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HomeMy WebLinkAbout102-CAFR Document.pdf C ITY OF S ARATOGA C ALIFORNIA COMPREHENSIVE ANNUAL FINANCIAL REPORT FISCAL YEAR 2009/10 Saratoga, California Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2010 City Council Kathleen King ............................................................................................................. Mayor Jill Hunter........................................................................................................... Vice Mayor Chuck Page ................................................................................................ Council Member Howard Miller ............................................................................................ Council Member Manny Cappello ......................................................................................... Council Member Presented under the direction of: David Anderson, City Manager Finance & Administrative Services Department CITY OF SARATOGA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2010 i T ABLE OF C ONTENTS I NTRODUCTORY SECTION Letter of Transmittal ......................................................................................................... 1 GFOA Certificate of Achievement for Excellence in Financial Reporting ........................... 5 Principal Officers of the City ............................................................................................ 6 Organization Chart ........................................................................................................... 7 F INANCIAL S ECTION Independent Auditor’s Report ............................................................................................. 9 Management’s Discussion and Analysis (Required Supplementary Information) ............. 11 Basic Financial Statements: Government-Wide Financial Statements Statement of Net Assets ............................................................................................ 23 Statement of Activities and Changes in Net Assets ..................................................... 24 Fund Financial Statements Governmental Funds: Balance Sheet ........................................................................................................... 25 Reconciliation of the Government Funds Balance Sheet to the Government-Wide Financial Statement of Net Assets .................................. 26 Statement of Revenues, Expenditures and Changes in Fund Balances ......................... 27 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balances to the Government-Wide Statement of Activities and Changes in Net Assets ................................................ 28 Proprietary Funds: Statement of Net Assets ............................................................................................ 29 Statement of Revenues, Expenses, and Changes in Fund Net Assets ........................... 30 Statement of Cash Flows ........................................................................................... 31 Fiduciary Funds: Statement of Fiduciary Net Assets ............................................................................. 32 Basic Financial Statement Notes: Notes to the Basic Financial Statements ..................................................................... 33 Required Supplementary Information Budgetary Information .............................................................................................. 57 Modified Approach for City Streets Infrastructure Capital Assets ............................... 59 CITY OF SARATOGA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2010 ii T ABLE OF C ONTENTS C ONTINUED S UPPLEMENTARY I NFORMATION: Non-Major Governmental Funds Combining Balance Sheets ....................................................................................... 62 Combining Statement of Revenues, Expenditures and Changes in Fund Balances ........ 64 Schedule of Revenues, Exp and Changes in Fund Balances – Budget and Actual: Capital Improvements .......................................................................................... 66 Lighting & Landscape Assessment Districts Special Revenue Funds ..................... 67 Community Development Block Grant Special Revenue Fund ............................... 68 Library Bond Debt Service Fund .......................................................................... 69 Library Expansion Capital Project Fund ............................................................... 70 Fiduciary Funds Statement of Changes in Assets and Liabilities – Agency Funds ................................. 72 Internal Service Funds Combining Statement of Net Assets ........................................................................... 74 Combining Statement of Revenues, Expenses, and Change in Fund Balance ............... 76 Combining Statement of Cash Flows ......................................................................... 78 Capital Assets Used in the Operation of Governmental Funds Comparative Schedule by Source ............................................................................... 83 Schedule by Function and Activity ............................................................................ 84 Schedule of Changes by Function and Activity .......................................................... 86 Statistical Section (Unaudited) Net Assets by Component .......................................................................................... 88 Changes in Net Assets ............................................................................................... 89 Fund Balance of Governmental Funds ........................................................................ 90 Governmental Activities Tax Revenues by Source ..................................................... 91 Changes in Fund Balances of Governmental Funds .................................................... 92 Direct and Overlapping Governments ........................................................................ 93 Assessed Value of Taxable Property .......................................................................... 94 Principal Property Taxpayers ..................................................................................... 96 Property Tax Levies and Collections .......................................................................... 97 Ratios of Outstanding Debt by Type .......................................................................... 98 Ratios of General Bonded Debt Outstanding .............................................................. 99 Direct and Overlapping Governmental Activities Debt ............................................. 100 Legal Debt Margin Information ............................................................................... 101 Demographic and Economic Statistics ..................................................................... 102 Principal Employers ............................................................................................... 103 Full-Time Equivalent City Government Employees by Function ............................... 104 Operating Indicators by Function ............................................................................. 105 Capital Asset Statistics by Function ......................................................................... 106 INTRODUCTORY SECTION 1 C ITY OF S ARATOGA C ITY H ALL 13777 F RUITVALE A VENUE S ARATOGA, C ALIFORNIA 95070 (408) 868-1200 November 8, 2010 Honorable Mayor and City Council, The Comprehensive Annual Financial Report (CAFR) of the City of Saratoga for the year ended June 30, 2010 is hereby submitted as mandated by applicable statutes. These statutes require that the City of Saratoga annually issue a report on its financial position and activity, and that an independent firm of certified public accountants audit this report. Responsibilities for both the accuracy of the data and the completeness and fairness of the presentation, including all disclosures, rests with the City's management. The information in this report is intended to present the reader with a comprehensive view of the City’s financial position and the results of its operations for the fiscal year ending June 30, 2010, along with additional disclosures and financial information designed to enable the reader to gain an understanding of the City’s financial activities. This report was prepared as prescribed in Governmental Accounting Standards Board (GASB) Statement No. 34, Basic Financial Statements and Management’s Discussions and Analysis-for State and Local Governments. This GASB Statement requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement MD&A and should be read in conjunction with it. THE REPORTING ENTITY AND ITS SERVICES The City, incorporated in 1956, is located 40 miles south of San Francisco in the Santa Clara Valley. The City currently covers a land area of approximately 12 square miles and contains a population of 31,997 at January 1, 2010 as reported by the Department of Finance. The City is a general law city of the State of California and operates under a council-manager form of government. Policymaking and legislative authority are vested in the City Council, which consists of a Mayor, Vice Mayor and three additional council members. City Council members are elected at-large for staggered four-year terms. The Mayor is selected annually by the City Council. The City Council is responsible for, among other things, passing ordinances, adopting the budget, appointing members to the City’s seven advisory commissions and hiring the City Manager and City Attorney. The City Manager is responsible for implementing the policies and ordinances of the City Council, overseeing the daily operations of the City, and recommending appointments of the City's department directors to the City Council. The City provides a limited range of services including public safety, development regulation, public works, community and recreation activities and events, and general administrative functions. As a minimal service city, activities are supplemented through numerous contracts with others. Contracted services include, but are not limited to, public safety, infrastructure maintenance, engineering services, legal services and recreation activities. The City is also committed to citizen participation in the evaluation, expansion and enhancement of services. 2 Saratoga residents who wish to assist the City Council in forming government policy may do so by serving on an advisory commission. The commissions all act in an advisory capacity to the City Council, and are comprised of the Heritage Preservation Commission, Library Commission, Parks and Recreation Commission, Planning Commission, Public Safety Commission, and Youth Commission. The financial reporting entity (the City) includes all the fund activity of the primary government, as well as all of its component units. Component units are legally separated entities for which the City is fully accountable. The City’s Saratoga Public Financing Authority (PFA) component unit which provided financial oversight of local bond obligations was finalized in FY 2005/06. The Authority’s final financial report was issued for FY 2006/07. Blended component units, although legally separate entities, are in substance, part of the City’s operations and data from these units are combined with data of the City. Accordingly, the operations of the Landscaping and Lighting Assessment Districts are reported in the City’s financial statements. ECONOMIC CONDITIONS AND OUTLOOK The financial structure of Saratoga with its mostly built-out residential neighborhoods and limited commercial development means that the two typically largest sources of revenue for cities—property tax and sales tax—will result in minimal growth in future years. In addition, while Proposition 1A protects the city from further ongoing unrestrained State takeaways of tax revenues, under the current budget crisis, the City expects to see shortfalls in unprotected State or County based funding, and temporary borrowings of property tax revenues permitted under Proposition 1A. With this in mind the City continues to restrict operations to minimal services and prepare for funding impacts. Capital improvements will continue to be funded with residual funding and grant moneys as funding levels allow. On a positive note the City began receiving a significant increase in property tax revenues due to the passage of Assembly Bill 117. This legislation, effective with the 2006/07 fiscal year, increased the property tax percentage allocated to the City as a result of the Tax Equity Allocation (TEA) formula. Assembly Member Cohn sponsored the bill which resulted from a joint effort of the City of Saratoga, Santa Clara County and 3 other affected cities – Cupertino, Monte Sereno and Los Altos Hills. While the TEA legislation restored the cities to the full “low tax” level of 7%, the State required the cities to continue to remit the County’s ERAF rate on these funds so that the bill would have no effect on the State budget. The ERAF rate the County remits is 47.7%, compared to the City of Saratoga’s rate of 17.14%, resulting in a significant impact to the revenues received. FINANCIAL INFORMATION AND MAJOR INITIATIVES Management of the City is responsible for establishing and maintaining an internal control structure designed to ensure that the assets of the City are protected from loss, theft or misuse and to ensure that adequate accounting data is compiled to allow for the preparation of financial statements in conformity with generally accepted accounting principles. The internal control structure is designed to provide reasonable, but not absolute, assurance that these objectives are met. The concept of reasonable assurance recognizes that: (1) the cost of a control should not exceed benefits likely to be derived, and (2) the valuation of costs and benefits requires estimates and judgments by management. As a recipient of federal, state and local financial assistance, the City is also responsible for guaranteeing that an adequate internal control structure is in place to ensure and document compliance with applicable laws and 3 regulations related to these programs. This internal control structure is subject to periodic evaluation by the City’s management. The City has practiced a passive approach to investments and maintains flexibility by managing a pooled cash system. Under the pooled cash concept, the City invests the cash of all funds with maturities planned to coincide with cash needs. Idle cash is invested in certain eligible securities as constrained by law and further limited by the City’s investment policy. The goals of the City’s investment policy are safety, liquidity and yield. In addition, the City maintains extensive budgetary controls. The objective of these controls is to ensure compliance with legal provisions embodied in the annual appropriated budget approved by the City Council. Activities of the general fund, special revenue funds, capital projects funds and debt service funds are included in the annual appropriation. The level of budgetary control (i.e., the level at which expenditures cannot exceed the appropriated amount) is at the fund level. The City also maintains an encumbrance accounting system as another method of maintaining budgetary control. Encumbered amounts lapse at year-end with the exception of the Capital Improvements Projects, which are multiple-year projects. However, outstanding encumbrances of a material nature are reviewed by the responsible department and in some cases a recommendation is made to the City Council to take action by Resolution to re-appropriate these funds into the following year’s budget. The FY 2009/10 budget focused on maintaining service levels in anticipation of further reductions in the City’s revenue sources due to the weakening economy. Departmental budgets were held or reduced to non- expansive levels. The City prepared for additional takeaways by the State due to the publicity of the State’s struggle with their budget. With decreasing resources, the FY 2009/10 budget process continued its focus on operational efficiencies to streamline services, the alignment of fees with services provided to the public, short-term eliminations of operational resources where available, and strengthening the organization’s tracking and communication of City operations. OTHER INFORMATION Independent Audit – California law requires cities to prepare an annual audit by an independent certified public accountant. In addition to meeting the requirements set forth in statutes, the audit was also designed to meet the requirements of the federal Single Audit Act of 1984, as amended, and the related U.S. Office of Management and Budget’s Circular. Generally accepted auditing standards set forth in the General Accounting Office’s Government Auditing Standards were used by the auditors in conducting the engagement. The auditor’s unqualified report is included in the financial section of this report. Vavrinek, Trine, Day & Co., LLP Certified Public Accountants performed the City’s Fiscal Year 2009/10 financial audit. Awards – The Government Finance Officers Association (GFOA) of the United States and Canada awarded a Certificate of Achievement to the City for its Excellence in Financial Reporting on the CAFR for the fiscal year ended June 30, 2009. In order to be awarded a Certificate of Achievement, the City published an easily readable and efficiently organized financial report. This report satisfied both generally accepted accounting principles and applicable legal requirements. The Certificate of Achievement is valid for a period of one year. We believe our current CAFR continues to meet the Certificate of Achievement program’s requirements, and plan on submitting it to the GFOA to determine its eligibility for another certificate. 4 Acknowledgements – This CAFR represents the culmination of numerous hours of hard work expended by many individuals in the Finance & Administrative Services Department. In particular, we would like to express our appreciation to Robert Edris, Sr. Accountant for his exemplary preparation of this annual financial report, and to our supporting staff members: Ann Xu, Accountant; Julie Ingraham, Karen Caselli, and Melanie Whitaker, Accounting Technicians for all their assistance with the audit and exemplary services throughout the year. Furthermore, we would like to thank Vavrinek, Trine, Day & Co. LLP, CPA’s for their helpful assistance in the preparation of this report. Finally, we would like to give credit to the City Council for their ongoing interest and support in planning, conducting and advising on the operations of the City in a responsible and representative manner. Respectfully submitted, Dave Anderson Mary Furey City Manager Finance and Administrative Services Director 5 6 CITY OF SARATOGA ELECTED OFFICIALS AND ADMINISTRATIVE PERSONNEL As of June 30, 2010 CITY COUNCIL Kathleen King - Mayor Jill Hunter – Vice Mayor Chuck Page Howard Miller Manny Cappello CITY STAFF Dave Anderson – City Manager Barbara Powell – Assistant City Manager Ann Sullivan – City Clerk Mary Furey – Finance & Administrative Services Director John Livingstone – Community Development Director John Cherbone – Public Works Director Michael Taylor – Recreation & Facilities Director CITY ATTORNEY Richard S. Taylor – Shute, Mihaly & Weinberger INDEPENDENT AUDITORS Vavrinek, Trine, Day & Co., LLP, CPA 7 City of Saratoga - Organization Chart CityAttorneyCity Manager Executive Assistant .60 CommunityDevelopment Department Community Development Director Administrative AnalystII 1 Human Resources Division 1 HR Manager Facilities Division 1Facility Maint.Supervisor 1 Facility Maint. Leadworker 2 Facility Maint. Workers .60 Facility Coordinator Planning Division 1 Senior Planner 2 Assistant Planners 1 Arborist 1 Office Specialist Engineering Division 1 Sr. Civil Engineer 1 Associate Engineer 1 Administrative Analyst .75 Office Specialist Parks Division 1 Manager -Parks 1 Park Maint. Leadworker 1 Park Maint. Specialist 6 Park Maint. Workers .50 Office Specialist III Finance Division 1 Accountant 3 Accounting Technicians Information Technology Division 1 IT Analyst Office of the City Clerk 1CityClerk .15 Deputy City Clerk Financeand Administrative Services Department Finance and Administrative Services Director Recreation and Facilities Department Recreation and Facilities Director PublicWorks Department Public Works Director Recreation Services Division 1 Senior Recreation Supervisor 1 Recreation Supervisor 1 Office Specialist Streets and Fleet Division 1 Manager -Streets and Fleet 1 Street Maint. Leadworker 1 Street Maint. Specialist 4 Street Maint. Workers .50 Office Specialist BuildingDivision 1 Building Official 2 Building Inspectors 1 Code Compliance Specialist 1 Plan Check Engineer 1 Office Specialist CitizenAdvisory Commissions and Citizens of Saratoga ElectedCity Council CityManager's Department Assistant City Manager/City Manager's Department Director 8 This page is intentionally blank. FINANCIAL SECTION 9 INDEPENDENT AUDITOR’S REPORT To Honorable Mayor and Members of the City Council of the City of Saratoga Saratoga, California We have audited the accompanying financial statements of the governmental activities, each major fund, and the aggregate remaining fund information of City of Saratoga (the City), as of and for the year ended June 30, 2010, which collectively comprise the City’s basic financial statements as listed in the table of contents. These financial statements are the responsibility of the City’s management. Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Governmental Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, each major fund, and the aggregate remaining fund information of the City of Saratoga, as of June 30, 2010, and the respective changes in financial position, and where applicable, cash flows thereof 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 November 8, 2010, on our consideration of the city’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in conjunction with this report in considering the results of our audit. 5000 Hopyard Road, Suite 335 Pleasanton, CA 94588 Tel: 925.734.6600 Fax: 925.734.6611 www.vtdcpa.com F R E S N O L A G U N A H I L L S P L E A S A N T O N R A N C H O C U C A M O N G A P A L O A L T O S A C R A M E N T O 10 The required supplementary information, such as management’s discussion and analysis, and the required supplementary information as listed on the table of contents, are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The introductory section, and the combining individual non-major fund statements and schedules, and statistical section, as listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the basic financial statements. The combining individual non-major fund statements and schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. The introductory and statistical sections have not been subjected to the auditing procedures applied in the audit of the basic financial statements and, accordingly, we express no opinion on them. Pleasanton, California November 8, 2010 CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2010 11 INTRODUCTION The following provides a narrative overview and analysis of the fiscal operations during the fiscal year ended June 30, 2010 for the City of Saratoga. The Management Discussion and Analysis (MD&A) is to be read in conjunction with the annual Transmittal Letter and the Basic Financial Statements. FISCAL YEAR 2009/10 FINANCIAL HIGHLIGHTS  The City's total net assets were $123,017,751, comprised of $108,965,864 for investment in capital assets, net of depreciation and related debt; $5,519,025 restricted for specific purposes; and $8,532,862 unrestricted net assets (reference pg #23).  Total City revenues were $18,901,842 which consists of program revenue of $6,536,962 and general revenues of $12,364,880 (reference pg #24).  The City’s expenses were $18,741,679 (reference pg #24).  Total Governmental Fund’s fund balances were $13,529,703, consisting of $8,010,678 in the General Fund, $3,705,941 in the Capital Improvement Funds, and $1,813,084 in the Other Governmental Funds (reference pg #25).  General Fund revenues were $15,245,049, while General Fund expenditures were $15,138,899 (reference pg #27). THE BASIC FINANCIAL STATEMENTS The Basic Financial Statements are comprised of 1) Government-wide (City-wide) Financial Statements, and; 2) Fund Financial Statements. These two sets of financial statements provide the reader two different perspectives of the City's financial activities and financial position. Government-Wide Financial Statements provide a longer-term view of the City's activities as a whole, and comprise the Statement of Net Assets and the Statement of Activities. The Statement of Net Assets provides information about the financial position of the City as a whole, including all its capital assets and long-term liabilities on a full accrual basis, similar to that used by corporations. The Statement of Activities provides information about all the City's revenues and all its expenses, also on a full accrual basis, with the emphasis on measuring net revenues and/or expenses for each of the City's programs. The Statement of Activities explains in detail the change in Net Assets for the fiscal year. All of the City's activities are required to be grouped into government activities and business-type activities. The entire amount in the Statement of Net Assets and the Statement of Activities are also required to be separated into governmental activities or business-type activities in order to provide a summary of these two activities of the City as a whole. In the case of the City of Saratoga, there are no business-type activities as of June 30, 2010. Fund Financial Statements report the City's operations in more detail than the government-wide statements and focus primarily on the short-term activities of the City's general fund and other major funds. The Fund Financial Statements measure only current revenues and expenditures and fund balances; they exclude capital assets, long-term debt, and other long-term amounts. CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2010 12 Major funds account for the major financial activities of the City and are presented individually, while the activities of non-major funds are presented in summary, with subordinate schedules presenting the detail for each of these other funds. Major funds are explained below. The Government-Wide Financial Statements Government-wide financial statements are prepared on the accrual basis, which means they measure the flow of all economic resources of the City as a whole. The Statement of Net Assets and the Statement of Activities present information about the following: Governmental Activities - All of the City's basic services are considered to be governmental activities, including general government, community development, public safety, transportation, and, culture and leisure. These services are supported by general City revenues such as taxes, and by specific program revenues such as developer and recreation program fees. Business-Type Activities - This category includes enterprise activities such as water, sewer, and utilities. Unlike governmental services, these services are fully supported by charges paid by users based on the amount of services they use. The City of Saratoga does not have any business-type activities at this time. Fund Financial Statements A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. Fund financial statements provide detailed information about each of the City's most significant funds, called major funds. The concept of major funds, and the determination of which are major funds, was established by GASB Statement 34 and replaces the concept of combining like funds and presenting them in total. Instead, each major fund is presented individually, with all non-major funds summarized and presented only in a single column. Subordinate schedules present the detail of these non-major funds. Major funds present the major activities of the City for the fiscal year, and may change from year to year as a result of changes in the pattern of the City's activities. The City's funds are segregated into three categories: governmental funds, proprietary funds, and fiduciary funds. Governmental Funds - The City's basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances available at year-end. Financial statements are prepared on the modified accrual basis, which means they measure only current financial resources and uses. Carrying amounts for capital assets and other long-lived assets, along with long-term liabilities are not presented on the balance sheet in the governmental fund financial statements. Unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating the City's near-term financing requirements. Proprietary Funds – Internal service funds are an accounting device used to accumulate and allocate costs internally among the City’s various functions. The City uses internal service funds to account for liability and risk management, workers compensation, office supplies, information technology services, vehicle and building maintenance, and vehicle and information technology equipment replacement. Because the internal service funds benefit the governmental functions, they have been included with the governmental activities in the government-wide financial statements. CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2010 13 Fiduciary Funds – These funds account for assets held by the City in a trustee capacity or as an agent for individuals, private organizations, other governmental units, and/or other funds. Fiduciary funds are not reflected in the government-wide financial statements because these resources are not available to support the City's programs. The City maintains one such fund, the Community Access Television Fund, which acts as trustee for the CATV Foundation Board for investment purposes. NOTES TO THE FINANCIAL STATEMENTS Notes to the Financial Statements provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. The notes can be found immediately following the fund financial statements. REQUIRED SUPPLEMENTARY INFORMATION Required supplementary information other than through the MD&A follows the Notes and includes a budgetary comparison for the General Fund as presented in the governmental fund financial statements, and information on the modified approach for city streets and infrastructure. SUPPLEMENTARY INFORMATION Combining and individual fund statements and schedules are included to provide information for non-major governmental funds, special revenue funds, fiduciary funds, and uses of capital assets. An un-audited statistical section provides historical and current data on financial trends, revenue and debt capacity, demographic and economic information, and operating information. GOVERNMENT-WIDE FINANCIAL ANALYSIS Net assets may serve over time as an indicator of the City's financial position. The City's Total Net Assets increased $160,163, from $122,857,588 in FY 2008/09 to $123,017,751 in FY 2009/10. The most significant portion of the City's net assets ($108,965,864 or 88.6%) accounts for its investment in capital assets, (e.g., land, buildings, general government infrastructure, equipment, etc.;) less any related debt used to acquire those assets that are still outstanding. These capital assets represent infrastructure which provides services to the citizens, consequently, these assets are not available for future spending. $5,519,025 or 4.5% of the City's net assets are subjected to external restrictions on how they may be used. Of these restricted net assets, $4,057,300 is restricted for capital projects, $892,593 is for repayment of long-term debt and $569,132 is restricted for housing activities and lighting and landscaping assessment districts. The remaining $8,532,862 or 6.9% of the City's net assets are unrestricted and may be used to meet the City's ongoing obligations to citizens and creditors. CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2010 14 Governmental Activities 20102009 Assets Current assets16,740,241$ 18,182,606$ Non-current assets58,337 71,670 Capital assets121,920,864 122,102,516 Total Assets 138,719,442 140,356,792 Liabilities Current liabilities2,794,845 4,317,341 Long-term debt12,906,846 13,181,863 Total Liabilities 15,701,691 17,499,204 Net Assets Investment in capital assets, net of related debt108,965,864 108,817,516 Restricted for Capital Project4,057,300 3,865,374 Restricted for Debt Service892,593 931,361 Restricted for Special Projects569,132 484,088 Unrestricted8,532,862 8,759,249 Total Net Assets 123,017,751$ 122,857,588$ Net Assets CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2010 15 Governmental ActivitiesIncrease Functions/Programs20102009(Decrease) Program Revenues Charges for services5,588,740$ 5,768,277$ (179,537)$ Operating grants and contributions275,035 228,534 46,501 Capital grants and contributions673,187 338,768 334,419 Total Program Revenues 6,536,962 6,335,579 201,383 General Revenues Property taxes8,371,322 8,335,805 35,517 Sales taxes954,574 1,043,034 (88,460) Local taxes560,040 663,053 (103,013) Franchise taxes1,663,657 1,656,716 6,941 Motor vehicle in-lieu101,218 116,273 (15,055) Intergovernmental revenues521,852 473,989 47,863 Investment earnings100,731 397,116 (296,385) Other revenues91,486 148,284 (56,798) Total General Revenues 12,364,880 12,834,270 (469,390) Expenses General and intergovernmental services3,729,036 5,595,474 (1,866,438) Public safety4,338,598 4,210,763 127,835 Public works6,534,902 7,643,545 (1,108,643) Community services1,710,769 1,633,997 76,772 Community development services1,751,348 1,999,754 (248,406) Interest on long-term debt (unallocated)677,026 696,800 (19,774) Total Expenses 18,741,679 21,780,333 (3,038,654)$ Increase / (Decrease) in Net Assets160,163 (2,610,484) Net Assets, Beginning of Year 122,857,588 125,468,072 Net Assets, End of Year 123,017,751$ 122,857,588$ Statement of Changes in Net Assets As shown in the above Statement of Changes in Net Assets schedule, the net change in program revenues from the prior fiscal year for governmental activities is an increase of $201,383. The net change in general revenues from the prior year is a decrease of $469,390, for a total decrease in revenues of $268,007. The net change in expenses from the prior year is a decrease of $3,038,654. With total program and general revenues for fiscal year 2009/10 at $18,901,842 and total expenses at $18,741,679, the net activity resulted in an increase in Net Assets of $160,163. CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2010 16 An analysis and graphical representation of the changes in revenues and expenditures by type of significant events follows: CHART OF REVENUE INCREASE OR (DECREASE) $- $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 $9,000,000 FY 2008/09 FY 2009/10 Total Revenues by Category Increases in Revenues  A $46,501 increase in operating grants is primarily the result of the State’s payment delay for COPS/SLESF funds as funding due in fiscal year 2008/09 was made in fiscal year 2009/10. A $334,419 increase in capital grants reflects a large street resurfacing grant reimbursement completed in FY 2009/10.  The small increase of $35,517 (.43%) in property tax revenue is the net of increases in property tax assessment values from real estate turnover of long-held properties, against decreases in overall assessed property values. The increase is significantly lower than in previous years due to the ongoing decrease in housing prices during FY 2009/10.  Intergovernmental revenues reflect an increase of $47,863 due primarily to an increase in Gas Tax revenues from the prior fiscal year. Decreases in Revenues  A decrease of $179,537 in Charge for Services reflects the ongoing impact to development service revenues caused by the economic downturn and credit crunch. The continued decline was offset by an approximate $80,000 increase in recreation revenues resulting from new dance programs. CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2010 17  Sales tax and local taxes also decreased in fiscal year 2009/10 as a result of the economic downturn. Sales tax decreased by $88,460 and local taxes by $103,013. The portion of the business license tax and the construction tax that are based on building permits comprised the majority of the decrease in local taxes, with the remainder of the decrease from the City’s hotel tax.  Investment Earnings decreased by $296,385 (75%) from the prior year due to historically low interest rates at under 1% during the fiscal year  Other Revenues represents miscellaneous refunds and reimbursements, proceeds from sales, cell tower leases, and minor oddities. Revenues will fluctuate from year to year as these types of receipts are typically unplanned and one-time occurrences. A continued emphasis on categorizing revenues into proper programs and categories has also contributed to the $56,798 decrease in this category. CHART OF EXPENSE INCREASE OR (DECREASE) $- $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 $7,000,000 $8,000,000 FY 2008/09 FY 2009/10 TotalExpenses by Category The net change in expenses for Governmental Activities was a decrease of $3,038,654. Expenditures with significant events include: Increases in Expenses  Public Safety expenses increased by $127,835 due to an increase in the Sheriff’s Office contract cost.  The $76,772 increase in Community Services expenses is due to increases in Recreation program costs resulting from additional dance program activities and staffing costs. Decreases in Expenses  A $1,866,438 decrease in the General and Intergovernmental Services category from the prior year is the result of strategic reductions in administrative staffing costs, operational expenses, and internal service charges to offset reductions in revenues. CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2010 18  A $1,108,643 decrease in the Public Works category reflects reductions in non-capital maintenance costs with the emphasis shifting to capital improvements rather than maintenance projects during the fiscal year.  The community development category of expenditures decreased by $248,406 with the continued downturn in services provided. MAJOR AND OTHER GOVERNMENTAL FUNDS: CHANGE IN FUND BALANCE A summary of the changes in fund balance of the major and other government funds are presented below: Other CapitalGovernmental GeneralImprovementFunds Total Revenues15,245,049$ 2,160,466$ 1,573,432$ Total Expenditures15,138,899 2,578,501 1,396,353 Revenues Over (Under) Expenditures106,150 (418,035) 177,079 Transfers in325,842 845,979 - Transfers out(650,000) (232,983) (133,838) Net change in fund balances(218,008) 194,961 43,241 Beginning of year 8,228,686 3,510,980 1,769,843 End of year8,010,678$ 3,705,941$ 1,813,084$ Major Funds Included in the Major Funds are the General Fund and the Capital Improvement Fund. The Other Governmental funds include twenty-four Lighting and Landscape Assessment Districts, accounted for as one fund in the financials, the Community Development Block Grant Fund, the Library Bond Debt Service Fund, and the Library Expansion Capital Project Fund. The net change of the Major and Other Governmental Funds fiscal year transactions is an increase of $20,194. General Fund - As shown in the preceding Major Funds table, the net change in the General Fund's Fund Balance was a decrease of $218,008. A net loss resulted from the net of operating revenues coming in just slightly over operating expenditures, and the transfer out of $650,000 to the Capital Improvement Program. Revenues are budgeted conservatively based upon prior year experience and specific information, while expenditures are limited to anticipated program needs at not-to-exceed projected funding levels. A large factor which contributed to the net loss was the more than $600,000 decrease in General Fund revenues from the prior year due to continued drops in development permits and fees, construction related taxes, and interest earnings. Capital Improvement Project Fund - As shown in the table above, the net change in the Capital Improvement Fund has an increase of $194,961 which is due to timely grant reimbursements and a net of $612,996 of transfers into the capital program to offset the operational shortfall. CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2010 19 Other Governmental Funds - As shown in the table, there was a net increase of $43,241 in the Other Governmental Funds, primarily due to lower operational costs in the landscape and lighting funds this fiscal year. GENERAL FUND – BUDGETARY HIGHLIGHTS Changes from the City's General Fund original budget to the final budget are detailed in the Required Supplementary Information Section along with a comparison to actual activity for the year ended. Changes to the City's budget that increase or decrease appropriations in a fund must be approved by a resolution of the City Council. Modifications to the budget that are a realignment of fiscal activities with no impact to the fund's bottom line may be approved by the City Manager. Adopted to Final Budget Fiscal Year Ended June 30, 2010 AdoptedBudgetFinal BudgetAdjustmentsBudget Expenditures15,816,578$ (478,033) 15,338,545$ Transfers out253,500$ 396,500 650,000$ The General Fund adopted expenditure budget was $15,816,578. At the City’s mid-year review, a revenue shortfall was anticipated so various departmental expenditures were reduced by $310,000 and funding for the City’s internal service funds was reduced by $168,033, reducing the General Fund’s budget by $478,033. CAPITAL ASSETS The City of Saratoga elected to use the "Modified Approach" as defined by GASB Statement No. 34 for infrastructure reporting in which eligible infrastructure capital assets are not required to be depreciated if the following requirements are met:  The City manages the assets using an asset management system which requires that the City (1) perform an up-to-date inventory; (2) perform condition assessments and summarize the results using a measurement scale; and (3) estimate the annual amount to preserve the assets at the established condition assessment level.  The City documents that the eligible infrastructure capital assets are being preserved approximately at or above the established and disclosed condition assessment level. The City policy is to achieve an average Pavement Condition Index (PCI) rating of 70 for all streets. The City achieved the 70 rating with 86% of streets rated as Excellent to Good, 13% of streets are rated as "Poor", and 1% of streets are rated as "Very Poor". The City spent $771,386 to maintain and preserve eligible infrastructure assets. For more detailed information on Capital Assets activity, please refer to Note 2 in the section entitled "Notes to the Basic Financial Statements" and "Required Supplementary Section". The next assessment study has been contracted for September, 2010. CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2010 20 As of June 30, 2010, the City had $121,920,864 invested in a variety of capital assets, as reflected in the following schedule, which represents a decrease of $181,652 or less than a 1% decrease from the prior year. Governmental Activities 20102009 Land 12,984,078$ 10,585,106$ Building and structures17,941,650 18,261,779 Machinery and equipment680,366 470,646 Infrastructure85,871,410 86,189,639 Construction in progress4,443,360 6,595,346 Total Capital Assets, Net of Depreciation121,920,864$ 122,102,516$ Capital Assets at Year End Net of Depreciation The following reconciliation summarizes the changes in Capital Assets. BalanceBalance July 1, 2009AdditionsRetirementsJune 30, 2010 Land10,585,106$ 2,398,972$ -$ 12,984,078$ Building and structures23,156,758 256,005 - 23,412,763 Machinery and equipment2,026,140 383,494 (127,790) 2,281,844 Infrastructure103,549,229 876,278 104,425,507 Construction in progress6,595,346 1,808,376 (3,960,362) 4,443,360 Depreciation(23,810,063) (1,944,415) 127,790 (25,626,688) Total Capital Assets, Net of Depreciation122,102,516$ 3,778,710$ (3,960,362)$ 121,920,864$ Changes in Capital Assets Major capital projects in progress during the fiscal year include the following:  Kevin Moran Park Improvements - $116,132  Library HVAC Upgrade - $276,548  Saratoga Avenue Resurfacing - $257,716  UPPR / DeAnza Trail - $251,007  Prospect Road Medians - $99,373 Additional information on Capital Assets is included in Note 6 to the financial statements. DEBT ADMINISTRATION The net change in outstanding debt for the City of Saratoga is a decrease of $220,747. During the fiscal year, the City did not enter into any new debt structures. CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2010 21 Governmental Activities 20102009 2001 General Obligation Bond12,955,000$ 13,285,000$ Compensated absences693,668 584,415 Total Outstanding Debt 13,648,668$ 13,869,415$ Outstanding Long-Term Obligation at Year End The current portions of long-term debt ($350,000 and $330,000 for 2010 and 2009, respectively), are classified as current liabilities in the City's Statement of Net Assets. 2001 General Obligation Bond - During the fiscal year, the City made debt service payments that include a principal reduction of $330,000 on the City's 2001 General Obligation $15,000,000 bond issue. Compensated absences are accrued liabilities for vested and unpaid vacation and sick pay. The compensated absences balance increased during the fiscal year by $109,253 due to an increase in unused compensated time off. Additional information on outstanding obligations can be found in Note 7 to the financial statements. ECONOMIC FACTORS In September 2006, the City received a significant increase in new property tax revenues on an annual basis due to the passage of Assembly Bill 117. This legislation effective with FY 2006/07 increases the amount of property taxes allocated to the City as a result of the TEA (Tax Equity Allocation) formula. Assembly Member Cohn sponsored the bill which resulted from a joint effort of the City of Saratoga, Santa Clara County and the three other affected cities - Cupertino, Monte Sereno and Los Altos Hills. These cities are referred to as "no/low tax cities" and will have restored a proportionate share of the property taxes which they lost to special legislation in 1989. This resulted in a permanent increase in general fund property taxes to approximately 5.45% of the 1% ad valorem tax property owners pay. The economy of the City and its major initiatives for the fiscal year are discussed in the accompanying Transmittal Letter. REQUEST FOR FINANCIAL INFORMATION This financial report is designed to provide a general overview of the City of Saratoga's finances for all of Saratoga's residents, taxpayers, customers, investors, and creditors. This financial report seeks to demonstrate the City's accountability for the money it receives. Questions concerning any of the information provided in this report or requests for additional information should be addressed to the Administrative Services Department, 13777 Fruitvale Avenue, Saratoga, California 95070. 22 This page is intentionally blank.. . BASIC FINANCIAL STATEMENTS CITY OF SARATOGA STATEMENT OF NET ASSETS JUNE 30, 2010 23 Primary Government Governmental Activities ASSETS Current Assets: Cash and investments15,864,455$ Receivables: Accounts 842,425 Interest 20,028 Loans 13,333 Total Current Assets16,740,241 Noncurrent Assets: Loans receivable 58,337 Capital Assets: Non-depreciable66,583,057 Depreciable, net55,337,807 Total Capital Assets121,920,864 Total Noncurrent Assets121,979,201 Total Assets 138,719,442 LIABILITIES Current Liabilities: Accounts payable523,533 Accrued payroll 372,018 Other payable 62,173 Interest payable 280,690 Deposits payable 750,387 Unearned revenue 9,621 Claims payable 54,601 Long-term debt - due within one year741,822 Total Current Liabilities2,794,845 Noncurrent Liabilities: Long-term debt - due in more than one year12,906,846 Total liabilities 15,701,691 Net Assets Investment in capital assets, net of related debt108,965,864 Restricted for: Capital projects funds4,057,300 Debt service 892,593 Special projects 569,132 Total Restricted5,519,025 Unrestricted 8,532,862 Total Net Assets 123,017,751$ The accompanying notes are an integral part of these financial statements CITY OF SARATOGA STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS JUNE 30, 2010 24 Net (Expense) Revenue and Changes in Program RevenuesNet Assets Primary OperatingCapitalGovernment Charges forGrants andGrants andGovernmental Functions/Programs ExpensesServicesContributionsContributionsTotalActivities Primary Government: Governmental Activities: General and intergovernmental services3,729,036$ 125,076$ -$ -$ 125,076$ (3,603,960)$ Public safety4,338,598 425,378 144,175 - 569,553 (3,769,045) Public works6,534,902 2,534,991 7,048 673,187 3,215,226 (3,319,676) Community services1,710,769 916,730 - - 916,730 (794,039) Community development services1,751,348 1,586,565 123,812 - 1,710,377 (40,971) Interest on long-term debt (unallocated)677,026 - - - - (677,026) Total 18,741,679$ 5,588,740$ 275,035$ 673,187$ 6,536,962$ (12,204,717)$ General Revenues: Taxes Property taxes8,371,322 Sales taxes954,574 Local taxes560,040 Franchise taxes1,663,657 Motor vehicle-in-lieu101,218 Total taxes11,650,811 Intergovernmental521,852 Investment earnings100,731 Other revenues91,486 Total General Revenues12,364,880 Change in Net Assets160,163 Net Assets - Beginning of Year122,857,588 Net Assets - End of Year123,017,751$ The accompanying notes are an integral part of these financial statements CITY OF SARATOGA GOVERNMENTAL FUNDS - BALANCE SHEET JUNE 30, 2010 25 OtherTotal Capital GovernmentalGovernmental GeneralImprovementFundsFunds ASSETS Cash and investments9,032,631$ 3,502,303$ 1,830,951$ 14,365,885$ Receivables: Accounts467,810 296,570 11,477 775,857 Interest17,892 - 2,136 20,028 Loans- - 71,670 71,670 Total assets 9,518,333$ 3,798,873$ 1,916,234$ 15,233,440$ LIABILITIES AND FUND BALANCES Liabilities: Accounts payable363,550$ 91,071$ 21,859$ 476,480$ Accrued payroll331,531 1,861 - 333,392 Deposits payable750,387 - - 750,387 Other payable62,173 - - 62,173 Deferred revenue14 - 81,291 81,305 Total liabilities 1,507,655 92,932 103,150 1,703,737 Fund Balances: Reserved for: Petty cash1,300 - - 1,300 Debt service- - 892,593 892,593 Unreserved, designated for: Operations2,889,077 - - 2,889,077 Economic uncertainty1,500,000 - - 1,500,000 Environmental services563,182 - - 563,182 Community development services632,380 - - 632,380 Grant matching600,000 - - 600,000 Hillside Reserve300,000 - - 300,000 Uncollected deposits44,791 - - 44,791 Carryforward Reserve68,600 68,600 Capital projects reserve126,983 126,983 Unreserved, undesignated, reported in: General fund1,284,365 - - 1,284,365 Special revenue funds- - 569,132 569,132 Capital projects funds- 3,705,941 351,359 4,057,300 Total fund balances 8,010,678 3,705,941 1,813,084 13,529,703 Total liabilities and fund balances 9,518,333$ 3,798,873$ 1,916,234$ 15,233,440$ The accompanying notes are an integral part of these financial statements Major Funds CITY OF SARATOGA RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE STATEMENT OF NET ASSETS JUNE 30, 2010 26 Total Fund Balances - Total Governmental Funds 13,529,703$ Amounts reported for governmental activities in the statement of net assets were different because: Capital assets used in governmental activities were not current financial resources. Therefore, they were not reported in the Governmental Funds Balance Sheet. The capital assets were adjusted as follows: Non-depreciable capital assets66,583,057 Depreciable capital assets, net55,046,268 Total Capital Assets121,629,325 Interest payable on long-term debt did not require current financial resources. Therefore, interest payable was not reported as a liability in Governmental Funds Balance Sheet.(280,690) Internal service funds are used by management to charge the costs of office stores, vehicle and equipment maintenance and replacement, information services and replacement, building maintenance, risk management, and workers compensation. The assets and liabilities of the internal service funds are included in the governmental activities in the statement of net assets1,655,207 Long-term receivables were not current available resources and therefore, were offset by a deferred revenue amount equal to the net receivable in the governmental funds.132,874 Long-term liabilities were not due and payable in the current period. Therefore, they were not reported in the Governmental Funds Balance Sheet. The long-term liabilities were adjusted as follows: General obligation bonds(12,955,000) Compensated absences(693,668) Total Long-Term Liabilities(13,648,668) Net Assets of Governmental Activities 123,017,751$ The accompanying notes are an integral part of these financial statements CITY OF SARATOGA STATEMENT OF REVENUES, EXPENDITURES AND CHANGE IN FUND BALANCE FOR THE YEAR ENDED JUNE 30, 2010 27 OtherTotal CapitalGovernmentalGovernmental GeneralImprovementFundsFunds REVENUES: Property taxes8,185,390$ -$ 186,006$ 8,371,396$ Special assessments8,974 1,237,806 1,246,780 Sales taxes954,574 - - 954,574 Other local taxes560,040 - - 560,040 Licenses & permits1,063,946 424,737 - 1,488,683 Fines & forfeiture350,751 8,010 - 358,761 Intergovernmental - Federal- 430,387 - 430,387 Intergovernmental - State323,837 934,083 - 1,257,920 Intergovernmental - Other34,050 99,712 123,812 257,574 Franchise fees1,663,657 - - 1,663,657 Use of money and property541,305 41,640 12,385 595,330 Other revenue1,558,525 221,897 13,423 1,793,845 Total revenues 15,245,049 2,160,466 1,573,432 18,978,947 EXPENDITURES: Current: General and intergovernmental services3,102,397 - - 3,102,397 Public safety4,348,778 - - 4,348,778 Public works 4,353,903 - 375,619 4,729,522 Community services1,222,649 - - 1,222,649 Community development services2,111,172 - - 2,111,172 Capital outlay- 2,578,501 5,458 2,583,959 Debt service: Principal- - 330,000 330,000 Interest and fiscal charges- - 685,276 685,276 Total expenditures 15,138,899 2,578,501 1,396,353 19,113,753 REVENUES OVER (UNDER) EXPENDITURES 106,150 (418,035) 177,079 (134,806) OTHER FINANCING SOURCES (USES): Transfers in325,842 845,979 - 1,171,821 Transfers out(650,000) (232,983) (133,838) (1,016,821) Total other financing sources (uses)(324,158) 612,996 (133,838) 155,000 Net change in fund balances (218,008) 194,961 43,241 20,194 FUND BALANCES: Beginning of year8,228,686 3,510,980 1,769,843 13,509,509 End of year 8,010,678$ 3,705,941$ 1,813,084$ 13,529,703$ The accompanying notes are an integral part of these financial statements. Major Funds CITY OF SARATOGA RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE TO THE GOVERNMENT-WIDE STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS FOR THE YEAR ENDED JUNE 30, 2010 28 Net Change in Fund Balances - Total Governmental Funds 20,194$ Amounts reported for governmental activities in the Statement of Activities and Changes in Net Assets were different because: Governmental Funds report capital outlay as expenditures. However, in the Government-Wide Statement of Activities and Changes in Net Assets, the cost of those assets was allocated over their estimated useful lives as depreciation expense. This is the amount of capital assets recorded in the current period.1,622,628 Depreciation expense on capital assets was reported in the Government-Wide Statement of Activities and Changes in Net Assets, but it did not require the use of current financial resources. Therefore, depreciation expense was not reported as expenditures in the Governmental Funds.(1,675,048) Internal service funds are used by management to charge the costs of office stores, vehicle and equipment maintenance and replacement, information services and replacement, building maintenance, risk management, and workers' compensation. The net revenue or (excess expenses) of the internal service funds is reported with government activities.(39,942) Certain revenues were recorded as deferred revenue in the governmental funds because they did not meet the revenue recognition criteria of availability. However, they were included as revenue in the Government-Wide Statement of Activities and Changes in Net Assets under the full accrual basis.3,334 Long-term compensated absences and claims payables were reported in the Government-Wide Statement of Activities and Changes in Net Assets, but they did not require the use of current financial resources. Therefore, long-term compensated absences and claims payable were not reported as expenditures in governmental funds. Compensated absences(109,253) Repayment of bond principal was an expenditure in governmental funds, but the repayment reduced long-term liabilities in the Government-Wide Statement of Net Assets. Long-term debt repayments330,000 Interest expense on long-term debt was reported in the Government-Wide Statement of Activities and Changes in Net Assets, but it did not require the use of current financial resources. Therefore, interest expense was not reported as expenditures in governmental funds. The following amount represented the change in accrued interest from prior year.8,250 Change in Net Assets of Governmental Activities 160,163$ The accompanying notes are an integral part of these financial statements CITY OF SARATOGA STATEMENT OF NET ASSETS PROPRIETARY FUNDS JUNE 30, 2010 29 Governmental Activities - Internal Service Funds ASSETS Current assets: Cash and investments1,498,570$ Accounts receivable5,378 Total current assets1,503,948 Noncurrent assets: Capital assets: Machinery and equipment714,059 Less: accumulated depreciation(422,520) Total capital assets (net of accumulated depreciation) 291,539 Total assets 1,795,487 LIABILITIES Liabilities: Current assets: Accounts payable47,053 Accrued payroll38,626 Other payables54,601 Total current liabilities140,280 NET ASSETS Investment in capital assets291,539 Unrestricted 1,363,668 Total net assets1,655,207$ The accompanying notes are an integral part of these financial statements CITY OF SARATOGA STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2010 30 Governmental Activities - Internal Service Funds Operating revenues: Charges for services2,003,010$ Other operating revenues54,618 Total operating revenues2,057,628 Operating expenses: Cost of services972,136 Administration828,857 Depreciation 141,577 Total operating expenses1,942,570 Operating income115,058 Transfers out (155,000) Change in net assets(39,942) Total net assets - beginning 1,695,149 Total net assets - ending1,655,207$ The accompanying notes are an integral part of these financial statements CITY OF SARATOGA STATEMENT OF CASH FLOWS PROPRIETARY FUNDS FOR THE YEAR ENDED JUNE 30, 2010 31 Governmental Activities - Internal Service Funds Cash flows from operating activities: Receipts from customers and users2,062,188$ Payments to suppliers(1,146,675) Payments to employees(703,438) Net cash provided (used) by operating activities212,075 Cash flows from noncapital financing activities: Operating transfers out(155,000) Net cash used in nonoperating activities(155,000) Cash flows from capital activities: Acquisition of capital assets(12,345) Net cash provided for the acquisition of capital assets(12,345) Net increase in cash and cash equivalents44,730 Cash and cash equivalents, beginning of year1,453,840 Cash and cash equivalents, ending of year1,498,570$ Reconciliation of operating income to net cash provided by operating activities: Operating income (loss)115,058$ Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation141,577 Change in operating assets and liabilities: Decrease in accounts receivables4,560 Increase in accounts payable(31,658) Increase in claims payable(28,615) Decrease in accured payroll11,153 Net cash provided (used) by operating activities212,075$ CITY OF SARATOGA STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2010 32 Agency Funds ASSETS Cash and investments 91,364$ Receivables: Accounts 18,352 Interest 126 Total assets 109,842$ LIABILITIES Deposits payable 109,842$ The accompanying notes are an integral part of these financial statements. CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 33 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The basic financial statements of the City of Saratoga, California, (the City) have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental agencies. The Governmental Accounting Standards Boards (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The more significant of the City's accounting policies are described below. A. Financial Reporting Entity The City was incorporated as a municipal corporation in 1956 under the general laws of the State of California, and had a population of 31,997 at June 30, 2010. The City is a largely residential community located in the foothills of the Santa Cruz Mountains. The City operated under the Council-Manager form of government, with five-elected Council members served by a full-time City Manager and staff. At June 30, 2010, the City's staff comprised 55 full-time and ten part-time employees, and numerous recreation seasonal employees who were responsible for the following City provided services:  Public Safety - The City provides round-the-clock police services under a contract with the County Sheriff's offices. Emergency management and Fire services are provided by special district. Code enforcement and inspection services are provided by one City employee.  Public Works/Maintenance - The City builds and maintains its parks, streets, curbs, gutters, and related public property with a force of 22 employees. Major projects may be contracted out to reduce costs.  Community Development - Zoning administration, plan checking and advance planning services are provided by 12 employees.  Culture, Recreation and Community Support services are provided by a total of ten employees.  General Government services are provided by a total of 12 employees. As required by GAAP, these basic financial statements present the City and its component units, entities for which the City is considered to be financially accountable. The City Council acts as the governing board. In addition, the City staff performs all administrative and accounting functions for these entities and these entities provide their services entirely to the City. Blended component units, although legally separate entities are, in substance, part of the City's operations and data from these units are combined with data of the City. Discretely presented component units, on the other hand, are reported in a separate column in the government-wide financial statements to emphasize their legal separateness from the City. Each blended component unit has a June 30 year-end. The City had no discretely presented component units. CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 34 The following entity is reported as blended component unit: Lighting and Landscaping Assessment District - The Lighting and Landscaping Assessment District (the District) was established in 1980, for the levy and the collection of assessments upon the several lots or parcels of land in the District, and for the construction or installation of improvements, including maintenance. The District is reported as a blended component unit of the City because it has the same Governing Board as the City. The activity for the District has been included in the accompanying basic financial statements and no separate financial statements are issued. B. Basis of Accounting and Measurement Focus The accounts of the City are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues, and expenditures or expenses, as appropriate. Governmental resources are allocated to and accounted for in individual funds based upon the purposes for which they are to be spent and the means by which spending activities are controlled. Government-Wide Financial Statements The City's government-wide financial statements include a Statement of Net Assets and a Statement of Activities and Changes in Net Assets. These statements present summaries of governmental activities for the City. Fiduciary activities of the City are not included in these statements. These statements are presented on an "economic resources" measurement focus and the accrual basis of accounting. Accordingly, all of the City's assets and liabilities, including capital assets, as well as infrastructure assets, and long-term liabilities, are included in the accompanying Statement of Net Assets. The Statement of Activities presents changes in net assets. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred. Certain types of transactions are reported as program revenues for the City in three categories:  Charges for services  Operating grants and contributions  Capital grants and contributions Certain eliminations have been made as prescribed by GASB Statement No. 34 in regards to interfund activities, payables, and receivables. All internal balances in the Statement of Net Assets have been eliminated. The following interfund activities have been eliminated:  Transfers in/Transfers out Governmental Fund Financial Statements Governmental fund financial statements include a Balance Sheet and a Statement of Revenues, Expenditures and Changes in Fund Balances for all major governmental funds and non-major funds aggregated. An accompanying schedule is presented to reconcile and explain the differences in net assets as presented in these statements to the net assets presented in the government-wide financial statements. CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 35 The City has presented all major funds that met the applicable criteria. The following funds are major funds: General Fund The General Fund is used to account for all of the general resources of the City not specifically levied or collected for other City funds and the related expenditures. The General Fund accounts for all financial resources of the City which are not accounted for in another fund. Capital Improvement Capital Projects Fund This fund accounts for resources used for the major capital acquisition and construction activities. All governmental funds are accounted for on a spending or "current financial resources" measurement focus and the modified accrual basis of accounting. Accordingly, only current assets and current liabilities are included on the balance sheets. The Statement of Revenues, Expenditures and Changes in Fund Balances present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Under the modified accrual basis of accounting, revenues are recognized in the accounting period in which they become both measurable and available to finance expenditures of the current period. Accordingly, revenues are recorded when received in cash, except that revenues subject to accrual (up to 60 days after year-end) are recognized when due. The primary revenue sources, which have been treated as susceptible to accrual by the City, are property tax, sales tax, special assessments, intergovernmental revenues, other taxes, interest revenue, rental revenue and certain charges for services. Fines, forfeitures, licenses and permits and parking meter revenues are not susceptible to accrual because they are usually not measurable until received in cash. Expenditures are recorded in the accounting period in which the related fund liability is incurred. Deferred revenues arise when potential revenues do not meet both the "measurable" and "available" criteria for recognition in the current period. Deferred revenues also arise when the government receives resources before it has a legal claim to them, as when grant monies are received prior to incurring qualifying expenditures. In subsequent periods when both revenue recognition criteria are met or when the government has a legal claim to the resources, the deferred revenue is removed from the combined balance sheet and revenue is recognized. Reconciliation of the Fund Financial Statements to the Government-Wide Financial Statements is provided to explain the differences created by the integrated approach of GASB Statement No. 34. Proprietary Funds The City’s internal service funds are proprietary funds. In the fund financial statements, proprietary funds are presented using the accrual basis of accounting. Revenues are recognized when they are earned and expenses are recognized when the related goods or services are delivered. In the fund financial statements, proprietary funds are presented using the “economic resources measurement focus”. This means all assets and liabilities (whether current or noncurrent) associated with their activities are included on their balance sheets. Proprietary fund type operating statements present increases (revenues) and decreases (expenses) in total net assets. CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 36 Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal value. Non-operating revenues, such as subsidies, taxes, and investment earnings result from nonexchange transactions or ancillary activities. Amounts paid to acquire capital assets are capitalized as assets in the internal service funds financial statements. Internal service funds account for charges to City departments for services provided, on a cost reimbursement basis, in the following areas: general liability, workers’ compensation, office stores, information technology services, vehicle maintenance, building maintenance, equipment replacement, and information technology replacement. Fiduciary Fund Financial Statements Fiduciary fund financial statements include a Statement of Net Assets. The City's fiduciary funds represent agency funds. Agency funds do not have a measurement focus, although they do have a basis of accounting. An accrual basis of accounting is used to record the financial transactions. Agency funds are custodial in nature (assets equal liabilities) and do not involve measurement of results of operations. The activity reported in the City’s fiduciary fund is for the support of the Saratoga Community Access Television, a non-profit organization responsible for operating the Public, Educational, and Government Access channels for the community of Saratoga. C. Cash, Cash Equivalents and Investments The City pools its available cash for investment purposes. The City's cash and cash equivalents are considered to be cash on hand, demand deposits, and short-term investments with original maturity of three months or less from the date of acquisition. Cash and cash equivalents are combined with investments and displayed as Cash and Investments. Deposit and Investment Risk Disclosures - In accordance with GASB Statement No. 40, Deposit and Investment Disclosures (Amendment of GASB Statement No. 3), certain disclosure requirements, if applicable, for Deposits and Investment Risks in the following areas:  Interest Rate Risk  Credit Risk o Overall o Custodial Credit Risk o Concentrations of Credit Risk  Foreign Currency Risk Other disclosures are specified including use of certain methods to present deposits and investments, highly sensitive investments, credit quality at year-end and other disclosures. The City participates in an investment pool managed by the State of California titled Local Agency Investment Fund (LAIF), which has invested a portion of the pool funds in Structured Notes and Asset Backed Securities. LAIF's investments are subject to credit risk with the full faith and credit of the State of California collateralizing these investments. In addition, these Structured Notes and Asset-Backed Securities are subject to market risk as to change in interest rates. CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 37 D. Interfund Transactions Interfund services provided and used are accounted for as revenue, expenditures or expenses, as appropriate. Transactions that constitute reimbursements to a fund for expenditures/expenses initially made from it that are properly applicable to another fund are recorded as expenditures/expenses in the reimbursed fund. All other interfund transactions, except for interfund services provided and used and reimbursements, are reported as transfers. Nonrecurring or nonroutine permanent transfers of equity are reported as residual equity transfers. All other interfund transfers are reported as transfers. E. Capital Assets Capital assets, which include land, buildings, improvements, furniture, equipment and infrastructure assets (e.g., roads, bridges, sidewalks, and similar items), were reported in the applicable governmental activities in the government-wide financial statements. Capital assets were recorded at historical cost or estimated historical cost if actual cost was not available. Donated assets were valued at their fair market value on the date of donation. City policy has set the capitalization threshold for reporting capital assets at $10,000. The City has chosen the Modified Approach for reporting the streets subsystem of infrastructure capital assets. Depreciation is recorded on a straight-line basis over the useful lives of the assets as follows: Buildings and structures 40 Years Machinery and equipment 5 to 10 Years Infrastructure 15 to 50 Years In June 1999, GASB issued Statement No. 34 Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments which requires the inclusion of infrastructure capital assets in local governments' basic financial statements. In accordance with Statement No. 34, the City has included the value of all infrastructure in its basic financial statements. The City defines infrastructure as the basic physical assets that allow the City to function, which includes the street system, park and recreation lands and improvements system; storm water conveyance and drainage system, buildings combined with site amenities such as parking and landscaping areas used by the City in the conduct of its business. Each major infrastructure system can be divided into subsystems. For example the street system can be subdivided into pavement, curb and gutters, sidewalks, medians, streetlights, traffic control devices (signs, signals and pavement markings), landscaping and land. These subsystems were not delineated in the basic financial statements. The appropriate operating department maintains information regarding the subsystems. The City elected to use the Modified Approach as defined by GASB Statement No. 34 for infrastructure reporting of its streets, concrete and asphalt pavements. The City commissioned a physical assessment of the streets condition as of June 30, 2007. This condition assessment is to be performed approximately every 3 years. The next condition assessment is scheduled for September 2010. A Pavement Condition Index (PCI) was assigned to each street segment. The index is expressed in a continuous scale from 0 to 100, where 0 is assigned to the least acceptable physical condition and 100 is assigned to segments of street that have the physical characteristics of a new street. CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 38 The following conditions were defined: ConditionRating Excellent80 - 100 Very Good70 - 79 Good50 - 69 Poor25 - 49 Very Poor0 - 24 The City's policy relative to maintaining the street assets is to achieve an average rating of 70 for all street segments. This acceptable rating allows minor cracking and raveling of the pavement along with minor roughness that could be noticeable to drivers traveling at the posted speeds. For all other infrastructure systems, the City elected to use the Basic Approach as defined by GASB Statement No. 34 for infrastructure reporting. The City commissioned an appraisal of City owned infrastructure and property as of June 30, 2001, and will complete an internal update in January, 2011. This appraisal determined the original cost, which is defined as the actual cost to acquire new property in accordance with market prices at the time of first construction/acquisition. Original costs were developed in one of three ways: 1) historical records; 2) standard unit costs appropriate for the construction/acquisition date; or 3) present cost indexed by a reciprocal factor of the price increase from the construction/acquisition date to the current date. The accumulated depreciation, defined as the total depreciation from the date of construction/acquisition to the current date on a straight line, unrecovered cost method was computed using industry accepted life expectancies for each infrastructure subsystem. The book value was then computed by deducting the accumulated depreciation from the original cost. F. Interest Payable In the government-wide financial statements, interest payable of long-term debt is recognized as an incurred liability for governmental fund types. The City has not allocated the interest on long-term debt to departments. In the fund financial statements, governmental fund types do not recognize the interest payable when the liability is incurred. Interest on long-term debt is recorded in the fund statements when payment is made. G. Claims Payable The City records a liability to reflect an actuarial estimate of ultimate uninsured losses for both general liability claims (including property damage claims) and workers' compensation claims. The estimated liability for workers' compensation claims and general liability claims includes "incurred but not reported" (IBNR) claims. There is no fixed payment schedule to pay these liabilities. H. Compensated Absences In the government-wide financial statements, compensated absences are recorded as incurred and the related expenses and liabilities are reported. In the fund financial statements, compensated absences are recorded as expenditures in the years paid, as it is the City's policy to liquidate any unpaid compensated absences at June 30 from future resources, CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 39 rather than currently available financial resources. Only the amounts which become due at June 30 are reported in the fund financials statements as a liability. I. Long- Term Obligations In the government-wide financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities. Bond premiums and discounts, as well as issuance costs, are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount. Bond issuance costs are reported as deferred charges and amortized over the term of the related debt. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financial sources. Premiums received on debt issuance are reported as other financing sources while discounts on debt issuance reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. J. Fund Balances In the fund financial statements, governmental funds report both reserved and unreserved fund balances. Reserved fund balances are reservations of fund balances for amounts that are not available for appropriation, or are legally restricted by outside parties for use for a specific purpose. Unreserved fund balances are comprised of both designated and undesignated fund balances. Designations represent funds identified by Council for an intended use, but are not legally obligated. Undesignated fund balance represents funds available to offset budgetary shortfalls or provide for unanticipated uses during the year. City Council has designated an amount for “Operations Reserve” to provide working capital cash flow. This designation was established at $2,000,000 on July 1, 1999, to be increased annually by an amount equal to the interest the City earned on an equivalent amount of cash and investments. As of June 30, 2010 this fund balance has grown to $2,889,077. City Council has designated $1,500,000 for an “Economic Uncertainty” reserve. This amount provides funding for emergency uses and economic downturns. The Environmental Services reserve, collected from surcharges on garbage bills is designated specifically for use as supplemental funding of Environmental Services program fees for household hazardous waste fees, storm drain, street sweeping, and other pollution mitigation expenses related to integrated waste programs and storm water management. The Development Services reserve is designated supplemental funding for community development services that includes zoning administration, inspection services, and development regulation programs during periods where expenditures exceed revenues. The Uncollected Deposits reserve is designated funding to offset development applicant deposits with outstanding balances owed to the City. CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 40 The Carryforward reserve designation represents prior-year funding held over for one-time operational activities that were not completed by year-end, or to carryforward prior-year funding for specific activities as directed by Council. The Grant Matching/Capital Improvement reserve designation represents funding set aside for use as the matching funds required for grant based capital improvement projects. The Hillside Stability reserve designation is funding for use as needed in hillside or landslide repairs or mitigation projects. K. Net Assets In the government-wide financial statements, net assets are classified in the following categories:  Invested in Capital Assets, Net of Related Debt - This amount consists of capital assets net of accumulated depreciation and reduced by outstanding debt that attributed to the acquisition, construction, or improvement of the assets.  Restricted Net Assets - This amount is restricted by external creditors, grantors, contributors, or laws or regulations of other governments.  Unrestricted Net Assets - This amount is all net assets that do not meet the definition of "invested in capital assets, net of related debt" or "restricted net assets." L. Use of Restricted/Unrestricted Net Assets When an expense is incurred for purposes for which both restricted and unrestricted net assets are available, the City's policy is to apply restricted net assets first. M. Property Tax and Special Assessments County tax assessments included secured and unsecured property taxes, and special assessments. "Unsecured" refers to taxes on personal property. These tax assessments are secured by liens on the property being taxed. Revenue is recognized in the period for which the tax and assessment is levied. The County of Santa Clara levies, bills and collects property taxes for the City, the County remits the entire amount levied and handles all delinquencies, retaining interest and penalties. Secured and unsecured property taxes are levied on January 1. Secured property tax is due in two installments on November 1 and February 1, and becomes a lien on those dates. It becomes delinquent on December 10 and April 10, respectively. Unsecured property tax is due on July 1 and becomes delinquent on August 31. CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 41 N. Use of Estimates The preparation of basic financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. O. Subsequent Events Management has considered subsequent events through November 8, 2010, the date which the financial statements were available to be issued. P. New GASB Pronouncements GASB Statement No. 51 - In June 2008, GASB issued Statement No. 51, Accounting and Financial Reporting for Intangible Assets. This Statement establishes accounting and financial reporting standards for many different types of assets that may be considered intangible assets, including easements, water rights, timber rights, patents, trademarks, and computer software. The City has no intangibles to which the statement applies. GASB Statement No. 53 - In June 2008, GASB issued Statement No. 53, Accounting and Financial Reporting for Derivative Instruments. This Statement addresses the recognition, measurement, and disclosure of information regarding derivative instruments entered into by State and local governments. This Statement is not effective until June 30, 2010. The City has no derivative investments to which the statement applies. GASB Statement No. 54 - In March, 2009, GASB issued Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definition. The objective of this Statement is to enhance the usefulness of fund balance information by providing clearer fund balance classifications that can be more consistently applied and by clarifying the existing governmental fund type definitions. This Statement is not effective until June 30, 2011. The City has determined this Statement change will have no effect on the financial statements. GASB Statement No. 55 - In March, 2009, GASB issued Statement No. 55, The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments. The objective of this Statement is to incorporate the hierarchy of generally accepted accounting principles (GAAP) for state and local governments into the Governmental Accounting Standard Board’s (GASB) authoritative literature. The City has determined this Statement change did not have an effect on the financial statements. GASB Statement No. 56 - In March, 2009, GASB issued Statement No. 56, Codification of Accounting and Financial Reporting Guidance Contained in the AICPA Statement of Auditing Standards. The object of this Statement is to incorporate into the Governmental Accounting Standard Board’s (GASB) authoritative literature certain accounting and financial reporting guidance presented in the American Institute of Certified Public Accounts’ Statement of Auditing Statements. The City has determined this Statement change did not have an effect on the financial statements. GASB Statement No. 57 – In December, 2009 GASB issued Statement No. 57, OPEB Measurement by Agent Employers and Agent Multiple-Employer Plans. The objective of this Statement is to address issues related to the use of the alternative measurement method and the frequency and timing of CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 42 measurements by employers that participate in agent multiple-employer benefit (OPEB) plans. The City has determined this Statement will not have an effect on the financial statements. GASB Statement No. 59 – In June 2010, GASB issued Statement No 59, Financial Instruments Omnibus. The objective of this Statement is to update and improve existing standards regarding financial reporting and disclosure requirements of certain financial instruments and external investment pools for which significant issues have been indentified in practice. This pronouncement is effective for periods beginning after June 15, 2010. The City does not believe there will be a significant financial statement effect related to this Statement. NOTE 2 - CASH AND INVESTMENTS The City maintains a cash and investment pool, which includes cash balances and authorized investments of all funds, which the City Treasurer invests to enhance interest earnings. The pooled interest earned is allocated to the funds based on average month-end cash and investment balances in these funds. The City has the following cash and investments at June 30, 2010: Statement of Net Assets GovernmentalFiduciary ActivitiesFundTotal Cash and investments15,864,455$ 91,364$ 15,955,819$ The City's Cash and Investments at June 30, 2010, in more detail: Cash and cash equivalents: Petty cash 1,300$ Demand deposits 201,598 Total Cash and Cash Equivalents202,898 Investments: Local Agency Investment Fund (LAIF)15,752,921 Total Cash and Investments15,955,819$ A. Cash Deposits The carrying amounts of the City's cash deposits were $201,598 at June 30, 2010. Bank balances before reconciling items were $710,867 at that date due to deposits in transit and outstanding checks. The total amount was collateralized or insured with securities held by the pledging financial institutions. The California Government Code requires California banks and savings and loan associations to secure the City's cash deposits by pledging securities as collateral. This Code states that collateral pledged in this manner shall have the effect of perfecting a security interest, and places the City ahead of general creditors of the institution. The market value of pledged securities must equal at least 110 percent of the City's cash deposits. California law also allows institutions to secure City deposits by pledging first trust deed mortgage notes that have a value of 150 percent of the City's total cash deposits. The City has waived the collateral CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 43 requirements for cash deposits which are fully insured to $250,000 by the Federal Deposit Insurance Corporation (FDIC). Demand deposits (non-interest bearing checking accounts) have unlimited insurance through the TAG Program. Other accounts are insured up to $250,000 per custodian within agency. The City follows the practice of pooling cash and investments of all funds, except for funds required to be held by fiscal agents under the provisions of bond indentures. Interest income from cash and investments with fiscal agents is credited directly to the related fund. B. Investments Under the provisions of the City's investment policy, and in accordance with California Government Code, the following investments are authorized:  Securities of the U.S. Government or its agencies.  Certificates of Deposit (or Time Deposits) placed with commercial banks and/or savings and loan companies.  Negotiable Certificates of Deposit.  California Local Agency Investment Fund.  Investment-grade obligations of State, local governments or public authorities.  Money market mutual funds.  Passbook savings account and demand deposits. The City is in compliance with GASB Statement No. 31, Accounting and Financial Reporting for Certain Investments and for External Investments Pools which requires the City's investments be recorded at fair value instead of cost. Under GASB 31, the carrying value of investments are adjusted to reflect their fair value at each fiscal year-end, with the effects of these adjustments included in the carrying value of the investments. C. External Investment Pool The City's investments with LAIF at June 30, 2010, include a portion of the pool funds invested in Structured Notes and Asset-Backed Securities. These investments include the following:  Structured Notes - debt securities (other than asset-backed securities) whose cash flow characteristics (coupon rate, redemption amount, or stated maturity) depend upon one or more indices and/or that have embedded forwards or options.  Asset-Backed Securities - the bulk of which are mortgage-backed securities, entitle their purchasers to receive a share of the cash flows from a pool of assets such as principal and interest repayments from a pool of mortgages (such as CMO's) or credit card receivables. LAIF is overseen by the Local Agency Investment Advisory Board, which consists of five members, in accordance with State statute. As of June 30, 2010, the City had $15,752,921 invested in LAIF which had invested 14.71 percent of the pool investment funds in Structured Notes and Asset-Backed Securities. The LAIF fair value factor of 1.001643776 was used to calculate the fair value of the investments in LAIF. CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 44 D. Risk Disclosures Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the term of an investment’s maturity, the greater the sensitivity to changes in market interest rates. Although the City’s investment policy allows for a broad range of investment instruments with varying terms of maturity, investments are limited to the Local Agency Investment Fund (LAIF) which is managed by the State Treasurer Office and overseen by the Pooled Money Investment Board, the State Treasurer investment committee, and a Local Agency Advisory Board. Included in LAIF’s investment portfolio are U.S. Treasuries, Federal Agency obligations, time deposits, negotiable certificates of deposits, commercial paper, corporate bonds, and security loans. Funds are available for withdrawal on demand, and are recorded on an amortized cost basis. At June 30, 2010, these investments had a weighted average maturity of 203 days. The City had the following invested in LAIF: Investment Maturities in Years FairLess Than ValueOne Year State of California - Local Agency Investment Fund (LAIF)15,752,921$ 15,752,921$ Credit Risk As of June 30, 2010, the City's investments in external investment pools are unrated. The City only invests in LAIF, therefore has no other policy relating to the credit risk of investments. Custodial Credit Risk For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the City will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The City did not hold any securities held by an investment counterparty at the year ended June 30, 2010. NOTE 3 - LOANS RECEIVABLE The City had the following loans receivable as of June 30, 2010: DueDue BalanceBalanceWithinMore Than July 1, 2009AdditionsDeletionsJune 30, 2010One YearOne Year Housing Rehabilitation Loan Program85,003$ -$ (13,333)$ 71,670$ 13,333$ 58,337$ CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 45 The City administers a housing rehabilitation program called the Saratoga Housing Assistance and Rehabilitation Program (SHARP) using Housing and Community Development Act funds. Under the SHARP program, individuals with incomes below a certain level and corporations building rental housing for low and-moderate income tenants are eligible to receive low interest loans, secured by deeds of trust, for construction work on their properties. Federal funds received by the City are deposited with a commercial bank. Upon approval of loans, the bank disburses the funds, arranges for and collects repayments. In the Governmental Fund Financial Statements, these loans have been offset by deferred revenue as they are not expected to be repaid immediately. In the Government-Wide Financial Statements, the amount of deferred revenue was recognized as revenue. NOTE 4 – PROPERTY TAXES: PROPOSITION 1A STATE BORROWING Under the provision of Proposition 1A and as part of the 2009/10 budget package passed by the California state legislature on July 28, 2009, the State of California borrowed 8% of the amount of property tax revenue, including those property taxes associated with the in-lieu motor vehicle license fee, the triple flip in lieu sales tax, and supplemental property tax, apportioned to cities, counties, and special districts (excluding redevelopment agencies). The state is required to repay this borrowing plus interest by June 30, 2103. After repayment of this initial borrowing, the California legislature may consider only one additional borrowing within a ten-year period. The amount of this borrowing pertaining to the City of Saratoga was $674,777. Authorized with the 2009/10 State budget package, the Proposition 1A Securitization Program was instituted by the California Statewide Communities Development Authority (“California Communities”), a joint power authority sponsored by the California State Association of Counties and the League of California Cities, to enable local governments to sell their Proposition 1A receivables to California Communities. Under the Securitization Program, California Communities simultaneously purchased the Proposition 1A receivables and issued bonds (“Prop 1A Bonds”) to provide local agencies with cash proceeds in two equal installments, on January 15, 2010 and May 3, 2010. The purchase price paid to the local agencies equal 100% of the amount of the property tax reduction. All transaction costs of issuance and interest were paid by the State of California. Participating local agencies have no obligation on the bonds and no credit exposure to the State. The City participated in the securitization program and accordingly property taxes have been recorded in the same manner as if the State had not exercised its right under Proposition 1A. The receivable sale proceeds were equal to the book value and, as a result, no gain or loss was recorded. CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 46 NOTE 5 - FUND FINANCIAL STATEMENTS INTERFUND TRANSACTIONS Transfers In/Out Transfers for the year ended June 30, 2010 were as follows: Transfer inTransfer outAmount General FundCommunity Development Block Grant42,859$ Capital Improvement Fund232,983 IT Equipment Replacement Fund50,000 325,842 Capital Improvement FundGeneral Fund650,000 Community Development Block Grant90,574 IT Equipment Replacement Fund105,000 Library Capital Improvement Fund405 845,979 Total 1,171,821$ Of the transfers, $650,000 was transferred from the General Fund, $90,574 from the Community Development Block Grant Fund, $105,000 from the IT Equipment Replacement Fund, and $405 from the Library Capital Improvement Fund to fund various projects in the Capital Improvement Plan. A transfer of $106,000 from the Capital Improvement Fund went to the General Fund to reimburse administration and engineering staff services for the Gas Tax funded street program. Additionally, $126,983 was transferred from the Capital Improvement Fund back to the General Fund upon the closeout of two projects. A transfer from the Community Development Block Grant Fund to the General Fund was reimbursement for grants and administrative costs, and the IT Equipment Replacement Fund transferred $50,000 to the General Fund for budget relief. CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 47 NOTE 6 - CAPITAL ASSETS Capital assets activity for the year ended June 30, 2010, consisted of the following: Primary Government BalanceBalance July 1, 2009AdditionsRetirementsReclassificationsJune 30, 2010 Governmental activities: Capital assets, not being depreciated: Land and land improvements10,585,106$ -$ -$ 2,398,972$ 12,984,078$ Construction in progress6,595,346 1,808,376 (57,958) (3,902,404) 4,443,360 Infrastructure: Street pavement system48,570,458 - - 585,161 49,155,619 Total capital assets, not being depreciated65,750,910 1,808,376 (57,958) (918,271) 66,583,057 Capital assets, being depreciated: Buildings and structures23,156,758 - - 256,005 23,412,763 Machinery and equipment- - Governmental funds1,324,426 - (127,790) 371,149 1,567,785 Internal service funds701,714 12,345 - - 714,059 Infrastructure:- - Bridges1,563,654 - - - 1,563,654 Signs and lights1,820,585 - - - 1,820,585 Drainage system39,912,821 - - - 39,912,821 Sidewalks11,681,711 - - 291,117 11,972,828 Total capital assets, being depreciated80,161,669 12,345 (127,790) 918,271 80,964,495 Accumulated depreciation: Buildings and structures(4,894,979) (576,134) - - (5,471,113) Machinery and equipment Governmental funds(1,274,551) (32,197) 127,790 - (1,178,958) Internal service funds(280,943) (141,577) - - (422,520) Infrastructure: Bridges(945,168) (28,034) - - (973,202) Signs and lights(723,540) (68,565) - - (792,105) Drainage system(11,531,047) (798,256) - - (12,329,303) Sidewalks(4,159,835) (299,652) - - (4,459,487) Total accumulated depreciation(23,810,063) (1,944,415) 127,790 - (25,626,688) Total capital assets, being depreciated, net56,351,606 (1,932,070) - 918,271 55,337,807 Governmental activities capital assets, net 122,102,516$ (123,694)$ (57,958)$ -$ 121,920,864$ Depreciation expense, including the amount related to the internal service funds, was charged in the following functions in the Statement of Activities: General Government1,182,170$ Public Works606,544 Community Services13,577 Community Development547 Internal Service Funds141,577 Total Depreciation Expense1,944,415$ CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 48 In accordance with GASB Statement No. 34, the City has reported all capital assets including infrastructure in the Government-Wide Statement of Net Assets. The City elected to use the "Modified Approach" as defined by GASB Statement No. 34 for infrastructure reporting for its pavement system. As a result, no accumulated depreciation or depreciation expense has been recorded for this system. A more detailed discussion of the "Modified Approach" is presented in the Required Supplementary Information section of this report. All other capital assets including other infrastructure systems were reported using the Basic Approach whereby accumulated depreciation and depreciation expense have been recorded. NOTE 7 – LONG-TERM OBLIGATIONS A summary of the City's long-term obligations transactions for the year ended June 30, 2010, is presented below: Classification BalanceBalanceDue WithinDue In More DescriptionJuly 1, 2009AdditionsRetirementsJune 30, 2010One YearThan One Year General Obligation Bonds: 2001 Library Bonds13,285,000$ -$ (330,000)$ 12,955,000$ 350,000$ 12,605,000$ Compensated absences584,415 531,322 (422,069) 693,668 391,822 301,846 Total13,869,415$ 531,322$ (752,069)$ 13,648,668$ 741,822$ 12,906,846$ General Obligation 2001 Library Bonds - Original Issue $15,000,000 On May 1, 2001, the City issued General Obligation Bonds Series 2001 in the amount of $15,000,000. The proceeds of the bonds were used to improve, renovate, and expand the Saratoga Community Library. The bonds are payable from and secured by certain property taxes within the City. Interest on the bonds ranges from 5 percent to 6 percent and is payable on February 1 and August 1 of each year, commencing February 1, 2002. Principal is due annually beginning on August 1, 2002, in amounts ranging from $60,000 to $940,000. The bonds mature on August 1, 2031, and are subject to redemption prior to maturity. The bonds may be called for redemption at the option of the City at redemption prices from 101 percent beginning on or after August 1, 2010 and 100 percent of par on or after August 1, 2011. At June 30, 2010, the outstanding balance of the bonds was $12,955,000. CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 49 The annual debt service requirements on these bonds are as follows: Year EndedPrincipalInterestTotal 2011350,000$ 663,156$ 1,013,156$ 2012370,000 641,556 1,011,556 2013395,000 620,581 1,015,581 2014415,000 600,331 1,015,331 2015435,000 579,081 1,014,081 2016-20202,350,000 2,555,031 4,905,031 2021-20252,970,000 1,887,966 4,857,966 2026-20303,840,000 1,005,113 4,845,113 2031-20321,830,000 97,388 1,927,388 Total12,955,000$ 8,650,203$ 21,605,203$ Compensated Absences The City's liability for vested and unpaid compensated absences (accrued vacation and sick pay) has been accrued and amounts to $693,668 at June 30, 2010. The compensated absences liability will generally be liquidated through the General Fund. NOTE 8 - RISK MANAGEMENT The City participates in the following public entity risk pools: ABAG Plan Corporation (ABAG PLAN) covers general liability claims up to a limit of $5 million and purchases an additional $15 million of excess insurance coverage, for a total of $20 million per occurrence limit. The City has a deductible or uninsured liability of up to $25,000 per claim. Once the City's deductible is met, ABAG PLAN becomes responsible for payment of all claims up to the limit. During the fiscal year ended June 30, 2010, the City contributed $184,614 for current year coverage and received no refund of prior year excess contributions. The ABAG Workers' Compensation Pool Insurance Authority (ABAG POOL) covers workers' compensation coverage up to $250,000 and excess coverage provides an employer liability limit of $5 million per occurrence, and workers’ compensation per occurrence limit to $100 million. The City has no deductible for these claims. During the fiscal year ended June 30, 2010, the City contributed $182,575 for current year coverage. The City's contribution equals the ratio of the City's payroll to the total payrolls of all entities participating in the same layer of each program, in each program year. Actual surpluses or losses are shared according to a formula developed from overall loss costs and spread to member entities on a percentage basis after a retrospective rating. CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 50 There have been no significant reductions of insurance settlements that exceeded insurance coverage for the past three years. The workers’ compensation and general liability claims payable of $54,601 reported at June 30, 2010, are based on the requirements of GASB Statement No. 10, which requires that a liability for claims be reported if information prior to the issuance of the basic financial statements indicates that it is probable that a liability has been incurred at the date of the basic financial statements and the amount of the loss can be reasonably estimated. Changes in the claims payable amounts were as follows: Year EndedYear Ended June 30, 2010June 30, 2009 Claims payable, beginning of year83,216$ 59,908$ Fiscal year claims and changes in estimates49,735 54,366 Claims payments(78,350) (31,058) Claims payable, end of year54,601$ 83,216$ The General Fund has been used in the prior years to liquidate the liability for claims and judgments. Each risk pool is governed by a board consisting of representatives from member municipalities. The board controls the operations of each risk pool, including selection of management and approval of operating budgets, independent of any influence by member municipalities beyond their representation on the Board. The following represents summary audited financial information of ABAG Plan Corporation and the ABAG Workers’ Compensation Pool Insurance Authority for the fiscal year ended June 30, 2009 (most recent available): PlanComp Shared CorporationRisk Pool Total Assets48,715,107$ 3,431,189$ Total Liabilities17,360,134 580,976 Net Assets31,354,973$ 2,850,213$ Total Revenues11,211,127$ 667,365$ Total Expenses7,218,603 482,364 Net Increase in Net Assets3,992,524$ 185,001$ Audited financial information for each risk pool may be obtained from ABAG at P.O. Box 2089, Oakland, California 94604-2089. CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 51 NOTE 9 - RETIREMENT PLANS Pension Plan Plan Description - The City contributes to the California Public Employees' Retirement System (CalPERS), a cost-sharing multiple-employer defined benefit plan. CalPERS provide retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. CalPERS act as a common investment and administrative agent for participating public entities within the State of California. Benefit provisions and all other requirements are established by State statute and City ordinance. Copies of CalPERS' annual financial report may be obtained from their Executive Office located at 400 P Street, Sacramento, California 95811. Funding Policy – The City employer is required to contribute an actuarially determined rate of annual covered payroll for its miscellaneous employees (11.652 percent for FY 2009/10). Active plan members are required by State statute to contribute 7 percent (7%) of their annual covered salary. The City employer contributes this required amount on behalf of City employees, which amounted to $339,339 for the year ended June 30, 2010. Annual Pension Cost - For fiscal year 2009/10, the City's annual pension cost was $564,855. The required contribution was determined as part of the June 30, 2007, actuarial valuation using the entry age normal actuarial cost method. The actuarial assumptions included (a) 7.75 percent (7.75%) investment rate of return (net of administrative expenses), (b) projected annual salary increases ranging from 3.25 percent to 14.45 percent for miscellaneous employees depending on age, service, and type of employment, and (c) 3.25 percent per year payroll growth adjustments. Both (a) and (b) included an inflation component of 3.00 percent. The actuarial value of CalPERS assets was determined using techniques that smooth the effects of short-term volatility in the market value of investments over a three- year period. CalPERS unfunded actuarial accrued liability (or surplus) is amortized as a level percentage of projected payroll on a closed basis. The amortization period at June 30, 2007, was 20 years for miscellaneous employees for prior and current service unfunded liability. THREE-YEAR ANNUAL PENSION COSTS TREND INFORMATION FOR CALPERS AnnualNet FiscalPension CostAPCPension Year(APC)ContributedObligation 2008538,526$ 100%-$ 2009559,971 100%- 2010564,855 100%- Required Supplementary Information In 2004, CalPERS established a risk pool for cities and other government entities that have less than 100 active members. Actuarial valuations are performed with other participants within the same risk pool. Stand alone information of the Schedule of the Funding Progress for the City is no longer available; therefore, the following information is the CalPERS Risk Pool Information for all entities within the pool (latest available information): CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 52 Entry AgeUnfundedUAAL NormalActuarialLiability (UAAL)Annualas a ValuationAccruedValue(ExcessFundedCoveredPercentage DateLiabilityof AssetsAssets)StatusPayrollof Payroll 6/30/20062,754,396,608$ 2,492,226,176$ 262,170,432$ 90.5%699,897,835$ 37.5% 6/30/20072,611,746,790 2,391,434,447 220,312,343 91.6%655,522,859 33.6% 6/30/20082,780,280,768 2,547,323,278 232,957,490 91.6%688,606,681 33.8% NOTE 10 - NET ASSETS / FUND BALANCES A. Investment in Capital Assets, Net of Related Debt As of June 30, 2010, the investment in capital assets, net of related debt consisted of the following: Capital Assets, Net121,920,864$ 2001 General Obligation Library Bonds(12,955,000) Investment in Capital Assets, Net of Related Debt108,965,864$ B. Restricted Net Assets As of June 30, 2010, the restricted net assets consisted of the following: CapitalDebtSpecial ProjectsServiceProjectsTotal Restricted Net Assets4,057,300$ 892,593$ 569,132$ 5,519,025$ Restricted For NOTE 11 - JOINT POWERS AGREEMENTS The City is a member of the Santa Clara County Traffic Authority (Traffic Authority), which consists of various cities in the San Francisco Bay area. The Traffic Authority was formed in 1985, by a joint exercise of powers agreement between the County of Santa Clara and the cities of Santa Clara County for the purpose of financing highway capital improvements within the County to serve transportation needs. Financial statements may be obtained from the Traffic Authority at 1754 Technology Drive, Suite 224, San Jose, California 95110. The City is also a member of other Joint Powers Authorities (JPA) but has had no material transactions with them. These JPA's are governed by boards consisting of representatives from their members. The boards control the operations of each JPA, including selection of management and approval of operating budgets, independent of any influence by its members beyond their representation on the board. CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 53 NOTE 12 - EXCESS EXPENDITURES OVER APPROPRIATIONS There were no excess of expenditures over appropriations in individual funds during fiscal year 2009/10. NOTE 13 - COMMITMENTS AND CONTINGENCIES A. Lawsuits The City is presently involved in certain matters of litigation that have arisen in the normal course of conducting City business. City management believes, based upon consultation with the City Attorney, that these cases, in the aggregate, are not expected to result in a material adverse financial impact on the City. Additionally, City management believes that the City's insurance programs are sufficient to cover any potential losses should an unfavorable outcome materialize. B. Federal and State Grant Programs The City participates in Federal and State grant programs. These programs are audited by the City's independent accountants in accordance with the provisions of the Federal Single Audit Act Amendments of 1996 and applicable State requirements. For Federal programs, the City reached the level of qualifying cost during the current fiscal year so a single audit was required. Expenditures which may be disallowed, if any, by the granting agencies, cannot be determined at this time. The City expects such amounts, if any, to be immaterial. CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2010 54 C. Commitments The City had several outstanding contracts or planned construction projects as of June 30, 2010. These projects are evidenced by contractual commitments with contractors and include: OriginalCommitment VendorcommitmentRemaining Fehr & Peers40,000$ 29,846$ Cotton Shires & Associates1,011 1,011 O' Grady Paving751,768 497,156 Labor Consultants7,000 7,000 BFK Engineers498,238 426,363 David Gates & Associates14,092 3,677 Testing Engineers8,087 8,087 Metropolitan Planning Group8,540 500 Maggiora Brothers Drilling47,075 13,548 Steve Benzing Architect5,250 2,647 Mark Thomas & Company56,809 35,814 Guerra Construction70,653 5,475 Hakone Foundation - New Visitor Center250,000 250,000 1,758,523$ 1,281,124$ As of June 30, 2010, in the opinion of City management, there were no additional outstanding matters that would have a significant effect on the financial position of the funds of the City. REQUIRED SUPPLEMENTARY INFORMATION CITY OF SARATOGA REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED JUNE 30, 2010 57 NOTE 1 - BUDGETARY INFORMATION Through the budget, the City Council sets the direction of the City, allocates its resources and establishes its priorities. The Annual Operating and Capital Budgets assure the efficient and effective uses of the City's economic resources, as well as establishing that the highest priority objectives are accomplished. The annual budgets are adopted for the period of July 1 to June 30, and prepared to accurately and openly communicate service and infrastructure priorities to the community, businesses, vendors, employees, and other public agencies. The Annual Operating Budget is developed on a program basis for all funds with fund level authority. It establishes the foundation of effective financial planning by providing resource planning, performance measures and controls that permit the evaluation and adjustment of the City's performance. The City adopts an annual budget for the capital projects as part of adopting the five-year Capital Improvement Plan. The annual capital budget is adopted on a project-by-project basis. The City follows these procedures in establishing the budgetary data reflected in the basic financial statements: a. The City Manager submits to the City Council a proposed operating budget for the fiscal year commencing the following July 1. The operating and capital budgets include proposed expenditures and the means of financing them. b. Public hearings are conducted to obtain taxpayer comments. c. The budgets are legally enacted through the passage of a resolution. d. For the Operating Budget, the City Manager may authorize transfers of budget amounts within a fund. However, any revisions that increase the total budgeted expenditures of any fund must be approved by the City Council. Expenditures may not legally exceed budgeted appropriations at the fund level without City Council approval. e. As Capital Projects are adopted on a project basis, the City Council must approve increases or decreases of budgeted amounts or changes in project scope. Upon project completion, immaterial amounts are transferred to ongoing maintenance projects within the capital program. If remaining project funds are material, the project balance is brought back to Council for approval to transfer. f. Formal budgetary integration in the form of legally adopted budgets is employed as a management control device for all funds. Budgets are adopted on a basis consistent with generally accepted accounting principles. Budgeted expenditures reported are as amended by supplemental appropriations of the City Council. Encumbrance accounting, under which purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of the applicable appropriation, is employed as an extension of formal budgetary integration in the General, Special Revenue, Internal Service, and Capital funds. Unexpended and unencumbered appropriations automatically lapse at the end of the fiscal year. CITY OF SARATOGA REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED JUNE 30, 2010 58 The following is the budget comparison schedules for General Fund. Variance with Final Budget Budgeted AmountsActualPositive OriginalFinalAmounts(Negative) REVENUES: Property taxes8,169,500$ 8,169,500$ 8,185,390$ 15,890$ Special assessments6,000 6,000 8,974 2,974 Sales taxes935,000 910,000 954,574 44,574 Other local taxes655,000 630,000 560,040 (69,960) Licenses & permits1,271,400 1,031,400 1,063,946 32,546 Fines & forfeitures285,000 285,000 350,751 65,751 Intergovermental - state285,000 245,000 323,837 78,837 Intergovermental - other23,500 23,500 34,050 10,550 Franchise fees1,675,000 1,675,000 1,663,657 (11,343) Use of money & property684,342 534,342 541,305 6,963 Other revenue1,756,881 1,606,881 1,558,525 (48,356) Total revenues 15,746,623 15,116,623 15,245,049 128,426 EXPENDITURES: Current: General and intergovernmental services3,495,806 3,276,989 3,102,397 174,592 Public safety4,345,915 4,345,234 4,348,778 (3,544) Public works 4,511,348 4,324,168 4,353,903 (29,735) Community services1,277,906 1,248,694 1,222,649 26,045 Community development services2,185,603 2,143,460 2,111,172 32,288 Total expenditures 15,816,578 15,338,545 15,138,899 199,646 REVENUES OVER (UNDER) EXPENDITURES (69,955) (221,922) 106,150 328,072 OTHER FINANCING SOURCES (USES): Transfers in153,732 325,842 325,842 - Transfers out(253,500) (650,000) (650,000) - Total other financing sources (uses)(99,768) (324,158) (324,158) - Net change in fund balances (169,723)$ (546,080)$ (218,008) 328,072$ FUND BALANCES: Beginning of year8,228,686 End of year 8,010,678$ CITY OF SARATOGA REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED JUNE 30, 2010 59 NOTE 2 - MODIFIED APPROACH FOR CITY STREETS INFRASTRUCTURE CAPITAL ASSETS In accordance with GASB Statement No. 34, the City is required to account for and report infrastructure capital assets. The City defines infrastructure as the basic physical assets that allow the City to function and those resources utilized primarily by the public which provide future economic benefits for a minimum of two years. Infrastructure can be defined as assets that are immovable and of value only to the government. Major infrastructure includes the street system, park and recreation lands and improvements; storm water conveyance and drainage systems, and buildings combined with site amenities such as parking and landscaping areas used by the City in the conduct of its business. Each major infrastructure system can be divided into subsystems. For example, the street system can be divided into concrete and asphalt pavements, concrete curb and gutters, sidewalks, medians, streetlights, traffic control devices (signs, signals and pavement markings), landscaping and land. Subsystem detail is not presented in these basic financial statements; however, the City maintains detailed information on these subsystems. The City has elected to use the "Modified Approach" as defined by GASB Statement No. 34 for infrastructure reporting for its Streets Pavement System. Under GASB Statement No. 34, eligible infrastructure capital assets are not required to be depreciated under the following requirements:  The City manages the eligible infrastructure capital assets using an asset management system with characteristics of (1) an up-to-date inventory; (2) perform condition assessments and summarize the results using a measurement scale; and (3) estimate annual amount to maintain and preserve at the established condition assessment level.  The City documents that the eligible infrastructure capital assets are being preserved approximately at or above the established and disclosed condition assessment level. The City commissioned a physical assessment of the streets conditions as of June 30, 2007. The study assists the City by providing current inspection data used to evaluate current pavement condition. This helps to maintain a City-defined desirable level of pavement performance while optimizing the expenditure of limited fiscal resources. The entire pavement network within the City is composed of approximately 140 centerline miles of paved surfaces. The City’s road system can be grouped by function class and includes 23.4 centerline miles of arterial, 23.3 centerline miles of collector, and 93.3 miles as residential. A visual survey of all pavement segments was conducted to assess the existing surface condition of each of the individual pavement segments. Upon completion of the study, a Pavement Condition Index (PCI) was calculated for each segment in the City's pavement network to reflect the overall pavement condition. Rating between 0 and 100, a PCI of 0 would correspond to a badly deteriorated pavement with virtually no remaining life. A PCI of 100 would correspond to a pavement with proper engineering design and construction at the beginning of its life cycle. The next assessment study is contracted for September, 2010. CITY OF SARATOGA REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED JUNE 30, 2010 60 The following conditions were defined: ConditionRating Excellent80 - 100 Very Good70 - 79 Good50 - 69 Poor25 - 49 Very Poor0 - 24 The City's policy is to achieve an average rating of 70 for all streets, which is a very good rating. This rating allows minor cracking and raveling of the pavement along with minor roughness that could be noticeable to drivers traveling at the posted speeds. As of June 30, 2010, the City's street system was rated at a PCI index of 70 on the average with the detail condition as follows: Percent of ConditionStreets Excellent to Good86% Poor13% Very Poor1% The City expended $771,386 on street maintenance for the year ended June 30, 2010. These routine maintenance expenditures delayed deterioration. The budget required to maintain and improve the current level of overall condition through the year 2011 is a minimum of $6,000,000. (Approximately $2,000,000 projected budget each year for the years ending June 30, 2010 and 2011.) A schedule of estimated annual amount calculated to maintain and preserve its streets at the current level compared to actual expenditures for street maintenance for the last nine years is presented below: Funded By FiscalActualOtherGas TaxTotalPCI YearBudgetExpendituresSourcesFundFundedIndex 2000-012,520,255$ 801,160$ 205,309$ 595,851$ 801,160$ - 2001-023,529,420 2,214,717 1,631,855 582,862 2,214,717 - 2002-032,207,922 1,553,674 974,514 579,160 1,553,674 - 2003-041,961,844 1,489,667 907,327 582,340 1,489,667 70 2004-051,800,000 2,609,648 1,478,216 1,131,432 2,609,648 70 2005-061,156,547 1,030,382 353,652 676,730 1,030,382 70 2006-072,026,404 1,156,889 19,899 970,818 990,717 70 2007-082,246,152 1,691,466 1,252,709 438,757 1,691,466 70 2008-092,680,504 1,574,485 1,148,650 425,835 1,574,485 70 2009-101,811,130 771,386 575,710 195,676 771,386 70 As of June 2010, approximately 40 percent of the City's streets were rated below the average standard of 70. The City will continue to rehabilitate these segments of the streets. Total deficiencies (deferred maintenance) identified in the Pavement Management System Report at the end of a five-year period (2007-2011) amounted to approximately $11,600,000 for all streets and are expected to be rehabilitated with a minimum annual budget of $1,000,000. SUPPLEMENTARY INFORMATION 61 NONMAJOR GOVERNMENTAL FUNDS Special Revenue Funds Lighting and Landscape Assessment District Funds – This combined fund accounts for revenues and expenditures associated with maintaining the 24 Landscape and Lighting districts throughout the city which were approved by consent of property owners living along or within the boundaries of the Districts. Community Development Block Grant - This fund accounts for grant funds received from the Federal Government for the purpose of assisting programs and building infrastructure for the development of viable urban communities and for the City's rehabilitation loan program. Debt Service Fund Library Bond - Santa Clara County general obligation bond tax revenues are accumulated in this fund to pay annual principal and interest payments on the voter approved 2001 Library Improvement Bond. Capital Projects Funds Library Expansion - This fund accounts for the remaining resources approved for use in the remodel and expansion of the City's library. CITY OF SARATOGA COMBINING BALANCE SHEETS NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2010 62 Debt Service Lighting andCommunity LandscapingDevelopment AssessmentBlockLibrary DistrictGrantBond ASSETS Cash and investments459,919$ 128,550$ 890,341$ Receivables: Accounts442 9,621 1,414 Interest536 192 838 Loans- 71,670 - Total assets 460,897$ 210,033$ 892,593$ LIABILITIES AND FUND BALANCES Liabilities: Accounts payable20,507$ -$ -$ Deferred revenue- 81,291 - Total liabilities 20,507 81,291 - Fund Balances: Reserved for: Debt service- - 892,593 Unreserved, undesignated, reported in: Special revenue funds440,390 128,742 - Capital projects funds- - - Total fund balances 440,390 128,742 892,593 Total liabilities and fund balances 460,897$ 210,033$ 892,593$ The accompanying notes are an integral part of these financial statements Special Revenue 63 Capital Projects Total Other LibraryGovernmental ExpansionFunds 352,141$ 1,830,951$ - 11,477 570 2,136 - 71,670 352,711$ 1,916,234$ 1,352$ 21,859$ - 81,291 1,352 103,150 - 892,593 - 569,132 351,359 351,359 351,359 1,813,084 352,711$ 1,916,234$ CITY OF SARATOGA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2010 64 Debt Service Lighting andCommunity LandscapingDevelopment AssessmentBlockLibrary DistrictGrantBond REVENUES: Property taxes186,006$ -$ -$ Special assessment266,609 - 971,197 Intergovernmental - Other- 123,812 - Use of money and property3,388 858 5,311 Other revenue90 13,333 - Total revenues 456,093 138,003 976,508 EXPENDITURES: Current: Public works 375,619 - - Capital outlay- - - Debt service: Principal- - 330,000 Interest and fiscal charges- - 685,276 Total expenditures 375,619 - 1,015,276 REVENUES OVER (UNDER) EXPENDITURES 80,474 138,003 (38,768) OTHER FINANCING (USES): Transfers out- (133,433) - Total other financing sources (uses)- (133,433) - Net change in fund balances 80,474 4,570 (38,768) FUND BALANCES: Beginning of year359,916 124,172 931,361 End of year 440,390$ 128,742$ 892,593$ The accompanying notes are an integral part of these financial statements Special Revenue 65 Capital Projects Total Other LibraryGovernmental ExpansionFunds -$ 186,006$ - 1,237,806 - 123,812 2,828 12,385 - 13,423 2,828 1,573,432 - 375,619 5,458 5,458 - 330,000 - 685,276 5,458 1,396,353 (2,630) 177,079 (405) (133,838) (405) (133,838) (3,035) 43,241 354,394 1,769,843 351,359$ 1,813,084$ CITY OF SARATOGA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL CAPITAL IMPROVEMENT FOR THE YEAR ENDED JUNE 30, 2010 66 Variance with Final Budget Budgeted AmountsActualPositive OriginalFinalAmounts(Negative) REVENUES: Licenses & permits303,903$ 303,903$ 424,737$ 120,834$ Fines & forfeitures- - 8,010 8,010 Intergovermental - federal3,772,906 3,772,906 430,387 (3,342,519) Intergovermental - state1,844,630 1,844,630 934,083 (910,547) Intergovermental - other79,724 79,724 99,712 19,988 Use of money and property- - 41,640 41,640 Other revenue359,940 411,940 221,897 (190,043) Total revenues 6,361,103 6,413,103 2,160,466 (4,252,637) EXPENDITURES: Capital outlay10,340,221 10,572,313 2,578,501 7,993,812 Total expenditures 10,340,221 10,572,313 2,578,501 7,993,812 REVENUES OVER (UNDER) EXPENDITURES (3,979,118) (4,159,210) (418,035) 3,741,175 OTHER FINANCING SOURCES (USES): Transfers in332,971 1,045,443 845,979 (199,464) Transfers out(106,000) (232,983) (232,983) - Total other financing sources (uses)226,971 812,460 612,996 (199,464) Net change in fund balances (3,752,147)$ (3,346,750)$ 194,961 3,541,711$ FUND BALANCES: Beginning of year3,510,980 End of year 3,705,941$ CITY OF SARATOGA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL LIGHTING & LANDSCAPING ASSESSMENT DISTRICT SPECIAL REVENUE FUND FOR THE YEAR ENDED JUNE 30, 2010 67 Variance with Final Budget Budgeted AmountsActualPositive OriginalFinalAmounts(Negative) REVENUES: Property taxes158,467$ 158,467$ 186,006$ 27,539$ Special assessments269,681 269,681 266,609 (3,072) Use of money and property11,210 11,210 3,478 (7,732) Total revenues 439,358 439,358 456,093 16,735 EXPENDITURES: Current: Public works 526,560 536,060 375,619 160,441 Total expenditures 526,560 536,060 375,619 160,441 REVENUES OVER (UNDER) EXPENDITURES (87,202) (96,702) 80,474 177,176 Net change in fund balances (87,202)$ (96,702)$ 80,474 177,176$ FUND BALANCES: Beginning of year359,916 End of year 440,390$ CITY OF SARATOGA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL COMMUNITY DEVELOPMENT BLOCK GRANT SPECIAL REVENUE FUND FOR THE YEAR ENDED JUNE 30, 2010 68 Variance with Final Budget Budgeted AmountsActualPositive OriginalFinalAmounts(Negative) REVENUES: Intergovernmental - Other332,897$ 332,897$ 123,812$ (209,085)$ Use of money and property3,000 3,000 858 (2,142) Other revenue- - 13,333 13,333 Total revenues 335,897 335,897 138,003 (197,894) OTHER FINANCING SOURCES (USES): Transfers in13,000 - - - Transfers out(140,203) (332,897) (133,433) 199,464 Total other financing sources (uses)(127,203) (332,897) (133,433) 199,464 Net change in fund balances 208,694$ 3,000$ 4,570 1,570$ FUND BALANCES: Beginning of year124,172 End of year 128,742$ CITY OF SARATOGA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL LIBRARY BOND DEBT SERVICE FUND FOR THE YEAR ENDED JUNE 30, 2010 69 Variance with Final Budget Budgeted AmountsActualPositive OriginalFinalAmounts(Negative) REVENUES: Special assessments950,000$ 950,000$ 971,197$ 21,197$ Use of money and property10,000 10,000 5,311 (4,689) Total revenues 960,000 960,000 976,508 16,508 EXPENDITURES: Debt service: Principal330,000 330,000 330,000 - Interest and fiscal charges685,556 685,556 685,276 280 Total expenditures 1,015,556 1,015,556 1,015,276 280 REVENUES OVER (UNDER) EXPENDITURES (55,556) (55,556) (38,768) 16,788 Net change in fund balances (55,556)$ (55,556)$ (38,768) 16,788$ FUND BALANCES: Beginning of year931,361 End of year 892,593$ CITY OF SARATOGA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL LIBRARY EXPANSION CAPITAL PROJECTS FUND FOR THE YEAR ENDED JUNE 30, 2010 70 Variance with Final Budget Budgeted AmountsActualPositive OriginalFinalAmounts(Negative) REVENUES: Use of money and property10,000$ 10,000$ 2,828$ (7,172)$ Total revenues 10,000 10,000 2,828 (7,172) EXPENDITURES: Current: Capital outlay15,000 15,000 5,458 9,542 Total expenditures 15,000 15,000 5,458 9,542 REVENUES OVER (UNDER) EXPENDITURES (5,000) (5,000) (2,630) 2,370 OTHER FINANCING SOURCES (USES): Transfers out- (405) (405) - Total other financing sources (uses)- (405) (405) - Net change in fund balances (5,000)$ (5,405)$ (3,035) 2,370$ FUND BALANCES: Beginning of year354,394 End of year 351,359$ 71 FIDUCIARY FUND FINANCIAL STATEMENTS Agency Funds Community Access Television Trust - This fund accounts for funds of the Saratoga Community Access Television (CATV) Trust Fund Foundation. CITY OF SARATOGA STATEMENT OF CHANGES IN ASSETS AND LIABILITIES AGENCY FUND FOR THE YEAR ENDED JUNE 30, 2010 72 BalanceBalance Cable T.V. Trust July 1, 2009AdditionsDeductionsJune 30, 2010 ASSETS Cash and investments69,769$ 69,060$ (47,465)$ 91,364$ Receivables: Accounts14,573 18,352 (14,573) 18,352 Interest261 126 (261) 126 Total assets 84,603$ 87,538$ (62,299)$ 109,842$ LIABILITIES Deposits payable84,603$ 87,538$ (62,299)$ 109,842$ The accompanying notes are an integral part of these financial statements. 73 INTERNAL SERVICE FUNDS Liability/Risk Management Insurance Fund – Accounts for insurance premiums, self-insurance portion of claims, and administrative cost associated with settling claims. Charges made to operating departments are based on liability risk and claim occurrence history. Worker’s Compensation Self-insurance Fund – Accounts for insurance premiums, self insured portion of claims, and administrative costs associated with settling claims. Charges made to operating departments are based on liability risk and claim occurrence history. Office Stores Fund - Photocopy equipment, postage and bulk mail meter expenses are controlled at one source point and expended to the departments as goods or services are utilized. Information Technology Services Fund – Supports the delivery of technology based services and infrastructure, including desktop support, network systems, technology upgrades and initiatives, community systems, and associated information technology equipment. Vehicle & Equipment Maintenance Fund – Accounts for the cost of operating and maintaining automotive equipment used for service operations in various City departments. Building Maintenance Fund – Accounts for operating costs associated with building maintenance. Expenses include custodial supplies and services, maintenance and repair, utilities, and staffing costs. Vehicle & Equipment Replacement Fund – Established to accumulate funding for the replacement of vehicles and equipment. Replacement costs are charged to program over the asset’s life span, reflective of usage. Information Technology Equipment Replacement Fund – Established to accumulate funding for the replacement of information technology equipment. Replacement costs are charged to departments over the asset’s lifespan, reflective of usage. CITY OF SARATOGA INTERNAL SERVICE FUNDS COMBINING STATEMENT OF NET ASSETS JUNE 30, 2010 74 Liability / Risk Workers'Office ManagementCompensationStores ASSETS Current assets: Cash and investments298,431$ 197,763$ 27,432$ Accounts receivable3,201 2,177 - Total current assets301,632 199,940 27,432 Noncurrent assets: Capital assets: Machinery and equipment- - - Less: accumulated depreciation- - - Total capital assets (net of accumulated depreciation) - - - Total assets 301,632 199,940 27,432 LIABILITIES Liabilities: Current assets: Accounts payable778 895 602 Accrued payroll1,691 454 - Claims payable54,601 - - Total current liabilities57,070 1,349 602 NET ASSETS Investment in capital assets- - - Unrestricted244,562 198,591 26,830 Total net assets244,562$ 198,591$ 26,830$ The accompanying notes are an integral part of these financial statements 75 Information InformationVehicleVehicleTechnology Technologyand EquipmentBuildingand EquipmentEquipment ServicesMaintenanceMaintenanceReplacementReplacementTotal 231,679$ 61,264$ 249,239$ 236,230$ 196,532$ 1,498,570$ - - - - - 5,378 231,679 61,264 249,239 236,230 196,532 1,503,948 - - - 623,819 90,240 714,059 - - - (359,352) (63,168) (422,520) - - - 264,467 27,072 291,539 231,679 61,264 249,239 500,697 223,604 1,795,487 7,524 3,350 24,058 - 9,846 47,053 10,214 3,655 22,612 - - 38,626 - - - - - 54,601 17,738 7,005 46,670 - 9,846 140,280 - - - 264,467 27,072 291,539 213,941 54,259 202,569 236,230 186,686 1,363,668 213,941$ 54,259$ 202,569$ 500,697$ 213,758$ 1,655,207$ CITY OF SARATOGA INTERNAL SERVICE FUNDS COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS FOR THE YEAR ENDED JUNE 30, 2010 76 Liability / Risk Workers'Office ManagementCompensationStores Operating revenues: Charges for services250,000$ 250,000$ 23,000$ Other operating revenues9,056 27,692 11,693 Total operating revenues259,056 277,692 34,693 Operating expenses: Cost of services- - - Administration217,366 202,136 47,496 Depreciation- - - Total operating expenses217,366 202,136 47,496 Operating income41,690 75,556 (12,803) Transfers out- - - Change in net assets41,690 75,556 (12,803) Total net assets - beginning202,872 123,035 39,633 Total net assets - ending244,562$ 198,591$ 26,830$ The accompanying notes are an integral part of these financial statements 77 Information InformationVehicleVehicleTechnology Technologyand EquipmentBuildingand EquipmentEquipment ServicesMaintenanceMaintenanceReplacementReplacementTotal 400,000$ 208,000$ 704,000$ 110,000$ 58,010$ 2,003,010$ 963 5,214 - - 54,618 400,963 208,000 709,214 110,000 58,010 2,057,628 - 210,396 715,486 14,640 31,614 972,136 361,859 - - - - 828,857 - - - 123,529 18,048 141,577 361,859 210,396 715,486 138,169 49,662 1,942,570 39,104 (2,396) (6,272) (28,169) 8,348 115,058 - - - - (155,000) (155,000) 39,104 (2,396) (6,272) (28,169) (146,652) (39,942) 174,837 56,655 208,841 528,866 360,410 1,695,149 213,941$ 54,259$ 202,569$ 500,697$ 213,758$ 1,655,207$ CITY OF SARATOGA INTERNAL SERVICE FUNDS COMBINING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2010 78 Liability / Risk Workers'Office ManagementCompensationStores Cash flows from operating activities: Receipts from customers and users 260,198$ 278,580$ 34,693$ Payments to suppliers(243,965) (192,833) (49,854) Payments to employees(21,982) (8,638) - Net cash provided by operating activities(5,749) 77,109 (15,161) Cash flows from noncapital financing activities: Operating transfers out- - - Net cash used in nonoperating activities- - - Cash flows from capital activities: Acquisition of capital assets- - - Net cash used for acquisition of capital assets- - - Net increase (decrease) in cash and cash equivalents(5,749) 77,109 (15,161) Cash and cash equivalents, beginning of year304,180 120,654 42,593 Cash and cash equivalents, ending of year298,431$ 197,763$ 27,432$ Reconciliation of operating income to net cash provided by operating activities: Operating income (loss)41,690$ 75,556$ (12,803)$ Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation- - - Change in operating assets and liabilities: Decrease in accounts receivables1,142 888 - (Decrease) increase in accounts payable(21,657) 592 (2,358) (Decrease) in claims payable(28,615) - - Increase in accured payroll1,691 73 - Net cash provided (used) by operating activities(5,749)$ 77,109$ (15,161)$ 79 Information InformationVehicleVehicleTechnology Technologyand EquipmentBuildingand EquipmentEquipment ServicesMaintenanceMaintenanceReplacementReplacementTotal 400,963$ 208,000$ 709,214$ 112,530$ 58,010$ 2,062,188$ (169,423) (136,740) (316,259) (14,640) (22,961) (1,146,675) (185,740) (72,520) (414,558) - - (703,438) 45,800 (1,260) (21,603) 97,890 35,049 212,075 - - - - (155,000) (155,000) - - - - (155,000) (155,000) - - - (12,345) - (12,345) - - - (12,345) - (12,345) 45,800 (1,260) (21,603) 85,545 (119,951) 44,730 185,879 62,524 270,842 150,685 316,483 1,453,840 231,679$ 61,264$ 249,239$ 236,230$ 196,532$ 1,498,570$ 39,104$ (2,396)$ (6,272)$ (28,169)$ 8,348$ 115,058$ - - - 123,529 18,048 141,577 - - - 2,530 - 4,560 2,999 159 (20,046) - 8,653 (31,658) - - - - - (28,615) 3,697 977 4,715 - - 11,153 45,800$ (1,260)$ (21,603)$ 97,890$ 35,049$ 212,075$ 80 This page is intentionally blank. 81 CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS 82 CITY OF SARATOGA CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS COMPARATIVE SCHEDULE BY SOURCE JUNE 30, 2010 AND 2009 83 20102009 Governmental Funds Capital Assets: Land and land improvements12,984,078$ 10,585,106$ Buildings and structures23,412,763 23,156,758 Machinery and equipment1,567,785 1,324,426 Infrastructure104,425,507 103,549,229 Construction in progress4,443,360 6,595,346 Total Governmental Funds Capital Assets 146,833,493 145,210,865 Accumulated depreciation(25,204,168) (23,529,120) Total Governmental Funds Capital Assets, Net 121,629,325$ 121,681,745$ Investments in Governmental Funds Capital Assets by Source: General Fund115,548,433$ 115,642,022$ Special revenue funds974,487 1,008,688 Capital projects funds30,213,225 28,462,807 Donations97,348 97,348 Accumulated depreciation(25,204,168) (23,529,120) Total Governmental Funds Capital Assets 121,629,325$ 121,681,745$ 1 This schedule presents only the capital asset balances related to governmental funds. Accordingly the capital assets reported in internal service funds are excluded from the above amounts. Generally, the capital assets of internal service funds are included as governmental activities in the statement of net assets. CITY OF SARATOGA CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS SCHEDULE BY FUNCTION AND ACTIVITY1 JUNE 30, 2010 84 LandBuildings and Landand ImprovementsStructures Function and Activity General and intergovernmental services: Management services-$ 438,036$ Administrative services- 167,585 Intergovernmental services118,183 3,138,641 Total General and Intergovernmental Services:118,183 3,744,262 Public safety: Police services- - Code enforcement- - Total Public Safety:- - Public works: Streets and sidewalks835,155 30,628 Parks/open space2,637,061 2,656,850 Total Public Works:3,472,216 2,687,478 Community services7,651,215 2,666,124 Community development services1,742,464 14,314,899 Total Governmental Funds Capital Assets12,984,078 23,412,763 Accumulated depreciation- (5,471,113) Total Governmental Funds Capital Assets, Net 12,984,078$ 17,941,650$ 1 This schedule presents only the capital asset balances related to governmental funds. Accordingly the capital assets reported in internal service funds are excluded form the above amounts. Generally, the capital assets of internal service funds are included as governmental activities in the statement of net assets. 85 MachineryConstruction andin EquipmentInfrastructureProgressTotal 405,358$ -$ 99,031$ 942,425$ 74,491 - - 242,076 47,560 - - 3,304,384 527,409 - 99,031 4,488,885 27,813 - - 27,813 7,548 - - 7,548 35,361 - - 35,361 483,632 104,342,490 1,914,299 107,606,204 270,483 - - 5,564,394 754,115 104,342,490 1,914,299 113,170,598 220,753 83,017 2,402,019 13,023,128 30,147 - 28,011 16,115,521 1,567,785 104,425,507 4,443,360 146,833,493 (1,178,957) (18,554,098) - (25,204,168) 388,828$ 85,871,409$ 4,443,360$ 121,629,325$ CITY OF SARATOGA CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS SCHEDULE BY FUNCTION AND ACTIVITY JUNE 30, 2010 86 GovernmentalGovernmental Funds CapitalFunds Capital AssetsAssets July 1, 2009AdditionsDeletionsJune 30, 2010 Function and Activity General and intergovernmental services: Management services474,684$ 490,608$ (22,867)$ 942,425$ Administrative services252,449 - (10,373) 242,076 Intergovernmental services3,304,385 - (1) 3,304,384 Total General and Intergovernmental Services:4,031,518 490,608 (33,241) 4,488,885 Public safety: Police services27,813 - - 27,813 Code enforcement7,548 - - 7,548 Total Public Safety:35,361 - - 35,361 Public works: Streets and sidewalks107,000,101 653,263 (47,160) 107,606,204 Parks/open space5,606,449 (42,055) 5,564,394 Total Public Works:112,606,550 653,263 (89,215) 113,170,598 Community services12,413,046 659,859 (49,777) 13,023,128 Community development services16,124,390 4,646 (13,515) 16,115,521 Total Governmental Funds Capital Assets 145,210,865 1,808,376 (185,748) 146,833,493 Accumulated depreciation(23,529,120) 127,790 (1,802,838) (25,204,168) Total Governmental Funds Capital Assets, Net 121,681,745$ 1,936,166$ (1,988,586)$ 121,629,325$ 1 This schedule presents only the capital asset balances related to governmental funds. Accordingly the capital assets reported in internal service funds are excluded form the above amounts. Generally, the capital assets of internal service funds are included as governmental activities in the statement of net assets. STATISTICAL SECTION 87 This part of the City of Saratoga's comprehensive annual financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures and required supplementary information says about the government's overall financial health. Contents Page Financial Trends These schedules contain trend information to help the reader understand how the government's financial performance and well being have changed over time. 88-92 Revenue Capacity These schedules contain information to help the reader assess the government’s most significant local revenue source; property tax. 93-97 Debt Capacity These schedules present information to help the reader assess the affordability of the government's current levels of outstanding debt and the government's ability to issue additional debt in the future. 98-101 Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the government's financial activities take place. 102-103 Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the government's financial report relates to the services the government provides and the activities it performs. 104-106 The City of Saratoga implemented GASB Statement No. 34 in fiscal year 2001/02; schedules presenting government-wide information include information beginning in that year. The City of Saratoga implemented GASB Statement No. 44 in fiscal year 2007/08; newly required schedules presenting information in the Statistical Section include the earliest available information. CITY OF SARATOGA NET ASSETS BY COMPONENT LAST SIX YEARS (ACCRUAL BASIS OF ACCOUNTING) 88 (amounts expressed in thousands) 200520062007200820092010 Primary government Governmental activities Investment in capital assets, net of related debt 105,784$ 107,100$ 108,102$ 109,818$ 108,818$ 108,966$ Restricted6,328 5,370 5,928 5,940 5,281 5,519 Unrestricted6,789 9,955 8,593 9,710 8,759 8,533 Total primary government118,901$ 122,425$ 122,623$ 125,468$ 122,858$ 123,018$ Source: CAFR Fiscal Year $95,000  $100,000  $105,000  $110,000  $115,000  $120,000  $125,000  $130,000  200520062007200820092010 Net Assets by Component Investment in capital assets, net of related debt Restricted Unrestricted CITY OF SARATOGA CHANGES IN NET ASSETS LAST SIX YEARS (ACCRUAL BASIS OF ACCOUNTING) 89 (amounts expressed in thousands) 200520062007200820092010 Expenses: Governmental activities: General and intergovernmental services4,160$ 3,473$ 4,532$ 6,293$ 5,595$ 3,729$ Public safety3,736 3,427 3,844 4,166 4,211 4,339 Public works3,829 4,752 6,425 5,325 7,643 6,535 Community services1,929 1,395 1,437 1,286 1,634 1,711 Community development services2,349 2,226 1,993 2,032 2,000 1,751 Interest on long-term debt (unallocated)760 754 768 714 697 677 Total governmental activities expenses16,763 16,027 18,999 19,816 21,780 18,742 Program revenues: Charges for services: General and intergovernmental services- 31 452 1,787 133 125 Public safety141 122 - 411 520 425 Public works1,988 1,890 528 1,705 2,379 2,535 Community services757 1,008 604 911 935 917 Community development services1,890 2,665 1,328 2,110 1,802 1,586 Operating grants and contributions1,218 1,549 2,155 151 228 275 Capital grants and contributions865 1,568 1,282 1,715 339 674 Total governmental activates program revenues6,859 8,833 6,349 8,790 6,336 6,537 Net (expense) revenue and change in net assets(9,904) (7,194) (12,650) (11,026) (15,444) (12,205) General revenue and other changes in net assets Taxes: Property taxes4,841 5,652 5,772 8,099 8,336 8,371 Sales taxes1,011 988 995 1,058 1,043 955 Local taxes1,143 1,288 1,099 694 663 560 Franchise taxes995 1,040 1,187 1,625 1,657 1,664 Motor vehicle in-lieu420 718 177 149 116 101 Total Taxes8,410 9,686 9,230 11,625 11,815 11,651 Intergovernmental- - 673 841 474 522 Investment earnings283 709 2,813 1,057 397 101 Other revenues193 323 132 348 148 91 Total general revenues8,886 10,718 12,848 13,871 12,834 12,365 Change in net assets(1,018) 3,524 198 2,845 (2,610) 160 Net assets - beginning of year119,919 118,901 122,425 122,623 125,468 122,858 Net assets - end of year118,901$ 122,425$ 122,623$ 125,468$ 122,858$ 123,018$ Source: CAFR Fiscal Year CITY OF SARATOGA FUND BALANCE OF GOVERNMENTAL FUNDS LAST SIX YEARS (ACCRUAL BASIS OF ACCOUNTING) 90 (amounts expressed in thousands) 200520062007200820092010 General fund: Reserved-$ 1$ 64$ 1$ 1$ 1$ Unreserved6,979 10,378 9,097 10,396 8,228 8,010 Total general fund6,979$ 10,379$ 9,161$ 10,397$ 8,229$ 8,011$ All other governmental funds: Reserved Debt service funds855$ 865$ 746$ 854$ 931$ 893$ Unreserved, reported in: Special revenue funds201 919 844 318 484 569 Capital project funds5,322 3,586 4,338 4,768 3,865 4,057 Total all other governmental funds6,378$ 5,370$ 5,928$ 5,940$ 5,280$ 5,519$ Source: CAFR Fiscal Year $‐ $2,000  $4,000  $6,000  $8,000  $10,000  $12,000  General ‐ Reserved General ‐ Unreserved Debt ServiceSpecial  Revenue Capital  Projects Fund Balances of Governmental Funds 2005 2006 2007 2008 2009 2010 CITY OF SARATOGA GOVERNMENTAL ACTIVITIES TAX REVENUES BY SOURCE LAST SIX YEARS (ACCRUAL BASIS OF ACCOUNTING) 91 (amounts expressed in thousands) 200520062007200820092010 Tax revenues: Property taxes4,841$ 5,652$ 5,772$ 8,099$ 8,336$ 8,371$ Special assessments1,476 1,369 271 1,392 1,368 1,247 Sales taxes1,011 988 995 1,058 1,043 955 Local taxes1,143 1,288 1,099 694 663 560 Franchise taxes995 1,040 1,187 1,625 1,657 1,664 Motor vehicle in-lieu420 718 177 149 116 101 Total tax revenues9,886$ 11,055$ 9,501$ 13,017$ 13,183$ 12,898$ Source: CAFR Fiscal Year $‐ $1,000  $2,000  $3,000  $4,000  $5,000  $6,000  $7,000  $8,000  $9,000  Property taxesSpecial  assessments Sales taxesLocal taxesMotor vehicle  in‐lieu Franchise  taxes Tax  Revenues  by Source 2005 2006 2007 2008 2009 2010 CITY OF SARATOGA CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS LAST SIX YEARS (ACCRUAL BASIS OF ACCOUNTING) 92 (amounts expressed in thousands) 200520062007200820092010 Revenues: Property taxes4,893$ 5,652$ 4,758$ 7,877$ 8,335$ 8,371$ Special assessments1,411 1,370 1,285 1,566 1,368 1,247 Sales taxes1,011 987 995 1,058 1,043 954 Other local taxes851 1,288 1,126 773 663 560 Licensed and permits100 79 1,340 1,671 1,460 1,489 Fines and forfeitures162 259 396 344 360 359 Intergovernmental - federal- - - - - 430 Intergovernmental - state1,375 2,660 3,631 1,641 1,283 1,258 Intergovernmental - other671 976 629 777 290 258 Franchise fees1,294 1,041 1,187 1,622 1,657 1,664 Use of money any property664 752 2,813 924 794 595 Other revenues153 1,719 151 326 1,966 1,794 Current services charges3,093 2,715 900 4,184 - - Total tax revenues15,768 19,498 19,211 22,763 19,219 18,979 Expenditures: Current: General and intergovernmental services3,238 3,346 3,806 4,083 3,330 3,102 Public safety3,731 3,423 3,824 4,166 4,206 4,349 Public works2,599 3,501 5,714 4,717 4,700 4,730 Community services1,875 1,210 1,381 1,262 1,424 1,223 Community development services1,990 1,847 1,962 2,026 2,450 2,111 Capital outlay1,777 2,908 2,130 4,246 4,060 2,584 Debt service: Principal255 270 280 295 310 330 Interest and fiscal charges766 760 774 721 705 685 Total expenditures16,231 17,265 19,871 21,515 21,185 19,114 Excess of revenues over (under) expenditures (463) 2,233 (660) 1,247 (1,966) (135) Other financing sources (uses): Transfers in2,492 499 3,422 2,241 2,043 1,172 Transfers out(2,492) (499) (3,422) (2,241) (2,043) (1,017) Total other financing sources (uses)- - - - - 155 Net change in fund balances(463)$ 2,233$ (660)$ 1,247$ (1,966)$ 20$ Debt as a percentage of noncapital expenditures7.06%7.17%5.94%5.62%4.89%5.80% Source: CAFR Fiscal Year CITY OF SARATOGA PROPERTY TAX RATES – DIRECT AND OVERLAPPING GOVERNMENTS LAST SIX YEARS (ACCRUAL BASIS OF ACCOUNTING) 93 (Property Tax Rates per $100 of Assessed Value) 200520062007200820092010 General1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 County Retirement Levy0.0388 0.0388 0.0388 0.0388 0.0388 0.0388 County Library0.0024 0.0024 0.0024 0.0024 0.0024 0.0024 City of Saratoga0.0148 0.0117 0.0096 0.0113 0.0104 0.0094 Campbell School District0.0529 0.0512 0.0508 0.0475 0.0524 0.0552 Cupertino Elementary School District0.0360 0.0350 0.0289 0.0337 0.0306 0.0312 Moreland Elementary School District0.0612 0.0561 0.0556 0.0569 0.0565 0.0594 Saratoga School District0.0361 0.0356 0.0351 0.0363 0.0363 0.0388 Campbell Union High School District0.0197 0.0224 0.0198 0.0285 0.0299 0.0314 Fremont Union High School District0.0268 0.0260 0.0243 0.0241 0.0339 0.0306 Los Gatos-Saratoga Joint Union High School District0.0409 0.0371 0.0651 0.0345 0.0330 0.0352 Foothill-DeAnza Community College District0.0129 0.0119 0.0346 0.0113 0.0123 0.0322 West Valley-Mission Community College District- 0.0140 0.0126 0.0118 0.0032 0.0140 Saratoga Fire District0.0017 0.0052 0.0049 0.0053 0.0053 0.0058 Santa Clara Valley Water District - State Water Project0.0086 0.0069 0.0070 0.0067 0.0059 0.0071 Santa Clara Valley Water District - Zone W-10.0006 0.0009 0.0002 0.0040 0.0002 0.0002 Source: California Municipal Statistics, Inc. Fiscal Year CITY OF SARATOGA ASSESSED VALUE OF TAXABLE PROPERTY LAST SIX YEARS 94 (amounts expressed in thousands) Fiscal Year EndedResidentialCommercialIndustrialVacantOther June 30PropertyPropertyPropertyInstitutionalPropertyProperty 20057,114,095$ 166,071$ 8,746$ 33,509$ 70,276$ 35,127$ 20067,883,965 177,149 8,921 38,027 90,611 32,858 20078,467,894 187,142 9,099 45,706 107,228 39,536 20089,025,628 208,369 9,281 50,590 110,656 49,023 20099,605,309 213,951 9,467 51,052 128,898 43,240 20109,729,087 231,691 9,656 57,495 110,225 44,856 Source:1 HdL Coren & Cone, Santa Clara County Assessor 2007/08 Combined Tax Rolls Other property includes: Irrigated, Dry Farm, Recreational Government, and Miscellaneous 2 California Municipal Statistics, Inc. $‐ $2,000,000  $4,000,000  $6,000,000  $8,000,000  $10,000,000  $12,000,000  200520062007200820092010 Total  Assessed Property Unsecured Other Vacant Institutional Industrial Commercial Residential 95 Total2 TotalLess:Total Taxable 1 Direct UnsecuredAssessedTax ExemptAssessedTax PropertyPropertyReal PropertyValueRate 42,965$ 7,470,789$ (76,932)$ 7,393,857$ 1.0560 46,874 8,278,405 (133,951) 8,144,454 1.0529 39,764 8,896,369 (140,859) 8,755,510 1.0508 35,775 9,489,322 (159,369) 9,329,953 1.0525 43,933 10,095,850 (161,488) 9,934,362 1.0516 58,210 10,241,220 (173,628) 10,067,592 1.0506 CITY OF SARATOGA PRINCIPAL PROPERTY TAXPAYERS CURRENT YEAR AND FIVE YEARS AGO JUNE 30, 2010 96 (amounts expressed in thousands) % of Total% of Total TaxableTaxableTaxableTaxable AssessedAssessedAssessedAssessed TaxpayerValueRankValueValueRankValue Cupertino Village Associates, LLC34,889$ 10.35% Quito Village Group, LLC31,110 20.31%12,901 30.22% John M. & Abby J. Sobrato17,643 30.18% Gregpenn Properties, LLC14,424 40.14% San Jose Water Works13,308 50.13%9,901 50.13% John I. Keller12,208 60.12% David J. & Terri E. Morrison10,604 70.11%9,423 60.13% Argonaut Associates, LLV10,510 80.10%12,005 30.13% Ashok Krishnamurthi10,439 90.10%9,282 70.13% Rakesh & Dipti Bl Mathur10,200 100.10% Odd Fellows Home of California22,325 10.53% Saratoga Office Center Partners, LLC13,543 20.26% David C. & Roxanne N. Petterschmidt9,241 80.12% Deloise A. Jordan8,918 90.12% David L. House8,800 100.12% Assessed Value10,067,592$ 7,393,858$ 1 Earliest information available Source: California Municipal Statistics, Inc./HdL Coren & Cone 201020051 CITY OF SARATOGA PROPERTY TAX LEVIES AND COLLECTIONS LAST SIX YEARS 97 Fiscal YearTotal TaxCollections in EndedLevy forSubsequent June 30Fiscal YearAmountPercentageYearsAmountPercentage 20054,972,875$ 4,839,668$ 97.3%133,207$ 4,972,875$ 100.0% 20065,243,038 5,112,766 97.5%130,272 5,243,038 100.0% 20076,032,558 6,040,230 100.1%(7,672) 6,032,558 100.0% 20088,108,364 8,106,743 100.0%3,621 8,110,364 100.0% 20098,332,184 8,335,805 100.0%- 8,335,805 100.0% 20108,371,396 8,381,134 100.1%(9,738) 8,371,396 100.0% Source: City of Saratoga Note:Information on this schedule is not provided from the County of Santa Clara. An estimate has been used for the total tax levy for the fiscal year based upon collections of prior year property taxes in the next fiscal year. Collected within the Fiscal Year of the LevyTotal Collections to Date CITY OF SARATOGA RATIOS OF OUTSTANDING DEBT BY TYPE LAST SIX YEARS 98 (amounts expressed in thousands, except per capita amounts) 200520062007200820092010 Governmental activities General obligation bonds14,440$ 14,170$ 13,890$ 13,595$ 13,285$ 12,955$ Total primary government14,440$ 14,170$ 13,890$ 13,595$ 13,285$ 12,955$ Percentage of Personal Income1 0.00%0.00%0.00%0.00%n/an/a Per capita2 468 460 443 430 419 405 Source: CAFR 1Bureau of Economic Analysis - personal income information only available through 2008 San Jose-Sunnyvale-Santa Clara region 2Population information from California State Controller's Office Fiscal Year CITY OF SARATOGA RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST SIX YEARS 99 (amounts expressed in thousands, except per capita amounts) 200520062007200820092010 General obligation bonds14,440$ 14,170$ 13,890$ 13,595$ 13,285$ 12,955$ Less: Amount available in debt service fund(855) (865) (747) (854) (926) (890) Total primary government13,585$ 13,305$ 13,143$ 12,741$ 12,359$ 12,065$ Percentage of actual taxable value of property0.18%0.16%0.15%0.14%0.12%0.12% Per capita1 440 431 419 403 390 377 Source: CAFR 1Population information from California State Controller's Office Fiscal Year CITY OF SARATOGA DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT 100 (amounts expressed in thousands) Estimated EstimatedShare of DebtPercentageOverlapping OutstandingApplicable 1 Debt Direct Debt: City of Saratoga12,955 100.000%12,955 Overlapping Tax and Assessment Debt: Santa Clara County350,000$ 3.729%13,052$ Santa Clara Valley Water District, Zone W-1910 4.023%37 Foothill-De Anza Community College District479,279 1.716%8,224 West Valley Community College District215,070 11.726%25,219 Campbell Union High School District136,395 5.544%7,562 Fremont Union High School District202,415 3.686%7,461 Los Gatos-Saratoga Joint Union High School District58,915 40.910%24,102 Campbell Union School District98,223 6.846%6,724 Cupertino Union School District127,265 6.179%7,864 Moreland School District73,272 12.960%9,496 Saratoga Union School District49,432 86.175%42,598 Saratoga Fire Protection District5,049 97.424%4,919 Santa Clara Valley Water District Benefit Assessment152,440 3.729%5,684 Total Overlapping Tax and Assessment Debt162,942 Overlapping General Fund Debt: Santa Clara County General Fund Obligations825,070 3.729%30,767$ Santa Clara County Pension Obligations388,045 3.729%14,470 Santa Clara County Board of Education Certificates of Participation13,580 3.729%506 Santa Clara County Vector Control District Certificates of Participation3,965 3.729%148 Foothill-De Anza Community College District Certificates of Participation23,450 1.716%402 West Valley-Mission College District General Fund Obligations56,120 11.726%6,581 Los Gatos-Saratoga Joint Union High School District Certificates of Participation10,205 40.910%4,175 Saratoga Union School District Certificates of Participation6,380 86.175%5,498 Midpeninsula Open Space Park District General Fund Obligations113,788 6.277%7,142 Total Overlapping General Fund Debt69,689 Combined Total Debt 2 245,586$ 1Percentage of overlapping agency's assessed valuation located within boundaries of the city. 2Excludes tax and revenue anticipation notes, enterprise revenue, mortgage revenue and tax allocation bonds and non-bonded capital lease obligations. Source: California Municipal Statistics, Inc. CITY OF SARATOGA LEGAL DEBT MARGIN INFORMATION LAST SIX YEARS 101 (amounts expressed in thousands) 200520062007200820092010 Debt Limit1,120,618$ 1,241,761$ 1,334,455$ 1,423,398$ 1,514,378$ 1,536,183$ Total net debt applicable to limit13,585 13,305 13,143 12,741 12,359 12,065 Legal debt margin1,107,033$ 1,228,456$ 1,321,312$ 1,410,657$ 1,502,019$ 1,524,118$ Total net debt applicable to the limit as a percentage of debt limit 1.21%1.07%0.98%0.90%0.82%0.79% Legal debt margin calculation Assessed value7,393,857$ 8,144,454$ 8,755,510$ 9,329,953$ 9,934,362$ 10,067,592$ Add back: exempt real property76,932 133,951 140,859 159,369 161,488 173,628 Total assessed value7,470,789$ 8,278,405$ 8,896,369$ 9,489,322$ 10,095,850$ 10,241,220$ Debt limit (15% of total assessed value)1,120,618$ 1,241,761$ 1,334,455$ 1,423,398$ 1,514,378$ 1,536,183$ Debt applicable to limit: General obligation bonds14,440$ 14,170$ 13,890$ 13,595$ 13,285$ 12,955$ Less: Amount available in debt service fund(855) (865) (747) (854) (926) (890) Total net debt applicable to limit13,585$ 13,305$ 13,143$ 12,741$ 12,359$ 12,065$ Legal debt margin1,107,033$ 1,228,456$ 1,321,312$ 1,410,657$ 1,502,019$ 1,524,118$ Source: CAFR Fiscal Year CITY OF SARATOGA DEMOGRAPHIC AND ECONOMIC STATISTICS LAST SIX YEARS 102 PersonalPer Capita FiscalCityIncomePersonalLaborUnemployment YearPopulation1 (in thousands)2 Income2 Force 3 Rate3 200530,850 89,615 51,418 12,600 2.5% 200630,835 98,252 55,754 12,700 2.1% 200731,352 105,999 59,338 12,900 2.3% 200831,592 105,979 58,531 13,100 3.2% 200931,679 n/an/a13,300 6.0% 200931,997 n/an/a12,500 5.8% Source:1Popluaton information from California State Controller's Office 2Bureau of Economic Analysis - San Jose-Sunnyvale-Santa Clara region 3State of California - Employment Development Department 10,000  15,000  20,000  25,000  30,000  35,000  200520062007200820092010 Labor Force vs. Population Population Labor Force CITY OF SARATOGA PRINCIPAL EMPLOYERS CURRENT YEAR AND FIVE YEARS AGO AT JUNE 30, 2010 103 PercentagePercentage of Total Cityof Total City EmployerEmployeesRankEmploymentEmployeesRankEmployment Gene's Fine Foods85 10.68%85 11.39% Safeway65 20.52%65 21.06% Saratoga Country Club65 30.52%65 31.06% Windermere SVP27 40.22%27 50.44% Longs Drug20 50.16%20 60.33% Classic Car Wash20 60.16%20 70.33% Harmonie European Day Spa20 70.16%20 80.33% Hinshaw, Draa & Marsh20 80.16%20 90.33% Jakes of Saratoga20 90.16% Bella Saratoga18 100.14%20 100.33% 24 Hour Fitness0.00%30 40.49% Total City Employment2 12,500 6,129 1 Earliest information available 2State of California - Employment Development Department Source: City of Saratoga 201020051 CITY OF SARATOGA FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION LAST SIX FISCAL YEARS 104 200520062007200820092010 Function General government12.65 10.75 11.00 13.00 12.00 11.75 Public works20.75 20.75 21.75 22.75 21.75 21.75 Community development14.00 13.00 14.00 14.00 14.00 12.00 Parks and recreation10.35 10.35 10.60 10.60 10.60 9.35 Total57.75 54.85 57.35 60.35 58.35 54.85 Source: City of Saratoga Budget Document Fiscal Year ‐ 10.00  20.00  30.00  40.00  50.00  60.00  70.00  200520062007200820092010 Full‐Time  Equivalents Parks & Rec Comm  Development Public works General gov't CITY OF SARATOGA OPERATING INDICATORS BY FUNCTION LAST SIX FISCAL YEARS 105 200520062007200820092010 Function Part 1 crimes1 463 426 425 381 282 173 Total incidents42,011 40,567 39,663 41,243 41,384 39,942 Police reports1,767 1,659 1,767 1,941 1,949 1,273 Public Works Street resurfacing (miles)N/A5 14 N/A6 3 Street lights repaired2 3 3 12 25 24 Potholes filled (sq. ft.)N/A5,000 5,000 7,000 10,000 10,000 Community Development Total permit valuation ($000)74,668 94,485 69,935 70,442 61,117 44,658 Parks and Recreation Classes, trips (enrollment) community events5,604 5,712 4,817 4,782 4,698 4,366 Adult Exercise (e.g. JS Dance. Jazzerxcise)272 312 285 362 515 545 Sports programs (e.g. Adult basketball, softba l 470 473 515 591 459 423 Prescholl programs (enrollment)200 163 159 225 171 161 Day/summer camps (enrollment)301 287 205 242 225 331 Teen/youth council (enrollment)2,506 3,798 2,221 94 419 2,110 Senior center (enrollment/attendance days)22,312 22,591 18,515 17,826 16,325 16,533 1Part 1 Crimes are the following as reported to DOJ: homicide, rape, robbery, burglary, assault, theft, auto theft, and arson. Source: City of Saratoga various records Fiscal Year CITY OF SARATOGA CAPITAL ASSET STATISTICS BY FUNCTION LAST SIX FISCAL YEARS 106 200520062007200820092010 Function Public safety Police Station1 1 - - - - Fire Station Saratoga Fire District1 1 1 1 1 1 Central Fire District1 1 1 1 1 1 Public Works Street Miles - Private13 13 13 13 14 14 Street Miles - Public137 137 137 137 140 140 West Valley Sanitation District Number of Connections8,601 8,621 8,651 8,651 8,683 8,687 Length of Sewer Lines120 120 127 127 127 127 Cupertino Valley Sanitation District Number of Connections2,118 2,118 2,915 2,927 2,938 2,949 Length of Sewer Lines36 36 36 36 36.5 36.5 Parks and Recreation Parks Acreage81 81 81 81 84 84 Parks 15 15 15 15 15 15 Source: City of Saratoga various records Fiscal Year