HomeMy WebLinkAboutStaff Report 11741
City of Palo Alto (ID # 11741)
Finance Committee Staff Report
Report Type: Action Items Meeting Date: 12/1/2020
City of Palo Alto Page 1
Council Priority: Fiscal Sustainability
Summary Title: Approval of FY 2020 Comprehensive Annual Financial Report
(CAFR) & Budget Amendments
Title: Recommendation to the City Council to Approve the Fiscal Year (FY)
2020 Comprehensive Annual Financial Report (CAFR) and FY 2020 Budget
Amendments in Various Funds
From: City Manager
Lead Department: Administrative Services
Recommendation
Staff recommends that the Finance Committee forward to the City Council for its approval:
1. The City’s FY 2020 Comprehensive Annual Financial Report (CAFR) (Attachment C); and
2. Amend the Fiscal Year (FY) 2020 Budget Appropriation Ordinance for various funds as
identified in the attached Recommended Amendments to the City Manager’s FY2020
Budget (Operating Budget: Attachment B – Exhibit 1; Capital Budget: Attachment B –
Exhibit 2).
Financial Highlights for FY 2020
Government-wide
At the close of FY 2020, the City’s overall Net Position remains positive despite of the financial
impacts of COVID-19. The Statement of Activities (p.29 of the attached CAFR) reports
Governmental Activities (the City’s basic services which are generally funded by taxes, and by
specific program revenues such as fees and grants) Net Position at $440.6 million, a $9.4
million decrease from the prior year, and Business-Type Activities (the City’s enterprise
activities which are funded in whole or in part by fees charged to external parties) Net Position
at $785.0 million, a $43.5 million increase. Various factors contributed to these changes,
including accounting adjustments required by the Governmental Accounting Standards Board
(GASB). Financial highlights by fund category can be found in the Discussion section of this
report.
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General Fund
The General Fund ended with a $35.9 million Budget Stabilization Reserve (BSR), a $18.9
million, or 34.5 percent, decrease when compared to FY 2019. The BSR decreased mainly due
to a $13.4 million shortfall of revenue to expense resulting from the COVID-19 shelter in place
orders. The shelter in place orders impacted the City’s revenue from sales tax, transient
occupancy tax, and charges for services.
The General Fund ended FY 2020 with a $2.9 million surplus when compared to the
assumptions used in the development of the FY 2021 Adopted Operating Budget and the
rebalancing adjustments for FY 2020 approved by the City Council in June 2020 as a result of
the financial impacts of COVID-19 (Staff Report #11328). The primary driver of the surplus was
the overall expense savings realized across all the departments, and the largest variances were
experienced in the Planning and Development Services department and Non-Departmental. As
of June 30, 2020, the BSR is $35.9 million, which is 18.2 percent of the FY 2021 Adopted General
Fund budgeted expenses and $0.5 million below the City Council target level of $36.4 million, or
18.5 percent of General Fund expenses.
Enterprise Funds
The City’s Enterprise Funds, except for the Refuse fund, ended the year in surplus positions. The
Refuse Fund ended with a net loss due to lower revenues resulting from the reduction of
services of commercial and industrial customers due to COVID-19 shelter in place order and an
increase in reimbursement to GreenWaste of Palo Alto for new waste collection vehicles.
Internal Service Funds
Internal Service Funds ended the fiscal year with $80.3 million fund balance. All funds showed
positive balances except the Printing and Mailing which reported a $0.4 million negative
balance due to the pension liability per GASB 68 and OPEB liability per GASB 75. Once adjusted
for these noncash transactions, the Printing and Mailing fund remains with a positive fund
balance.
Background
The City’s fiscal year ends on June 30, at which time its financial records are closed for the year
and financial reports are prepared. The reports, along with the City’s financial data, are audited
by Macias Gini & O’Connell LLP (MGO), Certified Public Accountants, a firm hired by the City
Auditor. MGO issues an audit opinion on the financial position of the City’s activities and,
together with the City’s financial statements and other information; this comprises the City’s
Comprehensive Annual Financial Report (CAFR) that can be found in Attachment C.
Attachment B outlines recommended amendments to the FY 2020 Budget. These
recommended actions close the fiscal year by reallocating and realigning budget to
reappropriate funds or adjust transfers between operating and capital funds. The General Fund
Summary found in Attachment A, provides detailed information of the fund’s activity this year.
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The CAFR includes government-wide statements and fund level financial statements that
provide a snapshot of fund balances and activity for the year. An overview of financial results,
information on how to navigate the CAFR document, and highlights of key fiscal issues affecting
the City can be found in the Management’s Discussion and Analysis (MD&A) section (CAFR p. 5).
The MD&A also provides a discussion and analysis of the City’s current fiscal health and
includes financial statements and analysis that is compared to the prior year, along with capital
asset and debt administration data.
In addition, staff has prepared and attached a budgetary basis summary of General Fund
Revenues and Expenditures to provide a snapshot of the fund’s revenue and expenditures by
department (Attachment A). The Discussion section of this staff report includes Results by Fund
which discusses position of fund balances, major revenue sources, and expense highlights.
Financial Results
Government-wide Statements
Statement of Net Position
The Statement of Net Position presents information on all the City’s assets plus deferred
outflows of resources, and liabilities plus deferred inflows of resources, with the reported as
net position.
The City’s net position was $1,225.6 billion on June 30, 2020 compared to the balance of
$1,191.5 billion on June 30, 2019. Of the total increase of $34.1 million, or 2.9 percent, $43.5
million is from business-type activities partially offset by a decrease of $9.4 million from
governmental activities.
The largest portion of the City’s net position ($1,118.7 billion or 91.2 percent) is its net
investment in capital assets such as land, buildings, infrastructure and vehicles, less any related
outstanding debt that was used to acquire these assets. The restricted portion of the City’s net
position ($48.7 million - or 4.0 percent) represents resources that are subject to external
restrictions on how they may be used. The remaining balance of $58.2 million, across all funds,
representing 4.8 percent of the City’s net position, is unrestricted and may be used to meet the
City’s ongoing obligations to its citizens and creditors.
The unrestricted net position for the governmental activities portion is negative due to
recognition of the net pension liabilities as required by GASB Statement No. 68 and net OPEB
liabilities a required by GASB Statement No. 75. The deficit of $101.4 million in FY 2020 for the
governmental activities included the impact of $291.9 million for the net pension liabilities and
the related deferred inflows and outflows of resources and $93.2 million for the Net OPEB
liabilities and the related deferred inflows and outflows of resources.
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STATEMENT OF NET POSITION
As of June 30, 2020
(in millions)
2020 2019 2020 2019 2020 2019
Cash and investments 342.8$ 354.0$ 277.4$ 253.4$ 620.2$ 607.4$
Other assets 60.5 69.8 52.8 51.3 113.3 121.1
Capital assets 596.3 566.1 693.2 673.5 1,289.5 1,239.6
Deferred outflows 55.8 63.4 21.1 21.7 76.9 85.1
Total assets and deferred outflows 1,055.4 1,053.3 1,044.5 999.9 2,099.9 2,053.2
Net pension and OPEB liabilities 416.3 417.3 153.7 154.4 570.0 571.7
Long-term debt 112.5 115.1 74.5 74.2 187.0 189.3
Other liabilities 61.5 63.8 21.7 26.6 83.2 90.4
Deferred inflows 24.5 7.1 9.6 3.2 34.1 10.3
Total Liabilities 614.8 603.4 259.5 258.4 874.3 861.8
Net Position
Net investment in capital assets 497.4 493.7 621.3 602.1 1,118.7 1,095.8
Restricted 44.6 45.6 4.1 4.0 48.7 49.7
Unrestricted (101.4)(89.4)159.6 135.4 58.2 46.0
Total Net Position 440.6$ 449.9$ 785.0$ 741.5$ 1,225.6$ 1,191.5$
Governmental Business-type Government-wide
Activities Activities Totals
Statement of Activities
The major sources of the City’s revenues are Program Revenues and General Revenues.
Program Revenues consist of charges for services (both governmental and business type
activities) as well as operating and capital grants and contributions. General Revenues include
property tax, sales tax, utility user tax, transient occupancy tax, documentary transfer tax, other
taxes and miscellaneous revenue.
Revenues for the City in FY 2020 were $584.7 million, a decrease of $20.9 million or 3.5 percent
compared to FY 2019, due to a $25.1 million decrease in Governmental Activities that is
partially offset by a $4.2 million increase from Business Activities. Governmental Activities
decreased $25.1 million mainly due to decreases in sales tax, transient occupancy tax,
development and related activities, reduced programs and classes, and the closure of the golf
course caused by the COVID-19 shelter in place order. Business Activities revenue increased
$4.2 mainly due to rate increases in the Electric, Water, Wastewater collection, and Storm
Drainage Funds, increased billing for capital, operating and sewage costs in the Wastewater
Treatment Fund partially offset by decrease in Gas Fund revenues caused by the COVID-19
shelter in place order.
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Expenses for the City in FY 2020 were $550.6 million, an increase of $21.0 million or 4 percent
compared to FY 2019, due to an $8.6 million increase from Governmental Activities and a $12.5
million increase from Business-type expenses. The increase in Governmental Activities expense
is driven by an adjustment to capital assets that was offset by disposal of capital asset expense.
During this fiscal year, staff reviewed capital asset balances and determined that certain
expenses, specifically repair and maintenance costs, should not have been capitalized per
GAAP. The expense to correct these balances was recorded as part of Public Works functional
expenses. The expense increase in Business Activities is driven by several cost categories and
resulted in higher costs compared to prior year, including salaries and benefits, transmission
costs in Electric Fund, and reimbursement to GreenWaste of Palo for new waste collection
vehicles in Refuse Fund. These increases were partially offset by a decrease of lower
commodity purchase costs due to lower than expected natural gas prices and transportation
costs in Gas Fund.
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2020 2019
Increase /
(Decrease)
Revenues
Program Revenues 428.6$ 435.8$ (7.2)$
General Revenues 156.1 169.8 (13.7)
Total Revenues 584.7$ 605.6$ (20.9)$
Expenses
Governmental Activities
City Council 0.2$ 0.3$ (0.1)
City Manager 3.6 3.3 0.3
City Attorney 2.8 3.1 (0.3)
City Clerk 0.8 0.8 (0.0)
City Auditor 0.6 1.1 (0.5)
Administrative Services 15.9 19.2 (3.3)
Human Resources 3.1 3.0 0.1
Public Works 45.6 36.6 9.0
Planning and Development Services 21.7 24.8 (3.1)
Office Of Transportation 4.7 0.0 4.7
Police 50.9 49.8 1.1
Fire 41.3 39.4 1.9
Community Services 34.1 36.8 (2.7)
Library 13.0 12.6 0.4
Interest and Other Expense 4.7 3.7 1.0
Business Type Activities
Water 43.0 40.6 2.4
Electric 142.4 139.6 2.8
Fiber Optics 2.8 2.5 0.3
Gas 27.2 30.9 (3.7)
Wastewater Collection 18.9 17.3 1.6
Wastewater Treatment 28.8 27.1 1.7
Refuse 36.9 30.4 6.5
Storm Drainage 5.5 4.9 0.6
Airport 2.1 1.8 0.3
Total Expenses 550.6$ 529.6$ 21.0$
Change in Net Position 34.1$ 76.0$ (41.9)$
Statement of Activities for the Year Ended June 30
(in millions)
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Capital Assets
The City’s capital assets for its governmental and business-type activities as of June 30, 2020,
amounts to $1,289.5 billion (net of accumulated depreciation), which is a $49.9 million
increase, or 4 percent increase, compared to FY 2019. The increase was primarily due to various
projects such as Charleston/Arastradero Corridor, New Public Safety Building, California Avenue
Parking Garage and Transmission, Distribution and Treatment systems for the various City
utility services.
Increase/
2020 2019 (Decrease)
Governmental activites
Land and improvements 82.2$ 77.6$ 4.6
Street trees 14.8 14.7 0.1
Construction in progress 142.1 107.0 35.1
Building and improvements 251.1 247.3 3.8
Intangible assets 3.8 3.8 (0.0)
Equipment 79.2 74.9 4.3
Roadway network 335.2 334.3 0.9
Recreation and open space network 35.2 35.2 -
Less accumulated depreciation (347.3) (328.7) 18.6
Business-Type Activities
Land 5.0 5.0 -
Construction in progress 121.1 158.0 (36.9)
Buildings and improvements 74.0 68.3 5.7
Capital Leases 0.5 0.5 -
Infrastructure 0.6 0.6 -
Transmission, distribution and treatment systems 884.8 822.4 62.4
Less accumulated depreciation (392.8) (381.3) 11.5
Total Capital Assets 1,289.5$ 1,239.6$ 49.9$
CAPITAL ASSETS AT JUNE 30
(in millions)
City of Palo Alto Page 8
Long Term Debt
As of June 30, 2020, the City’s long-term obligations totaled $808.1 million. The long-term
obligations for the City include debt, claims payable, compensated absences, pension, other
post-employment benefit (OPEB) obligations, and land fill closure.
Increase/
2020 2019 (Decrease)
Governmental Activities
General Obligation Bonds 62.1$ 64.0$ (1.9)$
Certificates of Participation 50.5 51.2 (0.7)
Claims payable 29.7 28.4 1.3
Compensated Absences 14.2 12.3 1.9
Net pension liability 325.8 312.0 13.8
Net OPEB liability 90.5 105.3 (14.8)
Business-type Activities
Utility Revenue Bonds 40.6$ 44.4$ (3.8)$
Energy Tax Credit Bonds 0.1 0.2 (0.1)
State Water Resources Loan 33.8 29.6 4.2
Landfill post-closure 7.1 7.0 0.1
Net pension liability 117.2 111.9 5.3
Net OPEB liability 36.5 42.5 (6.0)
Total long term liabilities 808.1$ 808.8$ (0.7)$
LONG-TERM DEBT AT JUNE 30
(in millions)
Fund Financial Statements
General Fund
General Fund Reserves
At the end of the current fiscal year, fund balance of the General Fund was $61.9 million. The
$61.9 million fund balance is comprised of several reserves: the BSR, reappropriations, notes
and loans, inventory, prepaid items, and other general government special purpose reserves
(this includes reserves for encumbrances, donations, and Excess ERAF). As described in the BSR
reserve (City’s general reserve) policy approved by the Council, the reserve is to remain
between 15 and 20 percent of the General Fund operating budget, with a target goal of 18.5
percent. Any reserve balance in excess of the 18.5 percent target may be transferred to the
Infrastructure Reserve (IR) in the Capital Projects Fund at the discretion of the City Manager.
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The FY 2021 Adopted Operating Budget projected a $33.0 million BSR balance as of June 30,
2020, compared to the actual balance of $35.9 million (this is a component of the General
Fund, fund balance noted above). This is $2.9 million above estimates; however, at $35.9
million the BSR is still $0.5 million below the Council’s 18.5 percent target of the FY 2021
Adopted expenses of $36.4 million. As such, there are no recommended allocations or
adjustments of any “excess” BSR funds as part of this report.
General Fund Revenues
General Fund revenues for FY 2020 were $180.4 million, which is $16.7 million or 8.5 percent
lower than the prior year. Year over year changes in each of the major tax revenue categories
are summarized in the following table.
Category FY 2020 FY 2019 % Change
Increase (Decrease)
Property tax $ 51,089 $ 47,327 8.0%
Sales tax 30,563 36,508 (16.3%)
Utility user tax 16,140 16,402 (1.6%)
Transient occupancy tax 18,553 25,649 (27.7%)
Documentary transfer tax 6,903 6,923 (0.3%)
Property tax revenue increased $3.8 million or 8.0 percent, due to increased property assessed
value growth and a $1.2 million increase compared to prior year of the ERAF distribution from
the County of Santa Clara. These higher assessed values reflected the continued robust
commercial and residential real estate markets during this period. Unlike other tax revenue,
property taxes are not yet impacted from COVID-19.
Sales tax receipts were $5.9 million, or 16.3 percent lower compared to the prior fiscal year,
due to economic disruptions caused by COVID-19. In the last quarter of FY 2020, the shelter in
place order resulted in closure of populous locations and economic engines in the City such as
downtown core, California Avenue, Stanford Shopping Center and other related business
activities that significantly impacted the sales tax. A portion of the decrease is due to timing
difference in receipts rather than performance. The State has offered certain businesses the
option to defer sales tax payments through interest free payment plans. This plan allows large
businesses to delay their sales and use taxes remittance for ninety days and small businesses to
defer remittance over twelve months. In addition, FY 2019 receipts were higher by $0.7 million
due to delay of distribution of sales tax in FY 2018 from California Department of Tax Fee
Administration (CDTFA) resulting from the transition of the new technology and collection
process.
Utility user tax revenues were $0.3 million, or 1.6 percent, lower compared to the prior year
due to lower consumption of both utility commodity and telephone caused by COVID-19. The
utility commodity rate increase for FY 2020 offsets with lower consumption.
Transient occupancy tax (TOT) ended the year $7.0 million, or 27.7 percent, lower than prior
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year. In November 2018, Measure E was approved by voters to increase the TOT by 1.5 percent,
from 14 percent to 15.5 percent. The new tax rate was implemented April 2019 however TOT
began to decline almost a year ago by 3.1 percent and worsened as a result of COVID-19.
During shelter in place in the last quarter of FY 2020, almost a dozen hotels, which represent 30
percent of available rooms, fully suspended operations. The remaining hotels’ last quarter
occupancy rate were in the low double digits and the average room rates dropped by over half.
For the fiscal year, average occupancy and daily room rate was 61 percent and $265,
respectively. The entire 15.5 percent TOT rate from new hotels, plus 3.5 percent from all other
hotels, has been allocated to the Infrastructure Plan pursuant to City Council direction. The
following is a comparative breakdown of the allocation of transient occupancy tax receipts:
FY 2020 FY 2019 % Change
Increase (Decrease)
General Fund: $ 11,567 $ 16,957 (31.8%)
Infrastructure Plan:
New hotels – 12% 2,793 4,423 (36.9%)
All hotels – 3.5% 4,193 4,269 (1.8%)
Subtotal Infrastructure 6,986 8,692 (19.6%)
Total TOT Receipts $ 18,553 $ 25,649 (27.7%)
Documentary transfer tax had no significant change from FY 2019 to FY 2020 though in the last
quarter of FY 2020 receipts declined by 40.9 percent and the number of sales declined 28.2
percent. Overall, the number of transactions for FY2020 were lower than FY 2019 by 13.6
percent. This revenue source is volatile since it is highly dependent on sales volume and the mix
of commercial and residential sales.
Charges for services decreased $3.2 million or 11.7 percent. The decrease was primarily due to
reduced programs and classes ($1.6 million), closure of golf course ($0.6 million) and fewer plan
reviews and inspections ($1.0 million) during the initial phases of COVID-19 shelter in place
order and limited operations afterwards.
All other revenues decreased from prior year by $2.9 million primarily due to the $2.4 million
sale of the former City Manager’s house in FY 2019 which was co-owned by the City.
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The following is a chart which depicts the relative contribution of each tax category over the
past seven years (2014 through 2020), as well as the current budgeted year (2021).
General Fund Tax Revenues
Actual Fiscal Years 2014 – 2020
Budget Fiscal Year 2021
($ in thousands)
0 25,000 50,000 75,000 100,000 125,000 150,000
FY 2021 Budget
FY 2020 Actual
FY 2019 Actual
FY 2018 Actual
FY 2017 Actual
FY 2016 Actual
FY 2015 Actual
FY 2014 Actual
FY 2021
Budget
FY 2020
Actual
FY 2019
Actual
FY 2018
Actual
FY 2017
Actual
FY 2016
Actual
FY 2015
Actual
FY 2014
Actual
Property Tax 52,000 51,089 47,327 42,839 39,381 36,607 34,117 30,587
Sales Tax 20,500 30,563 36,508 31,091 29,923 30,018 29,675 29,424
Utility User Tax 15,100 16,140 16,402 15,414 14,240 12,469 10,861 11,008
Trans Occ Tax 14,900 18,553 25,649 24,937 23,477 22,366 16,699 12,255
Doc Transfer Tax 4,700 6,903 6,923 9,229 7,491 6,266 10,384 7,811
General Fund Expenditures
General Fund expenditures for FY 2020, including encumbrances and reappropriations, totaled
$202.1 million; an increase of 4.7 percent from the prior year. The Adopted Budget of $196.8
million was increased to the Final Adjusted Budget amount of $206.4 million, primarily due to
the expenditure of prior year encumbered and reappropriated balances; increases for several
departments throughout the year also occurred based on City Council direction per
recommendations contained in City Manager Reports.
The following is a chart which compares actual departmental costs, including encumbrances
and reappropriations, excluding Cubberley lease over the past seven years and budgeted costs
for FY 2021.
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General Fund Departments
Actual Expenditures Fiscal Years 2014– 2020 (including reappropriations and encumbrances)
Budgeted Expenditures Fiscal Year 2021
($ in thousands)
0 20 40 60 80 100 120 140 160 180 200
FY 2021 Budget
FY 2020 Actual
FY 2019 Actual
FY 2018 Actual
FY 2017 Actual
FY 2016 Actual
FY 2015 Actual
FY 2014 Actual
FY 2021
Budget
FY 2020
Actual
FY 2019
Actual
FY 2018
Actual
FY 2017
Actual
FY 2016
Actual
FY 2015
Actual
FY 2014
Actual
Public Safety 75,340 83,616 77,592 75,975 72,815 65,005 62,459 63,403
Community Services 28,362 31,489 30,201 28,395 26,573 25,262 23,902 23,402
Admin Depts 25,637 28,169 29,304 23,538 22,157 22,059 19,771 19,784
Public Works 18,427 18,932 17,928 18,908 17,475 15,084 14,210 14,138
Planning and Development
Services 17,386 21,098 22,606 23,006 22,400 21,784 20,361 14,637
Office Of Transportation 1,904 2,360 -
Library 8,421 10,092 9,491 9,357 9,266 8,217 8,144 8,072
The Development Services Department was combined with the Planning and Community Environment in FY 2020 and renamed
to the Planning and Development Services Department.
The Office of Transportation department, which previously was a division of the Planning and Community Environment
Department was established in FY 2020.
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Capital Projects Fund
The Capital Projects Fund ended the year with a fund balance of $83.6 million, which are
comprised of the following:
Fund Balance Component Amount
($ in millions)
Restricted for Library projects $ 598
Reserved for Roth Building rehabilitation 5,146
Reserved for Cubberley expenditures 4,203
Restricted for California Avenue Parking Garage 12,980
Assigned for all other Capital projects 60,704
Total Capital Projects Fund Balance $ 83,631
Restricted for Library projects $0.6 million is the portion of fund balance dedicated to
remaining Library expenditures which, if considered bond expenses will be paid for with cash
from Bond proceeds. Non-bondable expenditures such as salaries and benefits are funded from
the Infrastructure Reserve, as established at the time of the bond issuance. The library project
is already completed but a roof defects need to be fixed using this reserve.
Restricted for California Avenue Parking Garage $13.0 million represents the remaining bond
funding dedicated to the construction of the new California Avenue parking garage.
Assigned for all other Capital projects of $60.7 million represents the amount of unspent funds
associated with Adopted Capital projects and other noted items. Outside funding sources such
as grants, donations and future debt issues are not factored into this component of the fund
balance until they are actually received.
Enterprise Funds
The City’s Enterprise Funds reported a total Net Position of $781.1 million, a $39.6 million
increase from the prior year. The overall change in Net Position was driven by the Electric Fund,
Water Fund, and Airport Fund. The table below summarizes the overall change in Net Position
for each Enterprise Fund. Compared to FY 2019, the Change in Net Position for Enterprise funds
decreased $14.8 million driven primarily by the Gas Fund and Refuse Fund – details of these
funds are summarized following this table.
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ENTERPRISE FUNDS
Change in Net Position for the Year Ended June 30
(in millions)
Increase/
Fund Name 2020 2019 (Decrease)
Water 8.0$ 8.0$ -$
Electric 18.6 19.0 (0.4)
Fiber Optics 2.9 3.5 (0.6)
Gas 3.0 5.3 (2.3)
Wastewater Collection 2.1 3.3 (1.2)
Wastewater Treatment 0.3 1.5 (1.2)
Refuse (3.1)4.9 (8.0)
Storm Drainage 2.2 2.3 (0.1)
Airport 5.6 6.6 (1.0)
Total Change in Net Position 39.6$ 54.4$ (14.8)$
The Gas Fund decreased $2.3 million compared to prior year due to decrease in revenues as a
result of lower consumption; increase in operating expenses partially offset by the decrease in
commodity purchase costs due to lower than expected natural gas prices and transportation
costs.
The change in net position for Wastewater Collection Fund decreased $1.2 million due to higher
operating expenses offset by the increase in revenues because of the 7.0 percent rate increase
effective July 1, 2019.
The change in net position for Wastewater Treatment Fund decreased $1.2 million due to
increase in operating expenses because of higher sewage treatment operation and
maintenance cost offset by the increase in revenues resulting from higher partner’s billing.
The Refuse Fund decreased by $8.0 million due to lower revenues from the reduction of
services by commercial and industrial customers due to COVID-19 and increase in GreenWaste
of Palo Alto charges for reimbursement of new waste collection vehicles.
The table below details the Change in Unrestricted Net Position in the Enterprise Funds.
Enterprise Fund Rate Stabilization, Operations and other reserve balances are shown in detail in
the CAFR (CAFR p. 84, Footnote 10). Overall, except for the Wastewater Treatment Fund and
the Airport Fund, each Enterprise Funds maintained a positive unrestricted net position balance
as of June 30, 2020. Adjustments for the Pension Reserve (as required by GASB Pronouncement
No. 68) and OPEB Reserve (as required by GASB Pronouncement No. 75) total $142.4 million for
all Enterprise Funds and reduce each fund’s unrestricted net position.
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The Wastewater Treatment Fund reflects a $10.5 million Unrestricted Reserve deficit and is
driven by $28.3 million in Pension Reserves and OPEB Reserves negative adjustments.
The Airport Fund reports a $4.4 million deficit net position which is attributed to the $1.3
million Pension Reserve and OPEB Reserve adjustments. Second, the fund deficit in the Airport
Fund is also a result of cumulative fund deficits over the life of the fund as fiscal operations at
the airport stabilize and capital projects near completion. The $5.6 million change in net
position of Airport Fund in current year is not driven by operations but due to $5.5 million
grants received in current year. The General Fund transferred a series of advances totaling $3.1
million for “start-up” costs for the airport and repayment to the General Fund started in FY
2020.
Enterprise Funds
Change in Unrestricted (Deficit) Net Position
(in Millions)
Increase/
Fund Name 2020 2019 (Decrease)
Water 28.2$ 25.5$ 2.7$
Electric 83.6 69.8 13.8
Fiber Optics 33.0 30.2 2.8
Gas 8.5 7.5 1.0
Wastewater Collection 1.2 2.2 (1.0)
Wastewater Treatment (10.5)(13.8)3.3
Refuse 12.1 15.1 (3.0)
Storm Drainage 4.0 1.9 2.1
Airport (4.4)(3.3)(1.1)
Total Change in Reserves (Unrestricted)155.7$ 135.3$ 20.4$
Resource Impact
Recommended actions in the report will align the FY 2020 appropriations with final financial
activities as outlined in Attachment B. Overall, the City ended the FY 2020 in a positive net
position and in certain areas where net reserves were higher than estimated in the
development of the FY 2021 Adopted budget, those additional funds will be included as part of
the FY 2021 budget balancing and rate setting activities.
Stakeholder Engagement
The review and writing of this report was coordinated among various divisions within the
Administrative Services Department, and the actions recommended in this report were
discussed and communicated to the impacted departments.
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Environmental Review
This is not a project for purposes of the California Environmental Quality Act.
Attachments:
• Attachment A: Budget to Actuals
• Attachment B: Recommended FY20 Year-end Clean-up Actions
• Attachment C: City of Palo Alto FY2020 Comprehensive Annual Financial Report
GENERAL FUND SUMMARY ($000s)
FY 2020 FY 2020 FY 2020 FY 2020 FY 2020 FY 2020 FY 2020
Adopted Adjusted Rev/Exp Allocated Encum / Actual Actual to
Budget Budget Actuals Charges Reappropriation Rev/Exp Adj Budget
Variance
Revenues
Sales Tax 34,346 30,617 30,563 30,563 (54)
Property Tax 48,634 50,853 51,089 51,089 236
Transient Occupancy Tax 29,309 19,425 18,553 18,553 (871)
Documentary Transfer Tax 8,369 6,676 6,903 6,903 227
Utility User Tax 17,581 16,133 16,140 16,140 7
Other Taxes, Fines and penalties 2,032 1,237 1,172 1,172 (64)
Charges for Services 30,127 25,196 24,127 24,127 (1,068)
Permits and Licenses 8,667 6,597 7,467 7,467 870
Investment Earnings 1,433 1,433 1,480 1,480 47
Rental Income 16,326 16,041 15,964 15,964 (77)
From Other Agencies 2,756 3,245 3,783 518 4,301 1,057
Charges to Other Funds 10,908 10,908 11,099 11,099 190
Other Revenues 587 619 585 - 585 (34)
Total Revenues 211,076 188,980 177,828 11,099 518 189,445 465
Add: Operating Transfers In 20,999 20,840 20,840 20,840 -
Prior Year Encum / Reappropriation 6,469 6,469 6,469 -
Total Source of Funds 232,075 216,289 205,137 11,099 518 216,754 465
Expenditures
3,387 3,896 2,509 1,013 268 3,789 107
City Auditor 1,235 1,157 680 259 42 981 176
City Clerk 1,346 1,402 815 319 52 1,186 216
City Council 498 542 214 111 89 414 128
City Manager 4,546 4,718 3,273 1,073 325 4,671 47
Administrative Services 8,519 8,770 5,960 2,321 234 8,515 255
Community Services 30,929 31,591 29,603 197 1,689 31,489 103
Fire 34,889 36,773 36,440 163 169 36,772 1
Human Resources 3,902 4,107 2,792 1,095 107 3,994 113
Library 10,314 10,187 9,988 - 104 10,092 95
Office of Transportation 2,312 2,733 2,052 - 308 2,360 373
Planning and Development Services 20,356 22,021 19,269 328 1,501 21,098 923
Police 46,369 46,845 45,679 577 589 46,844 1
Public Works 19,142 19,357 13,577 3,643 1,713 18,932 425
Non-Departmental 2,744 5,874 3,722 - 898 4,618 1,255
Cubberley Lease 6,284 6,438 6,385 - 6,385 53
Total Expenditures 196,773 206,412 182,956 11,099 8,088 202,141 4,271
Add: Operating Trans Out 5,023 8,049 8,049 - 8,049 -
Transfer to Infrastructure 28,962 24,172 24,172 - 24,172 -
Total Use of Funds 230,758 238,633 215,177 11,099 8,088 234,362 4,271
Net Surplus/(Deficit) 1,317 (22,344) (10,040) - 8,088 (17,608) 4,736
Attachment A
Statement of Revenues, Expenditures and Change in Fund Balance - Budget and Actual
City Attorney
Department Adjustment Adjustment
GENERAL FUND (102)
City Manager's
Office
Departmental Expense Savings
This action reallocates departmental vacancy savings within the General Fund in order to
offset departments with higher than anticipated expenses in FY 2020.
-$ (780,000)$
Fire Salaries & Benefits
This action reallocates funding as a result of higher than anticipated salary expenses in FY
2020. These higher anticipated expenditures are due to a number of variables including the
Department continuing to hire ahead for its recruit academy in an attempt to reduce sworn
vacancies. In addition, payments for disability/worker's compansation were higher than
budgeted. These overages were partially offset by overtime savings.
-$ 764,000$
Non-
Departmental
Transient Occupancy Tax/Transfer to Capital Improvement Fund
This action decreases the transfer to the Capital Improvement Fund as it relates to Transient
Occupancy Tax (TOT) revenues earmarked for city-wide infrastructure improvements due to
lower than anticipated TOT collections.
(171,173)$ (171,173)$
Police Salaries & Benefits
This action reallocates funding as a result of higher than anticipated salary expenses in FY
2020. This overage is primarily due to preliminary budget adjustments in Q3 2020 that
reduced the Police Department budget by $350,000 for anticipated expense savings (CMR
11328). These savings did not materialize due to a number of variables including use of
overtime for significant vacancies in the Dispatch and Patrol teams, and response to
protests.
-$ 392,000$
Public Works Departmental Expense Savings
This action reallocates departmental vacancy savings within the General Fund in order to
offset departments with higher than anticipated expenses in FY 2020.
-$ (376,000)$
GENERAL FUND (102) SUBTOTAL (171,173)$ (171,173)$
CITY OF PALO ALTO
RECOMMENDED AMENDMENTS TO THE CITY MANAGER'S FY 2020 BUDGET
Revenues Expenses
ATTACHMENT B, EXHIBIT 1
Department Adjustment Adjustment
CAPITAL IMPROVEMENT FUNDS
GENERAL FUND CAPITAL IMPROVEMENT FUND (471)
Capital Capital Improvement Project Adjustments
This action reflects the combined impact from adjustments to projects as outlined in
Attachment A, Exhibit 2.
-$ 811,000$
Capital Transfer from General Fund
This action decreases the transfer from the General Fund related to TOT revenue Council
earmarked to use for city-wide infrastructure improvements due to actual revenue collected
being lower than budgeted in FY 2020.
(171,173)$ -$
Capital Transfer to Parkland Dedication Fee Fund
This action transfers funding back to the Parkland Dedication Fee Fund that was intended to
be used for the Turf Management Plan capital project (PG-18002). This project was defunded
as part of the development of the 2021-2025 Capital Improvement Plan (CIP) due to budget
constraints and a reprioritization of projects.
-$ 100,000$
Capital Transfer to Parks Develpoment Impact Fee Fund
This action transfers funding back to the Parks Development Impact FeeFund that was
intended to be used for the Baylands Athletic Center 10.5 Acre Expamnsion Plan capital
project (PG-19001). This project was defunded as part of the development of the 2021-2025
CIP due to budget constraints and a reprioritization of projects.
-$ 85,000$
Capital Transfer to California Avenue Parking Garage COP Fund
This action transfers funding to the California Avenue Parking Garage (Certificates of
Participation) COP Fund to fund the debt services costs associated with the issuance of the
New California Avenue Area Parking Garage (PE-18000) COP funding. This funding was
previously budgeted to be spent directly in the Capital Improvment Fund. A corresponding
action reduces the debt service payment budgeted in the Capital Improvement Fund.
-$ 2,335,000$
Capital Transfer from Gas Tax Fund
This action increases the transfer from the Gas Tax Fund due to actual revenue collected being
higher than budgeted in FY 2020. A corresponding transfer is recommended from the Gas Tax
Fund to the Capital Improvement Fund. The funding will be appropriated to the Street
Maintenance capital project (PE-86070) as part of the FY 2021 Mid-Year Budget Review.
156,270$ -$
Capital Debt Service Payments
This action reduces funding for the debt service costs associated with the issuance of the 2019
California Avenue Parking Garage COP funding. Corresponding actions in this report transfer
funding for these costs to the California Avenue Parking Garage COP Fund and appropriate
funding for the debt service costs to be paid out of the California Avenue Parking Garage COP
Fund.
(2,335,000)$
Fund Balance Adjustment to Fund Balance
This action decreases the fund balance to offset adjustments recommended in this report.
-$ (1,010,903)$
GENERAL FUND CAPITAL IMPROVEMENT FUND (471) SUBTOTAL (14,903)$ (14,903)$
CITY OF PALO ALTO
RECOMMENDED AMENDMENTS TO THE CITY MANAGER'S FY 2020 BUDGET
Revenues Expenses
ATTACHMENT B, EXHIBIT 1
Department Adjustment Adjustment
CAPITAL IMPROVEMENT FUNDS
CITY OF PALO ALTO
RECOMMENDED AMENDMENTS TO THE CITY MANAGER'S FY 2020 BUDGET
Revenues Expenses
ATTACHMENT B, EXHIBIT 1
CUBBERLEY PROPERTY INFRASTRUCTURE FUND (472)
Capital Capital Improvement Project Adjustments
This action reflects the combined impact from adjustments to projects as outlined in
Attachment A, Exhibit 2.
-$ 13,400$
Fund Balance Adjustment to Fund Balance
This action decreases the fund balance to offset adjustments recommended in this report.
-$ (13,400)$
CUBBERLEY PROPERTY INFRASTRUCTURE FUND (472) SUBTOTAL -$ -$
Department Adjustment Adjustment
ENTERPRISE FUNDS
ELECTRIC FUND (513 & 523)
Capital Capital Improvement Project Adjustments
This action reflects the combined impact from adjustments to projects as outlined in
Attachment A, Exhibit 2.
-$ 594,200$
Fund Balance Adjustment to Fund Balance
This action decreases the fund balance to offset adjustments recommended in this report.
-$ (594,200)$
ELECTRIC FUND (513 & 523) SUBTOTAL -$ -$
STORMWATER MANGEMENT FUND (528)
Capital Capital Improvement Project Adjustments
This action reflects the combined impact from adjustments to projects as outlined in
Attachment A, Exhibit 2.
-$ 16,000$
Fund Balance Adjustment to Fund Balance
This action decreases the fund balance to offset adjustments recommended in this report.
-$ (16,000)$
STORMWATER MANGEMENT FUND (528) SUBTOTAL -$ -$
WATER FUND (522)
Capital Capital Improvement Project Adjustments
This action reflects the combined impact from adjustments to projects as outlined in
Attachment A, Exhibit 2.
-$ 260,000$
Fund Balance Adjustment to Fund Balance
This action decreases the fund balance to offset adjustments recommended in this report.
-$ (260,000)$
WATER FUND (522) SUBTOTAL -$ -$
CITY OF PALO ALTO
RECOMMENDED AMENDMENTS TO THE CITY MANAGER'S FY 2020 BUDGET
Revenues Expenses
ATTACHMENT B, EXHIBIT 1
Department Adjustment Adjustment
INTERNAL SERVICE FUNDS
INFORMATION TECHNOLOGY FUND (682)
Capital Capital Improvement Project Adjustments
This action reflects the combined impact from adjustments to projects as outlined in
Attachment A, Exhibit 2.
-$ 3,400$
Fund Balance Adjustment to Fund Balance
This action decreases the fund balance to offset adjustments recommended in this report.
-$ (3,400)$
INFORMATION TECHNOLOGY FUND (682) SUBTOTAL -$ -$
WORKERS' COMPENSATION FUND (688)
Non-
Departmental
Charges to Other Funds
This action increases the estimate for charges to other funds by $1,300,000 ($870,000 in the
General Fund) due to an updated actuarial analysis in August 2020 for workers' compensation
that have been incurred but not reported (IBNR) being $3.4 million higher than budgeted. Of
this amount, $1.3 million was charged to departments to offset this exense and ensure positive
fund balance. Departments had sufficient savings at the end of FY 2020 to support the
additional costs and did not require budgetary adjustments.
1,300,000$ -$
Non-
Departmental
Liability Insurance
This action increases the appropriation for liability insurance expense by $900,000 due to an
updated actuarial analysis in August 2020 for general liabilities that have been incurred but not
reported (IBNR) being $3.4 million higher than budgeted. The additional liability expense has
been fully recognized in FY 2020 and has been partially recovered through additional
allocations to departments. Due to sufficient savings elsewhere in the General Liability Fund a
reduced adjustment of $0.9 million is recommended for the additional liability expense.
-$ 900,000$
Fund Balance Adjustment to Fund Balance
This action increases the fund balance to offset adjustments recommended in this report.
-$ 400,000$
WORKERS' COMPENSATION FUND (688) SUBTOTAL 1,300,000$ 1,300,000$
CITY OF PALO ALTO
RECOMMENDED AMENDMENTS TO THE CITY MANAGER'S FY 2020 BUDGET
Revenues Expenses
ATTACHMENT B, EXHIBIT 1
Department Adjustment Adjustment
SPECIAL REVENUE FUNDS
GAS TAX FUND (231)
Non-
Departmental
State of California Revenue: SB1/Transfer to Capital Improvement Fund
This action increases the revenue estimate for State of California SB1 allocations to align with
higher than anticipated actuals during the period. In FY 2020, the total allocation to the City
was $1,310,000 which was $156,000 higher than preliminary estimates from the State
Department of Finance. Funding from SB1 is earmarked for transportation and traffic-related
capital projects and was used during the period to partially fund the Street Maintenance Capital
Improvement Project (PE-86070). The additional revenues are recommended to offset an
additional appropriation to this project through a corresponding transfer from the Gas Tax Fund
to the Capital Fund.
156,270$ 156,270$
GAS TAX FUND (231) SUBTOTAL 156,270$ 156,270$
HAMILTON AVENUE - PUBLIC BENEFIT FUND (235)
Planning &
Development
Services
Unit Resale Revenue
This action increases the estimate for unit resales as result of higher than anticipated revenues
in FY 2020. Revenues in this fund were established through a developer deposit of $500,000 for
the senior housing project on Hamilton Avenue ("The Hamilton") to provide funding for senior
services. Additional revenue is generated through interest earnings and 2.5 percent of the sales
price of units.
239,000$ -$
Planning &
Development
Services
Grants & Subsides
This action increases the grants and subsidies appropriation as result of slightly higher than
anticipated expenses in FY 2020. Grant & Subsidy expenditures in this fund are attributable to
accumulated interest earnings that are required to be paid to the Avenidas agency (formerly
Senior Coordinating Council) to provide services to seniors.
-$ 8,500$
Fund Balance Adjustment to Fund Balance
This action increases the fund balance to offset adjustments recommended in this report.
-$ 230,500$
HAMILTON AVENUE - PUBLIC BENEFIT FUND (235) SUBTOTAL 239,000$ 239,000$
PARKLAND DEDICATION FEE FUND (209)
Community
Services
Transfer from Capital Improvement Fund
This action transfers funding from the Capital Improvement Fund that was intended to be used
for the Turf Management Plan capital project (PG-18002). This project was defunded as part of
the development of the 2021-2025 Capital Improvement Plan (CIP) due to budget constraints
and a reprioritization of projects.
100,000$ -$
Fund Balance Adjustment to Fund Balance
This action increases the fund balance to offset adjustments recommended in this report.
-$ 100,000$
PARKLAND DEDICATION FEE FUND (209) SUBTOTAL 100,000$ 100,000$
CITY OF PALO ALTO
RECOMMENDED AMENDMENTS TO THE CITY MANAGER'S FY 2020 BUDGET
Revenues Expenses
ATTACHMENT B, EXHIBIT 1
Department Adjustment Adjustment
SPECIAL REVENUE FUNDS
CITY OF PALO ALTO
RECOMMENDED AMENDMENTS TO THE CITY MANAGER'S FY 2020 BUDGET
Revenues Expenses
ATTACHMENT B, EXHIBIT 1
PARKS DEVELOPMENT IMPACT FEE FUND (210)
Community
Services
Transfer from Capital Improvement Fund
This action transfers funding from the Capital Improvement Fund that was intended to be used
for the Baylands Athletic Center 10.5 Acre Expamnsion Plan capital project (PG-19001). This
project was defunded as part of the development of the 2021-2025 CIP due to budget
constraints and a reprioritization of projects.
85,000$ -$
Fund Balance Adjustment to Fund Balance
This action increases the fund balance to offset adjustments recommended in this report.
-$ 85,000$
PARKS DEVELOPMENT IMPACT FEE FUND (210) SUBTOTAL 85,000$ 85,000$
PUBLIC ART FUND (207)
Community
Services
Public Art Fee Revenue
This action increases the estimate for Art Fees as result of higher than anticipated revenues in
FY 2020.
185,000$ -$
Community
Services
Salaries & Benefits
This action increases the salaries and benefits appropriation as result of slightly higher than
anticipated expenses in FY 2020.
-$ 1,700$
Fund Balance Adjustment to Fund Balance
This action increases the fund balance to offset adjustments recommended in this report.
-$ 183,300$
PUBLIC ART FUND (207) SUBTOTAL 185,000$ 185,000$
PUBLIC SERVICES DONATION FUND (191)
Various Donations Revenue/Non-Salary Expenses
This action increases the appropriation for expenses in the Public Services Donation Fund to
align with FY 2020 year end expense and encumbered funds. Donations in this fund are for
activities such as parks and open space activities, art center programs, and animal care services.
A corresponding adjustment to revenue reflecting higher than budgeted donations is
recommended to offset this increase.
65,000$ 41,000$
Fund Balance Adjustment to Fund Balance
This action increases the fund balance to offset adjustments recommended in this report.
-$ 24,000$
PUBLIC SERVICES DONATION FUND (191) SUBTOTAL 65,000$ 65,000$
Department Adjustment Adjustment
DEBT SERVICE & AGENCY TRUST FUNDS
2019 CALIFORNIA AVENUE PARKING GARAGE COP FUND (362)
Administrative
Services
Transfer from Capital Improvement Fund/Debt Service Payments
This action transfers funding from the Capital Improvement Fund to fund the debt services
costs associated with the issuance of the New California Avenue Area Parking Garage (PE-
18000) COP funding. This action also appropriates funding for principal and interest payments
in order to repay the debt service associated with the COP funding. These debt service
payments were previously budgeted in the Capital Improvement Fund.
2,335,000$ 2,335,000$
2019 CALIFORNIA AVENUE PARKING GARAGE COP FUND (362) SUBTOTAL 2,335,000$ 2,335,000$
EYERLY TRUST FUND (774)
Administrative
Services
Investment Income/General Expense (Special Events)
This action increases the interest income revenue collected in this fund to align the budget with
the actual revenue collected. A corresponding increase to the appropriation for General
Expenses within the fund is also recommended to align budget levels with actual expenditures
in FY 2020.
12,000$ 7,000$
Fund Balance Adjustment to Fund Balance
This action increases the fund balance to offset adjustments recommended in this report.
-$ 5,000$
EYERLY TRUST FUND (774) SUBTOTAL 12,000$ 12,000$
UNIVERSITY AVENUE PARKING ASSESSMENT AGENCY FUND (775)
Administrative
Services
Special Asessment District Fees/Contract Services
This action increases the Special Assessment District Fee revenue collected in this fund to align
the budget with the actual revenue collected. A corresponding increase to the appropriation for
Contract Services within the fund is also recommended to align budget levels with actual
expenditures in FY 2020.
21,000$ 6,000$
Fund Balance Adjustment to Fund Balance
This action increases the fund balance to offset adjustments recommended in this report.
-$ 15,000$
UNIVERSITY AVENUE PARKING ASSESSMENT AGENCY FUND (775) SUBTOTAL 21,000$ 21,000$
CITY OF PALO ALTO
RECOMMENDED AMENDMENTS TO THE CITY MANAGER'S FY 2020 BUDGET
Revenues Expenses
ATTACHMENT B, EXHIBIT 1
Project
Number Title Revenue Expense Comments
AS-10000 Capital Improvement Fund
Administration
$ (453,981) Adjustment to allocate Salaries and Benefits
across capital projects based on actual
expenditures
AC-86017 Art in Public Places $ 44,500 Adjustment to allocate Salaries and Benefits
across capital projects based on actual
expenditures
AC-18001 JMZ Renovation $ 123,600 Adjustment to allocate Salaries and Benefits
across capital projects based on actual
expenditures
FD-14002 Fire Ringdown System Replacement $ 7,000 Adjustment to allocate Salaries and Benefits
across capital projects based on actual
expenditures
FD-20000 Cardiac Monitor Replacement $ 24,161 Adjustment to shift a Transfer from the Utility
Administration Fund to FY 2020 to align with
project expenditures.
OS-00001 Open Space Trails and Amenities $ 62,200 Adjustment to allocate Salaries and Benefits
across capital projects based on actual
expenditures
PE-17008 City Hall Floor 4 Remodel $ 1,380 Adjustment to allocate Salaries and Benefits
across capital projects based on actual
expenditures
PE-17009 City Hall Floor 5 Remodel $ 7,600 Adjustment to allocate Salaries and Benefits
across capital projects based on actual
expenditures
PE-19003 Birch Street Improvements $ 136,120 Adjustment to allocate Salaries and Benefits
across capital projects based on actual
expenditures
PE-20001 City Bridge Improvements $ 6,370 Adjustment to allocate Salaries and Benefits
across capital projects based on actual
expenditures
PF-14002 Fire Station 1 Improvements $ 330 Adjustment to allocate Salaries and Benefits
across capital projects based on actual
expenditures
PG-06001 Athletic Courts Resurfacing $ 8,000 Adjustment to allocate Salaries and Benefits
across capital projects based on actual
expenditures
PG-17000 Baylands Comprehensive Conservation
Plan
$ 2,400 Adjustment to allocate Salaries and Benefits
across capital projects based on actual
expenditures
PL-19000 Emergency Vehicle Traffic Signal
Preemption System Pilot
$ 26,420 Adjustment to allocate Salaries and Benefits
across capital projects based on actual
expenditures
PE-15003 Fire Station No. 3 Replacements $ 394,100 Adjustment to allocate Salaries and Benefits
($3,900) and increase project ($390,200) due to
higher than anticipated expenditures in FY 2020.
PE-14015 Lucie Stern Buildings Mechanical and
Electrical Upgrades
$ (251,000) Adjustment to allocate unspent expenses due to
project competion in FY 2020.
PL-15004 Downtown Parking Wayfinding $ (139,200) Adjustment to allocate unspent expenses due to
project competion in FY 2020.
PE-15001 New Public Safety Building $ 811,000 Adjustment to increase project due to higher than
anticipated expenditures in FY 2020.
Total $ - $ 811,000
ATTACHMENT B, EXHIBIT 2
CAPITAL IMPROVEMENT FUND
CITY OF PALO ALTO
RECOMMENDED AMENDMENTS TO THE CITY MANAGER'S FY 2020 CAPITAL IMPROVEMENT PROGRAM
Project
Number Title Revenue Expense Comments
ATTACHMENT B, EXHIBIT 2
CITY OF PALO ALTO
RECOMMENDED AMENDMENTS TO THE CITY MANAGER'S FY 2020 CAPITAL IMPROVEMENT PROGRAM
CB-19000 Cubberley Track and Field Replacement $ 13,400 Increase to project due to higher than anticipated
expenditures.
Total $ - $ 13,400
ELECTRIC FUND
EL-02010 SCADA System Upgrade $ 5,200 Increase to project due to higher than anticipated
expenditures.
EL-89028 Electric Customer Connections $ 589,000 Increase to project due to higher than anticipated
expenditures.
Total $ - $ 594,200
SD-20000 Storm Drain Pump Station $ 16,000 Increase to project due to higher than anticipated
expenditures.
Total $ - $ 16,000
TE-01012 IT Disaster Recovery $ 3,400 Increase to project due to higher than anticipated
expenditures.
Total $ - $ 3,400
WS-80013 Water System, Customer Connections $ 260,000 Increase to project due to higher than anticipated
expenditures.
Total $ - $ 260,000
$ - $ 1,698,000 TOTAL CIP ADJUSTMENTS
CUBBERLEY PROPERTY INFRASTRUCTURE FUND
STORMWATER MANAGEMENT FUND
TECHNOLOGY FUND
WATER FUND
COMPREHENSIVE
ANNUAL
FINANCIAL
REPORT
City of Palo Alto, California
Fiscal Year Ended
June 30, 2020
The engine is the heart of an airplane, but the pilot is its soul – Walter A. Raleigh
is accepting applications for the position of
Airport Manager
Fiscal Year 2020
Comprehensive Annual
Financial Report
City of Palo Alto, CA Fiscal Year Ended June 30, 2020
City Council
Adrian Fine, Mayor
Tom DuBois, Vice Mayor
Alison Cormack
Eric Filseth
Liz Kniss
Lydia Kou
Greg Tanaka
Ed Shikada, City Manager
Kiely Nose, Director of Administrative Services/Chief Financial Officer
Prepared by: Administrative Services Department
CITY OF PALO ALTO
For the Year Ended June 30, 2020
Table of Contents
Page
INTRODUCTORY SECTION:
Transmittal Letter .................................................................................................................................... i
City Officials ........................................................................................................................................... vii
Organizational Structure ...................................................................................................................... viii
Administrative Services Organization .................................................................................................... ix
GFOA Certificate of Achievement for Excellence in Financial Reporting ............................................... x
FINANCIAL SECTION:
Independent Auditor’s Report .............................................................................................................. 1
Management’s Discussion and Analysis
(Required Supplementary Information – Unaudited) ...................................................................... 5
Basic Financial Statements
Government‐wide Financial Statements:
Statement of Net Position ....................................................................................................... 29
Statement of Activities ............................................................................................................ 31
Governmental Fund Financial Statements:
Balance Sheet .......................................................................................................................... 33
Reconciliation of the Balance Sheet of Governmental Funds to
the Statement of Net Position ‐ Governmental Activities ................................................. 34
Statement of Revenues, Expenditures and Changes in Fund Balances .................................. 35
Reconciliation of the Statement of Revenues, Expenditures and Changes
in Fund Balances of Governmental Funds to the Statement of Activities –
Governmental Activities ................................................................................................... 36
Statement of Revenues, Expenditures and Changes in Fund Balance –
Budget and Actual – General Fund ................................................................................... 37
Proprietary Fund Financial Statements:
Statement of Net Position ....................................................................................................... 38
Statement of Revenues, Expenses and Changes in Fund Net Position ................................... 40
Statement of Cash Flows ......................................................................................................... 42
Fiduciary Fund Financial Statement:
Statement of Assets and Liabilities ......................................................................................... 44
Index to the Notes to the Basic Financial Statements ................................................................. 45
Notes to the Basic Financial Statements ...................................................................................... 47
Required Supplementary Information:
Schedule of Changes in Net Pension Liability and related Ratios – Miscellaneous Plan ............. 107
Schedule of Pension Contributions – Miscellaneous Plan ........................................................... 108
CITY OF PALO ALTO
For the Year Ended June 30, 2020
Table of Contents (Continued)
Page
Required Supplementary Information:
Schedule of Changes in Net Pension Liability and Related Ratios – Safety Plan ......................... 109
Schedule of Pension Contributions – Safety Plan ........................................................................ 110
Schedule of Changes in Net OPEB Liability and Related Ratios ................................................... 111
Schedule of Employer OPEB Contributions ................................................................................. 112
Supplementary Information:
Non‐Major Governmental Funds:
Combining Balance Sheet ...................................................................................................... 113
Combining Statement of Revenues, Expenditures and
Changes in Fund Balances ............................................................................................... 115
Non‐Major Special Revenue Funds:
Combining Balance Sheet ...................................................................................................... 118
Combining Statement of Revenues, Expenditures and
Changes in Fund Balances ............................................................................................... 120
Combining Schedule of Revenues, Expenditures and
Changes in Fund Balances – Budget and Actual ............................................................. 122
Non‐Major Debt Service Funds:
Combining Balance Sheet ...................................................................................................... 128
Combining Statement of Revenues, Expenditures and
Changes in Fund Balances ............................................................................................... 129
Combining Schedule of Revenues, Expenditures and
Changes in Fund Balances – Budget and Actual ............................................................. 130
Non‐Major Permanent Fund:
Schedule of Revenues, Expenditures and
Changes in Fund Balance – Budget and Actual ............................................................... 132
Internal Service Funds:
Combining Statement of Fund Net Position .......................................................................... 134
Combining Statement of Revenues, Expenses and
Changes in Fund Net Position ......................................................................................... 135
Combining Statement of Cash Flows ..................................................................................... 136
Fiduciary Funds:
Statement of Changes in Assets and Liabilities – All Agency Funds ...................................... 138
CITY OF PALO ALTO
For the Year Ended June 30, 2020
Table of Contents (Continued)
Page
STATISTICAL SECTION:
Financial Trends:
Net Position by Component ......................................................................................................... 141
Changes in Net Position ............................................................................................................... 142
Fund Balances of Governmental Funds ....................................................................................... 144
Changes in Fund Balances of Governmental Funds ..................................................................... 146
Revenue Capacity:
Electric Operating Revenue by Source ......................................................................................... 147
Supplemental Disclosure for Water Utilities ............................................................................... 148
Supplemental Disclosure for Gas Utilities .................................................................................... 149
Assessed Value of Taxable Property ............................................................................................ 150
Property Tax Rates, All Overlapping Governments ..................................................................... 151
Property Tax Levies and Collections ............................................................................................ 152
Principal Property Taxpayers ....................................................................................................... 153
Assessed Valuation and Parcels by Land Use .............................................................................. 154
Per Parcel Assessed Valuation of Single Family Residential ........................................................ 155
Debt Capacity:
Ratio of Outstanding Debt by Type .............................................................................................. 156
Computation of Direct and Overlapping Debt ............................................................................. 157
Computation of Legal Bonded Debt Margin ................................................................................ 158
Revenue Bond Coverage .............................................................................................................. 159
Demographic and Economic Information:
Taxable Transactions by Type of Business ................................................................................... 160
Demographic and Economic Statistics ......................................................................................... 161
Principal Employers...................................................................................................................... 162
Operating Information:
Operating Indicators by Function/Program ................................................................................. 164
Capital Asset Statistics by Function/Program .............................................................................. 166
Full‐Time Equivalent City Government Employees by Function .................................................. 168
Introduction
……….…………………………………………………………………………………………….
City of Palo Alto i
Transmittal Letter…………………………………………………...…
OFFICE OF THE CITY MANAGER
250 Hamilton Ave, 7th Floor
Palo Alto, CA 94301
650.329.2692
October 30, 2020
THE HONORABLE CITY COUNCIL
Palo Alto, California
COMPREHENSIVE ANNUAL FINANCIAL REPORT
YEAR ENDED JUNE 30, 2020
Members of the Council and Citizens of Palo Alto:
I am pleased to present the Comprehensive Annual Financial Report (CAFR) for the fiscal year ended
June 30, 2020 in accordance with Article III, Section 16 and Article IV, Section 13 of the City of Palo Alto
Charter. The format and content of this CAFR complies with the principles and standards of accounting
and financial reporting adopted by the Governmental Accounting Standards Board (GASB), and
contains all information needed for readers to gain a reasonable understanding of City of Palo Alto
(City) financial affairs. Management takes sole responsibility for the completeness and reliability of
the information contained in this report, based upon a comprehensive framework of internal control
that it has established for this purpose. The objective of internal controls is to provide reasonable,
rather than absolute, assurance that the financial statements are free of any material misstatements.
The City’s financial statements have been audited by Macias Gini & O’Connell LLP, Certified Public
Accountants (MGO). The goal of the audit is to obtain reasonable assurance that the financial
statements are free of material misstatements and are fairly presented in conformity with generally
accepted accounting principles (GAAP). MGO issued an unmodified opinion for the fiscal year ended
June 30, 2020. Their report is presented as the first component of the financial section of this report.
While MGO has issued an unmodified opinion for this report, information and the contents of this
report is the responsibility of the City.
An overview of the City’s financial activities for the fiscal year is discussed in detail in the
Management’s Discussion and Analysis (MD&A) section of the CAFR. MD&A complements this
transmittal letter and should be read in conjunction with it.
Introduction
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ii City of Palo Alto
CITY OF PALO ALTO PROFILE
The City was incorporated in 1894 and named after a majestic coastal redwood tree which lives along
the San Francisquito Creek where early Spanish explorers settled. Located between the cities of San
Francisco and San Jose, the City is a largely built-out community of approximately 67,019 residents.
The City delivers a full range of municipal services and public utilities under the Council-Manager form
of government and offers an outstanding quality of life for its residents. It covers an area of twenty-
six square miles and has dedicated almost one-half of the area to open spaces of parks and wildlife
preserves. Public facilities include five libraries, four community centers, a cultural arts center, an
adult and children’s theater, a junior museum and zoo, an airport, and a golf course. The City provides
a diverse array of services for seniors and youth, an extensive continuing education program, concerts,
exhibits, team sports and special events. The independent Palo Alto Unified School District (PAUSD)
has achieved State and national recognition for the excellence of its programs.
City Council: The seven members are elected at-large for four-year staggered terms. At the first
meeting of each calendar year, Council elects a Mayor and Vice-Mayor from its membership, with the
Mayor having the duty of presiding over Council meetings. Council is the appointing authority for the
positions of City Manager and three other officials, the City Attorney, City Clerk, and City Auditor, all
of whom report to Council.
Finance Committee and Policy and Services Committee: While retaining the authority to approve all
actions, Council has established two subcommittees, the Finance Committee and the Policy and
Services Committee. The Finance Committee considers and makes recommendations on matters
relating to finance, budget, financial audits, capital planning and debt. Each subcommittee is
comprised of three Council members. Staff provides the subcommittees and Council with reports such
as the CAFR, quarterly budget-versus-actual results, and various planning reports, all of which are
utilized in their review of the City’s financial position.
FISCAL/ECONOMIC CONDITIONS AND OUTLOOK
Beginning in March 2020, the City declared a state of emergency and the world began to grapple with
the impacts of the novel coronavirus (COVID-19), a global pandemic, and the ensuing public health
emergency. This fiscal year ending June 30, 2020 saw the most significant immediate impacts as
shelter in place orders were instituted in the County of Santa Clara and State of California. Therefore,
these financials reflect nearly three quarters of a healthy economy followed by a quarter with an
immediate and stark change in society, impacting residents, business, and visitors in profound and
unseen ways.
Employment Trends: The City is located in the heart of Silicon Valley and is adjacent to Stanford
University, one of the premier institutions of higher education in the nation which has produced much
of the talent that founded many successful high-tech companies in Palo Alto and Silicon Valley. With
varied historically and relatively stable employers such as Stanford University, Stanford Health Care,
Palo Alto Medical Foundation, Palo Alto Unified School District, Stanford Shopping Center and
businesses such as Hewlett-Packard, VMware, Tesla, SAP labs Inc. and Space Systems Loral, Palo Alto
has enjoyed diverse employment and revenue bases. The City’s unemployment rate was 5.7 percent
compared to the prior year level of 2.1 percent. The County of Santa Clara’s unemployment rate of
10.7 percent, compared to the prior year level of 2.7 percent. The State of California’s unemployment
rate was 14.9 percent, compared to the prior year level of 4.5 percent. These levels are significantly
higher than recent years as many businesses were forced to adjust their workforce and operations
were severely restricted by shelter-in-place orders.
Introduction
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City of Palo Alto iii
Real Estate Market: The 2019-2020 County of Santa Clara Assessor’s Annual Report noted that the
County of Santa Clara’s annual assessment roll increased by $32.8 billion to $516.1 billion, a 6.79
percent increase over the prior year. Palo Alto’s assessment roll represents 7.6 percent of the County
of Santa Clara’s assessment roll and grew 6.7 percent over the prior year to $39.3 billion. Per the Santa
Clara County Association of Realtors, home prices in Palo Alto remain well above the County of Santa
Clara’s average at $3.3 million as of second quarter 2020. Cushman & Wakefield has an optimistic look
that the Silicon Valley’s office market was flat, as most deals were brought to a halt due to the
pandemic and shelter in place. As of second quarter 2020, the overall average asking rent for Class A
office space in Palo Alto was reported at $8.06 per square foot per month, while research and
development space was noted at $7.01 per square foot per month. Cushman & Wakefield expects the
Silicon Valley market will recover faster than other markets as the economy recovers from the impacts
of the public health emergency.
Local Trends: The national and local level economy was healthy at the time that the FY 2020 budget
was developed. On March 16, 2020, the State of California and the County of Santa Clara ordered a
Shelter in Place directives to slow the spread of COVID-19. Disruptions caused by COVID-19 are both
widespread and significant to Palo Alto’s economic environment and community. Nationally, gross
domestic product (GDP) declined by 5.0 percent in the first (calendar) quarter and 31.4 percent in the
second (calendar) quarter of 2020. California experienced similar GDP declines. The City’s
unemployment has been elevated since the pandemic hit the region, however, the rate is significantly
lower than national, State of California, and County of Santa Clara’s unemployment rates. Job growth
is tepid. Economically sensitive revenue sources such as transient occupancy tax and sales tax have
significantly declined while utility user’s and documentary transfer taxes growth have plateaued.
Property taxes has been resilient with a healthy growth, however, future years will be monitored
closely.
General Fund Balancing and Results: In June 2020, the FY 2020 budget was modified by the City
Council to balance projected revenue impacts resulting from the public health emergency which
included significant adjustments to the City’s major tax revenue sources (CMR 11328). Compared to
the Adopted Budget, the financial impacts of COVID-19 resulted in an estimated reduction in revenue
of $23.7 million: a $15.0 million loss in General Fund tax revenue, a $7.5 million reduction in charges
for services, and a $1.2 million loss in permits and licenses revenue. These impacts were balanced
through a citywide hiring freeze, a $6.7 million reduction towards general capital improvement
investments, elimination of reserves for recruitment and retention initiatives and operations, and the
balance drawn from the City’s Budget Stabilization Reserve (BSR). Through these efforts and active
response by departments to the financial implications of the public health emergency the City was able
to minimize the impact on reserve balances at the close of FY 2020. While society continues to respond
to slow the spread and contain the COVID-19, the magnitude of the financial impacts continues to
remain unknown.
Despite the financial constraints, the City maintained its commitment to addressing its long-term
liabilities. Contributions towards the City’s long-term pension obligations and other post- employment
obligations were maintained this fiscal year including payment to trust funds. These were made
possible by cost containment strategies utilized across the organization over the past several years.
The FY 2020 budget also includes several one-time actions that are designed to contain costs while
departments continue to evaluate service delivery options and redeployment of resources that have
minimal service level impact. In addition to the City’s past practice of planning for staffing costs
contained in the agreed upon labor terms outlined in memorandums of agreement, CalPERS-
Introduction
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iv City of Palo Alto
determined retirement contribution levels, and a vacancy factor in the General Fund, proactive
pension funding contributions to the City’s irrevocable Section 115 Pension Trust Fund were achieved
in FY 2020. In the General Fund, this resulted in $3.8 million in additional contributions from various
departments and reflects what retirement costs would be if the “normal cost” of contributions was
budgeted at a 6.2 percent discount rate (CalPERS is currently at a 7.0 percent discount rate). As of
June 30, 2020, the City’s irrevocable pension trust fund has a total of $27.3 million in Citywide
contributions (excluding earnings from investments), of which $17.8 million are from the General
Fund.
As the community grapples with the various impacts of COVID-19, the City is taking a hard look at
operating and capital budgets by prioritizes essential services, paring back discretionary items, and
continually the monitoring impacts the global pandemic has on the City’s major revenue sources and
economic sectors. In addition to these challenges, the City remains focused on implementing a
Sustainability and Climate Action Plan while structurally balancing revenues and expenses to maintain
high quality services. These issues were reflected in the setting of Council priorities for 2020:
• Housing, with an emphasis on affordable housing
• Sustainability, in the context of the changing climate
• Mobility, improving mobility for all
Progress continues to be made on these priorities, which require long-term strategies. The FY 2020
budget established an Office of Transportation in the City Manager’s Office to address the growing
complexity and demands associated with parking, traffic, and pending decisions regarding grade
separation. This new office will be better able to proactively engage the community and address
critical transportation needs.
Staff presented a “Fiscal Sustainability” workplan to the City Council, articulating the ecosystem of
available resources, desired outcomes, and long-term solvency of the City. Advancing and establishing
the City’s pension policy, with the goal of balancing near-term investments with long-term needs and
minimizing service delivery crowd-out from escalating pension costs, is a central focus of the Fiscal
Sustainability workplan. It is anticipated that Council will adopt the pension policy before the close of
the calendar year.
In FY 2014, the City Council approved a $125.8 million Infrastructure Plan (IP), which includes projects
such as a new Public Safety Building, replacement of two Fire Stations, a Bike and Pedestrian plan and
two parking garages. Through the development of the 2020-2024 Capital Improvement Plan (CIP), a
tenth project was added to the IP, Downtown Automated Parking Guidance Systems, and the IP
projects were updated for scope increases and cost escalations, resulting in a revised Infrastructure
Plan of $280.6 million. These projects will be funded partially by debt to be repaid with voter approved
increases of 3.5 percent in the transient occupancy tax (TOT) rate and from other sources such as
impact fees and Stanford University Medical Center development agreement monies. The 2020-2024
CIP assumed the opening of new Marriott hotels in FY 2021, and the additional annual TOT funding is
estimated to cover the cost of the IP projects. Staff is already revising these figures and adjusting and
planning for the impacts associated with the public health emergency and its impact on revenues.
Rates increased in 2020 for electric, gas, storm drain, wastewater, and water services. In general, the
size and timing of rate adjustments take into account current and future revenue requirements and
reserve levels for needs such as increasing costs of commodity purchases, capital construction costs,
Introduction
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City of Palo Alto v
and contractually obligated increases to compensate for inflation, usually based on the annual change
to the Bay Area consumer price index (CPI).
Long Range Financial Forecast: The City produces a 10-year General Fund Long Range Financial
Forecast (LRFF) annually. This comprehensive report analyzes local, state, and federal economic
conditions, short and long-term revenue and expense trends, and addresses challenges such as funding
long-term pension and healthcare liabilities and infrastructure needs. The forecast is designed to
highlight finance issues which the City can address proactively. Moreover, it is a tool that allows
policymakers an opportunity to prioritize funding needs over time. It sets the tone for the annual
budget process and is one of the many tools and reports that Council uses for financial planning.
The FY 2020-2029 LRFF was presented to the Finance Committee in December 2018 and approved by
the City Council in March 2020. The forecast anticipated a near-term gap in the General Fund. Staff
identified and recommended a course of action that would structurally balance the General Fund in FY
2020 and largely balance the General Fund on an ongoing basis. As discussed above, the FY 2020
budget included a proactive pension funding contribution to the City’s irrevocable Section 115 Pension
Trust Fund, and reflected what retirement costs would be if the “normal cost” of contributions was
budgeted at a 6.2 percent discount rate (CalPERS completed its ‘step-down’ to a 7.0 percent discount
rate). This resulted in the need to include cost containment actions with specific resulting service
impacts such as the elimination of positions and non-salary funding throughout the organization.
Both Moody’s and Standard and Poor’s (S&P) awarded their highest credit rating of Triple A to the
City’s general obligation bonds. This rating has been awarded to only a few cities in the State of
California.
SIGNIFICANT EVENTS AND ACCOMPLISHMENTS
The City is a community dedicated to meeting the social, cultural, recreational,
educational, commercial, and retail needs of its citizens and businesses. As such,
open space, education, recreational facilities, cultural events and safe streets
and neighborhoods are important aspects of the community and the City has
been recognized for its accomplishments with a wide variety of awards and
recognitions over the past year. Following is a sampling of those awards and
accomplishments:
• Library Council’s Top Innovator 2019 Award for providing education programming for youth
and families, using robots
• National Energy Innovator Award and Smart Energy Provider Award from the American Public
Power Association (APPA) for the City’s Home Efficiency Genie program
• Implemented emergency telework for 400 nonessential employees to work from home in
response to response to the COVID-19 pandemic and continued all essential services
• Provided virtual classes and programs at the Art Center, Children’s Theater, Junior Museum &
Zoo and throughout the recreation division as a response to the COVID-19 pandemic
• Achieved annual accreditation with the Center for Public Safety Excellence
Awards: During the past year, the City received an award for the prior fiscal year (2019) CAFR from
the Government Finance Officers Association (GFOA) for “excellence in financial reporting.” The 2020
CAFR will be submitted to the GFOA award program to be considered for this distinguished financial
reporting award.
Introduction
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vi City of Palo Alto
Acknowledgments: This CAFR reflects the hard work, talent and commitment of the staff members of
the Administrative Services Department. This document could not have been accomplished without
their efforts and each contributor deserves sincere appreciation. Management wishes to acknowledge
the support of the entire accounting staff for their high level of professionalism and dedication.
Management would also like to express its appreciation to MGO, the City’s independent external
auditors, who assisted and contributed to the preparation of this Comprehensive Annual Financial
Report.
Special acknowledgment must be given to City Council and the Finance and Policy and Services
Committees for their dedication to directing the financial affairs of the City in a responsible,
professional and progressive manner.
Respectfully submitted,
KIELY NOSE ED SHIKADA
Chief Financial Officer City Manager
Introduction
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City of Palo Alto vii
City of Palo Alto City Officials ………………………….…………
Council-Appointed Officers
City Manager
Ed Shikada
City Attorney
Molly Stump
City Clerk
Beth Minor
City Auditor
Kyle O'Rourke
(appointed 9/2020)
City Council
Adrian Fine, Mayor
Tom DuBois, Vice-Mayor
Alison Cormack
Eric Filseth
Liz Kniss
Lydia Kou
Greg Tanaka
Finance Committee
Greg Tanaka, Chair
Tom DuBois
Liz Kniss
Nancy Shepherd
Policy and Services Committee
Alison Cormack, Chair
Eric Filseth
Lydia Kou
Introduction
…….…………………………………………………………………………………………….
viii City of Palo Alto
City Attorney
Molly Stump
City Manager
Ed Shikada
City Auditor
Kyle O'Rourke City Clerk
Beth Minor
City of Palo Alto Organization ……………………………………
Community Services
Kristen O’Kane, Director
Administrative Services
Kiely Nose, Chief Financial Officer
Fire
Geoffrey Blackshiere, Chief
Human Resources
Rumi Portillo, Director
Police
Robert Jonsen, Chief
Planning & Development Services
Jonathan Lait, Director
Utilities
Dean Batchelor, Director
Public Works
Brad Eggleston, Director
Library
Gayathri Kanth, Interim Director
Office of Emergency Services
Kenneth Dueker, Director
Information Technology
Darren Numoto,
Interim Chief Information Officer
Palo Alto Residents
City Council
Introduction
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City of Palo Alto ix
Administrative Services Organization ………
Administrative Services Department
Administrative Division Treasury Division
Accounting Division Office of Management & Budget
Purchasing Division Real Estate Division
Mission Statement
To provide proactive administrative and technical support to
City departments and decision makers, and to safeguard and
facilitate the optimal use of City resources.
Introduction
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x City of Palo Alto
Government Finance Officers Association of
the United States and Canada – Award ……
www.mgocpa.com
Macias Gini & O’Connell LLP 2121 N. California Boulevard, Suite 750 Walnut Creek, CA 94596
1
Independent Auditor’s Report
Honorable Mayor and the Members
of the City Council of
City of Palo Alto, California
Report on the 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 Palo Alto,
California (City), as of and for the year ended June 30, 2020, and the related notes to the financial
statements, which collectively comprise the City’s basic financial statements as listed in the table of
contents.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in
accordance with accounting principles generally accepted in the United States of America; this includes the
design, implementation, and maintenance of internal control relevant to the preparation and fair presentation
of financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted
our audit in accordance with auditing standards generally accepted in the United States of America and the
standards applicable to financial audits contained in Government Auditing Standards, issued by the
Comptroller General of the United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the
financial statements. The procedures selected depend on the auditor’s judgment, including the assessment
of the risks of material misstatement of the financial statements, whether due to fraud or error. In making
those risk assessments, the auditor considers internal control relevant to the entity’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 entity’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.
2
Opinions
In our opinion, 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,
and the aggregate remaining fund information of the City as of June 30, 2020, and the respective changes
in financial position, and, where applicable, cash flows thereof and the respective budgetary comparison
for the General Fund for the year then ended in accordance with accounting principles generally accepted
in the United States of America.
Emphasis of a Matter
As discussed in Note 17 to the basic financial statements, in March 2020, the World Health Organization
declared coronavirus COVID-19 a global pandemic. The City expects this outbreak to adversely impact
revenues and operations for future reporting periods. The City is not able to predict the duration or
magnitude of the adverse results of the outbreak and its effects on the City or results of operations. Our
opinion is not modified with respect to this matter.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s
discussion and analysis, the schedules of changes in net pension liability and related ratios, the schedules
of pension contributions, the schedule of changes in net OPEB liability and related ratios, and the schedule
of employer OPEB contributions, 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, combining and individual
nonmajor fund financial statements and schedules, and statistical section, are presented for purposes of
additional analysis and are not a required part of the basic financial statements.
The combining and individual nonmajor fund financial statements are the responsibility of management
and were derived from and relate directly to the underlying accounting and other records used to prepare
the basic financial statements. Such information has been subjected to the auditing procedures applied in
the audit of the basic financial statements and certain additional procedures, including comparing and
reconciling such information directly to the underlying accounting and other records used to prepare the
basic financial statements or to the basic financial statements themselves, and other additional procedures
in accordance with auditing standards generally accepted in the United States of America. In our opinion,
the combining and individual nonmajor fund financial statements are fairly stated, in all material respects,
in relation to the basic financial statements as a whole.
3
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 October 30, 2020
on our consideration of the City’s internal control over financial reporting and on our tests of its compliance
with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose
of that report is 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.
Walnut Creek, California
October 30, 2020
4
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Management’s Discussion and Analysis ◼
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City of Palo Alto 5
Management’s Discussion and Analysis (Unaudited)
Management’s Discussion and Analysis (MD&A) provides an overview of the City of Palo Alto’s financial
performance for the fiscal year ended June 30, 2020. To obtain a complete understanding of the City’s financial
condition, this document should be read in conjunction with the accompanying Transmittal Letter and Basic
Financial Statements. Certain balances for prior year are reclassified to conform with current year
presentation.
FINANCIAL HIGHLIGHTS
▪ The assets and deferred outflows of resources of the City of Palo Alto (City) exceeded its liabilities and
deferred inflows of resources at the close of Fiscal Year (FY) 2020 by $1.2 billion. Of this amount, $29.5
million represents unrestricted net position, which may be used to meet the government’s ongoing
obligations to citizens and creditors.
▪ The City’s net position increased $34.1 million, or 2.9 percent, for the current fiscal year including
increase of $43.5 million business-type activities offset by decrease of $9.4 million by governmental
activities.
▪ The City’s total outstanding long-term debt decreased by $2.3 million during the current fiscal year.
▪ At the close of FY 2020, the City’s governmental funds reported total fund balances of $266.7 million,
a decrease of $38.3 million from the prior year. Approximately 13.4 percent of this amount, or $35.9
million, is unassigned fund balance and available for spending at the City’s discretion.
▪ At the end of the current fiscal year, unrestricted fund balance (the total of the committed, assigned
and unassigned components of fund balance) for the General Fund was $52.9 million, or 24.7 percent
of total general fund expenditures, including transfers.
▪ In March 2020, the World Health Organization declared novel coronavirus (COVID-19) a global
pandemic. Revenues and operations were adversely impacted and the City expects the impact to
continue for future reporting periods. The City is not able to predict the duration or magnitude of the
adverse results of the outbreak and its effects on the City or results of operations.
OVERVIEW OF THE COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR)
The CAFR is presented in five sections:
▪ An introductory section that includes the Transmittal Letter and general information
▪ Management’s Discussion and Analysis
▪ The Basic Financial Statements that include the Government-wide and Fund Financial Statements,
along with the Notes to the Basic Financial Statements
▪ Required and Other Supplemental Information
▪ Statistical Information
Government-wide Financial Statements
The Government-wide Financial Statements provide a longer-term view of the City’s activities as a whole.
They include the Statement of Net Position and the Statement of Activities.
The Statement of Net Position includes the City’s capital assets and long-term liabilities on a full accrual basis
of accounting similar to that used by private sector companies. Over time, increases or decreases in net
position may serve as a useful indicator of whether the financial position of the City is improving or
deteriorating.
◼ Management’s Discussion and Analysis
……….……………………………………………………………………
6 City of Palo Alto
The Statement of Activities provides information about the City’s revenues and expenses on a full accrual
basis, with an emphasis on measuring net revenues or expenses for each of the City’s programs. The
Statement of Activities explains in detail the change in net position for the year. All changes in net position
are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of
related cash flows.
The amounts in the Statement of Net Position and the Statement of Activities are separated into
Governmental and Business-type Activities in order to provide a summary of each type of activity.
Governmental Activities
All of the City’s basic services are considered to be governmental activities. Included in basic services are the
City Council, City Manager, City Attorney, City Clerk, City Auditor, Administrative Services, Human Resources,
Public Works, Planning and Development Services, Office of Transportation, Police, Fire, Community Services,
and Library. These services are supported by City’s general revenues such as taxes, and by specific program
revenues such as fees and grants.
The City’s governmental activities also include the activities of the Palo Alto Public Improvement Corporation,
which is a separate legal entity financially accountable to the City.
Business-type Activities
All of the City’s enterprise activities are reported as business-type activities, including Water, Electric, Fiber
Optics, Gas, Wastewater Collection, Wastewater Treatment, Refuse, Storm Drainage, and Airport. Unlike
governmental services, these services are intended to recover all or a significant portion of their costs through
user fees and charges.
The Government-wide Financial Statements can be found on pages 29 and 31 of this report.
Fund Financial Statements
The 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 major funds, was
established by Governmental Accounting Standards Board (GASB) Statement No. 34. Therefore, each major
fund is presented individually, with all non-major funds combined in a single column on each fund statement.
Supplemental schedules display these non-major funds in more detail. The General Fund is always considered
a major fund, but other funds may change from year to year as a result of changes in the pattern of City
activities.
The Fund Financial Statements display the City’s operations in more detail than the Government-wide
Financial Statements. Fund Financial Statements include Governmental, Proprietary, and Fiduciary Funds.
Governmental Funds
Governmental Fund Financial Statements are prepared on the modified accrual basis of accounting, which
means they measure only current financial resources and uses. Capital assets and other long-term assets,
along with long-term liabilities, are presented only in the Government-wide Financial Statements. For FY 2020,
the City had two major governmental funds - the General Fund and the Capital Projects Fund. Data from the
other governmental funds are combined into a single column for presentation. Individual fund data for each
of these non-major governmental funds is provided in the Supplemental Information section of this report.
Management’s Discussion and Analysis ◼
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City of Palo Alto 7
Because the focus of governmental funds is narrower than that of the Government-wide Financial Statements,
it is useful to compare the information presented for governmental funds with similar information presented
for governmental activities in the Government-wide Financial Statements. By doing so, readers may better
understand the long-term impact of the government’s near-term financing decisions. Both the Governmental
Fund Balance Sheet and the Governmental Fund Statement of Revenues, Expenditures and Changes in Fund
Balances provide a reconciliation to facilitate this comparison between governmental funds and governmental
activities.
The Governmental Fund Financial Statements can be found on pages 33-37 of this report.
Proprietary Funds
Enterprise and Internal Service Fund Financial Statements are prepared on the full accrual basis of accounting,
similar to that used by private sector companies. These statements include all of the current and long-term
assets, deferred outflows of resources, current and long-term liabilities, and deferred inflows of resources.
The City’s Internal Service Funds provide goods and services exclusively to the City’s governmental and
business-type activities. Internal Service Funds cannot be considered major funds because their revenues are
derived from other City funds. Revenues between funds are eliminated in the Government-wide Financial
Statements, and any related profits or losses in Internal Service Funds are returned to the activities in which
they were created, along with any residual net position of the Internal Service Funds.
The Proprietary Fund Financial Statements can be found on pages 38-43 of this report.
Fiduciary Funds
Fiduciary funds accounted for assets held by the City that are custodial in nature and do not involve
measurement of results of operations. The City’s fiduciary funds are reported in the Statement of Fiduciary
Net Position. These funds are excluded from the City’s governmental-wide financial statements because the
City cannot utilize these assets to finance its own operations.
The Fiduciary Fund Financial Statement can be found on page 44 of this report.
Notes to the Basic Financial Statements
The Notes to the Basic Financial Statements provide additional information that is necessary to acquire 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 47-106 of this report.
Required and Other Supplemental Information
The Required Supplementary Information related to the City’s pension and OPEB plans is included after the
Notes to the Basic Financial Statements on pages 107-112. The combining statements and individual fund
statements and schedules referred to earlier in connection with non-major Governmental Funds and Internal
Service Funds are presented immediately following the Required Supplementary Information and can be
found on pages 113-138 of this report.
◼ Management’s Discussion and Analysis
……….……………………………………………………………………
8 City of Palo Alto
FINANCIAL ANALYSIS OF GOVERNMENT-WIDE FINANCIAL STATEMENTS
This section focuses on the City’s net position and changes in net position of its governmental and business-
type activities for the fiscal year ended June 30, 2020. As noted earlier, the City’s total assets and deferred
outflows of resources exceeded total liabilities and deferred inflows of resources by $1.2 billion at the end of
the fiscal year, an increase in net position of $34.1 million.
CONDENSED STATEMENT OF NET POSITION
As of June 30
(in millions)
2020 2019 2020 2019 2020 2019
Cash and investments 342.8$ 354.0$ 277.4$ 253.4$ 620.2$ 607.4$
Other assets 60.5 69.9 52.8 51.3 113.3 121.2
Capital assets 596.3 566.1 693.2 673.5 1,289.5 1,239.6
Total Assets 999.6 990.0 1,023.4 978.2 2,023.0 1,968.2
Unamortized loss from refunding - - 0.2 0.2 0.2 0.2
Pension and OPEB related 55.8 63.4 20.9 21.5 76.7 84.9
Total Deferred Outflows of Resources 55.8 63.4 21.1 21.7 76.9 85.1
Net pension and OPEB liabilities 416.3 417.3 153.7 154.4 570.0 571.7
Long-term debt 112.5 115.1 74.5 74.2 187.0 189.3
Other liabilities 61.5 63.9 21.7 26.6 83.2 90.5
Total Liabilities 590.3 596.3 249.9 255.2 840.2 851.5
Pension and OPEB related 24.5 7.1 9.6 3.2 34.1 10.3
Total Deferred Inflows of Resources 24.5 7.1 9.6 3.2 34.1 10.3
Net Position
Net investment in capital assets 497.4 493.7 621.3 602.1 1,118.7 1,095.8
Restricted 73.3 59.7 4.1 4.0 77.4 63.7
Unrestricted (130.1) (103.4) 159.6 135.4 29.5 32.0
Total Net Position 440.6$ 450.0$ 785.0$ 741.5$ 1,225.6$ 1,191.5$
Governmental
Activities
Business-type
Activities
Government-wide
Totals
The largest portion of the City’s net position (91.3 percent) is its net investment in capital assets such as land,
buildings, infrastructure and vehicles, less any related outstanding debt that was used to acquire those assets.
The City uses these capital assets to provide a variety of services to its citizens. Accordingly, these assets are
not available for future spending. Although the City’s investment in capital assets is reported net of related
debt, it should be noted that the resources used to repay this debt must be provided from other sources, since
the capital assets themselves cannot be used to liquidate these liabilities.
The restricted portion of the City’s net position (6.3 percent) represents resources that are subject to external
restrictions on how they may be used. The remaining balance of $29.5 million, representing 2.4 percent of
the City’s net position, is unrestricted and may be used to meet the City’s ongoing obligations to its citizens
and creditors.
Management’s Discussion and Analysis ◼
……….……………………………………………………………………
City of Palo Alto 9
At the end of the current fiscal year, the City is able to report positive unrestricted net positions for the
government as a whole. The unrestricted net position for governmental activities is negative due to
recognition of the net pension liabilities as required by GASB Statement No. 68 and net OPEB liabilities as
required by GASB Statement No. 75. The deficit of $130.1 million in FY 2020 for the governmental activities
includes the impact of $291.9 million for the net pension liabilities and the related deferred inflows and
outflows of resources and $93.2 million for the Net OPEB liabilities and the related deferred inflows and
outflows of resources.
Components of the $34.1 million increase in total net position are discussed in the following sections for
governmental activities and business-type activities.
Governmental Activities – Net Position
The following analysis focuses on the net position and changes in net position of the City’s Governmental
Activities presented in the Government-wide Statement of Net Position and Statement of Activities.
Increase/
2020 2019 (Decrease)
Cash and investments 342.8$ 354.0$ (11.2)$
Other assets 60.5 69.9 (9.4)
Capital assets 596.3 566.1 30.2
Total Assets 999.6 990.0 9.6
Pension and OPEB related 55.8 63.4 (7.6)
Total Deferred Outflows of Resources 55.8 63.4 (7.6)
Net pension and OPEB liabilities 416.3 417.3 (1.0)
Long-term debt 112.5 115.1 (2.6)
Other liabilities 61.5 63.9 (2.4)
Total Liabilities 590.3 596.3 (6.0)
Pension and OPEB related 24.5 7.1 17.4
Total Deferred Inflows of Resources 24.5 7.1 17.4
Net investment in capital assets 497.4 493.7 3.7
Restricted 73.3 59.7 13.6
Unrestricted (130.1)(103.4) (26.7)
Total Net Position 440.6$ 450.0$ (9.4)$
CONDENSED STATEMENT OF NET POSITION
As of June 30
(in millions)
GOVERNMENTAL ACTIVITIES
◼ Management’s Discussion and Analysis
……….……………………………………………………………………
10 City of Palo Alto
▪ The City’s Governmental Activities total net position decreased $9.4 million to $440.6 million as of
June 30, 2020.
▪ Cash and investments decreased $11.2 million mainly due to the usage of restricted cash and
investments for the construction of the California Avenue Parking Garage offset by an increase in
restricted cash and investments held in the Public Agency Retirement Services Section 115 irrevocable
trust (Section 115 Pension Trust).
▪ Other assets decreased $9.4 million mainly due to decrease of tax revenues and receivables caused
by COVID-19 and the collection of receivables from Stanford fire protection services during current
year.
▪ Capital assets increased $30.2 million due to continued construction of the Charleston/Arastradero
Corridor, Highway 101 Pedestrian / Bicycle overpass, New Public Safety Building, and California
Avenue Parking Garage.
▪ Pension and OPEB related deferred outflows of resources decreased $7.6 million primarily due to
decrease of pension related deferred outflows of resources of $12.2 million offset by the increase of
OPEB related deferred outflows of resources of $4.6 million.
▪ Long-term debt decreased $2.6 million due to scheduled debt retirements.
▪ Other liabilities decreased $2.4 million primarily due to decreases of accruals as a result of COVID-19
related deferment of non-essential spending partially offset by increases of compensated absences
and claims payable.
▪ Pension and OPEB related deferred inflows of resources increased $17.4 million mainly due to
increase in OPEB related deferred inflows of resources for differences between expected and actual
experience because of lower than expected medical and premiums caps and demographic
differences, such as Medicare eligibility.
▪ Net investment in capital assets increased $3.7 million to $497.4 million due to the net increase in
capital assets offset by the reduction of restricted cash and investments used for the construction of
the California Avenue Parking Garage. Restricted net position increased $13.6 million to $73.3 million
primarily due to increase of restricted cash and investments held in the Section 115 Pension Trust.
Unrestricted net position is negative primarily due to the recognition of the net pension and OPEB
liabilities as required by GASB Statements Nos. 68 and 75.
Management’s Discussion and Analysis ◼
……….……………………………………………………………………
City of Palo Alto 11
Governmental Activities – Revenues
The table below shows that Governmental Activities revenues totaled $213.3 million in FY 2020, a decrease
of $25.0 million from prior year revenues of $238.3 million.
Increase/
Revenues by Source 2020 2019 (Decrease)
Program Revenues:
Charges for services 57.1$ 70.9$ (13.8)$
Operating grants and contributions 2.6 2.1 0.5
Capital grants and contributions 9.0 8.3 0.7
Total Program Revenues 68.7 81.3 (12.6)
General Revenues:
Property tax 55.6 51.7 3.9
Sales tax 30.6 36.5 (5.9)
Utility user tax 16.1 16.4 (0.3)
Transient occupancy tax 18.6 25.6 (7.0)
Documentary transfer tax 6.9 6.9 0.0
Other tax 2.9 2.6 0.3
Investment earnings 13.8 15.4 (1.6)
Miscellaneous 0.1 1.9 (1.8)
Total General Revenues 144.6 157.0 (12.4)
Total Revenues 213.3$ 238.3$ (25.0)$
GOVERNMENTAL ACTIVITIES
Revenues for the Year Ended June 30
(in millions)
Program Revenues such as charges for services, operating grants and contributions, and capital
grants and contributions are generated from or restricted to each activity. Total Program Revenues
decreased $12.6 million, or 15.5 percent, from the prior year due to the following:
▪ $7.8 million decrease in developer impact fees, housing in-lieu, and transportation mitigation fees, all
of which vary depending on volume and magnitude of development projects.
▪ $3.9 million decrease in other revenue due to sale of Transfer Development Rights in FY 2019.
▪ Reduced programs and classes, closure of golf course and fewer plan reviews and inspections during
the initial phase of COVID-19 shelter in place order and limited operations afterwards.
◼ Management’s Discussion and Analysis
……….……………………………………………………………………
12 City of Palo Alto
General Revenues decreased $12.4 million, or 7.9 percent, from the prior year mainly due to decreases in
sales tax, utility user tax, and transient occupancy tax revenues impacted by the COVID-19 shelter in place
order.
Further analysis of program revenues and general revenues can be found in the Financial Analysis of
Governmental Funds section of the MD&A.
Governmental Activities – Revenues by Source
The chart below presents revenues by source for Governmental Activities. General Revenues are composed
of taxes and other revenues not specifically generated by, or restricted to, individual activities. All tax revenues
and investment earnings are included in General Revenues.
Property Tax
26%
Program Revenues
32%
Sales Tax
14%
Utility User Tax
8%
Transient Occupancy Tax
9%
Documentary Transfer Tax
3%Other
8%
Management’s Discussion and Analysis ◼
……….……………………………………………………………………
City of Palo Alto 13
Governmental Activities – Expenses
The table below presents a comparison of FY 2020 and FY 2019 expenses by function, along with interest and
other expenses and transfers. Total Governmental Activities functional expense was $242.9 million in FY 2020,
an increase of $8.5 million.
Increase/
Activities 2020 2019 (Decrease)
City Council 0.2$ 0.3$ (0.1)$
City Manager 3.6 3.3 0.3
City Attorney 2.8 3.1 (0.3)
City Clerk 0.8 0.8 0.0
City Auditor 0.6 1.1 (0.5)
Administrative Services 15.9 19.2 (3.3)
Human Resources 3.0 3.0 0.0
Public Safety 92.2 89.2 3.0
Planning and Development Services 21.7 24.7 (3.0)
Office of Transportation 4.7 - 4.7
Public Works 45.6 36.6 9.0
Community Services 34.2 36.8 (2.6)
Library 13.0 12.6 0.4
Interest and Other Expense 4.6 3.7 0.9
Total Functional Expense 242.9 234.4 8.5
Change in Net Position before Transfers (29.6)3.9 (33.5)
Transfers 20.2 18.7 1.5
Change in Net Position (9.4)22.6 (32.0)
Net Position, Beginning 450.0 427.4 22.6
Net Position, Ending 440.6$ 450.0$ (9.4)$
GOVERNMENTAL ACTIVITIES
Expenses and Change in Net Position for the Year Ended June 30
(in millions)
The increase in functional expenses was mainly due to the increase in loss on disposal of capital assets of $8.7
million recorded as part of Public Works functional expenses, from FY 2019’s $4.0 million to FY 2020’s $12.7
million.
◼ Management’s Discussion and Analysis
……….……………………………………………………………………
14 City of Palo Alto
Governmental Activities – Functional Expenses
The functional expenses chart below includes only current year expenses. It does not include capital outlays,
as those are added to the City’s capital assets. Functions which comprise less than 2 percent of total expenses
are combined into the “All Other” category in the chart below. All Other includes City Council, City Manager,
City Attorney, City Clerk, City Auditor, Human Resources.
Community Services
14%
Library
5%
All Other
5%
Administrative Services
6%
Public Works
19%
Interest and Other Expense
2%
Planning & Development Services
9%
Office Of Transportation
2%
Fire
17%
Police
21%
Management’s Discussion and Analysis ◼
……….……………………………………………………………………
City of Palo Alto 15
Business-Type Activities – Net Position
The following analysis focuses on the net position and changes in net position of the City’s Business-type
Activities presented in the Government-wide Statement of Net Position and Statement of Activities.
Increase/
2020 2019 (Decrease)
Cash and investments 277.4$ 253.4$ 24.0$
Other assets 52.8 51.3 1.5
Capital assets 693.2 673.5 19.7
Total Assets 1,023.4 978.2 45.2
Unamortized loss from refunding 0.2 0.2 -
Pension and OPEB related 20.9 21.5 (0.6)
Total Deferred Outflows of Resources 21.1 21.7 (0.6)
Net pension and OPEB liabilities 153.7 154.4 (0.7)
Long-term debt 74.5 74.2 0.3
Other liabilities 21.7 26.6 (4.9)
Total Liabilities 249.9 255.2 (5.3)
Pension and OPEB related 9.6 3.2 6.4
Total Deferred Inflows of Resources 9.6 3.2 6.4
Net Position
Net investment in capital assets 621.3 602.1 19.2
Restricted 4.1 4.0 0.1
Unrestricted 159.6 135.4 24.2
Total Net Position 785.0$ 741.5$ 43.5$
BUSINESS-TYPE ACTIVITIES
As of June 30
(in millions)
CONDENSED STATEMENT OF NET POSITION
▪ The City’s Business-type Activities total net position increased $43.5 million to $785.0 million as of
June 30, 2020.
▪ Cash and investments increased $24.0 million primarily due to revenues exceeding expenses for all
enterprise funds except for the Refuse fund.
▪ Capital assets increased $19.7 million to $693.2 million primarily due to capital assets addition in the
Water, Electric, Gas, Wastewater Collection, Wastewater Treatment, and Airport Funds. These capital
assets addition also contributed to the $19.2 million increase in net investment in capital assets to
$621.3 million in FY 2020.
◼ Management’s Discussion and Analysis
……….……………………………………………………………………
16 City of Palo Alto
▪ Other liabilities decreased $4.9 million primarily due to lower accruals in the Airport Fund for the
Apron Reconstruction Project.
▪ Deferred inflows of resources increased $6.4 million mainly due to increase in OPEB related deferred
inflows of resources for differences between expected and actual experience because of lower than
expected medical and premiums caps and demographic differences, such as Medicare eligibility.
▪ Unrestricted net position of $159.6 million, an increase of $24.2 million from the prior year, represents
assets available to finance day-to-day operations and other expenditures approved by the City
Council. This amount includes rate stabilization reserves (RSR) of $72.4 million and operations
reserves of $77.5 million, along with the electric special projects (Calaveras) reserve of $46.7 million,
and the hydro stabilization reserve of $15.4 million. The positive balances in these reserves are offset
by the GASB 68 pension reserve deficit of $104.8 million and GASB 75 OPEB reserve deficit of $37.6
million. Additional details are included in Note 10 to the financial statements.
Business-Type Activities – Revenues
The table below presents the revenues by source of the City’s Business-type Activities. The City operates the
Water, Electric, Fiber Optics, Gas, Wastewater Collection, Wastewater Treatment, Refuse, Storm Drainage,
and Airport funds.
BUSINESS-TYPE ACTIVITIES
Revenues for the Year Ended June 30
(in millions)
Increase/
Revenues by Source 2020 2019 (Decrease)
Program Revenues:
Charges for services 353.0$ 347.4$ 5.6$
Operating grants and contributions 0.5 0.4 0.1
Capital grants and contributions 6.4 6.7 (0.3)
Total Program Revenues 359.9 354.5 5.4
General Revenues:
Investment earnings 11.5 12.7 (1.2)
Total General Revenues 11.5 12.7 (1.2)
Total Revenues 371.4$ 367.2$ 4.2$
Business-type Activities revenues totaled $371.4 million, an increase of $4.2 million from the prior year.
Program revenues increased $5.4 million year over year. Charges for services increased $5.6 million from the
prior year due to the following:
▪ Rate increases in the Electric, Water, Wastewater Collection, and Storm Drainage funds.
▪ Wastewater Treatment fund revenue increased as a result of increased billing for capital costs,
operating and sewage treatment costs.
Management’s Discussion and Analysis ◼
……….……………………………………………………………………
City of Palo Alto 17
▪ The increases mentioned above were partially offset by decreases in the Gas Fund revenues due to
lower consumption and in Refuse fund revenues due to reduction of commercial and industrial
services caused by COVID-19.
Business-Type Activities – Expenses
The table below presents a comparison of the FY 2020 and FY 2019 expenses for the City’s Business-type
Activities. Encumbrances and reappropriations are not included.
BUSINESS-TYPE ACTIVITIES
Expenses and Change in Net Position for the Year Ended June 30
(in millions)
Increase/
Business-type Activities 2020 2019 (Decrease)
Water 43.0$ 40.6$ 2.4$
Electric 142.4 139.6 2.8
Fiber Optics 2.8 2.5 0.3
Gas 27.2 30.9 (3.7)
Wastewater Collection 18.9 17.3 1.6
Wastewater Treatment 28.8 27.1 1.7
Refuse 36.9 30.4 6.5
Storm Drainage 5.5 4.9 0.6
Airport 2.1 1.8 0.3
Total Functional Expense 307.6 295.1 12.5
Increase in Net Position before Transfers 63.7 72.1 (8.4)
Transfers (20.2)(18.7)(1.5)
Change in Net Position 43.5 53.4 (9.9)
Net Position, Beginning 741.5 688.1 53.4
Net Position, Ending 785.0$ 741.5$ 43.5$
Business-type Activities expenses increased $12.5 million for a total of $307.6 million mainly due to the
following:
▪ Salaries and benefits for all the funds increased $13.0 million. The increases are mainly due to
increases in salaries and benefits for new labor contracts, contributions to the Section 115 Pension
Trust, pension contributions and workers’ compensation.
▪ Electric Fund expenses increased $2.8 million due to higher electric transmission costs.
▪ Refuse Fund expenses increased $6.5 million due to GreenWaste of Palo Alto charges for
reimbursement of new waste collection vehicles.
▪ Gas Fund expenses decreased $3.7 million due to lower commodity purchases as a result of lower
natural gas prices and transportation costs.
◼ Management’s Discussion and Analysis
……….……………………………………………………………………
18 City of Palo Alto
FINANCIAL ANALYSIS OF GOVERNMENTAL FUNDS
As noted earlier, the City uses fund accounting to ensure and demonstrate compliance with finance-related
legal requirements.
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 financing requirements. In
particular, the unassigned fund balance may serve as a useful measure of a government’s net resources
available for discretionary use as it represents the portion of fund balance not yet limited to use for a particular
purpose by either an external party, the City itself, or an entity that has been delegated authority by the City
Council to assign resources for use.
As of June 30, 2020, the City’s Governmental Funds reported combined fund balances of $266.7 million, a
decrease of $38.3 million from the prior year. Approximately 13.4 percent, or $35.9 million, constitutes
unassigned fund balance, which is available for spending at the City’s discretion and other purposes. The
remainder of the fund balance is either non-spendable, restricted, committed, or assigned to indicate that it
is: 1) not in spendable form ($11.5 million); 2) restricted for particular purposes ($55.5 million); 3) committed
for particular purposes ($88.5 million); or 4) assigned for particular purposes ($75.3 million).
Governmental Fund revenues decreased $23.7 million, or 10.2 percent, from the prior year to $208.7 million.
General Fund revenues decreased $16.7 million and Capital Projects Fund revenue increased $6.6 million.
Non-major Governmental Funds revenue decreased $13.6 million primarily due to decreases in developer
impact fees, housing in-lieu, transportation mitigation fees and other revenues for the sale of Transfer
Development Rights.
Governmental Fund expenditures were $260.9 million, an increase of $25.9 million from the prior year.
General Fund expenditures increased $6.4 million, Capital Projects Fund expenditures increased by $19.4
million, and Non-major Governmental Funds expenditures increased by $0.1 million. Details of significant
changes are discussed in the following sections.
Management’s Discussion and Analysis ◼
……….……………………………………………………………………
City of Palo Alto 19
General Fund
Balance Sheet
The General Fund is the primary operating fund of the City. At the end of the current fiscal year, the fund
balance of the General Fund was $61.8 million, compared to $75.2 million in the prior year. The fund balance
is classified as follows: $9.0 million non-spendable, $4.5 million committed, $12.5 million assigned, and $35.9
million unassigned. The unassigned amount is designated by the City Council for Budget Stabilization Reserve.
Statement of Revenues, Expenditures and Changes in Fund Balance - Revenues
The City’s General Fund revenues totaled $180.4 million in FY 2020. This represents a decrease of $16.7
million, or 8.5 percent, compared to the prior year. The year over year change in significant revenue sources
is noted in the following table.
Property tax revenue increased $3.8 million, or 8.0 percent, due to property assessed value growth and an
increase of $1.2 million for a temporary Educational Revenue Augmentation Fund (ERAF) distribution from
the County of Santa Clara. The higher assessed values reflected the continued robust real estate markets.
Unlike other tax revenue, property taxes are not yet impacted by COVID-19.
Increase/
Revenues by Source 2020 2019 (Decrease)
Property tax 51.1$ 47.3$ 3.8$
Sales tax 30.6 36.5 (5.9)
Utility user tax 16.1 16.4 (0.3)
Transient occupancy tax 18.6 25.6 (7.0)
Documentary transfer tax 6.9 6.9 0.0
Charges for services 24.1 27.3 (3.2)
Permits and licence 7.5 8.4 (0.9)
Rental income 16.0 16.3 (0.3)
Other 9.5 12.4 (2.9)
Total Revenues 180.4$ 197.1$ (16.7)$
GENERAL FUND
Revenues for the Year Ended June 30
(in millions)
◼ Management’s Discussion and Analysis
……….……………………………………………………………………
20 City of Palo Alto
Sales tax receipts were $5.9 million, or 16.2 percent, lower compared to the prior year mainly due to economic
disruptions caused by COVID-19. For the last quarter of FY 2020, the shelter in place order resulted in closure
of populous locations and economic engines in the City such as downtown core, California Avenue, Stanford
Shopping Center and other related business activities that significantly impacted the sales tax. A portion of
the decrease is due to timing difference in receipts rather than performance. The State has offered certain
businesses the option to defer sales tax payments through interest free payment plans. This plan allows large
businesses to delay their sales and use taxes remittance for ninety days and small businesses to defer
remittance over twelve months. In addition, FY2019 receipts were higher by $0.7 million due to delay of
distribution of sales tax in FY 2018 from California Department of Tax Fee Administration (CDTFA) resulting
from the transition of the new technology and collection process.
Utility user tax revenues were $0.3 million, or 1.8 percent, lower compared to the prior year due to lower
consumption of both utility commodity and telephone caused by COVID-19. The decrease is offset by utility
commodity rate increase for FY 2020.
Transient occupancy tax (TOT) were $7.0 million, or 27.3 percent, lower than prior year. There is an increase
of 1.5 percent TOT rate in April 2019, however, TOT decreased is due to base TOT, which began to decline
almost a year ago by 3.1 percent and deepened by COVID-19. During shelter in place in the last quarter of the
current year, almost a dozen, which represent 30 percent of available rooms, have fully suspended operations.
The remaining hotels’ last quarter occupancy rate are in the low double digit and the average room rates have
dropped by over half. For the fiscal year, average occupancy and daily room rate is 61 percent and $265,
respectively.
Documentary transfer tax has no significant change for the current year though in the last quarter of FY2020
it declined by 40.9 percent and the number of sales declined 28.2 percent. The number of transactions for FY
2020 are lower than FY 2019 by 13.6 percent. This revenue source is volatile since it is highly dependent on
sales volume and the mix of commercial and residential sales.
Charges for services decreased $3.2 million, or 11.7 percent, when compared to prior year. The decrease was
primarily due to reduced programs and classes ($1.6 million), closure of golf course ($0.6 million) and fewer
plan reviews and inspections ($1.0 million) during the initial phase of COVID-19 shelter in place order and
limited operations afterwards.
Other revenues decreased $2.9, or 23.4 percent, when compared to prior year primarily due to the one-time
revenue of $ 2.4 million from the sale of the former City Manager’s house co-owned by the City in FY 2019.
Management’s Discussion and Analysis ◼
……….……………………………………………………………………
City of Palo Alto 21
Statement of Revenues, Expenditures and Changes in Fund Balance - Expenditures
General Fund expenditures totaled $182.1 million for FY 2020 compared to $175.7 in the prior year. This
amount excludes encumbrances and reappropriations. The year over year change for major functions is noted
in the following table.
Increase/
Expenditures by Function 2020 2019 (Decrease)
Administrative Services 6.0$ 5.5$ 0.5$
Public Works 13.6 13.8 (0.2)
Planning and Community Environment 19.3 19.6 (0.3)
Development Services 2.0 - 2.0
Police 45.7 42.9 2.8
Fire 36.4 33.5 2.9
Community Services 29.6 28.9 0.7
Library 10.0 9.3 0.7
Non-Departmental 9.2 11.8 (2.6)
All other 10.3 10.4 (0.1)
Total Expenditures 182.1$ 175.7$ 6.4$
GENERAL FUND
Expenditures for the Year Ended June 30
(in millions)
Starting FY 2020, the Development Services Department was combined with the Planning and Community
Environment Department to form the Planning and Development Services Department. The Office of
Transportation Department, which previously was a division of the Planning and Community Environment
Department, was established in the current year.
Police Department and Fire Department expenditures increased $2.8 million and $2.9 million, respectively,
mainly due to increases in salaries and benefits partially offset by decreases in overtime. The increases are
due to new labor contracts, increased number of filled positions, contributions to the Section 115 Pension
Trust pension contributions, and workers’ compensation.
Non-Departmental expenditures decreased $2.6 million primarily due to a one-time $5.5 million settlement
agreement for an overpayment claim by Stanford University regarding fire protection services in FY 2019. This
decrease was offset by a $2.5 million purchase of current City Manager’s house in current year (75 percent
City’s equity share).
◼ Management’s Discussion and Analysis
……….……………………………………………………………………
22 City of Palo Alto
Statement of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual
Revenues, excluding Charges to Other Funds, were originally budgeted at $200.2 million. Budget estimates
were revised downward by $22.1 million. Revenue categories that were adjusted are shown in the table
below.
Adopted Final Increase/
Budgeted Revenues Budget Budget (Decrease)
Property tax 48.6$ 50.9$ 2.3$
Sales tax 34.3 30.6 (3.7)
Utility iser tax 17.6 16.1 (1.5)
Transient occupany tax 29.3 19.4 (9.9)
Documentary transfer tax 8.4 6.7 (1.7)
All other 62.0 54.4 (7.6)
200.2 178.1 (22.1)
Charges to other funds 10.9 10.9 -
Prior year encumbrances and appropriations - 6.5 6.5
Total Budgeted Revenues 211.1$ 195.5$ (15.6)$
GENERAL FUND
Budgeted Revenues for the Year Ended June 30
(in millions)
The downward adjustments to the original budget were made as part of the third quarter financial report to
the City Council to address the impact of COVID-19. The property tax increased mainly due to additional
receipt of excess funds from the ERAF distribution. Historically, during an economic downturn such as
recession and/or COVID-19, impact to property tax is delayed by at least a year.
Expenditures, excluding Operating Transfers, were originally budgeted at $196.8 million and were revised
upward by $9.6 million, for a final budgeted amount of $206.4 million.
Management’s Discussion and Analysis ◼
……….……………………………………………………………………
City of Palo Alto 23
Adopted Final Increase/Actuals, plus
Budgeted Expenditures Budget Budget (Decrease)Encumbrances
Community Services 30.9$ 31.6$ 0.7$ 31.5$
Fire 34.9 36.8 1.9 36.8
Police 46.4 46.8 0.4 46.8
Library 10.3 10.2 (0.1) 10.1
Planning and Development Services 20.4 22.0 1.6 21.1
Public Works 19.1 19.4 0.3 18.9
Non-Departmental 9.0 12.3 3.3 11.0
All Other 25.8 27.3 1.5 25.9
Total Budgeted Expenditures 196.8$ 206.4$ 9.6$ 202.1
Less: Charges to Other Funds and Departments (11.1)
Less: Encumbrances and Reappropriations (7.6)
Less: Others (1.3)
Net General Fund Expenditures 182.1$
GENERAL FUND
Budgeted Expenditures for the Year Ended June 30
(in millions)
Adjustments of $9.6 million to the original budget were primarily due to the following:
▪ $6.5 million carry-forward of encumbrances from prior year and reappropriations.
▪ $3.1 million for various budget adjustments that were approved throughout the year by the City
Council.
The final budgeted expenditure amount of $206.4 million compared to the actual expenditures plus
encumbrances and reappropriations of $202.1 million, a difference of $4.3 million, of which $7.6 million is
encumbrances and reappropriations carried forward to FY 2021. The lower actual expenditures versus the
budget were realized across the departments, and the largest variances were experienced in Planning and
Development Services and Non-departmental for $0.9 million and $1.3 million, respectively.
Transfers out were originally budgeted at $34.0 million, with the final budget number at $32.2 million, a
decrease of $1.8 million. The decrease was due to a reduction of the transfer to Capital Project Fund as a
result of decreases in Transient Occupancy Tax revenues caused by COVID-19. This reduction was partially
offset by an increase of transfer to General Benefits Internal Services Fund to fund the Section 115 Pension
Trust.
Capital Projects Fund
Capital Projects Fund revenues were $9.5 million in FY 2020, an increase of $6.6 million from the prior year
primarily due to $2.6 million from the Santa Clara Valley Transportation Authority for 2016 Measurement B
Reimbursement – Local Streets and Roads (LSR) funding, $2.3 million from San Francisquito Creek Joint Power
Authority for Golf Reconfiguration and Bayland Athletic Center Improvement, and $1.1 million from the State
of California for reimbursements of various projects.
◼ Management’s Discussion and Analysis
……….……………………………………………………………………
24 City of Palo Alto
Capital Projects Fund expenditures were $66.4 million in FY 2020, an increase of $19.4 million from the prior
year driven by the constructions of Charleston/Arastradero Corridor, Highway 101 Pedestrian / Bicycle
overpass, New Public Safety Building, and California Avenue Parking Garage. This level of expenditure is
consistent with the City’s effort to rehabilitate and maintain its existing infrastructure.
Non-Major Governmental Funds
These funds are not presented separately in the Basic Financial Statements, but are individually presented in
the Other Supplemental Information.
FINANCIAL ANALYSIS OF ENTERPRISE FUNDS
At June 30, 2020, the City’s Enterprise Funds reported total net position of $781.1 million, an increase of $39.6
million or 5.3 percent from the prior year. The increase was primarily from the Electric and Water funds for
$18.6 million and $7.9 million, respectively. Unrestricted net position for the Enterprise Funds totaled $155.7
million, a 15.0 percent increase from FY 2019.
The changes in net position for the Enterprise Funds are summarized in the following table.
Change in Net Position for the Year Ended June 30
(in millions)
Increase/
Fund Name 2020 2019 (Decrease)
Water 8.0$ 8.0$ -$
Electric 18.6 19.0 (0.4)
Fiber Optics 2.9 3.5 (0.6)
Gas 3.0 5.3 (2.3)
Wastewater Collection 2.1 3.3 (1.2)
Wastewater Treatment 0.3 1.5 (1.2)
Refuse (3.1)4.9 (8.0)
Storm Drainage 2.2 2.3 (0.1)
Airport 5.6 6.6 (1.0)
Total Change in Net Position 39.6$ 54.4$ (14.8)$
The most significant factors in the change in net position between years for Enterprise Funds are as follows:
▪ The change in net position for Gas Fund decreased $2.3 million in FY 2020 due to decrease in revenues
as a result of lower consumption; increase in operating expenses (excluding commodity purchase
costs) partially offset by the decrease in commodity purchase costs due to lower than expected
natural gas prices and transportation costs.
▪ The change in net position for Wastewater Collection Fund decreased $1.2 million due to higher
operating expenses offset by the increase in revenues as a result of the 7.0 percent rate increase
effective July 1, 2019.
▪ The change in net position for Wastewater Treatment Fund decreased $1.2 million due to increase in
operating expenses as a result of higher sewage treatment operation and maintenance cost offset by
the increase in revenues resulting from higher partner’s billing.
Management’s Discussion and Analysis ◼
……….……………………………………………………………………
City of Palo Alto 25
▪ The change in net position of Refuse Fund decreased $8.0 million due to lower revenues as a result of
the reduction of services from commercial and industrial customers resulting from COVID-19 and
increase in GreenWaste of Palo Alto charges for reimbursement of new waste collection vehicles.
▪ The change in net position of Airport Fund decreased $1.0 million due to the decrease in federal grant
revenues for the Apron Reconstruction project and increase in operating expenses.
CAPITAL ASSETS
GASB Statement No. 34 requires that the City record all its capital assets, including infrastructure and
intangible assets. Infrastructure includes roads, bridges, signals and similar assets used by the entire
population. The table below shows capital assets and the amount of accumulated depreciation for these
assets for Governmental and Business-type Activities. Further detail can be found in Note 6 to the financial
statements.
Increase/
2020 2019 (Decrease)
Governmental activites
Capital Assets
Land and improvements 82.2$ 77.6$ 4.6
Street trees 14.8 14.7 0.1
Construction in progress 139.4 104.5 34.9
Building and improvements 251.1 247.3 3.8
Intangible assets 3.8 3.8 -
Equipment 15.7 12.6 3.1
Roadway network 335.2 334.3 0.9
Recreation and open space network 35.2 35.2 -
Less accumulated depreciation (302.5) (285.7) (16.8)
Internal Service funds
Construction in progress 2.7 2.5 0.2
Equipment 63.5 62.3 1.2
Less accumulated depreciation (44.8) (43.0) (1.8)
Total Governmental Activities 596.3$ 566.1$ 30.2$
Business-Type Activities
Land 5$ 5$ -$
Construction in progress 121.1 158.0 (36.9)
Buildings and improvements 74.0 68.3 5.7
Capital Leases 0.5 0.5 -
Infrastructure 0.6 0.6 -
Transmission, distribution and treatment systems 884.8 822.4 62.4
Less accumulated depreciation (392.8) (381.3) (11.5)
Total Business-type Activities 693.2$ 673.5$ 19.7$
CAPITAL ASSETS AT JUNE 30
(in millions)
◼ Management’s Discussion and Analysis
……….……………………………………………………………………
26 City of Palo Alto
Governmental Activities’ capital assets net of depreciation increased by $30.2 million from the prior year. The
increase was primarily due to activity in various projects such as Charleston/Arastradero Corridor, Highway
101 Pedestrian / Bicycle overpass, New Public Safety Building and California Avenue Parking Garage.
The City Council approved a $125.8 million Infrastructure Plan (IP) in June 2014, which includes projects such
as a new Public Safety Building, replacement of two Fire Stations, a Bike and Pedestrian plan and two parking
garages. Through the development of the 2020-2024 Capital Improvement Plan (CIP), a tenth project was
added to the IP, Downtown Automated Parking Guidance Systems, and the IP projects were updated for scope
increases and cost escalations, resulting in a revised Infrastructure Plan of $280.6 million. These projects will
be funded partially by debt to be repaid with voter approved increases of 3.5 percent in the transient
occupancy tax (TOT) rate and from other sources such as impact fees and Stanford University Medical Center
development agreement monies. The 2020-2024 CIP assumed the opening of new Marriott hotels in FY 2021,
and the additional annual TOT funding is estimated to cover the cost of the IP projects. The City is currently
assessing the COVID-19 impact of this project.
Major Governmental Activities’ capital projects that are currently in progress, including the remaining capital
commitment of each, are as follows:
▪ Highway 101 Pedestrian/Bicycle Overpass - $14.5 million
▪ California Avenue Parking Garage - $10.4 million
▪ Charleston Arastradero Corridor – $7.1 million
▪ Municipal Service Center Improvements - $6.0 million
▪ Vehicle Replacements - $5.7 million
▪ Telephone Infrastructure - $4.6 million
Business-type Activities’ capital assets net of depreciation increased by $19.7 million from the prior year. The
increase is primarily due to Water, Electric, Gas, Wastewater Collection, Wastewater Treatment, and Airport
Funds.
Major Business-type Activities’ capital projects that are currently in progress, including the remaining capital
commitment of each, are as follows:
▪ Seismic Water Systems Upgrades - $5.1 million
▪ Water Main Replacement for Water Fund - $3.1 million
▪ Wastewater Collection Fund Rehabilitation/Augmentation Project - $3.7 million
The City depreciates its capital assets over their estimated useful lives, as required by GASB Statement No. 34.
The purpose of depreciation is to spread the cost of a capital asset over the years of its useful life so that an
allocable portion of the cost of the asset is borne by all users. Additional information on capital assets and
depreciable lives are in Note 6.
Management’s Discussion and Analysis ◼
……….……………………………………………………………………
City of Palo Alto 27
DEBT ADMINISTRATION
Each of the City’s debt issues is discussed in detail in Note 7 to the financial statements. The City’s debt as of
June 30, 2020 is shown in the following table.
Increase/
2020 2019 (Decrease)
Governmental Activities
General Long-Term Obligations
General Obligation Bonds
2010 43.3$ 44.6$ (1.3)$
Add: unamortized premium 2.5 2.6 (0.1)
2013A 15.5 15.9 (0.4)
Add: unamortized premium 0.8 0.8 -
Certificates of Participation
2018 Capital Improvement Projects 8.7 8.9 (0.2)
2019 California Ave Parking Garage
Series A & B 37.0 37.4 (0.4)
Add: unamortized premium 4.7 4.9 (0.2)
Total Governmental Activities 112.5$ 115.1$ (2.6)$
Business-type Activities
Enterprise Long-Term Obligations
Utility Revenue Bonds
1995 Series A -$ 0.6$ (0.6)$
1999 Refunding 6.7 7.5 (0.8)
2009 Series A 25.5 26.6 (1.1)
2011 Refunding 7.9 9.1 (1.2)
Add: unamortized premium 0.5 0.6 (0.1)
Energy Tax Credit Bonds
2007 Series A 0.2 0.3 (0.1)
Less: unamortized discount (0.1) (0.1) -
State Water Resources Loan
2007 4.0 4.5 (0.5)
2009 5.3 5.7 (0.4)
2017 24.5 19.4 5.1
Total Business-type Activities 74.5$ 74.2$ 0.3$
LONG-TERM DEBT AT JUNE 30
(in millions)
City-wide long-term debt decreased a total of $2.3 million due to scheduled debt retirement in the amount of
$7.7 million, amortization of bond premium and discount of $0.4 million, offset by the addition of State Water
Resource loan of $5.8 million.
◼ Management’s Discussion and Analysis
……….……………………………………………………………………
28 City of Palo Alto
CONTACTING THE CITY’S FINANCIAL MANAGEMENT
The CAFR is intended to provide citizens, taxpayers, investors, and creditors with a general overview of the
City’s finances. Questions about this report should be directed to the Administrative Services Department,
located at 250 Hamilton Avenue, 4th Floor, Palo Alto, California. The Department can also be contacted by
email at: adminsvcs@cityofpaloalto.org. This report and other financial reports can be viewed on the City of
Palo Alto website at: www.cityofpaloalto.org. On the home page, select Departments, select Administrative
Services, and select Financial Reporting. Within Financial Reporting, there are links to reports by title and
reporting date.
CITY OF PALO ALTO
Statement of Net Position
June 30, 2020
(Amounts in thousands)
Governmental Business‐Type
Activities Activities Total
ASSETS:
Cash and investments available for operations (Note 3) 300,540$ 273,338$ 573,878$
Receivables, net:
Accounts and intergovernmental 17,705 49,437 67,142
Interest receivable 1,726 1,494 3,220
Notes and loans receivable (Note 5) 34,944 ‐ 34,944
Internal balances (Note 4)1,114 (1,114) ‐
Deposits 15 ‐ 15
Due from other government agencies ‐ 2,700 2,700
Inventory of materials and supplies, prepaids and deposits 4,976 269 5,245
Restricted cash and investments with fiscal agents and trustees (Note 3) 42,305 4,060 46,365
Capital assets (Note 6):
Nondepreciable 242,648 126,069 368,717
Depreciable, net of accumulated depreciation 353,657 567,182 920,839
Total assets 999,630 1,023,435 2,023,065
DEFERRED OUTFLOWS OF RESOURCES:
Unamortized loss from refunding ‐ 179 179
Pension related (Note 11)39,827 14,595 54,422
OPEB related (Note 12)15,961 6,288 22,249
Total deferred outflows of resources 55,788 21,062 76,850
LIABILITIES:
Accounts payable and accruals 12,697 13,422 26,119
Accrued salaries and benefits 2,399 1,129 3,528
Unearned revenue 2,479 ‐ 2,479
Accrued compensated absences (Note 1):
Due in one year 8,182 ‐ 8,182
Due in more than one year 6,062 ‐ 6,062
Claims payable (Note 14):
Due in one year 6,198 ‐ 6,198
Due in more than one year 23,515 ‐ 23,515
Landfill post‐closure liability (Note 9):
Due in more than one year ‐ 7,101 7,101
Net pension liabilities (Note 11):
Due in more than one year 325,806 117,147 442,953
Net OPEB liabilities (Note 12):
Due in more than one year 90,486 36,544 127,030
Long‐term debt (Note 7):
Due in one year 2,946 5,551 8,497
Due in more than one year 109,559 68,985 178,544
Total liabilities 590,329 249,879 840,208
DEFERRED INFLOWS OF RESOURCES:
Pension related (Note 11)5,875 2,258 8,133
OPEB related (Note 12)18,640 7,354 25,994
Total deferred inflows of resources 24,515 9,612 34,127
NET POSITION (Note 10):
Net Investment in capital assets 497,378 621,354 1,118,732
Restricted for:
Transportation mitigation 12,265 ‐ 12,265
Public benefit 19,908 ‐ 19,908
Supplemental pension 28,693 ‐ 28,693
Others 5,980 ‐ 5,980
Debt service 3,888 4,060 7,948
Nonexpendable ‐ Eyerly Family 2,540 ‐ 2,540
Total restricted net position 73,274 4,060 77,334
Unrestricted (130,078) 159,592 29,514
Total net position $ 440,574 $ 785,006 $ 1,225,580
See accompanying notes to the basic financial statements.
29
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CITY OF PALO ALTO
Statement of Activities
For the Year Ended June 30, 2020
(Amounts in thousands)
Net (Expense) Revenue and
Program Revenues Changes in Net Position
Operating Capital
Charges for Grants and Grants and Governmental Business‐Type
Functions/Programs Expenses Services Contributions Contributions Activities Activities Total
Governmental Activities:
City Council 172$ ‐$ ‐$ ‐$ (172)$ ‐$ (172)$
City Manager 3,616 ‐ 589 ‐ (3,027) ‐ (3,027)
City Attorney 2,845 ‐ ‐ ‐ (2,845) ‐ (2,845)
City Clerk 748 ‐ ‐ ‐ (748) ‐ (748)
City Auditor 645 ‐ ‐ ‐ (645) ‐ (645)
Administrative Services 15,919 5,758 168 ‐ (9,993) ‐ (9,993)
Human Resources 3,060 ‐ ‐ ‐ (3,060) ‐ (3,060)
Public Works 45,609 990 ‐ 4,683 (39,936) ‐ (39,936)
Planning and Development Services 21,725 16,173 1,150 ‐ (4,402) ‐ (4,402)
Office of Transportation 4,693 1,161 ‐ 2,579 (953) ‐ (953)
Police 50,907 2,703 456 ‐ (47,748) ‐ (47,748)
Fire 41,280 9,398 223 148 (31,511) ‐ (31,511)
Community Services 34,147 20,808 16 1,611 (11,712) ‐ (11,712)
Library 12,971 94 17 ‐ (12,860) ‐ (12,860)
Interest on long‐term debt 4,576 ‐ ‐ ‐ (4,576) ‐ (4,576)
Total Governmental Activities 242,913 57,085 2,619 9,021 (174,188) ‐ (174,188)
Business‐Type Activities:
Water 43,034 48,740 473 467 ‐ 6,646 6,646
Electric 142,426 169,389 ‐ ‐ ‐ 26,963 26,963
Fiber Optics 2,761 4,576 ‐ ‐ ‐ 1,815 1,815
Gas 27,212 37,402 ‐ ‐ ‐ 10,190 10,190
Wastewater Collection 18,877 20,933 ‐ 501 ‐ 2,557 2,557
Wastewater Treatment 28,755 29,310 ‐ ‐ ‐ 555 555
Refuse 36,947 32,695 ‐ ‐ ‐ (4,252) (4,252)
Storm Drainage 5,514 7,543 ‐ ‐ ‐ 2,029 2,029
Airport 2,131 2,362 ‐ 5,481 ‐ 5,712 5,712
Total Business‐Type Activities 307,657 352,950 473 6,449 ‐ 52,215 52,215
Total 550,570$ 410,035$ 3,092$ 15,470$ (174,188) 52,215 (121,973)
General Revenues:
Taxes:
Property tax 55,604 ‐ 55,604
Sales tax 30,563 ‐ 30,563
Utility user tax 16,140 ‐ 16,140
Transient occupancy tax 18,553 ‐ 18,553
Documentary transfer tax 6,903 ‐ 6,903
Other taxes 2,872 ‐ 2,872
Investment earnings 13,850 11,482 25,332
Miscellaneous 60 ‐ 60
Transfers (Note 4)20,234 (20,234) ‐
Total general revenues and transfers 164,779 (8,752) 156,027
Change in net position (9,409) 43,463 34,054
Net position, beginning of year 449,983 741,543 1,191,526
Net position, end of year 440,574$ 785,006$ 1,225,580$
See accompanying notes to the basic financial statements.
31
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CITY OF PALO ALTO
Governmental Funds
Balance Sheet
June 30, 2020
(Amounts in thousands)
Capital Other Total
General Projects Governmental Governmental
Fund Fund Funds Funds
ASSETS:
Cash and investments available for operations (Note 3) 46,853$ 71,221$ 87,039$ 205,113$
Receivables, net:
Accounts and intergovernmental 11,944 5,314 416 17,674
Interest receivable 695 29 495 1,219
Notes and loans receivable (Note 5) 845 ‐ 34,099 34,944
Deposits 15 ‐ ‐ 15
Due from other fund (Note 4) 1,895 ‐ ‐ 1,895
Advances to other funds (Note 4) 3,233 ‐ ‐ 3,233
Inventory of materials and supplies 4,874 ‐ ‐ 4,874
Restricted cash and investments with fiscal agents (Note 3) ‐ 13,578 34 13,612
Total assets 70,354$ 90,142$ 122,083$ 282,579$
LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND FUND BALANCES:
Liabilities:
Accounts payable and accruals 3,581$ 5,386$ 594$ 9,561$
Accrued salaries and benefits 2,046 123 27 2,196
Unearned revenue 2,479 ‐ ‐ 2,479
Due to other funds (Note 4) ‐ ‐ 136 136
Total liabilities 8,106 5,509 757 14,372
Deferred inflows of resources
Deferred inflows of resources ‐ Unavailable revenue 409 1,002 71 1,482
8,515 6,511 828 15,854
Fund balances (Note 10):
Nonspendable:
Deposits 15 ‐ ‐ 15
Inventories 4,874 ‐ ‐ 4,874
Advances to other funds 3,233 ‐ ‐ 3,233
Notes and loans receivable 845 ‐ ‐ 845
Eyerly family ‐ ‐ 2,540 2,540
Restricted for:
Transportation mitigation ‐ ‐ 12,265 12,265
Federal revenue ‐ ‐ 5,221 5,221
Street improvement ‐ ‐ 73 73
Local law enforcement ‐ ‐ 615 615
California Avenue parking garage ‐ 12,980 ‐ 12,980
Library bond project ‐ 598 ‐ 598
Public benefit ‐ ‐ 19,908 19,908
Debt service ‐ ‐ 3,888 3,888
Committed for:
Development services 3,804 ‐ ‐ 3,804
Roth building rehabilitation ‐ 5,146 ‐ 5,146
Cubberley improvements ‐ 4,203 ‐ 4,203
Developer impact fees ‐ ‐ 15,028 15,028
Housing in‐lieu ‐ ‐ 52,882 52,882
Special districts ‐ ‐ 6,649 6,649
Edgewood Plaza 701 ‐ ‐ 701
Downtown business ‐ ‐ 65 65
Assigned for:
Unrealized gains on investments 3,199 ‐ 2,121 5,320
Capital projects ‐ 60,704 ‐ 60,704
Other general government purposes 7,219 ‐ ‐ 7,219
Electric charger 25 ‐ ‐ 25
College Terrace fines 160 ‐ ‐ 160
Reappropriations 1,893 ‐ ‐ 1,893
Unassigned for:
Budget Stabilization 35,871 ‐ ‐ 35,871
Total fund balances 61,839 83,631 121,255 266,725
Total liabilities, deferred inflows of resources, and fund
balances 70,354$ 90,142$ 122,083$ 282,579$
Total liabilities and deferred inflows of resources
See accompanying notes to the basic financial statements.
33
CITY OF PALO ALTO
Reconciliation of the Balance Sheet of Governmental Funds to
the Statement of Net Position ‐ Governmental Activities
June 30, 2020
Total fund balances reported on the governmental funds balance sheet 266,725$
Amounts reported for governmental activities in the statement of net position
are different from those reported in the governmental funds balance sheet because
of the following:
Deferred outflows and inflows of resources in governmental activities are not
financial resources and, therefore, are not reported in the governmental funds.
Deferred outflows of resources 55,788
Deferred inflows of resources (24,515)
Certain receivables are not available to pay for current period expenditures
and therefore are deferred in the governmental funds. 1,482
Capital assets used in governmental activities are not current assets or financial
resources and therefore are not reported in the governmental funds (Note 6) 596,305
Internal service funds are used by management to charge the costs of activities
such as insurance, equipment acquisition and maintenance, and certain
employee benefits to individual funds. The assets and liabilities of the
internal service funds are therefore included in governmental activities in
the statement of net position (excludes capital assets, deferred outflows
of resources, deferred inflows of resources, net pension liabilities and
net OPEB liabilities reported herein) 75,154
Some liabilities, including bonds payable, are not due and payable in the
current period and therefore are not reported in the governmental funds:
Interest payable (1,568)
Net pension liabilities (Note 11) (325,806)
Net OPEB liabilities (Note 12) (90,486)
Long‐term debt (Note 7) (112,505)
Net position of governmental activities 440,574$
(Amounts in thousands)
See accompanying notes to the basic financial statements.
34
CITY OF PALO ALTO
Governmental Funds
Statement of Revenues, Expenditures and Changes in Fund Balances
For the Year Ended June 30, 2020
(Amounts in thousands)
Capital Other Total
General Projects Governmental Governmental
Fund Fund Funds Funds
REVENUES:
Property tax 51,089$ ‐$ 4,515$ 55,604$
Special assessments ‐ ‐ 24 24
Sales tax 30,563 ‐ ‐ 30,563
Utility user tax 16,140 ‐ ‐ 16,140
Transient occupancy tax 18,553 ‐ ‐ 18,553
Documentary transfer tax 6,903 ‐ ‐ 6,903
Other taxes and fines 1,172 ‐ 2,961 4,133
Charges for services 24,127 ‐ ‐ 24,127
Intergovernmental 3,783 7,684 848 12,315
Licenses, permits and fees 7,467 ‐ 5,677 13,144
Investment earnings 4,037 1,680 3,689 9,406
Rental income 15,964 ‐ 3 15,967
Housing In‐Lieu ‐ residential ‐ ‐ 750 750
Other revenue 587 171 333 1,091
Total revenues 180,385 9,535 18,800 208,720
EXPENDITURES:
Current:
City Council 214 ‐ ‐ 214
City Manager 3,273 ‐ ‐ 3,273
City Attorney 2,509 ‐ ‐ 2,509
City Clerk 815 ‐ ‐ 815
City Auditor 680 ‐ ‐ 680
Administrative Services 5,960 ‐ 284 6,244
Human Resources 2,792 ‐ ‐ 2,792
Public Works 13,577 ‐ 1,216 14,793
Planning and Development Services 19,269 ‐ 901 20,170
Office of Transportation 2,052 ‐ 2,123 4,175
Police 45,679 ‐ 54 45,733
Fire 36,440 ‐ ‐ 36,440
Community Services 29,603 ‐ 265 29,868
Library 9,988 ‐ ‐ 9,988
Non‐Departmental 9,255 ‐ 243 9,498
Capital outlay ‐ 66,362 ‐ 66,362
Debt service:
Principal ‐ ‐ 2,280 2,280
Interest and fiscal charges ‐ ‐ 5,025 5,025
Total expenditures 182,106 66,362 12,391 260,859
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES (1,721) (56,827) 6,409 (52,139)
OTHER FINANCING SOURCES (USES):
Transfers in (Note 4) 20,568 33,458 4,371 58,397
Transfers out (Note 4) (32,223) (2,520) (9,809) (44,552)
Total other financing sources (uses) (11,655) 30,938 (5,438) 13,845
Change in fund balances (13,376) (25,889) 971 (38,294)
FUND BALANCES, BEGINNING OF YEAR 75,215 109,520 120,284 305,019
FUND BALANCES, END OF YEAR 61,839$ 83,631$ 121,255$ 266,725$
See accompanying notes to the basic financial statements.
35
CITY OF PALO ALTO
Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances
of Governmental Funds to the Statement of Activities ‐ Governmental Activities
For the Year Ended June 30, 2020
Net change in fund balances ‐ total governmental funds (38,294)$
Amounts reported for governmental activities in the statement of activities are different
from those reported in the governmental funds because of the following:
Governmental funds report capital outlays as expenditures. However, in the statement of
activities, the costs of these assets are capitalized and allocated over their estimated useful
lives and reported as depreciation expense. Therefore, the activities associated with
capital assets are as follows:
Capital outlay added back to fund balance for current year additions 60,154
Depreciation expense is deducted from fund balance (depreciation expense is net of
internal service fund depreciation of $3,366) (Note 6), which has already been allocated
through the internal service fund activities below (16,818)
Disposal of capital assets (12,688)
Pension and OPEB contribution made subsequent to the measurement date is an
expenditure in the governmental funds, but reported as a deferred outflows of
resources in the government‐wide financial statements 40,070
Pension and OPEB expenses reported in the statement of activities do not require the
use of current financial resources and, therefore, are not reported as expenditures in
governmental funds (63,307)
Principal payments on long‐term liabilities are reported as expenditures in governmental
funds when paid. The governmental activities, however, report principal payments as
a reduction of long‐term debt on the statement of net position. Interest accrued on
long‐term debt and amortization of premiums do not require the use of current financial
resources and therefore are not reported as expenditures in governmental funds. Therefore,
the activities associated with long‐term debt are as follows:
Principal paid during the year 2,280
Change in interest payable 98
Amortization of bond premium 351
Revenues earned but not available are deferred in the governmental funds but are recognized
in the government‐wide financial statements. Also, revenues recognized in the governmental
funds during the current year that were earned and recognized in previous years in the
government‐wide financial statements are reported as beginning net position in the
statement of activities 76
Internal service funds are used by management to charge the costs of activities, such
as insurance, equipment acquisition and maintenance, and employees benefits to
individual funds. The portion of the net expense of these internal service
funds arising out of their transactions with governmental funds is reported with
governmental activities. 18,669
Change in net position of governmental activities (9,409)$
(Amounts in thousands)
See accompanying notes to the basic financial statements.
36
Variance with
Budgeted Amounts Final Budget
Actual, Budgetary Positive
Adopted Final Basis (Negative)
48,634$ 50,853$ 51,089$ 236$
34,346 30,617 30,563 (54)
17,581 16,133 16,140 7
29,309 19,425 18,553 (872)
Documentary transfer tax 8,369 6,676 6,903 227
2,032 1,237 1,172 (65)
30,127 25,196 24,127 (1,069)
2,756 3,245 4,301 1,056
8,667 6,597 7,467 870
1,433 1,433 1,480 47
16,326 16,041 15,964 (77)
587 619 587 (32)
200,167 178,072 178,346 274
10,908 10,908 11,099 191
‐ 6,469 6,469 ‐
211,075 195,449 195,914 465
498 542 414 128
4,546 4,718 4,671 47
3,387 3,896 3,789 107
1,346 1,402 1,186 216
1,235 1,157 981 176
8,519 8,770 8,515 255
3,902 4,107 3,994 113
19,142 19,357 18,932 425
20,356 22,021 21,098 923
Office of Transportation 2,312 2,733 2,360 373
Police 46,369 46,845 46,844 1
34,889 36,773 36,772 1
30,929 31,591 31,489 102
10,314 10,187 10,092 95
9,028 12,312 11,001 1,311
196,772 206,411 202,138 4,273
14,303 (10,962) (6,224) 4,738
20,999 20,842 20,842 ‐
(33,985) (32,223) (32,223) ‐
(12,986) (11,381) (11,381) ‐
1,317$ (22,343)$ (17,605) 4,738$
Unrealized gain/loss on investments 2,479
Changes in interfund balances (196)
Changes in notes receivable 845
Current year encumbrances and reappropriations 7,570
Prior year encumbrances and reappropriations (6,469)
(13,376)
75,215
61,839$
REVENUES:
CITY OF PALO ALTO
General Fund
Statement of Revenues, Expenditures and Changes in Fund Balance ‐ Budget and Actual
For the Year Ended June 30, 2020
(Amounts in thousands)
Charges to other funds and departments
Sales tax
Property tax
Transient occupancy tax
Utility user tax
Other taxes and fines
Charges for services
Licenses, permits and fees
Investment earnings
Rental income
Intergovernmental
Other revenues
City Auditor
City Clerk
City Council
City Manager
Administrative Services
Prior year encumbrances
Total revenues
EXPENDITURES:
Current:
City Attorney
Community Services
Total other financing sources (uses)
Human Resources
Library
Planning and Development Services
Total expenditures
EXCESS OF REVENUES OVER EXPENDITURES
OTHER FINANCING SOURCES (USES):
Transfers in
Transfers out
Public Works
Non‐Departmental
Fire
FUND BALANCE AT BEGINNING OF YEAR, GAAP BASIS
FUND BALANCE AT END OF YEAR, GAAP BASIS
EXCESS (DEFICIENCY) OF REVENUES OVER (UNDER)
EXPENDITURES, BUDGETARY BASIS
Adjustment to Budgetary Basis:
CHANGE IN FUND BALANCE, GAAP BASIS
See accompanying notes to the basic financial statements.
37
Fiber
Water Electric Optics Gas
ASSETS:
Current assets:
Cash and investments available for operations (Note 3) 43,573$ 106,595$ 34,283$ 28,349$
Accounts receivable, net of allowance of $462 7,054 26,491 1,104 2,545
Interest receivable 241 574 188 155
Due from other government agencies ‐ ‐ ‐ ‐
Inventory of materials and supplies ‐ ‐ ‐ ‐
Restricted cash and investments with fiscal agents and trustees (Note 3) 3,256 ‐ ‐ 804
Total current assets 54,124 133,660 35,575 31,853
Noncurrent assets:
Due from other government agencies ‐ ‐ ‐ ‐
Deposit ‐ 44 ‐ ‐
Prepaid expense 75 ‐ ‐ ‐
Capital assets (Note 6):
Nondepreciable 26,023 26,282 1,858 16,239
Depreciable, net 107,077 179,760 7,475 94,948
Total noncurrent assets 133,175 206,086 9,333 111,187
Total assets 187,299 339,746 44,908 143,040
DEFERRED OUTFLOWS OF RESOURCES:
Unamortized loss from refunding 78 ‐ ‐ 101
Pension related (Note 11) 1,974 4,775 366 2,061
OPEB related (Note 12) 788 2,467 ‐ 1,006
Total deferred outflows of resources 2,840 7,242 366 3,168
LIABILITIES:
Current liabilities:
Accounts payable and accruals 4,245 2,491 419 1,472
Accrued salaries and benefits 161 384 24 159
Due to other funds ‐ ‐ ‐ ‐
Accrued compensated absences (Note 1) ‐ ‐ ‐ ‐
Current portion of long term debt (Note 7) 1,775 100 ‐ 666
Accrued claims payable (Note 14) ‐ ‐ ‐ ‐
Total current liabilities 6,181 2,975 443 2,297
Noncurrent liabilities:
Accrued compensated absences (Note 1) ‐ ‐ ‐ ‐
Accrued claims payable (Note 14) ‐ ‐ ‐ ‐
Advance from other fund (Note 4) ‐ ‐ ‐ ‐
Landfill post‐closure liability (Note 9) ‐ ‐ ‐ ‐
Net pension liabilities (Note 11) 15,823 37,797 2,458 16,638
Net OPEB liabilities (Note 12) 4,088 13,336 ‐ 5,887
Long term debt, net of
unamortized discounts/premiums (Note 7) 27,940 89 ‐ 3,964
Total noncurrent liabilities 47,851 51,222 2,458 26,489
Total liabilities 54,032 54,197 2,901 28,786
DEFERRED INFLOWS OF RESOURCES:
Pension related (Note 11) 266 725 62 274
OPEB related (Note 12) 914 2,872 ‐ 1,177
Total deferred inflows of resources 1,180 3,597 62 1,451
NET POSITION (Note 10):
Net Investment in capital assets 103,463 205,613 9,333 106,658
Restricted for:
Debt service 3,256 ‐ ‐ 804
Supplemental pension ‐ ‐ ‐ ‐
Unrestricted (deficit) 28,208 83,581 32,978 8,509
Total net position 134,927$ 289,194$ 42,311$ 115,971$
Some amounts reported for Business‐type Activities in the statement of net position are different because certain
Internal Service Fund net positions are included with Business‐type Activities
Net position reported in Business‐type Activities
Business‐Type Activities‐Enterprise Funds
CITY OF PALO ALTO
Proprietary Funds
Statement of Net Position
June 30, 2020
(Amounts in thousands)
See accompanying notes to the basic financial statements.
38
Governmental
Non‐Major Activities ‐
Wastewater Wastewater Storm Internal Service
Collection Treatment Refuse Drainage Airport Totals Funds
9,468$ 16,233$ 26,565$ 8,272$ ‐$ 273,338$ 95,427$
2,883 2,977 3,308 846 2,229 49,437 31
53 82 159 42 ‐ 1,494 507
‐ 300 ‐ ‐ ‐ 300 ‐
‐ ‐ ‐ ‐ ‐ ‐ 102
‐ ‐ ‐ ‐ ‐ 4,060 28,693
12,404 19,592 30,032 9,160 2,229 328,629 124,760
‐ 2,400 ‐ ‐ ‐ 2,400 ‐
‐ ‐ ‐ ‐ ‐ 44 ‐
‐ 150 ‐ ‐ ‐ 225 ‐
14,200 5,933 1,952 9,067 24,515 126,069 2,723
77,662 62,463 3,157 31,673 2,967 567,182 18,642
91,862 70,946 5,109 40,740 27,482 695,920 21,365
104,266 90,538 35,141 49,900 29,711 1,024,549 146,125
‐ ‐ ‐ ‐ ‐ 179 ‐
1,111 2,861 615 620 212 14,595 2,303
385 983 441 160 58 6,288 881
1,496 3,844 1,056 780 270 21,062 3,184
431 1,474 2,441 116 333 13,422 1,568
85 208 45 44 19 1,129 203
‐ ‐ ‐ ‐ 1,759 1,759 ‐
‐ ‐ ‐ ‐ ‐ ‐ 8,182
104 2,131 ‐ 775 ‐ 5,551 ‐
‐ ‐ ‐ ‐ ‐ ‐ 6,198
620 3,813 2,486 935 2,111 21,861 16,151
‐ ‐ ‐ ‐ ‐ ‐ 6,062
‐ ‐ ‐ ‐ ‐ ‐ 23,515
‐ ‐ ‐ ‐ 3,233 3,233 ‐
‐ ‐ 7,101 ‐ ‐ 7,101 ‐
9,251 23,535 6,286 4,312 1,047 117,147 16,867
2,250 6,973 2,502 1,099 409 36,544 4,889
348 34,081 ‐ 2,563 ‐ 68,985 ‐
11,849 64,589 15,889 7,974 4,689 233,010 51,333
12,469 68,402 18,375 8,909 6,800 254,871 67,484
179 451 104 137 60 2,258 462
450 1,168 514 190 69 7,354 1,027
629 1,619 618 327 129 9,612 1,489
91,410 34,884 5,109 37,402 27,482 621,354 21,365
‐ ‐ ‐ ‐ ‐ 4,060 ‐
‐ ‐ ‐ ‐ ‐ ‐ 28,693
1,254 (10,523) 12,095 4,042 (4,430) 155,714 30,278
92,664$ 24,361$ 17,204$ 41,444$ 23,052$ 781,128 80,336$
3,878
785,006$
Business‐Type Activities‐Enterprise Funds
See accompanying notes to the basic financial statements.
39
Fiber
Water Electric Optics Gas
OPERATING REVENUES:
Sales to:
Customers 43,929$ 132,080$ 3,391$ 34,647$
City departments 2,441 4,286 1,054 527
Surplus energy ‐ 9,695 ‐ ‐
Service connection charges and miscellaneous 1,351 1,432 42 905
Charges for services ‐ ‐ ‐ ‐
Other 1,019 21,896 89 1,323
Total operating revenues 48,740 169,389 4,576 37,402
OPERATING EXPENSES:
Purchase of utilities:
Retail purchase of utilities 21,773 84,924 ‐ 11,102
Surplus energy ‐ 5,867 ‐ ‐
Administrative and general 6,655 10,805 864 5,504
Engineering (operating) 402 2,056 ‐ 666
Resource management and energy efficiency 1,159 5,460 ‐ 1,013
Operations and maintenance 7,021 13,440 1,526 5,334
Rent 1,904 5,667 81 645
Depreciation 3,002 8,498 418 3,454
Claims payments and changes in
estimated self‐insurance liability ‐ ‐ ‐ ‐
Refund of charges for services ‐ ‐ ‐ ‐
Employment benefits ‐ ‐ ‐ ‐
Total operating expenses 41,916 136,717 2,889 27,718
Operating income (loss) 6,824 32,672 1,687 9,684
NONOPERATING REVENUES (EXPENSES):
Investment earnings 1,906 4,463 1,415 1,138
Interest expense (1,546) (7,094) ‐ (124)
Gain on disposal of capital assets ‐ ‐ ‐ ‐
Loss on disposal of capital assets (252) (87) ‐ (48)
Other nonoperating revenues 473 ‐ ‐ ‐
Total nonoperating revenues (expenses) 581 (2,718) 1,415 966
Income (loss) before transfers and capital contributions 7,405 29,954 3,102 10,650
Capital contributions 467 ‐ ‐ ‐
Transfers in (Note 4) 548 2,582 ‐ ‐
Transfers out (Note 4) (475) (13,906) (162) (7,683)
Change in net position 7,945 18,630 2,940 2,967
NET POSITION, BEGINNING OF YEAR 126,982 270,564 39,371 113,004
NET POSITION, END OF YEAR 134,927$ 289,194$ 42,311$ 115,971$
Some amounts reported for Business‐type Activities in the statement of activities are different because certain
Internal Service Fund activities are included with Business‐type Activities
Change in net position reported in Business‐type Activities
Business‐Type Activities‐Enterprise Funds
CITY OF PALO ALTO
Proprietary Funds
Statement of Revenues, Expenses and Changes in Fund Net Position
For the Year Ended June 30, 2020
(Amounts in thousands)
See accompanying notes to the basic financial statements.
40
Governmental
Non‐Major Activities‐
Wastewater Wastewater Storm Internal Service
Collection Treatment Refuse Drainage Airport Totals Funds
20,189$ 18,434$ 29,214$ 7,068$ 1,665$ 290,617$ ‐$
146 10,278 911 423 ‐ 20,066 ‐
‐ ‐ ‐ ‐ ‐ 9,695 ‐
185 ‐ ‐ ‐ ‐ 3,915 ‐
‐ ‐ ‐ ‐ ‐ ‐ 124,832
413 598 2,570 52 697 28,657 112
20,933 29,310 32,695 7,543 2,362 352,950 124,944
10,234 ‐ 23,044 ‐ ‐ 151,077 ‐
‐ ‐ ‐ ‐ ‐ 5,867 ‐
2,431 ‐ 1,713 1,187 1,219 30,378 13,783
339 2,417 271 204 ‐ 6,355 ‐
‐ ‐ ‐ 1,150 ‐ 8,782 ‐
3,467 22,284 9,495 1,737 775 65,079 15,221
332 ‐ 2,130 44 ‐ 10,803 ‐
2,443 3,257 86 1,015 49 22,222 3,366
‐ ‐ ‐ ‐ ‐ ‐ 7,023
‐ ‐ ‐ ‐ ‐ ‐ 131
‐ ‐ ‐ ‐ ‐ ‐ 73,604
19,246 27,958 36,739 5,337 2,043 300,563 113,128
1,687 1,352 (4,044) 2,206 319 52,387 11,816
404 621 1,218 317 ‐ 11,482 4,444
(29) (779) (196) (218) (129) (10,115) ‐
‐ ‐ ‐ ‐ ‐ ‐ ‐
(2) (422) ‐ ‐ ‐ (811) (178)
‐ ‐ ‐ ‐ ‐ 473 30
373 (580) 1,022 99 (129) 1,029 4,296
2,060 772 (3,022) 2,305 190 53,416 16,112
501 ‐ ‐ ‐ 5,481 6,449 ‐
‐ ‐ ‐ ‐ ‐ 3,130 9,256
(467) (432) (116) (92) (31) (23,364) (2,867)
2,094 340 (3,138) 2,213 5,640 39,631 22,501
90,570 24,021 20,342 39,231 17,412 57,835
92,664$ 24,361$ 17,204$ 41,444$ 23,052$ 80,336$
3,832
43,463$
Business‐Type Activities‐Enterprise Funds
See accompanying notes to the basic financial statements.
41
Fiber
Water Electric Optics Gas
Cash flows from operating activities:
Cash received from customers 44,559$ 140,821$ 3,463$ 36,073$
Cash payments to suppliers for goods and services (27,828) (103,513) (557) (14,155)
Cash payments to employees (9,955) (22,811) (1,641) (8,823)
Internal activity‐ receipts (payments) from (to) other funds 2,441 4,286 1,054 527
Other receipts 1,019 21,896 89 1,323
Net cash provided by (used in) operating activities 10,236 40,679 2,408 14,945
Cash flows from noncapital financing activities:
Receipt (repayment) of loans from other funds ‐ ‐ ‐ ‐
Interest subsidy received from Build America Bonds 473 ‐ ‐ ‐
Transfers in 548 2,582 ‐ ‐
Transfers out (475) (13,906) (162) (7,683)
Net cash provided by (used in)
noncapital financing activities 546 (11,324) (162) (7,683)
Cash flows from capital and related financing activities:
Acquisition and construction of capital assets (6,737) (13,248) (586) (4,792)
Proceeds from sale of capital assets ‐ ‐ ‐ ‐
Capital grants and contributions 467 ‐ ‐ ‐
Proceeds from debt issuance ‐ ‐ ‐ ‐
Principal paid on long‐term debt (1,706) (100) ‐ (644)
Interest paid on long‐term debt (1,571) (7,089) ‐ (155)
Net cash used in capital and related
financing activities (9,547) (20,437) (586) (5,591)
Cash flows from investing activities:
Interest received 1,930 4,504 1,427 1,165
Net cash provided by investing activities 1,930 4,504 1,427 1,165
Net change in cash and cash equivalents 3,165 13,422 3,087 2,836
Cash and cash equivalents, beginning of year 43,664 93,173 31,196 26,317
Cash and cash equivalents, end of year $ 46,829 $ 106,595 $ 34,283 $ 29,153
Financial statement presentation:
Cash and investments available for operations 43,573$ 106,595$ 34,283$ 28,349$
Restricted cash and investments with fiscal agents and trustees 3,256 ‐ ‐ 804
Cash and cash equivalents, end of year 46,829$ 106,595$ 34,283$ 29,153$
Reconciliation of operating income (loss) to
net cash provided by (used in) operating activities:
Operating income (loss) 6,824$ 32,672$ 1,687$ 9,684$
Adjustments to reconcile operating income (loss) to
net cash provided by (used in) operating activities:
Depreciation 3,002 8,498 418 3,454
Other ‐ ‐ ‐ ‐
Change in assets and liabilities:
Accounts receivable (721) (2,386) 30 521
Inventory of materials and supplies ‐ ‐ ‐ ‐
Deposit 8 (3) ‐ ‐
Deferred outflow of resources ‐ pension plans 239 688 44 351
Deferred outflow of resources ‐ OPEB (271) (784) ‐ (265)
Accounts payable and accruals 161 (234) 117 382
Accrued salaries and benefits 55 124 4 49
Accrued compensated absences ‐ ‐ ‐ ‐
Landfill closure and post‐closure care ‐ ‐ ‐ ‐
Accrued claims payable ‐ ‐ ‐ ‐
Net pension liability 824 1,753 107 699
Net OPEB liability (687) (2,215) ‐ (957)
Deferred inflow of resources ‐ pension plans (24) (18) 1 (23)
Deferred inflow of resources ‐ OPEB 826 2,584 ‐ 1,050
Net cash provided by (used in) operating activities $ 10,236 $ 40,679 $ 2,408 $ 14,945
Business‐Type Activities‐Enterprise Funds
CITY OF PALO ALTO
Proprietary Funds
Statement of Cash Flows
For the Year Ended June 30, 2020
(Amounts in thousands)
See accompanying notes to the basic financial statements.
42
Governmental
Non‐Major Activities‐
Wastewater Wastewater Storm Internal Service
Collection Treatment Refuse Drainage Airport Totals Funds
20,226$ 18,384$ 29,976$ 7,052$ 3,660$ 304,214$ 127,068$
(11,045) (11,019) (34,030) (1,705) (4,619) (208,471) (14,509)
(5,411) (13,428) (2,794) (2,632) (1,002) (68,497) (85,643)
146 10,278 911 423 ‐ 20,066 (5,566)
413 598 2,696 52 697 28,783 30
4,329 4,813 (3,241) 3,190 (1,264) 76,095 21,380
‐ ‐ ‐ ‐ 1,877 1,877 (737)
‐ ‐ ‐ ‐ ‐ 473 ‐
‐ ‐ ‐ ‐ ‐ 3,130 9,256
(467) (432) (116) (92) (31) (23,364) (2,867)
(467) (432) (116) (92) 1,846 (17,884) 5,652
(5,420) (4,729) ‐ (394) (6,857) (42,763) (3,194)
‐ ‐ ‐ ‐ ‐ ‐ 96
501 300 ‐ ‐ 5,481 6,749 ‐
‐ 5,775 ‐ ‐ ‐ 5,775 ‐
(99) (2,131) ‐ (730) ‐ (5,410) ‐
(29) (777) (196) (216) (129) (10,162) ‐
(5,047) (1,562) (196) (1,340) (1,505) (45,811) (3,098)
411 622 1,235 313 7 11,614 4,463
411 622 1,235 313 7 11,614 4,463
(774) 3,441 (2,318) 2,071 (916) 24,014 28,397
10,242 12,792 28,883 6,201 916 253,384 95,723
$ 9,468 $ 16,233 $ 26,565 $ 8,272 $ ‐ $ 277,398 $ 124,120
9,468$ 16,233$ 26,565$ 8,272$ ‐$ 273,338$ 95,427$
‐ ‐ ‐ ‐ ‐ 4,060 28,693$
9,468$ 16,233$ 26,565$ 8,272$ ‐$ 277,398$ 124,120$
1,687$ 1,352$ (4,044)$ 2,206$ 319$ 52,387$ 11,816$
2,443 3,257 86 1,015 49 22,222 3,366
‐ ‐ ‐ ‐ ‐ ‐ 30
(148) (50) 762 (16) 1,995 (13) 2,233
‐ ‐ ‐ ‐ ‐ ‐ 146
‐ 17 ‐ ‐ ‐ 22 ‐
201 589 141 67 48 2,368 611
(102) (111) (126) (22) (7) (1,688) (264)
(106) (1,056) (513) (329) (3,835) (5,413) (326)
27 59 18 14 8 358 82
‐ ‐ ‐ ‐ ‐ ‐ 1,909
‐ ‐ 126 ‐ ‐ 126 ‐
‐ ‐ ‐ ‐ ‐ ‐ 1,348
286 832 264 306 201 5,272 340
(366) (1,083) (410) (172) (64) (5,954) (802)
5 (12) (5) (45) (38) (159) (30)
402 1,019 460 166 60 6,567 921
$ 4,329 $ 4,813 $ (3,241) $ 3,190 $ (1,264) $ 76,095 $ 21,380
Business‐Type Activities‐Enterprise Funds
See accompanying notes to the basic financial statements.
43
Agency
Funds
ASSETS:
Cash and investments available for operations (Note 3) 2,824$
Accounts receivable 499
Interest receivable 16
Restricted cash and investments with fiscal agents (Note 3) 2,701
Total assets 6,040$
LIABILITIES:
Accounts payable and accruals 219$
Due to bondholders 4,824
Due to other governments 997
Total liabilities 6,040$
CITY OF PALO ALTO
Statement of Assets and Liabilities
June 30, 2020
(Amounts in thousands)
Agency Funds
See accompanying notes to the basic financial statements.
44
CITY OF PALO ALTO
Index to the Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
45
Page
1. Summary of Significant Accounting Policies ........................................................................... 47
2. Budgets and Budgetary Accounting ........................................................................................ 56
3. Cash and Investments ............................................................................................................. 57
4. Interfund Transactions ............................................................................................................ 63
5. Notes and Loans Receivable .................................................................................................... 65
6. Capital Assets .......................................................................................................................... 70
7. Long‐Term Debt ....................................................................................................................... 76
8. Special Assessment Debt ......................................................................................................... 82
9. Landfill Post‐Closure Maintenance ......................................................................................... 82
10. Net Position and Fund Balances .............................................................................................. 83
11. Pension Plans ........................................................................................................................... 86
12. Other Post‐Employment Benefits (OPEB) ............................................................................... 93
13. Deferred Compensation Plan .................................................................................................. 97
14. Risk Management .................................................................................................................... 98
15. Joint Ventures .......................................................................................................................... 99
16. Commitments and Contingencies ......................................................................................... 102
17. Uncertainties ......................................................................................................................... 105
Notes are essential to present fairly the information contained in the overview level of the basic financial
statements. Narrative explanations are intended to communicate information that is not readily apparent
or cannot be included in the statements themselves, and to provide additional disclosures as required by
the Governmental Accounting Standards Board.
46
This page is left intentionally blank.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
47
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The City of Palo Alto (the City) was incorporated in 1894 and operates as a charter city, having had its first
charter granted by the State of California in 1909. The City operates under the Council‐Manager form of
government and provides the following services: public safety (police and fire), public works, electric, fiber
optics, water, gas, wastewater, storm drain, refuse, airport, golf course, planning and zoning, general
administration services, library, open space and science, recreational and human services.
(a) Reporting Entity
The City is governed by a seven‐member council, elected by City residents. The City is legally
separate and fiscally independent, which means it can issue debt, set and modify budgets and
fees, and sue or be sued. The accompanying basic financial statements present the financial
activities of the City, which is the primary government presented, along with the financial
activities of its component unit, which is an entity for which the City is financially accountable.
Although a separate legal entity, a blended component unit is, in substance, part of the City’s
operations and is reported as an integral part of the City’s financial statements. The City’s
component unit described below is blended.
The Palo Alto Public Improvement Corporation (the Corporation) provides financing of public
capital improvements for the City through the issuance of Certificates of Participation (COPs), a
form of debt that allows investors to participate in a stream of future lease payments. Proceeds
from the COPs are used to construct projects that are leased to the City. The lease payments are
sufficient in timing and amount to meet the debt service requirements of the COPs. The Board of
Directors of the Corporation is composed of the same members as the City Council. The
Corporation is controlled by the City, which performs all accounting and administrative functions
for the Corporation. The financial activities of the Corporation are included in the Downtown
Parking Improvement Debt Service Fund.
Financial statements for the Corporation may be obtained from the City of Palo Alto,
Administrative Services Department, 4th Floor, 250 Hamilton Avenue, Palo Alto, CA 94301.
(b) Basis of Presentation
The City’s basic financial statements are prepared in conformity with accounting principles
generally accepted in the United States of America. The Governmental Accounting Standards
Board (GASB) is the acknowledged standard setting body for establishing accounting and financial
reporting standards followed by governmental entities in the United States.
These standards require that the financial statements described below be presented:
Government‐wide Statements: The Statement of Net Position and the Statement of Activities
display information about the primary government and its component unit. These statements
include the financial activities of the overall City government, except for fiduciary activities.
Eliminations have been made to minimize the double counting of internal activities. However,
interfund goods and services transactions have not been eliminated in the consolidation process.
These statements distinguish between the governmental and business‐type activities of the City.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
48
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(b) Basis of Presentation (Continued)
Governmental activities generally are financed through taxes, intergovernmental revenues, and
other non‐exchange 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 and, therefore, are clearly identifiable to a particular function. Program
revenues include: (a) charges paid by the recipients for goods and 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 its blended component unit. 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 internal service funds are
aggregated and reported as non‐major funds.
Proprietary fund operating revenues, such as utilities sales and 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 non‐exchange transactions or
ancillary activities.
Operating expenses for enterprise funds and internal service funds include the cost of sales and
services, administrative expenses, and depreciation on capital assets. All expenses not meeting
this definition are reported as nonoperating expenses.
(c) Major Funds and Other Funds
The City’s major governmental and enterprise funds need to be identified and presented
separately in the fund financial statements. All other funds, called non‐major funds, are combined
and reported in a single column, regardless of their fund type.
Major funds are defined as funds that have assets and deferred outflows of resources, liabilities
and deferred inflows of resources, revenues or expenditures/expenses equal to at least 10
percent of their fund type total and at least 5 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 on a qualitative basis.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
49
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(c) Major Funds and Other Funds (Continued)
The City reported the following major governmental funds in the accompanying financial
statements:
General Fund – This is the City’s primary operating fund. It accounts for all financial resources of
the general government, except those required to be accounted for in another fund.
Capital Projects Fund – This fund accounts for resources used for the acquisition and construction
of capital facilities by the City, with the exception of those assets financed by proprietary funds.
The City reported the following enterprise funds as major funds in the accompanying financial
statements:
Water Services Fund – This fund accounts for all financial transactions relating to the City’s water
service. Services are on a user‐charge basis to residents and business owners located in the City.
Electric Services Fund – This fund accounts for all financial transactions relating to the City’s
electric service. Services are on a user‐charge basis to residents and business owners located in
the City.
Fiber Optics Fund – This fund accounts for all financial transactions relating to the City’s fiber
optics service. Services are on a user‐charge basis to licensees located in the City.
Gas Services Fund – This fund accounts for all financial transactions relating to the City’s gas
service. Services are on a user‐charge basis to residents and business owners located in the City.
Wastewater Collection Services Fund – This fund accounts for all financial transactions relating
to the City’s wastewater collection service. Services are on a user‐charge basis to residents and
business owners located in the City.
Wastewater Treatment Services Fund – This fund accounts for all financial transactions relating
to the City’s wastewater treatment. Services are on a user‐charge basis to residents and business
owners located in the City.
Refuse Services Fund – This fund accounts for all financial transactions relating to the City’s refuse
service. Services are on a user‐charge basis to residents and business owners located in the City.
Storm Drainage Services Fund – This fund accounts for all financial transactions relating to the
City’s storm drainage service. Services are on a user‐charge basis to residents and business
owners located in the City.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
50
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(c) Major Funds and Other Funds (Continued)
The City also reports the following funds:
Airport Fund – This non‐major enterprise fund accounts for all financial transactions relating to
the Palo Alto Airport (PAO). The City assumed control over operation of PAO from the County of
Santa Clara, effective August 11, 2014.
Internal Service Funds – These funds account for fleet replacement and maintenance, technology,
central duplicating, printing and mailing services, administration of compensated absences and
health benefits, and the City’s self‐insured workers’ compensation and general liability programs,
all of which are provided to other departments on a cost‐reimbursement basis. Also included is
the Retiree Health Benefits Internal Service Fund, which accounts for benefits to retirees.
Vehicle Replacement and Maintenance – This fund accounts for the maintenance and
replacement of vehicles and equipment used by all City departments. The source of revenue is
from reimbursement of fleet replacement and maintenance costs allocated to each department
by usage of vehicle.
Technology – This fund accounts for replacement and upgrade of technology, and covers four
primary areas used by all City departments: desktop, infrastructure, applications, and technology
research and development. The source of revenue is from reimbursement of costs for support
provided to other departments.
Printing and Mailing Services – This fund accounts for central duplicating, printing and mailing
services provided to all City departments. The source of revenue for this fund is from
reimbursement of costs for services and supplies purchased by other departments.
General Benefits – This fund accounts for the administration of compensated absences and health
benefits.
Workers’ Compensation Insurance Program – This fund accounts for the administration of the
City’s self‐insured workers’ compensation program.
General Liability Insurance Program – This fund accounts for the administration of the City’s self‐
insured general liability program.
Retiree Health Benefits – This fund accounts for retiree health benefits.
Fiduciary Funds – These funds account for assets held by the City, an agent for assessment
districts, and members of the Cable Joint Powers Authority. These funds are custodial in nature
and do not involve measurement of results of operations. The City maintains two agency funds.
The financial activities of these funds are excluded from the government‐wide financial
statements, but are presented in separate fiduciary fund financial statements. Agency funds
apply the accrual basis of accounting but do not have a measurement focus.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
51
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(c) Major Funds and Other Funds (Continued)
Cable Joint Powers Authority – This fund accounts for the activities of the cable television system
on behalf of the members.
University Avenue Area Off‐Street Parking Assessment District – This fund accounts for the
receipts and disbursements associated with the 2012 Limited Obligation Refunding Improvement
Bonds.
(d) Basis of Accounting
The government‐wide and proprietary fund financial statements are reported using the economic
resources measurement focus and the full accrual basis of accounting. Agency funds do not have
a measurement focus but are reported using the 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.
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 revenues susceptible to accrual reported in the
governmental funds to be available if the revenues are collected within ninety days after year‐
end, except for property taxes, which are available if collected within sixty days after year‐end.
Expenditures are recorded when the related fund liability is incurred, except for principal and
interest on general 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 of general long‐term debt and
acquisitions under capital leases are reported as other financing sources.
Revenues susceptible to accrual include taxes, intergovernmental revenues, interest and charges
for services.
Grant revenues are recognized in the fiscal year in which all eligibility requirements are met.
Under the terms of grant agreements, the City may fund certain programs with a combination of
cost‐reimbursement grants, categorical block grants, and general revenues. Thus, both restricted
and unrestricted net position may be 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.
Certain indirect costs are included in program expenses reported for individual functions and
activities. Transactions representing the exchange of interfund goods and services have also been
included.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
52
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(e) Cash and Cash Equivalents
Restricted and unrestricted pooled cash and investments held in the City Treasury, and other
unrestricted investments invested by the City Treasurer, are considered cash equivalents for
purposes of the statement of cash flows because the City’s cash management pool and funds
invested by the City Treasurer possess the characteristics of demand deposit accounts. Other
restricted and unrestricted investments with maturities of less than three months at the time of
purchase are considered cash equivalents for purposes of the statement of cash flows.
(f) Investments
The City’s investments are carried at fair value, and its fair value measurements are categorized
within the fair value hierarchy established by generally accepted accounting principles. 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.
(g) Inventory of Materials and Supplies
Materials and supplies are held for consumption and are valued at average cost. The consumption
method is used to account for inventories. Under the consumption method, inventories are
recorded as expenditures at the time inventory items are used, rather than purchased.
(h) Prepaid items
Prepaid items are recorded at cost. Using the consumption method, prepaid items are recorded
as expenditures over the period that service is provided.
(i) Compensated Absences
The liability for compensated absences includes the vested portion of vacation, sick leave, and
overtime compensation pay. The City’s liability for accrued compensated absences is recorded in
the General Benefits Internal Service Fund. The fund is reimbursed through payroll charges to all
other funds. Earned but unpaid vacation and overtime compensation pay are recognized as an
expense or expenditure in the proprietary and governmental fund types when earned because
the City has provided financial resources for the full amount through its budgetary process.
Vested accumulated sick pay is paid in the event of termination due to disability and, under certain
conditions, is specified in employment agreements.
During the fiscal year ended June 30, 2020, changes to the compensated absences liabilities were
as follows (in thousands):
Beginning balance 12,335$
Additions 7,412
Payments (5,503)
Ending balance 14,244$
Current portion 8,182$
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
53
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(j) Property Tax
Santa Clara County (the County) assesses properties and bills, collects, and distributes property
taxes to the City. The County remits the entire amount levied and handles all delinquencies,
retaining interest and penalties.
The County assesses property values, levies bills and collects taxes as follows:
Secured Unsecured
Lien Dates January 1 January 1
Levy Dates October 1 July 1
Due Dates 50% on November 1 Upon receipt of billing
50% on February 1
Delinquent after December 10 (for November) August 31
April 10 (for February)
The term “unsecured” refers to taxes on personal property other than real estate, land and
buildings. These taxes are secured by liens on the property being taxed. Property tax revenues
are recognized by the City in the fiscal year they are assessed, provided they become available as
defined previously within sixty days after year‐end.
(k) Deferred Outflows of Resources and Deferred Inflows of Resources
A deferred outflow of resources is the consumption of net position that is applicable to a future
reporting period. A deferred inflow of resources is defined as an acquisition of net position
applicable to a future reporting period.
(l) Pensions and OPEB
For purposes of measuring the net pension liability and net OPEB liability, deferred
outflows/inflows of resources related to pensions and OPEB, and pension and OPEB expense,
information about the fiduciary net position of the City’s pension and OPEB plans and additions
to/deductions from the plans’ fiduciary net positions have been determined on the same basis as
they are reported by the California Public Employees’ Retirement System (CalPERS) and the
California Employer’s Retiree Benefit Trust Fund Program (CERBT), respectively. For this purpose,
benefit payments (including refunds of employee contributions) are recognized when due and
payable in accordance with the benefit terms. Investments are reported at fair value. The
governmental activities’ share of net pension liability and net OPEB liability are typically liquidated
by the General Fund.
(m) Rounding
All amounts included in the basic financial statements and footnotes are presented to the nearest
thousand.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
54
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(n) Effects of New Pronouncements
As of July 1, 2019, the City implemented the following GASB Statement:
In May 2020, the GASB issued Statement No. 95, Postponement of the Effective Dates of Certain
Authoritative Guidance. This primary object of this statement is to provide temporary relief to
governments and other stakeholders in light of the COVID‐19 pandemic. The objective is
accomplished by postponing the effective dates of certain provisions in GASB Statements and
Implementation Guides that first became effective or are scheduled to become effective for
period beginning after June 15, 2018, and later. Implementation of this statement did not have a
significant impact on the City’s financial statements for the fiscal year ended June 30, 2020.
The City is currently analyzing its accounting practices to determine the potential impact on the
financial statements for the following GASB Statements:
In January 2017, the GASB issued Statement No. 84, Fiduciary Activities. The 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. The statement provides recognition and measurement guidance for situations
in which a government is a beneficiary of these agreements. The requirements of this statement
are effective for the City’s fiscal year ending June 30, 2021.
In June 2017, the GASB issued Statement No. 87, Leases. The objective of this statement is to
better meet the information needs of financial statement users by improving accounting and
financial reporting for leases by governments. This statement 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. The requirements of this
statement are effective for the City’s fiscal year ending June 30, 2022.
In June 2018, the GASB issued Statement No. 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. The requirements of this statement are effective for the City’s fiscal year ending
June 30, 2022.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
55
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(n) Effects of New Pronouncements (Continued)
In August 2018, the GASB issued Statement No. 90, Majority Equity Interests, an amendment of
GASB Statements No. 14 and No. 61. The 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. The requirements of this statement are effective for the City’s fiscal year ending
June 30, 2021.
In May 2019, the GASB issued Statement No. 91, Conduit Debt Obligations. The 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 disclosure. The
requirements of this statement are effective for the City’s fiscal year ending June 30, 2023.
In January 2020, the GASB issued Statement No. 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. The requirements of this
statement are effective for the City’s fiscal year ending June 30, 2022.
In March 2020, the GASB issued Statement No. 93, Replacement of Interbank Offered Rates. The
objective of this statement is to address those and other accounting and financial reporting
implications that result from the replacement of an interbank offered rate. The requirements of
this statement are effective for the City’s fiscal year ending June 30, 2022.
In March 2020, the GASB issued Statement No. 94, Public‐Private and Public‐Public Partnerships
and Availability Payment Arrangements. The objective of this Statement is to improve financial
reporting by addressing issues related to public‐private and public‐public partnership
arrangements (PPPs). 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. The requirements of this statement
are effective for the City’s fiscal year ending June 30, 2023.
In May 2020, the GASB issued Statement No. 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. The
requirements of this statement are effective for the City’s fiscal year ending June 30, 2023.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
56
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(n) Effects of New Pronouncements (Continued)
In June 2020, the GASB issued Statement No. 97, Certain Component Unit Criteria, and Accounting
and Financial Reporting for Internal Revenue Code Section 457 Deferred Compensation Plans – an
Amendment of GASB Statements No. 14 and No. 84, and a Supersession of GASB Statement No. 32.
The 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.
The requirements of this statement are effective for the City’s fiscal year ending June 30, 2022.
(o) Use of Estimates
The accompanying basic financial statements have been prepared on the modified accrual and
accrual basis of accounting in accordance with generally accepted accounting principles. This
requires management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results could differ from those
estimates.
NOTE 2 – BUDGETS AND BUDGETARY ACCOUNTING
1. The City Manager submits proposed operating and capital budgets to the City Council for the fiscal
year commencing the following July 1. The budget includes planned expenditures and the means of
financing them.
2. Public hearings are conducted to obtain comments on the proposed budgets.
3. The budget is approved with the adoption of a budget ordinance for all funds except Agency Funds.
4. Per the Palo Alto Municipal Code, only the City Manager is authorized to reallocate funds from
contingency accounts maintained in the General Fund. Amendments to appropriations to
departments in the General Fund, to total appropriations for all other budgeted funds, or to transfer
of appropriations between funds, require approval by the City Council. Amendments to budgeted
revenue and expenditures are added to or subtracted from the Adopted Budget and the resulting
totals are reflected as Final Budget amounts.
5. As defined in the Palo Alto Municipal Code, expenditures may not exceed budgeted appropriations at
the department level for the General Fund, and at the fund level for Enterprise, Internal Service,
Special Revenue and Debt Service Funds.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
57
NOTE 2 – BUDGETS AND BUDGETARY ACCOUNTING (Continued)
6. Budgets for governmental funds are adopted on a basis consistent with generally accepted accounting
principles (GAAP), except that unrealized gains or losses on investments, changes in advances to other
funds and notes receivable are not recognized on a budgetary basis and encumbrances are treated as
budgetary expenditures when incurred.
7. Expenditures for the Capital Projects Fund are budgeted and maintained at a project level for the life
of the project. Budget to actual comparisons for these expenditures have been excluded from the
accompanying financial statements.
NOTE 3 – CASH AND INVESTMENTS
The City pools cash from all sources and all funds, except restricted bond proceeds with fiscal agents and
Public Agency Retirement Services, and invests its pooled idle cash according to State of California law
and the City’s Investment Policy. The basic principles underlying the City’s investment philosophy are to
ensure the safety of public funds, ensure that sufficient funds are available to meet current expenditures,
and achieve a reasonable rate of return on investments.
Policies
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.
Classification
Cash and investments 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 agreements (in thousands):
Governmental Business‐Type Fiduciary
Activities Activities Funds Total
Cash and investments:
Available for operations 300,540$ 273,338$ 2,824$ 576,702$
With fiscal agents and trustees 42,305 4,060 2,701 49,066
Total cash and investments 342,845$ 277,398$ 5,525$ 625,768$
Investments Authorized by the City’s Investment Policy, Debt Agreements and Trust Agreements
The table below summarizes the investment types that are authorized by the California Government Code
(Code) and the City’s Investment Policy, and includes the interest rate risk, credit risk and concentration
of credit risk as outlined in the Investment Policy. In addition, the table discloses investment of debt
proceeds held by bond trustees. These investments are governed by the provisions of each debt
agreement of the City, rather than the general provisions of the City’s Investment Policy.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
58
NOTE 3 – CASH AND INVESTMENTS (Continued)
Maximum
Maturity
Minimum
Credit Quality
Maximum
Percentage
of Portfolio
Maximum
Investment in
One Issuer
U.S. Government Securities 10 years (*) N/A No Limit No Limit
U.S. Federal Agency Securities (C) 10 years (*) N/A No Limit (A) No Limit
Certificates of Deposit 10 years (*) N/A 20% 10% of the par
value of
portfolio
Bankers Acceptances 180 days (D) N/A (D) 30% $5 million
Commercial Paper 270 days A‐1 15% $3 million (B)
Local Agency Investment Fund N/A N/A No Limit $50 million per
account
Short‐Term Repurchase Agreements 1 year N/A No Limit No Limit
City of Palo Alto Bonds N/A N/A No Limit No Limit
Money Market Mutual Funds N/A N/A (E) No Limit No Limit
Mutual Funds (F) N/A N/A 20% 10%
Negotiable Certificates of Deposit 10 years (*) N/A 10% $5 million
Medium‐Term Corporate Notes 5 years AA 10% $5 million
10 years (*) AA/AA2 30% No Limit
5 years AA/AA2 20% 10% of the par
value of
portfolio
(A)
(B) The lesser of $3 million or 10% of outstanding commercial paper of any one institution.
Debt Agreements:
(C)
(D)
(E)
(F)
(*)The maximum maturity is based on the Investment Policy that is approved by the City Council and is less restrictive
than the California Government Code.
Utility Revenue Bonds 2011 Refunding, General Obligation Bonds 2010 and 2013A, and University Avenue Parking
Bond 2012 are allowed to invest in the California Asset Management Program.
Authorized Investment Type
Bonds of State of California Municipal
Agencies & Other U.S. States
Callable and multi‐step securities are limited to no more than 25% of the par value of the portfolio, provided that: 1)
the potential call dates are known at the time of purchase, 2) the interest rates at which they "step‐up" are known at
the time of purchase, and 3) the entire face value of the security is redeemable at the call date.
Utility Revenue Bonds 2011 Refunding and 1999 Refunding allow general obligations of states with a minimum credit
quality rating of A2/A by Moody's and Standard & Poor's.
Utility Revenue Bonds 2011 Refunding and 1999 Refunding require a minimum credit quality rating of A‐1/P‐1 by
Moody's and Standard & Poor's and maturing after no more than 360 days.
Water Revenue Bonds 2009 Series A, Utility Revenue Bonds 2011 Refunding and 1999 Refunding require a minimum
credit quality rating of AAAm or AAAm‐G by Standard & Poor's.
Supranational
The City must maintain required amounts of cash and investments with trustees under the terms of
certain debt issues. These funds are unexpended bond proceeds or are pledged as reserves to be used if
the City fails to meet its obligations under these debt issues. The Code requires these funds to be invested
in accordance with City ordinance, bond indentures or state statute. All of these funds have been invested
as permitted under the Code and the investment policy approved by the City Council.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
59
NOTE 3 – CASH AND INVESTMENTS (Continued)
The City has implemented investment guidelines for its Public Agencies Retirement Services (PARS) Trust
which authorizes the investments in U.S. Treasury securities, federal agencies and U.S. guaranteed
obligations, corporate notes, certificates of deposit, bankers’ acceptances, equities investments, and
mutual funds.
Fair Value Measurements
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. All of the
investments are measured using level 2 inputs, except for investments in money market mutual funds,
California Asset Management Program and Local Agency Investment Fund, which are not subject to the
fair value hierarchy.
Investment securities classified in Level 2 of the fair value hierarchy are valued using prices determined
by the use of matrix pricing techniques maintained by the pricing vendors for these securities. Matrix
pricing is used to value securities based on the securities relationship to benchmark quoted prices.
The following is a summary of the fair value measurements of the City as of June 30, 2020 (in thousands):
Type of Investment June 30, 2020 Level 2
Investments by fair value hierarchy
U.S. Federal Agency Securities 214,818$ 214,818$
U.S. Treasury Notes 11,911 11,911
Local Government Bonds 169,956 169,956
Negotiable Certificates of Deposit 40,555 40,555
Corporate Bonds 17,061 17,061
Supranational Bonds 26,351 26,351
Total investments by fair value hierarchy 480,652 480,652$
Investment not subject to fair value hierarchy
Money Market Mutual Funds 37,485
Equity Mutual Funds (Irrevocable for Pension)28,693
California Asset Management Program 3,299
Local Agency Investment Fund 75,350
Total investments not subject to fair value hierarchy 144,827
Total investments measured at fair value 625,479$
Local Agency Investment Fund
The City participates in the Local Agency Investment Fund (LAIF) which, under the oversight of the
Treasury of the State of California, is regulated by California Government Code Section 16429. LAIF
management calculates the fair value and cost of the entire LAIF pool. The City adjusts its cost basis
invested in LAIF to fair value based on this ratio. The fair value of the City’s position in the pool is the
same as the value of the pool share. The balance available for withdrawal on demand is based on
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
60
NOTE 3 – CASH AND INVESTMENTS (Continued)
accounting records maintained by LAIF, which are recorded on an amortized cost basis. LAIF is part of the
State’s Pooled Money Investment Account (PMIA). The total balance of the PMIA is approximately $101.0
billion as of June 30, 2020. Of that amount, 96.6 percent was invested in nonderivative financial products
and 3.4 percent in structured notes and asset backed securities. At June 30, 2020, LAIF had a weighted
average maturity of 191 days.
Money Market Mutual Funds
Money market mutual funds are available for withdrawal on demand and at June 30, 2020, had a weighted
average maturity of 49 days.
California Asset Management Program
The City is a voluntary participant in the California Asset Management Program (CAMP). CAMP is an
investment pool offered by the California Asset Management Trust (the Trust). The Trust is a joint powers
authority and public agency created by the Declaration of Trust and established under the provisions of
the California Joint Exercise of Powers Act (California Government Code Sections 6500 et seq., or the
“Act”) for the purpose of exercising the common power of its participants to invest certain proceeds of
debt issues and surplus funds. The City’s investments are limited to investments permitted by
subdivisions (a) to (n), inclusive, of Section 53601 of the California Government Code. The City reports its
investments in CAMP at the fair value amounts provided by CAMP, which is the same as the value of the
pool share. At June 30, 2020, the fair value approximated the City’s cost. CAMP had a weighted average
maturity of 53 days at June 30, 2020.
Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates may adversely affect the fair value of an
investment. Normally, the longer the maturity of an investment, the greater the sensitivity its fair value
is to changes in market interest rates. As of June 30, 2020, the City’s investments consisted of the
following (in thousands):
Type of Investment
Less Than
One Year
One to
Three Years
Three to
Five Years
Over
Five Years Total
U.S. Federal Agency Securities 35,414$ 65,324$ 36,537$ 77,543$ 214,818$
U.S. Treasury Notes ‐ 11,911 ‐ ‐ 11,911
Local Government Bonds 12,689 41,539 35,214 80,514 169,956
Corporate Bonds 10,069 1,456 5,536 ‐ 17,061
Money Market Mutual Funds 37,485 ‐ ‐ ‐ 37,485
Equity Mutual Funds
(Irrevocable for Pension)28,693 ‐ ‐ ‐ 28,693
Negotiable Certificates of Deposit 5,941 20,277 13,580 757 40,555
California Asset Management Program 3,299 ‐ ‐ ‐ 3,299
Supranational Bonds ‐ 3,326 23,025 ‐ 26,351
Local Agency Investment Fund 75,350 ‐ ‐ ‐ 75,350
Total Investments 208,940$ 143,833$ 113,892$ 158,814$ 625,479
Cash in bank and on hand 289
Total Cash and Investments 625,768$
Maturities
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
61
NOTE 3 – CASH AND INVESTMENTS (Continued)
Investment with Fair Values Highly Sensitive to Interest Rate Fluctuations
At June 30, 2020, the City’s investments (including investments held by bond trustees) include U.S. Federal
Agency Callable Securities totaling $84 million. These investments are highly sensitive to interest rate
fluctuations (to a greater degree than already indicated in the information provided above) and are
subject to early redemption.
Credit Risk
Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the
investment. This is measured by the assignment of a rating by a nationally recognized statistical rating
organization.
Presented below is the actual rating as provided by Standard & Poor’s, Moody’s and/or Fitch’s investment
rating system as of June 30, 2020, for each investment type (in thousands):
Type of Investment Rating Total
U.S. Federal Agency Securities AA+ 214,818$
Corporate Bonds AAA 10,063
AA+ 6,025
AA 973
Total Corporate Bonds 17,061
Local Government Bonds AAA 55,719
AA+ 54,347
AA 43,264
N/A 16,626
Total Government Bonds 169,956
Supranational Bonds AAA 26,351
Money Market Mutual Funds AA+ 17,074
N/A 20,411
Total Money Market Mutual Funds 37,485
Subtotal rated investments 465,671
Not Applicable:
U.S. Treasury Notes 11,911
Not Rated:
California Asset Management Program 3,299
Local Agency Investment Fund 75,350
Negotiable Certificates of Deposit 40,555
Equity Mutual Funds (Irrevocable for Pension) 28,693
Cash in bank and on hand 289
Total Cash and Investments 625,768$
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
62
NOTE 3 – CASH AND INVESTMENTS (Continued)
Concentration of Credit Risk
Investments in any one issuer, other than U.S. Treasury securities, mutual funds, and external investment
pools, that represent 5 percent or more of total City portfolio investments are as follows at June 30, 2020
(in thousands):
Investments Reporting Type Fair Value at Year‐End
Federal Home Loan Bank U.S. Federal Agency Securities 46,813$
Federal Agricultural Mortgage Corporation U.S. Federal Agency Securities 83,134
Federal Farm Credit Bank U.S. Federal Agency Securities 44,906
Custodial Credit Risk
California law requires banks and savings and loan institutions to pledge government securities with a
market value of 110 percent of the City’s cash on deposit or first trust deed mortgage notes with a value
of 150 percent of the deposit as collateral for these deposits. Under California Law, this collateral is
considered held in the City’s name and places the City ahead of general creditors of the institution. The
City has waived collateral requirements for the portion of deposits covered by federal deposit insurance.
The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to
a transaction, the City will not be able to recover the value of its investment or collateral securities that
are in the possession of another party. The City’s Investment Policy limits its exposure to custodial credit
risk by requiring that all security transactions entered into by the City be conducted on a delivery‐versus‐
payment basis. Securities are to be held by a third‐party custodian.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
63
NOTE 4 – INTERFUND TRANSACTIONS
Transfers Between Funds
With Council approval, resources may be transferred from one City fund to another. The purpose of the
majority of transfers is to subsidize a fund. Less often, a transfer may be made to open or close a fund.
Transfers between City funds during fiscal year 2020 were as follows on the following page (in thousands):
Fund Making Transfer
Amount
Transferred
General Fund Nonmajor Governmental Funds 492$ A
Electric Services Fund 13,134 B
Gas Services Fund 6,942 B
Capital Projects Fund General Fund 24,173 C
Nonmajor Governmental Funds 9,285 C
Nonmajor Governmental Funds General Fund 1,774 A
Capital Projects Fund 2,520 A
Water Services Fund 11 A
Electric Services Fund 23 A
Fiber Optics Fund 2 A
Gas Services Fund 9 A
Wastewater Collection Fund 6 A
Internal Service Funds 26 A
Water Services Fund Gas Services Fund 274 C
Wastewater Collection Fund 274 C
Electric Services Fund General Fund 2,083 D
Water Services Fund 136 C
Gas Services Fund 136 C
Fiber Optics Fund 102 C
Internal Service Funds 125 C
Internal Service Funds General Fund 4,193 E/F
Nonmajor Governmental Funds 32 E/F
Water Services Fund 328 E/F
Electric Services Fund 749 E/F
Fiber Optics Fund 58 E/F
Gas Services Fund 322 E/F
Wastewater Collection Fund 187 E/F
Wastewater Treatment Fund 432 E/F
Refuse Services Fund 116 E/F
Storm Drainage Services Fund 92 E/F
Airport 31 E/F
Internal Service Funds 2,716 E/G
Total 70,783$
Fund Receiving Transfer
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
64
NOTE 4 – INTERFUND TRANSACTIONS (Continued)
The reasons for these transfers are set forth below:
(A) Transfer to fund street maintenance activities, to pay debt service, fund City employee parking,
and to return unspent project funds.
(B) Transfer to fund the return of initial investment made by general fund when utility department
was created.
(C) Transfers of funds to construct, purchase or maintain capital assets.
(D) Transfer to fund electricity costs associated with City streetlight and traffic signal costs.
(E) Transfer to fund supplemental pension trust fund.
(F) Transfer to fund replacement and maintenance of critical desktop, software, infrastructure,
vehicles and equipment.
(G) Transfer to fund an implied subsidy for retiree healthcare.
Current Interfund Balances
Current interfund balances arise in the normal course of business and are expected to be repaid shortly
after the end of the fiscal year. At June 30, 2020, the non‐major Street Improvement Special Revenue
Fund, the non‐major Federal Revenue Special Revenue Fund, and the non‐major Airport Enterprise Fund
owed the General Fund $109 thousand, $27 thousand, and $1.8 million, respectively.
Long‐Term Interfund Advance
On December 6, 2010, the City Council accepted an Airport Business Plan of the Palo Alto Airport (PAO)
and approved creation of the Airport Enterprise Fund to facilitate the transition of PAO control from the
County of Santa Clara to the City. The City Council approved six separate general fund advances to the
non‐major Airport Enterprise Fund. All advances bear interest equal to the average return yield on the
City’s investment portfolio. The six separate advances and interest incurred have been consolidated and
are scheduled to be repaid by June 2034. At June 30, 2020, the outstanding advances was $3.2 million.
Internal Balances
Internal balances represent the net interfund receivables and payables remaining after the elimination of
all such balances within governmental and business‐type activities.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
65
NOTE 5 – NOTES AND LOANS RECEIVABLE
At June 30, 2020, the City’s notes and loans receivable totaled (in thousands):
Palo Alto Housing Corporation:
Tree House Apartments 5,344$
Emerson Street Project 375
Alma Single Room Occupancy Development 2,222
Barker Hotel 2,111
Sheridan Apartments 2,222
Oak Court Apartments, L.P. 7,834
El Dorado Palace, LLC 150
Mid‐Peninsula Housing Coalition:
Palo Alto Gardens Apartments 100
Community Working Group, Inc. 1,280
Opportunity Center Associates, L.P. 945
Home Rehabilitation Loans 46
Executive Relocation Assistance Loans 845
Below Market Rate Assessment Loans 53
Oak Manor Townhouse Water System 114
Lytton Gardens Assisted Living 101
Emergency Housing Consortium 75
Alma Gardens Apartments 1,150
2811‐2825 Alma Street Acquisition 1,890
Palo Alto Family Housing, 801 Alma Street 6,422
Palo Alto Senior Housing Project ‐ Stevenson House, LLC 901
MP Palo Alto Garden, LLC 672
Colorado Park Housing Corporation 204
Buena Vista ‐ County of Santa Clara 14,500
Total Notes and Loans Receivable 49,556
Less: Valuation Allowance (14,612)
Total Notes and Loans Receivable, Net 34,944$
Housing Loans
The City engages in programs designed to encourage construction or improvement in low‐to‐moderate
income housing or other projects. Under these programs, grants or loans are provided under favorable
terms to homeowners or developers who agree to spend these funds in accordance with the City’s terms.
These loans have been offset by restricted or committed fund balances, as they are not expected to be
repaid immediately.
Some of these loans contain forgiveness clauses that provide for the amount loaned to be forgiven if the
third party maintains compliance with the terms of the loan and associated regulatory agreements. Since
some of these loans are secured by trust deeds that are subordinated to other debt on the associated
projects or are only repayable from residual cash receipts on the projects, collectability of some of the
outstanding balances may not be realized. As a result of the forgiveness clauses and nature of these
housing projects and associated cash flows, a portion of the outstanding balances of the loans has been
offset by a valuation allowance.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
66
NOTE 5 – NOTES AND LOANS RECEIVABLE (Continued)
Tree House Apartments
In March 2009, the City agreed to loan $2.8 million to Tree House Apartments, L.P. (THA) for the purchase
of the real property located at 488 West Charleston Road. The loan accrues simple interest at the rate of
3 percent per annum. The loan was funded with $1.8 million of Community Development Block Grant
(CDBG) funds and $1.0 million of residential housing funds. An additional development loan in the amount
of $2.5 million was approved by the City on October 18, 2010. Principal and interest payments will be
deferred, however if the borrower has earned extra income, and if it is acceptable to the other entities
providing final permanent sources of funds, payment of interest and principal based on the City’s
proportionate share of the project’s residual receipts from net operating income shall be made by the
borrower. In no event shall full payment be made by the borrower later than concurrently with the
expiration or earlier termination of the loan agreement, which is December 31, 2067.
Emerson Street Project
On November 8, 1994, the City loaned $375,000 to Palo Alto Housing Corporation (PAHC) for expenses
necessary to acquire an apartment complex for the preservation of rental housing for low and very low
income households in the City. This loan is collateralized by a second deed of trust. The loan bears interest
at 3 percent.
Alma Single Room Occupancy Development
On December 13, 1996, the City loaned $2.2 million to Alma Place Associates, L.P. for development of a
107‐unit single room occupancy development. This loan bears interest at 3 percent and is collateralized
by a subordinated deed of trust. The principal balance is due in 2041.
Barker Hotel
On April 12, 1994, the City loaned a total of $2.1 million for the preservation, rehabilitation and expansion
of a low‐income, single occupancy hotel. This loan was funded by three sources: $400,000 from the
Housing In‐Lieu Fund, $1.0 million from HOME Investment Partnership Program Funds, and $670,000 from
CDBG funds. All three notes bear no interest and are collateralized by a deed of trust, which is
subordinated to private financing. Loan repayments are deferred until 2035.
In July 2004, the City agreed to loan up to $41,000 to PAHC to rehabilitate the interior of the Barker Hotel.
The loan was funded with CDBG funds and is collateralized by a deed of trust on the property. Annual
loan payments are deferred until certain criteria defined in the loan agreement are reached. The loan will
be forgiven if the borrower satisfactorily complies with all terms and conditions of the loan agreement.
Sheridan Apartments
On December 8, 1998, the City loaned $2.2 million to PAHC for the purchase and rehabilitation of a 57‐
unit apartment complex to be used for senior and low‐income housing (Sheridan Apartments). The loan
was funded with $1.6 million in CDBG funds, and $825,000 of Housing In‐Lieu funds. The note is
collateralized by a second deed of trust and an affordability reserve account held by PAHC. The loan was
amended in June 2017. It will not accrue interest between May 1, 2017 and March 1, 2030. The loan will
be forgiven on June 30, 2030 if PAHC uses the funds that would otherwise have been due to the City for
another affordable housing project.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
67
NOTE 5 – NOTES AND LOANS RECEIVABLE (Continued)
Oak Court Apartments, L.P.
On August 18, 2003, the City loaned $5.9 million to PAHC for the purchase of land. The note bears interest
of 5 percent and is secured by a deed of trust. Note payments are due annually after 55 years, or beginning
in 2058, unless PAHC elects to extend the note until 2102, as defined in the regulatory agreement. The
City also loaned $1.9 million to Oak Court Apartments, L.P. for the construction of a 53‐unit rental
apartment complex for low and very low‐income households with children, which was completed in April
2005. The note bears no interest until certain criteria defined in the note are satisfied, at which time the
note will bear an interest rate not to exceed 3 percent. The note is secured by a subordinate deed of
trust. The principal balance is due in 2060.
El Dorado Palace, LLC
On June 22, 2015, the City approved a loan to PAHC in the amount of $375,000 to increase the supply of
affordable low income housing in the City. The City loaned $52,000 and $13,000 in June 2017 and March
2018, respectively. In February 2019, the City loaned an additional $85,000. The loan bears three percent
(3%) interest, however in the event of default will accrue at the lesser of 8% or the highest rate permitted
by law. The term of the loan shall expire 55 years unless the City agree to extend an additional 44 years.
As of June 30, 2020, the outstanding balance was $150,000.
Palo Alto Gardens Apartments
On April 22, 1999, the City loaned $1.0 million to Mid‐Peninsula Housing Coalition (the Coalition) for the
purchase and rehabilitation of a 155‐unit complex for the continuation of low‐income housing. The loan
was funded with $659,000 of CDBG funds and $341,000 of Housing In‐Lieu funds. The two notes bear
interest at 3 percent and are secured by second deeds of trust and a City Affordability Reserve Account
held by the Coalition. The remaining principal balance is due in 2039. As of June 30, 2020, the outstanding
balance was $100,000.
Community Working Group, Inc.
On May 13, 2002, the City loaned $1.3 million to Community Working Group, Inc. for predevelopment,
relocation and acquisition of land for development of an 89‐unit complex and homeless service center for
very low income households. The loan was funded with $1.3 million of CDBG funds. The note bears no
interest and is secured by a first deed of trust. No repayment is required as long as the borrower complies
with all terms and conditions of the agreement. After 89 years of compliance with the regulatory
agreement, the City’s loan would convert to a grant and its deed of trust would be re‐conveyed.
Opportunity Center Associates, L.P.
On July 19, 2004, the City loaned $750,000 for a 55‐year term to Opportunity Center Associates, L.P. for
construction of 89 units of rental housing for extremely low‐income and very low‐income households.
The loan was funded with $750,000 of residential housing funds. The note bears 3 percent interest and
is secured by a deed of trust. The loan remains outstanding and becomes due at the end of the 55‐year
term. During fiscal year 2019, the City received $25,000 in principal payments. On April 17, 2019, the City
approved up to an additional $220,000 loan drawn from CDBG for the improvement of rental housing. In
February 2019 and April 2019, the City loaned $191,000 and $29,000, respectively. The note bears 3
percent interest, and all payments of interest and principal shall be deferred until July 19, 2103. The loan
balance owed as of June 30, 2020 was $945,000.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
68
NOTE 5 – NOTES AND LOANS RECEIVABLE (Continued)
Home Rehabilitation Loans
The City administers a closed housing rehabilitation loan program initially funded with CDBG funds. Under
this program, individuals with incomes below a certain level are eligible to receive low interest loans for
rehabilitation work on their homes. These loans are secured by deeds of trust, which may be subordinated
to subsequent encumbrances upon said real property with the prior written consent of the City. The loan
repayments may be amortized over the life of the loans, deferred, or a combination of both.
Executive Relocation Assistance Loans
The City Council may authorize a mortgage loan as part of a relocation assistance package to executive
staff. The loans are secured by first deeds of trust, and interest is adjusted annually based on the rate of
return of invested funds of the City for the year ended June 30 plus one‐quarter of a percent. Principal
and interest payments are due monthly. Employees must pay any outstanding balance on their loans
within a certain period after ending employment with the City. During the year ended June 30, 2020, the
City entered into a 30‐year loan with the City Manager for $845,000. The purchase cost for the City
Manager’s home was $3.4 million and the City holds 75 percent equity share.
Below Market Rate Assessment Loans
In December 2002, the City loaned $53,000 to below market rate homeowners with low incomes and/or
very limited assets for capital repairs, special assessments and improvements of their properties. The
loans bear interest at 3 percent and are secured by a deed of trust on each property. Loan payments are
deferred until 2032.
Oak Manor Townhouse Water System
On May 12, 2003, the City Council approved an allocation of $114,000 to Palo Alto Housing Corporation
Apartments, Inc. (PAHCA) to replace the water pipes. Repayment of the loan will not be required unless
the property is sold, the program is terminated or purpose of the program is changed without City’s
approval prior to July 1, 2033. The loan for this project is subordinated to the existing City loan with PAHCA
dated January 7, 1991 for the acquisition of the project site, which is discussed earlier in this section.
Lytton Gardens Assisted Living
In June 2005, the City loaned $101,000 to Community Housing, Inc. to upgrade and modernize the existing
kitchens at the senior residential facility known as Lytton Gardens Assisted Living. The loan was funded
with CDBG funds, and bears simple interest of 3 percent. Principal and interest payments are deferred
until July 1, 2035, as long as the borrower continues to comply with all terms and conditions of the
agreement.
Emergency Housing Consortium
In November 2005, the City agreed to loan up to $75,000 to Emergency Housing Consortium to cover
architectural expenses that will be incurred in rehabilitating and expanding the property. The loan was
funded with CDBG funds, and bears simple interest of 3 percent. Principal and interest payments are
deferred until July 1, 2035, as long as the borrower continues to comply with all terms and conditions of
the agreement.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
69
NOTE 5 – NOTES AND LOANS RECEIVABLE (Continued)
Alma Garden Apartments
In March 2006, the City agreed to loan up to $1.2 million to Community Working Group, Inc. to acquire a
10‐unit multi‐family housing complex known as Alma Garden Apartments. The loan was funded with
CDBG funds. Principal and interest payments are deferred until July 1, 2061 as long as the borrower
complies with all terms and conditions of the agreement.
2811‐2825 Alma Street Acquisition
On October 9, 2011, the City agreed to loan $1.3 million to PAHC to acquire properties on Alma Street for
the purpose of developing an affordable rental housing project. On June 29, 2015, the City loaned PAHC
an additional $0.6 million, and entered into an Amended and Restated Acquisition and Development
Agreement which combined the two loans for a total loan of $1.9 million. The loan term expires on
December 8, 2066 with an option to extend the term for an additional 44 years. The loan bears simple
interest of 3 percent, however in the event of default interest will accrue at the lesser of 8 percent or the
highest rate permitted by law. Principal and interest payments are payable during the term of the
agreement on a “residual receipt” basis as described in the agreement. All principal and interest is due in
the event of an unauthorized transfer, a default or the expiration of the term.
Palo Alto Family Housing, 801 Alma Street
On February 14, 2011, the City agreed to loan Palo Alto Family, LP up to $9.3 million for the purposes of
predevelopment expenses and acquiring certain real property for the Alma Street Affordable Multi‐Family
Rental Housing Project. The loan bears simple interest of 3 percent. Principal and interest are due and
payable during the term of the agreement on a “residual receipt” basis as described in the agreement.
Except in the case of default, all remaining principal and interest shall be payable on the Restriction
Termination Date as defined in the agreement. As of June 30, 2020, the outstanding amount is $6.4
million.
Palo Alto Senior Housing Project
On October 1, 2015, the City entered into an affordable housing fund loan agreement with PASHPI
Stevenson House LP, a California limited partnership, in the principal amount of $1 million to assist in the
rehabilitation of the Stevenson House. The loan bears simple interest of 3 percent. As of June 30, 2020,
the loan outstanding balance is $901,000 and is due at the end of the 55‐year term.
MP Palo Alto Garden, LLC
The City loaned $619,000 and $53,000 in March 2017 and October 2017, respectively, in CDBG funds for
the rehabilitation of the property. The note bears 3% simple interest and shall be deferred until April 24,
2054. If there are no Events of Default prior to the end of the terms, the unpaid principal and interest will
be treated as a grant and no repayment will be due to the City.
Colorado Park Housing Corporation
On September 8, 2014, the City entered into an affordable housing fund loan agreement with Colorado
Park Housing Corporation (CPHC), a California nonprofit public benefit corporation, in the principal
amount of $204,000. The loan bears no interest except in the event of default. The principal and any
accrued interest is due and payable on the earlier of (a) expiration of the term, or (b) a default by CPHC
which has not been cured as provided for in the agreement.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
70
NOTE 5 – NOTES AND LOANS RECEIVABLE (Continued)
Buena Vista Mobile Home Park – Santa Clara County
In September 2017, the City entered into an agreement with the Santa Clara County Housing Authority
(SCCHA) for the acquisition of Buena Vista Mobile Home Park. The City loaned SCCHA $14.5 million for
the acquisition. The City is entitled to twenty six percent of all residual receipts. Interest for the
promissory note is 3% simple interest. Principal and interest payments commenced on
September 30, 2019 and the note and all interest is payable in full on September 29, 2092.
NOTE 6 – CAPITAL ASSETS
Valuation
Capital assets are valued at historical cost if purchased or constructed. Donated capital assets, donated
works of art and similar items, and capital assets received in a service concession arrangement are
recorded at acquisition value at the time received. The City’s policy is to capitalize all assets when costs
are equal to or exceed $5,000 and the useful life exceeds one year. Infrastructure assets are capitalized
when costs are equal to or exceed $100,000.
Proprietary fund capital assets are recorded at cost including significant interest costs incurred under
restricted tax‐exempt borrowings, which finance the construction of capital assets. These interest costs,
net of interest earned on investment of proceeds of such borrowings, are capitalized and added to the
cost of capital assets during the construction period. Maintenance and repairs are expensed as incurred.
The City has recorded all its public domain capital assets, consisting of roadway and recreation and open
space, in its government‐wide financial statements. GASB Statement No. 34 requires that all capital assets
with limited useful lives be depreciated over their estimated useful lives. Alternatively, the “modified
approach” may be used for certain capital assets. Depreciation is not provided under this approach, but
all expenditures on these assets are expensed unless they are additions or improvements. The City has
elected to use the depreciation method for its capital assets. The purpose of depreciation is to spread the
cost of capital assets equitably among all users over the life of those assets. The amount charged to
depreciation expense each year represents that year’s pro rata share of the cost of capital assets.
Depreciation of capital assets is charged as an expense against operations each year and the total amount
of depreciation taken over the years, called accumulated depreciation, is reported on the statement of
net position as a reduction in the book value of capital assets.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
71
NOTE 6 – CAPITAL ASSETS (Continued)
Depreciation is calculated 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 City has assigned the useful lives listed below to capital assets.
Governmental Activities Years
Buildings and structures 20 ‐ 30
Equipment:
Computer equipment 3 ‐ 5
Office machinery and equipment 5
Machinery and equipment 5 ‐ 30
Intangible assets ‐ software 5‐20
Roadway network:
5 ‐ 40
Recreation and open space network:
25 ‐ 40
Business‐type Activities
Buildings and structures 25 ‐ 60
Vehicles and heavy equipment 3 ‐ 10
Machinery and equipment 10 ‐ 50
Transmission, distribution and treatment systems 10 ‐ 100
Includes pavement, striping and legends, curbs, gutters and sidewalks, parking lots,
traffic signage, and bridges
Includes major park facilities, park trails, bike paths and medians
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
72
NOTE 6 – CAPITAL ASSETS (Continued)
Governmental Activities
Changes in the capital assets for governmental activities during the year ended June 30, 2020 were (in
thousands):
Balance Balance
July 1, 2019 Additions Retirements Transfers June 30, 2020
Governmental activities
Nondepreciable capital assets:
Land and improvements 77,575$ 1,930$ ‐$ 2,701$ 82,206$
Street trees 14,720 143 (76) ‐ 14,787
Intangible assets ‐ Easement 3,567 ‐ ‐ ‐ 3,567
Construction in progress 104,465 57,457 (12,612) (9,945) 139,365
Total nondepreciable capital assets 200,327 59,530 (12,688) (7,244) 239,925
Depreciable capital assets:
Buildings and structures 247,274 607 ‐ 3,238 251,119
Intangible assets ‐ Software 279 ‐ ‐ ‐ 279
Equipment 12,600 17 (14) 3,134 15,737
Roadway network 334,330 ‐ ‐ 872 335,202
Recreation and open space network 35,186 ‐ ‐ ‐ 35,186
Total depreciable capital assets 629,669 624 (14) 7,244 637,523
Less accumulated depreciation:
Buildings and structures (98,657) (7,327) ‐ ‐ (105,984)
Intangible assets ‐ Software (279) ‐ ‐ ‐ (279)
Equipment (8,376) (494) 14 ‐ (8,856)
Roadway network (163,779) (7,743) ‐ ‐ (171,522)
Recreation and open space network (14,613) (1,254) ‐ ‐ (15,867)
Total accumulated depreciation (285,704) (16,818) 14 ‐ (302,508)
Depreciable capital assets, net 343,965 (16,194) ‐ 7,244 335,015
Internal service fund capital assets
Construction in progress 2,530 3,176 ‐ (2,983) 2,723
Equipment 62,307 18 (1,832) 2,983 63,476
Less accumulated depreciation (43,026) (3,366) 1,558 ‐ (44,834)
Net internal service fund capital assets 21,811 (172) (274) ‐ 21,365
Governmental activities capital assets, net 566,103$ 43,164$ (12,962)$ ‐$ 596,305$
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
73
NOTE 6 – CAPITAL ASSETS (Continued)
Business‐Type Activities Capital Assets
Changes in the capital assets for the business‐type activities during the year ended June 30, 2020 were
(in thousands):
Balance Balance
July 1, 2019 Additions Retirements Transfers June 30, 2020
Business‐type activities
Nondepreciable capital assets:
Land and improvements 4,973$ ‐$ ‐$ ‐$ 4,973$
Construction in progress 157,986 42,144 ‐ (79,034) 121,096
Total nondepreciable capital assets 162,959 42,144 ‐ (79,034) 126,069
Depreciable capital assets:
Buildings and structures 68,322 ‐ ‐ 5,715 74,037
Capital Leases 531 ‐ ‐ ‐ 531
Infrastructure 633 ‐ ‐ ‐ 633
Transmission, distribution and treatment systems 822,449 619 (11,596) 73,319 884,791
Total depreciable capital assets 891,935 619 (11,596) 79,034 959,992
Less accumulated depreciation:
Buildings and structures (14,812) (1,329) ‐ ‐ (16,141)
Infrastructure (44) (21) ‐ ‐ (65)
Transmission, distribution and treatment systems (366,517) (20,872) 10,785 ‐ (376,604)
Total accumulated depreciation (381,373) (22,222) 10,785 ‐ (392,810)
Depreciable capital assets, net 510,562 (21,603) (811) 79,034 567,182
Business‐type activities capital assets, net 673,521$ 20,541$ (811)$ ‐$ 693,251$
Capital Asset Contributions
Some capital assets may be acquired using federal and state grant funds, or they may be contributed by
developers or other governments. Generally accepted accounting principles require that these
contributions be accounted for as revenues at the time the capital assets are contributed.
Depreciation Allocation
Depreciation expense was charged to functions and programs based on their usage of the related assets.
The amount allocated to each function or program is as follows (in thousands):
Governmental Activities Business‐type Activities
City Manager 4$ Water 3,002$
City Attorney 1 Electric 8,498
City Clerk 4 Fiber Optics 418
City Auditor 1 Gas 3,454
Administrative Services 4 Wastewater Collection 2,443
Public Works 10,520 Wastewater Treatment 3,257
Planning and Development Services 360 Refuse 86
Office of Transportation 3 Storm Drainage 1,015
Police 135 Airport 49
Fire 209 22,222$
Community Services 3,204
Library 2,373
Internal Service Funds 3,366
20,184$
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
74
NOTE 6 – CAPITAL ASSETS (Continued)
Construction In Progress
Construction in progress as of June 30, 2020 is comprised of the following (in thousands):
Governmental Activities
Expended to
June 30, 2020
California Avenue Parking Garage 39,779$
Charleston/Arastradero Corridor 12,475
Fire Station No. 3 Replacement Design 9,912
Bicycle Boulevards Implementation Project 9,120
New Public Safety Building 8,742
Highway 101 Pedestrian/Bicycle Overpass 8,447
Lucie Stern Buildings Mech/Electrical Improvements 6,388
Traffic Signal Upgrades 4,648
Railroad Grade Separation 3,225
JMZ Renovation 2,486
Baylands Interpretive Center & Boardwalk Improvements 2,384
Rincondada Park Improvements 2,341
Telephone Infrastructure and Network 2,237
Animal Shelter Renovation 1,913
Safe Routes To School 1,812
Cubberley Track and Field Replacement 1,807
CalTrain Corridor Video Management System Installation 1,556
Benches/Signage/Fencing/Walkways 1,458
Newell Road Bridge/SFC Bridge Replacement 1,443
New Downtown Parking Garage 1,440
Quarry Road 1,282
Parks Master Plan 1,254
Art in Public Places 1,100
Tennis & Basketball Court Resurfacing 922
Residential Preferential Parking 874
Other construction in progress 13,043
Total Governmental Activities 142,088$
Business‐type Activities
Expended to
June 30, 2020
Airport's Apron Reconstruction 26,354$
Gas system extension replacements and improvements 16,075
Electric distribution system improvements 14,229
Sewer system rehabilitation and extensions 13,919
Water system extension replacements and improvements 12,477
Storm drainage structural and water quality improvements 8,725
Water quality control plant equipment replacement and lab facilities 3,033
Fiber Optic system improvements 1,799
Other construction in progress 24,485
Total Business‐type Activities 121,096$
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
75
NOTE 6 – CAPITAL ASSETS (Continued)
Construction In Progress Commitments
Major governmental capital projects that are currently in progress, and the remaining capital commitment
of each, are as follows:
California Avenue Parking Garage ‐ $10.4 million
Vehicle Replacements ‐ $5.7 million
Charleston Arastradero Corridor – $7.1 million
Telephone Infrastructure ‐ $4.6 million
Railroad Grade Separation ‐ $3.7 million
Highway 101 Pedestrian/Bicycle Overpass ‐ $14.5 million
Municipal Service Center Improvements ‐ $6.0 million
El Camino / Churchill Intersection Improvement ‐ $2.9 million
Animal Shelter Renovation ‐ $2.0 million
Major business‐type capital projects that are currently in progress, and the remaining capital commitment
of each, are as follows:
Seismic Water Systems Upgrades ‐ $5.1 million
Water Main Replacement for Water Fund ‐ $3.1 million
Wastewater Collection Fund Rehabilitation/Augmentation Project ‐ $3.7 million
Vehicle Registration Fees (VRF)
In fiscal year 2020, the City received VRF funds from the Santa Clara Valley Transportation Authority and
expended the full amount on capital expenditures for the Overlay Resurfacing Project (PE‐86070) (in
thousands):
Starting VRF balance July 1, 2019 ‐$
VRF revenue 465
VRF interest earned 2
VRF expense (467)
Ending VRF balance June 30, 2020 ‐$
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
76
NOTE 7 – LONG‐TERM DEBT
The City’s long‐term debt balances and activities, other than special assessment debt discussed in Note 8,
are as follows (in thousands):
Original Balance Balance Current
Issue Amount July 1, 2019 Additions Retirements June 30, 2020 Portion
Governmental Activities Debt:
2010 General Obligation Bonds,
3.25% ‐ 5%, due 08/01/2040 55,305$ 44,585$ ‐$ 1,290$ 43,295$ 1,330$
2013A General Obligation Bonds,
2 ‐ 5%, due 08/01/2041 20,695 15,915 ‐ 435 15,480 450
2018 Captial Improvement Project
and Refinancing Certficates of Participation,
2.2%‐ 4.22%, due 11/1/2047 8,970 8,935 ‐ 180 8,755 185
2019 California Ave Parking Garage
Certficates of Participation, Series A & B
2.5%‐5%, due 11/1/2048 37,370 37,370 ‐ 375 36,995 630
Add: Unamortized Premium ‐ 8,331 ‐ 351 7,980 351
Total Governmental Activities Debt 122,340$ 115,136$ ‐$ 2,631$ 112,505$ 2,946$
Original Issue
Amount
Balance
July 1, 2019 Additions Retirements
Balance
June 30, 2020 Current Portion
Business‐type Activities Debt:
Utility Revenue Bonds
1995 Series A,
5.00‐6.25%, due 06/01/2020
8,640$ 645$ ‐$ 645$ ‐$ ‐$
1999 Refunding,
5.125‐5.25%, due 06/01/2024
17,735 7,470 ‐ 810 6,660 1,540
2009 Series A,
1.80‐5.95%, due 06/01/2035
35,015 26,640 ‐ 1,130 25,510 1,180
2011 Refunding,
3‐4%, due 06/01/2035
17,225 9,060 ‐ 1,170 7,890 1,210
Add: Unamortized Premium ‐ 561 ‐ 82 479 ‐
Energy Tax Credit Bonds
2007 Series A, 0%, Due 12/15/2021 1,500 300 ‐ 100 200 100
Less: Unamortized Discount ‐ (16) ‐ (5) (11) ‐
Total Bonds 80,115 44,660 ‐ 3,932 40,728 4,030
State Water Resources Loans
Direct Borrowings:
2007, 1.02%, due 06/30/2029 9,000 4,500 ‐ 450 4,050 450
2009, 2.6%, due 11/30/2030 8,500 5,666 ‐ 408 5,258 419
2017, 1.8%, due 5/31/2049 29,684 19,422 5,775 697 24,500 652
Total Direct Borrowings 47,184 29,588 5,775 1,555 33,808 1,521
Total Business‐type Activities Debt 127,299$ 74,248$ 5,775$ 5,487$ 74,536$ 5,551$
Bond premiums and discounts of long‐term debt issues are amortized over the life of the related debt.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
77
NOTE 7 – LONG‐TERM DEBT (Continued)
Description of Long‐Term Debt Issues
2010 General Obligation Bonds (2010 GO Bonds) – On June 30, 2010, the City issued $55.3 million of 2010
GO Bonds to finance costs for constructing a new Mitchell Park Library and Community Center, and to
fund substantial improvements to the Rinconada Library and the Downtown Library. Principal payments
are due annually on August 1 and interest payments semi‐annually on February 1 and August 1 and are
payable from property tax revenues. The true interest cost (TIC) is 4.21 percent.
On June 28, 2016, the City defeased $2.3 million of 2010 GO Bonds using funds from bond premiums
received at time of issue by depositing the amount in an irrevocable trust account. The trust account
assets and the liability for the defeased bonds are not included in the City’s financial statements. The City
legally remains the primary obligor on the $2.3 million of defeased bonds until they are paid on August 1,
2020.
2013A General Obligation Bonds (2013A GO Bonds) – On June 30, 2013, the City issued $20.7 million of
2013A GO Bonds to finance costs for constructing a new Mitchell Park Library and Community Center, as
well as making substantial improvements to the Rinconada Library and the Downtown Library. Principal
payments are due annually on August 1 and interest payments semi‐annually on February 1 and August 1
from 2 percent to 5 percent, and are payable from property tax revenues. The TIC is 3.85 percent.
On June 28, 2016, the City defeased $2.8 million of 2013A GO Bonds using funds remaining at completion
of the project by depositing the amount in an irrevocable trust account The trust account assets and the
liability for the defeased bonds are not included in the City’s financial statements. The City legally remains
the primary obligor on the $2.8 million of defeased bonds until they are paid on August 1, 2023.
The City’s 2010 and 2013A GO Bonds are general obligations of the City, secured and payable solely from
ad valorem property taxes levied by the City and collected by the County of Santa Clara. The City is
empowered and obligated to annually levy ad valorem taxes for the payment of the Bonds and the interest
thereon upon all property within the City subject to taxation by the City, without limitation of rate or
amount (except certain personal property which is taxable at limited rates) until the final maturity dates
of the bonds on August 1, 2040 and August 1, 2041 respectively. For the fiscal year ended June 30, 2020,
the City received $4.5 million in ad valorem property taxes for principal of $1.7 million and interest of $2.7
million for the 2010 and 2013A GO Bonds.
2018 Capital Improvement (“Golf Course”) Project and Refinancing Certificates of Participation (2018
COPs) – On June 1, 2018, the City issued taxable COPs of $9.0 million for the renovation of the Palo Alto
Municipal Golf Course ($8.4 million) and to fully refinance the 2002B COPs ($0.6 million). There are two
semi‐annual debt service payments, consisting of principal payments due annually on November 1 and
interest payments due on May 1 and November 1, which are payable solely from and secured by the lease
payments to be made by the City’s General Fund to the Public Improvement Corporation pursuant to the
Lease Agreement. The leased property is the Palo Alto University Fire Station 1. The 2018 COPs has a final
maturity date of November 1, 2047.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
78
NOTE 7 – LONG‐TERM DEBT (Continued)
2019 California Avenue Parking Garage Series A and B Certificates of Participation (2019A and 2009B
COPs) – On March 21, 2019, the City issued tax exempt 2019A COPs of $26.8 million and taxable 2019B
COPs of $10.6 million for the construction of the California Avenue Parking Garage. There are two semi‐
annual debt service payments, consisting of principal payments due annually on November 1 and interest
payments due on May 1 and November 1. The debt service is payable solely from and secured by the lease
payments to be made by the City’s General Fund to the Public Improvement Corporation pursuant to the
Lease Agreement. The leased property is the Rinconada Library and after construction and the substantial
readiness of the California Avenue Parking Garage project, the garage will become the leased property.
The maturity dates and TIC for 2019A COPs are November 2044 and 3.51 percent, respectively, and 2019B
COPs are November 2048 and 4.32 percent, respectively, with a combined rate of 3.75 percent. The
reserve account requirement was waived due to the City being a highly rated bond issuer.
1995 Utility Revenue Bonds, Series A – The City issued $8.6 million of Utility Revenue Bonds on
February 1, 1995 to finance certain extensions and improvements to the City’s Storm Drainage and
Surface Water System. The Bonds are special obligations of the City payable solely from and secured by
a pledge of and lien upon the revenues derived by the City from the funds, services and facilities of all
Enterprise Funds except the Refuse Services Fund, Fiber Optics Fund and Airport Fund. Principal payments
are payable annually on June 1 and interest payments semi‐annually on June 1 and December 1. During
the year ended June 30, 2020, the outstanding balance of the bonds was paid off.
1999 Utility Revenue and Refunding Bonds – The City issued $17.7 million of Utility Revenue Bonds on
June 1, 1999, to refund the 1990 Utility Revenue Refunding Bonds, Series A and the 1992 Utility Revenue
Bonds, Series A, and to finance rehabilitation of two Wastewater Treatment sludge incinerators. The 1990
Utility Revenue Refunding Bonds, Series A and the 1992 Utility Revenue Bonds, Series A, were
subsequently retired.
The 1999 Bonds are special obligations of the City payable solely from and secured by a pledge of and lien
upon certain net revenues derived by the City’s sewer system and its storm and surface water system (the
“Storm Drain System”). As of June 30, 2001, the 1999 Bonds had been allocated to and were repayable
from net revenues of the following enterprise funds: Wastewater Collection (10.2 percent), Wastewater
Treatment (64.6 percent) and Storm Drainage (25.2 percent). Principal payments are payable annually on
June 1 and interest payments semi‐annually on June 1 and December 1. A $3.1 million 5.3 percent term
bond and a $5.1 million 5.3 percent term bond are due June 1, 2021 and 2024, respectively.
As required by the Indenture, the City established a Reserve Account with a Reserve Requirement. At the
time it issued the Bonds, the City satisfied the Reserve Requirement with a deposit into the Reserve
Account of a surety bond issued by Ambac Indemnity Corporation (renamed to Ambac Assurance
Corporation in 1997).
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
79
NOTE 7 – LONG‐TERM DEBT (Continued)
The pledge of future Net Revenues for the above bonds ends upon repayment of the $6.7 million principal
and $0.9 million interest as the remaining debt service on the bonds, which is scheduled to occur in fiscal
year 2024. For fiscal year 2020, Net Revenues, including operating revenues and non‐operating interest
earnings, amounted to $59.1 million; operating costs, including operating expenses but not interest,
depreciation or amortization, amounted to $45.8 million. Net Revenues available for debt service
amounted to $13.3 million, which represents coverage of 11.1 times over the $1.2 million in debt service.
2009 Water Revenue Bonds, Series A – On October 6, 2009, the City issued $35.0 million of Water
Revenue Bonds to finance certain improvements to the City’s water utility system. Principal payments are
due annually on June 1, and interest payments are due semi‐annually on June 1 and December 1 from
1.80 percent to 5.95 percent. The 2009 Revenue Bonds are secured by net revenues generated by the
Water Services Fund. The 2009 Bonds were issued as bonds designated as “Direct Payment Build America
Bonds” under the provisions of the American Recovery and Reinvestment Act of 2009 (“Build America
Bonds”). The City expects to receive a cash subsidy payment from the United States Treasury equal to 35
percent of the interest payable on the 2009 Bonds. The lien of the 1995 Bonds on the Net Revenues is
senior to the lien on Net Revenues securing the 2009 Bonds and the 2011 Bonds. The City received subsidy
payments amounting to $473 thousand, which represents 33.0 percent of the interest payments due on
December 1 and June 1.
The pledge of future Net Revenues for the above bonds ends upon repayment of the $25.5 million
principal and $13.0 million interest as the remaining debt service on the bonds, which is scheduled to
occur in fiscal year 2035. For fiscal year 2020, Net Revenues, including operating revenues and non‐
operating interest earnings, amounted to $50.6 million; operating costs, including operating expenses but
not interest, depreciation or amortization, amounted to $38.9 million. Net Revenues available for debt
service amounted to $11.7 million, which represented coverage of 4.6 times over the $2.6 million in debt
service.
2011 Utility Revenue Refunding Bonds – On September 8, 2011, the City issued $17.2 million in Lease
Revenue Bonds (2011 Bonds) to refund the outstanding 2002 Series A Utility Revenue Bonds (2002 Bonds)
on a current basis. The 2002 Bonds were issued to finance improvement to the City’s municipal water
utility system and the natural gas utility system. Principal of the 2011 Bonds is payable annually on June 1,
and interest on the 2011 Bonds is payable semi‐annually on June 1 and December 1. The 2011 Bonds are
secured by net revenues generated by the Water Services and Gas Services Funds. The TIC is 2.28 percent.
The pledge of future Net Revenues of the above bonds ends upon repayment of the $7.9 million principal
and $0.9 million interest as remaining debt service on the bonds, which is scheduled to occur in fiscal year
2026. For fiscal year 2020, Net Revenues, including operating revenues and non‐operating interest
earnings, amounted to $89.1 million; operating costs, including operating expenses but not interest,
depreciation or amortization, amounted to $63.1 million. Net Revenues available for debt service
amounted to $26.0 million, which represented coverage of 17.9 times over the $1.5 million in debt service.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
80
NOTE 7 –LONG‐TERM DEBT (Continued)
2007 Electric System Clean Renewable Energy Tax Credit Bonds, Series A – In October 2007, the City
issued $1.5 million of Electric Utility Clean Renewable Energy Tax Credit Bonds (CREBs), 2007 Series A, to
finance the City’s photovoltaic solar panel project. The CREBs do not bear interest. In lieu of receiving
periodic interest payments, bondholders are allowed annual federal income tax credits in an amount
equal to a credit rate for such CREBs multiplied by the outstanding principal amount of the CREBs owned
by the bondholders. The CREBs are payable solely from and secured solely by a pledge of the Net Revenues
of the Electric system and the other funds pledged under the Indenture.
The pledge of future Electric Fund Net Revenues ends upon repayment of the $0.2 million remaining debt
service on the bonds, which is scheduled to occur in fiscal year 2022. For fiscal year 2020, Net Revenues,
including operating revenues and non‐operating interest earnings, amounted to $173.8 million; operating
costs, including operating expenses but not interest, depreciation or amortization, amounted to $128.2
million. Net Revenues available for debt service amounted to $45.6 million, which represented coverage
of 456.4 times over the $0.1 million in debt service.
Direct Borrowing ‐ 2007 State Water Resources Loan – In October 2007, the City approved a $9 million
direct loan agreement with State Water Resources Control Board (SWRCB) to finance the City’s Mountain
View/Moffett Area reclaimed water pipeline project. Under the terms of the contract, the City has agreed
to repay $9 million to the State in exchange for receiving $7.5 million in proceeds to be used to fund the
Project. The difference of $1.5 million between the repayment obligation and proceeds represents in‐
substance interest on the outstanding balance. Principal payments are payable annually on June 30.
Concurrently with the loan, the City entered into various other agreements including a cost sharing
arrangement with the City of Mountain View. Pursuant to that agreement, City of Mountain View agreed
to finance a portion of the project with a $6.0 million loan repayable to the City. This loan has been
recorded as “Due from other government agencies” in the accompanying financial statements. The
balance due to the City at June 30, 2020 was $2.7 million.
Direct Borrowing ‐ 2009 State Water Resources Loan – In October 2009, the City approved an $8.5 million
direct loan agreement with SWRCB to finance the City’s Ultraviolet Disinfection project. Principal and
interest payments are payable annually on November 30. The loan interest rate is 2.60 percent which
represents a combination of loan service charge and interest.
Direct Borrowing ‐ 2017 State Water Resources Loan ‐ In June 2017, the SWRCB and the City executed a
direct loan agreement for an award up to $30 million, payable over 30 years to finance the replacement
of sewage sludge “bio‐solids” incinerators at the City’s Regional Water Quality Control Plant (RWQCP). In
September 2017, due to the projected lower project costs, the agreement was amended to a lower loan
amount of $29.7 million. Under the terms of the agreement, a portion of the loan amount, $4.0 million,
is federally funded and has been adjusted to reflect the correct long term obligation balance. The loan
interest rate is 1.80 percent.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
81
NOTE 7 – LONG‐TERM DEBT (Continued)
The new facility will dewater the bio‐solids and allow the material to be loaded onto trucks and taken to
a separate facility for further treatment. The RWQCP provides treatment and disposal for wastewater for
Palo Alto, Mountain View, Los Altos, Los Altos Hills, East Palo Alto Sanitary District, and Stanford
University. Though Palo Alto is the recipient of the loan, the City’s agreement with the partner agencies
oblige them to pay their proportionate share of the principal and interest of this loan. Palo Alto’s share of
the loan payment is 38.2 percent with the partner agencies paying 61.8 percent.
Debt Service Requirements (in thousands):
Debt service requirements are shown below for all long‐term debt.
For the Year Ending
June 30 Principal Interest Total Principal Interest Total Principal Interest Total
2021 2,595$ 4,740$ 7,335$ 4,030$ 1,982$ 6,012$ 1,521$ 578$ 2,099$
2022 2,695 4,640 7,335 4,215 1,797 6,012 1,541 317 1,858
2023 2,795 4,535 7,330 4,300 1,616 5,916 1,566 300 1,866
2024 2,910 4,413 7,323 4,485 1,427 5,912 1,589 283 1,872
2025 3,035 4,298 7,333 2,790 1,229 4,019 1,613 266 1,879
2026‐2030 17,525 19,030 36,555 9,625 4,655 14,280 7,997 1,057 9,054
2031‐2035 22,000 14,466 36,466 10,815 2,005 12,820 4,574 648 5,222
2036‐2040 27,530 8,775 36,305 ‐ ‐ ‐ 4,409 467 4,876
2041‐2045 13,390 3,613 17,003 ‐ ‐ ‐ 4,820 284 5,104
2046‐2050 10,050 861 10,911 ‐ ‐ ‐ 4,178 84 4,262
Total 104,525$ 69,371$ 173,896$ 40,260$ 14,711$ 54,971$ 33,808$ 4,284$ 38,092$
Governmental Activities
Bonds Direct Borrowings
Business‐Type Activities
Debt Call Provisions
Long‐term debt as of June 30, 2020 is callable on the following terms and conditions:
Initial Call Date
Governmental Activities Long‐Term Debt
2010 General Obligation Bonds
$6.595 million due 08/01/2032 08/01/31 (2)
$4.890 million due 08/01/2034 08/01/33 (2)
$17.725 million due 08/01/2040 08/01/35 (2)
Business‐Type Activities Long‐Term Debt
Utility Revenue Bonds
1999 Refunding 06/01/09 (1)
2011 Refunding 06/01/21 (1)
(1) Callable in inverse numerical order of maturity at par plus a premium of 2 percent beginning on the
initial call date. The call price declines subsequent to the initial date.
(2) Callable in any order specified by the City at par value plus any accrued interest beginning on the
initial call date.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
82
NOTE 7 – LONG‐TERM DEBT (Continued)
Leasing Arrangements
COPs and Capital Leases are issued for the purpose of financing the construction or acquisition of projects
defined in each leasing arrangement. Projects are leased to the City for lease payments which, together
with unspent proceeds of the leasing arrangement, will be sufficient to meet the debt service obligations
of the leasing arrangement. At the termination of the leasing arrangement, title to the project will pass to
the City.
Leasing arrangements are similar to debt in that they allow investors to participate in a share of
guaranteed payments made by the City. Because they are similar to debt, the present value of the total
payments to be made by the City is recorded as long‐term debt. The City’s leasing arrangements are
included in long‐term obligations discussed above.
Events of Default and Acceleration Clauses
Generally, the City is considered to be in default if the City fails to pay the principal of and interest on the
outstanding long‐term debt when become due and payable. If an event of default has occurred and is
continuing, the principal of the long‐term debt, together with the accrued interest, may be declared due
and payable immediately.
NOTE 8 – SPECIAL ASSESSMENT DEBT
Special Assessment Debt with no City Commitment
On February 29, 2012, the University Avenue Area Off‐Street Parking Assessment District issued Limited
Obligation Refunding Improvement Bonds (2012 Bonds), but the City has no legal or moral liability with
respect to the payment of this debt, which is secured only by assessments on properties in this District.
Therefore, this debt is not included in Governmental Activities long‐term debt of the City. At
June 30, 2020, the District’s outstanding debt amounted to $19.5 million. The proceeds from the 2012
Bonds, combined with available Assessment Funds, were used to redeem the outstanding University
Avenue Area Off‐Street Parking Assessment District Series 2001‐A and Series 2002‐A Bonds. On June 28,
2016, the District defeased $1.6 million of the 2012 Bonds using funds remaining from completion of the
project. The defeased debt will be paid on September 2, 2022. The TIC is 3.97 percent.
NOTE 9 – LANDFILL POST‐CLOSURE MAINTENANCE
The 126 acre Palo Alto Refuse Disposal Site (Palo Alto Landfill) was filled to capacity and stopped accepting
waste in July 2011. State and federal laws and regulations require the City to construct a final cover to
cap the waste, and to perform certain post‐closure maintenance and monitoring activities at the site for
a minimum of thirty years after closure. As of November 2015, the Palo Alto Landfill has been fully capped
and subsequently converted to a pastoral park (Byxbee Park) that is open to the public. A final post‐
closure maintenance plan and cost estimate for the thirty year post‐closure related activities was
approved by State and local regulatory agencies in 2014. This cost estimate is adjusted annually for
inflation at a percentage provided by the State. Landfill post‐closure liabilities as of June 30, 2020 are
$7.1 million, an increase of $0.1 million from the previous year. The City is required by State and federal
laws and regulations to fund post‐closure maintenance activities by pledging future revenue received
from Refuse customers through rate fees.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
83
NOTE 10 – NET POSITION AND FUND BALANCES
Net Position
Net Position is the excess of the City’s assets and deferred outflows of resources over its liabilities and
deferred inflows of resources. Net position is divided into three categories that are described below:
Net Investment in Capital Assets describes the portion of net position, which is represented by 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 that is reduced by liabilities related to restricted assets.
Generally a liability relates to restricted assets if the asset results from a resource flow that also results in
the recognition of a liability or if the liability will be liquidated with the restricted assets reported.
Unrestricted describes the portion of net position which is not restricted as to use.
Fund Balances
As prescribed by GASB Statement No. 54, governmental funds report fund balances in classifications based
primarily on the extent to which the City is bound to honor constraints on the specific purposes for which
amounts in the funds can be spent. Fund balances for governmental funds are made up of the following:
Nonspendable – This category is comprised of amounts that are: (a) not in spendable form, or (b) legally
or contractually required to be maintained intact. The “not in spendable form” criterion includes items
that are not expected to be converted to cash, for example: prepaid items. The corpus of the permanent
fund is contractually required to be maintained intact.
Restricted – This category is comprised of amounts that can be spent only for the specific purposes
stipulated by external resource providers, constitutionally or through enabling legislation. Restrictions
may effectively be changed or lifted only with the consent of resource providers.
Committed – This category is comprised of amounts that can only be used for the specific purposes
determined by the action that constitutes the most binding constraint (i.e. ordinance) of the City’s highest
level of decision‐making authority, the City Council. Commitments may be changed or lifted only by the
City taking the same formal action that imposed the constraint originally.
Assigned – This category is comprised of amounts intended to be used by the City for specific purposes
that are neither restricted nor committed. Intent is expressed by the City Council or the City Manager, to
whom the City Council has delegated the authority to assign amounts to be used for specific purposes.
Unassigned –This category is the residual classification for the General Fund and includes all amounts not
contained in the other classifications. Unassigned amounts are technically available for any purpose.
Other governmental funds may report negative unassigned fund balance, which occurs when a fund has
a residual deficit after allocation of fund balance to the nonspendable, restricted or committed categories.
The fund balances of all governmental funds are presented by the above mentioned categories on the
face of the financial statements. In circumstances when an expenditure is made for a purpose for which
amounts are available in multiple fund balance categories, fund balance is depleted in the order of
restricted, committed, assigned, and unassigned.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
84
NOTE 10 – NET POSITION AND FUND BALANCES (Continued)
The General Fund Budget Stabilization Reserve (BSR) is established by authority of the General Fund
Reserve Policy, which is approved by the City Council and included in the City’s annual adopted budget.
The BSR is maintained in the range of 15 to 20 percent of General Fund expenditures and operating
transfers, with a target of 18.5 percent. Any reserve level below 15 percent requires City Council approval.
At the discretion of the City Manager, a reserve balance above 18.5 percent may be transferred to the
Infrastructure Reserve within the Capital Projects Fund. The purpose of the General Fund BSR is to fund
unbudgeted, unanticipated one‐time costs. The BSR is not meant to fund ongoing, recurring General Fund
expenditures.
As of June 30, 2020 total outstanding encumbrances and reappropriations related to governmental funds
were $7.6 million for the General Fund, $59.2 million for the Capital Projects Fund, and $22.0 million for
the Special Revenue Funds.
Enterprise Funds
At June 30, 2020, enterprise funds’ unrestricted net position (in thousands) were as follows:
Water Electric Fiber Optics Gas
Wastewater
Collection
Wastewater
Treatment Refuse
Storm
Drainage Airport Total
Unrestricted
Rate stabilization
Supply ‐$ ‐$ ‐$ 2,057$ ‐$ ‐$ ‐$ ‐$ ‐$ 2,057$
Distribution 9,069 ‐ 33,064 6,363 342 5,562 16,382 3,681 (4,155) 70,308
9,069 ‐ 33,064 8,420 342 5,562 16,382 3,681 (4,155) 72,365
Operations
Supply ‐ 29,429 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 29,429
Distribution 19,840 9,109 ‐ 13,449 5,661 ‐ ‐ ‐ ‐ 48,059
19,840 38,538 ‐ 13,449 5,661 ‐ ‐ ‐ ‐ 77,488
Emergency plant replacement ‐ ‐ 1,000 ‐ ‐ 1,980 ‐ ‐ ‐ 2,980
Electric special projects ‐ 46,664 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 46,664
Reappropriations 9,692 6,243 774 799 2,554 1,746 ‐ 4,641 ‐ 26,449
Commitments 2,210 9,372 294 2,930 2,354 6,821 3,025 678 1,039 28,723
Underground loan ‐ 727 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 727
Notes and loans ‐ ‐ ‐ ‐ ‐ 1,651 ‐ ‐ ‐ 1,651
Landfill corrective action ‐ ‐ ‐ ‐ ‐ ‐ 771 ‐ ‐ 771
Hydro stabilization reserve ‐ 15,400 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 15,400
Public benefit program ‐ 1,905 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 1,905
Reserve for LCFS ‐ 6,340 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 6,340
CIP reserve 5,726 5,880 ‐ 3,820 978 ‐ ‐ ‐ ‐ 16,404
Geng Road reserve ‐ ‐ ‐ ‐ ‐ ‐ 268 ‐ ‐ 268
GASB 68 Pension reserve (14,114) (33,747) (2,154) (14,851) (8,319) (21,125) (5,775) (3,829) (894) (104,808)
GASB 75 OPEB reserve (4,215) (13,741) (6,058) (2,316) (7,158) (2,576) (1,129) (420) (37,613)
Total 28,208$ 83,581$ 32,978$ 8,509$ 1,254$ (10,523)$ 12,095$ 4,042$ (4,430)$ 155,714$
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
85
NOTE 10 – NET POSITION AND FUND BALANCES (Continued)
The City Council has set aside unrestricted net position for general contingencies, and future capital and
debt service expenditures including operating and capital contingencies for unusual or emergency
expenditures.
Internal Service Funds
At June 30, 2020, Internal Service Funds unrestricted net position (in thousands) were as follows:
Vehicle
Replacement
and
Maintenance Technology
Printing and
Mailing
Services
General
Benefits
Workers'
Compensation
Insurance
Program
General
Liabilities
Insurance
Program
Retiree Health
Benefits Total
Unrestricted net position:
Commitments 6,571$ 7,004$ 63$ 518$ 16$ 33$ ‐$ 14,205$
Future catastrophic losses ‐ ‐ ‐ ‐ ‐ 4,029 ‐ 4,029
Retiree health care ‐ ‐ ‐ ‐ 1,459 ‐ 1,310 2,769
GASB 68 pension reserve (3,326) (11,418) (276) ‐ (6) ‐ ‐ (15,026)
GASB 75 OPEB reserve (1,607) (3,281) (146) ‐ (1) ‐ ‐ (5,035)
Available 6,547 17,861 (33) 4,961 ‐ ‐ ‐ 29,336
Total 8,185$ 10,166$ (392)$ 5,479$ 1,468$ 4,062$ 1,310$ 30,278$
Commitments represent the portion of net position set aside for open purchase orders and
reappropriations.
Future catastrophic losses represent the portion of net position to be used for unforeseen
future losses.
Retiree health care represents the portion of net position set aside to defer future costs of
retiree health care coverage.
GASB 68 pension reserve is the portion of net position required to be set aside to meet
defined benefit pension obligations.
GASB 75 OPEB reserve is the portion of net position required to be set aside to meet OPEB
obligations.
Deficit Fund Balance and Net Position:
At June 30, 2020, the City’s Printing and Mailing Services internal service fund had a deficit net position of
$359 thousand. The deficit is due to the impact of Pension and OPEB liabilities and related balances. The
deficit is expected to be funded by future internal service charges to other City funds.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
86
NOTE 11 – PENSION PLANS
(a) General Information about the Pension Plans
Plan Descriptions ‐ Substantially all permanent City employees are eligible to participate in the City’s
separate Safety (police and fire) and Miscellaneous (all other) Plans, agent multiple‐employer defined
benefit pension plans administered by CalPERS, which acts as a common investment and administrative
agent for its participating member employers. Benefits provisions under the Plans are established by State
statute and City resolution. CalPERS issues publicly available reports that include a full description of the
pension plans including benefits provisions, assumptions and membership information. The reports can
be found on the CalPERS website.
Benefits Provided ‐ CalPERS provides retirement and disability benefits, annual cost of living adjustments
and death benefits to Plan members, who must be public employees and beneficiaries. Benefits are based
on years of credited service (equal to one year of full‐time employment), age at retirement and final
compensation. The death benefit is one of the following: the 1959 Survivor Benefit, or the pre‐retirement
option 2W Death Benefit for local fire members only.
The Plans’ provisions and benefits in effect at June 30, 2020, are summarized in the following table.
Contribution rates are based on the Actuarial Valuation Report as of June 30, 2017.
Fire Fighters,
Fire Chief
Association,
Police Officers,
Fire Fighters,
Fire Chief Association
Police Officers,
Police Management
Fire Fighters,
Fire Chief
Association,
Police Officers,
Hire Date Prior to June 8, 2012
On or after June 8,
2012
On or after Dec. 8,
2012
On or after Jan 1,
2013
Benefit formula1 3% at 55 3% at 55 3% at 50 2.7% at 57
Benefit vesting schedule 5 years service 5 years service 5 years service 5 years service
Benefit payment monthly for life monthly for life monthly for life monthly for life
Retirement age 50 55
1 551 571
Monthly benefit as % of eligible compensation 3% 3% 3% 2.7%
Actuarially determined contribution rate ‐ EE 9% 9% 9% 11.25%
Actuarially determined contribution rate ‐ ER 59.378% 59.378% 59.378% 59.378%
Hire Date Prior to July 17, 2010
On or after July 17,
2010
On or after Jan 1,
2013
Benefit formula 2.7% at 55
2 2% at 602 2% at 623
Benefit vesting schedule 5 years service 5 years service 5 years service
Benefit payments monthly for life monthly for life monthly for life
Retirement age 55
2 602 623
Monthly benefit as % of eligible compensation2 2.70% 2.0% ‐ 2.418% 2%
Actuarially determined contribution rate ‐ EE 8% 7% 6.25%
Actuarially determined contribution rate ‐ ER 35.631% 35.631% 35.631%
1 Employees can retire at age 50 with reduced benefits of 2.4% ‐ 2.88% if hired before Jan 1, 2013, or 2.0% ‐ 2.6% if hired on or
after Jan 1, 2013.
2 Employees can retire at age 50 with reduced benefits of 2.0% ‐ 2.56% if hired before July 17, 2010, or 1.092% ‐ 1.874% if hired on or
after July 17, 2010.
3 Employees can retire at age 52 with reduced benefits of 1.0% ‐ 1.9%
Miscellaneous Plan
Safety Plan
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
87
NOTE 11 – PENSION PLANS (Continued)
Employees Covered – Based on the Actuarial Valuation Report as of June 30, 2019, the most recent
information available, the following employees were covered by the benefits terms for each Plan:
Miscellaneous
Plan Safety Plan
Inactive employees or beneficiaries currently receiving benefits1,194 430
Inactive employees entitled to but not yet receiving benefits 826 109
Active employees 773 169
Total 2,793 708
Contributions – Section 20814(c) of the California Public Employees’ Retirement Law requires that the
employer contribution rates for all public employers be determined on an annual basis by the actuary and
shall be effective on the July 1 following notice of a change in the rate. Funding contributions for the Plans
are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate
is the estimated amount necessary to finance the costs of benefits earned by employees during the year,
with an additional amount to finance any unfunded accrued liability. The City is required to contribute
the difference between the actuarially determined rate and the contribution rate of employees. Further
detail of contributions can be found in the Required Supplemental Information Schedules of Pension
Contributions.
In April 2017, the City established a Section 115 irrevocable trust with the Public Agency Retirement
Services (PARS). The Council approved an initial deposit of $2.1 million in General Fund proceeds into the
General Fund subaccount of the City’s PARS Trust Account. The Trust Account allows more control and
flexibility in investment allocations compared to City’s portfolio which is restricted by State regulations to
fixed income instruments. The City proactively contributes to the Section 115 irrevocable trust amounts
reflective of what retirement costs would be if the normal cost of contributions was budgeted at a 6.2%
discount rate. During the year, the City contributed $9.5 million to the PARS Trust. As of June 30, 2020,
the City reported the account balance of $28.7 million as restricted investments in the General Benefits
Internal Service Fund.
(b) Net Pension Liability
The City’s net pension liability for each plan is measured as the total pension liability, less each plan’s
fiduciary net position. Net pension liability is measured as of June 30, 2019 (measurement date), using
the Actuarial Valuation Report as of June 30, 2018 rolled forward to June 30, 2019 using standard update
procedures.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
88
NOTE 11 – PENSION PLANS (Continued)
Actuarial Assumptions ‐ The total pension liabilities were determined using the following actuarial
assumptions:
Valuation Date
Measurement Date
Actuarial Cost Method
Actuarial Assumptions:
Discount Rate
Inflation
Salary Increases
Mortality1
Post Retirement Benefit Increase
Derived using CalPERS membership data
for all funds.
The lessor of contract COLA or 2.50% until
Purchasing Power Protection Allowance
Floor on purchasing power applies, 2.50%
thereafter.
Varies by Entry Age and Service
1 The mortality table used was developed based on CalPERS' specific data. The
probabilities of mortality are based on the 2017 CalPERS Experience Study for the
period from 1997 to 2015. Pre‐retirement and post‐retirement mortality rates
includes 15 years of projected mortality improvements using 90% of Scale MP‐2016
published by the Society of Actuaries. For more details on this table, please refer
to the 2017 CalPERS Experience Study available on the CalPERS website.
Miscellaneous and Safety Plans
June 30, 2018
June 30, 2019
Entry Age Normal
7.15%
2.50%
All other actuarial assumptions used in the June 30, 2018 actuarial valuation were based on the 2017
CalPERS Experience Study for the period from 1997 to 2015, including updates to salary increase, mortality
and retirement rates. Further details of the 2017 CalPERS Experience Study can be found on the CalPERS
website under Forms and Publications.
Discount Rate – The discount rate used to measure the total pension liability was 7.15 percent for each
Plan. The projection of cash flows used to determine the discount rate assumed that the contributions
from employers will be made at current member contribution rates and that contributions from
employers will be made at statutorily required rates, actuarially determined. Based on those
assumptions, the Plan’s fiduciary net position was projected to be available to make all projected future
benefit payments of current plan members. Therefore, the long‐term expected rate of return on plan
investments was applied to all periods of projected benefit payments to determine the total pension
liability.
The long‐term expected rate of return on pension plan investments was determined using a building‐
block method in which expected future real rates of return (expected returns, net of pension plan
investment expense and inflation) are developed for each major asset class.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
89
NOTE 11 – PENSION PLANS (Continued)
In determining the long‐term expected rate of return, CalPERS took into account both short‐term
and long‐term market return expectations as well as the expected pension fund cash flows. Using
historical returns of all the funds’ asset classes, expected compound ( geometric) returns were
calculated over the short‐term (first 10 years) and the long‐term (11+ years) using a building‐block
approach. Using the expected nominal returns for both short‐term and long‐term, the present value of
benefits was calculated for each fund. The expected rate of return was set by calculating the rounded
single equivalent expected return that arrived at the same present value of benefits for cash flows as
the one calculated using both short‐term and long‐term returns. The expected rate of return was then
set equal to the single equivalent rate calculated and adjusted to account for assumed administrative
expenses.
The rate of return was calculated using the capital market assumptions applied to determine the discount
rate and asset allocation. The long‐term expected real rate of return by asset class and the target
allocation adopted by the CalPERS Board effective on July 1, 2018, are as follows:
Asset Class
Current
Target
Allocation
Real Return
Years 1 ‐ 10 1
Real Return
Years 11+ 2
Global Equity 50.0% 4.80% 5.98%
Global Fixed Income 28.0 1.00 2.62
Inflation Sensitive 0.0 0.77 1.81
Private Equity 8.06.307.23
Real Estate 13.0 3.75 4.93
Liquidity 1.0 0.00 (0.92)
(1) An expected inflation rate of 2.00% is used for this period.
(2) An expected inflation rate of 2.92% is used for this period.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
90
NOTE 11 – PENSION PLANS (Continued)
(c) Changes in the Net Pension Liability
The following table is based on the GASB 68 Accounting Valuation Report and shows the changes in the
net pension liability for the Miscellaneous and Safety Plans (in thousands):
Total Pension
Liability
Plan Net
Position
Net Pension
Liability
Miscellaenous Plan:
Balances calculated at July 1, 2019 811,330$ 546,669$ 264,661$
Changes for the year:
Service cost 15,045 ‐ 15,045
Interest on total pension liability 57,523 ‐ 57,523
Differences between expected and actual experiences 6,230 ‐ 6,230
Contributions from employer ‐ 25,423 (25,423)
Contributions from employees ‐ 6,940 (6,940)
Net investment income ‐ 36,323 (36,323)
Benefit payments, including refunds of employee contributions (41,124) (41,124) ‐
Administrative expense ‐ (390) 390
Other non‐investment expenses ‐ (1) 1
Net changes 37,674 27,171 10,503
Balances reported at June 30, 2020 849,004 573,840 275,164
Safety Plan:
Balances calculated at July 1, 2019 439,408$ 280,173$ 159,235$
Changes for the year:
Service cost 7,259 ‐ 7,259
Interest on total pension liability 31,066 ‐ 31,066
Differences between expected and actual experiences 3,841 ‐ 3,841
Contributions from employer ‐ 12,370 (12,370)
Contributions from employees ‐ 3,225 (3,225)
Net investment income ‐ 18,217 (18,217)
Benefit payments, including refunds of employee contributions (24,757) (24,757) ‐
Administrative expense ‐ (201) 201
Other non‐investment income ‐ 1 (1)
Net changes 17,409 8,855 8,554
Balances reported at June 30, 2020 456,817 289,028 167,789
Total 1,305,821$ 862,868$ 442,953$
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
91
NOTE 11 – PENSION PLANS (Continued)
Sensitivity of the Net Pension Liability to Changes in the Discount Rate ‐ The following table presents the
net pension liability of the Plans as of the measurement date, calculated using the discount rate of 7.15
percent, compared to a discount rate that is 1 percentage point lower (6.15 percent) or 1 percentage
point higher (8.15 percent). Amounts shown below are in thousands:
Discount Rate ‐ 1%
(6.15%)
Current Discount Rate
(7.15%)
Discount Rate + 1%
(8.15%)
Miscellaneous Plan:
Plan's Net Pension Liability 383,299$ 275,164$ 185,277$
Safety Plan:
Plan's Net Pension Liability 226,585$ 167,789$ 119,244$
Plan Fiduciary Net Position – Detailed information about the Plan’s fiduciary net position is available in
the separately issued CalPERS financial report.
(d) Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions
For the year ended June 30, 2020, the City recognized a pension expense of $46.9 million and $30.5 million
for the Miscellaneous and Safety Plan, respectively, for a total of $77.4 million. At June 30, 2020, the City
reported pension related deferred outflows of resources and deferred inflows of resources for the
Miscellaneous and Safety Plans from the following sources (in thousands):
Miscellaneous Plan:
Deferred
Outflows
of Resources
Deferred
Inflows
of Resources
Pension contributions subsequent to
measurement date 28,872$ ‐$
Change of assumptions ‐ 1,891
Difference between expected and actual experience 5,505 ‐
Net difference between projected and actual earnings
on plan investments ‐ 4,014
Balance reported at June 30, 2020 34,377 5,905
Safety Plan:
Pension contributions subsequent to
measurement date 14,260 ‐
Change of assumptions ‐ 393
Difference between expected and actual experience 5,785 ‐
Net difference between projected and actual earnings
on plan investments ‐ 1,835
Balance reported at June 30, 2020 20,045 2,228$
Total, Miscellaneous and Safety Plans 54,422$ 8,133$
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
92
NOTE 11 – PENSION PLANS (Continued)
The $43.1 million reported as deferred outflows of resources relates to contributions paid by the City from
July 1, 2019 through June 30, 2020 which is subsequent to the City’s measurement date of June 30, 2019
for both the Miscellaneous and Safety Plans. This amount will be recognized as a reduction of the net
pension liability in the year ended June 30, 2021.
The net differences reported as deferred outflows of resources and deferred inflows of resources related
to pensions will be recognized in future pension expense as follows (in thousands):
Year Ended June 30,
Miscellaneous
Plan
Safety
Plan Total
2021 3,307$ 5,299$ 8,606$
2022 (3,139) (1,528) (4,667)
2023 (1,034) (503) (1,537)
2024 466 289 755
(400)$ 3,557$ 3,157$
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
93
NOTE 12 – OTHER POST‐EMPLOYMENT BENEFITS (OPEB)
(a) General Information about the OPEB Plan
In addition to providing pension benefits, the City participates in the California Public Employees’ Medical
and Health Care Act program to provide certain health care benefits for retired employees. The City’s
Other Post‐Employment Benefit plan is an agent multiple‐employer defined benefit plan. Employees who
retire directly from the City are eligible for retiree health benefits if they retire on or after age 50 with 5
years of service and are receiving a monthly pension from CalPERS. Details of benefits to retirees are
noted in the following tables:
Unit Hired Before
Retiree
Coverage1
Dependent
Coverage
Retired on or
After
Retiree
Contribution
Management & Professional2 1/1/2004 100% 100% 5/1/2011 Flat rate
4
Police Management2 1/1/2004 100% 100% 6/1/2012 Flat rate
4
Fire Fighters2 1/1/2004 100% 100% 12/1/2011 Flat rate
4
Fire Chiefs Association2 1/1/2004 100% 100% 1/1/2013 Flat rate
4
SEIU2 1/1/2005 100% 100% 5/1/2011 Flat rate
4
Police Officers3 1/1/2006 100% 100% 4/1/2015 Flat rate
4
Utilities Managers & Professional2 1/1/2004 100% 100% 5/1/2011 10%
2 Effective 1/1/2007 plan capped at the second highest CalPERS Bay Area Basic plan premium.
3 Effective 7/1/2014 plan capped at the second highest CalPERS Bay Area Basic plan premium.
4 For the year ended June 20, 2020, City pays $804‐$840 for employee, $1,606‐1,680 for employee +1, and $2,088‐$2,180 for family.
Unit
Hired on or
After
Retiree
Coverage1
Dependent
Coverage2
Management & Professional 1/1/2004 50%‐100% Max. 90%
Police Management 1/1/2004 50%‐100% Max. 90%
Fire Fighters 1/1/2004 50%‐100% Max. 90%
Fire Chiefs Association 1/1/2004 50%‐100% Max. 90%
Utilities Managers & Professional 1/1/2004 50%‐100% Max. 90%
SEIU 1/1/2005 50%‐100% Max. 90%
Police Officers 1/1/2006 50%‐100% Max. 90%
specified employer contribution, with the City portion increasing by 5% for each additional year of service credit.
2 The City will contribute an additional 90 percent of the weighted average of the additional premiums required for
enrollment of those family members, during the benefit year to which the forumla is applied.
1 100% of benefits if the employee has five years CalPERS service credit and the employee retired from the City.
1 Employees with ten years of CalPERS service, at least five of which are at the City of Palo Alto, receive 50% of the
Retiree contributions for units with the following hire dates are determined by Government Code Section 22893,
20 year graduated schedule:
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
94
NOTE 12 – OTHER POST‐EMPLOYMENT BENEFITS (OPEB) (Continued)
In fiscal year 2008, the City elected to participate in an irrevocable trust to provide a funding mechanism
for retiree health benefits. The Trust, California Employers’ Retirees Benefit Trust (CERBT), is
administrated by CalPERS and managed by a separately appointed board, which is not under control of
the City Council. This Trust is not considered a component unit of the City.
Employees Covered – Employees covered by the benefit terms as of June 30, 2019, the most recent
information available, are as follows:
Inactive employees or beneficiaries currently
receiving benefits 974
Inactive employees entitled to but not yet
receiving benefits 123
Active employees 930
Total 2,027
Contributions – The City’s OPEB funding policy is to contribute 100 percent or more of the actuarially
determined contribution each year pursuant to City Council Resolution. For the year ended June 30, 2020,
the City’s contributions totaled $16.5 million.
(b) Net OPEB Liability
The City’s net OPEB liability is measured as the total OPEB liability, less the OPEB plan’s fiduciary net
position. The net OPEB liability is measured as of June 30, 2019, using an annual actuarial valuation as of
June 30, 2019. A summary of principal assumptions and methods used to determine the net OPEB liability
is shown below.
Valuation Date June 30, 2019
Measurement Date June 30, 2019
Actuarial Cost Method Entry‐Age, level percentage of payroll
Actuarial Assumptions:
Discount Rate 6.75%
Inflation 2.75%
Payroll Growth 3.00%
Projected Salary Increase 2017 CalPERS Experience Study for the period from
1997 to 2015
Medical Trend Non‐Medicare ‐ 7.25% for 2021, decreasing to an
ultimate rate of 4.0% in 2076
Medicare ‐ 6.3% for 2021, decreasing to an ultimate
rate of 4.0% in 2076
Disability, Termination, Retirement CalPERS 1997‐2015 Experience Study
Mortality 2017 CalPERS Experience Study for the period from
1997 to 2015
Mortality Improvement Post‐retirement mortality projected fully
generational with Society of Actuaries Scale MP‐
2019
Increase to Group 3 Flat Dollar Caps 1/2 of Medical Trend, not less than assumed
inflation (2.75%)
Healthcare Participation for Future Future retirees: 95‐98%, based on Plan experience
ACA Excise Tax Estimate by 2% load on cash subsidy
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
95
NOTE 12 – OTHER POST‐EMPLOYMENT BENEFITS (OPEB) (Continued)
Change of Assumptions – During measurement period 2019, demographic assumptions were change in
accordance to the 2017 CalPERS Experience Study while mortality improvement scale was updated to
Scale MP‐2019.
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 the City’s contribution will be made equal
to the actuarially determined contribution. Based on those assumptions, the OPEB plan’s fiduciary net
position was projected to be available to make all projected OPEB payments for current active and inactive
employees. Therefore, the long‐term expected rate of return on OPEB plan investments applied to all
periods of projected benefit payments to determine the total OPEB liability.
The long‐term expected rate of return for OPEB plan investments was 6.75%. The asset class target
allocation and geometric real rates of return for each major asset class are summarized in the following
table.
Asset Class
Current
Target
Allocation
Expected Real
Rate of Return
Global Equity 59.0% 4.82%
Fixed Income 25.0 1.47
TIPS 5.0 1.29
Commodities 3.0 0.84
REITS 8.0 3.76
Assumed long‐term rate of inflation of 2.75%
(c) Changes in the Net OPEB Liability
The following table shows the changes in the net OPEB liability (in thousands):
Total OPEB
Liability
Plan Fiduciary
Net Position
Net OPEB
Liability
Balance at June 30, 2019 255,630$ 107,810$ 147,820$
Changes during the measurement period:
Service cost 6,622 ‐ 6,622
Interest on the total OPEB liability 17,292 ‐ 17,292
Changes in benefit terms 972 ‐ 972
Changes in assumptions 7,057 ‐ 7,057
Differences between expected and actual experience (29,907) ‐ (29,907)
Contributions ‐ employer ‐ 15,997 (15,997)
Investment income ‐ 6,852 (6,852)
Administrative expenses ‐ (23) 23
Benefit payments (12,157) (12,157) ‐
Net changes (10,121) 10,669 (20,790)
Balance at June 30, 2020 245,509$ 118,479$ 127,030$
Increase (Decrease)
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
96
NOTE 12 – OTHER POST‐EMPLOYMENT BENEFITS (OPEB) (Continued)
Sensitivity of the Net OPEB Liability to Changes in the Discount Rate – The following presents the net
OPEB liability of the City as of the measurement date, calculated using the discount rate of 6.75 percent,
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% (5.75%)
Current
Discount Rate
(6.75%)
Discount Rate
+1% (7.75%)
158,831$ 127,030$ 100,815$
Sensitivity of the Net OPEB Liability to Changes in the Healthcare Cost Trend 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 healthcare cost trends rates that are 1% lower or 1% higher than the current healthcare
cost trend rates.
Healthcare Trend
Rate ‐ 1%
Healthcare Trend
Current Rate
Healthcare Trend
Rate + 1%
99,522$ 127,030$ 160,713$
OPEB Plan Fiduciary Net Position – Detailed information about the OPEB plan’s fiduciary net position is
available in the separately issued CalPERS financial report.
(d) OPEB Expenses and Deferred Outflows/Inflows of Resources Related to OPEB
For the fiscal year ended June 30, 2020, the City recognized an OPEB expense of $12.7 million for the OPEB
plan. At June 30, 2020, the City reported deferred outflows of resources and deferred inflows of resources
related to OPEB from the following sources (in thousands):
Deferred
Outflows
of Resources
Deferred
Inflows
of Resources
OPEB contributions subsequent to
measurement date $ 16,475 $ ‐
Differences between expected and
actual experience ‐ 24,469
Changes in assumptions 5,774 ‐
Net differences between projected and actual
earnings on plan investments ‐ 1,525
Total $ 22,249 $ 25,994
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
97
NOTE 12 – OTHER POST‐EMPLOYMENT BENEFITS (OPEB) (Continued)
The $16.5 million reported as deferred outflows of resources relates to contributions made by the City
from July 1, 2019 through June 30, 2020, which is subsequent to the City’s measurement date of
June 30, 2019. This amount will be recognized as a reduction of the net OPEB liability in the fiscal year
ended June 30, 2021.
The net differences reported as deferred outflows of resources and deferred inflows of resources related
to OPEB will be recognized in future OPEB expense as follows (in thousands):
Fiscal Year Ending June 30,
2021 (4,903)$
2022 (4,903)
2023 (4,275)
2024 (4,064)
2025 (2,075)
Total (20,220)$
NOTE 13 – DEFERRED COMPENSATION PLAN
City employees may defer a portion of their compensation under City sponsored Deferred Compensation
Plans created in accordance with Internal Revenue Code Section 457. Under these Plans, participants are
not taxed on the deferred portion of their compensation until distributed to them. Distributions may be
made only at termination, retirement, death or in an emergency as defined by the Plans.
The laws governing deferred compensation plan assets require plan assets to be held by a Trust for the
exclusive benefit of plan participants and their beneficiaries. Since the assets held under these plans are
not the City’s property and are not subject to City control, they have been excluded from these financial
statements.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
98
NOTE 14 – RISK MANAGEMENT
Coverage
The City provides dental coverage to employees through a City plan, which is administered by a third party
service agent. The City is self‐insured for dental claims.
The City has a workers’ compensation insurance policy with coverage up to the statutory limit set by the
State of California. The City retains the risk for the first $750,000 in losses for each accident and employee
under this policy.
The City also has public employee dishonesty insurance with a $5,000 deductible and coverage up to
$1.0 million per loss. The Director of Administrative Services/CFO and City Manager each have coverage
up to $4.0 million per loss.
The City’s property, boiler, and machinery insurance policy has various deductibles and coverage based
on the type of property.
The City is a member of the Authority for California Cities Excess Liability (ACCEL), which provides excess
general liability insurance coverage, including auto liability, up to $200 million per occurrence. The City
retains the risk for the first $1.0 million in losses for each occurrence under this policy.
ACCEL was established for the purpose of creating a risk management pool for central California
municipalities. ACCEL is governed by a Board of Directors consisting of representatives of its member
cities. The board controls the operations of ACCEL, including selection of claims management, general
administration and approval of the annual budget.
The City’s deposits with ACCEL equal the ratio of the City’s payroll to the total payroll of all entities. Actual
surpluses or losses are shared according to a formula developed from overall loss costs and spread to
member entities on a percentage basis after a retrospective rating.
During the year ended June 30, 2020, the City paid $1.4 million to ACCEL for current year coverage.
Audited financial statements are available from ACCEL at 100 Pine Street, 11th Floor, San Francisco,
California 94111.
Claims Liability
The City provides for the uninsured portion of claims and judgments in the General Liabilities insurance
program funds. Claims and judgments, including a provision for claims incurred but not reported, and
claim adjustment expenses are recorded when a loss is deemed probable of assertion and the amount of
the loss is reasonably determinable. As discussed above, the City has coverage for such claims, but it has
retained the risk for the deductible or uninsured portion of these claims.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
99
NOTE 14 – RISK MANAGEMENT (Continued)
The City’s liability for uninsured claims is limited to dental, general liability, and workers’ compensation
claims, as discussed above. Dental liability is based on a percentage of current year actual expense.
General and workers’ compensation liabilities are based on the results of actuarial studies, and include
amounts for claims incurred but not reported as follows as of June 30 (in thousands):
2020 2019
Beginning balance 28,365$ 23,748$
Claims expense, including claims incurred but not
reported (IBNR)6,914 8,998
Claims paid (5,566) (4,381)
Ending balance 29,713$ 28,365$
Current portion 6,198$ 6,171$
Year Ended June 30
The City has not incurred a claim that has exceeded its insurance coverage limits in any of the last three
years, nor have there been any significant reductions in insurance coverage.
NOTE 15 – JOINT VENTURES
General
The City participates in joint ventures through Joint Powers Authorities (JPAs) established under the Joint
Exercise of Powers Act of the State of California. As separate legal entities, these JPAs exercise full powers
and authorities within the scope of the related Joint Powers Agreement, 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. Obligations and liabilities of the JPAs, including the long‐term debt in which the City
participates in repayment, are not obligations and liabilities of the City, and are not reported on the City’s
financial statements.
Each JPA is governed by a board consisting of representatives from each member agency. Each board
controls the operations of its respective JPA, including selection of management and approval of operating
budgets, independent of any influence by member agencies beyond their representation on the Board.
Northern California Power Agency
The City is a member of Northern California Power Agency (NCPA), a joint powers agency which operates
under a joint powers agreement among fifteen public agencies. The purpose of NCPA is to use the
combined strength of its members to purchase, generate, sell and interchange electric energy and
capacity through the acquisition and use of electrical generation and transmission facilities. Each agency
member has agreed to fund a pro rata share of certain assessments by NCPA and enter into take‐or‐pay
power supply contracts with NCPA. While NCPA is governed by its members, none of its obligations are
those of its members unless expressly assumed by them.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
100
NOTE 15 – JOINT VENTURES (Continued)
During the year ended June 30, 2020, the City incurred expenses totaling $84.9 million for purchased
power and assessments earned by NCPA.
The City’s interest in NCPA projects and reserves, as computed by NCPA, was $8.0 million at June 30, 2020.
This amount represents the City’s portion of funds, which resulted from the settlement with third parties
of issues with financial consequences and reconciliations of several prior years’ budgets for programs. It
is recognized that all the funds credited to the City are linked to the collection of revenue from the City’s
ratepayers, or to the settlement of disputes relating to electric power supply and that the money was
collected from the City’s ratepayers to pay power bills. Additionally, the NCPA Commission identified and
approved the funding of specific reserves for working capital, accumulated employees’ post‐retirement
medical benefits, and billed property taxes for the geothermal project. The Commission also identified a
number of contingent liabilities that may or may not be realized, the cost of which in most cases is difficult
to estimate at this time. One such contingent liability is the steam field depletion, which will require
funding to cover debt service and operational costs in excess of the expected value of the electric power.
The General Operating Reserve (GOR) is intended to minimize the number and amount of individual
reserves needed for each project, protect NCPA’s financial condition and maintain its credit worthiness.
There are no funds on deposit with NCPA as a reserve against these contingencies identified by NCPA.
Members of NCPA may participate in an individual project of NCPA without obligation for any other
project. Member assessments collected for one project may not be used to finance other projects of NCPA
without the member’s permission.
Geothermal Projects
A purchased power agreement with NCPA obligated the City for 6.2 percent and 6.2 percent, respectively,
of the operating costs and debt service of the two NCPA 110‐megawatt geothermal steam‐powered
generating plants, Project Number 2 and Project Number 3.
The City’s participation in the Geothermal Project was sold to Turlock Irrigation District in October 1984.
Accordingly, the City is liable for payment of outstanding geothermal related debt only in the event that
Turlock Irrigation District fails to make specified payments. Effective July 2019, the City’s obligation to
backstop Turlock Irrigation District is completed as the related outstanding debt are paid off.
Calaveras Hydroelectric Project
In July 1981, NCPA agreed with Calaveras County Water District to purchase the output of the North Fork
Stanislaus River Hydroelectric Development Project and to finance its construction. Debt service payments
to NCPA began in February 1990 when the project was declared substantially complete and power was
delivered to the participants. Under its power purchase agreement with NCPA, the City is obligated to pay
22.9 percent of this Project’s debt service and operating costs. At June 30, 2020, the book value of this
Project’s plant, equipment and other assets was $333.2 million, while its long‐term debt totaled $279.4
million and other liabilities totaled $46.8 million. The City’s share of the Project’s long‐term debt
amounted to $64.0 million at that date.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
101
NOTE 15 – JOINT VENTURES (Continued)
Geothermal Public Power Line
In 1983, NCPA, the Sacramento Municipal Utility District, the City of Santa Clara and the Modesto Irrigation
District (Joint Owners) initiated studies for a Geothermal Public Power Line (GPPL), which would carry
power generated at several existing and planned geothermal plants in The Geysers area to a location
where the Joint Owners could receive it for transmission to their load centers. NCPA has an 18.5 percent
share of this Project and the City has an 11.1 percent participation in NCPA’s share. In 1989, the
development of the proposed Geothermal Public Power Line was discontinued because NCPA was able to
contract for sufficient transmission capacity to meet its needs in The Geysers.
However, because the project financing provided funding for an ownership interest in a Pacific Gas &
Electric (PG&E) transmission line, a central dispatch facility and a performance bond pursuant to the
Interconnection Agreement with PG&E, as well as an ownership interest in the proposed GPPL, NCPA
issued $16 million in long‐term, fixed‐rate revenue bonds in November 1989 to defease the remaining
variable rate refunding bonds used to refinance this project. The City is obligated to pay its 11.1 percent
share of the related debt service, but debt service costs are covered through NCPA billing mechanisms
that allocate the costs to members based on use of the facilities and services.
At June 30, 2020, the book value of this Project’s plant, equipment and other assets was zero, and its long‐
term debt totaled zero.
NCPA’s financial statements can be obtained from NCPA, 180 Cirby Way, Roseville, CA 95678.
Transmission Agency of Northern California (TANC)
The City is a member of a joint powers agreement with 14 other entities in Transmission Agency of
Northern California (TANC). TANC’s purpose is to provide electrical transmission or other facilities for the
use of its members. While governed by its members, none of TANC’s obligations are those of its members
unless expressly assumed by them. The City was obligated to pay 4 percent of TANC’s debt‐service and
operating costs. However, a Resolution was approved authorizing the execution of a Long‐Term Layoff
Agreement (LTLA) between the Cities of Palo Alto and Roseville. These two agencies desired to “layoff”
their entitlement rights to the California‐Oregon Transmission Project (COTP) (and Roseville’s South of
Tesla entitlement rights) for a period of 15 years to those acquiring members (Sacramento Municipal
Utility District, Turlock Irrigation District, and Modesto Irrigation District). The effective date of this
Agreement was February 1, 2009. As a result, the City is not obligated to pay TANC’s debt‐service and
operating costs starting February 1, 2009, for a period of fifteen years.
TANC’s financial statements can be obtained from TANC, P.O. Box 15129, Sacramento, CA 95851.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
102
NOTE 15 – JOINT VENTURES (Continued)
Bay Area Water Supply and Conservation Agency (BAWSCA)
The City is a member of a regional water district with 26 other entities, the Bay Area Water Supply and
Conservation Agency (BAWSCA). BAWSCA was created on May 27, 2003 to represent the interests of 24
cities and water districts and two private utilities in Alameda, Santa Clara and San Mateo counties that
purchase water on a wholesale basis from the San Francisco regional water system. It has the power to
issue debt and plan, finance, construct, and operate water supply, transmission, reclamation, and
conservation projects on behalf of its members.
In 2013 the City participated in a debt issuance by BAWSCA. The debt was issued to repay certain long‐
term costs associated with the San Francisco Public Utilities Commission (SFPUC) water supply contract.
During the fiscal year, the City paid its share of the annual debt service of $1.9 million, which will vary
based on annual water purchases of the City compared to other BAWSCA agencies.
BAWSCA’s financial statements can be obtained from BAWSCA, 155 Bovet Road, Suite 650, San Mateo,
California 94402.
NOTE 16 – COMMITMENTS AND CONTINGENCIES
Palo Alto Unified School District – The City leases 27 acres of the former Cubberley School site and twelve
extended day care sites from Palo Alto Unified School District (PAUSD). The lease includes a mechanism
for a joint planning process between the City and PAUSD to develop a long‐term master plan for the
Cubberley site. The City agreed to pay $1.86 million annually into a separate fund to be used for repairing,
renovating and/or improving the infrastructure at the Cubberley site. The previous lease term expired on
December 31, 2014, and the City and PAUSD reached an agreement to extend the lease agreement for an
additional five (5) years, with an expiration date of December 31, 2019. The City and PAUSD also agreed
to distribute gains or losses of revenue that resulted from the Foothill College departure from Cubberley.
The City entered into a new lease agreement with PAUSD that was effective July 1, 2020. Under the new
Cubberley lease, the City will lease approximately 65,046 rentable square feet of building area and 15.94
acres of outdoor recreational area through December 31, 2024 and will continue to lease the twelve
extended daycare sites through June 30, 2022.
Total lease expenditures for the year ended June 30, 2020 amounted to $7.7 million. Future minimum
annual lease payments are as follows (in thousands):
Year Ending
June 30 Payment
2021 3,489
2022 3,489
2023 2,733
2024 2,733
2025 1,367
13,811$
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
103
NOTE 16 – COMMITMENTS AND CONTINGENCIES (Continued)
GreenWaste of Palo Alto – GreenWaste of Palo Alto is the City’s contractor for waste collection,
transportation, and processing services. The agreement expires June 30, 2026. The base compensation
for GreenWaste is adjusted annually based on CPI indicators stipulated in the contract. In fiscal year 2020
payments to GreenWaste were $11.7 million.
City of Palo Alto Regional Water Quality Control Plant – The cities of Palo Alto, Mountain View and Los
Altos (the Partners) participate jointly in the cost of maintaining and operating the City of Palo Alto
Regional Water Quality Control Plant and related system (the Plant). The City is the owner and
administrator of the Plant, which provides the transmission, treatment and disposal of sewage for the
Partners. The cities of Mountain View and Los Altos are entitled to use a portion of the capacity of the
Plant for a specified period of time. Each partner has the right to rent unused capacity from/to the other
partners. The expenses of operations and maintenance are paid quarterly by each partner based on its
pro rata share of treatment costs. Additionally, joint system revenues are shared by the partners in the
same ratio as expenses are paid. The amended agreement has a term of fifty years beginning from the
original signing in October 1968, but may be terminated by any partner upon ten years’ notice to the other
partners. All sewage treatment property, plant and equipment are included in the Wastewater Treatment
Enterprise Fund’s capital assets balance. If the City initiates the termination of the contracts, it is required
to pay the other partners their unamortized contribution towards the capital assets.
Solid Waste Materials Recovery and Transfer Station (SMaRT Station) – On June 9, 1992, the City, along
with the City of Mountain View, signed a Memorandum of Understanding (MOU) with the City of
Sunnyvale (Sunnyvale) to participate in the construction and operation of the SMaRT Station, which
recovers recyclable materials from the municipal solid waste delivered from participating cities. Per the
MOU, the City has a capacity share of 21.3 percent of this facility and reimburses its proportionate capacity
share of design, construction and operation costs to Sunnyvale.
In fiscal year 2008, the members agreed to finance an Equipment Replacement Project from existing
reserves and proceeds from the Solid Waste Revenue Bond, Series 2007. The City has committed to repay
27.8 percent of the remaining debt service on the Bonds. The City’s portion of the Bonds amounts to
$0.2 million as of June 30, 2020. During the year ended June 30, 2020, the City paid $0.2 million as its
portion of current debt services.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
104
NOTE 16 – COMMITMENTS AND CONTINGENCIES (Continued)
UTILITIES ENERGY RESOURCE MANAGEMENT
Electric Power Supply Purchase Agreements – The City has numerous power purchase agreements with
power producers to purchase capacity and energy to supply a portion of its load requirements. As of
June 30, 2020, the approximate minimum obligations for the contracts, assuming the energy is delivered
over the next four years, are as follows:
Fiscal Year Projected Obligation
2021 $61.72 million
2022 $62.08 million
2023 $61.60 million
2024 $60.95 million
Contractual Commitments beyond 2022 (Electricity) – Several of the City’s purchase power and
transmission contracts extend beyond the five‐year summary presented above. These contracts expire
between 2026 and 2051 and provide for power under various terms and conditions. The City also has a
new solar power purchase agreement that is schedule to start in January 2023. The City estimates that
its annual minimum commitments under all of its contracts, assuming the energy is delivered, ranges
between $62.06 million in 2025 and $67.13 million in 2034. The City’s largest single purchase power
source is the Western Base Resource contract, whereby the City receives 12.31 percent of the amount of
energy made available by Western, after meeting Central Valley Project use requirements, in any given
year at a 12.31 percent share of their revenue requirement. The Western contract expires on
December 31, 2024. The City has the option to extend the Western contract for an additional 30‐year
period beyond 2024, although at a slightly lower share of the total energy output and revenue
requirement (12.06 percent instead of 12.31 percent).
Gas Transmission and Local Transportation Rates – The City relies on Pacific Gas and Electric Company’s
(PG&E) natural gas pipeline infrastructure, including both high‐pressured transmission and medium‐
pressure local transportation, to move gas from the California border to the City’s distribution system.
Rates are determined through proceedings at the California Public Utilities Commission. The rate Palo
Alto pays for gas transmission increased by 31% from fiscal year 2019 to fiscal year 2020 and are expected
to increase by another 15% in fiscal year 2021; the rate Palo Alto pays for local transportation decreased
by 15% from fiscal year 2019 to fiscal year 2020. Fiscal year 2021 local transmission rates are not expected
to change significantly, however, an ongoing proceeding may result in significant increases in fiscal year
2022.
San Francisco Public Utilities Commission – The City purchases water from the San Francisco Public
Utilities Commission (SFPUC) under a Water Supply Agreement (WSA) terminating in 2034. The City’s
wholesale water rate under this contract is determined by a ratemaking process under the authority of
the SFPUC, with contractual limitations on the types of costs that may be allocated to wholesale water
purchasers like the City. The WSA contains certain restrictions regarding water purchases from other
water suppliers, though those restrictions do not apply to recycled water or emergency water supplies.
The City’s cost of water under this contract is projected to remain flat through 2022.
CITY OF PALO ALTO
Notes to the Basic Financial Statements
For the Year Ended June 30, 2020
105
NOTE 16 – COMMITMENTS AND CONTINGENCIES (Continued)
Litigation
The City is subject to litigation arising in the normal course of business. In the opinion of the City Attorney,
there is no pending litigation, claims or assessments that are likely to have a materially adverse effect on
the City’s financial condition.
A class action lawsuit for refund of telephone users tax was filed against the City in August 2015. The City
Attorney is of the opinion that a loss is reasonably possible but cannot be reasonably estimated at this
time.
A class action lawsuit for refund of allegedly illegal charges to gas and electrical customers was filed
against the City in October 2016. The City Attorney is of the opinion that the loss is reasonably possible
but cannot be reasonably estimated at this time.
Grant Programs
The City participates in Federal and State grant programs. These programs have been audited by the City’s
independent auditors in accordance with the provisions of the Federal Single Audit Act amendments of
1996 and applicable State requirements. No costs were questioned as a result of these audits; however,
these programs are still subject to further examination by the grantors and the amount, if any, of
expenditures which may be disallowed by the granting agencies cannot be determined at this time. The
City expects such amounts, if any, to be immaterial.
Note 17 ‐ UNCERTAINTIES
In March 2020, the World Health Organization declared coronavirus COVID‐19 a global pandemic. This
contagious disease outbreak, which has continued to spread, and any related adverse public health
developments, has adversely affected organizations and its workforces, as well as the economy and
financial markets globally, and has led to an economic downturn. It has also disrupted the normal
operations of many governmental organizations, including the City. This outbreak decreased the revenues
and impacted the City’s operations starting March 2020. The City expects this outbreak to adversely
impact revenues and operations for future reporting periods. It is not possible for the City to predict the
duration or magnitude of the adverse results of the outbreak and its effects on the City or results of
operations at this time.
106
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CITY OF PALO ALTO
Required Supplementary Information (Unaudited)
Last 6 Fiscal Years*
107
I. SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS – MISCELLANEOUS PLAN
(In thousands)
Fiscal year 2019‐20 2018‐19 2017‐18 2016‐17 2015‐16 2014‐15
Measurement Period 2018‐19 2017‐18 2016‐17 2015‐16 2014‐15 2013‐14
Total pension liability
Service cost 15,045$ 14,724$ 14,423$ 12,582$ 12,183$ 12,442$
Interest 57,523 54,903 52,831 51,531 49,345 46,963
Changes of assumptions ‐ (5,673) 42,239 ‐ (11,552) ‐
Difference between expected and actual experience 6,230 4,271 (6,378) 757 3,507 ‐
Benefit payments, including refunds of employee contributions (41,124) (37,624) (36,405) (34,825) (32,980) (31,781)
Net change in total pension liability 37,674 30,601 66,710 30,045 20,503 27,624
Total pension liability ‐ beginning 811,330 780,729 714,019 683,974 663,471 635,847
Total pension liability ‐ ending (a) 849,004$ 811,330$ 780,729$ 714,019$ 683,974$ 663,471$
Plan fiduciary net position
Contributions ‐ employer 25,423$ 23,342$ 20,638$ 18,840$ 18,610$ 17,400$
Contributions ‐ employee 6,939 6,654 6,314 5,812 5,730 6,345
Net investment income 36,322 43,690 53,259 2,464 10,597 70,989
Benefit payments, including refunds of employee contributions (41,124) (37,624) (36,405) (34,825) (32,980) (31,781)
Administrative expense (390) (799) (694) (291) (538) ‐
Other non‐investment income (expenses) 1 (1,518) 30 ‐ ‐ ‐
Net change in fiduciary net position 27,171 33,745 43,142 (8,000) 1,419 62,953
Plan fiduciary net position ‐ beginning 546,669 512,924 469,782 477,782 476,363 413,410
Plan fiduciary net position ‐ ending (b) 573,840$ 546,669$ 512,924$ 469,782$ 477,782$ 476,363$
Plan net pension liability/(asset) ‐ Ending (a) ‐ (b) 275,164$ 264,661$ 267,805$ 244,237$ 206,192$ 187,108$
Plan fiduciary net position as a percentage of total pension liability 67.59% 67.38% 65.70% 65.79% 69.85% 71.80%
Covered payroll 82,573$ 80,634$ 77,606$ 73,722$ 69,837$ 66,373$
Plan net pension liability/(asset) as a percentage of covered payroll 333.24% 328.23% 345.08% 331.29% 295.25% 281.90%
Notes to Schedule:
Change in assumptions ‐ During measurement period 2014, the discount rate was 7.50%. During measurement period 2015, the discount rate was increased from 7.50
percent to 7.65 percent. There is no change in discount rate during measurement period 2016. During measurement period 2017, the discount rate was reduced from 7.65
percent to 7.15 percent. During measurement period 2018, demographic assumptions and inflation rate were changed in accordance to the CalPERS Experience Study and
Review of Actuarial Assumptions December 2017. There is no change in assumptions during measurement period 2019.
* Fiscal year ended June 30, 2015 was the first year of implementation of GASB Statement No. 68, therefore only six years of information is shown.
Benefit changes ‐ The figures above do not include any liability that may have resulted from plan changes which occurred after the June 30, 2018 valuation date. This applies
for voluntary benefit changes as well as any offers of two years additional service credit (a.k.a. Golden Handshake).
CITY OF PALO ALTO
Required Supplementary Information (Unaudited)
Last 7 Fiscal Years*
108
II. SCHEDULE OF PENSION CONTRIBUTIONS– MISCELLANEOUS PLAN
(In thousands)
Fiscal Year 2019‐20 2018‐19 2017‐18 2016‐17 2015‐16 2014‐15 2013‐14
Contractually required
contribution (actuarially determined) 28,872$ 25,423$ 23,342$ 20,638$ 18,840$ 18,610$ 17,400$
Actual contribution (28,872) (25,423) (23,342) (20,638) (18,840) (18,610) (17,400)
Contribution deficiency/(excess) ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$
Covered payroll 85,441$ 82,573$ 80,634$ 77,606$ 73,722$ 69,837$ 66,373$
Contributions as percentage of covered payroll 33.79% 30.79% 28.95% 26.59% 25.56% 26.65% 26.22%
Notes to Schedule:
The actuarial methods and assumptions used to set the actuarially determined contributions for fiscal year 2020
contribution rates are as follows:
ADC for fiscal year June 30, 2020
Actuarial valuation date June 30, 2017
Actuarial cost method Entry‐Age Normal Cost Method
Asset valuation method Actuarial value of assets
Inflation 2.625%
Salary increases Varies by entry age and services
Payroll growth 2.75%
Investment rate of return
Retirement age
Mortality
7.25%, net of pension plan investment and administrative expenses,
includes inflation.
The probabilities of retirement are based on the 2017 CalPERS
Experience Study for the period 1997 to 2015.
The probabilities of mortality are based on the 2017 CalPERS Experience
Study for the period from 1997 to 2015. Pre‐retirement and post‐
retirement mortality rates includes 15 years of projected mortality
improvements using 90% of Scale MP‐2016 published by the Society of
Actuaries.
* Fiscal year ended June 30, 2015 was the first year of implementation of GASB Statement No. 68, therefore only
seven years of information is shown.
CITY OF PALO ALTO
Required Supplementary Information (Unaudited)
Last 6 Fiscal Years*
109
III. SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS – SAFETY PLAN
(In thousands)
Fiscal year 2019‐20 2018‐19 2017‐18 2016‐17 2015‐16 2014‐15
Measurement Period 2018‐19 2017‐18 2016‐17 2015‐16 2014‐15 2013‐14
Total pension liability
Service cost 7,259$ 7,168$ 6,584$ 5,916$ 5,959$ 6,221$
Interest 31,066 29,871 28,272 27,816 27,047 26,113
Changes of assumptions ‐ (1,374) 22,566 ‐ (6,327) ‐
Difference between expected and actual experience 3,841 11,604 (2,790) (1,516) 75 ‐
Benefit payments, including refunds of employee contributions (24,757) (23,636) (22,413) (21,669) (21,148) (19,985)
Net change in total pension liability 17,409 23,633 32,219 10,547 5,606 12,349
Total pension liability ‐ beginning 439,408 415,775 383,556 373,009 367,403 355,054
Total pension liability ‐ ending (a) 456,817$ 439,408$ 415,775$ 383,556$ 373,009$ 367,403$
Plan fiduciary net position
Contributions ‐ employer 12,370$ 11,030$ 10,220$ 9,403$ 8,617$ 7,616$
Contributions ‐ employee 3,225 2,799 2,475 2,059 2,047 2,762
Net investment income 18,217 22,724 28,112 1,259 5,774 40,033
Benefit payments, including refunds of employee contributions (24,757) (23,636) (22,413) (21,669) (21,148) (19,985)
Administrative expense (201) (418) (370) (157) (290) ‐
Other non‐investment income (expenses) 1 (794) (30) ‐ ‐ ‐
Net change in fiduciary net position 8,855 11,705 17,994 (9,105) (5,000) 30,426
Plan fiduciary net position ‐ beginning 280,173 268,468 250,474 259,579 264,579 234,153
Plan fiduciary net position ‐ ending (b) 289,028$ 280,173$ 268,468$ 250,474$ 259,579$ 264,579$
Plan net pension liability/(asset) ‐ Ending (a) ‐ (b) 167,789$ 159,235$ 147,307$ 133,082$ 113,430$ 102,824$
Plan fiduciary net position as a percentage of total pension liability 63.27% 63.76% 64.57% 65.30% 69.59% 72.01%
Covered payroll 24,263$ 24,131$ 21,906$ 21,822$ 21,912$ 21,896$
Plan net pension liability/(asset) as a percentage of covered payroll 691.54% 659.88% 672.45% 609.85% 517.66% 469.60%
Notes to Schedule:
Benefit changes ‐ The figures above do not include any liability that may have resulted from plan changes which occurred after the June 30, 2018 valuation
date. This applies for voluntary benefit changes as well as any offers of two years additional service credit (a.k.a. Golden Handshake).
Change in assumptions ‐ During measurement period 2014, the discount rate was 7.50%. During measurement period 2015, the discount rate was increased
from 7.50 percent to 7.65 percent. There is no change in discount rate during measurement period 2016. During measurement period 2017, the discount rate
was reduced from 7.65 percent to 7.15 percent. During measurement period 2018, demographic assumptions and inflation rate were changed in accordance to
the CalPERS Experience Study and Review of Actuarial Assumptions December 2017. There is no change in assumptions during measurement period 2019.
* Fiscal year ended June 30, 2015 was the first year of implementation of GASB Statement No. 68, therefore only six years of information is shown.
CITY OF PALO ALTO
Required Supplementary Information (Unaudited)
Last 7 Fiscal Years*
110
IV. SCHEDULE OF PENSION CONTRIBUTIONS – SAFETY PLAN
(In thousands)
Fiscal Year 2019‐20 2018‐19 2017‐18 2016‐17 2015‐16 2014‐15 2013‐14
Contractually required
contribution (actuarially determined) 14,260$ 12,370$ 11,030$ 10,220$ 9,403$ 8,617$ 7,616$
Actual contribution (14,260) (12,370) (11,030) (10,220) (9,403) (8,617) (7,616)
Contribution deficiency/(excess) ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ ‐$
Covered payroll 25,570$ 24,263$ 24,131$ 21,906$ 21,822$ # 21,912$ 21,896$
Contributions as percentage of covered payroll 55.77% 50.98% 45.71% 46.65% 43.09% 39.33% 34.78%
Notes to Schedule:
The actuarial methods and assumptions used to set the actuarially determined contributions for fiscal year 2020
contribution rates are as follows:
ADC for fiscal year June 30, 2020
Actuarial valuation date June 30, 2017
Actuarial cost method Entry‐Age Normal Cost Method
Asset valuation method Actuarial value of assets
Inflation 2.625%
Salary increases Varies by entry age and services
Payroll growth 2.75%
Investment rate of return
Retirement age
Mortality
7.25%, net of pension plan investment and administrative expenses,
includes inflation.
The probabilities of retirement are based on the 2017 CalPERS
Experience Study for the period 1997 to 2015.
The probabilities of mortality are based on the 2017 CalPERS Experience
Study for the period from 1997 to 2015. Pre‐retirement and post‐
retirement mortality rates includes 15 years of projected mortality
improvements using 90% of Scale MP‐2016 published by the Society of
Actuaries.
* Fiscal year ended June 30, 2015 was the first year of implementation of GASB Statement No. 68, therefore only
seven years of information is shown.
CITY OF PALO ALTO
Required Supplementary Information (Unaudited)
Last 3 Fiscal Years*
111
V. SCHEDULE OF CHANGES IN NET OPEB LIABILITY AND RELATED RATIOS
(In thousands)
Fiscal year 2019‐20 2018‐19 2017‐18
Measurement Period 2018‐19 2017‐18 2016‐17
Total OPEB liability
Service cost 6,622$ 6,429$ 6,242$
Interest 17,292 16,546 15,853
Changes in benefit terms 972 ‐ ‐
Changes of assumptions 7,057 ‐ ‐
Difference between expected and actual experience (29,907) ‐ ‐
Benefit payments, including refunds of employee contributions (12,157) (12,104) (11,916)
Net change in total OPEB liability (10,121) 10,871 10,179
Total OPEB liability ‐ beginning 255,630 244,759 234,580
Total OPEB liability ‐ ending (a) 245,509$ 255,630$ 244,759$
Plan fiduciary net position
Contributions ‐ employer 15,997$ 21,349$ 14,739$
Net investment income 6,852 7,519 8,628
Benefit payments, including refunds of employee contributions (12,157) (12,104) (11,916)
Administrative expense (23) (204) (44)
Net change in fiduciary net position 10,669 16,560 11,407
Plan fiduciary net position ‐ beginning 107,810 91,250 79,843
Plan fiduciary net position ‐ ending (b) 118,479$ 107,810$ 91,250$
Plan net OPEB liability/(asset) ‐ Ending (a) ‐ (b) 127,030$ 147,820$ 153,509$
Plan fiduciary net position as a percentage of total OPEB liability 48.26% 42.17% 37.28%
Covered employee payroll 118,014$ 119,090$ 118,774$
Plan net OPEB liability/(asset) as a percentage of covered employee payroll 107.64% 124.12% 129.24%
Notes to Schedule:
Benefit changes ‐ The figures above do not include any liability that may have resulted from plan changes
which occurred after the measurement dates.
Changes in assumptions ‐ During measurement period 2019, demographic assumptions were change in accordance to the
2017 CalPERS Experience Study while mortality improvement scale was updated to Scale MP‐2019.
* Fiscal year ended June 30, 2018 was the first year of implementation of GASB Statement No. 75, therefore only three years
of information is shown.
CITY OF PALO ALTO
Required Supplementary Information (Unaudited)
Last 4 Fiscal Years*
112
VI. SCHEDULE OF EMPLOYER OPEB CONTRIBUTIONS
(In thousands)
Fiscal Year 2019‐20 2018‐19 2017‐18 2016‐17
Contractually required contribution (actuarially determined) 16,482$ 15,997$ 16,938$ 16,365$
Actual contribution (16,475) (15,997) (21,349) (14,739)
Contribution deficiency/(excess) 7$ ‐$ (4,411)$ 1,626$
Covered employee payroll 125,676$ 118,014$ 119,090$ 118,774$
Contributions as percentage of covered employee payroll 13.11% 13.56% 17.93% 12.41%
Notes to Schedule:
The actuarial methods and assumptions used to set the actuarially determined contributions for fiscal year 2020 contribution
rates are as follows:
ADC for fiscal year June 30, 2020
Actuarial valuation date June 30, 2017
Actuarial cost method Entry‐Age, level percentage of payroll
Amortization method Level percent of pay
Amortization period 25‐year fixed period for 2019/20
Asset valuation method Market value, no smoothing
Inflation 2.75%
Payroll growth 3.00%
Investment rate of return
Medical trend
Mortality
Mortality Improvement
6.75%
* Fiscal year ended June 30, 2018 was the first year of implementation of GASB Statement No. 75, therefore only
four years of information is shown.
Non‐Medicare ‐ 7.5% for 2019, decreasing to an ultimate rate of 4.0% in 2076
Medicare ‐ 6.5% for 2019, decreasing to an ultimate rate of 4.0% in 2076
2014 CalPERS Experience Study for the period 1997 to 2011
Post‐retirement mortality projected fully generational with Society of Actuaries
Scale MP‐2017
Total
Special Debt Other
Revenue Service Permanent Governmental
Funds Funds Fund Funds
ASSETS:
Cash and investments available for operations 80,684$ 3,826$ 2,529$ 87,039$
Receivables, net:
Accounts and intergovernmental 409 7 ‐ 416
Interest 460 21 14 495
Notes and loan receivable 34,099 ‐ ‐ 34,099
Restricted cash and investments with fiscal agents ‐ 34 ‐ 34
Total assets 115,652$ 3,888$ 2,543$ 122,083$
Liabilities:
Accounts payable and accruals 591$ ‐$ 3$ 594$
Accrued salaries and benefits 27 ‐ ‐ 27
Due to other funds 136 ‐ ‐ 136
Total liabilities 754 ‐ 3 757
Deferred inflows of resources
Deferred inflows of resources ‐ Unavailable revenue 71 ‐ ‐ 71
Total liabilities and deferred inflows of resources 825 ‐ 3 828
Fund balances:
Nonspendable
Eyerly family ‐ ‐ 2,540 2,540
Restricted for:
Transportation mitigation 12,265 ‐ ‐ 12,265
Federal revenue 5,221 ‐ ‐ 5,221
Street improvement 73 ‐ ‐ 73
Local law enforcement 615 ‐ ‐ 615
Public benefit 19,908 ‐ ‐ 19,908
Debt service ‐ 3,888 ‐ 3,888
Committed for:
Developer impact fee 15,028 ‐ ‐ 15,028
Housing In‐Lieu 52,882 ‐ ‐ 52,882
Special districts 6,649 ‐ ‐ 6,649
Downtown business 65 ‐ ‐ 65
Assigned for:
Unrealized gain on investment 2,121 ‐ ‐ 2,121
Unassigned for:
Total fund balances 114,827 3,888 2,540 121,255
Total liabilities and fund balances 115,652$ 3,888$ 2,543$ 122,083$
LIABILITIES AND FUND BALANCES:
CITY OF PALO ALTO
Non‐major Governmental Funds
Combining Balance Sheet
June 30, 2020
(Amounts in thousands)
113
114
This page is intentionally left blank.
Total
Special Debt Other
Revenue Service Permanent Governmental
Funds Funds Fund Funds
REVENUES:
Property tax ‐$ 4,515$ ‐$ 4,515$
Special assessments 24 ‐ ‐ 24
Other taxes and fines 2,961 ‐ ‐ 2,961
Intergovernmental 848 ‐ ‐ 848
Licenses, permits and fees:
University Avenue Parking 2,454 ‐ ‐ 2,454
California Avenue Parking 348 ‐ ‐ 348
Other licenses, permits and fees 2,875 ‐ ‐ 2,875
Investment earnings 3,462 119 108 3,689
Rental income 3 ‐ ‐ 3
Housing In‐Lieu ‐ residential 750 ‐ ‐ 750
Other revenue 333 ‐ ‐ 333
Total revenues 14,058 4,634 108 18,800
EXPENDITURES:
Current:
Administrative Services 284 ‐ ‐ 284
Public Works 1,216 ‐ ‐ 1,216
Planning and Development Services 901 ‐ ‐ 901
Office of Transportation 2,123 ‐ ‐ 2,123
Police 54 ‐ ‐ 54
Community Services 265 ‐ ‐ 265
Non‐Departmental 237 ‐ 6 243
Debt service:
Principal retirement ‐ 2,280 ‐ 2,280
Interest and fiscal charges ‐ 5,025 ‐ 5,025
Total expenditures 5,080 7,305 6 12,391
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES 8,978 (2,671) 102 6,409
OTHER FINANCING SOURCES (USES):
Transfers in 1,506 2,865 ‐ 4,371
Transfers out (9,809) ‐ ‐ (9,809)
Total other financing sources (uses) (8,303) 2,865 ‐ (5,438)
Change in fund balances 675 194 102 971
FUND BALANCES, BEGINNING OF YEAR 114,152 3,694 2,438 120,284
FUND BALANCES, END OF YEAR 114,827$ 3,888$ 2,540$ 121,255$
CITY OF PALO ALTO
Non‐major Governmental Funds
Combining Statement of Revenues, Expenditures and Changes in Fund Balances
For the Year Ended June 30, 2020
(Amounts in thousands)
115
116
This page is intentionally left blank.
117
NON‐MAJOR GOVERNMENTAL FUNDS
SPECIAL REVENUE FUNDS
Street Improvement
This fund accounts for revenues received from state gas tax. Allocations must be spent on the construction
and maintenance of the road network system of the City.
Federal Revenue
This fund accounts for grant funds received under the Community Development Act of 1974 and HOME
Investment Grant Programs, for activities approved and subject to federal regulations.
Housing In‐Lieu
This fund accounts for revenues from commercial and residential developers to provide housing under
the City’s Below Market Rate program.
Special Districts
This fund accounts for revenues from parking permits and for maintenance of various parking lots within
the City’s parking districts.
Transportation Mitigation
This fund accounts for revenues from fees or contributions required for transportation mitigation issues
encountered as a result of City development.
Local Law Enforcement
This fund accounts for revenues received in support of City’s law enforcement program.
Asset Seizure
This fund accounts for seized property and funds associated with drug trafficking. Under California
Assembly Bill No. 4162, the monies are released to the City for specific expenditures related to law
enforcement activities.
Developer Impact Fee
This fund accounts for fees imposed on new developments to be used for parks, community centers and
libraries.
Downtown Business Development District
The Downtown Business Development District Fund was established to account for the activities of the
Palo Alto Downtown Business Development District, which was established to enhance the viability of the
downtown business district.
Public Benefit
This fund accounts for the activities of the Stanford University Medical Center (SUMC) Development
Agreement (DA) whereby SUMC will enhance and expand their facilities and the City will grant SUMC the
right to develop the facilities in accordance with the DA.
Street Federal Housing Special
Improvement Revenue In‐Lieu Districts
ASSETS:
Cash and investments available for operations ‐$ ‐$ 24,683$ 7,042$
Receivables, net:
Accounts and intergovernmental 184 218 7 ‐
Interest ‐ ‐ 136 37
Notes and loan receivable ‐ 5,351 28,748 ‐
Total assets 184$ 5,569$ 53,574$ 7,079$
Liabilities:
Accounts payable and accruals ‐$ 249$ 64$ 237$
Accrued salaries and benefits ‐ 1 ‐ 23
Due to other funds 109 27 ‐ ‐
Total liabilities 109 277 64 260
Deferred inflows of resources
Deferred inflows of resources ‐ Unavailable revenue ‐ 71 ‐ ‐
Total liabilities and deferred inflows of sources 109 348 64 260
Fund balances:
Nonspendable
Restricted
Transportation mitigation ‐ ‐ ‐ ‐
Federal revenue ‐ 5,221 ‐ ‐
Street improvement 73 ‐ ‐ ‐
Local law enforcement ‐ ‐ ‐ ‐
Public benefit ‐ ‐ ‐ ‐
Committed
Developer impact fee ‐ ‐ ‐ ‐
Housing In‐Lieu ‐ ‐ 52,882 ‐
Special districts ‐ ‐ ‐ 6,649
Downtown business ‐ ‐ ‐ ‐
Assigned
Unrealized gains on investments 2 ‐ 628 170
Total fund balances 75 5,221 53,510 6,819
Total liabilities and fund balances 184$ 5,569$ 53,574$ 7,079$
LIABILITIES AND FUND BALANCES:
CITY OF PALO ALTO
Non‐major Special Revenue Funds
Combining Balance Sheet
June 30, 2020
(Amounts in thousands)
118
Downtown Total
Business Special
Transportation Local Law Asset Developer Development Public Revenue
Mitigation Enforcement Seizure Impact Fee District Benefit Funds
12,530$ 624$ 3$ 15,366$ 107$ 20,329$ 80,684$
‐ ‐ ‐ ‐ ‐ ‐ 409
74 3 ‐ 93 ‐ 117 460
‐ ‐ ‐ ‐ ‐ ‐ 34,099
12,604$ 627$ 3$ 15,459$ 107$ 20,446$ 115,652$
‐$ ‐$ ‐$ ‐$ 41$ ‐$ 591$
‐ ‐ ‐ 3 ‐ ‐ 27
‐ ‐ ‐ ‐ ‐ ‐ 136
‐ ‐ ‐ 3 41 ‐ 754
‐ ‐ ‐ ‐ ‐ ‐ 71
‐ ‐ ‐ 3 41 ‐ 825
12,265 ‐ ‐ ‐ ‐ ‐ 12,265
‐ ‐ ‐ ‐ ‐ ‐ 5,221
‐ ‐ ‐ ‐ ‐ ‐ 73
‐ 612 3 ‐ ‐ ‐ 615
‐ ‐ ‐ ‐ ‐ 19,908 19,908
‐ ‐ ‐ 15,028 ‐ ‐ 15,028
‐ ‐ ‐ ‐ ‐ ‐ 52,882
‐ ‐ ‐ ‐ ‐ ‐ 6,649
‐ ‐ ‐ ‐ 65 ‐ 65
339 15 ‐ 428 1 538 2,121
12,604 627 3 15,456 66 20,446 114,827
12,604$ 627$ 3$ 15,459$ 107$ 20,446$ 115,652$
119
Street Federal Housing Special
Improvement Revenue In‐Lieu Districts
REVENUES:
Special assessments ‐$ ‐$ ‐$ ‐$
Other taxes and fines 2,817 ‐ ‐ 144
Intergovernmental 78 606 ‐ ‐
Licenses, permits and fees:
University Avenue Parking ‐ ‐ ‐ 2,454
California Avenue Parking ‐ ‐ ‐ 348
Other licenses, permits and fees ‐ ‐ ‐ 787
Investment earnings 2 ‐ 1,076 275
Rental income ‐ ‐ 3 ‐
Housing In‐Lieu ‐ residential ‐ ‐ 750 ‐
Other revenue ‐ ‐ 270 63
Total revenues 2,897 606 2,099 4,071
EXPENDITURES:
Current:
Administrative Services ‐ ‐ ‐ 284
Public Works ‐ ‐ ‐ 1,216
Planning and Development Services ‐ 685 216 ‐
Office of Transportation ‐ ‐ ‐ 2,123
Police ‐ ‐ ‐ ‐
Community Services ‐ ‐ ‐ 52
Non‐Departmental ‐ ‐ 37 185
Total expenditures ‐ 685 253 3,860
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES 2,897 (79) 1,846 211
OTHER FINANCING SOURCES (USES):
Transfers in ‐ ‐ ‐ 1,064
Transfers out (3,074) ‐ (1) (154)
Total other financing sources (uses) (3,074) ‐ (1) 910
Change in fund balances (177) (79) 1,845 1,121
FUND BALANCES, BEGINNING OF YEAR 252 5,300 51,665 5,698
FUND BALANCES, END OF YEAR 75$ 5,221$ 53,510$ 6,819$
CITY OF PALO ALTO
Non‐major Special Revenue Funds
Combining Statement of Revenues, Expenditures and Changes in Fund Balances
For the Year Ended June 30, 2020
(Amounts in thousands)
120
Downtown Total
Business Special
Transportation Local Law Asset Developer Development Public Revenue
Mitigation Enforcement Seizure Impact Fee District Benefit Funds
‐$ ‐$ ‐$ ‐$ 24$ ‐$ 24$
‐ ‐ ‐ ‐ ‐ ‐ 2,961
‐ 164 ‐ ‐ ‐ ‐ 848
‐ ‐ ‐ ‐ ‐ ‐ 2,454
‐ ‐ ‐ ‐ ‐ ‐ 348
180 ‐ ‐ 1,908 ‐ ‐ 2,875
551 24 ‐ 669 2 863 3,462
‐ ‐ ‐ ‐ ‐ ‐ 3
‐ ‐ ‐ ‐ ‐ ‐ 750
‐ ‐ ‐ ‐ ‐ ‐ 333
731 188 ‐ 2,577 26 863 14,058
‐ ‐ ‐ ‐ ‐ ‐ 284
‐ ‐ ‐ ‐ ‐ ‐ 1,216
‐ ‐ ‐ ‐ ‐ ‐ 901
‐ ‐ ‐ ‐ ‐ ‐ 2,123
‐ 54 ‐ ‐ ‐ ‐ 54
‐ ‐ ‐ 213 ‐ ‐ 265
‐ ‐ ‐ ‐ 15 ‐ 237
‐ 54 ‐ 213 15 ‐ 5,080
731 134 ‐ 2,364 11 863 8,978
‐ ‐ ‐ 355 87 ‐ 1,506
(1,283) ‐ ‐ (4,397) ‐ (900) (9,809)
(1,283) ‐ ‐ (4,042) 87 (900) (8,303)
(552) 134 ‐ (1,678) 98 (37) 675
13,156 493 3 17,134 (32) 20,483 114,152
12,604$ 627$ 3$ 15,456$ 66$ 20,446$ 114,827
121
Street Improvement Federal Revenue
Variance Variance
Actual, Positive Actual, Positive
Budget Budgetary Basis (Negative) Budget Budgetary Basis (Negative)
REVENUES:
Special assessments ‐ ‐$ ‐$ ‐ ‐$ ‐$
Other taxes and fines 3,061 2,817 (244) ‐ ‐ ‐
Intergovernmental 79 78 (1) 636 606 (30)
Licenses, permits and fees
University Avenue Parking ‐ ‐ ‐ ‐ ‐ ‐
California Avenue Parking ‐ ‐ ‐ ‐ ‐ ‐
Other licenses, permits and fees ‐ ‐ ‐ ‐ ‐ ‐
Investment earnings 12 2 (10) ‐ ‐ ‐
Rental income ‐ ‐ ‐ ‐ ‐ ‐
Housing In‐Lieu ‐ residential ‐ ‐ ‐ ‐ ‐ ‐
Other:
Loan payoffs ‐ ‐ ‐ ‐ ‐ ‐
Other revenue ‐ ‐ ‐ ‐ ‐ ‐
Total revenues 3,152 2,897 (255) 636 606 (30)
EXPENDITURES:
Current:
Administrative Services ‐ ‐ ‐ ‐ ‐ ‐
Public Works ‐ ‐ ‐ ‐ ‐ ‐
Planning and Development Services ‐ ‐ ‐ 935 974 (39)
Office of Transportation ‐ ‐ ‐ ‐ ‐ ‐
Police ‐ ‐ ‐ ‐ ‐ ‐
Community Services ‐ ‐ ‐ ‐ ‐ ‐
Non‐Departmental ‐ ‐ ‐ ‐ ‐ ‐
Total expenditures ‐ ‐ ‐ 935 974 (39)
Excess (deficiency) of revenues
over (under) expenditures 3,152 2,897 (255) (299) (368) (69)
OTHER FINANCING SOURCES (USES):
Transfers in ‐ ‐ ‐ ‐ ‐ ‐
Transfers out (3,074) (3,074) ‐ ‐ ‐ ‐
Total other financing sources (uses) (3,074) (3,074) ‐ ‐ ‐ ‐
Change in fund balances, budgetary basis 78$ (177) (255)$ (299)$ (368) (69)$
Adjustment to Budgetary Basis:
Unrealized gain (loss) on investments ‐ ‐
Current year encumbrances/reappropriations ‐ 289
(177) (79)
FUND BALANCES, BEGINNING OF YEAR, GAAP BASIS 252 5,300
FUND BALANCES, END OF YEAR, GAAP BASIS 75$ 5,221$
CHANGE IN FUND BALANCE, GAAP BASIS
(Amounts in thousands)
CITY OF PALO ALTO
Non‐major Special Revenue Funds
Combining Schedule of Revenues, Expenditures and Changes in Fund Balances ‐
Budget and Actual
For the Year Ended June 30, 2020
122
Housing In‐Lieu Special Districts Transportation Mitigation
Variance Variance Variance
Actual, Positive Actual, Positive Actual, Positive
Budget Budgetary Basis (Negative) Budget Budgetary Basis (Negative) Budget Budgetary Basis (Negative)
‐ ‐$ ‐$ ‐ ‐$ ‐$ ‐ ‐$ ‐$
‐ ‐ ‐ 333 144 (189) ‐ ‐ ‐
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ 3,263 2,454 (809) ‐ ‐ ‐
‐ ‐ ‐ 522 348 (174) ‐ ‐ ‐
‐ ‐ ‐ 838 787 (51) 276 180 (96)
297 555 258 80 136 56 199 278 79
9 3 (6) ‐ ‐ ‐ ‐ ‐ ‐
2,989 750 (2,239) ‐ ‐ ‐ ‐ ‐ ‐
25 ‐ (25) ‐ ‐ ‐ ‐ ‐ ‐
170 270 100 ‐ 63 63 ‐ ‐ ‐
3,490 1,578 (1,912) 5,036 3,932 (1,104) 475 458 (17)
‐ ‐ ‐ 326 284 42 ‐ ‐ ‐
‐ ‐ ‐ 1,547 1,365 182 ‐ ‐ ‐
20,490 21,015 (525) ‐ ‐ ‐ 2,200 ‐ 2,200
‐ ‐ ‐ 3,936 2,878 1,058 ‐ ‐ ‐
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ 31 52 (21) ‐ ‐ ‐
696 37 659 231 185 46 ‐ ‐ ‐
21,186 21,052 134 6,071 4,764 1,307 2,200 ‐ 2,200
(17,696) (19,474) (1,778) (1,035) (832) 203 (1,725) 458 2,183
‐ ‐ ‐ 1,064 1,064 ‐ ‐ ‐ ‐
(1) (1) ‐ (1,683) (154) 1,529 (1,283) (1,283) ‐
(1) (1) ‐ (619) 910 1,529 (1,283) (1,283) ‐
(17,697)$ (19,475) (1,778)$ (1,654)$ 78 1,732$ (3,008)$ (825) 2,183$
521 139 273
20,799 904 ‐
1,845 1,121 (552)
51,665 5,698 13,156
53,510$ 6,819$ 12,604$
123
Local Law Enforcement Asset Seizure
Variance Variance
Actual, Positive Actual, Positive
Budget Budgetary Basis (Negative) Budget Budgetary Basis (Negative)
REVENUES:
Special assessments ‐ ‐$ ‐$ ‐ ‐$ ‐$
Other taxes and fines ‐ ‐ ‐ ‐ ‐ ‐
Intergovernmental 105 164 59 ‐ ‐ ‐
Licenses, permits and fees
University Avenue Parking ‐ ‐ ‐ ‐ ‐ ‐
California Avenue Parking ‐ ‐ ‐ ‐ ‐ ‐
Other licenses, permits and fees ‐ ‐ ‐ ‐ ‐ ‐
Investment earnings 5 12 7 ‐ ‐ ‐
Rental income ‐ ‐ ‐ ‐ ‐ ‐
Housing In‐Lieu ‐ residential ‐ ‐ ‐ ‐ ‐ ‐
Other:
Loan payoffs ‐ ‐ ‐ ‐ ‐ ‐
Other revenue ‐ ‐ ‐ ‐ ‐ ‐
Total revenues 110 176 66 ‐ ‐ ‐
EXPENDITURES:
Current:
Administrative Services ‐ ‐ ‐ ‐ ‐ ‐
Public Works ‐ ‐ ‐ ‐ ‐ ‐
Planning and Development Services ‐ ‐ ‐ ‐ ‐ ‐
Office of Transportation ‐ ‐ ‐ ‐ ‐ ‐
Police 155 54 101 ‐ ‐ ‐
Community Services ‐ ‐ ‐ ‐ ‐ ‐
Non‐Departmental ‐ ‐ ‐ ‐ ‐ ‐
Total expenditures 155 54 101 ‐ ‐ ‐
Excess (deficiency) of revenues
over (under) expenditures (45) 122 167 ‐ ‐ ‐
OTHER FINANCING SOURCES (USES):
Transfers in ‐ ‐ ‐ ‐ ‐ ‐
Transfers out ‐ ‐ ‐ ‐ ‐ ‐
Total other financing sources (uses) ‐ ‐ ‐ ‐ ‐ ‐
Change in fund balances, budgetary basis (45)$ 122 167$ ‐$ ‐ ‐$
Adjustment to Budgetary Basis:
Unrealized gain (loss) on investments 12 ‐
Current year encumbrances/reappropriations ‐ ‐
134 ‐
FUND BALANCES, BEGINNING OF YEAR, GAAP BASIS 493 3
FUND BALANCES, END OF YEAR, GAAP BASIS 627$ 3$
CHANGE IN FUND BALANCE, GAAP BASIS
(Amounts in Thousands)
CITY OF PALO ALTO
Non‐major Special Revenue Funds
Combining Schedule of Revenues, Expenditures and Changes in Fund Balances ‐
Budget and Actual
For the Year Ended June 30, 2020
124
Developer Impact Fee Downtown Business Improvement District
Variance Variance Variance
Actual, Positive Actual, Positive Actual, Positive
Budget Budgetary Basis (Negative) Budget Budgetary Basis (Negative) Budget Budgetary Basis (Negative)
‐ ‐$ ‐$ 88 24$ (64)$ ‐ ‐$ ‐$
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
1,058 1,908 850 ‐ ‐ ‐ ‐ ‐ ‐
257 326 69 ‐ 1 1 325 436 111
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
1,315 2,234 919 88 25 (63) 325 436 111
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
454 213 241 ‐ ‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ 125 72 53 ‐ ‐ ‐
454 213 241 125 72 53 ‐ ‐ ‐
861 2,021 1,160 (37) (47) (10) 325 436 111
355 355 ‐ 87 87 ‐ ‐ ‐ ‐
(6,896) (4,397) 2,499 ‐ ‐ ‐ (1,400) (900) 500
(6,541) (4,042) 2,499 87 87 ‐ (1,400) (900) 500
(5,680)$ (2,021) 3,659$ 50$ 40 (10)$ (1,075)$ (464) 611$
343 1 427
‐ 57 ‐
(1,678) 98 (37)
17,134 (32) 20,483
15,456$ 66$ 20,446$
Public Benefit
125
126
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127
NON‐MAJOR GOVERNMENTAL FUNDS
DEBT SERVICE FUNDS
2018 Golf Course Capital Improvement
This fund accounts for revenues received from the General Fund to provide payment of principal and
interest associated with the 2018 Golf Course Capital Improvement Certificates of Participation as they
become due.
2019 California Avenue Parking Garage COPs
This fund accounts for revenues received from the General Fund to provide payment of principal and
interest associated with the 2019 California Avenue Parking Garage Certificates of Participation as they
become due.
Library Projects
This fund accounts for revenues received from property taxes to provide payment of principal and interest
associated with the 2010 and 2013A General Obligation Bonds as they become due.
CITY OF PALO ALTO
Non‐major Debt Service Funds
Combining Balance Sheet
June 30, 2020
(Amounts in thousands)
2018 Golf Course 2019 California Total
Capital Avenue Parking Library Debt Service
Improvement Garage COPs Projects Funds
ASSETS:
Cash and investments available for operations 1$ 3$ 3,822$ $3,826
Receivables:
Accounts and intergovernmental ‐ ‐ 7 7
Interest ‐ ‐ 21 21
Restricted cash and investments with fiscal agents 18 16 ‐ 34
Total assets 19$ 19$ 3,850$ 3,888$
FUND BALANCES:
Restricted:
Debt service 19$ 19$ 3,850$ 3,888$
128
CITY OF PALO ALTO
Non‐major Debt Service Funds
Combining Statement of Revenues, Expenditures and Changes in Fund Balances
For the Year Ended June 30, 2020
(Amounts in thousands)
2018 Golf Course 2019 California Total
Capital Avenue Parking Library Debt Service
Improvement Garage COPs Projects Funds
REVENUES:
Property tax ‐$ ‐$ 4,515$ 4,515$
Investment earnings 1 1 117 119
Total revenues 1 1 4,632 4,634
EXPENDITURES:
Debt service:
Principal retirement 180 375 1,725 2,280
Interest and fiscal charges 350 1,958 2,717 5,025
Total expenditures 530 2,333 4,442 7,305
EXCESS (DEFICIENCY) OF REVENUES
OVER (UNDER) EXPENDITURES (529) (2,332) 190 (2,671)
OTHER FINANCING SOURCES (USES):
Transfers in 530 2,335 ‐ 2,865
Total other financing sources (uses) 530 2,335 ‐ 2,865
Change in fund balances 1 3 190 194
FUND BALANCES, BEGINNING OF YEAR 18 16 3,660 3,694
FUND BALANCES, END OF YEAR 19$ 19$ 3,850$ 3,888$
129
Variance Variance Variance
Actual, Positive Actual Positive Actual Positive
Budget Budgetary Basis (Negative) Budget Budgetary Basis (Negative) Budget Budgetary Basis (Negative)
REVENUES:
Property tax ‐$ ‐$ ‐$ ‐$ ‐$ ‐$ 4,442$ 4,515$ 73$
Investment earnings ‐ 1 1 ‐ 1 1 ‐ 38 38
Total revenues ‐ 1 1 ‐ 1 1 4,442 4,553 111
EXPENDITURES:
Debt service:
Principal retirement 180 180 ‐ 375 375 ‐ 1,725 1,725 ‐
Interest and fiscal charges 350 350 ‐ 1,960 1,958 2 2,717 2,717 ‐
Total expenditures 530 530 ‐ 2,335 2,333 2 4,442 4,442 ‐
Excess (deficiency) of revenues
over (under) expenditures (530) (529) 1 (2,335) (2,332) 3 ‐ 111 111
OTHER FINANCING SOURCES (USES):
Transfers in 530 530 ‐ 2,335 2,335 ‐ ‐ ‐ ‐
Change in fund balances, budgetary basis ‐$ 1 1$ ‐$ 3 3$ ‐$ 111 111$
Adjustment to Budgetary Basis:
Unrealized gain (loss) on investments ‐ ‐ 79
1 3 190
FUND BALANCES, BEGINNING OF YEAR 18 16 3,660
FUND BALANCES, END OF YEAR 19$ 19$ 3,850$
CHANGE IN FUND BALANCE, GAAP BASIS
(Amounts in thousands)
CITY OF PALO ALTO
Non‐major Debt Service Funds
Combining Schedule of Revenues, Expenditures and Changes in Fund Balances ‐
Budget and Actual
For the Year Ended June 30, 2020
2018 Golf Course Capital Improvement 2019 California Avenue Parking Garage COPs Library Projects
130
131
NON‐MAJOR GOVERNMENTAL FUNDS
PERMANENT FUND
Eyerly Family
This fund accounts for the revenues received from assets donated by Mr. and Mrs. Fred Eyerly for the City
and or its citizenry.
Eyerly Family Permanent Fund
Variance
Actual, Positive
Budget Budgetary Basis (Negative)
REVENUES:
Investment earnings 53$ 53$ ‐$
EXPENDITURES:
Current:
Non‐Departmental 7 6 1
Change in fund balance 46$ 47 1$
Adjustment to Budgetary Basis:
Unrealized gain (loss) on investments 55
102
FUND BALANCE, BEGINNING OF YEAR 2,438
FUND BALANCE, END OF YEAR 2,540$
CHANGE IN FUND BALANCE, GAAP BASIS
(Amounts in thousands)
CITY OF PALO ALTO
Non‐major Permanent Fund
Schedule of Revenues, Expenditures and Changes in Fund Balance ‐
Budget and Actual
For the Year Ended June 30, 2020
132
133
INTERNAL SERVICE FUNDS
INTRODUCTION
Internal Service Funds are used to finance and account for special activities and services performed by a
designated department for other departments in the City on a cost reimbursement basis.
Vehicle Replacement and Maintenance
This fund accounts for the maintenance and replacement of vehicles and equipment used by all City
departments. The source of revenue is from reimbursement of fleet replacement and maintenance costs
allocated to each department by usage of vehicle.
Technology
This fund accounts for replacement and upgrade of technology, and covers four primary areas used by all
City departments: desktop, infrastructure, applications, and technology research and development. The
source of revenue is from reimbursement of costs for support provided to other departments.
Printing and Mailing Services
This fund accounts for central duplicating, printing and mailing services provided to all City departments.
Source of revenue for this fund is from reimbursement of costs for services and supplies purchased by
other departments.
General Benefits
This fund accounts for the administration of compensated absences and health benefits.
Workers’ Compensation Insurance Program
This fund accounts for the administration of the City’s self‐insured workers’ compensation programs.
General Liabilities Insurance Program
This fund accounts for the administration of the City’s self‐insured general liability programs.
Retiree Health Benefits
This fund accounts for the retiree health benefits contributions.
Vehicle Printing Workers' General Total
Replacement and Compensation Liabilities Retiree Internal
and Mailing General Insurance Insurance Health Services
Maintenance Technology Services Benefits Program Program Benefits Funds
ASSETS:
Current Assets:
Cash and investments available for operations 13,116$ 25,056$ 75$ 20,861$ 25,372$ 9,641$ 1,306$ 95,427$
Accounts receivable, net 3 5 ‐ 17 6 ‐ ‐ 31
Interest receivable 67 146 1 105 133 51 4 507
Inventory of materials and supplies 102 ‐ ‐ ‐ ‐ ‐ ‐ 102
Restricted cash and investments with fiscal agents and trustees ‐ ‐ ‐ 28,693 ‐ ‐ ‐ 28,693
Total current assets 13,288 25,207 76 49,676 25,511 9,692 1,310 124,760
Noncurrent Assets:
Capital assets:
Nondepreciable 486 2,237 ‐ ‐ ‐ ‐ ‐ 2,723
Depreciable, net 16,305 2,304 33 ‐ ‐ ‐ ‐ 18,642
Total noncurrent assets 16,791 4,541 33 ‐ ‐ ‐ ‐ 21,365
Total assets 30,079 29,748 109 49,676 25,511 9,692 1,310 146,125
DEFERRED OUTFLOWS OF RESOURCES:
Pension related 501 1,728 33 ‐ 41 ‐ ‐ 2,303
OPEB related 283 576 11 ‐ 11 ‐ ‐ 881
Total deferred outflows of resources 784 2,304 44 ‐ 52 ‐ ‐ 3,184
LIABILITIES:
Current Liabilities:
Accounts payable and accruals 136 211 42 1,100 69 10 ‐ 1,568
Accrued salaries and benefits 34 131 4 ‐ 34 ‐ ‐ 203
Accrued compensated absences ‐ ‐ ‐ 8,182 ‐ ‐ ‐ 8,182
Accrued claims payable ‐ current ‐ ‐ ‐ 160 3,960 2,078 ‐ 6,198
Total current liabilities 170 342 46 9,442 4,063 2,088 ‐ 16,151
Noncurrent liabilities:
Accrued compensated absences ‐ ‐ ‐ 6,062 ‐ ‐ ‐ 6,062
Accrued claims payable ‐ ‐ ‐ ‐ 19,973 3,542 ‐ 23,515
Net pension liabilities 3,696 12,820 306 ‐ 45 ‐ ‐ 16,867
Net OPEB liabilities 1,561 3,185 143 ‐ ‐ ‐ ‐ 4,889
Total noncurrent liabilities 5,257 16,005 449 6,062 20,018 3,542 ‐ 51,333
Total liabilities 5,427 16,347 495 15,504 24,081 5,630 ‐ 67,484
DEFERRED INFLOWS OF RESOURCES:
Pension related 131 326 3 ‐ 2 ‐ ‐ 462
OPEB related 329 672 14 ‐ 12 ‐ ‐ 1,027
Total deferred inflows of resources 460 998 17 ‐ 14 ‐ ‐ 1,489
NET POSITION:
Net Investment in capital assets 16,791 4,541 33 ‐ ‐ ‐ ‐ 21,365
Restricted for supplemental pension ‐ ‐ ‐ 28,693 ‐ ‐ ‐ 28,693
Unrestricted 8,185 10,166 (392) 5,479 1,468 4,062 1,310 30,278
Total net position 24,976$ 14,707$ (359)$ 34,172$ 1,468$ 4,062$ 1,310$ 80,336$
CITY OF PALO ALTO
Internal Service Funds
Combining Statement of Fund Net Position
June 30, 2020
(Amounts in thousands)
134
Vehicle Printing Workers' General Total
Replacement and Compensation Liabilities Retiree Internal
and Mailing General Insurance Insurance Health Services
Maintenance Technology Services Benefits Program Program Benefits Funds
OPERATING REVENUES:
Charges for services 9,457$ 14,458$ 1,592$ 73,430$ 7,381$ 4,300$ 14,214$ 124,832$
Other ‐ ‐ ‐ ‐ 109 3 ‐ 112
Total operating revenues 9,457 14,458 1,592 73,430 7,490 4,303 14,214 124,944
OPERATING EXPENSES:
Administrative and general 1,525 8,622 1,146 174 846 1,441 29 13,783
Operations and maintenance 4,113 8,264 380 2,255 209 ‐ ‐ 15,221
Depreciation 2,879 480 7 ‐ ‐ ‐ ‐ 3,366
Claim payments and change in estimated
self‐insured liability ‐ ‐ ‐ 1,131 6,414 (522) ‐ 7,023
Refund of charges for services 111 20 ‐ ‐ ‐ ‐ ‐ 131
Employment benefits ‐ ‐ ‐ 57,129 ‐ ‐ 16,475 73,604
Total operating expenses 8,628 17,386 1,533 60,689 7,469 919 16,504 113,128
Operating income (loss) 829 (2,928) 59 12,741 21 3,384 (2,290) 11,816
NONOPERATING REVENUES (EXPENSES):
Investment earnings 500 1,090 (2) 1,455 981 354 66 4,444
Loss on disposal of capital assets (178) ‐ ‐ ‐ ‐ ‐ ‐ (178)
Other nonoperating revenues 30 ‐ ‐ ‐ ‐ ‐ ‐ 30
Total nonoperating revenues (expenses) 352 1,090 (2) 1,455 981 354 66 4,296
Income (loss) before transfers 1,181 (1,838) 57 14,196 1,002 3,738 (2,224) 16,112
Transfers in ‐ 1,626 ‐ 5,241 ‐ 5 2,384 9,256
Transfers out (244) (220) (14) (2,384) (5) ‐ ‐ (2,867)
Change in net position 937 (432) 43 17,053 997 3,743 160 22,501
NET POSITION, BEGINNING OF YEAR 24,039 15,139 (402) 17,119 471 319 1,150 57,835
NET POSITION, END OF YEAR 24,976$ 14,707$ (359)$ 34,172$ 1,468$ 4,062$ 1,310$ 80,336$
CITY OF PALO ALTO
Internal Service Funds
Combining Statement of Revenues, Expenses and Changes in Fund Net Position
For the Year Ended June 30, 2020
(Amounts in thousands)
135
Vehicle Printing Workers' General Total
Replacement and Compensation Liabilities Retiree Internal
and Mailing General Insurance Insurance Health Services
Maintenance Technology Services Benefits Program Program Benefits Funds
Cash flows from operating activities:
Cash received from customers 9,494$ 14,772$ 1,592$ 73,435$ 7,375$ 4,303$ 16,097$ 127,068$
Cash payments to suppliers for goods and services (3,008) (7,997) (1,400) (153) (500) (1,451) ‐ (14,509)
Cash payments to employees (2,569) (8,253) (250) (57,501) (566) ‐ (16,504) (85,643)
Cash payments for judgments and claims ‐ ‐ ‐ (1,131) (2,880) (1,555) ‐ (5,566)
Other cash receipts 30 ‐ ‐ ‐ ‐ ‐ ‐ 30
Net cash flows provided by (used in)
operating activities 3,947 (1,478) (58) 14,650 3,429 1,297 (407) 21,380
Cash flows from noncapital financing activities:
Repayment of loans from other funds ‐ ‐ ‐ ‐ ‐ ‐ (737) (737)
Transfers in ‐ 1,626 ‐ 5,241 ‐ 5 2,384 9,256
Transfers out (244) (220) (14) (2,384) (5) ‐ ‐ (2,867)
Net cash flows provided by (used in)
noncapital financing activities (244) 1,406 (14) 2,857 (5) 5 1,647 5,652
Cash flows from capital and related financing activities:
Acquisition of capital assets (1,570) (1,624) ‐ ‐ ‐ ‐ ‐ (3,194)
Proceeds from sale of capital assets 96 ‐ ‐ ‐ ‐ ‐ ‐ 96
Net cash flows (used in)
capital and related financing activities (1,474) (1,624) ‐ ‐ ‐ ‐ ‐ (3,098)
Cash flows from investing activities:
Interest received (charged) 500 1,108 (2) 1,460 984 348 65 4,463
Net change in cash and cash equivalents 2,729 (588) (74) 18,967 4,408 1,650 1,305 28,397
Cash and cash equivalents, beginning of year 10,387 25,644 149 30,587 20,964 7,991 1 95,723
Cash and cash equivalents, end of year $ 13,116 $ 25,056 $ 75 $ 49,554 $ 25,372 $ 9,641 $ 1,306 $ 124,120
Financial statement presentation:
Cash and investments available for operations 13,116$ 25,056$ 75$ 20,861$ 25,372$ 9,641$ 1,306$ 95,427$
Restricted cash and investments with
fiscal agents and trustees ‐ ‐ ‐ 28,693 ‐ ‐ ‐ 28,693
Cash and cash equivalents, end of year 13,116$ 25,056$ 75$ 49,554$ 25,372$ 9,641$ 1,306$ $ 124,120
Reconciliation of operating income (loss) to net cash
flows provided by (used in) operating activities:
Operating income (loss) 829$ (2,928)$ 59$ 12,741$ 21$ 3,384$ (2,290)$ 11,816$
Adjustments to reconcile operating income (loss)
to net cash provided by (used in) operating activities:
Depreciation 2,879 480 7 ‐ ‐ ‐ ‐ 3,366
Other 30 ‐ ‐ ‐ ‐ ‐ ‐ 30
Change in assets and liabilities:
Accounts receivable 37 314 ‐ 5 (6) ‐ 1,883 2,233
Inventory of materials and supplies 146 ‐ ‐ ‐ ‐ ‐ ‐ 146
Deferred outflows of resources ‐ pension plans 170 404 21 ‐ 16 ‐ ‐ 611
Deferred outflows of resources ‐ OPEB (86) (174) 7 ‐ (11) ‐ ‐ (264)
Accounts payable and accruals (44) (129) (113) (23) (7) (10) ‐ (326)
Accrued salaries and benefits 10 53 1 ‐ 18 ‐ ‐ 82
Accrued compensated absences (5) (12) ‐ 1,927 (1) ‐ ‐ 1,909
Accrued claims payable ‐ ‐ ‐ ‐ 3,425 (2,077) ‐ 1,348
Net pension liability (57) 466 (32) ‐ (37) ‐ ‐ 340
Net OPEB liability (257) (525) (20) ‐ ‐ ‐ ‐ (802)
Deferred inflows of resources ‐ pension plans ‐ (30) 1 ‐ (1) ‐ ‐ (30)
Deferred inflows of resouces ‐ OPEB 295 603 11 ‐ 12 ‐ ‐ 921
Net cash flows provided by (used in)
operating activities 3,947$ (1,478)$ (58)$ 14,650$ 3,429$ 1,297$ (407)$ 21,380$
CITY OF PALO ALTO
Internal Service Funds
Combining Statement of Cash Flows
For the Year Ended June 30, 2020
(Amounts in thousands)
136
137
FIDUCIARY FUNDS
INTRODUCTION
Fiduciary Funds are used to account for assets held by the City acting in a fiduciary capacity for other
entities and individuals. The funds are operated to carry out the specific actions required by the trust
agreements, ordinances and other governing regulations.
Fiduciary Funds are presented separately from the Citywide and Fund financial statements.
Agency Funds are custodial in nature and do not involve measurement of results of operations. The City
maintains two agency funds, as follows:
Cable Joint Powers Authority
The fund was established to account for the activities of the cable television system on behalf of the
members.
University Avenue Area Off‐Street Parking Assessment District
The fund accounts for the receipts and disbursements associated with the Series 2012 Limited Obligation
Refunding Improvement Bonds.
CITY OF PALO ALTO
All Agency Funds
Statement of Changes in Assets and Liabilities
For the Year Ended June 30, 2020
Balance Balance
June 30, 2019 Additions Deletions June 30, 2020
Cable Joint Powers Authority
ASSETS:
Cash and investments available for operations 739$ ‐$ 11$ 728$
Accounts receivable 497 ‐ 13 484
Interest receivable 4 ‐ ‐ 4
Total assets 1,240$ ‐$ 24$ 1,216$
LIABILITIES:
Accounts payable and accruals ‐$ 219$ ‐$ 219$
Due to other governments 1,240 ‐ 243 997
Total Liabilities 1,240 219 243 1,216
ASSETS:
Cash and investments available for operations 2,028$ 68$ ‐$ 2,096$
Accounts receivable 13 2 ‐ 15
Interest receivable 11 1 ‐ 12
Cash and investments with fiscal agents 2,657 44 ‐ 2,701
Total assets 4,709$ 115$ ‐$ 4,824$
LIABILITIES:
Due to bondholders 4,709$ 115$ ‐$ 4,824$
Total Agency Funds
ASSETS:
Cash and investments available for operations 2,767$ 68$ 11$ 2,824$
Accounts receivable 510 2 13 499
Interest receivable 15 1 ‐ 16
Cash and investments with fiscal agents 2,657 44 ‐ 2,701
Total assets 5,949$ 115$ 24$ 6,040$
LIABILITIES:
Accounts payable and accruals ‐$ 219$ ‐$ 219$
Due to bondholders 4,709 115 ‐ 4,824
Due to other governments 1,240 ‐ 243 997
Total liabilities 5,949$ 334$ 243$ 6,040$
(Amounts in thousands)
University Avenue Area
Off‐Street Parking Assessment District
138
139
STATISTICAL SECTION
The statistical section contains comprehensive statistical data, which relates to physical, economic, social
and political characteristics of the City. It is intended to provide users with a broader and more complete
understanding of the City and its financial affairs than is possible from the financial statements and
supporting schedules included in the financial section.
In this section, readers will find comparative information related to the City’s revenue sources,
expenditures, property tax valuations, levies and collections, general obligation bonded debt, utility
revenue debt service, and demographics. Where available, the comparative information is presented for
the last ten fiscal years.
In addition, this section presents information related to the City’s legal debt margin computation, principal
taxpayers, notary and security bond coverages, and other miscellaneous statistics pertaining to services
provided by the City.
In contrast to the financial section, the statistical section information is not usually 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:
Net Position by Component
Changes in Net Position
Fund Balances of Governmental Funds
Changes in Fund Balances of Governmental Funds
Revenue Capacity
These schedules contain information to help the reader assess the City’s most significant local revenue
sources, property tax and electric charges:
Electric Operating Revenue by Source
Supplemental Disclosure for Water Utilities
Supplemental Disclosure for Gas Utilities
Assessed Value of Taxable Property
Property Tax Rates, All Overlapping Governments
Property Tax Levies and Collections
Principal Property Taxpayers
Assessed Valuation and Parcels by Land Use
Per Parcel Assessed Valuation of Single Family Residential
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:
Ratio of Outstanding Debt by Type
Computation of Direct and Overlapping Debt
Computation of Legal Bonded Debt Margin
Revenue Bond Coverage
140
STATISTICAL SECTION
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:
Taxable Transactions by Type of Business
Demographic and Economic Statistics
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:
Operating Indicators by Function/Program
Capital Asset Statistics by Function/Program
Full‐Time Equivalent City Government Employees by Function
Sources
Unless otherwise noted, the information in these schedules is derived from the Comprehensive Annual
Financial Reports for the relevant year.
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Governmental Activities
Investment in capital assets 364,747$ 370,111$ 378,047$ 386,696$ 405,921$ 425,179$ 453,878$ 473,233$ 493,706$ 497,378$
Restricted 16,437 52,934 71,717 68,331 55,963 47,907 38,138 46,724 59,669 73,274
Unrestricted 134,722 142,102 165,810 187,386 1,972 37,905 35,273 (92,587) (103,392) (130,078)
Total Governmental Activities Net Position 515,906$ 565,147$ 615,574$ 642,413$ 463,856$ 510,991$ 527,289$ 427,370$ 449,983$ 440,574$
Business‐type Activities
Investment in capital assets 416,418$ 437,151$ 446,597$ 473,795$ 490,874$ 512,918$ 532,063$ 573,688$ 602,136$ 621,354$
Restricted ‐ ‐ 4,060 4,166 4,142 4,115 4,073 4,014 4,016 4,060
Unrestricted 253,740 262,602 269,926 266,794 172,802 162,806 163,158 110,429 135,391 159,592
Total Business‐type Activities Net Position 670,158$ 699,753$ 720,583$ 744,755$ 667,818$ 679,839$ 699,294$ 688,131$ 741,543$ 785,006$
Primary Government
Investment in capital assets 781,165$ 807,262$ 824,644$ 860,491$ 896,795$ 938,097$ 985,941$ 1,046,921$ 1,095,842$ 1,118,732$
Restricted 16,437 52,934 75,777 72,497 60,105 52,022 42,211 50,738 63,685 77,334
Unrestricted 388,462 404,704 435,736 454,180 174,774 200,711 198,431 17,842 31,999 29,514
Total Primary Government Net Position 1,186,064$ 1,264,900$ 1,336,157$ 1,387,168$ 1,131,674$ 1,190,830$ 1,226,583$ 1,115,501$ 1,191,526$ 1,225,580$
Notes:
Source: Annual Financial Statements, Statement of Net Position
The City implemented GASB Statement No. 68, Accounting and Financial Reporting for Pensions, effective July 1, 2014, and GASB Statement No. 75,
Accounting and Financial Reporting for Postemployment Benefits Other Than Pension, effective July 1, 2017. The City's unrestricted net position decreased in FY
2015 and again in FY 2018 as a result.
Fiscal Year Ended June 30
CITY OF PALO ALTO
Net Position by Component
Last Ten Fiscal Years
(Amounts in thousands)
(Accrual basis of accounting)
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
$ T
h
o
u
s
a
n
d
s
Primary Government
Investment in capital assets Restricted Unrestricted
141
PROGRAM REVENUES 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Governmental Activities
Charges for services
Administrative Services 2,889$ 1,647$ 15,629$ 4,055$ 5,460$ 9,444$ 5,242$ 6,536$ 6,413$ 5,758$
Public Works 2,419 1,008 1,314 1,093 1,209 599 878 781 1,478 990
Planning & Community Environment2 7,237 31,491 28,768 12,896 8,090 9,071 6,067 5,119 11,997 ‐
Development Services1&2 ‐ ‐ ‐ ‐ 12,019 12,570 11,768 16,000 13,904 ‐
Planning & Development Services2 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 16,173
Office of Transportation3 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 1,161
Public Safety 15,274 15,658 16,139 14,902 15,726 13,945 12,670 13,507 14,179 12,101
Community Services 7,724 11,365 13,808 20,882 20,912 21,551 20,472 21,285 22,805 20,808
Library 480 1,600 187 166 137 198 139 145 134 94
Operating grants and contributions 2,884 3,441 5,038 5,360 5,300 2,164 1,990 14,054 2,100 2,619
Capital grants and contributions 1,903 1,064 515 917 619 344 1,929 1,534 8,247 9,021
Total Governmental Activities
Program Revenues 40,810 67,274 81,398 60,271 69,472 69,886 61,155 78,961 81,257 68,725
Business‐type Activities
Charges for services
Water 26,624 31,467 37,746 40,291 35,847 37,588 42,678 45,087 45,571 48,740
Electric 122,109 118,886 121,805 121,916 120,842 120,743 137,543 154,142 163,514 169,389
Fiber Optics 3,322 3,662 4,382 4,485 4,627 4,505 4,553 4,529 4,657 4,576
Gas 43,584 41,774 34,633 35,737 30,751 30,212 36,431 37,044 42,113 37,402
Wastewater Collection 15,094 14,942 16,077 15,599 16,182 16,496 17,748 17,990 20,219 20,933
Wastewater Treatment 18,830 22,200 21,528 18,460 24,120 23,825 23,649 27,382 27,573 29,310
Refuse 30,469 30,645 30,583 30,297 31,576 32,169 33,918 34,647 33,996 32,695
Storm Drainage 5,796 5,892 6,053 6,183 6,281 6,520 6,693 6,964 7,249 7,543
Airport ‐ ‐ ‐ ‐ 683 826 1,286 2,382 2,483 2,362
Operating grants and contributions 610 605 572 549 534 744 512 501 488 473
Capital grants and contributions 3,004 1,526 2,224 2,005 2,080 1,061 4,265 14,194 6,677 6,449
Total Business‐type Activities
Program Revenues 269,442 271,599 275,603 275,522 273,523 274,689 309,276 344,862 354,540 359,872
Total Primary Government
Program Revenues 310,252$ 338,873$ 357,001$ 335,793$ 342,995$ 344,575$ 370,431$ 423,823$ 435,797$ 428,597$
EXPENSES
Governmental Activities
City Council 15$ 345$ 94$ 387$ 271$ 352$ 329$ 345$ 270$ 172$
City Manager 1,842 1,960 1,237 2,180 2,155 2,662 1,975 2,757 3,336 3,616
City Attorney 953 1,656 1,642 1,797 1,759 2,472 2,140 2,511 3,086 2,845
City Clerk 803 908 330 641 680 582 762 931 822 748
City Auditor 138 235 464 489 362 414 847 994 1,081 645
Administrative Services 9,888 10,100 7,614 11,388 9,980 10,637 11,887 13,949 19,169 15,919
Human Resources 1,346 1,071 1,420 1,346 1,464 2,224 2,272 2,674 3,021 3,060
Public Works 19,357 14,568 20,816 24,577 21,075 24,613 25,539 30,349 36,617 45,609
Planning & Community Environment2 15,031 12,074 13,549 14,926 8,423 10,208 10,918 11,357 12,169 ‐
Development Services1&2 ‐ ‐ ‐ ‐ 10,449 11,158 11,102 12,664 12,622 ‐
Planning & Development Services2 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 21,725
Office of Transportation3 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 4,693
Public Safety (Police and Fire) 58,996 62,817 59,452 62,883 58,660 56,653 73,320 83,923 89,189 92,187
Community Services 22,845 21,915 22,705 23,822 24,688 28,547 27,866 33,709 36,815 34,147
Library 6,920 7,323 7,319 7,758 7,721 10,825 11,437 12,208 12,557 12,971
Interest on long term debt 2,742 2,575 2,562 3,367 3,658 3,552 2,846 2,761 3,653 4,576
Total Governmental
Activities Expenses 140,876 137,547 139,204 155,561 151,345 164,899 183,240 211,132 234,407 242,913
Business‐type Activities
Water 24,268 29,093 30,707 31,593 33,205 35,120 37,535 40,836 40,606 43,034
Electric 100,130 102,030 106,438 113,004 122,499 120,319 128,603 146,033 139,605 142,426
Fiber Optics 1,561 1,489 1,437 1,661 1,891 2,107 2,159 2,653 2,476 2,761
Gas 32,051 28,878 26,749 26,869 23,525 20,879 26,783 27,930 30,915 27,212
Wastewater Collection 12,275 14,825 14,313 13,235 14,595 15,199 16,405 16,801 17,324 18,877
Wastewater Treatment 19,731 20,712 20,635 21,018 21,553 22,546 23,498 27,518 27,070 28,755
Refuse 30,684 31,900 28,542 28,413 27,974 30,370 30,665 28,808 30,391 36,947
Storm Drainage 3,229 3,103 3,703 3,644 3,721 3,735 4,106 5,059 4,951 5,514
Airport 31 153 246 466 1,004 970 1,274 1,656 1,790 2,131
Total Business‐type
Activities Expenses 223,960 232,183 232,770 239,903 249,967 251,245 271,028 297,294 295,128 307,657
Total Primary
Government Expenses 364,836$ 369,730$ 371,974$ 395,464$ 401,312$ 416,144$ 454,268$ 508,426$ 529,535$ 550,570$
CITY OF PALO ALTO
Changes in Net Position
Last Ten Fiscal Years
(Accrual basis of accounting)
(Amounts in thousands)
Fiscal Year Ended June 30
142
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
NET (EXPENSE)/REVENUE
Governmental Activities (100,066)$ (70,273)$ (57,806)$ (95,290)$ (81,873)$ (95,013)$ (122,085)$ (132,171)$ (153,150)$ (174,188)$
Business‐type Activities 45,482 39,416 42,833 35,619 23,556 23,444 38,248 47,568 59,412 52,215
Total Primary Government
Net (Expense)/Revenue (54,584)$ (30,857)$ (14,973)$ (59,671)$ (58,317)$ (71,569)$ (83,837)$ (84,603)$ (93,738)$ (121,973)$
GENERAL REVENUES AND OTHER CHANGES IN NET POSITION
Governmental Activities
Taxes
Property tax 29,156$ 30,104$ 31,929$ 35,299$ 38,750$ 41,189$ 43,953$ 47,170$ 51,718$ 55,604$
Sales tax 20,746 22,132 25,606 29,424 29,675 30,018 29,923 31,091 36,508 30,563
Utility user tax 10,851 10,834 10,861 11,008 10,861 12,469 14,240 15,414 16,402 16,140
Transient occupancy tax 8,082 9,664 10,794 12,255 16,699 22,366 23,477 24,937 25,649 18,553
Other taxes 8,156 8,173 10,504 9,660 11,867 7,868 8,989 11,337 9,525 9,775
Investment earnings 3,500 6,238 (1,228) 5,859 5,010 8,639 (711) 420 15,375 13,850
Miscellaneous 12,377 14,943 518 2,575 3,428 894 168 1,973 1,906 60
Transfers 17,083 17,426 19,249 17,103 16,405 18,705 18,344 19,077 18,680 20,234
Total Governmental Activities 109,951 119,514 108,233 123,183 132,695 142,148 138,383 151,419 175,763 164,779
Business‐type Activities
Investment earnings 5,722 7,605 (2,754) 6,379 4,857 7,282 (449) 596 12,680 11,482
Transfers (17,083) (17,426) (19,249) (17,103) (16,405) (18,705) (18,344) (19,077) (18,680) (20,234)
Total Business‐type Activities (11,361) (9,821) (22,003) (10,724) (11,548) (11,423) (18,793) (18,481) (6,000) (8,752)
Total Primary Government 98,590$ 109,693$ 86,230$ 112,459$ 121,147$ 130,725$ 119,590$ 132,938$ 169,763$ 156,027$
CHANGE IN NET POSITION
Governmental Activities 9,885$ 49,241$ 50,427$ 27,893$ 50,822$ 47,135$ 16,298$ 19,248$ 22,613$ (9,409)$
Business‐type Activities 34,121 29,595 20,830 24,895 12,008 12,021 19,455 29,087 53,412 43,463
Total Primary Government
Change in Net Position 44,006$ 78,836$ 71,257$ 52,788$ 62,830$ 59,156$ 35,753$ 48,335$ 76,025$ 34,054$
Notes:1The Development Services Department was formed in FY15.
Source: Annual Financial Statements, Statement of Activities
2In FY20, the Development Services Department was combined with the Planning and Community Environment Department to form the Planning and Development Services
Department.
3In FY20, the City established the Office of Transportation in FY20.
Fiscal Year Ended June 30
143
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
General Fund
Nonspendable 6,085$ 6,007$ 5,749$ 6,188$ 6,296$ 7,088$ 7,709$ 8,049$ 7,647$ 8,967$
Committed ‐ ‐ ‐ ‐ ‐ ‐ ‐ 373 5,100 4,505
Assigned 6,235 6,400 5,415 5,432 7,976 8,261 7,280 7,098 7,657 12,496
Unassigned 31,859 29,616 30,913 36,690 48,198 51,582 48,118 52,826 54,811 35,871
Total General Fund 44,179$ 42,023$ 42,077$ 48,310$ 62,470$ 66,931$ 63,107$ 68,346$ 75,215$ 61,839$
Source: Annual Financial Statements, Balance Sheet
Fiscal Year Ended June 30
CITY OF PALO ALTO
Fund Balances of Governmental Funds (General Fund)
Last Ten Fiscal Years
(Modified accrual basis of accounting)
(Amounts in thousands)
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
$
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Nonspendable Committed Assigned Unassigned
144
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
All Other Governmental Funds
Nonspendable 1,422$ 11,112$ 18,189$ 14,869$ 1,468$ 1,505$ 1,499$ 1,498$ 2,438$ 2,540$
Restricted 50,646 61,324 84,688 68,468 59,650 47,113 35,298 40,317 85,940 55,548
Committed 24,775 14,284 20,400 27,145 48,434 65,745 71,566 72,781 84,616 83,973
Assigned 20,114 33,264 45,514 55,211 52,627 64,411 63,225 68,261 56,842 62,825
Unassigned ‐ ‐ ‐ ‐ ‐ ‐ ‐ (32) (32) ‐
Total All Other
Governmental Funds 96,957$ 119,984$ 168,791$ 165,693$ 162,179$ 178,774$ 171,588$ 182,825$ 229,804$ 204,886$
Source: Annual Financial Statements, Balance Sheet
Fiscal Year Ended June 30
CITY OF PALO ALTO
Fund Balances of Governmental Funds (All Other Governmental Funds)
Last Ten Fiscal Years
(Modified accrual basis of accounting)
(Amounts in thousands)
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
$180,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
$
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Nonspendable Restricted Committed Unassigned
($50,000)
$0
$50,000
$100,000
$150,000
$200,000
$250,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
$
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Nonspendable Restricted Committed Assigned Unassigned
145
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Revenues
Property tax 29,248$ 30,216$ 32,040$ 35,393$ 38,836$ 41,289$ 44,050$ 47,242$ 51,776$ 55,628$
Sales tax 20,746 22,132 25,606 29,424 29,675 30,018 29,923 31,091 36,508 30,563
Other taxes and fines 27,890 29,231 32,141 35,305 41,576 44,909 48,875 53,837 53,525 45,729
Contributions5 ‐ ‐ ‐ ‐ ‐ ‐ ‐ 11,733 ‐ ‐
Charges for services 22,311 46,273 38,976 23,962 25,973 23,910 22,267 26,835 27,346 24,127
From other agencies 1,614 1,116 4,109 5,700 7,727 4,417 5,443 5,392 4,689 12,315
Permits and licenses 5,433 7,136 8,218 8,990 9,179 11,228 10,523 12,786 17,759 13,144
Interest and rentals 16,553 18,583 12,136 18,445 18,658 22,269 15,348 16,288 32,905 26,123
Other revenue 8,624 12,739 17,570 7,471 12,837 13,827 4,985 6,067 7,955 1,091
Total Revenues 132,419 167,426 170,796 164,690 184,461 191,867 181,414 211,271 232,463 208,720
Expenditures
Administration1 8,351 9,412 8,291 9,961 10,806 11,501 13,192 14,721 15,799 16,527
Public Works 11,317 11,304 11,489 12,439 12,276 13,112 14,485 15,426 14,764 14,793
Planning and Community Environment3 10,309 11,966 13,474 14,761 8,628 9,722 10,568 10,332 10,911 ‐
Development Services2, 3 ‐ ‐ ‐ ‐ 11,152 10,643 10,908 11,749 11,549 ‐
Planning and Development Services2 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 20,170
Office of Transportation4 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 4,175
Public Safety (Police and Fire) 58,874 62,418 59,537 62,028 61,447 63,784 71,164 73,916 76,344 82,173
Community Services 20,029 20,860 21,661 22,644 23,553 25,511 25,408 29,831 31,619 29,868
Library 6,509 7,072 6,902 7,340 7,980 7,960 8,953 9,120 9,288 9,988
Non‐departmental 7,352 6,819 4,567 8,135 6,180 8,068 6,566 7,579 12,231 9,498
Capital Outlay 35,486 29,154 29,542 37,035 41,754 24,457 39,643 40,971 46,914 66,362
Debt service ‐ principal payments 870 1,743 1,489 1,524 1,948 7,130 2,066 2,961 2,101 2,280
Debt service ‐ interest and fiscal fees 1,815 2,757 2,659 3,196 3,404 4,266 3,032 2,956 3,398 5,025
Payment to bond refunding escrow ‐ 586 540 ‐ ‐ ‐ ‐ ‐ ‐ ‐
Total Expenditures 160,912 164,091 160,151 179,063 189,128 186,154 205,985 219,562 234,918 260,859
Excess (Deficiency) of Revenues
Over (Under) Expenditures (28,493) 3,335 10,645 (14,373) (4,667) 5,713 (24,571) (8,291) (2,455) (52,139)
Other Financing Sources (Uses)
Issuance of Debt ‐ ‐ ‐ ‐ ‐ ‐ ‐ 8,970 42,297 ‐
Proceeds from sale of capital assets ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 2,442 ‐
Transfers in 30,323 47,200 50,343 41,683 45,137 61,835 58,331 56,882 54,711 58,397
Transfers out (14,352) (29,782) (33,833) (24,175) (29,824) (46,492) (44,770) (41,085) (43,147) (44,552)
Proceeds from long term debt (101) 3,222 21,706 ‐ ‐ ‐ ‐ ‐ ‐ ‐
Payments to refund bond escrow ‐ (3,104) ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐
Total Other Financing Sources (Uses)15,870 17,536 38,216 17,508 15,313 15,343 13,561 24,767 56,303 13,845
Net Change in Fund Balances (12,623)$ 20,871$ 48,861$ 3,135$ 10,646$ 21,056$ (11,010)$ 16,476$ 53,848$ (38,294)$
Debt Service as a Percentage of
Non‐Capital Expenditures 2.2% 3.5% 3.2% 3.3% 3.7% 7.1% 3.1% 3.3% 2.8% 3.6%
Notes:
Source: Annual Financial Statements, Governmental Funds, Statement of Revenues, Expenditures and Changes in Fund Balances
4In FY20, the City established the Office of Transportation.
5Represents contributions from the Stanford University Medical Center in FY18.
2The Development Services Department was formed in FY15.
Fiscal Year Ended June 30
CITY OF PALO ALTO
Changes in Fund Balances of Governmental Funds
Last Ten Fiscal Years
(Modified accrual basis of accounting)
(Amounts in thousands)
1Comprised of the following departments: City Council, City Manager, City Attorney, City Clerk, City Auditor, Administrative Services, and Human Resources.
3In FY20, the Development Services Department was combined with the Planning and Community Environment Department to form the Planning and Development
Services Department.
146
Fiscal Commercial & City of
Year Residential Industrial Palo Alto Total
2011 19,848$ 88,076$ 2,991$ 110,915$
2012 20,328 85,895 3,352 109,575
2013 19,951 86,998 3,265 110,214
2014 18,744 88,419 3,225 110,388
2015 17,404 88,257 3,234 108,895
2016 18,191 86,715 3,127 108,033
2017 20,269 90,635 3,780 114,684
2018 22,764 100,200 4,264 127,228
2019 23,613 103,509 4,404 131,526
2020 25,466 107,335 4,286 137,087
* The electric operating revenues include sales to customers and City departments, and
excludes the sale of surplus energy, utility billing discounts, and bad debt expense.
529 Bryant Street LLC Technology
City of Palo Alto Municipal
Communications & Power Industries (CPI) Research
Lucille Packard Children's Hospital Hospital
Space Systems/Loral, LLC Satellite & Satellite Systems
Stanford Health Care Hospital/Health Care
Stanford Hospital & Clinics Hospital
Varian Medical Systems, Inc. Manufacturing
Veterans Administration Hospital Hospital
VMware, Inc. Computer
Number Kilowatt‐hour
of Customers Sales (kWh)Revenue2
Residential 25,326 154,509,779 25,466$
Commercial 3,665 551,244,105 89,063
Industrial 68 123,237,426 18,272
CPA 143 25,680,554 4,286
Total 29,202 854,671,864 137,087$
City of Palo Alto Power Purchase
Western Area Power Administration Hydroelectric 45.0%
Forward Market Purchases ‐9.0%
Wind Energy 11.0%
Landfill Gas Energy 12.0%
Solar Energy 39.0%
Northern California Power Agency Hydroelectric 12.0%
Short‐Term Market ‐10.0%
Source: City of Palo Alto, Utilities and Accounting Departments
Customer (alphabetical order)Type of Business
1The top ten customers accounted for approximately 36.3% of total kWh consumption (310,022,386 kWh)
and 33.6% of revenue ($45,596,827). The largest customer accounted for 9.4% of total kWh consumption
and 8.3% of revenue. The smallest customer accounted for 2.1% of total kWh consumption and 1.8% of
revenue. Revenue used to determine top ten electric customers includes metered and non‐metered
charges, adjustments, surcharges and discounts. Revenue does not include Utility Users Tax (UUT) and
deposits.
2Revenue includes metered and non‐metered charges and revenue adjustments. Revenue does not
include California Energy Commission (CEC) surcharges, Utility Users Tax (UUT), Primary Voltage and Rate
Assistance (RAP) discounts and deposits. Parts of this schedule are provided as required by the Continuing
Disclosure Agreement for the City's Utility Revenue Bond and are not required by Governmental
Accounting Standards Board (GASB).
CITY OF PALO ALTO
Electric Operating Revenue by Source *
Last Ten Fiscal Years
(Amounts in thousands)
Top Ten Electric Customers by Revenue1
147
Top Ten Largest Water Utility Customers (alphabetical order)
City of Palo Alto
Oak Creek Apartments
Palo Alto Hills Golf & Country Club
Palo Alto Unified School District
Simon Property Group
Stanford Hospital & Clinics
Stanford West Management
Veterans Administration Hospital
Vi at Palo Alto
VMware Inc.
The top ten customers total consumption is 885,069 CCF with revenue of $8,381,271.
This amount accounts for approximately 19% of total consumption and 18% of total
revenue. The largest customer (other than the City of Palo Alto) accounted for 5.3% of
consumption and 5.3% of revenue. The smallest customer accounted for 0.7% of
consumption and 0.8% of revenue. Revenue used to determine top ten water utility
customers includes metered and non‐metered charges, adjustments, surcharges
and discounts. Revenue does not include Utility Users Tax (UUT) and deposits.
Note:
Source: City of Palo Alto, Utilities Department
This schedule is provided as required by the Continuing Disclosure Agreement for the City's Utility Revenue
Bond and is not required by Governmental Accounting Standards Board (GASB).
CITY OF PALO ALTO
Supplemental Disclosure for Water Utilities
Fiscal Year 2020
148
Top Ten Largest Gas Utility Customers (alphabetical order)
City of Palo Alto
Genencor International
Hewlett Packard
Palo Alto Unified School District
Space Systems/Loral, LLC
Stanford Health Care
Stanford Hospital & Clinics
Stanford University
Veterans Administration Hospital
VMware Inc.
The top ten customers total consumption is 5,984,237 THM with revenue of $6,678,626.
This amount accounts for approximately 22.5% of total consumption and 18.9% of total
revenue. The largest customer (other than the City of Palo Alto) accounted for 6.9% of
consumption and 5.6% of revenue. The smallest customer accounted for 1.2% of
consumption and 1.1% of revenue.
Note:
Source: City of Palo Alto, Utilities Department
This schedule is provided as required by the Continuing Disclosure Agreement for the City's Utility Revenue
Bond and is not required by Governmental Accounting Standards Board (GASB).
CITY OF PALO ALTO
Supplemental Disclosure for Gas Utilities
Fiscal Year 2020
149
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Net Local Secured Roll
Land 11,011,160$ 11,352,993$ 12,255,515$ 13,357,851$ 14,409,837$ 15,718,665$ 17,333,969$ 18,770,642$ 20,386,904$ 22,186,582$
Improvements 10,962,928 11,703,597 12,381,306 12,984,735 13,633,986 14,998,502 16,752,295 18,642,970 19,845,666 21,183,768
Personal property 241,280 257,436 287,296 307,499 290,590 310,929 306,576 300,352 181,381 194,646
22,215,368 23,314,026 24,924,117 26,650,085 28,334,413 31,028,096 34,392,840 37,713,964 40,413,951 43,564,996
Less:
Exemptions net of state aid (1,757,241) (2,346,728) (2,589,653) (2,610,521) (2,761,495) (3,409,836) (4,244,500) (5,203,968) (5,522,323) (6,233,220)
Total Net Local Secured Roll 20,458,127 20,967,298 22,334,464 24,039,564 25,572,918 27,618,260 30,148,340 32,509,996 34,891,628 37,331,776
Public utilities 2,573 2,573 2,573 2,573 2,573 2,573 2,573 2,573 7,004 7,004
Unsecured property 1,495,574 1,516,837 1,355,970 1,493,922 1,622,636 1,794,921 1,803,468 1,922,170 1,902,781 1,946,680
Total Assessed Value 21,956,274$ 22,486,708$ 23,693,007$ 25,536,059$ 27,198,127$ 29,415,754$ 31,954,381$ 34,434,739$ 36,801,413$ 39,285,460$
Total Direct Tax Rate 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%
Note: The State Constitution requires property to be assessed at 100% of the most recent purchase price, plus an increment of no more than 2% annually,
plus any local over‐rides. These values are considered to be full market values.
Source: County of Santa Clara Assessor's Office
CITY OF PALO ALTO
Assessed Value of Taxable Property
Last Ten Fiscal Years
(Amounts in thousands)
Fiscal Year Ended June 30
$20,000,000
$22,000,000
$24,000,000
$26,000,000
$28,000,000
$30,000,000
$32,000,000
$34,000,000
$36,000,000
$38,000,000
$40,000,000
$42,000,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
$
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Total Assessed Value
150
Basic County County Total
County County Hospital City Library Santa Clara Affordable Direct and
Fiscal Wide Retirement G.O. Bond G.O. Bond Valley Water School Community Midpeninsula Housing Bond Overlapping
Year Levy Levy (Measure A)(Measure N)District District College Open Space1 (Measure A)2 Rates
2011 1.00 0.0388 0.0095 0.0171 0.0072 0.0751 0.0326 ‐ ‐ 1.18
2012 1.00 0.0388 0.0047 0.0155 0.0064 0.0742 0.0297 ‐ ‐ 1.17
2013 1.00 0.0388 0.0051 0.0129 0.0069 0.0718 0.0287 ‐ ‐ 1.16
2014 1.00 0.0388 0.0035 0.0177 0.0070 0.0655 0.0290 ‐ ‐ 1.16
2015 1.00 0.0388 0.0091 0.0159 0.0065 0.0657 0.0276 ‐ ‐ 1.16
2016 1.00 0.0388 0.0088 0.0148 0.0057 0.0604 0.0240 0.0008 ‐ 1.15
2017 1.00 0.0388 0.0086 0.0129 0.0086 0.0591 0.0234 0.0006 ‐ 1.15
2018 1.00 0.0388 0.0082 0.0118 0.0062 0.0570 0.0220 0.0009 0.0127 1.16
2019 1.00 0.0388 0.0072 0.0111 0.0042 0.0858 0.0217 0.0018 0.0105 1.18
2020 1.00 0.0388 0.0069 0.0106 0.0041 0.0783 0.0208 0.0016 0.0100 1.17
Notes:1The Midpeninsula Regional Open Space District Bond Issue and Property Tax, Measure AA, passed in 2014.
Rates were first levied for the 2015‐16 fiscal year.
2The Santa Clara County Affordable Housing Bond ‐ Measure A 2016 passed on November 8, 2016.
Rates were first levied for the 2017‐18 fiscal year.
Source: County of Santa Clara, Tax Rates and Information
CITY OF PALO ALTO
Property Tax Rates
All Overlapping Governments
Last Ten Fiscal Years
$1.14
$1.15
$1.16
$1.17
$1.18
$1.19
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Rate per $100 of Assessed Value
151
Fiscal Year Total Tax Percentage Collections in Percentage of
Ended June 30 Levy for FY1 Amount of Levy Subsequent Years2 Amount Levy
2011 25,688$ 25,688$ 100% ‐ 25,688$ 100%
2012 26,494 26,494 100% ‐ 26,494 100%
2013 28,742 28,742 100% ‐ 28,742 100%
2014 30,587 30,587 100% ‐ 30,587 100%
2015 34,117 34,117 100% ‐ 34,117 100%
2016 36,607 36,607 100% ‐ 36,607 100%
2017 39,381 39,381 100% ‐ 39,381 100%
2018 42,839 42,839 100% ‐ 42,839 100%
2019 47,327 47,327 100% ‐ 47,327 100%
2020 51,089 51,089 100% ‐ 51,089 100%
Notes:
Source:Annual Financial Statements, Government Funds, Statement of Revenues, Expenditures and
Changes in Fund Balances.
1During fiscal year 1995, the County of Santa Clara began providing the City 100% of its tax levy
under an agreement which allows the County to keep all interest and delinquency charges
collected.
2Effective fiscal year 1994, the City is on the Teeter Plan, under which the County of Santa Clara
pays the full tax levy due.
CITY OF PALO ALTO
Property Tax Levies and Collections
Last Ten Fiscal Years
(Amounts in thousands)
Collected within the
Fiscal Year of the Levy Total Collections to Date
152
Taxable
Assessed
Value Rank
Percentage of
Total Taxable
Assessed Value
Taxable
Assessed
Value Rank
Percentage of
Total Taxable
Assessed Value
Leland Stanford Jr. University 5,931,986$ 1 15.1% 3,328,472$ 1 15.2%
Google Inc. 287,898 2 0.7%
Space Systems Loral Land LLC 173,157 3 0.4% 208,784 2 1.0%
ARE‐San Francisco 69 LLC 138,720 4 0.4%
395 Page Mill LLC 120,669 5 0.3%
530 Lytton Owner LLC 117,500 6 0.3%
Hohbach Realty Co. LP 108,228 7 0.3%
SVF Sherman Palo Alto Corporation 99,813 8 0.3%
SI 45 LLC 82,768 9 0.2%
Gwin Property Inc. 80,111 10 0.2%
899 Charleston 157,700 3 0.7%
Albert L. Schultz Jewish Community Center 123,255 4 0.6%
Arden Realty Limited Partnership 111,632 5 0.5%
Whisman Ventures, LLC 104,281 6 0.5%
ECI 2 Bayshore LLC/ECI Hamilton LLC 73,349 7 0.3%
Blackhawk Parent LLC 49,821 8 0.2%
Ronald & Ann Williams Charitable Foundation 42,951 9 0.2%
300 / 400 Hamilton Associates 41,123 10 0.2%
Total 7,140,850$ 18.2% 4,241,368$ 19.3%
Total City Taxable Assessed Value:
FY 2020 39,285,460$
FY 2011 21,956,274$
Source: California Municipal Statistics, Inc.
Fiscal Year 2020 Fiscal Year 2011
Taxpayer
CITY OF PALO ALTO
Principal Property Taxpayers
Current Year and Nine Years Ago
(Amounts in thousands)
153
2019‐2020 No. of
Assessed % of No. of % of Taxable % of
Valuation1 Total Parcels Total Parcels Total
Non‐Residential:
Agricultural/forest 36,540,315$ 0.10 % 49 0.23 % 31 0.15 %
Commercial 1,954,320,758 5.24 461 2.20 457 2.23
Professional/office 5,912,420,380 15.84 560 2.68 540 2.63
Industrial/research & development 1,805,192,536 4.84 230 1.10 229 1.12
Recreational 74,033,074 0.20 16 0.08 14 0.07
Government/social/institutional 60,287,227 0.16 114 0.55 49 0.24
Miscellaneous 10,704,235 0.03 18 0.09 17 0.08
Subtotal Non‐Residential 9,853,498,525 26.39 1,448 6.92 1,337 6.52
Residential:
Single family residence 22,095,834,168 59.19 15,095 72.18 15,023 73.27
Condominium/townhouse 2,782,851,226 7.45 3,151 15.07 3,146 15.34
Mobile Home 106,101 0.00 8 0.04 8 0.04
2‐4 Residential units 527,914,189 1.41 497 2.38 497 2.42
5+ Residential units 1,685,880,408 4.52 345 1.65 329 1.60
Subtotal Residential 27,092,586,092 72.57 19,096 91.31 19,003 92.68
Vacant Parcels 385,691,046 1.03 370 1.77 164 0.80
Total 37,331,775,663$ 100 % 20,914 100 % 20,504 100 %
Notes: This schedule is provided as required by the Continuing Disclosure Agreement for the City's 2010 and 2013A
General Obligation Bonds and is not required by Governmental Accounting Standards Board (GASB).
Therefore, ten years of comparison data is not presented.
1Local secured assessed valuation, excluding tax‐exempt property.
Source: California Municipal Statistics, Inc.
CITY OF PALO ALTO
Assessed Valuation and Parcels by Land Use
As of June 30, 2020
154
No. of
Taxable Average
Parcels1 Assessed Valuation
Single Family Residential 15,023 $1,470,800
No. of % of Cumulative % of Cumulative
Taxable Total % of Total Total Total % of Total
Parcels1 Parcels Parcels Valuation Valuation Valuation
883 5.88 % 5.88 % 71,693,170$ 0.32 % 0.32 %
1,651 10.99 16.87 230,388,941 1.04 1.37
742 4.94 21.81 183,817,379 0.83 2.20
657 4.37 26.18 228,294,858 1.03 3.23
559 3.72 29.90 251,431,474 1.14 4.37
605 4.03 33.93 333,061,263 1.51 5.88
638 4.25 38.17 413,466,003 1.87 7.75
538 3.58 41.76 403,501,028 1.83 9.57
464 3.09 44.84 394,552,829 1.79 11.36
548 3.65 48.49 520,805,173 2.36 13.72
526 3.50 51.99 551,269,412 2.49 16.21
503 3.35 55.34 578,026,184 2.62 18.83
426 2.84 58.18 531,763,585 2.41 21.24
411 2.74 60.91 556,830,012 2.52 23.76
366 2.44 63.35 530,472,262 2.40 26.16
388 2.58 65.93 601,547,319 2.72 28.88
349 2.32 68.26 575,996,170 2.61 31.49
348 2.32 70.57 608,396,629 2.75 34.24
282 1.88 72.45 521,231,109 2.36 36.60
301 2.00 74.45 587,106,616 2.66 39.25
3,838 25.55 100.00 13,422,182,752 60.75 100.00
15,023 100.00 % 22,095,834,168$ 100.00 %
Notes:
Source: California Municipal Statistics, Inc.
Assessed Valuation Assessed Valuation
2019‐2020 Median
CITY OF PALO ALTO
Per Parcel Assessed Valuation of Single Family Residential
As of June 30, 2020
$600,000‐699,999
$22,095,834,168 $1,037,416
2019‐2020
Assessed Valuation
$0‐99,999
$100,000‐199,999
$200,000‐299,999
$300,000‐399,999
$400,000‐499,999
$500,000‐599,999
$1,800,000‐1,899,999
$700,000‐799,999
$800,000‐899,999
$900,000‐999,999
$1,000,000‐1,099,999
$1,100,000‐1,199,999
$1,200,000‐1,299,999
$1,300,000‐1,399,999
$1,400,000‐1,499,999
$1,500,000‐1,599,999
$1,600,000‐1,699,999
$1,700,000‐1,799,999
This schedule is provided as required by the Continuing Disclosure Agreement for the City's 2010 and 2013A
General Obligation Bonds and is not required by Governmental Accounting Standards Board (GASB). Therefore, ten
years of comparison data is not presented.
1Improved single family residential parcels. Excludes condominiums and parcels with multiple family units.
$1,900,000‐1,999,999
$2,000,000 and greater
Total
155
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
5,895$ 1,685$ 1,560$ 1,430$ 1,285$ 1,135$ 975$ 8,970$ 46,305$ 45,750$
55,305 54,540 74,235 73,215 71,795 65,210 63,710 62,140 60,500 58,775
2011 Lease‐Purchase Agreement ‐ 2,764 2,400 2,026 1,643 1,248 842 426 ‐ ‐
Add: unamortized premium 3,640 3,514 4,400 4,242 4,084 3,926 3,768 3,610 8,331 7,980
64,840 62,503 82,595 80,913 78,807 71,519 69,295 75,146 115,136 112,505
69,551 65,879 63,104 60,224 57,224 54,095 50,825 47,400 43,815 40,060
Energy Tax Credits 1,100 1,000 900 800 700 600 500 400 300 200
State Water Resources Loan 16,696 15,900 15,109 14,309 13,500 12,681 15,034 17,711 29,589 33,808
(229) 580 543 867 803 737 673 608 544 468
87,118 83,359 79,656 76,200 72,227 68,113 67,032 66,119 74,248 74,536
Outstanding Debt 151,958$ 145,862$ 162,251$ 157,113$ 151,034$ 139,632$ 136,327$ 141,265$ 189,384$ 187,041$
3.86% 3.36% 3.36% 3.24% 2.94% 2.39% 2.22% 2.17% 2.77% 2.59%
Population 64,417 65,544 66,368 66,861 66,029 66,968 66,478 66,649 67,082 67,019
2.36$ 2.23$ 2.44$ 2.35$ 2.29$ 2.09$ 2.05$ 2.12$ 2.82$ 2.79$
Notes:
Sources:
2019 Official City Data Set (population)
California Department of Transportation Long‐Term Socio‐Economic Forecasts (personal income)
Annual Financial Statements and Note 7 Long‐Term Debt
Governmental Activities
CITY OF PALO ALTO
Ratio of Outstanding Debt by Type
Last Ten Fiscal Years
(Amounts in thousands)
Fiscal Year Ended June 30
Percentage of Personal Income1
Certificates of Participation
General Obligation Bonds
Total Governmental Activities
Business‐type Activities
Utility Revenue Bonds
Add: unamortized premium
(discount), net
Total Business‐type Activities
Total Primary Government
Debt Per Capita
1See the schedule of Demographic and Economic Statistics for personal income data. Per capita personal income is only available for Santa Clara
County, therefore personal income is the product of the countywide per capita amount and the City's population.
County of Santa Clara (assessed valuation)
$0
$20,000
$40,000
$60,000
$80,000
$100,000
$120,000
$140,000
$160,000
$180,000
$200,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
$
T
h
o
u
s
a
n
d
s
Total Governmental Activities Total Business‐type Activities
156
2019‐2020 Assessed Value 39,285,460,007$
Percentage Amount
Applicable Applicable
Total Debt to City of to City of
Outstanding Palo Alto1 Palo Alto
Santa Clara County 881,455,000$ 7.62% 67,175,686$
Foothill‐DeAnza Community College District 607,960,590 22.00% 133,727,011
Palo Alto Unified School District 273,760,962 90.14% 246,781,819
Fremont Union High School District 520,515,088 0.01% 46,846
Los Gatos‐Saratoga Joint Union High School District 88,930,000 0.01% 11,561
Mountain View‐Los Altos Union High School District 131,002,659 0.89% 1,169,854
Cupertino Union School District 281,813,303 0.02% 45,090
Los Altos School District 177,350,000 1.16% 2,057,260
Mountain View‐Whisman School District 267,970,000 0.66% 1,765,922
Saratoga Union School District 21,227,353 0.03% 5,944
Whisman School District 10,802,557 1.75% 189,261
City of Palo Alto 58,775,000 100.00% 58,775,000
El Camino Hospital District 120,690,000 0.07% 88,104
Midpeninsula Regional Open Space District 88,810,000 12.55% 11,149,207
City of Palo Alto Special Assessment Bonds 19,455,000 100.00% 19,455,000
Santa Clara Valley Water District Benefit Assessment District 65,495,000 7.62% 4,991,374
Total Direct and Overlapping Tax and Assessment Debt 547,434,939
966,725,100 7.62% 73,674,120
346,996,639 7.62% 26,444,614
3,480,000 7.62% 265,211
24,092,620 22.00% 5,299,413
2,634,000 0.01% 342
2,834,136 0.89% 25,309
3,150,000 0.03% 882
Los Altos School District Certificates of Participation 2,185,335 1.16% 25,350
City of Palo Alto General Fund Obligations 45,750,000 100% 45,750,000
2,010,000 7.62% 153,182
Midpeninsula Regional Open Space Park District General Fund Obligations 111,985,600 12.55% 14,058,672
$ 165,697,095
2,448,732
$ 163,248,363
$ 710,683,302
Ratio to
Assessed Value
Total Direct Debt 0.29% 112,505,000$ 3
Total Overlapping Debt 1.54% 606,158,302
Total Direct and Overlapping Debt 1.83% 718,663,302$ 2
Notes:
2Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and non‐bonded capital lease obligations
Source: California Municipal Statistics, Inc.
Santa Clara County General Fund Obligations
CITY OF PALO ALTO
Computation of Direct and Overlapping Debt
As of June 30, 2020
Direct and Overlapping Tax and Assessment Debt
Direct and Overlapping General Fund Debt
3Includes unamortized premium of $7,980,000.
Santa Clara County Pension Obligations
Santa Clara County Board of Education Certificates of Participation
Foothill‐DeAnza Community College District Certificates of Participation
Los Gatos‐Saratoga Joint Union High School District Certificates of Participation
Mountain View‐Los Altos Union High School District Certificates of Participation
Saratoga Union High School District Certificates of Participation
Less: Santa Clara County supported obligations
Total Net Direct and Overlapping General Fund Debt
Santa Clara County Vector Control District Certificates of Participation
Total Gross Direct and Overlapping General Fund Debt
Total Combined Debt
1The percentage of overlapping debt applicable to the City is estimated using taxable assessed property value. Applicable percentages were
estimated by determining the portion of the overlapping district's assessed value that is within the boundaries of the City divided by the
district's total taxable assessed value.
157
Assessed Valuation:
Secured property assessed value,
net of exempt real property 39,285,460$
Bonded Debt Limit (3.75% of Assessed Value) 1 1,473,205
Direct Debt:
Certificates of Participation 45,750
General Obligation bonds 58,775
Total Direct Debt3 104,525
Less: Amount of Debt Not Subject to Limit 2 45,750
Total Net Debt Applicable to Limit 58,775
Legal Bonded Debt Margin 1,414,430$
Total Bonded Total Net Debt Legal Total Net Debt Ratio of Net General
Fiscal Assessed Debt Limit Applicable to Bonded Debt Applicable as % of Debt to Bonded Debt
Year Value (AV)(3.75% of AV)Limit Margin Population Bonded Debt Limit Assessed Value Per Capita
2011 21,880,359$ 820,513$ 55,305$ 765,208$ 64,417 6.74% 0.0025 0.86$
2012 22,486,708 843,252 54,540 788,712 65,544 6.47% 0.0024 0.83
2013 23,693,007 888,488 74,235 814,253 66,368 8.36% 0.0031 1.12
2014 25,536,058 957,602 73,215 884,387 66,861 7.65% 0.0029 1.10
2015 27,198,127 1,019,930 71,795 948,135 66,029 7.04% 0.0026 1.09
2016 29,415,754 1,103,091 65,210 1,037,881 66,968 5.91% 0.0022 0.97
2017 31,954,381 1,198,289 63,710 1,134,579 66,478 5.32% 0.0020 0.96
2018 34,434,739 1,291,303 62,140 1,229,163 66,649 4.81% 0.0018 0.93
2019 36,801,413 1,380,053 60,500 1,319,553 67,082 4.38% 0.0016 0.90
2020 39,285,460 1,473,205 58,775 1,414,430 67,019 3.99% 0.0015 0.88
Notes:
Source: Annual Financial Statements, Assessed Value of Taxable Property and Note 7 Long‐Term Debt
2In accordance with California Government Code Section 43605, only the City's General Obligation bonds are subject to the legal debt limit of 15%.
Enterprise Fund debt is not subject to legal debt margin.
CITY OF PALO ALTO
Computation of Legal Bonded Debt Margin
As of June 30, 2020
(Amounts in thousands)
1California Government Code, Section 43605 sets the debt limit at 15% of the assessed value of all real and personal property of the City. Because this
Code section was enacted when assessed value was 25% of market value, the limit is calculated at one‐fourth, or 3.75%. This legal debt margin applies
to General Obligation debt. Prior year limits have been adjusted to conform to the current year methodology.
3Total direct debt excludes any premiums, discounts or other amortization amounts.
158
Less: Net Revenue
Fiscal Gross Direct Operating Available for
Year Revenue Expenses2 Debt Service Principal Interest3 Total Coverage Ratio
2011 234,278$ 151,641$ 82,637$ 2,655$ 3,261$ 5,916$ 13.97
2012 235,160 169,777 65,383 2,945 2,959 5,904 11.07
2013 237,842 173,510 64,332 2,875 3,167 6,042 10.65
2014 239,948 176,718 63,230 2,980 3,073 6,053 10.45
2015 234,025 188,276 45,749 3,100 2,954 6,054 7.56
2016 235,386 186,793 48,593 3,230 2,823 6,053 8.03
2017 264,734 205,102 59,632 3,370 2,678 6,048 9.86
2018 288,610 231,255 57,355 3,525 2,524 6,049 9.48
2019 306,237 227,824 78,413 3,685 2,359 6,044 12.97
2020 313,317 237,223 76,094 3,855 2,419 6,274 12.13
Notes:1Airport, Refuse and Fiber Optics funds have no debt and are therefore excluded from this schedule.
2Excludes depreciation and amortization expense.
3Excludes joint venture debt service and federal interest subsidy.
Source: City of Palo Alto, Accounting Department
Debt Service
CITY OF PALO ALTO
Revenue Bond Coverage
Business‐type Activities1
Last Ten Fiscal Years
(Amounts in thousands)
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
$
T
h
o
u
s
a
n
d
s
Net Revenue Available for Debt Service Total Debt Service
159
Fiscal
Year
2011 2,374$ 2,621$ 1,564$ 1,292$ 381$ 630$ 242$ 4,873$ 6,322$ 20,299$
2012 2,445 2,937 1,590 1,492 387 722 257 5,049 7,034 21,913
2013 2,478 3,160 1,465 1,656 424 765 259 4,056 13,729 27,992
2014 2,097 3,541 1,555 2,041 392 772 444 4,845 9,890 25,577
2015 2,398 3,894 1,672 1,708 435 699 265 3,674 11,253 25,998
2016 2,250 4,134 1,410 1,694 448 582 257 4,949 12,423 28,147
2017 2,036 4,079 1,513 1,794 542 502 259 3,810 14,325 28,860
2018 2,001 4,224 1,716 1,647 428 614 243 3,184 15,663 29,720
2019 1,934 4,299 1,795 1,994 409 706 810 2,245 22,254 36,446
2020 1 1,260 3,488 1,421 1,391 417 572 1,413 1,597 18,313 29,872
Source: California State Board of Equalization, compiled by MuniServices LLC
Sales Tax Rates for the Fiscal Year ended June 30, 2020
State Rate:7.25%
Special District Tax Rates:
Santa Clara County Transit District (SCCT) 0.50%
Santa Clara County Valley Transportation Authority (SCVT) 0.50%
Santa Clara VTA BART Operating and Maintenance Transactions and Use Tax (SVTB) 0.125%
Santa Clara Retail Transactions and Use Tax (SCCR) 0.125%
Santa Clara County Valley Transportation Authority (SCVT) 0.50%
Total Sales and Use Tax Rate:9.000%
Notes:1Decrease due to the adverse impact of coronavirus COVID‐19 since March 2020
Source: California State Board of Equalization
CITY OF PALO ALTO
Taxable Transactions by Type of Business
Last Ten Fiscal Years
(Amounts in thousands)
Total
ECONOMIC SEGMENT
Department
Stores Restaurants
Furniture/
Appliance
Food
Markets
Service
Stations
Drug
Stores Other Retail All Other
Apparel
Stores
Department Stores
4%
Restaurants
12%
Furniture/ Appliance
5%
Apparel Stores
5%
Food Markets
1%
Service Stations
2%
Drugs Stores 2%
Other Retail
5%
All Other
61%
Fiscal Year 2019
Department Stores 0
5%Restaurants 0
12%
Furniture/ Appliance 0
5%
Apparel Stores 0
6%
Food Markets 0
1%
Service Stations 0
2%
Drugs Stores 2%
Other Retail 0
6%
All Other 0
61%
Fiscal Year 2019
Department Stores
4%
Restaurants
12%
Furniture/ Appliance
5%
Apparel Stores
5%
Food Markets
1%
Service Stations
2%
Drugs Stores 5%
Other Retail
5%
All Other
61%
Fiscal Year 2020
160
Santa Clara
City of Palo Alto City of Palo Alto Santa Clara City Population County Total Santa Clara
Fiscal City of Palo Alto Unemployment School County as a Percentage of Personal Income County Per Capita
Year Population Rate Enrollment Population County Population (in thousands)Personal Income
2011 64,417 5.3% 12,024 1,786,443 3.61% 109,300,000$ 61,183$
2012 65,544 4.7% 12,286 1,813,860 3.61% 120,100,000 66,212
2013 66,368 3.6% 12,396 1,840,218 3.61% 134,000,000 72,817
2014 66,861 2.8% 12,483 1,866,208 3.58% 135,200,000 72,446
2015 66,029 2.7% 12,532 1,890,929 3.49% 147,300,000 77,898
2016 66,968 2.9% 12,488 1,919,845 3.49% 167,800,000 * 87,403 *
2017 66,478 2.4% 12,261 1,933,775 3.44% 178,800,000 * 92,462 *
2018 66,649 2.5% 12,230 1,945,911 3.43% 190,000,000 * 97,641 *
2019 67,082 2.1% 11,938 1,956,579 3.43% 199,700,000 * 102,066 *
2020 67,019 5.7% 11,683 1,968,987 3.40% 212,300,000 107,822
Note: Data on personal income and per capita personal income is only available for Santa Clara County.
Source: Beginning in 2015 City population is sourced from the US Census Bureau American Community Survey (via the City of Palo Alto's Official City Data Set)
State of California Employment Development Office (unemployment rate)
Palo Alto Unified School District (school enrollment)
* California Department of Transportation Long‐Term Socio‐Economic Forecasts (personal income). Forecasts from prior years are updated.
CITY OF PALO ALTO
Demographic and Economic Statistics
Last Ten Fiscal Years
63,000
64,000
65,000
66,000
67,000
68,000 City Population
10,000
10,500
11,000
11,500
12,000
12,500
13,000 School Enrollment
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%City Unemployment Rate
161
Number of
Employees Rank
Percentage of Total
City Employment
Number of
Employees Rank
Percentage of Total
City Employment
Lucile Packard Children's Hospital 6,060 1 4.5% 3,549 3 3.2%
Stanford Health Care2 5,500 2 4.1% 5,813 2 5.3%
Hewlett‐Packard Company 5,000 3 3.7% 2,001 5 1.8%
Stanford University2 4,500 4 3.4% 10,223 1 9.3%
Veteran's Affairs Palo Alto Health Care System 3,900 5 2.9% 3,500 4 3.2%
VMware Inc. 3,500 6 2.6%
SAP Labs Inc. 3,500 7 2.6%
Palo Alto Medical Foundation 2,200 8 1.6% 2,000 6 1.8%
Varian Medical Systems 1,400 10 1.0%
Space Systems/Loral 1,250 9 0.9% 1,700 7 1.5%
Wilson Sonsini Goodrich & Rosati 1,500 8 1.4%
Palo Alto Unified School District 1,318 9 1.2%
City of Palo Alto 1,019 10 0.9%
Total 36,810 22.9% 29,074 26.4%
Estimated Total City Day Population:
FY 2020 134,152
FY 2011 110,000
Notes:
Source: 2020 Official City Data Set (total City day population); AtoZ databases; Stanford website.
CITY OF PALO ALTO
Principal Employers
Current Year and Nine Years Ago
FY 20201 FY 2011
Employer
1Available data sources are limited and may be unreliable. The City does not affirm the validity of this data. 2020 numbers are
rounded. Figures may include employees not located within City limits.
2FY20 data was not available for Stanford Health Care and Stanford University. FY18 data was used.
162
163
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2010 2011 2012 2013
Governmental activities
Community Services
Number of theater performances 174 175 175 184
Total hours of athletic field usage2 41,705 42,687 44,226 ‐
Number of rounds of golf 69,791 67,381 65,653 60,153
Enrollment in recreation classes (includes summer camps) 12,880 12,310 11,703 11,598
Planning and Community Environment
Planning applications completed 226 238 204 307
Building permits issued 2,847 3,559 3,320 3,682
Caltrain average weekday boarding3 4,359 4,923 5,730 6,763
Police
Calls for service 55,860 52,159 51,086 54,628
Total arrests 2,451 2,288 2,212 2,274
Parking citations issued 42,591 40,426 41,875 43,877
Animal Services
Number of service calls 2,692 2,804 3,051 2,909
Number of animals handled 3,147 3,323 3,379 2,675
Fire
Calls for service 7,468 7,555 7,796 7,904
Number of fire incidents 182 165 186 150
Number of fire inspections4 1,526 1,807 1,654 2,069
Library
Total number of cardholders 51,969 53,246 60,283 51,007
Total number of items in collection 298,667 314,101 306,160 277,749
Total checkouts 1,624,785 1,476,648 1,559,932 1,512,975
Public Works
Street resurfacing (lane miles) 32 29 40 36
Number of potholes repaired 3,149 2,986 3,047 2,726
Sq. ft. of sidewalk replaced or permanently repaired 54,602 71,174 72,787 82,118
Number of trees planted 201 150 143 245
Tons of materials recycled or composted 48,811 56,586 51,725 47,941
Business‐type activities
Electric
Number of customer accounts 29,430 29,708 29,545 29,299
Residential MWH consumed 163,098 160,318 160,604 156,411
Gas
Number of customer accounts 23,724 23,816 23,915 23,659
Residential therms consumed 11,394,712 11,476,609 11,522,999 10,834,793
Water
Number of customer accounts 20,134 20,248 20,317 20,043
Residential water consumption (CCF) 2,415,467 2,442,415 2,513,595 2,521,930
Wastewater collection
Number of customer accounts 22,231 22,320 22,421 22,152
Millions of gallons processed 8,184 8,652 8,130 7,546
Notes:
2According to the department, this measure was not accurately tracked during FY13 or FY14 and thus are not presented.
3Beginning 2015, data source is Official City Data Set.
Source:
FUNCTIONS/PROGRAMS
4The method for calculating the number of fire inspections changed in FY17. The department uses a more detailed feature which
categorizes inspections by type and location.
CITY OF PALO ALTO
Operating Indicators by Function/Program
Last Ten Fiscal Years1
City of Palo Alto Performance Report (formerly the Service Efforts and Accomplishments Report); 2019 Official City Data Set (Caltrain);
2019 data supplied by City of Palo Alto Departments.
1Ten most recent years available.
Fiscal Year Ended June 30
164
2014 2015 2016 2017 2018 2019
108 172 161 171 160 175
‐ 47,504 65,723 71,431 65,443 67,608
46,527 42,048 42,573 ‐ 6,790 54,619
11,997 12,586 12,974 11,649 10,652 13,553
310 335 383 365 376 260
3,624 3,844 3,492 2,970 3,105 2,918
7,564 8,294 9,622 9,994 9,977 10,400
58,559 59,795 53,870 53,901 55,480 54,479
2,589 3,273 2,988 2,745 2,678 2,388
36,551 41,412 37,624 33,661 37,441 33,496
2,398 2,013 2,421 1,674 1,737 2,550
2,480 2,143 2,184 2,211 2,077 2,125
7,829 8,548 8,882 9,153 8,981 8,843
150 135 150 155 189 133
1,741 1,964 2,806 5,476 9,581 10,984
46,950 51,792 57,307 54,676 56,159 68,034
361,103 429,460 461,292 427,548 472,895 485,157
1,364,872 1,499,406 1,400,926 1,524,614 1,538,118 1,467,038
36 31 39 39 31 10
3,418 2,487 3,435 3,449 2,835 2,929
74,051 120,776 115,293 17,275 38,557 66,662
148 305 387 319 411 403
49,594 50,546 56,438 60,582 57,744 55,900
29,338 29,065 29,304 29,616 29,475 29,616
153,190 145,284 150,112 148,986 149,526 146,036
23,592 23,461 23,467 23,637 23,395 23,664
10,253,776 8,537,754 9,535,377 10,233,669 10,261,276 9,794,177
20,037 20,061 19,994 20,213 20,000 20,012
2,496,549 2,052,176 1,696,383 1,856,879 2,120,588 2,058,663
22,105 21,990 22,016 22,216 21,979 22,216
7,186 6,512 6,387 7,176 6,464 6,958
Fiscal Year Ended June 30
165
2011 2012 2013 2014 2015
FUNCTION/PROGRAM
Public Safety
Fire:
Fire Stations Operated 8 7 7 7 7
Police:
Police Stations 1 1 1 1 1
Police Patrol Vehicles 30 30 30 30 30
Community Services
Acres ‐ Downtown/Urban Parks2 157 157 157 157 157
Acres ‐ Open Space2 3,744 3,744 3,744 3,744 3,752
Acres ‐ Parks and Preserves2 ‐ ‐ ‐ ‐ ‐
Acres ‐ Open Space2 ‐ ‐ ‐ ‐ ‐
Acres ‐ Municipal Golf Course2 ‐ ‐ ‐ ‐ ‐
Parks and Preserves 36 36 36 36 36
Golf Course (see above for acreage) 1 1 1 1 1
Tennis Courts 51 51 51 51 51
Athletic Center 4 4 4 4 4
Community Centers 4 4 4 4 4
Theaters 3 3 3 3 3
Cultural Center/Art Center 1 1 1 1 1
Junior Museum and Zoo 1 1 1 1 1
Swimming Pools 1 1 1 1 1
Nature Center 3 3 3 3 3
Libraries
Libraries 5 5 5 5 5
Public Works:
Number of Trees Maintained 31,993 31,890 31,923 31,757 31,652
Electric Utility1
Miles of Overhead Lines 193 223 222 223 223
Miles of Underground Lines 253 245 246 249 262
Water Utility
Miles of Water Mains 214 234 233 236 236
Gas Utility
Miles of Gas Mains 205 210 210 214 211
Waste Water
Miles of Sanitary Sewer Lines 207 217 217 217 217
Note:
Source: City of Palo Alto
1The City of Palo Alto Utilities Department completed the conversion of its electric system maps to a GIS mapping
system database. Therefore, the distances reported for FY 11/12 and forward are more accurate than the distances
reported in previous years.
2Beginning in 2016 park acreage is sourced from the Official City Data Set. The discrepancy between FY16 and FY17
is because FY16 numbers were derived off GIS parcels identified as parks or zoned in the Open Space Zoning District.
For FY17, Council approved Parks Master Plan numbers were used.
CITY OF PALO ALTO
Capital Asset Statistics by Function/Program
Last Ten Fiscal Years
Fiscal Year Ended June 30
166
2016 2017 2018 2019 2020
7 7 7 7 7
1 1 1 1 1
30 30 30 30 29
‐ ‐ ‐ ‐ ‐
‐ ‐ ‐ ‐ ‐
3,921 174 174 174 174
4,489 4,030 4,030 4,030 4,018
‐ 181 181 181 181
36 36 36 36 37
1 1 1 1 1
51 51 51 51 50
4 4 4 4 4
4 4 4 4 4
3 3 3 3 3
1 1 1 1 1
1 1 1 1 1
1 1 1 1 1
3 3 3 3 3
5 5 5 5 5
31,699 31,712 31,849 31,815 31,819
222 223 222 220 220
268 264 272 274 279
235 236 236 236 236
209 210 210 210 210
216 216 216 216 216
Fiscal Year Ended June 30
167
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Governmental Funds
General Fund:
Administration 83 83 85 83 84 86 87 89 87 86
Community Services 74 74 74 74 76 77 78 79 78 76
Development Services5 ‐ ‐ ‐ ‐ 38 38 36 36 36 ‐
Fire 121 122 119 116 107 107 109 109 98 98
Library 41 41 41 42 44 48 48 48 48 47
Office of Emergency Services4 ‐ ‐ ‐ 3 3 3 3 3 3 3
Planning and Community Environment5 44 43 48 49 28 31 32 30 30 ‐
Planning and Development Services5 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 62
Office of Transportation6 ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ ‐ 6
Police 157 157 154 155 155 155 155 155 155 149
Public Works1 59 56 57 56 53 54 56 55 51 49
Subtotal General Fund 579 576 578 578 588 599 604 604 586 576
All Other Funds:
Capital Projects Fund 24 24 26 27 27 28 31 34 33 36
Special Revenue Fund 2 2 2 9 10 9 10 9 10 11
Total Governmental Funds 605 602 606 614 625 636 645 647 629 623
Enterprise Funds
Public Works2 115 115 104 99 100 95 99 101 101 101
Utilities3 251 251 254 255 258 256 255 257 257 257
Total Enterprise Funds 366 366 358 354 358 351 354 358 358 358
Internal Service Funds
Printing and Mailing 2 2 2 2 2 2 2 2 2 2
Technology 30 30 31 32 32 34 35 36 36 36
Vehicle Replacement 16 16 17 17 17 17 16 16 16 16
Total Internal Service Funds 48 48 50 51 51 53 53 54 54 54
Total 1,019 1,016 1,014 1,019 1,034 1,040 1,052 1,059 1,041 1,035
Notes: 1Fleet and Facilities Management
2Refuse, Storm Drainage, Wastewater Treatment
Numbers adjusted for rounding purposes.
5ln FY15, staff was moved from Planning and Community Environment (PC&E), Public Works and Fire to create Development
Services; In FY20, the Development Services Department was combined with the Planning and Community Environment
Department to form the Planning and Development Services Department.
6ln FY20, the City established the Office of Transportation was formed. Staffing in prior years was included in the Development
Services Department and Planning and Community Environment Department.
4In 2014, emergency services and disaster preparation activities have been transferred from the Fire Department and are shown
in newly created Office of Emergency Services.
3Electric, Gas, Wastewater Collection, Water
CITY OF PALO ALTO
Full‐Time Equivalent City Government Employees by Function
Last Ten Fiscal Years
Full Time Equivalent Employees as of June 30
0
5
10
15
20
25
30
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Fu
l
l
T
i
m
e
E
q
u
i
v
a
l
e
n
t
s
Governmental Funds Internal Service Funds
0
200
400
600
800
1,000
1,200
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Fu
l
l
T
i
m
e
E
q
u
i
v
a
l
e
n
t
s
Governmental Funds Enterprise Funds Internal Service Funds
0
200
400
600
800
1,000
1,200
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Fu
l
l
T
i
m
e
E
q
u
i
v
a
l
e
n
t
s
Governmental Funds Enterprise Funds Internal Service Funds
168
Americans with Disabilities Act Statement
IN COMPLIANCE WITH
AMERICANS WITH DISABILITIES ACT (ADA) OF 1990,
THIS DOCUMENT MAY BE PROVIDED
IN OTHER ACCESSIBLE FORMATS.
For information contact:
ADA Coordinator
City of Palo Alto
250 Hamilton Ave
(650) 329-2550
ADA@cityofpaloalto.org
City of Palo alto
250 Hamilton avenue,
Palo alto, Ca 94301
P 650.329.2100
W CityofPaloalto.org
Spanish explorers named the area
for the tall, twin-trunked redwood
tree they camped beneath in 1769.
Palo Alto incorporated in 1894 and
the State of California granted its
first charter in 1909. The City has
long been known for its innovative
people and its exploration of ideas
that have changed the world. In
Palo Alto, our history has always
been about the future.
PALO ALTO