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HomeMy Public PortalAboutAudit Report - District- FY91Deloitte & Touche MIOPENINSULA REGIONAL OPEN SPACE DISTRICT Financial Statements for the Year Ended March 31, 1991 and Independent Auditors' Report Member Ting) ran ilnternational _ Deloitte & Touche A INDEPENDENT AUDITORS' REPORT Suite 800 60 South Market Street San Jose, California 95113-2303 Board of Directors, Midpeninsula Regional Open Space District: We have audited the accompanying balance sheet of Midpeninsula Regional Open Space District as of March 31, 1991 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 District 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, such financial statements present fairly, in all material respects, the financial position of Midpeninsula Regional Open Space District as of March 31, 1991 and the results of its operations for the year then ended in conformity with generally accepted accounting principles. ,eta( -7 - May 9, 1991 C C% C MIDPENINSULA REGIONAL OPEN SPACE DISTRICT COMBINED B ALANCE SHEET MARCH 31 . 1991 Gen eral Fund ASSETS AND OTHER DEBIT B ALANCES Cas h, including inter est bearing deposits and cash inv estments $ 8,597,503 Restr ic ted cash and ca sh inv estments 4,818,133 Interest and other r eceivables 3,146,243 Prepaid expenses and other assets 41,726 L and St ruc tur es and impro vements Equipment Amount to be pro vided for retirement of gener al lo ng-ter m debt TOTAL $16 ,603 ,605. LIABILITIES A ND FUND EQUITY Liabilities : Accounts payable Accr ued liabilities $ 302,432 174,255 De pos its 21,820 Deferr ed revenue 339,684 Defe rred co mpe nsatio n Lo ng-ter m debt Total liabilities Fund Equity: Inves tment in ge ner al fixe d as sets Fund ba lanc e Total fund e quity TOTA L Se e note s to financial s tatements . Agency Fund 205,114 ....ACCOUNT Gen eral Fix ed Assets 115,878,814 3,911,998 858,815 205 114 $120,649,627 205,114 838,191 205 ,114 15, 765,414 15, 765,414 $16,603,605, $205, 114 120,649,627 120.649.627 $120,649,627 GROUPS.... G ene ral L ong -Te rm Debt Total (Mem or andum Only) $8,597,503 5,023,247 3,146,243 41,726 115,878 ,814 3,911 ,998 858,815 $50,513,866 50 ,513,866 $50 ,513 ,866. $187,972,212 . $50.513 ,866 50 ,513,866 $ 302 ,432 174,255 21 ,820 339,684 205 ,114 50,513,866 51 ,557 ,171 120,649,627 15,765,414 136,415 .041 $50.513 ,866 $187 ,972 ,212 c MIDPENINSULA REGIONAL OPEN SPACE DISTRICT STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL - OF THE GENERAL FUND YEAR ENDED MARCH 31, 1991 REVENUES: General property tax State grants Other taxes Interest Rental income and other Proceeds from sale of land 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 DEFICIENCY OF REVENUES OVER EXPENDITURES OTHER FINANCING SOURCES (USES): Net proceeds from issuance of long-term debt Defeasance of 1987 notes Budget $ 8,470,000 2,178,000 170,000 820,000 1,319,000 3,500,000 16,457,000 Variance Favorable Actual (Unfavorable) $ 8,645,306 1,342,627 170,783 960,663 1,155,456 12,274.835 175,306 (835,373) 783 140,663 (163,544) (3.500,000) (4,182,165) 2,109,200 2,140,998 (31,798) 239,950 270,491 (30,541) 109,100 128,545 (19,445) 126,500 125,802 698 205,910 181,075 24,835 58,310 62,485 (4,175) 601,620 564,201 37,419 15,558,000 9,924,430 5,633,570 2,433,750 2,210,243 223,507 121,350 87,318 34,032 5,590,174 5,445,709 144,465 2,937,743 2,796,915 140,828 30,091,607 23,938,212 6,153,395 13,634,607 29,349,100 (12,100,000) TOTAL OTHER FINANCING SOURCES 17,249,100 EXCESS OF REVENUES AND OTHER SOURCES OVER EXPENDITURES AND OTHER USES FUND BALANCE, APRIL 1, 1990 FUND BALANCE, MARCH 31, 1991 See notes to financial statements. 3,614,493 9.806,384 $13,420,877 3 11,663,377 26,916,807 (9,294,400) 1,971,230 (2,432,293) 2,805,600 17,622,407 373,307 5,959,030 2,344,537 9,806,384 $15,765,414 $ 2,344,537 C C MIDPENINSULA REGIONAL OPEN SPACE DISTRICT NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Organization - The Midpeninsula Regional Open Space District (the "District") was formed in 1972 to acquire and preserve land and open space in the northern and western portions of Santa Clara County. In June 1976, the southern portion of San Mateo County was annexed to the District. 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. 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. 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. General Fixed Assets - Land, equipment, structures and improvements purchased by the District are stated at cost in the general fixed asset group of accounts. 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. Long -Term Debt - The principal portion of long-term debt is recorded as a liability in the general long-term debt account group. 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. C C 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: Valuation dates Lien/levy dates Due dates Delinquent as of Secured March 1 July 1 50% on November 1 50% on February 1 December 10 (for November) April 10 (for February) Unsecured March 1 March 1 July 1 August 31 Property taxes are distributed by the counties to the District 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. Totals (Memorandum Only) - The column in the financial statements captioned "Totals (Memorandum Only)" is presented for purposes of additional analysis and is not a required part of the basic financial statements. This data is not comparable to a consolidation and does not present financial position or results of operations in conformity with generally accepted accounting principles. 2. CASH AND CASH INVESTMENTS At March 31, 1991, the carrying value of the General Fund's deposits in cash and cash investments was $13,415,636 and the balance reported by the respective financial institution and County of Santa Clara was $13,702,098 and consists of: Commercial bank demand deposits $ 91,620 Cash investments including U.S. Treasury notes, commercial paper, bankers acceptances and repurchase agreements 4,782,967 County of Santa Clara pooled investment fund 8,827,511 TOTAL $13,702,098 Cash held in commercial bank demand deposits are insured up to $100,000 by federal depository insurance. The District's cash investments are insured, registered or collateralized by securities held by the District or its agent in the District's name. These investments had a market value of $4,809,904 at March 31, 1991. Investments made with District funds are restricted by State law. The County investment pool is subject to these restrictions and additional restrictions prescribed by the County. C State statutes authorize investments in obligations of the U.S Treasury, its agencies and instrumentalities, commercial paper rated A-1 by Standard & Poor's Corporation or P-1 by Moody's Commercial Paper Record, bankers' acceptances, repurchase agreements, and the State treasurer's investment pool (Local Agency Investment Fund). Cash investments of $4,818,133 are restricted by the terms of certain promissory notes; interest earned on such funds is unrestricted. Cash investments of $205,114 are restricted for the District's deferred compensation plan; earnings on this cash are restricted to the plan. Cash investments of the plan are held by the District's agent in the District's name and are subject to State statutes as described above. 3. FIXED ASSETS The changes in the general fixed assets account group for the period ended March 31, 1991 are as follows; Balance Balance March 31, 1990 Additions March 31, 1991 Land $105,954,384 $ 9,924,430 $115,878,814 Structures and improvements 1,701,755 2,210,243 3,911,998 Equipment 771,497 87,318 858,815 Total $108,427,636 $12,221,991 $120,649,627 All fixed asset additions during fiscal 1991 were acquired through general fund expenditures. In October 1990, the District purchased an office building to serve as the District's headquarters. The total cost of the building was $1,916,660 which included $41,660 of fees and interest. The cost of the building was financed with a portion of the proceeds from the issuance of thirty-year certificates of participation (see Note 5). In conjunction with the purchase of a certain parcel of land during 1986, the District holds an option through August 15, 1995 to acquire an additional 889 acres for $6.1 million plus $1,000 per day for each day after August 15, 1989. The purchase price as of March 31, 1991 was $6,693,000. 4. 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. The changes in the account group for the period ended March 31, 1991 are as follows: Long-term debt, March 31, 1990 Issues of notes payable Principal reductions $ 38,238,778 27,465,000 (15,189,912) Long-term debt, March 31, 1991 $ 50,513,866 c c c C Long-term debt of $38,013,866 bears interest at fixed rates from 5.5% to 11%, has a weighted average interest rate of 6.9% at March 31, 1991 and is collateralized with land with a cost of approximately $5,261,266. Long-term debt of $12,500,000, to be repaid in annual installments beginning in 1994, bears interest at a floating rate (4.3% at March 31, 1991) which is based upon prevailing market conditions and is redetermined every seven days. Maturities of long-term debt are as follows: Year Ending March 31: Principal Interest Total 1992 $ 1,601,231 $ 3,339,394 $ 4,940,625 1993 1,864,881 3,250,514 5,115,395 1994 2,556,040 3,146,173 5,702,213 1995 2,638,179 2,994,774 5,632,953 1996 3,166,995 2,817,375 5,984,370 Thereafter through 2020 38,686,540 25.346,749 64,033,289 $50.513,866 $40,894,979 $91,408,845 During fiscal 1991, the District purchased land and issued notes payable for $2,465,000 at rates ranging between 5% to 6%, due at varying dates through 1997. During fiscal 1991, the District repaid $2,400,000 of these notes. In September 1990 the District issued $10,000,000 in certificates of participation. The certificates bear interest at rates ranging from 6.3% to 7.6%, and mature through 2020 and are callable in fiscal 2000, The proceeds were used to purchase an office building to serve as the permanent headquarters of the District and to acquire approximately 40 parcels of open space land. The net proceeds of the certificates of participation was $9,758,851 after underwriter's discount and cost of issuance of $241,149. The District also issued $15,000,000 in Promissory Notes in September 1990. A portion of the proceeds were used to advance refund $9,744,000 of the 1987 Notes and $3,357,500 of land contract notes. The 1990 Notes mature through 2010 and are callable in fiscal 2000. The indenture agreement places certain restrictions on further borrowing by the District. The 1990 Notes carry an average interest rate of 7.4% compared to 5.4% on the 1987 Notes and 6% on the land contract notes. The total net proceeds of the 1990 Notes were $14,692,955 after payment of $307,045 in issuance costs, Of the total proceeds, $9,294,400 was used to purchase U.S. government securities. These securities were deposited in an irrevocable trust with an escrow agent to provide for all future debt service payments on the refunded portion of the 1987 notes. The advance refunding met the requirements of an in -substance debt defeasance and the notes were removed from the District's General Long -Term Debt Account Group. C <; C' C c The advance refunding permitted the District to restructure its debt maturities and to allow for more short-term funding of land acquisitions. As a result of the advance refunding, the District increased its total debt service requirements by $8,215,829, which resulted in an economic loss (difference between the present value of the debt service payments on the old and new debt) of $292,914. The trust account assets and the liability for defeased promissory notes in fiscal 1991 and prior years are not included in the District's financial statements. At March 31, 1991, $18,549,000 of promissory notes are considered defeased. 5. EMPLOYEES' RETIREMENT PLAN All regular employees are eligible to participate in the Public Employees' Retirement Fund (the Fund) of the State of California'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 the 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. For the year ended March 31, 1991, the District made contributions to the Fund of $159,925. The District's payroll for employees covered by the Fund for the year ended March 31, 1991 was $1,470,253 out of a total payroll of $1,586,685. District participation in the Fund is comprised of 45 active employees out of a total of 51 employees. The District's required employer contribution rate is 6,3%; 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. C C The pension benefit obligation was computed as part of an actuarial valuation performed as of June 30, 1989. The significant actuarial assumptions used in the 1989 valuation to compute the pension benefit obligation were an assumed rate of return on investment assets of 8.5%, annual payroll increases of 5.0% attributable to inflation and 2,0% attributable to merit or seniority, and no post -retirement benefit increases. Information applicable to the District's employee group at June 30, 1989 (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 Current employees: Accumulated employee contributions and allocated investment earnings Employer -financed, vested Employer -financed, nonvested $ 47,227 617,458 585,549 74,316 Total pension benefit obligation 1,324,550 Net assets available for benefits, at cost (total market value, $1,889,122) 1,611,879 Excess pension assets $ 287,329 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 District's contribution calculation for the year ended March 31, 1991 was made in accordance with the actuarially determined requirements computed as of June 30, 1989. If the District had not had a surplus in the PER's asset account, the total pension funded contribution for fiscal 1991 would have consisted of $196,088 normal cost (13.3% of current covered payroll). 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 a 12 -year period. Significant actuarial assumptions used in the 1989 valuation to compute the actuarially determined contribution requirements are the same as those used to compute the pension benefit obligation as described above. 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 System annual reports. C C Trend information for the District for each of the three years in the period ended June 30, 1989 (the period for which information is available) is as follows (dollars in thousands): Pension benefit obligation Net assets available for benefits Excess of nets 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 6. DEFERRED COMPENSATION PLAN 1990 1989 1988 $1,325 $1,023 $ 855 1,612 1,425 1,239 $ 287 402 $ 384 122% 139% 145% $1,416 $1,195 $1,048 20.3% 33.7% 36,6% 10.9% 7.0% 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 unforseeable 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 the 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 cash) of the deferred compensation plan for the year ended March 31, 1991 are as follows: Balance, March 31, 1990 $148,395 Additions 57,969 Reductions (1,250) Balance, March 31, 1991 $205,114 - 10 - r 7. LEASE REVENUES The District leases certain land and structures to others under operating leases with terms varying from month -to -month to fifty years. Lease revenue received was approximately $337,000 during the year ended March 31, 1991. 8. LITIGATION The District is named in certain claims and litigation. It is the opinion of management, after consultation with counsel, that the liability, if any, resulting therefrom will not have a material effect on the District's financial position. C