HomeMy Public PortalAboutAudit Report - District- FY06MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
ANNUAL FINANCIAL REPORT
MARCH 31, 2006
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
TABLE OF CONTENTS
MARCH 31, 2006
FINANCIAL SECTION
Independent Auditors' Report
Management's Discussion and Analysis 3
Basic Financial Statements
Government -Wide Financial Statements
Statement of Net Assets 8
Statement of Activities 9
Fund Financial Statements
Governmental Funds - Balance Sheet 10
Governmental Funds - Reconciliation of the Governmental Funds Balance Sheet to the
Statement of Net Assets 11
Governmental Funds - Statement of Revenues, Expenditures, and Changes in Fund Balance 12
Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and
Changes in Fund Balances to the District -Wide Statement of Activities 13
Notes to Financial Statements 14
REQUIRED SUPPLEMENTARY INFORMATION
General Fund - Budgetary Comparison Schedule 32
Note to Supplementary Information 34
INDEPENDENT AUDITORS' REPORTS
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
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FINANCIAL SECTION
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Vavrinek, Trine, Day & Co., LLP
Certified Public Accountants & Consultants
INDEPENDENT AUDITORS' REPORT
Board of Directors
Midpeninsula Regional Open Space District
Los Altos, California
VALUE THE DIFFERENCE
We have audited the accompanying financial statements of the governmental activities and each fund of the
Midpeninsula Regional Open Space District (the "District") as of and for the year ended March 31, 2006, which
collectively comprise the District's basic financial statements as listed in the table of contents. These financial
statements are the responsibility of the District's management. 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:
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 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 opinions.
In our opinion, the financial statements referred to above present fairly, in all material respects, the respective
financial position of the governmental activities and each fund of the Midpeninsula Regional Open Space District,
as of March 31, 2006, and the respective changes in financial positions and cash flows, where applicable, thereof
for the year then ended in conformity with accounting principles generally accepted in the United States of
America.
In accordance with Government Auditing Standards, we have also issued our report dated May 25, 2006, 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 the internal control over financial reporting or on
compliance. That report is an integral part of an audit performed in accordance with Government Auditing
Standards and should be considered in conjunction with this report in considering the results of our audit.
260 Sheridan Avenue, Suite 440 Palo Alto, CA 943061 Tel. 650.462.0400 Fax: 650.462.0500 www.vtdepa.com
FRESNO • LAGUNA HILLS • PALO ALTO - PLEASANTON • RANCHO CUCAMONGA
The required supplementary information, such as management's discussion and analysis on pages 3 through 7 and
budgetary comparison information on pages 32 through 34, are not a required part of the basic financial
statements, but are supplementary information required by the accounting principles generally accepted in the
United States of America. We have applied certain limited procedures, which consisted principally of inquiries of
management regarding the methods of measurement and presentation of the required supplementary information.
However, we did not audit the information and express no opinion on it.
Va4ALtiek I A•44-1' 1-C1 60. LLP
Palo Alto, California
May 25, 2006
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS
MARCH 31, 2006
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, 2006.
We encourage readers to consider the information presented here in conjunction with our basic financial
statements.
FINANCIAL HIGHLIGHTS
The major financial issue for the District in the 2006 fiscal year was continuing to respond to the State of California's
imposition of a.two year shift (called ERAF III) of property tax revenue from local government to state -funded
programs, in order to plug gaps in the state budget, The District's share of this "take -away" is $3.47 million over the
two years ending June 30, 2006. In the District's 2006 fiscal year, the revenue loss was approximately $1.74 million.
In response, the District continued to hold its operational expenses under budget and below long-term spending
guidelines.
Underlying tax revenue growth in fiscal 2006, before the temporary "take -away," was above average, about 8.4%,
compared to 5.5% gross tax revenue growth in fiscal 2005. Actual property tax revenue increased by 8.4%.
The District added $10.4 million of land in fiscal 2006. Land acquisition was unusually efficient as acquisition -
related grant income of $3.1 million and a $5.8 million land gift from the Peninsula Open Space Trust (POST)
covered 86% of the added land value, a much higher percentage than in any prior year.
The assets of the District exceeded liabilities at the close of the 2006 fiscal year by $180.1 million (net assets). Of
this amount, $128.2 million is invested in capital assets, net of related debt, $2.8 million is restricted by the terms of
existing District debt, and the remaining $49.2 million is unrestricted.
The District's total net assets increased by $14.8 million in fiscal 2006.
The District's total long-term obligations increased by $0.6 million, to $131.1 million due to increases in accrued
compensated absences and unamortized premium. The District refinanced the remaining $4.6 million of its 1995
Promissory Notes with $4.6 million of 2005 Refunding Promissory Notes. This refinancing resulted in an estimated
present value savings of $756,413.
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 (GASB 34), Basic Financial Statements — and Management's Discussion and Analysis (1//D&,4) —
for State and Local Governments.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS
MARCH 31, 2006
NET ASSETS
2006 2005 Change
Assets:
Current assets $ 54,461,959 $ 49,807,994 $ 4,653,965
Capital assets 257,597,399 246,874,365 10,723,034
Total assets 312,059,358 296,682,359 15,376,999
Liabilities:
Accounts payable and other liabilities
Long-term liabilities
Total liabilities
886,376 876,158
131,057,193 130,447,292
131,943,569
10,218
609,901
131,323,450 620,119
Net assets:
Invested in capital assets,
net of related debt 128,199,050 117,936,279 10,262,771
Restricted 2,759,760 2,662,316 97,444
Unrestricted 49,156,979 44,760,314 4,396,665
Total net assets $ 180,115,789 $ 165,358,909 $ 14,756,880
Analysis of Net Assets
The District's assets at the close of this fiscal year are $180.1 million more than its liabilities. The investment in
capital assets of $128.2 million, net of related debt, consists primarily of the District's 50,000 acres of land in 25
open space preserves protected for public enjoyment. The net assets subject to external restrictions are composed
of $2.8 million for debt service. Unrestricted net assets are used to finance additional land acquisition projects.
The District's budget for fiscal year 2007 includes $31.3 million for land acquisitions.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS
MARCH 31, 2006
Changes in Net Assets — Fiscal Years Ending March 31, 2006 and 2005
2006 2005 Change % Change
Revenues:
Program revenue:
Charges for services $ 826,156 $ 786,106 $ 40,050 5.1%
Grants and contributions 8,941,897 2,266,274 6,675,623 294.6%
General revenue:
General property tax 20,153,853 18,587,448 1,566,405 8.4%
Investment income 1,560,206 935,265 624,941 66.8%
Other 311,821 342,461 (30,640) -8,9%
Total Revenues 31,793,933 22,917,554 8,876,379 38.7%
Expenses
Change in net assets
17,037,053 15,825,954 1,211,099 7.7%
$ 14,756,880 $ 7,091,600 $ 7,665,280 108.1%
Analysis of Change in Net Assets
For the year ended March 31, 2006, the District's net assets increased by $14.8 million. Salaries and benefits
represented 43% of expenses compared to 39% in fiscal 2005. Salaries and benefits increased 19% over the prior
fiscal year. Salaries increased by 14.2% while benefits, principally retirement and group insurance costs, rose by
36.7%. The ratio of benefit costs to salaries increased from 27.3% to 32.3%.
Program revenues include rental income, grants, gifts of land, and donations. The major generator of current year
program revenue was POST, which provided a $5.8 million gift of land and a $2.1 million grant to help purchase
another parcel of land.
Overall tax revenue in fiscal 2006 increased by 8.4% due to a strong local real estate market in residential
property. Tax revenue was reduced by the impact of ERAF III by $1.74 million in fiscal 2006 and by $1.57
million in fiscal 2005. ERAF III ends in June 2006.
Investment income increased by 66.8% due to higher cash balances and significantly higher interest rates,
GENERAL FUND
The General Fund balance sheet includes all District accounts except for debt and capital assets. At March 31,
2006, the General Fund had a fund balance of $49.2 million, up $4.4 million from the prior year-end. All but $0.5
million of this fund balance is unreserved and designated for future land acquisitions, including $31.3 million
budgeted for land purchases in fiscal year 2007. Land purchases represented 28.6% of total General Fund
expenditures in fiscal year 2006, down from 29.3% in fiscal year 2005. This percentage varies significantly from
year to year due to the uncertain timing of completing complicated land purchase transactions, ranging from 25%
to 76% during this decade.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS
MARCH 31, 2006
DEBT SERVICE FUND
The only assets in the Debt Service Fund, $3.2 million, are reserve funds required by the terms of the District's
1996 and 2004 Revenue Bonds. The funds are held by the bond trustee and will be used to make the final debt
service payment on these issues. The District receives the interest earned on these reserve funds, and this is
shown on the Statement of Revenues, Expenditures and Changes in Fund Balance --Governmental Funds. Total
debt service in fiscal year 2006 was approximately $11.4 million, consisting of $7.3 million of principal and $4.1
million of interest.
CAPITAL ASSETS
As of March 31, 2006, the District's investment in capital assets is $128.2 million, net of related debt. The
District added $10.4 million of land in fiscal year 2006, representing 92.3% of the total increase in capital assets
and has committed $1.2 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 5 in the
Notes to the Basic Financial Statements.
LONG-TERM OBLIGATIONS
As of March 31, 2006, the District's long-term liabilities consist of $0.9 million in compensated absences, $2.0
million of subordinated notes issued to sellers in District land purchase transactions, $107.1 million of Authority
revenue bonds sold to the public in 1996, 1999 and 2004 and rated AAA by Moody's and Standard and Poor's
based on the municipal bond insurance policies purchased by the District issued by Ambac Assurance
Corporation, $4.6 million of Refunding Promissory Notes sold to the public in 2005 and rated AAA by Moody's
and Standard and Poor's and insured by Ambac, and $16.3 million of accreted interest, unamortized premium and
unamortized loss on refunding. 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 2005 and the final budget adjusted in December 2005.
Total District revenue in fiscal 2006 was $1.9 million (8.2%) above budget due to higher secured, unsecured and
supplemental tax revenue from Santa Clara County and higher interest rates on cash investments. Grant income
was within 4% of budget. Acquisitions of land, $4.3 million, were $15.5 million below budget. The major reason
for the shortfall in land acquisition was the delay in closing of a $9 million land purchase approved by the board
in January 2006. This transaction is expected to close in fiscal 2007.
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS
MARCH 31, 2006
Excluding land purchases and debt service, fiscal year 2006 expenditures were approximately $1.0 million, or
8.6%, below the final budget. Salaries and benefits were $0.1 million, or 1%, below budget, services and supplies
cost $0.5 million, or 19%, less than budget, and non -land capital spending was $0.6 million, or 35%, below
budget. This budget performance 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 2007 on March 22, 2006. This budget
assumes lower growth in underlying property tax revenue, about 5%, 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. Due to the end of ERAF III in June 2006,
overall District tax revenue is expected to increase by approximately 10% in fiscal year 2007.
With the final approval of the Coastside Protection Program in September 2004, the District's boundary was
extended to the Pacific Ocean in San Mateo County, from the southern borders of Pacifica to the San Mateo/Santa
Cruz County line. This annexation increased the size of the District from 331 to 556 square miles. This
expansion is expected to have only a minor impact on the District's operational spending in the next few years.
The fiscal 2007 budget includes $189,000 of spending specifically related to the Coastside Protection Program.
However, the District has begun purchasing land in the foothills of the coastside area.
The total land acquisition budget is $31.3 million in fiscal 2007, partially covered by $5.4 million of associated
acquisition -related grant income. Debt service requirements are $7.2 million. If all revenues and expenditures
occur as budgeted, the District's cash position would decrease by $21.7 million in fiscal year 2007.
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.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
STATEMENT OF NET ASSETS
MARCH 31, 2006
Governmental
Assets Activities
Cash and investments $ 43,251,749
Receivables
Taxes 5,564,328
Interest 273,000
Grant 550,000
Lease 1,501
Restricted cash and investments 3,148,873
Restricted interest receivable 8,041
Note receivable 255,730
Prepaid expense 5,623
Deferred charges 1,403,114
Capital assets
Nondepreciable
Land 248,036,353
Construction in progress 1,188,853
Depreciable, net of accumulated depreciation
Structures and improvements 4,757,224
Infrastructure 2,314,664
Equipment 291,206
Vehicles 1,009,099
Total assets 312,059,358
Liabilities
Accounts payable 331,479
Interest payable 397,154
Other accrued liabilities 103,669
Deposits payable 54,074
Long-term liabilities
Due within one year 3,202,257
Due in more than one year 127,854,936
Total liabilities 131,943,569
Net Assets
Invested in capital assets, net of related debt 128,199,050
Restricted for debt service 2,759,760
Unrestricted 49,156,979
Total net assets $ 180,115,789
The accompanying notes are an integral part of these financial statements.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED MARCH 31, 2006
Program expenses - general government:
Salaries $ (5,583,603)
Benefits (1,804,539)
Directors (30,500)
Services and supplies (2,175,004)
Depreciation (521,338)
Cost of issuance (64,385)
Interest (6,857,684)
Total program expenses (17,037,053)
Program revenues:
Charges for services
Capital grants and operating contributions
Total program revenues
Net program expenses
826,156
8,941,897
9,768,053
(7,269.000)
General revenues:
General property tax 20,153,853
Investment income 1,560,206
Miscellaneous 311,821
Total general revenues 22,025,880
Changes in net assets 14.756,880
Net assets - beginning of the year 165,358,909
Net assets - end of the year $180,115,789
The accompanying notes are an integral part of these financial statements.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
GOVERNMENTAL FUNDS
BALANCE SHEET
MARCH 31, 2006
Debt
General Service
Fund Fund
Total
ASSETS
Cash and investments $ 43,251,749 $ - $ 43,251,749
Receivables
Taxes 5,564,328 5,564,328
Interest 273,000 8,041 281,041
Grant 550,000 550,000
Lease 1,501 - 1,501
Prepaid expense 5,623 5,623
Restricted cash and investments - 3,148,873 3,148,873
Note receivable 255,730 255,730
Total assets $49,901,931 $ 3,156,914 $ 53,058,845
LIABILITIES AND
FUND BALANCES
Liabilities:
Accounts payable $ 331,479 $ $ 331,479
Accrued liabilities 103,669 103,669
Deposits payable 54,074 54,074
Unearned rent -
Deferred revenue 255,730 255,730
Total liabilities 744,952 - 744,952
Fund Balances:
Reserved for:
Debt service - 3,156,914 3,156,914
Encumbrances 500,224 500,224
Unreserved, designated for: -
Budgeted land acquisitions 31,300,000 31,300,000
Unreserved 17,356,755 - 17,356,755
Total fund balance 49,156,979 3,156,914 52,313,893
Total Liabilities and
Fund Balances $49,901,931
The accompanying notes are an integral part of these financial statements.
$ 3,156,914 $ 53,058,845
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
GOVERNMENTAL FUNDS
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET
TO THE STATEMENT OF NET ASSETS
MARCH 31, 2006
Amounts Reported for Governmental Activities in the Statement of
Net Assets are Different Because:
Total Fund Balance - Governmental Funds
$ 52,313,893
Capital assets used in governmental activities are not financial resources
and, therefore, are not reported as assets in governmental funds.
The cost of capital assets is $ 263,971,424
Accumulated depreciation is (6,374,025) 257,597,399
Note 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. 255,730
Bond issuance costs are expended in governmental funds when paid,
however, they are capitalized and amortized over the life of the
corresponding bonds for purposes of the statement of net assets. 1,403,114
Interest payable on long-term debt does not require the use of current
financial resources and, therefore, interest payable is generally not
accrued as a liability in the balance sheet of governmental funds. (397,154)
Long-term liabilities at year end consist of:
Promissory notes (6,655,917)
Lease revenue bonds (106,995,107)
Accreted interest on capital appreciation bonds (16,520,837)
Compensated absences (vacations) (885,332) (131,057,193)
Total Net Assets - Governmental Activities $ 180,115,789
The accompanying notes are an integral part of these financial statements.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
GOVERNMENTAL FUNDS
STATEMENT OF REVENUES, EXPENDITURES AND
CHANGES IN FUND BALANCE
FOR THE YEAR ENDED MARCH 31, 2006
Debt
General Service
Fund Fund
Total
REVENUES
Property tax $ 20,153,853 $ $ 20,153,853
Grant income 3,116,147 3,116,147
Investment income 1,187,343 205,434 1,392,777
Property management - rents 826,156 826,156
Other income 311,821 311,821
Total Revenues 25,595,320 205,434 25,800,754
EXPENDITURES
Current
Salaries 5,422,075 5,422,075
Benefits 1,804,539 1,804,539
Directors 30,500 30,500
Services and supplies 2,175,004 2,175,004
Capital outlay
New land purchases 4,251,000 4,251,000
Land acquisition support costs 273,293 273,293
Structures and improvements 26,248 - 26,248
Equipment 51,595 - 51,595
Vehicles 232,976 232,976
Construction in progress 587,472 587,472
Debt service
Principal repayment - 7,322,236 7,322,236
Interest and fiscal charges 4,103,090 4,103,090
Refunding bond issuance costs 219,653 219,653
Total Expenditures 14,854,702 11,644,979 26,499,681
Excess (deficiency) of
revenues over expenditures 10,740,618 (11,439,545) (698,927)
Other Financing Sources (Uses):
Proceeds from promissory notes 4,992,934 4,992,934
Transfers in 6,520,974 6,520,974
Tansfers out (6,520,974) (6,520,974)
Unrealized gain on investments 177,021 177,021
Net Financing Sources (Uses) (6,343,953) 11,513,908 5,169,955
NET CHANGE IN FUND BALANCES 4,396,665 74,363 4,471,028
Fund Balance - Beginning 44,760,314 3,082,551 47,842,865
Fund Balance - Ending $ 49,156,979 $ 3,156,914 $ 52,313,893
The accompanying notes are an integral part of these financial statements.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF
REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES
TO THE DISTRICT -WIDE STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED MARCH 31, 2006
Total Net Change in Fund Balances - Governmental Funds
Amounts Reported for Governmental Activities in the Statement of
Activities are Different Because:
Capital outlays to purchase or build capital assets are reported in governmental funds as
expenditures, however, for governmental activities, those costs are shown in the statement
of net assets and allocated over their estimated useful lives as annual depreciation expenses
in the statements of activities.
This is the amount by which capital outlays and donations exceed depreciation in the period.
Depreciation expense $ (521,338)
Donation of capital assets 5,825,750
Capital outlays 5,422,584 10,726,996
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. (5,630)
Proceeds received from sale of promissory notes is revenue in the governmental funds, but it increases long-term liabilities in the statement of net assets and does not affect the statement
of activities. (4,630,000)
Debt issuance costs are recorded as expenditures in governmental funds when paid, however, they
are capitalized and amortized over the life of the corresponding bonds for the purposes of the
statement of activities. 155,268
Debt premiums are recorded as revenues in governmental funds when received, however, they are
capitalized and amortized over the life of the corresponding debt for the purposes of the statement
of activities. (362,934)
Loss on disposal of capital assets is reported in the government -wide statement of net assets, but
is not recorded in the governmental funds. (3,962)
Accrued interest on long-term debt is reported in the government -wide statement of activities, but
does not require the use of current financial resources. Amortization of bond premiums,
amortization of loss on debt refunding are expensed as a component of interest expense on the
statement of activities, but they are not recognized in the governmental fund financial statements.
This amount represents the net accrued interest expense and the amortization not reported in
governmental funds.
Changes in accrued interest expense on current interest bonds 23,081
Amortization of bond premium 56,009
Accreted interest on capital appreciation bonds (2,720,578)
Amortization of deferred amounts (113,106) (2,754,594)
Repayment of long-term debt is reported as an expenditure in governmental funds, and thus, has
the effect of reducing fund balance because current financial resources have been used. However,
the principal payments reduce the liabilities in the statement of net assets and do not result in any
expense in the statement of activities. Principal payments in long-term debt are as follows:
Promissory notes 4,587,236
Lease revenue bonds 2,735,000 7,322,236
In the statement of activities, certain operating expenses - compensated absences
(vacations) are measured by the amounts earned during the year. In the
governmental funds, however, expenditures for these items are measured by the
amount of financial resources used (essentially, the amounts actually paid),
Vacation earned was more than the amounts used by $161,528. (161,528)
Change in Net Assets of Governmental Activities $ 14,756,880
The accompanying notes are an integral part of these financial statements.
$ 4,471,028
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
A reporting entity is comprised of the primary government, component units, and other organizations that are
included to ensure the financial statements are not misleading. The primary government of the District consists of
all funds, departments, boards, and agencies that are not legally separate from 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.
NOTE 2 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accounting system is organized and operated on a fund basis. A fund is defined as a fiscal and accounting
entity with a self -balancing set of accounts, which are segregated for the purpose of carrying on specific activities
or attaining certain objectives in accordance with special regulations, restrictions, or limitations.
Governmental Funds
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Governmental funds are those through which most governmental functions typically are financed. Governmental
fund reporting focuses on the sources, uses, and balances of current financial resources. Expendable assets are
assigned to the various governmental funds according to the purposes for which they may or must be used.
Current liabilities are assigned to the fund from which they will be paid. The difference between governmental
fund assets and liabilities is reported as fund balance.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006
Major Governmental Funds
General Fund
The General Fund accounts for all financial resources and activities except those required to be accounted for
in another fund. The General Fund balance is available to the District for any purpose provided it is expended
or transferred according to the general laws of California.
Other Non -Major Governmental Funds
Debt Service Fund
The Debt Service Fund is used to account for the accumulation of resources for, and the payment of, general
long-term debt principal, interest, and related costs.
Basis of Accounting - Measurement Focus
Government -Wide Financial Statements
The government -wide statements are prepared using the economic resources measurement focus and the accrual
basis of accounting. This is the same approach used in the preparation of commercial entity financial statements,
but differs from the manner in which governmental fund financial statements are prepared.
The government -wide statement of activities presents a comparison between expenses, both direct and indirect,
and program revenues of the District. Direct expenses are those that are specifically associated with a service,
program, or department and are therefore clearly identifiable to a particular function. Program revenues include
charges paid by the recipients of the goods or services offered by the programs and 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. The comparison of program revenues and
expenses identifies the extent to which each program or business segment is self-financing or draws from the
general revenues of the District.
Net assets should be reported as restricted when constraints placed on net asset use are either externally imposed
by creditors (such as through debt covenants), grantors, contributors, or laws or regulations of other governments
or imposed by law through constitutional provisions or enabling legislation. The net assets restricted for other
activities result from special revenue funds and the restrictions on their net asset use.
Fund Financial Statements
Fund financial statements report detailed information about the District. The focus of governmental fund
financial statements is on major funds rather than reporting funds by type. Each major fund is presented in a
separate column. The District has no non -major funds.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006
Governmental Funds
All governmental funds are accounted for using a flow of current financial resources measurement focus and the
modified accrual basis of accounting. With this measurement focus, only current assets and current liabilities
generally are included on the balance sheet. The statement of revenues, expenditures, and changes in fund
balance reports on the sources (revenues and other financing sources) and uses (expenditures and other financing
uses) of current financial resources. This approach differs from the manner in which the governmental activities
of the government -wide statements are prepared. Governmental fund financial statements therefore include
reconciliations with brief explanations to better identify the relationship between the government -wide statements
and the governmental funds financial statements.
Revenues — Exchange and Non -Exchange Transactions
Revenue resulting from exchange transactions, in which each party gives and receives essentially equal value, is
recorded on 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 that 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 expected to be received within 60 days
of fiscal year-end.
Non -exchange transactions, in which the District receives value without directly giving equal value in return,
include property taxes, certain grants, entitlements, and donations. Revenue from property taxes is recognized in
the fiscal year in which the taxes are earned and become measurable and available. Revenue from certain grants,
entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been
satisfied. Eligibility requirements include time and purpose requirements. On a modified accrual basis, revenue
from non -exchange transactions must also be available before it can be recognized.
Under the modified accrual basis, the following revenue sources are considered to be both measurable and
available at fiscal year-end: Property taxes, interest, certain grants, and other local sources.
Deferred Revenue
Deferred revenue arises when potential revenue does not meet both the "measurable" and "available" criteria for
recognition in the current period or when resources are received by the District prior to the incurrence of
qualifying expenditures. In subsequent periods, when both revenue recognition criteria are met, or when the
District has a legal claim to the resources, the liability for deferred revenue is removed from the combined balance
sheet and revenue is recognized.
Certain grants received before the eligibility requirements are met are recorded as deferred revenue. On the
governmental fund financial statements, receivables that will not be collected within the available period are also
recorded as deferred revenue.
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NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006
Expenses/Expenditures
On the accrual basis of accounting, expenses are recognized at the time they are incurred. The measurement focus
of governmental fund accounting is on decreases in net financial resources (expenditures) rather than expenses.
Expenditures are generally recognized in the accounting period in which the related fund liability is incurred, if
measurable. Principal and interest on general long-term debt, which has not matured, are recognized when paid in
the governmental funds. Allocations of costs, such as depreciation and amortization, are not recognized in the
governmental funds.
Cash and Investments
Restricted cash and investments are held by the District or outside fiscal agent under provisions of debt
agreements. The' District's investments are reported at fair value. The fair value of investments is determined
annually and is based on current market prices.
Capital Assets and Depreciation
Capital assets (including infrastructure) are recorded at historical cost or at estimated historical cost if actual cost
is not available. Contributed capital assets are valued at their estimated fair market value on the date contributed.
Capital assets include public domain (infrastructure). The District's infrastructure consist of improvements
including roadways, trails, parking lots, bridges and culverts. Effective April 1, 2003, the District increased its
capital assets capitalization threshold from $500 to $5,000. Capital assets used in operations are depreciated
using the straight-line method over their estimated useful lives in the government -wide statements.
Estimated useful lives of the various classes of depreciable capital assets are as follows: structures/improvements,
10 to 30 years; infrastructure, 30 to 40 years; equipment, 5 to 20 years, vehicles, 10 to 20 years.
The cost of normal maintenance and repairs that do not add to the value of the assets or materially extend the
useful lives is not capitalized. Improvements are capitalized and, for government -wide statements, are
depreciated over the remaining useful lives of the related capital assets.
Bond Issuance Costs, Original Issue Discounts and Premiums, Deferred Losses on Refunding
In the fund financial statements, the District recognizes bond premiums and discounts as other financing sources
or uses and issuance costs as expenditures in the period the bond proceeds are received. Bond
premiums/discounts and issuance costs for the government -wide statement of net assets are deferred and
amortized over the life of the bonds using a method that approximates the interest method. In the government -
wide statements, bond premiums/discounts are presented as an increase/reduction of the face amount of bonds
payable whereas issuance costs are recorded as deferred charges.
Gains or losses occurring from advance refundings, completed subsequent to April 1, 2003, are deferred and
amortized into expenses for governmental activities.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006
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 the 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 plan 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.
Property Tax Levy, Collection and Maximum Rate
The State of California (the State) Constitution Article XIIIA provides that the combined maximum property tax
rate on any given property may not exceed one percent of its assessed value unless voters have approved an
additional amount for general obligation debt. Assessed value is calculated at 100 percent of market value as
defined by Article XIIIA and may be increased by no more than two percent per year unless the property is sold
or transferred. The State Legislature has determined the method of distribution of receipts from the one percent
tax levy among the counties, cities, school districts and special districts. The District receives property tax
revenues from Santa Clara and San Mateo Counties.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006
The Counties assess properties and bill for the collection of property taxes as follows:
Santa Clara San Mateo
Secured Unsecured Secured Unsecured
Valuation/lien January 1
dates
Levy dates October 1
Due dates
Delinquent after
50% on November 1
50% on February 1
December 10
(for November)
April 10
(for February)
Fund Equity/Net Assets
January 1 January 1 January 1
July 1 On or before July 1
November 1
Upon receipt of billing 50% on November 1 July 1
50% on February 1
August 31 December 10 August 31
(for November)
April 10
(For February)
In the fund financial statements, governmental funds report fund balance reserved for amounts that are not
appropriate for expenditure or legally or contractually segregated for a specific future use. Fund balance
designations result from District management or Board action. Such designations are at the discretion of
management or Board and may be changed by future management or Board action.
In government -wide statements equity is classified as net assets and displayed in three components:
• Invested in capital assets, net of related debt consist of capital assets net of accumulated depreciation
and reduced by the outstanding balances of any bonds, notes, or other borrowings that are attributable to
the acquisition, construction, or improvements of those assets.
• Restricted net assets consist of net assets with constraints placed on the use either by 1) external groups
such as creditors, grantors, contributors, or laws or regulations of other governments; or 2) law through
constitutional provisions or enabling legislation.
• Unrestricted net assets consist of all other net assets that do not meet the definitions of "restricted" or
"invested in capital assets, net of related debt."
Use of Estimates
The District's management has made a number of estimates and assumptions relating to the reporting of assets
and liabilities and revenues, expenditures and expenses and the disclosure of contingent liabilities to prepare these
basic financial statements in conformity with generally accepted accounting principles. Actual results could differ
from those estimates.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006
Changes in Accounting Principles
In March 2003, the Governmental Accounting Standards Board (GASB) issued GASBS No. 40, Deposit and
Investment Risk Disclosures an amendment of GASB Statement No. 3. This Statement addressed common deposit
and investment risks related to credit risk, concentration of credit risk, interest rate risk, and foreign currency risk.
As an element of interest rate risk, this Statement requires certain disclosures of investments that have fair values
that are highly sensitive to changes in interest rates. Deposit and investment policies related to the risks identified
in the Statement also should be disclosed. As such, the District has made the applicable required disclosures.
New Accounting Pronouncements
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In November 2003, GASB issued GASBS No. 42, Accounting and Financial Reporting for Impairment of Capital
Assets and for Insurance Recoveries. This Statement establishes guidance for accounting and reporting for
impairment of capital assets and for insurance recoveries, whether associated with an impaired capital asset or not. L
This Statement is effective for periods beginning after December 31, 2004, or during the 2005-06 fiscal year. The
District has implemented this pronouncement. j
In July 2004, GASB issued GASBS No. 45, Accounting and Financial Reporting by Employers for
Postentployment Benefits Other Than Pensions. This Statement will require local governmental employers who
provide other postemployment benefits (OPEB) as part of the total compensation offered to employees to
recognize the expense and related liabilities (assets) in the government -wide financial statements of net assets and
activities. This Statement establishes standards for the measurement, recognition, and display of OPEB
expense/expenditures and related liabilities (assets), note disclosures, and, if applicable, required supplementary
information (RSI) in the financial reports of State and local governmental employers.
Current financial reporting practices for OPEB generally are based on pay-as-you-go financing approaches. They
fail to measure or recognize the cost of OPEB during the periods when employees render the services or to
provide relevant information about OPEB obligations and the extent to which progress is being made in funding
those obligations.
This Statement generally provides for prospective implementation - that is, that employers set the beginning net
OPEB obligation at zero as of the beginning of the initial year. The District will be required to implement the
provisions of this Statement for the fiscal year ended June 30, 2009.
In December 2004, GASB issued GASBS No. 46, Net Assets Restricted by Enabling Legislation. This Statement
clarifies that a legally enforceable enabling legislation restriction is one that a party external to a government -
such as citizens, public interest groups, or the judiciary - can compel a government to honor. The Statement states
that the legal enforceability of an enabling legislation restriction should be reevaluated if any of the resources
raised by the enabling legislation are used for a purpose not specified by the enabling legislation or if a
government has other cause for reconsideration. Although the determination that a particular restriction is not
legally enforceable may cause a government to review the enforceability of other restrictions, it should not
necessarily lead a government to the same conclusion for all enabling legislation restrictions.
This Statement also specifies the accounting and financial reporting requirements if new enabling legislation
replaces existing enabling legislation or if legal enforceability is reevaluated. Finally, this Statement requires
governments to disclose the portion of total net assets that is restricted by enabling legislation. The requirements
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006
of this Statement are effective for financial statements for periods beginning after June 15, 2005. The District has
not implemented this pronouncement, but does not believe it will impact future financial statements.
NOTE 3 — CASH AND INVESTMENTS
Total cash and investments are as follows:
Cash and cash equivalents $ 1,175,801
investments 42,075,948
Restricted cash and investments 3,148,873
$ 46,400,622
Cash on hand $ 800
Deposits 1,175,001
Investments 45,224,821
$ 46,400,622
The District is authorized under California Government Code to make direct investments in local agency bonds,
notes, or warrants within the State; U.S. Treasury instruments; registered State warrants or treasury notes;
securities of the U.S. Government, or its agencies; bankers acceptances; commercial paper; certificates of deposit
placed with commercial banks and/or savings and loan companies; repurchase or reverse repurchase agreements;
medium term corporate notes; shares of beneficial interest issued by diversified management companies,
certificates of participation, obligations with first priority security; and collateralized mortgage obligations.
Investment in County Treasury
The fair value of the District's investment in the pool is reported in the accounting financial statements at amounts
based upon 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 that portfolio). The balance available for withdrawal is based on the
accounting records maintained by the County Treasurer, which is recorded on the amortized cost basis.
General Authorizations
Limitations as they relate
schedules below:
o rn
eres
rate risk, credit risk, and concentration of credit risk are indicated in the
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006
Authorized
Investment Type
Local Agency Bonds, Notes, Warrants
Registered State Bonds, Notes, Warrants
U.S. Treasury Obligations
U.S. Agency Securities
Banker's Acceptance
Commercial Paper
Negotiable Certificates of Deposit
Repurchase Agreements
Reverse Repurchase Agreements
Medium -Term Notes
Mutual Funds
Money Market Mutual Funds
Mortgage Pass -Through Securities
County Pooled Investment Funds
Local Agency Investment Fund (LAIF)
Joint Powers Authority Pools
Interest Rate Risk
Maximum
Remaining
Maturity
5 years
5 years
5 years
5 years
180 days
270 days
5 years
1 year
92 days
5 years
N/A
N/A
5 years
N/A
N/A
N/A
Maximum
Percentage
of Portfolio
None
None
None
None
40%
25%
30%
None
20% of base
30%
20%
20%
20%
None
None
None
Maximum
Investment
In One Issuer
None
None
None
None
30%
10%
None
None
None
None
10%
10%
None
None
None
None
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
changes in market interest rates. The District manages its exposure to interest rate risk by purchasing a
combination of shorter term and longer term investments and by timing cash flows from maturities so that a
portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash
flow and liquidity needed for operations.
Specific Identification
Information about the sensitivity of the fair values of the District's investments to market interest rate fluctuation
is provided by the following schedule that shows the distribution of the District's investment by maturity:
Investment Type
U.S. Treasuries
County Pool
Total
Credit Risk
Fair
Value
$ 18,677,106
26,505,761
$ 45,182,867
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.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006
Presented below is the minimum rating required by the California Government Code, the Districts' investment
policy, or debt agreements, and the actual rating as of the year-end for each investment type.
U.S. Treasuries
County Pool
Investment Type
Total
Custodial Credit Risk - Deposits
Fair
Value
$18,677,106
26,505,761
$ 45,182,867
Minimum
Legal
Rating
N/A
N/A
Not Required
To Be
Rated
$18,677,106
26,505,761
$45,182,867
This is the risk that in the event of a bank failure, the District's deposits may not be returned to it. The District
does not have a policy for custodial credit risk for deposits. However, the California Government Code requires
that a financial institution secure deposits made by state or local governmental units by pledging securities in an
undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental
unit). The market value of the pledged securities in the collateral pool must equal at least 110 percent of the total
amount deposited by the public agencies. California law also allows financial institutions to secure public
deposits by pledging first trust deed mortgage notes having a value of 150 percent of the secured public deposits
and letters of credit issued by the Federal Home Loan Bank of San Francisco having a value of 105 percent of the
secured deposits.
Investments
The District's investment policy, consistent with the Government Code of California authorizes the District to
invest in the County of Santa Clara Treasurer's investment pool, obligations of the U.S. Treasury or its agencies,
certificates of deposit, bankers' acceptances, guaranteed and bank investment contracts, commercial paper and
mutual funds invested in U.S. Government securities. The District did not enter into any reverse repurchase
agreements during the year ended March 31, 2006.
Information is not available on whether the various mutual funds and the County of Santa Clara Treasurer's
investment pool in which the District has invested used, held or wrote derivative financial products during the
year ended March 31, 2006. The County of Santa Clara Treasurer's investment pool is subject to regulatory
oversight by the County's Treasury Oversight Committee, as required by California Government Code Section
27134. The fair value of the District's position in the pool is approximately the same as the value of the pool
shares.
NOTE 4 — NOTE 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 as a rate of 10% per annum. Monthly principal and interest payments of $2,624 are due
on the I of each month and late if not paid by the 10'1', with the final payment scheduled December 1, 2022. The
outstanding balance at March 31, 2006, is $255,730.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006
NOTE 5 - CAPITAL ASSETS
Capital asset activity for the fiscal year ended March 31, 2006, was as follows:
Governmental Activities
Capital Assets not being depreciated:
Land
Construction in progress
Total Capital Assets not being depreciated
Capital Assets being depreciated:
Structures and improvements
Infrastructure
Equipment
Vehicles
Total Capital Assets being depreciated
Total Capital Assets
Less Accumulated Depreciation:
Structures and improvements
Infrastructure
Equipment
Vehicles
Total Accumulated Depreciation
Governmental Activities Capital
Assets, Net
Balance
March 31, 2005
$ 237,686,310
2,036,726
239,723,036
8,479,944
2,338,960
653,093
1,563,376
Balance
Additions Deductions March 31, 2006
$10,350,043
587,472
10,937,515
$ 248,036,353
1,435,345 1,188,853
1,435,345 249,225,206
1,052,206
409,386 -
51,595
232,976 35,318
1,746,163 35,318 14,746,218
9,532,150
2,748,346
704,688
1,761,034
13,035,373
252,758,409
4,475,282
359,201
377,559
672,002
5,884,044
12,683,678 1,470,663 263,971,424
299,644
74,481
35,923
111,290
521,338 31,357
31,357
4,774,926
433,682
413,482
751,935
6,374,025
$ 246,874,365
$12,162,340 $1,439,306 $ 257,597,399
Capital Projects Commitments
As of March 31, 2006, the District had $1,331,376 in year-end commitments for active construction projects
primarily for the following significant projects:
• Pulgas Ridge Staging Area
• The Pichetti Ranch Seismic Upgrade
• El Corte de Madera Creek Erosions Control Project
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006
Donations of Land
The District, jointly with the Town of Los Gatos (the Town), was gifted an 11 -acre Open Space and Conservation
Easement in the Kennedy -Limekiln area of Sierra Azul Open Space Preserve. The District is responsible for
monitoring the easement and the Town will take responsibility for enforcement of the easement in the event of
violations. The District received other land donations during fiscal year 2005-2006. The donated easements
came from separate private family/citizens/living trust. These gifts were recorded at a total value of $5,825,750.
NOTE 6 - LONG-TERM OBLIGATIONS
The changes in the District's long-term obligations during the year consisted of the following:
Promissory notes
1995
Aine property
Lazenby property
McKannay-Seimers property
Dalolia property
Hunt property
2005 refunding
Total promissory notes
Lease revenue bonds
1996 issue
1999 first issue
1999 second issue
2004 issue
Subtotal lease revenue bonds
Unamortized premium
Unamortized loss on refunding
Total lease revenue bonds
Accreted interest on lease
revenue bonds
1996 issue
1999 first issue
1999 second issue
2004 issue
Total accreted interest
Accrued compensated absences
Balance
April 1, 2005 Additions Deductions
$ 4,555,000 $
61,352
30,212
250,000
216,589
1,500,000
4,630,000
4,630,000 4 587 236 6,655 917 149,354
$ 4,555,000
13,830
6,906
Balance
March 31, 2006
$
47,522
23,306
250,000
11,500 205,089
1,500,000
4,630,000
6,613,153
24,265,199
27,068,021
26,561,962
31,900,010
Due in
One Year
14,798
7,320
12,236
115,000
109,795,192
579,961
(1,065,077)
109,310,076
4,303,979
5,261,190
4,149,764
85,326
13,800,259
723,804
$ 130,447,292
1,185,000
765,000
775,000
10,000
23,080,199
26,303,021
25,786,962
31,890,010
1,315,000
865,000
880,000
50,000
3,110,000
56,009
(113,106)
2,735,000
362,934 56,009
(113,106)
362,934 2,677 903 106,995,107 3,052,903
107,060,192
886,886
(951,971)
655,901
1,023,360
964,116
77,201
2,720,578
161,528
$ 7,875,040
$ 7,265,139
4,959,880
6,284,550
5,113,880
162,527
16,520,837
885,332
$ 131,057,193
$ 3,202,257
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006
Promissory Notes
1995 notes, original principal balance of $11,000,000, is comprised of $855,000 of Serial Notes, bearing interest
rates ranging from 6.15% to 7%, mature annually from September 1, 2003 through September 1, 2009, and
$10,145,000 of 7% term notes due on September 1, 2014. These notes were paid with the proceeds from the 2005
refunding bond issued June 30, 2005.
On June 26, 2003, the District entered into a lease and management agreement between the Peninsula Open Space
Trust (POST), where POST is the one-half interest owner of the Hunt Partial Interest Property. In addition to the
management, control, and operation of the property, the District entered into a promissory note to pay the Hunt
Living Trust a sum of $1,500,000 on April 1, 2023, together with an interest rate of 5.5% through April I, 2013,
in a semi-annual basis, and thereafter at a rate of 5% per annum until the maturity or prior redemption of the note.
The remaining four land contract promissory notes aggregate to a total debt of $588,402, bears interest at fixed
rates from 4.1% to 7%, and matures at different intervals through October 10, 2017.
2005 Refunding Promissory Notes of $4,630,000 were issued June 30, 2005, bearing interest rates range from
3.25% to 5.00%, mature annually from September 1, 2006 through September 1, 2014. The notes were issued to
pay off the 1995 promissory notes.
Lease Revenue Bonds
On July 24, 1996, the Authority, on behalf of the District, issued the 1996 Revenue Bonds. These bonds are
comprised at $14,190,000 in current interest bonds, bearing interest at rates ranging from 5.1% to 5.75%, and
maturing annually from September I, 2004 through September 1, 2012. This issue also includes $4,900,000 of
current interest term bonds, bearing interest at 5.9% due September 1, 2014 and $9,921,707 of capital
appreciation bonds, bearing interest rates ranging from 6.2% to 6.3%, maturing annually from September 1, 2015
through September 1, 2026.
On January 27, 1999, the Authority, on behalf of the District, issued the 1999 Revenue Bonds, first issue. These
bonds are comprised of $13,855,000 of current interest bonds, bearing interest rates ranging from 3.75% to
4.625%, maturing annually from September 1, 2004 through September 1, 2014. This issue also includes
$18,207,771 of capital appreciation bonds, bearing interest rates ranging from 5.2% to 5.4%, maturing annually
from September 1, 2015 through September 1, 2030. A portion of the proceeds was used to advance refund the
1992 Promissory Notes.
On August 30, 1999, the Authority, on behalf of the District, issued the 1999 Revenue Bonds, second issue.
These bonds comprised of $9,815,000 current interest bonds, bearing interest rates ranging from 4.4% to 5.2%
maturing annually from August 1, 2004 through August 1, 2012. This issue also includes $6,185,000 of current
interest term bonds, bearing interest at 5.25%, due August 1, 2013 through August 1, 2017, and $14,489,430 of
capital appreciation bonds, bearing interest at rates ranging from 6.2% to 6.35%, maturing annually from August
1, 2018 through August 1, 2003. A portion of the proceeds was used to repay the 1990 Promissory Notes.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006
On January 30, 2004, the Authority, on behalf of the District, issued the 2004 Revenue Bonds. These bonds
comprised of $9,725,000 of current interest bonds, bearing interest at rates ranging from 2% to 4.5%, maturing
annually from September 1, 2005 through September 1, 2023. This issue also includes $20,835,000 of current
interest term bonds, bearing interest at 5%, due September 1, 2024 through September I, 2034, and $1,340,010 of
capital appreciation bonds, bearing interest at rates ranging from 5% to 5.53%, maturing annually from September
1, 2019 through September 1, 2027. A portion of the proceeds was used to repay a portion of the 1995
Promissory Notes.
All debt is payable from limited ad valorem property taxes levied on all taxable property within the District.
As of March 31, 2006, annual debt service requirements to maturity are as follows:
Promissory Notes
Promissory Notes
Fiscal Year
2007
2008
2009
2010
2011
2012-2016
2017-2021
2022-2024
Total
Lease Revenue Bonds
Principal
$ 149,355
156,613
178,964
164,738
175,681
4.289,804
40,762
1,500,000
$ 6,655,917
Interest to
Maturity
$ 318,185
311,227
303,620
295,258
288,115
846,917
377,587
187,500
$ 2,928,409
Lease Revenue Bonds
Total
$ 467,540
467,840
482,584
459,996
463,796
5,136,721
418,349
1,687,500
$ 9,584,326
Fiscal Year Principal
2007
2008
2009
2010
2011
2012-2016
2017-2021
2022-2026
2027-2031
2032-2035
Less unaccreted interest
Total
$ 3,110,000
3,505,000
3,865,000
4,315,000
4,795,000
25.154,675
20,173,185
13,792,302
16,520,491
11,829,539
$ 107,060,192
Accreted
Interest
5,305,325
25,039,952
29,966,204
34,807,867
3,905,462
(82,503,973)
$ 16,520,837
Interest
$ 3,584,690
3,429,965
3,254,959
3,056,914
2,832,534
10,299,326
6,841,637
5,704,175
3.556,267
1,179,125
$43,739,592
Total
$ 6,694,690
6,934,965
7,119,959
7,371,914
7,627,534
40,759.326
52,054,774
49,462.681
54,884.625
16,914,126
(82,503,973)
$ 167,320,621
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006
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 $826,156 was received during the year ended March 31, 2006.
NOTE 8 — EMPLOYEES' RETIRMENT PLAN
Plan Description
The District's defined benefits pension plan, Public Employees' Retirement System (PERS), provides retirement
and disability benefits, annual cost -of -living adjustments, and death benefits to plan members and beneficiaries.
The PERS is part of the miscellaneous portion of the California Public Employees' Retirement System
(CalPERS), an agent multiple employer plan administered by CalPERS, which acts as a common investment and
administrative agent for participating public employers within the State of California. A menu of benefit
provisions as well as other requirements are established by State statutes within the Public Employees' Retirement
Law. The District selects optional benefits through District resolution. A separate report for the District's plan is
not prepared; however, CalPERS issues a separate comprehensive annual financial report. Copies of the
CalPERS' annual financial report may be obtained from the CalPERS Executive Office at 400 P Street,
Sacramento, CA 95814.
Funding Policy
Active members in the PERS are required to contribute 7% of their annual covered salary, which is currently paid
by the District on behalf of its employees. The District is required to contribute the actuarial determined
remaining amount necessary to fund the benefits for its members. The actuarial methods and assumptions used
are those adopted by the CalPERS Board of Administration. The required employer contribution rate for the year
ended March 31, 2006, was 5.339%. The contribution requirements of the plan are established by State statute
and the employer contribution rate is established and may be amended by CalPERS.
Annual Pension Cost
For fiscal year 2006, the District's annual pension cost for CalPERS was equal to the District's required and
actual contributions, which were determined as part of the June 30, 2004, actuarial valuation using the entry age
normal actuarial cost method. The actuarial assumption included the following:
Investment rate of return
Projected salary increases . . .
Inflation
Payroll growth
Individual salary growth
7.75% (net of administrative services)
3.25% to 14.45% depending on age, service and type
of employment
3.00%
3.25%
A merit scale varying by duration of employment
coupled with an assumed annual inflation component
of 3.00% and an annual production growth of 0.25%
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006
The actuarial value of assets was determined using a technique that smoothes the effect of short-term volatility in
the market value of investment over a two to five year period depending on the size of investment gains and/or
losses. Unfunded actuarial accrued liability (UAAL) (or excess assets) is being amortized as a level percentage of
projected payroll on a closed basis. The amortization period of any unfunded actuarial liabilities of the District
end on June 30, 2014.
THREE YEAR TREND INFORMATION FOR PERS
Fiscal Year
Ending
3/31/2004
3/31/2005
3/31/2006
Annual
Pension Cost
(APC)
$ 373,614
519,337
785,982
Percentage of APC Net Pension
Contributed Obligation
100%
100%
100%
SCHEDULE OF FUNDING PROGRESS
(In Millions)
Valuation
Date
Accrued Acturial
Liabilities Assets
6/30/2003 $ 2,597 $ 2,373
6/30/2004*
2,746 2,461
* Most recent information available
Unfunded
Liabilities
(UL)
$ 224
285
Funded
Ratio
Annual
Covered
Payroll
91.4% $ 725
89.6% 744
UL as a%
of Payroll
30.9%
38.3%
Because the Agency's individual plan consists of less than 100 members, it is required to participate in a risk
pool, and has done so for the past 2 fiscal years. The above Schedule of Funding Progress presents information
on the risk pool as a whole and not on the Agency's individual plan. Data on the funding progress of the pool
prior to March 31, 2004 is not available.
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 (CAJPIA). The CAJPIA is composed of 91 California public entities and is organized under a joint
powers agreement pursuant to California Government Code Section 6500 et seq. The purpose of the CAJPIA 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 CAJPIA'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.
The District did not have settled claims that exceed the District's insurance coverage in any of the past 3 years.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006
Self -Insurance Programs of the CAJPIA
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 $30,001 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 $5,000,000 per occurrence and $50,000,000 annual aggregate.
Workers Compensation: The District also participates in the workers compensation pool administered by the
CAJPIA. 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 $50,001 to $100,000 per claim are
pooled based on the member's losses under its retention level. Costs between $100,001 and $500,000 per claim
are pooled based on payroll. Costs in excess of $500,000 are paid by excess insurance purchased by the CAJPIA.
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 CAJPIA. The policy covers sudden and gradual pollution of scheduled
property, streets, and storm drains owned by the District. Coverage is on a claims -made basis. There is a $50,000
deductible. The CAJPIA has a limit of $50,000,000 for the 3 -year period from July 1, 2005 through July 1, 2008,
with reinstatement of $50,000,000 if the initial $50,000,000 is depleted. Each member of the CAJPIA has a
$10,000,000 limit during the 3 -year term of the policy.
Property Insurance: The District participates in the all-risk property protection program of the CAJPIA. This
insurance is underwritten by several insurance companies. The District property is currently insured according to
a schedule of covered property submitted by the District to the CAJPIA. There is a $5,000 per loss deductible.
Premiums for the coverage are paid annually and are not subject to retroactive adjustments.
NOTE 10 — 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 San 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 and 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.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006
NOTE —11— 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
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REQUIRED SUPPLEMENTARY INFORMATION
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
GENERAL FUND
BUDGETARY COMPARISON SCHEDULE
FOR THE YEAR ENDED MARCH 31, 2006
REVENUES
Property tax
Grant income
Investment income
Property management - rents
Other income
Total Revenues
EXPENDITURES
Current
Salaries
Benefits
Directors
Services and supplies
Capital outlay
New land purchases
Land acquisition support costs
Structures and improvements
Equipment
Vehicles
Construction in progress
Debt service
Principal repayment
Interest and fiscal charges
Refunding bond issuance costs
Total Expenditures
Excess (deficiency) of
revenues over expenditures
Other Financing Sources (Uses):
Proceeds from promissory notes
Transfers in
Tansfers out
Unrealized gain on investments
Net Financing Sources (Uses)
NET CHANGE IN FUND BALANCES
Fund Balance - Beginning
Fund Balance - Ending
Budgeted Amounts
(GAAP Basis)
Original Final
$ 18,682,000
3,230,000
1,110,000
813,000
20,000
23,855,000
$ 18,682,000
3,230,000
1,110,000
813,000
20,000
23,855,000
Actual
(GAAP Basis)
$ 20,153,853
3,116,147
1,392,777
826,156
311,821
25,800,754
Variances -
Positive
(Negative)
Final
to Actual
$ 1,471,853
(113,853)
282,777
13,156
291,821
1,945,754
5,454,956 5,516,224 5,422,075 94,149
1,767,890 1,812,604 1,804,539 8,065
23,000 29,000 30,500 (1,500)
2,666,792 2,696,123 2,175,004 521,119
20,000,000 19,755,120 4,251,000 15,504,120
219,875 394,575 273,293 121,282
1,118,463 1,047,330 26,248 1,021,082
61,000 61,000 51,595 9,405
284,500 284,500 232,976 51,524
- 587,472 (587,472)
2,812,236 2,812,236 7,322,236 (4,510,000)
4,149,578 4,149,578 4,103,090 46,488
- - 219,653 -
38,558,290 38,558,290 26,499,681 12,058,609
(14,703,290) (14,703,290) (698,927) 14,004,363
4,992,934
6,520,974
(6,520,974)
177,021
4,992,934
6,520,974
6,520,974
177,021
6,697,995
5,169,955
4,471,028
(14,703,290)
44,760,314
$ 30,057,024
(14,703,290)
44,760,314
$ 30.057,024
44,760,314
$ 49,231,342
20,702,358
$ 20,702,358
The accompanying notes are an integral part of these financial statements.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
GENERAL FUND (CONTINUED)
BUDGETARY COMPARISON SCHEDULE
FOR THE YEAR ENDED MARCH 31, 2006
Explanation of difference between budgetary inflows and outflows and GAAP
revenues and expenditures:
Total revenues:
Actual amounts (budgetary basis) "total revenues" from the budgetary comparison
schedule
Difference - budget to GAAP:
Budget schedule includes results from debt service fund and are reclassified to the
debt service fund for GAAP reporting
$ 25,800,754
(205,434)
Total revenues as reported on the statement of revenues, expenditures and changes
in fund balance - general fund $ 25,595,320
Total expenditures:
Actual amounts (budgetary basis) "total expenditures" from the budgetary
comparison schedule
Difference - budget to GAAP:
Budget schedule includes results from debt service fund and are reclassified to the
debt service fund for GAAP reporting
Total expenditures as reported on the statement of revenues, expenditures and
changes in fund balance - general fund
See accompanying note to supplementary information.
$ 26,499,681
(11,644,979)
$ 14,854,702
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTE TO REQUIRED SUPPLEMENTARY INFORMATION
MARCH 31, 2006
Budgets and Budgetary Data
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.
See accompanying note to supplementary information.
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Vavrinek, Trine, Day & Co., LIP
Certified Public Accountants & Consultants
VALUE THE DIFFERENCE
INDEPENDENT AUDITORS' 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 the financial statements of the governmental activities, and each fund of Midpeninsula Regional
Open Space District as of and for the year ended June 30, 2006, which collectively comprise the Midpeninsula
Regional Open Space District's basic financial statements and have issued our report thereon dated May 25, 2006.
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.
Internal Control Over Financial Reporting
In planning and performing our audit, we considered Midpeninsula Regional Open Space District's internal
control over financial reporting in order to determine our auditing procedures for the purpose of expressing our
opinions on the financial statements and not to provide an opinion on the internal control over financial reporting.
Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the
internal control that might be material weaknesses. A material weakness is a reportable condition in which the
design or operation of one or more of the internal control components does not reduce to a relatively low level the
risk that misstatements caused by error or fraud in amounts that would be material in relation to the financial
statements being audited may occur and not be detected within a timely period by employees in the normal course
of performing their assigned functions. We noted no matters involving the internal control over financial
reporting and its operation that we consider to be material weaknesses.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Midpeninsula Regional Open Space District's financial
statements are free of 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 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.
260 Sheridan Avenue, Suite 440 Palo Alto, CA 94306 4%50,462.0400 Fax: 650.462.0500 www.vtdcpa.com
FRESNO • LAGUNA HILLS • PALO ALTO - PLEASANTON • RANCHO CUCAMONGA
This report is intended solely for the information and use of the Governing Board, management, the California
Department of Education, the State Controller's Office, and pass -through entities and is not intended to be and
should not be used by anyone other than these specified parties.
ic -7-4,4442,
Path Alto, California
May 25, 2006
1(ALLP
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