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HomeMy Public PortalAboutFinancial Report - Measure AA Oversight- FY17Measure AA Bond Annual Accountability Report July 1, 2016 – June 30, 2017 Stephen E. Abbors, General Manager Stefan Jaskulak, Chief Financial Officer Me a s u r e A A B o n d O v e r s i g h t C o m m i t t e e Measure AA Bond Annual Accountability Report Page i Table of Contents Letter from the General Manager ii Letter from the Chief Financial Officer iii Mission Statement iv Measure AA Portfolio Map v Section One Executive Summary 1 Chart 1: Portfolio Allocation to Expenditure Roll Up 2 Chart 2: Portfolio Level Expenditures to Allocations 3 Chart 3: Land Acquisition MAA Expenditures 4 Priority Portfolio Actions, by Region (from MAA Expenditure Plan) 7 Portfolio Expenditure Summary Numerically, by Portfolio Number 14 Financial Report by Project 68 Section Two Measure AA Ballot Language Section Three Annual Financial Audit Report Measure AA Bond Annual Accountability ReportPage ii Stephen E. Abbors, General Manager Message from the General Manager to the Bond Oversight Committee Midpeninsula Regional Open Space District’s constituents demonstrated their support of public open space in their community by passing Measure AA in 2014. Engaging in the vision planning process, they prioritized the use of these tax dollars to protect, restore, and improve access to their public lands. As members of the Measure AA Bond Oversight Committee, your role is to ensure that the District upholds its commitments to the public we serve. This Second Annual Measure AA Bond Accountability Report details how Measure AA dollars have been expended to date on the projects which the voters have approved. Employing these funds, the District continues to care for the natural resources that support all life in our community. Currently we are: • Protecting watersheds that capture and release clean water by working to purchase land from San Jose Water Company • Managing forests at Bear Creek Redwoods Open Space Preserve that provide clean air and wildlife habitat, and will soon be open to the public • Restoring healthy grasslands that support viable cattle grazing at La Honda Creek Open Space Preserve, where a new parking area and six miles of trail were recently opened • Connecting these landscapes into a functioning whole with projects like the Highway 17 wildlife crossings that are currently being planned The District is also working to protect the precious cultural resources that survive today in the open spaces we manage. Through interpretive panels and docent-led activities, we tell stories about local people and their relationship to the land, helping communities connect with their heritage. The stories of Native American traditions and Cold War history at the recently opened summit of Mount Umunhum, and the planned preservation of historic Alma College in Los Gatos are just two examples. All of these important projects would not be possible without essential capital resources supporting them, like those provided by Measure AA. Thank you for valuing your public open spaces and serving your community by overseeing the District’s Measure AA capital program; ultimately helping us fulfill our mission with the highest level of responsibility and transparency. Measure AA Bond Annual Accountability Report Page iii Message from the Chief Financial Offi cer to the Bond Oversight Committee Bond Oversight Committee: The Midpeninsula Regional Open Space District is pleased to present our second Measure AA Bond Annual Accountability Report. This report highlights Measure AA project progress, District activities in support of these projects, and an overview of bond expenditures for the Fiscal Year 2016-2017. As the District continues to deliver on its Measure AA vision, this report fulfi lls two key tenets of that legislation: transparency and accountability. The voters entrusted the District when they approved Measure AA, a $300 million bond measure to accelerate land acquisition, environmental restoration, and public access within the District. We present this report to you to document our progress as we expend those funds according to plan. As Committee members, your role was defi ned and authorized by Board Policy, adopted on August 12, 2015, which states: The Committee has the following three responsibilities for each of the years the Measure AA general obligation tax is collected or revenues expended: • Review Plan expenditures on an annual basis to verify conformity with the Expenditure Plan • Review the District’s Annual Audit and Annual Accountability report and present the Committee’s fi ndings to the Board at a public meeting • Review any proposed amendments to the Expenditure Plan The Committee Chair shall report the Committee’s fi ndings at a public meeting of the Board of Directors. The Committee shall not have authority to recommend, advise, or direct any such matters that may fall under its responsibility to review. The Committee is not advisory to the Board of Directors and has no power to determine how General Fund monies are spent. The Board of Directors retains its authority to make such decisions and determinations. Going into this reporting period, the District had spent a total of $21,202,097 in Measure AA bond funds. The District spent a total of $16,262,675 directly on Measure AA projects in the Fiscal Year 2016-2017, and a total of $37,464,772 life-to-date as of the end of this reporting period. Projects are completed or underway in 18 of the 25 portfolios, with progress in the current reporting year on projects spanning 15 portfolios. Additional efforts in support of the Measure AA Portfolios are also noted in the Portfolio Expenditure Summary. The District has funded projects which complement the Bond Expenditure Plan in several active Measure AA Portfolios, as well as fully funding work for the current budget period in two Portfolios. Looking ahead, the District continues to invest in projects across the 25 Priority Portfolios. The Fiscal Year 2017-18 Approved Budget includes projects in 21 portfolios funded through both Measure AA and General Fund Capital. As you review the District’s Annual Audit and Annual Accountability Report, we thank you for your time and service to your community and to the health of the environment we all share. Sincerely, Stefan Jaskulak, Chief Financial Offi cer Sincerely, Stefan Jaskulak, e mission of the Midpeninsula Regional Open Space District is to acquire and preserve a regional greenbelt of open space land in perpetuity, protect and restore the natural environment, and provide opportunities for ecologically sensitive public enjoyment and education. While implementing the District’s overall mission of open space land preservation, resource management, and low-intensity recreation, the District’s mission for the Coastal Annexation Area as de ned by the Service Plan is: To acquire and preserve in perpetuity open space land and agricultural land of regional significance, protect and restore the natural environment, preserve rural character, encourage viable agricultural use of land resources, and provide opportunities for ecologically sensitive public enjoyment and education. Long Ridge Open Space Preserve by Matthew Findling Measure AA Bond Annual Accountability Report e mission of the Midpeninsula Regional Open Space District is to acquire and preserve a regional greenbelt of open space land in perpetuity, protect and restore the natural environment, and provide opportunities for ecologically sensitive public enjoyment and education. While implementing the District’s overall mission of open space land preservation, resource management, and low-intensity recreation, the District’s mission for the Coastal Annexation Area as de ned by the Service Plan is: To acquire and preserve in perpetuity open space land and agricultural land of regional significance, protect and restore the natural environment, preserve rural character, encourage viable agricultural use of land resources, and provide opportunities for ecologically sensitive public enjoyment and education. Page iv Measure AA Bond Annual Accountability Report Page v Midpeninsula Regional Open Space District Measure AA Portfolio Map Top 25 Priority Action Portfolios*# Regional Trail Connections Projects*Regional Trail Connections *Represents generalized locations Midpen open space preserves MAA 1. Open Miramontes Ridge MAA 2. Build New Bayfront Trails MAA 3. Complete the Purisima-to-the-Sea Trail MAA 4. Build Walking, Hiking and Biking Trails at El Corte de Madera Creek MAA 5. Open Upper La Honda Creek Preserve MAA 6. Develop New Trails at Windy Hill MAA 7. Open Driscoll Ranch Area at La Honda Creek MAA 8. Preserve Upper San Gregorio Creek Watershed MAA 9. Open New Trails at Russian Ridge MAA 10. Re-Open Alpine Road at Coal Creek MAA 11 Build Welcome Center at Rancho San Antonio MAA 12. Complete Middle Stevens Creek Trail MAA 13. Expand Grazing at Cloverdale Coastal Ranch MAA 14. Open New Trails throughout the Redwoods MAA 15. Protect More Redwood Forests MAA 16. Create New Access Facilities at Long Ridge MAA 17. Complete Upper Stevens Creek Trail MAA 18. Complete Saratoga to Sea Trail MAA 19. Open El Sereno Trails to Dogs and Complete Trail Connections MAA 20. Preserve Safe Wildlife Corridors across Hwy. 17 MAA 21. Open Bear Creek Redwoods MAA 22. Open Cathedral Oaks at Sierra Azul MAA 23. Open Mount Umunhum at Sierra Azul MAA 24. Open Rancho de Guadalupe at Sierra Azul MAA 25. Open Loma Prieta Area at Sierra Azul Measure AA Bond Annual Accountability ReportPage vi View from Mt. Umunhum Trail, Mount Umunhum, Sierra Azul Open Space Preserve by Erin Ashford Measure AA Bond Annual Accountability Report Page 1 Executive Summary We are pleased to present the Midpeninsula Regional Open Space District’s Second Annual Measure AA Accountability Report. The timeframe of this report spans from July 1, 2016 – June 30, 2017 and reflects Measure AA expenditures during this time period. The structure of this document is guided by the Measure AA Ballot language, specifically Priority Portfolio Actions, by Region, which appears on page 7 of this report. The Expenditure Plan and the 25 Priority Actions, as well as the Portfolio designations and locations, were the culmination of the Vision Planning effort that began in 2002. The public visioning process spanned 18 months and defined the strategic direction of the District for the next 40 years. The Vision Plan yielded a list of 54 priority actions that then were narrowed to the top 25 Priority Actions for the purposes of the ballot initiative. Measure AA funded the top 25 Priority Actions through their inclusion in the Measure AA Expenditure Plan. This Measure AA Accountability Report is arranged in parallel with the Measure AA Expenditure Plan to facilitate review; projects are grouped in 25 key project portfolios organized by geographic area within the District’s boundaries. No change in portfolio allocation is proposed for this reporting period. In the future, should a shift in portfolio allocations be needed, the Measure AA Bond Oversight Committee will be advised through the Committee communication process for document review as soon as we are certain that we are going to need to amend the Expenditure Plan. Bond Oversight Committee and Nexus with Budget and Action Plan The Measure AA Bond Oversight Committee’s role is specific to reviewing retrospective expenditures, so this Committee is not charged with reviewing the budget or other prospective information, unless it is provided as part of an explanation of a proposed Portfolio Allocation adjustment. That said, there is a synergy between the budgeted and actual expenditures, and the following information is being provided as context for, and insight into, the District’s management of Measure AA spending. Each year the District embarks upon a priority-setting and budgeting process with the Board, which begins a 5-6 month planning process. The final Budget and Action Plan is approved prior to the start of the fiscal year, which begins July 1. Within the Budget and Action Plan document, there is a Measure AA Project Budget Overview which provides a prospective view into the next year’s planned spending. Bond Issuance, Size, and Look–Back In June 2014, voters approved a $300 million general obligation bond to be used to protect natural open space lands; open preserves or areas of preserves that are currently closed; construct public access improvements such as new trails and staging areas; and restore and enhance open space land, which includes forests, streams, watersheds, and coastal ranch areas. In August 2015, the District issued its first tranche of $45 million in general obligation bonds to reimburse itself for project expenses planned for approximately the next two years, as well as the legally permitted look-back period of 60 days prior to Board’s Certification of election results. $350,000,000 $300,000,000 $250,000,000 $200,000,000 $150,000,000 $100,000,000 $50,000,000 $0 Expenditure Plan Spending Expenditure Plan Allocation Remaining $37,464,772 Expended $262,535,228 Capacity remaining Measure AA Bond Annual Accountability ReportPage 2 Portfolio Allocations and Expenditures The chart below depicts a roll-up of how much of the Total Measure AA Expenditure Plan Allocation has been used on a life-to-date basis. Portfolio Allocation to Expenditure Roll Up The chart on the following page shows the Expenditure Plan allocations broken down by Portfolio, with the total expenditures for each portfolio through June 30, 2017. The purpose of this chart is to show the Portfolio Allocations that were approved in the Expenditure Plan and the relative expenditures in each portfolio, life-to-date. For more details, please reference the Financial Report on page 68, which contains actual expenditure numbers and remaining allocation. Ceremonial Circle at Mount Umunhum, Sierra Azul Open Space Preserve by Erin Ashford Measure AA Bond Annual Accountability Report Page 3 Spending Trends As of June 30, 2017, an estimated $37.5 million has been expended from MAA Funds. The primary spending for the period July 1, 2016 – June 30, 2017 was in engineering and construction associated with opening the Mount Umunhum Summit to the public the following year. Nearly 74% of spending in this reporting period was related to activities in MAA 23. These activities included restoring the mountain summit and constructing an access road, viewpoint and summit shelter, a Native American ceremonial space, parking lots, and multi-use trails. Portfolio expenditures for the year reflect this significant progress on the Mount Umunhum project during the summer of 2017 construction season, in addition to other expenses that occurred during the summer construction season. Another area of focus was La Honda Creek Open Space Preserve, where bridge, trailhead, and new parking area plans were completed and three miles of ranch roads were repaired in anticipation of the preserve opening to the public in the fall of 2017. Other key spending areas for this reporting period included land and associated costs in Sierra Azul Open Space Preserve and other preserves, as well as planning and permitting activities for Bear Creek Redwoods Open Space Preserve. In addition to direct spending on Measure AA projects, the District has prioritized key initiatives in support of Measure AA portfolios, including land acquisition negotiations, usage surveys, operational infrastructure improvements, environmental assessments, geotechnical studies, and habitat restorations. These are described in detail in the Portfolio Expenditure Summary starting on page 14. Of the $16.3 million expended in this reporting period, $1.8 million was related to Land Acquisition and Related Expenses, which represents 11% of all spending for the period. A chart containing a breakdown of Land Acquisition costs to date, by Portfolio, follows: Portfolio Level Expenditures to Allocations MA A 0 1 MA A 0 2 MA A 0 3 MA A 0 4 MM A 0 5 MA A 0 6 MA A 0 7 MA A 0 8 MA A 0 9 MA A 1 0 MA A 1 1 MA A 1 2 MA A 1 3 MA A 1 4 MA A 1 5 MA A 1 6 MA A 1 7 MA A 1 8 MA A 1 9 MA A 2 0 MA A 2 1 MA A 2 2 MA A 2 3 MA A 2 4 MA A 2 5 Life to Date Portfolio Expenditures Portfolio Allocation per Expenditure Plan $50,000,000 $40,000,000 $30,000,000 $20,000,000 $10,000,000 $0 PORTFOLIOS LAND WITH LAND PURCHASE AND ACQUISITION ASSOCIATED EXPENSES COSTS PURPOSE NOTES MAA 01 $52,915 Potential property purchase Preliminary surveying of property. Opportunity to purchase the land for conservation purposes has not yet been realized MAA 02 $108,273 SFPUC easement at Ravenswood Trail Easement property right MAA 03 $382,288 Riggs property purchase and site Includes lot line adjustment. cleanup & remediation Includes Guisti Uplands MAA 05 $1,756,093 Toepfer and Ashworth property purchases Land conservation purchases MAA 07 $9,008,773 Apple Orchard and Events Center property and Cunha property purchases Land conservation purchases MAA 15 $3,018,550 POST/Alpine ranch easement Easement property right MAA 17 $754,552 Lysons property purchase Property expense equals purchase price minus grant income of $740,000 MAA 22 $540,587 Freudenberg land purchase Land conservation purchase MAA 23 $1,264,084 Property purchase and associated costs Meyer property purchase and associated costs MAA 24 $1,591,996 Barth, Peterson, Navid/Gagher, Kahn property purchases Land conservation purchase MAA 25 $410,150 Burton property purchase Land conservation purchase Total Land Acquisition MAA Expenditures $18,888,261 Land Acquisition MAA Expenditures (May 11, 2014–June 30, 2017) Measure AA Bond Annual Accountability ReportPage 4 Pulgas Ridge Open Space Preserve by Karl Gohl Measure AA Bond Annual Accountability Report Page 5 Anticipated Future Trends The Bond Oversight Committee primarily reviews expenses that have been realized retrospectively. That said, the following section provides a high-level glimpse of the District trajectory, related to anticipated expenditures based on the approved Fiscal Year Budget and Action Plan as well as operational workload. This is being provided for contextual purposes and to demonstrate the managed progress the District is making toward MAA Projects. Next year’s report, which will cover Fiscal Year 2017–2018, will represent the third Measure AA Bond Annual Accountability Report. As of the close of the next reporting period, it is estimated, based on the Approved Fiscal Year 2017–2018 Budget that the planned life to date spending will exceed $50 million, or approximately 17% of the $300 million bonding capacity authorized under Measure AA. The capital program for the coming fiscal year includes many phased projects, in contrast to the concentrated effort that has been expended to open Mount Umunhum in fall of 2017. These projects include the Harkins Bridge replacement and Oljon Trail implementation; La Honda Creek Open Space Preserve Sears Ranch Road parking area and trail connection; Bear Creek Redwoods Open Space Preserve public access, water system and stables site plan, and the Alma College site rehabilitation plan. Additionally, approximately two months will be spent completing final work on the Mount Umunhum public access projects and the opening. The Planning Department continues to make significant progress in El Sereno, La Honda, and Bear Creek Redwoods Open Space Preserves, and although the expenses for those preserves were considered planning feasibility and paid for through other funding sources, it is expected that MAA eligible expenses may start to come in to support MAA Portfolio projects in those preserves, and others in the planning phases. Finally, Portfolio allocations include estimated land acquisition costs. Since purchases are primarily opportunity-driven, these are estimates not tied to a specific time frame, and we do not know when the properties and/or rights will be available for purchase. The Real Property Department has been actively pursuing targeted opportunities for land purchases as well as the purchase of property rights and easements, and it is anticipated that those expenses may be realized into the future, when the opportunity becomes available. Measure AA Bond Annual Accountability ReportPage 6 Monte Bello Open Space Preserve by Karl Gohl Measure AA Bond Annual Accountability Report Page 7 Priority Portfolio Actions, by Region (From the Measure AA Expenditure Plan) South Bay Foothills (Los Gatos, Monte Sereno, Saratoga, and Santa Cruz Mountains) Portfolio 18: South Bay Foothills – Saratoga-to-Sea Trail and Wildlife Corridor • Protect wildlife corridor along Highway 9 • Connect trail to Saratoga-to-Sea Trail and Skyline-to-the-Sea Trail • Portfolio Allocation: $1,365,000 Portfolio 19: El Sereno – Dog Trails and Connections • Provide infrastructure to open trails to dogs • Develop connections to Skyline, Sanborn County Park, and Lexington Reservoir • Portfolio Allocation: $2,254,000 Portfolio 20: South Bay Foothills – Wildlife Passage and Ridge Trail Improvements • Establish safe corridors for wildlife across Highway 17 • Establish Bay Area Ridge Trail crossing • Portfolio Allocation: $13,966,000 Portfolio 21: Bear Creek Redwoods – Public Recreation and Interpretive Projects • Open for hiking, equestrian activities • Provide parking areas, trails, upgrade stables • Restore and protect habitats for various species • Repair roads and trails to reduce sediment runoff into streams • Rehabilitate Alma College site • Portfolio Allocation: $17,478,000 Portfolio 22: Sierra Azul – Cathedral Oaks Public Access and Conservation Projects • Develop multi-use trail and plan future trails as land is available • Develop parking • Restore plant communities and soils • Install trailside amenities • Preserve additional open space and complete wildlife corridor in upper Los Gatos Creek watershed • Portfolio Allocation: $6,714,000 Measure AA Bond Annual Accountability ReportPage 8 Portfolio 23: Sierra Azul – Mount Umunhum Public Access and Interpretive Projects • Open Mount Umunhum for multi-use public access to summit via road and trail • Open Bay Area Ridge Trail and nearby trail connections • Preserve additional open space and complete wildlife corridor • Portfolio Allocation: $27,972,000 Portfolio 24: Sierra Azul – Rancho de Guadalupe Family Recreation • Open Rancho de Guadalupe to public access • Develop accessible multi-use trails with amenities such as parking and family recreation • Restore habitat for rare species • Protect cultural and natural resources • Portfolio Allocation: $10,078,000 Portfolio 25: Sierra Azul – Loma Prieta Area Public Access, Regional Trails, and Habitat Projects • Provide public access and recreation, including small campground • Develop, improve, connect regional multi-use trails to Forest of Nisene Marks State Park, to protected land to the east, and to Mount Umunhum • Protect Steelhead habitat, rare plants and grasslands, and restore Knob Cone Pine Stands • Portfolio Allocation: $7,986,000 View from Mount Umunhum, Sierra Azul Open Space Preserve by Erin Ashford Measure AA Bond Annual Accountability Report Page 9 Peninsula Foothills and Bay (Cupertino, Los Altos, Los Altos Hills, Sunnyvale, Mountain View, Palo Alto, East Palo Alto, Menlo Park, Atherton, Redwood City, San Carlos, Woodside, Portola Valley, Skyline) Portfolio 2: Regional – Bayfront Habitat Protection and Public Access Partnerships • Partner to complete gaps in Bay Trail and develop city-to-bay trails • Support wetland restoration and associated interpretive facilities • Preserve additional Bayfront open space • Portfolio Allocation: $5,052,000 Portfolio 4: El Corte de Madera Creek – Bike Trail and Water Quality Projects • Develop single-use biking/hiking trails, complete Ridge Trail gaps, and develop trail system leading to parking area • Restore damaged trails to improve water quality • Preserve additional open space as available • Portfolio Allocation: $8,376,000 Portfolio 5: La Honda Creek – Upper Area Recreation, Habitat Restoration, and Conservation Grazing Projects • Open upper half of the preserve to public; provide biking/hiking/equestrian trails, dog access, and staging areas • Provide loop and connector trails • Restore habitat for rare species • Improve fencing, corrals, and water systems to reintroduce conservation grazing • Portfolio Allocation: $11,733,000 Portfolio 6: Windy Hill – Trail Improvements, Preservation, and Hawthorns Area Historic Partnership • Improve trails, complete pond facilities • Increase multi-use trails, study possible improvements to increase dog use • Open Hawthorns Area; develop trails connecting to Portola Valley and Palo Alto trails • Partner to protect, restore, and interpret historic buildings • Improve habitat conditions in Los Trancos Creek • Preserve additional scenic open space as available • Portfolio Allocation: $12,740,000 Measure AA Bond Annual Accountability ReportPage 10 Portfolio 8: La Honda Creek and Russian Ridge – Preservation of Upper San Gregorio Watershed and Ridge Trail Completion • Preserve Upper San Gregorio watershed; restore endangered species habitats • Support opportunities to provide additional water for fisheries • Complete Bay Area Ridge Trail multi-use connections and gaps • Provide additional public use facilities • Portfolio Allocation: $15,347,000 Portfolio 9: Russian Ridge – Public Recreation, Grazing, and Wildlife Protection Projects • Open currently closed areas of preserve • Construct and extend trails • Improve fencing, corrals, and water systems to reintroduce conservation grazing • Improve habitat for sensitive species, implement pond enhancement projects for garter snakes and red-legged frogs • Portfolio Allocation: $5,560,000 Portfolio 10: Coal Creek – Reopen Alpine Road for Trail Use • Reopen Alpine Road as trail connection between Portola Valley and Skyline Boulevard • Reroute trails to reduce erosion and improve visitor experience • Portfolio Allocation: $8,017,000 Portfolio 11: Rancho San Antonio – Interpretive Improvements, Refurbishing, and Transit Solutions • Add welcome center • Refurbish and add interpretive exhibits to Deer Hollow Farm • Support of transit improvement options such as bike trails, bike share station, bus service, or additional parking • Portfolio Allocation: $10,811,000 Portfolio 12: Peninsula and South Bay Cities – Partner to Complete Middle Stevens Creek Trail • Support work by cities to develop the middle section of the Stevens Creek Trail and enhance neighborhood connections • Support work by partners to complete stream corridor restoration and Steelhead habitat enhancement below dam • Develop and install interpretive signage • Portfolio Allocation: $1,038,000 Measure AA Bond Annual Accountability Report Page 11 Portfolio 16: Long Ridge – Trail, Conservation, and Habitat Restoration Projects (Saratoga) • Improve roadside parking and provide restrooms • Develop new trail connections to Eagle Rock and Devils Canyon • Repair trails for year-round, multi-use access • Protect watersheds for Steelhead • Preserve additional open space as available • Implement pond and habitat enhancement restoration projects to benefit rare species • Portfolio Allocation: $5,140,000 Portfolio 17: Regional – Complete Upper Stevens Creek Trail • Complete multi-use connection between the Bay Trail and Bay Area Ridge Trail above the reservoir through Picchetti Ranch Open Space Preserve and Lower/Upper Stevens Creek County Parks • Improve Preserve trails and neighborhood connections • Preserve additional open space as available • Portfolio Allocation: $7,760,000 Long Ridge Open Space Preserve by Jim Mosher Measure AA Bond Annual Accountability ReportPage 12 Coast (Half Moon Bay, San Gregorio, Pescadero, La Honda) Portfolio 1: Miramontes Ridge – Gateway to the Coast Public Access, Stream Restoration, and Agriculture Enhancement • Preserve scenic open space land as available, and establish wildlife corridor • Restore fish and red-legged frog habitats in Madonna Creek watershed • Partner to enhance water availability for agriculture and fish • Develop trail loop system, including Ridge Trail and neighborhood access points • Develop staging area, repair bridges • Portfolio Allocation: $27,774,000 Portfolio 3: Purisima Creek Redwoods – Purisima-to-the-Sea Trail, Watershed Protection, and Conservation Grazing • Complete and open multi-use Purisima-to-the-Sea Trail connection between Ridge Trail and Coastal Trail, and new parking areas • Preserve additional open space as available • Remove fish barriers and restore Lobitos Creek • Restore ponds for endangered species • Portfolio Allocation: $7,608,000 Portfolio 7: La Honda Creek – Driscoll Ranch Public Access, Endangered Wildlife Protection, and Conservation Grazing • Open Driscoll Ranch Area; provide biking/hiking/equestrian trails, limited dog access, parking areas, and interpretive displays • Develop loop and connector trails • Restore habitat for endangered species • Restore La Honda Creek; remove fish migration barriers • Portfolio Allocation: $14,825,000 Portfolio 13: Cloverdale Ranch – Wildlife Protection, Grazing, and Trail Connections • Improve fencing, corrals, and water systems to increase conservation grazing and sustain large contiguous grasslands • Restore habitat for endangered species • Provide trail connections to nearby state parks • Portfolio Allocation: $15,712,000 Measure AA Bond Annual Accountability Report Page 13 Portfolio 14: Regional – Trail Connections and Campgrounds • Develop trails between Butano, Pescadero County Park, Russian Ridge, and between Skyline and Portola Redwoods, and Big Basin State Park • Partner with county and state parks to improve existing campgrounds • Portfolio Allocation: $3,966,000 Portfolio 15: Regional – Redwood Protection and Salmon Fishery Conservation • Preserve additional open space as available • Protect and enhance redwood stands, mountain scenery, various habitats, and Steelhead salmon • Portfolio Allocation: $50,728,000 Purisima Creek Redwoods Open Space Preserve by Kate Pittman Measure AA Bond Annual Accountability ReportPage 14 Portfolio Expenditures Numerically, by Portfolio Number Russian Ridge Open Space Preserve by Chris Tracey Measure AA Bond Annual Accountability Report Page 15 Preface The Portfolio Expenditure Summary includes a description of each of the 25 MAA Portfolio projects, which was included in the Measure AA ballot language, under the Expenditure Plan section. Included within each Portfolio Description is the Portfolio Allocation, which also was designated in the Expenditure Plan. This bond funding allocation may be shifted if needed following the Board of Director’s approval, however, for this reporting period, no deviation from the original Expenditure Plan is proposed. The Portfolio Expenditures listed in the Description section represent all project costs, which have been deemed eligible for Measure AA reimbursement from inception through June 30, 2017. These amounts tie to the numbers in Section 3, Annual Audit, page 65, Measure AA Bond Program Schedule of Program Expenditures. Portfolios that have no incurred expenditures are included in this report to keep the continuity of the report from year to year. Additional contextual information is included in the Notable Accomplishments, Project Challenges, and Potential Next Steps, as well as the Tables and Charts associated with each Portfolio. Though the Bond Oversight Committee review is focused on actual expenditures, additional narrative information has been included to help provide a sense of the projects, the nexus with non-MAA work or partner work, and general status. The tables and charts restate information gleaned from the District’s accounting system and provide another graphical way to view the expenditures. Finally, where available, we have included actual photographs of the preserves in which the Portfolio projects occur as a visual reference. Measure AA Bond Annual Accountability ReportPage 16 Portfolio 1: Miramontes Ridge—Gateway to the Coast Public Access, Stream Restoration, and Agriculture Enhancement Description • Preserve scenic open space land as available, and establish wildlife corridor • Restore fish and red-legged frog habitats in Madonna Creek watershed • Partner to enhance water availability for agriculture and fish • Develop trail loop system, including Ridge Trail and neighborhood access points • Develop staging area, repair bridges • Portfolio Allocation: $27,774,000 • Portfolio Expenditures through 6/30/2017: $52,915 Notable Accomplishments • Expenditures related to land acquisition activities Project Challenges • No project challenges identified at this time Potential Next Steps • Continue pursuing a potential new property purchase Miramontes Ridge Open Space Preserve by Karl Gohl Expenditure Plan remaining: $27,721,085 Life -To -Date Expended through 6/30/17 $52,915 OF FUNDS USED 0.19% LIFE-TO-DATE EXPENDITURE EXPENDITURE EXPENDED THROUGH PLAN PERCENT PORTFOLIO PROJECT PLAN 6/30/2017 REMAINING EXPENDED MAA Miramontes Ridge: 01 Gateway to Coast Public Access, Stream Restoration, and Agriculture Enhancement Gateway to San Mateo Coast 01-003 Potential Property Purchase $52,915 Subtotal $27,774,000 $52,915 $27,721,085 0.19% Measure AA Bond Annual Accountability Report Page 17 Measure AA Bond Annual Accountability ReportPage 18 Portfolio 2: Regional—Bayfront Habitat Protection and Public Access Partnerships Description • Partner to complete gaps in Bay Trail and develop city-to-bay trails • Support wetland restoration and associated interpretive facilities • Preserve additional Bayfront open space • Portfolio Allocation: $5,052,000 • Portfolio Expenditures through 6/30/2017: $205,433 Notable Accomplishments Bay Trail • Completed the environmental review documentation for compliance with the California Environmental Quality Act (CEQA) for both the easement transfer and for construction of the new Bay Trail connection • District Board of Directors approved the exchange agreement for Ravenswood Bay Trail easement in November 2016 with the City and County of San Francisco • With consultant assistance, completed the conceptual trail design, including 30% design plans, completed the environmental review, and received Board approval for the Ravenswood Bay Trail Connection Project • Received support for the proposed Exchange Agreement and Public Trail Easement from the San Francisco Public Utilities Commission Committee (SFPUC), who has forwarded their recommendation for approval to the City/County of San Francisco Board of Supervisors for their consideration in the fall of 2017 • Drafted a Memorandum of Agreement with the City of East Palo Alto for inter-agency coordination on the Ravenswood Bay Trail Easement • Initiated regulatory agency consultation, attended three meetings with regulatory agencies representatives, and received regulatory agency approval for geotechnical investigations to inform the final design of the trail improvements Cooley Landing • City of East Palo Alto completed and opened the Cooley Landing Education Center Project Challenges Bay Trail • Requires extensive, multiple agency coordination, and permits, including coordination between cities, Association of Bay Area Governments (ABAG), SFPUC and other governmental and regulatory entities Cooley Landing • Interagency coordination between District and City of East Palo Alto • Availability of resources for the project • Approval of Measure AA funding and development of amendment to Partnership Agreement Expenditure Plan remaining: $4,846,567 Life -To -Date Expended through 6/30/17 $205,433 4.07% OF FUNDS USED LIFE-TO-DATE EXPENDITURE EXPENDITURE EXPENDED THROUGH PLAN PERCENT PORTFOLIO PROJECT PLAN 6/30/2017 REMAINING EXPENDED MAA Regional: 02 Bayfront Habitat Protection and Public Access Partnership 02-002 Easement SFPUC Ravenswood Trail $309,771 Less: 02-002 Grant Income ($104,338) Subtotal $5,052,000 $205,433 $4,846,567 4.07% Measure AA Bond Annual Accountability Report Page 19 Potential Next Steps Bay Trail • Secure SFPUC approval for the easement exchange • Complete more detailed schematic designs for the new trail • Complete regulatory permitting and construction of new trail Cooley Landing • Complete design drawings, permitting, and construction of final phases of work Measure AA Bond Annual Accountability ReportPage 20 Portfolio 3: Purisima Creek Redwoods—Purisima-to-the-Sea Trail, Watershed Protection and Conservation Grazing Description • Complete and open multi-use Purisima-to-the-Sea Trail connection between Ridge Trail and Coastal Trail, and new parking areas • Preserve additional open space as available • Remove fish barriers and restore Lobitos Creek • Restore ponds for endangered species • Portfolio Allocation: $7,608,000 • Portfolio Expenditures through 6/30/2017: $586,104 Notable Accomplishments • Received two redwood parcel gifts totaling 0.5 acres to Purisima Creek Redwoods Preserve • Entered into a Letter of Understanding with a private property owner in Purisima Creek Redwoods Preserve regarding allowable uses and property transfer terms to proceed with a lot line adjustment and secure coastal uplands as an addition to the Preserve • Completed a survey of the Lobitos Creek Conservation Easement Area in Purisima Creek Redwoods Preserve • Submitted Lot Line Adjustment application for Giusti (Purisima Uplands) property to San Mateo County Planning Department • Completed Purisima Uplands cabin lead and asbestos abatement, demolition, and site cleanup assessment • Completed corral demolition, water system installation, and fence installation at the Bluebrush grazing and residential properties at Purisima Creek Redwoods Preserve • Repaired significant road damage on North Ridge Trail to make it accessible for emergency vehicles, completed extensive repairs on Borden-Hatch Mill Trail and Grabtown Gulch Trail for improved access and drainage, received bids for replacement of a key access bridge, and completed geotechnical work to inform the replacement of the lower parking lot restroom at Purisima Creek Redwoods Preserve • In support of Measure AA improvements, collaborated with the United States Geological Survey (USGS) to install a fog collection experimental stations at Purisima Creek Redwoods Preserve to conduct research on the viability of fog water harvesting • In support of Measure AA improvements in Purisima Creek Redwoods Preserve, completed mowing projects at October Farm to control brush encroachment and at Bluebrush Canyon to control invasive species and reduce wildfire fuels Project Challenges • No project challenges identified at this time Potential Next Steps • Secure all necessary permits and complete construction for the Harkins Bridge Project and the Purisima uplands lot line adjustment application to San Mateo County LIFE-TO-DATE EXPENDITURE EXPENDITURE EXPENDED THROUGH PLAN PERCENT PORTFOLIO PROJECT PLAN 6/30/2017 REMAINING EXPENDED MAA Purisima Creek Redwoods: 03 Purisima-to-the-Sea Trail, Watershed Protection, and Conservation Grazing 03-001 Lot Line Adjustment/Riggs Property Purchase $402,192 03-002 Site Cleanup & Remediation (Guisti Uplands) $5,255 03-004 Harkins Bridge Replacement $178,657 Subtotal $7,608,000 $586,104 $7,021,896 7.70% Expenditure Plan remaining: $7,021,896 Life -To -Date Expended through 6/30/17 $586,104 7.70% OF FUNDS USED Measure AA Bond Annual Accountability Report Page 21 Measure AA Bond Annual Accountability ReportPage 22 Portfolio 4: El Corte de Madera Creek—Bike Trail and Water Quality Projects Description • Develop single-use biking/hiking trails, complete Ridge Trail gaps, and develop trail system leading to parking area • Restore damaged trails to improve water quality • Preserve additional open space as available • Portfolio Allocation: $8,376,000 • Portfolio Expenditures through 6/30/2017: $368,188 Notable Accomplishments • Continued to make progress towards permitting the Oljon Trail at El Corte de Madera Open Space Preserve with construction expected to begin in FY 2017–18 Project Challenges • Securing the necessary California Department of Fish and Wildlife (CDFW) permit for the next phase of trail work may result in construction delays Potential Next Steps • Submit the CDFW permit application and secure the permit to construct Phase 2 • Initiate construction of the Phase 2 Oljon Trail segment El Corte de Madera Creek Open Space Preserve by Ron Langum LIFE-TO-DATE EXPENDITURE EXPENDITURE EXPENDED THROUGH PLAN PERCENT PORTFOLIO PROJECT PLAN 6/30/2017 REMAINING EXPENDED MAA El Corte de Madera Creek: 04 Bike Trail and Water Quality Projects 04-002 ECdM Watershed Protection Final Phase $235,934 04-003 ECdM Watershed Protection Re-assessment $83,956 04-004 Oljon Trail $48,298 Subtotal $8,376,000 $368,188 $8,007,812 4.40% Expenditure Plan remaining: $8,007,812 Life -To -Date Expended through 6/30/17 $368,188 4.40% OF FUNDS USED Measure AA Bond Annual Accountability Report Page 23 Measure AA Bond Annual Accountability ReportPage 24 Portfolio 5: La Honda Creek—Upper Area Recreation, Habitat Restoration, and Conservation Grazing Projects Description • Open upper half of the preserve to public; provide biking/hiking/equestrian trails, dog access, and staging areas • Provide loop and connector trails • Restore habitat for rare species • Improve fencing, corrals, and water systems to reintroduce conservation grazing • Portfolio Allocation: $11,733,000 • Portfolio Expenditures through 6/30/2017: $2,286,428 Notable Accomplishments • Completed nine preliminary technical site investigation studies, and conducted an iterative design development process resulting in two conceptual design alternatives • Conducted focused stakeholder outreach to support concept design development. Held Planning and Natural Resources Committee meeting and Community Open House to solicit public input on Red Barn Public Access Area Concept Design Alternatives • Conducted preliminary trail scouting from parking location Project Challenges • Major landslide blocked planned connection between upper and lower La Honda Potential Next Steps • Select preferred alternative for the Red Barn Site Plan for environmental review to fulfill the CEQA, conduct CEQA review, and forward to the Board for approval • Develop Phase II trail designs for planned trail connection between Red Barn site and Sears Ranch Road parking area (lower La Honda) La Honda Creek Open Space Preserve by Francis Freyberg LIFE-TO-DATE EXPENDITURE EXPENDITURE EXPENDED THROUGH PLAN PERCENT PORTFOLIO PROJECT PLAN 6/30/2017 REMAINING EXPENDED MAA La Honda Creek: Upper 05 Recreation Area, Habitat Restoration, and Conservation Grazing Projects 05-001 Land Conservation $1,756,093 05-002 Grazing/Water Systems Infrastructure $209,765 05-004 Sears Ranch Interim Parking $5,074 05-005 Red Barn Parking Area $216,937 05-006 Sears Ranch Road Repair $98,560 Subtotal $11,733,000 $2,286,428 $9,446,572 19.49% Expenditure Plan remaining: $9,446,572 Life -To -Date Expended through 6/30/17 $2,286,428 19.49% OF FUNDS USED Measure AA Bond Annual Accountability Report Page 25 Measure AA Bond Annual Accountability ReportPage 26 Windy Hill Open Space Preserve by Matt McLean Portfolio 6: Windy Hill—Trail Improvements, Preservation, and Hawthorns Area Historic Partnership Description • Improve trails, complete pond facilities • Increase multi-use trails, study possible improvements to increase dog use • Open Hawthorns Area; develop trails connecting to Portola Valley and Palo Alto trails • Partner to protect, restore, and interpret historic buildings • Improve habitat conditions in Los Trancos Creek • Preserve additional scenic open space as available • Portfolio Allocation: $12,740,000 • Portfolio Expenditures through 6/30/2017: $0 MAA Funds have not been expended on this Portfolio for this reporting period, therefore there are no funds in this Portfolio for the Bond Oversight Committee to validate at this time. This does not necessarily mean that work is not underway in this Preserve, it just means that if there is work in process, other funding sources are being utilized, and the scope is not what was contemplated as part of this Portfolio within the MAA Expenditure Plan, or the scope is not currently eligible for MAA funding. Project Challenges • Historic complex of structures, including the main residence and garage, require stabilization efforts to address public safety for future trail access Potential Next Steps • To facilitate future public access improvements in support of Measure AA, develop a site-specific plan for new public access trails and parking area at the Hawthorns property, in coordination with the Town of Portola Valley and stakeholders • Coordinate with Town of Portola Valley on their realignment and widening of existing trail adjacent to Alpine Road Expenditure Plan remaining: $12,740,000 Life -To -Date Expended through 6/30/17 $0 0% OF FUNDS USED LIFE-TO-DATE EXPENDITURE EXPENDITURE EXPENDED THROUGH PLAN PERCENT PORTFOLIO PROJECT PLAN 6/30/2017 REMAINING EXPENDED MAA Windy Hill: Implementation, 06 Preservation, and Hawthorns Area Historic Partnership Subtotal $12,740,000 – $12,740,000 0.00% Measure AA Bond Annual Accountability Report Page 27 Measure AA Bond Annual Accountability ReportPage 28 Portfolio 7: La Honda Creek—Driscoll Ranch Public Access, Endangered Wildlife Protection, and Conservation Grazing Description • Open Driscoll Ranch Area; provide biking/hiking/equestrian trails, limited dog access, parking areas, and interpretive displays • Develop loop and connector trails • Restore habitat for endangered species • Restore La Honda Creek; remove fish migration barriers • Portfolio Allocation: $14,825,000 • Portfolio Expenditure through 6/30/2017: $10,747,895 Notable Accomplishments • Completed invasive control work at the Apple Orchard and Driscoll Ranch properties of La Honda Creek Preserve • Completed site clean-up and demolition of numerous dilapidated structures, including photography documentation of the structures prior to demolition, to prepare the preserve for public access • Completed construction of a new corral system at the previous site of the Wool Ranch house to assist with grazing efforts • Completed numerous major actions and commenced or continued other major actions toward opening lower La Honda Creek Open Space Preserve to the public in late Fall/Winter 2017, including: • Completed three miles of ranch road repairs, which are critical for opening the roads to public access; maintaining safe passage for patrol, maintenance, and emergency vehicle use; and providing ranch access to support the ongoing conservation grazing program • Finalized plans to replace the decking and install new rails on the Harrington Creek Bridge, which will allow trail users to cross a major creek • Completed stakeholder outreach and received Board approval for new trail names and a new loop trail in the Lower La Honda Creek area • Received Board approval to begin construction of the new Sears Ranch Parking Area, which will provide 22 vehicle spaces, a restroom, signage, and the main trailhead to access the trails in the southern area of the Preserve • Completed design and permitting of the Sears Ranch Parking Lot and the related traffic analysis for the new parking lot • Began preparations for a groundbreaking ceremony and a grand opening ceremony for new Sears Ranch Parking Area • Completed site investigations and two conceptual designs for the proposed Red Barn parking area and trailhead gateway entrance; and conducted focused stakeholder outreach to receive public input on the two designs, including a Planning and Natural Resource Committee meeting and a community open house • Completed a District Housing Structures Assessment for the Driscoll Ranch Area of La Honda Creek Preserve and secured Board approval to build Agricultural Workforce Housing in partnership with San Mateo County • Completed fisheries habitat enhancement project at the former Apple Orchard parcel of lower La Honda Creek, consisting of installation of 13 in-stream large woody debris structures. Project was a partnership with the San Mateo Resource Conservation District and the California Department of Fish and Wildlife through the California State Fisheries Restoration Grant Program Expenditure Plan remaining: $4,077,105 Life -To -Date Expended through 6/30/17 $10,747,895 72.50% OF FUNDS USED LIFE-TO-DATE EXPENDITURE EXPENDITURE EXPENDED THROUGH PLAN PERCENT PORTFOLIO PROJECT PLAN 6/30/2017 REMAINING EXPENDED MAA La Honda Creek: 07 Driscoll Ranch Public Access, Endangered Wildlife Protection, and Conservation Grazing 07-001 Apple Orchard/Event Center Purchase $6,007,601 07-002 Fisheries Restoration Design/Permitting $727,716 Less: 07-002 Grant Income ($230,970) 07-003 Fisheries Enhancement Apple Orchard $16,152 07-004 Fisheries Enhancement Event Center $20,000 07-005 Pond DR05 Repair/Restore $189,422 07-006 Cunha Land Purchase $3,080,705 07-007 Wool House Demolitions $301,774 07-009 Sears Ranch Parking Area $177,011 07-010 Sears Ranch Road Repair $458,484 Subtotal $14,825,000 $10,747,895 $4,077,105 72.50% Measure AA Bond Annual Accountability Report Page 29 Project Challenges • No project challenges identified at this time Potential Next Steps • Develop plans for and construct Phase II roads and trails that will connect new Sears Ranch Road parking area (lower La Honda) with Red Barn parking area (upper La Honda) • Complete permit-only equestrian parking area and equestrian-only trail segment connecting to the new Folger Ranch Loop trail Measure AA Bond Annual Accountability ReportPage 30 Portfolio 8: La Honda Creek/Russian Ridge—Preservation of Upper San Gregorio Watershed and Ridge Trail Completion Description • Preserve Upper San Gregorio watershed; restore endangered species habitats • Support opportunities to provide additional water for fisheries • Complete Bay Area Ridge Trail multi-use connections and gaps • Provide additional public use facilities • Portfolio Allocation: $15,347,000 • Portfolio Expenditures through 6/30/2017: $0 MAA Funds have not been expended on this Portfolio for this reporting period, therefore there are no funds in this Portfolio for the Bond Oversight Committee to validate at this time. This does not necessarily mean that work is not underway in this Preserve, it just means that if there is work in process, other funding sources are being utilized, and the scope is not what was contemplated as part of this Portfolio within the MAA Expenditure Plan, or the scope is not currently eligible for MAA funding. La Honda Creek Open Space Preserve by Francis Freyberg LIFE-TO-DATE EXPENDITURE EXPENDITURE EXPENDED THROUGH PLAN PERCENT PORTFOLIO PROJECT PLAN 6/30/2017 REMAINING EXPENDED MAA La Honda Creek/Russian Ridge: 08 Preservation of Upper San Gregorio Watershed and Ridge Trail Subtotal $15,347,000 – $15,347,000 0.00% Expenditure Plan remaining: $15,347,000 Life -To -Date Expended through 6/30/17 $0 0% OF FUNDS USED Measure AA Bond Annual Accountability Report Page 31 Measure AA Bond Annual Accountability ReportPage 32 Russian Ridge Open Space Preserve by Rich Jarvis Portfolio 9: Russian Ridge—Public Recreation, Grazing, and Wildlife Protection Projects Description • Open currently closed areas of preserve • Construct and extend trails • Improve fencing, corrals, and water systems to reintroduce conservation grazing • Improve habitat for sensitive species, implement pond enhancement projects for garter snakes and red-legged frogs • Portfolio Allocation: $5,560,000 • Portfolio Expenditures through 6/30/2017: $241,819 Notable Accomplishments • Completed year four of the San Francisco garter snake field study and ongoing bullfrog eradication work at Mindego Ranch in Russian Ridge Preserve Project Challenges • No project challenges identified at this time Potential Next Steps • Complete pond enhancement projects for California red-legged frog and San Francisco garter snake Expenditure Plan remaining: $5,318,181 Life -To -Date Expended through 6/30/17 $241,819 4.35% OF FUNDS USED LIFE-TO-DATE EXPENDITURE EXPENDITURE EXPENDED THROUGH PLAN PERCENT PORTFOLIO PROJECT PLAN 6/30/2017 REMAINING EXPENDED MAA Russian Ridge: Public 09 Recreation, Grazing, and Wildlife Protection Projects 09-001 Mindego Grazing Infrastructure $174,416 09-004 Mindego Hill Trail $67,403 Subtotal $5,560,000 $241,819 $5,318,181 4.35% Measure AA Bond Annual Accountability Report Page 33 Mindego Hill, Russian Ridge Open Space Preserve by Karl Gohl Measure AA Bond Annual Accountability ReportPage 34 Coal Creek Open Space Preserve by Jack Gescheidt Portfolio 10: Coal Creek—Reopen Alpine Road for Trail Use Description • Reopen Alpine Road as trail connection between Portola Valley and Skyline Boulevard • Reroute trails to reduce erosion and improve visitor experience • Portfolio Allocation: $8,017,000 • Portfolio Expenditures through 6/30/2017: $4,286 Notable Accomplishments • Entered into contract to initiate an updated geotechnical evaluation of the Alpine Road Trail, owned by San Mateo County, to evaluate the ongoing landslide and drainage problems and identify potential long-term repair scenarios at Coal Creek Preserve Project Challenges • San Mateo County has determined that they can no longer participate in the repair due to other higher priority repair issues stemming from the 2016-17 winter storms • Alpine Road is owned in fee and easement by San Mateo County Potential Next Steps • Receive and review the Road Assessment, Repair Recommendations, and 3rd Party Cost Estimations • Request Board approval for recommended repair scope • Upon approval, enter into negotiations and secure permits to proceed with construction plans, CEQA, permits, etc. Expenditure Plan remaining: $8,012,714 Life -To -Date Expended through 6/30/17 $4,286 0.05% OF FUNDS USED LIFE-TO-DATE EXPENDITURE EXPENDITURE EXPENDED THROUGH PLAN PERCENT PORTFOLIO PROJECT PLAN 6/30/2017 REMAINING EXPENDED MAA Coal Creek: Reopen Alpine 10 Road for Trail Use 10-001 Alpine Rd Trail – Urgent Improvements $4,286 Subtotal $8,017,000 $4,286 $8,012,714 0.05% Measure AA Bond Annual Accountability Report Page 35 Measure AA Bond Annual Accountability ReportPage 36 Portfolio 11: Rancho San Antonio—Interpretive Improvements, Refurbishing, and Transit Solutions Description • Add welcome center • Refurbish and add interpretive exhibits to Deer Hollow Farm • Support of transit improvement options such as bike trails, bike share station, bus service, or additional parking • Portfolio Allocation: $10,811,000 • Portfolio Expenditures through 6/30/2017: $728 Notable Accomplishments • Most work accomplished in Rancho San Antonio has an alternative funding source, and the following activities have occurred in support of MAA improvements: • Conducted a one-week tabling campaign for mountain lion awareness at Rancho San Antonio Preserve • Restored the Deer Hollow Farm white barn milk room at Rancho San Antonio Preserve, which facilitates ongoing environmental interpretation and animal husbandry support for the popular farm site • Completed 69 days of vehicle occupancy counts to understand the parking use patterns for Rancho San Antonio Preserve • Initiated stakeholder agency engagement in identifying opportunities for parking and transit improvement options • Coordinated with the City of Mountain View and Friends of Deer Hollow Farm to prepare for a historic and structural assessment of the White Barn at Rancho San Antonio Preserve to be conducted during FY2017-18 Project Challenges • No project challenges identified at this time Potential Next Steps • In order to facilitate future MAA-eligible improvements, continue to engage stakeholder agencies and community in evaluating parking and transit improvement options • In order to facilitate future MAA-eligible improvements, continue to collaborate with City of Mountain View and stakeholders on the rehabilitation of the Deer Hollow Farm White Barn Rancho San Antonio Open Space Preserve by Daniel Todd Expenditure Plan remaining: $10,810,272 Life -To -Date Expended through 6/30/17 $728 0.01% OF FUNDS USED LIFE-TO-DATE EXPENDITURE EXPENDITURE EXPENDED THROUGH PLAN PERCENT PORTFOLIO PROJECT PLAN 6/30/2017 REMAINING EXPENDED MAA Rancho San Antonio: 11 Interpretive Improvements, Refurbishment, and Transit Solutions 11-001 New Trails to Connect Quarry Trail to Black Mountain Trail $728 Subtotal $10,811,000 $728 $10,810,272 0.01% Measure AA Bond Annual Accountability Report Page 37 Measure AA Bond Annual Accountability ReportPage 38 Portfolio 12: Peninsula/South Bay Cities—Partner to Complete Middle Stevens Creek Trail Description • Support work by cities to develop the middle section of the Stevens Creek Trail and enhance neighborhood connections • Support work by partners to complete stream corridor restoration and Steelhead habitat enhancement below dam • Develop and install interpretive signage • Portfolio Allocation: $1,038,000 • Portfolio Expenditures through 6/30/2017: $0 MAA Funds have not been expended on this Portfolio for this reporting period, therefore there are no funds in this Portfolio for the Bond Oversight Committee to validate at this time. This does not necessarily mean that work is not underway in this Preserve, it just means that if there is work in process, other funding sources are being utilized, and the scope is not what was contemplated as part of this Portfolio within the MAA Expenditure Plan, or the scope is not currently eligible for MAA funding. Stevens Creek Trail by Don Debold Expenditure Plan remaining: $1,038,000 Life -To -Date Expended through 6/30/17 $0 0% OF FUNDS USED LIFE-TO-DATE EXPENDITURE EXPENDITURE EXPENDED THROUGH PLAN PERCENT PORTFOLIO PROJECT PLAN 6/30/2017 REMAINING EXPENDED MAA Peninsula/South Bay Cities: 12 Partner to Complete Middle Stevens Creek Trail Subtotal $1,038,000 – $1,038,000 0.00% Measure AA Bond Annual Accountability Report Page 39 Measure AA Bond Annual Accountability ReportPage 40 Cloverdale ranch on the San Mateo Coast by Leigh Ann M. Gessner Portfolio 13: Cloverdale Ranch—Wildlife Protection, Grazing, and Trail Connections Description • Improve fencing, corrals, and water systems to increase conservation grazing and sustain large contiguous grasslands • Restore habitat for endangered species • Provide trail connections to nearby state parks • Portfolio Allocation: $15,712,000 • Portfolio Expenditures through 6/30/2017: $0 MAA Funds have not been expended on this Portfolio for this reporting period, therefore there are no funds in this Portfolio for the Bond Oversight Committee to validate at this time. This does not necessarily mean that work is not underway in this Preserve, it just means that if there is work in process, other funding sources are being utilized, and the scope is not what was contemplated as part of this Portfolio within the MAA Expenditure Plan, or the scope is not currently eligible for MAA funding. Expenditure Plan remaining: $15,712,000 Life -To -Date Expended through 6/30/17 $0 0% OF FUNDS USED LIFE-TO-DATE EXPENDITURE EXPENDITURE EXPENDED THROUGH PLAN PERCENT PORTFOLIO PROJECT PLAN 6/30/2017 REMAINING EXPENDED MAA Cloverdale Ranch: Wildlife 13 Protection, Grazing, and Trail Connections Subtotal $15,712,000 – $15,712,000 0.00% Measure AA Bond Annual Accountability Report Page 41 Measure AA Bond Annual Accountability ReportPage 42 Russian Ridge Open Space Preserve by Karl Gohl Portfolio 14: Regional—Trail Connections and Campgrounds Description • Develop trails between Butano, Pescadero County Park, and Russian Ridge, and between Skyline, Portola Redwoods, and Big Basin State Park • Partner with county and state parks to improve existing campgrounds • Portfolio Allocation: $3,966,000 • Portfolio Expenditures through 6/30/2017: $0 MAA Funds have not been expended on this Portfolio for this reporting period, therefore there are no funds in this Portfolio for the Bond Oversight Committee to validate at this time. This does not necessarily mean that work is not underway in this Preserve, it just means that if there is work in process, other funding sources are being utilized, and the scope is not what was contemplated as part of this Portfolio within the MAA Expenditure Plan, or the scope is not currently eligible for MAA funding. Expenditure Plan remaining: $3,966,000 Life -To -Date Expended through 6/30/17 $0 0% OF FUNDS USED LIFE-TO-DATE EXPENDITURE EXPENDITURE EXPENDED THROUGH PLAN PERCENT PORTFOLIO PROJECT PLAN 6/30/2017 REMAINING EXPENDED MAA Regional: Trail Connections 14 and Campgrounds Subtotal $3,966,000 – $3,966,000 0.00% Measure AA Bond Annual Accountability Report Page 43 Measure AA Bond Annual Accountability ReportPage 44 Long Ridge Open Space Preserve by Deane Little Portfolio 15: Regional—Redwood Protection and Salmon Fishery Conservation Description • Preserve additional open space as available • Protect and enhance redwood stands, mountain scenery, various habitats, and Steelhead salmon • Portfolio Allocation: $50,728,000 • Portfolio Expenditures through 6/30/2017: $3,018,550 Notable Accomplishments • Purchased 191-acre Conley property as an addition to Long Ridge Preserve to protect redwood forest and the upper Pescadero watershed Project Challenges • No project challenges identified at this time Potential Next Steps • No project next steps identified at this time Expenditure Plan remaining: $47,709,450 Life -To -Date Expended through 6/30/17 $3,018,550 5.95% OF FUNDS USED LIFE-TO-DATE EXPENDITURE EXPENDITURE EXPENDED THROUGH PLAN PERCENT PORTFOLIO PROJECT PLAN 6/30/2017 REMAINING EXPENDED MAA Regional: Redwoods 15 Protection and Salmon Fishery Conservation 15-001 POST/Alpine Ranch Easement $2,508,695 15-002 Conley Property Purchase $509,855 Subtotal $50,728,000 $3,018,550 $47,709,450 5.95% Measure AA Bond Annual Accountability Report Page 45 Measure AA Bond Annual Accountability ReportPage 46 Long Ridge Open Space Preserve by Charlie Theodorovich Portfolio 16: Long Ridge—Trail, Conservation, and Habitat Restoration Projects (Saratoga) Description • Improve roadside parking and provide restrooms • Develop new trail connections to Eagle Rock and Devils Canyon • Repair trails for year-round, multi-use access • Protect watersheds for Steelhead • Preserve additional open space as available • Implement pond and habitat enhancement restoration projects to benefit rare species • Portfolio Allocation: $5,140,000 • Portfolio Expenditures through 6/30/2017: $0 MAA Funds have not been expended on this Portfolio for this reporting period, therefore there are no funds in this Portfolio for the Bond Oversight Committee to validate at this time. This does not necessarily mean that work is not underway in this Preserve, it just means that if there is work in process, other funding sources are being utilized, and the scope is not what was contemplated as part of this Portfolio within the MAA Expenditure Plan, or the scope is not currently eligible for MAA funding. Expenditure Plan remaining: $5,140,000 Life -To -Date Expended through 6/30/17 $0 0% OF FUNDS USED LIFE-TO-DATE EXPENDITURE EXPENDITURE EXPENDED THROUGH PLAN PERCENT PORTFOLIO PROJECT PLAN 6/30/2017 REMAINING EXPENDED MAA Long Ridge: Trail, Conservation, 16 and Habitat Restoration Projects (Saratoga) Subtotal $5,140,000 – $5,140,000 0.00% Measure AA Bond Annual Accountability Report Page 47 Measure AA Bond Annual Accountability ReportPage 48 Stevens Creek Reservoir by Karl Gohl Portfolio 17: Regional—Complete Upper Stevens Creek Trail Description • Complete multi-use connection between the Bay Trail and Bay Area Ridge Trail above the reservoir through Picchetti Ranch Open Space Preserve and Lower/Upper Stevens Creek County Parks • Improve Preserve trails and neighborhood connections • Preserve additional open space as available • Portfolio Allocation: $7,760,000 • Portfolio Expenditures through 6/30/2017: $1,027,581 Notable Accomplishments • Evaluated Lysons Property for demolition and restoration Project Challenges • No project challenges identified at this time Potential Next Steps • Secure permits for bridges and construct bridges • Prepare demolition bid package and permits for Lysons Property demolition and restoration Expenditure Plan remaining: $6,732,419 Life -To -Date Expended through 6/30/17 $1,027,581 13.24% OF FUNDS USED LIFE-TO-DATE EXPENDITURE EXPENDITURE EXPENDED THROUGH PLAN PERCENT PORTFOLIO PROJECT PLAN 6/30/2017 REMAINING EXPENDED MAA Regional: Complete Upper 17 Stevens Creek Trail 17-001 Lysons Property Purchase $1,494,552 Less: Grant Income (50% of purchase price) ($740,000) 17-002 Lobner Demolition $128,760 17-004 Lower Stevens Canyon Hiking Bridge $144,269 Subtotal $7,760,000 $1,027,581 $6,732,419 13.24% Measure AA Bond Annual Accountability Report Page 49 Measure AA Bond Annual Accountability ReportPage 50 Portfolio 18: South Bay Foothills—Saratoga-to-Sea Trail and Wildlife Corridor Description • Protect wildlife corridor along Highway 9 • Connect trail to Saratoga-to-Sea Trail and Skyline-to-the-Sea Trail • Portfolio Allocation: $1,365,000 • Portfolio Expenditures through 6/30/2017: $0 MAA Funds have not been expended on this Portfolio for this reporting period, therefore there are no funds in this Portfolio for the Bond Oversight Committee to validate at this time. This does not necessarily mean that work is not underway in this Preserve, it just means that if there is work in process, other funding sources are being utilized, and the scope is not what was contemplated as part of this Portfolio within the MAA Expenditure Plan, or the scope is not currently eligible for MAA funding. Potential Next Steps • Provide partnership funding and technical staff support to City of Saratoga for completion of the trail design plans, environmental review and permitting of the approximately three-mile Saratoga-to-the-Sea Trail connection from Saratoga Quarry Park and Sanborn County Park Saratoga-to-Sea Trail by Midpen Staff Expenditure Plan remaining: $1,365,000 Life -To -Date Expended through 6/30/17 $0 0% OF FUNDS USED LIFE-TO-DATE EXPENDITURE EXPENDITURE EXPENDED THROUGH PLAN PERCENT PORTFOLIO PROJECT PLAN 6/30/2017 REMAINING EXPENDED MAA South Bay Foothills: 18 Saratoga-to-Sea Trail and Wildlife Corridor Subtotal $1,365,000 – $1,365,000 0.00% Measure AA Bond Annual Accountability Report Page 51 Measure AA Bond Annual Accountability ReportPage 52 El Sereno Open Space Preserve by Jack Gescheidt Portfolio 19: El Sereno—Dog Trails and Connections Description • Provide infrastructure to open trails to dogs • Develop connections to Skyline, Sanborn County Park, and Lexington Reservoir • Portfolio Allocation: $2,254,000 • Portfolio Expenditures through of 6/30/2017: $715 Notable Accomplishments • Completed CEQA review and a Use and Management Plan Amendment for Board approval to open existing trails to dogs on-leash • Added on-leash dog use to six miles of existing trail; however, this effort was funded through other funding sources. Per Generally Accepted Accounting Principles (GAAP), project did not qualify as a capital improvement project and therefore is ineligible for Measure AA Funds • To facilitate future Measure AA trail projects, initiated site investigations for regional trail connections between Sanborn County Park, El Sereno Open Space Preserve and potential Highway 17 Bay Area Ridge Trail crossing Project Challenges • Additional property rights are needed to provide contiguous access across all existing trailheads Potential Next Steps • The predominant MAA expenditures anticipated in the future will likely be related to purchasing land rights, easements, and fee title to provide access in support of Portfolio objectives • To facilitate future Measure AA trail projects, continue analysis of regional trail connections between Sanborn County Park, El Sereno Open Space Preserve and potential Highway 17 Bay Area Ridge Trail crossing Expenditure Plan remaining: $2,253,285 Life -To -Date Expended through 6/30/17 $715 0.03% OF FUNDS USED LIFE-TO-DATE EXPENDITURE EXPENDITURE EXPENDED THROUGH PLAN PERCENT PORTFOLIO PROJECT PLAN 6/30/2017 REMAINING EXPENDED MAA El Sereno: Dog Trails 19 and Connections $715 Subtotal $2,254,000 $715 $2,253,285 0.03% Measure AA Bond Annual Accountability Report Page 53 El Sereno Open Space Preserve ©David Weintraub, 2002 Measure AA Bond Annual Accountability ReportPage 54 Sierra Azul Open Space Preserve by Ken Hickman Portfolio 20: South Bay Foothills—Wildlife Passage and Ridge Trail Improvements Description • Establish safe corridors for mountain lions across Highway 17 • Establish Bay Area Ridge Trail crossing • Portfolio Allocation: $13,966,000 • Portfolio Expenditures through 6/30/2017: $191,974 Notable Accomplishments • In coordination with a consultant team completed a Draft Project Preliminary Alternatives Report for both the Wildlife Corridor, and Regional Trails Crossing at Highway 17 for agency review • Engaged public and stakeholders input on proposed draft preliminary alternatives and received agency comments on draft report • Released Agency Draft Recommended Alternatives Report for both the Wildlife Corridor, and Regional Trails Crossing at Highway 17 and received agency comments • Developed a Cooperative Agreement with Caltrans and a Caltrans Project Initiation Document Project Challenges • Complex Caltrans process and coordination with numerous project partners and stakeholders • Additional studies and coordination needed for identifying feasible trail connections linking to regional trail crossing at Highway 17, evaluating multiple scenarios for trail connections on either side of Highway 17 • Need for property rights to complete trail Potential Next Steps • Complete Project Preliminary Alternatives Report for submission to Caltrans Expenditure Plan remaining: $13,774,026 Life -To -Date Expended through 6/30/17 $191,974 1.37% OF FUNDS USED LIFE-TO-DATE EXPENDITURE EXPENDITURE EXPENDED THROUGH PLAN PERCENT PORTFOLIO PROJECT PLAN 6/30/2017 REMAINING EXPENDED MAA South Bay Foothills: Wildlife 20 Passage and Ridge Trail Improvements 20-001 Highway 17 Crossing Culvert $191,657 20-002 Highway 17 Bay Area Ridge Trail Crossing $317 Subtotal $13,966,000 $191,974 $13,774,026 1.37% Measure AA Bond Annual Accountability Report Page 55 Measure AA Bond Annual Accountability ReportPage 56 Portfolio 21: Bear Creek Redwoods—Public Recreation and Interpretive Projects Description • Open for hiking, equestrian activities • Provide parking areas, trails, upgrade stables • Restore and protect habitats for various species • Repair roads and trails to reduce sediment • Rehabilitate Alma College site • Portfolio Allocation: $17,478,000 • Portfolio Expenditures through 6/30/2017: $1,219,294 Notable Accomplishments • Began significant natural resources protection and restoration projects in Bear Creek Redwoods Open Space Preserve in preparation for opening the preserve to the public in late 2018, including: • Implemented the first year of a targeted invasive species treatment to restore native habitats throughout the Preserve • Completed a Pond Assessment and Management Plan to determine the water needs for wildlife and habitat values at aquatic sites • Completed the Bat Habitat Enhancement and Relocation Plan to protect the bat colonies at Alma College • Began the first year of the western pond turtle population study and developed a Western Pond Turtle Management Plan • Completed an Archaeological Resources Curation Guidelines Report to address cultural resources within the Preserve • Completed initial filings for Preserve water rights Bear Creek Redwoods Open Space Preserve by Ken Nitz Measure AA Bond Annual Accountability Report Page 57 Notable Accomplishments (continued) • To facilitate future Measure AA projects, completed numerous major actions and commenced or continued other major actions toward opening Bear Creek Redwoods Open Space Preserve to the public and improving Bear Creek Stables, including: • Received Board approval of the Bear Creek Redwoods Preserve Plan and certification of the accompanying Environmental Impact Report, which included as plan components the Alma College Cultural Landscape Rehabilitation Plan and Bear Creek Stables Site Plan • Completed archaeological studies in advance of ground disturbance activities as required by the project’s Environmental Impact Report, prior to beginning trail construction and road improvements work • Began clearing roads to establish two key trail connections that will connect visitors between the future new parking area and the trails that will be opened on the west side of Bear Creek Road • Conducted an engineering feasibility study to identify the preferred location for a Bear Creek Road trail undercrossing as an option for connecting visitors between the new parking area near the former Alma College site and trails located west of Bear Creek Road • Issued a Request for Proposals and entered into contract to complete the design, engineering, and construction documents for the new, Alma College Parking Area, Bear Creek Road undercrossing, and Bear Creek Stables Site Improvements • Conducted initial geotechnical studies to evaluate the integrity of large retaining walls on the property that are supporting a major access road and existing structures • Conducted a recreation planning analysis for potential re-use of the Alma College Chapel • Completed an earthquake fault rupture hazard study to determine if the Alma College Chapel could be occupied • Completed an assessment of water source options and associated cost estimates for the Preserve, concluding that the most cost effective and secure option is to seek a direct water line connection to the San Jose Water Company (SJWC) main line • Executed an agreement with SJWC to initiate a water line connection to the SJWC main line as the new source of water for the Preserve and Bear Creek Stables • Conducted numerous field investigations and trail route evaluations for a potential future regional trail crossing over Highway 17 that would become part of the Bay Area Ridge Trail near the El Sereno, St. Joseph’s Hill, and Bear Creek Redwoods Open Space Preserves • Received Board approval of a Memorandum of Understanding with the Santa Clara Valley Water District for a five year, $1,000,000 funding agreement to complete invasive species removal at Bear Creek Redwoods Open Space Preserve, with a possible five year extension for an additional $1,000,000 • Submitted CDFW and RWQCB permits for the Webb Creek Bridge Replacement Project • Awarded a contract for design and engineering services for water system improvements • Submitted application to SJWC and Santa Clara County encroachment permit for potable water connection on Bear Creek Road • To facilitate Measure AA improvements, obtained Board approval of the Preserve Plan, including the Bear Creek Stables Site Plan, Alma College Cultural Landscape Rehabilitation Plan, and Environmental Impact Report Measure AA Bond Annual Accountability ReportPage 58 Project Challenges • Additional design revisions and input for completing modifications to parking layout to reduce potential impacts to the Western pond turtle while avoiding major impacts to the surrounding historic resources and cultural landscape • Parking lot may also impact an adjacent, large underground culvert that extends under Bear Creek Road, which may require additional engineering work • Complex water sources and rights issues Potential Next Steps • Continue IPM implementation on roads and trails, shaded fuel break • Road, trail, bridge, and retaining wall improvements • Complete installation of water lateral to SJWC main on Bear Creek Road • Complete the design and construction plans, permitting and construction for the new Alma College parking area and trail connections • Complete design and construction of pond improvement projects Bear Creek Redwoods Open Space Preserve by Karl Gohl Expenditure Plan remaining: $16,258,706 Life -To -Date Expended through 6/30/17 $1,219,294 6.98% OF FUNDS USED LIFE-TO-DATE EXPENDITURE EXPENDITURE EXPENDED THROUGH PLAN PERCENT PORTFOLIO PROJECT PLAN 6/30/2017 REMAINING EXPENDED MAA Bear Creek Redwoods: 21 Public Recreation and Interpretive Projects 21-001 Moody Gulch Fence and Gate Improvements $848 21-002 Bear Creek Redwoods Preserve Plan ($14,369) 21-003 Water Infrastructure Improvements $102,699 21-004 Bear Creek Stables Site Plan (Phase I) $189,962 21-005 Bear Creek Preserve Plan (Phase I) $381,669 21-006 Alma College Rehabilitation $212,732 21-007 Bear Creek Reserve Invasive Weed Treatment $189,741 21-008 BCR Pond Restoration $89,998 21-009 Webb Creek Bridge Replacement $66,014 Subtotal $17,478,000 $1,219,294 $16,258,706 6.98% Measure AA Bond Annual Accountability Report Page 59 Measure AA Bond Annual Accountability ReportPage 60 Mt. Umunhum Trail, Sierra Azul Open Space Preserve by Erin Ashford Portfolio 22: Sierra Azul—Cathedral Oaks Public Access and Conservation Projects Description • Develop multi-use trail and plan future trails as land is available • Develop parking • Restore plant communities and soils • Install trailside amenities • Preserve additional open space and complete wildlife corridor in upper Los Gatos Creek watershed • Portfolio Allocation: $6,714,000 • Portfolio Expenditures through 6/30/2017: $646,225 Notable Accomplishments • Completed numerous natural resource protection and restoration projects in Sierra Azul Preserve, including: • Completed the fifth year of the coordinated monitoring effort to reduce mercury within the Guadalupe River Watershed • Completed the first phase of invasive plant removal and developed a partnership with the San Jose Conservation Corps for the Hendrys Creek watershed restoration effort Project Challenges • No project challenges identified at this time Potential Next Steps • No project next steps identified at this time Expenditure Plan remaining: $6,067,775 Life -To -Date Expended through 6/30/17 $646,225 9.63% OF FUNDS USED LIFE-TO-DATE EXPENDITURE EXPENDITURE EXPENDED THROUGH PLAN PERCENT PORTFOLIO PROJECT PLAN 6/30/2017 REMAINING EXPENDED MAA Sierra Azul: Cathedral Oaks 22 Public Access and Conservation Projects 22-001 Hendrys Creek Restoration $145,638 Less: 22-001 Grant Income ($40,000) 22-003 Freudenberg Land Purchase $540,587 Subtotal $6,714,000 $646,225 $6,067,775 9.63% Measure AA Bond Annual Accountability Report Page 61 Hendrys Creek, Sierra Azul Open Space Preserve by Midpen Staff Measure AA Bond Annual Accountability ReportPage 62 Portfolio 23: Sierra Azul—Mount Umunhum Public Access and Interpretation Projects Description • Open Mount Umunhum for multi-use public access to summit via road and trail • Open Bay Area Ridge Trail and nearby trail connections • Preserve additional open space and complete wildlife corridor • Portfolio Allocation: $27,972,000 • Portfolio Expenditures through 6/30/2017: $14,864,492 Notable Accomplishments • Created a new contract with Grassroots Ecology Native Plant Nursery to grow approximately 1,900 native plants and five pounds of native grass and forb seed for Phase One of the Mount Umunhum Revegetation Project • Developed a habitat restoration plan for the Mount Umunhum Summit to enhance the native plant recolonization of the restored mountaintop, incorporating input from the Amah Mutsun tribal group on Native American restoration techniques • Surveyed and mapped rare plant populations and collected native plant seeds in support of the restoration planting plan • Completed numerous major actions and commenced or continued other major actions to prepare for the September 2017 grand public opening of the Mount Umunhum Summit at Sierra Azul Open Space Preserve, including: • Completed major construction milestones on the Mount Umunhum Trail, including the construction of an additional 0.5-mile trail segment, the narrowing of old abandoned road cuts into a trail, and the installation of three new pedestrian bridges • Completed the Guadalupe Creek Overlook vista point structure • Completed 75% of the road safety improvements on Mount Umunhum Road, which will be made open to public vehicular use from Hicks Road all the way to the top of the summit • Completed the design, permitting and construction for the Guadalupe Creek Overlook (a featured overlook along the Mount Umunhum Trail), including permitting and construction of three new trail bridges for Mount Umunhum Trail • Purchased the 38.97-acre former Meyer/Connolly Property to protect additional open space and wildlife corridors • In support of MAA improvements, purchased 28-acre Rosetta property to secure public access rights along Mount Umunhum Road and the Woods Trail in the Mount Umunhum area of Sierra Azul Preserve (non-MAA funds) • Started programming of Meyer property structures for future Ranger housing Project Challenges • No project challenges identified at this time Potential Next Steps • Complete site and contour restoration of the summit • Complete construction of the Summit Project, which includes new parking at the summit, ADA-accessible trails, weather shelters, restrooms, stairs, ceremonial circle, and other site amenities • Complete construction of the Mount Umunhum Road Rehabilitation Project that improved over 5 miles of roadway for the public to safely drive to and from the summit Expenditure Plan remaining: $13,107,508 Life -To -Date Expended through 6/30/17 $14,864,492 53.14% OF FUNDS USED LIFE-TO-DATE EXPENDITURE EXPENDITURE EXPENDED THROUGH PLAN PERCENT PORTFOLIO PROJECT PLAN 6/30/2017 REMAINING EXPENDED MAA Sierra Azul: Mount Umunhum 23 Public Access and Interpretive Projects 23-001 Property Purchase $1,264,084 23-002 Bald Mountain Staging Area to Summit Trail $434,604 23-004 Summit Restoration and Improvement $8,370,004 Less: 23-004 Grant Income ($520,000) 23-005 Mt. Um. Trail Overlook and Bridges $233,804 23-006 Mt. Um. Road – Design/Permitting $5,081,996 Subtotal $27,972,000 $14,864,492 $13,107,508 53.14% Potential Next Steps (continued) • Complete and open nearly 4-miles of the new Mount Umunhum Trail to connect people to the summit • Develop interpretive material content and completed the design and installation of new interpretive signage and exhibits • Finalize the design, completed construction of the new trail steps and open the Mount Umunhum Trail to public use • Complete Rosetta property site cleanup including removal of debris and access road grading • Continue to evaluate and design Meyer property structures for future Ranger housing in support of Measure AA improvements • Continue native plant restoration of summit area Measure AA Bond Annual Accountability Report Page 63 Measure AA Bond Annual Accountability ReportPage 64 Rancho de Guadalupe Area at Sierra Azul Open Space Preserve by Midpen Staff Portfolio 24: Sierra Azul—Rancho de Guadalupe Family Recreation Description • Open Rancho de Guadalupe to public access • Develop accessible multi-use trails with amenities such as parking and family recreation • Restore habitat for rare species • Protect cultural and natural resources • Portfolio Allocation: $10,078,000 • Portfolio Expenditures through 6/30/2017: $1,591,996 Notable Accomplishments • Purchased three properties totaling 51 acres within the Rancho de Guadalupe area of Sierra Azul Preserve to protect grassland habitat and water quality in the Guadalupe Creek watershed Project Challenges • No project challenges identified at this time Potential Next Steps • No project next steps identified at this time LIFE-TO-DATE EXPENDITURE EXPENDITURE EXPENDED THROUGH PLAN PERCENT PORTFOLIO PROJECT PLAN 6/30/2017 REMAINING EXPENDED MAA Sierra Azul: Rancho de 24 Guadalupe Family Recreation 24-001 Barth Property Purchase $300,035 24-002RP Peterson Property Acquisition $700,603 24-003RP Property Exchange Navid/Bagher $39,184 24-004RP Kahn Property Acquisition $552,174 Subtotal $10,078,000 $1,591,996 $8,486,004 15.80% Expenditure Plan remaining: $8,486,004 Life -To -Date Expended through 6/30/17 $1,591,996 15.80% OF FUNDS USED Measure AA Bond Annual Accountability Report Page 65 Sierra Azul Open Space Preserve by Erin Ashford Measure AA Bond Annual Accountability ReportPage 66 Sierra Azul Open Space Preserve by Robin Lord Portfolio 25: Sierra Azul—Loma Prieta Area Public Access, Regional Trails, and Habitat Projects Description • Provide public access and recreation, including small campground • Develop, improve, connect regional multi-use trails to Forest of Nisene Marks State Park, to protected land to the east, and to Mount Umunhum • Protect Steelhead habitat, rare plants and grasslands, and restore Knob Cone Pine Stands • Portfolio Allocation: $7,986,000 • Portfolio Expenditures through 6/30/2017: $410,150 Notable Accomplishments • No accomplishments in the current reporting period Project Challenges • No project challenges identified at this time Potential Next Steps • No project next steps identified at this time Expenditure Plan remaining: $7,575,850 Life -To -Date Expended through 6/30/17 $410,150 5.14% OF FUNDS USED LIFE-TO-DATE EXPENDITURE EXPENDITURE EXPENDED THROUGH PLAN PERCENT PORTFOLIO PROJECT PLAN 6/30/2017 REMAINING EXPENDED MAA Sierra Azul: Loma Prieta Area 25 Public Access, Regional Trails, and Habitat Projects 25-001 Burton Property Purchase $410,150 Subtotal $7,986,000 $410,150 $7,575,850 5.14% Measure AA Bond Annual Accountability Report Page 67 View toward Mount Umunhum and Loma Prieta by Karl Gohl TOTAL THROUGH CURRENT PERIOD TOTAL LIFE TO EXPENDITURE PORT. EXPENDITURE PRIOR PERIOD 7/1/16 THROUGH DATE THROUGH PLAN PERCENT # PROJECT PLAN 6/30/16 6/30/17 6/30/17 REMAINING EXPENDED MAA Miramontes Ridge: Gateway 01 to Coast Public Access, Stream Restoration, and Agriculture Enhancement Gateway to San Mateo Coast 01-003 Zions Property Purchase $6,315 $46,600 $52,915 Subtotal $27,774,000 $6,315 $46,600 $52,915 $27,721,085 0.19% MAA Regional: Bayfront Habitat 02 Protection and Public Access Partnership Habitat Protection and Public Access 02-002 Easement SFPUC Ravenswood Trail $97,437 $212,334 $309,771 Less: 02-002 Grant Income – ($104,338) ($104,338) Subtotal $5,052,000 $ 97,437 $107,996 $205,433 $4,846,567 4.07% MAA Purisima Creek Redwoods: Purisima 03 to Sea Trail, Watershed Protection, and Conservation Grazing 03-001 Lot Line Adjustment/Riggs Property Purchase $382,288 $19,904 $402,192 03-002 Site Cleanup & Remediation (Guisti Uplands) – $5,255 $5,255 03-004 Harkins Bridge Replacement $121,680 $56,977 $178,657 Subtotal $7,608,000 $503,968 $82,136 $586,104 $7,021,896 7.70% MAA El Corte de Madera Creek: Bike 04 Trail and Water Quality Projects 04-002 ECdM Watershed Protection Final Phase $247,563 ($11,629) $235,934 04-003 ECdM Watershed Protection Re-assessment $83,956 – $83,956 04-004 Oljon Trail $26,602 $21,696 $48,298 Subtotal $8,376,000 $358,121 $10,067 $368,188 $8,007,812 4.40% MAA La Honda Creek: Upper Recreation 05 Area, Habitat Restoration, and Conservation Grazing Projects 05-001 Land Conservation $1,756,093 – $1,756,093 05-002 Grazing/Water Systems Infrastructure $209,765 – $209,765 05-004 Sears Ranch Interim Parking $5,074 – $5,074 05-005 Red Barn Parking Area $13,562 $203,375 $216,937 05-006 Sears Ranch Road Repair $86,930 $11,629 $98,560 Subtotal $11,733,000 $2,071,424 $215,004 $2,286,428 $9,446,572 19.49% Financial Report by Project Measure MAA Expenditures Measure AA Bond Annual Accountability ReportPage 68 TOTAL THROUGH CURRENT PERIOD TOTAL LIFE TO EXPENDITURE PORT. EXPENDITURE PRIOR PERIOD 7/1/16 THROUGH DATE THROUGH PLAN PERCENT # PROJECT PLAN 6/30/16 6/30/17 6/30/17 REMAINING EXPENDED MAA Windy Hill: Trail Implementation, 06 Preservation, and Hawthorns Area Historic Partnership Subtotal $12,740,000 $12,740,000 0.00% MAA La Honda Creek: Driscoll Ranch 07 Public Access, Endangered Wildlife Protection, and Conservation Grazing 07-001 Apple Orchard/Event Center Purchase $6,008,068 ($467) $6,007,601 07-002 Fisheries Restoration Design/Permitting $727,716 – $727,716 Less: 07-002 Grant Income ($230,970) – ($230,970) 07-003 Fisheries Enhancement – Apple Orchard – $16,152 $16,152 07-004 Fisheries Enhancement Event Center $20,000 – $20,000 07-005 Pond DR05 Repair/Restore $150,682 $38,740 $189,422 07-006 Cunha Land Purchase $3,080,705 – $3,080,705 07-007 Wool House Demolitions $38,606 $263,168 $301,774 07-009 Sears Ranch Parking Area $37,499 $139,512 $177,011 07-010 Sears Ranch Road Repair $2,564 $455,920 $458,484 Subtotal $14,825,000 $9,834,870 $913,025 $10,747,895 $4,077,105 72.50% MAA La Honda Creek/Russian Ridge: 08 Preservation of Upper San Gregorio Watershed and Ridge Trail Subtotal $15,347,000 – – – $15,347,000 0.00% MAA Russian Ridge: Public Recreation, 09 Grazing, and Wildlife Protection Projects 09-001 Mindego Grazing Infrastructure $169,078 $5,338 $174,416 09-004 Mindego Hill Trail $67,107 $296 $67,403 Subtotal $5,560,000 $236,185 $5,634 $241,819 $5,318,181 4.35% MAA Coal Creek: Reopen Alpine 10 Road for Trail Use 10-001 Alpine Road Trail – Urgent Improvements – $4,286 $4,286 Subtotal $8,017,000 – $4,286 $4,286 $8,012,714 0.05% Measure AA Bond Annual Accountability Report Page 69 TOTAL THROUGH CURRENT PERIOD TOTAL LIFE TO EXPENDITURE PORT. EXPENDITURE PRIOR PERIOD 7/1/16 THROUGH DATE THROUGH PLAN PERCENT # PROJECT PLAN 6/30/16 6/30/17 6/30/17 REMAINING EXPENDED MAA Rancho San Antonio: Interpretive 11 Improvements, Refurbishing, and Transit Solutions 11-001 New Trails to Connect Quarry Trail to Black Mountain Trail $728 – $728 Subtotal $10,811,000 $728 – $728 $10,810,272 0.01% MAA Peninsula/South Bay Cities: Partner to 12 Complete Middle Stevens Creek Trail Subtotal $1,038,000 – – – $1,038,000 0.00% MAA Cloverdale Ranch: Wildlife Protection, 13 Grazing, and Trail Connections Subtotal $15,712,000 – – – $15,712,000 0.00% MAA Regional: Trail Connections 14 and Campgrounds Subtotal $3,966,000 – – – $3,966,000 0.00% MAA Regional: Redwoods Protection and 15 Salmon Fishery Conservation 15-001 POST/Alpine Ranch Easement $2,495,713 $12,982 $2,508,695 15-002 Conley Property Purchase – $509,855 $509,855 Subtotal $50,728,000 $2,495,713 $522,837 $3,018,550 $47,709,450 5.95% MAA Long Ridge: Trail, Conservation, 16 and Habitat Restoration Projects (Saratoga) Subtotal $5,140,000 – – – $5,140,000 0.00% MAA Regional: Complete Upper 17 Stevens Creek Trail 17-001 Lysons Property Purchase $1,494,552 – $1,494,552 Less: Grant Income (50% of purchase price) ($740,000) – ($740,000) 17-002 Lobner Demolition $128,760 – $128,760 17-004 Lower Stevens Canyon Hiking Bridge $133,032 $11,237 $144,269 Subtotal $7,760,000 $1,016,344 $11,237 $1,027,581 $6,732,419 13.24% MAA South Bay Foothills: Saratoga-to-Sea 18 Trail and Wildlife Corridor Subtotal $1,365,000 – – – $1,365,000 0.00% Measure AA Bond Annual Accountability ReportPage 70 TOTAL THROUGH CURRENT PERIOD TOTAL LIFE TO EXPENDITURE PORT. EXPENDITURE PRIOR PERIOD 7/1/16 THROUGH DATE THROUGH PLAN PERCENT # PROJECT PLAN 6/30/16 6/30/17 6/30/17 REMAINING EXPENDED MAA El Sereno: Dog Trails and 19 Connections $715 – $715 Subtotal $2,254,000 $715 – $715 $2,253,285 0.03% MAA South Bay Foothills: Wildlife Passage 20 and Ridge Trail Improvements 20-001 Highway 17 Crossing Culvert $89,721 $101,936 $191,657 20-002 Highway 17 Bay Area Ridge Trail Crossing $317 – $317 Subtotal $13,966,000 $90,038 $101,936 $191,974 $13,774,026 1.37% MAA Bear Creek Redwoods: Public 21 Recreation and Interpretive Projects 21-001 Moody Gulch Fence and Gate Improvements $848 – $848 21-002 Bear Creek Redwoods Preserve Plan ($14,369) – ($14,369) 21-003 Water Infrastructure Improvements $85,742 $16,957 $102,699 21-004 Bear Creek Stables Site Plan (Phase I) $6,125 $183,837 $189,962 21-005 Bear Creek Preserve Plan (Phase I) $53,809 $327,860 $381,669 21-006 Alma College Rehabilitation $155,082 $57,650 $212,732 21-007 Bear Creek Reserve Invasive Weed Treatment $43,174 $146,567 $189,741 21-008 BCR Pond Restoration – $89,998 $89,998 21-009 Webb Creek Bridge Replacement – $66,014 $66,014 Subtotal $17,478,000 $330,411 $888,883 $1,219,294 $16,258,706 6.98% MAA Sierra Azul: Cathedral Oaks Public 22 Access and Conservation Projects 22-001 Hendrys Creek Restoration $66,107 $79,531 $145,638 Less: 22-001 Grant Income ($40,000) – ($40,000) 22-003 Freudenberg Land Purchase $540,587 – $540,587 Subtotal $6,714,000 $566,694 $79,531 $646,225 $6,067,775 9.63% Measure AA Bond Annual Accountability Report Page 71 TOTAL THROUGH CURRENT PERIOD TOTAL LIFE TO EXPENDITURE PORT. EXPENDITURE PRIOR PERIOD 7/1/16 THROUGH DATE THROUGH PLAN PERCENT # PROJECT PLAN 6/30/16 6/30/17 6/30/17 REMAINING EXPENDED MAA Sierra Azul: Mount Umunhum Public 23 Access and Interpretive Projects 23-001 Property Purchase $1,264,084 – $1,264,084 23-002 Bald Mountain Staging Area to Summit Trail $121,489 $313,115 $434,604 23-004 Summit Restoration and Improvement $978,058 $7,391,946 $8,370,004 Less: 23-004 Grant Income – ($520,000) ($520,000) 23-005 Mt. Um. Trail Overlook and Bridges 195,764 38,040 233,804 23-006 Mt. Um. Road – Design/Permitting $323,533 $4,758,463 $5,081,996 Subtotal $27,972,000 $2,882,928 $11,981,564 $14,864,492 $13,107,508 53.14% MAA Sierra Azul: Rancho de Guadalupe 24 Family Recreation 24-001 Barth Property Purchase $300,056 ($21) $300,035 24-002RP Peterson Property Acquisition – $700,603 $700,603 24-003RP Property Exchange Navid/Bagher – $39,184 $39,184 24-004RP Kahn Property Acquisition – $552,174 $552,174 Subtotal $10,078,000 $300,056 $1,291,940 $1,591,996 $8,486,004 15.80% MAA Sierra Azul: Loma Prieta Area Public 25 Access, Regional Trails, and Habitat Projects 25-001 Burton Property Purchase $410,150 – $410,150 Subtotal $7,986,000 $410,150 – $410,150 $7,575,850 5.14% Grand Total $300,000,000 $21,202,097 $16,262,675 $37,464,772 $262,535,228 12.49% Measure AA Bond Annual Accountability ReportPage 72 Midpeninsula Regional Open Space District 330 Distel Circle Los Altos, California 94022-1404 Phone: 650-691-1200 • Fax: 650-691-0485 E-mail: info@openspace.org Web site: www.openspace.org PRINTED ON POST CONSUMER WASTE PAPER PRINTED WITHSOY INK Photo on front cover Sierra Azul Open Space Preserve by Karl Gohl -5- EXHIBIT A Expenditure Plan TITLE: To improve access to hiking and biking opportunities, protect and preserve redwood forests, natural open spaces, the scenic beauty of the region and coastline, critical wildlife habitat, restore creeks to protect water quality, and reduce forest fire risk. 1. SUMMARY Founded by voters in 1972, the Midpeninsula Regional Open Space District (“District”) has protected, in perpetuity, 62,000 acres of open space containing 26 preserves and more than 220 miles of trails that serve Santa Clara, San Mateo, and a portion of Santa Cruz counties. The District’s preserves provide a scenic backdrop to the region offering residents places for hiking, biking, horseback riding, or simply connecting with nature, close to home. Throughout its 41-year history the District has used taxpayer dollars wisely, leveraging funds to bring in state, federal, and private grant money, and providing annual audits in a transparent public process. The District is governed by a publicly elected board of directors. Over the years, the number of acres and miles of trails the District owns and maintains have steadily increased, as have the number of visitors and the cost of land. Expanding public access, restoring sensitive environments and purchasing land are costly, yet are high priorities for the public. To reinforce and expand these types of services and resources, the Board of Directors is placing this funding measure on the June 3, 2014 ballot. $300 million in General Obligation Bonds will be sold. The bond repayment would be financed by an annual property tax override based on a tax rate not to exceed $3.18 per $100,000 of assessed value of property owned per year. This Expenditure Plan outlines priority actions identified by the public and proposed by the District to be funded with bond proceeds. Part B describes each priority action and describes what goals it will achieve. Part C of the Expenditure Plan describes the establishment of an independent Citizen Oversight Committee. -6- 2. PRIORITY ACTIONS The priority actions listed below are the result of a process that combined scientific analysis with broad public engagement to create a shared vision for the future of the District and the region’s open space. Each priority action may address one or more of the following as more specifically described in the table Priority Actions, By Region attached to this Expenditure Plan: • Improved hiking, biking, and equestrian opportunities • Protection and preservation of redwoods, natural open spaces, the scenic beauty of the region and coastline, critical habitats • Restoration of creeks to protect water quality • Reduction of forest fire risk Priority actions are distributed throughout the District as depicted on the map attached to this Expenditure Plan. If approved, the bond proceeds would be allocated to fund the capital improvements necessary to implement the priority actions listed below. Note: the number associated with each priority action does not denote its priority level, but is only used for identification purposes to correlate with the locations depicted on the map. The estimates associated with each priority action are in 2014 dollars. These are estimates only, and the actual costs may change in implementation. The District may annually review and propose amendments to the Expenditure Plan to provide for the use of additional federal, state and local funds, to account for unexpected revenues, or to take into consideration unforeseen circumstances. The District shall act on no more than one package of amendments each fiscal year. The District shall establish a process for proposed Expenditure Plan amendment(s) which ensures that the Citizen Oversight Committee is included in the development. Upon completion of this process, amendments(s) to the Expenditure Plan must be passed by a two-thirds majority of the District Board in a publicly noticed meeting. -7- PRIORITY ACTIONS, BY REGION South Bay Foothills (Los Gatos, Monte Sereno, Saratoga, and Santa Cruz Mountains) 18 South Bay Foothills: Saratoga-to-Sea Trail and Wildlife Corridor Protect wildlife corridor along Highway 9. Connect trail to Saratoga-to-Sea Trail and Skyline-to-Sea Trail. $1,365,000 19 El Sereno: Dog Trails and Connections Provide infrastructure to open trails to dogs. Develop connections to Skyline, Sanborn County Park, & Lexington Reservoir. $2,254,000 20 South Bay Foothills: Wildlife Passage and Ridge Trail Improvements Establish safe corridors for mountain lions across Highway 17. Establish Bay Area Ridge Trail crossing. $13,966,000 21 Bear Creek Redwoods: Public Recreation and Interpretive Projects Open for hiking, equestrian activities. Provide parking areas, trails; upgrade stables. Restore & protect habitats for various species. Repair roads & trails to reduce sediment. Rehabilitate Alma College site. $17,478,000 22 Sierra Azul: Cathedral Oaks Public Access and Conservation Projects Develop multi-use trail & plan future trails as land is available. Develop parking. Restore plant communities and soils. Install trailside amenities. Preserve additional open space and complete wildlife corridor in upper Los Gatos Creek watershed. $6,714,000 23 Sierra Azul: Mt. Umunhum Public Access and Interpretation Projects Open Mt. Umunhum for multi-use public access to summit via road and trail. Open Bay Area Ridge Trail and nearby trail connections. Preserve additional open space and complete wildlife corridor. $27,972,000 24 Sierra Azul: Rancho de Guadalupe Family Recreation Open Rancho de Guadalupe to public access. Develop accessible multi-use trails with amenities such as parking and family recreation. Restore habitat for rare species. Protect cultural and natural resources. $10,078,000 25 Sierra Azul: Loma Prieta Area Public Access, Regional Trails and Habitat Projects Provide public access and recreation, including small campground. Develop, improve, connect regional multi-use trails to Forest of Nisene Marks State Park, to protected land to east, and to Mt. Umunhum. Protect Steelhead habitat, rare plants and grasslands, restore Knobcone Pine stands. $7,986,000 -8- Peninsula Foothills and Bay (Cupertino, Los Altos, Los Altos Hills, Sunnyvale, Mountain View, Palo Alto, East Palo Alto, Menlo Park, Atherton, Redwood City, San Carlos, Woodside, Portola Valley, Skyline 2 Regional: Bayfront Habitat Protection and Public Access Partnerships Partner to complete gaps in Bay Trail and develop city-to-bay trails. Support wetland restoration and associated interpretive facilities. Preserve additional bayfront open space. $5,052,000 4 El Corte de Madera Creek: Bike Trail and Water Quality Projects Develop single-use biking/hiking trails, complete Ridge Trail gaps, and develop trail system leading to parking area. Restore damaged trails to improve water quality. Preserve additional open space as available. $8,376,000 5 La Honda Creek: Upper Area Recreation, Habitat Restoration and Conservation Grazing Projects Open upper half of the preserve to public; provide biking/hiking/equestrian trails, dog access, and staging areas. Provide loop & connector trails. Restore habitat for rare species. Improve fencing, corrals, and water systems to reintroduce conservation grazing. $11,733,000 6 Windy Hill: Trail Improvements, Preservation and Hawthorns Area Historic Partnership Improve trails, complete pond facilities. Increase multi-use trails, study possible improvements to increase dog use. Open Hawthorns Area; develop trails connecting to Portola Valley and Palo Alto trails. Partner to protect, restore, and interpret historic buildings. Improve habitat conditions in Los Trancos Creek. Preserve additional scenic open space as available. $12,740,000 8 La Honda Creek/Russian Ridge: Preservation of Upper San Gregorio Watershed & Ridge Trail Completion Preserve upper San Gregorio watershed; restore endangered species habitats. Support opportunities to provide additional water for fisheries. Complete Bay Area Ridge Trail multi-use connections and gaps. Provide additional public use facilities. $15,347,000 9 Russian Ridge: Public Recreation, Grazing and Wildlife Protection Projects Open currently closed areas of preserve. Construct and extend trails. Improve fencing, corrals, and water systems to reintroduce conservation grazing. Improve habitat for sensitive species, implement pond enhancement projects for garter snakes and red-legged frogs. $5,560,000 10 Coal Creek: Reopen Alpine Road for Trail Use Reopen Alpine Road as trail connection between Portola Valley & Skyline Blvd. Reroute trails to reduce erosion and improve visitor experience. $8,017,000 11 Rancho San Antonio: Interpretive Improvements, Refurbishing, and Transit Solutions Add welcome center, refurbish and add interpretive exhibits to Deer Hollow Farm. Support of transit improvement options such as bike trails, bikeshare station, bus service, or additional parking. $10,811,000 12 Peninsula/South Bay Cities: Partner to Complete Middle Stevens Creek Trail Support work by cities to develop the middle section of the Stevens Creek Trail and enhance neighborhood connections. Support work by partners to complete stream corridor restoration and steelhead habitat enhancement below dam. Develop and install interpretive signage. $1,038,000 16 Long Ridge: Trail, Conservation and Habitat Restoration Projects (Saratoga) Improve roadside parking and provide restrooms. Develop new trail connections to Eagle Rock and Devils Canyon. Repair trails for year-round multi-use access. Protect watersheds for steelhead. Preserve additional open space as available. Implement pond and habitat enhancement restoration projects to benefit rare species. $5,140,000 17 Regional: Complete Upper Stevens Creek Trail Complete multi-use connection between the Bay Trail & Bay Area Ridge Trail above the reservoir through Picchetti Ranch Open Space Preserve & Lower/Upper Stevens Creek County Parks. Improve Preserve trails and neighborhood connections. Preserve additional open space as available. $7,760,000 -9- Coast (Half Moon Bay, San Gregorio, Pescadero, La Honda,) 1 Miramontes Ridge: Gateway to the Coast Public Access, Stream Restoration and Agriculture Enhancement Preserve scenic open space land as available, and establish wildlife corridor. Restore fish and red-legged frog habitats in Madonna Creek watershed. Partner to enhance water availability for agriculture and fish. Develop trail loop system, including Ridge Trail and neighborhood access points. Develop staging area, repair bridges. $27,774,000 3 Purisima Creek Redwoods: Purisima-to-Sea Trail, Watershed Protection and Conservation Grazing Complete and open multi-use Purisima-to-Sea trail connection between Ridge Trail and Coastal Trail, and new parking areas. Preserve additional open space as available. Remove fish barriers and restore Lobitos Creek. Restore ponds for endangered species. $7,608,000 7 La Honda Creek: Driscoll Ranch Public Access, Endangered Wildlife Protection and Conservation Grazing Open Driscoll Ranch Area; provide biking/hiking/equestrian trails, limited dog access, parking areas, and interpretive displays. Develop loop & connector trails. Restore habitat for endangered species. Restore La Honda Creek; remove fish migration barriers. $14,825,000 13 Cloverdale Ranch: Wildlife Protection, Grazing and Trail Connections Improve fencing, corrals, and water systems to increase conservation grazing and sustain large contiguous grasslands. Restore habitat for endangered species. Provide trail connections to nearby State parks. $15,712,000 14 Regional: Trail Connections and Campgrounds Develop trails between Butano, Pescadero County Park, Pescadero, Russian Ridge, and between Skyline and Portola Redwoods, Big Basin State Park. Partner with County and State Parks to improve existing campgrounds. $3,966,000 15 Regional: Redwood Protection and Salmon Fishery Conservation Preserve additional open space as available. Protect and enhance redwood stands, mountain scenery, various habitats and steelhead salmon. $50,728,000 -10- -11- 3. INDEPENDENT CITIZEN OVERSIGHT COMMITTEE An Independent Citizen Oversight Committee will be formed to verify expenditures of bond proceeds. The Independent Citizen Oversight Committee will consist of seven at-large members, all of whom shall be District residents. The Citizen Oversight Committee will be selected by the Board and interviewed and approved in open session, and will be subject to the conflict of interest constraints of the California Political Reform Act. The responsibilities of the Committee include: • Review Plan expenditures on an annual basis to verify conformity with the Expenditure Plan. • Review District’s Annual Audit and Annual Accountability report and present the Committee’s findings to the Board at a public meeting. • Review any proposed amendments to the Expenditure Plan. -12- EXHIBIT B TAX RATE STATEMENT An election will be held in the Midpeninsula Regional Open Space District (the "District") on June 3, 2014, to authorize the sale of up to $300 million in bonds of the District to provide public access and acquire, restore, and preserve open space throughout the District as described in the ballot measure. If the bonds are approved, the District expects to sell the bonds in several series over time. Principal and interest on the bonds will be payable from the proceeds of tax levies made upon the taxable property in the District. The information contained in numbered paragraphs 1 - 3 below is provided in compliance with sections 9400-9404 of the Elections Code of the State of California. 1. The best estimate of the tax which would be required to be levied to fund this bond issue during the first fiscal year after the sale of the first series of bonds, based on estimated assessed valuations available at the time of filing of this statement, is $1.00 per $100,000 of assessed valuation in fiscal year 2015-16. 2. The best estimate of the tax rate which would be required to be levied to fund this bond issue during the first fiscal year after the sale of the last series of bonds, based on estimated assessed valuations available at the time of filing of this statement, is $2.90 per $100,000 of assessed valuation in fiscal year 2044-45. 3. The best estimate of the highest tax rate which would be required to be levied to fund this bond issue, based on estimated assessed valuations available at the time of filing of this statement, is $3.18 per $100,000 of assessed valuation in fiscal year 2034-35. Voters should note that the estimated tax rates are based on the estimated ASSESSED VALUE of taxable property on the respective County's official tax rolls, not on a property's market value. Property owners should consult their own property tax bills to determine their property's assessed value and any applicable tax exemptions. Attention of all voters is directed to the fact that the foregoing information is based upon the District's projections and estimates only, which are not binding upon the District. The actual tax rates and the years in which they will apply may vary from those presently estimated, due to variations from these estimates in the timing of bond sales, the amount of bonds sold and market interest rates at the time of each sale, and actual assessed valuations over the term of repayment of the bonds. The dates of sale and the amount of bonds sold at any given time will be determined by the District based on its needs for funds and other factors. The actual interest rates at which the bonds will be sold will depend on the bond market at the time of each sale. Actual future assessed valuation will depend upon the amount and value of taxable property within the District as determined by the respective County Assessor in the annual property value assessment process. Dated: _______, 2014. _________________________ 
 General Manager Midpeninsula Regional Open Space District MIDPENINSULA REGIONAL OPEN SPACE DISTRICT ANNUAL FINANCIAL AUDIT REPORT JUNE 30, 2017 CHAVAN & ASSOCIATES,LLP CERTIFIED PUBLIC ACCOUNTANTS 1475 SARATOGA AVE.,SUITE 180 SAN JOSE,CA 95129 Midpeninsula Regional Open Space District Santa Clara County Table of Contents TITLE PAGE FINANCIAL SECTION: Independent Auditor’s Report...................................................................................................... 4 - 6 Management’s Discussion and Analysis ..................................................................................... 8 - 13 Basic Financial Statements: Government-Wide Financial Statements: Statement of Net Position............................................................................................... 16 Statement of Activities ................................................................................................... 17 Fund Financial Statements: Balance Sheet –Governmental Funds ........................................................................... 18 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position ........................................................................................ 19 Statement of Revenues, Expenditures, and Changes in Fund Balance –Governmental Funds ................................................................. 20 Reconciliation of Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balance to the Statement of Activities.................................. 21 Notes to the Basic Financial Statements ............................................................................... 22 - 53 REQUIRED SUPPLEMENTARY INFORMATION: Schedule of Revenue, Expenditures and Changes in Fund Balance – Budget and Actual (GAAP) General Fund ........................................................................... 56 Schedule of Pension Plan Contributions ...................................................................................... 57 Schedule of Net Pension Liability Proportionate Shares............................................................. 58 Schedule of Funding Progress – Other Postemployment Benefits .............................................. 59 SUPPLEMENTARY INFORMATION: Schedule of Revenue, Expenditures and Changes in Fund Balance – Budget and Actual (GAAP) Measure AA Capital Projects Fund ......................................... 62 Schedule of Revenue, Expenditures and Changes in Fund Balance – Budget and Actual (GAAP) GF Capital Projects Fund......................................................... 63 Schedule of Revenue, Expenditures and Changes in Fund Balance – Budget and Actual (GAAP) Debt Service Fund ................................................................... 64 Measure AA Bond Program –Schedule of Program Expenditures ............................................. 65 Notes to Supplementary Information ........................................................................................... 66 OTHER INDEPENDENT AUDITOR’S REPORTS: Independent Auditor’s Report on Internal Control over Fi nancial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards ......................................... 68 - 69 2 FINANCIAL SECTION 3 1475 Saratoga Ave, Suite 180, San Jose, CA 95129 Tel: 408-217-8749 • E-Fax: 408-872-4159 info@cnallp.com • www.cnallp.com INDEPENDENT AUDITOR’S REPORT Board of Directors Midpeninsula Regional Open Space District Los Altos,California Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, each major funds, and the aggregate remaining fund information for Midpeninsula Regional Open Space District (the District), as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the District’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements The District’s management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the District’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the District’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the major funds, and the aggregate remaining fund information of the District, as of June 30, 2017, and the respective changes in 4 1475 Saratoga Ave, Suite 180, San Jose, CA 95129 Tel: 408-217-8749 • E-Fax:408-872-4159 info@cnallp.com • www.cnallp.com financial position for the year then ended in accordance with accounting principles generally accepted in the United States of America. Emphasis of a Matter Basis of Presentation On July 1, 2016, the District separated the capital projects fund into two funds in order to account for resources restricted by the Measure AA General Obligation (GO)Bond from other sources. To separate the capital projects fund, the District recorded a prior period adj ustment of $307,137 to account for projects reported in the capital projects fund which were related to other sources beyond the Measure AA GO Bond. See page 20 to review the impact on the governmental funds. Our opinion is not modified with respect to this matter. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, budgetary comparison information, pension schedules and other postemployment benefit information be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the District’s basic financial statements. The supplementary information as listed in the table of contents is presented for purposes of additional analysis and is not a required part of the basic financial statements. This information is the responsibility of management and was derived from,and relates directly to,the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information as listed in the table of contents is fairly stated, in all material respects, in relation to the basic financial statements as a whole. 5 1475 Saratoga Ave, Suite 180, San Jose, CA 95129 Tel: 408-217-8749 • E-Fax: 408-872-4159 info@cnallp.com • www.cnallp.com Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 13, 2017 on our consideration of the District’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance.That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the District’s internal control over financial reporting and compliance. October 13, 2017 San Jose, California 6 Management’s Discussion and Analysis 7 Midpeninsula Regional Open Space District Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2017 INTRODUCTION The purpose of the Management’s Discussion and Analysis (MD&A) is to present a discussion and analysis of the District’s financial performance during the year ended on June 30, 2017. During period ending June 30, 2016 in order to align with best practices of public agencies, the District’s Board adopted Resolution 15-32 on July 22, 2015, changing the District’s fiscal year end to June 30 from the prior March 31 and thereby extending the 2015- 2016 fiscal year to fifteen months. This report will (1) focus on significant financial issues, (2) provide an overview of the District’s financial activity, (3) identify changes in the District’s financial position, (4) identify any individual fund issues or concerns, and (5) provide descriptions of significant asset and debt activity. This information, presented in conjunction with the annual Basic Financial Statements, is intended to provide a comprehensive understanding of the District’s operations and financial standing. Required Components of the Annual Financial Report OVERVIEW AND USE OF THE FINANCIAL STATEMENTS This annual report consists of a series of basic financial statements and notes. The statements are organized so the reader can understand the District as an entire operating entity by providing an increasingly detailed look at specific financial activities. The Statement of Net Position and Statement of Activities is comprised of the government-wide financial statements and provides information about the activities of the District as a whole, presenting both an aggregate view of the District’s finances as well as a longer-term view of those finances. Fund Financial Statements provide the next level of detail. For governmental funds, these statements reflect how services were financed in the short- term as well as what remains for future spending. The Basic Financial Statements also include notes that explain some of the information in the financial statements and provide more detailed data. The full annual financial report is a product of three separate parts: the basic financial statements, supplementary information, and this section, the Management’s Discussion and Analysis. The three sections together provide a comprehensive financial overview of the District. The basic financials are comprised of two kinds of statements that present financial information from different perspectives, government-wide and fund statements. Government-wide financial statements, which comprise the first two statements, provide both short-term and long-term information about the District’s overall financial position. Individual parts of the District, which are reported as fund financial statements, focus on reporting the District’s operations in more detail. These fund financial statements comprise the remaining statements. Management’s Discussion & Analysis Government-Wide Financial Statements Fund Financial Statements Notes to the Financial Statements Basic Financial Statements 8 Midpeninsula Regional Open Space District Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2017 Notes to the financial statements, provide more detailed data and provide explanations to some of the information in the statements. The required supplementary information section provides further explanations and additional support for the financial statements. GOVERNMENT-WIDE FINANCIAL STATEMENTS - STATEMENT OF NET POSITION AND THE STATEMENT OF ACTIVITIES The view of the District as a whole looks at all financial transactions and asks the question, “How did we do financially during the fiscal year 2016-2017?” The Statement of Net Position and the Statement of Activities answers this question. These statements include all assets and liabilities using the accrual basis of accounting similar to the accounting practices used by most private-sector companies. This basis of accounting takes into account all of the current year revenues and expenses regardless of when cash is received or paid. These two statements report the District’s net position and changes in net position. This change in net position is important because it tells the reader that, for the District as a whole, whether the financial position of the District has improved or diminished. The causes of this change may be the result of many factors, some financial, and some not. Non-financial factors include the District’s property tax base, current property tax laws in California restricting revenue growth, facility conditions and other factors. In the Statement of Net Position and the Statement of Activities, the District reports governmental activities which reflect the District’s programs and services. The District does not have any business type activities. FINANCIAL HIGHLIGHTS District tax revenue and other metrics will not be comparable to the prior period due to the fifteen-month period of the prior period financial statements. As the overall economy continued to grow throughout the Silicon Valley, the District witnessed further strong growth in the assessed valuation of both secured and unsecured property within its boundaries. The 2017-18 assessed valuation reports released in June 2017 showed District-wide assessed values increasing by 8.7% (8.4% in Santa Clara and 9.5% in San Mateo). The District received 66% of its tax revenue from Santa Clara County and 34% from San Mateo County. Other financial highlights included: Tax revenue related to the GO bonds amounted to $1.57 million Program revenues decreased $0.7 million due to the 15 month period of the prior year The District issued $57.4 million in Refunding Bonds to refund the 2007 Series A Refunding Bonds and the 2011 Lease Revenue Bonds. Purchased $1.8 million land and associated structures funded through Measure AA GO bond proceeds. In addition, the District spent a further $12.5 million of bond proceeds on the road and summit restoration for the grand opening of the Mt. Umunhum Summit to the general public which occurred on September 18, 2017. District expenditures were over the annual budget for the Measure AA Capital Projects Fund and Debt Service Fund. The Measure AA Capital Projects Fund was over budget by $1.1 million and the Debt Service Fund was over budget by $1.3 million. However, it should be noted that the General Fund was under budget by $2.9 million. In fiscal year 2017, the District separated the budget to account for expenditures budgeted for each fund. As in most recent years, a large majority of the budget variance was due to delays and deferrals of capital projects; the District spent 97%of its General Fund budget for salaries and benefits (including a $1 million pre-payment to CalPERS), and 69%of the budget for services and supplies. The assets of the District exceeded liabilities at the close of the 2017 fiscal year by $337 million. Of this total net position, $308.6 million, or 92%, was the District’s net investment in capital assets (capital assets net of related debt). 9 Midpeninsula Regional Open Space District Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2017 REPORTING THE DISTRICT’S MOST SIGNIFICANT FUNDS Fund Financial Statements The analysis of the District’s fund financial statements begins on page 16. Fund financial reports provide detailed information about the District’s major funds. The District uses one operating fund, the General Fund, to account for a multitude of financial transactions, two capital project funds to account for capital projects, and one debt service fund to account for debt service payments. Governmental Funds The General Fund is a governmental fund type and is reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the District’s general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the future to finance educational programs. The relationship (or differences) between governmental activities (reported in the Statement of Net position and the Statement of Activities) and governmental funds is reconciled in the financial statements. THE DISTRICT AS A WHOLE Recall that the Statement of Net Position provides the perspective of the District as a whole.Table 1 provides a summary of the District’s net position as compared to last period: Percentage 2017 2016 Change Change As sets Cur rent As sets 77,668,537$ 83,335,071$ (5,666,534)$ -6.80% No ncur rent As sets 448,446,221 430,311,829 18,134,392 4.21% To tal As sets 526,114,758$ 513,646,900$ 12,467,858$ 2.43% To tal De ferred Outflows of Resources 15,636,983$ 9,274,127$ 6,362,856$ 68.61% Li abi lities Cur rent Li abi lities 8,787,223$ 4,496,132$ 4,291,091$ 95.44% No ncur rent Li abi lities 193,890,182 193,612,099 278,083 0.14% To tal Liabilities 202,677,405$ 198,108,231$ 4,569,174$ 2.31% To tal De ferred Inf lows of Resources 2,071,424$ 3,352,133$ (1,280,709)$ -38.21% Net Posi ti on Net Investment in Capi tal As sets 308,600,974$ 276,394,511$ 32,206,463$ 11.65% Re stricted 4,570,997 5,786,321 (1,215,324) -21.00% Unrestricted 23,830,941 39,279,831 (15,448,890) -39.33% To tal Ne t Position 337,002,912$ 321,460,663$ 15,542,249$ 4.83% Ta bl e 1 - Summar y o f St at ement of Ne t Posi ti on Total net position increased by $15.5 million, as revenues exceeded expenditures. Noncurrent assets increased due mostly to $18.1 million of capital expenditures. Current liabilities increased $4.2 million due to an increase in accounts payable. 10 Midpeninsula Regional Open Space District Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2017 Table 2 shows the changes in net position for 2017 as compared to period 2016. Percentage 2017 2016 Change Change Re ve nue s Program r evenue s 2,130,301$ 2,829,519$ (699,218)$ -24.71% Ge ne ral revenue s: Property t axe s 43,860,976 44,980,497 (1,119,521) -2.49% Investment earnings 462,618 647,839 (185,221) -28.59% Miscellane ous 783,977 810,250 (26,273) -3.24% To tal Re ve nue s 47,237,872 49,268,105 (2,030,233) -4.12% Program Expe ns es Land pr eservat ion 21,783,483 26,079,919 (4,296,436) -16.47% Int erest 8,327,042 9,751,674 (1,424,632) -14.61% De pr eciation 1,585,098 1,311,272 273,826 20.88% To tal Expe ns es 31,695,623 37,142,865 (5,447,242) -14.67% Chang e in Ne t Posi ti on 15,542,249 12,125,240 3,417,009 28.18% Ad jus tment to Begi nning Ne t Posi ti on - (11,789,641) 11,789,641 100.00% Begi nning Ne t Posi ti on 321,460,663 321,125,064 335,599 0.10% Endi ng Ne t Posi ti on 337,002,912$ 321,460,663$ 15,542,249$ 4.83% Ta bl e 2 - Summar y o f Chang es in Ne t Posi ti on Program revenues increased because the District had a decrease in land preservation and interest expenses in fiscal year 2017. THE DISTRICT’S FUND BALANCE Table 3 provides an analysis of the District’s fund balances and the total change in fund balances from the prior year. Measure AA Debt General Capital Service Percentage Fund Projects Fund Fund Total 2016 Change Nonspendable for prepaid expenditure 55,093$ -$ -$ 55,093$ -$ 100% Restricted for debt service - - 2,193,934 2,193,934 3,116,266 -30% Restricted for Measure AA Projects - 7,344,797 - 7,344,797 23,778,047 -69% Restricted for Hawthorne maintenance 1,971,040 - - 1,971,040 1,971,040 0% Committed for in frastructure 30,000,000 - - 30,000,000 30,000,000 0% Committed for equipment replacement 2,400,000 - - 2,400,000 2,400,000 0% Committed for natural dis asters 3,000,000 - - 3,000,000 3,000,000 0% Unassign ed 23,872,450 - - 23,872,450 16,857,586 42% Total Fund Balance 61,298,583$7,344,797$ 2,193,934$70,837,314$81,122,939$-13% Ta ble 3 - Summary o f Fund Balance (All Go vernmental Funds) 2017 Fo llowing the completion of its new thirty-year strategic plan, the Board of Directors committed a majority of the unassigned fund balance during fiscal year 2017 to reserves for infrastructure, equipment replacement and natural disasters. See page 28 of the audit report for a description of each commitment. 11 Midpeninsula Regional Open Space District Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2017 GENERAL FUND BUDGETING HIGHLIGHTS The District’s budget is prepared according to California law and in the modified accrual basis of accounting. During the course of 2017, the District revised its General Fund budget, which resulted in an increase in budgeted expenditures of $122 thousand from the original to final budget. The final budgeted revenue estimate was $45.6 million. A summary of the original and final budget is presented below: Percent Or iginal Budge t Fi nal Budge t Va rianc e Va rianc e Re ve nue s Property t axe s 42,785,000$ 42,785,000$ -$ 0.00% Gr ant revenue s 841,600 841,600 - 0.00% Property manage me nt 1,209,000 1,209,000 - 0.00% Investment earnings 450,000 450,000 - 0.00% Ot he r revenue s 332,440 332,440 - 0.00% To tal Re ve nue s 45,618,040 45,618,040 - 0.00% Expe ndi tures Sal ar ies and e mpl oyee bene fits 19,174,332 19,333,953 159,621 0.83% Se rvices and s uppl ies 8,168,018 8,130,731 (37,287) -0.46% To tal Expe ns es 27,342,350 27,464,684 122,334 0.45% Ne t Chang e in F und B al anc e 18,275,690$ 18,153,356$ (122,334)$ -0.67% Ta bl e 4 - Summar y o f Or iginal to F inal B udg ets CAPITAL ASSETS Table 4 shows 2017 capital asset balances as compared to 2016. Perc entage 2017 2016 Ch ange Ch ange La nd 407,986,151$ 403,773,365$ 4,212,786$ 1.04% Co ns truction-in -Pro gres s 19,020,245 7,223,594 11,796,651 163.31% Stru cture and Improveme nts 6,715,297 7,115,767 (400,470) -5.63% In fra stru cture 10,474,326 7,551,992 2,922,334 38.70% Eq uipment 804,552 945,829 (141,277) -14.94% Ve hicles 2,133,268 1,844,343 288,925 15.67% Total Ca pital A ssets - Ne t 447,133,839$ 428,454,890$ 18,678,949$ 4.36% Table 5 - S ummar y of Capital As sets Net of De pr eciati on 12 Midpeninsula Regional Open Space District Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2017 LONG TERM LIABILITIES Table 5 summarizes the changes in long-term liabilities from 2017 to 2016. Percentage 2017 2016 Change Change Promissory Notes 65,095,264$ 65,176,664$ (81,400)$ -0.12% Bo nds 116,855,465 115,198,421 1,657,044 1.44% Ne t Pension Obliugat ion 10,121,906 11,420,125 (1,298,219)-11.37% Co mpe ns at ed Abs ences 1,817,547 1,816,889 658 0.04% To tal Lo ng-term Liabilities 193,890,182$193,612,099$278,083$ 0.14% Ta bl e 6 - Summary o f Lo ng -term Li abi lities ECONOMIC FACTORS AND NEXT YEAR’S BUDGET The Board of Directors adopted the District’s budget for year 2017-2018 on June 14, 2017. This budget assumes $50.6 million in revenues and a growth in general fund property tax income of 7% over the prior period.This budget funds $19.2 million of capital spending, of which $12.6 million is expected to qualify for reimbursement from Measure AA GO bond funds.Operating expenditures and general fund and debt service are budgeted at $30.4 million and $11.7 million, respectively.If all revenues, expenditure (including debt service) occur as budgeted, the District’s overall cash balances would increase by $2 million. CONTACTING THE DISTRICT’S FINANCIAL MANAGEMENT This financial report is designed to provide our citizens, taxpayers, parents, participants, investors and creditors with a general overview of the District’s finances and to demonstrate the District’s accountability for the money it receives. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to the Administrative Office, Midpeninsula Regional Open Space District, 330 Distel Circle, Los Altos, California 94022. 13 Page Intentionally Left Blank 14 Basic Financial Statements 15 Assets Current assets: Cash and investments 77,020,898$ Accounts receivable: Deposits 587,047 Interest 5,278 Due from other governments: Taxes receivable 221 Other current assets 55,093 Total current assets 77,668,537 Noncurrent assets: Notes receivable 134,317 Unamortized issuance costs 772,042 Net OPEB asset 406,023 Non-depreciable capital assets 427,006,396 Capital assets, net of depreciation 20,127,443 Total noncurrent assets 448,446,221 Total Assets 526,114,758$ Deferred Outflows of Resources Pension change to adjustments 8,659,986$ Deferred loss on early retirement of long-term debt 6,976,997 Total Deferred Outflows of Resources 15,636,983$ Liabilities Current liabilities: Accounts payable 5,220,064$ Deposits payable 104,932 Payroll and other liabilities 1,506,227 Accrued interest 1,956,000 Total current liabilities 8,787,223 Noncurrent liabilities: Due within one year 7,423,614 Due after one year 186,466,568 Total noncurrent liabilities 193,890,182 Total Liabilities 202,677,405$ Deferred Inflows of Resources Pension adjustments 2,071,424$ Net Position Net investment in capital assets 308,600,974$ Restricted for: Debt service 2,193,934 Hawthorne maintenance 1,971,040 OPEB 406,023 Total restricted 4,570,997 Unrestricted 23,830,941 Total Net Position 337,002,912$ Midpeninsula Regional Open Space District Statement of Net Position June 30, 2017 The notes to the financial statements are an integral part of this statement. 16 Net (Expense) Capital Revenue and Charges for Grants and Changes in Expenses Services Contributions Net Position Governmental activities: Land preservation 21,783,483$ 1,479,462$ 650,839$ (19,653,182)$ Interest and fiscal charges 8,327,042 - - (8,327,042) Depreciation 1,585,098 - - (1,585,098) Total governmental activities 31,695,623$ 1,479,462$ 650,839$ (29,565,322) General revenues: Property taxes 43,860,976 Investment earnings 462,618 Other revenues 783,977 Total general revenues and special items 45,107,571 Change in net position 15,542,249 Net position beginning 321,460,663 Net position ending 337,002,912$ Midpeninsula Regional Open Space District Statement of Activities For the Fiscal Year Ended June 30, 2017 Program Revenues The notes to the financial statements are an integral part of this statement. 17 Measure AA GF Capital Debt Total General Capital Projects Service Governmental Fund Projects Fund Fund Fund Funds Assets Cash and investments 59,483,747$ 15,337,024$ -$ 2,200,127$ 77,020,898$ Receivables: Deposits 587,047 - - - 587,047 Interest 5,278 - - - 5,278 Due from other governments: Taxes receivable 221 - - - 221 Other current assets 55,093 - - - 55,093 Due from other funds 4,278,820 330,196 674,707 - 5,283,723 Notes receivable 134,317 - - - 134,317 Total Assets 64,544,523$ 15,667,220$ 674,707$ 2,200,127$ 83,086,577$ Liabilities Liabilities: Accounts payable 754,058$ 4,102,458$ 363,548$ -$ 5,220,064$ Deposits payable 104,932 - - - 104,932 Due to other funds 746,406 4,219,965 311,159 6,193 5,283,723 Payroll and other liabilities 1,506,227 - - - 1,506,227 Total Liabilities 3,111,623 8,322,423 674,707 6,193 12,114,946 Deferred Inflows Of Resources Unavailable revenues 134,317 - - - 134,317 Fund Balance Nonspendable: Prepaid expenditures 55,093 - - - 55,093 Restricted for: Debt service - - - 2,193,934 2,193,934 Measure AA capital projects - 7,344,797 - - 7,344,797 Hawthorne maintenance 1,971,040 - - - 1,971,040 Committed for: Infrastructure 30,000,000 - - - 30,000,000 Equipment replacement 2,400,000 - - - 2,400,000 Natural disasters 3,000,000 - - - 3,000,000 Unassigned 23,872,450 - - - 23,872,450 Total Fund Balance 61,298,583 7,344,797 - 2,193,934 70,837,314 Total Liabilities and Fund Balance 64,544,523$ 15,667,220$ 674,707$ 2,200,127$ 83,086,577$ Balance Sheet Midpeninsula Regional Open Space District June 30, 2017 Governmental Funds The notes to the financial statements are an integral part of this statement. 18 Total fund balance - governmental funds 70,837,314$ Amounts reported in the Statement of Net Position are different because: Capital assets used in governmental activities are not financial resources and therefore are not reported as assets in governmental funds. Capital assets at cost 462,547,391$ Accumulated depreciation (15,413,552) 447,133,839 Principal on notes receivables are recorded as unearned revenue in the funds, which upon collection is a current financial resource. In the government-wide financial statements, repayment of the principal amount does not generate revenue in the statement of activities; therefore, unearned revenue is not recorded.134,317 The difference between projected and actual earnings from pension plan assets is not included in the plan's actuarial study until the next fiscal year and are reported as deferred inflows of resources in the statement of net position.6,588,562 Interest payable on long-term debt does not require the use of current financial resources and, therefore, is not reported in the governmental funds.(1,956,000) Discounts and premiums related to bond issues are recorded as other financing sources and uses in the fund financial statements but are recorded as assets or liabilities and amortized over the life of the bond in the statement of net position: Premium 20,475,002$ Issuance cost (772,042) (19,702,960) Deferred loss on early retirement of long-term debt is recorded in the Statement of Net Position as a deferred outflow of resources and amortized on a straight line basis over the original life of the defeased bond.6,976,997 Long-term liabilities are not due and payable in the current year and therefore are not reported as liabilities in the funds. Long-term liabilities at year-end consists of: Bonds 102,715,000$ Net pension obligations 10,121,906 Promissory notes 58,760,727 Compensated absences 1,817,547 Annual net OPEB obligation (406,023) (173,009,157) Total net position - governmental activities 337,002,912$ Midpeninsula Regional Open Space District Balance Sheet to the Statement of Net Position June 30, 2017 Reconciliation of the Governmental Funds The notes to the financial statements are an integral part of this statement. 19 Measure AA GF Capital Debt Total General Capital Projects Service Governmental Fund Projects Fund Fund Fund Funds Revenues: Property taxes 42,281,739$ -$ -$ 1,579,237$ 43,860,976$ Grant income 650,839 - - - 650,839 Property management 1,479,462 - - - 1,479,462 Investment earnings 313,397 163,483 - 2,846 479,726 Other revenues 608,558 - - - 608,558 Total revenues 45,333,995 163,483 - 1,582,083 47,079,561 Expenditures: Current: Land preservation: Salaries and employee benefits 18,890,179 320,482 - - 19,210,661 Services and supplies 5,612,468 36,837 946,845 - 6,596,150 Capital outlay - 16,529,694 3,431,732 - 19,961,426 Debt service: Principal - - - 5,193,104 5,193,104 Interest - - - 6,403,845 6,403,845 Issuance cost - - - 786,497 786,497 Total expenditures 24,502,647 16,887,013 4,378,577 12,383,446 58,151,683 Excess (deficiency) of revenues over (under) expenditures 20,831,348 (16,723,530) (4,378,577) (10,801,363) (11,072,122) Other financing sources (uses): Transfers in - 1,030,287 4,685,714 10,122,821 15,838,822 Transfers out (13,761,391) (1,047,144) - (1,030,287) (15,838,822) Payment to refunded bond escrow agent - - - (68,187,161) (68,187,161) Proceeds of refunding bond - - - 57,410,000 57,410,000 Premium from bond issuances - - - 11,563,658 11,563,658 Total other financing sources (uses)(13,761,391) (16,857) 4,685,714 9,879,031 786,497 Net changes in fund balance 7,069,957 (16,740,387) 307,137 (922,332) (10,285,625) Fund balance beginning 54,228,626 23,778,047 - 3,116,266 81,122,939 Prior period adjustment - see note 12 - 307,137 (307,137) - - Fund balance beginning - as adjusted 54,228,626 24,085,184 (307,137) 3,116,266 81,122,939 Fund balance ending 61,298,583$ 7,344,797$ -$ 2,193,934$ 70,837,314$ Midpeninsula Regional Open Space District Statement of Revenues, Expenditures and Changes in Fund Balance Governmental Funds For the Fiscal Year Ended June 30, 2017 The notes to the financial statements are an integral part of this statement. 20 Total net change in fund balance - governmental funds (10,285,625)$ Capital outlays are reported in governmental funds as expenditures. However, in the Statement of Activities, the cost of those assets is allocated over their estimated useful lives as depreciation expense. Expenditures capitalized as capital assets 20,264,047$ Depreciation expense (1,585,098) 18,678,949 Repayment of notes receivable is reported as revenue in the governmental funds because financial resources were received and available during the fiscal year. In the statement of net position, the payment reduces the principal balance of notes receivable and does not generate revenue in the statement of activities.(17,108) Accreted interest on capital appreciation bonds is not recorded in the governmental funds but is required to be recorded under the accrual basis of accounting in the government wide financial statements.(1,125,509) The governmental funds report debt proceeds as an other financing source, while repayment of debt principal is reported as an expenditure. Interest is recognized as an expenditure in the governmental funds when it is due. The net effect of these differences in the treatment of long-term debt and related items is as follows: Proceeds from the issuance of general obligation bonds (57,410,000)$ Bond premium capitalized (11,563,658) Deferred loss on early retirement of refunded bonds 5,032,161 Advance refunding of bonds 63,155,000 Repayment of bond principal 4,130,000 Repayment of promissory notes princpal 1,063,104 4,406,607 Deferred loss on early retirement of long-term debt is amortized over the life of the debt in the statement of activities. Amortization expense is not reported in the governmental funds.(339,192) Prepaid issuance costs, discounts and premiums related to bond issues are recorded as other financing sources and uses in the fund financial statements but are recorded as assets or liabilities and amortized over the life of the bond in the statement of net position: Amortization of issuance costs and premiums - net (59,038) In the Statement of Activities, compensated absences are measured by the amount earned during the year. In governmental funds, however, expenditures for those items are measured by the amount of financial resources used (essentially the amounts paid). This year, vacation earned exceeded the amounts used.(658) In governmental funds, actual contributions to pension plans are reported as expenditures in the year incurred. However, in the government-wide statement of activities, only the current year pension expense as noted in the plans' valuation reports is reported as an expense, as adjusted for deferred inflows and outflows of resources.4,248,815 In the Statement of Activities, the net postemployment benefit asset is the amount by which the contributions toward the OPEB plan were more than the annual required contribution as actuarially determined. The net postemployment benefit is not recorded in the governmental fund statements. The change in the net OPEB was recorded in the Statement of Activities in the amount of:(292,992) Interest on long-term debt in the Statement of Activities differs from the amount reported in the governmental funds because interest is recognized as an expenditure in the funds when it is due and thus requires the use of current financial resources. In the Statement of Activities, however, interest expense is recognized as the interest accrues, regardless of when it is due.328,000 Change in net position of governmental activities 15,542,249$ Midpeninsula Regional Open Space District Statement of Revenues, Expenditures and Changes in Fund Balance For the Fiscal Year Ended June 30, 2017 Reconciliation of the Governmental Funds to the Statement of Activities The notes to the financial statements are an integral part of this statement. 21 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 NOTE 1 -SIGNIFICANT ACCOUNTING POLICIES A.General The Midpeninsula Regional Open Space District (the District) was formed in 1972 to acquire and preserve public open space land in northern and western portions of Santa Clara County. In June 1976, the southern and eastern portions of San Mateo County were annexed to the District. The District annexed a small portion of the northern tip of Santa Cruz County in 1992. In September 2004, the District completed the Coastside Protection Program, which extended the District boundaries to the Pacific Ocean in San Mateo County, from the southern borders of Pacifica to the San Mateo/Santa Cruz County line. B.Accounting Principles The accounting policies of the District conform to generally accepted accounting principles as prescribed by the Governmental Accounting Standards Board (GASB) and the American Institute of Certified Public Accountants (AICPA). C.Reporting Entity As required by generally accepted accounting principles, these basic financial statements present the Midpeninsula Regional Open Space District and its component unit. The component unit discussed in the following paragraph is included in the District's reporting entity because of the significance of their operational or financial relationships with the District. Blended Component Unit. The District and the County of Santa Clara entered into a joint exercise of powers agreement dated May 1, 1996, creating the Midpeninsula Regional Open Space District Financing Authority (the Authority), pursuant to the California Government Code. The District is financially accountable for the Authority, as it appoints a voting majority of the governing board; is able to impose its will in the Authority; and the Authority provides specific financial benefits to, and imposes specific financial burdens on, the District. The Authority was formed for the sole purpose of providing financing assistance to the District to fund the acquisition of land to preserve and use as open space. As such, the Authority is an integral part of the District, and accordingly, all of the Authority's activity is blended within the accompanying debt service fund. D.Reporting Period In order to improve the transparency over reporting financial transactions and overall operations, during the fiscal period ending June 30, 2016 the District changed its reporting period from April 1st through March 31st to July 1st through June 30th. The financial statements and the related note disclosures included in the prior ye ar’s report covers the fifteen month period ended June 30, 2016. The information covered in this financial statement covers the year ending June 30, 2017, thus information may not be comparable between the financial statements and note disclosures included in each of these reports. 22 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 E.Basis of Presentation Government-wide Financial Statements: The government-wide financial statements (i.e., the Statement of Net Position and the Statement of Activities) report information on all of the activities of the District.The Statement of Net Position reports all assets, deferred outflows of resources, liabilities, deferred inflows of resources, and net position. The government-wide statements are prepared using the economic resources measurement focus. This approach differs from the manner in which governmental fund financial statements are prepared. Governmental fund financial statements, therefore, include the reconciliation with brief explanations to better identify the relationship between the government wide statements and the statements for the governmental funds. The government-wide statement of activities presents a comparison between direct expenses and program revenues for each function or program of the District’s governmental activities. Direct expenses are those that are specifically associated with a service, program, or department and are therefore clearly identifiable to a particular function. The District does not allocate indirect expenses to functions in the statement of activities. Program revenues include charges paid by the recipients of goods or services offered by a program, as well as grants and contributions that are restricted to meeting the operational or capital requirements of a particular program. Revenues that are not classified as program revenues are presented as general revenues of the District, with certain exceptions. The comparison of direct expenses with program revenues identifies the extent to which each gove rnmental function is self-financing or draws from the general revenues of the District. Fund Financial Statements: Fund financial statements report detailed information about the District. The accounting and financial treatment applied to a fund is determined by its measurement focus. All governmental funds are accounted for using a flow of current financial resources measurement focus. With this measurement focus, only current assets, deferred outflows,current liabilities and deferred inflows are generally included on the balance sheet. The Statement of Revenues, Expenditures, and Changes in Fund Balance for these funds present increases (i.e., revenues and other financing sources) and decreases (i.e., expenditures and other financing uses)in net current assets. F.Basis of Accounting Basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements.Government-wide financial statements are prepared using the accrual basis of accounting.Governmental funds use the modified accrual basis of accounting. Revenues -Exchange and Non-exchange Transactions: Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is recorded under the accrual basis when the exchange takes place. On a modified accrual basis, revenue is recorded in the fiscal period in which the resources are measurable and 23 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 become available. “Available” means the resources will be collected within the current fiscal period or are expected to be collected soon enough thereafter to be used to pay liabilities of the current fiscal period. For the District, “available” means collectible within the current period or within 90 days after period-end. Non-exchange transactions, in which the District receives value without directly gi ving equal value in return, include property taxes, grants, and entitlements. Under the accrual basis, revenue from property taxes is recognized in the fiscal period for which the taxes are levied. Revenue from grants and entitlements is recognized in the fiscal period in which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the period when the resources are to be used or the fiscal period when use is first permitted; matching requirements, in which the District must provide local resources to be used for a specific purpose; and expenditure requirements, in which the resources are provided to the District on a reimbursement basis. Under the modified accrual basis, revenue from non-exchange transactions must also be available before it can be recognized. Deferred Outflows/Deferred Inflows: A deferred outflow of resources is defined as a consumption of net position that applies to a future period(s) and so will not be recognized as an outflow of resources (expenses/expenditure) until then. A deferred inflow of resources is defined as an acquisition of net position that applies to a future period(s) and so will not be recognized as an inflow of resources (revenues) until that time. When applicable, unamortized portions of the gain and loss on refunding debt are reported as deferred inflows and deferred outflows of resources, respectively. Deferred outflows and inflows of resources are reported for the changes related to pensions from the implementation of GASB Statement No. 68. In addition, when an asset is recorded in governmental fund financial statements but the revenue is not available, a deferred inflow of resources is reported until such time as the revenue becomes available. Unearned Revenue: Unearned revenue arises when assets are received before revenue recognition criteria have been satisfied. Grants and entitlements received before eligibility requirements are met are recorded as deferred inflows from unearned revenue. In the governmental fund financial statements, receivables associated with non-exchange transactions that will not be collected within the availability period have been recorded as deferred inflows from unearned revenue. Expenses/Expenditures: On the accrual basis of accounting, expenses are recognized at the time a liability is incurred. On the modified accrual basis of accounting, expenditures are generally recognized in the accounting period in which the related fund liability is incurred, as under the accrual basis of accounting. However, under the modified accrual basis of accounting, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when 24 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 payment is due. Allocations of cost, such as depreciation and amortization, are not recognized in the governmental funds. When both restricted and unrestricted resources are available for use, it is the District’s policy to use restricted resources first, then unrestricted resources as they are needed. G.Fund Accounting The accounts of the District are organized into two funds with a separate set of self-balancing accounts that comprise of the District’s assets, deferred outflows, liabilities, deferred inflows, fund balance, revenues, and expenditures. Major funds are defined as funds that have either assets, liabilities, revenues or expenditures/expenses equal to ten percent of their fund-type total and five percent of the grand total. The General Fund is always a major fund. The District may also select other funds it believes should be presented as major funds. The District reported all of its funds as major governmental funds in the accompanying financial statements: General Fund. The General Fund is the general operating fund of the District. It is used to account for all financial resources. The major revenue sources for this fund are property taxes, grant revenues and interest income. Expenditures are made for land preservation and other operating expenditures. Measure AA Capital Projects Fund. The Measure AA Capital Projects Fund is used to account for resources from bond proceeds and expenditures for capital projects related to the Measure AA GO Bond. GF Capital Projects Fund. GF Capital Projects Fund is used to account for expenditures for capital projects not related to any other capital projects funds. Debt Service Fund. The Debt Service Fund is used to account for accumulation of resources for, and the payment of long-term debt principal, interest and related costs. Resources are provided by General Fund transfers and interest income on unspent funds. H.Budgets and Budgetary Accounting The District's Board of Directors adopts an annual operating budget for the District by major fund, on or before June 30, for the ensuing fiscal period. The Board of Directors may amend the budget by resolution during the fiscal period. The legal level of control, the level at which expenditures may not legally exceed the budget, is at the category level. I.Assets, Liabilities, and Equity 1. Cash and Cash Equivalents The District’s cash deposits are considered to be cash on hand and cash in banks. Cash and Cash Equivalents are generally considered short-term, highly liquid investments with a maturity of three months or less from the purchase date. 25 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 2.Investments Investments are recorded at fair value in accordance with GASB Statement No. 72, Fair Value Measurement and Application. Accordingly, the change in fair value of investments is recognized as an increase or decrease to investment assets and investment income. This statement changed the definition of fair value and is effective for periods beginning after June 15, 2015. The following is a summary of the definition of fair value: Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction. In determining this amount, three valuation techniques are available: Market approach -This approach uses prices generated for identical or similar assets or liabilities. The most common example is an investment in a public security traded in an active exchange such as the NYSE. Cost approach -This technique determines the amount required to replace the current asset. This approach may be ideal for valuing donations of capital assets or historical treasures. Income approach -This approach converts future amounts (such as cash flows) into a current discounted amount. Each of these valuation techniques requires inputs to calculate a fair value. Observable inputs have been maximized in fair value measures, and unobservable inputs have been minimized. 3.Prepaid Expenditures The District has the option of reporting expenditures in governmental funds for prepaid items either when purchased or during the benefiting period. The District has chosen to report the expenditure during the benefiting period. 4.Deposits Receivable During the fiscal year ending June 30, 2017, the District, determined that a prior deposit receivable was no longer collectable. The original deposit receivable was $1,045,000, some of which was returned in a prior year. The remaining balance of $691,454 was written off in current year. 5.Capital Assets Capital assets, which include land, buildings and improvements, furniture, equipment, and construction in progress, are reported in the government-wide financial statements. Such assets are valued at historical cost or estimated historical cost unless obtained by annexation or 26 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 donation, in which case they are recorded at estimated market value at the date of receipt. The District utilizes a capitalization threshold of $1 for land, $25,000 for equipment, fixtures and vehicles, $50,000 for infrastructure, improvements, buildings and structures. Projects under construction are recorded at cost as construction in progress and transferred to the appropriate asset account when substantially complete. Costs of major improvements and rehabilitation of buildings are capitalized. Repair and maintenance costs are charged to expense when incurred. Equipment disposed of, or no longer required for its existing use, is removed from the records at actual or estimated historical cost, net of accumulated depreciation. All capital assets, except land and construction in progress, are depreciated using the straight- line method over the following estimated useful lives: Assets Years Structures/Improvements 50 Public Access Infrastructure 20 - 50 Equipment/Fixtures 5 -20 Vehicles 5 Software 5 - 10 6. Compensated Absences In accordance with the District's memorandum of understanding with various employee groups, employees accrue fifteen days of vacation during the first nine years of service, twenty days between service years 10 and fourteen, twenty-one days between service years fifteen and nineteen, twenty-three days between service years twenty and twenty-four, and twenty-five days after twenty-five years of service. An employee may accumulate vacation time earned to a maximum of two times the amount of his/her annual vacation accrual. Full-time employees accrue twelve days of sick leave: annually from the date of employment. An employee may accumulate sick leave time earned on an unlimited basis. Upon resignation, separation from service, or retirement from District employment, workers in good standing with ten or more years of District employment shall receive a cash payment of the equivalent cash value of accrued sick leave as follows: Percentage of equiva le nt cash value of accrued Years of Employme nt sick leave 15-20 20% 16-20 25% 21 or more 30% An employee hired before June 30, 2006, who retires from the District shall receive a cash payment of the percentage of equivalent cash value or accrued sick leave based on years of employment as described above, and apply the remainder of the equivalent cash value toward his/her cost of retiree medical plan premiums and/or other qualified medical expenses. Upon 27 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 retirement, the amount qualified and designated for retiree medical costs shall be deposited in the Retiree Health Savings (RHS) plan, set up by the District. The cost for maintaining the retiree's RHS account and the annual fee for the reimbursement process of qualified medical expenses will be paid for by the retiree. An employee hired on or after July 1, 2006, who retires from the District may elect to receive only a cash payment of the percentage of equivalent cash value of accrued sick leave based on years of employment as described above. In all cases the equivalent cash value of accrued sick leave will be based on current rate of pay as of the date of separation from District employment. The District accrues for all salary-related items in the government-wide statements for which they are liable to make a payment directly and incrementally associated with payments made for compensated absences on termination. 7.Long-Term/Noncurrent Obligations In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the Statement of Net Position. 8.Debt Discount and Issuance Costs Debt discounts, premiums, and prepaid issuance costs are capitalized as an offset to long- term debt and amortized using the straight line method over the life of the related debt. Issuance costs for the District's tax-exempt commercial paper short-term borrowings are expensed as incurred. 9.Fund Balance Classifications In accordance with Government Accounting Standards Board 54, Fund Balance Reporting and Governmental Fund Type Definitions, the District classifies governmental fund balances as follows: Nonspendable fund balance includes amounts that cannot be spent either because it is not in spendable form or because of legal or contractual constraints. Restricted fund balance includes amounts that are constrained for specific purposes which are externally imposed by providers, such as creditors or amounts constrained due to constitutional provisions or enabling legislation. Committed fund balances includes amounts that are constrained for specific purposes that are internally imposed by the government through formal action of the highest level of decision making authority and does not lapse at period-end. Committed fund balances were imposed by the District’s board of directors as follows: o Infrastructure: $30 million; projected minimum requirement for expansion of field and office facilities over the next five years. 28 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 o Equipment Replacement: $2.4 million; projected requirement for equipment and vehicle replacement based on the amount of accumulated depreciation recorded on capital assets in service. o Natural Disasters: $3.0 million; projected emergency expenditures required to respond quickly to a major fire, earthquake or flood. Assigned fund balance includes amounts that are intended to be used for specific purposes that are neither considered restricted or committed. Fund balance may be assigned by the General Manager. Unassigned fund balance includes positive amounts within the general fund which has not been classified within the above mentioned categories and negative fund balances in other governmental funds. The District uses restricted/committed amounts to be spent first when both restricted and unrestricted fund balance is available unless there are legal documents/contracts that prohibit doing this, such as a grant agreement requiring dollar for dollar spending. Additionally, the District would first use committed, then assigned, and lastly unassigned amounts of unrestricted fund balance when expenditures are made. 10.Net Position Net position represents the difference between assets, deferred outflows of resources, liabilities and deferred inflows of resources. Net investment in capital assets consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowings used for the acquisition, construction or improvement of those assets. In addition, deferred outflows of resources and deferred inflows of resources that are attributable to the acquisition, construction, or improvement of those assets or related debt also are included in the net investment in capital assets component of net position. Net position is reported as restricted when there are limitations imposed on its use either through the enabling legislation adopted by the District or through external restrictions imposed by creditors, grantors, laws or regulations of other governments. The District applies restricted resources when an expense is incurred for purposes for which both restricted and unrestricted net position is available. Unrestricted net position reflect amounts that are not subject to any donor-imposed restrictions. This class also includes restricted contributions whose donor-imposed restrictions were met during the fiscal period. A deficit unrestricted net position may result when significant cash balances restricted for capital projects exist. Once the projects are completed, the restriction on these assets are released and converted to capital assets. 11.Property Taxes The District receives property tax revenue from Santa Clara and San Mateo Counties (the Counties). The Counties are responsible for assessing, collecting and distributing property taxes in accordance with state law. Secured property taxes are recorded as revenue when 29 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 apportioned, in the fiscal period of the levy. The counties apportion secured property tax revenue in accordance with the alternate method of distribution prescribed by Section 4705 of the California Revenue and Taxation Code. This alternate method provides for crediting each applicable fund with its total secured taxes upon completion of the secured tax roll - approximately October 1 of each year. Taxes are levied annually on July 1st, and one-half are due by November 1st and one-half by February 1st. Taxes are delinquent after December 10th and April 10th, respectively. Supplemental property taxes are levied on a pro-rata basis when changes in assessed valuation occur due to the completion of construction or sales transactions. Liens on real property are established on January 15th for the ensuing fiscal period. On June 30, 1993, the Board of Supervisors adopted the "Teeter" method of property tax allocation. This method allocates property taxes based on the total property tax billed. At year-end, the Counties advances cash to each taxing jurisdiction equal to its current year delinquent taxes. Once the delinquent taxes are collected, the revenue from penalties and interest remains with each County and is used to pay the interest cost of borrowing the cash used for the advances. 12.Accounting Estimates The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates. J.Implemented New Accounting Pronouncements GASB Statement No. 77, Tax Abatement Disclosures -Effective date: the requirements of this Statement are effective for reporting periods beginning after December 15, 2015 (earlier application was encouraged and was applied at the District). This Statement requires governments that enter into tax abatement agreements to disclose the following information about the agreements: Brief descriptive information, such as the tax being abated, the District under which tax abatements are provided, eligibility criteria, the mechanism by which taxes are abated, provisions for recapturing abated taxes, and the types of commitments made by tax abatement recipients The gross dollar amount of taxes abated during the period Commitments made by a government, other than to abate taxes, as part of a tax abatement agreement. The implementation of this statement did not have a significant impact on the District’s financial statements and did not result in any prior period restatements or adjustments. GASB Statement No. 78, Pensions Provided through Certain Multiple-Employer Defined Benefit Pension Plans -The objective of this Statement is to address a practice issue regarding the scope and applicability of GASB Statement No. 68, Accounting and Financial Reporting for Pensions. This issue is associated with pensions provided through certain multiple-employer defined benefit pension 30 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 plans and to state or local governmental employers whose employees are provided with such pensions. Prior to the issuance of this GASB 78, the requirements of GASB 68 applied to the financial statements of all state and local governmental employers whose employees are provided with pensions through pension plans that are administered through trusts that meet the criteria in paragraph 4 of that statement. GASB 78 amends the scope and applicability of GASB 68 to exclude pensions provided to employees of state or local governmental employers through a cost-sharing multiple-employer defined benefit pension plan that (1) is not a state or local governmental pension plan, (2) is used to provide defined benefit pensions both to employees of state or local governmental employers and to employees of employers that are not state or local governmental employers, and (3) has no predominant state or local governmental employer (either individually or collectively with other state or local governmental employers that provide pensions through the pension plan). This Statement establishes requirements for recognition and measurement of pension expense, expenditures, and liabilities; note disclosures; and required supplementary information for pensions that have the characteristics described above. The implementation of this statement did not have a significant impact on the District’s financial statements and did not result in any prior period restatements or adjustments K.Upcoming Accounting and Reporting Changes GASB Statement No. 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions. The provisions in Statement 75 are effective for fiscal years beginning after June 15, 2017. The primary objective of this Statement is to improve accounting and financial reporting by state and local governments for postemployment benefits other than pensions (other postemployment benefits or OPEB). It also improves information provided by state and local governmental employers about financial support for OPEB that is provided by other entities. This Statement replaces the requirements of Statements No. 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions, as amended, and No. 57,OPEB Measurements by Agent Employers and Agent Multiple-Employer Plans, for OPEB. Statement No. 74, Financial Reporting for Postemployment Benefit Plans Other Than Pension Plans, establishes new accounting and financial reporting requirements for OPEB plans. The scope of this Statement addresses accounting and financial reporting for OPEB that is provided to the employees of state and local governmental employers. This Statement establishes standards for recognizing and measuring liabilities, deferred outflows of resources, deferred inflows of resources, and expense/expenditures. For defined benefit OPEB, this Statement identifies the methods and assumptions that are required to be used to project benefit payments, discount projected benefit payments to their actuarial present value, and attribute that present value to periods of employee service. Note disclosure and required supplementary information requirements about defined benefit OPEB also are addressed. In addition, this Statement details the recognition and disclosure requirements for employers with payables to defined benefit OPEB plans that are administered through trusts that meet the specified 31 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 criteria and for employers whose employees are provided with defined contribution OPEB. This Statement also addresses certain circumstances in which a nonemployer entity provides financial support for OPEB of employees of another entity. In this Statement, distinctions are made regarding the particular requirements depending upon whether the OPEB plans through which the benefits are provided are administered through trusts that meet the following criteria: Contributions from employers and nonemployer contributing entities to the OPEB plan and earnings on those contributions are irrevocable. OPEB plan assets are dedicated to providing OPEB to plan members in accordance with the benefit terms. OPEB plan assets are legally protected from the creditors of employers, nonemployer contributing entities, the OPEB plan administrator, and the plan members. The District is in the process of determining the impact this statement will have on the financial statements. GASB Statement No. 81, Irrevocable Split-Interest Agreements -The objective of this Statement is to improve accounting and financial reporting for irrevocable split-interest agreements by providing recognition and measurement guidance for situations in which a government is a beneficiary of the agreement. Split-interest agreements are a type of giving agreement used by donors to provide resources to two or more beneficiaries, including governments. Split-interest agreements can be created through trusts—or other legally enforceable agreements with characteristics that are equivalent to split-interest agreements—in which a donor transfers resources to an intermediary to hold and administer for the benefit of a government and at least one other beneficiary. Examples of these types of agreements include charitable lead trusts, charitable remainder trusts, and life-interests in real estate. This Statement requires that a government that receives resources pursuant to an irrevocable split- interest agreement recognize assets, liabilities, and deferred inflows of resources at the inception of the agreement. Furthermore, this Statement requires that a government recognize assets representing its beneficial interests in irrevocable split-interest agreements that are administered by a third party, if the government controls the present service capacity of the beneficial interests. This Statement requires that a government recognize revenue when the resources become applicable to the reporting period. The requirements of this Statement are effective for financial statements for periods beginning after December 15, 2016, and should be applied retroactively. Earlier application is encouraged. The District does not believe this statement will have a significant impact on the District’s financial statements. GASB Statement No. 82, Pension Issues -an amendment of GASB Statements No. 67, No. 68, and No. 73 -The objective of this Statement is to address certain issues that have been raised with respect to Statements No. 67, Financial Reporting for Pension Plans, No. 68, Accounting and Financial Reporting for Pensions, and No. 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions 32 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 of GASB Statements 67 and 68. Specifically, this Statement addresses issues regarding (1) the presentation of payroll-related measures in required supplementary information, (2) the selection of assumptions and the treatment of deviations from the guidance in an Actuarial Standard of Practice for financial reporting purposes, and (3) the classification of payments made by employers to satisfy employee (plan member) contribution requirements. The requirements of this Statement are effective for reporting periods beginning after June 15, 2016, except for the requirements of GASB 82 for selection of assumptions in a circumstance in which an employer’s pension liability is measured as of a date other than the employer’s most recent fiscal year-end. In that circumstance, the requirements for the selection of assumptions are effective for that employer in the first reporting period in which the measurement date of the pension liability is on or after June 15, 2017. Earlier application is encouraged. The District does not believe this statement will have a significant impact on the District’s financial statements. GASB Statement No. 83, Certain Asset Retirement Obligations -This Statement addresses accounting and financial reporting for certain asset retirement obligations (AROs). An ARO is a legally enforceable liability associated with the retirement of a tangible capital asset. A government that has legal obligations to perform future asset retirement activities related to its tangible capital assets should recognize a liability based on the guidance in this Statement. The requirements of this Statement are effective for financial statements for periods beginning after June 15, 2018. Earlier application is encouraged. The District does not believe this statement will have a significant impact on the District’s financial statements. GASB Statement No. 84, Fiduciary Activities -The objective of this Statement is to improve guidance regarding the identification of fiduciary activities for accounting and financial reporting purposes and how those activities should be reported. This Statement establishes criteria for identifying fiduciary activities of all state and local governments. The focus of the criteria generally is on (1) whether a government is controlling the assets of the fiduciary activity and (2) the beneficiaries with whom a fiduciary relationship exists. Separate criteria are included to identify fiduciary component units and postemployment benefit arrangements that are fiduciary activities. The requirements of this Statement are effective for financial statements for periods beginning after December 15, 2018. Earlier application is encouraged. The District does not believe this statement will have a significant impact on the District’s financial statements. GASB Statement No. 86, Certain Debt Extinguishment Issues -The primary objective of this Statement is to improve consistency in accounting and financial reporting for in-substance defeasance of debt by providing guidance for transactions in which cash and other monetary assets acquired with only existing resources—resources other than the proceeds of refunding debt—are placed in an irrevocable trust for the sole purpose of extinguishing debt. This Statement also improves accounting and financial reporting for prepaid insurance on debt that is extinguished and notes to financial statements for debt that is defeased in substance. The requirements of this Statement are effective for financial statements for periods beginning after June 15, 2017. Earlier application is encouraged. The District does not believe this statement will have a significant impact on the District’s financial statements. 33 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 NOTE 2 -CASH AND INVESTMENTS Summary of Cash and Investments The following summarizes deposits as of June 30, 2017: Cash and Cash Equivalents Av aila ble Cash and Investments for Operations Restricted Total Cash Deposits: Cash in Banks 212,857$ 45,000$ 257,857$ Petty Cash 1,500 - 1,500 Total Cash Deposits 214,357 45,000 259,357 Investments: Calif ornia Local Age ncy Investment Fund 360,549 - 360,549 CalTRUST - 1,535,871 1,535,871 Brokerage Ac counts/Cash with Fiscal Age nts 17,070,055 15,965,865 33,035,920 Santa Clara County Pool 40,257,915 1,571,286 41,829,201 Total Investments 57,688,519 19,073,022 76,761,541 Total Cash and Investments 57,902,876$ 19,118,022$ 77,020,898$ Cash in Banks Cash balances in banks are insured up to $250,000 per insured bank by the Federal Deposit Insurance Corporation ("FDIC"). The District’s accounts are held with various banks. As of June 30, 2017,the District’s bank balances exceeded FDIC coverage by $940,047. Fair Value Measurements GASB 72 established a hierarchy of inputs to the valuation techniques above. This hierarchy has three levels: Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are quoted market prices for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other than quoted prices that are not observable Level 3 inputs are unobservable inputs, such as a property valuation or an appraisal. 34 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 The District has the following investments with recurring fair value measurements as of June 30, 2017: 12 Months 13 - 24 25 - 60 More Than Rating Fair Va lu e or Less Months Months 60 Months Money Market Ac counts n/a 36,973$ n/a 36,973$ -$ -$ -$ 0.05% Mutual Funds n/a 2,935,216 Level 2 2,935,216 - - - 3.82% Municipal Bonds AA+/A-7,194,638 Level 2 357,923 3,483,177 2,073,272 1,280,266 9.37% Corp/Gov Bonds AAA/A-20,628,037 Level 1 13,331,164 6,698,535 598,338 - 26.87% LAIF n/a 360,167 Level 2 360,167 - - - 0.47% CalTrust A+f 1,535,871 Level 2 - - 1,535,871 - 2.00% Santa Clara County Pool n/a 41,829,201 Level 2 20,523,034 7,315,449 13,990,718 - 54.49% U.S. Obliga tions AA+2,241,056 Level 1 2,241,056 - - - 2.92% Total Investments 76,761,159$ 39,785,533$ 17,497,161$ 18,198,199$ 1,280,266$ 100.00% Input Level Maturities Concen- trationsInvestment Type Cash in Santa Clara County Treasury Santa Clara County is a fiscal agent of the District. The fair value of the District's investment in the county pool is reported at amounts based on the District's pro-rata share of the fair value provided by the County Treasurer for the entire portfolio (in relation to the amortized cost of the portfolio). The balance available for withdrawal is based on the accounting records maintained by the County Treasurer, which is recorded on the amortized costs basis. Santa Clara County investment pool funds were available for withdrawal on demand and had an average maturity date of less than one year. All cash and investments are stated at fair value. Pooled investment earnings are allocated monthly based on the average cash and investment balances of the various funds of the County. California Local Agency Investment Fund The District is a participant in the Local Agency investment Fund (LAIF) that is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. The District reports its investment in LAIF at the fair value amount provided by LAIF, which is the same as the value of the pool share. The balance is available for withdrawal on demand, and is based on the accounting records maintained by LAIF, which are recorded on an amortized cost basis. Included in LAIF's investment portfolio are collateralized mortgage obligations, mortgage-backed securities, other asset-backed securities, loans to certain state funds, and floating rate securities issued by federal agencies, government-sponsored enterprises, United States Treasury Notes and Bills, and corporations. At June 30, 2017, these investments had an average maturity date of less than one year. Investment Trust of California The District is a participant in the Investment Trust of California (CalTRUST)which is a California joint powers authority that has been established by its members pursuant to an agreement. The California Government Code provides that Public Agencies may purchase shares of beneficial interest issues by a joint powers authority, such as CalTRUST, organized pursuant to the Section 6500 of the Act. The District reports its investment in CalTRUST at the fair value amount provided by CalTRUST. The District participates in the Medium-Term Fund with CalTRUST.The balance in this Medium-Term Fund is available for withdrawal once a week (on Wednesdays), and is based on the net asset value per share on the Wednesday of each week. Included in CalTRUST's investment portfolio for the Medium-Term Fund are collateralized mortgage obligations, mortgage-backed securities, other asset-backed securities, loans to certain state funds, and floating rate securities issued by federal agencies, government-sponsored 35 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 enterprises, United States Treasury Notes and Bills, and corporations. At June 30, 2017, these investments had an average maturity date of 1 to 3 years. Investments Authorized by Debt Agreements The District must maintain required amounts of cash and investments with trustees or fiscal agents under the terms of certain debt issues. These funds are used if the District fails to meet its obligations under these debt issues. Restricted for Debt Service As of June 30, 2017, the District had $628,841 held by Zions bank as trustee, pledged to the payment or security of its outstanding bond issues. The District also had money held by the Bank of New York during the period (zero balance at period-end) which was pledged to the payment or security of its outstanding bonds. All transactions associated with debt service were administered by the Bank. Cash Restricted for Hawthorne Property Maintenance On November 10, 2011, the District received the gift of the 79 acre Hawthorne property, in Portola Valley, California, and an endowment of $2,018,445 to manage the property in perpetuity. The cash balance restricted for this purpose at June 30, 2017 was $1,535,871. Policies and Practices The District's Investment Policy and the California Government Code allow the District to invest in the following, provided the credit ratings of the issuers are acceptable to the District and approved percentages and maturities are not exceeded. The table below also identifies certain provisions of the California Government Code or the District's Investment Policy where it is more restrictive: Au thorized Investment Type Maxim um Remaining Maturity Maxim um Percentage of Portfolio Maxim um Investment in one Issuer Medium Term Notes 5 years 30%No Limit Money Market and Mutual Funds N/A 20%10% U.S. Treasury Obliga tions 5 years No Limit No Limit Federal Age ncy Securities 5 years No Limit No Limit Banker's Ac ceptance 180 days 40%30% Commercial P aper 270 days 25%10% Negotiable Certificates of Deposit 5 years 30%No Limit Repurchase Agr eements 1 year No Limit No Limit Reverse Repurchase Agr eements 92 days 20%No Limit Local Age ncy Investment Fund (LAIF)N/A $40 millio n per account No Limit a)Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to the changes in market interest rates.The District manages its exposure to interest rate 36 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 risk by investing in the Santa Clara County investment pool and LAIF,which had fair values of approximately $6.7 billion and $75.9 billion, respectively as of June 30, 2017, and diversifying its investments, as noted above, through the utilization of brokers. b)Credit Risk Credit risk is the risk of loss due to the failure of the security issuer. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The investment with the County’s investment pool is governed by the County’s general investment policy. The County’s investments in 2017 included U.S. government securities or obligations explicitly guaranteed by the U.S. government that are not considered to have credit risk exposure. See the schedule above for a summary of the District’s ratings by investment type. c)Custodial Credit Risk –Deposits Custodial credit risk is the risk that in the event of a bank failure, the District’s deposits may not be returned to it. The District does not have a policy for custodial credit risk for deposits. However, the California Government code requires that a financial institution secure deposits made by State or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under State law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least 110 percent of the total amount deposited by the public agencies. California law also allows financial institutions to secure public deposits by pledging first trust deed mortgage notes having a value of 150 percent of the secured public deposits and letters of credit issued by the Federal Home Loan Bank of San Francisco having a value of 105 percent of the secured deposits. d)Concentration of Credit Risk The District was not exposed to concentration of credit risk because it had no investments in any one issuer that exceeded 5% of its total investment portfolio. 37 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 NOTE 3 -INTERFUND TRANSACTIONS Interfund Receivables and Payables Interfund transactions are reported as loans or transfers. The District utilizes interfund transactions to account for funding received by the General Fund which is then distributed to the other funds for special uses, such as payment of debt or capital project and to supplement other funding sources. Loans are reported as interfund receivables and payables, as appropriate, and are subject to elimination upon consolidation. The following interfund loans were outstanding at fiscal year end June 30, 2017: Fu nd Due from Other Fu nds Due to Other Fu nds General Fund 4,278,820$ 746,406$ Measure AA Capital Projects Fund 330,196 4,219,965 GF Capital Projects Fund 674,707 311,159 Debt Service Fund - 6,193 Total 5,283,723$ 5,283,723$ At June 30, 2017, interfund transfers consisted of the following: Fu nd Tra nsfer In Tra nsfer Out General Fund -$ 13,761,391$ Measure AA Capital Projects Fund 1,030,287 1,047,144 GF Capital Projects Fund 4,685,714 - Debt Service Fund 10,122,821 1,030,287 Total 15,838,822$ 15,838,822$ NOTE 4 -NOTES RECEIVABLE On December 17, 1997, the District sold the title to and possession of a 50-year fee determinable estate 10-acre parcel near the Skyline Ridge Open Space Preserve. The District financed the purchase in the amount of $288,800 over 25 years at a rate of 10% per annum. Monthly principal and interest payments of $2,634 are due on the 1st of each month and late if not paid by the 10th, with the final payment scheduled December 1, 2022. The outstanding balance at June 30, 2017 was $134,317. 38 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 NOTE 5 -CAPITAL ASSETS AND DEPRECIATION Capital asset activity for the period ended June 30, 2017 is shown below: Balance Deletions/Balance Capital Assets June 30, 2016 Ad ditions Ad justments June 30, 2017 No n-depreciable: Land 403,773,365$ 4,212,786$ -$ 407,986,151$ Construction in Progress 7,223,594 15,248,007 (3,451,356) 19,020,245 Total Non-Depreciable 410,996,959 19,460,793 (3,451,356) 427,006,396 Depreciable: Structure and Improvements 15,604,717 - - 15,604,717 Infrastructure 9,981,800 3,451,355 - 13,433,155 Equipment 1,993,815 - - 1,993,815 Ve hicles 3,706,053 803,255 - 4,509,308 Total Depreciable 31,286,385 4,254,610 - 35,540,995 Less Accumulated Depreciatio n fo r: Structure and Improvements (8,488,950) (400,470) - (8,889,420) Infrastructure (2,429,808) (529,021) - (2,958,829) Equipment (1,047,986) (141,277) - (1,189,263) Ve hicles (1,861,710) (514,330) - (2,376,040) Total Accumulated Depreciation (13,828,454) (1,585,098) - (15,413,552) Total Depreciable Capital Assets - Net 17,457,931 2,669,512 - 20,127,443 Total Capital Assets - Net 428,454,890$ 22,130,305$ (3,451,356)$ 447,133,839$ NOTE 6 -LONG-TERM DEBT The following is a summary of the changes in long-term debt for the period ended June 30, 2017: Begin ning Ending Due Within Long-term Obliga tions Balance Ad ditions Deductions Balance One Year Promissory Notes: Current Interest 39,234,170$ -$ 1,063,104$ 38,171,066$ 1,126,067$ Capital Appreciation 15,474,708 - - 15,474,708 - Ac creted interest 3,989,444 1,125,509 - 5,114,953 - Unamortized Bond P remium 6,478,342 - 143,805 6,334,537 - Subtotal P romissory Notes 65,176,664 1,125,509 1,206,909 65,095,264 1,126,067 Bonds: Current Interest 112,590,000 57,410,000 67,285,000 102,715,000 4,480,000 Unamortized Bond P remium 2,608,421 11,563,658 31,614 14,140,465 - Subtotal Bonds 115,198,421 68,973,658 67,316,614 116,855,465 4,480,000 Net Pension Obliga tion 11,420,125 - 1,298,219 10,121,906 - Compensated Ab sences 1,816,889 1,182,992 1,182,334 1,817,547 1,817,547 Total Long-term Obliga tions 193,612,099$71,282,159$ 71,004,076$ 193,890,182$ 7,423,614$ 39 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 Promissory Notes Daloia Land Purchase Contract Promissory Note During the fiscal year ending 2003 the District entered into a land purchase contract promissory note in the amount of $240,000. The promissory note bears interest at a fixed rate of 6.25% and matured October 10, 2017. Hunt Living Trust Promissory Note On April 1, 2003, the District entered into a $1,500,000 promissory note with the Hunt Living Trust as part of a lease and management agreement. The note is due in full on April 1, 2023 and bears interest at 5.5% semi-annually through April 1, 2013 and 5.0% per annum until the maturity, or prior redemption, of the note. 2012 Refunding Promissory Notes On January 19, 2012, the District advance refunded $34,652,643 in 1999 lease revenue bonds by issuing $31,264,707 in promissory notes. The 2012 notes bear interest rates ranging from 2.00% to 6.04%. The notes are a blend of current interest and capital appreciation notes maturing through 2042. The net proceeds of $33,295,663 (after payment of $278,683 in underwriting fees, insurance, and other issuance costs and a premium of $2,309,638) were used to purchase U.S government securities. Those securities were deposited in an irrevocable trust with an escrow agent to provide for all future debt service payments on the 1999 Series bonds. As a result, the 1999 Series bonds are considered to be defeased and the liability for those bonds has been removed from the long-term debt in the financial statements. 2015 Refunding Promissory Notes On January 22, 2015, the District advance refunded $29,986,962 in 2004 Revenue Bonds by issuing $28,578,500 in promissory notes. The 2015 notes bear interest rates ranging from 2.00% to 5.00%. The notes are current interest notes maturing through 2035.The net proceeds of $28,325,491 (after payment of $253,009 in underwriting fees, insurance, and other issuance costs and a premium of $4,948,500) were used to purchase U.S government securities. Those securities were deposited in an irrevocable trust with an escrow agent to provide for all future debt service payments on the 2004 Revenue Bonds. As a result, the 2004 Revenue Bonds are considered to be defeased and the liability for those bonds has been removed from the long-term debt in the financial statements. Revenue and General Obligation Bonds 2007 Series A Revenue Refunding Bonds and Series B-T Taxable Revenue Refunding Bonds On December 15, 2006 the District issued six series of promissory notes (2007 District Notes) for the purpose of refunding its 1996 Project Lease, 1996 Promissory Notes, 1999 Project Lease, and 1999 Promissory Notes.On December 15, 2006 the Authority, on behalf of the District, issued $52,415,000 of 2007 Series A Revenue Refunding Bonds and $6,785,000 of 2007 Series B-T Taxable Revenue Refunding Bonds for the purpose of defeasing the aggregate purchase price of the 2007 District Notes. The Series A bonds bear interest from 4.0% to 5.0% and Series B-T bonds bear interest at 5.15%. Interest for both series A and B-T are due semi-annually on March 1 and 40 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 September 1. Principal payments for the Series A bonds began September, 2012 and are due annually, thereafter. Principal payments for the Series B-T bonds are due annually on September 1. This Bond was fully defeased during fiscal year 2017 with issuance of the 2016 Refunding Series A and B Green Bonds as noted below. 2011 Revenue Bonds On May 19, 2011, the Authority, on behalf of the District, issued $20,500,000 of 2011 Revenue Bonds for the purpose of acquiring land to preserve and use as open space and pay bond issue and related costs. The Bonds are not general obligations. Each period, the District will appropriate revenues-mainly limited properly tax collections that Santa Clara County and San Mateo County allocate to the District –to pay its obligations under a Lease Agreement for use and occupancy of District land in addition to other District debt and lease obligations unrelated to this financing. The Current Interest Bonds bear interest at 2.0% to 6.0% and are due semi-annually on March 1 and September 1. Principal payments on the Current Interest Bonds are due annually September 1. This Bond was partially defeased during fiscal ye ar 2017 with issuance of the 2016 Refunding Series A and B Green Bonds as noted below. 2015A and 2015B General Obligation Bonds On July 29, 2015, the District issued $40,000,000 of 2015A general obligation bonds and $5,000,000 of 2015B federally taxable general obligation bonds to finance certain projects authorized by voters. The bonds bear interest from 1.5% to 5% and are due semi-annually on March 1 and September 1. The bonds were issued at a premium of $2,559,224 with an underwriter’s discount of $107,599 and issuance costs of $170,000. 2016A and 2016B Refunding Green Bonds On September 8, 2016 the District issued $54,490,000 of 2016 Refunding Series A and $2,920,000 2016 Refunding Series B Green Bonds for the purpose of refunding its outstanding obligations under the 2007 Series A Revenue Refunding Bonds and prepay a portion of its obligations under the 2011 Lease Revenue Bonds.As a result the 2007 Series A Revenue Refunding Bonds and the 2011 Lease Revenue Bonds are considered to be defeased and the liability for those bonds has been removed from the government-wide financial statement of net position. The refunding resulted in a difference between the reacquisition price and the net carrying amount of the old debt of $5,032,161, which is reported as a deferred outflow on the government-wide statement of net position. This difference, reported in the accompanying financial statements as a deduction from bonds payable, is being charged to operations through fiscal ye ar 2036 using the straight line method. The District completed the refunding to obtain an economic gain (difference between the present value of the old and the new debt service payments) of $12,694,440. The 2016 Refunding Green Bonds Series A bears interest from 2.0% to 5.0% and the Series B bears interest of 0.73%. Interest for both Series A and B are due semi-annually on March 1 and September 1. Principal payments for Series A begins September 2017 and are due annually thereafter until September 2036. Series B has only one principal payment in September 2017. 41 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 The following schedule summarizes the District’s outstanding promissory notes and bonds as of June 30, 2017: Origin al Begin ning Ending Long Term Debt Issue Balance Additions Retirements Balance Promisso ry Notes: Daloia Note 240,000$ 34,171$ -$ 23,104$ 11,067$ Hunt Note 1,500,000 1,500,000 - - 1,500,000 2012 Refunding Note Current Int.15,790,000 14,474,999 - 365,000 14,109,999 2012 Refunding Note Cap Apprec.15,474,707 15,474,708 - - 15,474,708 2015 Refunding Note 23,630,000 23,225,000 - 675,000 22,550,000 Subtotal Promisso ry Notes 56,634,707 54,708,878 - 1,063,104 53,645,774 Bo nds: 2007 Series A Refunding 52,415,000 47,300,000 - 47,300,000 - 2011 Lease Revenue 20,500,000 20,290,000 - 19,210,000 1,080,000 2015A General Obliga tion Bonds 40,000,000 40,000,000 - - 40,000,000 2015B General Obliga tion Bonds 5,000,000 5,000,000 - 775,000 4,225,000 2016 Refunding Bond 57,410,000 - 57,410,000 - 57,410,000 Subtotal Bo nds 175,325,000 112,590,000 57,410,000 67,285,000 102,715,000 Accreted Interest: 2012 Refunding Note 3,989,444 1,125,509 - 5,114,953 Subtotal Accreted Interest 3,989,444 1,125,509 - 5,114,953 Unamo rtized Bond Premium 9,086,763 11,563,658 175,419 20,475,002 Total Long Term Debt 231,959,707$ 180,375,085$ 70,099,167$ 68,523,523$ 181,950,729$ The promissory notes future debt service requirements as of June 30, 2017 were as follows: Year Ending June 30,Prin cipal Remaining Ac cretion Interest Total 2018 1,126,067$ -$ 1,816,384$ 2,942,451$ 2019 1,200,000 - 1,765,775 2,965,775 2020 1,285,000 - 1,707,675 2,992,675 2021 1,370,000 - 1,654,925 3,024,925 2022 1,445,000 - 1,600,525 3,045,525 2023-2027 10,800,000 - 6,518,950 17,318,950 2028-2032 20,273,894 - 2,872,575 23,146,469 2033-2037 11,112,188 10,811,786 326,375 22,250,349 2038-2042 5,033,625 16,660,661 - 21,694,286 2043-2047 - 17,998,052 - 17,998,052 Total Debt Service 53,645,774$ 45,470,499$ 18,263,184$ 117,379,457$ 42 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 The bonds future debt service requirements as of June 30, 2017 were as follows: Year Ending June 30,Prin cipal Remaining Ac cretion Interest Total 2018 4,590,000$ -$ 4,188,152$ 8,778,152$ 2019 4,480,000 - 4,097,488 8,577,488 2020 4,145,000 - 3,959,988 8,104,988 2021 4,550,000 - 3,802,076 8,352,076 2022 4,755,000 - 3,626,063 8,381,063 2023-2027 27,195,000 - 14,362,440 41,557,440 2028-2032 15,525,000 - 8,778,027 24,303,027 2033-2037 15,400,000 - 5,983,245 21,383,245 2038-2042 12,640,000 - 3,002,400 15,642,400 2043-2047 9,435,000 - 773,500 10,208,500 Total Debt Service 102,715,000$-$ 52,573,379$ 155,288,379$ Amortization of the deferred loss on early retirement of long-term debt for the fiscal period ended June 30, 2017 was as follows: Begin ning Balance 2,284,026$ Ad dition 5,032,163 Am ortization (339,192) Ending Balance 6,976,997$ NOTE 7 -RENTAL INCOME The District rents certain land and structures to other entities under operating leases with terms generally on a month-to-month basis. Rental income of $1,122,022 was received during the period ended June 30, 2017. NOTE 8 -EMPLOYEE RETIREMENT SYSTEMS Pension Plan General Information about the Pension Plans Plan Description -The District provides benefits to eligible employees through cost-sharing multiple employer defined benefit pension plans (the Plan(s)) administered by the California Public Employees’ Retirement System (CalPERS). Members of the Plan include all permanent employees working full-time. Benefit provisions under the Plans are established by State statute and District resolution. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website. Benefits Provided -CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on ye ars of credited service, equal to one ye ar of full-time 43 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 employment. Members with five years of total service are eligible to retire at age 55 with statutorily reduced benefits. All members are eligible for non-industrial disability benefits after 10 years of service. The death benefit is the Optional Settlement 2W Death Benefit. The cost of living adjustments for the Plan are applied as specified by the Public Employees’ Retirement Law. The Plans’ provisions and benefits in effect at June 30, 2017, are summarized as follows: Tier 1 Tier 2 PEPRA Benefit formula 2.5% @ 55 2% @ 60 2% @ 62 Benefit ves ting sched ule 5 Years 5 Years 5 Years Benefit payments Mo nthly for Life Mo nthly for Life Mo nthly for Life Retirement age 55 60 62 Mo nthly benefits as a % of elig ible compens ation 2.0% to 2.5% 2.0% to 2.5%2.00% Required emp lo yee contribution rates 7.944%7.944%6.313% Required emp lo yer contribution rates 10.069%10.069%6.555% Mis cellane ous Employees Covered – At June 30, 2017, the following employees were covered by the benefit terms for the Plan: Miscella ne ous Activ e 134 Tra nsferred 48 Se pa rate d 62 Retired 62 Tota l 306 Contributions -Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Funding contributions for the Plan are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The District is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. For the ye ar ended June 30, 2017, the contributions recognized as part of pension expense for the Plan were as follows: Miscella ne ous Contributions - employe r $ 4,788,977 Contributions - employe e 691,005 Tota l $ 5,479,982 44 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions As of June 30, 2017, the District reported net pension liabilities for its proportionate shares of the net pension liability of the Plan as follows: Proportionate Share of Net Pension Liabilit y Miscella neous $ 10,121,906 The District’s net pension liability for the Plan is measured as the proportionate share of the net pension liability. The net pension liability of the Plan is measured as of June 30, 2016, and the total pension liability for the Plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2015 using standard procedures. The District’s proportion of the net pension liability was based on a projection of the District’s long-term share of contributions in to the pension plan relative to the projected contributions of all participating employers,as actuarially determined. The District’s proportionate share of the net pension liability for the Plan as of June 30, 2015 and 2016 was as follows: Miscella neous Proportion - June 30, 2015 0.4163% Proportion - June 30, 2016 0.2914% Change in Proportions -0.1249% For the year ended June 30, 2017,the District recognized pension expense of $1,718,954. At June 30, 2017, the District reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Outflows of Resources Deferred Inflows of Resources 2,529,862$ -$ Changes in assumptions - (492,935) 52,102 (11,938) 1,945,906 - 4,132,116 (1,566,551) 8,659,986$ (2,071,424)$ Total Change in employer's proportion and differences between the employer’s contributions and the employer’s proportionate share of contributions Pension contributions subsequent to measurement date Differences between expected and actual exp eriences Net differences between projected and actual earnings on plan in vestments 45 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 The District reported $2,529,862 as deferred outflows of resources related to contributions subsequent to the measurement date that will be recognized as a reduction of the net pension liability in the ye ar ended June 30, 2017. Other amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows: Fiscal Year Ending: Deferred Outflows/(inflows) of Resources 2018 843,970$ 2019 892,951 2020 1,657,267 2021 664,512 Total 4,058,700$ Actuarial Assumptions -The total pension liabilities in the June 30, 2016 actuarial valuations were determined using the following actuarial assumptions: Va lu ation Date June 30, 2015 Measurement Date June 30, 2016 Ac tuarial Cost Method Entry-Age Normal Cost Method Ac tuarial Assumptions: Discount Rate 7.65% Inflation 2.75% Payroll Growth 3.00% Projected Salary Increase (1) Investment Rate of Return 7.5% (2) Mortalit y (3) (3) Derived using CalPERS' membership data for all funds (1) Varies by age and service (2) Net of pension plan in vestment expenses, including inflation Discount Rate -The discount rate used to measure the total pension liability was 7.65 percent for the Plan. To determine whether the municipal bond rate should be used in the calculation of a discount rate for the Plan, CalPERS stress tested plans that would most likely result in a discount rate that would be different from the actuarially assumed discount rate. Based on the testing, none of the tested plans run out of assets. Therefore, the current 7.65 percent discount rate is adequate and the use of the municipal bond rate calculation is not necessary. The long term expected discount rate of 7.65 percent will be applied to all plans in the Public Employees Retirement Fund (PERF). The stress test results are presented in a detailed report that can be obtained from the CalPERS website. 46 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 CalPERS was scheduled to review all actuarial assumptions as part of its regular Asset Liability Management (ALM) review cycle that was scheduled to be completed in February 2018. Any changes to the discount rate will require Board action and proper stakeholder outreach. For these reasons, CalPERS expects to continue using a discount rate net of administrative expenses for GASB 67 and 68 calculations through at least the 2017-18 fiscal year. CalPERS will continue to check the materiality of the difference in calculation until such time as they have changed their methodology. The long-term expected rate of return on pension plan investments was determined using a building- block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations as well as the expected pension fund cash flows.Using historical returns of all the funds’ asset classes, expected compound returns were calculated over the short-term (first 10 years) and the long-term (11-60 years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected rate of return was then set equivalent to the single equivalent rate calculated above and rounded down to the nearest one quarter of one percent. The table below reflects the long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. These rates of return are net of administrative expenses. New Strategic Real Return Real Return As set Class Allo cation Years 1 - 10 (a)Years 11+ (b) Global Equity 51.00%5.25%5.71% Global Fixe d Income 20.00%0.99%2.43% Inflation Sensitive 6.00%0.45%3.36% Priv ate Equity 10.00%6.83%6.95% Real Estate 10.00%4.50%5.13% Infrastructure and Forestland 2.00%4.50%5.09% Liquidity 1.00%-0.55%-1.05% Total 100.00% (b) An expected in flation of 3.0% used for this period. (a) An expected in flation of 2.5% used for this period. 47 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 Sensitivity of the Proportionate Share of the Net Pension Liability to Changes in the Discount Rate -The following presents the District’s proportionate share of the net pension liability for the Plan, calculated using the discount rate for the Plan, as well as what the District’s proportionate share of the net pension liability would be if it were calculated using a discount rate that is 1-percentage point lower or 1-percentage point higher than the current rate: Miscella neous 1% Decrease 6.65% Net Pension Liabilit y $ 17,266,599 Current Discount Rate 7.65% Net Pension Liabilit y $ 10,121,906 1% Increase 8.65% Net Pension Liabilit y $ 4,217,172 Pension Plan Fiduciary Net Position -Detailed information about each pension plan’s fiduciary net position is available in the separately issued CalPERS financial reports. Other Postemployment Benefits (OPEB) Plan Description The District joined the California Employers' Retiree Benefit Trust (CERBT), an agent multiple- employe r plan administered by CalPERS, consisting of an aggregation of single-employer plans. The District Board authorized a deposit of $1,900,000 in CERBT on June 5, 2008, to begin funding its OPEB liability.By Board resolution and through agreements with its labor unit, the District provides certain health care benefits for retired employees (spouse and dependents are not included) under third-party insurance plans. A summary of eligibility and retiree contribution requirements are shown below: Eligibilit y Retire dir ectly from the District unde r CalPER (a ge 50 and 5 ye ars of servic e) Continue participa tion in PEMH CA Retiree Medic al Bene fit District pays retir ee medic al pre miums up to: => $300/mont h effectiv e 1/1/07 => $350/mont h effectiv e 1/1/09 Must be at least equa l to statutory PEMH CA minimum ($122 in 2015, $125 in 2016) PEMH CA Administrative Fee District pays CalPERS administrative fees (0.32% of premiu ms for 2015/16) Surviving Spous e Contin ua tion Retiree benefit continue s to survivin g spous e if retire e elects surviv or annuity unde r CalP ERS re tireme nt plan Other OPEB None 48 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 Funding Policy In accordance with the District's budget, the Annual Required Contribution (ARC) is to be funded throughout the period as a percentage of payroll. Concurrent with implementing Statement No. 45, the District’s Board of Directors passed a resolution to participate in CERBT, an irrevocable trust established to fund OPEB. CERBT is managed by an appointed board not under the control of the District. This Trust is not considered a component unit by the District and has been excluded from these financial statements. Separately issued financial statements for CERBT may be obtained from CALPERS at P.O. Box 942709, Sacramento, CA 94229-2709. Annual OPEB Cost and Net OPEB Obligation The District’s annual OPEB cost is calculated based on the ARC, an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each period and amortize any unfunded actuarial liabilities (or funding excess)over a period not to exceed thirty years. The following table shows the components of the District’s annual OPEB cost for the period, the amount actually contributed to the plan, and changes in the District’s net OPEB obligation: Description Balance An nual required contribution 572,000$ Interest on net OP EB asset (43,000) Ad justment to annual required contribution 62,000 An nual OPEB cost (expense) 591,000 Contributions made (298,008) Increase in net OP EB asset 292,992 Net OP EB obliga tion (asset) - begin ning (699,015) Net OP EB obliga tion (asset) - ending $ (406,023) The District’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and the net OPEB obligation for 2017 was as follows: Percentage Net OP EB Period An nual of An nual Obliga tion/ Ended OP EB Cost Cost Contributed (Asset) March 31, 2015 298,000 53%(863,176) June 30, 2016 386,000 57%(699,015) June 30, 2017 591,000 50%(406,023) 49 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 Funded Status and Funding Progress The most recent actuarial valuation date was June 30, 2015. The following summarizes the funded status of the plan as of June 30, 2017: Description Balance 5,119,000$ 3,262,927 1,856,073$ 64% 9,789,000$ 19% Funded ratio (actuarial value of plan assets/AAL ) Projected covered payroll (active P la n members) UAAL as a percentage of covered payroll Ac tuarial accrued lia bilit y (AAL ) Va lu e of plan assets Unfunded actuarial accrued lia bilit y (UAAL ) Actuarial Methods and Assumptions The ARC was determined as part of the actuarial valuation using the entry age normal actuarial cost method. This is a projected benefit cost method, which takes into account those benefits that are expected to be earned in the future as well as those already accrued. The actuarial assumptions included (a) 6.04% to 7.25%investment rate of return, (b) 3.25% projected annual salary increase, and (c) health inflation increases of 0% for 1 ye ar, 1.5% for the next 5 ye ars, and 3% thereafter. The actuarial methods and assumptions used include techniques that smooth the effects of short-term volatility in actuarial accrued liabilities and the actuarial value of assets. Actuarial calculations reflect a long-term perspective and actuarial valuations involve estimates of the value of reported amounts and assumptions about the probability of events far into the future. Actuarially determined amounts are subj ect to revision at least bi-annually as results are compared to past expectations and new estimates are made about the future. The District's OPEB unfunded actuarial accrued liability is being amortized as a level percentage of projected payroll using a 30 year open amortization period. NOTE 9 -JOINT VENTURES (JOINT POWERS AGREEMENTS) The District is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; injuries to employees; and natural disasters. Prior to July 1, 2002, the District managed and financed these risks by purchasing commercial insurance. On July 1, 2002, the District joined the California Joint Powers Insurance Authority (CAL JPIA). CAL JPIA is composed of 119 California public entities and is organized under a joint powers agreement pursuant to California Government Code Section 6500 et seq. The purpose of CAL JPIA is to arrange and administer programs for the pooling of self-insurance losses, to purchase excess insurance or reinsurance, and to arrange for group-purchased insurance for property and other coverages. CAL JPIA's pool began covering claims of its members in 1978. Each me mber government has an elected official as its representative on the Board of Directors. The Board operates through a nine member Executive Committee. During the past three fiscal periods, none of the programs of protection have had settlements or judgments that exceeded pooled or insured coverage. There have been no significant reductions in pooled or insured liability coverage from coverage in the prior period. 50 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 Self-Insurance Programs of the CAL JPIA General and Automobile Liability Each government member pays a primary deposit to cover estimated losses for a fiscal year (claims year). General liability (GL) coverage includes bodily injury, personal injury, or property damage to a third party resulting from a member activity. The GL program also provides automobile liability coverage. Six months after the close of a fiscal period, outstanding claims are valued. A retrospective deposit computation is then made for each open claims year. Costs are spread to members as follows: the first $30,000 to $750,000 are pooled based on member's share of costs under $30,000; costs in excess of $750,000 are shared by the members based upon each individual member's payroll. Costs of covered claims above $5,000,000 are currently paid by reinsurance. The protection for each member is $50,000,000 per occurrence, up to $50,000,000. Worker's Compensation The District also participates in the Worker's Compensation program administered by CAL JPIA. Pool deposits and retrospective adjustments are valued in a manner similar to the General Liability pool. The District is charged for the first $50,000 of each claim. Costs from $50,000 to $100,000 per claim are pooled based on the member's losses under its retention level. Costs between $100,000 and $2,000,000 per claim are pooled based on payroll. Costs from $2,000,000 to $5,000,000 are paid by excess insurance purchased by CAL JPIA. The excess insurance provides coverage to statutory limits. Purchased Insurance Environmental Insurance The District participates in the Pollution and Remediation Legal Liability Program, which is available through CAL JPIA. The policy provides coverage for both first and third party damages, including certain types of cleanups;fuel spill or hazmat incidents; member listed non-owned disposal sites; above ground and underground storage tanks; and for sudden and gradual pollution at or from property, streets, sanitary sewer trunk lines and storm drain outfalls owned by the District. Coverage is on a claims-made basis. There is a $50,000 deductible. CAL JPIA has a limit of $50,000,000 for the three-year coverage period. The current coverage period is July 2017 through July 1, 2020.Each member of CAL JPIA has a $10,000,000 aggregate limit during the three-year period. The current coverage period is July 2017 through July 1, 2020. Property Insurance The District participates in the All-Risk property program of CAL JPIA which includes all-risk coverage for real and personal property (such as scheduled buildings, office furniture, equipment, vehicles, etc). This insurance is underwritten by several insurance companies. Property is currently insured according to a schedule of covered property submitted by the District to CAL JPIA. The All-Risk deductible is $5,000 per occurrence; $1,000 for non-emergency vehicles. Premiums for the coverage are paid annually and are not subject to retroactive adjustments. 51 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 Boiler & Machinery Insurance The District participates in the optional coverage for boiler and machinery, which is purchased separately under the property program. Coverage is for physical damage for sudden and accidental breakdown of boilers and machinery, and electrical injury. There is a $5,000 per accident or occurrence deductible. Crime Insurance The District participates in the crime program of CAL JPIA in the amount of $1,000,000 per claim, with a $2,500 per occurrence deductible. Insurance provides coverage for employee dishonesty, failure to faithfully perform duties, forgery, counterfeiting, theft, robbery, burglary, and computer fraud. Premiums are paid annually and are not subject to retroactive adjustments. Special Event Tenant User Liability Insurance The District participates in the special events program of CAL JPIA which provides liability insurance when District premises are used for special events. The insurance premium is paid by the tenant user to the District according to a schedule. The District then pays the insurance arranged through CAL JPIA. There is no deductible and the District is added as additional insured. Liability limits are purchased in $1 million per occurrence increments. Vendors/Contractors Program General liability coverage with or without professional liability is offered through CAL JPIA to vendors/contractors who otherwise could not meet the District’s minimum insurance requirement: $1 million per occurrence, $2 million in aggregate. Cyber Liability Program The cyber liability program is partially covered under the liability program, and partially held through a stand-alone coverage program. Cyber liability provides coverage for both first-and third-party claims. First party coverage includes privacy, regulatory claims, security breach response, business income loss, dependent business income loss, digital asset restoration costs, and cyber-extortion threats, while third- party coverage includes privacy liability, network security liability, and multimedia liability. Members work directly with the reinsurer to investigate and respond to claims. There is a $1 million per occurrence limit of coverage, $1 million aggregate limit per policy period per member, and a $10 million aggregate limit of coverage for all members per policy period. NOTE 10 -COMMITMENTS AND CONTINGENCIES The District may be exposed to various claims and litigation during the normal course of business. However, management believes there were no matters that would have a material adverse effect on the District’s financial position or results of operations as of June 30, 2017. NOTE 11 -SUBSEQUENT EVENTS Management has reviewed subsequent events and transactions that occurred after the date of the financial statements through the date the financial statements were issued. The financial statements include all events or transactions, including estimates, required to be recognized in accordance with generally 52 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 accepted accounting principles. On July 18, 2017, the District made a $3.1 million deposit to purchase a new administrative office building. The full cost of the building is estimated at $31.5 million. On October 2, 2017, the District closed on the purchase of an industrial building/yard in the amount of $3.1 million. NOTE 12 -PRIOR PERIOD ADJUSTMENT The District recorded a prior period adjustment for fiscal year 2017 to record the separation of the Capital Projects Fund from fiscal year 2016 into two funds for fiscal year 2017. The District now has two capital projects funds, Measure AA Capital Projects Fund and the GF Capital Projects Fund. See note 1 for a description of each of the funds. The District analyzed the revenue sources and expenditures from fiscal year 2016, when the Capital Projects Fund was originally set up, to determine the ending fund balance for each new capital projects fund. Based on this analysis, the Measure AA Capital Projects Fund and the GF Capital Projects Fund, had each been separated in fiscal year 2016, would have had an ending fund balances for fiscal year 2016 of $24,085,184 and ($307,137), respectively. 53 Page Intentionally Left Blank 54 REQUIRED SUPPLEMENTARY INFORMATION 55 Variance with Final Budget Actual Positive - Original Final (GAAP Basis)(Negative) Revenues: Property taxes 42,785,000$ 42,785,000$ 42,281,739$ (503,261)$ Grant income 841,600 841,600 650,839 (190,761) Property management 1,209,000 1,209,000 1,479,462 270,462 Investment earnings 450,000 450,000 313,397 (136,603) Other revenues 332,440 332,440 608,558 276,118 Total revenues 45,618,040 45,618,040 45,333,995 (284,045) Expenditures: Current Salaries and employee benefits 19,174,332 19,333,953 18,890,179 443,774 Services and supplies 8,168,018 8,130,731 5,612,468 2,518,263 Total expenditures 27,342,350 27,464,684 24,502,647 2,962,037 Excess (deficiency) of revenues over (under) expenditures 18,275,690 18,153,356 20,831,348 2,677,992 Other financing sources (uses): Transfers in - - - - Transfers out - - (13,761,391) (13,761,391) Total other financing sources (uses)- - (13,761,391) (13,761,391) Net change in fund balance 18,275,690 18,153,356 7,069,957 (11,083,399) Fund balance beginning 54,228,626 54,228,626 54,228,626 - Fund balance ending 72,504,316$ 72,381,982$ 61,298,583$ (11,083,399)$ Budgeted Amounts Midpeninsula Regional Open Space District Budget to Actual (GAAP) For the Fiscal Year Ended June 30, 2017 Schedule of Revenues, Expenditures and Changes in Fund Balance General Fund The notes to the financial statements are an integral part of this statement. 56 Midpeninsula Regional Open Space District Schedule of Pension Plan Contributions June 30, 2017 2017 2016 2015 Contractually Required Contributions (Actuarially Determined)1,514,352$ 1,358,520$ 1,461,069$ Contributions in Relation to Ac tuarially Determined Contributions 1,514,352 1,358,520 1,461,069 Co ntributio n Deficiency (Excess)-$ -$ -$ Co vered Em plo yee Payroll 11,834,150$9,862,578$ 8,994,979$ Co ntributio ns as a Percentage of Covered Payroll 12.80% 13.77% 16.24% No tes to Schedule: Va lu ation Date:June 30, 2015 As sumptions Used:Entry Age Method used for Actuarial Cost Method Level Percentage of P ayroll (Closed) Used Amortization Method 3.7 Years Remaining Amortization Period Inflation Assumed at 2.75% Investment Rate of Returns set at 7.5% CalPERS mortalit y table using 20 years of membership data for all funds ** Fiscal year 2015 was the first year of im plementation, therefore only three years are shown. 57 Midpeninsula Regional Open Space District Schedule of Net Pension Liability Proportionate Shares June 30, 2017 2017 2016 2015 Proportion of Net Pension Liabilit y 0.29137%0.41627%0.39847% Proportionate Share of Net Pension Liabilit y 10,121,906$11,420,126$9,848,203$ Covered Employee P ayroll 11,834,150$9,862,578$ 8,994,979$ Proportio nate Share o f NPL as a % of Co vered Emplo yee Payroll 85.53%115.79%109.49% Plan's Fi duciary Net Po sitio n as a % of the TPL 80.93%73.93%76.19% ** Fiscal year 2015 was the first year of im plementation, therefore only three years are shown. 58 Midpeninsula Regional Open Space District Schedule of Funding Progress –Other Postemployment Benefits June 30, 2017 Ac tuarial Ac crued UAAL as Ac tuarial Liabilit y Unfunded a Percentage Ac tuarial Va lu e of (AAL )AAL Funded Covered of Covered Va lu ation As sets Entry Age (UAAL )Ratio Payroll Payroll Date (a)(b)(b-a)(a/b)(c)((b-a/c)) 6/30/2011 2,058,000$1,844,000$214,000$ 111.61% 7,331,000$-2.92% 6/30/2013 2,035,000 2,555,000 520,000 79.65% 8,043,000 6.47% 6/30/2015 2,520,000 4,612,000 2,092,000 54.64% 9,182,000 22.78% The above table is a summary schedule of the funding progress for the District’s OPEB plan as stated in each actuarial study. The actuarial studies are based on assumptions and data available at the time each study was completed. The actual funding progress of the plan as noted in Note 8 may be different than the projections included in the actuarial studies. 59 Page Intentionally Left Blank 60 SUPPLEMENTARY INFORMATION 61 Variance with Final Budget Actual Positive - Original Final (GAAP Basis)(Negative) Revenues: Property taxes -$ -$ -$ -$ Grant income - - - - Property management - - - - Investment earnings - 160,000 163,483 3,483 Other revenues - - - - Total revenues - 160,000 163,483 3,483 Expenditures: Current Salaries and employee benefits - - 320,482 (320,482) Services and supplies - - 36,837 (36,837) Capital outlay 15,674,800 15,733,580 16,529,694 (796,114) Total expenditures 15,674,800 15,733,580 16,887,013 (1,153,433) Excess (deficiency) of revenues over (under) expenditures (15,674,800) (15,573,580) (16,723,530) (1,149,950) Other financing sources (uses): Transfers in - - 1,030,287 1,030,287 Transfers out - - (1,047,144) (1,047,144) Total other financing sources (uses)- - (16,857) (16,857) Net change in fund balance (15,674,800) (15,573,580) (16,740,387) (1,166,807) Fund balance beginning 23,778,047 23,778,047 23,778,047 - Prior period adjustment - see note 12 307,137 307,137 307,137 - Fund balance beginning - as adjusted 24,085,184 24,085,184 24,085,184 - Fund balance ending 8,410,384$ 8,511,604$ 7,344,797$ (1,166,807)$ Midpeninsula Regional Open Space District Schedule of Revenues, Expenditures and Changes in Fund Balance Budget to Actual (GAAP) Measure AA Capital Projects Fund For the Fiscal Year Ended June 30, 2017 Budgeted Amounts The notes to the financial statements are an integral part of this statement. 62 Variance with Final Budget Actual Positive - Original Final (GAAP Basis)(Negative) Revenues: Property taxes -$ -$ -$ -$ Grant income - - - - Property management - - - - Investment earnings - - - - Other revenues - - - - Total revenues - - - - Expenditures: Current Salaries and employee benefits - - - - Services and supplies - - 946,845 (946,845) Capital outlay 4,016,050 4,438,050 3,431,732 1,006,318 Total expenditures 4,016,050 4,438,050 4,378,577 59,473 Excess (deficiency) of revenues over (under) expenditures (4,016,050) (4,438,050) (4,378,577) 59,473 Other financing sources (uses): Transfers in - - 4,685,714 4,685,714 Transfers out - - - - Total other financing sources (uses)- - 4,685,714 4,685,714 Net change in fund balance (4,016,050) (4,438,050) 307,137 4,745,187 Fund balance beginning - - - - Prior period adjustment - see note 12 (307,137) (307,137) (307,137) - Fund balance beginning - as adjusted (307,137) (307,137) (307,137) - Fund balance ending (4,323,187)$ (4,745,187)$ -$ 4,745,187$ Midpeninsula Regional Open Space District Schedule of Revenues, Expenditures and Changes in Fund Balance Budget to Actual (GAAP) GF Capital Projects Fund For the Fiscal Year Ended June 30, 2017 Budgeted Amounts The notes to the financial statements are an integral part of this statement. 63 Variance with Final Budget Actual Positive - Original Final (GAAP Basis)(Negative) Revenues: Property taxes -$ 1,800,000$ 1,579,237$ (220,763)$ Grant income - - - - Property management - - - - Investment earnings - - 2,846 2,846 Other revenues - - - - Total revenues - 1,800,000 1,582,083 (217,917) Expenditures: Debt service: Principal 6,002,900 6,002,900 5,193,104 809,796 Interest 5,081,940 5,081,940 6,403,845 (1,321,905) Issuance cost - - 786,497 (786,497) Total expenditures 11,084,840 11,084,840 12,383,446 (1,298,606) Excess (deficiency) of revenues over (under) expenditures (11,084,840) (9,284,840) (10,801,363) (1,516,523) Other financing sources (uses): Transfers in - - 10,122,821 10,122,821 Transfers out - - (1,030,287) (1,030,287) Payment to refunded bond escrow agent - - (68,187,161) (68,187,161) Proceeds of refunding bond - - 57,410,000 57,410,000 Premium from bond issuances - - 11,563,658 11,563,658 Total other financing sources (uses)- - 9,879,031 9,879,031 Net change in fund balance (11,084,840) (9,284,840) (922,332) 8,362,508 Fund balance beginning 3,116,266 3,116,266 3,116,266 - Fund balance ending (7,968,574)$ (6,168,574)$ 2,193,934$ 8,362,508$ Midpeninsula Regional Open Space District Schedule of Revenues, Expenditures and Changes in Fund Balance Budget to Actual (GAAP) Debt Service Fund For the Fiscal Year Ended June 30, 2017 Budgeted Amounts The notes to the financial statements are an integral part of this statement. 64 Expenditures Expenditures from from July 1, 2016 Inception through through Project No.Project Description June 30, 2017 June 30, 2017 20005 New Trail Easement - SFPUC, Ravenswood (MAA 2-2)-$ 22,603$ 20088 POST Hendry's Creek Restoration (MAA 22-1)- 41,330 20101 Lysons Property ( 17-1 MAA )- 27,059 20102 Lobner Demolition (MAA 17-2)- 128,760 20109 Riggs Property Appraisal - (3-1 MAA)- 6,500 20110 Purisima Creek Uplands Lot line Adjustment (3-1 MAA)- 13,000 20112 Conservation Easement Upper Alpine Ranch Area (15-1 MAA)- 8,695 20113 Preservation of Upper Los Gatos Creek Watershed (22-1 MAA)- 5,000 20114 Land Conservation Opportunities MAA 25-1 (Burtons )- 150 30503 ECDM Trail Improvements (MAA 4-4)- 3,930 30904 Mindego Area - Mindego Hill Trail (MAA 9-4)- 34,196 31309 Mt Um Bald Mtn Staging to Summit Trail (MAA 23-2)- 17,646 31310 Mt Um Summit Restor & Improv (MAA 23-4)- 79,491 31311 Mt Um Trail Overlook & Bridges (MAA 23-5)- 243 31500 Measure AA Project 11-1 - 728 65101 PCR Harkins Bridge Replacement (MAA 3-4)- 108,788 65201 Lower Stevens Canyon Hiking Bridge (MAA 17-4)- 103,187 80016 ECdM Creek Watershed Protection Program (MAA 4-3)- 45,507 80029 Pond DR05 Repair (MAA 7-5)- 150,682 80037 Mindego Grazing Infrastructure (MAA 9-1)- 135,748 80038 LHC Grazing Infrastructure - McDonald Ranch Fencing (MAA 5-2)- 178,850 AA01 Miramontes Ridge - Gateway to San Mateo Coast 46,600 52,915 AA02 Bayfront Habitat Protection & Public Access Partnerships 212,334 287,168 AA03 Purisima Creek Redwoods: Purisma-to Sea Trail, Watershed/Graze 82,136 457,816 AA04 El Corte de Madera Creek: Bike Trail & Water Quality 10,067 318,751 AA05 La Honda Creek - Upper Recreation Area 215,022 2,107,596 AA07 Driscoll Ranch Public Access, Wildlife Protection, Grazing 913,025 10,828,183 AA09 Russian Ridge: Public Recreation, Grazing & Wildlife Protection 5,634 71,875 AA10 Coal Creek: Reopen Alpine Road for Trail Use 4,286 4,286 AA15 Regional: Redwood Protection & Salmon Fishery Conservation 522,837 3,009,855 AA17 Regional: Complete Upper Stevens Creek Trail 11,237 1,508,575 AA19 El Sereno Dog Park & Connections - 715 AA20 South Bay Foothills: Wildlife Passage/Ridge Trail Improvements 101,936 191,974 AA21 CR:Pub Recreation Proj 888,883 1,219,293 AA22 Cathedral Oaks Public Access & Conservation 79,531 639,895 AA23 Mt Um Pub Access/Intrep 12,501,545 15,287,094 AA24 Rancho de Guadalupe Family Recreation 1,291,940 1,591,996 AA25 Loma Prieta Area Public Access - 410,000 Total MAA Bond Project Expenditures 16,887,013 39,100,080 Reimbursements from Grants, Contributions, and Other Funds (624,338) (1,635,308) Total MAA Bond Project Expenditures - Net Reimbursements 16,262,675$ 37,464,772$ Midpeninsula Regional Open Space District Measure AA Bond Program Schedule of Program Expenditures June 30, 2017 The notes to the financial statements are an integral part of this statement. 65 Midpeninsula Regional Open Space District Notes to Supplementary Information June 30, 2017 NOTE 1 -BACKGROUND Measure AA is a $300 million general obligation bond approved in June 2014 by over two-thirds of Midpen voters. Proceeds from bonds, which will be sold in a series over approximately the next 20- 30 years, will be used to: Protect natural open space lands Open preserves or areas of preserves that are currently closed Construct public access improvements such as new trails and staging areas Restore and enhance open space land, which includes forests, streams, watersheds, and coastal ranch areas. On July 29, 2015, the District issued $40,000,000 of 2015A general obligation bonds and $5,000,000 of 2015B federally taxable general obligation bonds to finance certain projects authorized by voters. The bonds bear interest from 1.5% to 5% and are due semi-annually on March 1 and September 1. The bonds were issued at a premium of $2,559,224 with an underwriter’s discount of $107,599 and issuance costs of $170,000. Land acquisition is the first step to open space conservation. The Vision Plan identified 50,000 acres of open space land that, when conserved, would significantly improve wildlife conditions, wetlands, watersheds, creeks, sensitive plant communities and healthy outdoor recreation. As of June 30, 2017, the District has acquired 1,245 acres of land with $18,898,663 in funding support from Measure AA Funds. NOTE 2 -OVERISGHT COMMITTEE The Oversight Committee is essential to implementing Measure AA and will consist of seven at- large members who reside within the District. The Committee convenes at least once a year and reviews annual Measure AA expenditures and Midpen’s Annual Audit and Accountability report. Each year, the Committee’s findings will be presented to the Board at a public meeting and will be posted on the District’s website. NOTE 3 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The basis of accounting utilized in preparation of this report may differ from accounting principles generally accepted in the United States of America. Accordingly, the accompanying program statement is not intended to present the financial position and the results of operations in conformity with accounting principles generally accepted in the United States of America. Expenditures incurred with Measure AA Bond proceeds are recorded on a modified accrual basis of accounting. Under the modified accrual basis of accounting, revenue is recognized when it is measureable and available. Similarly, expenses are recognized when they are incurred, not when they are paid. 66 OTHER INDEPENDENT AUDITOR’S REPORTS 67 1475 Saratoga Ave, Suite 180, San Jose, CA 95129 Tel: 408-217-8749 • E-Fax: 408-872-4159 info@cnallp.com • www.cnallp.com INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Board of Directors Midpeninsula Regional Open Space District Los Altos,California We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the governmental activities, each major fund, and the aggregate remaining fund information of Midpeninsula Regional Open Space District (the District) as of and for the year ended June 30, 2017, and the related notes to the financial statements, which collectively comprise the District’s basic financial statements, and have issued our report thereon dated October 13, 2017. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the District’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the District’s internal control. Accordingly, we do not express an opinion on the effectiveness of the District’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control over financial reporting was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses.However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the District’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and 68 1475 Saratoga Ave, Suite 180, San Jose, CA 95129 Tel: 408-217-8749 • E-Fax: 408-872-4159 info@cnallp.com • www.cnallp.com material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. October 13, 2017 San Jose, California 69