Analysis of expenditures and expenses.

(1) Do any components of expenditures and, at the government-wide level, expenses exhibit sharp growth?

(2) How flexible are expenditures? That is, are there large percentages of relatively nondiscretionary expenditures, such as for interest and public safety?

(3) How does the growth pattern of operating expenditures and expenses over the past 10 years compare with that of revenues?

Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the Fiscal Year Ended June 30, 2021 Amounts reported for governmental activities in the statement of activities are different because: Net change in fund balances - total governmental funds $(16,875,558) Governmental funds report capital outlays as expenditures. However, in the statement of a ctivities, the cost of these assets is allocated over their estimated useful lives and reported as depreciation expense. This is the a mount by which depreciation expense ($18,540,480) exceeded capital outlay, ($15,847,696) that was capitalized in the curre int period. The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins, and donations) is to decrease net position. Loss on sale of assets (1,682,878) Bond and other debt proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the Statement of Net Position. Repayment of bond and other debt principal is an expenditure in the governmental funds, but repayment reduces long-term liabilities in the Statement of Net Position. Also, governmental funds report the effect of premiums, discounts, and similaritems when debt is first issued, whereas these a mounts are deferred and amortized in the statement of activities. Repayments: Bond deferred charges and similaritems are recorded as expenditures in governmental funds when debt is first issued, whereas these payments are deferred and amortized in the statement of activities. This a mount is the net offset of the difference. (1,113,394) Interest payable related to debt services or long-term liabilities. This is the net change in interest payable expense for the current period. Pension expenditures reported in the governmental funds includes the annual required contributions. In the Statement of Activities, pension expense includes the change in the net pension liability, and related changes in pension amounts for deferred outflows of resources and deferred inflows of resources. 58,871 OPEB expenditures reported in the governmental funds includes payment of premiums for the current year. In the Statement of Activities, OPEB expense includes the change in the OPEB liability and (2,449,502) OPEB related deferred outflows of resources and deferred inflows of resources. (6,581,638) The government-wide financial statements are designed to provide readers with a broad overview of the City of Pasadena's finances, in a manner similar to a private-sector business. The statement of net position presents information on all of the City's assets and deferred outflows of resources and liabilies and deferred inflows of resources, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City of The statement of activities presents the most recent fiscal year changes in the City's net position. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods, e.g., uncollected taxes and earned but unused vacation leave. Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City of Pasadena include general government, public safety, transportation, utility, sanitation, health, culture and leisure, and community development. The business-type activities of the City of Pasadena include electric, water, refuse, parking, and telecommunication operations. The basic government-wide financial statements can be found on pages 2023 of this report. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objective. The City of Pasadena, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental Funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental funds financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Both the governmental funds balance sheet and the governmental funds statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City of Pasadena maintains thirty-one individual governmental funds. Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures, and changes in fund balances for the General Fund, the Project Management Capital Project Fund, the General Debt Service Fund, and the Housing Successor Fund, all four of which are considered to be major funds. Data from the other twenty-seven governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report. The City of Pasadena adopts an annual appropriated budget for its General Fund and Special Revenue Funds. Budgetary comparison statements have been provided for the General Fund and Special Revenue Funds to demonstrate compliance with this budget. The basic governmental fund financial statements can be found on pages 2427 of this report. Proprietary Funds The City of Pasadena maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its electric, water, refuse, parking, and telecommunication operations. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City's various functions. The City of Pasadena uses internal service funds to account for its computing and communication, building maintenance, fleet maintenance, fleet replacement, benefits, workers' compensation, general liability, and 311 call center services. Because each of these services predominantly benefits governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the Light and Power, Water, and Off-Street service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements elsewhere in this report. Data from the other two proprietary funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major proprietary funds is provided in the form of combining statements elsewhere in this report. The basic proprietary fund financial statements can be found on pages 2835 of this report. Fiduciary Funds Fiduciary funds are used to account for resources held for the benefits of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statement, because the resources of those funds are not available to support the City of Pasadena's own programs. The activities of the Successor Agency to the Pasadena Community Development Commission are also reported with the City's fiduciary funds as a private purpose trust fund. Individual fund data for each of these fiduciary funds is provided in the form of combining statements elsewhere in this report. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund financial statements can be found on pages 3637 of this report. Notes to the Basic Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the governmentwide and fund financial statements. The notes to the basic financial statements can be found on pages 43110 of this report. Other Information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information (RSI) concerning budgetary practices and budget-to-actual comparisons for the general fund and the major special revenue funds. Additional RSI includes pension and Other Postemployment Benefits (OPEB) information on net pension and OPEB liabilities and plan contributions. RSI can be found on pages 113-129 of this report. The combining statements referred to earlier in connection with non-major governmental funds and internal service funds are presented immediately following the required supplementary information. Combining and individual fund statements and schedules can be found on pages 132209 of this report. FINANCIAL HIGHLIGHTS New Significant Accounting Standards Implemented In FY 2021, the City adopted one new statement of financial accounting standards issued by the Government Accounting Standards Board (GASB) that relates to various accounting matters, Statement No. 84, Fiduciary Activities (GASB 84). GASB 84 requires a review and identification of all current activities recorded in the fiduciary funds to determine if they meet the revised criteria of a fiduciary activity. A fiduciary activity generally involves funds held by the City in trust or on behalf of a third party where the City does not have administrative involvement in the use of those funds. GASB 84 requires all Custodial Funds present a Statement of Changes in Fiduciary Net Position. Funds formerly classified as agency type funds are now reported under the new custodial fund classification. As agency type funds, amounts now classified as Net Position Held in Custody had been reported as payables, deposits, or other liabilities. The Employment Benefit OPEB Trust Fund previously was included in the City of Pasadena reporting entity as an Employee Benefit Trust Fund. GASB 84 clarified that this program does not meet the requirements to include within the City's financial statements, and so it is henceforth excluded from presentation as a fund in this Annual Comprehensive Financial Report. Restatement of Beginning Net Position and Fund Balances As disclosed in Note 22 on page 110, to implement GASB 84, the beginning net positions of the Custodial Funds were restated and decreased to a net deficit by $1,281,967. As noted earlier, net position may serve over time as a useful indicator of a government's financial position. In the case of the City of Pasadena, assets and deferred outflows exceeded liabilities and deferred inflows by $1,014 million at the close of the most recent fiscal year. $955 million of the City of Pasadena's net position reflect its investment in capital assets (e.g., land, buildings, machinery, and equipment), less any related outstanding debts used to acquire those assets. The City of Pasadena uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City of Pasadena's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. City of Pasadena's Net Position (in millions) A portion of the City of Pasadena's net position, $208.8 million or 20.6 percent represents resources that are subject to external restrictions on how they may be used. The remaining balance is a deficit in unrestricted net position of, 149.6 liabilities which exceed assets on hand, and is related to implementation of GASB 68 and GASB 75 regarding Pension Plan and OPEB reporting. At the end of FY 2021, the City of Pasadena is able to report positive balances in all categories of net position for the government as a whole except for unrestricted net position. During FY 2021, the primary government's net position decreased by \$7.6 million. Approximately \$30.1 million of this is a decrease in the City's governmental activities, and $22.5 million of this increase is in the City business-type activities. The decrease in the governmental activities reflects increases in spending, offset by decreases in revenues. The increase in business-type activities is the continuance of positive trend in increased revenues and this year's modest increases in expenses. - Property taxes increased by $5.9 million due to appreciation of property value in Pasadena. - Sales taxes increased by $4.8 million. Regular sales tax increased by $2.9 million and Measure I sales tax increased by $1.9 million. - Charges for services decreased by $18.7 million including changes in the following categories: - \$7.1 million decrease in rental income as a result of the ground lease revenue received as part of the Concord property sale in FY 2020 ; - \$2.7 decrease in million in billable services as a result of a reduction in outside events; - \$2.6 decrease parking citations as a result of temporary modifications to the City's parking policies due to the pandemic; - \$1 million decrease in traffic reduction impact fees; and - \$0.9 million decrease in emergency medical aid response (ground ambulance service) revenues. - Capital grants and contributions decreased by $27.3 million. The change was attributable to the FY 2020 sale of Concord property. The City received the property as a contribution, and subsequently sold it in May 2020 . The transaction resulted in \$27.5 million of developer contribution upon execution of a quitclaim deed turning improvements over to the City just prior to the sale. - Other taxes decreased by $5.3 million mainly due to the following categories: - \$6.8 million decrease in transient occupancy taxes, as the hospitality industry was heavily impacted by the pandemic; - \$2.0 million decrease in construction taxes due to construction project being negatively impacted by the pandemic; - The decrease is offset by the $4.1 million increase in underground utility surtax in. The City resumed collection of the surtax in FY 2021 after having been discontinued in FY 2020; - Other revenues decreased by $0.1 million including changes in the following categories: o \$5.7 million decrease in investment earnings; - \$3.0 million increase in intergovernmental revenues; and o \$1.6 million increase in motor vehicle in-lieu revenues. - Investment earnings decreased by $5.7 million due to unfavorable market conditions caused by the pandemic on overall investment instruments. - Miscellaneous revenue decreased by \$4.7 million due to a decrease of \$2.3 million in gain on sale of capital assets in relation to the Concord sale in the prior fiscal year. he expense components of governmental activities increased by $5.9 million or 1.48 percent. The changes in expenses were: eneral government increased by $5.4 million, other expenses decreased by $1.7 million, public safety decreased by $4.6 illion, community development decreased by $5.4 million, and transportation decreased by $6.8 million. The other tegories have a net increase of $8.1 million. - General government expenses increased by $5.4 million or 8.0 percent. There was $0.6 million more in sales taxes that the City passed to Pasadena Unified School District (PUSD) according to Measure J, a \$0.7 million decrease in general liability insurance and benefit expenses, and \$2.1 million more in other general expenses due to the pandemic. Other expenses decreased by $1.7 million, including $5.9 million decrease in utility expenses and $2.1 million increase in health expenses. The City suspended collection of the surtax in April 2020 and provided a direct rebate of the surtax paid by each customer of Pasadena Water and Power during the 24 months prior to April 2020. Therefore, the net expense due to light and power surtax rebate was $5.9 million in FY2021. The $2.1 million increase in health expenses was attributable to activities related to COVID-19 response, including response management, threat mitigation and enforcement. Public safety expenses decreased by $4.6 million or 3.0 percent mainly due to: $5.2 million decrease in the City's GASB 68 pension expenses, \$2.4 million increase in City's GASB 75 OPEB expenses, and \$1.1 million decrease in general liability insurance and benefit expenses for both the police and fire departments. Community development expenses increased by $5.4 million or 10.3 percent mainly due to: $0.7 million decrease in the City's GASB 68 pension expenses, \$0.6 million increase in City's GASB 75 OPEB expenses, and $0.1 million decrease in general liability insurance and benefit expenses. Transportation expenses decreased by $6.8 million, mainly due to: $1.0 million decrease in the City's GASB 68 pension expenses, \$0.7 million increase in City's GASB 75 OPEB expenses, and \$0.6 million decrease in general liability insurance and benefit expenses. Program Revenues and Expenses - Governmental Activities he City of Pasadena's investment in capital assets for its governmental and business-type activities as of June 30 , 2021 Imounts to $1,308 million, net of accumulated depreciation. This investment in capital assets includes land, buildings and ystems, improvements, machinery and equipment, park facilities, roads, highways, and bridges. The net increase in the City f Pasadena's investment in capital assets for the current fiscal year was $18 million, a $5 million decrease for governmental ictivities and \$23 million increase for business-type activities. Major capital asset related events during FY 2021 included the following: - A variety of street maintenance and construction, technology, traffic control and parks and landscape projects continue city-wide. \$29.7 million were spent on capital projects in governmental activities. Costs for projects not completed are shown as construction in progress. The amount of construction in progress as of June 30,2021 is $22.5 million for the governmental activities, and $82.5 million for the business-type activities. - For the technology upgrade projects, the City spent $1.2 million towards new and replacement computer equipment, nearly $1 million for enterprise building security management, $0.57 million toward new radio equipment, and $0.57 million for jail access control. - Improvement of city-owned facilities continues. The City spent $5 million for parks and landscape projects, $5 million for preventive maintenance and repairs for City buildings and facilities, $8.4 million for improvements to streets, sidewalks, and bridges, and \$2.3 million for improvements to sewers and stormdrains. The City spent approximately \$4 million for traffic safety and control programs and improvements. The City completed upgrade and replacement of parking access and revenue control equipment in eight City owned parking garages at a total cost of $3.3 million. - As of June 30, 2021, the business-type activities net assets amounted to $800 million, an increase of $23 million over the prior year. - Water and Power utility plant net assets amounted to $751 million, an increase of $23.2 million. During the fiscal year, the City spent $86.8 million on various water and power projects and moved $51 million into completed projects. - Some of the major power projects are: GT-1 \& GT-2 Upgrades and Replacement for \$16.1 million, Customer Information System for \$5 million, new 34.5kV Circuit at Oak Knoll for \$3.6 million, and Installation of Low \& High Voltage Electrical Services for $6.1 million. - Some of the major water projects are for distribution mains for $3.4 million and the customer information system for $2.7 million. City of Pasadena's Capital Assets (Net of Depreciation, in millions) The basic financial statements of the City of Pasadena, California (City) have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental entities. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The more significant accounting policies of the City are described below. (a) Reporting Entity The City was incorporated on June 19, 1887 as a Charter City, which operates under a Council-City Manager form of government. The City is a municipal corporation governed by an elected mayor and seven council members. As required by GAAP, these financial statements present the City and its component units, entities for which the City is considered to be financially accountable. The City is considered to be financially accountable for an organization if the City appoints a voting majority of that organization's governing body and the City is able to impose its will on that organization or there is a potential for that organization to provide specific financial benefits to or impose specific financial burdens on the City. The City is also considered to be financially accountable if that organization is fiscally dependent (i.e., it is unable to adopt its budget, levy taxes, set rates or charges, or issue bonded debt without approval from the City). In certain cases, other organizations are included as component units if the nature and significance of their relationship with the City is such that their exclusion would cause the City's financial statements to be misleading or incomplete. The two methods of reporting component unit data in the basic financial statements are blended and discrete presentation. Blending is limited exclusively to when the board of the component unit is substantively the same as that of the City or if the component unit serves the City exclusively, or almost exclusively. Blended component units, although legally separate entities, are in substance part of the City's operations; data from these units are combined with data of the City. Component units that do not meet the criteria for blending are included within financial statements as discrete presentations. Discretely presented component units are reported in a separate column in the government-wide financial statements to emphasize they are legally separate from the government. Similar to the City, each blended and discretely presented component unit has a June 30th year-end. Jointly governed organizations provide goods or services to the citizenry of two or more governments, but do not have an ongoing financial interest or responsibility by the participating governments. Pasadena Parking Authority (The Authority) The Authority was created by Resolution No. 1399, dated June 6, 1972 pursuant to the provisions of the Parking Law of 1949 (California Streets and Highways Code, Sections 32651 and $32661.1 ). The City Council constitutes the governing board of the Authority pursuant to the aforementioned Resolution. The primary purpose of the Authority is to establish parking facilities for motor vehicles within the City, to furnish motor vehicle parking spaces, and to care for such vehicles within any parking facility or space owned, controlled or operated by the Authority. The City has operational responsibility for the Authority. The Authority is reported as an Enterprise Fund and does not release a separate financial report. Pasadena Civic Improvement Corporation (PCIC) PCIC was created on August 9,1985 pursuant to the Non-profit Public Benefit Corporation Law of the State of California (Title 1, Division 2, Part 2 of the California Corporations Code). At the request of the City, PCIC was organized for the specific and primary purpose of providing financial assistance to the City by acquiring or constructing property and appurtenances for and on behalf of the City. This is accomplished through the issuance of such financing instruments as certificates of participation. The PCIC is a non-profit organization with three directors: Chief Executive Officer, Secretary/Financial Officer, and Assistant Executive Officer/Assistant Secretary. PCIC's financial data and transactions are blended with the Debt Service and Capital Projects fund types. The PCIC does not release a separate financial report. (b) Basis of Accounting and Measurement Focus The basic financial statements of the City are composed of the following: - Government-wide financial statements - Fund financial statements - Notes to the basic financial statements Government-wide Financial Statements Government-wide financial statements display information about the reporting government as a whole, except for its fiduciary activities. These statements include separate columns for the governmental and business-type activities of the primary government (including its blended component units), as well as its discretely presented component units. Eliminations have been made in the statement of activities so that certain allocated expenses are recorded only once (by function to which they were allocated). However, general governmental expenses have not been allocated as indirect expenses to the various functions of the City. Government-wide financial statements are presented using the economic resources measurement focus and the accrual basis of accounting. Under the economic resources measurement focus, all economic resources and obligations of the reporting government (both current and long-term) are reported in the government-wide financial statements. Basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. Under the accrual basis of accounting, revenues, expenses, gains, losses, assets, and liabilities are recognized in accordance with various GASB Statements. Program revenues include (1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function and (2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function. Program revenues are netted with program expenses in the statement of activities to present the net cost of each program. Taxes and other items not included among program revenues are reported instead as general revenues. Amounts paid to acquire capital assets are capitalized as assets in the government-wide financial statements, rather than reported as expenditures. Proceeds of long-term debt are recorded as a liability in the governmentwide financial statements, rather than as another financing source. Amounts paid to reduce long-term indebtedness of the City are reported as a reduction of the related liability, rather than as expenditures. Fund Financial Statements The underlying accounting system of the City is organized and operated on the basis of separate funds, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenditures or expenses, as appropriate. Governmental resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. Fund financial statements for the City are governmental, proprietary, and fiduciary funds and they are presented after the government-wide financial statements. These statements display information about major funds individually and non-major funds in the aggregate for governmental and enterprise funds. Fiduciary statements include financial information for fiduciary funds and similar component units. Fiduciary funds of the City primarily represent assets held by the City in a custodial capacity for other individuals or organizations. Governmental Funds In the fund financial statements, governmental funds are presented using the modified-accrual basis of accounting. Their revenues are recognized when they become measurable and available as net current assets. Measurable means that the amounts can be estimated, or otherwise determined. Available means that the amounts were collected during the reporting period or soon enough thereafter to be available to finance the expenditures accrued for the reporting period. The City uses a sixty-day availability period. The City accrues the following revenue types: taxes, licenses, fines and forfeits, and miscellaneous revenues. Revenue recognition is subject to the measurable and availability criteria for the governmental funds in the fund financial statements. Exchange transactions are recognized as revenues in the period in which they are earned (i.e., the related goods or services are provided). Locally imposed derived tax revenues are recognized as revenues in the period in which the underlying exchange transaction on which they are based takes place. Imposed nonexchange transactions are recognized as revenues in the period for which they were imposed. If the period of use is not specified, they are recognized as revenues when an enforceable legal claim to the revenues arises or when they are received, whichever occurs first. In the fund financial statements, governmental funds are presented using the current financial resources measurement focus. This means that only current assets and current liabilities are generally included on their balance sheets. The reported fund balance (net current assets) is considered to be a measure of "available spendable resources." Governmental fund operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Accordingly, they are said to present a summary of sources and uses of "available spendable resources" during a period. Non-current portions of long-term receivables due to governmental funds are reported on their balance sheets in spite of their spending measurement focus. Special reporting treatments are used to indicate that they should not be considered "available spendable resources," since they do not represent net current assets. Recognition of governmental fund type revenues represented by non-current receivables are deferred until they become current receivables. Non-current portions of other long-term receivables are reflected in non-spendable fund balance. Because of their spending measurement focus, expenditure recognition for governmental fund types excludes amounts represented by non-current liabilities. Since they do not affect net current assets, such long-term amounts are not recognized as governmental fund type expenditures or fund liabilities. Amounts expended to acquire capital assets are recorded as expenditures in the year that resources were expended, rather than as fund assets. The proceeds of long-term debt are recorded as other financing source rather than as a fund liability. Amounts paid to reduce long-term indebtedness are reported as fund expenditures. Proprietary Funds The City's Enterprise and Internal Service Funds are proprietary funds. In the fund financial statements, proprietary funds are presented using the accrual basis of accounting. Revenues are recognized when they are earned and expenses are recognized when the related goods or services are delivered. In the fund financial statements, proprietary funds are presented using the economic resources measurement focus. This means that all assets and all liabilities (whether current or non-current) associated with their activity are included on their balance sheets. Proprietary fund type operating statements present increases (revenues) and decreases (expenses) in total net position. Operating revenues and expenses generally result from providing services, and producing and delivering goods in connection with a proprietary fund's principal ongoing operations. The principal operating revenues of the Light and Power Fund, Water Fund, Off-Street Parking Facilities Fund and of the City's Internal Service Funds are charges to customers for sales and services. Operating expenses for the Enterprise Funds and Internal Service Funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenue and expenses not meeting this definition are reported as non-operating revenues and expenses. Amounts paid to acquire capital assets are capitalized as assets in the proprietary fund financial statements, rather than reported as expense. Proceeds of long-term debt are recorded as a liability in the proprietary fund financial statements. Amounts paid to reduce long-term liability of the proprietary funds are reported as a reduction of the related liability. When both restricted and unrestricted resources are combined in a fund, expenses are considered to be paid first from restricted resources, and then from unrestricted resources. The City's fiduciary funds include Employee Benefit Trust Funds, Custodial Funds, and Private-Purpose Trust Funds. Employee Benefit Trust Funds are used to account for resources that are required to be held in trust for the members and beneficiaries of benefit and contribution plans. Private-Purpose Trust Funds are to account for receipt of incremental property tax and payment of enforceable obligations (debts) of the former redevelopment agency. Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances of Governmental Funds to the Statement of Activities For the Fiscal Year Ended June 30, 2021 Amounts reported for governmental activities in the statement of activities are different because: Net change in fund balances - total governmental funds $(16,875,558) Governmental funds report capital outlays as expenditures. However, in the statement of a ctivities, the cost of these assets is allocated over their estimated useful lives and reported as depreciation expense. This is the a mount by which depreciation expense ($18,540,480) exceeded capital outlay, ($15,847,696) that was capitalized in the curre int period. The net effect of various miscellaneous transactions involving capital assets (i.e., sales, trade-ins, and donations) is to decrease net position. Loss on sale of assets (1,682,878) Bond and other debt proceeds provide current financial resources to governmental funds, but issuing debt increases long-term liabilities in the Statement of Net Position. Repayment of bond and other debt principal is an expenditure in the governmental funds, but repayment reduces long-term liabilities in the Statement of Net Position. Also, governmental funds report the effect of premiums, discounts, and similaritems when debt is first issued, whereas these a mounts are deferred and amortized in the statement of activities. Repayments: Bond deferred charges and similaritems are recorded as expenditures in governmental funds when debt is first issued, whereas these payments are deferred and amortized in the statement of activities. This a mount is the net offset of the difference. (1,113,394) Interest payable related to debt services or long-term liabilities. This is the net change in interest payable expense for the current period. Pension expenditures reported in the governmental funds includes the annual required contributions. In the Statement of Activities, pension expense includes the change in the net pension liability, and related changes in pension amounts for deferred outflows of resources and deferred inflows of resources. 58,871 OPEB expenditures reported in the governmental funds includes payment of premiums for the current year. In the Statement of Activities, OPEB expense includes the change in the OPEB liability and (2,449,502) OPEB related deferred outflows of resources and deferred inflows of resources. (6,581,638) The government-wide financial statements are designed to provide readers with a broad overview of the City of Pasadena's finances, in a manner similar to a private-sector business. The statement of net position presents information on all of the City's assets and deferred outflows of resources and liabilies and deferred inflows of resources, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City of The statement of activities presents the most recent fiscal year changes in the City's net position. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods, e.g., uncollected taxes and earned but unused vacation leave. Both of the government-wide financial statements distinguish functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City of Pasadena include general government, public safety, transportation, utility, sanitation, health, culture and leisure, and community development. The business-type activities of the City of Pasadena include electric, water, refuse, parking, and telecommunication operations. The basic government-wide financial statements can be found on pages 2023 of this report. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objective. The City of Pasadena, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental Funds Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental funds financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government's near-term financing requirements. Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government's near-term financing decisions. Both the governmental funds balance sheet and the governmental funds statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City of Pasadena maintains thirty-one individual governmental funds. Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures, and changes in fund balances for the General Fund, the Project Management Capital Project Fund, the General Debt Service Fund, and the Housing Successor Fund, all four of which are considered to be major funds. Data from the other twenty-seven governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements elsewhere in this report. The City of Pasadena adopts an annual appropriated budget for its General Fund and Special Revenue Funds. Budgetary comparison statements have been provided for the General Fund and Special Revenue Funds to demonstrate compliance with this budget. The basic governmental fund financial statements can be found on pages 2427 of this report. Proprietary Funds The City of Pasadena maintains two different types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City uses enterprise funds to account for its electric, water, refuse, parking, and telecommunication operations. Internal service funds are an accounting device used to accumulate and allocate costs internally among the City's various functions. The City of Pasadena uses internal service funds to account for its computing and communication, building maintenance, fleet maintenance, fleet replacement, benefits, workers' compensation, general liability, and 311 call center services. Because each of these services predominantly benefits governmental rather than business-type functions, they have been included within governmental activities in the government-wide financial statements. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the Light and Power, Water, and Off-Street service funds are combined into a single, aggregated presentation in the proprietary fund financial statements. Individual fund data for the internal service funds is provided in the form of combining statements elsewhere in this report. Data from the other two proprietary funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major proprietary funds is provided in the form of combining statements elsewhere in this report. The basic proprietary fund financial statements can be found on pages 2835 of this report. Fiduciary Funds Fiduciary funds are used to account for resources held for the benefits of parties outside the government. Fiduciary funds are not reflected in the government-wide financial statement, because the resources of those funds are not available to support the City of Pasadena's own programs. The activities of the Successor Agency to the Pasadena Community Development Commission are also reported with the City's fiduciary funds as a private purpose trust fund. Individual fund data for each of these fiduciary funds is provided in the form of combining statements elsewhere in this report. The accounting used for fiduciary funds is much like that used for proprietary funds. The basic fiduciary fund financial statements can be found on pages 3637 of this report. Notes to the Basic Financial Statements The notes provide additional information that is essential to a full understanding of the data provided in the governmentwide and fund financial statements. The notes to the basic financial statements can be found on pages 43110 of this report. Other Information In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information (RSI) concerning budgetary practices and budget-to-actual comparisons for the general fund and the major special revenue funds. Additional RSI includes pension and Other Postemployment Benefits (OPEB) information on net pension and OPEB liabilities and plan contributions. RSI can be found on pages 113-129 of this report. The combining statements referred to earlier in connection with non-major governmental funds and internal service funds are presented immediately following the required supplementary information. Combining and individual fund statements and schedules can be found on pages 132209 of this report. FINANCIAL HIGHLIGHTS New Significant Accounting Standards Implemented In FY 2021, the City adopted one new statement of financial accounting standards issued by the Government Accounting Standards Board (GASB) that relates to various accounting matters, Statement No. 84, Fiduciary Activities (GASB 84). GASB 84 requires a review and identification of all current activities recorded in the fiduciary funds to determine if they meet the revised criteria of a fiduciary activity. A fiduciary activity generally involves funds held by the City in trust or on behalf of a third party where the City does not have administrative involvement in the use of those funds. GASB 84 requires all Custodial Funds present a Statement of Changes in Fiduciary Net Position. Funds formerly classified as agency type funds are now reported under the new custodial fund classification. As agency type funds, amounts now classified as Net Position Held in Custody had been reported as payables, deposits, or other liabilities. The Employment Benefit OPEB Trust Fund previously was included in the City of Pasadena reporting entity as an Employee Benefit Trust Fund. GASB 84 clarified that this program does not meet the requirements to include within the City's financial statements, and so it is henceforth excluded from presentation as a fund in this Annual Comprehensive Financial Report. Restatement of Beginning Net Position and Fund Balances As disclosed in Note 22 on page 110, to implement GASB 84, the beginning net positions of the Custodial Funds were restated and decreased to a net deficit by $1,281,967. As noted earlier, net position may serve over time as a useful indicator of a government's financial position. In the case of the City of Pasadena, assets and deferred outflows exceeded liabilities and deferred inflows by $1,014 million at the close of the most recent fiscal year. $955 million of the City of Pasadena's net position reflect its investment in capital assets (e.g., land, buildings, machinery, and equipment), less any related outstanding debts used to acquire those assets. The City of Pasadena uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City of Pasadena's investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. City of Pasadena's Net Position (in millions) A portion of the City of Pasadena's net position, $208.8 million or 20.6 percent represents resources that are subject to external restrictions on how they may be used. The remaining balance is a deficit in unrestricted net position of, 149.6 liabilities which exceed assets on hand, and is related to implementation of GASB 68 and GASB 75 regarding Pension Plan and OPEB reporting. At the end of FY 2021, the City of Pasadena is able to report positive balances in all categories of net position for the government as a whole except for unrestricted net position. During FY 2021, the primary government's net position decreased by \$7.6 million. Approximately \$30.1 million of this is a decrease in the City's governmental activities, and $22.5 million of this increase is in the City business-type activities. The decrease in the governmental activities reflects increases in spending, offset by decreases in revenues. The increase in business-type activities is the continuance of positive trend in increased revenues and this year's modest increases in expenses. - Property taxes increased by $5.9 million due to appreciation of property value in Pasadena. - Sales taxes increased by $4.8 million. Regular sales tax increased by $2.9 million and Measure I sales tax increased by $1.9 million. - Charges for services decreased by $18.7 million including changes in the following categories: - \$7.1 million decrease in rental income as a result of the ground lease revenue received as part of the Concord property sale in FY 2020 ; - \$2.7 decrease in million in billable services as a result of a reduction in outside events; - \$2.6 decrease parking citations as a result of temporary modifications to the City's parking policies due to the pandemic; - \$1 million decrease in traffic reduction impact fees; and - \$0.9 million decrease in emergency medical aid response (ground ambulance service) revenues. - Capital grants and contributions decreased by $27.3 million. The change was attributable to the FY 2020 sale of Concord property. The City received the property as a contribution, and subsequently sold it in May 2020 . The transaction resulted in \$27.5 million of developer contribution upon execution of a quitclaim deed turning improvements over to the City just prior to the sale. - Other taxes decreased by $5.3 million mainly due to the following categories: - \$6.8 million decrease in transient occupancy taxes, as the hospitality industry was heavily impacted by the pandemic; - \$2.0 million decrease in construction taxes due to construction project being negatively impacted by the pandemic; - The decrease is offset by the $4.1 million increase in underground utility surtax in. The City resumed collection of the surtax in FY 2021 after having been discontinued in FY 2020; - Other revenues decreased by $0.1 million including changes in the following categories: o \$5.7 million decrease in investment earnings; - \$3.0 million increase in intergovernmental revenues; and o \$1.6 million increase in motor vehicle in-lieu revenues. - Investment earnings decreased by $5.7 million due to unfavorable market conditions caused by the pandemic on overall investment instruments. - Miscellaneous revenue decreased by \$4.7 million due to a decrease of \$2.3 million in gain on sale of capital assets in relation to the Concord sale in the prior fiscal year. he expense components of governmental activities increased by $5.9 million or 1.48 percent. The changes in expenses were: eneral government increased by $5.4 million, other expenses decreased by $1.7 million, public safety decreased by $4.6 illion, community development decreased by $5.4 million, and transportation decreased by $6.8 million. The other tegories have a net increase of $8.1 million. - General government expenses increased by $5.4 million or 8.0 percent. There was $0.6 million more in sales taxes that the City passed to Pasadena Unified School District (PUSD) according to Measure J, a \$0.7 million decrease in general liability insurance and benefit expenses, and \$2.1 million more in other general expenses due to the pandemic. Other expenses decreased by $1.7 million, including $5.9 million decrease in utility expenses and $2.1 million increase in health expenses. The City suspended collection of the surtax in April 2020 and provided a direct rebate of the surtax paid by each customer of Pasadena Water and Power during the 24 months prior to April 2020. Therefore, the net expense due to light and power surtax rebate was $5.9 million in FY2021. The $2.1 million increase in health expenses was attributable to activities related to COVID-19 response, including response management, threat mitigation and enforcement. Public safety expenses decreased by $4.6 million or 3.0 percent mainly due to: $5.2 million decrease in the City's GASB 68 pension expenses, \$2.4 million increase in City's GASB 75 OPEB expenses, and \$1.1 million decrease in general liability insurance and benefit expenses for both the police and fire departments. Community development expenses increased by $5.4 million or 10.3 percent mainly due to: $0.7 million decrease in the City's GASB 68 pension expenses, \$0.6 million increase in City's GASB 75 OPEB expenses, and $0.1 million decrease in general liability insurance and benefit expenses. Transportation expenses decreased by $6.8 million, mainly due to: $1.0 million decrease in the City's GASB 68 pension expenses, \$0.7 million increase in City's GASB 75 OPEB expenses, and \$0.6 million decrease in general liability insurance and benefit expenses. Program Revenues and Expenses - Governmental Activities he City of Pasadena's investment in capital assets for its governmental and business-type activities as of June 30 , 2021 Imounts to $1,308 million, net of accumulated depreciation. This investment in capital assets includes land, buildings and ystems, improvements, machinery and equipment, park facilities, roads, highways, and bridges. The net increase in the City f Pasadena's investment in capital assets for the current fiscal year was $18 million, a $5 million decrease for governmental ictivities and \$23 million increase for business-type activities. Major capital asset related events during FY 2021 included the following: - A variety of street maintenance and construction, technology, traffic control and parks and landscape projects continue city-wide. \$29.7 million were spent on capital projects in governmental activities. Costs for projects not completed are shown as construction in progress. The amount of construction in progress as of June 30,2021 is $22.5 million for the governmental activities, and $82.5 million for the business-type activities. - For the technology upgrade projects, the City spent $1.2 million towards new and replacement computer equipment, nearly $1 million for enterprise building security management, $0.57 million toward new radio equipment, and $0.57 million for jail access control. - Improvement of city-owned facilities continues. The City spent $5 million for parks and landscape projects, $5 million for preventive maintenance and repairs for City buildings and facilities, $8.4 million for improvements to streets, sidewalks, and bridges, and \$2.3 million for improvements to sewers and stormdrains. The City spent approximately \$4 million for traffic safety and control programs and improvements. The City completed upgrade and replacement of parking access and revenue control equipment in eight City owned parking garages at a total cost of $3.3 million. - As of June 30, 2021, the business-type activities net assets amounted to $800 million, an increase of $23 million over the prior year. - Water and Power utility plant net assets amounted to $751 million, an increase of $23.2 million. During the fiscal year, the City spent $86.8 million on various water and power projects and moved $51 million into completed projects. - Some of the major power projects are: GT-1 \& GT-2 Upgrades and Replacement for \$16.1 million, Customer Information System for \$5 million, new 34.5kV Circuit at Oak Knoll for \$3.6 million, and Installation of Low \& High Voltage Electrical Services for $6.1 million. - Some of the major water projects are for distribution mains for $3.4 million and the customer information system for $2.7 million. City of Pasadena's Capital Assets (Net of Depreciation, in millions) The basic financial statements of the City of Pasadena, California (City) have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental entities. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The more significant accounting policies of the City are described below. (a) Reporting Entity The City was incorporated on June 19, 1887 as a Charter City, which operates under a Council-City Manager form of government. The City is a municipal corporation governed by an elected mayor and seven council members. As required by GAAP, these financial statements present the City and its component units, entities for which the City is considered to be financially accountable. The City is considered to be financially accountable for an organization if the City appoints a voting majority of that organization's governing body and the City is able to impose its will on that organization or there is a potential for that organization to provide specific financial benefits to or impose specific financial burdens on the City. The City is also considered to be financially accountable if that organization is fiscally dependent (i.e., it is unable to adopt its budget, levy taxes, set rates or charges, or issue bonded debt without approval from the City). In certain cases, other organizations are included as component units if the nature and significance of their relationship with the City is such that their exclusion would cause the City's financial statements to be misleading or incomplete. The two methods of reporting component unit data in the basic financial statements are blended and discrete presentation. Blending is limited exclusively to when the board of the component unit is substantively the same as that of the City or if the component unit serves the City exclusively, or almost exclusively. Blended component units, although legally separate entities, are in substance part of the City's operations; data from these units are combined with data of the City. Component units that do not meet the criteria for blending are included within financial statements as discrete presentations. Discretely presented component units are reported in a separate column in the government-wide financial statements to emphasize they are legally separate from the government. Similar to the City, each blended and discretely presented component unit has a June 30th year-end. Jointly governed organizations provide goods or services to the citizenry of two or more governments, but do not have an ongoing financial interest or responsibility by the participating governments. Pasadena Parking Authority (The Authority) The Authority was created by Resolution No. 1399, dated June 6, 1972 pursuant to the provisions of the Parking Law of 1949 (California Streets and Highways Code, Sections 32651 and $32661.1 ). The City Council constitutes the governing board of the Authority pursuant to the aforementioned Resolution. The primary purpose of the Authority is to establish parking facilities for motor vehicles within the City, to furnish motor vehicle parking spaces, and to care for such vehicles within any parking facility or space owned, controlled or operated by the Authority. The City has operational responsibility for the Authority. The Authority is reported as an Enterprise Fund and does not release a separate financial report. Pasadena Civic Improvement Corporation (PCIC) PCIC was created on August 9,1985 pursuant to the Non-profit Public Benefit Corporation Law of the State of California (Title 1, Division 2, Part 2 of the California Corporations Code). At the request of the City, PCIC was organized for the specific and primary purpose of providing financial assistance to the City by acquiring or constructing property and appurtenances for and on behalf of the City. This is accomplished through the issuance of such financing instruments as certificates of participation. The PCIC is a non-profit organization with three directors: Chief Executive Officer, Secretary/Financial Officer, and Assistant Executive Officer/Assistant Secretary. PCIC's financial data and transactions are blended with the Debt Service and Capital Projects fund types. The PCIC does not release a separate financial report. (b) Basis of Accounting and Measurement Focus The basic financial statements of the City are composed of the following: - Government-wide financial statements - Fund financial statements - Notes to the basic financial statements Government-wide Financial Statements Government-wide financial statements display information about the reporting government as a whole, except for its fiduciary activities. These statements include separate columns for the governmental and business-type activities of the primary government (including its blended component units), as well as its discretely