DATE: January 14, 2026
TO: Honorable Mayor and City Councilmembers
FROM: Financial Services Department
TITLE: ACCEPTANCE OF THE ANNUAL COMPREHENSIVE FINANCIAL REPORT (ACFR) FOR FISCAL YEAR ENDING JUNE 30, 2025
RECOMMENDATION
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Staff recommends that the City Council accept the Annual Comprehensive Financial Report (ACFR) for the fiscal year ending June 30, 2025.
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BACKGROUND AND ANALYSIS
The Annual Comprehensive Financial Report (ACFR) is a set of financial statements for a state, municipality or other governmental entity that comply with the accounting requirements established by the Governmental Accounting Standards Board (GASB). It must be audited by an independent auditor using generally accepted government auditing standards. The City’s independent auditor, Lance, Soll & Lunghard, LLP, has reviewed and provided an unmodified opinion on the accuracy of the City’s financial statements.
On December 19, 2006, the American Institute of Certified Public Accounts (AICPA) Auditing Standards Board issued the Statement of Auditing Standards (SAS) No. 114. The primary purpose of this standard is to ensure open and transparent, two-way communication between the independent auditor and those responsible for overseeing the financial reporting process. This SAS also outlines the matters auditors must communicate to these parties. As part of the two-way communication with the governing body, the ACFR is submitted to the City Council via the formalized agenda process.
“Net position” represents the simplest test of financial health for a city, indicating the excess (or deficit) of assets over liabilities. Net position is used as a measure of “net worth” rather than as a measure of expendable available financial resources. The City’s Total Net Position is a combination of all City funds including governmental funds that are used for tax-supported activities, such as the General Fund, Housing Fund, Gas Tax Fund, etc., as well as proprietary funds for business-type activities such as the Water Fund, Wastewater Fund, Small Craft Harbor District Fund, etc. At the end of Fiscal Year 2024-25, the City’s Total Net Position increased $60.3 million, or 4.7 percent compared to the previous year. This indicates that the City is in strong financial health, with sufficient capacity to cover its expenses and debt obligations, while also maintaining the ability to reduce long-term debt and allocate funds for future infrastructure projects.
The following table is a five-year summary of the changes in Total Net Position for the entire City.
There are three components to Total Net Position:
1) Invested in Capital Assets (net of related debt) are assets used in operations such as land, buildings, infrastructure, and equipment. This component decreased $21.3 million from Fiscal Year 2023-24, due to the effect of expensing capital-in-progress costs that are not capitalizable and depreciation. These funds are not readily accessible for spending since they are “tied up” in capital assets.
2) Restricted Net Position funds are not readily accessible because they are subject to restrictions imposed by outside parties (i.e., creditors, grantors, contributors, laws and regulations of other governments), by the City Manager or the City Council. The increase in Restricted Net Position of $35.3 million is mostly due to an increase in funds held for capital projects.
3) The Unrestricted Net Position is the residual balance of Net Position after the elimination of Invested in Capital Assets (net of related debt) and Restricted Net Position. This component increased $46.1 million from Fiscal Year 2023-24. This increase is mostly due to the reduction in invested in capital assets.
A full compilation is available in the statistical section of the attached ACFR under “Net Position by Component”.
FISCAL IMPACT
For information purposes only, no fiscal impact.
COMMISSION OR COMMITTEE REPORT
Does not apply.
CITY ATTORNEY’S ANALYSIS
Does not apply.
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Prepared by: Christine Hernandez, Accounting Manager
Reviewed by: Jill Moya, Financial Services Director
Submitted by: Jonathan Borrego, City Manager
ATTACHMENTS:
1. Staff Report
2. Annual Comprehensive Financial Report FY 25