HomeMy Public PortalAboutAudit Report - District- FY15
MIDPENINSULA REGIONAL
OPEN SPACE DISTRICT
ANNUAL FINANCIAL AUDIT REPORT
MARCH 31, 2015
CHAVAN & ASSOCIATES, LLP
CERTIFIED PUBLIC ACCOUNTANTS
1475 SARATOGA AVE., SUITE 180
SAN JOSE, CA 95129
Midpeninsula Regional Open Space District
Santa Clara County
Table of Contents
TITLE PAGE
FINANCIAL SECTION:
Independent Auditor’s Report ..................................................................................................... 1 - 2
Management’s Discussion and Analysis ..................................................................................... 3 - 8
Basic Financial Statements:
Government-Wide Financial Statements:
Statement of Net Position .............................................................................................. 9
Statement of Activities .................................................................................................. 10
Fund Financial Statements:
Balance Sheet – Governmental Funds ........................................................................... 11
Reconciliation of the Governmental Funds Balance Sheet to the
Statement of Net Position ....................................................................................... 12
Statement of Revenues, Expenditures, and Changes
in Fund Balance – Governmental Funds ................................................................. 13
Reconciliation of Governmental Funds Statement of Revenues, Expenditures,
and Changes in Fund Balance to the Statement of Activities ................................. 14
Notes to the Basic Financial Statements ............................................................................... 15 - 36
REQUIRED SUPPLEMENTARY INFORMATION:
Schedule of Revenue, Expenditures and Changes in Fund Balance –
Budget and Actual (GAAP) General Fund ........................................................................... 37
Schedule of Funding Progress – Other Postemployment Benefits .............................................. 38
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 ......................................... 39 - 40
FINANCIAL
SECTION
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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 Midpeninsula Regional Open Space
District (the District), as of and for the year ended March 31, 2015, 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 District, as of March 31, 2015, and the respective changes in
financial position for the year then ended in accordance with accounting principles generally accepted
in the United States of America.
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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 and other postemployment
benefit information on pages 3 through 8, 37, and 38 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.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated June 25,
2015 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.
June 25, 2015
San Jose, California
Management’s Discussion and Analysis
Midpeninsula Regional Open Space District
Management’s Discussion and Analysis
For the Fiscal Year Ended March 31, 2015
3
INTRODUCTION
The Management’s Discussion and Analysis (MD&A) is a required section of the District’s annual financial
report, as shown in the overview below. The purpose of the MD&A is to present a discussion and analysis of the
District’s financial performance during the fiscal year that ended on March 31, 2015. 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
FINANCIAL HIGHLIGHTS
Driven by the continued strong economy in Silicon Valley, District property tax revenue again increased above its
long-term trend line in fiscal 2015, growing by $2.6 million, or 8.2%. Tax revenue also exceeded budget by $1.3
million, or 4.0%. The assessed valuation of secured and unsecured property within the District, as of July 1, 2014,
increased by 6.0%. District tax revenue growth never exactly matches the rate of increase in assessed valuation
because the District’s hybrid fiscal year spans two tax years and redevelopment-related taxes include some one-
time distributions. The District received 67.8% of its tax revenue from Santa Clara County and 32.2% from San
Mateo County.
The most significant long-term event of the year was the passage of Measure AA by District voters in June 2014,
allowing the issuance of $300 million of general obligation (GO) bonds over the next thirty years. The first
tranche of District GO bonds, $45 million, is expected to be issued in fiscal 2016. Some $5.2 million of Measure
AA-related capital spending made in fiscal 2015 qualifies for reimbursement from the proceeds of this sale of GO
bonds.
In January 2015, the District completed the refunding of its 2004 Revenue Bonds with the issuance of $23.6
million of 2015 Refunding Promissory Notes. This transaction resulted in a net present value savings of $7.3
million.
The District purchased $5.2 million of land and associated structures in fiscal 2015, including additions to the
Monte Bello and Purisima Creek open space preserves.
District expenditures were again within the annual budget. Excluding land acquisition and debt service, total
District spending, $21.5 million, was $4.2 million, or 16.3%, below budget. As in most recent years, a large
Management’s
Discussion & Analysis
Government-Wide
Financial Statements
Fund
Financial Statements
Notes to the
Financial Statements
Basic
Financial Statements
Midpeninsula Regional Open Space District
Management’s Discussion and Analysis
For the Fiscal Year Ended March 31, 2015
4
majority of the budget variance was due to delays and deferrals of capital projects; the District spent 92% of its
budget for salaries and benefits, and 79% of the budget for services and supplies.
The District’s net position increased by $10.0 million, or 3.2%, in fiscal 2015, as revenues exceeded expenditures.
The assets of the District exceeded liabilities at the close of the 2015 fiscal year by $321.1 million. Of this total
net position, $278.6 million, or 86.8%, was the District’s net investment in capital assets (capital assets net of
related debt).
USING THE ANNUAL REPORT
This annual report consists of a series of basic financial statements and notes to those statements. These statements
are organized so the reader can understand the District as an entire operating entity. The statements provide an
increasingly detailed look at specific financial activities.
The Statement of Net Position and Statement of Activities comprise the government-wide financial statements and
provide information about the activities of the whole District, presenting both an aggregate view of the District’s
finances and a longer-term view of those finances. Fund financial statements provide the next level of detail. For
governmental funds, these statements tell 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.
OVERVIEW OF THE FINANCIAL STATEMENTS
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.
Notes to the financials, which are included in the financial statements, provide more detailed data and explain
some of the information in the statements. The required supplementary information section provides further
explanations and provides 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 2014 - 2015?” The Statement of Net Position and the Statement of Activities
answer 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, 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.
Midpeninsula Regional Open Space District
Management’s Discussion and Analysis
For the Fiscal Year Ended March 31, 2015
5
In the Statement of Net Position and the Statement of Activities, the District reports governmental activities.
Governmental activities are the activities where the District’s programs and services are reported. The District
does not have any business type activities.
REPORTING THE DISTRICT’S MOST SIGNIFICANT FUNDS
Fund Financial Statements
The analysis of the District’s fund financial statements begins on page 11. 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 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 of March 31, 2015 as compared to March 31, 2014:
Percentage
2015 2014 Change Change
Assets
Current Assets 45,980,316$ 44,530,822$ 1,449,494$ 3.26%
Noncurrent Assets 413,584,109 407,253,012 6,331,097 1.55%
Total Assets 459,564,425$ 451,783,834$ 7,780,591$ 1.72%
Deferred Outflows of Resources
Deferred loss on early retirement of long-term debt 2,623,220$ 2,962,414$ (339,194)$ -11.45%
Total Deferred Outflows of Resources 2,623,220$ 2,962,414$ (339,194)$ -11.45%
Liabilities
Current Liabilities 2,962,155$ 2,175,974$ 786,181$ 36.13%
Noncurrent Liabilities 138,100,426 141,422,809 (3,322,383) -2.35%
Total Liabilities 141,062,581$ 143,598,783$ (2,536,202)$ -1.77%
Net Position
Net Investment in Capital Assets 278,611,038$ 268,869,441$ 9,741,597$ 3.62%
Restricted 2,565,732 4,326,997 (1,761,265) -40.70%
Unrestricted 39,948,294 37,951,027 1,997,267 5.26%
Total Net Position 321,125,064$ 311,147,465$ 9,977,599$ 3.21%
Table 1 - Summary of Statement of Net Position
Total net position increased by $10.0 million, as revenues exceeded expenditures. Noncurrent assets increased
due to $8.4 million of capital expenditures. Total liabilities decreased due to $3.1 million of principal payments
on outstanding debt and the defeasance of the 2004 Revenue Bonds.
Midpeninsula Regional Open Space District
Management’s Discussion and Analysis
For the Fiscal Year Ended March 31, 2015
6
Table 2 shows the changes in net position for fiscal year 2015 as compared to 2014.
Percentage
2015 2014 Change Change
Revenues
Program revenues 2,389,605$ 3,322,797$ (933,192)$ -28.08%
General revenues:
Property taxes 35,081,540 32,433,076 2,648,464 8.17%
Investment earnings 201,813 137,619 64,194 46.65%
Miscellaneous 216,219 182,011 34,208 18.79%
Total Revenues 37,889,177 36,075,503 1,813,674 5.03%
Program Expenses
Land preservation 19,477,519 17,929,658 1,547,861 8.63%
Interest 7,202,178 7,162,596 39,582 0.55%
Depreciation 1,231,881 1,094,962 136,919 12.50%
Total Expenses 27,911,578 26,187,216 1,724,362 6.58%
Change in Net Position 9,977,599 9,888,287 89,312 0.90%
Adjustment to Beginning Net Position - 1,971,040 (1,971,040) -100.00%
Beginning Net Position 311,147,465 299,288,138 11,859,327 3.96%
Ending Net Position 321,125,064$ 311,147,465$ 9,977,599$ 3.21%
Table 2 - Summary of Changes in Net Position
Program revenues decreased because the District received less grant income in fiscal 2015. In fiscal 2014, the
District received $1.9 million in capital grants versus $1.0 million in fiscal 2015. Approximately 82% of this
grant revenue was related to the demolition of the old Air Force structures on the top of Mt. Umunhum. Property
tax revenue increased by 8.2% due to growth in assessed valuation in both Santa Clara and San Mateo portions of
the District. Investment earnings increased due to higher cash balances.
THE DISTRICT’S FUND BALANCE
Table 3 provides an analysis of the District’s fund balances and the total change in fund balances from the prior
year.
Percentage
2015 2014 Change Change
Restricted for debt service -$ 1,620,515$ (1,620,515)$ -100%
Restricted for Hawthorne maintenance 1,702,556 1,702,557 (1) 0%
Assigned for economic contingencies - 5,000,000 (5,000,000) -100%
Committed for infrastructure 15,000,000 - 15,000,000 100%
Committed for equipment replacement 2,400,000 - 2,400,000 100%
Committed for natural disasters 3,000,000 - 3,000,000 100%
Unassigned 21,329,605 34,453,279 (13,123,674) -38%
Total Fund Balance 43,432,161$ 42,776,351$ 655,810$ 2%
Table 3 - Summary of Fund Balance
Following the completion of its new thirty year strategic plan, the Board of Directors committed a majority of the
unassigned fund balance during fiscal 2015 to reserves for infrastructure, equipment replacement and natural
disasters. See page 20 of the audit report for a description of each commitment.
Midpeninsula Regional Open Space District
Management’s Discussion and Analysis
For the Fiscal Year Ended March 31, 2015
7
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 the 2014-15 fiscal year, the District revised its General Fund budget which did not result in
an increase in total budgeted expenditures but did reclassify $100,000 from capital outlay to service and supplies
from the original to final budget. The final budgeted revenue and other financing sources estimate was
$38,751,448. The original budgeted estimate was $38,567,448.
CAPITAL ASSETS
Table 4 shows March 31, 2015 capital asset balances as compared to March 31, 2014.
Percentage
2015 2014 Change Change
Land 390,690,696$ 383,509,165$ 7,181,531$ 1.87%
Construction-in-Progress 3,250,593 4,709,807 (1,459,214) -30.98%
Structure and Improvements 7,188,257 7,201,862 (13,605) -0.19%
Infrastructure 7,700,415 7,011,681 688,734 9.82%
Equipment 910,497 884,424 26,073 2.95%
Vehicles 1,736,367 1,606,002 130,365 8.12%
Total Capital Assets - Net 411,476,825$ 404,922,941$ 6,553,884$ 1.62%
Table 4 - Summary of Capital Assets Net of Depreciation
LONG TERM LIABILITIES
Table 5 summarizes the percent changes in long-term liabilities over the past two years.
Percentage
2015 2014 Change Change
Promissory Notes 66,163,003$ 38,296,191$ 27,866,812$ 72.77%
Revenue Bonds 70,400,744 101,862,705 (31,461,961) -30.89%
Compensated Absences 1,536,679 1,263,913 272,766 21.58%
Total Long-term Liabilities 138,100,426$ 141,422,809$ (3,322,383)$ -2.35%
Table 5 - Summary of Long-term Liabilities
BUDGETARY PERFORMANCE
The budgetary comparison schedule following Note 10 of the footnotes shows how the District financial results of
fiscal 2015, on a GAAP basis, compared to the original budget adopted in March 2014 and the final budget
amended in December 2014. Total revenue was $0.9 million, or 2.3%, under budget, mostly due to delays in
completing land transactions which included land donations. Total expenditures were $8.3 million, or 23.8%,
below budget, leaving an excess of revenue over expenditure of $7.5 million. Delays and deferrals of capital
outlays accounted for 71.7% of the total spending variance. Spending for salaries, benefits, services and supplies
was at 88.6% of budget as compared to 92.4% in fiscal 2014.
ECONOMIC FACTORS AND NEXT YEAR’S BUDGET
The Board of Directors adopted the District’s budget for fiscal year 2016 on March 26, 2015. This budget
assumes the issuance of $45 million of GO bonds in the summer of 2015 and growth in general fund property tax
Midpeninsula Regional Open Space District
Management’s Discussion and Analysis
For the Fiscal Year Ended March 31, 2015
8
income of 6.5%. This budget funds $22.3 million of capital spending, of which $17.6 million would qualify for
reimbursement from Measure AA GO bond proceeds. The budget assumes a $5.3 million reimbursement of the
general fund for Measure AA qualified capital spending in fiscal 2014. Operating expenditures and general fund
debt service are budgeted at $21.8 million and $9.9 million, respectively. If all revenues, expenditures and debt
issuance occur as budgeted, the District’s overall cash balances would increase by $30.1 million. Assessed
valuation data received since March 2015 indicate that fiscal 2016 general fund tax revenue is likely to exceed
budget estimates by over $1.5 million.
CONTACTING THE DISTRICT’S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, parents, participants, investors and creditors
with a general overview of the District’s finances and to demonstrate the District’s accountability for the money it
receives. Questions concerning any of the information provided in this report or requests for additional financial
information should be addressed to the District Clerk, Midpeninsula Regional Open Space District, 330 Distel
Circle, Los Altos, California 94022.
Basic Financial Statements
Governmental
Activities
Assets
Current assets:
Cash and investments 35,562,081$
Accounts receivable:
Deposits 1,093,909
Interest 43,323
Due from other governments:
Taxes receivable 9,218,572
Due from grantor government 31,708
Other current assets 30,723
Total current assets 45,980,316
Noncurrent assets:
Net OPEB asset 863,176
Notes receivable 169,368
Unamortized issuance costs 1,074,740
Non-depreciable capital assets 393,941,289
Capital assets, net of depreciation 17,535,536
Total noncurrent assets 413,584,109
Total Assets 459,564,425$
Deferred Outflows of Resources
Deferred loss on early retirement of long-term debt 2,623,220$
Liabilities
Current liabilities:
Accounts payable 1,623,917$
Deposits payable 118,266
Payroll and other liabilities 805,972
Accrued interest 414,000
Total current liabilities 2,962,155
Noncurrent liabilities:
Due within one year 4,740,053
Due after one year 133,360,373
Total noncurrent liabilities 138,100,426
Total Liabilities 141,062,581$
Net Position
Net investment in capital assets 278,611,038$
Restricted for:
Hawthorne maintenance 1,702,556
OPEB 863,176
Total restricted 2,565,732
Unrestricted 39,948,294
Total Net Position 321,125,064$
Midpeninsula Regional Open Space District
Statement of Net Position
March 31, 2015
The notes to the financial statements are an integral part of this statement.
9
Net (Expense)
Capital Revenue and
Charges for Grants and Changes in
Expenses Services Contributions Net Position
Governmental activities:
Land preservation 19,477,519$ 1,436,680$ 952,925$ (17,087,914)$
Interest 7,202,178 - - (7,202,178)
Depreciation 1,231,881 - - (1,231,881)
Total governmental activities 27,911,578$ 1,436,680$ 952,925$ (25,521,973)
General revenues:
Property taxes 35,081,540
Investment earnings 201,813
Other revenues 284,525
Special items - loss on disposal of capital assets (68,306)
Total general revenues and special items 35,499,572
Change in net position 9,977,599
Net position beginning 311,147,465
Net position ending 321,125,064$
Midpeninsula Regional Open Space District
Statement of Activities
For the Fiscal Year Ended March 31, 2015
Program Revenues
The notes to the financial statements are an integral part of this statement.
10
Debt Total
General Service Governmental
Fund Fund Funds
ASSETS
Cash and investments 35,562,081$ -$ 35,562,081$
Receivables:
Deposits 1,093,909 - 1,093,909
Interest 43,323 - 43,323
Due from other governments:
Taxes receivable 9,218,572 - 9,218,572
Due from grantor government 31,708 - 31,708
Other current assets 30,723 - 30,723
Notes receivable 169,368 - 169,368
Total Assets 46,149,684$ -$ 46,149,684$
LIABILITIES
Liabilities:
Accounts payable 1,623,917$ -$ 1,623,917$
Deposits payable 118,266 - 118,266
Payroll and other liabilities 805,972 - 805,972
Total Liabilities 2,548,155 - 2,548,155
DEFERRED INFLOWS OF RESOURCES
Unearned revenue 169,368 - 169,368
FUND BALANCE
Restricted for:
Hawthorne maintenance 1,702,556 - 1,702,556
Committed for:
Infrastructure 15,000,000 - 15,000,000
Equipment replacement 2,400,000 - 2,400,000
Natural disasters 3,000,000 - 3,000,000
Unassigned 21,329,605 - 21,329,605
Total Fund Balance 43,432,161 - 43,432,161
Total Liabilities and Fund Balance 46,149,684$ -$ 46,149,684$
Balance Sheet
Midpeninsula Regional Open Space District
March 31, 2015
Governmental Funds
The notes to the financial statements are an integral part of this statement.
11
Total fund balance - governmental funds 43,432,161$
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 424,235,416$
Accumulated depreciation (12,758,591) 411,476,825
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.169,368
Net OPEB assets are not available to pay for current period expenditures and, therefore, are not
recognized in the governmental funds statements.863,176
Interest payable on long-term debt does not require the use of current financial resources and, therefore,
is not reported in the governmental funds.(414,000)
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:(5,898,397)
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.2,623,220
Long-term liabilities are not due and payable in the current period and therefore are not reported
as liabilities in the funds. Long-term liabilities at year-end consists of:
Revenue bonds 70,320,000$
Promissory notes 59,270,610
Compensated absences 1,536,679 (131,127,289)
Total net position - governmental activities 321,125,064$
Midpeninsula Regional Open Space District
Balance Sheet to the Statement of Net Position
March 31, 2015
Reconciliation of the Governmental Funds
The notes to the financial statements are an integral part of this statement.
12
Debt Total
General Service Governmental
Fund Fund Funds
Revenues:
Property taxes 35,081,540$ -$ 35,081,540$
Grant income 952,925 - 952,925
Property management 1,436,680 - 1,436,680
Investment earnings 174,654 40,956 215,610
Other revenues 241,335 - 241,335
Total revenues 37,887,134 40,956 37,928,090
Expenditures:
Current:
Salaries and employee benefits 13,629,502 - 13,629,502
Services and supplies 4,642,351 - 4,642,351
Capital outlay 8,445,355 - 8,445,355
Debt service:
Principal - 3,145,096 3,145,096
Interest - 5,748,505 5,748,505
Total expenditures 26,717,208 8,893,601 35,610,809
Excess (deficiency) of revenues
over (under) expenditures 11,169,926 (8,852,645) 2,317,281
Other financing sources (uses):
Proceeds from the issuance of refunding notes 28,325,491 - 28,325,491
Advance refunding of revenue bonds (28,325,491) (1,661,471) (29,986,962)
Transfers in - 8,893,601 8,893,601
Transfers out (8,893,601) - (8,893,601)
Total other financing sources (uses)(8,893,601) 7,232,130 (1,661,471)
Net changes in fund balance 2,276,325 (1,620,515) 655,810
Fund balance beginning 41,155,836 1,620,515 42,776,351
Fund balance ending 43,432,161$ -$ 43,432,161$
Midpeninsula Regional Open Space District
Statement of Revenues, Expenditures and Changes in Fund Balance
Governmental Funds
For the Fiscal Year Ended March 31, 2015
The notes to the financial statements are an integral part of this statement.
13
Total net change in fund balance - governmental funds 655,810$
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 7,906,213$
Depreciation expense (1,231,881) 6,674,332
Governmental funds do not report loss on disposal of capital assets. However, in the government-wide
statement of activities and changes in net position, the cost to dispose of capital assets, net any
proceeds, is accounted for as a special item. (120,448)
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.(13,797)
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.(1,121,982)
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 refunding notes (28,578,500)$
Advance refunding of revenue bonds 29,986,962
Repayment of bond principal 1,495,000
Repayment of promissory notes princpal 1,650,096 4,553,558
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.(339,194)
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 95,332
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.(272,766)
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:(140,749)
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.7,503
Change in net position of governmental activities 9,977,599$
Midpeninsula Regional Open Space District
Statement of Revenues, Expenditures and Changes in Fund Balance
For the Fiscal Year Ended March 31, 2015
Reconciliation of the Governmental Funds
to the Statement of Activities
The notes to the financial statements are an integral part of this statement.
14
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2015
15
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. 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
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2015
16
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 governmental 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.
E. 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 year in which the resources are measurable and
become available. “Available” means the resources will be collected within the current fiscal
year or are expected to be collected soon enough thereafter to be used to pay liabilities of the
current fiscal year. For the District, “available” means collectible within the current period or
within 90 days after year-end.
Non-exchange transactions, in which the District receives value without directly giving equal
value in return, include property taxes, grants, and entitlements. Under the accrual basis, revenue
from property taxes is recognized in the fiscal year for which the taxes are levied. Revenue from
grants and entitlements is recognized in the fiscal year in which all eligibility requirements have
been satisfied. Eligibility requirements include timing requirements, which specify the year when
the resources are to be used or the fiscal year when use is first permitted; matching requirements,
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2015
17
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 a consumption of net assets by the government that is
applicable to a future reporting period, for example; prepaid items and deferred charges.
A deferred inflow of resources is an acquisition of net assets by the government that is applicable
to a future reporting period, for example; unearned revenue and advance collections.
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
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.
F. 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,
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2015
18
grant revenues and interest income. Expenditures are made for land preservation and other
operating expenditures.
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.
G. 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.
H. Assets, Liabilities, and Equity
1. Cash and Cash Equivalents
Cash and cash equivalents include all cash and temporary investments with original
maturities of three months or less from the date of acquisition.
2. 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.
3. 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
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.
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2015
19
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
4. 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 equivalent
cash value of accrued
Years of Employment sick leave
15-20 20%
16-20 25%
21 or more 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.
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2015
20
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.
5. 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.
6. 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.
7. 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 year-end. Committed fund balances were
imposed by the District’s board of directors as follows:
o Infrastructure: $15.0 million; projected minimum requirement for expansion of field
and office facilities over the next five years.
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.
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2015
21
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.
8. 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 year. 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.
9. 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
apportioned, in the fiscal year 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
year.
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2015
22
On March 31, 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 County 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 the County and is used to pay the interest cost of borrowing the cash
used for the advances.
10. 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.
I. Upcoming Accounting and Reporting Changes
Summary of Statement No. 68 - Accounting and Financial Reporting for Pensions - an
amendment of GASB Statement No. 27 (Issued 06/12). The primary objective of this
Statement is to improve accounting and financial reporting by state and local governments for
pensions. It also improves information provided by state and local governmental employers about
financial support for pensions that is provided by other entities. This Statement replaces the
requirements of Statement No. 27, Accounting for Pensions by State and Local Governmental
Employers, as well as the requirements of Statement No. 50, Pension Disclosures, as they relate
to pensions that are provided through pension plans administered as trusts or equivalent
arrangements (hereafter jointly referred to as trusts) that meet certain criteria. This Statement
establishes a definition of a pension plan that reflects the primary activities associated with the
pension arrangement-determining pensions, accumulating and managing assets dedicated for
pensions, and paying benefits to plan members as they come due. This Statement is effective for
fiscal years beginning after June 15, 2014 (fiscal year ended March 31, 2016). The District has
received the June 30, 2013 PERS valuation report which shows the District’s share of the plan’s
unfunded liability to be $9,848,203 as of June 30, 2013. Barring additional contributions or
changes in assumptions, this amount will be reported as a deferred inflow of resources in the
District’s March 31, 2016 government wide statement of net position, but will not impact the
fund statements.
Statement No. 69 – In January, 2013, GASB issued Statement No. 69, Government
Combinations and Disposal of Government Operations. This Statement establishes accounting
and financial reporting standards related to government combinations and disposal of government
operations. As used in this Statement, combinations includes a variety of transactions referred to
as mergers, acquisitions, and transfers of operations. The District believes there will be no
financial statement effect related to this Statement.
Statement No. 70 – In April, 2013, GASB issued Statement No 70, Accounting and Financial
Reporting for Nonexchange Financial Guarantees. Some governments extend financial
guarantees for the obligations of another government, a not-for-profit entity, or private entity
without directly receiving equal or approximately equal value in exchange (a nonexchange
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2015
23
transaction). The District does not participate in nonexchange transactions and this Statement
will have no financial statement effect.
Statement No. 71 – In November, 2013, GASB issued Statement No 71, Pension Transition for
Contributions Made Subsequent to the Measurement Date—an amendment of GASB Statement
No. 68. The objective of this Statement is to address an issue regarding application of the
transition provisions of Statement No. 68, Accounting and Financial Reporting for Pensions. The
issue relates to amounts associated with contributions, if any, made by a state or local
government employer or nonemployer contributing entity to a defined benefit pension plan after
the measurement date of the government’s beginning net pension liability. The provisions of this
Statement are required to be applied simultaneously with the provisions of Statement 68. The
District is in the process of determining the impact this statement will have on the financial
statements.
Statement No. 72 – In February, 2015, GASB issued Statement No 72, Fair Value Measurement
and Application. This Statement addresses accounting and financial reporting issues related to
fair value measurements. The definition of fair value is the price that would be received to sell an
asset or paid to transfer a liability in an orderly transaction between market participants at the
measurement date. This Statement provides guidance for determining a fair value measurement
for financial reporting purposes. This Statement also provides guidance for applying fair value to
certain investments and disclosures related to all fair value measurements. The requirements of
this Statement are effective for financial statements for periods beginning after June 15, 2015.
The District is in the process of determining the impact this statement will have on the financial
statements.
NOTE 2 - CASH AND INVESTMENTS
Summary of Cash and Investments
The following summarizes deposits as of March 31, 2015:
Cash and
Cash Equivalents
Available Investment
Cash and Investments for Operations Restricted Total Rating Maturities
Cash Deposits:
Cash in Banks 80,658$ 1,690,779$ 1,771,437$ N/A N/A
Petty Cash 1,500 - 1,500 N/A N/A
Total Cash Deposits 82,158 1,690,779 1,772,937
Investments:
California Local Agency Investment Fund 7,843,853 - 7,843,853 Not Rated < 1yr
Santa Clara County Pool 25,945,291 - 25,945,291 Not Rated < 1yr
Total Investments 33,789,144 - 33,789,144
Total Cash and Investments 33,871,302$ 1,690,779$ 35,562,081$
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2015
24
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 March 31, 2015, the
District’s bank balances exceeded FDIC coverage by $1,505,165.
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 March
31, 2015, these investments had an average maturity date of less than one year.
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
During the year the District had money held by Bank of New York as trustee, pledged to the payment or
security of its outstanding bond issues. 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 March 31, 2015 was $1,690,779.
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2015
25
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:
Authorized Investment Type
Maximum
Remaining
Maturity
Maximum
Percentage of
Portfolio
Maximum
Investment
In One Issuer
Medium Term Notes 5 years 30% No Limit
Money Market and Mutual Funds N/A 20% 10%
U.S. Treasury Obligations 5 years No Limit No Limit
Federal Agency Securities 5 years No Limit No Limit
Banker's Acceptance 180 days 40% 30%
Commercial Paper 270 days 25% 10%
Negotiable Certificates of Deposit 5 years 30% No Limit
Repurchase Agreements 1 year No Limit No Limit
Reverse Repurchase Agreements 92 days 20% No Limit
Local Agency Investment Fund (LAIF) N/A $40 million 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
risk by investing in the Santa Clara County investment pool and LAIF, which had fair values of
approximately $5.6 billion and $62.5 billion, respectively as of March 31, 2015.
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 2014-15 included U.S. government securities or obligations explicitly guaranteed by
the U.S. government that are not considered to have credit risk exposure. The County’s two other
investment types, LAIF and money market mutual funds, are not rated.
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
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2015
26
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.
NOTE 3 – 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 $1,122,266 was received during the year
ended March 31, 2015.
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 March 31, 2015 was $169,368.
NOTE 5 - CAPITAL ASSETS AND DEPRECIATION
Capital asset activity for the year ended March 31, 2015, is shown below:
Balance Transfers/ Balance
Description March 31, 2014 Additions Deletions Adjustments March 31, 2015
Non-depreciable Capital Assets:
Land and land improvements 383,509,165$ 5,219,301$ -$ 1,962,230$ 390,690,696$
Construction in progress 4,709,807 1,031,671 (59,246) (2,431,639) 3,250,593
Total non-depreciable capital assets 388,218,972 6,250,972 (59,246) (469,409) 393,941,289
Depreciable Capital Assets:
Structure and Improvements 14,899,885 341,906 - 77,926 15,319,717
Infrastructure 8,640,137 684,628 - 391,483 9,716,248
Equipment 1,724,511 144,953 (25,960) - 1,843,504
Vehicles 3,145,161 483,754 (214,257) - 3,414,658
Total depreciable capital assets 28,409,694 1,655,241 (240,217) 469,409 30,294,127
Less accumulated depreciation for:
Structure and improvements 7,698,023 433,437 - - 8,131,460
Infrastructure 1,628,456 387,377 - - 2,015,833
Equipment 840,087 114,979 (22,059) - 933,007
Vehicles 1,539,159 296,088 (156,956) - 1,678,291
Total accumulated depreciation 11,705,725 1,231,881 (179,015) - 12,758,591
Total depreciable capital assets - net 16,703,969 423,360 (61,202) 469,409 17,535,536
Total capital assets - net 404,922,941$ 6,674,332$ (120,448)$ -$ 411,476,825$
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2015
27
NOTE 6 – LONG-TERM DEBT
The following is a summary of the changes in long-term debt for the year ended March 31, 2015:
Balance Balance Due Within
Long-term Obligations April 01, 2014 Additions Deductions March 31, 2015 One Year
Promissory Notes:
Current Interest 18,891,204$ 23,630,000$ 1,650,096$ 40,871,108$ 1,631,382$
Capital Appreciation 15,474,708 - - 15,474,708 -
Accreted interest 1,918,995 1,005,799 - 2,924,794 -
Unamortized Bond Premium 2,011,284 4,948,500 67,391 6,892,393 67,391
Subtotal Promissory Notes 38,296,191 29,584,299 1,717,487 66,163,003 1,698,773
Revenue Bonds:
Current Interest 99,395,000 - 29,075,000 70,320,000 2,730,000
Capital Appreciation 1,340,010 - 1,340,010 - -
Accreted interest 950,769 116,183 1,066,952 - -
Unamortized Bond Premium 176,926 - 96,182 80,744 80,744
Subtotal Revenue Bonds 101,862,705 116,183 31,578,144 70,400,744 2,810,744
Compensated Absences 1,263,913 272,766 - 1,536,679 230,536
Total Long-term Obligations 141,422,809$ 29,973,248$ 33,295,631$ 138,100,426$ 4,740,053$
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 matures
October 10, 2017. At March 31, 2015, the outstanding balance of the Daloia Land Contract note was
$61,109.
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, 2015, the outstanding balance on the note was $1,500,000.
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 1 and September
1. At March 31, 2015, there was no outstanding balance.
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 is due on a quarterly basis beginning February 28, 2011 and
mature on November 30, 2015. The principal is due in full at maturity. At March 31, 2015, the
outstanding balance was $850,000.
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2015
28
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. At March 31, 2015, the outstanding balance of the notes, including
accreted interest of $2,924,794, was $33,229,501.
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. At March 31,
2015, the outstanding balance of the notes was $23,630,000.
Revenue Bonds
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 5.53% 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. The outstanding
balance of these bonds was refunded in January of 2015.
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 semiannually on March 1 and September
1. Principal payments for the Series A bonds began September, 2012 and are due annually, thereafter.
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2015
29
Principal payments for the Series B-T bonds are due annually on September 1. At March 31, 2015
the outstanding balance of the 2007 Series A Bonds is $49,935,000. There is no remaining balance
on the 2007 Series B-T Bonds.
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 year, 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. At
March 31, 2015, the outstanding balance of these bonds was $20,385,000.
The following schedule summarizes the District’s outstanding Promissory Notes and Revenue Bonds
as of March 31, 2015:
Original Outstanding Outstanding
Long Term Debt Issue April 01, 2014 Additions Retirements March 31, 2015
Promissory Notes:
Daloia Note 240,000$ 81,205$ -$ 20,096$ 61,109$
Hunt Note 1,500,000 1,500,000 - - 1,500,000
2005 Refunding Note 4,630,000 1,210,000 - 1,210,000 -
Bergman Note 850,000 850,000 - - 850,000
2012 Refunding Note 15,790,000 15,249,999 - 420,000 14,829,999
2012 Refunding Note 15,474,707 15,474,708 - - 15,474,708
2015 Refunding Note 23,630,000 - 23,630,000 - 23,630,000
Subtotal Promissory Notes 62,114,707 34,365,912 23,630,000 1,650,096 56,345,816
Revenue Bonds:
2004 Revenue Bonds 30,560,000 28,275,000 - 28,275,000 -
2004 Revenue Bonds 1,340,010 1,340,010 - 1,340,010 -
2007 Series A Refunding 52,415,000 50,665,000 - 730,000 49,935,000
2011 Lease Revenue 20,500,000 20,455,000 - 70,000 20,385,000
Subtotal Revenue Bonds 104,815,010 100,735,010 - 30,415,010 70,320,000
Accreted Interest:
2012 Refunding Note 1,918,995 1,005,799 - 2,924,794
2004 Revenue Bonds 950,769 116,183 1,066,952 -
Subtotal Accreted Interest 2,869,764 1,121,982 1,066,952 2,924,794
Unamortized Bond Premium 2,188,210 4,948,500 163,573 6,973,137
Total Long Term Debt 166,929,717$ 140,158,896$ 29,700,482$ 33,295,631$ 136,563,747$
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2015
30
Promissory Notes future debt service requirements as of March 31, 2015 were as follows:
Year Ending March 31, Principal
Remaining
Accretion Interest Total
2016 1,631,382$ -$ 2,030,237$ 3,661,619$
2017 1,062,750 - 1,856,021 2,918,771
2018 1,131,977 - 1,816,666 2,948,643
2019 1,200,000 - 1,765,775 2,965,775
2020 1,285,000 - 1,707,675 2,992,675
2021-2025 9,215,000 - 7,551,100 16,766,100
2026-2030 18,147,418 - 4,570,000 22,717,418
2031-2035 14,781,048 10,811,786 927,250 26,520,084
2036-2040 6,022,461 16,660,661 - 22,683,122
2041-2042 1,868,780 17,998,052 - 19,866,832
Total Debt Service 56,345,816$ 45,470,499$ 22,224,724$ 124,041,039$
Revenue Bonds future debt service requirements as of March 31, 2015 were as follows:
Year Ending March 31, Principal Interest Total
2016 2,730,000$ 3,491,125$ 6,221,125$
2017 3,355,000 3,351,150 6,706,150
2018 3,555,000 3,186,100 6,741,100
2019 3,765,000 3,005,500 6,770,500
2020 3,490,000 2,826,100 6,316,100
2021-2025 22,045,000 11,107,356 33,152,356
2026-2030 16,230,000 5,703,013 21,933,013
2031-2035 4,555,000 4,114,744 8,669,744
2036-2040 - 3,038,625 3,038,625
2041-2042 10,595,000 911,588 11,506,588
Total Debt Service 70,320,000$ 40,735,301$ 111,055,301$
Amortization of the deferred loss on early retirement of long-term debt for the fiscal year ended
March 31, 2015 was as follows:
Beginning Balance, at April 1, 2014 2,962,414$
Net Change (339,194)
Ending Balance, at March 31, 2015 2,623,220$
NOTE 7 - EMPLOYEE RETIREMENT SYSTEMS
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 with acts 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 in the Miscellaneous (non safety) Employee Plan. Benefit provisions under the
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2015
31
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 pension plans' provisions and benefits in effect at March 31, 2015, are summarized as follows:
Benefit vesting schedule 5 years service
Benefit payments Monthly for life
Retirement age 55
Monthly benefits, as a % of annual salary 2.0-2.5%
Required employee contribution rates 7.89%
Required employer contribution rates 15.70%
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 7.50% is assumed, including inflation at 2.75%. 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.
As required by State law, effective July l, 2005, the District's Miscellaneous Plan was terminated,
and the employees in the plan were required by CALPERS to join new State-wide pools. One of the
conditions of entry to these pools was that the District true-up any unfunded liabilities in the former
Plans, either by paying cash or by increasing its future contribution rates through a Side Fund offered
by CALPERS. The District satisfied its Miscellaneous Plan's unfunded liability of $2,510,958 by
agreeing to contribute that amount to the Side Fund through an addition to its normal contribution
rates over the next 21 years. In 2013, the District made a one-time payment of $2,510,958 to
eliminate the liability. The required contributions representing annual pension cost, for the last three
fiscal years was as follows:
Fiscal Year
Ending
Annual
Pension Cost
(APC)
Percentage of
APC
Contributed
Net Pension
Obligation
3/31/2015 1,343,244$ 100% -$
3/31/2014 1,461,069 100% -
3/31/2013 4,298,913 100% -
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2015
32
The latest available actuarial values of the above State-wide pools (which differs from market value)
and funding progress were set forth as follows. The information presented below relates to the State-
wide pools as a whole, of which the District is one of the participating employers:
Valuation
Date
Accrued
Liability
Value of
Assets
Unfunded
(Overfunded)
Liability
Funded
Ratio
Annual
Covered
Payroll
Unfunded
(Overfunded)
Liability as %
of Payroll
6/30/2012 2,254,622,362 1,837,489,422 417,132,490 81.50% 339,228,272 122.97%
Audited annual financial statements are available from CALPERS at PO Box 942709, Sacramento,
CA 94229-2709.
Other Postemployment Benefits (OPEB)
Plan Description
The District joined the California Employers' Retiree Benefit Trust (CERBT), an agent multiple-
employer 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:
Eligibility Service or disability retirement from the District
Age 50 and 5 years of service
Continue participation in Public Employees
Medical and Hospital Care Act (PEMHCA)
Retiree Medical
Benefit
District pays retiree premiums up to:
$350 per month effective 1/1/2009
Must be at least equal to statutory PEMHCA minimum
($115 in 2013, $119 in 2014)
PEMHCA
Administrative Fee
District pays CalPERS administrative fees (0.33% of
premiums for 2013/14)
Surviving Spouse
Continuation
Retiree benefit continues to surviving spouse if
retiree elects survivor annuity under CalPERS
retirement plan
Other OPEB None
Funding Policy
In accordance with the District's budget, the Annual Required Contribution (ARC) is to be funded
throughout the year as a percentage of payroll. Concurrent with implementing Statement No. 45, the
District’s Board of Directors passed a resolution to participate in CERBT, an irrevocable trust
established to fund OPEB. CERBT is managed by an appointed board not under the control of the
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2015
33
District. This Trust is not considered a component unit by the District and has been excluded from
these financial statements. Separately issued financial statements for CERBT may be obtained from
CALPERS at P.O. Box 942709, Sacramento, CA 94229-2709.
Annual OPEB Cost and Net OPEB Obligation
The District’s annual OPEB cost is calculated based on the ARC, an amount actuarially determined
in accordance with the parameters of GASB Statement 45. The ARC represents a level of funding
that, if paid on an ongoing basis, is projected to cover normal cost each year and amortize any
unfunded actuarial liabilities (or funding excess) over a period not to exceed thirty years. The
following table shows the components of the District’s annual OPEB cost for the year, the amount
actually contributed to the plan, and changes in the District’s net OPEB obligation:
Annual required contribution 261,000$
Interest on net OPEB asset (60,000)
Adjustment to annual required contribution 97,000
Annual OPEB cost (expense) 298,000
Contributions made (157,251)
Decrease in net OPEB asset 140,749
Net OPEB obligation (asset) - beginning (1,003,925)
Net OPEB obligation (asset) - ending $ (863,176)
The District’s annual OPEB cost, the percentage of annual OPEB cost contributed to the plan, and
the net OPEB obligation for 2015 was as follows:
Fiscal Percentage Net OPEB
Year Annual of Annual Obligation/
Ended OPEB Cost Cost Contributed (Asset)
March 31, 2013 237,000$ 0% (1,097,306)$
March 31, 2014 265,000 65% (1,003,925)
March 31, 2015 298,000 53% (863,176)
Funded Status and Funding Progress
The most recent actuarial valuation date was June 30, 2013. The following summarizes the funded
status of the plan as of March 31, 2015:
2,555,000$
2,469,473
85,527$
97%
8,506,000$
1%
Funded ratio (actuarial value of plan assets/AAL)
Projected covered payroll (active Plan members)
UAAL as a percentage of covered payroll
Actuarial accrued liability (AAL)
Value of plan assets
Unfunded actuarial accrued liability (UAAL)
Actuarial Methods and Assumptions
The ARC was determined as part of a June 30, 2013 actuarial valuation using the entry age normal
actuarial cost method. This is a projected benefit cost method, which takes into account those
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2015
34
benefits that are expected to be earned in the future as well as those already accrued. The actuarial
assumptions included (a) 6.25% to 7.25% investment rate of return, (b) 3.25% projected annual
salary increase, and (c) health inflation increases of 0% for 1 year, 1.5% for the next 5 years, 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 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 open
amortization period.
NOTE 8 - 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 member 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 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
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2015
35
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.
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 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.
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 promises 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. Special Event Tenant User Liability Insurance. The District
participates in the special events program of CAL JPIA which provides liability insurance when District
promises 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.
Midpeninsula Regional Open Space District
Notes to the Basic Financial Statements
For the Fiscal Year Ended March 31, 2015
36
Vendors/Contractors Program
General liability coverage is provided to vendors/contractors who otherwise could not contract with the
District as they could not meet the minimum insurance requirement: $1 million per occurrence, $1 million
in aggregate.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
The District may be exposed to various claims and litigation during the normal course of business.
However, management believes there were no matters that would have a material adverse effect on the
District’s financial position or results of operations as of March 31, 2015.
NOTE 10 - SUBSEQUENT EVENTS
Management has reviewed subsequent events and transactions that occurred after the date of the financial
statements through the date the financial statements were issued. The financial statements include all
events or transactions, including estimates, required to be recognized in accordance with generally
accepted accounting principles.
REQUIRED
SUPPLEMENTARY
INFORMATION
Variance with
Final Budget
Actual Positive -
Original Final (GAAP Basis)(Negative)
Revenues:
Property taxes 33,556,000$ 33,740,000$ 35,081,540$ 1,341,540$
Grant income 1,624,000 1,624,000 952,925 (671,075)
Property management 1,422,448 1,422,448 1,436,680 14,232
Investment earnings 265,000 265,000 174,654 (90,346)
Land donation 1,500,000 1,500,000 - (1,500,000)
Other revenues 200,000 200,000 241,335 41,335
Total revenues 38,567,448 38,751,448 37,887,134 (864,314)
Expenditures:
Current
Salaries and employee benefits 14,755,318 14,755,318 13,629,502 1,125,816
Services and supplies 5,775,152 5,875,152 4,642,351 1,232,801
Capital outlay 14,516,200 14,416,200 8,445,355 5,970,845
Total expenditures 35,046,670 35,046,670 26,717,208 8,329,462
Excess (deficiency) of revenues
over (under) expenditures 3,520,778 3,704,778 11,169,926 7,465,148
Other financing sources (uses):
Transfers in - - - -
Transfers out (8,893,601) (8,893,601) (8,893,601) -
Total other financing sources (uses)(8,893,601) (8,893,601) (8,893,601) -
Net change in fund balance (5,372,823) (5,188,823) 2,276,325 7,465,148
Fund balance beginning 41,155,836 41,155,836 41,155,836 -
Fund balance ending 35,783,013$ 35,967,013$ 43,432,161$ 7,465,148$
Budgeted Amounts
Midpeninsula Regional Open Space District
Budget to Actual (GAAP)
For the Fiscal Year Ended March 31, 2015
Schedule of Revenues, Expenditures and Changes in Fund Balance
General Fund
37
Midpeninsula Regional Open Space District
Schedule of Funding Progress – Other Postemployment Benefits
For the Fiscal Year Ended March 31, 2015
38
Actuarial
Accrued UAAL as
Actuarial Liability Unfunded a Percentage
Actuarial Value of (AAL) AAL Funded Covered of Covered
Valuation Assets Entry Age (UAAL) Ratio Payroll Payroll
Date (a) (b) (b-a) (a/b) (c) ((b-a/c))
3/31/2010 1,894,000$ 1,500,000$ (394,000)$ 126.27% 5,772,000$ -6.83%
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%
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 7 may be different than
the projections included in the actuarial studies.
OTHER INDEPENDENT
AUDITOR’S REPORTS
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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 financial statements of the District as of
and for the year ended March 31, 2015, and the related notes to the financial statements, which
collectively comprise the District’s basic financial statements, and have issued our report thereon
dated June 25, 2015.
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
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
Page | 40 1475 Saratoga Ave, Suite 180, San Jose, CA 95129
Tel: 408-217-8749 • E-Fax: 408-872-4159
info@cnallp.com • www.cnallp.com
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.
June 25, 2015
San Jose, California