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HomeMy WebLinkAbout11.29.22 Finance Committee Agenda PacketCity Council Finance Committee Agenda November 29, 2022 Page 1 SARATOGA CITY COUNCIL FINANCE COMMITTEE NOVEMBER 29, 2022 3:30 P.M. SPECIAL MEETING Teleconference/Public Participation Information - Special Meeting The Special Meeting will be held in-person and by teleconference pursuant to amendments to the teleconference rules required by the Ralph M. Brown Act allowing teleconferencing during a proclaimed state of emergency when a local official has recommended social distancing. Members of the City Council and the public may participate in person at the location listed below or via the Zoom platform using the information below. Members of the public can view and participate in the meeting by: 1. Attending the meeting in person in the Linda Callon Conference Room located at 13777 Fruitvale Avenue, Saratoga CA 95070 2. Accessing the meeting through Zoom * Webinar URL https://us02web.zoom.us/j/88934078423 * Webinar ID: 889 3407 8423 * Calling 1.669.900.6833 or 1.408.638.0968 and pressing *9 to raise their hand to speak on an agenda item when directed by the Mayor Written Communication Members of the public can send written comments prior to the meeting by commenting online at www.saratoga.ca.us/fc prior to the start of the meeting. These emails will be provided to the members of the Council and will become part of the official record of the meeting. Public Comment Members of the public may comment on any item for up to three (3) minutes. The amount of time for public comment may be reduced by the Mayor. Meeting Recording Information In accordance with the Saratoga City Council’s Meeting Recording Policy, the City Council Finance Committee Meetings are recorded and made available to the public following the meeting on the City website. City Council Finance Committee Agenda November 29, 2022 Page 2 CALL TO ORDER ROLL CALL AGENDA ITEMS 1. Finance Committee Minutes Recommended Action: Review and approve the minutes for the October 27, 2022 meeting Finance Committee Minutes 2. Annual Comprehensive Financial Report (ACFR) for the fiscal year ended June 30, 2022 Recommended Action: Receive report and presentation from Chavan and Associates, LLC the City’s audit firm Recommend City Council action a) Receive and file the ACFR and b) Direct staff to prepare and post the 2022-23 Cities Financial Transactions Report using the audited financials Annual Comprehensive Financial Review Summary Attachment A - Draft Management Discussion and Analysis Attachment B - Draft Basic Financials To be posted on November 28th: Attachment C – Final ACFR for the fiscal year ended June 30, 2022 3. 2023-24 Capital Improvement Program (CIP) Development Recommended Action: Receive report – No action required 2023-24 Capital Improvement Program CIP Development ADJOURNMENT CERTIFICATE OF POSTING OF THE AGENDA, DISTRIBUTION OF THE AGENDA PACKET, COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT I, Gina Scott, Administrative Analyst for the City of Saratoga, declare that the foregoing agenda for the meeting of the City Council Finance Committee of the City of Saratoga was posted and available for public review on November 23, 2022, at the City of Saratoga, 13777 Fruitvale Ave., Saratoga, CA 95070, and on the City’s website at www.saratoga.ca.us. Signed this 23rd day of November 2022 at Saratoga, California. Gina Scott, Administrative Analyst In accordance with the Ralph M. Brown Act, copies of the staff reports and other materials provided to the Committee by City staff in connection with this agenda, copies of materials distributed to the Committee concurrently with the posting of the agenda, and materials distributed to the Committee by staff after the posting of the agenda are available on the City City Council Finance Committee Agenda November 29, 2022 Page 3 website at www.saratoga.ca.us and are available for review in the office of the City Clerk at 13777 Fruitvale Avenue, Saratoga, California. In compliance with the Americans with Disabilities Act and the Governor’s Executive Order, if you need assistance to participate in this meeting, please contact the City Clerk at bavrit@saratoga.ca.us or call 408.868.1216 as soon as possible before the meeting. The City will use its best efforts to provide reasonable accommodations to provide as much accessibility as possible while also maintaining public safety. [28 CFR 35.102-35.104 ADA title II] City Council Finance Committee Minutes – October 27, 2022 Page 1 MINUTES SARATOGA CITY COUNCIL FINANCE COMMITTEE REGULAR MEETING OCTOBER 27, 2022 CALL TO ORDER The meeting was called to order at 3:30 p.m. via Zoom. ROLL CALL Present: Mayor Tina Walia, Vice Mayor Kookie Fitzsimmons Also Present: Nick Pegueros, Administrative Services Director Crystal Bothelio, Assistant City Manager John Cherbone, Public Works Manager Agnes Pabis, Finance Manager Macedonio Nunez, Engineering Services Manager Mary Beth Redding, Foster and Foster Gina Scott, Administrative Analyst ORAL COMMUNICATIONS ON NON-AGENDIZED ITEMS None AGENDA ITEMS 1.Finance Committee Minutes Recommended Action: Approve the minutes for the September 22, 2022, Finance Committee Regular Meeting. FITZSIMMONS/WALIA MOVED TO APPROVE THE MINUTES FOR THE MAY 26, 2022 FINANCE COMMITTEE REGULAR MEETING. MOTION PASSED BY VERBAL ROLL CALL. AYES: FITZSIMMONS, WALIA. NOES: NONE. ABSTAIN: NONE. 2.Other Post-Employment Benefits (OPEBs) Actuarial Valuation Project Overview Recommended Action: Receive report – No action required Administrative Services Director Nick Pegueros introduced the Other Post-Employment Benefits (OPEBs) Actuarial Valuation Project Overview and staff from the actuarial firm. Mary Beth Redding from Foster and Foster provided an overview of the services they will be providing. 3.Single Audit Update for the fiscal year ended June 30, 2022 Recommended Action: Receive report – No action required 3 City Council Finance Committee Minutes – October 27, 2022 Page 2 Finance Manager Agnes Pabis explained the requirements for a single audit and shared data showing that the City of Saratoga did not meet the $750,000 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal awards. She also shared a copy of the letter submitted to the State Controller’s Office confirming the City exemption from the single audit for the fiscal year ending June 30, 2022. ADJOURNMENT FITZSIMMONS/WALIA MOVED TO ADJOURN THE MEETING AT 4:00 PM. MOTION PASSED BY VERBAL ROLL CALL. AYES: FITZSIMMONS, WALIA. NOES: NONE. Minutes respectfully submitted: Gina Scott, Administrative Analyst City of Saratoga 4 ADMINISTRATIVE SERVICES Memorandum To: City Council Finance Committee From: Nick Pegueros Agnes Pabis Date: November 29, 2022 Subject: Annual Comprehensive Financial Report (ACFR) Review Recommendation: City staff recommends that the Finance Committee: 1.Receive report from the City’s independent auditor, Chavan and Associates, on the City of Saratoga’s ACFR for the fiscal year ended June 30, 2022; and 2.Recommend the following City Council actions at their December 7 meeting: a.Receive and file the ACFR and related reports; and b.Direct City staff to prepare and post the City’s Annual Financial Transactions Report using the financial statements contained in the ACFR and in accordance with State law. The ACFR is a set of financial statements comprising the financial report of a state, municipal or other governmental entity that complies with the accounting requirements enacted by the Government Accounting Standards Board (GASB) and provides accurate and meaningful information concerning the entity’s financial condition and performance. Entities are required to engage an external certified public accounting firm to audit financial reports using GASB requirements. Accordingly, the City contracts with Chavan and Associates, LLP, a certified public accounting firm licensed by the State of California, to perform the various required financial audits. As required, Chavan and Associates, LLP, audited the City’s financial statements in the ACFR for the year ended June 30, 2022, to assess and render an opinion on whether the City’s financial statement reports are presented fairly, to obtain reasonable assurance as to whether the financial statements are free of material misstatements, and conform to applicable generally accepted accounting principles. Chavan and Associates, LLP, expressed an unmodified opinion which indicates that the financial data of the City for the year ended June 30, 2022, is free from material misstatements and fairly represents the financial position of the governmental activities. Attachment: 1. Annual Comprehensive Financial Report for the fiscal year ended June 30, 2022 5 CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2022 Draft Management Discussion & Analysis for the fiscal year ended June 30, 2022 Attachment A Page 1 INTRODUCTION The Management’s Discussion and Analysis (MD&A) is a required section of the City’s Annual Comprehensive Financial Report (ACFR), as shown in the overview below. The purpose of the MD&A is to present discussion and analysis of the City’s financial performance during the fiscal year that ended on June 30, 2022. This report will (1) focus on significant financial issues, (2) provide an overview of the City’s financial activity, (3) identify changes in the City’s financial position, (4) identify any individual fund issues or concerns, and (5) provide descriptions of significant asset and debt activity. This information. presented in conjunction with the annual Transmittal Letter and Basic Financial Statements is intended to provide a comprehensive understanding of the City’s operations and financial standing. Required Components of the Annual Financial Report FISCAL YEAR 2021-22 FINANCIAL HIGHLIGHTS Total net position, or the City's assets plus deferred outflow of resources ($170 million) less its liabilities plus deferred inflow of resources ($17.56 million), was $152.45 million as of June 30, 2022. This is an increase of $15.96 million over the prior fiscal year, which is primarily due to an increase in tax revenues, the American Rescue Plan Act’s State and Local Fiscal Recovery Fund’s (ARPA SLFRF) grant allocation, and program revenue. The City’s Net Pension Liability was $0.73 million. This is a decrease of $7.48 million over the prior fiscal year, primarily due to the most recent actuarial valuation by the California Public Employees’ Retirement System (CalPERS) which incorporated favorable investment returns for the fiscal year ended June 30, 2020, changes in assumptions, and overall plan experience. Net Position included $117 million as investment in capital assets, net of depreciation and related debt, $8.9 million restricted for specific purposes, and $26.5 million in Unrestricted Net Position. Total City-wide revenues of $39.5 million consisted of $25.3 million in general revenue and $14.2 million in program revenue. City expenses totaled $23.57 million. The Governmental Funds fund balances totaled $31.87 million, with $15.41 million in the General Fund, $7.13 million in the ARPA SLFRF fund, $7.55 million in the Capital Improvement Funds, and $1.78 million in Other Governmental Funds. This represents an increase of $9.2 million from the prior year. Management’s Discussion & Analysis Government-Wide Financial Statements Fund Financial Statements Notes to the Financial Statements Basic Financial Statements 6 CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2022 Draft Management Discussion & Analysis for the fiscal year ended June 30, 2022 Attachment A Page 2 General Fund revenues totaled $26.87 million, while General Fund expenditures totaled $23.73 million. THE BASIC FINANCIAL STATEMENTS The Basic Financial Statements are comprised of 1) Government-Wide (City-wide) Financial Statements, and; 2) Fund Financial Statements. These two sets of financial statements provide the reader two different perspectives of the City's financial activities and financial position. The Government-Wide Financial Statements Government-Wide financial statements are prepared on the accrual basis, which means they measure the flow of all economic resources of the City as a whole. The Statement of Net Position and the Statement of Activities present information about the following: Governmental Activities - All of the City's basic services are considered to be governmental activities, including general government, community development, public safety, transportation, and, culture and leisure. These services are supported by general City revenues such as taxes, and by specific program revenues such as development and recreation program fees. Business-Type Activities - This category includes enterprise activities such as water, sewer, and utilities. Unlike governmental services, these activities are meant to be fully supported by charges paid by users, based on the services used. The City of Saratoga currently does not have any business-type activities. Government-Wide Financial Statements provide a longer-term view of the City's activities as a whole and are comprised of the Statement of Net Position and the Statement of Activities. The Statement of Net Position provides summary level information about the financial position of the City, including all its capital assets and long-term liabilities on a full accrual basis, similar to that used by corporations. The Statement of Activities provides summary level information about the City's revenues and expenses, also on a full accrual basis, with the emphasis on measuring net revenues and/or expenses for each of the City's programs. The Statement of Activities illustrates the change in Net Position for the fiscal year. City financial activities are required to be grouped as either government activities or business-type activities. The amounts in the Statement of Net Position and the Statement of Activities are required to be separated into governmental activities or business-type activities in order to distinguish between the two types of activities. In the case of the City of Saratoga, there are no business-type activities as of June 30, 2022. Government-Wide Financial Statements Long-term view, including capital assets and long-term liabilities similar to corporate financial statements. 7 CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2022 Draft Management Discussion & Analysis for the fiscal year ended June 30, 2022 Attachment A Page 3 Fund Financial Statements A fund represents a grouping of related accounts and is used to maintain control over resources that are segregated for specific activities or objectives. The City, like other local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Fund financial statements provide detailed information about each of the City's most significant funds, called major funds. The concept of major funds, and the determination of which funds are classified as major funds, was established by GASB Statement 34 and replaces the concept of combining like funds and presenting them in total. Instead, each major fund is presented individually, with all non-major funds summarized and presented in a single column. Subordinate schedules present the detail of these non- major funds. Major funds present the major activities of the City for the fiscal year, and may change from year to year as a result of changes in the pattern of the City's activities. The City's funds are segregated into three types: governmental funds, proprietary funds, and fiduciary funds. •The City's basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances available at year-end. Financial statements are prepared on the modified accrual basis, which means they measure only current financial resources and uses. Carrying amounts for capital assets and other long-lived assets, along with long-term liabilities are not presented on the balance sheet in the governmental fund financial statements. 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 the City's near-term financing requirements. Governmental Funds •Internal service funds are an accounting device used to accumulate and allocate costs internally among the City’s various functions. The City uses internal service funds to account for liability/risk management, worker’s compensation, office equipment support services, information technology services, vehicle and building maintenance, and vehicle and information technology equipment replacement. Because internal service funds primarily benefit governmental functions, they have been included with the governmental activities in the Government-Wide financial statements. Proprietary Funds •These funds account for assets held by the City in a trustee capacity or as an agent for individuals, private organizations, other governmental units, and/or other funds. Fiduciary funds are not reflected in the government-wide financial statements because these resources are not available to support the City's programs. The City reports three fiduciary funds: The West Valley Clean Water Program, the 2018 Arrowhead Community Facilities District (CFD) Bond, and the Arrowhead CFD Project. Additional information regarding these funds can be found in Note 1 of the financial statements. Fiduciary Funds Fund Financial Statements report the City's operations in more detail than Government-Wide statements and focus primarily on the short-term activities of the City's General Fund and other major funds. The Fund Financial Statements measure current revenues and expenditures and fund balances; they exclude capital assets, long-term debt, and other long-term amounts. Major funds account for the major financial activities of the City and are presented individually, while the activities of non-major funds are presented in summary with subordinate schedules presenting the detail for each of these other funds in the Supplementary Information section. Major funds are explained below. Fund Financial Statements Near-term view, measuring current revenues, expenditures, and fund balances. 8 CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2022 Draft Management Discussion & Analysis for the fiscal year ended June 30, 2022 Attachment A Page 4 NOTES TO THE FINANCIAL STATEMENTS Notes to the Financial Statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes can be found immediately following the fund financial statements. REQUIRED SUPPLEMENTARY INFORMATION Required supplementary information, other than presented in this MD&A, follows the Notes Section and includes a budgetary comparison for the General Fund as presented in the Governmental Fund Financial Statements, and information on the modified approach for city streets and infrastructure. SUPPLEMENTARY INFORMATION Combining and individual fund statements and schedules are included to provide additional information on non-major governmental funds including special revenue, debt service, and capital project funds, as well as proprietary internal service fund information and uses of capital assets. An un-audited statistical section provides historical and current data on financial trends, revenue and debt capacity, demographic and economic information, and operating information. 9 CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2022 Draft Management Discussion & Analysis for the fiscal year ended June 30, 2022 Attachment A Page 5 GOVERNMENT-WIDE FINANCIAL ANALYSIS Net Position serves over time as an indicator of the City's financial position. The City's Total Net Position increased $15,958,787 in Fiscal Year 2021-22. The primary reason for the increase in net position is an increase primarily due to an increase in property tax revenue, program revenue, the ARPA grant, and reductions to pension liabilities. The most significant portion of the City's Net Position ($117,017,380 or 77%) accounts for its investment in capital assets, (e.g., land, buildings, general government infrastructure, equipment, etc.) less any related debt used to acquire those assets that are still outstanding. These capital assets represent infrastructure which provides services to the citizens, consequently, these assets are not available for future spending. Of the City’s Net Position, $8,910,134 or 6% is subject to external restrictions on how the funding may be used. The remaining balance of $26,520,921, or 17% of the City's Net Position, is unrestricted and may be used to meet the City's ongoing obligations to citizens and creditors. Governmental Activities 2022 2021 Assets Current assets 43,363,032$ 32,409,892$ Capital assets 124,201,306 125,442,265 Total Assets 167,564,338 157,852,157 Deferred Outflow of Resources Deferred Outflow 2,442,854 2,785,827 Total Deferred Outflow of Resources 2,442,854 2,785,827 Liabilities Current liabilities 7,660,499 6,457,875 Long-term liabilities 7,656,892 15,765,407 Total Liabilities 15,317,391 22,223,282 Deferred Inflow of Resources Deferred Inflow 2,241,366 1,925,054 Total Deferred Inflow of Resources 2,241,366 1,925,054 Net Position Net investment in capital assets 117,017,380 117,671,447 Restricted for environmental services - 63,182 Restricted for special assessment funds 977,234 872,945 Restricted for public works programs 7,127,589 - Restricted for debt service 805,311 791,385 Unrestricted 26,520,921 17,090,689 Total Net Position 152,448,435$ 136,489,648$ Table 1 - Net Position 10 CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2022 Draft Management Discussion & Analysis for the fiscal year ended June 30, 2022 Attachment A Page 6 As shown in the below summary of the Statement of Activities table, program revenues increased by $7,214,046 from the prior fiscal year for governmental activities, and general revenues increased by $107,020 from the prior year. This resulted in a total increase in revenues of $7,321,066. Expenses decreased by $7,495,298 from the prior year primarily due to pension expense adjustments related to changes in assumptions and differences between expected and actual investment returns and plan experience. With total program and general revenues for Fiscal Year 2021-22 at $39,533,693 and total expenses at $23,574,906, the net activity resulted in an increase in Net Position of $15,958,787. Governmental Activities Increase Functions/Programs 2022 2021 (Decrease) Program Revenues Charges for services 6,498,905$ 5,345,704$ 1,153,201$ Operating grants and contributions 7,381,323 563,716 6,817,607 Capital grants and contributions 334,869 1,091,631 (756,762) Total Program Revenues 14,215,097 7,001,051 7,214,046 General Revenues Property taxes 17,427,588 16,294,043 1,133,545 Sales taxes 1,393,853 925,289 468,564 Local taxes 1,054,587 868,821 185,766 Franchise taxes 2,496,572 2,338,382 158,190 Intergovernmental revenues 2,477,479 3,105,433 (627,954) Investment earnings (299,911) 34,240 (334,151) Other revenues 768,428 1,645,368 (876,940) Total General Revenues 25,318,596 25,211,576 107,020 Expenses General and intergovernmental services 4,381,120 7,287,258 (2,906,138) Public safety 7,197,048 6,734,604 462,444 Public works 9,309,018 12,530,168 (3,221,150) Community services 532,308 966,536 (434,228) Community development services 1,881,150 3,262,810 (1,381,660) Interest on long-term debt (unallocated)274,262 288,828 (14,566) Total Expenses 23,574,906 31,070,204 (7,495,298)$ Increase / (Decrease) in Net Position 15,958,787 1,142,423 14,816,364 Net Position, Beginning of Year 136,489,648 135,347,225 1,142,423 Net Position, End of Year 152,448,435$ 136,489,648$ 15,958,787$ Table 2 - Statement of Activities 11 CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2022 Draft Management Discussion & Analysis for the fiscal year ended June 30, 2022 Attachment A Page 7 An analysis and graphical representation of the changes in revenues and expenditures by type of significant events follows: Revenues For Fiscal Year 2021-22, the growth in property tax revenues reflect the ongoing strength of the San Francisco Bay Area economy. The decrease in Capital Grants revenue is due to decreased activity in the activity for grant-funded Public Works and Community Services capital projects in fiscal year 2021-22. The increase in operating grants represent the ARPA SLFRF grant for loss revenue making it a operating grant. The City subsequently allocated the full ARPA SLFRF allocation to clean water capital improvement programs consistent with the goals and objectives of the ARPA legislation. General Revenues increased by $107,020 from the prior year. The most significant changes include: Property Tax revenue increased $1,133,545 over the prior year. The increase is largely due to an increase in the City’s Excess ERAF receipts which arise from strong property tax growth and school funding formulas set by the State of California. Intergovernmental revenue decreased $627,954 primarily due to one-time increase Measure B funds in previous year which were suspended due to legal action in years prior to fiscal year 2020-21. Other revenues decreased by $867,940 primarily because of the one-time sale of Rule 20A credits totaling $1,208,330 which occurred in the prior year. Program Revenues increased by $7,214,046 from the prior year. The most significant changes include: Capital Grants and Contributions increased $6,817,607 from the prior year primarily due to full receipt of the City’s ARPA SLFRF allocation. Charges for Services increased by $1,153,201 from the prior year due to receipt of Park In-lieu revenue of $970,299. 12 CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2022 Draft Management Discussion & Analysis for the fiscal year ended June 30, 2022 Attachment A Page 8 Expenses Fiscal year 2021-22 expenses decreased by $9,172,432, primarily due to changes in assumptions, investment returns and overall plan experience. The fiduciary net position in the pension pools increased by 23% which was an increase of $10,986,723 in the City’s proportionate share of the assets in the pool. The fiduciary net position directly offsets the net pension liability and directly affects pension expense. Readers of the financial statements are encouraged to consider that the positive decrease in pension liabilities reported in this report does not incorporate CalPERS' negative investment losses for the year ended June 30, 2022, of 6.1 percent. The impact to each program is summarized as follows: The following summarizes the changes in total government-wide expenses by category: Increase 2022 2021 (Decrease) General and intergovernmental services (2,310,496) 707,070 (3,017,566) Public works (3,148,421) 894,097 (4,042,518) Community services (432,005) 119,075 (551,080) Community development services (1,208,726) 352,542 (1,561,268) Total Adjustment (7,099,648)$ 2,072,784$ (9,172,432)$ Table 3 - Pension Expense Adjustment by Program 13 CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2022 Draft Management Discussion & Analysis for the fiscal year ended June 30, 2022 Attachment A Page 9 The following analysis removes the $10,986,723 adjustment to pension liabilities, discussed above, to highlight the $1,194,263 operational expenditure changes increase over prior year:  Public Safety expenses increased by $432,971 due to contractual cost increases for services provided by the Santa Clara County Sherriff’s Office.  Internal Service costs increased by $785,951, largely attributed to the liability/ risk management and information technology funds. Liability insurance premiums increased by $122,945, approximately 40 percent, and claims liability expense increased by $205,555. Information technology expenditures increased by $160,720. 14 CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2022 Draft Management Discussion & Analysis for the fiscal year ended June 30, 2022 Attachment A Page 10 MAJOR AND OTHER GOVERNMENTAL FUNDS: CHANGE IN FUND BALANCE A summary of the changes in fund balance of the Major Funds and Other Governmental Funds is presented below: The General Fund, ARPA/SLFRF fund and Capital Improvement Funds are listed as Major Funds in fiscal year 2021-22. The Other Governmental Funds category includes thirty Landscape and Lighting Districts and Storm Drain funds (presented as one combined fund in the financials) and the Library Bond Debt Service Fund. The total net change from fiscal year transactions, including Major Funds and Other Governmental Funds, was an increase of $9,216,259. General Fund As shown in the Major Funds table above, the net change in the General Fund's ending fund balance is an increase of $188,875. General Fund revenue budgets are conservatively based upon prior year experience and revenue specific information. Overall, revenues increased by $473,532 whereas expenditures increased by $1,071,625. The growth in expenditures outpaces the growth in revenues raising concern that the General Fund’s ability to transfer funds to the Capital Improvement Program is quickly diminishing. Expenses are budgeted at anticipated program needs at not-to-exceed projected funding levels. However, the City has opted to commit additional funding towards the Unfunded Accrued Liability (UAL) related to pensions. In fiscal year 2021-22, the City Council directed staff to make a $1,000,000 payment towards the UAL. This payment is more than the required minimum contribution amount required, thereby reducing the principal at a faster pace. As of June 30, 2022, the Net Pension Liability, or NPL, is $727,447. This is a decrease of $7.48. million over the prior fiscal year, primarily due to estimated investments returns vs. actual and overall plan experience. ARPA SLFRF Fund The ARPA SLFRF fund is a new fund to record the City’s allocation from the ARPA SLFRF and has a net increase of $7,213,238. The revenue is an operating grant under the US Department of Treasury’s lost revenue allowance under the SLFRF final rules. The City subsequently allocated the full ARPA SLFRF allocation to clean water capital improvement programs consistent with the goals and objectives of the ARPA legislation. Other ARPA Capital Governmental General SLFRF Improvement Funds Total Revenues 26,874,382$ 7,213,238$ 4,132,331$ 1,384,033$ Total Expenditures 23,725,375 - 5,396,532 1,265,818 Revenues Over (Under) Expenditures 3,149,007 7,213,238 (1,264,201) 118,215 Transfers in - - 3,045,781 - Transfers out (2,960,132) (85,649) - - Net change in fund balances 188,875 7,127,589 1,781,580 118,215 Beginning of year 15,221,575 - 5,763,785 1,664,330 End of year 15,410,450$ 7,127,589$ 7,545,365$ 1,782,545$ Major Funds Table 4 - Changes in Fund Balances 15 CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2022 Draft Management Discussion & Analysis for the fiscal year ended June 30, 2022 Attachment A Page 11 Capital Improvement Project Fund The net increase of $1,781,580 in the Capital Improvement Funds occurred due to General Fund transfers to fund capital improvements offset by current year capital expenditures. Other Governmental Funds Other Governmental Funds fund balances increased by a total of $118,215 as special assessments continue to exceed publics works expenditures and debt service costs. 16 CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2022 Draft Management Discussion & Analysis for the fiscal year ended June 30, 2022 Attachment A Page 12 GENERAL FUND – BUDGETARY HIGHLIGHTS Changes from the City's General Fund original budget to the final budget are detailed in the Required Supplementary Information Section along with a comparison to actual activity for the fiscal year. Changes to the City's budget that increase or decrease appropriations in a fund must be approved by a resolution of the City Council. Modifications to the budget that are a realignment of fiscal activities with no impact to the fund's bottom line may be approved by the City Manager. Significant changes from the City’s original budget to the final budget are summarized as follows: Revenues and Transfers In The General Fund adopted and final revenue budget is shown in the schedule below: Table 5 - Adopted to Final Budget Fiscal Year Ended June 30, 2022 The budget for other revenues decreased by $2,785,000 because the adopted budget included the first half of ARPA SLFRF allocation as General Fund revenue. With the decision to dedicate the ARPA SLFRF to clean water projects, the City moved the funds to the newly established ARPA SLFRF fund. Expenses and Transfers Out The original and final General Fund expense budget is shown in the schedule below: Table 6 - Adopted to Final Budget Fiscal Year Ended June 30, 2022 During the fiscal year, the original budget was increased by $42,000 to account for increased contract costs. Transfers out were increased by $225,001 to fund various additional capital projects. += Adopted Budget Final Budget Adjustments Budget Revenues 27,094,296$ (2,785,000)$ 24,309,296$ Transfers in -$ -$ -$ General Fund Revenues and Transfers In += Adopted Budget Final Budget Adjustments Budget Expenses 25,032,141$ 42,000$ 25,074,141$ Transfers out 2,735,131$ 225,001$ 2,960,132$ General Fund Expenditures & Transfers Out 17 CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2022 Draft Management Discussion & Analysis for the fiscal year ended June 30, 2022 Attachment A Page 13 CAPITAL ASSETS The City of Saratoga elected to use the "Modified Approach" as defined by GASB Statement No. 34 for infrastructure reporting in which eligible infrastructure capital assets are not required to be depreciated if the following requirements are met: The City manages the assets using an asset management system which requires the City (1) perform an up-to-date inventory; (2) perform condition assessments and summarize the results using a measurement scale; and (3) estimate the annual amount to preserve the assets at the established condition assessment level. The City documents that the eligible infrastructure capital assets are being preserved approximately at or above the established and disclosed condition assessment level. City policy is to achieve a Pavement Condition Index (PCI) average rating of 70 for all streets, at minimum. The City’s most recent overall rating, in 2022, was estimated to be 66 with 49% of streets rated “Very Good”, 30% rated as “Good”, 15% of streets rated “Poor,” and 6% of streets rated as "Very Poor." While the City Council continues to review infrastructure investment strategies, the City continues to make significant investments into City streets in order to bring the average PCI rating up to the target of 70. It was estimated in the most recent pavement study in February 2020 that the five-year (2019-2023) cost to maintain the street infrastructure at its 2019 level (PCI of 67) would be $21,350,000 ($4.27 million/year). For more detailed information on Capital Assets activity, please refer to Note 4 in the section entitled "Notes to the Basic Financial Statements" and Note 2 in the "Required Supplementary Section." As reflected in the following schedule, the City has $125,442,265 invested in a variety of capital assets as of June 30, 2021. This represents an increase of $18,335 from the prior year. 2022 2021 Land 20,173,790$ 20,160,713$ Building and structures 13,639,657 14,335,493 Machinery and equipment 928,166 1,011,404 Infrastructure 80,064,084 80,840,452 Construction in progress 9,395,609 9,094,203 Total Capital Assets, Net of Depreciation 124,201,306$ 125,442,265$ Table 7 - Capital Assets Net of Depreciation Governmental Activities 18 CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2022 Draft Management Discussion & Analysis for the fiscal year ended June 30, 2022 Attachment A Page 14 The following reconciliation summarizes the changes in Capital Assets. Major capital projects in progress during fiscal year 2021-22 included the following expenditures:  Mendelsohn Lane Rehabilitation - $109,999  Saratoga Avenue Sidewalk - $68,801  Saratoga-Sunnyvale Road Pathway - $110,000  Quito Road Sidewalk Gap Closure - $142,390  Quito Road Bridge Replacement – ROW - $95,008  Orchard Irrigation and Tree Improvements - $89,052  Blue Hills Elementary Pedestrian Crossing - $57,557  Community Center Improvements - $66,266  Senior Center/ Community Center Generator and EV Charging Stations - $76,043 Additional information on Capital Assets is included in Note 4 to the financial statements. Balance Balance June 30, 2021 Additions Retirements Reclassification June 30, 2022 Land 20,160,713$ -$ -$ 13,077$ 20,173,790$ Building and structures 27,370,739 - - 84,543 27,455,282 Machinery and equipment 4,269,711 201,528 - - 4,471,239 Infrastructure 113,118,066 - - 600,143 113,718,209 Construction in progress 9,094,203 999,169 - (697,763) 9,395,609 Depreciation (48,571,167) (2,441,656) - - (51,012,823) Total Capital Assets, Net of Depreciation 125,442,265$ (1,240,959)$ -$ -$ 124,201,306$ Table 8 - Changes in Capital Assets 19 CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2022 Draft Management Discussion & Analysis for the fiscal year ended June 30, 2022 Attachment A Page 15 DEBT AND OTHER LONG-TERM OBLIGATION ADMINISTRATION The net change in outstanding obligations for the City of Saratoga was a decrease of $593,884. Total long- term bonded debt, including premiums, decreased by $586,892. Outstanding compensated absences decreased by $6,992. The current portion of long-term debt ($580,000 for the refunded 2011 General Obligation Bonds for fiscal year 2021-22) and $21,892 of amortized net original premium are classified as a current liability in the City's Statement of Net Position. General Obligation Bonds On July 14, 2011 the City refunded the 2001 General Obligation Bonds and, in their place, issued 2011 General Obligation Bonds for $11,995,000. Interest rates on the bonds range from 2.0% to 4.0%, and the final payment is due August 1, 2031. Principal of $565,000 and interest of $280,852 were paid during the fiscal year. Compensated Absences Compensated absences are accrued liabilities for vested and unpaid vacation and sick pay. The compensated absences balance decreased during the fiscal year by $6,992 due to a decrease in use of paid time-off. An estimated current liability of $641,025 is anticipated for the next fiscal year. Additional information on outstanding obligations can be found in Note 5 of the financial statements. 2022 2021 2011 General obligation bond 6,965,000$ 7,530,000$ Net original issue premuim 218,926 240,818 Compensated absences 988,436 995,428 Total Outstanding long-term obligations 8,172,362$ 8,766,246$ Table 9 - Outstanding Long-Term Obligations Governmental Activities 20 CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2022 Draft Management Discussion & Analysis for the fiscal year ended June 30, 2022 Attachment A Page 16 ECONOMIC FACTORS The City of Saratoga is primarily a residential community with limited commercial or industrial activity within its boundaries. Saratoga is considered a desirable place to live due to its highly rated schools, beautiful neighborhoods, fine dining, and proximity to many technology companies. In 2021-22, Saratoga’s assessed property values continued to increase, consumer sales tax and hotel tax recovered to near their pre- pandemic highs, and personal income remained resilient. The following discuss the key economic factors impacting the city’s finances. Assessed values. The assessed value of property in Saratoga continues to demonstrate strength. Through the Great Recession, when many communities experienced assessed value losses, Saratoga’s remained positive, providing stability in the City’s largest revenue source. The October 2022 preliminary Santa Clara County Assessor’s assessed valuation working file for the fiscal year 2023-24 reports an increase in Saratoga’s property values of 4.04 percent, outperforming the countywide valuation increase of 3.5 percent. Sales and transient occupancy/hotel taxes. Unlike many of its neighbors, Saratoga’s consumption-based tax revenues (sales and hotel taxes) center around experiences such as regional and State parks, the downtown Village, Hakone Gardens, fine dining, vineyards, and performance venues. UCLA Anderson Forecast notes that experience-based spending, such as dining, is growing faster than purchasing goods as consumers return to pre-pandemic social activities. The trend works in Saratoga’s favor resulting in the City’s rapid recovery of the consumption-based tax revenues to near pre-pandemic highs. Employment The City’s unemployment rate is 2%, on par with the County’s overall unemployment (California Employment Development Department, September 2022.) UCLA Anderson Forecast’s 2022 San Francisco Economic Outlook report highlighted that low unemployment would likely persist due to the impacts of demographic shifts as the oldest segment of the workforce retires and younger generations are unable to fill the vacancies created. An additional economic indicator of note by Anderson Forecast is the level of venture capital flowing into California and the Bay Area. Venture capital investment is largely viewed as an investment in the future, and the location of the investment can benefit from higher employment, housing costs, and consumer spending. For the first half of 2022, Anderson Forecast reports that of the $118 billion in venture capital invested in California, approximately 44% occurred in the Bay Area region. 21 CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2022 Draft Management Discussion & Analysis for the fiscal year ended June 30, 2022 Attachment A Page 17 OUTLOOK Although the City remains optimistic and the near-term economic outlook remains positive, several factors with yet to be determined impacts warrant monitoring. The factors most concerning in 2023-24 and beyond are the impacts of inflation, the perpetual threat to local revenue sources, and effects of extreme weather events. Any one of the three poses a risk to Saratoga’s finances; however, growing evidence suggests that two or more will converge thereby challenging the City’s ability to balance its budget in 2023-24 and beyond.    Cost of Goods and Services. The impacts of forty-year high inflation weighs on the current and future year budgets. Bids for public works projects and various contract services have increased between 7 and 15 percent compared to previous years. As costs increase, whether to maintain current service levels at the higher cost or to reduce services to hold expenditures flat is a decision required in 2023-24. Employee Salaries. The 2022-23 budget includes increases in employee salaries and benefits afforded by the current labor agreements, which expire at the end of 2022-23. Employees received a 3 percent cost-of- living-adjustment for base salary in 2022-23, an increase below the regional inflation rate of 5.2 percent as measured in February 2022. Due to contractual obligations, the 2022-23 budget includes approximately $450,000 in increased personnel costs. The impact of inflation on City personnel costs in 2023-24 and beyond is subject to negotiations that commence in January 2023. CalPERS Pension Costs. Inflation has also sparked concerns about an economic downturn and is widely credited with significant stock market losses in recent months, most notably in the technology sector. If the recent stock market performance flattens at the current level or worsens, the City’s unfunded pension liability costs will increase beginning in 2024-25. Public Safety Contract Services. The City contracts with the Santa Clara County Sheriff’s Office for public safety services and the City of San Jose for animal control services total $7,555,000. As service organizations, both agencies will experience similar inflationary pressures on employee salaries and benefits as the City.  The animal control contract expires at the end of 2022-23, and the public safety services contract expires at the end of 2023-24. The 2022-23 budget includes the maximum increase allowed under the current Sheriff’s contract of approximately $500,000 or 7 percent. Revenue Loss Threats. In 2004, the State permanently reduced the vehicle license fee (VLF) from 2 to 0.65 percent, which reduced funding for cities and counties by approximately $4.4 billion (in 2004 dollars.) To mitigate this impact, the State agreed to backfill the lost VLF revenues dollar-for-dollar by allocating more property tax revenues to cities and counties. The State Department of Finance has added language to the State’s 2022-23 budget that threatens the VLF backfill for those agencies that receive more Educational Revenue Augmentation Fund (ERAF) dollars than required to fund schools up to their minimum state funding levels (“Excess ERAF”). The 2022-23 budget includes $650,000 of Excess ERAF revenue. Recent court challenges to the Excess ERAF formula threatens future growth of this revenue source. 22 CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2022 Draft Management Discussion & Analysis for the fiscal year ended June 30, 2022 Attachment A Page 18 Extreme Weather Events. 2022 is the driest year in California’s 128 years of recorded history. The prolonged drought has stressed and caused death to trees in all communities; however, Saratoga’s is significantly impacted due to the number of trees in our community. In high wind and extraordinary wet weather events, tree failures that block roads and paths require urgent removal to protect residents’ safety. The City contracts for emergency tree removals, and the emergency tree removal budget has increased by more than 60 percent in 2022-23 as the frequency of tree removals have increased and demand for tree removal services is high. Property and Liability Insurance Premiums. The frequency and severity of natural disaster-related insurance claims in California have impacted the cost of maintaining property and liability insurance. The City has experienced an increase in premiums of $546,000 from 2018 to 2023. The rapid escalation has occurred primarily in 2021-22 and the 2022-23 budget, with the prospect of similar increases in future years. REQUEST FOR FINANCIAL INFORMATION This financial report is designed to provide a general overview of the City of Saratoga's finances for all of Saratoga's residents, taxpayers, customers, investors, and creditors. This financial report seeks to demonstrate the City's accountability for the money it receives. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Administrative Services Director, 13777 Fruitvale Avenue, Saratoga, California 95070. 23 CITY OF SARATOGA STATEMENT OF NET POSITION JUNE 30, 2022 Draft Basic Financial Statements for the fiscal year ended June 30, 2022 Attachment B Page 1 Governmental Activities ASSETS Current Assets: Cash and investments 36,477,881$ Restricted cash and investments 1,797,979 Receivables: Accounts 5,082,691 Prepaids 4,481 Total Current Assets 43,363,032 Noncurrent Assets: Capital Assets: Non-depreciable 82,704,176 Depreciable, net 41,497,130 Total Capital Assets 124,201,306 Total Assets 167,564,338$ DEFERRED OUTFLOWS OF RESOURCES Adjustments related to pension liability 2,442,854$ Total Deferred Outflows of Resources 2,442,854$ LIABILITIES Current Liabilities: Accounts payable 1,474,840$ Accrued payroll 285,463 Interest payable 112,410 Deposits payable 4,349,186 Claims payable 195,683 Long-term obligations - due within one year 1,242,917 Total Current Liabilities 7,660,499 Noncurrent Liabilities: Net pension liabilty 727,447 Long-term obligations - due in more than one year 6,929,445 Total Noncurrent Liabilities 7,656,892 Total Liabilities 15,317,391$ DEFERRED INFLOWS OF RESOURCES Adjustments related to pension liability 1,958,998$ Unavailable revenue 282,368 Total Deferred Inflows of Resources 2,241,366$ Net Position Net investment in capital assets 117,017,380$ Restricted for: Special assessment funds 977,234 Public works programs 7,127,589 Debt service 805,311 Total Restricted 8,910,134 Unrestricted 26,520,921 Total Net Position 152,448,435$ 24 CITY OF SARATOGA STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2022 Draft Basic Financial Statements for the fiscal year ended June 30, 2022 Attachment B Page 2 Net (Expense) Revenue and Changes in Program Revenues Net Position Primary Operating Capital Government Charges for Grants and Grants and Governmental Functions/Programs Expenses Services Contributions Contributions Total Activities Primary Government: Governmental Activities: General and intergovt'l services 4,381,120$ 57,937$ 6,800$ -$ 64,737$ (4,316,383)$ Public safety 7,197,048 573,133 161,285 - 734,418 (6,462,630) Public works 9,309,018 3,280,102 7,213,238 334,869 10,828,209 1,519,191 Community services 532,308 281,526 - - 281,526 (250,782) Community development services 1,881,150 2,306,207 - - 2,306,207 425,057 Interest on long-term debt (unall.)274,262 - - - - (274,262) Total 23,574,906$ 6,498,905$ 7,381,323$ 334,869$ 14,215,097$ (9,359,809)$ General Revenues: Taxes Property taxes 17,427,588$ Sales taxes 1,393,853 Local taxes 1,054,587 Franchise taxes 2,496,572 Total taxes 22,372,600 Intergovernmental (not restricted to specific programs)2,477,479 Investment earnings (299,911) Other revenues 768,428 Total General Revenues 25,318,596 Change in Net Position 15,958,787 Net Position - Beginning of Year 136,489,648 Net Position - End of Year 152,448,435$ 25 CITY OF SARATOGA GOVERNMENTAL FUNDS – BALANCE SHEET JUNE 30, 2022 Draft Basic Financial Statements for the fiscal year ended June 30, 2022 Attachment B Page 3 Other Total ARPA Capital Governmental Governmental General SLFRF Improvement Funds Funds ASSETS Cash and investments 19,909,470$ 3,520,970 7,787,341$ -$ 31,217,781$ Restricted cash and investments - - - 1,797,979 1,797,979 Receivables: Accounts 961,990 3,606,619 488,619 6,286 5,063,514 Prepaid Items 4,481 - - - 4,481 Total assets 20,875,941$ 7,127,589$ 8,275,960$ 1,804,265$ 38,083,755$ LIABILITIES AND FUND BALANCES Liabilities: Accounts payable 843,748$ -$ 466,104$ 21,720$ 1,331,572$ Accrued payroll and benefits 254,680 - - - 254,680 Deposits payable 4,349,186 - - - 4,349,186 Total liabilities 5,447,614 - 466,104 21,720 5,935,438 DEFERRED INFLOW OF RESOURCES Deferred revenue 17,877 - 264,491 - 282,368 Total deferred outflow of resources 17,877 - 264,491 - 282,368 Fund Balances: Nonspendable: Prepaid Items 4,481 - - - 4,481 Restricted: Lighting and landscape assessments - - - 977,234 977,234 Public works programs - 7,127,589 - - 7,127,589 Debt service - -- 805,311 805,311 Committed: Capital improvement program - - 7,545,365 - 7,545,365 Hillside stability 1,000,000 - - - 1,000,000 Assigned: Future capital & efficiency 3,509,000 - - - 3,509,000 Carryforwards 20,000 - - - 20,000 Facility replacement 3,700,000 - - - 3,700,000 Unassigned: Working capital 1,000,000 - - - 1,000,000 Fiscal stabilization 3,250,000 - - - 3,250,000 Compensated absences 330,000 - - - 330,000 Other unassigned 2,596,969 - - - 2,596,969 Total fund balances 15,410,450 7,127,589 7,545,365 1,782,545 31,865,949 Total liabilities and fund balances 20,875,941$ 7,127,589$ 8,275,960$ 1,804,265$ 38,083,755$ Major Funds 26 CITY OF SARATOGA RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET POSITION JUNE 30, 2022 Draft Basic Financial Statements for the fiscal year ended June 30, 2022 Attachment B Page 4 Total Fund Balances - Total Governmental Funds 31,865,949$ Amounts reported for governmental activities in the statement of net position were different because: Capital assets used in governmental activities were not current financial resources. Therefore, they were not reported in the Governmental Funds Balance Sheet. The capital assets were adjusted as follows: Non-depreciable capital assets 82,704,176 Depreciable capital assets, net 41,028,269 Total Capital Assets 123,732,445 Interest payable on long-term debt did not require current financial resources. Therefore, interest payable was not reported as a liability in Governmental Funds Balance Sheet.(112,410) Internal service funds are used by management to charge the costs of office stores, vehicle and equipment maintenance and replacement, information services and replacement, building maintenance, risk management, and workers compensation. The assets and liabilities of the internal service funds are included in the governmental activities in the statement of net position 5,378,404 Deferred outflows of resources are transactions that have already taken place but are not ready to be recognized on the financial statements as expenses Differences between Expected and Actual Experience 81,575 Change in employer's proportion 604,314 Pension Contributions Made Subsequent to Measurement Date 1,756,965 Total Deferred Outflows of Resources 2,442,854 Long-term obligations were not due and payable in the current period. Therefore, they were not reported in the Governmental Funds Balance Sheet. The long-term liabilities were adjusted as follows: General obligation bonds (6,965,000) Net Pension Liability (727,447) Compensated absences (988,436) Net original issue premium (218,926) Total Long-Term Obligations (8,899,809) Deferred inflows of resources are transactions that have already taken place but are not ready to be recognized on the financial statements as revenues Changes of Assumptions - Differences between Projected and Actual Investment Earnings (635,022) Differences between Employer's Contributions and Proportionate Share of Contributions (1,312,975) Change in employer's proportion (11,001) Total Deferred Inflows of Resources (1,958,998) Net Position of Governmental Activities 152,448,435$ 27 CITY OF SARATOGA STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE FOR THE YEAR ENDED JUNE 30, 2022 Draft Basic Financial Statements for the fiscal year ended June 30, 2022 Attachment B Page 5 Other Total ARPA Capital Governmental Governmental General SLFRF Improvement Funds Funds REVENUES: Property taxes 17,409,864$ -$ -$ 17,724$ 17,427,588$ Special assessments - - - 1,362,327 1,362,327 Sales taxes 1,393,853 - - - 1,393,853 Other local taxes 1,054,587 - - - 1,054,587 Licenses & permits 2,292,527 - 1,566,313 - 3,858,840 Fines & forfeiture 95,697 - 17,485 - 113,182 Intergovernmental - Federal - 7,213,238 37,183 - 7,250,421 Intergovernmental - State 549,667 - 1,383,412 - 1,933,079 Intergovernmental - Other 46,856 - 963,315 - 1,010,171 Charges for services 923,533 - 3,364 - 926,897 Franchise fees 2,418,837 - 77,735 - 2,496,572 Use of money and property 15,914 - -3,982 19,896 Other revenue 673,047 - 83,524 - 756,571 Total revenues 26,874,382 7,213,238 4,132,331 1,384,033 39,603,984 EXPENDITURES: Current: General and intergovernmental services 5,515,624 - - - 5,515,624 Public safety 7,197,048 - - - 7,197,048 Public works 7,095,948 - - 419,966 7,515,914 Community services 1,031,282 - - - 1,031,282 Community development services 2,885,473 - - - 2,885,473 Capital outlay - - 5,396,532 - 5,396,532 Debt service: Principal - - - 565,000 565,000 Interest and fiscal charges - - - 280,852 280,852 Total expenditures 23,725,375 - 5,396,532 1,265,818 30,387,725 REVENUES OVER (UNDER) EXPENDITURES 3,149,007 7,213,238 (1,264,201) 118,215 9,216,259 OTHER FINANCING SOURCES (USES): Transfers in - - 3,045,781 - 3,045,781 Transfers out (2,960,132) (85,649) - - (3,045,781) Total other financing sources (uses)(2,960,132) (85,649) 3,045,781 - - Net change in fund balances 188,875 7,127,589 1,781,580 118,215 9,216,259 FUND BALANCES: Beginning of year 15,221,575 - 5,763,785 1,664,330 22,649,690 End of year 15,410,450$ 7,127,589$ 7,545,365$ 1,782,545$ 31,865,949$ Major Funds 28 CITY OF SARATOGA RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE TO THE GOVERNMENT-WIDE STATEMENT OF ACTIVITIES AND CHANGES IN NET POSITION FOR THE YEAR ENDED JUNE 30, 2022 Draft Basic Financial Statements for the fiscal year ended June 30, 2022 Attachment B Page 6 Net Change in Fund Balances - Total Governmental Funds 9,216,259$ Amounts reported for governmental activities in the Statement of Activities and Changes in Net Position were different because: Governmental Funds report capital outlay as expenditures. However, in the Government-Wide Statement of Activities and Changes in Net Position, the cost of those assets was allocated over their estimated useful lives as depreciation expense. This is the amount of capital assets recorded in the current period.999,167 Depreciation expense on capital assets was reported in the Government-Wide Statement of Activities and Changes in Net Position, but it did not require the use of current financial resources. Therefore, depreciation expense was not reported as expenditures in the Governmental Funds.(2,258,630) Internal service funds are used by management to charge the costs of office stores, vehicle and equipment maintenance and replacement, information services and replacement, building maintenance, risk management, and workers' compensation. The net revenue or excess expenses of the internal service funds is reported with government activities.301,868 GASB 68 Adjustments to pension expense Change in net pension liability - current year 7,476,566 Amortization of changes in deferred outflows (342,973) Amortization of changes in deferred inflows (33,944) Adjustments to pension expense as a result of GASB 68 7,099,649 Long-term compensated absences and claims payables were reported in the Government-Wide Statement of Activities and Changes in Net Position, but they did not require the use of current financial resources. Therefore, long-term compensated absences and claims payable were not reported as expenditures in governmental funds. Compensated absences 6,992 Repayment of bond principal was an expenditure in governmental funds, but the repayment reduced long-term liabilities in the Government-Wide Statement of Net Position. Long-term debt repayments 565,000 Revenues resulting from the refunding of outstanding debt are not available to pay current-period expenditures and therefore, are revenue in the funds. Net original issue premium 21,892 Interest expense on long-term debt was reported in the Government-Wide Statement of Activities and Changes in Net Position, but it did not require the use of current financial resources. Therefore, interest expense was not reported as expenditures in governmental funds. The following amount represented the change in accrued interest from prior year.6,590 Change in Net Position of Governmental Activities 15,958,787$ 29 CITY OF SARATOGA STATEMENT OF NET POSITION PROPRIETARY FUNDS JUNE 30, 2022 Draft Basic Financial Statements for the fiscal year ended June 30, 2022 Attachment B Page 7 Governmental Activities - Internal Service Funds ASSETS Current assets: Cash and investments 5,260,100$ Accounts receivable 19,177 Total current assets 5,279,277 Noncurrent assets: Capital assets: Machinery and equipment 2,201,949 Less: accumulated depreciation (1,733,088) Total capital assets (net of accumulated depreciation)468,861 Total assets 5,748,138$ LIABILITIES Liabilities: Current liabilities: Accounts payable 143,268$ Accrued payroll and benefits 30,783 Other payables 195,683 Total current liabilities 369,734$ NET POSITION Net investment in capital assets 468,861$ Unrestricted 4,909,543 Total net position 5,378,404$ 30 CITY OF SARATOGA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2022 Draft Basic Financial Statements for the fiscal year ended June 30, 2022 Attachment B Page 8 Governmental Activities - Internal Service Funds Operating revenues: Charges for services 3,560,000$ Other operating revenues 44,954 Total operating revenues 3,604,954 Operating expenses: Cost of services 3,120,062 Depreciation 183,024 Total operating expenses 3,303,086 Operating income (loss)301,868 Change in net position 301,868 Total net position - beginning 5,076,536 Total net position - ending 5,378,404$ 31 CITY OF SARATOGA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2022 Draft Basic Financial Statements for the fiscal year ended June 30, 2022 Attachment B Page 9 Governmental Activities - Internal Service Funds Cash flows from operating activities: Receipts from customers and users 3,592,896$ Payments to suppliers (1,846,245) Payments to employees (1,119,266) Net cash provided (used) by operating activities 627,385 Cash flows from capital activities: Acquisition of capital assets (201,528) Net cash provided for the acquisition of capital assets (201,528) Net increase in cash and cash equivalents 425,857 Cash and cash equivalents, beginning of year 4,834,243 Cash and cash equivalents, ending of year 5,260,100 Reconciliation of operating income to net cash provided by operating activities: Operating income (loss)301,868 Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation 183,024 Change in operating assets and liabilities: Accounts receivables (12,058) Accounts payable 55,288 Accrued payroll (56,571) Claims payable 155,834 Net cash provided (used) by operating activities 627,385$ 32 CITY OF SARATOGA STATEMENT OF FIDUCIARY NET POSITION JUNE 30, 2022 Draft Basic Financial Statements for the fiscal year ended June 30, 2022 Attachment B Page 10 West Valley Clean Total Water Arrowhead Custodial Program CFD Funds ASSETS Cash and investments 391,660$ 125,102$ 516,762$ Accounts receivable 283,275 300 283,575 Total assets 674,935$ 125,402$ 800,337$ LIABILITIES Accounts payable 110,745$ 1,000$ 111,745$ Accrued payroll 5,535 - 5,535 Total liabilities 116,280$ 1,000$ 117,280$ NET POSITION Restricted for individuals, organizations and other governments 558,655$ 124,402$ 683,057$ Total Net Position 558,655$ 124,402$ 683,057$ 33 Draft Basic Financial Statements for the fiscal year ended June 30, 2022 Attachment B Page 11 West Valley Clean Total Water Arrowhead Custodial Program CFD Funds ADDITIONS Taxes collected from community facilities districts -$ 113,250 113,250$ Assessments 677,943 - 677,943 Charges for services 291,267 - 291,267 Other revenue 32,788 - 32,788 Interest income 1,115 - 1,115 Total additions 1,003,113 113,250 1,116,363 DEDUCTIONS Personnel Costs 421,973 - 421,973 Professional Services 404,458 - 404,458 Insurance 16,946 - 16,946 Fees and charges 61,191 - 61,191 Materials and Supplies 13,013 - 13,013 Rent 22,584 - 22,584 Travel and Meetings 8,797 - 8,797 Utilities 7,366 - 7,366 Grant expenses 26,155 - 26,155 Debt service payments for community facilities districts - 378,466 378,466 Total deductions 982,483 378,466 1,360,949 Change in net position 20,630 (265,216) (244,586) Total net position - beginning 538,025 746,458 1,284,483 Prior period adjustments: Correction to cash with fscial agent balances - (356,840) (356,840) Total net position - beginning, as adjusted 538,025 389,618 927,643 Total net position - ending 558,655$ 124,402$ 683,057$ 34 ADMINISTRATIVE SERVICES Memorandum To: City Council Finance Committee From: Nick Pegueros Date: November 29, 2022 Subject: 2023-24 Capital Improvement Program (CIP) Development City Council’s adopted Capital Improvement Program Project Process Policy establishes a timeline for City Council consideration of the annual CIP at their annual retreat; tentatively scheduled for February 10, 2023. City staff is preparing for the retreat using the following timeline: December 21 CIP project submissions due •Revisions and updates to adopted CIP project scopes, narratives, and funding requests •New project nominations from City staff and City Council January 2-13 CIP Development (all departments, primarily Public Works) •Prepare project scope and cost estimates for new project nominations •Identify funding modifications o Close projects with completion estimated by June 30, 2023 o Amend the City Council adopted project scope •Prepare mid-year CIP financial update including review of funds available for 2023-24 January 16-19 CIP binder preparation (City Manager’s Office and Finance) January 26 Finance Committee Meeting •CIP binder overview •Committee provides feedback and questions for City Council’s February 10th retreat February 10 City Council retreat •Provide direction on CIP prioritization and development 35