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Home My WebLink About102-CAFR.pdf C ITY OF S ARATOGA C ALIFORNI A COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE FISCAL YEAR ENDING JUNE 30, 2011 Saratoga, California Comprehensive Annual Financial Report For the Fiscal Year Ended June 30, 2011 City Council Howard Miller ............................................................................................................. Mayor Chuck Page ........................................................................................................ Vice Mayor Jill Hunter................................................................................................... Council Member Emily Lo .................................................................................................... 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, 2011 i TABLE OF C ONTENTS I NTRODUCTORY SECTION Letter of Transmittal ......................................................................................................... 1 GFOA Certificate of Achievement for Excel lence in Financial Reporting ........................... 5 Pri ncipal Officers of the City ............................................................................................ 6 Organization Chart ........................................................................................................... 7 F INANCIAL S ECTION Independent A uditor’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 Finan cial 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 Reconcilia tion 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 .............................................................................................. 5 7 Modified Approach for City Streets Infrastructure Capital Assets ............................... 59 CITY OF SARATOGA COMPREHENSIVE ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED JUNE 30, 2011 ii TABLE OF C ONTENTS C ONTINUED SUPPLEMENTARY I NFORMATION : Non -Major Governmental Funds Combining Balance Sheets ....................................................................................... 64 Combining Statement of Revenues, Expenditures and C hanges in Fund Balances ........ 66 Schedule of Revenues, Exp and Changes in Fun d Balances – Budget and Actual: Capital Improvements .......................................................................................... 68 Lighting & Landscape Assessment Districts Special Revenue Funds ..................... 69 Community Development Block Grant Special Revenue Fund ............................... 70 Library Bond Debt Service Fund .......................................................................... 71 Library Expansion Capital Project Fund ............................................................... 72 Fiduciary Funds Statement of Changes in Assets and Liabilities – Agency Funds ................................. 74 Internal Service Funds Combining Statement of Net Assets ........................................................................... 7 6 Combining Statement of Revenues, Expense s, and Change in Fund Balance ............... 78 Comb ining Statement of Cash Flows ......................................................................... 80 Capital Assets Used in the Operation of Governmental Funds Comparative Schedule by Source ............................................................................... 85 Schedule by Function and Activity ............................................................................ 86 Schedule of Changes by Function and Activity .......................................................... 88 Statistical Section (Unaudited) Net Assets by Component .......................................................................................... 90 Changes in Net Assets ............................................................................................... 92 Fund Balance of Governmental Funds ........................................................................ 94 Governmental Activities Tax Revenues by Source ..................................................... 96 Changes in Fund Balances of Governmental Funds .................................................... 98 Direct a nd Overlapping Government s ...................................................................... 100 Assessed Value of Taxable Property ........................................................................ 102 Principal Property Taxpayers ................................................................................... 104 Property Tax Levies and Collections ........................................................................ 105 Ratio s of Outstanding Debt by Type ........................................................................ 106 Ratios of Ge neral Bonded Debt Outstanding ............................................................ 108 Legal Debt Margin Inf ormation ............................................................................... 110 Direct and Overlapping Governmental Activities Debt ............................................. 112 Demographic and Economic Statistics ..................................................................... 113 Principal Employers ............................................................................................... 114 Full -Time Equivalent City Government Employees by Function ............................... 116 Operating Indicators by Function ............................................................................. 118 Capital Asset St atistics by Function ......................................................................... 120 INTRODUCTORY SECTION This page is intentionally blank. 1 C ITY OF S ARATOGA C ITY H ALL 13777 F RUITVALE A VENUE S ARATOGA , C ALIFORNIA 95070 (408) 868 -1200 November 15, 2011 Honorable Mayor and City Council, The Comprehensive Annual Financial Report (CAFR) of the City of Saratoga for the year ended June 30, 2011 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, 2011, 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 the MD&A and should be read in conjunction with it. THE REPORTING ENTITY AND ITS SERVICES The City of Saratoga (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 30,195 at January 1, 2011 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 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 City of Saratoga is primarily funded by the two typically largest sources of revenue for cities—property tax and sales tax. As Saratoga consists of mostly built-out residential neighborhoods and limited commercial development, its financial structure is expected to show minimal growth in future years. Additional concerns arise from the State Government’s dire situation. While Proposition 1A protects the city from further ongoing unrestrained State takeaways of property tax revenues, under the current economic crisis, the City expects to see shortfalls in unprotected State or County based funding. 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%, thereby 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 regulations related to these programs. This internal control structure is subject to periodic evaluation by the City’s management. 3 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. On occasion, outstanding encumbrances of a material nature are reviewed by the responsible department at year end, and if deemed critical, 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 2010/11 budget focused on maintaining service levels in anticipation of further reductions in the City’s revenue sources due to the weakening economy, and departmental budgets were held or reduced to non-expansive levels. Overall, 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 2010/11 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 2010/11 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, 2010. 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. 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 4 express our appreciation to Robert Edris, Sr. Accountant for his exemplary preparation of this annual financial report, and to our supporting staff members: Glenda Cracknell, Sr. Accountant; Ann Xu, Accountant; Julie Ingraham, and Karen Caselli, 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, 2011 CITY COUNCIL Howard Miller - Mayor Chuck Page – Vice Mayor Jill Hunter Emily Lo Manny Cappello CITY STAFF Dave Anderson – City Manager Ann Sullivan – City Clerk Mary Furey – Finance & Administrative Services Director Christopher Riordan – Interim 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 City AttorneyCity Manager Community Development Department Community Facilities Division 1 Facility Maint. Supervisor 1 Facility Maint. Leadworker Planning Division 1 Senior Planner 2 Assistant Planners 1 Arborist 1 Office Specialist Engineering Division 1 Sr. Civil Engineer 1 Associate Engineer .90 Administrative Analyst .75 Office Specialist Parks Division 1 Manager -Parks 1 Park Maint. Leadworker 1 Park Maint. Specialist 5.90 Park Maint. Workers Finance Division .90 Accountant 3 Accounting Technicians Information Technology Division 1 IT Analyst Administrative Services Department Administrative Services Director Recreation & Facilities Department Recreation & Facilities Director Public Works Department Public Works Director Recreation Services Division 1 Senior Recreation Supervisor 1 Recreation Supervisor Streets and Fleet Division 1 Manager -Streets and Fleet 1 Street Maint. Leadworker 1 Street Maint. Specialist 4 Street Maint. Workers Building Division 1 Building Official 2 Building Inspectors 1 Code Compliance Specialist Citizen Advisory Commissions and Committees Citizens of Saratoga Elected City Council Human Resources Division 1 HR Manager City Manager's Office 1 Administrative Analyst Office of the City Clerk 1 City Clerk .45 Deputy City Clerk 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, 2011, 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 finan cial 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, 2011, 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. As described in the notes to the financial statements, the City has adopted the provisions of GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, effective July 1, 2010. In accordance with Government Auditing Standards, we have also issued our report dated November 15, 2011, 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 fina ncial 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 15, 2011 CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2011 11 INTRODUCTION The following provides a narrative overview and analysis of the fiscal operations during the fiscal year ended June 30, 2011 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 2010/11 FINANCIAL HIGHLIGHTS The City's total net assets were $123,810,427, comprised of $110,015,887 for investment in capital assets, net of depreciation and related debt; $1,867,964 restricted for specific purposes; and $11,926,576 unrestricted net assets (reference pg #23). Total City revenues were $20,603,948 which consists of program revenue of $7,879,348 and general revenues of $12,724,600 (reference pg #24). The City’s expenses were $19,811,272 (reference pg #24). Total Governmental Fund’s fund balances were $13,314,257, consisting of $7,484,064 in the General Fund, $4,475,411 in the Capital Improvement Funds, and $1,354,782 in the Other Governmental Funds (reference pg #25). General Fund revenues were $15,742,117, while General Fund expenditures were $15,616,298 (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, 2011. 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, 2011 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 equipment support services, 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, 2011 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. In past years, the City maintained one such fund, the Community Access Television Fund, investing the funds as trustee for the CATV Foundation Board. In December 2010, all CATV funds on hand were remitted to the Foundation Board as the Board will be managing the savings themselves in the future. 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 additional information on non-major governmental funds including special revenue, debt service, and capital project funds, as well as proprietary internal service fund information 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 $792,676, from $123,017,751 in FY 2009/10 to $123,810,427 in FY 2010/11. The most significant portion of the City's net assets ($110,015,887 or 88.9%) 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. $1,867,964 or 1.5% of the City's net assets are subjected to external restrictions on how they may be used. Of these restricted net assets, $504,125 is restricted for lighting and landscaping assessment districts $513,182 is restricted to environmental programs, and $850,657 is for repayment of long-term debt. The remaining $11,926,576 or 9.6% of the City's net assets are unrestricted and may be used to meet the City's ongoing obligations to citizens and creditors. CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2011 14 Governmental Activities 2011 2010 Assets Current assets 16,825,492$ 16,740,241$ Non-current assets 45,004 58,337 Capital assets 122,620,887 121,920,864 Total Assets 139,491,383 138,719,442 Liabilities Current liabilities 3,123,915 2,794,845 Long-term debt 12,557,041 12,906,846 Total Liabilities 15,680,956 15,701,691 Net Assets Investment in capital assets, net of related debt 110,015,887 108,965,864 Restricted for Special Assessment Funds 504,125 569,132 Restricted for Environmental Services 513,182 563,182 Restricted for Debt Service 850,657 892,593 Unrestricted 11,926,576 12,026,980 Total Net Assets 123,810,427$ 123,017,751$ CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2011 15 Governmental Activities Increase Functions/Programs 2011 2010 (Decrease) Program Revenues Charges for services 6,257,418$ 5,588,740$ 668,678$ Operating grants and contributions 400,692 275,035 125,657 Capital grants and contributions 1,221,238 673,187 548,051 Total Program Revenues 7,879,348 6,536,962 1,342,386 General Revenues Property taxes 8,199,341 8,371,322 (171,981) Sales taxes 990,579 954,574 36,005 Local taxes 632,500 560,040 72,460 Franchise taxes 1,821,131 1,663,657 157,474 Motor vehicle in-lieu 145,782 101,218 44,564 Intergovernmental revenues 773,197 521,852 251,345 Investment earnings 64,598 100,731 (36,133) Other revenues 97,472 91,486 5,986 Total General Revenues 12,724,600 12,364,880 359,720 Expenses General and intergovernmental services 4,367,615 3,729,036 638,579 Public safety 4,457,478 4,338,598 118,880 Public works 6,644,742 6,534,902 109,840 Community services 1,846,393 1,710,769 135,624 Community development services 1,838,918 1,751,348 87,570 Interest on long-term debt (unallocated)656,126 677,026 (20,900) Total Expenses 19,811,272 18,741,679 1,069,593$ Increase / (Decrease) in Net Assets 792,676 160,163 Net Assets, Beginning of Year 123,017,751 122,857,588 Net Assets, End of Year 123,810,427$ 123,017,751$ 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 $1,342,386. The net change in general revenues from the prior year is an increase of $359,720, for a total increase in revenues of $1,702,106. The net change in expenses from the prior year was an increase of $1,069,593. With total program and general revenues for fiscal year 2010/11 at $20,603,948 and total expenses at $19,811,272, the net activity resulted in an increase in Net Assets of $792,676. CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2011 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 2009/10 FY 2010/11 Total Revenues by Category Increases in Revenues Overall, the City of Saratoga saw a considerable increase in revenues during FY 2010/11; however, most of the increases are one-time revenues. For program revenues, the net change from the prior year for governmental activities is an increase of $1,342,386. This increase results from the following: A $668,678 increase in Charge for Services (in which revenues are directly related to program expenses) was a combination of various operational activities. This includes a $50,000 increase in recreation class revenues due to an expanded dance program, $20,000 in general plan update fees, $135,000 in building permits and plan checks, and $100,000 in engineering reviews and inspections due primarily to a 20 unit subdivision, and $173,000 in a Sheriff contract reimbursement from reduced service activities under the Sheriff’s contract. A $125,657 increase in Operating Grants was the result of the completion and reimbursement of several multi-year CDBG program projects during the fiscal year. A $548,051 increase in Capital Grants stems from a federal stimulus grant reimbursement for the Saratoga Avenue resurfacing project, and a VTA grant for the De Anza Trail project. The net change in general revenues from the prior year is an increase of $359,720. The most significant changes contributing to increases include the following: CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2011 17 A $157,474 increase in Franchise Taxes stems primarily from a $130,000 leap in solid waste revenues; a modest $20,000 rise in electric franchise fees also contributed to the increase. Intergovernmental revenues reflect an increase of $251,345 due primarily to the reclassification of Prop 42 Funds to Gas Tax revenues effective with FY 2010/11. Decreases in Revenues Property Taxes decreased by $171,981, reflecting the impact of the economic crisis on property values through foreclosures, the resulting reductions in housing prices, and a slowdown in sales throughout Santa Clara County. Investment Earnings decreased by $36,133 from the prior year due to historically low interest rates, lingering at approximately one-half of one percent (.5%) during the entire fiscal year. CHART OF EXPENSE INCREASE OR (DECREASE) The net change in expenses for Governmental Activities was an increase of $1,069,593. Expenditures with significant events include: Increases in Expenses The $1,069,593 increase in expenditures from the prior year is considerable; however these too are, in large part, one-time occurrences. This increase results from the following: General and Intergovernmental Expenses increased by $638,579 from the prior year. Approximately $340,000 was related to legal, organizational and employment matters, $74,400 in County election fee for a special measure (Measure Q) and three open seats on the City Council, and $128,416 was due to the close out of the KSAR Trust Fund. Other category increases include ongoing operational CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2011 18 costs such as salary and benefit increases for management, administration, and Internal Service Fund staffing, insurance premium increases, and depreciation. Public Safety expenses increased by $118,880 due to an increase in the Sheriff’s Office contract cost. A $109,840 increase in Public Works is the cumulative result of ongoing increases in environmental program fees, park maintenance costs, and salary and benefit increases for Public Works and related Internal Service Fund staff The increase of $135,624 in Community Services expenses stems from Recreation class and excursion costs increasing in line with revenues, and increases in staffing costs in both recreation and facility functions. Overall, Community Development Services expenditures increased by a net of $87,570. While most of the department costs decreased, a $210,748 close out of the Saratoga Housing and Rehabilitation Program (SHARP) as of the end of FY 2010/11 offset the expenditure decreases, leaving a net increase. Decreases in Expenses A $20,900 decrease in Interest on Long Term Debt is the result of ongoing reductions in outstanding principal each year. MAJOR AND OTHER GOVERNMENTAL FUNDS: CHANGE IN FUND BALANCE A summary of the changes in fund balance of the major and other government funds are presented below: Other Capital Governmental General Improvement Funds Total Revenues 15,742,117$ 3,153,243$ 1,806,133$ Total Expenditures 15,616,298 3,703,638 1,622,003 Revenues Over (Under) Expenditures 125,819 (550,395) 184,130 Transfers in 224,550 1,500,865 - Transfers out (876,983) (181,000) (642,432) Net change in fund balances (526,614) 769,470 (458,302) Beginning of year 8,010,678 3,705,941 1,813,084 End of year 7,484,064$ 4,475,411$ 1,354,782$ Major Funds Included in the Major Funds are the General Fund and the Capital Improvement Fund. The Other Governmental funds include twenty-five Lighting and Landscape Assessment Districts, accounted for as one fund in the financials, the Community Development Block Grant Fund, and the Library Bond Debt Service Fund. The net change of the Major and Other Governmental Funds fiscal year transactions was a decrease of $215,446. CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2011 19 General Fund - As shown in the preceding Major Funds table, the net change in the General Fund's Fund Balance was a decrease of $526,614. A net loss resulted from the net of operating revenues coming in just slightly over operating expenditures, and the transfer out of $876,983 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. While revenue levels improved from the prior year, the ongoing economic downturn continues its impact as development activity remains constricted and property taxes have fallen. Capital Improvement Project Fund - As shown in the table above, the net change in the Capital Improvement Fund has an increase of $769,470 which was due to additional federal and state grants and increased park dedication fees. Other Governmental Funds - As shown in the table, there was a net decrease of $458,302 in the Other Governmental Funds, primarily due to transfers out to fund the project in the Capital Improvement Project Fund. GENERAL FUND – BUDGETARY HIGHLIGHTS Changes from the City's General Fund original budget to the final budget are detailed in the Required Supplementary Information Section along with a comparison to actual activity for the year ended. Changes to the City's budget that increase or decrease appropriations in a fund must be approved by a resolution of the City Council. Modifications to the budget that are a realignment of fiscal activities with no impact to the fund's bottom line may be approved by the City Manager. Adopted to Final Budget Fiscal Year Ended June 30, 2011 += Adopted Budget Final Budget Adjustments Budget Expenditures 15,520,629$ 112,437 15,633,066$ Transfers out 605,000$ 271,983 876,983$ The General Fund adopted expenditure budget was $15,520,629 and adopted transfers out was $605,000. At the City’s mid-year review, most General Fund costs were tracking in line with the budget, however an adjustment was requested due to unplanned claims, legal, and organizational expenditures totally $140,000. These costs were somewhat offset by a decrease of $27,000 in election expenditure. General Fund transfers out were increased by $271,983, comprised of funding of $50,000 for the Padero Ct Landside/Erosion Mitigation and funding of $221,983 for the Saratoga Village Pedestrian Enhancement. 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: CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2011 20 The City manages the assets using an asset management system which requires that the Cit y (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. City policy is to achieve an average Pavement Condition Index (PCI) rating of 70 for all streets , at minimum. The City’s overall rating was 76 with 83% of streets rated as Excellent to Very Good, 14% of streets are rated as "Good", 3% of streets rated ―Poor‖, and 0% of streets are rated as "Very Poor". The City spent $1,847,221 to maintain and preserve eligible infrastructure assets. For more detailed information on Capital Assets activity, please refer to Note 5 in the section entitled "Notes to the Basic Financial Statements" and "Required Supplementary Section". The latest assessment study was contracted during the fall of 2010. As of June 30, 2011, the City had $122,620,887 invested in a variety of capital assets as reflected in the following schedule, which represents an increase of $700,023 or less than a 1% increase from the prior year. Governmental Activities 2011 2010 Land 13,135,756$ 12,984,078$ Building and structures 17,407,842 17,941,650 Machinery and equipment 690,356 680,366 Infrastructure 85,138,639 85,871,410 Construction in progress 6,248,294 4,443,360 Total Capital Assets, Net of Depreciation 122,620,887$ 121,920,864$ Capital Assets at Year End Net of Depreciation The following reconciliation summarizes the changes in Capital Assets. Balance Balance July 1, 2010 Additions Reclassification June 30, 2011 Land 12,984,078$ 151,678$ -$ 13,135,756$ Building and structures 23,412,763 49,975 - 23,462,738 Machinery and equipment 2,281,844 205,501 - 2,487,345 Infrastructure 104,425,507 478,406 104,903,913 Construction in progress 4,443,360 2,713,511 (908,577) 6,248,294 Depreciation (25,626,688) (1,990,471) - (27,617,159) Total Capital Assets, Net of Depreciation 121,920,864$ 1,608,600$ (908,577)$ 122,620,887$ Changes in Capital Assets CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2011 21 Major capital projects in progress during fiscal year 2010/11 included the following expenditures: Saratoga-Sunnyvale Road ADA Ramp - $105,040 HVAC System Upgrade - $117,015 Saratoga Avenue Resurfacing - $482,487 ADA Signal Crossing - $138,691 Highway 9 Traffic Safety - $242,544 Village Sidewalk, Curb, and Gutters - $405,692 UPRR/De Anza Trail - $456,193 Additional information on Capital Assets is included in Note 5 to the financial statements. DEBT ADMINISTRATION The net change in outstanding debt for the City of Saratoga is a decreas e of $323,822. During the fiscal year, the City did not enter into any new debt structures. Governmental Activities 2011 2010 2001 General Obligation Bond 12,605,000$ 12,955,000$ Compensated absences 719,846 693,668 Total Outstanding Debt 13,324,846$ 13,648,668$ Outstanding Long-Term Obligation at Year End The current portions of long-term debt ($370,000 and $350,000 for 2011 and 2010, 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 $350,000 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 $26,178 due to an increase in unused compensated time off. An estimate of $397,805 is the current portion which is expected to be used in the next fiscal year. Additional information on outstanding obligations can be found in Note 6 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. 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 - CITY OF SARATOGA MANAGEMENT’S DISCUSSION AND ANALYSIS FOR THE YEAR ENDED JUNE 30, 2011 22 Cupertino, Monte Sereno and Los Altos Hills. These cities, referred to as "no/low tax cities", were restored a proportionate share of the property taxes which they lost to special legislation in 1989. The legislation was effective with FY 2006/07 and increases the amount of property taxes allocated to the City as a result of setting the TEA (Tax Equity Allocation) formula to the 7% minimum allocation. However, the legislation requires the cities to continue the Counties ERAF rate on the funds so the change would have no effect on the State’s budget. This change 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 BASIC FINANCIAL STATEMENTS CITY OF SARATOGA STATEMENT OF NET ASSETS JUNE 30, 2011 23 Primary Government Governmental Activities ASSETS Current Assets: Cash and investments 15,750,282$ Receivables: Accounts 1,102,828 Interest 17,386 Total Current Assets 16,870,496 Noncurrent Assets: Capital Assets: Non-depreciable 68,539,669 Depreciable, net 54,081,218 Total Capital Assets 122,620,887 Total Noncurrent Assets 122,620,887 Total Assets 139,491,383 LIABILITIES Current Liabilities: Accounts payable 1,005,812 Accrued payroll 184,939 Other payable 96,734 Interest payable 271,940 Deposits payable 782,594 Claims payable 14,091 Long-term obligations - due within one year 767,805 Total Current Liabilities 3,123,915 Noncurrent Liabilities: Long-term obligations - due in more than one year 12,557,041 Total liabilities 15,680,956 Net Assets Investment in capital assets, net of related debt 110,015,887 Restricted for: Special assessment funds 504,125 Environmental funds 513,182 Debt service 850,657 Total Restricted 1,867,964 Unrestricted 11,926,576 Total Net Assets 123,810,427$ The accompanying notes are an integral part of these financial statements CITY OF SARATOGA STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS JUNE 30, 2011 24 Net (Expense) Revenue and Changes in Program Revenues Net Assets Primary Operating Capital Government Charges for Grants and Grants and Governmental Functions/Programs Expenses Services Contributions Contributions Total Activities Primary Government: Governmental Activities: General and intergovtl services 4,367,615$ 170,506$ -$ -$ 170,506$ (4,197,109)$ Public safety 4,457,478 561,253 100,000 - 661,253 (3,796,225) Public works 6,644,742 2,771,296 - 1,221,238 3,992,534 (2,652,208) Community services 1,846,393 1,020,268 - - 1,020,268 (826,125) Community development services 1,838,918 1,734,095 300,692 - 2,034,787 195,869 Interest on long-term debt (unall.)656,126 - - - - (656,126) Total 19,811,272$ 6,257,418$ 400,692$ 1,221,238$ 7,879,348$ (11,931,924)$ General Revenues: Taxes Property taxes 8,199,341 Sales taxes 990,579 Local taxes 632,500 Franchise taxes 1,821,131 Motor vehicle-in-lieu 145,782 Total taxes 11,789,333 Intergovernmental 773,197 Investment earnings 64,598 Other revenues 97,472 Total General Revenues 12,724,600 Change in Net Assets 792,676 Net Assets - Beginning of Year 123,017,751 Net Assets - End of Year 123,810,427$ The accompanying notes are an integral part of these financial statements CITY OF SARATOGA GOVERNMENTAL FUNDS - BALANCE SHEET JUNE 30, 2011 25 Other Total Capital Governmental Governmental General Improvement Funds Funds ASSETS Cash and investments 8,388,367$ 4,430,765$ 1,475,712$ 14,294,844$ Receivables: Accounts 511,425 438,758 54,767 1,004,950 Interest 16,252 - 1,134 17,386 Total assets 8,916,044$ 4,869,523$ 1,531,613$ 15,317,180$ LIABILITIES AND FUND BALANCES Liabilities: Accounts payable 382,058$ 393,288$ 176,831$ 952,177$ Accrued payroll 170,582 824 - 171,406 Deposits payable 782,594 - - 782,594 Other payable 96,734 - - 96,734 Deferred revenue 12 - - 12 Total liabilities 1,431,980 394,112 176,831 2,002,923 Fund Balances: Restricted: Environmental services 513,182 - - 513,182 Special assessment funds - - 504,125 504,125 Debt service - - 850,657 850,657 Committed: Capital project funds - 4,475,411 - 4,475,411 Hillside stability 500,000 - - 500,000 Assigned: Capital projects 500,000 - - 500,000 Carryforwards 326,900 - - 326,900 Unassigned: Operations 2,903,522 - - 2,903,522 Economic uncertainy 1,500,000 - - 1,500,000 Development services 632,380 - - 632,380 Uncollected deposits 44,791 - - 44,791 Other unassigned 563,289 - - 563,289 Total fund balances 7,484,064 4,475,411 1,354,782 13,314,257 Total liabilities and fund balances 8,916,044$ 4,869,523$ 1,531,613$ 15,317,180$ 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, 2011 26 Total Fund Balances - Total Governmental Funds 13,314,257$ 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 assets 68,539,669 Depreciable capital assets, net 53,930,655 Total Capital Assets 122,470,324 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.(271,940) 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 assets 1,524,742 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.97,890 Long-term obligations 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 (12,605,000) Compensated absences (719,846) Total Long-Term Obligations (13,324,846) Net Assets of Governmental Activities 123,810,427$ 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, 2011 27 Other Total Capital Governmental Governmental General Improvement Funds Funds REVENUES: Property taxes 8,018,809$ -$ 180,532$ 8,199,341$ Special assessments 7,850 1,246,686 1,254,536 Sales taxes 990,579 - - 990,579 Other local taxes 632,500 - - 632,500 Licenses & permits 1,090,351 859,291 - 1,949,642 Fines & forfeiture 284,109 1,390 - 285,499 Intergovernmental - Federal - 1,032,750 - 1,032,750 Intergovernmental - State 348,126 1,132,089 - 1,480,215 Intergovernmental - Other 36,621 - 300,692 337,313 Franchise fees 1,821,131 - - 1,821,131 Use of money and property 502,341 41,411 5,842 549,594 Other revenue 2,009,700 86,312 72,381 2,168,393 Total revenues 15,742,117 3,153,243 1,806,133 20,701,493 EXPENDITURES: Current: General and intergovernmental services 3,524,183 - - 3,524,183 Public safety 4,467,738 - - 4,467,738 Public works 4,320,463 - 396,379 4,716,842 Community services 1,322,152 - - 1,322,152 Community development services 1,981,762 - 210,748 2,192,510 Capital outlay - 3,703,638 - 3,703,638 Debt service: Principal - - 350,000 350,000 Interest and fiscal charges - - 664,876 664,876 Total expenditures 15,616,298 3,703,638 1,622,003 20,941,939 REVENUES OVER (UNDER) EXPENDITURES 125,819 (550,395) 184,130 (240,446) OTHER FINANCING SOURCES (USES): Transfers in 224,550 1,500,865 - 1,725,415 Transfers out (876,983) (181,000) (642,432) (1,700,415) Total other financing sources (uses)(652,433) 1,319,865 (642,432) 25,000 Net change in fund balances (526,614) 769,470 (458,302) (215,446) FUND BALANCES: Beginning of year 8,010,678 3,705,941 1,813,084 13,529,703 End of year 7,484,064$ 4,475,411$ 1,354,782$ 13,314,257$ 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, 2011 28 Net Change in Fund Balances - Total Governmental Funds (215,446)$ 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.2,690,494 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.(1,849,495) 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.(130,465) Certain revenues were not recorded or 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 Assess under the full accrual basis.(34,984) 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 (26,178) 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 repayments 350,000 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.8,750 Change in Net Assets of Governmental Activities 792,676$ The accompanying notes are an integral part of these financial statements CITY OF SARATOGA STATEMENT OF NET ASSETS PROPRIETARY FUNDS JUNE 30, 2011 29 Governmental Activities - Internal Service Funds ASSETS Current assets: Cash and investments 1,455,438$ Total current assets 1,455,438 Noncurrent assets: Capital assets: Machinery and equipment 714,059 Less: accumulated depreciation (563,496) Total capital assets (net of accumulated depreciation) 150,563 Total assets 1,606,001 LIABILITIES Liabilities: Current assets: Accounts payable 53,635 Accrued payroll 13,533 Other payables 14,091 Total current liabilities 81,259 NET ASSETS Investment in capital assets 150,563 Unrestricted 1,374,179 Total net assets 1,524,742$ 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, 2011 30 Governmental Activities - Internal Service Funds Operating revenues: Charges for services 1,920,001$ Other operating revenues 98,117 Total operating revenues 2,018,118 Operating expenses: Cost of services 994,071 Administration 988,536 Depreciation 140,976 Total operating expenses 2,123,583 Operating income (loss)(105,465) Transfers out (25,000) Change in net assets (130,465) Total net assets - beginning 1,655,207 Total net assets - ending 1,524,742$ 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, 2011 31 Governmental Activities - Internal Service Funds Cash flows from operating activities: Receipts from customers and users 2,023,496$ Payments to suppliers (1,238,910) Payments to employees (802,718) Net cash provided (used) by operating activities (18,132) Cash flows from noncapital financing activities: Transfers out (25,000) Net cash used in nonoperating activities (25,000) Net increase in cash and cash equivalents (43,132) Cash and cash equivalents, beginning of year 1,498,570 Cash and cash equivalents, ending of year 1,455,438$ Reconciliation of operating income to net cash provided by operating activities: Operating income (loss)(105,465)$ Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation 140,976 Change in operating assets and liabilities: Decrease in accounts receivables 5,378 Increase in accounts payable 6,582 (Decrease) in claims payable (40,510) (Decrease) in accured payroll (25,093) Net cash provided (used) by operating activities (18,132)$ The accompanying notes are an integral part of these financial statements CITY OF SARATOGA STATEMENT OF FIDUCIARY NET ASSETS FIDUCIARY FUNDS JUNE 30, 2011 32 Agency Funds ASSETS Cash and investments -$ Receivables: Accounts - Interest - Total assets -$ LIABILITIES Deposits payable -$ The administration of the Saratoga Community Access TV (KSAR) fund was transferred back to the outside agency KSAR during fiscal year 2010/11. CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 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 30,195 at June 30, 2011. 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, 2011, 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 23 employees. Major projects may be contracted out to reduce costs. Community Development - Zoning administration, plan checking and advance planning services are provided by 14 employees. Culture, Recreation and Community Support services are provided by a total of 11 employees. General Government services are provided by a total of 13 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, 2011 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. 0 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, 2011 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 45 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, 2011 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, 2011 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), are 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, 2010. This condition assessment was performed in the fall of 2010 with the final report presented in March, 2011. 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, 2011 38 The following conditions were defined: Condition Rating Excellent 80 - 100 Very Good 70 - 79 Good 50 - 69 Poor 25 - 49 Very Poor 0 - 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. An 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 inte rest 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, 2011 39 rather than currently available financial resources. Only the amounts which become due at June 30 are reported in the fund financial 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 February 2009, the Governmental Accounting Standards Board (GASB) issued Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. This standard left unchanged the total amount reported as fund balance, but substantially altered the categories and terminology used to describe its components. The new categories and terminology focuses, not on financial resources available for appropriation, but on the extent to which the government is bound to honor constraints on the specific purpose for which the amounts in the fund can be spent. The components of fund balance are now categorized as follows: ―non-spendable fund balance‖, resources that are inherently non-spendable from the vantage point of the current period; ―restricted fund balance‖, resources that are subject to external enforceable legal restrictions; ―committed fund balance‖, resources whose use is constrained by limitations that the government imposes upon itself at its highest level of decision making and remain binding unless removed in the same manner; ―assigned fund balance‖, resources that reflects a government’s intended use of resources, such intent would have to be established at either the highest level of decision making, by a body, or an official designated for that purpose; and ―unassigned fund balance‖, net resources in excess of what can properly be classified in one of the other four categories. Currently, the City’s fund balance reserves fall into one of the four spendable categories; restricted, committed, assigned, or unassigned fund balance. The City maintains three restricted fund balances constrained by external legal restrictions that can be spent only for the stipulated purposes. These fund balances are: Special Assessments Fund Balance – collectively represents year-end fund balances of twenty- four landscape and/or lighting assessment districts which use is restricted to the individual district. Environmental Services Fund Balance – represents funds collected from surcharges on garbage bills specifically for use as supplemental funding of Environmental Se rvices 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. These funds are used to supplement environmental expenditures by using $50,000 per year. CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 40 Debt Service Fund Balance – represents funding collected for and use in the City’s general obligation bond debt originally issued in 2001. The committed category, in which fund balance is constrained by limitations that the government imposes upon itself at its highest level of decision making and remain binding unless removed in the same manner, includes the following: Capital Projects Fund Balance – represents collective funding appropriated for use in capital improvement projects. Capital Improvement funding is assigned to one of the following program funds: Streets, Park & Trail, Facility, or Administration. Hillside Stability - funding set aside for use either in emergency repairs or high-cost and non- routine mitigation of hillside or landslide projects. In the assigned category, fund balance reflects an intended use as established by Council. This category includes the following reserves: Capital Project - represents General Fund funding set aside for capital projects but not yet committed to a specific improvement project. Carryforward – represents either prior-year funds designated for one-time operational activities not yet completed by year-end, or to carryforward prior-year funding for specific activities as directed by Council. Carryover funds are appropriated for use in the following fiscal year. The Unassigned Fund Balance category represents funding which may be held for specific types of uses or stabilization purposes, but is not yet directed to be used for a specific purpose. Operations – provides funds for working capital cash flow. Council policy set aside $2,000,000 on July 1, 1999, to be increased annually by an amount equal to the interest the City earned on the equivalent amount of cash and investments. As of June 30, 2011 this fund balance has grown to $2,903,522. This fund balance is not appropriated for use. Economic Uncertainty - Council policy is to maintain $1,500,000 for use by Council direction in case of disasters, emergencies, and economic downturns. Development Services – represents funds collected for development services to be used to supplement funding for zoning administration, inspection services, and development regulation programs during periods where expenditures exceed revenues. Uncollected Deposits – represents funding to offset development applicant receivables for outstanding balances owed to the City. The balance is adjusted at year end based on outstanding deposit levels. Other Unassigned Fund Balance - represents funding not yet appropriated or assigned for use. Council policy is to maintain a minimum of $500,000 in unassigned funds as a buffer for unplanned expenditures or revenue shortfalls. CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 41 Spending Order Policy – When expenditures are incurred for purposes for which both restricted and unrestricted fund balance is available, the City considers restricted funds to be spent first. When expenditures are incurred for which committed, assigned, or unassigned fund balances are available, the City considers amounts to be spent first out of committed funds, then assigned funds, and finally unassigned funds, as needed, unless the City Council has directed otherwise. 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 include 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. 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 15, 2011, the date which the financial statements were available to be issued. CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 42 P. New GASB Pronouncements GASB Statement No. 60 - In November, 2010, GASB issued Statement No. 60, Accounting and Financial Reporting for Service Concession Arrangements. The objective of this Statement is to improve financial reporting by addressing issues related to service concession arrangements, which are a type of public-private or public-public partnership. This pronouncement is effective for periods beginning after December 15, 2011. The City does not believe there will be a significant financial statement effect related to this Statement. GASB Statement No. 61 – In November, 2010, GASB issued Statement No. 61, The Financial Reporting Entity: Omnibus—an amendment of GASB Statements No. 14 and No. 34. The objective of this Statement is to improve financial reporting for a governmental financial reporting entity. The requirements of Statement No. 14, The Financial Reporting Entity, and the related financial reporting requirements of Statement No. 34, Basic Financial Statements—and Management’s Discussion and Analysis—for State and Local Governments, were amended to better meet user needs and to address reporting entity issues that have arisen since the issuance of those Statements. This pronouncement is effective for periods beginning after June 15, 2012. The City does not believe there will be a significant financial statement effect related to this Statement. GASB Statement No. 62 – In December, 2010, GASB issued Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements. The objective of this Statement is to incorporate into the GASB’s authoritative literature certain accounting and financial reporting guidance that is included in the following pronouncements issued on or before November 30, 1989, which does not conflict with or contradict GASB pronouncements: 1. Financial Accounting Standards Board (FASB) Statements and Interpretations 2. Accounting Principles Board Opinions 3. Accounting Research Bulletins of the American Institute of Certified Public Accountants’ (AICPA) Committee on Accounting Procedure. This pronouncement is effective for periods beginning after December 15, 2011. The City does not believe there will be a significant financial statement effect related to this Statement. Statement No. 63 - In June, 2011, GASB issued Statement No. 63, Financial Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position, The objective of this Statement is to improve financial reporting by providing guidance and standardizing the presentation of deferred outflows of resources and deferred inflows of resources and their effect on a government’s net positions. This pronouncement is effective for financial statements for periods beginning after December 15, 2011. The City has determined this Statement change will not have an effect on the financial statements. Statement No. 64 - In June, 2011, GASB issued Statement No. 64, Derivative Instruments: Application of Hedge Accounting Termination Provisions—an amendment of GASB Statement No. 53. The objective of this Statement is to enhance comparability and improve financial reporting by clarifying the circumstances in which hedge accounting should continue when a swap counterparty or a swap counterparty’s credit support provider is replaced. This pronouncement is effective for financial statements for periods beginning after June 15, 2011. The City has determined this Statement change will not have an effect on the financial statements. CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 43 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, 2011: Statement of Net Assets Governmental Fiduciary Activities Fund Total Cash and investments 15,750,281$ -$ 15,750,281$ The City's Cash and Investments at June 30, 2011, in more detail: Cash and cash equivalents: Petty cash 1,450$ Demand deposits 118,026 Total Cash and Cash Equivalents 119,476 Investments: Local Agency Investment Fund (LAIF)15,630,805 Total Cash and Investments 15,750,281$ A. Cash Deposits The carrying amounts of the City's cash deposits were $118,028 at June 30, 2011. Bank balances before reconciling items were $841,140 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 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. CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 44 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, 2011, 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. The approved investments policy is listed on the LAIR website, located at http://www.treasurer.ca.gov/pmia-laif/ As of June 30, 2011, the City had $15,606,205 invested in LAIF. The LAIF fair value factor of 1.001576470 was used to calculate the fair value of the investments in LAIF. CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 45 D. Risk Disclosures Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an investment. Generally, the longer the term of an investment’s maturity, the greater the sensitivity to changes in market interest rates. Although the City’s investment policy allows for a broad range of investment instruments with varying terms of maturity, investments are limited to the Local Agency Investment Fund (LAIF) which is managed by the State Treasurer Office and overseen by the Pooled Money Investment Board, the State Treasurer investment committee, and a Local Agency Advisory Board. Included in LAIF’s investment portfolio are U.S. Treasuries, Federal Agency obligations, time deposits, negotiable certificates of deposits, commercial paper, corporate bonds, and security loans. Funds are available for withdrawal on demand, and are recorded on an amortized cost basis. At June 30, 2011, these investments had a weighted average maturity of 203 days. The City had the following invested in LAIF: Investment Maturities in Years Fair Less Than Value One Year State of California - Local Agency Investment Fund (LAIF)15,630,805$ 15,630,805$ Credit Risk As of June 30, 2011, 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, 2011. NOTE 3 - LOANS RECEIVABLE The City had the following loans receivable as of June 30, 2011: Balance Balance July 1, 2010 Additions Deletions June 30, 2011 Housing Rehabilitation Loan Program 71,670$ -$ (71,670)$ -$ CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 46 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. The SHARP program was closed on the City of Saratoga books at fiscal year -end. The program is to be transferred back to Santa Clara County along with outstanding loan balances for future administration. NOTE 4 - FUND FINANCIAL STATEMENTS INTERFUND TRANSACTIONS Transfers In/Out Transfers for the year ended June 30, 2011 were as follows: Transfer in Transfer out Amount General Fund Community Development Block Grant 43,550$ Capital Improvement Fund 181,000 224,550 Capital Improvement Fund General Fund 876,983 Community Development Block Grant 247,522 Liability / Risk Management Fund 25,000 Library Capital Improvement Fund 351,360 1,500,865 Total 1,725,415$ The General Fund received monies from the Community Development Block Grant fund for the Saratoga Area Senior Coordination Council – Adult Day Care Program of $28,550 and for general administration of $15,000; from the CIP Parks fund for the repayment of a loan of $75,000; and from the Gas Tax fund for general administration of $106,000. The Capital Improvement Fund received monies from the General Fund for the Saratoga Village Enhancement project of $221,983; for various CIP Facilities projects of $335,000; for various CIP Streets project of $125,000; for various CIP Parks & Trials project of $145,000; and Padero Erosion Mitigation project of $50,000. The Capital Improvement Fund received monies from the Community Development Block Grant fund for various ADA projects of $247,522. The Liability / Risk Management Fund transferred monies for CIP Parks & Trails project of $25,000. The Liability Capital Improvement Fund was closed and the remaining balance of $351,360 was transferred into the Capital Improvement Fund. CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 47 NOTE 5 - CAPITAL ASSETS Capital assets activity for the year ended June 30, 2011, consisted of the following: Primary Government Balance Balance July 1, 2010 Additions Retirements Reclassifications June 30, 2011 Governmental activities: Capital assets, not being depreciated: Land and land improvements 12,984,078$ -$ -$ 151,678$ 13,135,756$ Construction in progress 4,443,360 2,713,511 (23,017) (885,560) 6,248,294 Infrastructure: Street pavement system 49,155,619 - - - 49,155,619 Total capital assets, not being depreciated 66,583,057 2,713,511 (23,017) (733,882) 68,539,669 Capital assets, being depreciated: Buildings and structures 23,412,763 - - 49,975 23,462,738 Machinery and equipment Governmental funds 1,567,785 - - 205,501 1,773,286 Internal service funds 714,059 - - - 714,059 Infrastructure: Bridges 1,563,654 - - - 1,563,654 Signs and lights 1,820,585 - - - 1,820,585 Drainage system 39,912,821 - - 123,132 40,035,953 Sidewalks 11,972,828 - - 355,274 12,328,102 Total capital assets, being depreciated 80,964,495 - - 733,882 81,698,377 Accumulated depreciation: Buildings and structures (5,471,113) (583,783) - - (6,054,896) Machinery and equipment Governmental funds (1,178,958) (54,535) - - (1,233,493) Internal service funds (422,520) (140,976) - - (563,496) Infrastructure: Bridges (973,202) (27,312) - - (1,000,514) Signs and lights (792,105) (68,565) - - (860,670) Drainage system (12,329,303) (799,488) - - (13,128,791) Sidewalks (4,459,487) (315,812) - - (4,775,299) Total accumulated depreciation (25,626,688) (1,990,471) - - (27,617,159) Total capital assets, being depreciated, net 55,337,807 (1,990,471) - 733,882 54,081,218 Governmental activities capital assets, net 121,920,864$ 723,040$ (23,017)$ -$ 122,620,887$ Depreciation expense, including the amount related to the internal service funds, was charged in the following functions in the Statement of Activities: General Government 1,210,436$ Public Works 620,975 Community Services 18,084 Community Development - Internal Service Funds 140,976 Total Depreciation Expense 1,990,471$ CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 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 6 – LONG-TERM OBLIGATIONS A summary of the City's long-term obligations transactions for the year ended June 30, 2011, is presented below: Classification Balance Balance Due Within Due In More Description July 1, 20010 Additions Retirements June 30, 2011 One Year Than One Year General Obligation Bonds: 2001 Library Bonds 12,955,000$ -$ (350,000)$ 12,605,000$ 370,000$ 12,235,000$ Compensated absences 693,668 452,912 (426,734) 719,846 397,805 322,041 Total 13,648,668$ 452,912$ (776,734)$ 13,324,846$ 767,805$ 12,557,041$ 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, 2011, the outstanding balance of the bonds was $12,605,000. The annual debt service requirements on these bonds are as follows: CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 49 Compensated Absences The City's liability for vested and unpaid compensated absences (accrued vacation and sick pay) has been accrued and amounts to $719,846 at June 30, 2011. The compensated absences liability will generally be liquidated through the General Fund. NOTE 7 - RISK MANAGEMENT The City participates in the two 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, 2011, the City contributed $231,831 for current year coverage and received no refund of prior year excess contributions. 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, 2011, the City contributed $168,332 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. 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 $14,091 reported at June 30, 2011, are based on the requirements of GASB Statement No. 10, which requires that a liability for claims be reported if information prior to the issuance of the basic financial statements indicates that it is probable that a liability has incurred at the date of the basic financial statements and the amount of the los s can be reasonably estimated. Changes in the claims payable amounts were as follows: The General Fund has been used in the prior years to liquidate the liability for claims and judgments. Year Ended Year Ended June 30, 2011 June 30, 2010 Claims payable, beginning of year 54,601$ 83,216$ Fiscal year claims and changes in estimates 14,091 49,735 Claims payments (54,601) (78,350) Claims payable, end of year 14,091$ 54,601$ CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 50 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, 2010 (most recent available): Plan Comp Shared Corporation Risk Pool Total Assets 50,436,628$ 3,484,609$ Total Liabilities 18,640,521 632,327 Net Assets 31,796,107$ 2,852,282$ Total Revenues 11,285,711$ 607,510$ Total Expenses 10,844,577 605,441 Net Increase in Net Assets 441,134$ 2,069$ Audited financial information for each risk pool may be obtained from ABAG at P.O. Box 2089, Oakland, California 94604-2089. NOTE 8 - 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 (11.863 percent for FY 2010/11). 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 $341,801 for the year ended June 30, 2011. Annual Pension Cost - For fiscal year 2010/11, the City's annual pension cost was $579,256. The required contribution was determined as part of the June 30, 2007, actuarial valuation using the entry age normal actuarial cost method. The actuarial assumptions included (a) 7.75 percent (7.75%) investment rate of return (net of administrative expenses), (b) projected annual salary increases ranging from 3.25 percent to 14.45 percent for miscellaneous employees depending on age, service, and type of CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 51 employment, and (c) 3.25 percent per year payroll growth adjustments. Both (a) and (b) included an inflation component of 3.00 percent. The actuarial value of CalPERS assets was determined using techniques that smooth the effects of short-term volatility in the market value of investments over a three- year period. CalPERS unfunded actuarial accrued liability (or surplus) is amortized as a level percentage of projected payroll on a closed basis. The amortization period at June 30, 2008, was 30 years for miscellaneous employees for prior and current service unfunded liability. THREE-YEAR ANNUAL PENSION COSTS TREND INFORMATION FOR CALPERS Annual Net Fiscal Pension Cost APC Pension Year (APC)Contributed Obligation 2009 559,971$ 100%-$ 2010 564,855 100%-$ 2011 579,256 100%-$ 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): Entry Age Unfunded UAAL Normal Actuarial Liability (UAAL)Annual as a Valuation Accrued Value (Excess Funded Covered Percentage Date Liability of Assets Assets)Status Payroll of Payroll 6/30/2008 2,780,280,768$ 2,547,323,278$ 232,957,490$ 91.6%688,606,681$ 33.8% 6/30/2009 3,104,798,222 2,758,511,101 346,287,121 88.9%742,981,488 46.6% 6/30/2010 3,309,064,934 2,946,408,106 362,656,828 88.9%748,401,352 48.5% NOTE 9 - NET ASSETS A. Investment in Capital Assets, Net of Related Debt As of June 30, 2011, the investment in capital assets, net of related debt consisted of the following: Capital Assets, Net 122,620,887$ 2001 General Obligation Library Bonds (12,605,000) Investment in Capital Assets, Net of Related Debt 110,015,887$ B. Restricted Net Assets CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 52 As of June 30, 2011, the restricted net assets consisted of the following: Special Debt Environmental Assessments Service Services Total Restricted Net Assets 504,125$ 850,657$ 513,182$ 1,867,964$ Restricted For NOTE 10 - JOINT POWERS AGREEMENTS The City is a member of several Joint Power Agreements, as follows: The Santa Clara County Valley Transportation Authority (VTA) consists of various cities in the San Francisco Bay area. .The Transportation 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 West Valley Solid Waste Management Joint Powers Authority consists of the west valley cities of Campbell, Los Gatos, Monte Sereno, and Saratoga. The JPA was formed to coordinate efforts in carrying out solid waste collection and disposal activities, and in meeting the mandates of AB939, the States’ Integrated Waste Management Act. The Silicon Valley Regional Interoperability Authority (SVRIA) consists of Silicon Valley agencies formed to coordinate the design and implementation of an interoperable public safety communication system. The Santa Clara County Library System JPA consists of various member agencies as a policy making and governing body of the County’s library system. 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. NOTE 11 - EXCESS EXPENDITURES OVER APPROPRIATIONS There were no excess of expenditures over appropriations in individual funds during fiscal year 2010/11. CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 53 NOTE 12 - 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, 2011 54 C. Commitments The City had several outstanding contracts or planned construction projects as of June 30, 2011. These projects are evidenced by contractual commitments with contractors and include: Original Commitment Vendor commitment Remaining Allied Engineering Company 17,820$ 12,474$ BFK Engineers 507,562 264,900 Columbia Electric, Inc 42,405 9,380 CRW Industries 45,157 17,679 David Gates & Associates 3,677 31 Duran & Venables, Inc 3,000 3,000 Ekim Painting - North, Inc 5,400 5,400 Fehr Engineering Company, Inc 14,700 6,150 Fresh Paint 5,935 4,863 G Bortolotto & Company Inc 168,439 19,481 Guerra Construction Group 1,143,411 746,465 Mark Thomas & Company 8,880 8,880 O'Grady Paving, Inc 497,156 154,729 Our City Forest 35,000 27,140 Peelle Technologies, Inc 120,876 87,181 Playgrounds Unlimited 41,795 41,795 Precision Concrete Cutting Inc 2,500 2,500 Premier West Interiors, Inc. 5,923 5,923 Pro Door & Glass 17,782 17,782 Real Goods Energy Tech 119,340 119,340 Riley's Striping, Inc 53,242 2,618 Robert A Bothman, Inc 919,710 555,332 Ross Recreation Equipment Co 18,700 1,487 Santa Clara Valley Water 50,000 12,963 Schaaf & Wheeler 2,019 2,019 Steve Benzing Architect 14,898 6,975 Structural Engineers, Inc 75,750 922 Testing Engineers 34,086 19,111 1,966,386$ 1,098,703$ As of June 30, 2011, 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. CITY OF SARATOGA NOTES TO FINANCIAL STATEMENTS JUNE 30, 2011 55 NOTE 13 – SUBSEQUENT EVENTS 2001 General Obligation Bond – At year-end, the City was in the process of refunding the outstanding General Obligation Bond (GO Bond) to take advantage of low interest rates. A competitive sale offering took place on June 29, 2011, and the bond sale was completed in July. The actual refunding redemption of the bonds took place on August 1, 2011; the first day the bonds could be redeemed without penalty. The refunding will provide savings to Saratoga property owners through reduced tax levy assessments over the next twenty years. Saratoga Housing And Rehabilitation Program (SHARP) – In past years, the City of Saratoga has administered a federally funded loan program, known as SHARP, to provide no/low-interest loans to low- income home owners for approved home improvements. The majority of the program was transferred to the County in 2006. Staff has not been successful in awarding rehabilitation loans to City property owners since that time. Therefore, the City’s program was terminated to allow the funds to be managed at the County level. City and County approval was obtained in April, 2011, the fund was closed out at year- end, and the fund transfer will be completed in early FY 2011/12. 56 This page is intentionally blank. REQUIRED SUPPLEMENTARY INFORMATION CITY OF SARATOGA REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED JUNE 30, 2011 57 NOTE 1 - BUDGETARY INFORMATION The following is the budget comparison schedules for General Fund. Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Property taxes 8,014,600$ 8,014,600$ 8,018,809$ 4,209$ Special assessments 8,000 8,000 7,850 (150) Sales taxes 910,000 910,000 990,579 80,579 Other local taxes 545,000 545,000 632,500 87,500 Licenses & permits 960,900 960,900 1,090,351 129,451 Fines & forfeitures 303,000 303,000 284,109 (18,891) Intergovermental - state 230,000 230,000 348,126 118,126 Intergovermental - other 37,000 37,000 36,621 (379) Franchise fees 1,652,000 1,652,000 1,821,131 169,131 Use of money & property 526,320 496,320 502,341 6,021 Other revenue 1,880,635 1,928,635 2,009,700 81,065 Total revenues 15,067,455 15,085,455 15,742,117 656,662 EXPENDITURES: Current: General and intergovernmental services 3,304,898 3,417,335 3,524,183 (106,848) Public safety 4,523,431 4,523,431 4,467,738 55,693 Public works 4,297,380 4,297,380 4,320,463 (23,083) Community services 1,327,039 1,327,039 1,322,152 4,887 Community development services 2,067,881 2,067,881 1,981,762 86,119 Total expenditures 15,520,629 15,633,066 15,616,298 16,768 REVENUES OVER (UNDER) EXPENDITURES (453,174) (547,611) 125,819 673,430 OTHER FINANCING SOURCES (USES): Transfers in 249,550 224,550 224,550 - Transfers out (605,000) (876,983) (876,983) - Total other financing sources (uses)(355,450) (652,433) (652,433) - Net change in fund balances (808,624)$ (1,200,044)$ (526,614) 673,430$ FUND BALANCES: Beginning of year 8,010,678 End of year 7,484,064$ 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 CITY OF SARATOGA REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED JUNE 30, 2011 58 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, 2011 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 with the final report received March 30, 2011. 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, 23.5 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 assessment study was conducted during November, 2010. CITY OF SARATOGA REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED JUNE 30, 2011 60 The following conditions were defined: Condition Rating Excellent 80 - 100 Very Good 70 - 79 Good 50 - 69 Poor 25 - 49 Very Poor 0 - 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, 2011, the City's street system was rated at a PCI index of 76 on the average with the detail condition as follows: Percent of Condition Streets Excellent 8% Very Good 75% Good 14% Poor 3% Very Poor 0% The City expended $1,847,221 on street maintenance for the year ended June 30, 2011. 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 $2,000,000 projected budget each year for the years ending June 30, 2011 and 2012.) A schedule of estimated annual amount calculated to maintain and preserve its streets at the current level compared to actual expenditures for street maintenance for the last ten years is presented below: Funded By Fiscal Actual Other Gas Tax Total PCI Year Budget Expenditures Sources Fund Funded Index 2001-02 3,529,420$ 2,214,717$ 1,631,855$ 582,862$ 2,214,717$ - 2002-03 2,207,922 1,553,674 974,514 579,160 1,553,674 - 2003-04 1,961,844 1,489,667 907,327 582,340 1,489,667 - 2004-05 1,800,000 2,609,648 1,478,216 1,131,432 2,609,648 70 2005-06 1,156,547 1,030,382 353,652 676,730 1,030,382 70 2006-07 2,026,404 1,156,889 19,899 970,818 990,717 70 2007-08 2,246,152 1,691,466 1,252,709 438,757 1,691,466 70 2008-09 2,680,504 1,574,485 1,148,650 425,835 1,574,485 70 2009-10 1,811,130 771,386 575,710 195,676 771,386 70 2010-11 4,770,782 1,847,221 1,449,686 397,535 1,847,221 76 CITY OF SARATOGA REQUIRED SUPPLEMENTARY INFORMATION FOR THE YEAR ENDED JUNE 30, 2011 61 As of June 2011, approximately 17 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 $1,000,000. 62 This page is intentionally blank. SUPPLEMENTARY INFORMATION 63 NONMAJOR GOVERNMENTAL FUNDS Special Revenue Funds Lighting and Landscape Assessment District Funds – These funds account for revenues and expenditures associated with maintaining the City’s 24 Landscape and Lighting districts which were approved by consent of property owners living along or within the boundaries of the Districts. Community Development Block Grant - This fund accounts for grant funds received from the Federal Government for the purpose of assisting programs and building infrastructure for the development of viable urban communities and for the City's rehabilitation loan program. Debt Service Fund Library Bond - Santa Clara County general obligation bond tax revenues are accumulated in this fund to pay annual principal and interest payments on the voter approved 2001 Library Improvement Bond. Capital Projects Funds Library Expansion - This fund accounts for the remaining resources approved for use in the remodel and expansion of the City's library. CITY OF SARATOGA COMBINING BALANCE SHEETS NONMAJOR GOVERNMENTAL FUNDS JUNE 30, 2011 64 Debt Service Lighting and Community Landscaping Development Assessment Block Library District Grant Bond ASSETS Cash and investments 526,916$ 101,077$ 847,719$ Receivables: Accounts 1,148 51,153 2,466 Interest 481 181 472 Total assets 528,545$ 152,411$ 850,657$ LIABILITIES AND FUND BALANCES Liabilities: Accounts payable 24,420$ 152,411$ -$ Total liabilities 24,420 152,411 - Fund Balances: Restricted: Special revenue funds 504,125 - - Debt service - - 850,657 Total fund balances 504,125 - 850,657 Total liabilities and fund balances 528,545$ 152,411$ 850,657$ 1Library Expansion Fund closed in fiscal year 2010/11 The accompanying notes are an integral part of these financial statements Special Revenue 65 Capital Projects Total Other Library1 Governmental Expansion Funds -$ 1,475,712$ - 54,767 - 1,134 -$ 1,531,613$ -$ 176,831$ - 176,831 - 504,125 - 850,657 - 1,354,782 -$ 1,531,613$ CITY OF SARATOGA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE NONMAJOR GOVERNMENTAL FUNDS FOR THE YEAR ENDED JUNE 30, 2011 66 Debt Service Lighting and Community Landscaping Development Assessment Block Library District Grant Bond REVENUES: Property taxes 180,236$ -$ 296$ Special assessment 276,725 - 969,961 Intergovernmental - Other - 300,692 - Use of money and property 2,445 714 2,683 Other revenue 708 71,672 - Total revenues 460,114 373,078 972,940 EXPENDITURES: Current: Public works 396,379 - - Community development services - 210,748 - Debt service: Principal - - 350,000 Interest and fiscal charges - - 664,876 Total expenditures 396,379 210,748 1,014,876 REVENUES OVER (UNDER) EXPENDITURES 63,735 162,330 (41,936) OTHER FINANCING (USES): Transfers out - (291,072) - Total other financing sources (uses)- (291,072) - Net change in fund balances 63,735 (128,742) (41,936) FUND BALANCES: Beginning of year 440,390 128,742 892,593 End of year 504,125$ -$ 850,657$ 1Library Expansion Fund closed in fiscal year 2010/11 The accompanying notes are an integral part of these financial statements Special Revenue 67 Capital Projects Total Other Library1 Governmental Expansion Funds -$ 180,532$ - 1,246,686 - 300,692 - 5,842 1 72,381 1 1,806,133 - 396,379 - 210,748 - 350,000 - 664,876 - 1,622,003 1 184,130 (351,360) (642,432) (351,360) (642,432) (351,359) (458,302) 351,359 1,813,084 -$ 1,354,782$ CITY OF SARATOGA COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - BUDGET AND ACTUAL CAPITAL IMPROVEMENT FOR THE YEAR ENDED JUNE 30, 2011 68 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Licenses & permits 358,202$ 743,300$ 859,291$ 115,991$ Fines & forfeitures - - 1,390 1,390 Intergovermental - federal 3,973,941 5,633,250 1,032,750 (4,600,500) Intergovermental - state 1,827,392 1,829,075 1,132,089 (696,986) Intergovermental - other 80,000 60,000 - (60,000) Use of money and property 40,000 40,000 41,411 1,411 Other revenue 1,114,622 1,176,108 86,312 (1,089,796) Total revenues 7,394,157 9,481,733 3,153,243 (6,328,490) EXPENDITURES: Capital outlay 12,106,905 14,411,452 3,703,638 10,707,814 Total expenditures 12,106,905 14,411,452 3,703,638 10,707,814 REVENUES OVER (UNDER) EXPENDITURES (4,712,748) (4,929,719) (550,395) 4,379,324 OTHER FINANCING SOURCES (USES): Transfers in 1,269,891 1,541,874 1,500,865 (41,009) Transfers out - (75,000) (181,000) (106,000) Total other financing sources (uses)1,269,891 1,466,874 1,319,865 (147,009) Net change in fund balances (3,442,857)$ (3,462,845)$ 769,470 4,232,315$ FUND BALANCES: Beginning of year 3,705,941 End of year 4,475,411$ 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, 2011 69 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Property taxes 173,295$ 173,295$ 180,236$ 6,941$ Special assessments 279,898 279,898 276,725 (3,173) Use of money and property 2,000 2,000 2,445 445 Other revenue - - 708 708 Total revenues 455,193 455,193 460,114 4,921 EXPENDITURES: Current: Public works 625,406 625,406 396,379 229,027 Total expenditures 625,406 625,406 396,379 229,027 REVENUES OVER (UNDER) EXPENDITURES (170,213) (170,213) 63,735 233,948 Net change in fund balances (170,213)$ (170,213)$ 63,735 233,948$ FUND BALANCES: Beginning of year 440,390 End of year 504,125$ 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, 2011 70 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Intergovernmental - Other 341,702$ 341,702$ 300,692$ (41,010)$ Use of money and property 1,000 1,000 714 (286) Other revenue - - 71,672 71,672 Total revenues 342,702 342,702 373,078 30,376 EXPENDITURES: Current: Community development services - - 210,748 (210,748) Total expenditures - - 210,748 (210,748) REVENUES OVER (UNDER) EXPENDITURES 342,702 342,702 162,330 (180,372) OTHER FINANCING (USES): Transfers out (332,081) (332,081) (291,072) 41,009 Total other financing sources (uses)(332,081) (332,081) (291,072) 41,009 Net change in fund balances 10,621$ 10,621$ (128,742) (139,363)$ FUND BALANCES: Beginning of year 128,742 End of year -$ 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, 2011 71 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Property taxes -$ -$ 296$ 296$ Special assessments 950,000 950,000 969,961 19,961 Use of money and property 5,000 5,000 2,683 (2,317) Total revenues 955,000 955,000 972,940 17,644 EXPENDITURES: Debt service: Principal 350,000 350,000 350,000 - Interest and fiscal charges 669,656 669,656 664,876 4,780 Total expenditures 1,019,656 1,019,656 1,014,876 4,780 REVENUES OVER (UNDER) EXPENDITURES (64,656) (64,656) (41,936) 22,720 Net change in fund balances (64,656)$ (64,656)$ (41,936) 22,720$ FUND BALANCES: Beginning of year 892,593 End of year 850,657$ 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, 2011 72 Variance with Final Budget Budgeted Amounts Actual Positive Original Final Amounts (Negative) REVENUES: Use of money and property -$ -$ 1$ 1$ Total revenues - - 1 1 OTHER FINANCING (USES): Transfers out (351,360) (351,360) (351,360) - Total other financing (uses)(351,360) (351,360) (351,360) - Net change in fund balances (351,360)$ (351,360)$ (351,359) 1$ FUND BALANCES: Beginning of year 351,359 End of year -$ 1 Library Expansion Fund closed in fiscal year 2010/11 73 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, 2011 74 Balance Balance Cable T.V. Trust July 1, 2010 Additions Deductions June 30, 2011 ASSETS Cash and investments 91,364$ 37,146$ (128,510)$ -$ Receivables: Accounts 18,352 - (18,352) - Interest 126 - (126) - Total assets 109,842$ 37,146$ (146,988)$ -$ LIABILITIES Deposits payable 109,842$ 37,146$ (146,988)$ -$ 75 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, 2011 76 Liability / Risk Workers'Office Management Compensation Stores ASSETS Current assets: Cash and investments 149,703$ 224,739$ 21,700$ Total current assets 149,703 224,739 21,700 Noncurrent assets: Capital assets: Machinery and equipment - - - Less: accumulated depreciation - - - Total capital assets (net of accumulated depreciation) - - - Total assets 149,703 224,739 21,700 LIABILITIES Liabilities: Current assets: Accounts payable - 359 5,869 Accrued payroll 706 276 - Claims payable 14,091 - - Total current liabilities 14,797 635 5,869 NET ASSETS Investment in capital assets - - - Unrestricted 134,906 224,104 15,831 Total net assets 134,906$ 224,104$ 15,831$ The accompanying notes are an integral part of these financial statements 77 Information Information Vehicle Vehicle Technology Technology and Equipment Building and Equipment Equipment Services Maintenance Maintenance Replacement Replacement Total 246,924$ 53,059$ 240,794$ 332,952$ 185,567$ 1,455,438$ 246,924 53,059 240,794 332,952 185,567 1,455,438 - - - 623,819 90,240 714,059 - - - (482,280) (81,216) (563,496) - - - 141,539 9,024 150,563 246,924 53,059 240,794 474,491 194,591 1,606,001 12,281 8,706 24,841 1,579 - 53,635 3,580 1,536 7,435 - - 13,533 - - - - - 14,091 15,861 10,242 32,276 1,579 - 81,259 - - - 141,539 9,024 150,563 231,063 42,817 208,518 331,373 185,567 1,374,179 231,063$ 42,817$ 208,518$ 472,912$ 194,591$ 1,524,742$ CITY OF SARATOGA INTERNAL SERVICE FUNDS COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET ASSETS FOR THE YEAR ENDED JUNE 30, 2011 78 Liability / Risk Workers'Office Management Compensation Stores Operating revenues: Charges for services 200,000$ 215,000$ 30,000$ Other operating revenues 75,014 6,967 8,535 Total operating revenues 275,014 221,967 38,535 Operating expenses: Cost of services - - - Administration 359,670 196,454 49,534 Depreciation - - - Total operating expenses 359,670 196,454 49,534 Operating income (84,656) 25,513 (10,999) Transfers out (25,000) - - Change in net assets (109,656) 25,513 (10,999) Total net assets - beginning 244,562 198,591 26,830 Total net assets - ending 134,906$ 224,104$ 15,831$ The accompanying notes are an integral part of these financial statements 79 Information Information Vehicle Vehicle Technology Technology and Equipment Building and Equipment Equipment Services Maintenance Maintenance Replacement Replacement Total 400,000$ 200,000$ 725,001$ 100,000$ 50,000$ 1,920,001$ - - 7,601 - - 98,117 400,000 200,000 732,602 100,000 50,000 2,018,118 - 211,442 726,653 4,857 51,119 994,071 382,878 - - - - 988,536 - - - 122,928 18,048 140,976 382,878 211,442 726,653 127,785 69,167 2,123,583 17,122 (11,442) 5,949 (27,785) (19,167) (105,465) - - - - - (25,000) 17,122 (11,442) 5,949 (27,785) (19,167) (130,465) 213,941 54,259 202,569 500,697 213,758 1,655,207 231,063$ 42,817$ 208,518$ 472,912$ 194,591$ 1,524,742$ CITY OF SARATOGA INTERNAL SERVICE FUNDS COMBINING STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2011 80 Liability / Risk Workers'Office Management Compensation Stores Cash flows from operating activities: Receipts from customers and users 278,215$ 224,144$ 38,535$ Payments to suppliers (359,100) (178,806) (44,267) Payments to employees (42,843) (18,362) - Net cash provided by operating activities (123,728) 26,976 (5,732) Cash flows from noncapital financing activities: Transfers out (25,000) - - Net cash used in nonoperating activities (25,000) - - Net increase (decrease) in cash and cash equivalents (148,728) 26,976 (5,732) Cash and cash equivalents, beginning of year 298,431 197,763 27,432 Cash and cash equivalents, ending of year 149,703$ 224,739$ 21,700$ Reconciliation of operating income to net cash provided by operating activities: Operating income (loss)(84,656)$ 25,513$ (10,999)$ Adjustments to reconcile operating income (loss) to net cash provided (used) by operating activities: Depreciation - - - Change in operating assets and liabilities: Decrease in accounts receivables 3,201 2,177 - (Decrease) increase in accounts payable (778) (536) 5,267 (Decrease) in claims payable (40,510) - - (Decrease) in accured payroll (985) (178) - Net cash provided (used) by operating activities (123,728)$ 26,976$ (5,732)$ 81 Information Information Vehicle Vehicle Technology Technology and Equipment Building and Equipment Equipment Services Maintenance Maintenance Replacement Replacement Total 400,000$ 200,000$ 732,602$ 100,000$ 50,000$ 2,023,496$ (177,673) (129,836) (284,985) (3,278) (60,965) (1,238,910) (207,082) (78,369) (456,062) - - (802,718) 15,245 (8,205) (8,445) 96,722 (10,965) (18,132) - - - - - (25,000) - - - - - (25,000) 15,245 (8,205) (8,445) 96,722 (10,965) (43,132) 231,679 61,264 249,239 236,230 196,532 1,498,570 246,924$ 53,059$ 240,794$ 332,952$ 185,567$ 1,455,438$ 17,122$ (11,442)$ 5,949$ (27,785)$ (19,167)$ (105,465)$ - - - 122,928 18,048 140,976 - - - - - 5,378 4,757 5,356 783 1,579 (9,846) 6,582 - - - - - (40,510) (6,634) (2,119) (15,177) - - (25,093) 15,245$ (8,205)$ (8,445)$ 96,722$ (10,965)$ (18,132)$ 82 This page is intentionally blank. 83 CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS 84 This page is intentionally blank. CITY OF SARATOGA CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS COMPARATIVE SCHEDULE BY SOURCE JUNE 30, 2011 AND 2009 85 2011 2010 Governmental Funds Capital Assets: Land and land improvements 13,135,756$ 12,984,078$ Buildings and structures 23,462,738 23,412,763 Machinery and equipment 1,773,286 1,567,785 Infrastructure 104,903,913 104,425,507 Construction in progress 6,248,294 4,443,360 Total Governmental Funds Capital Assets 149,523,987 146,833,493 Accumulated depreciation (27,053,663) (25,204,168) Total Governmental Funds Capital Assets, Net 122,470,324$ 121,629,325$ Investments in Governmental Funds Capital Assets by Source: General Fund 115,548,433$ 115,548,433$ Special revenue funds 974,487 974,487 Capital projects funds 32,903,719 30,213,225 Donations 97,348 97,348 Accumulated depreciation (27,053,663) (25,204,168) Total Governmental Funds Capital Assets 122,470,324$ 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 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, 2011 86 Land Buildings and Land and Improvements Structures Function and Activity General and intergovernmental services: Management services -$ 438,036$ Administrative services - 167,585 Intergovernmental services 118,183 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 sidewalks 835,155 30,628 Parks/open space 2,637,061 2,656,850 Total Public Works:3,472,216 2,687,478 Community services 7,802,893 2,716,099 Community development services 1,742,464 14,314,899 Total Governmental Funds Capital Assets 13,135,756 23,462,738 Accumulated depreciation - (6,054,896) Total Governmental Funds Capital Assets, Net 13,135,756$ 17,407,842$ 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. 87 Machinery Construction and in Equipment Infrastructure Progress Total 529,425$ -$ 174,271$ 1,141,732$ 129,490 - - 297,075 47,559 - - 3,304,383 706,474 - 174,271 4,743,190 27,813 - - 27,813 7,548 - - 7,548 35,361 - - 35,361 483,633 104,820,896 3,048,041 109,218,353 270,483 - 42,128 5,606,522 754,116 104,820,896 3,090,169 114,824,875 247,187 83,017 2,941,517 13,790,713 30,147 - 42,337 16,129,847 1,773,285 104,903,913 6,248,294 149,523,986 (1,233,492) (19,765,274) - (27,053,662) 539,793$ 85,138,639$ 6,248,294$ 122,470,324$ CITY OF SARATOGA CAPITAL ASSETS USED IN THE OPERATION OF GOVERNMENTAL FUNDS SCHEDULE OF CHANGE BY FUNCTION AND ACTIVITY JUNE 30, 2011 88 Governmental Governmental Funds Capital Funds Capital Assets Assets July 1, 2010 Additions Deletions June 30, 2011 Function and Activity General and intergovernmental services: Management services 942,425$ 208,944$ (9,637)$ 1,141,732$ Administrative services 242,076 61,380 (6,381) 297,075 Intergovernmental services 3,304,384 - (1) 3,304,383 Total General and Intergovernmental Services:4,488,885 270,324 (16,019) 4,743,190 Public safety: Police services 27,813 - - 27,813 Code enforcement 7,548 - - 7,548 Total Public Safety:35,361 - - 35,361 Public works: Streets and sidewalks 107,606,204 1,612,149 - 109,218,353 Parks/open space 5,564,394 42,128 - 5,606,522 Total Public Works:113,170,598 1,654,277 - 114,824,875 Community services 13,023,128 774,585 (7,000) 13,790,713 Community development services 16,115,521 14,326 - 16,129,847 Total Governmental Funds Capital Assets 146,833,493 2,713,512 (23,019) 149,523,986 Accumulated depreciation (25,204,168) (1,849,494) - (27,053,662) Total Governmental Funds Capital Assets, Net 121,629,325$ 864,018$ (23,019)$ 122,470,324$ 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 89 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. 90-95 Revenue Capacity These schedules contain information to help the reader assess the government’s most significant local revenue source; property tax. 96-105 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. 106-112 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. 113-114 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. 115-121 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 SEVEN YEARS (ACCRUAL BASIS OF ACCOUNTING) 90 (amounts expressed in thousands) 2005 2006 2007 2008 Primary government Governmental activities Investment in capital assets, net of related debt 105,784$ 107,100$ 108,102$ 109,818$ Restricted 6,328 5,370 5,928 5,940 Unrestricted 6,789 9,955 8,593 9,710 Total primary government 118,901$ 122,425$ 122,623$ 125,468$ Fiscal Year $95,000 $100,000 $105,000 $110,000 $115,000 $120,000 $125,000 $130,000 2005 2006 2007 2008 2009 2010 2011 Net Assets by Component Investment in capital assets, net of related debt Restricted Unrestricted 91 2009 2010 2011 108,818$ 108,966$ 110,016$ 5,281 5,519 5,830 8,759 8,533 7,964 122,858$ 123,018$ 123,810$ CITY OF SARATOGA CHANGES IN NET ASSETS LAST SEVEN YEARS (ACCRUAL BASIS OF ACCOUNTING) 92 (amounts expressed in thousands) 2005 2006 2007 2008 Expenses: Governmental activities: General and intergovernmental services 4,160$ 3,473$ 4,532$ 6,293$ Public safety 3,736 3,427 3,844 4,166 Public works 3,829 4,752 6,425 5,325 Community services 1,929 1,395 1,437 1,286 Community development services 2,349 2,226 1,993 2,032 Interest on long-term debt (unallocated)760 754 768 714 Total governmental activities expenses 16,763 16,027 18,999 19,816 Program revenues: Charges for services: General and intergovernmental services - 31 452 1,787 Public safety 141 122 - 411 Public works 1,988 1,890 528 1,705 Community services 757 1,008 604 911 Community development services 1,890 2,665 1,328 2,110 Operating grants and contributions 1,218 1,549 2,155 151 Capital grants and contributions 865 1,568 1,282 1,715 Total governmental activates program revenues 6,859 8,833 6,349 8,790 Net (expense) revenue and change in net assets (9,904) (7,194) (12,650) (11,026) General revenue and other changes in net assets Taxes: Property taxes 4,841 5,652 5,772 8,099 Sales taxes 1,011 988 995 1,058 Local taxes 1,143 1,288 1,099 694 Franchise taxes 995 1,040 1,187 1,625 Motor vehicle in-lieu 420 718 177 149 Total Taxes 8,410 9,686 9,230 11,625 Intergovernmental - - 673 841 Investment earnings 283 709 2,813 1,057 Other revenues 193 323 132 348 Total general revenues 8,886 10,718 12,848 13,871 Change in net assets (1,018) 3,524 198 2,845 Net assets - beginning of year 119,919 118,901 122,425 122,623 Net assets - end of year 118,901$ 122,425$ 122,623$ 125,468$ Source: CAFR Fiscal Year 93 2009 2010 2011 5,595$ 3,729$ 4,368$ 4,211 4,339 4,457 7,643 6,535 6,645 1,634 1,711 1,846 2,000 1,751 1,839 697 677 656 21,780 18,742 19,811 133 125 171 520 425 561 2,379 2,535 2,771 935 917 1,020 1,802 1,586 1,734 228 275 401 339 674 1,221 6,336 6,537 7,879 (15,444) (12,205) (11,932) 8,336 8,371 8,199 1,043 955 991 663 560 632 1,657 1,664 1,821 116 101 146 11,815 11,651 11,789 474 522 773 397 101 65 148 91 97 12,834 12,365 12,724 (2,610) 160 792 125,468 122,858 123,018 122,858$ 123,018$ 123,810$ CITY OF SARATOGA FUND BALANCE OF GOVERNMENTAL FUNDS LAST SEVEN YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) 94 (amounts expressed in thousands) 2005 2006 2007 2008 General fund: Restricted 899 910 711 679 Committed - - - - Assigned 75 615 831 1,258 Unassigned 6,002 8,854 7,619 8,459 Total general fund 6,976$ 10,379$ 9,161$ 10,396$ All other governmental funds: Restricted Special revenue funds 202$ 919$ 844$ 318$ Debt service 856 865 746 854 Committed Capital project funds 5,321 3,586 4,338 4,768 Total all other governmental funds 6,379$ 5,370$ 5,928$ 5,940$ Source: CAFR Information prior to fiscal year 2011 have been updated to conform with GASB 54 requirements Fiscal Year $- $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 General - Restricted General - Committed General - Assigned General - Unassigned Debt Service Special Revenue Capital Projects Fund Balances of Governmental Funds 2005 2006 2007 2008 Series6 2011 CITY OF SARATOGA FUND BALANCE OF GOVERNMENTAL FUNDS LAST SEVEN YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) 95 2009 2010 2011 613 563 513 550 300 500 322 196 667 6,744 6,952 5,804 8,229$ 8,011$ 7,484$ 484$ 569$ 504$ 931 893 851 3,866 4,057 4,475 5,281$ 5,519$ 5,830$ CITY OF SARATOGA GOVERNMENTAL ACTIVITIES TAX REVENUES BY SOURCE LAST SEVEN YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) 96 (amounts expressed in thousands) 2005 2006 2007 2008 Tax revenues: Property taxes 4,841$ 5,652$ 5,772$ 8,099$ Special assessments 1,476 1,369 271 1,392 Sales taxes 1,011 988 995 1,058 Local taxes 1,143 1,288 1,099 694 Franchise taxes 995 1,040 1,187 1,625 Motor vehicle in-lieu 420 718 177 149 Total tax revenues 9,886$ 11,055$ 9,501$ 13,017$ Source: CAFR Fiscal Year $- $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $9,000 Property taxes Special assessments Sales taxes Local taxes Motor vehicle in-lieu Franchise taxes Tax Revenues by Source 2005 2006 2007 2008 2009 2010 2011 97 2009 2010 2011 8,336$ 8,371$ 8,199$ 1,368 1,247 1,255 1,043 955 991 663 560 633 1,657 1,664 1,821 116 101 146 13,183$ 12,898$ 13,045$ CITY OF SARATOGA CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS LAST SEVEN YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) 98 (amounts expressed in thousands) 2005 2006 2007 2008 Revenues: Property taxes 4,893$ 5,652$ 4,758$ 7,877$ Special assessments 1,411 1,370 1,285 1,566 Sales taxes 1,011 987 995 1,058 Other local taxes 851 1,288 1,126 773 Licensed and permits 100 79 1,340 1,671 Fines and forfeitures 162 259 396 344 Intergovernmental - federal - - - - Intergovernmental - state 1,375 2,660 3,631 1,641 Intergovernmental - federal 90 - - - Intergovernmental - other 671 976 629 777 Franchise fees 1,294 1,041 1,187 1,622 Use of money any property 664 752 2,813 924 Other revenues 153 1,719 151 326 Current services charges 3,093 2,715 900 4,184 Total tax revenues 15,768 19,498 19,211 22,763 Expenditures: Current: General and intergovernmental services 3,238 3,346 3,806 4,083 Public safety 3,731 3,423 3,824 4,166 Public works 2,599 3,501 5,714 4,717 Community services 1,875 1,210 1,381 1,262 Community development services 1,990 1,847 1,962 2,026 Capital outlay 1,777 2,908 2,130 4,246 Debt service: Principal 255 270 280 295 Interest and fiscal charges 766 760 774 721 Total expenditures 16,231 17,265 19,871 21,515 Excess of revenues (463) 2,233 (660) 1,247 Other financing sources (uses): Transfers in 2,492 499 3,422 2,241 Transfers out (2,492) (499) (3,422) (2,241) Total other financing sources (uses)- - - - Net change in fund balances (463)$ 2,233$ (660)$ 1,247$ Debt as a percentage of noncapital expenditures 7.06%7.17%5.94%5.62% Source: CAFR Fiscal Year 99 2009 2010 2011 8,335$ 8,371$ 8,199$ 1,368 1,247 1,255 1,043 954 991 663 560 632 1,460 1,489 1,950 360 359 285 - 430 1,033 1,283 1,258 1,480 - - - 290 258 337 1,657 1,664 1,821 794 595 550 1,966 1,794 2,169 - - - 19,219 18,979 20,702 3,330 3,102 3,524 4,206 4,349 4,467 4,700 4,730 4,717 1,424 1,223 1,322 2,450 2,111 2,193 4,060 2,584 3,704 310 330 350 705 685 665 21,185 19,114 20,942 (1,966) (135) (240) 2,043 1,172 1,725 (2,043) (1,017) (1,700) - 155 25 (1,966)$ 20$ (215)$ 4.89%5.80%5.56% CITY OF SARATOGA PROPERTY TAX RATES – DIRECT AND OVERLAPPING GOVERNMENTS LAST SEVEN YEARS 100 (Property Tax Rates per $100 of Assessed Value) 2005 2006 2007 2008 General 1.0000 1.0000 1.0000 1.0000 County Retirement Levy 0.0388 0.0388 0.0388 0.0388 County Library 0.0024 0.0024 0.0024 0.0024 City of Saratoga 0.0148 0.0117 0.0096 0.0113 1.0560 1.0529 1.0508 1.0525 Campbell School District 0.0529 0.0512 0.0508 0.0475 County Bond 2008 Hospital 0.0000 0.0000 0.0000 0.0000 Campbell Elementary 2002 0.0000 0.0000 0.0000 0.0000 Campbell Elementary 2010 0.0000 0.0000 0.0000 0.0000 Campbell Union High 1999 0.0198 0.0224 0.0198 0.0285 Campbell Union High 2006 0.0000 0.0000 0.0000 0.0000 Cupertino Elementary School District 0.0360 0.0350 0.0289 0.0337 Moreland Elementary School District 0.0612 0.0561 0.0556 0.0569 Saratoga School District 0.0361 0.0356 0.0351 0.0363 Campbell Union High School District 0.0197 0.0224 0.0198 0.0285 Fremont Union High School District 0.0268 0.0260 0.0243 0.0241 Los Gatos-Saratoga Joint Union High School District 0.0409 0.0371 0.0651 0.0345 Foothill-DeAnza Community College District 0.0129 0.0119 0.0346 0.0113 West Valley-Mission Community College District 0.0000 0.0140 0.0126 0.0118 Saratoga Fire District 0.0017 0.0052 0.0049 0.0053 Santa Clara Valley Water District - State Water Project 0.0086 0.0069 0.0070 0.0067 Santa Clara Valley Water District - Zone W-1 0.0006 0.0009 0.0002 0.0040 0.3172 0.3247 0.3587 0.3291 Total Tax Rate 1.3732 1.3776 1.4095 1.3816 Source: California Municipal Statistics, Inc. Fiscal Year 101 2009 2010 2011 1.0000 1.0000 1.0000 0.0388 0.0388 0.0388 0.0024 0.0024 0.0024 0.0104 0.0094 0.0094 1.0516 1.0506 1.0506 0.0524 0.0285 0.0249 0.0000 0.0122 0.0095 0.0000 0.0267 0.0298 0.0000 0.0000 0.0005 0.0299 0.0183 0.0196 0.0000 0.0131 0.0131 0.0306 0.0000 0.0000 0.0565 0.0000 0.0000 0.0363 0.0000 0.0000 0.0299 0.0000 0.0000 0.0339 0.0000 0.0000 0.0330 0.0000 0.0000 0.0123 0.0000 0.0000 0.0032 0.0140 0.0139 0.0053 0.0000 0.0000 0.0059 0.0071 0.0070 0.0002 0.0300 0.0002 0.3294 0.1499 0.1185 1.3810 1.2005 1.1691 CITY OF SARATOGA ASSESSED VALUE OF TAXABLE PROPERTY LAST SEVEN YEARS 102 (amounts expressed in thousands) Fiscal Year Ended Residential Commercial Industrial Vacant Other June 30 Property Property Property Institutional Property Property 2005 7,114,095$ 166,071$ 8,746$ 33,509$ 70,276$ 35,127$ 2006 7,883,965 177,149 8,921 38,027 90,611 32,858 2007 8,467,894 187,142 9,099 45,706 107,228 39,536 2008 9,025,628 208,369 9,281 50,590 110,656 49,023 2009 9,605,309 213,951 9,467 51,052 128,898 43,240 2010 9,729,087 231,691 9,656 57,495 110,225 44,856 2011 9,639,781 234,675 9,514 49,446 88,494 58,655 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 $12,000,000 2005 2006 2007 2008 2009 2010 2011 Total Assessed Property Unsecured Other Vacant Institutional Industrial Commercial Residential 103 Total2 Total Less:Total Taxable1 Direct Unsecured Assessed Tax Exempt Assessed Tax Property Property Real Property Value Rate 42,965$ 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 57,172 10,137,737 (174,325) 9,963,412 1.0506 CITY OF SARATOGA PRINCIPAL PROPERTY TAXPAYERS CURRENT YEAR AND NINE YEARS AGO JUNE 30, 2011 104 (amounts expressed in thousands) % of Total % of Total Taxable Taxable Taxable Taxable Assessed Assessed Assessed Assessed Taxpayer Value Rank Value Value Rank Value Cupertino Village Associates, LLC 34,807$ 1 0.34% Quito Village Group, LLC 19,000 2 0.19% John I. and Michelle Keller 18,456 3 0.18% San Jose Water Works 14,676 4 0.14%12,974 2 0.18% Gregpenn Properties, LLC 14,390 5 0.14% John M. & Abby J. Sobrato 13,289 6 0.13%11,517 4 0.16% Argonaut Associates, LLV 10,486 7 0.10%8,417 10 0.11% Ashok Krishnamurthi 10,414 8 0.10% Public Storage Inc.9,395 9 0.09% Coyote Properties IV, LLC 8,306 10 0.08% Odd Fellows Home of California Saratoga Office Center Partners, LLC 32,640 1 0.26% Howell and McNeil Devel, LLC 12,033 3 0.16% Pfeiffer Ranch Investors 10,396 5 0.14% Harvey L. Armstrong 10,200 6 0.14% Carson Estate Compayn 10,098 7 0.14% Bagher and Kefayat Navid 9,684 8 0.13% David J. & Terri E. Morrison 9,057 9 0.12% Assessed Value 10,137,737$ 7,393,858$ Source: HdL Coren & Cone 2011 2002 CITY OF SARATOGA PROPERTY TAX LEVIES AND COLLECTIONS LAST SEVEN YEARS 105 Fiscal Year Total Tax Collections in Ended Levy for Subsequent June 30 Fiscal Year Amount Percentage Years Amount Percentage 2005 4,972,875$ 4,972,875$ 100.0%-$ 4,972,875$ 100.0% 2006 5,243,038 5,243,038 100.0%- 5,243,038 100.0% 2007 6,032,558 6,032,558 100.0%- 6,032,558 100.0% 2008 8,108,364 8,108,364 100.0%- 8,108,364 100.0% 2009 8,332,184 8,332,184 100.0%- 8,332,184 100.0% 2010 8,371,396 8,371,396 100.0%- 8,371,396 100.0% 2011 8,199,341 8,199,341 100.0%- 8,199,341 100.0% Source: City of Saratoga Collected within the Fiscal Year of the Levy Total Collections to Date CITY OF SARATOGA RATIOS OF OUTSTANDING DEBT BY TYPE LAST SEVEN YEARS 106 (amounts expressed in thousands, except per capita amounts) 2005 2006 2007 2008 Governmental activities General obligation bonds 14,440$ 14,170$ 13,890$ 13,595$ Total primary government 14,440$ 14,170$ 13,890$ 13,595$ Percentage of Personal Income 1 0.00%0.00%0.00%0.00% Per capita 2 468 460 443 430 Source: CAFR 1Bureau of Economic Analysis - personal income information only available through 2009 San Jose-Sunnyvale-Santa Clara region 2Population information from California State Controller's Office Fiscal Year 107 2009 2010 2011 13,285$ 12,955$ 12,605$ 13,285$ 12,955$ 12,605$ 0.00%n/a n/a 419 405 417 CITY OF SARATOGA RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST SEVEN YEARS 108 (amounts expressed in thousands, except per capita amounts) 2005 2006 2007 2008 General obligation bonds 14,440$ 14,170$ 13,890$ 13,595$ Less: Amount available in debt service fund (855) (865) (747) (854) Total primary government 13,585$ 13,305$ 13,143$ 12,741$ Percentage of actual taxable value of property 0.18%0.16%0.15%0.14% Per capita1 440 431 419 403 Source: CAFR 1Population information from California State Controller's Office Fiscal Year 109 2009 2010 2011 13,285$ 12,955$ 12,605$ (926) (890) (848) 12,359$ 12,065$ 11,757$ 0.12%0.12%0.12% 390 377 389 CITY OF SARATOGA LEGAL DEBT MARGIN INFORMATION LAST SEVEN YEARS 110 (amounts expressed in thousands) 2005 2006 2007 2008 Debt Limit 1,120,618$ 1,241,761$ 1,334,455$ 1,423,398$ Total net debt applicable to limit 13,585 13,305 13,143 12,741 Legal debt margin 1,107,033$ 1,228,456$ 1,321,312$ 1,410,657$ Total net debt applicable to the limit as a percentage of debt limit 1.21%1.07%0.98%0.90% Legal debt margin calculation Assessed value 7,393,857$ 8,144,454$ 8,755,510$ 9,329,953$ Add back: exempt real property 76,932 133,951 140,859 159,369 Total assessed value 7,470,789$ 8,278,405$ 8,896,369$ 9,489,322$ Debt limit (15% of total assessed value)1,120,618$ 1,241,761$ 1,334,455$ 1,423,398$ Debt applicable to limit: General obligation bonds 14,440$ 14,170$ 13,890$ 13,595$ Less: Amount available in debt service fund (855) (865) (747) (854) Total net debt applicable to limit 13,585$ 13,305$ 13,143$ 12,741$ Legal debt margin 1,107,033$ 1,228,456$ 1,321,312$ 1,410,657$ Source: CAFR Fiscal Year 111 2009 2010 2011 1,514,378$ 1,536,183$ 1,520,661$ 12,359 12,065 11,757 1,502,019$ 1,524,118$ 1,508,904$ 0.82%0.79%0.77% 9,934,362$ 10,067,592$ 9,963,412$ 161,488 173,628 174,325 10,095,850$ 10,241,220$ 10,137,737$ 1,514,378$ 1,536,183$ 1,520,661$ 13,285$ 12,955$ 12,605$ (926) (890) (848) 12,359$ 12,065$ 11,757$ 1,502,019$ 1,524,118$ 1,508,904$ CITY OF SARATOGA DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT 112 (amount expressed in thousands) Estimated Estimated Share of Debt Percentage Overlapping Outstanding Applicable1 Debt Direct Debt: City of Saratoga 12,605 100.000%12,605 Overlapping Tax and Assessment Debt: Santa Clara County 334,900$ 3.755%12,575$ Santa Clara Valley Water District, Zone W-1 405 4.034%16 Foothill-De Anza Community College District 466,244 1.718%8,010 West Valley Community College District 213,049 11.820%25,182 Campbell Union High School District 167,315 5.606%9,380 Fremont Union High School District 265,975 3.709%9,865 Los Gatos-Saratoga Joint Union High School District 55,215 40.690%22,467 Campbell Union School District 119,646 6.953%8,319 Cupertino Union School District 122,480 6.109%7,482 Moreland School District 71,684 12.793%9,171 Saratoga Union School District 47,550 85.966%40,877 Saratoga Fire Protection District 4,819 97.261%4,687 Santa Clara Valley Water District Benefit Assessment 143,160 3.755%5,376 Total Overlapping Tax and Assessment Debt 163,407 Overlapping General Fund Debt: Santa Clara County General Fund Obligations 786,980 3.755%29,551$ Santa Clara County Pension Obligations 386,025 3.755%14,495 Santa Clara County Board of Education Certificates of Participation 12,580 3.755%472 Santa Clara County Vector Control District Certificates of Participation 3,800 3.755%143 Foothill-De Anza Community College District Certificates of Participation 21,215 1.718%364 West Valley-Mission College District General Fund Obligations 56,120 11.820%6,633 Los Gatos-Saratoga Joint Union High School District Certificates of Participation 9,650 40.690%3,927 Saratoga Union School District Certificates of Participation 6,110 85.966%5,253 Midpeninsula Open Space Park District General Fund Obligations 131,003 6.236%8,169 Total Overlapping General Fund Debt 69,007 Combined Total Debt2 245,019$ 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 DEMOGRAPHIC AND ECONOMIC STATISTICS LAST SEVEN YEARS 113 Personal Per Capita Fiscal City Income Personal Labor Unemployment Year Population1 (in thousands)2 Income2 Force3 Rate3 2005 30,850 89,615 51,418 12,600 2.5% 2006 30,835 98,252 55,754 12,700 2.1% 2007 31,352 105,576 59,306 12,900 2.3% 2008 31,592 105,979 58,351 13,100 3.2% 2009 31,679 101,926 55,169 13,300 6.0% 2010 31,997 n/a n/a 12,500 5.8% 2011 30,195 n/a n/a 13,200 5.2% 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 2005 2006 2007 2008 2009 2010 2011 Labor Force vs. Population Population Labor Force CITY OF SARATOGA PRINCIPAL EMPLOYERS CURRENT YEAR AND SIX YEARS AGO AT JUNE 30, 2011 114 Percentage Percentage of Total City of Total City Employer Employees Rank Employment Employees Rank Employment Gene's Fine Foods 85 1 0.68%85 1 1.39% Safeway 65 2 0.52%65 2 1.06% Saratoga Country Club 65 3 0.52%65 3 1.06% McDonald's 45 4 0.36% Roku Inc 33 5 0.26% La Fondue 22 6 0.18% CVS 20 7 0.16%20 6 0.33% Classic Car Wash 20 8 0.16%20 7 0.33% Hinshaw, Draa & Marsh 20 9 0.16%20 9 0.33% Jakes of Saratoga 20 10 0.16% 24 Hour Fitness 30 4 0.49% Windermere 27 5 0.44% Harmonic European Day Sap 20 8 0.33% Bella Saratoga 20 10 0.33% Total City Employment2 12,500 6,129 1Earliest information available 2State of California - Employment Development Department Source: City of Saratoga 2011 20051 115 This page is intentionally blank. CITY OF SARATOGA FULL-TIME EQUIVALENT CITY GOVERNMENT EMPLOYEES BY FUNCTION LAST SEVEN FISCAL YEARS 116 117 2009 2010 2011 12.00 11.75 11.45 21.75 21.75 21.65 14.00 12.00 12.00 10.60 9.35 9.50 58.35 54.85 54.60 CITY OF SARATOGA OPERATING INDICATORS BY FUNCTION LAST SEVEN FISCAL YEARS 118 2005 2006 2007 2008 Function Part 1 crimes1 463 426 425 381 Total incidents 42,011 40,567 39,663 41,243 Police reports 1,767 1,659 1,767 1,941 Public Works Street resurfacing (miles)N/A 5 14 N/A Street lights repaired 2 3 3 12 Potholes filled (sq. ft.)N/A 5,000 5,000 7,000 Community Development Total permit valuation ($000)74,668 94,485 69,935 70,442 Parks and Recreation Classes, trips (enrollment) community events 5,604 5,712 4,817 4,782 Adult Exercise (e.g. JS Dance. Jazzerxcise)272 312 285 362 Sports programs (e.g. Adult basketball, softball)470 473 515 591 Prescholl programs (enrollment)200 163 159 225 Day/summer camps (enrollment)301 287 205 242 Teen/youth council (enrollment)2,506 3,798 2,221 94 Senior center (enrollment/attendance days)22,312 22,591 18,515 17,826 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 119 2009 2010 2011 282 173 373 41,384 39,942 41,642 1,949 1,273 1,549 6 3 25 24 25 10,000 10,000 11,000 61,117 44,658 50,936 4,698 4,366 6,135 515 545 661 459 423 - 171 161 142 225 331 326 419 2,110 1,323 16,325 16,533 14,640 CITY OF SARATOGA CAPITAL ASSET STATISTICS BY FUNCTION LAST SEVEN FISCAL YEARS 120 2005 2006 2007 2008 Function Public safety Police Station 1 1 - - Fire Station Saratoga Fire District 1 1 1 1 Central Fire District 1 1 1 1 Public Works Street Miles - Private 13 13 13 13 Street Miles - Public 137 137 137 137 West Valley Sanitation District Number of Connections 8,601 8,621 8,651 8,651 Length of Sewer Lines 120 120 127 127 Cupertino Valley Sanitation District Number of Connections 2,118 2,118 2,915 2,927 Length of Sewer Lines 36 36 36 36 Parks and Recreation Parks Acreage 81 81 81 81 Parks 15 15 15 15 Source: City of Saratoga various records Fiscal Year 121 2009 2010 2011 - - - 1 1 1 1 1 1 14 14 14 140 140 140 8,683 8,687 8,664 127 127 127 2,938 2,949 2,954 37 37 37 84 84 84 15 15 15 122 This page is intentionally blank.