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County of San Mateo - Public Financial Report
COUNTY OF SAN MATEO CALIFORNIA JUAN RAIGOZA SAN MATEO COUNTY CONTROLLER FINANCIAL HIGHLIGHTS Fiscal Year Ended June 30, 2021 Foster City © County of San Mateo FY 2020-21 Financial Highlights 2 County of San Mateo, California Letter to the Residents of San Mateo County I am honored to present the County of San Mateo’s Financial Highlights report, also known as the Popular Annual Financial Report (PAFR), for fiscal year July 1, 2020 through June 30, 2021 (FY 2020-21). The goal of this report is to provide financial information in an easy-to-understand manner that is transparent to our residents, taxpayers, policy leaders and County management. It summarizes key information reported in the County’s more detailed Annual Comprehensive Financial Report (ACFR). While the number of County residents who are getting sick and being hospitalized from COVID-19 decreased this last year due to the County’s robust efforts to vaccinate its residents, the County will continue to allocate substantial re- sources, from one-time federal grants, to mitigate the negative impacts of the pandemic. Please visit our website at https://controller.smcgov.org to view or download copies of the County’s PAFR, Property Tax Highlights publication, and other reports. We welcome your comments and questions at (650) 363-4777 or controller@smcgov.org. Sincerely, Juan Raigoza San Mateo County Controller The financial information in this report is derived from the County’s Annual Comprehensive Financial Report (ACFR) for FY 2020-21. The ACFR is prepared in conformity with generally accepted accounting principles (GAAP), and provides details and disclosures required for fair presentation in conformity with GAAP. The PAFR contains only financial data of the primary government and general fund, excluding all of the County’s discretely presented component units. Additionally, information is presented in a summarized manner and certain note disclosures required by GAAP are omitted. The ACFR is available at https://controller.smcgov.org/annual-comprehensive-financial-report-acfr County of San Mateo Controller’s Office - 555 County Center, 4th Floor, Redwood City, CA 94063 https://www.facebook.com/CountyofSanMateo https://twitter.com/sanmateoco TABLE OF CONTENTS County Profile ……………………………………………….3 Statistical Information……………………………………….4 Government-Wide Financial Position…………………...5-7 Government-Wide Results of Operations……………..8-10 Tax Revenues………………………………………..……..11 Property Tax Revenues…………………………..………..12 General Fund Budget……………………………..………..13 General Fund Financial Position………………..………...14 General Fund Results of Operations……………..……....15 Award for Outstanding Achievement……………..……....16 FY 2020-21 Financial Highlights 3 County of San Mateo, California Established in 1856, San Mateo County is home to advanced technology firms and towering redwood forests. The County occupies 455 square miles and contains 20 cities on the peninsula bounded by San Francisco to the North, Santa Clara and Santa Cruz counties to the South, San Francisco Bay to the East, and the Pacific Ocean to the West. Most of the County’s population resides in the suburban corridor between the Santa Cruz Mountains and the picturesque San Francisco Bay. The coastal region of the County remains primarily rural and has some of California’s most beautiful coastline. A diversified group of industries thrive in the County including computer software, social media, bio- technology, hospitality, and transportation. The County provides a vast array of services for all residents in the County. These services include social services, public health protection, housing programs, property tax assessment, tax collection, elections, and public safety. The County also provides city-type services such as police, fire protection, sanitation, and street/road maintenance in unincorporated areas. The County is governed by a five-member Board of Supervisors elected by San Mateo County voters. From left to right and front to back: Name (District Number) Warren Slocum (4), Don Horsley (3), Dave Pine (1) Carole Groom (2), David J. Canepa (5) County Profile South San Francisco view from Sign Hill © County of San Mateo The Mission of the County government is to pro- tect and enhance the health, safety, welfare, and natural resources of the community, and to provide quality services that benefit and enrich the lives of the people of the community. The County is committed to: • The highest standards of public service • A common vision of responsiveness • The highest standards of ethical conduct • Accessible services for those in need • Treating people with respect and dignity FY 2020-21 Financial Highlights 4 County of San Mateo, California The statistics below illustrate some key economic indicators that impact the finances of the County’s residents, businesses, and the County itself. The County’s unemployment rate declined to 5% in 2021 after a sudden and significant increase in 2020 due to the COVID-19 pandemic. Home prices continue to increase, along with the properties’ assessed values, resulting in increased property taxes. With respect to the local commercial real estate market, the average lease asking rates for the office space were similar to last year, while vacancy rates have gone up. Statistical Information Pascadero - Birds on Rock © County of San Mateo FY 2020-21 Financial Highlights 5 County of San Mateo, California The Statement of Net Position presents information on the County’s assets, liabilities, deferred outflows/inflows of resources, and net position (net worth). Over time, increases or decreases in net position may serve as a useful indicator on whether the County’s financial position is improving or declining. For FY 2020-21, the County’s total net position increased by $304 million to $3 billion. The net position is classified into three categories: $918 million in net investment in capital assets, $361 million in restricted resources, and $1.7 billion in unrestricted resources. The Change in Net Position chart below provides a snapshot based on current year activities. Statement of Net Position Fiscal Year Inc./(Dec.) (In Millions) 2020-21 2019-20 Amount Current and other assets $ 3,287 $ 2,930 $ 357 Capital assets 1,296 1,221 75 Total assets 4,583 4,151 432 Deferred outflows of resources 755 533 222 Long-term liabilities 866 727 140 Net pension liability 831 582 249 Net OPEB liability 58 93 (35) Other liabilities 554 578 (24) Total liabilities 2,309 1,980 330 Deferred inflows of resources 62 41 21 Net position: Net investment in capital assets 918 858 60 Restricted 361 321 40 Unrestricted 1,688 1,484 204 Total net position $ 2,967 $ 2,663 $ 304 Assets are resources with service capacity that the County controls. Liabilities are obligations the County owes. Long-term liabilities include estimated claims, compensated absences, and debts (such as lease revenue bonds, notes payable, and other long-term obligations). Deferred outflows of resources are the consumption of net assets applicable to future reporting periods. Deferred inflows of resources are the acquisition of net assets applicable to future reporting periods. Net position reflects the County’s net worth. Net Position = (Assets + Deferred Outflows of Resources) - (Liabilities + Deferred Inflows of Resources) Net investment in capital assets represents the County’s investment in capital assets, less any related outstanding debt used to acquire those assets. These capital assets are used to provide services to residents and are not available for future spending. Restricted net position represents resources that are subject to external restrictions on their use and are available to meet the County’s ongoing obligations for programs. Unrestricted net position represents resources that are available to fund County programs for residents and debt obligations to creditors. Glossary Government-Wide Financial Position Peninsula Station Apartments San Mateo © County of San Mateo FY 2020-21 Financial Highlights 6 County of San Mateo, California The County’s Capital Assets include land and easements, infrastructure, construction in progress, structures and improvements, equipment, and software. As of June 30, 2021, the County’s total investment in capital assets increased by $75 million, or 6%, to $1,296 million, net of depreciation. The increase was mainly attributed to the following: • Increase in construction in progress included, $26 million for Parking Structure 2, $18 million for Health System Center Campus Upgrade, $17 million for Cordilleras Mental Health Facility replacement, and $11 million for County Office Building 3. • $2.5 million increase in infrastructure from the Loyola Avenue Reconstruction Project. • Acquisition of $1.3 million in land and easement. Government-Wide Financial Position The County’s Current and Other Assets, which includes cash and investments, receivables, and amounts due from other agencies, increased by $357 million, or 12%, to $3,287 million. Increases in FY 2020-21 are mainly from property tax revenues, and operating grants and contributions. However, charges for services were up $45 million or 7% for the year. The County’s Long-term Debts (a subset of total long-term liabilities) increased $138.4 million, or 24%, to $716 million as of June 30, 2021. This amount consists of $708.6 million in lease revenue bonds, $2.1 million in notes payable, and $5.7 million in other long-term obligations. The increase in long-term debts was mainly due to issuance of the 2021 Series A Lease Revenue Bonds for $170.7 million offset by normal debt repayments of $32.6 million. New Parking Structure 2 © County of San Mateo Construction of County Center Parking Structure 2 © County of San Mateo FY 2020-21 Financial Highlights 7 County of San Mateo, California Pension Plan FY 2020-21 FY 2019-20 FY 2018-19 Net Pension Liability $831 million $582 million $461.5 million Discount Rate 6.67% 6.67% 6.92% County’s Contribution $254.1 million $188.6 million $236 million Funded Ratio as of June 30 84.5% 88.5% 90.0% Government-Wide Financial Position Net pension liability is the difference between the total pension liability and plan assets at fair value (fiduciary net position). Net OPEB Liability is the unfunded liability, which is the difference between the total OPEB liability and plan assets at fair value (fiduciary net position). Discount rate is the investment rate of return used to measure the total pension or OPEB liability. Funded ratio is the percentage of the plan assets currently available to pay the actuarial accrued liabilities. Glossary As of June 30, 2021, the County’s net pension liability was $831 million, up from prior year’s $582 million. Using a discount rate of 6.67%, the plan’s funded ratio was 84.5% as of June 30, 2021, down from prior year’s 88.5%. Contributions from the County to the pension plan totaled $254.1 million in FY 2020-21. The County administers an Other Post Employment Benefits (OPEB) Retiree Health Plan to members who retire and are eligible to receive a pension from the County. For the fiscal year ended June 30, 2021, the County contributed $28.7 million to the Retiree Health Plan. Using a discount rate of 6.25%, the plan’s funded ratio was 85.5% as of June 30, 2021, up from prior year’s 77.5%. The County’s net OPEB liability was $58.4 million as of June 30, 2021, down from prior year’s $93.3 million. OPEB Plan FY 2020-21 FY 2019-20 FY 2018-19 Net OPEB Liability $58.4 million $93.3 million $100.1 million Discount Rate 6.25% 6.50% 6.50% County’s Contribution $28.7 million $28.2 million $29.2 million Funded Ratio as of June 30 85.5% 77.5% 74.6% College of San Mateo © County of San Mateo Maple Street Correctional Center © County of San Mateo Crystal Springs Reservoir © County of San Mateo FY 2020-21 Financial Highlights 8 County of San Mateo, California The Statement of Activities reports information on the County’s revenues and expenses during the fiscal year and changes in net position. Significant changes to revenues and expenses are discussed on Page 9. Statement of Activities and Change in Net Position (In Millions) Fiscal Year 2020-21 2019-20 2018-19 Population in San Mateo County 765,245 773,244 774,845 Per capita general revenue (in absolute dollars) $ 1,245 $ 1,264 $ 1,176 Per capita revenue (in absolute dollars) $ 3,220 $ 2,898 $ 2,708 Per capita expense (in absolute dollars) $ (2,845) $ (2,491) $ (2,202) Per capita net revenue (in absolute dollars) $ 375 $ 407 $ 506 Revenues are monies the County receives from a variety of sources. Program revenues, primarily from State and Federal sources, are derived directly from County programs and can be broken down into the following categories: • Charges for services paid by the recipients of goods and services offered by the County’s various programs. • Grants and contributions are restricted in use to meet the operational or capital requirements of County programs. General revenues are non-program revenues that include property taxes, sales and use tax, and other taxes. Expenses are monies spent to provide services to the County’s residents. Governmental activities are normally funded by taxes and intergovernmental revenues and cover various services including: • General government includes costs incurred by the County’s administrative offices. • Public protection safeguards the public through law enforcement, custody of criminals, and re-socialization of offenders. • Public ways and facilities maintain County roads, bridges, and other infrastructure. • Health and sanitation builds a healthy community and provides health care to vulnerable populations. • Public assistance helps individuals and families to achieve economic self- sufficiency, promotes community and family strength, and ensures child safety and well-being. • Recreation provides residents with access to parks and recreational facilities. • Business-type activities include those services provided by San Mateo Medical Center, Airports, Coyote Point Marina, and Housing Authority. These activities rely heavily on fees for services. Glossary Government-Wide Results of Operations Revenues: Program Revenues Charges for services $ 716 $ 671 $ 588 Operating grants and contributions 792 589 594 Capital grants and contributions 3 4 5 Total program revenues 1,511 1,264 1,187 General Revenues Taxes: Property taxes 782 691 649 Property transfer taxes 14 10 11 Sales and use taxes 108 119 127 Transient occupancy taxes 3 2 2 Aircraft taxes 1 1 1 Vehicle rental business license tax 2 11 12 Subtotal - taxes 910 834 802 Unrestricted interest and investment earnings 4 81 61 Miscellaneous 39 62 48 Total general revenues 953 977 911 Total revenues 2,464 2,241 2,098 Expenses: General government 398 239 150 Public protection 485 478 424 Public ways and facilities 27 28 24 Health and sanitation 409 386 376 Public assistance 284 231 255 Recreation 21 23 17 Interest on long-term liabilities 24 23 22 San Mateo Medical Center 400 404 336 Airports 5 5 5 Coyote Point Marina 1 1 1 Housing Authority 123 108 96 Total expenses 2,177 1,926 1,706 Excess before special item 288 315 392 Special item - (39) - Change in net position 288 276 392 Net position, beginning, as previously stated 2,663 2,387 1,995 Prior period adjustment 16 - - Net position, beginning, as restated 2,679 2,387 1,995 Net position, end of the year $ 2,967 $ 2,663 $ 2,387 Breakdown of net position, end of the year Net investments in capital assets $ 919 $ 858 $ 787 Restricted 361 321 325 Unrestricted 1,687 1,484 1,275 Net position, end of the year $ 2,967 $ 2,663 $ 2,387 FY 2020-21 Financial Highlights 9 County of San Mateo, California Revenues Total revenues increased by $224 million, or 10%, to $2.46 billion, mainly due to the following: • Charges for services increased by $45 million, or 7%, due to increases to various charges. • Operating grants and contributions increased by $203 million, or 35%, mainly due to one-time federal grants to address COVID-19 pandemic. • Property tax revenues increased by $91 million, or 13%, mainly due to growth in assessed values and ERAF distributions. • Unrestricted interest and investment earnings decreased by $76 million, or 95%, due to less robust earnings on investments in current year compared to prior year. Government-Wide Results of Operations *Other includes interest on long-term liabilities $24M, public ways and facilities $27M, recreation $21M, airports $5M, and Coyote Marina Point $1M. Expenses Total expenses increased by $252 million, or 13%, to $2.18 billion, mainly due to the following: • General Government increased by $159 million, or 67%, mainly due to expenses related to responding to COVID-19 pandemic. • Public Assistance expenses increased by $53 million, or 23%, due to operating costs for CalFresh, CalWorks, Child Welfare Digital Services, Homeless Emergency Aid Program, and Housing Assistance Payments program. • Health and Sanitation increased by $23 million, or 6%, mainly due to increase in expenditures associated with Assembly Bill 85, Redirection of Health Realignment, and settlement payments. • Public Protection expenses increased by $8 million, or 2%, due to increase in salary and benefits. M = million M = million South of Pacifica © County of San Mateo FY 2020-21 Financial Highlights 10 County of San Mateo, California For the past five fiscal years revenues from the County’s Governmental Activities were greater than expenses. A majority of the County’s Business-type Activities are related to the San Mateo Medical Center. In each of the past five fiscal years, total revenues from the County’s business-type activities were less than related expenses. The deficits, mainly resulting from mandated healthcare services provided to uninsured and indigent residents, were absorbed by General Fund (governmental activities) subsidies to the San Mateo Medical Center. Government-Wide Results of Operations San Mateo County Event Center © County of San Mateo FY 2020-21 Financial Highlights 11 County of San Mateo, California For the fiscal year ended June 30, 2021, tax revenues grew to $910 million, an increase of $76 million, or 9.1%, compared to the prior fiscal year, mainly due to the following: • $91 million increase in property tax revenues mainly due to growth in assessed values and ERAF distributions. • $11 million decrease in sales and use taxes due to impacts of COVID-19 pandemic. • $8 million decrease in Vehicle Rental Business License Taxes. * includes Measure K taxes Tax Revenues M = million Measure K is a voter-approved countywide half-cent sales tax to support County services. In FY 2020-21 Measure K generated $89 million in sales tax revenues, while $70 million was spent on Measure K funded initiatives. Significant Measure K expenditures for FY 2020-21 included: Affordable Housing ($14.9 million), Elder Youth and Education Initiatives ($10.1 million), County Fire Engine Replacement Fund ($1.4 million), Parks projects ($5.8 million), Dependent Adult Protection Program ($2.1 million), Technology Infrastructure and Open Data ($4.1 million), and COVID- 19 Immigrant Relief Fund ($4.0 million). 636 El Camino Real, SSF Affordable Housing © County of San Mateo FY 2020-21 Financial Highlights 12 County of San Mateo, California Countywide property taxes are levied each fiscal year on taxable real property (secured) and personal property (unsecured) in the County. Property tax revenues make up the County’s largest source of General Fund discretionary revenues. The health of the local real estate market and associated changes in property assessed values are key indicators of the financial outlook for the County. The FY 2020-21 countywide assessed values increased $16.8 billion, or 7%, to $257.3 billion, as of lien date of January 1, 2020, compared to the prior year. This increase translated to a countywide increase of $168 million to the 1% general property tax, shared by local taxing agencies (schools, cities, special districts, and the County). The FY 2021-22 countywide assessed property values increased 4%, or $10.8 billion, to $268.1 billion compared to prior year. FY 2021-22 property assessed values are at a new historic high for the eleventh consecutive year. Total property values for FY 2022-23, with a lien date of January 1, 2022, are expected to grow but perhaps not by as much as in recent prior years. Property Tax Revenues County's Top Ten Taxpayers in FY 2020-21 (In Millions) Property % of Total Taxes Levied* Taxes Levied Genentech Inc $ 34 1.06% Pacific Gas & Electric Co. 31 0.96% Gilead Sciences Inc. 29 0.91% United Airlines Inc. 24 0.74% Hibiscus Properties LLC 23 0.71% Google Inc 17 0.53% Facebook Inc 14 0.44% Slough BTC LLC 12 0.39% ARE San Francisco 12 0.38% HCP Oyster Point III LLC 9 0.27% Total $ 205 6.39% * Based on the general tax and debt service on secured, unsecured, unitary, and railroad properties as of June 30, 2021. The Cove at Oyster Point, South San Francisco. FY 2020-21 Financial Highlights 13 County of San Mateo, California The annual General Fund Budget is the foundation for the County’s financial planning and control of expenditures. Budget expenditures are enacted into law by the Board of Supervisors through the passage of an Appropriation Ordinance. The ordinance sets limits on expenditures, which cannot be changed except by amendments to the budget. General Fund Expenditures - Budgetary Comparison Budget vs. Actual by Department/Budget Unit FY 2020-21 Budget Actual** % of Total Departments/Budget Units (In Millions) Actual Health System* $ 480 $ 449 26.2% Sheriff's Office 294 258 15.1% Human Services Agency 276 200 11.7% Probation 114 79 4.6% District Attorney 46 37 2.2% Assessor-Clerk-Recorder-Elections 37 36 2.1% Aging & Adult Services 40 32 1.9% Public Works 47 27 1.6% Private Defender Program 20 20 1.2% Housing 88 20 1.2% County Support Courts 20 19 1.1% Parks Department 25 19 1.1% Information Services 44 19 1.1% County Managers Office-Clerk of the Board 29 18 1.1% Public Safety Communications 22 18 1.1% Human Resources 21 16 0.9% Controller 17 13 0.8% Fire Protection 20 14 0.8% County Counsel 20 13 0.8% Child Support Services 11 11 0.6% Planning and Building 17 13 0.8% Tax Collector-Treasurer 15 8 0.5% Office of Sustainability 16 8 0.5% Agriculture Weights and Measures 8 7 0.4% Board of Supervisors 5 5 0.3% Special Services 5 4 0.2% Coroner 4 4 0.2% In Home Support Services 4 4 0.2% Revenue Services 1 2 0.1% Message Switch 1 0 0.0% Non-Departmental Services 749 336 19.6% Contingencies (Non-departmental) 65 - 0.0% Total $ 2,561 $ 1,709 100.0% * Excludes San Mateo Medical Center, business-type activities. ** On a budgetary basis. General Fund Budget Other financing uses are transfers of financial resources from one fund to another. Intrafund transfers are used by the County to show reimbursements between operations within the same fund. Contingencies are budgeted amounts that may be used by the County to address one-time emergencies and economic uncertainties. Glossary * Represent reimbursements between operations within the same fund. San Pedro Valley, Montara © County of San Mateo FY 2020-21 Financial Highlights 14 County of San Mateo, California The General Fund is the County’s primary operating fund. The activities funded by the General Fund include general government, public protection, health and sanitation, public assistance, and recreation services. For FY 2020-21, fund balance increased by a total of $36 million to $1.45 billion. The fund balance amount provides information about the County’s net resources available for spending and financing requirements. The General Fund's financial health is measured by comparing total unrestricted fund balance and total fund balance to the General Fund's total functional expenditures (Total General Fund expenditures less Other Financing Uses). • The total unrestricted (assigned and unassigned) fund balance amount of $1.25 billion approximates 84% of the total functional expenditures of $1.48 billion. • The total fund balance amount of $1.45 billion approximates 98% of the total functional expenditures of $1.48 billion. The General Fund had a total fund balance of $1.45 billion consisting of the following: • $51 million is nonspendable and includes items not expected to be converted to cash such as inventories, prepaid items, and long-term interfund advances and receivables. • $149 million is restricted and can only be spent for specific purposes as stipulated by external resource providers. • $6 million is assigned to be used by the County for specific purposes. • $1.24 billion is unassigned and can be used for any purpose. General Fund Financial Position Pigeon Point Lighthouse © County of San Mateo General Fund - Fund Balance by Fiscal Year General Fund - Fund Balance as of June 30, 2021 In Millions FY 2020-21 Financial Highlights 15 County of San Mateo, California The General Fund is the County’s largest source of discretionary revenue and is presented in the governmental fund financial statements on a modified-accrual basis. This means the General Fund operations included revenues received during the fiscal year, revenues received within 60 days after the fiscal year-end, and expenditures incurred during the fiscal year. General Fund Revenues (In Millions) FY 2020-21 FY 2019-20 Inc.(Dec.) Source Amount % of Total Amount % of Total Amount Taxes $ 717 42.3% $ 766 47.7% $ (49) Licenses and permits 8 0.5% 7 0.4% 1 Intergovernmental 722 42.6% 549 34.2% 173 Charges for services 194 11.5% 157 9.8% 37 Fines, forfeitures, and penalties 7 0.4% 8 0.5% (1) Rents and concessions 2 0.1% 2 0.1% - Investment income - 0% 57 3.6% (57) Other 32 1.9% 40 2.5% (8) Sub-Total 1,682 1,586 96 Other financing sources 12 0.7% 19 1.2% 6 Total Revenues $ 1,694 100.0% $ 1,605 100.0% $ 102 General Fund Expenditures (In Millions) FY 2020-21 FY 2019-20 Inc.(Dec.) Source Amount % of Total Amount % of Total Amount General government $ 396 23.7% $ 201 14.1% $ 195 Public protection 443 26.5% 431 30.3% 12 Health and sanitation 370 22.1% 350 24.6% 20 Public assistance 248 14.8% 196 13.8% 52 Recreation 19 1.1% 20 1.4% (1) Capital outlay 9 0.5% 23 1.6% (14) Functional Expenditures 1,485 1,221 264 Other financing uses 189 11.3% 202 14.2% (13) Total Expenditures* $ 1,674 100.0% $ 1,423 100.0% $ 251 * Differences between total general fund expenditures and total actual (budgetary basis) expenditures are due mainly to reporting on budgetary basis versus the current financial resources measurement focus. General Fund Results of Operations Poplar Creek Golf Course at Coyote Point © County of San Mateo FY 2020-21 Financial Highlights 16 County of San Mateo, California Award for Outstanding Achievement The Government Finance Officers Association of the United States and Canada (GFOA) has given an Award for Outstanding Achievement in Pop- ular Annual Financial Reporting to San Mateo County for its Financial Highlights publication for the fiscal year ended June 30, 2020. This Award is a prestigious national award recognizing con- formance with the highest standards for prepara- tion of state and local government popular re- ports. In order to receive this award, a government unit must publish a Popular Annual Financial Report, with contents that conform to program standards of creativity, presentation, understandability and reader appeal. An Award for Outstanding Achievement in Popu- lar Annual Financial Reporting is valid for a period of one year. San Mateo County has received this award for the nineteenth consecutive year. We believe this report, for fiscal year ended June 30, 2021, continues to conform to the Popular Annual Financial Reporting requirements, and are submitting it to the GFOA for consideration for this award. View of San Francisco From Belmont Hills © County of San Mateo