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Home My WebLink AboutFin Year-End Financial Statements and Related Audit Reports____________________________________________________________________________________ FOR CITY CLERK ONLY Council Meeting: November 15, 2021 Disposition: Accepted report Agenda Item No: 8.a Meeting Date: November 15, 2021 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 2020-2021 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 2020-2021 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 2020-2021. 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, 2022. 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, 2021, 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. SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 2 ANALYSIS: Overview Fiscal Year 2020-21 had economists, revenue experts and government agency officials perplexed due to the direction it took. What once was projected to be a challenging year due to the COVID- 19 pandemic turned out to be a windfall as sales taxes increased, property transfer taxes increased and the Federal government provided aid to state and local agencies putting the City in a unique position to fund goals and initiatives that would have otherwise been unfunded. The full annual funding of the City’s Retiree and OPEB costs have been incorporated into the adopted fiscal year 2021-2022 budget; therefore, there is no negative impact on City operations or services resulting from the reporting of financial information under these reporting standards. Fiscal Year 2020-21 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 $156.5 million, an increase of $17.4 million from the prior year adjusted balance. This increase is attributable to a number of factors. First, sales and use tax remittances greatly outperformed forecasts as government stimulus in response to the COVID-19 pandemic infused the economy. Also significantly impacting the increase was the addition of the Measure R transaction and use tax during the year as well as the timely passage of the Wayfair decision providing remittances from online sales that have soared. Secondly, the City saw over $7 million in increased capital grant activity as the City ramped up capital projects. Lastly, property tax revenues increased 17% with the addition of assessments resulting from the passage of Measure C supporting wildfire prevention activities as well as property transfer taxes. The Parking Fund, reported as a business-type activity, ended the fiscal year with a net position of $9 million, or $931 thousand less than that of the previous fiscal year. 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 revenues exceeded expenditures by $7.0 million. Measure E revenues of $4.6 million dedicated to public safety facilities construction and infrastructure were used to cover debt and transferred out of the General Fund in support of the projects whereas $1.1 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, 2021 was $16.8 million (an increase of $7 million from the prior year balance): $378 thousand is non-spendable, $8.3 million is committed, $7.2 million is assigned and $921 thousand is unassigned. The committed portion of $8.3 million is for emergency and cash flow needs which meets the minimum target reserve levels at 10% of general fund operating expenditures. SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 3 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 2021-2022 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 administrative and clerical errors. 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 continues to have negative operating results resulting from the pandemic, with $2.7 million in total revenues and $3.6 million in expenditures for the fiscal year. The fund balance decreased from $1.3 million to $369 thousand of which funds have been accumulated for capital improvements. The audit resulted in no adverse findings. Transportation Development Act Financial Report 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 $731,879 of a total grant amount of $731,879 and has received reimbursement of $423,983 as of June 30, 2021. 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 2020- 21 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 2020-21 Draft Comprehensive Annual Financial Report 2. FY 2020-21 Draft Gann Appropriations Limit 3. FY 2020-21 Draft Memorandum of Internal Controls 4. FY 2020-21 Draft Required Communications 5. FY 2020-21 Draft Child Development Program Financial Report 6. FY 2020-21 Draft Transportation Development Act Financial Report COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDING JUNE 30, 2021 Rainbow over City Hall, San Rafael, California DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT SAN RAFAEL THE CITY WITH A MISSION DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Fiscal Year Ended June 30, 2021 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 11-8-21 DRAFT DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT Volunteer Broom Pull INTRODUCTORY SECTION DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended June 30, 2021 Table of Contents 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 i DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended June 30, 2021 Table of Contents 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 ..................................... 94 Schedule of Contributions – Defined Benefit Pension Plan ......................................................... 95 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 ........................................................................................................................... 110 Traffic and Housing Mitigation Special Revenue Fund .......................................................... 111 Gas Tax Special Revenue Fund ............................................................................................... 112 Supplementary Information: Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual Budgetary Basis Essential Facilities Capital Projects Fund ................................................................................ 114 Non-major Governmental Funds: Combining Balance Sheets ......................................................................................................... 118 Combining Statements of Revenues, Expenditures, and Changes in Fund Balance ................................................................................................................... 124 Budgeted Non-major Governmental Funds: Combining Schedules of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual ...................................................................... 130 ii DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended June 30, 2021 Table of Contents FINANCIAL SECTION (Continued) Internal Service Funds: Combining Statements of Net Position ....................................................................................... 140 Combining Statements of Revenues, Expenses and Changes in Fund Net Position ................... 142 Combining Statements of Cash Flows ........................................................................................ 144 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 iii DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL, CALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT For the Year Ended June 30, 2021 Table of Contents 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 iv DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT Kate Colin, Mayor • Maribeth Bushey, Vice Mayor • Rachel Kertz, Councilmember • Maika Llorens Gulati, Councilmember • Eli Hill, Councilmember November 15, 2021 Honorable Mayor, Members of the City Council and Residents of San Rafael: The Comprehensive Annual Financial Report (“Annual Report”) of the City of San Rafael (“City”) for the year ended June 30, 2021, 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, 2021. 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 Annual Report 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 Annual Report 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 11-8-21 DRAFT CITY OF SAN RAFAEL I 1400 FIFTH AVENUE , SAN RAFAEL , CALIFORNIA 94901 I CITYOFSANRAFAEL.ORG Kate Colin, Mayor • Maribeth Bushey, Vice Mayor • Rachel Kertz, Councilmember • Maika Llorens Gulati, Councilmember • Eli Hill, 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 24 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 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, 2021 was 59,016. 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 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 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. vi DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL I 1400 FIFTH AVENUE , SAN RAFAEL , CALIFORNIA 94901 I CITYOFSANRAFAEL.ORG Kate Colin, Mayor • Maribeth Bushey, Vice Mayor • Rachel Kertz, Councilmember • Maika Llorens Gulati, Councilmember • Eli Hill, Councilmember The City and California Municipal Finance Authority compose the San Rafael Joint Powers Financing Authority, originally established by the City and former Redevelopment Agency for the purpose of financing redevelopment and other projects. The San Rafael Sanitation District is a discretely presented component unit of the City 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 Annual Report. 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 Annual Report. Building from over a decade of community efforts to address San Rafael's aging essential public safety facilities, the Essential Facilities project has been underway with major milestones met during the year. In August of 2020 the City completed and placed into service the new Public Safety Center, a state-of-the-art facility for police headquarters and public safety services. On October 18, 2021 the City Council approved a construction bid for Fire Station 54 and Fire Station 55. A construction timeline will be established over the oncoming months. 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 52% of overall sales tax revenues. The COVID-19 continues to test the resilience of the California economy with the Delta variant currently causing disruption to the greatly anticipated recovery. Although Californians are now grappling with the reality of a prolonged pandemic environment, the economy is certainly in recovery with the tech sector leading the way. However, with a return to normality seemingly in reach, the specter of inflation looms overhead, threatening another hurdle to overcome in our push to economic recovery. vii DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL I 1400 FIFTH AVENUE , SAN RAFAEL , CALIFORNIA 94901 I CITYOFSANRAFAEL.ORG Kate Colin, Mayor • Maribeth Bushey, Vice Mayor • Rachel Kertz, Councilmember • Maika Llorens Gulati, Councilmember • Eli Hill, 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. 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 during the fiscal year ended June 30, 2021, for San Rafael were: 1. Autos and Transportation (26.6%), 2. State and County Pools (23.5%), and 3. Building and Construction (20.3%).  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 $2,648. The median home value in San Rafael is $1,333,197. Recent growth and economic vibrancy:  San Rafael ranked No. 2 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 11-8-21 DRAFT CITY OF SAN RAFAEL I 1400 FIFTH AVENUE , SAN RAFAEL , CALIFORNIA 94901 I CITYOFSANRAFAEL.ORG Kate Colin, Mayor • Maribeth Bushey, Vice Mayor • Rachel Kertz, Councilmember • Maika Llorens Gulati, Councilmember • Eli Hill, Councilmember The City is 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). 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. The City also partnered with the Agricultural Institute of Marin to bring back the Summer Thursday night market from May through September 2021. 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. The City develops a budget based upon City Council priorities and department objectives. The Finance Department maintains a traditional line item budget by major function. Budget control is accomplished at the functional or division level within each fund. This budget creates a comprehensive management and fiscal system aimed at achieving the objectives of each operating level consistent with those that have been set for the community by the City Council. Each department director is responsible for accomplishing goals within his or her functional area and monitoring the use of her or his budget allocations consistent with policies set by the City Council and monitored by the City Manager. ix DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL I 1400 FIFTH AVENUE , SAN RAFAEL , CALIFORNIA 94901 I CITYOFSANRAFAEL.ORG Kate Colin, Mayor • Maribeth Bushey, Vice Mayor • Rachel Kertz, Councilmember • Maika Llorens Gulati, Councilmember • Eli Hill, Councilmember ACKNOWLEDGMENTS The preparation of this City-wide document would not have been possible without the assistance of each of the City’s departments. In addition, Finance support staff Sara Smith, Whitney Zimmerman, Kate Llamas, and Finance lead Shawn Plate, with oversight by Accounting Manager Van Bach and Finance Director Nadine Atieh Hade were key to the timely issuance of this report. We believe this document meets the Government Finance Officers Association’s (GFOA) Certificate of Achievement for Excellence in Financial Reporting requirements and will be submitting it to the GFOA to determine its eligibility. If accepted, this will mark the tenth consecutive year for which the City received the award. Lastly, we appreciate the ongoing leadership and support from the Mayor and City Councilmembers. Their strong commitment to financial accountability and stewardship provide inspiration to the organization and motivate a high level of achievement. Respectfully submitted, Jim Schutz Nadine Atieh Hade City Manager Finance Director x DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL I 1400 FIFTH AVENUE , SAN RAFAEL , CALIFORNIA 94901 I CITYOFSANRAFAEL.ORG 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 11-8-21 DRAFT SAN RAFAEL THE CITY WITH A MISSION City Council and Staff As of November 15, 2021 City Council Kate Colin, Mayor Maribeth Bushey, Vice Mayor Maika Llorens Gulati, Councilmember Eli Hill, Councilmember Rachel Kertz, Councilmember Elected Officials Rob Epstein, City Attorney Lindsay Lara, City Clerk Executive Team Jim Schutz, City Manager Cristine Alilovich, Assistant City Manager David Spiller, Chief of Police Darin White, Fire Chief Bill Guerin, Public Works Director Alicia Giudice, Community Development Director Susan Andrade-Wax, Library & Recreation Director Nadine Atieh Hade, Finance Director Jessica MacLeod, Director of Digital Service & Open Government Carmen Valdez, Interim Human Resources Director xii DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT SAN RAFAEL THE CITY WITH A MISSION xiii DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT ·----=o Sant, Rosa 0 I Petaluma O Greater San Francisco -¢-· Bay Area • s!!5-_..._o~'!!'!'!"!"''!!!'!si;;;;;;;;;;;;;;;;;;;;;;;;;.10!!!!!!!'!!!!"!!!!"!!!!1s Miles LOCATION MAP .,,--"' 0 Concord Hayward 0 • 1 fremont 0 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 11-8-21DRAFT~SAN RAFAEL ~ THE CITY WITH A M ISSION 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, 2020 Executive Director/CEO xv DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT e DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT Blooms at Canal Community Garden FINANCIAL SECTION DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT DRAFT DRAFT REVIEW DRAFT 11-8-21 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, 2021, 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%, 57%, and 15%, 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 11-8-21 DRAFT Accountancy Corporation 3478 Buskirk Avenue, Su it e 215 Pleasant Hill , CA 94523 T 925.930 .0902 F 925.930.0135 E maze@mazeassociates.com w mazeassociates.com 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, 2021, 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. Change in Accounting Principles Management adopted the provisions of Governmental Accounting Standards Board Statement No. 84, Fiduciary Activities, which became effective during the year ended June 30, 2021 and required the restatement of net position as discussed in Note 1S to the financial statements. The emphasis of this matter does not constitute a modification to our opinions. 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. 2 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT 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. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 15, 2021, 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 solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance. Pleasant Hill, California November 15, 2021 3 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2021 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, 2021. 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, 2021 by $165 million. Activities – During the fiscal year the City’s total revenues of $127.3 were greater than expenses of $109.8 million for governmental and business-type activities. Changes in Net Position – The City’s total net position increased by $17.4 million in fiscal year 2020-2021 as compared to the net position of the previous year. Net position of governmental activities increased by $18.4 million, while net position of the business-type activities decreased by $931 thousand. Fund Level: Governmental Funds – As of the close of fiscal year 2020-2021, the City’s governmental funds reported combined ending fund balances of $54.8 million, an increase of $8.7 million primarily due greater than expected tax receipts during the fiscal year. Of this total amount, $378 thousand is nonspendable, $36 million is restricted, $10.2 million is committed, $7.3 million is assigned, and $921 is unassigned. Governmental fund revenues totaled $124 million, an increase of $17.2 million from the those of the previous fiscal year. Approximately $10 million was due larger than anticipated tax remittances as well the institution of Measure R, a quarter-cent transaction and use tax, as well as Measure C Wildfire Prevention assessments. The remainder was mainly due to an increase in grant reimbursements for capital projects as the City ramped up activity during the year following the stay-at-home orders that marked the end of the prior fiscal year. Governmental fund expenditures decreased by $13.3 million to $116.5 million, from $129.8 million in the prior year, due primarily to a $12.3 million reduction in culture and recreation activities as a result of the COVID-19 pandemic. The remainder can be attributed to staffing measures such as furloughs and freezing positions as the city sought to navigate the uncertain times ahead during budgeting. Enterprise fund operating revenue decreased $1.7 million to a total of $3.4 million as a result of dramatically reduced operations in response to the COVID-19 pandemic. Enterprise operating expenditures totaled $3.6 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, including Fiduciary Funds, along with the Notes to these financial statements 4.Combining statements for Non-Major Governmental Funds and Internal Service Funds 5.Statistical Information 5 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2021 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 11-8-21 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2021 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 118 through 145 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 118 through 138 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 11-8-21 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2021 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 Statement of Changes in Fiduciary Net Position. 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 93 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 94 through 107 of this report. GOVERNMENT-WIDE FINANCIAL ANALYSIS Statement of Net Position Net position measures the difference between (a) assets and deferred outflows of resources and (b) liabilities and deferred inflows of resources. During this fiscal year, the net position of the City was $156.5 million from Governmental Activities and $9 million from Business-type Activities, for a total of $165.5 million. This represents an increase of $17.4 million from the prior year net position. 8 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2021 The following is the condensed Statement of Net Position for the fiscal years ended June 30, 2021 and 2020: Current governmental assets increased by $21.4 million, primarily resulting from an increase in cash and investments following the receipt of $8 million in American Rescue Plan Act (ARPA) funds in May of 2021 as well as positive results of activities for the year. In addition, there was a $3.7 million increase in intergovernmental receivables as capital project reimbursements ramped up during the year. The $5.8 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 $11 million in deferred outflows is primarily a result the impact of pension-related investment losses during the measurement year. 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. Current and other liabilities increased by approximately $7.6 million, primarily due to the receipt of ARPA funds at the end of the year that were classified as unearned revenue. Noncurrent governmental liabilities increased by $19 million a result of the increase in net pension liability, partially offset by the reduction long-term debt from principal payments during the year. Deferred inflows decreased by $6.7 million mainly as a result of the difference between projected and actual earning on investments during the measurement period that resulted in a net deferred outflow. The net position in business-type activities reflects the fiscal activity of the Parking Services program and decreased by $931 thousand from the previous year as operating revenue continues to be significantly impacted by the ongoing pandemic. Capital assets decreased by $226 thousand due to current year depreciation. The increase in deferred outflows and related decrease in deferred inflows was due to the pension-related adjustment mentioned above. The $407 thousand increase in noncurrent liabilities is driven by the increase in net pension liabilities. Increase Increase 2021 2020 (Decrease) 2021 2020 (Decrease) Current and other assets $106,662 $85,240 $21,422 $2,536 $3,371 ($835) Capital assets 279,337 273,513 5,824 15,505 15,731 (226) Total assets 385,999 358,753 27,246 18,041 19,102 (1,061) Deferred outflows (Notes 9 and 11)57,577 46,498 11,079 1,864 1,506 358 Current and other liabilities 23,067 15,423 7,644 464 432 32 Noncurrent liabilities 242,272 223,220 19,052 9,793 9,386 407 Total liabilities 265,339 238,643 26,696 10,257 9,818 439 Deferred inflows (Notes 9 and 11)21,739 28,481 (6,742) 678 890 (212) Net Position: Net investment in capital assets 228,253 230,737 (2,484) 11,174 11,104 70 Restricted 36,175 23,522 12,653 0 0 0 Unrestricted (107,930) (116,133) 8,203 (2,205) (1,204) (1,001) Total net position $156,498 $138,126 $18,372 $8,969 $9,900 ($931) Governmental Activities Business-Type Activities Summary of Net Position (in thousands) 9 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2021 At June 30, 2021, the largest portion of total net position in the amount of $239.4 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, $36.2 million, is subject to external restrictions, and their use is determined by those restrictions whether legal or by covenant. The remaining portion, unrestricted negative $110.1 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)$239,427 Restricted 36,175 Unrestricted (110,135) Total Net Position $165,467 Net Position as of 6/30/2021 (in thousands) 10 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2021 Statement of Activities - Governmental The following is the condensed Statement of Activities and Changes in Net Position for the fiscal years ended June 30, 2021 and 2020: Increase 2021 2020 (Decrease) REVENUES Program revenues: Charges for services $19,764 $19,142 $622 Operating grants and contributions 5,133 5,546 (413) Capital grants and contributions 8,719 1,348 7,371 Total program revenues 33,616 26,036 7,580 General revenues: Property taxes 30,994 26,492 4,502 Sales taxes 39,599 33,783 5,816 Paramedic tax 5,153 4,923 230 Transient occupancy tax 1,798 2,411 (613) Franchise tax 3,974 4,029 (55) Business license tax 2,575 2,825 (250) Other taxes 2,997 2,153 844 Investment earnings 389 1,908 (1,519) Miscellaneous 2,840 2,471 369 Total general revenues 90,319 80,995 9,324 TOTAL REVENUES 123,935 107,031 16,904 EXPENS ES General government 12,255 15,630 (3,375) Public safety 54,737 50,001 4,736 Public works and parks 20,750 21,661 (911) Community/economic development 5,804 5,314 490 Culture and recreation 10,619 11,828 (1,209) Interest on long-term debt 1,936 1,975 (39) TOTAL EXPENSES 106,101 106,409 (308) EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENSES 17,834 622 17,212 Transfers in 538 586 (48) Net Change in Net Position 18,372 1,208 17,164 Beginning Net Position 138,126 136,918 1,208 Ending Net Position, June 30 $156,498 $138,126 $18,372 Governmental Activities Summary of Changes in Net Position (in thousands) 11 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2021 The City’s governmental activities net position increased by $18.4 million during fiscal year 2020-2021. Year-over- year increases in revenues of $16.9 million were the result of a number of factors. First, sales and use tax remittances greatly outperformed forecasts as government stimulus in response to the COVID-19 pandemic infused the economy with unexpected capital, boosting construction and auto sales significantly. Also impacting the increase was the addition of the Measure R transaction and use tax during the year as well as the timely passage of the Wayfair decision providing remittances from online sales that have soared. Secondly, the City saw over $7 million in increased capital grant activity as the City ramped up capital projects following a brief lull after regrouping following initial stay-at- home orders in the third and fourth quarters of the previous fiscal year. Lastly, property tax revenues increased 17% with the addition of assessments resulting from the passage of Measure C supporting wildfire prevention activities as well as property transfer taxes, which are grouped with property taxes for reporting purposes, that almost doubled from the previous year as low interest rates and other pandemic related pressures have fueled a red-hot housing market. Although overall operating expenses appear to have remained flat, there was an 11 percent decline in governmental fund operating expenses as a result of pandemic related staffing reductions that was offset by required pension and OPEB related adjustments determined by outside Actuarial reports. The increase in Public Safety expenditures is due to a number of factors; first, the new Wildfire Prevention program began during the fiscal year incurring roughly $1.4 million in expenses; second, $1,000,000 was set aside in the vehicle replacement fund to replace aging fire department vehicles; third, a significant increase in pension costs was borne during the year as a result of a prior actuarial study; and, lastly, the fire department engaged in increased strike-team activity, increasing overtime costs that are ultimately reimbursed by the state. The following graph shows governmental revenues by source: 12 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT Revenues by Source Go,vernmental A,cf v"f es Taxes., 70.27% __ operatioggrants and contributions, 4.14% Miscellaneous, 2.29% \ Investment earnings, 0.31% Capital grants and contributions, 7.04% Charges for services., 15.95% CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2021 Total expenses for governmental activities were $104.2 million (excluding interest on long-term debt of $1.9 million). Program revenues offset total expenses as follows:  Those who directly benefited from programs contributed $19.8 million in charges for services.  A total of $13.9 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 $70.5 million. Functional expenses for the year ended June 30, 2021, were as follows: Function Amount Percent of Total General government $12,255 11.6% Public safety 54,737 51.6% Public works and parks 20,750 19.6% Community development 5,804 5.5% Culture and recreation 10,619 10.0% Interest on debt 1,935 1.8% Total expenses $106,100 100% Expenses by Function (in thousands) 13 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 s- Public Safety Expenses and Program Revenues Governmenta I Activities (in thousands) Public Works and Parks Culture and Recreati o:n General Government Commuriity Devel opment ■ Program Revenues ■ Expenses CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2021 The net position for business-type activities decreased from the prior year by $931 thousand.  Parking services is the City’s only business-type activity with income derived from program revenues of $3.4 million. Program revenues include parking meter coin income of $1.1 million and parking garage hourly and monthly parking income of $0.7 million. Revenues also include parking and non-vehicle code fines totaling $1.6 million. Total expenses for parking services were $3.7 million and transfers out to general fund and non-major governmental fund for support totaled $538 thousand during the fiscal year 2020-2021. The Parking services program has been acutely affected by the coronavirus pandemic as the effects of reduced brick-and-mortar business activity and increased remote work arrangements have reduced street and garage parking revenue by a combined $748 thousand or 30%. Parking services also suspended citation activities for a portion of the year leading to a $963 thousand or 38% decline in citation revenue. Staffing levels were reduced during this time as reflected in the $765 thousand or 17% decrease in operating expenses for the period. Increase 2021 2020 (Decrease) Revenues Program revenues: Charges for services $3,352 $5,063 ($1,711) Total program revenues 3,352 5,063 (1,711) General revenues: Investment Income 4 71 (67) Total general revenues 4 71 (67) TOTAL REVENUES 3,356 5,134 (1,778) Expenses General government 3,749 4,491 (742) TOTAL EXPENSES 3,749 4,491 (742) EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENSES (393) 643 (1,036) OTHER FINANCING SOURCES (USES) Transfers out (538) (586) 48 Net Change in Net Position (931) 57 (988) Net Position, Beginning 9,900 9,843 57 Net Position, Ending $8,969 $9,900 ($931) Summary of Changes in Net Position For the periods ended June 30, 2021 and 2020 (in thousands) Business-Type Activities 14 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2021 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, 2021, the City reported a combined ending fund balance of $54.8 million of all its governmental funds (an increase of $8.7 million from the prior year): $377 thousand is non-spendable, $36 million is restricted, $10.2 million is committed, $7.3 million is assigned, and $921 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, 2021, was $16.8 million (an increase of $7 million from the prior year balance): $377 thousand is non-spendable, $8.3 million is committed, $7.2 million is assigned and $921 thousand is unassigned. The assigned portion of the balance includes $8.3 million for emergency and cash flow needs. General Fund Budgetary Highlights: The original adopted General Fund budget projected total revenue of $76.3 million and transfers-in of $3.9 million for total resources of $80.2 million. This budget appropriated expenditures of $81 million and transfers-out of $2 million for total appropriations of $83.3 million. Revenues were later increased to $87.9 million as sales and use tax receipts exceeded expectations as a forecasted overall economic downturn did not materialize due, in part, to wide ranging government stimulus programs. Transfers-out were increased by $2 million based on increased support of recreation fund expenditures as a result of the pandemic and project support. Actual revenues, at $88.7 million, exceeded original budgeted revenues by $12.4 million. Sales and use taxes made up the largest portion of the increase as construction and automobile sales unexpectedly flourished, as well as the additional revenues provided by the new Measure R quarter-cent use tax. Other impacts included increased property tax revenues above expectations in addition to large one-time collections for fees related to large development projects. Expenditures of $80.7 million were roughly in line with original budgeted expenditures of $81 million as the main component of staffing remained on budget. Fiscal year 2020-2021 General Fund revenues and transfers in of $91.8 million exceeded expenditures and transfers out of $84.8 million by $7 million. The increase allowed the City to fully replenish the emergency reserve partially used to absorb the loss in the prior year as well as commit to various projects and initiatives for the future. 15 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2021 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 increased from $4.2 million to $6.6 million. Revenues totaled $5.9 million, while $3.5 million was charged against this fund to support the maintenance of the City-wide traffic model. The City’s matching portion of the County of Marin’s purchase of 3301 Kerner Boulevard through the State’s Project Homekey initiative accounted for $1.3 million. This site will be converted to 44 permanent supportive housing units. As part of the same project, the City issued a grant in the amount of $750 thousand from the Affordable Housing Trust Fund. The Innovative Deployment of Enhanced Arterial project designed to proactively identify and correct traffic signal performance accounted for an additional $988 thousand in expenditures. 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 expenditures and net transfers exceeded revenues by $2.2 million in fiscal year 2020- 2021 resulting in a decrease in fund balance from $6.5 million to $4.3 million. The activities for the year were all planned and approved project work. Expenditures during fiscal year 2020-2021 totaled $11 million. In addition to routine street-related maintenance of $1.4 million, major expenditures included $4.2 million for sidewalk improvements along Francisco Boulevard , $2 million for a multi-use path along Francisco Boulevard, $1 million for resurfacing Smith Ranch Road and Lucas Valley Road, $652 thousand related to studies and improvements to Third Street , $546 thousand to for resurfacing the streets surrounding the new Public Safety Center, and $438 thousand for the San Rafael High School crosswalk. The largest sources of revenues were $3.8 million in federal grants, $1.2 million from State gasoline taxes, $1.1 million in State RMRA (Road Maintenance and Rehabilitation Account) funding, $1 million in local Measure A funding, and $908 thousand in development impact fees. 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 the Public Safety Center was completed and the design phase has been completed on Fire Stations 54 and 55 with bid selection completed in October, 2021. Expenditures during fiscal year 2020-2021 totaled $1.1 million, transfers from the General Fund representing an allocation of Measure E Transaction and Use Tax totaled $1.5 million and $300 thousand was allocated from paramedic tax funds. Adopted Budget Revised Budget Actual Revenues $76,261 $87,879 $88,703 Transfers in 3,915 3,090 3,090 Total resources 80,176 90,969 91,793 Expenditures 81,045 $81,312 80,707 Operating transfers out 2,000 2,508 2,508 Capital Transfers out - 1,538 1,538 Total uses 83,045 85,358 84,753 Net Results ($2,869) $5,611 $7,040 Summary of General Fund Budget and Actual For the fiscal year ended June 30, 2021 (in thousands) 16 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2021 Non-major Governmental Funds – The City’s non-major funds are presented in the basic financial statements in the aggregate. At June 30, 2021, non-major funds had a total fund balance of $15 million, a $1.9 million increase over that of the previous year. The largest fund balance decrease, $905 thousand, was recorded in the Childcare Fund as result of reduced charges for services resulting from the pandemic. The largest fund balance increase, $487 thousand, was recorded in the Measure G- Cannabis Fund as operations and funding was accumulated during the year for specific future projects. Of the ending total non-major fund balances of $15.0 million: $13 million (87%) is legally restricted for specific purposes by external funding source providers, $1.8 million (13%) is committed for special purposes by the City Council, and $116 thousand (less than 1%) is assigned. 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 decreased by $931 thousand during the fiscal year. The Parking Services Fund is the City’s sole business-type (Enterprise) activity. The parking services fund’s operating revenue decreased by $1.7 million in fiscal year 2020-2021 to $3.4 million. The enterprise fund operating expenses were $3.6 million in fiscal year 2020-2021, a decrease of $0.7 million over the prior fiscal year. The change in operating revenues and expenses was driven by adverse impacts on parking operations from the pandemic environment. The City’s Internal Service Funds are also reported in this Proprietary Fund classification. In fiscal year 2020-2021, 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 $4.4 million. Net investment in capital assets decreased by $787 thousand, while unrestricted fund balance increased by $5.2 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 Vehicle Replacement Fund and Equipment Replacement Fund to fund replacement of aging capital assets. The other Internal Service Funds reported small-to-moderate changes to their respective net positions. 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, 2021 amounts to $295 million, net of accumulated depreciation of $197 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 addition to the City’s investment in capital assets for the current fiscal year was $14.3 million, offset by accumulated depreciation of $8.6 million. 17 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2021 Additions to capital assets during fiscal year 2020-2021 included:  Building and structure projects: $45.7 million  Public Safety Center - $45.5 million  B Street Community Center Renovations - $224 thousand  Infrastructure: $6.3 million  Slide Repairs at 70 Irwin Street - $1.9 million  Intersection improvements at Third and Hetherton - $521 thousand  Street resurfacing at Smith Ranch and Lucas Valley roads – $1.1 million  Francisco Boulevard West Multi-use path - $2.2 million  Street resurfacing surrounding the Public Safety Center - $546 thousand The City’s Capital Assets for the fiscal years ending June 30, 2021 and 2020 were as follows: Additional information on the City’s capital assets can be found in Note 5 on pages 62 through 63 of this report. 2021 2020 Governmental Activities Land $83,662 $83,662 Construction in progress 24,617 62,961 Land improvements 9,763 9,763 Buildings and structures 119,165 73,514 Machinery and equipment 21,146 20,842 Infrastructure 213,602 207,290 Less accumulated depreciation (192,618) (184,519) Subtotal Governmental Activities 279,337 273,513 Business-type Activities Land 8,621 8,621 Buildings and structures 10,714 10,714 Machinery and equipment 940 1,009 Less accumulated depreciation (4,770)(4,613) Subtotal Business-type Activities 15,505 15,731 Total Capital Assets $294,842 $289,244 Summary of Capital Assets (in thousands) 18 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2021 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 a 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, 2021 and 2020 were as follows: 2021 2020 Governmental Activity Debt: 2018 Authority Lease Revenue Bond $50,179 $52,596 2010 Taxable Pension Obligation Bonds 2,845 3,320 PG & E City Hall HVAC Retrofit Note Payable 79 113 PG & E Efficiency Note Payable 826 972 Subtotal Governmental Activity Debt 53,929 57,001 Business-Type Activity Debt: PG & E Parking Lot Lighting Retrofit Note Payable 14 21 2012 Authority Lease Revenue Refunding Bonds, as adjusted 4,317 4,606 Subtotal Business-Type Activity Debt 4,331 4,627 Total Long-Term Obligations $58,260 $61,628 Summary of Long-Term Debt (in thousands) 19 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2021 ECONOMIC CLIMATE AND NEXT YEAR’S BUDGET As 2021 draws toward a close, the economy that once appeared resilient in the face of a global pandemic is beginning to show weakness. As the Delta variant has laid to waste any anticipated near-term return to normalcy, the country is now struggling with sweeping supply chain issues and inflationary pressures. The future is not as bleak as these factors may suggest, however, as economic fundamentals remain strong with gross domestic product back above pre- pandemic levels and balance sheets are healthy. The medium-term outlook remains quite positive, it’s the near-term that remains murky with many variables potentially impacting our recovery. California comes into the new year with bolstered capacity as ARPA funds along with a surplus from the prior year put it in strong financial position to invest in the State. Unemployment remains high but is trending downward at 7.5% for August of 2021 versus 12.3% as of August 2020. California is grappling with the same supply chain and inflation issues that the rest of the Country is experiencing as the ports of Los Angeles and Long Beach had over 70 container ships anchored in San Pedro Bay waiting to unload at the end of September. To make matters worse, the current trucking shortage further bottlenecks the supply chain and with wages rising to combat the issue, increased carrying costs are likely to add further pressure to prices. Locally, Marin County’s unemployment rate is the lowest in the State at 4.4% as of August 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 remains as hot as ever with median house sales reaching a peak of $1.73 million in the third quarter of calendar 2021. With some of the highest vaccination rates in the State, Marin is in position to emerge from the pandemic strong. In San Rafael, economic impacts remain mixed. Sales and use taxes for the first two months of fiscal year 2022 are showing strong growth against that of the prior year, however, transient occupancy taxes remain depressed as we navigate the prolonged pandemic environment. Receipt of ARPA funds late in fiscal year 2021 position the City to provide meaningful impact to its communities going forward and lead Marin to post-pandemic recovery. The City’s General Fund is as healthy as it’s ever been, bolstered by shocking sales and use tax growth in light of a global pandemic as well as the infusion of federal funds from ARPA. Staffing is poised to return to pre-pandemic levels helping position the City to grow its service and maintenance levels from pre-pandemic levels. The strong balance sheet headed into the new year provides the City a unique opportunity to make significant investments to its communities and infrastructure in the near-term while fulfilling its current obligations. Sales tax and transactions and use tax (Measure E and Measure R) combined, represent the City’s largest tax revenue generators, the second largest being property tax. The City is forecasting sales and use taxes to remain largely level with that of the record remittances of the previous year as we face competing pressures of supply chain disruption and inflation. Property taxes are expected to continue to grow three percent in the year ahead. 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 new three-year contracts that expire on June 30, 2024. 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 11-8-21 DRAFT CITY OF SAN RAFAEL Management’s Discussion and Analysis Fiscal Year Ended June 30, 2021 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 11-8-21 DRAFT DRAFT DRAFT REVIEW DRAFT 11-8-21 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 11-8-21 DRAFT DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL STATEMENT OF NET POSITION JUNE 30, 2021 Component Primary Government Unit San Rafael Governmental Business-type Sanitation Activities Activities Total District ASSETS Cash and investments available for operations (Note 2)$85,718,476 $1,564,712 $87,283,188 $42,815,664 Restricted cash and investments (Note 2)1,299,504 1,299,504 Receivables: Accounts, net 2,296,837 971,117 3,267,954 1,464,376 Intergovernmental 10,396,947 10,396,947 Grants 1,257,006 1,257,006 Interest 86,061 86,061 Loans (Note 4)304,725 304,725 Long-term receivable from San Rafael Sanitation District (Note 4E)4,924,370 4,924,370 Prepaid expenses and others 377,861 377,861 65,542 Capital assets (Note 5): Nondepreciable 108,279,316 8,620,853 116,900,169 4,152,566 Depreciable, net 171,057,690 6,884,349 177,942,039 50,562,660 Total Assets 385,998,793 18,041,031 404,039,824 99,060,808 DEFERRED OUTFLOWS OF RESOURCES Deferred outflows related to pension (Note 9)52,450,338 1,737,463 54,187,801 Deferred outflows related to OPEB (Note 11) 5,126,833 126,167 5,253,000 Total Deferred Outflows of Resources 57,577,171 1,863,630 59,440,801 LIABILITIES Accounts payable 7,608,095 82,820 7,690,915 284,568 Deposits payable 287,695 287,695 Interest payable 38,147 38,147 Developer deposits payable 457,255 457,255 Unearned revenue 8,413,802 21,174 8,434,976 Claims payable (Note 13): Due in one year 2,944,075 2,944,075 Due in more than one year 9,324,828 9,324,828 Compensated absences (Note 1L): Due in one year 600,763 14,774 615,537 Due in more than one year 4,205,342 103,419 4,308,761 Long-term debt (Note 6): Due in one year 2,755,169 306,816 3,061,985 Due in more than one year 51,173,847 4,023,785 55,197,632 Long-term payable to the City of San Rafael, due in more than one year (Note 4E)4,924,370 Net OPEB liability, due in more than one year (Note 11)25,331,613 623,387 25,955,000 Net pension liability, due in more than one year (Note 9)152,236,607 5,042,969 157,279,576 Total Liabilities 265,339,091 10,257,291 275,596,382 5,208,938 DEFERRED INFLOWS OF RESOURCES Deferred inflows related to pension (Note 9)16,802,157 556,586 17,358,743 Deferred inflows related to OPEB (Note 11)4,936,517 121,483 5,058,000 Total Deferred Inflows of Resources 21,738,674 678,069 22,416,743 NET POSITION (Note 8): Net investment in capital assets 228,252,998 11,174,601 239,427,599 54,715,226 Restricted for: Special revenue projects: Housing and street improvements 12,126,119 12,126,119 Stormwater 1,168,865 1,168,865 Emergency medical services 845,028 845,028 Other 9,397,748 9,397,748 Capital projects 12,637,398 12,637,398 Total Restricted Net Position 36,175,158 36,175,158 Unrestricted (107,929,957) (2,205,300) (110,135,257) 39,136,644 Total Net Position $156,498,199 $8,969,301 $165,467,500 $93,851,870 See accompanying notes to financial statements 25 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2021 Program Revenues Operating Capital Charges for Grants and Grants and Functions/Programs Expenses Services Contributions Contributions Primary Government Governmental Activities: General government $12,254,642 $388,833 $100,209 Public safety 54,736,561 5,332,486 1,588,127 $838,846 Public works and parks 20,749,666 2,719,148 3,260,167 7,780,568 Community development 5,804,134 8,390,282 Culture and recreation 10,619,181 2,932,869 184,093 99,350 Interest on long-term debt and fiscal charges 1,935,532 Total Governmental Activities 106,099,716 19,763,618 5,132,596 8,718,764 Business-type Activities: Parking services 3,748,667 3,351,864 Total Business-type Activities 3,748,667 3,351,864 Total Primary Government $109,848,383 $23,115,482 $5,132,596 $8,718,764 Component Unit San Rafael Sanitation District $13,790,905 $16,945,721 $5,609 $277,752 General revenues: Taxes: Property Sales: Sales and Use Measure R quarter-cent sales Measure E half-cent sales Measure E quarter-cent sales Paramedic Transient occupancy Franchise Business license Other Investment earnings Gain from sale of capital assets 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 11-8-21 DRAFT Component Primary Government Unit San Rafael Governmental Business-type Sanitation Activities Activities Total District ($11,765,600)($11,765,600) (46,977,102)(46,977,102) (6,989,783)(6,989,783) 2,586,148 2,586,148 (7,402,869)(7,402,869) (1,935,532)(1,935,532) (72,484,738)(72,484,738) ($396,803)(396,803) (396,803)(396,803) (72,484,738)(396,803) (72,881,541) $3,438,177 30,993,516 30,993,516 1,888,197 24,771,103 24,771,103 1,133,448 1,133,448 9,129,708 9,129,708 4,564,854 4,564,854 5,153,448 5,153,448 1,797,578 1,797,578 3,973,806 3,973,806 2,575,341 2,575,341 2,996,950 2,996,950 388,645 4,065 392,710 48,614 26,784 26,784 2,813,015 2,813,015 538,405 (538,405) 90,856,601 (534,340) 90,322,261 1,936,811 18,371,863 (931,143) 17,440,720 5,374,988 138,126,336 9,900,444 148,026,780 88,476,882 $156,498,199 $8,969,301 $165,467,500 $93,851,870 Net (Expenses) Revenues and Changes in Net Position 27 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT DRAFT DRAFT REVIEW DRAFT 11-8-21 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 2020-2021: 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 11-8-21 DRAFT CITY OF SAN RAFAEL GOVERNMENTAL FUNDS BALANCE SHEET JUNE 30, 2021 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) $19,321,465 $6,322,450 $5,032,068 $12,173,178 $13,320,514 $56,169,675 Restricted cash and investments (Note 2)593,903 8 705,593 1,299,504 Receivables: Accounts 1,378,253 226,086 692,498 2,296,837 Intergovernmental 9,703,853 172,853 520,241 10,396,947 Grants 31,527 1,205,775 1,237,302 Interest 85,306 755 86,061 Loans (Note 4)961 34,288 269,476 304,725 Prepaids 377,861 377,861 Total Assets $31,461,602 $6,582,824 $5,236,448 $12,173,186 $16,714,852 $72,168,912 LIABILITIES Accounts payable $4,882,382 $24,751 $891,594 $75,796 $1,205,911 $7,080,434 Deposits payable 142,824 144,871 287,695 Developer deposits payable 453,620 3,635 457,255 Unearned revenue 8,044,443 369,359 8,413,802 Total Liabilities 13,523,269 24,751 891,594 75,796 1,723,776 16,239,186 DEFERRED INFLOWS OF RESOURCES Unavailable revenue: SB90 reimbursement receivable 1,092,434 1,092,434 Total Deferred Inflows of Resources 1,092,434 1,092,434 Fund Balances (Note 8): Nonspendable 377,861 377,861 Restricted 6,558,073 4,344,854 12,097,390 13,043,198 36,043,515 Committed 8,321,000 1,831,036 10,152,036 Assigned 7,226,153 116,842 7,342,995 Unassigned 920,885 920,885 Total Fund Balances 16,845,899 6,558,073 4,344,854 12,097,390 14,991,076 54,837,292 Total Liabilities, Deferred Inflows of Resources and Fund Balances $31,461,602 $6,582,824 $5,236,448 $12,173,186 $16,714,852 $72,168,912 Special Revenue Funds See accompanying notes to basic financial statements 30 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL GOVERNMENTAL FUNDS BALANCE SHEET - RECONCILIATION OF GOVERNMENTAL FUND BALANCES TO NET POSITION OF GOVERNMENTAL ACTIVITIES JUNE 30, 2021 Total fund balances reported on the governmental funds balance sheet $54,837,292 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. 266,932,869 Internal service funds are used by management to charge the cost of management of 29,176,078 Long-term liabilities, including bonds payable, are not due and payable in the current period and, therefore, are not reported in the Governmental Funds. (53,929,016) Compensated absences (4,806,105) Unavailable revenue 1,092,434 Long-term receivable from San Rafael Sanitation District 4,924,370 Deferred outflows related to pension 52,450,338 Net pension liability (152,236,607) Deferred inflows related to pension (16,802,157) Deferred outflows related to OPEB 5,126,833 Deferred inflows related to OPEB (4,936,517) Net OPEB liability (25,331,613) Net Position of governmental activities $156,498,199 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 11-8-21 DRAFT CITY OF SAN RAFAEL GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2021 Traffic and Essential Other Total Housing Facilities Capital Governmental Governmental General Mitigation Gas Tax Projects Fund Funds Funds REVENUES Taxes and special assessments $76,771,466 $9,576,262 $86,347,728 Licenses and permits 3,000,666 3,000,666 Fines and forfeitures 219,030 219,030 Use of money and properties 156,398 $10,666 $7,349 $8,854 483,837 667,104 Intergovernmental 4,819,890 1,254,954 7,703,287 3,081,618 16,859,749 Charges for services 2,789,005 4,575,877 1,520,508 6,179,973 15,065,363 Other revenue 946,294 23,951 216,180 688,874 1,875,299 Total Revenues 88,702,749 5,865,448 9,447,324 8,854 20,010,564 124,034,939 EXPENDITURES Current: General government 10,795,698 1,345,827 285,374 12,426,899 Public safety 44,558,789 9,805,083 54,363,872 Public works and parks 12,221,102 255,736 1,846,936 787,198 15,110,972 Community development 5,520,129 750,000 6,270,129 Culture and recreation 2,604,071 7,096,668 9,700,739 Capital outlay 1,177,594 9,157,141 1,105,796 2,194,535 13,635,066 Debt service: Principal 2,563,711 2,563,711 Interest and fiscal charges 2,443,476 2,443,476 Total Expenditures 80,706,976 3,529,157 11,004,077 1,105,796 20,168,858 116,514,864 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 7,995,773 2,336,291 (1,556,753) (1,096,942) (158,294) 7,520,075 OTHER FINANCING SOURCES (USES) Transfers in (Note 3A)3,089,518 30,000 1,836,629 2,593,443 7,549,590 Transfers out (Note 3A)(4,046,072)(646,000) (1,117,225) (519,826) (6,329,123) Total Other Financing Sources (Uses)(956,554)(616,000) 719,404 2,073,617 1,220,467 Net Change in Fund Balances 7,039,219 2,336,291 (2,172,753) (377,538) 1,915,323 8,740,542 FUND BALANCES, BEGINNING OF YEAR 9,806,680 4,221,782 6,517,607 12,474,928 13,075,753 46,096,750 FUND BALANCES, END OF YEAR $16,845,899 $6,558,073 $4,344,854 $12,097,390 $14,991,076 $54,837,292 See accompanying notes to financial statements Special Revenue Funds 32 DRAFT DRAFT REVIEW DRAFT 11-8-21 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, 2021 NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS $8,740,542 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 13,660,847 Loss on disposal of capital assets is deducted from fund balance (57,523) Depreciation expense is deducted from fund balance (6,992,063) (Depreciation expense is net of internal service fund depreciation of $1,338,781, 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 2,563,711 Amortized bond premium expense is added back to fund balance 507,944 Accrual of Non-Current Items The amount below included in the Statement of Activities does not require the use of current financial Compensated absences (42,151) Unavailable revenue (181,483) Long-term receivable from San Rafael Sanitary District (12,679) 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. (5,716,485) 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. 1,502,922 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. 4,398,281 Change in Net Position of Governmental Activities $18,371,863 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 11-8-21 DRAFT DRAFT DRAFT REVIEW DRAFT 11-8-21 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 11-8-21 DRAFT CITY OF SAN RAFAEL PROPRIETARY FUNDS STATEMENT OF NET POSITION JUNE 30, 2021 Business-type Activities - Governmental Enterprise Fund Activities Parking Internal Services Service Funds ASSETS Current Assets: Cash and investments available for operations (Note 2) $1,564,712 $29,548,801 Receivable: Accounts, net 971,117 Grants 19,704 Total Current Assets 2,535,829 29,568,505 Noncurrent Assets: Capital assets (Note 5): Nondepreciable 8,620,853 346,647 Depreciable, net 6,884,349 12,057,490 Total Noncurrent Assets 15,505,202 12,404,137 Total Assets 18,041,031 41,972,642 DEFERRED OUTFLOWS OF RESOURCES Deferred outflows related to pension (Note 9) 1,737,463 Deferred outflows related to OPEB (Note 11) 126,167 Total Deferred Outflows of Resources 1,863,630 LIABILITIES Current Liabilities: Accounts payable 82,820 527,661 Interest payable 38,147 Unearned revenue 21,174 Compensated absences, due in one year (Note 1L) 14,774 Claims payable, due in one year (Note 13) 2,944,075 Long-term debt, due in one year (Note 6) 306,816 Total Current Liabilities 463,731 3,471,736 Noncurrent Liabilities: Compensated absences (Note 1L) 103,419 Claims payable (Note 13)9,324,828 Long-term debt (Note 6) 4,023,785 Net OPEB liability (Note 11) 623,387 Net pension liability (Note 9) 5,042,969 Total Noncurrent Liabilities 9,793,560 9,324,828 Total Liabilities 10,257,291 12,796,564 DEFERRED INFLOWS OF RESOURCES Deferred inflows related to pension (Note 9) 556,586 Deferred inflows related to OPEB (Note 11) 121,483 Total Deferred Inflows of Resources 678,069 NET POSITION (Note 8): Net investment in capital assets 11,174,601 12,404,137 Unrestricted (2,205,300) 16,771,941 Total Net Position $8,969,301 $29,176,078 See accompanying notes to financial statements 36 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL PROPRIETARY FUNDS STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION FOR THE YEAR ENDED JUNE 30, 2021 Business-type Activities - Governmental Enterprise Fund Activities Parking Internal Services Service Funds OPERATING REVENUES Charges for current services $1,767,713 $19,645,714 Other operating revenues 1,584,151 926,086 Intergovernmental 19,704 Total Operating Revenues 3,351,864 20,591,504 OPERATING EXPENSES Personnel 2,199,288 3,935,030 Insurance premiums and claims 6,730,673 Maintenance and repairs 57,192 151,407 Depreciation expense (Note 5) 234,619 1,338,781 General and administrative 1,075,847 3,434,988 Total Operating Expenses 3,566,946 15,590,879 Operating Income (215,082) 5,000,625 NONOPERATING REVENUES (EXPENSES) Investment income 4,065 52,934 Interest expense (159,113) (Loss) gain from sale of capital assets (22,608) 26,784 Total Nonoperating Revenues (Expenses) (177,656) 79,718 Income Before Contributions and Transfers (392,738) 5,080,343 TRANSFERS OUT (Note 3A) (538,405) (682,062) Change in Net Position (931,143) 4,398,281 NET POSITION, BEGINNING OF YEAR 9,900,444 24,777,797 NET POSITION, END OF YEAR $8,969,301 $29,176,078 See accompanying notes to financial statements 37 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL PROPRIETARY FUNDS STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2021 Business-type Activities - Governmental Enterprise Fund Activities Parking Internal Services Service Funds CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers/other funds $1,767,713 $19,726,562 Cash payments to suppliers for goods and services (1,110,840) (13,164,301) Cash payments to employees for salaries and benefits (2,055,896) (1,286,053) Other revenues 1,310,490 926,086 Cash Flows from Operating Activities (88,533) 6,202,294 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Interfund payments (538,405) (682,062) Cash Flows from Noncapital Financing Activities (538,405) (682,062) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Principal payments on revenue bonds and note payable (296,816) Interest expenses and fiscal charges (160,563) Acquisition of capital assets (30,986) (519,649) Proceeds from sale of property 35,187 Cash Flows from Capital and Related Financing Activities (488,365) (484,462) CASH FLOWS FROM INVESTING ACTIVITIES Interest received 4,065 52,934 Cash Flows from Investing Activities 4,065 52,934 NET CHANGE IN CASH AND CASH EQUIVALENTS (1,111,238) 5,088,704 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 2,675,950 24,460,097 CASH AND CASH EQUIVALENTS, END OF YEAR $1,564,712 $29,548,801 Reconciliation of operating income to net cash provided by operating activities: Operating income ($215,082) $5,000,625 Adjustments to reconcile operating income to cash flows from operating activities: Depreciation 234,619 1,338,781 Net change in assets and liabilities: Accounts receivable (275,719) 61,144 OPEB system (42,078) Accounts payable 22,199 (46,882) Unearned revenue 2,058 Compensated absence obligations (534) Retirement system 186,004 Claims payable (151,374) Net Cash Provided by Operating Activities ($88,533) $6,202,294 NON-CASH TRANSACTIONS: Retirement of capital assets ($22,608) ($8,403) Amortization of bond discount $725 See accompanying notes to basic financial statements 38 DRAFT DRAFT REVIEW DRAFT 11-8-21 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 present fund statements that consist of a Statement of Net Position and a Statement of Changes in 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 CUSTODIAL 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 11-8-21 DRAFT Successor Agency to the Pt. San Pedro Redevelopment Road Assessment Agency District Private-Purpose Custodial Trust Fund Fund ASSETS Cash and investments (Note 2)$229,646 Receivables: Taxes $3,547,605 940 Total Assets 3,547,605 230,586 LIABILITIES Interest payable 14,053 21,686 Long-term debt (Note 15C): Due within one year 3,445,000 Due more than one year 3,485,896 Total Liabilities 6,944,949 21,686 NET POSITION (DEFICIT) Restricted for: Other governments (3,397,344) Bondholders 208,900 Total Net Position ($3,397,344)$208,900 See accompanying notes to financial statements CITY OF SAN RAFAEL FIDUCIARY FUNDS STATEMENT OF FIDUCIARY NET POSITION JUNE 30, 2021 40 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT Successor Agency to the Pt. San Pedro Redevelopment Road Assessment Agency District Private-Purpose Custodial Trust Fund Fund ADDITIONS Property taxes $3,913,358 $133,955 Total Additions 3,913,358 133,955 DEDUCTIONS General government 102,397 Payments to bondholders 79,901 Interest expense 343,589 61,722 Total Deductions 445,986 141,623 Change in Net Position 3,467,372 (7,668) NET POSITION Beginning of year, as restated (Note 1S)(6,864,716)216,568 End of year ($3,397,344)$208,900 CITY OF SAN RAFAEL STATEMENT OF CHANGES IN FIDUCIARY NET POSITION FOR THE YEAR ENDED JUNE 30, 2021 See accompanying notes to financial statements 41 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 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 unit is 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 4E, a receivable from the District has been established. 43 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 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 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 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, 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 Custodial 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. 45 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 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 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 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 one source, intergovernmental receivables. 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. For the fiscal year ended June 30, 2021, the following expenditures exceeded the budgeted appropriations: Expenditures Exceeded Budget Pt. San Pedro - Maintenance Portion Special Revenue Fund $10,172 Low and Moderate Income Housing Special Revenue Fund 11,879 Measure C - Wildfire Prevention Special Revenue Fund 575,449 The above expenditures exceeded the budgeted appropriations, however, there were sufficient revenues to cover the excess expenditures during the fiscal year in each of the funds. 47 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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. 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 48 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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 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 in compensated absences as of June 30, 2021 were as follows: Governmental Business-Type Activities Activities Total Beginning Balance $4,763,954 $118,727 $4,882,681 Additions 3,014,334 84,914 3,099,248 Payments (2,972,183) (85,448) (3,057,631) Ending Balance $4,806,105 $118,193 $4,924,298 Current Portion $600,763 $14,774 $615,537 49 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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) 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 County 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. 50 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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. 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. Closed Funds The Peacock Gap Assessment District, Mariposa Assessment District and the 1997 Financing Authority Revenue Bonds Debt Service Funds were closed as of June 30, 2021. 51 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) S. New Accounting Pronouncement In January 2017, GASB issued GASB Statement No. 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 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. The provisions of this Statement were implemented during fiscal year 2021. As part of the implementation of this Statement, it was determined that the Pt. San Pedro Road Assessment District Agency Fund be accounted for and reported as a Custodial Fund, which required the restatement of beginning net position of the fund in the amount of $216,568. 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. 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. 52 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 NOTE 2 - CASH AND INVESTMENTS (Continued) B. Classification Cash and investments as of June 30, 2021, 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 $87,283,188 Restricted cash and investments 1,299,504 Total Primary Government Cash and Investments 88,582,692 San Rafael Sanitation District (Component Unit): Cash and investments available for operations 42,815,664 Total San Rafael Sanitation District Cash and Investments 42,815,664 Statement of Fiduciary Net Position (separate statement): Pt. San Pedro Road Assessment District Custodial Fund: Restricted cash 229,646 Total Fiduciary Cash 229,646 Total Cash and Investments $131,628,002 53 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 NOTE 2 - CASH AND INVESTMENTS (Continued) 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. 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 Obligations 5 years N/A No limit No limit Federal Agency Securities and Instruments 5 years N/A No limit No limit Repurchase Agreements 1 year N/A No limit No limit Prime Commercial Paper 270 days A-1 25% 10% of total outstanding commercial paper and 5% of portfolio Banker's Acceptances 180 days A 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 AAAm 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 issued by the City of San Rafael 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. 54 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 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 Banker's 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 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 Defeasance Securities N/A N/A No Limit (A) At time of purchase. (B) Guaranteed Investment Contracts must be fully collateralized with U.S. Treasur y or U.S. Agency Obligations. Maximum Percentage of Portfolio Guaranteed Investment Contracts (fully collateralized) (B) Authorized Investment Type Minimum Credit Quality (A) 55 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 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, 2021: (a)(b)(c) Level 1 Level 2 Level 3 Total City: Money Market Funds $672,976 $672,976 U.S. Government Obligations $4,439,181 4,439,181 Federal Agency Securities and Instruments 13,695,845 13,695,845 Medium-Term Corporate Notes 14,048,285 14,048,285 Investment in Pt. San Pedro Bonds $1,195,628 (d)1,195,628 $4,439,181 $28,417,106 $1,195,628 34,051,915 Investments Exempt from Fair Value Hierarchy: Local Agency Investment Fund 45,372,347 Marin County Investment Pool 81,348 Total Investments 79,505,610 Cash in banks and on hand 9,077,082 Total City Cash and Investments 88,582,692 Fiduciary: Cash in banks 229,646 Total Fiduciary Cash 229,646 Total City and Fiduciary Cash 88,812,338 San Rafael Sanitation District: Marin County Investment Pool 42,815,664 42,815,664 Total Cash and Investments $131,628,002 Source: The above GASB 72 Classifications in the different input levels are provided by US Bank Institution Trust & (a)Level 1 inputs are quoted prices in active market for identical assets. These are quoted prices in active markets f 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 i active markets; b) Quoted prices for identical or similar assets in markets that are not active; and c) Inputs othe 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 exten that observable inputs are not available, thereby allowing for situations in which there is little, if any, market act 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 56 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 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 $672,976 $672,976 Local Agency Investment Fund 45,372,347 45,372,347 Marin County Investment Pool 81,348 81,348 U.S. Government Obligations $4,439,181 4,439,181 Federal Agency Securities and Instruments 4,393,483 9,302,362 13,695,845 Medium-Term Corporate Notes 1,214,676 12,833,609 14,048,285 Investment in Pt. San Pedro Bonds 1,195,628 1,195,628 Total Investments $51,734,830 $27,770,780 79,505,610 Cash in banks and on hand 9,077,082 Total City Cash and Investments 88,582,692 Fiduciary: Cash in banks 229,646 Total Fiduciary Cash 229,646 Total City and Fiduciary Cash 88,812,338 San Rafael Sanitation District: Marin County Investment Pool 42,815,664 Total District's Cash and Investments 42,815,664 Total Cash and Investments $131,628,002 57 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 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. 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, 2021, these investments matured in an average of 291 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 20 days at June 30, 2021. 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. 58 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 NOTE 2 - CASH AND INVESTMENTS (Continued) 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, 2021, 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 $672,976 < 1%AAAm Marin County Investment Pool 81,348 < 1%Aaa/AAA U.S. Government Obligations 4,439,181 6%AA+ Federal Agency Securities and Instruments 13,695,845 18%AA+ Medium-Term Corporate Notes 14,048,285 18% AA+, AA, A+, A, A- Local Agency Investment Fund 45,372,347 58%Not Rated Investment in Pt. San Pedro Bonds 1,195,628 2%Not Rated Total City Investments 79,505,610 San Rafael Sanitation District: Marin County Investment Pool 42,815,664 AAA/V1 Total Investments $122,321,274 H. Concentration Risk Investments in the securities of any individual issuers, other than U.S. Treasury securities, mutual funds, and external investment pools, that represent 5% or more of the total entity–wide investments are as follows at June 30, 2021: Issuer Investment Type Amount Federal National Mortgage Association Federal Agency Securities and Instruments $5,382,813 59 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 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, 2021, were as follows: From Fund To Fund Amount General Fund Essential Facilities Capital Projects Fund $1,537,629 (A) Non-Major Governmental Funds 2,508,443 (B) Gas Tax Special Revenue Fund General Fund 646,000 (C) Essential Facilities Capital Projects Fund General Fund 1,117,225 (D) Parking Services Enterprise Fund General Fund 453,405 (D) Non-Major Governmental Funds 85,000 (A) Employee Retirement Internal Service Fund General Fund 682,062 (D) Non-Major Governmental Funds General Fund 190,826 (C), (E) Gas Tax Special Revenue Fund 30,000 (A) Essential Facilities Capital Projects Fund 299,000 (F) $7,549,590 (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. (E) Transfers to close out debt service funds. (F) Transfers for project support. 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. As of June 30, 2021, these loans consisted of the following: Employee Loans $961 Centertown Associates 269,476 One "H" Street Associates 34,288 Total $304,725 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, 2021, the balance of the employee loans receivable was $961. 60 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 NOTE 4 - LOANS RECEIVABLE (Continued) 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, 2021, the balance of the loan including principal and accrued interest was $269,476. 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, 2021, the balance of this loan was $34,288. E. 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, 2021, is $4,924,370, and is composed of the following: Defined benefit pension liability allocation $3,778,048 Other post-employment benefit liability allocation 1,146,322 Total long-term receivable from San Rafael Sanitation District $4,924,370 61 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 NOTE 5 - CAPITAL ASSETS Changes in capital assets during the fiscal year consisted of: Balance Balance June 30, 2020 Additions Retirements Transfers June 30, 2021 Governmental Activities Capital assets not being depreciated: Land $83,662,359 $83,662,359 Construction in progress 62,961,226 $13,662,829 ($52,007,098) 24,616,957 Total capital assets not being depreciated 146,623,585 13,662,829 (52,007,098) 108,279,316 Capital assets being depreciated: Land improvements 9,762,567 9,762,567 Buildings and structures 73,513,733 ($57,524) 45,708,933 119,165,142 Machinery and equipment 20,842,395 545,222 (241,658)21,145,959 Infrastructure 207,290,196 13,140 6,298,165 213,601,501 Total capital assets being depreciated 311,408,891 558,362 (299,182) 52,007,098 363,675,169 Less accumulated depreciation for: Land improvements (6,872,805) (265,055)(7,137,860) Buildings and structures (22,176,356) (1,987,389)(24,163,745) Machinery and equipment (13,844,422) (1,132,227) 233,256 (14,743,393) Infrastructure (141,626,308) (4,946,173)(146,572,481) Total accumulated depreciation (184,519,891) (8,330,844) 233,256 (192,617,479) Total net capital assets being depreciated 126,889,000 (7,772,482) (65,926) 52,007,098 171,057,690 Total governmental activity capital assets $273,512,585 $5,890,347 ($65,926)$279,337,006 Balance Balance June 30, 2020 Additions Retirements June 30, 2021 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 1,009,130 $30,986 ($99,952)940,164 Total capital assets being depreciated 11,722,944 30,986 (99,952) 11,653,978 Less accumulated depreciation for: Buildings and structures (3,716,047) (205,363)(3,921,410) Machinery and equipment (896,307) (29,256)77,344 (848,219) Total accumulated depreciation (4,612,354) (234,619)77,344 (4,769,629) Total net capital assets being depreciated 7,110,590 (203,633) (22,608) 6,884,349 Total business-type activity capital assets $15,731,443 ($203,633) ($22,608) $15,505,202 62 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 NOTE 5 - CAPITAL ASSETS (Continued) Balance Balance June 30, 2020 Additions June 30, 2021 San Rafael Sanitation District Capital assets not being depreciated: Land and easements $115,329 $115,329 Construction in progress 1,377,642 $2,659,595 4,037,237 Total capital assets not being depreciated 1,492,971 2,659,595 4,152,566 Capital assets being depreciated: Subsurface lines 41,453,130 457,173 41,910,303 Sewage collection facilities 45,012,915 60,250 45,073,165 General plant and administration 2,230,686 135,253 2,365,939 Total capital assets being depreciated 88,696,731 652,676 89,349,407 Less accumulated depreciation for: Subsurface lines (13,014,065) (523,983) (13,538,048) Sewage collection facilities (22,268,128) (1,416,554) (23,684,682) General plant and administration (1,429,249) (134,768) (1,564,017) Total accumulated depreciation (36,711,442) (2,075,305) (38,786,747) Total net capital assets being depreciated 51,985,289 (1,422,629) 50,562,660 Total District's capital assets $53,478,260 $1,236,966 $54,715,226 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. 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 $106,279 Public safety 651,777 Public works and parks 5,461,028 Community development 37,711 Culture and recreation 735,268 Internal service funds 1,338,781 Total Governmental Activities $8,330,844 Business-type Activities Parking services $234,619 Total Business-type Activities $234,619 63 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 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, 2021, are as follows: Authorized Balance Balance Current and Issued June 30, 2020 Retirements June 30, 2021 Portion Governmental Activities Bonds: 2018 Authority Lease Revenue Bonds 4.00%-5.00%, due 6/1/2034 $45,485,000 $45,485,000 $1,910,000 $43,575,000 $2,070,000 Add: unamortized bond premium 7,111,209 507,944 6,603,265 2010 Taxable Pension Obligation Bonds 6.00%-6.25%, due 7/1/2025 4,490,000 3,320,000 475,000 2,845,000 505,000 Total Governmental Activities Bonds 55,916,209 2,892,944 53,023,265 2,575,000 Governmental Activities - Direct Borrowings: PG & E City Hall HVAC Retrofit Note Payable 0.00%, due 11/30/2023 334,585 112,718 33,280 79,438 33,280 PG & E CEC Efficiency Note Payable 1.00%, due 12/22/2026 1,104,799 971,744 145,431 826,313 146,889 Total Governmental Activities - Direct Borrowings 1,084,462 178,711 905,751 180,169 Total Governmental Activities Debt $57,000,671 $3,071,655 $53,929,016 $2,755,169 Business-type Activities: Direct Borrowing: PG & E Parking Lot Lighting Retrofit Note Payable 0.00%, due 11/30/2023 $66,380 $20,939 $6,816 $14,123 $6,816 2012 Authority Lease Revenue Refunding Bonds 2.00-4.00%, due 4/1/2033 6,750,000 4,615,000 290,000 4,325,000 300,000 Less: unamortized bond discount (9,247) (725) (8,522) Total Business-type Activities Bonds 4,605,753 289,275 4,316,478 300,000 Total Business-type Activities $4,626,692 $296,091 $4,330,601 $306,816 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. 64 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 NOTE 6 - LONG-TERM DEBT (Continued) 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. 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 included 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. 65 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 NOTE 6 - LONG-TERM DEBT (Continued) 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. 66 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 NOTE 6 - LONG-TERM DEBT (Continued) E. Future Debt Service Future debt service requirements, including interest, at June 30, 2021, are as follows: Governmental Activities For the Year Bonds Direct Borrowings Ended June 30 Principal Interest Principal Interest 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 3,510,000 1,729,256 152,868 1,919 2027 - 2031 18,160,000 6,148,250 77,007 386 2032 - 2034 13,155,000 1,282,000 Totals 46,420,000 $17,643,024 905,751 $25,015 Reconciliation of Long-term debt: Add: unamortized premium 6,603,265 $53,023,265 $905,751 Business-type Activities For the Year Bonds Direct Borrowing Ended June 30 Principal Interest Principal 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 335,000 113,562 2027 - 2031 1,880,000 382,668 2032 - 2034 850,000 51,400 Totals 4,325,000 $1,102,382 14,123 Reconciliation of Long-term debt: Less: unamortized discount (8,522) $4,316,478 $14,123 67 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 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, 2021, the balances of these Districts’ outstanding debt were as follows: Project Original Outstanding Description Amount June 30, 2021 Pt. San Pedro Road Median Landscaping Pt. San Pedro Road Assessment District Limited Obligation Bonds-2012 Median Landscaping $1,750,000 $1,239,200 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, 2021, the balance of this issuers’ outstanding debt was as follows: Project Original Outstanding Description Amount June 30, 2021 San Rafael Redevelopment Agency 162-175 Belvedere Multifamily Housing Revenue Bonds-2000A Apartments $3,590,529 $899,501 California Statewide Communities Development Authority Revenue Bonds-2001 St. Marks School 5,605,000 2,645,000 San Rafael Redevelopment Agency San Rafael Commons Multifamily Housing Revenue Bonds-2002 Apartments 6,100,000 4,265,000 San Rafael Redevelopment Agency Multifamily Housing Revenue Bonds-2007 Series A Martinelli House Project 6,000,000 1,736,147 Multifamily Housing Revenue Bonds-2007 Series B Martinelli House 1,000,000 141,151 Total $22,295,529 $9,686,799 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: 68 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 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. 69 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 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, 2021, 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 $377,861 $377,861 Total Nonspendable 377,861 377,861 Restricted for: Assessment District capital projects $305,090 305,090 Baypoint Lagoons Assessment District 190,369 190,369 Bedroom tax capital projects 103,275 103,275 Childcare 368,580 368,580 Development services 300,100 300,100 Emergency medical services 845,028 845,028 Street improvements and Maintenance (Gas Tax) $4,344,854 4,344,854 Grant funded programs 755,323 755,323 Household hazmat facility 443,289 443,289 Library 2,477,814 2,477,814 Library assessment 1,011,963 1,011,963 Loch Lomond Assessment District 761,291 761,291 Loch Lomond Assessment District #2 510,358 510,358 Low and Moderate Income Housing 1,223,192 1,223,192 Measure A - Open space 598,505 598,505 Measure C - Wildlife Prevention 418,949 418,949 Measure E - Public Safety Facility $12,097,390 12,097,390 Measure G - Cannabis 562,598 562,598 Parkland dedication 332,473 332,473 Public safety 129,544 129,544 Pt. San Pedro- Maintenance Portion 122,899 122,899 Recreation revolving 413,693 413,693 Stormwater 1,168,865 1,168,865 Traffic and housing mitigation $6,558,073 6,558,073 Total Restricted 6,558,073 4,344,854 12,097,390 13,043,198 36,043,515 Committed to: Capital improvement capital projects 1,816,227 1,816,227 Emergency and cash flow 8,321,000 8,321,000 Park capital projects 14,809 14,809 Total Committed 8,321,000 1,831,036 10,152,036 Assigned to: Contractual commitments 4,907,644 4,907,644 Furlough paybacks 533,374 533,374 Infrastructure Reserve 600,000 600,000 General plan / long range planning 1,185,135 1,185,135 Open space capital projects 116,842 116,842 Total Assigned 7,226,153 116,842 7,342,995 Unassigned 920,885 920,885 Total Fund Balances $16,845,899 $6,558,073 $4,344,854 $12,097,390 $14,991,076 $54,837,292 Special Revenue Funds 70 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 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 $8,321,000 at June 30, 2021, and the balance of the reserve, included in the General Fund’s committed fund balance was $8,321,000 at that date. The balance of the reserve previously 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. The balance of the reserve was replenished in full by June 30, 2021. 2) Other Facilities and Infrastructure The purpose of the assigned infrastructure 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, 2021. The General Plan/Long Range Planning reserve included in the General Fund’s assigned fund balance was $1,185,135 at June 30, 2021 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. 71 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 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. 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. 72 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 NOTE 9 - PENSION PLAN (Continued) 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. 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, 2021 were as follows: Employer Employee Contribution Rate Contribution Rate Benefit Basis City of San Rafael Misc Tier 1 54.12%0.00% - 16.13% 2.7% @ 55 Highest year City of San Rafael Misc Tier 2 52.17%7.34% - 11.76% 2.0% @ 55 Average three highest years City of San Rafael Fire Tier 1 74.24%0.00% - 19.59% 3.0% @ 55 Highest year City of San Rafael Fire Tier 2 72.96%11.40% - 17.36% 3.0% @ 55 Average three highest years City of San Rafael Safety Police Tier 1 73.88%0.00% - 19.59% 3.0% @ 55 Highest year City of San Rafael Safety Police Tier 2 74.95%11.40% - 17.36% 3.0% @ 55 Average three highest years PEPRA Misc 46.24%9.22%2.0% @ 62 Average three highest years PEPRA Safety 63.28%14.40%2.7% @ 57 Average three highest years 73 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 NOTE 9 - PENSION PLAN (Continued) These rates were determined by MCERA, based on the actuarial valuation dated June 30, 2019. The actual rate of return on investments during that year was 5.51% on a market value basis net of investment expenses, as compared to the prior year’s 7% 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 $20,106,821 for the year ended June 30, 2021, based on a total payroll of $42,784,955, of which $31,697,590 represented the basis for the plan contributions. Of the total payroll subject to plan contributions, $1,384,284 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 (11 years remaining as of June 30, 2019), except for the additional UAL attributable to the outstanding unfunded actuarial loss from 2009, which is being amortized over a separate closed period (currently 19 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. D. Pension Liability and Pension Expense The City’s net pension liability (NPL) has been determined for the financial reporting period ended June 30, 2021 based on the following methodology: The City’s NPL as of June 30, 2019 was updated to the measurement date of June 30, 2020 using the actual City’s plan assets as of June 30, 2020 and estimating the change in the City’s liabilities between July 1, 2019 and June 30, 2020. 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 $157,279,576, or 34.3574% of the total MCERA NPL of $457,774,963 (reference MCERA’s GASB 67/68 report as of June 30, 2020). This compares to the previous year’s NPL of $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). 74 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 NOTE 9 - PENSION PLAN (Continued) In addition to the reporting of the NPL as of June 30, 2021, the City reported deferred inflows of $17,358,743 and deferred outflows of $34,080,980 as of the measurement date June 30, 2020. The City reported post-measurement date outflows of $20,106,821 from actual fiscal year 2020- 2021 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 $120,450,518. After allocations to the San Rafael Sanitation District, the net impact on the City’s Statement of Net Position was $116,672,470. 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 $20,106,821. 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. The table below provides a summary of the key results during the reporting period: Measurement Date Measurement Date Description 6/30/2020 6/30/2019 Net Pension Liability $157,279,576 $133,877,531 Deferred Inflows 17,358,743 22,558,119 Deferred Outflows (34,080,980) (21,856,007) Impact on Net Position before Deferred Outflows from Contributions 140,557,339 134,579,643 Additional Deferred Outflows - Contributions Subsequent to Measurement Date (20,106,821) (20,031,614) Impact on Statement of Net Position before Allocations 120,450,518 114,548,029 Allocation of NPL to SRSD 5,026,185 4,354,685 Allocation of Deferred Inflows (measurement date) to SRSD 554,734 733,756 Allocation of Deferred Outflows (measurement date) to SRSD (1,089,126) (710,919) Impact on Net Position before Allocation of Deferred Outflows from Contributions to SRSD 4,491,793 4,377,522 Allocation of Additional Deferred Outflows (Contributions) to SRSD (713,745) (655,534) Long-Term Receivable from SRSD, due to pension obligations (see Note 4E)3,778,048 3,721,988 Impact on Statement of Net Position, net of receivable from SRSD $116,672,470 $110,826,041 Pension Expense $25,009,310 $22,533,040 Summary of Results 75 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 NOTE 9 - PENSION PLAN (Continued) 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, 2020. The beginning of year measurement of TPL is based on the actuarial valuation as of June 30, 2019. The TPL at the end of the measurement year, June 30, 2020, is also measured as of the valuation date of June 30, 2019 and projected to June 30, 2020. 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, 2019. The FNP at the end of the measurement year, June 30, 2020, is also measured as of the valuation date of June 30, 2019, and projected to June 30, 2020. 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, 2020 (measurement date) was determined by an actuarial valuation as of June 30, 2019, 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% per year, net of investment expenses Discount Rate 7.00% per year Price Inflation 2.75% per year Salary Increases 3.00% 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 $5.2 million for FY 2019-20, 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 2019-20 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 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 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, 2020: 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% 0.50% 3.25% Public Real Assets 7% 3.20% 5.95% 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 (19 years remaining as of the June 30, 2019 actuarial valuation), and an amount necessary to amortize the remaining Unfunded Actuarial Liability as a level percentage of payroll over a closed period (11 years remaining as of the June 30, 2019 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 87%. A one percent increase in the discount rate decreases the TPL by approximately 11% and decreases the NPL by approximately 72%. 77 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 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 $1,196,531,719 $1,059,269,505 $946,197,520 Fiduciary Net Position 901,989,929 901,989,929 901,989,929 Net Pension Liability $294,541,790 $157,279,576 $44,207,591 75.4%85.2%95.3%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 $6,897,756 $293,135 Changes in assumptions 3,504,598 Change in proportion 6,296,927 6,062,250 Difference between City contributions and proportionate share of contributions 11,003,358 Actual FY 20-21 contributions (post measurement date)20,106,821 Net difference between projected and actual earnings on pension plan investments 17,381,699 Deferred Inflows and Outflows Before Allocations $54,187,801 $17,358,743 Allocation of Deferred Inflows and Outflows to SRSD As of measurement date $1,089,126 $554,734 Post-measurement date 713,745 Net Deferred Inflows and Outflows $52,384,930 $16,804,009 78 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 NOTE 9 - PENSION PLAN (Continued) The $20,106,821 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, 2022. 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 2022 ($64,672) 2023 4,255,724 2024 6,329,346 2025 6,201,839 Total $16,722,237 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 $101,631. The total covered payroll of employees participating in the plan for the year ended June 30, 2021, was $2,710,163. 79 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 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, 2021, 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, 2020, the measurement date: Active plan members 346 Inactive employees or beneficiaries currently receiving benefit payments 354 Inactive employees entitled to but not yet receiving benefit payments 76 Total 776 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, 2020, using an actuarial valuation as of June 30, 2019 rolled forward to June 30, 2020 using standard update procedures. 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 7.25% in 2021 to 4% 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 11-8-21 DRAFT I I I CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 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 October 2018 – 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 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 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, 2020 (6/30/19 measurement date) $48,283,000 $21,676,000 $26,607,000 Changes Recognized for the Measurement Period: Service Cost 687,000 687,000 Interest on the total OPEB liability 3,196,000 3,196,000 Contributions from the employer 3,784,000 (3,784,000) Net investment income 770,000 (770,000) Administrative expenses (19,000) 19,000 Benefit payments and refunds (3,225,000) (3,225,000) Net Changes during July 1, 2020 to June 30, 2021 658,000 1,310,000 (652,000) Balance at June 30, 2021 (6/30/20 measurement date) $48,941,000 $22,986,000 $25,955,000 Increase (Decrease) The benefit payments and refunds include implied subsidy benefit payments in the amount of $740,000. 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%) $31,318,000 $25,955,000 $21,428,000 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% $22,700,000 $25,955,000 $29,925,000 Plan's Net OPEB Liability/(Asset) 82 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 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 2020-2021 were as follows: Service Cost $687,000 Interest on Total OPEB Liability 3,196,000 Projected earning on investments (1,463,000) Administrative expense 19,000 Recognition of deferred outflows/inflows: Experience (1,232,000) Assumptions 361,000 Asset Returns 210,000 OPEB Expense $1,778,000 Components of deferred outflows of resources and deferred inflows of resources related to OPEB at June 30, 2021 were as follows: Governmental Business-Type Activities Activities Total Deferred outflows of resources: Changes of assumptions $1,462,724 $36,003 $1,498,727 Net difference between projected and actual earnings on plan investments 421,526 10,164 431,690 Employer contributions made subsequent to the measurement date 3,242,583 80,000 3,322,583 Total deferred outflows of resources $5,126,833 $126,167 $5,253,000 Deferred inflows of resources: Differences between expected and actual experience $3,188,859 $78,141 $3,267,000 Changes of assumptions 1,747,658 43,342 1,791,000 Total deferred inflows of resources $4,936,517 $121,483 $5,058,000 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 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 NOTE 11 - POST-EMPLOYMENT HEALTH CARE BENEFITS (Continued) $3,322,583 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, 2022. 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 2022 ($857,000) 2023 (778,000) 2024 (835,000) 2025 (657,583) ($3,127,583) The table below provides a summary of the key results during this reporting period. Measurement Date Measurement Date Description June 30, 2020 June 30, 2019 Net OPEB Liability $25,955,000 $26,607,000 Deferred Inflows 5,058,000 6,814,000 Deferred Outflows (1,930,417) (2,332,000) Impact on Net Position before deferred contributions 29,082,583 31,089,000 Additional Deferred Outflows - Contributions subsequent to measurement date (3,322,583) (3,784,000) Impact on Statement of Net Position before Allocations 25,760,000 27,305,000 Allocation of NOL to SRSD 1,155,000 1,184,000 Allocation of Deferred Inflows (measurement date) to SRSD 225,081 303,220 Allocation of Deferred Outflows (measurement date) to SRSD (85,885) (103,773) Impact on Net Position before deferred contributions to SRSD 1,294,196 1,383,447 Allocation of Additional Deferred Outflows (contributions) to SRSD (147,874) (168,386) Long-Term Receivable from SRSD, due to OPEB obligations (see Note 4E)1,146,322 1,215,061 Impact on Statement of Net Positions, net of receivable from SRSD $24,613,678 $26,089,939 OPEB Expense $1,778,000 $2,194,000 Covered Employee Payroll $39,920,000 $40,496,000 Summary of Results 84 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 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 $280,241 for the year ended June 30, 2021. 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, administrative responsibility for MarinMap and the CATV program formerly administered by the Marin Telecommunications Authority established to regulate the rates for cable television service and equipment. The City’s contribution to MGSA was $746,336 for the year ended June 30, 2021. Financial statements of the MGSA can be obtained at 555 Northgate Drive, Suite 230, San Rafael, California 94903. 85 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 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. On 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 $703,531 of the Authority’s operations and debt service for the fiscal year ended June 30, 2021. 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 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, 2021. Financial statements of the Authority can be obtained at 3501 Civic Center Drive, San Rafael, California 94903. 86 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 NOTE 12 - JOINTLY GOVERNED ORGANIZATIONS (Continued) E. 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. 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 $175,501,451. The City is self-insured up to $750,000 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 $546,304 in liability coverage premiums during the fiscal year ended June 30, 2021. 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 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 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 * 2021 2020 Balance, beginning of year $4,353,908 $8,066,369 $12,420,277 $9,721,548 Current year claims and changes in estimates 518,497 1,232,694 1,751,191 4,445,625 Claims paid (831,198) (1,071,367) (1,902,565) (1,746,896) Balance, end of year $4,041,207 $8,227,696 $12,268,903 $12,420,277 Due in one year $1,376,677 $1,567,398 $2,944,075 $3,338,607 Due in more than one year 2,664,530 6,660,298 9,324,828 9,081,670 Total claim liabilities $4,041,207 $8,227,696 $12,268,903 $12,420,277 * Liability based on an actuarial valuation as of December 31, 2020, extrapolated to June 30, 2021 The claims settlements have not exceeded insurance coverage for the past three years. 88 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 NOTE 13 - RISK MANAGEMENT (Continued) B. 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 Note 1operations 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. CSRMA 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, 2021 together with coverage limits for each insured event: Insurance Program Limits Coverage Description CSRMA - Allied World Assur.$3,000,000 Gen/Mgt liability - aggregate CSRMA - Allied World Assur.$1,000,000 Gen/Mgt liability - occurrence CSRMA - Allied World Assur.$1,000,000 Auto liability - accident CSRMA - Allied World Assur.$4,000,000 Excess liability CSRMA - Public Entity Property Insurance Program (P.E.P.I.P.)$2,176,408 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 - first party CSRMA - Travelers Ins.$25,000 Identity theft CSRMA - Lloyds of London $2,500,000 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 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 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, 2021, SRSD had several contracts for sewer improvement projects with remaining obligations of approximately $2,520,000, the majority of which are expected to be completed within the 2021-2022 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 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 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 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 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 $7.1 million in remaining debt service on the Bonds, which is scheduled to occur in 2023. For fiscal year June 30, 2021, 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 11-8-21 DRAFT CITY OF SAN RAFAEL NOTES TO BASIC FINANCIAL STATEMENTS For the Year Ended June 30, 2021 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, 2021: Authorized Balance Balance Current and Issued June 30, 2020 Additions Retirements June 30, 2021 Portion San Rafael Successor Agency 1999 Tax Allocation Bonds Capital Appreciation Bonds 5.58%-5.6%, due 12/1/2022 $2,389,004 $4,529,313 $216,865 $1,440,000 $3,306,178 $1,440,000 2002 Tax Allocation Refunding Bonds 2.00%-5.25%, due 12/1/2021 25,020,000 1,205,000 590,000 615,000 615,000 2009 Tax Allocation Refunding Bonds 3.00%-5.00%, due 12/1/2022 14,660,000 4,170,000 1,320,000 2,850,000 1,390,000 Add: deferred bond premium costs 239,579 79,861 159,718 Total Successor Agency Long-term Debt $10,143,892 $216,865 $3,429,861 $6,930,896 $3,445,000 Debt Service Requirements Annual debt service requirements are shown below: For the Year Ended June 30 Principal Interest 2022 $3,445,000 $120,819 2023 3,530,000 36,500 Totals 6,975,000 $157,319 Reconciliation of long-term debt: Less: unaccreted discount (203,822) Less: deferred bond premium costs 159,718 $6,930,896 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 was made in ten equal, annual installments. The final payment of $190,444 was made during the year ended June 30, 2021. 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, 2021, the Successor Agency had prepared fourteen 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. 93 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2021 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 6/30/2020 City's proportionate share 36.6081% 34.3574% Proportionate share of total pension liability $1,082,900,638 $1,059,269,505 Proportionate share of fiduciary net position 949,023,107 901,989,929 Proportionate share of the net pension liability $133,877,531 $157,279,576 Plan fiduciary net position as a percentage of the total pension liability 87.64% 85.15% Covered payroll (report date)$32,887,922 $31,697,590 Net pension liability as a percentage of covered payroll 407.07% 496.19% * - The fiscal year ended June 30, 2015 was the first year of implementation, therefore only seven years are shown. Cost-Sharing Multiple Employer Plan Schedule of the City's Proportionate Share of the Net Pension Liability Last 10 years* 94 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2021 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) $0 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 95 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2021 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)$0 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 year of implementation was Fiscal Year ended June 30, 2015) (Continued) Cost-Sharing Multiple Employer 96 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2021 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)$0 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 97 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2021 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) $0 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. Classic Tiers: Safety - 50, Miscellaneous - 55; PEPRA Tiers: Safety - 57, Miscellaneous - 62 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) (Continued) 98 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2021 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), th e 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. 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 99 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2021 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) $0 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), th e 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 Safety members), with the 15-year st atic 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 year 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 100 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2021 Fiscal year ended, June 30 2021 Contractually required contribution $20,106,821 Contributions in Relation to the Contractually required contribution 20,106,821 Contribution Deficiency/ (Excess)$0 Covered payroll $31,697,590 Contributions as a percentage of covered payroll 63.43% Notes to Schedule Valuation Date / Timing 6/30/2019 (for contributions made in FY2020-2021) Key Methods and Assumptions Used to Determine Contribution Rates (for FY2020 - 21): Actuarial cost method Entry Age Normal Cost Method Amortization method Level percentage of payroll with separate period for Extraordinary Gains or Losses (19 years remaining as of 6/30/19), the remaining UAL as of June 30, 2013 (11 years as of 6/30/19), 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 11 years remaining as of June 30, 2019 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 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) (Continued) Classic Tiers: Safety - 50, Miscellaneous - 55; PEPRA Tiers: Safety - 57, Miscellaneous - 62 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 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. 101 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2021 Measurement period 2015-16 2016-17 2017-18 2018-19 2019-20 Total OPEB liability Service cost $766,000 $789,000 $822,000 $805,000 $687,000 Interest 3,447,000 3,540,000 3,435,000 3,515,000 3,196,000 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) (3,225,000) Net change in total OPEB liability 1,317,000 2,038,000 1,229,000 (4,527,000) 658,000 Total OPEB liability - beginning 48,226,000 49,543,000 51,581,000 52,810,000 48,283,000 Total OPEB liability - ending (a)$49,543,000 $51,581,000 $52,810,000 $48,283,000 $48,941,000 OPEB fiduciary net position Contributions - employer $2,896,000 $3,475,000 $3,573,000 $3,725,000 $3,784,000 Net investment income 157,000 1,675,000 1,425,000 1,224,000 770,000 Benefit payments, including refunds of employee contributions (2,896,000) (3,015,000) (3,028,000) (3,072,000) (3,225,000) Administrative expense (7,000) (8,000) (44,000) (12,000) (19,000) Net change in plan fiduciary net position 150,000 2,127,000 1,926,000 1,865,000 1,310,000 Plan fiduciary net position - beginning 15,608,000 15,758,000 17,885,000 19,811,000 21,676,000 Plan fiduciary net position - ending (b)$15,758,000 $17,885,000 $19,811,000 $21,676,000 $22,986,000 Plan net OPEB liability - ending (a) - (b)$33,785,000 $33,696,000 $32,999,000 $26,607,000 $25,955,000 Plan fiduciary net position as a percentage of the total OPEB liability 31.81%34.67%37.51%44.89%46.97% Covered employee payroll (Report Date)$32,885,000 $36,350,000 $40,496,000 $39,920,000 $39,310,000 Plan net OPEB liability as a percentage of covered employee payroll 102.74%92.70%81.49%66.65%66.03% Historical information is required only for the measurement periods for which GASB 75 is applicable. Other Post-Employment Benefits (OPEB) Last Ten Fiscal Years Agent Multiple Employer Defined Benefit Plan SCHEDULE OF CHANGES IN NET OPEB LIABILITY AND RELATED RATIOS 102 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2021 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 to converge to ultimate improvement rates in 2022 Same as discount rate - expected City contributions projected to keep sufficient plan assets to pay all benefits from trust 103 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2021 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-2017 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 11-8-21 DRAFT CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2021 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 De termined 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 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 Agent Multiple Employer Defined Benefit Plan 105 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2021 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 11-8-21 DRAFT CITY OF SAN RAFAEL REQUIRED SUPPLEMENTARY INFORMATION For the Year Ended June 30, 2021 SCHEDULE OF CONTRIBUTIONS Last Ten Fiscal Years Other Post-Employment Benefits (OPEB) (Continued) Fiscal year 2020-21 Actuarially determined contribution $3,027,000 Contributions in relation to the actuarially determined contribution (3,322,583) Contribution deficiency (excess) ($295,583) Covered employee payroll $39,310,000 Contributions as a percentage of covered employee payroll 8.45% 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, 2020 and June 30, 2019, 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 107 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT DRAFT DRAFT REVIEW DRAFT 11-8-21 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. 109 DRAFT DRAFT REVIEW DRAFT 11-8-21 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, 2021 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Taxes and special assessments $66,064,254 $76,123,191 $76,771,466 $648,275 Licenses and permits 2,644,570 2,644,570 3,000,666 356,096 Fines and forfeitures 254,895 254,895 219,030 (35,865) Use of money and properties 189,999 189,999 156,398 (33,601) Intergovernmental 3,560,070 4,380,070 4,819,890 439,820 Charges for services 2,381,762 2,381,762 2,789,005 407,243 Other revenue 1,165,086 1,904,086 946,294 (957,792) Total Revenues 76,260,636 87,878,573 88,702,749 824,176 EXPENDITURES Current: General government 11,176,030 10,949,532 10,795,698 153,834 Public safety 44,713,943 44,695,502 44,558,789 136,713 Public works and parks 11,841,838 12,353,333 12,221,102 132,231 Community development 5,575,867 5,575,865 5,520,129 55,736 Culture and recreation 2,621,335 2,621,330 2,604,071 17,259 Capital outlay 92,776 92,776 92,776 Debt service: Principal 2,570,692 2,570,692 2,563,711 6,981 Interest and fiscal charges 2,452,869 2,452,869 2,443,476 9,393 Total Expenditures 81,045,350 81,311,899 80,706,976 604,923 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (4,784,714) 6,566,674 7,995,773 1,429,099 OTHER FINANCING SOURCES (USES) Transfers in 3,914,620 3,089,518 3,089,518 Transfers out (2,000,000) (4,046,072) (4,046,072) Total Other Financing Sources (Uses) 1,914,620 (956,554) (956,554) Net Change in Fund Balance ($2,870,094) $5,610,120 7,039,219 $1,429,099 FUND BALANCE, BEGINNING OF YEAR 9,806,680 FUND BALANCE, END OF YEAR $16,845,899 110 DRAFT DRAFT REVIEW DRAFT 11-8-21 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, 2021 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Use of money and properties $70,000 $70,000 $10,666 ($59,334) Intergovernmental 1,254,954 1,254,954 Charges for services 550,000 550,000 4,575,877 4,025,877 Other revenue 23,951 23,951 Total Revenues 620,000 620,000 5,865,448 5,245,448 EXPENDITURES Current: General government 25,000 25,000 1,345,827 (1,320,827) Public works and parks 400,000 527,044 255,736 271,308 Community development 750,000 750,000 Capital outlay 1,400,000 2,609,090 1,177,594 1,431,496 Total Expenditures 1,825,000 3,911,134 3,529,157 381,977 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (1,205,000) (3,291,134) 2,336,291 5,627,425 Net Change in Fund Balance ($1,205,000) ($3,291,134) 2,336,291 $5,627,425 4,221,782 FUND BALANCE, END OF YEAR $6,558,073 FUND BALANCE, BEGINNING OF YEAR 111 DRAFT DRAFT REVIEW DRAFT 11-8-21 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, 2021 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Use of money and properties $24,000 $24,000 $7,349 ($16,651) Intergovernmental 3,987,029 3,987,029 7,703,287 3,716,258 Charges for services 1,043,600 1,043,600 1,520,508 476,908 Other revenue 180,000 180,000 216,180 36,180 Total Revenues 5,234,629 5,234,629 9,447,324 4,212,695 EXPENDITURES Current: General government Public works and parks 6,880,000 8,706,479 1,846,936 6,859,543 Capital outlay 10,277,652 9,157,141 1,120,511 Total Expenditures 6,880,000 18,984,131 11,004,077 7,980,054 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (1,645,371) (13,749,502) (1,556,753) 12,192,749 OTHER FINANCING SOURCES (USES) Transfers in 30,000 30,000 Transfers out (1,646,000) (646,000) (646,000) Total Other Financing Sources (Uses) (1,646,000) (616,000) (616,000) Net Change in Fund Balance ($3,291,371) ($14,365,502) (2,172,753) $12,192,749 FUND BALANCE, BEGINNING OF YEAR 6,517,607 FUND BALANCE, END OF YEAR $4,344,854 112 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT SUPPLEMENTARY INFORMATION DRAFT DRAFT REVIEW DRAFT 11-8-21 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, 2021 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES Use of money and property $400,000 $400,000 $8,854 ($391,146) Total Revenues 400,000 400,000 8,854 (391,146) EXPENDITURES Capital outlay 8,400,000 8,655,502 1,105,796 7,549,706 Total Expenditures 8,400,000 8,655,502 1,105,796 7,549,706 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (8,000,000) (8,255,502) (1,096,942) 7,158,560 OTHER FINANCING SOURCES (USES) Transfers in 220,394 1,836,629 1,836,629 Transfers out (1,117,225) (1,117,225) (1,117,225) Total Other Financing Sources (Uses)(896,831) 719,404 719,404 Net Change in Fund Balance ($8,896,831) ($7,536,098) (377,538) $7,158,560 FUND BALANCE, BEGINNING OF YEAR 12,474,928 FUND BALANCE, END OF YEAR $12,097,390 114 DRAFT DRAFT REVIEW DRAFT 11-8-21 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 that 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. 115 DRAFT DRAFT REVIEW DRAFT 11-8-21 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. 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. 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. Open Space Fund – Established for the acquisition of open space. 116 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEETS FOR THE YEAR ENDED JUNE 30, 2021 SPECIAL REVENUE FUNDS Baypoint Loch Lomond Lagoons Household #10 Recreation Assessment Hazmat Community Revolving District Facility Childcare Facilities Dist. ASSETS Cash and investments $765,939 $199,902 $282,253 $377,300 $761,111 Restricted cash and investments Receivables: Accounts 147,219 429,502 Taxes 203 180 Grants 31,401 Interest Loans Total Assets $913,158 $200,105 $711,755 $408,701 $761,291 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $130,106 $9,736 $268,466 $40,121 Deposits payable Developer deposits payable Unearned revenue 369,359 Total Liabilities 499,465 9,736 268,466 40,121 Fund Balances: Restricted 413,693 190,369 443,289 368,580 $761,291 Committed Assigned Total Fund Balances 413,693 190,369 443,289 368,580 761,291 Total Liabilities and Fund Balances $913,158 $200,105 $711,755 $408,701 $761,291 118 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT SPECIAL REVENUE FUNDS Loch Lomond Marina #2 Community Library Public Development Facilities Dist. Library Assessment Safety Stormwater Services Grants $509,019 $2,479,401 $1,033,685 $129,544 $1,266,638 $432,317 $776,137 1,339 7,364 6,292 $510,358 $2,479,401 $1,041,049 $129,544 $1,272,930 $432,317 $776,137 $1,587 $29,086 $104,065 $1,599 $12,545 126,983 8,269 3,635 1,587 29,086 104,065 132,217 20,814 $510,358 2,477,814 1,011,963 $129,544 1,168,865 300,100 755,323 510,358 2,477,814 1,011,963 129,544 1,168,865 300,100 755,323 $510,358 $2,479,401 $1,041,049 $129,544 $1,272,930 $432,317 $776,137 (Continued) 119 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEETS FOR THE YEAR ENDED JUNE 30, 2021 SPECIAL REVENUE FUNDS Low and Emergency Pt. San Pedro Moderate Parkland Medical Business Maintenance Income Dedication Services Improvement Portion Housing ASSETS Cash and investments $332,473 $745,153 $12,585 $125,477 $959,818 Restricted cash and investments Receivables: Accounts 109,219 6,558 Taxes 37,043 978 Grants Interest 127 Loans 269,476 Total Assets $332,473 $891,415 $12,585 $126,455 $1,235,979 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $46,387 $12,585 $3,556 $12,787 Deposits payable Developer deposits payable Unearned revenue Total Liabilities 46,387 12,585 3,556 12,787 Fund Balances: Restricted $332,473 845,028 122,899 1,223,192 Committed Assigned Total Fund Balances 332,473 845,028 122,899 1,223,192 Total Liabilities and Fund Balances $332,473 $891,415 $12,585 $126,455 $1,235,979 120 DRAFT DRAFT REVIEW DRAFT 11-8-21 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 $351,846 $421,824 $608,685 $289,112 624,245 247,888 140,774 78,180 1,174,374 628 $599,734 $562,598 $686,865 $2,088,359 $1,229 $267,916 $262,513 9,619 1,229 267,916 272,132 598,505 $562,598 418,949 1,816,227 598,505 562,598 418,949 1,816,227 $599,734 $562,598 $686,865 $2,088,359 (Continued) 121 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL NONMAJOR GOVERNMENTAL FUNDS COMBINING BALANCE SHEETS FOR THE YEAR ENDED JUNE 30, 2021 CAPITAL PROJECTS FUNDS Total Park Non-Major Bedroom Assessment Capital Open Governmental Tax Districts Projects Space Funds ASSETS Cash and investments $103,275 $223,742 $16,436 $116,842 $13,320,514 Restricted cash and investments 81,348 705,593 Receivables: Accounts 692,498 Taxes 520,241 Grants 1,205,775 Interest 755 Loans 269,476 Total Assets $103,275 $305,090 $16,436 $116,842 $16,714,852 LIABILITIES AND FUND BALANCES Liabilities: Accounts payable $1,627 $1,205,911 Deposits payable 144,871 Developer deposits payable 3,635 Unearned revenue 369,359 Total Liabilities 1,627 1,723,776 Fund Balances: Restricted $103,275 $305,090 13,043,198 Committed 14,809 1,831,036 Assigned $116,842 116,842 Total Fund Balances 103,275 305,090 14,809 116,842 14,991,076 Total Liabilities and Fund Balances $103,275 $305,090 $16,436 $116,842 $16,714,852 122 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT Baypoint Loch Lomond Lagoons Household #10 Recreation Assessment Hazmat Community Revolving District Facility Childcare Facilities Dist. REVENUES Taxes and special assessments $25,368 $22,558 Use of money and properties $17,682 407 $614 $1,345 1,558 Intergovernmental 14,293 260,808 Charges for services 522,804 178,015 2,408,851 Other revenue 6,779 9,720 Total Revenues 561,558 25,775 178,629 2,680,724 24,116 EXPENDITURES Current: General government Public safety 146,796 Public works and parks 45,098 7,174 Community development Culture and recreation 2,694,309 3,586,230 Capital outlay Total Expenditures 2,694,309 45,098 146,796 3,586,230 7,174 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (2,132,751) (19,323) 31,833 (905,506) 16,942 OTHER FINANCING SOURCES (USES) Transfers in 2,500,000 Transfers out (10,683) Total Other Financing Sources (Uses) 2,500,000 (10,683) Net Change in Fund Balances 367,249 (19,323) 31,833 (905,506) 6,259 Fund Balance, Beginning 46,444 209,692 411,456 1,274,086 755,032 Fund Balance, Ending $413,693 $190,369 $443,289 $368,580 $761,291 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, 2021 124 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT Loch Lomond Marina #2 Community Library Public Development Facilities Dist. Library Assessment Safety Stormwater Services Grants $167,402 $1,073,425 883 $5,022 1,585 $2,066 $36,061 $75,056 $500,068 1,185 834,407 23,310 10,319 1,770 168,285 29,517 1,075,010 85,375 838,243 36,061 500,068 67,144 13,827 161,975 430,449 498,183 7,543 795,268 30,663 13,827 7,543 795,268 161,975 528,846 497,593 154,458 21,974 279,742 (76,600) 309,397 36,061 2,475 85,000 8,443 (9,000)(30,000) (9,000)85,000 (30,000)8,443 145,458 21,974 279,742 8,400 279,397 36,061 10,918 364,900 2,455,840 732,221 121,144 889,468 264,039 744,405 $510,358 $2,477,814 $1,011,963 $129,544 $1,168,865 $300,100 $755,323 (Continued) SPECIAL REVENUE FUNDS 125 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL COMBINING STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2021 Low and Emergency Pt. San Pedro - Moderate Parkland Medical Business Maintenance Income Dedication Services Improvement Portion Housing REVENUES Taxes and special assessments $6,425 $5,153,449 $145,778 Use of money and properties 639 286 112 $409,393 Intergovernmental 168,604 Charges for services 35,424 2,199,287 Other revenue 510,889 67,880 27,024 Total Revenues 42,488 8,032,515 213,770 436,417 EXPENDITURES Current: General government 106,879 Public safety 7,614,489 Public works and parks 178,372 Community development Culture and recreation Capital outlay Total Expenditures 7,614,489 178,372 106,879 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 42,488 418,026 35,398 329,538 OTHER FINANCING SOURCES (USES) Transfers in Transfers out (299,000) Total Other Financing Sources (Uses)(299,000) Net Change in Fund Balances 42,488 119,026 35,398 329,538 Fund Balance, Beginning 289,985 726,002 87,501 893,654 Fund Balance, Ending $332,473 $845,028 $122,899 $1,223,192 SPECIAL REVENUE FUNDS 126 DRAFT DRAFT REVIEW DRAFT 11-8-21 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 $500,463 $628,118 $1,845,116 501 387 $3,964 2,062,789 23,239 500,964 628,118 1,868,742 2,066,753 107,033 34,460 1,403,087 58,371 9,359 4,429 35,588 2,123,855 72,159 141,493 1,438,675 2,123,855 428,805 486,625 430,067 (57,102) ($2,875) ($16,573) ($151,695) (2,875) (16,573) (151,695) 428,805 486,625 430,067 (2,875) (16,573) (151,695) (57,102) 169,700 75,973 (11,118) 2,875 16,573 151,695 1,873,329 $598,505 $562,598 $418,949 $1,816,227 (Continued) 127 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL COMBINING STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2021 CAPITAL PROJECTS FUNDS Total Park Non-Major Bedroom Assessment Capital Open Governmental Tax Districts Projects Space Funds REVENUES Taxes and special assessments $8,160 $9,576,262 Use of money and properties 208 $884 $240 483,837 Intergovernmental 3,081,618 Charges for services 6,179,973 Other revenue $7,944 688,874 Total Revenues 8,368 884 7,944 240 20,010,564 EXPENDITURES Current: General government 4,318 285,374 Public safety 9,805,083 Public works and parks 787,198 Community development Culture and recreation 3,959 7,096,668 Capital outlay 2,194,535 Total Expenditures 3,959 4,318 20,168,858 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 8,368 884 3,985 (4,078) (158,294) OTHER FINANCING SOURCES (USES) Transfers in 2,593,443 Transfers out (519,826) Total Other Financing Sources (Uses)2,073,617 Net Change in Fund Balances 8,368 884 3,985 (4,078) 1,915,323 Fund Balance, Beginning 94,907 304,206 10,824 120,920 13,075,753 Fund Balance, Ending $103,275 $305,090 $14,809 $116,842 $14,991,076 128 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT DRAFT DRAFT REVIEW DRAFT 11-8-21 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, 2021 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) Use of money and properties $31,400 $17,682 ($13,718) 4,000 407 (3,593) Intergovernmental 73,945 14,293 (59,652) Charges for services 1,762,462 522,804 (1,239,658) Other revenue 570 6,779 6,209 Total Revenues 1,868,377 561,558 (1,306,819) 29,500 25,775 (3,725) EXPENDITURES Current: General government Public safety Public works and parks 229,278 45,098 184,180 Community development Culture and recreation 3,869,165 2,694,309 1,174,856 Capital outlay Total Expenditures 3,869,165 2,694,309 1,174,856 229,278 45,098 184,180 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (2,000,788) (2,132,751) (131,963) (199,778) (19,323) 180,455 OTHER FINANCING SOURCES (USES) Transfers in 2,500,000 2,500,000 Transfers out Total Other Financing Sources (Uses) 2,500,000 2,500,000 NET CHANGE IN FUND BALANCE $499,212 367,249 ($131,963) ($199,778) (19,323) $180,455 FUND BALANCES, BEGINNING OF YEAR 46,444 209,692 FUND BALANCES, END OF YEAR $413,693 $190,369 130 DRAFT DRAFT REVIEW DRAFT 11-8-21 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 $22,558 $1,159 $2,000 $614 ($1,386) $20,000 $1,345 ($18,655) 12,000 1,558 (10,442) 385,799 260,808 (124,991) 178,470 178,015 (455) 4,200,000 2,408,851 (1,791,149) 9,720 9,720 180,470 178,629 (1,841) 4,605,799 2,680,724 (1,925,075) 33,399 24,116 (9,283) 176,835 146,796 30,039 10,929 7,174 3,755 4,726,946 3,586,230 1,140,716 176,835 146,796 30,039 4,726,946 3,586,230 1,140,716 10,929 7,174 3,755 3,635 31,833 28,198 (121,147) (905,506) (784,359) 22,470 16,942 (5,528) (10,683) (10,683) (10,683) (10,683) $3,635 31,833 $28,198 ($121,147) (905,506) ($784,359) $11,787 6,259 ($5,528) 411,456 1,274,086 755,032 $443,289 $368,580 $761,291 (Continued) Community Facilities District SPECIAL REVENUE FUNDS 131 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT Library Variance Variance Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) REVENUES Taxes and special assessments $80,000 $167,402 $87,402 Use of money and properties 5,000 883 (4,117) $32,500 $5,022 ($27,478) Intergovernmental 1,000 (1,000) Charges for services 7,500 1,185 (6,315) Other revenue 7,000 23,310 16,310 Total Revenues 85,000 168,285 83,285 48,000 29,517 (18,483) EXPENDITURES Current: General government Public safety Public works and parks 172,500 13,827 158,673 Community development Culture and recreation 40,000 7,543 32,457 Capital outlay Total Expenditures 172,500 13,827 158,673 40,000 7,543 32,457 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (87,500) 154,458 241,958 8,000 21,974 13,974 OTHER FINANCING SOURCES (USES) Transfers in Transfers out (9,000) (9,000) Total Other Financing Sources (Uses) (9,000) (9,000) NET CHANGE IN FUND BALANCE ($96,500) 145,458 $241,958 $8,000 21,974 $13,974 FUND BALANCES, BEGINNING OF YEAR 364,900 2,455,840 FUND BALANCES, END OF YEAR $510,358 $2,477,814 Community Facilities District SPECIAL REVENUE FUNDS Loch Lomond Marina #2 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, 2021 132 DRAFT DRAFT REVIEW DRAFT 11-8-21 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) $1,089,591 $1,073,425 ($16,166) 2,500 1,585 (915) $4,001 $2,066 ($1,935) $75,100 $75,056 ($44) 827,423 834,407 6,984 75,000 10,319 (64,681) 5,000 1,770 (3,230) 1,092,091 1,075,010 (17,081) 150,100 85,375 (64,725) 836,424 838,243 1,819 260,907 161,975 98,932 996,838 498,183 498,655 1,097,533 795,268 302,265 119,317 30,663 88,654 1,097,533 795,268 302,265 260,907 161,975 98,932 1,116,155 528,846 587,309 (5,442) 279,742 285,184 (110,807) (76,600) 34,207 (279,731) 309,397 589,128 85,000 85,000 (30,000) (30,000) 85,000 85,000 (30,000) (30,000) ($5,442) 279,742 $285,184 ($25,807) 8,400 $34,207 ($309,731) 279,397 $589,128 732,221 121,144 889,468 $1,011,963 $129,544 $1,168,865 (Continued) 133 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT Grants Variance Variance Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) REVENUES Taxes and special assessments Use of money and properties $45,000 $36,061 ($8,939) Intergovernmental $449,250 $500,068 $50,818 Charges for services Other revenue Total Revenues 45,000 36,061 (8,939) 449,250 500,068 50,818 EXPENDITURES Current: General government 120,005 67,144 52,861 Public safety 719,643 430,449 289,194 Public works and parks Community development Culture and recreation Capital outlay Total Expenditures 839,648 497,593 342,055 EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES 45,000 36,061 (8,939) (390,398) 2,475 392,873 OTHER FINANCING SOURCES (USES) Transfers in 8,443 8,443 Transfers out Total Other Financing Sources (Uses) 8,443 8,443 NET CHANGE IN FUND BALANCE $45,000 36,061 ($8,939) ($381,955) 10,918 $392,873 FUND BALANCES, BEGINNING OF YEAR 264,039 744,405 FUND BALANCES, END OF YEAR $300,100 $755,323 Development Services FOR THE YEAR ENDED JUNE 30, 2021 SPECIAL REVENUE FUNDS BUDGET AND ACTUAL CITY OF SAN RAFAEL BUDGETED NONMAJOR GOVERNMENTAL FUNDS COMBINING SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES 134 DRAFT DRAFT REVIEW DRAFT 11-8-21 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) $6,425 $6,425 $5,189,000 $5,153,449 ($35,551) $5,000 639 (4,361) 2,750 286 (2,464) 140,000 168,604 28,604 35,424 35,424 2,601,000 2,199,287 (401,713) 450,000 510,889 60,889 5,000 42,488 37,488 8,382,750 8,032,515 (350,235) 8,142,999 7,614,489 528,510 100,000 100,000 100,000 100,000 8,142,999 7,614,489 528,510 (95,000) 42,488 137,488 239,751 418,026 178,275 (299,000) (299,000) (299,000) (299,000) ($95,000) 42,488 $137,488 ($59,249) 119,026 $178,275 289,985 726,002 $332,473 $845,028 (Continued) SPECIAL REVENUE FUNDS 135 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT Low and Moderate Income Housing Variance Variance Final Positive Final Positive Budget Actual (Negative) Budget Actual (Negative) REVENUES Taxes and special assessments $145,000 $145,778 $778 Use of money and properties 112 112 $10,000 $409,393 $399,393 Intergovernmental Charges for services Other revenue 67,880 67,880 27,024 27,024 Total Revenues 145,000 213,770 68,770 10,000 436,417 426,417 EXPENDITURES Current: General government 95,000 106,879 (11,879) Public safety Public works and parks 168,200 178,372 (10,172) Community development Culture and recreation Capital outlay Total Expenditures 168,200 178,372 (10,172) 95,000 106,879 (11,879) EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES (23,200) 35,398 58,598 (85,000) 329,538 414,538 OTHER FINANCING SOURCES (USES) Transfers in Transfers out Total Other Financing Sources (Uses) NET CHANGE IN FUND BALANCE ($23,200) 35,398 $58,598 ($85,000) 329,538 $414,538 FUND BALANCES, BEGINNING OF YEAR 87,501 893,654 FUND BALANCES, END OF YEAR $122,899 $1,223,192 Pt. San Pedro-Maintenance Portion SPECIAL REVENUE FUNDS FOR THE YEAR ENDED JUNE 30, 2021 CITY OF SAN RAFAEL BUDGETED NONMAJOR GOVERNMENTAL FUNDS COMBINING SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL 136 DRAFT DRAFT REVIEW DRAFT 11-8-21 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) $365,003 $500,463 $135,460 $300,000 $628,118 $328,118 $913,226 $1,845,116 $931,890 501 501 387 387 23,239 23,239 365,504 500,964 135,460 300,000 628,118 328,118 913,226 1,868,742 955,516 269,932 107,033 162,899 30,068 34,460 (4,392) 863,226 1,403,087 (539,861) 164,760 58,371 106,389 13,477 9,359 4,118 210,003 4,429 205,574 35,588 (35,588) 388,240 72,159 316,081 300,000 141,493 158,507 863,226 1,438,675 (575,449) (22,736) 428,805 451,541 486,625 486,625 50,000 430,067 380,067 ($22,736) 428,805 $451,541 486,625 $486,625 $50,000 430,067 $380,067 169,700 75,973 (11,118) $598,505 $562,598 $418,949 (Continued) 137 DRAFT DRAFT REVIEW DRAFT 11-8-21 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, 2021 DEBT SERVICE FUND 1997 Financing Authority Revenue Bonds Variance Final Positive Budget Actual (Negative) REVENUES Taxes and special assessments Use of money and properties Intergovernmental Charges for services Other revenue Total Revenues EXPENDITURES Current: General government Public safety Public works and parks Community development Culture and recreation Capital outlay Total Expenditures EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER) EXPENDITURES OTHER FINANCING SOURCES (USES) Transfers in Transfers out ($151,695) ($151,695) Total Other Financing Sources (Uses) (151,695) (151,695) NET CHANGE IN FUND BALANCE ($151,695) (151,695) FUND BALANCES, BEGINNING OF YEAR 151,695 FUND BALANCES, END OF YEAR 138 DRAFT DRAFT REVIEW DRAFT 11-8-21 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. 139 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL INTERNAL SERVICE FUNDS COMBINING STATEMENTS OF NET POSITION JUNE 30, 2021 Building Vehicle Equipment Employee Liability Maintenance Replacement Replacement Benefits Insurance ASSETS Current Assets: Cash and investments $1,502,248 $3,753,231 $4,834,425 $175,096 $5,394,827 Grants receivable 19,704 Capital assets: Nondepreciable assets 346,647 Depreciable assets, net 5,952,050 5,877,196 228,244 Total Assets 7,820,649 9,630,427 5,062,669 175,096 5,394,827 LIABILITIES Current Liabilities: Accounts payable 62,550 60,385 247,059 28,494 7,975 Claims payable - due in one year 1,376,677 Non-current Liabilities: Claims payable - due in more than one year 2,664,530 Total Liabilities 62,550 60,385 247,059 28,494 4,049,182 NET POSITION: Net investment in capital assets 6,298,697 5,877,196 228,244 Unrestricted 1,459,402 3,692,846 4,587,366 146,602 1,345,645 Total Net Position $7,758,099 $9,570,042 $4,815,610 $146,602 $1,345,645 140 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT OPEB/ Workers' Dental Employee Retiree Radio Telephone Sewer Compensation Insurance Retirement Medical Replacement Replacement Maintenance Total $9,225,981 $364,514 $2,683,430 $1,165,722 $4,365 $369,082 $75,880 $29,548,801 19,704 346,647 12,057,490 9,225,981 364,514 2,683,430 1,165,722 4,365 369,082 75,880 41,972,642 692 3,542 25,839 15,245 75,880 527,661 1,567,398 2,944,075 6,660,298 9,324,828 8,228,388 3,542 25,839 15,245 75,880 12,796,564 12,404,137 997,593 360,972 2,683,430 1,139,883 4,365 353,837 16,771,941 $997,593 $360,972 $2,683,430 $1,139,883 $4,365 $353,837 $29,176,078 141 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT Building Vehicle Equipment Employee Liability Maintenance Replacement Replacement Benefits Insurance OPERATING REVENUES Charges for current services $1,060,248 $2,200,000 $3,953,346 $679,000 $1,764,880 Intergovernmental 19,704 Other operating revenues 5,086 3,671 Total Operating Revenues 1,079,952 2,205,086 3,957,017 679,000 1,764,880 OPERATING EXPENSES Personnel 850,402 248,813 Insurance premiums and claims 1,180,700 Maintenance and repairs 127,521 1,130 General and administrative 55,543 1,896,374 220,001 Depreciation expense 289,221 981,783 67,777 Total Operating Expenses 472,285 982,913 1,964,151 1,070,403 1,429,513 Operating Income (Loss) 607,667 1,222,173 1,992,866 (391,403) 335,367 NONOPERATING REVENUES (EXPENSES) Investment income 1,746 5,468 6,030 4,144 10,276 Gain from sale of capital assets 26,784 Total Nonoperating Revenues (Expenses) 1,746 32,252 6,030 4,144 10,276 Net income (loss) before contributions and transfers 609,413 1,254,425 1,998,896 (387,259) 345,643 TRANSFERS OUT Change in Net Position 609,413 1,254,425 1,998,896 (387,259) 345,643 NET POSITION, BEGINNING OF YEAR 7,148,686 8,315,617 2,816,714 533,861 1,000,002 NET POSITION, END OF YEAR $7,758,099 $9,570,042 $4,815,610 $146,602 $1,345,645 CITY OF SAN RAFAEL INTERNAL SERVICE FUNDS COMBINING STATEMENTS OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION FOR THE YEAR ENDED JUNE 30, 2021 142 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT OPEB/ Workers' Dental Employee Retiree Radio Telephone Sewer Compensation Insurance Retirement Medical Replacement Replacement Maintenance Total $2,258,229 $450,001 $3,207,725 $648,660 $666,761 $2,756,864 $19,645,714 19,704 916,927 402 926,086 2,258,229 450,001 4,124,652 648,660 667,163 2,756,864 20,591,504 186,838 2,648,977 3,935,030 1,690,665 369,760 3,489,548 6,730,673 22,756 151,407 1,281 $2,001 703,532 448,369 107,887 3,434,988 1,338,781 1,878,784 369,760 2,001 3,489,548 703,532 471,125 2,756,864 15,590,879 379,445 80,241 (2,001) 635,104 (54,872) 196,038 5,000,625 18,148 673 6,040 409 52,934 26,784 18,148 673 6,040 409 79,718 397,593 80,914 4,039 635,104 (54,872) 196,447 5,080,343 (682,062) (682,062) 397,593 80,914 (678,023) 635,104 (54,872) 196,447 4,398,281 600,000 280,058 3,361,453 504,779 59,237 157,390 24,777,797 $997,593 $360,972 $2,683,430 $1,139,883 $4,365 $353,837 $29,176,078 143 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL INTERNAL SERVICE FUNDS COMBINING STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2021 Building Vehicle Equipment Employee Liability Maintenance Replacement Replacement Benefits Insurance CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers/other funds $1,067,393 $2,202,128 $3,953,346 $679,000 $1,764,880 Cash payments to suppliers for goods and services (124,581) (1,130) (1,804,838) (301,519) (1,496,033) Cash payments to employees for salaries and benefits (850,402) (248,813) Other operating revenues 5,086 3,671 Cash Flows from Operating Activities 942,812 2,206,084 2,152,179 (472,921) 20,034 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Interfund payments Cash Flows from Noncapital Financing Activities CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition and construction of capital assets (15,122) (504,527) Proceeds from sale of property 35,187 Cash Flows from Investing Activities (15,122) (469,340) CASH FLOWS FROM INVESTING ACTIVITIES Interest received 1,746 5,468 6,030 4,144 10,276 Cash Flows from Investing Activities 1,746 5,468 6,030 4,144 10,276 Net increase (decrease) in cash and cash equivalents 929,436 1,742,212 2,158,209 (468,777) 30,310 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 572,812 2,011,019 2,676,216 643,873 5,364,517 CASH AND CASH EQUIVALENTS, END OF YEAR $1,502,248 $3,753,231 $4,834,425 $175,096 $5,394,827 Reconciliation of operating income (loss) to net cash provided by operating activities: Operating income (loss) $607,667 $1,222,173 $1,992,866 ($391,403) $335,367 Adjustments to reconcile operating income to cash flows from operating activities: Depreciation 289,221 981,783 67,777 Net change in assets and liabilities: Accounts receivable (12,559) 2,128 Accounts payable 58,483 91,536 (81,518) (2,632) Claims payable (312,701) Net Cash Provided by (Used in) Operating Activities $942,812 $2,206,084 $2,152,179 ($472,921) $20,034 NON-CASH TRANSACTIONS: Retirement of capital assets ($8,403) 144 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT OPEB/ Workers' Dental Employee Employee Radio Telephone Sewer Compensation Insurance Retirement Retirement Replacement Replacement Maintenance Total $2,258,229 $450,001 $3,279,300 $648,660 $666,761 $2,756,864 $19,726,562 (1,530,071) (373,394) ($2,001) (3,501,779) (703,532) (511,712) (2,813,711) (13,164,301) (186,838)(1,286,053) 916,927 402 926,086 541,320 76,607 (2,001) 694,448 (54,872) 155,451 (56,847) 6,202,294 (682,062) (682,062) (682,062) (682,062) (519,649) 35,187 (484,462) 18,148 673 6,040 409 52,934 18,148 673 6,040 409 52,934 559,468 77,280 (678,023) 694,448 (54,872) 155,860 (56,847) 5,088,704 8,666,513 287,234 3,361,453 471,274 59,237 213,222 132,727 24,460,097 $9,225,981 $364,514 $2,683,430 $1,165,722 $4,365 $369,082 $75,880 $29,548,801 $379,445 $80,241 ($2,001) $635,104 ($54,872) $196,038 $5,000,625 1,338,781 71,575 61,144 548 (3,634) (12,231) (40,587) ($56,847) (46,882) 161,327 (151,374) $541,320 $76,607 ($2,001) $694,448 ($54,872) $155,451 ($56,847) $6,202,294 ($8,403) 145 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT Goat Grazing-wildfire tax dollars at work STATISTICAL SECTION DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT DRAFT DRAFT REVIEW DRAFT 11-8-21 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.Property Tax Rates, Direct & Overlapping Governments 4.Principal Property Taxpayers 5.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 11-8-21 DRAFT CITY OF SAN RAFAEL NET POSITION BY COMPONENT Last Ten Fiscal Years (accrual basis of accounting) 2012 2013 2014 2015 Governmental activities Net investment in capital assets $192,361,245 $193,222,791 $190,286,275 $190,621,085 Restricted 24,693,205 35,780,412 37,339,141 33,389,224 Unrestricted 10,652,263 11,151,318 (196,824) (82,336,534) Total governmental activities net position $227,706,713 $240,154,521 $227,428,592 $141,673,775 Business-type activities Net investment in capital assets $10,650,558 $10,670,190 $10,786,591 $10,744,952 Unrestricted 2,495,889 2,501,498 2,049,957 (938,519) Total business-type activities net position $13,146,447 $13,171,688 $12,836,548 $9,806,433 Primary government Net investment in capital assets $203,011,803 $203,892,981 $201,072,866 $201,366,037 Restricted 24,693,205 35,780,412 37,339,141 33,389,224 Unrestricted 13,148,152 13,652,816 1,853,133 (83,275,053) Total primary government net position $240,853,160 $253,326,209 $240,265,140 $151,480,208 (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. Fiscal Year Ended June 30, ($130,000) ($80,000) ($30,000) $20,000 $70,000 $120,000 $170,000 $220,000 $270,000 $320,000 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021Thousands Net investment in capital assets Restricted Unrestricted 150 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT □ ■ ■ 2016 2017 2018 2019 2020 2021 $193,707,175 $199,202,842 $217,170,376 $231,844,210 $230,737,025 $228,252,998 31,286,725 29,225,643 25,549,583 23,288,874 23,522,748 36,175,158 (93,273,480) (112,913,181) (122,577,233) (118,215,177) (116,133,437) (107,929,957) $131,720,420 $115,515,304 $120,142,726 $136,917,907 $138,126,336 $156,498,199 $10,958,058 $10,968,642 $10,951,518 $11,023,426 $11,104,751 $11,174,601 (1,136,050) (871,620) (886,848) (1,180,121) (1,204,307) (2,205,300) $9,822,008 $10,097,022 $10,064,670 $9,843,305 $9,900,444 $8,969,301 $204,665,233 $210,171,484 $228,121,894 $242,867,636 $241,841,776 $239,427,599 31,286,725 29,225,643 25,549,583 23,288,874 23,522,748 36,175,158 (94,409,530) (113,784,801) (123,464,081) (119,395,298) (117,337,744) (110,135,257) $141,542,428 $125,612,326 $130,207,396 $146,761,212 $148,026,780 $165,467,500 151 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL CHANGES IN NET POSITION Last Ten Fiscal Years (Accrual Basis of Accounting) 2012 2013 2014 2015 Expenses Governmental Activities: General government $10,171,332 $10,202,530 $9,085,672 $9,099,858 Public safety 39,876,910 41,966,065 43,800,158 39,968,631 Public works and parks 17,423,033 17,695,164 22,125,336 16,893,164 Community development 4,587,557 3,403,158 3,451,244 3,128,373 Culture and recreation 11,020,663 11,330,058 11,846,818 11,198,151 Interest on long-term debt and fiscal charges 1,224,991 283,805 327,350 284,288 Total Governmental Activities Expenses 84,304,486 84,880,780 90,636,578 80,572,465 Business-Type Activities: Parking services 3,446,482 3,545,387 4,125,476 4,249,597 Total Business-Type Activities Expenses 3,446,482 3,545,387 4,125,476 4,249,597 Total Primary Government Expenses $87,750,968 $88,426,167 $94,762,054 $84,822,062 Component Unit: San Rafael Sanitation District $10,185,779 $10,169,082 $11,378,055 $11,375,239 Program Revenues Governmental Activities: Charges for services: General government $1,986,791 $2,655,749 $2,838,940 $1,379,523 Public safety 7,122,396 6,478,321 6,014,034 4,966,251 Public works and parks 5,214,267 7,837,472 6,101,460 3,078,267 Community development 3,255,367 3,984,204 3,279,251 3,796,684 Culture and recreation 5,873,147 6,075,129 6,417,003 6,537,646 Operating grants and contributions 3,158,281 4,085,073 4,698,142 4,185,450 Capital grants and contributions 2,705,696 5,876,993 762,719 1,308,027 Total Government Activities Program Revenues 29,315,945 36,992,941 30,111,549 25,251,848 Business-Type Activities: Charges for services: Parking services 3,901,175 3,990,706 4,485,394 5,173,557 Total Business-Type Activities Program Revenues 3,901,175 3,990,706 4,485,394 5,173,557 Total Primary Government Program Revenues $33,217,120 $40,983,647 $34,596,943 $30,425,405 Component Unit: San Rafael Sanitation District Charges for service $12,368,889 $12,413,123 $13,732,496 $14,629,758 Operating grants and contributions Capital grants and contributions Total Component Unit Program Revenues $12,368,889 $12,413,123 $13,732,496 $14,629,758 Net (Expense)/Revenue Governmental Activities ($54,988,541) ($47,887,839) ($60,525,029) ($55,320,617) Business-Type Activities 454,693 445,319 359,918 923,960 Total Primary Government Net Expense ($54,533,848) ($47,442,520) ($60,165,111) ($54,396,657) Component Unit Activities $2,183,110 $2,244,041 $2,354,441 $3,254,519 Fiscal Year Ended June 30, 152 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT 2016 2017 2018 2019 2020 2021 $12,952,983 $10,996,269 $9,835,941 $11,967,641 $15,629,601 $12,254,642 55,399,798 44,366,734 53,231,197 49,899,296 50,000,809 54,736,561 22,929,289 19,845,719 22,084,433 19,270,613 21,661,442 20,749,666 4,307,269 4,242,743 4,040,195 5,781,826 5,314,692 5,804,134 15,026,680 14,131,000 13,285,563 12,819,429 11,828,353 10,619,181 277,263 271,263 884,336 1,848,263 1,974,834 1,935,532 110,893,282 93,853,728 103,361,665 101,587,068 106,409,731 106,099,716 4,762,851 4,188,152 4,627,716 5,038,553 4,491,375 3,748,667 4,762,851 4,188,152 4,627,716 5,038,553 4,491,375 3,748,667 $115,656,133 $98,041,880 $107,989,381 $106,625,621 $110,901,106 $109,848,383 $11,654,767 $11,255,194 $12,235,868 $12,601,257 $13,853,263 $13,790,905 $526,495 $421,393 $517,542 $377,606 $394,882 $388,833 4,939,658 4,264,939 5,628,478 5,304,832 5,824,555 5,332,486 5,157,289 1,804,698 2,362,375 4,158,338 3,082,495 2,719,148 4,004,178 3,850,107 3,814,892 4,312,259 5,470,010 8,390,282 6,683,059 6,941,013 6,819,303 5,750,846 4,370,442 2,932,869 4,678,338 3,965,351 5,142,670 4,584,855 5,545,731 5,132,596 1,470,953 1,702,993 974,603 8,042,524 1,348,640 8,718,764 27,459,970 22,950,494 25,259,863 32,531,260 26,036,755 33,614,978 5,212,181 5,268,991 5,203,585 5,362,016 5,063,318 3,351,864 5,212,181 5,268,991 5,203,585 5,362,016 5,063,318 3,351,864 $32,672,151 $28,219,485 $30,463,448 $37,893,276 $31,100,073 $36,966,842 $15,414,530 $16,014,016 $16,829,908 $16,964,083 $16,874,361 $16,945,721 36,945 58,440 5,907 5,719 5,609 79,245 105,734 1,433,871 175,217 277,752 $15,414,530 $16,130,206 $16,994,082 $18,403,861 $17,055,297 $17,229,082 ($83,433,312) ($70,903,234) ($78,101,802) ($69,055,808) ($80,372,976) ($72,484,738) 449,330 1,080,839 575,869 323,463 571,943 (396,803) ($82,983,982) ($69,822,395) ($77,525,933) ($68,732,345) ($79,801,033) ($72,881,541) $3,862,215 $4,875,012 $4,758,214 $5,802,604 $3,202,034 $3,438,177 153 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL CHANGES IN NET POSITION (continued) Last Ten Fiscal Years (Accrual Basis of Accounting) 2012 2013 2014 2015 General Revenues and Other Changes in Net Position Governmental Activities: Taxes: Property $20,107,637 $17,317,772 $18,439,619 $19,039,443 Sales 22,355,749 24,262,282 27,758,971 32,269,915 Special assessments Paramedic 3,807,545 3,804,985 3,816,070 3,820,240 Motor vehicles Transient occupancy 1,866,575 2,185,287 2,332,277 2,661,878 Franchise 3,076,094 3,331,160 3,260,958 3,272,390 Business license 2,332,146 2,507,785 2,588,728 2,670,071 Other 3,574,918 2,929,915 3,452,171 3,295,751 Investment earnings 205,413 991,762 184,171 216,066 Gain (loss) from sale of capital assets Miscellaneous 542,816 2,580,882 1,140,743 2,254,901 Special item - Court fines repayment Transfers 57,960 423,817 449,917 432,630 Total Government Activities 57,926,853 60,335,647 63,423,625 69,933,285 Business-Type Activities: Investment earnings 7,675 3,739 4,375 7,008 Gain (loss) from sale of capital assets Transfers (57,960)(423,817)(449,917)(432,630) Total Business-Type Activities (50,285)(420,078)(445,542)(425,622) Total Primary Government $57,876,568 $59,915,569 $62,978,083 $69,507,663 Component Unit: San Rafael Sanitation District Property Taxes $1,192,566 $1,177,469 $1,345,018 $1,319,852 Investment earnings 38,191 25,591 151,729 171,804 Miscellaneous Aid from other governmental agencies 9,613 56,589 22,125 35,090 Total Component Unit $1,240,370 $1,259,649 $1,518,872 $1,526,746 Special Item Governmental Activities $4,462,815 Component Unit Activities ($4,462,815) Change in Net Position Governmental Activities $2,938,312 $12,447,808 $2,898,596 $19,075,483 Business-Type Activities 404,408 25,241 (85,624) 498,338 Total Primary Government $3,342,720 $12,473,049 $2,812,972 $19,573,821 Change in Net Position Component Unit Activities $3,423,480 $3,503,690 $3,873,313 $318,450 Fiscal Year Ended June 30, 154 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT 2016 2017 2018 2019 2020 2021 $19,998,567 $23,343,140 $24,627,373 $25,903,240 $26,491,505 $30,993,516 34,348,089 31,819,259 34,119,502 35,626,646 33,784,770 39,599,113 4,226,020 5,485,637 4,923,148 4,934,584 4,923,092 5,153,448 3,063,263 2,984,758 3,115,151 3,203,499 2,410,745 1,797,578 3,418,277 3,610,824 3,726,841 3,627,254 4,029,050 3,973,806 2,824,664 2,774,803 2,790,212 2,788,496 2,824,722 2,575,341 3,465,193 1,824,830 2,245,882 1,783,170 2,152,617 2,996,950 300,091 210,628 556,745 1,450,434 1,907,591 388,645 26,784 1,387,315 2,448,604 5,991,713 5,904,968 2,470,926 2,813,015 448,478 536,000 632,657 608,698 586,387 538,405 73,479,957 75,038,483 82,729,224 85,830,989 81,581,405 90,856,601 14,723 10,810 24,436 63,870 71,583 4,065 (448,478)(536,000)(632,657)(608,698)(586,387)(538,405) (433,755)(525,190)(608,221)(544,828)(514,804)(534,340) $73,046,202 $74,513,293 $82,121,003 $85,286,161 $81,066,601 $90,322,261 $1,367,172 $1,528,047 $1,620,584 $1,727,221 $1,833,137 $1,888,197 46,225 97,090 234,379 519,793 876,369 48,614 10,690 7,768 489 $1,413,397 $1,625,137 $1,865,653 $2,254,782 $2,709,995 $1,936,811 ($9,953,355) $4,135,249 $4,627,422 $16,775,181 $1,208,429 $18,371,863 15,575 555,649 (32,352)(221,365)57,139 (931,143) ($9,937,780) $4,690,898 $4,595,070 $16,553,816 $1,265,568 $17,440,720 $5,275,612 $6,500,149 $6,623,867 $8,057,386 $5,912,029 $5,374,988 155 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT 2012 2013 2014 (b) 2015 (b) General Fund Nonspendable $527,509 $527,235 $503,338 $399,299 Restricted 76,188 Committed 651,121 800,876 Assigned 1,516,644 2,476,676 6,866,149 12,374,002 Unassigned 1,588,500 Total General Fund $2,771,462 $3,804,787 $7,369,487 $14,361,801 All Other Governmental Funds Nonspendable $788,031 $51,521 $8,719 $2,359 Restricted 16,856,959 20,769,546 30,185,064 31,742,184 Committed 5,135,257 8,447,495 2,185,825 931,871 Assigned 5,283,559 6,511,850 4,959,533 712,810 Unassigned Total all other governmental funds $28,063,806 $35,780,412 $37,339,141 $33,389,224 (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. CITY SAN RAFAEL FUND BALANCES OF GOVERNMENTAL FUNDS Last Ten Fiscal Years (Modified Accrual Basis of Accounting) Fiscal Year Ended June 30, ($5,000) $15,000 $35,000 $55,000 $75,000 $95,000 2012 2013 2014 (b) 2015 (b) 2016 (b) 2017 2018 2019 2020 2021Thousands Total Fund Balance 156 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT I □ 2016 (b)2017 2018 2019 2020 2021 (a) $476,316 $508,446 $1,008,234 $37,271 $7,540 $377,861 8,321,000 16,440,910 14,900,945 11,214,720 11,391,084 9,799,140 7,226,153 1,772,577 1,295,041 1,104,216 920,885 $18,689,803 $16,704,432 $12,222,954 $12,532,571 $9,806,680 $16,845,899 $9,449 $302,366 $27,627 $7,813 27,552,245 $25,812,405 73,489,688 53,260,504 34,288,302 $36,043,515 3,799,421 3,491,708 1,754,983 1,901,271 1,884,153 1,831,036 119,183 115,103 115,942 118,139 120,920 116,842 (11,118) $31,480,298 $29,419,216 $75,662,979 $55,307,541 $36,290,070 $37,991,393 157 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT 2012 2013 2014 2015 Revenues Taxes and special assessments $51,395,116 $51,549,306 $56,686,142 $61,804,228 Licenses and permits 1,648,890 1,929,387 1,934,755 2,456,820 Fines and forfeitures 801,758 734,005 669,553 556,076 Use of money and properties 315,561 325,043 363,089 444,757 Intergovernmental 10,537,396 11,869,889 11,953,308 13,233,503 Charges for services 19,649,433 23,575,374 19,949,333 15,346,794 Other revenue 870,957 4,092,411 2,045,407 1,777,003 Total Revenues 85,219,111 94,075,415 93,601,587 95,619,181 Expenditures Current: General government 8,783,873 10,529,480 8,678,833 10,203,687 Public safety 39,311,551 41,377,062 41,900,762 43,954,515 Public works and parks 11,518,822 12,002,448 13,697,957 12,758,643 Community development 3,755,504 2,961,275 3,296,375 3,416,859 Culture and recreation 10,345,673 10,591,057 11,106,367 11,616,777 Capital outlay 1,312,383 4,009,454 2,154,900 4,498,924 Capital improvement/special projects 3,604,171 5,284,720 7,168,776 2,186,986 Debt service: Principal 2,518,320 208,642 75,172 Interest and fiscal charges 735,221 283,805 327,350 284,288 Total Expenditures 81,885,518 87,039,301 88,539,962 88,995,851 Excess (deficiency) of revenues over (under) expenditures 3,333,593 7,036,114 5,061,625 6,623,330 Other Financing Sources (Uses) Issuance of debt Proceeds from PG&E loans 568,481 Transfers in 4,539,646 8,425,474 3,655,302 4,348,149 Transfers (out)(4,864,293)(6,711,657)(3,053,865)(3,051,499) Total other financing sources (uses)(324,647)1,713,817 1,169,918 1,296,650 Extraordinary Item Transfer to Successor Agency (2,352,584) Net Change in fund balances $3,008,946 $6,397,347 $6,231,543 $7,919,980 Debt service as a percentage of noncapital expenditures 4.2%0.4%0.7%0.4% CITY OF SAN RAFAEL CHANGES IN FUND BALANCE OF GOVERNMENTAL FUNDS Last Ten Fiscal Years (Modified Accrual Basis of Accounting) Fiscal Year Ended June 30, 158 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT 2016 2017 2018 2019 2020 2021 $65,866,218 $71,166,891 $74,893,789 $77,101,185 $76,410,697 $86,347,728 2,588,411 2,559,841 2,718,166 2,661,500 3,047,144 3,000,666 435,829 400,283 384,268 337,680 350,388 219,030 460,206 349,349 654,531 1,583,060 1,537,869 667,104 13,685,003 8,063,156 8,878,974 15,602,264 9,287,181 16,859,749 14,366,744 13,425,161 14,660,094 15,166,876 13,834,843 15,065,363 3,208,749 1,842,053 5,219,414 5,158,042 2,309,226 1,875,299 100,611,160 97,806,734 107,409,236 117,610,607 106,777,348 124,034,939 11,349,079 10,557,416 10,010,100 12,553,499 16,689,526 12,426,899 47,071,166 49,018,153 51,805,708 51,678,876 50,071,531 54,363,872 14,390,699 16,752,961 17,647,312 15,617,622 17,453,823 15,110,972 3,670,108 3,759,564 4,051,224 4,988,260 5,276,887 6,270,129 12,048,104 12,646,728 12,823,771 12,468,008 11,179,410 9,700,739 4,813,757 2,100,926 22,815,967 38,701,047 25,984,748 13,635,066 4,826,576 7,403,249 75,172 175,172 280,172 495,172 618,316 2,563,711 277,263 271,263 1,005,636 2,356,207 2,482,778 2,443,476 98,521,924 102,685,432 120,439,890 138,858,691 129,757,019 116,514,864 2,089,236 (4,878,698)(13,030,654)(21,248,084)(22,979,671)7,520,075 46,565,800 23,999 7,533,364 9,287,007 68,351,964 15,482,297 13,797,526 7,549,590 (6,582,555)(8,454,762)(68,373,222)(14,280,034)(12,585,216)(6,329,123) 950,809 832,245 46,544,542 1,202,263 1,236,309 1,220,467 $3,040,045 ($4,046,453)$33,513,888 ($20,045,821) ($21,743,362)$8,740,542 0.4%0.5%1.3%2.8%3.0%4.9% 159 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL ASSESSED AND ESTIMATED ACTUAL VALUE OF TAXABLE PROPERTY LAST TEN FISCAL YEARS Real Property Total Real Total Fiscal Residential Commercial Industrial Secured Unsecured Total Estimated Direct Year Property Property Property Other Property Property Assessed (a) Full Market (a) Tax Rate (b) 2012 7,317,280,602$ 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% 2021 11,011,781,157 2,956,073,592 305,080,963 143,953,920 14,416,889,632 460,690,899 14,877,580,531 14,877,580,531 0.11734% (a) (b) Data Source: Marin County Assessor 2011/12 - 2020/21 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 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021Millions Unsecured Property Secured Property 160 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT Fiscal School Misc. Special Year City County (1)Districts Districts Total 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% 2021 0.154 0.295 0.8246 0.0678 1.3414 0.11734% 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 2011/12 - 2020/21 Tax Rate Tables CITY OF SAN RAFAEL PROPERTY TAX RATES ALL OVERLAPPING GOVERNMENTS LAST TEN FISCAL YEARS Total Direct Rate 161 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 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 0.01840 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 0.00000 Marin Community College Bonds 0.01750 0.01780 0.02040 0.01800 0.01650 0.01420 0.03380 0.03390 0.02690 0.02650 Marin Healthcare Bond 0.00000 0.00000 0.00000 0.00000 0.02350 0.00930 0.02010 0.01900 0.01750 0.02180 Miller Creek School Bonds 0.00000 0.01540 0.01500 0.01470 0.04170 0.03830 0.02090 0.03450 0.03280 0.03030 Ross Elementary School 0.06550 0.06640 0.06570 0.06030 0.06150 0.06030 0.06190 0.06180 0.05710 0.05800 Ross Valley School Bonds 0.06130 0.06110 0.05960 0.05700 0.05550 0.05370 0.05680 0.05390 0.05270 0.05190 San Rafael Elementary Bonds 0.04740 0.02170 0.03320 0.02620 0.02570 0.05350 0.05030 0.07290 0.07050 0.06950 San Rafael High Bonds 0.02680 0.04960 0.05130 0.04850 0.04710 0.07100 0.05680 0.06170 0.06000 0.05830 Tamalpais Union High School 0.04100 0.03710 0.03860 0.03520 0.03130 0.02880 0.02690 0.02580 0.02390 0.02260 Total Direct & Overlapping Tax Rates 1.27790 1.26910 1.28380 1.25990 1.30280 1.32910 1.32750 1.36350 1.34140 1.33890 City's Share of 1% Levy Per Prop 13 0.12311 0.12313 0.12306 0.12233 0.12233 0.12233 0.12233 0.12232 0.12232 0.12231 Total Direct Rate 0.17827 0.17456 0.11985 0.11657 0.11672 0.11693 0.11709 0.11742 0.11724 0.11734 Notes: Data Source: Marin County Assessors Office 2011/12 - 2020/21 Tax Rate Tables CITY OF SAN RAFAEL PROPERTY TAX RATES DIRECT & OVERLAPPING GOVERNMENTS LAST TEN FISCAL YEARS (RATE PER $100 OF ASSESSED VALUE) (1) In 1978, California voters passed Proposition 13 which set the property tax rate at a 1.00% fixed amount. This 1.00% is shared by all taxing agencies for which the subject property resides within. In addition to the 1.00% fixed amount, property owners are charged taxes as a percentage of assessed property values for the payment of any voter approved bonds. 162 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL PRINCIPAL PROPERTY TAX PAYERS CURRENT FY 2020/21 AND FY 2011/2012 Percentage Percentage of Total City of Total City Taxable Taxable Taxable Taxable Assessed Assessed Assessed Assessed Taxpayer Value Value Value Value California Corporate Center ACQ LLC 287,573,990$ 1.99% MGP XI Northgate LLC 231,346,654 1.56% Professional Financial Investors Inc 160,767,462 1.12% BRE Properties Inc 66,209,344 0.46% South Valley Apartments LLC 56,285,166 0.39% Nort Bay 4040 TT LLC 53,672,399 0.37% Kaiser 51,186,581 0.34% Regency Center II Associates LP 49,995,939 0.35% 41,904,940$ 0.41% Northbay Properties II 48,724,358 0.34% 41,269,164 0.41% Pur San Rafael LLC 46,243,829 0.32% Bay Apartment Communities Inc 35,800,438 0.35% Northgate Mall Associates 128,055,911 1.27% SR Corporation Center Phase 1 79,314,980 0.78% SR Corporation Center Phase 2 71,241,415 0.71% Sutter Health 48,659,081 0.48% Robert Dickson Trust 44,303,303 0.44% County of Marin 42,050,428 0.42% Marin Sanitary Service 38,636,950 0.38% Subtotal 1,052,005,722$ 7.07% 571,236,610$ 5.65% Total Net Assessed Valuation: Fiscal Year 2020-2021 14,877,580,531$ Fiscal Year 2011-2012 10,104,558,711$ FY 2020-2021 FY 2011-2012 163 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT Delinquent taxes Fiscal as a Percent of Year Rate Levies Allocations Collections Apportionments Delinquencies Allocations 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% 2021 1.00 (2)29,762,184 (2)29,762,184 (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 $31 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021MillionsAllocationsApportionments 164 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT -& --------...,, ,, ...,, ---...,, -,. ,. -- CITY OF SAN RAFAEL RATIO OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS Pension Lease Fiscal Note Obligation Revenue Year Payable Bonds Bonds Total 2012 169,000$ 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 2021 905,751 2,845,000 50,178,265 53,929,016 Parking Total Percentage Fiscal Services Note Primary of Personal Per Year Bonds Payable Total Government Income (a) Capita (a) 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 1.87% 1,030.44 2021 4,316,478 14,123 4,330,601 58,259,617 n/a 987.18 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 $70 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021MillionsTotal Governmental Total Business 165 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT a • CITY OF SAN RAFAEL COMPUTATION OF DIRECT AND OVERLAPPING DEBT June 30, 2021 2020-21 Assessed Valuation:14,877,580,531$ Total Debt City's Share of OVERLAPPING TAX AND ASSESSMENT DEBT:6/30/2021 % Applicable (1) Debt 6/30/2021 Marin Community College District 450,805,000$ 17.259% 77,804,435$ San Rafael High School District 170,443,727 78.341% 133,527,320 Tamalpais Union High School District 93,045,000 0.064%59,549 Miller Creek School District (Formerly Dixie School District)29,095,810 66.779% 19,429,891 Ross School District 16,511,647 1.245% 205,570 Ross Valley School District 39,586,751 0.011%4,355 San Rafael School District 129,726,453 83.457% 108,265,806 Marin Healthcare District 365,855,000 20.670% 75,622,229 Marin Emergency Radio Authority Parcel Tax Obligations 29,715,000 17.233% 5,120,786 City of San Rafael 1915 Act Bonds 1,239,200 100.000% 1,239,200 TOTAL OVERLAPPING TAX AND ASSESSMENT DEBT 421,279,141$ DIRECT AND OVERLAPPING GENERAL FUND DEBT: Marin County Certificates of Participation 79,636,865$ 17.233% 13,723,821$ Marin County Pension Obligation Bonds 70,500,000 17.233% 12,149,265 Marin County Transit District General Fund Obligations 24,072 17.233%4,148 Marin Municipal Water District General Fund Obligations 19,584 21.921%4,293 Marin Community College District Certification of Participation 12,540,834 17.259% 2,164,423 San Rafael School District Certificates of Participation 2,855,000 83.457% 2,382,697 City of San Rafael General Fund Obligations 55,414,617 100.000% 55,414,617 (2) City of San Rafael Pension Obligations 2,845,000 100.000% 2,845,000 TOTAL DIRECT AND OVERLAPPING GENERAL FUND DEBT 88,688,264 Less: City of San Rafael lease revenue bonds supported by parking revenues 4,316,478 TOTAL NET DIRECT AND OVERLAPPING GENERAL FUND DEBT 84,371,786$ OVERLAPPING TAX INCREMENT DEBT (Successor Agency)4,450,264$ 100.000% 4,450,264$ TOTAL GROSS DIRECT DEBT 58,259,617 TOTAL NET DIRECT DEBT 53,943,139 TOTAL OVERLAPPING DEBT 456,158,052 GROSS COMBINED TOTAL DEBT 514,417,669 (3) NET COMBINED TOTAL DEBT 510,101,191 (2) Includes $905,751 PG&E notes. Ratios to 2020-21 Assessed Valuation: Total Overlapping Tax and Assessment Debt 2.83% Total Gross Direct Debt ($58,259,617)0.39% Total Net Direct Debt ($53,943,139)0.36% Gross Combined Total Debt 3.46% Net Combined Total Debt 3.43% Ratios to Redevelopment Incremental Valuation ($3,231,506,699) Total Overlapping Tax Increment Debt 0.14% Data Source: Avenu Insights & Analytics, California Municipal Statistics, Inc. (1) The percentage of overlapping debt applicable to the city is estimated using taxable assessed property value. Applicable percentages were estimated by determining the portion of the overlapping district's assessed value that is within the boundaries of the city divided by the district's total taxable assessed value. (3) Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non-bonded capital lease 166 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT ASSESSED VALUATION:14,877,580,531$ BONDED DEBT LIMIT (3.75% OF ASSESSED VALUE) (a)557,909,270 LESS AMOUNT OF DEBT SUBJECT TO LIMIT:53,929,016 LEGAL BONDED DEBT MARGIN 503,980,254$ 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 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 57,000,671 477,731,303 11.93% 2021 557,909,270 53,929,016 503,980,254 10.70% NOTE: (a) Source: City of San Rafael's Finance Department CITY OF SAN RAFAEL COMPUTATION OF LEGAL BONDED DEBT MARGIN June 30, 2021 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 11-8-21 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 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 2021 3,355,929 3,332,327 23,602 290,000 161,288 451,288 0.05 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 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Coverage 168 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT 1 - 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 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 3,301,286 55,938 6.70% 260,831 22.93% 2021 59,016 n/a n/a n/a 257,774 22.89% 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% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Unemployment Rate (%) 22.00% 22.50% 23.00% 23.50% 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 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 $60 ThousandsPer Capita Personal Income (2) 169 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT a ■ II I ■ ---+--- ■ CITY OF SAN RAFAEL PRINCIPAL EMPLOYERS FISCAL YEAR 2020-2021 LAST TEN CALENDAR YEARS Employer # (A) # (A) # (A) # (A) Kaiser Permanente 2,059 1.64% 2,014 6.22% 2,092 6.62% 2,061 6.52% BioMarin Pharmaceutical Inc. 0.00% 950 2.93% San Rafael Elementary/High Schools Dist(s) 700 0.56% 700 2.16% 700 2.22% 700 2.22% City of San Rafael 405 0.32% 410 1.27% 410 1.30% 454 1.44% Dominican University of California 394 0.31% 421 1.30% 319 1.01% 456 1.44% Buckelew Programs 0.00% 103 0.32% 106 0.34% 240 0.76% Lifehouse 0.00% 100 0.31% EO Products 108 0.09% 150 0.46% Toyota Marin 0.00% 141 0.44% Ghilotti Bros., Inc. 298 0.24% Community Action Marin 270 0.21% Equator Coffees, LLC 88 0.07% Totals 4,322 3.44% 4,989 15.40% 4,508 14.27% 5,650 17.88% #Number of FTE employees in Marin locations (A)Percentage of total employment 2020 2019 20172018 Note: From the EDD website, it shows that the Total 2020 Employment in the City of San Rafael was 125,600 of which it is used as the denominator for the 2020 percentages are calculated. Data Sources: State of California, Employment Development Department, Labor Market Information Division & North Bay Business Journal (Annual Book of Lists) 170 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT # (A) # (A) # (A) # (A) # (A) # (A) 662 2.02% 1,575 4.82% 1,637 5.26% 1,756 5.74% 1,803 6.68% 1,330 4.93% 650 1.98% 650 1.99% 600 1.93% 600 1.96% 600 2.22% 600 2.22% 577 1.76% 581 1.78% 666 2.14% 643 2.10% 521 1.93% 592 2.19% 485 1.48% 422 1.29% 354 1.14% 347 1.13% 346 1.28% 336 1.24% 186 0.57% 5,314 16.20% 5,620 17.19% 6,025 19.37% 6,079 19.87% 6,715 24.87% 6,007 22.25% 20152016 2014 2013 2012 2011 171 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION LAST TEN FISCAL YEARS 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Function General Government 55.23 53.23 55.11 58.11 60.61 62.11 60.11 63.11 62.11 61.41 Public Safety 162.00 163.00 168.00 171.75 175.75 176.55 175.35 175.65 175.30 181.50 Public Works and Parks 62.00 60.00 61.00 62.00 62.00 63.00 66.67 66.00 68.00 69.00 Community Development 18.25 18.25 17.80 17.80 19.80 20.00 21.00 22.00 21.75 21.75 Culture and Recreation 81.56 80.76 83.66 84.23 84.25 84.35 87.35 85.82 78.07 78.07 Total 379.04 375.24 385.57 393.89 402.41 406.01 410.48 412.58 405.23 411.73 Data Source: City of San Rafael's Finance Department 0 50 100 150 200 250 300 350 400 450 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021FTE'sGeneral Government Public Safety Public Works and Parks Community Development Culture and Recreation 173 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT • • • • CITY OF SAN RAFAEL OPERATING INDICATORS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS 2012 2013 2014 2015 Function/Program Public safety: Fire: Inspection permit issued 282 307 261 282 Police: Police calls for service 39,537 42,707 51,261 55,805 Law violations: Part I crimes 2,101 2,523 2,289 2,533 Physical arrests (adult and juvenile) 2,981 2,951 3,227 3,450 Traffic violations 4,048 3,448 4,498 4,168 Parking violations 32,492 30,881 38,814 36,398 Public works Street resurfacing (miles) (Eng Div) N/A 2.70 9.00 6.40 Potholes repaired N/A N/A N/A N/A Asphalt used for street repairs (tons) 178.9 7,500 10,700 11,000 Culture and recreation: Recreation class participants 12,075 7,082 9,857 10,023 Recreation Facility Rentals Childcare School-Age program participants Library: Items in collection 159,180 125,920 168,620 127,763 Total items borrowed 366,460 392,230 478,960 443,639 Note: N/A denotes information not available. 174 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT 2016 2017 2018 2019 2020 2021 198 233 186 123 167 207 57,026 53,567 51,013 47,919 47,968 43,649 2,523 2,392 2,326 1,893 2,988 2,546 3,453 2,526 2,019 1,923 2,527 1,893 3,252 3,341 2,758 2,944 2,342 2,161 34,803 36,169 36,208 40,407 28,029 24,099 6.76 2.32 2.50 4.30 14.30 5.00 N/A N/A N/A N/A 967 1,368 7,195 5,800 4,730 7,200 5,885 3,650 12,725 13,493 12,842 N/A N/A N/A 5,146 3,875 1,550 7,592 6,270 2,132 227,890 117,354 115,812 123,432 140,610 103,399 469,790 327,297 324,452 356,301 199,903 113,385 175 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS 2012 2013 2014 2015 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 179 179 145 145 Data Source: City of San Rafael's Finance Department 176 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT 2016 2017 2018 2019 2020 2021 666666 111111 173 173 173 173 173 173 4,435 4,435 4,435 4,435 4,435 4,435 89 89 89 89 90 90 20 20 20 20 24 24 42 42 42 42 99 99 14 14 14 14 14 14 20 20 20 20 20 20 111122 11 444433 000000 000000 000000 111111 10 10 10 10 10 10 555566 555555 222222 222222 145 145 145 145 145 145 177 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT INDEPENDENT ACCOUNTANT’S REPORT ON APPLYING AGREED UPON PROCEDURES FOR COMPLIANCE WITH THE PROPOSITION 111 2021-2022 APPROPRIATIONS LIMIT INCREMENT Honorable Mayor and Members of the City Council City of San Rafael, California We have performed the procedures enumerated below on the Appropriations Limit Worksheet (Worksheet) of the City of San Rafael, California, for the year ended June 30, 2022. The City’s management is responsible for the Worksheet. The City has agreed to and acknowledged that the procedures performed are appropriate to meet the intended purpose of 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. This report may not be suitable for any other purpose. The procedures performed may not address all the items of interest to a user of this report and may not meet the needs of all users of this report and, as such, users are responsible for determining whether the procedures performed are appropriate for their purposes. The procedures and associated findings were as follows: A. We obtained the Worksheet (Exhibit A to the Resolution) and determined that the 2021-2022 Appropriations Limit of $150,770,339 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 adjustment factor of the change in the population of Marin County was used for the calculation of the 2021-2022 Appropriations Limit. B. We recomputed the 2021-2022 Appropriations Limit by multiplying the 2020-2021 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, City Population Factor and County Population Factor to California State Department of Finance Worksheets, and the Change in Assessment Roll for Nonresidential Construction Factor to the Marin County Worksheet. We were engaged by the City to perform this agreed-upon procedures engagement and conducted our engagement 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 engagement, 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. DRAFT DRAFT REVIEW DRAFT 11-8-20 DRAFT Accountancy Corporation 3478 Buskirk Avenue, Suite 215 Pleasant Hill, CA 94523 T 925.930.0902 F 925.930.0135 E maze@mazeassociates.com w mazeassociates.com We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements related to our agreed-upon procedures engagement. 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 15, 2021 DRAFT DRAFT REVIEW DRAFT 11-8-20 DRAFT CITY OF SAN RAFAEL MEMORANDUM ON INTERNAL CONTROL FOR THE YEAR ENDED JUNE 30, 2021 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT This Page Left Intentionally Blank DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL MEMORANDUM ON INTERNAL CONTROL For the Year Ended June 30, 2021 Table of Contents Page Memorandum on Internal Control .................................................................................................. 1 Schedule of Significant Deficiencies ...................................................................................... 3 Schedule of Other Matters ...................................................................................................... 5 Status of Prior Year Significant Deficiencies ....................................................................... 15 Status of Prior Year Other Matters ....................................................................................... 17 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT This Page Left Intentionally Blank DRAFT DRAFT REVIEW DRAFT 11-8-21 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, 2021 and have issued our report thereon dated November 15, 2021. 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 11-8-21 DRAFT Accountancy Corporation 3478 Buskirk Avenue, Sui te 215 Pleasant Hill, CA 94523 T 925.930.0902 F 925.930.0135 e maze@mazeassociat es .com w mazeassociates.com 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 15, 2021 2 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL MEMORANDUM ON INTERNAL CONTROL SCHEDULE OF SIGNIFICANT DEFICIENCIES 2021-01 Inaccurate Building Permit Fees The rates charged in the City’s permit billing system should be consistent with the City’s Master Fee Schedule approved by City Council and on the City’s website. We tested twenty-five receipts and recalculated the fees using the City’s Master Fee Schedule and we noted one receipt for a building permit in the amount of $78,946 that we recalculated, but could not arrive at the same amount. Based on our recalculation using the City’s Master Fee Schedule, the building permit fee that should have been charged was $83,137. The Community Development Department (CDD) staff determined that the Master Fee Schedule approved by City Council and posted on the City’s website included incorrect building permit fees and CDD staff believed that the correct fees had been charged, resulting in the fee of $78,946. Although City staff believe that the correct fees were charged, we were unable to verify that the correct fees were charged based on the Master Fee Schedule approved by City Council. Therefore, the City’s building permit fees may be understated due to the use of a lower fee schedule. We understand that the City plans to present an updated Master Fee Schedule to Council to ensure that accurate charges are approved and presented on the City website. We recommend that the City develop a process to ensure that the fees approved by City Council are properly entered into the City’s permit billing system to ensure proper fees are charged. In addition, we recommend that the City ensure that the Master Fee Schedule on the City’s website agree to the Master Fee Schedule approved by City Council. Management’s Response: Going forward, when a fee change is approved by Council, Finance will be responsible for ensuring the approved fee change has been uploaded to the website, the changes have been entered into the billing system properly and the fee change is implemented on the effective date approved by Council. To formalize this, Finance will create a checklist and will require sign-off as each item is reviewed. 3 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL MEMORANDUM ON INTERNAL CONTROL SCHEDULE OF SIGNIFICANT DEFICIENCIES 2021-02 Schedule of Expenditures of Federal Awards (SEFA) Preparation The City should report all Federal awards expended in the Schedule of Expenditures of Federal Awards (SEFA) each fiscal year in accordance with the requirements of OMB Uniform Administrative Requirements Subpart D Section 200.302(b)(1). During our testing of the City’s June 30, 2020 SEFA provided for our audit, we noted that the City incorrectly included non-federal expenditure amounts in the SEFA. After further research by the City, it was determined that the SEFA overstated federal expenditures of $299,054 for the Highway Planning and Construction Program (CFDA # 20.205) and $398,282 for the Disaster Grants Program (CFDA # 97.036). After those corrections were made, it was determined that the City did not need a Single Audit for the year ended June 30, 2020. We understand that the City accounts for federal award expenditures in the same general ledger accounts that the City accounts for local match expenditures. During the preparation of the SEFA by the City’s outside consultant, the entire account balance was used, and the amounts reported did not exclude the non- federal amounts. Incorrect reporting not only misstates the SEFA, but it also means the City is not in compliance with the reporting requirements of the OMB Uniform Administrative Requirements. As a result, future federal funding could be adversely affected. The City should develop procedures and policies to centralize the reporting of grant activity to ensure that all data is readily available when year-end grant activity reporting is necessary. The procedures and policies should facilitate the preparation of the SEFA so that annual expenditures for all grant programs are accurately included on the SEFA. In addition, City staff, including those in departments other than Finance that manage grants, must familiarize themselves with the guidelines for determining federal awards expended contained in the Uniform Guidance. Management’s Response: Finance Management has met with staff that manage grants to provide guidance on how to account for federal award expenditures. Finance Management plans to create a process document that can be referenced by any federal grant manager. Furthermore, the preparation of the SEFA has been brought inhouse which will allow for a more detailed analysis and review. 4 DRAFT DRAFT REVIEW DRAFT 11-8-21 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 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. 5 DRAFT DRAFT REVIEW DRAFT 11-8-21 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. 6 DRAFT DRAFT REVIEW DRAFT 11-8-21 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. 7 DRAFT DRAFT REVIEW DRAFT 11-8-21 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. 8 DRAFT DRAFT REVIEW DRAFT 11-8-21 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. 9 DRAFT DRAFT REVIEW DRAFT 11-8-21 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. 10 DRAFT DRAFT REVIEW DRAFT 11-8-21 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. 11 DRAFT DRAFT REVIEW DRAFT 11-8-21 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. 12 DRAFT DRAFT REVIEW DRAFT 11-8-21 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. 13 DRAFT DRAFT REVIEW DRAFT 11-8-21 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. 14 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL MEMORANDUM ON INTERNAL CONTROL STATUS OF PRIOR YEAR 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. Current Status: Implemented. 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. 15 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL MEMORANDUM ON INTERNAL CONTROL STATUS OF PRIOR YEAR 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. Current Status: Implemented. 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. Current Status: Implemented. 16 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL MEMORANDUM ON INTERNAL CONTROL STATUS OF PRIOR YEAR 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. Current Status: Implemented. 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. Current Status: 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. 17 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT This Page Left Intentionally Blank DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL REQUIRED COMMUNICATIONS FOR THE YEAR ENDED JUNE 30, 2021 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT This Page Left Intentionally Blank DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL REQUIRED COMMUNICATIONS For the Year Ended June 30, 2021 Table of Contents Page Required Communications ............................................................................................................... 1 Significant Audit Matters .............................................................................................................. 1 Accounting Policies ................................................................................................................ 1 Unusual Transactions, Controversial or Emerging Areas .................................................... 3 Accounting Estimates ............................................................................................................. 3 Disclosures .............................................................................................................................. 4 Difficulties Encountered in Performing the Audit ................................................................ 4 Corrected and Uncorrected Misstatements ............................................................................ 4 Disagreements with Management .......................................................................................... 4 Management Representations ................................................................................................. 5 Management Consultations with Other Independent Accountants ...................................... 5 Other Audit Findings or Issues ............................................................................................... 5 Other Information Accompanying the Financial Statements ....................................................... 5 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT This Page Left Intentionally Blank DRAFT DRAFT REVIEW DRAFT 11-8-21 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, 2021. We did not audit the financial statements of the San Rafael Sanitation District, as of and for the year ended June 30, 2021, which represents 25%, 57%, and 15% of the assets, net position, and revenues, respectively, of the primary government. These component unit 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 this entity, is based solely on the report of the other auditors. 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 Matters 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: 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. 1 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT Accountancy Corporation 3478 Buskirk Aven ue, Suite 215 Pl easant Hil l, CA 94523 T 925.930 .0902 F 925 .930.0135 E maze@mazeassociates.com w mazeassociates.com 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. The pronouncement became effective, and as disclosed in Note 1S to the financial statements required a prior period restatement for the cumulative effect on the financial statements. 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 pronouncement became effective, but did not have a material effect on the financial statements. 2 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT 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 prior to and during fiscal year June 30, 2021 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. 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. 3 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT Estimated Fair Value of Investments: As of June 30, 2021, 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, 2021. These fair values are not required to be adjusted for changes in general market conditions occurring subsequent to June 30, 2021. Estimated long-term receivable from San Rafael Sanitation District: Management’s estimate of the long-term receivable from the District is disclosed in Note 4E 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. 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. We did not propose any audit adjustments that, in our judgment, could have a significant effect, either individually or in the aggregate, on the City’s financial reporting process. 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 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. 4 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT Management Representations We have requested certain representations from management that are included in a management representation letter dated November 15, 2021. 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. 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 15, 2021 5 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT This Page Left Intentionally Blank DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT / REVIEW DRAFT CITY OF SAN RAFAEL CIIlLDDEVELOPMENTPROGRAM BASIC FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2021 11 /9/2021 2:44 PM This Page Left Intentionally Blank REVIEW DRAFT 11 /9/2021 2 :44 PM CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM FOR THE YEAR ENDED JUNE 30, 2021 Table of Contents INTRODUCTORY SECTION: T a ble of Contents ........................................................................................................................................... .i FINANCIAL SECTION: Independent Auditor's Report ................................................................................................................... 1 Basic Financial Statements Balance Sheet ......................................................................................................................................... .3 Statement of Revenue, Expenditures and Changes in Fund Balance ........................................................................................................................................ 4 Notes to Basic Financial Statements ...................................................................................................... 5 Supplementary Information Schedule of Awards .............................................................................................................................. 10 Combining Statement of Revenues, Expenditures and Changes in Fund Balance ................................................................................................................................ 11 Schedule of Expenditures by State Categories .................................................................................... 12 Schedule of Reimbursable Administrative Costs ................................................................................ 13 Schedule of Equipment Expenditures Utilizing Contract Funds ...................................................... 14 Schedule of Renovation and Repair Expenditures Utilizing Contract Funds ..................................... 14 Audited Attendance and Fiscal Rep01ts/Audited Fiscal Reports: CSPP 0287 -California State Preschool Programs ........................................................................... 15 Audited Reserve Account Activity Rep01t ....................................................................................... 23 Compliance Report Independent Auditor's Rep01t on Internal Control over Financial Repo1ting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ...................................................................... 25 Current Year Findings and Responses ........................................................................................... 27 REVIEW DRAFT 11/9/2021 2 :44PM This Page Left Intentionally Blank REVIEW DRAFT 11/9/2021 2 :44 PM 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, 2021, 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 perfonning procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedw-es 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. REVIEW DRAFT I 1/9/2021 2:44PM 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 3 0, 2021, 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. The Supplementaiy Information as listed in the Table of Contents are presented for purposes of additional analysis and are not required paits 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 Depaitment 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 Inf01mation 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 Governm ent Auditing Standards, we have also issued our rep011 dated DATE on our consideration of the Program 's internal control over financial repo11ing and on our tests of its compliance with ce1tain provisions of laws , regulations , contracts , and grant agreements and other matters. The purpose of that repo11 is to describe the scope of our testing of internal control over financial rep011ing 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 rep011ing and compliance. Pleasant Hill, California DATE REVIEW DRAFT 11 /9/2021 2 :44 PM CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM BALANCE SHEET JUNE 30, 2021 ASSETS Cash (Note 3) Accounts receivable Grants receivable (Note 4) Total Assets LIABILITIES AND FUND BALANCE Accounts payable Due to other government Total Liabilities Fund balance, restricted (Note 5) Total Liabilities and Fund Balance See accompanying notes to financial statements $377,300 31,401 $408,701 $40,121 40 ,1 21 368,580 $408,701 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM STATEMENT OF REVENUE, EXPENDITURES AND CHANGES IN FUND BALANCE FOR THE YEAR ENDED JUNE 30 , 2021 REVENUES State grants: Current year grants CDBG preschool grant First five school readiness grants Local grant Interest Parent fees Other Total Revenues EXPENDITURES Ce11ified salaries Classified Salaries E mployee benefits Training and instruction Office supplies Books and supplies Utilities and housekeeping services Travel and conference Rentals Services and other operating expenditures Equipment Insurance Renovation and repair Total Expenditures OTHER FINANCING SOURCES (USES) Transfers out to the City Total Transfers CHANGE IN FUND BALANCE FUND BALANCE, Beginning of year End of year See accompanying notes to financial statements $99 ,350 161 ,458 1,345 2 ,408 ,851 9,720 2 ,680,724 55,718 1,762 ,094 1,284,414 2,183 858 77 ,493 38,448 19,959 236 ,975 3,913 28 ,490 64,989 3,575,534 (894 ,810) 1,263,390 $368,580 I NOTE 1 -ORGANIZATION CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM Notes to the Basic Financials Statements For the Year Ended June 30, 2021 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 Depat1ment 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. I NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Basis of Accounting The accounting and reporting treatment applied to a fund is detennined by its measurement focus. Govermnental funds are accounted for on a spending or "cmTent financial resources" measurement focus. Accordingly, only current assets and current liabilities generally are included on the balance sheets . Operating statements of govermnental 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 rep011ed in the govermnental 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. REVIEW DRAFT 11/9/2021 2:44 PM CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM Notes to the Basic Financials Statements For the Year Ended June 30, 2021 JNOTE 2 -SUM:MARY 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 pat1icipants 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) m 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. J 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 pennit investments in Securities of the U.S. Government or its agencies, Cet1ificates of Deposit, Negotiable Ce11ificates 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. REVIEW DRAFT 11 /9/2021 2:44 PM CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM Notes to the Basic Financials Statements For the Year Ended June 30, 2021 I NOTE 4 -GRANTS RECEIVABLE The Program has the following grants receivable at June 30, 2021: Agency Grant Marin Cow1ty First 5 Grant Total I NOTE 5 -FUND BALANCES Amorn1t $31,401 $31 ,401 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 constrnints 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 conve1ted 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 catego1y . 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 categ01y 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. REVIEW DRAFT 11/9/2021 2:44PM CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM Notes to the Basic Financials Statements For the Year Ended June 30, 2021 I NOTE 6 -CONTINGENCIES AND COMMITMENTS The Program participates in Federal, State and County grant programs that are fully or pa11ially 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 , 2021, 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 govermnental funds or the overall fmancial condition of the City . REVIEW DRAFT 11/9/2021 2:44 PM SUPPLEMENTARY INFORMATION REVIEW DRAFT 11/9/2021 2:44 PM CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM SCHEDULE OF FEDERAL, STATE AND LOCAL AW ARDS FOR THE YEAR ENDED JUNE 30, 2021 Pass-Tlu·ough Identifying Award Program CFDA# Nwnber Amount Federal Awards US Department of Housing and Urban Development, Pass-tlu·ough the County of Marin Conununity Development Block Grant 14 .2 18 40CDBG20CD4527 $21,500 Total Federal Awards $21 ,500 State Awards State of California Department of Education Child Development Division State Preschool Program FY202 l CSPP-028 7 $238 ,821 Total State Awards $238,821 County Award County of Marin First Five -Preschool CSRI-21-009-11 Local Awards Marin Child Care Council NIA $161,458 Total Local Awards $161 ,458 Total State, Federal Awards, and Local $421,779 Revenue Expenditures $21,500 $21,500 $21,500 $21,500 $99,350 $257 ,771 $99 ,350 $257 ,771 $16 1,458 $161,458 $161 ,458 $161,458 $282,308 $440,729 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE FOR THE YEAR ENDED JUNE 30, 2021 State Preschool Program Total CDE Non-CDE (CSPP0287) CD Contracts Programs REVENUES State grants: Current year grants $99 ,350 $99,350 CDBG preschool grant First Five school readiness grants Local grants 161 ,458 Interest 1,345 Parent fees -noncertified children 2,408,851 Other 9,720 Total Revenues 99,350 99,350 2,581,374 EXPENDITURES Cet1ified salaries 55,718 55,718 Classified salaries 72,094 72 ,094 1,690,000 Emp loyee benefits 109,438 109,438 1,174,976 Training and instruction 2,183 Office supplies 858 Books and suppli es 7,818 7,818 69,675 Utilities and housekeeping services 38,448 Rentals 19 ,959 Services and other operating expenditures 12,703 12 ,703 224,272 Equipment 3,913 Insurance 28 ,490 Renovation and rep air 64,989 Total Expenditures 257,771 257,771 3,317,763 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENDITURES (158 ,421) (158,421) (736 ,389) CHANGE IN FUND BALANCE ($158 ,421) ($158,421) ($736,389) Total $99 ,350 161,458 l,345 2,408 ,851 9,720 2,680 ,724 55,718 1,762,094 1,284 ,414 2,183 858 77 ,493 38 ,448 19 ,959 236,975 3,913 28 ,490 64,989 3,575,534 (894,810) ($894,810) CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM SCHEDULE OF EXPENDITURES BY STATE CATEGORIES FOR THE YEAR ENDED JUNE 30, 2021 EXPENDITURES: 11000 Certified personnel salaries 1100 Teachers' salaries 1200 Administration 1300 1600 12001 2100 2300 2400 2500 2600 13000 3200 3300 3400 3600 14000 4200 4300 4500 4600 15000 5100 5200 5300 5400 5500 5600 5700 5800 16000 6100 6200 6400 6500 Supervisors' salaries Infant educators Classified personnel salaries Instructional aides' salaries Clerical and other office salaries Maintenance and operations salari es Food services salaries Transp011ation salaries Employee benefits Payroll taxes (Medicare) Other benefits Health and welfare Workers' compensation insurance Books and supplies Other books Instructional materials and supplie s Other supplies Food supplies Services and other operating expenditures Lecturer Travel and conferences Memberships and dues Insurance Utilities and housekeeping services Rentals, leases and repairs Audit expense Other direct services & admin. Capital Outlay Sites and improvements of sites Buildings and improvements of buildings Equipment (program-related) Equipment replacement (program related) Depreciation Costs capitalized as Fixed Assets TOTAL OF REIMBURSABLE AND NONREIMBURSABLE EXPENDITURES CSPP-9283 State Preschool Program $55,718 55 ,718 $72,094 72,094 $109,438 1,7 06 76,263 30,059 1,410 $7,818 7,818 $12 ,703 484 1,988 341 9,890 $257,771 We have examined the claims filed for reimbursement and the original records supp011ing 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, necessa1y, and adequately supp011ed, according to governing laws, regulations, and contract provisions . Totals $55 ,718 I 55 ,718 $72 ,094 1 72,094 $109,438 1 1,706 76 ,263 30,059 1,410 $7,818 I 7,818 $12 ,103 1 484 1,9 88 341 9,890 $257,771 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM SCHEDULE OF REIMBURSABLE ADMINISTRATIVE COSTS FOR THE YEAR ENDED JUNE 30, 2021 Administrative Costs (Audit Fees) Total Administrative Costs CSPP-9283 State Preschool Program $9,424 $9 ,424 CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM SCHEDULE OF EQUIPMENT EXPENDITURES UTILIZING CONTRACT FUNDS FOR THE YEAR ENDED JUNE 30, 2021 Expenditures Under $7,500 Unit Cost Expenditures Over $7 ,500 Unit Cost with CDD Approval Expenditures Over $7,500 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, 2021 Expenditures Under $10,000 Unit Cost Cost Item None Expenditures Over $10,000 Unit Cost with CDD Approval Cost Item None Expenditures Over $10,000 Unit Cost Without CDD Approval Cost Item None California Department of Education Audited Attendance and Fiscal Report for California State Preschool Programs A U D 8501 Page 1 of 8 Full Name of Contractor [city of San Rafael Child Development Program Section 1 -Days of Enrollment Certified Children Column A Enrollment Category Cumulative CDNFS 8501 Three Years and Older Full-time-plus Three Years and Older Full-time Three Years and Older Three-quarters-time Three Years and Older One-half-time 7,705 Exceptional Needs Full-time-plus Exceptional Needs Full-time Exceptional Needs Three-quarters-time Exceptional Needs One-half-time Limited and Non-English Proficient Full-time-plus Limited and Non-English Proficient Full-t ime Limited and Non-English Proficient Three-quarters-time Limited and Non-English Proficient One-half-time Audit Report Page [ 1 Column B Audit Adjustments Fiscal Year Ending !June 30, 2021 I Contract Number [cspp 0287 Vendor Code ~12_1_93 ___ ~ Column C Column D Column E Cumulative Adjustment Adjusted Days per Audit Factor per Audit 1.1800 0 1.0000 0 0.7500 0 7 ,705 0.6193 4 ,771.7065 1.8172 0 - 1.5400 0 1.1550 0 0.9537 0 1.2980 0 1.1000 0 0.8250 0 0.6193 0 A U D 8501 Page 2 of 8 Contract Number [csPP 0287 Full Name of Contractor [city of San Rafael Child Development Program Section 1 -Days of Enrollment Certified Children (continued) Column A Column B Column C Column D Column E Enrollment Category Cumulative Audit Cumulative Adjustment Adjusted Days CDNFS 8501 Adjustments per Audit Factor per Audit At Risk of Abuse or Neglect Full-time-plus 1.2980 0 At Risk of Abuse or Neglect Full-time 1.1000 0 At Risk of Abuse or Neglect Three-quarters-time 0.8250 0 At Risk of Abuse or Neglect One-half-time 0.6193 0 Severely Disabled Full-time-plus 2.2774 0 Severely Disabled Full-time 1.9300 0 Severely Disabled Three-quarters-time 1.4475 0 Severely Disabled One-half-time 1.1952 0 TOTAL DAYS OF ENROLLMENT 7,705 7,705 N/A 4,771.7065 DAYS OF OPERATION 175 175 N/A N/A DAYS OF ATTENDANCE 7,696 7,696 N/A N/A D NO NON-CERTIFIED CHILDREN Check this box (omit pages 3 and 4) and continue to Revenue Section on page 5. Audit Report Page[ 2 A U D 8501 Page 3 of 8 Contract Number [csPP 0287 Full Name of Contractor [city of San Rafael Child Development Program Section 2 -Days of Enrollment Non-Certified Children Column A Column B Column C Column D Column E Enrollment Category Cumulative Audit Cumulative Adjustment Adjusted Days CDNFS 8501 Adjustments per Audit Factor per Audit Toddlers (18 up to 36 months) Full-time-plus 2 .1240 0 Toddlers (18 up to 36 months) Full-time 1.8000 0 Toddlers (18 up to 36 months) Three-quarters-time 1.3500 0 Toddlers (18 up to 36 months) One-half-time 0.9900 0 Three Years and Older Full-time-plus 1.1800 0 Three Years and Older Full-time 1.0000 0 Three Years and Older Three-quarters-time 0.7500 0 Three Years and Older One-half-time 0.6193 0 Exceptional Needs Full-time-plus 1.8172 0 Exceptional Needs Full-time 1.5400 0 Exceptional Needs Three-quarters-time 1.1550 0 Exceptional Needs One-half-time 0.9537 0 Audit Report Page[ 3 A U D 8501 Page 4 of 8 Contract Number [cspp 0287 Full Name of Contractor [city of San Rafael Child Development Program Section 2 -Days of Enrollment Non-Certified Children (continued) Column A Column B Column C Column D Column E Enrollment Category Cumulative Audit Cumulative Adjustment Adjusted Days CDNFS 8501 Adjustments per Audit Factor per Audit Limited and Non-English Proficient Full-time-plus 1.2980 0 Limited and Non-English Proficient Full-time 1.1000 0 Limited and Non-English Proficient Three-quarters-time 0.8250 0 Limited and Non-English Proficient One-half-time 0.6193 0 At Risk of Abuse or Neglect Full-time-plus 1.2980 0 At Risk of Abuse or Neglect Full-time 1.1000 0 At Risk of Abuse or Neglect Three-quarters-time 0.8250 0 At Risk of Abuse or Neglect One-half-time 0.6193 0 Severely Disabled Full-time-plus 2.2774 0 Severely Disabled Full-time 1.9300 0 Severely Disabled Three-quarters-time 1.4475 0 Severely Disabled One-half-time 1.1952 0 TOTAL NON-CERTIFIED DAYS OF ENROLLMENT N/A 0 Audit Report Page[ 4 A U D 8501 Page 5 of 8 Contract Number lcSPP 0287 Full Name of Contractor [city of San Rafael Child Development Program Section 3 -Revenue Column A Column B Column C Revenue Category Cumulative Audit Cumulative CDNFS 8501 Adjustments per Audit Restricted Income -Child Nutrition Programs Restricted Income -County Maintenance of Effort (EC Section 8279) Restricted Income -Other: Restricted Income -Subtotal Transfer from Reserve -General Transfer from Reserve -Professional Development Transfer from Reserve Total Waived Family Fees for Certified Children (July -August) Family Fees Collected for Certified Children (September -June) Waived Family Fees for Certified Children (September -June) Family Fees for Certified Children (September -June) -Subtotal Interest Earned on Child Development Apportionment Payments Unrestricted Income -Fees for Non-Certified Children Unrestricted Income -Head Start Unrestricted Income -Other: Total Revenue Comments: Audit Report Page[ 5 A U D 8501 Page 6 of 8 Contract Number [cspp 0287 Full Name of Contractor [city of San Rafael Child Development Program Section 4 -Reimbursable Expenses Column A Column B Column C Expense Category Cumulative Audit Cumulative CDNFS 8501 Adjustments per Audit Direct Payments to Providers (FCCH only) 1000 Certificated Salaries 55,718 55,718 2000 Classified Salaries 72 ,094 72,094 3000 Employee Benefits 109,438 109,438 4000 Books and Supplies 7,818 7,818 5000 Services and Other Operating Expenses 12,702 12,702 6100/6200 Other Approved Capital Outlay 6400 New Equipment (program-related) 6500 Equipment Replacement (program-related) Depreciation or Use Allowance Start-up Expenses (service level exemption) Budget Impasse Credit Indirect Costs (include in Total Administrative Cost) Non-Reimbursable (State use only) Total Reimbursable Expenses 257,770 257,770 Total Administrative Cost (included in Section 4 above) 9,424 9,424 Total Staff Training Cost (included in Section 4 above) Approved Indirect Cost Rate: ~ NO SUPPLEMENTAL REVENUE/ EXPENSES Check this box and omit page 7. Audit Report Page[ 6 A U D 8501 Page 7 of 8 Contract Number [cspp 0287 Full Name of Contractor [city of San Rafael Child Development Program Section 5 -Supplemental Revenue Column A Column B Column C Supplemental Revenue Category Cumulative Audit Cumulative CDNFS 8501 Adjustments per Audit Enhancement Funding Other: Other: Total Supplemental Revenue Section 6 -Supplemental Expenses Column A Column B Column C Supplemental Expense Category Cumulative Audit Cumulative CDNFS 8501 Adjustments per Audit 1000 Certificated Salaries 2000 Classified Salaries 3000 Employee Benefits 4000 Books and Supplies 5000 Services and Other Operating Expenses 6000 Equipment/ Capital Outlay Depreciation or Use Allowance Indirect Costs Non-Reimbursable Supplemental Expenses Total Supplemental Expenses Audit Report Page [ 7 A U D 8501 Page 8 of 8 Contract Number !cspp 0287 Full Name of Contractor [city of San Rafael Child Development Program Section 7 -Summary Column A Column B Column C Summary Category Cumulative Audit Cumulative CDNFS 8501 Adjustments per Audit Total Certified Days of Enrollment 7,705 7,705 Days of Operation 175 175 Days of Attendance 7,696 7,696 Restricted Program Income Transfer from Reserve Family Fees for Certified Children (September -June) Interest Earned on Apportionment Payments Direct Payments to Providers Start-up Expenses (service level exemption) Total Reimbursable Expenses 257,770 257,770 Total Administrative Cost 9,424 9 ,424 Total Staff Training Cost Total Certified Adjusted Days of Enrollment [4,771 .7065 Total Non-Certified Adjusted Days of Enrollment ! 0 I Independent 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): Ives I Reimbursable expenses claimed on page 6 are eligible for reimbursement, reasonable, necessary, and adequately supported (select YES or NO from the drop-down box): ._IY_e_s_~ Include any comments in the comments box on page 5. If necessary, attach additional sheets to explain adjustments. Audit Report Page l 8 I Fiscal Year End June 30, 2021 California Department of Education Audited Reserve Account Activity Report Reserve Account Type Center-Based A U D 9530A Page 1 of 1 Vendor Code Full Name of Contractor !city of San Rafael Child Development Program Section 1 -Prior Year Reserve Account Activity 1. Beginning Balance (2019-20 AUD 9530A Ending Balance) 2193 0 2. Plus Transfers to Reserve Account: Per 2019-20 Post-Audit CDNFS 9530 Contract No.9283 Contract No. Contract No. Contract No. Contract No. Contract No . Total Transferred from 2019-20 Contracts to Reserve 3. Less Excess Reserve to be Billed 4. Ending Balance per 2019-20 Post-Audit CDNFS 9530 0 Section 2 -Current Year (2020-21) Reserve Account Activity Column A Column B Column C CDNFS Audit 9530A Adjustments per Audit 5. Plus Interest Earned This Year on Reserve 6. Less Transfers to Contracts from Reserve: CSPP General-Contract No .0287 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, 2021 0 0 COMMENTS -If necessary, attach additional sheets to explain adjustments. Audit Report PageCJ This Page Left Intentionally Blank REVIEW DRAFT 11 /9/2021 2:44 PM 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, 2021, and the related notes to the financial statements, and have issued our rep01t thereon dated DA TE. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Program's internal control over financial repo1ting (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 n01mal course of perfo1ming 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 imp01tant 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 and therefore, material weaknesses or significant deficiencies may exist that have not been identified . Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. Compliance and Other Matters As pait of obtaining reasonable assurance about whether the Program's financial statements are free from material misstatement, we performed tests of its compliance with ce1tain 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. REVIEW DRAFT 11 /9/2021 2:44PM 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. Purpose of this Report The purpose of this repott 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 repo1t is an integral pa1t 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 REVIEW DRAFT 11 /9/2021 2 :44 PM CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM CURRENT STATUS OF PRIOR YEAR FINDINGS For the Year Ended June 30, 2021 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 infonnation. Condition: We noted that more than one staff charged with processing accounts payable has access to edit the vendor database. We also understand that the City has a process for reviewing the changes made to the vendor database on a qua1terly 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 quruterly 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 qua1terly basis in order to detect phantom vendors and unauthorized changes to vendor accounts . Management reviews a repo1t in Eden, the City 's Financial System . Going forward, to formalize the review process, the repott will be printed to PDF and signed by the reviewer. Current Status: Implemented. 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 . REVIEW DRAFT 11/9/2021 2 :44 PM CITY OF SAN RAFAEL CHILD DEVELOPMENT PROGRAM CURRENT STATUS OF PRIOR YEAR FINDINGS For the Year Ended June 30, 2021 To mitigate the control risk, we understand that the City has a process to review the employee audit rep01is each pay period for accuracy and to ensure no unauthorized changes were made to the employee database. However, we selected tlu·ee pay periods (November 15, 2019 , January 31 , 2020 and May 15 , 2020) for testing of review of the employee audit repo11 and noted that there was no documentation of the review. 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 repo1is in some formal manner. Management Response: The Finance Director reviews an employee audit rep011 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. Current Status: Implemented. REVIEW DRAFT 11/9/2021 2 :44 PM CITY OF SAN RAFAEL, CALIFORNIA PEDESTRIAN AND BICYCLE PROJECTS FINANCIAL STATEMENTS FOR THE YEARS ENDED JUNE 30, 2021 AND 2020 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT This Page Left Intentionally Blank DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL PEDESTRIAN AND BICYCLE PROJECTS Financial Statements For the Years Ended June 30, 2021 and 2020 Table of Contents Page Independent Auditor's Report ........................................................................................................................ 1 Balance Sheets ........................................................................................................................................ 3 Statements of Revenues, Expenditures and Changes in Fund Balance .................................................. 4 Notes to the 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 11-8-21 DRAFT This Page Left Intentionally Blank DRAFT DRAFT REVIEW DRAFT 11-8-21 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 of San Rafael(City), as of and for the years ended June 30, 2021 and 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 opinions on these financial statements based on our audits. We conducted our audits 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 opinions. Opinions 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, 2021 and 2020, and the changes in financial position and cash flows, where applicable, for the years then ended in accordance with accounting principles generally accepted in the United States of America. 1 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT Accountancy Corporation 3478 Buskirk Avenue, Suite 215 Pleasant Hill, CA 94523 T 925.930.0902 F 925.930 .0135 E maze@mazeassociates.com w mazeassociates.com 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, 2021 and 2020, the changes in its financial position for the years then ended in accordance with accounting principles generally accepted in the United States of America. Our opinions are 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 15, 2021, 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 solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on 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 15, 2021 2 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT Allocation Allocation Instruction Instruction Number Number 20001098 21001022 2021 2020 ASSETS Due from Metropolitan Transportation Commission $68,460 $239,436 $307,896 $239,940 LIABILITIES Due to the City $68,460 $239,436 $307,896 $239,940 DEFERRED INFLOWS OF RESOURCES Unavailable Revenue 68,460 239,436 307,896 FUND BALANCE (68,460) (239,436) (307,896) Total Liabilities, Deferred Inflows of Resources and Fund Balance $68,460 $239,436 $307,896 $239,940 See accompanying notes to financial statements Totals CITY OF SAN RAFAEL PEDESTRIAN AND BICYCLE PROJECTS BALANCE SHEETS JUNE 30, 2021 AND 2020 3 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT Allocation Allocation Instruction Instruction Number Number 20001098 21001022 2021 2020 REVENUES TDA Article 3.0 (Note 2)$423,983 Total Revenues 423,983 EXPENDITURES Pedestrian and Bicycle Improvements (Note 2) Francisco Blvd. West $68,460 $239,436 $307,896 239,940 Francisco Blvd. West Multi-Use Pathway 184,043 Total Expenditures 68,460 239,436 307,896 423,983 Excess of Revenues over Expenditures (68,460) (239,436) (307,896) Fund balance at beginning of year Fund balance (deficit) at end of year ($68,460) ($239,436) ($307,896) See accompanying notes to financial statements Totals CITY OF SAN RAFAEL PEDESTRIAN AND BICYCLE PROJECTS STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE FOR THE YEARS ENDED JUNE 30, 2021 AND JUNE 30, 2020 4 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT CITY OF SAN RAFAEL PEDESTRIAN AND BICYCLE PROJECTS Notes to the Financial Statements For the Years Ended June 30, 2021 and 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 11-8-21 DRAFT CITY OF SAN RAFAEL PEDESTRIAN AND BICYCLE PROJECTS Notes to the Financial Statements For the Years Ended June 30, 2021 and June 30, 2020 NOTE 2 - TDA ARTICLE 3.0 REVENUE AND EXPENDITURES As of June 30, 2021 and 2020, the City had allocation instructions from the Metropolitan Transportation Commission for the following projects: Allocation Grant Project Name Instruction # Amount 2021 2020 2021 2020 Francisco Blvd. West Multi-Use Pathway 19001078 $184,043 $184,043 $184,043 Francisco Blvd. West 20001098 308,400 $68,460 239,940 239,940 Francisco Blvd. West 21001022 239,436 239,436 Total $731,879 $307,896 $423,983 $0 $423,983 Expended from Inception to June 30 Revenue Received from Inception to June 30 Expenditures for the Francisco Blvd. West Multi-Use Pathway (Allocation Instruction #19001078) were incurred during the year ended June 30, 2019. The expenditures were 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 11-8-21 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 Bicycle/Pedestrian Projects (Projects) as of and for the year ended June 30, 2021, and the related notes to the financial statements, and have issued our report thereon dated November 15, 2021. 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) as a basis for designing 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 11-8-21 DRAFT Accountancy Corporation 3478 Buskirk Avenue, Suite 215 Pleasant Hill , CA 94523 T 925.930.0902 F 925.930.0135 E maze @mazeassociates.com w mazeassociates.com 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 financial statements. 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 15, 2021 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 15, 2021 8 DRAFT DRAFT REVIEW DRAFT 11-8-21 DRAFT