HomeMy Public PortalAboutAudit Report - District- FY05I
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
ANNUAL FINANCIAL REPORT
MARCH 31, 2005
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
TABLE OF CONTENTS
MARCH 31, 2005
FINANCIAL SECTION
Independent Auditors' Report 2
Management's Discussion and Analysis 4
Basic Financial Statements
Government -Wide Financial Statements
Statement of Net Assets 9
Statement of Activities 10
Fund Financial Statements
Governmental Funds - Balance Sheet 11
Governmental Funds - Reconciliation of the Governmental Funds Balance Sheet to the
Statement of Net Assets - 12
Governmental Funds - Statement of Revenues, Expenditures, and Changes in Fund Balance 13
Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and
Changes in Fund Balances to the District -Wide Statement of Activities 14
Notes to Financial Statements 15
REQUIRED SUPPLEMENTARY INFORMATION
General Fund - Budgetary Comparison Schedule 30
Note to Supplementary Information 32
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., LIP
Cerlilied 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 major fund of
the Midpeninsula Regional Open Space District (the District), as of and for the year ended March 31, 2005, 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 opinion.
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 major fund of the Midpeninsula Regional Open Space
District, as of March 31, 2005, 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 24, 2005, 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 assessing the results of our audit.
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3880 South Bascom Avenue Suite 215 San Jose, CA 95124 Tel: 408.558.0770 Fax: 408.558.0765 www.vtdcpa.com
FRESNO • LAGUNA HILLS • PALO ALTO • PLEASANTON • RANCHO CUCAMONGA • SAN JOSE
The required supplementary information, including management's discussion and analysis on pages 4 through 8
and budgetary comparison information on pages 30 through 32, are not a required part of the basic financial
statements, but are supplementary information required by the Governmental Accounting Standards Board
(GASB). 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.
\ItcotmiiikTitmuLcii 1LP
San Jose, California
May 24, 2005
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS
MARCH 31, 2005
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, 2005.
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 2005 fiscal year was responding 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 a gap 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 hybrid March fiscal year, this revenue loss breaks down, on an accrual basis,
to approximately $1.57 million in fiscal 2005, $1.74 million in fiscal 2006 and $0.16 million in fiscal 2007. The
District responded to the announcement of ERAF III by reducing its expenditure budget for fiscal 2005 by
approximately $1.4 million, or 4.5%, and, on an operating basis, excluding debt service and land purchases, the
District held its expenditures approximately $0.8 million, or 7.6%, under this amended budget.
Underlying tax revenue growth in fiscal 2005, before the temporary "take -away," was above average, about 5.5%,
compared to 1.8% tax revenue growth in fiscal 2004. The District held operational spending, excluding debt service
and land purchases, approximately one percentage point below this rate.
The District added $6.69 million of land in fiscal 2005. Land acquisition was unusually efficient as acquisition -
related grant income of $2.1 million covered 31% of the added land value, a much higher percentage than in any
recent year.
The assets of the District exceeded liabilities at the close of the 2005 fiscal year by•$165.4 million (net assets). Of
this amount, $117.9 million is invested in capital assets, net of related debt, $2.7 million is restricted by the terms of
existing District debt, and the remaining $44.8 million is unrestricted.
The District's total net assets increased by $7.1 million in fiscal 2005.
The District's total long-term obligations increased by $0.2 million, to $130.4 million, as accretion on capital
appreciation bonds and amortization of prior refunding costs slightly exceeded principal repayments. The District
issued no new debt in fiscal 2005.
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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 second 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 (MD&A) —
for State and Local Governments.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS
MARCH 31, 2005
NET ASSETS
Statement of Net Assets — Fiscal Years Ending March 31, 2005 and 2004
2005 2004 Change
Assets:
Current assets $ 49,807,994 $ 50,728,891 $ (920,897)
Capital assets 246,874,365 238,988,627 7,885,738
Total assets 296,682,359 289,717,518 6,964,841
Liabilities:
Accounts payable and other liabilities 876,158 1,192,902 (316,744)
Long-term liabilities 130,447,292 130,257,307 189,985
Total liabilities 131,323,450 131,450,209 (126,759)
Net assets:
Invested in capital assets,
net of related debt 117,936,279 110,692,983 7,243,296
Restricted 2,662,316 2,517,934 144,382
Unrestricted 44,760,314 45,056,392 (296,078)
Total net assets $ 165,358,909. $ 158,267,309 $ 7,091,600
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Analysis of Net Assets
The District's assets at the close of this fiscal year are $165.4 million more than its liabilities. This is the result of
the District's inventory of capital assets. The investment in capital assets, $117.9 million consists primarily of the
District's 50,000 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 $2.7 million for debt service. Unrestricted net assets are used to
finance additional land acquisition projects.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS
MARCH 31, 2005
Changes in Net Assets — Fiscal Years Ending March 31, 2005 and 2004
Revenues:
Program revenue:
Charges for services $ 786,106 $ 756,368 $ 29,738 3.9%
Grants and contributions 2,266,274 2,512,862 (246,588) -9.8%
General revenue:
General property tax 18,587,448 19,113,761 (526,313) -2.8%
Investment income 935,265 609,575 325,690 53.4%
Other 342,461 276,993 65,468 23.6%
Total Revenues 22,917,554 23,269,559 (352,005) -1.5%
2005 2004 Change % Change
Expenses
Change in net assets
15,825,954 14,810,841 1,015,113 6.9%
$ 7,091,600 $ 8,458,718 $ (1,367,118) -16.2%
Analysis of Change in Net Assets
For the year ended March 31, 2005, the District's net assets increased by $7.1 million. Salaries and benefits
represented 39% of expenses compared to 40% in fiscal 2004. Salaries and benefits increased 4.1% over the prior
fiscal year. Salaries increased by 1.3% while benefits, principally retirement and group insurance costs, rose by
15.8%. The ratio of benefit costs to salaries increased from 23.9% to 27.3%.
Program revenues include rental income, grants and donations. The major generator of current year program
revenue was a $1.69 million grant from the California Coastal Conservancy to reimburse the District for a portion
of a land acquisition made in fiscal year 2004.
Overall tax revenue in fiscal 2005 decreased by 2.8% due to the impact of the ERAF III "take -away." Excluding
the approximately $1.57 million impact of this temporary measure, the underlying tax revenue growth was above
average, about 5.5%. ERAF III ends in June 2006.
Investment income increased significantly due to investment of the cash proceeds, $10 million, from the issuance
of the 2004 Revenue Bonds in fiscal year 2004.
GENERAL FUND
The General Fund balance sheet includes all District accounts except for debt and capital assets. At March 21,
2005, the General Fund had a fund balance of $44.8 million, down $0.7 million from the prior year-end. All but
$0.1 million of this fund balance is unreserved and designated for future land acquisitions, including $20 million
budgeted for land purchases in fiscal year 2006. Land purchases represented 39% of total General Fund
expenditures in fiscal year 2005, down from 50% in fiscal year 2004. This percentage varies significantly from
year to year due to the uncertain timing of completing complicated land purchase transactions, ranging from 31%
to 76% during this decade.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS
MARCH 31, 2005
DEBT SERVICE FUND
The only asset in the Debt Service Fund, $3.1 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 2005 was approximately $6.9 million, consisting of $4.4 million of principal and $2.5
million of interest.
CAPITAL ASSETS
As of March 31, 2005, the District's investment in capital assets is $246.9 million, net of accumulated
depreciation. The District added $6.7 million of land in fiscal year 2005, representing 84% of the total increase in
capital assets and has committed $0.8 million of its fund balance for various uncompleted capital projects
included in construction in progress. Additional information on the District's capital assets can be found in Note
5 in the Notes to the Basic Financial Statements.
LONG-TERM OBLIGATIONS
As of March 31, 2005, the District's long-term liabilities consist of $0.7 million in compensated absences, $2.1
million of subordinated notes issued to sellers in District land purchase transactions, $4.6 million of promissory
notes sold to the public in 1995 and rated A+ by Standard and Poor's, $109.3 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, and $13.8
million of accreted interest, unamortized premium and unamortized loss on refunding. The District did not issue
any debt in fiscal year 2005. 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's financial results compared to the
original budget adopted in March 2004 and the final budget adjusted in December 2004. In the December
revision, budgeted revenue was reduced by $1.7 million and budgeted expenditures were reduced by $1.4 million
in response to the imposition of the two year shift of property tax revenue from local governments to the State,
ERAF III.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
MANAGEMENT'S DISCUSSION AND ANALYSIS
MARCH 31, 2005
Total District revenue in fiscal 2005 was $0.6 million (2.5%) below budget due to delays in completing land
acquisition projects with committed Proposition 40 grant funding. Land acquisition -driven grant income was $1.8
million below budget. Expenditures for land purchases, $6.4 million, were $8.4 million below budget, Many of
these delayed land acquisition projects are expected to be completed, and associated grant income received, in
fiscal 2006. Tax revenue exceeded the final budget by $1.1 million as assessed valuations increased at an above
average rate, especially in the San Mateo County portion of the District. Investment income exceeded the budget
due to delays in completing land purchases and, therefore, holding higher cash balances than budgeted.
Excluding land purchases and debt service, fiscal year 2005 expenditures were approximately $0.8 million, or
7.6%, below the final budget. Salaries and benefits were $0.2 million, or 3%, below budget, services and supplies
cost $0.4 million, or 16%, less than budget, and non -land capital spending was $0.2 million, or 11%, below
budget. This budget performance was within the normal range of recent years (89% to 94% of budget), except
that non -land capital spending was closer to budget than usual.
ECONOMIC FACTORS AND NEXT YEAR'S BUDGET
The Board of Directors adopted the District's budget for fiscal year 2006 on March 23, 2005. This budget
includes the impact of a full year of ERAF III property tax "take -away," $1.74 million. Including this "take-
away," overall tax revenue cash receipts are expected to increase by $0.4 million, or 2.4%. This assumes a
continued above -average overall growth in underlying property tax revenue, 5.3%, due to continuing strength in
the residential property market in both Santa Clara and San Mateo County portions of the District, It is assumed
that the large reductions in unsecured property taxes, due to the downward assessments of commercial property in
Silicon Valley, are slowing. The District receives about 2/3 of its tax revenue from Santa Clara County and 1/3
from San Mateo County. ERAF III will end in June 2006, which will allow a large recovery in District tax
revenue 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 2006 budget includes $348,000 of spending related to the Coastside Protection Program. However, the
District is working on several land acquisition projects in the foothills of the coastside area.
The total land acquisition budget is $20 million in fiscal 2006, partially covered by $2.8 million of associated
acquisition -related grant income. Debt service requirements are $7.0 million. If all revenues and expenditures
occur as budgeted, the District's cash position would decrease by $14.5 million in fiscal year 2006.
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, 2005
Governmental
Assets Activities
Cash and investments $ 39,665,703
Receivables
Taxes 5,315,083
Interest 169,150
Grant 33,853
Lease 32,448
Restricted cash and investments 3,067,442
Restricted interest receivable 15,109
Note receivable 261,360
Deferred charges 1,247,846
Capital assets
Nondepreciable
Land 237,686,310
Construction in progress 2,036,726
Depreciable, net of accumulated depreciation
Structures and improvements 4,004,662
Infrastructure 1,979,759
Equipment 275,534
Vehicles 891,374
Total assets 296,682,359
Liabilities
Accounts payable 329,416
Interest payable 420,235
Other accrued liabilities 69,858
Deposits payable 54,549
Prepaid rent 2,100
Long-term liabilities
Due within one year 2,718,846
Due in more than one year 127,728,446
Total liabilities 131,323,450
Net Assets
Invested in capital assets, net of related debt 117,936,279
Restricted for debt service 2,662,316
Unrestricted 44,760,314
Total net assets $ 165,358,909
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, 2005
Program expenses - general government:
Salaries $ (4,889,533)
Benefits (1,320,516)
Directors (22,700)
Services and supplies (2,114,591)
Depreciation
(473,903)
Interest
(7,004,711)
Total prgram expenses (15,825,954)
Program revenues:
Charges for services 786,106
Capital grants and operating contributions 2,266,274
Total program revenues 3,052,380
Net program expenses (12,773,574)
General revenues:
General property tax 18,587,448
Investment income 935,265
Miscellaneous 342,461
Total general revenues 19,865,174
Changes in net assets 7,091,600
Net assets - beginning of the year 158,267,309
Net assets - end of the year $165,358,909
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, 2005
ASSETS
Cash and investments
Receivables
Taxes
Interest
Grant
Lease
Restricted cash and investments
Note receivable
Total assets
LIABILITIES AND
FUND BALANCES
Liabilities:
Accounts payable
Accrued liabilities
Deposits payable
Unearned rent
Deferred revenue
Total liabilities
Fund Balances:
Reserved for:
Debt service
Encumbrances
Unreserved, designated for:
Budgeted land acquisitions
Future capital purchases
Total fund balance
Total Liabilities and
Fund Balances
General
Fund
Debt
Service
Fund
Total
$ 39,665,703 $
5,315,083
169,150
33,853
32,448
261,360
- $ 39,665,703
15,109
3,067,442
$45,477,597 $ 3,082,551
5,315,083
184,259
33,853
32,448
3,067,442
261,360
$ 48,560,148
$ 329,416 $
69,858
54,549
2,100
261,360
$ 329,416
69,858
54,549
2,100
261,360
717,283
717,283
129,634
20,000,000
24,630,680
44,760,314 3,082,551
3,082,551
3,082,551
129,634
20,000,000
24,630,680
47,842,865
$45,477,597 $ 3,082,551 $ 48,560,148
The accompanying notes are an integral part of these financial statements.
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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, 2005
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Amounts Reported for Governmental Activities in the Statement of
Net Assets are Different Because:
Total Fund Balance - Governmental Funds
$ 47,842,865
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 $ 252,758,409
Accumulated depreciation is (5,884,044) 246,874,365
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. 261,360
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. 1,247,846
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. (420,235)
Long-term liabilities, including bonds payable, are not due and payable
in the current period and, therefore, are not reported as liabilities in the
funds:
Long-term liabilities at year end consist of:
Promissory notes (6,613,153)
Lease revenue bonds (109,310,076)
Accreted interest on capital appreciation bonds (13,800,259)
Compensated absences (vacations) (723,804) (130,447,292)
Total Net Assets - Governmental Activities $ 165,358,909
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, 2005
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
Total Expenditures
Excess (deficiency) of
revenues over expenditures
Other Financing Sources (Uses):
Transfers in
Tansfers out
Unrealized gain on investments
Net Financing Sources (Uses)
NET CHANGE IN FUND BALANCES
Fund Balance - Beginning
Fund Balance - Ending
General
Fund
Debt
Service
Fund
Total
$18,587,448
2,266,274
780,278
786;106
182,961
22,603,067
4,837,126
1,320,516
22,700
2,114,591
6,418,295
112,732
250,000
41,536
60,506
1,317,072
16,495,074
6,107,993
(6,839,084)
30,082
(6,809,002)
(701,009)
45,461,323
$ 44,760,314
The accompanying notes are an integral part of these financial statements.
$ $ 18,587,448
2,266,274
130,011 910,289
786,106
182,961
130,011 22,733,078
4,837,126
1,320,516
22,700
2,114,591
6,418,295
112,732
250,000
41,536
60,506
1,317,072
2,495,249 2,495,249
4,395,677 4,395,677
6,890,926 23,386,000
(6,760,915) (652,922)
6,839,084 6,839,084
(6,839,084)
30,082
6,839,084 30,082
78,169 (622,840)
3,004,382 48,465,705
$ 3,082,551 $ 47,842,865
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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, 2005
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 depreciation exceeds capital outlays in the period.
Depreciation expense $ (473,903)
Donation of capital assets 159,500
Capital outlays 8,200,141 7,885,738
Repayment of notes receivable is reported as a 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. The District's loan
receivable was reduced because loan payments were received. (5,106)
Bond 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. (42,420)
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 66,213
Amortization of bond premium 19,716
Accrued interest on capital appreciation bonds (2,539,437)
Amortization of deferred amounts (113,106) (2,566,614)
Repayment of long-term debt principal 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 75,249
Lease revenue bonds 2,420,000 2,495,249
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 $52,407. (52,407)
Change in Net Assets of Governmental Activities $ 7,091,600
The accompanying notes are an integral part of these financial statements.
$ (622,840)
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
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
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.
15
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
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.
16
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
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 r�
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 L
of fiscal year-end.
ri
Non -exchange transactions, in which the District receives value without directly giving equal value in return, L
include property taxes, certain grants, entitlements, and donations. Revenue from property taxes is recognized in
thefiscal year in which the taxes are earned and become measurable and available. Revenue from certain grants, 'F "
entitlements, and donations is recognized in the fiscal year in which all eligibility requirements have been L
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. F,
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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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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
Expenses/Expenditures
On the accrual basis of accounting, expenses are recognized at the lime 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.
18
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
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, 2005
The Counties assess properties and bill for the collection of property taxes as follows:
Santa Clara San Mateo
Secured Unsecured Secured Unsecured
Valuation/lien
dates
Levy dates
Due dates
Delinquent after
January 1 January 1 January 1 January 1
October 1 July 1 On or before July 1
November 1
50% on November 1 Upon receipt of billing 50% on November 1 July 1
50% on February 1 50% on February 1
December 10 August 31 December 10 August 31
(for November) (for November)
April 10 April 10
(for February) (For February)
Fund Equity/Net Assets
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.
20
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
NOTE 3 — CASH AND INVESTMENTS
Total cash and investments are as follows:
Governmental
Carrying
Amount
Cash:
Cash on hand $ 800
Deposits 65,067
Total cash 65,867
Investments:
In Santa Clara County's pool 23,586,367
With fiscal agent 13 083,424
Other 5,997,487
Total investments 42,667,278
Total cash and investments $ 42,733,145
Deposits
At March 31, 2005, the carrying amount of the District's deposits was $65,067 and the bank balance was
$193,249. The difference between the bank balance and the carrying amount represents outstanding checks and
deposits in transit. Of the bank balance, $100,000 was covered by federal depository insurance and $93,249 was
collateralized by the pledging financial institutions as required by Section 53652 of the California Government
Code.
Under the California Government Code, a financial institution is required to secure deposits in excess of those
covered by federal depository insurance made by state or local governmental units by pledging government
securities held in the form of an undivided collateral pool. The market value of the pledged securities in the
collateral pool must equal at least 110% of the total amount deposited by the public agencies. California law also
allows financial institutions to secure public deposits by pledging first deed mortgage notes having a value of
150% of the secured public deposits. The collateral must be held at the pledging financial institution's trust
depaitment or other bank, acting as the pledging financial institution's agent, in the District's name.
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, 2005.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
Information is not available on whether the various mutual finds 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, 2005. 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.
For financial reporting purposes, investments are categorized to give an indication of the level of custodial credit
risk assumed by the entity at year-end. Category 1 includes investments that are insured or registered, or
securities held by the District or its agent in the District's name. Category 2 includes uninsured and unregistered
investments, with securities held by the counterparty's trust department or agent in the District's name. Category
3 includes uninsured and unregistered investments for which the securities are held by the counterparty, or by its
trust department or agent, but not in the District's name.
Investments at March 31, 2005, are as follows:
Reported in
Governmental Funds
Category 1
U.S. Government Bonds $ 3,986,800
Intl Lease Finance Discount Commercial Paper 996,000
Uncategorized:
County of Santa Clara Treasurer's investment pool 23,586,367
Guaranteed investment contracts 13,083,424
Money market mutual funds 1,014,687
$ 42,667,278
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 1.s` of each month and late if not paid by the 10th, with the final payment scheduled December 1, 2022. The
outstanding balance at March 31, 2005, is $261,360.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
NOTE 5 - CAPITAL ASSETS
Capital asset activity for the fiscal year ended March 31, 2005, 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
Capital Projects Commitments
Balance
March 31, 2004
$ 230,995,783
774,734
231,770,517
8,209,033
2,304,791
611,557
1,502,870
Additions
$6,690,527
1,317,072
8,007,599
270,911
34,169
41,536
60,506
407,122
Balance
Deductions March 31, 2005
55,080
55,080
$ 237,686,310
2,036,726
239,723,036
8,479,944
2,338,960
653,093
1,563,376
12,628,251
13,035,373
244,398,768
8,414,721
55,080
252,758,409
4,200,927 274,355
294,955 64,246
344,305 33,254
569,954 102,048
5,410,141 473,903
4,475,282
359,201
377,559
672,002
5,884,044
$ 238,988,627 $7,940,818 $ 55,080 $ 246,874,365
As of March 31, 2005, the District had $847,933 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
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 2004-2005. The one donated easements
came from a separate private family/citizens/living trust. These gift was recorded at a total value of $159,500.
23
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
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
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
Promissory Notes
Balance
April 1, 2004 Additions Deductions
$ 4,600,000 $
74,277
36,727
250,000
227,398
1,500,000
6,688,402
25,325,199
27,743,021
27,246,962
31,900,010
$ 45,000
12,925
6,515
Balance
March 31, 2005
$ 4,555,000
61,352
30,212
250,000
10,809 216,589
1,500,000
75 249
1,060,000
675,000
685,000
112;215,192
599,677
(1,178,183)
111,636,686
3,686,508
4,319,750
3,242,468
12,096
11,260,822
671,397
$ 130,257,307
2,420,000
19,716
(113,106)
2,326 610 109,310,076
Due in
One Year
$ 45,000
13,830
6,906
11,500
6613,153
77 236
24,265,199
27,068,021
26,561,962
31,900,010
1,185,000
765,000
775,000
10,000
2,735,000
19,716
(113,106)
2,641 610
109,795,192
579,961
(1,065,077)
617,471
941,440
907,296
73,230
2,539,437
52,407
$ 2,591,844
4,303,979
5,261,190
4,149,764
85 326
13,800,259
723 804
$ 2,401,859 $ 130,447,292
$ 2,718,846
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.
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 1, 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.
24
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
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 1, 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.
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 1, 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.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
As of March 31, 2005, annual debt service requirements to maturity are as follows:
Promissory Notes
Promissory Notes
Fiscal Year
2006
2007
2008
2009
2010
2011-2015
2016-2020
2021-2025
Total
Lease Revenue Bonds
Principal
$ 77,236
79,355
81,613
108,964
94,738
4,609,101
62,143
1,500,000
$ 6,613,150
Interest to
Maturity
$ 429,166
424,010
418,669
412,278
404,483
1,409,204
380,976
262,500
$ 4,141,286
Lease Revenue Bonds
Total
$ 506,402
503,365
500,282
521,242
499,221
6,018,305
443,119
1,762,500
$ 10,754,436
Fiscal Year Principal
2006
2007
2008
2009
2010
2011-2015
2016-2020
2021-2025
2026-2030
2031-2035
Less unaccreted interest
Total
NOTE 7— RENTAL INCOME
$ 2,735,000
3,110,000
3,505,000
3,865,000
4,315,000
26,355,000
21,118,410
13,706,752
15,542,260
15,542,770
$ 109,795,192
Accreted
Interest
5,305,325
25,039,952
29,966,204
34,807,866
3,905,463
(85,224,551)
$ 13,800,259
Interest
$ .3,720,410
3,584,690
3,429,965
3,254,959
3,056,914
6,220,086
480,211
3,771,725
3,613,124
9,118,144
$ 40,250,228
Total
$ 6,455,410
6,694,690
6,934,965
7,119,959
7,371,914
37,880,411
46,638,573
47,444,681
53,963,250
28,566,377
(85,224,551)
$ 163,845,679
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 $786,106 was received during the year ended March 31, 2005.
26
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
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
CaIPERS' 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 CaIPERS Board of Administration. The required employer contribution rate for the year
ended March 31, 2005, 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
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For Fiscal year 2005, the District's annual pension cost for CaIPERS was equal to the District's required and
actual contributions, which were determined as part of the June 30, 2003, 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
8.25% (net of administrative services)
3.25% to 13.70% 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%
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.
27
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
THREE YEAR TREND INFORMATION FOR PERS
Annual
Fiscal Year Pension Cost Percentage of APC Net Pension
Ending (APC) Contributed Obligation
3/31/2003 $ 296,724 100%
3/31/2004 373,614 100%
3/31/2005 519,337 100%
SCHEDULE OF FUNDING PROGRESS
Entry Age
Normal Actuarial Unfunded/ Annual UAAL as
Valuation Accrued Value of (Overfunded) Funded Covered a % of
Date Liability Assets Liability Ratio Payroll Payroll
06/30/01 8,163,873 9,493,705 (1,933,192) 123.7% 3,696,670 -52.3%
06/30/02 9,267,640 9,971,988 (704,348) 107.6% 4,217,990 -16.7%
06/30/03 11,609,104 10,508,577 1,100,527 90.5% 4,542,178 24.2%
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.
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 $5,00,0,000 are currently paid by reinsurance. The
protection for each member is $5,000,000 per occurrence and $50,000,000 annual aggregate.
28
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2005
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 L
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 $20,000,000 for the 3 -year period from July 1, 2002 through June 30, r
2005, with reinstatement of $20,000,000 if the initial $20,000,000 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.
Lb
NOTE 10 — COMMITMENTS
During May 2000, the District and the County of Santa Clara (the County) entered into an agreement whereby the r
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.
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 managements, after consultation with counsel, the
liability, if any, resulting there from will not have a material effect on the District's financial position
29
REQUIRED SUPPLEMENTARY INFORMAHON
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
GENERAL FUND
BUDGETARY COMPARISON SCHEDULE
FOR THE YEAR ENDED MARCH 31, 2005
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
Total Expenditures
Excess (deficiency) of
revenues over expenditures
Other Financing Sources (Uses):
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
$ 19,258,000
4,037,000
765,000
783,000
200,000
25,043,000
$ 17,521,651
4,037,000
765,000
783,000
200,000
23,306,651
Actual
(GAAP Basis)
$ 18,587,448
2,266,274
910,289
786,106
182,961
22,733,078
Variances -
Positive
(Negative)
Final
to Actual
$ 1,065,797
(1,770,726)
145,289
3,106
(17,039)
(573,573)
5,197,764 4,976,134 4,837,126 139,008
1,395,358 1,369,210 1,320,516 48,694
23,000 23,000 22,700 300
2,718,144 2,524,210 2,114,591 409,619
15,000,000 14,835,000 6,418,295 8,416,705
209,000 166,050 112,732 53,318
400,000 300,000 250,000 50,000
39,000 41,683 41,536 147
164,000 60,550 60,506 44
1,994,414 1,439,803 1,317,072 122,731
2,495,249 2,495,249 2,495,249
4,395,677 4,395,677 4,395,677
34,031,606 32,626,566 23,386,000 9,240,566
(8,988,606) (9,319,915) (652,922) 8,666,993
30,082
30,082
30,082
30,082
(8,988,606)
45,461,323
$ 36,472,717
(9,319,915)
45,461,323
$ 36,141,408
The accompanying notes are an integral part of these financial statements.
(622,840)
45,461,323
$ 44,838,483
8,697,075
$ 8,697,075
30
MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
GENERAL FUND (CONTINUED)
BUDGETARY COMPARISON SCHEDULE
FOR THE YEAR ENDED MARCH 31, 2005
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
Total revenues as reported on the statement of revenues, expenditures and changes
in fund balance - general fund
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.
$ 22,733,078
(130,011)
$ 22,603,067
$ 23,386,000
(6,890,926)
$ 16,495,074
31
MIDPENINSULAREGIONAL OPEN SPACE DISTRICT
NOTE TO REQUIRED SUPPLEMENTARY INFORMATION
MARCH 31,
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.
L
Lu
r,
,
See accompanying note to supplementary information.
L.
32
Vavrinek, Trine, Day & Co., LLP
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 fmancial statements of Midpeninsula Regional Open Space District as of and for the year
ended March 31, 2005, and have issued our report thereon dated May 24, 2005. 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
opinion 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 over fmancial reporting that might be material weaknesses. A material weakness is a 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 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 grants, 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 that are required to be reported under Government Auditing
Standards.
33
3880 South Bascom Avenue Suite 215 San Jose, CA 95124 Tel: 408.558.0770 Fax: 408.558.0765 www.vtdcpa.com
FRESNO • LAGUNA HILLS • PALO ALTO • PLEASANTON • RANCHO CUCAMONGA • SAN JOSE
This report is intended solely for the information and use of the Board of Directors, management, and the State
Controller's Office and is not intended to be and should not be used by anyone other than these specified parties.
v'e�J T lel4 co. t_ __P
San Jose, California
May 24, 2005
ri
L5
34