HomeMy Public PortalAboutAudit Report - District- FY96MIDPENINSULA REGIONAL OPEN SPACE DISTRICT
(M.R.O.S.D.)
Financial Statements
and
Report of Independent Certified Public Accountants
March 31, 1996
Suite 600
150 Almaden Blvd,
San Jose, CA 95113
408 275-9000
FAX 408 275-0582
Report of Inde •endent Certified Public Accountants
Grant Thornton
The Board of Directors
Midpeninsula Regional Open Space District
GRANT THORNTON LLP Accountants and
Management Consultants
The U.S. Member Firm of
Grant Thornton International
We have audited the accompanying combined balance sheet of the Midpeninsula Regional Open Space
District (the "District") as of March 31, 1996, and the related statement of revenue, expenditures and
changes in fund balance, budget and actual, of the District General Fund. 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, 1.996, 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.
San Jose, California
June 14, 1996
Midpeninsula Regional Open Space District
COMBINED BALANCE SHEET
March 31, 1996
ASSETS
Account Groups
General General Total
General Agency Fixed Long -Term (Memorandum
Fund Fund Assets Debt Only)
Cash, Including interest -bearing deposits and
cash equivalents $ 2,168,491 $
Restricted cash and cash equivalents 353,043
Restricted investments 4,535,435
Property tax and other receivables 3,399,161
Prepaid expenses 5,762
Land
Structures and improvements
Equipment
Amount available in General Fund
Amount to be provided for retirement of general
long-term debt
1,388,925
$ $ 2,168,491
353,043
5,924,360
3,399,161
5,762
159, 759, 076 159, 759, 076
6,359,406 - 6,359,406
1,466,485 - 1,466,485
- 4,886,478 4,888,478
65,698,796 65,698,796
TOTAL ASSETS $ 10,461,892 $ 1,388,925 $ 167,584,967 $ 70,587,274 $ 250,023,058
LIABILITIES AND FUND EQUITY
Liabilities
Accounts payable $ 148,527 $ $ - $ - $ 148,527
Accrued liabilities 246,728 246,728
Deposits 25,415 - - 25,415
Deferred revenue 223,117 - - 223,117
Deferred compensation 1,388,925 1,388,925
Long-term debt - _ 70,587,274 70,587,274
Total liabilities 643,787 1,388,925 - 70,587,274 72,619,986
Fund equity
Investment in general fixed assets - 167,584,967 167,584,967
Fund balance 9,818,105 - 9,818,105
Total fund equity 9,818,105 167,584,967 177,403,072
TOTAL LIABILITIES AND FUND EQUITY $ 10,461,892 $ 1,388,925 $ 167,584,967 $ 70,587,274 $ 250,023,058
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, 1996
REVENUES
General property tax
State grants
Other property taxes
Interest
Gifts
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 EXPENDITURES OVER REVENUES
OTHER FINANCING SOURCES
Proceeds from issuance of long-term debt, net
REVENUES AND OTHER FINANCING SOURCES
OVER (UNDER) EXPENDITURES
Fund balance, April 1, 1995
Fund balance, March 31, 1996
Budget
$ 9,927,000
486,000
180,000
575,000
659,000
11,827,000
3,162, 300
325,900
149,700
8,900
193,250
130,050
353,800
14,339,500
910,750
184,600
1,483, 000
3,971,000
25,212,750
(13,385,750)
7,260,000
Actual
$ 10,173,272
332,268
118,564
693,687
300,000
761,783
12, 379, 574
2,922,558
333,864
138,206
10,145
191,781
115,306
393,020
14,408,676
300,715
180,605
1,483,007
3,951,132
24,429,015
(12, 049,441)
7,258,515
Variance
Favorable
(Unfavorable)
$ 246,272
(153,732)
(61,436)
118,687
300,000
102,783
552,574
239,742
(7,964)
11,494
(1,245)
1,469
14,744
(39,220)
(69,176)
610,035
3,995
(7)
19,868
783,735
1,336,309
(1,485)
(6,125,750) (4,790,926) 1,334,824
14,609,031
14,609,031
$ 8,483,281 $ 9,818,105 g, 1,334,824
The accompanying notes are an integral part of this statement.
Midpeninsula Regional Open Space District
NOTES TO FINANCIAL STATEMENTS
March 31, 1996
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. 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.
3. 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.
4. 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.
5. 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.
6. Long -Term Debt
The principal portion of long-term debt is recorded as a liability in the General Long -Term Debt
Account Group.
Midpeninsula Regional Open Space District
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1996
NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)
7. 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 March 1
July 1 March 1
50% on November 1 July 1
50% on February 1
December 10 (for November) August 31
April 10 (for February)
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.
8. Compensated Absences
Vacation pay is recorded as an expenditure in the year earned. Sick leave is recorded as an
expenditure when paid. Any unused sick leave is forfeited by the employee upon termination of
service, death or retirement.
9. 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.
Midpeninsula Regional Open Space District
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1996
NOTE B - CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of the following at March 31, 1996:
Deposits
Cash on hand and in banks - unrestricted $ (5,980)
Cash in banks - restricted 338,924
Pooled Funds
Cash in Santa Clara County Treasury - unrestricted
Cash in Santa Clara County Treasury - restricted
2,174,471
14,119
Cash balances held in banks are insured up to $100,000 by the Federal Depository Insurance
Corporation. 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 Santa Clara County investment pool is subject to legal restrictions, and additional
restrictions prescribed by the County.
NOTE C - DEFERRED COMPENSATION INVESTMENTS
Investments of $1,388,925 with a fair market value of $1,388,925 at March 31, 1996, 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 - RESTRICTED INVESTMENTS
The District maintains certain restricted investments for purposes of satisfying the future requirements
of its long-term debt. These investments are in U.S. Government securities with maturity dates ranging
from March 31, 1997 to August 31, 1999. The investments are recorded at cost which approximates
fair market value as of March 31, 1996.
Midpeninsula Regional Open Space District
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1996
NOTE E - FIXED ASSETS
Changes in the General Fixed Assets Account Group for the year ended March 31, 1996 were as
follows:
Balances Balances
April 1, March 31, '
1995 Additions Retirements 1996
Land $ 145,350,400 $14,408,676 $ - $ 159,759,076
Structures and improvements 6,058,691 300,715 - 6,359,406
Equipment 1,312.573 180.605 26.693 1.466.485
$ 152.721.664 $14,889.996 $ 26,693 $ 167.584,967
All fixed assets additions during fiscal 1995 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,
1996 were as follows:
Long-term debt, April 1, 1995
Issuance of notes payable (interest at 8.0%, due in 2010)
Issuances of note payable (interest at 6%, due in 1996)
Principal reductions
$64,811,766
6,258,515
1,000,000
(1.483,007)
Long-term debt, March 31, 1996 $70.587.274
Long-term debt of $9,002,274 bears interest at fixed rates from 5% to 8% at March 31, 1996 (weighted
average interest rate is 7.47%) and is collateralized by land with an original cost basis of approximately
$17,000,000.
The following is a detail of the remaining long-term of the District as of March 31, 1996:
• 1988 Notes, principal balance outstanding of $10,400,000, bearing interest at a variable floating rate
(4.1% as of March 31, 1996), due February 1, 2008.
• 1990 Notes, principal balance of $14,460,000, bearing interest at rates ranging from 6.50% to
7.50%, with a weighted average interest rate of 7.25%, maturing annually from September 1, 1995
through September 1, 2010.
• 1992 Notes, principal balance of $8,000,000, bearing interest at rates ranging from 5% to 6.35%,
with a weighted average interest rate of 6.00%, maturing annually from July 1, 1997 through July 1,
2012.
Midpeninsula Regional Open Space District
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1996
NOTE F - LONG-TERM DEBT (continued)
• 1993 Certificates of Participation including Serial Certificates with a principal balance of $6,970,000,
bearing interest at rates ranging from 2.90% to 5.6%, with a weighted average interest rate of
5.16%, 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.
• 1995 Notes, principal balance of $11,500,000, including $1,355,000 of Serial Notes, bearing interest
at rates ranging from 5.75% to 7%, with a weighted average interest rate of 6.56%, maturing
annually from September 1, 1998 through September 1, 2009. This issue also includes
$10,145,000 of 7% term notes due on September 1, 2014.
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 Principal
1997
1998
1999
2000
2001
Thereafter through 2021
NOTE G - EMPLOYEES' RETIREMENT PLAN
$ 3,664,395
2,850,084
2,536,043
2,638,650
2,831,894
56.066.208
Interest
$ 4,348,314
4,099,772
3,937,919
3,797,670
3,648,015
29.984.194
$ 70.587.274 $ 49.815.884
Total
$ 8,012,709
6,949,856
6,473,962
6,436,320
6,479,909
86.050.402
$ 120.403.158
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 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.
Midpeninsula Regional Open Space District
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1996
NOTE G - EMPLOYEES' RETIREMENT PLAN (continued)
For the year ended March 31, 1996, the District made contributions to the Fund of $140,691. The
District's payroll for employees covered by the Fund for the year ended March 31, 1996 was
$2,249,510 from a total payroll of $2,922,558. District participation in the Fund is comprised of 52
active employees of a total of 55 employees. The District's required employer contribution rate is 5.3%.
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.
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, 1994 (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, 1994 (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
Total pension benefit obligation
Net assets available for benefits, at cost (total market value, $3,620,354)
Unfunded pension benefit obligation (surplus)
$ 737,742
1,201, 369
622,094
58.376
2,619,581
3.631.247
$(1.011.666)
Changes in the pension benefit obligation from last year due to;
Changes in benefit provisions $
Changes in actuarial assumptions (225,249)
Midpeninsula Regional Open Space District
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1996
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 District's
contribution calculation for the year ended March 31, 1996 was made in accordance with the actuarially
determined requirements computed as of June 30, 1994.
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 1994 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, 1994 (the
period for which information is available) is as follows (dollars in thousands):
1994 1993 1992 1991 1990
Net assets available for benefits $ 3,631 $ 2,868 $ 2,459 $ 2,100 $ 1,771
Pension benefit obligation 2.619 2.345 2.124 1.831 1.571
Excess of net assets over the
pension benefit obligation $ 1.012 $ 523 $ 335 $ 269 $ 200
Percentage funded 139% 122% 116% 115% 113%
Annual covered payroll $ 2,293 $ 2,013 $ 1,876 $ 1,718 $ 1,444
Excess of net assets over the
pension obligation as a percentage
of covered payroll
Employer contributions as a
percentage of covered payroll
44% 26% 17.9% 15.7% 13.9%
6.1% 12.4% 10.2% 5.4% 11.9%
Midpeninsula Regional Open Space District
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1996
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, 1996 are as follows:
Balance, April 1, 1995 $ 1,037,698
Additions 362,449
Payments (11,222)
Balance, March 31, 1996 $ 1.388.925
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 $684,392 during the year ended
March 31, 1996.
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 Districts
financial position.
Midpeninsula Regional Open Space District
NOTES TO FINANCIAL STATEMENTS (continued)
March 31, 1996
NOTE K - SUBSEQUENT EVENT
The District issued $29,910,201 of Revenue bonds dated July 1, 1996. The bonds mature in
September 2026 with yield rates ranging from 3.9% to 6.3%. The District will be required to make
principal and interest payments on this obligation beginning September 1, 1997, out of an established
reserve. The proceeds from the bonds were used to defease the 1988 Notes and to retire a
$1,000,000 note payable. The remainder of the proceeds are being held in the General Fund to be
used to retire certain outstanding long-term obligations and, possibly, for future land acquisitions.