67 or paragraph 3 of Statement 74, respectively, are effective immediately. The requirements of this Statement that are related to the accounting and financial reporting for Section 457 plans are effective for fiscal years beginning after June 15, 2021. For purposes of determining whether a primary government is financially accountable for a potential component unit, the requirements of this Statement that provide that for all other arrangements, the absence of a governing board be treated the same as the appointment of a voting majority of a governing board if the primary government performs the duties that a governing board typically would perform, are effective for reporting periods beginning after June 15, 2021. Earlier application of those requirements is encouraged and permitted by requirement as specified within this Statement. How the Changes in this Statement will Improve Financial Reporting The requirements of this Statement will result in more consistent financial reporting of defined contribution pension plans, defined contribution OPEB plans, and other employee benefit plans, while mitigating the costs associated with reporting those plans. The requirements also will enhance the relevance, consistency, and comparability of (1) the information related to Section 457 plans that meet the definition of a pension plan and the benefits provided through hose plans and (2) investment information for all 457 plans. 11 DRAFT DRAFT REVIEW DRAFT 11-12-20 DRAFT CITY OF SAN RAFAEL MEMORANDUM ON INTERNAL CONTROL SCHEDULE OF OTHER MATTERS EFFECTIVE FISCAL YEAR 2022/23: GASB 91 – Conduit Debt Obligations The primary objectives of this Statement are to provide a single method of reporting conduit debt obligations by issuers and eliminate diversity in practice associated with (1) commitments extended by issuers, (2) arrangements associated with conduit debt obligations, and (3) related note disclosures. This Statement achieves those objectives by clarifying the existing definition of a conduit debt obligation; establishing that a conduit debt obligation is not a liability of the issuer; establishing standards for accounting and financial reporting of additional commitments and voluntary commitments extended by issuers and arrangements associated with conduit debt obligations; and improving required note disclosures. A conduit debt obligation is defined as a debt instrument having all of the following characteristics:  There are at least three parties involved: (1) an issuer (2) a third-party obligor, and (3) a debt holder or a debt trustee.  The issuer and the third-party obligor are not within the same financial reporting entity.  The debt obligation is not a parity bond of the issuer, nor is it cross-collateralized with other debt of the issuer.  The third-party obligor or its agent, not the issuer, ultimately receives the proceeds from the debt issuance.  The third-party obligor, not the issuer, is primarily obligated for the payment of all amounts associated with the debt obligation (debt service payments). All conduit debt obligations involve the issuer making a limited commitment. Some issuers extend additional commitments or voluntary commitments to support debt service in the event the third party is, or will be, unable to do so. An issuer should not recognize a conduit debt obligation as a liability. However, an issuer should recognize a liability associated with an additional commitment or a voluntary commitment to support debt service if certain recognition criteria are met. As long as a conduit debt obligation is outstanding, an issuer that has made an additional commitment should evaluate at least annually whether those criteria are met. An issuer that has made only a limited commitment should evaluate whether those criteria are met when an event occurs that causes the issuer to reevaluate its willingness or ability to support the obligor’s debt service through a voluntary commitment. This Statement also addresses arrangements—often characterized as leases—that are associated with conduit debt obligations. In those arrangements, capital assets are constructed or acquired with the proceeds of a conduit debt obligation and used by third-party obligors in the course of their activities. Payments from third-party obligors are intended to cover and coincide with debt service payments. During those arrangements, issuers retain the titles to the capital assets. Those titles may or may not pass to the obligors at the end of the arrangements. 12 DRAFT DRAFT REVIEW DRAFT 11-12-20 DRAFT CITY OF SAN RAFAEL MEMORANDUM ON INTERNAL CONTROL SCHEDULE OF OTHER MATTERS GASB 91 – Conduit Debt Obligations (Continued) Issuers should not report those arrangements as leases, nor should they recognize a liability for the related conduit debt obligations or a receivable for the payments related to those arrangements. In addition, the following provisions apply:  If the title passes to the third-party obligor at the end of the arrangement, an issuer should not recognize a capital asset.  If the title does not pass to the third-party obligor and the third party has exclusive use of the entire capital asset during the arrangement, the issuer should not recognize a capital asset until the arrangement ends.  If the title does not pass to the third-party obligor and the third party has exclusive use of only portions of the capital asset during the arrangement, the issuer, at the inception of the arrangement, should recognize the entire capital asset and a deferred inflow of resources. The deferred inflow of resources should be reduced, and an inflow recognized, in a systematic and rational manner over the term of the arrangement. This Statement requires issuers to disclose general information about their conduit debt obligations, organized by type of commitment, including the aggregate outstanding principal amount of the issuers’ conduit debt obligations and a description of each type of commitment. Issuers that recognize liabilities related to supporting the debt service of conduit debt obligations also should disclose information about the amount recognized and how the liabilities changed during the reporting period. How the Changes in this Statement will Improve Financial Reporting The requirements of this Statement will improve financial reporting by eliminating the existing option for issuers to report conduit debt obligations as their own liabilities, thereby ending significant diversity in practice. The clarified definition will resolve stakeholders’ uncertainty as to whether a given financing is, in fact, a conduit debt obligation. Requiring issuers to recognize liabilities associated with additional commitments extended by issuers and to recognize assets and deferred inflows of resources related to certain arrangements associated with conduit debt obligations also will eliminate diversity, thereby improving comparability in reporting by issuers. Revised disclosure requirements will provide financial statement users with better information regarding the commitments issuers extend and the likelihood that they will fulfill those commitments. That information will inform users of the potential impact of such commitments on the financial resources of issuers and help users assess issuers’ roles in conduit debt obligations. 13 DRAFT DRAFT REVIEW DRAFT 11-12-20 DRAFT CITY OF SAN RAFAEL MEMORANDUM ON INTERNAL CONTROL SCHEDULE OF OTHER MATTERS GASB 94 – Public-Private and Public-Public Partnerships and Availability Payment Arrangements The primary objective of this Statement is to improve financial reporting by addressing issues related to public-private and public-public partnership arrangements (PPPs). As used in this Statement, a PPP is an arrangement in which a government (the transferor) contracts with an operator (a governmental or nongovernmental entity) to provide public services by conveying control of the right to operate or use a nonfinancial asset, such as infrastructure or other capital asset (the underlying PPP asset), for a period of time in an exchange or exchange-like transaction. Some PPPs meet the definition of a service concession arrangement (SCA), which the Board defines in this Statement as a PPP in which (1) the operator collects and is compensated by fees from third parties; (2) the transferor determines or has the ability to modify or approve which services the operator is required to provide, to whom the operator is required to provide the services, and the prices or rates that can be charged for the services; and (3) the transferor is entitled to significant residual interest in the service utility of the underlying PPP asset at the end of the arrangement. This Statement also provides guidance for accounting and financial reporting for availability payment arrangements (APAs). As defined in this Statement, an APA is an arrangement in which a government compensates an operator for services that may include designing, constructing, financing, maintaining, or operating an underlying nonfinancial asset for a period of time in an exchange or exchange-like transaction. PPPs - This Statement requires that PPPs that meet the definition of a lease apply the guidance in Statement No. 87, Leases, as amended, if existing assets of the transferor that are not required to be improved by the operator as part of the PPP arrangement are the only underlying PPP assets and the PPP does not meet the definition of an SCA. This Statement provides accounting and financial reporting requirements for all other PPPs: those that either (1) meet the definition of an SCA or (2) are not within the scope of Statement 87, as amended (as clarified by this Statement). The PPP term is defined as the period during which an operator has a noncancellable right to use an underlying PPP asset, plus, if applicable, certain periods if it is reasonably certain, based on all relevant factors, that the transferor or the operator either will exercise an option to extend the PPP or will not exercise an option to terminate the PPP. A transferor generally should recognize an underlying PPP asset as an asset in financial statements prepared using the economic resources measurement focus. However, in the case of an underlying PPP asset that is not owned by the transferor or is not the underlying asset of an SCA, a transferor should recognize a receivable measured based on the operator’s estimated carrying value of the underlying PPP asset as of the expected date of the transfer in ownership. In addition, a transferor should recognize a receivable for installment payments, if any, to be received from the operator in relation to the PPP. Measurement of a receivable for installment payments should be at the present value of the payments expected to be received during the PPP term. A transferor also should recognize a deferred inflow of resources for the consideration received or to be received by the transferor as part of the PPP. Revenue should be recognized by a transferor in a systematic and rational manner over the PPP term. This Statement requires a transferor to recognize a receivable for installment payments and a deferred inflow of resources to account for a PPP in financial statements prepared using the current financial resources measurement focus. Governmental fund revenue would be recognized in a systematic and rational manner over the PPP term. 14 DRAFT DRAFT REVIEW DRAFT 11-12-20 DRAFT CITY OF SAN RAFAEL MEMORANDUM ON INTERNAL CONTROL SCHEDULE OF OTHER MATTERS GASB 94 – Public-Private and Public-Public Partnerships and Availability Payment Arrangements (Continued) This Statement also provides specific guidance in financial statements prepared using the economic resources measurement focus for a government that is an operator in a PPP that either (1) meets the definition of an SCA or (2) is not within the scope of Statement 87, as amended (as clarified in this Statement). An operator should report an intangible right-to-use asset related to an underlying PPP asset that either is owned by the transferor or is the underlying asset of an SCA. Measurement of the right-to- use asset should be the amount of consideration to be provided to the transferor, plus any payments made to the transferor at or before the commencement of the PPP term, and certain direct costs. For an underlying PPP asset that is not owned by the transferor and is not the underlying asset of an SCA, an operator should recognize a liability measured based on the estimated carrying value of the underlying PPP asset as of the expected date of the transfer in ownership. In addition, an operator should recognize a liability for installment payments, if any, to be made to the transferor in relation to the PPP. Measurement of a liability for installment payments should be at the present value of the payments expected to be made during the PPP term. An operator also should recognize a deferred outflow of resources for the consideration provided or to be provided to the transferor as part of the PPP. Expense should be recognized by an operator in a systematic and rational manner over the PPP term. This Statement also requires a government to account for PPP and non-PPP components of a PPP as separate contracts. If a PPP involves multiple underlying assets, a transferor and an operator in certain cases should account for each underlying PPP asset as a separate PPP. To allocate the contract price to different components, a transferor and an operator should use contract prices for individual components as long as they do not appear to be unreasonable based on professional judgment or use professional judgment to determine their best estimate if there are no stated prices or if stated prices appear to be unreasonable. If determining the best estimate is not practicable, multiple components in a PPP should be accounted for as a single PPP. This Statement also requires an amendment to a PPP to be considered a PPP modification, unless the operator’s right to use the underlying PPP asset decreases, in which case it should be considered a partial or full PPP termination. A PPP termination should be accounted for by a transferor by reducing, as applicable, any receivable for installment payments or any receivable related to the transfer of ownership of the underlying PPP asset and by reducing the related deferred inflow of resources. An operator should account for a termination by reducing the carrying value of the right-to-use asset and, as applicable, any liability for installment payments or liability to transfer ownership of the underlying PPP asset. A PPP modification that does not qualify as a separate PPP should be accounted for by remeasuring PPP assets and liabilities. APAs - An APA that is related to designing, constructing, and financing a nonfinancial asset in which ownership of the asset transfers by the end of the contract should be accounted for by a government as a financed purchase of the underlying nonfinancial asset. This Statement requires a government that engaged in an APA that contains multiple components to recognize each component as a separate arrangement. An APA that is related to operating or maintaining a nonfinancial asset should be reported by a government as an outflow of resources in the period to which payments relate. 15 DRAFT DRAFT REVIEW DRAFT 11-12-20 DRAFT CITY OF SAN RAFAEL MEMORANDUM ON INTERNAL CONTROL SCHEDULE OF OTHER MATTERS GASB 96 – Subscription-Based Information Technology Arrangements This Statement provides guidance on the accounting and financial reporting for subscription-based information technology arrangements (SBITAs) for government end users (governments). This Statement (1) defines a SBITA; (2) establishes that a SBITA results in a right-to-use subscription asset—an intangible asset—and a corresponding subscription liability; (3) provides the capitalization criteria for outlays other than subscription payments, including implementation costs of a SBITA; and (4) requires note disclosures regarding a SBITA. To the extent relevant, the standards for SBITAs are based on the standards established in Statement No. 87, Leases, as amended. A SBITA is defined as a contract that conveys control of the right to use another party’s (a SBITA vendor’s) information technology (IT) software, alone or in combination with tangible capital assets (the underlying IT assets), as specified in the contract for a period of time in an exchange or exchange-like transaction. The subscription term includes the period during which a government has a noncancelable right to use the underlying IT assets. The subscription term also includes periods covered by an option to extend (if it is reasonably certain that the government or SBITA vendor will exercise that option) or to terminate (if it is reasonably certain that the government or SBITA vendor will not exercise that option). Under this Statement, a government generally should recognize a right-to-use subscription asset—an intangible asset—and a corresponding subscription liability. A government should recognize the subscription liability at the commencement of the subscription term, —which is when the subscription asset is placed into service. The subscription liability should be initially measured at the present value of subscription payments expected to be made during the subscription term. Future subscription payments should be discounted using the interest rate the SBITA vendor charges the government, which may be implicit, or the government’s incremental borrowing rate if the interest rate is not readily determinable. A government should recognize amortization of the discount on the subscription liability as an outflow of resources (for example, interest expense) in subsequent financial reporting periods. The subscription asset should be initially measured as the sum of (1) the initial subscription liability amount, (2) payments made to the SBITA vendor before commencement of the subscription term, and (3) capitalizable implementation costs, less any incentives received from the SBITA vendor at or before the commencement of the subscription term. A government should recognize amortization of the subscription asset as an outflow of resources over the subscription term. Activities associated with a SBITA, other than making subscription payments, should be grouped into the following three stages, and their costs should be accounted for accordingly:  Preliminary Project Stage, including activities such as evaluating alternatives, determining needed technology, and selecting a SBITA vendor. Outlays in this stage should be expensed as incurred.  Initial Implementation Stage, including all ancillary charges necessary to place the subscription asset into service. Outlays in this stage generally should be capitalized as an addition to the subscription asset. 16 DRAFT DRAFT REVIEW DRAFT 11-12-20 DRAFT CITY OF SAN RAFAEL MEMORANDUM ON INTERNAL CONTROL SCHEDULE OF OTHER MATTERS GASB 96 – Subscription-Based Information Technology Arrangements (Continued)  Operation and Additional Implementation Stage, including activities such as subsequent implementation activities, maintenance, and other activities for a government’s ongoing operations related to a SBITA. Outlays in this stage should be expensed as incurred unless they meet specific capitalization criteria. In classifying certain outlays into the appropriate stage, the nature of the activity should be the determining factor. Training costs should be expensed as incurred, regardless of the stage in which they are incurred. If a SBITA contract contains multiple components, a government should account for each component as a separate SBITA or nonsubscription component and allocate the contract price to the different components. If it is not practicable to determine a best estimate for price allocation for some or all components in the contract, a government should account for those components as a single SBITA. This Statement provides an exception for short-term SBITAs. Short-term SBITAs have a maximum possible term under the SBITA contract of 12 months (or less), including any options to extend, regardless of their probability of being exercised. Subscription payments for short-term SBITAs should be recognized as outflows of resources. This Statement requires a government to disclose descriptive information about its SBITAs other than short-term SBITAs, such as the amount of the subscription asset, accumulated amortization, other payments not included in the measurement of a subscription liability, principal and interest requirements for the subscription liability, and other essential information. How the Changes in this Statement will Improve Financial Reporting The requirements of this Statement will improve financial reporting by establishing a definition for SBITAs and providing uniform guidance for accounting and financial reporting for transactions that meet that definition. That definition and uniform guidance will result in greater consistency in practice. Establishing the capitalization criteria for implementation costs also will reduce diversity and improve comparability in financial reporting by governments. This Statement also will enhance the relevance and reliability of a government’s financial statements by requiring a government to report a subscription asset and subscription liability for a SBITA and to disclose essential information about the arrangement. The disclosures will allow users to understand the scale and important aspects of a government’s SBITA activities and evaluate a government’s obligations and assets resulting from SBITAs. 17 DRAFT DRAFT REVIEW DRAFT 11-12-20 DRAFT This Page Left Intentionally Blank 18 DRAFT DRAFT REVIEW DRAFT 11-12-20 DRAFT CITY OF SAN RAFAEL REQUIRED COMMUNICATIONS FOR THE YEAR ENDED JUNE 30, 2020 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT This Page Left Intentionally Blank DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL REQUIRED COMMUNICATIONS For the Year Ended June 30, 2020 Table of Contents Page Required Communications ............................................................................................................... 1 Significant Audit Findings ............................................................................................................ 1 Accounting Policies ................................................................................................................ 1 Unusual Transactions, Controversial or Emerging Areas .................................................... 2 Accounting Estimates ............................................................................................................. 3 Disclosures .............................................................................................................................. 4 Difficulties Encountered in Performing the Audit ................................................................ 4 Corrected and Uncorrected Misstatements ............................................................................ 4 Disagreements with Management .......................................................................................... 4 Management Representations ................................................................................................. 4 Management Consultations with Other Independent Accountants ...................................... 4 Other Audit Findings or Issues ............................................................................................... 5 Other Information Accompanying the Financial Statements ....................................................... 5 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT This Page Left Intentionally Blank DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT REQUIRED COMMUNICATIONS To the City Council of the City of San Rafael, California We have audited the basic financial statements of the City of San Rafael (City) for the year ended June 30, 2020. We did not audit the financial statements of the San Rafael Sanitation District, as of and for the year ended June 30, 2020, which represents 25%, 60%, and 18% of the assets, net position, and revenues, respectively, of the primary government. These component unit financial statements were audited by another auditor, whose report thereon has been furnished to us, and our opinion, insofar as it relates to the amounts included for this entity, is based solely on the report of the other auditor. Professional standards require that we communicate to you the following information related to our audit under generally accepted auditing standards, Government Auditing Standards and the Uniform Guidance. Significant Audit Findings Accounting Policies Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by the City are described in Note 1 to the financial statements. No new accounting policies were adopted and the application of existing policies was not changed during the year, except as follows: Parking Citation Accounts Receivable and Allowance for Doubtful Accounts During the year ended June 30, 2020, the City changed its policy related to parking citations and began recording both the balance for parking citations receivable and an estimate for an allowance for doubtful accounts related to those citations that may not be collectible. Allocation of Internal Service Fund Elimination to Business-Type Activities The City determined that the elimination of Internal Service Fund activities in the entity-wide financial statements would no longer include an allocation to Business-type Activities, as the net effect of that elimination was deemed immaterial. Therefore, beginning in fiscal year 2020, the elimination is only allocated to Governmental Activities. The following Governmental Accounting Standards Board (GASB) pronouncement became effective: GASB 95 – Postponement of the Effective Dates of Certain Authoritative Guidance The primary objective of this Statement is to provide temporary relief to governments and other stakeholders in light of the COVID-19 pandemic. That objective is accomplished by postponing the effective dates of certain provisions in Statements and Implementation Guides that first became effective or are scheduled to become effective for periods beginning after June 15, 2018, and later. 1 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT GASB 95 – Postponement of the Effective Dates of Certain Authoritative Guidance (Continued) The effective dates of certain provisions contained in the following pronouncements are postponed by one year: Statement No. 83, Certain Asset Retirement Obligations Statement No. 84, Fiduciary Activities Statement No. 88, Certain Disclosures Related to Debt, including Direct Borrowings and Direct Placements Statement No. 89, Accounting for Interest Cost Incurred before the End of a Construction Period Statement No. 90, Majority Equity Interests Statement No. 91, Conduit Debt Obligations Statement No. 92, Omnibus 2020 Statement No. 93, Replacement of Interbank Offered Rates Implementation Guide No. 2017-3, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions (and Certain Issues Related to OPEB Plan Reporting) Implementation Guide No. 2018-1, Implementation Guidance Update—2018 Implementation Guide No. 2019-1, Implementation Guidance Update—2019 Implementation Guide No. 2019-2, Fiduciary Activities. The effective dates of the following pronouncements are postponed by 18 months: Statement No. 87, Leases Implementation Guide No. 2019-3, Leases. Earlier application of the provisions addressed in this Statement is encouraged and is permitted to the extent specified in each pronouncement as originally issued. The City implemented the provisions of Statement No. 95 in fiscal year 2020. Unusual Transactions, Controversial or Emerging Areas We noted no transactions entered into by the City during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. However, events that occurred during fiscal year June 30, 2020 discussed below could have an impact on the financial statements: On March 11, 2020, the World Health Organization declared the novel strain of coronavirus (COVID‐19) a global pandemic and recommended containment and mitigation measures worldwide. The COVID‐19 outbreak in the United States has caused business disruption through mandated and voluntary closings of businesses and shelter in place orders for all but those deemed essential services. While the business disruption is currently expected to be temporary, there is considerable uncertainty around the duration of the closings and whether shelter in place orders will be reinstated. Although many of the City's services are considered essential, City Hall was closed to the public, certain other services transitioned to online‐only and because the City's major revenue sources, including businesses that collect sales and transient occupancy taxes, are directly impacted by these events, it is probable that this matter will negatively impact the City. However, the ultimate financial impact and duration cannot be reasonably estimated at this time. 2 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT Accounting Estimates Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. The most sensitive estimate(s) affecting the City’s financial statements were: Estimated Net Pension Liability and Pension-Related Deferred Outflows and Inflows of Resources: Management’s estimates of the net pension liability and related deferred outflows/inflows of resources are disclosed in Note 9 to the financial statements and are based on an actuarial study and accounting valuation determined by the Marin County Employees’ Retirement Association which are based on the experience of the City. We evaluated the key factors and assumptions used to develop the estimates and determined they are reasonable in relation to the basic financial statements taken as a whole. Estimated Net OPEB Liability and OPEB-Related Deferred Outflows and Inflows of Resources: Management’s estimates of the net OPEB liability and related deferred outflows/inflows of resources are disclosed in Note 11 to the financial statements and are based on an actuarial study determined by a consultant, which is based on the experience of the City. We evaluated the key factors and assumptions used to develop the estimates and determined they are reasonable in relation to the basic financial statements taken as a whole. Management’s estimate of the depreciation: is based on useful lives determined by management. These lives have been determined by management based on the expected useful life of assets as disclosed in Note 1K to the financial statements. We evaluated the key factors and assumptions used to develop the depreciation estimate and determined that it is reasonable in relation to the basic financial statements taken as a whole. Estimated Fair Value of Investments: As of June 30, 2020, cash and investments were measured by fair value, as disclosed in Note 2 to the financial statements. Fair value is essentially market pricing in effect as of June 30, 2020. These fair values are not required to be adjusted for changes in general market conditions occurring subsequent to June 30, 2020. Estimated long-term receivable from San Rafael Sanitation District: Management’s estimate of the long-term receivable from the District is disclosed in Note 4F to the financial statements and is based on the District’s estimated liability for pension and post-employment health care benefits incurred by the City for the District staff, but not yet funded. We evaluated the key factors and assumptions used to develop the long-term receivable from the District in determining that it is reasonable in relation to the financial statements taken as a whole. Estimated Claims Liabilities: Management’s estimate of the claims liabilities payable is disclosed in Note 13 to the financial statements and is based on actuarial studies determined by a consultant, which are based on the claims experience of the City. We evaluated the key factors and assumptions used to develop the estimate and determined that it is reasonable in relation to the basic financial statements taken as a whole. 3 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT Estimate of Compensated Absences: Accrued compensated absences which are comprised of accrued vacation, holiday, and certain other compensating time is estimated using accumulated unpaid leave hours and hourly pay rates in effect at the end of the fiscal year as disclosed in Note 1L to the financial statements. We evaluated the key factors and assumptions used to develop the accrued compensated absences and determined that it is reasonable in relation to the basic financial statements taken as a whole. Disclosures The financial statement disclosures are neutral, consistent, and clear. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are clearly trivial, and communicate them to the appropriate level of management. Management has corrected all such misstatements. In addition, none of the misstatements detected as a result of audit procedures and corrected by management were material, either individually or in the aggregate, to each opinion unit’s financial statements taken as a whole. Professional standards require us to accumulate all known and likely uncorrected misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. We have no such misstatements to report to the City Council. Disagreements with Management For purposes of this letter, a disagreement with management is a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor’s report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in a management representation letter dated November 9, 2020. Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the City’s financial statements or a determination of the type of auditor’s opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. 4 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the governmental unit’s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Other Information Accompanying the Financial Statements We applied certain limited procedures to the required supplementary information that accompanies and supplements the basic financial statements. Our procedures consisted of inquiries of management regarding the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We did not audit the required supplementary information and do not express an opinion or provide any assurance on the required supplementary information. We were engaged to report on the supplementary information which accompany the financial statements, but are not required supplementary information. With respect to this supplementary information, we made certain inquiries of management and evaluated the form, content, and methods of preparing the information to determine that the information complies with accounting principles generally accepted in the United States of America, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audit of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements or to the financial statements themselves. We were not engaged to report on the Introductory and Statistical Sections which accompany the financial statements, but are not required supplementary information. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements, and accordingly, we do not express an opinion or provide any assurance on it. ****** This information is intended solely for the use of City Council and management and is not intended to be, and should not be, used by anyone other than these specified parties. Pleasant Hill, California November 9, 2020 5 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT This Page Left Intentionally Blank DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2020 This Page Left Intentionally Blank i CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM FOR THE YEAR ENDED JUNE 30, 2020 Table of Contents Page INTRODUCTORY SECTION: Table of Contents ........................................................................................................................................... i FINANCIAL SECTION: Independent Auditor’s Report .................................................................................................................. 1 Basic Financial Statements Balance Sheet ......................................................................................................................................... 4 Statement of Revenue, Expenditures and Changes in Fund Balance ........................................................................................................................................ 5 Notes to Basic Financial Statements ...................................................................................................... 6 Supplementary Information Schedule of Awards ............................................................................................................................. 11 Combining Statement of Revenues, Expenditures and Changes in Fund Balance ................................................................................................................................ 12 Schedule of Expenditures by State Categories .................................................................................... 13 Schedule of Reimbursable Administrative Costs ................................................................................ 14 Schedule of Equipment Expenditures Utilizing Contract Funds ...................................................... 15 Schedule of Renovation and Repair Expenditures Utilizing Contract Funds .................................... 15 Audited Attendance and Fiscal Reports/Audited Fiscal Reports: CSPP8280 – California State Preschool Programs ........................................................................... 16 Audited Reserve Account Activity Report ........................................................................................ 24 Compliance Report Independent Auditor’s Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ....................................................................... 26 Current Year Findings and Responses .......................................................................................... 28 INDEPENDENT AUDITOR’S REPORT To the Honorable Members of the City Council City of San Rafael, California Report on the Financial Statements We have audited the accompanying financial statements of the City of San Rafael Child Development Program (Program) of the City of San Rafael, California, as of and for the year ended June 30, 2020, and the related notes to the financial statements, which collectively comprise the Program’s basic financial statements as listed in the Table of Contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Program’s preparation and fair presentation of the financial statements 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 Program’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 1 Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Program as of June 30, 2020, and changes in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Program’s basic financial statements as a whole. The Supplementary Information as listed in the Table of Contents are presented for purposes of additional analysis and are not required parts of the basic financial statements. The Supplementary Information as listed in the Table of Contents 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 in conformity with the CDE Audit Guide, issued by the California Department of Education, 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 Supplementary Information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated DATE on our consideration of the Program’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 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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Program’s internal control over financial reporting and compliance. Pleasant Hill, California DATE 2 This Page Left Intentionally Blank 3 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM BALANCE SHEET JUNE 30, 2020 ASSETS Cash (Note 3)$1,270,651 Accounts Receivable 17,400 Grants receivable (Note 4)36,910 Total Assets $1,324,961 LIABILITIES AND FUND BALANCE Accounts payable $50,875 Total Liabilities 50,875 Fund balance, restricted (Note 5)1,274,086 Total Liabilities and Fund Balance $1,324,961 See accompanying notes to financial statements 4 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCE FOR THE YEAR ENDED JUNE 30, 2020 REVENUES State grants: Current year grants $238,821 CDBG preschool grant 30,000 First five school readiness grants 91,459 Local grant 73,272 Interest 38,734 Parent fees 2,751,787 Other 23,870 Total Revenues 3,247,943 EXPENDITURES Certified salaries 1,783,324 Classified Salaries 65,684 Employee benefits 1,189,381 Training and instruction 7,671 Office supplies 5,511 Books and supplies 131,311 Utilities and housekeeping services 27,610 Travel and conference 198 Rentals 60,251 Services and other operating expenditures 276,490 Equipment 38,118 Insurance 31,220 Renovation and repair 51,093 Total Expenditures 3,667,862 OTHER FINANCING SOURCES (USES) Transfers out (52,840) Total Transfers (52,840) CHANGE IN FUND BALANCE (472,759) FUND BALANCE, Beginning of year 1,746,845 End of year $1,274,086 See accompanying notes to financial statements 5 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM Notes to the Basic Financials Statements For the Year Ended June 30, 2020 NOTE 1 - ORGANIZATION The City of San Rafael operates the Child Development Program encompassing eight childcare centers within the City of San Rafael. One of these centers provides day care services to subsidized families under the Child Development Program funded by the California Department of Education, which includes the Preschool program. The City is financially accountable for the activities of the Program. The Program has no employees and substantially all staff services which it requires are performed by the City's personnel. Costs incurred by the City to provide such services including compensation, retirement, and other benefit costs are reimbursed by the Program. These basic financial statements present only the activities of the Program and are not intended to present the financial position of the City of San Rafael, California, or the results of its operations. The financial statements of the Program are included as a Special Revenue Fund in the City's financial statements. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Basis of Accounting The accounting and reporting treatment applied to a fund is determined by its measurement focus. Governmental funds are accounted for on a spending or “current financial resources” measurement focus. Accordingly, only current assets and current liabilities generally are included on the balance sheets. Operating statements of governmental funds present increases (revenues and other financial sources) and decreases (expenditures and other financial uses) in net current assets. The Program’s financial activities are accounted for using the modified accrual basis of accounting. Under this method, revenues are recognized when measurable and available. The City considers all revenues reported in the governmental funds to be available if the revenues are collected within sixty days after year-end. Expenditures are recorded when the related fund liability is incurred. Revenues considered susceptible to accrual include charges for services, federal and state grants, and interest. Expenditures are recognized in the accounting period in which the liability is incurred, if measurable. B. Fund Balance Fund Balance is the excess of all the Program’s assets over all its liabilities. 6 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM Notes to the Basic Financials Statements For the Year Ended June 30, 2020 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) C. Fair Value Measurements Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The fair value hierarchy categorizes the inputs to valuation techniques used to measure fair value into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are inputs – other than quoted prices included within level 1 – that are observable for an asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for an asset or liability. If the fair value of an asset or liability is measured using inputs from more than one level of the fair value hierarchy, the measurement is considered to be based on the lowest priority level input that is significant to the entire measurement. NOTE 3 - CASH AND INVESTMENTS The Program’s cash is included in a City-wide cash and investment pool, the details of which are presented in the City’s basic financial statements. The Program pools cash from all sources with the City of San Rafael so that it can be invested at the maximum yield, consistent with safety and liquidity, while individual funds can make expenditures at any time. The City’s investment policy and the California Government Code permit investments in Securities of the U.S. Government or its agencies, Certificates of Deposit, Negotiable Certificates of Deposit, Banker’s Acceptances, Commercial Paper, the State of California Local Authority Investment Fund (LAIF Pool), Repurchase Agreements, Medium-Term Corporate Notes, Limited Obligation Improvement Bonds related to special assessment districts and special tax districts, and Money Market/Mutual Funds. The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure fair value of the assets. Level 1 inputs are quoted prices in an active market for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs. The City of San Rafael pooled investments is an uncategorized input not defined as Level 1, Level 2, or Level 3 input. 7 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM Notes to the Basic Financials Statements For the Year Ended June 30, 2020 NOTE 4 – GRANTS RECEIVABLE The Program has the following grants receivable at June 30, 2020: Agency Grant Amount Marin County First 5 Grant $36,910 Total $36,910 NOTE 5 – FUND BALANCES Governmental fund balances represent the net current assets of each fund. Net current assets generally represent a fund’s cash and receivables, less its liabilities. The City’s fund balances are classified based on spending constraints imposed on the use of resources. For programs with multiple funding sources, the City prioritizes and expends funds in the following order: Restricted, Committed, Assigned, and Unassigned. Each category in the following hierarchy is ranked according to the degree of spending constraint. Nonspendable represents balances set aside to indicate items do not represent available, spendable resources even though they are a component of assets. Fund balances required to be maintained intact, such as Permanent Funds, and assets not expected to be converted to cash, such as prepaids, notes receivable, and land held for redevelopment are included. However, if proceeds realized from the sale or collection of nonspendable assets are restricted, committed or assigned, then Nonspendable amounts are required to be presented as a component of the applicable category. Restricted fund balances have external restrictions imposed by creditors, grantors, contributors, laws, regulations, or enabling legislation which requires the resources to be used only for a specific purpose. Nonspendable amounts subject to restrictions are included along with spendable resources. Committed fund balances have constraints imposed by formal action of the City Council which may be altered only by formal action of the City Council. Nonspendable amounts subject to council commitments are included along with spendable resources. Assigned fund balances are amounts constrained by the City’s intent to be used for a specific purpose, but are neither restricted nor committed. Intent is expressed by the City Council or its designee and may be changed at the discretion of the City Council or its designee. This category includes nonspendables, when it is the City’s intent to use proceeds or collections for a specific purpose, and residual fund balances, if any, of Special Revenue, Capital Projects and Debt Service Funds which have not been restricted or committed. Unassigned fund balance represents residual amounts that have not been restricted, committed, or assigned. This includes the residual general fund balance and residual fund deficits, if any, of other governmental funds. 8 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM Notes to the Basic Financials Statements For the Year Ended June 30, 2020 NOTE 6 – CONTINGENCIES AND COMMITMENTS The Program participates in Federal, State and County grant programs that are fully or partially funded by grants received from other governmental units. Expenditures financed by grants are subject to audit by the appropriate grantor government. If expenditures are disallowed due to noncompliance with grantor program regulations, the City may be required to reimburse the grantor government. As of June 30, 2020, some amounts of grant expenditures have not been audited, but the City believes that disallowed expenditures, if any, based on subsequent audits will not have a material effect on any individual governmental funds or the overall financial condition of the City. 9 SUPPLEMENTARY INFORMATION 10 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM SCHEDULE OF AWARDS FOR THE YEAR ENDED JUNE 30, 2020 Program CFDA # Pass-Through Identifying Number Award Amount Revenue Expenditures Federal Awards US Department of Housing and Urban Development, Pass-through the County of Marin Community Development Block Grant 14.218 40CDBG20CD4527 $30,000 $30,000 $30,000 Total Federal Awards $30,000 $30,000 $30,000 State Awards State of California Department of Education Child Development Division State Preschool Program FY2018 CSPP-9283 $238,821 $238,821 $228,125 Total State Awards $238,821 $238,821 $228,125 County Award County of Marin First Five - Preschool CSRI-21-009-11 $91,459 $91,459 $91,459 Local Awards Marin Child Care Council N/A $73,272 $73,272 $73,272 Total Local Awards $73,272 $73,272 $73,272 Total State, Federal Awards, and Local $433,552 $433,552 $422,856 11 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE FOR THE YEAR ENDED JUNE 30, 2020 State Preschool Program Total CDE Non-CDE (CSPP 9283) CD Contracts Programs Total REVENUES State grants: Current year grants $238,821 $238,821 $238,821 CDBG preschool grant $30,000 30,000 First Five school readiness grants 91,459 91,459 Local grants 73,272 73,272 Interest 38,734 38,734 Parent fees - noncertified children 2,751,787 2,751,787 Other 23,870 23,870 Total Revenues 238,821 238,821 3,009,122 3,247,943 EXPENDITURES Certified salaries 48,144 48,144 1,735,180 1,783,324 Classified salaries 65,684 65,684 65,684 Employee benefits 91,166 91,166 1,098,215 1,189,381 Training and instruction 7,671 7,671 Office supplies 5,511 5,511 Books and supplies 8,770 8,770 122,541 131,311 Utilities and housekeeping services 27,610 27,610 Travel and conference 198 198 Rentals 60,251 60,251 Services and other operating expenditures 14,361 14,361 262,129 276,490 Equipment 38,118 38,118 Insurance 31,220 31,220 Renovation and repair 51,093 51,093 Total Expenditures 228,125 228,125 3,439,737 3,667,862 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES 10,696 10,696 (430,615) (419,919) OTHER FINANCING SOURCE (USES) Transfers out (52,840) (52,840) Total Transfers (52,840) (52,840) CHANGE IN FUND BALANCE $10,696 $10,696 ($483,455) ($472,759) 12 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM SCHEDULE OF EXPENDITURES BY STATE CATEGORIES FOR THE YEAR ENDED JUNE 30, 2020 CSPP-9283 State Preschool Program Totals EXPENDITURES: 1000 Certified personnel salaries $48,144 $48,144 1100 Teachers' salaries 48,144 48,144 1200 Administration 1300 Supervisors' salaries 1600 Infant educators 2001 Classified personnel salaries $65,684 $65,684 2100 Instructional aides' salaries 65,684 65,684 2300 Clerical and other office salaries 2400 Maintenance and operations salaries 2500 Food services salaries 2600 Transportation salaries 3000 Employee benefits $91,166 $91,166 3200 Payroll taxes (Medicare)1,492 1,492 3300 Other benefits 60,901 60,901 3400 Health and welfare 27,539 27,539 3600 Workers' compensation insurance 1,234 1,234 4000 Books and supplies $8,770 $8,770 4200 Other books 4300 Instructional materials and supplies 8,673 8,673 4500 Other supplies 97 97 4600 Food supplies 5000 Services and other operating expenditures $14,361 $14,361 5100 Lecturer 5200 Travel and conferences 5300 Memberships and dues 484 484 5400 Insurance 1,990 1,990 5500 Utilities and housekeeping services 1,249 1,249 5600 Rentals, leases and repairs 5700 Audit expense 5800 Other direct services & admin.10,638 10,638 6000 Capital Outlay 6100 Sites and improvements of sites 6200 Buildings and improvements of buildings 6400 Equipment (program-related) 6500 Equipment replacement (program related) Depreciation Costs capitalized as Fixed Assets TOTAL OF REIMBURSABLE AND NONREIMBURSABLE EXPENDITURES $228,125 $228,125 We have examined the claims filed for reimbursement and the original records supporting the transactions recorded under the contracts listed above to an extent considered necessary to assure ourselves that the amounts claimed by the contractor were eligible for reimbursement, reasonable, necessary, and adequately supported, according to governing laws, regulations, and contract provisions. 13 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM SCHEDULE OF REIMBURSABLE ADMINISTRATIVE COSTS FOR THE YEAR ENDED JUNE 30, 2020 CSPP-9283 State Preschool Program Administrative Costs (Audit Fees)$4,644 Total Administrative Costs $4,644 14 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM SCHEDULE OF EQUIPMENT EXPENDITURES UTILIZING CONTRACT FUNDS FOR THE YEAR ENDED JUNE 30, 2020 Expenditures Under $7,500 Expenditures Over $7,500 Expenditures Over $7,500 Unit Cost Unit Cost with CDD Approval Unit Cost Without CDD Approval Cost Item Cost Item Cost Item None None None SCHEDULE OF RENOVATION AND REPAIR EXPENDITURES UTILIZING CONTRACT FUNDS FOR THE YEAR ENDED JUNE 30, 2020 Expenditures Under $10,000 Expenditures Over $10,000 Expenditures Over $10,000 Unit Cost Unit Cost with CDD Approval Unit Cost Without CDD Approval Cost Item Cost Item Cost Item None None None 15 California Department of Education Audited Attendance and Fiscal Report for California State Preschool ProgramsA U D 8501 Page 1 of 8Fiscal Year EndingContract NumberVendor CodeFull Name of ContractorSection 1 - Days of Enrollment Certified ChildrenColumn A Cumulative CDNFS 8501Column B Audit AdjustmentsColumn C Cumulative per AuditColumn D Adjustment FactorColumn E Adjusted Days per AuditThree Years and Older Full-time-plus1.1800Three Years and Older Full-time 1.0000Three Years and Older Three-quarters-time0.7500Three Years and Older One-half-time0.6193Exceptional Needs Full-time-plus1.8172Exceptional Needs Full-time 1.5400Exceptional Needs Three-quarters-time1.1550Exceptional Needs One-half-time0.9537Limited and Non-English Proficient Full-time-plus1.2980Limited and Non-English Proficient Full-time1.1000Limited and Non-English Proficient Three-quarters-time0.8250Limited and Non-English Proficient One-half-time0.6193Page June 30, 2020CSPP-92832193City of San Rafael Child Development Program9,988 9,988 11,785.8400000000000 16 A U D 8501 Page 2 of 8Contract NumberFull Name of ContractorSection 1 - Days of Enrollment Certified Children (continued)Column A Cumulative CDNFS 8501 Column B Audit AdjustmentsColumn C Cumulative per AuditColumn D Adjustment FactorColumn E Adjusted Days per AuditAt Risk of Abuse or Neglect Full-time-plus1.2980At Risk of Abuse or Neglect Full-time 1.1000At Risk of Abuse or Neglect Three-quarters-time0.8250At Risk of Abuse or Neglect One-half-time0.6193Severely Disabled Full-time-plus2.2774Severely Disabled Full-time1.9300Severely Disabled Three-quarters-time1.4475Severely Disabled One-half-time1.1952TOTAL DAYS OF ENROLLMENTN/ADAYS OF OPERATIONN/AN/ADAYS OF ATTENDANCEN/AN/ANO NON-CERTIFIED CHILDREN Check this box (omit pages 3 and 4) and continue to Revenue Section on page 5.Page CSPP-9283City of San Rafael Child Development Program000000009,988 9,988 11,785.84161 1617,442 -100 7,342 17 A U D 8501 Page 3 of 8Contract NumberFull Name of ContractorSection 2 - Days of Enrollment Non-Certified ChildrenColumn A Cumulative CDNFS 8501Column B Audit AdjustmentsColumn C Cumulative per AuditColumn D Adjustment FactorColumn E Adjusted Days per Audit Toddlers (18 up to 36 months) Full-time-plus2.1240Toddlers (18 up to 36 months) Full-time1.8000Toddlers (18 up to 36 months) Three-quarters-time1.3500Toddlers (18 up to 36 months) One-half-time0.9900Three Years and Older Full-time-plus1.1800Three Years and Older Full-time 1.0000Three Years and Older Three-quarters-time0.7500Three Years and Older One-half-time0.6193Exceptional Needs Full-time-plus1.8172Exceptional Needs Full-time 1.5400Exceptional Needs Three-quarters-time1.1550Exceptional Needs One-half-time0.9537PageCSPP-9283City of San Rafael Child Development Program000000000000 18 A U D 8501 Page 4 of 8Contract NumberFull Name of ContractorSection 2 - Days of Enrollment Non-Certified Children (continued)Column A Cumulative CDNFS 8501Column B Audit AdjustmentsColumn C Cumulative per AuditColumn D Adjustment FactorColumn E Adjusted Days per AuditLimited and Non-English Proficient Full-time-plus1.2980Limited and Non-English Proficient Full-time1.1000Limited and Non-English Proficient Three-quarters-time0.8250Limited and Non-English Proficient One-half-time0.6193At Risk of Abuse or Neglect Full-time-plus1.2980At Risk of Abuse or Neglect Full-time 1.1000At Risk of Abuse or Neglect Three-quarters-time0.8250At Risk of Abuse or Neglect One-half-time0.6193Severely Disabled Full-time-plus2.2774Severely Disabled Full-time1.9300Severely Disabled Three-quarters-time1.4475Severely Disabled One-half-time1.1952TOTAL NON-CERTIFIED DAYS OF ENROLLMENTN/APageCSPP-9283City of San Rafael Child Development Program0000000000000 19 A U D 8501 Page 5 of 8Contract NumberFull Name of ContractorSection 3 - RevenueColumn A Cumulative CDNFS 8501Column B Audit AdjustmentsColumn C Cumulative per AuditRestricted Income - Child Nutrition ProgramsRestricted Income - County Maintenance of Effort (EC Section 8279)Restricted Income - Other:Restricted Income - SubtotalTransfer from Reserve - GeneralTransfer from Reserve - Professional DevelopmentTransfer from Reserve TotalFamily Fees for Certified ChildrenInterest Earned on Child Development Apportionment PaymentsUnrestricted Income - Fees for Non-Certified ChildrenUnrestricted Income - Head StartUnrestricted Income - Other:Total RevenueComments:PageCSPP-9283City of San Rafael Child Development Program 20 A U D 8501 Page 6 of 8Contract NumberFull Name of ContractorSection 4 - Reimbursable ExpensesColumn A Cumulative CDNFS 8501Column B Audit AdjustmentsColumn C Cumulative per AuditDirect Payments to Providers (FCCH only)1000 Certificated Salaries2000 Classified Salaries3000 Employee Benefits4000 Books and Supplies5000 Services and Other Operating Expenses6100/6200 Other Approved Capital Outlay6400 New Equipment (program-related)6500 Equipment Replacement (program-related)Depreciation or Use AllowanceStart-up Expenses (service level exemption)Budget Impasse CreditIndirect Costs (include in Total Administrative Cost)Non-Reimbursable (State use only)Total Reimbursable ExpensesTotal Administrative Cost (included in Section 4 above) Total Staff Training Cost (included in Section 4 above)Approved Indirect Cost Rate:NO SUPPLEMENTAL REVENUE / EXPENSES Check this box and omit page 7. PageCSPP-9283City of San Rafael Child Development Program48,144 48,14465,684 65,68491,166 91,1668,770 8,77014,361 14,361228,125 228,1254,644 4,644 21 A U D 8501 Page 7 of 8Contract NumberFull Name of ContractorSection 5 - Supplemental RevenueColumn A Cumulative CDNFS 8501Column B Audit AdjustmentsColumn C Cumulative per AuditEnhancement FundingOther:Other:Total Supplemental RevenueSection 6 - Supplemental ExpensesColumn A Cumulative CDNFS 8501Column B Audit AdjustmentsColumn C Cumulative per Audit1000 Certificated Salaries2000 Classified Salaries3000 Employee Benefits4000 Books and Supplies5000 Services and Other Operating Expenses6000 Equipment / Capital OutlayDepreciation or Use AllowanceIndirect CostsNon-Reimbursable Supplemental Expenses Total Supplemental ExpensesPageCSPP-9283City of San Rafael Child Development Program8,400 8,4008,400 8,400 22 A U D 8501 Page 8 of 8Contract NumberFull Name of ContractorSection 7 - SummaryColumn A Cumulative CDNFS 8501Column B Audit AdjustmentsColumn C Cumulative per AuditTotal Certified Days of EnrollmentDays of OperationDays of AttendanceRestricted Program IncomeTransfer from ReserveFamily Fees for Certified ChildrenInterest Earned on Apportionment PaymentsDirect Payments to ProvidersStart-up Expenses (service level exemption)Total Reimbursable ExpensesTotal Administrative CostTotal Staff Training CostTotal Certified Adjusted Days of EnrollmentTotal Non-Certified Adjusted Days of EnrollmentIndependent auditor's assurances on agency's compliance with the contract funding terms and conditions and program requirements of the California Department of Education, Early Learning and Care Division:Eligibility, enrollment and attendance records are being maintained as required (select YES or NO from the drop-down box):Reimbursable expenses claimed on page 6 are eligible for reimbursement, reasonable, necessary, and adequately supported (select YES or NO from the drop-down box):Include any comments in the comments box on page 5. If necessary, attach additional sheets to explain adjustments. PageCSPP-9283City of San Rafael Child Development Program9,988 9,988161 1617,442 -100 7,342228,125 228,1254,644 4,64411,785.84 0YesYes 23 California Department of Education Audited Reserve Account Activity Report A U D 9530A Page 1 of 1 Fiscal Year End Reserve Account Type Vendor Code Full Name of Contractor Section 1 - Prior Year Reserve Account Activity 1. Beginning Balance (2018–19 AUD 9530A Ending Balance) 2. Plus Transfers to Reserve Account:Per 2018–19 Post-Audit CDNFS 9530 Contract No. Contract No. Contract No. Contract No. Contract No. Contract No. Total Transferred from 2018–19 Contracts to Reserve 3. Less Excess Reserve to be Billed 4. Ending Balance per 2018–19 Post-Audit CDNFS 9530 Section 2 - Current Year Reserve Account Activity Column A CDNFS 9530A Column B Audit Adjustments Column C per Audit 5. Plus Interest Earned This Year on Reserve 6. Less Transfers to Contracts from Reserve: CSPP General-Contract No. CSPP General-Contract No. CSPP Professional Development-Contract No. CSPP Professional Development-Contract No. Subtotal CSPP Transfers Other Contract No. Other Contract No. Other Contract No. Other Contract No. Other Contract No. Subtotal Other Contract Transfers Total Transferred to Contracts from Reserve Account 7. Ending Balance on June 30, 2020 COMMENTS - If necessary, attach additional sheets to explain adjustments. Page June 30, 2020 Center-Based 2193 City of San Rafael Child Development Program 8280 0 0 0 00 24 This Page Left Intentionally Blank 25 INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Honorable Members of the City Council City of San Rafael, California We have audited, in accordance with the 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, the basic financial statements of the City of San Rafael Child Development Program (Program), California, as of and for the year ended June 30, 2020, and the related notes to the financial statements, and have issued our report thereon dated DATE. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Program's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Program’s internal control. Accordingly, we do not express an opinion on the effectiveness of Program’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the Program’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. We have identified certain deficiencies in internal control, as described in CDC 2020-01 and CDC 2020-02 in the accompanying Current Year Findings and Responses, that we consider to be significant deficiencies. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Program's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. 26 City’s Response to Findings The City’s response to the findings identified in our audit are described in the accompanying Current Year Findings and Responses. The City’s response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. 1Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Program’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Program’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Pleasant Hill, California DATE 27 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM CURRENT YEAR FINDINGS AND RESPONSES For the Year Ended June 30, 2020 During our audit of the financial statements of the City of San Rafael (City) for the year ended June 30, 2020 the following were identified as significant deficiencies in the City’s internal control. Since the Program utilizes the City to provide the Program’s accounting function, we consider the following to be significant deficiencies in the Program’s internal control. Finding CDC 2020-01: Documentation of Review of Changes to the Vendor Database Program: CSPP- 8580 Criteria: Accounts payable staff should not normally have access to make changes to the Vendor Database. In the event the system does not allow such a segregation of duties, changes to the Vendor Database should be reviewed and approved by a person who is not making changes to the database, so that two employees are involved in the process of adding, removing, or modifying vendor information. Condition: We noted that more than one staff charged with processing accounts payable has access to the vendor database. We also understand that the City has a process for reviewing the changes made to the vendor database on a quarterly basis, however, the review process is not documented. Effect: Without an independent review, the City is exposed to the risk of phantom vendors and unauthorized changes to vendor accounts. Cause: We understand City staff did not realize that the review process should be documented. Recommendation: The City should develop procedures to document the quarterly review and approval of change to the vendor database in some formal manner. Management Response: Finance Management reviews changes made to the Vendor Database on a quarterly basis in order to detect phantom vendors and unauthorized changes to vendor accounts. Management reviews a report in Eden, the City’s Financial System. Going forward, to formalize the review process, the report will be printed to PDF and signed by the reviewer. Finding CDC 2020-02: Documentation of Review of Eden Employee Audit Reports Program: CSPP- 8580 Criteria: Payroll staff should not normally have access to make any changes to the Payroll Database. In the event the system does not allow such a segregation of duties, changes to the Payroll Database should be reviewed and approved by a person who is not making the changes to the database, so that two employees are involved in the process of adding, removing, or modifying employee information. Condition: We noted that although the Human Resources Department is tasked with making changes to the Payroll Database, more than one staff charged with processing payroll in the Finance Department has access to edit base pay, incentives, and benefits in the payroll database. To mitigate the control risk, we understand that the City has a process to review the employee audit reports each pay period for accuracy and to ensure no unauthorized changes were made to the employee database. However, we selected three pay periods (November 15, 2019, January 31, 2020 and May 15, 2020) for testing of review of the employee audit report and noted that there was no documentation of the review. 28 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM CURRENT YEAR FINDINGS AND RESPONSES For the Year Ended June 30, 2020 Effect: Without proper documentation of the review process, we cannot determine if the above internal control procedure is in place. Cause: We understand City staff did not realize that the review process should be documented. Recommendation: The City should develop procedures to document the review of employee audit reports in some formal manner. Management Response: The Finance Director reviews an employee audit report in Eden each pay period to ensure no unauthorized changes are made to the employee database. Going forward, to formalize the review process, the report will be printed to PDF and signed by the reviewer. 29 CITY OF SAN RAFAEL, CALIFORNIA PEDESTRIAN AND BICYCLE PROJECTS FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2020 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT This Page Left Intentionally Blank DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL PEDESTRIAN AND BICYCLE PROJECTS Financial Statements For the Year Ended June 30, 2020 Table of Contents Page Independent Auditor's Report ........................................................................................................................ 1 Balance Sheet .......................................................................................................................................... 3 Statement of Revenues, Expenditures and Changes in Fund Balance ................................................... 4 Notes to Financial Statements ................................................................................................................. 5 Independent Auditor’s Report on Internal Control Over Financial Reporting, on Compliance with the Transportation Development Act and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ............................................................... 7 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT This Page Left Intentionally Blank DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT INDEPENDENT AUDITOR'S REPORT Honorable Members of the City Council City of San Rafael, California Report on the Financial Statements We have audited the financial statements of the Pedestrian and Bicycle Projects (Projects) of the City of San Rafael (City), as of and for the year ended June 30 2020, and the related notes to the financial statements, as listed in the Table of Contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. 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. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Projects’ preparation and fair presentation of the financial statements 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 Projects’ internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Projects as of June 30, 2020, and the change in financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. 1 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT Emphasis of Matter As discussed in Note 1, the financial statements present only the Projects and do not purport to, and do not present fairly the financial position of the City as of June 30, 2020 in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 9, 2020, on our consideration of the Projects’ 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 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 internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Projects’ internal control over financial reporting and compliance. Pleasant Hill, California November 9, 2020 2 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL PEDESTRIAN AND BICYCLE PROJECTS BALANCE SHEET JUNE 30, 2020 Allocation Allocation Instruction Instruction Number Number 19001078 20001098 Total ASSETS Due from Metropolitan Transportation Commission $239,940 $239,940 LIABILITIES Due to the City $239,940 $239,940 FUND BALANCE Total Liabilities and Fund Balance $239,940 $239,940 See accompanying notes to financial statements 3 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL PEDESTRIAN AND BICYCLE PROJECTS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE FOR THE YEAR ENDED JUNE 30, 2020 Allocation Allocation Instruction Instruction Number Number 19001078 20001098 Total REVENUES TDA Article 3.0 (Note 2)$184,043 $239,940 $423,983 Total Revenues 184,043 239,940 423,983 EXPENDITURES Pedestrian and Bicycle Improvements (Note 2) Francisco Blvd. West Multi-Use Pathway 184,043 184,043 Francisco Blvd. West 239,940 239,940 Total Expenditures 184,043 239,940 423,983 Excess of Revenues over Expenditures Fund balance at beginning of year Fund balance at end of year See accompanying notes to financial statements 4 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL PEDESTRIAN AND BICYCLE PROJECTS Notes to the Financial Statements For the Year Ended June 30, 2020 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The City of San Rafael, California (City), has developed the Pedestrian and Bicycle Projects (Projects) under the Transportation Development Act (TDA), Article 3.0, that provides funding for projects including the construction of pedestrian pathways, wheel chair ramps and bicycle master plan studies. The TDA funds are distributed through the Metropolitan Transportation Commission (MTC), which is the agency responsible for allocation of funds to eligible claimants within the greater San Francisco Bay Area. The Projects are included in the Gas Tax Fund of the Comprehensive Annual Financial Report of the City. The financial statements are intended to present the financial position and results of operation for the Projects, and not those of the City as a whole. A. Basis of Accounting Basis of accounting refers to when revenues and expenditures are recognized. The Projects are accounted for in a governmental fund type and the modified accrual basis of accounting is used. Under the modified accrual basis, revenues are recognized when they become measurable and available as net current assets. Expenditures are generally recognized when they are incurred. B. Deferred Outflows/Inflows of Resources In addition to assets, the statement of balance sheet may report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of fund balance that applies to a future period(s) and so will not be recognized as an outflow of resources (expenditure) until then. In addition to liabilities, the balance sheet may report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of fund balance that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. C. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 5 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT CITY OF SAN RAFAEL PEDESTRIAN AND BICYCLE PROJECTS Notes to the Financial Statements For the Year Ended June 30, 2020 NOTE 2 - TDA ARTICLE 3.0 REVENUE AND EXPENDITURES As of June 30, 2020, the City had allocation instructions from the Metropolitan Transportation Commission for the following projects: Expended from Revenue Received Allocation Grant Inception to Inception to Project Name Instruction # Amount June 30, 2020 June 30, 2020 Francisco Blvd. West Multi-Use Pathway 19001078 $184,043 $184,043 $184,043 Francisco Blvd. West 20001098 308,400 239,940 239,940 Expenditures for the Francisco Blvd. West Multi-Use Pathway (Allocation Instruction #19001078) were incurred during the year ended June 30, 2019. The expenditures are being reported as expenditures during the year ended June 30, 2020, because the City did not determine that they would be applied to the TDA Article 3.0 funding until fiscal year 2020. 6 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING, ON COMPLIANCE WITH THE TRANSPORTATION DEVELOPMENT ACT AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Honorable Members of the City Council City of San Rafael, California We have audited, in accordance with the 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, the financial statements of the City of San Rafael (City) Pedestrian and Bicycle (Projects), as of and for the year ended June 30, 2020, and the related notes to the financial statements, and have issued our report thereon dated November 9, 2020. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the Projects’ internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Projects’ internal control. Accordingly, we do not express an opinion on the effectiveness of the Projects’ internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the Projects’ financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 7 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT Compliance and Other Matters As part of obtaining reasonable assurance about whether the Projects’ financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. Our procedures included the applicable audit procedures contained in §6666 of Title 21 of California Code of Regulations and tests of compliance with the applicable provisions of the Transportation Development Act and the Allocation Instructions and Resolutions of the Metropolitan Transportation Commission. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. We have also issued a separate Memorandum on Internal Control dated November 9, 2020, which is an integral part of our audit and should be read in conjunction with this report. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Projects’ internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Projects’ internal control and compliance. Accordingly, this communication is not suitable for any other purpose. This report is intended solely for the information and use of the Metropolitan Transportation Commission, management, City Council, others within the City, and federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone other than these specified parties; however, this restriction is not intended to limit the distribution of this report, which is a matter of public record. Pleasant Hill, California November 9, 2020 8 DRAFT DRAFT REVIEW DRAFT 11-9-20 DRAFT