HomeMy Public PortalAboutAudit Report - District- FY04MIDPENINSULA REGIONAL OPEN SPACE
DISTRICT
Independent Auditor's Reports,
Management's Discussion and Analysis,
Basic Financial Statements and
Required Supplementary Information
Year Ended March 31, 2004
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Year Ended March 31, 2004
Table of Contents
Page(s)
Independent Auditor's Report 1 - 2
Management's Discussion and Analysis (Required Supplementary Information) 3 - 8
Basic Financial Statements:
Government -wide Financial Statements:
Statement of Net Assets 9
Statement of Activities 10
Governmental Funds Financial Statements:
Balance Sheet 11
Reconciliation of the Balance Sheet
to the Government -wide Statement of Net Assets 12
Statement of Revenues, Expenditures and Changes in Fund Balances 13
Reconciliation of the Statement of Revenues, Expenditures and
Changes in Fund Balances to the Government -wide Statement of Activities 14
Notes to the Basic Financial Statements 15 - 32
Required Supplementary Information:
Budgetary Comparison Schedule - General Fund 33 - 34
Note to Required Supplementary Information 35
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MACIAS GINI & COMPANYLLP
Mt. Diablo Plaza
' 2175 N. California Boulevard, Ste. 645
Walnut Creek, California 94596
925.274.0190 PHONE
925.274.3819 FAX
Board of Directors
Midpeninsula Regional Open Space District
Los Altos, California
INDEPENDENT AUDITOR'S REPORT
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, 2004, which collectively comprise the District's basic financial statements as listed in the
table of contents. These fmancial statements are the responsibility of the management of the District.
Our responsibility is to express opinions on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States
of America and the standards applicable to financial audits contained in Government Auditing
Standards, issued by the Comptroller General of the United States. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free 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 major fund of the District as of
March 31, 2004, and the respective changes in financial position, thereof for the year then ended in
conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 2 to the basic financial statements, the District adopted the provisions of
Governmental Accounting Standards Board (GASB) Statement No. 34, Basic Financial Statements -
and Management's Discussion and Analysis - for State and Local Governments; GASB Statement No.
37, Basic Financial Statements - and Management's Discussion and Analysis - for State and Local
Governments: Omnibus; GASB Statement No. 38, Certain Financial Statement Note Disclosures;
GASB Statement No. 41, Budgetary Comparison Schedules - Perspective Differences; and GASB
Interpretation No. 6, Recognition and Measurement of Certain Liabilities and Expenditures in
Governmental Fund Financial Statements.
www.maciasgini.com
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CERTIFIED PUBLIC ACCOUNTANTS S MANAGEMENT CONSULTANTS
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In accordance with Government Auditing Standards, we have also issued our report dated
June 23, 2004, 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 grants. That
report is an integral part of an audit performed in accordance with Government Auditing Standards and
should be read in conjunction with this report in considering the results of our audit.
The management's discussion and analysis and the budgetary comparison schedule listed in the table of
contents are not a required part of the basic financial statements but are supplementary information
required by 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 do not express an opinion on it.
7Thet ys,, .zii 4- £1 ompenij t.1. P
Certified Public Accountants
Walnut Creek, California
June 23, 2004, except as to Note 3,
which is as of August 17, 2004
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Management's Discussion and Analysis
This section of the Midpeninsula Regional Open Space District's (the District) basic financial statements
presents a narrative overview and analysis of the District's financial activities for the fiscal year ended
March 31, 2004. We encourage readers to consider the information presented here in conjunction with
our basic financial statements.
FINANCIAL HIGHLIGHTS
• The District completed the sale of $31.9 million of its 2004 Revenue Bonds through the Midpeninsula
Regional Open Space District Financing Authority (the Authority). The objective of this debt issue
was to take advantage of the historic low interest rates to refinance $20.4 million of existing long-
term notes and lease debt and to provide approximately $10 million of additional funds for land
acquisition. The true interest cost of the 2004 Revenue Bonds is 4.94% and the average life is 22.7
years. In spite of the additional cash, the District's overall debt service cost is reduced in each of the
next eleven years.
• The District added $9.9 million of land in fiscal year 2004.
• The assets of the District exceeded liabilities at the close of the 2004 fiscal year by $158.3 million
(net assets). Of this amount, $110.7 million is invested in capital assets, net of related debt, $2.5
million is restricted by the terms of existing District debt and the remaining is unrestricted.
• The District's total net assets increased by $8.5 million.
• The District's total long-term obligations increased by $12.0 million, to $130.3 million primarily due
to the sale of 2004 Revenue Bonds and issuance of a $1.5 million land contract note.
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.
Government -wide Financial Statements
The government -wide financial statements consist of a statement of net assets and a statement of
activities. These statements are designed to provide readers with a broad overview of the District's
finances, in a manner similar to a private -sector business. They provide information about the activities
of the District as a whole and present a long-term view of the District's finances.
The Statement of Net Assets presents information on all of the District's assets and liabilities, with the
difference between the two reported as net assets. Over time, increases or decreases in net assets may
serve as a useful indicator of whether the financial position of the District is improving or deteriorating.
The Statement of Activities presents information showing how the District's net assets changed during the
most recent fiscal year. All changes in net assets are reported as soon as the underlying event giving rise
to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are
reported in this statement for some items that will result in cash flows in future fiscal periods (e.g.
uncollected taxes, and earned but unused vacation and other employee compensation).
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The Authority is included in our basic financial statements and is a legally separate entity for which the
District is financially accountable and that has substantially the same governing board as the District and
provides services entirely to the District.
Fund Financial Statements are designed to report information about groupings of related accounts,
which are used to maintain control over resources that have been segregated for specific activities. The
District, like other state and local governments, uses fund accounting to ensure and demonstrate
compliance with finance -related legal requirements. All of the funds of the District are categorized as
governmental funds.
Governmental funds are used to account for essentially the same functions reported as governmental
activities in the government -wide financial statements. However, unlike the government -wide financial
statements, governmental fund financial statements focus on near -term inflows and outflows of spendable
resources, as well as on balances of spendable resources available at the end of the fiscal year. Such
information may be useful in evaluating the District's near -term financing requirements.
Because the focus of governmental funds is narrower than that of the government -wide financial
statements, it is useful to compare the information presented for governmental funds with similar
information presented for governmental activities in the government -wide financial statements. By doing
so, readers may better understand the long-term impact of the District's expenditures, and changes in fund
balances provide a reconciliation to facilitate this comparison between government funds and
governmental activities.
The Balance Sheet — Governmental Funds shows the fiscal year-end balances for the General Fund and
the Debt Service Fund. The District's debt and capital assets are excluded from this balance sheet.
The Reconciliation of the Balance Sheet to the Government -wide Statement of Net Assets explains the
difference between the total District fund balance and the fund balance shown on the Governmental
Funds balance sheet.
The Statement of Revenues, Expenditures and Changes in Fund Balances — Governmental Funds breaks
down the District's financial activities of the fiscal year by the General Fund and the Debt Service Fund.
The Reconciliation of the Statement of Revenues, Expenditures and Changes in Fund Balances to the
Government -wide Statement of Activities explains the difference between the Statement of Activities and
the Statement of Revenues, Expenditures and Changes in Fund Balances.
NET ASSETS
This is the first 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. Because this reporting model changes significantly both the recording and presentation of
financial data, the District has not restated prior fiscal years for the purpose of providing comparative
information for the MD&A. In future years when prior -year information is available, a comparative
analysis of government -wide data will be included in this report.
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Statement of Net Assets
March 31, 2004
Assets:
Current assets $ 50,728,891
Capital assets 238,988,627
Total assets 289,717,518
Liabilities:
Accounts payable and other liabilities
Long-term liabilities
1,192,902
130,257,307
Total liabilities 131,450,209
Net assets:
Invested in capital assets, net of related debt 110,692,983
Restricted 2,517,934
Unrestricted 45,056,392
Total net assets $ 158,267,309
Analysis of Net Assets
The District's assets at the close of this fiscal year are $158.3 million more than its liabilities. This is
the result of the District's inventory of capital assets. The investment in capital assets, $110.7 million,
consists primarily of the District's nearly 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 $2.5 million for debt service. Unrestricted net assets are used to finance budgeted land acquisitions
and other future capital projects.
Changes in Net Assets
For the Year Ended March 31, 2004
Revenues:
Program revenues:
Charges for services — rents/leases $ 756,368
Operating grants and contributions 21,045
Capital grants and contributions 2,491,817
General revenues:
General property taxes 19,113,761
Investment income 609,575
Gain on sale of capital assets 178,642
Miscellaneous 98,351
Total revenues
Expenses
Change in net assets
Net assets, beginning of year
Net assets, end of year
23,269,559
14,810,841
8,458,718
149,808,591
$ 158,267,309
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Analysis of Change in Net Assets
For the year ended March 31, 2004, the District's net assets increased by $8.5 million. Salaries and
benefits represented 40% of expenses. Salaries and benefits increased 8.2% over the prior fiscal year.
Salaries increased by 6.5% while retirement and group insurance expenses rose by approximately 19.0%.
The ratio of retirement and group insurance expense to salaries increased from 18.3% to 21.4%.
Program revenues include rental income, grants and donations. The major generator of current year
increases to program revenue was a $1.25 million state Proposition 12 grant to reimburse the District for a
portion of a land acquisition made in fiscal year 2003.
Overall tax revenue in fiscal 2004 increased by 1.8% as reductions in unsecured property taxes and
supplemental taxes, due to vacant business facilities in Silicon Valley, offset modest increases in secured
property taxes. Tax revenue grew by 3.5% in the San Mateo County portion of the District and rose by
only 0.9% in the Santa Clara County portion.
Total investment (interest) income, including interest from debt reserve funds, was down $0.5 million, or
46%, due to lower interest rates on cash investments. The District invests most of its cash in the Santa
Clara County Pooled Investment Fund (the Fund). The yield on the Fund decreased from 2.85% in
September 2002 (mid -year for the District) to 1.68% in September 2003.
GENERAL FUND
The General Fund balance sheet includes all District accounts except for debt and capital assets. At
March 31, 2004, the General Fund had a fund balance of $45.5 million, up $9.1 million from the prior
year-end. All but $0.7 million of this fund balance is unreserved and designated for future land
acquisitions, including $15 million budgeted for land purchases in fiscal year 2005. Land purchases
represented 50% of total General Fund expenditures in fiscal year 2004. In fiscal year 2004, the General
Fund experienced an excess of revenue over expenditures (including capital expenditures, but excluding
debt service) of $3.5 million.
DEBT SERVICE FUND
The only asset in the Debt Service Fund, $3 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 2004 was approximately $6.3 million,
consisting of $2.8 million of principal and $3.5 million of interest. Due to the refinancing portion of the
2004 Revenue Bonds, fiscal year 2004 debt service was $0.6 million less than projected in the notes to
last year's District financial statements.
CAPITAL ASSETS
As of March 31, 2004, the District's investment in capital assets is $239.0 million (net of accumulated
depreciation). The District added $9.9 million of land in fiscal year 2004, representing 89% of the total
increase in capital assets and has committed $2.3 million of its fund balance for various uncompleted
capital projects included in the construction in progress. Additional information on the District's capital
assets can be found in Note 6 in the Notes to the Basic Financial Statements.
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LONG TERM OBLIGATIONS
As of March 31, 2004, 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, $112.2 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 $10.7 million of accreted interest, unamortized premium and
unamortized loss on refunding. District long term obligations increased by $12.0 million in fiscal year
2004 due to the impact of the sale of the 2004 Revenue Bonds. Additional information on the District's
long-term obligations can be found in Note 7 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 2003 and the final budget adjusted in November 2003.
Due to receipt of a $1.25 million Proposition 12 state grant and recognizing deferred revenue earned, total
District revenue exceeded budget by approximately $1.6 million, or 7%. This grant reimbursed the
District for a portion of the cost of a fiscal year 2003 land acquisition. Tax revenue was almost exactly on
budget. Rental income was also very close to budget, but interest income was below budget, mostly
because the budget included $105,802 of interest earned from debt reserve funds. Donations of cash and
land exceeded budget by approximately $330,000. The largest portion of this variance was a $200,000
bequest.
Excluding debt service and debt operations, total expenditures were $7.0 million, or 27% below the final
budget. Most of the budget variance was in capital spending. Land purchases totaled approximately $9.7
million, $5.6 million (37%) under the $15.3 million final budget. The timing of completion of land
purchases is difficult to predict. Likewise, spending on structures and improvements, construction in
progress and infrastructure was below budget by $873,970, or 47%. The budget for structures and
improvements proves to be optimistic given weather, permitting and construction delays. Over the prior
four fiscal years, actual spending for structures and improvements averaged approximately 50% of
budget. Non -capital spending, approximately $8.4 million, was about $0.5 million, or 6% below budget.
Over the prior four fiscal years, actual total operational spending averaged 92% of budget, with a range of
89% to 94% of budget.
ECONOMIC FACTORS AND NEXT YEAR'S BUDGET
The Board of Directors adopted the District's budget for fiscal year 2005 on March 24, 2004. This budget
assumed an overall 2% increase in property tax revenue: a 1 to 2% increase in Santa Clara County and a
3 to 4% increase in San Mateo County. The District receives about 2/3 of its tax revenue from Santa
Clara County and 1/3 from San Mateo County. This tax revenue budget assumes continued downward
assessment of commercial property in Santa Clara County, more than offset by reasonably strong
residential real estate activity in the District portions of both counties.
District's tax revenue in fiscal years 2005 and 2006 is now in some jeopardy due to the state budget
negotiations. If the governor's budget proposal is adopted, the District would likely lose between $2
million and $5 million of tax revenue in each of the next two state fiscal years. In response to this
potential take -away, District management and Board of Directors are currently considering what changes
to make to the fiscal year 2005 budget. The fiscal year 2005 budget also assumes that the District will
complete its proposed annexation of the southern coastal area of San Mateo County. Expenses related to
this activity are included in the fiscal year 2005 budget.
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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, 2004
Assets:
Cash and investments $ 40,867,423
Receivables:
Taxes 5,067,212
Interest 168,342
Grant 64,800
Restricted cash and investments 3,004,382
Note receivable 266,466
Deferred charges 1,290,266
Capital assets:
Nondepreciable
Land 230,995,783
Construction in progress 774,734
Depreciable, net of accumulated depreciation
Structures and improvements 4,008,106
Equipment 2,009,836
Vehicles 267,252
Infrastructure 932,916
Total assets 289,717,518
Liabilities:
Accounts payable 623,980
Interest payable 486,448
Other accrued liabilities 48,000
Deposits payable 34,474
Long term liabilities:
Due within one year 2,452,773
Due in more than one year 127,804,534
Total liabilities 131,450,209
Net assets:
Invested in capital assets, net of related debt 110,692,983
Restricted for debt service 2,517,934
Unrestricted 45,056,392
Total net assets $ 158,267,309
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Statement of Activities
For the Year Ended March 31, 2004
Program expenses - general government:
Salaries $ (4,729,961)
Benefits (1,140,168)
Directors (22,900)
Services and supplies (2,440,592)
Depreciation (457,376)
Interest (6,019,844)
Total program expenses (14,810,841)
Program revenues:
Charges for services 756,368
Operating contributions 21,045
Capital grants and contributions 2,491,817
Total program revenues 3,269,230
Net program expenses (11,541,611)
General revenues:
General property tax 19,113,761
Investment income 609,575
Gain on sale of capital assets 178,642
Miscellaneous 98,351
Total general revenues 20,000,329
Change in net assets 8,458,718
Net assets - beginning of the year 149,808,591
Net assets - end of the year $ 158,267,309
The notes to the basic financial statements are an integral part of this statement.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Balance Sheet
Governmental Funds
March 31, 2004
General Debt Service
Fund Fund
Total
Assets
Cash and investments $ 40,867,423 $ $ 40,867,423
Receivables:
Taxes 5,067,212 5,067,212
Interest 168,342 168,342
Grant 64,800 64,800
Restricted cash and investments 3,004,382 3,004,382
Note receivable 266,466 266,466
Total assets $ 46,434,243 $ 3,004,382 $ 49,438,625
Liabilities
Accounts payable $ 623,980 $ $ 623,980
Accrued liabilities 48,000 - 48,000
Deposits payable 34,474 - 34,474
Deferred revenue 266,466 - 266,466
Promissory notes
Total liabilities
Fund balances:
Reserved for:
Debt service
Encumbrances
Unreserved, designated for:
Budgeted land acquisitions
Future capital purchases
Total fund balances
Total liabilities and fund balances
972,920 972,920
721,160
15,000,000
29,740,163
3,004,382
3,004,382
721,160
15,000,000
29,740,163
45,461,323 3,004,382 48,465,705
$ 46,434,243 $ 3,004,382 $ 49,438,625
The notes to the basic financial statements are an integral part of this statement.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Reconciliation of the Balance Sheet to the
Government -wide Statement of Net Assets
March 31, 2004
Fund balances - total governmental funds $ 48,465,705
Amounts reported for governmental activities in the
statement of net assets are different because:
Capital assets used in governmental activities are not financial
resources and, therefore, are not reported in the governmental
funds.
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 governmental funds.
Bond issuance costs are expended in governmental funds when
paid, however, are capitalized and amortized over the life of the
corresponding bonds for purposes of the statement of net assets.
Deferred charges, net of amortization
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.
Long-term liabilities, including bonds payable, are not due and
payable in the current period and therefore are not reported in the
governmental funds.
Compensated absences
Promissory notes
Lease revenue bonds
Accreted interest on capital appreciation bonds
Net assets of governmental activities
238,988,627
266,466
1,290,266
(486,448)
(671,397)
(6,688,402)
(111,636,686)
(11,260,822) (130,257,307)
The notes to the basic financial statements are an integral part of this statement.
$ 158,267,309
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Statement of Revenues, Expenditures and Changes in Fund Balances
Governmental Funds
For the Year Ended March 31, 2004
General Debt Service
Fund Fund
Total
Revenues:
Property tax $ 19,113,761 $ $ 19,113,761
Grant income 1,562,834 1,562,834
Investment income 508,386 105,802 614,188
Property management - rents 756,368 - 756,368
Other income 911,379 911,379
Total revenues 22,852,728 105,802 22,958,530
Expenditures:
Current - general government:
Salaries 4,773,224 - 4,773,224
Benefits 1,140,168 - 1,140,168
Directors 22,900 - 22,900
Services and supplies 2,433,522 - 2,433,522
Capital outlay:
New land purchases 9,695,258 9,695,258
Land acquisition support costs 104,306 104,306
Equipment 60,654 60,654
Vehicles 116,094 - 116,094
Construction in progress 541,282 - 541,282
Infrastructure 454,468 - 454,468
Debt service:
Principal repayment - 2,803,385 2,803,385
Interest and fiscal charges 3,540,578 3,540,578
Refunding bond issuance costs 1,297,336 1,297,336
Payment to advance refunding escrow 1,844,183 1,844,183
Total expenditures 19,341,876 9,485,482 28,827,358
Excess (deficiency) of revenues
over (under) expenditures 3,510,852 (9,379,680) (5,868,828)
Other financing sources (uses):
Proceeds from promissory notes 1,500,000 1,500,000
Proceeds from refunding bonds 31,900,010 31,900,010
Debt premium 602,963 602,963
Payment to refunded bond escrow agent (19,777,851) (19,777,851)
Transfers in 3,855,700 3,855,700
Transfers out (3,855,700) (3,855,700)
Deferral of sick -leave payouts 18,735 18,735
Proceeds from sale of capital assets 203,642 203,642
Total other financing sources (uses) 5,578,077 8,869,422 14,447,499
Net change in fund balances
9,088,929 (510,258) 8,578,671
Fund balances, beginning of year, as previously reported 36,085,130 3,514,640 39,599,770
Change in accounting principle 287,264 287,264
Fund balances, beginning of year, as restated 36,372,394 3,514,640 39,887,034
Fund balances, end of year $ 45,461,323 $ 3,004,382 $ 48,465,705
The notes to the basic financial statements are an integral part of this statement.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Reconciliation of the Statement of Revenues, Expenditures and Changes in
Fund Balances totheGovernment-wide Statement of Activities
For the Year Ended March 31, 2004
Net change in fund balances - total governmental funds $ 8,578,671
Amounts reported for governmental activities in the statement of activities are different because:
Governmental funds report capital outlay as expenditures. However, in the
statement of activities, the cost of those assets is allocated over their estimated
useful lives and reported as depreciation expense.
Capital outlay 10,972,062
Less current year sale of land (25,000)
Add current year donation of capital assets 137,000
Less current year depreciation (457,376) 10,626,686
Repayment of loans 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 result as a revenue in the statement of
activities. The District's loan receivable was reduced because loan payments
were received. (4,613)
Bond issuance costs are expended in governmental funds when paid, however,
are capitalized and amortized over the life of the corresponding bonds for the
purposes of the statement of activities.
Bond issuance costs - 1,297,336
Amortization of bond issuance costs (7,070) 1,290,266
Accrued interest expense 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, discount and deferred amount on refunding should
be expensed as a component of interest expense on the statement of activities.
This amount represents the net accrued interest expense and the amortization of
bond premiums, discounts and deferred amount on refunding not reported in
governmental funds.
Accrued interest on capital appreciation bonds (2,399,371)
Amortization of bond premium 3,286
Changes in accrued interest expense (64,330)
Amortization of deferred amounts (18,851) (2,479,266)
Bond proceeds are reported as financing sources in governmental funds and thus
contribute to the change in fund balances. However, issuing debt increases long-term
liabilities in the statement of net assets and does not affect the statement of activities. (34,002,973)
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 the
expense in the statement of activities. The District's long-term debt was
reduced because principal payments were made for the following:
Promissory notes 128,385
Certificates of participation 530,000
Lease revenue bonds 2,145,000
Payment to escrow agent for refunding 21,622,034 24,425,419
Some items reported in the statement of activities do not require the use of
current resources and therefore are not reported as expenditures in governmental
funds. This activity consists of the change in compensated absences. 24,528
Change in net assets of governmental activities $ 8,458,718
The notes to the basic financial statements are an integral part of this statement.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Basic Financial Statements
Year Ended March 31, 2004
NOTE 1 - ORGANIZATION AND REPORTING ENTITY
The Midpeninsula Regional Open Space District (the District) was formed in 1972 to acquire and
preserve public open space land in the 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.
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 body; is able to impose its will on 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
(a) Implementation of Governmental Accounting Standards Board (GASB) Pronouncements
GASB Statement No. 34
The District adopted the provisions of GASB Statement No. 34, Basic Financial Statements - and
Management's Discussion and Analysis - for State and Local Governments. This statement affects the
manner in which the District records transactions and presents financial information. State and local
governments have traditionally used a financial reporting model substantially different from the one
used to prepare private -sector fmancial reports.
GASB Statement No. 34 establishes new requirements and a new reporting model for the annual
financial reports of state and local governments. The statement was developed to make annual reports
of state and local governments easier to understand and more useful to the people who use
governmental financial information to make decisions.
Management's Discussion and Analysis - GASB Statement No. 34 requires that financial
statements be accompanied by a narrative introduction and analytical overview of the District's
financial activities in the form of "management's discussion and analysis" (MD&A). This analysis
is similar to the analysis provided in the annual reports of private -sector organizations.
Government -wide Financial Statements - The reporting model includes financial statements
prepared using full accrual accounting for all of the District's activities. This approach includes
not just current assets and liabilities but also capital and other long-term assets as well as long-term
liabilities. Accrual accounting also reports all of the revenues and costs of providing services each
year, not just those received or paid in the current year or soon thereafter.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Basic Financial Statements
Year Ended March 31, 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Statement of Net Assets - The statement of net assets is designed to display the financial
position of the government. The net assets of the District are broken down into three
categories - 1) invested in capital assets, net of related debt; 2) restricted and 3)
unrestricted.
Statement of Activities - The statement of activities reports expenses and revenues in a
format that focuses on the cost of each of the District's functions. The expense of
individual functions is compared to the revenue generated directly by the function.
Accordingly, the District has reported certain other long-term assets and liabilities in the
statement of net assets, and has reported all revenues and the cost of providing services under
the accrual basis of accounting in the statement of activities.
GASB Statement No. 37
The District adopted the provisions of GASB Statement No. 37, Basic Financial Statements -
and Management's Discussion and Analysis - for State and Local Governments: Omnibus.
This statement amends GASB Statement No. 34 to either 1) clarify certain provisions or 2)
modify other provisions that GASB believes may have unintended consequences in some
circumstances. Accordingly, the District considered the effects of this statement when
adopting the provisions of GASB Statement No. 34 as previously described.
GASB Statement No. 38
The District adopted the provisions of GASB Statement No. 38, Certain Financial Statement
Note Disclosures. This statement modifies, establishes and rescinds certain financial statement
note disclosure requirements. Accordingly, certain footnote disclosures have been revised to
conform to the provisions of GASB Statement No. 38.
GASB Statement No. 41
The District adopted the provisions of GASB Statement No. 41, Budgetary Comparison
Schedules - Perspective Differences. This statement amends GASB Statement No. 34 to clarify
the budgetary presentation requirements for governments with significant budgetary perspective
differences that result in their not being able to present budgetary comparison information for
their general fund and major special revenue funds and required the presentation of budgetary
comparison schedules as required supplementary information (RSI) based on the fund,
organization or program structure that the government uses for its legally adopted budget.
Accordingly, the District considered the effects of this statement when adopting the provisions
of GASB Statement No. 34 as previously described.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Basic Financial Statements
Year Ended March 31, 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
GASB Interpretation No. 6
The District adopted the provisions of GASB Interpretation No. 6, Recognition and
Measurement of Certain Liabilities and Expenditures in Governmental Fund Financial
Statements. This interpretation clarifies the application of standards for modified accrual
recognition of certain liabilities and expenditures in areas where differences have arisen, or
potentially could arise, in interpretation and practice. This interpretation impacts the fund level
financial statements required by GASB Statement No. 34 but has no direct impact on the
government -wide financial statements. Accordingly, the District has not recognized
compensated absences liabilities and the current portion of a promissory note in the
governmental funds financial statements for amounts not considered to be due and payable as
of March 31, 2004, and has restated fund balances as of April 1, 2003 to reflect the cumulative
effect of the change as of that date.
(b) Basis of Presentation
Government -wide Financial Statements
The statement of net assets and statement of activities display information about the District.
These statements include the financial activities of the overall government. Eliminations have
been made to minimize the double counting of internal activities.
The statement of activities presents a comparison between direct expenses and program
revenues. Direct expenses are those that are specifically associated with a program or function
and therefore, are clearly identifiable to a particular function. Program revenues include 1)
charges paid by the recipients of goods or services offered by the programs and 2) 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, including all taxes,
are presented instead as general revenues.
Fund Financial Statements
The fund financial statements provide information about the District's funds, including its
blended component unit.
The District reports the following major governmental funds:
General Fund is the general operating fund of the District. This fund accounts for all
financial resources and activities not required to be accounted for in other funds.
Debt Service Fund accounts for the accumulation of resources for the periodic payment of
interest and principal of the District's long-term bonds.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Basic Financial Statements
Year Ended March 31, 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(c) Measurement Focus and Basis of Accounting
The government -wide fmancial statements are reported using the economic resources
measurement focus and the accrual basis of accounting. Revenues are recorded when earned
and expenses are recorded at the time liabilities are incurred, regardless of when the related
cash flows take place. Nonexchange transactions, in which the District gives (or receives)
value without directly receiving (or giving) equal value in exchange, include property taxes,
grants, entitlements and donations. On an accrual basis, revenue from property taxes is
recognized in the fiscal year for which the taxes are levied. Revenues from grants,
entitlements and donations are recognized in the fiscal year in which all eligibility requirements
have been satisfied.
Governmental funds are reported using the current financial resources measurement focus and
the modified accrual basis of accounting. Under this method, revenues are recognized when
measurable and available. Property tax, interest, and grants are accrued when their receipt
occurs within sixty days after the end of the accounting period so as to be both measurable and
available. Expenditures are generally recorded when a liability is incurred, as under accrual
accounting. However, debt service expenditures as well as expenditures related to
compensated absences are recorded only when payment is due. General capital assets
acquisitions are reported as expenditures in governmental funds. Proceeds of general long-
term debt and capital leases are reported as other financing sources.
Under the terms of grant agreements, the District funds certain programs by a combination of
specific cost -reimbursement grants and general revenues. Thus, when program expenses are
incurred, there are both restricted and unrestricted net assets available to finance the program.
It is the District's policy to first apply restricted cost -reimbursement grant resources to such
programs and then unrestricted general revenues.
(d) Non -Current Governmental Assets/Liabilities
GASB Statement No. 34 eliminates the presentation of account groups, but provides for these
records to be maintained and incorporates the information in the government -wide statement of
net assets.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Basic Financial Statements
Year Ended March 31, 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(e) Cash and Investments
Restricted cash and investments are held by the District or outside fiscal agents under
provisions of debt agreements. The District's investments in guaranteed investment contracts
are reported at cost and all other investments are reported at fair value. The fair value of
investments is determined annually and is based on current market prices.
Capital Assets
Capital assets (including infrastructure) are recorded at historical cost or at estimated historical
cost if actual historical 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 consists of improvements including roadways,
trails, parking lots, bridges and culverts. Effective April 1, 2003, the District increased its
capital assets capitalization rate 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.
The estimated useful lives are as follows:
Structures and improvements 10 - 30 years
Infrastructure 30 - 40 years
Equipment 5 - 20 years
Vehicles 10 - 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.
(g)
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 bond proceeds are
received. Bond premiums/discounts and issuance costs for the government -wide statement of
net assets are deferred and amortized over the term 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 the Basic Financial Statements
Year Ended March 31, 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(h) 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 follow:
Percentage of equivalent cash
Years of Employment 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 Ca1PERs medical plan coverage
during retirement may elect to 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 Rates
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 the Basic Financial Statements
Year Ended March 31, 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 January 1 January 1
Levy Dates
Due dates
- Delinquent after
October 1
50% on November 1
50% on February 1
December 10
(for November)
April 10
(for February)
Q) Fund Equity/Net Assets
January 1
On or before
July 1 November 1
Upon receipt of billing 50% on November 1
50% on February 1
August 31 December 10
(for November)
April 10
(for February)
January 1
July 1
July 1
August 31
In the fund financial statements, governmental funds report fund balance reserves for amounts
that are not appropriable 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 - consists 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 improvement of those
assets.
Restricted net assets - consists 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 - all other net assets that do not meet the definition of "restricted"
or "invested in capital assets, net of related debt."
Change in Accounting Principle
GASB Interpretation No. 6 - The District's General Fund beginning fund balance has been
restated to reflect the cumulative effect of the change due to the implementation of GASB
Interpretation No. 6. The impact to the General Fund was to reduce the District's compensated
absence liability and the current portion of the promissory note and only recognize
expenditures in the governmental funds financial statements for those liabilities considered to
be due and payable as of the end of the fiscal year. Accordingly, the District has not
recognized the compensated absence liability and the current portion of the promissory note in
the governmental funds financial statements for amounts not considered due and payable as of
March 31, 2004 and has restated fund balances as of April 1, 2003 in the amount of $287,264,
in the General Fund to reflect the cumulative effect of the change as of that date.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Basic Financial Statements
Year Ended March 31, 2004
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(l) 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 fmancial statements in conformity with generally
accepted accounting principles. Actual results could differ from those estimates.
NOTE 3 — STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY
Debt Compliance
At March 31, 2004, the District was not in compliance with the provisions of the District's
1995 promissory notes that require assets to be accumulated in a restricted account or adequate
coverage be maintained under municipal bond insurance or a surety bond for the payment of
future debt service in the amount of $920,000. However at March 31, 2004, the District had
$460,000 in investments held in a reserve account. As a result, on August 17, 2004, the
District obtained a surety bond commitment from Ambac Assurance Corporation to provide the
additional reserve coverage required by the 1995 promissory notes indenture.
In addition, the District determined that the reserve provisions indicated in the bond indenture
and the official statement was incorrect and not consistent with other documentation with
respect to the issuance, sale and delivery of the 2004 Revenue Bonds. As a result, the District
is in the process of working with bond counsel to approve the necessary amendments to the
indenture so that the District clarifies its reserve requirements covenants.
NOTE 4 - CASH AND INVESTMENTS
Total District's cash and investments are as follows:
Cash:
Cash on hand $ 800
Deposits 67,163
Total cash 67,963
Investments:
In Santa Clara County's pool 40,805,156
With fiscal agents 2,998,686
Total investments 40,803,842
Total cash and investments $ 43,871,805
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Basic Financial Statements
Year Ended March 31, 2004
NOTE 4 - CASH AM) INVESTMENTS (Continued)
Deposits
At March 31, 2004, the carrying amount of the District's deposits was $67,163 and the bank
balance was $137,791. 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 $37,791 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 trust 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 department 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, 2004.
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, 2004. 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. The District does not have any
categorized investments at March 31, 2004.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Basic Financial Statements
Year Ended March 31, 2004
NOTE 4 - CASH AND INVESTMENTS (Continued)
A summary of the District's uncategorized investments at March 31, 2004 is shown below.
County of Santa Clara Treasurer's investment pool $ 40,805,156
Guaranteed investment agreements 2,993,435
Money market mutual funds 5,251
Total investments $ 43,803,842
NOTE 5 — NOTE RECEIVABLE
On December 17, 1997, the District sold title to and possession of a 50 -year fee determinable
estate 10 -acre parcel near the Skyline Ridge Open Space Preserve. The District financed the
purchase in the amount of $288,800 over 25 years at a rate of 10% per annum. Monthly
principal and interest payments of $2,624 are due on the 1" of each month and late if not paid
by the 10'", with the final payment scheduled on December 1, 2022. The outstanding balance
at March 31, 2004 is $266,466.
NOTE 6 - CAPITAL ASSETS
Capital asset activity for the year ended March 31, 2004 was as follows:
Balance Balance
April 1, 2003 March 31,
(as restated) Additions Retirements 2004
Capital assets, not being depreciated:
Land $ 221,084,219 $ 9,936,564 $ (25,000) $ 230,995,783
Construction in progress 233,452 541,282 774,734
Total capital assets,
not being depreciated 221,317,671 10,477,846 (25,000) 231,770,517
Capital assets, being depreciated:
Structures and improvements 8,209,033 - 8,209,033
Infrastructure 1,850,323 454,468 - 2,304,791
Equipment 550,903 60,654 - 611,557
Vehicles 1,445,744 116,094 (58,968) 1,502,870
Total capital assets,
being depreciated 12,056,003 631,216 (58,968) 12,628,251
Less accumulated depreciation for:
Structures and improvements 3,937,242 263685 4,200,927
Infrastructure 231,564 63,391 294,955
Equipment 311,123 33,182 - 344,305
Vehicles 531,804 97,118 (58,968) 569,954
Total accumulated depreciation
Total capital assets,
being depreciated, net
5,011,733
457,376 (58,968) 5,410,141
7,044,270 173,840 7,218,110
Capital assets, net $ 228,361,941 $ 10,651,686 $ (25,000) $ 238,988,627
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Basic Financial Statements
Year Ended March 31, 2004
NOTE 6 - CAPITAL ASSETS (Continued)
At March 31, 2004, the District made the following restatements to capital assets:
Capital assets as reported in the
general fixed assets account group - April 1, 2003 $ 238,156,566
Record write-off for structures and improvements, infrastructure, equipment and vehicles
below District's new capitalization threshold of $5,000 (4,782,892)
Record accumulated depreciation for structures and improvements, infrastructure,
equipment and vehicles (5,011,733)
Capital assets as restated - April 1, 2003 $ 228,361,941
Capital Projects Commitments
As of March 31, 2004, the District had $1.9 million in year-end commitments for active construction
projects primarily for the following significant projects:
• The Foothills Operations Shop Building
• Pulgas Ridge Staging Area
• Virginia Mill Trail and Creek Crossing
• The Pichetti Ranch Seismic Upgrade
• El Corte de Madera Creek Erosion 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-Limekilm area of Sierra Azul Open Space Preserve. The
District is responsible for monitoring the easement and the Town will take the responsibility for
enforcement of the easement in the event of violations. The District received other land donations
during fiscal year 2003/2004. The four donated easements each came from a separate private
family/citizens/living trust. These gifts were recorded at a total value of $137,000.
25
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Basic Financial Statements
Year Ended March 31, 2004
NOTE 7 - LONG-TERM OBLIGATIONS
The following table summarizes the changes in long-term obligations during the year:
Promissory notes:
1995
Aine Property
Lazenby Property
McKannay-Seimers Property
Dalolia Property
Hunt Property
Subtotal promissory notes
Balance
April 1, 2003 Additions Retirements
$ 11,000,000 $
86,357
42,873
250,000
237,557
11,616,787
1,500,000
1,500,000 6,428,385 6,688,402
$ 6,400,000
12,080
6,146
Balance
March 31,
2004
$ 4,600,000
74,277
36,727
250,000
10,159 227,398
- 1,500,000
Amounts
Due Within
One Year
$ 45,000
12,926
6,516
10,809
75,251
1993 Certificates of Participation 14,655,000
Lease revenue bonds
1996 issue 26,280,199
1999 first issue 28,333,021
1999 second issue 27,846,962
2004 issue -
Unamortized premium
Unamortized loss on refunding
Subtotal lease revenue bonds
Accreted interest on lease revenue bonds
19% issue
1999 first issue
1999 second issue
2004 issue
Subtotal accreted interest
Accrued compensated absence
Total
14,655,000
955,000
590,000
600,000
31,900,010
25,325,199 1,060,000
27,743,021 675,000
27,246,962 685,000
31,900,010
82,460,182
31,900,010
602,963
(1,197,034)
2,145,000
3,286
(18,851)
112,215,192 2,420,000
599,677 19,716
(1,178,183) (113,106)
82,460,182 31,305,939 2,129,435 111,636,686 2,326,610
3,105,215 581,293 - 3,686,508
3,367,596 952,154 - 4,319,750 -
2,388,640 853,828 3,242,468
12,096 - 12,096 -
8,861,451 2,399,371 11,260,822
695,925 332,734 357,262 671,397 50,912
$118,289,345 $ 35,538,044 $ 23,570,082 $130,257,307 $ 2,452,773
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Basic Financial Statements
Year Ended March 31, 2004
NOTE 7 - LONG-TERM OBLIGATIONS (Continued)
The District's long-term obligations at March 31, 2004 consisted of the following:
Promissory Notes
• 1995 Notes, principal balance of $11,000,000, comprised of $855,000 of Serial Notes, bearing
interest at rates ranging from 6.15% to 7%, maturing 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 1/2% through April 1, 2013 on 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.
Lease Revenue Bonds
• On July 24, 1996, the Authority on behalf of the District issued the 1996 Revenue Bonds.
These bonds are comprised of $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 at 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 at 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 capital appreciation bonds,
bearing interest at 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, beginning interest
at 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 capital appreciation
bonds, bearing interest at rates ranging from 6.2% to 6.35%, maturing annually from August
1, 2018 through August 1, 2031. A portion of the proceeds was used to repay the 1990
Promissory Notes.
27
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Basic Financial Statements
Year Ended March 31, 2004
NOTE 7 - LONG-TERM OBLIGATIONS (Continued)
• On January 30, 2004, the Authority on behalf of the District issued the 2004 Revenue Bonds.
These bonds comprised of $9,725,000 current interest bonds, beginning 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 capital appreciation
bonds, bearing interest at rates ranging from 5% to 5.53%, maturing annually from September
1, 2019 through September 1, 2027.
Proceeds of $19,777,851 and cash remaining from refunded debt in the amount of $1,844,183,
were deposited into an escrow to provide future debt service payments on the refunded 1993
Certificates of Participation and partially refunded 1995 Promissory Notes, resulting in a
defeasance. As of March 31, 2004, the 1993 Certificates of Participation and partially
refunded 1995 Promissory Notes considered defeased have an outstanding balance of $0 and
$6,300,000, respectively, Although the refunding resulted in the recognition of an accounting
loss of $1,197,034 for the year ended March 31, 2004, the District in effect increased its
aggregate debt service payments by $12,475,667 over the next 31 years and obtained an
economic gain (difference between the present values of the old and new debt service payment)
of $771,448.
All debt is payable from limited ad valorem property taxes levied on all taxable property within the
District.
Scheduled Payments
As of March 31, 2004, annual debt service requirements to maturity are as follows:
Lease Revenue Bonds Promissory Notes
Year ending March 31:
2005
2006
2007
2008
2009
2010-2014
2015-2019
2020-2024
2025-2029
2030-2034
2035
Less unaccreted interest
Total
NOTE 8 - RENTAL INCOME
Principal
$ 2,420,000
2,735,000
3,110,000
3,505,000
3,865,000
25,125,000
23,295,047
14,688,521
14,399,027
15,927,597
3,150,000
Accreted
Interest
19,319,953
27,661,478
33,955,974
18,117,403
(87,793,986)
Interest Principal Interest
$ 3,961,531 $ 75,251 $ 433,693
3,720,410 77,236 317,038
3,584,691 79,354 423,493
3,429,967 81,613 418,117
3,254,961 108,966 411,686
12,814,022 3,353,743 1,687,462
7,598,426 1,412,240 432,201
5,752,163 1,500,000 337,500
4,753,499
2,443,000 78,875 -
$ 112,215,192 $ 11,260,822 $51,391,545 $ 6,688,402 $ 4,461,192
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 $756,368 was received during
the year ended March 31, 2004.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Basic Financial Statements
Year Ended March 31, 2004
NOTE 9 - EMPLOYEES' RETIREMENT 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 benefit provisions from the benefit menu by
contracts with CalPERS and adopts those 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 - 400 P Street, Sacramento, CA 95814.
Funding Policy
Active plan 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 actuarially determined remaining amounts 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, 2004 was 1.468. 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 2004, 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, 2001 actuarial
valuation using the entry age normal actuarial cost method. The actuarial assumption included
the following:
Investment rate of return
8.25% (net of administrative services)
Projected salary increases
Inflation
Payroll growth
Individual salary growth
3.75% to 14.20% depending on age,
service and type of employment
3.50%
3.75%
A merit scale varying by duration of
employment coupled with an assumed
annual inflation component of 3.50%
and an annual production growth of
0.25%
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Basic Financial Statements
Year Ended March 31, 2004
NOTE 9 - EMPLOYEES' RETIREMENT PLAN (Continued)
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 ends on
June 30, 2014.
THREE YEAR TREND INFORMATION FOR PERS
Fiscal Annual Percentage Net
Year Pension of APC Pension
Ending Cost (APC) Contributed Obligation
3/31/2002 $ 269,187 100%
3/31/2003 296,724 100%
3/31/2004 373,614 100%
SCHEDULE OF FUNDING PROGRESS
Entry Age
Normal Actuarial Unfunded/ Annual UAAL
Valuation Accrued Value of (Overfunded) Funded Covered as a % of
Date Liability Assets Liability Ratio Payroll Payroll
6/30/00 $7,422,454 $8,269,579 ($2,071,251) 127.9% $3,271,912 (63.3)%
6/30/01 8,163,873 9,493,705 (1,933,192) 123.7% 3,696,670 (52.3)%
6/30/02 9,267,640 9,971,988 (704,348) 107.6% 4,217,990 (16.7)%
NOTE 10 - 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
Authority 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 commercial insurance
coverage in any of the past 3 years.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Basic Financial Statements
Year Ended March 31, 2004
NOTE 10 - RISK MANAGEMENT (Continued)
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 $50,000,000 per occurrence and
$50,000,000 annual aggregate.
Workers Compensation: The District also participates in the workers compensation pool
administered by the Authority. 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 $20,000,000 for the 3 -year period from July 1, 2002 though June 30,
2005, with reinstatement of $20,000,000 if the initial $20,000,000 is depleted. Each member
of the Authority 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 protection 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.
31
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to the Basic Financial Statements
Year Ended March 31, 2004
NOTE 11— 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.
NOTE 12 — CONTINGENT LIABILITIES
The District has entered into numerous agreements, has properties that will require
environmental remediation, and is named in certain claims and litigation. In the opinion of
management, after consultation with counsel, the liability, if any, resulting there from will not
have a material effect on the District's financial position.
NOTE 13 — SUBSEQUENT EVENT
The State of California budget for fiscal year 2005 has been approved which requires the
District's property tax revenue be reduced by 10% per year for the next two years. This
amount, which could be modified by procedural or legislative changes, would amount to a
reduction in revenue of approximately $2 million per year.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Budgetary Comparison Schedule - General Fund
For the Year Ended March 31, 2004
Revenues:
Property tax
Grant income
Investment income
Property management - Rents
Other income
Total revenues
Expenditures:
Current - general government:
Salaries
Benefits
Directors
Services and supplies
Capital outlay:
New land purchases
Land acquisition support costs
Structures and improvements
Equipment
Vehicles
Construction in progress
Infrastructure
Debt service:
Principal repayment
Interest and fiscal charges
Refunding bond issuance costs
Payment to advance refunding escrow
Total expenditures
Excess (deficiency) of revenues
over (under) expenditures
Other financing sources (uses):
Proceeds from promissory notes
Proceeds from refunding bonds
Debt premium
Payment to refunded bond escrow agent
Deferral of sick -leave payouts
Proceeds from sale of fixed assets
Total other financing sources (uses)
Net change in fund balance $ (11,330,186) $ (11,330,096)
Fund balance, beginning of year, as previously reported
Change in accounting principle
Fund balance, beginning of year, as restated
Fund balance, end of year
The note to the required supplementary information is an integral part of this statement.
Original
Budget
$ 19,117,000
561,000
735,000
758,000
200,000
21,371,000
4,752,309
1,177,801
25,000
2,401,358
15,000,000
150,000
2,051,158
47,000
129,500
2,804,320
4,162,740
32,701,186
Final Actual Amount
Budget Budgetary Basis
$ 19,117,000
561,000
735,000
758,000
200,000
$ 19,113,761
1,562,834
614,188
756,368
911,379
Variance with
Final Budget
Positive
(Negative)
$ (3,239)
1,001,834
(120,812)
(1,632)
711,379
21,371,000
22,958,530 1,587,530
4,924,053
1,192,931
25,000
2,736,023
15,280,899
150,000
1,869,720
54,000
121,500
2,804,231
3,542,739
32,701,096
4,773,224 150,829
1,140,168 52,763
22,900 2,100
2,433,522 302,501
9,695,258 5,585,641
104,306 45,694
1,869,720
60,654 (6,654)
116,094 5,406
541,282 (541,282)
454,468 (454,468)
2,803,385 846
3,540,578 2,161
1,297,336 (1,297,336)
1,844,183 (1,844,183)
28,827,358 3,873,738
(11,330,186) (11,330,096)
(5,868,828) 5,461,268
1,500,000 1,500,000
31,900,010 31,900,010
602,963 602,963
(19,777,851) (19,777,851)
18,735 18,735
203,642 203,642
14,447,499 14,447,499
8,578,671 $ 19,908,767
39,599,770
287,264
39,887,034
$ 48,465,705
33
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Budgetary Comparison Schedule — General Fund (Continued)
For the Year Ended March 31, 2004
Explanation of Differences between Budgetary Inflows and Outflows and
GAAP Revenues and Expenditures:
Total revenues:
Actual amounts (budgetary basis) "total revenues"
from the budgetary comparison schedule
Differences - 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 fund balance- general fund
Total expenditures:
Actual amounts (budgetary basis) "total expenditures"
from the budgetary comparison schedule
Differences - 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 fund balance- genera] fund
Total other financing sources (uses):
Actual amounts (budgetary basis) "total financing sources (uses)"
from the budgetary comparison schedule
Differences - budget to GAAP:
Budget schedule includes results from debt service fund and are reclassified
to the debt service fund for GAAP reporting
Total other financing sources (uses) as reported on the statement of revenues,
expenditures and changes fund balance - general fund
The note to the required supplementary information is an integral part of this statement.
$ 22,958,530
(105,802)
$ 22,852,728
$ 28,827,358
(9,485,482)
$ 19,341,876
$ 14,447,499
(8,869,422)
$ 5,578,077
34
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
Notes to Required Supplementary Information
Year Ended March 31, 2004
Budgets and Budgetary Accounting
The District's Board of Directors adopts an annual operating budget for the District as a whole, which
includes both its General and Debt Service Fund 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.
35
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