HomeMy Public PortalAboutAudit Report - District- FY03MIDPENINSULA REGIONAL
OPEN SPACE DISTRICT
Independent Auditor's Reports and
General -Purpose Financial Statements
For the Year Ended March 31, 2003
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
FOR 1'HE YEAR ENDED MARCH 31, 2003
Table of Contents
Page(s)
Independent Auditor's Report 1
General -Purpose Financial Statements:
Combined Balance Sheet 2
Combined Statement of Revenues, Expenditures and Changes in Fund Balances 3
Statement of Revenues, Expenditures and Changes in Fund Balance
Budget and Actual — General Fund 4
Notes to General -Purpose Financial Statements 5 - 14
Other Report:
Independent Auditor's Report on Compliance and on
Internal Control Over Financial Reporting Based on an
Audit of General -Purpose Financial Statements Performed
in Accordance with Government Auditing Standards 15
iT 1
Macias,Gint & Company 11P
Collllked Public Accounfonis and
Monogemenl Consullo, is
Mt. Diablo Plaza
2175 N. California Boulevard
Suite 620
Walnut Creek, CA 94596-3565
925.274.0190
925.274.3819 FAX
www.maciasgini.com
Board of Directors
Midpeninsula Regional Open Space District
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying general-purpose financial statements of the Midpeninsula Regional Open Space
District (District), as of and for the year ended March 31, 2003, as listed in the table of contents. These general-
purpose financial statements are the responsibility of the District's management. Our responsibility is to express
an opinion on these general-purpose 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 general-purpose financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the general-purpose
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 general-purpose financial statements referred to above present fairly, in all material respects,
the financial position of the District as of March 31, 2003, and the results of its operations 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 27, 2003 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.
Q
Certified Public Accountants
Walnut Creek, California
May 27, 2003
Offices located throughout California
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GENERAL-PURPOSE FINANCIAL STATEMENTS
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
COMBINED BALANCE SHEET
MARCH 31, 2003
Account Groups
ASSETS AND OTHER DEBITS
Assets:
Cash and investments
Restricted cash and investments
Receivables:
Taxes
Interest
Notes receivable
Prepaid items
Land
Structures and improvements
Equipment
Other Debits:
Amount available in Debt Service Fund
Amount to be provided for retirement
of general long-term debt
TOTAL ASSETS AND OTHER DEBITS
LIABILITIES, FUND EQUITY
AND OTHER CREDIT
Liabilities:
Accounts payable $ 287,659 $
Accrued liabilities 377,522
Deposits 41,204
Deferred revenue 786,538
Promissory notes 87,557
Certificates of participation
Revenue bonds
Total liabilities 1,580,480
Fund Equity and Other Credit:
Investment in general fixed assets - - 238,156,566
Fund balance:
Reserved for:
Encumbrances 253,354 Debt service - 3,514,640
Notes receivable 271,079 Prepaid items 150 Unreserved, designated for:
Budgeted land acquisitions 15,000,000 - Future capital purchases 20,560,547
General
Fund
Debt
Service
Fund
$ 32,555,772 $ - $
3,514,640
4,692,726
145,883
271,079
150
General General
Fixed Long -Term
Assets Debt
224,837,518
10,768,917
2,550,131
Total
(Memorandum
Only)
$ 32,555,772
3,514,640
4,692,726
145,883
271,079
150
224,837,518
10,768,917
2,550,131
3,514,640 3,514,640
113,991,223 113,991,223
$ 37,665,610 $ 3,514,640 $ 238,156,566 $ 117,505,863 $ 396,842,679
11,529,230
14,655,000
91,321,633
$ 287,659
377,522
41,204
786,538
11,616,787
14,655,000
91,321,633
Total fund equity and other credit 36,085,130 3,514,640 238,156,566
TOTAL LIABILITIES, FUND
EQUITY AND OI'D:LR CREDIT
117,505,863 119,086,343
238,156,566
253,354
3,514,640
271,079
150
15,000,000
20,560,547
277,756,336
$ 37,665,610 $ 3,514,640 $ 238,156,566 $ 117,505,863 $ 396.842,679
See accompanying notes to general-purpose financial statements.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
COMBINED STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES
YEAR ENDED MARCH 31, 2003
Debt Total
General Service (Memorandum
Fund Fund Only)
Revenue:
General property tax $ 18,528,887 $ $ 18,528,887
Other property taxes 250,048 250,048
Investment income 1,127,266 101,501 1,228,767
Grants 85,718 85,718
Donations 1,011,046 - 1,011,046
Rental income and other 830,931 - 830,931
Other revenue 134,735 - 134,735
Total revenue
21,968,631 101,501 22,070,132
Expenditures:
Salaries and benefits 5,460,570 - 5,460,570
Professional services 472,864 - 472,864
Vehicle expenditures 181,856 - 181,856
Insurance 92,937 - 92,937
Communications and publications 148,954 - 148,954
Site supplies and services 340,718 - 340,718
Utilities and communication 153,458 153,458
Other 465,962 - 465,962
Capital outlay:
Land 9,640,163 - 9,640,163
Structures and improvements 511,143 511,143
Equipment 281,635 - 281,635
Debt service:
Principal retirement 3,324,548 3,324,548
Interest and fiscal charges 4,282,984 4,282,984
Total expenditures 17,750,260 7,607,532 25,357,792
Excess (deficiency) of revenues
over (under) expenditures 4,218,371 (7,506,031) (3,287,660)
Other financing sources (uses):
Proceeds from promissory notes 150,000 150,000
Operating transfers in - 7,068,983 7,068,983
Operating transfers out (7,068,983) (7,068,983)
Total other financing sources (uses) (6,918,983) 7,068,983 150,000
Excess (deficiency) of revenues and other
financing sources over (under) expenditures
and other financing uses (2,700,612) (437,048) (3,137,660)
Fund balances, beginning of year 38,785,742 3,951,688 42,737,430
Fund balances, end of year $ 36,085,130 $ 3,514,640 $ 39,599,770
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See accompanying notes to general-purpose financial statements.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE
BUDGET AND ACTUAL - GENERAL FUND
YEAR ENDED MARCH 31, 2003
Revenue:
General property tax
Other property taxes
Investment income
Grants
Donations
Rental income and other
Other revenue
Total revenue
Expenditures:
Salaries and benefits
Professional services
Vehicle expenditures
Insurance
Communications and publications
Site supplies and services
Utilities and communication
Other
Capital outlay:
Land
Structures and improvements
Equipment
Total expenditures
Excess (deficiency) of revenues
over (under) expenditures
Other financing sources (uses):
Proceeds from promissory notes
Operating transfers out
Total other financing souces (uses)
Excess (deficiency) of revenues and other
financing sources over (under) expenditures
and other financing uses
Fund balance, beginning of year
Fund balance, end of year
Budget
Actual
Variance
$ 18,403,000
190,000
1,170,000
4,342,000
25,000
757,600
125,000
$ 18,528,887
250,048
1,127,266
85,718
1,011,046
830,931
134,735
$ 125,887
60,048
(42,734)
(4,256,282)
986,046
73,331
9,735
25,012,600 21,968,631 (3,043,969)
5,792,622 5,460,570 332,052
881,460 472,864 408,596
201,450 181,856 19,594
94,395 92,937 1,458
169,600 148,954 20,646
363,750 340,718 23,032
173,390 153,458 19,932
613,020 465,962 147,058
25,194,000 9,640,163 15,553,837
1,283,279 511,143 772,136
287,851 281,635 6,216
35,054,817 17,750,260 17,304,557
(10,042,217)
(7,289,568)
(7,289,568)
253,482
$ (17,331,785)
4,218,371 14,260,588
150,000
(7,068,983)
(6,918,983)
150,000
220,585
370,585
(1,344,055) (1,597,537)
(2,700,612) $ 14,631,173
38,785,742
$ 36,085,130
See accompanying notes to general-purpose financial statements.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS
YEAR ENDED MARCH 31, 2003
NOTE A: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The Midpeninsula Regional Open Space District (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.
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 (Authority), pursuant to the
California Government Code. The District is financially accountable for the Authority, as it appoints a voting
majority; 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.
Fund Accounting
The accounts of the District are organized on the basis of one fund and account groups, each of which is
considered a separate accounting entity. All resources and operations of the District, including the Authority, are
reported in the General Fund. The District reports its fixed assets in the General Fixed Assets Account Group and
reports its long-term liabilities in the General Long -Term Debt Account Group.
Basis of Accounting
The records of the District are maintained on the modified accrual basis of accounting. Under this method,
revenues, including property taxes, are generally recognized in the period they become measurable and available,
and expenditures are generally recognized when the obligation is incurred, except for principal and interest on
long-term debt, which are recognized as expenditures when due. Revenues are considered to be available if they
are collected within 60 days of the end of the current fiscal year. Substantially all revenues are susceptible to
accrual.
Budgets and Budgetary Accounting
The Board of Directors of the District adopts an annual operating budget for the General 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 fund level.
Encumbrances are recorded as reservations of fund balance since they do not constitute expenditures or liabilities.
The encumbered appropriation balance is carried forward to the succeeding year and is reappropriated. All
unencumbered appropriations lapse at the end of the fiscal year. The budget is presented on a basis consistent with
accounting principles generally accepted in the United States of America.
Investments
The District records investment transactions on the trade date. Investments are reported at fair value. Fair value
is defined as the amount that the District could reasonably expect to receive for an investment in a current sale
between a willing buyer and seller and is generally measured by quoted market prices.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED MARCH 31, 2003
General Fixed Assets
Land, structures, improvements and equipment purchased by the District are stated at cost in the General Fixed
Assets Account Group (Account Group). Donations of capital assets are stated at their estimated fair market value as
of the date received and are recorded as additions to the Account Group, however, are not recorded as revenue in the
General Fund as these types of donations do not represent spendable financial resources. Depreciation is not
recorded for fixed assets. In addition, during the current fiscal year, the District also approved an increase in their
fixed assets capitalization rate from $500 to $5,000 to be effective starting fiscal year 2003/04. This accounting
change will be retroactively adjusted to next year's fixed assets balance.
Property Tax Levy, Collection and Maximum Rates
The State of California (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. 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 I
Levy Dates
Due dates
Delinquent after
October 1
50% on November 1
50% on February 1
December 10
(for November)
April 10
(for February)
January 1 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
Taxes are secured by liens on the property being taxed. The term "unsecured" refers to taxes on personal
property and not land and buildings. Supplemental property taxes are levied based on changes in assessed values
between the date of real property sales and new construction and the next normal assessment date.
Property tax revenues are recognized when measurable and available to fmance current operations. Available
means collected within the current period or expected to be collected soon thereafter to be used to pay liabilities of
the current period (not to exceed 60 days).
Compensated Absences
Vacation pay is accrued when earned and is included in the General Fund as accrued liabilities. Sick leave is
recorded as an expenditure when paid.
Use of Estimates
The preparation of the general-purpose financial statements in conformity with accounting principles generally
accepted in the United States of America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
general-purpose financial statements, as well as revenues and expenditures during the reporting period. Actual
results could differ from those estimates.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED MARCH 31, 2003
Total (Memorandum Only) Column
The total column in the combined balance sheet is captioned as "Total (Memorandum Only)" because it does not
represent consolidated financial information and is presented only to facilitate financial analysis. The column does
not represent information that reflects financial position or results of operations in accordance with accounting
principles generally accepted in the United States of America.
Pronouncements to be Implemented in Future Years
• GASB Statement Nos. 34 and 37
In June 1999 and in June 2001, the GASB approved Statement No. 34, Basic Financial Statements - and
Management's Discussion and Analysis - for State and Local Governments, and Statement No. 37, Basic
Financial Statements - and Management's Discussion and Analysis - for State and Local Governments:
Omnibus. These statements establish new financial reporting requirements for state and local governments
throughout the United States. When implemented, these statements will require new information and will
restructure much of the information that governments have presented in the past. Some of the most
significant changes include the presentation of government -wide financial statements on the accrual basis of
accounting; all capital assets, including infrastructure, and long-term debt will be reported at the
government -wide level only; the budgetary comparison schedule for the general fund will be reformatted
and presented as required supplementary information; and the District will now prepare and report
management's discussion and analysis. The costs to implement GASB Statement No. 34 are unknown at
this time. The District is in the planning stages and anticipates various analyses to be required before the
full impact of these statements can be determined.
• GASB Statement No. 38
In June 2001, the GASB approved Statement No. 38, Certain Financial Statement Note Disclosures. This
statement modifies, adds and deletes various note disclosure requirements. The statement addresses
disclosure requirements for revenue recognition policies, actions taken in response to legal violations, debt
service requirements, variable -rate debt, receivable and payable balances, interfund transfers and balances,
and short-term debt.
• GASB Statement No. 40
In March 2003, the GASB approved Statement No, 40, Deposit and Investment Risk Disclosures. This
statement amends GASB Statement No. 3, Deposits with Financial Institutions, Investments (including
Repurchase Agreements), and Reverse Repurchase Agreements, to add certain other note disclosures, which
are designed to inform the financial statement users about deposit and investment risks that could affect the
government's ability to provide services and meet its obligations as they become due.
• GASB Statement No. 41
In May 2003, the GASB approved Statement No. 41, Budgetary Comparison Schedules - Perspective
Differences. This statement amends GASB Statement No. 34 to clarify the budgetary presentation
requirements.
• GASB Interpretation No. 6
In March 2000, the GASB approved 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.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED MARCH 31, 2003
NOTE B: CASH AND INVESTMENTS
The District's cash and investments consist of the following at March 31, 2003:
Cash and investments
Restricted cash and investments
$ 32,555,772
3,514,640
Total cash and investments $ 36,070,412
Deposits
At March 31, 2003, the carrying amount of the District's deposits was $4,395,843 and the bank balance was
$4,511,615. The difference between the bank balance and the carrying amount represents outstanding checks and
deposits in transit. Of the bank balance, $200,000 was covered by federal depository insurance and $4,311,615
was collateralized by the pledging fmancial 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
Statutes authorize 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, 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, 2003.
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, 2003. 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.
* Provisions of the District's bond trust agreements require that certain restricted accounts be established. These
accounts are held by trustees for the repayment of debt and as reserves. These funds have been invested only as
permitted by specific state statutes and applicable resolutions or bond indentures. The cash equivalents and
investments held by trustees have been classified as restricted on the balance sheet because their use is limited by
bond covenants.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED MARCH 31, 2003
Custodial Credit Risk
The District's investments are categorized below to give an indication of the level of custodial credit risk assumed
by the District at March 31, 2003. 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 the securities held by the counterparty's trust department or agent in the District's name.
Category 3 includes uninsured and unregistered investments, with securities held by the counterparty, or by its
trust department or agent, but not in the District's name. There were no Category 1 or 3 investments at March 31,
2003.
The District's investments were classified as follows at March 31, 2003:
Fair Value
Category 2 Investments:
U.S. Government securities
Investments not subject to categorization:
County of Santa Clara Treasurer's investment pool
Mutual funds
$ 3,416,640
28,170,406
87,523
Total $ 31,674,569
NOTE C: NOTES 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 purchaser 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 10th, with the final payment scheduled on December 1, 2022. The outstanding
balance at March 31, 2003 is $271,079.
NOTE 1): FIXED ASSETS
Changes in the General Fixed Assets Account Group for the year ended March 31, 2003, were as follows:
Balances Balances
April 1, 2002 Additions Retirements March 31, 2003
Land $ 214,597,355 $ 10,240,163 $ $ 224,837,518
Structures and improvements 10,257,774 511,143 10,768,917
Equipment 2,451,136 281,635 (182,640) 2,550,131
$ 227,306,265 $ 11,032,941 $ (182,640) $ 238,156,566
The District received land donations equal to an estimated fair market value of $600,000 during fiscal year
2002/03. The donations came from the Bay Area Ridge Trail Council and the Peninsula Open Space Trust. The
donations were recorded as additions to the General Fixed Assets Account Group, but were not reported in the
General Fund, as the District did not receive spendable resources as a result of the donations.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED MARCH 31, 2003
NOTE E: LONG-TERM DEBT
Changes in long-term debt for the year ended March 31, 2003 is presented below.
Promissory Notes:
1995
Hosking Property
Aine Property
Lazenby Property
McKannay-Seimers Property
McKannay-Tate/A. Property
Dalolia Property -current
Dalolia Property -noncurrent
1993 Certificates of Participation
Revenue Bonds:
1996
1999
1999, Second Issue
Total
Balance
April 1, 2002
Additions
and Accretion
$ 11,100,000 $
500,000
97,647
48,671
250,000
340,000
12,336,318
15,165,000
29,688,178
31,340,245
29,952,091
90,980,514
$ 118,481,832
90,000
150,000
240,000
Balance
Retirements March 31, 2003
$ (100,000)
(500,000)
(11,290)
(5,798)
(340,000)
(2,443)
$ 11,000,000
86,357
42,873
250,000
87,557
150,000
(959,531) 11,616,787
(510,000) 14,655,000
547,236 (850,000)
875,372 (515,000)
803,511 (520,000)
2,226,119 (1,885,000)
$ 2,466,119 $ (3,354,531)
The following is a detail of the long-term debt of the District as of March 31, 2003:
Promissory Notes
29,385,414
31,700,617
30,235,602
91,321,633
$ 117,593,420
• An early payment of the principal option has been exercised by Richard McKannay, the holder, on the
McKannay Tate/A. Property Note, in January 2003. In accordance with paragraph 3 of the Note, 8.1%
prepayment penalty was applied to the face amount of the $340,000 note, which totaled $27,540. This
resulted in principal balances due of $312,460.
• 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.
• The five land contract promissory notes aggregate to a total debt of $616,787, bearing interest at fixed
rates from 4.1% to 7%, and maturing at different intervals through October 10, 2017.
1993 Certificates of Participation
• 1993 Certificates of Participation, include serial certificates with a principal balance
bearing interest at rates ranging from 4.75% to 5.6%, maturing annually from September
September 1, 2009. 1993 Certificates of Participation also include $4,345,000 of 5.70%
due on September 1, 2014 and $5,910,000 of 5.75% term certificates due on September 1
of $4,400,000,
1, 2003 through
term certificates
, 2020.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED MARCH 31, 2003
Revenue Bonds
• On July 24, 1996, the Authority on behalf of the District issued the 1996 Revenue Bonds, which have a
principal balance outstanding of $29,385,414. These bonds are comprised of $15,145,000 in current
interest bonds, bearing interest at rates ranging from 4.6% to 5.75%, and maturing annually from
September 1, 2003 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 $9,340,414 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. Accretion on the capital appreciation bonds for the year ended March 31,
2003 was $547,236.
• On January 27, 1999, the Authority on behalf of the District issued the 1999 Revenue Bonds, first issue,
which has a principal balance outstanding of $31,700,617. These bonds are comprised of $14,445,000 of
current interest bonds, bearing interest at rates ranging from 3.75% to 4.625%, maturing annually from
September 1, 2003 through September 1, 2014. This issue also includes $17,255,617 capital appreciation
bonds, bearing interest at rates ranging from 5.2% to 5.4%, maturing annually from September 1, 2015
through September 1, 2030. Accretion on the capital appreciation bonds for the year ended March 31,
2003 was $875,372. 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, which has a principal balance outstanding of $30,235,602. These bonds comprised of $10,415,000
current interest bonds, beginning interest at rates ranging from 4.25% to 5.2% maturing annually from
August 1, 2003 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 $13,635,602 capital
appreciation bonds, bearing interest at rates ranging from 6.2% to 6.35 %, maturing annually from August
1, 2018 through August 1, 2031. Accretion on the capital appreciation bonds for the year ended March
31, 2003 was $803,511. A portion of the proceeds was used to repay the 1990 Promissory Notes.
All debt is payable from limited ad valorem property taxes levied on all taxable property within the District. The
District has not pledged its full faith and credit of taxing power for payment of the debt, nor is the debt
collateralized by any District property.
Maturities of long-term debt are as follows:
Year ending Total Debt
March 31, Principal Interest Future Accretion Service
2004 $ 446,110 $ 4,121,912 $ 2,357,275 $ 6,925,297
2005 619,044 3,982,421 2,496,207 7,097,672
2006 803,859 3,824,929 2,643,377 7,272,165
2007 1,015,090 3,648,237 2,799,264 7,462,591
2008 1,242,213 3,450,929 2,964,400 7,657,542
2009-2013 13,425,631 13,157,750 17,663,190 44,246,571
2014-2018 24,096,388 3,808,476 21,634,739 49,539,603
2019-2023 22,795,737 273,557 18,709,263 41,778,557
2024-2028 27,323,396 - 12,566,605 39,890,001
2029-2032 25,825,952 3,789,048 29,615,000
$ 117,593,420
$ 36,268,211 $ 87,623,368 $ 241,484,999
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED MARCH 31, 2003
NOTE F: RENTAL INCOME
The District leases (rents) certain land and structures to others under operating leases with terms generally on a
month -to -month basis, Rental income of $830,931 was received during the year ended March 31, 2003.
NOTE G: 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 Ca1PERS, 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
CaIPERS and adopts those benefits through District resolution, A separate report for the District's plan is not
prepared; however, Ca1PERS issues a separate comprehensive annual financial report. Copies of the Ca1PERS'
annual financial report may be obtained from the Ca1PERS 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 Ca1PERS Board of Administration. The required employer
contribution rate for the year ended March 31, 2003 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 Ca1PERS.
Annual Pension Cost - For the year ended March 31, 2003, the District's annual pension cost was $296,724 and
the District actually contributed $296,724. The required contribution for the year ended March 31, 2003 was
determined as part of the June 30, 2000 actuarial valuation using the entry age normal actuarial cost method with
the contributions determined as a percent of pay. The actuarial assumptions included (a) 8.25 % investment rate of
return (net of administrative expenses); (b) projected -salary increases that vary by duration of service; and (c) 2%
cost -of -living adjustment. Both (a) and (b) include an inflation component of 3.5%. The actuarial value of the
District's assets was determined using a technique that smoothes the effect of short-term volatility in the market
value of investments over a three-year period. The District's actuarial excess assets are being amortized as a level
of percentage of projected payroll on a closed basis. The remaining amortization period at June 30, 2000 was 14
years.
Three -Year Trend Information for the Fund
Fiscal Year ended March 31,
Annual Percentage Net
Pension Of APC Pension
Cost (APC) Contributed Obligation
2001 $ 261,223 100% $
2002 269,187 100%
2003 296,724 100%
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED MARCH 31, 2003
Schedule of Funding Progress
Actuarial
Valuation
Date *
6/30/99
6/30/00
6/30/01
(A)
Entry Age
Actuarial
Accrued
Liability
$ 6,356,332
7,422,454
8,163,873
(B)
Actuarial
Asset
Value
$ 8,269,579
9,493,705
10,097,065
(C)
(Excess Assets)
Actuarial
Accrued
Liability
[(A) — (B)]
$ (1,913,247)
(2,071,251)
(1,933,192)
(D)
Funded (E)
Ratio Covered
[(B) / (A)] Payroll
130.1% $ 2,986,627
127.9% 3,271,912
123.7% 3,696,670
* There were no changes in actuarial assumptions since the prior year's actuarial valuation.
NOTE H: RESERVATIONS AND DESIGNATIONS OF FUND EQUITY
(F)
Overfunded
Actuarial
Liability as a
Percentage of
Covered Payroll
[(C) / (E)]
(64.060%)
(63.304%)
(52.296%)
Reserved fund balance represents that portion of fund balance, which is not available for appropriation for
expenditure or is legally segregated for a specific future use. Portions of the unreserved fund balance have been
designated for future acquisition of open space and for future capital purchases to be decided at a future date.
Such plans or intentions are subject to change and may or may not result in expenditures.
NOTE I: 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 J: CONTINGENCIES
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 therefrom will not have a material effect on the District's financial position.
NOTE K: 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 (Authority). The Authority is composed of 89 California public entities and is organized under a joint
powers agreement pursuant to California Government Code §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 Authority'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 exceeded the District's commercial insurance coverage in any of the
past three years.
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MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
NOTES TO GENERAL-PURPOSE FINANCIAL STATEMENTS (CONTINUED)
YEAR ENDED MARCH 31, 2003
Self -Insurance Programs of the Authority
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 are pooled above that level to $50,000.
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 Authority. 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 Authority. 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 Authority has a limit of $50,000,000 for the 3 -year period from July 1, 2000 though June
30, 2003, with reinstatement of $50,000,000 if the initial $50,000,000 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 Authority. 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 Authority. There is a $5,000 per loss
deductible. Premiums for the coverage are paid annually and are not subject to retroactive adjustments.
Earthquake and Flood Insurance: The District purchases earthquake and flood insurance on a portion of its
property. The earthquake insurance is part of the property protection insurance program of the Authority. There
is a deductible of 5% of value with a minimum deductible of $100,000. Premiums for the coverage are paid
annually and are not subject to retroactive adjustments.
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O 1'HLR REPORT
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Macias, Gini & Company ar
Certified Public Aecounfants and
Munagemanl Cansullartls
Board of Directors
Midpeninsula Regional Open Space District
Mt. Diablo Plaza
2175 N. California Boulevard
Suite 620
Walnut Creek, CA 94596-3565
925.274.0190
925.274.3819 rAx
www.maciasgini_com
INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE AND ON
INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN
AUDIT OF GENERAL-PURPOSE FINANCIAL STATEMENTS PERFORMED
IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
We have audited the general-purpose financial statements of Midpeninsula Regional Open Space District (District)
as of and for the year ended March 31, 2003, and have issued our report thereon dated May 27, 2003. 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.
Compliance
As part of obtaining reasonable assurance about whether the District's general-purpose 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
general-purpose 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.
Internal Control over Financial Reporting
In planning and performing our audit, we considered the District's internal control over financial reporting in
order to determine our auditing procedures for the purpose of expressing our opinion on the general-purpose
financial statements and not to provide assurance 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 financial 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 general-purpose 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.
This report is intended solely for the information and use of the District's Board of Directors and District
management and is not intended to be and should not be used by anyone other than these specified parties.
Certified Public Accountants
Walnut Creek, California
May 27, 2003
a c..
LLt
Offices located throughout California
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