HomeMy Public PortalAboutAudit Report - District- FY08MIDPENINSULA REGIONAL OPEN
SPACE DISTRICT
BASIC FINANCIAL STATEMENTS
FOR THE YEAR ENDED MARCH 31, 2008
PREPARED BY THE
FINANCE DEPARTMENT
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
BASIC FINANCIAL STATEMENTS
For the Year Ended MARCH 31, 2005
Table of Contents
INDEPENDENT AUDITORS' OPINION 1
MANAGEMENT'S DISCUSSION AND ANALYSIS 3
BASIC FINANCIAL STATEMENTS
Statement of Net Assets 8
Statement of Activities 9
Balance Sheet 10
Reconciliation of the Governmental Funds — Balance Sheet with the Statement of Net Assets 11
Statement of Revenues, Expenditures and Changes in Fund Balances 12
Reconciliation of the Net Change in Fund Balances — Total Governmental Funds with the
Statement of Activities 13
NOTES TO FINANCIAL STATEMENTS 15
SUPPLEMENTARY INFORMATION
Schedule of Revenues, Expenditures and Changes in Fund Balances — Budget and Actual 34
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MAZE &
ASSOCIATES
ACCOUNTANCY CORPORATION
3478 Buskirk Ave. - Suite 215
Pleasant Hill, California 94523
(925) 930-0902 • FAX (925) 930-0135
maze @mazeass ocia tes. corn
www.mazeassociates.com
INDEPENDENT AUDITORS' REPORT
Board of Directors
Midpeninsula Regional Open Space District
Los Altos, California
We have audited the accompanying financial statements of the business -type activities and major fund of the
Midpeninsula Regional Open Space District, as of March 31, 2008 and for the year then ended, as listed in
the Table of Contents. These financial statements are the responsibility of the management of the District.
Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted. our audit in accordance with generally accepted auditing standards in. the United States of
America. Those standards require that we plan and perform the audit to obtain reasonable assurance as to
whether the financial statements are free of material misstatement. An audit includes examining on a test
basis evidence supporting the amounts and disclosures in the financial statements. An. audit also includes
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, such financial statements present fairly in all material respects, the financial position of the
business -type activities of the Midpeninsula Regional Open Space District as of March 31, 2008 and the
changes in the financial position and cash flows, thereof for the year then ended in conformity with
generally accepted accounting principles in the United States of America,
Management's Discussion and Analysis is required by the Governmental Accounting Standards Board, but
is not part of the basic financial statements. We have applied certain limited procedures to this information,
principally inquiries of management regarding the methods of measurement and presentation of this
information, but we did not audit this information and we express no opinion on it.
Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a
whole. The supplemental information listed in the table of contents is presented for purposes of additional
analysis and is not a required part of the basic financial statements of Midpeninsula Regional Open Space
District. Such information has been subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
May 28, 2008
A Professional Corporation
1
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Management's Discussion and Analysis
This section of the Midpeninsula Regional Open Space District's (the District) basic financial
statements presents a narrative overview and analysis of the District's financial activities for the
fiscal year ended March 31, 2008. We encourage readers to consider the information presented
here in conjunction with our basic financial statements.
FINANCIAL HIGHLIGHTS
Property tax revenue growth slowed significantly in fiscal 2008, increasing by about 3.6%,
compared to underlying property tax growth of 9.2% in fiscal 2007 and 7.7% in fiscal 2006.
Actual total property tax revenue increased by 18.6% in fiscal 2007 due to the favorable impact
of the completion of the state "take -away" program, ERAF III, in June 2006.
The District added a modest $1.6 million of land in fiscal 2008. This was a significant reduction
from the $41.6 million of land added in fiscal 2007. Several land purchase transactions were
negotiated and approved in fiscal 2008, but closing was delayed into fiscal 2009.
The assets of the District exceeded liabilities at the close of the 2008 fiscal year by $227.6
million (net assets). Of this amount, $176.2 million is invested in capital assets, net of related
debt, $1.4 million is restricted by the terms of existing District debt, and the remaining $50.0
million is unrestricted. A majority of the unrestricted balance is projected to be used in fiscal
2009 as the approved budget for fiscal 2009 forecasts land purchases totaling $37.4 million, or
$28.4 million net of associated grant income.
The District's total net assets increased by $9.6 million in fiscal 2008, as general and program
revenues exceeded program expenditures. Program expenditures were within budget.
The District's total long-term debt obligations declined by $0.4 million to $125.9 million.
OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to the District's basic
financial statements. The District's basic financial statements consist of three components: (1)
government -wide financial statements; (2) fund financial statements and (3) notes to the basic
financial statements. This report also contains other supplementary information in addition to
the basic financial statements themselves. This is the third year the District has presented its
financial statements under the new reporting model required by the Governmental Accounting
Standards Board Statement No. 34 (GASH 34), Basic Financial Statements — and Management's
Discussion and Analysis (MD&A) — for State and Local Governments.
3
NET ASSETS
Statement of Net Assets — March 31, 2008 and 2007
Assets:
Current assets
Capital assets
Total assets
Liabilities:
Accounts payable and other
liabilities
Long-term debt
Total liabilities
Net assets:
Invested in capital assets,
net of related debt
Restricted
Unrestricted
Total net assets
March 31, 2008
$ 53,641,620
302,143,421
355,785,041
2,257,299
125,945,409
128,202,708
176,198,012
1,433,211
49,951,110
$227.582,333
March 31, 2007 Increase
$ 46,441,203 $ 7,200,417
300,272,448 1,870,973
346,713,651 9,071,390
2,431,922
126,312,867
128,744,789
174,598,403
738,627
42,631,832
$217,968,862
- 174,623
- 367,458
- 542,081
1,599,609
694,584
7,319,278
$ 9.613 471
Analysis of Net Assets
The District's assets at the close of this fiscal year are $227.6 million more than its liabilities.
This is the result of the District's inventory of capital assets. The net investment in capital
assets, $176.2 million, consists primarily of the District's 56,000 acres of land in 25 open
space preserves protected for public enjoyment. The investment in capital assets is offset by
long-term debt obligations on promissory notes and lease revenue bonds. The net assets
subject to external restrictions are composed of $1.4 million for debt service. Unrestricted
net assets are used to finance additional land acquisition projects. The District's budget for
fiscal year 2009 includes $28.4 million for land acquisitions, net of related grant income.
4
Changes in Net Assets — Fiscal Years Ending March 31, 2008 and 2007
Revenues:
Program revenue:
Charges for services
Grants and contributions
General revenue:
General property tax
Investment income
Other
Total Revenues
Expenses
Change in net assets
Analysis of Change in Net Assets
Fiscal 2008 Fiscal 2007
$ 895,661
230,365
24,767,516
2,069,617
278,418
28,241,577
18,628,106
9,613,471
Increase
$ 837,248 $ 58,413
26,827,098 - 26,596,733
23,909,402
2,064,013
249,495
53,887,256
16,034,183
37,853.073
858,114
5,604
28,923
-25,645,679
2,593,923
-28.239.602
% Increase
7.0
-99.1
3.6
0.3
11.6
-47.6
16.2
- 74.6
For the year ended March 31, 2008, the District's net assets increased by $9.6 million. The
increase in overall expenses was principally due to higher interest charges. Salaries and
benefits represented 45% of expenses compared to 50% in fiscal 2007. Salaries and benefits
increased 6.1% over the prior fiscal year. Services and supplies increased by 5.7%. Interest
charges increased due to the impact of the issuance of the 2007 Revenue Refunding Bonds in
fiscal 2007.
Program revenues include rental income, grants, gifts of land, and donations. Grants and
contribution income is mostly tied to acquisitions of specific parcels of land. Such income
was very low in fiscal 2008 due to the few land acquisitions completed. The major
contributor of record fiscal 2007 program revenue was the Peninsula Open Space Trust,
which provided gifts of land totaling $20.2 million.
Overall tax revenue in fiscal 2008 increased by 3.6% as the local residential real estate
market slowed significantly from the torrid pace of the prior five years. The growth in
recurring tax revenue, excluding the impact of ERAF III, was 9.2% in fiscal 2007 and 7.7%
in fiscal 2006.
GENERAL FUND
The General Fund balance sheet includes all District accounts except for debt and capital
assets. At March 31, 2008, the General Fund had a fund balance of $49.7 million, up $7.0
million from the prior year-end. All but $0.1 million of this fund balance is unreserved and
designated for futm'e land acquisitions, including $37.4 million budgeted for land purchases
in fiscal year 2009.
5
DEBT SERVICE FUND
The only asset in the Debt Service Fund, $1.4 million, is a reserve fund required by the terms
of the District's 2004 Revenue Bonds. The funds are held by the bond trustee and will be
used to make the final debt service payment on this issue. The District receives the interest
earned on this reserve fund, and this is shown on the Statement of Revenues, Expenditures
and Changes in Fund Balance --Governmental Funds. Total debt service in fiscal year 2008
was $7.42 million, consisting of $1.85 million of principal and $5.57 million of interest.
CAPITAL ASSETS
As of March 31, 2008, the District's investment in capital assets is $302.1 million, net of
accumulated depreciation. The District added $1.6 million of land in fiscal year 2008,
representing 68% of the total increase in capital assets and has committed $0.9 million of its
fund balance for various uncompleted capital projects included in construction in progress.
Additional information on the District's capital assets can be found in Note 4 in the Notes to
the Basic Financial Statements.
LONG-TERM DEBT
As of March 31, 2008, the District's long-term debt includes $1.7 million of subordinated
notes issued to sellers in District land purchase transactions, $114.8 million of Authority
revenue bonds sold to the public in 1999, 2004, and 2007, $4.4 million of Refunding
Promissory Notes sold to the public in 2005, and $5.1 million of accreted interest,
unamortized premium and unamortized loss on refunding. The Authority bonds and
Refunding notes were originally rated AAA by Moody's and Standard & Poor's based on
municipal bond insurance policies purchased from Ambac Assurance Corporation and
MBIA. Due to increased loss projections from mortgage -related risk exposures, these
insurance companies no longer carry AAA ratings. As of June 2008, Ambac and MBIA
were rated Aa3 and A2, respectively, by Moody's and AA by Standard & Poor's. Additional
information on the District's long-term obligations can be found in Note 6 in the Notes to the
Basic Financial Statements.
BUDGETARY PERFORMANCE
The Budgetary Comparison Schedule General Fund shows how the District financial
results compared to the original budget adopted in March 2007 and the final budget adjusted
in December 2007.
Total District revenue in fiscal 2008 was $1.4 million (4.6%) below budget, due to lower
income from land acquisition grants. Land acquisition grants are tied to completion of
specific land purchases and few land purchases were completed in fiscal 2008. Other
revenue categories were above budget.
Excluding land purchases, fiscal year 2008 expenditures were approximately $1.4 million, or
10.3%, below the final budget. Salaries and benefits were $0.4 million, or 4.7%, below
6
budget, services and supplies cost $0.6 million, or 17.2%, less than budget, and non -land
capital spending was $0.3 million, or 29.0%, under budget. This expense budget
performance, 90% of budget, was within the normal range of recent years (89% to 94% of
budget).
ECONOMIC FACTORS AND NEXT YEAR'S BUDGET
The Board of Directors adopted the District's budget for fiscal year 2009 on March 26, 2008.
This budget assumes continued below -average growth in property tax revenue, about 3%,
due to slower turnover of residential property in both Santa Clara and San Mateo County
portions of the District. The District receives about 2/3 of its tax revenue from Santa Clara
County and 1/3 from San Mateo County.
The total land acquisition budget is $37.4 million in fiscal 2009, partially covered by $9.0
million of associated acquisition -related grant income. Debt service requirements are $7.6
million. If all revenues and expenditures occur as budgeted, the District's cash position
would decrease by $27.7 million in fiscal year 2009.
The District is currently pursuing potential land acquisition projects which would use up all
undesignated reserves within three years.
ADDITIONAL FINANCIAL INFORMATION
This financial report is designed to provide a general overview of the District's finances for
all those with an interest in the District's finances, Questions concerning any of the
information provided in this report or requests for additional financial information should be
addressed to the District Clerk, 330 Distel Circle, Los Altos, CA 94022.
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
STATEMENT OF NET ASSETS
MARCH 31, 2008
ASSETS
Cash and investments (Note 2) $42,899,419
Restricted cash and investments (Note 2) 1,433,211
Receivables:
Taxes 7,255,777
Interest 394,830
Grant 114,365
Prepaid expense 8,588
Notes receivable (Note 3) 258,165
Deferred charges 1,277,265
Capital assets (Note 4):
Nondepreciable
Land 291,299,339
Construction in progress 875,730
Depreciable, net of accumulated depreciation
Structures and improvements 5,277,498
Infrastructure 2,860,041
Equipment 456,045
Vehicles 1,374,768
Total Assets 355,785,041
LIABILITIES
Accounts payable 610,215
Accrued liabilities 324,312
Deposits payable 58,074
Compensated absences (Note 5) 844,989
Interest payable 419,709
Long-term debt (Note 6):
Due in one year 2,280,704
Due in more than one year 123,664,705
Total Liabilities 128,202,708
NET ASSETS (Note 10)
Investment in capital assets, net of related debt 176,198,012
Restricted for debt service 1,433,211
Unrestricted 49, 951,110
Total Net Assets $227,582,333
See accompanying notes to component unit financial statements
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED MARCH 31, 2008
Program Expenses:
General government
Salaries $6,039,229
Benefits 2,426,423
Directors 23,900
Service and Supplies 2,793,575
Depreciation (Note 4) 507,656
Interest 6,456,136
Loss on refunding of debt 381,187
Total program expenses 18,628,106
Program revenues:
Charges for services (Note 7)
Capital grants and operating contributions
895,661
230,365
Total program revenues 1,126,026
Net program expenses 17,502,080
General revenues:
Property tax increment 24,767,516
Use of money and property 2,069,617
Miscellaneous 278,418
Total general revenues and transfers
Change in Net Assets
Net assets - beginning
Net assets - ending
27,115,551
9,613,471
217, 968, 862
$227,582,333
See accompanying notes to financial statements
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
GOVERNMENTAL FUNDS
BALANCE SHEET
MARCH 31, 2008
Total
Governmental
General Fund Debt Service Fund Funds
ASSETS
Cash and investments (Note 2) $42,899,419 $42,899,419
Receivables
Taxes 7,255,777 7,255,777
Interest 394,830 394,830
Grant 114,365 114,365
Prepaid expense 8,588 8,588
Restricted cash and investments (Note 2) $1,433,211 1,433,211
Notes receivable (Note 3) 258,165 258,165
Total Assets $50,931,144
Accounts payable
Accrued liabilities
Deposits payable
Deferred revenue (Note 3)
Total Liabilities
LIABILITIES
FUND BALANCES
$610,215
324,312
58,074
258,165
$1,433,211 $52,364,355
$610,215
324,312
58,074
258,165
1,250,766 1,250,766
Reserved for:
Debt service
Encumbrances 148,965
Unreserved, designated for:
Budgeted land acquisition 37,350,000
Unreserved 12,181,413
Total fund balance 49,680,378
Total liabilities and fund balance $50,931,144
See accompanying notes to financial statements
$1,433,211
$1,433,211
148,965
37,350,000
12,181,413
1,433,211 51,113,589
$1,433,211 $52,364,355
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Reconciliation of the
GOVERNMENTAL FUNDS --BALANCE SHEET
with the
STATEMENT OF NET ASSETS
FOR THE YEAR ENDED MARCH 31, 2008
Total fund balances reported on the governmental funds balance sheet $51,113,589
Amounts reported for Governmental Activities in the Statement of Net Assets
are different from those reported in the Governmental Funds above because of the following:
CAPITAL ASSETS
Capital assets used in Governmental Activities are not current assets or financial resources and
therefore are not reported in the Governmental Funds,
NOTES RECEIVABLE
Notes receivables are not available to pay for current period expenditures and, therefore, are deferred
on the modified accrual basis in the balance sheet of government funds
$302,143,421
258,165
DEFERRED CHARGES
Bond issuance costs are expended in governmental funds when paid, however, they are capitalized ; 1,277,265
amortized over the life of the corresponding bonds for purposes of the statement of net assets
LONG TERM LIABILITIES
The liabilities below are not due and payable in the current period and therefore are not
reported in the Funds:
Long-term debt (125,945,409)
Accrued interest payable (419,709)
Compensated absences (844,989)
NET ASSETS OF GOVERNMENTAL ACTIVITIES $227,582,333
See accompanying notes to financial statements
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
FOR THE YEAR ENDED MARCH 31, 2008
Total
Governmental
General Fund Debt Service Fund Funds
REVENUES
Property taxes $24,767,516
Grant income 230,365
Investment income 1,988,757
Property management (Note 7) 895,661
Other income 297,548
Total Revenues 28,179,847
$80,860
$24,767,516
230,365
2,069,617
895,661
297,548
80,860 28,260,707
EXPENDITURES
Current:
Salaries 6,143,657 6,143,657
Benefits 2,426,423 2,426,423
Directors 23,900 23,900
Services and supplies 2,809,371 2,809,371.
Capital outlay:
New land purchases 1,540,000 1,540,000
Land acquisition support costs 90,244 90,244
Structures and improvements 268,652 268,652
Equipment 140,416 140,416
Vehicles 351,306 351,306
Debt service:
Principal 1,851,613 1,851,613
Interest and fiscal charges 5,566,476 5,566,476
Total Expenditures 13,793,969
7,418,089 21,212,058
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES 14,385,878 (7,337,229) 7,048,649
OTHER FINANCING SOURCES (USES)
Transfers in
Transfers (out)
Total Other Financing Sources (Uses)
NET CHANGE 1N FUND BALANCES
Fund balances at beginning of year
Fund balances at end of year
7,337,332 7,337,332
(7,337,332) (7,337,332)
(7,337,332) 7,337,332
7,048,546
42,631,832
103 7,048,649
1,433,108 44,064,940
$49,680,378 $1,433,211 $51,113,589
See accompanying notes to financial statements
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Reconciliation of the
NET CHANGE IN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS
with the
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED MARCH 31, 2008
The schedule below reconciles the Net Changes in Fund Balances reported on the Governmental Funds Statement of
Revenues, Expenditures and Changes in Fund Balance, which measures only changes in current assets and current
liabilities on the modified accrual basis, with the Change in Net Assets of Governmental Activities reported in the
Statement of Activities, which is prepared on the full accrual basis.
NET CHANGE TN FUND BALANCES - TOTAL GOVERNMENTAL FUNDS $7,048,649
Amounts reported for governmental activities in the Statement of Activities
are different because of the following:
CAPITAL ASSETS TRANSACTIONS
Governmental Funds report capital outlays as expenditures. However,
in the Statement of Activities the cost of those assets is capitalized and allocated over
their estimated useful lives and reported as depreciation expense.
The capital outlay expenditures are therefore added back to fund balance 2,390,618
Proceeds from the retirement of capital assets are deducted from the fund balance (11,989)
Depreciation expense is deducted from the fund balance (507,656)
NOTES RECEIVABLE
Repayment of notes receivable is reported as revenue in governmental funds, and thus, has
the effect of increasing fund balance because current financial resources have been received.
However, the loan payments reduce the receivables in the statement of net assets and do
not generate revenue in the statement of activities.
(7,141)
Loan additions increase the receivables in the statement of net assets and do not generate en
expenditure in the statement of activities 15,796
LONG TERM DEBT PROCEEDS AND PAYMENTS
Repayment of bond principal is an expenditure in the governmental funds, but
in the Statement of Net Assets the repayment reduces long-term, liabilities.
Accreted interest on capital appreciation bonds (1,221,475)
Repayment of debt principal is added back to fund balance 1,851,613
Change in accrued interest payable 274,772
Amortization of bond premium 57,043
Amortization of loss on refunding (319,723)
Amortization of deferred amounts (61,464)
ACCRUAL OF NON -CURRENT ITEMS
The amounts below included in the Statement of Activities do not provide or (require) the use of
current financial resources and therefore are not reported as revenue or expenditures in
governmental funds (net change):
Compensated absences
104,428
CHANGE IN NET ASSETS OF GOVERNMENTAL ACTIVITIES $9,613,471
See accompanying notes to financial statements
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Financial Statements
NOTE I — SUMMARY OF 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. Reporting Entity
As required by generally accepted accounting principles, these basic financial statements present
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 fiord.
C. Basis of Presentation
The District's Basic Financial Statements are prepared in conformity with accounting principles
generally accepted in the United States of America. The Government Accounting Standards
Board is the acknowledged standard setting body for establishing accounting and financial
reporting standards followed by governmental entities in the United States of America.
These Statements require that the financial statements described below be presented.
Government -wide Statements: The Statement of Net Assets and the Statement of Activities
display information about the primary government (the District) and its component unit. These
statements include the financial activities of the overall District government. Eliminations have
been made to minimize the double counting of internal activities. Governmental activities
generally are financed through taxes, intergovernmental revenues, and other nonexchange
transactions.
15
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Financial Statements
NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The Statement of Activities presents a comparison between direct expenses and program revenues
for each function of the District's governmental activities. Direct expenses are those that are
specifically associated with a program or function and, therefore, are clearly identifiable to a
particular function. Program revenues include (a) charges paid by the recipients of goods or
services offered by the programs, (b) grants and contributions that are restricted to meeting the
operational needs of a particular program and (c) fees, grants and contributions that are restricted
to financing the acquisition or construction of capital assets. Revenues that are not classified as
program revenues, including all taxes, are presented as general revenues.
Fund Financial Statements: The fund financial statements provide information about the
District's funds, including blended component units. Separate statements for each fund
category —governmental and fiduciary —are presented. The emphasis of fund financial statements
is on major individual governmental funds, each of which is displayed in a separate column.
D. Major Funds
Major funds are defined as funds that have either assets, liabilities, revenues or
expenditures/expenses equal to ten percent of their fund -type total and five percent of the grand
total. The General Fund is always a major fund. The District may also select other funds it
believes should be presented as major funds.
The District reported all of its funds as major governmental funds in the accompanying financial
statements:
General Fund - The General Fund is the general operating fund of the District. It is used to account
for all financial resources. The major revenue sources for this Fund are property taxes, grant
revenues and interest income. Expenditures are made for public safety 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.
E. Basis of Accounting
The government -wide financial statements are reported using the economic resources measurement
focus and the full accrual basis of accounting. Revenues are recorded when earned and expenses are
recorded at the time liabilities are incurred, regardless of when the related cash flows take place.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Financial Statements
NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Governmental funds are reported using the current financial resources measurement focus and the
modified accrual basis of accounting. Under this method, revenues are recognized when
measurable and available. The District considers all revenues reported in the governmental funds
to be available if the revenues are collected within sixty days after year-end. Expenditures are
recorded when the related fund liability is incurred, except for principal and interest on long-term
debt, claims and judgments, and compensated absences, which are recognized as expenditures to
the extent they have matured. Governmental capital asset acquisitions are reported as
expenditures in governmental funds. Proceeds of governmental long-term debt and acquisitions
under capital leases are reported as other financing sources.
Non -exchange transactions, in which the District gives or receives value without directly receiving
or giving equal value in exchange, include taxes, grants, entitlements, and donations. On the
accrual basis, revenue from taxes is recognized in the fiscal year for which the taxes are levied or
assessed. Revenue from grants, entitlements, and donations is recognized in the fiscal year in
which all eligibility requirements have been satisfied.
The District may fund programs with a combination of cost -reimbursement grants and general
revenues. Thus, both restricted and unrestricted net assets may be available to finance program
expenditures. The District's policy is to first apply restricted grant resources to such programs,
followed by general revenues, if necessary.
F. Budgets and Budgetary Accounting
The District's Board of Directors adopts an annual operating budget for the District as a whole,
which includes both its General and Debt Service Funds on or before March 31, for the ensuing
fiscal year. The Board. of Directors may amend the budget by resolution during the fiscal year.
The legal level of control, the level at which expenditures may not legally exceed the budget, is at
the category level. Encumbrances are recorded as reservations of fund balance since they do not
constitute expenditures or liabilities. All unencumbered appropriations lapse at the end of the
fiscal year.
G. Use of Estimates
The preparation of basic financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions
that affect certain reported amounts and disclosures. Accordingly, actual results could differ from
those estimates.
H. Compensated Absences
The total amount of liability for compensated absences is reflected in the basic financial
statements. See Note 5 for additional information regarding compensated absences.
17
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Financial Statements
NOTE 1— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
I. Cash and Cash Equivalents
For purposes of the statement of cash flows the District defines cash and cash equivalents to include
all cash and temporary investments with original maturities of three months or less from the date of
acquisition.
J. Property Taxes
Property taxes are levied by Santa Clara and San Mateo Counties and a portion is distributed to
the District. The District recognizes property taxes as revenue in the fiscal year of levy.
If. Debt Discount and Issuance Costs
Debt discount and issuance costs are capitalized as an offset to long-term debt and amortized
using the effective interest method over the life of the related. debt. Issuance costs for the
District's tax-exempt commercial paper short-term borrowings are expensed as incurred.
NOTE 2 — CASH AND INVESTMENTS
A. Policies
The District and its fiscal agents invest in individual investments and in investment pools.
Individual investments are evidenced by specific identifiable pieces of paper called securities
instruments, or by an electronic entry registering the owner in the records of the institution issuing
the security, called the book entry system. In order to maximize security, the District employs the
Trust Department of a bank as the custodian of all District managed investments, regardless of their
form.
California Law requires banks and savings and loan institutions to pledge government securities
with a market value of 110% of the District's cash on deposit or .first trust deed mortgage notes with
a value of 150% of the District's cash on deposit as collateral for these deposits. Under California
Law this collateral is held in an investment pool by an independent financial institution in the
District's name and places the District ahead of general creditors of the institution pledging the
collateral.
The District's investments are carried at fair value, as required by generally accepted accounting
principles. The District adjusts the carrying value of its investments to reflect their fair value at each
fiscal year end, and it includes the effects of these adjustments in income for that fiscal year. In the
District's case, fair value equals fair market value, since all District's investments are readily
marketable.
18
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Financial Statements
NOTE 2 — CASH AND INVESTMENTS (Continued)
B. Classification
Cash and investments are classified in the financial statements as shown below, based on whether
or not their use is restricted.
2008
Cash and cash equivalents, available for District operation $4,509,708
Investments, available for District operation 38,389,711
Restricted cash and investments 1,433,211
Total Cash and Investments $44,332,630
The District's cash and investments consist of the following at March 31:
2008
Cash on hand $800
Deposits 4,508,908
Investments 39,822,922
Total Cash and Investments $44,332,630
C. Investments Authorized by the California Government Code and the District's Investment Policy
The District's Investment Policy and the California Government Code allow the District to invest
in the following, provided the credit ratings of the issuers are acceptable to the District and
approved percentages and maturities are not exceeded. The table below also identifies certain
provisions of the California Government Code or the District's Investment Policy where it is
more restrictive:
Maximum Minimum Maximum Maximum
Remaining Credit Percentage Investment
Authorized Investment Type Maturity Quality of Portfolio In One Issuer
U.S. Treasury Obligations 5 years N/A No Limit No Limit
U.S. Agency Securities 5 years N/A No Limit No Limit
$40 million per
California Local Agency Investment Fund Upon Demand N/A account N/A
Negotiable Certificates of Deposit 5 years N/A 30% No Limit
Bankers Acceptances 180 days N/A 40% 30%
Commercial Paper 270 days A 25% 10%
Repurchase Agreements I year N/A No Limit No Limit
Reverse Repurchase Agreements 92 days N/A 20% No Limit
Medium Term Notes 5 years A 30% No Limit
Money Market and Mutual Funds N/A Highest Category 20% 10%
19
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Financial Statements
NOTE 2 — CASH AND INVESTMENTS (Continued)
D. Investments Authorized by Debt Agreements
The District must maintain required amounts of cash and investments with trustees or fiscal
agents under the terms of certain debt issues. These funds are unexpended bond proceeds or are
pledged reserves to be used if the District fails to meet its obligations under these debt issues.
The California Government Code requires these funds to be invested in accordance with District
resolutions, bond indentures or State statutes. At March 31, 2008, the bond indentures provided no
advice about investing the bonds and contain no limitations for maximum investment in any one
issuer or the maximum percentage of the portfolio that may be invested in any one investment type.
E. Interest Rate Risk
Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value
of an investment. Normally, the longer the maturity of an investment, the greater the sensitivity
of its fair value changes in market interest rates. The District generally manages its interest rate
risk by holding investments to maturity.
Information about the sensitivity of the fair values of the District's investments (including
investments held by bond trustees) to market interest rate fluctuations is provided by the
following table that shows the distribution of the District's investments by maturity or earliest call
date:
12 Months More than
Investment Type or less 25 months Total
Held by District:
California Local Agency Investment Fund $10,825,817 $10,825,817
Santa Clara County Pool 27,046,120 27,046,120
Certificates of Deposit 517,774 517,774
Held by Trustees:
Guaranteed Investment Contract $1,393,436 1,393,436
Money Market Mutual Funds (U.S. Securities) 39,775 39,775
Total Investments $38,429,486 $1,393,436 $39,822,922
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 LAW, 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, 2008, these investments matured
in an average of 205 days.
20
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Financial Statements
NOTE 2 — CASH AND INVESTMENTS (Continued)
The fair value of the District's investment in the 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 Pool funds were available for withdrawal on demand
and matured in an average of 447 days at March 31, 2008.
F. Credit Risk
Credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of
the investment. This is measured by the assignment of a rating by a nationally recognized.
statistical rating organization. Presented below is the actual rating as of March 31, 2008 for each
investment type as provided by Moody's investment rating system.
Investment Type
Held by Trustees:
Guaranteed Investment Contract
Money Market Mutual Funds (U.S. Securities
Aaa Total
$1,393,436 $1,393,436
39,775 39,775
Totals $1,433,211 1,433,211
Not rated:
California Local Agency Investment Fund 10,825,817
Santa Clara County Pool 27,046,120
Certificates of Deposit 517,774
Total Investments
G. Restricted ('as/i and Investments
$39,822,922
The District has the following restrictions on cash and investments:
Restricted for Debt Service - The District has moneys held by Bank of New York as trustee,
pledged to the payment or security of its outstanding bond issues. All transactions associated with
debt service are administered by the Bank. The cash and investment amounts were $1,433,211 at
March 31, 2008.
NOTE 3 — NOTES RECEIVABLE
On December 17, 1997, the District sold the title to and possession of
estate 10 -acre parcel near the Skyline Ridge Open Space Preserve.
purchase in the amount of $288,800 over 25 years at a rate of 10% per
and interest payments of $2,634 are due on the ls' of each month and
with the final payment scheduled December 1, 2022. The outstanding
was $243,130.
a 50 -year fee determinable
The District financed the
annum. Monthly principal
late if not paid by the 10°',
balance at March 31, 2008
21
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Financial Statements
NOTE 3 — NOTES RECEIVABLE (Continued)
On March 31, 2003, the District entered into an agreement with Graphic Arts Center Publishing
Company (The Company), in which the Company would pay royalties to the District for the sales
of their books. In 2007, the Company filed for Chapter 11 bankruptcy, in which the U.S.
Bankruptcy court ruled that the District will be paid back in full plus interest over the 5 year
period that began in spring 2007. The royalties due to the District total $15,305 over 5 years with
an interest rate of 8.25% per annum. Monthly principal and interest payments of $375 are due
with the final payment scheduled to be received in February 2012. The outstanding balance at
March 31, 2008 was $15,035.
NOTE 4 — CAPITAL ASSETS
Capital assets are recorded at the time of purchase and are capitalized at cost.
The District capitalizes as part of the asset cost, any significant interest incurred during the
construction phase of the asset.
Depreciation is provided using the straight-line method for assets other than land. Estimated
useful lives are as follows:
Structures and improvements 10 to 30 years
Infrastructure 30 to 40 years
Equipment 5 to 20 years
Vehicles 10 to 20 years
Changes in capital assets accounts are summarized below:
Balance at Retirements & Balance at
March 31, 2007 Additions Transfers March 31, 2008
Capital assets not being depreciated:
Land
Construction in Progress
$289,669,096
739,428
Total capital assets not being depreciated 290,408,524
$1,630,243
251,525 ($115,223)
$1,881,768 ($115,223)
$291,299,339
875,730
292,175,069
Capital assets being depreciated:
Structures and improvements 10,698,086 $17,824 10,715,910
Infrastructure 3,355,718 15,885 $115,223 3,486,826
Equipment 849,260 123,832 973,092
Vehicles 1,904,289 351,306 (113,413) 2,142,182
Total capital assets being depreciated: 16,807,353 $508,847 $1,810 17,318,010
Less accumulated depreciation for:
Structures and improvements 5,111,789 $326,623 5,438,412
Infrastructure 528,091 98,694 626,785
Equipment 461,732 55,315 517,047
Vehicles 841,817 27,024 ($101,427) 767,414
Total accumulated depreciation 6,943,429 507,656 ($101,427) 7,349,658
Net capital assets being depreciated 9,863,924 9,968,352
Total capital assets, net $300,272,448 $302,143,421
22
MIDPENFNSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Financial Statements
NOTE 4 — CAPITAL ASSETS (Continued)
Adjustments made were based on a physical inventory of capital assets at March 31, 2008.
Construction in progress represents construction of structure and improvements and infrastructure
not yet placed in service at March 31, 2008.
At March 31, 2008, the District had made commitments of approximately $2.9 million for
construction work, legal and consulting fees, and purchases of supplies and equipment.
NOTE 5 — ACCRUED 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 ten and fourteen, twenty-one days between service years fifteen and
nineteen, twenty-three days between service years twenty and twenty-four, and twenty-five days
after twenty-five years of service. An employee may accumulate vacation time earned to a
maximum of two times the amount of his/her annual vacation time.
Full-time employees accrue twelve days of sick leave annually from the date of employment. An
employee may accumulate sick leave time earned on an unlimited basis. Upon resignation,
separation from service, or retirement from District employment, workers in good standing with
ten or more years of District employment shall receive a cash payment of the equivalent cash
value of accrued sick leave as follows:
Years of Employment
Percentage of equivalent
cash value of accrued
sick leave
10-15 20%
16-20 25%
21 or more 30%
Workers who retire from the District and elect to continue CalPers medical coverage during
retirement may elect 1) apply equivalent cash value of 100% of accrued sick leave toward their
cost of the retiree medical plan premiums, or 2) receive a cash payment of the percentage of
equivalent cash value of accrued sick leave based on years of employment as described above, and
apply the remainder of the equivalent cash value toward their cost of retiree medical plans
premiums. In all cases the equivalent cash value of accrued sick leave will be based on current
rate of pay as of the date of separation from District employment.
The District accrues for all salary -related items in the government -wide statements for which they
are liable to make a payment directly and incrementally associated with payments made for
compensated absences on termination. Compensated absences were $844,989 as of March 31,
2008.
23
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Financial Statements
NOTE 6 - LONG-TERM DEBT
A. Current Year Transactions and Balances
Original Amount
Issue Balance Balance due within
Amount March 31, 2007 Additions Retirements March 31, 2008 one year
Promissory Notes
Hunt Living Trust Promissory Note
5.00-5.50%, due 4/2/2023 $1,500,000 $1,500,000 $1,500,000
Aine Land Contract Promissory Note
7.00%, due 1/31/2009 192,000 32,724 (G15,834) 16,890 $16,890
Lazenby Land Contract Promissory Note
6.00%, due 8/31/2008 100,000 15,986 (7,759) 8,227 8,227
Daloie Land Contract Promissory Note
6.25%, due 10/10/2017 240,000 192,853 (14,054) 178,799 13,851
2005 Refunding Promissory Notes
3,25-5,00%, due 4/1/2015 4,630,000 4,515,000 (120,000) 4,395,000 140,000
6,098,916 178,968
Total promissory notes
6,662,000 6,256,563
(157,647)
Revenue Bonds
1999 Lease Revenue Bonds
3.70-5.40%, due 4/1/2031 29,663 021 25,438,021 (970,000) 24,468,021 1,085 000
2004 Revenue Bonds
2.00-5.40%, due 9/1/2034 31,900 010 31,840,010 (95,000) 31,745 010 145,000
2007 Series A Revenue Rebinding Bonds 52,415 000
4.00-5.00%, due 9/1/2027 52,415,000 52,415 000
2007 Series B -T Taxable Revenue
Refunding Bonds, 5.15%, due 9/1/2012 6,785,000 6,785,000 (630,000) 6,155,000 1,135,000
Unamortized premium 830,877 (56,009) 774,868 56,009
Unamortized loss on refinrding (4,859,124) 319,723 (4,539,401) (319,273)
Total revenue bonds 120,763,031 112,449,784 (1,431,286) 111 018,498 2,101,736
Accreted Interest 8,498,280
1999 Revenue Bonds Accretion 7,362,606 $1,135,674
2004 Lease Revenue Bonds Accretion 243,914 85,801 329,715
Total Accretion 7,606 520 1,221 475 8,827,995
Total debt $127,425,031 $126,312,867 $1,221,475 (G1,588,933) $125,945,409 $2,280,704
B. Promissory Notes
Hunt Living Trust Promissory Note
On April 1, 2003, the District entered into a $1,500,000 promissory note with the Hunt Living
Trust as part of a lease and management agreement between the District and the Peninsula Open
Space Trust (POST), which is the one-half owner of the Hunt Partial Interest Property. 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, 2008 the
outstanding balance due on the note was $1,500,000.
Land Purchase Contract Promissory Notes
During fiscal years ending 1989, 2000, and 2003 the District 'entered into three- laud purchase
contract promissory notes in the amounts of $100,000, $192,000, and $240,000, respectively.
The promissory notes bear interest at fixed rates from 6.0% to 7.0% and mature at different
intervals through October 10, 2017. At March 31, 2008 the aggregate outstanding balance of
these notes amounted to $203,196.
24
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Financial Statements
NOTE 6 — LONG-TERM DEBT (Continued)
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, 2008 the outstanding balance was $4,395,000.
C. Revenue Bonds
1999 Lease Revenue Bonds
On January 20, 1999 the Authority, on behalf of the District, issued $29,663,021 of 1999 Lease
Revenue Bonds for the purpose of acquiring land to preserve and use as open space, purchase a
reserve fund surety policy, and pay bond issue costs. The bonds consist of Current Interest and
Capital Appreciation Bonds. The Current Interest Bonds bear interest at 3.7% to 5.4% and are
due semi-annually on March I and September 1. The Capital Appreciation Bonds accrete interest
at 5.2% to 5.4% and compound semi-annually on March 1 and September 1. Principal payments
on the Current Interest Bonds are due annually September I. Principal payments on the Capital
Appreciation Bonds are payable at maturity beginning March, 2016, At March 31, 2008 the
outstanding balance of these bonds was $32,966,301.
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 5.4% and compound
semi-annually on March 1 and September 1. Principal payments on the Current Interest Bonds
are due annually September I. Principal payments on the Capital Appreciation Bonds are
payable at maturity beginning March, 2020. At March 31, 2008 the outstanding balance of these
bonds was $32,074,725.
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 defeasing the aggregate purchase price of the
2007 District Notes. The Series A bonds bear interest from 4.0% to 5.0% and Series B -T bonds
bear interest at 5.15%. Interest for both series A and B -T are due semi-annually on March 1 and
September 1. Principal payments for the Series A bonds begin September, 2012 and are due
annually, thereafter. Principal payments for the Series B -T bonds are due annually on September
1.
25
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Financial Statements
NOTE 6 — LONG-TERM DEBT (Continued)
At March 31, 2008 the outstanding balance of 2007 Series A Bonds is $52,415,000 and the
outstanding 2007 Series B -T Bonds is $6,155,000, and the remaining balance of the defeased debt
was $48,985,811.
D. Debt Service Requirements
Annual debt service requirements are shown below for all long-term debt:
For The Year
Ending March 31
Principal
Promissory Notes
Interest Total
2009 $178,968 $293,371 $472,339
2010 164,738 285,009 449,747
2011 175,681 277,866 453,547
2012 796,684 254,163 1,050,847
2013 827,752 220,431 1,048,183
2014-2018 2,455,093 514,659 2,969,752
2019-2023 1,500,000 375,000 1,875,000
Total payments due $6,098,916 $2,220,499 $8,319,415
For The Year
Ending March 31
Revenue Bonds
Principal
Accreted Interest Interest
Total
2009 $2,365,000 $4,750,380 $7,115,380
2010 2,735,000 4,634,175 7,369,175
201.1 3,125,000 4,499,536 7,624,536
2012 3,660,000 4,343,129 8,003,129
2013 3,660,000 4,175,407 7,835,407
2014-2018 20,314,297 $1,115,330 18,596,336 40,025,963
2019-2023 27,000,511 6,290,487 14,488,386 47,779,384
2024-2028 31,985,761 14,140,395 9,670,659 55,796,815
2029-2033 13,867,462 10,994,782 3,036,875 27,899,119
2034-2035 6,070,000 309,500 6,379,500
Less unaccreted interest (8,827,995) (8,827,995)
Total payment due $114,783,031 $23,712,999 $68,504,383 $207,000,413
Plus: unamortized premiums 774,868
Minus: unamortized loss on
refundings (4,539,401)
Total carrying amount $111,018,498.
E. Debt Repayment
All debt is payable from limited ad valorem property taxes levied on all taxable property within
the District.
NOTE 7 —RENTAL INCOME
The District leases (rents) certain land and structures to others under operating leases with terms
generally on a month -to -month basis. Rental income of $895,661 was received during the year
ended March 31, 2008.
26
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Financial Statements
NOTE 8 — RETIREMENT PLAN
A. 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 which 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 Plan are established by State statute and District resolution.
Benefits are based on years of credited service, equal to one year of full time employment.
Funding contributions for the Plan are determined annually on an actuarial basis as of June 30 by
CALPERS; the District must contribute these amounts. The Plans' provisions and benefits in effect
at March 31, 2008, are summarized as follows:
Miscellaneous
Benefit vesting schedule 5 years service
Benefit payments Monthly for life
Retirement Age 50
Monthly benefits, as a % of annual salary 2.0% - 2.5%
Required employee contribution rates 8,0%
Required employer contribution rates 11.936%
CALPERS determines contribution requirements using a modification of the Entry Age Normal
Method. Under this method, the District's total normal benefit cost for each employee from date of
hire to date of retirement is expressed as a level percentage of the related total payroll cost. Normal
benefit cost under this method is the level amount the District must pay annually to fund an
employee's projected retirement benefit. This level percentage of payroll method is used to amortize
any unfunded actuarial liabilities. The actuarial assumptions used to compute contribution
requirements are also used to compute the actuarial accrued liability. The District does not have a net
pension obligation since it pays these actuarially required contributions bi-weekly.
CALPERS uses the market related value method of valuing the Plan's assets. An investment rate of
return of 7.75% is assumed, including inflation at 3.0%. Annual salary increases are assumed to vary
by duration of service. Changes in liability due to plan amendments, changes in actuarial
assumptions, or changes in actuarial methods are amortized as a level percentage of payroll on a
closed basis over twenty years. Investment gains and losses are accumulated as they are realized and
ten percent of the net balance is amortized annually.
27
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Financial Statements
NOTE 8 — RETIREMENT PLAN (Continued)
As required by new State law, effective July 1, 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 $2,470,881 by agreeing to contribute that amount to the Side Fund through an
addition to its normal contribution rates over the next 23 years.
Audited annual financial statements are available from CALPERS at P.O. Box 942709, Sacramento,
CA 94229-2709.
Actuarially required contributions were $1,104,388, $958,262 and $785,982 for fiscal years 2008,
2007 and 2006 respectively. The District made these contributions as required, together with
certain immaterial amounts required as the result of the payment of overtime and other additional
employee compensation.
NOTE 9 — RISK MANAGEMENT
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). The CAL JPIA is composed of 114
California public entities and is organized under a joint powers agreement pursuant to California
Government Code Section 6500 et seq. The purpose of the 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. The CAL JPIA's pool
began covering claims of its members in 1978. Each member government has an elected official as
its representative on the Board of Directors. The Board operates through a 9 -member Executive
Committee.
During the past 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 Liability: Each member government pays a primary deposit to cover estimated losses for
a fiscal year (claims year). 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 of each occurrence is charged directly to the
member; costs from $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.
28
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Financial Statements
NOTE 9 —RISK MANAGEMENT (Continued)
Worker's Compensation: The District also participates in the worker's compensation pool
administered by the CAL JPIA. Pool deposits and retrospective adjustments are valued in a manner
similar to the General Liability pool. The District is charged for the first $50,000 of each claim.
Costs from $50,000 to $100,000 per claim are pooled based on the member's losses under its
retention level. Costs between $100,000 and $2,000,000 per claim are pooled based on payroll.
Costs from $2,000,000 to $5,000,000 are paid by excess insurance purchased by the CAL JPIA.
The excess insurance provides coverage to statutory limits.
Purchased Insurance
Environmental Insurance: The District participates in the pollution legal liability and
remediation legal liability insurance, which is available through the CAL JPIA. The policy covers
sudden and gradual pollution of property, streets, and storm drains owned by the District.
Coverage is on a claims -made basis. There is a $50,000 deductible. The CAL JPIA has a limit of
$50,000,000 for the 3 -year period from July 1, 2005 through July 1, 2008. Each member of the
CAL JPIA has a $10,000,000 limit during the 3 -year term of the policy.
Property Insurance: The District participates in the all-risk property program of the CAL JPIA.
This insurance is underwritten by several insurance companies. The property is currently insured
according to a schedule of covered property submitted by the District to the CAL JPIA. There is a
$5,000 per loss deductible. Premiums for the coverage are paid annually and are not subject to
retroactive adjustments.
Earthquake and Flood Insurance: The District participates in the earthquake and flood program
on a portion of its property. The earthquake insurance is part of the property protection insurance
program of CAL JPIA. The District currently has earthquake protection in the amount of $0.
There is a deductible of 5% of value with a minimum deductible of $100,000 for the District's
flood coverage. Premiums for the coverage are paid annually and are not subject to retroactive
adjustments.
Crime Insurance: The District participates in the crime program of the CAL JPIA in the amount
of $1,000,000 per claim, with a $2,500 per claim deductible. The fidelity coverage is provided
through CAL JPIA. Premiums are paid annually and are not subject to retroactive adjustments.
Special Event Tenant User Liability Insurance: The District participates in the tenant user
liability program of the CAL JPIA. The District protects itself by requiring tenant users of certain
property to purchase tenant user liability insurance for certain activities on District property. 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.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Financial Statements
NOTE 10 — NET ASSETS
Net Assets is the excess of all the District's assets over all its liabilities, regardless of fund. Net
Assets are divided into three captions under GASB Statement 34. These captions apply only to
Net Assets, which is determined only at the District -wide level, and are described below:
Invested in Capital Assets, net of related debt describes the portion of Net Assets which is
represented by the current net book value of the District's capital assets, less the outstanding balance
of any debt issued to finance these assets.
Restricted describes the portion of Net Assets which is restricted as to use by the terms and
conditions of agreements with outside parties, governmental regulations, laws, or other restrictions
which the District cannot unilaterally alter.
Unrestricted describes the portion of Net Assets which is not restricted to use.
NOTE 11— COMMITMENTS AND CONTINGENCIES
A. Commitments
During May 2000, the District and the County of Santa Clara (the County) entered into an
agreement whereby the District would operate and manage the Rancho San Antonio County Park
(the Park). The Park encompasses 165 acres owned by the County and serves as a gateway
facility to the District's Rancho Santa Antonio Open Space Preserve (the Preserve). The
Preserve includes the Deer Hollow Farm, a homestead and educational center operated by the
City of Mountain View. Under the agreement, the District agreed to manage the Park for a term
of ten years to ensure that Deer Hollow Farm receives funding for operations of no less than
$50,000 per year. In return, the County contributed $1,500,000 to the District for the purpose of
acquiring open space.
B. Contingent Liabilities
The District has entered into numerous agreements, has properties that will require
environmental remediation, and is named in certain claims and litigations. In the opinion of
management, after consultation with counsel, the liability, if any, resulting there from will not
have a material effect on the District's financial position.
NOTE 12 — SUBSEQUENT EVENTS
A. Funding of Retiree Healthcare Plan
The District had an actuarial valuation performed for its' Retiree Healthcare Plan (the Plan) as of
March 31, 2008. This was done in order to determine the Plan Benefit Obligations pursuant to
Governmental Accounting Standards Board Statement No. 45 (GASB 45), and to calculate the
Annual Required Contribution for fiscal year 2008-2009. GASB 45 financial information for the
2008-2009 fiscal year is as follows:
The Present Value Benefit as of March 31, 2008 was calculated at $1,949,000. The PVB is a
measure of the District obligation for expected retiree healthcare benefits due to both past and
future service for current employees and retirees.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Financial Statements
NOTE 12 — SUBSEQUENT EVENTS (Continued)
The Annual Required Contribution (ARC) for the year ended March 31, 2009 was calculated at
$177,000. The ARC is the sum of the Normal Cost plus an amortization of the Unfunded
Actuarial Accrued Liability (UAAL) determined as of the end of the fiscal year. The Normal
Cost is the value of District provided benefits expected to be earned or allocated to the fiscal year.
The UAAL is excess of the District's obligation for benefits earned for past service over Plan
Assets.
On June 5, 2008 the District funded $1.9 million of the Present Value Benefit.
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SUPPLEMENTARY INFORMATION
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES
AND CHANGES IN FUND BALANCES
BUDGET AND ACTUAL
FOR THE YEAR ENDED MARCH 31, 2008
Budgeted Amounts
Original Final
Actual
Variance
Positive
(Negative)
REVENUES
Property taxes $23,714,000 $24,650,000 $24,767,516 $117,516
Grant income 3,921,000 1,878,000 230,365 (1,647,635)
Investment income 1,600,000 1,930,000 1,988,757 58,757
Property management - rents 846,000 846,000 895,661 49,661
Other income 250,000 250,000 297,548 47,548
Total Revenues 30,331,000
29,554,000 28,179,847 (1,374,153)
EXPENDITURES
Current:
Salaries 6,485,221 6,391,739 6,143,657 248,082
Benefits 2,549,049 2,603,717 2,426,423 177,294
Directors 25,000 25,000 23,900 1,100
Services and supplies 3,338,385 3,391,071 2,809,371 581,700
Capital outlay
New land purchases 30,000,000 29,948,000 1,540,000 28,408,000
Land acquisition support costs 300,000 185,000 90,244 94,756
Structures and improvements 859,200 533,600 268,652 264,948
Equipment 450,000 182,200 140,416 41,784
Vehicles 338,000 355,800 351,306 4,494
Total Expenditures 44,344,855 43,616,127 13,793,969 29,822,158
EXCESS (DEFICIENCY) OF REVENUES
OVER EXPENDITURES
(14,013,855) (14,062,127)
14,385,878 28,448,005
OTHER FINANCING SOURCES (USES)
Transfers (out) (7,337,332) (7,337,332)
Total Other Financing Sources (Uses) (7,337,332) (7,337,332)
NET CHANGE IN FUND BALANCES ($14,013,855) ($14,062,127) 7,048,546 $21,110,673
Fund balance at beginning of year 42,631,832
Fund balance at end of year $49,680,378
34