HomeMy Public PortalAboutAudit Report - District- FY11MIDPENINSULA REGIONAL
OPEN SPACE DISTRICT
ANNUAL FINANCIAL REPORT
YEAR ENDED MARCH 31, 2011
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
TABLE OF CONTENTS
MARCH 31, 2011
INDEPENDENT AUDITOR'S REPORT
MANAGEMENT'S DISCUSSION AND ANALYSIS
BASIC FINANCIAL STATEMENTS
Statement of Net Assets
Statement of Activities 9
Balance Sheet — Governmental Funds 10
Reconciliation of the Governmental Funds Balance Sheet to the Statement of Net Assets 11
Statement of Revenues, Expenditures, and Changes in Fund Balances — Governmental Funds 12
Reconciliation of the Statement of Revenues, Expenditures and Net Change in Fund Balances —
Total Governmental Funds with the Statement of Activities 13
1
2
NOTES TO FINANCIAL STATEMENTS
REQUIRED SUPPLEMENTARY INFORMATION
Schedule of Revenues, Expenditures and Changes in Fund Balances — Budget and Actual
8
14
34
Vavrinek, Trine, Day & Co., LLP
Certlfled Public Accountants
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Midpeninsula Regional Open Space District
Los Altos, California
VALUE THE DIFFERENCE
We have audited the accompanying financial statements of the governmental activities, and each major fund of
the Midpeninsula Regional Open Space District, as of March 31, 2011, and for the year then ended, as listed in
the Table of Contents. These financial statements are the responsibility of the management of the District. Our
responsibility is to express an opinion 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.
Those standards require that we plan and perform the audit to obtain reasonable assurance as to whether the
financial statements are free of material misstatement. An audit includes examining on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such financial statements present fairly in all material respects, the financial position of the
governmental activities and each major fund of the Midpeninsula Regional Open Space District as of March 31,
2011, and the respective changes in the financial position thereof for the year then ended in conformity with
generally accepted accounting principles in the United States of America.
The Management's Discussion and Analysis is required by the Governmental Accounting Standards Board, but is
not part of the basic financial statements. We have applied certain limited procedures to this information,
principally inquiries of management regarding the methods of measurement and presentation of this information,
but we did not audit this information and we express no opinion on it.
Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole.
The required supplemental information listed in the table of contents is presented for purposes of additional
analysis and is not a required part of the basic financial statements of Midpeninsula Regional Open Space District.
Such information has been subjected to the auditing procedures applied in the audits of the basic financial
statements and, in our opinion, is fairly stated in all material respects in relations to the basic financial statements
taken as a whole.
Vavrtntk, lithe,
Palo Alto, California
June 29, 2011
Ay QCo. U -P
260 Sheridan Avenue, Suite 440 Palo Alto, CA 94306 Tel: 650.462.0400 Fax: 650.462.0500 www,vtdcpa.com
FRESNO LAGUNA HILLS • PALO ALTO • PLEASANTON • RANCHO CUCAMONGA • SACRAMENTO
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS
MARCH 31, 2011
This section of the Midpeninsula Regional Open Space District's (the District) basic financial statements presents a
narrative overview and analysis of the District's financial activities for the fiscal year ended March 31, 2011. We
encourage readers to consider the information presented here in conjunction with our basic financial statements.
FINANCIAL HIGHLIGHTS
Property tax revenue declined slightly in fiscal year 2011, by 1.3%, as the assessed valuation of secured and
unsecured property within the District decreased for the first time since the District was formed in 1973. Total
assessed valuation dropped by 0.5% in the District portion of Santa Clara County, by 0.1% in San Mateo County, and
by 0.4% overall. In addition, tax refunds arising from county -wide downward reassessments prompted Santa Clara
County to suspend allocation of supplemental (SB813) taxes between July 2010 and March 2011. This suspension
drove a $187,859 reduction in fiscal year 2011 tax revenue. The District normally receives approximately two-thirds
of its tax revenue from Santa Clara County and one-third from San Mateo County. Property tax revenue increased by
4.9% in fiscal year 2010. Based on information from the county assessors, the District is expecting that tax revenue in
fiscal year 2012 will increase by approximately 1.4% including the resumption of allocations of supplemental
(SB813) taxes in Santa Clara County.
Partially offsetting the decrease in tax revenue, the District received $286,222 under a new five year agreement with
Santa Clara County to manage the developed portion of Rancho San Antonio County Park. This level of annual
revenue is expected to continue.
The District added $10.0 million of land and associated structures in fiscal year 2011. The four largest purchases,
totaling $8.7 million, were additions to the Bear Creek Redwoods, Sierra Azul, Russian Ridge and Monte Bello Open
Space Preserves. Given the State budget crisis, grants for land acquisition were scarce in fiscal year 2011, with none
received by the District. However, the District succeeded in obtaining a $1.25 million contribution from Santa Clara
County to cover half the cost of the additions to the Monte Bello Preserve. Net of grants and gifts, the District used
$8.8 million of cash for land purchases in fiscal year 2011, down from $13.8 million in fiscal year 2010. The District
added $17.5 million and $28.0 million of land and associated structures in fiscal year 2010 and 2009, respectively.
District expenditures were again within the annual budget. Some non -land capital projects were deferred due to the
tax revenue shortfall. Excluding the purchase price of new properties and debt service, total District spending, $15.4
million, was $3.3 million, or 17.6%, below budget and up 7.4% over fiscal year 2010. Delayed non -land capital
spending accounted for the majority of the budget variance. Due largely to the continuing growth in employee benefit
costs, expenditures for salaries and benefits exceeded 40% of District tax revenue for the first time. Employee benefit
costs increased by 13% and were 37.8% of salary expenses, compared to 36.3% in fiscal year 2010 and 35.4% in
fiscal year 2009. This unfavorable trend is expected to continue in fiscal years 2012 and 2013.
2
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS
MARCH 31, 2011
Statement of Net Assets
Presented below is a condensed statement of net assets for the past two years:
Years ended: March 31, 2011 March 31, 2010 Increase (Decrease)
Assets
Current assets $ 30,749,199 $ 32,690,558 $ (1,941,359)
Retiree Health Trust 1,513,561 1,666,561 (153,000)
Capital assets 359,566,233 348,762,622 10,803,611
Total assets 391,828,993 383,119,741 8,709,252
Liabilities
Accounts payable and
other liabilities 2,713,472 2,489,540
Long-term debt 123,019,978 123,670,744
Total liabilities 125,733,450 126,160,284
223,932
(650,766)
(426,834)
Net Assets
Invested in capital assets,
net of related debt 236,546,255 225,091,878 11,454,377
Restricted 1,407,548 1,417,195 (9,647)
Unrestricted 28,141,740 30,450,384 (2,308,644)
Total net assets $ 266,095,543 $ 256,959,457 $ 9,136,086
Analysis of Net Assets
The District's assets at the close of this fiscal year are $266.1 million more than its liabilities. This is the result of
the District's inventory of capital assets. The net investment in capital assets, $236.5 million, consists primarily
of the District's almost 60,000 acres of land in 26 open space preserves protected for public enjoyment. The
investment in capital assets is offset by long-term debt obligations on promissory notes and lease revenue bonds.
The net assets subject to external restrictions are composed of $1.4 million for debt service. Unrestricted net
assets are used to finance additional land acquisition projects. The District's budget for fiscal year 2012 includes
$12.5 million for land acquisitions, net of related grant income.
4
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS
MARCH 31, 2011
GENERAL FUND
The General Fund balance sheet includes all District accounts except for debt and capital assets. At March 31,
2011, the General Fund had a fund balance of $26.9 million, down $2.0 million from the prior year-end. This
decrease was the result of spending cash to complete land purchases. All but $0.7 million of this fund balance is
unreserved and designated for future land acquisitions, including $12.5 million budgeted for land purchases in
fiscal year 2012, net of associated grant funding.
DEBT SERVICE FUND
The only asset in the Debt Service Fund, $1.4 million, is a reserve fund required by the terms of the District's
2004 Revenue Bonds. The funds are held by the bond trustee and will be used to make the final debt service
payment on this issue. The District receives the interest earned on this reserve fund, and this is shown on the
Statement of Revenues, Expenditures and Changes in Fund Balance --Governmental Funds. Total debt service in
fiscal year 2011 was $8.09 million, consisting of $3.30 million of principal and $4.79 million of interest.
CAPITAL ASSETS
As of March 31, 2011, the District's investment in capital assets is $359.6 million, net of accumulated
depreciation. The District added $9.6 million of land in fiscal year 2011, representing 89% of the total increase in
capital assets, and has committed $2.8 million of its fund balance for various uncompleted capital projects
included in construction in progress. Additional information on the District's capital assets can be found in Note
4 in the Notes to the Basic Financial Statements.
LONG-TERM DEBT
As of March 31, 2011, the District's long-term debt includes $2.5 million of subordinated notes issued to sellers
in District land purchase transactions, $91.3 million of Authority revenue bonds sold to the public in 1999, 2004,
and 2007, $3.9 million of Refunding Promissory Notes sold to the public in 2005, and $25.3 million of accreted
interest, unamortized premium and unamortized loss on refunding. The Authority bonds and Refunding notes
were originally rated AAA by Moody's and Standard & Poor's based on municipal bond insurance policies
purchased from Ambac Assurance Corporation and MBIA. Due to loss projections from mortgage -related risk
exposures, these insurance companies no longer carry AAA ratings. In April 2011, Moody's withdrew its rating
of Ambac. Moody's currently rates MBIA Ba3. Standard & Poors's current ratings are D for Ambac and B for
MBIA. The District's current stand-alone credit rating is AA from Fitch and AA- from Standard & Poor's.
Additional information on the District's long-term obligations can be found in Note 6 in the Notes to the Basic
Financial Statements.
BUDGETARY PERFORMANCE
The Budgetary Comparison Schedule —General Fund shows how the District financial results compared to the
original budget adopted in March 2010 and the final budget adjusted in December 2010.
Total District revenue in fiscal year 2011 was within one percent of budget. Tax revenue was 0.9% below the
final budget, mostly due to suspension of supplemental (SB813) revenue in Santa Clara County. Grant income
was 11.0% below budget due to delays in completing certain preserve development projects. Interest income was
6
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
STATEMENT OF NET ASSETS
MARCH 31, 2011
ASSETS
Cash and investments (Note 2)
Receivables
Taxes
Interest
Deposit
Prepaid expense
Restricted cash and investments (Note 2)
Note receivable (Note 3)
Deferred charges
Net OPEB Asset (Note 9)
Capital assets (Note 4)
Nondepreciable
Land 345,388,885
Construction in progress 2,800,845
Depreciable, net of accumulated depreciation
Structures and improvements 6,356,212
Infrastructure 2,958,480
Equipment 737,851
Vehicles 1,323,960
Total assets
$ 20,331,553
6,585,000
55,148
1,054,547
5,338
1,407,548
217,192
1,092,873
1,513,561
391,828,993
LIABILITIES
Accounts payable 763,260
Accrued liabilities 319,525
Deposits payable 61,035
Interest payable 433,968
Compensated absences (Note 5)
Due in one year 23,234 u3
Due in more than one year 1,112,450
Long-term debt (Note 6)
Due within one year 4,831,964
Due in more than one year 118,188,014
Total liabilities 125,733,450
NET ASSETS (Note 11)
Invested in capital assets, net of related debt 236,546,255
Restricted for debt service 1,407,548
Unrestricted 28,141,740
Total net assets $ 266,095,543
See accompanying notes to financial statements.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
GOVERNMENTAL FUNDS BALANCE SHEET
MARCH 31, 2011
Debt Total
General Service Governmental
Fund Fund Funds
ASSETS
Cash and investments (Note 2) $ 20,331,553 $ - $ 20,331,553
Receivables
Taxes 6,585,000 - 6,585,000
Interest 55,148 55,148
Deposit 1,054,547 1,054,547
Prepaid expense 5,338 5,338
Restricted cash and investments (Note 2) - 1,407,548 1,407,548
Note receivable (Note 3) 217,192 - 217,192
Total Assets $28,248,778 $ 1,407,548 $ 29,656,326
LIABILITIES
Accounts payable $ 763,260 $ $ 763,260
Accrued liabilities 319,525 319,525
Deposits payable 61,035 61,035
Deferred revenue (Note 3) 217,192 217,192
Total liabilities 1,361,012 1,361,012
FUND BALANCES
Restricted
Debt service - 1,407,548 1,407,548
Encumbrances 731,498 731,498
Unassigned 26,156,268 26,156,268
Total fund balance 26,887,766 1,407,548 28,295,314
TOTAL LIABILITIES AND FUND BALANCE $ 28,248,778 $ 1,407,548 $ 29,656,326
See accompanying notes to financial statements.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCES
FOR THE YEAR ENDED MARCH 31, 2011
REVENUES
Property tax
Grant income
Investment income
Property management (Note 7)
Other income
Land donation
General
Fund
Debt
Service
Fund
Total
$ 27,268,652 $
1,392,868
191,515
955,243
550,615
16,585
102,444
- $ 27,268,652
1,392,868
293,959
955,243
550,615
16,585
Total Revenues 30,375,478 102,444 30,477,922
EXPENDITURES
Current
Salaries 7,898,301 - 7,898,301
Benefits 3,011,859 3,011,859
Directors 27,600 - 27,600
Services and supplies 2,744,234 - 2,744,234
Capital outlay
New land purchases 9,845,756 - 9,845,756
Land acquisition support costs 91,726 - 91,726
Structures and improvements 1,196,634 - 1,196,634
Equipment 276,032 - 276,032
Vehicles 185,094 - 185,094
Debt service
Principal 3,300,681 3,300,681
Interest and fiscal charges 4,785,900 4,785,900
Total Expenditures 25,277,236 8,086,581 33,363,817
EXCESS (DEFICIENCY) OF
REVENUES OVER EXPENDITURES 5,098,242 (7,984,137) (2,885,895)
OTHER FINANCING SOURCES (USES):
Other Sources 850,000 850,000
Transfers in - 7,974,490 7,974,490
Transfers out (7,974,490) - (7,974,490)
Total Other Financing Sources (Uses) (7,124,490) 7,974,490 850,000
NET CHANGE IN FUND BALANCES (2,026,248) (9,647) (2,035,895)
Fund Balance at beginning of year 28,914,014 1,417,195 30,331,209
Fund Balance at end of year $ 26,887,766 $ 1,407,548 $ 28,295,314
See accompanying notes to financial statements.
12
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2011
NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
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 ajoint 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.
Basis of Presentation
The District's Basic Financial Statements are prepared in conformity with accounting principles generally
accepted in the United States of America. The Government Accounting Standards Board is the acknowledged
standard setting body for establishing accounting and financial reporting standards followed by governmental
entities in the United States of America.
These Statements require that the financial statements described below be presented.
Government -wide Statements. The Statement of Net Assets and the Statement of Activities display
information about the primary government (the District) and its component unit. These statements include the
financial activities of the overall District government. Eliminations have been made to minimize the double
counting of internal activities. Governmental activities generally are financed through taxes,
intergovernmental revenues, and other nonexchange transactions.
The Statement of Activities presents a comparison between direct expenses and program revenues for each
function of the District's governmental activities. Direct expenses are those that are specifically associated
with a program or function and, therefore, are clearly identifiable to a particular function. Program revenues
include (a) charges paid by the recipients of goods or services offered by the programs, (b) grants and
contributions that are restricted to meeting the operational needs of a particular program and (c) fees, grants
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2011
Budgets and Budgetary Accounting
The District's Board of Directors adopts an annual operating budget for the District as a whole, which includes
both its General and Debt Service Funds on or before March 31, for the ensuing fiscal year. The Board of
Directors may amend the budget by resolution during the fiscal year. The legal level of control, the level at which
expenditures may not legally exceed the budget, is at the category level. Encumbrances are recorded as
restrictions of fund balance since they do not constitute expenditures or liabilities. All unencumbered
appropriations lapse at the end of the fiscal year.
Use of Estimates
The preparation of basic financial statements in conformity with accounting principles generally accepted in the
United States of America requires management to make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could differ from those estimates.
Compensated Absences
The total amount of liability for compensated absences is reflected in the basic financial statements. See Note 5
for additional information regarding compensated absences.
Cash and Cash Equivalents
For purposes of the statement of cash flows the District defines cash and cash equivalents to include all cash and
temporary investments with original maturities of three months or less from the date of acquisition.
Property Taxes
Property taxes are levied by Santa Clara and San Mateo Counties and a portion is distributed to the District. The
District recognizes property taxes as revenue in the fiscal year of levy.
Debt Discount and Issuance Costs
Debt discount and issuance costs are capitalized as an offset to long-term debt and amortized using the effective
interest 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.
NOTE 2 — CASH AND INVESTMENTS
Policies
The District and its fiscal agents invest in individual investments and in investment pools. Individual investments
are evidenced by specific identifiable pieces of paper called securities instruments, or by an electronic entry
registering the owner in the records of the institution issuing the security, called the book entry system. In order
to maximize security, the District employs the Trust Department of a bank as the custodian of all District
managed investments, regardless of their form.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2011
Investments Authorized by the California Government Code and the District's Investment Policy
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:
Authorized Investment Type
US Treasury Obligations
US Agency Securities
California Local Agency Investment Fund
Negotiable Certificates of Deposit
Bankers Acceptances
Commercial Paper
Repurchase Agreements
Reverse Repurchase Agreements
Medium Term Notes
Money Market and Mutual Funds
Maximum
Remaining
Maturity
5 years
5 years
Upon Demand
5 years
180 days
270 days
1 year
92 days
5 years
N/A
Minimum
Credit
Quality
N/A
N/A
N/A
N/A
N/A
A
N/A
N/A
A
Highest Category
Maximum
Percentage
of Portfolio
No Limit
No Limit
$40 million per
account
30%
40%
25%
No Limit
20%
30%
20%
Maximum
Investment
In One Issuer
No Limit
No Limit
No Limit
30%
10%
No Limit
No Limit
No Limit
10%
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 unexpended bond proceeds or are pledged reserves to be used if the
District fails to meet its obligations under these debt issues. The California Government Code requires these
funds to be invested in accordance with District resolutions, bond indentures or State statutes. At March 31,
2011, the bond indentures provided no advice about investing the bonds and contain no limitations for maximum
investment in any one issuer or the maximum percentage of the portfolio that may be invested in any one
investment type.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2011
Credit Risk
Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment.
This is measured by the assignment of a rating by a nationally recognized statistical rating organization.
Presented below is the actual rating as of March 31, 2011, for each investment type as provided by Moody's
investment rating system.
Investment Type Not Rated Aaa Total
Held by Trustees
US Federal Agency Securities $ $ 1,405,573 $ 1,405,573
Money Market Mutual Funds (US Securities) 1,975 1,975
California Local Agency Investment Fund 2,244,309 2,244,309
Santa Clara County Pool 17,892,835 17,892,835
Total Investments $ 20,137,144 $ 1,407,548 $ 21,544,692
Concentration Risk
Investments in any one issuer, other than US Treasury securities, mutual funds, and external investment pools,
that represent 5 percent or more of total District portfolio Entity -wide investments, are as follows at March 31,
2011:
Investments Reporting Type Investment Amount Percent of Portfolio
Federal Home Loan Mortgage Corp US Federal Agency Securities $ 1,405,573 6.5%
Restricted Cash and Investments
The District has the following restrictions on cash and investments:
Restricted for Debt Service. The District has moneys held by Bank of New York as trustee, pledged to the
payment or security of its outstanding bond issues. All transactions associated with debt serve are
administered by the Bank. The cash and investment amounts were $1,407,548 as of March 31, 2011.
NOTE 3 — 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 1s` of each month and late if not paid by the 10th, with the final payment scheduled December 1, 2022. The
outstanding balance at March 31, 2011 was $217,192.
20
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2011
At March 31, 2011, the District had made commitments of approximately $2.106 million for construction work,
legal and consulting fees, and purchases of supplies and equipment.
NOTE 5 — ACCURED 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 time.
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:
Years of Employment
10-15
16-20
21 or more
Percentage of equivalent
cash value of accrued
sick leave
20%
25%
30%
An employee hired before August 9, 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 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 August 9, 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. Accrued compensated absences were $1,135,684 as of March 31, 2011.
22
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2011
Promissory Notes
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. At March 31, 2011, the outstanding balance on the note was
$1,500,000.
Daloia Land Purchase Contract Promissory Note. During 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 matures October 10, 2017. At March 31, 2011, the outstanding balance of the Daloia
Land Contract note was $134,529.
2005 Refunding Promissory Note. On June 30, 2005, the District issued $4,630,000 of 2005 Refunding
Promissory Notes for the purpose of refunding all of its outstanding 1995 Promissory Notes. The 2005 notes
bear interest rates from 3.25% to 5.00%. Principal and interest rates are due semi-annually on March I and
September 1. At March 31, 2011, the outstanding balance was $3,945,000.
2010 Bergman Note. On Nov 30, 2010, the District issued a promissory note with Principal of $850,000 and
interest of 4% to finance the purchase of land. Interest and principal are due on a quarterly basis beginning
February 28th, 2011 and mature on November 30, 2011.
Revenue Bonds
1999 Lease Revenue Bonds. On January 20, 1999 the Authority, on behalf of the District, issued
$29,663,021 of 1999 Lease Revenue Bonds for the purpose of acquiring land to preserve and use as open
space, purchase a reserve fund surety policy, and pay bond issue costs. The bonds consist of Current Interest
and Capital Appreciation Bonds. The Current Interest Bonds bear interest at 3.7% to 5.4% and are due semi-
annually on March 1 and September 1. The Capital Appreciation Bonds accrete interest at 5.2% to 5.4% and
compound semi-annually on March 1 and September 1. Principal payments on the Current Interest Bonds are
due annually September 1. Principal payments on the Capital Appreciation Bonds are payable at maturity
beginning March, 2016. At March 31, 2011, the outstanding balance of these bonds was $33,229,454.
2004 Revenue Bonds. On January 20, 2004, the Authority on behalf of the District, issued $31,900,010 of
2004 Revenue Bonds for the purpose of acquiring land to preserve and use as open space, repay a portion of a
1995 Promissory Note, purchase a reserve fund surety policy, and pay bond issue costs. The bonds consist of
Current Interest and Capital Appreciation Bonds. The Current Interest Bonds bear interest at 2.0% to 5.4%
and are due semi-annually on March 1 and September 1. The Capital Appreciation Bonds accrete interest at
5.2% to %.4% and compound semi-annually on March 1 and September 1. Principal payments on the Current
Interest Bonds are due annually September 1. Principal payments on the Capital Appreciation Bonds are
payable at maturity beginning March, 2020. At March 31, 2011, the outstanding balance of these bonds was
$31,765,736.
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
24
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2011
Debt Repayment
All debt is payable from limited ad valorem property taxes levied on all taxable property within the District.
NOTE 7 — RENTAL INCOME
The District leases (rents) certain land and structures to others under operating leases with terms generally on a
month -to -month basis. Rental income of $955,243 was received during the year ended March 31, 2011.
NOTE 8 — RETIREMENT PLAN
Pension Plan
All permanent District employees are eligible to participate in the pension plan offered by California Public
Employees Retirement System (CALPERS) an agent multiple employer defined benefit pension plan withacts as
a common investment and administrative agent for its participating member employers. CALPERS provides
retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must
be public employees and beneficiaries. The District's employees participate h the Miscellaneous (non safety)
Employee Plan. Benefit provisions under the Plan are established by State statute and District resolution.
Benefits are based on years of credited service, equal to one year of full time employment. Funding contributions
for the Plan are determined annually on an actuarial basis as of June 30 by CALPERS; the District must
contribute these amounts. The Plans' provisions and benefits in effect at March 31, 2011, are summarized as
follows:
Miscellaneous
Benefit vesting schedule 5 years service
Benefit payments Monthly for life
Retirement age 50
Monthly benefits, as a % of annual salary 2.0-2.5%
Required employee contribution rates 8.0%
Required employer contribution rates 12.908%
CALPERS determines contribution requirements using a modification of the Entry Age Normal Method. Under
this method, the District's total normal benefit cost for each employee from date of hire to date of retirement is
expressed as a level percentage of the related total payroll cost. Normal benefit cost under this method is the level
amount the District must pay annually to fund an employee's projected retirement benefit. This level percentage
of payroll method is used to amortize any unfunded actuarial liabilities. The actuarial assumptions used to
compute contribution requirements are also used to compute the actuarial accrued liability. The District does not
have a net pension obligation since it pays these actuarially required contributions bi-weekly.
CALPERS uses the market related value method of valuing the Plan's assets. An investment rate of return of
7.75% is assumed, including inflation at 3.0%. Annual salary increases are assumed to vary by duration of
service. Changes in liability due to plan amendments, changes in actuarial assumptions, or changes in actuarial
methods are amortized as a level percentage of payroll on a closed basis over twenty years. Investment gains and
losses are accumulated as they are realized and ten percent of the net balance is amortized annually.
26
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2011
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 by bargaining unit:
Eligibility
Benefit
Surviving Spouse
Continuation
Dental, Vision and
Life
-Service or disability retirement from the Distric
-Age 50 and 5 years of service
-Continue participation in Public Employees
Medical and Hospital Care Act (PEMHCA)
District pays retiree premiums up to:
$300 per month effective 1/1/2007
$350 per month effective 1/1/2009
-Retirement plan election
-Same benefit continues to surviving spouse
None
As of March 31, 2011, approximately 94 active employees were eligible to receive retirement health care benefits.
Funding Policy and Actuarial Assumptions
The annual required contribution (ARC) was determined as part of a March 31, 2009, 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) 7.75% investment rate of return, (b) 3.25% projected annual salary increase, and (c) 3.0% health
inflation increases. 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 subject to
revision at least biannually 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 amortization period.
In accordance with the District's budget, the ARC is to be funded throughout the year as a percentage of payroll.
Concurrent with implementing Statement No. 45, the District Board passed a resolution to participate in the
California Employers Retirees Benefit Trust (CERBT), an irrevocable trust established to fund OPEB. CERBT is
administrated by CaIPERS, and is managed by an appointed board not under the control of the District Board.
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 PO Box
942709, Sacramento, CA 94229-2709.
28
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2011
NOTE 10 — RISK MANAGEMENT
Coverage
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 member government has an elected official as its
representative on the Board of Directors. The Board operates through a 9 -member Executive Committee.
_..
During the past threefiscal years, 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 year.
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 year, 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 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 3 -year period from July 1, 2008 through July 1,
2011. Each member of CAL JPIA has a $10,000,000 aggregate limit during the 3 -year policy term.
30
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2011
Contingent Liabilities
The District has entered into numerous agreements, has properties that will require environmental remediation,
and is named in certain claims and litigations. In the opinion of management, after consultation with counsel, the
liability, if any, resulting there from will not have a material effect on the District's financial position.
NOTE 12 — SUBSEQUENT EVENTS
In May 2011, the District Financing Authority sold $20.5 million of thirty-year bonds to finance the purchase of
land and structures. These bonds, structured as a lease and rated AA by Fitch and AA- by Standard & Poor's,
were sold at a total interest cost of 5.60%.
32
it
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES
IN FUND BALANCE
FOR THE YEAR ENDED MARCH 31, 2011
REVENUES
Property taxes
Grant income
Investment income
Property management - rents
Other income
Land Donation
Total Revenues
EXPENDITURES
Current
Salaries
Benefits
Directors
Services and supplies
Capital Outlay
New land purchases
Land acquisition support costs
Structures and improvements
Equipment
Vehicles
Total Expenditures
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES
OTHER FINANCING SOURCES (USES)
Other Sources
Transfers (out)
Total Other Financing Sources (Uses)
Budgeted Amounts
Original
$27,857,000
2,500,000
330,000
928,000
243,000
Final Actual
$ 27,527,000
1,565,000
330,000
928,000
235,000
$ 27,268,652
1,392,868
191,515
955,243
550,615
16,585
Variance
Favorable
(Unfavorable)
$ (258,348)
(172,132)
(138,485)
27,243
315,615
16,585
31,858,000 30,585,000 30,375,478 (209,522)
7,995,360 8,021,261 7,898,301 122,960
3,072,239 3,074,219 3,011,859 62,360
25,000 25,000 27,600 (2,600)
3,607,683 3,661,015 2,744,234 916,781
15,000,000 15,000,000 9,845,756 5,154,244
656,500 656,500 91,726 564,774
2,140,310 1,333,210 1,196,634 136,576
1,530,000 1,755,000 276,032 1,478,968
210,000 210,000 185,094 24,906
34,237,092 33,736,205 25,277,236 8,458,969
(2,379,092) (3,151,205) 5,098,242 8,249,447
850,000
850,000
(7,974,490) (7,974,490)
(7,124,490) (7,974,490)
NET CHANGE IN FUND BALANCE $
Fund balance at beginning of year
Fund balance at end of year
(2,026,248) $ (2,026,248)
28,914,014
$ 26,887,766
34