HomeMy Public PortalAboutAudit Report - District- FY98MIDPENINSULA REGIONAL
OPEN SPACE DISTRICT
Financial Statements and
Report of Independent Certified Public Accountants
March 31, 1998
150 Almaden Boulevard
P.O. Box 6779
San Jose, CA 95150-6779
408 275-9000
FAX 408 275-0582
Report of Independent Certified Public Accountants
Grant Thornton
1011 .
GRAN -MORN -MN LLP Accountants and
Management Consultants
The U.S. Member Firm of
Grant Thornton International
The Board of Directors
Midpeninsula Regional Open Space District
We have audited the accompanying combined balance sheet of the Midpeninsula Regional Open Space
District (the "District") as of March 31, 1998, and the related statement of revenues, expenditures and
changes in fund balance, budget and actual, of the General Fund for the year then ended. These financial
statements are the responsibility of the District's management. Our responsibility is to express an opinion
on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of the District at March 31, 1998, and the results of operations and changes in fund
balance of the General Fund for the year then ended in conformity with generally accepted accounting
principles.
4474V\ DID
San Jose, California
May 22, 1998
Midpeninsula Regional Open Space District
COMBINED BALANCE SHEET
March 31, 1998
Account Groups
ASSETS
General General Total
General Agency Fixed Long -Term (Memorandum
Fund Fund Assets Debt Only)
Cash, Including interest -bearing deposits and
cash equivalents $ 13,122,725 $ $ $ $ 13,122,725
Restricted cash and cash equivalents 1,788,190 - - - 1,788,190
Unrestricted investments 443,109 - - 443,109
Restricted investments 3,586,156 2,367,236 - - 5,953,392
Property tax and other receivables 3,404,647 - 3,404,647
Prepaid expenses 23,321 - 23,321
Land - 162,417,029 162,417,029
Structures and improvements 8,104,227 - 8,104,227
Equipment - 1,682,504 1,682,504
Amount available in General Fund - 5,817,455 5,817,455
Amount to be provided for retirement of general
long-term debt - - - 73,940,571 73,940,571
TOTAL ASSETS $ 22,368,148 $ 2,367,236 $ 172,203,760 $ 79,758,026 $ 276,697,170
LIABILITIES AND FUND EQUITY
Liabilities
Accounts payable $ 141,210 $ - $ - $ - $ 141,210
Accrued liabilities 183,319 - 183,319
Deposits 29,903 - - 29,903
Deferred revenue 289,192 - 289,192
Deferred compensation 2,367,236 2,367,236
Long-term debt - - 79,758,026 79,758,026
Total liabilities 643,624 2,367,236 79,758,026 82,768,886
Fund equity
Investment in general fixed assets
Fund balance
21,724,524
172,203,760
172,203,760
21,724,524
Total fund equity 21,724,524 - 172,203,760 193,928,284
TOTAL LIABILITIES AND FUND EQUITY $ 22,368,148 $ 2,367,236 $ 172,203,760 $ 79,758,026 $ 276,697,170
The accompanying notes are an integral part of this statement.
Midpeninsula Regional Open Space District
STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE -
BUDGET AND ACTUAL - GENERAL FUND
For the year ended March 31, 1998
REVENUES
General property tax
State grants
Other property taxes
Interest
Rental income and other
Total
EXPENDITURES
Salaries and benefits
Professional services
Vehicle expenses
Rent
Site supplies and services
Utilities and communications
Other
Acquisitions:
Land
Structures and improvements
Equipment
Debt service
Principal retirement
Interest
Total
EXCESS OF REVENUES OVER (UNDER)
EXPENDITURES
Fund balance, April 1, 1997
Fund balance, March 31, 1998
Budget
$ 10,980,000
886,000
180,000
845,000
643,000
13,534,000
3,390,650
254,850
155,000
10,000
214,800
167,400
550,225
13,154, 000
994,800
143,500
1,445, 950
4,533,650
25,014,825
Actual
$ 11,313,406
585,422
224,259
1,353,222
982,469
14,458,778
3,133,448
244,828
136,417
8,962
197,111
171,911
498,047
1,987,950
897,098
151,380
1,445, 974
4,533,576
13,406,702
(11,480,825) 1,052,076
20,672,448 20,672,448
Variance
Favorable
(Unfavorable)
$ 333,406
(300,578)
44,259
508,222
339,469
924,778
257,202
10,022
18,583
1,038
17,689
(4,511)
52,178
11,166,050
97,702
(7,880)
(24)
74
11,608,123
12,532,901
$ 9,191,623 $21,724,524 $ 12,532,901
The accompanying notes are an integral part of this statement,
Midpeninsula Regional Open Space District
NOTES TO FINANCIAL STATEMENTS
March 31, 1998
NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
1. Organization
The Midpeninsula Regional Open Space District (the "District") was formed in 1972 to acquire and
preserve open space land in the northern and western portions of Santa Clara County. In June
1976, the southern and eastern portion of San Mateo County was annexed to the District. The
District annexed a small portion of the northern tip of Santa Cruz County in 1992.
2. Reporting Entity
The District and the Midpeninsula Regional Open Space District Financing Authority (the "Authority")
have a financial and operational relationship which meets the reporting entity definition criteria of
GASB Statement No. 14, The Financial Reporting Entity, for inclusion of the Authority as a
component unit of the District. Accordingly, the financial activities of the Authority have been
included in the financial statements of the District.
The following are those aspects of the relationship between the District and the Authority which
satisfy GASB No. 14 criteria.
Accountability
1. The Authority's Board of Directors was appointed by the Districts Board of Directors, except
for the member appointed by the Board of Supervisors of Santa Clara County.
2. The District is able to impose its will upon the Authority, based on the following:
• All major financing arrangements, contracts, and other transactions of the Authority must
have the consent of the District.
• The District exercised significant influence over operations of the Authority. The District is
the sole obligator for any obligations issued by the Authority.
3. The Authority provides specific financial benefits or imposes specific financial burdens on the
District based upon the following:
• Any deficits incurred by the Authority will be reflected in the payments of the District.
• Any surpluses of the Authority revert to the District.
Scope of Public Service
The Authority is organized as a joint powers authority pursuant to the California Government
Code, 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, The District intends to
manage and occupy all properties financed by the Authority.
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Midpeninsula Regional Open Space District
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1998
NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial Presentation
For financial presentation purposes, the Authority's financial activity has been blended, or
combined, with the financial data of the District. The financial statements present the Authority's
financial activity within the General Fund and the Account Groups. The 1996 Revenue Bonds
issued by the Authority are included in the General Long -Term Debt Account Group.
3. Basis of Accounting
The records of the District are maintained on the modified accrual basis of accounting. Under this
method, revenues are generally recognized in the period they become measurable and available,
and expenditures are generally recognized when the obligation is incurred, except for interest on
long-term debt, which is recognized as an expenditure when due. Substantially all revenues are
susceptible to accrual.
4. Budgets and Budgetary Accounting
The Board of Directors of the District adopts an annual operating budget on or before March 31 for
the ensuing fiscal year. The Board of Directors may amend the budget by resolution during the
fiscal year. All appropriations lapse at the end of the fiscal year. The budget is presented on a
basis consistent with generally accepted accounting principles.
5. Agency Fund
The Agency Fund accounts for the assets of the District's deferred compensation plan which are
held by the District as an agent for its employees.
6. General Fixed Assets
Land, structures, improvements, and equipment purchased by the District are stated at cost in the
General Fixed Assets Account Group. Assets donated to the District are stated at their estimated
fair market value as of the date received. Depreciation is not recorded for fixed assets.
7. Long-term Debt
The principal portion of long-term debt is recorded as a liability in the General Long -Term Debt
Account Group.
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Midpeninsula Regional Open Space District
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1998
NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
8, Property Tax Levy, Collection and Maximum Rates
The State of California ("State") Constitution Article XIII A provides that the combined maximum
property tax rate on any given property may not exceed one percent of its assessed value unless an
additional amount for general obligation debt has been approved by voters. Assessed value is
calculated at 100 percent of market value as defined by Article XIII A 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 other districts.
The District receives property tax revenues from Santa Clara and San Mateo Counties. The
Counties assess properties, bill for and collect property taxes as follows:
Secured Unsecured
Valuation dates
Lien/Levy dates
Due dates
Delinquent as of
March 1
July 1
50% on November 1
50% on February 1
December 10 (for November)
April 10 (for February)
March 1
March 1
July 1
August 31
Property taxes are distributed to the District by the Counties following their collection,
Unsecured taxes are levied on personal property other than real estate, land and buildings. These
taxes are secured by liens on the property being taxed.
9. Compensated Absences
Vacation pay is recorded as an expenditure in the year earned. Sick leave is recorded as an
expenditure when paid.
10. Use of Estimates
In preparing financial statements in conformity with generally accepted accounting principles,
management is required to make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial
statements, as well as revenues and expenses during the reporting period. Actual results could
differ from those estimates.
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Midpeninsula Regional Open Space District
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1998
NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
11. Total (Memorandum Only)
The column in the financial statements captioned "Total (Memorandum Only)" is presented for
purposes of additional analysis and is not a required part of the basic financial statements. This
information is not comparable to a consolidation and does not present financial position in
conformity with generally accepted accounting principles.
NOTE B - CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following at March 31, 1998:
Deposits
Cash on hand and bank overdraft - unrestricted $ (97,668)
Cash in banks - restricted 1,779,628
Pooled Funds
Cash in Santa Clara County Treasury - unrestricted 13,220,393
Cash in Santa Clara County Treasury - restricted 8,562
Cash balances held in banks are insured up to $100,000 by the Federal Depository Insurance
Corporation. The Santa Clara County investment pool is subject to legal restrictions, and additional
restrictions prescribed by the County.
NOTE C - DEFERRED COMPENSATION INVESTMENTS
Investments with a fair market value of $2,367,236 at March 31, 1998, included in the Agency Fund,
are restricted for the District's deferred compensation plan. The investments of the plan are held by
the District's agent in the District's name.
NOTE D - INVESTMENTS
The District maintains certain restricted investments for purposes of satisfying the future requirements
of its long-term debt. The District also maintains certain unrestricted investments that are held by
Santa Clara County. All investments held are U.S. Government securities with a maturity date of
August 31, 1999. All U.S. Government securities are insured or collateralized with securities held by
the District or its agent in the District's name. The type of investments made by the District are
restricted by state law. The Investments are recorded at cost which approximates fair market value as
of March 31, 1998.
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Midpeninsula Regional Open Space District
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1998
NOTE E - FIXED ASSETS
Changes in the General Fixed Assets Account Group for the year ended March 31, 1998 were as
follows:
Balances Balances
April 1, March 31,
1997 Additions Retirements 1998
Land $ 160,429,360 $ 1,987,669 $ - $ 162,417,029
Structures and improvements 7,206,848 897,379 8,104,227
Equipment 1,543,066 151,380 11,942 1,682,504
$ 169,179,274 $ 3,036,428 $ 11,942 $ 172,203,760
All fixed assets additions during fiscal 1997 were acquired through general fund expenditures.
NOTE F - LONG-TERM DEBT
Long-term debt issued to acquire land, structures and improvements, and equipment is recorded in the
General Long -Term Debt Account Group. Changes in the account group for the year ended March 31,
1998 were as follows:
Long-term debt, April 1, 1997
Principal repayments
Long-term debt, March 31, 1998
$81,204,000
1,445,974
$79,758,026
The following is a detail of the long-term debt of the District as of March 31, 1998:
• Long-term debt $717,825 bears interest at fixed rates from 6% to 7% at March 31, 1998 and is
collateralized by land.
• 1990 Notes, principal balance of $13,270,000, bearing interest at rates ranging from 6.50% to
7,50%, maturing annually from September 1, 1995 through September 1, 2010.
• 1992 Notes, principal balance of $7,680,000, bearing Interest at rates ranging from 5% to 6.35%
maturing annually from July 1, 1997 through July 1, 2012.
• 1993 Certificates of Participation including Serial Certificates with a principal balance of $6,570,000,
bearing interest at rates ranging from 2.90% to 5.6% maturing annually from September 1, 1994
through September 1, 2009. This issue also includes $4,345,000 of 5.70% Term Certificates due on
September 1, 2014 and $5,910,000 of 5.75% Term Certificates due on September 1, 2020.
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Midpeninsula Regional Open Space District
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1998
NOTE F - LONG-TERM DEBT (continued)
• 1995 Notes, principal balance of $11,500,000, comprised of $1,355,000 of Serial Notes, bearing
interest at rates ranging from 5.75% to 7%, maturing annually from September 1, 1998 through
September 1, 2009, and $10,145,000 of 7% term notes due on September 1, 2014,
• 1996 Notes, principal balance of $29,765,201, including $18,630,000 of Current Interest Bonds,
bearing interest at rates ranging from 3.9% to 5.75% maturing annually from September 1, 1997
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 $6,235,201 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.
All notes are 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 or taxing power for payment of the notes
nor are the notes collateralized by any District property.
Maturities of long-term debt are as follows:
Year ending March 31,
1999
2000
2001
2002
2003
Thereafter through 2027
NOTE G - EMPLOYEES' RETIREMENT PLAN
Principal Interest Total
$ 2,001,951
2,203,031
2,364,170
2,552,405
3,247,088
67, 386, 381
$ 79,758,026
$ 4,440,435
4,326,246
4,199, 061
4,057,826
3,903,046
47,333,932
$ 68,260,546
$ 6,442,386
6,529,277
6,563,231
6,610,231
7,150,134
114, 723, 313
$ 148,018,572
All regular employees are eligible to participate in the Public Employees' Retirement Fund (the "Fund")
of the State of Califomia's Public Employees Retirement System ("PERS"). The Fund, an agent
multiple -employer defined benefit retirement plan that acts as a common investment and administrative
agent for various local and state governmental agencies within California, is administered by a Board of
Administration composed of individuals who are (1) elected by PERS members, (2) appointed by
elected State of California officials, and (3) specific elected State of California officials. The Fund
provides retirement, disability, and death benefits. Such benefits are based on each employee's years
of service, age and final compensation.
Employees vest after five years of service and are eligible to receive retirement benefits at age 50.
These benefits provisions and all other requirements are established by State statute and District
resolution.
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Midpeninsula Regional Open Space District
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1998
NOTE G - EMPLOYEES' RETIREMENT PLAN (continued)
For the year ended March 31, 1998, the District made contributions to the Fund of $201,520. The
District's payroll for employees covered by the Fund for the year ended March 31, 1998 was
$2,512,880 from a total payroll of $2,600,128. District participation in the Fund is comprised of 58
active employees of a total of 69 employees. The District's required employer contribution rate is
3.29%. The employees' required contribution rate is 7%, which is currently funded by the District.
Funding Status and Progress
The "pension" benefit obligation is determined for each participating employer by the Fund's actuary
and is a standardized disclosure measure that results from applying actuarial assumptions to estimate
the present value of pension benefits, adjusted for the effects of projected salary increases and step
rate benefits, to be payable in the future as a result of employee service to date. The measure is
intended to help users assess the funding status of the District's portion of the Fund to which
contributions are made on a going -concern basis, assess progress made in accumulating sufficient
assets to pay benefits when due, and make comparisons among employers. The measure is the
actuarial present value of credited projected benefits and is independent of the funding method used.
The "excess of net assets available for benefits over the pension benefit obligation" was computed as
part of an actuarial valuation performed as of June 30, 1996 (most recent valuation). Significant
actuarial assumptions used in the valuation include (a) rate of return on the investment of present and
future assets of 8.50% per year compounded annually; (b) projected salary increases of 4.5% per year
attributable to inflation; (c) across the board real salary increases of 0.0%; and (d) additional projected
salary increases, that vary by length of service, each year and are attributable to merit/longevity.
Information applicable to the District's employee group at June 30, 1996 (the latest date for which the
information is available) follows:
Pension benefit obligation:
Retirees and beneficiaries currently receiving benefits and
terminated employees not yet receiving benefits $ 920,393
Current employees -
Accumulated employee contributions and allocated investment
earnings 1,560,152
Employer -financed, vested 784,079
Employer -financed, nonvested 95,696
Total pension benefit obligation 3,360,320
Net assets available for benefits, at cost (total market value, $5,133,828) 4,780,546
Unfunded pension benefit obligation (surplus) $(1,420,227)
Changes in the pension benefit obligation from last year due to:
Changes in benefit provisions $
Changes in actuarial assumptions
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Midpeninsula Regional Open Space District
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1998
NOTE G - EMPLOYEES' RETIREMENT PLAN (continued)
Actuarially Determined Contributions Required and Contributions Made
The funding policy of the Fund provides for actuarially determined periodic contributions by the District
at rates such that sufficient assets will be available to pay Fund benefits when due. The Districts
contribution calculation for the year ended March 31, 1998 was made in accordance with the actuarially
determined requirements computed as of June 30, 1996.
The contribution rate for normal cost is determined using the credited projected benefits actuarial
funding method, The Fund uses the level percentage of payroll method to amortize the liability over an
eight -year period.
Significant actuarial assumptions used in the 1996 valuation to compute the actuarially determined
contribution requirements are the same as those used to compute the pension benefit obligation as
described above.
Historical Trend Information
Trend information gives an indication of the progress made in accumulating sufficient assets to pay for
benefits when due, System wide ten-year trend information may be found in the California Public
Employees' Retirement Systems' annual report.
Trend information for the District for each of the five years in the period ended June 30, 1996 (the
period for which information is available) is as follows (dollars in thousands):
1996 1995 1994 1993 1992
Net assets available for benefits $ 4,781 $ 4,206 $ 3,631 $ 2,868 $ 2,459
Pension benefit obligation 3.360 3.150 2,619 2,345 2.124
Excess of net assets over the pension
benefit obligation
Percentage funded
Annual covered payroll
Excess of net assets over the pension
obligation as a percentage of
covered payroll
Employer contributions as a percentage
of covered payroll
$ 1,421 $ 1,056 $ 1,012 $ 523 $ 335
142% 133% 139% 122% 116%
$ 2,736 $ 2,585 $ 2,293 $ 2,013 $ 1,876
52% 41% 44% 26% 17.9%
7.4% 7.7% 6.1% 12.4% 10.2%
Midpeninsula Regional Open Space District
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1998
NOTE H - DEFERRED COMPENSATION PLAN
During 1988, the District established a deferred compensation plan for its employees in accordance
with California Government Code Section 53212 and Internal Revenue Code Section 457. The plan,
available to all District employees, permits them to defer a portion of their salary until future years. The
deferred compensation is not available to employees until termination, retirement, death or
unforeseeable emergency.
All amounts of compensation deferred under the plan, all property and rights purchased with those
amounts, and all income attributable to those amounts, property or rights are (until paid or made
available to employee or other beneficiary) solely the property and rights of the District (without being
restricted to the provisions of benefits under the Plan), subject only to the claims of the District's
general creditors. Participants' rights under the plan are equal to those of general creditors of the
District in an amount equal to the fair market value of the deferred account for each participant.
Changes in the assets (restricted investments) of the deferred compensation plan for the year ended
March 31, 1998 are as follows:
Balance, April 1, 1997 $ 1,645,870
Additions 754,969
Payments 33,603
Balance, March 31, 1998 $ 2,367,236
NOTE I - LEASE REVENUES
The District leases certain land and structures to others under operating leases with terms generally on
a month -to -month basis. Lease revenue received was approximately $590,584 during the year ended
March 31, 1998.
NOTE J - LITIGATION
The District 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.
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