NEW ISSUE-BOOK-ENTRY ONLY RATINGS: Moody's: Aaa S&P:AA+ Fitch:AA+ (See "RATINGS" herein) In the separate opinions ofKutakRock LLP and Curls Bartling PC., Co-Bond CoW1sel, wider existing laws, regulations, rulings and judicial decisions and asswning the accuracy of certain representations and continuing compliance with certain covenants, interest on the Tax-Exempt Bonds (including any original issue discoW1t properly allocable to the owner of a Tax-Exempt Bond) is excludable from gross income for federal income tax purposes and is not a specific preference item for purposes of the federal alternative minimwn tax. Interest on the Taxable Bonds is included in gross income for federal income tax purposes. Co-Bond Counsel are also of the opinion that interest on the Bonds is exempt from State of California personal income taxes. For a more complete description of such opinions of Co-Bond Cowisel, see "TAXJvfATTERS" herein. $189,735,000 CITY AND COUNTY OF SAN FRANCISCO TAX-EXEMPT GENERAL OBLIGATION BONDS (EARTHQUAKE SAFETY AND EMERGENCY RESPONSE BONDS, 2014), SERIES 2018C $142,145,000 CITY AND COUNTY OF SAN FRANCISCO TAXABLE GENERAL OBLIGATION BONDS (AFFORDABLE HOUSING, 2015), SERIES 2018D $49,955,000 CITY AND COUNTY OF SAN FRANCISCO TAX-EXEMPT GENERAL OBLIGATION BONDS (PUBLIC HEALTH AND SAFETY, 2016), SERIES 2018E Dated: Date of Delivery Due: June 15, as shown in the inside cover The City and County of San Francisco Tax-Exempt General Obligation Bonds (Earthquake Safety and Emergency Response Bonds, 2014), Series 2018C (the "2018C Bonds"), the City and County of San Francisco Taxable General Obligation Bonds (Affordable Housing, 2015), Series 2018D (the "2018D Bonds" or the ''Taxable Bonds"), and the City and County of San Francisco Tax-Exempt General Obligation Bonds (Public Health and Safety, 2016), Series 2018E (the "2018E Bonds," and together with the 2018C Bonds and the 2018D Bonds, the "Bonds") are being issued under the Govenunent Code of the State of California and the Charter of the City and County of San Francisco (the "City"). The 2018C Bonds and the 2018E Bonds are collectively referred to herein as the ''Tax-Exempt Bonds." The issuance of the Bonds has been authorized by certain resolutions adopted by the Board of Supervisors of the City and duly approved by the Mayor of the City, as described under "THE BONDS -Authority for Issuance; Purposes." The proceeds of the Bonds will be used to finance certain public improvements as described herein, and to pay certain costs related to the issuance of 1he Bonds. See "PLAN OF FINANCE" and "SOURCES AND USES OF FUNDS." The Bonds will be dated and bear interest from their date of delivery until paid in full at the rates sho"Wll in the maturity schedule on the inside cover hereof. Interest on the Bonds will be payable on June 15 and December 15 of each year, commencing December 15, 2018. Principal -will be paid at maturity as sho"Wll on the inside cover. See ''THE BONDS - Payment of Interest and Principal." The Bonds will be issued only in fully registered form -without coupons, and when issued will be registered in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"). Individual purchases of the Bonds will be made in book-entry form only, in denominations of$5,000 or any integral multiple thereof. Payments of principal of and interest on the Bonds will be made by the City Treasurer, as paying agent, to DTC, which in turn is required to remit such principal and interest to the DTC Participants for subsequent disbursement to the beneficial owners of the Bonds. See ''THE BONDS - Form and Registration." The Bonds will be subject to redemption prior to maturity, as described herein. See "THE BONDS-Redemption." The Board of Supervisors has the power and is obligated to levy ad valorem taxes without limitation as to rate or amount upon all property subject to taxation by the City (except certain property which is taxable at limited rates) for the payment of the Bonds and the interest thereon when due. See "SECURITY FOR THE BONDS." This cover page contains certain information for general reference only. It is not intended to be a summary of the security for or the terms of the Bonds. Investors are advised to read the entire Official Statement to obtain information essential to the making of an informed investment decision. MATURITY SCHEDULE (See Inside Cover) The Bonds were sold by competitive sale on May 8, 2018, pursuant to the tenns of an Official Notice of Sale, dated April 30, 2018. See "SALE OF THE BONDS"herein. The Bonds are offered when, as and if issued by the City and accepted by the initial purchaser, subject to the approval of legality by Kutak Rock LLP and Curls Bartling PC., Co-Bond Counsel, and certain other conditions. Certain legal matters -will be passed upon for the City by its City Attorney and by Hawkins Delafield & Wood LLP, Disclosure Counsel. It is expected that the Bonds in book-entry form will be available for delivery through the facilities ofDTC on or about May 23, 2018. Dated: May 8, 2018.
Transcript
NEW ISSUE-BOOK-ENTRY ONLY RATINGS: Moody's: Aaa S&P:AA+ Fitch:AA+
(See "RATINGS" herein)
In the separate opinions ofKutakRock LLP and Curls Bartling PC., Co-Bond CoW1sel, wider existing laws, regulations, rulings and judicial decisions and asswning the accuracy of certain representations and continuing compliance with certain covenants, interest on the Tax-Exempt Bonds (including any original issue discoW1t properly allocable to the owner of a Tax-Exempt Bond) is excludable from gross income for federal income tax purposes and is not a specific preference item for purposes of the federal alternative minimwn tax. Interest on the Taxable Bonds is included in gross income for federal income tax purposes. Co-Bond Counsel are also of the opinion that interest on the Bonds is exempt from State of California personal income taxes. For a more complete description of such opinions of Co-Bond Cowisel, see "TAXJvfATTERS" herein.
$189,735,000 CITY AND COUNTY OF SAN FRANCISCO
TAX-EXEMPT GENERAL OBLIGATION BONDS
(EARTHQUAKE SAFETY AND EMERGENCY RESPONSE BONDS, 2014),
SERIES 2018C
$142,145,000 CITY AND COUNTY OF SAN FRANCISCO
TAXABLE GENERAL OBLIGATION BONDS (AFFORDABLE HOUSING, 2015),
SERIES 2018D
$49,955,000 CITY AND COUNTY OF SAN FRANCISCO
TAX-EXEMPT GENERAL OBLIGATION BONDS (PUBLIC HEALTH AND SAFETY, 2016),
SERIES 2018E
Dated: Date of Delivery Due: June 15, as shown in the inside cover
The City and County of San Francisco Tax-Exempt General Obligation Bonds (Earthquake Safety and Emergency Response Bonds, 2014), Series 2018C (the "2018C Bonds"), the City and County of San Francisco Taxable General Obligation Bonds (Affordable Housing, 2015), Series 2018D (the "2018D Bonds" or the ''Taxable Bonds"), and the City and County of San Francisco Tax-Exempt General Obligation Bonds (Public Health and Safety, 2016), Series 2018E (the "2018E Bonds," and together with the 2018C Bonds and the 2018D Bonds, the "Bonds") are being issued under the Govenunent Code of the State of California and the Charter of the City and County of San Francisco (the "City"). The 2018C Bonds and the 2018E Bonds are collectively referred to herein as the ''Tax-Exempt Bonds." The issuance of the Bonds has been authorized by certain resolutions adopted by the Board of Supervisors of the City and duly approved by the Mayor of the City, as described under "THE BONDS -Authority for Issuance; Purposes." The proceeds of the Bonds will be used to finance certain public improvements as described herein, and to pay certain costs related to the issuance of 1he Bonds. See "PLAN OF FINANCE" and "SOURCES AND USES OF FUNDS."
The Bonds will be dated and bear interest from their date of delivery until paid in full at the rates sho"Wll in the maturity schedule on the inside cover hereof. Interest on the Bonds will be payable on June 15 and December 15 of each year, commencing December 15, 2018. Principal -will be paid at maturity as sho"Wll on the inside cover. See ''THE BONDS - Payment of Interest and Principal." The Bonds will be issued only in fully registered form -without coupons, and when issued will be registered in the name of Cede & Co., as nominee of The Depository Trust Company ("DTC"). Individual purchases of the Bonds will be made in book-entry form only, in denominations of$5,000 or any integral multiple thereof. Payments of principal of and interest on the Bonds will be made by the City Treasurer, as paying agent, to DTC, which in turn is required to remit such principal and interest to the DTC Participants for subsequent disbursement to the beneficial owners of the Bonds. See ''THE BONDS - Form and Registration."
The Bonds will be subject to redemption prior to maturity, as described herein. See "THE BONDS-Redemption."
The Board of Supervisors has the power and is obligated to levy ad valorem taxes without limitation as to rate or amount upon all property subject to taxation by the City (except certain property which is taxable at limited rates) for the payment of the Bonds and the interest thereon when due. See "SECURITY FOR THE BONDS."
This cover page contains certain information for general reference only. It is not intended to be a summary of the security for or the terms of the Bonds. Investors are advised to read the entire Official Statement to obtain information essential to the making of an informed investment decision.
MATURITY SCHEDULE
(See Inside Cover)
The Bonds were sold by competitive sale on May 8, 2018, pursuant to the tenns of an Official Notice of Sale, dated April 30, 2018. See "SALE OF THE BONDS"herein.
The Bonds are offered when, as and if issued by the City and accepted by the initial purchaser, subject to the approval of legality by Kutak Rock LLP and Curls Bartling PC., Co-Bond Counsel, and certain other conditions. Certain legal matters -will be passed upon for the City by its City Attorney and by Hawkins Delafield & Wood LLP, Disclosure Counsel. It is expected that the Bonds in book-entry form will be available for delivery through the facilities ofDTC on or about May 23, 2018.
Dated: May 8, 2018.
MATURITY SCHEDULE (Base CUSIP1 Number: 797646)
$170,455,000 Serial 2018C Bonds
Maturity Maturity Date Principal Interest CU SJ Pt Date Principal Interest CUSJPt
t CU SIP is a registered trademark of the American Bankers Association. CUSIP data herein is provided by CUSIP Global Services, managed by S&P Global Market Intelligence on behalf of the American Bankers Association. CUSIP numbers are provided for convenience of reference only. Neither the City nor the initial purchaser take any responsibility for the accuracy of such numbers.
(cl Yield calculated to the first optional redemption date of June 15, 2024 at par.
No dealer, broker, salesperson or other person has been authorized by the City to give any information or to make any representation other than those contained herein and, if given or made, such other information or representation must not be relied upon as having been authorized by the City. This Official Statement does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Bonds, by any person in any jurisdiction in which it is unlawful for such person to make such an offer, solicitation or sale.
The information set forth herein other than that provided by the City, although obtained from sources which are believed to be reliable, is not guaranteed as to accuracy or completeness. The information and expressions of opinion herein are subject to change without notice and neither delivery of this Official Statement nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the City since the date hereof
The City maintains a website. The information presented on such website is not incorporated by reference as part of this Official Statement and should not be relied upon in making investment decisions with respect to the Bonds. Various other websites referred to in this Official Statement also are not incorporated herein by such references.
This Official Statement is not to be construed as a contract with the initial purchaser of the Bonds. Statements contained in this Official Statement which involve estimates, forecasts or matters of opinion, whether or not expressly so described herein, are intended solely as such and are not to be construed as representations of facts.
The issuance and sale of the Bonds have not been registered under the Securities Act of 1933 in reliance upon the exemption provided thereunder by Section 3(a)(2) for the issuance and sale of municipal securities.
IN CONNECTION WITH THE OFFERING OF THE BONDS, THE INITIAL PURCHASER MAY OVERALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE BONDS AT LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
CITY AND COUNTY OF SAN FRANCISCO
MAYOR
Mark E. Farrell
BOARD OF SUPERVISORS
London Breed, Board President, District 5
Sandra Lee Fewer, District 1 Catherine Stefani, District 2
Aaron Peskin, District 3 Katy Tang, District 4 Jane Kim, District 6
CITY ATTORNEY
Dennis J. Herrera
CITY TREASURER
Jose Cisneros
Norman Yee, District 7 Jeff Sheehy, District 8
Hillary Ronen, District 9 Malia Cohen, District 1 0 Ahsha Safai, District 11
OTHER CITY AND COUNTY OFFICIALS
Naomi M. Kelly, City Administrator Benjamin Rosenfield, Controller
Anna Van Degna, Director of Public Finance
PROFESSIONAL SERVICES
Paying Agent and Registrar
Treasurer of the City and County of San Francisco
Kulak Rock LLP Denver, Colorado
Co-Bond Counsel
Curls Bartling P.C Oakland, California
Co-Municipal Advisors
Hilltop Securities Inc. Ross Financial San Francisco, California San Francisco, California
Disclosure Counsel
Hawkins Delafield & Wood LLP San Francisco, California
TABLE OF CONTENTS
INTRODUCTION ............................................................................................................................................... 1 THE CITY AND COUNTY OF SAN FRANCISCO .......................................................................................... 2 THE BONDS ....................................................................................................................................................... 3
Authority for Issuance; Purposes ..................................................................................................................... 3 Form and Registration ...................................................................................................................................... 4 Payment of Interest and Principal .................................................................................................................... 4 Redemption ...................................................................................................................................................... 5 Defeasance ....................................................................................................................................................... 7
SOURCES AND USES OF FUNDS ................................................................................................................... 9 Deposit and Investment of Bond Proceeds ...................................................................................................... 9
DEBT SERVICE SCHEDULES ........................................................................................................................ 11 SECURITY FOR THE BONDS ........................................................................................................................ 15
General ........................................................................................................................................................... 15 Factors Affecting Property Tax Security for the Bonds ................................................................................. 15 City Long-Term Financial Challenges ........................................................................................................... 16 Seismic Risks ................................................................................................................................................. 1 7 Climate Change, Risk of Sea Level Rise and Flooding Damage ................................................................... 1 7 Cybersecurity ................................................................................................................................................. 19 Other Events ................................................................................................................................................... 19
TAX MATTERS ................................................................................................................................................ 20 The Tax-Exempt Bonds ................................................................................................................................. 20 The Taxable Bonds ........................................................................................................................................ 22 Changes in Federal and State Tax Law .......................................................................................................... 26
OTHER LEGAL MATTERS ............................................................................................................................. 26 PROFESSIONALS INVOLVED IN THE OFFERING .................................................................................... 27 ABSENCE OF LITIGATION ........................................................................................................................... 27 CONTINUING DISCLOSURE ......................................................................................................................... 27 RATINGS .......................................................................................................................................................... 28 SALE OF THE BONDS .................................................................................................................................... 28 MISCELLANEOUS ........................................................................................................................................... 29
APPENDICES
APPENDIX A- CITY AND COUNTY OF SAN FRANCISCO - ORGANIZATION AND FINANCES
APPENDIX B - COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY AND COUNTY OF SAN FRANCISCO FOR THE FISCAL YEAR ENDED JUNE 30, 2017
APPENDIX C - CITY AND COUNTY OF SAN FRANCISCO, OFFICE OF THE TREASURER -INVESTMENT POLICY
APPENDIX D -FORM OF CONTINUING DISCLOSURE CERTIFICATE
APPENDIXE -DTC AND THE BOOK ENTRY ONLY SYSTEM
APPENDIX F - PROPOSED FORMS OF OPINIONS OF BOND COUNSEL
OFFICIAL STATEMENT
$189,735,000 CITY AND COUNTY OF SAN FRANCISCO
TAX-EXEMPT GENERAL OBLIGATION BONDS
(EARTHQUAKE SAFETY AND EMERGENCY RESPONSE BONDS, 2014),
SERIES 2018C
$142,145,000 CITY AND COUNTY OF SAN FRANCISCO
TAXABLE GENERAL OBLIGATION BONDS (AFFORDABLE HOUSING, 2015),
SERIES 20180
$49,955,000 CITY AND COUNTY OF SAN FRANCISCO
TAX-EXEMPT GENERAL OBLIGATION BONDS (PUBLIC HEALTH AND SAFETY, 2016),
SERIES 2018E
INTRODUCTION
This Official Statement, including the cover page and the appendices hereto, is provided to furnish information in connection with the public offering by the City and County of San Francisco Tax-Exempt General Obligation Bonds (Earthquake Safety and Emergency Response Bonds, 2014), Series 201 SC (the "201 SC Bonds"), the City and County of San Francisco Taxable General Obligation Bonds (Affordable Housing, 2015), Series 2018D (the "2018D Bonds" or the "Taxable Bonds"), and the City and County of San Francisco Tax-Exempt General Obligation Bonds (Public Health and Safety, 2016), Series 201 SE (the "201 SE Bonds," and together with the 2018C Bonds and the 2018D Bonds, the "Bonds"). The 2018C Bonds and the 201 SE Bonds are collectively referred to herein as the "Tax-Exempt Bonds." The Board of Supervisors of the City has the power and is obligated to levy ad valorem taxes without limitation as to rate or amount upon all property subject to taxation by the City (except certain property which is taxable at limited rates) for the payment of the principal of and interest on the Bonds when due. See "SECURITY FOR THE BONDS" herein.
This Official Statement speaks only as of its date, and the information contained herein is subject to change. Except as required by the Continuing Disclosure Certificate to be executed by the City with respect to the Bonds, the City has no obligation to update the information in this Official Statement. See "CONTINUING DISCLOSURE" and APPENDIX D - "FORM OF CONTINUING DISCLOSURE CERTIFICATE" herein.
Quotations from and summaries and explanations of the Bonds, the resolutions providing for the issuance and payment of the Bonds, and provisions of the constitution and statutes of the State of California (the "State"), the charter of the City (the "Charter") and City ordinances, and other documents described herein, do not purport to be complete, and reference is made to said laws and documents for the complete provisions thereof. Copies of those documents and information concerning the Bonds are available from the City through the Office of Public Finance, 1 Dr. Carlton B. Goodlett Place, Room 336, San Francisco, California 94102-4682. Reference is made herein to various other documents, reports, websites, etc., which were either prepared by parties other than the City, or were not prepared, reviewed and approved by the City with a view towards making an offering of public securities, and such materials are therefore not incorporated herein by such references nor deemed a part of this Official Statement.
THE CITY AND COUNTY OF SAN FRANCISCO
The City is the economic and cultural center of the San Francisco Bay Area and northern California. The limits of the City encompass over 93 square miles, of which 49 square miles are land, with the balance consisting of tidelands and a portion of the San Francisco Bay (the "Bay"). The City is located at the northern tip of the San Francisco Peninsula, bounded by the Pacific Ocean to the west, the Bay and the San FranciscoOakland Bay Bridge to the east, the entrance to the Bay and the Golden Gate Bridge to the north, and San Mateo County to the south. Silicon Valley is about a 40-minute drive to the south, and the wine country is about an hour's drive to the north. The City's population in 2017 was approximately 884,000.
The San Francisco Bay Area consists of the nine counties contiguous to the Bay: Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano and Sonoma Counties ( collectively, the "Bay Area"). The economy of the Bay Area includes a wide range of industries, supplying local needs as well as the needs of national and international markets. Major business sectors in the Bay Area include retail, entertainment and the arts, conventions and tourism, service businesses, banking, professional and financial services, corporate headquarters, international and wholesale trade, multimedia and advertising, biotechnology and higher education. The California State Supreme Court is also based in San Francisco.
The City is a major convention and tourist destination. According to the San Francisco Travel Association, a nonprofit membership organization, during the calendar year 2016, approximately 25.2 million people visited the City and spent an estimated $9.0 billion during their visit, generating approximately $750 million in direct spending to the City from convention visitors.
The City benefits from a highly skilled, educated and professional labor force. The per-capita personal income of the City for fiscal year 2016-17 was $109,048, and the average unemployment rate was 3.1 %. The San Francisco Unified School District operates 16 transitional kindergarten schools, 64 elementary schools serving grades K-5, 8 schools serving grades K-8, 13 middle schools serving grades 6-8, 19 high schools serving grades 9-12, 5 continuation/alternative schools, and 9 County and Court schools. Higher education institutions located in the City include the University of San Francisco, California State University - San Francisco, University of California - San Francisco (a medical school and health science campus), the University of California Hastings College of the Law, the University of the Pacific's School of Dentistry, Golden Gate University, City College of San Francisco (a public community college), the Art Institute of California - San Francisco, the San Francisco Conservatory of Music, the California Culinary Academy, and the Academy of Art University.
San Francisco International Airport ("SFO"), located 14 miles south of downtown San Francisco in an unincorporated area of San Mateo County and owned and operated by the City, is the principal commercial service airport for the Bay Area and one of the nation's principal gateways for Pacific traffic. In fiscal year 2016-17, SFO serviced approximately 54 million passengers and handled 535,581 metric tons of cargo. The City is also served by the Bay Area Rapid Transit District ( electric rail commuter service linking the City with the East Bay and the San Francisco Peninsula, including SFO), Caltrain (a conventional commuter rail line linking the City with the San Francisco Peninsula), and bus and ferry services between the City and residential areas to the north, east and south of the City. San Francisco Municipal Railway, operated by the City, provides bus and streetcar service within the City. The Port of San Francisco (the "Port"), which administers 7.5 miles of Bay waterfront held in "public trust" by the Port on behalf of the people of the State, promotes a balance of maritime-related commerce, fishing, recreational, industrial and commercial activities, and natural resource protection.
The City is governed by a Board of Supervisors elected from 11 districts to serve 4-year terms, and a Mayor who serves as chief executive officer, elected citywide to a 4-year term. The City's original budget for fiscal years 2017-18 and 2018-19 totals $10.12 billion and $10.00 billion, respectively. The General Fund portion of each year's original budget is $5.15 billion in fiscal year 2017-18 and $5.31 billion in fiscal year 2018-19, with the balance being allocated to all other funds, including enterprise fund departments, such as
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SFO, the San Francisco Municipal Transportation Agency, the Port Commission and the San Francisco Public Utilities Commission. The City employed 32,749 full-time-equivalent employees at the end of fiscal year 2016-17, of which 2,124 positions were funded from sources other than the City's General Fund. According to the Controller of the City (the "Controller"), the fiscal year 2017-18 total net assessed valuation of taxable property in the City is approximately $234.1 billion.
More detailed information about the City's governance, organization and finances may be found in APPENDIX A "CITY AND COUNTY OF SAN FRANCISCO ORGANIZATION AND FINANCES" and in APPENDIX B "COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY AND COUNTY OF SAN FRANCISCO FOR THE FISCAL YEAR ENDED TIJNE 30, 2017."
THE BONDS
Authority for Issuance; Purposes
The Bonds will be issued under the Govermnent Code of the State and the Charter. The City authorized the issuance of the 201 SC Bonds by Resolution No. 313-14 and Resolution No. 111-18, adopted by the Board of Supervisors of the City on July 29, 2014 and April 24, 2018, respectively, and duly approved by the Mayor of the City August 7, 2014 and April 27, 2018, respectively (together, the "201 SC Resolution"). The City authorized the issuance of the 2018D Bonds by Resolution No. 407-16 and Resolution No. 112-18, adopted by the Board of Supervisors of the City on September 20, 2016 and April 24, 2018, respectively, and duly approved by the Mayor of the City on September 29, 2016 and April 27, 2018, respectively (together, the "2018D Resolution"). The City authorized the issuance of the 2018E Bonds by Resolution No. 514-16 and Resolution No. 113-18, adopted by the Board of Supervisors of the City on December 6, 2016 and April 24, 2018, respectively, and duly approved by the Mayor of the City on December 16, 2016 and April 27, 2018, respectively (together, the "20 I SE Resolution," and with the 20 I SC Resolution and the 20 I SD Resolution, the "Resolutions").
The 2018C Bonds will constitute the third and final series of bonds to be issued from an aggregate authorized amount of $400,000,000 of City and County of San Francisco General Obligation Bonds (Earthquake Safety and Emergency Response Bonds, 2014), duly approved by more than two-thirds of the voters voting on Proposition A at an election held on June 3, 2014 ("Proposition A (2014)"), to provide funds for the purposes authorized in Proposition A (2014), which are summarized as follows: to improve fire, earthquake and emergency response by: improving and/or replacing deteriorating cisterns, pipes, and tunnels, and related facilities to ensure firefighters a reliable water supply for fires and disasters; improving and/or replacing neighborhood fire and police stations; replacing certain seismically-unsafe police and medical examiner facilities with earthquake-safe buildings and to pay related costs. The City previously issued $100,670,000 of the bonds authorized by Proposition A (2014) on October 2, 2014 and $109,595,000 of the bonds authorized by Proposition A (2014) on April 20, 2016. After the issuance of the 2018C Bonds, no authorization of unissued bonds will remain under Proposition A (2014 ).
The 20 I SD Bonds will constitute the second series of bonds to be issued from an aggregate authorized amount of $310,000,000 of City and County of San Francisco Taxable and Tax-Exempt General Obligation Bonds (Affordable Housing, 2015), duly approved by more than two-thirds of the voters voting on Proposition A at an election held on November 3, 2015 ("Proposition A (2015)"), to provide funds for the purposes authorized in Proposition A (2015), which are summarized as follows: to finance the construction, development, acquisition, and preservation of housing affordable to low- and middle-income households through programs that will prioritize vulnerable populations such as San Francisco's working families, veterans, seniors, disabled persons; to assist in the acquisition, rehabilitation, and preservation of affordable rental apartment buildings to prevent the eviction of long-term residents; to repair and reconstruct dilapidated public housing; to fund a middle-income rental program; and to provide for homeownership down payment assistance opportunities for educators and middle-income households. The City previously issued $75,130,000
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of the bonds authorized by Proposition A (2015) on November I, 2016. After the issuance of the 2018D Bonds, approximately $92,725,000 ofunissued bonds will remain under Proposition A (2015).
The 20 I SE Bonds will constitute the second series of bonds to be issued from an aggregate authorized amount of $350,000,000 of City and County of San Francisco Taxable and Tax-Exempt General Obligation Bonds (Public Health and Safety, 2016), duly approved by more than two-thirds of the voters voting on Proposition A at an election held on June 7, 2016 ("Proposition A (2016)"), to provide funds for the purposes authorized in Proposition A (2016), which are summarized as follows: to protect public health and safety, improve community medical and mental health care services, earthquake safety, and emergency medical response; to seismically improve, and modernize neighborhood fire stations and vital public health and homeless service sites; to construct a seismically safe and improved San Francisco Fire Department ambulance deployment facility; and to pay related costs. The City previously issued $173, 120,000 of the bonds authorized by Proposition A (2016) on February I, 2017. After the issuance of the 2018E Bonds, approximately $126,925,000 ofunissued bonds will remain under Proposition A (2016).
The Administrative Code of the City (the "Administrative Code"), Proposition A (2014), Proposition A (2015) and Proposition A (2016) provide that, to the extent permitted by law, 0.1 % of the gross proceeds of all proposed bonds, including the Bonds, be deposited by the Controller and used to fund the costs of the City's independent citizens' general obligation bond oversight committee. The committee was created by the Administrative Code and is appointed by the Board of Supervisors of the City to inform the public concerning the expenditure of general obligation bond proceeds in accordance with the voter authorization.
Form and Registration
The Bonds will be issued in the principal amounts set forth on the inside cover hereof, in the denomination of $5,000 each or any integral multiple thereof, and will be dated their date of delivery. The Bonds will be issued in fully registered form, without coupons. The Bonds will be initially registered in the name of Cede & Co. as registered owner and nominee for The Depository Trust Company ("DTC"), which is required to remit payments of principal and interest to the DTC Participants for subsequent disbursement to the beneficial owners of the Bonds. See APPENDIX E - "DTC AND THE BOOK-ENTRY ONLY SYSTEM"
Payment of Interest and Principal
Interest on the Bonds will be payable on each June 15 and December 15 to maturity or prior redemption, commencing December 15, 2018, at the interest rates shown on the inside cover hereof. Interest will be calculated on the basis of a 360-day year comprised of twelve 30-day months. The City Treasurer will act as paying agent and registrar with respect to the Bonds. The interest on the Bonds will be payable in lawful money of the United States to the Registered Owner whose name appears on the Bond registration books of the City Treasurer as the owner thereof as of the close of business on the last day of the month immediately preceding an interest payment date (the "Record Date"), whether or not such day is a business day. Each Bond authenticated on or before November 30, 2018 will bear interest from the date of delivery. Every other Bond will bear interest from the interest payment date next preceding its date of authentication unless it is authenticated as of a day during the period from the Record Date next preceding any interest payment date to the interest payment date, inclusive, in which event it will bear interest from such interest payment date; provided, that if, at the time of authentication of any Bond, interest is then in default on the Bonds, such Bond will bear interest from the interest payment date to which interest has previously been paid or made available for payment on the Bonds or from the date of delivery of the Bonds if the first interest payment is not made.
The Bonds will mature on the dates shown on the inside cover page hereof The Bonds will be subject to redemption prior to maturity, as described below. See "- Redemption" below. The principal of the Bonds will be payable in lawful money of the United States to the owner thereof upon the surrender thereof at maturity or earlier redemption at the office of the City Treasurer.
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Redemption
Optional Redemption of the Bonds
The 2018C Bonds and the 2018E Bonds maturing on or before June 15, 2024 will not be subject to redemption prior to their respective stated maturity dates. The 2018D Bonds maturing on or before June 15, 2028 will not be subject to redemption prior to their respective stated maturity dates.
The 2018C Bonds and the 2018E maturing on or after June 15, 2025 will be subject to optional redemption prior to their respective stated maturity dates, at the option of the City, from any source of available funds, as a whole or in part on any date (with the maturities to be redeemed to be determined by the City and by lot within a maturity), on or after June 15, 2024, at the redemption price equal to the principal amount of the Bonds redeemed, together with accrued interest to the date fixed for redemption (the "Redemption Date"), without premium.
The 2018D Bonds maturing on or after June 15, 2029 will be subject to optional redemption prior to their respective stated maturity dates, at the option of the City, from any source of available funds, as a whole or in part on any date (with the maturities to be redeemed to be determined by the City and pro rata within a maturity), on or after June 15, 2028, at the redemption price equal to the principal amount of the Bonds redeemed, together with accrued interest to the Redemption Date, without premium.
Mandatory Redemption
The 2018C Bonds maturing on June 15, 2038 will be subject to redemption prior to their stated maturity date, in part, by lot, from mandatory sinking fund payments, on each June 15, as shown in the table below, at a redemption price equal to the principal amount thereof plus accrued interest thereon to the Redemption Date, without premium.
Mandatory Sinking Fund Redemption Date
(June 15)
1 Maturity
2037 20381
Sinking Fund Payment Principal Amount
$9,475,000 9,805,000
The 2018D Bonds maturing on June 15, 2038 will be subject to redemption prior to their stated maturity date, in part, pro rata, from mandatory sinking fund payments, on each June 15, as shown in the table below, at a redemption price equal to the principal amount thereof plus accrued interest thereon to the Redemption Date, without premium.
Whenever less than all of the outstanding Bonds are called for redemption on any one date, the Director of Public Finance will select the maturities of Bonds to be redeemed in his or her sole discretion.
Whenever less than all the outstanding 201SC Bonds or 201SE Bonds maturing on any one date are called for redemption on any date, the particular 20 l SC Bonds or 20 l SE Bonds or portions thereof to be redeemed will be selected by lot, in any manner which the Director of Public Finance deems fair Whenever less than all the outstanding 20 l SD Bonds maturing on any one date are called for redemption on any date, the particular 201SD Bonds or portions thereof to be redeemed will be selected on a pro rata basis. If the Director of Public Finance does not provide DTC with the necessary information and identify the redemption as on a pro rata basis, the 201 SD Bonds will be selected for redemption by lot in accordance with DTC procedures. The Bonds may be redeemed in denominations of $5,000 or any integral multiple thereof
If the Bonds to be optionally redeemed are also subject to mandatory redemption, the Director of Public Finance will designate the mandatory sinking fund payment or payments ( or portions thereof) against which the principal amount of the Bonds optionally redeemed will be credited.
Notice of Redemption
The City Treasurer will mail, or cause to be mailed, notice of any redemption of the Bonds, postage prepaid, to the respective registered owners thereof at the addresses appearing on the Bond registration books not less than 20 days and not more than 60 days prior to the Redemption Date.
Notice ofredemption also will be given, or caused to be given, by the City Treasurer, by (i) registered or certified mail, postage prepaid, (ii) confirmed facsimile transmission, (iii) overnight delivery service, or (iv) to the extent applicable to the intended recipient, email or similar electronic means, to (a) all organizations registered with the Securities and Exchange Commission as securities depositories and (b) such other services or organizations as may be required in accordance with the Continuing Disclosure Certificate. See "CONTINUING DISCLOSURE" and APPENDIX D - "FORM OF CONTINUING DISCLOSURE CERTIFICATE" herein.
Each notice ofredemption will (a) state the Redemption Date; (b) state the redemption price; ( c) state the maturity dates of the Bonds called for redemption, and, if less than all of any such maturity is called for redemption, the distinctive numbers of the Bonds of such maturity to be redeemed, and in the case of a Bond redeemed in part only, the respective portions of the principal amount thereof to be redeemed; ( d) state the CUSIP number, if any, of each Bond to be redeemed; ( e) require that such Bonds be surrendered by the owners at the office of the City Treasurer or his or her agent; and (f) give notice that interest on such Bonds or portions of such Bonds to be redeemed will cease to accrue after the designated Redemption Date. Any notice of optional redemption may be conditioned on the receipt of funds or any other event specified in the notice. See "-Conditional Notice; Right to Rescind Notice of Optional Redemption" below.
The actual receipt by the owner of any Bond of such notice of redemption will not be a condition precedent to redemption of such Bond, and failure to receive such notice, or any defect in such notice, will not affect the validity of the proceedings for the redemption of such Bond or the cessation of the accrual of interest on such Bond on the Redemption Date.
Effect of Notice of Redemption
When notice of optional redemption has been given as described above, and when the amount necessary for the redemption of the Bonds called for redemption (principal, premium, if any and accrued interest to the Redemption Date) is set aside for that purpose in the respective redemption account for the Bonds (the "Redemption Account") established under the respective Resolution, the Bonds designated for
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redemption will become due and payable on the Redemption Date, and upon presentation and surrender of said Bonds at the place specified in the notice of redemption, those Bonds will be redeemed and paid at said redemption price out of the respective Redemption Account. No interest will accrue on such Bonds called for redemption after the Redemption Date and the registered owners of such Bonds will look for payment of such Bonds only to the respective Redemption Account. Moneys held in each respective Redemption Account will be invested by the City Treasurer pursuant to the City's policies and guidelines for investment of moneys in the General Fund of the City. See APPENDIX C - "CITY AND COUNTY OF SAN FRANCISCO, OFFICE OF THE TREASURER - INVESTMENT POLICY."
Conditional Notice; Right to Rescind Notice of Optional Redemption
Any notice of optional redemption may provide that such redemption is conditioned upon: (i) deposit of sufficient moneys in the respective Redemption Account to redeem the applicable Bonds called for redemption on the anticipated Redemption Date, or (ii) the occurrence of any other event specified in the notice of redemption. In the event that such conditional notice of optional redemption has been given and on the scheduled Redemption Date (i) sufficient moneys to redeem the Bonds have not been deposited or (ii) any other event specified in the notice of redemption did not occur, such Bonds for which notice of conditional optional redemption was given will not be redeemed on the anticipated Redemption Date and will remain Outstanding for all purposes of the respective Resolution and the redemption not occurring will not constitute a default under the respective Resolution.
In addition, the City may rescind any optional redemption and notice thereof for any reason on any date prior to any Redemption Date by causing written notice of the rescission to be given to the Registered Owner of all Bonds so called for redemption. Notice of such rescission of redemption will be given in the same manner notice of redemption was originally given. The actual receipt by the Registered Owner of any Bond of notice of such rescission will not be a condition precedent to rescission, and failure to receive such notice or any defect in such notice so mailed will not affect the validity of the rescission.
Defeasance
Payment of all or any portion of the Bonds may be provided for prior to such Bonds' respective stated maturities by irrevocably depositing with the City Treasurer ( or any commercial bank or trust company designated by the City Treasurer to act as escrow agent with respect thereto): (a) an amount of cash equal to the principal amount of all of such Bonds or a portion thereof, and all unpaid interest thereon to maturity, except that in the case of Bonds which are to be redeemed prior to such Bonds' respective stated maturities and in respect of which notice of such redemption will have been given as described above or an irrevocable election to give such notice will have been made by the City, the amount to be deposited will be the principal amount thereof, all unpaid interest thereon to the Redemption Date, and premium, if any, due on such Redemption Date; or (b) Defeasance Securities (as defined below) not subject to call, except as described in the definition below, maturing and paying interest at such times and in such amounts, together with interest earnings and cash, if required, as will, without reinvestment, as certified by an independent certified public accountant, be fully sufficient to pay the principal and all unpaid interest to maturity, or to the Redemption Date, as the case may be, and any premium due on the Bonds to be paid or redeemed, as such principal and interest come due; provided, that, in the case of the Bonds which are to be redeemed prior to maturity, notice of such redemption will be given as described above or an irrevocable election to give such notice will have been made by the City; then, all obligations of the City with respect to said outstanding Bonds will cease and terminate, except only the obligation of the City to pay or cause to be paid from the funds deposited as described in this paragraph, to the owners of said Bonds all sums due with respect thereto, and the tax covenant obligations of the City with respect to the Tax-Exempt Bonds; provided, that the City will have received an opinion of nationally recognized bond counsel that provision for the payment of said Bonds has been made as required by the respective Resolution.
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As used in this section, the following terms have the meanings given below:
"Defeasance Securities" means any of the following which at the time are legal investments under the laws of the State of California for the moneys proposed to be invested therein: (1) United States Obligations (as defined below); and (2) Pre-refunded fixed interest rate municipal obligations meeting the following conditions: (a) the municipal obligations are not subject to redemption prior to maturity, or the trustee or paying agent has been given irrevocable instructions concerning their calling and redemption and the issuer has covenanted not to redeem such obligations other than as set forth in such instructions; (b) the municipal obligations are secured by cash or United States Obligations; ( c) the principal of and interest on the United States Obligations (plus any cash in the escrow fund or the applicable Redemption Account) are sufficient to meet the liabilities of the municipal obligations; ( d) the United States Obligations serving as security for the municipal obligations are held by an escrow agent or trustee; (e) the United States Obligations are not available to satisfy any other claims, including those against the trustee or escrow agent; and (f) the municipal obligations are rated (without regard to any numerical modifier, plus or minus sign or other modifier), at the time of original deposit to the escrow fund, by any two Rating Agencies ( as defined below) not lower than the rating then maintained by the respective Rating Agency on such United States Obligations.
"United States Obligations" means (i) direct and general obligations of the United States of America, or obligations that are unconditionally guaranteed as to principal and interest by the United States of America, including without limitation, the interest component of Resolution Funding Corporation (REFCORP) bonds that have been stripped by request to the Federal Reserve Bank of New Yark in book-entry form, or (ii) any security issued by an agency or instrumentality of the United States of America that is selected by the Director of Public Finance that results in the escrow fund being rated by any two Rating Agencies at the time of the initial deposit to the escrow fund and upon any substitution or subsequent deposit to the escrow fund, no lower than the rating then maintained by the respective Rating Agency on United States Obligations described in (i) herein.
"Rating Agencies" means Moody's Investors Service, Fitch Ratings, and S&P Global Ratings, or any other nationally-recognized bond rating agency that is the successor to any of the foregoing rating agencies or that is otherwise recognized as a national rating agency after the date of adoption of the related Resolution.
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SOURCES AND USES OF FUNDS
The following are the estimated sources and uses of funds in connection with the Bonds:
Sources 2018C 20180 2018E Total
Principal Amount of Bonds $189,735,000 $142, 145,000 $49,955,000 $381,835,000 Net Original Issue Premium 9,018,044 985,799 1,826,379 11,830,222
Total Sources of Funds $198,753,044 $143,130,799 $51,781,379 $393,665,222
Uses
Deposit to Project Subaccount $188,206,891 $140, 767,960 $49,558,969 $378,533,820 Deposit to Bond Subaccount 9,018,044 985,799 1,826,379 11,830,222 Oversight Committee 189,735 142, 145 49,955 381,835 Underwriter's Discount 1,009,295 985,292 257,768 2,252,355 Costs of Issuance ' 329,079 249,603 88,308 666,990
Total Uses of Funds $198,753,044 $143,130,799 $51,781,379 $393,665,222
Includes fees for services of rating agencies, Co-Municipal Advisors, Co-Bond Counsel, Disclosure Counsel, costs to the City, printing costs, other miscellaneous costs associated with the issuance of the Bonds, and rounding amounts.
Deposit and Investment of Bond Proceeds
2018C Bond Proceeds. Any bid premium received upon the delivery of the 2018C Bonds, and all taxes collected for payment of the 2018C Bonds, will be deposited into a special subaccount established for the payment of the 201 SC Bonds. The subaccount was created by the 201 SC Resolution specifically for payment of principal of and interest on the 201 SC Bonds (the "201 SC Bond Subaccount").
All remaining proceeds of the sale of the 2018C Bonds are required to be deposited by the City Treasurer into a special subaccount within the project account created by the City to hold proceeds of the sale of all of the Proposition A (2014) bonds, which proceeds are required to be applied exclusively to the purposes approved by the voters in Proposition A (2014 ), and to pay costs of issuance of such bonds. See "THE BONDS - Authority for Issuance; Purposes." The subaccount was created by the 2018C Resolution specifically to hold the proceeds of the 201 SC Bonds (the "201 SC Project Subaccount").
2018D Bond Proceeds. Any bid premium received upon the delivery of the 201 SD Bonds, and all taxes collected for payment of the 201 SD Bonds, will be deposited into a special subaccount established for the payment of the 20 I SD Bonds. The subaccount was created by the 20 I SD Resolution specifically for payment of principal of and interest on the 201 SD Bonds (the "201 SD Bond Subaccount").
All remaining proceeds of the sale of the 2018D Bonds are required to be deposited by the City Treasurer into a special subaccount within the project account created by the City to hold proceeds of the sale of all of the Proposition A (2015) bonds, which proceeds are required to be applied exclusively to the purposes approved by the voters in Proposition A (2015), and to pay costs of issuance of such bonds. See "THE BONDS - Authority for Issuance; Purposes." The subaccount was created by the 2018D Resolution specifically to hold the proceeds of the 201 SD Bonds (the "201 SD Project Subaccount").
2018E Bond Proceeds. Any bid premium received upon the delivery of the 2018E Bonds, and all taxes collected for payment of the 201 SE Bonds, will be deposited into a special subaccount established for the payment of the 2018E Bonds. The subaccount was created by the 2018E Resolution specifically for payment of principal of and interest on the 201 SE Bonds (the "201 SE Bond Subaccount").
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All remaining proceeds of the sale of the 2018E Bonds are required to be deposited by the City Treasurer into a special subaccount within the project account created by the City to hold proceeds of the sale of all of the Proposition A (2016) bonds, which proceeds are required to be applied exclusively to the purposes approved by the voters in Proposition A (2016), and to pay costs of issuance of such bonds. See "THE BONDS - Authority for Issuance; Purposes." The subaccount was created by the 2018E Resolution specifically to hold the proceeds of the 201 SE Bonds (the "201 SE Project Subaccount").
Under the Resolutions, the 201 SC Bond Subaccount, the 201 SC Project Subaccount, the 201 SD Bond Subaccount, the 201 SD Project Subaccount, the 201 SE Bond Subaccount and the 201 SE Project Subaccount may each be invested in any investment of the City in which moneys in the General Fund of the City are invested. The City Treasurer may commingle any of the moneys held in any such account with other City moneys, or deposit amounts credited to such accounts into a separate fund or funds for investment purposes only. All interest earned on any such account will be retained in that account. See APPENDIX C - "CITY AND COUNTY OF SAN FRANCISCO, OFFICE OF THE TREASURER-INVESTJ\1ENT POLICY"
A portion of the proceeds of the Bonds will be used to pay certain costs related to the issuance of the Bonds. Up to 0.1 % of the proceeds of each series of the Bonds are required to be appropriated to fund the Citizens' General Obligation Bond Oversight Committee, created to oversee various general obligation bond programs of the City. See "THE BONDS -Authority for Issuance; Purposes" herein.
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DEBT SERVICE SCHEDULES
The consolidated scheduled debt service payable with respect to the Bonds is shown in the table below (assuming no early redemptions). For debt service payable with respect to the City's other general obligation bonds, see Table A-22 under APPENDIX A - "CITY AND COUNTY OF SAN FRANCISCO ORGANIZATION AND FINANCES - CAPITAL FINANCING AND BONDS - Tax-Supported Debt Service."
City and County of San Francisco General Obligation Bonds
Series 2018C, Series 20180 and Series 2018E<1H2l
Total Principal Pa:rment Date Princi[>al Interest and Interest Fiscal Year Total
Total $381,835,000 $128,399,433 $510,234,433 $510,234,433
Cl) A portion of the debt service will be paid from original issue premium deposited in the Bond Subaccounts relating to the Bonds. See "SOURCES AND USES OF FUNDS."
C2> Amounts are rounded off to the nearest dollar.
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Scheduled debt service payable with respect to the 2018C Bonds is as follows (assuming no early redemptions):
City and County of San Francisco General Obligation Bonds
Series 201sc<1><2>
Total Principal Payment Date Principal Interest and Interest Fiscal Year Total
Total $189,735,000 $63,686,505 $253,421,505 $253,421,505
Cl) A portion of the debt service will be paid from original issue premium deposited in the 2018C Bond Subaccollllt relating to the 2018C Bonds. See "SOURCES AND USES OF FUNDS."
C2> Amounts are rounded off to the nearest dollar.
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Scheduled debt service payable with respect to the 2018D Bonds is as follows (assuming no early redemptions):
City and County of San Francisco General Obligation Bonds
Series 20180<1><2>
Total Principal Payment Date Principal Interest and Interest Fiscal Year Total
Total $142,145,000 $48,705,004 $190,850,004 $190,850,004
Cl) A portion of the debt service will be paid from original issue premium deposited in the 2018D Bond Subaccount relating to the 2018D Bonds. See "SOURCES AND USES OF FUNDS."
C2> Amounts are rounded off to the nearest dollar.
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Scheduled debt service payable with respect to the 2018E Bonds is as follows (assuming no early redemptions):
City and County of San Francisco General Obligation Bonds
Series 2018E<1><2>
Total Principal Payment Date Principal Interest and Interest Fiscal Year Total
Total $49,955,000 $16,007,923 $65,962,923 $65,962,923
Cl) A portion of the debt service will be paid from original issue premium deposited in the 201 SE Bond Subaccount relating to the 2018E Bonds. See "SOURCES AND USES OF FUNDS."
C2> Amounts are rounded off to the nearest dollar.
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SECURITY FOR THE BONDS
General
The Board of Supervisors of the City has the power and is obligated, and under the Resolutions has covenanted, to levy ad valorem taxes without limitation as to rate or amount upon all property subject to taxation by the City (except certain property which is taxable at limited rates) for the payment of the principal of and interest on the Bonds when due.
Factors Affecting Property Tax Security for the Bonds
The annual property tax rate for repayment of the Bonds will be based on the total assessed value of taxable property in the City and the scheduled debt service on the Bonds in each year, less any other lawfully available funds applied by the City for repayment of the Bonds. Fluctuations in the annual debt service on the Bonds, the assessed value of taxable property in the City, and the availability of such other funds in any year, may cause the annual property tax rate applicable to the Bonds to fluctuate. Issuance by the City of additional authorized bonds payable from ad valorem property taxes may cause the overall property tax rate to increase.
Discussed below are certain factors that may affect the City's ability to levy and collect sufficient taxes to pay scheduled debt service on the Bonds each year. See APPENDIX A - "CITY AND COUNTY OF SAN FRANCISCO ORGANIZATION AND FINANCES" for additional information on these factors.
Total Assessed Value of Taxable Property in the City. The greater the assessed value of taxable property in the City, the lower the tax rate necessary to generate taxes sufficient to pay scheduled debt service on bonds. The total net assessed valuation of taxable property in the City in fiscal year 2017-18 is approximately $234.1 billion. During economic downturns, declining market values of real estate, increased foreclosures, and increases in requests submitted to the Assessor and the Assessment Appeals Board for reductions in assessed value have generally caused a reduction in the assessed value of some properties in the City. See APPENDIX A - "CITY AND COUNTY OF SAN FRANCISCO ORGANIZATION AND FINANCES -PROPER TY TAXATION -Assessed Valuations, Tax Rates and Tax Delinquencies."
Natural and economic forces can affect the assessed value of taxable property in the City. The City is located in a seismically active region, and damage from an earthquake in or near the City could cause moderate to extensive or total damage to taxable property. See "Seismic Risks" below. Other natural or man-made disasters, such as flood, fire, toxic dumping or acts of terrorism, could also cause a reduction in the assessed value of taxable property within the City. Economic and market forces, such as a downturn in the Bay Area's economy generally, can also affect assessed values, particularly as these forces might reverberate in the residential housing and commercial property markets. In addition, the total assessed value can be reduced through the reclassification of taxable property to a class exempt from taxation, whether by ownership or use (such as exemptions for property owned by State and local agencies and property used for qualified educational, hospital, charitable or religious purposes).
Concentration of Taxable Property Ownership. The more property (by assessed value) owned by any single assessee, the more exposure of tax collections to weakness in that taxpayer's financial situation and ability or willingness to pay property taxes. As of July I, 2017, no single assessee owned more than 0.43% of the total taxable assessed value in the City. See APPENDIX A - "CITY AND COUNTY OF SAN FRANCISCO ORGANIZATION AND FINANCES -PROPERTY TAXATION - Tax Levy and Collection."
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Property Tax Rates. One factor in the ability of taxpayers to pay additional taxes for general obligation bonds is the cwnulative rate of tax. The total tax rate per $100 of assessed value (including the basic countywide 1 % rate required by statute) is discussed further in APPENDIX A- "CITY AND COUNTY OF SAN FRANCISCO ORGANIZATION AND FINANCES - PROPERTY TAXATION - Assessed Valuations, Tax Rates and Tax Delinquencies."
Debt Burden on Owners of Taxable Property in the City. Another measure of the debt burden on local taxpayers is total debt as a percentage of taxable property value. Issuance of general obligation bonds by the City is limited under Section 9.106 of the Charter to 3.00% of the assessed value of all taxable real and personal property located within the City's boundaries. For purposes of this provision of the Charter, the City calculates its debt limit on the basis of total assessed valuation net of non-reimbursable and homeowner exemptions. On this basis, the City's gross general obligation debt limit for fiscal year 2017-18 is approximately $7.02 billion, based on a net assessed valuation of approximately $234.1 billion. As of April 15, 2018, the City had outstanding approximately $2.32 billion in aggregate principal amount of general obligation bonds, which equals approximately 0.99% of the net assessed valuation for fiscal year 2017-18. See APPENDIX A - "CITY AND COUNTY OF SAN FRANCISCO ORGANIZATION AND FINANCES CAPITAL FINANCING AND BONDS."
Additional Debt; Authorized but U nissued Bonds. Issuance of additional authorized bonds can cause the overall property tax rate to increase. As of April 15, 2018, the City had voter approval to issue up to $1.12 billion in additional aggregate principal amount of new bonds payable from ad valorem property taxes. See APPENDIX A - "CITY AND COUNTY OF SAN FRANCISCO ORGANIZATION AND FINANCES -CAPITAL FINANCING AND BONDS - General Obligation Bonds." In addition, the City expects that it will propose further bond measures to the voters from time to time to help meet its capital needs. The City's most recent adopted 10-year capital plan sets forth $35.2 billion of capital needs for all City departments. See APPENDIX A - "CITY AND COUNTY OF SAN FRANCISCO ORGANIZATION AND FINANCES CAPITAL FINANCING AND BONDS - Capital Plan."
City Long-Term Financial Challenges
The following discussion highlights certain long-term challenges facing the City and is not meant to be an exhaustive discussion of challenges facing the City. Notwithstanding the City's strong economic and financial performance during the recent recovery and despite significant City initiatives to improve public transportation systems, expand access to healthcare and modernize parks and libraries, the City faces several long-term financial challenges and risks described below.
Significant capital investments are proposed in the City's adopted 10-year capital plan. However identified funding resources are below those necessary to maintain and enhance the City's physical infrastructure. As a result, over $11 billion in capital needs are deferred from the capital plan's 10-year horizon. Over two-thirds of these unfunded needs relate to the City's transportation and waterfront infrastructure, where state of good repair investment has lagged for decades.
In addition, the City faces long term challenges with respect to the management of pension and postemployment retirement obligations. The City has taken significant steps to address long-term unfunded liabilities for employee pension and other post-employment benefits, including retiree health obligations, yet significant liabilities remain. In recent years, the City and voters have adopted significant changes that should mitigate these unfunded liabilities over time, including adoption of lower-cost benefit tiers, increases to employee and employer contribution requirements, and establishment of a trust fund to set-aside funding for future retiree health costs. The financial benefit from these changes will phase in over time, however, leaving ongoing financial challenges for the City in the shorter term. Further, the size of these liabilities is based on a number of assumptions, including but not limited to assumed investment returns and actuarial assumptions. It is possible that actual results will differ materially from current assumptions, and such changes in investment returns or other actuarial assumptions could increase budgetary pressures on the City.
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Lastly, while the City has adopted a nwnber of measures to better position its operating budget for future economic downturns, these measures may not be sufficient. Economic stabilization reserves have grown significantly during the last four fiscal years and now exceed pre-recession peaks, but remain below adopted target levels of 1 Oo/o of discretionary General Fund revenues.
There is no assurance that other challenges not discussed in this Official Statement may become material to investors in the future. For more information, see APPENDIX A - "CITY AND COUNTY OF SAN FRANCISCO ORGANIZATION AND FINANCES" and in APPENDIX B - "COJ\1PREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY AND COUNTY OF SAN FRANCISCO FOR THE FISCAL YEAR ENDED JUNE 30, 2017."
Seismic Risks
The City is located in a seismically active region. Active earthquake faults underlie both the City and the surrounding Bay Area, including the San Andreas Fault, which passes within about three miles of the City's border, and the Hayward Fault, which runs under Oakland, Berkeley and other cities on the east side of San Francisco Bay, about 10 miles away. Significant seismic events include the 1989 Loma Prieta earthquake, centered about 60 miles south of the City, which registered 6.9 on the Richter scale of earthquake intensity. That earthquake caused fires, building collapses, and structural damage to buildings and highways in the City and surrounding areas. The San Francisco-Oakland Bay Bridge, the only east-west vehicle access into the City, was closed for a month for repairs, and several highways in the City were permanently closed and eventually removed. On August 24, 2014, the San Francisco Bay Area experienced a 6.0 earthquake centered near Napa along the West Napa Fault. The City did not suffer any material damage as a result of this earthquake.
In March 2015, the Working Group on California Earthquake Probabilities (a collaborative effort of the US. Geological Survey (US.G.S.), the California Geological Survey, and the Southern California Earthquake Center) reported that there is a 72% chance that one or more quakes of about magnitude 6.7 or larger will occur in the San Francisco Bay Area before the year 2045. Such earthquakes may be very destructive. In addition to the potential damage to City-owned buildings and facilities ( on which the City does not generally carry earthquake insurance), due to the importance of San Francisco as a tourist destination and regional hub of commercial, retail and entertainment activity, a major earthquake anywhere in the Bay Area may cause significant temporary and possibly long-term harm to the City's economy, tax receipts, and residential and business real property values.
In early 2016, the Port Commission of the City and County of San Francisco commissioned an earthquake vulnerability study of the Northern Waterfront Seawall. The Seawall was constructed over 100 years ago and sits on reclaimed land, rendering it vulnerable to seismic risk. The Seawall provides flood and wave protection to downtown San Francisco, and stabilizes hundreds of acres of filled land. Preliminary findings of the study indicate that a strong earthquake may cause most of the Seawall to settle and move outward toward the Bay, which would significantly increase earthquake damage and disruption along the waterfront. The Port Commission estimates that seismic retrofitting of the Seawall could cost as much as $3 billion, with another $2 billion or more needed to prepare the Seawall for rising sea levels. The study estimates that approximately $1.6 billion in Port assets and $2.1 billion ofrents, business income, and wages are at risk from major damage to the Seawall.
Climate Change, Risk of Sea Level Rise and Flooding Damage
Numerous scientific studies on global climate change show that sea levels will rise given the increasing temperature of the oceans and growing ocean volume, as land ice melts and runs off into the ocean. Over the past century, the sea level has risen about eight inches around the San Francisco Bay and along the Pacific coast. Such scientific studies also project accelerating sea level rise due to climate change over the coming century. As a result, coastal areas like San Francisco are at risk of substantial flood damage over time
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and this will affect private development as well as public infrastructure, including roads, utilities, emergency services, schools and parks. The City could lose considerable tax revenues and many residents, businesses and governmental operations along the waterfront could be displaced.
The City, including its Port, Department of the Enviromnent and various other departments and agencies, have been preparing for these impacts for many years and have issued a number of public reports. For example, in March 2016, the City released a report entitled "Sea Level Rise Action Plan," identifying geographic zones at risk of sea level rise and providing a framework for adaption strategies to confront these risks. That study shows an upper range of end-of-century projections for permanent sea level rise plus temporary flooding due to 100-year storm of up to 108 inches above 2015 average high tide. The City is working on a citywide adaption plan that will likely be finalized and released in the summer 2018. The goal of the adaption plan is to establish a long-term comprehensive planning framework, identify funding sources and prioritize investments.
In April 2017, the Working Group of the California Ocean Protection Council Science Advisory Team (in collaboration with several state agencies, including the California Natural Resource Agency, the Governor's Office of Planning and Research, and the California Energy Commission) published a report entitled "Rising Seas in California: An Update on Sea Level Rise Science" (the "Sea Level Rise Report") to provide a new synthesis of the state of science regarding sea level rise. The Sea Level Rise Report will provide the basis for State guidance to state and local agencies for incorporating sea-level rise into design, planning, permitting, construction, investment and other decisions. Among many findings, the Sea Level Rise Report indicates that the effects of sea level rise are already being felt in coastal California with more extensive coastal flooding during storms, period tidal flooding, and increased coastal erosion. In addition, the report notes that the rate of ice sheet loss from Greenland and Antarctic ice sheets pose a particular risk of sea level rise for the California coastline.
The City has already incorporated site specific adaption plans in the conditions of approval for certain large waterfront development projects, such as the Candlestick!Hunters Point Shipyard, Treasure Island, Pier 70 and Mission Rock projects. Also, the City has started the process of planning to fortify the Port's seawall from sea level rise, including an initial investment of about $8 million during 2017-2018 and consideration of financing options. The City expects short term upgrades to cost over $500 million and long term upgrades to cost more than $5 billion.
A scientific report issued in March 2018 by professors at UC Berkeley and the University of Arizona suggests that flooding risk from climate change could be exacerbated in the San Francisco Bay Area due to the sinking of soil, known as subsidence. The risk of subsidence affects certain parts of San Francisco built on landfill as well as the San Francisco International Airport. Under the new projections in this report, damage due to flooding could be worse than estimated under earlier climate change studies.
Projections of the impacts of global climate change on San Francisco are complex and depend on many factors that are outside the City's control. The various scientific studies that forecast the amount and timing of sea level rise and its adverse impacts, including flooding risk, are based on assumptions contained in such studies, but actual events may vary materially. Also, the scientific understanding of climate change and its effects continues to evolve. Accordingly, the City is unable to forecast when sea level rise or other adverse impacts of climate change ( e.g., the occurrence and frequency of 100 year storm events and king tides) will occur. In particular the City cannot predict the timing or precise magnitude of adverse economic effects, including, without limitation, material adverse impacts on the business operations or financial condition of the City and the local economy during the term of the Bonds. While the impacts of climate change may be mitigated by the City's past and future investment in adaptation strategies, the City can give no assurance about the net effects of those strategies and whether the City will be required to take additional adaptive mitigation measures.
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The City has filed a lawsuit against the five largest investor-owned oil companies that is pending in the United States District Court, Northern District of California, Case No. 3: l 7-cv-06012-WHA, entitled The People of the State of California, acting by and through the San Francisco City Attorney, Dennis J. Herrera, v. BP P.L.C, et al. In that lawsuit, the City Attorney is seeking to have the companies pay into an equitable abatement fund to help fund investment in sea level rise adaptation infrastructure. While the City believes that its claims are meritorious, the City can give no assurance regarding whether it will be successful and obtain the requested relief from the courts or contributions to the abatement fund from the defendant oil companies.
Cybersecurity
The City, like many other large public and private entities, relies on a large and complex technology environment to conduct its operations, and faces multiple cybersecurity threats including, but not limited to, hacking, viruses, malware and other attacks on its computing and other digital networks and systems (collectively, "Systems Technology"). As a recipient and provider of personal, private, or sensitive information, the City has been the subject of cybersecurity incidents that have resulted in or could have resulted in adverse consequences to the City's Systems Technology and that required a response action to mitigate the consequences. For example, in November 2016, the San Francisco Metropolitan Transportation Agency (the "SFMTA") was subject to a ransomware attack which disrupted some of the SFMTA's internal computer systems. Therefore, the attack did not interrupt Muni train services nor did it compromise customer privacy or transaction information. The SFMTA, however, took the precaution of turning off the ticket machines and fare gates in the Muni Metro subway stations from Friday, November 25 until the morning of Sunday, November 27.
Cybersecurity incidents could result from unintentional events, or from deliberate attacks by unauthorized entities or individuals attempting to gain access to the City's Systems Technology for the purposes of misappropriating assets or information or causing operational disruption and damage. To mitigate the risk of business operations impact and/or damage from cybersecurity incidents or cyber-attacks, the City invests in multiple forms of cybersecurity and operational safeguards. In November 2016, the City adopted a City-wide Cyber Security Policy ("Cyber Policy") to support, maintain, and secure critical infrastructure and data systems. The objectives of the Cyber Policy include the protection of critical infrastructure and information, manage risk, improve cyber security event detection and remediation, and facilitate cyber awareness across all City departments. The City's Department of Technology has established a cybersecurity team to work across all City departments to implement the Cyber Policy. The City's Cyber Policy is reviewed periodically.
The City has also appointed a City Chief Information Security Officer ("CCISO"), who is directly responsible for understanding the business and related cybersecurity needs of the City's 54 departments. The CCISO is responsible for identifying, evaluating, responding, and reporting on information security risks in a manner that meets compliance and regulatory requirements, and aligns with and supports the risk posture of the City.
While City cybersecurity and operational safeguards are periodically tested, no assurances can be given by the City that such measures will ensure against other cybersecurity threats and attacks. Cybersecurity breaches could damage the City's Systems Technology and cause material disruption to the City's operations and the provision of City services. The costs of remedying any such damage or protecting against future attacks could be substantial. Further, cybersecurity breaches could expose the City to material litigation and other legal risks, which could cause the City to incur material costs related to such legal claims or proceedings.
Other Events
Seismic events, wildfires, tsunamis, and other natural or man-made events may damage City infrastructure and adversely impact the City's ability to provide municipal services. For example, in August
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2013, a massive wildfire in Tuolwnne County and the Stanislaus National Forest burned over 257,135 acres (the "Rim Fire"), which area included portions of the City's Retch Retchy Project. The Retch Retchy Project is comprised of dams (including O' Shaughnessy Dam), reservoirs (including Retch Retchy Reservoir which supplies 85o/o of San Francisco's drinking water), hydroelectric generator and transmission facilities and water transmission facilities. Retch Hetchy facilities affected by the Rim Fire included two power generating stations and the southern edge of the Retch Retchy Reservoir There was no impact to drinking water quality. The City's hydroelectric power generation system was interrupted by the fire, forcing the San Francisco Public Utilities Commission to spend approximately $1.6 million buying power on the open market and using existing banked energy with PG&E. The Rim Fire inflicted approximately $40 million in damage to parts of the City's water and power infrastructure located in the region. In September 2010, a Pacific Gas and Electric Company ("PG&E") high pressure natural gas transmission pipeline exploded in San Bruno, California, with catastrophic results. There are numerous gas transmission and distribution pipelines owned, operated and maintained by PG&E throughout the City.
TAX MATTERS
The Tax-Exempt Bonds
General Matters. In the separate opinions of Kulak Rock LLP and Curls Bartling P.C., Co-Bond Counsel, under existing laws, regulations, rulings and judicial decisions, interest on the Tax-Exempt Bonds (including any original issue discount properly allocable to the owner of a Tax-Exempt Bond) is excludable from gross income for federal income tax purposes and is not a specific preference item for purposes of the federal alternative minimum tax. The opinion described above assumes the accuracy of certain representations and compliance by the City with covenants designed to satisfy the requirements of the Code that must be met subsequent to the issuance of the Tax-Exempt Bonds. Failure to comply with such requirements could cause interest on the Tax-Exempt Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Tax-Exempt Bonds. The City has covenanted to comply with such requirements. Co-Bond Counsel have expressed no opinion regarding other federal tax consequences arising with respect to the Tax-Exempt Bonds.
Notwithstanding Co-Bond Counsel's opinion that interest on the Tax-Exempt Bonds is not a specific preference item for purposes of the federal alternative minimum tax, for taxable years beginning before January 1, 2018, such interest will be included in adjusted current earnings of certain corporations, and such corporations are required to include in the calculation of alternative minimum taxable income 75 percent of the excess of such corporations' adjusted current earnings over their alternative minimum taxable income (determined without regard to such adjustment and prior to reduction for certain net operating losses). No federal alternative minimum tax applies to corporations for taxable years beginning after December 31, 2017.
The accrual or receipt of interest on the Tax-Exempt Bonds may otherwise affect the federal income tax liability of the owners of the Tax-Exempt Bonds. The extent of these other tax consequences will depend on such owners' particular tax status and other items of income or deduction. Co-Bond Counsel have expressed no opinion regarding any such consequences. Purchasers of the Tax-Exempt Bonds, particularly purchasers that are corporations (including S corporations and foreign corporations operating branches in the United States of America), property or casualty insurance companies, banks, thrifts or other financial institutions, certain recipients of social security or railroad retirement benefits, taxpayers entitled to claim the earned income credit, taxpayers entitled to claim the refundable credit in Section 36B of the Code for coverage under a qualified health plan or taxpayers who may be deemed to have incurred or continued indebtedness to purchase or carry tax-exempt obligations, should consult their tax advisors as to the tax consequences of purchasing or owning the Tax-Exempt Bonds.
Bond Counsel is also of the opinion that interest on the Tax-Exempt Bonds is exempt from State of California personal income taxes. Co-Bond Counsel have expressed no opinion regarding other tax
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consequences arising with respect to the Tax-Exempt Bonds under the laws of the State of California or any other state or jurisdiction.
A copy of the form of each opinion of Co-Bond Counsel is attached hereto as Appendix F.
Original Issue Discount. The maturities, if any, of Tax-Exempt Bonds that have an original yield above their respective interest rates, as shown on the inside cover page of this Official Statement (collectively, the "Discount Bonds"), are being sold at an original issue discount. The difference between the initial public offering prices of such Discount Bonds and their stated amounts to be paid at maturity constitutes original issue discount treated in the same manner for federal income tax purposes as interest, as described above.
The amount of original issue discount that is treated as having accrued with respect to a Discount Bond or is othen.vise required to be recognized in gross income is added to the cost basis of the owner of the bond in determining, for federal income tax purposes, gain or loss upon disposition of such Discount Bond (including its sale, redemption or payment at maturity). Amounts received on disposition of such Discount Bond that are attributable to accrued or otherwise recognized original issue discount will be treated as taxexempt interest, rather than as taxable gain, for federal income tax purposes.
Original issue discount is treated as compounding semiannually, at a rate determined by reference to the yield to maturity of each individual Discount Bond, on days that are determined by reference to the maturity date of such Discount Bond. The amount treated as original issue discount on such Discount Bond for a particular semiannual accrual period is equal to (a) the product of (i) the yield to maturity for such Discount Bond ( determined by compounding at the close of each accrual period) and (ii) the amount that would have been the tax basis of such Discount Bond at the beginning of the particular accrual period if held by the original purchaser, (b) less the amount of any interest payable for such Discount Bond during the accrual period. The tax basis for purposes of the preceding sentence is determined by adding to the initial public offering price on such Discount Bond the sum of the amounts that have been treated as original issue discount for such purposes during all prior periods. If such Discount Bond is sold between semiannual compounding dates, original issue discount that would have been accrued for that semiannual compounding period for federal income tax purposes is to be apportioned in equal amounts among the days in such compounding period.
Owners of Discount Bonds should consult their tax advisors with respect to the determination and treatment of original issue discount accrued as of any date, with respect to when such original issue discount must be recognized as an item of gross income and with respect to the state and local tax consequences of owning a Discount Bond. Subsequent purchasers of Discount Bonds that purchase such bonds for a price that is higher or lower than the "adjusted issue price" of the bonds at the time of purchase should consult their tax advisors as to the effect on the accrual of original issue discount.
Recognition of Income Generally. Section 451 of the Code was amended by Pub. L. No. 115-97, enacted December 22, 2017 (sometimes referred to as the Tax Cuts and Jobs Act), to provide that taxpayers using an accrual method of accounting for federal income tax purposes generally will be required to include certain amounts in income, including original issue discount and market discount, no later than the time such amounts are reflected on certain financial statements of such taxpayer. The application of this rule may require the accrual of income earlier than would have been the case prior to the amendment of Section 451 of the Code. The rule generally applies to taxable years after 2017, except that in the case of income from a debt instrument having original issue discount, the rule does not apply until taxable years after 2018. Investors should consult their own tax advisors regarding the application of this rule and its impact on the timing of the recognition of income related to the Tax-Exempt Discount Bonds under the Code.
Originallssue Premium. The maturities of the Tax-Exempt Bonds that have an original yield below their respective interest rates, as shown on the inside cover page of this Official Statement ( collectively, the "Premium Bonds"), are being sold at a premium. An amount equal to the excess of the issue price of a
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Premium Bond over its stated redemption price at maturity constitutes premium on such Premium Bond. A purchaser of a Premium Bond must amortize any premium over such Premium Bond's term using constant yield principles, based on the purchaser's yield to maturity (or, in the case of Premium Bonds callable prior to their maturity, generally by amortizing the premium to the call date, based on the purchaser's yield to the call date and giving effect to any call premium). As premium is amortized, the amount of the amortization offsets a corresponding amount of interest for the period, and the purchaser's basis in such Premium Bond is reduced by a corresponding amount resulting in an increase in the gain (or decrease in the loss) to be recognized for federal income tax purposes upon a sale or disposition of such Premium Bond prior to its maturity. Even though the purchaser's basis may be reduced, no federal income tax deduction is allowed. Purchasers of the Premium Bonds should consult their tax advisors with respect to the determination and treatment of premium for federal income tax purposes and with respect to the state and local tax consequences of owning a Premium Bond.
Backup Withholding. As a result of the enactment of the Tax Increase Prevention and Reconciliation Act of 2005, interest on tax-exempt obligations such as the Tax-Exempt Bonds is subject to information reporting in a manner similar to interest paid on taxable obligations. Backup withholding may be imposed on payments to any owner of the Tax-Exempt Bonds that fails to provide certain required information including an accurate taxpayer identification number to any person required to collect such information pursuant to Section 6049 of the Code. The reporting requirement does not in and of itself affect or alter the excludability of interest on the Tax-Exempt Bonds from gross income for federal income tax purposes or any other federal tax consequence of purchasing, holding or selling tax-exempt obligations.
The Taxable Bonds
General Matters. Co-Bond Counsel are of the opinion that interest on the Taxable Bonds is included in gross income for federal income tax purposes. Co-Bond Counsel are also of the opinion that interest on the Taxable Bonds is exempt from State of California personal income taxes. Co-Bond Counsel have expressed no opinion regarding other tax consequences arising with respect to the Taxable Bonds under the laws of the State of California or any other state or jurisdiction.
A copy of the form of each opinion of Co-Bond Counsel is attached hereto as Appendix F.
The following is a summary of certain anticipated federal income tax consequences of the purchase, ownership and disposition of the Taxable Bonds under the Code and the Regulations, and the judicial and administrative rulings and court decisions now in effect, all of which are subject to change or possible differing interpretations. The summary does not purport to address all aspects of federal income taxation that may affect particular investors in light of their individual circumstances, nor certain types of investors subject to special treatment under the federal income tax laws. Potential purchasers of the Taxable Bonds should consult their own tax advisors in determining the federal, state or local tax consequences to them of the purchase, holding and disposition of the Taxable Bonds.
In general, interest paid on the Taxable Bonds, original issue discount, if any, and market discount, if any, will be treated as ordinary income to the owners of the Taxable Bonds, and principal payments (excluding the portion of such payments, if any, characterized as original issue discount or accrued market discount) will be treated as a return of capital.
Bond Premium. An investor that acquires a Taxable Bond for a cost greater than its remaining stated redemption price at maturity and holds such bond as a capital asset will be considered to have purchased such bond at a premium and, subject to prior election permitted by Section l 71(c) of the Code, may generally amortize such premium under the constant yield method. Except as may be provided by regulation, amortized premium will be allocated among, and treated as an offset to, interest payments. The basis reduction requirements of Section 1016(a)(5) of the Code apply to amortizable bond premium that reduces interest payments under Section 171 of the Code. Bond premium is generally amortized over the bond's term using
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constant yield principles, based on the purchaser's yield to maturity. Investors of any Taxable Bond purchased with a bond premium should consult their own tax advisors as to the effect of such bond premium with respect to their own tax situation and as to the treatment of bond premium for state tax purposes.
Original Issue Discount. If the Taxable Bonds are issued with original issue discount, Section 1272 of the Code requires the current ratable inclusion in income of original issue discount greater than a specified de minimis amount using a constant yield method of accounting. In general, original issue discount is calculated, with regard to any accrual period, by applying the instrument's yield to its adjusted issue price at the beginning of the accrual period, reduced by any qualified stated interest allocable to the period. The aggregate original issue discount allocable to an accrual period is allocated to each day included in such period. As a general rule, the owner of a debt instrument must include in income the sum of the daily portions of original issue discount attributable to the number of days the owner owned the instrument. The legislative history of the original issue discount provisions indicates that the calculation and accrual of original issue discount should be based on the prepayment assumptions used by the parties in pricing the transaction. Owners of Taxable Bonds purchased at a discount should consult their tax advisors with respect to the determination and treatment of original issue discount accrued as of any date, with respect to when such original issue discount must be recognized as an item of gross income (notwithstanding the general rule described above in this paragraph) and with respect to the state and local tax consequences of owning such Taxable Bonds.
Recognition of Income Generally. Section 451 of the Code was amended by Pub. L. No. 115-97, enacted December 22, 2017 (sometimes referred to as the Tax Cuts and Jobs Act), to provide that taxpayers using an accrual method of accounting for federal income tax purposes generally will be required to include certain amounts in income, including original issue discount and market discount, no later than the time such amounts are reflected on certain financial statements of such taxpayer. The application of this rule may require the accrual of income earlier than would have been the case prior to the amendment of Section 451 of the Code. The rule generally applies to taxable years after 2017, except that in the case of income from a debt instrument having original issue discount, the rule does not apply until taxable years after 2018. Investors should consult their own tax advisors regarding the application of this rule and its impact on the timing of the recognition of income related to the Taxable Bonds under the Code.
Market Discount. An investor that acquires a Taxable Bond for a price less than the adjusted issue price of such bond may be subject to the market discount rules of Sections 1276 through 1278 of the Code. Under these sections and the principles applied by the Regulations, "market discount" means (a) in the case of a Taxable Bond originally issued at a discount, the amount by which the issue price of such bond, increased by all accrued original issue discount ( as if held since the issue date), exceeds the initial tax basis of the owner therein, less any prior payments that did not constitute payments of qualified stated interest, and (b) in the case of a Taxable Bond not originally issued at a discount, the amount by which the stated redemption price of such bond at maturity exceeds the initial tax basis of the owner therein. Under Section 1276 of the Code, the owner of such a Taxable Bond will generally be required (i) to allocate each principal payment to accrued market discount not previously included in income and, upon sale or other disposition of the bond, to recognize the gain on such sale or disposition as ordinary income to the extent of such cumulative amount of accrued market discount as of the date of sale or other disposition of such a bond or (ii) to elect to include such market discount in income currently as it accrues on all market discount instruments acquired by such owner on or after the first day of the taxable year to which such election applies.
The Code authorizes the Treasury Department to issue regulations providing for the method for accruing market discount on debt instruments the principal of which is payable in more than one installment. Until such time as regulations are issued by the Treasury Department, certain rules described in the legislative history will apply. Under those rules, market discount will be included in income either (a) on a constant interest basis or (b) in proportion to the accrual of stated interest or, in the case of a Taxable Bond with original issue discount, in proportion to the accrual of original issue discount.
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An owner of a Taxable Bond that acquired such bond at a market discount also may be required to defer, until the maturity date of such bond or its earlier disposition in a taxable transaction, the deduction of a portion of the amount of interest that the owner paid or accrued during the taxable year on indebtedness incurred or maintained to purchase or carry such bond in excess of the aggregate amount of interest (including original issue discount) includable in such owner's gross income for the taxable year with respect to such bond. The amount of such net interest expense deferred in a taxable year may not exceed the amount of market discount accrued on the Taxable Bond for the days during the taxable year on which the owner held such bond and, in general, would be deductible when such market discount is includable in income. The amount of any remaining deferred deduction is to be taken into account in the taxable year in which the Taxable Bond matures or is disposed of in a taxable transaction. In the case of a disposition in which gain or loss is not recognized in whole or in part, any remaining deferred deduction will be allowed to the extent gain is recognized on the disposition. This deferral rule does not apply if the owner elects to include such market discount in income currently as it accrues on all market discount obligations acquired by such owner in that taxable year or thereafter.
Attention is called to the fact that Regulations implementing the market discount rules have not yet been issued. Therefore, investors should consult their own tax advisors regarding the application of these rules as well as the advisability of making any of the elections with respect thereto.
Unearned Income Medicare Contribution Tax. Pursuant to Section 1411 of the Code, as enacted by the Health Care and Education Reconciliation Act of 2010, an additional tax is imposed on individuals earning certain investment income. Holders of the Taxable Bonds should consult their own tax advisors regarding the application of this tax to interest earned on the Taxable Bonds and to gain on the sale ofa Taxable Bond.
Sales or Other Dispositions. If an owner of a Taxable Bond sells the bond, such person will recognize gain or loss equal to the difference between the amount realized on such sale and such owner's basis in such bond. Ordinarily, such gain or loss will be treated as a capital gain or loss.
If the terms of a Taxable Bond were materially modified, in certain circumstances, a new debt obligation would be deemed created and exchanged for the prior obligation in a taxable transaction. Among the modifications that may be treated as material are those that relate to redemption provisions and, in the case of a nonrecourse obligation, those which involve the substitution of collateral. Each potential owner of a Taxable Bond should consult its own tax advisor concerning the circumstances in which such bond would be deemed reissued and the likely effects, if any, of such reissuance.
Defeasance. The legal defeasance of the Taxable Bonds may result in a deemed sale or exchange of such bonds under certain circumstances. Owners of such Taxable Bonds should consult their tax advisors as to the federal income tax consequences of such a defeasance.
Backup Withholding. An owner of a Taxable Bond may be subject to backup withholding at the applicable rate determined by statute with respect to interest paid with respect to the Taxable Bonds, if such owner, upon issuance of the Taxable Bonds, fails to provide to any person required to collect such information pursuant to Section 6049 of the Code with such owner's taxpayer identification number, furnishes an incorrect taxpayer identification number, fails to report interest, dividends or other "reportable payments" (as defined in the Code) properly, or, under certain circumstances, fails to provide such persons with a certified statement, under penalty of perjury, that such owner is not subject to backup withholding.
Foreign Investors. An owner of a Taxable Bond that is not a "United States person" (as defined below) and is not subject to federal income tax as a result of any direct or indirect connection to the United States of America in addition to its ownership of a Taxable Bond will generally not be subject to United States income or withholding tax in respect of a payment on a Taxable Bond, provided that the owner complies to the extent necessary with certain identification requirements (including delivery of a statement, signed by the owner under penalties of perjury, certifying that such owner is not a United States person and providing the
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name and address of such owner). For this purpose the term "United States person" means a citizen or resident of the United States of America, a corporation, partnership or other entity created or organized in or under the laws of the United States of America or any political subdivision thereof, or an estate or trust whose income from sources within the United States of America is includable in gross income for United States of America income tax purposes regardless of its connection with the conduct of a trade or business within the United States of America.
Except as explained in the preceding paragraph and subject to the provisions of any applicable tax treaty, a 30 percent United States withholding tax will apply to interest paid and original issue discount accruing on Taxable Bonds owned by foreign investors. In those instances in which payments of interest on the Taxable Bonds continue to be subject to withholding, special rules apply with respect to the withholding of tax on payments of interest on, or the sale or exchange of Taxable Bonds having original issue discount and held by foreign investors. Potential investors that are foreign persons should consult their own tax advisors regarding the specific tax consequences to them of owning a Taxable Bond.
Tax-Exempt Investors. In general, an entity that is exempt from federal income tax under the provisions of Section 501 of the Code is subject to tax on its unrelated business taxable income. An unrelated trade or business is any trade or business that is not substantially related to the purpose that forms the basis for such entity's exemption. However, under the provisions of Section 512 of the Code, interest may be excluded from the calculation of unrelated business taxable income unless the obligation that gave rise to such interest is subject to acquisition indebtedness. Therefore, except to the extent any owner of a Taxable Bond incurs acquisition indebtedness with respect to such bond, interest paid or accrued with respect to such owner may be excluded by such tax-exempt owner from the calculation of unrelated business taxable income. Each potential tax-exempt holder of a Taxable Bond is urged to consult its own tax advisor regarding the application of these prov1s1ons.
ERISA Considerations. The Employee Retirement Income Security Act of 1974, as amended ("ERISA"), imposes certain requirements on "employee benefit plans" (as defined in Section 3(3) of ERISA) subject to ERISA, including entities such as collective investment funds and separate accounts whose underlying assets include the assets of such plans ( collectively, "ERISA Plans") and on those persons who are fiduciaries with respect to ERISA Plans. Investments by ERISA Plans are subject to ERISA's general fiduciary requirements, including the requirement of investment prudence and diversification and the requirement that an ERIS A Plan's investments be made in accordance with the documents governing the ERISA Plan. The prudence of any investment by an ERISA Plan in the Taxable Bonds must be determined by the responsible fiduciary of the ERIS A Plan by taking into account the ERIS A Plan's particular circumstances and all of the facts and circumstances of the investment. Government and non-electing church plans are generally not subject to ERISA However, such plans may be subject to similar or other restrictions under state or local law.
In addition, ERISA and the Code generally prohibit certain transactions between an ERISA Plan or a qualified employee benefit plan under the Code and persons who, with respect to that plan, are fiduciaries or other "parties in interest" within the meaning of ERISA or "disqualified persons" within the meaning of the Code. In the absence of an applicable statutory, class or administrative exemption, transactions between an ERISA Plan and a party in interest with respect to an ERISA Plan, including the acquisition by one from the other of the Taxable Bonds could be viewed as violating those prohibitions. In addition, Section 4975 of the Code prohibits transactions between certain tax-favored vehicles such as Individual Retirement Accounts and disqualified persons. Section 503 of the Code includes similar restrictions with respect to governmental and church plans. In this regard, the City or any dealer of the Taxable Bonds might be considered or might become a "party in interest" within the meaning of ERISA or a "disqualified person" within the meaning of the Code, with respect to an ERISA Plan or a plan or arrangement subject to Sections 4975 or 503 of the Code. Prohibited transactions within the meaning of ERISA and the Code may arise if the Taxable Bonds are acquired by such plans or arrangements with respect to which the City or any dealer is a party in interest or disqualified person.
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In all events, fiduciaries of ERISA Plans and plans or arrangements subject to the above sections of the Code, in consultation with their advisors, should carefully consider the impact of ERISA and the Code on an investment in the Taxable Bonds. The sale of the Taxable Bonds to a plan is in no respect a representation by the City or the Underwriter that such an investment meets the relevant legal requirements with respect to benefit plans generally or any particular plan. Any plan proposing to invest in the Taxable Bonds should consult with its counsel to confirm that such investment is permitted under the plan documents and will not result in a non-exempt prohibited transaction and will satisfy the other requirements of ERISA, the Code and other applicable law.
Changes in Federal and State Tax Law
From time to time, there are legislative proposals in the Congress and in the states that, if enacted, could alter or amend the federal and state tax matters referred to under this heading "TAX MATTERS" or adversely affect the market value of the Bonds. It cannot be predicted whether or in what form any such proposal might be enacted or whether if enacted it would apply to bonds issued prior to enactment. In addition, regulatory actions are from time to time announced or proposed and litigation is threatened or commenced which, if implemented or concluded in a particular manner, could adversely affect the market value of the Bonds. It cannot be predicted whether any such regulatory action will be implemented, how any particular litigation or judicial action will be resolved, or whether the Bonds or the market value thereof would be impacted thereby. Purchasers of the Bonds should consult their tax advisors regarding any pending or proposed legislation, regulatory initiatives or litigation. The opinions expressed by Co-Bond Counsel are based on existing legislation and regulations as interpreted by relevant judicial and regulatory authorities as of the date of issuance and delivery of the Bonds, and Co-Bond Counsel have expressed no opinion as of any date subsequent thereto or with respect to any pending legislation, regulatory initiatives or litigation.
PROSPECTIVE PURCHASERS OF THE BONDS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISORS PRIOR TO ANY PURCHASE OF THE BONDS AS TO THE IMPACT OF THE CODE UPON THEIR ACQUISITION, HOLDING OR DISPOSITION OF THE BONDS.
OTHER LEGAL MATTERS
Certain legal matters incident to the authorization, issuance and sale of the Bonds and with regard to the tax status of the interest on the Bonds (see "TAX MATTERS" herein) are subject to the separate legal opinions ofKutak Rock LLP and Curls Bartling P.C., Co-Bond Counsel to the City. The signed legal opinions of Co-Bond Counsel, dated and premised on facts existing and law in effect as of the date of original delivery of the Bonds, will be delivered to the initial purchaser of the Bonds at the time of original delivery of the Bonds.
The proposed forms of the legal opinions of Co-Bond Counsel is set forth in APPENDIX F hereto. The text of the legal opinions to be delivered may vary if necessary to reflect facts and law on the date of delivery. The opinions will speak only as of their date, and subsequent distributions of the opinions by recirculation of this Official Statement or otherwise will create no implication that Co-Bond Counsel have reviewed or expresses any opinion concerning any of the matters referred to in the opinions subsequent to their date. In rendering their separate opinions, Co-Bond Counsel will rely upon certificates and representations of facts to be contained in the transcript of proceedings for the Bonds, which Co-Bond Counsel will not have independently verified.
Co-Bond Counsel undertakes no responsibility for the accuracy, completeness or fairness of this Official Statement.
Certain legal matters will be passed upon for the City by the City Attorney and by Hawkins Delafield & Wood LLP, San Francisco, California, Disclosure Counsel.
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Hawkins Delafield & Wood LLP has served as disclosure counsel to the City and in such capacity has advised the City with respect to applicable securities laws and participated with responsible City officials and staff in conferences and meetings where information contained in this Official Statement was reviewed for accuracy and completeness. Disclosure Counsel is not responsible for the accuracy or completeness of the statements or information presented in this Official Statement and has not undertaken to independently verify any of such statements or information. Rather, the City is solely responsible for the accuracy and completeness of the statements and information contained in this Official Statement. Upon the delivery of the Bonds, Disclosure Counsel will deliver a letter to the City which advises the City, subject to the assumptions, exclusions, qualifications and limitations set forth therein, that no facts came to attention of such firm which caused them to believe that this Official Statement as of its date and as of the date of delivery of the Bonds contained or contains any untrue statement of a material fact or omitted or omits to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. No purchaser or holder of the Bonds, or other person or party other than the City, will be entitled to or may rely on such letter or Hawkins Delafield & Wood LLP's having acted in the role of disclosure counsel to the City.
PROFESSIONALS INVOLVED IN THE OFFERING
Hilltop Securities Inc., San Francisco, California and Ross Financial, San Francisco, California have served as Co-Municipal Advisors to the City with respect to the sale of the Bonds. The Co-Municipal Advisors have assisted the City in the City's review and preparation of this Official Statement and in other matters relating to the planning, structuring, and sale of the Bonds. The Co-Municipal Advisors have not independently verified any of the data contained herein nor conducted a detailed investigation of the affairs of the City to determine the accuracy or completeness of this Official Statement and assume no responsibility for the accuracy or completeness of any of the information contained herein. The Co-Municipal Advisors, CoBond Counsel and Disclosure Counsel will all receive compensation from the City for services rendered in connection with the Bonds contingent upon the sale and delivery of the Bonds. The City Treasurer is acting as paying agent and registrar with respect to the Bonds.
ABSENCE OF LITIGATION
No litigation is pending or threatened concerning the validity of the Bonds, the ability of the City to levy the ad valorem tax required to pay debt service on the Bonds, the corporate existence of the City, or the entitlement to their respective offices of the officers of the City who will execute and deliver the Bonds and other documents and certificates in connection therewith. The City will furnish to the initial purchaser of the Bonds a certificate of the City as to the foregoing as of the time of the original delivery of the Bonds.
CONTINUING DISCLOSURE
The City has covenanted for the benefit of the holders and beneficial owners of the Bonds to provide certain financial information and operating data relating to the City (the "Annual Report") not later than 270 days after the end of the City's fiscal year (which currently ends on June 30), commencing with the report for fiscal year 2017-18, which is due not later than March 27, 2019, and to provide notices of the occurrence of certain enumerated events. The Annual Report will be filed by the City with the Municipal Securities Rulemaking Board ("MSRB"). The notices of enumerated events will be filed by the City with the MSRB. The specific nature of the information to be contained in the Annual Report or the notices of enumerated events is summarized in APPENDIX D - "FORM OF CONTINUING DISCLOSURE CERTIFICATE." These covenants have been made in order to assist the purchaser of the Bonds in complying with Securities and Exchange Commission Rule 15c2-12(b)(5). The ratings on certain obligations of the City were upgraded by Fitch Ratings on March 28, 2013. Under certain continuing disclosure undertakings of the City, the City was required to file a notice of such upgrade with the Electronic Municipal Market Access system of the MSRB by April 11, 2013. The City filed such notice on May 20, 2013.
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The City may, from time to time, but is not obligated to, post its Comprehensive Annual Financial Report and other financial information on the City Controller's web site at www. sfgov.org/controller.
RATINGS
Moody's Investors Service, Inc. ("Moody's"), S&P Global Ratings ("S&P"), and Fitch Ratings ("Fitch"), have assigned municipal bond ratings of "Aaa," "AA+," and "AA+," respectively, to the Bonds. Certain information not included in this Official Statement was supplied by the City to the rating agencies to be considered in evaluating the Bonds. The ratings reflect only the views of each rating agency, and any explanation of the significance of any rating may be obtained only from the respective credit rating agencies: Moody's, at www.moodys.com; S&P, at www.spratings.com; and Fitch, at www.fitchratings.com The information presented on the website of each rating agency is not incorporated by reference as part of this Official Statement. Investors are advised to read the entire Official Statement to obtain information essential to the making of an informed investment decision. No assurance can be given that any rating issued by a rating agency will be retained for any given period of time or that the same will not be revised or withdrawn entirely by such rating agency, if in its judgment circumstances so warrant. Any such revision or withdrawal of the ratings obtained may have an adverse effect on the market price or marketability of the Bonds. The City undertakes no responsibility to oppose any such downward revision, suspension or withdrawal.
SALE OF THE BONDS
The Bonds were sold at competitive bid on May 8, 2018. The 2018C Bonds were awarded to Morgan Stanley & Co. LLC (the "2018C Purchaser"), which submitted the lowest true interest cost bid, at a purchase price of $197,743,748.92 (representing the principal amount of the 2018C Bonds, plus net original issue premium of $9,018,044.25, less an underwriting discount of $1,009,295.33). The 2018D Bonds were awarded to Wells Fargo Bank, National Association (the "2018D Purchaser"), which submitted the lowest true interest cost bid, at a purchase price of $142, 145,506.37 (representing the principal amount of the 2018D Bonds, plus original issue premium of $985, 798.65, less an underwriting discount of $985,292.28). The 2018E Bonds were awarded to Citigroup Global Markets Inc. (the "2018E Purchaser," and together with the 2018C Purchaser and the 2018D Purchaser, the "Purchasers"), which submitted the lowest true interest cost bid, at a purchase price of $51,523,611.50 (representing the principal amount of the 2018E Bonds, plus net original issue premium of $1,826,379.30, less an underwriting discount of $257,767.80).
Under the terms of its bid, each Purchaser will be obligated to purchase all of a Series of the Bonds if any are purchased, the obligation to make such purchase being subject to the approval of certain legal matters by Co-Bond Counsel, and certain other conditions to be satisfied by the City.
The Purchasers provided the reoffering prices or yields set forth on the inside cover of this Official Statement and the City takes no responsibility for the accuracy of those reoffering prices or yields. The Purchasers may offer and sell Bonds to certain dealers and others at prices or yields that differ from those stated on the inside cover. The offering prices or yields may be changed from time to time by the Purchasers.
Morgan Stanley & Co. LLC., the 2018C Purchaser, has entered into a distribution agreement with its affiliate, Morgan Stanley Smith Barney LLC. As part of the distribution arrangement, Morgan Stanley & Co. LLC may distribute municipal securities to retail investors through the financial advisor network of Morgan Stanley Smith Barney LLC. As part of this arrangement, Morgan Stanley & Co. LLC may compensate Morgan Stanley Smith Barney LLC for its selling efforts with respect to the 2018C Bonds.
Any statements in this Official Statement involving matters of opinion, whether or not expressly so stated, are intended as such and not as representations of fact. This Official Statement is not to be construed as a contract or agreement between the City and the initial purchaser or owners and beneficial owners of any of the Bonds.
The preparation and distribution of this Official Statement have been duly authorized by the Board of Supervisors of the City.
CITY AND COUNTY OF SAN FRANCISCO
By: /s/ Benjamin Rosenfield ~~~~~~~~~~~~~~~~~~
Controller
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APPENDIX A
CITY AND COUNTY OF SAN FRANCISCO
ORGANIZATION AND FINANCES
This Appendix contains information that is current as of April 15, 2018.
This Appendix A to the Official Statement of the City and County of San Francisco (the "City" or "San
Francisco") provides general information about the City's governance structure, budget processes, property taxation system and other tax and revenue sources, City expenditures, labor relations, employment benefits and retirement costs, investments, bonds and other long-term obligations.
The various reports, documents, websites and other information referred to herein are not incorporated herein by such references. The City has referred to certain specified documents in this Appendix A which are hosted on the City's website. A wide variety of other information, including financial information, concerning the City is available from the City's publications, websites and its departments. Any such
information that is inconsistent with the information set forth in this Official Statement should be disregarded and is not a part of or incorporated into this Appendix A. The information contained in this Official Statement, including this Appendix A, speaks only as of its date, and the information herein is
subject to change. Prospective investors are advised to read the entire Official Statement to obtain information essential to make an informed investment decision.
TABLE OF CONTENTS
CITY GOVERNMENT ............................................................................................................................ A-4 City Charter ............................................................................................................................ A-4
Mayor .................................................................................................................................. A-5 2018 Mayoral Election ........................................................................................................... A-5 Board of Supervisors .............................................................................................................. A-5
Other Elected and Appointed City Officers ............................................................................. A-6 CITY BUDGET ...................................................................................................................................... A-7
Budget Process ...................................................................................................................... A-7 November 2009 Charter Amendment Instituting Two-Year Budgetary Cycle .......................... A-8 Role of Controller; Budgetary Analysis and Projections .......................................................... A-9 General Fund Results; Audited Financial Statements ............................................................. A-10 Five-Year Financial Plan ......................................................................................................... A-15
City Budget Adopted for Fiscal Years 2017-18 and 2018-19 ................................................... A-16 Other Budget Updates .......................................................................................................... A-17 Impact of the State of California Budget on Local Finances .................................................... A-17
Impact of Federal Government on Local Finances ................................................................. A-18 Budgetary Reserves .............................................................................................................. A-19 Rainy Day Reserve ................................................................................................................. A-19
Budget Stabilization Reserve ................................................................................................. A-20 THE SUCCESSOR AG ENCY ................................................................................................................... A-21
Authority and Personnel ....................................................................................................... A-21
Effect of the Dissolution Act .................................................................................................. A-21 Oversight Board .................................................................................................................... A-22
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Department of Finance Finding of Completion ...................................................................... A-22 State Controller Asset Transfer Review ................................................................................. A-23
Property Taxation System - General ..................................................................................... A-23
Assessed Valuations, Tax Rates and Tax Delinquencies .......................................................... A-24 Tax Levy and Collection ......................................................................................................... A-27 Taxation of State-Assessed Utility Property ........................................................................... A-29
OTHER CITY TAX REVENUES ............................................................................................................... A-30 Business Taxes ...................................................................................................................... A-30 Transient Occupancy Tax (Hotel Tax) ..................................................................................... A-31 Real Property Transfer Tax .................................................................................................... A-32 Sales and Use Tax .................................................................................................................. A-33
State - Realignment. .............................................................................................................. A-35
Public Safety Sales Tax .......................................................................................................... A-36 Other Intergovernmental Grants and Subventions ................................................................ A-36 Charges for Services .............................................................................................................. A-37
CITY GENERAL FUND PROGRAMS AND EXPENDITURES ...................................................................... A-37 General Fund Expenditures by Major Service Area ................................................................ A-37 Baselines ............................................................................................................................... A-38
EMPLOYMENT COSTS; POST-RETIREMENT OBLIGATIONS ................................................................... A-39 Labor Relations ..................................................................................................................... A-40 San Francisco Employees' Retirement System ("SFERS" or "Retirement System") ................. A-43
Medical Benefits ................................................................................................................... A-50 Total City Employee Benefits Costs ....................................................................................... A-55
INVESTMENT OF CITY FUNDS ............................................................................................................. A-56 CAPITAL FINANCING AND BONDS ...................................................................................................... A-58
Capital Plan ........................................................................................................................... A-58
Tax-Supported Debt Service .................................................................................................. A-60 General Obligation Bonds ..................................................................................................... A-61 Refunding General Obligation Bonds ..................................................................................... A-63
Lease Payments and Other Long-Term Obligations ................................................................ A-64 Commercial Paper Program .................................................................................................. A-66 Transbay Transit Center Interim Financing ............................................................................ A-67
MAJOR ECONOMIC DEVELOPMENT PROJECTS ................................................................................... A-71
Hunters Point Shipyard (Phase 1 and 2) and Candlestick Point .............................................. A-71 Treasure Island ..................................................................................................................... A-71 Mission Bay Blocks 29-32-Warrior's Multipurpose Recreation and Entertainment Venue ...... A-72
Transbay Transit Center ........................................................................................................ A-72 Mission Bay ........................................................................................................................... A-73 Seawall Lot (SWL) 337 and Pier 48 (Mission Rock) ................................................................. A-73
CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND EXPENDITURES ............................. A-75 Article XII IA of the California Constitution ............................................................................. A-75 Article XI 11 B of the California Constitution ............................................................................. A-76
Articles XII IC and XI II D of the California Constitution ............................................................. A-76 Statutory Limitations ............................................................................................................ A-77 Proposition lA ...................................................................................................................... A-78
Proposition 22 ...................................................................................................................... A-78 Proposition 26 ...................................................................................................................... A-79 Future Initiatives and Changes in Law ................................................................................... A-80
LITIGATION AND RISK MANAGEMENT ............................................................................................... A-80 Pending Litigation ................................................................................................................. A-80
Risk Retention Program ........................................................................................................ A-81
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CITY GOVERNMENT
City Charter
San Francisco is constituted as a city and county chartered pursuant to Article XI, Sections 3, 4, 5 and 6 of the Constitution of the State of California (the "State"), and is the only consolidated city and county in
the State. In addition to its powers under its charter in respect of municipal affairs granted under the State Constitution, San Francisco generally can exercise the powers of both a city and a county under
State law. On April 15, 1850, several months before California became a state, the original charter was granted by territorial government to the City. New City charters were adopted by the voters on May 26, 1898, effective January 8, 1900, and on March 26, 1931, effective January 8, 1932. In November 1995,
the voters of the City approved the current charter, which went into effect in most respects on July 1, 1996 (the "Charter").
The City is governed by a Board of Supervisors consisting of eleven members elected from supervisorial districts (the "Board of Supervisors"), and a Mayor elected at large who serves as chief executive officer
(the "Mayor"). Members of the Board of Supervisors and the Mayor each serve a four-year term. The
Mayor and members of the Board of Supervisors are subject to term limits as established by the Charter. Members of the Board of Supervisors may serve no more than two successive four-year terms and may
not serve another term until four years have elapsed since the end of the second successive term in office. The Mayor may serve no more than two successive four-year terms, with no limit on the number of non-successive terms of office. The City Attorney, Assessor-Recorder, District Attorney, Treasurer and
Tax Collector, Sheriff and Public Defender are also elected directly by the citizens and may serve unlimited four-year terms. The Charter provides a civil service system for most City employees. School functions are carried out by the San Francisco Unified School District (grades K-12) ("SFUSD") and the
San Francisco Community College District (post-secondary) ("SFCCD"). Each is a separate legal entity
with a separately elected governing board.
Under its original charter, the City committed to a policy of municipal ownership of utilities. The Municipal Railway, when acquired from a private operator in 1912, was the first such city-owned public transit system in the nation. In 1914, the City obtained its municipal water system, including the Hetch
Hetchy watershed near Yosemite. In 1927, the City dedicated Mill's Field Municipal Airport at a site in what is now San Mateo County 14 miles south of downtown San Francisco, which would grow to become today's San Francisco International Airport (the "Airport"). In 1969, the City acquired the Port of San Francisco (the "Port") in trust from the State. Substantial expansions and improvements have been
made to these enterprises since their original acquisition. The Airport, the Port, the Public Utilities Commission ("Public Utilities Commission") (which now includes the Water Enterprise, the Wastewater
Enterprise and the Hetch Hetchy Water and Power Project), the Municipal Transportation Agency ("MTA'') (which operates the San Francisco Municipal Railway or "Muni" and the Department of Parking
and Traffic ("DPT"), including the Parking Authority and its five public parking garages), and the City
owned hospitals (San Francisco General and Laguna Honda), are collectively referred to herein as the "enterprise fund departments," as they are not integrated into the City's General Fund operating
budget. However, certain of the enterprise fund departments, including San Francisco General Hospital, Laguna Honda Hospital and the MTA receive annually significant General Fund transfers.
The Charter distributes governing authority among the Mayor, the Board of Supervisors, the various other elected officers, the City Controller and other appointed officers, and the boards and commissions that oversee the various City departments. Compared to the governance of the City prior to 1995, the
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Charter concentrates relatively more power in the Mayor and Board of Supervisors. The Mayor appoints most commissioners subject to a two-thirds vote of the Board of Supervisors, unless otherwise provided
in the Charter. The Mayor appoints each department head from among persons nominated to the position by the appropriate commission, and may remove department heads.
Mayor
Mayor Mark E. Farrell is the 44'h Mayor of San Francisco. The Mayor has responsibility for general administration and oversight of all departments in the executive branch of the City. On January 23, thenSupervisor Farrell was voted in as Mayor by his colleagues on the Board of Supervisors, filling the seat of the late Mayor Edwin M. Lee. Mayor Farrell spent seven years on the Board of Supervisors, serving as the Chair of both the Land Use and Transportation Committee, and the Budget and Finance Committee, where he was the City's longest-serving Chair. Prior to joining the Board of Supervisors, Mayor Farrell
was a small business owner in the finance sector. Mayor Farrell was born and raised in San Francisco.
2018 Mayoral Election
On June 5, 2018, there will be a special election to elect a new mayor to fulfill the remaining term of the late Mayor Lee who was succeeded by the appointment by the Board of Mayor Mark E. Farrell. After the election results are determined, the Board of Supervisors will convene and act to declare the election results prior to the inauguration of the new mayor. The newly elected Mayor will serve until January 2020.
Board of Supervisors
Table A-1 lists the current members of the Board of Supervisors. The Supervisors are elected for staggered four-year terms and are elected by district. Vacancies are filled by appointment by the Mayor.
TABLE A-1
CITY AND COUNTY OF SAN FRANCISCO
Board of Supervisors
First Elected or
Name Aeeointed
Sandra Lee Fewer, District 1 2017 Catherine Stefani, District 2 2018 Aaron Peskin, District 3 2017 Katy Tang, District 4 2013 London Breed, Boa rd President, District 5 2017 Jane Kim, District 6 2010 Norman Yee, District 7 2017 Jeff Sheehy, District 8 2017 Hillary Rohen, District9 2017 Malia Cohen, District 10 2010 Ahsha Safai, District 11 2017
Dennis J. Herrera was re-elected to a four-year term as City Attorney in November 2015. The City Attorney represents the City in all legal proceedings in which the City has an interest. Mr. Herrera was first elected City Attorney in December 2001. Before becoming City Attorney, Mr. Herrera had been a partner in a private law firm and had served in the Clinton Administration as Chief of Staff of the U.S. Maritime Administration. He also served as president of the San Francisco Police Commission and was a member of the San Francisco Public Transportation Commission.
Carmen Chu was elected Assessor-Recorder of the City in November 2014. The Assessor-Recorder administers the property tax assessment system of the City. Before becoming Assessor-Recorder, Ms.
Chu was elected in November 2008 and November 2010 to the Board of Supervisors, representing the Sunset/Parkside District 4 after being appointed by then-Mayor Newsom in September 2007.
Jose Cisneros was re-elected to a four-year term as Treasurer of the City in November 2015. The Treasurer is responsible for the deposit and investment of all City moneys, and also acts as Tax Collector for the City. Mr. Cisneros has served as Treasurer since September 2004, following his appointment by then-Mayor Newsom. Prior to being appointed Treasurer, Mr. Cisneros served as Deputy General Manager, Capital Planning and External Affairs for the MTA.
Benjamin Rosenfield was appointed to a ten-year term as Controller of the City by then-Mayor Newsom in March 2008, and was confirmed by the Board of Supervisors in accordance with the Charter. Mr. Rosenfield was recently reappointed by Mayor Mark Farrell to a new 10-year term as Controller, and his nomination will be considered for confirmation by the Board of Supervisors on May 1, 2018.
he City Controller is responsible for timely accounting, disbursement, and other disposition of City moneys, certifies the accuracy of budgets, estimates the cost of ballot measures, provides payroll services for the City's employees, and, as the Auditor for the City, directs performance and financial audits of City activities. Before becoming Controller, Mr. Rosenfield served as the Deputy City Administrator under former City Administrator Edwin Lee from 2005 to 2008. He was responsible for the preparation and monitoring of the City's ten-year capital plan, oversight of a number of internal service offices under the City Administrator, and implementing the City's 311 non-emergency customer service center. From 2001 to 2005, Mr. Rosenfield worked as the Budget Director for then-Mayor Willie L. Brown, Jr. and then-Mayor Newsom. As Budget Director, Mr. Rosenfield prepared the City's proposed budget for each fiscal year and worked on behalf of the Mayor to manage City spending during the course of each year. From 1997 to 2001, Mr. Rosenfield worked as an analyst in the Mayor's Budget Office and a project manager in the Controller's Office.
Naomi M. Kelly was appointed to a five-year term as City Administrator by the late Mayor Lee on February 7, 2012 and re-appointed for a second five-year term on February 8, 2017. The City Administrator has overall responsibility for the management and implementation of policies, rules and regulations promulgated by the Mayor, the Board of Supervisors and the voters. In January 2012, Mrs. Kelly became Acting City Administrator. From January 2011, she served as Deputy City Administrator where she was responsible for the Office of Contract Administration, Purchasing, Fleet Management and Central Shops. Mrs. Kelly led the effort to successfully roll out the City's new Local Hire program last
year by streamlining rules and regulations, eliminating duplication and creating administrative efficiencies. In 2004, Mrs. Kelly served as the City Purchaser and Director of the Office of Contract Administration. Mrs. Kelly has also served as Special Assistant in the Mayor's Office of Neighborhood
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Services, in the Mayor's Office of Policy and Legislative Affairs and served as the City's Executive Director
of the Taxicab Commission.
CITY BUDGET
Overview
This section discusses the City's budget procedures, while following sections of this Appendix A describe the City's various sources of revenues and expenditures.
The City manages the operations of its nearly 60 departments, commissions and authorities, including
the enterprise fund departments, through its annual budget. In July 2017, the City adopted a full twoyear budget. The City's fiscal year 2017-18 adopted budget appropriates annual revenues, fund balance,
transfers and reserves of approximately $10.12 billion, of which the City's General Fund accounts for approximately $5.15 billion. In fiscal year 2018-19 appropriated revenues, fund balance, transfers and reserves total approximately $10.00 billion, of which $5.31 billion represents General Fund budget. For a further discussion of the fiscal years 2017-18 and 2018-19 adopted budgets, see "City Budget Adopted for Fiscal Years 2017-18 and 2018-19" herein.
Each year the Mayor prepares budget legislation for the City departments, which must be approved by the Board of Supervisors. Revenues consist largely of local property taxes, business taxes, sales taxes, other local taxes and charges for services. A significant portion of the City's revenues comes in the form
of intergovernmental transfers from the State and federal governments. Thus, the City's fiscal situation is affected by the health of the local real estate market, the local business and tourist economy, and by budgetary decisions made by the State and federal governments which depend, in turn, on the health of
the larger State and national economies. All of these factors are almost wholly outside the control of the Mayor, the Board of Supervisors and other City officials. In addition, the State Constitution strictly limits the City's ability to raise taxes and property-based fees without a two-thirds popular vote. See
"CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND EXPENDITURES" herein. Also, the fact that the City's annual budget must be adopted before the State and federal budgets adds uncertainty to
the budget process and necessitates flexibility so that spending decisions can be adjusted during the course of the fiscal year. See "CITY GENERAL FUND PROGRAMS AND EXPENDITURES" herein.
Budget Process
The City's fiscal year commences on July 1. The City's budget process for each fiscal year begins in the
middle of the preceding fiscal year as departments prepare their budgets and seek any required approvals from the applicable City board or commission. Departmental budgets are consolidated by the City Controller, and then transmitted to the Mayor no later than the first working day of March. By the
first working day of May, the Mayor is required to submit a proposed budget to the Board of Supervisors for certain specified departments, based on criteria set forth in the Administrative Code. On or before the first working day of June, the Mayor is required to submit the complete budget, including all
departments, to the Board of Supervisors.
Under the Charter, following the submission of the Mayor's proposed budget, the City Controller must
provide an opinion to the Board of Supervisors regarding the accuracy of economic assumptions underlying the revenue estimates and the reasonableness of such estimates and revisions in the proposed budget (the City Controller's "Revenue Letter"). The City Controller may also recommend
reserves that are considered prudent given the proposed resources and expenditures contained in the
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Mayor's proposed budget. The City Controller's current Revenue Letter can be viewed online at
www.sfcontroller.org. The Revenue Letter and other information from said website are not incorporated herein by reference. The City's Capital Planning Committee also reviews the proposed budget and provides recommendations based on the budget's conformance with the City's adopted ten-year capital plan. For a further discussion of the Capital Planning Committee and the City's ten-year capital plan, see
"CAPITAL FINANCING AND BONDS-Capital Plan" herein.
The City is required by the Charter to adopt a budget which is balanced in each fund. During its budget
approval process, the Board of Supervisors has the power to reduce or augment any appropriation in the proposed budget, provided the total budgeted appropriation amount in each fund is not greater than the total budgeted appropriation amount for such fund submitted by the Mayor. The Board of Supervisors must approve the budget by adoption of the Annual Appropriation Ordinance (also referred to herein as the "Original Budget") by no later than August 1 of each fiscal year.
The Annual Appropriation Ordinance becomes effective with or without the Mayor's signature after 10
days; however, the Mayor has line-item veto authority over specific items in the budget. Additionally, in
the event the Mayor were to disapprove the entire ordinance, the Charter directs the Mayor to promptly return the ordinance to the Board of Supervisors, accompanied by a statement indicating the reasons for disapproval and any recommendations which the Mayor may have. Any Annual
Appropriation Ordinance so disapproved by the Mayor shall become effective only if, subsequent to its return, it is passed by a two-thirds vote of the Board of Supervisors.
Following the adoption and approval of the Annual Appropriation Ordinance, the City makes various revisions throughout the fiscal year (the Original Budget plus any changes made to date are collectively referred to herein as the "Revised Budget"). A "Final Revised Budget" is prepared at the end of the fiscal
year reflecting the year-end revenue and expenditure appropriations for that fiscal year.
November 2009 Charter Amendment Instituting Two-Year Budgetary Cycle
On November 3, 2009, voters approved Proposition A amending the Charter to make significant changes to the City's budget and financial processes which are intended to stabilize spending by requiring multi
year budgeting and financial planning.
Proposition A made four significant changes:
1. Specifies a two-year (biennial) budget, replacing the annual budget. Fixed two-year budgets are
currently approved by the Board of Supervisors for five departments: the Airport, Child Support Services, the Port, the Public Utilities Commission and MTA. All other departments prepared balanced, rolling two-year budgets.
2. Requires a five-year financial plan, which forecasts revenues and expenses and summarizes expected public service levels and funding requirements for that period. The most recent five
year financial plan, including a forecast of expenditures and revenues and proposed actions to balance them in light of strategic goals, was issued by the Mayor, Budget Analyst for the Board of Supervisors and Controller's Office on December 16, 2016, for fiscal year 2017-18 through
fiscal year 2021-22, to be considered by the Board of Supervisors. See "Five Year Financial Plan"
below. This plan was most recently updated on March 23, 2017.
3. Charges the Controller's Office with proposing to the Mayor and Board of Supervisors financial policies addressing reserves, use of volatile revenues, debt and financial measures in the case of disaster recovery and requires the City to adopt budgets consistent with these policies once approved. The Controller's Office may recommend additional financial policies or amendments to existing policies no later than October 1 of any subsequent fiscal year.
4. Standardizes the processes and deadlines for the City to submit labor agreements for all public employee unions by May 15.
On April 13, 2010, the Board of Supervisors unanimously adopted policies to 1) codify the City's current practice of maintaining an annual General Reserve for current year fiscal pressures not anticipated in the budget and roughly double the size of the General Reserve by fiscal year 2015-16, and 2) create a new Budget Stabilization Reserve funded by excess receipts from volatile revenue streams to augment the existing Rainy Day Reserve to help the City mitigate the impact of multi-year downturns. On November 8 and 22, 2011, the Board of Supervisors unanimously adopted additional financial policies limiting the future approval of Certificates of Participation and other long-term obligations to 3.25% of discretionary
revenue, and specifying that selected nonrecurring revenues may only be spent on nonrecurring expenditures. On December 16, 2014, the Board of Supervisors unanimously adopted financial policies to implement voter-approved changes to the City's Rainy Day Reserve, as well as changes to the General
Reserve which would increase the cap from 2% to 3% of revenues and reduce deposit requirements during a recession. These policies are described in further detail below under "Budgetary Reserves." The Controller's Office may propose additional financial policies by October 1 of any fiscal year.
Role of Controller; Budgetary Analysis and Projections
As Chief Fiscal Officer and City Services Auditor, the City Controller monitors spending for all officers, departments and employees charged with receipt, collection or disbursement of City funds. Under the Charter, no obligation to expend City funds can be incurred without a prior certification by the Controller that sufficient revenues are or will be available to meet such obligation as it becomes due in the then-current fiscal year, which ends June 30. The Controller monitors revenues throughout the fiscal year, and if actual revenues are less than estimated, the City Controller may freeze department appropriations or place departments on spending "allotments" which will constrain department expenditures until estimated revenues are realized. If revenues are in excess of what was estimated, or budget surpluses are created, the Controller can certify these surplus funds as a source for supplemental appropriations that may be adopted throughout the year upon approval of the Mayor and the Board of Supervisors. The City's annual expenditures are often different from the estimated expenditures in the
Annual Appropriation Ordinance due to supplemental appropriations, continuing appropriations of prior years, and unexpended current-year funds.
In addition to the five year planning responsibilities established in Proposition A of November 2009 and discussed above, Charter Section 3.105 directs the Controller to issue periodic or special financial reports during the fiscal year. Each year, the Controller issues six-month and nine-month budget status reports to apprise the City's policymakers of the current budgetary status, including projected year-end revenues, expenditures and fund balances. The Controller issued the most recent of these reports, the fiscal year 2017-18 Six Month Report (the "Six Month Report"), on February 14, 2018. The City Charter
also directs the Controller to annually report on the accuracy of economic assumptions underlying the revenue estimates in the Mayor's proposed budget. On June 9, 2017 the Controller released the Discussion of the Mayor's fiscal year 2017-18 and fiscal year 2018-19 Proposed Budget (the "Revenue
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Letter" as described in "Budget Process" above). All of these reports are available from the Controller's
website: www.sfcontroller.org. The information from said website is not incorporated herein by
reference.
General Fund Results: Audited Financial Statements
The General Fund portions of the fiscal year 2017-18 and 2018-19 Original Budgets total $5.15 billion
and $5.31 billion, respectively, including appropriations, reserves, and transfers out. These amounts do
not include expenditures of the enterprise fund departments such as the Airport, the MTA, the Public Utilities Commission, the Port and the City-owned hospitals (San Francisco General and Laguna Honda). Table A-2 shows Final Revised Budget revenues and appropriations for the City's General Fund for fiscal
years 2014-15 through 2016-17 and the Original Budgets for fiscal years 2017-18 and 2018-19. See "PROPERTY TAXATION -Tax Levy and Collection," "OTHER CITY TAX REVENUES" and "CITY GENERAL
FUND PROGRAMS AND EXPENDITURES" herein.
The City's most recently completed Comprehensive Annual Financial Report (the "CAFR," which includes
the City's audited financial statements) for fiscal year 2016-17 was issued on December 29, 2017. The
fiscal year 2016-17 CAFR reported that as of June 30, 2017, the General Fund balance available for appropriation in subsequent years was $545.9 million (see Table A-4), of which $183.3 million was
assumed in the fiscal year 2017-18 Original Budget and $288.2 million was assumed in the fiscal year 2018-19 Original Budget. This represents a $110.7 million increase in available fund balance over the $435 million available as of June 30, 2016 and resulted primarily from greater-than-budgeted additional
tax revenue, particularly property, business and transfer tax revenues, partially offset by under performance in sales, hotel and parking tax revenues in fiscal year 2016-17.
Va ria nee of Actua I vs. Budget 373,696 296,673 249,475
Total Actual Budgetary Fund Balance ' $1,236,090 $1,526,855 $625,955 $0
1 Over the pa st five years, the City has consolidated various departments to a chi eve operational efficiencies. This has resulted
in changes in how departments were summarized in the service area groupings above for the time periods shown. 2 Fiscal year2017-18 Final Revised Budget will be available upon release of the fiscal year 2017-18 CAFR. 3 Fi sea I year 2018-19 Original Budget Prior -Year Budgetary Fund Ba la nee & Reserves will be reconciled with the previous yea r's
Final Revised Budget.
Source: Office of the Controller, City and County of San Francisco.
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2018-19
Original
Budget 3
$289,258
$1,620,000
762,500
1,098,110
30,367
4,579
18,390
14,984
1,024,209
241,536
40,634
$4,855,309
$87
$1,366,723
156,079
1,017,189
875,974
163,576
366,421
206,528
$4,152,490
$57,000
$168,277
(1,103,441)
($935,164)
$1
$1
The City prepares its budget on a modified accrual basis. Accruals for incurred liabilities, such as claims and judgments, workers' compensation, accrued vacation and sick leave pay are funded only as payments are required to be made. The audited General Fund balance as of June 30, 2017 was $1.9 billion (as shown in Table A-3 and Table A-4) using Generally Accepted Accounting Principles ("GAAP"),
derived from audited revenues of $4.5 billion. Audited General Fund balances are shown in Table A-3 on both a budget basis and a GAAP basis with comparative financial information for the fiscal years ended June 30, 2013 through June 30, 2017.
TABLE A-3 CITY AND COUNTY OF SAN FRANCISCO
Summary of Audited General Fund Balances Fiscal Years 2012-13 through 2016-17
(OOOs)
2012-13 2013-14
Restricted for rainy day (Economic Stabilization account) $23,329 $60,289 Restricted for rainy day (One-time Spending account) 3,010 22,905
Committed for budget stabilization (citywide) 121,580 132,264
Committed for Recreation & Parks expenditure savings reserve 15,907 12,862
Assigned not ava ii able for a ggrogriati on Assigned for encumbrances $74,815 $92,269 Assigned for appropriation carryforward 112,327 159,345
Assigned for budget savings incentive program (Citywide) 24,819 32,088 Assigned for salaries and benefits 6,338 10,040
Total Fund Balance NotAvailablefor Appropriation $382,125 $522,062
Assigned and unassigned availablefor aggrogriation
Assigned for litigation & contingencies $30,254 79,223 Assigned for General reserve 21,818 Assigned for subsequent year's budget 122,689 135,938
Unassigned for General Reserve 45,748 Unassigned - Budgeted for use second budget year 111,604 137 ,075 Unassigned - Contingency for second budget year Unassigned - Avai I abl efor future appropriation 6,147 21,656
Total Fund BalanceAvailablefor Appropriation $292,512 $419,640
Total Fund Balance, Budget Basis $674,637 $941,702
Budget Basis to GAAP Basis Reconciliation
Tota I Fund Bal a nee - Budget Basis $674,637 $941,702
Unrealized gain or loss on investments (1.140) 935
Table A-4, entitled "Audited Statement of Revenues, Expenditures and Changes in General Fund Balances," is extracted from information in the City's CAFR for the five most recent fiscal years. Audited
financial statements for the fiscal year ended June 30, 2017 are included herein as Appendix B -"COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY AND COUNTY OF SAN FRANCISCO FOR THE YEAR ENDED JUNE 30, 2017." Prior years' audited financial statements can be obtained from the City
Controller's website. Information from the City Controller's website is not incorporated herein by reference. Excluded from this Statement of General Fund Revenues and Expenditures in Table A-4 are
fiduciary funds, internal service funds, special revenue funds (which relate to proceeds of specific
revenue sources which are legally restricted to expenditures for specific purposes) and all of the enterprise fund departments of the City, each of which prepares separate audited financial statements.
[Remainder of Page Intentionally Left Blank}
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TABLE A-4
CITY AND COUNTY OF SAN FRANCISCO
Audited Statement of Revenues, Expenditures and Changes in General Fund Balances
Public Protection $1,057,451 $1,096,839 $1,148,405 $1,204,666 $1,257,948
Public Works, Transportation & Commerce
Human Wei fa re and Neighborhood Development
Community Hea Ith
Culture and Recreation General Administration & Finance
General City Responsibilities
Tota I Expenditures
68,014
660,657
634,701
105,870 186,342
81,657
$2,794,692
78,249
720,787
668,701
113,019 190,335
86,968
87,452
786,362
650,741
119,278 208,695
98,620
$2,954,898 $3,099,553
136,762
853,924
666,138
124,515 223,844
114,663
$3,324,512
166,285
956,478
600,067
139,368 238,064
121,444
$3,479,654
Excess of Revenues over Expenditures $532,344 $792,463 $1,013,091 $1,032,404 $1,157,133
Other Financing Sources (Uses):
Transfers In
Transfers Out
Other Financing Sources
Other Financing Uses
$195,272
(646,912)
4,442
$216,449
(720,806)
6,585
$164,712 $209,494
(873,741) (962,343)
5,572 4,411
$140,272
(857,629)
1,765
Total Other Financing Sources (Uses) ($447,198) ($497,772) ($703,457) ($748,438) ($715,592)
Excess (Deficiency) of Revenues and Other Sources
Over Expenditures and Other Uses $85,146 $294,691 $309,634 $283,966 $441,541
Total Fund BalanceatBeginningofYear $455,725 $540,871 $835,562 $1,145,196 $1,429,162
Total Fund Ba la nee at End of Year -- GAAP Basis 3 $540,871 $835,562 $1,145,196 $1,429,162 $1,870,703
Assigned for Subsequent Year's Appropriations and Unassigned Fund Balance, Year End
-- GAAP Basis $135,795 $178,066 $234,273
-- Budget Basis $240,410 $294,669 $390,830
$249,238
$435,202
$273,827
$545,920
1 Summary offinancial information derived from City CAFRs. Fund balances include amounts reserved for rainy day (Economic
Stabilization and One-time Spending accounts), encumbrances, appropriation carryforwards and other purposes (as required
by the Charter or appropriate accounting practices) as well as unreserved designated and undesignated available fund balances
(which amounts constitute unrestricted General Fund balances). 2 Does not include business taxes allocated to special revenue fund for the Community Challenge Grant program. 3 Total fiscal year2012-13 amount is comprised of$122. 7 million in assigned balance subsequently appropriated for use in fiscal
year2013-14 plus $117.8 million unassigned balance available for future appropriations.
Sources: Comprehensive Annual Financial Report; Office of the Controller, City and County ofSan
Francisco.
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Five-Year Financial Plan
The Five-Year Financial Plan ("Plan") is required under Proposition A. The Charter requires the City to forecast expenditures and revenues for the next five fiscal years, propose actions to balance revenues and expenditures during each year of the Plan, and discuss strategic goals and corresponding resources for City departments. Proposition A required that a Plan be adopted every two years. The City updates the Plan annually. The most recently adopted Plan, for fiscal years 2017-18 through 2021-22, was adopted by the Board of Supervisors and signed by the Mayor on May 5, 2017.
On December 21, 2017 (the "December 2017 Update"), the Mayor, Budget Analyst for the Board of Supervisors and the Controller's Office issued an update for the remaining four years of the City's Five Year Financial Plan for fiscal year 2018-19 through fiscal year 2021-22. The December Update Plan projected cumulative annual shortfalls of $88.2 million, $173.4 million, $561.2 million, and $709.3 million for fiscal years 2018-19 through 2021-22, respectively.
On March 21, 2018 (the "March 2018 Update"), the Mayor, Budget Analyst for the Board of Supervisors and the Controller's Office issued an update to the December 2017 Update. The March 2018 Update projects annual shortfalls of $37.9 million, $99.0 million, $521.0 million, and $651.9 million cumulative for fiscal years 2018-19 through 2021-22, respectively.
The updated Plan projects growth over a four-year period in General Fund revenues of 9%, primarily composed of growth in local tax sources, offset by projected expenditure increases of 22% over the same period, primarily composed of growth in employee wages and health care costs, citywide operating expenses, and Charter mandated baselines and reserves. The City currently projects growth in General Fund sources of $488.7 million over the Plan period, and expenditure growth of $1.14 billion. Growth in salaries and benefits accounts for 47% or $531.2 million of the cumulative four year shortfall. Growth in citywide operating costs accounts for 25% or $283 million of the cumulative four year shortfall. Growth in Charter mandated baselines and reserves accounts for 17% or $190.7 million of the cumulative four year shortfall. Growth in individual department costs account for 12% or $135.6 million of the cumulative four year shortfall. These figures incorporate the key assumptions from the March 2018 Update, including:
• Continued Increases in Employer Contribution Rates to City Retirement System: Consistent with the prior plan, the March 2018 Update anticipates increased retirement costs. The increase in employer contribution rates is due to three main factors: lower than expected actual fiscal year 2016-17 investment earnings; updated demographic assumptions, which show that retirees are living longer and collecting pensions longer than previously expected; and an appellate court ruling against the City which found that voter-adopted changes to the conditions under which retirees could receive a supplemental COLA violated retirees' vested rights.
• Continued Increases in Wages and Health Care Costs: The March 2018 Update incorporates the cost of contract extensions for most miscellaneous employees, as negotiated for fiscal years 2017-18 and 2018-19, with most labor unions. The parties agreed to a wage increase schedule
of 3% on July 1, 2017 and 3% on July 1, 2018, with a provision to delay the fiscal year 2018-19 adjustment by six months if the City's deficit, as projected in the March 2018 Update to the FiveYear Financial Plan, exceeds $200 million.
The March 2018 Update assumes no change from the December 2017 Update: employer share of health and dental insurance costs for active employees will increase by 6% in fiscal year 2018-19 and 8% in each subsequent fiscal year. This is a significant increase from the proposed Plan
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projection in December 2014, which anticipated approximately 5% growth in the employer share of health and dental rates. The March 2018 Update also assumes no change for retiree health costs, which are projected to increase by 9% in each year of projection.
• Voter Adopted Revenue and Spending Requirements: The March 2018 Update continues to assume several new revenue and expenditure requirements adopted by voters in 2016: a Recreation and Parks baseline (June 2016 Proposition B), a Dignity Fund baseline (November 2016 Proposition I), and a Street Tree Maintenance Fund baseline (November 2016 Proposition E). In addition to these spending requirements, the voters adopted an increase to the Real Property Transfer Tax rate (November 2016 Proposition W) and a tax on the distribution of sugar-sweetened beverages (November 2016 Proposition).
• In-Home Supportive Services (IHSS) Cost Shift: IHSS is an entitlement program which provides homecare services to 22,000 elderly and disabled San Franciscans, allowing them to stay in their homes rather than move into more costly nursing facilities or other programs. It is funded by federal, state, and county sources. Due to changes in the fiscal year 2017-18 Enacted State budget, significant costs for this program were shifted from the state to counties. The City's fiscal year 2017-18 and 2018-19 adopted budgets, assumed cost increases of $11.1 million in fiscal year 2017-18 and $16.9 million in fiscal year 2018-19, as compared to prior budget
projections. As more detail has been released by the State, the March 2018 Update adds an additional cost of $11.1 million in fiscal year 2017-18, bringing the total cost growth in that year to $22.3 million above prior projections. The cost shift continues to grow in fiscal year 2018-19 to $37.9 million, $60.8 million in fiscal year 2019-20, $74.2 million in fiscal year 2020-21, and $84.8 million in fiscal year 2021-22.
Beyond the IHSS Cost Shift, the March 2018 Update does not assume any losses of federal or state revenues, except for formula-driven reductions. Although proposals that would have significant negative impact on the City budget are pending at the state and federal level, it is unclear which will ultimately be adopted and what the specific impacts will be.
While the projected shortfalls in the March 2018 Update reflect the difference in projected revenues and expenditures over the next four years if current service levels and policies continue, San Francisco's Charter requires that each year's budget be balanced. Balancing the budgets will require some combination of expenditure reductions and/or additional revenues. These projections assume no ongoing solutions are implemented. To the extent budgets are balanced with ongoing solutions, future shortfalls will decrease.
The March 2018 Update does not assume an economic downturn due to the difficulty of predicting recessions; however, the City has historically not experienced more than six consecutive years of expansion, and the current economic expansion began over eight years ago.
Based on the revenue and expenditure projections contained in the December 2017 Update, on December 4, 2017, the Mayor's Office issued budget instructions to departments requiring expenditure reductions of 2.5% in fiscal year 2018-19 and an additional reduction of 2.5% in fiscal year 2019-20.
City Budget Adopted for Fiscal Years 2017-18 and 2018-19
On July 26, 2017, the late Mayor Lee signed the Consolidated Budget and Annual Appropriation Ordinance (the "Original Budget") for the fiscal years ending June 30, 2018 and June 30, 2019. This is the sixth two-year budget for the entire City. The adopted budget closed the $119 million and $283 million
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General Fund shortfalls for fiscal years 2017-18 and 2018-19 identified in the City's December 2016 Plan update through a combination of increased revenues and expenditures savings.
The Original Budget for fiscal year 2017-18 and fiscal year 2018-19 totals $10.12 billion and $10.00 billion respectively, representing a year over year increase of $532 million in fiscal year 2017-18 and year over year decrease of $117 million in fiscal year 2018-19. The General Fund portion of each year's budget is $5.15 billion in fiscal year 2017-18 and $5.31 billion in fiscal year 2018-19 representing year over year increases of $83 million and $138 million. There are 30,835 funded full time positions in the fiscal year 2017-18 Original Budget and 30,938 in the fiscal year 2018-19 Original Budget representing year-over-year increases of 208 and 103 positions, respectively.
Other Budget Updates
On June 9, 2017, the Controller's Office issued the Controller's Discussion of the Mayor's fiscal year 2017-18 and fiscal year 2018-19 Proposed Budget ("Revenue Letter"). The report found that the revenue assumptions in the proposed and now-adopted budget are reasonable, voter-required baseline and setaside requirements are met or exceeded, and that code-mandated reserves and funded and maintained at required levels.
The letter also certified that the Original Budget for fiscal years 2017-18 and 2018-19 adheres to the City's policy limiting the use of certain nonrecurring revenues to nonrecurring expenses proposed by the Controller's Office and approved unanimously by the Board of Supervisors on November 22, 2011. The policy was approved by the Mayor on December 1, 2011 and can only be suspended for a given fiscal year by a two-thirds vote of the Board. Specifically, this policy limited the Mayor and Board's ability to use for operating expenses the following nonrecurring revenues: extraordinary year-end General Fund
balance (defined as General Fund prior year unassigned fund balance before deposits to the Rainy Day Reserve or Budget Stabilization Reserve in excess of the average of the previous five years), the General Fund share of revenues from prepayments provided under long-term leases, concessions, or contracts, otherwise unrestricted revenues from legal judgments and settlements, and other unrestricted revenues from the sale of land or other fixed assets. Under the policy, these nonrecurring revenues may only be used for nonrecurring expenditures that do not create liability for or expectation of substantial ongoing costs, including but not limited to: discretionary funding of reserves, acquisition of capital equipment, capital projects included in the City's capital plans, development of affordable housing, and discretionary payment of pension, debt or other long term obligations.
Impact of the State of California Budget on Local Finances
Revenues from the State represent approximately 15% of the General Fund revenues appropriated in the Original Budget for fiscal years 2017-18 and 2018-19, and thus changes in State revenues could have
a significant impact on the City's finances. In a typical year, the Governor releases two primary proposed budget documents: 1) the Governor's Proposed Budget required to be submitted in January; and 2) the "May Revise" to the Governor's Proposed Budget. The Governor's Proposed Budget is then considered
and typically revised by the State Legislature. Following that process, the State Legislature adopts, and the Governor signs, the State budget. City policy makers review and estimate the impact of both the Governor's Proposed and May Revise Budgets prior to the City adopting its own budget.
On June 27, 2017, the Governor signed the 2017-18 State Budget, appropriating $183.3 billion from the General Fund and other State funds. General Fund appropriations total $125.1 billion, $3.7 billion or 3% more than the 2016-17 budget. The State budget agreement focuses on maintaining fiscal prudence by adding mostly one-time expenditures, paying down past budgetary borrowing and state employee
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pension liabilities, and contributing to stabilization reserves. The budget increases funding to K-14 schools and community colleges by adding $3.1 billion above fiscal year 2016-17 funding levels, including $1.4 billion through the Local Control Funding Formula. The budget expands the State's Earned Income Tax Credit (EITC) to include a wider income range, as well as self-employed individuals. It also implements the Road Repair and Accountability Act of 2017 (SBl) providing $54 billion of new transportation infrastructure funding over the next 10 years.
The final fiscal year 2017-18 budget re-bases the In-Home Supportive Services Maintenance-of-Effort "IHSS MOE" agreement negotiated in 2012, as proposed in the Governor's January budget, but provides $400 million of General Fund support to partially mitigate the increase to counties' costs in fiscal year 2017-18, $330 million in 2018-19, $200 million in 2019-20, and $150 million annually thereafter. The City's fiscal year 2017-18 budget assumes a cost of $11.1 million to support the IHSS program, partially offset by health and welfare realignment subventions. As more detail has been released, the City projected cost has grown by an additional $8.8 million in fiscal year 2017-18, bringing the total cost growth to $19.9 million. On January 10, 2018, the Governor released the State's proposed fiscal year 2018-19 budget. The budget contains no changes to the fundamental structure of the re-based IHSS
MOE. The exact impact of the new IHSS funding structure on the City is still uncertain, as the funding structure and formulas are still being developed.
In addition, the City's fiscal year 2017-18 budget assumes $8.6 million of new street-related capital funding through the Road Repair and Accountability Act of 2017 (SBl). This amount is expected to annualize to approximately $23 million in fiscal year 2018-19. A potential November 2018 state ballot measure to repeal the gas tax increase would result in a loss of these funds.
Impact of Federal Government on Local Finances
The City is continuing to assess the potential material adverse changes in current and anticipated federal funding under the current presidential administration and Congress. These changes include, for example, potential increased costs associated with changes to or termination or replacement of the Affordable Care Act ("ACA"), potential withholding of federal grants or other federal funds flowing to "sanctuary jurisdictions" and suspension or termination of other federal grants for capital projects. The
scope and timing of such changes will not be known until the administration concretely proposes specific changes or Congress acts on such proposals, as applicable. As to potential withholding of funds for "sanctuary cities" the City has challenged in federal court the Presidential Executive Order that would cut funding from "sanctuary jurisdictions." The federal district court issued a permanent injunction in November 2017, and the case is currently on appeal at the Ninth Circuit. The fiscal year 2016-17 Original Budget includes about $1.2 billion in federal payments, of which about $1 billion is for entitlement programs mostly administered by the City's Human Services Agency and Department of Public Health. The City also receives about $800 million in multi-year federal grants. The City will continue to monitor federal budget and policy changes, but cannot at this time determine the financial impacts of any proposed federal budget changes, or whether the budget will include a reserve against anticipated loss of federal funding.
The federal tax reform bill that was approved by Congress on December 20, 2017 and its effects on San Francisco are not clear at this time. However, the local economy may be affected by the tax law's provisions, including: (1) creation of a $10,000 cap on the state and local tax deduction, which will increase many residents' total tax liabilities and affect consumer spending; (2) repeal of the individual health insurance mandate under the ACA; and (3) reduction in the mortgage interest tax deduction.
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Budgetary Reserves
Under the Charter, the Treasurer, upon recommendation of the City Controller, is authorized to transfer legally available moneys to the City's operating cash reserve from any unencumbered funds then held in the City's pooled investment fund. The operating cash reserve is available to cover cash flow deficits in
various City funds, including the City's General Fund. From time to time, the Treasurer has transferred unencumbered moneys in the pooled investment fund to the operating cash reserve to cover temporary cash flow deficits in the General Fund and other City funds. Any such transfers must be repaid within the
same fiscal year in which the transfer was made, together with interest at the rate earned on the pooled funds at the time the funds were used. The City has not issued tax and revenue anticipation notes to finance short-term cash flow needs since fiscal year 1996-97. See "INVESTMENT OF CITY FUNDS -Investment Policy" herein.
The financial policies passed on April 13, 2010 codified the current practice of maintaining an annual General Reserve to be used for current-year fiscal pressures not anticipated during the budget process. The policy set the reserve equal to 1% of budgeted regular General Fund revenues in fiscal year 2012-13
and increasing by 0.25% each year thereafter until reaching 2% of General Fund revenues in fiscal year 2016-17. The Original Budget for fiscal years 2017-18 and 2018-19 includes starting balances of $107.3
million and $121.4 million for the General Reserve, respectively. On December 16, 2014, the Board of
Supervisors adopted financial policies to further increase the City's General Reserve from 2% to 3% of General Fund revenues between fiscal year 2017-18 and fiscal year 2020-21 while reducing the required
deposit to 1.5% of General Fund revenues during economic downturns. The intent of this policy change is to increase reserves available during a multi-year downturn.
In addition to the operating cash and general reserves, the City maintains two types of reserves to offset
unanticipated expenses and which are available for appropriation to City departments by action of the Board of Supervisors. These include the Salaries and Benefit Reserve (Original Budget for fiscal years 2017-18 and 2018-19 includes $14.5 million in fiscal year 2017-18 and $31.0 million in fiscal year 2018-
19), and the Litigation Reserve (Original Budget for fiscal years 2017-18 and 2018-19 includes $11 million in each year). Balances in both reflect new appropriations to the reserves and do not include carry
forward of prior year balances. The Charter also requires set asides of a portion of departmental
expenditure savings in the form of a citywide Budget Savings Incentive Reserve and a Recreation and Parks Budget Savings Incentive Reserve.
The City also maintains Rainy Day and Budget Stabilization reserves whose balances carry-forward
annually and whose use is allowed under select circumstances described below.
Rainy Day Reserve
In November 2003, City voters approved the creation of the City's Rainy Day Reserve into which the previous Charter-mandated cash reserve was incorporated. Charter Section 9.113.5 requires that if the
Controller projects total General Fund revenues for the upcoming budget year will exceed total General
Fund revenues for the current year by more than five percent, then the City's budget shall allocate the anticipated General Fund revenues in excess of that five percent growth into two accounts within the Rainy Day Reserve and for other lawful governmental purposes. Effective January 1, 2015, Proposition C
passed by the voters in November 2014 divided the existing Rainy Day Economic Stabilization Account into a City Rainy Day Reserve ("City Reserve") and a School Rainy Day Reserve ("School Reserve") with
each reserve account receiving 50% of the existing balance. Additionally, any deposits to the reserve
subsequent to January 1, 2015 will be allocated as follows:
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• 37.5 percent of the excess revenues to the City Reserve;
• 12.5 percent of the excess revenues to the School Reserve;
• 25 percent of the excess revenues to the Rainy Day One-Time or Capital Expenditures account; and
• 25 percent of the excess revenues to any lawful governmental purpose.
Fiscal year 2016-17 revenue exceeded the deposit threshold by $8.9 million generating a deposit of $3.4 million to the City Reserve, $1.1 million to the School Reserve, and $2.2 million to the One-Time or Capital Expenditures account. Deposits to the Rainy Day Reserve's Economic Stabilization account are
subject to a cap of 10% of actual total General Fund revenues as stated in the City's most recent independent annual audit. Amounts in excess of that cap in any year will be allocated to capital and other one-time expenditures.
Monies in the City Reserve are available to provide a budgetary cushion in years when General Fund revenues are projected to decrease from prior-year levels (or, in the case of a multi-year downturn, the highest of any previous year's total General Fund revenues). Monies in the Rainy Day Reserve's OneTime or Capital Expenditures account are available for capital and other one-time spending initiatives.
The fiscal year 2016-17 combined ending balance of the One-Time and Economic Stabilization portions
of the Reserve was $125.7 million. There are no projected deposits or withdrawals assumed in the fiscal year 2017-18 and 2018-19 budgets.
Budget Stabilization Reserve
On April 13, 2010, the Board of Supervisors unanimously approved the Controller's proposed financial policies on reserves and the use of certain volatile revenues. The policies were approved by the Mayor on April 30, 2010, and can only be suspended for a given fiscal year by a two-thirds vote of the Board.
With these policies the City created two additional types of reserves: the General Reserve, described above, and the Budget Stabilization Reserve.
The Budget Stabilization Reserve augments the existing Rainy Day Reserve and is funded through the dedication of 75% of certain volatile revenues, including Real Property Transfer Tax ("RPTI") receipts in excess of the five-year annual average (controlling for the effect of any rate increases approved by
voters), funds from the sale of assets, and year-end unassigned General Fund balances beyond the amount assumed as a source in the subsequent year's budget.
Fiscal year 2016-17 RPTI receipts exceeded the five-year annual average by $144.4 million and ending
general fund unassigned fund balance was 57.6 million, triggering a $57.6 million deposit. However, $6.7
million of this deposit requirement was offset by the Rainy Day Reserve deposit, resulting in a $144.8 million deposit to the Budget Stabilization Reserve and leaving an ending balance to $323.3 million. The fiscal year 2017-18 and 2018-19 budgets assume no reserve deposits given projected RPTI receipts. The
Controller's Office determines deposits in October of each year based on actual receipts during the prior
fisca I year.
The maximum combined value of the Rainy Day Reserve and the Budget Stabilization Reserve is 10% of General Fund revenues, which would be approximately $467 million for fiscal year 2016-17. No further deposits will be made once this cap is reached, and no deposits are required in years when the City is
eligible to withdraw. The Budget Stabilization Reserve has the same withdrawal requirements as the Rainy Day Reserve, however, there is no provision for allocations to the SFUSD. Withdrawals are structured to occur over a period of three years: in the first year of a downturn, a maximum of 30% of
the combined value of the Rainy Day Reserve and Budget Stabilization Reserve could be drawn; in the
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second year, the maximum withdrawal is 50%; and, in the third year, the entire remaining balance may be drawn.
THE SUCCESSOR AGENCY
As described below, the Successor Agency was established by the Board of Supervisors of the City following dissolution of the former San Francisco Redevelopment Agency (the "Former Agency")
pursuant to the Dissolution Act (defined below). Within City government, the Successor Agency is titled "The Office of Community Investment and Infrastructure as the Successor to the San Francisco Redevelopment Agency." Set forth below is a discussion of the history of the Former Agency and the
Successor Agency, the governance and operations of the Successor Agency and its powers under the
Redevelopment Law and the Dissolution Act, and the limitations thereon.
The Successor Agency maintains a website as part of the City's website. The information on such
websites is not incorporated herein by reference.
Authority and Personnel
The powers of the Successor Agency are vested in its governing board (the "Successor Agency
Commission"), referred to within the City as the "Commission on Community Investment and
Infrastructure," which has five members who are appointed by the Mayor of the City with the approval of the Board of Supervisors. Members are appointed to staggered four-year terms (provided that two
members have initial two-year terms). Once appointed, members serve until replaced or reappointed.
The Successor Agency currently employs approximately 47 full-time equivalent positions. The Executive
Director, Nadia Sesay, was appointed in October 2017. The other principal full-time staff positions are the Deputy Director, Projects and Programs; the Deputy Director, Finance and Administration; and the Successor Agency General Counsel and Deputy Director. Each project area in which the Successor
Agency continues to implement redevelopment plans, is managed by a Project Manager. There are separate staff support divisions with real estate and housing development specialists, architects, engineers and planners, and the Successor Agency has its own fiscal, legal, administrative and property
management staffs.
Effect of the Dissolution Act
AB 26 and AB 27. The Former Agency was established under the Community Redevelopment Law in 1948. As a result of AB lX 26 and the decision of the California Supreme Court in the California Redevelopment Association case, as of February 1, 2012, (collectively, the "Dissolution Act"), redevelopment agencies in the State were dissolved, including the Former Agency, and successor
agencies were designated as successor entities to the former redevelopment agencies to expeditiously wind down the affairs of the former redevelopment agencies and also to satisfy "enforceable
obligations" of the former redevelopment agency all under the supervision of a new oversight board,
the State Department of Finance and the State Controller.
Pursuant to Resolution No. 11-12 (the "Establishing Resolution") adopted by the Board of Supervisors of
the City on January 24, 2012 and signed by the Mayor on January 26, 2012, and Sections 34171(j) and 34173 of the Dissolution Act, the Board of Supervisors of the City confirmed the City's role as successor to the Former Agency. On June 27, 2012, the Redevelopment Law was amended by AB 1484, which
clarified that successor agencies are separate political entities and that the successor agency succeeds to the organizational status of the former redevelopment agency but without any legal authority to
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participate in redevelopment activities except to complete the work related to an approved enforceable obligation.
Pursuant to Ordinance No. 215-12 passed by the Board of Supervisors of the City on October 2, 2012
and signed by the Mayor on October 4, 2012, the Board of Supervisors (i) officially gave the following name to the Successor Agency: the "Successor Agency to the Redevelopment Agency of the City and
County of San Francisco," (ii) created the Successor Agency Commission as the policy body of the Successor Agency, (iii) delegated to the Successor Agency Commission the authority to act in place of
the Former Agency Commission to implement the surviving redevelopment projects, the replacement housing obligations and other enforceable obligations of the Former Agency and the authority to take actions that AB 26 and AB 1484 require or allow on behalf of the Successor Agency and (iv) established the composition and terms of the members of the Successor Agency Commission.
As discussed below, many actions of the Successor Agency are subject to approval by an "oversight board" and the review or approval by the California Department of Finance, including the issuance of bonds but excludes the community facilities district ("CFD") bonds that the agency may issue from time
to time.
Oversight Board
The Oversight Board was formed pursuant to Establishing Resolution adopted by the City's Board of Supervisors and signed by the Mayor on January 26, 2012. The Oversight Board is governed by a seven
member governing board, with four members appointed by the Mayor, and one member appointed by each of the Bay Area Rapid Transit District ("BART"), the Chancellor of the California Community
Colleges, and the County Superintendent of Education.
Department of Finance Finding of Completion
The Dissolution Act established a process for determining the liquid assets that redevelopment agencies should have shifted to their successor agencies when they were dissolved, and the amount that should be available for remittance by the successor agencies to their respective county auditor-controllers for
distribution to affected taxing entities within the project areas of the former redevelopment agencies. This determination process was required to be completed through the final step (review by the State
Department of Finance) by November 9, 2012 with respect to affordable housing funds and by April 1, 2013 with respect to non-housing funds. Within five business days of receiving notification from the State Department of Finance, a successor agency must remit to the county auditor-controller the
amount of unobligated balances determined by the State Department of Finance, or it may request a meet and confer with the State Department of Finance to resolve any disputes.
On May 23, 2013, the Successor Agency promptly remitted to the City Controller the amounts of unobligated balances relating to affordable housing funds, determined by the State Department of Finance in the amount of $10,577,932, plus $1,916 in interest. On May 23, 2013, the Successor Agency
promptly remitted to the City Controller the amount of unobligated balances relating to all other funds determined by the State Department of Finance in the amount of $959,147. The Successor Agency has made all payments required under AB 1484 and has received its finding of completion from the State
Department of Finance on May 29, 2013.
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State Controller Asset Transfer Review
The Dissolution Act requires that any assets of a former redevelopment agency transferred to a city, county or other local agency after January 1, 2011, be sent back to the successor agency. The Dissolution Act further requires that the State Controller review any such transfer. The State Controller's Office, ('SCO") issued their Asset Transfer Review in October 2014. The review found
$746,060,330 in assets transferred to the City after January 1, 2011, including unallowable transfers to the City totaling $666,830, or less than 1% of transferred assets. The City returned $666,830 to Office of Community Investment and Infrastructure, ("OCII") to comply with the SCO review.
Continuing Activities
The Former Agency was organized in 1948 by the Board of Supervisors of the City pursuant to the Redevelopment Law. The Former Agency's mission was to eliminate physical and economic blight within
specific geographic areas of the City designated by the Board of Supervisors. The Former Agency had redevelopment plans for nine redevelopment project areas.
Because of the existence of enforceable obligations, the Successor Agency is authorized to continue to implement, through the issuance of tax allocation bonds, four major redevelopment projects that were
previously administered by the Former Agency: (i) the Mission Bay North and South Redevelopment Project Areas, (ii) the Hunters Point Shipyard Redevelopment Project Area and Zone 1 of the Bayview Redevelopment Project Area, and (iii) the Transbay Redevelopment Project Area (collectively, the "Major Approved Development Projects"). In addition, the Successor Agency continues to manage
Verba Buena Gardens and other assets within the former Verba Buena Center Redevelopment Project Area ("YBC"). The Successor Agency exercises land use, development and design approval authority for
the Major Approved Development Projects and manages the former Redevelopment Agency assets in YBC in place of the Former Agency. The Successor Agency also issues CFD bonds from time to time to facilitate development in the major approved development projects in accordance with the terms of
such enforceable obligations.
PROPERTY TAXATION
Property Taxation System - General
The City receives approximately one-third of its total General Fund operating revenues from local
property taxes. Property tax revenues result from the application of the appropriate tax rate to the total
assessed value of taxable property in the City. The City levies property taxes for general operating purposes as well as for the payment of voter-approved bonds. As a county under State law, the City also
levies property taxes on behalf of all local agencies with overlapping jurisdiction within the boundaries
of the City.
Local property taxation is the responsibility of various City officers. The Assessor computes the value of locally assessed taxable property. After the assessed roll is closed on June 30'h, the City Controller issues
a Certificate of Assessed Valuation in August which certifies the taxable assessed value for that fiscal year. The Controller also compiles a schedule of tax rates including the 1.0% tax authorized by Article XIIIA of the State Constitution (and mandated by statute), tax surcharges needed to repay voter
approved general obligation bonds, and tax surcharges imposed by overlapping jurisdictions that have been authorized to levy taxes on property located in the City. The Board of Supervisors approves the
schedule of tax rates each year by ordinance adopted no later than the last working day of September. The Treasurer and Tax Collector prepare and mail tax bills to taxpayers and collect the taxes on behalf of
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the City and other overlapping taxing agencies that levy taxes on taxable property located in the City. The Treasurer holds and invests City tax funds, including taxes collected for payment of general obligation bonds, and is charged with payment of principal and interest on such bonds when due. The State Board of Equalization assesses certain special classes of property, as described below. See ''Taxation of State-Assessed Utility Property" below.
Assessed Valuations, Tax Rates and Tax Delinquencies
Table A-5 provides a recent history of assessed valuations of taxable property within the City. The property tax rate is composed of two components: 1) the 1.0% countywide portion, and 2) all voterapproved overrides which fund debt service for general obligation bond indebtedness. The total tax rate shown in Table A-5 includes taxes assessed on behalf of the City as well as SFUSD, SFCCD, the Bay Area Air Quality Management District ("BAAQMD"), and BART, all of which are legal entities separate from the City. See also, Table A-26: "Statement of Direct and Overlapping Debt and Long-Term Obligations" below. In addition to ad valorem taxes, voter-approved special assessment taxes or direct charges may also appear on a property tax bill.
Additionally, although no additional rate is levied, a portion of property taxes collected within the City is allocated to the Successor Agency (OCII). Property tax revenues attributable to the growth in assessed value of taxable property (known as "tax increment") within the adopted redevelopment project areas may be utilized by OCII to pay for outstanding and enforceable obligations and a portion of administrative costs of the agency causing a loss of tax revenues from those parcels located within project areas to the City and other local taxing agencies, including SFUSD and SFCCD. Taxes collected for payment of debt service on general obligation bonds are not affected or diverted. The Successor Agency received $129 million of property tax increment in fiscal year 2016-17, diverting about $72 million that would have otherwise been apportioned to the City's discretionary general fund.
The percent collected of property tax (current year levies excluding supplemental) was 99.15% for fiscal year 2016-17. This table has been modified from the corresponding table in previous disclosures to make the levy and collection figures consistent with statistical reports provided to the State. Foreclosures, defined as the number of trustee deeds recorded by the Assessor-Recorder's Office, numbered 212 for fiscal year 2015-16 compared to 102 for fiscal year 2014-15. The trustee deeds recorded in fiscal year 2011-12, fiscal year 2012-13 and fiscal year 2013-14 were 804, 363 and 187, respectively. In fiscal year 2016-17 there were 262 Notices of Trustee's Sales deeds recorded.
[Remainder of Page Intentionally Left Blank}
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TABLE A-5
CllY ANDCOUNlYOFSAN FRANCISCO
Assessed Valuation of Taxable Property Fiscal Years 2012-13 through 2017-18
(OOOs)
Total Tax
Fiscal NetAssessed1 % Change from Rate Total Tax Tota I Tax
1 Unsecured Rolls, less Non-reimbursable Exemptions and Homeowner Exemptions.
2 Annua I tax rate for unsecured property is the same rate as the previous ye a r's secured tax rate. 3
The Total Tax Levy and Total Tax Collected through fisca I year 2016-17 is based on year-end current year secured and
unsecured levies as adjusted through ro 11 corrections, e xcl udi ng supp I e me nta I ass es s me nts, as re ported tot he State of
California (avai I able on the website of the California SCO). Tota I Tax Levy for fisca I year 2017-18
is based on NAVtimes the 1.1723% tax rate.
Note: This table has been modified from the corresponding table in previous bond disclosures to make levy and collection figures consistent with statistical reports provided to the SCO.
Source: Office oft he Control I er, City and County of San Francisco.
SCO source noted in (3):http://www.sco.ca.gov/Fi les-ARD-Tax-lnfo/raxDe Ii nq/sa nfrancisco.pdf
% Collected
June30
98.6%
98.8%
98.8%
99.1%
99.1%
N/A
At the start of fiscal year 2017-18, the total net assessed valuation of taxable property within the City
was $234.1 billion. Of this total, $220.1 billion (94.0%) represents secured valuations and $14.0 billion (6.0%) represents unsecured valuations. See "Tax Levy and Collection" below, for a further discussion of secured and unsecured property valuations.
Proposition 13 limits to 2% per year any increase in the assessed value of property, unless it is sold or the structure is improved. The total net assessed valuation of taxable property therefore does not
generally reflect the current market value of taxable property within the City and is in the aggregate substantially less than current market value. For this same reason, the total net assessed valuation of taxable property lags behind changes in market value and may continue to increase even without an increase in aggregate market values of property.
Under Article XIIIA of the State Constitution added by Proposition 13 in 1978, property sold after March 1, 1975 must be reassessed to full cash value at the time of sale. Every year, some taxpayers appeal the Assessor's determination of their property's assessed value, and some of the appeals may be retroactive
and for multiple years. The State prescribes the assessment valuation methodologies and the adjudication process that counties must employ in connection with counties' property assessments.
The City typically experiences increases in assessment appeals activity during economic downturns and decreases in appeals as the economy rebounds. Historically, during severe economic downturns, partial reductions of up to approximately 30% of the assessed valuations appealed have been granted.
Assessment appeals granted typically result in revenue refunds, and the level of refund activity depends
on the unique economic circumstances of each fiscal year. Other taxing agencies such as SFUSD, SFCCD, BAAQMD, and BART share proportionately in the rest of any refunds paid as a result of successful appeals. To mitigate the financial risk of potential assessment appeal refunds, the City funds appeal reserves for its share of estimated property tax revenues for each fiscal year.
In addition, appeals activity is reviewed each year and incorporated into the current and subsequent years' budget projections of property tax revenues. Refunds of prior years' property taxes from the discretionary General Fund appeals reserve fund for fiscal years 2011-12 through 2016-17 are listed in Table A-6 below.
TABLE A-6
CITY AND COUNTY OF SAN FRANCISCO
Refunds of Prior Years' Property Taxes
General Fund Assessment Appeals Reserve Fiscal Years 2011-12 through 2016-17
(OOOs)
Fi sea I Year Arnau nt Refunded
2011-12 $53,288 2012-13 36,744
2013-14 25,756 2014-15 16,304 2015-16 16,199
2016-17 33,397
Source: Office of the Controller, City and County of San Francisco.
As of July 1, 2017, the Assessor granted 7,090 temporary reductions in property assessed values worth a total of $194.9 million (equating to a reduction of approximately $2.3 million in general fund taxes), compared to 7,055 temporary reductions worth $128.7 million (equating to a reduction of approximately $1.52 million in general fund taxes) as of July 1, 2016 and 8,598 temporary reductions worth $425.1 million (equating to a reduction of approximately $5.03 million in general fund taxes) as of July 1, 2015. The July 2017 temporary reductions of $194.9 million represent.08% of the fiscal year 2017-18 Net Assessed Valuation of $234.1 billion shown in Table A-5. All of the temporary reductions
granted are subject to review in the following year. Property owners who are not satisfied with the valuation shown on a Notice of Assessed Value may have a right to file an appeal with the Assessment Appeals Board ("AAB") within a certain period of time. For regular, annual secured property tax assessments, the time period for property owners to file an appeal typically falls between July 2nd and September 15th.
As of December 31, 2017, the total number of open appeals before the AAB was 1,605, compared to 1,754 open AAB appeals as of December 31, 2016. In the first six months of fiscal year 2017-18, there were 1,183 new appeals filed. The difference between the current assessed value and the taxpayers' opinion of values for the open AAB appeals is $13.5 billion. Assuming the City did not contest any taxpayer appeals and the Board upheld all the taxpayers' requests, a negative potential property tax impact of about $158.4 million would result, with an negative impact on the General Fund of about $80.9 million. The volume of appeals is not necessarily an indication of how many appeals will be granted, nor of the magnitude of the reduction in assessed valuation that the Assessor may ultimately grant. City revenue estimates take into account projected losses from pending and future assessment appeals.
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Tax Levy and Collection
As the local tax-levying agency under State law, the City levies property taxes on all taxable property
within the City's boundaries for the benefit of all overlapping local agencies, including SFUSD, SFCCD, the Bay Area Air Quality Management District and BART. The total tax levy for all taxing entities in fiscal year 2017-18 is estimated to produce about $2.7 billion, not including supplemental, escape and special assessments that may be assessed during the year. Of total property tax revenues (including supplemental and escape property taxes), the City has budgeted to receive $1.6 billion into the General Fund and $201.5 million into special revenue funds designated for children's programs, libraries and open space. SFUSD and SFCCD are estimated to receive about $176.3 million and $33.1 million, respectively, and the local ERAF is estimated to receive $580.0 million (before adjusting for the vehicle license fees ("VLF") backfill shift). The Successor Agency will receive about $136 million. The remaining portion is allocated to various other governmental bodies, various special funds, and general obligation bond debt service funds, and other taxing entities. Taxes levied to pay debt service for general obligation bonds issued by the City, SFUSD, SFCCD and BART may only be applied for that purpose.
General Fund property tax revenues in fiscal year 2016-17 were $1.48 billion, representing an increase of $66 million (4.7%) over fiscal year 2016-17 Original Budget and $85.7 million (6.2%) over fiscal year 2015-16 actual revenue. Property tax revenue is budgeted at $1.56 billion in fiscal year 2017-18 representing an increase of $78.3 million (5.3%) over fiscal year 2016-17 actual receipts and $1.62 billion in fiscal year 2018-19 representing an annual increase of $63.0 million (4.0%) over fiscal year 2017-18 budget. Tables A-2 and A-3 set forth a history of budgeted and actual property tax revenues for fiscal years 2011-12 through 2016-17, and budgeted receipts for fiscal years 2017-18 and fiscal year 2018-19.
The City's General Fund is allocated about 48% of total property tax revenue before adjusting for the VLF backfill shift. The State's Triple Flip ended in fiscal year 2015-16, eliminating the sales tax in-lieu
revenue from property taxes from succeeding fiscal years and shifting it to the local sales tax revenue line.
Generally, property taxes levied by the City on real property becomes a lien on that property by operation of law. A tax levied on personal property does not automatically become a lien against real property without an affirmative act of the City taxing authority. Real property tax liens have priority over all other liens against the same property regardless of the time of their creation by virtue of express provision of law.
Property subject to ad valorem taxes is entered as secured or unsecured on the assessment roll maintained by the Assessor-Recorder. The secured roll is that part of the assessment roll containing State-assessed property and property (real or personal) on which liens are sufficient, in the opinion of the Assessor-Recorder, to secure payment of the taxes owed. Other property is placed on the "unsecured roll."
The method of collecting delinquent taxes is substantially different for the two classifications of property. The City has four ways of collecting unsecured personal property taxes: 1) pursuing civil action against the taxpayer; 2) filing a certificate in the Office of the Clerk of the Court specifying certain facts, including the date of mailing a copy thereof to the affected taxpayer, in order to obtain a judgment against the taxpayer; 3) filing a certificate of delinquency for recording in the Assessor-Recorder's Office
in order to obtain a lien on certain property of the taxpayer; and 4) seizing and selling personal property, improvements or possessory interests belonging or assessed to the taxpayer. The exclusive means of
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enforcing the payment of delinquent taxes with respect to property on the secured roll is the sale of the property securing the taxes. Proceeds of the sale are used to pay the costs of sale and the amount of
delinquent taxes.
A 10% penalty is added to delinquent taxes that have been levied on property on the secured roll. In
addition, property on the secured roll with respect to which taxes are delinquent is declared "tax defaulted" and subject to eventual sale by the Treasurer and Tax Collector of the City. Such property
may thereafter be redeemed by payment of the delinquent taxes and the delinquency penalty, plus a
redemption penalty of 1.5% per month, which begins to accrue on such taxes beginning July 1 following the date on which the property becomes tax-defaulted.
In October 1993, the Board of Supervisors passed a resolution that adopted the Alternative Method of Tax Apportionment (the ''Teeter Plan"). This resolution changed the method by which the City
apportions property taxes among itself and other taxing agencies. Additionaly, in June 2017, the Teeter Plan was extended to include the allocation and distribution of special taxes levied for City and County of San Francisco Community Facilities District No. 2014-1 (Transbay Transit Center). The Teeter Plan
method authorizes the City Controller to allocate to the City's taxing agencies 100% of the secured property taxes billed but not yet collected. In return, as the delinquent property taxes and associated penalties and interest are collected, the City's General Fund retains such amounts. Prior to adoption of
the Teeter Plan, the City could only allocate secured property taxes actually collected (property taxes billed minus delinquent taxes). Delinquent taxes, penalties and interest were allocated to the City and other taxing agencies only when they were collected. The City has funded payment of accrued and
current delinquencies through authorized internal borrowing. The City also maintains a Tax Loss Reserve for the Teeter Plan as shown on Table A-7.
Source: Office of the Control !er, City and County of San
Fra nci sea.
Assessed valuations of the aggregate ten largest assessment parcels in the City for the fiscal year beginning July 1, 2017 are shown in Table A-8. The City cannot determine from its assessment records
whether individual persons, corporations or other organizations are liable for tax payments with respect to multiple properties held in various names that in aggregate may be larger than is suggested by the Office of the Assessor-Recorder.
TABLE A-8 CITY AND COUNTY OF SAN FRANCISCO
Top 10 Parcels Total Assessed Value
July 1, 2017
(OOOs)
Tota I Assessed
Assessee Location Parcel Number Tl'.ee HWA 555 Owners LLC 555 California St 0259 026 Commercial Office
Elm Property Venture LLC 101 California St 0263 011 Commercial Office
PPF Para mount One Market Plaza Owner LP 1 Market St 3713 007 Commercial Office
SHR St. Francis LLC 301- 345 Powell St 0307 001 Commercial Hotel
Sutter Bay Hospitals3
1101 Van Ness Ave 0695 006 Commercial Hospital
Tra nsbay Tower LLC 415 Mission St 3720 009 Commercial Office
PSS Hotel Owner LLC 55 Cyril Magnin St 0330 026 Commercial Hotel
Union Investment Real EstateGMBH 555 Mission St 3721120 Commercial Office
Emporium Mall LLC 845 Market St 3705 056 Commercial Retail
1 Represents the Total Assessed Valuation (TAV) as of the Basis oflevy, which excludes assessments processed during the fiscal year.
TAV includes land & improvements, personal property, and fixtures. 2 The Basis of Levy is total assessed value less exemptions for which the state does not reimburse counties (e.g. those that apply to
non profit organizations). 3 Nonprofit organization that is exempt from property taxes.
Source: Office ofth e Assessor -Recorder, City and County of San Francisco.
Taxation of State-Assessed Utility Property
Value ' $998,450
965,547
817,948
675,803
656,823
653,432
560,825
527,815
483,303
456,949
% of Basis
of Levl'. ' 0.43%
0.41%
0.35%
0.29%
0.28%
0.28%
0.24%
0.22%
0.21%
0.19%
2.90%
A portion of the City's total net assessed valuation consists of utility property subject to assessment by the State Board of Equalization. State-assessed property, or "unitary property," is property of a utility system with components located in many taxing jurisdictions assessed as part of a "going concern"
rather than as individual parcels of real or personal property. Unitary and certain other State-assessed
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property values are allocated to the counties by the State Board of Equalization, taxed at special countywide rates, and the tax revenues distributed to taxing jurisdictions (including the City itself) according to statutory formulae generally based on the distribution of taxes in the prior year. The fiscal year 2016-17 valuation of property assessed by the State Board of Equalization is $3.5 billion.
OTHER CITY TAX REVENUES
In addition to the property tax, the City has several other major tax revenue sources, as described below. For a discussion of State constitutional and statutory limitations on taxes that may be imposed by the City, including a discussion of Proposition 62 and Proposition 218, see "CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND EXPENDITURES" herein.
The following section contains a brief description of other major City-imposed taxes as well as taxes that
are collected by the State and shared with the City.
Business Taxes
Through tax year 2014 businesses in the City were subject to payroll expense and business registration taxes. Proposition E approved by the voters in the November 6, 2012 election changed business registration tax rates and introduced a gross receipts tax which phases in over a five-year period beginning January 1, 2014, replacing the current 1.5% tax on business payrolls over the same period. Overall, the ordinance increases the number and types of businesses in the City that pay business tax and registration fees from approximately 7,500 currently to 15,000. Current payroll tax exclusions will be converted into a gross receipts tax exclusion of the same size, terms and expiration dates.
The payroll expense tax is authorized by Article 12-A of the San Francisco Business and Tax Regulation Code. The 1.5% payroll tax rate in 2013 was adjusted to 1.35% in tax year 2014, 1.16% in tax year 2015, 0.829% in tax year 2016, 0.71% in tax year 2017, and annually thereafter according to gross receipts tax collections to ensure that the phase-in of the gross receipts tax neither results in a windfall nor a loss for the City. The gross receipts tax ordinance, like the current payroll expense tax, is imposed for the privilege of "engaging in business" in San Francisco. The gross receipts tax will apply to businesses with
$1 million or more in gross receipts, adjusted by the Consumer Price Index going forward. Proposition E also imposes a 1.4% tax on administrative office business activities measured by a company's total payroll expense within San Francisco in lieu of the Gross Receipts Tax, and increases annual business registration fees to as much as $35,000 for businesses with over $200 million in gross receipts. Prior to Proposition E, business registration taxes varied from $25 to $500 per year per subject business based on the prior year computed payroll tax liability. Proposition E increased the business registration tax rates to between $75 and $35,000 annually.
Business tax revenue in fiscal year 2016-17 was $702.3 million (all funds), representing an increase of $41.4 million (6.3%) from fiscal year 2015-16. Business tax revenue is budgeted at $752.7 million in fiscal year 2017-18 representing an increase of $50.4 million (7.2%) over fiscal year 2016-17 budgeted
revenue. Business tax revenue is budgeted at $764.4 million in fiscal year 2018-19 representing an increase of $11.7 million (1.6%) over fiscal year 2017-18.
Includes Payroll Tax, portion of Payrol I Tax a I located to s pecia I revenue funds for the Community Challenge Grant program, Business Registration Tax, and beginning in fisca I year 2013-14, Gross Receipts Tax revenues. Figures for ti sea I yea rs 2013-14 through 2016-17 a re audited a ctua Is. Figures for ti sea I year 2017-18 and 2018-19 a re Origi na I Budget a mounts.
Source: Office of the Controller, City and County of San Francisco.
Transient Occupancy Tax (Hotel Tax)
Pursuant to the San Francisco Business and Tax Regulation Code, a 14.0% transient occupancy tax is imposed on occupants of hotel rooms and is remitted by hotel operators monthly. A quarterly tax-filing
requirement is also imposed. Hotel tax revenue growth is a function of changes in occupancy, average daily room rates ("ADR") and room supply. Revenue per available room (RevPAR), the combined effect of occupancy and ADR, experienced double digit growth rates between fiscal years 2013-14 and 2014-
15, driving an average annual increase of 28.5% in hotel tax revenue during this period. RevPAR growth began to slow in fiscal year 2015-16 and then declined in fiscal year 2016-17, due mainly to the partial
year closure of the Moscone Convention Center. The partial-year closure was in connection with the
construction of Moscone Convention Center Expansion. Hotel tax revenue experienced declines during this period. The Moscone Center re-opened in the second quarter of fiscal year 2017-18, and RevPAR is
expected to see a partial recovery during this fiscal year. In fiscal year 2018-19, RevPAR is expected to fully recover, which is reflected in the expected growth in hotel tax revenue. Fiscal year 2016-17
transient occupancy tax was $375 million, representing a $17.4 million decrease from fiscal year 2015-
16 revenue. Fiscal year 2017-18 is budgeted to be $377 million, an increase of $1.8 million (0.5%) from fiscal year 2016-17. Fiscal year 2018-19 is budgeted to be $402 million, an increase of $25.7 million (6.8%) from fiscal year 2016-17 budget.
San Francisco and a number of other jurisdictions in California and the United States are currently involved in litigation with online travel companies regarding the companies' duty to remit hotel taxes on
the difference between the wholesale and retail prices paid for hotel rooms. On February 6, 2013, the Los Angeles Superior Court issued a summary judgment concluding that the online travel companies had no obligation to remit hotel tax to San Francisco. The City has received approximately $88 million in
disputed hotel taxes paid by the companies. Under State law, the City is required to accrue interest on such amounts. The portion of these remittances that will be retained or returned (including legal fees and interest) will depend on the ultimate outcome of these lawsuits. San Francisco has appealed the judgment against it. That appeal has been stayed pending the California Supreme Court's decision in a
similar case between the online travel companies and the City of San Diego. That ruling was issued on
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December 12, 2016 but did not resolve the matters that are the subject to the City's appeal. The City's appeal is proceeding, but the schedule for that appeal is not yet known.
1 Figures for fiscal year 2013-14through fiscal year 2016-17 a re audited actuals and include thE portion of hotel tax revenue used to pay debt service on hotel tax revenue bonds. Figures for
fiscal year 2017-18 and 2018-19 a re origina I budget a mounts. 2 Arnau nts in fisca I year 2014-15 a re su bsta ntia lly adjusted due to multi-year audit and
litigation resolution.
Source: Office of the Controller, City and County of San Francisco.
Real Property Transfer Tax
A tax is imposed on all real estate transfers recorded in the City. Transfer tax revenue is more susceptible to economic and real estate cycles than most other City revenue sources. Prior to November 8, 2016, the rates were $5.00 per $1,000 of the sale price of the property being transferred for properties valued at $250,000 or less; $6.80 per $1,000 for properties valued more than $250,000 and less than $999,999; $7.50 per $1,000 for properties valued at $1.0 million to $5.0 million; $20.00 per $1,000 for properties valued more than $5.0 million and less than $10.0 million; and $25 per $1,000 for properties valued at more than $10.0 million. After the passage of Proposition Von November 8, 2016, transfer tax rates were amended, raising the rate to $22.50 per $1,000 for properties valued more than $5.0 million and less than $10.0 million; $27.50 per $1,000 for properties valued at more than $10.0 million and less than $25.0 million; and $30.00 per $1,000 for properties valued at more than $25.0 million. This change resulted in an additional $39 million in transfer tax revenue in fiscal year 2016-17.
Real property transfer tax ("RPTI") revenue in fiscal year 2016-17 was $410.5 million, a $141.5 million (52.6%) increase from fiscal year 2015-16 revenue. Fiscal year 2017-18 RPTI revenue is budgeted to be $300 million, approximately $110.6 million (-26.9%) less than the revenue received in fiscal year 2016-17 primarily due to the assumption that fiscal year 2016-17 represented the peak in high value property transactions during the current economic cycle. This slowing is budgeted to continue into fiscal year 2018-19 with RPTI revenue budgeted at $245 million, a reduction of $55 million (-18.3%).
1 Figures forfisca I year 2013-14 through 2016-17 a re audited actua Is.
Figures for fisca I year 2017-18 and 2018-19 a re Origi na I Budget
amounts.
Source: Office of the Control !er, City and County of San Francisco.
Sales and Use Tax
12.5%
20.1%
-14.5%
52.6%
-26.9%
-18.3%
The sales tax rate on retail transactions in the City is 8.50%, of which 1.00% represents the City's local share. State collects the City's local sales tax on retail transactions along with State and special district
sales taxes, and then remits the local sales tax collections to the City. Between fiscal year 2004-05 and the first half of fiscal year 2015-16, the State diverted one-quarter of City's 1.00% local share of the sales
tax, and replaced the lost revenue with a shift of local property taxes to the City from local school
district funding. This "Triple Flip" concluded on December 31, 2015, after which point the full 1.00% local tax is recorded in the General Fund.
Local sales tax collections in fiscal year 2016-17 were $189.5 million, a decrease of $14.7 million (-8.7%) from fiscal year 2015-16 sales tax revenue. Moderate revenue growth is expected during fiscal year
2017-18 with $199.9 million budgeted, an increase of $10.5 million (5.5%) from fiscal year 2016-17.
Fiscal year 2018-19 revenue is budgeted to be $204.9 million, an increase of $5 million (2.5%) from fiscal year 2017-18 budget.
Historically, sales tax revenues have been highly correlated to growth in tourism, business activity and population. This revenue is significantly affected by changes in the economy. In recent years, online retailers have contributed significantly to sales tax receipts, offsetting sustained declines in point of sale purchases. The budget assumes no changes from State laws affecting sales tax reporting for these online retailers. Sustained growth in sales tax revenue will depend on changes to state and federal law and
order fulfillment strategies for online retailers.
Table A-12 reflects the City's actual sales and use tax receipts for fiscal years 2013-14 through 2016-17,
and budgeted receipt for fiscal year 2017-18 and 2018-19, as well as the imputed impact of the property tax shift made in compensation for the one-quarter of the sales tax revenue taken by the State through the fiscal year 2016-17.
*Figures for fisca I year 2013-14 through fisca I year 2016-17 a re audited actua Is. Figures for fisca I yea rs 2017-18 and
2018-19 a re Origina I Budget a mounts.
1Adj usted figures represent the va I ue of the entire 1.00% loca I sales tax, which was reduced by 0.25% beginning in
fisca I year 2004-05 through December 31, 2015 in order to repay the State's Economic Recovery Bonds as authorized
under Proposition 57 in March 2004. This 0.25% reduction is backfilled by the State. 2The 2015-16 adjusted figure includes the State's fin a I payment to the Counties for the lost 0.25% of sales tax, from July
1, 2015 through December 31, 2015. It also includes a true-up payment for April through June 2015. ~In November 2012 voters approved Proposition 30, which temporarily increases the state sales tax rate by 0.25%
effective January 1, 2013 through December 31, 2016. The City share did not change.
Source: Office of the Control I er, City and County of San Francisco.
Utility Users Tax
The City imposes a 7.5% tax on non-residential users of gas, electricity, water, steam and telephone services. The Telephone Users Tax ("TUT") applies to charges for all telephone communications services
in the City to the extent permitted by Federal and State law, including intrastate, interstate, and international telephone services, cellular telephone services, and voice over internet protocol ("VOiP").
Telephone communications services do not include Internet access, which is exempt from taxation under the Internet Tax Freedom Act.
Fiscal year 2016-17 Utility User Tax revenues were $101.2 million, representing an increase of $2.6 million (2.6%) from fiscal year 2015-16 revenue. Fiscal year 2017-18 revenue is budgeted to be $99.7
million, representing expected decline of $1.5 million (1.5%) from fiscal year 2016-17. Fiscal year 2018-
19 Utility User Tax revenues are budgeted at $100.8 million, a $1.1 million (1.1%) increase from fiscal year 2017-18 budget.
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Access Line Tax
The City imposes an Access Line Tax ("ALT") on every person who subscribes to telephone communications services in the City. The ALT replaced the Emergency Response Fee ("ERF") in 2009. It applies to each telephone line in the City and is collected from telephone communications service subscribers by the telephone service supplier. Access Line Tax revenue for fiscal year 2016-17 was $46.5 million, a $3 million (6.8%) increase over the previous fiscal year due 2015-16. In fiscal year 2017-18, Access Line Tax revenue is budgeted at $49.6 million, a $3 million (6.5%) increase from fiscal year 2016-17 revenue. Fiscal year 2018-19 revenue is budgeted at $51.1 million a $1.6 million (3.1%) increase from fiscal year 2017-18 and 2018-19 budget. Budgeted amounts in fiscal year 2017-18 assume annual inflationary increases to the access line tax rate as required under Business and Tax Regulation Code Section 784.
Sugar Sweetened Beverage Tax
On November 9, 2016 voters adopted Proposition V, a one cent per ounce tax on the distribution of sugary beverages. This measure took effect on January 1, 2018 and is expected to raise $15 million in annual revenue.
Parking Tax
A 25% tax is imposed on the charge for off-street parking spaces. The tax is paid by occupants and
remitted monthly to the City by parking facility operators. Historically, parking Tax revenue was positively correlated with business activity and employment, both of which are projected to increase over the next two years as reflected in increases in business and sales tax revenue projections. However, widespread use of ride-sharing services and redevelopment of surface lots and parking garages into office and other uses have led to declines in this source over the past two fiscal years.
Fiscal year 2016-17 Parking Tax revenue was $84.3 million, $1.7 million (-2.0%) below fiscal year 2015-16 revenue. Parking tax revenue is budgeted at $82.2 million in fiscal year 2017-18, a decrease of $2.1 million (-2.5%) below the fiscal year 2016-17 amount. In fiscal year 2018-19, Parking Tax revenue is budgeted at $83.0 million, $0.8 million (1%) over the fiscal year 2017-18 budgeted amount.
Parking tax revenues are deposited into the General Fund, from which an amount equivalent to 80% is transferred to the MTA for public transit as mandated by Charter Section 16.110.
INTERGOVERNMENTAL REVENUES
State - Realignment
San Francisco receives allocations of State sales tax and Vehicle License Fee (VLF) revenue for 1991 Health and Welfare Realignment and 2011 Public Safety Realignment.
1991 Health & Welfare Realignment. In fiscal year 2016-17, the General Fund share of 1991 realignment revenue was $192.1 million. In fiscal year 2017-18, it is budgeted at $188.6 million, or $3.4 million (-1.8%) less than the fiscal year 2016-17 actual. This growth is attributed to a $2.4 million (1.5%) increase in sales tax distribution and a $5.8 million (-15.3%) decrease in the VLF distribution due to base allocation changes and projected fiscal year 2016-17 growth payments.
The fiscal year 2018-19 General Fund share of revenue is budgeted at $192.2 million, a net
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increase of $3.5 million (1.9%) in sales tax and VLF distributions based on the projected growth payments.
Increases in both years are net of State allocation reductions due to implementation of the Affordable Care Act (ACA) equal to assumed savings for counties as a result of treating fewer uninsured patients. The State's fiscal year 2017-18 Budget included assumed savings of $689 million as a result of ACA implementation, and redirects these savings from realignment allocations to cover CalWORKs expenditures previously paid for by the State's General Fund.
Reductions to the City's allocation are assumed equal to $11.9 million. Future budget adjustments could be necessary depending on final State determinations of ACA savings amounts, which are expected in January 2019 and January 2020 for fiscal year 2016-17 and fiscal year 2017-18, respectively. The fiscal year 2017-18 and 2018-19 realignment budget assumes the redirection of sales tax and VLF growth distributions from health and mental health allocations to social service allocations, consistent with IHSS assumptions enacted in the Governor's 2017-18 budget.
Public Safety Realignment. Public Safety Realignment (AB 109), enacted in early 2011, transfers responsibility for supervising certain kinds of felony offenders and state prison parolees from state prisons and parole agents to county jails and probation officers. In fiscal year 2016-17, this
revenue source totaled $35.5 million or $4.4 million (-11%) less than the fiscal year 2015-16 amount. Based on the State's adopted budget, this revenue is budgeted at $41.3 million in fiscal year 2017-18, a $5.9 million (17%) increase over the fiscal year 2016-17 actual. This increase reflects increased State funding to support implementation of AB109. The fiscal year 2018-19 budget assumes a $1.1 million (2.5%) increase from fiscal year 2017-18 budget.
Public Safety Sales Tax
State Proposition 172, passed by California voters in November 1993, provided for the continuation of a one-half percent sales tax for public safety expenditures. This revenue is a function of the City's proportionate share of Statewide sales activity. Revenue from this source for fiscal year 2016-17 was $100.4 million, an increase of $3.4 million (3.5%) from fiscal year 2015-16 revenues. This revenue is budgeted at $101.6 million in fiscal year 2017-18 and $104.1 million in fiscal year 2018-19, representing annual growth of $1.2 million (1.2%) and $2.5 million (2.4%) respectively. These revenues are allocated to counties by the State separately from the local one-percent sales tax discussed above, and are used to fund police and fire services. Disbursements are made to counties based on the county ratio, which is the county's percent share of total statewide sales taxes in the most recent calendar year. The county ratio for San Francisco in fiscal year 2016-17 is almost 3% and is expected to decline slightly in fiscal years 2017-18 and 2018-19.
Other Intergovernmental Grants and Subventions
In addition to those categories listed above, the City received $604.6 million of funds in fiscal year 2016-17 from grants and subventions from State and federal governments to fund public health, social services and other programs in the General Fund. This represents a $16.9 million (2.9%) increase from fiscal year 2015-16. The fiscal year 2017-18 budget is $687.6 million, an increase of $82.9 million (13.7%) and fiscal year 2018-19 budget is 685.6 million, a decrease of $2 million (0.3%).
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Charges for Services
Revenue from charges for services in the General Fund in fiscal year 2016-17 was $220.8 million and is projected to be largely unchanged in the fiscal year 2017-18 and 2018-19 budget.
CITY GENERAL FUND PROGRAMS AND EXPENDITURES
Unique among California cities, San Francisco as a charter city and county must provide the services of both a city and a county. Public services include police, fire and public safety; public health, mental health and other social services; courts, jails, and juvenile justice; public works, streets, and transportation, including port and airport; construction and maintenance of all public buildings and facilities; water, sewer, and power services; parks and recreation; libraries and cultural facilities and events; zoning and planning, and many others. Employment costs are relatively fixed by labor and retirement agreements, and account for approximately 50% of all City expenditures. In addition, the Charter imposes certain baselines, mandates, and property tax set-asides, which dictate expenditure or service levels for certain programs, and allocate specific revenues or specific proportions thereof to other programs, including MTA, children's services and public education, and libraries. Budgeted baseline and mandated funding is $1.092 billion in fiscal year 2017-18 and $1.102 billion in fiscal year 2018-19. As noted above, voters approved additional spending requirements on the November 2016 ballot, which are incorporated into five-year projections and included in the fiscal year 2017-18 budget.
General Fund Expenditures by Major Service Area
San Francisco is a consolidated city and county, and budgets General Fund expenditures for both city and county functions in seven major service areas described in table A-13:
TABLE A-13
Mai or Service Areas
Public Protection
Human Welfare& Neighborhood Development
Community Health
General Administration & Finance
Culture & Recreation
Genera I City Responsi bi I iti es
Public Works, Transportation & Commerce
Tota I*
*Total may not add due to rounding
CITY AND COUNTY OF SAN FRANCISCO
Expenditures by Major Service Area Fiscal Years 2014-15 through 2018-19
(OOOs)
2014-15 2015-16
Fina I Budget Fina I Budget
$1,173,977 $1,223,981
799,355 857,055
736,916 787,554
293,107 286,871
126,932 137,062
158,180 186,068
127,973 161,545
$3,416,440 $3,640,137
Source: Office of the Controller, City and County of San Francisco.
2016-17 2017-18 2018-19
Final Budget Original Budget Original Budget
$1,298,185 $1,331,196 $1,366,723
176,768 995,230 1,017 ,189
970,679 884,393 875,974
786,218 358,588 366,421
158,954 162,622 163,576
349,308 152,390 206,528
154,344 170,949 156,079
$3,894,456 $4,055,368 $4,152,490
Public Protection primarily includes the Police Department, the Fire Department and the Sheriff's Office. These departments are budgeted to receive $459 million, $246 million and $176 million of General Fund support respectively in fiscal year 2017-18 and $467 million, $249 million, and $189 million, respectively in fiscal year 2018-19. Within Human Welfare & Neighborhood Development, the Department of Human Services, which includes aid assistance and aid payments and City grant programs, is budgeted to receive $242 million of General Fund support in the fiscal year 2017-18 and $255 million in fiscal year 2018-19.
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The Public Health Department is budgeted to receive $715 million in General Fund support for public health programs and the operation of San Francisco General Hospital and Laguna Honda Hospital in fiscal year 2017-18 and $771 million in fiscal year 2018-19.
For budgetary purposes, enterprise funds are characterized as either self-supported funds or General
Fund-supported funds. General Fund-supported funds include the Convention Facility Fund, the Cultural
and Recreation Film Fund, the Gas Tax Fund, the Golf Fund, the Grants Fund, the General Hospital Fund, and the Laguna Honda Hospital Fund. The MTA is classified as a self-supported fund, although it receives
an annual general fund transfer equal to 80% of general fund parking tax receipts pursuant to the Charter. This transfer is budgeted to be $65.7 million in fiscal year 2017-18 and $66.4 million in the fiscal year 2018-19.
Baselines
The Charter requires funding for baselines and other mandated funding requirements. The chart below identifies the required and budgeted levels of appropriation funding for key baselines and mandated funding requirements. Revenue-driven baselines are based on the projected aggregate City discretionary revenues, whereas expenditure-driven baselines are typically a function of total spending. This table reflects spending requirements at the time the fiscal year 2017-18 and fiscal year 2018-19 budget was
finally adopted.
[Remainder of Page Intentionally Left Blank}
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TABLE A-14
CITY AND COUNTY OF SAN FRANCISCO Baselines & Set-Asides
Fiscal Year 2017-18
{millions)
Baselines & Set-Asides
Municipal Transportation Agency (MTA)
Municipal Railway Baseline
Parking and Traffic Bas el i ne
Population Adjustment
Children's Services
Transitional Aged Youth
Li bra ry Preservation
Recreation and Park Maintenance of Effort
Dignity Fund StreetTreet Maintenance Fund
City Services Auditor
Human Services Homeless Care Fund
Public Education Enrichment Funding
Unified School District
Office of Early Ca re and Education
Pub Ii c Education Baseline Services
Property Tax Related Set-Asides
Municipal Symphony Children's Fund Set-Aside Library Preservation Set-Aside
Open Space Set-Aside
Staffing and Service-Driven
Pol ice Mini mum Staffing
Fi re Neighborhood Fi rehouse Funding
Treatment on Demand
Total Baseline Spending
2017-18
Required
Baseline
$228.1
$85.5
$39.1
$164.8
$19.8
$78.0 $70.2
$44.1
$19.0
$17.4
$17.6
$69.5
$34.8
$2.9
$86.4
$57.6
$57.6
2017-18
Original
Budget
$228.1
$85.5
$39.1
$166.9
$24.6
$78.0 $73.0
$44.1
$19.0
$17.4
$17.6
$69.5
$34.8
$2.9
$86.4
$57.6
$57.6
Requirement met
Requirement met
Requirement met
$1,092.2 $1,102.0
Source: Office of the Controller, City and County of San Francisco.
With respect to Police Department staffing, the Charter mandates a police staffing baseline of not less than 1,971 full-duty officers. The Charter-mandated baseline staffing level may be reduced in cases
where civilian hires result in the return of a full-duty officer to active police work. The Charter also
provides that the Mayor and Board of Supervisors may convert a position from a sworn officer to a
civilian through the budget process. With respect to the Fire Department, the Charter mandates
baseline 24-hour staffing of 42 firehouses, the Arson and Fire Investigation Unit, no fewer than four
ambulances and four Rescue Captains (medical supervisors).
EMPLOYMENT COSTS; POST-RETIREMENT OBLIGATIONS
The cost of salaries and benefits for City employees represents nearly half of the City's expenditures,
totaling $5.0 billion in the fiscal year 2017-18 Original Budget (all-funds), and $5.1 billion in the fiscal
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year 2018-19 Original Budget. Looking only at the General Fund, the combined salary and benefits
budget was $2.3 billion in the fiscal year 2017-18 Original Budget and $2.4 billion in the fiscal year 2018-
19 Original Budget. This section discusses the organization of City workers into bargaining units, the status of employment contracts, and City expenditures on employee-related costs including salaries, wages, medical benefits, retirement benefits and the City's retirement system, and post-retirement
health and medical benefits. Employees of SFUSD, SFCCD and the San Francisco Superior Court are not City employees.
Labor Relations
The City's budget for fiscal years 2017-18 and 2018-19 includes 30,835 and 30,938 budgeted City
positions, respectively. City workers are represented by 37 different labor unions. The largest unions in the City are the Service Employees International Union, Local 1021 ("SEIU"); the International
Federation of Professional and Technical Engineers, Local 21 ("IFPTE"); and the unions representing police, fire, deputy sheriffs and transit workers.
The wages, hours and working conditions of City employees are determined by collective bargaining pursuant to State law (the Meyers-Milias-Brown Act, California Government Code Sections 3500-3511) and the City Charter. San Francisco is unusual among California's cities and counties in that nearly all of
its employees, even managers, are represented by labor organizations. Further, the City Charter provides a unique impasse resolution procedure. In most cities and counties, when labor organizations cannot reach agreement on a new contract, there is no mandatory procedure to settle the
impasse. However, in San Francisco, nearly all of the City's contracts advance to interest arbitration in the event the parties cannot reach agreement. This process provides a mandatory ruling by an impartial third party arbitrator, who will set the terms of the new agreement. Except for nurses and less than one-hundred unrepresented employees, the Charter requires that bargaining impasses be resolved
through final and binding interest arbitration conducted by a tripartite mediation and arbitration panel. The award of the arbitration panel is final and binding. Wages, hours and working conditions of nurses are not subject to interest arbitration, but are subject to Charter-mandated economic limits. Strikes by
City employees are prohibited by the Charter. Since 1976, no City employees have participated in a union-authorized strike.
The City's employee selection procedures are established and maintained through a civil service system.
In general, selection procedures and other merit system issues, with the exception of discipline, are not subject to arbitration. Disciplinary actions are generally subject to grievance arbitration, with the exception of police, fire and sheriff's employees.
In June 2013, the City negotiated a contract extension with the Police Officers' Association ("POA''),
through June 30, 2018, that includes wage increases of 1% on July 1, 2015; 2% on July 1, 2016; and 2%
on July 1, 2017. In addition, the union agreed to lower entry rates of pay for new hires in entry Police Officer classifications. In May 2014, the City negotiated a contract extension with the Firefighters Association through June 30, 2018, which mirrored the terms of POA agreement.
In May 2014, the City negotiated three-year agreements (for fiscal years 2014-15 through 2016-17) with
most of its labor unions. In general, the parties agreed to: (1) annual wage increase schedules of 3%
(October 11, 2014), 3.25% (October 10, 2015), and 3.25% (July 1, 2016); and (2) some structural reforms of the City's healthcare benefit and cost-sharing structures to rebalance required premiums between
the two main health plans offered by the City. These changes to health contributions support reforms
agreed to by most unions during earlier negotiations.
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Pursuant to Charter Section 8A.104, the MTA is responsible for negotiating contracts for the transit operators and employees in service-critical bargaining units. These contracts are subject to approval by
the MTA Board. In May 2014, the MTA and the union representing transit operators, the Transit Workers Union ("TWU"), Local 250-A agreed to a three-year contract that runs through June 30, 2017.
Provisions in the contract include 14.25% in wage increases in exchange for elimination of the 7.5% employer retirement pick-up.
In February 2017, the City negotiated two-year contract extensions (for fiscal years 2017-18 and 2018-
19) with most of its labor unions. The parties agreed to a wage increase schedule of 3% on July 1, 2017 and 3% on July 1, 2018, with a provision to delay the fiscal year 2018-19 adjustment by six months if the City's deficit for fiscal year 2018-2019, as projected in the March, 2018 update to the Five Year Financial
Plan, exceeds $200 million. MTA and TWU, along with unions representing MTA service critical employees, agreed to two-year contract extensions with the same wage provisions and term as those
contracts covering City employees. Existing agreements with police officers, firefighters, and physicians expire in June 2018; the agreement with supervising nurses expires in June, 2019. Successor labor agreements are expected to be completed prior to the adoption of the fiscal year 2018-19 budget.
Table A-15 shows the membership of each operating employee bargaining unit and the date the current
labor contract expires.
[Remainder of Page Intentionally Left Blank}
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TABLE A-15 CITY AND COUNTY OF SAN FRANCISCO (All Funds)
Employee Organizations as of July 1, 2016
Budgeted
Organization Positions
Auto Machinist, Lodge 1414 466 Bricklayers, Local 3 I Hod Carriers, Local 36 10 Building Inspectors Association 92 CAIR/CIR (Interns & Residents} 0 Carpenters, Local 22 116 Carpet, Linoleum & Soft Tile 3 Cement Masons, Local 300 43 Electrical Workers, Local 6 915 Firefighters, Local 798 1,875 Glaziers, Local 718 9 Hod Carriers, Local 36 8 Iron Workers, Local 377 15 Laborers, Local 261 1,158 Municipal Attorneys Association 465 Municipal Exec Assoc - Fire 9 Municipal Exec Assoc - Misc 1,330 Municipal Exec Assoc - Pol ice 16 Operating Engineers, Local 3 65 Physician/Dentists, UAPD 203 Pile Drivers, Local 34 37 Plasterers & Shphnds, Local 66 0 Plumbers, Local 38 349 Police Officers Association 2,495 Prof & Tech Eng, Local 21 6,212 Roofers, l..oca I 40 13 SEIU 1021, H-1 Paramedics 4 SEI U 1021, Misc. 12,509 SEI U 1021, Staff & Per Diem RNs 1,720 SF City Workers United 131 SF Deputy Sheriffs Assn 825 SF Probation Off Assoc 152 SF Sheriff's Managers and Supv 100 SFDA Investigators Assn 45 SFIPOA, Op Eng, Local 3 2 Sheet Metal Workers, Local 104 43 Stationary Engineers, Local 39 690 Sup Probation Ofer, Op Eng 3 31 Teamsters, Local 853 173 Teamsters, Local 856 Multi-Unit 112 Teamsters, Local 856 Spv Nurses 127 Theatrical Stage Emp, Local 16 27 TWU Local 200 364 TWU Local 250-A, AutoServWrkr 126 TWU Local 250-A, Misc 111 TWU Local 250-A, TranFarelnsp 54
TWU Local 250-A, TransitOpr 2,659
Unrepresented Employees 83 35,990
Budgeted pas itions do not include SFUSD, SFCCD, or Superior Court Personnel.
Expriation Date
of MOU 30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-18
30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-18
30-Jun-19
30-Jun-18
30-Jun-19
30-Jun-18
30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-18
30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-19
30-Jun-18
Source: Department of Human Resources - Employee Relations Division, City and County of San Francisco.
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San Francisco City and County Employees' Retirement System ("SFERS" or "Retirement System")
History and Administration
SFERS is charged with administering a defined-benefit pension plan that covers substantially all City
employees and certain other employees. The Retirement System was initially established by approval of City voters on November 2, 1920 and the State Legislature on January 12, 1921 and is currently codified in the City Charter. The Charter provisions governing the Retirement System may be revised only by a
Charter amendment, which requires an affirmative public vote at a duly called election.
The Retirement System is administered by the Retirement Board consisting of seven members, three
appointed by the Mayor, three elected from among the members of the Retirement System, at least two of whom must be actively employed, and a member of the Board of Supervisors appointed by the
President of the Board of Supervisors.
The Retirement Board appoints an Executive Director and an Actuary to aid in the administration of the
Retirement System. The Executive Director serves as chief executive officer, with responsibility extending to all divisions of the Retirement System. The Actuary's responsibilities include advising the
Retirement Board on actuarial matters and monitoring of actuarial service providers. The Retirement
Board retains an independent consulting actuarial firm to prepare the annual valuation reports and other analyses. The independent consulting actuarial firm is currently Cheiron, Inc., a nationally recognized firm selected by the Retirement Board pursuant to a competitive process.
In 2014, the Retirement System filed an application with the Internal Revenue Service ("IRS") for a
Determination Letter. In July 2014, the IRS issued a favorable Determination Letter for SFERS. Issuance
of a Determination Letter constitutes a finding by the IRS that operation of the defined benefit plan in accordance with the plan provisions and documents disclosed in the application qualifies the plan for federal tax exempt status. A tax qualified plan also provides tax advantages to the City and to members
of the Retirement System. The favorable Determination Letter included IRS review of all SFERS provisions, including the provisions of Proposition C approved by the City voters in November 2011.
Membership
Retirement System members include eligible employees of the City and County of San Francisco, the San
Francisco Unified School District, the San Francisco Community College Disctrict, and the San Francisco Trial Courts.
The Retirement System estimates that the total active membership as of July 1, 2017 is 41,867, compared to 40,051 at July 1, 2016. Active membership at July 1, 2017 includes 7,381 terminated
vested members and 1,039 reciprocal members. Terminated vested members are former employees who have vested rights in future benefits from SFERS. Reciprocal members are individuals who have established membership in a reciprocal pension plan such as CalPERS and may be eligible to receive a
reciprocal pension from the Retirement System in the future. Monthly retirement allowances are paid to approximately 29,127 retired members and beneficiaries. Benefit recipients include retired members, vested members receiving a vesting allowance, and qualified survivors.
Table A-16 displays total Retirement System participation (City and County of San Francisco, SFUSD, SFCCD, and San Francisco Trial Courts) as of the five most recent actuarial valuation dates, July 1, 2013
through July 1, 2017.
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TABLE A-16
As of
7 /1/2017
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
Sources:
Notes:
City and County of San Francisco
Employees' Retirement System Fiscal Years 2011-12 through 2016-17
Active Vested Reci proca I Total Retirees/ Members Members Members Non-retired Continua nts
28,097 4,543 1,015 33,655 25,190
28,717 4,933 1,040 34,690 26,034
29,516 5,409 1,032 35,957 26,852
30,837 5,960 1,024 37,821 27,485
32,406 6,617 1,028 40,051 28,286
33,447 7,381 1,039 41,867 29,127
SFERS' an n ua I July 1 actua ri a I va I uation re ports
See http://mysfers.org/resou rces/pu bl ications/sfe rs-a ctua ria 1-va I uations/
Member counts exclude DROP participants.
Active to
Retiree Ra ti a
1.115
1.103
1.099
1.122
1.146
1.148
Member counts a re for the entire Retirement System and include non-City employees.
Funding Practices
Employer and employee (member) contributions are mandated by the Charter. Sponsoring employers are required to contribute 100% of the actuarially determined contribution approved by the Retirement Board. The Charter specifies that employer contributions consist of the normal cost (the present value of the benefits that SFERS expects to become payable in the future attributable to a current year's
employment) plus an amortization of the unfunded liability over a period not to exceed 20 years. The Retirement Board sets the funding policy subject to the Charter requirements.
The Retirement Board adopts the economic and demographic assumptions used in the annual valuations. Demographic assumptions such as retirement, termination and disability rates are based upon periodic demographic studies performed by the consulting actuarial firm approximately every five years. Economic assumptions are reviewed each year by the Retirement Board after receiving an economic experience analysis from the consulting actuarial firm.
At the November 2017 Retirement Board meeting, the Board adopted updated economic assumptions for the July 1, 2017 actuarial valuation after consideration of two options presented by the consulting actuarial firm. Key economic assumptions are the long-term investment earnings assumption of 7.50%, the long-term wage inflation assumption of 3.50%, and the long-term consumer price index assumption of 3.00%. In November 2015 the Board voted to update demographic assumptions, including mortality, after review of a new demographic assumptions study by the consulting actuarial firm.
While employee contribution rates are mandated by the Charter, sources of payment of employee contributions (i.e. City or employee) may be the subject of collective bargaining agreements with each union or bargaining unit. Since July 1, 2011, substantially all employee groups have agreed through collective bargaining for employees to contribute all employee contributions through pre-tax payroll
deductions.
Prospective purchasers of the City's bonds should carefully review and assess the assumptions regarding
the performance of the Retirement System. Audited financials and actuarial reports may be found on the Retirement System's website, mysfers.org, under Publications. The information on such website is not incorporated herein by reference. There is a risk that actual results will differ significantly from assumptions. In addition, prospective purchasers of the City's bonds are cautioned that the information
and assumptions speak only as of the respective dates contained in the underlying source documents, and are therefore subject to change.
Employer Contribution History and Annual Valuations
Fiscal year 2015-16 total City employer contributions were $496.3 million which included $215.2 million from the General Fund. Fiscal year 2016-2017 total City contributions were $519.1 million which included $230.1 million from the General Fund. For fiscal year 2017-18, total City employer
contributions to the Retirement System are budgeted at $568.7 million which includes $265.8 million from the General Fund. These budgeted amounts are based upon the fiscal year 2017-18 employer
contribution rate of 23.46% (estimated to be 20.1% after taking into account the 2011 Proposition C cost-sharing provisions). The fiscal year 2018-19 employer contribution rate is 23.31% (estimated to be 19.8% after cost-sharing). The slight decrease in employer contribution rate from 23.46% to 23.31%
reflects investment experience better than assumed and the reduction in wage inflation from 3.75% to 3.50% offset by a new Supplemental COLA effective July 1, 2017 and the continued phase-in of the 2015 assumption changes approved by the Retirement Board. As discussed under "City Budget - Five Year
Financial Plan" increases in retirement costs are projected in the City's December 2016 Five Year
Financial Plan.
Table A-17 shows total Retirement System liabilities, assets and percent funded for the last five actuarial valuations as well as contributions for the fiscal years 2012-13 through 2016-17. Information is shown
for all employers in the Retirement System (City, SFUSD, SFCCD and San Francisco Trial Courts). "Actuarial Liability" reflects the actuarial accrued liability of the Retirement System measured for purposes of determining the funding contribution. "Market Value of Assets" reflects the fair market value of assets held in trust for payment of pension benefits. "Actuarial Value of Assets" refers to the
plan assets with investment returns different than expected smoothed over five years to provide a more stable contribution rate. The "Market Percent Funded" column is determined by dividing the market value of assets by the actuarial accrued liability. The "Actuarial Percent Funded" column is determined
by dividing the actuarial value of assets by the actuarial accrued liability. "Employee and Employer Contributions" reflects the total of mandated employee contributions and employer contributions received by the Retirement System in the fiscal year ended June 30'h prior to the July 1" valuation date.
[Remainder of Page Intentionally Left Blank}
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TABLE A-17
City and County of San Francisco
Employees' Retirement System
Fiscal Years 2012-13 through 2016-17 {OOOs)
Employee &
Market Actuarial Employer
As of Actuarial Market Va I ue Actuarial Value Percent Percent Contributions 7/1/2017 Lia bi I ity of Assets of Assets Funded Funded in prior FY
1 Employer contribution rates for fisca I yea rs 2017-18 and 2018-19 a re 23.46% and 23.31 %, respectively.
Sources: SFERS' audited yea r--end fi nancia I statements and required supplemental information
SFERS' annual July 1 actua ria Iva I uation reports
Note: Information above reflects entire Retirement System, not just the City and County of San Francisco.
Employer
Contribution Rates '
in prior FY
20.71
24.82
26.76
22.80
21.40
As noted in the table above, the Market Percent Funded ratio is again higher than the Actuarial Percent
Funded ratio in 2017. The Actuarial Percent Funded ratio does not yet fully reflect the net asset gains from the last five fiscal years.
The actuarial accrued liability is measured by an independent consulting actuary in accordance with Actuarial Standards of Practice. In addition, an actuarial audit is conducted every five years in accordance with Retirement Board policy.
The Retirement System discloses accounting and financial reporting information under GASB Statement No. 67, Financial Reporting for Pension Plans. This statement was first implemented by the Retirement System in fiscal year 2013-14. The City discloses accounting and financial information about the
Retirement System under GASB Statement No. 68, Accounting and Financial Reporting for Pensions. This accounting statement was first effective in fiscal year 2014-15. These accounting statements
separated financial reporting from funding and required additional disclosures in the notes to the financial statements and required supplemental information. In general, the City's funding of its pension obligations are not affected by the GASB 68 changes to the reporting of the City's pension
liability. Funding requirements are specified in the City Charter and are described in "Funding Practices"
above.
Total Pension Liability reported under GASB Statements No. 67 and 68 differs from the Actuarial Liability calculated for funding purposes in several ways, including the following differences. First, Total Pension Liability measured at fiscal year-end is a roll-forward of liabilities calculated at the beginning of the year
and is based upon a beginning of year census adjusted for significant events that occurred during the year. Second, Total Pension Liability is based upon a discount rate determined by a blend of the assumed investment return to the extent the fiduciary net position is available to make payments and at
a municipal bond rate to the extent that the fiduciary net position is unavailable to make payments. Differences between the discount rate and assumed investment return have been small, ranging from
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zero to six basis points at the last five fiscal year-ends. The third distinct difference is that Total Pension
Liability includes a provision for Supplemental COLAS that may be granted in the future, while Actuarial
Liability for funding purposes includes only Supplemental COLAS that have been already been granted.
Table A-17A below shows for the five most recent fiscal years the collective Total Pension Liability, Plan
Fiduciary Net Position (market value of assets), and Net Pension Liability for all employers who sponsor the Retirement System. The City's audited financial statements disclose only its own proportionate
share of the Net Pension Liability and other required GASB 68 disclosures.
TABLE A-17A
As of
6/30/2017
2012-13
2013-14
2014-15
2015-16
2016-17
Sources:
Notes:
Collective
Total Pension
Liability(TPL)
$20,785,417
21,691,042
22,724,102
25,967,281
27,403,715
City and County of San Francisco
Employees' Retirement System {OOOs)
GASB 67 /68 Disclosures
Plan Net
Discount Plan Fiduciary Position as
Rate Net Position % of TPL
7.52 % $17,011,545 81.8 %
7.58 19,920,607 91.8
7.46 20,428,069 89.9
7.50 20,154,503 77.6
7.50 22,410,350 81.8
Collective Net
Pension
Liability (NPL)
$3,773,872
1,770,435
2,296,033
5,812,778
4,993,365
SFERSfiscal year-end GASB 67 /68 Reports as of June 30, 2014, 2015, 2016 and 2017.
Collective a mounts include a II employees (City and County, SFUSD, SFCCD, Superior Courts J
City and County's
Proportionate
Share of NPL
$3,552,075
1,660,365
2,156,049
5,476,653
4,697,131
The fiscal year 2017 decline in the City's net pension liability is due to investment return during the fiscal
year that exceeded the assumed 7.50%.
[Remainder of Page Intentionally Left Blank}
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Asset Management
The assets of the Retirement System, (the "Fund") are invested in a broadly diversified manner across
the institutional global capital markets. In addition to U.S. equities and fixed income securities, the Fund holds international equities, global sovereign and corporate debt, global public and private real estate
and an array of alternative investments including private equity and venture capital limited partnerships. For a breakdown of the asset allocation as of June 30, 2017, see Appendix B: "COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY AND COUNTY OF SAN FRANCISCO FOR THE
FISCAL YEAR ENDED JUNE 30, 2017," page 63.
Annualized investment returns (net of fees and expenses) for the Retirement System for the five years
ending June 30, 2017 were 9.98%. For the ten-year and twenty-year periods ending June 30, 2017, annualized investment returns were 5.40% and 7.46% respectively.
The investments, their allocation, transactions and proxy votes are regularly reviewed by the Retirement Board and monitored by an internal staff of investment professionals who in turn are advised by
external consultants who are specialists in the areas of investments detailed above. A description of the Retirement System's investment policy, a description of asset allocation targets and current investments, and the Annual Report of the Retirement System are available upon request from the Retirement System by writing to the San Francisco Retirement System, 1145 Market Street, 5th Floor,
San Francisco, California 94103, or by calling (415) 487-7020. Certain documents are available at the Retirement System website at www.mysfers.org. These documents are not incorporated herein by
reference.
Recent Voter Approved Changes to the Retirement Plan
The levels of SFERS plan benefits are established under the Charter and approved directly by the voters, rather than through the collective bargaining process. Changes to retirement benefits require a voter
approved Charter amendment. As detailed below, the most recent changes to SFERS plan benefits have been intended to reduce pension costs associated with future City employees.
Voters of San Francisco approved Proposition C in November 2011 which provided the following:
1. New SFERS benefit plans for Miscellaneous and Safety employees commencing employment on or after January 7, 2012, which raise the minimum service retirement age for Miscellaneous members from 50 to 53; limit covered compensation to 85% of the IRC §401(a)(17) limits for
Miscellaneous members and 75% of the I RC §401(a)(l 7) limits for Safety members; calculate final compensation using highest three-year average compensation; and decrease vesting allowances for Miscellaneous members by lowering the City's funding for a portion of the vesting allowance
from 100% to 50%;
2. Employees commencing employment on or after January 7, 2012 otherwise eligible for
membership in Cal PERS may become members of SFERS;
3. Cost-sharing provisions which increase or decrease employee contributions to SFERS on and
after July 1, 2012 for certain SFERS members based on the employer contribution rate set by the Retirement Board for that year. For example, Miscellaneous employees who earn between $50,000 and $100,000 per year pay a fluctuating contribution rate in the range of +4% to -4% of the Charter-mandated employee contribution rate, while Miscellaneous employees who earn
$100,000 or more per year pay a fluctuating contribution rate in the range of +5% to -5% of the
Charter-mandated employee contribution rate. Similar fluctuating employee contributions are
also required from Safety employees; and
4. Effective July 1, 2012, no Supplemental COLA will be paid unless SFERS is fully funded on a market value of assets basis and, for employees hired on or after January 7, 2012, Supplemental COLA benefits will not be permanent adjustments to retirement benefits - in any year when a
Supplemental COLA is not paid, all previously paid Supplemental COLAs will expire.
A retiree organization has brought a legal action against the requirement in Proposition C that SFERS be fully funded in order to pay the Supplemental COLA. In that case, Protect our Benefits {POB) v. City of San Francisco (1st DCA Case No. A140095), the Court of Appeals held that changes to the Supplemental
COLA adopted by the voters in November 2011 under Proposition C could not be applied to current City employees and those who retired after November 1996 when the Supplemental COLA provisions were
originally adopted, but could be applied to SFERS members who retired before November 1996. This decision is now final and its implementation increased the July 1, 2016 unfunded actuarial liability by $429.3 million for Supplemental COLAs granted retroactive to July 1, 2013 and July 1, 2014.
On July 13, 2016, the SFERS Board adopted a Resolution to exempt members who retired before November 6, 1996, from the "fully funded" provision related to payment of Supplemental COLAs under
Proposition C. The Resolution directed that retroactive payments for Supplemental COLAs be made to these retirees. After the Board adopted the Resolution, the Retirement System published an actuarial study on the cost to the Fund of payments to the pre-1996 retirees. The study reports that the two
retroactive supplemental payments will trigger immediate payments of $34 million, create additional liability for continuing payments of $114 million, and cause a new unfunded liability of $148 million. This liability does not include the Supplemental COLA payments that may be triggered in the future. Under
the cost sharing formulas in Proposition C, the City and its employees will pay for these costs in the form of higher yearly contribution rates. The Controller has projected the future cost to the City and its employees to be $260 million, with over $200 million to be paid in the next five fiscal years. The City
obtained a permanent injunction to prevent SFERS from making Supplemental COLA payments to these members who retired before November 6, 1996. The Retirement Board has appealed the Superior Court's injunction, and the schedule for that appeal is not yet known.
In August 2012, Governor Brown signed the Public Employee Pension Reform Act of 2012 ("PEPRA").
Current plan provisions of SFERS are not subject to PEPRA although future amendments may be subject to these reforms.
Recent Changes in the Economic Environment and the Impact on the Retirement System
As of June 30, 2017, the audited market value of Retirement System assets was $22.4 billion. As of
March 31, 2018, the unaudited market value of SFERS' portfolio was $23.7 billion. These values represent, as of the date specified, the estimated value of the Retirement System's portfolio if it were liquidated on that date. The Retirement System cannot be certain of the value of certain of its portfolio
assets and, accordingly, the market value of the portfolio could be more or less. Moreover, appraisals for classes of assets that are not publicly traded are based on estimates which typically lag changes in actual market value by three to six months. Representations of market valuations are audited at each fiscal year end as part of the annual audit of the Retirement System's financial statements.
The Retirement System investment portfolio is structured for long-term performance. The Retirement
System continually reviews investment and asset allocation policies as part of its regular operations and continues to rely on an investment policy which is consistent with the principles of diversification and
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the search for long-term value. Market fluctuations are an expected investment risk for any long-term
strategy. Significant market fluctuations are expected to have significant impact on the value of the
Retirement System investment portfolio.
A decline in the value of SFERS Trust assets over time, without a commensurate decline in the pension
liabilities, will result in an increase in the contribution rate for the City. No assurance can be provided by the City that contribution rates will not increase in the future, and that the impact of such increases will not have a material impact on City finances.
Other Employee Retirement Benefits
As noted above, various City employees are members of Cal PERS, an agent multiple-employer public employee defined benefit plan for safety members and a cost-sharing multiple-employer plan for
miscellaneous members. The City makes certain payments to Cal PERS in respect of such members, at rates determined by the CalPERS board. Such payment from the General Fund equaled $19.2 million in fiscal year 2012-13 and $20.0 million in fiscal year 2013-14. For fiscal year 2014-15, the City prepaid its
annual CalPERS obligation at a level of $25.2 million. Further discussion of the City's CalPERS plan obligations are summarized in Note 9 to the City's CAFR, as of June 30, 2017, attached to this Official Statement as Appendix B. A discussion of other post-employment benefits, including retiree medical
benefits, is provided below under "Medical Benefits - Post-Employment Health Care Benefits and GASB4S."
Medi ca I Benefits
Administration through San Francisco Health Service System; Audited System Financial Statements
Medical benefits for eligible active City employees and eligible dependents, for retired City employees and eligible dependents, and for surviving spouses and domestic partners of covered City employees (the "City Beneficiaries") are administered by the San Francisco Health Service System (the "San Francisco Health Service System" or "SFHSS") pursuant to City Charter Sections 12.200 et seq. and
A8.420 et seq. Pursuant to such Charter Sections, the San Francisco Health Service System also
administers medical benefits to active and retired employees of SFUSD, SFCCD and the San Francisco Superior Court (collectively the "System's Other Beneficiaries"). However, the City is not required to fund medical benefits for the System's Other Beneficiaries and therefore this section focuses on the
funding by the City of medical and dental benefits for City Beneficiaries.
The San Francisco Health Service System is overseen by the City's Health Service Board (the "Health Service Board"). The seven member Health Service Board is composed of members including a seated
member of the City's Board of Supervisors, appointed by the Board President; an individual who
regularly consults in the health care field, appointed by the Mayor; a doctor of medicine, appointed by the Mayor; a member nominated by the Controller and approved by the Health Service Board, and three members of the San Francisco Health Service System, active or retired, elected from among their members. The plans (the "SFHSS Medical Plans") for providing medical care to the City Beneficiaries and the System's Other Beneficiaries (collectively, the "SFHSS Beneficiaries") are determined annually by
the Health Service Board and approved by the Board of Supervisors pursuant to Charter Section A8.422.
The San Francisco Health Service System oversees a trust fund (the "Health Service Trust Fund")
established pursuant to Charter Sections 12.203 and A8.428 through which medical benefits for the
SFHSS Beneficiaries are funded. The San Francisco Health Service System issues annually a publicly available, independently audited financial report that includes financial statements for the Health
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Service Trust Fund. This report may be obtained on the SFHSS website or by writing to the San Francisco Health Service System, 1145 Market Street, Third Floor, San Francisco, California 94103, or by calling (415) 554-1727. Audited annual financial statements for several years are also posted on the SFHSS
website. The information available on such website is not incorporated in this Official Statement by reference.
As presently structured under the City Charter, the Health Service Trust Fund is not a fund through which assets are accumulated to finance post-employment healthcare benefits (an "Other Post
Employment Benefits trust fund"). Thus, the Health Service Trust Fund is not currently affected by GASB Statement Number 45, Financial Reporting for Postemployment Benefit Plans Other Than Pensions ("GASB 45"), which applies to OPEB trust funds.
Determination of Employer and Employee Contributions for Medical Benefits
According to the City Charter Section A8.428, the City's contribution towards SFHSS Medical Plans for active employees and retirees is determined by the results of a survey annually of the amount of
premium contributions provided by the 10 most populous counties in California (other than the City). The survey is commonly called the 10-County Average Survey and is used to determine "the average
contribution made by each such County toward the providing of health care plans, exclusive of dental or
optical care, for each employee of such County." Under City Charter Section A8.428, the City is required to contribute to the Health Service Trust Fund an amount equal to such "average contribution" for each
City Beneficiary.
In the Memoranda of Understandings negotiated through collective bargaining in June 2014, the 10-
County Average was eliminated in the calculation of premiums for active employees represented by
most unions, and exchanged for a percentage based employee premium contribution. The long term impact of the premium contribution model is anticipated to be a reduction in the relative proportion of the projected increases in the City's contributions for healthcare, stabilization of the medical plan
membership and maintenance of competition among plans. The contribution amounts are paid by the City into the Health Service Trust Fund. The 10-County Average is still used as a basis for calculating all
retiree premiums. To the extent annual medical premiums exceed the contributions made by the City as
required by the Charter and union agreements, such excess must be paid by SFHSS Beneficiaries or, if elected by the Health Service Board, from net assets also held in the Health Service Trust Fund. Medical benefits for City Beneficiaries who are retired or otherwise not employed by the City (e.g., surviving spouses and surviving domestic partners of City retirees) ("Nonemployee City Beneficiaries") are funded
through contributions from such Nonemployee City Beneficiaries and the City as determined pursuant
to Charter Section A8.428. The San Francisco Health Service System medical benefit eligibility requirements for Nonemployee City Beneficiaries are described below under "- Post-Employment Health Care Benefits and GASB 45."
Contributions relating to Nonemployee City Beneficiaries are also based on the negotiated methodologies found in most of the union agreements and, when applicable, the City contribution of the "10-County average contribution" corresponding to such Nonemployee City Beneficiaries as
described in Charter Section A8.423 along with the following:
Monthly contributions from Nonemployee City Beneficiaries in amounts equal to the monthly contributions required from active employees excluding health coverage or subsidies for health coverage paid for active employees as a result of collective bargaining. However, such monthly
contributions from Nonemployee City Beneficiaries covered under Medicare are reduced by an amount equal to the amount contributed monthly by such persons to Medicare.
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In addition to the 10-County Average contribution, the City contributes additional amounts in respect of the Nonemployee City Beneficiaries sufficient to defray the difference in cost to the San Francisco Health Service System in providing the same health coverage to Nonemployee City Beneficiaries as is provided for active employee City Beneficiaries, excluding health coverage or subsidies for health coverage paid for active employees as a result of collective bargaining.
After application of the calculations described above, the City contributes 50% of monthly contributions required for the first dependent.
Health Care Reform
The election of a Republican President in November 2016 who promised to repeal "Obamacare" (or the Affordable Care Act ("ACA") combined with both Houses of Congress with Republican majorities who are equally set on repealing the ACA puts many of the fees and taxes in limbo until legislation is passed to "repeal and replace Obamacare" by the current Congress and signed by President Trump ("Health Reform 2.0"). The following discussion is based on the current status of the Patient Protection and Affordable Care Act (the "ACA"). Many attempts have been made to completely repeal the ACA however full appeal has been unsuccessful thus far. Two pieces of legislation, passed by Congress and signed by President Trump in December 2017 and January 2018, have chipped away at many of the fiscal requirements of the law.
In December 2017, Congress passed the Tax Cuts and Jobs Act (the "ACT") which was immediately signed by President Trump. The ACT eliminated the ACA's requirement which "zeroes out" the ACA individual mandate penalty effective beginning after December 31, 2018. This does not end the mandate, rather eliminates the tax penalty for violating the mandate. The ACA mandate that requires employers, with 50 or more full-time employees, to offer full-time workers ACA-compliant health
coverage is still in place. Eligibility for health benefits is offered to employees who are employed, on
average, at least 20 hours of service per week. In addition, the employer reporting obligations under the ACA remains unchanged. In January 2018, approximately 50,000 1095 forms were distributed to members documenting compliance to this mandate.
The potential impact with the repeal of the individual mandate may: 1) increase uncompensated care costs, which is generally passed onto plan sponsors, employers and other payers, 2) destabilize the individual market leading to more employees and dependents electing COBRA instead of buying coverage elsewhere, and 3) limit the opportunity for plan sponsors/employers to leverage the healthcare marketplace as a coverage vehicle for groups such as part-time employees or pre-54 retirees.
On January 22, 2018 Congress approved the delay of three ACA taxes that impact SFHSS rates for medical coverage. The taxes are:
• Excise Tax on High-cost Employer-sponsored Health Plans
The Excise Tax on High-cost Employer-sponsored Health Plans (Cadillac Tax) is a 40% excise tax on high-cost coverage health plans. Implementation of the tax has been delayed twice and is now effective in 2022. SFHSS continues to evaluate the future impact of the cost of medical benefits for all coverage tiers and it is expected that the plans for pre-65 retirees will trigger the
tax first.
• Health Insurance Tax ("HIT")
The ACA also imposed a tax on health insurance providers, which was passed on to employer sponsored fully-insured plans in the form of higher premiums. A moratorium on this tax was in
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place for 2017, and the spending bill passed by Congress in January 2018 includes another moratorium for 2019.
The HIT tax is mandated for the 2018 plan year. The 2018 plan year premiums for Kaiser Permanente and City Health Plan (UH() included the impact of the HIT tax. Late in 2016, Blue Shield and the California Department of Managed Health Care agreed that the HIT tax was not applicable to Blue Shield because SFHSS "flex funds" Blue Shield meaning that SFHSS is at risk directly for non-physician costs and thus it is not fully-insured. This resulted in a one-time refund for 2016 of $9.93 million which is applied to the 2018 rate stabilization reserve. The estimated impact of the HIT tax on the City was $10.98 million.
• Medical Device Excise Tax
The ACA's medical device excise tax imposes a 2.3 percent tax on sales of medical devices (except certain devices sold at retail). Implementation of the tax is delayed until 2020.
The Patient Centered Outcomes Research Institute ("PCORI") fee is still in place for 2018, however it sunsets in 2019. Beginning in 2013, the PCORI Fee was accessed at the rate of $2.00 per enrollee per year to all participants in the Self-Insured medical-only plan (approximately 8,600). PCORI was factored into the calculation of medical premium rates and premium equivalents for the 2018 plan year and the impact on the City is $0.31 million.
Local Elections:
Proposition B (2008) Changing Qualification for Retiree Health and Pension Benefits and Establishing a Retiree Health Care Trust Fund
On June 3, 2008, the San Francisco voters approved Proposition B, a charter amendment that changed the way the City and current and future employees share in funding SFERS pension and health benefits. With regard to health benefits, elected officials and employees hired on or before January 9, 2009, contribute up to 2% of pre-tax compensation toward their retiree health care and the City contributes up to 1%. The impact of Proposition Bon standard retirements occurred in 2014.
Proposition C (2011) City Pension and Health Care Benefit
On November 8, 2011, the San Francisco voters approved Proposition C, a charter amendment that made additional changes to the way the City and current and future employees share in funding SFERS pension and health benefits. The Proposition limits the 50% coverage for dependents to employees who left the workforces (without retiring) prior to 2001. The San Francisco Health Service System is in compliance with Proposition C.
Employer Contributions for San Francisco Health Service System Benefits
For fiscal year 2016-17, based on the most recent audited financial statements, the San Francisco Health Service System received approximately $713.9 million from participating employers for San Francisco Health Service System benefit costs. Of this total, the City contributed approximately $604.5 million; approximately $165.4 million of this $604.5 million amount was for health care benefits for approximately 21,410 retired City employees and their eligible dependents and approximately $439.1 million was for benefits for approximately 31,905 active City employees and their eligible dependents.
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The 2018 aggregate plan costs for the City increased by 3.28%. This is due to a number of factors including aggressive contracting by SFHSS that maintains competition among the City's vendors,
implementing Accountable Care Organizations that reduced utilization and increased use of generic prescription rates and changing the City's Blue Shield plan from a fully-funded to a flex-funded product and implementing a narrow network. Flex-funding allows lower premiums to be set by the City's
actuarial consultant, AON-Hewitt, without the typical margins added by Blue Shield; however, more risk is assumed by the City and reserves are required to protect against this risk. The flattening is anticipated to continue.
Post-Employment Health Care Benefits and GASB 45
Eligibility of former City employees for retiree health care benefits is governed by the Charter. In general, employees hired before January 10, 2009 and a spouse or dependent are potentially eligible for
health benefits following retirement at age 50 and completion of five years of City service. Proposition B, passed by San Francisco voters on June 3, 2008, tightened post-retirement health benefit eligibility rules for employees hired on or after January 10, 2009, and generally requires payments by the City and
these employees equal to 3% of salary into a new retiree health trust fund.
Proposition A, passed by San Francisco voters on November 5, 2013, restricted the City's ability to
withdraw funds from the retiree health trust fund. The restrictions allow payments from the fund only when two of the three following conditions are met:
1. The City's account balance in any fiscal year is fully funded. The account is fully funded when it is
large enough to pay then-projected retiree health care costs as they come due; and,
2. The City's retiree health care costs exceed 10% of the City's total payroll costs in a fiscal year.
The Controller, Mayor, Trust Board and a majority of the Board of Supervisors must agree to allow payments from the Fund for that year. These payments can only cover retiree health care
costs that exceed 10% of the City's total payroll cost. The payments are limited to no more than 10% of the City's account; or,
3. The Controller, Mayor, Trust Board and two-thirds of the Board of Supervisors approve changes to these limits.
GASB 45 Reporting Requirements
The City was required to begin reporting the liability and related information for unfunded OPEBs in the City's financial statements for the fiscal year ending June 30, 2008. This reporting requirement is defined under GASB 45. GASB 45 does not require that the affected government agencies, including the City, actually fund any portion of this post-retirement health benefit liability - rather, GASB 45 requires
government agencies to determine on an actuarial basis the amount of its total OPEB liability and the annual contributions estimated to fund such liability over 30 years. Any underfunding in a year is recognized as a liability on the government agency's balance sheet.
City's Estimated Liability
The City is required by GASB 45 to prepare a new actuarial study of its post-retirement benefits
obligation every two years. As of July 1, 2014, the most recent actuarial valuation date, the funded
status of retiree health care benefits was 1.1%. The actuarial accrued liability for benefits was $4.26 billion, and the actuarial value of assets was $49.0 million, resulting in an unfunded actuarial accrued
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liability ("UAAL'') of $4.21 billion. As of July 1, 2014, the estimated covered payroll (annual payroll of active employees covered by the plan) was $2.62 billion and the ratio of the UAAL to the covered payroll was 160.8%.
The difference between the estimated ("ARC") and the amount expended on post-retirement medical benefits in any year is the amount by which the City's overall liability for such benefits increases in that year. The City's most recent CAFR estimated that the 2016-17 annual OPEB cost was $401.4 million, of which the City funded $175.0 million which caused, among other impacts, the City's long-term liability to increase by $237.5 million (as shown on the City's balance sheet and below). The annual OPEB cost consists of the ARC, one year of interest on the net OPEB obligation and recognition of one year of amortization of the net OPEB obligation. While GASB 45 does not require funding of the annual OPEB cost, any differences between the amount funded in a year and the annual OPEB cost are recorded as increases or decreases in the net OPEB obligation. See Note 9(b) to the City's CAFR, as of June 30, 2017, included as Appendix B to this Official Statement. Five-year trend information is displayed in Table A-18
TABLE A-18
Fi sea I Year 2012-13
2013-14
2014-15
2015-16
2016-17
CITY AND COUNTY OF SAN FRANCISCO
Five-year Trend
Fiscal Years 2012-13 to 2016-17
(OOOs)
Annual Percentage of Annual
OPEB OPEB Cost Funded $418,539 38.3%
353,251 47.2%
363,643 46.0%
326,133 51.8%
401,402 43.6%
Net OPEB
Obligation
$1,607,130
1,793,753
1,990,155
2,147,434
2,384,938
Actuarial projections of the City's OPEB liability will be affected by Proposition Bas well as by changes in
the other factors affecting that calculation. For example, the City's actuarial analysis shows that by 2031, Proposition B's three-percent of salary funding requirement will be sufficient to cover the cost of retiree health benefits for employees hired after January 10, 2009. See "Retirement System - Recent Voter Approved Changes to the Retirement Plan" above. As of June 30, 2017, the fund balance in the Retiree Health Care Trust Fund established by Proposition B was $187.4 million, an increase of 63% versus the prior year. See"- Local Elections: Proposition C (2011)."
Total City Employee Benefits Costs
The City budgets to pay its ARC for pension and has established a Retiree Health Care Trust Fund into which both the City and employees are required to contribute funds as retiree health care benefits are earned. Currently, these Trust deposits are only required on behalf of employees hired after 2009, and are therefore limited, but is expected to grow as the workforce retires and this requirement is extended to all employees in 2016. Proposition A, passed by San Francisco voters on November 5, 2013 restricted the City's ability to make withdrawals from the Retiree Health Care Trust Fund.
The balance in the Retiree Health Care Trust Fund as of June 30, 2017 is approximately $187.4 million. The City will continue to monitor and update its actuarial valuations of liability as required under GASB 45. Table A-19 provides a five-year history for all health benefits costs paid including pension, health,
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dental and other miscellaneous benefits. For all fiscal years shown, a "pay-as-you-go" approach was used by the City for health care benefits.
Table A-19 below provides a summary of the City's employee benefit actual and budgeted costs from fiscal years 2013-14 to fiscal year 2017-18.
TABLE A-19
CITY AND COUNTY OF SAN FRANCISCO
Employee Benefit Costs, All Funds
Fiscal Years 2013-14 through 2017-181
(OOOs)
2013-14 2014-15
Actual Actual
SFERS and PERS Retirement Contributions $535,309 $593,619
Social Security & Medicare 160,288 171,877
Health - Medi ca I + Denta I, active employee: 369,428 383,218
Health - Retiree Medical 2 161,859 146,164
Other Benefits 3
16,106 18,439
Total Benefit Costs $1,242,990 $1,313,318
2015-16 2016-17
Actual Actual
$531,821 $554,956
184,530 196,914
421,864 459,772
158,939 165,822
20,827 21,388
$1,317,981 $1,398,852
1 Fi sea I ye a r 2013-14 th rough fis ca I yea r 2 016-17 figures a re audited a ctua Is. Fis ca I year 2017-18 figures a re origin a I bud get.
2017-18
Budget
$597,176
207,108
480,956
180,975
29,145
$1,495,360
2 Does not include Health Service System administrative costs. Does include flexible benefits that may be used for hea Ith insura nee. 3
"Other Benefits" includes u ne m pl oyme nt ins u ra nee premiums, I ife i nsu ranee and other mi see I la neous employee benefits.
Source: Office oft he Control I er, City and County of San Francis co.
INVESTMENT OF CITY FUNDS
Investment Pool
The Treasurer of the City (the "Treasurer") is authorized by Charter Section 6.106 to invest funds
available under California Government Code Title 5, Division 2, Part 1, Chapter 4. In addition to the funds of the City, the funds of various City departments and local agencies located within the boundaries of the City, including the school and community college districts, airport and public hospitals, are deposited into the City and County's Pooled Investment Fund (the "Pool"). The funds are commingled for investment purposes.
Investment Policy
The management of the Pool is governed by the Investment Policy administered by the Office of the Treasurer and Tax Collector in accordance with California Government Code Sections 27000, 53601, 53635, et. al. In order of priority, the objectives of this Investment Policy are safety, liquidity and return on investments. Safety of principal is the foremost objective of the investment program. The investment portfolio maintains sufficient liquidity to meet all expected expenditures for at least the next six months. The Office of the Treasurer and Tax Collector also attempts to generate a market rate of return, without undue compromise of the first two objectives.
The Investment Policy is reviewed and monitored annually by a Treasury Oversight Committee established by the Board of Supervisors. The Treasury Oversight Committee meets quarterly and is
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comprised of members drawn from (a) the Treasurer; (b) the Controller; (c) a representative appointed by the Board of Supervisors; (d) the County Superintendent of Schools or his/her designee; (e) the Chancellor of the Community College District or his/her designee; and (f) Members of the general public. A complete copy of the Treasurer's Investment Policy, dated February 2018, is included as an Appendix to this Official Statement. The Investment Policy is also posted at the Treasurer's website. The
information available on such website is not incorporated herein by reference.
Investment Portfolio
As of March 31, 2018, the City's surplus investment fund consisted of the investments classified in Table A-20, and had the investment maturity distribution presented in Table A-21.
TABLE A-20
TJ'.ge of Investment
U.S. Treasuries
Federal Agencies
State and Local Obligations
Pub Ii c Ti me Deposits
City and County of San Francisco
Investment Portfolio
Pooled Funds
As of March 31, 2018
Par Value Book Value
$1,125,000,000 $1,118,343,589
4,596,776,000 4,595,724,972
165,633,823 167,726,719
24,980,000 24,980,000
Negotiable Certificates of Deposit 2,157 ,838,000 2,157 ,838,000
Commercial Paper 708,000,000 701,938,712
Medi um Term Notes 70,000,000 69,982,200
Money Market Funds 396,513,435 396,513,435
Supra nati ona Is 520,300,000 518,914,919
Total $9,765,041,258 $9,751,962,546
March 2018 Earned Income Yield: 1.71%
Sources: Office oft he Treasurer and Tax Collector, City and County of San Francisco
From Citi bank-Custodia I Safekeeping, Sun Ga rd Systems-Inventory Control Program.
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Market Value
$1,112,880,783
4,551,885,764
164,382,469
24,980,000
2,155,091,420
704,224,613
69,877,600
396,513,435
514,648,364
$9,694,484,448
TABLE A-21
City and County of San Francisco
Investment Maturity Distribution
Pooled Funds
As of March 31, 2018
Maturity in Months Par Value ::iercentage
0 to 1 $1,063,983,435 10.9%
1 to 2 407,710,000 4.2%
2 to 3 599,000,000 6.1%
3 to 4 842,250,000 8.6%
4 to 5 192,000,000 2.0%
5 to 6 280,000,000 2.9%
6 to 12 1,954,383,000 20.0%
12 to 24 1,723,420,000 17.6%
24 to 36 1,508, 175,000 15.4%
36 to 48 712,544,823 7.3%
48 to 60 481,575,000 4.9%
$9,765,041,258 100.0%
Weighted Average Maturity: 474 Days
Sources: Office of the Treasurer and Tax Collector, City and County of San Francisco
From Citibank-Custodia I Safekeeping, SunGard Systems-Inventory Control Program.
Further Information
A report detailing the investment portfolio and investment activity, including the market value of the portfolio, is submitted to the Mayor and the Board of Supervisors monthly. The monthly reports and annual reports are available on the Treasurer's web page: www.sftreasurer.org. The monthly reports
and annual reports are not incorporated by reference herein.
Additional information on the City's investments, investment policies, and risk exposure as of June 30, 2017 are described in Appendix B: "COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY AND
COUNTY OF SAN FRANCISCO FOR THE FISCAL YEAR ENDED JUNE 30, 2017," Notes 2(d) and 5.
CAPITAL FINANCING AND BONDS
Capital Plan
In October 2005, the Board of Supervisors adopted, and the Mayor approved, Ordinance No. 216-05,
which established a new capital planning process for the City. The legislation requires that the City develop and adopt a 10 year capital expenditure plan for City-owned facilities and infrastructure. It also created the Capital Planning Committee ("CPC") and the Capital Planning Program ("CPP"). The CPC,
composed of other City finance and capital project officials, makes recommendations to the Mayor and Board of Supervisors on all of the City's capital expenditures. To help inform CPC recommendations, the
CPP staff, under the direction of the City Administrator, review and prioritize funding needs; project and coordinate funding sources and uses; and provide policy analysis and reports on interagency capital planning.
The City Administrator, in conjunction with the CPC, is directed to develop and submit a 10 year capital plan every other fiscal year for approval by the Board of Supervisors. The Capital Plan is a fiscally constrained long-term finance strategy that prioritizes projects based on a set of funding principles. It provides an assessment of the City's infrastructure needs over 10 years, highlights investments required to meet these needs and recommends a plan of finance to fund these investments. Although the Capital Plan provides cost estimates and proposes methods to finance such costs, the document does not reflect any commitment by the Board of Supervisors to expend such amounts or to adopt any specific financing method. The Capital Plan is required to be updated and adopted biennially, along with the City's Five Year Financial Plan and the Five-Year Information & Communication Technology Plan. The CPC is also charged with reviewing the annual capital budget submission and all long-term financing proposals, and providing recommendations to the Board of Supervisors relating to the compliance of any such proposal or submission with the adopted Capital Plan.
The Capital Plan is required to be submitted to the Mayor and the Board of Supervisors by each March 1 in odd-numbered years and adopted by the Board of Supervisors and the Mayor on or before May 1 of the same year. The fiscal year 2018-2027 Capital Plan was approved by the CPC on February 27, 2017, and was adopted by the Board of Supervisors in April 2017. The Capital Plan contains $35.2 billion in capital investments over the coming decade for all City departments, including $5.25 billion in projects for General Fund-supported departments. The Capital Plan proposes $1.9 billion for General Fund payas-you-go capital projects over the next 10 years. The amount for General Fund pay-as-you-go capital projects is assumed to grow to over $200 million per year by fiscal year 2023-24. Major capital projects for General Fund-supported departments included in the Capital Plan consist of upgrades to public
health, police, and fire facilities; improvements to homeless service sites; street and right-of-way improvements; the removal of barriers to accessibility; park improvements; the relocation of public health staff and services to improved spaces, among other capital projects. $2.1 billion of the capital projects of General Fund supported departments are expected to be financed with general obligation bonds and other long-term obligations. The balance is expected to be funded by federal and State funds, the General Fund and other sources.
In addition to the City General Fund-supported capital spending, the Capital Plan recommends $18.9 billion in enterprise fund department projects to continue major transit, economic development and public utility projects such as the Central Subway project, runway and terminal upgrades at San Francisco International Airport, Pier 70 infrastructure investments and the Sewer System Improvement Program, among others. Approximately $12.3 billion of enterprise fund department capital projects is financed with revenue bonds. The balance is expected to be funded by federal and State funds, user/operator fees, General Fund and other sources.
While significant investments are proposed in the City's adopted Capital Plan, identified resources remain below those necessary to maintain and enhance the City's physical infrastructure. As a result, over $4.6 billion in capital needs including enhancements are deferred from the plan's horizon. Over two-thirds of these unfunded needs are for the City's transportation and waterfront infrastructure, where core maintenance investments have lagged for decades. The late Mayor Edwin Lee convened a taskforce to recommend funding mechanisms to bridge a portion of the gaps in the City's transportation needs, but it is likely that significant funding gaps will remain even assuming the identification of significant new funding sources for these needs.
Failure to make the capital improvements and repairs recommended in the Capital Plan may have the following impacts: (i) failing to meet federal, State or local legal mandates; (ii) failing to provide for the imminent life, health, safety and security of occupants and the public; (iii) failing to prevent the loss of
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use of the asset; (iv) impairing the value of the City's assets; (v) increasing future repair and replacement costs; and (vi) harming the local economy.
Tax-Supported Debt Service
Under the State Constitution and the Charter, City bonds secured by ad valorem property taxes ("general obligation bonds") can only be authorized with a two-thirds approval of the voters. As of April 15, 2018, the City had approximately $2.32 billion aggregate principal amount of general obligation bonds outstanding.
Table A-22 shows the annual amount of debt service payable on the City's outstanding general
This table includes the City's Genera I Obligation Bonds shown in Table A-24
and does not include any over lapping debt, such as any assessment district indebtedness
or any redevelopment agency indebtedness. 2 Tota Is reflect rounding to nearest dollar. 3 Excludes payments made to date in current fiscal year
Section 9.106 of the City Charter I imits issua nee of genera I obligation
bonds of the City to 3% of the assessed value of a 11 rea I and persona I
assessment di strict indebtedness or any redevelopment agency indebtedness.
Source: Office of Public Fina nee, City and County of San Francisco.
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General Obligation Bonds
Certain general obligation bonds authorized by the City's voters as discussed below have not yet been issued. Such bonds may be issued at any time by action of the Board of Supervisors, without further approval by the voters.
In November 1992, voters approved Proposition A, which authorized the issuance of up to $350.0 million in general obligation bonds to provide moneys to fund the City's Seismic Safety Loan Program (the "Loan Program"). The purpose of the Loan Program is to provide loans for the seismic strengthening of privately-owned unreinforced masonry buildings in San Francisco for affordable housing and market-rate residential, commercial and institutional purposes. In April 1994, the City issued $35.0 million in taxable general obligation bonds to fund the Loan Program and in October 2002, the City redeemed all outstanding bonds remaining from such issuance. In February 2007, the Board of Supervisors approved the issuance of additional indebtedness under this authorization in an amount not to exceed $35.0 million. Such issuance would be achieved pursuant to the terms of a Credit Agreement with Bank of America, N.A. (the "Credit Bank"), under which the Credit Bank agreed to fund one or more loans to the City from time to time as evidenced by the City's issuance to the Credit Bank of the Taxable General Obligation Bond (Seismic Safety Loan Program), Series 2007A. The funding by the Credit Bank of the loans at the City's request and the terms of repayment of such loans are governed by the terms of
the Credit Agreement. Loan funds received by the City from the Credit Bank are in turn used to finance loans to Seismic Safety Loan Program borrowers. In March 2007, the City initiated an initial borrowing of $2.0 million, and in October 2007, the City borrowed approximately $3.8 million from the Credit Bank. In January 2008, the City borrowed approximately $3.9 million and in November 2008, the City borrowed $1.3 million from the Credit Bank. Further borrowings under the Credit Agreement with the Credit Bank (up to the $35.0 million not-to-exceed amount) are expected as additional loans to Seismic Safety Loan
Program borrowers are approved. In August 2015, the City issued $24.0 million in Series 2015A taxable general obligation bonds under the Seismic Safety Loan Program authorization. On November 8, 2016, voters approved Proposition C, authorizing the use of Seismic Safety Bond Program to fund the purchase and improvement of buildings in need of safety upgrades in order to convert them into affordable housing.
In February 2008, voters approved Proposition A, which authorized the issuance of up to $185.0 million in general obligation bonds for the construction, reconstruction, purchase, and/or improvement of park and recreation facilities located in the City and under the jurisdiction of the Recreation and Parks Commission or under the jurisdiction of the Port Commission. The City issued the first series of bonds under Proposition A in the amount of approximately $42.5 million in August 2008. The City issued the second series in the amount of approximately $60.4 million in March 2010 and the third series in the amount of approximately $73.4 million in March 2012. The City issued the fourth and final series in the amount of approximately $8.7 million in January 2016.
In June 2010, voters approved Proposition B, which authorized the issuance of up to $412.3 million in general obligation bonds to provide funds to finance the construction, acquisition, improvement and retrofitting of neighborhood fire and police stations, the auxiliary water supply system, a public safety building, and other critical infrastructure and facilities for earthquake safety and related costs. The City issued the first series of bonds under Proposition B in the amount of $79.5 million in December 2010 and the second series of bonds in the amount of $183.3 million in March 2012. The City issued the third series in the amount of approximately $38.3 million in August 2012 and the fourth series of bonds in the amount of $31.0 million in June 2013, and the fifth series in the amount of $54.9 million was issued in October 2014. The final series was issued in June 2016 in the amount of approximately $25 million.
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In November 2011, voters approved Proposition B, which authorized the issuance of up to $248.0 million in general obligation bonds to provide funds to repair and repave City streets and remove potholes; strengthen and seismically upgrade street structures; redesign street corridors by adding or improving pedestrian signals, lighting, sidewalk extensions, bicycle lanes, trees and landscaping; construct and renovate curb ramps and sidewalks to increase accessibility and safety for everyone, including persons with disabilities; and add and upgrade traffic signals to improve MUNI service and traffic flow. The City issued the first series of bonds under Proposition Bin the amount of approximately $74.3 million in March 2012 and the second series of bonds in the amount of $129.6 million in June 2013. The City issued the final series in June 2016 in the amount of approximately $109 million.
In November 2012, voters approved Proposition B, which authorized the issuance of up to $195.0 million in general obligation bonds to provide funds for the construction, reconstruction, renovation, demolition, environmental remediation and/or improvement of park, open space and recreation facilities located in the City and under the jurisdiction of the Recreation and Parks Commission or under the jurisdiction of the Port Commission. The City issued the first series of bonds under Proposition B in the amount of approximately $71.9 million in June 2013. The City issued the second series of bonds in the amount of $43 million in January 2016. The third series of bonds under the 2012 Proposition B authorization was issued in April 2018 in the amount of approximately $76.7 million.
In June 2014, voters approved Proposition A, which authorized the issuance of up to $400.0 million in general obligation bonds to improve fire, earthquake and emergency response by improving and/or replacing deteriorating cisterns, pipes, and tunnels, and related facilities to ensure firefighters a reliable water supply for incurring indebtedness of fires and disasters; improving and/or replacing neighborhood fire and police stations; replacing certain seismically unsafe police and medical examiner facilities with earthquake-safe buildings and to pay related costs . The City issued the first series of bonds in the
amount of $100.7 million in October 2014 and the second series of bonds in the amount of $109.6 million in April 2016. The third and final series is expected to be issued in May 2018.
In November 2014, voters approved Proposition A, which authorized the issuance of up to $500 million in general obligation bonds to provide funds to finance the construction, acquisition and improvement of certain transportation and transit related improvements and other related costs. The City issued the first series of bonds under Proposition A in the amount of approximately $67 million in June 2015. The second series of bonds under the 2014 Proposition A authorization was issued in April 2018 in the amount of approximately 174.4 million.
In November 2015, voters approved Proposition A which authorized the issuance of up to $310 million in general obligation bonds to provide funds to finance the construction, development, acquisition and preservation of housing affordable to low- and middle-income households and to assist in the acquisition, rehabilitation, and preservation of affordable rental apartment buildings to prevent the eviction of long-term residents; to repair and reconstruct dilapidated public housing; to fund a middleincome rental program; and to provide for homeownership down payment assistance opportunities for educators and middle-income households. The City issued the first series of bonds under Proposition A
in the amount of approximately $75 million in October 2016. The second series is expected to be issued in May 2018.
In June 2016, voters approved Proposition A, which authorized the issuance of up to $350 million in general obligation bonds to provide funds to protect public health and safety, improve community medical and mental health care services, earthquake safety and emergency medical response; to seismically improve, and modernize neighborhood fire stations and vital public health and homeless service sites; to construct a seismically safe and improved San Francisco Fire Department ambulance
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deployment facility; and to pay related costs. The City issued the first series of the bonds under Proposition A in the amount of approximately $173.1 million in February 2017. The second series is expected to be issued in May 2018.
Refunding General Obligation Bonds
The Board of Supervisors adopted Resolution No. 272-04 on May 11, 2004 (the "2004 Resolution"). The Mayor approved the 2004 Resolution on May 13, 2004. The 2004 Resolution authorized the issuance of not to exceed $800.0 million aggregate principal amount of its General Obligation Refunding Bonds from time to time in one or more series for the purpose of refunding all or a portion of the City's then outstanding General Obligation Bonds. On November 1, 2011, the Board of Supervisors adopted, and the Mayor approved, Resolution No. 448-11 (the "2011 Resolution," and together with the 2004 Resolution, the "Refunding Resolutions"). The 2011 Resolution authorized the issuance of not to exceed
$1.356 billion aggregate principal amount of the City's General Obligation Refunding Bonds from time to time in one or more series for the purpose of refunding certain outstanding General Obligation Bonds of the City. The City has issued four series of refunding bonds currently outstanding under the Refunding Resolutions, as shown on Table A-23.
TABLE A-23
CITY AND COUNTY OF SAN FRANCISCO
General Obligation Refunding Bonds
As of April 15, 2018
Series Name Date Issued Principal Amount Issued Amount Outstanding
2008-Rl May 2008 $232,075,000 $6,675,000
2008-R2 May 2008 39,320,000 5,680,000 2011-Rl November 2011 339,475,000 202,220,000
1
2015-Rl February 2015 293,910,000 261,095,000 2
1 Series 2004-Rl Bonds were refunded by the 2011-Rl Bonds in November 2011 2 Series 2006-Rl, 2006-R2, and 2008-R3 Bonds were refunded by the 2015-Rl Bonds in February 2015.
Table A-24 below lists for each of the City's voter-authorized general obligation bond programs the
amount issued and outstanding, and the amount of remaining authorization for which bonds have not yet been issued. Series are grouped by program authorization in chronological order. The authorized and unissued column refers to total program authorization that can still be issued, and does not refer to any particular series. As of April 15, 2018, the City had authorized and unissued general obligation bond authority of approximately $1.12 billion.
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TABLE A-24
CITY AND COUNTY OF SAN FRANCISCO General Obligation Bonds
As of April 15, 2018
Description of Issue {Date of Authorization)
Seismic Safety Loan Program{ll/3/92)
Clean & Safe Neighborhood Parks {2/5/08)
San Francisco General Hospital and Trauma Center {11/4/08)
Earthquake Safety and Emergency Response Bond {6/8/10)
Road Repaving& Street Safety {11/8/11)
Clean & Safe Neighborhood Parks {11/6/12)
Earthquake Safety and Emergency Response Bond {6/3/14)
Transportation and Road lmprovement{ll/4/14)
Affordable Housing Bond {11/3/15)
Public Health and Safety Bond {6/7/16)
SUB TOTALS
General Obligation Refunding Bonds:
Series 2008-Rl issued 5/29/08
Series 2008-R2 issued 5/29/08
Series 2011-Rl issued 11/9/12
Series 2015-Rl issued 2/25/15
SUB TOTALS
TOTALS
Series Issued
2007A $30,315,450
2015A 24,000,000
20108 24,785,000
20100 35,645,000
20128 73,355,000
2016A 8,695,000
2009A 131,650,000
2010A 120,890,000
2010( 173,805,000
20120 251,100,000
2014A 209,955,000
2010E 79,520,000
2012A 183,330,000
2012E 38,265,000
20138 31,020,000
2014( 54,950,000
2016( 25,215,000
2012( 74,295,000
2013( 129,560,000
2016E 44,145,000
2013A 71,970,000
20168 43,220,000
2018A 76, 710,000
20140 100,670,000
20160 109,595,000
20158 67,005,000
20188 174,445,000
2016F 75,130,000
2017A 173,120,000
$2,636,360,450
232,075,000
39,320,000
339,475,000
293,910,000
904, 780,000
$3,541,140,450
Outstanding
$21,461,743
24,000,000
5,120,000
35,645,000
50,675,000
7,825,000
10,790,000
24,980,000
173,805,000
163,495,000
169,055,000
43,175,000
127,945,000
31,400,000
18,320,000
43,665,000
23,260,000
51,880,000
76,465,000
40,715,000
42,490,000
25,395,000
76,710,000
79,970,000
78,475,000
45,375,000
174,445,000
53,060,000
125,760,000
$1,845,356,743
6,675,000
5,680,000
202,220,000
261,095,000
475,670,000
$2,321,026,743
Section 9.106 of the City Charter limits issuance ofgeneral obligation bonds of the City to 3% of the assessed value of all
taxable real and personal property, located within the City and County.
Lease Payments and Other Long-Term Obligations
Authorized
' & Un issued
$260,684,550
3,100,000
189,735,000
258,550,000
234,870,000
176,880,000
$1,123,819,550
$1,123,819,550
The Charter requires that any lease-financing agreements with a nonprofit corporation or another public
agency must be approved by a majority vote of the City's electorate, except (i) leases approved prior to April 1, 1977, (ii) refunding lease financings expected to result in net savings, and (iii) certain lease financing for capital equipment. The Charter does not require voter approval of lease financing agreements with for-profit corporations or entities.
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Table A-25 sets forth the aggregate annual lease payment obligations supported by the City's General
Fund with respect to outstanding lease revenue bonds and certificates of participation as of April 15, 2018. The annual payment obligations reflected in Table A-25 reflect the fully accreted value of any
capital appreciation obligations as of the payment dates.
TABLE A-25
CITY AND COUNTY OF SAN FRANCISCO
Lease Revenue Bonds and Certificates of Participation
1 Excludes payments made to date in current fisca I year. 2
Tota Is reflect rounding to nearest do Ila r.
Annua I Payment
Obli~ation
$19,014,835
126,216,217
109,418,198
115,655,890
113,517,504
113,509,175
112,994,771
110,490,114
108,145,624
108,173,011
106,414,005
106,378,461
103,366,226
92,128,665
79,057,593
77,941,642
77,673,261
64,060,673
61,294,242
58,364,230
58,207,665
58,038,956
57,877,472 57,692,668
22,407,611
11,367,000
9,373,000
9,370,800
1,590,000
1,591,200 3
$2,151,330,709
3 For purposes of th is table, the interest rate on the Lease Revenue Bonds Series
2008-1, and 2008-2 (Moscone Center Expansion Project) is assumed to be 3 .25%.
These bonds are invariable rate mode.
Source: Office of Public Fina nee, City and County of San Francisco.
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The City electorate has approved several lease revenue bond propositions, some of which have authorized but unissued bonds. The following lease programs have remaining authorization:
In 1987, voters approved Proposition B, which authorizes the City to lease finance (without limitation as to maximum aggregate par amount) the construction of new parking facilities, including garages and surface lots, in eight of the City's neighborhoods. In July 2000, the City issued $8.2 million in lease revenue bonds to finance the construction of the North Beach Parking Garage, which was opened in February 2002. There is no current plan to issue any more bonds under Proposition B.
In 1990, voters approved Proposition C, which amended the Charter to authorize the City to leasepurchase equipment through a nonprofit corporation without additional voter approval but with certain restrictions. The City and County of San Francisco Finance Corporation (the "Corporation") was incorporated for that purpose. Proposition C provides that the outstanding aggregate principal amount of obligations with respect to lease financings may not exceed $20.0 million, with such amount increasing by five percent each fiscal year. As of April 15, 2018 the total authorized amount for such financings was $75.1 million. The total principal amount outstanding as of April 15, 2018 was $890 million.
In 1994, voters approved Proposition B, which authorized the issuance of up to $60.0 million in lease revenue bonds for the acquisition and construction of a combined dispatch center for the City's emergency 911 communication system and for the emergency information and communications equipment for the center. In 1997 and 1998, the Corporation issued $22.6 million and $23.3 million of Proposition B lease revenue bonds, respectively, leaving $14.0 million in remaining authorization. There is no current plan to issue additional series of bonds under Proposition B.
In June 1997, voters approved Proposition D, which authorized the issuance of up to $100.0 million in lease revenue bonds for the construction of a new football stadium at Candlestick Park, the previous home of the San Francisco 49ers football team. If issued, the $100.0 million of lease revenue bonds would be the City's contribution toward the total cost of the stadium project and the 49ers would be responsible for paying the remaining cost of the stadium construction project. There is no current plan to issue the Proposition D bonds.
On March 7, 2000, voters approved Proposition C, which extended a two and one half cent per $100.0 in assessed valuation property tax set-aside for the benefit of the Recreation and Park Department (the "Open Space Fund"). Proposition C also authorizes the issuance of lease revenue bonds or other forms of indebtedness payable from the Open Space Fund. The City issued approximately $27.0 million and $42.4 million of such Open Space Fund lease revenue bonds in October 2006 and October 2007, respectively.
In November 2007, voters approved Proposition D, which amended the Charter and renewed the Library Preservation Fund. Proposition D continues the two and one half cent per $100.0 in assessed valuation property tax set-aside and establishes a minimum level of City appropriations, moneys that are
maintained in the Library Preservation Fund. Proposition D also authorizes the issuance of revenue bonds or other evidences of indebtedness. The City issued the first series of lease revenue bonds in the amount of approximately $34.3 million in March 2009.
Commercial Paper Program
The Board authorized on March 17, 2009 and the Mayor approved on March 24, 2009 the establishment of a not-to-exceed $150.0 million Lease Revenue Commercial Paper Certificates of Participation Program, Series 1 and 1-T and Series 2 and 2-T (the "CP Program"). Commercial Paper Notes (the "CP
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Notes") are issued from time to time to pay approved project costs in connection with the acquisition, improvement, renovation and construction of real property and the acquisition of capital equipment and vehicles in anticipation of long-term or other take-out financing to be issued when market
conditions are favorable. Projects are eligible to access the CP Program once the Board and the Mayor have approved the project and the long-term, permanent financing for the project. The former Series 1
and 1-T and Series 2 and 2-T letters of credit issued in 2010 by J.P. Morgan Chase Bank, N.A. and U.S.
Bank National Association expired in June 2016. In May 2016, the City obtained renewal credit facilities securing the CP Notes issued by State Street Bank and Trust Company with a maximum principal amount
of $75 million and by U.S. Bank National Association with a maximum principal amount of $75 million. The renewal credit facilities will expire in May 2021.
The Board authorized on July 16, 2013 and the Mayor approved on July 25, 2013 an additional $100.0 million Lease Revenue Commercial Paper Certificates of Participation Program, Series 3 and 3-T and
Series 4 and 4-T that increases the total authorization of the CP Program to $250.0 million. The Series 3 and 3-T and 4 and 4-T are secured by a letter of credit issued by State Street Bank and Trust Company
expiring February 2019.
As of April 15, 2018, the outstanding principal amount of CP Notes is $25.2 million. The weighted average interest rate for outstanding CP Notes is approximately 1.67%.
Transbay Transit Center Interim Financing
The Board authorized on May 3, 2016 and the Mayor approved on May 13, 2016 the establishment of a not-to-exceed $260.0 million Lease Revenue Commercial Paper Certificates of Participation ("short-term certificates") to meet cash flow needs during the construction of the Transbay Transit Center. The short
term certificates are expected to be repaid in part from Transbay Transit Center CFD special taxes and tax increment. Long-term debt will be issued to retire the short-term certificates, and such long-term
debt is also expected to be repaid from such sources.
The short-term certificates consists of $160 million direct placement revolving certificates with Wells Fargo, expiring January 10, 2020 and $100 million direct placement revolving certificates with Bay Area Toll Authority expiring September 1, 2021.
As of April 15, 2018, the TJPA had drawn a total of $103,000,000 from the Wells Fargo financing facility, at a current interest rate of 2.34%.
Board Authorized and Unissued Long-Term Obligations
The Board of Supervisors authorized October 8, 2013 and the Mayor approved October 11, 2013 the
issuance of not to exceed $13.5 million of City and County of San Francisco Certificates of Participation (Treasure Island Improvement Project) to finance the cost of additions and improvements to the utility infrastructure at Treasure island.
The Board of Supervisors authorized on November 29, 2016 and the Mayor approved on December 1, 2016 the issuance of not to exceed $60.5 million of City and County of San Francisco Certificates of
Participation (Animal Care and Control Renovation Project) to finance the costs acquisition, construction, and improvement of an animal care and control facility. The City anticipates issuing the certificates in the summer of 2019.
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The Board of Supervisors authorized on June 6, 2017 and the Mayor approved on June 15, 2017 the issuance of not to exceed $321.8 million of City and County of San Francisco Certificates of Participation (1500 Mission Project) to finance a portion of the development costs, including construction and improvement, and related FF&E (furniture, fixture, or other equipment), technology, and moving costs for the 1500 Mission Street office building. The City anticipates issuing the certificates in the Fall of 2019.
Overlapping Debt
Table A-26 shows bonded debt and long-term obligations as of April 15, 2018 sold in the public capital markets by the City and those public agencies whose boundaries overlap the boundaries of the City in whole or in part. Long-term obligations of non-City agencies generally are not payable from revenues of the City. In many cases, long-term obligations issued by a public agency are payable only from the
General Fund or other revenues of such public agency. In the table, lease obligations of the City which support indebtedness incurred by others are included. As noted below, the Charter limits the City's outstanding general obligation bond debt to 3% of the total assessed valuation of all taxable real and personal property within the City.
[Remainder of Page Intentionally Left Blank}
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TABLE A-26
CITY AND COUNTY OF SAN FRANCISCO
Statement of Direct and Overlapping Debt and Long-Term Obligations
As of April 15, 2018
2017-18 Assessed Va I uation {net of non-reimbursable & homeowner exemptions): $234,074,596,933
DIRECT GENERAL OBLIGATION BOND DEBT General City Purposes Carried on the Tax Roll
GROSS DIRECT DEBT
DIRECT LEASE PAYMENT AND LONG-TERM OBLIGATIONS
San Francisco Fina nee Corporation, Equipment LRBs Seri es 2012A, and 2013A
San Francisco Fina nee Corporation Emergency Communication Refunding Seri es, 2010-Rl
San Francisco Fina nee Corporation Moscone Expansion Center, Seri es, 2008-1, 2008-2
San Francisco Finance Corporation LRBs Open Space Fund {Various Park Projects) Series 2006, 2007
San Francisco Finance Corporation LRBs Library Preservation Fund Series, 2009A
San Francisco COPs, Seri es 2009A Multiple Ca pita I Improvement Projects {Laguna Honda Hos pita I J
San Francisco COPs, Seri es 20098 Multiple Ca pita I Improvement Projects {Street Improvement Project)
San Francisco COPs, Seri es 2009C Office Project {525 Golden Gate Avenue) Tax Exempt
San Francisco COPs, Seri es 2009D Office Project {525 Golden Gate Avenue) Taxable BABs
San Francisco Refunding Certificates of Participation, Seri es 2010A
San Francisco COPs, Refunding Series 2011AB {Moscone)
San Francisco COPs, Seri es 2012A Multiple Ca pita I Improvement Projects {Street Improvement Project)
San Francisco COPs, Series 2013BC Port Facilities
San Francisco COPs, Series 2014-Rl {Courthouse Project), 2014-R2 {Juvenile Hall Project)
San Francisco COPs, Seri es 2015AB War Memorial Veterans Bui I ding Seismic Upgrade and Improvements
San Francisco Refunding COPs, Seri es 2015-Rl {City Office Bui I dings-Mui ti pl e Properties Project)
San Francisco COPs, Seri es 2016A War Memoria I Veterans Bui I ding Seismic Upgrade and Improvements
San Francisco COPs Seri es 2017 A {Hope SF)
San Francisco COPs Seri es 20178 {Moscone Convention Center Expansion)
LONG-TERM OBLIGATIONS
GROSS DIRECT DEBT & LONG-TERM OBLIGATIONS
OVERLAPPING DEBT & LONG-TERM OBLIGATIONS
Bays hare Hester Assessment District
San Francisco Bay Area Rapid Transit District {29%) Sa I es Tax Revenue Bonds
San Francisco Bay Area Rapid Transit District {33%) Genera I Obi i gati on Bonds
San Francisco Community Col I ege District Genera I Obligation Bonds {2001, 2005)
San Francisco Redevelopment Agency Hotel Tax Revenue Bonds {2011)
San Francisco Redevelopment Agency Obi i gati ans {Property Tax Increment)
San Francisco Redevelopment Agency Obi igati ans {Specia I Tax Bonds)
Association of Bay Area Governments Obligations {Special Tax Bonds)
Special Tax District No. 2009-1 lmprovementArea l, 2 SF Sustainable Financing
San Francisco Unified School District Genera I Obligation Bonds {2003, 2006, 2011, 2015R, 2016, 2017)
San Francisco Community Facilities District No. 2014-1 {Trans bay Trans it Center) Seri es 2017 A, 20178
TOTAL OVERLAPPING DEBT & LONG-TERM OBLIGATIONS
GROSS COMBINED TOTAL OBLIGATIONS
Ratios to Assessed Valuation:
Gross Direct Debt {Genera I Obligation Bonds)
Gross Direct Debt & Long-Term Obli gati ans
Gross Combined Total Obligations
Actual Ratio
0.99%
1.59%
2.88%
Excludes revenue and mortgage revenue bonds and non-bonded third party financing lease obligations. Also excludes tax al location bonds
sold in August, 2009.
Section 9 .106 of the City Charter I imits issua nee of general obligation bonds of the City to 3 % of the assessed value of all taxable re al and
personal property, located within the City and County.
Source: Office of Public Finance, City and County of San Francisco.
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$2,321,026,743
$2,321,026,743
$890,000
8,545,000
96,020,000
43,940,000 27,030,000
119,130,000
30,075,000
19,835,000
129,550,000
100,575,000
25,515,000
35,460,000
31,170,000
35,150,000
125,295,000
118,100,000
14,305,000
27,575,000
402,550,000
$1,390,710,000
$3,711,736,743
$510,000
155,152,854
278,226,665
247,520,000
30,995,000
920,054,677
151,301,115
18,140,000
2,906,624
1,021,010,000
207,500,000
$3,033,316,935
$6,745,053,678
Charter Req.
< 3.00%
n/a n/a
On November 4, 2003, voters approved Proposition A. Proposition A of 2003 authorized the SFUSD to issue up to $295.0 million of general obligation bonds to repair and rehabilitate school facilities, and various other improvements. The SFUSD issued $58.0 million of such authorization in October 2004, $130.0 million in October 2005, and $92.0 million in October 2006, leaving $15.0 million authorized but unissued. In March 2012, the SFUSD issued $116.1 million in refunding general obligation bonds that refunded $137.4 million in general obligation bonds authorized under Proposition A of 2003.
On November 2, 2004, voters approved Proposition AA. Proposition AA authorized the San Francisco BART to issue general obligation bonds in one or more series over time in an aggregate principal amount not to exceed $980.0 million to strengthen tunnels, bridges, overhead tracks and the underwater Transbay Tube for BART facilities in Alameda and Contra Costa counties and the City. Of the $980.0 million, the portion payable from the levy of ad valorem taxes on property within the City is approximately 29.0% or $282.0 million. Of such authorization, BART issued $100.0 million in May 2005 and $400.0 million in July 2007, of which the allocable City portion is approximately $29.0 million and $116.0 million, respectively.
On November 8, 2016, voters approved Measure RR. Measure RR authorized BART to issue general obligation bonds in one or more series over time in an aggregate principal amount not to exceed $3.5 billion to keep BART safe; prevent accidents I breakdowns I delays; relieve overcrowding; reduce traffic congestion I pollution; improve earthquake safety and access for seniors I disabled by replacing and upgrading 90 miles of severely worn tracks; tunnels damaged by water intrusion; 44-year-old train control systems; and other deteriorating infrastructure. Of the $3.5 billion, the portion payable from the levy of ad valorem taxes on property within the City is approximately 29.0% or $1.015 billion. Of such authorization, BART issued $300.0 million in May 2017, of which the allocable City portion is approximately $87.0 million.
On November 7, 2006, voters approved Proposition A. Proposition A of 2006 authorized the SFUSD to issue an aggregate principal amount not to exceed $450.0 million of general obligation bonds to modernize and repair up to 64 additional school facilities and various other improvements. The SFUSD issued the first series in the aggregate principal amount of $100 million under the Proposition A authorization in February 2007. The SFUSD issued the second series in the aggregate principal amount of $150.0 million under the Proposition A authorization in January 2009. The SFUSD issued the third series in the aggregate principal amount of $185.0 million under the Proposition A authorization in May 2010. On November 8, 2011, voters approved Proposition A. Proposition A of 2011 authorized the SFUSD to issue an aggregate principal amount not to exceed $531.0 million of general obligation bonds to repair and rehabilitate school facilities to current accessibility, health, safety and instructional standards, and where applicable, replace worn-out plumbing, electrical and other major building systems, replace aging heating, ventilation and air handling systems, renovate outdated classrooms and training facilities, construct facilities to replace aging modular classrooms. The SFUSD issued the first series in the aggregate principal amount of $115.0 million under the Proposition A of 2011 authorization in March 2012.
On November 8, 2016, voters approved Proposition A. Proposition A of 2016 authorized the SFUSD to issue an aggregate principal amount not to exceed $744.25 million of general obligation bonds to repair and rehabilitate San Francisco Unified School District facilities to current accessibility, health, safety, seismic and instructional standards, replace worn-out plumbing, electrical, HVAC, and major building systems, renovate outdated classrooms and training facilities, construct school facilities and replace aging modular classrooms, improve information technology systems and food service preparation
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systems. The SFUSD issued the first series in the aggregate principal amount of $180.0 million under the Proposition A of 2016 authorization in March 2017.
MAJOR ECONOMIC DEVELOPMENT PROJECTS
Numerous development and construction projects are in progress throughout the City at any given time. This section describes several of the most significant privately owned and managed real estate developments currently under way in the City in which there is City participation, generally in the form of a public/private partnership. The information in this section has been prepared by the City based on City-approved plans as well as unofficial plans and representations of the developer in each case, and includes forward-looking statements. These forward-looking statements consist of expressions of opinion, estimates, predictions, projections, plans and the like; such forward-looking statements in this section are those of the developers and not of the City. The City makes no prediction, representation or assurance that the plans and projects described will actually be accomplished, or the time frame in which the developments will be completed, or as to the financial impact on City real estate taxes, developer fees, other tax and fee income, employment, retail or real estate activity, or other consequences that might be expected or projected to result from the successful completion of each development project. Completion of development in each case may depend on the local economy, the real estate market, the financial health of the developer and others involved in the project, specific features of each development and its attractiveness to buyers, tenants and others, as well as the financial health of such buyers, tenants, and others. Completion and success of each development will also likely depend on other factors unknown to the City.
Hunters Point Shipyard (Phase 1 and 2) and Candlestick Point
The Hunters Point Shipyard Phase 1 and 2 and Candlestick Point project area will deliver approximately 12,100 new homes, approximately 32 percent of which will be below market rate and will include the rebuilding of the Alice Griffith public housing development consistent with the City's HOPE SF program, up to 3 million square feet of research and development space, and more than 350 acres of new parks in the southeast portion of San Francisco (the "Project"). In total, the Project will generate over $6 billion of new economic activity to the City, more than 15,000 permanent jobs, hundreds of new construction jobs each year, new community facilities, new transit infrastructure, and provide approximately $90 million in community benefits. The Project's full build out will occur over 20 to 30 years. In the next five
years over 1,000 units of housing and 26 acres of parks will be completed in the first phase of the Shipyard.
The first phase of development has begun at the Hunters Point Shipyard site with 375 completed units and 198 units currently under construction. An additional 478 units are expected to begin construction in 2018. On Candlestick Point, 306 housing units are now complete which includes a mix of public housing replacement and new, affordable units, with an additional 31 units in construction. In 2016, horizontal infrastructure construction commenced to support additional residential and commercial development; designs for approximately 1260 housing units, 220 hotel rooms, and a 62,000 sf film and arts center are currently underway.
Treasure Island
Former Naval Station Treasure Island is located in the San Francisco Bay and connected to the City by the San Francisco-Oakland Bay Bridge. The former base, which ceased operations in 1997, consists of approximately 405 acres on Treasure Island and 90 acres on adjoining Verba Buena Island. Development
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plans for the islands include up to 8,000 new homes, 25% of which will be offered at below-market rates; up to 500 hotel rooms; a 400 slip marina; restaurants; retail and entertainment venues; and a world-class 300-acre parks and open space system. The compact mixed-use transit-oriented
development is centered around a new ferry terminal connecting the island to downtown San Francisco and is designed to prioritize walking, biking and public transit. The development plans include green building standards and best practices in low-impact development.
The first major land transfer from the Navy to the Treasure Island Development Authority ("TIDA")
occurred in May 2015 and included the northern half of Verba Buena Island and more than half of the area of Treasure Island. The developer, Treasure Island Community Development ("TICD"), received its first land transfer in February 2016, and demolition and initial infrastructure improvements under contract are currently underway. The first phase of development will include extensive horizontal infrastructure improvements (utilities, roadway improvements, site preparation, etc.) as well as the initial vertical developments. The complete build-out of the project is anticipated to occur over 15 to 20
years.
Mission Bay Blocks 29-32-Warriors Multipurpose Recreation and Entertainment Venue
The Golden State Warriors, a National Basketball Association team, is developing a multipurpose
recreation and entertainment venue and associated development in Mission Bay. The site is bordered by Third Street to the West, Terry Francois Boulevard to the East, 16'h Street to the South and South Street to the North. The Warriors project includes a state-of-the-art multi-purpose recreation and
entertainment venue for Warriors' home games, concerts and family shows. The site will also have restaurants, retail, office space, bike valet, public plazas and a limited amount of parking. Environmental review has been completed for the site, and was upheld in a November 2016 decision.
The project began construction in January 2017 and the event center is scheduled to open in time for the 2019-2020 basketball season.
Transbay Transit Center
The Transbay Project Redevelopment Project Area was adopted in 2005 with the purpose of redeveloping 10 acres of property owned by the State in order to generate funding for the new Salesforce Transit Center. In 2012 the Transit Center District Plan, the guiding document for the area
surrounding the transit center, was approved by the Planning Commission and by the Board of Supervisors. The Transit Center District Plan includes additional funding sources for the Salesforce Transit Center. The Transbay Program will replace the former Transbay Terminal at First and Mission
Streets with a modern transit hub and extend the Caltrain commuter rail line underground 1.3 miles into the Financial District. The Salesforce Transit Center broke ground on August 11, 2010, and is scheduled to commence operations in late Summer 2018. Demolition of existing structures on the site was
completed in August 2011.
The Pelli Clarke Pelli Architects-designed transit center will serve more than 100,000 people per day
through 11 transportation systems, including future California High Speed Rail, which will be designed to connect San Francisco to Los Angeles in less than 2-1/2 hours. The center is designed to embrace the goals of green architecture and sustainability. The heart of the Salesforce Transit Center, "Salesforce Park," a 5.4-acre public park atop the facility, that will serve as a living green roof for the transit
facility. The center will have a LEED rating of at least Silver. The Transbay Program is funded by various public funding partners, including the federal government, the State, the Metropolitan Transportation
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Commission, the San Francisco County and San Mateo County Transportation Authorities, AC Transit and the Successor Agency among others.
The 10 acres of property formerly owned by the State surrounding the Transbay Transit Center is being redeveloped with plans for 3,300 new homes, 1,300 to be affordable below-market rate homes, over 2.4 million square feet of new office space, over 9 acres of new parks and open space, and a new retail boulevard on Folsom Street. Of the parcels over which OCII has jurisdiction, three parcels are fully complete and seven parcels are in various stages of development and pre-development. Four of those
parcels are currently under construction and will provide over 1,400 housing units and 760,000 of commercial space within the next 2 years. The sale of various sites has generated more than $600 million in funding for construction of the Transbay Transit Center.
Mission Bay
The development plans for Mission Bay include a new University of California-San Francisco ("UCSF") research campus containing 3.15 million square feet of building space on 46 acres of land, of which 43 acres were donated by the Mission Bay Master Developer and the City; UCSF's 550-bed hospital; 3.4 million square feet of biotech, 'cleantech' and health care office space; 6,500 housing units, with 1,850 (29%) affordable to moderate-, low-, and very low-income households; 425,000 square feet of retail
space; a 250-room hotel with up to 25,000 square feet of retail entertainment uses; 49 acres of public open space, including parks along Mission Creek and San Francisco Bay and eight acres of open space within the UCSF campus; a new SOD-student public school; and a new fire and police station and police headquarters. Mission Bay is approximately 70% complete.
Over 5,646 units have been completed with an additional 262 units under construction, along with several new parks. In the past 6 months, a 119-unit affordable housing project and a 250 room have broken ground.
Seawall Lot (SWL) 337 and Pier 48 (Mission Rock)
Mission Rock is a mixed-use development at Seawall Lot 337 and Pier 48, Port-owned property comprising approximately 28 acres. The development plan for Mission Rock includes: approximately 8 acres of public parks and open spaces, including a 5-acre regional waterfront park; approximately 1,500 new rental housing units, 40 percent of which will be affordable to low- and moderate-income households; 1.0 to 1.4 million square feet of commercial space; 250,000 square feet of restaurant and retail space, approximately 3,000 parking spaces within a dedicated parking structure which will serve patrons of AT&T Park as well as Mission Rock occupants and visitors; and the rehabilitation and reuse of historic Pier 48.
On November 3, 2015, 74% of San Francisco voters approved the Mission Rock Affordable Housing, Parks, Jobs and Historic Preservation Initiative (Proposition D), which authorized increased height limits on the Project Site. Environmental review for the project was successfully completed in October 2017. The Port Commission approved the project's CEQA findings and transaction documents in January 2018 and the Mayor signed legislation approving the project and all associated transaction documents in March 2018. On In April 2018, State Lands Commission made determinations required under California statutes regarding the Mission Rock development. Site preparation and ground improvement work is planned for fall 2018 and full project buildout is anticipated to occur in four phases over 15 to 30 years.
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Pier 70
Plans for Pier 70 call for substantial development, including major parks and historic building rehabilitation, on this 69-acre site to achieve a number of goals, including preservation and adaptive reuse of historic structures; retention of the ship repair operations; provision of new open space; reactivation and economic development on the site; and needed infrastructure and site remediation. The Port, which controls Pier 70, OEWD, in its capacity as lead City negotiator, and the City's development partner, Forest City, completed project approvals in February 2018 for new mixed-use neighborhood on a 28-acre portion of Pier 70 known as the Waterfront Site. Approvals included: passage of Proposition F by San Francisco voters in November 2014 - the Union Iron Works Historic District Housing, Waterfront Parks, Jobs, and Preservation Initiative - which allowed for an increase in height limits on the Waterfront Site to up to 90 feet; Mayoral signature on legislation approving the project in late 2017; and State Lands Commission action on the project in February 2018.
The Special Use District for the neighborhood includes 9 acres of parks, 1,600 to 3,000 residential units and 30% affordable housing, rehabilitation and reuse of three historic buildings in the Union Iron Works Historic District, almost 500,000 square feet of retail, arts, and light industrial space, 1.1 to 1.7 million square feet of commercial office. The project is anticipated to be developed in 3 phases over 15 to 25 years. The Forest City team has submitted its phase 1 application and anticipates breaking ground on Phase 1 in the first half of 2018.
Moscone Convention Center Expansion Project
The Moscone Center Expansion Project will add approximately 300,000 square feet and repurpose an additional 120,000 square feet to the portion of the existing Moscone Center located on Howard Street between 3rd and 4th Streets in the Verba Buena Gardens neighborhood of San Francisco. Nearly 140,000 square feet of this additional space would be created by excavating and expanding the existing below-grade exhibition halls that connect the Moscone North and South buildings under Howard Street,
with the remaining consisting of new and repurposed lobby area, new multi-purpose/meeting room area, and new and repurposed building support area.
In addition to adding new rentable square footage, the project architects propose an iconic sense of arrival that enhances Moscone's civic presence on Howard Street and reconnects it to the surrounding neighborhood through the creation of reintroduced lost mid-block passageways. As such, the project proposes a new mid-block pedestrian entrance from Third Street and a replacement pedestrian bridge connecting Verba Buena Gardens with the cultural facilities and children's playground to the south. An
additional enclosed pedestrian bridge would provide enhanced circulation for Moscone convention attendees and reduce on-street congestion.
A May 2012 analysis by Jones Lang Lasalle Hotels estimated that the City would forego up to $2 billion in revenue over the next decade if Moscone were not expanded. The project allows the City to recover approximately $734 million of this future revenue and create 3,480 local jobs through a phased construction schedule that keeps Moscone in continuous revenue generating operation.
The proposed project is a joint partnership between the City and the hotel industry, acting through the Tourist Improvement District Management Corporation, with the City paying approximately one-third of all expansion costs and the hotel community paying approximately two-thirds. The Board of Supervisors unanimously approved the creation of the Moscone Expansion District and the issuance of $507 million in Certificates of Participation on February 5, 2013 and the Planning Commission
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unanimously approved the project on August 15, 2014. On July 6, 2017, the City issued $412 million in Certificates of Participation for the Moscone Convention Center Expansion Project, and there are no plans to issue any subsequent certificates for the expansion project. Project development began in December 2012, with major construction starting in November 2014. The project is expected to reach completion by the end of 2018.
CONSTITUTIONAL AND STATUTORY LIMITATIONS ON TAXES AND EXPENDITURES
Several constitutional and statutory limitations on taxes, revenues and expenditures exist under State law which limit the ability of the City to impose and increase taxes and other revenue sources and to spend such revenues, and which, under certain circumstances, would permit existing revenue sources of the City to be reduced by vote of the City electorate. These constitutional and statutory limitations, and future limitations, if enacted, could potentially have an adverse impact on the City's general finances and its ability to raise revenue, or maintain existing revenue sources, in the future. However, ad valorem property taxes required to be levied to pay debt service on general obligation bonds was authorized and approved in accordance with all applicable constitutional limitations. A summary of the currently effective limitations is set forth below.
Article XIIIA of the California Constitution
Article XIIIA of the California Constitution, known as "Proposition 13," was approved by the California voters in June of 1978. It limits the amount of ad valorem tax on real property to 1% of "full cash value," as determined by the county assessor. Article XIIIA defines "full cash value" to mean the county assessor's valuation of real property as shown on the 1975-76 tax bill under "full cash value," or thereafter, the appraised value of real property when "purchased, newly constructed or a change in ownership has occurred" (as such terms are used in Article XIIIA) after the 1975 assessment. Furthermore, all real property valuation may be increased or decreased to reflect the inflation rate, as shown by the CPI or comparable data, in an amount not to exceed 2% per year, or may be reduced in the event of declining property values caused by damage, destruction or other factors. Article XIIIA provides that the 1% limitation does not apply to ad valorem taxes to pay interest or redemption charges on 1) indebtedness approved by the voters prior to July 1, 1978, 2) any bonded indebtedness for the acquisition or improvement of real property approved on or after July 1, 1978, by two-thirds of the votes cast by the voters voting on the proposition, or 3) bonded indebtedness incurred by a school district or community college district for the construction, reconstruction, rehabilitation or replacement of school facilities or the acquisition or lease of real property for school facilities, approved by 55% of the voters of the district voting on the proposition, but only if certain accountability measures are included in the proposition.
The California Revenue and Taxation Code permits county assessors who have reduced the assessed valuation of a property as a result of natural disasters, economic downturns or other factors, to subsequently "recapture" such value (up to the pre-decline value of the property) at an annual rate higher or lower than 2%, depending on the assessor's measure of the restoration of value of the damaged property. The California courts have upheld the constitutionality of this procedure.
Since its adoption, Article XIIIA has been amended a number of times. These amendments have created a number of exceptions to the requirement that property be assessed when purchased, newly constructed or a change in ownership has occurred. These exceptions include certain transfers of real property between family members, certain purchases of replacement dwellings for persons over age 55 and by property owners whose original property has been destroyed in a declared disaster, and certain improvements to accommodate persons with disabilities and for seismic upgrades to property. These
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amendments have resulted in marginal reductions in the property tax revenues of the City. Both the California State Supreme Court and the United States Supreme Court have upheld the validity of
Article XI 11 .
Article XIIIB of the California Constitution
Article XIIIB was enacted by California voters as an initiative constitutional amendment in November 1979. Article XIIIB limits the annual appropriations from the proceeds of taxes of the State
and any city, county, school district, authority or other political subdivision of the State to the level of appropriations for the prior fiscal year, as adjusted for changes in the cost of living, population, and services rendered by the governmental entity. However, no limit is imposed on the appropriation of
local revenues and taxes to pay debt service on bonds existing or authorized by January 1, 1979, or subsequently authorized by the voters. Article XIIIB includes a requirement that if an entity's revenues in
any year exceed the amount permitted to be spent, the excess would have to be returned by revising tax or fee schedules over the next two years.
Articles XIIIC and XIIID of the California Constitution
Proposition 218, an initiative constitutional amendment, approved by the voters of the State in 1996, added Articles XII C and XIIID to the State Constitution, which affect the ability of local governments, including charter cities such as the City, to levy and collect both existing and future taxes, assessments, fees and charges. Proposition 218 does not affect the levy and collection of taxes for voter-approved
debt. However, Proposition 218 affects the City's finances in other ways. Article XIIIC requires that all new local taxes be submitted to the electorate for approval before such taxes become effective. Taxes for general governmental purposes of the City require a majority vote and taxes for specific purposes require a two-thirds vote. Under Proposition 218, the City can only continue to collect taxes that were
imposed after January 1, 1995 if voters subsequently approved such taxes by November 6, 1998. All of the City's local taxes subject to such approval have been either reauthorized in accordance with
Proposition 218 or discontinued. The voter approval requirements of Article XIII C reduce the City's
flexibility to manage fiscal problems through new, extended or increased taxes. No assurance can be given that the City will be able to raise taxes in the future to meet increased expenditure requirements.
In addition, Article XIIIC addresses the initiative power in matters of local taxes, assessments, fees and charges. Pursuant to Article XIIIC, the voters of the City could, by initiative, repeal, reduce or limit any
existing or future local tax, assessment, fee or charge, subject to certain limitations imposed by the courts and additional limitations with respect to taxes levied to repay bonds. The City raises a
substantial portion of its revenues from various local taxes which are not levied to repay bonded indebtedness and which could be reduced by initiative under Article XIIIC. No assurance can be given that the voters of the City will disapprove initiatives that repeal, reduce or prohibit the imposition or
increase of local taxes, assessments, fees or charges. See "OTHER CITY TAX REVENUES" herein, for a discussion of other City taxes that could be affected by Proposition 218.
With respect to the City's general obligation bonds (City bonds secured by ad valorem property taxes), the State Constitution and the laws of the State impose a duty on the Board of Supervisors to levy a property tax sufficient to pay debt service coming due in each year. The initiative power cannot be used
to reduce or repeal the authority and obligation to levy such taxes which are pledged as security for payment of the City's general obligation bonds or to otherwise interfere with performance of the duty
of the City with respect to such taxes which are pledged as security for payment of those bonds.
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Article XIIID contains several provisions making it generally more difficult for local agencies, such as the City, to levy and maintain "assessments" (as defined in Article XIIID) for local services and programs. The
City has created a number of special assessment districts both for neighborhood business improvement purposes and community benefit purposes, and has caused limited obligation bonds to be issued in 1996 to finance construction of a new public right of way. The City cannot predict the future impact of Proposition 218 on the finances of the City, and no assurance can be given that Proposition 218 will not have a material adverse impact on the City's revenues.
Statutory Limitations
On November 4, 1986, California voters adopted Proposition 62, an initiative statute that, among other things, requires (i) that any new or increased general purpose tax be approved by a two-thirds vote of the local governmental entity's legislative body and by a majority vote of the voters, and (ii) that any new or increased special purpose tax be approved by a two-thirds vote of the voters.
In Santa Clara County Local Transportation Authority v. Guardino, 11 Cal. 4th 220 (1995) (the "Santa Clara decision"), the California Supreme Court upheld a Court of Appeal decision invalidating a one-half cent countywide sales tax for transportation purposes levied by a local transportation authority. The California Supreme Court based its decision on the failure of the authority to obtain a two-thirds vote for the levy of a "special tax" as required by Proposition 62. The Santa Clara decision did not address the question of whether it should be applied retroactively. In McBrearty v. City of Brawley, 59 Cal. App. 4th 1441 ( 1997), the Court of Appeal, Fourth District, concluded that the Santa Clara decision is to be applied retroactively to require voter approval of taxes enacted after the adoption of Proposition 62 but before the Santa Clara decision.
The Santa Clara decision also did not decide, and the California Supreme Court has not otherwise decided, whether Proposition 62 applies to charter cities. The City is a charter city. Cases decided by the California Courts of Appeal have held that the voter approval requirements of Proposition 62 do not apply to certain taxes imposed by charter cities. See Fielder v. City of Los Angeles, 14 Cal. App. 4th 137 (1993) and Fisher v. County of Alameda, 20 Cal. App. 4th 120 (1993).
Proposition 62, as an initiative statute, does not have the same level of authority as a constitutional initiative, but is analogous to legislation adopted by the State Legislature, except that it may be amended only by a vote of the State's electorate. Since it is a statute, it is subordinate to the authority of charter cities to impose taxes derived from the State Constitution. Proposition 218 (discussed above), however, incorporates the voter approval requirements initially imposed by Proposition 62 into the State Constitution.
Even if a court were to conclude that Proposition 62 applies to charter cities, the City's exposure under Proposition 62 may not be significant. The effective date of Proposition 62 was November 1986. Proposition 62 contains provisions that apply to taxes imposed on or after August 1, 1985. Since August 1, 1985, the City has collected taxes on businesses, hotel occupancy, utility use, parking, property transfer, stadium admissions and vehicle rentals. See "OTHER CITY TAX REVENUES" herein. Only the hotel and stadium admissions taxes have been increased since that date. The increases in these taxes were ratified by the voters on November 3, 1998 pursuant to the requirements of Proposition 218. With the exception of the vehicle rental tax, the City continues to collect all of the taxes listed above. Since these remaining taxes were adopted prior to August 1, 1985, and have not been increased, these taxes would not be subject to Proposition 62 even if Proposition 62 applied to a charter city.
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Proposition lA
Proposition lA, a constitutional amendment proposed by the State Legislature and approved by the voters in November 2004, provides that the State may not reduce any local sales tax rate, limit existing local government authority to levy a sales tax rate, or change the allocation of local sales tax revenues, subject to certain exceptions. As set forth under the laws in effect as of November 3, 2004, Proposition lA generally prohibits the State from shifting any share of property tax revenues allocated to local governments for any fiscal year to schools or community colleges. Any change in the allocation of property tax revenues among local governments within a county must be approved by two-thirds of both houses of the Legislature. Proposition lA provides, however, that beginning in fiscal year 2008-09, the State may shift to schools and community colleges up to 8% of local government property tax revenues, which amount must be repaid, with interest, within three years, if the Governor proclaims that the shift is needed due to a severe State financial hardship, the shift is approved by two-thirds of
both houses and certain other conditions are met. The State may also approve voluntary exchanges of local sales tax and property tax revenues among local governments within a county.
Proposition lA also provides that if the State reduces the annual vehicle license fee rate below 0.65% of vehicle value, the State must provide local governments with equal replacement revenues. Further, Proposition lA requires the State to suspend State mandates affecting cities, counties and special districts, excepting mandates relating to employee rights, schools or community colleges, in any year that the State does not fully reimburse local governments for their costs to comply with such mandates.
Proposition lA may result in increased and more stable City revenues. The magnitude of such increase and stability is unknown and would depend on future actions by the State. However, Proposition lA could also result in decreased resources being available for State programs. This reduction, in turn, could affect actions taken by the State to resolve budget difficulties. Such actions could include increasing State taxes, decreasing aid to cities and spending on other State programs, or other actions, some of which could be adverse to the City.
Proposition 22
Proposition 22 ("Proposition 22") which was approved by California voters in November 2010, prohibits the State, even during a period of severe fiscal hardship, from delaying the distribution of tax revenues for transportation, redevelopment, or local government projects and services and prohibits fuel tax revenues from being loaned for cash-flow or budget balancing purposes to the State General Fund or any other State fund. In addition, Proposition 22 generally eliminates the State's authority to temporarily shift property taxes from cities, counties, and special districts to schools, temporarily increase a school and community college district's share of property tax revenues, prohibits the State from borrowing or redirecting redevelopment property tax revenues or requiring increased pass
through payments thereof, and prohibits the State from reallocating vehicle license fee revenues to pay for State-imposed mandates. In addition, Proposition 22 requires a two-thirds vote of each house of the State Legislature and a public hearing process to be conducted in order to change the amount of fuel excise tax revenues shared with cities and counties. Proposition 22 prohibits the State from enacting new laws that require redevelopment agencies to shift funds to schools or other agencies (but see "San Francisco Redevelopment Agency Dissolution" above). While Proposition 22 will not change overall
State and local government costs or revenues by the express terms thereof, it will cause the State to adopt alternative actions to address its fiscal and policy objectives.
Due to the prohibition with respect to the State's ability to take, reallocate, and borrow money raised by local governments for local purposes, Proposition 22 supersedes certain provisions of Proposition lA
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(2004). However, borrowings and reallocations from local governments during 2009 are not subject to Proposition 22 prohibitions. In addition, Proposition 22 supersedes Proposition lA of 2006. Accordingly, the State is prohibited from borrowing sales taxes or excise taxes on motor vehicle fuels or changing the allocations of those taxes among local governments except pursuant to specified procedures involving public notices and hearings.
Proposition 26
On November 2, 2010, the voters approved Proposition 26 ("Proposition 26"), revising certain provisions of Articles XIII and XIII of the California Constitution. Proposition 26 re-categorizes many State and local fees as taxes, requires local governments to obtain two-thirds voter approval for taxes levied by local governments, and requires the State to obtain the approval of two-thirds of both houses of the State Legislature to approve State laws that increase taxes. Furthermore, pursuant to Proposition 26, any increase in a fee beyond the amount needed to provide the specific service or benefit is deemed to be a tax and the approval thereof will require a two-thirds vote. In addition, for State-imposed charges, any tax or fee adopted after January 1, 2010 with a majority vote which would have required a two-thirds
vote if Proposition 26 were effective at the time of such adoption is repealed as of November 2011 absent the re-adoption by the requisite two-thirds vote.
Proposition 26 amends Article XIII of the State Constitution to state that a "tax" means a levy, charge or exaction of any kind imposed by a local government, except (1) a charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege; (2) a charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product; (3) a charge imposed for the reasonable regulatory costs to a local government for issuing licenses and permits, performing investigations, inspections and audits, enforcing agricultural marketing orders, and the administrative enforcement and adjudication thereof; (4) a charge imposed for entrance to or use of local government property or the purchase rental or lease of local government property; (5) a fine, penalty, or other monetary charge imposed by the judicial branch of government or a local government as a result of a violation of law, including late payment fees, fees imposed under administrative citation ordinances, parking violations, etc.; (6) a charge imposed as a condition of property development; or (7) assessments and property related fees imposed in accordance with the provisions of Proposition 218. Fees, charges and payments that are made pursuant to a voluntary contract that are not "imposed by a local government" are not considered taxes and are not covered by Proposition 26.
Proposition 26 applies to any levy, charge or exaction imposed, increased, or extended by local government on or after November 3, 2010. Accordingly, fees adopted prior to that date are not subject to the measure until they are increased or extended or if it is determined that an exemption applies.
If the local government specifies how the funds from a proposed local tax are to be used, the approval will be subject to a two-thirds voter requirement. If the local government does not specify how the funds from a proposed local tax are to be used, the approval will be subject to a fifty percent voter requirement. Proposed local government fees that are not subject to Proposition 26 are subject to the approval of a majority of the governing body. In general, proposed property charges will be subject to a majority vote of approval by the governing body although certain proposed property charges will also require approval by a majority of property owners.
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Future Initiatives and Changes in Law
The laws and Constitutional provisions described above were each adopted as measures that qualified for the ballot pursuant to the State's initiative process. From time to time other initiative measures
could be adopted, further affecting revenues of the City or the City's ability to expend revenues. The
nature and impact of these measures cannot be anticipated by the City.
On April 25, 2013, the California Supreme Court in McWilliams v. City of Long Beach (April 25, 2013, No.
5202037), held that the claims provisions of the Government Claims Act (Government Code Section 900 et. seq.) govern local tax and fee refund actions (absent another State statue governing the issue), and that local ordinances were without effect. The effect of the McWilliams case is that local governments
could face class actions over disputes involving taxes and fees. Such cases could expose local governments to significant refund claims in the future. The City cannot predict whether any such class
claims will be filed against it in the future, the outcome of any such claim or its impact on the City.
LITIGATION AND RISK MANAGEMENT
Pending Litigation
There are a number of lawsuits and claims routinely pending against the City, including those summarized in Note 18 to the City's CAFR as of June 30, 2017, attached as Appendix B to this Official Statement. Included among these are a number of actions which if successful would be payable from
the City's General Fund. In the opinion of the City Attorney, such suits and claims presently pending will not materially impair the ability of the City to pay debt service on the Certificates, its General Fund lease or other debt obligations, nor materially impair the City's ability to fund current operations.
Millennium Tower is a 58-story luxury residential building completed in 2009 and located at 301 Mission
Street in downtown San Francisco. On August 17, 2016, some owners of condominiums in Millennium Tower filed a lawsuit, San Francisco Superior Court No. 16-553758 (the "Lehman Lawsuit") against the Transbay Joint Powers Authority (''TJPA") and the individual members of the TJPA, including the City. The TJPA is a joint exercise of powers authority created by the City, the Alameda-Contra Costa Transit
District, the Peninsula Corridor Joint Powers Board, and Caltrans (ex officio). The TJPA is responsible under State law for developing and operating the Transbay Transit Center, which will be a new regional transit hub located near the Millennium Tower. See "MAJOR ECONOMIC DEVELOPMENT PROJECTSTransbay".
The TJPA began excavation and construction of the Transbay Transit Center in 2010, after the Millennium Tower was completed. In brief, the Lehman Lawsuit claims that the construction of the Transbay Transit Center harmed the Millennium Tower by causing it to settle into the soil more than
planned and tilt toward the west/northwest, and the owners claim unspecified monetary damages for inverse condemnation and nuisance. The TJPA has asserted that the Millennium Tower was already sinking more than planned and tilting before the TJPA began construction of the Transbay Transit Center
and that the TJPA took precautionary efforts to avoid exacerbating the situation. In addition to the Lehman Lawsuit, several other lawsuits have been filed against the TJPA related to the subsidence and tilting of the Millennium Tower. In total, seven lawsuits have been filed against TJPA, and a total of
three of those name the City.
In addition to the Lehman Lawsuit, the City is named as a defendant in a lawsuit filed by the owners of a
single unit, the Montana Lawsuit, San Francisco Superior Court Case No. 17-558649, and in a lawsuit filed by owners of multiple units, Case No. 17-559210, the Ying Lawsuit. The Montana and Ying Lawsuits
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contain the same claims as the Lehman Lawsuit. The City continues to evaluate the lawsuits, and the subject matter of the lawsuits, and is engaged in discovery, but cannot now make any prediction as to the outcome of the lawsuits, or whether the lawsuits, if determined adversely to the TJPA or the City, would have a material adverse impact on City finances.
Risk Retention Program
Citywide risk management is coordinated by the Risk Management Division which reports to the Office of the City Administrator. With certain exceptions, it is the general policy of the City not to purchase commercial liability insurance for the risks of losses to which it is exposed but rather to first evaluate self-insurance for such risks. The City's policy in this regard is based on its analysis that it is more
economical to manage its risks internally and administer, adjust, settle, defend, and pay claims from budgeted resources (i.e., "self-insurance"). The City obtains commercial insurance in certain
circumstances, including when required by bond or lease financing covenants and for other limited purposes. The City actuarially determines liability and workers' compensation risk exposures as permitted under State law. The City does not maintain commercial earthquake coverage, with certain minor exceptions.
The City's property risk management approach varies depending on various factors including whether the facility is currently under construction or if the property is owned by a self-supporting enterprise fund department. For new construction projects, the City has utilized traditional insurance, ownercontrolled insurance programs or contractor-controlled insurance programs. Under the latter two
approaches, the insurance program provides coverage for the entire construction project. When a traditional insurance program is used, the City requires each contractor to provide its own insurance, while ensuring that the full scope of work be covered with satisfactory limits to protect the City from risk exposure. The majority of the City's commercial insurance coverage is purchased for enterprise fund departments and other similar revenue-generating departments (the Airport, MTA, the SF Public Utilities Commission, the Port and Convention Facilities, etc.). The remainder of the commercial insurance coverage is for General Fund departments that are required to provide coverage for bondfinanced facilities, coverage for collections at City-owned museums and to meet statutory requirements for bonding of various public officials, and other limited purposes where required by contract or other agreement.
Through coordination with the City Controller and the City Attorney's Office, the City's general liability risk exposure is actuarially determined and is addressed through appropriations in the City's budget and also reflected in the CAFR. The appropriations are sized based on actuarially determined anticipated claim payments and the projected timing of disbursement.
The City actuarially estimates future workers' compensation costs to the City according to a formula
based on the following: (i) the dollar amount of claims; (ii) yearly projections of payments based on historical experience; and (iii) the size of the department's payroll. The administration of workers' compensation claims and payouts are handled by the Workers' Compensation Division of the City's Department of Human Resources. The Workers' Compensation Division determines and allocates workers' compensation costs to departments based upon actual payments and costs associated with a department's injured workers' claims. Statewide workers' compensation reforms have resulted in some
City budgetary savings in recent years. The City continues to develop and implement programs to lower or mitigate workers' compensation costs. These programs focus on accident prevention, transitional return to work for injured workers, improved efficiencies in claims handling and maximum utilization of medical cost containment strategies.
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The City's estimated liability and workers' compensation risk exposures are summarized in Note 16 to
the City's CAFR, attached to this Official Statement as Appendix B.
A-82
APPENDIXB
COMPREHENSIVE ANNUAL FINANCIAL REPORT OF THE CITY AND COUNTY OF SAN FRANCISCO
FOR THE FISCAL YEAR ENDED JUNE 30, 2017
CITY AND COUNTY OF SAN FRANCISCO, CALIFORNIA
Comprehensive Annual Financial Report Year ended June 30, 2017
Prepared by: Office of the Controller
~1012 ::> Ben Rosenfield Controller
'Iliis page has Geen intentwnaiJy feft 5fanli.,
CITY AND COUNTY OF SAN FRANCISCO
Comprehensive Annual Financial Report Year Ended June 30, 2017
TABLE OF CONTENTS
INTRODUCTORY SECTION
Controller's Letter of Transmittal
Cert1f1cate of Achievement- Government Finance Officers Assoc1at1on
City and County of San Francisco Organization Chart
List of Principal Officials
FINANCIAL SECTION
Independent Auditor's Report
Management's D1scuss1on and Analysis (unaudited)
Basic F1nanc1al Statements
Government-wide F1nanc1al Statements
Statement of Net Pos1t1on
Statement of Act1v1t1es
Fund F1nanc1al Statements
22
24
Balance Sheet - Governmental Funds 25
Reconc1l1at1on of the Governmental Funds Balance Sheet to the Statement of Net Pos1t1on 26
Statement of Revenues, Expenditures, and Changes 1n Fund Balances - Governmental Funds 27
Reconc1l1at1on of the Statement of Revenues, Expenditures, and Changes 1n Fund Balances of Governmental Funds to the Statement of Act1v1t1es 28
Statement of Net Pos1t1on - Propnetary Funds 29
Statement of Revenues, Expenses, and Changes 1n Fund Net Pos1t1on - Proprietary Funds 31
Statement of Cash Flows - Proprietary Funds 32
Statement of F1duc1ary Net Pos1t1on - F1duc1ary Funds 34
Statement of Changes 1n F1duc1ary Net Pos1t1on - F1duc1ary Funds 35
Notes to the Basic F1nanc1al Statements
(1) The F1nanc1al Reporting Entity
(2) Summary of S1gnif1cant Accounting Pol1c1es
(3) Reconc1l1at1on of Government-wide and Fund F1nanc1al Statements
(4) Effects of New Accounting Pronouncements
(5) Deposits and Investments
(6) PropertyTaxes
(7) Capital Assets
(8) Bonds, Loans, Capital Leases and Other Payables
(9) Employee Benefit Programs
(1 OJ Fund Equity
(11) Unavailable Resources 1n Governmental Funds
(12) San Francisco County Transportation Authority
(13) Detailed Information forEnterpnse Funds
(14) Successor Agency to the Redevelopment Agency of the City and County of San Francisco
36
38
48
53
55
75
76
78
96
113
116
116
118
134
CITY AND COUNTY OF SAN FRANCISCO
Comprehensive Annual Financial Report Year Ended June 30, 2017
TABLE OF CONTENTS
(15) Treasure Island Development Authority
(16) lnterfund R ece1vables, Payables and Transfers
(17) Commitments and Contingent Llab1l1t1es
(18) Risk Management
(19) Subsequent Events
Required Supplementary Information (unaud1ted)-Pens1on Plans
Schedules of the City's Proportionate Share of the Net Pension Llab1l1ty
Schedules of Changes 1n the Net Pension Llab1l1ty and Related Ratios
Schedules of Employer Contributions - Pension Plans
Other Postemployment Healthcare Benefits
Schedules of Funding Progress and Employer Contnbut1ons
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CITY AND COUNTY OF SAN FRANCISCO OFFICE OF THE CONTROLLER
The f1nanc1al statements of several enterpnse act1v1t1es and of all included 1n this CAFR Some units' f1nanc1al statements are
reason
internal
The Statistical Section includes up to ten economic 1nfomiat1on that confomis to
of historical f1nanc1al data and miscellaneous social and standards for
may be of special interest to c1t1zens and prospective investors 1n
SAN FRANCISCO'S ECONOMY:
Overview of Recent Trends
An educated workforce and easy access to transit and f1nanc1al capital continue to drive business investment 1n the City San Francisco's losses from the most recent recession, and growth continues to outpace that of the economies The City's P11c,mcdcym 1n fiscal remained neariy constant at a rate of 3 1 % , a drop of O 3% from the
rates for Cal1forn1a and the nation Pmemplcyme11t rate 1s due to continued strength 1n the
In fiscal year 2016-17, pnvate non farm Metrn1,cl1tac D1v1s1on grew 3 1% over the prior fiscal year, compared to
reaching a new historical high of 870,887 1n 2016 0% increase versus the prior year, and cumulative
Key 1nd1cators of the City's real estate market have shown marked over the past fiscal Commercial rents and median home prices increased to new The monthly per square rental rates for commercial grew to $73 71 1n fiscal year 2016-17, a 5 1% increase versus the
The average median price 1n the fiscal year grew to an annual high 01$1,156,233, up the previous fiscal year
San Francisco's economic A large amount of housing units
has stimulated the demand for new res1dent1al and commercial space during the last fiscal with 4,745
PIIIJSCCPl,SllPCIICllat the end of the permits for development 1s 1n the Eastern Ne1gt,bc1hccds
1n Candlestick Point/Hunters Point
SAN FRANCISCO GOVERNMENT:
transportation, sewer, planning regulation The heads of these de1aartme11ts
advised by comm1ss1ons and boards appointed by City elected
subd1v1s1on leg1slat1ve
a11d a11d
CITY AND COUNTY OF SAN FRANCISCO OFFICE OF THE CONTROLLER
Elected offlc1als include the SPpecrns,,s Assessor-Recorder, City and Treasurer Since
district elections The eleven district are staggered for five six seats at a time, and held 1n even-numbered years Board members serve four-yeartemis and vacancies are filled by Mayoral appointment
The budget 1s e,1,e1m1cPrnw1th1n each department, and the department level and fund 1s The notes to the budgetary schedule 1n
sP1apl1,m,,11tacy 1nformat1on summanzes the budgetary roles of off1c1als and the actions according to the City Charter
adopted annual budgets for all governmental funds and ,,, ,
0 ,,,,,,, and certain debt service funds The voters
to further strengthen the City's for the first time adopted a
upcoming fiscal years 1n July The Charter requires that the each year unless the Board of Supervisors authorizes a "fixed" fund, 1n which case authorization occurs every two years As of departments on a two-year fixed budget
by these amendments, The most recent was 1n
a mechanism for the to propose, f1nanc1al pol1c1es, which can only be suspended by a sP1te11sa1c11" now been adopted under these the recurring revenues, and l1m1ts on
a five-year f1nanc1al Add1t,cm,llc these Charter
of the annual budget are 1n cmsplmtce amounts are exercised by 1ntegrat1ng the funds An encumbrance system 1s also used to account for
purchase orders and commitments Encumbered balances of appropriations at year-end are earned forward and are not reappropriated 1n the following year's budget
Pension and Retiree Health Trust Fund Operations
The City has seven pension plans, with a substantial Francisco Employees' Retirement System (SFERS), a different actuarial valuation studies - one for f1nanc1al reporting
Ai,',~:~::: Standard Board and the other for funding purposes d contributions to the plan
iii
CITY AND COUNTY OF SAN FRANCISCO
Purposes - The most recent actuarial valuation estimates the unfunded actuarial accrued
actuarial valuation dated July 1, 2015 down from 85 6%
c,,amc,al R,,,,,,1,w - As of June 30, 2017, for f1nanc1al b1ll1on, an increase of $3 32 b1ll1on
OFFICE OF THE CONTROLLER
report for the SFERS pension dated at $3 75 b1ll1on, an increase of m1ll1on
valuation report estimates the plan to be
pecce,tc,geoftotal l1ab1l1ty, which 1s cmao,,rnl1lelc 77
unfunded retiree health benefit l1ab1l1ty has been calculated at $4 21 b1ll1on as of July 1, 2014 In and began to pre-fund obl1gat1ons through contributions of 3% of
on or after January These contributions are held 1n an 11Tevocable Care Trust Fund Beginning 1n fiscal employees hired before
rn,11,1,cllcoto the Trust Fund with an starting at a combined O 5% 2019-20 June 30, 2017, the Trust Fund had a net
Given 1ncreas1ng and ic,rn,cec,llyh"ed employees, expects
General Fund Financial Position Highlights
The City's Gen era I Fund f1nanc1al pos1t1on continued to post s1gnif1cant improvement during this most recent fiscal year, cont1nu1ng trends from recent years
Total GAAP-bas1s General Fund balance, which includes funds reserved for cont1nu1ng appropriations and reserves, ended fiscal year 2016-17 at $1 87 b1ll1on, up $441 5 m1ll1on from the pnor year
The General Fund's cash year-end peak of $2 14
,m11rnmce,,t 1n fiscal year 2016-17, rising to a new 2016
The General Fund rainy day and budget stab1l1zat1on reserves grew to $448 9 m1ll1on at the end of fiscal years 2016-17, an increase 01$150 4 m1ll1on compared to prior year
The majonty of fund balance available for appropriation on a basis totaled $545 9 m1ll1on or $14 4 m1ll1on more than had been and ape,;crmaled by the Mayor and Board as a source 1n the adopted two-year
Key Government Initiatives
San Francisco's workers, v1s1tors, These economic foundations range from housing de1,el11pow,t, to transportation infrastructure, investments 1n health and human services, and the City's quality of life City 1s taking to strengthen this infrastructure, to San Francisco's economic recovery and long-term prosperity important 1nit1at1ves are
Improving the City's Public Transportation Systems
San Francisco 1s situated to serve the Bay Area's need to into a lmc,s,t-a,cu,ss,ble employment center, and efficiently taxi or bicycle
bnng a dense
numbers of workers on foot, mass transit.
Plans for a multi-modal transit hub located 1n the core - the Transbay Transit Center - are targeted to meet a portion of this regional need The center 1s to expanded bus, commuter train, and ultimately rail connections into the City and state, and to pedestrian surface rail, and bus services The tcooe,te,m at the site has been with completion of the new center targeted for year 2017-18 The
CITY AND COUNTY OF SAN FRANCISCO OFFICE OF THE CONTROLLER
$2 3 b1ll1on transit center, managed by a independent authonty, 1s funded revenue sources, federal stimulus funding, sale increment, local and other revenues from planned dense, mixed-use to the site In order to meet cash flow needs of the an interim f1nanc1ng plan not to exceed m1ll1onwas both the City and the 1n year2015-16 This 1ntenm will be provided 1s secured against special tax revenues generated by future private 1n the area ,m,M,J,alelc surrounding the terminal
The City 1s currently constructing the Central the second phase of a IP create a line running from Chinatown, of downtown, and cc,mectmg recent of the light-rail system to the Southeast of the Bay Area Rapid Transit (BART) and Caltra1n, the largest commuter rail services The Central with an estimated 6 b1ll1on and a targeted date of 2019, 1s estimated to 35,000 ,,,,, '""''"" at four stations along new 1 7 mile line Once 1n active service 1n the project will times and congestion along some of the most congested vehicular and public transit routes 1n Cal1forn1a
The City 1s also 1m plem ent1ng a street repair and 1m provement funded with a $248 m1ll1on obl1gat1on bond, as well as state and local revenue sources this over 2,500
to be 1,900 curb ramps for disabled access will constructed, and over sidewalk will be repaired In commercial corridors, and to build complete streets that enhance and
The program also funds to rnhab,l,tate traffic transit signal along
During the years, City has more than 1,400 built curb ramps, made 40 structural repairs, than 525,000 square feet of sidewalk
the infrastructure will be accelerated given voter approval of a the first of four funding measures recommended
ye,,c, 013-14 to pnont1ze critical transportation infrastructure projects and recommend funding strategies meet these needs Projects planned for the bond include investments to rel1ab1l1ty and travel time on mass transit. improve pedestrian safety, improve and priority deferred maintenance needs
The continued to invest 1n ,mc,,m,eo;e;1ts as part of an
renovation of Terminal a new long-term Airport hotel and an extension of the A1rTra1n growth 1n at SFO, which has e,i1ec,e,ced e,c,ht,cc1tsernt,e and a record number of passengers 1n air travel and 69% of all air travel into the Bay Area
Investing in Affordable Housing
In November San Francisco voters approved an Affordable Housing Bond, which authonzed the issuance of up to m1ll1on to fund the construction, development, affordable housing, 1nclud1ng rehab1l1tat1on, and
the repair and of public housing, assistance programs
Completing Critical Infrastructure Upgrades for Water Power and Sewer Services
Service rel1ab1l1ty and disaster prnparnd,ess are also priorities of the City's Public Ut1l1t1es Comm1ss1on as evidenced 1n the of infrastructure investment being deployed and planned 1n all
enterprises the PUC operates
v
CITY AND COUNTY OF SAN FRANCISCO OFFICE OF THE CONTROLLER
As of the end of fiscal year 2016-17, the City was over 94% with a $4 8 b1ll1on capital to local and regional known as Water System Program The consists of both and regional proJects spread over seven counties from
Francisco The WSIP delivers improvements that enhance the system's ab1l1ty to to its 27 and regional retail counties, collectively serving some 2 6 m1ll1on water quality requirements, improve se1sm1c obJect1ves
The PUC IS also
where substations, 170 miles of p1pel1nes and of-way Improvements 1n San Francisco include fixtures with modern, energy-efficient ones enabling the to achieve cost-eff1c1ency and control them remotely Over the next ten years, $1
Expanding Access to Healthcare
an environmentally sustainable manner Santa Clara, San Mateo, and San Francisco
1s structured to cost effectively meet and meet long-term water supply
and rightstreetl1ght
new will have wireless controls, performance through the to monitor and
of critical infrastructure 1s planned
Pub::c health and human services are important to the :ong-term health and residents and to me overall product1v1ty of the C ,y's workforce The City offers a host of health 1nciud1ng operation of t,,10 pubi:c the adm1n:strat1on of federai, state, programs, and a vast array of health and human services
cf full-scale 1rnplernental :on e fthe Affordab!e Carn Act 1nclud1ng the Medi- Cal expansion In I he c,ty c,oc,1'xtYd extensive
outreach and the Department of Pub!lc Hea!th Health the department's fu!! continuum ot care services The San F ranc1sco Health Network 1s an integrated health care that improves the departrn ent's ab:!lty to and manage care for insured patients that our network, organ:ze the elements of the
system, improve system eff:c1ency, and improve the pat:ent experience
Cumuiat1vel·;, over 140,000 San Franciscans have enrolled :n new heaith insurance options since the launch of the Affordable Care Act 1n 2014, mere than 78,000 through the expansion of
the increased insurance enrollment 1s a heallh access fer the
the uninsured 1nc!ude those ,nel1g:ble for the insurance """''°"''' offered under the ACA and those who are
but wno. for a of reasons, do not enroll City w:!I cont:nue to be a key provider of safety services for these
Wh:ie not successful to date, efforts :n Congress to less of healthcare coverage for San Franciscans and a
or replace the ACA could cause a s1gn:f:cant of revenue for DPH The adopted iiscal ·;ear
CITY AND COUNTY OF SAN FRANCISCO OFFICE OF THE CONTROLLER
2017- establ:shes a $50 IT11 i:on IT1 anagem ent reserve to begin prei1m 1nary efforts to plan for these future
Modernizing the City's Parks and Libraries
San Francisco voters have approved a number of bond measures to fund parks and libraries during the decade, the most recent
improvements to the 1n November2012 of a
m1ll1on general for improvements neighborhood have completed renovations of 13 recreation centers, during a ten-year period
Delivering Public and Private Waterfront Improvements
key waterfront 1n improve safety and res1l1ence of the h1stonc Embarcadero design, and 1m plem ent the most critical 1m prov em ents over the next decade, Land Use the framework for ensuring a disaster res1l1ent waterfront by the City's San Francisco Plan
Improving Earthguake Safety and Preparedness and Public Health
In June 2014, San Francisco voters m1ll1on Earthquake Safety and Emergency Response Bond (ESER 2014) to continue work 1n the ESER program and to pay for repairs and ,mr,cm,ecrncls that will allow San Francisco to quickly to a earthquake or disaster The first
oftheESERprogramwas 2010 s1ncethe the completed the new Public to a
firehouses, constructed a new headquarters em erg ency f1refight1ng water system
In June 2016, the voters of San Francisco a $350 m1ll1on Public Health and Safety Bond to provide funds to improve critical public health 1nclud1ng fire stations as well as cc,cmcmty and mental health care fac1l1t1es The bond funds will be used to build a se1sm1cally
ambulance deployment center and make improvements to homeless service sites
pension and remain The
estimate unfunded of $7 96 b1ll1on for these b1ll1on for retiree health obl1gat1ons and $3 75 b1ll1on for employee pension
vii
CITY AND COUNTY OF SAN FRANCISCO OFFICE OF THE CONTROLLER
benefits In recent years, the changes that should unfunded l1ab1l1t1es over time, benefit tiers, increases to and
pl eye, ccct,,bct,cc requ1rem ents, of a trust fund to set-aside funding retiree costs The f1nanc1al benefit from these changes will phase 1n over time, however, leaving ongoing
f1nanc1al challenges for the City 1n the shorter term
OTHER INFORMATION:
Independent Audit
1n future fiscal years will allow by future economic volat1l1ty
The City's Charter requires an annual audit of the Controller's records These records, represented 1n the basic f1nanc1al statements included 1n the CAFR have been audited by the recognized certified
ac1~c~,~:::,;r,,~,m;;·: Macias G1ni & O'Connell LLP The various enterprise the Health Service
1, Retirement System, the Retiree Health Care Trust, the San Francisco County the San Francisco Finance Corporation, and the Successor to the San
Rede,elcpm:';;:,~:("~;\(:,';;;,been separately audited The on our 1s presented 1n the F1nanc1al Section
my apprec1at1on to the entire staff of the Controller's Office whose p,11fe1ss11m,,1,o1a effm,ccy ,,,, responsible for the preparation of this report I would also Macias
LLP for their invaluable 1n the preparation of the CAFR Finally, I want to thank the their interest and support 1n planning and conducting the City's operations
Respectfully submitted,
Ben Rosenfield Controller
viii
Govcmmcril Finance Officers Associatioo
Certificate of Achievement for Excellence
in Financial Reporting
Presented tn
City and County of San Francisco
California
For its Comprehen~iv~ AnnWll Financial Report
for the Fl seal Year Ended
June 30, 2016
~/~. ~-cu five Directur/CEO
City and County of San Francisco Organization Chart {As of June ::NI, 2017)
London Breed Sandra Lee Fewer Mark Farrell Aaron Peskin Katy Tang Jane Kim Nomi an Yee Jeff Sheehy
Ronen Malia Ahsha Safai Cami en Chu Dennis J Herrera
Gasc6n
V1ck1 Hennessy
Ten L Jackson Cisneros
DEPARTMENT DIRECTORS/ADMINISTRATORS
Airport Board
Comm1ss1on Asian Art Museum Board of Supervisors
Board Authonty
Sciences Child Support Services Children, Youth and Their Fam 1l1es Civil Service Economic and Workforce Development Elections Emergency Management Entertainment Environment Ethics Fine Arts Museums Fire
Ivar C Satero Cynthia Goldstein Tom DeCaigny Jay Xu Angela Calvillo Dawn Duran Tilly Chang Tom HUI Jonathan Foley, PhD Karen M Roye Mana Su Michael L Brown Todd Rufo John Arntz Anne Kronenberg Jocelyn Kane Deborah Raphael LeeAnn Pelham Max Holle1n Joanne Hayes-White
CITY AND COUNTY OF SAN FRANCISCO
List of Principal Officials As of June 30, 2017
DEPARTMENT DIRECTORS/ADMINISTRATORS (Continued)
General Services Animal Care Convention Fac1l1t1es Management
Clerk Examiner
Public Works Purchaser/Contract Adm 1n1strat1on Real Estate Department of Technology
Health Service Homelessness Human Resources Human Rights Human Services
Supportive Housing
and Adult Services
Law Library Board of Trustees Library Municipal Transportation Agency Planning Police Police Accountab1l1ty Pert Public Health Public Ut1l1t1es Recreation and Park Res1dent1al Rent Board Retirement System Small Business Status of Women
~:::::~;e~:~g;mcy le the Redevelopment Agency
Probation WarMemonal
Donohue Noguchi
Catherine Stefani Michael Hunter Mohammed Nuru
Sheryl Evans Davis Trent Rhorer Sh1reen Mcspadden Allen A Nance Marcia Bell Luis Herrera Ed Re1sk1n John Rahaim \Mll1am "6111" Scott Paul Henderson (Interim) Elaine Forbes Barbara A Garcia Harian Kelly Phil Ginsburg Robert Collins Jay Huish Regina D1ck-Endnzz1 Emily M Murase Nadia (Interim)
Elizabeth Murray
DISCRETELY PRESENTED COMPONENT UNIT
Treasure Island Development Authority Robert P Beck
xii
'Iliis page has Geen intentwnaiJy feft 5fanli.,
FINANCIAL SECTION
m Independent Auditor's Report
m Management's Discussion and Analysis
m Basic Financial Statements
11111 Notes to the Financial Statements
11111 Required Supplementary Information
rrliis page lias 6een intentionaffy fejt 6fan(
Honorable City and
Independent Auditor's Report
and Members of the Board of Supervisors of San Francisco, Cal1forn1a
We have audited the accompanying financial statements of the governmental act1v1t1es, the business-type act1v1t1es, each maJor fund, and the aggregate discretely presented component unit and remaining fund 1nformat1on, of the City and County of San Francisco (City), as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the City's basic financial statements as listed 1n the table of contents
Management's Responsibility for the Financial Statements
Management 1s responsible for the preparation and fair presentation of these financial statements 1n accordance with accounting pr1nc1ples generally accepted 1n the United states of America, this includes the design, 1mplementat1on, 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 respons1b1l1ty 1s to on these financial statements based on our audit We did not audit the financial statements of County Transportation San Francisco International Airport (maJor San Francisco Water Enterprise fund), Hetch Hetchy and Power fund), San Francisco Transportation San Francisco Wastewater Enterprise fund), and the Health Service System, which following percentages of the assets, pos1t1on/fund balances, and revenues/add1t1ons of the following opinion units
Net Pos1t1on/ Revenues/ Opinion Unit Assets Fund Balances Add1t1ons
Those f1nanc1al statements were audited by other auditors whose reports have been furnished to us, and cc, cp1rn1rns. insofar as they relate to the amounts included for those ent1t1es, are based solely on the reports of the cthec,accl1trns We conducted our audit 1n accordance with aud1t1ng standards accepted 1n the United States of America Those standards require that we plan and perform the audit obtain reasonable assurance about whether the f1nanc1al statements are free from material misstatement
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures 1n the f1nanc1al statements The procedures selected depend on the auditor's Judgment, 1nclud1ng the assessment of the risks of material misstatement of the f1nanc1al 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 f1nanc1al statements 1n order to design audit procedures that are appropriate 1n the circumstances, but not for the of '. , '''.."an opinion on the effectiveness of the entity's internal control we no
includes evaluating the appropriateness of accounting pol1c1es and reasonableness of s1gn1f1cant accounting estimates made by management, as well as evaluating the overall presentation of the f1nanc1al statements
We believe that the audit evidence we have obtained 1s sufficient and appropriate to provide a basis for our audit opinions
Opinions
In our op1n1on other auditors, the f1nanc1al statements referred to above present fairly, 1n all material respects, the financial pos1t1on of the governmental act1v1t1es, the business-type act1v1t1es, each maJor fund, and the aggregate discretely presented unit and remaining fund 1nformat1on, of the City as of June 30, 2017, and the respective changes 1n pos1t1on and, where applicable, cash flows thereof for the year th en ended 1n accordance with accounting principles generally accepted 1n the United States of America
Emphasis of Matter
As discussed 1n Note 4 to the basic f1nanc1al statements, effective July 1, 2016, the City adopted the Governmental standards Board (GASB) statement No 73, and Financial Pensions and Related That Are Not Within the of GASB Statement and Amendments Provisions ofGASB Statements 61 and 68 Our op1n1on 1s mod1f1ed with respect to this matter
Other Matters
Prior-Year Comparative Information The financial statements include partial and summarized prior-year comparative 1nformat1on Such 1nformat1on does not include all of the 1nformat1on required or suff1c1ent detail to constitute a presentation 1n accounting pr1nc1ples generally accepted 1n the United States of America such 1nformat1on be read 1n conJunct1on with the statements for the year ended 30, 2016, from which such partial and summarized
We have 2016 financial statements, and we expressed, based on our audit and the reports audit opinions on the respective financial statements of the governmental act1v1t1es, the each and the aggregate discretely presented component unit and remaining fund 1n our report 18, 2016 In our opinion, the summarized comparative 1nformat1on presented herein as of and for the year ended June 30, 2016, 1s consistent, 1n all material respects, with the audited financial statements from which 11 has been derived
Reqwred Supplementary Information Accounting principles generally 1n the United States of America require that the management's d1scuss1on and analysis, the schedules of the share of the net l1ab1l1ty, the schedules of changes 1n the net pension l1ab1l1ty and related schedules of pension plans, the schedules of funding progress and - other healthcare benefits, and the budgetary comparison schedule Fund, as listed 1n table contents be presented to supplement the basic f1nanc1al statements Such 1nformat1on, although not a part of the basic f1nanc1al statements, 1s required by the GASB who considers 11 to be an essential part of f1nanc1al reporting for placing the basic f1nanc1al statements 1n an appropriate operational, economic, or historical context We and other auditors have applied certain l1m1ted procedures to the required 1nformat1on 1n accordance with aud1t1ng standards accepted 1n the United States of America, of 1nqu1ries of management about the methods preparing the 1nformat1on and comparing the 1nformat1on for with management's responses to our 1nqu1r1es, the basic financial statements, and other knowledge we our audit of the basic financial statements We do not an opinion or
any assurance on the 1nformat1on because the l1m1ted procedures do not provide us sufficient evidence express an opinion or provide any assurance
Other Information Our audit was conducted for the purpose of forming City's basic f1nanc1al statements The stat1st1cal sections are presented for purposes of statements
on the f1nanc1al statements that statements and schedules and the mt,Pd,,ct,x;
analysis and are not a required part of the basic f1nanc1al
The f1nanc1al statements and schedules are the respons1b1l1ty of management and were derived from and the accounting and other records used to prepare the basic f1nanc1al statements Such
to the aud1t1ng procedures applied 1n the audit of the basic f1nanc1al statements and certain add1t1onal 1nclud1ng comparing and reconc1l1ng such 1nformat1on directly to the underlying accounting and records used to prepare the basic f1nanc1al statements or to the basic f1nanc1al statements themselves, and other add1t1onal procedures 1n accordance with aud1t1ng standards generally accepted 1n the United States of America us and other auditors In our op1n1on, based on our audit, the procedures performed as described above, and the of the other auditors, the combining f1nanc1al statements and schedules are fairly stated, 1n all material respects, 1n relation to the basic f1nanc1al statements as a whole
The introductory and stat1st1cal sections have not been subJected to the aud1t1ng procedures applied 1n the audit of the basic f1nanc1al statements, and accordingly, we do not express an opinion or provide any assurance on them
H""'"" Gw i Oc~r l1!P San Francisco, Cal1forn1a December 29, 2017
CITY AND COUNTY OF SAN FRANCISCO
Management's Discussion and Analysis (Unaudited) Year Ended June 30, 2017
This section of the City and County of San Francisco's (the City) Annual Financial Report "';;;;-;a narrative overview and analysis of the f1nanc1al of the City for the year ended
We encourage readers to consider the 1nformat1on presented here 1n conJunct1on with add1t1onal 1nfomrnt1on 1n our transmittal letter Certain amounts presented as fiscal year 2015-16 summarized comparative f1nanc1al 1nfomrnt1on 1n the basic financial statements have been reclass1f1ed to confollTl to the presentation 1n the fiscal year 2016-17 basic f1nanc1al statements
FINANCIAL HIGHLIGHTS
exceeded its l1ab1l1t1es and defe1Ted inflows of resources at the end of the fiscal year ape,m,,m,,tely $7 56 b1ll1on pos1t1on) Of this balance, $8 32 b1ll1on represents the City's net 1n assets, $2 represents restncted net
and unrestncted net has a def1c1t of 84 b1ll1on The City's total net pos1t1on decreased m1ll1on, or5 6 from the previous year Ofth1s amount, total net1nvestment 1n
assets and restricted $170 4 m1ll1on or 2 1 and 2 m1ll1on or percent, respectively, decreased by 9 percent
and increased capital
1s a $181 6 m1ll1on or taxes, business taxes, sales m1ll1on, $414 m1ll1on, $24 3
reflecting 9 m1ll1on
At the end of the fiscal year, total fund balances for the governmental funds amounted to $3 40 b1ll1on, an increase 3 m1ll1on or 20 1 percent from prior year, due to $122 0 m1ll1on 1n from sale of assets which offset the greater increase 1n over revenues as as the slight increase 1n other f1nanc1ng uses
$41 2 m1ll1on during fiscal year 2016-17 The City, 1n Me,tmocl,trn, Trnccsocrt:,t,cc c:cccm,ssm obtained a short term credit fac1l1ty
1n an amount not to $260 0 $100 0 m1ll1on MTC and $160 0 m1ll1on Wells Fargo Bank and drew $49 0 m1ll1on therefrom for the construction of the TransbayTrans1t Center The balance of commercial paper notes decreased by $90 2 a $104 2 m1ll1on increase 1n governmental act1v1t1es offset by a m1ll1on decrease 1n act1v1t1es The Airport and the Water Enterprise commercial paper notes outstanding decreased $1651 m1ll1on and $91 0 m1ll1on respectively through ref1nanc1ng issuance of long-term debt The long-term debt increased by $1 15 b1ll1on A total of $248 3 1n general obl1gat1on bonds were issued for affordable housing and for se1sm1c strengthening, and betterment of fac1l1t1es The issued $740 1 m1ll1on revenue bonds redevelopment of Terminal 1 and other enhancements SFMTA issued $177 8 m1ll1on revenue bonds to fund transit and upgrades The Water Enterpnse issued $259 4 m1ll1on
pa1,e, csedand $20 0 m1ll1on new money for the Water and the Enterprise issued revenue refunding for
rnspe,,t,ely for econ om 1c gain
gm,ec,mectal ccc-emplc1ec contnbut1ng ent1t1es for was partially 1n fiscal
olecxec,tatmc resulted 1n a restatement due to change 1n accounting principle decreasing 2016 by $55 0 m1ll1on
CITY AND COUNTY OF SAN FRANCISCO
Management's Discussion and Analysis (Unaudited) (Continued) Year Ended June 30, 2017
OVERVIEW OF THE FINANCIAL STATEMENTS
This d1scuss1on and analysis are intended to serve as an 1ntroduct1on to the City's basic f1nanc1al statements The basic f1nanc1al statements three Government-wide f1nanc1al statements, Fund f1nanc1al statements, and This report also contains other supplementary information 1n to the basic f1nanc1al statements themselves These various elements of the Comprehensive Annual F1nanc1al Report are related as shown 1n the graphic below
Organization of City and County of San Francisco Comprehensive Annual Financial Report
Introductory
Section
~ u. F1nanc1al 5 Section
Stat1st1cal Section
INTRODUCTORY SECTION
Management's Discussion and Analysis (MD&A)
Government -wide Financial
Statements
Statement of net pos1t1on
Statement of act1v1t1es
Fund Financial Statements
Governmental Funds
Balance sheet
Statement of revenues,
acd
Proprietary Funds
Statement of net pos1t1on
Statement of
Statement of cash flows
Notes to the F1nanc1al Statements
Fiduciary Funds
Statement of
Statement of changes 1n
Required Supplementary Information Other Than MD&A
lnfomiat1on on 1nd1v1dual nonmaJor fuds and other supplementary 1nformat1on that 1s not required
STATISTICAL SECTION
4
CITY AND COUNTY OF SAN FRANCISCO
Management's Discussion and Analysis (Unaudited) (Continued) Year Ended June 30, 2017
The also
table summarizes the m aJor features of the f1nanc1al statements The overview section below the structure and contents of each of the statements 1n more detail
Scope
Accounting basis and measurement focus
Type of balance information
Type of inflow and outflow information
Government -wide Statements
Accrual accounting and economic resources focus
All assets, defe1Ted outflows of resources,
acd inflows
of resources, both f1nanc1al and capital, short-term and long-temi
All inflows and outflows dunng
regardless cash 1s
Fund Financial Statements
Governmental
services
Mod1f1ed accrual accounting and current f1nanc1al resources focus
Balances of spendable resources
Near-term inflows and outflows of spendable resources
Proprietary Fiduciary
enterprises
Instances 1n which the City administers resources on behalf of others, such as employee benefits
Accrual accounting Accrual accounting and economic and economic resources focus resources focus,
All assets, deferred outflows of resources, l1ab1l1t1es, and deferred inflows of resources, both f1nanc1al and
short-temi long-term
All add1t1ons and deductions during the year, regardless of when
received or paid cash 1s received or paid
Government-wide Financial Statements
f1nanc1al statements are to provide readers with a broad overview of the pc,,;ale;-st,clcP business
The statement of net position presents 1nformat1on on all of the City's assets, deferred outflows of resources, l1ab1l1t1es, and deferred inflows of resources, with the difference Over
increases or decreases 1n net may serve as a useful 1nd1cator of the City 1s 1mprov1ng or detem,rntmc
CITY AND COUNTY OF SAN FRANCISCO
Management's Discussion and Analysis (Unaudited) (Continued) Year Ended June 30, 2017
The statement of activities presents 1nformat1on how the City's net pos1t1on changed during the most recent fiscal year All changes 1n net as soon as the underlying event g1v1ng nse to the occurs, regardless of the of cash flows Thus, revenues and are reported 1n statement for some items will only result 1n cash flows 1n future fiscal such as revenues pertaining to uncollected taxes and expenses pertaining to earned but unused vacation and sick leave
gm,ec,mect-w,de f1nanc1al statements d1st1ngu1sh functions of the and intergovernmental revenues (governmental act1v1t1es) from
to recover all or a significant portion of their costs user fees and charges (b11s,rnss-t,oe act1v1t1es) The governmental act1v1t1es of the public transportation commerce, human welfare and culture and recreation, general adm1nistrat1on and finance, general act1v1t1es of the include an airport, port, transportation system care hospital, a long-term care hospital, and sewer
Fund Financial Statements
The fund f1nanc1al statements are designed to 1nfollllal1on about of related accounts that are used to maintain control over resources that been segregated act1v1t1es or obJect1ves The City, like other state and local governments, uses fund ensure and demonstrate compliance with finance-related legal requirements All of the funds of City can be d1v1ded into the following three categories governmental funds, proprietary funds, and fiduciary funds
Governmental funds. Governmental funds are used to account for essentially the same functions as governmental act1v1t1es 1n the f1nanc1al statements - 1 e most of the City's services are reported 1n funds These statements, however, focus on how cash and other f1nanc1al assets can the balances at that are available and the for spending Such 1nformat1on useful 1n determining f1nanc1al resources are available 1n the near future to finance the City's programs
Because the focus of governmental funds 1s narrower than that of the f1nanc1al statements, 111s useful to compare the inform at1on presented s1m 1lar 1nformat1on presented for act1v1t1es 1n the doing so, readers may better the long-term of the government's near-lellll f1nanc1ng Both the gm,ec,meclalfunds balance sheet and funds statement of revenues, and
1n fund balances provide a and governmental act1v1t1es
to fac1l1tate this comparison between governmental
CITY AND COUNTY OF SAN FRANCISCO
Management's Discussion and Analysis (Unaudited) (Continued) Year Ended June 30, 2017
The City maintains several 1nd1v1dual governmental funds revenue, debt capital and permanent governmental funds and 1n the governmental and changes 1n fund balances for the General Fund, which 1s considered to be a maJorfund from the
gcmcmeclal funds are combined into a presentation lnd1v1dual fund data
Proprietary funds. Proprietary funds are customers - either outside customers,
of combining statements elsewhere 1n
used to account for services forwh1ch the City units of the City Propnetaryfunds
the same type of 1nfollllal1on as shown 1n the ocmcmect-w,de f1nanc1al statements, only 1n more The City maintains the following two types of proprietary funds
Enterprise funds are used to report the same functions presented as business-type act1v1t1es 1n the gm,ec,mect-w1def1nanc1al statements The City uses funds to account for the operations of
San Francisco International Airport (SFO or Francisco Water Enterpnse Hetch Water and Power (Hetch Municipal Transportation
Francisco General San Francisco Wastewater Enterprise (Wastewalec) Port of San Francisco Laguna Honda Hospital (LHH ). all of which are
maJor funds of the
Internal Service funds are used to report act1v1t1es that provide supplies and services for certain City programs and act1v1t1es The City uses internal service funds to account for its fleet of vehicles, management 1nformat1on and telecommunicat1on services, pnnt1ng and mail services, and for lease-purchases of equipment by the San Francisco Finance Because these services predominantly benefit rather than business-type they have been included w1th1n governmental 1n the government-wide f1nanc1al statements The internal service funds are combined into a single, aggregated presentation 1n the fund f1nanc1al statements lnd1v1dual fund data for the internal service funds 1s form of combining statements elsewhere 1n this report
Fiduciary funds. F1duc1ary funds are used to account for resources held for the benefit of parties outside the The City employees' pension and health plans, retirees' health the the
of the Treasurer's Office investment pool, and the are f1duc1ary Since the resources of these funds are not available support the they are not reflected 1n the government-wide f1nanc1al statements The accounting 1s much like that used for proprietary funds
Notes to the Basic Financial Statements
The notes to the basic f1nanc1al statements provide add1t1onal 1nformat1on that 1s essential to a full understanding of the data provided 1n the government-wide and fund f1nanc1al statements
Required Supplementary Information
In add1t1on to the basic f1nanc1al statements and certain required pension cc,,tct,ct,,cs acd employees and the City's
CITY AND COUNTY OF SAN FRANCISCO
Management's Discussion and Analysis (Unaudited) (Continued) Year Ended June 30, 2017
Combining Statements and Schedules
The statements and schedules referred to earlier 1n connection with nonmaJor guMcmeclal service funds, and funds are 1mmed1ately following
supplementary1nformat1on on pensions and benefits
Condensed Statement of Net Position (in thousands)
Governmental actillnies Business-type activities Total
2017 2016 2017 2016 2017 2016 --------
Assets:
Current and other assets $5,0971)48 $4;309,790 4 903 )334 4,893995 $101)00)382 9,203,785
Capital assets 5,307 )376 5,125,352 16,761,881 15)395817 221)69 f,57 20821,169
Total assets 10,404,724 9,435,142 21,665,515 201:,89812 321)70 ,239 301)24954
Deferred outflows of resources: 1,3111)74 404,560 1,2731)96 ~ 21:,84,170 ~
Total net pos1t1on ~ ~ ~ ~ ~ ~ * See note 10(d) to the bas1cfinanc1al statements
Anal~sis of Net Position
The which may serve as a useful 1nd1cator of the government's f1nanc1al was of fiscal 2016-17, a 5 6 decrease over the year City's governmental act1v1t1es account for 79 b1ll1on ofth1s and $5 77 b1ll1on stem its business-type act1v1t1es
1s the $8 32 b1ll1on 1n net investment 1n 4 m1ll1on or2 1 percent increase prior
seen 1n the act1v1t1es and an overall increase 1n business-type a $284 8 m1ll1on increase at SFMTA offset by a decrease of $167 4 m1ll1on at the uses capital assets to services, these assets are not available for future
Further, the resources to p",the cut,tm,do,g assets themselves
Another portion of the City's net pos1t1on 1s the $2 08 b1ll1on that to external l1m1tat1ons their use The remaining
$2 def1c1t 1n gm,ec,meclal act1v1t1es business-type act1v1t1es def1c1t 1s due to
Note 9) The governmental act1v1t1es deficit also included fund the LHH rebuild certain park fac1l1t1es eu,ec,iecoywater the Water Enterprise,
CITY AND COUNTY OF SAN FRANCISCO
Management's Discussion and Analysis (Unaudited) (Continued) Year Ended June 30, 2017
Condensed Statement of Activities (in thousands)
Governmental actillities Business-type actillities Total
Revenues Program re;,,nues
Chargesforser~ces Operating grantsandcontnbulons Capital grantsandcontnbut1ons
General re;,,nues
Propertyta><es Business taxes Sales and use tax Hotel room tax
The City's change 1n net 84 b1ll1on 1n fiscal year2016-17, due to a $145 b1ll1on increase 1n the prior decrease 1n the current year The decrease 1n the
1n net pos1t1on was due to a $889 5 m1ll1on decrease from governmental act1v1t1es and a m1ll1on decrease from business-type act1v1t1es
-;;;c j :iii §
'$1,300
$1,tl()t)
$1.4{)0
$1,200
S1,000
ssoo
SDOO
5400
$200
£{)
CITY AND COUNTY OF SAN FRANCISCO
Management's Discussion and Analysis (Unaudited) (Continued) Year Ended June 30, 2017
Expen$eS and Program Revenues -Governmental ActiVlties
11\Expenses
oflrogram Revenues
Revenues By Source - Governmental Activities:
Utility ur:.ers 1a~ 1-7%
10
Capital grams am! i:::onb ihutiorn,
0.)%
Opsraling grants and contnb1,1ho111,
"'""
CITY AND COUNTY OF SAN FRANCISCO
Management's Discussion and Analysis (Unaudited) (Continued) Year Ended June 30, 2017
c,,tcc,tal net pos1t1on by approximately $222 7 m1ll1on Key factors contributing to this change are
Overall, total revenues from gc'momeolal increase over the prior year
a $305 6 m1ll1on or 5 3 percent 63 b1ll1on before transfers of
$647 9 m1ll1on
Property tax revenues increased by $142 8 m1ll1on or 7 9 This growth was due 1n large part to regular annual tax and tax collections with higher assessed values of secured real
and unsecured 1n San Francisco and also due to increase 1n supplemental for both year and assessments An increase 1n
of $142 7 m1ll1on or 35 7 byan increase 1n real property transfer tax due to an increase 1n the full phase 1n of a rate increase enacted 1n November 2016
Revenues from business and sales and use taxes totaled $62 7 m1ll1on over the $41 m1ll1on due
portion of the and increased business fee levels Sales and use tax $21 m1ll1on 1s primarily due to the 1n January 2016, 1n which O 25 percent of 1 percent Bradley Burns allocation was to to for economic bonds, with the O 75 being allocated to local percent revenue
as sales tax 1n 2016-17 as opposed to half of the prior year
Hotel room tax revenues declined Convention Center for renovations
3 m1ll1on, or 4 5 fact that the City
room tax revenue growth 1s a function of changes 1n occupancy, room revenue per available room, which combines the slightly 1n six years
acd fell
This was largely due to decreases 1n other offset by increases from State sources The
Transportation, and Commerce due to This was offset primanly by a $54 8 m1ll1on
Total for services decreased $130 8 m1ll1on, or 16 8 The decrease 1s due to several one-time 1nclud1ng $23 9 m1ll1on at the Department Health caused by a change 1n collection of adm1nistrat1ve fees as well as higher audit reserves There was also a decrease of $39 9 m1ll1on 1n 1nclus1onary fees owing to a non-recurnng development proJect 1n the prior year, a decrease 1n Stab1l1zat1on fees of m1ll1on after a increase 1n the a decrease 1n community impact fees 4 m1ll1on due to fees to 3 m1ll1on decrease 1n revenue from San Francisco increased by $123 7 m1ll1on due
Interest and investment income revenue increased by $11 2 m1ll1on, or 46 5 percent, due to increased interest rates as well as balances 1n the City's investment due to an increase 1n property tax revenues, real property transfer tax revenues, business tax revenues, and other revenues
Net transfers from the act1v1t1es to business-type act1v1t1es were $64 7 9 m 1ll1on, a $23 2 m 1ll1on decrease or 3 5 from the prior year This was mainly due to a decrease 1n operating subs1d1es to SFGH of $177 m1ll1on offset by increased subs1d1es from the General Fund of $33 6 m1ll1on to SFMTAand $11 0 m1ll1on to LHH In add1t1on, $28 1 m1ll1on for road improvement and street safety proJects, and $68 9 m 1ll1on 1n capital assets related to Sustainable Streets
The increase oftotal 1n pension expense
expenses of$1 22 b1ll1on, or27 6 percent, was 7 m1ll1on, plus salary increases and increases 1n demand
11
an increase
$1,600
$1,.tQQ
$1,200
$400
$200
CITY AND COUNTY OF SAN FRANCISCO
Management's Discussion and Analysis (Unaudited) (Continued) Year Ended June 30, 2017
Expenses and Program Revenues - Business-Type Activities
,,----
1-'m,sr
7 m1ll1on 1n Public 5 m1ll1on 1n Culture
Waslewater
Revenues Sy Source~ Business~typeActivities
Charges for SBMCCS
lntemstanct
l0peratmg grants and contnblJ!ians
!J.5%
12
CITY AND COUNTY OF SAN FRANCISCO
Management's Discussion and Analysis (Unaudited) (Continued) Year Ended June 30, 2017
Business-type activities decreased the City's net pos1t1on by $225 9 m1ll1on and key factors contributing to this decrease are
International Airport had a decrease 1n net pos1t1on at fiscal year-end of to a 9 m1ll1on increase 1n the a $166 8 m1ll1on difference
revenues 8 m1ll1on for fiscal year an increase of $59 8 m1ll1on or percent over the prior year and included increases of $49 9 m1ll1on, $2 8 m1ll1on, and $13 8 m1ll1on
1n av1at1on, concession, parking and partially offset a decrease of $6 7 m1ll1on 1n net sales and services revenues, growth at the For the same
penod, the ":::'.,~';'.cd~;~,:~~t m1ll1on, or26 3 net operating N act1v1t1es saw a of $201 0 m1ll1on versus
m1ll1on increase The increase 1n both operating and 1n deprec1at1on, and other nonoperat1ng
$123 6 due to a s1gnif1cant pension costs increase,
1n Cal1forn1a, reported a decrease 1n net compared to an increase 2 m1ll1on at
revenues totaled 3 expenses from transfers was
$40 8 m1ll1on, which included 6 m1ll1on 1n enterprise reported a total increase of $107 0 m1ll1on 1n fiscal $79 0 m1ll1on increase 1n personnel services mainly due to adm1nistrat1ve, and $12 2 m1ll1on 1n dec,ce,ccatccc expenses mainly from reductions
Hetch Hetchy Water and Power ended fiscal year 2016-17 with a net rn,ac,nd le a $25 7 m1ll1on increase the
$99 9 and the
ac m1ll1on 1n general and
3 for general and adm1nistrat1ve on actuarial report,
2 m1ll1on 1n decreased 1n revenues and $27 1
and adm1nistrat1ve expenses 1n expenses 1n its first year as a
separate segment
The City's Wastewater Enterprise's net decreased by $9 7 m1ll1on, increase the prior year, a $23 6 m1ll1on Operating revenues a $18 4 m1ll1on increase 1n charges for services as a result of an increase A $1 1 m1ll1on increase of interest and investment income,
rate non-
operating revenues mainly related to state assistance for stollll water flood management proJects The
13
CITY AND COUNTY OF SAN FRANCISCO
Management's Discussion and Analysis (Unaudited) (Continued) Year Ended June 30, 2017
increases were offset a decrease of $3 5 m1ll1on attnbuted to prior year's settlement from Pac1f1c Gas and Electric and 7 m1ll1on related to decrease 1n fees resulting from a 20 0 percent decline 1n permit sales and of increased by $22 7 m1ll1on due to increases of $55 3 (SSIP) and cost of l1v1ng pension costs,
by other departments, which were offset due to increased cap1tal1zat1on of fixed
ad,am,st;,t,ceexpenses, 5 m1ll1on 1n materials and supplies, and $1 2 1n services Add1t1onal increases include $6 2 m1ll1on 1n interest expense, offset by $2 9 m1ll1on 1n amort1zat1on of premium, loss and issuance cost Transfers out totaled 7 m1ll1on due to a transfer to City Real Estate for the Phase 1 of the Central Shops
The Port ended fiscal year 2016-17 with a net pos1t1on increase of $2 1 m1ll1on, $35 1 m1ll1on increase 1n the a $33 0 m1ll1on difference The Port 1s rnspccs,ble and one-half miles and its revenue 1s derived primarily from commercial and 1ndustnal enterprises a diverse mix ofmant1me In
revenues increased by $13 6 m1ll1on, mostly due to cm,scDce<cc
d:::::::~e'.:,",;;~: transaction fees, and recovenes realized d expenses $27 3 m1ll1on over the prior
2 m1ll1on 1n personnel services, which increase 1n pension expense, $5 8 m1ll1on 1n contractual services, and $2 amort1zat1on
The SFMTA had an increase 1n net pos1t1on of increase 01$478 3 m1ll1on 1n the
7 m1ll1on for fiscal year 2016-17, compared to an 6 m1ll1on SFMTA's total operating revenues
were $500 0 m1ll1on, while 7 m1ll1on
expenses $141 b1ll1on year and 1s mainly due to increase 1n for
4 fines and penalties by $5 0 m1ll1on, revenue by These increases were offset by 5 m1ll1on 1n passenger fares revenue, and slight decrease
increased by $308 5 m1ll1on pnmarily due to salary and hiring increases Net
grants, development of assets, interest and 1nvestm ent income, were offset by decrease 1n
grants and amortized portion of the lease leaseback benefits Net transfers increased m1ll1on mainly due to a $33 7 m1ll1on increase 1n transfers from the City's General Fund mainly
for operating subs1d1es
LHH, the City's skilled nursing care hospital, had a decrease 1n net of $69 5 m1ll1on at the end of fiscal 2016-17, to an increase of
1 difference LHH's loss before 6 m1ll1on versus a loss of $22 7 m1ll1on for the
due to a 3 m1ll1on decrease 1n operating revenues, a
the end of the year, a contributions and transfers the year was
This change of $109 9 m1ll1on was mostly 1 m1ll1on increase 1n operating expenses,
and a m1ll1on increase 1n other nonoperat1ng revenues
2016-17 with a decrease 1n net pos1t1on of the a $328 5 m1ll1on change This
pwcc y,ems net transfers which
year This was due services revenues, and increases 1n
Management's Discussion and Analysis (Unaudited) (Continued) Year Ended June 30, 2017
FINANCIAL ANALYSIS OF THE CITY'S FUNDS
As noted earlier, the City uses fund accounting to ensure and demonstrate com pl1ance with finance-related legal requirements
Governmental Funds
The focus of the City's funds statements 1s to provide 1nfomiat1on on near-term inflows, outflows, and balances resources available for future Such 1nfomiat1on 1s useful 1n assessing
serve as a useful measure
Capital Fund
At the end of fiscal year 2016-17, the City funds reported combined fund balances of $3 40 b1ll1on, an increase of 3 m1ll1on or 1 percent over the Of the total fund balances, $1 17 b1ll1on 1s assigned 1 m1ll1on 1s unassigned The total b1ll1on or 36 7 of the total fund balances constitutes the fund balances that are accessible to meet the City's needs fund balance class1f1cat1ons, the General Fund had an fund balance of $1 09 b1ll1on The remainder of the governmental fund balances includes $0 6 nonspendable for items that are not expected to be converted to cash such as inventories and long-term loans, $1 83 b1ll1on restricted for programs at vanous levels and $327 6 m1ll1on committed for other reserves
The General Fund 1s the fund of the City As a measure ofl1qu1d1ty, both the sum and unassigned fund balances and fund balance can be compared to total fund expenditures of the end of the fiscal and unassigned fund balances totaled $1 42 b1ll1on while total fund balance reached $1 b1ll1on assigned and fund balances represent 40 7 percent of total while total fund balance represents 53 of total expenditures For the year, the Fund's total revenues exceeded expenditures b1ll1on, before transfers and other items of $715 6 m1ll1on, resulting 1n total fund balance 1ncreas1ng 5 m1ll1on Overall, the 1n revenues, business taxes, ccc,certctcm,sfec Im were offset growth due to costs across 1n an increased fund C,,,,,C,,, fiscal year
The City's prnprn,tmy fund statements act1v1t1es government-wide
the same type of 1nformat1on found 1n the business-type statements but with some add1t1onal
At the end of fiscal year 2016-17, the unrestricted net funds was as follows Hetch Hetchy Water and Power $1894 m1ll1on, m1ll1on, and the Port
4 m1ll1on In add1t1on, the following funds had net deficits 1n unrestricted net 8 m1ll1on, Water Enterprise $43 5 SFMTA $37 1 m1ll1on, San Francisco
9 m1ll1on, and Laguna Honda Hospital 8 m1ll1on
15
CITY AND COUNTY OF SAN FRANCISCO
Management's Discussion and Analysis (Unaudited) (Continued) Year Ended June 30, 2017
and the results of
the current year f1nanc1al 1n the previous section on the City's business-type act1v1t1es
Non-Operating Operating C1')itat
Operating Operating Income Revenues Contributions Revenues Expenses ~ (Expense) and others
maintains f1duc1ary funds for the assets of the San Francisco Employees' Retirement System, System and Retiree Health Care Trust, and the investment of monies held 1n trust
At the end of fiscal year the net of the Retirement Service and Retiree Health Care Trust totaled $22 67
rnprn,,ectmg a $2 33 b1ll1on increase from the and 11 5 percent change The increase 1s a reduced by the net difference between contnbut1ons
made from the Plan The Private-Purpose Trust Fund a net def1c1t of $388 8 m1ll1on at year's end This 3 1
or 8 m1ll1on, increase 1n def1c1t 1s due to decreases 1n developer and other increases 1n program costs The lnvestm ent Trust Fund's net m1ll1on at year's end,
and the 16 0 percent increase represents the excess of d1stribut1on to external part1c1pants
General Fund Budgetary Highlights
The City's final budget differs from the original budget 1n that 11 contains carry-forward ape,mrmat,cc,s fee various programs and projects, and supplemental appropriations approved dunng the year
During the year, actual revenues and other resources were $128 0 m1ll1on the final budget The realized $166 6 m1ll1on, $69 1 m1ll1on, 1 m1ll1on, $10 2 m1ll1on and 9 m1ll1on more revenue than
1n real business taxes, interest and investment offset by reductions of $48 1 m1ll1on,
1n sales and use tax, hotel room tax, service charges and parking tax,
Differences between the final and the actual (budgetary basis) expenditures resulted 1n $121 5 m1ll1on 1n expenditure include
$52 1 m1ll1on 1n savings from from professional services of $41 2 m1ll1on and $10 1 m1ll1on savings 1n salary and fringe benefit $14 7 m1ll1on 1n from the Human Services to operating savings 1n salanes and benefits from 1n hiring, contract savings, 1n assistance and aid payments and lower than expected caseload levels The Department of Homelessness and Housing has a $5 7 m1ll1on due to the delay of purchase and of a bu1ld1ng but was not changes 1n the intended use The Department Children,
16
CITY AND COUNTY OF SAN FRANCISCO
Management's Discussion and Analysis (Unaudited) (Continued) Year Ended June 30, 2017
Youth, has a $1 2 m1ll1on savings 1n work order e,r;e,,d,t,arn resulting from able to complete all requested work w1th1n fiscal
Services Agency, and finance
and and benefits mainly 1n Treasurer/Tax General Asse,srn'/Reu,cd,s,, and other departments 1n general adm1nistrat1on
$12 7 m1ll1on savings 1n general city respons1b1l1t1es mainly from lower than expected city grant and retiree health subsidy
7 m1ll1on 1n salary and benefit and other departments 1n
Major capital asset events during the current fiscal year included the following
• Under act1v1t1es, net capital assets increased by $182 3 m1ll1on or 3 6 m1ll1on worth of construction 1n progress work was substantially and and infrastructure Of the
Glen Canyon Center and ape;m;,c,at,,ly$1 Fire Boat The remaining completed projects projects
The City's 5 m1ll1on O m1ll1on
2016 551,702
3,575,554 13,855,518
1,314,193 1 ,387 ,394
134,808 20,821,159
About
The Water Enterprise's net capital assets increased increase 1n construction and capital ,mpm,e,sect
included Calaveras Dam
Reserve
$155 0 m1ll1on or 3 2 percent, Major add1t1ons to construction
Groundwater Storage and Environmental Impact Project -
and improvement June 30, Water Enterprise 1s 94 0 through construction its mult1-b1ll1on dollar, multi-year program to upgrade the Hetch Regional and Local Water Systems The
17
CITY AND COUNTY OF SAN FRANCISCO
Management's Discussion and Analysis (Unaudited) (Continued) Year Ended June 30, 2017
w1th1n San Francisco and 52 regional foothills to San Francisco As of June
date 1s For
over seven
SFMTA's net assets increased O m1ll1on or 14 9 percent mainly from construction 1n progress of 6 m1ll1on for the new Project, transit lane, and rail rnplace,;,ect Equ1pm ent costs of $219 1 m1ll1on were 1ncu1Ted fiscal procurement motor bus, radio procurement of light rail and street car rehab1l1tat1on Land and $57 0 m1ll1on was incurred 2017 for lslais Creek fac1l1ty
and street, escalator m,,d;m,c,,t,cc. and upgrade of garage ctc,ectw,1,tc improvement
LHH's net assets decreased by $11 0 m1ll1on or 2 1 percent due expense new construction 1n due to the completion the new 1n March 2014 Laguna Honda Hospital 780 resident beds 1n three state of the Laguna Honda's 62-acre US Green Bu1ld1ng Leadership 1n Energy and Environmental Design (LEED) program, becoming the first green-certified hospital 1n Cal1forn1a
SFGH's net capital assets decreased by $13 3 m1ll1on or7 2 percent due expense and lower new construction 1n due to the cmw plet,,,c ,,ttheZmckc,,bc,cg General Hospital rebuild The rebuild act1v1ty and transactions are accounted for 1n the
The Wastewater Enterpnse net capital assets reported an increase of $192 0 m1ll1on or 9 3 mainly from new construction 1n act1v1t1es These include the B1osol1ds
and Clanf1er,
$40 5 m1ll1on or 10 0 percent to $444 7 m1ll1on primarily ,m,wmce,,t, and equipment for Mountain Tunnel
lm11rn 11ec;e;1t Moccasin Fac1l1t1es P1pel1ne Rehab1l1tat1on, and fac1l1t1es to the TransbayTrans1t Center The Improvement Program 1s a capital
program from 2012 to 2025 and includes and to address necessary work on water transm1ss1on, power transm1ss1on fac1l1t1es 1n
Stanislaus, San Joaquin and Alameda counties, essential to continued delivery
Th,, A,rn,,rt, net capital assets increased improvement project costs c;,'-;,;,, ' cew
ex1st1ng fac1l1t1es, renovate and security, develop
1n or under cc1,stccct,cc includes the rnclecelcw,ect
a new baggage which creates a notable ongoing
adm1nistrat1on campus bu1ld1ng, a
maintenance include the Terminal 1 (T1)
Area B, the expansion of the to the Tellll1nal 3 (T3)
chc;ckpmcLacd constructs a new secure connector the on-airport hotel, a new consolidated
parking garage, and a new industrial waste treatment plant
18
CITY AND COUNTY OF SAN FRANCISCO
Management's Discussion and Analysis (Unaudited) (Continued) Year Ended June 30, 2017
The Port's net assets decreased $3 1 m1ll1on or O 7 de1ornc,atmc of 1m prov em ents 1n 1nclud1ng the Pier 31
2 m1ll1on project for new and structural 1m1,;m1e,;,ects new roofing system at Piers and 31 Piers
San Francisco Embarcadero Historic District listed 1n the National Register of security improvements through the 1nstallat1on and of closed-c1rcu1t telev1s1on and integrated access control/1ntrus1on detection systems at key fac1l1t1es continue 1n phases, largely based on priority and available funding
bc;,1m;ss,tY1,e act1v1t1es had 'Pl'm;,mately for various Enterprise had an $579 8 m1ll1on, $229 7 m1ll1on, Airport had $188 8 m1ll1on, 7 m1ll1on, Port had $13 7 m1ll1on, Laguna Honda Hospital had $1 0 m1ll1on and the General 6 m1ll1on In there was $83 4 m1ll1on reserved for encumbrances 1n capital project funds for the projects
For governm ent-w1de f1nanc1al statement p;e,sect,,tm,, all depreciable assets were depreciated from statements record capital acqu1s1t1on date to the end of the current year Governmental fund
asset purchases as expenditures
Add1t1onal 1nfollllat1on about the City's capital assets can be found 1n Note 7 to the Basic F1nanc1al Statements
Debt Administration
At the end of June 30, 2017, the had total long-term and commercial 50 b1ll1on Of this amount, $2 28 1s general obl1gat1on bonds
without l1m1tat1on as to rate or amount upon all subject to $13 22 b1ll1on 1s revenue bonds, commercial and secured solely by spec1f1ed revenue sources noted previously, all bonds, loans, commercial paper notes and capital leases increased the fiscal year
cuMcmectal act1v1t1es was $204 3 m1ll1on primarily due to the bonds to finance 1) affordable housing improvements and
,'tcem1th,m1,c and betlellllent of critical and mental shelter and service fac1l1t1es The l1kew1se
refinance commercial used to finance the development 1n the Hunters View
b1ll1on comm erc1al paper for the expansion and executed $49 m1ll1on revolving cert1f1cates of part1c1pat1on for the
development of the Transbay Transit Center The City bo1Towed add1t1onal $46 0 m1ll1on for the San Francisco County Transportation Authority's voter approved K Expenditure Plan and entered into a capital lease with Banc of America for $34 m1ll1on to purchase and install a new emergency system and maintain the old system during the trans1t1on
The net debt increase for the revenue bonds to refinance a firehouse and vehicle security new adm1nistrat1on campus, enhancements to accommodate lacge, rn1m1fts
1, relocation of
A1rTrain extension, gate tee hcclcgycp,Jrndes to network services The
issued 8 m1ll1on revenue bonds to vanous transit and parking projects loan for the renovation of Portsmouth Plaza Parking The Water Enterprise
4 m1ll1on revenue bonds to refund commercial used and provide $20 0 m1ll1on new various capital projects 1n furtherance of the water system improvement program The
19
CITY AND COUNTY OF SAN FRANCISCO
Management's Discussion and Analysis (Unaudited) (Continued) Year Ended June 30, 2017
Airport and the Water Enterprise issued revenue refunding bonds for $147 8 m1ll1on and $893 8 m1ll1on, respectively, for economic gain
The City's Charter imposes a l1m1t on the amount of general obl1gat1on bonds the City can have outstanding at That l1m1t 1s three percent of the assessed value of taxable City- estimated at 30 b1ll1on 1n value as of the close of the fiscal As of June 30, had $2 28 b1ll1on
m and outstanding 1n full, the total debt burden would be of net) taxable assessed value of property
The City's underlying ratings on general obl1gat1on bonds as of June 30, 2017 were
Investors Service, Inc & Poor's
Fitch Ratings
Aa1 AA• AA•
Standard & Poor's and Fitch Ratings aff1mied , and AA+ rnspectwel,1 w,th Stable Outlook on all the City's outstanding
The enterpnse act1v1t1es carried debt ratings for the SFMT A of "AA" with Stable Rating Owllcck f,cm Standard & Poor's and "Aa2" Standard and Poor's and Fitch Ratings affirmed their credit ratings of the Airport and "A+", each with Stable Rating Outlook The Enterpnse carried underlying ratings of "Aa3" "AA-" Moody's and Standard and Poor's respectively
Add1t1onal inform at1on 1n the City's long-term debt can be found 1n Note 8 to the Basic F1nanc1al Statements
Economic factors and future budgets and rates
San Francisco has continued to\'.;'::;';:odc:, improvement 1n the c, 1n the of the City's
was adopted Mayor and the Board cfc,wpewism's for the SFMTA. the
The from
averages,~::;~~'.:;'~;;:; for fiscal average u1 rate 1n
continued to show year 2016-17 was $1
Commercial rents have shown strong square foot rental rates for cmm,e;;11al increases over the prior year
2016-17 was 3 1 percent, a decrease of O 3 percent year2015-16
new historical highs The average median home percent from the previous fiscal year
1n fiscal year The monthly per
a 5 1 percent
also continued to grow, a new historical high of 870,887 1n 2016 O increase versus the pnor year, Census Bureau This represents a
growth of 102,237 or 13 3 percent over the
The Board of Supervisors approved a final 2017, which assumes use of prior year $288 2 m1ll1on, respectively
budget for fiscal years 2017-18 and 2018-19 1n balance from General Fund of $183 3 m1ll1on
20
CITY AND COUNTY OF SAN FRANCISCO
Management's Discussion and Analysis (Unaudited) (Continued) Year Ended June 30, 2017
REQUESTS FOR INFORMATION
This f1nanc1al report 1s with a general overview receives Below are the 1nformat1on
City and County of San Francisco Office of the Controller 1 Dr Carlton B Goodlett Place, Room 316 San Francisco, CA 94102-4694
Individual Department Financial Statements
San Francisco International Airport Office of the Director Business and PO Box 8097 San Francisco, CA 94128
San Francisco Water Enterprise Hetch Hetchy Water and Power San Francisco Wastewater Enterprise Chief F1nanc1al Officer 525 Golden Gate Avenue, 13th Floor San Francisco, CA 94102
Municipal Transportation Agency SFMT A Chief F1nanc1al Officer 1 South Van Ness Avenue, 3rd Floor San Francisco, CA 94103
Zuckerberg San Francisco General Hospital and Trauma Center Chief F1nanc1al Officer 1001 Potrero Avenue, Suite 2A5 San Francisco, CA 94110
Successor Agency to the San Francisco Redevelopment Agency 1 South Van Ness Avenue, S1h Floor San Francisco, CA 94103
Port of San Francisco Public lnfomiat1on Officer Pier 1, The Embarcadero San Francisco, CA 94111
Laguna Honda Hospital Chief F1nanc1al Officer 375 Laguna Honda Blvd San Francisco, CA 94116
Health Service System Chief F1nanc1al Officer 1145 Market Street, Suite 300 San Francisco, CA 94103
San Francisco Employees' Retirement System Executive Director 1145 Market Street, 5th Floor San Francisco, CA 94103
Retiree Health Care Trust c!o Office of the Controller City Hall, Room 316 1 Dr Carlton B Goodlett Place San Francisco, CA 94102
Blended Component Units Financial Statements
San Francisco County Transportation Authority Director for Adm1nistrat1on and Finance
Street, 22nd Floor San Francisco, CA 94103
San Francisco Finance Corporation Office of Public Finance City Hall, Room 336 1 Dr Carlton B Goodlett Place San Francisco, CA 94102
WWWSFGOV ORG
21
CITY AND COUNTY OF SAN FRANCISCO
Statement of Net Position June 30, 2017 (In Thousands)
ASSETS Current assets
Deposits and 111Vestm ents with City Treasury Deposits and 111Vestm ents outside City Treasury Receivables (net of allowance for uncollectlble amounts
of $252,763 for the primary government) Property taxes and penalties other local taxes Federal and state grants and subventions Charges for se1v1ces Interest and other
Due from component units lllVentones other assets Restricted assets
Deposits and investments with City Treasury Deposits and investments outside City Treasury Grants and other receivables
Total current assets
Noncurrentassets Loan receivables (net of allcrwance for uncollect1ble
amounts of $1 ,263,252) Advance to component units other assets Restncted assets
Deposits and 111Vestm ents with City Treasury Deposits and 111Vestm ents outside City Treasury Grants and other receivables
Capital assets Land and other assets not being depreciated Fac111t1es, infrastructure and equipment, net of
deprec1a1Jon
Total capital assets
Total noncurrent assets
Total assets
DEFERRED OUTFLOWS OF RESOURCES Unamortized loss on refunding of debt Deferred outflcrws on derivatlve 1nstrum ents Deferred outflcrws related to pensions
Total deferred outflows of resources
Primary Government
Governmental Business-Activities ___ Type Activities_
3,911,280 155,356
99,951 267,319 284,807
85,002 13,743 1,581
95,020
21,617
4,845,676
138,223 13,149
1,Cl40,075
4,267,601
5,307,676
5,459,Cl48
10,404,724
16,339
1,294,735
1,311,074
2,446,138 15,576
184,811 ,m
98,374 6,156
351,472 291 ,800
22,271
3,840,5[14
2,627 11,452
569,877 443, 145
36,029
4,325,916
12,435,965
16,761 ,881
17,825,011
21,665,515
204,299 54,870
1,013,927
1,273,096
6,357,418 170,932
99,951 267,319 468,176 334,971 198,554
101,176
351,472 313,417
22,271
8,786,180
138,223 15,776 11,452
569,877 443, 145
36,029
5,365,991
16,703,566
22,069,557
23,284,059
32,070,239
220,638 54,870
2,308,662
2,584,170
The notes to the f1nanc1al statements are an integral part of this statement 22
Component Unit Treasure Island
Development _____ Authoritv __ _
7,225
7,938
20,390
" 20,402
20,402
28,340
'" '"
CITY AND COUNTY OF SAN FRANCISCO
Statement of Net Position (Continued) June 30, 2017 (In Thousands)
Primary Government
Governmental Business-Activities Type Activities ,~.
LIABILITIES Current l1ab1l1t1es
Accounts payable 281,462 184,413 475,875 Accrued payroll 1Cl4,840 80,055 184,895 Accrued vacation and sick leave pay 91,060 65,212 156,272 Accrued workers' compensatrnn 42,621 32,875 75,496 Estimated claims payable 71,290 39,424 110,714 Bonds, loans, capital leases, and other payables 573,669 546,565 1,120,234 Accrued interest payable 12,240 55,187 67,427 Unearned grant and subvention revenues 25,884 25,884 Due to primary gcrvernment Internal balances 35,190 Unearned revenues and other l1ab1l11Jes 573,442 1,086,469 Llab1l11Jes payable from restricted assets
Bonds, loans, capital leases, and other payables 228,895 228,895 Accrued interest payable 36,062 36,062 other 155,406 155,406
Total current l1ablllt1es 1,811,708 1,911,931 3,723,639
Non current l1ab1l1t1es Accrued vacation and sick leave pay 65,080 43,824 108,904 Accrued workers' compensation 199,202 161,053 360,255 other postemplcryment benefits obl1gat1on 1,338,592 974,031 2,312,623 Estlmated claims payable 55,256 186,455 Bonds, loans, capital leases, and other payables 11,224,019 14,149,187 Advance from pnmary government Unearned revenues and other l1ablllt1es 1,896 117,432 119,328 Derivative instruments l1ab1l11Jes 65,965 65,965 Net pension l1ab1l1ty 3,306,484 2,501 ,732 5,808,216
Total noncurrent l1ab1llt1es 7,967,621 15,143,312 23,110,933
Total l1ab1l1t1es 9,779,329 17,055,243 26,834,572
DEFERRED INFLOWS OF RESOURCES Unamortized gain on refunding of debt m w SM Unamortized gain on leaseback transaction 4,015 4,015 Deferred inflows related to pensions 149,841 107,154 256,995
Total deferred 1nflcrws of resources 150,058 111,466 261 ,524
NET POSITION Net 1rrvestment 1n capital assets, Note 10(d) 2,873,927 5,752,069 8,321,778 Restnctedfor
Reserve for rainy day 125,689 125,689 Debt service 108,179 310,441 Capital proJects, Note 1 O(d) 257,634 569,948 Community development 434,691 434,691 Transportation Authonty actrv1t1es 16,189 16,189 Bu1ld1ng 1nspect1on programs 150,109 150,109 Children and fam111es 115,284 115,284 Culture and recreatlon 130,984 Grants 90,087 other purposes 44,373 93,696 138,069
Llab1lrt1es Accounts payable Accrued payroll Unearned grant and subvention revenues Due to other funds Unearned revenues and otherl1ab1lrt1es Bonds, loans, capital leases, and other payables
Total l1ab1lrt1es
Deferred 1nfio1W of resources
Fund balances
Commrtted Assigned Unassigned
Total fund balances
Total l1ab1lrt1es, deferred 1nfiaws of resources and fund balances
The notes to the f1nanc1al statements are an integral part of this statement 25
$ 3,279,724 84,845
81,801
~ ~
' 353,721 89,262 24,250 33,696
494,796
~ 1,098,503
~
ms 1,564,062
187,170 945,652
~ 2,835,474
~
CITY AND COUNTY OF SAN FRANCISCO
Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position
June 30, 2017 (In Thousands)
Fund balances - total go,emmental funds
Amounts reported for gavernmental act1,1t1es 1n the statement of net pos1t1on are different because
Capital assets used 1n go,emmental act11,1t1es are not financial resources and, therefore, are not reported
1n the funds
Long-term l1ab1l1t1es, 1nclud1ng bonds payable, are not due and payable 1n the current penod and therefore are not reported 1n the go,emmental funds
other long-term assets are not available to pay for current-penod expenditures and, therefore, are deferred 1nflCP!ls of resources and are recognized as revenues 1n the penod the amounts become available 1n the
gavernm ental funds
Interest on long-term debt 1s not accrued 1n the funds, but rather 1s recognized as an expenditure when
Oce
Deferred outflows and inflows of resources 1n gavemmental act11,1t1es are not financial resources and, therefore, are not reported 1n the go,emmental funds
Net pension l1ab1l1ty and pension related deferred outftCP!ls and inflows of resources are not due 1n the
current period and therefore are not reported 1n the go,emmental funds
Internal seNce funds are used by management to charge the costs of capital lease financing, fleet management, printing and ma111ng sel\1ces, and 1nformat1on systems to 1nd1,1dual funds The assets and
l1ab1l1t1es of internal sel\1ce funds are included 1n gavemmental act11,1t1es 1n the statement of net pos1t1on
Net pos1t1on of go,emmental act1,1t1es
The notes to the f1nanc1al statements are an integral part of this statement 26
3,404,773
5,296,075
(4,969,646)
370,845
(11,016)
15,110
(2,120,840)
(198,890)
1,786,411
CITY AND COUNTY OF SAN FRANCISCO
Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds
Year Ended June 30, 2017 (\Mth comparative f1nanc1al 1nformat1on as of June 30, 2016)
(In Thousands)
Other Gouerrirental General Fund Funds Total Gouemrrerrtal Funds
The notes to the f1nanc1al statements are an integral part of this statement 27
$ 1,798,776 660,926 267,443 387,661
98,651 86,012
269,090 44,780 43,722 36,169 23,931
135,865
416,823 776,866
85,872 392,665 264,722
5,789,974
1,269,000 416,152
1,252,588 776,612 364,909 277,729 114,684
252,456 119,723
7,108 223,904
5074865
~
580,737 (1,251,800)
595,925
~ (168,578)
546,531 2,288,943
~
CITY AND COUNTY OF SAN FRANCISCO
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities
2017
Net changes 1n fund balances - total gavernmental funds
Amounts reported for go,emmental act1,1t1es 1n the statement of act1,1t1es are different because
Go,.ernmental funds report capital outlays as expenditures However, 1n the statement of act1,1t1es the
cost of those assets 1s allocated averthe1rest1mated useful l11tes and reported as deprec1at1on expense This 1s the amount by which capital outlays exceeded deprec1at1on and loss on disposal of capital assets 1n the current penod
Some expenses reported 1n the statement of act1,1t1es do not require the use of current f1nanc1al resources and therefore are not reported as expenditures 1n gavemmental funds This 1s the amount by which the increase 1n certain l1ab1l1t1es reported 1n the statement of net pos1t1on of the pre,1ous year exceeded expenses reported 1n the statement of act1,1t1es that do not require the use of current financial resources
Property taxes are recognized as re,.enues 1n the penod the amounts become available This 1s the
$569,299
181,708
(1,632,027)
current penod amount by which the deferred inflows of resources decreased 1n the go,emmental funds 14,002
other re,enues that were unavailable are reported as deferred inflows of resources 1n the gavemmental
funds 1111s 1s the current penod amount by which deferred 1nflcrws of resources decreased 1n the go,emmental funds
Go,.ernmental funds report re,.enues and expenditures pnmarily pertaining to long-term loan act1,1t1es, which are not reported 1n the statement of act1,1t1es These act1,1t1es are reported at the go,emment-w1de
le1tel 1n the statement of net pos1t1on 1111s 1s the net expenditures reported 1n the gavemmental funds
Changes to net pension l1ab1l1ty and pension related deferred outflows and inflows of resources do not require the use of current financial resources and therefore are not reported as expenditures 1n go,emmental funds
The issuance of long-term debt and capital leases pro,1des current f1nanc1al resources to go,emmental
funds, while the repayment of the pnnc1pal of long-term debt and capital leases consume the current f1nanc1al resources of gavemmental funds These transactions, hcrwe,.er, ha,e no effect on net pos1t1on
This 1s the amount by which bond and other debt proceeds exceeded pnnc1pal retirement 1n the current penod
Bond premiums are reported 1n the gavemmental funds when the bonds are issued, and are cap1tal1zed and am ort1zed 1n the statement of net pos1t1on This 1s the amount of bond premiums cap1tal1zed during the current period
Interest expense 1n the statement of act1,1t1es differs from the amount reported 1n the go,.emmental funds
because of add1t1onal accrued and accreted interest, amort1zat1on of bond discounts, premiums and refunding losses and gains
The act1,1t1es of internal se1,1ce funds are reported with go,ernmental act1,1t1es
Change 1n net pos1t1on of go,emmental act1,1t1es
The notes to the f1nanc1al statements are an integral part of this statement 28
23,050
7,615
746,638
(73,398)
(12,432)
19, 186
(11,255)
(167,614)
'Iliis page has Geen intentwnaiJy feft 5fanli.,
ASSETS Current Assets
Deposits and 1nvestmentswrth City Treasury Deposits and 1nvestmentsouts1de City Treasury Recewables(netofallowancefor
Fraicisco Fraicisco Hetchy Municipal Hospttal Francisco Port of L<l:luna Actilltties- Internal lnternalional Wiler Waleraid Traisportalion Medical \llbstewater Sai Homa Total ServiceFunds ~ Enterprise Po..,, Agency Center Enterprise Fraicisco ~ ~~ ~~
"" 4,245
$ 319,162 $ 264,026 $ 34 10
150 244 54,425 13,716 1,682 261
'"' "" 7,436
8,521 m
'"' ""
921,116 9,651
131,365 4,516 9,732
31,742
77,120
""
$224,663 $ 195,559 $146,019 $
rn "
" 68,805 164,590
8,500
2,251 28,874
'" m
1,192 4,737 6,074
1,592 m
38,114 21,811
rn
1,221
$ 2,446, 138 $ 2,370,166 15,576 16,494
98,374 6,156
225,984 232,251 199,453
27,133
102,000 3,163
$29,919 $35,264
95 53 742 633
11,233 14,409
Deposits and 1nvestmentswrth City Treasury 273,106 34,748 10,144
43,618 351,472 250,115 Deposits and 1nvestmentsouls1de City Treasury 142,557 107,188 3,783 28,128 291,800 312,380 21,617 25,349 Grants and other receivables ~ ~~
Total current assets
Noncurrentassets Other assets
Deposrtsand 1nvestments>MthCityTreasury Deposrtsand 1nvestmentsouls1deCityTreasury Grants and otherrecewables
Caprtal assets Land and other assets not being deprecrated Facrlrt1es,1nfrastructure,and
equ1pment,netofdeprec1at1on
Total capital assets
Total noncurrentassets
Total assets
DEFERRED OUTFLOV.S OF RESOURCES Unamort1zedlossonrefund1ngofdebt Deferred oulfiows on derwatwe instruments Deferredoulfiowsrelatedto pensions
Total deferred outflows of resources
LIABILITIES Currentl1ab1lrt1es Accounts payable
Total current l1ab1l1t1es
Noncurrentl1ab1l1t1es Accruedvacat1onand srckleavepay Accruedwotkers'compensat1on Otherpostemploymentbenefitsobl1gat1on Est1matedclarms payable ll1earnedrevenueandotherl1ab1l1t1es Bonds, loans, caprtal leases, and other payables Derwatwe 1nstrumentsl1ab1lrt1es Nstpens1onl1ab1l1ty
Total noncurrentl1ab1lrt1es
Total l1ab1l1t1es
DEFERRED INFLOV.S OF RESOURCES Unamort1zedga1nonrefund1ngofdebt Unamort1zedga1nonleasebacktransact1on Deferred1nfiowsrelatedtopens1ons
Total deferred 1nflowsofresources
NET POSITION Net1nvestment1ncap1talassets Restricted
lnternalional -" Walerand Traisportalion Medical \llbstewaler -~ Honda Total Service Funds Airport Enterprise ~-, Agency Center Enterprise Fraicisco Hosprtal 2017 M, ~~
91,578 s 31,830 s 6~95 s m s 23,477 s rn s 170,338 s 1,997 s ""' MS 8,772 49,ll13 '"" 3,334 18,607 88,225
1,910 2,&14 oos SSS OS
282,453
1,2SJ 2,ll57
The notes to the f1nanc1al statements are an integral part of this statement 33
CITY AND COUNTY OF SAN FRANCISCO
Statement of Fiduciary Net Position Fiduciary Funds
June 30, 2017 (In Thousands)
Pension, Other E"l'loyee and
Other Post-E"l'loyment Private-
BenefitTrust lnvestrrent PurposeTrust Funds Trust Fund Fund Agency Funds
ASSETS Depos1tsand1nvestmentswrthCrtyTreasury Deposits and investments outside CrtyTreasury
Cash and deposits Short-term investments
Debt securrt1es Equ1tysecunt1es Real assets Prwate equity and other alternatwe investments
Receivables Employer and employeecontnbut1ons Brokers, general partners and others Federal and state grants and sul:went1ons Interest and other Loans(netofallowanceforuncollect1bleamounts)
Other assets Restricted asset
Deposits and investments outside CrtyTreasury Capital assets
Land and other assets not being depreciated Fac1lrt1es, infrastructure and equipment, net ofdeprec1at1on
Total assets
DEFERRED OUTFLOWS OF RESOURCES Deferredoutfiows related to pensions Unamortized loss on refunding of debt
Totaldeferredoutfiowsofresources
LIABILITIES kcountspayable Estimated claims payable Due to the primary government A,Jencyobl1gat1ons kcrued1nterestpayable Payable to brokers Deferred Retirement Option Program Payable to borrowers ofsecunt1es Otherhab1ht1es Mvancefrompnmarygovernment Long-term obligations Net pension hab1hty
Total hab1ht1es
DEFERRED INFLOWS OF RESOURCES Deferred1nfiows related to pensions
NET POSITION Restnctedforpens1onand otheremployeebenefrts Held for external pool part1c1pants Held for RedevelopmentA,Jency d1ssolut1on
Total net posrt1on
50,782
65697 347,744
4,494029 10,693,290 2,975;)74 3,979516
%4 ,Ct
34653 145,795
34,108
45,402
22,867 ;355
19,128 27,755
147095 m rne
2656
197 053
22,670;302
22,670;302
864035
1 081
~
2500
-------22Qg_
862616
~
239,516
5,ffi7
~· 11,758 1,724 1,623
348,529
~
3,883
~ ~
18,321
sm
18,451
1,225 13,149
1,104,148
~ ~
________§_E2
~ ~
The notes to the f1nanc1al statements are an integral part of this statement 34
187,821
3,233
51,565
281 ,227
45,538
~
69,785
499,599
~
_, ___
CITY AND COUNTY OF SAN FRANCISCO
Statement of Changes In Fiduciary Net Position Fiduciary Funds
Year Ended June 2017 (le
Private-
Pension, Other El11)1oyee and
Other PostEmployment
Benefit Trust Investment Purpose Trust Funds Trust Fund Fund
Add1t1ons
461,765 1,461,184
3,162,246 Total contr1but1ons 1,942,969 3,162,246
Investment income Interest 176,412 5,374 D1v1dends 209,951 Net apprec1at1on 1n fair value of investments 2,356,432 Securities lending income 9,004
Total investment income 2,753,799 5,374 Less investment expenses
Securities lending borrower rebates and expenses (3,469) Other investment expenses (47,597)
Total investment expenses (51,066)
Other add1t1ons Total add1t1ons, eel 4,645,662 3, 167 ,622
Deductions Neighborhood development Deprec1at1on Interest on debt Benefit payments 2,261,516 Refunds of contributions 13,507 D1stnbut1on from pooled investments 3,046,901 Adm1nistrat1ve expenses 16,243
Total deductions 2,313,266 3,046,901
Change 1n net pos1t1on 2,332,414 116, 721 Net pos1t1on at beginning of year 20,337,888 743,895
Net pos1t1on at end of year 22,670,302 862,616
The notes to the f1nanc1al statements are an integral part of this statement 35
129,233 46,467
175, 700
2,266
2,266
11,916 169,904
130,840 4,949
52,947
12,975 201, 711
(11,607) (377,042)
(388,849)
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements June 30, 2017
(Dollars 1n Thousands)
(1) THE FINANCIAL REPORTING ENTITY
San Francisco 1s a city and chartered by the State of Cal1forn1a and as such can exercise the powers as both a city and a under state law As required accepted
the ";;i::;;:~;:;,j f1nanc1al statements present the City of San Francisco y and its component units The component discussed below are
entity because of the s1gnif1cance of their operations or f1nanc1al
Blended Component Units
of those legally sepsac::''.''":,:~~:f'~:~ units for which the City 1s f1nanc1ally acrn,1een that are with the primary~ because of their 1nd1v1dual governance or f1nanc1al relat1onsh1ps to the City
""
The Finance Corporation ,ec,,,p,,m,,, $20 0 m1ll1on
legally separate from
pc;;,','.{,:::;;e:;'~;::: because its sole C 1s governed by a three-The Finance
Place, San Francisco,
was created 1n Pc,pces,t,cc D authorized
c,ty C hartec amendment created Parking and Traffic the Mayor Upon creation
rnspccstb1l1I y to oversee the was transferred from to the The staff Parking Authority were also
into the Beginning on July 1 ',~;,'.,~';::':;for the operations PTC became the respons1b1l1ty of the .re to
Pcccces,t,ccE, which was passed the voters 1n November prepared for the Further inform at1on about the
from the SFMTA Chief F1nanc1al at 1 South Van Ness Avenue, 94103
36
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Discretely Presented Component Unit
/s~,;t' ~::;::i:'::;''::~:;:;·~~'~'h: TIDA)- The T IDA IS a public benefit. :::~11Cal tcc I with the Treasure Island Act of
by the Mayor, subject to conf1miat1on by the purpose of the TIDA 1s to promote
reuse, and conversion of the known as common benefit of the
adopted as its m1ss1on the creation of affordable housing and economic decelcp,aect opportunities on Treasure Island
The TIDA's body 1s not substantively the same as that of the services entirely entirely to the City The TIDA 1s
separate from the City The City 1s TIDA's Board and the ab1l1ty of the
to the TIDA, where are separately f1nanc1al statements are not Further 1nformat1on TIDA can be from the1radm1nistrat1ve offices of the Palms, Suite 241, Treasure Island, San Francisco, CA 94130
Fiduciary Component Unit
Cal1forn1a Redevelopment D1ssolut1on Law The Successor Agency 1s Comm1ss1on, commonly known as the Comm1ss1on on
lcfrn,t,cctcrn and 1s a separate entity from the of the and are conf1rmat1on
The City 1s the Successor Agency of the Com m1ss1on and a requirement that the Board of Supervisors approve the S11ccw;ccAgerncy, annual budget
units, ent1t1es for which the and County of San Francisco
authority formed between form er Agency act1v1t1es The
F1nanc1ng 1s as component unit 1n the Successor f1nanc1al statements because the F1nanc1ng Authonty provides services entirely to the
Per the Redevelopment D1ssolut1on Law, certain actions of the the d1rect1on of an Oversight Board The Oversight Board 1s rncrn,,ectat,,e, from local government bodies four City representatives
subject to conf1rmat1on by the Board of of the City, the Francisco Community District, the member of the Bay Area the Executive Operations of the San Francisco Unified
37
Transit District, and District
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Non-Disclosed Organizations
There are other governmental independent governing boards f1nanc1al statements, for certain
that provide services w1th1n the City These ent1t1es have 1s not f1nanc1ally accountable for them The basic held by the as an agent, do not reflect of
Cccpcrnt,cc, San Health Authority, San Francisco District and San Francisco Ccmc,P,,,ly
the Bay Area which are also
(2) SUfolTAA.RYOF SIGNIFICANT ACCOUNTING POLICIES
(a) Government-wide and fund financial statements
ouMcmect-w,de f1nanc1al statements (1 e, the statement of net report 1nformat1on on all of the ccc-t,dp,c,rn"
component units Governmental act1v1t1es, normally are mt,,,ocw,mmectal revenues, are reported from business-type rely, to a
extent, on fees and charges for the primary government 1s reported certain legally separate units forwh1ch the primary government 1s f1nanc1ally
The statement of act1v1t1es demonstrates the degree to which the direct expenses of a or segment 1s offset by program revenues Direct are those that are clearly with
function or Program revenues (1) charges to customers or applicants who or benefit from by a function or
segment, and grants and are the or capital requirements a particular function or segment Taxes and other items not properly included among program revenues are reported instead as general revenues
f1nanc1al statements are provided for governmental funds, funds, and f1duc1ary even though the latter are excluded from the statements MaJor
oc•mcmectal funds and m aJor 1nd1v1dual enterprise funds are reported as separate columns statements
rn,wo,,rnt,"e 1nformat1on This of detail for
principles such statements for the year ended
(b) Measurement focus, basis of accounting, and financial statement presentation
The government-wide f1nanc1al statements are reported using the economic resources measurement focus and the accrual basis of as are the fund and f1duc1ary fund financial
and cannot be said to have a are recorded when a l1ab1l1ty
1s incurred, regardless of the Pc;pc,rty trnrns are recognized as revenues 1n the for which they are Grants and s1m1lar items are recognized as revenue as soon as all requirements have been met
Governmental fund f1nanc1al statements are measurement focus and the modified accrual basis
using the current f1nanc1al resources Revenues are recognized as soon
rncmlece,d to be available when w1th1n the current period or soon enough thereafter to pay l1ab1l1t1es of the cu1Tent
38
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
are collected w1th1n 60 days of the end of All other revenues are rn,1scclec;d I c be available 1f they are generally collected
w1th1n 60 days end of the cu1Tent fiscal period It 1s the City's submit reimbursement and claim requests for federal and state grant revenues w1th1n 30 days end of the program and payment 1s the first or second quarter of the fiscal year E,1,ec1d,tpce,s
when a l1ab1l1ty1s 1ncu1Ted, as under accrual However, service as related to vacation, sick leave, claims and Judgments, are
recorded only when 1s due
Property taxes, other local taxes, grants and subventions, licenses, for services, rents and concessions, and interest associated with the current fiscal penod are considered susceptible to accrual and so have been as revenues of the current fiscal period All other revenue items are considered to be and available only when the City receives cash
The City reports the following maJor governmental fund
The General Fund 1s the City except those required to
fund It accounts for all f1nanc1al resources of the for 1n another fund
The City reports the following m aJor proprietary (enterprise) funds
The San Francisco International Airport Fund accounts for the act1v1t1es of the City-owned commercial service airport 1n the San Francisco Bay Area
The San Francisco Water Enterprise Fund accounts for the act1v1t1es of the San Francisco Water Enterpnse Enterprise) The Water Enterprise 1s engaged 1n the d1stribut1on of water to the City and suburban areas
The Hetch Hetchy Water and Power Enterprise Fund accounts for the act1v1t1es of Hetch Hetchy Water and Power (Hetch and CleanPowerSF Hetch 1s engaged 1n the collection and conveyance of 85 0% of the City's water and 1n the and transm1ss1on of aggregates the buying power of Francisco to purchase renewable energy
The Municipal Transportation Agency Fund accounts for the act1v1t1es Transportation Agency (SFMT A) The SFMT A was established by Pcc,pp;;t,ccc
voters 1n November 1999 The SFMTA includes the San Francisco
the of Sustainable Streets, which includes the -,t,i,itm;;,,;,;;,,cc est;bl,sh,,d 1n 1912 and 1s for the operations of the City's 01
rn,;cccscble for proposing and 1mplement1ng changes and operations Sustainable Streets 1s a separate department of
accounts for the act1v1t1es of various corporations acquire land,
The General Hospital Medical Center Fund accounts for the act1v1t1es of the San Francisco General Hospital (SFGH), a City-owned acute care hospital
The San Francisco Wastewater Enterprise Fund was created after the San Francisco voters a propos1t1on 1n 1976, the City to issue $240 0 m1ll1on 1n bonds forthe purpose
acqu1nng, construction, 1mprov1ng, improvements to the City's municipal sewage treatment and disposal system
The Port of San Francisco Fund accounts for the and maintenance of seven and one-half miles of waterfront property of Port of San (Port) This was established 1n 1969 after the San Francisco voters approved a propos1t1on to accept the transfer of the Harbor of San Francisco from the State of Cal1forn1a
The Laguna Honda Hospital Fund accounts for the act1v1t1es of Laguna Honda the City-owned skilled nursing fac1l1ty, which spec1al1zes 1n serving elderly and
39
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Add1t1onally, the City reports the following fund types
The Debt Service Funds account for the accumulation of periodic payment of interest and principal on general and related authorized costs
taxes and other revenues for certain lease revenue bonds
The Capital Projects Funds are used to account for f1nanc1al resources that are restricted, com milted or assigned to expenditures for the acqu1s1t1on of land or acqu1s1t1on and construct1on of maJor fac1l1t1es other than those financed 1n the proprietary fund types
The Special Revenue Funds are used to account for the that are restricted or committed to expenditures for capital proJects
The Permanent Fund accounts for resources that are earnings, not principal, may be used for purposes that
pf revenue sources debt service or
restricted to the extent that only spec1f1c programs
The Internal Service Funds account for the f1nanc1ng of goods or services by one City department to another City department on a cost-reimbursement basis Service Funds account for the act1v1t1es of the maintenance services, centralized printing and services, centralized and 1nformat1on services, and lease f1nanc1ng the Finance Corporation
The Pension, Other Employee and Other Postemployment Benefit Trust Funds reflect the act1v1t1es of the Employees' Retirement System (Retirement System). the Health Service and the Retiree Health Care Trust Fund The Retirement System accounts for contnbut1ons, and the earnings and profits from investments It also the made for employee retirement benefits, withdrawals, d1sab1l1ty and death benefits as well as adm1nistrat1ve The Health Service accounts for contribut1ons from active and retired emplcye,,s
l1m1ted circumstances
The Investment Trust Fund accounts for the external The funds of the San Francisco Community
the Trial Courts of the State of Cal1forn1a and accounted for w1th1n the Investment Trust Fund
of the Treasurer's Office investment D1strict, San Francisco Unified School Transbay Joint Powers Authority are
The Private-Purpose Trust Fund accounts for the custodial rn~~~:::::::;e; that are assigned to the Successor Agency with the passage of the Redevelopment Act
The Agency Funds account for the resources held by the City 1n a custodial the State of Cal1forn1a and other agencies, employees for human welfare, community and transportation programs
The City applies all applicable Governmental Accounting Standards Board (GASB) pronouncements
In general, the effect of 1nterfund act1v1ty has been el1m1nated from the government-wide f1nanc1al statements to this rule are charges to other City departments from the General Fund, Water Enterprise and Hetchy These charges have not been el1m1nated because el1m1nat1on would distort the direct costs and program revenues reported 1n the statement of act1v1t1es
Propnetary funds d1st1ngu1sh revenues and expenses ongoing operations The
revenues and expenses from items from services 1n connect1on with fund's
City's enterprise and internal service
40
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
sewer and power charges, public transportation patient service fees, commercial and 1ndustnal
mc,mtemmce fees, and telecommunicat1on and 1nfomiat1on system expenses for enterprise funds and internal service funds include the cost
services, ;,,~,,,;;,, ,;,;,",expenses, and deprec1at1on on capital assets All revenues and expenses not meeting this def1nit1on are reported as nonoperat1ng revenues and expenses
When both restricted and unrestricted resources are available for use, 11 1s the City's policy to use restricted resources first. then unrestricted resources as they are needed
(c) Deposits and Investments
Investment in the Treasurer's Pool
The Treasurer invests on behalf of most funds of the City and external p~:';1::~;,,;,,:;:;;:'.h';:;:;:::: the City's Cal1forn1a State Government Code T
of Supervisors manages the Treasurer's Cecot, T,e1,scc,Overs1ght Committee 1s to review and monitor the
to m on1tor com pl1ance with the investment policy and reporting prov1s1ons audit
The Treasurer's investment consists of two pooled deposits and investments and 2) dedicated investment The dedicated represent restricted funds and relate to bond issues of the Enterpnse Funds, and the General Fund's cash reserve requirement In add1t1on to the Treasurer's investment the has other funds that are held by trustees These funds are related to the issuance of and loan programs of the City The investments of the Retirement System and of the Retiree Health Care Trust Fund are held by trustees
The San Francisco Unified School District (School D1stnct). San Francisco Community rc,om ,acmtc College D1stnct). and the are involuntary part1c1pants 1n the ,ccestmeot 1cecl of June m,,lw,tmyoart,e1oacts accounted for 96 part1c1pants accounted for pool Further, the the Trial Courts of the State of and the Transbay Joint Powers part1c1pants of the City's pool At June 30, $862 6 m1ll1on was held on behalf external pmt,c,prn,ts The total percentage share of the pool that relates to these four external part1c1pants 1s 10 Internal part1c1pants accounted for90 of the pool
Investment Valuation
lnvestm ents are earned at fair value, except for certain non-negotiable 1nvestm ents that are reported at cost because they are not transferable and have temis that are not affected changes 1n market interest rates, such as collateral1zed cert1f1cates of deposit and time The fair value of investments 1s determined 1s based on prices The ofpart1c1pants'
1n the of the pool shares The method used to detemi1ne the value P';~,"'."''' '.'"'') 1s based on the book value of the part1c1pants' In the
event a overdraws its share of cash, the General Fund and a payable to the General Fund 1s 1n the City's basic f1nanc1al statements
Retirement System - Investments are reported at fair value Securities traded on national or 1nternat1onal exchanges are valued at the last reported sales price at current rates Securities that do not have an established market are reported at estimated fair value from third-party pricing services Purchases and sales of investments are recorded on a trade date basis
The fair values of real estate investments are based on Net Asset Values investment managers Private values of private equity ,ccestmeots general
ili oo_ 0 (D(J)'°(D ::Jo m (D I :f::J:lgS,80 (Dg(Dd-03'2: C----, o_"" ::J 3 '.g ::Jal~ g (D (D (D °c~m::0'1§<')-'
(J) mm 3 ----, -i 3 m
mm" 6- 6- :[
z o O
[ ~ ~ .. ro z
~- ~ '.5 :!! g ~ t; z ~ i6 ~- ~ ::J W!!!. Q --,_o(I) "Tl g ::,;;: (/) (J) ~(D :l=-Cl)-...., 3 Z 6- g "Tl
(J) ! ~ n z g O ~ (/) , 0 a o s
z o O
[ ~ ~ .. ro z
~- ~ '.5 :!! g ~ t; z ~ i6 ~- ~ ~-8~ ~ g ::,;;: (/) (J) ~(D :l=-
~-...., ~ :;; (J) ! ~
n z g O ~ (/) , 0 a o s
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
(f) Property Held for Resale
Property held for resale includes both res1dent1al and commercial property and 1s recorded as other assets at the lower of estimated cost or estimated conveyance value Estimated conveyance value 1s management's estimate of net realizable value of each based on its current intended use Property held for sale may, dunng the 111s generate rental income, which 1s recognized as 11 becomes due and 1s collectible
(g) Capital Assets
Capital assets, which include land, fac1l1t1es and machinery and equipment, infrastructure assets, and 1ntang1ble are reported 1n applicable or bus1ness-type act1v1t1es columns 1n the f1nanc1al statements and 1n proprietary and pnvate-
trust funds assets, except for 1ntang1ble are defined as assets with an 1nit1al $5 and have an estimated life that a single reporting period
or more than a Intangible assets have a Such assets are recorded at historical or estimated historical cost or constructed Donated capital assets are
value at of donation Capital outlay 1s recorded as expenditures of the and other governmental funds and as assets 1n the governm ent-w1de f1nanc1al statements to the extent the cap1tal1zat1on threshold 1s met Interest incurred during the construction phase of the capital assets business-type act1v1t1es 1s reflected 1n the value of the asset constructed, net of interest earned on the invested proceeds over the same period Amort1zat1on of assets under capital leases 1s included 1n and amort1zat1on Fac1l1t1es and infrastructure, machinery and equipment, easements, and 1ntang1ble assets of the as well as the component units, are depreciated using the straight-line method over the estimated useful lives
Assets Years Fac1l1t1es and improvements 15 to 175 Infrastructure 15 to 70 Machinery and equipment 2 to 75 Intangible assets Vanes with type
Works of art, h1stoncal treasures and research 1n furtherance of public service, are protected, unencumbered, cared for, and preserved proceeds from sale of these items for the acqu1s1t1on
(h) Accrued Vacation and Sick Leave Pay
prior to December 6, and employment by retirement or d1sab1l1ty caused by industrial accident
education, or
ut1l1ze
pf
upon lellll1nat1on of
The City accrues for all salary-related items 1n the government-wide and fund f1nanc1al statements for which they are liable to make a payment and associated with payments made for com pen sated absences on term1nat1on The its share of social security and Medicare payments made on behalf of the employees 1n the accrual for vacation and sick leave pay
44
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
(i) Bond Issuance Costs, Premiums, Discounts, and Interest Accretion
In the governm ent-w1de f1nanc1al statements, the type f1nanc1al statements, debt and other long-term as 1n the applicable governmental business-type act1v1t1es, propnetary or f1duc1ary fund statement of net
Bond issuance costs related to prepaid insurance costs, bond premiums and discounts for Francisco International San Francisco Water Enterprise, H etch Power,
SFMTA, and San Francisco Enterprise are amortized over the life bonds using the effective interest method The bond prepaid insurance costs, bond premiums and discounts are calculated Bonds payable are reported net of the applicable bond premium or
In the fund f1nanc1al statements, governmental funds recognize bond and discounts as other sources and uses, Issuance costs 1nclud1ng insurance costs, whether or
from the actual received, are reported as debt service expenditures
Interest accreted bonds 1s reported as accrued interest payable 1n the government-wide, and f1duc1ary fund f1nanc1al statements
Ul Fund Equity
Governmental Fund Balance
As prescribed by Statement No 54, Fund Balance Reporting and Governmental Fund fund balance 1n one of five class1f1cat1ons that comprise a
tc,nh,chthe City 1s bound to honor constraints on the spec1f1c purposes 1n the funds can be spent The five fund balance class1f1cat1ons are as follows
Non spendable - includes amounts that cannot be spent because they are either not 1n spendable follll to be maintained intact The not 1n follll criterion
by external resource Restcct,c,c,; may effectively be
Committed - includes amounts
to be converted to
ordinance passed the Board of Sc1se1"''"' changed or lifted by the City originally
due to constraints or enabling leg1slat1on
the consent of resource providers
Assigned- includes amounts that are not class1f1ed as restricted, or committed, but are intended to be used by the City for 1s expressed action of the Board of or to which leg1slat1on authority to assign to be used for spec1f1c purposes
unes,,gc,w - 1s the residual class1f1cat1on for the General Fund and includes all amounts not 1n the other class1f1cat1ons Unassigned amounts are available for any
Other governmental funds a negative balance that was after class1ficat1on 1n one of the balance categories
In circumstances whe::,J'::",~"::::~~:i:';, 1s made for a purpose for which amounts are available 1n multiple fund balance fund balance 1s generally depleted 1n the order of restncted, comm1tted, assigned, and
45
Encumbrances
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
The City establishes encumbrances to record the amount of orders, contracts, and other obl1gat1ons, which have not yet been fulfilled, cancelled, or Encumbrances outstanding at year-end are recorded as part of restncted or assigned fund balance
Net Position
and propnetary fund f1nanc1al statements ut1l1ze a net pos1t1on presentation Net 1s categorized as net investment 1n capital assets, restricted, and unrestncted
Netlnvestmentln Capital Assets - This all capital assets, infrastructure, into one component of net deprec1at1on and the balances of debt, 1nclud1ng debt related outflows and inflows of resources, that are to the acqu1s1t1on, construction, or improvement of these assets reduce the balance 1n this category
represents net pos1t1on that has external restrictions cm;tcbvlvcs or laws or regulations of other and
through const1tut1onal prov1s1ons or enabling
Unrestncted Net Pos1t10n - This category represents net pos1t1on of the City, not restricted for any project or other purpose
(kl lnterfund Transfers
lnterfund transfers are generally recorded as transfers 1n ( out) except for certain types of transactions that are described below
Charges for services are recorded as revenues of the performing fund and e,c,ecm,rns of the requesting fund Unbilled costs are recognized as an asset of the performing and a l1ab1l1ty of the requesting fund at the end of the fiscal year
(I) Refunding of Debt
cv1emmeclalacdbv1o1m1ssly1,e
(m) Pollution Remediation Obligations
one fund, which are re1mburs1ng fund
Iv vi
Pollution remed1at1on obl1gat1ons are measured at their current value using a cost-accumulation based on the pollution remed1at1on outlays to be incurred to settle those
vbl1gal1vcis Each or event 1s possible amounts Some estimates of ranges possible
a few discrete scenanos or a single scenano, such as the amount spec1f1ed 1n a for pollution remed1at1on services
(n) Cash Flows
Statements of cash flows are fund types Cash and cash equivalents include all unrestricted and restrictee:d:;1~)'::'.l'.~d ,c,eslme,cls ong1nal purchase maturities of three months or less Pooled cash and 1n Treasury represent monies 1n a cash management pool and such accounts are s1m1lar 1n nature to deposits
46
(o) Pensions
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
and defe1Ted outflows~nflows of resources related the f1duc1ary net of the SFERS and the
the plans' r~,~:,::,;~::v~;",'.1:v;~ei::~;~~I (CalPERS) plans add1t1ons to/deductions from
delecm,ed on the same basis as are reported by the Forth1s
due and 1n the period 1n
vi ,,m1slvyee cm,lclovl,vcs I are recognized cv,,mvvmmsare recognized
GASB Statement No 68, and for Pens10ns - an amendment of GASB Statement No 21 (GASB No requires reported results pertain to asset 1nfomiat1on w1th1n certain defined L1ab1l1t1es are based on the results of calculations performed as of June 30, 2015 and were rolled fomard to June 30, 2016 Forth1s report, the following t1meframes are used for the City's pension plans
Valuation Date (VD) Measurement Date (MD) Measurement Penod (MP)
June 30, 2015 updated to June 30, 2016 June 30, 2016 July 1, 2015toJune30, 2016
(p) Restricted Assets
Certain proceeds of the City's act1v1t1es, enterprise and internal service funds as well as certain resources aside for their repayment, are class1f1ed as restricted assets on
because the use of the proceeds 1s l1m1ted by bond covenants and resolutions assets account for the and interest accumulated to pay debt service, unspent bond proceeds, and amounts for future capital projects
(q) Deferred Outflows and Inflows of Resources
The City records deferred outflows or inflows of resources 1n its cm1evsm,1clc1I mvo1ie1,," f1duc1ary, and government-wide financial statements for that 1s
to a future reporting penod These f1nanc1al
In governmental fund statements, deferred inflows of resources consist of revenues not collected w1th1n the period after fiscal In government-wide f1nanc1al statements, defe1Ted outflows and inflows are for unamortized losses and gains on refunding of debt, deferred outflows and inflows of resources related to deferred outflows of resources on derivative 1nstrum ents, and defe1Ted inflows of resources related the SFMT A's leaseback transaction
(r) Estimates
The preparation of f1nanc1al statements 1n conformity with generally requires management to make estimates and assumptions that affect disclosures Accordingly, actual results could differ from those estimates
(s) Reclassifications
Certain amounts, as fiscal Summarized the basic statements, have reclass1f1ed for presentation 1n the fiscal year 2016-17 basic f1nanc1al
47
accounting principles reported amounts and
F1nanc1al Information 1n purposes, to confomi to the
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
(3) RECONCILIATION OF GOVERNMENT-WIDE AND FUND FINANCIAL STATEWENTS
(a) Explanation of certain differences between the governmental funds balance sheet and the government-wide statement of net position
Total fund balances of the governmental funds, $3,404,773, yf governmental act1v1t1es, $1 reported 1n the statement of net results from the long-term economic focus 1n the statement of net resources focus 1n the governmental funds balance sheets
Total Long-term lmernal Redassi- Statement of Governmental Assels, Service fications aid Net Poslion
Furds Lial>illies Funds"' ElinWmtions Tolals -.. Deposits and 1n.,,strrents"'"th City Treasury ' 29,919 ' Deposits and 1n.,,strrentsouts1deC1ty Treasury 21,617 RBce1vables,net
Property taxes and penalties otherlocaltaxes Federalandstategrantsandsubvent1ons Charges for services % Interest and other m Duefromotherfunds (17,550)
Duefromcorrponentunit 1,581 Advance ID corrponentunit 13, 149 Loans receivable, net 138,223 Capital asset~ net 5,296,075 11,601 5,307,676 other assets ~ ~
Totalasffits ~ ~ ~ ~) 10,404, 724
Deferred outflows of resources Unarmrt1zedlosson refunding of debt 15,327 1,012 16,339 Deferred outflows related to pensions ~ ~ 1,294,735
Total deferred outrlows of resources ~ ~ ~
Lial>ltties Accounts payable
152,924 Accruedworkers'corrpensat1on 240,023 otherposterrployrrentbenefrtsobl1gat1on 1,312,199 Esl1tmtedcla1mspayable 202,489 Accrued interest payable 11,016 1,224 Unearned grant and sub.,,nt1onrevenues Due to other funds 1,787 (17,550) Unearned revenue and other l1abillt1es " Bonds, loans, caprtal lease~ and other payables 182,783 Netpenson l1abillty ~ ~ 3,306,484
Totall1abillt1es ~ ~ 287,045 ~) 9, 779,329
Deferred inflowsofreso..-ces Unavailable revenue 370,845 (370,845) Unarmrt1zedga1n on refunding of debt m m Deferred inflows related to pensons ~ -------1Z:!!_ ~
Total deferred inflows of rerources --------1ZM§ ______ill1ill.l -------1Z:!!_ _____J_fil@
Fmd balaicesl nel position Totalfundbalanceslnetpost1on $ 3 404 773 ~ $ (198890)
_, ___ $1786411
48
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
(1) When capital assets (land, infrastructure, bu1ld1ngs, assets) that are to be used 1n governmental act1v1t1es are the costs of those assets are reported as e,r,emJ,tcrns 1n governmental funds
the statement of net those assets, net of acccmclated deprec1at1on, among assets of the City as a
Cost of assets Accc,c ctatc,d deprec1at1on
to the governmental act1v1t1es are not due and ace c;,Jm,ilv are not reported as fund l1ab1l1t1es
are reported 1n the statement of net pos1t1on
Accrued vacation and sick leave pay Accrued workers' compensation Other postemployment benefits obl1gat1on Estimated claims Unearned revenue other l1ab1l1t1es Bonds, loans, capital leases, and other payables
Interest on long-tellll debt 1s not accrued 1n governmental funds, but rather 1s recognized as an expenditure when due
act1v1t1es are governmental funds
of resources related to debt resources, and therefore,
Unamortized loss on refunding of debt Unamortized gain on refunding of debt
1n governmental reported 1n the
Net l1ab1l1ty 1s not due and payable 1n the current period, and ac,cc,dmclc 1s reported as a fund l1ab1l1ty Deferred outflows of resources to pensions are not f1nanc1al resources, and are not reported 1n the governmental funds
l1ab1l1ty outflows of resources related to pensions
Deferred inflows of resources related to pensions
Because the focus of gcmcmectal funds 1s on the of resources, some assets will not be to pay for cu1Tent period e,c,mJ,t;rn, and thus are not included 1n fund balance
Revenue not collected w1th1n 60 days of the end of the cu1Tent fiscal period
49
$ 6,923,800 (1,627,725) $5296075
$ (152,924) (240,023)
(1,312, 199) (202,489)
(1,896) (3,060, 115) $(4 969 646)
(11 016)
15,327 217
15 110
370 845
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
(2) Internal service funds are used management to charge the costs of certain act1v1t1es, such as capital lease maintenance services,
and mailing services, and and 1nformat1on systems, funds The assets and l1ab1l1t1es of the internal service funds are
included 1n governmental act1v1t1es 1n the statement of net pos1t1on
Net before adJustments AdJcstmectsfor internal balances with the San Francisco Finance Ccco,rnt,cc
Capital lease receivables from other governmental and enterprise Unearned revenue and other l1ab1l1t1es
(35,728)
(178,943) 15 781
(198 890)
(b) Explanation of certain differences between the governmental funds statement of revenues, expenditures, and changes in fund balances and the government-wide statement of activities
differs from the 1n net of act1v1t1es The d,fferncc,,,
arise from the long-tellll economic f1nanc1al resources focus 1n the governmental funds The effect of the differences 1s illustrated below
Revenues Property taxes Business taxes Sales ard use tax Hotel room tax
Rents and conress1ons lntergo,a-nmental
Fecleral AAe other
Chargesfors«sces
Other
Totalre1enues
Expen<ituresl Expenses
Current
Publ1cProtect1on
Public V10rks,transportet1on and commerce
Hum an welfare and ne1ghbothood de1elopment
Communrtyhealth
Cultureandreoreet1on
Genera adm1nrstrat1onand 1nanre
Genera C1tyrespons1b1lrt1es
Debt sersce
Bond issuance costs Caprtal rutlay
Tctalexpend1tures
Total Gooernrnental
Furxls
~ ~
1,323,517
332,ffi3
1,424,425
712,485
390,Cl38
303,113
121,447
283,3% 125,ffi1
2,ffi5
~ ~
655,601
50
Long-term Reveruesl
Expenses(3)
14,002
(315)
''° (3,870)
(1,377)
~)
~
343,745
75,969
118,008
124,228
74,085
140,785
"''
~
(840,722)
Cap~al- Internal Long~errn statement of related Service "~ Activities ltems(4) Funds(5) Transactioos(6) Totals
J
JSJ
~ rn ~ ~ ,oo 6,106,886
29,554 (4,652) 1,692,224
(20,971) (268) 387,423
'" "' 1,543,047
31,905 868,628
87,282 (11,889) 539,516
(106,663) C,J 337,209
22,846 145,247
4,664
(237,0ffi)
(275,301) ~ ~ 5,626,558
372,625 ~ 302,542 480,328
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
,~, Long-term Capital- Internal Long-term Goverrrnental Reveruesl related Service "~
Funds Expen,es(3) ltems(4) Funds(5) Transactions(6) other financing sources(usesj I
changes in net positioo Nettr,rnfers1n(oct) (581,040) (68,917) 2,015 lssuanceofl:ondsandloans
Face1alueofbords1ssued 276,570 (276,570)
Face1alueofloansrssued 46,000 (46,000)
Premium on issuance of bends 12,432 (12,432)
Proceeds from saleofcaprtal assets 122,000 (122,000)
other1nanc1ngsources-caprtalleases ~ ~ ~)
Totalother1nanc1ngsources(uses) ~) (190,S17) ~ ~)
Net change for the year ... ~ ~ ~ ~ ~
(3) Property taxes that were unavailable and are as deferred inflows of resources 1n the governmental funds are rn,,,g,,,rnd as revenues 1n the statement of act1v1t1es
Other revenues that were unavailable and as defe1Ted inflows of resources 1n the governmental funds are rn,,ce,,,rnd as revenues 1n the statement of act1v1t1es
Some reported 1n the statement of act1v1t1es do not require the use of resources and therefore are not reported as 1n
governmental funds Certain long-term l1ab1l1t1es reported 1n prior year statement of net pos1t1on were paid during the current period resulting 1n e,r,emJ,tcrn, 1n the governmental funds This 1s the amount by which the increase 1n l1ab1l1t1es exceeded expenditures 1n funds that do not require the use
statement of Activmes
Totals
(647,942)
(647,642)
~
14,002
23 050 37 052
of cu1Tent f1nanc1al resources $( 1,632 ,027)
Changes to net pension l1ab1l1ty and related deferred outflows and inflows of resources do not resources and, therefore, are not reported as a reduction 1n e,,,e,,dttcce,, 746,638
eJ1m10tccrnsprimarily pertaining to long-tellll loan 1n the statement of act1v1t1es These act1v1t1es are at the level 1n the statement of net pos1t1on This 1s the net expenditures reported 1n the governmental funds 7 615
(877 774)
51
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
(4) assets that are to be used 1n act1v1t1es are purchased
(5)
the resources for those assets are as e,r1ecd,tr,rns 1n governmental funds However, 1n the statement of the
of those assets 1s allocated over their estimated useful lives and reported as deprec1at1on expense As a result, fund balance decreases the amount of financial resources expended, whereas net pos1t1on decreases the amount of deprec1at1on expense charged for the year and the loss on disposal of capital assets
Capital
Gain on Loss on Transfer Wnte off of construction 1n progress Increase 1n construction 1n Proceeds from sale of
Difference
the costs of certain mc1mtem,we. pnnt1ng and
mailing services, funds The adJustments for internal service funds add1t1onal amounts to crnirc,catrcc governmental act1v1t1es to cc,c pretedy ,cc,ecthe internal service funds' costs year
(6) Bond premiums are a source of funds 1n the governmental funds when the bonds are issued, but are 1n the statement of net pos1t1on This 1s the amount of premiums during the cu1Tent penod
Bond and loan and capital leases are reported as otherf1nanc1ng sources 1n funds and thus contribute to the change 1n fund balance In the government-wide debt increases long-term l1ab1l1t1es 1n the statement of net affect the statement of act1v1t1es Proceeds were received
52
486,779
(11 255)
(12 432)
283,356
(248,250) (28,320) (34, 184) (46 000)
(356,754)
$~
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Interest 1n the statement of act1v1t1es differs from the amount reported 1n gc,,ec,mectar funds because add1t1onal accrued and accreted interest was calculated for bonds, notes and capital leases, and bond discounts, prem 1ums losses and gains are eel e,per,de,d the fund statements
Decrease 1n accrued interest Amort1zat1on of bond premiums and discounts Amort1zat1on of bond refunding losses and gains
(4) EFFECTS OF NEW ACCOUNTING PRONOUNCEMENTS
During fiscal year 2017, the City implemented the following accounting standards
877 20,245 (1,936) 19 186
In June 2015, the GASB issued Statement No 73, and FmanC1al Reportmg for Pensions and Related Assets That Are NotW1thm the Scope ofGASB and Amendments to Certam Prov1s1ons of GASB Statements 61 and 68 This statement establishes requ1rem ents for defined benefit pensions that are not w1th1n the scope of Statement No 68, as well as for the assets accumulated for purposes of those In add1t1on, 11 establishes requirements for defined contribut1on
of Statement No 68 It also amends certain prov1s1ons of Hc•ecoel H,ep,;ct,,;g t,v F'ecsmcPlans, and Statement No 68 for pension and
The prov1s1ons 1n this statement were that address and
are not w1th1n the scope 68, which 2017 lmplementat1on of the standard resulted 1n a
of governmental act1v1t1es for fiscal year 2016-17
In June 2015, the GASB issued Statement No 74, Fmanc1al Reportmg for Postem,,!oym,,ct Plans Other Than Pens10n Plans and Statement No 75, and for P~,;;~~i~";;';'.;','. Benefits Other Than Pensions Statement No revises new a, benefit plans other than pensions (OPEB) and f1nanc1al reporting requirements for governments that requires add1t1onal OPEB disclosures Statement No 74 1s after June 15, 2016, and 1s effective
the notes
June 30,
Statement No was implemented for the City's fiscal year 1n accordance with GASB Statement No 74, 1s presented 1n
'";:::::,:,:::': 1nfollllal1on 1n the Retiree Health Care Trust Fund's t 75 1s effective for the City's year ending
In August 2015, the GASB issued Statement No 77, Tax Abatement Disclosures Statement No 77 establishes f1nanc1al reporting standards for tax abatement agreements entered into ,c,,ec,mects The new standard 1s effective for periods after December 15,
statement did not have a significant impact on the year ended June 30,
In December 2015, the GASB issued Statement No 78, Pens10ns Provided through Certam Mult1p/e-Emp/oyer Def med Benefit Pens10n Plans GASB Statement No 78 establishes and f1nanc1al reporting standards for defined benefit by state or local a cost-sharing plan that meets the critena 68 and 1s not a state pension plan The new standard 1s effective for periods after December 15, ofth1s statement did not have a s1gnif1cant impact on the
53
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
In January Blending Requirements for Certam Component Umts----an GASB Statement No 14 statement amends the blending requirements established 1n paragraph 53 of Statement No 14, The Fmanc1al Entity, as amended The add1t1onal cnterion requires of a component unit mcccpcmted which the sole member new standard 1s
this statement did not have a s1gnif1cant
In add1t1on, the City 1s currently analyzing its accounting practices to determine the potential impact of the following pronouncements
In March Statement No agreements created through trusts 1n a
Irrevocable Split-Interest Agreements GASB standards for irrevocable split-interest
rnAcrnt1tyt,rndscs resources to an 1ntermed1ary The new standard 1s effective for periods statement 1s effective for the City's year ending
In November 2016, the GASB issued Statement No 83, Certam
15, 2016 Appl1cat1on of this
Statement No 83 addresses accounting and f1nanc1al reporting for asset retirement The statement establishes critena for determining the and pattern of of a c::;~;;,:,:;~':1~ deferred outflow of resources for and requires of a used The new standard 1s effective for periods after June 15, 2018 Appl1cat1on of this 1s effective for the City's year ending June
In January 2017, the GASB issued Statement No 84, establishes criteria for 1dent1fy1ng f1duc1ary act1v1t1es of all state are included to 1dent1fy units and pcstemptcym
act1v1t1es The new 1s effective for Aot,ltcaltcte of this statement 1s effective for the City's year ending
In March 2017, the GASB issued Statement No 85, Ommbus 2011 GASB Statement No 85 addresses a variety of measurement
In May 2017, the GASB issued Statement No 86, Certam Debt Issues GASB Statement No 86 clanf1es and f1nanc1al reporting for in-substance of debt
of refunding debt The new standard 1s effective for Aot,ltcat,c,c ofth1s statement 1s effective for the City's year ending June
In June 2017, the GASB issued Statement No 87, Leases GASB Statement No 87 establishes a mode I for lease accounting and requires reporting of certain lease assets, l1ab1l1t1es, and deferred
that are not reported The new standard 1s effective for periods after December 15, 2019 of this statement 1s effective for the City's year ending June
54
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
(5) DEPOSiTS AND INVESTMENTS
(a) Cash, Deposits and Investments Presentation
Total C1tycash, deposits and investments, at fa1rvalue, are as follows
Deposits and1nvestmentsw1th
C1tyTreasury
Deposits and investments outside
C1tyTreasury
Restricted assets
Deposits and1nvestmentsw1th
C1tyTreasury
Deposits and1nvestmentsouts1de C1tyTreasury
lnvested1nsecunt1eslend1ngcollateral
Totaldepos1ts&1nvestments
Cash and deposits Investments
Total deposits and investments
(b) Investment Policies
Treasurer's Pool
Primary Government Governmental Business-type Rduciary
Activities Activities Funds
3;)11,280 2,446,138 1 ,342 ,154
155,356 15,576 22,565 544
921 ,349
21 617 734,945 348 529 ,Cl
4088,253 4,118,008 $ 24,256,428
Component Unn
Total TIOA
7 699 572 7 ;2.25
22,736,476
921 ;349
1,105091 ,Cl
32,462689 7 ;2.25
276 ;2.78 32,186,411 7 ;2.25
32,462689 7 ;2.25
safek,,er1mg and custody practices with investment instruments, and
with large cash balances, and members funds maintained 1n the investment pool
Government Code The Treasurer prepares and submits an the Board of members of the Oversight Committee and
prnitctprn,ts covers the type of investments 1n the pool,
The investment places l1m1ts based on the type of security Investments held by the Treasurer during year did not repurchase agreements or reverse repurchase agreements The table below 1dent1f1es the 1nvestm ent types that are authorized May 2016 The table also 1dent1f1es certain of the interest rate risk and concentration of credit
55
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Maxim um Maximum Percentage of
Authorized lnvestm ent Type Maturity Portfolio US Treasuries 5 years 1 00% Federa I Ag en c1es 5 years 1 00% State and Local Go1ternmentAgencyObl1ga1Jons 5 years 20%' Publ1cT1me Deposits 13months' None N egot1able Cert1f1cates of Depos1t!Yankee
Cer1Jf1cates of Deposit 5 years 30% Bankers Acceptances 180 days 40% Commercial Paper 270 days 25%' Medium Term Notes 24 months' 25%' Repurchase Agreements (Government Securities) 1 year None Re purchase Agreements (Securities permitted by CA
Government Code, Sect10 ns 53601 and d 53 635 1 year 10% Re1ters e Repurchase Agreements I Securities Lend 1ng 45 days' None Money Market (lnst1tut1onal Go1ternment Funds) N/A 10%' Money Market (lnst1tut1onal Prime Funds) 60 days 5% Supranat1onals 5 years 5%' State of Cal1forn1a Local Agency Investment Fund (LAIF) N/A Statutory
Maximum lnvestm ent in One Issuer
100% 100% 5%' None
None None 10%
10%' None
None $75 m1ll1on'
N/A
N/A None None
' Represents re stnct1on for which the City's 1n1te stment policy 1s mo re restnct11te than the Cal1forn1a Government Code
The Treasurer also holds for bequests, trust funds, and lease departments The and trust consist of stocks and debentures valued at par, cost, at the time of donation
Other Funds
for other City instruments are
and investments with trustees related to the issuance of bonds by the City These funds are invested either 1n accordance with
bond covenants are for payment interest. and spec1f1ed capital improvements or 1n accordance with grant agreements and may for the issuance of loans
56
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Employees' Retirement System
The Retirement System's investments are invested pursuant to investment established by the Retirement Board The of the 1s to max1m1ze the fund at an acceptable level of risk The Board established ce,cec,tw;e for types of investments to ensure the portfolio 1s d1vers1f1ed
Investment managers are required to d1vers1fy by lnvestm ent man agers retained by the Ret1rem ent System evaluated against spec1f1c market benchmarks that represent investment from general from the Retirement Board The Retirement 1n secunt1es such as asset backed securities, securities and collateral1zed mortgage obl1gat1ons The value, securities are sens1t1ve to changes 1n economic or defaults, or both, and may be affected by shifts 1n the 1n interest rates
and related income of these
investments 1n domestic and 1nternat1onal debt and real estate, foreign cu1Tency contracts, denvat1ve mscmmems investments, which include investments 1n a variety of commingled partnership
The Retirement Board's asset allocation pol1c1es for the year ended June 30, 2017, are as follows
Asset Class Global Equity Fixed Income Private Equity Real Assets Hedge Funds/Absolute Return
Target Allocation 40 0% 20 0% 18 0% 17 0% 50%
100 0%
1s not directly involved 1n repurchase or reverse repurchase agreements However, investment managers retained by the Retirement System arrangements 1fthe securities or sold the manager's mcestmect The Retirement System monitors investment managers to ensure compliance with gu1del1nes
Retiree Health Care Trust Fund (RHCTF)
The RHCTF's investments outside of the City gu1del1nes as established the RHCTF Board so as to achieve the reasonably prudent real the RHCTF to invest 1n and 1ntemat1onal
equity, US nominal 1nflat1on-l1nked bonds, RHCTF does not currently hold assets 1n these classes
has percentage gu1del1nes for types of investments to ensure the portfolio 1s d1vers1fied, as follows
Asset Class Domestic Equity International Equity Investment Grade Bonds
Target Allocation 37 0% 37 0% 26 0%
100 0%
57
Range 32 0-42 0% 32 0-42 0% 21 0-31 0%
(c) Fair Value Hierarchy
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
c::t,~:;~ ~s9
1ts fair value measurements w1th1n the fairvalue hierarchy established by generally I; The 1s based on the valuation inputs used to measure fair
prices 1n an active market for 1dent1cal assets, Level 2 are significant other observable inputs, and Level 3 inputs are significant unobservable inputs
City does not value any of its investments using Level 3 The inputs or methodology used securities are not an 1nd1cat1on of risk associated 1nvest1ng 1n those securities
The following 1s a summary of inputs used 1n valuing the City's investments as of June 30, 2017
PrimuyGovernment: Investments Held in City Treasury.
US Treasury i'lltes US Agencies - 01scount US Agencies - Coupon (no callopt1on) US Agencres (callable option) State and Local Agencies Negotiable Certificates ofOepos11s Corporate Notes Supranat1onals CommercralPaper PublrcT1me Oeposrrs Money Market Mutual Funds
Subtotal
Investments Held Outside Cttylreasury. (Governmental and Business-Type) US Treasury i'lltes US Agencres CommercralPaper Money Market Mutual Funds Cemficates ofDeposrr
Subtotal Investments Outside City Treasury
'i'lltsub1ecttofarrvalueh1erarchy
Fair value 613012017
872,449 483,736
3,028,514 1,195,831
334,967 1,053,728
89,933 358,801 836,967
%0 301,857
297,460 234,885 77,697
534,668
Fair value Measure,,..,nts Using Quoted Prices in Significant Active Markets Other
for Identical Observable Unobservalle Assets Inputs Inputs
(Level 1) (Level 2) (Level 3)
872,449 $
297,460 $ 234,885
M
=="'"""':,"~'= :c=:ln~;Js!co[ $ 234,885
58
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Fair Value Measurements Using
En-.,loyees' Retirement System Investments Short Term Investments Debt Securities
US Government &Jl{Jency Securities Other Debt Securities
lnvestedsecunt1eslend1ngcollateral Subtotal Employees' Retirement System Investments
Investments measured at the net asset value (NA\/) Short Term Investments Fixed Income
US Government &Jl{Jency Securities Other Fixed Income
Equ1t1es Domestic Equrty lnternat1onalEqu1ty
Real Assets Prwate Equity Absolule Return
Total investments measured at the NAV Total investments measured atfarrvalue
Healthcare Trust (measurements at the NA\/) Fixed Income
US Debt Index Fund Equ1t1es
Domestic S&P 500 Equrty Index Fund
International EAFE Equrty Index Fund
Money Market Investments Treasury Money Market Fund
Subtotal Investments 1n Healthcare Trust
Total Investments
*Not subJecttofarrvalue hierarchy
Fair Value 6BOQ017
59
329!,87
1,194P34 2,004!,64
4,749997 3,770;343
"' '°' 12,049,490
18,157
916,247 1,121,429 2,975974 3,401 i,47
97967 10,293!,25 22,300015
47P27
67P90
67!,84
32,193,636
Quoted Prices in Significant Active Markets Other
for Identical Observable Unobservable Assets Inputs Inputs
(Level 1) (Level 2) (Level3)
2,%7 333,620
64,537
4P54,187 '°' 95,ED7 3,764,376 4,004 1,833
"' '°' 8,418,933 3,141,915 489012
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Investments Held in City Treasury
US Treasury Notes are valued using quoted prices 1n active markets and class1f1ed 1n Level 1 of the fair value hierarchy
US Government State and Local agencies, Negotiable Certificates of Deposit, Corporate Notes, Com merc1al and Supranat1onals are valued using a variety of techniques such as matrix
market corroborated inputs such as yield curve, 1nd1ces, and other market related data 1n Level 2 fair value hierarchy
Market Funds and Public Time Deposits have maturities of one year or less from fiscal year-end are not subject to GASB Statement No 72
Investments Held Outside City Treasury
US Treasury Notes are valued prices 1n active markets and class1f1ed 1n Level 1 of the fa1rvalue hierarchy U S c;crns e;;tl\cc,;;cces are valued using a variety of techniques such as m atnx
market corroborated pricing such as curve, 1nd1ces, and other market related data and 1n Level 2 Commercial Money Funds, and Cert1f1cates of Deposit are not subject to fair value hierarchy
Employees' Retirement System Investments
Investments, at Fair Value
Equity securities class1f1ed 1n Level 1 of the fa1rvalue hierarchy are valued using prices quoted 1n active markets Debt and equity securities class1f1ed 1n Level 2 of the fair value hierarchy are valued using
determ 1ned by the use of m atnx techniques m a1nta1ned by the various vendors for securities Debt securities 1nclud1ng instruments are based on prices
Such evaluated may be detellll1ned by factors which but are not l1m1ted to, market quotations, maturities, call ratings, 1nst1tut1onal size trading 1n s1m1lar groups of securities related to secunt1es securities not traded on an active exchange, or 1f the obtained from vendors are generally and equity securities class1f1ed 1n of the fair value are securities whose stated market prices are unobservable Many of these secunt1es are priced uncorroborated 1nd1cat1ve pnces on inputs from different sources, using such as extrapolated data, proprietary
pnc1ng vendors
that would be received to sell an asset or paid to transfer a l1ab1l1ty 1n an market part1c1pants at the measurement date In some cases, a
multiple inputs used to measure fair value, and each might fall into hierarchy The level 1n the fair value a fair value
measurement falls 1n its entirety 1s determined based on the lowest level that 1s s1gn1f1cant to the measurement The pnces used 1n determ1n1ng the fair value hierarchy are from various pricing sources by the Retirement System's custodian bank
Investments, at Net Asset Value (NAV)
The debt funds are commingled funds that are priced at net asset value and fund NAV 1s the market value of all secunt1es owned by a fund, minus d1v1ded by the number of shares issued and outstanding The NAV of an open-end fund 1s its price
60
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
investments 1n pnvate credit 1nvestm ents, opportunistic public real assets, and absolute return investments are based on net asset values
by the m,,d,ce,tl Partners") Such value generally represents the Retirement System's proportionate share of
the net assets of the l1m1ted partnerships The partnership f1nanc1al statements are audited of December 31 and the net asset value are adjusted by add1t1onal contnbut1ons to and dcst;;t,ct;,,;;s from the partnership, the Retirement System's share of net earnings and losses, and unrealized gains and losses resulting from changes 1n fair value, as determined by the General Partners
The General Partners may use one or more valuation metth,,d,dcci,es Value Measurement For some investments, little market
Fair exist The General Partners'
1n the circumstances and may involve assumptions and estimates, the General Partners' assessment of the
investments The General Partners may external factors, 1nclud1ng but not l1m1t to, l1qu1d1ty Such fair value estimates involve
1nformat1on market part1c1pants would use 1n take into cons1derat1on a comb1nat1on of internal
The values been used
by the General Partners maay;,:d,,:1:1·~ec'.e';,;;'""'"''Yfrom the values that would have a ready market existed for these 1r
Private Credit investments are held 1n funds These investments are d1stribut1ons received over the life of the They are typically not have set redemption schedules Two opportunistic public investments, valued are currently being These proceeds are to received over the next 3-5 years The remaining public are subject to a 2-year lock up with l1qu1d1ty provided with 60 notice The real asset holdings are 1ll1qu1d D1stribut1ons are received over which could equal or exceed ten years They are not
have set redemption schedules Pnvate investment strategies include and s1tuat1ons 1n the asset class are
P':;:,::::;;,"i,ih::,:~::;~::,,:,:\ but also include 1 and rnsmoco,,;;s am These investments
Absolute return investment strategies include credit, macro, multi-strategy, special s1tuat1ons, and Investments are partnerships The table below provides a summary of the terms and cond1t1ons Retirement may redeem its absolute return investments Investments have potential to become under stressed market cond1t1ons and, 1n certain circumstances, investors be subject to restrictions that differ from the standard tellll s and cond1t1ons summarized which can the return of capital according to those terms and cond1t1ons
Absolute Return Investment Measured at NAV as of June 30, 2017
% of NAV 25%' 46% 10% 19%
100%
Redemption Frequency
' 5% subject to a lock-up that expires as of April 1, 2018
61
Redemption Notice Period 65-95 days
95 days 95 days 95 days
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Retiree Health Care Trust Fund
Investments, at Net Asset Value (NAV)
At June 30, 2017 the Retiree Health Care Trust Fund had investments 1n equity and debt crnm1mc1led index funds, the City Treasury Pool, and market funds The funds are pnced at net asset (NAV) and fund fam1l1es 1s the market value of all secunt1es owned minus d1v1ded by the number of shares issued and outstanding As of June there are no redemption restrictions on the commingled index funds
(d) Investment Risks
Custodial Credit Risk - Deposits
Custodial credit risk for 1nst1tut1on, the City will securities that are 1n the p11sses1s,cc
acd
Interest Rate Risk
Interest rate risk 1s the risk that changes 1n market interest rates will an investment Generally, the longer the maturity of an 1nvestm ent, the q;c,atc,i tc1e value to changes 1n interest rates lnfollllat1on about the investments to interest rate fluctuations 1s by the of the investments by matunty Retirement
1n section (fl of this note
62
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
S&PRating Fair Value Primary Government:
Investments 1n C1tvTreasury US Treasury Notes AA• 872,449 US Agencies- Coupon NR- AA+ 4,708,081 Negotiable certificates of deposits A-1 -A-1+ 1,053,728 Money Market Mutual Funds -m 301,857 Public time deposits ce '°" State/Local Agencies A-1+,AA--AA+ 334,967 Supranat1onals - 358,801 Corporate notes A+ - AA- 89,933 Commercial Paper A-1-A-1+ 836,967
Less Treasure Island DevelopmentAuthontv Investments >Mth C1tv Treasury "" (7,225)
Less Employees'RetirementSystem Investments >Mth C1tvTreasury (11,800)
Less Health Care Trust Investments >Mth C1tvTreasury "" (2,215)
Subtotal pooled investments 8,536,503 ' Investments Outside C1tyTreasury
(Governmental and Business-Type)
US Treasury Notes NRIAAPIAA+ 297,460 ' US Agencies- Coupon AA• 8,031 US Agencies - Discount AA+/A-1+ 226,854 Corporate notes Money Market Mutual Funds -m 513,349 US Treasury Money Market Funds -m 21,319
Commercial Paper A-1+/A-1 77,697 Certificate of Deposit ce m
Subtotal investments outside C1tvTreasury 1,144,975 ' Retiree Health Care Trust Investments 185,118 Employees' Retirement System investments 22,31 9,815
Investments >Mth C1tvTreasury "" 7,225 ' Total Investments 32, 193,636
Investment Maturtties
Less than 1 to 5 1 year years
248,387 2,835,803
1,025,822 27,906 301,857
'°" 170,852 164,115 204,996 153,805
39,794 50,139 836,967
(7,225)
(11,800)
(2,215)
5,077,588 ' 3,458,915
93,751 203,709 8,031
31,739 195,115
513,349 21,319
77,697
'°' 738,120 ' 406,855
7,225
As of June 30, 2017, the investments 1n the City Treasury had a weighted average matunty of4 71 days
63
Credit Risk
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Credit risk 1s the risk that an issuer of an investment will not fulf1ll 1ts investment This 1s measured ccc,ac,rnt,cc The Standard &
Custodial Credit Risk for Investments
holder of the
Custodial credit risk for investments 1s the risk that, 1n the event of the failure of the counterparty to transact1on, the City will not be able to recover the value of its investment or collateral securities that are 1n the of another party The Cal1forn1a Government Code and the investment
do contain legal or requirements that would l1m1t the to credit nsk investments, however, 11 1s practice of the Treasurer
registered or held by the Treasurer's custodial 1n the name The governmental and business-type act1v1t1es also have investments the issuance of bonds that are uninsured, unregistered and held by the rn,,cte;;c,arte s trust departments but not 1n the City's name These amounts are included 1n the investments City Treasury shown 1n the table above
Concentration of Credit Risk
The contains no l1m1tat1ons on the amount that can be invested 1n any one issuer by the Cal1forn1a Government Code and/or its investment policy US Treasury and agency securities expl1c1tly guaranteed by the U S government are not subJect to single issuer l1m1tat1on
As of June 30, 2017, the City Treasurer has investments 1n U S Agencies that represent 5 0% or more of the total Pool 1n the following
Federal Farm Credit Bank Federal Home Loan Federal Home Loan
Corporation 21 9% 144% 95%
In add1t1on, the funds'
maJor funds hold investments with trustees that represent 5 0% or more of the City Treasury as of June 30, 2017
Airport Federal National Assoc1at1on Federal Home Loan Federal Home Loan Mortgage Corporation
Hetch Hetchy Federal Farm Credit Bank
64
16 6% 14 0% 89%
68 2%
(e) Treasurer's Pool
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
The a condensed statement of net pos1t1on and changes 1n net pos1t1on for the as of June 30, 2017
Statement of Net Position
Nel posi1ion held in 1rus1 for all pool par1icipan1s ..
Equilyof inlernal pool par1icipan1s ..
Equilyof ex1ernal pool par1icipan1s ..
Tola I equi1y ..
Statement of Changes in Net Position
Nel posi1ion al July 1, 2016 ..
Nel change in inveslm enls by pool par1icipan1s ..
Nel posi1ion al June 30, 2017 ..
$8,628,146
$7,765,530
862,616
$8,628,146
$7,916,658
711,488
$8,628,146
The June 30,
provides a summary of key investment 1nformat1on for the Treasurer's Pool as of
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
(f) Retirement System's Investments
The Retirement System's investments as of June 30, 2017, are summarized as follows
Fixed Income Investments Short-term 1mestments Investments 1n City Treasury
Debt secunt1es US Government and agencies Other debt securities Subtotal debt secunt1es
Total fixed income 1mestments
Equity securities Domestic International
Total equity securities
Real assets Private equity Absolute return Foreign currency contracts, net Investment 1n lending agent's short-term investment pool
Total Retirement System Investments
Interest Rate Risk
347,744 11,800
1,555,180 2,891,222 4,446,402
4,805,946
5,666,244 4,891,772
10,558,016
2,975,974 3,401,547
577,967 164 201
22,319,815
The Retirement System does not have a the time d1stribut1on
to manage interest rate risk Below 1s a table income investments based upon the expected
as of June 30, 2017
Maturities Less than 1
Investment Type Fair Value year 1-0years 6-10years 10+years 'A',,'o"<00,'c't'co<s<,,w'c'1t1e',~-----,,~,,,,,c,a,co-,~~--.,~--"co00.'SO'<- $ 8,992 $ 85,057 Bank Loans 148,645 City Investment Pool Collateral1zed Bonds Commercial Mortgage-Backed
The securities listed as "Not Rated" include short-term 1nvestment~f~o~od;,~_~:;;;;;::;;;;;; securities, and investments that invest 1n rated securities,
market funds, but do not have a spec1f1c credit the Rated" component of credit would be approximately 20 2%
Concentration of Credit Risk
Concentration of credit risk 1s the risk of loss attnbuted to the of the Retirement typ1rnllyrnotctcl a pos1t1on to
Securities issued or guaranteed 1nvestment1na no more than 5 investment manager's by the U S government or its agencies are exempt from this
As of June 30, 2017, the Retirement exceeded 5 0% of total Retirement
Custodial Credit Risk
had no investments of a single issuer that equaled or investments or net pos1t1on
20 2 __ - ,- R et1rement System or its agent 1n the
m1ll1on of the Retirement System's investments were exposed to custodial credit risk because were not insured or registered 1n the name of the R et1rement and were held by the rncmto,;pc1rty o trust department or agent but not 1n the Retirement
Retirement
For fiscal managed
cash received as securities lending collateral 1s invested 1n a separate account agent using investment gu1del1nes approved by the Retirement System and
67
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
custodial bank Secunt1es 1n this separately managed account are not
Foreign Currency Risk
The Ret1rem ent System's exposure to foreign derives from its pos1t1ons 1n foreign currency denom 1nated cash, equity, fixed private em,,tc ,m,estm ,sots real assets, and swap 1nvestm ents The Retirement System's managers to enter into foreign exchange contracts, which are l1m1ted to ex1st1ng 1n the Denvat1ves are considered investments, rather than and f1nanc1al
The Retirement System's net exposures to foreign currency risk as of June 30, 2017, are as follows
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Derivative Instruments
As of June 30, 2017, the derivative instruments held by the Retirement System are considered investments and not hedges for accounting purposes The gains and losses arising from this are recognized as 1ncu1Ted 1n the statement of changes 1n f1duc1ary net All mcesbae,,t denvat1ves discussed below are included w1th1n the investment risk subsection Investment derivative instruments are disclosed separately to and d1st1nct view ofth1s act1v1ty and its impact on the overall investment
The fair value of the mstm,aeots. such as futures, options, The fair values foreign currency
foreign exchange rates as the Retirement System's investment managers
,mestmeot instruments
The table below presents the notional amounts, the fair value amounts, and the related oelaP1crn,c,at<eo ( deprec1at1on) 1n the fair value of derivative 1nstrum ents that were outstanding at June 30,
Net Appreciation Notional (Depreciation) in
Derivative Type I Contracts Amount Fair Value Fair Value Forwards
(a) The Retirement System's investment managers enter into a wide variety of forvvard foreign exchange and other contracts, which frequently do not involve the US dollar As a result, a US dollar-based notional value 1s not included
All investment derivatives are reported as investments at fair value 1n the statement of pos1t1on Rights and warrants are 1n F ore1gn exchange contracts are
contracts, contracts that are not derivatives All changes 1n fair value are
SP1crnc<al<eo (depee,c<ctl<eo) 1n fair value of investments 1n the statements of changes 1n
Counterparty Credit Risk
The Retirement System 1s to credit risk on occ,-e,ch,,ooe are 1n asset pos1t1ons As of 30, 2017, the fa1rvalue
exchange contract options) to purchase and stee;":,~;'.:~,'.~,'.::'t' m1ll1on m1ll1on, The Retirement System's c, credit ratings of A or better on 85 and credit of B on 14 0% one or more of the maJor credit rating organizations
69
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Custodial Credit Risk
The custodial credit risk disclosure for exchange traded derivative instruments 1s made 1n accordance with the custodial credit risk disclosure requirements of GASB Statement No 40 At June 30, 2017, all of the R et1rem ent System's investments 1n derivative 1nstrum ents are held 1n the Ret1rem ent System's
name and are not exposed to custodial credit risk
Interest Rate Risk
The table below describes the maturity periods of the derivative instruments exposed to interest rate risk at June 30, 2017
Maturities Less than 1
Derivative Type I Contracts Fair Value year 1-0 years 6-10 years 10+ years Forwards
Foreign Exchange Contracts lo, m (11) Options
Foreign Exchange Contracts (12) (12) Swaps
Credit Contracts (45) 18 Interest Rate Contracts '°s (217) m I" Total Return Contracts 1,233 1,233
Total 1,596 1,200 m I"
The table details the reference rate, notional amount, and fair value of interest rate swaps sens1t1ve to changes 1n interest rates as of June 30, 2017
Notional Fair Investment Type Reference Rate Value Value
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Foreign Currency Risk
At June 30, to foreign currency risk on its investments 1n fomards, cu1Tenc1es Below 1s the derivative instruments currency nsk
Rights/ Currency Forwards Warrants Swaps Total Argentine peso 148 148 Australian dollar 25 31 Braz1l1an real (10,598) (55) (10,653) British pound sterling (6,219) (6,219) Canadian dollar 747 747 Chilean peso (241) (241) Colombian peso 1,342 16 1,358 Czech koruna 1,273 1,273 Euro (36,771) 41 567 (36, 163) Offshore Chinese yuan renm1nb1 (1,285) (1,285) Hong Kong dollar (36) (36) Hungarian forint 2, 166 2, 166 Indian rupee 764 764 Indonesian rupiah 2,846 2,846 Japanese yen (1,096) (1,096) M alays1an nngg1t 1,807 1,807 M ex1can peso 5,867 135 6,002 New Romanian leu 262 262 New Russian ruble 36 36 New Taiwan dollar (2,332) (2,332) Peru,1an nuew sol 168 168 Ph1l1pp1ne peso (57) (57) Polish zloty 5,790 (61 5,784 Singapore dollar (592) (592) South African rand (997) 45 (952)
South Korean won (732) (732)
Swedish krona 388 388
Swiss franc (117) 243 126
Thai bah! 9,928 118 10,046
Turkish lira 4,753 4,753
Total (23, 175) 47 1,487 (21,641)
Contingent Features
At June 30, 2017, the Retirement System held no pos1t1ons 1n derivatives containing contingent features
72
Securities Lending
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
The Retirement lends US government obl1gat1ons, domestic and 1nternat1onal bonds, and equ1t1es to various with a simultaneous agreement to return collateral for the same securities plus a fee 1n the future The securities agent manages the securities and receives securities and cash as collateral and non-cash collateral 1s 105 0% of the fair value of dom est1c securities and 1nternat1onal securities respectively There are no restnct1ons on the number of securities that can be lent at one time However, starting 1n the year ended June 30, 2009, the Retirement System engaged 1n a reduction of the value of securities on loan with a target of no more than ten percent time The term to maturity of the loaned securities 1s the investment of the collateral On lnvestm ent Staff to d1scont1nue the Lending
The Retirement System does not have the or sell collateral securities unless a bo1Tower defaults The securities collateral 1s not statement of net pos1t1on As of June 30, the Retirement System has no credit risk exposure to borrowers the amounts the owes them exceed the amounts they owe the Retirement System As with other
the Retirement may bear the nsk of 1n recovery or of rights 1n the collateral should the borrower of fail f1nanc1ally However, the agent 1ndemnif1es the Retirement System against all bo1Tower defaults
lent $259 1n securities and received collateral of $106 and rnspe,ct'"ely from bo1Towers The cash collateral 1s invested 1n a separately
ag,rnt <N11g 1nvestm ent gu1del1nes approved by the Ret1rem ent Board Due to the increase 1n the held 1n the separately managed the Retirement System's invested cash collateral was valued at $201 The net unrealized gain of 1s as part of the net 1n fair value of investments 1n the statement the f1duc1ary System 1s to investment risk managed secunt1es lending account due to the
The Retirement System's securities lending transactions as of June 30, 2017, are summarized 1n the following table
Fair Value of Cash Fair Value ofNon-Investment Type Loaned Securities Collateral Cash Collateral
Securities on Loan for Cash Collateral
us Corporate Fixed Income 103 106
Securities on Loan for Non-Cash Collateral
us Corporate Fixed Income 156 160
Total 258 106 160
The following table presents the segmented time d1stribut1on and credit risk for the reinvested cash collateral account, based upon the expected maturity (1n years) as of June 30, 2017
Maturity Less Investment Type Credit Rating Fair Value Than 1 Year
Totalcaprtalassets, not being depreciated 3,349,945 1,596,365 (620,394) 4,325,916
Capital assets, being depreciated Facilrt1esand1rrproverrents 16,246,429 450,521 (68,039) 16,628,911 Machinery andequ1prrent 2,569,041 248,340 2,689,986 Infrastructure 1,290,206 59,650 1,349,120 Property held under Lease ,,, ,,, Intangible assets 219,000 25,066 (44,133) 199,933
Totalcaprtalassets, being depreciated 20,325,373 783,577 (240,303) 20,868,647
Less accutrulated depreciation for Facilrt1esand1rrproverrents 5,762,094 447,183 6,155,171 Machinery andequ1prrent 1,456,181 152,664 1,490,621 Infrastructure 589,177 37,844 (17) 627,004 Property held under lease ,,, ,,, Intangible assets 171,352 31,847 (44,010) 159,189
Total accutrulated depreciation 7,979,501 669,538 (216,357) 8,432,682
Totalcaprtalassets, being depreciated, net 12,345,872 114,039 (23,946) 12,435,965
Business-type act1vrt1es capital assets, net 15,695,817 ~ (644,340) ' 16,761,881
The increases and decreases include transfers of categories of capital assets from construction 1n progress to depreciable categories
76
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Deprec1at1on expense was charged to functions/programs of the pnm ary government as follows
Governmental Act1vit1es
Public protection
Public works transportation and commerce
Human welfare and neighborhood development
Community Health
Culture and recreation
General adm1nistrat1on and finance
Capital assets held by the City's internal se1v1ce funds
charged to the various functions on a prorated basis
Total deprec1at1on expense - governmental act1vit1es
Business-type act1vit1es
Airport
Water
Power
Transportation
Hospitals
Wastewater
Pert
Total deprec1at1on expense - business-type act1v1t1es
30,486
31,342
756
36,841
57,396
23,917
3,294
184,032
265,841
118,826
17,730
146,595
40,914
55,441
24, 191
669,538
Equipment 1s generally estimated to have useful lives of 2 to 40 years, except for certain equipment of the Water Enterprise that has an estimated useful life of to 75 years Fac1l1t1es and improvements
estimated to have useful lives from 15 to years, for ut1l1ty type assets of the Enterpnse, Hetch the Wastewater Enterprise, the and the Port that have
estimated useful lives from 51 175 These long-lived assets include pumping stations of Hetch Car Barn fac1l1t1es and structures of substructures of the Port, which $3 80 b1ll1on as of June 30, 2017 Hetch 1ntang1ble assets estimated useful lives from 51 to 100 m1ll1on as of June 30, had $6 9 m1ll1on 1n 1ntang1ble assets
ut1l1ty type assets with useful lives over
funds incurred total interest expense and 5 m1ll1on, Of these amounts,
rnr;,tal,rnd The Airport wnte-offs and loss on The Water Enterprise, Hetch
5 m1ll1on, and O m1ll1on, on certain proJects that were disrn,rt,m,ed
City entered into two sale-leaseback agreements for M1ss1on Street and 30 Van Ness Avenue Under the agreements, the
with a book value of 7 m 1ll1on for a total of $122 0 m1ll1on 1n gross rnccg,crnd a gain from the sale 1n amount of $97 3 m1ll1on 1n the gcmcmect-wrde statements In add1t1on, the City agreed to leaseback the office space, from years with an option for two one-year extensions through 2022
77
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Component Unit
Capital asset act1v1ty of the component unit for the year ended June 30, 2017 was as follows
Treasure Is land Development Authority: Capital assets, not being depreciated Crna
Capital assets, being depreciated Machinery and equipment
Less accutnJlated deprec1at1on for Machinery and equipment
Total capital assets, being depreciated, net
Corrponent unrt capital asssets, net
Balance Balance July 1, June 30, 2016 Increases Decreases 2017
$ 5,529 $ 14,861 $ $ 20,390
ll
u ____ co $ 5,546 $ 14,856 $ $ 20 ,402
the year ended June 30, 2017, the 7 acres of land to TIDA as the overall Treasure Island Project 1s ant1c1pated to begin 1n late
with the bu1ldout of the project occurnng over fifteen to twenty years For add1t1onal 15
(8) BONDS, LOANS, CAPiTAL LEASES AND OTHER PAYABLES
Changes in Short-Term Obligations
The 1n short-term obl1gat1ons for governmental and business-type act1v1t1es for the year ended are as follows
July 1, Type of Obligation 2016
Governmental actrnt1es Commercial paper
Multlple Capital Projects 1 02 ,778
Direct placement revol,1ng cer1lf1cates of part1c1pat1on
Trans bay Transit Center Project Governmental ac1J,11Jes short-term obl1gat1ons 1 02 ,778
Business-type ac1J,11Jes
Commercial paper San Francisco General Hospital 28,572
San Francisco International AJrport 343,050
San Francisco Water Enterpns e 236,000
Hetch HetchyWaterand Power
San Francisco Wastewater Enterpns e 61 ,000 Business-type act1,1t1es short-term obl1ga1Jons 668,622
Additional Current June 30, Obligation Maturities 2017
1 ,350,670 $ (1,246,509) $206,939
49,000 49,000
1 ,399,670 $ (1,246,509) $255,939
21,399 (30,169) $ 19,802
179,000 (344,050) 178,000
145,736 (236,736) 145,000
20,058 20,058
111,411 (61 ,000) 111,411
4 77 ,604 (671 ,955) $474,271
costs 1n connection with the and the acqu1s1t1on of No 85-09 approved 1n
the Board of Supervisors established a O m1ll1on commercial paper Pursuant to Resolution 247-13, the authonzat1on of the commercial was to $250 0 m1ll1on from $150 0 m1ll1on The City currently has letters the $250 0 m1ll1on program
78
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
The CP 1s an alternative form of short-term (or interim) f1nanc1ng for projects that permits the costs as expenditures are 1ncu1Ted The CP are issued and short-term
,cccccedccly y,hec as they are incurred The CP has a fixed m atunty matures 1n 270 days The CP notes are by two
issued State Street Bank and Trust Street a fee of and O 45%, a
Amee,se,,t (LOC:) ,ssc,edby State Street Bank with a fee of O 50% State Bank and US Bank to expire 1n May 2021 and the State Street Bank LOC 1s scheduled to expire
1n February 2019
General sites while 1ncreas1ng
for ex1st1ng residents and the sc,Tm,w,mg Cect,,; ern,,ee,cc As of June 30, 2017, the outstanding
and $1 4 m1ll1on, with interest rates ranging
the Alameda-Contra Costa Transit District, and the Peninsula Corndor Joint Powers Board a Joint Powers Agreement which created and established the Transbay Joint Powers Authority The T JPA has with respect to all matters concerning f1nanc1ng, design, construction, of the Transit Center In order to address a temporary cash flow shortfall
the City, 1n partnership with the M,,trnccl,tac Transportation Comm1ss1on 2016 a short-tellll f1nanc1ng with the 1n an amount not to exceed
has entered a Certificate Purchase with Wells Fargo to establish a revolving credit 1n an amount not to exceed $160 m1ll1on with an annualized rate based on the London Interbank Offered Rate (LIBOR) plus a spread of O 56% for taxable MTC, the also entered into a Cert1f1cate Purchase Agreement with the (BAT A) to a revolving credit 1n an amount not to exceed m1ll1on with an annualized floating rate based on the LIBOR O 61% The City would issue short term vanable rate notes at times and 1n necessary meet construction funding needs for the
As of June 30, 2017, the T JPA had drawn a total O m1ll1on from the Wells Fargo at a interest rate of 1 56% The has recorded a receivable, 1n the
of to this f1nanc1ng act1v1ty The short-
sources
taxes and tax increment Long-term debt 1s also expected to be repaid from such
San Francisco General Hospital
In 2014, the Board of Supervisors authorized the execution and delivery of tax-exempt and/or CP 1n an aggregate amount not to exceed $41 0 m1ll1on to for the
costs of acqu1s1t1on of furniture, and for the new hospital of June the amount of CP 1s 8 The weighted average interest rate was
79
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
the Airport adopted Resolution No 97-0146, as amended and supplemented (the "Note Rescl;t,,ct. issuance of subordinate CP notes 1n an amount not to
O m1ll1on or the stated amount of the the CP In Ncce,a bee '.'016. I he A, ocrt adopted Resolution No 16-0275 which
Net Revenues are or with respect to
use and
maximum amount by $100 0 m1ll1on, from $400 0 m1ll1on to $500 00 m1ll1on
are further the pnor payment of the
Bm,ds;) IIPll,lrn,d11,g from time to time under as amended and supplemented (the 1991 Master Bond
defined 1n the Note Resolution as all revenues earned by the maintenance,
1n the Note
The CP notes are l1m1ted obl1gat1ons of the Airport, and the interest on the CP 1s secured of, lien on and interest 1n the and amounts 1n the funds and as 1n the Note R esolut1on, subJect to the of of and interest on the Senior The CP notes are secured on panty
or other obl1gat1ons from t1m e to time outstanding under the Note Resolution
as of June a third LOC issued by Royal Bank date of May 1 and a new LOC issued on June
its York Branch, 1n the principal an , 2022 Each of the LOC separate subseries of CP and permits the
issue CP up to a combined maximum amount of $500 0 m1ll1on as of June 30, 2017
As of June 30, 2017, there were no obl1gat1ons other than the CP notes outstanding under the Note Resolution
1 01%,
the Airport issued $67 0 m1ll1on of new and 1 0 m1ll1on 1mr1m::ec;ec1tprnJ.•,cls The Airport also $1 m1ll1on of new
fund costs related to various bond and note transactions AMT, and Non-AMT CP were O 90%, 0 36% to
80
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
San Francisco Water Enterprise
The San Francisco Public Ut1l1t1es Comm1ss1on and the Board of have authorized the
issuance $500 0 m1ll1e,c,~11;1e:;C~P,~;'~;;:;'';: 2014, the O m1ll1on CP a was comprised of 2002 Propos1t1on and $250 0 m 1ll1on pursuant to cctecappcc,ced 011,01,sll,cc no CP was under Propos1t1on A Amounts cP1mmo111q m1ll1on at June 30, CP interest rates ranged from O 1% to 1 With maturities the Water Enterprise intends to maintain the remarket1ng the CP upon near-to-medium term, atwh1ch time be refunded with revenue
done to take advantage of the rate environment If the CP interest rates rise a level that exceeds these benefits, the Water Enterprise will refinance the CP with long-term, fixed rate debt
Hetch HetchyWater and Power
Effective December under Charter Sections 9 107(6) and 9 the San Francisco Public Ut1l1t1es Comm1ss1on and of Supervisors authorized the issuance to $90 0 m1ll1on 1n CP for the reconstruction or replacement of ex1st1ng transm1ss1on and d1stcbPt1e,11 fac1l1t1es of the
Power Interest rates for the CP from O to O 93% 1n fiscal 2017 The Hetch Power had $20 1 m1ll1on outstanding as of June 30,
San Francisco Wastewater Enterprise
Under the 2002 Propos1t1on E, 1n fiscal year 2017, the San Francisco Public Ut1l1t1es Comm1ss1on and of Supervisors authorized an increase 1n the CP authorization from $500 0 m1ll1on to $750 0 m1ll1on for and repairing the Wastewater Enterprise's fac1l1t1es The Wastewater Enterprise had outstanding as June 30, 2017
San Francisco Municipal Transportation Agency
In June 2013, pursuant to the City Charter Section SA 102 (b) the SFMTA Board of Directors authorized the issuance of CP 1n an amount exceed $100 0 m1ll1on In July 2013, the Board issuance The CP 1s secured by an irrevocable LOC
and Trust Company issued on 10, 2013 for a term of five years and interest rate not to exceed 12% per annum The LOC as well as the interest accrued on the 270 maturity date The CP by the Office of Public Finance and SFMTA OPF will be 1nit1at1ng issuance CP with the dealers and
The CP will be issued from time to time on a
81
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Long-Term Obligations
The following 1s a summary of long-term obl1gat1ons of the City as of June 30, 2017
Includes the 1992 Seismic Safety Loan Rogram GOB Serres 2015A w h1ch bears v arrable interest rate that resets monthly The rate for GOB Serres 2015A at June 30, 2017 was 1 631 %
= Includes the Moscone Center West Expansion RoJect Refunding Bonds Serres 2008 - 1 &2, both of which were financed w 1th variable rate bonds that reset weekly The rate at June 30, 2017 for Serres 2008 -1 &2 averaged to O 83%
=• The Rev olv 1ng credit agreement loan interest rate equals to the sum of 70% of 1 month LIBOR plus O 30%
Debt ser,ice payments are made from the following sources
(a) Property tax recorded 1n the Debt Ser,ice Fund (b) Lease revenues from part1c1pat1ng departments 1n the General, Special Revenue and Enterpnse Funds (c) Revenues recorded 1n the Special Revenue Funds (d) Revenues recorded 1n the General Fund (e) Hotel taxes and other revenues recorded 1n the General and Special Revenue Funds (f) User-charge reimbursements from the General, Special Revenue and Enterpnse Funds
Internal Service Funds serve pmcrn ,lythe qc,,eo,meotal funds Accordingly, long-term l1ab1l1t1es for the Internal Service Funds are amounts
82
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
BUSINESS-TYPE ACTIVITIES Final Remaining
Maturity Interest Entity and Type of Oblig'1ion , .. ......
San Francisco International Airport Revenue bonds• "''" 212%- 600%'
San Francisco Water Enterprise Revenue bonds m 087%- 695% Cert1f1cates of part1c1pat1on "'" 200%- 649% Accreted interest "'"
San Francisco General Hospital Medical Center Cert1f1cates of part1c1pat1on "''" 555%
San Francisco Wast.ew ater Enterprise Revenue bonds "'" 1 00%- 582% Cert1f1cates of part1c1pat1on "'" 200%- 649%
Port of San Francisco Revenue bonds "'" 220%-7408% Cert1f1cates of part1c1pat1on "'" 475%-525% Loans "'" 450%
Laguna Honda Hospital Cert1f1cates of part1c1pat1on m 430%-525%
Business-type act~ 1t1es total long-term obl1gat1ons
Amount
4,757,529
4,257,800 100,092
6,278
53,615
14,852
356,025 ew
15,673
957,265 28,846
52,860 32,275 2,113
125,570
10,770,643
Includes Second Senes Revenue Bonds Issue 36 A, B & C, 37C and 201 OA, which were issued as van able rate bonds 1n a weekly mode For the fiscal year ended June 30, 2017, the average interest rates on Issue 36A, 366, 36C and 37C were o 67%, o 64%, o 67%, & o 67%, respectively, and for Issue 2010A, the average interest rates were o 67%
Sources of funds to meet debt service requirements are revenues derived from user fees and charges for services recorded 1n the respective enterprise funds
83
Debt Compliance
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
The believes 11 1s 1n compliance with all s1gnif1cant l1m1tat1ons and restnct1ons contained 1n the vanous indentures
As of June 30, 2017, total amount of debt $4 09 b1ll1on
Arbitrage
debt l1m1t to the
of valuation subject to taxation) was $6 37 b1ll1on The was $2 28 b1ll1on The resulting legal debt margin was
Under U S Treasury Department regulations, 1986 1s subject to arbitrage rebate requ1rem ents earnings from the investment of tax-exempt bond:.,··cc·· such investments were invested at a rate
lease revenue bonds The l1ab1l1tyas of June 30, 2017 Each arbitrage rebate rn11P11ec,ecls has been
issuance The City has evaluated each pmt:c:patmc issued and the Finance Corporation has
Finance Corporation do not have a rebatable arbitrage fund has s1m1lar analysis of its debt, subject to
arbitrage to the debt of the enterpnse funds respective fund
Office of Housing and Community Development and the follller San Rede::el::pc;e::ts.geccy issued various mortgage revenue bonds and cc:cmPmly
bonds for the mult1fam1ly rental housing and below-market rate mortgage first hc:cet:Pyecs to fac1l1tate affordable housing and the const11.1ct1on and rehab1l1tat1on 1n the City
were issued on behalf of vanous owners and developers who retain full rns:pcc.s:b:lcty for the of the debt and are related indebtedness and
30, 2017, the total
84
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Changes in Long-Term Obligations
The changes 1n long-term obl1gat1ons for the year ended June 30, 2017, are as follows Current
Additional Maturities, Amounts Obligations, Retirements, "' July 1, and Net and Net June 30, Within
Internal Service Funds serve the governmental funds, the long-term l1ab1l1t1es of which are included as part of the above act1v1t1es for the act1v1t1es, claims and judgments and absences are generally General Fund
85
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Annual debt service requirements to maturity for all bonds and loans outstanding as of June 30, 2017 for governmental and business-type act1v1t1es are as follows
(1l The spec1f1c year for payment of estimated claims payable, accrued vacation and sick leave pay and accrued workers' compensation 1s not practicable to determine
(2l The interest 1s before federal subsidy for the General Obl1gat1on Bonds Series 2010 c and Series 2010 D The subsidy 1s approximately $28 8 m1ll1on and $5 9 m1ll1on, respectively, through the year ending 2030 The payment of subsidy by the IRS 1n fiscal year 2017 was reduced by 6 9% due to federal sequestration Future interest subsidy may be reduced as well
(3l Includes the Moscone Center Expansion Project Lease Revenue Bonds Series 2008-1 & 2 which bear interest at a weekly rate An assumed rate of o 83%, together with l1qu1d1ty fee of and remarket1ng fee of o 0725% were used to project the interest rate payment 1n this table
(4l The San Francisco County Transportation Authonty variable interest rate revolving of interest equal to the sum of 70% of 1-month LIBOR plus o 30% An assumed rate of 1 rate payment 1n this table
on June 8, 2018 and has a rate used to project the interest
(5l Debt service for the Airport 1s per debt ser,ice requirement In the event the letters of credit securing the Airport's outstanding variable rate bonds had to be withdrawn upon to pay such bonds and the amount drawn had to be repaid by the Airport pursuant to the terms of the related agreement with banks prav1d1ng such letters of credit, the total interest would be $1 08 9 m1ll1on less
(6l The interest 1s before federal subsidy for the San Francisco Water Enterprise, San Francisco Wastewater and Hetch Hetchy Water and Power of $447 9 m1ll1on, $64 o m1ll1on and $6 6 m1ll1on through the fiscal year ending 2051 respectively The payment of subsidy by the IRS 1n fiscal year 2017 was reduced by 6 9% due to federal sequestration Future interest subsidy may be reduced as well
86
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Governmental Activities Long-term Liabilities
ac11ccs;ctcco or improvement of real have been issued for both
governmental and business-type act1v1t1es general obl1gat1on bonds for the fiscal year ended June 30,
Governmental Activities - General Obligation Bonds
Authorized and uniss ued as of June 30, 2016
Bonds issued
Series 2016F Mordable Housing
Series 2017APubl1c Health and Safety
Netauthonzed and unissued as of June 30, 2017
$ 1,623,225
(75,130)
(173,120)
$1,374,975
In November 2016, the City issued Affordable Housing General Obl1gat1on Bonds Series 2016F (the "Series 1n the amount of $75 1 m1ll1on with interest rates from 2 0% to 3 1% and maturity from 2017 through June 2036 The of the Series will be used to finance certain affordable housing improvements, for homeownership down payment assistance for educators and and pay certain costs related to the issuance Series 2016F
the City issued Public Health and 1n the amount of $173 1 m 1ll1on to
improvements and pay certain costs related to the issuance of the Series The Series bears interest rates ranging from 2 0% to 5 0% with principal amort1z1ng from June 2017 to June 2036
The debt service payments are funded through ad valorem taxes on property
In June 2017, the SF) Sen es 2017 A for $28 3 m1ll1on to provide funds to 1 or refinance a 1nstallat1on or 1mprovem ent to, or rehab1l1tat1on
costs of the construction,
View (Hope SF) and related of the Fund established execution and to 4 0% with
Hunters
costs of 32%
As 2017, the City sold two City office bu1ld1ngs located at 30 Van Ness 16130-1680M1ss1on for a combined amount of $122 0 m1ll1on The sales proceeds
the residual fund balance of the reserve funds of $22 7 m1ll1on and $1 6 1n June 2017 with the escrow agent and invested 1n Bills The escrow
fund will be 1n trust for the benefit of the owners of the COP Series (30 Van Ness) and Series 2007A and the moneys and securities held 1n the escrow fund will be
the COP Series 2001A and Series 2007 A as provided 1n the escrow agreement $24 8 m1ll1on and $2 3 m1ll1on outstanding balance of COP Senes 2001A and Senes 2007A, respectively, are now considered retired and defeased, 2) and will be used to fund the ofa new office at 1500 M1ss1on Street The planned bu1ld1ng at Pellll1tl1ng that would service to
collocating the Departments
87
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
As of June 30, has a total of $551 8 m1ll1on of cert1f1cates of part1c1pat1on by pledged revenues rental payments by the City The total requirement on the certificates of prni,c,pat,cc 1s $833 through Apnl 1, 204 7 For the year ended June 30, 2017, $66 1 m1ll1on and $25 4 m1ll1on, respectively
Lease Revenue Bonds
The changes 1n governmental act1v1t1es - lease revenue bonds for the year ended June 30, 2017, were as follows
Governmental Activities - Lease Revenue Bonds
Allthonzed and un1ssu ed as of June 30, 2016
Increase 1n author1zat1on 1n this fiscal year Current year annual increase 1n Finance Corporation's equ1pm ent program
Current year matu nt1es 1n Finance Corporation's equipment program
Net authorized and un1ssued as of June 30, 2017
Finance Corporation
The purpose of the Finance Corporation 1s to a means to f1nanc1ngs, the construction and of fac1l1t1es, eq,a,p,crnH and personal property City's general governmental purposes
175 ,382
3,386
4,495
183,263
real
Cc~crnt,cc uses lease revenue bonds to finance the purchase or construction of property are 1n tum leased to the under the lelllls of an Indenture and Equipment
Lease 1n the basic f1nanc1al statements of the City Since the sole lease f1nanc1ng to the City, any amount that 1s not applied or of real and personal such as unappl1ed acqu1s1t1on fund, bond issue costs, fund withheld pursuant to reserve requirement, and amount designated for cap1tal1zed interest 1s recorded as unearned revenues 1n the internal service fund until such t1m e 111s used for its intended purpose The unearned amounts are el1m 1nated 1n the governmental act1v1t1es statement of net pos1t1on
The lease revenue bonds are payable b;,~~:~:::;revenues from the base rental payments payable by the pursuant to a Master Lease !- between the and the San Francisco Finance
c::::::::::;forthe use of equipment and C The total debt service requirement
through June 2034 For the year ended June Cccp,,rnt,cc 1n the form of lease payments made by the City respectively
through a non-profit corporation using lm-e,rnc;pt cbl,,at,y;,s Corporation was authorized to issue lease revenue amount outstanding plus 5% annual each July 1 authorized and outstanding was $71 1 and $2 0 m1ll1on, respectively
Public Safety Radio Lease Purchase F1nanc1ng
In December 2016, the as the lessee, entered into a lease amount of $34 2 m1ll1on Banc of America Public Capital Corp Marketplace, as the lessor to finance the safety radio replacement for the purchase and 1nstallat1on of a new 800 MHz Radio public
88
agreement 1n the State F1nanc1al This IS
with
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
necessary to maintain the old system during the the City The bears interest
2017 to
Business-Type Activities Long-Term Liabilities
The following provides a brief descnpt1on of the current year add1t1ons to the long-lellll debt of the business-type act1v1t1es
San Francisco International Airport
Second Series Revenue Bonds (Capital Plan Bonds)
Pursuant to resolutions
On-Airport Hotel Second Senes Revenue Bonds and Related Special FaC1l1ty Bonds
Pursuant to resolutions adopted 1n fiscal years 2016 and 2017, the Airport has authonzed the issuance of $278 0 m1ll1on of Capital Plan Bonds and O m1ll1on of San Francisco International Hotel
Fac1l1ty Revenue Bonds to finance development and construction of a new A,c1scc-°'med and related A1rTra1n station The also designated the planned hotel as a
under the 1991 Master Resolution, will allow the hotel revenues to be se,arnoaled Airport's other revenues and used to
Fac1l1ty Bonds To obtain the cost cCCm,rn,,;c
Fac1l1ty Bonds to investors, but will purchase them Plan Bonds, which will be sold to investors The total net
be O m1ll1on, which will be
costs of issuance
89
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Second Senes Revenue Bonds, Senes 2016BIC
Plan Bonds Series 20166 and the
Second Series Revenue Refunding Bonds
between fiscal years 2005 through has authorized b1ll1on of San Francisco International Senes Revenue
of refunding outstanding 1991 Master Bond Resolution Bonds and funding debt service reserves, and paying costs of issuance,
rn,teo;ptcco prem 1ums
As of June 30, 2017, $1 00 b1ll1on of such refunding bonds remained authonzed but unissued
During the fiscal year 2017, the Airport issued the following new refunding bonds under the 1991 Master Bond Resolution
Second Senes Revenue Refunding Bonds, Senes 20160
m1ll1on to advance refund and fixed rate Series 10 and 2011G bonds The Series 20160 bonds rate of 5 0% and
1, 2031 The net proceeds of $188 1 m1ll1on were used to $0 3 m1ll1on and $0 2 m1ll1on 1n costs of issuance and $187 6 m1ll1on irrevocable
escrow funds with the Senior Trustee to defease and refund O m1ll1on 1n revenue bonds as described below
Amount Refunded Interest Rate
Second Senes Revenue Bond Issue
201 OC (Non-AMT)
2011 D (Non-AMT)
2011 G (Non-AMT)
Total
The refunded bonds were 2010C) and May 3, 2021
$
$
42,210
39,245
76,535
157,990
4 00%-5 00%
5 00%
5 00%-5 25%
defeased and scheduled for rndempt,c,o 10 and Senes 2011G)
has been removed from accompanying statements of net pos1t1on
Redemption Price
100%
100%
100%
recognition of a deferred accounting gain of 2 m1ll1on for ended June 30, reduced its aggregate debt service $15 0 m1ll1on over the next years and obtained an economic gain present values of the old debt and the new debt) of $13 5 m1ll1on
90
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
Variable Rate Demand Bonds
As of June 30, 2017, the
Rate Bonds 1s secured applicable bondholders
(Dollars 1n Thousands)
are not reimbursed by constitute "Repayment under the 1991 Master Bond Resolution and are status of other outstanding to the extent provided 1n the Resolution The commitment fees for the LOC range between O 45% and O 63% per annum As of June 30, 2017, there were no unre1mbursed draws under these fac1l1t1es
The LOC securing the Variable Rate Bonds included 1n long-term debt as of June 30, 2017, are as follows
c'~=""="cA~- c'==•="'c'~- c'~=""="cc~- c'==•="cc~--- Series 2010A
Principal Amount $93,130 $37,820 $33,655 $86,930 $209,240
Expiration Date June 29, 2018 April 25, 2018 April 25, 2018 January 28, 2019 June 29, 2020 Credit Provider Wells Fargo('! BTh,1U (2 ! BTMU (2! MUFG Union Bank (JJ Bank of America(4 J
(1) Wells Fargo Bank, National Assoc1at1on
(2) The Bank 01Tokyo-M1tsub1sh1 UFJ Ltd
(3) Formerly Union Bank, NA
(4) Bank of America, National Assoc1at1on
Interest Rate Swaps
ObJect!Ve and Terms- In December 2004, the Airport entered into seven fomard starting interest rate swaps 2004 with an aggregate notional amount of $405 0 m1ll1on, 1n connection with the cot,rncted issuance Series Variable Rate Revenue Refunding Bonds, Issue 32A-E 1n February 2005, and Second Series Variable Rate Revenue Bonds, Issue 33 1n February 2006 The debt service when compared rate refunding bonds at the time of issuance exp1rat1on date of 2004 swaps 1s May 1, 2026
entered into four add1t1onal forward starting interest rate swaps 1n connection issuance of its Second Series Variable Rate Revenue Bonds, Issue
three associated swap associated with
2007 Bonds, 2010 swaps
refunded several issues of Issue 2004 swaps associated with
Second Senes Variable Rate Revenue Sct1seqc,cct111n October 2008 and December 2008, the
91
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
In December the Airport terminated a 2010A-3 Bonds, a notional amount of $72 0 the Series 201 OA-3 Bonds, which are variable rate,
In refunded the Issue 360 Bonds with of the San Francisco Revenue Refunding Bonds, Series and term 1nated the
with JP Morgan Bank, NA associated with Issue 360, which had an 1nit1al notional amount $30 0 m1ll1on The Airport paid a term1nat1on fee of $4 6 m1ll1on to the Under the 2004 swaps, the Airport receives a variable rate payment from each equal to 63 50% of USD-LIBOR-BBA O 29% the 2007 and 2010 swaps, the receives 61 85% of
34% These payments are intended to approximate vanable interest rates by the swaps The makes a monthly fixed rate to the
which commenced on date of issuance of the The 1s to achieve a synthetic fixed rate with respect to the hedged bonds All of the
rate are temi1nable at any time upon making a market-based term1nat1on at the option Airport
As of June 30, denvat1ve instruments comprised six interest rate swaps that the Airport entered into to interest on several series of its variable rate Second Sen es Revenue Bonds The determined between the variable rate bonds and the related interest rate swaps to be effective as
• The lss ue 378 Bonds that are hedged byth1s swap agreem entwere purchased with proceeds of the Sen es 20088 N ates, which the AJrport subsequentjy refunded, and the lss ue 378 Bonds are held 1n trust The swap 1s now 1nd1rectjyhedg1ng the Sen es 201 OA--3 Bonds for accounbng purposes
"Hedges Senes 2010A-1 and 2010A-2
Fair Value
The fair values take into cons1derat1on the prevailing interest rate environment and the and cond1t1ons of each All values were estimated using the rnc-ccc17cc d1s,cccct,c1g This method calculates the payments the
the yield curve are the are discounted using the
zero-coupon rate bond due on the date on the swaps arnve at the so-called "settlement amount", 1 e , the approximate amount a omtc •ernJd have to pay or would receive 1f the swap was terminated
92
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
the settlement amounts are then adJusted for the non-performance to amve at the fair value For each the non-performance risk was
computed as the total cost transactions required to hedge the I e , a series of European swapt1ons, exercisable on each of the future payment exchange under the that are structured to reverse the remaining future cash flow obl1gat1ons as of such dates,
on each future date Default were derived from rnccc,eccrnte or generic ratings borrowing curves that fall into
As of June 30, 2017, the fair value of the and fixed rate payable by the Airport are as
six outstanding swaps, counterparty credit ratings,
No. Currentbonds Counterparty/guarantor*
1 36AB J.P. Morgan Chase Bank, N.A.
36AB J.P. Morgan Chase Bank, N.A.
36C J.P. Morgan Chase Bank, N.A.
,DIQA (37B)'' Melli II Lynch Capital Services, Inc./
,DIQA' ..
Melli II Lynch Derivative Products AG
J.P. Morgan Chase Bank, N.A.
Goldman Sachs Bank USA/
Goldman Sachs Group, Inc.
Total
• Reflects ratings of the guarantor.
Counterparty
credit ratings
(S&P/M oody's/Fitch)
A+/Aa3/AA-
A+/Aa3/AA-
A+/Aa3/AA-
AA/Aa3/NR'
A+/Aa3/AA-
A+/A3/A'
Fixed rate
payable by Fairvalueto
Airport Airport
3.444% $ (S,SlD)
3.445% (S,513)
3.444% (2,363)
<=> (12,652) ,_, (14,581)
3.9b% {b,346) {ffi,9ffi)
•• The issue 37B Bonds that are hedged by this swap agreement were purchased with proceeds of the Series ,DJ8B
Notes, which the Airport subsequently refunded, and the Issue 37B Bonds are held in trust. The swap is now
indirectly hedgingthe Series ,D1.0A-3Bonds for accounting purposes.
••• Hedges Series 201.0A-l and 201.0A-2.
Fair Value Hierarchy
Interest rate swaps
Change m Fair Value
Fair Value June30,2017
(65.965)
Fair value measurements using signtticant other observable inputs
!Level 2) (65.965)
The impact of the interest rate swaps on the f1nanc1al statements for the year ended June 30, 2017 1s as follows
Balance as of June 3:>, 2016
Change in fafrvalu eto year-end Balance as of June 3:>, 2017
Deferred outflows
on derivative Derivative Instruments instruments
83,614 96,132
(28,744) (30,167)
The fa1rvalue of the interest rate swap the Airport would owe a term1nat1on to the Unless a swap was detemi1ned 1ncept1on of its the fair value of the
1s recorded as a deferred of resources (1f a would be due to the rn,,m,,~acl) or inflow of resources (1f a term1nat1on payment would to the Airport) The off-
ofthe are recorded as costs with respect to various refunded bond issues Unlike 1nftow/outflow the balance of off-market
are valued on a present value, or fixed yield, to maturity basis The difference the outflows and derivative instruments 1n the table above constitutes the unamortized
off-mark et portions of the swaps as of June
93
Risks
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
1nsuff1c1ent to make the due on the bonds result 1n an increase 1n interest rate on the while changes that cause the payments to
due on the associated bonds result 1n a decrease 1n the interest rate on the bonds the ended June the Airport a total
than the payments received from counterpart1es, interest rates on the associated
1s not exposed to credit risk because the have a interest rates rise and the fair value of swaps
to credit risk 1n the amount of the swaps' fair value of the swaps, are required to post collateral cons1st1ng US
securities 1n an amount equal to the market value of a to the counterparty's credit ratings Any such collateral
Termmat1on Risk - All the interest rate the option of the Airport The Airport has That risk would arise from certain credit-related events of default on the part Airport, the swap insurer, or the The Airport has secured insurance for all its regular payments and some due under all its swaps, except the swaps associated with the Series from the following insurers
No. Swap
1 Issue 36AB
lssue36AB
Issue 36C
Insurer Credit ratings June 30, Swap Insurer 2017 (S&P/Moody's/Fitch)
FGIC/National Public Finance Guarantee Corporation A/ A3/NR
FGIC/National Public Finance Guarantee Corporation A/ A3/NR
Assured Guaranty Municipal Corp.
Series 201.Qll. (37B) Assured Guaranty Municipal Corp.
AA/A2/NR
AA/A2/NR AA/A2/NR Issue 37C Assured Guaranty Municipal Corp.
Series 201.Qll. None '/A
94
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
If the Airport 1s rated between Baa1/BBB+ and Baa3/BBB- and the applicable bond insurer 1s rated below A3/A- (Moody's/S&P), the the swaps and require the Airport to the term1nat1on value, 1f chooses to suitable replacement assign the interest 1n to a c:::~'.~~~rt;, secure the swap term1nat1on value the B M,c~:{,t~~l:::;':;,'.::;c are withdrawn or suspended, and the bond insurer
,\\ counterpart1es may terminate the swaps and require the Airport to pay the term1nat1on value, 1f any With to the Series 2010A swaps with no swap insurance, the counterparty term1nat1on prov1s1ons the Airport rating thresholds are the same as described above
Add1t1onal T ellll 1nat1on Events under the swap documents with respect to the Airport include an insurer payment default under the and certain insurer rating downgrades or
15 business days
In December 2016,
The of any
te1m11d1ccevent or event of default on the part below investment grade Add1t1onal Term1nat1on
to a or its include a rating cfthecrn4ctec,artytcass1gn its nghts
1nsurerw1th1n
counter Lynch
c:~::::~::~: may become or insolvent and not periollll under the C( does not perform under its swap,
to the counterparty even may elect to terminate a
a substantial term1nat1on at the time As of June
shown above
Water Enterprise
Water Revenue Refund mg Bonds 2016 Senes AB
of the outstanding 2009 Series A bonds c~csrn~?',',9}2009 Senes B bonds maturing on and
outstanding F bonds matunng on and after November 1, were issued to refund, on a cu1Tent basis, all the outstanding 2006 Senes Band Series C bonds, and a portion of the outstanding 2010 Series A bonds maturing on and alter November 1, 2020 The bonds earned "Aa3" and "AA-" ratings from and S&P, The 2016 Series AB bonds include serial bonds with interest rates ranging 1 50% to 5 have a final maturity 1n 2039 The Series AB bonds have a true interest cost of 2 85% Unamortized bond issuance costs at the date of refunding were $145 for 2006 Series B bonds and for 2006 Sen es C bonds The refunding resulted 1n the of a deferred accounting loss 2 debt service savings O m1ll1on, an economic of $107 2 m1ll1on or 1 52% of principal As of June the principal amount of Series AB bonds outstanding was $882 4 m1ll1on
Water Revenue Bonds 2016 Senes C
In December 2016, the Water Enterprise issued taxable bonds, 2016 Series C 1n the amount of $259 4 m1ll1on The bonds were issued as Green Bonds The purpose of the bonds was to refund all the
95
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
aor;cm"mate amount of and to The bonds earned and ratings
bonds include serial bonds with interest rates 1n 2046, and two term bonds with 4 035% and
The Series C bonds have a true interest cost of 3 97% As of June 30, 2017, the principal amount of 2016 Series C bonds outstanding was $259 4 m1ll1on
the SFMTA issued Revenue Bonds, Series 2017 1n the total amount 01$177 8 m1ll1on to capital forthe SFMTA The Series 2017 bonds
and a final maturity on March 1, 204 7
(9) EMPLOYEE BENEFIT PROGRAWIS
(a) Retirement Plans
General Information About the Pension Plans - The San Francisco
Ret1rem ent System (Ret1rem ent System) adm 1nisters a cost-sharicc~g ;;::i::i,~,~~''6'.: plan (SFERS Plan). which covers substantially all of the e
Francisco, and certain class1f1ed and cert1f1cated emprPye,1, and Unified School emorPwc,,
acd amthccrtyrchr,,h ,,,t-,1brrthe,
ccg
Replacement Benefits Plan - The Replacement Benefit Plan 1s a qualified excess benefit plan established 1n October 1989 Internal Revenue Code Section for excess benefit
l1m1ts, provided that the SFERS retirees any
retirement allowance that exceeds the 415 l1m1t RBP plan does not meet the cnteria of a trust under GASB Statement No 73
RBP assets are subJect to the claims of the general creditors under federal and state law 1n the event of insolvency
In add1t1on, some City are el1g1ble to part1c1pate 1n the Public forpr11yee, (PERF) of the Cal1forn1a Employees' Ret1rem ent System (Cal PER SJ
plan, or the CalPERS Miscellaneous Plan, a cost-sharing pension plan employees of the Transportation Authority, a blended component and Agency, a f1duc1ary component unit, are el1g1ble to part1c1pate 1n a CalPERS Miscellaneous Plan or a CalPERS Public Employees' Pension Reform Act (PEPRA) Miscellaneous Plan, both are cost-sharing
plans In add1t1on, some employees of the Treasure Island Development presented unit, are el1g1ble to part1c1pate 1n the CalPERS
cc,,t-shmrcg plan
CalPERS acts as a common investment and adm1nistrat1ve agent for various local and state governmental agencies w1th1n the State of Cal1fom1a Benefit prov1s1ons and other requirements are established State statute, employer contract with CalPERS and City resolution CalPERS issues
:::::~:;:;::,b;: reports that include a full of the regarding benefit prov1s1ons,
and membership 1nfollllat1on can on the CalPERS website at WWW
96
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Benefits
SFERS - The SFERS Plan provides service retirement, and death benefits based on spec1f1ed percentages of defined final average adJustm ents (COLA) after ret1rem ent The SFERS Plan qualified survivors The benefits according category Pf r;m rsrm1mect the type of benefit coverage The four main categories of SFERS members am
Miscellaneous Non-Safety Members - staff, employees who are not 1n special membership
supervisory, and all other el1g1ble
Departmect and Miscellaneous Safety Members - sheriffs assuming office on and after and undersherilfs, deputized of the Sheriff's Department, and
m,scerrac,ePPS ,,,fel y ,,mr1rp,1e,,, hired on and after 7, 2012
Police Members - police officers and other enforcement or who occupy pos1t1ons rte,srmrat, d
duties are 1n active law pos1t1ons
The membership groups and the related service retirement benefits are summarized as follows
M1scellaneous Non-Safety Members who became members July 1, 2010, for a service retirement benefit 1fthey are at least 50 years old and have least 20 years of service or 11
least
old and have at least 10 years of credited service The service retirement the member's final (highest one-year average monthly
member's years of service times the member's age factor up member's final compensation
1, 2010, and IP a service retirement benefit 11 they are at least years old and at
old and have at least 10 years of using the member's final ccrcpcm,trPc
by the member's years service of the member's final compensation
M1scellaneous Members who became members on or after January 7, 2012, for a service retirement are at least 53 years old and have at least 20 years of service or 1fthey are at least 60 years and have at least 10 years of credited service The service retirement
the member's final (highest three-year average monthly compensation) member's years of service times the member's age factor up to a maximum of member's final compensation
Shenff's Department Members and M1scellaneous Safety Members who were hired on or after January 7, 2012, for a service retirement benefit 11 they are at least 50 years old and have at least 5 years of service The service retirement benefit 1s calculated using the member's final compensation (highest three-year average monthly by the member's years of credited service times the member's age factor up of the member's final compensation
Firefighter Members and Police Members who became members before November 2, 1976, a service retirement benefit 11 they are at least 50 old and have at least 25 years_, ___ ;,_,, service The service retirement benefit 1s the member's final compensation (monthly
the member for at least one year 1mmed1ately prior to by the years of credited service times the member's age factor up to a
of the member's final compensation
97
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
and Police Members who became members on or after November 2, 1976, and for a service retirement benefit 1f they are at least 50 years old and have
least 5 years of service The service retirement benefit 1s calculated the member's final compensation (highest one-year average monthly compensation) the member's years of credited service times the member's age factor up to a maximum member's final compensation
Firefighter Members and Police Members who became members on or alter July 1, 2010, and January 7, 2012, for a service retirement benefit 1f they are at least 50 years old and at least 5 years of service The service retirement benefit 1s calculated using the member's final rn1cpemsatcc,c (highest two-year average monthly the member's years of
service times the member's age factor up of the member's final compensation
Firefighter Members and Pol/Ce Members who became members on or after January 7, 2012, for a service retirement benefit 1fthey are at least 50 years old and have at least 5 years of service The service retirement benefit 1s calculated the member's final (highest three-year average monthly compensation) m em be r's years of service t1m es the member's age factor up to a maximum of member's final compensation
for a d1sab1l1ty retirement benefit, regardless of age, when they have service and sustain an injury or illness that prevents them from
periomi1ng their
industrial d1sab1l1ty ret1rem ent benefit an illness or injury that they receive while
All retired members receive a benefit adjustment each July 1, which 1s the Basic COLA The majonty of are determined changes 1n CPI with increases at 2 0% The SFERS Plan
for a Supplemental 1n years when there are Plan The maximum benefit adjustment each 1 1s 3 5%
July 1, 2012, voters 1n the criteria payment of the Sppplemeclal so that only be when the Plan 1s also
Certain prov1s1ons of this ';,::';·;~;,;;:;;;,:P;;c:;;';~";,~;,::,;:::":;,~'. :, the Cal1forn1a Courts mod1f1ed the Jr retired before November 6,
1s also fully funded on a market value of assets However, to members who retired on or after November 6,
members hired before January 7, 2012, all SPPPlemeclal benefits will continue into the future even where an
year For members hired on and after retirees when the Plan 1s funded on a mcwkctl ,al Pe
members, COLAs
CalPERS - CalPERS service retirement and benefits, annual cost of l1v1ng adjustments and death to plan who must be employees and benef1c1aries Benefits are based on a final compensation 1s the rate and special compensation during any consecutive or three-year period adjustments for the CalPERS Public Employees' Retirement Law The Cal1forn1a PEPRA. the way CalPERS retirement and health benefits
l1m1ts on members As such, members who established January 1, 2013, are known as "PEPRA" members
98
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
The CalPERS' prov1s1ons and benefits 1n effect at June 30, 2017, are summarized as follows
Hire date Benefit forrrula Benefit vesting schedule Benefit payments Required e~loyee contnbut1on rates Required e~loyer contnbut1on rates
City Miscellaneous Plan Prior to On or after
January 1, 2013 January 1, 2013' 2%@60
5 years of service Monthly for life
5 00% 10 26%
Transponation Alffhotity Miscellaneous Plan
Pnorto On or after January 1, 2013 January 1, 2013
26%@55 2%@62 5yearsofse.,,,ce 5yearsofset\Sce
Monthly for life Monthly for life 7 00% 6 25% 8 88% 6 56%
City Safety Plan Pnorto Onorafier
January 1, 2013 January 1, 2013 2%@50,2%@ 2%@57or 55or3%@55 27%@57
5yearsofset\Sce Monthly for life
7 00% to 9 00% 27 39%
5 years of service Monthly forl1fe
1075%101300% 21 33% to 26 25%
Successor Agency Miscellaneous Plan
Pnorto On or after January 1, 2013 January 1, 2013
2%@55 2%@62 5yearsofset\Sce 5 years of service
Monthly for life Monthly forl1fe 6 89% 6 50%
26 52% 7 08%
'For rhe Cir/ Miscellaneous Plan rhere are no current acrive errp/oyees hired on or afrer January 1, 2013 Forrhe Treasure ls/and Miscellaneous Plan rhere are no current acrive employees
At June 30, 2017, the CalPERS' City Safety Plan had a total of 2,307 members who were covered these benefits, which includes 991 1nact1ve employees or benef1c1anes currently rece1v1ng benefits, 1nact1ve employees entitled to but not yet rece1v1ng benefits, and 1,003 active employees
Contributions
For the years ended June 30, 2017 and 2016, the City's actuarial determined contributions were as follows
SFERS Plan City CalPERS Miscellaneous Plan City CalPERS Safety Plan Transportation Authority Cal PERS Classic & PEPRA Miscellaneous Plans Successor Agency CalPERS Classic & PEPRA Miscellaneous Plans Treasure Island DB.€lopment Authority Cal PERS Miscellaneous Plan Replacement Benefits Plan
Total
employees rates for fiscal ,e,wecd,,d June 30, 2017, most
contribute the full amount of the
$
$
'°" '°" 519,073 $ 496,343 Co cc
27, 190 23,629 m ,ec p,c '''
547,563 $ 521, 115
CalPERS - Section of the Cal1forn1a Public Employees' Retirement Law that the all be determined on an annual basis actuary
of a 1n the rate Funding for on an basis as 30 by CalPERS The actuarially
detemi1ned rate 1s the amount necessary to finance the costs of benefits earned by public employees during the year, with an add1t1onal amount to finance any unfunded accrued l1ab1l1ty
99
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Reolacement Benefits Plan The RBP 1s and will remain unfunded and the rights benef1c1ary are l1m1ted to those 1n the RBP The RBP constitutes an the City to make benefit m1ll1on replacement
Net Pension Liability
The table below shows how the net pension l1ab1l1ty (NPL) as of June 30, 2017 1s d1stnbuted
Governmental act1v,t1es Business-type act1v,t1es
F1duc1ary funds Component Unit - Treasure Island Development Authority
Total
As of June 30, 2017, the City's NPL 1s comprised of the following
3,306,484 2,501,732
23,281 27
5,831,524
Proportionate Share of folet Pension
SFERS Plan
City Cal PERS Miscellaneous Plan
City Cal PERS Safety Plan
Transportation Authority CalPERS Classic & PEP RA Miscellaneous Plans Successor Agency CalPERS Classic & PEP RA Miscellaneous Plans
Treasure Island Development Authority CalPERS Miscellaneous Plan
Replacement Benefits Plan
Total
Share Liabiltty(Asset)
942175% 5,476,654 -01469%
00204% 02691% 00003%
'"
(12,711) 263,908
78,600 5,831,524
rn,,t-shrn-mg plans 1s measured as a share of the plans'
dete1TT11ned The City's proportions of of the valuation date
1s measured as 30, 2016, and the total calculate the NPLs was determined by an actuarial
June 30, 2016, using standard procedures The SFERS Plan was based on the share of
contributions of all actuarially
"
100
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
The pcc,pcrt,ccale share and NPL of each of its cost-sharing plans as of June 30, 2016 and 2015
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
The City's NPL for the Replacement Benefits Plan 1s measured as the total pension l1ab1l1ty as there are no assets 1n the plan The change 1n the NPL for the City Replacement Benefits Plan 1s as follows
Balance at June 30, 2015 (\ID) Change 1n year
Service cost Interest on the total pension l1ab1l1ty Ch an ges of ben ef1ts Changes of assumptions Benefit payments, 1nclud1ng refunds of
employee contr1but1ons Net changes during measurementpenod Balance at June 30, 2016 (MD)
Increase (Decrease) Net Pension
Liability (Asset)
55,038
956 2,112
10,310 11,516
(1,332) 23,562 78,600
Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions
For the year ended June 30, 2017, the recognized pension expense 1nclud1ng amort1zat1on of deferred outflows/inflows related to pension as follows
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
At June 30, 2017, the City reported $547 6 m1ll1on as deferred outflows of resources related to contributions subsequent to the measurement date, which will be as a reduction to net pension 1n the ending June 30, 2018 Other amounts as deferred outflows of resources inflows of resources related to pensions will be recognized as pension expense as follows
Year Ending June 30
2018 2019 2020 2021
Total
Deferred Outflows/ (Inflows) of Resources
$ 213,134 214,051 613,203 461,141
$ 1,501,529
Actuarial Assumptions
A of the actuarial assumptions and methods used to calculate the total pension l1ab1l1ty as of
Valuation ciate
Measurement ciate
Pctuanal cost m ethoci lmestm ent rate of return
Mun1apal bonci ~elci
Inflation
Pro1ecteci salary1ncreases
Discount rate
Basic COLA
below, 1nclud1ng any assumptions that differ from those used 1n the valuation
SFERS Plan andReplacemert Benefits Plan (RBP) CalPERS MiscellaneousandSafetyPlans
June 30, 201 5 upciateci to June 30, 201 6
June 30,2016
Entry-age norm al cost m ethoci 7 50%, net ofpens1on plan imestm ent
e~enses(SFERS) Not applicable for RBP
3 85% as of June 30, 2015
2 85% as of June 30, 2016 Bonci Buier 20-Bonci GO lnciex, July 2, 2015 anci July 30, 2016 3 25%
3 75% plus m ent component baseci on emploiee dass1lcat1on anci iears ofser~ce
7 50% as of June 30, 2016 (SFERS) 2 85% as of June 30, 2016 (RBP)
Olci Miscellaneous anci
~I New Plans Olci Police anci Fire Pre7~f75Retirements
Chapters AB 595 anci AB 596 Chapters AB 559 anci AB 585
June 30, 2015 upciateci to June 30, 201 6
June30,2016
Entry-age normal cost m ethoci 7 50%, net ofpens1on plan imestm ent
e~ense, 1ncluci1ng 1nflat1on
2 75%
Vanes byEntryA,ie anci Ser~ce
7 65% as of June 30, 2016
2 00% Miscellaneous Contract COLA up to 2 75% until Purchasing Protection ~lov.ance Floor
2 70% on Purchasing Pov,er applies 2 75%
3 30% thereafter
4 40% Safetystanciarci COLA2 0%
rates for active members and healthy annuitants were based Employee and base year using a CalPERS m ortal1ty tables generationally from
version of the MP-2015 pr0Ject1on
The actuarial assumptions used 1n the SFERS June 30, 2015, valuation was based upon the results of an experience study for the period July 1, 2009, through June 30, 2014
For CalPERS, the mortality table used was based on CalPERS' spec1f1c data The table includes 20 years of mortality improvements of Actuanes Scale BB All other actuanal assumptions used 1n the CalPERS June e,r1eoem e study for the period 1997 to to salary increase, mortality and
rates The Experience Study report can be at CalPERS' website
For the Benefits Plan of the year measurements are also based on the census data as 30, 2015 Because beginning and values are based on the same census data, no l1ab1l1ty gains or losses due to experience are this year
104
Discount Rates
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
SFERS - The beginning and end of year measurements are based on different as,Pmpmms acd contribution methods that result 1n different discount rates The discount rate was as of June 30, 2015, and 7 50% as of June 30, 2016
l1ab1l1ty as of June 30, 2016 was 7 50% of cash flows used to determine discount rate assumed that plan member continue to be made at the rates 1n the Charter Employer contributions were
assumed to be made 1n accordance with the policy 1n effect for July 1, 2014 actuarial valuation That policy includes contnbut1ons equal to the employer of the Entry-Age normal costs for members as of the valuation for the adm1nistrat1ve expenses, and an amort1zat1on payment on the Unfunded Llab1l1ty
The amort1zat1on payment 1s based on closed periods that 1n on the source Charter amendments prior to 1, 2014, are amortized any Charter changes to active member are amortized over 15 years and changes to 1nact1ve member benefits, 1nclud1ng Supplemental COLAs, are amortized over 5 The remaining Unfunded Actuarial Llab1l1ty not attributable to Charter amendments as of July , 2013, 1s amortized over a 19-
period 2014 Experience and losses and or method on or after are amortized over years For the valuation, the
increase 1n the L1ab1l1ty attributable to the Supplemental 2013 and July amortized over and 5-years rn,,pect"'''Y schedules are as a level percentage so 75% each year The Unfunded Actuarial L1ab1l1ty 1s based on an Value Assets that smooths investment
and losses over five and a measurement of the Actuarial Llab1l1ty that excludes the value any future
While the contnbut1ons and measure of the Actuarial L1ab1l1ty 1n the actuanal valuation do not future COLAs, the contributions for the determ1nat1on of the rate
the CO LAs for current after November 6, 1996,
Pcc,py;,t,cm C passed, the Market Value of Assets must also exceed the Actuarial Llab1l1ty at the year for a Supplemental COLA to be granted When a COLA 1s granted, amount depends on the amount of excess earnings and the basic amount for each membership group The large maJority of members receive a 1 50% Supplemental COLA when granted
Year Blding Before 11 /6/96 or June 30 96 - Prop C After Prop C 2018 0 750% 0 000% 2023 0 750% 0 220% 2028 0 750% 0 322% 2033 0 750% 0 370% 2038+ 0 750% 0 375%
of benefit payments to current members for determining the discount rate includes the of ant1c1pated future Supplemental COLAs
105
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Based on these the Retirement System's f1duc1ary net available to make benefit payments for current
benefit payments are benefit payments are d,s,ccqcted expected on
assets to the the net pos1t1on 1s available to payments and at the municipal bond rate of 2 85% to the are not available The single equivalent rate used to delellll1ne the total pension l1ab1l1ty as of June 2016, 1s 7 50%
The long-lellll investments was 7 50% It was set by the Retirement returns and historical returns em,ec,ecced by the Ret1rem ent System Expected future returns were determined by 1n which best-estimate ranges of future real rates of return were asset class These long-term the future target asset
Target allocation and best estimates cf ,,ecme,tcc plan investment expense and table
Asset Class Target Allocation Long-Term Expected Real Rate of Return
Global Equity Fixed Income Private Equity Real Assets Hedge Funds/Absolute Return
40 0% 20 0% 18 0% 17 0% 50%
51% 11% 63% 43% 33%
CalPERS - The discount rate used to measure each of the CalPERS Miscellaneous Plans and the l1ab1l1ty was 7 65% To determine whether the
used 1n the of a discount rate for each plan, CalPERS stress result 1n a discount rate that would be different from the actuanally
ofthe plans, the tests revealed the assets would not run discount 1s adequate and the use of the municipal bond rate calculation 1s not necessary The long-term discount rate of 7 65% 1s applied to all plans 1n the Public Employees Retirement Fund stress test results are presented 1n a detailed called "GASB Crossover Testing Report" that can be obtained at CalPERS' website under the Statement No 68 section
The rate of return on pension plan investments was determined 1n best-estimate ranges of future real rates of return
net of pension plan investment expense and are developed for each maJor asset class
In determining the long-term rate of return, CalPERS took into account both short-term and long-term market return e,r,,ectat,,,,,, as well as the expected pension fund cash flows Such cash flows were developed assuming both members and will make their required contribut1ons on time and as scheduled 1n all returns of all the funds' asset classes, expected over the short-term (first 10 years) and the long-term the nominal returns for both short-term and was fund The expected rate
expected return that amved at the same present value of benefits for cash flows as the one using both short-lellll and returns The expected rate of return was then set equivalent to the single equivalent rate above and rounded down to the nearest one quarter of one percent
106
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
The table below reflects long-term real rate of return by asset class adopted by the Board, effective on July 1, 2015 The rate return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation
Target Real Return Real Return
Asset Class Allocation Years 1 -10 (1J Years11+ (ll
Global equity Global fixed income Inflation sens1t1ve Private equity Real estate Infrastructure and forestland Llqu1d1ty
51 00% 20 00%
6 00% 10 00% 10 00% 2 00% 1 00%
C1l An expected 1nflat1on of2 5% used forth1s period (2J An expected 1nflat1on of3 0% used forth1s period
Replacement Benefits Plan - The and end of year measurements are based on different assumptions that result 1n different rates The discount rate was 3 85% as of June 2015, and 2 85% as of June 30, 2016 This reflects the
bond with an Buyer Index as and June 2016 These are the rates used to determine the total pension l1ab1l1ty as of June 30, 2015, and June 2016
'.P-~ ~;'P'."!''°" of 3 25% compounded annually was used for However, the actual IRC Section 415(b) l1m 1tat1ons
and 2016 was used for both the 2015 and 2016 measurement
The SFERS assumptions about Basic and SPppl,,m,ecLal Replacement Benefits Plan, the funding requirement fc,pavm,ect cfcfqpplemectal and the impact 1s
Memt,e,,h,p 1n the plan include 33,447 active members and 84 retirees and benef1c1aries cu1Tently rece1v1ng
Sensitivity of Proportionate Share of the Net Pension Liability to Changes in the Discount Rate
The presents the City's share of the NPL for each of the City's cc,,t-shmmg calculated using rate, as well as what the proportionate share
l1ab1l1ty (asset) would be 1f 11 were calculated using a rate that 1s 1 0% lower or h,ql,ecth,m the cu1Tent rate
Cost-Sharing Pension Plans Proportionate Share ot Net Pension Liability
SFERS
City CalPERS Miscellaneous Plan Transportatlon Authonty CalPERS Classic & PEP RA M 1scellaneous Plans Successor Agency CalPERS Classic & PEP RA Miscellaneous Plans Treasure Island De1oelopm ent Authonty ca PERS Miscellaneous Plan
107
1o/, Decrease
Share otNPL @6SOo/,
' 8,678,794
1o/, Decrease Share otNPL
@6.65o/,
(9,903) 2,978
37,564
"
Current Share 1o/, Increase
ot NPL ShareotNPL @7.50o/, @8.50o/,
5,476,654 ' 2,828,104
Current Share 1o/, Increase ot NPL ShareotNPL
@7.65o/, @8.65o/,
(12,711) (15,032) 1,765 "' 23,281 11,478
" ''
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
The following presents the the discount rate, 1n
NPL for each of the City's agent mc,11,,,1e-empl1,yec as of the measurement date, as well as
be 1f 11 were calculated using a discount rate that 1s 1 0% lower or 1 0% rate
1% Decrease Agent Pension Plan @6.65%
City CalPERS Safety Plan 425,527
1% Decrease @1.85%
Replacement Benefits Plan 96, 762
Detailed 1nformat1on about the Cal PERS Safety Plan's f1duc1ary net issued CalPERS f1nanc1al report, copies may be obtained www calpers ca gov
Deferred Compensation Plan
The offers its em_plcye,,, (IRC) 457
Measurement Date@ 7.65%
263,908
Measurement Date @2.85%
78,600
1% Increase @8.65%
130,402
1% Increase @3.85%
56,782
The City has no adm1nistrat1ve involvement and does not the 1nvest1ng function The City has no for the and, plan assets and related l1ab1l1t1es to plan
1n the
(b) Postemployment Health Care Benefits
City (excluding the Transportation Authority and the Successor Agency)
Plan Description - The City maintains a benefits plan, which health care
",;~,:,;";~::~:~0
idte,1:~1ne<ed benefit other postemployment JE retired and
through the of the
Health care are Health Plan, Kaiser, and
pc,;teisplcym ee<lbenef1t plan
The its OPEB obl1gat1ons through the Retiree Health Care Trust Fund (RHCTF), an '"''"°'"ble trust fund that allows part1c1pat1ng employers to prefund certain benefits other than pensions for their covered The RHCTF 1s an agent and has two the and the San Francisco
were members for the City retirees
the recent actuarial valuation reports as 25,919 retirees and benef1c1aries, and 2,843 terminated
The Community College District had 1,369 active members and 1,041 el1g1ble
The RHCTF 1s administered by the City and 1s presented as an other benefit trust fund It 1s a Retiree Health Care Board of Adm1nistrat1on cons1st1ng trustees one selected one by the Treasurer, one by the Executive Director of the San Francisco Retirement System, elected by the active and retired members of the City's Health The RHCTF issues a available f1nanc1al report cons1st1ng of f1nanc1al statements required 1nformat1on RHCTF 1n aggregate The maybe obtained from City Hall, Room B Goodlett Place, San Francisco, CA
108
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
benefits on Trust Fund
are based on a pay-asfor postemployment
4 m1ll1on to the Retiree Health Care
Annual OPEB Cost and Net OPEB Obl1gat1on - The (OPEB) expense 1s calculated based on the annual delellll1ned 1n accordance with the parameters represents a of that, basis, 1s to cover the normal cost of each year and
amortized over thirty years The ARC was delec,a,c,ed
The net OPEB Pbl,,at,ccis business-type and f1duc1ary funds The annual OPEB cost for the year, the amount contnbuted obl1gat1on
Annual required contnbut1on Interest on Net OPEB obl1gat1on AdJustment to annual required contnbut1on
Annual OPEB cost Contnbut1on made
Increase 1n net OPEB obl1gat1on Net OPEB obl1gat1on - beginning of year
Net OPEB obl1gat1on - end of year
of the governmental act1v1t1es, shows the of the City's and changes 1n City's net OPEB
362, 700 98,562
(39,860)
421,402 (183,898)
237,504 2,147,434
$2,384,938
The table below shows how the total net OPEB obl1gat1on as of June 30, 2017, 1s distributed
Funded Status and Funding Progress - The unfunded actuarial accrued a level percentage of expected payroll over an open thirty-year period As recent actuarial valuation date, the funded status of the Retiree Health Care was 11% The actuarial accrued for benefits was $4 26 b1ll1on, and the actuarial value of assets was $49 0
actuarial accrued l1ab1l1ty (UAAL) of $4 21 b1ll1on As of July 1, payroll of active covered by the plan) was $2
the covered payroll was
109
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Actuarial Methods and Assumptions -Actuarial valuations of an plan involve estimates of the value of reported amounts and assumptions about the occurrence of events far into the future include assumptions about future mortality, and the healthcare cost trend determ 1ned regarding the funded status plan and the annual contribution of the employer are subject to continual rev1s1on as actual results are compared past expectations and new estimates are made about the future The schedule of funding progress, presented as required ''.i;~;'.:i,::'':'i,1nformat1on the notes to the f1nanc1al statements, presents multi-year trend 1r whether the value of assets 1s 1ncreas1ng or decreasing over time relative to the actuarial accrued l1ab1l1t1es lctbe1,et1ts
In the actuanal valuation as of July 1, 2014, the entry age normal cost method was used Under this method, the actuarial present value of the projected benefits of each 1nd1v1dual included 1n the valuation 1s allocated as a level percent of expected salary for each year of employment between entry age (age at hire) and assumed exit (m ax1mum ret1rem ent age) Unfunded l1ab1l1t1es are amortized using the level percentage of payroll over a rolling 30-year period The actuarial assumptions included a 4 50% investment rate ofretum on investment, 3 25% 1nflat1on rate, 3 75% payroll growth, and actual medical premiums from 2015 through 2017 and an ultimate medical 1nflat1on rate of8 00% to 4 50% from 2018 through 2032
The San Francisco Retiree Health Care Trust Fund (RHCTF) was established 1n December 2010 the Retiree Health Trust Fund Board of the The RHCTF was established to receive
by the pcstrnltrno,eot
Ptc,pcs,i,cm C also requires all emplcye,,s 0 25% of pay to RHCTF commencing 1 0% of pay The employer 1s 1n short-tellll fixed income
The Charter amendment passed withdrawals from the RHCTF until funds are aside to costs as determined by an actuanal L1m1ted withdrawals will be pellll1tled 1f annually retiree health care costs rise above expenses, and will be to no more than 10 0% of the RHCTF balance rev1s1ons to these funding l1m1tat1ons and requ1rem ents and an external actuary and 1f approved by the RHCTF and the Mayor
San Francisco County Transportation Authority
to contnbute and the
The Transportation Authority maintains a separate defined benefit OPEB plan and did not have a net OPEB as of June 30, Authority's most recent
as of June 30, 2015, covering year ended June 30, 2017 The 1s for retiree healthcare benefits and was 57 3% funded and the
was $0 9 m1ll1on of the 30, 2015, actuarial valuation, the estimated covered payroll was $3 9 m1ll1on and the ratio of the UAAL was 22 2% Details of the Authority's OPEB maybe found 1n its f1nanc1al statements for the year ended June 30, F1nanc1al statements
110
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
can be obtained from their finance and adm1nistrat1ve offices at 1455 Market CA 94103 or the Transportation Authonty's website
As of June 30, 2017, the Transportation Authority's annual OPEB expense of $200 5 was greater than the ARC Three-year trend 1nformat1on 1s as follows
Percentage of Fiscal Year Annual Annual OPEB Net OPEB
of law to dissolve the former the Successor pcstemptc,rn,mt healthcare plan Successor
other postemployment benefits Successor Agency The
Benefit Trust (CERBT) Fund CERBT IS m cll1ple-,emplcye1 lets! of Cal PER s· f1nanc1al report
Cal1fom1a 95811
Funding Policy - The contribution requirements of the established by and may be amended by the Sccu1ssc1 ,Cm1ccv plan benefits through the CERBT by contnbut1ng at
The annual contribution (ARC) 1s an amount parameters Statement No 45 Dunng the year ended contributed $1 2 m1ll1on to this plan
CalPERS at 400 Q Street,
determined 1n accordance with the 30, 2017, the Successor Agency
Annual Other Postemployment Benefit Cost and Net Obl1gat1on - The Successor annual OPEB cost (expense) 1s calculated based on the ARC of the employer The ARC a level of
that, 1f paid on an basis, 1s to cover normal cost each year and amortize any actuanal l1ab1l1t1es over a penod not to exceed thirty years Annual OPEB
the historical differences between the ARC and amounts
Annual required contribution Interest on Net OPEB obl1gat1on Adjustment to annual required contribution
annual OPEB cost for the year
813 3Q
~ Annual OPEB cost 804 Contribution made ~
Decrease 1n net OPEB obl1gat1on (428) Net OPEB obl1gat1on - beginning of year 430
Net OPEB obl1gat1on - end of year
111
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Three-year trend 1nformat1on 1s as follows Percentage of
Fiscal Year Annual Annual OPEB Net OPEB Ended OPEB Cost Cost Contributed Obl1gat1on
Funded Status and Funding Progress - The funded status of the plan of the Successor Agency as of July 1, 2015, the plan's most recent actuarial valuation date, was as follows
Actuarial Methods and Assum pt1ons - Projections of benefits for f1nanc1al reporting purposes are based on the substantive plan (the plan as understood by the employer and plan members) and include the types of benefits provided at the time of each valuation and the historical pattern of sharing of benefits costs between the employer and plan members to that point
Actuarial valuations of an involve estimates of the value of reported amounts and
::::~::::::: about the occu1Tence of events far into the future Examples include
about future emplcym,eet mortality, and the healthcare cost trend Amounts determined and the annual required contributions of the
results are compared with past expectations and new
The ARC for the June 30, 2017, and the funding status of the plan was detemi1ned based on the July 1, the age normal actuanal cost method Actuanal ,,,,cc,pt,,,o, include rate of 7 0%, (b) m ed1cal costs trend increases of4 (c) 1nflat1on growth of 2 and (e) 2014 CalPERS active mortality table for miscellaneous employees Successor 1nit1al and residual UAAL 1s being amortized as a level dollar amount over closed 30 years and open 22 years, respectively
Health Service System
The Health Service System was established 1n employees and surv1v1ng spouses are financed Service The contribution, includes the San District, Francisco School D1stnct and the San Francisco ao1scm,;m,telc $713 9 m1ll1on 1n fiscal year 2018-17 The
Chart,sc,,cm,is,co based on s1m 1lar contributions counties 1n Cal1forn1a and the contribution models negotiated with the unions Included 1n amount 1s
5 m1ll1on to health care benefits for 27 ,581 retired part1c1pants, of which 4 m1ll1on The City's contribution 1s out of current available
resources and funded on a pay-as-you-go basis The Health Service f1nanc1al report that includes f1nanc1al statements That the San Francisco Health Service System, 1145 Market Street, or from the City's website
112
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
(10) FUND EQUITY
(a) Governmental Fund Balance
Fund balances for all the major and nonmajor governmental funds as of June 30, 2017, were distributed as follows
Nonspendable Imprest Cash, Advances, and Long Term Receivables
Restricted Rainy Day Public Protection
Police Sheriff Other Public Protection
Public Works, Transportation & Commerce Human Welfare & Neighborhood Development Affordable Housing Community Health Culture & Recreation General Adm1nistrat1on & Finance Capital Projects Debt SeNce
Total Restricted
Committed Budget Stab1l1zat1on Recreation and Parks Expenditure Sav1ngs
Total Committed Assigned
Public Protection Police Sheriff Other Public Protection
Public Works, Transportation & Commerce Human Welfare & Neighborhood Development Affordable Housing Community Health Culture & Recreation General Adm1nistrat1on & Finance General City Respons1b1l1t1es Capital Projects L1t1gat1on and Cont1ngenc1es Subsequent Year's Budget
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
(b) General Fund Stabilization and Other Reserves
Rainy Day Reserve
The City ma1nta1ns a "Rainy Day" or economic stab1l1zat1on reserve under Charter Section 9 113 with separate accounts for the benefit of the and the San Francisco U nif1ed District (the "School Reserve") In any that total General Fund revenues for the budget year are to the General Fund revenues
the City actm,at,rnllc Secc,ctc-t"e
take 1n less money than 11 had to half the money 1n the City Reserve, General Fund revenues up to the level of the current The
mayw,th,Jrn>eup to half the money 1n the School Reserve when 11 expects to less money fiscal year and would have to off a s1gnif1cant number of emplcyec,s
School District's can ovemde those l1m1ts and any amount 1n the School by a two-thirds vote The City does not expect to routinely money from the Rainy Day Reserve after evaluating its recent General Fund revenues trends its most recent update to the Five-Year F1nanc1al Plan covering fiscal years 2017-18 through 2021-22
Budget Stabilization Reserve
The City sets aside as an add1t1onal reserve 75 collected over the five years,
and Fund balances be able to spend those less than two after using the amount by a resolution of the Board of Supervisors
mc,y t,cmpmac,ly ccspei,d these a natural disaster that
Recreation and Parks Expenditure Savings Reserve
The City maintains a Recreation and Parks Expenditure Savings Reserve under Charter Section 16107, which sets aside and maintains such an amount,lcc,ellww,th interest earned 1n the reserve account, and any amount unspent or of the fiscal earned fomard to the next fiscal year and, subject to the bwJcetac 1,a11d shall be then or thereafter for capital and/or and and other one-time expenditures of the
(c) Encumbrances
At June 30, 2017, encumbrances recorded 1n the General Fund and nonmajor governmental funds were $244 2 m1ll1on and $277 3 m1ll1on, respectively
114
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
(d) Restricted Net Position
At June 30, 2017, the government-wide statement of net pos1t1on reported restricted net $1,473 2 m1ll1on 1n act1v1t1es and $690 6 m1ll1on 1n act1v1t1es, m1ll1on and $90 9 are restricted by enabling leg1slat1on 1n act1v1t1es and bus1ness-type act1v1t1es, respectively
The City issued general and Laguna rncceetmctmg and 1mprov1ng
work to ensure
reduced net investment 1n restricted for capital projects to reflect the perspective
(e) Deficit Fund Balances and Net Position
column of the pnmary government as a whole
The Human Welfare Fund and Senior Citizens' Program Fund had def1c1ts of $3 5 m1ll1on, and $0 8 m1ll1on, as of June 2017 The def1c1ts relate to unavailable revenue 1n various programs which 1s expected be collected 60 days of the end of fiscal year 2017
The Moscone Convention Center Fund had a $241 2 m1ll1on def1c1t as of June 2017 The def1c1t 1s related to the issuance of commercial paper for the construct1on of Moscone Center
and Improvement Project and will be covered by ref1nanc1ng com merc1al paper as long-term
Prior to February 1, 2012, the Cal1fom1a Law provided tax increment f1nanc1ng as a source of revenue to agencies to redevelopment act1v1t1es O nee a rn,Jecelcpciect area was the could receive tax 1ncrem ent to the extent that 11 show
mdebledie,,sthat must be repaid with tax increment Due to the the former Agency l1ab1l1t1es exceeded assets Therefore, the
former Agency earned a which was expected to be reduced as future tax increment revenues were received and used to reduce its debt This def1c1t was transferred tothe onFebruary1,2012 At June of $388 8 m1ll1on, will be el1m1nated with future rnctecelcpmect p1cp,crt 11 ta, from the Redevelopment Property Tax Trust Fund ad,attttst,crnd
115
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
(11) UNAVAILABLE RESOURCES IN GOVERNMENTAL FUNDS
The defe1Ted inflows of resources balance 1n governmental funds as of June 30, 2017 consists of the following unavailable resources
other Total Governmental Governmental
General Fund Funds Funds
Grant and subvention revenues 83,757 56, 126 139,883
Property Tax 62,512 15,843 78,355
Teeter Plan 38,469 38,469
SB 90 8,218 8,218
Advances to Successor Agency 13, 149 13, 149
PG&E franchise tax 3,346 3,346
Loans 9,666 79,759 89,425
Total 205,968 164,877 370,845
Cal1forn1a Senate 6111 90 was adopted 1n 1972 and added to the State Const1tut1on 1n 1979 When the Governor or mandates a new or higher level of service local
and school SB90 requires the State reimburse local and districts the cost of these new programs or levels of service The 1n deferred inflows of
resources 1s the value of reimbursement submitted to the State which are subject to audit for unallowable costs
As described 1n Note 6, under the Teeter Plan the has been billed but not collected Collections which not occurred included 1n deferred inflows of resources 1n the General Fund
(12) SAN FRANCISCO COUNTY TRANSPORTATION AUTHORITY
programs
Sales Tax Program. On November 4, 2003, the San Francisco voters K with a 74 7% aff1miat1ve vote, amending the City Business and Tax Code to one-half of one percent sales tax, and to replace the 1989 B Plan with a new 30-year c,pe,;o"m Plan The new Expenditure Plan includes 1) Transit. and Traffic Safety (1nclud1ng street
Paratrans1t services for seniors and System
M;,~,'.;c";~::~:;:;:;e:;;: lnit1at1ves funds management, tr use coord1nat1on, demand management efforts) projects to
Propos1t1on K Expenditure Plan include of the Rapid Transit and Muni Metro BJ construction of the Muni Central Street Light Rail Project-Phase
CJ construction of the Caltra1n Downtown Extension to a Transbay Terminal, and South to the Golden Gate Bridge Doyle Drive (re-env1s1oned as the Pursuant to the of D1v1s1on Public Ut1l1t1es Code, the
T;;aeepcrtat,cc Authority may adopt an updated Expenditure Plan any time after 20 years from
116
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
the effective date of adoption of the K Expenditure Plan but no later than the last general election 1n which the K Plan 1s 1n effect The Sales Tax would continue as as a new or mod1f1ed 1s 1n Under Propos1t1on K the Transportation directs the use of the Tax and may up to $485 m1ll1on per year and may issue up $1 88 b1ll1on 1n bonds secured by the Sales
Transportation Fund for Clean Air (TFCA) Program. On June 15, 2002, th,, Trncsp,,rt,1!,cc was designated to act as the overall program manager for the local guarantee (40%) share transportation funds available through the TFCA Funds from this administered by the Bay Area Air Management District come a $4 vehicle fee on automobiles registered 1n the Bay Through this the Transportation that benefit air quality by reducing
program
Treasure Island Mobility Management Authority (TIMMA) The Treasure Island T'.,'.:~:~:::::•,:; Management Act of 2008 (AB 981) authorizes the creation or des1gnat1on of a Treasure Ii
~
;:i!ff:i,:::i:•~m~a;'c::'Ige:;m~1",':1';:agency On 1 the City's Board of 0Ppe1wm approved a the Transportation TIMMA to the Treasure Island Transportation Plan 1n Project In Se,stecab,;; Assembly 6111 141, establ1sh1ng TIMMA as a entity firewall the Transportation functions The eleven members of the T;;aeepcrtat,cc Authority Board act as the of Comm1ss1oners for TIMMA The Transportation financial statements include TIMMA as a blended special revenue component unit
117
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
(13) DETAILED INFORMATION FOR ENTERPRISE FUNDS
(a) San Francisco International Airport
San Francisco International Airport (the or SFO ). which 1s owned and operated the City, 1s the commercial service San Francisco Bay Area A 1s rn,,pccs,ble for the and management of the Airport The Airport 1s located 14
south of San Francisco 1n an unincorporated area of San Mateo between the Bayshore Freeway (US and the San Francisco Bay 2016 North American Traffic Report from Counc1l lnternat1onal the Airport 1s
1n the United States 1n lelllls and 1n terms
all of the Net Revenues (as defined 1n bond resolutions
I ~;~,~;:;;;~,~,,i:::::1:h:e obl1gat1ons, when due, 1n order of pnonty, In Senes Bonds and a portion
under the letters of credit the Senior (2) the Subordinate Commercial Paper and any other obl1gat1ons Bonds) and amounts due to reimburse under the letters of credit securing Commercial Paper Notes,
under the letters of credit securing the Senior
During fiscal year 2017, the original issued, and interest
amount of the Senior Bonds and Com merc1al Paper Notes on outstanding Senior Bonds and Commercial Paper
Notes, the
~i,~,:ii,;,:::c1da;;,::;;:and Net Revenues are as set forth 1n
term1nat1on payments due
Bonds issued with revenue pledge Bond and interest
paper issued with revenue Comm erc1al paper principal and interest remaining Net revenues Bond 1n the fiscal year
end of the fiscal year
interest and fees paid 1n the fiscal year
179,000
408,750 4, 106
Debt Service Requirement- Under the terms of the 1991 Master Bond Resolution, for a Senes of Second Series Revenue Bonds to be secured the parity common account (the Issue 1 Reserve Account). the Airport 1s required to trustee an amount equal to the maximum annual debt service accruing 1n during the life of all Second Series Revenue Bonds secured
the Issue 1 Reserve Account the may establish a reserve account a different reserve requirement to secure an series of bonds revenue bonds are
outstanding, the Airport may not create liens on its essential to operations, may not of to maintaining revenues the Airport, and must maintain
insurance or self-insurance
Under the lelllls of the 1991 Master Bond Resolution, the has covenanted that 11 will establish and at all times maintain rentals, rates, fees, and charges for use of the Airport and for services rendered by the Airport so that
(1) Net revenues 1n each fiscal will be at least sufficient debt service payments and 1n fiscal respect to acy scb1>1d1cate bonds, and any general bonds issued the City for the benefit of the annual service payment to the City,
118
(11)
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
debt service coverage differs statements
Passenger Facility Charges - The Airport, as authonzed Federal Av1at1on Adm1nistrat1on (FAA) pursuant to the Av1at1on Safety and of 1990 Act). as amended, Passenger Fac1l1ty Charge (PFC) of passenger at the the Act, air earners are responsible are required to remit to the Airport 1n the month after they are recorded by the air earner As of June 30, FAA has approved (PFC #2 to PFC #7) for collect1on with a total cwcmmce collect1on amount of (PFC #2 to PFC has been for use with a total cumulative use amount The final charge date 1s to be February 1, 2030 The Airport 1s working with the FAA to the exp1rat1on date for PFC #3 and the charge effective date for PFC #5 from January 2017, to 1, 2013, because PFC #3 was fully collected earlier than ant1c1pated to increased passenger levels For the ended June 30, 2017, the approximately $104 0 m1ll1on of PFC revenue, 1s included 1n other nonoperat1ng revenues 1n the ace om pany1ng basic financial statements
Commitments and Contingencies - In add1t1on to the long-termm0:::~:'.'i~:d1scussed 1n Note 8, there
were $68 2 m1ll1on of Special Fac1l1t1es Lease Revenue Bonds 01 financed improvements to the Airport's av1at1on fuel and delivery Fuel LLC (SFO Fuel), a special
SFO Fuel
Purchase commitments for construct1on, material and services as of June 30, 2017 are as follows
Construct1on 188,826 28 896
217 722
Transactions with Other Funds - Pursuant to the Lease and Use Agreement between the and most of the a1rl1nes at the Airport, the makes an annual service payment to
General Fund of concession revenue adJustments). but not less than
certain direct services Department, the Fire Deca,tmc,cl Purchasing year ended
119
for all 1nd1rect services provided to the 2017 was O m1ll1on and was
Fund for the cost of
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Business Concentrations - In add1t1on to the Lease and Use Aqrncmmts leases fac1l1t1es to other businesses to operate concessions at June 2017, revenues realized from the following Airport tenant of the Airport's total operating revenues
United A1ri1nes 23 9%
(b) Port of San Francisco
A five-member Port Comm1ss1on 1s rn,,pcos,ble for the and maintenance act1v1t1es of the Port of San Francisco In February was 1n trust to the
under the terms and cond1t1ons ("Burton Act") rat1f1ed by the electorate of the Prior to 1969, the Port was operated State of Cal1forn1a The State retains the to
amend, or revoke the transfer of 1n trust provided that 11 assumes all lawful related to
Pledged Revenues - The Port's revenues, derived primarily from property rentals to commercial and industrial enterprises and from mant1me which include cargo, ship repair, f1sh1ng, harbor services, cruise and other mant1me act1v1t1es, are 1n a separate enterpnse fund and aptcm1oc,ated for expenditure and fiscal prov1s1ons of the City Charter, trust requ1rem ents the Burton Act, and the transfer agreement between the City and the State, Port revenues may be spent only for uses and purposes of the public trust
The Port payments
future net revenues to repay its revenue bonds Annual principal and interest to require less than 11% of net pledged revenues as calculated
1n accordance the bond The total and interest to be paid on the bonds 1s $91 4 m1ll1on The made 1n 2017 were $4 m1ll1on and revenues (total net revenues June 30, 2017, were $39 0 m1ll1on
m ac,cccdm;cew1th the bond indenture) for the year
The Port has entered into a loan the Cal1forn1a Department of Boating and w,,tecoai;s 5 m1ll1on to finance certain Street Harbor improvements The loan 1s subordinate to
by the Port and 1s secured by gross revenues as defined 1n the loan agreement Total and interest remaining to be paid on this loan 1s $2 8 m1ll1on Annual and interest
payments were $0 23 m1ll1on 1n 2017 and pledged harbor revenues were $0 for the year ended June 30, 2017
Commitments and Contingencies - The Port 1s projects that involve a commitment to purchase commitments for services, materials and supplies, and other services were $13 7 m1ll1on for capital projects and $3 2 m1ll1on for general operations
Under an agreement with the San Francisco Bay C ccse,"t,cc and Development Comm 1ss1on the Port 1s committed to fund and expend up $30 0 m1ll1on over a for parks and plazas, and other Through
for under In to work directly funded the Piers 15 and 17 and a cco-h,st,mc
Transactions with Other Funds - The Port receives from, services to, various City In 2017, the $19 0 m1ll1on 1n services by City departments included $2 7
of insurance premiums and $0 6 m1ll1on 1n compensation expense
In connection with the Project which commenced July 2016, the Port received $0 m1ll1on the San Francisco Transportation Agency (SFMT A) and $0 5 m1ll1on from the Planning Department 1n support of the project
120
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
The Port and SFMTA entered into an MOU dated January 25, right to use an 17-acre portion of certain Port therein SFMTA paid to the Port $29 7 m1ll1on 1n for the future transfer of this property, subject to the sat1sfact1on of various
sat1sf1ed and the the Board cfc,qcern,sm s the interdepartmental ,ccsd,,ctmcal
Comm1ss1on to SFMTA for no add1t1onal cons1derat1on The transfer 2001 was the estimated fair market value determined by an mde,emdeot paid
South Beach Harbor Project Obligations - A portion of the Rincon Point South ReJe,elcpmeot Project Area 1s w1th1n the Port Area and the former Redevelopment
interests to certain Port In 2015, the Port and the Office cfCCmc mcc,tyirn,estm eot and Infrastructure, Successor Agency, concerning the trans1t1on, agreements, the transfer of cp,;;m,ccs, certain associated obl1gat1ons The resultant memorandum of agreement received approvals and 1s 1n executory status, pending the completion of several closing cond1t1ons
Under BCDC Perm 11 Amendment No 17 for the South Beach Harbor Project, certain pql,lm acce,,s other improvements must be by December 31 , 2017 Construction Port consultant 1n 2014 1nd1cate this work would cost ap1,cm,mately 1nclud1ng certain structural repairs, soft costs with the water recreation community to BCDC cons1derat1on An extension oft1me improvements Port management believes that the alternate access improvements that are relevant to the project area and
Pollution Remediation Obligations - The Port's f1nanc1al statements include and adjusted based on new 1nformat1on, 1n accordance with estimated with environmental laws and regulations remed1at1on of known contam1nat1on 1s undertaken, the Port evaluates its overall prov1s1ons
tanks
nature of future act1v1t1es contemplated for each site that 1n future reporting periods
to environmental risk elements typical of sites with a mix of light 1ndustnal trnos1wtat,cc transportat1on-related and warehousing act1v1t1es Due to the
and widespread use of and underground tcm,sc,ccmqfuel, elevated levels of hydrocarbons and
Cm,seqqtmtlc any construct1on, excavation or may encounter hazardous materials and/or generate
A 65-acre area commonly known as "Pier 70" has been used for over 150 for iron and steel works, ship and and other and/or occupied U rn11trnctc1s industrial use has hindered repair rehab1l1tat1on de,elcpmeot for adaptive reuse The
previous development proposals for Pier 70
1n 2011 reduced the uncertainty need for remed1at1on, and costs as,,cc,atc,d
Water Quality Control Board Plan provides ml,tqt,ccal
~- ~ '.5 :!! g ~ i:; z ~ i6 ~- ~ :::J W!!!. Q ---i_o(I) "Tl g ::,;;: (/) (Jl -'-<D :l=-Cl)---., 3 Z 6- g "Tl
(Jl ! ~ n z g O ~ (/) o O a o s
z o O
[ ~ ~ .. ro z
~- ~ '.5 :!! g ~ i:; z ~ i6 ~- ~ ~-8~ ~ g ::,;;: (/) (Jl -'-<D :l=-~---., ~ :;; (Jl ! ~
n z g O ~ (/) o O a o s
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Segment Information - Hetch Power issued debt to finance its improvements The Hetch Hetchy Water fund, the Hetch Hetchy and CleanPowerSF fund are for 1n a enterprise (1 e, Hetch Hetchy Enterprise) CleanPowerSF 1s presented as a of the Enterprise
ended 2017 However, investors 1n the debt rely on the revenue generated the act1v1t1es for repayment Summary f1nanc1al 1nformat1on Hetchy 1s presented
Condensed Statements of Net Position Hetch Hetchy Hetch Hetchy CleanPower SC
Assets Current assets Receivables from other funds and component units Noncurrent restncted cash and 1n1oestments othernoncurrent assets Capital assets
Total assets
Deferred outflows of resources related to pensions
Llab1l1t1es
Current l1ab1l1t1es Noncurrent l1ab1l1t1es
Total l1ab1l1t1es
Deferred inflows of resources related to pensions
Net pos1t1on Net 1n1oestment 1n capital assets Restncted for debt se1V1ce
Unrestncted Total net pos1t1on
Condensed Statements of Revenues, Expenses, and Changes in Fund Net Position
Operating revenues
Depreciation expense
other operating expenses
Operating income (loss)
Nonoperating re,enues (expenses)
Federal grants
Interest and 1n1oestment income
Interest expense, net of amortization of premium,
discount, and issuance costs
other nonoperating re,enues net of expenses
Transfers 1n (out), net
Change 1n net pos1t1on
Net position at beginning of year
Net position at end of year
Water Power
76.027
4.154
127.731
208.081
12.659
6.293
44.753
51.046
1.338
127.731
40.625 168.356
187.635 18.673 35.998
1.100
316.990
560.396
40.543
132.005
172.548
1.635
260.681
4S5
140.520 401.686
El1m1nat1on
19.600 (7.250)
Total
283.262 11.423 40.152
1.269
444.721
19.600 (7.250) 780.827
28.132
6.032 (2.000) 50.868
5.350~~
11.382~~
2.973
Hetch Hetchy Hetch Hetchy CleanPower Water Power SC Total
35, 150 120,962 33,867 189,979
(4,505) (13,225) (17,730)
(45,594) (103,710) (27 ,096) (176,400)
(14,949) 4,027 6,771 (4,151)
37 37
46 1,718 89 1,853
(2,945) (70) (3,015)
548 10,319 10,871
60,000 51 60,051
45,645 13,207 6,794 65,646
122,711 388,479 1,424 512,614
168,356 401,686 8,218 578,260
124
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Condensed Statements of Cash Flows Hetch Hetchy
Net cash pro1Aded by (used 1n)
Operating act1V1t1es
Noncap1tal f1nanc1ng act11At1es
Capital and related financing act1V1t1es
Investing act11At1es
Increase 1n cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Pledged Revenues - Hetch Hetchy Power has Clean Renewable Energy Bonds (CREBs). the
Water
(2,920)
61,067
(15,080)
112
43,179
36,367
79,546
the 2012 New Clean Renewable Energy Bonds (NCREBs).
Hetch Hetchy Power
29,975
12,486
(25,205)
1,742
18,998
192,923
211,921
CleanPower SC
5,859
(66)
87
5,880
8,174
14,054
Hetchy Power has future for 2015 Series AB pmssc rnMrns
Total
32,914
73,487
(40,285)
1,941
68,057
237,464
305,521
from the bonds capital construction and sff1ccscc1,p1cieds The Series bonds are payable through fiscal
Hetchy Power on a senior lien basis to the and the 2015 NCREBs
The original amount of revenue bonds issued, total interest paid, during 2017, and applicable revenues
and interest remaining, principal and are as follows
Hetch Hetchy Power (excluding CleanPowerSF) Bonds issued with revenue pledge Bond principal and interest remaining due at end of the fiscal year Net revenues Bond and interest 1n the fiscal year Funds for revenue service
31,229
Commitments and Contingencies - As of June 30, 2017, Hetch Hetchy had outstanding commitments with third parties of $72 7 m1ll1on for various capital projects and other purchase agreements form aterials and services
Hetch Hetchy Water To meet certain of the Don Pedro Reservoir the City entered into an agreement with the lmgat1on District (MID) and Irrigation (TIO) 1n which they would be responsible for an increase 1n water flow releases from the reservoir 1n exchange for annual payments from the City Total payments were $4 7 m1ll1on 1n fiscal year2017 The are to be made for the duration of the license, but may be terminated with one year's 2001 The City and the Districts have also agreed to monitor the fisheries, 1n lower Tuolumne River, for the duration of the license A maximum of $1 4 m1ll1on 1s to be shared between the City and the Districts over the term of the license share of the monitoring costs 1s 52 0% and the D1stncts are responsible for 48 0% of the costs
Hetch Hetchy Power In April 1988, Hetch Hetchy Power entered into two separate power sales aornsimsmts Aqc,ssmsmt) with the two 1rngat1on d1stncts, the MID and TIO, expired June In
Ccmc11ss1cc and the Board of approved the extension of both agreements one year to June 30, 2016 A second agreement has been subsequently to continue the current terms and cond1t1ons for MID through June 30, 2017 The extension agreement for TIO to remove the district's rights to excess from the project and terminate those with the first extension agreement on June 30, The Comm1ss1on will continue to comply with the Raker Act by making Hetch Hetchy generated hydro power available at cost
125
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
to MID and TIO for their agncultural from the Hetch project 1s available alter meeting the municipal load cbl1gat,c,is For fiscal year energy sales to the Districts totaled 152,321 Megawatt hours (MWh) 8 m 1ll1on
In 1987, the City entered into an 1nterconnect1on agreement with PG&E to provide transm1ss1on, d1stribut1on, and other services for the City's use of PG&E's transm1ss1on and d1stribut1on
to deliver City's customers The renegotiated agreement 1n 2007 1, 2015 In 2014, PG&E filed several separate service and
By FERC order, the 1s currently taking transm1ss1on using the CAISO Transm1ss1on Tanff and 1s
taking d1stnbut1on service PG&E's rnplac,em,ect agreements, but to waiver of certain terms and cond1t1ons and subject to refund PG&E, pecd,cgthe FER C's dec1s1on During fiscal year 2017, Hetch
transm1ss1on, d1stribut1on services, and other services from replacement agreements and the 1987 Agreement
Hetchy Hetch Hetchy's higher due to increased water flows maintenance outages
energy, at Sunset Reservoir
LP, owned by Duke Energy (Seller) In and began to provide Hetchy Power energy generated by the
commercial
The PPA sets the purchase price of generated at $235/MWh, increased by 3 0% each throughout the term of the agreement, and 111s that the fac1l1ty will generate 6,560 per year In fiscal year 2017, the fac1l1ty generated MWh In the event that the fac1l1ty generates more
due to better than normal meteorological cond1t1ons, the PP A requires the Buyer excess energy but 1n excess of 120 0% of at no
The PPA also the
CleanPowerSF CleanPowerSF launched 1n May 2016 and entered into contracts with Services LP (Calpine) and Shiloh I Wind Project LLC to renewable energy and resource adequacy to meet its retail Both contracts feature 10-yearmaster agreements under be executed CleanPowerSF has executed two multi-year transactions lellll) The transaction m1ll1on as of June 30, 1s equivalent to months' of estimated 2017, total electricity purchased from Calpine and Shiloh were
CleanPowerSF entered into contract with Noble Amencas 1n November 2015 for a three-year term, not to exceed $5 6 m1ll1on to provide adm1nistrat1ve and customer care services related to electricity data management, b1ll1ng, call center and related services During fiscal 2017, amount was $1 0 m1ll1on Prior year costs were included 1n Hetchy Power's start-up for Cl,rn,,Pcwe,SF
126
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
2017, there was a letter of credit outstanding that guarantees certain payment The Letter of Credit 1s secured by Hetchy Power revenue at the 111h
lien level under the Hetchy Power Indenture The letter of credit, issued by JP Chase, was 1n amount 9 m1ll1on as of June 30, 2017 There were no draws against the credit dunng fiscal
Transactions with Other Funds - The Water Enterpnse purchases water from Hetch Hetchy Water and from Hetch Hetchy Power Included 1n the revenues are the water assessment
$34 6 m1ll1on and for the year ended June 30, 2017 -''' - -,,, power from Hetch Hetchy Power totaling $10 7
1n 2017 operating revenues are sales of power to
As of June 30, 2017, operating revenues 1n sales of power from CleanPowerSF to $0 01 m1ll1on Operating expenses 1n purchase of power from Hetchy Power to $1 9 m1ll1on
data
were
services from Hetchy Power This amount totaled $0 2 m1ll1on
(e) San Francisco Municipal Transportation Agency
The San Francisco Municipal Transportation of Directors who are appointed by the Mayor statements include the entire San Francisco's
1s governed by the SFMTA Board The SFMT A f1nanc1al
transportation network that off and on street regulation of
rn,pc,at,,,cs operated separate
The SFMT A was established (the Charter) 1n 1999 (P,cpcsit,cc surface transportation System with the resources, independence,
add1t1onal Charter amendments
inter entity transactions have
which increased management $500 m1ll1on 1n General Obl1gat1on
Bonds for l,rn,spcrt,,t,cc street and 1n 2014 (Propos1t1on BJ which increases General Fund to SFMTA based on the City's population increase
Muni 1s one of America's oldest public transit agencies and the largest 1n the Bay Area about 226 m1ll1on historic streetcars, modem light rail vehicles,
coaches, and the world-famous cable cars, Muni's fleet 1s among the most diverse 1n the worid
The SFMTA's Sustainable Streets 1nit1ates and coordinates 1m1,cm,ecrncls bicycles, and infrastructure It manages lots In 2009, the Comm1ss1on was merged assumed respons1b1l1ty for taxi regulation to advance industry refollll s
127
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Three corporations provide cp,,rnt,coal Sctte,-St ccktco. Union and PcrtstTICPlh are owned by the and Park Department but SFMT A The act1v1t1es nonprofit garages are accounted for 1n the SFMT A's parking garages account
Pledged Revenue - In 2007, San Francisco voters A. which authonzed the SFMTA to issue revenue bonds and other fomis further voter approval but with
SFMTA Board of Directors and concu1Tence by the Board of Supervisors The SFMTA future revenues to various bonds Proceeds from the revenue bonds provided
'--- __ -,__ and to refund bonds These bonds for City General and restricted sources
for fiscal year 2017 were 38 9% of funds available for revenue bond amount of revenue bonds issued, total and interest remaining, principal and interest 2017 and applicable revenues are as
Bonds issued with revenue pledge Bond principal and interest remaining due at end of the fiscal year Net revenues Bond and interest 1n the fiscal year
for revenue service
Operating and Capital Grants and Subsidies - The
funds to subs1d1ze the operating def1c1ts of SFMT A and \'.,':i;;,;:;,':•0
• budgetary and to the a1 Fund subsidy to the $415 0 a total revenue baseline transfer of an allocation of the parking
Funds to
received such as the planning and design on Wamors Arena transportation improvements
The SFMT A also receives Transit Development Act and sales tax allocations As of June
$32 8 m1ll1on In fiscal year 2017, the
387,670 596,359
42,457
had various operating grants receivable assistance from BART's Americans with federal, state, and local grants of $59 5 m1ll1on, to
Act related support of$1 7 m1ll1on, expenses that are operating 1n nature
Pc;o1,s1t1co 16 1s a $20 b1ll1on transportation infrastructure bond that was approved 1n November The bond measure was composed of several funding
the Public Transportation Modern1zat1on, and Service Eolutee1se1,t (PTM ISEA) and the Transit & The SFMTA received cash totaling 16 funds do not require funds three years of the date awarded
fiscal years 2008 and 20,11100
10;T::h:;e:~:'.~,:;"d~:
the Budget Act of 2014 rE be further extended to June extended to June 30, 2020 The
fiscal year costs
128
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Commitments and Contingencies - The SFMTA has contract commitments of ap1,cc;malely$579 8 m1ll1on with third parties, for various capital Grant funding 1s available
ofth1s amount The SFMTA also has outstanding commitments of $74 8 m1ll1on parties for non-capital expenditures Vanous local funding sources are used to these expenditures
Leveraged Lease-Leaseback of BREDA Vehicles -Tranches 1 and 2
In Apnl 2002 and 1n September 2003, the approval of the Federal Transit Adm1nistrat1on, SFMTA Board of Directors, and the of Supervisors, Muni entered into separate lease-leaseback transactions for over and 21 Breda light rail vehicles (the Tranche 1 seem sccie Equ1pm ent, and collectively, the "Equ1pm en!") Each transact1on, also referred to as a "sale 1n lease out" , was structured as a head lease of the Equipment to a special trust and a sublease of the Equipment back from such trust Under each sublease, Muni an to
the Equipment on spec1f1ed dates between November 2026 through January 2030 case Tranche 1 Equipment and 1n January 2030 1n the case of the Tranche 2 Equipment During the
terms of the subleases, Muni maintains custody of the Equipment and 1s obligated to insure and maintain the Equipment
Muni received an aggregate of $388 2 m1ll1on and $72 6 m1ll1on, 1n 2002 and 2003, from the investors 1n full prepayment of the head leases Muni
payments into separate escrows that were invested 1n US agency maturities that to the dates for the Equipment as
lease with a debt are guaranteed by Assurance
Standard & Poor's and "Aaa" 1 and Tranche 2 Equ1pm ent tcrn,sc1cl1ccs were entered into
represent a legal defeasance of Mun1's obl1gat1ons under the subleases, management believes that these transactions are structured 1n such a way that 111s not probable that Muni will need to access other monies to make sublease payments Therefore, the assets and the sublease obl1gat1ons have not been recorded on the f1nanc1al statements of the SFMT A
As a result of the cash transactions above, Muni recorded $35 5 m1ll1on and $4 4 m1ll1on 1n fiscal 2002 and 2003 the difference between amounts received m1ll1on and $72 6 5 m1ll1on paid to the escrows, the debt payment and for certain expenses These amounts have been class1f1ed as deferred inflows of resources 1n fiscal 2017 and will be amortized over the life of each sublease unless the purchase option 1s exp1rat1on date
or sublease 1s othem1se terminated before its
As of June 30, 2017, one lease transaction with respect to 29 items of Tranche 1 Equipment an 1nit1al transaction of $98 7 m1ll1on remains outstanding All other lease transactions
were 1n prior fiscal years
The deferred inflows of resources amortized amount was $0 3 m1ll1on for the Tranche 1 Equipment 1n fiscal year 2017
(f) Laguna Honda Hospital
General Fund Subsidy - The Laguna Honda Hospital elderly and disabled residents The
1s the City's to fund basis, however, the amount of City Any amount not required
129
which of LHH are by the
of the enterpnse on a budgetary 1s l1m1ted to the amount by the
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
back to the General Fund at the end of each fiscal year, unless othem1se Supervisors For the year ended June 30, 2017, the subsidy for LHH was
Net Patient Service Revenue - Net patient services revenues are recorded at the estimated net realizable amounts from patients, third-party payors and others for services rendered, 1nclud1ng a prov1s1on for doubtful accounts and estimated retroactive adjustments under reimbursement agreements with federal and state government programs and other third-party payors Retroactive adjustments are accrued on an estimated basis 1n the the related services are rendered and adjusted 1n future periods, as final settlements are Patient accounts receivable are recorded net of estimated allowances, which include allowances for contractuals and bad debt These allowances are based on current payment rates, 1nclud1ng D1agnos1s-R elated Group (DR G) reimbursement amounts and payment received as a of gross charges
Third-Party Payor Agreements - LHH has agreements with that provide for reimbursement to LHH at amounts different from its established rates adjustments under third-party reimbursement represent the difference between the established rate for services and amounts by third-party payors Medicare and are the major th1rd-
payors with whom such agreements have been established Laws and regulations and Medi-Cal are complex and to 1nterpretat1on LHH believes that 1s 1n
''.;;:,'::::,::,,? laws and 1s not aware of any pending or threatened 1r of wrongdoing While no such regulatory 1nqu1ries have been made, compliance such laws and regulations can be subject to future government review and 1nterpretat1on as well as s1gnif1cant regulatory action 1nclud1ng fines, penalties and exclusion from the Medicare and Medi-Cal programs
During the year ended June 30, 2017, LHH's patient receivables and charges for services were as follows
Patient Receviables, net Medi-Cal Medicare Other Total
Gross Accounts Receivable $ 56,281 3,480 $ 1,822 61,583 Less
Net Patient Service Revenue Medi-Cal Medicare Other
Gross Revenue Less
$ 396,316 $ 22,337 $ 11,697
Prov1s1on for Contractual Allowances (230,130) (15,345) (11,438)
Total, net $ 166,186 $ 6,992 259
Because Medi-Cal reimbursement rates are less that LHH's established to receive supplemental federal As of June 30, 2017, LHH recorded receivable for matching federal funds local funds
Total
$ 430,350
(256,913)
$ 173,437
Unearned Credits and Other Liabilities - As of June 30, 2017, LHH recorded $29 6 m1ll1on 1n other l1ab1l1t1es for third-party payor settlements payable
Transactions with Other Funds - A vanety of other City provide services such as e11,i1m1e1111g, purchasing, legal, data human resources, and
LHH and charge to recover those departments' costs These $10 9 m1ll1on for the year ended June 30, 2017, and have been included 1n services
by other departments
130
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Commitments and Contingencies -As of June 30, 2017, LHH has entered into various contracts totaling $1 0 m1ll1on that are related to the old bu1ld1ng remodel phase of the Replace,ce,,t Project
The Cal1forn1a of Health Care Services for Medicare Services (CMS)
d1scuss1ons with the Centers d1sall,,w,,we of approximately $56
m1ll1on, related to payments made to LHH
(g) San Francisco General Hospital
General Fund Subsidy - San Francisco General Hospital Medical Center (SFGH) 1s an acute care The operations of SFGH are subs1d1zed the City's General Fund It 1s the to
fully enterprise however, the amount of provided 1s l1m1ted to amount amount not required for the meeting an enterprise fund def1c1t be the General Fund at the fiscal unless othem1se by the Board of Supervisors Forthe year ended June 30, the for SFGH was m1ll1on
Net Patient Service Revenue - Net patient services revenues are recorded at the estimated net realizable amounts from patients, third-party payors and others for services rendered, 1nclud1ng a prov1s1on for doubtful accounts and estimated retroactive adjustments under reimbursement agreements with federal and state government programs and other third-party payors Retroactive adjustments are accrued on an estimated basis 1n the period the related services are rendered and adjusted 1n future periods, as final settlements are determined
Patient accounts receivable are recorded net of estimated allowances, which include allowances for contractuals, bad debt, and adm1nistrat1ve write-offs These allowances are based on current rates, 1nclud1ng per d1ems, DRG amounts and payment received as a percentage of gross
Third-Party Payor Agreements - SFGH has agreements with that provide for reimbursement to SFG H at amounts different from its established rates adjustments under third-party reimbursement represent the difference between SFGH's established rates and amounts reimbursed Major third-party with whom such agreements have been established are and the State through the Section 1115
Laws and regulations the 1nterpretat1on SFGH believes that 1s 1n
and 1s not aware of any pending or threatened While no such regulatory 1nqu1nes have
been made, compliance such laws and can be subject to future government review and 1nterpretat1on as well as s1gnif1cant regulatory action 1nclud1ng fines, penalties and exclusion from the Medicare and Medi-Cal programs
During the ended June 30, 2017, SFGH's patient receivables and charges for services were as follows (1n thccs,mdst
Patient Receivables, Net
Medi-Cal Medicare other Total
Gross Accounts Receivable 286,908 156,878 129,071 572,857 Less
Contractual Allowances (263,858) (143,121) (75,755) (482,734) Provision for Bad Debt (21,318) (21,318)
Total, Net Accounts Receivable 23,050 13,757 31,998 68,805
131
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Net Patient Service Revenue Medi-Cal Medicare
Gross Pat1entServ1ce Revenue $ 1,782,843 798,047
Less Contractual J\Jlowance (1,829,125) (871,158)
Bad DebtW1te Off
Total, Net Patient Service Revenue 153,718 128,891
Cal1forn1a's Section 1115 Medicaid
Other
858,242
(387,437)
(79,292)
409,513
Total
3,437,132
(2,887,718)
(79,292)
890,122
as the Safety Low Income
by the would expend its
oa,i,c,oat,'vc Revenues recognized under the June 30, 2017 The DSRIP 1s a pay-for
to meet spec1f1c benchmarks related to
The Bndge to Health Care Reform waiver October 31, 2015 On December 30, 2015, the Centers for Medicare and Medicaid Services Cal1forn1a's Section 1115 Medicaid Waiver, which
care, through programs that are outpatient, and
fundamental cv,c,,,ce,,t care A of Cal1forn1a's Medicaid was a
Care Act (ACA) ab1l1ty to continue to successfully 1m plem ent the Affordable
of coverage expansion
The Medi-Cal 2020 waiver features four new transformation and alignment program that 1s cvc,s,dec,,d waiver's DSRIP, known as PRIME (Public Hospital Redesign and Incentives 1n Payment Program for services to the uninsured 1n designated pcl;l,chv,;p,tal Person Care Pilot which would be a voluntary program integrated care vulnerable Dental TransfollTlat1on an optional 1ncent1ve program to increase quality of dental care provided to
Payments received under Medi-Cal 2020 Waiver's GPP are ut1l1zat1on based and not dependent on Cert1f1ed Public Expenditures (CPEs) However, GPP claims are State and Federal audit and final reconc1l1at1on SFGH has established reserves for the ""''""""" potential audit and reconc1l1at1on adjustments Revenues recognized under approximated $98 8 m1ll1on for the year ended June 30, 2017
In add1t1on, SFG H was reimbursed by the State of Cal1forn1a, under the Short-Doyle Program, for mental health services provided to residents based on an established rate unit of service not to exceed an annual amount During the ended June 2017, reimbursement under the $8 4 m1ll1on and 1s included 1n net patient service revenue
Unearned Credits and Other Liabilities -As of June 30, 2017, SFGH recorded ap11mwc,at,11y$315 m1ll1on 1n unearned credits and other l1ab1l1t1es, which was comprised of $275 m1ll1on 1n unearned
132
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
related to receipts under DSH/Sai'etyNet Care Pool, the LIHP, and AB915 programs, 1n Third Party Settlements
Charity Care - SFGH provides care without charge or at amounts less than its established rates to patients who meet certain cnteria under its based on established rates were $227 7 m1ll1on and estimated costs were $81 2 m1ll1on 1n fiscal year2018-2017
w,,c ec,d,,d June 30, by the Affordable
;;,,-p;;;,~;;;,;; ff;v,;r the health care services for decrease as much of the
Cal1forn1a Starting July 1, ,' ,,,,,,s .. a. mechanism
to redirect health realignment funds to fund social service
through State
detellTl1ned according to a formula that takes into account a cost and revenue experience and redirects 80% of the realized by the county The State an amount of health rn,,l,g,,mec,t to be $3 9 m1ll1on 1n fiscal year and $12 m1ll1on 1n fiscal year 2015-
City and County of San Francisco and withheld those amounts from health realignment remittances to the City A final reconc1l1at1on has been conducted for fiscal year 2014-15 showing $0 realignment to be redirected
Contracts with the University of California San Francisco - The City contracts on a year-to-year basis on behalf of SFGH with the of Cal1forn1a Under the contract, SFGH serves as a teaching for UC professional residents, and interns who, 1n return, provide and surgical The total amount for services rendered under the contract was approximately $188 8 m1ll1on
accounted for as ,v,;ec,,mec,tal Capital Projects
have been completed and the General and transactions are accounted for 1n the
Bonds are
Gift - From fiscal year 2014-2015 from the San Francisco General
(FF&E) for the new
fiscal year 2015-2018, SFGH has received $82 4 m1ll1on Foundation for the acqu1s1t1on of fixtures and of June 30, 2017, SFGH has spent $38 8 from the
of FF&E as by the donor and recorded the remaining $23 8 m1ll1on as
Commitments and Contingencies - As of June 30, 2017, SFGH had outstanding comm 1tments with third parties for capital projects totaling $18 8 m1ll1on
(h) San Francisco Wastewater Enterprise
The San Francisco Wastewater Enterprise established 1n 1977, following the transfer of all sewage-system-related assets and l1ab1l1t1es City to the Wastewater Enterprise pursuant to bond resolution, to account for the City's mun1c1pal sewage treatment and disposal system
The Wastewater Enterprise collects, transmits, treats, and discharges w1th1n the City, for the protection of health and emvrnc,mec,tal
W,,st,,w,,tecEnterprise serves, on a cv,vrncwrn l1m1ts, 1nclud1ng the North San Mateo
and the City of Brisbane The Wastewater the volume and of sanitary Enterprise serves
res1dent1al which discharge about 18 1 m1ll1on units of sanitary flow per year 1n hundreds of cubic feet, or and approximately 18,141 non-res1dent1al accounts, which discharge about 7 8 m1ll1on units flow per year
133
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Pledged Revenues - Wastewater Enterprise's revenues, which consist mainly of sewer service charges, are for the payment of principal and interest on various revenue bonds Proceeds, from the f1nanc1ng for vanous capital construction and to refund previously issued bonds bonds are solely from net revenues Enterprise and are payable through fiscal year ending
The original amount of revenue bonds issued, total pnnc1pal and interest interest dunng fiscal year 2017, applicable net revenues, are as
Bonds issued with revenue pledge Bond principal and interest remaining due at end of the fiscal year Net revenues Bond and interest 1n the fiscal year
for revenue service
$ 1,072,950
60,407 251,543
Commitments and Contingencies -As of June 30, 2017, the Wastewater Enterpnse had outstanding commitments, with third parties, for capital projects and for materials and services totaling $229 7 m1ll1on
Pollution Remediation Obligations -As of June 2017, the Wastewater Enterprise recorded $2 7 m1ll1on 1n remed1at1on O m1ll1on cleanup cost estimate at the Yosemite Creek $0 6 m1ll1on at the and Treatment and 1 m1ll1on for the hazardous materials at the Southeast plant The pollution remed1at1on reported 1n the accompanying statements of net pos1t1on 1s based on estimated contractual
Transactions with Other Funds -The Wastewater Enterprise Power totaling $10 7 m1ll1on for the year ended June 30, 2017
services such as purchasing, o,c,cess",o resources to the Enterprise
departments' costs These charges total :ft! ~',:~:~::Yd::~~;:;;','; and have been included 1n services
(14) SUCCESSOR AGENCY TO THE REDEVELOPWENT AGENCY OF THE CITY AND COUNTY OF SAN FRANCISCO
Pursuant to the Redevelopment D1ssolut1on Law, funds that would have been distributed to the former as tax increment. hereafter referred to as redevelopment property tax revenues, are Successor Tax Trust Fund (Trust Fund) adcmmsternd
the City's Controller enforceable obl1gat1ons and taxing ent1t1es that receive pass-through payments Any remaining 1n the Trust Fund, plus unencumbered redevelopment cash and funds from asset sales are distributed by the City to the agencies 1n the project area unless needed to pay enforceable obl1gat1ons
134
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
the Cal1fom1a Department of Finance (DOF) granted a F1nd1ng of Completion for the Pursuant to Health and (HSC) section 34179 7, the DOF verified that
to the ent1t1es as determined under HSC With a F1nd1ng of the
ag,eemects between the the
In add1t1on, the receipt of the F1nd1ng of Completion allowed the Range Property Plan (LRPMP) to the Oversight Board and the LRPMP pertains to the and use of real held by the the LRPMP, which addresses the d1spos1t1on of located at 706 M1ss1on
the DOF on October 4, 2013 During fiscal year the terms and closing cond1t1ons of the 706 M1ss1on Purchase and Sale Alter
mccccmtlmg feedback from the DOF, the remainder of the LRPMP was approved the Oversight on November 23, 2015, and by the DOF on December 7, 2015
g;
rn,asrnecc,,e 1n the City by allowing the subject to the
declares that M1ss1on Bay Bay South, Point Phase 1, Candlestick Point - Hunters Point Shipyard Phase 2, and Transbay projects are finally and conclusively approved as enforceable obl1gat1ons
(a) Capital Assets Held by the Successor Agency
For the year ended June 30, 2017, the summary of changes 1n capital assets 1s as follows
Tata1 aemmdsJij<H,;r,ac1~ton
T1ta1 orital ais'lls ;em1,Jifpmat!ef ~t
~~tal wpltal UtS*V'*
the year ended June 30, $10 m1ll1on to a developer for an
Area The transfer of the property was recorded as a net pos1t1on
transferred land with a book value of detelcpmect project at the Transbay Project
1n the statement of changes 1n f1duc1ary
135
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
(b) Summary of the Successor Agency's Long-Term Obligations
Final Maturity Remaining
B1tity and Type of Obligation Dare Interest Rate Hotel tax revenue bonds (al 2025 5 00% Tax allocation revenue bonds (bl 2047 145%-900% Cal1fom1a Department of Boating and
Waterways Loan (cl 2037 4 50%
Total long-term bonds and loans
Debt service payments are made from the following sources
(a) Hotel taxes from the occupancy of guest rooms 1n the hotels w1th1n the City
Amount 30,995
970,381
8,830
$ 1,008,008
(b) revenues from the BayV1ew Hunters Western Rincon Point Buena Center, India Basin, South of Golden Gateway, Bay South, Transbay, and M1ss1on Bay North project areas
(c) South Beach Harbor Project revenues (subordinated to Refunding Bonds)
Issuance of Successor Agency Bonds - On December 24, 2013, the DOF released its letter the issuance of bonds by the Successor On 20, 2016, the Successor
issued Tax Allocation Revenue Bonds Senes D Bonds) for$74 7 m1ll1on March 29, 2017, the revenue bonds, Tax Allocation Revenue Bonds
Series 2017 A (2017 Senes A for 8 m1ll1on, Tax Allocation Revenue Bonds Series 2017 B (2017 Series B Bonds) 9 m1ll1on and Tax Allocation Revenue and Refunding Bonds Series 2017 C (2017 Series C Bonds) $43 4 m1ll1on
Proceeds from the 2016 Senes D Bonds were used to f1nancewc;s1~rt~a;m::,;;;::::c:,: act1v1t1es of the sc,ccsssc,; Y,isc,;yw,thm or of benefit to the M1ss1on Bay South R 'rn1sctAeeta The 2016 Series D fixed interest rates ranging from 3 00% to 5 final maturity on August 1, 2043
Proceeds from the 2017 Series A Bonds were used to finance certain affordable the or of benefit to the BayV1ew Hunters Point Rsdscslcp,wst,l The 2017 bear fixed interest rated ranging from 2 19% to 4 38% on August 1, 2044
Proceeds from the 2017 Series B Bonds were used to finance certain infrastructure or of benefit to the Transbay Project Area
B Bonds bear interest rates of 5 00% and reach final on August 1, 2046
cf
of the Sen es
Proceeds of $22 o m1ll1on of the 2017 Series C Bonds will be used to finai;:1':'.s~c::si:rt:;''.m\ii:'::f:t:f:1:::;J act1v1t1es of the or of benefit to the M1ss1on Bay South Area The remaining from the 2017 Series C Bonds were used to Bonds Series 2006 A. Senes 2009 E, and Series 2011 E 1n the amount of $3 2 m1ll1on, 0 m1ll1on, and $9 4
The resulted 1n net present value savings of 2 m1ll1on and an of 1 m1ll1on The Series C Bonds bearf1xed interest rates ranging from 145%
to 4 38% and reach final maturity on August 1, 2043
Pledged Revenues for Bonds - The Tax Allocation Bonds are and ratably secured by the pledge and lien of the tax revenues tax increment) These revenues have been final of the bonds The total
'Pl':"""'.m,,c,_$$1172 The redevelopment prnps,iyta, were $129 2 m1ll1on against
service
136
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
The Hotel Tax Revenue Bonds are secured by the the from the City These revenues
maturity of the total and 1nteres_t;c;,,,,sJ-d;m;ct Hotel Tax Bonds 1s a,r,;c;,m,,tsly$38 2 m1ll1on The revenue n the year ended June 30, 2017 was $4 9 which equaled the total debt service payment
The 1n long-tellll obl1gat1ons for the Successor Agency for the year ended June 30, 2017, are as
6ords ooya~le< Ti!X M'H!'l'tt.Wi !:;oodt
Less um.mmtlEe-0 amounts
July t. ,.,, 8]9}94
42 21:5 6 857
<fill 430
'l'IBE'itl
Additi,.wu:il Obtlgatimis,
lnlmesi; Accr:etlon and Net
lru::rcasc::.
Zr!Ji61
Cvrr~mt :Mttt.u,ili~.
Relfrenwnt:E, llrtdUet
Oecrnaoos
s (65 88&)
JIU)O 30, 2"11
HKll 376
49 441 rn, !3()
2 1 toJ 14:ll
(1 l Amounts represent interest accretion Capital Apprec1at1on Bonds
As of June 30, 2017, the debt service to matunty for the Successor Agency, excluding accrued vacation and sick leave, are as
Fiscal Year Tax Revenue Other Long-Term Ending Bonds Obligations Total
Total 1,001,376 752,998 6,630 $ 3,278 $ 1,008,006 756,276
'Includes payment of accreted interest
During the ended June 30, 2010, the follller Agency borrowed $16 5 m1ll1on from the Low and
Moderate Housing Fund to make payment of $28 7 m1ll1on to the s::::::,::;',~ Education Revenue Augmentation to meet the State's Propos1t1on 98 o schools d1ssolut1on of the follller City elected to become the Housing
In accordance with
137
assets and functions, rights, powers, duties, and 4(b )(3 ). interest 1s accrued quarterly at an annual
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
balance due to the City For the year ended June 30, 2017, interest 1n the amountof$03 wasaccrued,andthe made 1ntheamountof$18 m1ll1on to the City The payable balance at was $13 1 m1ll1on, which was compnsed of pnnc1pal of $10 0 and accrued interest of $3 1 m1ll1on
As of June 30, 2017, the Successor Agency also has a payable to the City 1n the amount of $0 6 m1ll1on for services provided
(c) Commitments and Contingencies Related to the Successor Agency
Encumbrances -At June 30, 2017, the Successor Agency had outstanding encumbrances totaling approx1mately$46 6 m1ll1on
Risk Management - The SPcce,cccc ,\mmcc public off1c1al errors and om1ss1ons occurrence ($5 0 m1ll1on for employment occurrence
Operating Lease - The SPCUICCPI .Cg,wy a Master Lease Agreement San Francisco
automobile l1ab1l1ty, of $10 0 m1ll1on per
m1ll1on deductible per
cbl1gct1cc,cofthe SPcu,cc,x llgcmcy As of June 30, 2017, the SP•xc,cceoc l\gc,ccy exercised several
Years 2023-2027 2028-2032 2033-2037 2038-2042 2043-2047 2048-2051
Total
4,351 4,351 4,351 4,351 4,351 1,958
28,063
Rent payments totaling $1 4 m1ll1on are included 1n the Successor Agency's f1nanc1al statements for the year ended June 30, 2017
rental income, the Successor has noncancelable leases on various proJect areas
Fiscal Years 2018 2019 2020 2021 2022 2023-2027
For the ended June m1ll1on, ofwh1ch
The minimum rental income are as
$ Fiscal Years
2028-2032 $ 2033-2037 2038-2042 2043-2047
3,633 2048-2050 18,047
Total $
operating lease rental income for noncancelable contingent rental 1ncom e received
9 m1ll1on
138
20,292 18,515
1,482
113,823
leases 2017,
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Notes and Mortgages Receivable - During the process of and 1ssu1ng mortgage revenue bonds, the sale and revenue bond fees from various developers 1n exchange for notes receivable, aids the developers' The Successor recognizes all revenues and interest on the arrangements when earned, net amounts deemed to be uncollect1ble During the year ended June 30, 2017, the Successor Agency $66 0 m1ll1on to the developers this a1Tangement and recorded an allowance against these receivables This allowance 1s as deductions 1n the f1nanc1al statements At June 30, 2017, the gross value of the notes and mortgage receivable was $176 7 m 1ll1on and the allowance for uncollect1ble amounts was $175 0 m1ll1on
Conduit Debt - Vanous issued the former Agency on various de,,e111pecc rncpm,cclcel,ty for the repayment of the debt When these cblcgcl ,ccc
indebtedness and special cc,seccmect are not ;;,,c,d;(ed ;obl1gat1ons of the Successor the f1nanc1al statements Debt service the
6 m1ll1on
During year
Agrne m eel (~cec0;e
0,:,~::
01:;:~~ :;, \ cc the then-ex1st1ng
dccel,cp,cec,t of the Transbay Transit State-owned parcels and
increments to finance the TTC
m1ll1on from a developer and distributed the funds to the T JPA The neighborhood development deduction on the statement of changes 1n
(15) TREASURE ISLAND DEVELOPMENT AUTHORITY
The Treasure Island authorized 1n accordance members of the TIDA Board of Directors who are appointed by the Mayor, the Board of The spec1f1c of TIDA 1s to rnclec,clcpmect rncmsm,c11cc. rehab1l1tat1on, reuse
public interest. convenience, welfare 1nhab1tants of the City
The services by T IDA include adm 1n1stenng the Island with the S Navy and the Treasure Treasure Island fac1l1t1es generate revenues to cover infrastructure, and overseeing
139
In early
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Treasure Community De,elcp1M1,t Exclusive Negot1at1ng 1n for the Naval Station Treasure was endorsed by TIDA Board and the San Francisco
2010, the TIDA Board Board of both cmrn,cocc,sl, to the Plan and Tellll
Cm,eee,1tce M;,m,,crn,d11m of Agreement (EDC MOA Term Treasure Island Homeless Development lnit1at1ve (TIHDI)
uses, phasing, and equal opportunity programs, Supervisors unanimously upheld the approved the entitlements These way for of a new thousands of construction and permanent jobs
On May 29, 2015, the the first transfer of property to TIDA cons1st1ng of 275 acres on Yerba Buena and Treasure and the offshore submerged lands Ex1st1ng structures on Yerba Buena were demolished between February and August 2016, and structures 1n the first area of development on Treasure Island were demolished between July 2016 and February 2017 The first infrastructure construction - new water reservoirs and new and related fac1l1t1es on Yerba Buena late 2018, TIDA
with construction 1n 2020 A second transfer from
1n Septemberof2016 The complete
In 2008, and amended several times over the the Transportation into a loan agreement with TIDA 1n the amount of m1ll1on for the repayment of
related to the Yerba Buena Island (YBI) Interchange Project Under the telllls of the agreement, TIDA was to the Transportation for all project costs 1ncu1Ted by the Transportation accrued interest. less government reimbursements to the
Under the D1spos1t1on and Development the loan repayment The repayment to the Transportation structured to be
mtallmecctsw1th the first installment to 50% of the current balance being Station Treasure Island to TIDA from
second installment was due on the anniversary of the first installment 1n an amount of 50% then cu1Tent and a final of the balance of the loan was due on December 31, 2016 The and accrued interest have The Transportation Authority will 1nvo1ce T IDA quarterly for any future project costs not el1g1ble re1m burs em ent
As of June 30, 2017, TIDA has the following payables to other City departments
6/3012017 Payable to Purpose Current Non current Total Transportation Authority YBI and mob1l1ty management expenses 1,389 ,-------:- 1,389 Hetch Hetchy Ut1l1ty under MOU 200 28 228 Hetch Hetchy Energy project 2,599 2,599
1,589 2,627 4,216
140
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
(16) INTERFUND RECEIVABLES, PAYABLES, AND TRANSFERS
"Due to" and "due from" balances have pooled cash or when there are ent1t1es where one or both ent1t1es do not part1c1pate 1n the City's pooled cash or when there are short-term loans between funds The compos1t1on of 1nterfund balances as of June 30, 2017 1s as follows
Receivable Fund General Fund
Nonm ajor Governmental Funds
General Hospital Medical Center
San Francisco Water Enterprise
Hetch Hetchy Water and Power Enterprise
Mun1c1pal Transportation Agency
San Francisco Wastewater Enterprise
Total
Payable Fund Nonmajor Governmental Funds San Francisco Water Enterprise Municipal Transportation Agency San Francisco Wastewater Enterprise Port of San Francisco
General Fund Nonm ajor Governmental Funds Internal Service Funds Municipal Transportation Agency
Nonmajor Governmental Funds
General Fund Nonm ajor Governmental Funds
Nonmajor Governmental Funds General Hospital Medical Center San Francisco Wastewater Enterprise CleanPower Enterprise
General Fund Nonm ajor Governmental Funds
General Fund
In add1t1on to routine short-tellll loans, Hetch Hetchy serves as the City's projects and maintains the Sustainable Energy Account (SEA) to sponsor
Amount $ 10,108
627 84
100
10,926
178
1,806 1,787 2,853 6,624
20 342
362
6,618 350
1,166 387
8,521
225 31,517 31,742
137
58,314
projects at various In this role, Hetch Hetchy may secure to sw,ol,,m,eot funds 1n the SEA fund At June 30, 2017, Hetch Hetchy loaned $6 9 m1ll1on to
funds Hetch Hetchy 1s also due $1 2 m1ll1on from the Wastewater Enterprise for its share of to 525 Golden Gate Headquarters project for equipment
The SFMTA has a receivable from nonmajor governmental funds of $31 5 m1ll1on for capital and operating grants
141
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Due from component units:
Receivable Entity Hetch Hetchy Water and Power Enterprise Nonmajor Governmental Funds Nonmajor Governmental Funds San Francisco Water Enterprise Hetch Hetchy Water and Power Enterprise San Francisco Wastewater Enterprise
Advance to component units:
Receivable Entity Hetch Hetchy Water and Power Enterprise Nonmajor Governmental Funds
See d1scuss1on at Note 15
Payable Entity Component unit TIDA Component unit- TIDA Successor Agency Successor Agency Successor Agency Successor Agency
Payable Entity Component unit- TIDA Successor Agency
Amount 200
1,389 182 270
75 23
Amount 2,627
13,149
See d1scuss1on at Note 14(b) related to the Due to/Advances from the Primary Government
earn Francisco Nonma1or General
Go1ern- Internal Mun1apal Hospital Laguna mental Seroce ~·, Power Transporta- Medical Wastawater Honda
'" '" " " " "
'" "
Transfers Out: ,_ General Fund Funds Funds Entarprise Enterprise lon/!gency Center Enterprise Hospital Total
General Fund $315,285 $2,153 $ 100 $ $ 415P14 $ 62,701 $ 40 $62,336 $ 857P29
The $857 6 m1ll1on General Fund transfer out includes a total of $540 0 m1ll1on 1n to SFMTA. SFGH, and Laguna Honda Hospital (note 13) The transfer of $315 General Fund to the funds 1s to provide support to various as the Public Library and and Fam1l1es Fund, as well as to provide resources of debt service
The transfers between the funds 1n the amount of $65 5 m1ll1on are to for various City programs of debt service In
1n year 2017, the proceeds from sale of properties at Ness Avenue and 1660-1680 M1ss1on Street 1n the amount of $93 9 m1ll1on were transferred to projects fund for the 1500 M1ss1on Street development and 3 m1ll1on were nonmajor debt service fund to pay down outstanding of as previously discussed
142
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
O m1ll1on to the General of concession revenues (note earned by the SFGH but the General Fund and $7 2 m1ll1on from SFGH's return of excess
funds SFGH transferred to the General Fund 1 m1ll1on and Laguna Honda rnspe1t,,,,lyforequ1pment lease payments The Fund also received $23 0
from Laguna Honda Hospital to fund the DPH and $0 2 m1ll1on for interest earned by the Laguna Honda Hospital funds but credited to the Laguna Honda Hospital funds received $2 4 m1ll1on from nonmajor governmental funds for the Laguna Honda Hospital improvement project close out
SFMTA received $148 6 m1ll1on transfers from was for capital act1v1t1es, street improvement funds to pay for various street ,m,,m,e,aeot capital assets from go'momeotal related to Sustainable of act1v1t1es
governmental funds, of which $97 1 m1ll1on and $28 1 m1ll1on to fund various
m1ll1on to nonmajor governmental SFMTA also received $68 9 m1ll1on transfer of
projects and 1m1,rnce1M1,ts governmental
The Water Enterprise transferred $60 0 m1ll1on to Hetch Hetchy Water and Power Enterprise to fund vanous upcountry to San Francisco Recreation and Parks Department mainly for water
Square Park, $16 credited to the transfer out from Laguna Honda funds, and $32 to the Office of the City Adm1n1strator for the Surety
Program In turn, the Enterpnse received from the mainly for the San Francisco War M emonal Veterans Bu1ld1ng project and $28 from and Department for return of excess project funds
The Wastewater Enterprise transfe1Ted $30 1 m1ll1on to the adjacent to the Southeast Water Pollution Control Plant Comm1ss1on for art ennchment and $32 to the Office of the Program On the other hand, the Wastewater Enterpnse community projects
(17) COfolTol!ITNENTS AND CONTINGENT LIABILITIES
Operating Leases
The City has noncancelable operating leases for certain
of the
and data processing equipment, which require the following minimum annual payments (1n th,,osao,151
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
Bus1ness-t',!Qe Act1v1t1es
San Francisco Port San Francisco Municipal Total Fiscal International of San General Transportation Business-type Years Airport Francisco Hospital Agency Activities
and Port have certain rental agreements with concessionaires, which that rental are to be based on a percentage of tenant sales, subJectto a minimum amount Cccc,ess,cc
pe1ce11tacie rents 1n excess of minimum guarantees for the and Port were approximately $29 6 $17 7 1n fiscal year 2016-17 Airport also exercised a five-year car
January 1, 2014 Under this the rental car revenues or a minimum guaranteed rent, 1s
telllls their concession agreement, the minimum annual guarantee does not 1f the actual enplanements achieved during a one-month period
1s less than of the actual of the same reference month 1n the reference year, and such shortfall continues for three consecutive months The MAG attributable to the rental car companies was approximately $42 5 m1ll1on for fiscal year2016-17
Other Commitments
The Retirement System has unfunded commitments to contribute for real assets 1n the amount of $2 1 b1ll1on, equity 1n the amount of $2 6 b1ll1on, private Investments known
c,rwrtcrnst;c fixed 1n the amount of $0 6 and absolute return 1n the of$738m1ll1on, $531 b1ll1onatJune 2017
In February 2011, the Asian Art Museum Foundation (Foundation) entered into an agreement with JP Morgan Chase Bank to refinance its of $97 0 m1ll1on To fac1l1tate the ref1nanc1ng, the City entered into an assurance agreement 1n the event of requires the C1tyto seek an appropriation to make payments as has not legally guaranteed the debt, and the believes that the 1s remote, no amount 1s recorded 1n the
145
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
(18) RISK MANAGEMENT
Risk Retention Program Description
The 1s exposed to various nsks of losses related to torts, theft of,
m;;':c,:::';;,,"~q::ors and om1ss1ons, automobile e; health claim payments
,,,,,,,,·,,,,,, and 1njunes to employees
to purchase commercial risks losses to which 1s exposed 111s more economical
its nsks 1ntemally and set aside funds as needed current claim settlements and ccfa,cmblejudgments through annual appropriations and supplemental appropriations
l1ab1l1ty insurance coverage for losses and h1jack1ng
The Port carries the following insurance 1) marine general to a deductible of per occurrence, 2) hull and · ' : ·,:,
occu1Tence, 3) commercial subject to a maximum
occurrence for the Port's O m1ll1on, to a of per occurrence The Port also carries
auto l1ab1l1ty, property damage for certain high value Port vehicles, prnce,,smoequ1pment Tenants whose operations pose a s1gnif1cant
post an environmental oversight deposit and an environmental periomiance deposit
em,cc,p,,sse, both self-insured and insured methods Insurance rnc,cd,cated through City's Risk M,,caoe,M,,l
agency Self-insurance 1s when the settles, defends, and pays claims from resources,
1s to first evaluate self-insurance for the nsks of loss to required by debt f1nanc1ng covenants,
insurance as necessary or required
Risks a General/Transit L1ab1l1ty b Property c Workers' Cornpensat1on d Employee (transit operators) e Directors and Officers
Covera e Self-insure Self-insure and purchase insurance Self-insure Purchase insurance Purchase insurance
The SFMT A 1s self-insured for general l1ab1l1ty Through coord1nat1on with the Controller and City
Office, the SFMTA general l1ab1l1ty payments are addressed through p'.;';~~/c~'.;i;,;;; as well as a reserve that 1s increased each t
the reserve was $22 4 m1ll1on Claim l1ab1l1t1es are
146
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
of disbursement, considering recent claim settlement trends,
Insurance on transit per a M;m,iac,dmTI cf u,,dc,;stac,Jmo w,th tfrn ·rrncs,,cct \C'ccf,ecs and has purchased insurance to cover errors and om1ss1ons management
Settled claims have not exceeded com merc1al insurance coverage 1n past three fiscal years Expenditures and l1ab1l1t1es for all workers' compensation claims and estimated claims payable
11 1s probable that a loss has occurred and the amount of that loss can be rnasc,mbly These losses include an estimate of claims that have been incurred but not
Because actual claim l1ab1l1t1es depend on such complex factors as 1nflat1on, changes 1n and damage the used 1n claim l1ab1l1t1es does not ce,,essa,,ly exact amount Claim to take into cons1derat1on claims, the of claims, and other legal and economic factors The recorded l1ab1l1t1es been d,scc,mte,d
Estimated Claims Payable
Numerous lawsuits are or threatened against the City The has been actuarially and includes an estimate of allocated loss adjustment expenses
l1ab1l1ty as of June 30, 2017 but not reported losses and
1n the reported estimated claims payable since July 1, 2015, resulted from the following
Current Beg1nn1ng Year Claims Fiscal Year and Changes
Breakdown of the estimated claims payable at June 30, 2017 1s follows
Governmental act1v1t1es Current portion of est1rnated cla1rns payables Long-terrn portion of est1rnated cla1rns payable
Total
Business-type act1v1t1es Current portion of est1rnated cla1rns payables Long-terrn portion of est1rnated cla1rns payable
Total
Workers' Compensation The City self-insures for workers' rn,cp,;csat,,,,, been actuanally detemi1ned and an estimate amount estimated to be for claims 1ncu1Ted as of June reported 1n the appcc,pcate
147
71,280 131,188
202,488
38,424 55,256
84,680
l1ab1l1ty as of June 30, 2017 has not losses The total
8 m1ll1on, which 1s accounting pol1c1es
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
1n the reported accrued workers' com pensat1on since July 1 , 2015, resulted from the following
Current Beg1nn1ng Year Claims Ending Fiscal Year and Changes Claim Fiscal Year
Fiscal Year L1ab1l1ty 1n Estimates Payments L1ab1l1ty
Breakdown of the accrued workers' compensation l1ab1l1ty at June 30, 2017 1s as follows
Governmental act1v1t1es Current portion of accrued \I\JOrkers' compensation l1ab1l1ty Long-term portion of accrued \I\JOrkers' compensation l1ab1l1ty
Total
Business-type act1v1t1es Current portion of accrued \I\JOrkers' compensation l1ab1l1ty Long-term portion of accrued \I\JOrkers' compensation l1ab1l1ty
Total
(19) SUBSEQUENT EVENTS
(a) Long-term Debt Issuance
42,621 199,202
241,823
32,875 161,053
193,928
In 2017, the issued Cert1f1cates of (Moscone Convention Center Series 1n the amount of 4 m1ll1on, the ofwh1ch will
to retire certain commercial of the City, the cost of renovation, of improvements to the
finance or refinance of certain ,mc;;m,eo,iots interest payable with respect to the through of the Reserve Fund established under the Trusstt,:;:;~:::":
the P''I fc1 ucsts of execution and delivery of the Cert1f1cates The C 0% and 5 0% and will mature from April 2019 through April 2042
In July 2017, the issued a total of $19 8 m1ll1on commercial paper (CP) with interest rates of O 90% and and 1n September and The CP was issued to refund $19 8 m1ll1on of maturing CP equipment for the San Francisco General Hospital and Trauma Center
In 2017, the issued $14 3 m1ll1on ta,e,,sm1ct CP to refinance $11 8 m1ll1on maturing CP San Francisco Hospital capital and finance $2 0 m1ll1on for the Animal Care and Control project The CP bears an 85% and will mature on December 2017
Loan and Grant to fund the Water Enterprise's SF Westside loan 1s 1n the amount of $171 2 m1ll1on and will bear interest rate
term, with repayments one year after substantial completion of CWSRF loan 1s secured on a lien basis with the Water Enterprise's cqtsUmclmqrevenue bonds The grant 1s 1n the amount of m1ll1on
148
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
In September the SFPUC Resources Control
Aqrnc,mc,cts with the State Water of the Wastewater
Enterprise's Sewer Program The aggregate of the CWSRF loans 1s $94 7 m1ll1on, each interest rate equal to one-half of the State of Cal1forn1a's most recent General Obl1gat1on Bond true interest cost The CWRSF loans will each have a term, one year after substantial of each project's rn1,st1qctmo The on a parity lien basis with the Enterpnse's outstanding revenue bonds
In October 2017, the issued $8 0 m1ll1on ta,-e,eotplCP with interest rate ofO 94% and maturity of December 2017 The refinance $8 0 m 1ll1on CP for the San Francisco General Hospital capital equipment project, the 1500 M1ss1on project, and Animal Care and Control project
In November 2017, the Transportation Authority issued Senior Sales Tax Revenue Bonds Series 2017 2017) 1n the amount of 3 m1ll1on The Series 2017 was issued to (1 finance a of
costs of construction, and 1mprovem ent of certain transit, street traffic and other transportation fiscal and other fees and
on behalf of the District No 2014-1 (TransbayTrans1t Bonds Series 2017A (2017 1n the amount of $361 rnspe,,tcely The 2017 Bonds were issued to 1) vanous
streets and improvement 1n the of the transit "formeriy known as the TransbayTrans1t de'1el,cq1ce1it
improvement of the adjacent open 2) the planning, design, eo,im,se,mg core and shell of the two of the SalesforceTrans1t a portion of the
4) a debt service reserve ""-': ,: and 6) cost of issuance of the
mature from September 2018 2048 with interest rate from 1 5% to 4 0% The 2017 Bonds are l1m1ted the City,
the Special Tax Revenues pledged under the Fiscal of funds The General Fund of the
ofor onthe2017 Cal1forn1a or any its pol1t1cal sot,dc,s,c,o
qf
In December 2017, the City issued $21 0 m1ll1on CP with an interest rate of 1 04% and maturity of February 2018 The CP will refinance $20 7 maturing CP for the San Francisco General Hospital capital equipment project, 1500 M1ss1on Street project, and Animal Care and Control project
Issuance of Capital Plan Bonds and Refunding Bonds and Swaps Termination
In October issued $571 6 m1ll1on 1n Second Series Revenue Bonds, Series 2017A and 20176, a will be used to finance and refinance (through the repayment of m1ll1on of commercial paper notes) a of the costs of capital to the Airport, m1ll1on 1n Second Series Revenue Series to fund a deposit to the Contingency Account, to finance a $12 6 m1ll1on payment on a portion of the interest rate swaps associated with the Second Series Revenue Refunding Bonds, Issue 36A, 366, and 36C, and to costs of issuance of its Second Series Revenue Refunding Series 20170, and $144 8
1n Second Series Revenue Refunding Bonds, Series to refund the remaining 6 m1ll1on amount of the Second Series Revenue Refunding Bonds, Issue 36A, 366, and The expects to issue 1n February 2018, $115 4 m1ll1on 1n Second Series Revenue
149
Issue
CITY AND COUNTY OF SAN FRANCISCO
Notes to Basic Financial Statements (Continued) June 30, 2017
(Dollars 1n Thousands)
agreement executed on October refunding 1 m1ll1on 1n Second Series Revenue
S&P, and Fitch assigned credit ratings of "A1" "A+", and "A+" to these
The Airport issued an add1t1onal $152 4 m1ll1on 1n subordinate CP notes 1n July 2017, for a total of $330 4 m1ll1on subordinate commercial paper notes outstanding
Interest Rate Swaps - LIBOR
Airport's interest rate swap agreements rnc,clct~tarty to the Airport each month using LIBOR
swaps are not scheduled to terminate until agreements to be mod1f1ed to reflect the d1scont1nuat1on
a new variable rate benchmark or vanable rate-setting mechanism
Credit Ratings Changes
In Fitch the long-tellll credit rating of Wells Fargo Bank, NA O m1ll1on amount irrevocable letter of credit 1n
Variable Rate Revenue Bonds, Issue 36A As a result, on Fitch lowered its long-term supported rating on the Issue 36A Bonds from "APA" to "AA+" short-term rating on the Issue Bonds ("F1 +") remained unchanged Fitch's underlying long-
term rating on the Issue 36A Bonds ("A+") also remained unchanged
Property Purchase
at 1500 M1ss1on Street 1n San Francisco for $56 2 m1ll1on, for retail, and City office The
M1ss1on Street 30 Van
In September the Water Enterpnse purchased at 1657-1663 Rollins Road 1n Burlingame, CA that served as the location staff of the Water Enterprise The $9 1 m1ll1on purchase was funded proceeds from Water Enterprise Revenue Bonds
Insurance Settlement for Pacific Rod & Gun Club
the settlement of a lawsuit between the Water Enterprise and the Pac1f1c The Ordinance was signed the Mayor on November 3, 2017 The Water Enterprise will receive an insurance settlement for m1ll1on to the excavation of contaminated soil that contained polycyclic aromatic hydrocarbons from the Rod & Gun Club site 1n the Lake Merced area
150
SUPPLEMENTARY
INFORMATION
'Iliis page has Geen intentwna[[y feft 5fanli.,
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)Schedules of the City's Proportionate Share of the Net Pension Liability
June 2017' (Dollars 1n
For the year ended June 30, 2017
Transportation Successor City Authority Classrc Agency Classrc Treasure
SFERS Plan --'-"-' _ & PEP RA & PEPRA Island
Proportion of net pension l1ab1l1ty 94 2175% -0 1469% 0 0204% 0 2691 % 0 0003%
Proportionate share of the net pension l1ab1l1ty (asset) $ 5,476,654 ' (12, 711) 1,765 23,281 " Covered payroll $ 2,681,695 ' ,w 3,644 3,769
Proportionate share of the net pension l1ab1l1ty as a percentage of covered pay roll 204 22% -3863 53% 48 44% 617 70% 0 00%
Plan fiduc 1ary net pos1t1on as a percentage of total pension l1ab1l1ty 77 61% 74 06% 74 06% 74 06% 74 06%
For the year ended June 30, 2016 CalPERS Miscellaneous Plans
Transportation Successor City Authority Classrc Agency Classrc Treasure
SFERS Plan __ c_,<,__ & PEP RA & PEPRA Island
Proportion of net pension l1ab1l1ty 93 9032% -0 2033% 0 0188% 0 2413% 0 0004%
Proportionate share of the net pension l1ab1l1ty (asset) $2,156,049 ' (13,956) 1,288 16,563 " Covered payroll $ 2,529,879 ' ,rn 3,684 3,427
Proportionate share of the net pension l1ab1l1ty as a percentage of covered pay roll 85 22% -4374 92% 34 96% 483 31 % 0 00%
Plan fiduc 1ary net pos1t1on as a percentage of total pension l1ab1l1ty 89 90% 78 40% 78 40% 78 40% 78 40%
For the year ended June 30, 2015 CalPERS Miscellaneous Plans
Transportation Successor City Authority Classrc Agency Classrc Treasure
SFERS Plan __ c_,<,__ & PEP RA & PEPRA Island
Proportion of net pension l1ab1l1ty 93 7829% -0 1829% 0 0208% 0 2550% "' Proportionate share of the net pension l1ab1l1ty (asset) $1,660,365 ' (11,381) 1,299 15,870
Covered payroll $ 2,398,979 ' '°' 3,264 3,962 Proportionate share of the net pension l1ab1l1ty as
a percentage of covered payroll 69 21% -375611% 39 80% 400 56% Plan fiducrary net pos1t1on
as a percentage of total pension l1ab1l1ty 91 84% 80 43% 80 43% 80 43%
151
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)-Schedules of the City's Proportionate Share of the Net Pension Liability (Continued)
June 2017 (Dollars 1n
Notes to Schedule:
SFERS Plan
Benefit Changes - The impact of benefit changes for the year ended June 30, 2017, which was $1 22 b1ll1on, was recognized 1mmed1ately as pension expense
of Assumptions - For the w,rn,de,d June 30, 2017, the discount rate was increased from 7 46% to 7 For the year ended June 2016, the discount rate was reduced from 7 58% to 7 46%
- The figures above do not include any l1ab1l1ty impact that may have resulted from plan occurred after the June 30, 2015 valuation date This benefit changes
as any offers of Two Years Add1t1onal Service Credit (aka
the measurement period ended expense) 1n 2015
' Fiscal 2014-15 was the first year of 1mplementat1on ofGASB No 68, therefore only three years of ,cfc,;mat,c,o 1s shown
152
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)Schedules of Changes in Net Pension Liability and Related Ratios
June 2017' (Dollars 1n
City CalPERS Safety Plan 2017 2016
Total pension liability: Service cost 31, 141 30 ,98 7 Interest on the total pens1 on l1ab1l1ty 85,094 80 ,05 7 Changes of assumptions (19,949) Differences between expected and actual experience 950 (14,218) Benefit payments, 1nclu ding refunds of
employee contributions (47,774) (44,699)
Net change 1n total pension l1ab1l1ty 69,411 32,178
Total pension l1ab1l1ty, beg1nn1ng 1,119,705 1,087,527
Total pension l1ab1l1ty, ending $1,189,116 1,119,705
Plan fiduciary net position: Plan to plan resource movement (4) Contr1but1ons from the employer 23,640 20,718 Contr1but1ons from employees 14,310 15,061 Net 1nvestm ent Income 4,731 20,469 Benefit payments, 1nclu ding refunds of
employee contributions (47,774) (44,699) Adm1nistrat1ve expenses (567) (1,048) Net change 1n plan f1duc1ary net pos1t1on (5,660) 10,497 Plan f1du c1ary net pos1t1on, beg1 nnin g 930,868 920,371 Plan f1du c1ary net pos1t1on, end1 ng 925,208 930,868
Plan net pension liability, ending ... 263,908 188,837
Plan f1du c1ary net pos1t1on as a percentage of the total pension l1ab1l1ty 77 81% 83 14%
Covered pal{oll 110,139 109,462
Plan net pension l1ab1l1ty as a percentage of the covered payroll 239 61% 172 51%
Notes to Schedule:
2015
32,688 76,177
(41,387)
67,478
1,020,049
1,087,527
20,613 15,216
138,628
(41,387)
133,070 787,301 920,371
167,156
84 63%
111,311
150 17%
Benefit Changes - There were no changes to benefit terms that applied to all members of the Public Agency Pool as of valuation date June 30, 2015
Changes of Assumptions - There were no changes of assumptions during the measurement period ended June 30, 2016 The discount rate remained the same as prior year, at 7 65% The discount rate was changed from 7 50% (net of administrative expense) 1n fiscal year 2015 to 7 65% 1n fiscal year 2016
Fiscal year 2014-15 was the first year of implementation of GASB No 68, therefore only three years of 1nformat1on 1s shov.n
153
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)-Schedules of Changes in Net Pension Liability and Related Ratios (Continued)
June 30, 2017' (Dollars 1n Thousands)
City Replacement Benefits Plan"
Net pension liability: Service cost
Interest
Changes of benefits
Changes of assumptions
Ben ef1t payments
Net change 1n net pension l1ab1l1ty
Net pension l1ab1l1ty, beginning
Plan net pension liability, ending ...
Notes to Schedule:
Covered payroll
Plan net pen s1on l1ab1l1ty as a percentage of the
covered payroll
2017
956 2,112
10,310
11,516
(1,332)
23,562
55,038
78,600
$ 2,681,695
2 93%
No assets are accumulated 1n a trust that meet the criteria 1n GASB Statement No 73 to pay related benefits
Benefit Changes - The impact of benefit changes, which was $10 3 m1ll1on, was recognized 1mmed1ately 1n fiscal year 2017 as pension expense
Changes of Assumptions - The discount rate was changed from 3 85% 1n the measurement period ended June 30, 2015 to 2 85% 1n the measurement period ended June 30, 2016
Fiscal year 2016-17 was the first year of implementation of GASB Statement No 73, therefore only one year of information 1s shown
154
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)Schedules of Employer Contributions - Pensions
June 30, 2017' (Dollars 1n Thousands)
For the year ended June 30, 2017 CalPERS Miscellaneous Plans
City SFERS Plan
Transportation Successor Treasure CalPERS City Authority Agency ~ Safety Plan
Fiscal year 2014-15 was the f1rstyear of implementation of GASB No 68, therefore only three years of 1nformat1on 1s shov.n
In fiscal year 2014-15, the actuarially determined contributions were based on an estimate The City made a $0 1 m1ll1on adJustment to align the estimated employer contribution amount with the actual employer contribution per the 2015 agent-multiple employer Cal PERS report for the Cal PERS Safety Plan Due to the early 1mplementat1on of GASB Statement No 82, the City decreased the actuarially determined contributions for the City SFERS plan to deduct the employer pickup 1n the amount of$8 6 m1ll1on
155
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)Schedules of Employer Contributions - Pensions (Continued)
June 2017' (Dollars 1n
Methods and assumptions used to determine FY 2016-17 contribution rates to SFERS Plan
Valuation date
Actuanal cost method
Amort1zat1on method
Remaining amort1zat1on penod
Asset valuation method
Investment rate of return
Inflation
Projected salary increase
July 1, 2015
Entry-age nonnal cost method
Level annual percentage of payroll
Closed 15-year period
5 year smoothed malhet
7 50% (net of investment expenses)
3 25% compounded annually
Wage inflation component 3 75%
Methods and assumptions used to determine FY 2015-16 contribution rates to SFERS Plan
Valuation date Actuanal cost method Amort1zat1on method Remaining amort1zat1on penod Asset valuation method Investment rate of return
Inflation Projected salary increase
July 1, 2014 Entry-age nonnal cost method
Level annual percentage of payroll Closed 15-year period 5 year smoothed malhet 7 50% (net of investment expenses)
June 30, 2015 updated to June 30, 2016 Entry-age normal cost method Level percent of payroll Gains and losses over a fixed 30-year period with increases or decreases 1n the rate spread directly over a 5-year period (Miscellaneous) Experience gains and losses over a fixed 30-year period and spread rate increases or decreases over a 5-year period (Safety) Actuarial Value of Assets 7 50% (net of pension plan investment expense, including 1nflat1on) Vanes by Entry-Age and Service 2 75% 3 00%
Methods and assumptions used to determine FY 2015-16 contribution rates to CalPERS plans
Valuation date Actuarial cost method Amort1zat1on method Amort1zat1on period
June 30, 2014 updated to June 30, 2015 Entry-age normal cost method Level percent of payroll Gains and losses over a fixed 30-year period with increases or decreases 1n the rate spread directly over a 5-year period (Miscellaneous)
Experience gains and losses over a fixed 30-year period and spread rate increases or decreases over a 5-year period (Safety) Market Value 7 50% (net of pension plan investment expense, including 1nflat1on) 3 30% to 14 20% depending on age, service, and type of employment 2 75% 3 00% A merit duration of employment coupled with an assumed growth of 2 75% and an annual production growth of O 25%
Methods and assumptions used to determine FY 2014-15 contribution rates to CalPERS plans
Valuation date Actuarial cost method Amort1zat1on method Amort1zat1on period
June 30, 2013 updated to June 30, 2014 Entry-age normal cost method Level percent of payroll
7 years as of the valuation daait;e;Y,\~\::~''"'"'i 25 years as of the valuation d, 15-year smoothed market 7 50% (net of pension plan investment expense, including 1nflat1on) 3 30% to 14 20% depending on age, service, and type of employment 2 75% 3 00% A merit duration of employment coupled with an assumed growth of 2 75% and an annual production growth of O 25%
157
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)Schedules of Funding Progress and Employer Contributions
Other Postemployment Healthcare Benefits June 30, 2017
(Dollars 1n Thousands)
below consolidated snapshots of the entity's ab1l1ty pmi,c,Jm' mlee<dlc most 1s the funded status ratio
This ratio conveys a health of the OPEB meet all of its future
an important 1nd1cator to determine the f1nanc1al The closer the plan 1s to a 100% funded status, the better pos1t1on 11 will be 1n to
Schedule of Funding Progress - City and County of San Francisco - Other Postemployment Health Care Benefits
Date Value Entry Age Ratio Payroll Payroll 0110111 o('l $ 4,420,146 00% 2,393,930 184 6% 07/01/12 17 ,852 3,997,762 04% 2,457,633 161 9% 07/01/14 48,988 4,260,256 11% 2,618,426 160 8%
(1l As of July 1, 2010, the City set-aside approximately $3 2 m1ll1on 1n assets for the OPEB plan However, the Retiree Health Care Trust Fund was not established until December 2010
Schedule of Employer Contributions - City and County of San Francisco - Other Postemployment Health Care Benefits
Required Supplementary Information (Unaudited)Budgetary Comparison Schedule - General Fund (continued)
Year Ended June 2017 (lo
Original Vai111ce
Budgetay Positive ~ Final Budget ~ (Negalive)
Charges to Approprialions (Outflows): Public Protection
Adult Probation ' 30,380 ' 30,469 ' 28,296 ' 2,173 District Attorney 51,067 50,521 50,023 ,,s Emergency Communications 64,265 52,498 52,175 ;n Fire Department 343,785 340,907 340,907 Juvenile Probation 39,620 36,073 33,024 3,049 Police Department 506,000 503,375 501,540 1,835 Public Defender 33,516 33,670 33,273 "' Sheriff 196,495 188,023 186,831 1,192 Superior Court ~ ~ ~ '" Subtotal- Public Protection 1,295,742 ~ 1,256,489 ~
Publiclllllrks, Tr111sportation and CormErce Board of Appeals ,rn SS1 sn rn Business and Economic Development 32,421 32,421 General Services Agency - Public Works 129,129 129,129 Public ut1l1t1es Comm1ss1on 2,644 2,644 Municipal Transportation Agency --'-'-" _______!_d_!_± Subtotal - Public Works, Transportation and Commerce ~ ~ ~ rn
Hum'ln llllaffare 111d Neighborhood Developrrnnt Children, Youth and Their Fam1l1es 39,089 39,138 37,908 1,230 Comm1ss1on on the Status ofWomen 6,732 6,802 6,802 County Education Office m 11o 11o Environment ;; ;; Homelessness and Supportive Housing 177,756 150,583 144,842 5,741 Human Rights Comm1ss1on 3,079 2,760 2,760 Human Services 743,908 717,974 703,297 14,677 Mayor- Hous1ng(Ne1ghborhoods ~ ~ ~ Subtotal - Human Welfare and Neighborhood Development 1,063,980 ~ ~ ~
Corm1mily Heatth Public Health ~ ~ ~ ~
Cutture 111d Recrealion Academy of Sciences 6,175 5,413 5,413 ArtsComm1ss1on 10,548 11,257 11,257 Asian Art Museum 10,094 10,153 10,138 1S Fine Arts Museum 15,778 15,961 15,869 " Law l.Jbrary 1,727 1,715 1,411 "' Recreation and Park Comm1ss1on ~ ~ ~ Subtotal- Culture and Recreation ~ ~ ~ '11
161
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)Budgetary Comparison Schedule - General Fund (continued)
Year Ended June 2017 (le
Actual Variance Original Budgetary Positive Budget Final Budget Basis (Negative)
General Administration and Finance Assessor/Recorder Board ofSuperosors
General City Responsibiltties General City Respons1b1l1t1es
Otherlnancrng uses 126,861
Debt ser;rce 11,548 Transfers to other funds 944,856 Budgetary reserves and des1gnat1ons
Total charges to appropnat,ons ~
4,859,781
Total Sources less Current Year Uses _, ___
Budgetmyfund balance, .-me 30 before rese,vesand designations Reservesanddes1gnat1onsmadel'ombudgetary fund balance not ava1lableforappropnat1on Reservesforl.rt1gat1on andCont1ngenc1es and General Reserves
Net Available Budgetary Fund Balance, ..Une 30
Sourcesl1ntlows of resources Actualamounts(budgetarybas1s)"ava1lableforappropnat1ot1' Difference - budget to GAAP
The fund balance at the beginning oftheyear,s a budgetary resource but ,snot acurrentyearrevenueforlnancralreport,ngpurposes
Property tax revenue-Teeter Plan net changel'om pnoryear Change 1nunreal1zed ga1nl(loss) on ,nvestrrents lnteresteam1ngslchargesl'omotherfundsass1gnedtoGeneralFundas1nterestad1ustrrent lnteresteam1ngsl'omotherfundsass1gnedt0General Fund as other revenues Grants, subventions and otherrece,vables received after60-day recognrt,on period Prepaid lease revenue, c,~c Center Garage Transfers from other funds are inflows of budgetary resources, but are not
revenuesforfinancralreport,ngpurposes
Totalrevenuesasreportedonthestatement ofrevenues, expenditures and changes 1nfund balance - General Fund
IJ3esloutflows of resources Actualamounts(budgetarybas1s)"totalchargestoappropnat1ons" Difference - budget to GAAP
Capital asset purchases funded under capital leases>Mth Finance Corporation and other vendors
Recognit1onofexpend1turesforactifances and imprest cash andcaprtal asset acqu1srt1on for,ntemalserocefund
Intergovernmental expense offset Transfers to other funds are outflows of budgetary resources but are not
expendrturesforfinanc1alreport1ngpurposes Total expenditures asreportedonthestaterrent of revenues, expendrtures and changes
1nfund balance - General Fund
162
1,000 17,136 14,829
4,342 52,972
3,986 ;rn
18,273 6,100 1,160
~ ~
134, 153
rn 857,528
~ ~ ~
' 21,425 13,903 14,899 41,602
rn 16,237 14,829
3,517 50,552 3,986
n 17,706
6,100 1,160
~ ~
121,448
857,528
4,446,763
~
$ 1,999,334 (1,222,178)
~
~
$ 6,446,097
$ 4,446,763
1,765
' 1,904 ,M
2,160 m SM
mo 2,420
12,705
rn
~ ~ ~
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)Budgetary Comparison Schedule - General Fund (continued)
Year Ended June 2017 (le
Notes to Budgetary Schedule:
(a) Budgetary Data
adopts two-year rolling budgets annually for all cc1memeelal funds on a substantially mod1f1ed of except for capital and cert1f1cates of part1c1pat1on and other debt
service funds, which adopt length budgets
The budget of the City 1s a detailed operating to estimated revenues The includes provided during the fiscal year, estimated to ap1,rn1rnalm,s deliberated, legal
The Adm1nistrat1ve Code detailing the budget t1mel1ne
Original Budget
3 outlines the summary of the key
act1v1t1es to be lcca,1,rn1oc,alme and (3) the
there 1s no
budgetary with Section 3 3 steps 1s summanzed as
(1) Departments and Comm1ss1ons conduct heanngs to obtain public comment on their budgets beginning 1n December and submit their budget proposals to the Cm,lmlle,s than February 21
annual
(2) The Controller's Office consolidates the budget estimates and transmits them to the Mayor's Office no
(3)
(4)
later than the first day of March Staff of the Office analyze, review and refine the budget estimates before the Mayor's to the Board of Supervisors
of June, the Mayor submits the a draft of the Annual Appropnat1on
tccselect,ecthe departments include not rely on the State's
Proposed Budget to the Board of prepared by the Controller's
(5) \Mth1n five working days of the Mayor's proposed budget transm1ss1on to the Board the Controller reviews the estimated revenues and assumptions 1n the and provides an opinion as to their accuracy and reasonableness The also may make a recommendation regarding prudent reserves given the Mayor's proposed resources and expenditures
(6) The designated Committee (usually the Budget Ccm,mttee) hearings, hears comment, and reviews the recommends an budget the Supervisors passes an 1ntenm ao1xcm1,,t,c,c
(7) Not later than the last wc,ktcg of the Annual Appropriation
163
SPpetVISPIS conducts The Committee 30, the Board of
passage
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)Budgetary Comparison Schedule - General Fund (continued)
Year Ended June 2017 (111
Final Budget
data presented 1n the basic f1nanc1al statements reflects the following changes to the original
(1) are not funds, are carried fomard to the following annual be carried alter appropriate not to be fomard, lapse at the end of the from the pnor year are included 1n the final budgetary data
(2) A:::'.~,'..~'~:11: may be adJusted during the and the Board of ::= e g supplemental ap1,rn1,cat,cc,s A,dd,t,ccally transfers of surplus appropriations budgetary data
The Annual the budget at the character level of expenditure w1th1n departments 1s authonzed to make certain transfers of
Acrn,dmgly the legal level of budgetary control by the Board of
Budgetary data, as revised, 1s presented 1n the basic f1nanc1al statements for the General Fund Final budgetary data excludes the amount reserved for encumbrances for appropriate comparison to actual expenditures
(b) Budgetary Results Reconciled to Results in Accordance with Generally Accepted Accounting Principles
The for certain transactions on a basis other than GAAP The 1n the comparison statement 1n accordance with the
basis) to provide a meaningful comparison with the budget
The maJor differences between the Budget basis "actual" and GAAP basis are t1m1ng differences differences represent transactions that are accounted for 1n different for Budget basis and basis reporting Certain revenues accrued on a Budget basis have deferred for GAAP reporting These primarily relate to the accounting revenues under the Teeter Plan (Note revenues not meeting the 80-day availab1l1ty period assets not available for budgetary apprnp11at11m
164
CITY AND COUNTY OF SAN FRANCISCO
Required Supplementary Information (Unaudited)Budgetary Comparison Schedule - General Fund (continued)
Year Ended June 2017 (111
The fund balance of the General Fund as of June 30, 2017, on a Budget basis 1s reconciled to the fund balance on a GAAP basis as follows
Fund Balance -on Investments
Cumulative Excess Property Tax Revenues Recognized on a Budget Basis Cumulative Excess Health, Human Sei'vices, Franchise and Other Revenues
Recognized on a Budget Basis Pre-paid lease revenue
Nonspendable Fund Balance (Assets Reserved for Not Available for Appropnat1on)
Fund Balance - GAAP basis
General Fund budget basis fund balance as of June 30, 2017 1s composed of the following Not available for appropriations
Restricted Fund Balance Rainy Day - Economic Stab1l1zat1on Reserve Rainy Day - One Time Spending Account
Committed Fund Balance Budget Stab1l1zat1on Reserve Recreation and Parks Expenditure S8Vlng Reserve
Assigned for Encumbrances Assigned for Carryforward Assigned Years' Budgets
Budget S8Vlngs Program City-wide Salaries and benefits costs (MOU)
Subtotal
Available for appropriations Assigned for Llt1gat1on and Cont1ngenc1es Assigned balance subsequently appropriated as part of the General Fund budget for use 1n fiscal year 2017-18
Unassigned- General Reserve Unassigned - Budget for use 1n fiscal year 2018-19 Unassigned - Contingency for fiscal year 2017-18 Unassigned- Available for future appropriations
Subtotal
Fund Balance, June 30, 2017 - Budget basis
165
78,338 47,353
323,204 4,403
244,158 424,223
87,450 23,051
138,080
183,328 95,158
288,185 80,000 14,409
$ 1,999,324 (1, 197)
(38,489)
525
$ 1,870,703
$ 1,222,178
777,158
$ 1,999,324
'Iliis page has Geen intentwnaiJy feft 5fanli.,
COMBINING FINANCIAL STATEMENTS AND SCHEDULES
rrliis page has 6een i:ntentionaffy feft 6fan(
CITY AND COUNTY OF SAN FRANCISCO
NONMAJOR GOVERNMENTAL FUNDS
SPECIAL REVENUE FUNDS
Special Revenue Funds are used to account for the proceeds or comm 1tted to expenditures for spec1f1ed purposes other than
sources that are restricted
Inspection Fund -Accounts for the revenues and expenditures of the Bureau provides enforcement and of laws regulating the use, cc,cpc,accy
maintenance of bu1ld1ngs This shall be used by the Department of Bu1ld1ng to defray the costs of the Bureau of Bu1ld1ng Inspection 1n and rev1ew1ng permits appl1cat1ons and plans, filed 1nspect1ons, code enforcement and reproduction documents
prnpe,iyta, revenues, tobacco tax prov1s1on Monies 1n this fund are as
services to children less than eighteen years old, decelcp1ce1,I of children from the prenatal stage to five years
from the Department adcrnrnslernd by the former
to provide for community of rundown areas, to promote new and public recreation areas, to of social programs for the
provide loans for vanous act1v1t1es This fund also proceeds from a bond issuance to benefit the Se1sm1c Loan Program which provides
loans for se1sm1c strengthening of privately-owned unreinforced masonry bu1ld1ngs 1n the City
Commumty Health Services Fund -Accounts for state and federal grants used to promote public health and mental health programs
Convention Fac1l1t1es Fund - Accounts tcccce,rnlmc revenues of the convention fac1l1t1es Moscone Center, Brooks Hall and Civic Auditorium In transfers for lease of the Moscone Center, this fund provides for operating costs Convention and V1s1tors Bureau
of the various convention and the San Francisco
Court's Fund -Accounts for a portion of revenues from court filing fees that are spec1f1cally dedicated for Courthouse costs
Culture and Recreation Fund - Accounts for revenues received from a variety of cultural and recreational funds such as Public Arts, Youth Arts and Yacht Harbor with revenues used for certain spec1f1ed operating costs
Environmental Protect10n Fund - Accounts for revenues received from state, federal and other sources for the preservation of the environment, recycling, and reduction of toxic waste from the City's waste stream
Gasoline Tax Fund - Accounts for the subventions received from state gas taxes under the of the Streets and Code and for operating transfers from other funds which are for the same
sPlwe,ct,ccs are restricted to uses related to local streets and highways, acqu1s1t1ons construction and improvements, and maintenance and repairs
General Services Fund -Accounts for the act1v1t1es of several non-grant act1v1t1es, generally established by adm1nistrat1ve action
Gift and Other Expendable Trusts Fund-Accounts for certain cash Board on behalf of the the
Gift Fund because s0e,c1ltc t,,m1s
Golf Fund- Accounts for the revenue and expenditures related to the City's six golf courses
Human Welfare Fund - Accounts for state and federal grants used to promote education and discourage dom est1c violence
June 30, 2017 June 30, 2017 (In Thousands) (In Thousands)
Children Corrm.mity/ Conrnunny Culture Gift and Building '"" Neighborhood Health Convention '"" Environmental General Other
Inspection Fanilies Development Services Focilities Court's Recreation Protection Gasoline Services Expendable Fund Fund Fund Fund Fund Fund Fund Fund Tax Fund Fund Trusts Fund Golf Fund
Assets Assets Deposits and $ 177,169 112,047 475,2:l8 28967 I 30,428 '" Deposrts and 13,408 m, $ 26)306 $ 24,160 12,478 I 5,707 Deposits and investments " 7,514 Deposrtsand investments 11)82 " Recewables Recewables
Property taxes and penalties 3,864 Property taxes and penalties Otherlocaltaxes Other local taxes Federal and state grants and subventions 1,419 11,841 23)362 Federal and state grants and subventions ,oo 1,779 2,186 " ,oo ,~ 1,2C6 2)395 '" m '" ~, "" rn SITT ,ffi ~ c " m c
Due from other funds 2,892 Due from other funds " Duefromcomponentunrt
m 79,101
~ m Total assets ~ ~ ~ L...E2l L.21!22 L2l Total assets ~ ~ ~ ~ L....!1.ill! !.....§.ffil
1,8J8 '~ "" 1553 '" kcruedpayroll '" '"' coo "" "" ,~ 1,942 1,493 1,285 Unearned grant and subvention revenues m coo ""' 1,251 w " " Due to other funds "" Unearned revenues and other l1ab1l1t1es 24,333 1,282 rn 1 )335 Unearned revenues and other hab1lrt1es ' Total hab1lrt1es 27544 18864 17,462 ~ 3824 Total hab1lrt1es 1,933 ______.!_Q§Q ~ _____gQ§_ _____!_2!1. -----1!e
Deferred 1nflcrws of resources ------1!1. ~ ~ ~ Deferred inflows ofresources ------"' ___ ,_00 --" Fund balances Fund balances
Total fund balances 1:D,109 ~ ~ ~ ~ ------1!2 Total fund balances -------12§§_ ---'-'" 27,226 24520 _____J__1___2__ ~ Totall1ab1l1t1es,deferred 1nfiows of resources Totalhab1l1t1es,deferred 1nfiowsofresources
and fund balances ~ ~ ~ L...E2l L.21!22 L2l and fund balances ~ ~ ~ ~ L....!1.ill! !.....§.ffil
171 172
CITY AND COUNTY OF SAN FRANCISCO CITY AND COUNTY OF SAN FRANCISCO
June 30, 2017 June 30, 2017 (In Thousands) (In Thousands)
Low and Moderate Open Public Works, San Francisco Senior
Human Income Space Public Public Transportation Real County Citizens' w. Welfare Housing and Park Library Protection and Corrmerce Property Transportation Program Mermrial
Fund Asset Fund Fund Fund Fund Fund Fund Authority Fund Fund Fund Total Assets Assets
I 23)375 $ 43,835 $ ':J,836 I 361)88 44)365 Deposits $ 16,164 35;)53 I 8,729 1,174,186 Deposrtsandirwestments Deposits 12,488 211)92 Recewables Recewables
Property taxes and penalties 2,ffi9 2,ffi9 Property taxes and penalties 9,202 Other local taxes Other local taxes 18,414 18,414 Federal and state grants and sul:went1ons 7;)99 24,482 % Federal and state grants and subventions 14,197 1,499 89;)77
,m ; 2,266 5,164 " 13,431
' '" e, " w 1,151 " 3,763 Due from other funds mo Due from other funds e,, 3598 Due from componentunrt m Duefromcomponentunrt 1389 1581
13,149 AJvanceto component unrt 13,149 Loans recewable (net of allowance for uncollect1ble
Total assets ~ ~ !..£21.1. ~ ~ ~ Total assets ~ ~ ~ L.§1±!. ~
L1ab1ht1es L1ab1lrt1es Accounts payable 21)93 2;)84 m 2,920 51)47 1565 Accounts payable 2,194 11,928 ,m ,o; 75,9:18 Accrued payroll " " 1,039 3,074 "m 31)87 Accrued payroll 1,177 rn, m 16,451 Unearned grant and subvention revenues rn 9,171 mo Unearned grant and subvention revenues 17,149 Due to other funds 5)353 " m 94 Due to other funds 33,314 1,310 41,973 Unearned revenues and otherl1ab1ht1es 5501 1,017 1,016 " 5,763 Unearned revenues and otherl1ab1ht1es SITT rn ______Qill
Total l1ab1lrt1es ~ 8532 2,333 7,004 161)75 111)89 Total hab1lrt1es 4,259 ~ ~ %0 ~
Combining Statement of Revenues, Expenditures and Changes in Fund Balances
Nonmajor Governmental Funds - Special Revenue Funds (Continued) Year Ended June 30, 2017
(In Thousands) .. .,, Culture and fi>v,mnmemAI ou,.,, !ilaer••ti~n l'«:rtecllrn, li<,=l,ne: lo.tf"'nd•tfu
Fw><:1 -~~ Fo.>nd 'f~~ J".,,,J ""~d Tn,sts Fund G,;MF,"'1
' "" ),8()4
' "'' ,,, "' " '"'
"" 24,403' "' rm 6,12!
12'
~ 2&:rn, ~ ~ fU5&
t5q 1.000 N.:a!IB
1,:;;z B.;r,<n
14,~W:l N
176
CITY AND COUNTY OF SAN FRANCISCO
Combining Statement of Revenues, Expenditures and Changes in Fund Balances
Nonmajor Governmental Funds - Special Revenue Funds (Continued) Year Ended June 30, 2017
(In Thousands)
u:,,n,nd -·· ttumm lnoome. '"" ,~,., f'ubllc
Wlllf""' HOl"i.og Sp=,,...,a l lh,a,y l'm!Mfioi, ,~, lla""91F11ru! Parl<furtd ""' ·~· 1; S{,?n s 64,,n
,~ ,oo
' 1fl5 w
t,n1
'" j
~ ,,~.JJFl'.) ii!JcQOO
OM~ \S!f Jlr3
30,500 41,299 ~.7&1
<W,6N 116,$16 3,025
~
~!3) ~14..71;;! ---1':°Plr' ~
177
f'uM,,.W0!11,, T,,mw~twn a,mc""'""""" ,~,
1J,OOI
1},857
3.iX\7
CITY AND COUNTY OF SAN FRANCISCO
Combining Statement of Revenues, Expenditures and Changes in Fund Balances
Nonmajor Governmental Funds - Special Revenue Funds (Continued) Year Ended June 30, 2017
(In Thousands)
178
CITY AND COUNTY OF SAN FRANCISCO CITY AND COUNTY OF SAN FRANCISCO
Combining Statement of Revenues, Expenditures and Changes Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual - Budget Basis in Fund Balances - Budget and Actual - Budget Basis
Nonmajor Governmental Funds - Special Revenue Funds Nonmajor Governmental Funds - Special Revenue Funds (Continued) Year Ended June 30, 2017 Year Ended June 30, 2017
(In Thousands) (In Thousands)
B Lilding Inspection Fund Children and FaniliesFund Comrunity I Neighborhood DeveloprrentFund ConnunityHealth ServicesFuOO Variance Variance Variance Variance
Original Final Positive Original Final Positive Original Final Positive Original Final Positive Bu:lget Budget ~ (Negative) Budget Bu:lget ~ (Negative) Bu:lget Budget ~ (Negative) Budget Bu:lget ~ (Negative)
Re;,,nues Re;,,nues Property taxes ' 72,570 ' 72,570 ' 75,922 ' 3~52 Property taxes Business taxes Business taxes 2,000 2,000 1,795 (205) Sales and use tax Sales and use tax Llc«1,.,s,petm1ts,and1hmch1ses 6,693 6,696 6~76 (120) Llcen,.,s,petm1ts,and1hmchses F1nes,forfertures,andpenalt1es Fines, forfertures,and pene!t1es cc; cc; 2,602 (96) lnterestand1n;,,stment1ncome SS SSS 1 ~70 en a;s as 1,006 es, lnterestand1n;,,stment1ncome 4,832 7P25 2,193 1,553 Rertsandconcess1ons Rffllsandconcess1ons " ''° m as lntergoverrmental Intergovernmental
Transfers in 102,440 103,937 103,937 Transfers in ' scs scs 000 000 Transfers out Transfers out (10) (14,727) (14,727) (589) (589) lssuanceofcommerc1e! paper lssuanceofcommerc1e! paper 8,723 8,723 lssuanceofbonds lssuanceofbonds 38,7SJ 103,450 103,450 lssuanceofloans lssuanceofloans Premium on1ssuanceofbonds Premium on1ssuanceofbonds m m Proceeds from saleofcaprtalasse!s Proceeds from saleofcaprtalasse!s Budgetreser;,,sanddes1gnat1ons Budgetreser;,,sanddes1gnat1ons
CITY AND COUNTY OF SAN FRANCISCO CITY AND COUNTY OF SAN FRANCISCO
Combining Statement of Revenues, Expenditures and Changes Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual - Budget Basis in Fund Balances - Budget and Actual - Budget Basis
Nonmajor Governmental Funds - Special Revenue Funds (Continued) Nonmajor Governmental Funds - Special Revenue Funds (Continued) Year Ended June 30, 2017 Year Ended June 30, 2017
(In Thousands) (In Thousands)
Convention FacilitiesFrnd Court'sFrnd Cultt.-e aOO Recreation FuOO E nvtonnertal Protection Fund Variance Variance Variance Variance
Original Final Positive Original Final Positive Original Final Positive Original Final Positive Bu:lget Budget ~ (Negative) Budget Bu:lget ~ (Negative) Bu:lget Budget ~ (Negative) Budget Bu:lget ~ (Negative)
Re;,,nues Re;,,nues Property taxes Property taxes Business taxes Business taxes Sales and use tax Sales and use tax Llc«1,.,s,petm1ts,and1hmch1ses Llc«1,.,s,petm1ts,and1hmch1ses '" "' '" (17) F1nes,forfertures,andpenalt1es rn rn n " F1nes,forfertures,andpenalt1es lnterestand1n;,,stment1ncome 1,622 rn (1,185) lnterestand1n;,,stment1ncome 3 ,s e, " Rertsandconcess1ons 22,450 22,450 22,703 ,sa Rertsandconcess1ons OS arn Bo s, lntergoverrmental lntergoverrmental
Feder<! Feder<! " " m rn Sae Sae 1,343 1 ~43 ns 5,443 5,443 Other Other SS
Cha-gesf«ser~ces 2,311 2,311 2,465 ,s, Cha-gesf«ser~ces 8,487 9,777 9,489 (288) m s;e as (440) Other ------'-" ~ ___ , ~) Other ~ ~ ~ ~) ~ ~ __ a;_e ~)
Total revenues 22,60J 24,552 ~ ~) ~ ~ ~ ~ Total revenues ~ ~ ~ ~) -----2,!£. ~ ~ ~)
bpend1tures bpend1tures Current Current
Publlcprotect1on 2,792 ,e, as, SS Publlcprotect1on Publlc;,,crks,transpcrtat1onandcomm«ce m m Publlc;,,crks,transpcrtat1onandcomm«ce 1,0SJ 1,096 1,096 Humanw,lfareandne1ghborhooddevelopment aea aea Humanw,lfareandne1ghborhooddevelopment 1,072 1,072 3,312 8,140 6,070 2,070 Communrtyhealth Communrtyhealth Cultureaidrecreat1on 81,483 51,874 40,896 10,978 Cultureaidrecreat1on m General atm1rnstrat1onandlnarre General atm1rnstrat1onandlnance " H
Transfers in 45,40J 45,400 45,400 rn rn m Transfers in 18,3JJ ms m m Transfers out (24,175) (24,175) (2,344) (2,344) Transfers out '"' (465) (465) (465) lssuanceofcommerc1e! paper lssuanceofcommerc1e! paper lssuanceofbonds lssuanceofbonds lssuanceofloans lssuanceofloans Premium on1ssuanceofbonds Premium on1ssuanceofbonds Proceeds from saleofcaprtalasse!s Proceeds from saleofcaprtalasse!s Budgetreser;,,sanddes1gnat1ons Budgetreser;,,sanddes1gnat1ons
CITY AND COUNTY OF SAN FRANCISCO CITY AND COUNTY OF SAN FRANCISCO
Combining Statement of Revenues, Expenditures and Changes Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual - Budget Basis in Fund Balances - Budget and Actual - Budget Basis
Nonmajor Governmental Funds - Special Revenue Funds (Continued) Nonmajor Governmental Funds - Special Revenue Funds (Continued) Year Ended June 30, 2017 Year Ended June 30, 2017
(In Thousands) (In Thousands)
Gasoline Tax FuOO General Services Fund Gift and Other Expendable TrustsFuOO Golf Fund llilriance Variance llilriance Variance
Original Final Positive Original Final Positive Original Final Positive Original Final Positive Bu:lget Budget ~ (Negative) Budget Bu:lget ~ (Negative) Bu:lget Budget ~ (Negative) Budget Bu:lget ~ (Negative)
Re;,,nues Re;,,nues Property taxes Property taxes Business taxes Business taxes Sales and use tax Sales and use tax
3,120 3,120 2,904 (216) Llcen,.,s,petm1ts,and1hmch1ses F1nes,forfertures,andpenalt1es sea m " " " m 1rn SS SS SS SS lnterestand1n;,,stment1ncome " m m m as n
Community health Communrtyhealth n n Cultureandrecreat1on 1,202 1,202 Cultureaidrecreat1on em 1,344 1,344 15,498 14,632 14,098 sas General adm1rnstrat1onandlnance 9p91 4,907 4,907 General atm1rnstrat1onandlnance SS SS
Transfers in 3,190 3,207 1SS m m Transfers in ms ms Transfers out (3,099) (14) (14) Transfers out (40J) (400) (400) lssuanceofcommerc1al paper lssuanceofcommerc1e! paper lssuanceofbonds lssuanceofbonds lssuanceofloans lssuanceofloans Premium on1ssuanceofbonds Premium on1ssuanceofbonds Proceeds from saleofcaprtalassets Proceeds from saleofcaprtalasse!s Budgetreser;,,sanddes1gnat1ons Budgetreser;,,sanddes1gnat1ons
CITY AND COUNTY OF SAN FRANCISCO CITY AND COUNTY OF SAN FRANCISCO
Combining Statement of Revenues, Expenditures and Changes Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual - Budget Basis in Fund Balances - Budget and Actual - Budget Basis
Nonmajor Governmental Funds - Special Revenue Funds (Continued) Nonmajor Governmental Funds - Special Revenue Funds (Continued) Year Ended June 30, 2017 Year Ended June 30, 2017
(In Thousands) (In Thousands)
H tITBn Welfare Fund Low aOO Moderate lncorre H rusing Asset Fund Open Space and Park Fund PlDlic Library Fund llilriance Variance llilriance Variance
Original Final Positive Original Final Positive Original Final Positive Original Final Positive Bu:lget Budget ~ (Negative) Budget Bu:lget ~ (Negative) Bu:lget Budget ~ (Negative) Budget Bu:lget ~ (Negative)
Re;,,nues Re;,,nues Property taxes Property taxes ' 51,838 ' 51,838 ' 54,729 ' 2,891 ' 51,838 ' 51,838 ' 54,729 ' 2)391 Business taxes Business taxes Sales and use tax Sales and use tax
'" '" '" " Llc«1,.,s,petm1ts,and1hmch1ses B B F1nes,forfertures,andpenalt1es
1,836 2,055 m lnterestand1n;,,stment1ncome '" ''' nc m m m ass rn Rents and concessions 3,783 2,899 (884) Rertsandconcess1ons '" lntergo;,,rnmental lntergoverrmental
Federal 39,935 Feder<!
"" "' State '" '" 'es '" ,n m m '" Other ms " " 1,747 1,773 1,773 Other Chargesfor,.,rv1ces '°' '°' ''° " Cha-gesf«ser~ces rn rn °'' (101) Other _______I!!i ~ ~ ~ Other ___ , __ ,
Publlc;,,crks,transpcrtat1onandcomm«ce rn rn en en 48,081 30,522 30~22 4,481 41,198 41,198 Humanw,lfareandne1ghborhooddevelopment
Community health Communrtyhealth Cultureandrecreat1on Cultureaidrecreat1on 54,29J 47,802 46,687 1,115 124,808 115,644 115,546 So General adm1rnstrat1onandlnance General atm1rnstrat1onandlnance
CITY AND COUNTY OF SAN FRANCISCO CITY AND COUNTY OF SAN FRANCISCO
Combining Statement of Revenues, Expenditures and Changes Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual - Budget Basis in Fund Balances - Budget and Actual - Budget Basis
Nonmajor Governmental Funds - Special Revenue Funds (Continued) Nonmajor Governmental Funds - Special Revenue Funds (Continued) Year Ended June 30, 2017 Year Ended June 30, 2017
(In Thousands) (In Thousands)
San Francisco Countylransportatioo Authori1j( Public Protection Fund Public Works, Transportation and Comrerce Fund Real Property Fund Fund
Variance Variance Variance Variance Original Final Positive Original Final Positive Original Final Positive Original Final Positive Bu:lget Budget ~ (Negative) Budget Bu:lget ~ (Negative) Bu:lget Budget ~ (Negative) Budget Bu:lget ~ (Negative)
Re;,,nues Re;,,nues Property taxes Property taxes Business taxes Business taxes Sales and use tax Sales and use tax 108,219 102,237 Llc«1,.,s,petm1ts,and1hmch1ses s,e srn srn Llc«1,.,s,petm1ts,and1hmch1ses 4,834 4,550 F1nes,forfertures,andpenalt1es 6,876 6,876 4P25 "' as, ,s, F1nes,forfertures,andpenalt1es lnterestand1n;,,stment1ncome Bo lnterestand1n;,,stment1ncome ass as m sac Rertsandconcess1ons Rertsandconcess1ons 11,822 55,442 48P15 (7,427) lntergoverrmental lntergoverrmental
Feder<! 33,087 Feder<! 8,691 18,274 Sae 13,975 State ''' 2,009 Other ,s rn 1,823 1,823 Other m m m 2,876 5,334
Cha-gesf«ser~ces 1,790 16,429 17)345 1,216 15,474 28,009 29,984 1 )385 Cha-gesf«ser~ces &S e;s rn (198) Other __ e ___ e ~ ~ ~) Other ~ ~ ______Qi!_) --" __ e, __ ,_, __ a
Total revenues 56,282 72,437 ~ ~) ~ ~ ~ ~ Total revenues ~ ~ ~ ~) 125,795 139,192 ~ ~)
Communrtyhealth Communrtyhealth Cultureaidrecreat1on Cultureaidrecreat1on General atm1rnstrat1onandlnance 4,63J 3,025 3,025 m m General atm1rnstrat1onandlnance 15,631 45,167 37,309 7,858
2,798 2,798 21,000 21,000 21,000 sec 1,327 1,099 w
Transfers in Transfers in Transfers out (1,8c6) (1,332) (1,332) Transfers out (129,175) (129,175) lssuanceofcommerc1e! paper lssuanceofcommerc1e! paper lssuanceofbonds lssuanceofbonds lssuanceofloans lssuanceofloans 25,000 46,336 46,000 (336) Premium on1ssuanceofbonds Premium on1ssuanceofbonds Proceeds from saleofcaprtalasse!s Proceeds from saleofcaprtalasse!s 122,000 122,000 Budgetreser;,,sanddes1gnat1ons Budgetreser;,,sanddes1gnat1ons
Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual - Budget Basis
Nonmajor Governmental Funds - Special Revenue Funds (Continued) Year Ended June 30, 2017
(In Thousands)
Senior Citizens' Program Fund War Mennrial Fund llilriance Variance
Original Final Positive Original Final Positive
Re;,,nues
Property taxes Business taxes Sales and use tax
Rents and concessions lntergo;,,rnmental
Federal Sae Other
Chargesforserv,ces Other
Total revenues
E,pendrtures Current
Publlcprotect,on
General adm1rnstrat1onandlnance Debtser~ce
Bond1ssuancecosts
Totale,pendrtures
Excess(delaency)ofrevenues
o;,,r(under)expendrtures
Otherlnanc,ngsources(uses) Transfers in Transfers out lssuanceofcommerc,al paper lssuanceofbonds lssuanceofloans Premium on,ssuanceofbonds Proceeds from saleofcaprtalassets Budgetreser;,,sanddes1gnat1ons
Combining Statement of Revenues, Expenditures and Changes in Fund Balances - Budget and Actual - Budget Basis
Nonmajor Governmental Funds - Special Revenue Funds (Continued) Year Ended June 30, 2017
(In Thousands)
Total \fariaoce
Original Final Positive Budget ~~ (Negative)
Revenues Property taxes $176,246 ' 176,246 ' 185,380 ' Business taxes 2,000 2,000 1,795 Sales and use tax 108,219 108,219 102,237 1.Jcenses,perm1ts,andfranch1ses 15,627 15,627 15,061 F1nes,fotfertures,andpenalt1es 9,488 11,007 8,867 lnterestand1nvestment1ncome 3,278 10,968 15,035 Rents and concessions 40,991 90,259 82,476 Intergovernmental
Federal 182,238 199,080 193,957 (5,123) State 99,297 102,441 104,199 1,758 Other 5,369 12,159 9,299 (2,860)
Charges for services 110,648 144,911 158,326 13,415 Other ~ ~ ~ (33,710)
Total revenues 809,458 1,052,470 1,022,475 (29,995) Expendrtures
Current Public protection 51,385 65,723 65,629 '' Publicworks,transportst1onandcommerce 365,618 368,517 282,731 Human we Ware and neighborhood development 337,296 470,930 467,710 Community health 122,373 112,428 112,428 Culture andrecrest1on 326,647 263,224 249,725 Generaladm1nistrst1onandfinance 50,545 72,908 65,050
22,197 44,899 42,101 2,009 2,994 2,766
Bond issuance costs ~ __ ,_rn __ ,_rn Totalexpendrtures 1,291,820 1,402,542 1,289,059 113,483 Excess(deficiency) of revenues
over(under)expend1tures (482,362) (350,072) (266,584) ~ Other financing sources (uses) Transfers in 277,703 277,703 Transfers out (185,564) (185,564)
8, 723 8,723 38,750 103,450 103,450
Issuance of loans 25,000 46,336 46,000 (336) Prem1umon1ssuanceofbonds m m Proceeds from sale ofcaprtalassets 122,000 122,000 Budgetreser;esanddes1gnst1ons _____ill!_§ _____Ql!.§ ~
Total other financing sources (uses) 325,400 ~ ~ ~ Net changes in fund balances (156,962) ~ ~ ~
Budgetary fund balances, July1 ~ 1,064,601 1,064,601 Budgetary fund balances, June30 ~ ~ ~ ~
190
CITY AND COUNTY OF SAN FRANCISCO
Schedule of Expenditures by Department Budget and Actual - Budget Basis
Nonmajor Governmental Funds - Special Revenue Funds Year Ended June 30, 2017
(In Thousands)
Original Budget Final Budget Actual
BUILDING INSPECllON FUND Public Works, Transportation and Commerce
Bu1ld1ng Inspection Public Ut1l1t1es Comm1ss1on Public Works
70,068 67 ,597 400
65
65,261 400
65
Variance Positive
(Negative)
2,336
Total Building lnspectwn Fund
CHILDREN AND FAMILIES FUND
~ ~ ~ ______1E_Q
~~~~
Human Welfare and Neighborhood Development Child Support Services Children and Fam1l1es Comm1ss1on Human Services Mayor's Office
Public Works, Transportation and Commerce Municipal Transportation Agency
Total Children and Fam1l1es Fund
COMMUNITY I NEIGHBORHOOD DEVELOPMENT FUND Public Works, Transportation and Commerce
Mayor's Office
Municipal Transportation Agency Public Works Public Ut1l1t1es Comm1ss1on
Human Welfare and Neighborhood Development Homelessness And Supportive Housing Human Services Mayor's Office
Rent Arb1trat1on Board
Culture and Recreation Arts Comm1ss1on Recreation and Park Comm1ss1on
General Administration and Finance Administrative Serv1ces City Planning
Total Community I Neighborhood Development Fund
COMMUNrTY HEAL TH SERVICES FUND Community Health
Community Health Network
Human Welfare & Neighborhood Development Homelessness And Supportive Housing
Total Community Health Services Fund
191
397
39,473 33,740 33,740
~~~ ~~~ 397
7 7 ~ ~ ~ ___ 3o_7
16,288
22,699
50
~ ~
6,962 56
3,392 8
31 902
933
6,962 56
3,392 8
31 902
933
~ ___ 1._81_7 ________:t_!1l
~~......1..1.!1l2
612 612
CITY AND COUNTY OF SAN FRANCISCO
Schedule of Expenditures by Department Budget and Actual - Budget Basis
Nonmajor Governmental Funds - Special Revenue Funds (Continued) Year Ended June 30, 2017
(In Thousands)
CONVENllON FACILITIES FUND Public Works, Transportation and Commerce
Public Ut1l1t1es Comm1ss1on Public Works
Human Welfare and Neighborhood Development Mayor's Office
Culture and Recreation Administrative Serv1ces
Total Convention Fac1l1t1es Fund
COURT'S FUND Public Protection
Trial Courts
Total Court's Fund
CUL TlJRE AND RECREAllON FUND Public Works, Transportation and Commerce
Human Welfare and Neighborhood Development Mayor's Office
Culture and Recreation Arts Comm1ss1on Asian Art Museum Fine Arts Museums Recreation and Park Comm1ss1on
General Administration and Finance City Planning Administrative Serv1ces
Total Culture and Recreation Fund
ENVIRONMENTAL PROTECTION FUND Human Welfare and Neighborhood Development
Mayor's Office
General Administration and Finance City Planning
Total Environmental Protection Fund
GASOLINE TAX FUND Public Works, Transportation and Commerce
Municipal Transportation Agency Public Ut1l1t1es Comm1ss1on Public Works
Schedule of Expenditures by Department Budget and Actual - Budget Basis
Nonmajor Governmental Funds - Special Revenue Funds (Continued) Year Ended June 30, 2017
(In Thousands)
GENERAL SERVICES FUND Public Protection
D1stnctAttorney Tnal Courts
Culture and Recreation Fine Arts Museum
General Administration and Finance Administrative Serv1ces Assessor/Recorder Board of Supervisors Human Resources Mayor's Office Telecommunications and Information Services Treasurer/Tax Collector
Total General Services Fund
GIFT AND OTHER EXPENDABLE TRUSTS FUND Public Protection
District Attorney Fire Department Police Department
Public Works, Transportation and Commerce Public Works
Human Welfare and Neighborhood Development EnVlronment Mayor's Office Homelessness And Supportive Housing Social Services Comm1ss1on on Status of Women
Community Health Community Health Network
Culture and Recreation Arts Comm1ss1on Fine Arts Museums Public Library Recreation and Park Comm1ss1on
General Administration and Finance Board of Supervisors Administrative Serv1ces City Attorney Telecommunications and lnformatwn Services
Total Gift and Other Expendable Trusts Fund
193
Original Budget Final Budget Actual
26 26 280 163 163 280 189 189
223 3,899
32 91
150 3,336
______J_2Q_Q
1 1 2,041 2,041
26 994 139
1,064 642
427
26 994 139
1,064 642
500 187 427 187
_________£Q_Q ___ 61_9 ___ 6_19
719
5 877
___ 1._19_1 __ 1_.1_91
40
55 21 23
139
73
199 760
10 375
81 9 2
99
40
55 21 23
139
73
199 760
10 375
81 9 2
99
Variance Positive
(Negative) GOLF FUND
CITY AND COUNTY OF SAN FRANCISCO
Schedule of Expenditures by Department Budget and Actual - Budget Basis
Nonmajor Governmental Funds - Special Revenue Funds (Continued) Year Ended June 30, 2017
(In Thousands)
Original Budget Final Budget Actual
Culture and Recreation
Variance Positive
(Negative)
Recreation and Park Commission
Total Golf Fund ~ ~ ~ ________@i
~~~~ HUMAN WELFARE FUND
Human Welfare and Neighborhood Development Comm1ss1on on Status of Women Homelessness And Supportive Housing Social Services
Total Human Welfare Fund
LOW AND MODERATE INCOME HOUSING ASSET FUND Human Welfare and Neighborhood Development
Mayor's Office
Total Low and Moderate Income Housing Asset Fund
OPEN SPACE AND PARK FUND Public Works, Transportation and Commerce
Public Works
Culture and Recreation Arts Comm1ss1on Recreation and Park Comm1ss1on
Total Open Space and Park Fund
PUBLJC LIBRARY FUND Public Works, Transportation and Commerce
Public Works
Culture and Recreation Arts Comm1ss1on Public Library
Total Public Library Fund
PUBLJC PROTECTION FUND Public Protection
Adult Probation D1stnctAttorney Emergency Communications Department Fire Department Juvenile Probation Police Commission Public Defender Sheriff
Human Welfare and Neighborhood Development Mayor's Office Comm1ss1on on Status of Women
General Administration and Finance C 1ty Attorney
Total Public Protection Fund
194
~~~
~~~
139 139
2 2 ~ ~ ~ __ 1_.1_15
~ ~ ~ __ 1_.1_15 ~ ~ ~ __ 1._11_5
973 973
11 11 124,808 ~ ~
~~~ ~~~
3,640 3,211 3,211
2,166
4 , 04 7 --------11.Z.Z -------11.Z_Z
~~~
3,740 3,713 74
3,713 74
~~~ ~~~
98 98 98
CITY AND COUNTY OF SAN FRANCISCO
Schedule of Expenditures by Department Budget and Actual - Budget Basis
Nonmajor Governmental Funds - Special Revenue Funds (Continued) Year Ended June 30, 2017
(In Thousands)
PUBLIC WORKS, TRANSPORTAllON AND COMMERCE FUND Public Works, Transportation and Commerce
Public Works
Human Welfare and Neighborhood Development Mayor's Office
General Administration and Finance City Planning
Total Public Works, Transportation and Commerce Fund
REAL PROPERTY FUND Public Works, Transportation and Commerce
Public Ut1l1t1es Comm1ss1on General Administration and Finance
Administrative Serv1ces
Total Real Property Fund SAN FRANCISCO COUNTY TRANSPORTATION AUTHORrTY FUND Public Works, Transportation and Commerce
Board of Supervisors
Total SF County Transportation Authority Fund SENIOR crnZENS' PROGRAM FUND Human Welfare and Neighborhood Development
Social Services Department Total Senior C1t1zens' Program Fund
WAR MEMORIAL FUND Culture and Recreation War Memorial
Public Works, Transportation and Commerce Public Ut1l1t1es Comm1ss1on Public Works
Total War Memorial Fund
Original Budget
~
-------11.J1..Q
~
~ ~
229,244
~
_______Q2!1
~
~
~
Final Budget Actual
________:l_l_gQ ~
~ ~
135 135
~ ~
31 31
~ ----1..?.2Q2
~ --2.:.2!9.
~ ~ ~ ~
~ _______§_J.iZ
----2.:1!Z. ___!1!Z.
~ -----1iQ11
29 29 97 97
126 126
~ ~
Variance Positive
(Negative)
141
141
~ ~
~ ~
-----2§1
___ 5s_2
Total Special Revenue Funds With Legally Adopted Budgets ~ ~ ~ ~
CITY AND COUNTY OF SAN FRANCISCO
Combining Balance Sheet Nonmajor Governmental Funds - Debt Service Funds
June 30, 2017 June 30, 2017 (In Thousands) (In Thousands)
Fire Earthquake Protection
City Facilities Safety Systems Moscone Public Library Recreation Street Improvement Improvement Improvement Convention Improvement and Park Improvement
Fund Fund Fund Center Fund Fund Projects Fund Tobi Assets Assets
Deposits and 1rwestments with City Treasury 337,869 3,966 Deposits and 1rwestments with City Treasury 40,124 Deposits and 1rwestments outside City Treasury 83,890 11,732 Deposits and 1rwestments outside City Treasury Receivables Receivables
Federal and state grants and subventmns Federal and state grants and subventmns 2,796 '"' 6,340 Interest and other ,,, Interest and other M oe ''° Due from other funds Due from otherfunds 1,787 1,239 3,026
Other assets Other assets w rn Total assets ~
, ___ ~ L.....11.lE Total assets
, ___ ~ ~ ~
LJab1l11Jes LJab1l11Jes Accounts payable 1,0 33,613 Accounts payable 3,645 Accrued payroll ' eo Accrued payroll ,w Unearned grant and subvention revenue Unearned grant and subvention revenue "" 1 Due to other funds 8,373 Due to other funds " 8,420 Unearned revenues and other l1ab1l11Jes se ,e 3,900 Unearned revenues and other l1ab1l11Jes " 1,510 5,555 Bonds, loans, capllal leases, and other payables ~ Bonds, loans, capllal leases, and other payables ~
Total l1ablllt1es _______2'_22:§_ no ~ Total l1ablllt1es ~ ~ ~
Deferred 1nflaws of resources Deferred 1nflaws of resources ~ ~ ~
Fund balances Fund balances Restricted 414,680 3,797 Restricted 38,131 58,797 515,405 Unassigned ~) Unassigned ~)
Total fund balances ~ ~ ~) Total fund balances ~ ~ ~ Total l1ablllt1es, deferred inflows of resources Total l1ab1l1t1es, deferred inflows of resources
and fund balances $ 422,156 , ___ ~ L.....11.lE and fund balances , ___
~ ~ $ 549,265
199 200
CITY AND COUNTY OF SAN FRANCISCO CITY AND COUNTY OF SAN FRANCISCO
Combining Statement of Revenues, Expenditures Combining Statement of Revenues, Expenditures and Changes in Fund Balances and Changes in Fund Balances
Nonmajor Governmental Funds - Capital Projects Funds Nonmajor Governmental Funds - Capital Projects Funds (Continued) Year Ended June 30, 2017 Year Ended June 30, 2017
(In Thousands) (In Thousands)
Fire Earthquake Protection Moscone
City Facilities ""' Systems Convention Public Library Recreation Street Improvement Improvement Improvement Center Improvement and Park Improvement
Fund Fund Fund Fund Fund Projects Fund Total Revenues Revenues
Fines, forfeitures, and penalties Fines, forfeitures, and penaltJes rn rn Interest and 1rwestment income 2,[)48 " Interest and 111Vestment income '" ''° 3,180 Rents and concessions Rents and concessions " " lntergavemmental lntergavemmental
Federal Federal ow 4,212 State State 9,672 ,, Other Other '°' Other Other ~ " _______1___,§£
Total revenues ~ " ' Total revenues ~ ~ ~ Expenditures Expenditures
Debt ser,ice Debt ser,ice Interest and other fiscal charges rn 2,726 Interest and other fiscal charges ' Bond issuance costs 1,327 Bond issuance costs rn
Capital outlay ~ ~ ~ Capital ou~ay ~ ______J_12_1_1_ 297,089
Total expenditures ~ ~ 140,328 Total expenditures ~ ~ ~ Def1c1ency of revenues Def1c1ency of revenues
under expenditures ~) ~) (140,321) under expenditures (27,650) ~) (281,223)
Otherf1nanc1ng sources (uses) Otherf1nanc1ng sources (uses) Transfers 1n 0,1 Transfers 1n w, 113,348 Transfers out (17) (226) Transfers out (417) (60,698) Issuance of bonds Issuance of bonds
Face value of bonds issued 173,120 Face value of bonds issued 173,120 Premium on issuance of bonds 11,820 Premium on issuance of bonds 11,820
Otherf1nanc1ng sources-capital leases ~ otherf1nanc1ng sources-capital leases ~ ~ Total otherf1nanc1ng sources, net ~ _____j'l) ______ill§) ___ ,,_1 Total other financing sources, net ~ ~ ~) 273,561
Net changes 1n fund balances 202,667 (17) (3,159) (139,800) Net changes 1n fund balances (417) (25,756) (41,180) (7,662) Fund balances at beginning of year ~ H ~ ~) Fund balances at beginning of year '" ~ ~ 281,894
Fund balances at end of year ~ , ___ L....2l2l $ (241,173) Fund balances at end of year
, ___ L...2111!.. ~ ~
201 202
CITY AND COUNTY OF SAN FRANCISCO
INTERNAL SERVICE FUNDS
Internal Service Funds are used to account for the f1nanc1ng of goods and services provided by one department or agency to other departments or agencies on a cost reimbursement basis
Central Shops Fund - Accounts for Central Shops equipment (pnmarily vehicle) maintenance service charges and the related b1ll1ngs to various departments
Fmance Co,'pomt,w City because its sole purpose 1s to Finance Corporation were
services provided by the Finance to establ,sh,td the Finance Corporation Internal fund
to the City Previously, the act1v1t1es of the
Rep;;~~,~~-~:0
:Fund - Accounts for printing, design and mail services required by various City and agencies
Telecommumcat1ons and Information Fund -Accounts for centralized telecommunications act1v1t1es 1n the Wide Area radio communication and telephone systems
ao,sl<e,el<eo support to department-spec1f1c and Web site, mainframe computers ac,i t,,choclcoc
the related b1ll1ngs various departments for spec1f1c services periolllled the General Fund
203
CITY AND COUNTY OF SAN FRANCISCO
Combining Statement of Net Position Internal Service Funds
June 30, 2017 (In Thousands)
lll"!Jtc
l,Gt2
~ ----1 011 ----.!Im ----
;in ''" :Km " "' 1.{11'
~ ............... ~
204
T,,1('0¢"1·
mtrnk~t1on,~!I
"' ........ zs.sn
---~-~
2_t,D1f. .~
,~u,n
CITY AND COUNTY OF SAN FRANCISCO
Combining Statement of Revenues, Expenses and Changes in Fund Net Position
Internal Service Funds Year Ended June 30, 2017
(In Thousands)
205
,1,332 (4,!)6~]
""
Tola!ad~"'1n"mls"
CITY AND COUNTY OF SAN FRANCISCO
Combining Statement of Cash Flows Internal Service Funds
Year Ended June 2017 (lo
NM o,i,rn prosldwl by (ll\/,00 illi op:-<r"11<l\! arm.n""' ...
206
CITY AND COUNTY OF SAN FRANCISCO
FIDUCIARY FUNDS
F1duc1ary Funds include all Trust and Agency Funds which account for assets held by the City as a trustee or as an agent for 1nd1v1duals or other governmental units
Trust Funds
- Accounts for the contributions from from investments of monies
contributions and for retirements,
w,thd,owol-d,sob,l,te and death benefits of the employees as well as adm1nistrat1ve expenses
- Accounts for the contributions from active and retired employees, and spouses, contributions and the earnings and profits from investment of monies D,s1bo1ssme,cts are made for medical expenses and to vanous health plans of the benef1c1aries
Retiree Health Care Trust - Accounts for the contributions from earnings and profits from investment of monies Disbursements are and other charges properly allocable to the trust fund
Agency Funds
contributions and the expenses
Funds are custodial 1n nature and do not involve measurement of results of operations Such no equity accounts since all assets are due to 1nd1v1duals or ent1t1es at some future time
Assistance human
Fund - Accounts for collections and advances received as an agent under various and health programs Monies are disbursed 1n accordance with legal
requirements and program rnc,c,aocc,s
Fund - Accounts for all deposits under the control of the departments D1spos1t1ons of the are governed by the terms of the statutes and o,d,caou,s establ1sh1ng the deposit
requirement
Payroll Deduction Fund - Accounts for monies held for payroll charges 1nclud1ng federal, state and other payroll related deductions
State Revenue Col/ect10n Fund - Accounts for various fees, fines and penalties collected by City departments for the State of Cal1forn1a which are passed through to the State
Tax Collection Fund - Accounts for m on1es received for current and authority for d1stnbut1on Included are
This fund also accounts for monies and claims Upon final settlement, monies
to the dispute
payment of settlement of courts or by
Transit Fund - Accounts for the Equal1zat1on and deposited Transportation Comm1ss1on, the directs their use and d1stribut1on
of one percent sales tax collected by the State Board of of origin for local transportation support The Metropolitan agency responsible for adm1nistrat1on of these monies,
Other Agency Funds-Accounts for monies held as agent for a variety of purposes
Total Agency Funds Assets Deposits and investments with City Treasury ... $138,794 $4,974,618 $4,925,591 $187,821 Deposits and investments outside City Treasury .. 817 3,234 818 3,233 Receivables:
Employer and employee contributions .. 43,571 7,994 51,565 Interest and other .. 276,318 2,725,379 2,720,470 281,227
Total liabilities .. $505,038 $4,446,337 $4,381,991 $569,384
212
STATISTICAL SECTION
'Iliis page has Geen intentwnaiJy feft 5fanli.,
'Iliis page has Geen intentwna[[y feft 5fanli.,
CITY AND COUNTY OF SAN FRANCISCO
Statistical Section
This section of the fee
comprehensive annual f1nanc1al report presents detailed 1nfollllal1on as a context the 1nfollllal1on 1n the f1nanc1al statements, note disclosures, and required
sP1spl,emeclmt"cfmmtmc says about the City's overall f1nanc1al health
Financial Trends These schedules contain trend 1nfollllal1on to help the reader understand how the City's f1nanc1al periollll ance and well-being have changed over t1m e
Revenue Capacity These schedules contain 1nfollllal1on to help the reader assess the C1t'ys most s1gn1f1cant local revenue sources, the property tax
Debt Capacity These schedules present 1nfollllal1on to levels of outstanding debt and the City's
the reader assess the alfordab1l1ty of the City's current issue add1t1onal debt 1n the future
Demographic and Economic Information These schedules offer and economic 1nd1cators to help the reader understand the
f1nanc1al act1v1t1es take place
Operating Information These schedules contain 1nformat1on about the City's understand how the City's f1nanc1al 1nformat1on relates act1v1t1es 11 performs
Sources:
and resources to services the City
the reader and the
Unless othervv1se noted, the 1nformallon 1n these schedules 1s derived from the comprehensive annual f1nanc1al reports for the relevant year
(2) In fiscal year 2015, the City adopted the prav1s1ons ofGASB Statement Nos 68 and 71 As restatement of all prior periods 1s not practical, the cumulative effect of applying these statements 1s reported as a restatement of beginning net pos1t1on as of July 1, 2014
(3) Certain net pos1t1on reclass1f1ca1Jons were made to reflect the pnmary government as a whole perspective since fiscal year 2009 See Note 1 O(d) 1n the Notes to Basic F1nanc1al Statements for details
Not-,,-0) The Crtyadopted GAS8 statemaatNo 8'miscal}"ac2014aadboaaa"'portmgthecostof,ssoaaceasaae,pease Paociscal}"acsh,,..actbeea"'stated
Q) h iscal }"ac201', the Crtyadoptedthe '"'""'"' ofGAS8 statement Nos '8 aad 71 h "'statement ofall paocpeaods" act pract,cal, the com,lat,,.. eflact ofappl~agthese
statement," "'ported asa ~~atementofbegmmag aet posrt,oa as ofJ.,ly 1, 2014
215
CITY AND COUNTY OF SAN FRANCISCO
CHANGES IN NET POSITION (Continued) Last Ten Fiscal Years
(2) h iscal }"ac2014-15,the Crtyadoptedthe '"'"'""' ofGAS8 statement Nos '8 aad 71 h ~,ratement of all paocpeaods" act pract,cal,the comUat,,.. eflact ofappl~ag thesestatemeats ""'portedasa"'statementofbegnmagaetposrt,oaasofJ.,ly1,2014
216
28,58' 240,838
'71,173
940,37'
~
721,849 728,18'
28,547 2'7.419
847,942
933,908
~
0'7.'14)
~
General Fund
Unreserved
Total general fund
All other governmental funds Reserved for assets not ava1lableforappropnat1on Reser;edfordebt servrce Reser;edforencumbrances
Special revenue funds Capital proJectsfunds Permanent fund
Total other governmental funds
General Fund Nonspendable
Restncted
Corrm1tted
Assigned
Unassigned
Total general fund
All other governmental funds Nonspendable
Restricted
Assigned
Unassigned
Total other governmental funds
Notes
CITY AND COUNTY OF SAN FRANCISCO
FUND BALANCES OF GOVERNMENTAL FUNDS Last Ten Fiscal Years
' "' ' m ' so ' so 1,115,226 1,110,836 1,443,956 1,701,020
50,733 66,740 66,085 78,413
~) ~ ~) (245,445)
~ ~ ~ ~
Revenues: Property taxes Business taxes Sales and use tax Hotel room tax ut1l1tyuserstax Otherlocaltaxes l.Jcenses, permits andl'anch1ses F1nes,fotfe1turesandpenalt1es lnterestand1nvestrrent1ncome Rent and concessions Intergovernmental
Federal State Other
Chargesforser;ices Other
Total revenues
Expendttures
Public protection Public works, transportation and comrrerce Human welfare and ne1ghbothood development Community health Culture and recreation General adm1nistrat1onandlnance General Crty respons1b1l1t1es Debt set\Oce
Pnncipal retirerrent lnterestandlscalcharges Bond issuance costs
Capital outlay Total expenditures Excess of revenues over expenditures
Other financing ,.,u,ces(uses):
Transfers 1n Transfers out lssuanceofbondsandloans
11) In fiscal year 2008-2009, the City transferred its Emergency Communications Department and General Service Agency Technology's function from Public Works, Transportatlon and Commerce to Public Protection and General Adm1nistra1Jon and Finance
(') :,%::::~,;:::,::;:::~:::~,:::,';,:':!',:;::::::':::•:,co, The maximum tax rate 1s 1% of the full cash value or
"
Const1tut1on, Artrc le XVI and S ect1on 33675 or':,,:.'.,'~,.,;,:,,,~,'.,',::,.:,,;,,:' ;,';,~,:,:,'.':::.":.::.'.;'.,:'.'.::.::''.'.:':C:'.;,'''.'.'.'.:,' indebtedness agreement between the Crty and Redevelopment Agency
(JJ Based on certified assessed values (4) Based on year end actual assessed values
Notes (1) Details regarding the City's outstanding debt can be found 1n the notes to the f1nanc1al statements In compliance
with GASB Statement No 65, the amount for general obl1gallon bonds was restricted to exclude bond refunding gains or losses
(2) Population data can be found 1n Demographic and Economic Stallst1cs (3) Fiscal years 2015 and 2016 updated from last year's CAFR wth newly available data (4) Taxable property data can be found 1n Assessed Value of Taxable Property
225
CITY AND COUNTY OF SAN FRANCISCO
LEGAL DEBT MARGIN INFORMATION Last Ten Fiscal Years
(In Thousands)
Fiscal Year
"'" 2009 2010
Debt l1m1t 4,050,223 4,497,000 4,853,760
Total net debt applicable to l1m1t 1,135,205 1,208,353 1 ,442,448
Legal debt margin 2,915,018 3,288,647 3,411,312
Total net debt applicable to the l1m1t as a percentage of debt l1m 11 28 03% 26 87% 29 72%
Fiscal Year
"'" 2014 2015
Debt l1m1t 5,030,049 5,279,242 5,482,482
Total net debt applicable to l1m1t 2,052, 155 2,105,885 2,096,765
Legal debt margin 2,977,894 3,173,357 3,385,717
Total net debt applicable to the l1m1t
as a percentage of debt l1m 11 40 80% 39 89% 38 24%
Legal Debt Margin Calculation for Fiscal Year 2017
Noie's
Total assessed value
Less no11-re1mbursable exemptions (1J
Assessed value (1)
Debt 11m1t (three percent of valuation subJect to taxation f-l
Debt applicable to l1m1t - general obl1gat1on bonds
Legal debt margin
(l) Source Assessor, City and County of San Francisco
Percentage of direct and overlapping general obl1gat1on debt per assessed valuation
Percentage of total direct and overlapping debt per assessed valuation
Estimated total direct and overlapping total debt per capita
Estimated Share of Overlapping Debt
(In thousands)
2,331 ,894
182,783
582,759
162,876
32,586
3,242,898
893,824
285,043
192,058
1 ,370,925
4,613 ,823
212,2:l9,610
879 862
172%
2 17%
$5 244
Note Overlapping districts are those that at least 1n part, with the geographic boundaries of the This schedule est1matestheport1onoftheoutstand1ng ofthose overlapp1ngd1strictsthat1sbornebythe and businesses of the recogn1zesthat,when considering the City's ab1l1tyto issue and repay long-term debt, the entire debt bytheres1dentsandbus1nessesshouldbetaken1ntoaccount
(') The percentage of overlapping debt applicable 1s estimated using taxable assessed property value were estimated determ1n1ng the portion of the City's taxable assessed value that 1s w1th1n the d1v1d1ng1tbythe assessed value
PLEDGED-REVENUE COVERAGE (Continued) Last Ten Fiscal Years
(In Thousands)
San Francisco Wastewater Enterprise 1"1 Less: Net
Fiocal Gross Operating Available Year Revenuesl 141 Expen,.,sl"I Adjustmentsl"I Total 1171 Coverage 117
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
'" (14) Gross revenue consists ofchargesforservices, rentalincomeandother1ncome (15) In accordance v.ath GASB Statement No 44, Wastewater Enterpnse operating expenses related to the pledged
Fiscal
Year
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Total Operating
,.. Operating
Port of San Francioco 1"1 ,. Available Debt Service
Principal lntere!t Total
4,070 "' 4,418 4,185 m 4,407 4,320 B 4,395
''' 2,843
'" 2,845
'" 2,846 m 2,847
4,171 4,176 4,169
(19) The pledged-revenue cooBrage calculations presented 1n this schedule conform to the requirements of GA SB Statement No 44 and as such differs significantly from those calculated 1n accordancev.aththe bond indenture
(20) TotalreoBnuescons1stofoperat1ngrevenues and interest and1noBstment1ncome
Coverage
"' "' SSC
'" '" C SC
"' '" '" '"
(21) In accordance v.ath GASB Statement No 44, operating expenses related to the pledged-reoBnue stream exclude interest, deprec,at1onandamort1zat1on Deta1lsregard1ngoutstand1ngdebt canbefound1nthenotestothefinanc,al statements Operating expenses, as defined try the bond indenture, also excludes amortized dredging costs
,.. Fiscal l"I Cm• Operating
Year Revenuesl"I
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
'" '" (24)
'" '" ''"
Hetch HetchyWater and Power l"l~'I ,. Available
229
Debt Service
m m m m
rn rn rn rn rn
"' "' '" 'cc "'
12616 8033 9899 4870 rn rn
2631
CITY AND COUNTY OF SAN FRANCISCO
DEMOGRAPHIC AND ECONOMIC STATISTICS Last Ten Fiscal Years
Per Capita Average Rs cal Personal Income Personal Median Public School Unemployment Year Population (1) (In Thousands) (2) Income (3) Age (4) Enrollment (5) Rate (6) 2008 808 001 $58 ,199 006 ~ --,-0-0- 55!,90 4 6%
(1) US Census Bureau Fiscal years 2015 and 2016 are updated frorn last year's CA FR with new~ available data (l) US Bureau of Economc Ana~s,s Fiscal year 2015 was updated frornlast year's CAFRwrth new~ available data (JJ US Bureau of Economc Ana~s,s Fiscal year 2015 was updated frornlast year's CAFRwrth new~ available data (4) US Census Bureau, Arrencan OJmrun,ty Sutv"'f (5) CalIToma Departrrent of 5:Jucat,on
Note (7) 2016 ,s updated frornlastyear's CAFRwrth new~ SNa1lable data 2017 population was estimated by rrult1p~1ng
the est,rmted 2017 population by the 2015- 2016 populst1ongrowthrste (SJ Personal ,ncorre was est,rmted by assumng that ,ts percentage of state personal ,ncorre ,n 2016 and 2017
remained at the 2015 level of 4 26 percent Fiscal years 2015 to 2016 are updatedfrornlast year's CAFRwrth newly SNa1lable
data (',) Per caprta personal ,ncorre for 2016 and 2017 was est,rmted by d1v1d1ng the estimated personal ,ncorre for 2016
and2017 by the reported andest1rmtedpopulat1on ,n 2016 and 2017, respectwely Fiscal years 2015 and2016 are updated frornlast year's CAFRwrth new~ SNa1lable data
(1 0) Median age for FY2016 was est,rmted try SNerag1ng the rred1an age ,n 2014 and 2015 The rred1an age for FY2017 was est,rmted
bySNerag1ngtherred1anage1n2015and2016
230
CITY AND COUNTY OF SAN FRANCISCO
Employer
City and County of San Francisco
Un1vers1ty of California, San Francisco San Francisco Unified School District
Wells Fargo &Co Salesforce
Cal1forn1a Pacific Medical Center PG&E Corporation
Gap, Inc Kaiser Permanente
Uber Technologies Inc State of California
United States Postal Service
Total
Principal Employers Cu1Tent Year and Nine Years Ago
Year 2016 11 I
Percentage of Tota I City
Employees Rank Employment
29 ,962 5 53%
25 ,398 4 69% 9,227 1 70%
8,195 1 51% 6,600 1 22%
6,000 111% 4,325 0 80%
4,268 0 79% 4,100 0 76%
3,650 rn 0 67%
101 ,725 18 78%
Year 2007
Employees Rank
26 ,665
17 ,500 5,579
8,139
5,569 4,800
4,075 0 3,918 rn
6,226
~
~
Percentage of Total City Employment
6 44%
4 23% 1 35%
196%
1 34% 116%
0 98% 0 95%
1 50% 119%
21 10%
~Total Crty and County of San Francisco employee count 1s obtained from the State ofCallforn1a Employee Development Department All other data 1s obtained from the San Francisco Business Times Book of Lists
(1) Measo~ ohaoged tom mad,., time to a>erage,m, m FY 2008 """" Joe FY 2006 thco"lh FY 2007 ~,,ct meJ,aot,me, FY 2000 th"D"lh FY 201' ceiectsa>eraga time (2) \!aloes Joe FY aJ06 ha>e t.eo cestatedto be "'°""""' as aom.al a>era,e t< isoal yea, fumth, MTAseruc, staoJacds ~ports (3) TheC3hDmaAoadaoryofSaeo,esopo,edoo S<oterrtec27,2008
"' 10,814,01'
1,?ll,378
WA• hDimaboo "oota,.,,lable - tral m most "'""""' doe to the t,ot that the Qty S<ney, whoh was admrnsteced aoruallyoot,I aJ05, tho, t,o,o,allyate,wacd,, ,sth, data ,rucc,
233
CITY AND COUNTY OF SAN FRANCISCO
CAPITAL ASSET STATISTICS BY FUNCTION Last Ten Fiscal Years
CITY AND COUNTY OF SAN FRANCISCO OFFICE OF THE TREASURER
INVESTMENT POLICY
1.0 Policy
CITY AND COUNTY OF SAN FRANCISCO OFFICE OF THE TREASURER & TAX COLLECTOR
INVESTMENT POLICY Effective February 2018
It is the policy of the Office of the Treasurer & Tax Collector of the City and County of San Francisco (Treasurer's Office) to invest public funds in a manner which will preserve capital, meet the daily cash flow demands of the City, and provide a market rate of return while confonning to all state and local statutes governing the investment of public funds.
2.0 Scope
This investment policy applies to all funds over which the Treasurer's Office has been granted fiduciary responsibility and direct control for their management.
3.0 Prudence
The standard of prudence to be used by the Treasurer's Office shall be the Prudent Investor Standard as set forth by California Govermnent Code, Section 53600.3 and 27000.3. The Section reads as follows: The Prudent Investor Standard states that when investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the Treasurer's Office, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the Treasurer's Office.
This standard of prudence shall be applied in the context of managing those investments that fall under the Treasurer's direct control. Investment officers acting in accordance with written procedures and this investment policy and exercising due diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments.
4.0 Objective
The primary objectives, in priority order, of the Treasurer's Office's investment activities shall be:
4.1 Safety: Safety of principal is the foremost objective of the investment program. Investments of the Treasurer's Office shall be undertaken in a manner that seeks to ensure the preservation of capital. To attain this objective, the Treasurer's Office will diversify its investments.
4.2 Liquidity: The Treasurer's Office investment portfolio will remain sufficiently liquid to enable the Treasurer's Office to meet cash flow needs which might be reasonably anticipated.
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4.3 Return on Investments: The portfolio shall be designed with the objective of generating a market rate of return without undue compromise of the first two objectives.
5.0 Delegation of Authority
The Treasurer of the City and County of San Francisco (Treasurer) is authorized by Charter Section 6.106 to invest funds available under California Government Code Title 5, Division 2, Part I, Chapter 4, Article I. The Treasurer shall submit any modification to this Investment Policy to the Treasury Oversight Committee members within five (5) working days of the adoption of the change.
6.0 Authorized Broker/Dealer Firms
The City seeks to employ a fair and unbiased broker-dealer selection process, which culminates in an array of medium to large-sized firms that provide the best investment opportunities and service to the City.
The Treasurer's Office will evaluate and classify broker-dealers based on the qualifications of the firm and firm's assigned individual. Approved broker-dealers will be evaluated and may be classified into one of the following categories:
FULL ACCESS - Broker-dealers will have significant opportunity to present investment ideas to the investment team.
LIMITED ACCESS - Broker-dealers will have limited opportunity to present investment ideas to the investment team.
All others may apply for Provisional status appointment. Provisional appointments will be made for:
(I) Applicants who have changed firms; (2) Applicants (firm and individual) who were not approved by the Treasurer's Office in the
past year; and (3) Broker-dealers who have been classified as Limited Access, but are seeking Full Access
status.
Broker-dealers, who are granted Provisional status, will be treated as Full Access firms for a limited time period of up to six months. During the Provisional status period, the investment team will evaluate the applicant and provide a determination of status (Full Access, Limited Access or Not Approved). Brokerdealers may reapply for Provisional status every two years. A limited number of broker-dealers will be granted Provisional status concurrently.
All broker-dealers are encouraged to apply for consideration. All applicants will be evaluated and classified based on the qualifications of the firm and the firm's assigned individual. A score will be assigned to each applicant and will serve as the sole determinant for Full Access, Limited Access, or Not-Approved status.
All approved broker-dealers will be re-assessed annually. During the reassessment period, broker-dealers will be sent the City's most recent Investment Policy and are expected to respond with a policy acknowledgement letter, updated profile information and a completed questionnaire.
All securities shall be purchased and sold in a competitive enviromnent.
The Treasurer's Office will not do business with a firm which has, within any consecutive 48-month period following January I, 1996, made a political contribution in an amount exceeding the limitations contained
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in Rule G-37 of the Municipal Securities Rulemaking Board, to the Treasurer, any member of the Board of Supervisors, or any candidate for those offices.
7.0 Authorized & Suitable Investments
Investments will be made pursuant to the California Government Code (including Section 53601 et seq.) and this investment policy to ensure sufficient liquidity to meet all anticipated disbursements.
Unless otherwise noted, the maximum maturity from the trade settlement date can be no longer than five years.
Types of investment vehicles not authorized by this investment policy are prohibited.
In an effort to limit credit exposure, the Treasurer's Office will maintain Eligible Issuer, Eligible Counterparty and Eligible Money Market lists for security types where appropriate. These lists are intended to guide investment decisions. Investments, at time of purchase, are limited solely to issuers, counterparties and money market funds listed; however, investment staff may choose to implement further restrictions at any time.
The Treasurer's Office shall establish a Credit Committee comprised of the Treasurer, Chief Assistant Treasurer, Chieflnvestment Officer and additional investment personnel at the Treasurer's discretion. The Committee shall review and approve all eligible issuers and counterparties prior to inclusion on the aforementioned Eligible Issuer and Eligible Counterparty lists. The Committee shall also be charged with determining the collateral securing the City's repurchase agreements.
In the event of a downgrade of the issuer's credit rating below the stated requirements herein, the Credit Committee shall convene and determine the appropriate action.
In addition, the Treasurer's Office shall conduct an independent credit review, or shall cause an independent credit review to be conducted, of the collateralized CD issuers to determine the creditworthiness of the financial institution. The credit review shall include an evaluation of the issuer's financial strength, experience, and capitalization, including, but not limited to leverage and capital ratios relative to benchmark and regulatory standards (See Section 7.4). The following policy shall govern unless a variance is specifically authorized by the Treasurer and reviewed by the Treasury Oversight Committee pursuant to Section 5.0.
7.1 U.S. Treasuries
United States Treasury notes, bonds, bills or certificates of indebtedness, or those for which the faith and credit of the United States are pledged for the payment of principal and interest.
Allocation Issuer Limit Issue Limit Maximum Maturity/Term Maximum Maximum Maximum 100% of the 100% 100% 5 years portfolio value
7.2 Federal Agencies
Federal agency or United States government-sponsored enterprise obligations, participations, or other
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instruments, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States govermnent-sponsored enterprises.
Allocation Issuer Limit Issue Limit Maximum
Maturity/Term Maximum Maximum Maximum 100% of the 100% 100% 5 years portfolio value
7.3 State and Local Government Agency Obligations
The Treasurer's Office may purchase bonds, notes, warrants, or other evidences of indebtedness of any local or State agency within the 50 United States, including bonds payable solely out of the revenues from a revenue-producing property owned, controlled, or operated by the local agency or State, or by a department, board, agency, or authority of the local agency or State.
Allocation Issuer Limit Issue Limit Maximum
Maturity/Term Maximum Maximum Maximum 20% of the 5% No Limit 5 years portfolio value
Issuer Minimum Credit Rating: Issuers must possess either a short-term rating of the highest ranking or long-term credit rating (dependent upon maturity length) of the second highest ranking or better (irrespective of+/-) from at least one NRSRO (Nationally Recognized Statistical Rating Organization). This limitation applies to all local and State agencies within the 50 United States with the exception of the State of California.
7.4 Public Time Deposits (Term Certificates of Deposit)
The Treasurer's Office may invest in either:
I. Non-negotiable time deposits (Certificates of Deposit or CDs) that have FDIC or similar deposit insurance; or
2. Fully collateralized CDs in approved financial institutions.
The Treasurer's Office will invest in CDs and Time Deposits only with those firms having at least one branch office within the boundaries of the City and County of San Francisco. As required by Govermnent Code Section 53649, the Treasurer's Office shall have a signed agreement with any depository accepting City funds.
For Public Time Deposits not employing deposit insurance (such as FDIC), the Treasurer's Office is authorized to accept two forms of collateral:
A. Deposit Collateral. Collateralized CDs are required to be fully collateralized with 110% of the type of collateral authorized in California Govermnent Code, Section 53651 (a) through (i). The Treasurer's Office, at its discretion, may waive the collateralization requirements for any portion that is covered by deposit insurance.
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B. Letters of Credit Issued by the Federal Home Loan Bank of San Francisco. As authorized by Section 53651 (p) of the California Govermnent Code, the Treasurer's Office may be accepted as collateral and shall confom1 lo the requirements of Section 53651.6 of the California Government Coded include the following tenns:
(I) The Administrator, as defined by Section 53630 (g) of the California Government Code, shall be the beneficiary of the letter of credit: and
(2) "Ihe letter of credit shall be clean and irrevocable, and shall provide 1ha11he Administrator may draw upon it up 1o the total amount in the event of the failure of the depository savings association or federal association or ifthe depository savings association or federal association refuses to pemrit the withdrawal of funds by a treasurer.
Allocation Issuer Limit Issue Limit Maturity /Term Maximum Maximum Maximum Maximum No Limit None NIA 13 months
Issuer Minimum Credit Rating (applies to collateralized CDs only): Maintenance of the minimum standards for "well-capitalized" status as established by the Federal Reserve Board. The current standards are as follows:
Tier 1 risk-based capital ratio of 8% or greater Combined Tier 1 and Tier 2 capital ratio of 10% or greater Leverage ratio of 5% or greater
Failure to maintain minimum standards may result in early termination, subject to the discretion of the Treasurer's Office.
7.5 Negotiable Certificates of Deposit I Yankee Certificates Of Deposit
Negotiable certificates of deposit issued by a nationally or state-chartered bank, a savings association or a federal association (as defined by Section 5102 of the Financial Code), a state or federal credit union, or by a state-licensed branch of a foreign bank. Yankee certificates of deposit are negotiable instruments that are issued by a branch of a foreign bank.
Allocation Issuer Limit Issue Limit Maximum
Maturity/Term Maximum Maximum Maximum 30% of the No Limit NIA 5 years portfolio value
Issuer Minimum Credit Rating: Issuers must possess either a short-term rating of the highest ranking or long-term credit rating (dependent upon maturity length) of the second highest ranking or better (irrespective of+/-) from at least one NRSRO.
7.6 Bankers Acceptances
Bills of exchange or time drafts drawn on and accepted by a commercial bank, otherwise known as bankers'
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acceptances.
Allocation Issuer Limit Issue Limit Maximum Maturity/Term Maximum Maximum Maximum 40% of the 30% No Limit 180 days portfolio value
Issuer Minimum Credit Rating: None
7. 7 Commercial Paper
Obligations issued by a corporation or bank to finance short-term credit needs. such as accounts receivable and inventory. which may be unsecured or secured by pledged assets.
Allocation Issuer Limit Issue Limit Maximum
Maturity/Term Maximum Maximum Maximum 25% of the 10% None 270 days portfolio value
Issuer Minimum Credit Rating: Issuers must possess a short-term credit rating of the highest ranking (irrespective of+/-) from at least one NRSRO.
7.8 Medium Term Notes
Medium-term notes. defined as all corporate and depository institution debt securities with a maximum remaining maturity of five years or less. issued by corporations organized and operating within the United States or by depository institutions licensed by the U.S. or any state. and operating within the U.S.
Allocation Maximum Issuer Limit Issue Limit Maturity/Term Maximum Maximum Maximum
25% of the portfolio 10% 5% 24 months value
Issuer Minimum Credit Rating: Issuers must possess either a short-term rating of the highest ranking or long-term credit rating (dependent upon maturity length) of the second highest ranking or better (irrespective of+/-) from at least one NRSRO.
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7.9 Repurchase Agreements
To the extent that the Treasurer's Office utilizes this investment vehicle. said collateral shall be delivered to a third-party custodian. so that recognition of ownership of the City and County of San Francisco is perfected.
Type of collateral Allocation Maximum Issuer Limit Maturity/Term Maximum Maximum
Govermnent securities No Limit N/A I year
Securities permitted by CA Govermnent
10% N/A I year Code. Sections 53601 and 53635
7.10 Reverse Repurchase and Securities Lending Agreements
This procedure shall be limited to occasions when the cost effectiveness dictates execution. specifically to satisfy cash flow needs or when the collateral will secure a special rate. A reverse repurchase agreement shall not exceed 45 days; the amount of the agreement shall not exceed $75MM; and the offsetting purchase shall have a maturity not to exceed the term of the repo.
7.11 Money Market Funds
Shares of beneficial interest issued by diversified management companies that are money market funds registered with the Securities and Exchange Commission under the Investment Company Act of 1940 (15 U.S.C. Sec. 80a-l. et seq.).
Fund Type Allocation Issuer Limit Percentage of Maturity/Term Maximum Maximum Fund's Net Assets Maximum
Maximum Institutional 20% of total
N/A 5% N/A Govermnent Pool assets
Issuer Minimum Credit Rating: Fund must be rated in the highest rating category from not less than two NRSROs.
7.12 Local Agency Investment Fund (LAIF)
Investments in LAIF. a California state investment fund available to California municipalities. are authorized.
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7.13 Su pranationals *
United States dollar denominated senior unsecured unsubordinated obligations issued or unconditionally guaranteed by:
• International Bank for Reconstruction and Development. • International Finance Corporation, or • Inter-American Development Bank.
Allocation Issuer Limit Issue Limit Maturity/Term Maximum Maximum Maximum Maximum
30% None None 5 years Issuer Minimum Credit Rating: Issuers must possess either a short-term credit rating of the highest ranking or long-term credit rating (dependent upon maturity length) of the second highest ranking or better (irrespective of+/-) from at least one NRSRO.
* Effective as of January 1. 2015. as consistent with State Law.
8.0 Interest and Expense Allocations
The costs of managing the investment portfolio. including but not limited to: investment management; accounting for the investment activity; custody of the assets. managing and accounting for the banking; receiving and remitting deposits; oversight controls; and indirect and overhead expenses are charged to the investment earnings based upon actual labor hours worked in respective areas. Costs of these respective areas are accumulated and charged to the Pooled Investment Fund on a quarterly basis. with the exception of San Francisco International Airport costs which are charged directly through a work order.
The San Francisco Controller allocates the net interest earnings of the Pooled Investment Fund. The earnings are allocated monthly based on average balances.
9.0 Safekeeping and Custody
All security transactions. including collateral for repurchase agreements. entered into by the Treasurer's Office shall be conducted on a delivery-versus-payment (DVP) basis pursuant to approved custodial safekeeping agreements. Securities will be held by a third party custodian designated by the Treasurer and evidenced by safekeeping receipts.
10.0 Deposit and Withdrawal of Funds
California Government Code Section 53684 et seq. provides criteria for outside local agencies. where the Treasurer does not serve as the agency's treasurer. to invest in the County's Pooled Investment Fund. subject to the consent of the Treasurer. Currently. no government agency outside the geographical boundaries of the City and County of San Francisco shall have money invested in City pooled funds.
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The Treasurer will honor all requests to withdraw funds for normal cash flow purposes that are approved by the San Francisco Controller. Any requests to withdraw funds for purposes other than cash flow, such as for external investing, shall be subject to the consent of the Treasurer. In accordance with California Government Code Sections 27136 et seq. and 27133(h) et seq., such requests for withdrawals must first be made in writing to the Treasurer. These requests are subject to the Treasurer's consideration for the stability and predictability of the Pooled Investment Fund, or the adverse effect on the interests of the other depositors in the Pooled Investment Fund. Any withdrawal for such purposes shall be at the value shown on the Controller's books as of the date of withdrawal.
11.0 Limits on Receipt ofHonoraria, Gifts and Gratuities
In accordance with California Government Code Section 27133(d) et seq., this Investment Policy hereby establishes limits for the Treasurer, individuals responsible for management of the portfolios, and members of the Treasury Oversight Committee on the receipt ofhonoraria, gifts and gratuities from advisors, brokers, dealers, bankers or others persons with whom the Treasurer conducts business. Any individual who receives an aggregate total of gifts, honoraria and gratuities in excess of those limits must report the gifts, dates and firms to the Treasurer and complete the appropriate State disclosure.
These limits may be in addition to the limits set by a committee member's own agency, by state law, or by the California Fair Political Practices Commission. Members of the Treasury Oversight Committee also must abide by the following sections of the Treasurer's Office Statement oflncompatible Activities: Section III(A)(l)(a), (b) and (c) entitled "Activities that Conflict with Official Duties," and Section III(C) entitled "Advance Written Determination".
12.0 Reporting
In accordance with the provisions of California Government Code Section 53646, which states that the Treasurer may render a quarterly report or a monthly report on the status of the investment portfolio to the Board of Supervisors, Controller and Mayor; the Treasurer regularly submits a monthly report. The report includes the investment types, issuer, maturity date, par value, and dollar amount invested; market value as of the date of the report and the source of the valuation; a statement of compliance with the investment policy or an explanation for non-compliance; and a statement of the ability or inability to meet expenditure requirements for six months, as well as an explanation of why moneys will not be available if that is the case.
13.0 Social Responsibility
In addition to and subordinate to the objectives set forth in Section 4.0 herein, investment of funds should be guided by the following socially responsible investment goals when investing in corporate securities and depository institutions. Investments shall be made in compliance with the forgoing socially responsible investment goals to the extent that such investments achieve substantially equivalent safety, liquidity and yield compared to investments permitted by state law.
13.1 Social and Environmental Concerns Investments are encouraged in entities that support community well-being through safe and enviromnentally sound practices and fair labor practices. Investments are encouraged in entities that support equality of rights regardless of sex, race, age, disability or sexual orientation. Investments are discouraged
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in entities that manufacture tobacco products, firearms, or nuclear weapons. In addition, investments are encouraged in entities that offer banking products to serve all members of the local community, and investments are discouraged in entities that finance high-cost check-cashing, deferred deposit (paydaylending) businesses and organizations involved in financing, either directly or indirectly, the Dakota Access Pipeline or, as determined by the Treasurer, similar pipeline projects. Prior to making investments, the Treasurer's Office will verify an entity's support of the socially responsible goals listed above through direct contact or through the use of a third party such as the Investors Responsibility Research Center, or a similar ratings service. The entity will be evaluated at the time of purchase of the securities.
13.2 Community Investments
Investments are encouraged in entities that promote community economic development. Investments are encouraged in entities that have a demonstrated involvement in the development or rehabilitation of low income affordable housing, and have a demonstrated commitment to reducing predatory mortgage lending and increasing the responsible servicing of mortgage loans. Securities investments are encouraged in financial institutions that have a Community Reinvestment Act (CRA) rating of either Satisfactory or Outstanding, as well as financial institutions that are designated as a Community Development Financial Institution (CDFI) by the United States Treasury Department, or otherwise demonstrate commitment to community economic development.
13.3 City Ordinances
All depository institutions are to be advised of applicable City contracting ordinances, and shall certify their compliance therewith, ifrequired.
14.0 Treasury Oversight Committee
A Treasury Oversight Committee was established by the San Francisco Board of Supervisors in Ordinance No. 316-00. The duties of the Committee shall be the following:
(a) Review and monitor the investment policy described in California Goverrunent Code Section 27133 and prepared annually by the Treasurer.
(b) Cause an annual audit to be conducted to determine the Treasurer's compliance with California Goverrunent Code Article 6 including Sections 27130 through 27137 and City Administrative Code Section 10. 80-1. The audit may examine the structure of the investment portfolio and risk. This audit may be a part of the County Controller's usual audit of the Treasurer's Office by internal audit staff or the outside audit firm reviewing the Controller's Annual Report.
( c) Nothing herein shall be construed to allow the Committee to direct individual decisions, select individual investment advisors, brokers, or dealers, or impinge on the day-to-day operations of the Treasurer. (See California Goverrunent Code, Section 27137.)
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APPENDIX
Glossary
AGENCIES: Federal agency securities and/or Government-sponsored enterprises.
ASK/OFFER: The price at which securities are offered.
BANKERS' ACCEPTANCE (BA): A draft or bill or exchange accepted by a bank or trust company. The accepting institution guarantees payment of the bill, as well as the issuer.
BENCHMARK: A comparative base for measuring the performance or risk tolerance of the investment portfolio. A benchmark should represent a close correlation to the level of risk and the average duration of the portfolio's investments.
BID: The price offered by a buyer of securities. (When you are selling securities, you ask for a bid.) See Offer.
BROKER: A broker brings buyers and sellers together for a commission.
CERTIFICATE OF DEPOSIT (CD): A time deposit with a specific maturity evidenced by a Certificate. Large-denomination CD's are typically negotiable.
COLLATERAL: Securities, evidence of deposit or other property, which a borrower pledges to secure repayment of a loan. Also refers to securities pledged by a bank to secure deposits of public monies.
COMPREHENSIVE ANNUAL FINANCIAL REPORT (CAFR): The CAFR is the City's official annual financial report. It consists of three major sections: introductory, financial, and statistical. The introductory section furnishes general information on the City's structure, services, and environment. The financial section contains all basic financial statements and required supplementary information, as well as information on all individual funds and discretely presented component units not reported separately in the basic financial statements. The financial section may also include supplementary information not required by GAAP. The statistical section provides trend data and nonfmancial data useful in interpreting the basic financial statements and is especially important for evaluating economic condition.
COUPON: (a) The annual rate ofinterest that a bond's issuer promises to pay the bondholder on the bond's face value. (b) A certificate attached to a bond evidencing interest due on a payment date.
DEALER: A dealer, as opposed to a broker, acts as a principal in all transactions, buying and selling for his own account.
DEBENTURE: A bond secured only by the general credit of the issuer.
DELIVERY VERSUS PAYMENT: There are two methods of delivery of securities: delivery versus payment and delivery versus receipt. Delivery versus payment is delivery of securities with an exchange of money for the securities. Delivery versus receipt is delivery of securities with an exchange of a signed receipt for the securities.
DEPOSITORY INSTITUTIONS: These institutions hold City and County moneys in the forms of certificates of deposit (negotiable or term), public time deposits and public demand accounts.
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DERIVATIVES: (I) Financial instruments whose return profile is linked to, or derived from, the movement of one or more underlying index or security, and may include a leveraging factor, or (2) financial contracts based upon notional amounts whose value is derived from an underlying index or security (interest rates, foreign exchange rates, equities or commodities).
DISCOUNT: The difference between the cost price of a security and its maturity when quoted at lower than face value. A security selling below original offering price shortly after sale also is considered to be at a discount.
DISCOUNT SECURITIES: Non-interest bearing money market instruments that are issued a discount and redeemed at maturity for full face value, e.g., U.S. Treasury Bills.
DIVERSIFICATION: Dividing investment funds among a variety of securities offering independent returns.
FDIC DEPOSIT INSURANCE COVERAGE: The FDIC is an independent agency of the United States government that protects against the loss ofinsured deposits if an FDIC-insured bank or savings association fails. Deposit insurance is backed by the full faith and credit of the United States government. Since the FDIC was established, no depositor has ever lost a single penny of FDIC-insured funds. FDIC insurance covers funds in deposit accounts, including checking and savings accounts, money market deposit accounts and certificates of deposit (CDs). FDIC insurance does not, however, cover other financial products and services that insured banks may offer, such as stocks, bonds, mutual fund shares, life insurance policies, annuities or municipal securities. There is no need for depositors to apply for FDIC insurance or even to request it. Coverage is automatic. To ensure funds are fully protected, depositors should understand their deposit insurance coverage limits. The FDIC provides separate insurance coverage for deposits held in different ownership categories such as single accounts, joint accounts, Individual Retirement Accounts (IRAs) and trust accounts. Basic FDIC Deposit Insurance Coverage Limits* Single Accounts (owned by one person) $250,000 per owner Joint Accounts (two or more persons) $250,000 per co-owner IRAs and certain other retirement accounts $250,000 per owner Trust Accounts $250,000 per owner per beneficiary subject to specific limitations and requirements** *The financial reform bill, officially named the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law on July 21, 2010, made the $250,000 FDIC coverage limit permanent.
FEDERAL CREDIT AGENCIES: Agencies of the Federal government set up to supply credit to various classes of institutions and individuals, e.g., S&L's, small business firms, students, farmers, farm cooperatives, and exporters.
FEDERAL FUNDS RATE: The rate of interest that depository institutions lend monies overnight to other depository institutions. Also referred to as the overnight lending rate.This rate is currently pegged by the Federal Reserve through open-market operations.
FEDERAL HOME LOAN BANKS (FHLB): Government sponsored wholesale banks (currently 12 regional banks), which lend funds and provide correspondent banking services to member commercial banks, thrift institutions, credit unions and insurance companies. The mission of the FHLBs is to liquefy the housing related assets of its members who must purchase stock in their district Bank.
FEDERAL NATIONAL MORTGAGE ASSOCIATION (FNMA): FNMA, like GNMA was chartered under the Federal National Mortgage Association Act in 1938. FNMA is a federal corporation working under the auspices of the Department of Housing and Urban Development (HUD). It is the largest single
February 2018
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provider of residential mortgage funds in the United States. Fannie Mae, as the corporation is called, is a private stockholder-owned corporation. The corporation's purchases include a variety of adjustable mortgages and second loans, in addition to fixed-rate mortgages. FNMA's securities are also highly liquid and are widely accepted. FNMA assumes and guarantees that all security holders will receive timely payment of principal and interest.
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC): Freddie Mac's nuss10n is to provide liquidity, stability and affordability to the housing market. Congress defined this mission in (their) 1970 charter. Freddie Mac buys mortgage loans from banks, thrifts and other financial intermediaries, and re-sells these loans to investors, or keeps them for their own portfolio, profiting from the difference between their funding costs and the yield generated by the mortgages.
FEDERAL OPEN MARKET COMMITTEE (FOMC): Consists of seven members of the Federal Reserve Board and five of the twelve Federal Reserve Bank Presidents. The President of the New York Federal Reserve Bank is a permanent member, while the other Presidents serve on a rotating basis. The Committee periodically meets to set Federal Reserve guidelines regarding purchases and sales of Govermnent Securities in the open market as a means of influencing the volume of bank credit and money.
FEDERAL RESERVE SYSTEM: The central bank of the United States created by Congress and consisting of a seven member Board of Governors in Washington, D.C., 12 regional banks and about 5,700 commercial banks that are members of the system.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA or Ginnie Mae): Securities influencing the volume of bank credit guaranteed by GNMA and issued by mortgage bankers, commercial banks, savings and loan associations, and other institutions. Security holder is protected by full faith and credit of the U.S. Govermnent. Ginnie Mae securities are backed by the FHA, VA or FmHA mortgages. The term "pass-throughs" is often used to describe Ginnie Maes.
GOVERNMENT SECURITIES: Obligations of the U.S. Govermnent and its agencies and instrumentalities.
LIQUIDITY: A liquid asset is one that can be converted easily and rapidly into cash without a substantial loss of value. In the money market, a security is said to be liquid if the spread between bid and asked prices is narrow and reasonable size can be done at those quotes.
LOCAL GOVERNMENT INVESTMENT POOL (LGIP): The aggregate of all funds from political subdivisions that are placed in the custody of the State Treasurer for investment and reinvestment.
MARKET VALUE: The price at which a security is trading and could presumably be purchased or sold.
MASTER REPURCHASE AGREEMENT: A written contract covering all future transactions between the parties to repurchase-reverse repurchase agreements that establishes each party's rights in the transactions. A master agreement will often specify, among other things, the right of the buyer-lender to liquidate the underlying securities in the event of default by the seller borrower.
MATURITY: The date upon which the principal or stated value of an investment becomes due and payable.
MONEY MARKET: The market in which short-term debt instruments (bills, commercial paper, bankers' acceptances, etc.) are issued and traded.
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NRSRO: Nationally Recognized Statistical Rating Organization; Credit rating agencies that are registered with the SEC. Such agencies provide an opinion on the creditworthiness of an entity and the financial obligations issued by an entity.
OFFER: The price asked by a seller of securities. (When you are buying securities, you ask for an offer.) See Asked and Bid.
OPEN MARKET OPERATIONS: Purchases and sales of government and certain other securities in the open market by the New York Federal Reserve Bank as directed by the FOMC in order to influence the volume of money and credit in the economy. Purchases inject reserves into the bank system and stimulate growth of money and credit; sales have the opposite effect. Open market operations are the Federal Reserve's most important and most flexible monetary policy tool.
PAR VALUE: The principal amount of a bond returned by the maturity date.
PORTFOLIO: Collection of securities held by an investor.
PRIMARY DEALER: A group of government securities dealers who submit daily reports of market activity and positions and monthly financial statements to the Federal Reserve Bank of New York and are subject to its informal oversight. Primary dealers include Securities and Exchange Commission (SEC)-registered securities broker-dealers, banks, and a few unregulated firms.
PRUDENT PERSON RULE: An investment standard. In some states the law requires that a fiduciary, such as a trustee, may invest money only in a list of securities selected by the custody state-the so-called legal list. In other states the trustee may invest in a security if it is one which would be bought by a prudent person of discretion and intelligence who is seeking a reasonable income and preservation of capital.
PUBLIC TIME DEPOSITS (Term Certificates Of Deposit): Time deposits are issued by depository institutions against funds deposited for a specified length of time. Time deposits include instruments such as deposit notes. They are distinct from certificates of deposit (CDs) in that interest payments on time deposits are calculated in a manner similar to that of corporate bonds whereas interest payments on CDs are calculated similar to that of money market instruments.
QUALIFIED PUBLIC DEPOSITORIES: A financial institution which does not claim exemption from the payment of any sales or compensating use or ad valorem taxes under the laws of this state, which has segregated for the benefit of the commission eligible collateral having a value of not less than its maximum liability and which has been approved by the Public Deposit Protection Commission to hold public deposits.
RA TE OF RETURN: The yield obtainable on a security based on its purchase price or its current market price. This may be the amortized yield to maturity on a bond the current income return.
REPURCHASE AGREEMENT (RP OR REPO): A holder of securities sells these securities to an investor with an agreement to repurchase them at a fixed price on a fixed date. The security "buyer" in effect lends the "seller" money for the period of the agreement, and the terms of the agreement are structured to compensate him for this. Dealers use RP extensively to finance their positions. Exception: When the Fed is said to be doing RP, it is lending money that is, increasing bank reserves.
SAFEKEEPING: A service to customers rendered by banks for a fee whereby securities and valuables of all types and descriptions are held in the bank's vaults for protection.
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SECONDARY MARKET: A market made for the purchase and sale of outstanding issues following the initial distribution.
SECURITIES & EXCHANGE COMMISSION: Agency created by Congress to protect investors m securities transactions by administering securities legislation.
SEC RULE 15(C))3-l: See Uniform Net Capital Rule.
STRUCTURED NOTES: Notes issued by Government Sponsored Enterprises (FlfLB, FNMA, SLMA, etc.) and Corporations, which have imbedded options (e.g., call features, step-up coupons, floating rate coupons, derivative-based returns) into their debt structure. Their market performance is impacted by the fluctuation of interest rates, the volatility of the imbedded options and shifts in the shape of the yield curve.
TREASURY BILLS: A non-interest bearing discount security issued by the U.S. Treasury to finance the national debt. Most bills are issued to mature in three months, six months, or one year.
TREASURY BONDS: Long-term coupon-bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities of more than 10 years.
TREASURY NOTES: Medium-term coupon-bearing U.S. Treasury securities issued as direct obligations of the U.S. Government and having initial maturities from two to 10 years.
UNIFORM NET CAPITAL RULE: Securities and Exchange Commission requirement that member firms as well as nonmember broker-dealers in securities maintain a maximum ratio of indebtedness to liquid capital of 15 to I; also called net capital rule and net capital ratio. Indebtedness covers all money owed to a firm, including margin loans and commitments to purchase securities, one reason new public issues are spread among members of underwriting syndicates. Liquid capital includes cash and assets easily converted into cash.
YIELD: The rate of annual income return on an investment, expressed as a percentage. (a) INCOME YIELD is obtained by dividing the current dollar income by the current market price for the security. (b) NET YIELD or YIELD TO MATURITY is the current income yield minus any premium above par or plus any discount from par in purchase price, with the adjustment spread over the period from the date of purchase to the date of maturity of the bond.
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APPENDIXD
FORM OF CONTINUING DISCLOSURE CERTIFICATE
$189,735,000 CITY AND COUNTY OF SAN FRANCISCO
TAX-EXEMPT GENERAL OBLIGATION BONDS (EARTHQUAKE SAFETY AND EMERGENCY
RESPONSE BONDS, 2014), SERIES 2018C
$142,145,000 CITY AND COUNTY OF SAN FRANCISCO
TAXABLE GENERAL OBLIGATION BONDS (AFFORDABLE HOUSING, 2015),
SERIES 20180
$49,955,000 CITY AND COUNTY OF SAN FRANCISCO
TAX-EXEMPT GENERAL OBLIGATION BONDS (PUBLIC HEALTH AND SAFETY, 2016),
SERIES 2018E
This Continuing Disclosure Certificate (the "Disclosure Certificate") is executed and delivered by the City and County of San Francisco (the "City") in connection with the issuance of the bonds captioned above (the "Bonds"). The Bonds will be issued under the Government Code of the State and the Charter The City authorized the issuance of the 2018C Bonds by Resolution No. 313-14 and Resolution No. 111-18, adopted by the Board of Supervisors of the City on July 29, 2014 and April 24, 2018, respectively, and duly approved by the Mayor of the City August 7, 2014 and April 27, 2018, respectively (together, the "2018C Resolution"). The City authorized the issuance of the 2018D Bonds by Resolution No. 407-16 and Resolution No. 112-18, adopted by the Board of Supervisors of the City on September 20, 2016 and April 24, 2018, respectively, and duly approved by the Mayor of the City on September 29, 2016 and April 27, 2018, respectively (together, the "2018D Resolution"). The City authorized the issuance of the 2018E Bonds by Resolution No. 514-16 and Resolution No. 113-18, adopted by the Board of Supervisors of the City on December 6, 2016 and April 24, 2018, respectively, and duly approved by the Mayor of the City on December 16, 2016 and April 27, 2018, respectively (together, the "2018E Resolution," and with the 2018C Resolution and the 2018D Resolution, the "Resolutions"). The City covenants and agrees as follows:
SECTION 1. Purpose of the Disclosure Certificate. This Disclosure Certificate is being executed and delivered by the City for the benefit of the Holders and Beneficial Owners of the Bonds and in order to assist the Participating Underwriters in complying with Securities and Exchange Commission Rule 15c2-12(b)(5).
SECTION 2. Definitions. The following capitalized terms shall have the following meanings:
"Annual Report" shall mean any Annual Report provided by the City pursuant to, and as described in, Sections 3 and 4 of this Disclosure Certificate.
"Beneficial Owner" shall mean any person which: (a) has or shares the power, directly or indirectly, to make investment decisions concerning ownership of any Bonds (including persons holding Bonds through nominees, depositories or other intermediaries) including, but not limited to, the power to vote or consent with respect to any Bonds or to dispose of ownership of any Bonds; or (b) is treated as the owner of any Bonds for federal income tax purposes.
"Dissemination Agent" shall mean the City, acting in its capacity as Dissemination Agent under this Disclosure Certificate, or any successor Dissemination Agent designated in writing by the City and which has filed with the City a written acceptance of such designation.
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"Holder" shall mean either the registered owners of the Bonds, or, if the Bonds are registered in the name of The Depository Trust Company or another recognized depository, any applicable participant in such depository system
"Listed Events" shall mean any of the events listed in Section 5(a) and 5(b) of this Disclosure Certificate.
"MSRB" shall mean the Municipal Securities Rulemaking Board or any other entity designated or authorized by the Securities and Exchange Commission to receive reports pursuant to the Rule. Until otherwise designated by the MSRB or the Securities and Exchange Commission, filings with the MSRB are to be made through the Electronic Municipal Market Access (EMMA) website of the MSRB currently located at http://emma.msrb.org.
"Participating Undenvriter" shall mean any of the original underwriters or purchasers of the Bonds required to comply with the Rule in connection with offering of the Bonds.
"Rule" shall mean Rule 15c2-12(b)(5) adopted by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as the same may be amended from time to time.
SECTION 3. Provision of Annual Reports.
(a) The City shall, or shall cause the Dissemination Agent to, not later than 270 days after the end of the City's fiscal year (which is June 30), commencing with the report for the 2017-18 Fiscal Year (which is due not later than March 27, 2019), provide to the MSRB an Annual Report which is consistent with the requirements of Section 4 of this Disclosure Certificate. If the Dissemination Agent is not the City, the City shall provide the Annual Report to the Dissemination Agent not later than 15 days prior to said date. The Annual Report must be submitted in electronic format and accompanied by such identifying information as is prescribed by the MSRB, and may cross-reference other information as provided in Section 4 of this Disclosure Certificate; provided, that if the audited financial statements of the City are not available by the date required above for the filing of the Annual Report, the City shall submit unaudited financial statements and submit the audited financial statements as soon as they are available. If the City's Fiscal Year changes, it shall give notice of such change in the same manner as for a Listed Event under Section 5(e).
(b) If the City is unable to provide to the MSRB an Annual Report by the date required m subsection (a), the City shall send a notice to the MSRB in substantially the form attached as Exhibit A
(c) The Dissemination Agent shall (if the Dissemination Agent is other than the City), file a report with the City certifying the date that the Annual Report was provided to the MSRB pursuant to this Disclosure Certificate.
SECTION 4. Content of Annual Reports. The City's Annual Report shall contain or incorporate by reference the following information, as required by the Rule:
(a) the audited general purpose financial statements of the City prepared in accordance with generally accepted accounting principles applicable to govermnental entities;
(b) a summary of budgeted general fund revenues and appropriations;
(c) a summary of the assessed valuation of taxable property in the City;
(d) a summary of the advalorem property tax levy and delinquency rate;
a schedule of aggregate annual debt service on tax-supported indebtedness of the
(f) the City.
summary of outstanding and authorized but unissued tax-supported indebtedness of
Any or all of the items listed above may be set forth in a document or set of documents, or may be included by specific reference to other documents, including official statements of debt issues of the City or related public entities, which are available to the public on the MSRB website. If the document included by reference is a final official statement, it must be available from the MSRB. The City shall clearly identify each such other document so included by reference.
SECTION 5. Reporting of Significant Events.
(a) The City shall give, or cause to be given, notice of the occurrence of any of the following events numbered 1-9 with respect to the Bonds not later than ten business days after the occurrence of the event:
1. Principal and interest payment delinquencies;
2. Unscheduled draws on debt service reserves reflecting financial difficulties;
3. Unscheduled draws on credit enhancements reflecting financial difficulties;
4. Substitution of credit or liquidity providers, or their failure to perform;
5. Issuance by the Internal Revenue Service of proposed or final determination of taxability or of a Notice of Proposed Issue (IRS Form 5701 TEE) or adverse tax opinions;
6. Tender offers;
7. Defeasances;
8. Rating changes; or
9. Bankruptcy, insolvency, receivership or similar event of the obligated person.
Note: for the purposes of the event identified in subparagraph (9), the event is considered to occur when any of the following occur: the appointment of a receiver, fiscal agent or similar officer for an obligated person in a proceeding under the US. Bankruptcy Code or in any other proceeding under State or federal law in which a court or governmental authority has assumed jurisdiction over substantially all of the assets or business of the obligated person, or if such jurisdiction has been assumed by leaving the existing governmental body and officials or officers in possession but subject to the supervision and orders of a court or governmental authority, or the entry of an order confirming a plan of reorganization, arrangement or liquidation by a court or governmental authority having supervision or jurisdiction over substantially all of the assets or business of the obligated person.
(b) The City shall give, or cause to be given, notice of the occurrence of any of the following events numbered 10-16 with respect to the Bonds not later than ten business days after the occurrence of the event, if material:
10. Unless described in paragraph 5(a)(5), other material notices or determinations by the Internal Revenue Service with respect to the tax status of the Bonds or other material events affecting the tax status of the Bonds;
11. Modifications to rights of Bond holders;
12. Unscheduled or contingent Bond calls;
13. Release, substitution, or sale of property securing repayment of the Bonds;
14. Non-payment related defaults;
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15. The consummation of a merger, consolidation, or acquisition involving an obligated person or the sale of all or substantially all of the assets of the obligated person, other than in the ordinary course of business, the entry into a definitive agreement to undertake such an action or the termination of a definitive agreement relating to any such actions, other than pursuant to its terms; or
16. Appointment of a successor or additional trustee or the change of name of a trustee.
( c) The City shall give, or cause to be given, in a timely manner, notice of a failure to provide the annual financial information on or before the date specified in Section 3, as provided in Section 3(b ).
(d) m Section 5(b ), securities laws.
Whenever the City obtains knowledge of the occurrence of a Listed Event described the City shall determine if such event would be material under applicable federal
(e) If the City learns of the occurrence of a Listed Event described in Section 5(a), or determines that knowledge of a Listed Event described in Section 5(b) would be material under applicable federal securities laws, the City shall within ten business days of occurrence file a notice of such occurrence with the MSRB in electronic format, accompanied by such identifying information as is prescribed by the MSRB. Notwithstanding the foregoing, notice of the Listed Event described in subsection 5(b )(12) need not be given under this subsection any earlier than the notice (if any) of the underlying event is given to Holders of affected Bonds pursuant to the Resolutions.
SECTION 6. Termination of Reporting Obligation. The City's obligations under this Disclosure Certificate shall terminate upon the legal defeasance, prior redemption or payment in full of all of the Bonds. If such termination occurs prior to the final maturity of the Bonds, the City shall give notice of such termination in the same manner as for a Listed Event under Section 5(e).
SECTION 7. Dissemination Agent. The City may, from time to time, appoint or engage a Dissemination Agent to assist it in carrying out its obligations under this Disclosure Certificate, and may discharge any such Agent, with or without appointing a successor Dissemination Agent. The Dissemination Agent shall have only such duties as are specifically set forth in this Disclosure Certificate.
SECTION 8. Amendment; Waiver. Notwithstanding any other provision of this Disclosure Certificate, the City may amend or waive this Disclosure Certificate or any provision of this Disclosure Certificate, provided that the following conditions are satisfied:
(a) If the amendment or waiver relates to the provisions of Sections 3(a), 3(b), 4, 5(a) or 5(b ), it may only be made in connection with a change in circumstances that arises from a change in legal requirements, change in law, or change in the identity, nature or status of an obligated person with respect to the Bonds or the type of business conducted;
(b) The undertaking, as amended or taking into account such waiver, would, in the opinion of the City Attorney or nationally recognized bond counsel, have complied with the requirements of the Rule at the time of the original issuance of the Bonds, after taking into account any amendments or interpretations of the Rule, as well as any change in circumstances; and
( c) The amendment or waiver either (i) is approved by the owners of a majority m aggregate principal amount of the Bonds or (ii) does not, in the opinion of the City Attorney or nationally recognized bond counsel, materially impair the interests of the Holders.
In the event of any amendment or waiver of a provision of this Disclosure Certificate, the City shall describe such amendment in the next Annual Report, and shall include, as applicable, a narrative explanation
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of the reason for the amendment or waiver and its impact on the type ( or in the case of a change of accounting principles, on the presentation) of financial information or operating data being presented by the City. In addition, if the amendment relates to the accounting principles to be followed in preparing financial statements: (i) notice of such change shall be given in the same manner as for a Listed Event under Section 5; and (ii) the Annual Report for the year in which the change is made should present a comparison (in narrative form and also, if feasible, in quantitative form) between the financial statements as prepared on the basis of the new accounting principles and those prepared on the basis of the former accounting principles.
SECTION 9. Additional Information. Nothing in this Disclosure Certificate shall be deemed to prevent the City from disseminating any other information, using the means of dissemination set forth in this Disclosure Certificate or any other means of communication, or including any other information in any Annual Report or notice of occurrence of a Listed Event, in addition to that which is required by this Disclosure Certificate. If the City chooses to include any information in any Annual Report or notice of occurrence of a Listed Event in addition to that which is specifically required by this Disclosure Certificate, the City shall have no obligation under this Disclosure Certificate to update such information or include it in any future Annual Report or notice of occurrence of a Listed Event.
SECTION 10. Remedies. In the event of a failure of the City to comply with any provision of this Disclosure Certificate, any Participating Underwriter, Holder or Beneficial Owner of the Bonds may take such actions as may be necessary and appropriate to cause the City to comply with its obligations under this Disclosure Certificate; provided that any such action may be instituted only in a federal or state court located in the City and County of San Francisco, State of California, and that the sole remedy under this Disclosure Certificate in the event of any failure of the City to comply with this Disclosure Certificate shall be an action to compel performance.
SECTION 11. Beneficiaries. This Disclosure Certificate shall inure solely to the benefit of the City, the Dissemination Agent, the Participating Underwriters and Holders and Beneficial Owners from time to time of the Bonds, and shall create no rights in any other person or entity.
Date: May 23, 2018.
Approved as to form:
DENNIS J. HERRERA CITY ATTORNEY
By: Deputy City Attorney
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CITY AND COUNTY OF SAN FRANCISCO
Benjamin Rosenfield Controller
Name of City:
Name of Bond Issue:
Date of Issuance:
CONTINUING DISCLOSURE CERTIFICATE
EXHIBIT A
FORM OF NOTICE TO THE MUNICIPAL SECURITIES RULEMAKING BOARD
OF FAILURE TO FILE ANNUAL REPORT
CITY AND COUNTY OF SAN FRANCISCO
CITY AND COUNTY OF SAN FRANCISCO TAX-EXEMPT GENERAL OBLIGATION BONDS (EARTHQUAKE SAFETY AND EMERGENCY RESPONSE BONDS, 2014), SERIES 2018C
CITY AND COUNTY OF SAN FRANCISCO TAXABLE GENERAL OBLIGATION BONDS (AFFORDABLE HOUSING, 2015), SERIES 2018D
CITY AND COUNTY OF SAN FRANCISCO TAX-EXEMPT GENERAL OBLIGATION BONDS (PUBLIC HEALTH AND SAFETY, 2016), SERIES 2018E
May 23, 2018
NOTICE IS HEREBY G !VEN to the Municipal Securities Rulemaking Board that the City has not provided an Annual Report with respect to the above-named Bonds as required by Section 3 of the Continuing Disclosure Certificate of the City and County of San Francisco, dated May 23, 2018. The City anticipates that the Annual Report will be filed by _____ _
Dated: -------
CITY AND COUNTY OF SAN FRANCISCO
By: [to be signed only if filed] Title:
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APPENDIXE
OTC AND THE BOOK ENTRY ONLY SYSTEM
The information in numbered paragraphs 1-10 of this Appendix E, concerning The Depository Trust Company ('VTC") and DTC's book-entry system, has been furnished by DTC for use in official statements and the City takes no responsibility for the completeness or accuracy thereof The City cannot and does not give a'?)' assurances that DTC, DTC Participants or Indirect Participants will distribute to the Beneficial Owners (a) payments of interest or principal with respect to the Bonds, (b) certzficates representing ownership interest in or other confirmation or ownership interest in the Bonds, or (c) redemption or other notices sent to DTC or Cede & Co., its nominee, as the registered owner of the Bonds, or that they will so do on a timely basis, or that DTC, DTC Participants or DTC Indirect Participants will act in the manner described in this Appendix. The current ''Rules" applicable to DTC are on file with the Securities and Exchange Commission and the current ''Procedures" of DTC to be followed in dealing with DTC Participants are on file with DTC. As used in this appendix, "Securities" means the Bonds, ''Issuer" means the City, and ''Agent" means the Paying Agent.
Information Furnished by OTC Regarding its Book-Entry Only System
I. The Depository Trust Company ("DTC") will act as securities depository for the securities (the "Securities"). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC' s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for the Securities, in the aggregate principal amount of such issue, and will be deposited with DTC.
2. DTC, the world's largest securities depository, is a limited-purpose trust company organized under the New Yark Banking Law, a "banking organization" within the meaning of the New Yark Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and a "clearing agency" registered pursuant to the provisions of Section 17 A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.5 million issues of US. and non-U. S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC's participants ("Direct Participants") deposit with DTC. DTC also facilitates the posttrade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants' accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U. S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("DTCC"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both US. and non-US. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly ("Indirect Participants"). DTC has a S&P Global Ratings rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com. The information set forth on such website is not incorporated herein by reference.
3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC's records. The ownership interest of each actual purchaser of each Security ("Beneficial Owner") is in turn to be recorded on the Direct and Indirect Participants' records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be
accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued.
4. To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC' s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC's records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.
5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time.
6. Redemption notices shall be sent to DTC. If less than all of the Bonds of a maturity are being redeemed, DTC's practice is to determine by lot the amount of the interest of each Direct Participant in such issue to be redeemed.
7. Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC's :rvITvfI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).
8. Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative ofDTC. DTC's practice is to credit Direct Participants' accounts upon DTC's receipt of funds and corresponding detail information from Issuer or Agent, on payable date in accordance with their respective holdings shown on DTC's records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. ( or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.
9. DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered.
10. Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC ( or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC.
Discontinuation of Book-Entry Only System; Payment to Beneficial Owners
In the event that the book-entry system described above is no longer used with respect to the Bonds, the following provisions will govern the registration, transfer and exchange of the Bonds.
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Payment of the interest on any Bond shall be made by check mailed on the interest payment date to the owner at the owner's address at it appears on the registration books described below as of the Record Date (as defined herein).
The City Treasurer will keep or cause to be kept, at the office of the City Treasurer, or at the designated office of any registrar appointed by the City Treasurer, sufficient books for the registration and transfer of the Bonds, which shall at all times be open to inspection, and, upon presentation for such purpose, the City Treasurer shall, under such reasonable regulations as he or she may prescribe, register or transfer or cause to be registered or transferred, on said books, Bonds as hereinbefore provided.
Any Bond may, in accordance with its terms, be transferred, upon the registration books described above, by the person in whose name it is registered, in person or by the duly authorized attorney of such person, upon surrender of such Bond for cancellation, accompanied by delivery of a duly executed written instrument of transfer in a form approved by the City Treasurer.
Any Bonds may be exchanged at the office of the City Treasurer for a like aggregate principal amount of other authorized denominations of the same interest rate and maturity.
Whenever any Bond or Bonds shall be surrendered for transfer or exchange, the designated City officials shall execute and the City Treasurer shall authenticate and deliver a new Bond or Bonds of the same series, interest rate and maturity, for a like aggregate principal amount. The City Treasurer shall require the payment by any Bond owner requesting any such transfer of any tax or other governmental charge required to be paid with respect to such transfer or exchange.
No transfer or exchange of Bonds shall be required to be made by the City Treasurer during the period from the Record Date ( as defined in this Official Statement) next preceding each interest payment date to such interest payment date or after a notice of redemption shall have been mailed with respect to such Bond.
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APPENDIXF
PROPOSED FORMS OF OPINIONS OF CO-BOND COUNSEL
Board of Supervisors City and County of San Francisco San Francisco, California
[Closing Date]
Re: $189, 735,000 City and County of San Francisco Tax-Exempt General Obligation Bonds (Earthquake Safety and Emergency Response Bonds, 2014), Series 2018C
Ladies and Gentlemen:
We have acted as Co-Bond Counsel to the City and County of San Francisco (the "City") in connection with the issuance by the City of its Tax-Exempt General Obligation Bonds (Earthquake Safety and Emergency Response Bonds, 2014), Series 2018C in the aggregate principal amount of $189,735,000 (the "Bonds"). The Bonds are being issued pursuant to the Charter of the City, the Government Code of the State of California and all laws of the State of California supplemental thereto (collectively, the "Law"), Resolution No. 313-14, adopted by the Board of Supervisors of the City (the "Board of Supervisors") on July 29, 2014 and approved by the Mayor of the City on August 7, 2014 ("Resolution No. 313-14"), and Resolution No. 111-18, adopted by the Board of Supervisors on April 24, 2018 and approved by the Mayor of the City on April 27, 2018 ("Resolution No. 111-18," and together with Resolution No. 313-14, the "Resolutions").
In connection with the issuance of the Bonds, we have examined: (a) the Law; (b) certified copies of the Resolutions; ( c) an executed copy of the Certificate Awarding the Bonds and Fixing Definitive Interest Rates for the Bonds, dated May 8, 2018, by the Controller of the City; (d) an executed copy of the Certificate as to Tax Exemption, dated the date hereof, by the City, relating to the Bonds and other matters; (e) certifications of the City, Hilltop Securities Inc. and Ross Financial, co-financial advisors to the City, the original purchaser of the Bonds and others; and (f) such other documents, opinions and matters as we deemed relevant and necessary in rendering the opinions set forth herein. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof by, and the validity against, any parties, other than the City, thereto. We have assumed, without undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the documents referred to in this paragraph.
The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or whether any other matters come to our attention after the date hereof We call attention to the fact that the obligations of the City and the security provided therefor, as set forth in the Bonds and the Resolutions, may be subject to general principles of equity which permit the exercise of judicial discretion, and are subject to the provisions of applicable bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium or similar laws relating to or affecting the enforcement of creditors' rights generally, now or hereafter in effect, and to the limitations on legal remedies against charter cities and counties in the State of California. We have not undertaken any responsibility for the accuracy, completeness or fairness of the Official Statement dated May 8, 2018 or any other offering material relating to the Bonds and express no opinion relating thereto.
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Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions:
I. The Bonds constitute the valid and binding obligations of the City.
2. The Board of Supervisors has the power and is obligated to levy property taxes without limitation as to rate or amount upon all property within the City's boundaries subject to taxation by the City (except for certain personal property which is taxable at limited rates) for payment of the Bonds and the interest thereon.
3. Under existing laws, regulations, rulings and judicial decisions, interest on the Bonds (including any original issue discount properly allocable to the owner of a Bond) is excludable from gross income for federal income tax purposes and is not a specific preference item for purposes of the federal alternative minimum tax. However, for the purpose of computing the alternative minimum tax imposed on certain corporations for taxable years beginning before January I, 2018, interest on the Bonds will be included in the "adjusted current earnings" of such corporations, and such corporations are required to include in the calculation of alternative minimum taxable income 75 percent of the excess of such corporations' adjusted current earnings over their alternative minimum taxable income (determined without regard to this adjustment and prior to reduction for certain net operating losses). The opinions set forth in the sentences above are subject to the condition that the City comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excludable from gross income for federal income tax purposes. The City has covenanted to comply with such requirements. Failure to comply with certain of such requirements may cause the interest on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds.
4. Under existing laws, regulations, rulings and judicial decisions, interest on the Bonds is exempt from present State of California personal income tax.
Although we are of the opinion that interest on the Bonds is excluded from gross income for federal tax purposes, the accrual or receipt of interest on the Bonds may othen.vise affect the federal income tax liability of the recipient. The extent of these other tax consequences will depend upon the recipient's particular tax status or other items of income or deduction. We express no opinion regarding any such consequences.
Our engagement with respect to the Bonds has concluded with their issuance, and we disclaim any obligation to update, revise or supplement this opinion letter.
Very truly yours,
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Board of Supervisors City and County of San Francisco San Francisco, California
[Closing Date]
Re: $142,145,000 City and County of San Francisco Taxable General Obligation Bonds (Affordable Housing, 2015), Series 2018D
Ladies and Gentlemen:
We have acted as Co-Bond Counsel to the City and County of San Francisco (the "City") in connection with the issuance by the City of its Taxable General Obligation Bonds (Affordable Housing, 2015), Series 2018D in the aggregate principal amount of $142,145,000 (the "Bonds"). The Bonds are being issued pursuant to the Charter of the City, the Government Code of the State of California and all laws of the State of California supplemental thereto (collectively, the "Law"), Resolution No. 407-16, adopted by the Board of Supervisors of the City (the "Board of Supervisors") on September 20, 2016 and approved by the Mayor of the City on September 29, 2016 ("Resolution No. 407-16"), and Resolution No. 112-18, adopted by the Board of Supervisors on April 24, 2018, and approved by the Mayor of the City on April 27, 2018 ("Resolution No. 112-18," and together with Resolution No. 407-16, the "Resolutions").
In connection with the issuance of the Bonds, we have examined: (a) the Law; (b) certified copies of the Resolutions; ( c) an executed copy of the Certificate Awarding the Bonds and Fixing Definitive Interest Rates for the Bonds, dated May 8, 2018, by the Controller of the City; (d) certifications of the City, Hilltop Securities Inc. and Ross Financial, co-financial advisors to the City, the original purchaser of the Bonds and others; and (f) such other documents, opinions and matters as we deemed relevant and necessary in rendering the opinions set forth herein. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof by, and the validity against, any parties, other than the City, thereto. We have assumed, without undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the documents referred to in this paragraph.
The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or whether any other matters come to our attention after the date hereof We call attention to the fact that the obligations of the City and the security provided therefor, as set forth in the Bonds and the Resolutions, may be subject to general principles of equity which permit the exercise of judicial discretion, and are subject to the provisions of applicable bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium or similar laws relating to or affecting the enforcement of creditors' rights generally, now or hereafter in effect, and to the limitations on legal remedies against charter cities and counties in the State of California. We have not undertaken any responsibility for the accuracy, completeness or fairness of the Official Statement dated May 8, 2018 or any other offering material relating to the Bonds and express no opinion relating thereto.
Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions:
1. The Bonds constitute the valid and binding obligations of the City.
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2. The Board of Supervisors has the power and is obligated to levy property taxes without limitation as to rate or amount upon all property within the City's boundaries subject to taxation by the City (except for certain personal property which is taxable at limited rates) for payment of the Bonds and the interest thereon.
3. The interest on the Bonds is included in gross income for federal income tax purposes.
4. Under existing laws, regulations, rulings and judicial decisions, interest on the Bonds 1s
exempt from present State of California personal income tax.
Our engagement with respect to the Bonds has concluded with their issuance, and we disclaim any obligation to update, revise or supplement this opinion letter.
Very truly yours,
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Board of Supervisors City and County of San Francisco San Francisco, California
[Closing Date]
Re: $49,955,000 City and County of San Francisco Tax-Exempt General Obligation Bonds (Public Health and Safety, 2016), Series 2018E
Ladies and Gentlemen:
We have acted as Co-Bond Counsel to the City and County of San Francisco (the "City") in connection with the issuance by the City of its Tax-Exempt General Obligation Bonds (Public Health and Safety, 2016), Series 2018E in the aggregate principal amount of $49,955,000 (the "Bonds"). The Bonds are being issued pursuant to the Charter of the City, the Government Code of the State of California and all laws of the State of California supplemental thereto (collectively, the "Law"), Resolution No. 514-16, adopted by the Board of Supervisors of the City (the "Board of Supervisors") on December 6, 2016 and approved by the Mayor of the City on December 16, 2016 ("Resolution No. 514-16"), and Resolution No. 113-18, adopted by the Board of Supervisors on April 24, 2018 and approved by the Mayor of the City on April 27, 2018 ("Resolution No. 113-18," and together with Resolution No. 514-16, the "Resolutions").
In connection with the issuance of the Bonds, we have examined: (a) the Law; (b) certified copies of the Resolutions; ( c) an executed copy of the Certificate Awarding the Bonds and Fixing Definitive Interest Rates for the Bonds, dated May 8, 2018, by the Controller of the City; (d) an executed copy of the Certificate as to Tax Exemption, dated the date hereof, by the City, relating to the Bonds and other matters; (e) certifications of the City, Hilltop Securities Inc. and Ross Financial, co-financial advisors to the City, the original purchaser of the Bonds and others; and (f) such other documents, opinions and matters as we deemed relevant and necessary in rendering the opinions set forth herein. We have assumed the genuineness of all documents and signatures presented to us (whether as originals or as copies) and the due and legal execution and delivery thereof by, and the validity against, any parties, other than the City, thereto. We have assumed, without undertaking to verify, the accuracy of the factual matters represented, warranted or certified in the documents referred to in this paragraph.
The opinions expressed herein are based on an analysis of existing laws, regulations, rulings and court decisions and cover certain matters not directly addressed by such authorities. Such opinions may be affected by actions taken or omitted or events occurring after the date hereof. We have not undertaken to determine, or to inform any person, whether any such actions are taken or omitted or events do occur or whether any other matters come to our attention after the date hereof We call attention to the fact that the obligations of the City and the security provided therefor, as set forth in the Bonds and the Resolutions, may be subject to general principles of equity which permit the exercise of judicial discretion, and are subject to the provisions of applicable bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance, moratorium or similar laws relating to or affecting the enforcement of creditors' rights generally, now or hereafter in effect, and to the limitations on legal remedies against charter cities and counties in the State of California. We have not undertaken any responsibility for the accuracy, completeness or fairness of the Official Statement dated May 8, 2018 or any other offering material relating to the Bonds and express no opinion relating thereto.
Based on and subject to the foregoing, and in reliance thereon, as of the date hereof, we are of the following opinions:
1. The Bonds constitute the valid and binding obligations of the City.
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2. The Board of Supervisors has the power and is obligated to levy property taxes without limitation as to rate or amount upon all property within the City's boundaries subject to taxation by the City (except for certain personal property which is taxable at limited rates) for payment of the Bonds and the interest thereon.
3. Under existing laws, regulations, rulings and judicial decisions, interest on the Bonds (including any original issue discount properly allocable to the owner of a Bond) is excludable from gross income for federal income tax purposes and is not a specific preference item for purposes of the federal alternative minimum tax. However, for the purpose of computing the alternative minimum tax imposed on certain corporations for taxable years beginning before January 1, 2018, interest on the Bonds will be included in the "adjusted current earnings" of such corporations, and such corporations are required to include in the calculation of alternative minimum taxable income 75 percent of the excess of such corporations' adjusted current earnings over their alternative minimum taxable income (determined without regard to this adjustment and prior to reduction for certain net operating losses). The opinions set forth in the sentences above are subject to the condition that the City comply with all requirements of the Code that must be satisfied subsequent to the issuance of the Bonds in order that interest thereon be, or continue to be, excludable from gross income for federal income tax purposes. The City has covenanted to comply with such requirements. Failure to comply with certain of such requirements may cause the interest on the Bonds to be included in gross income for federal income tax purposes retroactive to the date of issuance of the Bonds.
4. Under existing laws, regulations, rulings and judicial decisions, interest on the Bonds is exempt from present State of California personal income tax.
Although we are of the opinion that interest on the Bonds is excluded from gross income for federal tax purposes, the accrual or receipt of interest on the Bonds may othen.vise affect the federal income tax liability of the recipient. The extent of these other tax consequences will depend upon the recipient's particular tax status or other items of income or deduction. We express no opinion regarding any such consequences.
Our engagement with respect to the Bonds has concluded with their issuance, and we disclaim any obligation to update, revise or supplement this opinion letter.
Very truly yours,
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