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Home My Public Portal AboutAudit Report - District- FY17Midpeninsula Regional Open Space District Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2017 Headquartered in Los Altos, California Operating over 63,000 acres of Regional Open Space Preserves and Trails within San Mateo and Santa Clara, and part of Santa Cruz Counties Page Intentionally Left Blank Comprehensive Annual Financial Report Fiscal Year Ended June 30, 2017 Midpeninsula Regional Open Space District Prepared by: Finance and Administrative Services Page Intentionally Left Blank Introductory Section Page Intentionally Left Blank Midpeninsula Regional Open Space District Santa Clara County Comprehensive Annual Financial Report For the Year Ended June 30, 2017 TABLE OF CONTENTS TITLE PAGE INTRODUCTORY SECTION Table of Contents......................................................................................................................... 1 Transmittal Letter ........................................................................................................................ 3 Principal Officials ........................................................................................................................ 9 Organizational Charter................................................................................................................. 10 Location Map ............................................................................................................................... 11 FINANCIAL SECTION Independent Auditor’s Report...................................................................................................... 14 Management’s Discussion and Analysis ..................................................................................... 18 Basic Financial Statements: Government-Wide Financial Statements: Statement of Net Position............................................................................................... 28 Statement of Activities ................................................................................................... 29 Fund Financial Statements: Balance Sheet –Governmental Funds ........................................................................... 32 Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Position ........................................................................................ 33 Statement of Revenues, Expenditures, and Changes in Fund Balance –Governmental Funds ................................................................. 34 Reconciliation of Governmental Funds Statement of Revenues, Expenditures, and Changes in Fund Balance to the Statement of Activities.................................. 35 Notes to the Basic Financial Statements ............................................................................... 38 REQUIRED SUPPLEMENTARY INFORMATION Schedule of Revenue, Expenditures and Changes in Fund Balance – Budget and Actual (GAAP) General Fund ........................................................................... 74 Schedule of Pension Plan Contributions ...................................................................................... 75 Schedule of Net Pension Liability Proportionate Shares............................................................. 76 Schedule of Funding Progress – Other Postemployment Benefits .............................................. 77 SUPPLEMENTARY INFORMATION Schedule of Revenue, Expenditures and Changes in Fund Balance – Budget and Actual (GAAP) Measure AA Capital Projects Fund......................................... 82 Schedule of Revenue, Expenditures and Changes in Fund Balance – Budget and Actual (GAAP) GF Capital Projects Fund......................................................... 83 Schedule of Revenue, Expenditures and Changes in Fund Balance – Budget and Actual (GAAP) Debt Service Fund ................................................................... 84 Measure AA Bond Program –Schedule of Program Expenditures ............................................. 85 Notes to Supplementary Information ........................................................................................... 86 STATISTICAL SECTION Net Position ................................................................................................................................. 90 Changes in Net Position............................................................................................................... 91 Fund Balances of Governmental Funds ....................................................................................... 92 1 Midpeninsula Regional Open Space District Santa Clara County Comprehensive Annual Financial Report For the Year Ended June 30, 2017 Changes in Fund Balances of Governmental Funds .................................................................... 93 Assessed and Actual Value of Taxable Property ......................................................................... 94 Direct and Overlapping Property Tax Rates ................................................................................ 95 Principal Property Tax Payers ..................................................................................................... 96 Property Tax Levies and Collections ........................................................................................... 97 Ratios of General Bonded Debt Outstanding............................................................................... 98 Ratios of Outstanding Debt.......................................................................................................... 99 Legal Debt Margin Information ................................................................................................... 100 Demographic and Economic Statistics ........................................................................................ 101 Principal Employers..................................................................................................................... 102 Full-time Equivalent District Government Employees by Function............................................ 103 Capital Asset Statistics by Function ............................................................................................ 104 Operating Indicators by Function ................................................................................................ 105 OTHER INDEPENDENT AUDITOR’S REPORTS: 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 ......................................... 107 2 3 4 5 6 7 8 Midpeninsula Regional Open Space District Santa Clara County Comprehensive Annual Financial Report For the year ended June 30, 2017 DISTRICT BOARD OF DIRECTORS Pete Siemens, Ward 1 – Board Secretary (Term ends 12/31/2018) Yoriko Kishimoto, Ward 2 – Board Member (Term ends 12/31/2018) Jed Cyr, Ward 3 – Board Treasurer (Term ends 12/31/2020) Curt Riffle, Ward 4 – Board Vice President (Term ends 12/31/2020) Nonette Hanko, Ward 5 – Board Member (Term ends 12/31/2018) Larry Hassett, Ward 6 – Board President (Term ends 12/31/2018) Cecily Harris, Ward 7 (Term ends 12/31/2020) DISTRICT MANAGEMENT Stephen E. Abbors, General Manager Ana Ruiz, Assistant General Manager Kevin Woodhouse, Assistant General Manager Michael L. Foster, Controller Sheryl Schaffner, Esq., General Counsel Stefan Jaskulak, Chief Financial Officer/Director of Administrative Services 9 PUBLIC BOARD OF DIRECTORS Steve Abbors General Manager Mike Foster Controller Sheryl Schaffner General Counsel Hilary Stevenson Asst. General Counsel Sue Voiss Risk Management Coordinator Ana Ruiz Project Planning & Delivery Assistant General Manager Stefan Jaskulak CFO/ Director of Administrative Services Kevin Woodhouse Visitor & Field Services Assistant General Manager FINANCE Andrew Taylor, Manager IST Garrett Dunwoody, Manager HUMAN RESOURCES Candice Basnight, Supervisor Pamela Mullen Sr. Management Analyst Mindy Vargas HR Management Analyst II Rutuja Khare HR Analyst I Heather Reiter Training & Safety Specialist VACANT Sr. Accountant VACANT Budget & Analysis Manager Debbie Ledger Sr. Finance & Accounting Technician Amudha Sankar Sr. Finance & Accounting Technician VACANT Administrative Assistant Benny Hsieh IT Program Administrator Casey Hiatt GIS Program Administrator Owen Sterzl IT Technician II Davin Wong IT Intern Jamie Hawk Data Analyst I Nathaniel Greig Data Analyst I Torie Robinson GIS Intern PLANNING Jane Mark, Manager ENGINEERING & CONSTRUCTION Jay Lin, Manager Damon Adlao Capital Project Manager III VACANT Capital Project Manager III Matt Brunnings Capital Project Manager III Zachary Alexander Capital Project Manager II Tina Hugg Sr. Planner Meredith Manning Sr. Planner Gretchen Lausten Planner III Lisa Bankosh Planner III Leslie Chan Planner II Alicia Halpern Planner I Bryan Apple Planner II Melissa Borgesi Administrative Assistant REAL PROPERTY Mike Williams, Manager NATURAL RESOURCES Kirk Lenington, Manager LAND & FACILITIES SERVICES Brian Malone, Manager VISITOR SERVICES Michael Newburn, Manager Cindy Roessler Sr. Resource Mgmt Specialist Matt Baldzikowski Sr. Resource Mgmt Specialist PUBLIC AFFAIRS Christine Butterfield, Manager Cydney Bieber Website Administrator Amanda Mills Resource Mgmt Specialist I Julie Andersen Resource Mgmt Specialist III Matt Chaney Resource Mgmt Specialist I Aaron Hebert Water Resources Specialist Whitney Berry Planner II Allen Ishibashi Sr. Real Property Agent Elish Ryan Planner III Maria Soria Executive Assistant/ Deputy District Clerk Jennifer Woodworth District Clerk/ Assistant to the General Manager Jordan McDaniel Administrative Assistant VACANT Real Property Specialist I/II Joshua Hugg Governmental Affairs Specialist Coty Sifuentes- Winter IPM Coordinator Tad Hammer Data Administrator Refer to Visitor Services Org Chart Refer to Land & Facilities Services Org Chart VACANT Sr. Administrative Assistant Melanie Askay Grants Specialist Janine Ward Procurement & Contracts Specialist Dave Jaeckel Management Analyst II Updated: June 30, 2017 Clayton Koopmann Resource Mgmt Specialist II VACANT Natural Resources Intern (Half-time)Marion Shaw Management Analyst II Elissa Martinez Management Analyst I Carmen Lau Public Affairs Specialist I Peggy Gibbons Public Affairs Specialist II VACANT Resource Mgmt Specialist I/II VACANT Natural Resources Intern (Half-time) Lupe Hernandez Administrative Assistant 10 680 880 280 280 280 280 Santa ClaraSunnyvale Stanford University Palo Alto Mountain View ALAMEDA COUNTY SANTA CLARA COUNTY SANTA CRUZ COUNTY SAN MATEO COUNTY Campbell Soquel Demonstration State Forest Ano Nuevo State Park San Gregorio Castle Rock State Park Don Edwards San Francisco Bay National Wildlife Refuge State Wildlife Refuge S a n M a t e o B r i d g e Half Moon Bay El Granada Burlingame San Mateo Foster CityCrystal Springs Watershed (City & Co. of SF) Sanborn Skyline County Park Woodside San Carlos Huddart County Park Big Basin Redwoods State Park Butano State Park Pescadero Creek County Park Saratoga Los Gatos San Jose Redwood City Almaden Quicksilver County Park 280 280 280 680 880 280 Forest of Nisene Marks State Park Cloverdale Ranch East Palo Alto P a c i f i c O c e a n Ano Nuevo Bay S a n Fra n c i s c o B a y District Boundary S p h e r e o f I n f l u e n c e 0 4 82 Miles 15 San Francisco San Francisco Bay Santa Cruz Oakland San Jose Half Moon Bay Midpeninsula Regional Open Space District Pacific Ocean 16 22 13 14 10 14 3 23 24 7 5 92 17 20 11 8 2625 12 6 18 4 1 21 19 91 1 82 101280 92 35 35 82 101 84 84 84 880 880 237 101280 87 35 85 17 17 N 85 680 280 Midpeninsula Regional Open Space District Open Space Preserves and Locations Land Trust, Private Watershed Lands, & Conservation Easements/Plans MROSD Preserves Other Protected Open Space or Park Lands & Public Watershed Lands Private Property Other Public Agency Lands & Institutional Lands # Preserve Acres 17 Russian Ridge 3,491 18 Saratoga Gap 1,608 19 Sierra Azul 18,939 20 Skyline Ridge 2,143 21 St. Joseph’s Hill 270 22 Stevens Creek 55 23 Teague Hill 626 24 Thornewood 167 25 Tunitas Creek* 1,660 26 Windy Hill 1,414 # Preserve Acres 9 Los Trancos 274 10 Miramontes Ridge* 1,716 11 Monte Bello 3,537 12 Picchetti Ranch 308 13 Pulgas Ridge 366 14 Purisima Creek Redwoods 4,752 15 Rancho San Antonio 3,988 16 Ravenswood 376 # Preserve Acres 1 Bear Creek Redwoods 1,437 2 Coal Creek 508 3 El Corte de Madera Creek 2,906 4 El Sereno 1,419 5 Foothills 212 6 Fremont Older 739 7 La Honda Creek 6,144 8 Long Ridge 2,035 * Currently not open for public access. The Midpeninsula Regional Open Space District 11 Page Intentionally Left Blank 12 Financial Section 13 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 14 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. 15 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 16 Management’s Discussion and Analysis 17 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 18 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, $308.6 million, or 92%, was the District’s net investment in capital assets (capital assets net of related debt). 19 Midpeninsula Regional Open Space District Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2017 REPORTING THE DISTRICT’S MOST SIGNIFICANT FUNDS Fund Financial Statements The analysis of the District’s fund financial statements begins on page 16. Fund financial reports provide detailed information about the District’s major funds. The District uses one operating fund, the General Fund, to account for a multitude of financial transactions, two capital project funds to account for capital projects, and one debt service fund to account for debt service payments. Governmental Funds The General Fund is a governmental fund type and is reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the District’s general government operations and the basic services it provides. Governmental fund information helps determine whether there are more or fewer financial resources that can be spent in the future to finance educational programs. The relationship (or differences) between governmental activities (reported in the Statement of Net position and the Statement of Activities) and governmental funds is reconciled in the financial statements. THE DISTRICT AS A WHOLE Recall that the Statement of Net Position provides the perspective of the District as a whole.Table 1 provides a summary of the District’s net position as compared to last period: Percentage 2017 2016 Change Change As sets Cur rent As sets 77,668,537$ 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 $4.2 million due to an increase in accounts payable. 20 Midpeninsula Regional Open Space District Management’s Discussion and Analysis For the Fiscal Year Ended June 30, 2017 Table 2 shows the changes in net position for 2017 as compared to period 2016. Percentage 2017 2016 Change Change Re ve nue s Program r evenue s 2,130,301$ 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. 21 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 22 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. 23 Page Intentionally Left Blank 24 Basic Financial Statements 25 Page Intentionally Left Blank 26 GOVERNMENT-WIDE STATEMENTS Statement of Net Position and Statement of Activities The Statement of Net Position and the Statement of Activities summarize the entire District’s financial activities and financial position. They are prepared on the same basis as is used by most businesses, which means they include all the District’s assets and all its liabilities, as well as all its revenues and expenses. This is known as the full accrual basis. The effect of all of the District’s transactions is taken into account, regardless of whether or when cash changes hands, but all material internal transactions between District funds have been eliminated. The Statement of Net Position reports the difference between the District’s total assets and the District’s total liabilities, including all the District’s capital assets and all its long-term debt. The Statement of Net Position presents information in a way that focuses the reader on the composition of the District’s net position, by subtracting total liabilities from total assets. The Statement of Net Position summarizes the financial position of all of the District’s Governmental Activities in a single column. The District’s Governmental Activities include the activities of its General Fund, along with all its Special Revenue Funds, Capital Projects Funds, and Debt Service Funds. The Statement of Activities reports increases and decreases in the District’s net position. It is also prepared on the full accrual basis, which means it includes all the District’s revenues and all its expenses, regardless of when cash changes hands. This differs from the “modified accrual” basis used in the Fund financial statements, which reflect only current assets, current liabilities, available revenues and measurable expenditures. The Statement of Activities presents the District’s expenses first, listed by program. Program revenues – that is, revenues which are generated directly by these programs - are then deducted from program expenses to arrive at the net expense of each governmental program. The District’s general revenues are then listed in the Governmental Activities and the Change in Net Position is computed and reconciled with the Statement of Net Position. Both these Statements include the financial activities of the District and the Midpeninsula Regional Open Space District Financing Authority. This entity is legally separate but is a component unit of the District because it is controlled by the District, which is financially accountable for the Authority’s activities. 27 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. 28 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. 29 Page Intentionally Left Blank 30 Fund Title Fund Description General Fund The 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 This 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 This fund is used to account for expenditures for capital projects not related to any other capital projects funds. Debt Service Fund This 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. FUND FINANCIAL STATEMENTS MAJOR GOVERNMENTAL FUNDS The funds described below were determined to be Major Funds by the District in fiscal year 2017. 31 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. 32 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. 33 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. 34 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. 35 Page Intentionally Left Blank 36 Notes to Financial Statements 37 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. 38 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 39 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 40 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. 41 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 42 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 43 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. 44 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 45 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 46 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 47 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 48 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. 49 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 $940,047. Fair Value Measurements GASB 72 established a hierarchy of inputs to the valuation techniques above. This hierarchy has three levels: Level 1 inputs are quoted prices in active markets for identical assets or liabilities. Level 2 inputs are quoted market prices for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or other than quoted prices that are not observable Level 3 inputs are unobservable inputs, such as a property valuation or an appraisal. 50 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 The District has the following investments with recurring fair value measurements as of June 30, 2017: 12 Months 13 - 24 25 - 60 More Than Rating Fair Va lu e or Less Months Months 60 Months Money Market Ac counts n/a 36,973$ 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 51 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 52 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. 53 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 $134,317. 54 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 NOTE 5 -CAPITAL ASSETS AND DEPRECIATION Capital asset activity for the period ended June 30, 2017 is shown below: Balance Deletions/Balance Capital Assets June 30, 2016 Ad ditions Ad justments June 30, 2017 No n-depreciable: Land 403,773,365$ 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$ 55 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 56 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 $12,694,440. The 2016 Refunding Green Bonds Series A bears interest from 2.0% to 5.0% and the Series B bears interest of 0.73%. Interest for both Series A and B are due semi-annually on March 1 and September 1. Principal payments for Series A begins September 2017 and are due annually thereafter until September 2036. Series B has only one principal payment in September 2017. 57 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 The following schedule summarizes the District’s outstanding promissory notes and bonds as of June 30, 2017: Origin al Begin ning Ending Long Term Debt Issue Balance Additions Retirements Balance Promisso ry Notes: Daloia Note 240,000$ 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$ 58 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 59 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 60 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 61 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. 62 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. 63 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, $125 in 2016) PEMH CA Administrative Fee District pays CalPERS administrative fees (0.32% of premiu ms for 2015/16) Surviving Spous e Contin ua tion Retiree benefit continue s to survivin g spous e if retire e elects surviv or annuity unde r CalP ERS re tireme nt plan Other OPEB None 64 Midpeninsula Regional Open Space District Notes to the Basic Financial Statements June 30, 2017 Funding Policy In accordance with the District's budget, the Annual Required Contribution (ARC) is to be funded throughout the period as a percentage of payroll. Concurrent with implementing Statement No. 45, the District’s Board of Directors passed a resolution to participate in CERBT, an irrevocable trust established to fund OPEB. CERBT is managed by an appointed board not under the control of the District. This Trust is not considered a component unit by the District and has been excluded from these financial statements. Separately issued financial statements for CERBT may be obtained from CALPERS at P.O. Box 942709, Sacramento, CA 94229-2709. Annual OPEB Cost and Net OPEB Obligation The District’s annual OPEB cost is calculated based on the ARC, an amount actuarially determined in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding that, if paid on an ongoing basis, is projected to cover normal cost each period and amortize any unfunded actuarial liabilities (or funding excess)over a period not to exceed thirty years. The following table shows the components of the District’s annual OPEB cost for the period, the amount actually contributed to the plan, and changes in the District’s net OPEB obligation: Description Balance An nual required contribution 572,000$ 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) 65 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. 66 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. 67 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 68 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 ($307,137), respectively. 69 Page Intentionally Left Blank 70 Required Supplementary Information 71 Page Intentionally Left Blank 72 This schedule presents information that shows the District's actuarial accrued liability,acturiral value of assets,funded ratio and covred payroll related to retiree healthcare benefits provided by the District.The unfunded actuarial accrued liability is not a liability recorded in the fund or government-wide statements. REQUIRED SUPPLEMENTARY INFORMATION BUDGETARY SCHEDULES This schedule presents a comparison of the original budget,final budget and actual revenues and expendirures for General Fund. The schedule presents the difference between the final budget and actuals. PENSION SCHEDULES These schedules present information that shows the District's proportionate share of the pension liability in the cost sharing pools, actuarial information,and contributions.The proportionate share information is useful in determining the District's liability on relation to all other entities in the pool. RETIREE HEALTH CARE 73 Variance with Final Budget Actual Positive - Original Final (GAAP Basis)(Negative) Revenues: Property taxes 42,785,000$ 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. 74 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. 75 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. 76 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$-2.92% 6/30/2013 2,035,000 2,555,000 520,000 79.65% 8,043,000 6.47% 6/30/2015 2,520,000 4,612,000 2,092,000 54.64% 9,182,000 22.78% The above table is a summary schedule of the funding progress for the District’s OPEB plan as stated in each actuarial study. The actuarial studies are based on assumptions and data available at the time each study was completed. The actual funding progress of the plan as noted in Note 8 may be different than the projections included in the actuarial studies. 77 Page Intentionally Left Blank 78 Supplementary Information 79 Page Intentionally Left Blank 80 SUPPLEMENTARY INFORMATION BUDGETARY SCHEDULES These schedules present comparisons of the original budget,final budget and actual revenues and expendirures for major capital project funds and debt service funds. These schedules presents the difference between the final budget and actuals. PROGRAM EXPENDITURES This schedule presents the program expenditures for the Measure AA Bond Program for the current ye ar and the in total since the inception of the program. 81 Variance with Final Budget Actual Positive - Original Final (GAAP Basis)(Negative) Revenues: Property taxes -$ -$ -$ -$ 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. 82 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. 83 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. 84 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. 85 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. 86 Statistical Information 87 Page Intentionally Left Blank 88 Financial Trends Revenue Capacity Debt Capacity Demographic and Economic Information Operating Information Sources These schedules contain service and infrastructure data to help the reader understand how the information in the District’s financial report relates to the services the District provides and the activities it performs: 1. Full-Time Equivalent Employees by Function 2. Capital Asset Statistics by Function 3. Operating Indicators by Function Unless otherwise noted, the information in these schedules is derived from the Annual Financial Reports for the relevant year. STATISTICAL SECTION This part of the District’s Comprehensive Annual Financial Report presents detailed information as a context for understanding what the information in the financial statements,note disclosures,and required supplementary information says about the District’s overall financial health. In contrast to the financial section, the statistical section information is not subject to independent audit. These schedules contain trend information to help the reader understand how the District’s financial performance and well being have changed over time: 1. Net Position 2. Changes in Net Position 3. Fund Balances of Governmental Funds 4. Changes in Fund Balances of Governmental Funds These schedules contain information in relation to the District’s property tax assessments: 1. Assessed and Actual Value of Taxable Property 2. Direct and Overlapping Property Tax Rates 3. Pricipal Property Tax Payers 4. Property Tax Levies and Collections These schedules present information to help the reader assess the affordability of the District’s current levels of outstanding debt and the District’s ability to issue additional debt in the future: 1. Ratios of General Bonded Debt Outstanding 2. Ratios of Outstanding Debt by Type 3. Legal Debt Margin Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the District’s financial activities take place: 1. Demographic and Economic Statistics 2. Principal Employers 89 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Governmental activities Net investment in capital assets 176,198$ 205,980$ 225,092$ 236,546$ 245,393$ 259,638$ 268,869$ 278,611$ 276,395$ 308,601$ Restricted 1,433 1,405 1,417 1,408 1,568 2,731 4,327 2,566 5,786 4,571 Unrestricted 49,951 38,377 30,450 28,142 42,738 36,919 37,951 39,948 39,280 23,831 Total Net Position 227,582$ 245,762$ 256,959$ 266,096$ 289,699$ 299,288$ 311,147$ 321,125$ 321,461$ 337,003$ Source: Annual Financial Report Notes: Starting fiscal year (FY) 2015-16 the District changed from a fiscal year end date of March 31st to June 30th. As a result, FY2015-16 is a fifteen (15) month period rather than a twelve (12) month period. Midpeninsula Regional Open Space District Net Position (amounts expressed in thousands) Last Ten Fiscal Years (accrual basis of accounting) 90 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Expenses Governmental activities Land preservation 11,283$12,518$13,254$13,768$14,312$19,338$17,930$19,478$26,080$21,783$ Interest and fiscal charges 6,456 6,265 6,208 6,739 7,483 7,273 7,163 7,202 9,752 8,327 Depreciation 508 653 715 882 806 840 1,095 1,232 1,311 1,585 Loss on refunding of debt 381 381 381 - - - - - - - Total governmental activities expenses 18,628 19,817 20,558 21,389 22,601 27,451 26,188 27,912 37,143 31,695 Program Revenues Governmental Activities Charges for Services 896 879 911 1,241 1,320 1,381 1,422 1,437 1,636 1,479 Grants and Contributions 230 9,050 659 1,393 1,453 913 1,901 953 1,194 651 Land donations - - 2,259 17 13,928 3,890 - - - - Total governmental activities program revenues 1,126 9,929 3,829 2,651 16,701 6,184 3,323 2,390 2,830 2,130 Net (expense)/revenue - governmental activities (17,502)(9,888) (16,729) (18,738)(5,900) (21,267) (22,865) (25,522) (34,313) (29,565) General Revenues and Other Changes in Net Position Governmental Activities Property taxes 24,768 26,351 27,631 27,269 28,737 30,270 32,433 35,082 44,980 43,861 Investment earnings - - - 294 375 288 138 202 648 463 Use of money and property 2,070 1,228 80 - - - - - - - Miscellaneous 278 488 216 311 394 298 182 216 810 784 Total governmental activities 27,116 28,067 27,927 27,874 29,506 30,856 32,753 35,500 46,438 45,108 Change in Net Position Governmental activities 9,614 18,179 11,198 9,136 23,606 9,589 9,888 9,978 12,125 15,543 Prior period adjustments - - - - - - 1,971 - (11,790)- Total Changes in Net Position 9,614$ 18,179$11,198$9,136$ 23,606$9,589$ 11,859$9,978$ 335$ 15,543$ Source: Annual Financial Report Notes: Starting fiscal year (FY) 2015-16 the District changed from a fiscal year end date of March 31st to June 30th. As a result, FY2015-16 is a fifteen (15) month period rather than a twelve (12) month period. Midpeninsula Regional Open Space District Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (amounts expressed in thousands) 91 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 General fund Reserved 149$ 75$ 579$ -$ -$ -$ -$ -$ -$ -$ Unreserved, designated in 37,350 20,379 15,657 - - - - - - - Unreserved, reported in 12,181 16,153 12,678 - - - - - - - Nonspendable - - - - - - - - - 55 Restricted - - - 731 - - 1,702 1,702 1,971 1,971 Committed - - - - - - - 20,400 35,400 35,400 Assigned - - - - - - 5,000 - - - Unassigned - - - 26,156 41,782 37,513 34,453 21,330 16,848 23,872 Total General Fund 49,680$ 36,607$ 28,914$ 26,887$ 41,782$ 37,513$ 41,155$ 43,432$ 54,219$ 61,298$ All other governmental funds Reserved 1,433$ 1,405$ 1,417$ -$ -$ -$ -$ -$ -$ -$ Restricted - - - 1,408 1,568 1,634 1,621 - 26,894 9,539 Total all other governmental funds 1,433$ 1,405$ 1,417$ 1,408$ 1,568$ 1,634$ 1,621$ -$ 26,894$ 9,539$ Source: Annual Financial Report Notes: Starting fiscal year (FY) 2015-16 the District changed from a fiscal year end date of March 31st to June 30th. As a result, FY2015-16 is a fifteen (15) month period rather than a twelve (12) month period. (modified accrual basis of accounting) (amounts expressed in thousands) Midpeninsula Regional Open Space District Fund Balances of Governmental Funds Last Ten Fiscal Years 92 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Expenses Governmental activities Land preservation 11,283$ 12,518$ 13,254$ 13,768$ 14,312$ 19,338$ 17,930$ 19,478$ 26,080$ 21,783$ Interest and fiscal charges 6,456 6,265 6,208 6,739 7,483 7,273 7,163 7,202 9,752 8,327 Depreciation 508 653 715 882 806 840 1,095 1,232 1,311 1,585 Loss on refunding of debt 381 381 381 - - - - - - - Total governmental activities expenses 18,628 19,817 20,558 21,389 22,601 27,451 26,188 27,912 37,143 31,695 Program Revenues Governmental Activities Charges for Services 896 879 911 1,241 1,320 1,381 1,422 1,437 1,636 1,479 Grants and Contributions 230 9,050 659 1,393 1,453 913 1,901 953 1,194 651 Land donations - - 2,259 17 13,928 3,890 - - - - Total governmental activities program revenues 1,126 9,929 3,829 2,651 16,701 6,184 3,323 2,390 2,830 2,130 Net (expense)/revenue - governmental activities (17,502) (9,888) (16,729) (18,738) (5,900) (21,267) (22,865) (25,522) (34,313) (29,565) General Revenues and Other Changes in Net Position Governmental Activities Property taxes 24,768 26,351 27,631 27,269 28,737 30,270 32,433 35,082 44,980 43,861 Investment earnings - - - 294 375 288 138 202 648 463 Use of money and property 2,070 1,228 80 - - - - - - - Miscellaneous 278 488 216 311 394 298 182 216 810 784 Total governmental activities 27,116 28,067 27,927 27,874 29,506 30,856 32,753 35,500 46,438 45,108 Change in Net Position Governmental activities 9,614 18,179 11,198 9,136 23,606 9,589 9,888 9,978 12,125 15,543 Prior period adjustments - - - - - - 1,971 - (11,790) - Total Changes in Net Position 9,614$ 18,179$ 11,198$ 9,136$ 23,606$ 9,589$ 11,859$ 9,978$ 335$ 15,543$ Source: Annual Financial Report Notes: Starting fiscal year (FY) 2015-16 the District changed from a fiscal year end date of March 31st to June 30th. As a result, FY2015-16 is a fifteen (15) month period rather than a twelve (12) month period. Midpeninsula Regional Open Space District Changes in Net Position Last Ten Fiscal Years (accrual basis of accounting) (amounts expressed in thousands) 93 Fiscal Year Secured State Board Unsecured Total before Rdv. Increment Total after Rdv. Increment Total Direct Tax Rate 2008 96,554,434$ 8,767$ 6,135,424$ 102,698,625$ 98,822,743$ 1.00% 2009 105,225,752 5,138 6,543,064 111,773,954 107,222,540 1.00% 2010 108,749,899 5,138 7,220,172 115,975,209 110,945,627 1.00% 2011 108,672,177 5,138 6,448,241 115,125,556 110,403,735 1.00% 2012 110,480,451 5,192 6,843,137 117,328,780 112,337,379 1.00% 2013 115,665,767 5,192 7,574,405 123,245,364 117,796,453 1.00% 2014 125,816,313 5,192 8,032,680 133,854,185 128,261,360 1.00% 2015 134,293,819 3,616 8,134,278 142,431,713 136,364,266 1.00% 2016 148,710,117 3,616 8,236,861 156,950,594 151,221,560 1.00% 2017 161,457,837 3,616 8,664,927 170,126,380 163,586,434 1.00% Fiscal Year Secured State Board Unsecured Total before Rdv. Increment Total after Rdv. Increment Total Direct Tax Rate 2008 46,572,913$ 6,774$ 1,931,063$ 48,510,750$ 44,934,136$ 1.00% 2009 49,927,409 6,759 2,058,386 51,992,554 48,084,153 1.00% 2010 51,288,838 6,652 2,039,518 53,335,008 49,431,098 1.00% 2011 51,197,326 6,653 2,006,682 53,210,661 49,373,928 1.00% 2012 51,670,521 2,465 1,952,159 53,625,145 49,913,049 1.00% 2013 53,793,234 2,465 1,948,563 55,744,262 51,977,724 1.00% 2014 57,513,572 2,336 2,180,554 59,696,462 55,714,674 1.00% 2015 60,798,837 2,343 2,087,353 62,888,533 58,641,318 1.00% 2016 66,177,633 3,086 2,363,781 68,544,500 63,519,108 1.00% 2017 72,017,698 3,085 2,640,434 74,661,217 68,354,025 1.00% Source: California Municipal Statistics, Inc Notes: Starting fiscal year (FY) 2015-16 the District changed from a fiscal year end date of March 31st to June 30th. As a result, FY2015-16 is a fifteen (15) month period rather than a twelve (12) month period. County of San Mateo Midpeninsula Regional Open Space District Assessed and Actual Value of Taxable Property Last Ten Fiscal Years (amounts expressed in thousands) County of Santa Clara 94 Fiscal Year General Property Tax Levy Other Overlapping Governments Open Space District Total General Property Tax Levy Other Overlapping Governments Open Space District Total 2009 1.00000 0.09740 - 1.09740 1.00000 0.06760 - 1.06760 2010 1.00000 0.11987 - 1.11987 1.00000 0.06970 - 1.06970 2011 1.00000 0.14951 - 1.14951 1.00000 0.07530 - 1.07530 2012 1.00000 0.15060 - 1.15060 1.00000 0.08120 - 1.08120 2013 1.00000 0.18750 - 1.18750 1.00000 0.08060 - 1.08060 2014 1.00000 0.18740 - 1.18740 1.00000 0.07470 - 1.07470 2015 1.00000 0.18304 - 1.18304 1.00000 0.08530 - 1.08530 2016 4 1.00000 0.17807 0.00080 1.17887 1.00000 0.08420 0.00080 1.08500 2017 1.00000 0.17160 0.00060 1.17220 1.00000 0.10990 0.00060 1.11050 2018 1.00000 0.18133 0.00090 1.18223 1.00000 0.10300 0.00090 1.10390 Source: California Municipal Statistics, Inc. Notes: Starting fiscal year (FY) 2015-16 the District changed from a fiscal year end date of March 31st to June 30th. As a result, FY2015-16 is a fifteen (15) month period rather than a twelve (12) month period. 1 Due to the District’s size and that it is located in two counties (County of Santa Cruz excluded), there is no tax rate area that represents the typical total tax rate for the District. The above tax rate areas are the largest in terms of assessed valuation for each County’s portion of the District. 2 The 2015-16 assessed valuation of Tax Rate Area (TRA) 6-001 is $23,936,719,617, w hich is 10.62% of the District’s total assessed valuation. 3 The 2015-16 assessed valuation of TRA 9-001 is $8,109,918,455, w hich is 3.60% of the District’s total assessed valuation. 4 Fiscal Year 2015-16 was the first year in which ad valorem property taxes authorized by Measure AA were levied. Midpeninsula Regional Open Space District Property Tax Rates Direct and Overlapping1 Property Tax Rates Last Ten Fiscal Years County of Santa Clara (Tax Rate Area 6-001) 2 County of San Mateo (Tax Rate Area 9-001) 3 95 Taxpayer Taxable Assessed Valuation Rank Percentage of Total Assessed Valuation Taxable Assessed Valuation Rank Percentage of Total Assessed Valuation Board of Trustees, Leland Stanford Jr. University 6,263,481$ 1 2.48%3,506,001$ 1 2.45% Google Inc.3,490,160 2 1.38 285,161 12 0.20 Campus Holdings Inc. 3,076,342 3 1.22 ** Apple Computer Inc. 1,232,162 4 0.49 427,883 7 0.30 Lockheed Missiles and Space Co. Inc.996,510 5 0.39 467,321 5 0.33 Sobrato Interests 784,904 6 0.31 ** Oracle Corp. 627,216 7 0.25 428,968 6 0.30 Menlo & Juniper Networks LLC 603,926 8 0.24 ** Network Appliance Inc. 504,705 9 0.20 418,744 8 0.29 Applied Materials Inc.491,686 10 0.19 470,620 4 0.33 Yahoo Inc.**498,380 2 0.35 VII Pac Shores Investors LLC **490,900 3 0.34 Hewlett Packard Co.**330,320 9 0.23 Spansion LLC **307,092 10 0.21 Total 18,071,092$ 7.15%7,631,390$ 5.33% * Information not available Source: California Municipal Statistics, Inc. Midpeninsula Regional Open Space District Principal Property Tax Payers Current Year and Nine Years Ago (amounts expressed in thousands) Fiscal Year 2008Fiscal Year 2017 96 Fiscal Year Santa Clara County Taxes Levied San Mateo County Taxes Levied Santa Clara County Collections % of County Levy San Mateo County Collections % of County Levy 2016 1,186,363$ 527,932$ 1,177,636$ 99.3%524,982$ 99.4% 2017 968,301 431,711 962,730 99.4%429,436 99.5% Source: California Municipal Statistics, Inc. Notes: Starting fiscal year (FY) 2015-16 the District changed from a fiscal year end date of March 31st to June 30th. As a result, FY2015-16 is a fifteen (15) month period rather than a twelve (12) month period. 1 District's general obligation bond debt service levy. Prior years are not available. Levy began in FY2015-16 CollectionsLevy 1 Midpeninsula Regional Open Space District Property Tax Levies and Collections Last Ten Fiscal Years 97 Fiscal Year General Obligation Bonds Debt Service Monies Available Total Taxable Assessed Value Percentage of Taxable AV 1 Per Capita 2 2008 -$ -$ -$ 143,756,879$ 0.000%-$ 2009 - - - 155,306,693 0.000%- 2010 - - - 160,376,725 0.000%- 2011 - - - 159,777,663 0.000%- 2012 - - - 162,250,428 0.000%- 2013 - - - 169,774,177 0.000%- 2014 - - - 183,976,034 0.000%- 2015 - - - 195,005,584 0.000%- 2016 45,000 3,116 41,884 214,740,668 0.020%15.55 2017 44,225 2,200 42,025 231,940,459 0.018%15.52 Source: Annual Financial Report Notes: Starting fiscal year (FY) 2015-16 the District changed from a fiscal year end date of March 31st to June 30th. As a result, FY2015-16 is a fifteen (15) month period rather than a twelve (12) month period. 1 See the Schedule of Assessed and Actual Value of Taxable Property for property value data. 2 Population data can be found in the Schedule of Demographic and Economic Statistics. Midpeninsula Regional Open Space District Ratios of General Bonded Debt Outstanding Last Ten Fiscal Years (amounts expressed in thousands, except per-capita amount) 98 Fiscal Year General Obligation Bonds Lease Revenue Bonds Refunding Bonds Bond Premiums Notes Payable Total Taxable Assessed Value (AV) Percentage of Taxable AV Percentage of Personal Income Per Capita 2008 -$ 65,041$ 54,031$ 774$ 6,099$ 125,945$ 143,756,879$ 0.088% 0.121% 931.92$ 2009 - 65,098 53,215 719 5,920 124,952 155,306,693 0.080% 0.126% 990.96 2010 - 65,049 52,204 663 5,755 123,671 160,376,725 0.077% 0.119% 957.04 2011 - 64,995 50,988 607 6,429 123,019 159,777,663 0.077% 0.110% 870.64 2012 - 51,947 49,179 2,515 36,898 140,539 162,250,428 0.087% 0.115% 912.72 2013 - 51,568 47,994 2,351 37,039 138,952 169,774,177 0.082% 0.106% 884.70 2014 - 51,021 50,665 2,188 36,285 140,159 183,976,034 0.076% 0.099% 840.19 2015 - 20,385 49,935 6,973 59,271 136,564 195,005,584 0.070% 0.086% 757.39 2016 45,000 20,290 47,300 9,087 58,698 180,375 214,740,668 0.084%* * 2017 44,225 1,080 57,410 20,475 58,761 181,951 231,940,459 0.078%* * *Information not available Source: Annual Financial Report Notes: Starting fiscal year (FY) 2015-16 the District changed from a fiscal year end date of March 31st to June 30th. As a result, FY2015-16 is a fifteen (15) month period rather than a twelve (12) month period. (1)Details regarding the District's outstanding debt can be found in the notes to the financial statements. (2)Refer to the Demographics Statistics for personal income and population data. Ratios of Outstanding Debt Last Ten Fiscal Years Midpeninsula Regional Open Space District (amounts expressed in thousands, except per-capita amount) 99 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Assessed Valuation: Assessed value subject to debt levy 143,756,879$155,306,693$160,376,725$159,777,663$162,250,428$169,774,177$183,976,034$195,005,584$214,740,668$231,940,459$ Total assessed valuation 143,756,879 155,306,693 160,376,725 159,777,663 162,250,428 169,774,177 183,976,034 195,005,584 214,740,668 231,940,459 Debt Applicable to Limitation: Total debt 125,945 124,952 123,671 123,019 140,539 138,952 140,159 136,564 180,375 181,951 Less: amount available for repayment - - - - - - - - 3,116 2,200 Total debt applicable to limitation 125,945 124,952 123,671 123,019 140,539 138,952 140,159 136,564 177,259 179,751 Legal Debt Margin: Bonded debt limit (15% AV)21,563,532 23,296,004 24,056,509 23,966,649 24,337,564 25,466,127 27,596,405 29,250,838 32,211,100 34,791,069 Debt applicable to limitation 125,945 124,952 123,671 123,019 140,539 138,952 140,159 136,564 177,259 179,751 Legal debt margin 21,437,587$ 23,171,052$ 23,932,838$ 23,843,630$ 24,197,025$ 25,327,175$ 27,456,246$ 29,114,274$ 32,033,841$ 34,611,318$ Notes: Starting fiscal year (FY) 2015-16 the District changed from a fiscal year end date of March 31st to June 30th. As a result, FY2015-16 is a fifteen (15) month period rather than a twelve (12) month period. Under California Government Code Section 61126 (b) the Midpeninsula Regional Open Space District shall not incur bonded indebtedness that exceeds 15% of the total assessed property value. Midpeninsula Regional Open Space District Legal Debt Margin Information Last Ten Fiscal Years (amounts expressed in thousands) 100 Fiscal Year Population 1 Personal Income 2 (in millions) Per Capita Personal Income 2 Median Age 3 School Enrollment 4 County Unemployment Rate 5 2008 1,837,075 103,993$ 59,227$ 36.6 259,116 5.1% 2009 1,857,621 99,550 55,781 36.2 259,800 8.7% 2010 1,880,876 103,636 58,018 36.2 262,126 11.6% 2011 1,797,375 111,880 61,833 36.4 265,543 10.5% 2012 1,816,486 122,259 66,535 36.6 269,858 9.0% 2013 1,842,254 130,624 70,151 36.7 273,701 7.6% 2014 1,868,558 141,974 74,883 *276,175 6.1% 2015 1,889,638 158,729 82,756 *274,948 4.6% 2016 1,927,888 ***273,264 4.0% 2017 1,938,180 *** *3.5% Calendar Year Population 1 Personal Income 2 (in millions) Per Capita Personal Income 2 Median Age 6 School Enrollment 7 County Unemployment Rate 5 2008 703,830 53,434$ 75,919$ 39.9 88,974 4.8% 2009 713,617 50,175 70,311 38.9 89,971 8.9% 2010 719,951 51,264 71,204 39.3 91,371 8.9% 2011 729,425 57,965 79,465 39.4 92,097 8.3% 2012 740,738 64,765 87,444 39.6 93,674 7.0% 2013 750,489 65,193 86,911 39.3 93,931 5.7% 2014 758,581 69,717 91,935 39.4 94,667 4.2% 2015 759,155 74,641 97,553 39.8 95,187 3.3% 2016 765,895 **39.5 95,502 3.3% 2017 770,203 ***95,620 2.9% * Information not available Data Sources 1 State of California Department of Finance 2 U.S. Department of Commerce Bureau of Economic Analysis 3 Association of Bay Area Census (California) 4 Santa Clara County Office of Education 5 State of California Employment Development Department, Labor Market Division 6 U.S Census Bureau, American Community Survey 7 State of California Department of Education Notes: Starting fiscal year (FY) 2015-16 the District changed from a fiscal year end date of March 31st to June 30th. As a result, FY2015-16 is a fifteen (15) month period rather than a twelve (12) month period. Midpeninsula Regional Open Space District Demographic and Economic Statistics Last Ten Fiscal Years County of Santa Clara County of San Mateo 101 Employer Number of Employees 1 Rank Percentage of Total Employment Number of Employees 2 Rank Percentage of Total Employment Apple Computer, Inc.25,000 1 2.53%10,000 3 1.22% Alphabet Inc.20,000 2 2.02 ** County of Santa Clara 18,244 3 1.85 16,011 1 * Stanford University 16,919 4 1.71 ** Cisco Systems Inc.15,700 5 1.59 13,000 2 1.59 Kaiser Permanente 12,500 6 1.27 ** Stanford Healthcare 10,034 7 1.02 5,500 7 0.67 Tesla Mortors Inc. 10,000 8 1.01 ** Facebook Inc.9,385 9 0.95 ** Intel Corporation 8,500 10 0.86 5,000 9 0.61 Lockheed Martin Space Systems Co.**9,400 4 1.15 IBM **7,650 5 0.93 Hewlett-Packard Co.**7,000 6 0.86 Fujitsu **5,000 8 0.61 Applied Materials, Inc **4,000 10 0.49 Total 146,282 14.81%82,561 8.13% Employer Number of Employees Rank Percentage of Total Employment Number of Employees Rank Percentage of Total Employment United Airlines 10,500 1 2.41%9,600 1 2.73% Genentech Inc.10,000 2 2.30 7,845 2 2.23 Oracle Corp.6,750 3 1.55 5,642 4 1.61 Facebook Inc.6,068 4 1.40 ** County of San Mateo 5,500 5 1.26 5,777 3 1.64 Cvisa Inc.3,500 6 0.80 ** Gilead Sciences Inc.3,500 7 0.80 ** Mills-Peninsula Health Services 2,500 8 0.57 1,800 9 0.51 Safeway Inc.2,393 9 0.55 2,280 6 0.65 Electronic Arts Inc.2,367 10 0.54 2,000 8 0.57 Kaiser Permanente **3,609 5 1.03 United States Postal Service **2,174 7 0.62 Applied Biosystems **1,578 10 0.45 Total 53,078 12.18%42,305 12.04% * Information not available Source: 1 Silicon Valley Business Journal, 7/21/2017 2 County of Santa Clara Finance Department. FY2007-08 CAFR 3 San Francisco Business Times - 2017 Book of Lists and California Employment Development Department 4 Latest information available for principal employers in the County of San Mateo. 2016 1 2008 County of San Mateo 3 County of Santa Clara Midpeninsula Regional Open Space District Principal Employers Most Current Year and Nine Years Ago 2017 2008 102 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Function Office of the General Manager 3.00 3.00 3.00 3.00 4.00 4.00 4.00 5.00 6.00 8.00 Real Property 5.00 5.00 5.00 5.00 5.00 5.00 5.00 6.00 7.00 4.00 Plannning 13.50 13.50 13.50 14.00 14.00 14.00 14.00 14.00 14.00 10.50 Engineering & Construction N/A N/A N/A N/A N/A N/A N/A N/A N/A 5.50 Public Affairs 8.00 8.00 8.00 8.00 8.00 9.00 9.00 11.00 12.00 8.00 Admininstration Reception 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 Finance 3.25 3.25 3.25 3.25 3.25 3.25 4.75 4.75 5.25 9.25 Human Resources 2.00 2.00 2.00 2.00 2.50 3.50 3.50 5.50 7.00 7.00 Information Technology 1 1.00 1.00 1.00 1.00 1.00 2.00 2.50 2.50 5.50 7.50 Operations Administration 6.50 6.50 6.50 6.00 6.00 6.00 6.00 6.00 6.00 N/A Patrol 23.00 23.00 23.00 28.00 28.00 28.00 28.00 31.00 32.00 N/A Land/Facilities Maintenance 20.00 20.00 20.00 26.00 26.00 26.00 26.00 28.30 30.30 N/A Resource Management 2 6.00 6.00 6.00 6.00 N/A N/A N/A N/A N/A N/A Land & Facilities N/A N/A N/A N/A N/A N/A N/A N/A N/A 49.30 Visitor Services N/A N/A N/A N/A N/A N/A N/A N/A N/A 41.90 General Counsel 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50 Natural Resources 2 N/A N/A N/A N/A 8.00 8.00 8.00 9.00 10.00 11.00 Total 94.75 94.75 94.75 105.75 109.25 112.25 114.25 126.55 138.55 165.45 Source: Midpeninsula Regional Open Space District Notes: Starting fiscal year (FY) 2015-16 the District changed from a fiscal year end date of March 31st to June 30th. As a result, FY2015-16 is a fifteen (15) month period rather than a twelve (12) month period. 1 In 2015, the GIS function was integrated into Information Technology from the Planning Department 2 In 2012, the Resource Management function under the Operations Department became the Natural Resources Department During 2015, the District underwent a complete reorganization which become effective during FY 2016-17. As part of the reorganization, the Planning Department was split with a new Engineering & Construction Department, a portion of Real Property and Operations became the new Land & Facilities Department, and part of Public Affairs and Operations/Patrol became the new Visitor Services Department. Midpeninsula Regional Open Space District Full-time Equivalent District Government Employees by Function Last Ten Fiscal Years 103 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Function Land: Number of preserves 26262626262626262626 Acreage: Santa Clara County 30,935.31 31,629.05 31,833.30 32,380.34 32,873.33 32,889.63 33,041.64 33,142.05 33,366.70 33,449.98 San Mateo County 24,277.99 25,325.44 26,588.84 26,704.01 27,625.36 28,668.50 28,669.87 29,063.13 29,452.58 29,643.96 Santa Cruz County 2,004.18 2,004.18 2,004.18 2,004.18 2,004.18 2,004.18 2,004.18 2,004.18 2,004.18 2,004.18 Total 57,217.48 58,958.67 60,426.32 61,088.53 62,502.87 63,562.31 63,715.69 64,209.36 64,823.46 65,098.12 Facilities: Administrative office 1111111111 Field/patrol offices 2222222222 Visitor Center 2222222222 Vehicles & Equipment: Patrol vehicles 24283235373941383742 Service vehicles 333333581013 Maintenance vehicles 55568913161925 Motorcycles/ATVs 11 12 13 13 13 13 13 13 13 13 Bulldozers/excavators/tractors 13131314141717171818 Dump trucks 3334444555 Water Truck 1111222222 Tractors 3333334455 Chippers/mowers 1222224455 Source: Midpenninsula Regional Open Space District Notes: Starting fiscal year (FY) 2015-16 the District changed from a fiscal year end date of March 31st to June 30th. As a result, FY2015-16 is a fifteen (15) month period rather than a twelve (12) month period. Midpeninsula Regional Open Space District Capital Asset Statistics by Function Last Ten Fiscal Years 104 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Function General Manager Board meetings 27 29 37 31 45 36 35 33 31 31 Resolutions adopted 44 37 50 41 56 20 39 61 61 40 Real Property Acres preserved Santa Clara County 23.73 1,047.45 1,263.40 115.17 921.35 1,043.14 1.37 393.26 389.45 191.38 San Mateo County 71.34 693.74 204.25 547.04 492.99 16.30 152.01 100.41 224.65 83.28 Public Affairs Stewardship volunteer hours 7,595 8,854 9,849 11,314 11,843 11,232 13,579 14,354 15,839 17,440 Interpretation and education docent hours 3,505 3,875 3,305 5,433 4,669 5,559 4,718 5,828 4,462 4,697 Website visits N/A 248,697 274,559 274,133 434,402 349,398 359,432 418,748 429,891 487,215 Operations Bicycle Accident 32 41 25 22 36 37 30 20 26 19 Equestrian Accident 5 2 1 1 2 1 2 Hiking/Running Accident 38 49 21 18 16 16 22 20 14 37 Other first aid 2 4 10 15 25 24 15 25 26 23 Search & rescue 8 9 11 15 10 8 5 8 3 4 Vehicle Accident 13 9 8 11 16 15 14 19 14 17 Fire 5 7 6 5 7 8 16 9 10 9 HazMat - - 3 3 - - 1 1 6 1 Subject Citation/Juvenile Contact Report 509 510 558 509 526 737 617 825 767 678 Parking Citation 468 474 386 434 527 621 584 700 645 836 Arrests 7 1 2 1 1 2 1 4 3 2 Day Permits N/A 973 954 1,059 1,235 1,237 1,521 2,154 2,541 2,530 Multi-day permits N/A 134 214 248 225 253 306 306 321 366 Camping permits N/A 195 221 259 341 336 393 476 573 613 Source: Midpenninsula Regional Open Space District Notes: Starting fiscal year (FY) 2015-16 the District changed from a fiscal year end date of March 31st to June 30th. As a result, FY2015-16 is a fifteen (15) month period rather than a twelve (12) month period. Midpeninsula Regional Open Space District Operating Indicators by Function Last Ten Fiscal Years 105 Page Intentionally Left Blank 106 Other Independent Auditor’s Reports 107 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 107 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 107 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 Fremont Older Open Space Preserve by Susanne Karlak PRINTED ON RECYCLED PAPER